OfficeMax 2015 Annual Report Download - page 42

Table of Contents
Due to the completion of the Internal Revenue Service (“IRS”) examination for 2013, the Company’s balance of unrecognized tax benefits decreased by $4
million during 2015, which did not impact income tax expense due to an offsetting change in valuation allowance. During 2015, the IRS examination of the
OfficeMax 2012 U.S. federal income tax return concluded, which resulted in a $6 million decrease in tax credit carryforwards. Such decrease had no impact
on income tax expense due to an offsetting change in valuation allowance. It is reasonably possible that certain tax positions will be resolved within the next
12 months, which would decrease the Company’s balance of unrecognized tax benefits by $5 million but would not affect the effective tax rate due to an
offsetting change in valuation allowance. Additionally, the Company anticipates that it is reasonably possible that new issues will be raised or resolved by
tax authorities that may require changes to the balance of unrecognized tax benefits; however, an estimate of such changes cannot reasonably be made.
Refer to Note 9, “Income Taxes,” in the Notes to Consolidated Financial Statements for additional tax discussion.
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At December 26, 2015, we had $1.1 billion in cash and equivalents and another $1.2 billion available under the Amended Credit Agreement (as defined in
Note 8, “Debt,” of the Consolidated Financial Statements) based on the December 2015 borrowing base certificate, for a total liquidity of $2.2 billion. The
Amended Credit Agreement provides for an asset based, multi-currency revolving credit facility of up to $1.25 billion and expires May 25, 2017. We
consider our resources adequate to satisfy our cash needs for at least the next twelve months.
Cash and cash equivalents held outside the United States, at December 26, 2015, amounted to $253 million and could result in additional tax expense if
repatriated. Refer to Note 9, “Income Taxes” of the Consolidated Financial Statements for additional information.
No amounts were drawn under the Amended Credit Agreement during 2015 and no amounts were outstanding at December 26, 2015. There were letters of
credit outstanding under the Amended Credit Agreement at the end of the year totaling $84 million.
The Company had short-term borrowings of $4 million at December 26, 2015 under various local currency credit facilities for international subsidiaries that
had an effective interest rate at the end of the year of approximately 4%. The maximum month end balance occurred in June 2015 at $6 million and the
maximum monthly average amount occurred in July 2015 at $5 million. The majority of these short-term borrowings represent outstanding balances on
uncommitted lines of credit, which do not contain financial covenants.
The Company was in compliance with all applicable financial covenants at December 26, 2015.
Since the Merger date, we have incurred significant expenses associated with the Merger and integration actions, including costs associated with the Real
Estate Strategy, and we have incurred significant expenses from restructuring activities in Europe. Approximately $100 million of net cash Merger
integration costs are anticipated through the remaining integration period.
In 2016, the Company expects capital expenditures to be approximately $250 million, including approximately $50 million related to Merger integration.
We have entered into the Staples Merger Agreement with Staples and have agreed to pay a fee of $185 million to Staples if each of the following conditions
are met: (i) the Staples Merger Agreement is terminated by the Company before the date permitted by the Staples Merger Agreement, as amended, (ii) a third
party has made an acquisition proposal before the termination of the Staples Merger Agreement, and (iii) within 12 months of the termination of the Staples
Merger Agreement, the Company enters into an alternative transaction. Staples is
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