Business Context and Reporting Period
Texas Roadhouse, Inc. filed this Form 8-K on May 31, 2007, to report the entry into a new material definitive agreement and the termination of a prior credit facility. The company is incorporated in Delaware and operates as a restaurant chain.
Key Financial Metrics and Debt Structure
- New Credit Facility: A five-year unsecured revolving credit agreement with a syndicate led by Bank of America, N.A., Banc of America Securities LLC, and National City Bank.
- Capacity: Up to $250.0 million, with an option to increase by an additional $100.0 million.
- Interest Rates: LIBOR plus 0.50% to 0.875% on outstanding borrowings, dependent on the leverage ratio.
- Commitment Fees: 0.10% to 0.175% per year on unused portions, dependent on the leverage ratio.
- Drawdown: Approximately $35.0 million was drawn immediately to repay the previous facility.
- Letters of Credit: New letters of credit totaling approximately $3.0 million were obtained.
- Refinancing Costs: Fees and expenses were paid from cash on hand.
Material Changes Versus Prior Period
The new facility replaces the previous five-year credit facility entered into on October 8, 2004, which had a borrowing capacity of $150.0 million. The new agreement increases the total available credit capacity by $100.0 million. The previous facility was terminated immediately prior to the effectiveness of the new agreement.
Covenants, Risks, and Management Commentary
- Financial Covenants: The company must maintain a fixed charge coverage ratio of 2.00 to 1.00 and a maximum leverage ratio of 3.00 to 1.00. Lenders' obligations to extend credit depend on compliance with these covenants.
- Additional Indebtedness: The company may incur additional secured or unsecured indebtedness outside the facility, provided secured indebtedness does not exceed 20% of Consolidated Tangible Net Worth and compliance with financial covenants is maintained.
- Default Provisions: Obligations can be accelerated upon an Event of Default as defined in the Amended and Restated Credit Agreement.
- Outlook: The filing does not provide specific revenue guidance or management commentary on future operational performance beyond the refinancing details.
Investor Verification Checklist
- Verify the company's current leverage ratio and fixed charge coverage ratio to ensure compliance with the new 3.00 and 2.00 covenants, respectively.
- Confirm the exact amount of outstanding debt under the new facility following the $35.0 million drawdown.
- Review the full text of the Amended and Restated Credit Agreement (Exhibit 10.1) for specific definitions of "Event of Default" and "Consolidated Tangible Net Worth."
- Monitor future filings for any utilization of the $100.0 million expansion option or incurrence of additional secured debt.