Business Context and Reporting Period
This Form 8-K filing by Under Armour, Inc. reports events occurring on March 29, 2011. The primary purpose of the filing is to disclose the entry into a new material definitive credit agreement and the simultaneous termination of a prior credit facility.
Key Financial Metrics and Debt Structure
The filing details a restructuring of the company's debt facilities rather than reporting operational financial results such as revenue or profit.
- New Credit Agreement Total Commitment: $325,000,000
- Revolving Credit Facility: $300,000,000 (expandable to $350,000,000 subject to conditions)
- Term Loan Commitment: $25,000,000 (expires May 29, 2011)
- Letters of Credit Capacity: Up to $5,000,000
- Interest Rate Structure: LIBOR plus 1.25% to 1.75% or Base Rate plus 0.25% to 0.75% (no rate floor)
- Commitment Fee: 0.25% to 0.35% on unused borrowings
- Collateral: Substantially all assets (excluding trademarks and the corporate office complex) and a 65% pledge of equity interests in certain foreign subsidiaries.
Material Changes Versus Prior Period
Under Armour terminated its existing $200,000,000 revolving credit facility, originally dated January 28, 2009. This was replaced by the new $325,000,000 facility, representing a $125,000,000 increase in total committed credit capacity. The new agreement extends the term to four years.
Outlook, Management Commentary, and Risks
Use of Proceeds: The company anticipates using the $25,000,000 term loan to finance a portion of the purchase price for part of the office complex at its corporate headquarters. The acquisition is expected to close by May 29, 2011. The revolving facility is designated for working capital and general corporate purposes.
Covenants and Restrictions: The agreement requires the maintenance of specific leverage and interest coverage ratios. It restricts the company's ability to incur additional indebtedness, pledge assets, guarantee third-party obligations, make investments, undergo mergers, or materially change its line of business.
Risks: Lenders retain the right to reduce the borrowing base upon a material adverse change to the company's business or financial condition, even if the company is in compliance with all other conditions. The agreement includes a cross-default provision linking it to other debt obligations.
Investor Verification Checklist
- Verify the closing date and final purchase price of the corporate headquarters office complex acquisition.
- Monitor the company's leverage ratio to ensure compliance with the new credit agreement covenants.
- Confirm whether the revolving credit facility is increased to the $350,000,000 cap in future filings.
- Review subsequent filings for any material adverse changes that could trigger a reduction in the borrowing base.