|9 Months Ended|
Oct. 01, 2011
In August 2010, the Company executed a Loan and Security Agreement (the "Loan Agreement") and other definitive documentation for a $35 million secured credit facility (the "Facility"). Silicon Valley Bank ("Bank") is the lender under the Facility. The Facility is comprised of a term loan in the original principal amount of $25 million and a revolving line of credit with availability up to $10 million. The Facility has a final maturity date of June 30, 2014, and borrowings under the Facility bear interest, at the election of the Company, at LIBOR (with a floor of 1.25%) plus a margin of from 2.00% to 3.00% per annum, or at the Wall Street Journal Prime Rate plus a margin of from 1.00% to 2.00% per annum, based upon the Company's maximum funded debt ratio. An unused revolving line fee of 0.375% per annum is payable on the undrawn committed amount of the revolving line of credit. Interest on outstanding borrowings under the term loan and the revolving line of credit is payable no less than quarterly and the outstanding principal of the term loan is amortized over four years and payable quarterly, with any outstanding amount under the Facility to be paid in full on the final maturity date. Borrowings under the Facility are secured by liens over all assets of the Company, including shares of stock in each of the Company's subsidiaries. Ten of the Company's subsidiaries are acting as co-borrowers under the Facility.
The Loan Agreement requires the Company to comply with a number of restrictive covenants, including financial covenants related to maximum funded debt to consolidated EBITDA, liquidity, and consolidated fixed charge coverage ratios; negative pledge requirements; requirements to deliver quarterly and annual consolidated financial statements; requirements to maintain adequate insurances; prohibitions on changes in the business and disposition of the Company's assets; and other customary covenants. The Loan Agreement also requires the Company to obtain a prior written consent from the Bank when the Company determines to pay any dividends on or make any distribution related to its common stock. The Loan Agreement includes usual and customary events of default and remedies for facilities of this nature. In February and October 2011, the Company and the Bank entered into Amendment No. 1 and Amendment No. 2, respectively, to Loan and Security Agreement and Limited Waiver (collectively, the "Amendments"). The Amendments waived the Company's lack of compliance with the consolidated fixed charge coverage ratio covenant in the Loan Agreement as of January 1, 2011 and October 1, 2011 to more readily accommodate the Company's integration of the WAG acquisition.
As of January 1, 2011, the required consolidated fixed charge coverage ratio was 1.10: 1.00 and the Company's consolidated fixed charge coverage ratio was 0.60: 1.00. For purposes of calculating the consolidated fixed charge coverage ratio, the Amendment No. 1 amended the definition of "Consolidated EBITDA" to allow the Company to add back restructuring costs and transaction fees and expense related to the WAG acquisition to the extent paid on or before June 30, 2011 in an amount not to exceed $5,000,000 and integration capital expenditures related to the WAG acquisition in an amount not to exceed $5,000,000 in the aggregate for the fourth quarter ending January 1, 2011 and three consecutive fiscal quarters thereafter to the extent paid during such periods. As amended, the Company's consolidated fixed charge coverage ratio was 1.25:1.00 and was in compliance.
As of October 1, 2011, the required consolidated fixed charge coverage ratio was 1.25:1.00 and the Company's consolidated fixed charge coverage ratio was 0.92: 1.00. For purposes of calculating the consolidated fixed charge coverage ratio, the Amendment No. 2 amended the definition of "Consolidated EBITDA" to allow the Company to add back restructuring costs and transaction fees and expenses related to the WAG acquisition to the extent paid in the fiscal quarters ending January 1, 2011, April 2, 2011, July 2, 2011 or October 1, 2011 and integration capital expenditures related to the WAG acquisition in the fiscal quarters ending January 1, 2011, April 2, 2011, July 2, 2011 and October 1, 2011, to the extent paid during such periods. As amended, the Company's consolidated fixed charge coverage ratio was 1.80:1.00 and was in compliance.
For the thirteen and thirty-nine weeks ended October 1, 2011, as amended by the Amendments, the Company was in compliance with all covenants under the credit facility.
The Loan Agreement, as amended by the Amendments, contains the following financial covenants:
The Company's financial covenant ratios under the Loan Agreement as of October 1, 2011, as amended, were 1.30:1.00 for maximum funded debt to consolidated EBITDA and 1.80:1.00 for consolidated fixed charge coverage. As of October 1, 2011, the Company's liquidity was $15,023,000.
The Company expects to be in compliance with the financial covenants in the Loan Agreement through the remaining term of the Loan Agreement, however, it is possible that a breach of the financial covenants may occur in the future, should the Company's forecasted EBITDA levels not be achieved. If the Company breaches any of the covenants under the Loan Agreement and is unable to obtain waivers from the Bank, the Bank will be able to exercise their rights and remedies under the Loan Agreement, including a call provision on outstanding debt, which would have a material adverse effect on the Company's business and financial condition.
At October 1, 2011, the LIBOR floor rate and the margin were 1.25% and 2.50% per annum, respectively. The Company had no borrowings on the revolving line of credit at October 1, 2011. The remaining term loan balance was $19.4 million as of October 1, 2011 and is to be repaid according to the following schedule (in thousands):
Based on the borrowing rates currently available to the Company for bank loans with similar terms and average maturities, the fair value of our long-term debt under the facility approximated its carrying amount as of October 1, 2011.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://www.xbrl.org/2003/role/presentationRef