Debt

3 Months Ended

May 27, 2023

Debt Disclosure [Abstract]

Debt

Debt

As of May 27, 2023, we had a committed revolving credit facility with Wells Fargo Bank, N.A. as administrative agent, and other lenders with maximum borrowings of up to $385 million and a maturity date of August 5, 2027. Outstanding borrowings under the revolving credit facility were $155.0 million and $156.0 million as of May 27, 2023 and February 25, 2023, respectively.

Our revolving credit facility contains two maintenance financial covenants that require us to stay below a maximum debt-to-EBITDA ratio of 3.25 and maintain a minimum ratio of EBITDA-to-interest expense of 3.00. In the event we make an acquisition for which the purchase price is greater than $75 million, we can elect to increase the maximum debt-to-EBITDA ratio to 3.75 for a period of four consecutive fiscal quarters, commencing with the fiscal quarter in which a qualifying acquisition occurs. No more than two acquisition "holidays" can occur during the term of the facility, and at least two fiscal

quarters must separate qualifying acquisitions. Both ratios are computed quarterly, with EBITDA calculated on a rolling four-quarter basis. At May 27, 2023, we were in compliance with both financial covenants.

Borrowings under the credit facility bear floating interest at either the Base Rate or Term SOFR, plus a margin based on the Leverage Ratio (as defined in the Credit Agreement). For Base Rate borrowings, the margin ranges from 0.125% to 0.75%. For Term SOFR borrowings, the margin ranges from 1.135% to 1.85%.

The facility also contains an "accordion" provision. Under this provision, we can request that the facility be increased by as much $200.0 million. Any Lender may elect or decline to participate in the requested increase at the Lender’s sole discretion.

At May 27, 2023, we had a total of $12.3 million of ongoing letters of credit related to industrial revenue bonds, construction contracts and insurance collateral that expire in fiscal years 2024 to 2032 and reduce borrowing capacity under the revolving credit facility. As of May 27, 2023, the amount available for revolving borrowings under the Wells Fargo credit facility was $217.7 million.

At May 27, 2023, debt included $12.0 million of industrial revenue bonds that mature in fiscal years 2036 through 2043. The fair value of all industrial revenue bonds approximated carrying value at May 27, 2023, due to the variable interest rates on these instruments.

We also maintain two Canadian committed, revolving credit facilities with the Bank of Montreal totaling $25.0 million (USD). The Canadian committed revolving credit facilities expire annually in February, but can be renewed each year solely at our discretion until August 2027, therefore, we have classified all outstanding amounts under these facilities as long-term debt within our consolidated balance sheets. At May 27, 2023 and February 25, 2023, outstanding borrowings under these Canadian committed, revolving credit facilities were $3.7 million and $1.8 million, respectively. At May 27, 2023, the total amount available for revolving borrowings under the Bank of Montreal credit facilities was $21.3 million. The Bank of Montreal credit facilities have two maintenance financial covenants that are identical to those contained in the Wells Fargo credit facility. At May 27, 2023, we were in compliance with both financial covenants.

Our Wells Fargo credit facility, Bank of Montreal credit facilities and industrial revenue bonds would be classified as Level 2 within the fair value hierarchy described in Note 4.

Interest payments under the Wells Fargo and Bank of Montreal facilities were $2.4 million and $1.1 million for the three months ended May 27, 2023 and May 28, 2022, respectively.