OfficeMax 2007 Annual Report Download - page 64

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The Company conducts regular reviews of its real estate portfolio to identify underperforming
facilities, and closes those facilities that are no longer strategically or economically viable. The
Company records a liability for the cost associated with a facility closure at its fair value in the
period in which the liability is incurred, which is either the date the lease termination is
communicated to the lessor or the location’s cease-use date. Upon closure, unrecoverable costs
are included in facility closure reserves on the Consolidated Balance Sheets and include provisions
for the present value of future lease obligations, less contractual or estimated sublease income.
Accretion expense is recognized over the life of the payments. Integration and facility closure
reserve account activity during 2007, 2006 and 2005, including activity related to the reorganization
of the Contract segment, retail store closures and headquarters consolidation, was as follows:
Lease\ Asset
Contract Severance\ Write-off &
Terminations Retention Impairment Other Total
(thousands)
Balance at December 31, 2004 .... $116,390 $ 6,642 $ — $ 409 $ 123,441
Charges to income ............ 547 21,214 23,062 3,565 48,388
Change in goodwill ............ — — — — —
Changes to estimated costs
included in income ........... — — — — —
Cash payments ............... (28,872) (6,354) — (3,235) (38,461)
Non-cash charges ............. — — (23,062) — (23,062)
Accretion ................... 3,390 — — — 3,390
Balance at December 31, 2005 .... $ 91,455 $ 21,502 $ — $ 739 $ 113,696
Charges to income ............ 89,934 19,407 9,543 27,332 146,216
Change in goodwill ............ (11,000) — — — (11,000)
Changes to estimated costs
included in income ........... — (1,080) — — (1,080)
Cash payments ............... (68,596) (28,991) — (18,951) (116,538)
Non-cash charges ............. — — (9,543) (5,978) (15,521)
Accretion ................... 6,031 — — — 6,031
Balance at December 30, 2006 .... $107,824 $ 10,838 $ — $ 3,142 $ 121,804
Charges to income ............ — — — — —
Change in goodwill ............ — — — — —
Changes to estimated costs
included in income ........... — — — — —
Cash payments ............... (38,196) (8,424) — (1,725) (48,345)
Non-cash charges ............. — — — — —
Accretion ................... 3,603 — — — 3,603
Balance at December 29, 2007 .... $ 73,231 $ 2,414 $ — $ 1,417 $ 77,062
At December 29, 2007, approximately $22.2 million of the reserve liability was included in
accrued liabilities, other, and $54.9 million was included in other long-term liabilities. At
December 30, 2006, approximately $44.7 million of the reserve liability was included in accrued
liabilities, other, and $77.1 million was included in other long-term liabilities. At December 29, 2007,
the integration activities and facility closures reserve included approximately $73 million for
estimated future lease obligations, which represents the estimated fair value of the lease obligations
and is net of anticipated sublease income of approximately $77 million.
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