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39
PART II
Discontinued Operations
Net cash usedin discontinued operations was $53 million
for fiscal 2004. There was nocash used in discontinued
operations in fiscal 2006 and fiscal 2005 due to the sale
of our interest in Musicland during the second quarter of
fiscal 2004.
Sources of Liquidity
Funds generated by operating activities, available cashand
cash equivalents, and short-term investments continue to be
our most significant sources of liquidity. We believe funds
generated fromthe expected results of operations, available
cash and cash equivalents, and short-term investments will
be sufficient to finance anticipated expansion plans and
strategic initiatives for the next fiscal year. In addition, our
revolving credit facilities are available for additional
workingcapital needs or investment opportunities. There
canbe no assurance, however, that we will continue to
generate cash flows at or above current levels or that we
will be able to maintain our ability to borrow under our
revolving credit facilities.
We have a$200 million bank revolving credit facility which
is guaranteed by certain of our subsidiaries. The facility
expires on December 22, 2009, and replaced a $200
million revolvingcredit facility that would have expired on
March 21, 2005. Borrowings under this facility are
unsecured and bear interest at rates specified inthe credit
agreement. We also pay certain facility and agent fees. The
agreement contains covenants that require us to maintain
certain financial ratios. AsofFebruary 25, 2006, and
February 26, 2005, $199 million and $139 million,
respectively, were available under these facilities. There
were no borrowings outstanding under these facilities for
any period presented. However, amounts outstandingunder
letters of credit reduce amounts available under these
facilities.
We also have inventory financing facilities through which
certain suppliers receive payments from adesignated
finance company on invoices we owe them. At February 25,
2006, and February 26,2005, $59 million and $68
million, respectively, were outstanding and $177 million
and $157 million, respectively, were available for use under
these inventory financing facilities.
Our International segment has a $22 million revolving
demand facility, of which$17 million is available from
February through July and $22 million is available from
August through January of each year. There is no set
expiration date for this facility. All borrowings under this
facility are made available at the sole discretion of the
lender and are payable on demand. Borrowings under this
facility are unsecured and bear interest at rates specified in
the credit agreement. The agreement for this facility
contains certain reporting and operatingcovenants. There
were no borrowings outstanding under this facility for any
period presented. However, amounts outstanding under
letters of credit and letters of guarantee reduced amounts
available under this facility to $17 million and $15 million,
at February 25,2006, and February 26, 2005,
respectively.
Ourability to access ourcredit facilities is subject toour
compliance with the terms andconditions ofthe credit
facilities, including financial covenants. The financial
covenants require us to maintain certain financial ratios. At
the end of fiscal 2006, we were in compliance with all such
covenants. In the event we were to default on any of our
other debt, it would constitute a default under our credit
facilities as well.
We offer our customers extended financingthrough a
third-party financial institution. The third-party institution
assumes the risk of collection from our customers and has
no recourse against us for uncollectible amounts.
Generally, these financing offers allow customers to
purchase products with repayment terms rangingfrom 90
days to 24 months without a finance charge. Ourcontract
with the third-party financial institution extends through
January 2009. If the contract were to beterminated priorto
January 2009, we believe wecould contract with an
alternative third-party financial institution or directly provide
our customers with extended financing.
An interest coverage ratio represents the ratio of pre-tax
earnings before fixed charges (interest expense and the
interest portion of rent expense) to fixed charges. Our
interest coverageratio calculated asreported in
Exhibit 12.1 of this Annual Report on Form 10-Kwas 9.8
and 8.4 for fiscal 2006 and fiscal 2005, respectively.