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Debt
3 Months Ended
Jul. 25, 2014
Debt Disclosure [Abstract]  
Debt
Debt
On January 2, 2014, we entered into a $750,000 Revolving Credit Facility Amended and Restated Credit Agreement (“credit agreement”). The credit agreement represents a syndicated secured revolving credit facility under which up to $750,000 will be available, with a letter of credit sub-facility of $50,000, and an accordion option to increase the revolving credit commitment to $1,050,000. It is secured by the stock pledges of certain material subsidiaries. This agreement replaced our existing variable-rate revolving credit facility. Borrowings under the credit agreement bear interest, at Borrower’s option, at a rate based on LIBOR or the Base Rate, plus a margin based on the Leverage Ratio, ranging from 0.00% to 2.75% per annum for LIBOR, and ranging from 0.00% to 1.75% per annum for Base Rate. The Base Rate means for any day, a fluctuating per annum rate of interest equal to the highest of (i) the Federal Funds Open Rate, plus 0.50%, (ii) the Prime Rate, or (iii) the Daily LIBOR Rate, plus 1.00%. We are also required to pay a commitment fee of 0.15% per annum to 0.25% per annum of the average unused portion of the total lender commitments then in effect. We incurred financing costs of $2,064 associated with this refinancing, which along with previous unamortized debt financing costs of $760 are being amortized over five years.
On July 23, 2014, we entered into a First Amendment to the Credit Agreement. The terms of the credit agreement that were amended related to: (a) an increase to the Maximum Leverage Ratio for the period starting July 25, 2014, through July 22, 2016, (b) certain restricted payment requirements related to share repurchases and (c) an update to the Pricing Grid, which determines variable pricing and fees, to reflect changes in the allowable maximum leverage ratio. We incurred financing costs of $1,279 associated with this amendment, which are being amortized over 24 months using the straight line method, which approximates the effective interest method.
Our credit agreement contains financial and other various affirmative and negative covenants that are typical for financings of this type. Our credit agreement contains financial covenants that require us to maintain a specified minimum coverage ratio and maximum leverage ratio at July 25, 2014, of (1) a minimum coverage ratio of not less than 3.00 to 1.00; and (2) a maximum leverage ratio that may not exceed 4.50 to 1.00. As of July 25, 2014, our coverage ratio was 20.89, and our leverage ratio was 3.69, as defined in our credit agreement. A breach of any of these covenants could result in a default under our credit agreement, in which all amounts under our credit agreement may become immediately due and payable, and all commitments under our credit agreement to extend further credit may be terminated. There were no covenant violations during the three months ended July 25, 2014.
Our effective interest rate for the credit agreement was 1.66% and 1.47% for the three months ended July 25, 2014, and July 26, 2013, respectively. Of our total letter of credit sub-facility, $11,024 was used for certain stand-by letters of credit at July 25, 2014. The credit agreement has a maturity date of January 1, 2019.
As of July 25, 2014, we had $458,836 outstanding on the credit agreement. The primary purposes of the credit agreement are for trade and stand-by letters of credit in the ordinary course of business as well as working capital, refinancing of existing indebtedness, if any, capital expenditures, joint ventures and acquisitions, stock repurchases and other general corporate purposes. A one percent increase in the benchmark rate used for our credit facility would increase our annual interest expense by approximately $4,652 assuming the $458,836 outstanding at the end of the first quarter of fiscal 2015 was outstanding for the entire year.
In the three months ended July 25, 2014, we obtained a $3,000 Research and Development Investment Loan ("R&D Loan") from the State of Ohio. The R&D Loan has a term of seven years, a variable interest rate as low as 2.00% and certain available tax incentives provided we meet certain requirements related to headcount, wages and capital expenditures. The R&D Loan was used to defray the purchase cost of machinery and equipment for our test kitchen.