Change in Fair Value of Interest Rate Swap
The Company had an interest rate swap agreement that effectively fixed the interest payments on a portion of the Companys
variable-rate debt. The swap, which terminated on September 11, 2016, effectively fixed the LIBOR-based interest rate on the debt in the amount of the notional amount of the swap at 9.985%. Prior to the termination of the interest rate swap,
the notional amount of the swap was $72.5 million. During fiscal 2016, prior the termination of the interest rate swap, the fair value of the derivative increased by $0.3 million and, accordingly, a
non-cash gain of $0.3 million was recorded. For the fifty-two weeks ended December 26, 2015, the fair value of the derivative increased by $0.1 million
and a non-cash gain of $0.1 million was recorded.
Provision for (Benefit from) Income
The benefit from income taxes was less than $0.1 million for fiscal 2016 as compared to a provision for
income taxes of $1.4 million for the fifty-two weeks ended December 26, 2015.
The effective tax rate for fiscal 2016 was -0.3% as compared to an effective tax rate of 7.4% for
the fifty-two week period ended December 26, 2015. The tax benefit in fiscal 2016 reflected the utilization of deferred tax assets, and subsequent reversal of valuation allowances against such deferred
tax assets, which offset the Companys pre-tax book income. The tax expense for the fifty-two week period ended December 26, 2015 primarily related to foreign
and alternative minimum tax.
Liquidity and Capital Resources
At December 30, 2017, the Company had net working capital of $101.4 million. The Companys capitalization at December 30, 2017 was $249.1 million and consisted of total debt of
$141.6 million and stockholders equity of $107.5 million.
On June 11, 2013, the Company entered into a
Loan Agreement (the ABL Facility) by and among the Company, Bank of America, N.A., as Agent, SunTrust Bank, as Syndication Agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated and SunTrust Robinson Humphrey, Inc., as Joint
Lead Arrangers and Bookrunners, and the Lenders that are party to the ABL Facility (the Asset-Based Lenders).
Under the ABL Facility, the Asset-Based Lenders agreed to provide a revolving senior secured asset-based credit facility in an aggregate
principal amount of $175,000. On August 7, 2015, the aggregate commitments were permanently reduced, at the election of the Company, by $50,000, from $175,000 to $125,000. Outstanding amounts under the ABL Facility will bear interest at a rate
per annum equal to, at the Companys election: (1) a base rate (equal to the greatest of (a) the prime lending rate, (b) the federal funds rate plus 0.50%, and (c) the
30-day LIBOR rate plus 1.00% per annum) (the Base Rate) plus an applicable margin (equal to a specified margin based on the interest rate elected by the Company, the fixed charge coverage ratio
under the ABL Facility and the applicable point in the life of the ABL Facility (the Applicable Margin)), or (2) a LIBOR rate plus the Applicable Margin (the LIBOR Rate). Interest on loans under the ABL Facility bearing
interest based upon the Base Rate will be due monthly in arrears, and interest on loans bearing interest based upon the LIBOR Rate will be due on the last day of each relevant interest period or, if sooner, on the respective dates that fall every
three months after the beginning of such interest period. In September 2015 and April 2017, the ABL Facility was amended to, among other things, provide a new lower pricing tier and extend the maturity of the ABL Facility. For more information, see
Note 8 Debt ABL Facility.
Pursuant to an Amended and Restated Guarantee and Collateral Agreement dated as of April 7,
2017 (the ABL Security Agreement), the ABL Facility is secured by a first priority security interest in substantially all assets of the Company and the subsidiary borrowers. Under the New Intercreditor Agreement (as defined below), the
ABL Lenders have a first priority security interest in substantially all working capital assets of the Company and the subsidiary borrowers, and a second priority security interest in all other assets, subordinate only to the first priority security
interest of the New Term Loan Lenders (as defined below) in such other assets.