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OfficeMax Reports $27.4M Net

Itasca, Ill. — OfficeMax reported a net income of $27.4 million for the second quarter, ended July 1, a turnaround from last year when it reported a $21.5 million net loss for the period.

For the second quarter, net income before special items was $23.0 million, compared with a net loss before special items of $10.2 million in last year’s second quarter. Overall sales for the quarter were $2.04 billion, down slightly from the prior year’s $2.09 billion.

“We are pleased with our second-quarter operating performance and the resulting increase in our financial outlook for full year 2006,” said Sam Duncan, chairman/CEO. “In our retail segment, significantly lower inventory clearance activity, reduced shrinkage and cost controls provided strong operating income improvement.”

In the OfficeMax retail segment, sales decreased 6.2 percent in the second quarter, compared with the second quarter of 2005 due primarily to the 109 strategic store closings completed in the first quarter of 2006. Same-store sales for the second quarter of 2006 decreased about 1 percent.

Retail operating income for the second quarter included a $9.0 million pretax benefit resulting from an adjustment to the reserve for retail store closures. Excluding this special item, operating income increased to $18.2 million, compared with an operating loss of $15.5 million in the second quarter of 2005.

Retail segment gross margin increased to 29.7 percent vs. 25.6 percent for the same time last year, due to significantly lower inventory clearance activity, reduced shrinkage and a more effective promotional strategy. Retail segment operating income in the second quarter also benefited from targeted cost reduction programs including reduced store labor expense, offset by higher allocated general and administrative expense as well as store incentive compensation expense.

During the second quarter of 2006, OfficeMax opened nine new retail stores and closed two stores, ending the quarter with 874 retail stores, compared with 946 stores at the end of the second quarter of 2005.