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Note 6 - Debt | 12 Months Ended
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May 29, 2016
Notes to Financial Statements |
Debt Disclosure [Text Block] |
6. | Debt
Long-term debt consists of the following (in thousands):
|  | May 29, 2016 |  |  | May 31, 2015 |
Real property 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 |  | $ | 14,167 |  |  | $ | 15,172 |
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 |  |  | 5,904 |  |  |  | 7,705 |
Capital equipment loan with GE Capital; due in monthly principal and interest payments of $95,120 through July 17, 2019 with interest based on a fixed rate of 3.68% per annum |  |  | 5,558 |  |  |  | 6,476 |
Capital equipment loan with GE Capital; due in monthly principal and interest payments of $55,828 through December 1, 2019 with interest based on a fixed rate of 3.74% per annum |  |  | 3,375 |  |  |  | 3,907 |
Capital equipment loan with Bank of America (“BofA”); due in monthly principal and interest payments of $68,274 through June 28, 2020 with interest based on a fixed rate of 2.79% per annum |  |  | 3,158 |  |  |  | 3,819 |
Real property loan agreement with GE Capital ; due in monthly principal payments of $46,000 through March 1, 2026, plus interest payable monthly at LIBOR plus 2.25% per annum |  |  | 7,622 |  |  |  | — |
Capital equipment loan with GE Capital; due in monthly principal payments of $122,000 through March 1, 2021, plus interest payable monthly at LIBOR plus 2.25% per annum |  |  | 8,873 |  |  |  | — |
Capital equipment loan with BofA; due in monthly principal and interest payments of $75,000 through November 27, 2020 with interest based on a fixed rate of 2.92% per annum |  |  | 3,940 |  |  |  | — |
Term note with BMO Harris Bank N.A. (“BMO Harris”); due in monthly principal payments of $250,000 through May 23, 2016, plus interest payable monthly at LIBOR plus 2% per annum |  |  | — |  |  |  | 3,000 |
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 (0.59% and 0.31% at May 29, 2016 and May 31, 2015, respectively) |  |  | 2,065 |  |  |  | 2,440 |
Total |  |  | 54,662 |  |  |  | 42,519 |
Less current portion |  |  | (8,048 | ) |  |  | (8,353 | )
Long-term portion |  | $ | 46,614 |  |  | $ | 34,166 |
The future minimum principal payments of the Company’s debt for each year presented are as follows (in thousands):
|  |  |  |  | GE |  |  |  |  |  |  |  |  |  |
|  | GE RE Loans |  |  | M&E Loans |  |  | BofA Loans |  |  | IRB |  |  | Total |
FY 2017 |  |  | 1,431 |  |  |  | 4,686 |  |  |  | 1,541 |  |  |  | 390 |  |  |  | 8,048 |
FY 2018 |  |  | 1,474 |  |  |  | 4,829 |  |  |  | 1,585 |  |  |  | 400 |  |  |  | 8,288 |
FY 2019 |  |  | 1,518 |  |  |  | 4,975 |  |  |  | 1,631 |  |  |  | 410 |  |  |  | 8,534 |
FY 2020 |  |  | 1,564 |  |  |  | 5,541 |  |  |  | 1,678 |  |  |  | 425 |  |  |  | 9,208 |
FY 2021 |  |  | 1,613 |  |  |  | 3,679 |  |  |  | 663 |  |  |  | 440 |  |  |  | 6,395 |
Thereafter |  |  | 14,189 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 14,189 |
Total |  | $ | 21,789 |  |  | $ | 23,710 |  |  | $ | 7,098 |  |  | $ | 2,065 |  |  | $ | 54,662 |
On July 17, 2014, Apio entered into an amendment with GE Capital, which amended the revolving line of credit dated April 23, 2012 among the parties. Under the amendment, the revolving line of credit increased from $25.0 million to $40.0 million, the interest rate was reduced from LIBOR plus 2.0% to LIBOR plus 1.75%, and the term was extended to July 17, 2019, among other changes. The availability under the revolving line of credit is based on the combination of the eligible accounts receivable and eligible inventory (availability was $22.6 million at May 29, 2016). Apio’s revolving line of credit has a fee of 0.375% per annum on the unused amount. At May 29, 2016, Apio had $3.5 million outstanding under its revolving line of credit. As of May 31, 2015, there was no outstanding balance under Apio’s revolving line of credit. Also on July 17, 2014, Apio entered into a new equipment loan with GE Capital whereby Apio can borrow up to $25.0 million based on eligible equipment purchases between August 1, 2012 and August 31, 2015. Each borrowing under this new equipment loan has a five year term with a seven year amortization period. On August 28, 2014, Apio borrowed $7.1 million under the new equipment loan at a fixed rate of 3.68%. On November 24, 2014, Apio borrowed an additional $4.1 million under the new equipment loan at a fixed rate of 3.74%. This loan was terminated upon entering into the commitment letter with GE Capital on May 15, 2015. On May 15, 2015, GE Capital and Apio entered into a commitment letter, pursuant to which GE Capital committed to lend Apio up to approximately $14.7 million in equipment financing and approximately $7.7 million in real property financing. The equipment loan and the real property loan will be made pursuant to existing loan agreements dated as of April 23, 2012, as amended May 17, 2013 and July 17, 2014. The equipment loan is available to finance purchases of equipment between May 1, 2015 and June 30, 2017. The real property loan will be used to finance the expansion of Apio’s facility in Hanover, PA. On February 26, 2016, the Company borrowed $9.1 million under the equipment loan at a rate of LIBOR plus 2.25% with a term of five years and $7.7 million under the real property loan also at a rate of LIBOR plus 2.25% with a term of ten years. 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 Capital real estate and equipment loans are guaranteed by Landec, and Landec has pledged its equity interest in Apio as collateral under the line of credit agreement. The GE Debt Agreements contain customary covenants, such as limitations on the ability to (1) incur indebtedness or grant liens or negative pledges on Apio’s assets; (2) make loans or other investments; (3) pay dividends, sell stock or repurchase stock or other securities; (4) sell assets; (5) engage in mergers; (6) enter into sale and leaseback transactions; or (7) make changes in Apio’s corporate structure. In addition, Apio must maintain a minimum fixed charge coverage ratio of 1.10 to 1.0 if the availability under its line of credit falls below $12.0 million. Apio was in compliance with all financial covenants as of May 29, 2016 and May 31, 2015. On May 15, 2015, Apio and BofA entered into a commitment letter and loan agreement, pursuant to which Apio will be permitted to borrow up to $15.0 million to finance equipment purchases made between October 1, 2014 and April 30, 2016 (the “BofA Loan”). Each borrowing under the BofA Loan will have a five-year term and a fixed interest rate based on the 2.5-year swap rate at the time of borrowing. Borrowings will be secured by equipment financed with proceeds of the BofA Loan. In addition, on May 15, 2015, Landec and BofA entered into a Guaranty, pursuant to which Landec guaranteed Apio’s payment obligations under the BofA Loan. On May 29, 2015, Apio borrowed $3.8 million under this equipment loan at a fixed rate of 2.79%. On November 27, 2015, Apio borrowed $4.2 million under this equipment loan at a fixed rate of 2.92%. During fiscal year 2016, Apio capitalized $200,000 of loan origination fees from new real property and equipment loans and/or amendments with GE Capital and BofA. During fiscal year 2015, Apio capitalized $397,000 of loan origination fees from new real property and equipment loans and/or amendments with GE Capital and BofA. No loan origination fees were capitalized in fiscal year 2014. Amortization of loan origination fees for Apio recorded to interest expense for fiscal years 2016, 2015 and 2014 were $293,000, $206,000 and $187,000, respectively. Unamortized loan origination fees were $1.1 million and $1.2 million at May 29, 2016 and May 31, 2015, respectively, and are included in other assets in the Consolidated Balance Sheets. On May 23, 2012, Lifecore entered into two financing agreements with BMO Harris Bank N.A. and/or its affiliates (“BMO Harris”):
(1) | 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”). The Term Loan was paid off on May 2, 2016.
(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 IRBs described above.
On May 22, 2015, Lifecore entered into a Credit and Security Agreement (the “Credit Agreement”) with BMO Harris which includes (a) a two-year, $10.0 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 $9.6 million at May 29, 2016) and with no unused fee and as of May 29, 2016 no amounts were outstanding under the line of credit. On August 19, 2004, Lifecore issued variable rate industrial revenue bonds (“IRBs”). These IRBs were assumed by Landec in the acquisition of Lifecore. 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 1 st .

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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 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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