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Debt | 9 Months Ended
--- | ---
Sep. 30, 2017
Debt Disclosure [Abstract] |
Debt |
8. | Debt
Debt consists of the following (in thousands):
|  | September 30, 2017 |  | December 31, 2016
Loan |  | $ | 85,000 |  |  | $ | 3,532 |
Less deferred loan costs and discount |  | (9,350 | ) |  | (803 | )
Total Loan, net |  | 75,650 |  |  | 2,729 |
Notes and deferred payments to sellers, Tealstone acquisition |  | 12,118 |  |  | — |
Notes payable for transportation and construction equipment and other |  | 1,837 |  |  | 2,665 |
|  | 89,605 |  |  | 5,394 |
Current maturities of long-term debt |  | 986 |  |  | 4,648 |
Less current deferred loan costs |  | — |  |  | (803 | )
Less current maturities of long-term debt, net |  | (986 | ) |  | (3,845 | )
Total long-term debt |  | $ | 88,619 |  |  | $ | 1,549 |
On April 3, 2017, the Company, as borrower, and certain of its subsidiaries, as guarantors, entered into a Loan and Security Agreement with Wilmington Trust, National Association, as agent, and the lenders party thereto (the “Loan Agreement”), providing for a term loan of $85,000,000 (the “Loan”) with a maturity date of April 4, 2022, which replaced the then existing debt facility. The Loan is secured by substantially all of the assets of the Company and its subsidiaries. Interest on the Loan is equal to the one-, two-, three- or six-month London interbank rate, or LIBOR, plus 8.75% per annum on the unpaid principal amount of the Loan, subject to adjustment under certain circumstances. Interest on the Loan is generally payable monthly. There are no amortized principal payments; however, the Company is required to prepay the Loan, and in certain cases pay a prepayment premium thereon, with proceeds received from the issuances of debt or equity, transfers, events of loss and extraordinary receipts. The Company is required to make an offer quarterly to the lenders to prepay the Loan in an amount equal to 75% of its excess cash flow, plus accrued and unpaid interest thereon and a prepayment premium. The Loan Agreement contains various covenants that limit, among other things, the Company’s ability and certain of its subsidiaries’ ability to incur certain indebtedness, grant certain liens, merge or consolidate, sell assets, make certain loans, enter into acquisitions, incur capital expenditures, make investments, and pay dividends. In addition, the Company is required to maintain the following principal financial covenants:
• | a ratio of secured indebtedness to EBITDA of not more than 3.10 to 1.00 for four consecutive quarters, reducing to 1.80 to 1.00 by the four consecutive quarters ending September 30, 2019;
• | daily cash collateral of not less $15,000,000, potentially further increasing to $18,000,000 beginning on April 4, 2018;
• | a rolling four quarter gross margin in contract backlog of not less than $60,000,000, increasing to $70,000,000 by March 31, 2019;
• | the incurrence of net capital expenditures during each four consecutive fiscal quarters shall not exceed $15,000,000;
• | bonding capacity shall be maintained at all times in an amount not less than $1,000,000,000; and
• | the EBITDA of Tealstone Residential Concrete, Inc. shall not be less than $12,000,000 during each four consecutive fiscal quarters.
The Company is in compliance with these covenants at September 30, 2017. The Loan Agreement also includes customary events of default, including events of default relating to non-payment of principal or interest, inaccuracy of representations and warranties, breaches of covenants, cross-defaults, bankruptcy and insolvency events, certain unsatisfied judgments, loan documents not being valid, calls under the Company’s bonds, failure of specified individuals to remain employed by the Company, and a change of control. If an event of default occurs, the lenders will be able to accelerate the maturity of the Loan Agreement and exercise other rights and remedies. Deferred loan costs and discounts totaled $10.4 million, which included attorney fees, investment bank fees as well as amounts paid to the lenders and which were discounted from the loan amount. Warrants valued at $3.5 million were included as well. Refer to Note 11 for additional information on the warrants. The total amount will be amortized on a straight-line basis over the five-year life of the Loan. Amortization expense of $0.5 million and $1.0 million, respectively has been included in interest expense for the three and nine months ended September 30, 2017. As part of the extinguishment of our prior credit facility, $0.8 million in debt extinguishment costs was expensed and included as a “loss on extinguishment of debt” on our statement of operations for the nine months ended September 30, 2017. Fair Value The Company’s debt is recorded at its carrying amount in the condensed consolidated balance sheets. As of September 30, 2017 and December 31, 2016, the carrying values of our debt outstanding approximated the fair values and were $85.0 million and $3.5 million, respectively for the Loan. There was no revolver as of September 30, 2017 and no amounts outstanding on the prior revolver as of December 31, 2016. Notes and Deferred Payments to Sellers As part of the Tealstone Acquisition, the Company issued $5,000,000 of promissory notes to the sellers and agreed to make $2,426,000 and $7,500,000 of deferred cash payments on the second and third anniversaries of the closing date, respectively. Based on a preliminary 12% discount rate, the Company recorded $11.6 million as notes and deferred payments to sellers in long-term debt on our condensed consolidated balance sheet at the acquisition closing date. Accreted interest for the period was $0.3 million and $0.5 million for the three and nine months ended September 30, 2017, respectively, and was recorded as interest expense. Notes Payable for Transportation and Construction Equipment The Company has purchased and financed various transportation and construction equipment to enhance the Company’s fleet of equipment. The total long-term notes payable related to the purchase of financed equipment was $1.8 million and $2.7 million at September 30, 2017 and December 31, 2016, respectively. The purchases have payment terms ranging from 3 to 5 years and the associated interest rates range from 3.15% to 6.92% The fair value of these notes payable approximates their book value. Interest Expense Interest expense related to our Loan and prior credit facility and other debt for the three and nine months ended September 30, 2017 was $3.6 million and $6.7 million, respectively, and $0.5 million and $2.2 million for the three and nine months ended September 30, 2016, respectively. The increase in interest cost for both periods is due to our new Loan that has a higher amount of principal outstanding.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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