OfficeMax 2007 Annual Report Download - page 29

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Contract segment gross profit margin improved by 0.6% of sales to 22.5% of sales for 2006
compared to 21.9% of sales in the previous year. The year-over-year increase resulted from a
continued focus on the middle-market and other higher margin sales opportunities.
Operating expenses for the Contract segment decreased by 1.4% of sales to 18.3% of sales for
2006 from 19.7% of sales a year earlier. Fiscal year 2006 includes $10.3 million of costs related to
the Contract segment reorganization. Fiscal year 2005 includes a $9.8 million pre-tax charge for a
legal settlement with the Department of Justice and a $5.4 million pre-tax charge related to the
restructuring of our international operations. Excluding the impact of these charges, operating
expenses were 18.2% and 19.4% of sales for 2006 and 2005, respectively. The year-over-year
improvement in operating expenses as a percentage of sales is due to lower promotion and
marketing costs as well as reduced payroll and integration expenses.
Contract segment income increased $97.4 million to $197.7 million, or 4.2% of sales, for 2006,
compared to income of $100.3 million, or 2.2% of sales, for 2005. Excluding the $10.3 million of
costs related to the Contract segment reorganization, adjusted Contract segment income was
$208.0 million, or 4.4% of sales, for 2006. Excluding the $9.8 million legal settlement with the
Department of Justice and the $5.4 million of international restructuring charges, adjusted Contract
segment income was $115.5 million, or 2.5% of sales, for 2005.
OfficeMax, Retail
($ in millions)
2007 2006 2005
Sales ............................................. $4,265.9 $4,251.2 $4,529.1
Segment income .................................... $ 173.7 $ 86.3 $ 27.9
Sales by Product Line
Office supplies and paper .............................. $1,640.4 $1,627.5 $1,639.6
Technology products ................................. 2,241.8 2,212.5 2,363.5
Office furniture ...................................... 383.7 411.2 526.0
Sales by Geography
United States(a) ..................................... $4,030.0 $4,057.4 $4,358.9
International ........................................ 235.9 193.8 170.2
Sales growth ....................................... 0.3% (6.1)% 1.1%
Same-location sales growth ............................. (1.2)% 0.1% (1.0)%
(percentage of sales)
Gross profit margin ................................... 29.5% 29.3% 26.2%
Operating expenses, including allocated general and
administrative expenses .............................. 25.4% 27.3% 25.6%
Operating profit margin ................................ 4.1% 2.0% 0.6%
(a) Includes our operations in the United States, Puerto Rico and the U.S. Virgin Islands.
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 during 2007.
Adjusted for the Company’s initiative to eliminate mail-in rebates, and to provide instant rebates
in lieu of national, vendor-sponsored mail-in rebates, same-store sales decreased 0.5% during 2007.
During the fourth quarter of 2007, Retail segment same-store sales decreased 7.3% year-over-year
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