Lululemon 2014 Annual Report Download - page 37

Table of Contents
Revolving Credit Facility
On November 22, 2013, we entered into unsecured demand revolving credit facilities with HSBC Bank Canada and Bank of America,
N.A., Canada Branch, which replaced our 2007 credit facility. The credit facilities provide us with available borrowings in a total amount of
$15.0 million. Borrowings under the credit facilities must be repaid in full on demand and are available by way of U.S. or Canadian denominated
advances, letters of credit or depository bills. Advances denominated in U.S. Dollars bear interest on the outstanding balance at a rate equal to
U.S. LIBOR plus 100 basis points or the U.S. prime rate, at our option. Advances denominated in Canadian Dollars bear interest on the
outstanding balance at a rate equal to the CDOR Rate plus 100 basis points or the Canadian prime rate, at our option. Borrowings drawn down
under standby letters of credit bear a fee of 100 basis points and borrowings drawn down under commercial letters of credit bear the banks'
standard pricing. We are also required to pay a quarterly commitment fee of 10 basis points on the unused portion of the facility. Our wholly-
owned subsidiary, lululemon usa inc., has provided a guarantee to the bank counter-parties under the facilities. The revolving credit facilities are
unsecured, with a negative pledge on assets subject to permitted encumbrances, and no financial covenants. These facilities were renewed for a
one year period in November 2014. As of February 1, 2015 , aside from letters of credit of $0.6 million , we had no other borrowings
outstanding under these credit facilities.
Contractual Obligations and Commitments
Leases. We lease certain store and other retail locations, distribution centers, offices, 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 one and 10 years, excluding extensions at our option. A substantial number of our leases 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 table below. Most of our leases for store premises also include contingent rental payments based on sales volume, the impact of
which also are not reflected in the table below.
Product purchase obligations. The amounts listed for product purchase obligations in the table below represent agreements (including
open purchase orders) to purchase products in the ordinary course of business that are enforceable and legally binding and that specify all
significant terms. In some cases, prices are subject to change throughout the production process. The reported amounts exclude product purchase
liabilities included in accounts payable and accrued inventory liabilities as of February 1, 2015 .
The following table summarizes our contractual arrangements as of February 1, 2015 , 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 standby letters of credit to secure certain of our obligations, including leases, taxes and duties. As of February 1, 2015 ,
letters of credit and letters of guarantee totaling $0.6 million have been issued.
Other than our operating leases and 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 2015 2016 2017 2018 2019 Thereafter
(In thousands)
Operating leases (minimum rent)
$
395,483
$
82,282
$
81,697
$
72,660
$
57,190
$
43,625
$
58,029
Product purchase obligations
$
189,723
$
189,723
$
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$
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$
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$
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$
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