Dick's Sporting Goods 2008 Annual Report Download - page 63

extent to which the then market price exceeds $28.08 per share. The net effect of the bond hedge and the warrants is to reduce the
potential dilution from the conversion of the notes if the Company elects a net share settlement. There would be dilution impact from
the conversion of the notes to the extent that the then market price per share of the common stock exceeds $28.08 per share at the
time of conversion.
As described in Note 19, the Company repaid substantially all of the notes on February 18, 2009. By their terms, the warrant and
bond hedge concurrently expired and no longer had the ability to be exercised. Based on the current price of the Company’s common
stock and the number of Notes remaining outstanding, the Company believes conversion of the remaining notes would not have a
dilutive effect on the Company’s estimated outstanding number of shares as a result of the notes.
Revolving Credit Agreement – On July 27, 2007, the Company entered into a Fourth Amendment to its Second Amended and Restated
Credit Agreement (the “Credit Agreement”) that, among other things, extended the maturity of the Credit Agreement from July 2008
to July 2012, increased the potential Aggregate Revolving Credit Commitment, as defi ned in the Credit Agreement, from $350 million
to a potential commitment of $450 million and reduced certain applicable interest rates and fees charged under the Credit Agreement,
including up to $75 million in the form of letters of credit. The Credit Agreement’s term was extended to July 27, 2012.
On November 19, 2008, the Company entered into an Eighth Amendment to its Credit Agreement, the effect of which was to increase
the aggregate revolving loan commitment by $90 million to a total of $440 million.
As of January 31, 2009 and February 2, 2008, the Company’s total remaining borrowing capacity, after subtracting letters of credit,
under the Credit Agreement was $417.5 million and $333.2 million, respectively. Borrowing availability under the Company’s Credit
Agreement is generally limited to the lesser of 70% of the Company’s eligible inventory or 85% of the Company’s inventory’s liquidation
value, in each case net of specifi ed reserves and less any letters of credit outstanding. Interest on outstanding indebtedness under
the Credit Agreement is based upon a formula at either (a) the prime corporate lending rate minus the applicable margin of 0.25% or
(b) the London Interbank Offering Rate (“LIBOR”), plus the applicable margin of 0.75% to 1.50%. The applicable margins are based on
the level of total borrowings during the prior three months. Borrowings are collateralized by the assets of the Company, excluding
store and distribution center equipment and fi xtures that have a net carrying value of $133.8 million as of January 31, 2009.
At January 31, 2009 and February 2, 2008, the prime rate was 3.25% and 6.00%, respectively, and LIBOR was 4.19% and 3.14%,
respectively. There were no outstanding borrowings under the Credit Agreement at January 31, 2009 and February 2, 2008.
The Credit Agreement contains restrictive covenants including the maintenance of a certain fi xed charge coverage ratio of not less
than 1.0 to 1.0 in certain circumstances and prohibits payment of any dividends. As of January 31, 2009, the Company was in
compliance with the terms of the Credit Agreement.
The Credit Agreement provides for letters of credit not to exceed the lesser of (a) $75 million, (b) $350 million less the outstanding
loan balance and (c) the borrowing base minus the outstanding loan balance. As of January 31, 2009 and February 2, 2008, the
Company had outstanding letters of credit totaling $22.5 million and $16.8 million, respectively.
The following table provides information about the Credit Agreement borrowings as of and for the periods:
2008 2007
(Dollars in thousands)
Balance, fi scal period end $ — $ —
Average interest rate 3.51% 6.50%
Maximum outstanding during the year $ 244,598 $ 210,208
Average outstanding during the year $ 74,845 $ 94,185
DICK’S SPORTING GOODS, INC. 2008 ANNUAL REPORT 61