OfficeMax delays 3Q results to study Lehman impact

[October 30, 2008]  CHICAGO (AP) -- OfficeMax Inc. delayed its third-quarter results on Wednesday, saying it needed extra time to determine the size of a non-cash impairment charge related to the bankruptcy of Lehman Brothers Holdings Inc.

The full results, scheduled to be released Friday, will now be available sometime before Nov. 6. The office supply chain gave preliminary sales figures Wednesday, saying revenue fell about 9.5 percent to $2.1 billion during the three months ending in September.

OfficeMax, based in suburban Chicago, said it did not expect its operations or liquidity to be hurt by the Lehman-related charge, which it said could be at least $82.5 million.

The Lehman bankruptcy prompted a default on securization notes partially guaranteed by the bank. Last month, OfficeMax said its OMX Timber Finance Investments II had previously issued $735 million in securitization notes related to the sale of timberlands in 2004. Those notes were secured by Boise Land & Timber II installment notes and partially guaranteed by Lehman Brothers, whose bankruptcy filing prompted a default on the installment notes.

The company said it expects to pay no more than $50 million in accelerated tax liability from a one-time gain it received from the 2004 deal.

OfficeMax said the difference between the amount of the installment note guaranteed by Lehman and the aggregate principal of the securitization note is $82.5 million, but it is working to determine if the charge will exceed that sum.

Meanwhile, the company said same-store sales -- an important retail industry metric of stores open at least a year -- slid 11 percent in the third quarter as fewer consumers and small business owners spent money.

Operating income in the company's contract segment fell 35 percent to $35.5 million from $55 million. Retail segment profit slid 36 percent to $29.1 million from $45.3 million.

"Results in both our contract and retail segments reflect the weaker global economic environment," Chairman and Chief Executive Sam Duncan said in a statement. "As to the impact of the recent Lehman bankruptcy on our timber notes, while we are completing our assessment of the non-cash impairment charge, we do not believe there will be any adverse impact on our operations."

Duncan said the company expects falling sales to continue through the remainder of the year, but said the company's cash flow from operations and access to capital remain solid.

"They will provide us with the resources we need to continue the turnaround initiatives that are strengthening our business," he said.

OfficeMax shares, which have fallen more than 80 percent this year, rose 84 cents, or 21 percent, to $4.84 in trading Wednesday.

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On the Net:

http://www.officemax.com/

[Associated Press; By ASHLEY M. HEHER]

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