Circuit City 2006 Annual Report Download - page 23

the number of lenders participating and to provide for borrowings by both our United States and United Kingdom businesses.
The upgraded facility expires in October 2010. Borrowings under the agreement are subject to borrowing base limitations of
up to 85% of eligible accounts receivable and 40% of qualified inventories and are secured by accounts receivable,
inventories and certain other assets. The undrawn availability under the facility may not be less than $15 million until the last
day of any month in which the availability net of outstanding borrowings is at least $70 million. The revolving credit
agreement requires that we maintain a minimum level of availability. If such availability is not maintained, we will then be
required to maintain a fixed charge coverage ratio (as defined). The agreement contains certain other covenants, including
restrictions on capital expenditures and payments of dividends. We were in compliance with all of the covenants as of
December 31, 2006, except for the required timely submission of certain financial statements, for which we have obtained a
waiver. As of December 31, 2006, eligible collateral under the facility was $104.1 million, there were outstanding advances
of $9.3 million (all in the United Kingdom), outstanding letters of credit of $11.0 million and total availability of $83.8
million.
In connection with the amendment to our revolving credit agreement in October 2005, we terminated our £15 million
multi-currency credit facility with a financial institution in the United Kingdom, which was available to our United Kingdom
subsidiaries. We also paid off the remaining £4.7 million balance on our United Kingdom term loan, which we had entered
into in 2002 to finance the construction of our United Kingdom headquarters.
Our Netherlands subsidiary has a €5 million ($6.6 million at the December 31, 2006 exchange rate, which exchange
rate applies to all other Euro denominated amounts below) credit facility. 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, 2006 there were €2.2 million ($3.0 million) of borrowings outstanding under this line with interest payable at a rate of
5.0%. The facility expires in August 2007.
In April 2002, we entered into a ten year, $8.4 million mortgage loan on our Suwanee, Georgia distribution facility.
The mortgage had monthly principal and interest payments of $62,000 payable through May 2012, with a final additional
principal payment of $6.4 million at maturity in May 2012. The mortgage loan bore interest at 7.04% and was collateralized
by the underlying land and building. During the first quarter of fiscal 2006, we sold this facility and repaid the remaining
balance on the loan. The facility was replaced by a larger, leased distribution center in a nearby area.
We are obligated under non-cancelable operating leases for the rental of most of our facilities and certain of our
equipment which expire at various dates through 2026. We currently lease our New York facility from an entity owned by
Richard Leeds, Robert Leeds and Bruce Leeds, the Company’
s three principal shareholders and senior executive officers. The
annual rental totals $612,000 and the lease expires in 2007. We have sublease agreements for unused space we lease in
Compton, California and Wellingborough, England. In the event a sublessee is unable to fulfill its obligations, we would be
responsible for rent due under the lease. However, we expect the sublessees will fulfill their obligations under the leases.
Following is a summary of our contractual obligations for future principal payments on our debt, minimum rental
payments on our non-cancelable operating leases and minimum payments on our other purchase obligations at December 31,
2006 (in thousands):
After
2007 2008 2009 2010 2011 2011
---- ---- ---- ---- ----- -----
Contractual Obligations:
Payments on capital lease
obligations $573 $402 $81 $11 $10
Payments on non-cancelable
operating leases, net of
subleases 10,255 10,033 9,568 7,358 6,170 $51,719
Dividends payable 35,800
------
Purchase and other obligations 3,936 1,733 1,191 1,169 900 2,836
----- ----- ----- ----- --- -----
Total contractual obligations $50,564 $12,168 $10,840 $8,538 $7,080 $54,555
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Our purchase and other obligations consist primarily of certain employment agreements and service agreements.