Lululemon 2011 Annual Report Download - page 44

Table of Contents
guaranty in Canadian currency or U.S. currency. The revolving credit facility bears interest on the outstanding balance in accordance with the
following: (i) prime rate for prime loans; (ii) U.S. base rate for U.S. based loans; (iii) a fee of 1.125% per annum on bankers’ acceptances;
(iv) LIBOR plus 1.125% per annum for LIBOR based loans; (v) a 1.125% annual fee for letters of credit; and (vi) a 1.125% annual fee for letters
of guaranty. Both lululemon usa inc. and lululemon FC USA inc., Inc. provided Royal Bank of Canada with guarantees and postponements of
claims in the amounts of CDN$20.0 million with respect to lululemon athletica canada inc.’s obligations under the revolving credit facility. The
revolving credit facility is also secured by all of our present and after acquired personal property, including all intellectual property and all of the
outstanding shares we own in our subsidiaries. As of January 29, 2012, aside from the letters of credit and guarantees, we had $nil in borrowings
outstanding under this credit facility.
Contractual Obligations and Commitments
Leases. We lease certain corporate-owned store locations, storage spaces, building and equipment under non-cancelable operating leases.
Our leases generally have initial terms of between five and 10 years, and generally can be extended only in five-year increments, if at all. Our
leases expire at various dates between 2011 and 2021, excluding extensions at our option. A substantial number of our leases for corporate-
owned store premises include renewal options and certain of our leases include rent escalation clauses, rent holidays and leasehold rental
incentives, none of which are reflected in the following table. Most of our leases for corporate-owned store premises also include contingent
rental payments based on sales volume, the impact of which also are not reflected in the following table. The following table summarizes our
contractual arrangements as of January 29, 2012, and the timing and effect that such commitments are expected to have on our liquidity and cash
flows in future periods:
Off-Balance Sheet Arrangements
We enter into documentary letters of credit to facilitate the international purchase of merchandise. We also enter into standby letters of
credit to secure certain of our obligations, including insurance programs and duties related to import purchases. As of January 29, 2012, letters of
credit and letters of guarantee totaling $1.5 million have been issued.
Other than these standby letters of credit, we do not have any off-balance sheet arrangements, investments in special purpose entities or
undisclosed borrowings or debt. In addition, we have not entered into any derivative contracts or synthetic leases.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make
estimates and assumptions. Predicting future events is inherently an imprecise activity and, as such, requires the use of judgment. Actual results
may vary from estimates in amounts that may be material to the financial statements. An accounting policy is deemed to be critical if it requires
an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different
estimates that reasonably could have been used or changes in the accounting estimates that are reasonably likely to occur periodically, could
materially impact our consolidated financial statements.
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Payments Due by Fiscal Year
Total 2012 2013 2014 2015 2016
Thereafter
(In thousands)
Operating Leases (minimum rent)
$
270,783
$
46,020
$
45,569
$
44,915
$
41,847
$
37,129
$
55,303