Line of Credit |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Line of Credit |
8. Line of Credit
Amendment No. 3 to the ABL Credit and Guarantee Agreement - On April 10, 2023, the Company entered into Amendment Number Three to ABL Credit and Guarantee Agreement (the “LOC Amendment No. 3”) to that certain ABL Credit and Guarantee Agreement, dated as of February 12, 2018 (the “LOC Agreement”). The LOC Amendment No. 3, among other things, (i) replaced the interest rate based on the LIBOR and related LIBOR-based mechanics applicable to borrowings under the LOC Agreement with an interest rate based on the Secured Overnight Financing Rate (“SOFR”) and related SOFR-based mechanics and (ii) updated certain other provisions of the LOC Agreement to reflect the transition from LIBOR to SOFR. The LOC Amendment provided for a revolving line of credit of $80.0 with interest payments due in arrears. The interest rate on the facility is based on a base rate, unless a SOFR Rate (as defined in the LOC Agreement) option is chosen by the Company. If the SOFR Rate is elected, the interest computation is equal to the SOFR Rate plus the SOFR Margin (as defined in the LOC Agreement) of either 1.25% or 1.50%. If the Base Rate (as defined in the LOC Agreement) is elected, the interest computation is equal to the Base Rate of the greatest of (a) the federal funds rate plus 0.50%, (b) the SOFR rate for a one month tenor plus 1.00%, (c) the floor (i.e., zero), or (d) the financial institution’s Prime Rate (as defined in the LOC Agreement), plus the Base Rate Margin (as defined in the LOC Agreement) of either 0.25% or 0.50%. As of December 31, 2022, the interest rate for the facility was 7.80%. At the beginning of each quarter, the applicable margin is set and determined based on the average net availability on the line of credit for the previous quarter.
2023 ABL Credit and Guarantee Agreement - On August 3, 2023, the Company refinanced the revolving credit facility, pursuant to a new ABL Credit and Guarantee Agreement (the “2023 LOC Agreement”). The 2023 LOC Agreement, among other things, (i) increased the previous aggregate commitments from $80.0 to $125.0, (ii) updated the manner in which the previous borrowing base under the 2023 LOC Agreement was determined, and (iii) replaced the administrative agent with a new administrative agent. Interest payments with respect to the 2023 LOC Agreement are due in arrears. The maturity date is August 3, 2028.
The interest rate on the facility is based on a base rate, unless an Adjusted Term SOFR Rate (as defined in the 2023 LOC Agreement) option is chosen by the Company. If the Adjusted Term SOFR Rate is elected, the interest computation is equal to the Adjusted Term SOFR Rate, which is subject to a 10bps flat credit spread adjustment (“CSA”) plus the SOFR Margin (as defined in the 2023 LOC Agreement) of either 1.25%, 1.50%, or 1.75%, based on excess availability (as of December 30, 2023, the SOFR Margin Rate was 1.25%). If the Alternate Base Rate (as defined in the 2023 LOC Agreement) is elected, the interest computation is equal to the Alternate Base Rate of the greatest of (a) the federal funds rate plus 0.50%, (b) the Adjusted Term SOFR Rate for a one month tenor plus 1.00%, or (c) the financial institution’s Prime Rate (as defined in the 2023 LOC Agreement), plus the Base Rate Margin (as defined in the 2023 LOC Agreement) of either 0.25%, 0.50%, or 0.75% (as of December 30, 2023, the Base Rate Margin was 0.25%). At the beginning of each quarter, the applicable margin is set and determined based on the average net availability on the line of credit for the previous quarter. As of December 30, 2023, the Adjusted Term SOFR interest rate for the facility was 6.76%. The line of credit is collateralized by accounts receivable and inventories. The Company accrues an unused commitment fee to the administrative agent at the varying rate of .25% to .38%, based on the unused portion of the maximum commitment, as defined in the 2023 LOC agreement.
This refinancing amendment was accounted for as a debt extinguishment and a $0.2 loss on debt extinguishment was recognized for this transaction within Loss on extinguishment and modification of debt on the Consolidated Statement of Operations and Comprehensive Income. The Company incurred $1.3 of debt issuance costs, which were capitalized and are being amortized over the term of the facility that expires on August 3, 2028, using the straight-line method, and are presented as part of Other assets within our Consolidated Balance Sheet. The amortization of the deferred loan costs is included in Interest expense on the Consolidated Statements of Operations and Comprehensive Income.
Amortization of approximately $0.3, $0.2 and $0.3 was recognized for the years ended December 30, 2023, December 31, 2022 and January 1, 2022, respectively. The unamortized portion of the fees, included in Other assets, as of December 30, 2023 and December 31, 2022, was approximately $1.1 and $0.4, respectively. There were no borrowings outstanding on the line of credit as of December 30, 2023 and December 31, 2022.
As of December 30, 2023, and December 31, 2022, the Company maintained one letter of credit totaling approximately $0.4. The amount available on the revolver as of December 30, 2023 and December 31, 2022, respectively was approximately $124.6 and $79.6, respectively.
9. Long-Term Debt
Long-term debt consists of the following:
Notes Payable - Amendment No. 3 First Lien - As of February 5, 2021, the Company completed a repricing of its First Lien and First Lien B2 Term Loans, in which the principal terms of the amendment were a reduction in the overall interest rate based upon the loan type chosen and a consolidation of the prior two outstanding tranches into a single tranche of debt with the syndicate. The Amendment No.3 First Lien was comprised of a syndicate of lenders originating on February 5, 2021 in the amount of $634.6 with interest payable in arrears. The outstanding loan balance was to be repaid on a quarterly basis of 0.25% of the original balance beginning the last day of September 2021 with the remaining principal due on the maturity date of February 12, 2025. As chosen by the Company, the amended loan bears interest at a floating rate per annum consisting of LIBOR, plus an applicable margin percent. The debt was secured by substantially all business assets.
As a result of the repricing transaction, the Company recognized a loss on extinguishment of approximately $1.4. The loss is included in Loss on extinguishment and modification of debt on the Consolidated Statements of Operations and Comprehensive Income.
As of June 7, 2021 and as a result of the Business Combination, the Company repaid approximately $61.6 of debt and recognized a loss on extinguishment of approximately $1.0. The loss is included in Loss on extinguishment and modification of debt on the Consolidated Statements of Operations and Comprehensive Income for the year ended January 1, 2022.
Notes Payable - Amendment No. 4 First Lien - On August 18, 2021, the Company completed a refinancing of its First Lien Amendment No. 3, in which the principal terms of the amendment were new borrowings of $155.0 which was used to fund the DBCI acquisition. The Amendment No. 4 First Lien was comprised of a syndicate of lenders originating on August 18, 2021 in the amount of $726.4 with interest payable in arrears. The outstanding loan balance was to be repaid on a quarterly basis of 0.25% of the original balance beginning the last day of September 2021 with the remaining principal due on the maturity date of February 12, 2025. As chosen by the Company, the amended loan bears interest at a floating rate per annum consisting of LIBOR, plus an applicable margin percent (effective interest rate of 7.98% as of December 31, 2022). The debt is secured by substantially all business assets. This refinancing amendment was accounted for as a modification and as such no gain or loss was recognized for this transaction and any third party fees paid in connection with this amendment were expensed. The Company incurred $3.1 of bank fees, original issue discount and charges associated with this amendment which were capitalized and are being amortized as a component of interest expense over the remaining loan term.
Notes Payable - Amendment No. 5 First Lien - On June 20, 2023, the Company entered into Amendment No. 5 (the “Amendment No. 5 First Lien”) to the First Lien Credit and Guarantee Agreement, dated as of February 12, 2018 (the “First Lien Agreement”) (“First Lien Term Loan”). The Amendment No. 5 First Lien, among other things, (i) replaced the interest rate based on LIBOR and related LIBOR-based mechanics applicable to borrowings under the First Lien Agreement with an interest rate based on SOFR and related SOFR-based mechanics and (ii) updated certain other provisions of the First Lien Agreement to reflect the transition from LIBOR to SOFR. The Amendment No. 5 First Lien had an aggregate principal balance of $726.4 with interest payable in arrears. The outstanding loan balance was to be repaid on a quarterly basis of 0.28% of the original principal amount of the loans outstanding on the Fourth Amendment Effective Date (i.e., August 17, 2021) with the remaining principal due on the maturity date of February 12, 2025. For the year ended December 30, 2023, the Company made voluntary payments of $85.3 toward the First Lien Term Loan. The Company used cash on hand to make the voluntary prepayments.
Notes Payable - Amendment No. 6 First Lien - On August 3, 2023, the Company refinanced its existing First Lien Term Loan pursuant to Amendment No. 6 (the “Amendment No. 6 First Lien”) to the First Lien Agreement. The loan was made by a syndicate of lenders, with the aggregate amount of $625.0. The outstanding loan balance is to be repaid on a quarterly basis of 0.25% of the original balance of the amended loan beginning the last business day of December 2023 with the remaining principal due on the maturity date of August 3, 2030. As chosen by the Company, the amended loan bears interest at a floating rate per annum consisting of Adjusted Term SOFR plus an applicable margin percent. The interest rate on the Amendment No. 6 First Lien term loan as of December 30, 2023, was 8.76%, which is a variable rate based on Adjusted Term SOFR, subject to a 1.00% floor, and includes a 0.10% CSA and an applicable margin percentage of 3.25%. The debt was secured by substantially all business assets. There are no prepayment penalties if the company makes voluntary prepayments on the outstanding principal balance.
The amendment was accounted for in accordance with ASC 470-50, “Debt - Modification and Extinguishment.” As discussed above, the amended First Lien Term Loan consists of a syndicate of lenders which were evaluated, for accounting purposes, as individual lenders. Certain lenders exited the Term Loan credit facility, which resulted in extinguishment accounting. There were $287.4 of borrowings held by lenders in the new agreement, that were also held by lenders in the previous agreement. As a result, the Company wrote off a portion of unamortized debt financing costs associated with the prior First Lien Agreement, that was deemed extinguished and recognized a loss on debt extinguishment of $1.4 for the year ended December 30, 2023, recognized within Loss on extinguishment and modification of debt on the Consolidated Statement of Operations and Comprehensive Income.
In conjunction with the Amendment No 6, the Company incurred $2.3 of costs from third parties that did not qualify for capitalization of deferred finance costs, and were expensed within Loss on extinguishment and modification of debt on the Consolidated Statement of Operations and Comprehensive Income. The Company also incurred $9.5 of additional deferred finance costs, which will be amortized over the remaining term of the modified loan. Deferred finance costs are being amortized using the effective interest method. Amortization of approximately $3.4, $3.4, and $3.0 was recognized for the years ended December 30, 2023 and December 31, 2022, and January 1, 2022 respectively, as a component of interest expense.
Finance Leases
During the year ended December 30, 2023, the Company’s finance lease obligation primarily consists of vehicle lease agreements. The leases expire at various dates through 2028 with terms between and five years.
Aggregate annual maturities of long-term debt and finance leases at December 30, 2023, are:
(in millions)
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