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Note 10 - Debt

12 Months Ended

Aug. 27, 2014

Note 10. Debt

Revolving Credit Facility

As of August 27, 2014, the Company had $42.0 million in outstanding loans and $1.1 million committed under letters of credit, which the Company reissued as security for the payment of insurance obligations and $1.1 million in capital lease commitments.

In August 2013, the Company entered into a revolving credit facility with Wells Fargo Bank, National Association, as Administrative Agent, and Amegy Bank, National Association, as Syndication Agent. The following description summarizes the material terms of the revolving credit facility, as subsequently amended on March 21, 2014 and November 7, 2014, (the revolving credit facility is referred to as the “2013 Credit Facility”). The 2013 Credit Facility is governed by the credit agreement dated as of August 14, 2013 (the “2013 Credit Agreement”) among the Company, the lenders from time to time party thereto, Wells Fargo Bank, National Association, as Administrative Agent, and Amegy Bank, National Association, as Syndication Agent. The maturity date of the 2013 Credit Facility is September 1, 2017.

The aggregate amount of the lenders’ commitments under the 2013 Credit Facility was $70.0 million as of August 28, 2013. The 2013 Credit Facility also provides for the issuance of letters of credit in a maximum aggregate amount of $5.0 million outstanding as of August 14, 2013 and $15.0 million outstanding at any one time with prior written consent of the Administrative Agent and the Issuing Bank. At August 27, 2014, under the 2013 Credit Facility, the total available borrowing capacity was up to $49.3 million after applying the Lease Adjusted Leverage Ratio Limitation, the available borrowing capacity was $5.1 million.

The 2013 Credit Facility is guaranteed by all of the Company’s present subsidiaries and will be guaranteed by our future subsidiaries. In addition to the bank’s increased commitment under the 2013 Credit Agreement, it may be increased to a maximum commitment of $90 million.

At any time throughout the term of the 2013 Credit Facility, the Company has the option to elect one of two bases of interest rates. One interest rate option is the greater of (a) the Federal Funds Effective Rate plus 0.50%, or (b) prime, plus, in either case, an applicable spread that ranges from 0.75% to 2.25% per annum. The other interest rate option is the London InterBank Offered Rate plus a spread that ranges from 2.50% to 4.0% per annum. The applicable spread under each option is dependent upon the ratio of our debt to EBITDA at the most recent determination date.

The Company is obligated to pay to the Administrative Agent for the account of each lender a quarterly commitment fee based on the average daily unused amount of the commitment of such lender, ranging from 0.30% to 0.40% per annum depending on the Total Leverage Ratio at the most recent determination date.

The proceeds of the 2013 Credit Facility are available for the Company’s general corporate purposes and general working capital purposes and capital expenditures.

Borrowings under the 2013 Credit Facility are subject to mandatory repayment with the proceeds of sales of certain of the Company’s real property, subject to certain exceptions.

The 2013 Credit Facility is secured by a perfected first priority lien on certain of the Company’s real property and all of the material personal property owned by the Company or any of its subsidiaries, other than certain excluded assets (as defined in the 2013 Credit Agreement). At August 27, 2014, the carrying value of the collateral securing the 2013 Credit Facility was $84.4 million.

The 2013 Credit Agreement, as amended, contains the following covenants among others:

	●	maintenance of a ratio of (a) EBITDA minus $7.5 million (for maintenance capital expenditures) for the four fiscal quarters ending on the last day of any fiscal quarter to (b) the sum of (x) interest expense (as defined in the 2013 Credit Agreement) for such four fiscal-quarter-period plus (y) the outstanding principal balance of the loans as of the last day of such fiscal quarter divided by ten (the “Debt Service Coverage Ratio), of not less than 1.10 to 1.00 during the first, second and third fiscal quarters of fiscal 2015; 1.25 to 1.00 during the fourth fiscal quarter of fiscal 2015 and the first and second fiscal quarters of fiscal 2016; and 1.50 to 1.00 at all times thereafter.

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maintenance of minimum net profit of $1.00 (1) for at least one of any two consecutive fiscal quarters starting with the third fiscal quarter of 2016, and (2) for any period of four consecutive fiscal quarters starting with the fourth fiscal quarter of 2015 (for the fiscal year 2015).

	●	maintenance of a ratio of (a) the sum of (x) indebtedness as of the last day of any fiscal quarter plus (y) eight times rental expense for the four fiscal quarters ending on the last day of any fiscal quarter to (b) the sum of (x) EBITDA for such four fiscal-quarter-period plus (y) rental expense for such four fiscal-quarter-period (the “Lease Adjusted Leverage Ratio”) of no more than (i) 5.75 to 1.00 during the first, second and third fiscal quarters of fiscal 2015, (ii) 5.50 to 1.00 during the fourth fiscal quarter of 2015, (iii) 5.25 to 1.00 during the first fiscal quarter of 2016, (iv) 5.00 to 1.00 during the second fiscal quarter of 2016 and, (v) 4.75 to 1.00 at all times thereafter.

	●	capital expenditures limited to $25.0 million per year,

	●	restrictions on incurring indebtedness, including certain guarantees and capital lease obligations,

	●	restrictions on incurring liens on certain of our property and the property of our subsidiaries,

	●	restrictions on transactions with affiliates and materially changing our business,

	●	restrictions on making certain investments, loans, advances and guarantees,

	●	restrictions on selling assets outside the ordinary course of business,

	●	prohibitions on entering into sale and leaseback transactions,

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restrictions on certain acquisitions of all or a substantial portion of the assets, property and/or equity interests of any person, including share repurchases and dividends.

The Company was in compliance with the covenants contained in the Credit Agreement as of August 27, 2014.

The 2013 Credit Agreement also includes customary events of default. If a default occurs and is continuing, the lenders’ commitments under the 2013 Credit Facility may be immediately terminated and/or the company may be required to repay all amounts outstanding under the 2013 Credit Facility.

As of August 27, 2014, the Company had $42.0 million in outstanding loans and $1.1 million committed under letters of credit, which the company reissued as security for the payment of insurance obligations and $1.1 million in capital lease commitments.

Interest Expense

Total interest expense incurred for fiscal 2014, 2013 and 2012 was $1.6 million, $0.9 million and $0.9 million, respectively. Interest paid was approximately $1.4 million, $0.8 million and $0.8 million in fiscal 2014, 2013 and 2012, respectively. No interest expense was allocated to discontinued operations in fiscal 2014, 2013 or 2012 . No interest was capitalized on properties in fiscal 2014, 2013 or 2012.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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