Harris Teeter 2009 Annual Report Download - page 25

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The Company’s principal source of liquidity has been cash generated from operating activities and
borrowings available under the Company’s credit facility. During fiscal 2009, the net cash provided by operating
activities was $233.7 million, compared to $227.2 million during fiscal 2008 and $212.6 million during fiscal
2007. Investing activities during fiscal 2009 required net cash of $218.8 million, compared to $226.2 million
during fiscal 2008 and $204.8 million during fiscal 2007. Capital spending has been financed by cash provided
by operating activities along with borrowings under the Company’s credit facility. Financing activities for
fiscal 2009 utilized $6.9 million of cash and included an additional $23.9 million of borrowings under the
Company’s credit facility. Financing activity also includes $17.5 million for the payment of dividends in fiscal
2009, compared to $23.2 million in fiscal 2008 and $21.1 million in fiscal 2007.
During fiscal 2009, consolidated capital expenditures totaled $209.2 million. Harris Teeter capital
expenditures were $206.7 million in fiscal 2009, compared to $192.2 million in fiscal 2008 and $205.5 million
in fiscal 2007. A&E’s capital expenditures were $2.5 million during fiscal 2009, compared to $7.3 million in
fiscal 2008 and $7.7 million in fiscal 2007. In connection with the development of certain of its new stores,
Harris Teeter invested an additional $7.6 million which was effectively offset by $7.5 million received from
property investment sales and partnership distributions during fiscal 2009. Also in fiscal 2009, A&E invested
an additional $8.7 million in Vardhman and an additional $0.7 million in its joint venture in Brazil. Fiscal 2010
consolidated capital expenditures are planned to total approximately $155 million, consisting of $150 million for
Harris Teeter and $5 million for A&E. Harris Teeter anticipates that its capital for new store growth and store
remodels will be concentrated in its existing markets in fiscal 2010 as well as the foreseeable future. A&E expects
to mainly invest in the modernization of its global operations. Such capital investment is expected to be financed
by internally generated funds, liquid assets and borrowings under the Company’s credit facility. Management
believes that the Company’s revolving line of credit provides sufficient liquidity for what management expects
the Company will require through the expiration of the line of credit in December 2012.
The Company’s credit facility was entered into on December 20, 2007 with eleven banks and provides for
a five-year revolving credit facility (“Revolving Credit Facility”) in the aggregate amount of up to $350 million
and a non-amortizing term loan of $100 million due December 20, 2012. The credit agreement also provides
for an optional increase of the Revolving Credit Facility by an additional amount of up to $100 million and two
1-year maturity extension options, both of which require the consent of the lenders. The amount which may
be borrowed from time to time and the interest rate on any outstanding borrowings are each dependent on a
leverage factor. The leverage factor is based on a ratio of rent-adjusted consolidated funded debt divided by
earnings before interest, taxes, depreciation, amortization and operating rents, as set forth in the credit agreement.
The more significant of the financial covenants which the Company must meet during the term of the credit
agreement include a maximum leverage ratio and a minimum fixed charge coverage ratio. As of September 27,
2009, the Company was in compliance with all financial covenants of the credit agreement and $52.9 million
of borrowings were outstanding under the Revolving Credit Facility. Issued letters of credit reduce the amount
available for borrowings under the Revolving Credit Facility and amounted to $22.1 million as of September
27, 2009. In addition to the $275.0 million of borrowings available under the Revolving Credit Facility as of
September 27, 2009, the Company has the capacity to borrow up to an aggregate amount of $32.3 million from
two major U.S. life insurance companies utilizing certain insurance assets as collateral. In the normal course of
business, the Company will continue to evaluate other financing opportunities based on the Company’s needs
and market conditions.
Covenants in certain of the Company’s long-term debt agreements limit the total indebtedness that the
Company may incur. As of September 27, 2009, the amount of additional debt that could be incurred within
the limitations of the most restrictive debt covenants exceeded the additional borrowings available under the
Revolving Credit Facility. As such, Management believes that the limit on indebtedness does not restrict the
Company’s ability to meet future liquidity requirements through borrowings available under the Company’s
Revolving Credit Facility, including any liquidity requirements expected in connection with the Company’s
expansion plans for the foreseeable future.