OfficeMax 2015 Annual Report Download - page 20

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Table of Contents

OfficeMax sponsors defined benefit pension plans covering certain terminated employees, vested employees, retirees, and some active employees (the
“Pension Plans”). The Pension Plans are frozen and do not allow new entrants, however, they are under-funded and we may be required to make contributions
in subsequent years in order to maintain required funding levels. Required future contributions could have an adverse impact on our cash flows and our
financial results. Additional future contributions to the Pension Plans, financial market performance and Internal Revenue Service (“IRS”) funding
requirements could materially change these expected payments.
In connection with OfficeMax’s sale of its paper, forest products and timberland assets in 2004, OfficeMax agreed to assume responsibility for certain
liabilities of the businesses sold. These obligations include liabilities related to environmental, asbestos, health and safety, tax, litigation and employee
benefit matters. Some of these retained liabilities could turn out to be significant, which could have an adverse effect on our results of operations. Our
exposure to these liabilities could harm our ability to compete with other office products distributors, who would not typically be subject to similar
liabilities.


Our global tax rate is derived from a combination of applicable tax rates in the various domestic and international jurisdictions in which we operate.
Depending upon the sources of our income, any agreements we may have with taxing authorities in various jurisdictions, and the tax filing positions we take
in these jurisdictions, our overall tax rate may fluctuate significantly from other companies or even our own past tax rates. At any given point in time, we base
our estimate of an annual effective tax rate upon a calculated mix of the tax rates applicable to our Company and to estimates of the amount of income likely
to be generated in any given geography. Additionally, because of recent operating losses, the Company has significant valuation allowances on deferred tax
assets, limiting the amount of deferred tax benefits that can be recognized on current operations. The loss of or modification to one or more agreements with
taxing jurisdictions, whether as a result of a third party challenge, negotiation, or otherwise, a change in the mix of our business from year to year and from
country to country, changes in rules related to accounting for income taxes, changes in tax laws in any of the multiple jurisdictions in which we operate,
changes in valuation allowances, or adverse outcomes from the tax audits that regularly are in process in any of the jurisdictions in which we operate could
result in substantial volatility, including an unfavorable change in our overall tax rate and/or our effective tax rate.
.
We depend on our executive management team and other key personnel, and the recruitment and retention of certain personnel could adversely affect our
performance and result in the loss of management continuity and institutional knowledge. We depend heavily upon our retail labor force to identify new
customers and provide desired products and personalized customer service to existing customers. The market for qualified employees, with the right talent
and competencies, is highly competitive, and may subject us to increased labor costs during periods of low unemployment. The loss of the services of key
employees or the inability to attract additional qualified managers for our retail stores and other lines of business may adversely affect our ability to conduct
operations in accordance with the standards that we have set.
Although certain members of our executive team have entered into agreements relating to their employment with us, most of our key personnel are not bound
by employment agreements, and those with employment or retention agreements are bound only for a limited period of time. If we are unable to retain our
key personnel, we may be unable to successfully develop and implement our business plans, which may have an adverse effect on our business and results of
operations.
18