Staples 2005 Annual Report Download - page 100

STAPLES, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)
C-15
NOTE E Debt and Credit Agreements (Continued)
Notes: On September 30, 2002, Staples issued $325 million principal amount of senior notes due October 1, 2012
(the “Notes”), with a fixed interest rate of 7.375% payable semi-annually on April 1 and October 1 of each year
commencing on April 1, 2003. Staples has entered into an interest rate swap agreement to turn the Notes into variable
rate obligations (see Note F).
Senior Notes: On August 12, 1997, Staples issued $200 million principal amount of senior notes due August 15,
2007 (the “Senior Notes”), with a fixed interest rate of 7.125% payable semi-annually on February 15 and August 15 of
each year commencing on February 15, 1998. Staples has entered into interest rate swap agreements to turn the Senior
Notes into variable rate obligations (see Note F).
Credit Agreements: On December 14, 2004, Staples entered into a revolving credit facility (the “Credit Facility”)
with a syndicate of banks, which provides for a maximum borrowing of $750 million. The Credit Facility terminates on
December 14, 2009. The Credit Facility replaced a $600 million revolving credit facility (the “Prior Credit Facility”) that
had been entered into on June 21, 2002 and was scheduled to terminate in June 2006. On December 14, 2004, there were
no borrowings outstanding under the Prior Credit Facility, and approximately $62.4 million of letters of credit issued
under the Prior Credit Facility were transferred to the Credit Facility.
Borrowings made pursuant to the Credit Facility may be syndicated loans, competitive bid loans, or swing line loans.
Syndicated loans bear interest, payable quarterly or, if earlier, at the end of any interest period, at either (a) the base
rate, which is the higher of the annual rate of the lead bank’s prime rate or the federal funds rate plus 0.50%, or (b) the
Eurocurrency rate (a publicly published rate) plus a percentage spread based on the Company’s credit rating and fixed
charge coverage ratio; competitive bid loans bear the competitive bid rate as specified in the applicable competitive bid;
and swing line loans bear interest that is the lesser of the base rate or the swing line rate. Under the Credit Facility, the
Company pays a facility fee, payable quarterly, at rates that range from 0.090% to 0.250% depending on the Company’s
credit rating and fixed charge coverage ratio, and when applicable, a utilization fee.
Payments under the Credit Facility are guaranteed by the same subsidiaries that guarantee the Company’s publicly
issued notes. The Credit Facility contains customary affirmative and negative covenants for credit facilities of its type.
The covenants require that in the event a Staples subsidiary that is not currently a guarantor under the Credit Facility
becomes a guarantor of any of Staples’ publicly issued notes or bonds, Staples shall cause such subsidiary to become a
guarantor under the Credit Facility. The Credit Facility also contains financial covenants that require us to maintain a
minimum fixed charge coverage ratio of 1.5 and a maximum adjusted funded debt to total capitalization ratio of 0.75.
The Credit Facility provides for customary events of default with corresponding grace periods, including defaults relating
to other indebtedness of at least $50,000,000 in the aggregate and failure to meet the requirement that Staples and its
guarantor subsidiaries collectively have at least $355,000,000 of consolidated EBT (as defined in the Credit Facility). As
of January 28, 2006, no borrowings were outstanding under the Credit Facility, however $68.1 million of letters of credit
were issued under the facility.
Euro Notes: Staples issued notes in the aggregate principal amount of 150 million Euros on November 15, 1999
(the “Euro Notes”). These notes came due on November 15, 2004 and were repaid in full on this date. Prior to their
repayment, these notes were designated as a foreign currency hedge on the Company’s net investments in Euro
denominated subsidiaries and gains or losses were recorded in the cumulative translation adjustment line in
Stockholders’ Equity.
On October 4, 2002, the Company entered into a $325 million 364-Day Term Loan Agreement with a group of
commercial banks to finance a portion of the purchase price of the European mail order businesses that the Company
acquired in October 2002. The Term Loan was repaid in its entirety on May 2, 2003.
Staples had $125.0 million available under lines of credit, which had an outstanding balance of $0.2 million at
January 28, 2006, with $0.8 million of letters of credit issued under the facilities.