OfficeMax 2009 Annual Report Download - page 72

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Pre-tax income (loss) related to continuing operations from domestic and foreign sources is as
follows:
2009 2008 2007
(thousands)
Domestic ....................................... $(69,386) $(1,953,946) $272,169
Foreign ........................................ 39,053 (18,454) 65,358
Total pre-tax income (loss) ........................... $(30,333) $(1,972,400) $337,527
Total gross unrecognized tax benefits at December 26, 2009 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 Company does not anticipate any tax settlements to occur within the
next twelve months. The recorded income tax benefit for 2009 includes a $14.9 million decrease in
unrecognized benefits due to the resolution of an issue under IRS appeal related to the deductibility
of interest on the Company’s industrial revenue bonds. The recorded income tax benefit for 2008
includes 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. As of December 26, 2009, the
Company had $8.2 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 27, 2008 .......................................... $20,380
Increase related to prior year tax positions ................................. 1,710
Decrease related to prior year tax positions ................................. (14,369)
Increase related to current year tax positions ................................ 1,420
Settlements ........................................................ (894)
Balance at December 26, 2009 .......................................... $ 8,247
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 2003.
The Company recognizes accrued interest and penalties associated with uncertain tax positions
as part of income tax expense. As of December 26, 2009, the Company had $2.1 million of accrued
interest and penalties associated with uncertain tax positions. Income tax benefit for 2009 includes
a benefit of $0.1 million related to interest and penalties, reflecting interest accrued less the effect of
adjustments on settlement.
Deferred taxes are not recognized for temporary differences related to investments in foreign
subsidiaries because such earnings are considered to be indefinitely reinvested in the business.
The determination of the amount of the unrecognized deferred tax liability related to the
undistributed earnings is not practicable because of the complexities associated with its
hypothetical calculation.
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
68