Pep Boys 2014 Annual Report Download - page 55

THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2015, February 1, 2014 and February 2, 2013
NOTE 5—DEBT AND FINANCING ARRANGEMENTS (Continued)
On October 11, 2012, the Company entered into two new interest rate swaps for a notional
amount of $50.0 million each that together were designated as a cash flow hedge on the first
$100.0 million of the Term Loan. The interest rate swaps convert the variable LIBOR portion of the
interest payments due on the first $100.0 million of the Term Loan to a fixed rate of 1.855%.
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 Company recorded $0.8 million of deferred financing costs related to the First
Amendment.
As of January 31, 2015, 141 stores collateralized the Term Loan. The amount outstanding under
the Term Loan as of January 31, 2015 and February 1, 2014 was $196.0 million and $198.0 million,
respectively.
Revolving Credit Agreement Through July 2016
The Company has a Revolving Credit Agreement among the Company, Bank of America, N.A., as
Administrative Agent, and the other parties thereto providing for borrowings of up to $300.0 million
and having a maturity of July 2016. The interest rate on this facility is LIBOR plus a margin of 2.00%
to 2.50% for LIBOR rate borrowings or Prime plus 1.00% to 1.50% for Prime rate borrowings. The
margin is based upon the then current availability under the facility. As of January 31, 2015, the
Company had $17.0 million outstanding under the facility and $35.1 million of availability was utilized
to support outstanding letters of credit. Taking into account the borrowing base requirements (including
reduction for amounts outstanding under the trade payable program), as of January 31, 2015 there was
$138.4 million of availability remaining under the facility.
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 January 31, 2015, 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 2014 and 2013 was 4.1% and 4.9%, respectively.
The Company has a trade payable program with availability up to $200.0 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 suppliers. The Company, in turn, makes the regularly
scheduled full supplier payments to the bank participants. The outstanding balance under the program
was $140.9 million and $129.8 million under the program as of January 31, 2015 and February 1, 2014,
respectively.
The Company has letter of credit arrangements in connection with its risk management and import
merchandising programs. The Company had $8.1 million and $13.9 million outstanding commercial
letters of credit as of January 31, 2015 and February 1, 2014, respectively. The Company was
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