Revolving Credit Facility

6 Months Ended

Jun. 30, 2017

Revolving Credit Facility

Revolving Credit Facility

4.Revolving Credit Facility

The Company has a senior secured 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 up to $350 million with a maturity date of December 3, 2021, and an “accordion” feature providing for potential future expansion of the Facility up to $150 million of additional borrowings upon 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 the Company’s leverage ratio.  The Facility is secured by substantially all assets and the assets and stock of the Company’s subsidiaries. The subsidiaries have also guaranteed the Facility.  Debt issuance costs of $4.7 million were capitalized with the Facility and are being amortized to interest expense 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. 

On December 30, 2016, the Company borrowed approximately $128.9 million from the Facility to finance the CHS-JV transaction, which was classified as a Transaction deposit and was included in revolving credit facility in the 2016 Consolidated Balance Sheet.  On December 31, 2016, the first day of the Company’s 2017 fiscal year, the Transaction deposit converted to purchase price with the closing of the CHS-JV acquisition.  On January 25, 2017, the Company sold 3.5 million shares of common stock for net proceeds of $143.9 million, after deducting the estimated underwriting discounts and commissions and offering expenses, which were used to repay obligations under the Facility. 

As of June 30, 2017, the Company was in compliance with the various financial covenants.  Application of the Facility’s borrowing formula as of June 30, 2017, would have permitted approximately $198.2 million to be used.  The Company had irrevocable letters of credit totaling $16.7 million in connection with its self-insurance programs. 

The effective interest rates on the Company’s borrowings were 3.89% and 5.76% for the quarters ended June 30, 2017 and July 1, 2016, respectively.