OfficeMax 2007 Annual Report Download - page 89

The remaining compensation expense to be recognized related to outstanding stock options,
net of estimated forfeitures, is approximately $0.6 million. At December 29, 2007, the aggregate
intrinsic value was $0.2 million for outstanding stock options and exercisable stock options. The
aggregate intrinsic value represents the total pre-tax intrinsic value (i.e. the difference between the
Company’s closing stock price on the last trading day of the fourth quarter of 2007 and the
exercise price, multiplied by the number of in-the-money options at the end of the quarter).
The Company did not grant any stock options during 2006. To calculate stock-based employee
compensation expense under the fair value method as outlined in SFAS 123(R) for 2007 grants and
SFAS 123 for 2005 grants, the Company estimated the fair value of each option award on the date
of grant using the Black-Scholes option pricing model with the following weighted-average
assumptions: risk-free interest rates of 4.5% in 2007 and 4.3% in 2005 (based on the applicable
Treasury bill rate); expected dividends of 60 cents per share in both years (based on actual cash
dividends expected to be paid); expected life of 3.0 years in 2007 and 3.4 years in 2005 (based on
the time period options are expected to be outstanding based on historical experience); and
expected stock price volatility of 35.5% in 2007 and 28% in 2005 (based on the historical volatility of
the Company’s common stock).
Other
In May 2005, the Company repurchased 23.5 million shares of its common stock and the
associated common stock purchase rights through a modified Dutch auction tender offer at a
purchase price of $775.5 million, or $33.00 per share, plus transaction costs.
In September 1995, the Company’s Board of Directors authorized the purchase of up to
4.3 million shares of the Company’s common stock. As part of this authorization, the Company
repurchased odd-lot shares (fewer than 100 shares) from shareholders wishing to exit their holdings
in the Company’s common stock. Shares repurchased under this program are retired. Since 1995,
the Company has repurchased 50,577 shares of common stock under this authorization, including
907 shares in 2006 and 2,190 shares in 2005. The Company’s Board of Directors terminated the
share repurchase authorization in December 2006.
16. Segment Information
The Company manages its business using three reportable segments: OfficeMax, Contract;
OfficeMax, Retail; and Corporate and Other. Management reviews the performance of the Company
based on these segments.
OfficeMax, Contract distributes a 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 small and medium-sized offices in the United
States, Canada, Australia and New Zealand. This segment markets and sells through field
salespeople, outbound telesales, catalogs, the Internet and in some markets, including Canada,
Hawaii, Australia and New Zealand, through office products stores. Substantially all products sold
by OfficeMax, Contract are purchased from third-party manufacturers or industry wholesalers,
except office papers. OfficeMax, Contract purchases office papers primarily from the paper
operations 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 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. The
retail segment also operates office supply stores in Mexico through a 51%-owned joint venture.
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