Cracker Barrel 2006 Annual Report Download - page 60

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5TENDER OFFER
On March 31, 2006, the Company commenced a tender
offer in which it sought to acquire up to 16,750,000
shares of its common stock at a price between $42.00
and $46.00 per share (“the Tender Offer”). The Tender
Offer expired on April 27, 2006, at which time approx-
imately 23,500,000 shares were tendered at a price of
$42.00 per share. The Tender Offer met the definition
of a forward contract under SFAS No. 150, “Accounting
for Certain Financial Instruments with Characteristics
of both Liabilities and Equity.” As of April 28, 2006, the
obligation to settle the Tender Offer of $702,852 and
the related transaction fees of $1,219 were recorded
as a liability and a reduction to shareholders’ equity.
On May 4, 2006, the Company accepted for payment
16,750,000 shares of its common stock at a purchase
price of $42.00 per share for a total purchase price of
$703,500. In accordance with SFAS No. 150, the
difference of $648 between the fair market value of
the obligation at April 28, 2006 of $702,852 and
the total purchase price of $703,500 was included in
interest expense in the Company’s fourth quarter.
The Company contemporaneously drew $725,000 under
its new credit facility, described in Note 6, to pay
for the shares accepted in the Tender Offer and related
transaction fees and expenses.
6DEBT
Long-term debt consisted of the following at:
July 28, July 29,
2006 2005
Term Loan B payable $2,000 per
quarter with the remainder due
on April 27, 2013 $723,000 —
$300,000 Revolving Credit Facility
payable on or before February 21, 2008
terminated on April 27, 2006 — $ 21,500
3.0% Zero-Coupon Contingently
convertible Senior Notes payable
on or before April 2, 2032 196,464 190,718
919,464 212,218
Current maturities of Term Loan B (8,000) —
Long-term debt $911,464 $212,218
Effective April 27, 2006, the Company entered into
a $1,250,000 credit facility (the “2006 Credit
Facility”) that consisted of up to $1,000,000 in term
loans (an $800,000 Term Loan B facility and a
$200,000 Delayed-Draw Term Loan facility) with a
scheduled maturity date of April 27, 2013 and a
$250,000 Revolving Credit facility expiring April 27,
2011. As described in Note 5, contemporaneously
with the acceptance of shares in the Tender Offer,
on May 3, 2006, the Company drew $725,000 under
the $800,000 available under the Term Loan B
facility, which was used to pay for the shares accepted
in the Tender Offer, fees associated with the 2006
Credit Facility and the related transaction costs.
The $200,000 Delayed-Draw Term Loan facility can be
used any time prior to October 27, 2007 to refi-
nance the Company’s Senior Notes or for general
corporate purposes.
The Term Loan B, Delayed-Draw Term Loan facility
and the Revolving Credit facility interest rates are
based on either LIBOR or prime. A spread is added to
the interest rates according to a defined schedule
based on the Company’s consolidated total leverage
ratio as defined in the 2006 Credit Facility, 1.50% as
of July 28, 2006. The Company’s policy is to manage
interest cost using a mixture of fixed-rate and vari-
able-rate debt. To manage this risk in a cost efficient
manner, the Company entered into an interest rate
swap on May 4, 2006 in which it agreed to exchange
with a counterparty, at specified intervals effective
August 3, 2006, the difference between fixed and
variable interest amounts calculated by reference to
an agreed-upon notional principal amount. See
Note 2 for a further discussion of the Company’s inter-
est rate swap. As of July 28, 2006, the interest rate
on the Term Loan B was 6.63%.
Loan acquisition costs associated with the Term
Loan B, Revolving Credit facility and Delayed-Draw
Term Loan facility were capitalized in the amount of
$7,122 (net of $656 in commitment fees that were
written off in 2006 related to the $75,000 availability
that was not drawn on the Term Loan B), $2,456,
and $1,964, respectively, and will be amortized over
the respective terms of the facilities. Financial
covenants related to the 2006 Credit Facility require
that the Company maintain a maximum consolidated
total leverage ratio (ratio of total indebtedness to
EBITDA, which is defined as earnings before interest,
taxes, depreciation and amortization) of 4.5 to 1.0
through April 27, 2007, 4.25 to 1.0 from April 28,
2007 through May 2, 2008, 4.0 to 1.0 from May 3,
2008 through May 1, 2009 and 3.75 to 1.0 from