OfficeMax 2007 Annual Report Download - page 11

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We are more leveraged than some of our competitors, which could adversely affect our
business plans. A relatively greater portion of our cash flow 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 economic and industry conditions and creates other competitive disadvantages compared
with other companies with relatively less leverage.
Fluctuations in our effective tax rate may adversely affect our business and results of
operations. We are a multi-national, multi-channel provider of office products and services. As a
result, our effective tax rate is derived from a combination of applicable tax rates in the various
countries, states and other jurisdictions in which we operate. Our effective tax rate may be lower or
higher than our tax rates have been in the past due to numerous factors, including the sources of
our income, any agreements we may have with taxing authorities in various jurisdictions, and the
tax filing positions we take in various jurisdictions. We base our estimate of an effective tax rate at
any given point in time upon a calculated mix of the tax rates applicable to our company and to
estimates of the amount of business likely to be done in any given jurisdiction. The loss of one or
more agreements with taxing jurisdictions, a change in the mix of our business from year to year
and from country to country, changes in rules related to accounting for income taxes, changes in
tax laws in any of the multiple jurisdictions in which we operate or adverse outcomes from tax
audits that we may be subject to in any of the jurisdictions in which we operate could result in an
unfavorable change in our effective tax rate, which change could have an adverse effect on our
business and results of our operations.
Compromises of our information security may adversely affect our business. Through our
sales and marketing activities, we collect and store certain personal information that our customers
provide to purchase products or services, enroll in promotional programs, register on our website,
or otherwise communicate and interact with us. We also gather and retain information about our
associates in the normal course of business. We may share information about such persons with
vendors that assist with certain aspects of our business. Despite instituted safeguards for the
protection of such information, we cannot be certain that all of our systems are entirely free from
vulnerability to attack. Computer hackers may attempt to penetrate our or our vendors’ network
security and, if successful, misappropriate confidential customer or business information. In
addition, a Company employee, contractor or other third party with whom we do business may
attempt to circumvent our security measures in order to obtain such information or inadvertently
cause a breach involving such information. Loss of customer or business information could disrupt
our operations and expose us to claims from customers, financial institutions, payment card
associations and other persons, which could have a material adverse effect on our business,
financial condition and results of operations.
We cannot ensure new systems and technology will be implemented successfully. Our
acquisition of 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 these systems has been complex and still requires a number of system enhancements
and conversions that, if not done properly, could divert the attention of our workforce during
development and implementation and constrain for some time our ability to provide the level of
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 these systems or to realize
the intended efficiencies could have an adverse effect on our business and results of our
operations.
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