OfficeMax 2014 Annual Report Download - page 74

Table of Contents


Franchise fees, royalty income and the sales of products to franchisees and licensees, which currently are not significant, are included in Sales, while related
product costs are included in Cost of goods sold and occupancy costs in the Consolidated Statements of Operations.
 Cost of goods sold and occupancy costs include:
- inventory costs (as discussed above);
- outbound freight;
- employee and non-employee receiving, distribution, and occupancy costs (rent), including real estate taxes and common area costs, of
inventory-holding and selling locations; and
- identifiable employee-related costs associated with services provided to customers.
 Selling, general and administrative expenses include amounts incurred related to expenses of operating and
support functions, including:
- employee payroll and benefits, including variable pay arrangements;
- advertising;
- store and field support;
- executive management and various staff functions, such as information technology, human resources functions, finance, legal, internal audit, and
certain merchandising and product development functions;
- other operating costs incurred relating to selling activities; and
- closed defined benefit pension and postretirement plans.
Selling, general and administrative expenses are included in the determination of Division operating income to the extent those costs are considered to be
directly or closely related to segment activity and through allocation of support costs.
       Merger, restructuring, and other operating expenses, net in the Consolidated Statements of
Operations includes amounts related to the Merger, including transaction, integration, employee termination benefits, employee retention, employee
relocation, and other related expenses. Transaction and integration activities are primarily integration-related professional fees, incremental labor, travel and
relocation costs, non-capitalizable software integration costs, and other direct costs to combine the companies. Other related expenses include accelerated
depreciation, lease closure accruals and gains and losses on asset dispositions. This presentation reflects costs incurred by the Company prior to the Merger
and costs incurred by the combined entity following the Merger. The impacts of future integration activities such as facility closures, contract terminations,
and additional employee-related costs will be reported in this financial statement line item. Integration activities are expected to continue through 2016.
Also, the current and prior period amounts include restructuring-related charges not associated with the Merger. Such expenses include facility closure and
functional re-alignment costs, gains and losses associated with business and asset dispositions, and expenses related to certain shareholder matters and
process improvement activities. Changes in estimates and accruals related to these restructuring activities are also reflected on this line.
Merger, restructuring, and other operating expenses are not included in the measure of Division operating income. Refer to Note 3 for additional information.
72