Saks Fifth Avenue 2009 Annual Report Download - page 33

Table of Contents
agreement. The maximum borrowing capacity of the amended facility remains at $500.0 million and the maturity date of the amended revolving credit agreement
is November 2013. At January 30, 2010 and January 31, 2009, the Company maintained cash and cash equivalent balances of $147.3 million and $10.3 million,
respectively. Exclusive of approximately $11.0 million and $10.0 million of store operating cash at January 30, 2010 and January 31, 2009, respectively, cash
was invested principally in money market funds, demand deposits, and time deposits.
At January 30, 2010, the Company had no direct borrowings under its revolving credit facility, and had $28.5 million in unfunded letters of credit, which
reduces the amount of borrowings under the facility. Borrowings are limited to a prescribed percentage of eligible inventories and receivables. There are no debt
ratings-based provisions in the revolving credit facility. The facility includes a fixed-charge coverage ratio requirement of 1 to 1 that the Company is subject to
only if availability under the facility becomes less than $87.5 million. The Company had availability under the facility of $289.0 million at January 30, 2010. The
availability is based primarily on current levels of inventory, as well as the deduction for outstanding letters of credit at year end and excluding the last $87.5
million of availability due to the fixed charge ratio falling below the required 1 to 1 coverage. The amount of cash on hand and borrowings under the facility are
influenced by a number of factors, including sales, inventory levels, vendor terms, the level of capital expenditures, cash requirements related to financing
instruments, and the Company’s tax payment obligations, among others.
CAPITAL STRUCTURE
The Company continuously evaluates its debt-to-capitalization ratio in light of economic trends, business trends, levels of interest rates, and terms,
conditions and availability of capital in the capital markets. At January 30, 2010, the Company’s capital and financing structure comprised a revolving credit
agreement, senior unsecured notes, convertible senior unsecured notes, and capital and operating leases. At January 30, 2010, total funded debt (including the
equity component of the convertible notes) was $575.7 million, representing a decrease of $64.4 million from the balance of $640.1 million at January 31, 2009.
This decrease in debt was primarily the result of a decrease of $156.7 million in outstanding borrowings from the revolving credit facility, the extinguishment of
$23.0 million of the 7.5% senior notes and principal payments of $4.7 million on capital lease obligations in 2009. These decreases were partially offset by the
issuance of $120.0 million of 7.5% convertible notes during the second quarter of 2009. Additionally, the debt-to-capitalization ratio decreased to 36.1% in 2009,
from 40.3% in 2008, primarily as a result of the decrease in debt in 2009 partially offset by the equity issuance in the second quarter of fiscal 2009.
Senior Revolving Credit Facility
At January 30, 2010, the Company maintained a senior revolving credit facility maturing in 2013, which is secured by inventory and certain third party
credit card accounts receivable. Borrowings are limited to a prescribed percentage of eligible inventories and receivables. There are no debt ratings-based
provisions in the revolving credit facility. The facility includes a fixed-charge coverage ratio requirement of 1 to 1 that the Company is subject to only if
availability under the facility becomes less than $87.5 million. At January 30, 2010, the Company’s fixed charge coverage was below the 1 to 1 requirement;
however, the Company is not subject to the fixed charge coverage ratio as its availability under the facility exceeds $87.5 million. The facility contains default
provisions that are typical for this type of financing, including a provision that would trigger a default of the facility if a default were to occur in another debt
instrument resulting in the acceleration of principal of more than $20 million in that other instrument. Borrowings under the facility bear interest at a per annum
rate of either LIBOR plus a percentage ranging from 3.5% to 4.0%, or at the higher of the prime rate and federal funds rate plus a percentage ranging from 2.5%
to 3.0%. Letters of credit are charged a per annum fee equal to the then applicable LIBOR borrowing spread (for standby letters of credit) or the applicable
LIBOR spread minus 0.50% (for documentary or commercial letters of credit). The Company also pays an unused line fee ranging from 0.5% to 1.0% per annum
on the average daily unused revolver.
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Source: SAKS INC, 10-K, March 18, 2010 Powered by Morningstar® Document Research℠