OfficeMax 2006 Annual Report Download - page 84

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80
The assumed healthcare cost trend rateshave a significant effect onthe amounts reported for the
healthcare plans. A one-percentage-point change in the assumed healthcarecost trend rateswould
have the following effects:
One-Percentage-Point
Increase
One-Percentage-Point
Decrease
(thousands)
Effect on total of service and interest cost..... $ 421 $ (322)
Effect on postretirement benefit obligation..... $ 3,469$ ( 2,737 )
Effective October 1, 2005, thehealthcare cost trend rate assumptions for the U.S. plan were
reduced to zero following the adoption of plan changes that reduced the medical insurance subsidy
to retirees as discussed previously.Asa result, the above amounts reflectthe impact of changes in
trend rates for the Canadian plan only.
Plan Assets
The allocation of pension plan assets by category at December 30, 2006 and December 31, 2005
is as follows:
AssetCategory 2006 2005
U.S. equity securities ................................................... 45.1% 51.5%
International equity securities ............................................ 23.4% 15.7%
Fixed-income securities................................................. 31.5% 32.8%
100 % 100%
The Company’s Retirement Funds Investment Committee is responsible for establishing and
overseeing the implementation of the investment policy for the Company’s pension plans. The
investment policy is structured to optimize growthof the pension plan trust assets, while minimizing
the risk ofsignificant losses, inorder to enable the plans to satisfy their benefit payment obligations
over time. Plan assets are invested primarily in U.S. equities, international equities and fixed-income
securities. The Company uses benefit payments and Company contributions as its primary
rebalancing mechanisms to maintain the asset classexposures within the guideline ranges
established under the investment policy.
The current asset allocation guidelines set forth a U.S. equity range of 40% to 50%,an
international equity range of 20% to 26% and a fixed-income range of 27% to37%.Asset-class
positions within the ranges are continually evaluated and adjusted based on expectations for future
returns, the funded position of the plans and market risks. Occasionally, the Company may utilize
futuresorother financial instruments to alter the pension trust’s exposure to various asset classes ina
lower-cost manner than trading securities in the underlying portfolios. At December 30, 2006 and
December 31,2005, the pensiontrust did not have anyequity investments inthe Company’s common
stock.
Cash Flows
Pension plan contributions include required statutory minimums and, insomeyears, additional
discretionary amounts. During 2006, the Company made cash contributions to itspensionplans
totaling $9.6 million. During 2005, the Company made cash contributions to its pension plans totaling
$2.8 million. In 2004, cash contributions to the Company’s pension plans totaled $279.8 million.
Minimum contribution requirements for 2007 are approximately $11 million. However, the Company
may elect to make additional voluntary contributions.