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Long-term Debt
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Dec. 28, 2013
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Long-term Debt |
Long-term Debt
On June 30, 2010, the Company entered into a Credit Agreement with a regional bank to provide a $20,000,000 line of credit that was to expire on June 30, 2013. This agreement was amended by the bank on August 19, 2011 to extend the maturity date of the Credit Agreement by one additional year to June 30, 2014. In connection with the Palmer acquisition discussed in Note 16, on August 21, 2012, the Company modified the Credit Agreement to increase the limit of the credit facility by $5,000,000 to a maximum of $25,000,000, and extended the maturity date to August 21, 2015. On October 22, 2012, the Company modified this agreement to increase the limit by an additional $5,000,000 to a maximum of $30,000,000. This increase was in effect for one year and the maximum line of credit reverted back to $25,000,000 on October 22, 2013. None of the other provisions of the Credit Agreement were changed as a result of this modification. Interest on the Credit Agreement is calculated using the One Month LIBOR (as defined in the Credit Agreement), plus a pre-defined spread, based on the Company's Total Funded Debt to EBITDA ratio (as defined in the Credit Agreement). Borrowings under the line of credit are limited to an amount equal to a borrowing base calculation that includes eligible accounts receivable, inventories and other non-capital assets.
The Credit Agreement modification on August 21, 2012 also provided for a ten-year term loan in the amount of $22,500,000 that requires equal monthly payments of $187,500 plus interest. In conjunction with the new term loan, to mitigate the variability of the interest rate risk, the Company entered into an interest rate swap contract (the "Palmer swap") on August 21, 2012 with its current bank. The Palmer swap was for an initial notional amount of $22,500,000 with a fixed interest rate of 3.74 percent, and a term of ten years, expiring on August 21, 2022, which is consistent with the maturity of the term loan. The notional amount of the interest rate swap decreases as monthly principal payments are made.
In connection with acquisition of CRI, discussed in Note 16, on August 9, 2013 the Company amended its Credit Agreement for a new ten-year term loan in the amount of $4,033,250, with monthly principal payments customized to account for the 20 year amortization of the real estate assets combined with a 5-year amortization of the equipment assets purchased. In conjunction with the new term loan, to mitigate the variability of interest rate risk, the Company entered into an interest rate swap contract (the "CRI swap") on September 3, 2013. The CRI swap was for an initial notional amount of $4,033,250 with a fixed interest rate of 4.83 percent and runs for ten years to August 19, 2023, which equates to the due date of the term loan. The notional amount of the interest rate swap decreases as monthly principal payments are made.
Although both swap agreements are expected to effectively offset variable interest in the borrowings, hedge accounting will not be utilized. Therefore, changes in their fair value are being recorded in current assets or liabilities, as appropriate, with corresponding offsetting entries to other income (expense). The Company recorded a $301,000 asset and a $450,000 liability for the fair value of the Palmer swap as of December 28, 2013 and December 29, 2012, respectively. During 2012, a portion of the initial change in fair value on the Palmer swap was deemed to be attributable to a cost of underwriting the term loan obtained for the Palmer acquisition, therefore $337,000 of the total change in fair value was classified as an acquisition cost, and the remainder as other income (expense). As of December 28, 2013, the Company recorded an $80,000 liability for the fair value of the CRI swap. During 2013, a portion of the initial change in fair value on the CRI swap was deemed to be attributable to a cost of underwriting the term loan obtained for the CRI Tolling acquisition; therefore $70,000 of the total change in fair value was classified as an acquisition cost, and the remainder as other income (expense). In future periods, the change in fair value will be charged or credited to other income or expense.
Pursuant to the Credit Agreement, the Company was required to pledge all of its tangible and intangible properties, including the acquired assets of Palmer and CRI. Covenants under the Credit Agreement include maintaining a certain Total Funded Debt to EBITDA ratio (as defined in the Credit Agreement), a minimum tangible net worth, and total liabilities to tangible net worth ratio. The Company will also be limited to a maximum amount of capital expenditures per year, which is in line with the Company's currently projected needs. At December 28, 2013, the Company was in compliance with all debt covenants.
The line of credit interest rates were 2.16 percent, 2.21 percent, and 1.78 percent at December 28, 2013, December 29, 2012, and December 31, 2011, respectively. Additionally, the Company is required to pay a fee equal to 0.125 percent on the average daily unused amount of the line of credit on a quarterly basis. No amounts were borrowed on the line of credit as of December 28, 2013 resulting in $25,000,000 available for borrowing under the line of credit at December 28, 2013. Average line of credit borrowings outstanding during fiscal 2013, 2012 and 2011 were $19,860,000, $11,045,000 and $5,663,000 with weighted average interest rates of 1.74 percent, 1.82 percent and 1.73 percent, respectively. The average borrowings for 2013 was determined based on the period the Company had an outstanding balance on the line of credit, which was completely paid in October 2013.
The Company also had one vehicle loan with a bank that was acquired with the acquisition of Palmer (Note 16) and was paid in full during 2013. Monthly installments of $2,039 including principal and interest were due on the loan, expiring April 16, 2015. The interest rate on the vehicle loan was fixed at 0.90 percent. The vehicle loan was secured by the vehicle.
Scheduled maturities of total long-term debt obligations are as follows: 2014 - $2,534,000; 2015 - $2,534,000; 2016 - $2,534,000; 2017 - $2,534,000; 2018 - $2,497,000; and thereafter - $10,806,000.
The Company made interest payments on all credit facilities of $1,202,000 in 2013, $492,000 in 2012 and $114,000 in 2011.
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