OfficeMax 2009 Annual Report Download - page 13

cyclical market pressures. Historical prices for products have been volatile, and industry participants
have limited influence over the timing and extent of price changes. The relationship between supply
and demand in these industries significantly affects product pricing. Demand for building products
is driven mainly by factors such as new construction and remodeling rates, business and consumer
credit availability, interest rates and weather. The recent falloff in U.S. housing starts has resulted in
lower building products shipments and prices. The supply of paper and building products fluctuates
based on manufacturing capacity. Excess manufacturing capacity, both domestically and abroad,
can result in significant variations in product prices. Our ability to realize the carrying value of our
equity interest in Boise Cascade Holdings, L.L.C. is dependent upon many factors, including the
operating performance of Boise Cascade, L.L.C. and Boise Inc. and other market factors that may
not be specific to Boise Cascade, L.L.C. or Boise Inc., due in part to the fact that there is not a
liquid market for our equity interest. Our exposure to these risks could decrease our ability to
compete effectively with our competitors, who typically are not subject to such risks.
Our obligation to purchase paper from Boise White Paper L.L.C.. concentrates our supply
of an important product primarily with a single supplier. When we sold our paper, forest
products and timberland assets, we agreed to purchase substantially all of our requirements of
paper for resale from Boise Cascade, L.L.C., or its affiliates or assigns, currently Boise White Paper
L.L.C., on a long term basis. The price we pay for this paper is market based and therefore subject
to fluctuations in the supply and demand for the products. Our purchase obligation limits our ability
to take advantage of spot purchase opportunities and exposes us to potential interruptions in
supply, which could impact our ability to compete effectively with our competitors, who would not
typically be restricted in this way.
We have substantial business operations in states in which the regulatory environment is
particularly challenging. Our operations in California and other heavily regulated states with
relatively more aggressive enforcement efforts expose us to a particularly challenging regulatory
environment, including, without limitation, consumer protection laws, advertising regulations,
escheat, and employment and wage and hour regulations. This regulatory environment requires the
Company to maintain a heightened compliance effort and exposes us to defense costs, possible
fines and penalties, and liability to private parties for monetary recoveries and attorneys’ fees, any
of which could have an adverse effect on our business and results of operations.
We are subject to certain legal proceedings that may adversely affect our results of
operations and financial condition. We are periodically involved in various legal proceedings,
which may involve state and federal governmental inquiries and investigations, employment, tort,
consumer litigation and intellectual property litigation. In addition, we may be subject to
investigations by regulatory agencies and customers audits. These legal proceedings, investigations
and audits could expose us to significant defense costs, fines, penalties, and liability to private
parties for monetary recoveries and attorneys’ fees, any of which could have a material adverse
effect on our business and results of operations.
Our results may be adversely affected by disruptions or catastrophic events. Unforeseen
events, including public health issues, such as the H1N1 flu pandemic, and natural disasters such
as earthquakes, hurricanes and other adverse weather and climate conditions, whether occurring in
the United States or abroad, could disrupt our operations, disrupt the operations of our suppliers or
customers, have an adverse impact on consumer spending and confidence levels or result in
political or economic instability. Moreover, in the event of a natural disaster or public health issue,
we may be required to suspend operations in some or all of our locations, which could have a
material adverse effect on our business, financial condition and results of operations. These events
could also reduce demand for our products or make it difficult or impossible to receive products
from suppliers.
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