OfficeMax 2007 Annual Report Download - page 31

Corporate and Other segment totaling $46.4 million. Excluding the expenses related to
headquarters consolidation, adjusted Corporate and Other expenses were $71.6 million in 2006.
The year-over-year decrease in our Corporate and Other expenses was primarily due to reduced
incentive compensation expense and lower legacy costs. Corporate and Other expenses were
$118.5 million during 2005, and included $56.9 million of expenses related to the headquarters
consolidation, one-time severance payments and other expenses, primarily professional service
fees, which are not expected to be ongoing. Excluding the headquarters consolidation, one-time
severance payments and other expenses, primarily professional service fees, Corporate and Other
expenses were $61.6 million in 2005.
Discontinued Operations
In December 2004, our board of directors authorized management to pursue the divestiture of
a facility near Elma, Washington that manufactured integrated wood-polymer building materials. The
board of directors and management concluded that the operations of the facility were no longer
consistent with the Company’s strategic direction. As a result of that decision, the Company
recorded the facility’s assets as held for sale on the Consolidated Balance Sheets and reported the
results of its operations as discontinued operations.
During 2005, the Company experienced unexpected difficulties in achieving anticipated levels
of production at the facility. 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 in the near term and elected to cease operations at the
facility during the first quarter of 2006. As of December 29, 2007, the Company has not identified a
buyer for the facility.
We recorded pre-tax charges, including $28.2 million recorded in the fourth quarter of 2005, to
reduce the carrying value of the long-lived assets of the Elma, Washington facility to their estimated
fair value. During the first quarter of 2006, we ceased 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 reflected within discontinued operations in the Consolidated Statements of Income
(Loss).
See Note 2, 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 the discontinued operation.
Integration Activities and Facility Closures
Increased scale as a result of the OfficeMax, Inc. acquisition has allowed management to
evaluate the Company’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 Emerging Issues Task Force (‘‘EITF’’) Issue
No. 95-3, ‘‘Recognition of Liabilities in Connection with a Purchase Business Combination,’’ and
recognized as liabilities in connection with the acquisition and charged to goodwill. Costs incurred
in connection with all other business integration activities have been recognized in the Consolidated
Statements of Income (Loss).
In September 2005, the board of directors approved a plan to relocate and consolidate our
retail headquarters in Shaker Heights, Ohio and existing corporate headquarters in Itasca, Illinois
into a new facility in Naperville, Illinois. We began the consolidation and relocation process in the
latter half of 2005. As of December 30, 2006, we had expensed approximately $70.9 million of costs
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