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This excerpt taken from the MHS 10-K filed Feb 24, 2009. Financing
Facilities
Five-Year
Credit Facilities
We have a senior unsecured credit facility consisting of a
$1 billion,
5-year
senior unsecured term loan and a $2 billion,
5-year
senior unsecured revolving credit facility. The term loan
matures on April 30, 2012, at which time the entire
facility is required to be repaid. If there are pre-payments on
the term loan prior to the maturity date, that portion of the
loan would be extinguished. At our current debt ratings, the
credit facilities bear interest at London Interbank Offered Rate
(“LIBOR”) plus a 0.45 percent margin, with a
10 basis point commitment fee due on the unused portion of
the revolving credit facility.
During 2008, our net borrowings under the revolving credit
facility decreased by approximately $400 million,
consisting of repayments of $2.2 billion and draw-downs of
$1.8 billion. As a result of this activity, the revolving
credit facility’s outstanding balance decreased from
$1.4 billion at fiscal year-end 2007 to $1.0 billion
as of December 27, 2008. As of December 27, 2008, we
had $987 million available for borrowing under our
revolving credit facility, after giving effect to
$13 million in issued letters of credit, an increase from
the $587 million available for borrowing as of
December 29, 2007, after giving effect to $13 million
in issued letters of credit. The revolving credit facility is
available through April 30, 2012.
On October 31, 2007, we drew down $1 billion under the
revolving credit facility in order to partially fund the
acquisition of PolyMedica. We also drew down an additional
$400 million under the revolving credit facility in the
fourth quarter of 2007, primarily to pay down PolyMedica’s
outstanding debt balances and to acquire Critical Care. For more
information on the acquisitions of PolyMedica and Critical Care,
see Note 3, “Acquisitions of Businesses,” to the
consolidated financial statements included in Part II,
Item 8 of this Annual Report on
Form 10-K.
2007
Refinancing
In connection with a refinancing in April 2007, our pre-existing
senior unsecured credit facilities were extinguished and our
indebtedness outstanding pursuant to such facilities was paid in
full. The pre-existing facilities consisted of a
$750 million senior unsecured term loan under which we had
quarterly installments, and a $750 million senior unsecured
revolving credit facility. The pre-existing credit facilities
incurred interest at LIBOR plus a 0.5 percent margin, with
a 12.5 basis point commitment fee due on the unused
revolving credit facility.
Accounts
Receivable Financing Facility
Through a wholly-owned subsidiary, we have a $600 million,
364-day
renewable accounts receivable financing facility that is
collateralized by our pharmaceutical manufacturer rebate
accounts receivable. At December 27, 2008, there was
$600 million outstanding with no additional amounts
available for borrowing under the facility. We pay interest on
amounts borrowed under the agreement based on the funding rates
of the bank-related commercial paper programs that provide the
financing, plus an applicable margin determined by our credit
rating. The weighted average annual interest rate on amounts
borrowed under the facility as of December 27, 2008 and
December 29, 2007 was 3.10% and 5.49%, respectively. This
facility is renewable annually in July at the option of both
Medco and the banks. If our accounts receivable financing
facility is not renewed, we have adequate capacity under our
revolving credit facility.
Interest
Rates
The weighted average annual interest rate on our indebtedness
was approximately 5.1% for 2008 and 6.3% for both 2007 and 2006
and reflects variability in floating interest rates on the
senior unsecured credit facilities, swap agreements and the
accounts receivable financing facility. Several factors could
change the weighted average annual interest rate, including but
not limited to a change in our debt ratings, reference rates
used under our bank credit facility, swap agreements and the mix
of our debt, including the effect of our March 2008 issuance of
senior notes.
Table of Contents
Swap
Agreements
On December 12, 2007, we entered into forward-starting
interest rate swap agreements in contemplation of the issuance
of long-term fixed-rate financing. We entered into these cash
flow hedges to manage our exposure to changes in benchmark
interest rates and to mitigate the impact of fluctuations in the
interest rates prior to the issuance of the long-term financing.
The cash flow hedges entered into were for a notional amount of
$500 million on the then-current
10-year
treasury interest rate, and for a notional amount of
$250 million on the then-current
30-year
treasury interest rate, both with a settlement date of
March 31, 2008. At the time of purchase, the cash flow
hedges were anticipated to be effective in offsetting the
changes in the expected future interest rate payments on the
proposed debt offering attributable to fluctuations in the
treasury benchmark interest rate. As of December 29, 2007,
we included in accumulated other comprehensive income an
unamortized swap loss of $7.9 million ($4.8 million,
net of tax).
In connection with the issuance of the
5-year
senior notes and
10-year
senior notes described above, a portion of the $250 million
notional amount
30-year
treasury interest rate cash flow hedge was deemed an ineffective
hedge. The cash flow hedges were settled on March 17, 2008
for $45.4 million and included the ineffective portion that
was recorded as an increase of $9.8 million to interest
(income) and other (income) expense, net, for the year ended
December 27, 2008. The effective portion was recorded in
accumulated other comprehensive income and is reclassified to
interest expense over the ten-year period in which we hedged our
exposure to variability in future cash flows. The unamortized
effective portion reflected in accumulated other comprehensive
income as of December 27, 2008 was $20.0, net of tax.
In 2004, we entered into five interest rate swap agreements on
$200 million of the $500 million in 7.25% senior
notes. We entered into these swap agreements as an effective
hedge to (i) convert a portion of the senior note fixed
rate debt into floating rate debt; (ii) maintain a capital
structure containing appropriate amounts of fixed and floating
rate debt; and (iii) lower the interest expense on these
notes in the near term. We do not expect our cash flows to be
affected to any significant degree by a sudden change in market
interest rates.
Covenants
All of the senior notes discussed above are subject to customary
affirmative and negative covenants, including limitations on
sale/leaseback transactions; limitations on liens; limitations
on mergers and similar transactions; and a covenant with respect
to certain change of control triggering events. The
6.125% senior notes and the 7.125% senior notes are
also subject to an interest rate adjustment in the event of a
downgrade in the ratings to below investment grade. In addition,
the senior unsecured credit facilities and the accounts
receivable financing facility are subject to covenants,
including, among other items, maximum leverage ratios. We were
in compliance with all covenants at December 27, 2008 and
December 29, 2007.
Debt
Ratings
Medco’s debt ratings, all of which represent investment
grade, are as follows as of the filing date of this Annual
Report on
Form 10-K:
Moody’s Investors Service, Baa3; Standard &
Poor’s, BBB; Fitch Ratings, BBB.
This excerpt taken from the MHS 10-Q filed Nov 1, 2007. Financing Facilities Senior Bank Credit Facility and Refinancing. On April 30, 2007, we entered into a senior unsecured credit agreement which, in addition to replacing our existing senior unsecured credit facility, is available to fund our share repurchase program, general corporate activities, working capital requirements, capital expenditures and acquisitions. In connection with the refinancing, our pre-existing senior unsecured credit facility was extinguished and our indebtedness outstanding pursuant to such facility was paid in full. The current facility consists of a $1 billion, 5-year senior unsecured term loan and a $2 billion, 5-year senior unsecured revolving credit facility. The pre-existing facility consisted of a $750 million senior unsecured term loan and a $750 million senior unsecured revolving credit facility. The current term loan matures on April 30, 2012, at which time the outstanding balance is required to be repaid, compared with the pre-existing credit facility, under which we had quarterly installment payments. At our current debt ratings, the current credit facility bears interest at London Interbank Offered Rate (“LIBOR”) plus a 0.45 percent margin, with a 10 basis point commitment fee due on the unused revolving credit facility. The pre-existing credit facility incurred interest at LIBOR plus a 0.5% margin, with a 12.5 basis point commitment fee due on the unused revolving credit facility. As of September 29, 2007, we had $1 billion outstanding under the term loan facility. In addition, we had no amounts outstanding and had $1.987 billion available for borrowing, after giving effect to $13 million in issued letters of credit, under the revolving credit facility. On October 31, 2007, we drew down $1 billion under the revolving credit facility in order to partially fund the acquisition of PolyMedica Corporation. For more information, see Note 11, “Subsequent Events—PolyMedica Acquisition,” to the unaudited interim condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. Accounts Receivable Financing Facility. Through a wholly-owned subsidiary, we have a $600 million, 364-day renewable accounts receivable financing facility that is collateralized by our pharmaceutical manufacturer rebate accounts receivable. At September 29, 2007, there was $600 million outstanding with no additional amounts available for borrowing under the facility. We pay interest on amounts borrowed under the agreement based on the funding rates of the bank-related commercial paper programs that provide the financing, plus an applicable margin determined by our credit rating. During the first nine months of 2007, we drew down $275 million under the facility. Interest Rates and Covenants. The weighted average annual interest rate on our indebtedness was approximately 6.4% and 6.5% for the third quarter and nine months of 2007, respectively, and 6.5% and 6.2% for the third quarter and nine months of 2006, respectively. Several factors could change the weighted average annual interest rate, including but not limited to a change in reference rates used under our bank credit facility and swap agreements. Our senior unsecured credit facility, senior notes, and accounts receivable financing facility contain covenants, including, among other items, maximum leverage ratios. We were in compliance with all financial covenants at September 29, 2007. As a result of the aforementioned refinancing, our financial covenants are slightly less restrictive. Debt Ratings. Medco’s debt ratings, all of which represent investment grade, reflect the following as of the filing date of this Quarterly Report on Form 10-Q: Moody’s Investors Service, Baa3; Fitch Ratings, BBB; Standard & Poor’s, BBB. These ratings reflect our refinancing and acquisition of PolyMedica.
28
Table of ContentsLooking Forward. We believe that our operating cash flows will continue to be positive and adequate to fund our ongoing operations, our debt service requirements and capital investments for the next twelve months and in the foreseeable future. However, we may incur additional indebtedness by drawing down additional amounts under our senior unsecured revolving credit facility or by obtaining financing through other sources, in order to, for example, fund strategic investments. It is anticipated that our 2007 base capital expenditures, for items such as capitalized software development for strategic initiatives and infrastructure enhancements, will be approximately $150 million. We have no immediate plans for dividend payments. This excerpt taken from the MHS 10-Q filed Jul 27, 2007. Financing Facilities Senior Bank Credit Facility and Refinancing. On April 30, 2007, we entered into a new senior unsecured credit agreement which, in addition to replacing our previously existing senior unsecured bank credit facility, is available to support our recently expanded share repurchase program, general corporate activities, working capital requirements and capital expenditures. In connection with the new credit facility, our previously existing senior bank credit facility was terminated and our existing indebtedness outstanding pursuant to such facility was paid in full. The new facility is comprised of a $1 billion, 5-year senior unsecured term loan and a $2 billion, 5-year senior unsecured revolving credit facility, compared with the previously existing $750 million senior unsecured term loan facility and the $750 million senior unsecured revolving credit facility. The new term loan matures on April 30, 2012, at which time the outstanding balance is required to be repaid, compared with the previously existing credit facility, under which we had quarterly installment payments. At current debt ratings, the new credit facility bears interest at London Interbank Offered Rate (“LIBOR”) plus a 0.45 percent margin, with a 10 basis point commitment fee due on the unused revolving credit facility. The previously existing credit facility incurred interest at the LIBOR plus a 0.5% margin. As of June 30, 2007, we had $1 billion outstanding under the term loan facility. In addition, we had no amounts outstanding and had $1.987 billion available for borrowing, exclusive of $13 million in issued letters of credit, under the revolving credit facility.
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Table of ContentsAccounts Receivable Financing Facility. Through a wholly-owned subsidiary, we have a $600 million, 364-day renewable accounts receivable financing facility that is collateralized by our pharmaceutical manufacturer rebate accounts receivable. At June 30, 2007, there was $600 million outstanding with no additional amounts available for borrowing under the facility. We pay interest on amounts borrowed under the agreement based on the funding rates of the bank-related commercial paper programs that provide the financing, plus an applicable margin determined by our credit rating. During the first six months of 2007, we drew down $275 million under the facility. Interest Rates and Covenants. The estimated weighted average annual interest rate on our indebtedness was approximately 6.4% and 6.6% for the second quarter and six months of 2007, respectively, and 6.3% and 6.1% for the second quarter and six months of 2006, respectively. Several factors could change the weighted average annual interest rate, including but not limited to a change in reference rates used under our bank credit facility and swap agreements. Our senior unsecured credit facility, senior notes, and accounts receivable financing facility contain covenants, including, among other items, maximum leverage ratios. We were in compliance with all financial covenants at June 30, 2007. As a result of the aforementioned refinancing, our financial covenants are slightly less restrictive. Debt Ratings. Medco’s debt ratings, all of which represent investment grade, reflect the following as of the filing date of this Quarterly Report on Form 10-Q: Moody’s Investors Service, Baa3 (stable outlook); Fitch Ratings, BBB (stable outlook); Standard & Poor’s, BBB (stable outlook). These ratings reflect the recent refinancing. This excerpt taken from the MHS 10-Q filed May 2, 2007. Financing Facilities Senior Bank Credit Facility. At March 31, 2007, we had a $1.5 billion senior unsecured credit facility, composed of a $750 million term loan and a $750 million revolving credit facility. There was $437.5 million outstanding under our term loan facility as of March 31, 2007. We had no amounts outstanding under our revolving credit facility as of March 31, 2007. Prior to its termination, such credit facility incurred interest at the London Interbank Offered Rate (“LIBOR”) plus a 0.5% margin. At March 31, 2007, we had $737 million available for borrowing under the revolving credit facility, exclusive of $13 million in issued letters of credit. On April 30, 2007, such senior bank credit facility was terminated and our existing indebtedness outstanding pursuant to such facility was satisfied in full in connection with the new credit facility described below. Accounts Receivable Financing Facility. Through a wholly-owned subsidiary, we have a $600 million, 364-day renewable accounts receivable financing facility that is collateralized by our pharmaceutical manufacturer rebate accounts receivable. At March 31, 2007, there was $600 million outstanding and no amounts available for borrowing under the facility. We pay interest on amounts borrowed under the agreement based on the funding rates of the bank-related commercial paper programs that provide the financing, plus an applicable margin determined by our credit rating. During the first quarter of 2007, we drew down $275 million under the facility. Subsequent Refinancing. On April 30, 2007, we completed a new bank financing which, in addition to replacing our existing senior unsecured bank credit facility, is available to support our recently expanded share repurchase program, general corporate activities, working capital requirements and capital expenditures. A new $1 billion senior unsecured term loan and a $2 billion senior unsecured revolving credit facility replaced the previously existing $750 million senior unsecured term loan facility, of which $437.5 million was outstanding as of March 31, 2007, and the $750 million senior unsecured revolving credit facility. At current debt ratings, the new credit facility will bear interest at LIBOR plus a 0.45 percent margin, with a 10 basis point commitment fee due on the unused revolving credit facility. As of April 30, 2007, we had $1.987 billion available for borrowing under the revolving credit facility, exclusive of $13 million in issued letters of credit. Due to the debt refinancing, net interest expense is expected to increase by approximately $65 million over 2006 levels throughout the remainder of 2007. Interest Rates and Covenants. The estimated weighted average annual interest rate on our indebtedness was approximately 6.9% and 5.9% for the quarters ended March 31, 2007 and April 1, 2006, respectively. Several factors
25
Table of Contentscould change the weighted average annual interest rate, including but not limited to a change in reference rates used under our bank credit facility and swap agreements. Our senior unsecured credit facility, senior notes, and accounts receivable financing facility contain covenants, including, among other items, minimum interest coverage and maximum leverage ratios. We were in compliance with all financial covenants at March 31, 2007. Subsequent to the aforementioned refinancing, our financial covenants are somewhat less restrictive and exclude a minimum interest coverage ratio. Debt Ratings. Medco’s debt ratings, all of which represent investment grade, reflect the following as of May 1, 2007: Moody’s Investors Service, Baa3 (stable outlook); Fitch Ratings, BBB (stable outlook); Standard & Poor’s, BBB (stable outlook). These ratings reflect the subsequent refinancing. This excerpt taken from the MHS 10-K filed Feb 22, 2007. Financing Facilities Senior Bank Credit Facilities. We have a $1.5 billion senior unsecured credit facility, comprised of a $750 million term loan and a $750 million revolving credit facility. There was $456 million outstanding under our term loan facility as of December 30, 2006. We had no amounts outstanding under our revolving credit facility as of December 30, 2006. The credit facilities bear interest at the London Interbank Offered Rate (“LIBOR”) plus a 0.5% margin. In order to provide additional financial flexibility, effective November 17, 2006, our revolving credit facility was increased from $500 million to $750 million. At December 30, 2006, we had $737 million available for borrowing under the revolving credit facility, exclusive of $13 million in issued letters of credit. Accounts Receivable Financing Facility. Through a wholly-owned subsidiary, as of December 30, 2006, we have a $600 million, 364-day renewable accounts receivable financing facility that is collateralized by our pharmaceutical manufacturer rebate accounts receivable. Effective July 31, 2006, the accounts receivable financing facility was increased from $500 million to $600 million. At December 30, 2006, there was $325 million outstanding and $275 million available for borrowing under the facility. We pay interest on amounts borrowed under the agreement based on the funding rates of the bank-related commercial paper programs that provide the financing, plus an applicable margin determined by our credit rating. The weighted average annual interest rate on amounts borrowed under the facility as of December 30, 2006 was 5.51%.
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Table of ContentsThis excerpt taken from the MHS 10-Q filed Nov 3, 2006. Financing Facilities Senior Bank Credit Facilities. We have a $1.25 billion senior unsecured credit facility, comprised of a $750 million term loan and a $500 million revolving credit facility. There was $475 million outstanding under our term loan facility as of September 30, 2006. We had no amounts outstanding under our revolving credit facility as of September 30, 2006. The credit facilities bear interest at the London Interbank Offered Rate (“LIBOR”) plus a 0.5% margin. Accounts Receivable Financing Facility. Through a wholly-owned subsidiary, as of September 30, 2006, we have a $600 million, 364-day renewable accounts receivable financing facility that is collateralized by our pharmaceutical manufacturer rebate accounts receivable. There was $450 million outstanding under this accounts receivable financing facility as of September 30, 2006. We pay interest on amounts borrowed under the agreement based on the funding rates of the bank-related commercial paper programs that provide the financing, plus an applicable margin determined by our credit rating. Effective July 31, 2006, the accounts receivable financing facility was increased from $500 million to $600 million. During the third quarter of 2006, we drew down and repaid $150 million under the facility. Interest Rates and Covenants The estimated weighted average annual interest rate on our indebtedness was approximately 6.5% and 6.2% for the third quarter and nine months of 2006, respectively, and 5.6% and 5.8% for the third quarter and nine months of 2005, respectively. Several factors could change the weighted average annual interest rate, including but not limited to a change in reference rates used under our credit facilities and swap agreements. Our senior unsecured credit facility, senior notes and accounts receivable financing facility contain covenants, including, among other items, minimum interest coverage, maximum leverage ratios, as well as restrictions on dividends, share repurchases, and asset sales and liens. We were in compliance with all financial covenants at September 30, 2006. This excerpt taken from the MHS 10-Q filed Aug 4, 2006. Financing Facilities Senior Bank Credit Facilities. We have a $1.25 billion senior unsecured credit facility, comprised of a $750 million term loan and a $500 million revolving credit facility. There was $493.8 million under our term loan outstanding as of July 1, 2006. We had no amounts outstanding under our revolving credit facility as of July 1, 2006. The credit facilities bear interest at the London Interbank Offered Rate (“LIBOR”) plus a 0.625% margin. Accounts Receivable Financing Facility. Through a wholly-owned subsidiary, as of July 1, 2006, we had a $500 million, 364-day renewable accounts receivable financing facility that is collateralized by our pharmaceutical manufacturer rebate accounts receivable. There was $450 million outstanding under this accounts receivable financing facility as of July 1, 2006. We pay interest on amounts borrowed under the agreement based on the funding rates of the bank-related commercial paper programs that provide the financing, plus an applicable margin determined by our credit rating. Subsequent to the quarter ended July 1, 2006 and effective July 31, 2006, the accounts receivable financing facility was increased to $600 million, and on August 1, 2006, we drew down an additional $150 million under the facility, bringing the total amount outstanding under the facility to $600 million. This excerpt taken from the MHS 10-Q filed May 5, 2006. Financing Facilities Senior Bank Credit Facilities. We have a $1.25 billion senior unsecured credit facility, comprised of a $750 million term loan and a $500 million revolving credit facility. There was $512.5 million under our term loan outstanding as of April 1, 2006. The credit facilities bear interest at the LIBOR plus a 0.625% margin. Accounts Receivable Financing Facility. We, through a wholly-owned subsidiary, have a $500 million, 364-day renewable accounts receivable financing facility that is collateralized by our pharmaceutical manufacturer rebate accounts receivable. There was $450 million under our accounts receivable financing outstanding as of April 1, 2006. We pay interest on amounts borrowed under the agreement based on the funding rates of the bank-related commercial paper programs that provide the financing, plus an applicable margin determined by our credit rating. The estimated weighted average annual interest rate on our indebtedness was approximately 5.9% and 5.8% for the quarters ended April 1, 2006 and March 26, 2005, respectively. Several factors could change the weighted average annual interest rate, including but not limited to a change in reference rates used under our credit facilities and swap agreements. Our senior unsecured credit facility, senior notes and accounts receivable financing facility contain covenants, including, among other items, minimum interest coverage, maximum leverage ratios, as well as restrictions on dividends, share repurchases, and asset sales and liens. We were in compliance with all financial covenants at April 1, 2006. | EXCERPTS ON THIS PAGE:
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