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Lines of Credit and Paycheck Protection Plan Loan | 12 Months Ended
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May 02, 2021
Debt Disclosure [Abstract] |
Lines of Credit and Paycheck Protection Plan Loan |
1 1. | LINES OF CREDIT AND PAYCHECK PROTECTION PLAN LOAN
Revolving Credit Agreement – United States Overall Our Credit Agreement (“Credit Agreement”) with Wells Fargo Bank, N.A. (“Wells Fargo”) provides a revolving loan commitment of $30 million, is set to expire on August 15, 2022, and allows us to issue letters of credit not to exceed $1 million. Interest was charged under the Credit Agreement at a rate (applicable interest rate of 1.71% and 1.75% as of May 2, 2021, and May 3, 2020, respectively) as a variable spread over LIBOR based on our ratio of debt to EBITDA. Outstanding borrowings are secured by a pledge of 65% of the common stock of Culp International Holdings, Ltd. (a subsidiary located in the Cayman Islands). As a result of the COVID-19 global pandemic and the uncertainty relating to the unknown duration and overall effect on the company, we proactively took a precautionary measure and borrowed the maximum amount available from this line of credit during the fourth quarter of fiscal 2020. Consequently, we had outstanding borrowings of $29.8 million under the Credit Agreement as of May 3, 2020. During June 2020, we repaid the entire $29.8 million outstanding balance and there were no additional borrowings made during fiscal 2021. As a result, there were no borrowing outstanding pursuant to the Credit Agreement as of May 2, 2021. As of May 2, 2021, and May 3, 2020, there were $275,000 and $250,000, respectively, of outstanding letters of credit provided by the Credit Agreement. As of May 2, 2021, we had $725,000 remaining for the issuance of additional letters of credit. Seventh Amendment to the Credit Agreement Effective June 30, 2020, we entered into a Seventh Amendment to our Credit Agreement (the “Seventh Amendment”) which includes provisions that (i) modify the method for calculating the company’s debt to EBITDA covenant under the Credit Agreement solely during the temporary period beginning on the date of the Seventh Amendment and ending on the Rate Determination Date (as defined in the Credit Agreement), following the end of the company’s fiscal 2021 fourth quarter (such temporary period, the “Modification Period,”), and (ii) amend the pricing matrix used to determine the interest rate payable on loans made under the Credit Agreement solely during the Modification Period. Specifically, the Seventh Amendment provides that during the Modification Period, the company’s ratio of debt to EBITDA shall be determined by excluding the fourth quarter of fiscal 2020 from the calculation thereof, such that the ratio shall be determined using the four most recent quarterly periods other than (i.e., excluding) the fourth quarter of fiscal 2020, rather than calculating on a rolling four-quarter basis. It further provides that during the Modification Period, the Applicable Margin (as defined in the Credit Agreement) set forth in the pricing matrix is increased to 1.6% for price level I, 2.05% for price level II, 2.5% for price level III, and 3.0% for price level IV. Additionally, the Seventh Amendment (i) changes the capital expenditure covenant by reducing permitted annual capital expenditures to $10 million during fiscal year 2021, (ii) changes the liens and other indebtedness covenant to reduce the permitted amount of allowable liens and other indebtedness to 5% of consolidated net worth, and (iii) adds a new covenant that prohibits the company, solely during the Modification Period, from paying dividends or repurchasing stock in excess of $10 million in the aggregate during the Modification Period. Revolving Credit Agreements – China Operations Denominated in Chinese Yuan Renminbi (RMB) We have an unsecured credit agreement denominated in RMB with a bank located in China that provides for a line of credit of up to 40 million RMB ($6.2 million USD as of May 2, 2021). This agreement has an interest rate determined by the Chinese government at the time of borrowing and is set to expire on December 1, 2021. As of May 3, 2020, there were outstanding borrowings under this agreement totaling $1.0 million at an applicable interest rate of 2.41%. During June 2020, we repaid the entire $1.0 million and there were no additional borrowings made during fiscal 2021. As a result, there were no borrowings outstanding under this agreement as of May 2, 2021. Denominated in United States Dollar (USD) We have an unsecured credit agreement denominated in USD with another bank located in China that provides for a line of credit up to $2 million USD. This agreement has an interest rate determined by the Chinese government at the time of borrowing and expired on July 7, 2021. There were no borrowings outstanding under this agreement as of May 2, 2021. We are currently in the process of renewing this agreement. We expect the renewal will be completed during the second quarter of fiscal 2022. Small Business Administration - Paycheck Protection Program On April 15, 2020, we received a loan of $7.6 million (the “Loan”) pursuant to the U.S. Small Business Administration (the “SBA”) Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief and Economic Security Act of 2020 (the “CARES Act”). We planned to use the proceeds from the Loan for covered payroll costs, rent, and utilities in accordance with the applicable terms and conditions of the CARES Act. We believed the Loan would enable us to retain more of our employees, maintain payroll and benefits, and make lease and utility payments while producing and supplying critical products for essential businesses during the COVID-19 global pandemic. Following our application and receipt of the Loan, the SBA and U.S. Treasury Department issued new guidance regarding eligibility requirements under the PPP, raising questions regarding the eligibility of publicly traded companies to receive loans under the program. As a result, out of an abundance of caution, we voluntarily repaid the L oan in full on May 13, 2020. Overall Our loan agreements require, among other things, that we maintain compliance with certain financial covenants. As of May 2, 2021, we complied with our financial covenants. Interest paid during fiscal years 2021, 2020, and 2019 was $60,000, $124,000, and $54,000, respectively.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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