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Note 11 - Long-Term Debt

3 Months Ended

Sep. 29, 2013

11. 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 an 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 29, 2013		September 29, 2013			June 30, 2013
ABL Revolver	May 2018		3.2%	$	44,900		$	52,500
ABL Term Loan	May 2018		3.1%		50,000			42,800
Term loan from unconsolidated affiliate	August 2014		3.0%		1,250			1,250
Capital lease obligation	November 2027		4.6%		1,189			1,203
Total debt					97,339			97,753
Current portion of long-term debt					(1,316	)		(65	)
Total long-term debt				$	96,023		$	97,688

ABL Facility

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 consists of a $100,000 revolving credit facility (“ABL Revolver”) and a $50,000 term loan (“ABL Term Loan”). In addition, the Company entered into a $30,000 term loan (“Term B Loan”) which was repaid on January 8, 2013. The Company entered into a First Amendment to Credit Agreement on December 27, 2012 and a Second Amendment to Credit Agreement on June 25, 2013. The ABL Facility, as amended, has a maturity date of May 24, 2018.

The ABL Facility is secured by a first-priority perfected security interest in substantially all property and assets of Unifi, Inc., Unifi Manufacturing, Inc. and its subsidiary guarantors (the “Loan Parties”). It is also secured by a first-priority perfected security interest in all 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; provided, that only 65% of the stock of (or other ownership interests in) first tier controlled foreign corporations is pledged, 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 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. Should excess availability under the ABL Revolver fall below the greater of $10,000 or 20% of the maximum revolver amount, 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. In addition, the ABL Facility contains restrictions on certain payments and investments, including restrictions on the payments of dividends and share repurchases, unless excess availability is greater than $20,000 for the thirty day period prior to the making of such a distribution (as calculated on a pro forma basis as if the payment and any revolving loans made in connection therewith were made on the first day of such period).

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 applicable margin is based on the average quarterly excess availability under the ABL Revolver. 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 an unused line fee under the ABL Revolver of 0.25% to 0.375% of the unused line amount which is paid monthly.

The ABL Term Loan bears interest at LIBOR plus an applicable margin of 2.25%, or the Base Rate plus an applicable margin of 1.25% with interest paid monthly. ABL Term Loan principal payments (if any) are based on the amount that the outstanding balance of the ABL Term Loan exceeds a calculation of eligible machinery and equipment and eligible real property collateral specific to the ABL Term Loan. 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.

Under the terms of the ABL Facility, the Company is required to hedge at least $50,000 of variable interest rate exposure so long as the outstanding principal of all indebtedness having variable interest rates exceeds $75,000.

As of September 29, 2013, the Company was in compliance with all financial covenants, the excess availability under the ABL Revolver was $38,968, the fixed charge coverage ratio was 4.58 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 for $1,250 with its unconsolidated affiliate U.N.F. Industries Ltd. (“UNF”). The loan bears interest at 3% with interest payable semi-annually. The loan does not amortize and has a maturity date of August 30, 2014, at which time the entire principal balance is due.

Capital Lease Obligation

On November 19, 2012, the Company entered into a capital lease with Salem Leasing Corporation for certain transportation equipment. The original amount due under the fifteen year term of the lease is $1,234 and payments are made monthly. The implicit annual interest rate under the lease is approximately 4.6%.

Scheduled Debt Maturities

The following table presents the scheduled maturities of the Company’s outstanding debt obligations for the remainder of fiscal year 2014 and the following fiscal years thereafter:

	Scheduled Maturities on a Fiscal Year Basis
	2014		2015		2016		2017		2018		Thereafter
ABL Revolver	$	—	$	—	$	—	$	—	$	44,900	$	—
ABL Term Loan		—		—		—		—		50,000		—
Capital lease obligation		50		63		66		69		72		869
Term loan from unconsolidated affiliate		—		1,250		—		—		—		—
Total	$	50	$	1,313	$	66	$	69	$	94,972	$	869

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

	September 29, 2013
Balance at beginning of year	$	2,117
Amounts paid related to debt modification		3
Amortization charged to interest expense		(107	)
Balance at end of period	$	2,013

Interest expense consists of the following:

	For the Three Months Ended
	September 29, 2013			September 23, 2012
Interest on ABL Facility	$	853		$	901
Interest on Term B Loan		—			362
Amortization of debt financing fees		107			166
Marked to market adjustment for interest rate swap		140			—
Reclassification adjustment for interest rate swap		155			—
Interest capitalized to Property, plant and equipment, net		(42	)		—
Other		39			15
Total Interest expense	$	1,252		$	1,444

The components of Loss on extinguishment of debt consist of the following:

	For the Three Months Ended
	September 29, 2013		September 23, 2012
Prepayment call premium and other costs for Term B Loan	$	—	$	135
Non-cash charges due to write-off of debt financing fees		—		107
Loss on extinguishment of debt	$	—	$	242