Debt

12 Months Ended

Jan. 28, 2023

Debt Disclosure [Abstract]

Debt

Note 9 – Debt

On March 23, 2022 we entered into an Amended and Restated Credit Agreement (the “Credit Agreement”), which replaced our existing credit agreement (the "Previous Credit Agreement"). This $100 million amended and restated credit agreement is collateralized by our inventory, expires on March 23, 2027 and contains a swingline sublimit of $15 million. Material covenants associated with the Credit Agreement require that we maintain a minimum net worth of $250 million and a consolidated interest coverage ratio of not less than 3.0 to 1.0. The Credit Agreement also provides that cash dividends and share repurchases of $15 million or less per fiscal year can be made without restriction as long as there is no default or event of default before and immediately after such distributions. We are also permitted to make acquisitions and pay cash dividends or repurchase shares in excess of $15 million in a fiscal year provided that (a) no default or event of default exists before and immediately after the transaction and (b) on a proforma basis, the ratio of (i) the sum of (A) our consolidated funded indebtedness plus (B) three times our consolidated rental expense to (ii) the sum of (A) our consolidated EBITDA plus (B) our consolidated rental expense is less than 3.5 to 1.0. We were in compliance with these covenants at January 28, 2023.

Among other restrictions, the Credit Agreement also limits our ability to incur additional secured or unsecured debt to $20 million. The Credit Agreement bears interest, at our option, at (1) the agent bank’s base rate plus 0.0% to 1.0% or (2) Adjusted Term SOFR plus 0.9% to 1.9%, depending on our achievement of certain performance criteria. A commitment fee is charged at 0.2% to 0.3% per annum, depending on our achievement of certain performance criteria, on the unused portion of the lenders’ commitment.

The terms “net worth”, “consolidated interest coverage ratio”, “consolidated funded indebtedness”, “consolidated rental expense”, “consolidated EBITDA”, “base rate” and “Adjusted Term SOFR” are defined in the Credit Agreement.

The Previous Credit Agreement was terminated on March 23, 2022. At its termination, the Previous Credit Agreement contained covenants which stipulated: (1) Total Shareholders’ Equity (as defined in the Previous Credit Agreement) could not fall below $250 million at the end of each fiscal quarter; (2) the ratio of funded debt plus three times rent expense to EBITDA (as defined in the Previous Credit Agreement) plus rent expense could not exceed 3.0 to 1.0, except for the fiscal quarters ending on or about July 31, 2020; October 31, 2020; and January 31, 2021; (3) the aggregate amount of cash dividends for a fiscal year could not exceed $10 million; and (4) distributions in the form of redemptions of Equity Interests (as defined in the Previous Credit Agreement) could be made solely with cash on hand so long as before and immediately after such distributions there were no revolving loans outstanding under the Previous Credit Agreement. We were in compliance with these covenants at January 29, 2022.

At its termination, the Previous Credit Agreement bore interest, at our option, at (1) the agent bank’s prime rate as defined in the Previous Credit Agreement plus 1.0%, with the prime rate defined as the greater of (a) the Federal Fund rate plus 0.50% or (b) the interest rate announced from time to time by the agent bank as its “prime rate” or (2) LIBOR plus 1.50% to 2.50%, depending on our achievement of certain performance criteria. If the stated LIBOR rate was less than 0.75%, the LIBOR rate for purposes of calculating the interest rate under the Previous Credit Agreement would have been 0.75%. A commitment fee was charged at 0.30% to 0.40% per annum, depending on our achievement of certain performance criteria, on the unused portion of the lenders’ commitment.

No borrowings were outstanding under the credit agreements as of January 28, 2023 and January 29, 2022 and we did not borrow under the credit agreements during Fiscal 2022 or Fiscal 2021. As of January 28, 2023, there were $700,000 in letters of credit outstanding and $99.3 million available to us for borrowing under the Credit Agreement.