Pep Boys 2013 Annual Report Download - page 101

Within From From After
Commercial Commitments Total 1 year 1 to 3 years 3 to 5 years 5 years
(dollar amounts in thousands)
Commercial letters of credit ................ $ 13,959 $13,959 $ — $— $—
Standby letters of credit ................... 30,872 30,752 120 — —
Surety bonds ........................... 10,581 8,514 2,067 — —
Purchase obligations(1)(2) ................... 46,127 23,685 22,442 — —
Total commercial commitments .............. $101,539 $76,910 $24,629 $— $—
(1) Our open purchase orders are based on current inventory or operational needs and are fulfilled by
our suppliers within short periods of time. We currently do not have minimum purchase
commitments under our supply agreements (other than (2) below) and generally, our open purchase
orders (orders that have not been shipped) are not binding agreements. Those purchase
obligations that are in transit from our suppliers at February 1, 2014 that we do not have legal title
to are considered commercial commitments.
(2) In fiscal 2013, we renewed our commercial commitment to purchase 6.3 million units of oil
products at various prices over a three-year period. Based on our present consumption rate, we
expect to meet the cumulative minimum purchase requirements under this contract in fiscal 2016.
Senior Secured Term Loan due October 2018
On October 11, 2012, we entered into the Second Amended and Restated Credit Agreement
among the Company, Wells Fargo Bank, N.A., as Administrative Agent, and the other parties thereto
that (i) increased the size of our Senior Secured Term Loan (the ‘‘Term Loan’’) to $200.0 million,
(ii) extended the maturity of the Term Loan from October 27, 2013 to October 11, 2018, (iii) reset the
interest rate under the Term Loan to the London Interbank Offered Rate (LIBOR), subject to a floor
of 1.25%, plus 3.75% and (iv) added an additional 16 of our owned locations to the collateral pool
securing the Term Loan. The amended and restated Term Loan is deemed to be substantially different
than the prior Term Loan, and therefore the modification of the debt has been treated as a debt
extinguishment.
Net proceeds from the amended and restated Term Loan together with cash on hand were used to
settle the outstanding interest rate swap on the Term Loan as structured prior to its amendment and
restatement and to satisfy and discharge all of our outstanding 7.5% Senior Subordinated Notes
(‘‘Notes’’) due 2014. The settlement of the interest rate swap resulted in the reclassification of
$7.5 million of accumulated other comprehensive loss to interest expense. We recognized, in interest
expense, $1.9 million of deferred financing costs related to the Notes and the Term Loan as structured
prior to its amendment and restatement. The interest payment and the swap settlement payment are
presented within cash flows from operations on the consolidated statement of cash flows.
On November 12, 2013, the Company entered into the First Amendment to the Second Amended
and Restated Credit Agreement. The First Amendment reduced the interest rate payable by the
Company from (i) LIBOR, subject to a 1.25% floor, plus 3.75% to (ii) LIBOR, subject to a 1.25%
floor, plus 3.00%. The reduction in the interest rate is anticipated to result in approximately
$1.5 million in annualized interest savings.
As of February 1, 2014, 142 stores collateralized the Term Loan. The amount outstanding under
the Term Loan as of February 1, 2014 and February 2, 2013 was $198.0 million and $200.0 million,
respectively.
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