OfficeMax Inc. (OMX, Financial) filed Quarterly Report for the period ended 2010-09-25.
Officemax Inc. has a market cap of $1.43 billion; its shares were traded at around $17.1 with a P/E ratio of 29.9 and P/S ratio of 0.2. OMX is in the portfolios of Steven Cohen of SAC Capital Advisors, David Tepper of APPALOOSA MANAGEMENT LP, Jim Simons of Renaissance Technologies LLC, Louis Moore Bacon of Moore Capital Management, LP, Charles Brandes of Brandes Investment, Jeremy Grantham of GMO LLC.
As noted in the discussion and analysis that follows, our operating results were impacted by significant items in both years. These items included charges for store closures and severance, and favorable adjustments to legacy reserves as well as gains from non-operating legacy activities. Excluding the impact of these items, of which there were none in the third quarter of 2010, our adjusted operating income was $40.9 million and $129.7 million for the third quarter and first nine months of 2010, respectively, and was $26.7 million and $64.9 million for the third quarter and first nine months of 2009, respectively. Excluding the impact of these items, of which there were none in the third quarter of 2010, our adjusted net income available to OfficeMax common shareholders was $20.0 million, or $0.23 per diluted share, and $63.5 million, or $0.73 per diluted share, for the third quarter and first nine months of 2010, respectively, compared to $6.6 million, or $0.08 per diluted share, and $20.9 million, or $0.27 per diluted share, for the third quarter and first nine months of 2009, respectively.
At the end of the third quarter of 2010, we had $587.9 million in cash and cash equivalents and $570.0 million in available (unused) borrowing capacity under our credit facilities. The combination of cash and cash equivalents and estimated available borrowing capacity yields $1,157.9 million of overall liquidity. We had outstanding recourse debt of $294.0 million (both current and long-term) and non-recourse obligations of $1,470.0 million related to the timber securitization notes. There is no recourse against OfficeMax on the securitized timber notes payable as recourse is limited to proceeds from the applicable pledged installment notes receivable and underlying guarantees. There were no borrowings on our credit facilities during the first nine months of 2010.
Interest income was $10.6 million and $10.9 million for the third quarters of 2010 and 2009, respectively. For the first nine months of 2010 and 2009, interest income was $31.9 and $36.4 million, respectively. The decrease was due primarily to the $4.4 million of interest income recorded in 2009 related to the tax escrow balance discussed above. As a result of the September 2008 bankruptcy filing by Lehman Brothers Holdings Inc. (Lehman), we recorded no interest income on the Lehman portion of the timber notes receivable in 2010 or 2009. Interest expense decreased to $18.4 million in the third quarter of 2010 from $19.3 million in the third quarter of 2009 and to $55.1 million in the first nine months of 2010 from $58.0 million in the first nine months of 2009. The decrease in interest expense was due primarily to reduced debt resulting from debt repayments made in 2009.
For the third quarter of 2010, we recognized income tax expense of $11.7 million on pre-tax income of $33.1 million (effective tax rate of 35.3%) compared to income tax expense of $9.9 million on pre-tax income of $16.8 million (effective tax rate of 59.3%) for the third quarter of 2009. For the first nine months of 2010, we recognized income tax expense of $34.4 million on pre-tax income of $95.1 million (effective tax rate of 36.2%) compared to income tax expense of $4.4 million on pre-tax income of $6.6 million (effective tax rate of 67.4%) for the first nine months of 2009. The effective tax rate in both years was impacted by the effects of state income taxes, income items not subject to tax, non-deductible expenses, the mix of domestic and foreign sources of income as well as low levels of profitability in 2009.
common shareholders of $20.0 million, or $0.23 per diluted share, and $56.5 million, or $0.65 per diluted share, for the third quarter and first nine months of 2010, respectively. Adjusted net income available to OfficeMax common shareholders, as discussed above, was $20.0 million, or $0.23 per diluted share, for the third quarter of 2010 compared to $6.6 million, or $0.08 per diluted share, for the third quarter of 2009. There were no adjustments to net income available to OfficeMax common shareholders in the third quarter of 2010. For the first nine months of 2010 and 2009, adjusted net income available to OfficeMax common shareholders was $63.5 million, or $0.73 per diluted share, for 2010 compared to $20.9 million, or $0.27 per diluted share, for 2009.
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Officemax Inc. has a market cap of $1.43 billion; its shares were traded at around $17.1 with a P/E ratio of 29.9 and P/S ratio of 0.2. OMX is in the portfolios of Steven Cohen of SAC Capital Advisors, David Tepper of APPALOOSA MANAGEMENT LP, Jim Simons of Renaissance Technologies LLC, Louis Moore Bacon of Moore Capital Management, LP, Charles Brandes of Brandes Investment, Jeremy Grantham of GMO LLC.
Highlight of Business Operations:
Sales for the third quarter of 2010 decreased 1.0% year-over-year to $1,813.4 million, while sales of $5,383.8 million for the first nine months of 2010 declined 0.3% compared to the first nine months of 2009. In local currency, sales for the third quarter of 2010 declined 2.0% compared to the third quarter of 2009 and sales for the first nine months of 2010 declined 2.7% compared to the first nine months of 2009. Retail sales increased for the third quarter of 2010 year-over-year, but declined for the first nine months of 2010 compared to the prior year same period. Contract sales declined for the third quarter of 2010 year-over-year, but increased for the first nine months of 2010 compared to the prior year same period. In local currencies, Contract sales declined for both time periods of 2010 compared to the prior year same periods. Gross profit margin increased 2.2% of sales (220 basis points) to 25.9% of sales in the third quarter of 2010 year-over-year and 2.1% of sales (210 basis points) to 26.1% of sales in the first nine months of 2010 compared to the prior year same period, due in part to improved product margins and reduced occupancy costs in both our Contract and Retail segments. Gross profit margin in the first nine months of 2010 also benefited from the reversal of inventory shrinkage reserves due to favorable results from our annual physical inventory counts of $15.0 million. Total operating expenses were negatively impacted by higher compensation expense of $23.0 million for the third quarter of 2010 and $55.9 million for the first nine months of 2010, compared to $12.2 million for the third quarter of 2009 and $17.0 million for the first nine months of 2009. This increase was primarily due to timing, as we did not anticipate the favorable payout under our incentive plans for the full year of 2009 until the fourth quarter of 2009. Total operating expenses were also negatively impacted by increased expenses related to our growth and profitability initiatives. We reported operating income of $40.9 million and $118.4 million in the third quarter and first nine months of 2010, respectively, compared to operating income of $25.2 million for both the third quarter of 2009 and the first nine months of 2009. The net income available to OfficeMax common shareholders was $20.0 million, or $0.23 per diluted share, in the third quarter of 2010 compared to $5.7 million, or $0.07 per diluted share, in the third quarter of 2009. The net income available to OfficeMax common shareholders was $56.5 million, or $0.65 per diluted share, in the first nine months of 2010 compared to $1.1 million, or $0.01 per diluted share, in the first nine months of 2009.As noted in the discussion and analysis that follows, our operating results were impacted by significant items in both years. These items included charges for store closures and severance, and favorable adjustments to legacy reserves as well as gains from non-operating legacy activities. Excluding the impact of these items, of which there were none in the third quarter of 2010, our adjusted operating income was $40.9 million and $129.7 million for the third quarter and first nine months of 2010, respectively, and was $26.7 million and $64.9 million for the third quarter and first nine months of 2009, respectively. Excluding the impact of these items, of which there were none in the third quarter of 2010, our adjusted net income available to OfficeMax common shareholders was $20.0 million, or $0.23 per diluted share, and $63.5 million, or $0.73 per diluted share, for the third quarter and first nine months of 2010, respectively, compared to $6.6 million, or $0.08 per diluted share, and $20.9 million, or $0.27 per diluted share, for the third quarter and first nine months of 2009, respectively.
At the end of the third quarter of 2010, we had $587.9 million in cash and cash equivalents and $570.0 million in available (unused) borrowing capacity under our credit facilities. The combination of cash and cash equivalents and estimated available borrowing capacity yields $1,157.9 million of overall liquidity. We had outstanding recourse debt of $294.0 million (both current and long-term) and non-recourse obligations of $1,470.0 million related to the timber securitization notes. There is no recourse against OfficeMax on the securitized timber notes payable as recourse is limited to proceeds from the applicable pledged installment notes receivable and underlying guarantees. There were no borrowings on our credit facilities during the first nine months of 2010.
Interest income was $10.6 million and $10.9 million for the third quarters of 2010 and 2009, respectively. For the first nine months of 2010 and 2009, interest income was $31.9 and $36.4 million, respectively. The decrease was due primarily to the $4.4 million of interest income recorded in 2009 related to the tax escrow balance discussed above. As a result of the September 2008 bankruptcy filing by Lehman Brothers Holdings Inc. (Lehman), we recorded no interest income on the Lehman portion of the timber notes receivable in 2010 or 2009. Interest expense decreased to $18.4 million in the third quarter of 2010 from $19.3 million in the third quarter of 2009 and to $55.1 million in the first nine months of 2010 from $58.0 million in the first nine months of 2009. The decrease in interest expense was due primarily to reduced debt resulting from debt repayments made in 2009.
For the third quarter of 2010, we recognized income tax expense of $11.7 million on pre-tax income of $33.1 million (effective tax rate of 35.3%) compared to income tax expense of $9.9 million on pre-tax income of $16.8 million (effective tax rate of 59.3%) for the third quarter of 2009. For the first nine months of 2010, we recognized income tax expense of $34.4 million on pre-tax income of $95.1 million (effective tax rate of 36.2%) compared to income tax expense of $4.4 million on pre-tax income of $6.6 million (effective tax rate of 67.4%) for the first nine months of 2009. The effective tax rate in both years was impacted by the effects of state income taxes, income items not subject to tax, non-deductible expenses, the mix of domestic and foreign sources of income as well as low levels of profitability in 2009.
common shareholders of $20.0 million, or $0.23 per diluted share, and $56.5 million, or $0.65 per diluted share, for the third quarter and first nine months of 2010, respectively. Adjusted net income available to OfficeMax common shareholders, as discussed above, was $20.0 million, or $0.23 per diluted share, for the third quarter of 2010 compared to $6.6 million, or $0.08 per diluted share, for the third quarter of 2009. There were no adjustments to net income available to OfficeMax common shareholders in the third quarter of 2010. For the first nine months of 2010 and 2009, adjusted net income available to OfficeMax common shareholders was $63.5 million, or $0.73 per diluted share, for 2010 compared to $20.9 million, or $0.27 per diluted share, for 2009.
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