Borrowings

12 Months Ended

Jan. 02, 2018

Debt Disclosure [Abstract]

Borrowings

Long-Term Debt

The Company has a credit facility consisting of a credit line of $97.5 million, expiring in June 2019. As of January 2, 2018, the Company had $58.8 million of indebtedness and $3.3 million of letters of credit outstanding under the revolving line of credit. The Company’s ability to borrow funds pursuant to the revolving line of credit is further limited by the requirement that it comply with the revolving line of credit’s financial covenants upon the measurement dates specified therein. These financial covenants include a maximum lease-adjusted leverage ratio and a minimum consolidated fixed charge coverage ratio. The credit agreement also contains other customary covenants, including limitations on additional borrowings, acquisitions, dividend payments and lease commitments.

On February 8, 2017, the Company entered into an amendment to its credit facility. Among other things, giving effect to the equity issuances completed during the first quarter of 2017, the amendment increased the interest rate, increased capital expenditure amounts related to restaurant growth and made certain other changes.

On November 8, 2017, the Company entered into an amendment to its credit facility. Among other things, the amendment (i) increased the lease adjusted leverage ratios and decreased the fixed charge coverage ratios, (ii) increased the interest rate margin applicable to the total lease adjusted leverage levels at and above 3.75:1.00, (iii) added automatic and permanent reduction to the revolving credit facility by $2.5 million per quarter beginning with the fourth quarter of 2017, (iv) provided for a maturity date of June 4, 2019, (v)

modified the capital expenditure covenant so that it applies to total capital expenditures and not only growth capital expenditures and permits total capital expenditures of up to $22.0 million in 2017 and $10.0 million per year thereafter, and (vi) made certain other changes. Borrowings under the agreement as amended bear interest, at the Company’s option, at either (i) LIBOR plus 2.50% to 3.75%, based on the lease-adjusted leverage ratio or (ii) the highest of the following rates plus 1.50% to 2.75%: (a) the federal funds rate plus 0.50%; (b) the Bank of America prime rate or (c) the one month LIBOR plus 1.00%. The credit facility includes a commitment fee of 0.35% to 0.55%, based on the lease-adjusted leverage ratio, per year on any unused portion of the credit facility.

The credit facility bore interest at a range of 3.77% to 7.00% during 2017. The Company recorded interest expense of $3.8 million, $2.9 million and $1.4 million for 2017, 2016 and 2015, respectively, of which $0.5 million, $0.1 million, and $0.1 million was amortization of debt issuance costs in each of the respective years.

As of January 2, 2018, the Company was in compliance with all of its debt covenants.

The credit facility is secured by a pledge of stock of substantially all of the Company’s subsidiaries and a lien on substantially all of the personal property assets of the Company and its subsidiaries.