Barnes and Noble 2003 Annual Report Download - page 30

varies based upon the Company’s fixed charge coverage
ratio, calculated as a percentage of the unused portion. The
Company is required to pay utilization fees of 0.125
percent or 0.25 percent on all outstanding loans under the
Facility if the aggregate outstanding loans are greater than
33 percent and 66 percent, respectively, of the aggregate
amount of the Facility.
A portion of the Facility, not to exceed $100,000, is
available for the issuance of letters of credit. Also, under
certain circumstances, the Company may increase the
size of the Facility to an amount not to exceed $600,000.
Mandatory prepayments include the requirement that loans
outstanding under the Facility be reduced by 100 percent of
the net cash proceeds from (i) the disposition of the
Company’s stock in certain entities, (ii) any equity issuance,
and (iii) the disposition of certain other material assets,
other than those assets disposed of during the ordinary
course of business. Under certain circumstances, mandatory
commitment reductions may include the requirement that
the aggregate size of the Facility be reduced upon the
disposition by the Company of its stock in GameStop.
The Facility contains covenants, limitations and events of
default typical of credit facilities of this size and nature,
including financial covenants, which require the Company
to meet, among other things, leverage and fixed charge
coverage ratios and which limit capital expenditures.
Negative covenants include limitations on other
indebtedness, liens, investments, mergers, consolidations,
sales or leases of assets, acquisitions, distributions and
dividends and other payments in respect of capital stock,
transactions with affiliates, and sale/leaseback
transactions. In the event the Company defaults on these
financial covenants, all outstanding borrowings under the
Facility may become immediately payable and no further
borrowings may be available. The Facility is secured by the
Company’s capital stock in its subsidiaries, and by the
accounts receivable and certain general intangibles of the
Company and its subsidiaries. Net proceeds from the
Facility are available for general corporate purposes.
In fiscal 2001, the Company issued $300,000, 5.25
percent convertible subordinated notes due March 15,
2009. The notes are convertible into the Company’s
common stock at a conversion price of $32.512 per
share. At the Company’s option, it may redeem the notes
at a premium to par beginning on March 20, 2004.
The Company from time to time enters into interest rate
swap agreements to manage interest-costs and risk
associated with changes in interest rates. These agreements
effectively convert underlying variable-rate debt based on
prime rate or LIBOR to fixed-rate debt through the
exchange of fixed and floating interest payment
obligations without the exchange of underlying principal
amounts. For each of the years ended January 31, 2004
and February 1, 2003, the Company had a notional
amount outstanding of $0 and $55,000, respectively.
Selected information related to the Company’s
convertible subordinated notes and revolving credit
facility:
Fiscal Year 2003 2002 2001
Balance at end of year $ 300,000 300,000 449,000
Average balance outstanding
during the year $ 342,469 377,297 689,326
Maximum borrowings outstanding
during the year $ 474,150 490,300 870,000
Weighted average interest rate
during the year 5.88% 5.70% 5.27%
Interest rate at end of year 5.25% 5.25% 4.33%
Fees expensed with respect to the unused portion of the
Facility were $1,170, $999 and $516, during fiscal
2003, 2002 and 2001, respectively.
The amounts outstanding under the Facility have been
classified as long-term debt based on the Company’s
ability to continually maintain principal amounts
outstanding.
The Company has no agreements to maintain
compensating balances.
4. FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents
reported in the accompanying consolidated balance
sheets approximate fair value due to the short-term
maturities of these assets. The aggregate fair value of
the Facility approximates its carrying amount because
of its recent and frequent repricing based upon market
conditions.
Interest-rate swap agreements are valued based on market
quotes obtained from dealers. There were no interest-rate
swap agreements outstanding at January 31, 2004. The
estimated fair value of the interest-rate swaps liability was
$6 at February 1, 2003. The interest-rate swaps are
included as a component of other long-term liabilities.
[NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS continued ]
29 2003 Annual Report Barnes & Noble, Inc.