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Long-Term Debt | 3 Months Ended
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Apr. 28, 2024
Debt Disclosure [Abstract] |
Long-Term Debt [Text Block] | 10. Long-Term Debt On July 26, 2022, we entered into the Fourth Amendment (the “amendment”) to the Second Amended and Restated Loan Agreement with Bank of America, N.A. (“BofA”) to replenish cash used to make the acquisition of substantially all of the assets of Sunset West (which closed at the beginning of the first quarter of fiscal 2023) (the “Sunset Acquisition”). The Second Amended and Restated Loan Agreement dated as of September 29, 2017, had previously been amended by a First Amendment to Second Amended and Restated Loan Agreement dated as of January 31, 2019, a Second Amendment to Second Amended and Restated Loan Agreement dated as of November 4, 2020, and a Third Amendment to Second Amended and Restated Loan Agreement dated as of January 27, 2021 (as so amended, the “Existing Loan Agreement”). Details of the individual credit facilities provided for in the Amendment are as follows:
| ■ | Unsecured Revolving Credit Facility. Under the Amendment, the expiration date of the existing $35 million Unsecured Revolving Credit Facility (the “Existing Revolver”) was extended to July 26, 2027. Any amounts outstanding will bear interest at a rate per annum, equal to the then current Bloomberg Short-Term Bank Yield Index (“BSBY”) (adjusted periodically) plus 1.00%. The interest rate will be adjusted on a monthly basis. The actual daily amount of undrawn letters of credit is subject to a quarterly fee equal to a per annum rate of 1%. We must also pay a quarterly unused commitment fee that is based on the average daily amount of the facility utilized during the applicable quarter;
| ■ | 2022 Secured Term Loan. The Amendment provided us with an $18 million term loan (the “Secured Term Loan”), which was disbursed to us on July 26, 2022. We are required to pay monthly interest only payments at a rate per annum equal to the then current BSBY rate (adjusted periodically) plus 0.90% on the outstanding balance until the principal is paid in full. The interest rate will be adjusted on a monthly basis. On July 26, 2027, the entire outstanding indebtedness is due in full, including all principal and interest. The Secured Term Loan is secured by certain company-owned life insurance policies under a Security Agreement (Assignment of Life Insurance Policy as Collateral) dated July 26, 2022, by and between the Company and BofA; and
| ■ | 2022 Unsecured Term Loan. The Amendment provided us with a $7 million unsecured term loan (the “Unsecured Term Loan”), which was disbursed to us on July 26, 2022. We are required to make monthly principal payments of $116,667 and monthly interest payments at a rate per annum equal to the then current BSBY (adjusted periodically) plus 1.40% on the outstanding balance until paid in full. The interest rate will be adjusted monthly. On July 26, 2027, the entire outstanding indebtedness is due in full, including all principal and interest.
We may prepay any outstanding principal amounts borrowed under either the Secured Term Loan or the Unsecured Term Loan at any time, without penalty provided that any payment is accompanied by all accrued interest owed. As of April 28, 2024, $4.5 million was outstanding under the Unsecured Term Loan and $18 million was outstanding under the Secured Term Loan. We incurred $37,500 in debt issuance costs in connection with our term loans. As of April 28, 2024, unamortized loan costs of $24,375 were netted against the carrying value of our term loans on our condensed consolidated balance sheets. The Amendment also included customary representations and warranties and requires us to comply with customary covenants, including, among other things, the following financial covenants:
| ■ | Maintain a ratio of funded debt to EBITDA not exceeding:
| o | 2.25:1.0 through July 30, 2024; and
| o | 2.00:1.00 thereafter.
| ■ | A basic fixed charge coverage ratio of at least 1.25:1.00; and
| ■ | Limit capital expenditures to no more than $15.0 million during any fiscal year.
The Existing Loan Agreement also limits our right to incur other indebtedness, make certain investments and create liens upon our assets, subject to certain exceptions, among other restrictions. The Existing Loan Agreement does not restrict our ability to pay cash dividends on, or repurchase, shares of our common stock, subject to our compliance with the financial covenants discussed above if we are not otherwise in default under the Existing Loan Agreement. Due to our first quarter results, we were not in compliance with the Existing Loan Agreement’s basic fixed charge ratio covenant; however, subsequent to the end of our fiscal 2025 first quarter, we obtained a covenant waiver from BofA. Based on the risk of future non-compliance, we have classified all of the debt as current, and we have sufficient cash and investments on hand to retire the debt if necessary. However, we are in discussions with our lender, and we expect to reach a longer-term solution through amendments to the Existing Loan Agreement or otherwise, such that we expect to be in compliance with our financial covenants beginning in our fiscal 2025 second quarter and for the foreseeable future. As of April 28, 2024, we had $28.3 million available under our $35 million Existing Revolver to fund working capital needs. Standby letters of credit in the aggregate amount of $6.7 million, used to collateralize certain insurance arrangements and for imported product purchases, were outstanding under the Existing Revolver as of April 28, 2024. There were no additional borrowings outstanding under the Existing Revolver as of April 28, 2024.

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