OfficeMax 2007 Annual Report Download

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Incorporated 2007 Annual Report

Table of contents

  • Page 1
    Incorporated 2007 Annual Report

  • Page 2
    ...initiatives in 2007 were supported by improved marketing programs for new store openings, branding, and selling events, including our successful and popular holiday marketing website ElfYourself.com. Additionally, our supply chain initiatives benefited merchandise inventory levels resulting in lower...

  • Page 3
    ... Common Stock, $2.50 par value Shares Outstanding as of February 22, 2008 75,904,885 Document incorporated by reference Portions of the registrant's proxy statement relating to its 2008 annual meeting of shareholders to be held on April 23, 2008 (''OfficeMax Incorporated's proxy statement'') are...

  • Page 4
    ... 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 43 44 95 95 95 PART...

  • Page 5
    ... 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 (formerly Boise Cascade Corporation) was organized...

  • Page 6
    ... the paper supply contract.) As of January 26, 2008, OfficeMax Contract operated 51 distribution centers and 6 customer service and outbound telesales centers. OfficeMax, Contract also operated 75 office products stores in Canada, Hawaii, Australia and New Zealand. OfficeMax, Contract sales for 2007...

  • Page 7
    ... paper operations of Boise Cascade, L.L.C., under a 12-year paper supply contract we entered into at the time of the Sale. As of January 26, 2008, our Retail segment operated 981 stores in the U.S. and Mexico, three large distribution centers in the U.S., and two small distribution centers in Mexico...

  • Page 8
    ... products, prices and services to multiple locations as well as medium and small businesses at a competitive cost. We believe our OfficeMax, Retail segment competes favorably based on the quality of our customer service, our innovative store formats, the breadth and depth of our merchandise...

  • Page 9
    ... paper, print and document services, technology products and solutions and office furniture. We compete with worldwide contract stationers, office supply superstores, mass merchandisers, wholesale clubs, computer and electronics superstores, Internet merchandisers, direct-mail distributors, discount...

  • Page 10
    ...rates, as well as rising employee benefit costs, including insurance costs and compensation programs. Changes in any of these factors, including especially a shortage of available workforce in the areas in which we operate, could interfere with our ability to adequately provide services to customers...

  • Page 11
    ...business and results of our operations. Compromises of our information security may adversely affect our business. Through our sales and marketing activities, we collect and store certain personal information that our customers provide to purchase products or services, enroll in promotional programs...

  • 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
    ... Michigan Minnesota New Jersey New York North Carolina Ohio Oregon Pennsylvania 1 1 1 1 1 2 1 1 1 1 Tennessee Texas Utah Virginia Washington Wisconsin Puerto Rico Canada Australia New Zealand 1 2 1 1 1 1 1 7 10 4 OfficeMax, Contract also operated 75 office products stores in Hawaii (2), Canada...

  • Page 14
    ... Nevada New Jersey New Mexico New York North Carolina North Dakota Ohio 2 1 1 9 43 42 5 27 3 9 14 5 9 30 28 3 53 Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Virginia Washington West Virginia Wisconsin Wyoming Puerto Rico U.S. Virgin Islands Mexico...

  • Page 15
    ... in 2008, we have 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. The claims vary widely and often are not specific about the plaintiffs' contacts with the Company...

  • Page 16
    ...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 are making this Form 10-K available to our shareholders...

  • Page 17
    ... stock awards. 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 Purchased Paid per Share or Programs Plans or Programs 3,731 935 618 $33.35 $26.08 $24.61 - - - - - - Period...

  • Page 18
    ...2007 22FEB200819291745 ANNUAL RETURN PERCENTAGE Years Ending Company\Index Name OfficeMax Incorporated ...S&P 500 Index ...S&P 500 Specialty Retail...20.27 INDEXED RETURNS Years Ending Company\Index Name OfficeMax Incorporated ...S&P 500 Index ...S&P 500 Specialty Retail Index . Base Period Dec 02 $...

  • Page 19
    ... and ''Item 8. Financial Statements and Supplementary Data'' of this Form 10-K. 2007(a) 2006(b) 2005(c) 2004(d) 2003(e) (millions, except per-share amounts) Assets Current assets ...Property and equipment, net ...Timber, timberlands and timber deposits . Goodwill ...Timber notes receivable ...Other...

  • 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
    ... our results include: • In 2007, we recognized pre-tax income of $32.5 million and received cash payments from Boise Cascade L.L.C. of $32.5 million related to the Additional Consideration Agreement that was entered into in connection with the 2004 sale of our paper, forest products and timberland...

  • Page 22
    ... Department of Justice related to allegations that the Company submitted false claims when it sold office supply products manufactured in countries not permitted by the Trade Agreements Act to U.S. government agencies. We incurred $14.4 million of costs related to our early retirement of debt, and...

  • Page 23
    Year Ended (millions, except per-share amounts) December 29, 2007 As Special Reported Items Segment Sales OfficeMax, Contract ...$4,816.1 OfficeMax, Retail ...4,265.9 9,082.0 Segment Income (loss) Office, Contract ...$ 207.9 $ OfficeMax, Retail ...173.7 Corporate and Other ...(37.4) Operating income...

  • Page 24
    ... of sales in 2007 from 18.3% of sales a year earlier. The improvement in operating and selling expenses as a percent of sales was the result of targeted cost reduction programs, including lower promotion and marketing costs and delivery expenses in the Contract segment, and reduced store labor and...

  • Page 25
    ... and is not netted against the related interest expense in our Consolidated Statements of Income (Loss). Excluding the interest income earned on the timber notes receivable, interest income was $5.4 million and $7.2 million for the years ended December 29, 2007 and December 30, 2006, respectively...

  • Page 26
    ... percent of sales was the result of targeted cost reduction programs, including lower promotion and marketing costs, payroll and integration expenses in the Contract segment, and reduced store labor and marketing costs in the Retail segment. General and administrative expenses were 4.0% of sales for...

  • Page 27
    ... Canada, Hawaii, Australia and New Zealand, through office products stores. OfficeMax, Retail is a retail distributor of office supplies and paper, print and document services, technology products and solutions and office furniture. Our retail segment has operations in the United States, Puerto Rico...

  • Page 28
    ... renewing accounts with lower gross margin rates and the impact of paper price increases throughout the year. Operating expenses for the Contract segment decreased 0.8% of sales to 17.5% of sales for 2007 from 18.3% of sales a year earlier. Fiscal year 2006 included $10.3 million of costs related to...

  • Page 29
    ... United States, Puerto Rico and the U.S. Virgin Islands. 29.5% 25.4% 4.1% 29.3% 27.3% 2.0% 26.2% 25.6% 0.6% 2007 Compared With 2006 Retail segment sales for 2007 increased by 0.3% to $4,265.9 million from $4,251.2 million for 2006. Retail segment same-location sales decreased 1.2% year-over-year...

  • Page 30
    ... of the 109 strategic store closings during the first quarter of 2006 and the 53rd week included in 2005 results. Retail segment same-location sales increased 0.1% year-over-year during 2006. During 2006, we opened 44 new retail stores in the U.S., ending the period with 859 retail stores in the...

  • Page 31
    ...a result of the OfficeMax, Inc. acquisition has allowed management to evaluate 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...

  • Page 32
    ...$7.3 million for employee severance related to the reorganization. The Contract segment also recorded an additional $3.0 million of costs during 2006, primarily related to a facility closure and employee severance. During 2006, we closed 109 underperforming, domestic retail stores and recorded a pre...

  • Page 33
    Integration and facility closure reserve account activity during 2007, 2006 and 2005, including activity related to the reorganization of our Contract segment, retail store closures and headquarters consolidation, was as follows: Lease\ Asset Contract Severance\ Write-off & Terminations Retention ...

  • Page 34
    ..., 2007, we entered into a new loan agreement (See Note 12, Debt of the notes to Consolidated Financial Statements in ''Item 8, Financial Statements and Supplementary Data'' of this Form 10-K). The new loan agreement amended our existing revolving credit facility and replaced our accounts receivable...

  • Page 35
    ... in supply chain and information systems. Details of 2007 capital investment by segment are included in the table below: 2007 Capital Investment by Segment Acquisitions Property and Equipment (millions) Total $ 43.8 98.3 142.1 - $142.1 OfficeMax, Contract ...OfficeMax, Retail ...Corporate and...

  • Page 36
    .... Credit Agreements On July 12, 2007, we entered into an Amended and Restated Loan and Security Agreement (the ''Loan Agreement'') with a group of banks. The Loan Agreement amended the Company's existing revolving credit facility and replaced our accounts receivable securitization program. The new...

  • Page 37
    ... paying interest of 5.42% and 5.54%, respectively. As a result of these transactions, we received $1,470 million in cash from the OMXQ's, and over 15 years will earn approximately $82.5 million per year in interest income on the timber installment notes receivable and incur annual interest expense...

  • Page 38
    ... Statements in ''Item 8. Financial Statements and Supplementary Data'' in this Form 10-K. (c) The current portion of these liabilities is also included. (d) Our Consolidated Balance Sheet as of December 29, 2007 includes $200.3 million of liabilities associated with our retirement and benefit plans...

  • Page 39
    ..., 2007, we entered into a new loan agreement (See Note 12, Debt, of the notes to Consolidated Financial Statements in ''Item 8, Financial Statements and Supplementary Data'' of this Form 10-K). The new loan agreement amended our existing revolving credit facility and replaced our accounts receivable...

  • Page 40
    ... new-year office supply restocking month of January, the back-to-school period and the holiday selling season, respectively. Disclosures of Financial Market Risks Our debt is predominantly fixed-rate. At December 29, 2007, the estimated current market value of our debt, based on quoted market prices...

  • Page 41
    ... as obligations for pension plans and other postretirement benefits, are not reflected in the table. Financial Instruments Year Ended 2007 2008 Debt Short-term borrowings ...Average interest rates ...Long-term debt Fixed-rate debt payments Average interest rates . Timber notes securitized . Average...

  • Page 42
    ... to promote the sale of vendor products, or to earn rebates that reduce the cost of merchandise purchased. Vendor rebates and allowances are accrued as earned. Rebates and allowances received as a result of attaining defined purchase levels are accrued over the incentive period based on the terms of...

  • Page 43
    ... rates, and the effect on our financial position and results of operations could be material. For 2008, our discount rate assumption used in the measurement of our net periodic benefit cost was 6.3%, and our expected return on plan assets was 8.0%. Using these assumptions, our 2008 pension expense...

  • Page 44
    ... interest, expected to be settled within the next year are included in accrued expenses and other current liabilities with the remainder included in other long-term obligations in the Consolidated Balance Sheets. Interest and penalties related to income tax exposures are recognized as incurred and...

  • Page 45
    ... closing of the Sale continue to be liabilities of OfficeMax, in addition to the liabilities related to certain sites referenced in Note 18, Legal Proceedings and Contingencies, of the Notes to Consolidated Financial Statements in ''Item 8. Financial Statements and Supplementary Data'' in this Form...

  • Page 46
    ...EITF Issue was 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 did not impact our consolidated financial statements. In September 2006, the FASB issued...

  • Page 47
    ... the first annual reporting period beginning on or after December 15, 2008. SFAS No. 141R will impact the accounting for business combinations completed beginning January 1, 2009. In December 2007, the FASB issued SFAS No. 160, ''Noncontrolling Interests in Consolidated Financial Statements.'' SFAS...

  • Page 48
    ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA OfficeMax Incorporated and Subsidiaries Consolidated Statements of Income (Loss) Fiscal Year Ended December 30, December 31, 2006 2005 $ 8,965,707 6,656,497 2,309,210 1,641,147 361,818 140,343 165,902 - (123,082) 89,723 ...

  • Page 49
    OfficeMax Incorporated and Subsidiaries Consolidated Balance Sheets December 29, 2007 December 30, 2006 (thousands, except share and per-share amounts) ASSETS Current assets: Cash and cash equivalents Receivables, net ...Related party receivables . Inventories ...Deferred income taxes ...Other ...

  • Page 50
    OfficeMax Incorporated and Subsidiaries Consolidated Balance Sheets December 29, 2007 December 30, 2006 (thousands, except share and per-share amounts) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term borrowings ...Current portion of long-term debt ...Accounts payable: Trade ...

  • Page 51
    ...of income tax ...Pension and other postretirement benefits expense . Discontinued operations ...(Gain) loss on sales of assets ...Non-cash asset write-downs ...Other, principally stock compensation ...Changes other than from acquisition of business: Receivables ...Inventories ...Accounts payable and...

  • Page 52
    OfficeMax Incorporated and Subsidiaries Consolidated Statements of Shareholders' Equity For the Fiscal Years ended December 29, 2007, December 30, 2006 and December 31, 2005 Common Shares Outstanding Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Total Shareholders' Equity...

  • Page 53
    ...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 is www.officemax.com. The Company manages its business using three reportable segments: OfficeMax, Contract; OfficeMax, Retail...

  • Page 54
    ... 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 55
    ...its customer and vendor base, which extends across many different industries and geographic regions. The Company has an agreement with a third-party service provider that manages the Company's private label credit card program and directly extends credit to customers. Prior to July 2007, the Company...

  • Page 56
    ... in the first quarters of 2007 and 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 have an indefinite life...

  • Page 57
    ... related to discount rates, rates of return on investments, future compensation costs, healthcare cost trends, benefit payment patterns and other factors. The Company measures changes in the funded status of its plans using actuarial models in accordance with SFAS 87, ''Employers' Accounting...

  • Page 58
    ... and closed-site monitoring costs recorded on the Company's Consolidated Balance Sheet was $4.2 million at December 29, 2007 and December 30, 2006. These obligations are related to assets held for sale. Environmental liabilities that relate to the operation of the sold paper, forest products and...

  • Page 59
    ... catalog costs, which are included in other current assets in the Consolidated Balance Sheets, totaled $7.6 million at December 29, 2007, and $9.3 million at December 30, 2006. Pre-Opening Expenses The Company incurs certain non-capital expenses prior to the opening of a store. These pre-opening...

  • Page 60
    ...instrument's change in fair value is immediately recognized in earnings. Instruments that do not meet the criteria for hedge accounting or contracts for which the Company has not elected hedge accounting, are marked to fair value with unrealized, gains or losses reported in earnings. Recently Issued...

  • Page 61
    ... Company beginning in fiscal year 2007. We collect such taxes from customers and account for them on a net (excluded from revenues) basis. The adoption of EITF Issue No. 06-03 did not impact the consolidated financial statements. In September 2006, the FASB issued Statement of Financial Accounting...

  • Page 62
    ... included in the prior years' financial statements have been revised to conform with the current year's presentation. In the current year, the Company separately presented the effect of exchange rate changes on cash in the consolidated Statements of Cash Flows. In prior periods, these amounts were...

  • Page 63
    ... scale as a result of the Acquisition allowed management to evaluate 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...

  • Page 64
    ...sublease income. Accretion expense is recognized over the life of the payments. Integration and facility closure reserve account activity during 2007, 2006 and 2005, including activity related to the reorganization of the Contract segment, retail store closures and headquarters consolidation, was as...

  • Page 65
    ...shares of common stock were outstanding during 2007, but were not included in the computation of diluted income (loss) per common share because the impact would have been anti-dilutive as the option price is higher than the average market price during the year. Options to purchase 3.8 million shares...

  • Page 66
    ... Legal settlement with the Department of Justice. 6. Income Taxes The income tax (provision) benefit attributable to income (loss) from continuing operations as shown in the Consolidated Statements of Income (Loss) includes the following components: 2007 Current income Federal ...State ...Foreign...

  • Page 67
    ... 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: 2007 Tax (provision) benefit at statutory rate ...State taxes, net of federal effect ...Foreign tax provision differential ...Basis...

  • Page 68
    ... the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Management believes it is more likely than not that the Company will realize the benefits of these deductible differences, except for certain state net...

  • Page 69
    ... tax positions. This increase was accounted for as an adjustment to the beginning balance of retained earnings on the Consolidated Balance Sheet. Including the cumulative effect of this increase, at the beginning of 2007, the Company had $70.6 million of total gross unrecognized tax benefits. As...

  • Page 70
    ... and penalties associated with uncertain tax positions as part of income tax expense. As of December 29, 2007, the Company had $5.5 million of accrued interest and penalties associated with uncertain tax positions. Income tax expense for 2007 includes a benefit of $0.4 million related to interest...

  • Page 71
    ... fees associated with the program, and were included in the Consolidated Statements of Income (Loss). On July 12, 2007, the Company entered into a new loan agreement that amended the Company's existing revolving credit facility and replaced the Company's accounts receivable securitization program...

  • Page 72
    ... recorded in purchase accounting related to the retail segment. Acquired Intangible Assets Intangible assets represent the values assigned to trade names, customer lists and relationships, noncompete agreements and exclusive distribution rights of businesses acquired. The trade name assets have...

  • Page 73
    ...-lived purchased intangible assets were necessary. 11. Timber Notes 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...

  • Page 74
    ... Scheduled Debt Maturities The scheduled payments of long-term debt, excluding timber notes due in 2019, are $34.8 million in 2008, $50.9 million in 2009, $15.9 million in 2010, $0.5 million in 2011, $35.1 million in 2012 and $247.0 million thereafter. Credit Agreements On July 12, 2007, the Company...

  • Page 75
    ... tranches paying interest of 5.42% and 5.54%, respectively. As a result of these transactions, OfficeMax received $1,470 million in cash from the OMXQ's, and over 15 years will earn approximately $82.5 million per year in interest income on the timber installment notes receivable and incur annual...

  • Page 76
    ...a restriction on sale and leaseback transactions involving Principal Properties. In December 2004, both Moody's Investors Service, Inc., and Standard & Poor's Rating Services upgraded the credit rating on the Company's 7.00% senior notes to investment grade as a result of actions the Company took to...

  • Page 77
    ... exchange rates expose the Company to financial market risk. Management occasionally uses derivative financial instruments, such as interest rate swaps, forward purchase contracts and forward exchange contracts, to manage the Company's exposure to changes in interest rates on outstanding debt...

  • Page 78
    ... prices at December 29, 2007 and December 30, 2006, we did not recognize an asset or liability in our Consolidated Balance Sheet related to the Additional Consideration Agreement. In February 2008, Boise Cascade, L.L.C. sold a majority interest in its paper and packaging and newsprint businesses...

  • Page 79
    ... pension plan was closed to new entrants on November 1, 2003, and on December 31, 2003, the benefits of eligible OfficeMax, Contract participants were frozen. Under the terms of the Company's plans, the pension benefit for salaried employees was based primarily on the employees' years of service...

  • Page 80
    ... and plan assets during 2007 and 2006, as well as the funded status of the Company's plans at December 29, 2007 and December 30, 2006, were as follows: Pension Benefits 2007 2006 (thousands) Other Benefits 2007 2006 Change in benefit obligation: Benefit obligation at beginning of year Service cost...

  • Page 81
    ... recognized in the Consolidated Balance Sheets related to the Company's defined benefit pension and other postretirement benefit plans at year end: Pension Benefits 2007 2006 Prepaid benefit cost ...Deferred income tax assets ...Accrued benefit liability-current ...Accrued benefit liability-non...

  • Page 82
    ... used in the measurement of net periodic benefit cost: Pension Benefits 2007 Weighted average assumptions: Discount rate ...Expected return on plan assets ...Rate of compensation increase ... 2006 2005 Other Benefits United States Canada 2007 2006 2005 2007 2006 2005 5.80% 8.00% - 5.60% 8.00...

  • Page 83
    ... 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 29, 2007...

  • Page 84
    ... contribution plan account balances for active paper and forest products employees were transferred to plans established by Boise Cascade, L.L.C. The plan for non-Retail salaried employees includes an employee stock ownership plan (''ESOP'') component through which the Company matches contributions...

  • Page 85
    ... for transactions in which an entity obtains employee services in exchange for share-based payments. SFAS 123R requires entities to recognize compensation expense from all share-based payment transactions in the financial statements. SFAS 123R establishes fair value as the measurement objective...

  • Page 86
    ... the 2003 Plan, including stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, performance shares, annual incentive awards and stock bonus awards. Restricted Stock and Restricted Stock Units In 2007, the Company granted to employees and nonemployee...

  • Page 87
    ... common share after the restriction 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...

  • Page 88
    ... of options to 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...

  • Page 89
    ... of Boise Cascade, L.L.C., under a 12-year paper supply contract. (See Note 17, Commitments and Guarantees, for additional information related to the paper supply contract.) OfficeMax, Retail is a retail distributor of office supplies and paper, print and document services, technology products and...

  • Page 90
    .... The effect of these changes was not material to the financial statements. No single customer accounts for 10% or more of consolidated trade sales. OfficeMax, Contract has foreign operations in Canada, Australia and New Zealand. OfficeMax, Retail has foreign operations in Mexico through a 51%-owned...

  • Page 91
    Segment sales to external customers by product line are as follows: 2007 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 ......

  • Page 92
    ... of outstanding long-term debt. In addition, the Company has purchase obligations for goods and services and capital expenditures that were entered into in the normal course of business. Pursuant to an Additional Consideration Agreement between OfficeMax and Boise Cascade, L.L.C. related to the Sale...

  • Page 93
    ..., 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 94
    ...financial position, results of operations or cash flows. Over the past several years and continuing in 2008, we have 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 95
    ...value of the Additional Consideration Agreement we entered into in connection with the sale of our paper, forest products and timberland assets in 2004. Includes $98.5 million of store closing and impairment charges, $15.7 million of charges related to headquarters consolidation and $11.0 million of...

  • Page 96
    ... benefits related to 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...

  • Page 97
    ..., and the related consolidated statements of income (loss), shareholders' equity, and cash flows for each of the years in the three-year period ended December 29, 2007. We also have audited OfficeMax Incorporated's internal control over financial reporting as of December 29, 2007, based on criteria...

  • Page 98
    ... in Note 1 to the consolidated financial statements, OfficeMax Incorporated adopted the provisions of FASB Interpretation No. 48, ''Accounting for Uncertainty in Income Taxes-An Interpretation of FASB Statement No. 109,'' in 2007, and Statements of Financial Accounting Standards No. 123R, ''Share...

  • Page 99
    ... officer and chief financial officer concluded that the Company's disclosure controls and procedures were effective in alerting them in a timely manner to material information that the Company is required to disclose in its filings with the Securities and Exchange Commission. (b) Management's Report...

  • Page 100
    ... various merchandising positions until 1992. Sam Martin, 51, was first elected officer of the Company on September 17, 2007. At that time, Mr. Martin became executive vice president and chief operating officer of the Company. Mr. Martin has responsibility for all areas of Retail, Contract and Supply...

  • Page 101
    ...statement and is incorporated by reference. We have adopted a Code of Ethics that 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...

  • Page 102
    ...'' and ''Related Transactions'' in our proxy statement and is incorporated by reference. In addition, in 2007, certain of the entities which own or owned more than five percent of our stock purchased office supplies from us. These transactions were entered into in the ordinary course of business and...

  • Page 103
    ... • Consolidated Statements of Shareholders' Equity for the years ended December 29, 2007, December 30, 2006 and December 31, 2005. • Notes to Consolidated Financial Statements. • Report of Independent Registered Public Accounting Firm. (2) Financial Statement Schedules. All financial statement...

  • Page 104
    ... behalf by the undersigned, thereunto duly authorized. OfficeMax Incorporated By /s/ SAM K. DUNCAN Sam K. Duncan Chief Executive Officer Dated: February 27, 2008 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf...

  • Page 105
    ... 29, 2007, annual report on Form 10-K of OfficeMax Incorporated. Our report on the Company's consolidated financial statements refers to changes in accounting for uncertainty in income taxes in 2007, and for stock-based compensation and defined benefit and other postretirement plans during 2006...

  • Page 106
    ... Purchase Agreement between Boise White Paper, L.L.C., OfficeMax Contract, Inc., and OfficeMax North America, Inc. Installment Note for $559,500,000 between Boise Land & Timber, L.L.C. (Maker) and Boise Cascade Corporation (now OfficeMax Incorporated) (Initial Holder) dated October 29, 2004 Form...

  • Page 107
    ... (now OfficeMax incorporated), Forest Products Holdings, L.L.C., and Boise Cascade Holdings, L.L.C., dated October 29, 2004 Stockholders Agreement among Kooskia Investment Corporation, Forest Products Holdings, L.L.C., and Boise Land & Timber Holdings Corp., dated October 29, 2004 Purchase Agreement...

  • Page 108
    ...04 10.31†Boise Cascade Corporation (now 10-K OfficeMax Incorporated) Supplemental Pension Plan, as amended through September 26, 2003 Form of Severance Agreement with Executive Officer (for executive officer covered by Supplemental Early Retirement Plan) 1984 Key Executive Stock Option Plan, as...

  • Page 109
    ... through September 26, 2003 Directors Stock Option Plan, 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...

  • Page 110
    ...†Settlement and Release Agreement by 8-K and between Gary J. Peterson and OfficeMax Contract, Inc. dated March 22, 2005 Employment Agreement between OfficeMax Incorporated and Sam Duncan dated April 15, 2005 Nonstatutory Stock Option Award Agreement between OfficeMax Incorporated and Sam Duncan...

  • Page 111
    ... to OfficeMax Incorporated Executive Savings Deferral Plan Amendment to 2003 OfficeMax Incentive and Performance Plan Form of 2006 Annual Incentive Award Agreement Form of 2006 Restricted Stock Unit Award Agreement Form of 2006 Director Restricted Stock Unit Award Agreement Form of 2007 Annual...

  • Page 112
    ... 16, 2004, among Boise Cascade Corporation, U.S. Bank Trust National Association and BNY Western Trust Company was filed as exhibit 4.1 to our Current Report on Form 8-K filed on September 22, 2004. The Sixth Supplemental Indenture dated October 29, 2004, between OfficeMax Incorporated and U.S. Bank...

  • Page 113
    ... Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. Each of the documents referenced in this footnote is incorporated by reference. (4) Our Code of Ethics can be found on our website (www.officemax.com) by clicking on ''About us,'' ''Investors'' and then ''Code of Ethics.'' 109

  • Page 114
    Exhibit 11 OFFICEMAX INCORPORATED AND SUBSIDIARIES Computation of Per Share Earnings Fiscal Year Ended December 29, December 30, December 31, 2007 2006 2005 (thousands, except per-share amounts) Basic Income (loss) from continuing operations ...Preferred dividends ...Basic income (loss) from ...

  • Page 115
    Exhibit 12.1 OFFICEMAX INCORPORATED AND SUBSIDIARIES Ratio of Earnings to Fixed Charges Fiscal Year Ended December 29, December 30, December 31, December 31, December 31, 2007 2006 2005 2004 2003 (thousands, except ratios) Interest costs ...Guarantee of interest on ESOP debt ...Interest capitalized...

  • Page 116
    Exhibit 12.2 OFFICEMAX INCORPORATED AND SUBSIDIARIES Ratio of Earnings to Combined Fixed Charges and Preferred Dividend Requirements Fiscal Year Ended December 30, December 31, December 31, 2006 2005 2004 (thousands, except ratios) December 29, 2007 December 31, 2003 Interest costs ...Interest ...

  • Page 117
    ... North America, Inc. OMX Timber Finance Holdings I, LLC OMX Timber Finance Holdings II, LLC Clearfield Insurance Limited Grupo OfficeMax S. de R.L. de C.V. Delaware Nevada Ontario, Canada Australia Louisiana New Zealand Ohio Delaware Delaware Bermuda Mexico Note: The names of various consolidated...

  • Page 118
    ...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 to make the...

  • Page 119
    ...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 to make the...

  • Page 120
    ... Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and (ii) the information contained in the Report fairly presents, in all material respects, OfficeMax Incorporated's financial condition and results of operations. /s/ DON CIVGIN Don Civgin Chief Financial Officer Dated: February 27, 2008 A signed...

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  • Page 123
    ... and Chief Financial Officer, The Bear Steams Companies, Inc. Phillip DePaul Senior Vice President, Controller and Chief Accounting Officer Investor Relations Department OfficeMax Incorporated 263 Shuman Boulevard Naperville, IL 60563 Tel (630) 864-6800 or e-mail [email protected] Website...

  • Page 124
    Incorporated 2007 Annual Report