Line of Credit

6 Months Ended

Aug. 03, 2019

Debt Disclosure [Abstract]

Line of Credit

7. LINE OF CREDIT

After completion of a debt refinancing on February 1, 2018 the Company has in place a $50,000,000 senior secured revolving credit facility (the “Credit Facility”), which was entered into in connection with the issuance of the Company’s $25,000,000 Term Loan (as defined below) (see Note 7). Proceeds from advances under the Credit Facility, subject to certain restrictions, may be used to provide financing for working capital, letters of credit, capital expenditures, and other general corporate purposes.

The Credit Facility, which matures on January 31, 2023, contains various affirmative and negative covenants and representations and warranties including the requirement that the Company maintain Excess Availability (as defined in the related Credit Agreement) of more than the greater of 10% of the Combined Loan Caps (as defined in the related Credit Agreement) and $7,000,000. In the event the outstanding balance of the Term Loan exceeds the Term Loan Borrowing Base (as defined in the related Term Loan Agreement) then a reserve will be imposed against availability under the Credit Facility. The Credit Facility is secured by a security interest in the Company’s trade receivables, inventory, letter of credit rights, cash, intangibles and certain other assets. The interest rate on outstanding borrowings is equal to, at the Company’s election, either 1) the lender’s base rate plus 0.50% or 2) a LIBOR rate plus 1.0%. The Company also pays an unused line fee under the Credit Facility of 0.25% per annum.

Any amounts outstanding under the Credit Facility may be accelerated and become due and payable immediately and all loan and letter of credit commitments thereunder may be terminated upon an event of default and expiration of any applicable cure period. Events of default include: 1) nonpayment of obligations due under the subject loan agreement and related loan documents, 2) cross-defaults to other indebtedness and documents, 3) failure to perform any covenant or agreement contained in the subject loan agreement, 4) material misrepresentations, 5) failure to pay, or certain other defaults under, other material indebtedness of the Company, 6) certain bankruptcy or insolvency events, 7) a change of control, 8) indictments of the Company or senior management in a material forfeiture action, 9) default under certain material contracts to the extent such termination or default has or could reasonably be expected to have a material adverse effect, and 10) customary ERISA defaults, among others.

In connection with the original execution and subsequent amendments of the Credit Facility, the Company incurred deferred financing costs of $1,281,000. These deferred financing costs are being amortized over the term of the Credit Facility agreement and are included in “interest expense, net” in the consolidated statements of operations.

As of August 3, 2019, the Company had $23,300,000 in outstanding borrowings under the Credit Facility, $6,297,000 in letters of credit and $5,169,000 of availability based on the Company’s Borrowing Base formula and availability reserve requirements. As of August 4, 2018, the Company had $7,300,000 in outstanding borrowings under the previous Credit Facility, $7,327,000 in letters of credit and $19,044,000 of availability. For the three months ended August 3, 2019 and August 4, 2018 borrowings had a weighted interest rate of 4.37% and 4.13% per annum, respectively. For the six months ended August 3, 2019 and August 4, 2018 borrowings had a weighted interest rate of 4.45% and 3.97% per annum, respectively.  During the six months ended August 3, 2019 and August 4, 2018 the Company’s average levels of direct borrowings were $26,904,000 and $16,356,000, respectively, and the Company’s maximum borrowings were $32,300,000 and $27,400,000, respectively.