OfficeMax 2011 Annual Report Download - page 60

Liquidity and Capital Resources
At the end of fiscal year 2011, the total liquidity available for OfficeMax was $1,060.3 million. This
includes cash and cash equivalents of $427.1 million, including $126.2 million in foreign cash balances, and
borrowing availability of $633.2 million. The borrowing availability included $580.3 million from our credit
agreement associated with the Company and certain of our subsidiaries in the U.S., Puerto Rico and Canada and
$52.9 million from our credit agreement associated with our subsidiaries in Australia and New Zealand. At the
end of fiscal year 2011, the Company was in compliance with all covenants under the two credit agreements. The
credit agreement associated with the Company and certain of our subsidiaries in the U.S., Puerto Rico and
Canada expires on October 7, 2016 and the credit agreement associated with our subsidiaries in Australia and
New Zealand expires on March 15, 2013. At the end of fiscal year 2011, we had $268.2 million of short-term and
long-term recourse debt and $1,470.0 million of non-recourse timber securitization notes outstanding.
Under certain circumstances there are restrictions on our ability to repatriate certain amounts of foreign cash
balances. If the Company chose to repatriate certain unrestricted foreign cash balances, it could result in a
repatriation provision of approximately $2.5 million in excess of the amount already accrued and $4.0 million in
cash taxes due.
Our primary ongoing cash requirements relate to working capital, expenditures for property and equipment,
technology enhancements and upgrades, lease obligations, pension funding and debt service. We expect to fund
these requirements through a combination of available cash balance and cash flow from operations. We also have
revolving credit facilities as additional liquidity. The following sections of this Management’s Discussion and
Analysis of Financial Condition and Results of Operations discuss in more detail our operating, investing, and
financing activities, as well as our financing arrangements.
Operating Activities
Our operating activities provided cash of $53.7 million in 2011 compared to $88.1 million in 2010. Cash
from operations for 2011 was lower than the prior year primarily reflecting a lower level of earnings and $13.5
million of net tax payments in 2011 (international and state payments) versus net tax refunds of $5.0 million in
2010. Changes in accounts payable and accrued liabilities includes an unfavorable impact from paying the 2010
incentive compensation accrual in 2011 and recording a significantly reduced accrual for 2011 incentive
compensation expense. This change was offset by reduced legal and advertising payments in 2011.
Total company inventory decreased slightly year over year, primarily due to a decrease in international
inventory. In addition to the changes discussed above, accounts payable and accrued liabilities also reflected a
reduction in accounts payable from the timing and mix of purchases. Accounts receivable at the end of 2011 was
higher in our domestic businesses, primarily attributable to higher vendor receivables from increased vendor-
supported promotional activity, and increased customer receivables from a shift in the timing of sales.
Our operating activities generated cash of $88.1 million in 2010. Cash from operations in 2010 was net of
$44.4 million of payments of loans on company-owned life insurance policies (“COLI policies”) as well as $72.4
million of increased working capital primarily from larger holdings of our international inventories and the
timing of repayments and obligations.
Cash from operations in 2011 and 2010 included the impact of approximately $55 million and $58 million,
respectively, of incentive compensation payments made associated with the achievement of incentive plan
performance targets for 2010 and 2009, respectively. The Company accrued a minimal amount of incentive
compensation in 2011, as performance targets were generally not achieved. Therefore, 2012 incentive
compensation payments will be minimal.
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