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REVOLVING BANK LOAN AND LONG-TERM DEBT | 3 Months Ended
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Mar. 28, 2020
REVOLVING BANK LOAN AND LONG-TERM DEBT |
REVOLVING BANK LOAN AND LONG-TERM DEBT | 10. Revolving Bank Loan and Long-Term Debt The Company entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) effective March 16, 2020, with the Lenders from time to time party thereto and CIBC Bank USA, as administrative agent. Borrowings under the Credit Agreement are secured by the Company’s accounts receivable, inventories, machinery, equipment, vehicles, certain real estate and the common stock of all of the Company’s subsidiaries. Borrowings under the Credit Agreement bear interest based on a London Interbank Offered Rate (LIBOR) or prime rate based option. The Credit Agreement either limits or requires prior approval by the lender of additional borrowings, acquisition of stock of other companies, purchase of treasury shares and payment of cash dividends. Payment of accrued interest is due monthly or at the end of the applicable LIBOR period. The Credit Agreement as amended provides for the following:
| · |  | The Revolving Commitment is $20,000,000.
| · |  | Borrowings under the Revolving Commitment are limited to (a) 85% of eligible accounts receivable, (b) the lesser of 60% of eligible inventories and $8,500,000.
| · |  | Financial Covenants include:
o Minimum EBITDA for the three months ending March 31, 2020 must exceed $(525,000) o Minimum EBITDA for the three months ending June 30, 2020 must exceed $265,000 o The Minimum Fixed Charge Coverage Ratio is not permitted to be below 1.06 to 1.0 for each computation period measured at the end of each fiscal quarter, provided that the Fixed Charge Coverage Ratio shall not be tested if the average daily Excess Availability during the Fiscal Quarter exceeds $5,000,000. A computation period is the nine months ending September 30, 2020 or twelve months for all subsequent fiscal quarters
| · |  | The maturity date of the credit facility is May 1, 2023.
| · |  | Interest rate pricing for the revolving credit facility is currently LIBOR plus 2.0% or the prime rate.
Definitions under the Credit Agreement as amended are as follows:
| · |  | Fixed Charge Coverage Ratio means, for any Computation Period, the ratio of (a) the sum (without duplication) for such period of (i) EBITDA, minus (ii) income taxes paid in cash by the Loan Parties, minus (iii) all unfinanced Capital Expenditures, minus (iv) all amounts paid in cash in respect of any Permitted Capital Securities Repurchase, to (b) the sum for such period of (i) cash Interest Expense, plus (ii) scheduled payments of principal of Funded Debt (excluding the Revolving Loans), plus (iii) cash payments made in respect of Capital Leases, plus (iv) the amount by which reclamation or similar costs paid in such period exceed the cash proceeds received from the sale of quarry assets and cash refunds of escrow balances; provided, however that for purposes hereof, to the extent during any period there are excess cash proceeds from the sale of quarry assets after netting such proceeds against the reclamation or similar costs in such period, such excess cash proceeds may be carried forward and netted against the reclamation or similar costs in a later period, plus (v) all amounts paid in respect of any earnout or other deferred payment in connection with any Permitted Acquisition.
| · |  | EBITDA means, for any Computation Period (or another time period to the extent expressly provided herein), the sum of the following with respect to the Company and its Subsidiaries each as determined in accordance with GAAP:
| · |  | Consolidated Net Income, plus (without duplication) each of the following items to the extent deducted in determining such Consolidated Net Income:
| i. |  | federal, state and other income taxes deducted in the determination of Consolidated Net Income;
ii. interest Expense deducted in the determination of Consolidated Net Income;
| ii. |  | depreciation, depletion and amortization expense deducted in the determination of Consolidated Net Income;
iv.non-recurring fees and costs paid by the Company and its Subsidiaries in respect of the following: (i) fees, expenses (including legal fees and expenses) and due diligence costs associated with Permitted Acquisitions, whether or not consummated; (ii) legal fees and costs associated with the Valco trial preparation; (iii) fees, costs and expenses (including legal fees and expenses) in connection with the amendment and restatement of this agreement and all matters reasonably related thereto; (iv) fees, costs and expenses (including legal fees and expenses) in connection with the purchase of Capital Securities of the Company by Bee Street Holdings LLC or a Subsidiary thereof and transactions and other matters reasonably related thereto; (v) additional fees and costs associated with the exploration of the Hitch Rack Ranch facility in Colorado Springs, Colorado to determine the sustainability for mining and the pursuit of mining permits; and (vi) fees, costs and expenses in connection with reclamation or similar transactions related to the sale of quarry assets; v.any other non-cash charges and any extraordinary charges deducted in the determination of Consolidated Net Income, including any asset impairment charges (including write downs of goodwill); and vi.the amount of any earnout or other deferred payment paid in connection with any Permitted Acquisition; minus
| · |  | any gains from Asset Dispositions, any extraordinary gains and any gains from discontinued operations included in the determination of Consolidated Net Income
Outstanding funded revolving debt was zero as of March 28, 2020 compared to $800,000 as of December 28, 2019. The highest balance outstanding during the first three months of 2020 and 2019 was $2,950,000 and $2,200,000, respectively. Average outstanding funded debt was $1,134,000 and $802,000 for the first three months of 2020 and 2019 respectively. At March 28, 2020, the Company had outstanding letters of credit totaling $5,620,000. At all times since the inception of the Credit Agreement, the Company has had sufficient qualifying and eligible assets such that the available borrowing capacity exceeded the cash needs of the Company. Management expects a trend of decreased working capital and decreased cash from continuing operations, relative to fiscal year 2019, may occur over the remainder of fiscal 2020 due to uncertainty of the impact of the COVID-19 coronavirus pandemic and related governmental reaction on economic conditions. Although no assurance can be provided that the Company will obtain forgiveness of the PPP Loan (See note 20) in whole or in part, management currently expects to use the proceeds of the PPP Loan for forgivable purposes in accordance with the CARES Act, and management expects that such proceeds will substantially fund any trend of increased working capital requirements and to offset the decreased cash from continuing operations, relative to fiscal year 2019, that may occur into the second quarter of fiscal 2020. Management cannot currently predict when the negative impacts on the Company and its businesses related to the COVID-19 coronavirus pandemic and related governmental reaction will end. Although the Company believes that its existing cash balance, anticipated cash flow from continuing operations and available borrowing capacity under the Credit Agreement and the PPP Loan will be sufficient to cover expected cash needs during the remainder of fiscal year 2020, that belief is based on the assumption that negative impacts related to the COVID-19 coronavirus pandemic and related governmental reaction will substantially improve commencing in the second quarter and continuing thereafter. The Company was not in compliance with the Fixed Coverage Charge Ratio covenant under the Credit Agreement as of December 28, 2019. The lender provided a waiver of the covenant violation for the period ended December 28, 2019. Based on the assumption that negative impacts related to the COVID-19 coronavirus pandemic and related governmental reaction will substantially improve commencing in the second quarter and continuing thereafter, the Company currently expects to be in compliance with all covenants under the Credit Agreement throughout the facility’s remaining term.

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- Definition 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. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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