OfficeMax 2005 Annual Report Download - page 46

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Additional Consideration Agreement
Pursuant to an Additional Consideration Agreement between OfficeMax and Boise Cascade,
L.L.C. related to the Sale, we may be required to make substantial cash payments to, or receive
substantial cash payments from, Boise Cascade, L.L.C. Under the Additional Consideration
Agreement, the Sale proceeds may be adjusted upward or downward based on paper prices
during the six years following the closing date, subject to annual and aggregate caps. Under the
terms of the agreement, neither party will be obligated to make a payment in excess of $45 million
in any one year. Payments by either party are also subject to an aggregate cap of $125 million that
declines to $115 million in the fifth year and $105 million in the sixth year. In connection with
recording the Sale in 2004, we calculated our projected future obligation under the Additional
Consideration Agreement and accrued $42 million in ‘‘Other long-term liabilities’’ on our
Consolidated Balance Sheet. We calculated the $42 million based on the net present value of
weighted average expected payments using industry paper price projections. We record the
changes in the fair value of this obligation in our net income (loss) in the period they occur. The
change in fair value of this obligation in 2005 resulted in expense of $2.9 million and is reflected in
our Consolidated Statement of Income (Loss).
The table below provides information about our financial instruments outstanding at
December 31, 2005 that are sensitive to changes in interest rates or paper prices. For debt
obligations, the table presents principal cash flows and related weighted average interest rates by
expected maturity dates. For obligations with variable interest rates, the table sets forth payout
amounts based on current rates and does not attempt to project future rates. Estimated future cash
payments under the terms of the Additional Consideration Agreement, included in the table below,
are based on weighted average expected payments using industry paper price projections. Other
instruments subject to market risk, such as obligations for pension plans and other postretirement
benefits, are not reflected in the table.
Financial Instruments
December 31
2005 2004
There- Fair Fair
2006 2007 2008 2009 2010 after Total Value Total Value
Debt
Short-term borrowings $18.7 $ — $ — $ — $ — $ — $ 18.7 $ 18.7 $ 10.3 $ 10.3
Average interest rates 6.6% —% —% —% —% —% 6.6% 6.6% — —
Long-term debt
Fixed-rate debt
payments ...... $68.6 $25.4 $34.6 $50.9 $15.7 $ 281.4 $ 476.6 $ 471.3 $ 683.6 $ 697.7
Average interest
rates ....... 6.3% 7.9% 7.6% 8.9% 5.7% 6.6% 6.9% —% 7.0% —
Timber notes
securitized ..... $ — $ — $ — $ — $1,470.0 $1,470.0 $$1,440.7 $1,470.0 $1,452.4
Average interest
rates ....... ———— 5.5% 5.5% 5.7% 5.5% 5.6%
Additional
Consideration
Agreement ...... $9.2 $8.5 $12.4 $19.9 $ 4.7 $ — $ 54.7 $ 44.9 $ 54.7 $ 42.0
42