OfficeMax 2005 Annual Report Download - page 12

and administration methods; and unanticipated costs of terminating or relocating facilities and
operations. There may also be negative effects associated with employee morale and performance
because of job changes and reassignments.
We retained responsibility for certain liabilities of the paper, forest products and
timberland businesses we sold. These obligations include liabilities related to environmental, tax,
litigation and employee benefit matters. Some of these retained liabilities could turn out to be
significant, which could have a material adverse effect on our results of operations. Our exposure to
these liabilities could harm our ability to compete with other office products distributors, who would
not typically be subject to similar liabilities.
Our continued equity interest in Boise Cascade, L.L.C. subjects us to the risks associated
with the paper and forest products industry. When we sold our forest products businesses, we
purchased a continuing equity interest in affiliates of Boise Cascade, L.L.C. In addition, we have an
ongoing obligation to purchase paper from an affiliate of Boise Cascade, L.L.C. These continuing
interests subject us to market risks associated with the paper and forest products industry. These
industries are subject to cyclical market pressures. Historical prices for products have been volatile,
and industry participants have limited influence over the timing and extent of price changes. The
relationship between supply and demand in these industries significantly affects product pricing.
Demand for building products is driven mainly by factors such as new construction and remodeling
rates, interest rates and weather. The supply of paper and building products fluctuates based on
manufacturing capacity, and excess capacity, both domestically and abroad, can result in significant
variations in product prices. The level of supply and demand for forest products will affect the price
we pay for paper. Our ability to realize the carrying value of our equity interest in affiliates of Boise
Cascade L.L.C. is dependent upon many factors, including the operating performance of Boise
Cascade L.L.C. and other market factors that may not be specific to Boise Cascade L.L.C., due in
part to the fact that there is not a liquid market for our equity interest. Our exposure to these risks
could decrease our ability to compete effectively with our competitors, who typically are not subject
to such exposures.
Compromises of customer debit and credit card data, regardless of the source of the
breach, may damage OfficeMax reputation. There is an ongoing federal investigation relating to
ATM fraud involving legitimate debit card use at various retailers that was later tied to fraudulent
transactions outside the U.S. While we have no knowledge of a security breach at OfficeMax, it is
possible that information security compromises involving OfficeMax customer data, including
breaches that occur at third party processors, may damage our reputation. Such damage to our
reputation could adversely affect our operating results.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
The majority of OfficeMax facilities are rented under operating leases. (For more information
about our operating leases, see Note 10, Leases, of the Notes to Consolidated Financial Statements
in ‘‘Item 8. Financial Statements and Supplementary Data’’ of this Form 10-K.) Our properties are in
good operating condition and are suitable and adequate for the operations for which they are used.
Presented below is a list of our facilities by segment as of February 25, 2006. In addition, our
corporate headquarters is in Itasca, Illinois, and our retail operations are headquartered in Shaker
Heights, Ohio. We are currently in the process of consolidating these headquarters locations into a
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