OfficeMax 2006 Annual Report Download - page 40

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Off-Balance-Sheet Activities and Guarantees
On June 19, 2006,weentered into a FourthAmended and Restated Receivables Sale Agreement
with a group of lenders, which replacedthe Third Amended and Restated Receivables Sale
Agreement that expiredon that day. The agreement allows us to sell, on a revolving basis, an undivided
interest in a defined pool of receivables while retaining a subordinated interest in a portion of the
receivables. The receivables are sold without legal recourse to third party conduits through a wholly
owned bankruptcy-remote special purpose entity that is consolidated for financial reporting purposes.
TheCompany continues servicing the sold receivables and charges the third party conduits a monthly
servicing fee at market rates. The program qualifies for sale treatment under FASB Statement No. 140,
“Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities.” The
amount of available proceeds under the program is limited to $200 million, and is subject to change
based on the level of eligible receivables, restrictions on concentrations ofreceivables and the historical
performance of the transferred receivables. AtDecember 30, 2006 and December 31, 2005,
$180.0 million and$163.0 million, respectively, ofsold accounts receivable were excluded from
receivables in the accompanying Consolidated Balance Sheets. The Company’s subordinated
retained interest inthe transferred receivables was $111.2 million and $73.3million at December 30,
2006 and December 31, 2005, respectively, and is included in receivables, net in the Consolidated
BalanceSheets. The receivables sale agreement will expire on June 18, 2007. When the current
program expires, none of the parties are obligated to renew the arrangement. Our experience over the
last five years, however, has been that the parties do renew the arrangement with minimal alterations. If
the program were not renewed, we would seek replacement funding from alternative funding sources.
Use of those sources, however, might result in anincrease in our interest expense and an increase in
both liabilities and assets on our Consolidated Balance Sheet.
Guarantees
Note 18, Commitments and Guarantees,ofthe Notes to Consolidated Financial Statements in
“Item 8. FinancialStatements and Supplementary Data” in this Form10-K describes the nature of our
guarantees, including the approximate terms of the guarantees, how the guarantees arose, the events
or circumstances that would require us to perform under the guarantees and the maximum potential
undiscounted amounts offuture payments we could be required to make .
Inflationary and Seasonal Influences
We believe that neither inflation nor deflation has had a material effect on our financial condition
or results of operations; however, there can be no assurance that we will not be affected by inflation or
deflation in the future.
Our business is seasonal, with OfficeMax, Retail showing a more pronouncedseasonal trend than
OfficeMax,Contract. Sales in the second quarter and summer months are historically the slowest of
the year. Sales are stronger during the first, third and fourth quarters that include the important new-
year office supply restocking month of January, theback-to-school period and the holiday selling
season, respectively.
Disclosures of Financial Market Risks
Ourdebt is predominantly fixed-rate. At December 30, 2006, theestimated current market value
of our debt, based on quoted marketprices when available or then-currentinterest rates for similar
obligations with like maturities,including the timber notes, wasapproximately $28 million lessthan the
amount of debt reported in the Consolidated Balance Sheet. The estimated fair values of our other
financial instruments, including cash and cash equivalents, receivables and short-term borrowings are