OfficeMax 2005 Annual Report Download - page 70

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primarily to future lease termination costs, net of estimated sublease income. Most of the
expenditures for these facilities will be made over the remaining lives of the operating leases.
In addition to these store closures, at December 31, 2003, the Company identified and closed
45 OfficeMax, Retail facilities that were no longer strategically and economically viable. As a result,
the Company recorded a $69.4 million liability in the Consolidated Balance Sheet. During 2004, we
identified and closed an additional 11 stores that were no longer strategically or economically
viable. All of the above charges were accounted for as exit activities in connection with the
acquisition and were not recorded as a charge to income.
Since the Acquisition, the Company closed 18 U.S. distribution centers and 2 customer service
centers. In connection with these closures the Company recorded a charge to income in our
Consolidated Statement of Income (Loss) of $29.7 million during 2004.
In September 2005, the board of directors approved a plan to relocate and consolidate the
Company’s retail headquarters in Shaker Heights, Ohio and its existing corporate headquarters in
Itasca, Illinois into a new facility in Naperville, Illinois. The relocation and consolidation process is
expected to be completed during the second half of 2006.
Management expects the total cost of the relocation and consolidation will be approximately
$40 to $50 million on a pre-tax basis, and will be recognized in operations during 2005 and 2006.
Such charges are expected to require cash outlays of $15 to $20 million for severance, retention
and other employee costs, and approximately $10 to $15 million for contract termination and other
closure costs. Non-cash charges for accelerated depreciation of facilities and leasehold
improvements are expected to total $10 to $15 million during 2005 and 2006. These estimated
costs do not include expected future expenses for personnel training, recruiting and relocation or
the potential savings from these actions due to expected efficiencies and tax incentives.
The Company recorded charges totaling $25.0 million during the third and fourth quarters of
2005 related to the headquarters relocation and consolidation in the Corporate and Other segment.
Also in 2005, the Company recorded charges to income of $23.2 million for the write-down of
impaired assets related to underperforming retail stores and the restructuring of its Canadian
operations.
66