Garmin 2001 Annual Report Download - page 30

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Contractual Obligations and Commercial Commitments
On March 23, 2000, Garmin International, Inc. completed a $20.0 million 20-year Taxable Industrial Revenue Bond issuance for
the expansion of its Olathe, Kansas facility. At December 29, 2001, outstanding principal under the 2000 Bonds totaled $20.0 million.
Interest on the 2000 Bonds is payable monthly at a variable interest rate (2.10% at December 29, 2001), which is adjusted weekly to
the current market rate as determined by the remarketing agent of the 2000 Bonds with principal due upon maturity on April 15, 2020.
The 2000 Bonds are secured by an irrevocable letter of credit totaling $20.3 million with facility fees of 0.75%. This renewable
letter of credit initially expires on September 20, 2004. The bank has required a sinking fund be established with semiannual
payments of $0.7 million beginning April 2002.
On January 1, 1995, Garmin International, Inc. completed a $9.5 million 30-year Tax-Exempt Industrial Revenue Bond issuance for
the construction of its new corporate headquarters located in Olathe, Kansas. Upon completion of the project in 1996, Garmin
International retired bonds totaling $0.2 million. At December 29, 2001 and December 30, 2000, outstanding principal under the
Bonds totaled $9.3 million. Interest on the Bonds is payable monthly at a variable interest rate (1.75% and 5.15% at December 29,
2001 and December 30, 2000, respectively), which is adjusted weekly to the current market rate as determined by the remarketing
agent for the Bonds with principal due upon maturity on January 1, 2025.
The Bonds are secured by an irrevocable letter of credit totaling $9.7 million, with facility fees of 0.75% annually, through September
30, 2004, renewable on an annual basis thereafter. The bank has the option of requiring Garmin International, Inc. to establish a
sinking fund related to the principal balance outstanding on the Bonds, which it had not exercised through December 29, 2001.
The letter of credit is secured by a mortgage on all assets financed with the proceeds of the Bonds and is guaranteed by Garmin
Corporation.
Our reimbursement agreements contain restrictive covenants, which include, among other things, financial covenants requiring
minimum cash flow leverage, maximum capitalization, minimum tangible net worth, and other affirmative and negative covenants.
We do not expect these limitations to have a material effect on our business or results of operations. We are in compliance with
all covenants contained in the reimbursement agreements.
During 1999, Garmin Corporation borrowed $18.0 million to finance the purchase of land and a new manufacturing facility in Shijr,
Taiwan. The outstanding balance of $2.8 million at December 29, 2001, was paid in full in January 2002.
We utilize interest rate swap agreements to manage interest rate exposure. The principal objective of such financial derivative
contracts is to moderate the effect of fluctuations in interest rates. We, as a matter of policy, do not speculate in financial markets
and therefore do not hold these contracts for trading purposes. We utilize what are considered simple instruments, such as non-
leveraged interest rate swaps, to accomplish our objectives.
The company has the option at any time during the year to retire a portion or all of its long-term debt.