Supercuts 2006 Annual Report Download - page 92

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
During March of fiscal year 2002, the Company completed a $125.0 million private debt placement. Of this amount, $58.0 million was
issued at a fixed coupon rate of 6.73 percent with a final maturity date of March 15, 2009 and $67.0 million was issued at a fixed coupon rate
of 7.20 percent with a final maturity date of March 15, 2012. This private placement debt is unsecured and payments are due on a semi-annual
basis. In anticipation of the new Master Note Purchase Agreement discussed above, the Company closed on the First Amendment to Note
Purchase Agreement (related to this private debt placement) in April 2005. The amendment modified certain financial covenants so that they
would be more consistent with the financial covenants in the new Master Note Purchase Agreement.
Revolving Credit Facility
The Company has an unsecured $350.0 million revolving credit facility with rates tied to LIBOR plus 87.5 basis points. The revolving
credit facility requires a quarterly fee related to the unused portion of the facility of 17.5 basis points. Both the LIBOR credit spread and the
unused fee are based on the Company’s debt-to-EBITDA ratio at the end of each fiscal quarter. The facility expires in April 2010.
The credit agreement includes financial covenants and other customary terms and conditions. The maturity date for the facility may be
accelerated upon the occurrence of various events of default, including breaches of the credit agreement, certain cross-
default situations, certain
bankruptcy related situations, and other customary events of default. The interest rates under the facility vary and are based on a bank’s
reference rate, the federal funds rate and/or LIBOR, as applicable, and a leverage ratio for the Company determined by a formula tied to the
Company’s debt and its adjusted income.
As of June 30, 2006 and 2005, the Company had outstanding borrowings under this facility of $63.0 and $6.8 million, respectively.
Because the credit agreement provides for possible acceleration of the maturity date of the facility based on provisions that are not objectively
determinable, the outstanding borrowings as of June 30, 2006 and 2005 are classified as part of the current portion of the Company’s long-
term
debt. Additionally, the Company had outstanding standby letters of credit under the facility of $60.6 and $29.1 million at June 30, 2006 and
2005, respectively, primarily related to its self-insurance program and Department of Education requirements surrounding Title IV funding.
Unused available credit under the facility at June 30, 2006 and 2005 was $226.4 and $314.2 million, respectively.
Equipment and Leasehold Notes Payable
The equipment and leasehold notes payable are primarily comprised of capital lease obligations which are payable in monthly installments
through fiscal year 2011. The capital lease obligations are collateralized by the assets purchased under the agreement.
Other Notes Payable
Within other notes payable are mortgage notes for $8.8 and $10.3 million at June 30, 2006 and 2005, respectively, related to the
Company’s distribution centers in Chattanooga, Tennessee and Salt Lake City, Utah. The note for the Salt Lake City distribution center is
secured by that distribution center and the note for the Chattanooga distribution center is unsecured. Additionally, the Company had $3.9 and
$1.2 million in unsecured outstanding notes at June 30, 2006 and 2005, respectively, related to debt assumed in acquisitions.
5. DERIVATIVE FINANCIAL INSTRUMENTS:
The primary market risk exposure of the Company relates to changes in interest rates in connection with its debt, some of which bears
interest at variable rates based on LIBOR plus an applicable borrowing
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