Pep Boys 2008 Annual Report Download - page 85

availability falls below $50,000,000). The amendment also provided the flexibility, upon satisfaction of
certain conditions, to release up to $99,000,000 of reserves required as of December 2, 2004 under the
line of credit agreement to support certain operating leases. Finally, the amendment extended the term
of the agreement through December 2009. The weighted average interest rate on borrowings under the
line of credit agreement was 7.51% at February 2, 2008. On January 16, 2009, the Company terminated
this revolving credit agreement and recognized in interest expense $1,172,000 due to the accelerated
write off of related unamortized deferred financing costs.
Revolving Credit Agreement due December, 2014
On January 16, 2009, we entered into a new revolving credit agreement with available borrowings
up to $300,000,000. Our ability to borrow under the revolving credit agreement is based on a specific
borrowing base consisting of inventory and accounts receivable. Total incurred fees of $6,754,000 were
capitalized and will be amortized over the 5 year life of the facility. The interest rate on this credit line
is LIBOR or Prime plus 2.75% to 3.25% based upon the then current availability under the facility.
The weighted average interest rate on borrowing under the facility was 6.25% at January 31, 2009. Fees
based on the unused portion of the facility range from 37.5 to 75.0 basis points. As of January 31, 2009,
current borrowings under the facility were $23,862,000.
The weighted average interest rate on borrowings during the fiscal years 2008 and 2007 were 5.8%
and 7.51%, respectively.
Other Notes
During fiscal year 2008, notes payable with aggregate principal balances of $248,000 and a
weighted average interest rates of 8.0% at February 2, 2008 were paid in full.
Other Matters
Several of our debt agreements require compliance with covenants. The most restrictive of these
requirements is contained in our revolving credit agreement. During any period the availability under
the revolving credit agreement drops below $52,500,000, we are required to maintain a consolidated
fixed charge coverage ratio, of at least 1.1:1.0, calculated as the ratio of (a) EBITDA (net income plus
interest charges, provision for taxes, depreciation and amortization expense, non-cash stock
compensation expenses and other non-recurring, non-cash items) minus capital expenditures and
income taxes paid to (b) the sum of debt service charges and restricted payments made. The failure to
satisfy this covenant would constitute an event of default under the revolving credit agreement, which
would result in a cross-default under our 7.5% Senior Subordinated Notes and Senior Secured Term
Loan.
As of January 31, 2009, the Company had additional availability under the revolving credit
agreement of approximately $182,115,000 and was in compliance with its financial covenants.
Other Contractual Obligations
In the third quarter of fiscal 2004, we entered into a vendor financing program with an availability
of $20,000,000. Under this program, our factor made accelerated and discounted payments to our
vendors and we, in turn, made our regularly-scheduled full vendor payments to the factor. This
program was terminated effective December, 2007.
On June 29, 2007, we replaced the vendor financing program with a new lender and increased
availability up to $65,000,000. This availability was subsequently reduced to $40,000,000. There was an
outstanding balance of $31,930,000 and $14,254,000 under this program as of January 31, 2009 and
February 2, 2008, respectively.
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