Notes to Consolidated Financial Statements

Note 8:
Debt

Debt from continuing operations consisted of the following:

The annual maturities of debt for succeeding years are as follows:

In addition to the above amounts, the Company had $4,619,000 of outstanding debt at January 30, 1999 related to its discontinued same-day delivery business. Annual maturities are $3,443,000, $1,015,000 and $161,000 for fiscal years 1999, 2000 and the periods thereafter, respectively. This debt will be either assumed by the purchaser or paid in full from the sale proceeds. This debt is included in Net Assets of Discontinued Operations on the Consolidated Balance Sheets.

Certain of the debt agreements contain provisions that require maintenance of certain financial ratios, including debt to cash flow and fixed charge coverage. The Company's Senior Secured Credit Facility prohibits the distribution of dividends without the prior written consent of the lenders.

On April 10, 1998, the Company closed the Dutch Auction tender offer it commenced on February 5, 1998, and purchased 35,000,000 shares tendered at a price of $10.75 per share. The Company funded the purchase of such shares and the payment of related fees and expenses through its new $1.0 billion Senior Secured Credit Facility. This Senior Secured Credit Facility consists of a $250,000,000 seven-year term loan and a $750,000,000 five-year revolving credit facility. The Senior Secured Credit Facility is guaranteed by substantially all domestic subsidiaries of the Company and is collateralized by all tangible and intangible property of the guarantors including inventory and receivables. At the Company's option interest rates are at a base rate or a Eurodollar rate plus an applicable margin determined by a leverage ratio as defined in the loan agreements. The term loan's interest rate ranges from 0.25% to 0.75% above the revolving loan interest rate. The Company is subject to usual covenants customary for this type of facility including financial covenants. In January 1999, the Company amended these covenants to clarify that the restructuring charge is excluded from the computations and to permit the disposal of certain non-core assets. The available funds may be used for general corporate purposes including permitted acquisitions and permitted share repurchases. The Company is in compliance with all debt covenants under the Senior Secured Credit Facility.

On April 22, 1998, the Company's previous Senior Credit Facility was replaced and paid in full with proceeds from the new Senior Secured Credit Facility. Approximately $1,810,000 of deferred financing costs related to the previous Senior Credit Facility were expensed in the first quarter of fiscal 1998 and are shown as an extraordinary item of $1,104,000, net of tax of $706,000.

On May 29, 1998, CEX Holdings, Inc., a wholly-owned subsidiary of the Company issued at par $350,000,000 principal amount of unsecured 95/8% Senior Subordinated Notes due 2008 (the "95/8% Notes"). The notes are guaranteed by all material domestic subsidiaries of the Company and are subordinated in right of payment to all senior debt, which totaled approximately $511,000,000 at January 30, 1999. On or after June 1, 2003 through maturity, the notes may be redeemed at the option of the Company, in whole or in part, at redemption rates ranging from 104.813% to 100%. At any time on or before June 1, 2001, the Company may redeem up to 35% of the notes with the net cash proceeds of one or more public equity offerings at a redemption price equal to 109.625% of the principal amount thereof, subject to certain restrictions. Semi-annual interest payments are due on June 1 and December 1 which began on December 1, 1998. In May 1998 the Company settled an interest rate hedging contract based on $300,000,000 of U.S. Treasury notes related to the completed offering of the 95/8% Notes. The cost of the settlement of the contract was $7,271,000 and will be amortized over the ten-year term of the 95/8% Notes, bringing the effective interest rate of the debt instrument to 9.96%. On November 6, 1998, CEX Holding, Inc. commenced an exchange offer pursuant to which the 95/8% Notes were exchanged for substantially similar notes which have been registered under the federal securities laws. A portion of the proceeds from the sale of these notes was used to repay prior to maturity substantially all of the $90,000,000 91/8% Notes and to repay $245,000,000 on the Senior Secured Credit Facility. As a result of the early extinguishment of the 91/8% Notes, the Company recorded an extraordinary loss of $4,477,000, net of tax of $2,862,000, in the second quarter of fiscal 1998.

On June 24, 1996, the Company issued $325,000,000 aggregate principal amount of Convertible Notes. The notes are convertible into the Company's common stock at a conversion price of $33.33 per share, subject to adjustments under certain conditions. A portion of the proceeds from the sale of the Convertible Notes was used to repay the Company's then existing credit facility and an acquisition note payable with the remaining proceeds being used to fund acquisitions and for other general corporate purposes.

In conjunction with the purchase price allocation for the acquisition of DDI, the Company recorded DDI's 13.5% Senior Secured Notes, due in 2002, at their fair market value, then repurchased $54,068,000 of the Notes at a redemption price of 115%. On or after July 15, 1999 the Notes are redeemable, at the option of the Company, in whole or in part at redemption prices of 104.2% in 1999 decreasing to 100% in 2001. Interest on the notes is due semi-annually on January 15 and July 15. The notes were collateralized by a first priority security interest in substantially all assets of DDI other than accounts receivable. In accordance with the terms of the indenture, the remaining notes were defeased in 1998 and all collateral released, by depositing $5,578,000 in U.S. Government securities with the trustee.

The Company capitalized $5,725,000, $3,239,000 and $3,887,000 of interest expense in the fiscal 1998, 1997 and 1996 periods, respectively, primarily related to software developed for internal use and the construction of corporate facilities.