Debt And Lines Of Credit

6 Months Ended

Jul. 02, 2011

Debt And Lines Of Credit

Debt And Lines Of Credit

NOTE 9 DEBT AND LINES OF CREDIT

In February 2007, the Company issued $175 million in convertible subordinated notes. The notes are subordinated to all of the Company's existing and future senior indebtedness, mature on February 15, 2012 and bear interest at a rate of 2.5% per year, payable in cash semiannually in arrears on February 15 and August 15 of each year.

Holders may convert their notes into shares of the Company's common stock based on a conversion rate of 41.5861 shares per $1,000 principal amount of notes (equal to an initial conversion price of $24.05 per share) under certain circumstances. Upon conversion, in lieu of shares of the common stock, for each $1,000 principal amount of notes, a holder will receive an amount in cash equal to the lesser of (i) $1,000 or (ii) the conversion value, determined in the manner set forth in the indenture. If the conversion value exceeds $1,000, the Company will also deliver, at its election, cash or common stock or a combination of cash and common stock with respect to the remaining common stock deliverable upon conversion. As of July 2, 2011, the conversion value was less than the principal amount of the notes.

At July 2, 2011, the Company had $126.8 million in convertible subordinated notes outstanding with a carrying value of $124.1 million, net of $2.7 million in unamortized debt discount, which is included in short-term borrowings in the accompanying consolidated balance sheets. At January 1, 2011, the Company had $126.8 million in convertible subordinated notes outstanding with a carrying value of $122.0 million, net of $4.8 million in unamortized debt discount, which was included in long-term debt. At July 2, 2011 and January 1, 2011, the carrying value of the equity component was $26.2 million, net of $0.9 million of equity issuance costs. At July 2, 2011, debt issuance costs of $0.5 million, net of accumulated amortization, was included in prepaid expenses and other current assets. At January 1, 2011, debt issuance costs of $0.8 million, net of accumulated amortization, was included in other assets. The remaining debt issuance costs and unamortized debt discount are being amortized through February 15, 2012 using the effective interest method.

Interest cost on the convertible subordinated notes consisted of the following components:

	Three Months Ended				Six Months Ended
(In thousands)	July  2, 2011		July  3, 2010		July  2, 2011		July  3, 2010
Contractual interest	$	792	$	792	$	1,585	$	1,585
Amortization of debt discount		1,045		1,010		2,081		2,012
Interest cost on convertible subordinated notes	$	1,837	$	1,802	$	3,666	$	3,597

During June 2011, the Company retired 300 million yen in private placement bonds that matured on June 30, 2011 and issued 200 million yen ($2.5 million at July 2, 2011) in private placement bonds through a Japanese bank. These new bonds bear interest at a rate of 0.62% per year, payable in cash semiannually in arrears on June 30 and December 31 of each year, and mature on June 30, 2014. The bonds are included in long-term debt in the accompanying consolidated balance sheet as of July 2, 2011.

At July 2, 2011, the Company had a total of four lines of credit, including one domestic revolving line of credit and three revolving lines of credit with Japanese banks. Additionally, the Company has agreements with two Japanese banks under which it sells trade notes receivable with recourse.

The Company's domestic revolving line of credit has a total credit limit of $3.0 million and expires December 1, 2011. Certain certificates of deposit held at this lending institution collateralize this line of credit, which bears interest at either the prevailing London Interbank Offered Rate (LIBOR) (0.19% at July 2, 2011) plus 1.00% or the British Bankers Association LIBOR Daily Floating Rate (0.13% at July 2, 2011) plus 1.00%, at the Company's option, and carries an unused line fee of 0.25% per year. At July 2, 2011, there were no balances outstanding under this line of credit, with $0.7 million available, after considering outstanding letters of credit totaling $2.3 million.

The three revolving lines of credit with Japanese banks totaled 1.0 billion yen ($12.4 million at July 2, 2011) and expire as follows: $3.7 million on August 31, 2011, $7.4 million on September 1, 2011 and $1.3 million on September 30, 2011. The $7.4 million and $1.3 million lines of credit bear interest at the prevailing bank rate, which was 2.475% at July 2, 2011, and the $3.7 million line of credit bears interest at LIBOR plus 1.75%. Certain certificates of deposit held by the lending institution's U.S. affiliate collateralize the $3.7 million line of credit. At July 2, 2011, the Company had $7.8 million outstanding and $4.6 million available for borrowing under these lines of credit. Amounts outstanding are included in short-term borrowings in the accompanying consolidated balance sheets.

The Company has agreements with two Japanese banks under which it sells trade notes receivable with recourse. These agreements allow the Company to sell receivables totaling up to 550 million yen ($6.8 million at July 2, 2011), have no expiration dates and bear interest at the prevailing bank rate, which was 1.475% at July 2, 2011. At July 2, 2011, the Company had $1.6 million outstanding and $5.2 million available for the sale of notes receivable under these agreements. Amounts outstanding under these agreements are included in short-term borrowings in the accompanying consolidated balance sheets, as the sale of these receivables has not met the criteria for sale treatment in accordance with ASC 860-30, Transfers and Servicing - Secured Borrowing and Collateral.

As of July 2, 2011, the weighted-average effective interest rate on all of the Company's Japanese borrowings, including the private placement bonds, was 1.98%.

Total short-term debt, net of unamortized debt discount, was as follows:

(In thousands)	July  2, 2011		January  1, 2011
Lines of credit	$	9,419	$	8,788
Japanese private placement bonds due June 2011, interest at 1.55% payable semi-annually		—		3,680
Convertible notes due February 2012, interest at 2.5% payable semi-annually		124,124		—
Total short-term debt	$	133,543	$	12,468