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excess tax benefits from stock-based awards. The repayment of long-term debt under the term loan included a voluntary prepayment of
approximately $25.4 million in December 2010, of which approximately $19.6 million would have been required to be paid in 2011.
Net cash used in financing activities attributable to continuing operations in 2009 was $69.7 million related to the $50.0 million repayment
of long-term debt under the term loan which included a voluntary prepayment of $35 million in December 2009, of which approximately $30
million would have been required to be paid in March 2010 through an “excess cash flow” payment as required by the terms of the credit
agreement. The credit agreement requires an “excess cash flow” payment if HSNi’s leverage ratio is above 1.75x. Since HSNi’s leverage ratio
was below 1.75x as of December 31, 2010 and 2009, “excess cash flow” payments were not required in either of the subsequent years. In
addition, HSNi made a $20.0 million repayment of the revolving credit facility in the first quarter of 2009.
The credit agreement contains two principal financial covenants consisting of a maximum leverage ratio, as defined in the credit
agreement, of 2.75x and a minimum interest coverage ratio, as defined in the credit agreement, of 3.00x, among other covenants. HSNi was in
compliance with all such covenants as of December 31, 2010, with a leverage ratio of 1.21x and an interest coverage ratio of 8.57x. The amount
available under the credit agreement is reduced by the amount of commercial and standby letters of credit issued under the revolving credit
facility portion of the agreement. As of December 31, 2010, there were $26.4 million of outstanding commercial and standby letters of credit
issued under the revolving credit facility. The ability to draw funds under the revolving credit facility is dependent upon meeting the
aforementioned financial covenants, which may limit HSNi’s ability to draw the full amount of the facility. As of December 31, 2010, the
additional amount that could be borrowed under the revolving credit facility, in consideration of the financial covenants and outstanding letters
of credit, was approximately $123.6 million.
Net cash provided by discontinued operations in 2010 and 2009 of less than $0.1 million and $1.0 million, respectively, relates primarily to
the operations of HSNi’s international subsidiaries. HSNi does not expect future cash flows associated with existing discontinued operations to
be material.
HSNi does not currently have any material commitments for capital expenditures; however, management does anticipate that HSNi will
need to make capital and other expenditures in connection with the development and expansion of its operations. HSNi’s ability to fund its cash
and capital needs will be affected by its ongoing ability to generate cash from operations, the overall capacity and terms of its financing
arrangements as discussed above, and access to the capital markets. HSNi believes that its cash on hand, its anticipated operating cash flows, its
available unused portion of the revolving credit facility and its access to capital markets will be sufficient to fund its operating needs, capital,
investing and other commitments and contingencies for the foreseeable future.
Contractual Obligations and Commercial Commitments
The following table presents HSNi’s contractual obligations as of December 31, 2010:
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Payments Due by Period
Contractual Obligations
Total
Amounts
Committed
Less Than
1 Year
1
-
3 Years
3
-
5 Years
More Than
5 Years
(In thousands)
Long
-
term debt, including current maturities
$
309,841
$
5,820
$
64,021
$
—
$
240,000
Interest on debt (a)
165,346
28,607
55,739
54,000
27,000
Operating leases
159,814
27,583
45,306
35,354
51,571
Purchase obligations (b)
275,062
92,393
170,382
12,287
—
Total contractual obligations
$
910,063
$
154,403
$
335,448
$
101,641
$
318,571
(a)
Includes interest on variable rate debt estimated using the rate in effect as of December 31, 2010.