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Lines of Credit | 9 Months Ended
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Jan. 26, 2025
Debt Disclosure [Abstract] |
Lines of Credit | 11. Lines of Credit Revolving Credit Agreement – United States Culp, Inc., as borrower (the “borrower”), and Read, as guarantor (the “Guarantor”), are parties to an agreement (the "ABL Credit Agreement") by and among the borrower, the Guarantor and Wells Fargo Bank, National Association, as the lender (the “Lender”), to establish an asset-based revolving credit facility (the “ABL Facility”). The proceeds from the ABL Facility may be used to pay fees and expenses related to the ABL Facility and provide funding for ongoing working capital and general corporate purposes. The ABL Facility may be used for revolving credit loans and letters of credit from time to time up to a maximum principal amount of $35.0 million, subject to the limitations described below. The ABL Facility contains a sub-facility that allows the company to issue letters of credit in an aggregate amount not to exceed $1.0 million. The amount available under the ABL Facility is limited by a borrowing base consisting of certain eligible accounts receivable and inventory, reduced by specified reserves, as follows: • 85% of eligible accounts receivable, plus • the least of: o the sum of: ▪ lesser of (i) 65% of eligible inventory valued at cost based on a first-in first-out basis (net of intercompany profits) and (ii) 85% of the net-orderly-liquidation value percentage of eligible inventory, plus ▪ the least of (i) 65% of eligible in-transit inventory valued at cost based on a first-in first-out basis (net of intercompany profits), (ii) 85% of the net-orderly-liquidation value percentage of eligible in-transit inventory, and (iii) $5.0 million, plus ▪ the lesser of (i) 65% of eligible raw material inventory valued at cost based on a first-in first-out basis (net of intercompany profits) and (ii) 85% of the net-orderly-liquidation value percentage of eligible raw material inventory In each case, the net-orderly-liquidation value is calculated based on the lower of (i) a first-in first-out basis and (ii) market value, and is (A) net of intercompany profits, (B) net of write-ups and write-downs in value with respect to foreign currency exchange rates and (C) consistent with most recent appraisals received and acceptable to Lender. o $22.5 million; and o An amount equal to 200% of eligible accounts receivable, minus • applicable reserves. The ABL Facility permits both base rate borrowings and borrowings based upon daily simple SOFR (the secured overnight financing rate administered by the Federal Reserve Bank of New York (or its successor)). Borrowings under the ABL Facility bear interest at an annual rate equal to daily simple SOFR plus 150 basis points (if the average monthly excess availability under the ABL Facility is greater than 50%) or 175 basis points (if the average monthly excess availability under the ABL Facility is less than or equal to 50%) or 50 basis points above base rate (if the average monthly excess availability under the ABL Facility is greater than 50%) or 75 basis points above base rate (if the average monthly excess availability under the ABL Facility is less than or equal to 50%), as applicable, with a fee on unutilized commitments at an annual rate of 37.5 basis points and an annual servicing fee of $12,000. The ABL Facility ma tures on January 19, 2026. The ABL Facility may be prepaid from time to time, in whole or in part, without a prepayment penalty or premium. In addition, customary mandatory prepayments of the loans under the ABL Facility are required upon the occurrence of certain events including, without limitation, outstanding borrowing exposures exceeding the borrowing base and certain dispositions of assets outside of the ordinary course of business. Accrued interest is payable monthly in arrears. The borrower’s obligations under the ABL Facility (and certain related obligations) are guaranteed by the Guarantor. In addition, the ABL Credit Agreement requires that the borrower's future domestic subsidiaries guarantee the ABL Facility on a senior secured basis (such future domestic subsidiaries, together with the Guarantor and the borrower, the "Loan Parties"). The borrower's obligations under the ABL Facility are secured by first priority liens and other security interests on all assets of the Loan Parties, subject to certain exceptions and permitted liens. Cash Dominion. Under the terms of the ABL Facility, if (i) an event of default has occurred or (ii) excess borrowing availability under the ABL Facility (based on the lesser of $35.0 million and the borrowing base) (the “Excess Availability”) falls below $7.0 million, at such time, the Loan Parties will become subject to cash dominion, which will require prepayment of loans under the ABL Facility with the cash deposited in certain deposit accounts of the Loan Parties, including a concentration account, and will restrict the Loan Parties’ ability to transfer cash from their concentration account. Such cash dominion period (a “Dominion Period”) shall end when Excess Availability shall be equal to or greater than $7.0 million for a period of 60 consecutive days and no event of default is continuing. Financial Covenants. The ABL Facility contains a springing covenant requiring that the company’s fixed charge coverage ratio be no less than 1.10 to 1.00 during any period that (i) an event of default has occurred or (ii) Excess Availability under the ABL Facility falls below $5.25 million. Such compliance period shall end when Excess Availability shall be equal to or greater than $5.25 million for a period of 60 consecutive days and no event of default is continuing. Affirmative and Restrictive Covenants. The ABL Credit Agreement governing the ABL Facility contains customary representations and warranties, affirmative and negative covenants (subject, in each case, to exceptions and qualifications), and events of defaults, including covenants that limit the company’s ability to, among other things: • incur additional indebtedness; • make investments; • pay dividends and make other restricted payments; • sell certain assets; • create liens; • consolidate, merge, sell or otherwise dispose of all or substantially all of the company’s assets; and • enter into transactions with affiliates. Overall Interest is charged at a rate (applicable interest rate of 5.80%, 6.81%, and 6.81% as of January 26, 2025, January 28, 2024, and April 28, 2024, respectively) calculated using the Applicable Margin over SOFR based on the borrower's excess availability under the ABL Facility, as defined in the ABL Credit Agreement. There were $925,000, $535,000, and $535,000 of outstanding letters of credit provided by the ABL Credit Agreement as of January 26, 2025, January 28, 2024, and April 28, 2024, respectively. As of January 26, 2025, the borrower had $75,000 remaining for the issuance of additional letters of credit under the ABL Credit Agreement. There were no borrowings outstanding under the ABL Credit Agreement as of January 26, 2025, January 28, 2024, and April 28, 2024, respectively. As of January 26, 2025, ou r available borrowings calculated under the provisions of the ABL Credit Agreement totaled $23.2 million of which we borrowed $6.0 million from January 27, 2025, through March 7, 2025. Denominated in Chinese Yuan Renminbi (“RMB”) Agricultural Bank of China - RMB Unsecured Credit Agreement Effective March 20, 2024, we entered into an unsecured credit agreement denominated in RMB that provides for a line of credit up to 29.0 million RMB ($4.0 million USD as of January 26, 2025). Of this 29.0 million RMB line of credit, 9.6 million RMB, 9.7 million RMB, and 9.7 million RMB expire on March 7, 2 025, March 8, 2025, and March 9, 2025, respectively. Interest charged under this agreement is based on the Loan Prime Rate ("LPR") in China minus 50 basis points at the time of borrowing, which represents 2.95%. As of January 26, 2025, the amount outstanding was 29.0 million RMB ($4.0 million USD) which we expect to repay during the fourth quarter when the line of credit expires based on the dates noted in the preceding paragraph. Currently, we are negotiating the terms for a renewal of this agreement, which is expected to be finalized during the fourth quarter of fiscal 2025, and such terms are not expected to adversely affect our liquidity. Bank of China - RMB Credit Agreement Effective November 5, 2024, we entered into a credit agreement (“Agreement”) denominated in RMB that provides 10.0 million RMB ($1.4 million USD as of January 26, 2025) for an unsecured working capital loan and 25.0 million RMB ($3.5 million USD as of January 26, 2025) for letters of credit, guarantees, and other financing arrangements secured by trade accounts receivable associated with the company’s operations located in China. The working capital loan and letters of credit expire on November 6, 2025, and July 31, 2025, respectively. Interest is charged under the Agreement based on the LPR in C hina minus 50 basis points at the time of borrowing which represents 2.60%. As of January 26, 2025, the amount outstanding under the working capital loan, which represents the total amount available, was 10.0 million RMB ($1.4 million USD). The working capital loan was used to fund certain working capital expenditures incurred in China. As of January 26, 2025, there were no outstanding for letters of credit under the Agreement. Overall Our loan agreements require, among other things, that we maintain compliance with certain financial covenants. As of January 26, 2025, we were in compliance with our financial covenants. Interest payments of $16,000 were made during the nine-month period ended January 26, 2025. There were no interest payments during the nine-month period ended January 28, 2024.

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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/disclosureRef -Topic 470 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147481544/470-10-50-6 Reference 2: 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