OfficeMax 2011 Annual Report Download - page 93

As of December 31, 2011, the Company had $21.2 million of total unrecognized tax benefits, $7.0 million
of which would affect the Company’s effective tax rate if recognized. 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 reconciliation of the beginning and
ending unrecognized tax benefits is as follows:
2011 2010 2009
(thousands)
Unrecognized gross tax benefits balance at beginning of year ................ $20,863 $ 8,247 $ 20,380
Increase related to prior year tax positions ............................... 570 12,983 1,710
Decrease related to prior year tax positions .............................. — — (14,369)
Increase related to current year tax positions ............................. — — 1,420
Settlements ....................................................... (261) (367) (894)
Unrecognized tax benefits balance at end of year ......................... $21,172 $20,863 $ 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, and the Company is no longer subject to income tax examinations prior to 2005 for its
major foreign jurisdictions.
The Company recognizes accrued interest and penalties associated with uncertain tax positions as part of
income tax expense. As of December 31, 2011, the Company had approximately $1 million of accrued interest
and penalties associated with uncertain tax positions.
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 such as maintenance and insurance. Rental
payments include minimum rentals plus, in some cases, contingent rentals based on a percentage of sales above
specified minimums. Rental expense for operating leases included the following components:
2011 2010 2009
(thousands)
Minimum rentals ................................................ $336,924 $338,924 $355,662
Contingent rentals ............................................... 1,060 1,187 1,013
Sublease rentals ................................................. (504) (422) (671)
Total .......................................................... $337,480 $339,689 $356,004
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