OfficeMax 2008 Annual Report Download - page 73

Download and view the complete annual report

Please find page 73 of the 2008 OfficeMax annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 120

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120

disclosure and transition. As of December 27, 2008, the Company had $20.4 million of total gross
unrecognized tax benefits. The reconciliation of the beginning and ending gross unrecognized tax
benefits is as follows:
Amount
(thousands)
Balance at December 29, 2007 .......................................... $33,128
Increase related to prior year tax positions ................................. 2,147
Decrease related to prior year tax positions ................................. (4,123)
Increase related to current year tax positions ................................ 2,775
Settlements ........................................................ (13,547)
Balance at December 27, 2008 .......................................... $20,380
The total gross unrecognized tax benefits at December 27, 2008, represent the amount of
unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in
future periods. Any adjustments would result from the effective settlement of tax positions with
various tax authorities. The effective tax rate for 2008 benefited from the recognition of $6.8 million
in previously unrecognized tax benefits due to the settlement of a federal income tax audit through
the 2005 tax year.
The Company or its subsidiaries file income tax returns in the U.S. Federal jurisdiction, and
multiple state and foreign jurisdictions. Years prior to 2006 are no longer subject to U.S. Federal
income tax examination. The Company is no longer subject to state income tax examinations by tax
authorities in its major state jurisdictions for years before 2002.
The Company recognizes accrued interest and penalties associated with uncertain tax positions
as part of income tax expense. As of December 27, 2008, the Company had $2.3 million of accrued
interest and penalties associated with uncertain tax positions. Income tax benefit for 2008 includes
a benefit of $3.1 million related to interest and penalties, reflecting interest accrued less the effect of
adjustments on settlement.
8. Leases
The Company leases its retail stores as well as certain other property and equipment under
operating leases. These leases are noncancelable and generally contain multiple renewal options
for periods ranging from three to five years, and require the Company to pay all executory costs
such as maintenance and insurance. Rental payments include minimum rentals plus, in some
cases, contingent rentals based on a percentage of sales above specified minimums. Rental
expense for operating leases included the following components:
2008 2007 2006
(thousands)
Minimum rentals ................................... $360,294 $ 341,067 $ 343,203
Contingent rentals ................................. 886 908 763
Sublease rentals ................................... (1,013) (1,258) (1,660)
$360,167 $340,717 $342,306
For operating leases with remaining terms of more than one year, the minimum lease payment
requirements are: $377.8 million for 2009, $342.8 million for 2010, $299.1 million for 2011,
$244.2 million for 2012, $195.5 million for 2013 and $520.7 million thereafter. These minimum lease
payments do not include contingent rental payments that may be due based on a percentage of
sales in excess of stipulated amounts. These future minimum lease payment requirements have not
69