Note 7 - Bank Credit Facility

3 Months Ended

Mar. 02, 2024

Notes to Financial Statements

Debt Disclosure [Text Block]

7. Bank Credit Facility

Our bank credit facility provides for a line of credit of up to $25,000. At March 2, 2024, we had $3,731 outstanding under standby letters of credit against our line, leaving availability under our credit line of $21,269. The line bears interest at the One-Month Term Secured Overnight Financing Rate (“One-Month Term SOFR”) plus 1.5% and is unsecured. Our bank charges a fee of 0.25% on the daily unused balance of the line, payable quarterly. Under the terms of the facility, we must maintain the following financial covenants, measured quarterly on a rolling twelve-month basis:

● Consolidated fixed charge coverage ratio of not less than 1.4 times,

● Consolidated lease-adjusted leverage ratio not to exceed 3.0 times, and

● Minimum tangible net worth of $140,000.

Due to our results of operations in 2023, we were not in compliance with certain of these covenants at the end of our 2023 fiscal year. Consequently, our bank agreed to reduce the consolidated fixed charge coverage ratio to 1.0 times and increase the consolidated lease-adjusted leverage ratio to 3.75 times, as defined, for the year ended November 25, 2023 and the quarter ended March 2, 2024. We were in compliance with the amended covenants at November 25, 2023 and at March 2, 2024. The respective ratios will revert back to the previous values for the quarter ending June 1, 2024. We are in negotiations with our bank and plan to have an amended, restated or new agreement with a similar line of credit in place by the end of the second quarter of 2024.