Debt

9 Months Ended

Jul. 03, 2011

Debt

Debt

10.          Debt

On March 28, 2011, we entered into a new credit agreement (“Credit Agreement”) and concurrently terminated our prior credit agreement.  The Credit Agreement provides for a $460 million five-year revolving credit facility (“Facility”), which includes a $200 million sublimit for the issuance of standby letters of credit and a $100 million sublimit for multicurrency borrowings and letters of credit.  At our election, the Facility may be increased from time to time by an amount up to $140 million in the aggregate, provided that no existing lender is required to commit to any such increased amount.  As of July 3, 2011, we had $111.5 million in borrowings outstanding at a weighted-average interest rate of 1.92% per annum, $28.5 million in standby letters of credit and $320 million in availability under the Facility.  We had $11.5 million in multicurrency borrowings and letters of credit under the Facility as of July 3, 2011.

Interest on borrowings under the Credit Agreement is payable, at our election, at either (a) a base rate (the highest of the U.S. federal funds rate plus 0.50% per annum, the bank’s prime rate and the Eurocurrency rate plus 1.00%) plus a margin that ranges from 0.50% to 1.50% per annum, or (b) a Eurocurrency rate plus a margin that ranges from 1.50% to 2.50% per annum.

The Credit Agreement contains certain financial and various other affirmative and negative covenants.  They include, among others, a maximum consolidated leverage ratio of 2.5x (total funded debt/earnings before interest, tax, depreciation and amortization (“EBITDA”, as defined in the Credit Agreement)), and a minimum consolidated fixed charge coverage ratio of 1.25x (EBITDA minus capital expenditures/cash interest plus taxes plus principal payments).  As of July 3, 2011, we were in compliance with these covenants with a consolidated leverage ratio of 1.04x, and a consolidated fixed charge coverage ratio of 2.02x.

The Facility is guaranteed by our material subsidiaries and certain additional designated subsidiaries.  Borrowings under the Credit Agreement are collateralized by our accounts receivable, the stock of our subsidiaries and intercompany debt.  As of July 3, 2011, we met all compliance requirements.