OfficeMax 2006 Annual Report Download - page 38

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Note Agreements
In October 2003, we issued $300 million of 6.50% senior notes duein 2010 and $200million of
7.00% senior notes due in 2013. At the time of issuance, the senior note indentures contained a
number of restrictive covenants, substantially all ofwhich havebeen eliminatedthrough the execution
of supplemental indentures as described below. On November 5, 2004, we repurchased
approximately $286.3 million of the 6.50% senior notes and received the requisite consents toadopt
amendments to the indenture pursuant to a tender offer for these securities. As a result, theCompany
and the trustee executed a supplementalindenture thateliminated substantially all of the restrictive
covenants, certain events of default and relatedprovisions, and replacedthem with the covenants
contained in the Company’s other public debt. Those covenants include a limitation on mergers and
similar transactions, a restriction on secured transactions involving Principal Properties, as defined,
and a restriction onsale and leaseback transactions involving Principal Properties.
In December 2004, both Moody’s Investors Service, Inc. and Standard & Poor’s Rating Services
upgraded thecredit rating on our 7.00% senior notes to investment grade.The upgrades were the
result of actions we took to collateralize the notes by granting the note holders asecurity interest in
$113 million in principal amount of General Electric Capital and Bank of America Corp. notes maturing
in 2008 (the “pledged instruments”). These pledged instruments are reflected as restricted
investments in the Consolidated Balance Sheets. As a result of these ratings upgrades, the original
7.00% senior note covenants havebeen replaced with the covenants found in the Company’s other
public debt. During the first quarter of 2005, we purchased andcancelled $87.3million of the 7.00%
senior notes. As a result, $92.8 million of the 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 Sheets.
Other
We hadleased certain equipment at our integrated wood-polymer building materials facilitynear
Elma, Washington under a capital lease. Thelease agreement had a base term of seven years and an
interest rate of 4.67%. During the first quarter of 2006, we paid $29.1 million to terminate the lease
agreement. At December 31, 2005, the capital lease obligation wasincluded in the current portion of
long-term debt inthe Consolidated Balance Sheets.
Cash Paidfor Interest
Cash payments for interest, net of interest capitalized, were $124.1 millionin 2006, $122.6 million
in 2005 and $167.7 million in 2004. The decline inpayments made in 2005 relative to 2004was due to
the repayment of outstanding debt in the fourth quarter of 2004 using aportion of the proceeds from
the Sale.