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Long-Term Debt
 6 Months Ended
Jun. 28, 2011
Long-Term Debt  
Long-Term Debt

3.  Long-Term Debt

 

In December 2010, we entered into a five-year credit agreement (“Facility”) that provides us with revolving loan commitments that total $200 million, including letter of credit subfacility commitments that total $35 million.  The Facility contains a commitment increase feature that could provide for an additional $50 million in available credit upon our request and the satisfaction of certain conditions.  We had no outstanding borrowings under the Facility at June 28, 2011 or December 28, 2010.

 

Borrowings under the Facility bear interest at a floating rate based on LIBOR, plus a spread ranging from 1.75% to 2.25%, depending on our ratio of debt plus eight times rent (“Adjusted Debt”) to trailing 12-month earnings before interest, taxes, depreciation, amortization, rent  and noncash stock option expense (“EBITDAR”), as defined in the agreement.  In addition, we pay a commitment fee ranging from 0.3% to 0.4%, also depending on our ratio of Adjusted Debt to EBITDAR, calculated on the average unused portion of the Facility.

 

We are obligated to maintain certain financial covenants, which include a maximum Adjusted Debt to trailing 12-month EBITDAR ratio (“Adjusted Debt Ratio”) of 4.0, as well as a trailing 12-month minimum EBITDAR to interest and rental expense ratio (“EBITDAR Ratio”) of 1.9.  At June 28, 2011, our Adjusted Debt and EBITDAR Ratios were both 2.8.  Therefore we were in compliance with the financial covenants in effect under the Facility at that date.

 

Availability under the Facility is reduced by outstanding standby letters of credit, which are used to support our self-insurance programs.  At June 28, 2011, we had net availability for borrowings of $181 million, based upon a zero outstanding debt balance and $19 million in standby letters of credit. In addition, our Facility limits cash distributions with respect to our equity interests, such as cash dividends and share repurchases, based on a defined leverage ratio.