Exhibit 99.1
[OfficeMax, Inc. LOGO]
Headquarters: 3605 Warrensville Center Rd., Shaker Heights, OH 44122-5203
Mailing Address: P.O. Box 228070, Cleveland, OH 44122-8070
FOR IMMEDIATE RELEASE
NEWS RELEASE
For inquiries:
Steve Baisden
Manager, Investor &
Public Relations
(216) 471-3441
investor@officemax.com
OFFICEMAX REPORTS FIRST QUARTER RESULTS WITH DOMESTIC SAME-STORE SALES UP FIVE
PERCENT, FOURTH CONSECUTIVE QUARTER OF POSITIVE IMPROVEMENTS;
EARNINGS PER SHARE MEET ANALYSTS' CONSENSUS ESTIMATE;
OFFICEMAX ENDS QUARTER WITH CASH OF $76 MILLION AND NO SHORT-TERM BORROWINGS,
COMPARED TO DEBT OF $118 MILLION LAST YEAR; AND
FIRST TWO WEEKS OF SECOND QUARTER OFF TO A STRONG START WITH SAME-STORE SALES
CURRENTLY RUNNING ABOVE THE DOUBLE-DIGIT THRESHOLD
CLEVELAND - May 13, 2003 - OfficeMax, Inc. (NYSE: OMX) today reported sales for
its first quarter ended April 26, 2003 reached $1.226 billion, with domestic
same-store sales up five percent. This compares to $1.178 billion for the like
quarter a year ago. Net income on a generally accepted accounting principles
(GAAP) basis was $9.8 million, or eight cents per diluted share. Last year's
first quarter earnings, which benefited from a cash tax refund of $57.5 million,
or 46 cents per diluted share, were $63.5 million, or 51 cents per diluted
share.
Assuming an approximate 40 percent tax rate provision, which is typically how
Wall Street analysts measure the Company's performance, earnings per diluted
share were five cents in the first quarter, compared to three cents in the first
quarter of fiscal 2002 excluding last year's cash tax refund, OfficeMax said.
Other than the benefit from the cash tax refund recorded last year, the
Company's first quarter 2003 and 2002 results do not reflect a tax provision
because of a deferred tax valuation allowance it established in the fourth
quarter of fiscal 2001.
Consolidated same-store sales, which include both the Company's domestic segment
and Mexico international segment, increased four percent. Comparable-store sales
for OfficeMax's Mexico segment declined 16 percent primarily as a result of a
year-over-year unfavorable currency translation from the weakening of the
Mexican Peso against the U.S. Dollar.
Michael Feuer, the Company's chairman and chief executive officer, said, "Our
first quarter results are further evidence of the Company's ability to drive
sales by continuing to increase both same-store customer transactions and the
average amount per transaction. The Company believes these first quarter results
would have been even better had it not been for the negative effects of the war
in Iraq and the accompanying `CNN effect,' manifested by customers spending less
time shopping and more time at home viewing war reports and live action on
television. The first quarter started strong with February sales in the high
single digits but sales began to be affected in mid-March after President Bush
issued the country's ultimatum to the Iraqi regime and the war began. The `CNN
effect,' combined with consumer uncertainties related to the war, continued
through most of April until it became apparent that the country's major combat
effort was winding down.
"Since the end of April, sales have resumed a more robust upward trend, with
second quarter comparable-store sales off to a very strong start, currently
running above the double-digit threshold," Mr. Feuer said. "We believe that, in
part, these recent sales results are reflective of a positive, post-war sales
bounce back."
In addition, the Company said it elected to delay the launch of its major
television branding advertising campaign originally planned for March because
the commercials' upbeat messages would have been inappropriate during the war.
OfficeMax did subsequently launch the new campaign in the beginning of the
second quarter on a much reduced seasonally adjusted basis.
Mr. Feuer noted, "The Company's improved sales in the first quarter take on
added significance in light of a negative temporary sales impact in 84 stores
that were remodeled as part of our previously announced plan to remodel 250
stores in fiscal 2003. The
-more-
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OFFICEMAX, INC.
1Q03 OPERATING RESULTS
MAY 13, 2003
remodels utilize many or all of the features of the Company's newest prototype
format, including reduced shelf heights, enhanced navigational signing and
increased visibility of the CopyMax print-for-pay area, each of which helps make
shopping easier and more efficient for the customer."
COMPANY EXPECTS TO END FISCAL 2003 WITH NO DEBT AND CONTINUED SALES AND EARNINGS
GAINS OfficeMax said it had cash of $76 million and no seasonal short-term
borrowings at the end of the first quarter. This is down from $118 million in
short-term borrowings for the comparable period a year ago. Based on current
estimates, OfficeMax anticipates ending this fiscal year with virtually no debt
for the second consecutive year. In addition, the Company said that improved
working capital management, combined with enhancements in its supply chain
enabled OfficeMax to improve annualized inventory turns to 3.8 times for the
first quarter, compared to 3.6 times in the same quarter last year. OfficeMax
said the inventory turn increases occurred while building to the highest
merchandise in-stock positions in the Company's history. OfficeMax anticipates
further improvement as the year progresses with an inventory turn goal of 4.1
times for fiscal 2003.
The Company said that it anticipates year-over-year improvement continuing in
the second quarter with same-store sales in the mid-single digit range.
OfficeMax noted that, historically, sales in its second quarter comprised of May
through July, are the slowest of the year as customers turn more to outdoor
activities, including vacations, and spend less time in the office. The Company
plans to utilize this slower period to complete the major portion of its store
remodel program and seasonal merchandise space reallocations across the chain.
Mr. Feuer said, "This will prepare the Company's stores for the high volume
third and fourth quarters, which include back-to-school, holiday and the January
back-to-business selling seasons." OfficeMax said that typically it generates,
by far, the vast majority of its full-year earnings during the second half of
the year.
The Company also expects to improve expense leverage and register benefits in
other key operating metrics during the second quarter, narrowing its traditional
seasonal loss to approximately $0.22 per share on a GAAP basis, or approximately
$0.13 per share assuming a full-tax rate. This includes an estimated $0.01 to
$0.02 per share after-tax impact as a result of OfficeMax's required adoption of
the Financial Accounting Standards Board's recent Emerging Issues Task Force
(EITF) guideline 02-16 which addresses the accounting for cash consideration
received from vendors. Consistent with the transition provisions which the EITF
finalized in March 2003, the Company is required to adopt this new guidance
prospectively, or on a going-forward basis, rather than through a one-time,
cumulative adjustment. OfficeMax said this change in accounting principle from
the current GAAP application does not affect the amount of vendor income it will
receive and recognize. However, it could affect how the Company is required to
account for this income; either as an offset to advertising expense or a
reduction of merchandise costs to be recognized on a flow through basis as the
goods are sold. This accounting change reduced earnings by approximately $0.01
per diluted share for the Company's first quarter.
Mr. Feuer concluded by stating, "OfficeMax is in its best position in recent
memory for a very strong second half of the year and sustained growth through
fiscal 2004, 2005 and beyond. The Company expects continued benefits from its
`Max Means More' marketing campaign, in-store Boundless Selling efforts and new
protocols for store execution, combined with further improvements from its
massive new infrastructure programs that were developed and implemented during
the past 36 months."
ABOUT OFFICEMAX
OfficeMax serves its customers through nearly 1,000 superstores, e-commerce Web
sites and direct-mail catalogs. The Company has operations in the United States,
Canada, Puerto Rico, the U.S. Virgin Islands and Mexico. In addition to offering
office products, business machines and related items, OfficeMax superstores
feature CopyMax and FurnitureMax, store-within-a-store modules devoted
exclusively to "print-for-pay" services and office furniture. The Company also
reaches customers in the United States with an offering of over 40,000 items
through its award winning e-commerce site, OfficeMax.com, its direct-mail
catalogs and its outside sales force, all of which are serviced by its three
PowerMax distribution facilities, 17 delivery centers and two national customer
call and contact centers.
# # #
Note: Statements in this news release, other than those concerning historical
information (including information incorporated by reference), contain
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Any information in this news release that is not
historical information is a forward-looking statement
PAGE 3 OF 7
OFFICEMAX, INC.
1Q03 OPERATING RESULTS
MAY 13, 2003
which may be identified by the use of language such as "may," "will," "should,"
"expects," "plans," "anticipates," "estimates," "believes," "thinks,"
"continues," "indicates," "outlook," "looks," "goals," "initiatives,"
"projects," or similar expressions. These statements are likely to address the
Company's growth strategy, future financial performance (including sales, gross
margin and earnings), strategic initiatives, marketing and expansion plans, and
the impact of operating initiatives. The forward-looking statements, which speak
only as of the date the statement was made, are subject to risks, uncertainties
and other factors that could cause actual results to differ materially from
those stated, projected or implied in the forward-looking statements. These
risks and uncertainties include those described in Exhibit 99.1 of the Company's
Annual Report on Form 10-K for the fiscal year ended January 25, 2003, and in
other reports and exhibits to those reports filed with the Securities and
Exchange Commission. You are strongly urged to review such filings for a more
detailed discussion of such risks and uncertainties. The Company's filings with
the Securities and Exchange Commission are available at no charge at www.sec.gov
and www.freeEDGAR.com, as well as on a number of other web sites including
OfficeMax.com, under the investor information section. These risks and
uncertainties also include the following: risks associated with general economic
conditions (including the effects of the continuing hostilities in Iraq and
Afghanistan, the stock market decline, currency devaluation, additional
terrorist attacks and hostilities, slower than anticipated economic recovery and
declining employment rate or other changes in our customers' business
environments, including an increase in bankruptcy filings); increasing
competition that includes office supply superstores, wholesale clubs, contract
stationers, computer and electronics superstore retailers, Internet
merchandisers and mass merchandisers, as well as grocery and drug store chains;
and the result of continuing FAS 142 assessments along with other new accounting
pronouncements. The foregoing list of important factors is not exclusive. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events, or otherwise.
(Financial tables follow)
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OFFICEMAX, INC.
1Q03 OPERATING RESULTS
MAY 13, 2003
OFFICEMAX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
13 WEEKS ENDED
-------------------------------
(Unaudited)
APR. 26, Apr. 27,
2003 2002
---------- ----------
Sales................................................ $1,226,460 $1,178,152
Cost of merchandise sold, including
buying and occupancy costs......................... 918,005 878,824
---------- ----------
Gross profit......................................... 308,455 299,328
Store operating and selling expenses................. 264,403 257,213
General and administrative expenses.................. 33,203 34,013
---------- ----------
Total operating expenses............................. 297,606 291,226
Operating income..................................... 10,849 8,102
Interest expense and other, net...................... 469 1,341
---------- ----------
Income before income taxes
and minority interest............................. 10,380 6,761
Income tax benefit.................................. -- (57,500)
Minority interest................................... 597 743
---------- ----------
Net income.......................................... $ 9,783 $ 63,518
========== ==========
EARNINGS PER COMMON
SHARE DATA:
Basic........................................... $0.08 $0.52
Diluted......................................... $0.08 $0.51
========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
Basic........................................... 124,233 123,204
Diluted......................................... 125,382 124,781
========== ==========
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OFFICEMAX, INC.
1Q03 OPERATING RESULTS
MAY 13, 2003
OFFICEMAX, INC.
BUSINESS SEGMENT DATA
(In thousands, except per share data)
13 WEEKS ENDED
-------------------------------
(Unaudited)
APR. 26, Apr. 27,
2003 2002
---------- ----------
DOMESTIC BUSINESS SEGMENT
Sales........................................... $1,192,124 $1,139,888
Cost of merchandise sold, including
buying and occupancy costs.................... 892,134 849,682
---------- ----------
Gross profit.................................... 299,990 290,206
Operating income................................ 9,975 6,758
Net income...................................... $ 9,161 $ 62,744
========== ==========
INTERNATIONAL BUSINESS SEGMENT
Sales........................................... $ 34,336 $ 38,264
Cost of merchandise sold, including
buying and occupancy costs.................... 25,871 29,142
---------- ----------
Gross profit.................................... 8,465 9,122
Operating income................................ 874 1,344
Minority interest............................... 597 743
Net income...................................... $ 622 $ 774
========== ==========
EARNINGS PER SHARE ON A DILUTED BASIS WERE:
Domestic Business Segment $ 0.07 $ 0.50
International Business Segment $ 0.01 $ 0.01
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OFFICEMAX, INC.
1Q03 OPERATING RESULTS
MAY 13, 2003
OFFICEMAX, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
- ------------------------------------------------------------------------------------------------
APR. 26, JAN. 25,
2003 2003
(UNAUDITED)
- ------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and equivalents $ 75,946 $ 137,143
Accounts receivable, net of allowances
of $1,240 and $1,073, respectively 115,660 90,339
Merchandise inventories 946,085 927,679
Other current assets 32,310 27,585
Total current assets 1,170,001 1,182,746
Property and Equipment:
Buildings and land 36,253 36,133
Leasehold improvements 192,140 183,547
Furniture, fixtures and equipment 649,787 645,466
---------- ----------
Total property and equipment 878,180 865,146
Less: Accumulated depreciation (589,634) (567,709)
---------- ----------
Property and equipment, net 288,546 297,437
Other assets and deferred charges 14,686 14,763
Goodwill, net of accumulated amortization of $89,757 290,495 290,495
---------- ----------
$1,763,728 $1,785,441
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 440,796 $ 437,884
Accrued expenses and other liabilities 206,651 227,022
Accrued salaries and related expenses 43,607 60,190
Taxes other than income taxes 79,775 79,781
Revolving credit facility - -
Redeemable preferred shares - Series B 21,750 21,750
Mortgage loan, current portion 130 128
---------- ----------
Total current liabilities 792,709 826,755
Mortgage loan 1,354 1,390
Other long-term liabilities 159,210 157,587
---------- ----------
Total liabilities 953,273 985,732
---------- ----------
Minority interest 19,517 19,264
Shareholders' equity:
Common stock 886,366 887,556
Deferred stock compensation (282) (153)
Cumulative translation adjustment (2,829) (2,457)
Retained deficit (4,082) (13,865)
Less: Treasury stock, at cost (88,235) (90,636)
---------- ----------
Total shareholders' equity 790,938 780,445
---------- ----------
$1,763,728 $1,785,441
========== ==========
PAGE 7 OF 7
OFFICEMAX, INC.
1Q03 OPERATING RESULTS
MAY 13, 2003
OfficeMax's accompanying news release includes non-GAAP earnings per share
results for the Company's quarter ended April 26, 2003 and estimated results for
the current quarter ending July 26, 2003 and the comparative quarters from
fiscal 2002. For the first quarter, these results include the effect of a
normalized tax provision excluding a change in the Company's valuation allowance
for deferred tax assets. The effect of a normalized tax provision would have a
similar impact on the second quarter estimates. This information is included to
provide operating results on a more comparable basis to OfficeMax's historical
operating results, its industry peers and estimates projected by securities
analysts. Below is a reconciliation of the Company's GAAP earnings per share
results and estimates to the non-GAAP measures presented in this release:
(in 000's, except EPS data) 13 Weeks Ended 13 Weeks Ended
- -------------------------- ------------------------------------------- --------------------------------------------------
(Unaudited) (Unaudited) (Estimated) (Unaudited)
Apr. 26, 2003 EPS Apr. 27, 2002 EPS July 26, 2003 EPS July 27, 2002 EPS
------------- ------ ------------- ------ ------------- -------- ------------- -------
GAAP Net income (loss) $ 9,783 $ 0.08 $ 63,518 $ 0.51 $ (27,000) $ (0.22) $ (33,362) $ (0.27)
Income tax benefit - - (57,500) (0.46) - - - -
Estimated tax (provision)
benefit (3,864) (0.03) (2,377) (0.02) 10,800 $ 0.09 13,178 0.11
------------------- --------------------- --------------------- ------------------------
Non-GAAP net income (loss) $ 5,919 $ 0.05 $ 3,641 $ 0.03 $ (16,200) $ (0.13) $ (20,184) $ (0.16)
=================== ===================== ===================== ========================
Weighted Average number of
common shares outstanding 125,382 124,781 124,750 123,920