Nautilus 2008 Annual Report Download - page 59

Table of Contents
8. ACCRUED LIABILITIES
9. BORROWINGS
On January 16, 2008 the Company and its subsidiary, Nautilus International S.A., entered into a Loan and Security Agreement (the “Loan
Agreement”) with Bank of America N.A. The Loan Agreement was amended during 2008 to revise certain covenants, extend the maturity date
of the loan to coincide with the sale of the Company’s fitness apparel division, allow for the Company to repurchase up to $10.0 million of
common stock, and reduce the overall commitment of the Loan Agreement. The Loan Agreement has a five year term and provides the
Company with a revolving secured credit line which is available to fund the Company’s letters of credit, working capital needs and for other
general business purposes, including acquisition financing. The interest rate under the Loan Agreement is either, prime rate plus zero to 75 basis
points, or LIBOR plus 150 to 325 basis points, depending on the Company’s fixed charge coverage ratio. The use of prime or LIBOR is at the
discretion of management. The weighted average interest rate on the Company’s outstanding borrowings at December 31, 2008 and 2007 were
4.0% and 7.2%, respectively. The Loan Agreement is collateralized by substantially all of the Company’s U.S. assets.
The Loan Agreement contains a financial covenant, as well as limitations on capital expenditures, mergers and acquisitions, indebtedness, liens,
dispositions, dividends, and investments. The financial covenant is applicable only during a trigger period that would be in effect when excess
availability (based on the value of our collateral assets, less then current borrowings) falls below certain pre-established limits. Once activated,
the trigger period would generally last until the Company meets minimum excess borrowing capacity requirements for a 90-day period. The
Loan Agreement also contains customary provisions regarding events of default. Upon an event of default, the lenders would have the option of
accelerating all obligations under the Loan Agreement.
The terms of the Loan Agreement initially provided the Company with access to a $100 million revolving secured credit line. The amount of the
credit line was reduced: to $70 million by the First Amendment dated February 29, 2008; to $40 million by the Fourth Amendment dated
August 27, 2008; and to $30 million by the Fifth Amendment dated March 10, 2009. The credit line reductions were in line with declining
borrowing needs of the Company. The Loan Agreement, as amended, may be increased to $55 million under certain circumstances.
The original financial covenant was a measure of earnings before interest, taxes, depreciation and amortization (“EBITDA”),
with adjustment for
specified one time charges and a contractually defined cumulative minimum for each month through November 2008. Pursuant to the terms of
the Loan Agreement, effective December 1, 2008, the financial covenant changed, from an EBITDA-based measurement, to a rolling 12 month
fixed charge coverage ratio of 1.0 to 1.0 or greater.
The Company was in a trigger period during the first quarter of 2008, failed to meet the financial covenant, and received a waiver from Bank of
America as part of the First Amendment to the Loan Agreement dated February 29, 2008. The Company has maintained adequate excess
capacity and has not triggered the application
55
December 31,
(In thousands)
2008
2007
Restructuring
$
1,535
$
—
Warranty reserve, current portion
15,344
18,266
Payroll and benefit
3,593
7,052
Royalties
1,957
1,537
Legal and professional
2,970
942
Other
5,073
9,804
$
30,472
$
37,601