OfficeMax 2005 Annual Report Download - page 84

pledged instruments were released from the security interest granted to the 7.00% senior note
holders, and were sold during the second quarter of 2005. The remaining pledged instruments
continue to be subject to the security interest, and are reflected as restricted investments in the
Consolidated Balance Sheet at December 31, 2005.
Adjustable Conversion-Rate Equity Securities (ACES)
In December 2001, the Company issued 3,450,000 7.50% adjustable conversion-rate equity
security units (ACES) to the public at an aggregate offering price of $172.5 million. The units traded
on the New York Stock Exchange under the ticker symbol BEP. At the time of issuance, there were
two components of each unit. Investors received a preferred security issued by Boise Cascade
Trust I (the ‘‘Trust’’), a statutory business trust whose common securities were owned by the
Company, with a liquidation amount of $50. These preferred securities were mandatorily
redeemable in December 2006. Investors also entered into a contract to purchase, for $50,
common shares of the Company, subject to a collar arrangement. The Trust used the proceeds
from the offering to purchase debentures issued by Boise Cascade Corporation (now OfficeMax
Incorporated). These debentures were 7.50% senior, unsecured obligations and had a scheduled
maturity in December 2006.
On September 16, 2004, the Company dissolved the Trust and distributed the debentures to
the unit holders in exchange for their preferred securities. Also on that date, the remarketing of
$144.5 million of these debentures was completed. In connection with the remarketing, the interest
rate on the debentures was reset to 2.75% over the average of the rates for three-month LIBOR.
The reset interest rate on the debentures was 4.62% per annum. On November 5, 2004, the
Company repurchased $144.5 million of these debentures pursuant to an offer to purchase these
securities; open market purchases of an additional $15.2 million of the debentures were made in
December 2004. As of December 31, 2004, $12.8 million of the debentures were outstanding. The
remaining debentures were repurchased in 2005.
On December 16, 2004, holders of the adjustable conversion-rate equity security units received
1.5689 of the Company’s common shares upon settlement of each purchase contract resulting in
the issuance of a total of 5,412,705 common shares. The Company received $50 per unit, or
$172.5 million in aggregate proceeds, as a result of the settlement of the purchase contracts.
Other
During 2003, the Company entered into a $33.5 million sale-leaseback of certain equipment at
its integrated wood-polymer building materials facility near Elma, Washington. The sale-leaseback
agreement, which was terminated in early 2006, had a base term of seven years and an interest
rate of 4.67%, and was accounted for as a financing. The Company’s obligation under this
arrangement is included in the current portion of long-term debt in the Consolidated Balance Sheet.
The 9.45% debentures, due in 2009, contain a provision under which, in the event of the
occurrence of both a designated event, as defined (generally a change of control or a major
distribution of assets), and a subsequent rating decline, as defined, the holders of these notes may
require the Company to redeem the securities.
Through the date of its repayment in 2004, the Company had guaranteed the debt used to
fund its employee stock ownership plan (‘‘ESOP’’), which was a part of the Savings and
Supplemental Retirement Plan for the Company’s U.S. salaried employees. (See Note 17,
Retirement and Benefit Plans for additional information related to the ESOP.) Although the debt has
been repaid, under the terms of these indemnities, the Company would be required to pay
additional amounts to the debt holders in the event the interest payments on the debt were
determined to be taxable. Any amounts paid under this tax indemnification would be dependent
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