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BORROWINGS | 12 Months Ended
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Dec. 30, 2012
BORROWINGS | BORROWINGS Domestic Revolving Credit Facility The Company has a domestic revolving credit facility that provides for a maximum aggregate amount of loans and letters of credit of up to $100 million (with the option to increase it to a maximum of $150 million upon the satisfaction of certain conditions) at any one time, subject to the borrowing base described below. The key features of the domestic revolving credit facility are as follows:
| • |  | The revolving credit facility currently matures on June 24, 2016;
| • |  | The revolving credit facility includes a domestic U.S. dollar syndicated loan and letter of credit facility made available to Interface, Inc. up to the lesser of (1) $100 million, or (2) a borrowing base equal to the sum of specified percentages of eligible accounts receivable and inventory in the United States (the percentages and eligibility requirements for the borrowing base are specified in the credit facility), less certain reserves;
| • |  | Advances under the facility are secured by a first-priority lien on substantially all of Interface, Inc.’s assets and the assets of each of its material domestic subsidiaries, which have guaranteed the revolving credit facility; and
| • |  | The revolving credit facility contains a financial covenant (a fixed charge coverage ratio test) that becomes effective in the event that the Company’s excess borrowing availability falls below 12.5% of the aggregate loan commitments of the lenders. In such event, the Company must comply with the financial covenant for a period commencing on the last day of the fiscal quarter immediately preceding such event (unless such event occurs on the last day of a fiscal quarter, in which case the compliance period commences on such date) and ending on the last day of the fiscal quarter immediately following the fiscal quarter in which such event occurred.
The revolving credit facility also includes various reporting, affirmative and negative covenants, and other provisions that restrict the Company’s ability to take certain actions, including provisions that restrict the Company’s ability to repay its long-term indebtedness unless it meets a specified minimum excess availability test. Interest Rates and Fees. Interest on base rate loans is charged at varying rates computed by applying a margin ranging from 0.75% to 1.25% over the applicable base interest rate (which is defined as the greatest of the prime rate, a specified federal funds rate plus 0.50%, or the one-month LIBOR rate), depending on the Company’s average excess borrowing availability during the most recently completed fiscal quarter. Interest on LIBOR-based loans and fees for letters of credit are charged at varying rates computed by applying a margin ranging from 1.75% to 2.25% over the applicable LIBOR rate, depending on the Company’s average excess borrowing availability during the most recently completed fiscal quarter. In addition, the Company pays an unused line fee of 0.375% per annum on the facility. Prepayments. The revolving credit facility requires prepayment from the proceeds of certain asset sales. Covenants. The revolving credit facility also limits the Company’s ability, among other things, to:
| • |  | repay the Company’s other indebtedness prior to maturity unless the Company meets a specified minimum excess availability test;
| • |  | incur indebtedness or contingent obligations;
| • |  | make acquisitions of or investments in businesses (in excess of certain specified amounts);
| • |  | sell or dispose of assets (in excess of certain specified amounts);
| • |  | create or incur liens on assets; and
| • |  | enter into sale and leaseback transactions.
The Company is presently in compliance with all covenants under the domestic revolving credit facility and anticipates that it will remain in compliance with the covenants for the foreseeable future. Events of Default. If the Company breaches or fails to perform any of the affirmative or negative covenants under the revolving credit facility, or if other specified events occur (such as a bankruptcy or similar event or a change of control of Interface, Inc. or certain subsidiaries, or if the Company breaches or fails to perform any covenant or agreement contained in any instrument relating to any of the Company’s other indebtedness exceeding $15 million), after giving effect to any applicable notice and right to cure provisions, an event of default will exist. If an event of default exists and is continuing, the lenders’ agent may, and upon the written request of a specified percentage of the lender group shall:
| • |  | declare all commitments of the lenders under the facility terminated;
| • |  | declare all amounts outstanding or accrued thereunder immediately due and payable; and
| • |  | exercise other rights and remedies available to them under the agreement and applicable law.
Collateral. The facility is secured by substantially all of the assets of Interface, Inc. and its domestic subsidiaries (subject to exceptions for certain immaterial subsidiaries), including all of the stock of the Company’s domestic subsidiaries and up to 65% of the stock of its first-tier material foreign subsidiaries. If an event of default occurs under the revolving credit facility, the lenders’ collateral agent may, upon the request of a specified percentage of lenders, exercise remedies with respect to the collateral, including, in some instances, foreclosing mortgages on real estate assets, taking possession of or selling personal property assets, collecting accounts receivables, or exercising proxies to take control of the pledged stock of domestic and first-tier material foreign subsidiaries. As of December 30, 2012, the Company had no borrowings outstanding under this facility. At December 30, 2012, the Company had $3.9 million outstanding in letters of credit under this facility. As of December 30, 2012, the Company could have incurred $62.8 million of additional borrowings under this facility. Credit Agreement with The Royal Bank of Scotland N.V. The Company’s European subsidiary Interface Europe B.V. and certain of Interface Europe B.V.’s subsidiaries have a Credit Agreement with The Royal Bank of Scotland N.V. (as successor to ABN AMRO Bank N.V.) (“RBS”). Under the Credit Agreement, RBS provides a credit facility, until further notice, for borrowings and bank guarantees of up to €20.0 million. Interest on borrowings under the facility is charged at varying rates computed by applying a margin of 1% over RBS’s euro base rate (consisting of the leading refinancing rate as determined from time to time by the European Central Bank plus a debit interest surcharge), which base rate is subject to a minimum of 3.5% per annum. Fees on bank guarantees and documentary letters of credit are charged at a rate of 1% per annum or part thereof on the maximum amount and for the maximum duration of each guarantee or documentary letter of credit issued. A facility fee of 0.5% per annum is payable with respect to the facility amount. The facility is secured by liens on certain real property, personal property and other assets of the Company’s principal European subsidiaries. The facility also includes certain financial covenants (which require the borrowers and their subsidiaries to maintain a minimum interest coverage ratio, total debt/EBITDA ratio and tangible net worth/total assets) and affirmative and negative covenants, and other provisions that restrict the borrowers’ ability (and the ability of certain of the borrowers’ subsidiaries) to take certain actions. As of December 30, 2012, there were no borrowings outstanding under this facility. The Company is presently in compliance with all covenants under this facility and anticipates that it will remain in compliance with the covenants for the foreseeable future. 7 5/8% Senior Notes On December 3, 2010, the Company completed a private offering of $275 million aggregate principal amount of 7 5/8% Senior Notes due 2018 (the “7 5/8% Senior Notes”). Interest on the 7 5/8% Senior Notes is payable semi-annually on June 1 and December 1 (the first payment was made on June 1, 2011). The Company used the net proceeds from the sale of the 7 5/8% Senior Notes (plus cash on hand) in connection with the repurchase of approximately $141.9 million aggregate principal amount of the 11.375% Senior Secured Notes and approximately $98.5 million aggregate principal amount of the former 9.5% Senior Subordinated Notes, pursuant to a tender offer the Company conducted. The 7 5/8% Senior Notes are guaranteed, fully, unconditionally, and jointly and severally, on an unsecured senior basis by certain of the Company’s domestic subsidiaries. The Company may redeem some or all of these notes at any time prior to December 1, 2014, at a redemption price equal to 100% of the principal amount plus a make-whole premium. Prior to December 1, 2014, the Company may redeem up to 10% of the aggregate principal amount of the 7 5/8% Senior Notes per 12-month period at a redemption price equal to 103% of the principal amount of the notes redeemed, plus accrued and unpaid interest. In addition, at any time prior to December 1, 2013, the Company may redeem up to 35% of the 7 5/8% Senior Notes with the net cash proceeds from specified equity offerings at a redemption price equal to 107.625% of the principal amount, plus accrued and unpaid interest, if any, to the date of redemption. In addition, the notes will become redeemable for cash after December 1, 2014 at the Company’s option, in whole or in part, initially at a redemption price equal to 103.813% of the principal amount, declining to 100% of the principal amount on December 1, 2016, plus accrued interest thereon to the date fixed for redemption. As of both December 30, 2012, and January 1, 2012, the balance of the 7 5/8% Senior Notes outstanding was $275 million. The estimated fair value of the 7 5/8% Senior Notes as of December 30, 2012, and January 1, 2012, based on then current market prices, was $295.6 million and $288.8 million, respectively. 11 3/8% Senior Secured Notes On June 5, 2009, the Company completed a private offering of $150 million aggregate principal amount of 11 3/8% Senior Secured Notes due 2013. Interest on the 11 3/8% Senior Secured Notes is payable semi-annually on May 1 and November 1 (the first payment was made on November 1, 2009). The 11 3/8% Senior Secured Notes are guaranteed, jointly and severally, on a senior secured basis by certain of the Company’s domestic subsidiaries. The 11 3/8% Senior Secured Notes are secured by a second-priority lien on substantially all of the Company’s and certain of the Company’s domestic subsidiaries’ assets that secure the Company’s domestic revolving credit facility on a first-priority basis. The Company may redeem all or a part of the 11 3/8% Senior Secured Notes from time to time at a price equal to 100% of the principal amount plus a make-whole premium. As of both December 30, 2012, and January 1, 2012, the balance of the 11 3/8% Senior Secured Notes outstanding, net of the remaining unamortized original issue discount, was approximately $8.1 million. The estimated fair value of the 11 3/8% Senior Secured Notes as of both December 30, 2012, and January 1, 2012, based on then current market prices, was $8.1 million. 9.5% Senior Subordinated Notes On February 4, 2004, the Company completed a private offering of $135 million in 9.5% Senior Subordinated Notes due 2014. Interest on these notes is payable semi-annually on February 1 and August 1 (the first payment was made on August 1, 2004). As of January 1, 2012, the Company had outstanding $11.5 million of 9.5% Senior Subordinated Notes due 2014. At January 1, 2012, the estimated fair value of these notes, based on then current market prices, was approximately $11.5 million. On April 9, 2012, the Company redeemed all of the remaining $11.5 million of these notes at a price equal to 100% of the principal amount of the notes plus accrued interest through the redemption date. Other Lines of Credit Subsidiaries of the Company have an aggregate of the equivalent of $18.9 million of other lines of credit available at interest rates ranging from 1% to 9%. As of December 30, 2012, and January 1, 2012, there were no borrowings outstanding under these lines of credit. Borrowing Costs Deferred borrowing costs, which include underwriting, legal and other direct costs related to the issuance of debt, net of accumulated amortization, were $5.4 million and $6.7 million, as of December 30, 2012, and January 1, 2012, respectively. The Company amortizes these costs over the life of the related debt. Expenses related to such costs for the years 2012, 2011 and 2010 amounted to $1.2 million, $1.4 million and $2.2 million, respectively. In addition to these expenses, the year 2010 includes $4.5 million of expense related to the write-down of debt costs associated with note repurchases. Future Maturities The aggregate maturities of borrowings for each of the five fiscal years subsequent to 2012, are as follows:
|  | AMOUNT |
FISCAL YEAR |  | (in thousands) |
2013 |  |  | 8,143 |
2014 |  |  | 0 |
2015 |  |  | 0 |
2016 |  |  | 0 |
2017 |  |  | 0 |
Thereafter |  |  | 275,000 |
|  | $ | 283,143 |

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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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