OfficeMax 2006 Annual Report Download

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Incorporated 2006 Annual Report

Table of contents

  • Page 1
    Incorporated 2006 Annual Report

  • Page 2
    ... our company in 2006. Contract segment operating expense benefited from lower promotion and marketing costs, reduced payroll, and lower integration costs resulting from the consolidation of distribution centers. Retail segment operating expense benefited from a more targeted and productive approach...

  • Page 3
    ... For the fiscal year ended December 30, 2006 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from Commission File Number: 1-5057 to OFFICEMAX INCORPORATED (Exact name of registrant as specified in its charter) Delaware (State or...

  • Page 4
    ... and Results of Operations...Quantitative and Qualitative Disclosures About Market Risk...Financial Statements and Supplementary Data ...Changes In and Disagreements With Accountants on Accounting and Financial Disclosure ...Controls and Procedures ...Other Information ...12 15 17 44 45 97 97 97...

  • Page 5
    .... OfficeMax customers are served by more than 36,000 associates through direct sales, catalogs, the Internet and retail stores. Our common stock trades on the New York Stock Exchange under the ticker symbol OMX, and our corporate headquarters is in Naperville, Illinois. OfficeMax Incorporated...

  • Page 6
    ... services, technology products and solutions and office furniture. Our retail segment has operations in the United States, Puerto Rico and the U.S. Virgin Islands. Our retail office supply stores feature OfficeMax ImPress, an in-store module devoted to print-for-pay and related services. Our retail...

  • Page 7
    ... centers in Mexico. Each store offers approximately 10,000 stock keeping units (SKUs) of name-brand and OfficeMax private-branded merchandise and a variety of business services targeted at serving the small business customer, including OfficeMax ImPress. As of January 27, 2007, our Retail...

  • Page 8
    ... office products markets are highly and increasingly competitive. Customers have many options when purchasing office supplies and paper, print and document services, technology products and solutions and office furniture. We compete with worldwide contract stationers, office supply superstores...

  • Page 9
    ... periodically and to dispose of assets that do not meet our criteria for return on investment, or cease to warrant retention for other reasons. See Note 2, Sale of Paper, Forest Products and Timberland Assets; and Note 6, Other Operating, Net, of the Notes to Consolidated Financial Statements...

  • Page 10
    ... office products markets are highly and increasingly competitive. Customers have many options when purchasing office supplies and paper, print and document services, technology products and solutions and office furniture. We compete with worldwide contract stationers, office supply superstores...

  • Page 11
    ... with our headquarters consolidation, we have hired approximately 600 new employees to replace existing associates who did not relocate to the new headquarters. As a result, we now have a significant number of associates with limited experience with OfficeMax performing key functions. Although...

  • Page 12
    ... our earnings. Failure to identify desirable products and make them available to our customers when desired and at attractive prices could have an adverse effect on our business and results of operations. Our investment in Boise Cascade, L.L.C. subjects us to the risks associated with the paper and...

  • Page 13
    ...Minnesota New Jersey New York North Carolina Ohio Oregon Pennsylvania 1 1 1 1 1 1 1 1 1 2 Tennessee Texas Utah Virginia Washington Wisconsin Puerto Rico Canada Australia New Zealand 1 2 1 1 1 1 1 7 9 4 OfficeMax, Contract also operated 82 office products stores in Hawaii (2), Canada (51), Australia...

  • Page 14
    ... similar federal and state laws, or have received a claim from a private party, with respect to 15 active sites where hazardous substances or other contaminants are or may be located. The number of active sites is now 12. All 12 active sites relate to operations either no longer owned by the Company...

  • Page 15
    ... 2004 when the Company received claims by a vendor to its retail business that certain employees acted inappropriately in requesting promotional payments and in falsifying supporting documentation. The internal investigation was conducted under the direction of the Company's audit committee and...

  • Page 16
    PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the New York Stock Exchange (the "Exchange"). The Exchange requires each listed company to distribute an annual report to its shareholders. We ...

  • Page 17
    ...Repurchases Information concerning our stock repurchases during the fourth quarter of 2006 is as follows: Total Number of Shares Purchased as Part Maximum Number Total Number of Publicly of Shares That May Yet of Shares Average Price Announced Plans Be Purchased Under the Paid per Share Purchased or...

  • Page 18
    ... Index DOLLARS 150 100 50 0 2001 2002 2003 2004 2005 2006 ANNUAL RETURN PERCENTAGE Years Ending Company\Index Name OfficeMax Incorporated ...S&P 500 Index...S&P 500 Specialty Stores Index...S&P 500 Specialty Retail Index ...Dec 02 -24.28 -22.10 -11.11 -33.52 Dec 03 33.33 28.68 34.66 45.77...

  • Page 19
    ...Item 8. Financial Statements and Supplementary Data" of this Form 10-K. 2006(a) Assets Current assets ...Property and equipment, net ...Timber, timberlands and timber deposits ...Goodwill ...Timber notes receivable ...Other...Liabilities and shareholders' equity Current liabilities ...Long-term debt...

  • Page 20
    ... sale of our paper, forest products and timberland assets to affiliates of Boise Cascade, L.L.C., a new company formed by Madison Dearborn Partners LLC, and recorded a $280.6 million pre-tax gain. Part of the consideration we received in connection with the Sale consisted of timber installment notes...

  • Page 21
    ... (store closures), Contract segment (reorganization) and Corporate and Other segment (headquarters consolidation), respectively. During 2006, we reduced the liability related to the Additional Consideration Agreement that was entered into in connection with the sale of the paper, forest products and...

  • Page 22
    ...-store sales increased 1.0% year-over-year primarily as a result of higher sales in our Contract segment. For more information about our segment results, see the discussion of segment results below. Gross profit margin improved 1.8% of sales to 25.8% of sales in 2006 compared to 24.0% of sales...

  • Page 23
    ... in connection with the Sale. The reduction in the liability reflects the effect of changes in our expectations regarding paper prices over the remaining term of the agreement, and resulted in the recognition of $48.0 million of other non-operating income in 2006. See Note 14, Financial Instruments...

  • Page 24
    ... charges for store closures, contract segment reorganization and our headquarters consolidation, income from continuing operations was $159.2 million, or $2.10 per diluted share, for 2006. Excluding the charges for the write-down of impaired assets of certain retail stores, our legal settlement with...

  • Page 25
    ... broad line of items for the office, including office supplies and paper, technology products and solutions and office furniture. OfficeMax, Contract sells directly to large corporate and government offices, as well as to small and medium-sized offices in the United States, Canada, Australia and New...

  • Page 26
    ... services, technology products and solutions and office furniture. Our retail segment has operations in the United States, Puerto Rico and the U.S. Virgin Islands. Our retail segment's office supply stores feature OfficeMax ImPress, an in-store module devoted to print-for-pay and related services...

  • Page 27
    ... changes to product mix as our Contract segment sales shifted more towards technology and paper products which have lower gross margins than office supplies. The lower gross profit margin in our Contract segment also reflected a more competitive pricing environment for large U.S. contract customers...

  • Page 28
    OfficeMax, Retail ($ in millions) Sales ...Segment income...Sales by Product Line Office supplies and paper ...Technology products ...Office furniture...Sales by Geography United States(a) ...International ...Sales growth (2004 is pro-forma)...Same-location sales growth ...Gross profit margin......

  • Page 29
    ...in Mexico and closed 9 stores in the U.S. Our Retail segment gross profit margin for 2005 was 26.2% of sales, compared to 25.6% of sales in 2004. The increase in gross profit margin was primarily due to a shift in mix to higher margin products and services, a direct result of our new promotional and...

  • Page 30
    ... an independent office products distribution company. Some assets of the businesses we sold, such as the facility near Elma, Washington and Company-owned life insurance, were retained by OfficeMax, as were some liabilities including those associated with retiree pension and benefits, litigation and...

  • Page 31
    ... the Company's combined office products business and to identify opportunities for consolidating operations. Costs associated with the planned closure and consolidation of acquired OfficeMax, Inc. facilities were accounted for under EITF Issue No. 95-3, "Recognition of Liabilities in Connection with...

  • Page 32
    ... 11 stores. These charges were accounted for as exit activities in connection with the acquisition and were not recorded as a charge to income. Since the OfficeMax, Inc. acquisition, we have closed 18 of our U.S. distribution centers and 2 customer service centers. In connection with these closures...

  • Page 33
    ... the life of the payments. Integration and facility closure reserve account activity during 2006, 2005 and 2004, including activity related to the reorganization of our Contract segment, retail store closures and headquarters consolidation, was as follows: Asset Lease\ Contract Severance\ Write-off...

  • Page 34
    ... from the sale of the paper, forest products and timberland assets, and expensed $151.5 million of costs related to the early retirement of debt. During 2004, we announced plans to return between $800 million and $1 billion of the Sale proceeds to shareholders via common or preferred stock buybacks...

  • Page 35
    ...our pension plans totaling $279.8 million. The Asset Purchase Agreement with affiliates of Boise Cascade, L.L.C., required us to fully fund the plans covering active employees of the paper and forest products businesses on an accumulated-benefit-obligation basis using a 6.25% liability discount rate...

  • Page 36
    ...& Poor's Rating Services downgraded our corporate credit rating to B+. The downgrade increased the reporting requirements under our receivable sale agreement and increased the annual cost of that facility by less than $1 million. Our debt structure consists of credit agreements, note agreements, and...

  • Page 37
    ..., 2006, the Company was in compliance with all covenants under the revolver agreement and excess availability was in excess of $75 million. The revolver expires on June 24, 2010. Timber Notes In October 2004, we sold our timberlands as part of the Sale and received credit-enhanced timber installment...

  • Page 38
    ...lease agreement had a base term of seven years and an interest rate of 4.67%. During the first quarter of 2006, we paid $29.1 million to terminate the lease agreement. At December 31, 2005, the capital lease obligation was included in the current portion of long-term debt in the Consolidated Balance...

  • Page 39
    ... 30, 2006 includes $287.1 million of liabilities associated with our retirement and benefit plans and $311.8 million of other long-term liabilities. These amounts have been excluded from the above table as the timing and/or the amount of any cash payment is uncertain. Lease obligations for closed...

  • Page 40
    ... entity that is consolidated for financial reporting purposes. The Company continues servicing the sold receivables and charges the third party conduits a monthly servicing fee at market rates. The program qualifies for sale treatment under FASB Statement No. 140, "Accounting for Transfers and...

  • Page 41
    ...or receive substantial cash payments from, Boise Cascade, L.L.C. Under the Additional Consideration Agreement, the Sale proceeds may be adjusted upward or downward based on paper prices during the six years following the Sale, subject to annual and aggregate caps. Specifically, we have agreed to pay...

  • Page 42
    ... as obligations for pension plans and other postretirement benefits, are not reflected in the table. Financial Instruments Year Ended 2006 2007 Debt Short-term borrowings ...Average interest rates ...Long-term debt Fixed-rate debt payments Average interest rates. . Timber notes securitized . Average...

  • Page 43
    ... expected purchase levels. Volume-based rebates and allowances earned are initially recorded as a reduction in the cost of merchandise inventories and are included in operations (as a reduction of cost of goods sold) in the period the related product is sold. Amounts received under other promotional...

  • Page 44
    ...the associated assets and obligations to the new plans. Effective October 29, 2004, under the terms of the Asset Purchase Agreement with affiliates of Boise Cascade, L.L.C., we transferred sponsorship of the plans covering active employees of the paper and forest products businesses to Boise Cascade...

  • Page 45
    ... between OfficeMax and Boise Cascade, L.L.C. was entered into in connection with the Sale. Under the Additional Consideration Agreement, we may be required to make substantial cash payments to, or receive substantial cash payments from, Boise Cascade, L.L.C. depending on average annual paper prices...

  • Page 46
    ... using a discount rate reflecting our estimated average cost of funds. In estimating future cash flows, we used our internal budgets and operating plans, which include assumptions about retail store openings and closures, the consolidation of our distribution networks and improvements in our supply...

  • Page 47
    ... benefit pension and other postretirement plans resulted in an increase in Shareholders' Equity of $11.9 million, which was net of income taxes of $7.6 million. We currently measure the funded status of our defined benefit plans as of the date of our fiscal year-end statement of financial position...

  • Page 48
    ... of Accounting Policies." The EITF Issue is effective for the Company beginning in fiscal year 2007. We collect such taxes from our customers and account for them on a net (excluded from revenues) basis. The adoption of EITF Issue No. 06-03 will not impact our consolidated financial statements, but...

  • Page 49
    ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA OfficeMax Incorporated and Subsidiaries Consolidated Statements of Income (Loss) Fiscal Year Ended December 30, December 31, December 31, 2006 2005 2004 (thousands, except per-share amounts) $ 8,965,707 $ 9,157,660 $ 13,270,196 6,656,497 6,960,390...

  • Page 50
    OfficeMax Incorporated and Subsidiaries Consolidated Balance Sheets December 30, 2006 ASSETS Current assets: Cash and cash equivalents ...Receivables, net ...Related party receivables ...Inventories ...Deferred income taxes...Other...Total current assets ...Property and equipment: Land and land ...

  • Page 51
    ... of long-term debt ...Accounts payable: Trade...Related parties ...Accrued expenses and other current liabilities: Compensation and benefits ...Other ...Liabilities related to assets held for sale ...Total current liabilities ...Long-term debt: Long-term debt, less current portion ...Timber notes...

  • Page 52
    ...Other ...Changes other than from acquisition of business Receivables ...Inventories ...Accounts payable and accrued liabilities ...Current and deferred income taxes ...Pension and other postretirement benefits payments ...Other ...Cash provided by (used for) operations...Cash provided by (used for...

  • Page 53
    ...,699) - For the Fiscal Years ended December 30, 2006, December 31, 2005 and December 31, 2004 Total Accumulated ShareOther Additional Deferred holders' Comprehensive Paid-In Retained ESOP Common Preferred Equity Loss Capital Earnings Benefit Stock Stock (thousands, except share amounts) $ (193,818...

  • Page 54
    ... retail stores located throughout the United States, Canada, Australia, New Zealand and Mexico. The Company's common stock is traded on the New York Stock Exchange under the ticker symbol OMX. The Company's corporate headquarters is located in Naperville, Illinois, and the OfficeMax website address...

  • Page 55
    ... warranty contracts sold by the Company are assumed by an unrelated third party. Costs associated with these contracts are recognized in the same period as the related revenue. Fees for shipping and handling charged to customers in connection with sale transactions are included in sales. Costs...

  • Page 56
    ... of the Consolidated Statements of Cash Flows. Accounts Receivable Accounts receivable relate primarily to amounts owed by customers for trade sales of products and services and amounts due from vendors under volume purchase rebate, cooperative advertising and various other marketing programs. An...

  • Page 57
    ..., market conditions and product obsolescence. If the estimated realizable value is less than cost, the inventory value is reduced to its estimated realizable value. Throughout the year, the Company performs physical inventory counts at all locations. For periods subsequent to each retail location...

  • Page 58
    ..., in connection with the closure of 109 retail stores in 2006, and concluded there was no impairment. Intangible assets represent the values assigned to trade names, customer lists and relationships, noncompete agreements and exclusive distribution rights of businesses acquired. Trade name assets...

  • Page 59
    ... Matters The Company has adopted the provisions of SFAS No. 143, "Accounting for Asset Retirement Obligations," in accounting for landfill closure costs related to the sold paper, forest products and timberland assets. This statement requires legal obligations associated with the retirement of...

  • Page 60
    ...expense in the periods in which the related sales occur. Advertising expense was $240.4 million in 2006, $276.2 million in 2005 and $344.1 million in 2004, and is recorded in operating and selling expenses in the Consolidated Statements of Income (Loss). Capitalized catalog costs, which are included...

  • Page 61
    ... benefit pension and other postretirement plans resulted in an increase in Shareholders' Equity of $11.9 million, which was net of income taxes of $7.6 million. We currently measure the funded status of our defined benefit plans as of the date of our fiscal year-end statement of financial position...

  • Page 62
    ... of Accounting Policies." The EITF Issue is effective for the Company beginning in fiscal year 2007. We collect such taxes from our customers and account for them on a net (excluded from revenues) basis. The adoption of EITF Issue No. 06-03 will not impact our consolidated financial statements, but...

  • Page 63
    ...from the Sale and related transactions. In 2004, the Company used a portion of these proceeds to repurchase and retire outstanding debt, to redeem outstanding Series D preferred stock and to make contributions to the pension plans for active employees who became employees of Boise Cascade, L.L.C. in...

  • Page 64
    ... the Company's combined office products business and to identify opportunities for consolidating operations. Costs associated with the planned closure and consolidation of acquired OfficeMax, Inc. facilities were accounted for under EITF Issue No. 95-3, "Recognition of Liabilities in Connection with...

  • Page 65
    ... the life of the payments. Integration and facility closure reserve account activity during 2006, 2005 and 2004, including activity related to the reorganization of the Contract segment, retail store closures and headquarters consolidation, was as follows: Lease\ Asset Contract Severance\ Write-off...

  • Page 66
    ... 5. Net Income (Loss) Per Common Share Basic net income (loss) per share is calculated using net earnings available to common stockholders divided by the weighted-average number of shares of common stock outstanding during the year. Diluted net income (loss) per share is similar to basic net income...

  • Page 67
    ... timberlands ...Gain on sale of forest products assets (Note 2) ...Integration activities and facility closure costs (Note 4) ...Loss on sale and write-down of Yakima assets(b) ...Costs incidental to the Sale (Note 2) ...Legal settlement(c) ...Other, net ...Earnings from affiliates...(a) (b) 2005...

  • Page 68
    ... the years ended December 30, 2006 and December 31, 2005 and 2004 differed from the amounts computed by applying the statutory U.S. Federal income tax rate of 35% to pre-tax income (loss) from continuing operations as a result of the following: 2006 Tax (provision) benefit at statutory rate...State...

  • Page 69
    ..., which are available to reduce future regular Federal income taxes, if any, over an indefinite period, and foreign tax credit carryforwards of $11.8 million with an expiration date of 2016. The Company also has deferred tax assets related to various state net operating losses of $24.3 million, net...

  • Page 70
    ... consolidated for financial reporting purposes. The Company continues servicing the sold receivables and charges the third party conduits a monthly servicing fee at market rates. The program qualifies for sale treatment under SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets...

  • Page 71
    ... $66 million) of the equity units received in exchange for the Company's investment carry no voting rights. This investment is accounted for under the cost method as Boise Cascade, L.L.C. does not maintain separate ownership accounts for its members, and the Company has less than a 20 percent voting...

  • Page 72
    ... to accruals for estimated costs associated with retail store closures and the consolidation of the Company's distribution center network and customer service centers. During 2005, the Company filed the remaining tax returns related to the pre-acquisition operations of OfficeMax, Inc. and adjusted...

  • Page 73
    ...Receivable In October 2004, OfficeMax sold its timberlands as part of the Sale. In exchange for the timberlands, the Company received timber installment notes receivable in the amount of $1,635 million, which were credit enhanced with guarantees. The guarantees were issued by highly-rated financial...

  • Page 74
    ... Scheduled Debt Maturities The scheduled payments of long-term debt, excluding timber notes due in 2019, are $25.6 million in 2007, $35.1 million in 2008, $50.9 million in 2009, $15.8 million in 2010, $0.5 million in 2011 and $282.7 million thereafter. Credit Agreements On June 24, 2005, the Company...

  • Page 75
    ... 30, 2006, the Company was in compliance with all covenants under the revolver agreement and excess availability was in excess of $75 million. The revolver expires on June 24, 2010. Timber Notes In October 2004, the Company sold its timberlands as part of the Sale and received creditenhanced timber...

  • Page 76
    ... agreement had a base term of seven years and an interest rate of 4.67%. During the first quarter of 2006, the Company paid $29.1 million to terminate the lease agreement. At December 31, 2005, the capital lease obligation was included in the current portion of long-term debt in the Consolidated...

  • Page 77
    ... methods and assumptions were used to estimate the fair value of each class of financial instruments: • Timber notes receivable: The fair value is determined as the present value of expected future cash flows discounted at the current interest rate for loans of similar terms with comparable credit...

  • Page 78
    ...time it is reclassified to operations. Prior to the Sale, the Company had a commodity-price risk management strategy that used derivative instruments to minimize significant, unanticipated earnings fluctuations caused by energy price volatility. The activities of the Company's paper, forest products...

  • Page 79
    ... to hedge the interest rate risk associated with the issuance of debt securities in connection with the securitization of the timber notes received in the Sale. (See Note 13 Debt, for additional information related to the timber notes and the related securitization transaction.) The Company paid $19...

  • Page 80
    ... businesses, and transferred the associated assets and obligations to the new plans. Effective October 29, 2004, under the terms of the Asset Purchase Agreement, the Company transferred sponsorship of the plans covering active employees of the paper and forest products businesses to Boise Cascade...

  • Page 81
    ...SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions." Accordingly, there was no gain related to the plan changes recognized in the Consolidated Statement of Income (Loss) for 2005. The reduction in the accumulated post-retirement benefit obligation will be recognized...

  • Page 82
    ... current and long-term ...Accumulated other comprehensive loss...Deferred income tax assets...Components of Net Periodic Benefit Cost (Income) The components of net periodic benefit cost (income) are as follows: Pension Benefits 2006 2005 2004 Service cost ...Interest cost ...Expected return on plan...

  • Page 83
    ... gross domestic product and earnings growth, as well as other economic factors. The weights assigned to each asset class are based on the Company's investment strategy. The weighted-average expected return on plan assets used in the calculation of net periodic pension benefit cost for 2006 is 8.00...

  • Page 84
    ... returns, the funded position of the plans and market risks. Occasionally, the Company may utilize futures or other financial instruments to alter the pension trust's exposure to various asset classes in a lower-cost manner than trading securities in the underlying portfolios. At December 30, 2006...

  • Page 85
    ... benefit payments are paid by the Company. Future benefit payments by year are estimated to be as follows: Pension Benefits 2007 ...2008 ...2009 ...2010 ...2011 ...Years 2012-2016 ...Defined Contribution Plans The Company also sponsors defined contribution plans for most of its employees. Through...

  • Page 86
    ... requires all companies to apply a fair-value-based measurement method in accounting for share-based payment transactions with employees. Effective January 1, 2006, the Company adopted SFAS 123R using the modified prospective transition method. Accordingly, the financial statements for periods prior...

  • Page 87
    ... accounted for share-based awards using SFAS 123, the adoption of SFAS 123R did not have a material impact on the Company's financial position, results of operations or cash flows. The Company sponsors several share-based compensation plans, which are described below. Compensation costs related...

  • Page 88
    ...has lapsed. No entries are made in the financial statements on the grant date of restricted stock and RSU awards. The Company recognizes compensation expense related to these awards over the vesting periods based on the closing prices of the Company's common stock on the grant dates. If these awards...

  • Page 89
    ... purchase shares of common stock to key employees of the Company. The exercise price of awards under the KESOP was equal to the fair market value of the Company's common stock on the date the options were granted. Options granted under the KESOP expire, at the latest, ten years and one day following...

  • Page 90
    ... December 2006. 17. Segment Information The Company manages its business using three reportable segments: OfficeMax, Contract; OfficeMax, Retail; and Corporate and Other. Results for periods prior to the sale include the operations of the Boise Building Solutions and Boise Paper Solutions segments...

  • Page 91
    ... services, technology products and solutions and office furniture. OfficeMax, Retail has operations in the United States, Puerto Rico and the U.S. Virgin Islands. OfficeMax, Retail office supply stores feature OfficeMax ImPress, an in-store module devoted to print-for-pay and related services...

  • Page 92
    .... The Company also had a 47% interest in an oriented strand board plant in Canada, which was accounted for under the equity method and sold in May 2004. The following table summarizes by geography, net sales for fiscal years 2006, 2005 and 2004, and long-lived assets at each year end: 2006 Net sales...

  • Page 93
    ...external customers by product line are as follows: 2006 OfficeMax, Contract Office supplies and paper ...Technology products ...Office furniture...OfficeMax, Retail Office supplies and paper ...Technology products ...Office furniture...Total OfficeMax Office supplies and paper ...Technology products...

  • Page 94
    ... 31, 2004 OfficeMax, Contract . . $ 4,368.8 $ OfficeMax, Retail ...4,481.3 8,850.1 Boise Building Solutions...Boise Paper Solutions. Corporate and Other . . Assets held for sale. Intersegment eliminations ...Interest expense ...Interest income and other ...Debt retirement expense ...Timber notes...

  • Page 95
    ..., for more information related to the Additional Consideration Agreement). In connection with the Sale, the Company entered into a paper supply contract with affiliates of Boise Cascade, L.L.C. under which we are obligated to purchase our North American requirements for cut-size office paper, to the...

  • Page 96
    ... financial position or results of operations. Over the past several years and continuing into 2006, the Company has been named a defendant in a number of cases where the plaintiffs allege asbestos-related injuries from exposure to asbestos products or exposure to asbestos while working at job sites...

  • Page 97
    ... 2004 when the Company received claims by a vendor to its retail business that certain employees acted inappropriately in requesting promotional payments and in falsifying supporting documentation. The internal investigation was conducted under the direction of the Company's audit committee and...

  • Page 98
    ... the Company's Elma, Washington manufacturing facility that is accounted for as a discontinued operation. Quarters added together may not equal full year amount because each quarter is calculated on a stand-alone basis. The Company's common stock (symbol OMX) is traded on the New York Stock Exchange...

  • Page 99
    ... of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the...

  • Page 100
    ... the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 30, 2006 and December 31, 2005, and the related consolidated statements of income (loss), shareholders' equity, and cash flows for each of the years in the three-year period...

  • Page 101
    ... registered public accounting firm regarding accounting or financial disclosure matters. ITEM 9A. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures As of the end of the period covered by this report, the chief executive officer and chief financial officer directed and...

  • Page 102
    ... Prior to his election as executive vice president, finance of the Company, Mr. Civgin served as senior vice president and chief financial officer of General Binding Corporation, a designer, manufacturer and distributor of branded office equipment, related supplies and laminating equipment and films...

  • Page 103
    ... applies to all OfficeMax employees and directors, including our senior financial officers. Copies of the Code are available, free of charge, on our website at www.officemax.com, by clicking on "About us," "Investors" and then "Code of Ethics." You also may obtain copies of this Code by contacting...

  • Page 104
    ...Plan have been replaced by the OfficeMax Incentive and Performance Plan. None of the following are included in this chart: (a) interests in shares of common stock in the OfficeMax Common Stock Fund held by the trustee of the company's 401(k) Savings Plan, (b) Series D Preferred Stock in the Employee...

  • Page 105
    ... AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as a part of this Form 10-K: (1) Consolidated Financial Statements. The Consolidated Financial Statements, the Notes to Consolidated Financial Statements and the Report of Independent Registered Public Accounting Firm are...

  • Page 106
    ... Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. OfficeMax Incorporated By /S/ SAM K. DUNCAN Sam K. Duncan Chief Executive Officer Dated: February 28, 2007 Pursuant to the...

  • Page 107
    ...30, 2006, annual report on Form 10-K of OfficeMax Incorporated. Our report on the Company's consolidated financial statements refers to changes in accounting for stock-based compensation and defined benefit and other postretirement plans during 2006. /s/ KPMG LLP KPMG LLP Chicago, Illinois February...

  • Page 108
    ... Annual Report on Form 10-K for the Year Ended December 30, 2006 Exhibit Number 2.1 Incorporated by Reference File Exhibit Filing Filed Exhibit Description Form Number Number Date Herewith Agreement and Plan of Merger dated 8-K 001-05057 2 7/14/03 as of July 13, 2003, among Boise Cascade Corporation...

  • Page 109
    ... Agreement 10-Q among Boise Cascade Corporation (now OfficeMax Incorporated), Forest Products Holdings, L.L.C., and Boise Cascade Holdings, L.L.C. dated October 29, 2004 Registration Rights Agreement among Kooskia Investment Corporation, Forest Products Holdings, L.L.C., and Boise Land & Timber...

  • Page 110
    ...Investment Corporation, Forest Products Holdings, L.L.C., and Boise Land & Timber Holdings Corp., dated October 29, 2004 Purchase Agreement dated December 13, 2004, between OMX Timber Finance Investments I, LLC, OMX Timber Finance Investments II, LLC, OfficeMax Incorporated, Wachovia Capital Markets...

  • Page 111
    ...10.36†Form of Agreement with Executive 10-K Officers, as amended through September 26, 2003 (for executive officers who were employees of Boise Cascade Corporation) Supplemental Healthcare Plan for Executive Officers, as amended through January 1, 2003 Executive Officer Severance Pay Policy, as...

  • Page 112
    ... as amended through September 26, 2003 Form of Agreement with Executive Officers, as amended through September 26, 2003 (for Boise Office Solutions employees who were executive officers of Boise Cascade Corporation) 2001 Key Executive Deferred Compensation Plan, as amended through September 26, 2003...

  • Page 113
    ... 2005 Annual Incentive Award 8-K Agreement between OfficeMax Incorporated and Sam Duncan dated April 18, 2005 Amended and Restated Going Public 8-K Agreement dated as of May 17, 2005 Letter Agreement between OfficeMax Incorporated and Christopher C. Milliken, effective July 13, 2005 Form of 2005...

  • Page 114
    ... 2003 OfficeMax Incentive and Performance Plan 8-K 001-05057 99.2 12/14/05 10.67†10.68†10.69†10.70 8-K 001-05057 001-05057 001-05057 001-05057 99.3 10.1 10.2 99.1 12/14/05 2/15/06 2/15/06 6/23/06 Form of 2006 Annual Incentive Award 8-K Agreement Form of 2006 Restricted Stock Unit...

  • Page 115
    ... Company of New York) was filed as exhibit 99.2 in our Current Report on Form 8-K filed on December 10, 2001. The Fourth Supplemental Indenture dated October 21, 2003, between Boise Cascade Corporation and U.S. Bank Trust National Association was filed as exhibit 4.1 in our Current Report on Form...

  • Page 116
    Exhibit 11 OFFICEMAX INCORPORATED AND SUBSIDIARIES Computation of Per Share Earnings Fiscal Year Ended December 30, December 31, December 31, 2006 2005 2004 (thousands, except per-share amounts) Basic Income (loss) from continuing operations ...Preferred dividends ...Basic income (loss) from ...

  • Page 117
    ... Ratio of Earnings to Fixed Charges December 30, 2006 Fiscal Year Ended December 31, December 31, December 31, 2005 2004 2003 (thousands, except ratios) December 31, 2002 Interest costs ...Guarantee of interest on ESOP debt...Interest capitalized during the period ...Interest factor related to...

  • Page 118
    ...minority interest, and cumulative effect of accounting changes ...Undistributed (earnings) losses of less than 50% owned entities, net of distributions received ...Total fixed charges...Less interest capitalized...Total earnings before fixed charges ...Ratio of earnings to combined fixed charges and...

  • Page 119
    ...: State or Other Jurisdiction of Incorporation or Organization Picabo Holdings, Inc. OfficeMax Nevada Company Loving Creek Funding Corporation Grand & Toy Limited National Office Products Ltd. OfficeMax Southern Company OfficeMax New Zealand Limited OfficeMax North America, Inc. OMX Timber Finance...

  • Page 120
    ... I, Sam K. Duncan, chief executive officer of OfficeMax Incorporated, certify that: 1. 2. I have reviewed this annual report on Form 10-K of OfficeMax Incorporated; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary...

  • Page 121
    ...2002 I, Don Civgin, chief financial officer of OfficeMax Incorporated, certify that: 1. 2. I have reviewed this annual report on Form 10-K of OfficeMax Incorporated; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary...

  • Page 122
    ... OFFICER AND CHIEF FINANCIAL OFFICER OF OFFICEMAX INCORPORATED We are providing this Certificate pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C., Section 1350. It accompanies OfficeMax Incorporated's annual report on Form 10-K (the "Report") for the year ended December 30, 2006...

  • Page 123
    ... of the Board and Chief Executive Officer, OfficeMax Incorporated Harold Mulet Executive Vice President, Retail Stores Financial and Other Company Information Questions regarding stock holdings, certificate replacement/transfer, dividends and address changes should be addressed to: Wells Fargo...

  • Page 124
    Incorporated 2006 Annual Report OfficeMax Incorporated 263 Shuman Boulevard Naperville, IL 60563 Tel (630) 438-7800 The 2006 annual report was printed on recycled paper using soy-based ink.