OSIS » Topics » 8. LINE-OF-CREDIT BORROWINGS AND DEBT

This excerpt taken from the OSIS 10-K filed Aug 28, 2008.

8.    LINE-OF-CREDIT BORROWINGS AND DEBT

 

In July, 2007, the Company entered into a credit agreement with certain lenders. The agreement provided for an $89.5 million credit facility, which was subsequently increased to $124.5 million in June 2008. The new credit agreement replaced former U.S. dollar credit agreements, which were repaid and terminated simultaneously with the close of the new agreement. The new credit agreement consists of a $74.5 million five-year revolving credit facility, including a $45 million sub-limit for letters-of-credit, and a $50 million five-year term loan. Borrowings under this facility bear interest at either (a) the U.S. dollar-based London Interbank Offered Rate (LIBOR) plus between 2.00% and 2.50% or (b) the bank’s prime rate plus between 1.00% and 1.50%. The rates are determined based on the Company’s consolidated leverage ratio. As of June 30, 2008, the effective weighted average interest rate under the credit agreement was 5.0% per annum. Borrowings under the credit agreement are guaranteed by substantially all of the direct and indirect wholly-owned subsidiaries of the Company and are secured by substantially all of its assets and by the assets of its subsidiaries. The agreement contains various representations, warranties, affirmative, negative and financial covenants, and conditions of default customary for financing agreements of this type. As of June 30, 2008, $47.8 million was outstanding under the term loan, $14.0 million was outstanding under the revolving credit facility, and $3.6 million was outstanding under the letter-of-credit facility.

 

Several of the Company’s foreign subsidiaries maintain bank lines-of-credit, denominated in local currencies, to meet short-term working capital requirements and for the issuance of letters-of-credit. As of June 30, 2008, the total amount available under these various credit facilities was $34.8 million with a total cash borrowing sub-limit of $8.7 million, of which $4.7 million was outstanding at June 30, 2008. The weighted average interest rate of these facilities was 7.1% per annum at June 30, 2008.

 

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OSI SYSTEMS, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

FOR THE THREE YEARS ENDED JUNE 30, 2008

 

In December 2004, the Company entered into a bank loan of $5.3 million to fund the acquisition of land and buildings in the U.K. The loan is payable over a 20-year period, with quarterly installments of £34,500 (approximately $69,000 as of June 30, 2008). The loan bears interest at British pound-based LIBOR plus 1.2%, payable on a quarterly basis. As of June 30, 2008, $4.5 million remained outstanding under this loan at an interest rate of 7.2% per annum.

 

Long-term debt consisted of the following at June 30 (in thousands):

 

     2007    2008

Five-year term loan due in 2012

   $ 21,782    $ —  

Five-year term loan due in 2013

     —        47,763

Twenty-year term loan due in 2024

     4,846      4,539

Capital leases

     3,334      2,193

Other

     1,491      1,189
             
     31,453      55,684

Less current portion of long-term debt

     5,744      6,593
             

Long-term portion of debt

   $ 25,709    $ 49,091
             

 

Fiscal year principal payments of long-term debt as of June 30, 2008 are as follows (in thousands):

 

2009

   $ 6,593

2010

     8,605

2011

     11,034

2012

     7,825

2013

     18,069

2014 and thereafter

     3,558
      

Total

   $ 55,684
      

 

This excerpt taken from the OSIS 10-K filed Sep 13, 2007.

9.    LINE-OF-CREDIT BORROWINGS AND DEBT

 

On July 27, 2007, the Company entered into a credit agreement with Wachovia Bank allowing for borrowings of up to $89.5 million. The new credit agreement replaces the pre-existing agreements with Bank of the West (described below), which were repaid and terminated simultaneously with the close of the agreement with Wachovia Bank. The facility consists of a $44.75 million five-year revolving credit facility, including a $35 million sub-limit for letters of credit, and a $44.75 million five-year term loan. Borrowings under this facility bear interest at LIBOR plus margins that range from 2.00% to 2.50% or the bank’s prime rate plus margins that range from 1.00% to 1.50%. The margins are determined by the Company’s consolidated leverage ratio. The facility is guaranteed by substantially all of the Company’s direct and indirect wholly-owned subsidiaries and are secured by substantially all of the Company’s and its subsidiary guarantors’ assets. The agreement contains various representations, warranties, affirmative, negative and financial covenants, and conditions of default customary for financing of this type.

 

In July 2006, the Company replaced its second amended and restated credit agreement with Bank of the West by entering into a third amended and restated credit agreement with Bank of the West. Concurrently, Spacelabs Healthcare, a publicly traded, wholly-owned subsidiary of the Company, entered into a credit agreement with Bank of the West.

 

The third amended and restated credit agreement provided for a $35 million senior revolving line-of-credit, including a letter-of-credit and foreign exchange facility. This facility was secured by substantially all of the Company’s U.S. assets, including its ownership interest in Spacelabs Healthcare. Interest on the revolving loans was based, at the Company’s option, on either the bank’s prime rate plus up to 0.5%, or LIBOR plus up to 2.5%. The agreement contained various representations, warranties, affirmative, negative and financial covenants, and conditions of default customary for financing of this type. As of June 30, 2007, $7.5 million was outstanding under the revolving line-of-credit and $8.6 million of standby letters of credit were issued and outstanding under the letter-of-credit facility.

 

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OSI SYSTEMS, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

FOR THE THREE YEARS ENDED JUNE 30, 2007

 

The Spacelabs Healthcare agreement provided for a $10 million senior revolving line-of-credit, including a letter-of-credit and foreign exchange facility, and a $27.4 million term loan to fund the purchase of the Del Mar Reynolds cardiology division of Ferraris Group PLC. The agreement was secured by substantially all of the assets of the U.S. subsidiaries of the Company’s Healthcare division. Interest on the revolving loans was based, at Spacelabs Healthcare’s option, on either the bank’s prime rate, plus up to 0.5%, or on LIBOR plus up to 2.5%. The agreement contained various representations, warranties, affirmative, negative and financial covenants, and conditions of default customary for financing of this type. As of June 30, 2007, $9.3 million was outstanding under the revolving line-of-credit and $21.8 million was outstanding under the term loan.

 

As a result of terminating the aforementioned Bank of the West credit agreements, $0.6 million of unamortized loan costs were impaired as of June 30, 2007.

 

As of June 30, 2007, several of the Company’s foreign subsidiaries maintained bank lines-of-credit, denominated in local currencies, to meet short-term working capital requirements and for the issuance of letters of credit. The total amount of these credit facilities was $36.3 million with a total cash borrowing sub limit of $10.8 million, of which nothing was outstanding at June 30, 2007. The weighted average interest rate of these facilities was 7.1% at June 30, 2007.

 

In December 2004, the Company entered into a bank loan of $5.3 million to fund the acquisition of land and buildings in England. The loan is payable over a 20 year period, with quarterly installments of £34,500 (approximately $70,000 as of June 30, 2007). The loan bears interest at LIBOR plus 1.2%, payable on a quarterly basis. As of June 30, 2007, $4.8 million remained outstanding under this loan.

 

In December 2006, the Company entered into a five-year, $2.3 million capital lease to finance the purchase of manufacturing equipment. The lease bears interest at an 8.22% annual percentage rate. Lease payments of approximately $47,000 are payable monthly. As of June 30, 2007, $2.0 million remained outstanding on the lease. In addition, the Company has entered into several other capital leases to finance the purchase of manufacturing equipment.

 

Long-term debt consisted of the following at June 30 (in thousands):

 

     2006    2007

Five-year term loan due in 2011

   $ —      $ 21,782

Twenty-year term loan due in 2024

     4,721      4,846

Capital leases

     248      3,334

Other

     1,765      1,491
             
     6,734      31,453

Less current portion of long-term debt

     1,251      5,744
             

Long-term portion of debt

   $ 5,483    $ 25,709
             

 

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Table of Contents

OSI SYSTEMS, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

FOR THE THREE YEARS ENDED JUNE 30, 2007

 

Fiscal year principal payments of long-term debt as of June 30, 2007 are as follows (in thousands):

 

2008    $ 5,744

2009

   5,181

2010

   4,551

2011

   4,630

2012

   7,529

2013 and thereafter

   3,818
    

Total

   31,453
    

 

EXCERPTS ON THIS PAGE:

10-K
Aug 28, 2008
10-K
Sep 13, 2007
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