OfficeMax 2005 Annual Report Download - page 39

During 2004, we repaid $1.6 billion of our debt, primarily with the proceeds of the Sale, and we
redeemed $110 million of our Series D preferred stock and paid related accrued dividends of
$3 million. In addition, in 2004, we settled the purchase contracts related to our adjustable
conversion-rate equity units and received $172.5 million.
Additions to long-term debt in 2003 resulted primarily from our acquisition of OfficeMax, Inc.
Additions included $150 million under an unsecured credit agreement, $300 million of 6.50% notes,
$200 million of 7.00% notes, $50.0 million of 7.45% medium-term notes and $33.5 million for the
sale-leaseback of equipment at our integrated wood-polymer building materials facility near Elma,
Washington, that was accounted for as a financing arrangement. Payments of long-term debt in
2003 included $125 million of medium-term notes and $40 million under our revolving credit
agreement.
Our debt-to-equity ratio, excluding the securitized timber notes, was .28:1 and .27:1 at
December 31, 2005 and 2004, respectively. Our debt-to-equity ratio remained constant year over
year despite a net debt reduction of $198.7 million due in large part to the stock buyback activity in
2005.
We lease our store space and other property and equipment under operating leases. These
operating leases are not included in debt; however, they represent a significant commitment.
Obligations under operating leases are shown in the ‘‘Contractual Obligations’’ section of this
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Financing Arrangements
Our debt structure consists of credit agreements, note agreements, and other borrowings as
follows. For more information, see ‘‘Contractual Obligations’’ and ‘‘Disclosures of Financial Market
Risks’’ in this Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
Credit Agreements
On June 24, 2005, we entered into a loan and security agreement for a new revolving credit
facility. The new revolver replaced our previous revolving credit facility, which was scheduled to
expire on June 30, 2005. The maximum aggregate borrowing amount under the new facility is equal
to the lesser of (i) a percentage of the value of certain eligible inventory less certain reserves or
(ii) $500 million. Letters of credit may be issued under the revolver up to a maximum limit of
$100 million. The combined sum of outstanding borrowings and letters of credit issued under the
revolver may not exceed the maximum aggregate borrowing amount. The outstanding balance
under the new revolver was $18.7 million at December 31, 2005. Letters of credit issued under the
revolver totaled $89.6 million as of December 31, 2005. As of December 31, 2005, our maximum
aggregate borrowing amount was $500.0 million. The minimum and maximum amounts of
short-term borrowings outstanding were zero and $101.0 million during the year ended
December 31, 2005, and $6.2 million and $493.7 million during the year ended December 31, 2004.
The average amounts of short-term borrowings outstanding during the years ended December 31,
2005 and 2004, were $30.3 million and $82.8 million, respectively. The weighted average annual
interest rates for these borrowings were 6.6% for 2005 and 2.8% for 2004. The activity in 2004
reflects the addition of two $200 million term loan facilities in September 2004 to fund incremental
contributions to our pension plans and to decrease our accounts receivable financing. In addition,
during the second quarter of 2004, we added two $20 million floating rate term loans. On
October 29, 2004, we repaid the two $200 million and two $20 million term loans with the proceeds
from the Sale.
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