OfficeMax's new CFO resigns amid accounting problems
Shares in the company dropped 5 percent in afternoon trading.
CHICAGO (AP) -- OfficeMax Inc. announced the resignation of its new chief financial officer Wednesday and said its fourth-quarter earnings report will be delayed because of accounting problems, compounding recent financial turmoil at the nation's No. 3 office products retailer.
The latest dose of bad news sent shares in the company down $1.42, or 5 percent, to $28.88 in afternoon trading on the New York Stock Exchange -- 24 percent off its 52-week high of $38.01 reached last June.
The company declined to cite a reason for the departure of Brian Anderson, who had held the job only since November. But the resignation came as it fired four employees as the result of an ongoing internal investigation which it said confirmed a vendor's complaint that some bills were falsified.
OfficeMax, which disclosed the investigation last month, said employees fabricated supporting documentation for about $3.3 million in claims billed to the company in 2003-04. It said the review has been expanded to look at other payments and might last until late February, when it now intends to issue fourth-quarter and full-year earnings that were originally scheduled for release Jan. 20.
Former CFO Ted Crumley is returning to the post on an interim basis while OfficeMax seeks a permanent replacement.
Anderson, who was ousted as chief financial officer at Baxter International Inc. last June in a management shake-up, would have been required to certify OfficeMax's financial statements for the year under the Sarbanes-Oxley Act, which holds CFOs and CEOs criminally liable for inaccuracies.
Attempts to reach Anderson for comment were unsuccessful.
Analysts speculated that he became unwilling to do so after the evidence arose of phony billing over two years.
"Clearly he was in a situation where he did not feel comfortable with what was going on there," said Anthony Chukumba of Chicago-based Morningstar Inc.
President and CEO Chris Milliken expressed disappointment in Anderson's resignation. "We regret that his commitment to our business was not strong enough to allow him to make a long-term contribution," he said.
The company has been rocked by a series of setbacks since late fall, when it changed its name from Boise Cascade Corp. and moved its headquarters from Idaho to suburban Itasca, Ill.
That move followed the late 2003 acquisition of OfficeMax -- then based in Cleveland -- for $1.2 billion by Boise Cascade, which subsequently shed its wood and paper products operations to focus exclusively on office products.
Three weeks ago, it announced the investigation into a vendor's allegations that some employees demanded promotional payments and falsified documents.
The next day, it reduced its forecast for fiscal 2004 operating income, citing poor holiday sales. Then last week, the company announced the resignation of Gary Peterson, the president of its retail division.
Analyst Ivan Feinseth of Matrix USA LLC said he sees no long-term concerns beyond the recent troubles.
'Model is intact'
"We believe these issues will be straightened out," he said. "Three million dollars, while it is a lot of money, is not a lot of money in this situation. ... The ongoing business model is intact."
Chukumba said that while he suspects the problems were caused by a few rogue employees, the series of recent troubles "doesn't create a lot of investor confidence."
"The bigger problem is it's the third player in a three-player market and they're way behind Staples, which is the clear industry leader and is only widening the gap with Office Depot and OfficeMax," he said.
As the two leading U.S. office products retailers, Staples Inc. had $13.2 billion in fiscal 2004 sales while Office Depot Inc. reported $12.4 billion in 2003 sales.
OfficeMax sells office and computer supplies, paper and office furniture and operates nearly 1,000 OfficeMax superstores. As Boise Cascade, it reported $3.65 billion in sales through the first three quarters of 2004.
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