Memorex 2011 Annual Report Download - page 84

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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.
As of December 31, 2011, we had no other credit facilities available outside the United States.
As of December 31, 2011 we had outstanding standby letters of credit of $0.6 million. As of December 31, 2010, we had
outstanding standby and import letters of credit of $3.4 million. When circumstances allow, we are using standardized
payment terms and are no longer actively using trade letters of credit as payments to certain foreign suppliers, which has
resulted in a decrease in our outstanding letters of credit as of December 31, 2011.
Our interest expense, which includes letter of credit fees, facility fees and commitment fees under the Credit Agreement,
for 2011, 2010 and 2009 was $3.7 million, $4.2 million and $2.9 million, respectively. Interest expense also includes
amortization of debt issuance costs which are being amortized through March 2013. Cash paid for interest for 2011, 2010 and
2009, relating to both continuing and discontinued operations, was $2.7 million, $2.7 million and $1.4 million, respectively.
Note 12 — Fair Value Measurements
Fair Value of Financial Instruments
At December 31, 2011 and 2010, our financial instruments included cash and cash equivalents, accounts receivable,
accounts payable and derivative contracts. The fair values of cash and cash equivalents, accounts receivable and accounts
payable approximated carrying values due to the short-term nature of these instruments. In addition, derivative instruments,
assets held for sale and certain fixed assets are recorded at fair value as discussed below.
Fair value measurements are categorized into one of three levels based on the lowest level of significant input used:
Level 1 (unadjusted quoted prices in active markets for identical assets); Level 2 (significant observable market inputs
available at the measurement date, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that
cannot be corroborated by observable market data).
Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis
The Company’s non-financial assets such as goodwill, intangible assets, and property, plant, and equipment are measured
at fair value when there is an indicator of impairment and recorded at fair value only when an impairment is recognized.
The Company assesses the impairment of intangible assets whenever events or changes in circumstances indicate that
the carrying amount of an intangible asset may not be recoverable. The aggregate carrying amount of intangible assets was
81