Staples 2003 Annual Report Download - page 60

STAPLES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
balances available under credit agreements, debt outstanding and principal payments due on our outstanding debt and
operating lease obligations is presented below (amounts in thousands):
Principal Payments Due
Available Before 1 1 - 3 3 - 5 After 5
Credit Outstanding Year Years Years Years
Revolving credit facility effective through June
2005 ............................. $554,000 $ — $ — $ — $ — $ —
Notes due October 2012 ................ — 325,000 — — — 325,000
Term Loan due October 2003 ............ — 325,000 325,000 — — —
Euro Notes due November 2004 .......... — 162,225 — 162,225 — —
Senior Notes due August 2007 ............ — 200,000 — — 200,000 —
Uncommitted lines of credit ............. 70,000 ———— —
Other lines of credit ................... 75,784 ———— —
Capital leases and other notes payable ...... — 14,892 2,671 4,700 2,900 4,621
Total Debt Obligations ................ $699,784 $1,027,117 $327,671 $166,925 $202,900 $ 329,621
Operating leases ...................... $ — $4,415,048 $462,722 $853,185 $740,461 $2,358,680
On June 21, 2002, we entered into a revolving credit facility (the ‘‘New Credit Facility’’) with a syndicate of banks,
which provides for a maximum borrowing of $600 million. The New Credit Facility terminates in June 2005 and replaced
two existing revolving credit facilities, which provided an aggregate of $550 million in available borrowings and were to
expire in 2002. Borrowings made pursuant to the New Credit Facility bear interest at the lower of (a) the higher of the
lead bank’s prime rate or the federal funds rate plus 0.50%, (b) the Eurodollar rate plus a percentage spread based upon
certain defined ratios, or (c) a competitive bid rate. The New Credit Facility contains financial covenants that require
that we maintain a minimum fixed charge coverage ratio of 1.5 and a maximum adjusted debt to total capital ratio of 0.75
and an affirmative covenant that requires us to maintain at least $275 million of consolidated EBIT (as defined in the
New Credit Facility) for our subsidiaries that guarantee the New Credit Facility. As of February 1, 2003, no borrowings
were outstanding under the New Credit Facility, but our available credit is reduced by $46.0 million of letters of credit
that were issued against the facility.
On September 30, 2002, we completed an offering of $325 million principal amount of 7.375% senior notes due
October 2012 (the ‘‘Notes’’). The Notes were sold in a private placement to qualified institutional investors pursuant to
Rule 144A and Regulation S of the Securities Act of 1933, as amended. We used the net proceeds to finance a portion of
the purchase price of the European mail order acquisition. In February 2003, we filed an exchange offer registration
statement with the SEC pursuant to which the holders of these notes may exchange them for publicly tradable notes.
On October 4, 2002, we entered into a $325 million 364-Day Term Loan Agreement (the ‘‘Term Loan’’) with a group
of commercial banks, with Fleet National Bank acting as agent. We used the Term Loan to finance a portion of the
purchase price of the European mail order acquisition. Borrowings under the Term Loan bear interest, at our option, at
either (a) the higher of the lead bank’s prime rate or the federal funds rate plus 0.50%, or (b) the Eurodollar rate plus a
percentage spread based upon certain defined ratios. The Term Loan’s financial and affirmative covenants are the same
as those contained in the New Credit Facility. The Term Loan matures on October 3, 2003.
We utilize a 364-day accounts receivable securitization agreement for the purpose of providing us with additional
low cost short-term working capital funding that enables us to reduce our borrowings under our revolving credit facility.
Under the accounts receivable securitization agreement, we sell, through two special purpose entities which are fully
consolidated in our financial statements, participating interests in accounts receivable of Quill and our contract stationer
business at a discount to an unrelated third party financier who purchases and receives an ownership interest in the
accounts receivable. Specifically, (i) we transfer our interest in a pool of our accounts receivable to Hackensack Funding,
LLC, a special purpose entity that is 99.9995% owned by us and 0.0005% owned by an unrelated third party investor who
shares equal voting control with us, (ii) Hackensack Funding, LLC then sells its interest in the accounts receivable to
Lincolnshire Funding, LLC, a bankruptcy remote special purpose entity that is wholly owned by Hackensack Funding,
LLC, and (iii) Lincolnshire Funding, LLC then sells its interest in the accounts receivable to a commercial paper conduit
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