Harman Kardon 2010 Annual Report Download - page 63

will also deliver, at our election, cash or common stock or a combination of cash and common stock for the
conversion value in excess of $1,000. If not converted, the Convertible Senior Notes are due October 15, 2012.
Debt issuance costs of $4.8 million associated with this transaction were capitalized and are being amortized
to interest expense in our Consolidated Statements of Operations over the term of the Convertible Senior
Notes. The unamortized balance of debt issuance costs at June 30, 2010 and June 30, 2009 was $1.8 million and
$3.2 million, respectively.
Covenants
The Indenture contains covenants, one of which requires us to calculate the ratio of Consolidated Total Debt
to Consolidated EBITDA, as defined in the Indenture, each time we incur additional indebtedness, for the most
recently ended four quarter period. On January 12, 2010, we entered into a supplemental indenture to the
Indenture (the “Supplemental Indenture”) which amended this covenant. Under the Supplemental Indenture, we
are now permitted to, without complying with the ratio of Consolidated Total Debt to Consolidated EBITDA of
3.25 to 1.00: (a) incur revolving extensions of credit under the Amended Credit Agreement, up to a maximum
amount of $231.6 million, and (b) incur additional indebtedness, subject to a requirement to make a pro rata offer
to purchase a principal face amount of the Convertible Senior Notes equal to 50 percent of the aggregate amount
of such indebtedness so incurred, plus accrued and unpaid interest thereon. This prepayment obligation survives
until the earlier to occur of (i) October 23, 2010 or (ii) the date on which less than $200 million in principal
amount of Convertible Senior Notes are outstanding, subject in all instances to the satisfaction of certain
conditions. In January 2010, prior to entering into the Supplemental Indenture, we paid down $222.5 million of
outstanding debt under the Amended Credit Agreement, which amount represented the total outstanding
borrowings at that time. At June 30, 2010, we were in compliance with all covenants under the Indenture, as
amended, and we believe that we will be in compliance with these covenants for at least the next 12 months.
Off-Balance Sheet Arrangements
Although we rarely utilize off-balance sheet arrangements in our operations, we enter into operating leases
for land, buildings and equipment in the normal course of business which are not included in our Consolidated
Balance Sheets. In addition, we had outstanding letters of credit of $6.6 million and $7.4 million at June 30, 2010
and 2009, respectively, that were not included in our Consolidated Balance Sheets.
Contractual Obligations
We have obligations and commitments to make future payments under debt agreements and operating
leases. The following table details our financing obligations by due date:
Year Ending June 30,
($ in thousands) 2011 2012 2013 2014 2015 Thereafter Total
Short-term debt(a) ................... $ 13,472 $ — $ — $ — $ — $ — $ 13,472
Convertible senior notes(a) ............ — — 400,000 — — — 400,000
Capital leases(a) .................... 368 373——— — 741
Other long-term obligations(a) ......... 350 105 110 115 120 131 931
Firm commitments for capital
expenditures ..................... 7,693 — — — — — 7,693
Purchase obligations(b) ............... 217,885 — — — — — 217,885
Non-cancelable operating leases(c) ...... 32,646 30,835 29,360 25,104 21,496 57,127 196,568
Uncertain tax positions(d) ............. 20,560 — — — — — 20,560
Total contractual cash obligations ...... $292,974 $31,313 $429,470 $25,219 $21,616 $57,258 $857,850
(a) Refer to Note 9 – Debt in the Notes to the Consolidated Financial Statements for more information and for
interest payments associated with our long-term debt.
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