Redbox 2006 Annual Report Download - page 62

COINSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
YEARS ENDED DECEMBER 31, 2006, 2005, AND 2004
The credit facility contains standard negative covenants and restrictions on actions including, without
limitation, restrictions on indebtedness, liens, fundamental changes or dispositions of our assets, payments of
dividends or common stock repurchases, capital expenditures, foreign investments, acquisitions, sale and
leaseback transactions and swap agreements, among other restrictions. In addition, the credit agreement requires
that we meet certain financial covenants, ratios and tests, including maintaining a maximum consolidated
leverage ratio and a minimum interest coverage ratio, as defined in the agreement. As of December 31, 2006, we
were in compliance with all covenants.
Following our mandatory debt paydown of $16.9 million this year, our quarterly principal payments were
reduced from $522,000 to $479,000. These quarterly principal payments will continue until March 31, 2011. The
remaining principal balance of $178.8 million will be due July 7, 2011, the maturity date of the facility. Due to
the mandatory debt paydown, we accelerated the expense recognition of $0.2 million in deferred finance fees
related to this early retirement. Commitment fees on the unused portion of the facility, currently 37.5 basis
points, may vary and are based on our consolidated leverage ratio.
As of December 31, 2006, scheduled principal payments on our long-term debt are as follows:
(in thousands)
2007 .......................................................... $ 1,917
2008 .......................................................... 1,917
2009 .......................................................... 1,917
2010 .......................................................... 1,917
2011 .......................................................... 179,284
$186,952
Interest rate hedge: On September 23, 2004, we purchased an interest rate cap and sold an interest rate
floor at zero net cost, which protects us against certain interest rate fluctuations of the LIBOR rate, on $125.0
million of our variable rate debt under our credit facility. The interest rate cap and floor became effective on
October 7, 2004 and expires after three years on October 9, 2007. The interest rate cap and floor consists of a
LIBOR ceiling of 5.18% and a LIBOR floor that stepped up in each of the three years beginning October 7, 2004,
2005 and 2006. The LIBOR floor rates are 1.85%, 2.25% and 2.75% for each of the respective one-year periods.
Under this interest rate hedge, we will continue to pay interest at prevailing rates plus any spread, as defined by
our credit facility, but will be reimbursed for any amounts paid on LIBOR in excess of the ceiling. Conversely,
we will be required to pay the financial institution that originated the instrument if LIBOR is less than the
respective floor rates.
We have recognized the fair value of the interest rate cap and floor as an asset of $164,000 and $202,000 at
December 31, 2006 and 2005, respectively. Any change in the fair value of the interest rate cap and floor is
reported in accumulated other comprehensive income. Because the critical terms of the interest rate cap and floor
and the underlying obligation are the same, there was no ineffectiveness recorded in the consolidated statements.
NOTE 7: COMMITMENTS
Lease commitments: Our corporate administrative, marketing and product development facility is located
in a 46,070 square foot facility in Bellevue, Washington, under a lease that expires December 1, 2009. In
connection with our acquisitions of Amusement Factory and ACMI, we assumed the leases for their respective
corporate headquarters. See discussion in Note 16, Related Party Transactions.
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