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Equipment Notes Payable and Financial Arrangements
 6 Months Ended
Apr. 15, 2022
Debt Disclosure [Abstract]  
Equipment Notes Payable and Financial Arrangements

Note 6 – Equipment Notes Payable and Financial Arrangements:

 

Revolving Credit Facility

 

We maintain a line of credit with Wells Fargo Bank, N.A. that extends to March 1, 2023. As of year-end October 29, 2021, under the terms of this line of credit, we could borrow up to $15,000 at an interest rate equal to the bank’s prime rate or LIBOR plus 2.0%. The line of credit has an unused commitment fee of 0.25% of the available loan amount. The line of credit is presented under non-current liabilities in the consolidated balance sheets. On December 1, 2021, Wells Fargo Bank, N.A. expanded our line of credit to $25,000 through June 15, 2022, upon which the credit limit will return to $15,000 for the balance of the term. Under the terms of this expanded line of credit, we may borrow up to $25,000 at an interest rate equal to the bank’s prime rate or secured overnight financing rate (“SOFR”) plus 2.0%. The former benchmark interest rate of LIBOR for our line of credit has been transitioned to SOFR which could impact the cost of credit and alter the value of debt and loans. We borrowed $2,000 under this line of credit on December 2, 2020, $2,000 on April 27, 2021, $2,000 on July 1, 2021, $3,000 on July 19, 2021, $3,000 on October 15, 2021, $2,000 on November 1, 2021, $2,000 on December 16, 2021 and $2,000 on January 24, 2022, for a combined total of $18,000 as of April 15, 2022.

 

Equipment Notes Payable

 

On December 26, 2018, we entered into a master collateral loan and security agreement with Wells Fargo Bank, N.A. (the “Original Wells Fargo Loan Agreement”) for up to $15,000 in equipment financing which was amended and expanded as detailed below. We subsequently entered into additional master collateral loan and security agreements with Wells Fargo Bank, N.A. on each of; April 18, 2019, December 19, 2019, March 5, 2020, and April 17, 2020 (the Original Wells Fargo Loan Agreement and the subsequent agreements collectively referred to as the “Wells Fargo Loan Agreements”). Pursuant to the Wells Fargo Loan Agreements, we owe the amounts as stated in the table below.

 

Bridge Loan

 

On August 30, 2021, we entered into a loan commitment note for a bridge loan of up to $25,000 which we plan to use to pay off the existing equipment loans as they come out of the lock out period and may be prepaid (dates detailed in the table below). The outstanding principal balances of the bridge loan shall be due and payable in full on the earlier of the following dates (1) August 31, 2023 or (2) one Federal Reserve business day after the closing of the transactions contemplated under the CRG Purchase Agreement. As of April 15, 2022, we prepaid $18,651 in equipment loans (equipment loans 4.13%, 3.98%, 3.70% and 3.29% in the table below) utilizing proceeds from the new bridge loan. The Company evaluated the exchange under ASC 470 and determined that the exchange should be treated as a debt modification prospectively. The Company accounted for this transaction as a debt modification and did not incur any gain or loss relating to the modification. The debt modification did not meet the greater than ten percent test and was deemed not substantial.

 

 

The following table reflects major components of our line of credit and borrowing agreements as of April 15, 2022 and October 29, 2021, respectively.

 

   April 15, 2022   October 29, 2021 
         
Revolving credit facility  $18,000   $12,000 
Equipment notes:          
3.70% note due 12/21/26, out of lockout 12/23/21   -    2,901 
3.29% note due 03/05/27, out of lockout 03/06/22   -    5,951 
3.68% note due 04/16/27, out of lockout 04/17/22   5,391    5,888 
SOFR plus 2.00% bridge loan due 08/31/23   18,651    10,329 
Total debt   42,042    37,069 
Less current debt   (3,446)   (1,065)
Total long-term debt  $38,596   $36,004 

 

On June 2, 2022, we prepaid our outstanding balance under the bridge loan and terminated the loan commitment note and plan to repay the outstanding balance under our revolving credit facility, which facility continues in effect per its terms to March 1, 2023. Refer to Note 7 - Subsequent Events for further information.

 

Loan Covenants

 

The Wells Fargo Loan Agreements collectively contain various affirmative and negative covenants that limit the use of funds and define other provisions of the loan. The main financial covenants are listed below:

 

  ● Total Liabilities divided by Tangible Net Worth not greater than 2.5 to 1.0 at each fiscal quarter,
  ● Quick Ratio not less than .85 to 1.0 at each fiscal quarter end,
  ● Net Income After Taxes not less than $500 on a quarterly basis, and
  ● Capital Expenditures less than $5,000.

 

As of April 15, 2022, the Company was in compliance with all covenants under the Wells Fargo Loan Agreements.