Liabilities

12 Months Ended

Jan. 03, 2014

Note 8 —Liabilities

Lines of Credit

The Company’s wholly owned Japanese subsidiary, STAAR Japan, has an agreement, as amended on December 28, 2012, with Mizuho Bank which provides for borrowings of up to 500,000,000 Yen, at an interest rate equal to the Tokyo short-term prime interest rate (approximately 1.475% as of January 3, 2014) and may be renewed annually (the current line expires on April 4, 2014). The credit facility is not collateralized. The Company had 500,000,000 Yen outstanding on the line of credit as of January 3, 2014 and December 28, 2012, (approximately $4.8 million and $5.8 million based on the foreign exchange rates on January 3, 2014 and December 28, 2012, respectively) which approximates fair value due to the short-term maturity and market interest rates of the line of credit. In case of default, the interest rate will be increased to 14% per annum. As of January 3, 2014, there were no available borrowings under the line.

In August 2010, the Company’s wholly-owned Swiss subsidiary, STAAR Surgical AG, entered into a credit agreement with Credit Suisse (the “Bank”). The credit agreement provides for borrowing of up to 1,000,000 CHF (Swiss Francs) ($1.1 million at the rate of exchange on January 3, 2014), to be used for working capital purposes. Accrued interest and 0.25% commissions on average outstanding borrowings is payable quarterly and the interest rate will be determined by the Bank based on the then prevailing market conditions at the time of borrowing. The credit agreement is automatically renewed on an annual basis based on the same terms assuming there is no default. The credit agreement may be terminated by either party at any time in accordance with its general terms and conditions. The credit facility is not collateralized and contains certain conditions such as providing the Bank with audited financial statements annually and notice of significant events or conditions, as defined in the credit agreement. The Bank may also declare all amounts outstanding to be immediately due and payable upon a change of control or a material qualification, as defined in the agreement, in STAAR Surgical independent auditors’ report. There were no borrowings outstanding as of January 3, 2014 and the full amount of the line was available for borrowing.

Covenant Compliance

The Company is in compliance with covenants of its credit facilities and lines of credit as of January 3, 2014.

Asset Retirement Obligation

The Company recorded certain Asset Retirement Obligations (“ARO”), in accordance with ASC 410-20 in connection with the Company’s leased facilities in Japan that specifically relate to leasehold improvements made to the facility. This liability arises from the Company’s obligation to return the facility to its “original condition”, as defined in the lease agreements. The Company has recognized the fair value of the ARO liability obligation included in noncurrent liabilities. During 2012, in connection with the Company’s decision to consolidate its manufacturing operations to the U.S. and close its Japanese manufacturing facility, which was completed in 2013, the Company obtained more current estimates of the costs to return the facility to its original condition as shown in the table below. The remaining ARO is for the existing offices under the current lease agreement expected to be settled upon expiration of the lease agreement in 2018.

The following table describes all changes to the Company’s asset retirement obligation liability (in thousands):

	January 3,		December 28,
	2014		2012
Asset retirement obligation at beginning of the year	$	707	$	577
Increase (decrease) in estimated liabilities		(221)		169
Liabilities settled		(206)		—
Accretion expense		10		15
Impact of changes in the Japanese Yen		(133)		(54)
Asset retirement obligation at end of the year	$	157	$	707