Quarterly report pursuant to Section 13 or 15(d)

Debt

v3.23.3
Debt
 9 Months Ended
Oct. 02, 2023
Debt Disclosure [Abstract]  
Debt Debt
(in thousands) October 2, 2023 January 2, 2023
Term loan $ 52,067  $ 54,507 
Related party note payable 15,100  10,000 
Revolving line of credit —  4,000 
Other notes payable 722  780 
Finance lease liability 1,280  933 
Total Debt $ 69,169  $ 70,220 
Less: Unamortized debt discount to related party note (650) (765)
Less: Unamortized debt issuance costs (1,134) (1,441)
Total Debt, net 67,385  68,014 
Less: Short-term borrowings, including finance leases (3,539) (4,985)
Total Long-term borrowings, including finance leases and related party note payable $ 63,846  $ 63,029 

The Company Credit Agreement, which provides the Company with lender financing structured as a $52.1 million term loan and $4.0 million available under the line of credit as of October 2, 2023, has a maturity date of September 30, 2025.

On February 1, 2023, the Credit Agreement was amended through the Fourteenth Amendment and subsequently on February 24, 2023 further amended through the Fifteenth Amendment resulting in the Company and its subsidiaries entering into a Secured Promissory Note (the “Note”) with CP7 Warming Bag L.P., an affiliate of L. Catterton Fund L.P., as lender (the “Junior Lender”), pursuant to which the Junior Lender continued that certain delayed draw term loan (the “Delayed Draw Term Loan”) of $10.0 million, under the Credit Agreement, which is junior subordinated secured indebtedness, and also provided $5.1 million of new junior subordinated secured indebtedness, to the Company (collectively the “Junior Indebtedness”), for a total of $15.1 million in junior subordinated secured debt on terms reasonably acceptable to the Required Lenders (as defined in the Credit Agreement), including, without limitation, that (1) such indebtedness shall not mature until at least two (2) years after the maturity date of the credit facility of September 30, 2025; (2) no payments of cash interest shall be made on such indebtedness until after the repayment in full of the obligations under the Credit Agreement; and (3) no scheduled or voluntary payments of principal shall be made until after the repayment in full of the obligations under the Credit Agreement.

On July 7, 2023 the Credit Agreement was amended through the Sixteenth Amendment, which amended the definition of EBITDA for the purposes of expanding the scope of non-recurring items that may be included in the determination of Adjusted EBTIDA, as well as modifications to certain covenants for leverage and fixed charge ratios.

The terms of the Credit Agreement require the Company to repay the principal of the term loan in quarterly installments with the balance due at the maturity date, as follows:

in thousands
2023 $ 814 
2024 3,254 
2025 47,999 
Total $ 52,067 

The Credit Agreement, including the term loan and revolving line of credit, is secured by substantially all of the Company’s assets and incurs interest on outstanding amounts at the following rates per annum through maturity:
Time Period Interest Rate
Through December 31, 2022 6.75%
From January 1, 2023 through June 15, 2023 6.75%
From June 16, 2023 through December 31, 2023 6.75%
From January 1, 2024 through June 15, 2024 7.25%
From June 16, 2024 through maturity 7.75%

The Delayed Draw Term Loan is a non-interest bearing loan and accordingly was recorded at fair value as part of the Anthony’s acquisition which resulted in a debt discount of approximately $1.3 million and is being amortized over the period of the Delayed Draw Term Loan. The Company recorded debt discount amortization of an immaterial amount for the quarter ended October 2, 2023 and $0.1 million for the nine months ended October 2, 2023, which is included within interest expense in the accompanying consolidated statements of operations.

The Junior Indebtedness, which accrues interest at 4% per annum (i) is secured by a second lien on substantially all of the assets of the Company and the subsidiary guarantors (the “Guarantors”) pursuant to the terms and that certain Guaranty and Security Agreement, dated February 24, 2023, by and among the Guarantors and the Junior Lender, (ii) is subject to the terms of that certain Intercreditor and Subordination Agreement dated February 24, 2023, by and between the Administrative Agent and the Junior Lender and acknowledged by the borrowers and the guarantors, and (iii) matures on the date that is the second anniversary of the maturity date under the Credit Agreement (the “Junior Maturity Date”) (September 30, 2027, based on the maturity date under the Credit Agreement of September 30, 2025).

Under the terms of the Junior Indebtedness, no payments of cash interest or payments of principal shall be due until the Junior Maturity Date, and no voluntary prepayments may be made on the Junior Indebtedness prior to the Junior Maturity Date until after the repayment in full of the obligations under the Credit Agreement.

The Company had $14.4 million and $9.2 million recorded, net of unamortized discount under the Junior Indebtedness as of October 2, 2023 and January 2, 2023, included in related party note payable in the accompanying consolidated balance sheets.

The amendments to the Credit Agreement and the Delayed Draw Term Loan were accounted for as modifications of debt in the Company’s accompanying consolidated financial statements.

For the quarter and nine months ended October 2, 2023 and October 3, 2022, interest expense consisted of:



Quarter Ended Nine Months Ended
(in thousands) October 2, 2023 October 3, 2022 October 2, 2023 October 3, 2022
Interest on credit agreement $ 1,069  $ 1,024  $ 3,199  $ 2,855 
Amortization of debt issuance costs 38  110  115  402 
Amortization of related party note discount 128  128  364  383 
Non-cash interest on redeemable preferred stock 1,063  963  3,127  2,871 
Other interest (income) expense, net (79) 20  (297) 51 
$ 2,219  $ 2,245  $ 6,508  $ 6,562