Office Depot 2009 Annual Report Download - page 33

LIQUIDITY AND CAPITAL RESOURCES
Liquidity
At December 26, 2009, we had approximately $660 million in cash and equivalents and another $726 million
available under our asset based credit facility based on the December borrowing base certificate. We consider our
resources adequate to satisfy our cash needs at least over the next twelve months. We anticipate that market
conditions will continue to be challenging through 2010, and in response, we are focused on maximizing cash
flow. We have made strong progress towards reducing inventory levels and remain focused on accelerating the
collection of our accounts receivable balances. During the first half of 2009, we entered into sale-leaseback
transactions and sales of certain assets, and during the third quarter of 2009, we entered into a committed
factoring arrangement in France that allows us to sell certain foreign trade receivables to a third party which
provides up to approximately $85 million additional liquidity, depending on the level of eligible receivables and
currency exchange rates. As of December 26, 2009, we had not sold any receivables under this agreement.
We hold cash throughout our service areas, but we principally manage our cash through regional headquarters in
North America and Europe. We may move cash between those regions from time to time through short-term
transactions and have used these cash transfers at the end of fiscal quarterly periods to pay down borrowings
outstanding under our credit facilities. Although such transfers and debt repayments took place during the first
three quarters of 2007, we completed a non-taxable distribution to the U.S. in the amount of $220 million during
the fourth quarter of 2007, thereby permanently repatriating this cash. Additional distributions, including
distributions of foreign earnings or changes in long-term arrangements could result in significant additional U.S.
tax payments and income tax expense. Currently, there are no plans to change our expectation of foreign earnings
reinvestment or the long-term nature of our intercompany arrangements, though accounting impacts of any
change in these classifications would be recognized in the period of the change.
On September 26, 2008, the company entered into a Credit Agreement (the “Agreement”) with a group of
lenders, which provides for an asset based, multi-currency revolving credit facility (the “Facility”) of up to $1.25
billion. The amount that can be drawn on the Facility at any given time is determined based on percentages of
certain accounts receivable, inventory and credit card receivables (the “Borrowing Base”). At December 26,
2009, the company was eligible to borrow approximately $872 million of the Facility. The Facility includes a
sub-facility of up to $250 million which is available to certain of the company’s European subsidiaries (the
“European Borrowers”). Certain of the company’s domestic subsidiaries (the “Domestic Guarantors”) guaranty
the obligations under the Facility. The Agreement also provides for a letter of credit sub-facility of up to $400
million. All loans borrowed under the Agreement may be borrowed, repaid and reborrowed from time to time
until September 26, 2013 (or, in the event that the company’s existing 6.25% Senior Notes are not repaid, then
February 15, 2013), on which date the Facility matures.
All amounts borrowed under the Facility, as well as the obligations of the Domestic Guarantors, are secured by a
lien on the company’s and such Domestic Guarantors’ accounts receivables, inventory, cash and deposit accounts.
All amounts borrowed by the European Borrowers under the Facility are secured by a lien on such European
Borrowers’ accounts receivable, inventory, cash and deposit accounts, as well as certain other assets. At the
company’s option, borrowings made pursuant to the Agreement bear interest at either, (i) the alternate base rate
(defined as the higher of the Prime Rate (as announced by the Agent) and the Federal Funds Rate plus 1/2 of 1%) or
(ii) the Adjusted LIBOR Rate (defined as the LIBOR Rate as adjusted for statutory revenues) plus, in either case, a
certain margin based on the aggregate average availability under the Facility. The Agreement also contains
representations, warranties, affirmative and negative covenants, and default provisions which are conditions
precedent to borrowing. The most significant of these covenants and default provisions include a capital expenditure
limitation of $500 million in any fiscal year and limitations in certain circumstances on acquisitions, dispositions,
share repurchases and the payment of cash dividends. The cash dividend restrictions are based on the then-current
and proforma fixed charge coverage ratio and borrowing availability at the point of consideration. The company has
never declared or paid cash dividends on its common stock. The company was in compliance with all financial
covenants at December 26, 2009. The Facility also includes provisions whereby if the global availability is less than
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