Home Shopping Network 2012 Annual Report Download - page 30

Table of Contents
The Credit Agreement contains various covenants, limitations and events of default customary for similar facilities including a maximum
leverage ratio of 3.00x and a minimum interest coverage ratio of 3.00x. HSNi was in compliance with all such covenants as of December 31,
2012, with a leverage ratio of 0.80x and an interest coverage ratio of 16.72x.
Loans under the Credit Agreement bear interest at a per annum rate equal to LIBOR plus a predetermined margin that ranges from 1.50%
to 2.25% or the Base Rate (as defined in the Credit Agreement) plus a predetermined margin that ranges from 0.50% to 1.25%. HSNi can elect
to borrow at either LIBOR or the Base Rate and the predetermined margin is based on HSNi's leverage ratio. The term loan interest rate as of
December 31, 2012 was 1.72%. HSNi pays a commitment fee ranging from 0.25% to 0.40% (based on the leverage ratio) on the unused portion
of the revolving credit facility.
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, which totaled $29.2 million as of December 31, 2012. 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, 2012, 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 $320.8 million.
To reduce our future exposure to rising interest rates under our credit facility, we entered into a forward-starting swap in December 2012
that effectively converts $187.5 million of our variable rate term loan to a fixed-rate basis beginning January 2014 through April 2017. For
additional information related to our interest rate swaps, refer to Note 8 of Notes to Consolidated Financial Statements.
On July 28, 2008, HSNi issued $240 million of 11.25% Senior Notes due 2016. The Senior Notes were fully redeemed on August 1, 2012
for $253.5 million, or 105.625% of the principal amount. HSNi drew $250 million from its term loan on July 31, 2012 and used its cash on hand
to fund the redemption. HSNi reported approximately $18.6 million in pre-
tax charges primarily associated with redemption of the Senior Notes.
These charges resulted from the redemption premium of $13.5 million and $5.1 million related to the write-off of unamortized issuance costs
and original issue discount.
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.
On September 27, 2011, HSNi’s Board of Directors approved a share repurchase program which allows HSNi to purchase 10 million
shares of its common stock from time to time through privately negotiated and/or open market transactions. The timing of any repurchases and
actual number of shares repurchased will depend on a variety of factors, including the stock price, corporate and regulatory requirements,
restrictions under HSNi’s debt obligations and other market and economic conditions. The repurchase program may be suspended or
discontinued by HSNi at any time. For the year ended December 31, 2012, HSNi repurchased approximately 5.5 million shares at a cost of
$220.6 million, or an average cost of $40.40 per share. As of December 31, 2012, approximately 3.7 million shares remained authorized for
repurchase under the program.
Effective February 13, 2013, HSNi's Board of Directors approved a cash dividend of $0.18 per common share. The dividend will be paid
on March 20, 2013 to HSNi's record holders as of March 6, 2013.
26