Famous Footwear 2012 Annual Report Download - page 38

36 2012 BROWN SHOE COMPANY, INC. FORM 10-K
Interest on borrowings is at variable rates based on the London Inter-Bank Oered Rate (“LIBOR”) or the prime rate, as
defined in the Credit Agreement, plus a spread. The interest rate and fees for letters of credit vary based upon the level of
excess availability under the Credit Agreement. There is an unused line fee payable on the unused portion under the facility
and a letter of credit fee payable on the outstanding face amount under letters of credit.
The Credit Agreement limits the Company’s ability to incur additional indebtedness, create liens, make investments or
specified payments, give guarantees, pay dividends, make capital expenditures and merge or acquire or sell assets. In
addition, certain additional covenants would be triggered if excess availability were to fall below specified levels, including
fixed charge coverage ratio requirements. Furthermore, if excess availability falls below the greater of (i) 15.0% of the lesser
of (x) the borrowing base or (y) the total commitments and (ii) $35.0 million for three consecutive business days, or an
event of default occurs, the lenders may assume dominion and control over the Company’s cash (a “cash dominion event”)
until such event of default is cured or waived or the excess availability exceeds such amount for 30 consecutive days.
The Credit Agreement contains customary events of default, including, without limitation, payment defaults, breaches
of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, certain events of
bankruptcy and insolvency, judgment defaults in excess of a certain threshold, the failure of any guaranty or security
document supporting the agreement to be in full force and eect and a change of control event. In addition, if the excess
availability falls below the greater of (i) 12.5% of the lesser of (x) the borrowing base or (y) the total commitments and
(ii) $35.0 million, and the fixed charge coverage ratio is less than 1.0 to 1.0, we would be in default under the Credit
Agreement. The Credit Agreement also contains certain other covenants and restrictions. We were in compliance with all
covenants and restrictions under the Credit Agreement as of February 2, 2013.
At February 2, 2013, we had $105.0 million in borrowings outstanding and $9.0 million in letters of credit outstanding under
the Credit Agreement. Total additional borrowing availability was $380.6 million at February 2, 2013.
$200 Million Senior Notes Due 2019
On May 11, 2011, we closed on an oering (the “Oering”) of $200.0 million aggregate principal amount of 7.125% Senior
Notes due 2019 (the “2019 Senior Notes”). We used a portion of the net proceeds to call and redeem our outstanding 8.75%
senior notes due in 2012 (the “2012 Senior Notes”). We used the remaining net proceeds for general corporate purposes,
including repaying amounts outstanding under the Credit Agreement.
The 2019 Senior Notes are guaranteed on a senior unsecured basis by each of our subsidiaries that is an obligor under
the Credit Agreement. Interest on the 2019 Senior Notes is payable on May 15 and November 15 of each year beginning
on November 15, 2011. The 2019 Senior Notes mature on May 15, 2019. Prior to May 15, 2014, we may redeem some or all
of the 2019 Senior Notes at a redemption price equal to the sum of the principal amount of the 2019 Senior Notes to be
redeemed, plus accrued and unpaid interest, plus a “make whole” premium. After May 15, 2014, we may redeem all or
a part of the 2019 Senior Notes at the redemption prices (expressed as a percentage of principal) set forth below plus
accrued and unpaid interest, if redeemed during the 12-month period beginning on May 15 of the years indicated below:
Year Percentage
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.344%
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.563%
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.781%
2017 and thereafter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.000%
In addition, prior to May 15, 2014, we may redeem up to 35% of the 2019 Senior Notes with the proceeds from certain equity
oerings at a redemption price of 107.125% of the principal amount of the 2019 Senior Notes to be redeemed, plus accrued
and unpaid interest thereon, if any, to the redemption date.
The 2019 Senior Notes also contain certain other covenants and restrictions that limit certain activities including, among
other things, levels of indebtedness, payments of dividends, the guarantee or pledge of assets, certain investments,
common stock repurchases, mergers and acquisitions and sales of assets. Proceeds from the sale of TBMC were reinvested
into our business as allowed by the 2019 Senior Notes. As of February 2, 2013, we were in compliance with all covenants
and restrictions relating to the 2019 Senior Notes.
Loss on Early Extinguishment of Debt
During 2011, we completed a cash tender oer for the 2012 Senior Notes and called for redemption and repaid the remaining
notes that were not tendered. We incurred a loss on the early extinguishment of the 2012 Senior Notes prior to maturity
totaling $1.0 million, of which approximately $0.6 million was non-cash.