OfficeMax 2010 Annual Report Download - page 73

which may not be finally determined for several years. Our estimate of the expected proceeds has not changed,
and at December 25, 2010 and December 26, 2009, the carrying value of the Lehman Guaranteed Installment
Note remained at $81.8 million. Going forward, we intend to adjust the carrying value of the Lehman Guaranteed
Installment Note as further information regarding our share of the proceeds, if any, from the Lehman bankruptcy
estate becomes available. On April 14, 2010, Lehman filed its Debtors’ Disclosure Statement with the United
States Bankruptcy Court for the Southern District of New York. The Disclosure Statement indicated a range of
estimated recoveries for general unsecured creditors of Lehman. As our estimate is similar to the estimate
included in the Disclosure Statement, we have not adjusted our estimated carrying value for the Lehman
Guaranteed Installment Note.
Recourse on the Securitization Notes is limited to the proceeds from the applicable pledged Installment
Notes and underlying Lehman and Wachovia guaranty. Accordingly, the Lehman Guaranteed Installment Note
and underlying guarantees by Lehman will be transferred to the holders of the Securitization Notes guaranteed by
Lehman in order to settle and extinguish that liability. However, under current generally accepted accounting
principles, we are required to continue to recognize the liability related to the Securitization Notes guaranteed by
Lehman until such time as the liability has been extinguished. This will occur when the Lehman Guaranteed
Installment Note and the guaranty are transferred to and accepted by the Securitization Note holders. We expect
that this will occur no later than the date when the assets of Lehman are distributed and the bankruptcy is
finalized. Accordingly, we expect to recognize a non-cash gain equal to the difference between the carrying
amount of the Securitization Notes guaranteed by Lehman ($735.0 million at December 25, 2010) and the
carrying value of the Lehman Guaranteed Installment Note ($81.8 million at December 25, 2010) in a later
period when the liability is legally extinguished. The actual gain to be recognized in the future will be measured
based on the carrying amounts of the Lehman Guaranteed Installment Note and the Securitization Notes
guaranteed by Lehman at the date of settlement.
Through December 25, 2010, we have received all payments due under the Installment Notes guaranteed by
Wachovia (the “Wachovia Guaranteed Installment Notes”), which have consisted only of interest due on the
notes, and made all payments due on the related Securitization Notes guaranteed by Wachovia, again consisting
only of interest due. As all amounts due on the Wachovia Guaranteed Installment Notes are current and we have
no reason to believe that we will not be able to collect all amounts due according to the contractual terms of the
Wachovia Guaranteed Installment Notes, the notes are stated in our Consolidated Balance Sheets at their original
principal amount of $817.5 million. The Installment Notes and Securitization Notes are scheduled to mature in
2020 and 2019, respectively. The Securitization Notes have an initial term that is approximately three months
shorter than the Installment Notes.
At the time of the sale of the timberlands in 2004, we generated a tax gain and recognized the related
deferred tax liability. The timber installment notes structure allowed the Company to defer the resulting tax
liability of $543 million until 2020, the maturity date for the Installment Notes. Due to the Lehman bankruptcy
and note defaults, the recognition of the Lehman portion of the gain will be triggered when the Lehman
Guaranteed Installment Note is transferred to the Securitization Note holders as payment and/or when the
Lehman bankruptcy is resolved. At that time, we expect to reduce the estimated cash payment due by utilizing
our available alternative minimum tax credits.
5. Goodwill, Intangible Assets and Other Long-lived Assets
Impairment Reviews and Charges
In 2008, management concluded that indicators of potential impairment were present and evaluated the
carrying values of goodwill, intangibles and other long-lived assets. An impairment loss was recognized for the
excess of carrying value over the implied fair value of reporting unit goodwill. We recorded a charge of
$1,201.5 million in 2008 to write-off the goodwill of the Company in both segments; Contract ($815.5 million)
and Retail ($386.0 million). The impairment charges included a portion of goodwill that was not deductible for
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