OfficeMax 2014 Annual Report Download - page 42

Table of Contents
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On June 25, 2014, the Company participated in a non-binding, voluntary mediation in which the Company negotiated a potential settlement to resolve the
Sherwin lawsuit. During the second quarter of 2014, the Company recorded an $80 million incremental increase to the legal accrual which included the
potential settlement, as well as attorneys’ fees and other related legal matters. On December 19, 2014, Office Depot and the plaintiffs executed a Settlement
Agreement to resolve the lawsuit. Pursuant to the terms of the Settlement Agreement, the Company agreed to pay the plaintiffs $68 million to settle the matter
(the “Settlement Amount”), as well as $9 million in legal fees, costs, and expenses. In exchange for, and in consideration of, the Company’s agreement to pay
the Settlement Amount, the plaintiffs agreed to dismiss their action against the Company with prejudice. In February 2015, the court entered orders
approving the settlement and dismissing the case with prejudice. The Settlement Amount was subsequently placed in escrow pursuant to the Settlement
Agreement. The funds are to be released from escrow and disbursed in accordance with the terms of the court’s orders.
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The Company allocates to the Divisions functional support costs that are considered to be directly or closely related to segment activity. Those allocated
costs are included in the measurement of Division operating income. Other companies may charge more or less of functional support costs to their segments,
and our results therefore may not be comparable to similarly titled measures used by other companies. The unallocated costs primarily consist of the
buildings used for the Company’s corporate headquarters and personnel not directly supporting the Divisions, including certain executive, finance, audit and
similar functions. Following the Merger, unallocated costs also include certain pension expense or credit related to the frozen OfficeMax pension and other
benefit plans.
Unallocated costs were $122 million, $89 million, and $74 million in 2014, 2013, and 2012, respectively. The 2014 and 2013 increases are primarily due to
the addition of OfficeMax expenses and higher variable pay.
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(In millions)  2013 2012
Interest income  $ 5 $ 2
Interest expense   (69) (69)
Loss on extinguishment of debt   — (12)
Gain on disposition of joint venture   382 —
Other income, net   14 35
Interest income in 2014 and 2013 includes $21 million and $3 million, respectively, related to OfficeMax Timber Notes, including amortization of the fair
value adjustment recorded in purchase accounting. The associated non-recourse debt added $20 million and $3 million of interest expense in 2014 and 2013,
respectively, including amortization of the fair value adjustment recorded in purchase accounting. Refer to Note 7, “Timber Notes/Non-Recourse Debt”, in
Notes to Consolidated Financial Statements for additional information. Interest expense in 2014 includes a $9 million reversal of previously accrued interest
expense on uncertain tax positions following resolution of the related matter. Interest expense in 2013 also reflects the maturity in August 2013 of $150
million of the 6.25% senior notes.
On March 15, 2012, we completed a cash tender offer to purchase up to $250 million aggregate principal amount of 6.25% Senior Notes due 2013. The total
consideration for each $1,000.00 note surrendered was $1,050.00. Additionally, tender fees and a proportionate amount of deferred debt issue costs and a
deferred cash flow hedge gain were included in the measurement of the $12 million extinguishment costs reported in our Consolidated Statement of
Operations for 2012.
The pre-tax Gain on disposition of joint venture of $382 million results from the July 2013 sale of the investment in Office Depot de Mexico for the Mexican
Peso amount of 8,777 million in cash ($680 million at then-current
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