OfficeMax 2007 Annual Report Download - page 36

Financing Arrangements
We lease our store space and certain other property and equipment under operating leases.
These operating leases are not included in debt; however, they represent a significant commitment.
Obligations under operating leases are shown in the ‘‘Contractual Obligations’’ section of this
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Our debt structure consists of credit agreements, note agreements, and other borrowings as
described below. For more information, see ‘‘Contractual Obligations’’ and ‘‘Disclosures of Financial
Market Risks’’ in this Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
Credit Agreements
On July 12, 2007, we entered into an Amended and Restated Loan and Security Agreement
(the ‘‘Loan Agreement’’) with a group of banks. The Loan Agreement amended the Company’s
existing revolving credit facility and replaced our accounts receivable securitization program. The
new Loan Agreement permits the Company to borrow up to a maximum of $700 million subject to a
borrowing base calculation that limits availability to a percentage of eligible accounts receivable
plus a percentage of the value of eligible inventory less certain reserves. The revolving credit facility
may be increased (up to a maximum of $800 million) at the Company’s request or reduced from
time to time, in each case according to terms detailed in the Loan Agreement. There were no
borrowings outstanding under the Company’s revolving credit facilities as of December 29, 2007 or
December 30, 2006. The maximum amount outstanding under the revolving credit facility was
$103.0 million and $122.0 million during 2007 and 2006, respectively. The average amount
outstanding under the revolving credit facility was $6.8 million during 2007 and $20.6 million during
2006. Letters of credit, which may be issued under the revolving credit facility up to a maximum of
$250 million, reduce available borrowing capacity under the revolving credit facility. Letters of credit
issued under the revolving credit facility totaled $85.5 million as of December 29, 2007 and
$75.5 million as of December 30, 2006. As of December 29, 2007, the maximum aggregate
borrowing amount available under the revolver was $700.0 million and excess availability under the
revolving credit facility totaled $614.5 million. At December 29, 2007, the Company was in
compliance with all covenants under the Loan Agreement. The Loan Agreement allows the payment
of dividends subject to availability restrictions and so long as no default has occured. The Loan
Agreement expires on July 12, 2012.
Borrowings under the revolving credit facility bear interest at rates based on either the prime
rate or the London Interbank Offered Rate (‘‘LIBOR’’). Margins are applied to the applicable
borrowing rates and letter of credit fees under the revolving credit facility depending on the level of
average excess availability. Fees on letters of credit issued under the revolving credit facility were
charged at a weighted average rate of 0.875% during the year ended December 29, 2007. The
Company is also charged an unused line fee of 0.25% on the amount by which the maximum
available credit exceeds the average daily outstanding borrowings and letters of credit.
As of December 29, 2007, Grupo OfficeMax, our 51%-owned joint venture in Mexico, had short
term borrowings of $14.2 million. The short-term borrowings consist of three loans with balances of
$4.6 million, $4.6 million and $5.0 million respectively. Two of these loans are promissory notes to
be repaid in the first quarter of 2008. The third loan is a simple revolving loan. The financing for
Grupo OfficeMax is unsecured with no recourse against the Company.
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