Nautilus 2012 Annual Report Download - page 30

Table of Contents
We have a Credit Agreement (the "Loan Agreement”) with Bank of the West that, as amended and restated on March 30, 2012, provides for a
$15,750,000 maximum revolving secured credit line. The line of credit is available through March 31, 2015 for working capital, standby letters
of credit and general corporate purposes. Borrowing availability under the Loan Agreement is subject to our compliance with certain financial
and operating covenants at the time borrowings are requested. Standby letters of credit under the Loan Agreement are treated as a reduction of
the available borrowing amount and are subject to covenant testing.
The interest rate applicable to borrowings under the Loan Agreement is based on either, at our discretion, Bank of the West's base rate, a floating
rate or LIBOR , plus an applicable margin based on certain Company financial performance metrics. Our borrowing rate was 2.00% as of
December 31, 2012 . The Loan Agreement contains customary covenants, including minimum fixed charge coverage ratio and leverage ratio,
and limitations on capital expenditures, mergers and acquisitions, indebtedness, liens, dispositions, dividends and investments. The Loan
Agreement also contains customary events of default. Upon an event of default, the lender has the option of terminating its credit commitment
and accelerating all obligations under the Loan Agreement. Borrowings under the Loan Agreement are collateralized by substantially all of our
assets, including intellectual property assets.
As of December 31, 2012 , we had no outstanding borrowings and $1.0 million in standby letters of credit issued under the Loan Agreement. As
of December 31, 2012 , we were in compliance with the financial covenants of the Loan Agreement and approximately $14.8 million was
available for borrowing.
On September 3, 2010, we entered into a Note Purchase Agreement (the “Purchase Agreement”) with certain entities (collectively, the
“Sherborne Purchasers”) under common control of Sherborne Investors GP, LLC and its affiliates (collectively “Sherborne”). Sherborne was
formerly our largest shareholder and is controlled by Edward J. Bramson, the Company's former Chairman and Chief Executive Officer, and
Craig L. McKibben, a former member of our Board of Directors.
Pursuant to the Purchase Agreement, we issued to the Sherborne Purchasers $6,096,996 in aggregate principal amount at maturity of Increasing
Rate Senior Discount Notes due December 31, 2012 (the “Notes”). The Notes had an original principal amount totaling $5,000,000 and an
original maturity date of December 31, 2012. On March 12, 2012, the maturity date of the Notes was automatically extended under certain terms
of the Purchase Agreement to May 2, 2013.
On July 19, 2011, beneficial interest in the Notes was assigned by the Sherborne Purchasers pro-rata to their respective investors in the manner
permitted by the Purchase Agreement. Such assignment was made in connection with the resignation of Messrs. Bramson and McKibben from
their respective positions with Nautilus on May 26, 2011, and the subsequent pro-rata distribution by certain Sherborne-affiliated entities to their
respective investors of the common stock of Nautilus owned by such entities.
We repaid all amounts outstanding under the Notes on March 30, 2012. If all of the Notes were paid on the original maturity date, the effective
rate of interest over the term of the Purchase Agreement would have been approximately 8.7% per annum, which was the rate at which interest
expense was accrued in periods preceding the repayment date. The actual effective rate of interest through the repayment date was approximately
6.4% per annum.
Non
-Cancelable Contractual Obligations
Our operating cash flows include the effect of certain non-cancelable, contractual obligations. A summary of such obligations as of
December 31, 2012 , including those related to our discontinued Commercial operation, is as follows (in thousands):
25
Payments due by period
Total Less than 1
year 1-3 years 3-5 years More than 5
years
Operating lease obligations
$
16,835
$
3,369
$
6,437
$
5,379
$
1,650
Purchase obligations
(1)
1,323
1,323
— —
—
Minimum royalty obligations
250
250
— —
—
Total
$
18,408
$
4,942
$
6,437
$
5,379
$
1,650
(1)
Our purchase obligations are comprised primarily of inventory purchase commitments. Because substantially all of our inventory is
sourced from Asia, we have long lead times and therefore need to secure factory capacity from our vendors in advance.