NOTE 8 DEBT AND LINES OF CREDIT

Short-Term Debt

Convertible Notes

In February 2007, the Company issued $175 million in convertible subordinated notes. The notes were subordinated to all of the Company's existing and future senior indebtedness, matured on February 15, 2012 and bore interest at a rate of 2.5% per year, payable in cash semiannually in arrears on February 15 and August 15 of each year. During 2011, 2009 and 2008, the Company extinguished $114.4 million, $20.2 million and $28.0 million of these notes, respectively. The remaining outstanding principal amount of the notes was repaid in February 2012.

During 2011, the Company extinguished $114.4 million of its convertible subordinated notes at a weighted-average price equal to 100.5% of the principal amount of the notes, or $115.0 million. The $0.1 million difference between the fair value of the notes and the carrying value of the notes, which included $1.0 million in deferred debt issuance costs and unamortized debt discount, has been recorded as a loss on extinguishment of debt in the Company's consolidated statements of operations. In addition, $1.5 million was allocated to the extinguishment of the equity component of such notes.

During 2009, the Company extinguished $20.2 million of its convertible subordinated notes at a weighted-average price equal to 91.6% of the principal amount of the notes, or $18.7 million. The $0.3 million difference between the fair value of the notes and the carrying value of the notes, which included $1.7 million in deferred debt issuance costs and unamortized debt discount, has been recorded as a gain on extinguishment of debt in the Company's consolidated statements of operations. In addition, $0.3 million was allocated to the extinguishment of the equity component of such notes.

During 2008, the Company extinguished $28.0 million of its convertible subordinated notes at a weighted-average price equal to 59.9% of the principal amount of the notes, or $16.8 million. The $7.7 million difference between the fair value of the notes and the carrying value of the notes, which included $3.5 million in deferred debt issuance costs and unamortized debt discount, was recorded as a gain on extinguishment of debt in the Company's consolidated statements of operations.

Holders could convert their notes based on a conversion rate of 41.5861 shares of the Company's common stock per $1,000 principal amount of notes (equal to an initial conversion price of approximately $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 could 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 exceeded $1,000, the Company would 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 December 31, 2011, the conversion value was less than the principal amount of the notes.

At December 31, 2011, the Company had $12.4 million in convertible subordinated notes outstanding with a carrying value of $12.4 million, net of a nominal amount of remaining 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. At December 31, 2011 and January 1, 2011, the carrying value of the equity component was $24.8 million and $26.2 million, respectively, net of $0.9 million of equity issuance costs. At December 31, 2011, a nominal amount of remaining debt issuance costs, 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 investments and other assets. The remaining debt issuance costs and unamortized debt discount were amortized through February 15, 2012 using the effective interest method.

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


	Year Ended
(In thousands)	December 31, 2011		January 1, 2011		January 2, 2010
Contractual interest	$	2,941	$	3,196	$	3,636
Amortization of debt discount		3,891		4,058		4,575

Interest cost on convertible subordinated notes	$	6,832	$	7,254	$	8,211

Short-Term Lines of Credit and Loans

At December 31, 2011, the Company had 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 three revolving lines of credit with Japanese banks totaled 1.0 billion yen ($12.9 million at December 31, 2011) and expire as follows: $7.7 million on November 30, 2012, $3.9 million on July 27, 2012, and $1.3 million on January 31, 2012 (which has subsequently been extended to July 31, 2012). The $7.7 million and $1.3 million lines of credit bear interest at the prevailing bank rate at each institution, which was 2.475% and 2.20%, respectively, at December 31, 2011, and the $3.9 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 $3.9 million line of credit. At December 31, 2011, the Company had $5.5 million outstanding and $7.4 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 ($7.1 million at December 31, 2011), have no expiration dates and bear interest at the prevailing bank rate, which was 1.475% at December 31, 2011. At December 31, 2011, the Company had $1.3 million outstanding and $5.8 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 December 31, 2011, the weighted-average effective interest rate on all of the Company's Japanese borrowings, including the private placement bonds described under "Long-Term Debt" below, was 1.92%.

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


(In thousands)	December 31, 2011		January 1, 2011
Short-term lines of credit	$	6,801	$	8,788
Japanese private placement bonds due June 2011, interest at 1.55%		—		3,680
Convertible notes due February 2012, interest at 2.5%		12,356		—
Current portion of long-term debt		25,992		—

Total short-term borrowings	$	45,149	$	12,468

Long-Term Debt

Secured Credit Facility

In October 2011, the Company entered into a new credit agreement with certain lenders (Credit Agreement). The Credit Agreement and related security agreement provide for a new senior secured credit facility consisting of a $185 million term loan and a $65 million revolving line of credit, each with a term of five years, which is secured by substantially all of the Company's assets. The Credit Agreement replaced the Company's previously existing domestic revolving line of credit of $3 million. The initial interest rates per annum applicable to amounts outstanding under the term loan and the revolving line of credit are, at the Company's option, either (a) the base rate as defined in the Credit Agreement (Base Rate) plus 1.75%, or (b) the Eurodollar Rate as defined in the Credit Agreement (Eurodollar Rate) plus 2.75%. The margins over the Base Rate and Eurodollar Rate applicable to the term loan and loans outstanding under the revolving line of credit are subject to adjustment in future periods based on the Company's consolidated leverage ratio, as defined in and calculated pursuant to the Credit Agreement; provided, that the maximum applicable margins are 2.00% for Base Rate loans and 3.00% for Eurodollar Rate loans, and the minimum applicable margins are 1.25% for Base Rate loans and 2.25% for Eurodollar Rate loans. Principal amortization and interest payments on the term loan are due quarterly. The Company's ability to borrow funds under the revolving line of credit is subject to certain conditions, including compliance with certain covenants and making certain representations and warranties.

Japanese Bonds

In June 2011, the Company retired 300 million yen in private placement bonds that matured on June 30, 2011 and issued 200 million yen ($2.6 million at December 31, 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 December 31, 2011.

Long-Term Lines of Credit and Loans

As part of the acquisition of High Q, the Company assumed certain loans with Austrian financial institutions, eight of which were outstanding as of December 31, 2011. Three of the loans are promissory notes with remaining principal balances of €0.1 million ($0.1 million) each at December 31, 2011, which bear interest at rates ranging from 2.23% to 3.25% and mature at various dates through December 2020. Principal and interest on such notes are paid monthly. The Company also has five revolving lines of credit with an aggregate outstanding balance of €3.0 million ($3.9 million) as of December 31, 2011. These lines of credit are secured by certain cash deposits, accounts receivable and bank guarantees. These lines of credit do not require principal repayment as long as certain conditions are met. Interest accrues on these lines of credit at a rate of 2.90% and is payable bi-monthly. Amounts outstanding under all of these loans with Austrian financial institutions are included in long-term debt in the accompanying balance sheet as of December 31, 2011.

As part of the acquisition of Ophir, the Company assumed certain loans with Israeli and Japanese banks. In Israel, eight loans with an aggregate principal balance of $5.9 million were outstanding as of December 31, 2011. Such loans bear interest at rates ranging from 2.97% to 5.00% and mature at various dates through October 2015. In Japan, seven loans with an aggregate principal balance of $1.3 million were outstanding as of December 31, 2011. Such loans bear interest at rates ranging from 1.25% to 1.45% and mature at various dates through June 2016. In addition, Ophir borrowed an additional $5.0 million during the fourth quarter of 2011. The interest rate on this loan was LIBOR plus 2.35%, and this loan was repaid on January 5, 2012. Ophir's loans in Japan are generally unsecured, and Ophir's loans in Israel are generally secured by pledges of and liens on certain of Ophir's assets.

During December 2011, Ophir retired its publicly traded bonds with a carrying value of approximately $9.1 million for $9.6 million, resulting in a loss of $0.5 million.

Total long-term debt was as follows:


(In thousands)	December 31, 2011		January 1, 2011
Japanese private placement bonds due June 2014, interest at 0.62%	$	2,576	$	—
Japanese amortizing loans due through June 2016, interest at 1.30%		954		—
Austrian amortizing loans due through December 2020, interest rates from 2.23% to 3.25%		270		—
Austrian lines of credit, no due date, interest at 2.90%		3,888		—
Israeli amortizing loans due through October 2015, interest rates from 2.97% to 5.00%		3,785		—
Israeli loans, due through July 2013, interest rates from 4.50% to 5.00%		70		—
Term loan due October 2016, interest at 3.02%		166,500		—
Convertible notes due February 2012, interest at 2.5%		—		122,042

Total long-term debt	$	178,043	$	122,042

Maturities of the Company's debt obligations as of December 31, 2011 were as follows:


(In thousands)
2012	$	45,149
2013		33,854
2014		32,265
2015		28,518
2016		83,319
Thereafter		87

	$	223,192