OfficeMax 2009 Annual Report Download - page 26

resulting payment defaults on the timber note receivable guaranteed by Lehman and the related
securitization notes payable. On October 29, 2008, Lehman failed to pay the semi-annual interest
payment due on the timber note receivable that it guarantees. Because we are only obligated to
make interest payments on the securitization notes supported by the timber note receivable and
Lehman guaranty to the extent that we receive the interest payments due on the timber note
receivable, we stopped accruing (and making) interest payments due on those securitization notes
after the Lehman default. As a result in 2008 we recorded $33.7 million in interest expense on the
Lehman securitization notes payable. In 2009, we did not accrue any interest on this non-recourse
obligation.
Interest income was $47.3 million and $57.6 million for the years ended 2009 and 2008,
respectively. This decline reflects the $13.1 million reduction of interest income recorded on the
timber note receivable guaranteed by Lehman in 2009 as compared to 2008, partially offset by
$4.4 million of interest income related to a tax escrow balance established in a prior period in
connection with the sale of our legacy Voyageur Panel business. As a result of Lehman’s
September 2008 bankruptcy filing, we recorded no interest income on the Lehman portion of the
timber notes receivable in 2009. In 2008, we accrued and collected approximately $13.1 million in
interest income on the Lehman timber note receivable for the period from January 1 through
April 29, 2008. In 2009, approximately $40.8 million of interest income and $39.8 million of interest
expense recorded relating to the Wachovia portion of the timber notes receivable and associated
securitized obligation. See the ‘‘Timber Notes/Non-Recourse Debt’’ section that follows in this
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
For 2009, we recognized an income tax benefit of $28.8 million on a pre-tax loss of
$30.3 million (effective tax benefit rate of 94.8%) compared to an income tax benefit of
$306.5 million on a pre-tax loss of $1,972.4 million (effective tax benefit rate of 15.5%) for 2008.
Income taxes and the related effective rates for both years were affected by several significant items
that caused our actual tax benefits to vary from the amount based on our reported pre-tax
accounting income and the statutory U.S. federal tax rate of 35%. In 2009, the recorded tax benefit
included $14.9 million from the release of a tax reserve upon the resolution of our claim that interest
on certain of our industrial revenue bonds was fully tax deductible. In 2008, the goodwill and other
assets impairment charge of $1.4 billion unfavorably impacted the tax benefit rate as the book basis
of these assets was higher than the amortizable tax basis which resulted in a 4.6% tax benefit on
the charge. In addition, in 2008 the Company also recognized a tax benefit resulting from a
favorable U.S. Internal Revenue Service settlement. The effective tax rate in both years was also
impacted by the effects of state income taxes, income items not subject to tax and non-deductible
expenses and the mix of domestic and foreign sources of income.
We reported a net loss attributable to OfficeMax and noncontrolling interest of $1.6 million for
2009. After adjusting for joint venture earnings attributable to noncontrolling interest and preferred
dividends, we reported a net loss available to OfficeMax common shareholders of $2.2 million or
$(0.03) per diluted share for 2009. Excluding the effects of the significant items discussed above,
adjusted net income available to OfficeMax common shareholders was $18.6 million or $0.24 per
diluted share for 2009 compared to $100.1 million or $1.30 per diluted share for 2008.
22