OfficeMax 2015 Annual Report Download - page 109
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Table of Contents
As a global supplier of office products and services the Company is exposed to risks associated with changes in foreign currency exchange rates, fuel and
other commodity prices and interest rates. Depending on the exposure, settlement timeframe and other factors, the Company may enter into derivative
transactions to mitigate those risks. Financial instruments authorized under the Company’s established risk management policy include spot trades, swaps,
options, caps, collars, forwards and futures. Use of derivative financial instruments for speculative purposes is expressly prohibited. The Company may
designate and account for such qualifying arrangements as hedges. As of December 26, 2015, the foreign exchange contracts extend through December 2016
and fuel contracts extended through January 2017.
The fair values of the Company’s foreign currency contracts and fuel contracts are the amounts receivable or payable to terminate the agreements at the
reporting date, taking into account current interest rates, exchange rates and commodity prices. The values are based on market-based inputs or unobservable
inputs that are corroborated by market data. At December 26, 2015, Accrued expenses and other liabilities in the Consolidated Balance Sheets includes $2
million related to derivative fuel contracts.
The following table presents information about financial instruments at the balance sheet dates indicated.
2014
(In millions)
Carrying
Value
Fair
Value
Financial assets:
Timber notes receivable $ 926 $930
Company-owned life insurance 82 82
Financial liabilities:
Recourse debt:
9.75% Senior Secured Notes, due 2019 250 280
7.35% debentures, due 2016 18 18
Revenue bonds, due in varying amounts periodically through 2029 186 185
American & Foreign Power Company, Inc. 5% debentures, due 2030 14 13
Non-recourse debt 839 845
The following methods and assumptions were used to estimate the fair value of each class of financial instruments:
• Fair value is determined as the present value of expected future cash flows discounted at the current interest rate for
loans of similar terms with comparable credit risk (Level 2 measure).
• In connection with the Merger, the Company acquired company-owned life insurance policies on certain
former employees. The fair value of the company-owned life insurance policies is derived using determinable net cash surrender value (Level 2
measure).
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