DEBT

Short-term Borrowings and Current Portion of Long-term Debt

Short-term borrowings and current portion of long-term debt at September 23, 2012 and at December 25, 2011 consisted of the following:



(amounts in thousands)	September 23, 2012		December 25, 2011
Overdraft	$	309	$	405
Full-recourse factoring liabilities	—		8,809
Term loans	2,436		9,125
Other short-term borrowings	1,078		2,529
Current portion of long-term debt	537		910
Total short-term borrowings and current portion of long-term debt	$	4,360	$	21,778

In September 2012, $7.4 million (€5.7 million) was paid in order to extinguish our existing short-term full-recourse factoring agreement in Germany. The arrangement was included in short-term borrowings in the accompanying Consolidated Balance Sheets.

In June 2012, $8.0 million (HKD 61.8 million) was paid in order to extinguish our existing Hong Kong term loan. The term loan was included in short-term borrowings in the accompanying Consolidated Balance Sheets.

In June 2012, $0.7 million (INR 37.2 million) was paid in order to extinguish an overdraft facility and other short-term loans assumed in connection with the acquisition of the Shore to Shore businesses. The loans were included in short-term borrowings in the accompanying Consolidated Balance Sheets.

In February 2012, the Company entered into a $3.2 million Sri Lanka banking facility, which includes a $2.7 million term loan, and a combined $0.5 million sublimit for an overdraft/import line. As of September 23, 2012, $2.4 million and $0.4 million were outstanding on the term loan and overdraft/import line, respectively.

Long-Term Debt

Long-term debt as of September 23, 2012 and December 25, 2011 consisted of the following:



(amounts in thousands)	September 23, 2012		December 25, 2011
Senior secured credit facility:
$69 million variable interest rate revolving credit facility maturing in 2014	$	44,206	$	52,248
Senior Secured Notes:
$22 million 4.00% fixed interest rate Series A senior secured notes maturing in 2015	22,038		25,000
$22 million 4.38% fixed interest rate Series B senior secured notes maturing in 2016	22,038		25,000
$22 million 4.75% fixed interest rate Series C senior secured notes maturing in 2017	22,038		25,000
Full-recourse factoring liabilities	998		1,333
Other capital leases with maturities through 2016	554		1,013
Total	111,872		129,594
Less current portion	537		910
Total long-term portion	$	111,335	$	128,684

Senior Secured Credit Facility

On February 17, 2012, we received an amendment to our Senior Secured Credit Facility which increased the required leverage ratio covenant of adjusted EBITDA to total debt from 2.75 to 3.00, 3.35 and 3.25 for the periods ended March 25, June 24 and September 23, 2012. In addition, the amendment prohibits the Company from consummating any acquisitions from February 17, 2012 through the fiscal quarter ending September 23, 2012. Had we not received the amendment, we would have been in violation of the leverage ratio covenant as of March 25, 2012.

On July 31, 2012, we received an additional amendment to our Senior Secured Credit Facility ("July 2012 Amendment"), which contained several modifications. The July 2012 Amendment reduced the total commitment of the Senior Secured Credit Facility from $125.0 million to $75.0 million. The July 2012 Amendment reduced the sublimit for the issuance of letters of credit from $25.0 million to $5.0 million. The July 2012 Amendment reduced the sublimit for swingline loans from $25.0 million to $5.0 million. The July 2012 Amendment increased the required leverage ratio covenant of adjusted EBITDA to total debt to 5.25, 6.50, 5.50, 3.50, and 2.75 for the periods ended June 24, 2012, September 23, 2012, December 30, 2012, March 31, 2013, and June 30, 2013 and thereafter. Cash restructuring of up to $25.0 million is excluded from the calculation of EBITDA beginning in the fiscal quarter ending June 24, 2012. The July 2012 Amendment waives the fixed charge covenant from June 24, 2012 through September 23, 2012 (the "Waiver Period"), decreases it to 1.00 for the period ended December 30, 2012, and returns to 1.25 for periods thereafter. In addition, the July 2012 Amendment permits divestitures, acquisitions and transfers of assets to non-credit parties, under certain conditions. The July 2012 Amendment also contains a provision whereby if our cash balance exceeds $65 million as of weekly measurement dates, we must prepay any additional borrowings made subsequent to the July 2012 Amendments. This provision is effective until we are in compliance with our original covenant requirements for two consecutive quarters. There were no required prepayments in the third quarter of 2012.

Absent the waiver and additional July 2012 Amendment, we would have been in violation of the June 24, 2012 leverage ratio and fixed charge coverage covenants. We are in compliance with the leverage ratio covenant as of September 23, 2012. The fixed charge covenant was waived for the quarter ended September 23, 2012. Absent the waiver, we would have been in violation of the fixed charge covenant as of September 23, 2012. Although we cannot provide full assurance, we project to be in compliance with all of our covenants for all periods subsequent to the fiscal quarter ended September 23, 2012.

During the Waiver Period, the interest rate spread on the Senior Secured Credit Facility increases to a maximum of 4.25% over the Base Rate or 5.25% over the LIBOR rate. The “Base Rate” is the highest of (a) our lender’s prime rate, (b) the Federal Funds rate, plus 0.50%, and (c) a daily rate equal to the one-month LIBOR rate, plus 1.00%. The unused line fee will increase to a maximum of 1.00% per annum. The maximum is based in accordance with changes in our leverage ratio.

During the quarter ended September 23, 2012, the Company incurred $1.4 million in fees and expenses in connection with the July 2012 Amendment to the Senior Secured Credit Facility, which were capitalized and will be amortized over the term of the Senior Secured Credit Facility to interest expense on the Consolidated Statement of Operations. In connection with the reduction in borrowing capacity of the Senior Secured Credit Facility, the Company recognized $0.8 million of unamortized debt issuance costs. The cost was recognized in interest expense on the Consolidated Statement of Operations in the third quarter of 2012.

On September 21, 2012, the Company repaid $6.1 million on the Senior Secured Credit Facility. Pursuant to the terms of the July 2012 Amendment, the repayment permanently reduced the outstanding borrowing capacity from $75.0 million to $68.9 million. In connection with the reduction in borrowing capacity of the Senior Secured Credit Facility, the Company recognized $0.2 million of unamortized debt issuance costs. The cost was recognized in interest expense on the Consolidated Statement of Operations in the third quarter of 2012.

The Senior Secured Credit Facility includes an expansion option that will allow us, subject to certain conditions, to request an increase in the Senior Secured Credit Facility of up to an aggregate of $50.0 million, for a potential total commitment of $118.9 million. As of September 23, 2012, we were not eligible to elect to request the $50.0 million expansion option due to financial covenant restrictions.

As of September 23, 2012, $1.4 million issued in letters of credit were outstanding under the Senior Secured Credit Facility.

All obligations of domestic borrowers under the Senior Secured Credit Facility are irrevocably and unconditionally guaranteed on a joint and several basis by our domestic subsidiaries. The obligations of foreign borrowers under the Senior Secured Credit Facility are irrevocably and unconditionally guaranteed on a joint and several basis by certain of our foreign subsidiaries as well as the domestic guarantors. Collateral under the Senior Secured Credit Facility includes a 100% stock pledge of domestic subsidiaries and a 65% stock pledge of all first-tier foreign subsidiaries, excluding our Japanese sales subsidiary. As a condition of the July 2012 Amendment, all domestic assets are also pledged as collateral. The approximate net book value of the collateral as of September 23, 2012 was $142 million.

Pursuant to the original terms of the Senior Secured Credit Facility, we are subject to various requirements, including covenants requiring the maintenance of a maximum total leverage ratio of 2.75 and a minimum fixed charge coverage ratio of 1.25. The Senior Secured Credit Facility also contains customary representations and warranties, affirmative and negative covenants, notice provisions and events of default, including change of control, cross-defaults to other debt, and judgment defaults. Upon a default under the Senior Secured Credit Facility, including the non-payment of principal or interest, our obligations under the Senior Secured Credit Facility may be accelerated and the assets securing such obligations may be sold. Certain of our wholly-owned subsidiaries with respect to the Company are guarantors of our obligations under the Senior Secured Credit Facility.

Senior Secured Notes

On February 17, 2012, we received an amendment to our Senior Secured Notes which increased the required leverage ratio covenant of adjusted EBITDA to total debt from 2.75 to 3.00, 3.35 and 3.25 for the periods ended March 25, June 24 and September 23, 2012. In addition, the amendment prohibits the Company from consummating any acquisitions from February 17, 2012 through the fiscal quarter ending September 23, 2012. Had we not received the amendment, we would have been in violation of the leverage ratio covenant as of March 25, 2012.

On July 31, 2012, we received an additional amendment to our Senior Secured Notes ("July 2012 Amendment"), which contained several modifications. The July 2012 Amendment increased the required leverage ratio covenant of adjusted EBITDA to total debt to 5.25, 6.50, 5.50, 3.50, and 2.75 for the periods ended June 24, 2012, September 23, 2012, December 30, 2012, March 31, 2013, and June 30, 2013 and thereafter. Cash restructuring of up to $25.0 million is excluded from the calculation of EBITDA beginning in the fiscal quarter ending June 24, 2012. The July 2012 Amendment waives the fixed charge covenant from June 24, 2012 through September 23, 2012 (the "Waiver Period"), decreases it to 1.00 for the period ended December 30, 2012, and returns to 1.25 for periods thereafter. In addition, the July 2012 Amendment permits divestitures, acquisitions and transfers of assets to non-credit parties, under certain conditions.

Absent the waiver and additional July 2012 Amendment, we would have been in violation of the June 24, 2012 leverage ratio and fixed charge coverage covenants. We are in compliance with the amended leverage ratio covenant as of September 23, 2012. The fixed charge covenant was waived for the quarter ended September 23, 2012. Absent the waiver, we would have been in violation of the fixed charge covenant as of September 23, 2012. Although we cannot provide full assurance, we project to be in compliance with all of our covenants for all periods subsequent to the fiscal quarter ended September 23, 2012.

During the Waiver Period, and until such time the financial covenants return to the original covenants for two consecutive quarters, the coupon rate on the Senior Secured Notes will increase to 5.75%, 6.13%, and 6.50% for the Series A Senior Secured Notes, Series B Senior Secured Notes, and Series C Senior Secured Notes, respectively.

During the quarter ended September 23, 2012, the Company incurred $1.4 million in fees and expenses in connection with the July 2012 Amendment to the Senior Secured Notes, of which $0.7 million were recognized in selling, general, and administrative expenses on the Consolidated Statement of Operations in the third quarter of fiscal 2012 and $0.7 million, which were capitalized and will be amortized over the term of the Senior Secured Notes to interest expense on the Consolidated Statement of Operations.

On September 21, 2012, the Company repaid $8.9 million in principal as well as a make-whole premium of $1.1 million related to the Senior Secured Notes. In connection with the repayment on the Senior Secured Notes, the Company recognized $0.1 million of unamortized debt issuance costs. The unamortized debt issuance costs and make whole premium fees were recognized in interest expense on the Consolidated Statement of Operations in the third quarter of fiscal 2012.

The Senior Secured Notes Agreement provides that for a three-year period ending on July 22, 2013, we may issue, and our lender may, in its sole discretion, purchase, additional fixed-rate senior secured notes and together with the Senior Secured Notes, up to an aggregate amount of $50.0 million. As of September 23, 2012, we were not eligible to elect to request the $50.0 million expansion option due to financial covenant restrictions.

All obligations under the Senior Secured Notes are irrevocably and unconditionally guaranteed on a joint and several basis by our domestic subsidiaries. Collateral under the Senior Secured Notes includes a 100% stock pledge of domestic subsidiaries and a 65% stock pledge of all first-tier foreign subsidiaries, excluding our Japanese sales subsidiary. As a condition of the July 2012 Amendment, all domestic assets are also pledged as collateral. The approximate net book value of the collateral as of September 23, 2012 was $142 million.

The original Senior Secured Notes Agreement is subject to covenants that are substantially similar to the covenants in the Senior Secured Credit Facility Agreement, including covenants requiring the maintenance of a maximum total leverage ratio of 2.75 and a minimum fixed charge coverage ratio of 1.25. The Senior Secured Notes Agreement also contains representations and warranties, affirmative and negative covenants, notice provisions and events of default, including change of control, cross-defaults to other debt, and judgment defaults that are substantially similar to those contained in the Senior Secured Credit Facility, and those that are customary for similar private placement transactions. Upon a default under the Senior Secured Notes Agreement, including the non-payment of principal or interest, our obligations under the Senior Secured Notes Agreement may be accelerated and the assets securing such obligations may be sold. Additionally, the Senior Secured Notes have a make-whole provision that requires the discounted value of the remaining payments on the Senior Secured Notes expected through the end term of each of the Senior Secured Notes to be paid in full upon early termination, acceleration, or prepayment. Certain of our wholly-owned subsidiaries are also guarantors of our obligations under the Senior Secured Notes.

Full-recourse Factoring Arrangements

In December 2009, we entered into new full-recourse factoring arrangements in Europe. The arrangements are secured by trade receivables. The Company received a weighted average of 92.4% of the face amount of receivables that it desired to sell and the bank agreed, at its discretion, to buy. As of September 23, 2012 the factoring arrangements had a balance of $1.0 million (€0.8 million), of which $0.3 million (€0.3 million) was included in the current portion of long-term debt and $0.7 million (€0.5 million) was included in long-term borrowings in the accompanying Consolidated Balance Sheets since the receivables are collectible through 2016.