Long-Term Debt | 6 Months Ended |
Jun. 29, 2014 |
Debt Disclosure [Abstract] | ' |
Long-Term Debt | ' |
6. Long-Term Debt |
A summary of long-term debt is as follows: |
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| | Maturity | | | Interest Rate | | | As Of | |
Facility | | | | June 29, | | | December 29, | |
2014 | 2013 |
Senior Secured | | | | | | | | | | | | | | | | |
Term Loan, net of original issue discount | | | Apr-20 | | | | Variable | | | $ | 308,332 | | | $ | 311,240 | |
$60.0 million Revolving Credit Facility | | | April 2018 | | | | Variable | | | | — | | | | — | |
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Total debt | | | | | | | | | | | 308,332 | | | | 311,240 | |
Less current portion | | | | | | | | | | | (5,837 | ) | | | (5,822 | ) |
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Long-term debt, net of current portion | | | | | | | | | | $ | 302,495 | | | $ | 305,418 | |
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Current portion of long-term debt is presented net of issue discount of $1.2 million at both June 29, 2014 and December 29, 2013. The noncurrent portion of long-term debt is presented net of issue discount of $5.3 million and $5.8 million as of June 29, 2014 and December 29, 2013, respectively. |
Senior Secured Credit Facilities |
April 2013 Refinancing |
On April 23, 2013, the Company’s subsidiary, Sprouts Farmers Markets Holdings, LLC (“Intermediate Holdings”), as borrower, refinanced (the “April 2013 Refinancing”) the Former Revolving Credit Facility and the Former Term Loan (each, as defined below), by entering into a new credit facility (the “Credit Facility”). The Credit Facility provides for a $700.0 million term loan (the “Term Loan”) and a $60.0 million senior secured revolving credit facility (the “Revolving Credit Facility”). |
The terms of the Credit Facility allow the Company, subject to certain conditions, to increase the amount of the term loans and revolving commitments thereunder by an aggregate incremental amount of up to $160.0 million, plus an additional amount, so long as after giving effect to such increase, (i) in the case of incremental loans that rank pari passu with the initial term loans, the net first lien leverage ratio does not exceed 4.00 to 1.00, and (ii) in the case of incremental loans that rank junior to the initial Term Loan, the total leverage ratio does not exceed 5.25 to 1.00. |
Guarantees |
Obligations under the Credit Facility are guaranteed by the Company and all of its current and future wholly owned material domestic subsidiaries. Borrowings under the Credit Facility are secured by (i) a pledge by Sprouts of its equity interests in Intermediate Holdings and (ii) first-priority liens on substantially all assets of Intermediate Holdings and the subsidiary guarantors, in each case, subject to permitted liens and certain exceptions. |
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Interest and Applicable Margin |
All amounts outstanding under the Credit Facility will bear interest, at the Company’s option, at a rate per annum equal to LIBOR (with a 1.00% floor with respect to Eurodollar borrowings under the Term Loan), adjusted for statutory reserves, plus a margin equal to 3.00%, or an alternate base rate, plus a margin equal to 2.00%, as set forth in the Credit Facility. These interest margins were reduced to their current levels (from 3.50% and 2.50%, respectively) effective August 2, 2013, as a result of (i) the consummation of the Company’s IPO, and (ii) the Company achieving a reduction in the net first lien leverage ratio to less than or equal to 2.75 to 1.00. |
Payments and Prepayments |
The Term Loan will mature in April 2020 and will amortize at a rate per annum, in four equal quarterly installments, in an aggregate amount equal to 1.00% of the original principal balance, with the balance due on the maturity date. |
Subject to exceptions set forth therein, the Credit Facility requires mandatory prepayments in amounts equal to (i) 50% (reduced to 25% if net first lien leverage is less than 3.00 to 1.00 but greater than 2.50 to 1.00 and 0% if net first lien leverage is less than 2.50 to 1.00) of excess cash flow (as defined in the Credit Facility) at the end of each fiscal year, (ii) 100% of the net cash proceeds from certain non-ordinary course asset sales by the Company or any subsidiary guarantor (subject to certain exceptions and reinvestment provisions) and (iii) 100% of the net cash proceeds from the issuance or incurrence of debt by the Company or any of its subsidiaries not permitted under the Credit Facility. |
Voluntary prepayments of borrowings under the Credit Facility are permitted at any time, in agreed-upon minimum principal amounts. Prepayments will not be subject to premium or penalty (except LIBOR breakage costs, if applicable). |
Revolving Credit Facility |
The Credit Facility includes a $60.0 million Revolving Credit Facility which matures in April 2018. The Revolving Credit Facility includes letter of credit and $5.0 million swingline loan subfacilities. Letters of credit issued under the facility reduce the borrowing capacity on the total facility. There are no amounts outstanding on the Revolving Credit Facility at June 29, 2014. Letters of credit totaling $7.4 million have been issued as of June 29, 2014 primarily to support the Company’s insurance programs. Amounts available under the Revolving Credit Facility at June 29, 2014 totaled $52.6 million. |
Interest terms on the Revolving Credit Facility are the same as the Term Loan. |
The Company capitalized debt issuance costs of $1.1 million related to the Revolving Credit Facility, which are being amortized to interest expense over the term of the Revolving Credit Facility. |
Under the terms of the Credit Facility, the Company is obligated to pay a commitment fee on the available unused amount of the Revolving Credit Facility commitments equal to 0.50% per annum. |
Covenants |
The Credit Facility contains financial, affirmative and negative covenants. The negative covenants include, among other things, limitations on the Company’s ability to: |
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| • | | incur additional indebtedness; | | | | | | | | | | | | | |
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| • | | grant additional liens; | | | | | | | | | | | | | |
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| • | | enter into sale-leaseback transactions; | | | | | | | | | | | | | |
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| • | | make loans or investments; | | | | | | | | | | | | | |
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| • | | merge, consolidate or enter into acquisitions; | | | | | | | | | | | | | |
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| • | | pay dividends or distributions; | | | | | | | | | | | | | |
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| • | | enter into transactions with affiliates; | | | | | | | | | | | | | |
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| • | | enter into new lines of business; | | | | | | | | | | | | | |
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| • | | modify the terms of subordinated debt or other material agreements; and | | | | | | | | | | | | | |
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| • | | change its fiscal year | | | | | | | | | | | | | |
Each of these covenants is subject to customary or agreed-upon exceptions, baskets and thresholds. |
In addition, if the Company has any amounts outstanding under the Revolving Credit Facility as of the last day of any fiscal quarter, the Revolving Credit Facility requires the borrower to maintain a ratio of Revolving Facility Credit exposure to consolidated trailing 12-month EBITDA (as defined in the Credit Facility) of no more than 0.75 to 1.00 as of the end of each such fiscal quarter. |
The Company was in compliance with all applicable covenants under the Credit Facility as of June 29, 2014. |