OfficeMax 2012 Annual Report Download - page 76

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recorded a reserve, which is separate from the facility closure reserve above, for the related lease payments and
other contract termination and closure costs. During 2010, we sold the facility’s equipment and terminated the
lease. As a result, we recorded pre-tax income of approximately $9.4 million to adjust the associated reserve.
This income is reported in other operating expenses, net in our Consolidated Statements of Operations.
Environmental
As an owner and operator of real estate, we may be liable under environmental laws for the cleanup of past
and present spills and releases of hazardous or toxic substances on or from our properties and operations. We can
be found liable under these laws if we knew of, or were responsible for, the presence of such substances. In some
cases, this liability may exceed the value of the property itself.
Environmental liabilities that relate to the operation of the paper and forest products businesses and
timberland assets prior to the closing of the sale of our paper, forest products and timberland assets in 2004
continue to be our liabilities. We have been notified that we are a “potentially responsible party” under the
Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) or similar federal and
state laws, or have received a claim from a private party, with respect to certain sites where hazardous substances
or other contaminants are or may be located. These sites relate to operations either no longer owned by the
Company or unrelated to its ongoing operations. For sites where a range of potential liability can be determined,
we have established appropriate reserves. We cannot predict with certainty the total response and remedial costs,
our share of the total costs, the extent to which contributions will be available from other parties, or the amount
of time necessary to complete the cleanups. Based on our investigations; our experience with respect to cleanup
of hazardous substances; the fact that expenditures will, in many cases, be incurred over extended periods of
time; and in some cases the number of solvent potentially responsible parties, we do not believe that the known
actual and potential response costs will, in the aggregate, materially affect our financial position, our results of
operations or our cash flows.
Critical Accounting Estimates
The Securities and Exchange Commission defines critical accounting estimates as those that are most
important to the portrayal of our financial condition and results. These estimates require management’s most
difficult, subjective or complex judgments, often as a result of the need to estimate matters that are inherently
uncertain. The accounting estimates that we currently consider critical are as follows:
Vendor Rebates and Allowances
We participate in volume purchase rebate programs, some of which provide for tiered rebates based on
defined levels of purchase volume. We also participate in programs that enable us to receive additional vendor
subsidies by promoting the sale of vendor products. Vendor rebates and allowances are accrued as earned.
Rebates and allowances received as a result of attaining defined purchase levels are accrued over the incentive
period based on the terms of the vendor arrangement and estimates of qualifying purchases during the rebate
program period. These estimates are reviewed on a quarterly basis and adjusted for changes in anticipated
product sales and expected purchase levels. Vendor rebates and allowances earned are recorded as a reduction in
the cost of merchandise inventories and are included in operations (as a reduction of cost of goods sold) in the
period the related product is sold.
We provide an allowance to cover disputes in the event that our interpretation of the contract terms differ
from our vendors’ and our vendors seek to recover some of the consideration from us as well as for uncollectible
accounts. These allowances are based on specific information regarding disputes and historical experience as
well as the current financial condition of our vendors. If actual recoveries are different than those estimated,
adjustments to the recorded allowance may be required.
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