Dick's Sporting Goods 2005 Annual Report Download - page 54

The net effect of the purchased bond hedge and the warrants is to either reduce the potential dilution from the conversion of
the senior convertible notes if the Company elects a net share settlement or to increase the net cash proceeds of the offering if
a net cash settlement is elected if the senior convertible notes are converted at a time when the market price of the common
stock exceeds $39.31 per share. There would be dilution from the conversion of the senior convertible notes to the extent that
the then market price per share of the common stock exceeds $56.16 at the time of conversion.
Revolving Credit Agreement – On July 28, 2004, the Company executed its Second Amended and Restated Credit Agreement
(the “Credit Agreement”), between Dick’s and lenders named therein. The Credit Agreement became effective on July 29, 2004
and provides for a revolving credit facility in an aggregate outstanding principal amount of up to $350 million, including up to
$75 million in the form of letters of credit. The Credit Agreement’s term was extended to May 30, 2008.
As of January 28, 2006 and January 29, 2005, the Company’s total remaining borrowing capacity, after subtracting letters of
credit, under the Credit Agreement was $275.6 million and $184.1 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 specified 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 or (b) the one-month London Interbank Offering Rate (“LIBOR”), plus the applicable margin of 1.25% to 1.75% based on
the level of excess borrowing availability. Borrowings are collateralized by the assets of the Company, excluding store and
distribution center equipment and fixtures that have a net carrying value of $98.4 million as of January 28, 2006.
At January 28, 2006 and January 29, 2005, the prime rate was 7.25% and 5.25%, respectively, and LIBOR was 4.57% and 2.59%,
respectively. There were no outstanding borrowings at January 28, 2006. The borrowings outstanding at January 29, 2005 were
$76.1 million.
The Credit Agreement contains restrictive covenants including the maintenance of a certain fixed charge coverage ratio
of not less than 1.0 to 1.0 in certain circumstances and prohibits payment of any dividends.
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 28, 2006 and January 29, 2005, the
Company had outstanding letters of credit totaling $17.8 million and $17.1 million, respectively.
The following table provides information about the Credit Agreement borrowings as of and for the periods:
2005 2004
(Dollars in thousands)
Balance, fiscal period end $–$ 76,094
Average interest rate 4.76% 3.30%
Maximum outstanding during the year $ 251,963 $ 290,755
Average outstanding during the year $134,610 $ 94,682
dick’s sporting goods, inc. 2005 annual report
52