Barnes and Noble 2005 Annual Report Download - page 18

17 2005 Annual Report Barnes & Noble, Inc.
[MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS continued ]
Borrowings made pursuant to the New Facility as
committed loans will bear interest, payable quarterly or,
if earlier, at the end of any interest period, at either (a)
the base rate, described in the New Facility as the higher
of Bank of America N.A.’s prime rate (7.25% as of
January 28, 2006) or the federal funds rate (4.38% as
of January 28, 2006) plus 0.50%, or (b) the Eurodollar
rate (a publicly published rate which was 4.57% as of
January 28, 2006) plus a percentage spread (ranging
from 0.750% to 1.375%) based on the Company’s
consolidated fixed charge coverage ratio. Swing line
loans bear interest at the base rate. Under the New
Facility, the Company agrees to pay a commitment
facility fee, payable quarterly, at rates that range from
0.150% to 0.300% depending on the Company’s
consolidated fixed charge coverage ratio. The payments
under the New Facility are guaranteed by material
subsidiaries of the Company.
The New Facility contains customary affirmative and
negative covenants for credit facilities of this type,
including limitations on the Company and its subsidiaries
with respect to indebtedness, liens, investments,
distributions, mergers and acquisitions, disposition of
assets, sale-leaseback transactions, and transactions with
affiliates. The New Facility permits the Company to use
proceeds of the credit loans and letters of credit for
working capital and capital expenditures and for all other
lawful corporate purposes, including payment of
dividends, acquisitions of assets, capital stock of other
companies and share repurchases, in each case to the
extent permitted in the New Facility. The New Facility also
contains financial covenants that require the Company to
maintain a minimum consolidated fixed charge coverage
ratio of 1.75 and a maximum consolidated funded debt to
earnings ratio of 2.00.
The New Facility provides for customary events of default
with corresponding grace periods, including failure to pay
any principal or interest when due, failure to comply with
covenants, any material representation or warranty made
by the Company proving to be false in any material
respect, certain bankruptcy, insolvency or receivership
events affecting the Company or its subsidiaries, defaults
relating to certain other indebtedness, imposition of
certain judgments and a change in control of the
Company (as defined in the New Facility).
On June 28, 2004, the Company completed the
redemption of its $300.0 million outstanding 5.25%
convertible subordinated notes due 2009. Holders of
the notes converted a total of $17.7 million principal
amount of the notes into 545,821 shares of common
stock of the Company, plus cash in lieu of fractional
shares, at a price of $32.512 per share. The Company
redeemed the balance of $282.3 million principal
amount of the notes at an aggregate redemption price,
together with accrued interest and redemption
premium, of $295.0 million. The write-off of the
unamortized portion of the deferred financing fees from
the issuance of the notes and the redemption premium
resulted in a charge of $14.6 million.
Selected information related to the Company’s term
loan, convertible subordinated notes and the New and
Prior Facilities:
Fiscal Year 2005 2004 2003
Revolving credit facility $— — —
Term loan — 245,000 —
Convertible subordinated notes — — 300,000
Balance at end of year $ — 245,000 300,000
Average balance outstanding
during the year
$ 121,915 276,043 342,469
Maximum borrowings outstanding
during the year
$ 245,000 392,700 474,150
Weighted average interest rate
during the year
6.91% 5.25% 6.33%
Interest rate at end of year — 3.78% 5.25%
Fees expensed with respect to the unused portion of the
New and Prior Facilities were $1.3 million, $1.0 million
and $1.2 million, during fiscal 2005, 2004 and 2003,
respectively.
The amounts outstanding under the New and Prior
Facilities, if any, 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.
Capital Investment
Capital expenditures totaled $187.2 million, $184.9
million and $130.1 million during fiscal 2005, 2004
and 2003, respectively. Capital expenditures in fiscal
2006, primarily for the opening of 30 to 40 new Barnes
& Noble stores, the maintenance of existing stores and
system enhancements for the retail stores and the Web
site, are projected to be in the range of $190.0 million
to $200.0 million, although commitment to many of
such expenditures has not yet been made.
Based on current operating levels and the store
expansion planned for the next fiscal year, management