Quarterly report pursuant to Section 13 or 15(d)

Note F - Debt

Note F - Debt
6 Months Ended
Mar. 28, 2020
Notes to Financial Statements  
Long-term Debt [Text Block]
Note F—Debt
Credit Facility
May 10, 2016,
we entered into a Fifth Amended and Restated Credit Agreement (as further amended, the “Amended Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”), as Administrative Agent, the Sole Lead Arranger and the Sole Book Runner, and the financial institutions named therein as Lenders, which are Wells Fargo, PNC Bank, National Association and Regions Bank. Our subsidiaries M.J. Soffe, LLC, Culver City Clothing Company (f/k/a Junkfood Clothing Company), Salt Life, LLC, and
LLC (f/k/a Art Gun, LLC) (collectively, the "Borrowers"), are co-borrowers under the Amended Credit Agreement. The Borrowers entered into amendments to the Amended Credit Agreement with Wells Fargo and the other lenders on
November 27, 2017,
March 9, 2018,
October 8, 2018.
November 19, 2019, 
the Borrowers entered into a Consent and Fourth Amendment to the Fifth Amended and Restated Credit Agreement with Wells Fargo and the other lenders set forth therein (the "Fourth Amendment"). The Fourth Amendment, among other things, (i) increased the borrowing capacity under the Amended Credit Agreement from
 million to
 million (subject to borrowing base limitations), (ii) extended the maturity date from
May 21, 2021
November 19, 2024, (
iii) reduced pricing on the revolver and
-in last-out "FILO" borrowing components by
basis points, and (iv) added 
of the fair value of eligible intellectual property to the borrowing base calculation. In addition, the Fourth Amendment amended the definition of Fixed Charge Coverage Ratio to exclude up to
 million of capital expenditures incurred by the Borrowers in connection with the expansion of their distribution facility located within the Town of Clinton, Anderson County, Tennessee.
The Amended Credit Agreement allows us to borrow up to
 million (subject to borrowing base limitations), including a maximum of
 million in letters of credit. Provided that
event of default exists, we have the option to increase the maximum credit to
 million (subject to borrowing base limitations), conditioned upon the Administrative Agent's ability to secure additional commitments and customary closing conditions. 
As of
March 28, 2020
, there was
million outstanding under our U.S. revolving credit facility at an average interest rate of
Our cash on hand combined with the additional borrowing availability under the U.S. credit facility totaled
million. This credit facility includes a financial covenant requiring that if the amount of availability falls below the threshold amounts set forth in the Amended Credit Agreement, our Fixed Charge Coverage Ratio (“FCCR”) (as defined in the Amended Credit Agreement) for the preceding
-month period must
be less than
We were
subject to the FCCR covenant at
March 28, 2020
, because our availability was above the minimum required under the Amended Credit Agreement, but we would have satisfied our financial covenant had we been subject to it. At
March 28, 2020
, and
September 28, 2019
, there was
million and
million, respectively, of retained earnings free of restrictions to make cash dividends or stock repurchases.
The Amended Credit Agreement contains a subjective acceleration clause and a “springing” lockbox arrangement (as defined in ASC
Debt ("ASC
)) whereby remittances from customers will be forwarded to our general bank account and will
reduce the outstanding debt until and unless a specified event or an event of default occurs. We classify borrowings under the Amended Credit Agreement as long-term debt.
See Note Q
Subsequent Events for a discussion of the Fifth Amendment to the Fifth Amended and Restated Credit Agreement entered into on
April 27, 2020.
Promissory Note
October 8, 2018,
we acquired substantially all of the assets of Silk Screen Ink, Ltd. d/b/a SSI Digital Print Services. In conjunction with the acquisition, we issued a promissory note in the principal amount of
million. The promissory note bears interest at
with quarterly installments which began
January 2, 2019,
with the final installment due
October 1, 2021.
As of
March 28, 2020
, there was
 million outstanding on the promissory note.
Honduran Debt
March 2011,
we have entered into term loans and a revolving credit facility with Banco Ficohsa, a Honduran bank, to finance both the operations and capital expansion of our Honduran facilities. Each of these loans is secured by a
-priority lien on the assets of our Honduran operations and is
guaranteed by our U.S. entities. These loans are denominated in U.S. dollars and the carrying value of the debt approximates its fair value. The revolving credit facility requires minimum payments during each
-month period of the
-month terms; however, the loan agreement permits additional drawdowns to the extent payments are made and certain objective covenants are met. The current revolving Honduran debt, by its nature, is
long-term, as it requires scheduled payments each
months. However, as the loan permits us to re-borrow funds up to the amount repaid, subject to certain covenants, and we intend to re-borrow funds, subject to those covenants, the amounts have been classified as long-term debt.
Additional information about these loans and the outstanding balances as of
March 28, 2020
, is as follows (in thousands):
March 28,
Revolving credit facility established March 2011, weighted average interest at 6.6% expiring August 2025
Term loan established November 2014, interest at 6.0%, payable monthly with a six-year term
Term loan established June 2016, interest at 6.0%, payable monthly with a six-year term
Term loan established October 2017, interest at 6.0%, payable monthly with a six-year term