Pep Boys 2009 Annual Report Download - page 111

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THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 30, 2010, January 31, 2009 and February 2, 2008
(dollar amounts in thousands, except share and per share data)
NOTE 5—DEBT AND FINANCING ARRANGEMENTS (Continued)
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 of deferred financing costs.
On January 16, 2009, we entered into a new Revolving Credit Agreement with available
borrowings up to $300,000. 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
were capitalized and are amortized over the 5 year life of the agreement. 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
agreement. Fees based on the unused portion of the facility range from 37.5 to 75.0 basis points. As of
January 30, 2010, there were no outstanding borrowings under the agreement.
The weighted average interest rate on all debt borrowings during fiscal 2009 and 2008 were 4.2%
and 5.8%, respectively.
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 the greater of $50,000 or 17.5% of the borrowing base,
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 7.50% Senior
Subordinated Notes and Senior Secured Term Loan.
As of January 30, 2010, the Company had no borrowings outstanding under the Revolving Credit
Agreement, additional availability of approximately $137,848 and was in compliance with its financial
covenants.
Other Contractual Obligations
On June 29, 2007, we entered into a vendor financing program with a new lender with availability
up to $65,000. Under this program, our factor made accelerated and discounted payment to our
vendors and we in turn, made our regularly-scheduled full vendor payments to the factor. The
availability was subsequently reduced to $40,000. On April 6, 2009, we replaced this program by a new
$50,000 program which is funded by various bank participants who have the ability, but not the
obligation, to purchase account receivables owed by us directly from our vendors. There was an
outstanding balance of $34,099 and $31,930 under these programs as of January 30, 2010 and
January 31, 2009, respectively.
We have letter of credit arrangements in connection with our risk management, import
merchandising and vendor financing programs. We were contingently liable for $5 and $354 in
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