Secured Borrowings and Collateralized Receivables

12 Months Ended

Jun. 30, 2012

Secured Borrowings and Collateralized Receivables [Abstract]

Secured Borrowings and Collateralized Receivables

(4) Secured Borrowings and Collateralized Receivables

We have transferred certain customer installment and trade receivables to financial institutions that are accounted for as secured borrowings. The transferred receivables serve as collateral under the receivable sales facilities. The customers' payments of the underlying receivables fund the repayment of the related amounts borrowed. The weighted average interest rate on the secured borrowings was 8.7% at June 30, 2012. We impute interest income on installment receivables which serve as collateral under the receivable sales facilities at approximately the same interest rate.

We maintain arrangements with General Electric Capital Corporation and Silicon Valley Bank (“SVB”) providing for borrowings that are secured by our installment and other receivable contracts, and for which limited recourse exists against us. We can be required to repurchase the receivables under certain circumstances in case of specific defaults by us as set forth in the program terms. Potential recourse obligations are primarily related to the SVB arrangement, which requires us to pay interest to SVB for a limited period when the underlying customer has not paid by the receivable due date. Payments related to this obligation have been less than $0.1 million for fiscal 2012, 2011 and 2010, respectively. Other than the specific items noted above, the financial institution bears the credit risk of the customers associated with the receivables the institution purchased. In the ordinary course of us acting as a servicing agent for receivables transferred to SVB, we may receive funds from customers that are processed and remitted onward to SVB. While in our possession, these cash receipts are contractually owned by SVB and are held by us on their behalf until remitted to the bank. We did not have any cash receipts held for the benefit of SVB in our cash balances and current liabilities as of June 30, 2012 and 2011. Any such amounts would be restricted from our use.

At June 30, 2012 and 2011, receivables totaling $6.3 million and $25.0 million, respectively, were pledged as collateral for the secured borrowings. The secured borrowings totaled $10.8 million and $24.9 million as of June 30, 2012 and 2011, respectively. The collateralized receivables are presented at their net present value. The interest rate implicit in the installment receivables was 8% as of June 30, 2012 and 2011. We recorded $1.2 million, $3.2 million and $6.2 million of interest income associated with the collateralized receivables for fiscal 2012, 2011 and 2010, respectively, and recognized $3.0 million, $5.3 million and $8.0 million of interest expense associated with the secured borrowings. Proceeds from and payments on the secured borrowings are presented as components of cash flows from financing activities in the consolidated statements of cash flows. Reductions of secured borrowings are recognized as financing cash flows upon payment to the financial institution and operating cash flows from collateralized receivables are recognized upon customer payment of amounts due.

Since December 2007, we have not sold any receivables for the purpose of raising cash, but we have sold some large dollar receivables in order to fund the repurchase of several large groups of smaller receivables previously sold to the banks, for the purpose of simplifying our administration of the programs and replacing previously-financed receivables that have been superseded and repurchased. When previously-financed receivables contracts are superseded with new arrangements, the secured borrowings collateralized by those receivables become immediately due and payable. As a result, they are reported in accrued expenses and other current liabilities until payment is remitted to the financial institution.