OfficeMax 2008 Annual Report Download - page 11

policies, competitive conditions, foreign currency fluctuations and unstable political and economic
conditions.
Our quarterly operating results are subject to fluctuation. Our quarterly operating results
have fluctuated in the past and are likely to do so in the future. Factors that may contribute to these
quarter-to-quarter fluctuations could include the effects of seasonality, severe weather, our level of
advertising and marketing, new store openings, changes in product mix and competitors’ pricing.
Most of our operating expenses do not vary depending on the level of sales; if we are unable to
reduce these expenses commensurately with the reduced sales then these quarterly fluctuations
could have an adverse effect on both our financial results and the price of our common stock.
Expense reductions may impact our ability to compete and execute our strategic
initiatives. We have reduced our expenses significantly in response to the recent declines in
consumer and business spending. Expense reductions have occurred throughout the organization
and include reduced capital projects, staffing, advertising expenditures, repair and maintenance
activities, and training. Management believes these reductions are reasonable, but there can be no
assurance that they will not impact our ability to compete.
We may be unable to attract and retain qualified associates. We attempt to attract and
retain an appropriate level of personnel in both field operations and corporate functions. We face
many external risks and internal factors in meeting our labor needs, including competition for
qualified personnel, prevailing wage rates, as well as rising employee benefit costs, including
insurance costs and compensation programs. Failure to attract and retain sufficient qualified
personnel could interfere with our ability to adequately provide services to customers.
Our expanded offering of proprietary branded products may not improve our financial
performance and may expose us to product liability claims. Our product offering includes many
proprietary branded products. While we have focused on the quality of our proprietary branded
products, we rely on third-party manufacturers for these products. Such third-party manufacturers
may prove to be unreliable, the quality of our globally sourced products may not meet our
expectations or such products may not meet applicable regulatory requirements. Furthermore,
economic and political conditions in areas of the world where we source such products may
adversely affect the availability and cost of such products. In addition, our proprietary branded
products compete with other manufacturers’ branded items that we offer. As we continue to
increase the number and types of proprietary branded products that we sell, we may adversely
affect our relationships with our vendors, who may decide to reduce their product offerings through
OfficeMax and increase their product offerings through our competitors. Finally, if any of our
customers are harmed by our proprietary branded products, they may bring product liability and
other claims against us. Any of these circumstances could have an adverse effect on our business
and financial performance.
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 and the potential Pension Plans funding discussed previously.
This reduces the funds we have available for working capital, capital expenditures, acquisitions, new
stores, store remodels and other purposes and, given current credit constriction, may make it more
difficult for us to make borrowings in the future. 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
7