Memorex 2011 Annual Report Download - page 35

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Borrowings under the Credit Agreement as amended (collectively the Amended Credit Agreement) would have borne
interest through December 31, 2009 at a rate equal to (i) the Eurodollar Rate (as defined in the Amended Credit Agreement)
plus 3.00 percent or (ii) the Base Rate (as defined in the Amended Credit Agreement) plus 2.00 percent. On January 1, 2010,
the applicable margins for the Eurodollar Rate and the Base Rate became subject to adjustments based on average daily
availability (as defined in the Amended Credit Agreement), as set forth in the definition of “Applicable Rate” in the Amended
Credit Agreement.
Our U.S. obligations under the Amended Credit Agreement are guaranteed by the material domestic subsidiaries of
Imation Corp. (the Guarantors) and are secured by a first priority lien (subject to customary exceptions) on the real property
comprising Imation Corp.’s corporate headquarters and all of the personal property of Imation Corp., its subsidiary Imation
Enterprises Corp., which is also an obligor under the Amended Credit Agreement, and the Guarantors. Advances under the
U.S. portion of the Credit Facility are limited to the lesser of (a) $150 million and (b) the “U.S. borrowing base.” The
U.S. borrowing base is equal to the following:
• up to 85 percent of eligible accounts receivable; plus
• up to the lesser of 65 percent of eligible inventory or 85 percent of the appraised net orderly liquidation value of
eligible inventory; plus
• up to 60 percent of the appraised fair market value of eligible real estate (the Original Real Estate Value), such
Original Real Estate Value to be reduced each calendar month by 1/84th, provided, that the Original Real Estate
Value shall not exceed $40 million; plus
• such other classes of collateral as may be mutually agreed upon and at advance rates as may be determined by the
Agent; minus
• such reserves as the Agent may establish in good faith.
Our European obligations under the Credit Agreement are secured by a first priority lien on substantially all of the
material personal property of the European Borrower. Advances under the European portion of the Credit Facility are limited
to the lesser of (a) $50 million and (b) the “European borrowing base.” The European borrowing base calculation is
fundamentally the same as the U.S. borrowing base, subject to certain differences to account for European law and other
similar issues.
During the twelve months ended December 31, 2011 interest on borrowings under the Amended Credit Agreement
would have been at a variable rate of interest of approximately 5.0 percent. However, we did not have borrowings under the
Credit Agreement during 2011.
The Amended Credit Agreement contains covenants which are customary for similar credit arrangements, including
covenants relating to financial reporting and notification; payment of indebtedness, taxes and other obligations; compliance
with applicable laws; and limitations regarding additional liens, indebtedness, certain acquisitions, investments and
dispositions of assets. We were in compliance with all covenants as of December 31, 2011. The Amended Credit Agreement
also contains a conditional financial covenant that requires us to have a Consolidated Fixed Charge Coverage Ratio (as
defined in the Amended Credit Agreement) of not less than 1.20 to 1.00 during certain periods described in the Amended
Credit Agreement. At December 31, 2011 the condition did not arise such that the Consolidated Fixed Charge Coverage Ratio
was required as a covenant. As of December 31, 2011, our total availability under the Credit Facility was $127.6 million
We had $88 million of cash outside the U.S. at December 31, 2011. We also have significant net operating loss
carryforwards offset by a full valuation allowance in the U.S. The calculation of a deferred tax liability on the repatriation of the
cash outside the U.S. is impractical. However, because of the valuation allowance in the U.S., we do not believe there would
be any significant impact to earnings if we were to remit this foreign held cash.
Our liquidity needs for 2012 include the following: restructuring payments of approximately $5 million to $10 million,
litigation settlement payments of $18.5 million, capital expenditures of approximately $8 million to $12 million, pension funding
of approximately $7 million to $10 million, operating lease payments of approximately $8 million, any amounts associated with
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