OfficeMax 2009 Annual Report Download - page 41

either the amounts are fully or partially funded, or the timing and/or the amount of any cash
payment is uncertain. Actuarially-determined liabilities related to pension and postretirement benefits
are recorded based on estimates and assumptions. Key factors used in developing estimates of
these liabilities include assumptions related to discount rates, rates of return on investments, future
compensation costs, healthcare cost trends, benefit payment patterns and other factors. Changes in
assumptions related to the measurement of funded status could have a material impact on the
amount reported.
In accordance with an amended and restated joint venture agreement, the minority owner of
Grupo OfficeMax, our joint venture in Mexico, can elect to put its 49% interest in the joint venture to
OfficeMax if certain earnings targets are achieved. Earnings targets are calculated quarterly on a
rolling four-quarter basis. Accordingly, the targets can be achieved in one quarter but not in the
next. If the earnings targets are achieved and the minority owner elects to put its ownership interest
to OfficeMax, the redemption value would be calculated based on the joint venture’s earnings for
the last four quarters before interest, taxes and depreciation and amortization, and the current
market multiples of similar companies. At December 26, 2009, Grupo OfficeMax met the earnings
targets and the estimated redemption value of the minority owner’s interest was $21.1 million. While
this estimated value is less than the book value at December 26, 2009, other valuation
methodologies yield an estimated fair value that is consistent with the December 26, 2009 book
value.
In addition to the contractual obligations quantified in the table above, we have other
obligations for goods and services entered into in the normal course of business. These contracts,
however, are either not enforceable or legally binding or are subject to change based on our
business decisions.
Off-Balance-Sheet Activities and Guarantees
Note 15, ‘‘Commitments and Guarantees,’’ of the Notes to Consolidated Financial Statements
in ‘‘Item 8. Financial Statements and Supplementary Data’’ in this Form 10-K describes certain of
our off-balance sheet arrangements as well as 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 of future payments we could be required to make.
Seasonal Influences
Our business is seasonal, with OfficeMax, Retail showing a more pronounced seasonal 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, the back-to-school period and the
holiday selling season, respectively.
Disclosures of Financial Market Risks
Financial Instruments
Our debt is predominantly fixed-rate. At December 26, 2009, the estimated current fair value of
our debt, based on quoted market prices when available or then-current interest rates for similar
obligations with like maturities, including the timber notes, was approximately $723.8 million less
than the amount of debt reported in the Consolidated Balance Sheet. As previously discussed,
there is no recourse against OfficeMax on the securitized timber notes payable as recourse is
limited to proceeds from the applicable pledged installment notes receivable and underlying
guarantees. The debt and receivable related to the timber notes have fixed interest rates and the
estimated fair values of the timber notes are reflected in the following table.
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