Ingram Micro 2008 Annual Report Download - page 49

In connection with the senior unsecured term loan facility above, we entered into an interest rate swap
agreement for $200 million of the term loan principal amount, the effect of which was to swap the LIBOR portion of
the floating-rate obligation for a fixed-rate obligation. The fixed rate including the variable margin is approximately
5%. The notional amount on the interest rate swap agreement reduces by $3.1 million quarterly beginning
November 2009, consistent with the amortization schedule of the senior unsecured term loan discussed above. We
account for the interest rate swap agreement as a cash flow hedge. At January 3, 2009, the mark-to-market value of
the interest rate swap amounted to $11.8 million which is recorded in other comprehensive income with an
offsetting adjustment to the hedged debt, bringing the total carrying value of the senior unsecured term loan to
$261.8 million.
We have a $275 million revolving senior unsecured credit facility with a bank syndicate in North America,
which matures in August 2012. The interest rate on the revolving senior unsecured credit facility is based on
LIBOR, plus a predetermined margin that is based on our debt ratings and leverage ratio. At January 3, 2009 and
December 29, 2007, we had no borrowings under this North American revolving senior unsecured credit facility.
This credit facility may also be used to issue letters of credit. At January 3, 2009 and December 29, 2007, letters of
credit of $9.1 million and $41.2 million, respectively, were issued to certain vendors and financial institutions to
support purchases by our subsidiaries, payment of insurance premiums and flooring arrangements. Our available
capacity under the agreement is reduced by the amount of any issued and outstanding letters of credit.
In October 2008, we terminated our 100 million Australian dollar senior unsecured credit facility with a bank
syndicate, which was due to expire in December 2008. During the fourth quarter of 2008, the terminated facility was
replaced with a 20 million Australian dollar (approximately $14 million at January 3, 2009) revolving senior
unsecured credit facility, which expires in December 2011. At December 29, 2007, we had borrowings of
$0.9 million under the former facility. We had no borrowings under the new facility at January 3, 2009.
We also have additional lines of credit, short-term overdraft facilities and other credit facilities with various
financial institutions worldwide, which provide for borrowing capacity aggregating approximately $803 million at
January 3, 2009. Most of these arrangements are on an uncommitted basis and are reviewed periodically for
renewal. At January 3, 2009 and December 29, 2007, we had $118.6 million and $134.7 million, respectively,
outstanding under these facilities. The weighted average interest rate on the outstanding borrowings under these
facilities, which may fluctuate depending on geographic mix, was 5.1% and 6.4% per annum at January 3, 2009 and
December 29, 2007, respectively. At January 3, 2009 and December 29, 2007, letters of credit totaling $31.6 million
and $30.2 million, respectively, were issued principally to certain vendors to support purchases by our subsidiaries.
The issuance of these letters of credit reduces our available capacity under these agreements by the same amount.
Covenant Compliance
We are required to comply with certain financial covenants under the terms of some of our financing facilities,
including restrictions on funded debt and covenants related to tangible net worth, leverage and interest coverage
ratios, and trade accounts receivable portfolio performance, including metrics related to receivables and payables.
We are also restricted by other covenants, including but not limited to, restrictions on the amount of additional
indebtedness we can incur, dividends we can pay, and the amount of common stock that we can repurchase annually.
At January 3, 2009, we were in compliance with all material covenants or other material requirements set forth in
our accounts receivable financing programs and credit agreements or other agreements with our creditors as
discussed above. The impairment charge to goodwill of $742.6 million in the fourth quarter of 2008 did not affect
our compliance with any of our covenants.
Contractual Obligations
The following summarizes our financing capacity and contractual obligations at January 3, 2009 (in millions),
and the effects of scheduled payments on such obligations are expected to have on our liquidity and cash flows in
future periods. The amounts do not include interest. Except for interest related to $200 million of the senior
unsecured term loan, which is fixed at approximately 5%, through the interest rate swap, all other interest is incurred
at variable rates (see Note 6 to our consolidated financial statements).
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