CHICAGO – OfficeMax Inc. (OMX) announced the resignation Monday of its president and chief executive officer and said it terminated six employees as a result of an ongoing internal investigation into its accounting.
The nation's No. 3 office products retailer also said it overstated operating income for first quarter fiscal 2004 by $5 million to $10 million by failing to record certain rebates and payments to vendors. The accounting error led to the understatement of income in the second and third quarters, the company said.
Christopher C. Milliken (search) has resigned and will be replaced on an interim basis by George J. Harad, the company's executive chairman. The Itasca, Ill.-based company said it would begin a search for a permanent CEO.
Milliken's resignation was a "mutual decision" between the CEO and the board of directors related to the company's operations and financial situation, spokesman Bill Bonner said. He declined to elaborate.
Last month, OfficeMax Chief Financial Officer Brian Anderson resigned, and the company said its fourth-quarter earnings report would be delayed because of accounting problems.
"We are taking steps to strengthen the OfficeMax management team, and fully expect to demonstrate the value inherent in this business for our shareholders," Harad said in a statement Monday.
OfficeMax said it fired six employees over its findings that some workers fabricated supporting documentation for about $3.3 million in claims billed to a supplier of its retail business. It had announced four of the firings last month after first disclosing the finding.
OfficeMax said Monday it will report fourth-quarter and full-year results March 14. It said it expects operating income to be $125 million to $135 million for 2004.
The company said its investigation should conclude by late February.
Analyst Anthony Chukumba of Chicago-based Morningstar said Milliken's departure was probably inevitable in light of the company's recent problems.
"At the end of the day, when you have a scandal like this, the CEO has got to go," he said.
OfficeMax's effort to hire a chief executive could be complicated by the fact that rival Office Depot Inc. (ODP) also has been searching for a CEO for several weeks, the analyst said. OfficeMax is the No. 3 U.S. office products retailer behind Staples Inc. (SPLS) and Office Depot.
Shares of OfficeMax fell $2.21, or 7 percent, to $29.54 on the New York Stock Exchange (search) — down more than 20 percent since June.