|12 Months Ended|
Dec. 27, 2018
The following table summarizes our long‑term debt as of December 27, 2018 and December 28, 2017 (dollars in thousands):
Repayment of Debt with Proceeds from Initial Public Offering
On May 2, 2017, the Company completed its IPO, pursuant to which it sold an aggregate of 10,147,025 shares of Class A common stock, par value $0.001 per share (after giving effect to the underwriters’ exercise in full of their option to purchase additional shares) at a price of $21.00 per share. The Company received aggregate net proceeds of approximately $192.0 million after deducting underwriting discounts and commissions and other offering expenses.
The Company used net proceeds from the IPO of approximately $192.0 million to repay a portion of the amounts outstanding under the Term Loan Facility, including accrued and unpaid interest. The partial paydown resulted in a loss on extinguishment of debt in the amount of approximately $5.4 million related to unamortized original issue discount and unamortized deferred debt issuance costs.
On September 30, 2016, the board of directors declared the Special Dividend and authorized the Option Payments. Payment of the Special Dividend and the Option Payments was made on September 30, 2016 to all stockholders and option holders of record at the close of business on September 30, 2016. In connection with the dividend, the Company refinanced its existing indebtedness by amending the prior asset-based revolving credit facility with an amended and restated $200.0 million asset-based revolving credit facility maturing on September 30, 2021 (the “ABL Facility”), entering into a $350.0 million senior secured term loan facility maturing on September 30, 2023 (the “Term Loan Facility” and together with the ABL Facility, our “Credit Facilities”) and repaying and terminating the prior term loan facility and the prior senior secured term loan facility with GCI Capital Markets LLC (the “GCI Facility”). As a result of the refinancing, the Company recorded $162 thousand of loss on extinguishment of debt related to unamortized deferred debt issuance cost for the Company’s prior asset-based revolving credit facility, as well as recorded $1,319 thousand of loss on extinguishment of debt related to unamortized original issue discount and unamortized deferred debt issuance cost for the prior term loan facility and GCI Facility. In addition, the Company recorded $10,347 thousand of original issue discount and deferred debt issuance cost related to new third‑party fees associated with the refinancing.
Term Loan Facility
As of December 27, 2018, the Term Loan Facility had an outstanding balance of $149.0 million and requires quarterly repayments of $875 thousand, which commenced on December 31, 2016, with the remainder due and payable at maturity. The Term Loan Facility matures on September 30, 2023.
As of December 27, 2018, the Term Loan Facility bore interest based on one of the following rates, at the Company’s option:
i)Adjusted LIBOR Rate plus a margin of 2.50%
ii)Base Rate plus a margin of 1.50%. Base Rate defined as the greater of the following:
(a)the base rate in effect on such day,
(b)the federal funds rate plus 0.50%,
(c)the adjusted LIBOR rate for the interest period of one month plus a margin of 1.00%
As of December 27, 2018, the ABL Facility had a maximum availability of $300 million with actual available borrowings limited to the sum, at the time of calculation, of eligible credit card receivables, plus the cost of eligible inventory, net of inventory reserves, multiplied by the product of an appraisal percentage multiplied by the appraised value of eligible inventory, plus 85% of eligible net trade receivables, plus all eligible cash on hand minus certain Availability Reserves (as defined in the credit agreement governing the ABL Facility). The ABL Facility is available for issuance of letters of credit and contains $30.0 million for standby letters of credit and commercial letters of credit. Available borrowings under the facility are reduced by the face amount of outstanding letters of credit. The ABL Facility matures on September 30, 2021. As of December 27, 2018, the borrowings bear interest at a floating rate, which is based on one of the following rates at the option of the Company:
i)LIBOR Rate plus a margin percentage ranging from 1.25% to 1.50% based on the level of borrowings or
ii)Base Rate plus a margin (ranging from 0.25% to 0.50% based on the level of borrowings). The Base Rate is defined as the highest of the following:
(a)the federal funds rate plus 0.50%,
(b)Adjusted LIBOR Rate plus 1.00%, or
(c)the lender’s prime rate
As of December 27, 2018, the Company had net availability under the ABL Facility of $289,141 thousand, including outstanding letters of credit of $10,859 thousand.
The following table summarizes scheduled maturities of our debt, including current maturities, as of December 27, 2018 (in thousands):
The credit agreements governing our Credit Facilities contain customary restrictive covenants that, among other things and with certain exceptions, limit the ability of the Company to (i) incur additional indebtedness and liens in connection therewith; (ii) pay dividends and make certain other restricted payments; (iii) effect mergers or consolidations; (iv) enter into transactions with affiliates; (v) sell or dispose of property or assets and (vi) engage in unrelated lines of business. In addition, these credit agreements subject us to certain reporting obligations and require that we satisfy certain financial covenants, including, among other things:
•a requirement that if borrowings under the ABL Facility exceed 90% of availability, we will maintain a certain fixed charge coverage ratio (defined as consolidated EBITDA less non‑financed capital expenditures and income taxes paid to consolidated fixed charges, in each case as more fully defined in the credit agreement governing the ABL Facility).
The Term Loan Facility has no financial maintenance covenants. As of December 27, 2018, we were in compliance with the covenants of the Credit Facilities.
Deferred Debt Issuance Cost and Original Issue Discount
Deferred debt issuance cost related to our ABL Facility and our prior asset-based revolving credit facility of $902 thousand and $1,005 thousand as of December 27, 2018 and December 28, 2017, respectively, are included in Other assets on our Consolidated Balance Sheets. Deferred debt issuance cost and original issue discount related to our Term Loan Facility of $3,666 thousand as of December 27, 2018 and $4,438 thousand as of December 28, 2017 are included in Term loans on our Consolidated Balance Sheets. Amortization expense was $1,045 thousand, $1,205 thousand, and $954 thousand for the years ended December 27, 2018, December 28, 2017, and December 29, 2016.
Fair Value of Debt
Market risk associated with our fixed and variable rate long‑term debt relates to the potential change in fair value and negative impact to future earnings, respectively, from a change in interest rates. The aggregate fair value of debt was based primarily on discounted cash flows utilizing estimated interest rates, maturities, credit risk, and underlying collateral and is classified primarily as Level 3 within the fair value hierarchy. At December 27, 2018 and December 28, 2017, the fair values of the Company’s debt are as follows (in thousands):
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://fasb.org/us-gaap/role/ref/legacyRef