Under Armour 2010 Annual Report Download - page 64

6. Revolving Credit Facility and Long Term Debt
Revolving Credit Facility
The Company has a revolving credit facility with certain lending institutions. The revolving credit facility
has a term of three years, expiring in January 2012, and provides for a committed revolving credit line of up to
$200.0 million based on the Company’s qualified domestic inventory and accounts receivable balances. The
commitment amount under the revolving credit facility may be increased by an additional $50.0 million, subject
to certain conditions and approvals under the credit agreement.
The revolving credit facility may be used for working capital and general corporate purposes. It is
collateralized by substantially all of the assets of the Company and its domestic subsidiaries (other than the
Company’s trademarks), and by a pledge of 65% of the equity interests of certain of the Company’s foreign
subsidiaries. Up to $5.0 million of the revolving credit facility may be used to support letters of credit, of which
no amounts were outstanding as of December 31, 2010. The Company must maintain a certain leverage ratio and
fixed charge coverage ratio as defined in the credit agreement. As of December 31, 2010, the Company was in
compliance with these financial covenants. The revolving credit facility also provides the lenders with the ability
to reduce the borrowing base, even if the Company is in compliance with all conditions of the revolving credit
facility, upon a material adverse change to the business, properties, assets, financial condition or results of
operations of the Company. The revolving credit facility contains a number of restrictions that limit the
Company’s ability, among other things, and subject to certain limited exceptions, to incur additional
indebtedness, pledge its assets as security, guaranty obligations of third parties, make investments, undergo a
merger or consolidation, dispose of assets, or materially change its line of business. In addition, the revolving
credit facility includes a cross default provision whereby an event of default under other debt obligations, as
defined in the credit agreement, will be considered an event of default under this credit agreement.
Borrowings under the revolving credit facility bear interest based on the daily balance outstanding at a
LIBOR rate option (with LIBOR subject to a rate floor of 1.25%) plus an applicable margin (varying from 2.0%
to 2.5%) or, in certain cases at the Company’s discretion, a base rate option (based on the prime rate or as
otherwise specified in the credit agreement, with the base rate subject to a rate floor of 2.25%) plus an applicable
margin (varying from 1.0% to 1.5%). The revolving credit facility also carries a commitment fee varying from
0.38% to 0.5% of the committed line amount less outstanding borrowings and letters of credit. The applicable
margins are calculated quarterly and vary based on the Company’s leverage ratio as defined in the credit
agreement.
Prior to entering into the revolving credit facility in January 2009, the Company terminated its prior $100.0
million revolving credit facility. In conjunction with the termination of the prior revolving credit facility, the
Company repaid the then outstanding balance of $25.0 million. The prior revolving credit facility was also
collateralized by substantially all of the Company’s assets, other than its trademarks, and included covenants,
conditions and other terms similar to the Company’s current revolving credit facility.
As of December 31, 2010, borrowings under the $200 million revolving credit facility were limited to
approximately $151.5 million based on the Company’s eligible domestic inventory and accounts receivable
balances. The weighted average interest rates on the balances outstanding under the prior revolving credit facility
were 1.4% and 3.7% during the years ended December 31, 2009 and 2008, respectively. No balances were
outstanding under the current revolving credit facility during the years ended December 31, 2010 and 2009.
Long Term Debt
The Company has long term debt agreements with various lenders to finance the acquisition or lease of
qualifying capital investments. Loans under these agreements are collateralized by a first lien on the related
assets acquired. As these agreements are not committed facilities, each advance is subject to approval by the
lenders. Additionally, these agreements include a cross default provision whereby an event of default under other
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