OfficeMax 2006 Annual Report Download - page 64

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60
termination and other closure costs. These chargesand expenses were reflectedwithin discontinued
operations in the Consolidated Statementsof Income (Loss).
The assets and liabilities of the wood-polymer building materials facility near Elma, Washington,
are included in current assets ($0.3million at December 31, 2005) and current liabilities ($15.5 million
at December 30, 2006 and $9.8 million at December 31, 2005, respectively) in the Consolidated
Balance Sheets. The assets are reported at their estimated fair value less costs to sell and are no
longer depreciated.
4. Integration Activities and Facility Closures
During 2003, the Company acquired OfficeMax, Inc. for $1.3 billion (the “Acquisition”). Increased
scale as a result of the Acquisitionallowed management to evaluate theCompany’s combined office
products businessand to identify opportunities forconsolidating operations. Costs associated with
the planned closure and consolidation of acquired OfficeMax, Inc. facilities wereaccounted forunder
EITF Issue No. 95-3,“Recognition of Liabilities in Connection with a Purchase Business Combination,”
and recognized as liabilities inconnection with the acquisition and charged to goodwill. Costs
incurred inconnection with all other business integration activities havebeen recognized in the
Consolidated Statement of Income (Loss).
Priortothe Acquisition, OfficeMax, Inc. had identified and closed underperforming facilities. As
part of thepurchase price allocation, the Company recorded $58.7 million of reserves for the
estimated fair value of future liabilities associated with these closures. These reserves related primarily
to future lease termination costs, net of estimated sublease income. In addition to these store
closures, at December 31, 2003, the Company identifiedand closed 45 OfficeMax, Retail facilitiesthat
were no longer strategically and economically viable, and recorded a $69.4 million liability in the
Consolidated BalanceSheet. During 2004, the Company identified and closed an additional 11 stores.
All of the abovecharges were accounted for as exit activities in connection with the acquisition and
were not recorded as charges to income.
Since the Acquisition, the Company has closed 18 U.S. distribution centers and2 customer
servicecenters. In connection with these closures the Company recorded acharge to income in the
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 Company began the consolidation and
relocation process in the latter half of 2005. As of December 30, 2006, the Company has incurred and
expensed approximately $70.9 million of costs related to theheadquarters consolidation, including
$45.9 million recognized during 2006 and $25.0million recognized during the second half of2005, all
of which wasreflected in the Corporate and Other segment. The consolidation and relocation process
was completed during the secondhalf of 2006.
Also in 2005, theCompany recorded charges to income of $23.2million for the write-down of
impaired assets related to underperforming retail stores and the restructuring of its Canadian
operations.
During 2006, the Company announced the reorganization of the Contract segment, and recorded
a pre-tax charge of$7.3 million for employee severance related to the reorganization. The Contract
segment also recorded an additional $3.0 million of costs during 2006 primarily related to a facility
closure and employee severance.