LONG-TERM DEBT

3 Months Ended

Feb. 02, 2020

NOTE 5 – LONG-TERM DEBT

Long-term debt consists of the following:

	February 2, 2020			October 31, 2019

Project Loans	$	35,094		$	34,490
Working Capital Loans (value added tax component)		9,314			9,539

		44,408			44,029
Current portion of long-term debt		(7,959	)		(2,142	)

Long-term debt	$	36,449		$	41,887

At February 2, 2020, maturities of our long-term debt over the next five fiscal years and thereafter were as follows:

2020 (remainder of)	$	1,788
2021		8,449
2022		12,648
2023		3,501
2024		6,704
Thereafter		11,318
	$	44,408

As of February 2, 2020 and October 31, 2019, the weighted-average interest rates of our short-term debt were 3.90% and 3.84%, respectively.

Project Loans

In November 2018, PDMCX was approved for credit of $50 million, subject to certain limitations related to PDMCX registered capital at the time of the initial approval, pursuant to which PDMCX has and will enter into separate loan agreements (“the Project Loans”) for intermittent borrowings. The Project Loans, which are denominated in Chinese renminbi (RMB), are being used to finance certain capital expenditures in China. PDMCX granted liens on its land, building, and certain equipment, which had a combined carrying value of $92.9 million as of February 2, 2020, as collateral for the Project Loans. As of February 2, 2020, PDMCX had borrowed 243.4 million RMB ($35.1 million) against this approval. Payments on these borrowings are due semi-annually through December 2025; the initial payment is scheduled for June 2020. The table below presents, in U.S. dollars, the timing of future payments against the borrowings.

	Fiscal Year
	2020		2021		2022		2023		2024		2025		2026

Principal payments	$	1,298	$	6,488	$	5,785	$	3,501	$	6,704	$	6,416	$	4,902

The interest rates on the Project Loans are based on the benchmark lending rate of the People’s Bank of China (4.9% at February 2, 2020). Interest incurred on the loans will be reimbursed through incentives provided by the Xiamen Torch Hi-Tech Industrial Development Zone, which provide for such reimbursements up to a prescribed limit.

Working Capital Loans

In November 2018, PDMCX received approval for unsecured credit of $25.0 million, pursuant to which PDMCX may enter into separate loan agreements. Under this credit agreement (the “Working Capital Loans”), PDMCX can borrow up to 140.0 million RMB to pay value-added taxes (“VAT”), and up to 60.0 million RMB to fund operations; combined total borrowings are limited to $25.0 million. As of February 2, 2020, PDMCX had 64.6 million RMB ($9.3 million) outstanding against the approval to pay VAT. Payments on these borrowings are due semiannually, at an increasing rate, through January 2022; PDMCX made installment payments totaling $0.4 million during the three-month period ended February 2, 2020. The table below presents, in U.S. dollars, the timing of future payments against these borrowings.

	Fiscal Year
	2020		2021		2022

Principal payments	$	490	$	1,961	$	6,863

As of February 2, 2020, PDMCX had borrowed, in several transactions to fund operations, 44.8 million RMB ($6.5 million) against the approval, all of which was outstanding as of that date repayments are due one year from the borrowing dates.

The interest rates on borrowings to fund operations are approximately 4.4 to 4.6% and interest rates on borrowings to pay VAT are approximately 4.8 to 4.9%; both rates are based on the RMB Loan Prime Rate of the National Interbank Funding Center, plus spreads that range from 25.75 to 67.75 basis points. Interest incurred on the loans will be reimbursed through incentives provided by the Xiamen Torch Hi-Tech Industrial Development Zone, which provide for such reimbursements up to a prescribed limit.

Equipment Loan

Effective July 2019, the Company entered into a Master Lease Agreement (“MLA”) which enables us to request advance payments or other funds to finance equipment to be leased or purchased in the U.S. In connection with this MLA, we were approved for financing of $35 million for the purchase of a high-end lithography tool. In the fourth quarter of fiscal 2019, the financing entity, upon our request, made an advance payment of $3.5 million to the equipment vendor on our behalf. Interest on this borrowing is payable monthly at thirty-day LIBOR plus 1% (2.67% at February 2, 2020), and will continue to accrue until the borrowing is repaid or, as allowed under the MLA, we enter into a lease for the equipment. We intend to enter into a lease agreement for the related equipment in fiscal year 2020; as such, we have classified this borrowing as current debt. All borrowings under the MLA are secured by the equipment to be leased or purchased.

Credit Agreement

In September 2018, we entered into a five-year amended and restated credit agreement (the “Credit Agreement”), which has a $50 million borrowing limit, with an expansion capacity to $100 million. The Credit Agreement is secured by substantially all of our assets located in the United States and common stock we own in certain foreign subsidiaries. The Credit Agreement includes minimum interest coverage ratio, total leverage ratio, and minimum unrestricted cash balance covenants (all of which we were in compliance with at February 2, 2020), and limits the amount of cash dividends, distributions, and redemptions we can pay on our common stock to an aggregate annual amount of $50 million. We had no outstanding borrowings against the Credit Agreement at February 2, 2020, and $50 million was available for borrowing. The interest rate on the Credit Agreement (2.65% at February 2, 2020) is based on our total leverage ratio at LIBOR plus a spread, as defined in the Credit Agreement.