Business appliance retailer OfficeMax announced that Christopher C. Milliken has resigned as president, CEO, and director. George J. Harad, executive chairman, has been appointed by the board of directors to serve as interim CEO. The board has formed a committee to begin a search for a permanent CEO immediately.
As previously announced, OfficeMax is currently conducting an investigation under the direction of its audit committee into its accounting for vendor income in prior periods. Based on the work completed to date, the company has confirmed that certain employees fabricated supporting documents for approximately U.S. $3.3 million in claims billed to a vendor to its retail business.
In addition, the company has determined that certain rebates and other payments from vendors in 2004 were not recorded in the appropriate accounting periods, so that operating income in the first fiscal quarter of 2004 was overstated and the second and third fiscal quarters of 2004 were understated. Six employees have been terminated for cause in connection with the investigation.
The company currently estimates that the amount of overstatement in operating income in the first quarter of 2004 was in the range of $5 million to $10 million, and the subsequent understatements in the second and third quarters reduce the net overstatement to a range of $4 million to $6 million through the end of the third quarter 2004.
As a result, subject to completion of the investigation, acceptance of a final investigation report by the audit committee, and review by the company's auditors, OfficeMax now expects to restate quarterly income in each of the first three fiscal quarters of 2004. Accordingly, the company believes that its previously issued interim statements of operating results for those periods should no longer be relied upon.
The company expects its investigation to be complete by February 2005. (Home Business World)
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