OfficeMax 2006 Annual Report Download - page 31

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$175 million reinvestment, transaction-related expenses and the monetization of the timber installment
notes. See Note 12, Timber Notes Receivable,and Note 13, Debt, of the Notes to Consolidated
Financial Statements in “Item 8. Financial Statements and Supplementary Data”of this Form 10-K for
additional information related to the timber notes.
Using a portion of the Sale proceeds, we reduced our debt by $1.8 billion during the fourth
quarterof 2004, incurred and paid $137.1 million of costs related to theearly retirement of debt, and
made a$45.8 million contribution to the pensionplans on behalf of activeemployees who became
employees of Boise Cascade, L.L.C.
During 2004, we also announced plans to return between $800 million and$1 billion of the Sale
proceeds to shareholders via common or preferred stock buybacks, cashdividends or a combination
of these alternatives. As part of this commitment to return cash to equity holders, we redeemed
$110 million of our Series D preferred stock and paid related accrued dividendsof $3 million in the
fourth quarter of 2004. In May 2005, we used substantially all of the remaining proceeds from the Sale
to repurchase23.5million shares of our common stock and associated common stock purchase
rights through amodified Dutch auction tender offer at a purchase price of approximately
$775.5 million, or $33.00per share, plus transaction costs.
Discontinued Operations
In December 2004, ourboard of directors authorized management to pursue the divestiture of a
facility near Elma, Washington that manufactured integrated wood-polymer buildingmaterials. The
board of directors and management concluded that the operations of the facility were no longer
consistent with theCompany’s strategic direction.As a result of that decision, the Company r ecorded
the facility’s assets as held for sale on theConsolidated Balance Sheets andreported the results of its
operations as discontinued operations.
During 2005, the Company experienced unexpected difficulties in achieving anticipated levels of
production at thefacility. These issues delayed the process of identifying and qualifying a buyer for
the business. While management made substantial progress in addressing the manufacturing issues
that caused production to fall below plan, during the fourth quarter of 2005, we concluded that we
would be unable to attract a buyer inthe near term and elected to ceaseoperations at the facility
during the first quarter of 2006.
In accordance with SFASNo. 144, we recorded pre-tax charges of $67.8 million in the fourth
quarter of2004and $28.2 million in the fourth quarter of 2005 to reduce the carrying valueof the long-
lived assets of the Elma, Washington facility to their estimated fair value. During the first quarter of
2006,weceased operations at the facility and recorded pre-tax expenses of $18.0 million for contract
termination and other closure costs. These charges and expenses were reflectedwithin discontinued
operations in the Consolidated Statementsof Income (Loss).
See Note 3, Discontinued Operations, of the Notes to Consolidated Financial Statements in
“Item 8. Financial Statements and Supplementary Data” of this Form 10-K for additional information
related to thediscontinued operation.
Integration Activities and Facility Closures
Increased scale as a result ofthe OfficeMax, Inc. acquisition has allowed managementto evaluate
theCompany’s combined office products business and to identify opportunities for consolidating
operations. Costs associated with the planned closure and consolidation of acquired OfficeMax, Inc.
facilities were accounted for under EITFIssue No. 95-3, “Recognition of Liabilities in Connection witha
Purchase Business Combination,” and recognized as liabilities in connection with the acquisition and
charged togoodwill.