Credit Agreement

9 Months Ended

Oct. 01, 2022

Debt Disclosure [Abstract]

Credit Agreement

Credit AgreementAs of October 1, 2022, our credit facility had a total commitment amount of $825 million. The credit facility is for general corporate purposes, to meet our seasonal working capital requirements and to repurchase our stock. The credit agreement includes an accordion feature which allows us to increase the amount of the credit facility from $825 million to $1.2 billion, subject to lenders’ approval. The credit agreement provides the lenders with a collateral security interest in substantially all of our assets and those of our subsidiaries and requires us to comply with, among other things, a maximum net leverage ratio (4.5x) and a minimum interest coverage ratio (3.0x). Under the terms of the credit agreement, we pay a variable rate of interest and a commitment fee based on our leverage ratio. The credit agreement matures in December 2026. We were in compliance with all financial covenants as of October 1, 2022.

We amended the credit agreement on October 26, 2022. The amendment, among other things, (a) provides relief from the requirement that the net leverage ratio not exceed 3.75x for certain corporate actions including Permitted Capital Distributions for Performance or Taxes (as defined in the Credit Agreement) and certain acquisition activity; (b) increases the permissible net leverage ratio to 5.0x for the three consecutive quarterly reporting periods ending July 1, 2023; (c) increases the commitment fee rate to 50 basis points and the margin applicable to interest rates for all borrowings by an additional 50 basis points, in each case if the net leverage ratio is greater than or equal to 4.5x; and (d) replaces the option to borrow at an interest rate based on London Interbank Offered Rate (LIBOR) to one based on a Term SOFR Rate. The Term SOFR Rate equals the sum of (x) the Term SOFR Screen Rate (as defined in the Credit Agreement) for the applicable interest period (but in no event less than zero), plus (y) 0.10%, plus (z) the margin based on Sleep Number’s net leverage ratio. A fee for the amendment is payable to the lenders in an amount equal to 7.5 basis points multiplied by the sum of the Revolving Credit Commitment and the outstanding amount of Term Loans (as each is defined in the Credit Agreement).

The following table summarizes our borrowings under the credit facility ($ in thousands):

	October 1, 2022			January 1, 2022
Outstanding borrowings	$	406,300		$	382,500
Outstanding letters of credit	$	5,947		$	3,997
Additional borrowing capacity	$	412,753		$	438,503
Weighted-average interest rate	5.1		%	1.6		%