Debt

3 Months Ended

Oct. 01, 2011

8. DEBT

Outstanding long-term debt obligations are as follows:


			October 1,			July 2,
	Maturities		2011			2011

Term loan		2016	$	11,921		$	12,571
Revolving credit facility		2013		—			—

Total long-term debt				11,921			12,571
Less current maturites				(2,600	)		(2,600	)

Total long-term debt, net of current portion			$	9,321		$	9,971

Interest on the senior term loan is payable quarterly, calculated on either a base or LIBOR rate per annum, at the Company’s option (5.75% at October 1, 2011 and July 2, 2011). The Credit Agreement requires payments on the senior term loan of equal quarterly principal installments of $650, to be paid on the first day of each fiscal quarter, with the balance of the senior term loan due at maturity.

The senior term loan and any borrowings under the revolving credit facility are secured by a first lien on substantially all assets of the Company. At October 1, 2011, the Company was required to maintain a Consolidated Total Leverage (“CTL”) not to exceed 3.0 to 1.0 and a Consolidated Fixed Charge Coverage (“FCC”) ratio of no less than 1.1 to 1.0. The CTL is calculated as the ratio of the Company’s outstanding debt and letters of credit to the Company’s trailing twelve months earnings before interest, income taxes, depreciation, amortization, and other non-cash expenses (“EBITDA”). The FCC ratio is calculated as the ratio of the Company’s EBITDA less certain capitalized expenditures to the sum of the Company’s current maturities of long-term debt and the amount of cash paid for interest on a trailing twelve month basis. The Credit Agreement also contains other covenants, including restrictions on additional debt, dividends, capital expenditures, acquisitions and dispositions. At October 1, 2011, the Company was not in compliance with the CTL and FCC ratio covenant requirements. On November 9, 2011, the Company entered into the ninth amendment to its Credit Agreement (the “Ninth Amendment”). The Ninth Amendment waives the CTL and FCC ratio defaults by the Company with its current financial covenants as of October 1, 2011 and modifies the computation of available borrowing base. The Ninth Amendment also amends the Credit Agreement to require that 100% of any net cash proceeds received as a result of any equity issuances be applied towards the prepayment of the term loan and it amends the banking fees to be paid by the Company when the Company’s CTL ratio is more than 2.5 to 1.0.

Under the revolving credit facility, the Company has a maximum borrowing capacity based on eligible accounts receivable and inventory, not to exceed $20,000. At October 1, 2011, there was $5,404 borrowing availability after the borrowing base was adjusted for $4,399 in outstanding letters of credit. At October 1, 2011 and July 2, 2011 there were no outstanding borrowings under the revolving credit facility.

The Company entered into a LIBOR interest rate cap transaction with respect to its senior term loan, with a notional amount of $20,000 (the “Interest Rate Cap Transaction”). The Interest Rate Cap Transaction became effective on August 15, 2008 and will terminate on April 2, 2012. Under the terms of the Interest Rate Cap Transaction, the counterparty will pay to the Company, on the first business day of each quarter, an amount equal to the greater of $0 and the product of (i) the outstanding notional amount of the Interest Rate Cap Transaction during the prior quarter, (ii) the difference between the three month LIBOR rate at the beginning of the prior quarter and 3.70% and (iii) the quotient of the number of days in the prior quarter over 360. The notional amount of the Interest Rate Cap Transaction amortized $4,500 on October 3, 2011, and $5,000 on October 1, 2010, 2009 and 2008 and the remaining $500 upon termination on April 2, 2012. As long as the counterparty makes the payments required under the Interest Rate Cap Transaction, the Company will have a maximum annual LIBOR interest rate exposure equal to the sum of 3.70% and a margin of 375 to 500 basis points, based on its CTL ratio, for the term of the Interest Rate Cap Transaction. At October 1, 2011 the Interest Rate Cap Transaction has an estimated fair market value of $0.

The Company’s U.K. subsidiary has debenture agreements used to facilitate issuances of letters of credit and bank guarantees of £6,000 ($9,352) at October 1, 2011 and £6,000 ($9,645) at July 2, 2011. This facility was secured by substantially all of the assets of the Company’s U.K. subsidiary and by a cash deposit of £3,630 ($5,658) at October 1, 2011 and £3,301 ($5,306) at July 2, 2011, which is recorded as restricted cash on the consolidated balance sheets. At October 1, 2011, there was £5,376 ($8,379) outstanding under stand-by letters of credit and bank guarantees under the debenture agreements. At July 2, 2011, there was £3,222 ($5,180) outstanding under stand-by letters of credit and bank guarantees under the debenture agreements. There are no amounts outstanding under the U.K. subsidiary’s debenture agreements at October 1, 2011 or July 2, 2011.