Rue 21 2011 Annual Report Download - page 37

Senior Secured Credit Facility
Effective April 10, 2008, we established a five-year $60.0 million senior secured credit facility with Bank of
America, N.A., which was amended on November 24, 2009. Key provisions of the amendment included an increase
in the borrowing ceiling to $85 million from $60 million, which is further expandable at our option in increments of
$5 million up to a maximum of $100 million under certain defined conditions. On November 18, 2011 a second
amendment was executed. The key provision of the second amendment allows the Company to provide guarantees
to third party lenders in connection with purchase orders in the ordinary course of business if such guarantees are
considered necessary by the Company. Interest accrues at the higher of the Federal Funds rate plus .50%, the prime
rate or the adjusted LIBOR rate plus 1.00% plus the applicable margin which ranges from 1.25% to 3.00%.
Availability under our senior secured credit facility is collateralized by a first priority interest in all of our assets. As
of January 28, 2012 and January 29, 2011, there was no amount outstanding under the senior secured credit facility.
Our senior secured credit facility includes a fixed charge covenant applicable only if net availability falls below
a 10% threshold. We are in compliance with all covenants under our senior secured credit facility as of January 28,
2012 and expect to remain in compliance for the next twelve months.
We believe that our cash position, net cash provided by operating activities and availability under our senior
secured credit facility will be adequate to finance working capital needs and planned capital expenditures for at least
the next twelve months.
Off Balance Sheet Arrangements
We are not a party to any off balance sheet arrangements.
Contractual Obligations
The following table summarizes our contractual obligations as of January 28, 2012 and the effect such
obligations are expected to have on our liquidity and cash flows in future periods.
Payments due by Period
Total Less than 1 year 1 - 3 years 4 - 5 years More than 5 years
(In thousands)
Operating lease obligations (1) . . . 385,556 63,522 109,280 84,482 128,272
Merchandise inventory purchase
commitments ............... 128,206 128,206 — — —
$513,762 $191,728 $109,280 $84,482 $128,272
(1) Excludes common area maintenance (CAM) charges, real estate taxes and certain other expenses which
amounted to approximately 19% of minimum lease obligations in fiscal year 2011 which we expect to be
consistent for the next three years.
Impact of Inflation
Our results of operations and financial condition are presented based on historical cost. While it is difficult to
accurately measure the impact of inflation due to the imprecise nature of the estimates required, we believe the
effects of inflation, if any, on our consolidated results of operations and financial condition have been immaterial.
Critical Accounting Policies
Management’s discussion and analysis of financial condition and results of operations is based upon our
consolidated financial statements, which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements requires estimates and judgments that
affect the reported amounts of our assets, liabilities, net sales and expenses. Management bases estimates on
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