OfficeMax 2015 Annual Report Download - page 18

Table of Contents
control the cost of manufacturers’ products, and cost increases must either be passed along to our customers or will result in erosion of our earnings.
Failure to identify desirable products and make them available to our customers when desired and at attractive prices could have an adverse effect on our
business and our results of operations. In addition, a material interruption in service by the carriers that ship goods within our supply chain may adversely
affect our sales. Many of our vendors are small or medium sized businesses which are impacted by current macroeconomic conditions, both in the U.S., Asia
and other locations. We may have no warning before a vendor fails, which may have an adverse effect on our business and results of operations.
Our product offering also includes many of our own branded products. While we have focused on the quality of our own branded products, we rely on third-
party manufacturers for these products. Such third-party manufacturers may prove to be unreliable, the quality of our globally sourced products may not meet
our expectations, such products may not meet applicable regulatory requirements which may require us to recall those products, or such products may
infringe upon the intellectual property rights of third-parties. Furthermore, economic and political conditions in areas of the world where we source such
products may adversely affect the availability and cost of such products. In addition, our own branded products compete with other manufacturers’ branded
items that we offer. As we continue to increase the number and types of our own branded products that we sell, we may adversely affect our relationships with
our vendors, who may decide to reduce their product offerings through us and may increase their product offerings through our competitors. Finally, if any of
our customers are harmed by our own branded products, they may bring product liability and other claims against us. Any of these circumstances could have
an adverse effect on our business and results of operations.

Economic and civil unrest in areas of the world where we source products, as well as shipping and dockage issues, could adversely impact the availability or
cost of our products, or both. Most of our goods imported to the U.S. arrive from Asia through ports located on the U.S. west coast and we are therefore subject
to potential disruption due to labor unrest, security issues or natural disasters affecting any or all of these ports. In addition, in recent years, we have
substantially increased the number and types of products that we sell under our own brands including Office Depot , OfficeMax and other proprietary
brands. While we have focused on the quality of our proprietary branded products, we rely on third-parties to manufacture these products. Such third-party
manufacturers may prove to be unreliable, the quality of our globally sourced products may vary from our expectations and standards, such products may not
meet applicable regulatory requirements which may require us to recall those products, or such products may infringe upon the intellectual property rights of
third-parties. Moreover, as we seek indemnities from the manufacturers of these products, the uncertainty of realization of any such indemnity and the lack of
understanding of U.S. product liability laws in certain foreign jurisdictions make it more likely that we may have to respond to claims or complaints from our
customers.

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While Merger-related costs have been significant between 2013 and 2015, historically, we have generated positive cash flow from operating activities and
have had access to broad financial markets that provide the liquidity we need to operate our business. Together, these sources have been used to fund
operating and working capital needs, as well as invest in business expansion through new store openings, capital improvements and acquisitions. A
deterioration in our financial results or the impact of significant Merger and integration costs could negatively impact our credit ratings, our liquidity and our
access to the capital markets. If we need to refinance all or a portion of that indebtedness, there is no assurance that we will be able to secure such refinancing
at the same or more favorable terms than the terms of our existing indebtedness.
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