OfficeMax 2006 Annual Report Download - page 76

Download and view the complete annual report

Please find page 76 of the 2006 OfficeMax annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 124

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124

72
Note Agreements
In October 2003, the Company issued $300 million of 6.50% senior notes duein2010and
$200 million of 7.00% senior notes due in 2013. At the timeofissuance, the senior note indentures
contained a number of restrictive covenants, substantially all of which have been eliminated through
the execution of supplemental indentures as described below. On November 5, 2004, the Company
repurchased approximately $286.3 million ofthe 6.50% senior notes and received the requisite
consents to adopt amendments to theindenture pursuant to a tender offer for these securities. As a
result, the Company and the trustee executed a supplemental indenture that eliminated substantially
all of the restrictive covenants, certain events of default and related provisions, and replaced them 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 on sale 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 theCompany’s 7.00% senior notes to investment grade. The upgrades
were the result of actionsthe Company took to collateralize the notes by granting thenote holders a
security interest in $113 million in principalamount of General Electric Capital and Bank of America
Corp. notes maturing in 2008 (the “pledged instruments”). These pledgedinstruments are reflected as
restricted investments in the Consolidated Balance Sheets. As a result of these ratings upgrades, the
original 7.00% senior note covenants have been replaced with thecovenants found in the Company’s
other public debt. During the first quarter of 2005, the Company purchased andcancelled
$87.3 million of the 7.00% senior notes. As a result, $92.8 million of the pledge dinstruments were
released from the security interest granted tothe 7.00% senior note holders, and were sold during the
second quarter of 2005. The remainingpledged instruments continue to be subject to the security
interest, and are reflected as restricted investments in the Consolidated Balance Sheets.
Other
The Company had leased certain equipment at its integrated wood-polymer building materials
facility near Elma, Washington under a capital lease.The lease agreement had a base termof seven
years and aninterest rate of 4.67%. During the first quarter of 2006, the Company paid $29.1 millionto
terminate the lease agreement. At December 31,2005, the capital lease obligation was included in the
current portion of long-term debt in the Consolidated Balance Sheets.
Cash Paid for 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.