Pep Boys 2012 Annual Report Download - page 91

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THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended February 2, 2013, January 28, 2012 and January 29, 2011
NOTE 5—DEBT AND FINANCING ARRANGEMENTS (Continued)
$6.8 million were capitalized and are being amortized over the original five year life of the facility. On
July 26, 2011, the Company amended and restated the Agreement to reduce its interest rate by 75 basis
points and to extend its maturity to July 2016. The Company’s ability to borrow under the Agreement
is based on a specific borrowing base consisting of inventory and accounts receivable. The interest rate
on this credit line is daily LIBOR plus 2.00% to 2.50% based upon the then current availability under
the Agreement. As of February 2, 2013, the Company had no borrowings outstanding under the
Agreement and $37.4 million of availability was utilized to support outstanding letters of credit. Taking
this into account, the borrowings under the vendor financing program, and the borrowing base
requirements, as of February 2, 2013, there was $141.2 million of availability remaining under the
Agreement.
Other Matters
The Company’s debt agreements require compliance with covenants. The most restrictive of these
covenants, an earnings before interest, taxes, depreciation and amortization (‘‘EBITDA’’) requirement,
is triggered if the Company’s availability under its Revolving Credit Agreement plus unrestricted cash
drops below $50.0 million. As of February 2, 2013, the Company was in compliance with all financial
covenants contained in its debt agreements.
The weighted average interest rate on all debt borrowings during fiscal 2012 and 2011 was 4.5%
and 6.3%, respectively.
Other Contractual Obligations
The Company has a vendor financing program with availability up to $175.0 million which is
funded by various bank participants who have the ability, but not the obligation, to purchase account
receivables owed by the Company directly from vendors. The Company, in turn, makes the regularly
scheduled full vendor payments to the bank participants. There was an outstanding balance of
$149.7 million and $85.2 million under the program as of February 2, 2013 and January 28, 2012,
respectively.
The Company has letter of credit arrangements in connection with its risk management, import
merchandising and vendor financing programs. The Company had $5.2 million outstanding commercial
letters of credit as of February 2, 2013. There were no outstanding commercial letters of credit as of
January 28, 2012. The Company was contingently liable for $32.2 million and $31.7 million in
outstanding standby letters of credit as of February 2, 2013 and January 28, 2012, respectively.
The Company is also contingently liable for surety bonds in the amount of approximately
$11.5 million and $8.3 million as of February 2, 2013 and January 28, 2012, respectively. The surety
bonds guarantee certain payments (for example utilities, easement repairs, licensing requirements and
customs fees).
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