CompUSA 2012 Annual Report Download - page 31

Our primary liquidity needs are to support working capital requirements in our business, including working capital for the exit from the PC
manufacturing business, opening a shared services center in Hungary, reorganizing our European operations, including separation costs, the new
distribution and call center for our Industrial Products segment, funding capital expenditures, including those related to our retail stores and
information technology systems, implementing new inventory and warehouse functions in Europe, continued investment in upgrading and
expanding our technological capabilities, repaying outstanding debt, special dividends declared by our Board of Directors and acquisitions. We
rely principally upon operating cash flows to meet these needs. We believe that cash flows from operations and our availability under credit
facilities will be sufficient to fund our working capital and other cash requirements for the next twelve months. We believe our current capital
structure and cash resources are adequate for our internal growth initiatives. To the extent our growth initiatives expand, including major
acquisitions, we would seek to raise additional capital. We believe that, if needed, we can access public or private funding alternatives to raise
additional capital.
Our working capital increase in 2012 is primarily the result of increased cash, accounts receivable, and prepaid balances offset by increased
accounts payable, accrued expenses and other current liabilities balances compared to 2011. Accounts receivable days outstanding were at 29.0
in 2012 up from 27.0 in 2011. We expect that future accounts receivable and inventory balances will fluctuate with net sales and the mix of our
net sales between consumer and business customers.
Net cash provided by operating activities from continuing operations was $75.4 million, $18.4 million, and $64.7 million during 2012, 2011, and
2010, respectively. The increase in cash provided by operating activities in 2012 compared to 2011 resulted from a $104.2 million increase in
our working capital accounts, primarily the result of increased payable balances at year end offset by a $47.2 million decrease in net income
adjusted by non-cash items, such as asset impairment charges, depreciation and provision for deferred income taxes. The decrease in cash
provided by operating activities in 2011 compared to 2010 resulted from changes in our working capital accounts which used $49.2 million
offset by a $2.9 million increase in net income adjusted by other non-cash items, such as depreciation expense. Net cash used in operating
activities from discontinued operations during 2012 and 2011 was $0.4 million and $0.2 million, respectively and net cash provided by
discontinued operations in 2010 was $0.2 million.
Net cash used in investing activities from continuing operations was $12.0 million for 2012 and were for warehouse racking systems for the new
distribution center, network upgrades, fabrication equipment, expenditures for a new retail store opening, upgrades and enhancements to our
information and communications systems hardware. In 2011, net cash used in investing activities was $12.3 million, primarily for upgrades and
enhancements to our information and communication systems hardware and software and expenditures in retail stores in North America. In
2010, net cash used in investing activities was $24.7 million, primarily for capital expenditures including expenditures for the second North
American distribution center for the Technology Products segment.
Net cash used in financing activities from continuing operations was $11.1 million in 2012, $0.5 million in 2011 and $4.5 million in 2010. In
2012, we paid a special dividend of $9.1 million and repaid approximately $2.8 million of capital lease obligations. Net proceeds and excess tax
benefits from stock option exercises provided $0.8 million. In 2011, we borrowed and repaid approximately $10.9 million from revolving credit
and short term debt facilities. We repaid approximately $2.5 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,
we borrowed and repaid approximately $261.7 million against our credit facilities. We repaid approximately $13.2 million in short term debt and
approximately $1.3 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. Net cash used in financing
activities from discontinued operations was $0 million, $0.2 million and $0.2 million for 2012, 2011 and 2010, respectively.
The Company maintains a $125.0 million (which may be increased to $200.0 million, subject to certain conditions) secured revolving credit
agreement with a group of financial institutions which provides for borrowings in the United States. The credit facility has a five year term and
expires in October 2015. Borrowings are secured by substantially all of the Company’s assets, including accounts receivable, inventory and
certain other assets, subject to limited exceptions. The 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 a minimum level of availability be maintained. If such
availability is not maintained, the Company will be required to maintain a fixed charge coverage ratio (as defined). 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. The
interest rate under this facility is computed at applicable market rates based on LIBOR or the Prime Rate, plus an applicable margin. The
applicable margin varies based on borrowing base availability. As of December 31, 2012, eligible collateral under this agreement was $110.6
million, total availability was $104.6 million, total outstanding letters of credit were $6.0 million and there were no outstanding advances. The
Company was in compliance with all of the covenants under this facility as of December 31, 2012.
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