11. REVOLVING CREDIT FACILITY & BANK BORROWINGS

Senior Revolving Credit Facility

On December 16, 2011, Crocs entered into an Amended and Restated Credit Agreement (as amended, the “Credit Agreement”), with the lenders named therein and PNC Bank, National Association (“PNC”), as a lender and administrative agent for the lenders. On December 27, 2013, Crocs entered into the Third Amendment to Amended and Restated Credit Agreement (the "Third Amendment"). The Third Amendment, among other things, allowed for the payment of dividends on the Series A preferred stock and permitted the Company to have greater flexibility to repurchase its Common Stock. See Note 16—Series A Preferred Stock for further details regarding the payment of dividends on the Series A preferred stock.

On April 2, 2015, Crocs entered into the Sixth Amendment to Amended and Restated Credit Agreement (the “Sixth Amendment”) pursuant to which certain terms of the Credit Agreement were amended. The Sixth Amendment primarily amended certain definitions of the financial covenants to be more favorable to Crocs including (i) setting the minimum fixed charge coverage ratio to 1.00 to 1.00 through December 31, 2015, 1.15 to 1.00 through March 31, 2016 and 1.25 to 1.00 for each quarter thereafter, (ii) setting the leverage ratio to 4.00 to 1.00 through March 31, 2016 and 3.75 to 1.00 for each quarter thereafter, and (iii) reducing the Company’s global cash requirement from $100.0 million to $50.0 million.

On September 1, 2015, the Company entered into the Eighth Amendment to Amended and Restated Credit Agreement (the “Eighth Amendment”) pursuant to which certain terms of the Credit Agreement were amended. The Eighth Amendment primarily amended certain definitions of the financial covenants to become more favorable to the Company including (i) increasing the exclusion of cash and non-cash charges from the EBITDAR calculation up to $85.0 million, not to exceed $65.0 million with respect to cash charges, (ii) setting the minimum fixed charge coverage ratio to 0.95 to 1.00 for the period ended September 30, 2015, (iii) allowing up to $40.0 million in stock repurchases to be made during the quarter ended September 30, 2015, (iv) suspending stock repurchases if the fixed charge coverage ratio is less than 1.00 to 1.00, and (v) eliminating the administrative agent basket through December 31, 2015.

On December 24, 2015, the Company entered into the Tenth Amendment to Amended and Restated Credit Agreement (the “Tenth Amendment”), pursuant to which certain terms of the Credit Agreement were amended. The Tenth Amendment primarily: (i) permitted $18.9 million in bad debt write-downs to be added back to EBITDAR, and (ii) increased the other EBITDAR add-back limit from $85.0 million (as permitted by Amendment Eight) to $100.0 million.

On February 18, 2016, the Company entered into the Eleventh Amendment to the Amended and Restated Credit Agreement which primarily: (i) extended the maturity date to February, 2021, (ii) resized the borrowing capacity of the facility to $75.0 million, (iii) amended certain definitions of the financial covenants to become more favorable to the Company, (iv) set the minimum fixed charge coverage ratio to 1.00 to 1.00 for the period ended June 30, 2016 and 1.10 to 1.00 thereafter, (v) set the maximum leverage ratio to 2.50 to 1.00 for the period ended June 30, 2016 and 2.00 to 1.00 thereafter, (vi) allows up to $50.0 million in stock repurchases to be made each fiscal year, subject to certain restrictions, and (vii) limited certain capital expenditures and commitments to an aggregate of $50.0 million per year. The Eleventh Amendment also changed the variable lending rate. For domestic rate loans, including swing loans, the interest rate is equal to a daily base rate plus a margin ranging from 0.50% to 0.75% based on certain conditions. For LIBOR rate loans, the interest rate is equal to a LIBOR rate plus a margin ranging from 1.50% to 1.75% based on certain conditions.

As of December 31, 2015, the Company was not in compliance with the fixed charge coverage ratio and the leverage ratio under the Credit Agreement. On February 18, 2016, the Company received a waiver from the lenders of the financial covenants as of December 31, 2015 and the Company entered into the Eleventh Amendment to Amended and Restated Credit Agreement. The Company anticipates it will be in compliance with its covenants as of March 31, 2016, however, there can be no assurance that the Company will be in compliance at that date.

As of December 31, 2015 and December 31, 2014, the Company had no outstanding borrowings under the Credit Agreement. As of December 31, 2015 and December 31, 2014, the Company had outstanding letters of credit of $1.3 million and $1.8 million, respectively, which were reserved against the borrowing base under the terms of the Credit Agreement. During the years ended December 31, 2015, 2014, and 2013, Crocs capitalized $0.2 million, $0.1 million, and $0.1 million, respectively, in fees and third party costs which were incurred in connection with the Credit Agreement, as deferred financing costs.

Asia Pacific Revolving Credit Facility

On August 28, 2015, a Crocs subsidiary entered into a revolving credit facility agreement with HSBC Bank (China) Company Limited, Shanghai Branch (“HSBC”) as the lender. The revolving credit facility enables Crocs to borrow uncommitted dual currency revolving loan facilities up to RMB 40.0 million, or the USD equivalent, and import facilities up to RMB 60.0 million, or the USD equivalent, with a combined facility limit of RMB 60.0 million. This revolving credit facility supports possible future net working capital needs in China. For loans denominated in USD, the interest rate is 2.1% per annum plus LIBOR for three months or any other period as may be determined by HSBC at the end of each interest period. For loans denominated in RMB, interest equals the one year benchmark lending rate effective on the loan drawdown date set forth by the People’s Bank of China with a 10% mark-up and is payable on the maturity date of the related loan. The revolving credit facility is guaranteed by Crocs, Inc. and certain accounts receivables in China are pledged as security under the revolving credit facility. The revolving credit facility can be canceled or suspended at any time at the discretion of the lender and contains provisions requiring Crocs to maintain compliance with certain restrictive covenants. As of December 31, 2015, Crocs had no outstanding borrowings under the revolving credit facility. As of December 31, 2015, the Company has received notification from the lender that the revolving credit facility has been temporarily suspended.

Long-term Bank Borrowings

On December 10, 2012, Crocs entered into a Master Installment Payment Agreement (“Master IPA”) with PNC in which PNC financed the Company’s recent implementation of a new ERP system, which began in October 2012 and was substantially completed in early 2015. The terms of each note payable, under the Master IPA, consist of a fixed interest rate and payment terms based on the amount borrowed and the timing of activity throughout the implementation of the ERP system. The Master IPA is subject to cross-default, cross-termination, and is coterminous with the Credit Agreement.

As of December 31, 2015 and 2014, Crocs had $6.4 million and $11.6 million, respectively, of debt outstanding under five separate notes payable, of which $4.8 million and $5.3 million, respectively, represents current installments. As of December 31, 2015, the notes bear interest rates ranging from 2.45% to 2.79% and maturities ranging from September 2016 to September 2017. As this debt arrangement relates solely to the construction and implementation of an ERP system for use by the entity, interest expense was capitalized to the consolidated balance sheets and amortized over the life of the assets, starting on the January 1, 2015 in-service date. During the years ended December 31, 2015 and 2014, Crocs capitalized $0.0 million and $0.4 million, respectively, in interest expense related to this debt arrangement to the consolidated balance sheets. Interest rates and payment terms are subject to changes as further financing occurs under the Master IPA.



	December 31, 2015
			Unused Borrowing Capacity (2)						Carrying Value (3)
	Weighted Average Interest Rate (1)			Borrowing Currency			U.S.D. Equivalent		December 31, 2015		December 31, 2014

			(in thousands)
Debt obligations
Senior revolving credit facility	LIBOR plus 1.25% - 2.00%		$	75,000	(4)	$	75,000	(4)	$	-	$	-
Asia Pacific revolving credit facility	LIBOR plus 2.10%		RMB	-	(5)		-	(5)		-		-
Long-term bank borrowings		2.63%								6,375		11,646
Total						$	75,000			6,375		11,646
Capital lease obligations										24		23
Total debt and capital lease obligations									$	6,399	$	11,669
Current maturities									$	4,772	$	5,288
Long-term debt and capital lease obligations									$	1,627	$	6,381

(1)

Carrying value represents the weighted average interest rate in effect at December 31, 2015 for all borrowings outstanding pursuant to each debt instrument, including any applicable margin. The interest rates presented represent stated rates and do not include the impact of the derivative instruments, deferred financing costs, original issue premiums or discounts and commitment fees, all of which affect Crocs’ overall cost of borrowing.

(2)

Unused borrowing capacity represents the maximum available under the applicable facility at December 31, 2015 without regard to covenant compliance calculations or other conditions precedent to borrowing.

(3)

As the interest rate of each credit agreement is variable, typically based on the daily LIBOR rates plus an additional margin, the estimated fair value of each debt instrument approximates its carrying value.

(4)

On February 18, 2016, the Company entered into the Eleventh Amendment to the Amended and Restated Credit Agreement, which extended the maturity date to February 2021, resized the borrowing capacity of the facility to $75.0 million, and amended certain definitions of the financial covenants to become more favorable to the Company.

(5)

As of December 31, 2015, Crocs received notification that the Asia Pacific revolving credit facility had been temporarily suspended.

The maturities of the Company’s debt obligations as of December 31, 2015 are presented below:



	December 31, 2015
	(in thousands)
Maturities of debt and capital lease obligations
2016	$	4,772
2017		1,616
2018		4
Thereafter		7
Total principal debt maturities	$	6,399
Current portion	$	4,772
Noncurrent portion	$	1,627

As of December 31, 2015 and 2014, the fair value of the Company’s debt instruments approximates their reported carrying amounts.