OfficeMax 2012 Annual Report Download

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2012 ANNUAL REPORT
PEOPLE.
PASSION.
PURPOSE.
On the Road to Success
>>

Table of contents

  • Page 1
    PEOPLE. PASSION. PURPOSE. On the Road to Success >> 2012 ANNUAL REPORT

  • Page 2
    ... our core business this year. We continue to launch value-added services for our business customers and plan to open our first new format prototype store in early 2013. Gaining Momentum Our long-term objectives remain to achieve peak operating margins, restore top-line growth and improve return on...

  • Page 3
    Financial Performance Sustainable Profitable Growth 2012 STRENGTHEN FOUNDATION 2013-2015 GAIN MOMENTUM 2016 & BEYOND PROFITABLE GROWTH Customer Satisfaction Creating "Win-Win" Relationships with Customers CUSTOMER SEGMENTATION MULTI-CHANNEL EXPERIENCES ENHANCE WORKPLACE EXPERIENCE Strategic...

  • Page 4
    ... CEO SVP, Supply Chain KIM FEIL EVP, Chief Marketing and Strategy Officer JOHN KENNING EVP, President of Contract Our Executive Team The OfficeMax mission-to provide workplace innovations that enable our customers to work better-is championed by the executive team and embraced company-wide. We...

  • Page 5
    ... RANDY BURDICK JIM BARR EVP, Chief Digital Officer EVP, Chief Information Officer EVP, President of Retail RON LALLA EVP, Chief Merchandising Officer STEVE PARSONS EVP, Chief Human Resources Officer BRUCE BESANKO EVP, Chief Financial Officer and Chief Administrative Officer EMPHASIS ON...

  • Page 6
    ...work that has been accomplished, and look forward to a year focusing on creating innovative and exciting experiences for our customers throughout the world. Table of Contents I II IV VII X XII XX XXII XXVI Sales At-a-Glance Company Strategy Contract Business International Digital Initiatives Retail...

  • Page 7
    ... CONTRACT SEGMENT $3.61 BILLION U.S. 69% INTERNATIONAL 31% SUPPLIES & PAPER TECHNOLOGY* FURNITURE RETAIL SEGMENT $3.31 BILLION U.S. MEXICO TECHNOLOGY* SUPPLIES & PAPER FURNITURE 57% 31% 12% 91% 9% 50% 43% 7% $ 6.92 Billion / FY12 *Technology includes ink & toner. 2012 OFFICEMAX® ANNUAL REPORT...

  • Page 8
    ... Optimize Store Network New Store Formats New Categories Key Foundation Key Enablers Breakthrough Ideas for Cost Efficiencies/Synergies High Caliber Talent Service & Innovation Culture Integrated Systems Strong Execution II // 2012 OFFICEMAX® ANNUAL REPORT // ROAD TO SUCCESS // COMPANY STRATEGY

  • Page 9
    ...% in our U.S. Contract business Achieved the highest net new sales in U.S. Contract in five years Gained momentum in product and service adjacencies Significantly improved capabilities of our websites Achieved double-digit sales growth on OfficeMax.com and launched Online Store Pickup to advance...

  • Page 10
    ...urgent to long-term needs, customers can choose from affordable, in-stock and ready-to-ship furniture that is best suited to them. >> Print & Documents With our nationwide digital print network, customers will enjoy lower processing, printing and distribution costs, faster speed to market and total...

  • Page 11
    ...-to-business office supplies and solutions provider to add Xerox's leading-edge cloud services to its holistic suite of work-better solutions for business customers. Scan this QR code to find out how we can streamline your workplace. 2012 OFFICEMAX® ANNUAL REPORT // ROAD TO SUCCESS // CONTRACT...

  • Page 12
    OUR GLOBAL REACH VI // 2012 OFFICEMAX® ANNUAL REPORT // ROAD TO SUCCESS // INTERNATIONAL

  • Page 13
    ...fit contributor. Our Australia and New Zealand business, combined with our North American operations and our Lyreco alliance in Europe and Asia, provide a powerful network through which we serve our global customers. Integral to our strategy, the international Contract businesses have been strong...

  • Page 14
    ... print and document services, facility resources, interiors and furniture and technology products can be evaluated and streamlined, helping our customers gain efficiencies and cost savings they never thought possible. VIII // 2012 OFFICEMAX® ANNUAL REPORT // ROAD TO SUCCESS // VERTICAL MARKETS

  • Page 15
    // IX

  • Page 16
    ...ceMaxWorkplace.com On our B-to-B website, we launched a new, more user-friendly interface with very positive feedback from our customers. We are on track with plans to launch the new search engine on our B-to-B website in early 2013. X // 2012 OFFICEMAX® ANNUAL REPORT // ROAD TO SUCCESS // DIGITAL

  • Page 17
    ... the global leader in Internet and mobile cloud testing and monitoring. The Keynote Online Retail Web Transaction Performance Index measures the speed of going to a selected retail electronics site to search for an item, adding it to the shopping cart, and proceeding to check out without logging on...

  • Page 18
    ... is being placed on high-margin services to build on our strong-performing OfficeMax Print Center and Ctrlcenter®; and in 2013, we're launching many value-added services targeting our small business/home office customers, including MiMedia cloud storage and Go Daddy® web services. We will also...

  • Page 19
    ... INNOVATIONS >> TUL ® Innovation Award For the third consecutive year, OfficeMax received Store Brands Decisions Retailer Innovation Award for product development. The winning product, OfficeMax's new TUL Ballpoint Pen, features an ergonomic design for optimal balance and writing precision...

  • Page 20
    XIV // 2012 OFFICEMAX® ANNUAL REPORT // ROAD TO SUCCESS // CUSTOMER EXPERIENCE

  • Page 21
    CUSTOMER EXPERIENCE Driving Innovation We strive to create exciting, innovative experiences for our customers when they visit our stores. New services such as Tech World and Service World provide solutions for our customers based on their specific needs. // XV

  • Page 22
    XVI // 2012 OFFICEMAX® ANNUAL REPORT // ROAD TO SUCCESS // CUSTOMER EXPERIENCE

  • Page 23
    ...ceMax Puerto Rico. District Sales Manager Mirnaly Abraham " Customers are the core of everything we do. Knowing exactly what our customers need-from global corporations to the at-home entrepreneurs-is what makes us the best at our business. Through Grand & Toy in Canada, OfficeMax Australia, Of...

  • Page 24
    ®

  • Page 25
    ... examples of the private brands we offer. They all have one unifying mission: to help our customers become more efficient and productive, because we want our customers to work smarter, not harder. INNOVATIVE ESSENTIALS ® 2012 OFFICEMAX® ANNUAL REPORT // ROAD TO SUCCESS // PRIVATE BRANDS // XIX

  • Page 26
    ... natural gas, gasoline, diesel fuel, bio-diesel fuel, propane and electricity usage. There were no direct emissions from OfficeMax resulting from manufacturing processes, as we do not directly manufacture products. XX // 2012 OFFICEMAX® ANNUAL REPORT // ROAD TO SUCCESS // LIVING OUR VALUES

  • Page 27
    ... for positive life changes. Through OfficeMax GoodworksSM, associates donate their time and resources to help build and sustain strong communities. The program encompasses various programs focused on providing products and supplies whenever and wherever they're needed. This year we partnered with...

  • Page 28
    ... diverse business product and service solutions for our customers. DiversityBusiness.com named OfficeMax one of the Top 50 Organizations for Multicultural Business Opportunities for the third consecutive year. In August, OfficeMax held its second annual "Business Opportunities Exchange," a one-day...

  • Page 29
    ... receiving the True North Corporate Partner Award for 2012. The Alabama Division of Rehabilitation Services recognized the McCalla PowerMax distribution center as the Partner of the Year by the Alabama Governor's Committee on Employment of People with Disabilities. OfficeMax Canada (Grand & Toy...

  • Page 30
    FOCUSED EFFORTS XXIV // 2012 OFFICEMAX® ANNUAL REPORT // ROAD TO SUCCESS // FOCUSED EFFORTS

  • Page 31
    ... 100 OfficeMax leaders from North American supply chain operations and human resources participated in what turned out to be Aspire's largest one-day volunteer event ever. Finding jobs for 100-plus volunteers was no small task, but Aspire kept everyone busy. Some lent a hand directly to the Aspire...

  • Page 32
    ... is responsible for managing all legal and corporate governance matters pertaining to OfficeMax. In addition, he oversees the company's government relations function and is responsible for the company's corporate compliance program. In 2004, Mr. Broad was appointed executive vice president, general...

  • Page 33
    ... April 2012. He has full responsibility for the Contract P&L and all aspects of the OfficeMax WorkplaceSM business. Prior to joining OfficeMax, he served as president, North America Commercial for ADT/ Tyco Security Services, and as senior vice president, global strategic sales and global partners...

  • Page 34
    PEOPLE. PASSION. PURPOSE. On the Road to Success >>

  • Page 35
    ... of common stock, as of the latest practicable date. Class Shares Outstanding as of February 8, 2013 86,884,058 Document incorporated by reference Portions of the registrant's proxy statement relating to its 2013 annual meeting of shareholders to be held on April 29, 2013 ("OfficeMax Incorporated...

  • Page 36
    ... ...Item 9B. Other Information ...Item 5. Item 10. Item 11. Item 12. Item 13. Item 14. Item 15. PART III Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Certain...

  • Page 37
    ... retail stores located throughout the United States, Canada, Australia, New Zealand, Mexico, the U.S. Virgin Islands and Puerto Rico. 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 38
    ... information related to the paper supply contract.) As of the end of the year, Contract operated 40 distribution centers in the U.S., Puerto Rico, Canada, Australia and New Zealand as well as four customer service and outbound telesales centers in the U.S. Contract also operated 44 office products...

  • Page 39
    ... and Guarantees," of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" of this Form 10-K for additional information related to the paper supply contract.) As of the end of the year, our Retail segment operated 941 stores in the U.S., Puerto Rico...

  • Page 40
    ... service offerings, including OfficeMax ImPress, and our ability to create office product merchandise solutions for other retailers to incorporate into their stores. Seasonal Influences The Company's business is seasonal, with Retail showing a more pronounced seasonal trend than Contract. Sales...

  • Page 41
    ...on our cash flows and our financial results. Additional future contributions of common stock or cash to the Pension Plans, financial market performance and Internal Revenue Service ("IRS") funding requirements could materially change these expected payments. Our business may be adversely affected by...

  • Page 42
    ...on our business and financial performance. Intense competition in our markets could harm our ability to maintain profitability. Domestic and international office products markets are highly and increasingly competitive. Customers have many options when purchasing office supplies and paper, print and...

  • Page 43
    ... customer or associate data 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, register on our website, or otherwise communicate...

  • Page 44
    ... over the timing and extent of price changes. The relationship between supply and demand in this industry significantly affects product pricing. Demand for building products is driven mainly by factors such as new construction and remodeling rates, business and consumer credit availability, interest...

  • Page 45
    ... in some or all of our locations, which could have a material adverse effect on our business, financial condition and results of operations. These events could also reduce demand for our products or make it difficult or impossible to receive products from suppliers. Fluctuations in our effective...

  • Page 46
    ... 3 Contract also operated 44 office products stores in Hawaii (2), Canada (22), Australia (4) and New Zealand (16) and four customer service and outbound telesales centers in Illinois (2), Oklahoma and Virginia. Retail As of the end of the year, Retail operated 941 stores in 47 states, Puerto Rico...

  • Page 47
    (a) Locations operated by Grupo OfficeMax. Retail also operated three large distribution centers in Alabama, Nevada and Pennsylvania; and one small distribution center in Mexico through our joint venture. ITEM 3. LEGAL PROCEEDINGS Information concerning legal proceedings is set forth in Note 16, ...

  • Page 48
    ... as executive vice president, general counsel since that time. Prior to that, Mr. Broad served as associate general counsel for Boise Cascade Corporation. Larry A. Hartley, 47, was first elected an officer of the Company in February 2005. He has served as senior vice president, supply chain since...

  • Page 49
    ... as executive vice president and president of retail since that time. From 2010 until early 2011, Mr. Lewis served as global head of a merchandising center for Wal-Mart Stores, Inc. ("Wal-Mart"), an international massmerchandise retailer, and was responsible for brand management and supply chain and...

  • Page 50
    ... the New York Stock Exchange (the "Exchange"). The Exchange requires each listed company to make an annual report available to its shareholders. We are making this Form 10-K available to our shareholders in lieu of a separate annual report. The reported high and low sales prices for our common stock...

  • Page 51
    ...150 100 50 0 2007 2008 2009 2010 2011 2012 ANNUAL RETURN PERCENTAGE Years Ending Company\Index Name Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 OfficeMax Incorporated ...S&P SmallCap 600 Index ...S&P 600 Specialty Retail Index ...INDEXED RETURNS Years Ending Company\Index Name Base Period Dec 07 Dec 08...

  • Page 52
    ... Data" of this Form 10-K. 2012(a) 2011(b) 2010(c) 2009(d) 2008(e) (millions, except per-share amounts) Assets: Current assets ...Property and equipment, net ...Timber notes receivable ...Other ...Total assets ...Liabilities and shareholders' equity: Current liabilities ...Long-term debt, less...

  • Page 53
    ... to retail store closures in the U.S. and Mexico. Our minority partner's share of this charge of $0.5 million is included in joint venture results attributable to noncontrolling interest. $18.1 million pre-tax charge for severance and other costs. $4.4 million pre-tax gain related to interest earned...

  • Page 54
    ...the timber installment note receivable due from Lehman and $20.4 million of related interest expense. $27.9 million charge for severance and costs associated with the termination of certain store and site leases. $20.5 million gain related to the Company's Boise Investment, primarily attributable to...

  • Page 55
    ... exchange rates and the impact of stores closed and opened during 2011 and 2012, sales in 2012 declined by 0.8% compared to 2011. Consolidated gross profit margin increased by 0.4 % of sales (40 basis points) to 25.8 % of sales in 2012 compared to 25.4% of sales in 2011, as higher customer margins...

  • Page 56
    ... to be completed by December 31, 2013. For additional information relating to the proposed merger, please see our Form 8-K filed on February 22, 2013. Results of Operations, Consolidated ($ in thousands) 2012 2011 2010 Sales ...Gross profit ...Operating, selling and general and administrative...

  • Page 57
    ... RESULTS FOR 2012(a) Net income Diluted available to income OfficeMax per Operating common common income shareholders(b) share(b) (thousands, except per-share amounts) As reported ...Gain on extinguishment of non-recourse debt ...Pension settlement charges ...Store closure, severance and other...

  • Page 58
    ... RESULTS FOR 2010(a) Net income Diluted available to income OfficeMax per Operating common common income shareholders share (thousands, except per-share amounts) As reported ...Store closure charges and severance adjustments ...Store asset impairment charge ...Reserve adjustments related to legacy...

  • Page 59
    ... and weak store traffic in our Retail segment, which were partially offset by stronger sales in our U.S Contract business and in Mexico. Gross profit margin increased by 0.4% of sales (40 basis points) to 25.8% of sales in 2012 compared to 25.4% of sales in 2011, as higher customer margins and lower...

  • Page 60
    ... income available to OfficeMax common shareholders by $6.8 million, or $0.08 per diluted share. • We recorded $14.9 million of severance charges ($13.9 million in Contract, $0.3 million in Retail and $0.7 million in Corporate) related primarily to reorganizations in Canada, Australia, New Zealand...

  • Page 61
    ... technology products and solutions, office furniture, print and document services and facilities products. 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 Zealand. This segment markets and...

  • Page 62
    ... Consolidated Statements of Operations. Contract ($ in thousands) 2012 2011 2010 Sales ...Gross profit ...Gross profit margin ...Operating, selling and general and administrative expenses ...Percentage of sales ...Segment income ...Percentage of sales ...Sales by Product Line Office supplies and...

  • Page 63
    ...result of decreased sales to existing customers and several large customers that were not retained in both Canada and Australia. Contract segment gross profit margin decreased 0.5% of sales (50 basis points) to 22.3% of sales for 2011 compared to 22.8% of sales for the previous year. The decrease in...

  • Page 64
    ...and closed two, ending the year with 90 retail stores. Retail segment gross profit margin increased 0.7% of sales (70 basis points) to 29.3% of sales for 2012 compared to 28.6% of sales for 2011. The gross profit margin increases were the result of higher customer margins in both the U.S. and Mexico...

  • Page 65
    ... stores during 2011 and closed two, ending the year with 82 retail stores. Retail segment gross profit margin decreased 0.5% of sales (50 basis points) to 28.6% of sales for 2011 compared to 29.1% of sales for 2010. The gross profit margin declines were the result of lower customer margins in Mexico...

  • Page 66
    ... in Australia and New Zealand effective March 30, 2012. At the end of the fiscal year 2012, the Company was in compliance with all covenants under the one remaining credit agreement. The credit agreement associated with the Company and certain of our subsidiaries in the U.S., Puerto Rico and Canada...

  • Page 67
    ... 2012 2011 2010 (millions) Contract ...Retail ...Corporate and Other ...Total ... $39.3 47.3 0.6 $87.2 $26.0 35.8 7.8 $69.6 $61.2 32.3 - $93.5 During 2012, we began considering potential options to sell our Croxley-branded wholesale, distribution and manufacturing business in New Zealand...

  • Page 68
    ...in executing our strategic plan to achieve sustainable, profitable growth. The quarterly dividends are expected to be $0.02 per common share, or $0.08 per common share on an annualized basis. During 2012, we paid $3.5 million in common stock dividends. Financing Arrangements We lease our store space...

  • Page 69
    ... base calculation that limited availability to a percentage of eligible accounts receivable plus a percentage of the value of certain owned properties, less certain reserves. During the first quarter of 2012, the Company exercised its option to terminate the Australia/New Zealand Credit Agreement...

  • Page 70
    ... non-current assets in the Consolidated Balance Sheets. During 2012, we received a distribution of $1.7 million from Boise Cascade Holdings, L.L.C., for the income tax liability associated with our share of allocated earnings, the majority of which was used to reduce the accrued dividend balance...

  • Page 71
    ... cash flows and related weighted average interest rates by expected maturity dates. For more information, see Note 10, "Debt," of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" in this form 10-K. There is no recourse against OfficeMax on the...

  • Page 72
    ... Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" in this Form 10-K. Our Consolidated Balance Sheet as of December 29, 2012 includes $365.6 million of long-term liabilities associated with our retirement and benefit and other compensation plans and...

  • Page 73
    ... include the important new-year office supply restocking month of January, the back-to-school period and the holiday selling season, respectively. Disclosures of Financial Market Risks Financial Instruments Our debt is predominantly fixed-rate. At December 29, 2012, the estimated current fair value...

  • Page 74
    ... return on the pension plan assets. The pension plan assets include OfficeMax common stock, U.S. equities, international equities, global equities and fixed-income securities, the cash flows of which change as equity prices and interest rates vary. The risk is that market movements in equity prices...

  • Page 75
    Changes in foreign currency exchange rates expose us to financial market risk. We occasionally use derivative financial instruments, such as forward exchange contracts, to manage our exposure associated with commercial transactions and certain liabilities that are denominated in a currency other ...

  • Page 76
    ...volume. We also participate in programs that enable us to receive additional vendor subsidies by promoting the sale of vendor products. 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...

  • Page 77
    ... years. We base our long-term asset return assumption on the average rate of earnings expected on invested funds. We believe that the accounting estimate related to pensions is a critical accounting estimate because it is highly susceptible to change from period to period, based on the performance...

  • Page 78
    ... consolidated financial statements. Years prior to 2006 are no longer subject to U.S. federal income tax examination. During 2012, the Company effectively completed all audit work related to U.S. federal income tax returns for the years 2006 through 2009 and expects final completion to occur in 2013...

  • Page 79
    ... effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. This guidance, which the Company adopted for the third quarter of 2012, did not have any impact on the Company's results of operations, financial position...

  • Page 80
    ... DISCLOSURES ABOUT MARKET RISK Information concerning quantitative and qualitative disclosures about market risk is included under the caption "Disclosures of Financial Market Risks" in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Form 10...

  • Page 81
    ...8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA OfficeMax Incorporated and Subsidiaries Consolidated Statements of Operations Fiscal year ended December 29, December 31, December 25, 2012 2011 2010 (thousands, except per-share amounts) Sales ...Cost of goods sold and occupancy costs ...Gross profit...

  • Page 82
    ... Incorporated and Subsidiaries Consolidated Statements of Comprehensive Income (Loss) Fiscal year ended December 31, December 25, 2011 2010 (thousands) December 29, 2012 Net income attributable to OfficeMax and noncontrolling interest ...Other comprehensive income (loss): Cumulative foreign...

  • Page 83
    OfficeMax Incorporated and Subsidiaries Consolidated Balance Sheets December 29, 2012 December 31, 2011 (thousands, except share and per-share amounts) ASSETS Current assets: Cash and cash equivalents ...Receivables, net ...Inventories ...Deferred income taxes and receivables ...Other current ...

  • Page 84
    ... and benefits obligations ...Deferred gain on sale of assets ...Other long-term liabilities ...Noncontrolling interest in joint venture ...Shareholders' equity: Preferred stock-no par value; 10,000,000 shares authorized; Series D ESOP: $.01 stated value; 608,693 and 638,353 shares outstanding...

  • Page 85
    ... Consolidated Statements of Cash Flows Fiscal year ended December 29, 2012 December 31, 2011 (thousands) December 25, 2010 Cash provided by operations: Net income attributable to OfficeMax and noncontrolling interest ...Non-cash items in net income: Dividend income from investment in Boise Cascade...

  • Page 86
    ...and Subsidiaries Consolidated Statements of Equity For the fiscal years ended December 29, 2012, December 31, 2011 and December 25, 2010 Total Retained Accumulated OfficeMax Additional Earnings Other ShareNonPreferred Common Paid-In (Accumulated Comprehensive holders' controlling Stock Stock Capital...

  • Page 87
    ... 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 88
    ... as a reduction in sales and are accrued as earned by the customer. Revenue from the sale of extended warranty contracts is reported on a commission basis at the time of sale, except in a limited number of states where state law specifies the Company as the legal obligor. In such states, the revenue...

  • Page 89
    ...our Contract segment such as picking/packing and shipping/receiving, as well as management and staff functions, such as information technology, human resources, finance, legal, merchandising and product development functions. Expenses related to selling activities include costs associated with store...

  • Page 90
    ... value. At the end of 2012, 2011 2010, we performed quantitative impairment tests of our trade name assets and no impairment was recorded as a result. Investment in Boise Cascade Holdings, L.L.C. Investments in other companies are accounted for under the cost method, if the Company does not exercise...

  • Page 91
    ... in 2012, 2011 and 2010, respectively. Software development costs that do not meet the criteria for capitalization are expensed as incurred. Pension and Other Postretirement Benefits The Company sponsors noncontributory defined benefit pension plans covering certain terminated employees, vested...

  • Page 92
    ...Note 12, "Retirement and Benefit Plans," for additional information related to the Company's pension and other postretirement benefits. Facility Closure Reserves The Company conducts regular reviews of its real estate portfolio to identify underperforming facilities, and closes those facilities that...

  • Page 93
    ... in the Consolidated Balance Sheets. At December 29, 2012 and December 31, 2011, other long-term liabilities included approximately $47.2 million and $52.3 million, respectively, related to these future escalation clauses. The expected term of a lease is calculated from the date the Company first...

  • Page 94
    ... in the Consolidated Statements of Operations. During 2012, we recorded facility closure charges of $41.0 million in our Retail segment related to closing 29 underperforming domestic stores prior to the end of their lease terms, all of which was related to the lease liability. During 2011, we...

  • Page 95
    Facility closure reserve account activity during 2012, 2011 and 2010 was as follows: Total (thousands) Balance at December 26, 2009 ...Charges related to stores closed in 2010 ...Transfer of deferred rent balance ...Changes to estimated costs included in income ...Cash payments ...Accretion ......

  • Page 96
    ... the sales and supply chain operations in the U.S., Canada and Australia/New Zealand contract operations in 2012 and 2011, respectively. As of December 29, 2012, $6.0 million of the severance charges remain unpaid and are included in accrued expenses and other current liabilities in the Consolidated...

  • Page 97
    ... Wachovia Guaranteed Installment Notes. 5. Intangible Assets and Other Long-lived Assets 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...

  • Page 98
    ... exceeds the asset's fair value. At the end of 2012, 2011 2010, we performed quantitative impairment tests of our trade name assets and no impairment was recorded as a result. Other Long-Lived Assets We are also required to test our long-lived assets for impairment whenever an indicator of potential...

  • Page 99
    ...,628 84,908 $ 0.81 2012 2011 2010 (thousands, except per-share amounts) Net income available to OfficeMax common shareholders ...Preferred dividends (a) ...Diluted net income attributable to OfficeMax ...Average shares-basic ...Restricted stock, stock options, preferred share conversion and other...

  • Page 100
    ... operations as shown in the Consolidated Statements of Operations includes the following components: 2012 2011 (thousands) 2010 Current income tax (expense) benefit: Federal ...State ...Foreign ...Total ...Deferred income tax (expense) benefit: Federal ...State ...Foreign ...Total ...Total income...

  • Page 101
    ... certain deferred items which was offset by the impairment of state net operating losses. The Company has a deferred tax asset related to alternative minimum tax credit carryforwards of approximately $100 million, which are available to reduce future regular federal income taxes, if any, over an 65

  • Page 102
    ... subject to U.S. federal income tax examination. During 2012, the Company effectively completed all audit work related to U.S. federal income tax returns for the years 2006 through 2009 and expects final completion to occur in 2013. The Company is no longer subject to state income tax examinations...

  • Page 103
    ...a result of purchase accounting from the 2003 acquisition of the U.S. retail business, we recorded an asset relating to store leases with terms below market value and a liability for store leases with terms above market value. The asset will be amortized through 2027 ($4 million per year), while the...

  • Page 104
    ... non-current assets in the Consolidated Balance Sheets. During 2012, we received a distribution of $1.7 million from Boise Cascade Holdings, L.L.C., for the income tax liability associated with our share of allocated earnings, the majority of which was used to reduce the accrued dividend balance...

  • Page 105
    ... follows: Total (thousands) 2013 ...2014 ...2015 ...2016 ...2017 ...Thereafter ...Total ... $ 10,232 1,574 213 20,264 115 204,272 $236,670 Credit Agreements On October 7, 2011, the Company entered into a Second Amended and Restated Loan and Security Agreement (the "Credit Agreement") with a group...

  • Page 106
    ... base calculation that limited availability to a percentage of eligible accounts receivable plus a percentage of the value of certain owned properties, less certain reserves. During the first quarter of 2012, the Company exercised its option to terminate the Australia/New Zealand Credit Agreement...

  • Page 107
    ... fair values of the Company's other financial instruments at December 29, 2012 and December 31, 2011. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. December 29, 2012 Level 1 Fair Value Level...

  • Page 108
    ... end of fiscal year 2012 or 2011. 12. Retirement and Benefit Plans Pension and Other Postretirement Benefit Plans The Company sponsors noncontributory defined benefit pension plans covering certain terminated employees, vested employees, retirees and some active employees, primarily in Contract. In...

  • Page 109
    ...shows the amounts recognized in the Consolidated Balance Sheets related to the Company's defined benefit pension and other postretirement benefit plans at year-end: Pension Benefits Other Benefits 2012 2011 2012 2011 (thousands) Current liabilities ...Noncurrent liabilities ...Net amount recognized...

  • Page 110
    ... loss and prior service credit that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost over the next fiscal year is $0.4 million and $4.0 million, respectively. During 2012, our pension plans were amended to provide a one-time special election period...

  • Page 111
    ... average assumptions used in the measurement of net periodic benefit cost as of year-end: Other Benefits United States Canada 2012 2011 2010 2012 2011 2010 Pension Benefits 2012 2011 2010 Discount rate ...Expected long-term return on plan assets ... 4.93% 5.64% 6.15% 3.70% 4.50% 5.10% 4.50% 5.30...

  • Page 112
    ... 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. In 2009, we contributed 8.3 million shares of OfficeMax common stock to our qualified pension plans, which are managed by an...

  • Page 113
    ... Money market funds ...Equity securities: OfficeMax common stock ...U.S. large-cap ...U.S. small and mid-cap ...International ...Fixed-Income: Corporate bonds ...Government securities ...Other fixed-income ...Other: Equity mutual funds ...Group annuity contracts ...Other, including plan receivables...

  • Page 114
    ...on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Cash Flows Pension plan contributions include required statutory minimum amounts and, in some years, additional discretionary amounts. During 2012, 2011 and 2010, the Company made...

  • Page 115
    ... income tax benefit recognized in the Consolidated Statement of Operations for share-based compensation arrangements was $4.0 million, $6.5 million and $5.1 million for 2012, 2011 and 2010, respectively. 2003 Director Stock Compensation Plan and OfficeMax Incentive and Performance Plan In February...

  • Page 116
    ... number of shares used to calculate diluted earnings per share as long as all applicable performance criteria are met, and their effect is dilutive. In the above table, nonvested RSUs outstanding at the end of 2012 include 96,755 and 349,229 shares of performance-based RSUs granted in 2010 and 2011...

  • Page 117
    ...with an exercise price equal to fair market value on the grant date and typically expire within seven years of the grant date. Stock options granted under the OfficeMax Incentive and Performance Plan generally vest over a three year period. In 2012, 2011 and 2010, the Company recognized $8.1 million...

  • Page 118
    ... technology products and solutions, office furniture, print and document services and facilities products. 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 Zealand. This segment markets and...

  • Page 119
    ... of consolidated trade sales. Segment sales to external customers by product line are as follows: 2012 2011 (thousands) 2010 Contract Office supplies and paper ...Technology products ...Office furniture ...Total ...Retail Office supplies and paper ...Technology products ...Office furniture ...Total...

  • Page 120
    ..., net Operating income (loss) Sales Year ended December 29, 2012 Contract ...Retail ...Corporate and Other ...Total ...Year ended December 31, 2011 Contract ...Retail ...Corporate and Other ...Total ...Year ended December 25, 2010 Contract ...Retail ...Corporate and Other ...Total ... $3,605...

  • Page 121
    ...contract. The new paper supply contract replaced the previous supply contract executed in 2004 with Boise. The paper supply contract requires us to purchase from Boise and Boise to sell to us virtually all of our North American requirements for office paper, subject to certain conditions. After 2012...

  • Page 122
    ... or cash flows. Over the past several years and continuing in the current year, 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...

  • Page 123
    ...year amount because each quarter is calculated on a stand-alone basis. (g) The Company's common stock (symbol OMX) is traded on the New York Stock Exchange. 18. Subsequent Events On February 20, 2013, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Office Depot...

  • Page 124
    ... Act of 1976, and (iii) effectiveness of a registration statement registering Office Depot, Inc. common stock. The Merger Agreement contains certain termination rights for both parties, and further provides for the payment of fees and expenses upon termination under specified circumstances. The...

  • Page 125
    Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders OfficeMax Incorporated: We have audited the accompanying consolidated balance sheets of OfficeMax Incorporated and subsidiaries (the Company) as of December 29, 2012 and December 31, 2011, and the related...

  • Page 126
    ... 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 127
    ... our senior financial officers. The Code is available, free of charge, on our website at investor.officemax.com by clicking on "Code of Ethics." You also may obtain copies of this Code, free of charge, by contacting our Investor Relations Department, 263 Shuman Boulevard, Naperville, Illinois 60563...

  • Page 128
    ... the 2003 OfficeMax Incentive and Performance Plan (the "2003 Plan", formerly the Boise Incentive and Performance Plan). These plans are designed to further align our directors' and management's interests with the Company's long-term performance and the long-term interests of our shareholders. The...

  • Page 129
    ... Flows for the years ended December 29, 2012, December 31, 2011 and December 25, 2010. Consolidated Statements of Equity for the years ended December 29, 2012, December 31, 2011 and December 25, 2010. Notes to Consolidated Financial Statements. Report of Independent Registered Public Accounting Firm...

  • Page 130
    ..., thereunto duly authorized. OfficeMax Incorporated By /S/ RAVICHANDRA SALIGRAM Ravichandra Saligram Chief Executive Officer Dated: February 25, 2013 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the...

  • Page 131
    ...the three-year period ended December 29, 2012, and the effectiveness of internal control over financial reporting as of December 29, 2012, which report appears in the December 29, 2012 annual report on Form 10-K of OfficeMax Incorporated. /s/ KPMG LLP KPMG LLP Chicago, Illinois February 25, 2013 95

  • Page 132
    ... with the Annual Report on Form 10-K for the fiscal year ended December 29, 2012 Exhibit Number Exhibit Description Form Incorporated by Reference Exhibit File Number Number Filing Date Filed Herewith 2.1 3.1 3.2 4.1(1) 4.2 9 10.1+ 10.2 10.3 10.4 10.5 Asset Purchase Agreement dated July...

  • Page 133
    ... Savings Deferral Plan 2005 Deferred Compensation Plan 2005 Directors Deferred Compensation Plan Directors Compensation Summary Sheet Form of OfficeMax Incorporated Nonstatutory Stock Option Agreement Executive Life Insurance Program Amendment to Executive Life Insurance Program Officer Annual...

  • Page 134
    ... Executive Officers, as amended through September 26, 2003 Boise Cascade Corporation (now OfficeMax Incorporated) Supplemental Pension Plan, as amended through September 26, 2003 1980 Split Dollar Life Insurance Plan, as amended through September 25, 2003 Form of Directors' Indemnification Agreement...

  • Page 135
    ...Policy Form of Executive Officer Change in Control Severance Agreement Amendment to OfficeMax Incorporated 2005 Directors Deferred Compensation Plan Form of Amendment of OfficeMax Incorporated Executive Savings Deferral Plan Form of 2009 Restricted Stock Unit Award Agreement (Performance Based) Form...

  • Page 136
    ... by Reference Exhibit File Number Number Filing Date Filed Herewith 10.50†Transition and Retirement Agreement between Mr. Duncan and OfficeMax Incorporated dated February 11, 2010 Form of 2010 Nonqualified Stock Option Award Agreement 2003 OfficeMax Incentive and Performance Plan as amended...

  • Page 137
    ... Exhibit File Number Number Filing Date Filed Herewith 10.64†10.65†Form of 2011 Nonqualified Stock Option Award Agreement Change in Control Agreement dated as of May 2, 2011 between OfficeMax Incorporated and Mr. Michael Lewis Restricted Stock Unit Award Agreement - Time Based dated...

  • Page 138
    ... between OfficeMax Incorporated and Ravi Saligram Form of 2012 Nonqualified Stock Option Award Agreement Form of 2012 Performance-Based RSU Award Agreement Form of 2012 Performance Unit Award Agreement Form of 2012 Annual Incentive Award Agreement (Executive Vice President - Business Unit) Change in...

  • Page 139
    ... Fair Competition Agreement dated as of April 2, 2012 between OfficeMax Incorporated and Mr. John Kenning Form of 2012 Director Restricted Stock Unit Award Agreement Form of 2004 Director Restricted Stock Award Agreement Inapplicable Inapplicable Inapplicable Code of Ethics Inapplicable Inapplicable...

  • Page 140
    ... Benefits Trust was filed as exhibit 10 in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. Each of the documents referenced in this footnote is incorporated herein by reference. (3) Our Code of Ethics can be found on our website investor.officemax.com by clicking on "Code...

  • Page 141
    ..., process, summarize and report financial information; and any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ RAVICHANDRA SALIGRAM Ravichandra Saligram Chief Executive Officer...

  • Page 142
    ... and report financial information; and any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ BRUCE BESANKO b. Date: February 25, 2013 Bruce Besanko Chief Financial Officer

  • Page 143
    ...'s annual report on Form 10-K (the "Report") for the fiscal year ended December 29, 2012. I, Ravichandra Saligram, OfficeMax Incorporated's chief executive officer, certify that: (i) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act...

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  • Page 147
    ... Tel 630.438.7800 Annual Shareholders Meeting Our annual meeting of shareholders will be held at 2:00 p.m. Central Time on Monday, April 29, 2013, in Naperville, Illinois. Stock Market Listing OfficeMax common stock (symbol OMX) is listed on the New York Stock Exchange. Transfer Agent and Registrar...

  • Page 148
    For the second consecutive year, OfficeMax® was named one of the World's Most Ethical Companies by the Ethisphere Institute. © 2013 OMX, Inc. All rights reserved.