OfficeMax 2009 Annual Report Download - page 91

15. Commitments and Guarantees
Commitments
The Company has commitments for minimum lease payments due under noncancelable leases
and for the repayment of outstanding long-term debt. In addition, the Company has purchase
obligations for goods and services and capital expenditures that were entered into in the normal
course of business. As previously disclosed, we have liabilities associated with retirement and
benefit plans.
In connection with the sale of our paper, forest products and timberland assets in 2004, the
Company entered into a paper supply contract with a former affiliate of Boise Cascade, L.L.C.,
Boise White Paper, L.L.C., now owned by Boise Inc., under which we are obligated to purchase our
North American requirements for cut-size office paper, to the extent Boise White Paper, L.L.C. or its
successor, produces such paper, until December 2012, at prices approximating market levels. The
Company’s purchase obligations under the agreement will phase-out over a four-year period
beginning one year after the delivery of notice of termination, but not prior to December 31, 2012.
Purchases under the agreement were $633.9 million, $668.3 million and $702.2 million for 2009,
2008 and 2007, respectively.
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 may 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.
Guarantees
The Company provides guarantees, indemnifications and assurances to others.
Indemnification obligations may arise from the Asset Purchase Agreement between OfficeMax
Incorporated, OfficeMax Southern Company, Minidoka Paper Company, Forest Products
Holdings, L.L.C. and Boise Land & Timber Corp. The Company has agreed to provide
indemnification with respect to a variety of obligations. These indemnification obligations are
subject, in some cases, to survival periods, deductibles and caps. At December 26, 2009, the
Company is not aware of any material liabilities arising from these indemnifications.
There are eight operating leases that have been assigned to other parties but for which the
Company remains contingently liable in the event of nonpayment by the other parties. The lease
terms vary and, assuming exercise of renewal options, extend through 2019. Annual rental
payments under these leases are approximately $3.9 million.
The Company and its affiliates enter into a wide range of indemnification arrangements in the
ordinary course of business. These include tort indemnifications, tax indemnifications, officer and
director indemnifications against third-party claims arising out of arrangements to provide services
to the Company and indemnifications in merger and acquisition agreements. It is impossible to
quantify the maximum potential liability under these indemnifications. At December 26, 2009, the
Company is not aware of any material liabilities arising from these indemnifications.
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