AutoZone 2010 Annual Report Download - page 145

outstanding letters of credit, the Company had $331.1 million in available capacity under this facility at August
28, 2010. Under the revolving credit facility, the Company may borrow funds consisting of Eurodollar loans or
base rate loans. Interest accrues on Eurodollar loans at a defined Eurodollar rate (defined as LIBOR) plus the
applicable percentage, which could range from 150 basis points to 450 basis points, depending upon the senior
unsecured (non-credit enhanced) long-term debt rating of the Company. Interest accrues on base rate loans at the
prime rate. The Company also has the option to borrow funds under the terms of a swingline loan subfacility.
The credit facility expires in 2012.
The revolving credit agreement requires that the Company’s consolidated interest coverage ratio as of the last day
of each quarter shall be no less than 2.50:1. This ratio is defined as the ratio of (i) consolidated earnings before
interest, taxes and rents to (ii) consolidated interest expense plus consolidated rents. The Company’s consolidated
interest coverage ratio as of August 28, 2010 was 4.27:1.
In June 2010, the Company entered into a letter of credit facility that allows the Company to request the
participating bank to issue letters of credit on the Company’s behalf up to an aggregate amount of $100 million.
The letter of credit facility is in addition to the letters of credit that may be issued under the revolving credit
facility. As of August 28, 2010, the Company has $100.0 million in letters of credit outstanding under the letter of
credit facility, which expires in June 2013.
During August 2009, the Company elected to prepay, without penalty, a $300 million bank term loan entered in
December 2004, and subsequently amended. The term loan facility provided for a term loan, which consisted of,
at the Company’s election, base rate loans, Eurodollar loans or a combination thereof. The entire unpaid principal
amount of the term loan would be due and payable in full on December 23, 2009, when the facility was scheduled
to terminate. Interest accrued on base rate loans at a base rate per annum equal to the higher of the prime rate or
the Federal Funds Rate plus 1/2 of 1%. The Company entered into an interest rate swap agreement on December
29, 2004, to effectively fix, based on current debt ratings, the interest rate of the term loan at 4.4%. The
outstanding liability associated with the interest rate swap totaled $3.6 million, and was expensed in operating,
selling, general and administrative expenses upon termination of the hedge in fiscal 2009.
On July 2, 2009, the Company issued $500 million in 5.75% Senior Notes due 2015 under the Company’s shelf
registration statement filed with the Securities and Exchange Commission on July 29, 2008 (the “Shelf
Registration”). In addition, on August 4, 2008, the Company issued $500 million in 6.50% Senior Notes due 2014
and $250 million in 7.125% Senior Notes due 2018 under the Shelf Registration. The Shelf Registration allows
the Company to sell an indeterminate amount in debt securities to fund general corporate purposes, including
repaying, redeeming or repurchasing outstanding debt and for working capital, capital expenditures, new store
openings, stock repurchases and acquisitions. In fiscal 2009, the Company used the proceeds from the issuance of
debt to repay outstanding commercial paper indebtedness, to prepay our $300 million term loan in August 2009
and for general corporate purposes. Proceeds from the debt issuance in fiscal 2008 were used to repay
outstanding commercial paper indebtedness and for general corporate purposes.
The 5.75% Senior Notes issued in July, 2009, and the 6.50% and 7.125% Senior Notes issued during August 2008
(collectively, the “Notes”), are subject to an interest rate adjustment if the debt ratings assigned to the Notes are
downgraded. They also contain a provision that repayment of the Notes may be accelerated if AutoZone
experiences a change in control (as defined in the agreements). The Company’s borrowings under the Company’s
other senior notes arrangements contain minimal covenants, primarily restrictions on liens. Under the Company’s
revolving credit facility, covenants include limitations on total indebtedness, restrictions on liens, a minimum
coverage ratio and a change of control provision that may require acceleration of the repayment obligations under
certain circumstances. All of the repayment obligations under the Company’s borrowing arrangements may be
accelerated and come due prior to the scheduled payment date if covenants are breached or an event of default
occurs.
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10-K