OfficeMax 2007 Annual Report Download - page 21

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion contains statements about our future financial performance. These
statements are only predictions. Our actual results may differ materially from these predictions. In
evaluating these statements, you should review ‘‘Item 1A, Risk Factors’’ of this Form 10-K, including
‘‘Cautionary and Forward-Looking Statements.’’
Executive Summary
Sales for 2007 were $9.1 billion, compared to $9.0 billion for 2006 and $9.2 billion for 2005.
Net income for 2007 was $207.4 million, or $2.66 per diluted share, compared to $91.7 million, or
$1.19 per diluted share, for 2006 and a net loss of $73.8 million, or $(0.99) per diluted share, for
2005.
Results for the years of 2007, 2006 and 2005 include various items related to the Company’s
previously announced restructuring activities and our transition from a predominately commodity
manufacturing-based company to an independent office products distribution company which are
not expected to be ongoing. Charges and obligations related to many of these items have been
included in our integration activities and facility closures reserve. For more information about these
reserves, see the discussion of ‘‘Integration Activities and Facility Closures’’ below. Some of the
more significant effects of these actions on 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 assets (the ‘‘Sale’’). This amount was included in Other income (Expense), net
(non-operating). Also, during 2007, we incurred a loss from the sale of OfficeMax, Contract’s
operations in Mexico to Grupo OfficeMax, our 51% owned joint venture, which resulted in a
$1.1 million increase in minority interest, net of income tax. Grupo OfficeMax’s results of
operations are included in our consolidated results of operations.
• In 2006, we recorded pre-tax charges of $89.5 million related to the closing of 109
underperforming, domestic retail stores, $10.3 million primarily related to the reorganization
of our contract segment and $46.4 million primarily related to the consolidation of our
corporate headquarters. These charges were included in Other operating, net in the
Consolidated Statements of Income (Loss) and were reflected in the Retail segment (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, which
resulted in a credit to Other income (Expense), net (non-operating) of $48.0 million. We also
recorded an $18.0 million pre-tax charge for the closure of our Elma, Washington
manufacturing facility which was reflected in Discontinued Operations in the Consolidated
Statements of Income (Loss).
• In 2005, we recorded pre-tax charges of $25.0 million related to the consolidation and
relocation of our corporate headquarters, $17.9 million related to the write-down of impaired
assets, primarily as a result of retail store closures, $5.4 million related to the restructuring of
our international operations, and $31.9 million for one-time severance payments, professional
fees and asset write-downs. These charges were reflected in the Retail segment (retail store
impairment), Contract segment (international restructuring) and Corporate and Other
segment (headquarters consolidation, severance, professional fees and asset write-downs),
respectively. In addition, we recognized a $9.8 million pre-tax charge in the Contract segment
17