Office Depot 2004 Annual Report Download - page 60

58 |Office Depot 2004 Annual Report
NOTE G—Debt
The debt components consisted of the following:
December 25, December 27,
(Dollars in thousands) 2004 2003
Current maturities of
long-term debt:
Capital lease obligations . . $ 13,673 $ 11,219
Other. . . . . . . . . . . . . . . . . . 1,470 1,697
$ 15,143 $ 12,916
Long-term debt, net of
current maturities:
Revolving credit facility. . . . $103,068 $100,102
$250 million senior
subordinated notes. . . . . —259,440
$400 million senior notes . . 403,771 398,923
Capital lease obligations . . 76,841 69,367
Other. . . . . . . . . . . . . . . . . . —1,470
$583,680 $829,302
In April 2004, we replaced our existing credit facility with a
$750 million 5-year unsecured multi-currency revolving credit
facility, which includes up to $350 million available for standby
and trade letters of credit. Upon mutual agreement, the maxi-
mum borrowing may be increased to $900 million. The agree-
ment provides borrowings up to the total amount in U.S. dollars,
British pounds, euro, or yen. We may elect interest periods of
one, two, three, six, nine or twelve months. Interest is based on
the London Interbank Offering Rate (“LIBOR”), plus a spread
determined at the time of usage. Based on current credit rat-
ings, borrowings include a spread of 0.70%. The effective inter-
est rate on yen borrowings at the end of 2004 was 0.763%.
At December 25, 2004, we had approximately $565.7 million
of available credit under our revolving credit facility, which
covers $81.9 million outstanding letters of credit. We had an
additional $8.2 million of letters of credit outstanding under a
separate trade agreement.
The credit facility in effect at December 27, 2003 allowed
borrowings up to $600 million and was an unsecured revolv-
ing credit facility that was due to mature in April 2005. Similar
to the current facility, this previous facility allowed us to select
currencies, and interest periods. Interest was based on either
LIBOR, U.S. prime, or a Eurocurrency rate, plus a spread to be
determined at the time of borrowing. At December 27, 2003, we
had yen borrowings equivalent to $100.1 million outstanding
with an average effective interest rate of 0.988%, and out-
standing letters of credit totaled $72.8 million.
In July 2001, we issued $250 million of senior subordinated
notes due on July 15, 2008. The notes were issued with a
coupon interest rate of 10.00%, payable semi-annually on
January 15 and July 15. In August 2001, we entered into LIBOR-
based fixed-to-variable rate swap agreements as a fair value
hedge of these notes. In September 2002, these interest rate
swap agreements were terminated and we received proceeds
of $18.8 million. The benefit associated with these proceeds
was being amortized over the remaining term of the notes,
lowering the effective interest rate on this borrowing to 8.7%.
In December 2004, we redeemed the entire issue of the $250
million senior subordinated notes, pursuant to the optional
redemption provisions of the subordinated notes indenture. The
payment of approximately $302 million included the principal,
accrued interest to the termination date, and contractual
interest, discounted at the appropriate U.S. Treasury rate plus
50 basis points. The redemption resulted in a fourth quarter
2004 charge of $45.4 million which included the make whole
payment, removal of deferred issuance costs, and the previ-
ously deferred gain related to the interest rate swap. The charge
is reported as loss on extinguishment of debt in the other
income (expense), net section of the Consolidated Statements
of Earnings.
In August 2003, we issued $400 million senior notes due
August 2013. These notes are not callable and bear interest at
the rate of 6.250% per year, to be paid on February 15 and
August 15 of each year. The notes contain provisions that, in cer-
tain circumstances, place financial restrictions or limitations on
us. Simultaneous with completing the offering, we liquidated a
treasury rate lock. The proceeds of $16.6 million are being amor-
tized over the term of the issue, reducing the effective interest
rate to 5.87%. During 2004, we entered into a series of fixed-to-
variable interest rate swap agreements as fair value hedges on
the $400 million of notes. The swaps qualify for shortcut hedge
accounting and no ineffectiveness has been recognized.
We are in compliance with all restrictive covenants included
in the above debt agreements.
Our scheduled debt maturities over the next five years
include $103 million for our revolving credit facility due in 2009;
$400 million for our senior notes is due thereafter.
OFFICE DEPOT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)