OfficeMax swings to $432 million 3rd-quarter loss
OfficeMax Inc. lost more than $400 million in the third quarter as sales fell and a hefty charge tied to the bankruptcy of Lehman Brothers weighed down results.
But the struggling Naperville-based retailer repeated its refrain that its finances were solid, and analysts said the company's underlying results were as expected.
OfficeMax posted a loss of $432.7 million, or $5.70 per share, compared with a profit of $49 million, or 64 cents per share, last year. The loss stemmed from $754 million in charges related to Lehman, whose bankruptcy in September prompted a default on securization notes partially guaranteed by the bank.
Excluding one-time items, the company earned $28 million, or 36 cents per share, in line with the partial results it released last month. Revenue fell 10 percent to $2.10 billion from $2.32 billion on weakness in the company's retail and contract business units.
Analysts polled by Thomson Reuters, who usually exclude one-time items from their estimates, expected a profit of 33 cents on sales of $2.13 billion.
OfficeMax delayed releasing full results as scheduled in late October in order to determine the size of the charge related to Lehman, saying it could be at least $82.5 million.
Chairman and Chief Executive Sam Duncan said Thursday that Lehman's bankruptcy will not severely hurt the company.
"We expect no adverse impact on our operations or liquidity from the Lehman bankruptcy filing," he told investors during a conference call. "And we believe any potential cash impact would be funded adequately by excess cash in our credit facility."
The company said its OMX Timber Finance Investments II had issued $735 million in securitization notes tied to the sale of timberlands in 2004. Those notes were secured by Boise Land & Timber II installment notes and partially guaranteed by Lehman.
Duncan also said the company would scale back new store remodeling efforts through 2009.
"We're taking a realistic approach to our business for the remainder of this year and 2009," he said.
During the third quarter, sales in OfficeMax's contract segment fell 11.5 percent to $1.05 billion, partly because of softer sales from existing corporate accounts. An 11.1 percent drop in same-store sales caused sales in OfficeMax's retail segment to slip 7.3 percent, also to $1.05 billion.
"We anticipate negative sales trends will continue through the remainder of the year," Duncan said.
OfficeMax also expects "significant" sales declines in the fourth quarter because of a tough economy and weak holiday season.
"Business trends remain bad," Deutsche Bank analyst Mike Baker told investors in a research note, but added: "On the positive side, several liquidity-related risks may not be as bad as perceived."
Goldman Sachs analyst Matthew Fassler said the results showed the effect of the company's cost discipline and said sales declines weren't disproportionate to decreases seen elsewhere in the retail sector.
"Results are little different from pre-released figures, but additional clarity on the balance sheet should help drive some relief off of battered valuation levels," he told invest
OfficeMax shares fell 42 cents, or 7.5 percent, to $5.15 in late afternoon trading.
ors in a research note published Thursday.