Note 12 - Long-Term Debt

12 Months Ended

Jun. 29, 2014

Disclosure Text Block [Abstract]

Long-term Debt [Text Block]

12. Long-Term Debt

Debt Obligations

The following table presents a summary of the total balances outstanding for the Company’s debt obligations, their scheduled maturity dates and the weighted average interest rate for borrowings (including the effects of any interest rate swaps) as well as the applicable current portion of long-term debt:

		Weighted Average		Principal Amounts as of
	Scheduled Maturity Date	Interest Rate as of June 29, 2014		June 29, 2014			June 30, 2013
ABL Revolver	March 2019		3.1%	$	26,000		$	52,500
ABL Term Loan	March 2019		2.9%		68,000			42,800
Term loan from unconsolidated affiliate	August 2015		3.0%		1,250			1,250
Capital lease obligations	(1)		(2)		4,238			1,203
Total debt					99,488			97,753
Current portion of long-term debt					(7,215	)		(65	)
Total long-term debt				$	92,273		$	97,688

(1) Scheduled maturity dates for capital lease obligations range from January 2017 to November 2027.

(2) Fixed interest rates for capital lease obligations range from 2.3% to 4.6%.

On May 24, 2012, the Company entered into a credit agreement (the “Credit Agreement”) to establish a $150,000 senior secured credit facility (“ABL Facility”) with Wells Fargo Bank, N.A. and Bank of America, N.A. In addition, the Company entered into a $30,000 term loan (“Term B Loan”). The purpose of entering into the ABL Facility and the Term B Loan was to, among other things, refinance the Company’s then-existing indebtedness. Since that establishment, the Term B Loan has been repaid (on January 8, 2013), and the ABL Facility has been amended several times (most recently on August 25, 2014), such that, as of June 29, 2014, it had a maturity date of March 28, 2019, and consisted of a $100,000 revolving credit facility (“ABL Revolver”) and a $68,000 term loan (“ABL Term Loan”). As a result of the last amendment entered into after the end of fiscal year 2014 (which is described more specifically below under “—Subsequent Event – Fifth Amendment”), the ABL Term Loan increased to $90,000.

ABL Facility

The ABL Facility is secured by a first-priority security interest in substantially all owned property and assets (together with proceeds and products) of Unifi, Inc., Unifi Manufacturing, Inc. and certain subsidiary guarantors (the “Loan Parties”). It is also secured by a first-priority security interest in all (or 65% in the case of first tier controlled foreign corporations) of the stock of (or other ownership interests in) each of the Loan Parties (other than the Company) and certain subsidiaries of the Loan Parties, together with all proceeds and products thereof. The ABL Facility is further secured by a first-priority lien on the Company’s limited liability company membership interest in Parkdale America, LLC (“PAL”).

The Credit Agreement, as amended, includes representations and warranties made by the Loan Parties, affirmative and negative covenants and events of default that are usual and customary for financings of this type. Should excess availability under the ABL Revolver fall below the defined Trigger Level, a financial covenant requiring the Loan Parties to maintain a fixed charge coverage ratio on a monthly basis of at least 1.05 to 1.0 becomes effective. The Trigger Level as of June 29, 2014 was $21,000. In addition, the ABL Facility contains restrictions on certain payments and investments, including restrictions on the payment of dividends and share repurchases, unless excess availability is greater than the Trigger Level for the thirty-day period prior to the making of such a distribution (as calculated on a pro forma basis as if the payment and any revolving loans made in connection therewith were made on the first day of such period).

The Company’s ability to borrow under the ABL Revolver is limited to a borrowing base equal to specified percentages of eligible accounts receivable and inventory and is subject to certain conditions and limitations. ABL Revolver borrowings bear interest at the London Interbank Offer Rate (“LIBOR”) plus an applicable margin of 1.75% to 2.25%, or the Base Rate plus an applicable margin of 0.75% to 1.25%, with interest payable on a monthly basis. The applicable margin is based on the average quarterly excess availability under the ABL Revolver. The Base Rate means the greater of (i) the prime lending rate as publicly announced from time to time by Wells Fargo, (ii) the Federal Funds Rate plus 0.5%, and (iii) LIBOR plus 1.0%. There is also a monthly unused line fee under the ABL Revolver of 0.25% to 0.375% of the unused line amount.

As of June 29, 2014, the ABL Term Loan bore interest at LIBOR plus an applicable margin of 2.25%, or the Base Rate plus an applicable margin of 1.25%, with interest payable on a monthly basis. Subject to certain provisions, the ABL Term Loan may be prepaid at par, in whole or in part, at any time before the maturity date, at the Company’s discretion.

As of June 29, 2014, under the terms of the ABL Facility, the Company was required to hedge at least $50,000 of variable interest rate exposure, so long as the outstanding principal of all indebtedness having variable rates of interest exceeds $75,000.  

First Amendment

On December 27, 2012, the Company entered into a First Amendment to Credit Agreement (“First Amendment”) to amend certain terms of the ABL Facility in connection with the Company’s then-anticipated January 8, 2013 repayment of all amounts outstanding under the Term B Loan. The First Amendment revised the definition of fixed charges within the Credit Agreement for the ABL Facility and within the Company’s fixed charge coverage ratio calculation to exclude any mandatory or optional prepayments of the Term B Loan made after December 25, 2012 and prior to February 4, 2013, in an amount not to exceed $13,800, subject to the satisfaction of certain specified conditions (which were met by the Company). An amendment fee of $50 was paid to the participating lenders during the quarter ended March 24, 2013.

Second Amendment

On June 25, 2013, the Company entered into a Second Amendment to Credit Agreement (“Second Amendment”). The Second Amendment, among other things: (i) extended the maturity date of the ABL Facility from May 24, 2017 to May 24, 2018; (ii) authorized the ABL Term Loan amount to be increased from its then existing balance of $42,800 to $50,000; (iii) replaced the $1,800 quarterly ABL Term Loan principal payments with payments (if any) based on the amount that the outstanding balance of the ABL Term Loan exceeds a calculation of eligible collateral; (iv) reduced the ABL Term Loan interest rate from LIBOR plus an applicable margin of 2.25% to 2.75%, or the Base Rate plus an applicable margin of 1.25% to 1.75%, to LIBOR plus an applicable margin of 2.25%, or the Base Rate plus an applicable margin of 1.25%; (v) revised the definition of fixed charges for purposes of the Company’s fixed charge coverage ratio calculation to exclude ABL Term Loan voluntary principal prepayments and all principal prepayments of the Term B Loan; (vi) revised the definition of fixed charge coverage ratio to exclude share repurchases permitted under the Credit Agreement; (vii) increased the trigger level for the financial covenant which requires the Company to maintain a fixed charge coverage ratio on a monthly basis of at least 1.05 to 1.0 when excess availability under the ABL Revolver falls below the greater of $10,000 or 20% of the maximum revolver amount (from the previous trigger level of the greater of $10,000 or 15% of the maximum revolver amount); (viii) required excess availability to not be less than $20,000 at any time during the thirty day period prior to the making of restricted payments consisting of dividends and share repurchases; (ix) after July 19, 2015, allowed the Company to reset the calculation of eligible machinery and equipment and eligible real property collateral specific to the ABL Term Loan (the “Collateral Reset”), such that the ABL Term Loan amount could be increased to $50,000 (the “ABL Term Loan Reload”), upon satisfaction of certain additional conditions at the time of the reload; and (x) reduced the letter of credit sublimit to $10,000. Some of the foregoing items were subject to satisfaction of certain conditions, including updated real estate appraisals, which conditions were subsequently satisfied on July 19, 2013. An amendment fee of $125 was paid to the participating lenders during the quarter ended June 30, 2013.

Third Amendment

On January 16, 2014, the Company entered into a Third Amendment to Credit Agreement (“Third Amendment”). The Third Amendment, among other things: (i) revised the definition of permitted indebtedness to allow the Company to enter into permitted sales and leaseback transactions of equipment in an aggregate amount not to exceed $4,000 per fiscal year; (ii) revised the definition of permitted dispositions to increase the amount of certain asset sales or dispositions from $500 to $4,000 per fiscal year; and (iii) revised the mandatory prepayment provision to increase the amount of net proceeds received from certain permitted dispositions that would be required to prepay the outstanding ABL Facility debt from $500 to $4,000 per fiscal year. No amendment fee was required.

Fourth Amendment

On March 28, 2014, the Company entered into a Fourth Amendment to Credit Agreement (“Fourth Amendment”). The Fourth Amendment, among other things: (i) increased the ABL Term Loan by $18,000 to $68,000; (ii) beginning October 1, 2014, requires $2,125 of fixed quarterly payments on the ABL Term Loan; (iii) extended the maturity date of the ABL Facility from May 24, 2018 to March 28, 2019; (iv) modified the calculation of the fixed charge coverage ratio to exclude certain capital expenditures, at the election of the Company, through June 30, 2015, subject to a maximum exclusion of $18,000 for any consecutive twelve month period and other limitations; (v) modified the definition of the trigger level, such that it is reached when excess availability under the ABL Revolver falls below the greater of $10,000, 20% of the maximum revolver amount or 12.5% of the sum of the maximum revolver amount plus the outstanding principal amount of the ABL Term Loan; and (vi) increased the ABL Term Loan Reload amount from $50,000 to $68,000. An amendment fee of $150 was paid to the participating lenders during the quarter ended June 29, 2014.

Subsequent Event - Fifth Amendment

On August 25, 2014, the Company entered into a Fifth Amendment to Credit Agreement (“Fifth Amendment”). The Fifth Amendment, among other things: (i) increased the ABL Term Loan by $22,000 to $90,000; (ii) increased the fixed quarterly payments on the ABL Term Loan from $2,125 to $2,812; (iii) modified the calculation of the fixed charge coverage ratio to exclude certain capital expenditures and permitted acquisitions, at the election of the Company, through June 30, 2015, subject to a maximum exclusion of $40,000 for any consecutive twelve-month period and other limitations; (iv) increased the ABL Term Loan interest rate from LIBOR plus an applicable margin of 2.25%, or the Base Rate plus an applicable margin of 1.25%, to LIBOR plus an applicable margin of 2.50%, or the Base Rate plus an applicable margin of 1.50%; (v) modified the date on which the eligibility of certain collateral is calculated as a date between July 19, 2015 and December 31, 2015, subject to satisfaction of certain additional conditions, such that the ABL Term Loan amount can be increased up to $90,000; (vi) related to the making of restricted payments (consisting of dividends and share repurchases), in addition to existing requirements, added a requirement to have a fixed charge coverage ratio of at least 1.0 to 1.0 during the same period, calculated on a pro forma basis as if all such restricted payments made pursuant to the most recent compliance certificate date were made on the last day of the applicable twelve-fiscal-month period; and (vii) removed the requirement to hedge interest rate exposure on funded indebtedness. An amendment fee of $95 was paid to the participating lenders during the quarter ending September 28, 2014.

As of June 29, 2014, the Company was in compliance with all financial covenants; the excess availability under the ABL Revolver was $61,103; the fixed charge coverage ratio was 10.3 to 1.0; and the Company had $2,325 of standby letters of credit, none of which have been drawn upon.

Term Loan from Unconsolidated Affiliate

On August 30, 2012, a foreign subsidiary of the Company entered into an unsecured loan agreement under which it borrowed $1,250 from the Company’s unconsolidated affiliate, U.N.F. Industries Ltd. The loan bears interest at 3% with interest payable semi-annually and does not amortize. During fiscal year 2014, the maturity date was extended from August 30, 2014 to August 30, 2015, at which time the entire principal balance is due.

Capital Lease Obligations

On November 19, 2012, the Company entered into a capital lease with Salem Leasing Corporation for certain transportation equipment. The present value of the fifteen-year lease was $1,234 and payments are made monthly. The implicit annual interest rate under the lease is approximately 4.6%.

During fiscal year 2014, the Company entered into four capital leases with an unrelated third party for certain machinery and equipment, with an aggregate present value of $3,353.

Scheduled Debt Maturities

The following table presents the scheduled maturities of the Company’s outstanding debt obligations for the following five fiscal years and thereafter:

	Scheduled Maturities on a Fiscal Year Basis
	2015		2016		2017		2018		2019		Thereafter
ABL Revolver	$	—	$	—	$	—	$	—	$	26,000	$	—
ABL Term Loan		6,375		8,500		8,500		8,500		36,125		—
Capital lease obligations		840		866		808		558		366		800
Term loan from unconsolidated affiliate		—		1,250		—		—		—		—
Total	$	7,215	$	10,616	$	9,308	$	9,058	$	62,491	$	800

Debt Financing Fees

Debt financing fees are classified within other non-current assets and consist of the following:

	June 29, 2014			June 30, 2013
Balance at beginning of year	$	2,117		$	2,870
Amounts paid related to debt refinancing		—			113
Amounts paid related to debt modification		400			197
Amortization charged to interest expense		(424	)		(632	)
Amounts charged to extinguishment of debt due to prepayments		—			(431	)
Balance at end of year	$	2,093		$	2,117

Interest Expense

Interest expense consists of the following:

	For the Fiscal Years Ended
	June 29, 2014			June 30, 2013			June 24, 2012
Interest on ABL Facility	$	3,292		$	3,673		$	1,920
Interest on Term B Loan		—			722			198
Interest on 11.5% Senior Secured Notes		—			—			13,045
Other		192			107			40
Subtotal		3,484			4,502			15,203
Reclassification adjustment for interest rate swap		554			322			—
Amortization of debt financing fees		424			632			870
Mark-to-market adjustment for interest rate swap		39			(931	)		—
Interest capitalized to property, plant and equipment, net		(172	)		(36	)		—
Subtotal		845			(13	)		870
Total interest expense	$	4,329		$	4,489		$	16,073

Loss on Extinguishment of Debt

The components of loss on extinguishment of debt consist of the following:

	For the Fiscal Years Ended
	June 29, 2014		June 30, 2013		June 24, 2012
Prepayment call premium for 11.5% Senior Secured Notes	$	—	$	—	$	288
Prepayment call premium and other costs for Term B Loan		—		671		284
Non-cash charges due to write-off of debt financing fees		—		431		2,631
Loss on extinguishment of debt	$	—	$	1,102	$	3,203