Harman Kardon 2009 Annual Report Download - page 86

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Harman International Industries, Incorporated and Subsidiaries
(Dollars in thousands, except per-share data and unless otherwise indicated)
of available credit under the revolving credit facility from $300 million to $270 million. Interest rates for
borrowings under the Amended Credit Agreement were increased to three percent above the applicable base rate
for base rate loans and four percent over LIBOR for Eurocurrency loans. In addition, the annual facility fee rate
payable under the Amended Credit Agreement increased to one percent. The interest rate on our old revolving
credit facility was based on LIBOR plus 37 to 90 basis points, plus a commitment fee of 8 to 22.5 basis points.
The interest rate spread and commitment fee were determined based upon our interest coverage ratio and senior
unsecured debt rating. In connection with the Amended Credit Agreement, we incurred $9.7 million in fees and
other expenses which have been capitalized within other current assets and other assets in our Consolidated
Balance Sheets and which are amortized over the term of the Amended Credit Agreement as interest expense in
our Consolidated Statements of Operations.
In connection with our public offering of common stock, described in Note 11 – Shareholder’s Equity and
Share-Based Compensation, on June 15, 2009, the Borrowers entered into the First Amendment to the Amended
Credit Agreement (the “First Amendment”). The purpose of the First Amendment was to reduce the Equity
Prepayment Percentage, as defined in the Amended Credit Agreement from 50 percent to 20 percent for a limited
period of time ending on June 30, 2009. The Equity Prepayment Percentage is the amount, expressed as a
percentage, of net cash proceeds received from the public offering of our common stock that we had to repay
under the revolving credit facility. As a result, we repaid $38 million of borrowings under the Amended Credit
Agreement, which represented 20 percent of the net cash proceeds received from the public offering. In addition,
our borrowing capacity under the Amended Credit Agreement was reduced by $38 million to a net borrowing
capacity of $232 million at June 30, 2009. In connection with the reduction in our borrowing capacity, we wrote
off $1.2 million of debt issuance costs to interest expense in our Consolidated Statements of Operations,
representing our net reduction in borrowing capacity in accordance with EITF 98-14, “Debtor’s Accounting for
Changes in Line-of-Credit or Revolving Debt Agreements.” At June 30, 2009, the unamortized balance of debt
issuance costs was $7.5 million.
At June 30, 2009, we had no available borrowing capacity under the Amended Credit Agreement and
outstanding borrowings of $234.7 million, consisting of $227.3 million under the revolving credit facility and
outstanding letters of credit of $7.4 million. Our total borrowings exceeded our borrowing capacity due to foreign
currency translation. The Amended Credit Agreement contains a provision that allows our total outstanding
borrowings to exceed the borrowing capacity by 5 percent, which is equal to $243.6 million. At June 30, 2009,
we had not exceeded this amount.
In accordance with the Amended Credit Agreement, we are required to maintain funds on deposit in a
separate bank account in an aggregate amount equal to the outstanding letters of credit which are undrawn and
unexpired. At June 30, 2009, we had $8.0 million on deposit in a separate bank account to satisfy this
requirement.
The Amended Credit Agreement contains financial and other covenants that, among other things:
• Requires us to maintain the following levels and ratios:
• Consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”) must be
above specified amounts based on a schedule starting at $100 million for the four-quarter period
ending June 30, 2010, and increasing on a quarterly basis until reaching $250 million for the four-
quarter period ending December 31, 2011;
• Our minimum liquidity amount (“Liquidity Amount”) may not be less than: (a) $150 million for
the fiscal quarter ending June 30, 2009; and (b) $100 million for the fiscal quarter ending
September 30, 2009 and each fiscal quarter thereafter, subject to certain exceptions. Liquidity
Amount is defined as cash, subject to certain exceptions, plus availability on the Amended Credit
Agreement; and
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