Note J - Long-term Debt

9 Months Ended

Mar. 27, 2020

Notes to Financial Statements

Debt Disclosure [Text Block]

J. Long-term Debt

The Company’s long-term debt represents borrowings made under the credit agreement, as amended, which it entered into with BMO Harris Bank N.A, on

June 29, 2018 (

“Credit Agreement”). The borrowings consist of a term loan component (“Term Loan”) with an interest rate based on LIBOR plus an applicable margin, requiring quarterly principal payments of

$500

and maturing on

March 4, 2026

,

and a revolving loan component (“Revolving Loans”) with a maximum facility of

$50,000.

The borrowings are subject to financial covenants, such as maintaining a maximum allowable ratio of total funded debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”), as defined in the Credit Agreement and subsequent amendments, and are secured by substantially all of the Company’s personal property, including accounts receivable, inventory, machinery and equipment and intellectual property.

On

January 28, 2020,

an amendment to the Credit Agreement was executed to increase such maximum allowable ratio from

3.00

to

1.00

to

4.00

to

1.00

for the quarter ended

December 27, 2019,

5.00

to

1.00

for the quarter ending

March 27, 2020,

4.00

to

1.00

for the quarter ending

June 30, 2020,

3.50

to

1.00

for the quarter ending

September 25, 2020

and

3.00

to

1.00

for quarters ending on or after

December 25, 2020.

The amendment also increased interest rate margins at the higher debt ratio levels. All other terms of the Credit Agreement were substantially unchanged.

The Credit Agreement, including its amendments, is more fully described in the Company’s Annual Report filed on Form

10

-K for

June 30, 2019,

as well as in Item

2

of this quarterly report.

Long-term debt at

March 27, 2020

and

June 30, 2019

consisted of the following:

	March 27, 2020			June 30, 2019
Borrowings under the Credit Agreement
Revolving loans	$	24,110		$	22,666
Term loan (due March 2026)		18,500			19,500
Other		264			325
Subtotal		42,874			42,491
Less: current maturities		(2,000	)		(2,000	)
Total long-term debt	$	40,874		$	40,491

During the

three

quarters ended

March 27, 2020,

the average interest rate was

3.67%

on the Term Loan, and

2.62%

on the Revolving Loans.

Other long-term debt pertains mainly to a financing arrangement in Europe. These liabilities carry terms of

three

to

five

years and implied interest rates ranging from

7%

to

25%.

A total amount of

$54

in principal was paid on these liabilities during the current fiscal year.

As of

March 27, 2020,

the Company’s borrowing capacity on the Revolving Loans under the terms of the Credit Agreement was

$42,427,

and the Company had approximately

$18,317

of available borrowings. In addition to the Credit Agreement, the Company has established unsecured lines of credit that are used from time to time to secure certain performance obligations by the Company.

The Company’s borrowings described above approximate fair value at

March 27, 2020

and

June 30, 2019.

If measured at fair value in the financial statements, long-term debt (including the current portion) would be classified as Level

2

in the fair value hierarchy.

On

April 22, 2019,

the Company entered into an interest rate swap arrangement with Bank of Montreal, with an initial notional amount of

$20,000

and a maturity date of

March 4, 2026

to hedge the Term Loan. The notional amount decreases as the Term Loan balance decreases due to repayments of principal. As of

March 27, 2020,

the notional amount was

$18,500.

This swap has been designated as a cash flow hedge under ASC

815,

Derivatives and Hedging. This swap is included in the disclosures in Note O, Derivative Financial Instruments.