Sunbeam 2004 Annual Report Download - page 23

Management’s Discussion and Analysis of Financial Condition and Results of Operations
(cont’d)
‰we issued an aggregate of 955,080 restricted shares of common stock under our 2003 Stock
Incentive Plan, of which, in conjunction with the AHI transaction, the restrictions on 735,000 of
these shares were lapsed at the time of issuance and we accelerated the granting of a further
140,000 of these shares; and
‰in anticipation of the additional floating rate debt financing required to complete the AHI
Acquisition, we entered into two interest rate swaps that converted an aggregate of $300 million
of existing floating rate interest payments under our term loan facility for a fixed obligation.
Specifically, in December 2004, in anticipation of the additional floating rate debt financing
required to complete the AHI Acquisition, we entered into two interest rate swaps, effective in January
2005, that converted an aggregate of $300 million of floating rate interest payments under our term loan
facility for a fixed obligation. The first interest rate swap, for $150 million of notional value, carries a
fixed interest rate of 3.625% per annum for a term of three years. The second interest rate swap, also for
$150 million of notional value, carries a fixed interest rate of 4.0675% per annum for a term of five
years. The swaps have interest payment dates that are the same as our term loan facilities. The swaps are
considered to be cash flow hedges and are also considered to be effective hedges against changes in
future interest payments of our floating-rate debt obligations for both tax and accounting purposes.
Gains and losses related to the effective portion of the interest rate swap will be reported as a component
of other comprehensive income and will be reclassified into earnings in the same period that the
hedged transaction affects earnings. As of December 31, 2004, the fair value of these interest rate swaps,
which was unfavorable in the amount of approximately $0.5 million, was included as an unrealized loss
in Accumulated Other Comprehensive Income on our Consolidated Balance Sheet.
On June 28, 2004, in connection with the USPC Acquisition, we completed our $116 million Term
B Add-on under the Second Amended Credit Agreement. The proceeds from the Term B Add-on were
used to partially fund the USPC Acquisition. The spread on the Term B Add-on was 2.25% over London
Interbank Offered Rate (“LIBOR”). Additionally, under this Second Amended Credit Agreement, the
spread on our existing Term B loan facility was reduced from 2.75% over LIBOR to 2.25% over LIBOR.
The Second Amended Credit Agreement did not significantly change the restrictions on the
conduct of our business or the financial covenants required in our previous senior credit facility
(“Amended Credit Agreement”) (see “2003 Activity” below). The Second Amended Credit Agreement,
which matures on April 24, 2008, also did not change the pricing and principal terms of our $70 million
revolving credit facility.
As of December 31, 2004, we had $302.9 million outstanding under our term loan facilities and no
outstanding amounts under the revolving credit facility of our Second Amended Credit Agreement. As
of December 31, 2004, net availability under the revolving credit facility was approximately $44.2 million,
after deducting $25.8 million of issued letters of credit. The letters of credit outstanding include an
amount of approximately $20 million securing a holdback on the USPC Acquisition (see “Acquisition
Activities” above). We are required to pay commitment fees on the unused balance of the revolving
credit facility.
As of December 31, 2004, we also had other debt outstanding in the amount of approximately $1.5
million, which principally consists of bank notes that are payable in equal quarterly installments through
April 2007 with rates of interest at Euro Interbank Offered Rate plus 1.00%.
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