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LONG-TERM DEBT | 12 Months Ended
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Feb. 28, 2014
LONG-TERM DEBT |
LONG-TERM DEBT | NOTE 9 – LONG-TERM DEBT A summary of long-term debt is as follows:
LONG-TERM DEBT
(dollars in thousands)
|  | Original |  |  |  |  |  |  |  |  |
|  | Date |  | Interest |  |  |  | February 28, |  |  | February 28, |
|  | Borrowed |  | Rates |  | Matures |  | 2014 |  |  | 2013 |
$37.61 million unsecured loan with a state industrial development corporation, interim draws, interest is set and payable quarterly at the Base Rate, as defined below, plus a margin of up to 1.125%, or applicable LIBOR plus a margin of up to 2.125%, as determined by the interest rate elected. Loan subject to holder’s call on or after March 1, 2018. Loan can be prepaid without penalty any time after March 20, 2014. |  | 03/13 |  | 1.16% |  | 03/23 |  | $ | 37,607 |  |  | $ | - |
$75 million unsecured floating interest rate 10 year Senior Notes. Interest set and payable quarterly at three month LIBOR plus 90 basis points. Principal is due in June 2014. Notes can be prepaid without penalty. (1) |  | 06/04 |  | 6.01% |  | 06/14 |  | 75,000 |  |  | 75,000 |
$100 million unsecured Senior Notes payable at a fixed interest rate of 3.90%. Interest payable semi-annually. Annual principal payments of $20 million begin in January 2014. Prepayment of notes are subject to a “make whole” premium. |  | 01/11 |  | 3.90% |  | 01/18 |  | 80,000 |  |  | 100,000 |
Total long-term debt |  |  |  |  |  |  |  | 192,607 |  |  | 175,000 |
Less current maturities of long-term debt |  |  |  |  |  |  |  | (96,900 | ) |  | (20,000 | )
Long-term debt, excluding current maturities |  |  |  |  |  |  |  | $ | 95,707 |  |  | $ | 155,000 |
(1) Floating interest rates have been hedged with an interest rate swap to effectively fix interest rates. Additional information regarding the swap is provided in Note (12) to these consolidated financial statements. In March 2013, Kaz USA, Inc. (“Kaz USA”), a wholly owned subsidiary of the Company, entered into a Loan Agreement (the “MBFC Loan Agreement”), dated as of March 1, 2013, with the Mississippi Business Finance Corporation (the “MBFC”) in connection with the issuance by the MBFC of up to $38 million of taxable industrial development revenue bonds (the “Bonds”). The Bonds are issued under a Trust Indenture (the “IRB Indenture”), between the MBFC and US Bank N.A., as trustee. Interim draws under the MBFC Loan Agreement, accumulating to $37.61 million, were made through February 28, 2014. There will not be any additional draws under the MBFC Loan Agreement. The Bonds and the related loan to Kaz USA (the “MBFC Loan”) will bear interest at a variable rate as elected by Kaz USA equal to either (a) a “Base Rate” plus a margin of 0.00 to 1.125 percent, depending upon the leverage ratio at the time of the borrowing or (b) the respective one-, two-, three-, or six-month LIBOR rate plus 1.00 to 2.125 percent, depending upon the leverage ratio at the time of the borrowing. The Base Rate is equal to the highest of (i) the federal funds rate for the day, plus 0.50 percent, (ii) the prime rate of Bank of America, N.A., or (iii) the respective one-, two-, three-, or six-month LIBOR rate plus 1.00 percent. The proceeds of the MBFC Loan have been used by Kaz USA to finance the purchase of land, construction of a distribution facility and the acquisition and installation of equipment, machinery and related assets located in Olive Branch, Mississippi. The outstanding principal of the MBFC Loan will be payable as follows: $1.90 million on March 1 in each of 2014, 2015, 2018, 2019, 2020, 2021 and 2022; $3.80 million on March 1, 2016; $5.70 million on March 1, 2017; and $14.81 million on March 1, 2023. Any remaining outstanding principal and interest is due upon maturity on March 1, 2023. The MBFC Loan may be prepaid in whole or part without penalty any time after March 20, 2014. Additionally, Bank of America, N.A., the purchaser of the Bonds, may elect for the MBFC Loan to be prepaid in full on March 1, 2018. Following March 1, 2018, Bank of America, N.A. may elect for the MBFC Loan to be prepaid on March 1 of each subsequent year prior to maturity upon at least 90 days notice. In lieu of any prepayment, the Bonds may be purchased by a transferee, as permitted under the IRB Indenture. On February 7, 2014, the Company and certain of its subsidiaries entered into an amendment to the guaranty agreement in favor of Bank of America, N.A. relating to the MBFC Loan. The Company’s financial covenants under the guaranty agreement are consistent with the covenants contained in the Credit Agreement. Accordingly, the amendment to the guaranty agreement eliminated the maintenance of a minimum consolidated net worth financial covenant and modified the limitation on the Company’s ability to declare or pay cash dividends to shareholders or make stock repurchases in the same manner as the Credit Agreement Amendment. The amendment does not modify the terms of the MBFC Loan Agreement or Indenture under which repayment may be accelerated or increased. See Note (6) to these consolidated financial statements for further information regarding the Credit Agreement Amendment. The fair market value of the fixed rate debt at February 28, 2014 computed using a discounted cash flow analysis was $83.95 million compared to the $80 million book value. All other long-term debt has floating interest rates, and its book value approximates its fair value at February 28, 2014. All of our debt is unconditionally guaranteed, on a joint and several basis, by the Company and certain of its subsidiaries. Our debt agreements require the maintenance of certain financial covenants, including maximum leverage ratios, minimum interest coverage ratios and minimum consolidated net worth levels (as each of these terms is defined in the various agreements). Our debt agreements also contain other customary covenants, including, among other things, covenants restricting or limiting the Company, except under certain conditions set forth therein, from (1) incurring debt, (2) incurring liens on its properties, (3) making certain types of investments, (4) selling certain assets or making other fundamental changes relating to mergers and consolidations, and (5) repurchasing shares of our common stock and paying dividends. As of February 28, 2014, our debt agreements effectively limited our ability to incur more than $391.80 million of additional debt from all sources, including our Credit Agreement. We were in compliance with the terms of these agreements as of February 28, 2014. The following table contains a summary of the components of our interest expense for the periods covered by our consolidated statements of income:
INTEREST EXPENSE |  |
(in thousands) |  |
|  | Fiscal Years Ended the Last Day of February, |
|  | 2014 |  | 2013 |  | 2012 |
Interest and commitment fees |  | $ | 5,609 |  | $ | 8,858 |  | $ | 7,670 |
Deferred finance costs |  | 912 |  | 903 |  | 823 |
Interest rate swap settlements, net |  | 3,672 |  | 3,584 |  | 4,424 |
Total interest expense |  | $ | 10,193 |  | $ | 13,345 |  | $ | 12,917 |

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 19, 20, 22 -Article 5 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
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