Office Depot 2011 Annual Report Download - page 145

Derivatives designated as
cash flow hedges:
Amount of
gain/(loss)
recognized
in OCI
Location of gain/(loss) reclassified
from OCI into earnings
Amount of gain/
(loss) reclassified
from OCI
into earnings
(Dollars in thousands) 2011 2010 2009 2011 2010 2009
Foreign exchange
contracts .............. $1,646 $(1,982) $ (266)
Cost of goods sold and
occupancy costs* .... $1,123 $(2,229)$ —
Commodity contracts —
fuel ..................
—— 2,919
Cost of goods sold and
occupancy costs &
Store and warehouse
operating and selling
expenses** ......... —— (6,800)
Total ............... $1,646 $(1,982) $2,653 $1,123 $(2,229)$(6,800)
* For 2011, approximately 60% of the amounts are reflected in cost of goods sold and occupancy costs and
the remaining 40% of the amounts are reflected in miscellaneous income, net. For 2010 and 2009, all
amounts are reflected in cost of goods sold and occupancy costs.
** Approximately 60% of the amounts for 2011, 2010, and 2009 are reflected in cost of goods sold and
occupancy costs. The remaining 40% of the amounts are reflected in store and warehouse operating and
selling expenses.
As of December 31, 2011, there were no hedging arrangements requiring collateral. However, we may be
required to provide collateral on certain arrangements in the future. The fair values of our foreign currency
contracts and fuel contracts are the amounts receivable or payable to terminate the agreements at the reporting
date, taking into account current exchange rates. The values are based on market-based inputs or unobservable
inputs that are corroborated by market data.
NOTE K — REDEEMABLE PREFERRED STOCK
On June 23, 2009, Office Depot, Inc. issued 274,596 shares of 10.00% Series A Redeemable Convertible
Participating Perpetual Preferred Stock, par value $0.01 per share (“Series A Preferred Stock”), and 75,404
shares of 10.00% Series B Redeemable Conditional Convertible Participating Perpetual Preferred Stock, par
value $0.01 per share (“Series B Preferred Stock”), to funds advised by BC Partners, Inc. (the “Investors”), for
$350 million (collectively, the “Preferred Stock”). The issued shares are out of 280,000 authorized shares of
Series A Preferred Stock and 80,000 authorized shares of Series B Preferred Stock. Approval of conversion and
voting rights for these shares was received at a special shareholders’ meeting on October 14, 2009.
The initial liquidation value of $1,000 per preferred share and the conversion rate of $5.00 per common share
allow the two series of preferred stock to be initially convertible into 70 million shares of common stock. The
conversion rate is subject to anti-dilution adjustments. Until converted or otherwise redeemed, the Preferred
Stock is recorded outside of permanent equity on the Consolidated Balance Sheets because certain redemption
conditions are not solely within the control of Office Depot. The balance is presented inclusive of accrued
dividends and net of approximately $25 million of fees.
Dividends are payable quarterly and will be paid in-kind or, in cash, only to the extent that the company has
funds legally available for such payment and a cash dividend is declared by the company’s board of directors and
allowed by credit facilities. If not paid in cash, an amount equal to the cash dividend due will be added to the
liquidation preference and measured for accounting purposes at fair value. After the third anniversary of
issuance, the dividend rate will be reduced to:
(i) 7.87% if at any time after June 23, 2010, the closing price of the company’s common stock is greater
than or equal to $6.62 per share for a period of 20 consecutive trading days, or
(ii) 5.75% if at any time after June 23, 2010, the closing price of the company’s common stock is greater
than or equal to $8.50 per share for a period of 20 consecutive trading days.
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