Office Depot 2001 Annual Report Download - page 46

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Office Depot, Inc.
Notes to Consolidated Financial Statements (continued)
The Company’s 364-day term domestic credit agreement provides up to
$255.0 million of working capital availability through May 2002. While no
amounts were outstanding under this agreement, the borrowing rate at
December 29, 2001 was 0.95% over the London Interbank Offered Rate
(“LIBOR”). The 364-day credit agreement existing at December 30, 2000 pro-
vided up to $300.0 million of credit. Of that amount, $146.0 was outstanding
at December 30, 2000, with an average effective interest rate of 7.996%.
The Company also has a long-term domestic credit facility that provides
working capital and letters of credit capacity totaling $300.0 million through
February 2003. There were no outstanding borrowings under this credit facil-
ity at December 29, 2001 compared with $243.6 million at December 30,
2000. Letters of credit utilized under this agreement totaled $36.8 million
and $49.5 million for the fiscal years ending 2001 and 2000, respectively. The
borrowing rates under this agreement at December 29, 2001 and December 30,
2000 were 0.70% over LIBOR and 0.475% over LIBOR, respectively. The
average effective interest rate on borrowings under this facility for the prior
year was 7.001%.
In July 2001, the Company issued $250 million of seven year, non-callable,
senior subordinated notes due on July 15, 2008. The notes have a coupon
interest rate of 10.00%, payable semi-annually on January 15 and July 15.
In August 2001, the Company entered into LIBOR-based variable rate swap
agreements with notional amounts aggregating $250 million that qualify for
shortcut hedge accounting. The effective interest rate on this borrowing at
December 29, 2001 including the effect of the swap agreements, was 7.8%
and will be reset every six months.
The Company has issued two series of zero coupon, convertible subordi-
nated notes (Liquid Yield Option Notes (LYONst), one series in 1992 and
one series in 1993. Each series is a zero coupon note that pays no current
interest, but increases in value to provide the holder with a constant yield to
maturity. Each LYONtis convertible into a specified amount of Office Depot
common stock at the option of the holder, is callable by the Company at the
original issue price plus accrued interest and is subordinated to all existing
and future senior indebtedness. Approximately 13.8 million shares of common
stock have been reserved for the possible conversion of these LYONs® issues.
The original proceeds of the 1992 LYONstwas $150.8 million. With a
5% yield, these notes will increase to $316.3 million by maturity in December
2007. The stock conversion rate on the 1992 LYONstis 43.895 per note.
These notes also contain an option feature that allows each holder to put the
security to the Company on December 11, 2002 in return for payment of the
issue price plus accrued interest. The Company may pay the holder in cash,
common stock or a combination of the two. Because the holder’s option on
the 1992 LYONstis exercisable in the next 12 months, this series has been
included in current maturities of long-term debt at December 29, 2001.
The original proceeds of the 1993 LYONstwas $190.5 million. These
notes provide a 4% yield through maturity in November 2008 and a stock
conversion rate of 31.851 per note. In November 2000, a majority of the hold-
ers of the 1993 LYONstrequired us to purchase the notes at original issue
price plus accrued interest. A total of $249.2 million was paid in connection
with this repurchase. Approximately $2.2 million of 1993 LYONs® remain
outstanding at December 29, 2001.
The Company has a term loan and revolving credit agreements with sev-
eral Japanese banks (the “yen facilities”) to provide financing for operating
and expansion activities in Japan. The yen facilities provide for maximum
aggregate borrowings of ¥9.76 billion (the equivalent of $74.5 million at
December 29, 2001) at an interest rate of 0.875% over the Tokyo Interbank
Offered Rate (“TIBOR”). At December 29, 2001 there were outstanding
yen borrowings equivalent to $74.5 million under these yen facilities, which
had an average effective interest rate of 1.118%. The total amount outstanding
is included in current maturities of long-term debt because the facility expires
in July 2002. The Company has entered into a yen interest rate swap agree-
ment with a U.S. dollar notional equivalent of $18.6 million at December 29,
2001. The terms of the swap specify that we pay an interest rate of 0.700%
and receive TIBOR and will expire in July 2002.
The Company is in compliance with all restrictive covenants included in
the above debt agreements.
Under capital lease agreements, the Company is required to make certain
monthly, quarterly or annual lease payments through 2020. The aggregate
minimum capital lease payments for the next five years and beyond, with
their present value as of December 29, 2001, are as follows:
December 29,
(Dollars in thousands) 2001
2002 $ 15,937
2003 15,134
2004 9,962
2005 7,009
2006 6,224
Thereafter 68,675
Total minimum lease payments 122,941
Less amount representing interest at 5.00% to 10.27% 42,484
Present value of net minimum lease payments 80,457
Less current portion 10,486
Long-term portion $ 69,971