Note 5 - Long-term Debt

6 Months Ended

Aug. 27, 2017

Notes to Financial Statements

Debt Disclosure [Text Block]

5

.

LONG-TERM DEBT

On

January 15, 2016,

the Company entered into a

three

-year revolving credit facility agreement (the “Credit Agreement”) with HSBC Bank USA, National Association (“HSBC Bank”). This Credit Agreement replaced the Amended Credit Agreement that the Company entered into with PNC Bank in

February 2014.

The Credit Agreement provides for loans up to

$75,000

and letters of credit up to

$2,000.

The Company borrowed

$75,000

under the Credit Agreement and obtained letters of credit in the initial principal amount of

$1,075.

During the

2016

fiscal year, the Company made

no

payments in accordance with the Credit Agreement. During the

2017

fiscal year, the Company paid a total of

$3,000

in accordance with the Credit Agreement; and, during the

2018

fiscal year

first

quarter ended

May 28, 2017,

the Company paid a quarterly installment of

$750.

The remaining

$71,250

is payable in

seven

quarterly installments of

$750

each, with the remaining amount outstanding under the Credit Agreement payable on

January 26, 2019.

Pursuant to an amendment entered into on

April 21, 2017,

the

second

and

third

installments due in the

2018

fiscal year were increased from

$750

to

$1,000.

     

Borrow

ings under the Credit Agreement bear interest at a rate equal to, at the Company’s option, either (a) a fluctuating rate per annum (computed on the basis of a year of

365

or

366

days, as the case

may

be, and actual days elapsed) equal to the Base Rate (as defined in the Credit Agreement), such interest rate to change automatically from time to time effective as of the effective date of each change in the Base Rate or (b) a rate per annum (computed on the basis of a year of

360

days and actual days elapsed) equal to the one, two,

three

or

six

month LIBOR plus

1.15%.

Under the Credit Agreement, the Company is also obligated to pay to HSBC Bank a nonrefundable commitment fee equal to

0.10%

per annum (computed on the basis of a year of

360

days and actual days elapsed) multiplied by the average daily difference between the amount of (i) the revolving credit commitment plus the letter of credit facility and (ii) the revolving facility usage, payable quarterly in arrears.

On

January 5, 2017,

the Company entered into an amendment to the Credit Agreement (the “Amended Credit Agreement”) with HSBC Bank that modified the LIBOR interest rate and certain covenants. Under the Amended Credit Agreement, the LIBOR interest rate will be equal to the one, two, three, or

six

month LIBOR plus (a)

1.65%

through

April 5, 2017, (

b)

1.90%

from

April 6, 2017

through

July 5, 2017, (

c)

2.15%

from

July 6, 2017

through

October 5, 2017

and (d)

2.65%

after

October 5, 2017.

The Credit Agreement and the Amended Credit Agreement contain certain customary affirmative and negative covenants, including customary financial covenants. The covenants require the Company to (a) maintain a gross leverage charge ratio

not

to exceed

4.25

to

1.00

for the fiscal quarter ending

August 27, 2017

and

3.75

to

1.00

each fiscal quarter thereafter, (b) maintain a minimum fixed charge coverage ratio of

0.50

to

1.00

for the fiscal quarter ending

August 27, 2017

and

1.10

to

1.00

for each fiscal quarter thereafter and (c) maintain a minimum quick ratio of

2.00

to

1.00.

In addition, the Company must maintain minimum domestic liquid assets of

$10,000

in cash held at all times in a domestic deposit account. The Company is in compliance with all the financial covenants.

During the quarter end

May 28, 2017,

the Company entered into

two

amendments to the Credit Agreement with HSBC Bank that modified the financial covenants and relaxed loan repayment requirements upon repatriation of foreign funds in the

first

and

second

quarters of fiscal year

2018.

The amendments modified the definition of EBITDA to exclude

$4,600

of restructuring charges in connection with the consolidation of the Company

’s Nelco Products, Inc. and Neltec, Inc. Business Units in the United States in fiscal year

2018,

reduced the maximum gross leverage charge ratio to

1.10

to

1.00

and reduced the fixed charge coverage ratio to

0.20

to

1.00

for the first,

second

and

third

quarters of the

2018

fiscal year.

At

August 27, 2017,

$70,250

of indebtedness was outstanding under the Credit Agreement with an interest rate of

3.41%.

Interest expense recorded under the Credit Agreement and the Amended Credit Agreement was

$603

and

$1,113

during the

13

-week and

26

-week periods ended

August 27, 2017,

respectively, and

$334

and

$667

during the

13

-week and

26

-week periods ended

August 28, 2016,

respectively.