Credit Agreement

12 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

Credit Agreement

Credit Agreement

As of December 31, 2022, the Company’s credit facility had a total commitment amount of $825 million. The credit facility is for general corporate purposes, to meet its seasonal working capital requirements and to repurchase its stock. The Credit Agreement includes an accordion feature which allows the Company 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 the Company’s assets and those of its subsidiaries and requires it to comply with, among other things, a maximum leverage ratio and a minimum interest coverage ratio (3.0x).

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. For the quarterly reporting period ending September 30, 2023 and subsequent quarterly reporting periods, the maximum leverage ratio will be 4.5x.

Under the terms of the Credit Agreement, the Company pays a variable rate of interest and a commitment fee based on its leverage ratio. The Credit Agreement matures in December 2026. The Company was in compliance with all financial covenants as of December 31, 2022.

The following tables summarizes the Company’s borrowings under the credit facility ($ in thousands):

	December 31, 2022			January 1, 2022
Outstanding borrowings	$	459,600		$	382,500
Outstanding letters of credit	$	5,947		$	3,997
Additional borrowing capacity	$	359,453		$	438,503
Weighted-average interest rate	6.7		%	1.6		%