FOOL CONFERENCE CALL SYNOPSIS*
By Debora Tidwell (MF Debit)

OfficeMax Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OMX)") else Response.Write("(NYSE: OMX)") end if %>
3605 Warrensville Center Road
Shaker Heights, OH 44122
(216) 921-6900
http://www.officemax.com

UNION CITY, Ca., October 21, 1996/FOOLWIRE/ --- OfficeMax reported third quarter 1996 results this morning. Net income for the quarter rose 28% to $23.7 million, up from $18.6 million, and that excludes last year's one-time after tax net gain of $69.1 million from the sale of their interest in Corporate Express (which put about $200 million in the bank for them). Earnings per share advanced to $0.19 versus $0.15 per share in the prior quarter. Sales were up 27% to $859.8 million, up from $679 million. Same store sales were up 10% on top of 19% last year.

GENERAL COMMENTS. This quarter was a very interesting quarter in that it was perhaps one of the most challenging they have faced since becoming a public company. Last year they had some unique benefits that helped the quarter including the comparison last year against the Windows '95 launch which really served as a proxy for a boost in computer peripheral sales, software sales, and a general catalyst for that whole category of business. That is not necessarily an excuse on their performance in terms of computers this year because they are very excited to state that their computer comps for the year were still up 25-30%. Additionally, in the past quarter, they did see a 25-30% decline in the paper prices, which in effect rippled down through all categories and negatively impacted comps by about 3%. With that, they came in, for the quarter with a 10% comp store gain which they think, under the circumstances was pretty decent and will be among the best in retailing.

RETAIL TRENDS. Back to school was again a very important season for them and a very successful one. They saw back to school begin much later this year than in previous years and they think that is a trend that will continue as people shop closer to the target date. They think that will be the case with Christmas too.

COMPUTER SALES. Sales were fueled by computer sales which generated a lot of traffic in the stores. They worked very effectively in trying to give the consumer a reason to come in and to generate the incremental sales. One of the things they did was change the way they went to market from a promotional standpoint in bringing customers in with a special purchased computer and special price promotions, but not at the sacrifice of margin in that they were special buys of quality computers but not of the big brand names. They think this year is going to be a very aggressive quarter, not one for the inexperienced or meek because they feel retailers are going to have to do a lot to bring customers in. Once they got them into the stores, they did trade them up to better computers as well as add on peripherals and that resulted in computer department sales of 25-30%. Computers includes computer software, printers, and peripherals. In software, breaking it out just for the past quarter, they actually had a negative in their comp store sales because of the Windows '95 comparison. So the 25-30% for the category was really a very strong number. They also had very good sales in CPUs and printers. What they are selling and sold in the third quarter was 120 mHz and higher computers which represents about 84% of their inventory at the quarter. Strong computer sales were offset somewhat by the negative paper prices.

GROSS MARGINS. Despite the higher than planned sales of lower margin computers, gross margins only declined 37 basis points to 22.1% and actually improved 45 basis points from the second quarter rate of 21.65%. That is a reflection of the continued leverage of their occupancy costs, focused inventory management and controls at store level.

STORE OPERATING & SELLING EXPENSES. Store operating and selling expenses improved 56 basis points to 15.29% of sales. Again that is a reflection of the strong controls and very strong corporate controls as well. They continued to leverage in the payroll and advertising expenses and they are pleased with their ability to control these expenses in light of the record 24 stores they opened during the quarter. G&A expenses were better than originally planned and came in at 1.94% of sales. A real important number for the quarter was that their operating income for the quarter increased 36% to $37.1 million, up from $27.2 million. On a four-wall operating income basis (gross profit less operating and selling expenses) they had a nice improvement of 29 basis points and came in at 6.8% of sales and that is up from last year's 6.5%. That is, again, on their way working towards this four-wall operating profit of 8% as a long term goal. This really reflects the maturation of the young base of stores, the leveraging of their store operating expenses and selling expenses over the sales volume last year. That was offset by the effects of implementing a number of new initiatives that are in the early stages of their growth cycle.

BALANCE SHEET. They ended the quarter with a cash position of $197 million which equates to about $1.50 per share. They expect to finish the year with a strong cash position and it should be upwards of about $2 per share at the end of the year. That leaves them with one of the strongest balance sheets in retail. Inventory level at the end of the quarter was $855 million, up about 32% from last year and is slightly higher (about 5% higher) than the rate of sales increase and the difference is largely accounted for by the stocking of 7 more delivery centers that they had at the end of this quarter compared to a year ago. Inventories are extremely clean getting ready for the all-important holiday selling season. One particular note, they are keeping an eye on what's been going on in the computer industry. They have been playing it pretty close to the vest with computer inventories. As a consequence, their computer inventory growth during the quarter was actually somewhat less than the sales growth (about 10% less). They ended the quarter with total assets of $1.7 billion and shareholders equity of $1.033 billion.

TAX RATE. The tax rate decreased to 38.8% in the quarter from 39.7% which was the rate in the second quarter. That puts the tax rate for the year at 39.1%. That would compare to a rate last year of 41.1%. This year's rate decrease is largely attributable to two things -- additional tax exempt interest income over last year as a result of the tax proceeds from the sale of Corporate Express and then the implementation of some state tax planning strategies. The change in the tax rate didn't change EPS.

EXPANSION PROGRAM. The third quarter of the year tends to be one of the busiest because of the heavy back to school selling season. As a result, they tend to keep their remodels to a minimum so they can focus on taking care of their customers. To minimize the sales disruption during this important period, they remodel their stores as well as conduct their CopyMax conversions at night over about a 6-8 week period. During the third quarter they completed an additional 18 remodels, bringing their total to 96 for the nine month period. They are real excited about the upcoming fourth quarter. Not only are they ready for the holiday selling season, but they are also scheduled to complete 56 of their 60 remodels by Thanksgiving. That puts them in an outstanding position for the important high volume holiday selling season.

NEW OPENINGS. During the quarter they opened a record 24 office products superstores versus 20 last year. They opened 10 stores in existing markets like Albany, Houston, Las Vegas, and Seattle. Nine stores were opened in new single store markets including Asheville North Carolina, Eau Claire Wisconsin, and Jensen Beach Florida. They opened one store in Wilmington Delaware, a new multi-store market, and they soft-opened four additional TriMax supercenters in Los Angeles, their new major multi-store market. As a background, on July 25th they soft-opened 8 TriMax stores in Los Angeles which included new and innovative retailing concepts like shopper-friendly merchandise displays, an illustrative video message center, and TechMax which showcases the latest in laptop computers as well as wireless and digital technology. They also extended the FurnitureMax assortment in all stores to include a variety of higher-end case goods such as desks and credenzas. Last Sunday, they successfully grand opened 19 stores in Los Angeles -- several additional stores are scheduled to open in the months ahead. They also opened two delivery centers during the quarter, one in Denver and the other in Salt Lake City. They ended the quarter with 517 stores and 17 delivery centers in over 200 markets in 44 states and Puerto Rico, and they opened their first international joint venture superstore in Mexico.

NEW ADVERTISING. New television and radio spots that feature their unique 3-store format with unique 3-lens sunglasses started last week and they are extremely pleased at the foot traffic being generated as well as the sales to date.

CATALOG AND DELIVERY BUSINESS. Their catalog and delivery business continues to mature and they are now in phase two of this business which will employ certain strategies to increase their efficiencies. Two examples include the fact that they are implementing a computerized routing system which will improve their customer service through more efficient vehicle utilization and they are rolling out a labor scheduling system which will increase order throughput and provide additional operating efficiencies by leveraging their payroll expense similar to what they have done in the retail stores.

Q4 OPENINGS. They expect to open another 45-50 stores in the fourth quarter and they will hit their new accelerated target of approximately 95-100 stores for the year. Of this amount, roughly 65-70 stores will be open by Thanksgiving which will exceed their target of 70% to be completed by that date.

OTHER MAX CONCEPTS. They also opened 11 FurnitureMax stores during the quarter and expect to end the year at 70, exceeding their target of 65. They also opened 53 CopyMax stores which includes the conversion of 43 business service centers. They now have 321 CopyMax centers and are well on their way to achieving their goal of being the largest print-for-pay provider in the country before the turn of the century. They expect to open 105 CopyMax centers, which includes 55 minis, in the fourth quarter and they should end the year with 426 locations in total, making CopyMax one of the country's fastest growing retail chains in and of itself.

COPYMAX & OFFICEMAX KIOSKS IN KEYCORP BANKS. They will open their first test store this week with KeyCorp Bank and that will be a CopyMax store within a bank in Cleveland and they have an agreement with KeyCorp to possibly roll out to as many as 1400 different banks which they operate. Within the KeyCorp bank they will also be putting in a new OfficeMax online kiosk which is the way they go to market bringing an entire store to an electronic online kiosk then leveraging their delivery centers. They say we will be hearing a lot more about this in the years ahead because they think this is the way to effectively put a store at the fingertips of anyplace where there is a phone line and electricity.

EXPANSION PLANS FOR NEXT YEAR. As they previously announced they have also set the stage for next year's expansion program to take advantage of the same window of opportunity provided by this year's merger of Staples and Office Depot and they are well on their way to their goal of 125-150 stores for next year which will include two new multi-store markets as previously announced (or at least two) -- Jacksonville Florida and New Orleans. They now have well over 100 leases and letters of intent signed for 1997 and they will hit their store opening numbers. They are finding a very receptive real estate community out there and, with their balance sheet and proven track record, and the uniqueness of their new merchandise presentation in TriMax, they are receiving very good opportunities from a real estate standpoint. They think it is fair to characterize some of these opportunities that are today more economically favorable to OfficeMax than they would have been in August of this year before the announced merger.

Looking at the year ahead, they are going to open about 50% of the stores in existing markets. While that will result in some cannibalization temporarily and will likely negatively impact comp store sales, it certainly improves the market penetration, top-of-the-mind awareness, and profitability in those markets very quickly. Equally important next year, 40% of the stores they open will be in new single store markets which they find exciting because in these kind of markets there are many opportunities for them and they can go into a market with a lot less people than they ever imagined and make it very successful. It was brought to their attention today that a small operator, a 30-store company called Office One has filed for Chapter 11 and will go into liquidation this week. They competed with Office One in about 9-12 stores which will be a homerun for them. If the Staples/Office Depot deal goes through there are now just two players and OfficeMax feels that provides great opportunities for them. And, finally, 10% of the stores they open next year will be in multi-store markets to be announced as well as the Jacksonville and New Orleans markets already announced.

NON-US EXPANSION. They are very pleased with what happened in Mexico. They opened their first TriMax supercenter in Mexico a couple of months ago. They are running 80% ahead of their internal plan. They opened their second store in Mexico last week and will have a third one opened in the next couple of weeks. They will also add a delivery center in Mexico. They will be returning to Japan in December for the formal signing and announcement of their joint venture partnership in Japan. They think the opportunity in Japan is for about 200 stores. Their joint venture partner is one of the premier operators in Japan both from a real estate and retail standpoint. They are preparing to put people through OfficeMax University and assign them to Japan for a 2-year stint and they think the international market is going to provide some significant opportunities.

COMPUTER RETAIL ENVIRONMENT. They are evaluating the computer environment and they are not Pollyannas. They think they have to be cognizant of the slowdown in the computers. They have not had the same slowdown as others, but that doesn't mean they are immune. They think they have developed this strategy that will give them the comp store computer number in the quarter north of 20% and they are on their way to be able to do that, but it is going to be a challenging quarter and to say anything else would be naive. They are really optimistic in that they think they have the price points and they think they have locked up the capability of having the product to give to the customer that many others just can't get now. They have some unique things they are going to do to bring in traffic. As was the case in the third quarter, the customers are not just going to come in, OfficeMax is going to have to give them a reason to come in and they are prepared to do that. They will do it with sanity in terms of margin but they will do it with merchandising, marketing, and the ability to bring the customers to the door.

COMPUTER PRICING & EXPECTED HOT ITEMS. They have seen in the last couple of days and the last week a significant reduction in pricing from the major manufacturers and that is positive because they do have the price protection, so they take an immediate reduction in the money they owe the vendors. Laptops are picking up significantly and they are going to have some very interesting price points in multimedia laptops. Peripherals and upgrade sales are very strong and they think are going to be extremely strong in the fourth quarter, particularly with the Iomega Zip drives and similar products that add capability to the computer as well as a lot of the new things like PDAs and organizers. January 7th, Intel will launch its MMX multimedia technology which is enhanced Internet capability with video conferencing and the ability to do a lot of things in audio and video right on the computer. They think that is going to be the next big thing to happen and is going to hit very nicely with their fourth quarter. January, as a reminder, is one of the best months of OfficeMax's year.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.