Office Depot 2010 Annual Report Download - page 13

LIQUIDITY AND CAPITAL RESOURCES
Liquidity
At December 25, 2010, we had approximately $627 million in cash and equivalents and another $674 million
available under our asset based credit facility based on the December borrowing base certificate, for a total
liquidity of approximately $1.3 billion. We consider our resources adequate to satisfy our cash needs at least over
the next twelve months. We anticipate that market conditions will continue to be challenging through 2011 and in
response, we are focused on maximizing cash flow.
On September 26, 2008, the company entered into a Credit Agreement (the “Agreement”) with a group of
lenders, which provides for an asset based, multi-currency revolving credit facility (the “Facility”) of up to $1.25
billion. The amount that can be drawn on the Facility at any given time is determined based on percentages of
certain accounts receivable, inventory and credit card receivables (the “Borrowing Base”). At December 25,
2010, the company was eligible to borrow approximately $845 million of the Facility. The Facility includes a
sub-facility of up to $250 million which is available to certain of the company’s European subsidiaries (the
“European Borrowers”). Certain of the company’s domestic subsidiaries (the “Domestic Guarantors”) guaranty
the obligations under the Facility. The Agreement also provides for a letter of credit sub-facility of up to $400
million. All loans borrowed under the Agreement may be borrowed, repaid and reborrowed from time to time
until September 26, 2013 (or, in the event that the company’s existing 6.25% Senior Notes are not repaid, then
February 15, 2013), on which date the Facility matures.
All amounts borrowed under the Facility, as well as the obligations of the Domestic Guarantors, are secured by a
lien on the company’s and such Domestic Guarantors’ accounts receivables, inventory, cash and deposit
accounts. All amounts borrowed by the European Borrowers under the Facility are secured by a lien on such
European Borrowers’ accounts receivable, inventory, cash and deposit accounts, as well as certain other assets.
At the company’s option, borrowings made pursuant to the Agreement bear interest at either, (i) the alternate
base rate (defined as the higher of the Prime Rate (as announced by JP Morgan Chase Bank, N.A. (the “Agent”))
and the Federal Funds Rate plus 1/2 of 1%) or (ii) the Adjusted LIBOR Rate (defined as the LIBOR Rate as
adjusted for statutory revenues) plus, in either case, a certain margin based on the aggregate average availability
under the Facility. The Agreement also contains representations, warranties, affirmative and negative covenants,
and default provisions which are conditions precedent to borrowing. The most significant of these covenants and
default provisions include a capital expenditure limitation of $500 million in any fiscal year and limitations in
certain circumstances on acquisitions, dispositions, share repurchases and payment of cash dividends. In the first
quarter of 2010, the company executed a second amendment to the Facility allowing, among other things, the
company to pay cash dividends on preferred stock and make share repurchases, in an aggregate amount of $50
million per fiscal year subject to the satisfaction of certain liquidity requirements. The company has never
declared or paid cash dividends on its common stock. The Agreement contains cash dividend restrictions based
on the then-current and pro forma fixed charge coverage ratio and borrowing availability at the point of
consideration. The company was in compliance with all financial covenants at December 25, 2010. The Facility
also includes provisions whereby if the global availability is less than $218.8 million, or the European
availability is below $37.5 million, the company’s cash collections go first to the Agent to satisfy outstanding
borrowings. Further, if total availability falls below $187.5 million, a fixed charge coverage ratio test is required
which could effectively eliminate additional borrowing under the Facility. Any event of default that is not cured
within the permitted period, including non-payment of amounts when due, any debt in excess of $25 million
becoming due before the scheduled maturity date, or the acquisition of more than 40% of the ownership of the
company by any person or group, could result in a termination of the Facility and all amounts outstanding
becoming immediately due and payable. On March 30, 2011, the company obtained from the lending institutions
participating in the Facility a waiver of default following identification of the need to restate the financial
statements in our original Form 10-K filed on February 22, 2011.
At December 25, 2010, we had approximately $674 million of available credit under our asset based credit
facility (the “Facility”). At December 25, 2010, the company’s borrowings under the Facility totaled
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