Note 12 - Long-Term Debt

3 Months Ended

Sep. 28, 2014

Disclosure Text Block [Abstract]

Long-term Debt [Text Block]

12. Long-Term Debt

Debt Obligations

The following table presents 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 the interest rate swap) as well as the applicable current portion of long-term debt:

		Weighted Average		Principal Amounts as of
	Scheduled Maturity Date	Interest Rate as of September 28, 2014		September 28, 2014			June 29, 2014
ABL Revolver	March 2019		2.2%	$	16,300		$	26,000
ABL Term Loan	March 2019		3.3%		90,000			68,000
Term loan from unconsolidated affiliate	August 2015		3.0%		1,250			1,250
Capital lease obligations	(1)		(2)		4,030			4,238
Total debt					111,580			99,488
Current portion of long-term debt					(13,347	)		(7,215	)
Total long-term debt				$	98,233		$	92,273

(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. The ABL Facility has been amended several times, such that it currently has a maturity date of March 28, 2019 and consists of a $100,000 revolving credit facility (“ABL Revolver”) and a $90,000 term loan (“ABL Term Loan”) as a result of the last amendment entered into on August 25, 2014.

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 certain first tier controlled foreign corporations, as required by the lenders) 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. If excess availability under the ABL Revolver falls 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 September 28, 2014 was $23,750. 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 all such payments and any revolving loans made in connection therewith were made on the first day of such period) and the fixed charge coverage ratio is at least 1.0 to 1.0 (as calculated on a pro forma basis as if all such payments made pursuant to the most recent compliance certificate date were made on the last day of the applicable twelve-month period). 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.

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 currently being paid on a monthly basis. 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%.

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 again 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. Debt financing fees of $182 were recorded during the quarter ended September 28, 2014 related to the amendment.

As of September 28, 2014, the Company was in compliance with all financial covenants; the excess availability under the ABL Revolver was $72,475; the fixed charge coverage ratio was 8.3 to 1.0; and the Company had $525 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 does not amortize and bears interest at 3%, payable semi-annually. The entire principal balance is due August 30, 2015, the maturity date.

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 remainder of fiscal year 2015 and the fiscal years thereafter:

	Scheduled Maturities on a Fiscal Year Basis
	2015		2016		2017		2018		2019		Thereafter
ABL Revolver	$	—	$	—	$	—	$	—	$	16,300	$	—
ABL Term Loan		8,438		11,250		11,250		11,250		47,812		—
Capital lease obligations		632		866		808		558		366		800
Term loan from unconsolidated affiliate		—		1,250		—		—		—		—
Total	$	9,070	$	13,366	$	12,058	$	11,808	$	64,478	$	800

Debt Financing Fees

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

	September 28, 2014
Balance at beginning of year	$	2,093
Amounts recorded related to debt modification		182
Amortization charged to interest expense		(112	)
Balance at end of period	$	2,163

Interest Expense

Interest expense consists of the following:

	For the Three Months Ended
	September 28, 2014			September 29, 2013
Interest on ABL Facility	$	860		$	836
Other		48			56
Subtotal		908			892
Reclassification adjustment for interest rate swap		104			155
Amortization of debt financing fees		112			107
Mark-to-market adjustment for interest rate swap		(258	)		140
Interest capitalized to property, plant and equipment, net		(47	)		(42	)
Subtotal		(89	)		360
Total interest expense	$	819		$	1,252