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Note 9 - Debt
 12 Months Ended
May 26, 2013
Debt Disclosure [Abstract]  
Debt Disclosure [Text Block]

9.            Debt


Long-term debt consists of the following (in thousands):


   

May 26, 2013

   

May 27, 2012

 

Real estate loan agreement with General Electric Capital Corporation (“GE Capital”); due in monthly principal and interest payments of $133,060 through May 1, 2022 with interest based on a fixed rate of 4.02% per annum

  $ 17,065     $ 17,957  

Real estate bridge loan agreement with GE Capital; due in monthly principal and interest payments of $8,902 with a lump sum final principal payment due on May 1, 2013 with interest based on a fixed rate of 4.02% per annum

    —       1,200  

Capital equipment loan with GE Capital; due in monthly principal and interest payments of $175,356 through May 1, 2019 with interest based on a fixed rate of 4.39% per annum

    11,080       12,660  

Term note with BMO Harris; due in monthly payments of $250,000 through May 23, 2016 with interest payable monthly at LIBOR plus 2% per annum

    9,000       12,000  

Industrial revenue bonds (“IRBs”) issued by Lifecore; due in annual payments through 2020 with interest at a variable rate set weekly by the bond remarketing agent (0.38% and 0.42% at May 26, 2013 and May 27, 2012, respectively)

    3,160       3,500  

Total

    40,305       47,317  

Less current portion

    (5,933 )     (7,012 )

Long-term portion

  $ 34,372     $ 40,305  

The future minimum principal payments of the Company’s debt for each year presented are as follows (in thousands):


   

GE RE Loan

   

GE Equipment

   

BMO Harris

   

IRB

   

Total

 
                                         

FY 2014

  $ 928     $ 1,650     $ 3,000     $ 355     $ 5,933  
                                         

FY 2015

    966       1,725       3,000       365       6,056  
                                         

FY 2016

    1,005       1,801       3,000       375       6,181  
                                         

FY 2017

    1,047       1,882       —       390       3,319  
                                         

FY 2018

    1,089       1,967       —       400       3,456  
                                         

Thereafter

    12,030       2,055       —       1,275       15,360  
                                         

Total

  $ 17,065     $ 11,080     $ 9,000     $ 3,160     $ 40,305  

In addition to entering into the GE real estate and equipment loans mentioned above, on April 23, 2012 in connection with the acquisition of GreenLine, Apio also entered into a five-year, $25.0 million asset-based working capital revolving line of credit, with an interest rate of LIBOR plus 2%, with availability based on the combination of the eligible accounts receivable and eligible inventory (availability was $14.6 million at May 26, 2013). Apio’s revolving line of credit has an unused fee of 0.375% per annum. At May 26, 2013 and May 27, 2012, Apio had $4.0 million and $11.7 million, respectively, outstanding under its revolving line of credit.


The GE real estate, equipment and line of credit agreements (collectively the “GE Debt Agreements”) are secured by liens on all of the property of Apio and its subsidiaries. The GE Debt Agreements contain customary events of default under which obligations could be accelerated or increased. The GE Debt Agreements are guaranteed by Landec and Landec has pledged its equity interest in Apio as collateral under the agreements. Apio was in compliance with all financial covenants as of May 26, 2013. Unamortized loan origination fees for the GE Debt Agreements were $1.2 million and $1.3 million at May 26, 2013 and May 27, 2012, respectively, and are included in other assets in the Consolidated Balance Sheets. Amortization of loan origination fees recorded to interest expense for fiscal years 2013, 2012 and 2011 were $181,000, $15,000 and zero, respectively.


On May 23, 2012, Lifecore entered into two financing agreements with BMO Harris Bank N.A. and/or its affiliates (“BMO Harris”), collectively (the “Lifecore Loan Agreements”):


 

1)

A Credit and Security Agreement (the “Credit Agreement”) which includes (a) a one-year, $8.0 million asset-based working capital revolving line of credit, with an interest rate of LIBOR plus 1.85%, with availability based on the combination of Lifecore’s eligible accounts receivable and inventory balances (availability was $7.0 million at May 26, 2013) and with no unused fee (at May 26, 2013 and May 27, 2012, no amounts were outstanding under the line of credit) and (b) a $12.0 million term loan which matures in four years due in monthly payments of $250,000 with interest payable monthly based on a variable interest rate of LIBOR plus 2% (the “Term Loan”).


 

2)

A Reimbursement Agreement pursuant to which BMO Harris caused its affiliate Bank of Montreal to issue an irrevocable letter of credit in the amount of $3.5 million (the “Letter of Credit”) which is securing the IRB described below.


The obligations of Lifecore under the Lifecore Loan Agreements are secured by liens on all of the property of Lifecore. The Lifecore Loan Agreements contain customary covenants, such as limitations on the ability to (1) incur indebtedness or grant liens or negative pledges on Lifecore’s assets; (2) make loans or other investments; (3) pay dividends or repurchase stock or other securities; (4) sell assets; (5) engage in mergers; (6) enter into sale and leaseback transactions; (7) adopt certain benefit plans; and (8) make changes in Lifecore’s corporate structure. In addition, under the Credit Agreement, Lifecore must maintain (a) a minimum fixed charge coverage ratio of 1.10 to 1.0 and a minimum quick ratio of 1.25 to 1.00, both of which must be satisfied as of the end of each fiscal quarter commencing with the fiscal quarter ending August 26, 2012 and (b) a minimum tangible net worth of $29,000,000, measured as of May 28, 2013, and as of the end of each fiscal year thereafter. Unamortized loan origination fees for the Lifecore Loan Agreements were $149,000 and $139,000 at May 26, 2013 and May 27, 2012, respectively, and are included in other assets in the Consolidated Balance Sheets. Amortization of loan origination fees recorded to interest expense for fiscal year 2013, 2012 and 2011 were $50,000, $161,000 and $45,000 respectively. Lifecore was in compliance with all financial covenants as of May 26, 2013.


The market value of the Company’s debt approximates its recorded value as the interest rates on each debt instrument approximates current market rates.


The Term Loan was used to repay Lifecore’s former credit facility with Wells Fargo Bank, N.A. (“Wells Fargo”). The Letter of Credit (which replaces a letter of credit previously provided by Wells Fargo) provides liquidity


and credit support for the IRBs.


On August 19, 2004, Lifecore issued variable rate industrial revenue bonds (“IRBs”).  These IRBs were assumed by Landec in the acquisition of Lifecore (see Note 2). The IRBs are collateralized by a bank letter of credit which is secured by a first mortgage on the Company’s facility in Chaska, Minnesota. In addition, the Company pays an annual remarketing fee equal to 0.125% and an annual letter of credit fee of 0.75%. The maturities on the IRBs are held in a sinking fund account, recorded in Other Current Assets in the accompanying Consolidated Balance Sheets, and are paid out each year on September 1st.