Memorex 2012 Annual Report Download - page 86

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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. Borrowings 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.
As of December 31, 2012, we had $20.0 million of borrowings outstanding under the Amended Credit Agreement, all of
which was borrowed in the United States. Outstanding borrowings in the United States bear interest of 2.25 percent as of
December 31, 2012. As of December 31, 2012, our total remaining borrowing capacity under the Credit Facility was
$90.3 million.
The Amended Credit Agreement contains covenants which are customary for similar credit agreements, including
covenants related 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. The Amended Credit Agreement contains a conditional financial covenant that requires Imation Corp.
to have a Consolidated Fixed Charge Coverage Ratio (as defined in the Amended Credit Agreement) of not less than 1.00 or
a liquidity requirement of $30.0 million of domestic borrowing availability. We were in compliance with the liquidity requirement
as of December 31, 2012.
As of December 31, 2012 and 2011 we had outstanding standby letters of credit of $0.4 million and $0.6 million,
respectively. The outstanding standby letters of credit are required by our insurance companies to cover potential deductibles
and reduce our allowed borrowing capacity under the Amended Credit Agreement.
During 2012 we capitalized $2.6 million of debt issuance costs related to the Amended Credit Agreement. These costs
were recorded to Other assets in the Consolidated Balance Sheets as of December 31, 2012 and are being amortized over
the term of the Amended Credit Agreement.
Our interest expense, which includes letter of credit fees, facility fees, commitment fees under the Amended Credit
Agreement and amortization of debt issuance costs, for 2012, 2011 and 2010 was $2.9 million, $3.7 million and $4.2 million,
respectively. Cash paid for interest for 2012, 2011 and 2010, relating to both continuing and discontinued operations, was
$2.4 million, $2.7 million and $2.7 million, respectively.
Note 12 — Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, or the exit
price in an orderly transaction between market participants on the measurement date. A three-level hierarchy is used for fair
value measurements based upon the observability of the inputs to the valuation of an asset or liability as of the measurement
date. Level 1 measurements consist of unadjusted quoted prices in active markets for identical assets or liabilities. Level 2
measurements include quoted prices in markets that are not active or model inputs that are observable either directly or
indirectly for substantially the full term of the asset or liability. Level 3 measurements include significant unobservable inputs.
A financial instrument’s level within the hierarchy is based on the highest level of any input that is significant to the fair value
measurement. Following is a description of our valuation methodologies used to estimate the fair value for our assets and
liabilities.
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 recorded
at fair value when an impairment is recognized or at the time acquired in a business combination. As discussed in Note 6 —
Intangible Assets and Goodwill and Note 7 — Restructuring and Other Expense, during each of 2012, 2011 and 2010, we
recorded impairment charges associated with goodwill, intangible assets or property, plant and equipment and reduced the
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