OfficeMax 2006 Annual Report Download - page 45

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41
December 30, 2006, the facility closure reserve included approximately $108 million of estimated
future lease obligations,which is net of anticipated sublease income of approximately $109 million.
For each closed location, we estimatefuture sublease income based on current real estate trends by
market and location-specific factors, including the ageand quality of the location, as well as our
historical experience with similar locations. If we had used different assumptions to estimate future
sublease income our reserves would be different and the difference could be material. In addition, if
actual sublease incomeis different than our estimates, adjustments to the recorded reserves may be
required.
Additional Consideration Agreement
The Additional Consideration Agreement between OfficeMax and Boise Cascade, L.L.C. was
entered into in connection with the Sale. Under the Additional Consideration Agreement, we maybe
required to make substantial cash payments to, or receive substantial cash payments from, Boise
Cascade, L.L.C. depending on average annual paper prices during thesix years following theSale,
subject to annual and aggregate caps.Specifically, we have agreed to payBoise Cascade, L.L.C.
$710,000 for each dollar by which the average market price per ton of a specified benchmark grade of
cut-size office paper during any 12-month period ending on September 30 is less than $800. Boise
Cascade, L.L.C. has agreed to pay us$710,000 for each dollar by which the average market price per
tonexceeds $920. Under the terms ofthe agreement, neither party will be obligated to make a
payment in excess of $45 million in any one year. Payments by either party are also subject t o an
aggregate cap of $125 million that declines to $115 million in the fifth year and$105 million in the sixth
year. We calculate the fair value of the obligation based on published industry paper price projections.
We record changes in the fair value of the Additional Consideration Agreement in our net income
(loss) in the period they occur; however, any potential payments from Boise Cascade,L.L.C. to us are
not recorded in net income (loss) until all contingencies have been satisfied, which is generally at the
end ofa12-month measurement period ending on September 30. At December 30, 2006, the net
amount recognized inour Consolidated Balance Sheets related to the Additional Consideration
Agreement (eitherreceivable or payable) was zero. The net amount recognized at December 30,
2006,is based on current published industry paper price projections. If actual future paper prices are
different thanthose projections adjustments to the amount recognized may be required and those
adjustments may be material.
Environmental Remediation
We are subject to a variety of environmental laws and regulations. We account for environmental
remediation liabilities in accordance with the Statement ofPosition (SOP) 96-1, “Environmental
RemediationLiabilities.” We record liabilities on an undiscounted basis when assessments and/or
remedial efforts are probable and the cost can be reasonably estimated. We estimate our
environmental liabilities based on various assumptions and judgments,as we cannot predict with
certainty the total response and remedial costs, our share of total costs, the extent to which
contributions will be available from other parties or the amount of time necessary to complete any
remediation. In makingthese judgments and assumptions, we consider,among other things, the
activity to date at particularsites, information obtained through consultation with applicable regulatory
authorities and third-party consultants and contractors and our historical experience at other sites that
are judged to be comparable. Due to the number ofuncertaintiesand variables associated with these
assumptions and judgments and theeffects of changes in governmental regulationand environmental
technologies, the precision of the resulting estimates of the related liabilities is subject to uncertainty.
We regularlymonitor our estimated exposure to our environmental liabilities. As additional information
becomesknown,our estimates may change.