OfficeMax 2006 Annual Report Download - page 11

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7
We may be unable to attract and retain qualified associates. We attempt to attract and retain
an appropriate level of personnel in both field operations and corporate functions. As a retailer, we
face the challenge of filling many positions at wage scales that are low, although appropriatefor our
industry and inlight of competitive factors. As a result, we face many external risks and internal factors
in meeting our labor needs, including competition for qualifiedpersonnel, overall unemployment
levels, prevailing wage rates,as well as rising employee benefit costs, including insurance costs and
compensation programs. Changes in any of these factors, including especially a shortageof available
workforce in the areas in which we operate, could interfere with our ability to adequately provide
services to customers and result in increasing our labor costs, which could have an adverse effect on
our business and results of ouroperations.
We cannot assure that newassociates will perform effectively. In conjunction with our
headquartersconsolidation, we have hired approximately 600 new employees to replace existing
associates who did not relocate to the new headquarters. As a result, we now have a significant
number of associates with limited experience with OfficeMax performing key functions. Although we
have carefully selected and trained these associates, there is stillarisk that institutional knowledge
may be lost and operations may be conducted less efficiently or effectively. Also, ifwe are unable to
continue to attract and retain qualified associates for our remaining open positions, as well as train
new associates and transition themsmoothly into their roles, it could adversely affect our operating
results.
Our expanded offering of proprietary branded products may not improve our financial
performance and may expose usto product liability claims. Our product offering includes many
proprietary branded products. While we have focused on the quality of our proprietarybranded
products, we rely on third-party manufacturers for theseproducts.Such third party manufacturers
may prove to be unreliable, or the quality ofour globally sourced productsmay not meet our
expectations. Furthermore, economic and political conditions in areas of the world where we source
such products may adversely affect the availability and cost of such products. In addition, our
proprietary branded products compete withother manufacturers’ branded items that we offer. As we
continue to increase the number and types of proprietary branded products that we sell, we may
adversely affect our relationships with our vendors, who may decide to reduce their product offerings
through OfficeMax and increase their product offerings through our competitors. Finally, if any of our
customers are harmed by our proprietary branded products, they may bring product liability and other
claims against us.Any of these circumstances could have an adverse effect on our businessand
financial performance.
We are moreleveraged than some of our competitors, which could adversely affect our
business plans. A relatively greater portion of ourcashflow is used to service debt and other
financial obligations including leases. This reduces the funds we have available for working capital,
capital expenditures, acquisitions,new stores, store remodels and other purposes. Similarly, our
relatively greater leverage increases our vulnerability to, and limits our flexibility in planning for,
adverse economicand industry conditions and creates other competitive disadvantages compared
with other companies with relatively less leverage.
We cannot ensure new systems and technology will be implemented successfully. Our
acquisitionof OfficeMax, Inc., in December 2003, required the integration and coordination of our
existing contract stationer systems with the retail systems of the acquired company. Integrating and
coordinating thesesystems has been complex and still requires anumber of system enhancements
and conversions that, if not done properly, could divert the attention ofour workforce during
development and implementation and constrain for some time our ability to provide the levelof
service our customers demand. Also, when implemented, the systems and technology enhancements
may not provide the benefits anticipated and could add costs and complications to our ongoing
operations. A failure to effectively implement changes to to these systems or to realize the intended
efficiencies could have an adverse effect on our business and results of our operations.