Long-term Debt

12 Months Ended

Jan. 01, 2022

Debt Disclosure [Abstract]

Long-term Debt

Long-term Debt

Long-term debt consists of the following:

In thousands	As of January 1, 2022		As of January 2, 2021
2025 Notes, due May 15, 2025	$	402,500	$	402,500
Term loan, due July 18, 2024	150,000		317,375
Revolving credit facility, due July 18, 2024	—		—
Long-term debt before debt discount	552,500		719,875
Unamortized discount and issuance costs - 2025 Notes	(7,986)		(93,123)
Unamortized discount and issuance costs - term loan	(948)		(2,141)
Long-term debt less debt discount	543,566		624,611
Less current maturities	—		—
Long-term debt - non-current portion	543,566		624,611
Finance lease obligations	26,514		30,750
Less current maturities	(3,999)		(3,598)
Long-term debt and finance lease obligations, less current portion and debt discount	$	566,081	$	651,763

2025 Notes

In May 2020, we completed the issuance of the 2025 Notes, pursuant to an indenture between the Company and U.S. Bank, dated as of May 12, 2020 (the “Indenture”). The 2025 Notes were sold only to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The 2025 Notes pay interest semi-annually in arrears on May 15 and November 15 of each year, commencing on November 15, 2020, at an annual rate of 2.50%.

We received proceeds from the offering of $390.9 million, net of $11.6 million in underwriter fees and other issuance costs. We used $294.3 million of the net proceeds from the offering to repay all outstanding amounts under the revolving credit facility and $75.0 million to partially repay the first lien term loan in an aggregate principal amount of $420.0 million (the “term loan”). The remainder of the net proceeds are being used for general corporate purposes.

Prior to February 15, 2025, the 2025 Notes are convertible at the option of the holder only under the following circumstances:

(i) during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (and only during such calendar quarter), if the Last Reported Sale Price (as defined in the Indenture) per share of the Company’s common stock exceeds 130% of the Conversion Price (as defined in the Indenture) for each of at least 20 Trading Days (as defined in the Indenture), whether or not consecutive, during the 30 consecutive Trading Days ending on, and including, the last Trading Day of the immediately preceding calendar quarter;

(ii) during the five consecutive business days immediately after any ten consecutive Trading Day period (such ten consecutive trading day period, the “measurement period”) in which the Trading Price (as defined in the Indenture) per $1,000 principal amount of the 2025 Notes for each Trading Day of the measurement period was less than 98% of the product of the Last Reported Sale Price per share of the Company’s common stock on such Trading Day and the conversion rate (as described below) on such Trading Day;

(iii) upon the occurrence of certain corporate events or distributions on the Company’s common stock, as described in the Indenture; or

(iv) if the Company calls such Notes for redemption.

On or after February 15, 2025 until 5:00 p.m., New York City time, on the second Scheduled Trading Day (as defined in the Indenture) immediately before the maturity date, the 2025 Notes will be convertible at the option of the holder at any time.

The 2025 Notes are initially convertible at a conversion rate of 32.0783 shares of common stock per $1,000 principal amount of 2025 Notes, which is equivalent to an initial conversion price of approximately $31.17 per share of common stock. The conversion rate will be subject to adjustment upon the occurrence of certain specified events including, but not limited to: issuance of stock dividends, splits and combinations; distribution of rights, options and

warrants; spin-offs and other distributed property; cash dividends or distributions; tender offers or exchange offers; and certain other corporate transactions. The Company can choose to settle upon conversion in cash, shares or a combination. Based on the initial conversion rate, the 2025 Notes are convertible into 12.9 million shares of our common stock and we reserved for the possible issuance of 16.5 million shares, which is the maximum amount that could be issued upon conversion. As of January 1, 2022, the 2025 Notes can be converted by holders based on condition (i) above. See Note 13. “Earnings Per Share” for the treatment of earnings per share in relation to the 2025 Notes. The holders of our term loan would have preference over the holders of the 2025 Notes in the event of a liquidation.

The Company adopted ASU 2020-06 as of January 3, 2021. ASU 2020-06 eliminates the cash conversion and the beneficial conversion feature models. Under the new convertible debt framework, the Company eliminated the equity components and increased the debt balance. Refer to Note 1. “Description of Business and Basis of Presentation” for further discussion of the adoption of ASU 2020-06. As a result of adopting ASU 2020-06, our effective interest rate decreased from 9.1% as of January 2, 2021 to 3.2% starting in the first quarter of 2021. We recognized interest expense for the interest coupon and amortization of issuance costs of $10.1 million and $2.2 million during fiscal 2021, respectively, and $6.4 million and $10.9 million during fiscal 2020, respectively. As of January 1, 2022, the remaining period for the unamortized debt issuance costs balance was approximately three years.

Credit Agreement

On July 18, 2019, our credit agreement, dated as of October 9, 2018 was amended and restated to establish a new first lien term loan of $420.0 million to repay all principal, interest fees and other amounts outstanding before the amendment and establish a new revolving credit facility in an aggregate principal amount of $300.0 million, including a $20.0 million letter of credit sublimit. In connection with the principal repayments of our existing debt, the Company wrote off associated deferred debt issuance costs of $6.0 million and associated unamortized debt discount of $3.8 million, in the third quarter of 2019.

On March 17, 2020, as a precautionary measure to preserve financial flexibility during the COVID-19 pandemic, we borrowed the remaining $146.3 million in available funds under our revolving credit facility. On May 5, 2020, we entered into an agreement with the lenders to amend certain provisions of our credit agreement. This amendment was intended to prevent the effects of the COVID-19 pandemic, including the temporary closure of our stores, from creating uncertainty relative to our ability to comply with certain financial covenants and allow the Company to focus on prudent management of the business over the quarters ahead. The amendment suspended certain financial maintenance covenants contained in our credit agreement until testing at the end of the second fiscal quarter of 2021.

Capitalized terms used but not defined herein shall have the meanings assigned to such terms in our credit agreement. During the second quarter of 2021, the Company amended its credit agreement to, among other things, add customary LIBOR replacement provisions, modify the applicable margins used to calculate the rate of interest payable on the first lien term loans thereunder to a range of 1.25% to 2.00% for LIBOR Loans and a range of 0.25% to 1.00% for ABR Loans, modify certain financial covenants related to maximum leverage and minimum interest coverage and remove the LIBOR floor, such that LIBOR shall be deemed to be no less than 0.00% per annum (instead of 1.00% per annum previously in effect).

Pursuant to our credit agreement, the Company will not permit (i) the Consolidated Total Debt to Consolidated EBITDA Ratio to be negative or greater than (x) 4.50 to 1.00 with respect to the last day of the Company’s second and third fiscal quarters of 2021 and (y) 4.25 to 1.00 from and after the last day of the Company’s fourth fiscal quarter of 2021, subject to certain step-ups after the consummation of a Material Acquisition, or (ii) the Consolidated Interest Coverage Ratio of the Company as of the last day of any fiscal quarter of the Company to be less than 3.00 to 1.00.

The amendment also contains covenants that, among other things, limit NVI’s ability to incur additional debt, create liens against assets, make acquisitions, pay dividends or distributions on its stock, merge or consolidate with another entity and transfer or sell assets. We were in compliance with all covenants related to our long-term debt as of January 1, 2022.

During the third quarter of 2019, we partially prepaid $25.0 million on the term loan. On May 12, 2020, we fully prepaid the $294.3 million outstanding under our revolving credit facility and partially prepaid $75.0 million on the term loan. During the second quarter of 2021, the Company partially prepaid $117.4 million of term loan principal and wrote off associated deferred debt issuance costs of $0.7 million. During the fourth quarter of 2021, the Company partially prepaid $50.0 million of term loan principal and wrote off associated deferred debt issuance costs of $0.3 million. As a result of the prepayments made in fiscal years 2019, 2020, and 2021, the Company has no additional mandatory principal payments on the term loan until maturity on July 18, 2024 and no amounts outstanding under the revolving credit facility. The borrowing capacity remaining as of January 1, 2022 was $293.6 million due to a reduction of $6.4 million for letters of credit outstanding. As a result of the repayment of the outstanding balance on our revolving credit facility, the Company reclassified a proportionate share of unamortized debt issuance costs to Other assets.

Scheduled annual maturities of debt are as follows:

Fiscal Year	In thousands
2022	$	—
2023	—
2024	150,000
2025	402,500
2026	—
Thereafter	—
	$	552,500