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Debt | 9 Months Ended
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Sep. 29, 2012
Debt |
10. | Debt
Debt and the average interest rates on debt outstanding are summarized as follows:
In thousands |  | Average interest rate September 29, 2012 |  | Maturity Year |  | September 29, 2012 |  |  | December 31, 2011 |  |  | October 1, 2011 |
Commercial paper |  |  |  |  |  | $ | — |  |  | $ | 3,497 |  |  | $ | — |
Revolving credit facilities |  | 1.160% |  | 2017 |  |  | 57,928 |  |  |  | 168,500 |  |  |  | 181,985 |
Senior notes - fixed rate |  | 5.650% |  | 2013-2017 |  |  | 400,000 |  |  |  | 400,000 |  |  |  | 400,000 |
Senior notes - floating rate |  | 1.050% |  | 2013 |  |  | 100,000 |  |  |  | 205,000 |  |  |  | 205,000 |
Senior notes - fixed rate |  | 1.875% |  | 2017 |  |  | 350,000 |  |  |  | — |  |  |  | — |
Senior notes - fixed rate |  | 5.000% |  | 2021 |  |  | 500,000 |  |  |  | 500,000 |  |  |  | 500,000 |
Senior notes - fixed rate |  | 3.150% |  | 2022 |  |  | 550,000 |  |  |  | — |  |  |  | — |
Other |  | 2.140% |  | 2012-2017 |  |  | 9,024 |  |  |  | 16,302 |  |  |  | 44,494 |
Capital lease obligations |  | 3.274% |  | 2013-2030 |  |  | 29,809 |  |  |  | 15,788 |  |  |  | 16,874 |
Total debt |  |  |  |  |  |  | 1,996,761 |  |  |  | 1,309,087 |  |  |  | 1,348,353 |
Less: Current maturities |  |  |  |  |  |  | (501,375 | ) |  |  | (1,168 | ) |  |  | (1,194) |
Short-term borrowings |  |  |  |  |  |  | (17 | ) |  |  | (3,694 | ) |  |  | (29,705) |
Long-term debt |  |  |  | $ | 1,495,369 |  |  | $ | 1,304,225 |  |  | $ | 1,317,454 |
The fair value of total debt excluding the effect of interest rate swaps was $2,105 million, $1,361 million and $1,400 million as of September 29, 2012, December 31, 2011 and October 1, 2011, respectively. This fair value measurement of debt is classified as Level 2 in the valuation hierarchy as defined in Note 10, “Derivatives and Financial Instruments”. In September 2012, Tyco Flow Control International S.A., a subsidiary of Flow Control that was renamed Pentair Finance S.A. (“PFSA”), completed a private offering of $550 million aggregate principal amount of 3.15% Senior Notes due 2022 (the “2022 Notes”) and $350 million aggregate principal amount of 1.875% Senior Notes due 2017 (the “2017 Notes” and, collectively, the “2017/2022 Notes”), which are guaranteed as to payment by Pentair Ltd. In certain circumstances, PFSA may be required to pay additional interest on the 2017/2022 Notes. The 2017/2022 Notes remained outstanding after the Merger. Approximately $435 million of the net proceeds from the 2017/2022 Notes offering was used to repay obligations to Tyco in conjunction with the Distribution and the Merger. In September 2012, Pentair, Inc. entered into a credit agreement providing for an unsecured, committed revolving credit facility (the “Credit Facility”) with initial maximum aggregate availability of up to $1,450 million. The Credit Facility replaced Pentair, Inc.’s $700 million Former Credit Facility (as defined below). The Credit Facility matures in September 2017. Upon the completion of the Merger, Pentair Ltd. became the guarantor under the Credit Facility and PFSA and certain other of our subsidiaries became affiliate borrowers under the Credit Facility. Borrowings under the Credit Facility generally bear interest at a variable rate equal to the London Interbank Offered Rate (“LIBOR”) plus a specified margin based upon PFSA’s credit ratings. PFSA must also pay a facility fee ranging from 10.0 to 30.0 basis points per annum (based upon PFSA’s credit ratings) on the amount of each lender’s commitment. In September 2012, Pentair, Inc. gave irrevocable notice to redeem the remaining outstanding aggregate principal of its 5.65% fixed rate senior notes due 2013-2017 totaling $400 million and its 1.05% floating rate senior notes due 2013 totaling $100 million (the “Fixed/Floating Rate Notes”). The redemptions occurred in October 2012, and included make-whole premiums of $65.8 million, which will be recorded as a loss on the early extinguishment of debt along with $0.5 million of unamortized deferred financing costs and other costs related to the redemption. Concurrent with the redemption of the Fixed/Floating Rate Notes, we terminated a related interest rate swap that was designated as a cash flow hedge, which will result in the reclassification of approximately $3.6 million of previously unrecognized variable to fixed swap losses from Accumulated other comprehensive income (loss) (“AOCI”) to earnings in October 2012. In May 2011, Pentair, Inc. completed a public offering of $500 million aggregate principal amount of our 5.00% Senior Notes due 2021 (the “2021 Notes”). Pentair, Inc. used the net proceeds from the offering of the 2021 Notes to finance in part the CPT acquisition in 2011. Effective October 1, 2012, the 2021 Notes were guaranteed as to payment by Pentair Ltd. In April 2011, Pentair, Inc. entered into a Fourth Amended and Restated Credit Agreement that provided for an unsecured, committed revolving credit facility (the “Former Credit Facility”) of up to $700 million, with multi-currency sub-facilities to support investments outside the U.S. Borrowings under the Former Credit Facility bore interest at the rate of LIBOR plus 1.75%. We used borrowings under the Former Credit Facility to fund a portion of the CPT acquisition in 2011 and to repay $105 million of matured senior notes in May 2012. The Former Credit Facility was terminated in September 2012 in connection with the Merger and replaced by the Credit Facility, at which time the subsidiary guarantees in place under the Former Credit Facility ceased to exist. PFSA is authorized to sell short-term commercial paper notes to the extent availability exists under the Credit Facility. PFSA will use the Credit Facility as back-up liquidity to support 100% of commercial paper outstanding. Our use of commercial paper as a funding vehicle depends upon the relative interest rates for PFSA commercial paper compared to the cost of borrowing under our Credit Facility. As of September 29, 2012, PFSA had no commercial paper outstanding. In October 2012, PFSA commenced issuing commercial paper. We used borrowings under the Credit Facility and proceeds from the 2017/2022 Notes offering, to repay the Former Credit Facility and to pay other fees and expenses in connection with the Merger. Total availability under the Credit Facility was $1,392 million as of September 29, 2012, which was not limited by any covenants contained in the Credit Facility’s credit agreement. In October 2012, we used the remaining proceeds from the 2017/2022 Notes offering and issuances of commercial paper to redeem the Fixed/Floating Rate Notes as discussed above, to repurchase shares in conjunction with our share repurchase as discussed in Note 17 and to purchase the remaining 25% interest in KEF for $100 million as discussed in Note 18. Our debt agreements contain certain financial covenants, the most restrictive of which are in the Credit Facility, including that we may not permit (i) the ratio of our consolidated debt plus synthetic lease obligations to our consolidated net income (excluding, among other things, non-cash gains and losses) before interest, taxes, depreciation, amortization, non-cash stock-based compensation expense, and up to $40 million of costs and expenses incurred in connection with the Merger (“EBITDA”) for the four consecutive fiscal quarters then ended (the “Leverage Ratio”) to exceed 3.50 to 1.00 on the last day of each fiscal quarter, and (ii) the ratio of our EBITDA for the four consecutive fiscal quarters then ended to our consolidated interest expense, including consolidated yield or discount accrued as to outstanding securitization obligations (if any), for the same period to be less than 3.00 to 1.00 as of the end of each fiscal quarter. For purposes of the Leverage Ratio, the Credit Facility provides for the calculation of EBITDA giving pro forma effect to the Merger and certain acquisitions, divestitures and liquidations during the period to which such calculation relates. As of September 29, 2012, we were in compliance with all financial covenants in our debt agreements. In addition to the Credit Facility, we have various other credit facilities with an aggregate availability of $74.1 million, of which $9.0 million was outstanding at September 29, 2012. Borrowings under these credit facilities bear interest at variable rates. Debt outstanding at September 29, 2012 matures on a calendar year basis as follows:
|  | Q4 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
In thousands |  | 2012 |  |  | 2013 |  |  | 2014 |  |  | 2015 |  |  | 2016 |  |  | 2017 |  |  | Thereafter |  |  | Total |
Contractual debt obligation maturities |  | $ | 500,017 |  |  | $ | 49 |  |  | $ | 17 |  |  | $ | — |  |  | $ | 8,941 |  |  | $ | 407,928 |  |  | $ | 1,050,000 |  |  | $ | 1,966,952 |
Capital lease obligations |  |  | 301 |  |  |  | 3,330 |  |  |  | 3,366 |  |  |  | 2,669 |  |  |  | 4,268 |  |  |  | 1,203 |  |  |  | 14,672 |  |  |  | 29,809 |
Total maturities |  | $ | 500,318 |  |  | $ | 3,379 |  |  | $ | 3,383 |  |  | $ | 2,669 |  |  | $ | 13,209 |  |  | $ | 409,131 |  |  | $ | 1,064,672 |  |  | $ | 1,996,761 |
As part of the Merger and CPT acquisition, we assumed capital lease obligations related primarily to land and buildings. As of September 29, 2012, December 31, 2011 and October 1, 2011, the recorded values of the assets acquired under those capital leases of $42.4 million, $22.7 million and $23.9 million, respectively, and the related accumulated amortization of $5.5 million, $5.1 million and $5.1 million, respectively, are included in Property, plant and equipment, net on the Condensed Consolidated Balance Sheets. Capital lease obligations consist of total future minimum lease payments of $32.4 million less the imputed interest of $2.6 million as of September 29, 2012.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 19, 20, 22 -Article 5 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 129 -Paragraph 2, 4 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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