Notes Payable

6 Months Ended

Jul. 31, 2018

Debt Disclosure [Abstract]

Notes Payable

Note 6 – Notes Payable

Long-term debt consists of the following:

	July 31, 2018			July 31, 2017			January 31, 2018
	(In thousands)
Term loan	$	300,000		$	300,000		$	300,000
Revolving credit facility		111,426			193,955			12,003
Note issued to LVMH		125,000			125,000			125,000
Subtotal		536,426			618,955			437,003
Less: Net debt issuance costs(1)		(11,320	)		(13,932	)		(12,626	)
Debt discount		(30,900	)		(36,189	)		(33,333	)
Total	$	494,206		$	568,834		$	391,044

(1) Does not include debt issuance costs, net of amortization, totaling $8.3 million, $10.8 million and $9.5 million as of July 31, 2018, July 31, 2017 and January 31, 2018, respectively, related to the revolving credit facility. The debt issuance costs have been deferred and are classified within prepaid expenses and other current assets in the accompanying Condensed Consolidated Balance Sheets as required under Accounting Standards Update (“ASU”) 2015-15.

Term Loan

In connection with the acquisition of DKI, the Company borrowed $350.0 million under a senior secured term loan facility (the “Term Loan”). On December 1, 2016, the Company prepaid $50.0 million in principal amount of the Term Loan. The Term Loan is payable on maturity in December 2022.

Interest on the outstanding principal amount of the Term Loan accrues at a rate equal to the London Interbank Offered Rate (“LIBOR”), subject to a 1% floor, plus an applicable margin of 5.25% or an alternate base rate (defined as the greatest of  (i) the “prime rate” as published by the Wall Street Journal from time to time, (ii) the federal funds rate plus 0.5% or (iii) the LIBOR rate for a borrowing with an interest period of one month) plus 4.25%, per annum, payable in cash. As of July 31, 2018, interest under the Term Loan was being paid at an average rate of 7.24% per annum.

The Term Loan is secured by certain assets of the Company and certain of its subsidiaries. The Term Loan is required to be prepaid with the proceeds of certain asset sales if such proceeds are not applied as required by the agreement within certain specified deadlines. The Term Loan contains covenants that restrict the Company’s ability to among other things, incur additional debt, sell or dispose certain assets, make certain investments, incur liens and enter into acquisitions. This loan also includes a mandatory prepayment provision based on excess cash flow as defined in the agreement. A first lien leverage covenant requires the Company to maintain a level of debt to EBITDA over the term of the agreement at a ratio as set forth in the agreement. As of July 31, 2018, the Company was in compliance with these covenants.

Revolving Credit Facility

Upon closing of the acquisition of DKI, the Company’s previous credit agreement was refinanced and replaced by a $650 million amended and restated credit agreement (the “revolving credit facility”). Amounts available under the revolving credit facility are subject to borrowing base formulas and over advances as specified in the revolving credit facility agreement. Borrowings bear interest, at the Company’s option, at LIBOR plus a margin of 1.25% to 1.75% or an alternate base rate (defined as the greatest of  (i) the “prime rate” of JPMorgan Chase Bank, N.A. from time to time, (ii) the federal funds rate plus 0.5% or (iii) the LIBOR rate for a borrowing with an interest period of one month) plus a margin of 0.25% to 0.75%, with the applicable margin determined based on the availability under the revolving credit facility agreement. As of July 31, 2018, interest under the revolving credit agreement was being paid at an average rate of 3.61% per annum. The revolving credit facility has a five-year term ending December 1, 2021. In addition to paying interest on any outstanding borrowings under the revolving credit facility, the Company is required to pay a commitment fee to the lenders under the credit agreement with respect to the unutilized commitments. The commitment fee accrues at a rate equal to 0.25% per annum on the average daily amount of the unutilized commitments.

As of July 31, 2018, the Company had $111.4 million of borrowings outstanding under the revolving credit facility all of which are classified as long-term liabilities. As of July 31, 2018, there were outstanding trade and standby letters of credit amounting to $12.4 million and $3.4 million, respectively.

LVMH Note

As part of the consideration for the acquisition of DKI, the Company issued to LVMH Moet Hennessy Louis Vuitton Inc. (“LVMH”) a junior lien secured promissory note in the principal amount of $125.0 million (the “LVMH Note”) that bears interest at the rate of 2% per year. $75.0 million of the principal amount of the LVMH Note is due and payable on June 1, 2023 and $50.0 million of such principal amount is due and payable on December 1, 2023. Accounting Standards Codification (“ASC”) 820 - Fair Value Measurements requires the note to be recorded at fair value. As a result, the Company recorded a debt discount in the amount of $40.0 million. This discount is being amortized as interest expense using the effective interest method over the term of the LVMH Note.