As previously announced, OfficeMax said sales were impacted by the integration of its new SAP Enterprise Resource Planning (ERP) system, the conversion of its Company operated computer departments to temporary Gateway, Inc. end-cap displays and a difficult overall retail environment. On a positive note, the Company reported a reduction in short-term borrowings to $180 million, down $163 million, from the $343 million reported at the end of its second quarter.

Third Quarter Consolidated Results

As expected, consolidated results from operations excluding special charges for the quarter reflected a loss of $10.3 million, or ($0.10) per share, compared to net income of $15.8 million, or $0.14 per share, during the third quarter last year. This was primarily due to lower than anticipated sales and additional costs associated with the acceleration of OfficeMax’s supply-chain management network and program, reduced income from vendor support programs eliminated as a result of the Company’s merchandising initiatives and the continued investment in the operations of its OfficeMax.com Business Segment.

As announced last week, OfficeMax recorded an approximate $19.5 million pre-tax charge in the third quarter, of which $14.4 million was non-cash, resulting from a lawsuit settlement with Ryder Integrated Logistics, Inc. Last year for its third quarter, OfficeMax incurred an $83.3 million pre-tax charge for item rationalization in preparation for the implementation of its network of mega-distribution centers and supply-chain management initiative. Including special charges, the Company reported third quarter net losses of $22.0 million, or ($0.20) per share, this year compared to a loss of $37.4 million, or ($0.33) per share, for the comparable period last year.

The Company also noted it expects to complete the majority of its MaxProcess operating improvement programs by the end of the first quarter of fiscal 2001, and that these programs are designed to significantly improve profitability and cash flow through improved inventory management, product margins and sales productivity. In addition to the installation of the SAP system and the conversion to Gateway computer departments, MaxProcess initiatives include the accelerated implementation of the PowerMax supply chain distribution network and improved merchandising and vendor management processes.

Core Business Segment Results

OfficeMax reported record Core Business Segment sales of $1.278 billion for its third quarter. This represents a 5.7 percent increase over the $1.209 billion for the same period in 1999 with a decline of 3.7 percent in comparable-store sales. The Core Business Segment consists of office supplies, furniture, business machines, peripherals and CopyMax printing services.

Prior to special charges, the Core Business Segment incurred a loss for the third quarter of $3.7 million, or ($0.04) per share, compared to income of $24.2 million, or $0.21 per share, for the third quarter of fiscal 1999. Including special charges, the Core Business Segment incurred a loss for the quarter of $15.3 million, or ($0.14) per share, compared to a loss of $29.1 million, or ($0.26) per share, for the same period last year.

For this year’s first nine months the Core Business Segment sales advanced 9.7 percent to a record $3.549 billion from $3.234 billion in fiscal 1999 as comparable-store sales were unchanged. Through the first 39 weeks of the year this segment incurred a loss of $9.6 million, or ($0.10) per share, compared to net income of $63.0 million, or $0.55 per share, in fiscal 1999 prior to special charges for both years. Including the special charges, the Core Business Segment incurred a loss for the first nine months of $21.3 million, or ($0.20) per share, compared to income of $9.7 million, or $0.09 per share, for the like period last year.

OfficeMax.com Segment Results

The Company also announced that sales for its business-to-small-business e-Commerce site, OfficeMax.com, increased 182 percent to $29.6 million from $10.5 million for the third quarter last year and incurred a net loss, as anticipated, of $6.7 million, or ($0.06) per share, compared to a loss of $1.8 million, or ($0.01) per share, for the same period last year. Strong sales growth, Mr. Feuer said, was attributable to both an increase in new customers as a result of more effective and frequent advertising, along with repeat business from existing OfficeMax.com customers. Gross margin for the quarter improved to 29.2 percent of sales or 470 basis points higher than last year’s results of 24.5 percent of sales. The Company said this was the result of a favorable sales mix and pricing discipline. Net losses increased over the same period last year due to a planned increase in expense to support the Company’s targeted marketing programs designed to acquire new small business customers.

For this year’s first nine months, OfficeMax.com sales jumped 303 percent to $81.9 million from $20.3 million for the same period in fiscal 1999. OfficeMax.com incurred a loss for the nine months of $17.4 million, or ($0.16) per share, compared to a loss of $3.3 million, or ($0.03) per share, for the like period last year. Similar to third quarter results, the year-to-date loss is attributable to incremental marketing and advertising spending for new programs launched during fiscal 2000.

Year-to-Date Consolidated Sales Results

Consolidated sales for the first three quarters increased 8.1 percent to a record $3.730 billion versus $3.452 billion for fiscal 1999. Net loss on a consolidated basis for the first nine months, excluding special charges, was $36.5 million, or ($0.34) per share, compared to income of $40.3 million prior to an inventory write-down charge, or $0.35 per share, for the comparable period last year. For the year-to-date period, comparable-store sales for Continuing Businesses were up 1.6 percent.

During the quarter, OfficeMax announced that it combined its e-Commerce business with its direct sales and catalog group, allowing it to eliminate redundancies and convert lower volume customers to Internet and catalog users. The Company said it believes the resulting synergies will produce cost savings of approximately $6 million annually starting next year.

Company Reduces Short-term Borrowings Almost 50 Percent and Increases

Liquidity with New Revolving Credit Facility and Letters of Credit

Totaling $750 Million

Last week, the Company also announced it signed a commitment letter for a new three year, $700 million, asset-based revolving credit facility with Fleet Retail Finance, Inc., a subsidiary of FleetBoston Financial, to replace the Company’s existing $400 million agreement. The Company also has a separate $50 million commitment with another financial institution for letters of credit.