Memorex 2013 Annual Report Download - page 42

• 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 1/120th, 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. Borrowings under the European portion of the Credit Facility are limited
to the lesser of (a) $30 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.
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, 2013 and our U.S. availability discussed above considers the $30 million liquidity requirement.
On July 16, 2013, we entered into an additional credit agreement for a revolving credit facility with a lender in Japan with
Imation Corporation Japan as the borrower and Imation Corp. as the guarantor. We intend to use the credit facility for general
operating purposes. The credit agreement is a three year asset-based revolving credit facility with a borrowing base
consistent with our existing Credit Agreement that allows for the borrowing of amounts up to 3.0 billion Japanese Yen, or
approximately $30.0 million. Borrowings under the credit facility will bear interest at an interest rate equal to the base rate
based on LIBOR or TIBOR plus the applicable margins provided for in the credit agreement. The credit agreement contains
financial covenants applicable to Imation Corporation Japan including a fixed charge coverage ratio requirement. As of
December 31, 2013, our borrowing capacity under this arrangement was $12.4 million and we did not have any borrowings
outstanding under this credit facility. Imation Corporation Japan is in compliance with all covenant requirements as of
December 31, 2013.
As of December 31, 2013 and 2012 we had outstanding standby letters of credit of $0.7 million and $0.4 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. Additionally, as of December 31, 2013 we
had a $6.0 million overdraft line of credit available in Japan.
We had $64 million of cash outside the U.S. at December 31, 2013. 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 a significant impact to earnings if we were to remit this foreign held cash.
Our liquidity needs for 2014 include the following: restructuring payments of approximately $5 million to $10 million, up
to $20 million repayment on our credit facility, capital expenditures of approximately $5 million to $10 million, pension funding
of approximately $2 million to $4 million, operating lease payments of approximately $7 million, any amounts associated with
organic investment opportunities and any amounts associated with the repurchase of common stock under the authorization
discussed above.
We expect that our cash positions in the U.S. and outside the U.S., together with cash flow from operations and
availability of borrowings under our Amended Credit Agreement, will provide liquidity sufficient to meet our needs for our
operations and our obligations in the countries in which we operate.
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