Hypercom Corporation Annual Report - CiteSeer

Changes in operating assets and liabilities and the related impact on our operating cash flows consist of the following:
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2009 2008 Change
Accounts receivable $ 14,981 $ 5,464 $ 9,517
Inventories (1,808 ) (7,371 ) 5,563
Accounts payable (1,874 ) (4,333 ) 2,459
Other (7,008 ) 5,492 (12,500 )
Increase (decrease) in operating assets and liabilities $ 4,291 $ (748 ) $ 5,039
The net increase in cash was due to improved collection of our accounts receivable, partially offset by a decrease in accounts
payable and other accrued expenses.
Cash flows used in investing activities
Cash flows used in investing activities of $10.0 million consist principally of capital expenditures for property, plant and
equipment of $8.1 million and a partial payment $2.1 million for the working capital adjustment related to the acquisition of TeT
during 2008.
The capital expenditures were principally for upgrades to computer software and hardware related to the TeT acquisition,
manufacturing tools and equipment related to new product launches and our move to contract manufacturing, and expenditures related
to outfitting the new corporate headquarters. Depending on the global economic environment, we intend to spend approximately $8.0
million to $10.0 million over the next 12 months for capital expenditures related to computer software to further integrate the TeT
product line and for manufacturing tools and equipment for new product launches.
Cash flows from financing activities
Cash flows used in financing activities of $3.0 million consist of payments made to Francisco Partners for partial, early
extinguishment of the debt financing related to the TeT acquisition.
Projected liquidity and capital resources
At December 31, 2009, cash and cash equivalents were $55.0 million. The amount of consolidated cash is subject to intra-month
and seasonal fluctuations and includes balances held by subsidiaries worldwide that are needed to fund their operations.
On January 15, 2008, we entered into a loan agreement that provides for a revolving credit facility of up to $25.0 million with the
ability to borrow up to $40 million if certain conditions are met. Available borrowings under the loan agreement are subject to
borrowing base calculations based on the value of eligible inventory and accounts receivable. The loan agreement includes customary
covenants and certain negative covenants prohibiting the occurrence of certain types of debt, limiting capital expenditures or disposing
of assets. The obligations under the revolving credit facility are secured by the inventory and accounts receivable of certain of our
subsidiaries in the U.S. and the U.K. The remaining balance of our consolidated assets are unencumbered under the loan agreement
and, if needed, may be used as collateral for additional debt. All amounts outstanding under this agreement are due on January 15,
2011.
On February 10, 2010, the Loan Agreement was amended to allow us to enter into a transaction between our former subsidiary,
HBNet, and The McDonnell Group, as well as making additional changes, including, among others, providing for the outstanding
amounts under the Loan Agreement to now bear interest, at our option, at either: (i) LIBOR plus 200 or 250 basis points; or (ii) the
bank’s prime rate plus 50 or 75 basis points depending on certain financial ratios. In addition, the borrowing base was amended to
eliminate inventory from the borrowing base calculation. All amounts outstanding under the Loan Agreement continue to be due on
January 15, 2011. The forgoing description of the amendment to the Loan Agreement is qualified in its entirety by reference to the
complete terms and conditions of the amendment to the Loan Agreement, a copy of which is attached to this Annual Report on Form
10-K as Exhibit 10.19 and is incorporated by reference herein.
During the second quarter of 2008, we completed the acquisition of TeT for approximately $150.5 To fund the acquisition, on
February 13, 2008, we entered into a credit agreement (the “Credit Agreement”) with Francisco Partners. The Credit Agreement
provided for a loan of up to $60.0 million to partially fund the acquisition at closing. The loan under the Credit Agreement bears
interest at 10% per annum, provided that, at our election, interest may be capitalized and added to the principal of the loan to be repaid
at maturity. The loan was funded by an affiliate of Francisco Partners, FP Hypercom Holdco, LLC (the “Lender”). All amounts
outstanding under the Credit Agreement are due March 31, 2012.