Under Armour 2006 Annual Report Download - page 63

Under Armour, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements—(Continued)
(amounts in thousands, except per share and share amounts)
As of December 31, 2006, the carrying amount of the intangible asset was $7,875, which comprises the
original fair value, net of $625 in accumulated amortization. Amortization expense, which is included in selling,
general and administrative expenses, was $625 for the year ended December 31, 2006. The estimated
amortization expense of the intangible asset is $1,500 for each of the years ended December 31, 2007 through
December 31, 2011.
6. Revolving Credit Facility and Long Term Debt
In December 2006, the Company entered into a third amended and restated financing agreement with a
lending institution. This financing agreement has a term of five years and provides for a revolving credit line of
up to $100,000 based on the Company’s domestic inventory and accounts receivable balances and may be used
for working capital and general corporate purposes. This financing agreement is collateralized by substantially all
of the assets of the Company and its domestic subsidiaries, other than their trademarks. Up to $10,000 of the
facility may be used to support letters of credit. The Company incurred $260 in deferred financing costs in
connection with the financing agreement. In accordance with EITF Issue No. 98-14, “Debtor’s Accounting for
Changes in Line-of-Credit or Revolving-Debt Arrangements,” unamortized deferred financing costs of $618
relating to the Company’s old revolving credit facility were added to the deferred financing costs of the new
revolving credit facility and will be amortized over the remaining life of the new facility.
The revolving credit facility bears interest based on the daily balance outstanding at the Company’s choice
of LIBOR plus an applicable margin (varying from 1.0% to 2.0%) or the JP Morgan Chase Bank prime rate plus
an applicable margin (varying from 0.0% to 0.5%). The applicable margin is calculated quarterly and varies
based on the Company’s pricing leverage ratio as defined in the agreement. The revolving credit facility also
carries a line of credit fee equal to the available but unused borrowings which can vary from 0.1% to 0.5%. As of
December 31, 2006, the Company’s availability was $93,033 based on its domestic inventory and accounts
receivable balances.
This financing agreement contains a number of restrictions that limit our ability, among other things, to
pledge our accounts receivable, inventory, trademarks and most of our other assets as security in our borrowings
or transactions; pay dividends on stock; redeem or acquire any of our securities; sell certain assets; make certain
investments; guaranty certain obligations of third parties; undergo a merger or consolidation; or engage in any
activity materially different from those presently conducted by the Company.
If net availability under the financing agreement falls below a certain threshold as defined in the agreement,
the Company would be required to maintain a certain leverage ratio and fixed charge coverage ratio as defined in
the agreement. This financing agreement also provides the lenders with the ability to reduce the available
revolving credit line amount under certain conditions even if the Company is in compliance with all conditions of
the agreement. The Company’s net availability as of December 31, 2006 was above the threshold for compliance
with the financial covenants and the Company was in compliance with all covenants as of December 31, 2006.
In September 2005, the Company entered into a second amended and restated financing agreement with a
lending institution that was to terminate in 2010. Under this financing agreement, the Company was required to
maintain prescribed levels of tangible net worth as defined in the agreement and was collateralized by
substantially all of the assets of the Company. The Company paid and recorded $1,061 in deferred financing
costs as part of the financing agreement which was comprised of both a $25,000 term note and a $75,000
revolving credit facility. In November 2005, the Company repaid the $25,000 term note plus interest and the
balance outstanding under the revolving credit facility of $12,200 with proceeds from the initial public offering
(see Note 9). The term note portion of the financing agreement was then terminated and as such the Company
expensed $265 of deferred financing costs. With the termination of the term note, the Company’s trademarks and
other intellectual property were released as a component of the collateral. The weighted average interest rate on
the term note was 9.4%.
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