All amounts in thousands. 2019" refers to fiscal year 2019. 6. Lululemon's financial statements are prepared in conformity with US GAAP. What does GAAP stand for? (4 pts) 7. How did the balance on "Inventories change solely due to operations in 2019? What amount? Which direction? Hint: Use the statement of cash flows. (6 pts) CIRCLE ONE AMOUNT INCREASE DECREASE Question #8 is NOT related to Lululemon. 8. At the end of the most recent fiscal year, a company had non-current assets of 700, non- current liabilities of 870, and total equity of 550. What was their working capital? (5 pts) Hint: Assets = Liabilities + Equity Current Assets + Non-Current Assets = Current Liab. + Non-Current Liab. + Equity 5 Table of Contents lululemon athletica inc. CONSOLIDATED BALANCE SHEETS (Amounts in thousands, excepe per share amounts) February 2, 2020 February 3, 2019 ASSETS Current assets Cash and cash equivalents Accounts receivable s $ Inventories Prepaid and receivable income taxes Other prepaid expenses and other current assets 1,093.505 40.219 518,513 85,159 70,542 1,807,938 007 930 671,693 689,664 24,423 31,435 56,201 3,281,354 881,320 35,786 404,842 49,385 57,949 1,429,282 567,237 Property and equipment, net Right-of-use lease assets Goodwill and intangible assets, net Deferred income tax assets Other non-current assets 24,239 26,549 37,404 2,084,711 S $ s $ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable Accrued inventory liabilities Accrued compensation and related expenses Current lease liabilities Current income taxes payable Unredeemed gift card liability Other current liabilities 95,533 16,241 109,181 79,997 6,344 133,688 128,497 26,436 120,413 125,043 620,418 611,464 48,226 43,432 5,596 1,329,136 67,412 99,412 112,698 500,477 Non-current lease liabilities Non-current income taxes payable Deferred income tax liabilities Other non-current liabilities 42,099 14,249 81,911 638,736 Commitments and contingencies Stockholders' equity Undesignated preferred stock $0.01 par value: 5,000 shares authorized; none issued and outstanding Exchangeable stock, no par value: 60,000 shares authorized; 6,227 and 9,332 issued and outstanding Special voting stock, 50.000005 par value: 60,000 shares authorized: 6,227 and 9,332 issued and outstanding Common stock, $0.005 par value: 400,000 shares authorized: 124, 122 and 121,600 issued and outstanding Additional paid-in capital Retained earnings Accumulated other comprehensive loss 621 355,541 1,820,637 (224,581) 1,952,218 3,281,354 608 315,285 1,346,890 (216,808) 1,445,975 2,084,711 $ $ See accompanying notes to the consolidated financial statements 38 Table of Contents lululemon athletica inc. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Amounts in thousands, except per share amounts) $ $ February 2. 2020 3,979,296 1,755,910 2,223,386 1,334,276 Fiscal Year Ended February 3, 2019 $ 3,288,319 1,472,032 1,816,287 1,110,451 Net revenue Cost of goods sold Goose Gross profit Selling, general and administrative expenses Asset impairment and restructuring costs Income from operations Other income (expense), net Income before income tax expense Income tax expense Net income January 28, 2018 2,649,181 1,250,391 1,398,790 904,264 38,525 456,001 3,997 459,998 201,336 258,662 889,110 8,283 897,393 251,797 645,596 $ 705,836 9,414 715,250 231,449 483,801 $ S Other comprehensive income (loss), net of tax: Foreign currency translation adjustment Comprehensive income (7,773) 637,823 (73,885) 409,916 58,577 317,239 s $ S Send for Comments 3.63 3.61 S s S Basic earnings per share S S 4.95 $ Diluted earnings per share S 4.93 $ Basic weighted average number of shares outstanding 130,393 Diluted weighted average number of shares outstanding 130,955 See accompanying notes to the consolidated financial statements 1.90 1.90 135,988 136,198 133,413 133,971 39 Table of Contents lululemon athletica inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) Fiscal Year Ended February 3, 2019 January 28, 2018 $ 483,801 $ 258,662 122.484 28,568 (6 859) 108.235 17,610 (6,202) ) 11,593 6,227 (11,416) (1,925) (14,876) 16,786 (85,942) (437) (30,653) 71,962 4,312 41,600 52,597 24,885 (6,169) February 2, 2020 Cash flows from operating activities Net income S 645.596 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 161,933 Stock-based compensation expense 45,593 Derecognition of unredeemed gift card liability (11,939) Asset impairment for ivivva restructuring Settlement of derivatives not designated in a hedging relationship Deferred income taxes 24,129 Changes in operating assets and liabilities: Inventories (117,591) Prepaid and receivable income taxes (35,775) Other prepaid expenses and other current and non-current assets (81,606) Accounts payable (14,810) Accrued inventory liabilities (9,598) Accrued compensation and related expenses 25,326 Current income taxes payable (40,264) Unredeemed gift card liability 33,289 Non-current income taxes payable 6,127 Duru 200 Right-of-use lease assets and current and non-current lease liabilities 17,422 Other current and non-current liabilities 23,409 ... Net cash provided by operating activities 669,316 Cash flows from investing activities Purchase of property and equipment (283,048) Settlement of net investment hedges 347 Other investing activities 4,293 Net cash used in investing activities (278,408) Cash flows from financing activities Proceeds from settlement of stock-based compensation 18,170 Taxes paid related to net share settlement of stock-based compensation () (21,944) Repurchase of common stock (173,399) Other financing activities Net cash used in financing activities (177,173) Effect of exchange rate changes on cash (1,550) Increase (decrease) in cash and cash equivalents 212.185 Cash and cash equivalents, beginning of period $ 881,320 Cash and cash equivalents, end of period $ 1,093,505 See accompanying notes to the consolidated financial statements (21,178) 32,242 (7,755) (1,551) 3,680 12,873 (16,470) 17,282 48,268 40,720 742,779 37,237 489,337 (225,807) (16.216) (771) (242,794) (157,864) (7,203) (8,325) (173,392) 5,628 ( (3,229) (100,261) 17,650 (8.779) (598,340) (745) (590,214) (18,952) (109,181) 990,501 881,320 (97,862) 37,572 255,655 734,846 990,501 $ S $ S 41 Table of Contents Right-of-use assets represent the right to control the use of the leased asset during the lease and are initially recognized in an amount equal to the lease liability. In addition, prepaid rent, initial direct costs, and adjustments for lease incentives are components of the right-of-use asset. Over the lease term the lease expense is amortized on a straight-line basis beginning on the lease commencement date. Right-of-use assets are assessed for impairment as part of the impairment of long-lived assets, which is performed whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Variable lease payments, including contingent rental payments based on sales volume, are recognized when the achievement of the specific target is probable. A right-of-use asset and lease liability are not recognized for leases with an initial term of 12 months or less, and the lease expense is recognized on a straight-line basis over the lease term. The Company recognizes a liability for the fair value of asset retirement obligations ("AROs") when such obligations are incurred. The Company's AROs are primarily associated with leasehold improvements which, at the end of a lease, the Company is contractually obligated to remove in order to comply with the lease agreement. At the inception of a lease with such conditions, the Company records an ARO liability and a corresponding capital asset in an amount equal to the estimated fair value of the obligation. The liability is estimated based on a number of assumptions requiring management's judgment, including store closing costs, cost inflation rates and discount rates, and is accreted to its projected future value over time. The capitalized asset is depreciated using the convention for depreciation of leasehold improvement assets. Upon satisfaction of the ARO conditions, any difference between the recorded ARO liability and the actual retirement costs incurred is recognized as an operating gain or loss in the consolidated statements of operations. The Company recognizes a liability for a cost associated with a lease exit or disposal activity when such obligation is incurred. A lease exit or disposal liability is measured initially at its fair value in the period in which the liability is incurred. The Company estimates fair value at the cease-use date of its operating leases as the remaining lease rentals, reduced by estimated sublease rentals that could be reasonably obtained for the property, even where the Company does not intend to enter into a sublease. Estimating the cost of certain lease exit costs involves subjective assumptions, including the time it would take to sublease the leased location and the related potential sublease income. The estimated accruals for these costs could be significantly affected if future experience differs from the assumptions used in the initial estimate. Revenue recognition Net revenue is comprised of company-operated store net revenue, direct to consumer net revenue through websites and mobile apps, including mobile apps on in-store devices that allow demand to be fulfilled via the Company's distribution centers, and other net revenue, which includes revenue from outlets, temporary locations, sales to wholesale accounts, warehouse sales, and license and supply arrangement net revenue, which consists of royalties as well as sales of the Company's products to licensees. All revenue is reported net of sales taxes collected from customers behalf of taxing authorities. Revenue is recognized when performance obligations are satisfied through the transfer of control of promised goods to the Company's customers. Control transfers once a customer has the ability to direct the use of, and obtain substantially all of the benefits from the product. This includes the transfer of legal title, physical possession, the risks and rewards of ownership, and customer acceptance. Revenue from company-operated stores and other retail locations is recognized at the point of sale. Direct to consumer revenue and sales to wholesale accounts are recognized upon receipt by the customer. In certain arrangements the Company receives payment before the customer receives the promised good. These payments are initially recorded as deferred revenue, and recognized revenue in the period when control is transferred to the customer. Revenue is presented net of an allowance for estimated returns, which is based on historic experience. The Company's liability for sales return refunds is recognized within other current liabilities, and an asset for the value of inventory which is expected to be returned is recognized within other prepaid expenses and other current assets on the consolidated balance sheets. Shipping fees billed to customers are recorded as revenue, and shipping costs are recognized within selling, general and administrative expenses in the same period the related revenue is recognized. Proceeds from the sale of gift cards are initially deferred and recognized within unredeemed gift card liability on the consolidated balance sheets, and are recognized as revenue when tendered for payment. Based on historical experience, and to the extent there is no requirement to remit unclaimed card balances to government agencies, an estimate of the gift card balances that will never be redeemed is recognized as revenue in proportion to gift cards which have been redeemed. While the Company will continue honor all gift cards presented for payment, management may determine the likelihood of redemption to be remote for certain card balances due to, among other things, long periods of inactivity. In these circumstances, to the extent management determines there is no requirement for remitting card balances to government agencies under unclaimed property laws, the portion of card balances not expected to be redeemed are recognized in net 45 Table of Contents NOTE 6. OTHER CURRENT LIABILITIES Accrued duty, freight, and other operating expenses Sales tax collected Deferred revenue Sales return allowances Accrued rent Accrued capital expenditures Forward currency contract liabilities Lease termination liabilities Other Other current liabilities February 2, 2020 February 3, 2019 (In thousands) $ 59,4035 49,945 17,370 16,091 12,705 8,045 12,897 11,318 8,356 7,331 BE 5,457 1195 11,295 1,920 1,042 182 2,293 6,753 5,338 $ 125,043 $ 112,698 Fill & Sign NOTE 7. OTHER NON-CURRENT LIABILITIES Tenant inducements Deferred lease liabilities Other Other non-current liabilities February 2, 2020 February 3, 2019 (In thousands) $ S 42,138 33,406 5,596 6,367 $ 5,596 S 81,911 NOTE 8. LONG-TERM DEBT AND CREDIT FACILITIES North America revolving credit facility On December 15, 2016, the Company entered into a $150.0 million committed and unsecured revolving credit facility. Any amounts outstanding under the revolving credit facility will be due and payable in full on December 15, 2021, subject to provisions that permit the Company to request a limited number of one year extensions annually. Up to $35.0 million of the revolving credit facility is available for the issuance of letters of credit and up to $25.0 million is available for swing line loans. Commitments under the revolving credit facility may be increased by up to $200.0 million, subject to certain conditions, including the approval of the lenders. Borrowings under the revolving credit facility may be made in U.S. Dollars, Euros, Canadian Dollars, and in other currencies, subject to the approval of the administrative agent and the lenders. Borrowings under the agreement may be prepaid and commitments may be reduced or terminated without premium or penalty (other than customary breakage costs). Borrowings made under the revolving credit facility bear interest at a variable rate per annum equal to, at the Company's option, either (a) LIBOR or (b) an alternate base rate, plus, in each case, an applicable margin. The applicable margin is determined by reference to a pricing grid, based on the ratio of indebtedness to earnings before interest, tax, depreciation, amortization, and rent ("EBITDAR") and ranges between 1.00%-1.759 for LIBOR loans and 0.00%-0.75% for alternate base rate loans. Additionally, a commitment fee of between 0.125%-0.200%, also determined by reference to the pricing grid, is payable on the average daily unused amounts under the revolving credit facility. The credit agreement contains negative covenants that, among other things and subject to certain exceptions, limit the ability of the Company's subsidiaries to incur indebtedness, incur liens, undergo fundamental changes, make dispositions of all or substantially all of their assets, alter their businesses and enter into agreements limiting subsidiary dividends and distributions. The Company is also required to maintain a consolidated rent-adjusted leverage ratio of not greater than 3.50:1.00 and it is not permitted to allow the ratio of consolidated EBITDAR to consolidated interest charges (plus rent) to be less than 2.00:1.00. The credit agreement also contains certain customary representations, warranties, affirmative covenants, and events of default (including, among others, an event of default upon the occurrence of a change of control). As of February 2, 2020, the Company was in compliance with all applicable covenants. 51 All amounts in thousands. 2019" refers to fiscal year 2019. 6. Lululemon's financial statements are prepared in conformity with US GAAP. What does GAAP stand for? (4 pts) 7. How did the balance on "Inventories change solely due to operations in 2019? What amount? Which direction? Hint: Use the statement of cash flows. (6 pts) CIRCLE ONE AMOUNT INCREASE DECREASE Question #8 is NOT related to Lululemon. 8. At the end of the most recent fiscal year, a company had non-current assets of 700, non- current liabilities of 870, and total equity of 550. What was their working capital? (5 pts) Hint: Assets = Liabilities + Equity Current Assets + Non-Current Assets = Current Liab. + Non-Current Liab. + Equity 5 Table of Contents lululemon athletica inc. CONSOLIDATED BALANCE SHEETS (Amounts in thousands, excepe per share amounts) February 2, 2020 February 3, 2019 ASSETS Current assets Cash and cash equivalents Accounts receivable s $ Inventories Prepaid and receivable income taxes Other prepaid expenses and other current assets 1,093.505 40.219 518,513 85,159 70,542 1,807,938 007 930 671,693 689,664 24,423 31,435 56,201 3,281,354 881,320 35,786 404,842 49,385 57,949 1,429,282 567,237 Property and equipment, net Right-of-use lease assets Goodwill and intangible assets, net Deferred income tax assets Other non-current assets 24,239 26,549 37,404 2,084,711 S $ s $ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable Accrued inventory liabilities Accrued compensation and related expenses Current lease liabilities Current income taxes payable Unredeemed gift card liability Other current liabilities 95,533 16,241 109,181 79,997 6,344 133,688 128,497 26,436 120,413 125,043 620,418 611,464 48,226 43,432 5,596 1,329,136 67,412 99,412 112,698 500,477 Non-current lease liabilities Non-current income taxes payable Deferred income tax liabilities Other non-current liabilities 42,099 14,249 81,911 638,736 Commitments and contingencies Stockholders' equity Undesignated preferred stock $0.01 par value: 5,000 shares authorized; none issued and outstanding Exchangeable stock, no par value: 60,000 shares authorized; 6,227 and 9,332 issued and outstanding Special voting stock, 50.000005 par value: 60,000 shares authorized: 6,227 and 9,332 issued and outstanding Common stock, $0.005 par value: 400,000 shares authorized: 124, 122 and 121,600 issued and outstanding Additional paid-in capital Retained earnings Accumulated other comprehensive loss 621 355,541 1,820,637 (224,581) 1,952,218 3,281,354 608 315,285 1,346,890 (216,808) 1,445,975 2,084,711 $ $ See accompanying notes to the consolidated financial statements 38 Table of Contents lululemon athletica inc. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Amounts in thousands, except per share amounts) $ $ February 2. 2020 3,979,296 1,755,910 2,223,386 1,334,276 Fiscal Year Ended February 3, 2019 $ 3,288,319 1,472,032 1,816,287 1,110,451 Net revenue Cost of goods sold Goose Gross profit Selling, general and administrative expenses Asset impairment and restructuring costs Income from operations Other income (expense), net Income before income tax expense Income tax expense Net income January 28, 2018 2,649,181 1,250,391 1,398,790 904,264 38,525 456,001 3,997 459,998 201,336 258,662 889,110 8,283 897,393 251,797 645,596 $ 705,836 9,414 715,250 231,449 483,801 $ S Other comprehensive income (loss), net of tax: Foreign currency translation adjustment Comprehensive income (7,773) 637,823 (73,885) 409,916 58,577 317,239 s $ S Send for Comments 3.63 3.61 S s S Basic earnings per share S S 4.95 $ Diluted earnings per share S 4.93 $ Basic weighted average number of shares outstanding 130,393 Diluted weighted average number of shares outstanding 130,955 See accompanying notes to the consolidated financial statements 1.90 1.90 135,988 136,198 133,413 133,971 39 Table of Contents lululemon athletica inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) Fiscal Year Ended February 3, 2019 January 28, 2018 $ 483,801 $ 258,662 122.484 28,568 (6 859) 108.235 17,610 (6,202) ) 11,593 6,227 (11,416) (1,925) (14,876) 16,786 (85,942) (437) (30,653) 71,962 4,312 41,600 52,597 24,885 (6,169) February 2, 2020 Cash flows from operating activities Net income S 645.596 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 161,933 Stock-based compensation expense 45,593 Derecognition of unredeemed gift card liability (11,939) Asset impairment for ivivva restructuring Settlement of derivatives not designated in a hedging relationship Deferred income taxes 24,129 Changes in operating assets and liabilities: Inventories (117,591) Prepaid and receivable income taxes (35,775) Other prepaid expenses and other current and non-current assets (81,606) Accounts payable (14,810) Accrued inventory liabilities (9,598) Accrued compensation and related expenses 25,326 Current income taxes payable (40,264) Unredeemed gift card liability 33,289 Non-current income taxes payable 6,127 Duru 200 Right-of-use lease assets and current and non-current lease liabilities 17,422 Other current and non-current liabilities 23,409 ... Net cash provided by operating activities 669,316 Cash flows from investing activities Purchase of property and equipment (283,048) Settlement of net investment hedges 347 Other investing activities 4,293 Net cash used in investing activities (278,408) Cash flows from financing activities Proceeds from settlement of stock-based compensation 18,170 Taxes paid related to net share settlement of stock-based compensation () (21,944) Repurchase of common stock (173,399) Other financing activities Net cash used in financing activities (177,173) Effect of exchange rate changes on cash (1,550) Increase (decrease) in cash and cash equivalents 212.185 Cash and cash equivalents, beginning of period $ 881,320 Cash and cash equivalents, end of period $ 1,093,505 See accompanying notes to the consolidated financial statements (21,178) 32,242 (7,755) (1,551) 3,680 12,873 (16,470) 17,282 48,268 40,720 742,779 37,237 489,337 (225,807) (16.216) (771) (242,794) (157,864) (7,203) (8,325) (173,392) 5,628 ( (3,229) (100,261) 17,650 (8.779) (598,340) (745) (590,214) (18,952) (109,181) 990,501 881,320 (97,862) 37,572 255,655 734,846 990,501 $ S $ S 41 Table of Contents Right-of-use assets represent the right to control the use of the leased asset during the lease and are initially recognized in an amount equal to the lease liability. In addition, prepaid rent, initial direct costs, and adjustments for lease incentives are components of the right-of-use asset. Over the lease term the lease expense is amortized on a straight-line basis beginning on the lease commencement date. Right-of-use assets are assessed for impairment as part of the impairment of long-lived assets, which is performed whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Variable lease payments, including contingent rental payments based on sales volume, are recognized when the achievement of the specific target is probable. A right-of-use asset and lease liability are not recognized for leases with an initial term of 12 months or less, and the lease expense is recognized on a straight-line basis over the lease term. The Company recognizes a liability for the fair value of asset retirement obligations ("AROs") when such obligations are incurred. The Company's AROs are primarily associated with leasehold improvements which, at the end of a lease, the Company is contractually obligated to remove in order to comply with the lease agreement. At the inception of a lease with such conditions, the Company records an ARO liability and a corresponding capital asset in an amount equal to the estimated fair value of the obligation. The liability is estimated based on a number of assumptions requiring management's judgment, including store closing costs, cost inflation rates and discount rates, and is accreted to its projected future value over time. The capitalized asset is depreciated using the convention for depreciation of leasehold improvement assets. Upon satisfaction of the ARO conditions, any difference between the recorded ARO liability and the actual retirement costs incurred is recognized as an operating gain or loss in the consolidated statements of operations. The Company recognizes a liability for a cost associated with a lease exit or disposal activity when such obligation is incurred. A lease exit or disposal liability is measured initially at its fair value in the period in which the liability is incurred. The Company estimates fair value at the cease-use date of its operating leases as the remaining lease rentals, reduced by estimated sublease rentals that could be reasonably obtained for the property, even where the Company does not intend to enter into a sublease. Estimating the cost of certain lease exit costs involves subjective assumptions, including the time it would take to sublease the leased location and the related potential sublease income. The estimated accruals for these costs could be significantly affected if future experience differs from the assumptions used in the initial estimate. Revenue recognition Net revenue is comprised of company-operated store net revenue, direct to consumer net revenue through websites and mobile apps, including mobile apps on in-store devices that allow demand to be fulfilled via the Company's distribution centers, and other net revenue, which includes revenue from outlets, temporary locations, sales to wholesale accounts, warehouse sales, and license and supply arrangement net revenue, which consists of royalties as well as sales of the Company's products to licensees. All revenue is reported net of sales taxes collected from customers behalf of taxing authorities. Revenue is recognized when performance obligations are satisfied through the transfer of control of promised goods to the Company's customers. Control transfers once a customer has the ability to direct the use of, and obtain substantially all of the benefits from the product. This includes the transfer of legal title, physical possession, the risks and rewards of ownership, and customer acceptance. Revenue from company-operated stores and other retail locations is recognized at the point of sale. Direct to consumer revenue and sales to wholesale accounts are recognized upon receipt by the customer. In certain arrangements the Company receives payment before the customer receives the promised good. These payments are initially recorded as deferred revenue, and recognized revenue in the period when control is transferred to the customer. Revenue is presented net of an allowance for estimated returns, which is based on historic experience. The Company's liability for sales return refunds is recognized within other current liabilities, and an asset for the value of inventory which is expected to be returned is recognized within other prepaid expenses and other current assets on the consolidated balance sheets. Shipping fees billed to customers are recorded as revenue, and shipping costs are recognized within selling, general and administrative expenses in the same period the related revenue is recognized. Proceeds from the sale of gift cards are initially deferred and recognized within unredeemed gift card liability on the consolidated balance sheets, and are recognized as revenue when tendered for payment. Based on historical experience, and to the extent there is no requirement to remit unclaimed card balances to government agencies, an estimate of the gift card balances that will never be redeemed is recognized as revenue in proportion to gift cards which have been redeemed. While the Company will continue honor all gift cards presented for payment, management may determine the likelihood of redemption to be remote for certain card balances due to, among other things, long periods of inactivity. In these circumstances, to the extent management determines there is no requirement for remitting card balances to government agencies under unclaimed property laws, the portion of card balances not expected to be redeemed are recognized in net 45 Table of Contents NOTE 6. OTHER CURRENT LIABILITIES Accrued duty, freight, and other operating expenses Sales tax collected Deferred revenue Sales return allowances Accrued rent Accrued capital expenditures Forward currency contract liabilities Lease termination liabilities Other Other current liabilities February 2, 2020 February 3, 2019 (In thousands) $ 59,4035 49,945 17,370 16,091 12,705 8,045 12,897 11,318 8,356 7,331 BE 5,457 1195 11,295 1,920 1,042 182 2,293 6,753 5,338 $ 125,043 $ 112,698 Fill & Sign NOTE 7. OTHER NON-CURRENT LIABILITIES Tenant inducements Deferred lease liabilities Other Other non-current liabilities February 2, 2020 February 3, 2019 (In thousands) $ S 42,138 33,406 5,596 6,367 $ 5,596 S 81,911 NOTE 8. LONG-TERM DEBT AND CREDIT FACILITIES North America revolving credit facility On December 15, 2016, the Company entered into a $150.0 million committed and unsecured revolving credit facility. Any amounts outstanding under the revolving credit facility will be due and payable in full on December 15, 2021, subject to provisions that permit the Company to request a limited number of one year extensions annually. Up to $35.0 million of the revolving credit facility is available for the issuance of letters of credit and up to $25.0 million is available for swing line loans. Commitments under the revolving credit facility may be increased by up to $200.0 million, subject to certain conditions, including the approval of the lenders. Borrowings under the revolving credit facility may be made in U.S. Dollars, Euros, Canadian Dollars, and in other currencies, subject to the approval of the administrative agent and the lenders. Borrowings under the agreement may be prepaid and commitments may be reduced or terminated without premium or penalty (other than customary breakage costs). Borrowings made under the revolving credit facility bear interest at a variable rate per annum equal to, at the Company's option, either (a) LIBOR or (b) an alternate base rate, plus, in each case, an applicable margin. The applicable margin is determined by reference to a pricing grid, based on the ratio of indebtedness to earnings before interest, tax, depreciation, amortization, and rent ("EBITDAR") and ranges between 1.00%-1.759 for LIBOR loans and 0.00%-0.75% for alternate base rate loans. Additionally, a commitment fee of between 0.125%-0.200%, also determined by reference to the pricing grid, is payable on the average daily unused amounts under the revolving credit facility. The credit agreement contains negative covenants that, among other things and subject to certain exceptions, limit the ability of the Company's subsidiaries to incur indebtedness, incur liens, undergo fundamental changes, make dispositions of all or substantially all of their assets, alter their businesses and enter into agreements limiting subsidiary dividends and distributions. The Company is also required to maintain a consolidated rent-adjusted leverage ratio of not greater than 3.50:1.00 and it is not permitted to allow the ratio of consolidated EBITDAR to consolidated interest charges (plus rent) to be less than 2.00:1.00. The credit agreement also contains certain customary representations, warranties, affirmative covenants, and events of default (including, among others, an event of default upon the occurrence of a change of control). As of February 2, 2020, the Company was in compliance with all applicable covenants. 51