Under Armour 2012 Annual Report Download - page 70

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a balloon payment of $37.3 million due at maturity. The assumed loan is nonrecourse with the lender’s remedies
for non-performance limited to action against the acquired property and certain required reserves and a cash
collateral account, except for nonrecourse carve outs related to fraud, breaches of certain representations,
warranties or covenants, including those related to environmental matters, and other standard carve outs for a
loan of this type. The loan requires certain minimum cash flows and financial results from the property, and if
those requirements are not met, additional reserves may be required. The assumed loan requires prior approval of
the lender for certain matters related to the property, including material leases, changes to property management,
transfers of any part of the property and material alterations to the property. The loan has an interest rate of
6.73%. In connection with the assumed loan, the Company incurred and capitalized $0.8 million in deferred
financing costs. In addition, the Company was required to set aside amounts in reserve and cash collateral
accounts. As of December 31, 2011, $2.0 million of restricted cash was included in prepaid expenses and other
current assets, and the remaining $3.0 million of restricted cash was included in other long term assets.
In December 2012, the Company repaid the remaining balance of the assumed loan of $37.7 million and
entered into a new $50.0 million loan collateralized by the land, buildings and tenant improvements comprising
the Company’s corporate headquarters. The new loan has a 7 year term and maturity date of December 2019. The
loan bears interest at one month LIBOR plus a margin of 1.50%, and allows for prepayment without penalty. The
Company is required to maintain the same leverage ratio and interest coverage ratio as set forth in the credit
facility. As of December 31, 2012, the Company was in compliance with these ratios. The loan contains a
number of restrictions that limit the Company’s ability, among other things, and subject to certain limited
exceptions, incur additional indebtedness, pledge its assets as a security, guaranty obligations of third parties,
make investments, undergo a merger or consolidation, dispose of assets, or materially change its line of business.
The loan requires prior approval of the lender for certain matters related to the property, including transfers of
any interest in the property. In addition, the loan includes a cross default provision similar to the cross default
provision in the credit facility discussed above. The Company incurred and capitalized $1.0 million in deferred
financing costs in connection with the new $50.0 million loan and expensed $0.1 million of unamortized deferred
financing costs related to the assumed loan during the three months ended December 31, 2012.
Interest expense was $5.2 million, $3.9 million and $2.3 million for the years ended December 31, 2012,
2011 and 2010, respectively. Interest expense includes the amortization of deferred financing costs and interest
expense under the credit and long term debt facilities, as well as the assumed loan discussed above.
7. Commitments and Contingencies
Obligations Under Operating Leases
The Company leases warehouse space, office facilities, space for its retail stores and certain equipment
under non-cancelable operating leases. The leases expire at various dates through 2023, excluding extensions at
the Company’s option, and include provisions for rental adjustments. The table below includes executed lease
agreements for factory house stores that the Company did not yet occupy as of December 31, 2012 and does not
include contingent rent the company may incur at its retail stores based on future sales above a specified limit.
The following is a schedule of future minimum lease payments for non-cancelable real property operating leases
as of December 31, 2012 as well as significant operating lease agreements entered into during the period after
December 31, 2012 through the date of this report:
(In thousands)
2013 $ 30,610
2014 33,558
2015 31,848
2016 24,980
2017 20,181
2018 and thereafter 61,718
Total future minimum lease payments $202,895
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