OfficeMax 2007 Annual Report Download - page 83

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The assumed healthcare cost trend rates have a significant effect on the amounts reported for
the healthcare plans. A one-percentage-point change in the assumed healthcare cost trend rates
would have the following effects:
One-Percentage-Point One-Percentage-Point
Increase Decrease
(thousands)
Effect on total of service and interest cost ..... $ 209 $ (166)
Effect on postretirement benefit obligation ..... $2,360 $(1,922)
Effective October 1, 2005, the healthcare 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. As a result, the above amounts reflect the impact of changes in
trend rates for the Canadian plan only.
Plan Assets
The allocation of pension plan assets by category at December 29, 2007 and December 30,
2006 is as follows:
Asset Category 2007 2006
U.S. equity securities .............................................. 44.5% 45.1%
International equity securities ........................................ 23.0% 23.4%
Fixed-income securities ............................................ 32.5% 31.5%
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 growth of the pension plan trust assets, while minimizing
the risk of significant losses, in order 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 class exposures 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% to 37%. 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
futures or other financial instruments to alter the pension trust’s exposure to various asset classes
in a lower-cost manner than trading securities in the underlying portfolios. At December 29, 2007
and December 30, 2006, the pension trust did not have any equity investments in the Company’s
common stock.
Cash Flows
Pension plan contributions include required statutory minimums and, in some years, additional
discretionary amounts. During 2007, 2006 and 2005, the Company made cash contributions to its
pension plans totaling $19.1 million, $9.6 million and $2.8 million, respectively. Minimum
contribution requirements for 2008 are approximately $9.4 million. However, the Company may elect
to make additional voluntary contributions.
79