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Financing Arrangements | 9 Months Ended
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Oct. 01, 2011
Financing Arrangements |
10) | Financing Arrangements
|  | Oct 1, 2011 |  |  | Jan 1, 2011 |
|  | (in thousands) |
Senior secured revolving credit line |  | $ | 295,250 |  |  | $ | 207,250 |
Foreign loans |  |  | 8,389 |  |  |  | 6,767 |
Total debt |  | $ | 303,639 |  |  | $ | 214,017 |
Less: Current maturities of long-term debt |  |  | 6,771 |  |  |  | 5,097 |
Long-term debt |  | $ | 296,868 |  |  | $ | 208,920 |
During the second quarter of 2011, the company exercised a provision under its current credit facility that allowed the company to increase the amount of availability under the revolving credit line by approximately $102.0 million. Terms of the company’s senior credit agreement provide for $600.0 million of availability under a revolving credit line. As of October 1, 2011, the company had $295.3 million of borrowings outstanding under this facility. The company also had $6.3 million in outstanding letters of credit as of October 1, 2011, which reduces the borrowing availability under the revolving credit line. Remaining borrowing availability under this facility, which is also reduced by the company’s foreign borrowings, was $290.0 million at October 1, 2011. At October 1, 2011, borrowings under the senior secured credit facility are assessed at an interest rate of 1.0% above LIBOR for long-term borrowings or at the higher of the Prime rate and the Federal Funds Rate. At October 1, 2011 the average interest rate on the senior debt amounted to 1.32%. The interest rates on borrowings under the senior secured credit facility may be adjusted quarterly based on the company’s indebtedness ratio on a rolling four-quarter basis. Additionally, a commitment fee based upon the indebtedness ratio is charged on the unused portion of the revolving credit line. This variable commitment fee amounted to 0.2% as of October 1, 2011. In August 2006, the company completed its acquisition of Houno A/S in Denmark. This acquisition was funded in part with locally established debt facilities with borrowings in Danish Krone. On October 1, 2011 these facilities amounted to $3.5 million in U.S. dollars, including $1.8 million outstanding under a revolving credit facility and $1.7 million of a term loan. The interest rate on the revolving credit facility is assessed at 1.25% above Euro LIBOR, which amounted to 3.9% on October 1, 2011. The term loan matures in 2013 and the interest rate is assessed at 4.55%. In April 2008, the company completed its acquisition of Giga Grandi Cucine S.r.l in Italy. This acquisition was funded in part with locally established debt facilities with borrowings denominated in Euro. On October 1, 2011 these facilities amounted to $4.9 million in U.S. dollars. The interest rate on the credit facilities is tied to six-month Euro LIBOR. At October 1, 2011, the average interest rate on these facilities was approximately 3.0%. The facilities mature in April 2015. The company’s debt is reflected on the balance sheet at cost. Based on current market conditions, the company believes its interest rate margins on its existing debt are below the rate available in the market, which causes the fair value of debt to fall below the carrying value. The company believes the current interest rate margin is approximately 1.0% below current market rates. However, as the interest rate margin is based upon numerous factors, including but not limited to the credit rating of the borrower, the duration of the loan, the structure and restrictions under the debt agreement, current lending policies of the counterparty, and the company’s relationships with its lenders, there is no readily available market data to ascertain the current market rate for an equivalent debt instrument. As a result, the current interest rate margin is based upon the company’s best estimate based upon discussions with its lenders. The company estimated the fair value of its loans by calculating the upfront cash payment a market participant would require to assume the company’s obligations. The upfront cash payment is the amount that a market participant would be able to lend at October 1, 2011 to achieve sufficient cash inflows to cover the cash outflows under the company’s senior revolving credit facility assuming the facility was outstanding in its entirety until maturity. Since the company maintains its borrowings under a revolving credit facility and there is no predetermined borrowing or repayment schedule, for purposes of this calculation the company calculated the fair value of its obligations assuming the current amount of debt at the end of the period was outstanding until the maturity of the company’s senior revolving credit facility in December 2012. Although borrowings could be materially greater or less than the current amount of borrowings outstanding at the end of the period, it is not practical to estimate the amounts that may be outstanding during future periods. The fair value of the company’s senior debt obligations as estimated by the company based upon its assumptions is approximately $299.8 million at October 1, 2011, as compared to the carrying value of $303.6 million. The carrying value and estimated aggregate fair value, based primarily on market prices, of debt is as follows (in thousands):
|  | October 1, 2011 |  |  | January 1, 2011 |
|  | Carrying Value |  |  | Fair Value |  |  | Carrying Value |  |  | Fair Value |
Total debt |  | $ | 303,639 |  |  | $ | 299,848 |  |  | $ | 214,017 |  |  | $ | 209,808 |
The company believes that its current capital resources, including cash and cash equivalents, cash generated from operations, funds available from its revolving credit facility and access to the credit and capital markets will be sufficient to finance its operations, debt service obligations, capital expenditures, acquisitions, product development and integration expenditures for the foreseeable future. The company has historically entered into interest rate swap agreements to effectively fix the interest rate on a portion of its outstanding debt. The agreements swap one-month LIBOR for fixed rates. As of October 1, 2011 the company had the following interest rate swaps in effect:
|  |  | Fixed |  |  |  |
Notional |  |  | Interest |  | Effective |  | Maturity
Amount |  |  | Rate |  | Date |  | Date
$ | 15,000,000 |  |  |  | 1.220 | % | 11/23/09 |  | 11/23/11
| 20,000,000 |  |  |  | 1.800 | % | 11/23/09 |  | 11/23/12
| 20,000,000 |  |  |  | 1.560 | % | 03/11/10 |  | 12/11/12
| 10,000,000 |  |  |  | 1.120 | % | 03/11/10 |  | 03/11/12
| 15,000,000 |  |  |  | 0.950 | % | 08/06/10 |  | 12/06/12
| 25,000,000 |  |  |  | 1.610 | % | 02/23/11 |  | 02/24/14
| 25,000,000 |  |  |  | 2.520 | % | 02/23/11 |  | 02/23/16
| 25,000,000 |  |  |  | 0.975 | % | 07/18/11 |  | 07/18/14
| 15,000,000 |  |  |  | 1.150 | % | 09/12/11 |  | 09/12/16
| 15,000,000 |  |  |  | 0.620 | % | 09/12/11 |  | 09/11/14
The terms of the senior secured credit facility limit the paying of dividends, capital expenditures and leases, and require, among other things, a maximum ratio of indebtedness to earnings before interest, taxes, depreciation and amortization (“EBITDA”) of 3.5 and a minimum EBITDA to fixed charges ratio of 1.25. The credit agreement also provides that if a material adverse change in the company’s business operations or conditions occurs, the lender could declare an event of default. Under terms of the agreement, a material adverse effect is defined as (a) a material adverse change in, or a material adverse effect upon, the operations, business properties, condition (financial and otherwise) or prospects of the company and its subsidiaries taken as a whole; (b) a material impairment of the ability of the company to perform under the loan agreements and to avoid any event of default; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the company of any loan document. A material adverse effect is determined on a subjective basis by the company's creditors. The credit facility is secured by the capital stock of the company’s domestic subsidiaries, 65% of the capital stock of the company’s foreign subsidiaries and substantially all other assets of the company. At October 1, 2011, the company was in compliance with all covenants pursuant to its borrowing agreements.

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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 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. 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 Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 + Details
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