Circuit City 2011 Annual Report Download - page 29

Net cash used in financing activities was $0.7 million in 2011. We borrowed and repaid approximately $10.9 million from revolving credit and short
term debt facilities. We also repaid approximately $2.7 million in capital lease obligations. Net proceeds and excess tax benefits from stock option
exercises provided $0.5 million and we received proceeds of approximately $1.5 million from the Recovery Zone Facility Bond. In 2010 net cash used
in financing activities was $4.7 million. We borrowed and repaid approximately $261.7 million against our credit facilities. We repaid approximately
$13.2 million in short term debt and approximately $1.5 million in capital lease obligations and received proceeds of approximately $7.9 million from
the Recovery Zone Facility Bond. Net proceeds and excess tax benefits from stock option exercises provided approximately $2.1 million of cash. In
2009, net cash used in financing activities was $31.5 million. We repaid approximately $3.6 million in short-term debt and approximately $0.8 million
in capital lease obligations, paid a special dividend of $27.6 million, and repurchased Company stock of approximately $1.2 million. Net proceeds and
excess tax benefits from stock option exercises provided approximately $1.7 million of cash.
On December 15, 2011, the Company entered into an amendment of its second amended and restated credit agreement. The amendment increased the
maximum availability under the United States revolving loan component of the facility by $25 million to a total of $125.0 million (which may be
increased to $200.0 million, subject to certain conditions), eliminated the Company’s unneeded $25 million United Kingdom revolving loan
component of the facility, released the related United Kingdom assets that were pledged to secure this component and removed the Company’s United
Kingdom subsidiary from the facility. The facility has a five year term expiring in October 2015. The borrowings under the agreement are subject to
borrowing base limitations of up to 85% of eligible accounts receivable and up to 40% of qualified inventories. Borrowings are secured by
substantially all of the Company’
s assets, including accounts receivable, inventory and certain other assets, subject to limited exceptions. The amended
and restated credit agreement contains certain operating, financial and other covenants, including limits on annual levels of capital expenditures,
availability tests related to payments of dividends and stock repurchases and fixed charge coverage tests related to acquisitions. 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). As of December 31, 2011, the Company was in compliance with all of the covenants under the credit facility.
Eligible collateral under the facility was $119.5 million, total availability was $113.1 million, outstanding letters of credit were $6.4 million and there
were no outstanding advances.
The Company’s Inmac WStore subsidiary maintains a secured revolving credit agreement with a financial institution in France which is secured by
WStore Europe SA accounts receivable balances. Available amounts for borrowing under this facility includes all accounts receivable balances not
over 60 days past due reduced by the greater of €4.0 million or 10% of the eligible accounts receivable. As of December 31, 2011, there was
availability under this credit facility of approximately €24.1 million ($31.2 million) and there were no outstanding borrowings. The credit facility
duration is indefinite; however either party may cancel the agreement with sixty days notice. Under this agreement the Company is subject to certain
non-financial covenants which it was in compliance with at December 31, 2011.
On September 23, 2010, the Company (through a subsidiary) completed tax exempt Recovery Zone Facility Bond (the “Bonds”) financing for up to
$15 million with the Development Authority of Jefferson, Georgia (the “Authority”). The Bonds were issued by the Authority and initially purchased
by GE Government Finance Inc., and mature on October 1, 2018. Interest on the Bonds is calculated at the rate of 4.15% per annum and principal and
interest payments are due monthly. The proceeds of the Bonds are used to finance or repay the costs of capital equipment purchased for the Company’
s
distribution facility located in Jefferson, Georgia. The purchase and installation of all the equipment for the facility was completed by December 31,
2011. Pursuant to the transaction, the Company will transfer to the Authority for consideration consisting of the Bond proceeds ownership of the
equipment to be used at the distribution facility and the Authority in turn will lease the equipment to the Company’s subsidiary pursuant to a capital
equipment lease expiring October 1, 2018. Under the capital equipment lease the Company has the right to acquire ownership of the equipment at any
time for a purchase price sufficient to pay off all principal and interest on the Bonds, plus $1.00.
Our earnings and cash flows are seasonal in nature, with the fourth quarter of the fiscal year generating higher earnings and cash flows than the other
quarters. Levels of earnings and cash flows are dependent on factors such as consolidated gross margin and selling, general and administrative costs as
a percentage of sales, product mix and relative levels of domestic and foreign sales. Unusual gains or expense items, such as special (gains) charges
and settlements, may impact earnings and are separately disclosed. We expect that past performance may not be indicative of future performance due
to the competitive nature of our Technology Products segment where the need to adjust prices to gain or hold market share is prevalent.
Macroeconomic conditions, such as business and consumer sentiment, may affect our revenues, cash flows or financial condition. However, we do not
believe that there is a direct correlation between any specific macroeconomic indicator and our revenues, cash flows or financial condition. We are not
currently interest rate sensitive, as we have significant cash balances and minimal debt.
We anticipate cash needs to support our growth and expansion plans, continued investment in upgrading and expanding our technological capabilities
and information technology infrastructure, opening of new retail stores, and in building out and expanding our distribution center facilities and
inventory systems.
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