OfficeMax 2011 Annual Report Download - page 99

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Derivatives and Hedging Activities
Changes in foreign currency exchange rates expose the Company to financial market risk. The Company
occasionally uses derivative financial instruments, such as forward exchange contracts, to manage its exposure
associated with commercial transactions and certain liabilities that are denominated in a currency other than the
currency of the operating unit entering into the underlying transaction. The Company does not enter into
derivative instruments for any other purpose. The Company does not speculate using derivative instruments. The
fair values of derivative financial instruments were not material at the end of fiscal year 2011 or 2010.
12. Retirement and Benefit Plans
Pension and Other Postretirement Benefit Plans
The Company sponsors noncontributory defined benefit pension plans covering certain terminated
employees, vested employees, retirees and some active employees, primarily in Contract. In 2004 or earlier, the
Company’s qualified pension plans were closed to new entrants and the benefits of eligible participants were
frozen.
Under the terms of the Company’s qualified plans, the pension benefit for employees was based primarily
on the employees’ years of service and benefit plan formulas that varied by plan. The Company’s general
funding policy is to make contributions to the plans in amounts that are within the limits of deductibility under
current tax regulations, and not less than the minimum contribution required by law.
The Company also sponsors various retiree medical benefit and life insurance plans. The type of retiree
benefits and the extent of coverage vary based on employee classification, date of retirement, location, and other
factors. All of the Company’s postretirement medical plans are unfunded. The Company explicitly reserves the
right to amend or terminate its retiree medical and life insurance plans at any time, subject only to constraints, if
any, imposed by the terms of collective bargaining agreements. Amendment or termination may significantly
affect the amount of expense incurred.
During 2009, based on the high level of inactive participants in the Company’s qualified pension plans as
well as the fact that all qualified plan participants were fully vested, the Company changed the estimated
amortization period for its unrecognized actuarial loss (which represents the difference between the actual funded
status and the expected funded status measured through 2009), from the average remaining service period of the
participants to their average remaining life expectancy. The impact of the change in the amortization period was
a reduction in pension expense for 2009 of $11.2 million ($6.8 million after-tax), or $0.09 per diluted share.
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