OfficeMax 2009 Annual Report Download - page 63

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a company’s involvement with a VIE and any significant changes in risk exposure due to that
involvement. The Company is currently evaluating the impact of the adoption of this guidance
(which is required beginning in 2010) but does not anticipate it will have a material impact on our
results of operations or financial condition.
2. Facility Closure Reserves
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 beneficial. 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, primarily the location’s cease-use date. Upon closure,
unrecoverable costs are included in facility closure reserves 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 required payments.
In 2009, the Company recorded charges of $31.2 million related to the closing of 21
underperforming stores prior to the end of their lease terms, of which 16 were in the U.S. and five
were in Mexico. In 2008, the Company recorded $3.1 million of charges related principally to close
five stores and it reduced rent and severance accruals by $3.4 million relating to prior closed
stores. In 2008, the Company also recorded $8.7 million of charges related to four domestic retail
stores where we had signed lease commitments, but decided not to open the stores due to the
existing economic environment. This charge was partially offset by reduced rent accruals of
$4.0 million on other store lease obligations.
These charges were included in other operating net, in the Consolidated Statements of
Operations.
Facility closure reserve account activity during 2009, 2008 and 2007, including activity related
to the reorganization of the Contract segment, retail store closures and headquarters consolidation
was as follows:
Lease\ Severance\
Contract Retention\
Terminations Other Total
(thousands)
Balance at December 30, 2006 ................... $107,824 $ 13,980 $ 121,804
Cash payments ............................... (38,196) (10,149) (48,345)
Accretion ................................... 3,603 — 3,603
Balance at December 29, 2007 ................... $ 73,231 $ 3,831 $ 77,062
Charges to income ............................ 11,774 79 11,853
Changes to estimated costs included in income ....... (5,982) (1,414) (7,396)
Cash payments ............................... (33,227) (2,002) (35,229)
Accretion ................................... 2,643 — 2,643
Balance at December 27, 2008 ................... $ 48,439 $ 494 $ 48,933
Charges related to stores closed .................. 30,001 1,207 31,208
Transfer of deferred rent balance .................. 3,214 — 3,214
Changes to estimated costs included in income ....... 418 (409) 9
Cash payments ............................... (23,315) (1,279) (24,594)
Accretion ................................... 2,802 — 2,802
Balance at December 26, 2009 ................... $ 61,559 $ 13 $ 61,572
59