Circuit City 2004 Annual Report Download - page 50

53
2004 2003
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(As restated,
see Note 2)
Mortgage note payable (a) $ 8,012 $ 8,170
Term loan payable (b) 9,713 10,338
Capitalized equipment lease obligations 1,185 1,591
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18,910 20,099
Less: current portion 10,271 1,746
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$ 8,639 $18,353
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The Company also has a £15,000,000 ($28,484,000 at the December 31, 2004 exchange rate) multi-currency
credit facility with a United Kingdom financial institution, which is available to its United Kingdom subsidiaries.
Drawings under the facility may be made by overdraft, trade acceptance or loan. The facility does not have a
termination date, but may be canceled with six months notice. Borrowings under the facility are secured by
certain assets of the Company's United Kingdom subsidiaries and a portion of the line is subject to a borrowing
base limitation of 70% of eligible accounts receivable. At December 31, 2004 there were £5.3 million ($10.0
million) of borrowings outstanding under this line with interest payable at a rate of 5.87%. At December 31, 2003
there were £7.5 million ($13.3 million at the December 31, 2003 exchange rate) of borrowings outstanding under
this line with interest payable at a rate of 5.85%.
The Company's Netherlands subsidiary maintains a €5 million ($6.7 million at the December 31, 2004 exchange
rate) credit facility with a local financial institution. Borrowings under the facility are secured by the subsidiary's
accounts receivable and are subject to a borrowing base limitation of 85% of the eligible accounts. At December
31, 2004 there were €3.5 million ($4.8 million) of borrowings outstanding under this line with interest payable at
a rate of 5.0%. At December 31, 2003 there were €4.5 million ($5.7 million at the December 31, 2003 exchange
rate) of borrowings outstanding under this line with interest payable at a rate of 5.0%. The facility expires in
November 2005.
The weighted average interest rate on short
-
term borrowings was 6.0% in 2004, 5.2% in 2003 and 6.3% in 2002.
7.
LONG
-
TERM DEBT
Long
-
term debt consists of (in thousands):
(a) Mortgage note payable. The Company has a ten year, $8.4 million mortgage loan on its Georgia
distribution facility. The mortgage has monthly principal and interest payments of $62,000 through May
2012, with a final additional principal payment of $6.4 million at maturity in May 2012. The mortgage
bears interest at 7.04% and is collateralized by the underlying land and building.
(b)
Term loan payable. The Company has a term loan agreement which was used to finance the construction of
its United Kingdom facility and which is secured by the underlying land and building. The loan matures in
August 2012 and is repayable in quarterly installments of(pound)165,000 ($313,000) plus interest. The
outstanding borrowing bears interest at the 12 month LIBOR plus 160 basis points (5.25% at December 31,
2004 and December 31, 2003). The term loan agreement also contains certain financial and other covenants
related to the Company's United Kingdom subsidiaries. As of December 31, 2004, the Company was not in
compliance with the financial covenants and has classified the entire obligation as current.
In connection with this term loan, the Company also entered into an interest rate collar agreement to reduce
its exposure to market rate fluctuations. The collar agreement covers a period of three years, matures in the
same amounts and over the same periods as the related debt and has a cap of 6.0% and a floor of 4.5%. This
derivative has been designated as a cash flow hedge for accounting purposes. As of December 31, 2004, the
notional amount of the interest rate collar was £
5,115,000 ($9,713,000). The collar was in a neutral position
as of December 31, 2004 and in a loss position of approximately $39,000 as of December 31, 2003, and,