Revolving Credit Facility

12 Months Ended

Dec. 30, 2016

Revolving Credit Facility

Revolving Credit Facility

NOTE 4 - REVOLVING CREDIT FACILITY

On December 5, 2016, the Company entered into a new and expanded revolving credit facility with JPMorgan Chase Bank, N.A., as Administrative Agent, and certain other lenders (the “Facility”).  The Facility provides a credit line of $225.0 million on and after December 5, 2016, and up to $350 million on and after the closing of the Company’s acquisition of 80% of the membership interests in the CHS JV Transaction.  The Facility also includes an accordion feature providing that up to $150 million of additional borrowings may be available upon our further request and approval by a lender or lenders willing to extend such borrowings.  Borrowings, other than letters of credit, under the Facility generally will bear interest at a varying rate equal to the London Interbank Offered Rate (“LIBOR”) plus a margin which varies from 1.50% to 2.75%, depending on our leverage ratio.  The Facility is secured by substantially all our assets and the assets and stock of our subsidiaries. Our subsidiaries have also guaranteed the Facility.  The Facility has a maturity date of December 3, 2021.  Debt issuance costs of $4.7 million were capitalized with the Facility and will be amortized through December, 2021. 

Borrowings under the Facility are subject to various covenants, including a maximum leverage ratio for all calculation dates ending on or before December 31, 2017, of 4.0 times earnings before interest, taxes, depreciation and amortization, as adjusted (“EBITDA”) plus “Acquired EBITDA” from pro-forma acquisitions as defined.  The maximum leverage ratio steps down, to a maximum leverage ratio of 3.75 times EBITDA plus Acquired EBITDA for calculation dates after December 31, 2017, and on or before June 30, 2018, and to a maximum leverage ratio of 3.5 times EBITDA plus Acquired EBITDA for calculation dates on and after September 30, 2018.  Borrowings under the revolving credit facility may be used for general corporate purposes, including acquisitions.  A portion of the proceeds were used to repay all the outstanding obligations of our prior credit agreement.  Additionally, on December 30, 2016 the Company borrowed approximately $128.9 million from the Facility to finance the CHS Home Health transaction, which was classified as a Transaction Deposit and included in Revolving credit facility in the Consolidated Balance Sheets. 

As of December 30, 2016, the Company was in compliance with the various financial covenants.  Application of the Facility’s borrowing formula as of December 30, 2016, would have permitted approximately $78.6 million to be used.  We had irrevocable letters of credit totaling $14.7 million in connection with our self-insurance programs.

On January 25, 2017, the Company sold 3,450 shares of common stock for net proceeds of $144.3 million, after deducting the estimated underwriting discounts and commissions and our offering expenses, which were used to repay obligations under the Facility.  As a result, credit available under the Facility increased thereafter to approximately $204 million. See Note 13, “Subsequent Events” for further details.    

The effective interest rates on our borrowings were 3.6% and 3.5% for 2016 and 2015, respectively.