Annual report pursuant to Section 13 and 15(d)

Credit Agreements

v3.8.0.1
Credit Agreements
12 Months Ended
Feb. 03, 2018
Debt Disclosure [Abstract]  
Credit Agreements [Text Block]
Credit Agreements
The Company's long-term credit facilities consist of:
 
 
February 3, 2018
 
January 28, 2017
PNC Credit Facility
 
 
 
 
PNC revolving loan due March 21, 2022, principal amount
 
$
59,900,000

 
$
59,900,000

 
 
 
 
 
PNC term loan due March 21, 2022, principal amount
 
14,148,000

 
10,637,000

Less unamortized debt issuance costs
 
(149,000
)
 
(181,000
)
PNC term loan due March 21, 2022, carrying amount
 
13,999,000

 
10,456,000

 
 
 
 
 
GACP Credit Agreement
 
 
 
 
GACP term loan due March 9, 2021, principal amount
 

 
16,292,000

Less unamortized debt issuance costs
 

 
(1,260,000
)
GACP term loan due March 9, 2021, carrying amount
 

 
15,032,000

 
 
 
 
 
Total long-term credit facilities
 
73,899,000

 
85,388,000

Less current portion of long-term credit facilities
 
(2,326,000
)
 
(3,242,000
)
Long-term credit facilities, excluding current portion
 
$
71,573,000

 
$
82,146,000


PNC Credit Facility
On February 9, 2012, the Company entered into a credit and security agreement (as amended through September 25, 2017, the "PNC Credit Facility") with PNC Bank, N.A. ("PNC"), a member of The PNC Financial Services Group, Inc., as lender and agent. The PNC Credit Facility, which includes CIBC Bank USA (formerly known as The Private Bank) as part of the facility, provides a revolving line of credit of $90.0 million and provides for a term loan on which the Company had originally drawn to fund improvements at the Company's distribution facility in Bowling Green, Kentucky and subsequently to pay down the Company's GACP Term Loan (as defined below). The PNC Credit Facility also provides an accordion feature that would allow the Company to expand the size of the revolving line of credit by another $25.0 million at the discretion of the lenders and upon certain conditions being met. On March 21, 2017, the Company entered into the Eighth Amendment to the PNC Credit Facility, which among other things, increased the term loan by $6,000,000, extended the term of the PNC Credit Facility from May 1, 2020 to March 21, 2022, and authorized the proceeds from the term loan to be used as part of a voluntary prepayment on its GACP Term Loan.
All borrowings under the PNC Credit Facility mature and are payable on March 21, 2022. Subject to certain conditions, the PNC Credit Facility also provides for the issuance of letters of credit in an aggregate amount up to $6.0 million which, upon issuance, would be deemed advances under the PNC Credit Facility. Maximum borrowings and available capacity under the revolving line of credit under the PNC Credit Facility are equal to the lesser of $90.0 million or a calculated borrowing base comprised of eligible accounts receivable and eligible inventory. The PNC Credit Facility is secured by a first security interest in substantially all of the Company’s personal property, as well as the Company’s real properties located in Eden Prairie, Minnesota and Bowling Green, Kentucky. Under certain circumstances, the borrowing base may be adjusted if there were to be a significant deterioration in value of the Company’s accounts receivable and inventory.
The revolving line of credit under the PNC Credit Facility bears interest at LIBOR plus a margin of between 3% and 4.5% based on the Company's trailing twelve-month reported EBITDA (as defined in the PNC Credit Facility) measured quarterly in fiscal 2016 and semi-annually thereafter as demonstrated in its financial statements. The term loan bears interest at either a Base Rate or LIBOR plus a margin consisting of between 4% and 5% on Base Rate term loans and 5% to 6% on LIBOR Rate term loans based on the Company’s leverage ratio as demonstrated in its audited financial statements.
As of February 3, 2018, the Company had borrowings of $59.9 million under its revolving credit facility. Remaining available capacity under the revolving credit facility as of February 3, 2018 is approximately $18.4 million, and provides liquidity for working capital and general corporate purposes. The PNC Credit Facility also provides for a term loan on which the Company has drawn to fund an expansion and improvements at the Company's distribution facility in Bowling Green, Kentucky and to partially pay down the Company's GACP Term Loan. As of February 3, 2018, there was approximately $14.1 million outstanding under the PNC Credit Facility term loan of which $2.3 million was classified as current in the accompanying balance sheet.
Principal borrowings under the term loan are to be payable in monthly installments over an 84-month amortization period commencing on April 1, 2017 and are also subject to mandatory prepayment in certain circumstances, including, but not limited to, upon receipt of certain proceeds from dispositions of collateral. Borrowings under the term loan are also subject to mandatory prepayment in an amount equal to fifty percent (50%) of excess cash flow for such fiscal year, with any such payment not to exceed $2.0 million in any such fiscal year. The PNC Credit Facility is also subject to other mandatory prepayment in certain circumstances. In addition, if the total PNC Credit Facility is terminated prior to maturity, the Company would be required to pay an early termination fee of 3.0% if terminated on or before March 21, 2018, 1.0% if terminated on or before March 21, 2019, 0.5% if terminated on or before March 21, 2020; and no fee if terminated after March 21, 2020. As of February 3, 2018, the imputed effective interest rate on the PNC term loan was 8.0%.
Interest expense recorded under the PNC Credit Facility was $4,128,000, $3,819,000 and $2,702,000 for fiscal 2017, fiscal 2016 and fiscal 2015.
The PNC Credit Facility contains customary covenants and conditions, including, among other things, maintaining a minimum of unrestricted cash plus unused line availability of $10.0 million at all times and limiting annual capital expenditures. As the Company's unused line availability was greater than $10.0 million at February 3, 2018, no additional cash was required to be restricted. Certain financial covenants, including minimum EBITDA levels (as defined in the PNC Credit Facility) and a minimum fixed charge coverage ratio of 1.1 to 1.0, become applicable only if unrestricted cash plus unused line availability falls below $10.8 million. As of February 3, 2018, the Company's unrestricted cash plus unused line availability was $42.4 million and the Company was in compliance with applicable financial covenants of the PNC Credit Facility and expects to be in compliance with applicable financial covenants over the next twelve months. In addition, the PNC Credit Facility places restrictions on the Company’s ability to incur additional indebtedness or prepay existing indebtedness, to create liens or other encumbrances, to sell or otherwise dispose of assets, to merge or consolidate with other entities, and to make certain restricted payments, including payments of dividends to common shareholders.
Costs incurred to obtain amendments to the PNC Credit Facility totaling $1,406,000 and unamortized costs incurred to obtain the original PNC Credit Facility totaling $466,000 have been deferred and are being expensed as additional interest over the five-year term of the PNC Credit Facility. Deferred financing costs, net of amortization, related to the revolving line of credit are included within other assets within the Company's balance sheet.
Great American Capital Partners Credit Agreement
On March 10, 2016, the Company entered into a term loan credit and security agreement (as amended through September 25, 2017, the "GACP Credit Agreement") with GACP Finance Co., LLC ("GACP") for a term loan of $17.0 million which was fully paid off during fiscal 2017 (as described below). Proceeds from the GACP Term Loan were used to provide for working capital and general corporate purposes and to help strengthen the Company's total liquidity position. The term loan under the GACP Credit Agreement (the "GACP Term Loan") was secured on a first lien priority basis by the proceeds of any sale of the Company's Boston television station FCC license and on a second lien priority basis by the Company's accounts receivable, equipment, inventory and certain real estate as well as other assets as described in the GACP Credit Agreement. The Company had also pledged the stock of certain subsidiaries to secure such obligations on a second lien priority basis.
On March 21, 2017, the Company made a voluntary principal prepayment of $9,500,000 on its GACP Term Loan. The principal payment was funded by a combination of cash on hand and $6,000,000 from the Company’s lower interest PNC Credit Facility term loan. The Company recorded a loss on extinguishment of debt totaling $913,000 in connection with the principal prepayment, which includes early termination and lender fees of $199,000 and unamortized debt issuance costs of $714,000, which represents the proportionate amount of unamortized debt issuance costs attributable to the extinguished debt.
On October 18, 2017, the Company made a voluntary principal prepayment of $2,500,000 on its GACP Term Loan. The principal payment was funded by proceeds received by the Company under the Channel Sharing Agreement, as discussed in Note 4 - "Intangible Assets". The Company recorded a loss on extinguishment of debt totaling $221,000 in connection with the principal prepayment, which includes early termination and lender fees of $50,000 and unamortized debt issuance costs of $171,000, which represents the proportionate amount of unamortized debt issuance costs attributable to the extinguished debt.
On December 6, 2017, the Company made a voluntary principal prepayment of $3,513,000 to fully retire its GACP Term Loan. The principal payment was funded by proceeds received upon the sale of the Boston television station, WWDP, as discussed in Note 4 - "Intangible Assets". The Company recorded a loss on extinguishment of debt totaling $323,000 in connection with the principal prepayment, which includes early termination and lender fees of $85,000 and unamortized debt issuance costs of $238,000, which represents the remaining amount of unamortized debt issuance costs attributable to the GACP Term Loan.
The GACP Term Loan bore interest at either (i) a fixed rate based on the greater of LIBOR for interest periods of one, two or three months or 1% plus a margin of 11.0%, or (ii) a daily floating Alternate Base Rate plus a margin of 10.0%. Principal borrowings under the GACP Term Loan were payable in consecutive monthly installments of $70,833 each, commencing on April 1, 2016, with a final installment due at the end of the five- year term equal to the aggregate principal amount of all loans outstanding on such date. The GACP Term Loan could be prepaid voluntarily at any time and, if terminated prior to maturity, the Company would be required to pay an early termination fee of 2.0% if terminated on or before March 10, 2018; 1.0% if terminated on or before March 10, 2019; and no fee if terminated after March 10, 2019. Interest expense recorded under the GACP Credit Agreement was $940,000 and $2,099,000 for fiscal 2017 and fiscal 2016.
Costs incurred to obtain the GACP Credit Agreement totaled $1,565,000, which were deferred and expensed as additional interest over the original five-year term of the GACP Credit Agreement, less costs written-off for the March 21, 2017 and October 18, 2017 partial debt extinguishments totaling $885,000. The remaining $238,000 of deferred costs were written-off as a loss on debt extinguishment in December 2017, when the remaining principal was paid in full.
The aggregate maturities of the Company's long-term credit facilities as of February 3, 2018 are as follows:
 
 
PNC Credit Facility
 
 
Fiscal year
 
Term loan
 
Revolving loan
 
Total
2018
 
$
2,326,000

 
$

 
$
2,326,000

2019
 
2,132,000

 

 
2,132,000

2020
 
2,326,000

 

 
2,326,000

2021
 
2,326,000

 

 
2,326,000

2022
 
5,038,000

 
59,900,000

 
64,938,000

 
 
$
14,148,000

 
$
59,900,000

 
$
74,048,000