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LONG-TERM DEBT | 12 Months Ended
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Dec. 31, 2016
LONG-TERM DEBT [Abstract] |
LONG-TERM DEBT | NOTE 9 – LONG-TERM DEBT Long-term debt consisted of the following (in thousands):
|  | December 31, |
|  | 2016 |  |  | 2015 |
Line of credit |  | $ | 147,600 |  |  | $ | 172,147 |
Term loan |  |  | 74,500 |  |  |  | 175,000 |
Promissory note payable in monthly installments at 2.9% through January 2021, collateralized by equipment |  |  | 3,577 |  |  |  | 4,408 |
Less unamortized debt issuance costs |  |  | (992 | ) |  |  | (2,046 | )
Total Debt |  |  | 224,685 |  |  |  | 349,509 |
Less: Current maturities |  |  | (51,354 | ) |  |  | (50,829 | )
Total Long-term Debt |  | $ | 173,331 |  |  | $ | 298,680 |
On July 11, 2012, DXP entered into a credit facility with Wells Fargo Bank National Association, as Issuing Lender, Swingline Lender and Administrative Agent for the lenders (as amended, the “Original Facility”). On January 2, 2014, the Company entered into an Amended and Restated Credit Agreement with Wells Fargo Bank, National Association, as Issuing Lender and Administrative Agent for other lenders (as amended by that certain First Amendment to the Amended and Restated Credit Agreement, dated as of August 6, 2015 (the “First Amendment”), that certain Second Amendment to the Amended and Restated Credit Agreement, dated as of September 30, 2015 (the “Second Amendment”), that certain Third Amendment to the Amended and Restated Credit Agreement, dated as of May 12, 2016 (the “Third Amendment”), that certain Fourth Amendment to the Amended and Restated Credit Agreement, dated as of August 15, 2016 (the “Fourth Amendment”), and that certain Fifth Amendment to the Amended and Restated Credit Agreement, dated as of November 28, 2016 (the “Fifth Amendment” and as so amended, the “Facility”), amending and restating the Original Facility. Pursuant to the Facility, as of December 31, 2016, the lenders named therein provided to DXP a $74.5 million term loan and a $205 million revolving line of credit. The Facility expires on March 31, 2018. Loans made from the Facility may be used for working capital and general corporate purposes of DXP and its subsidiaries. As of December 31, 2016, the aggregate principal amount of revolving loans outstanding under the facility was $147.6 million. Amortization payments are required with respect to the Facility on the last business day of each fiscal quarter, payable at $15.625 million per quarter for the fiscal quarter periods ending March 31, 2017 and thereafter. On October 31, 2016, DXP prepaid $12 million of the $15.625 million amortization payment due on March 31, 2017. The Fourth Amendment required additional term loan principal reductions of $17 million by December 31, 2016 and $14 million by March 31, 2017. During October, 2015 DXP paid the mandatory $17 million and $14 million principal reductions. At December 31, 2016, the aggregate principal amount of term loans outstanding under the Facility was $74.5 million. Substantially all of the Company’s assets are pledged as collateral to secure the credit facilities. Consolidated EBITDA as defined under the Facility for financial covenant purposes means, without duplication, for any period the consolidated net income of DXP plus, to the extent deducted in calculating consolidated net income, depreciation, amortization (except to the extent that such non-cash charges are reserved for cash charges to be taken in the future), non-cash compensation including stock option or restricted stock expense, interest expense and income tax expense for taxes based on income, certain one-time costs associated with our acquisitions, integration costs, facility consolidation and closing costs, severance costs and expenses, write-down of cash expenses incurred in connection with the existing credit agreement and extraordinary losses less interest income and extraordinary gains. Consolidated EBITDA shall be adjusted to give pro forma effect to disposals or business acquisitions assuming that such transaction(s) had occurred on the first day of the period excluding all income statement items attributable to the assets or equity interests that are subject to such disposition made during the period and including all income statement items attributable to property or equity interests of such acquisitions permitted under the Facility. Under the terms of the Fourth and Fifth Amendments:
| · | The revolving line of credit was reduced from $250 million to $205 million, as of August 15, 2016, and shall be reduced to $190 million, as of March 31, 2017.
| · | A permitted overadvance facility (the “Permitted Overadvance Facility”) has been added with amounts to be determined but which shall permit drawings in excess of the ratio of (i) the sum of 85% of net accounts receivable and 65% of net inventory to (ii) the aggregate amount of revolving credit outstandings (the “Asset Coverage Ratio”).
| · | Certain modifications were made to the pricing grid set forth in the Facility to increase the rate at which the Facility bears interest to a rate equal to LIBOR (or CDOR for Canadian dollar loans) plus 5.00% and Base Rate (or Canadian Base Rate for Canadian dollar loans) plus 4.00%; provided, that drawings under the Permitted Overadvance Facility shall bear interest at a rate equal to LIBOR (or CDOR for Canadian dollar loans) plus 6.00% and Base Rate (or Canadian Base Rate for Canadian dollar loans) plus 5.00%.
| · | The maturity date of the Facility was modified from January 2, 2019 to March 31, 2018.
| · | Additional mandatory prepayments were added in an amount equal to $30 million (including $17 million to be applied to the term loan) by December 31, 2016 and $25 million (including $14 million to be applied to the term loan) by March 31, 2017. As of October 31, 2016, both of these mandatory prepayments have been paid.
| · | The negative covenants were modified to reduce certain debt baskets, including for purchase money, capital lease and unsecured debt and to limit the ability of the Company to conduct asset sales in excess of $3.5 million without the consent of the Required Lenders.
| · | A financial covenant holiday has been provided through March 31, 2018 for the Consolidated Leverage Ratio and the Consolidated Fixed Charge Coverage Ratio.
| · | The minimum Asset Coverage Ratio was adjusted to 0.95 to 1.00 beginning June 30, 2016.
| · | A Minimum Consolidated EBITDA and capital expenditure covenant were added to the Facility.
On December 31, 2016, the LIBOR based rate in effect under the Facility was LIBOR plus 5.0% and the prime based rate of the Facility was prime plus 4.0%. At December 31, 2016, $222.1 million was borrowed under the Facility at a weighted average interest rate of approximately 5.89%. At December 31, 2016, the Company had $37.3 million available for borrowing under the Facility. Commitment fees of 0.50% per annum are payable on the portion of the Facility capacity not in use at any given time on the line of credit. Commitment fees are included as interest in the condensed consolidated statements of operations. The Facility’s principal financial covenants included: Consolidated Leverage Ratio – The Facility requires that the Company’s Consolidated Leverage Ratio, determined at the end of each fiscal quarter, not to exceed 3.50 to 1.00 from July 1, 2017 through December 31, 2017, and not to exceed 3.25 to 1.00 on January 1, 2018 and thereafter. The Consolidated Leverage Ratio is defined as the outstanding indebtedness divided by Consolidated EBITDA for the period of four consecutive fiscal quarters ending on or immediately prior to such date. Indebtedness is defined under the Facility for financial covenant purposes as: (a) all obligations of DXP for borrowed money including but not limited to obligations evidenced by bonds, debentures, notes or other similar instruments; (b) obligations to pay deferred purchase price of property or services; (c) capital lease obligations; (d) obligations under conditional sale or other title retention agreements relating to property purchased; and (e) contingent obligations for funded indebtedness. At December 31, 2016, the Company’s Leverage Ratio was 3.78 to 1.00, but the Facility does not require compliance with a Consolidated Leverage Ratio from June 30, 2016 through March 31, 2018. Consolidated Fixed Charge Coverage Ratio – The Facility requires that the Consolidated Fixed Charge Coverage Ratio on the last day of each quarter be not less than 1.25 to 1.00 from July 1, 2017 and thereafter, with “Consolidated Fixed Charge Coverage Ratio” defined as the ratio of (a) Consolidated EBITDA for the period of 4 consecutive fiscal quarters ending on such date minus capital expenditures during such period (excluding acquisitions) minus income tax expense paid minus the aggregate amount of restricted payments defined in the agreement to (b) the interest expense paid in cash, scheduled principal payments in respect of long-term debt and the current portion of capital lease obligations for such 12-month period, determined in each case on a consolidated basis for DXP and its subsidiaries. At December 31, 2016, the Company's Consolidated Fixed Charge Coverage Ratio was 0.77 to 1.00, but the Facility does not require compliance with a Consolidated Fixed Charge Coverage Ratio from June 30, 2016 through March 31, 2018. Asset Coverage Ratio – The Facility requires that the Asset Coverage Ratio at any time be not less than 0.95 to 1.00 from June 30, 2016 and thereafter, with “Asset Coverage Ratio” defined as the ratio of (a) the sum of 85% of net accounts receivable plus 65% of net inventory to (b) the aggregate outstanding amount of the revolving credit on such date and excluding the Permitted Overadvance Facility. At December 31, 2016, the Company's Asset Coverage Ratio was 1.18 to 1.00. Minimum Consolidated EBITDA– The Facility requires that the Company’s Consolidated EBITDA for any twelve month period as of the last day of any calendar month ending during the periods specified below not be less than the corresponding amount set forth below:
Period |  | Minimum Consolidated EBITDA |
December 31, 2016 |  | $ | 39,891,000 |
January 31, 2017 |  | $ | 40,576,000 |
February 28, 2017 |  | $ | 42,257,000 |
March 31, 2017 |  | $ | 43,276,000 |
April 30, 2017 |  | $ | 41,266,000 |
May 31, 2017 |  | $ | 39,283,000 |
June 30, 2017 |  | $ | 36,210,000 |
July 31, 2017 |  | $ | 42,968,000 |
August 31, 2017 |  | $ | 42,411,000 |
September 30, 2017 |  | $ | 39,306,000 |
October 31, 2017 and thereafter |  | $ | 39,000,000 |
At December 31, 2016, the Company’s Consolidated EBITDA was $59,698,000. The following table sets forth the computation of the Leverage Ratio as of December 31, 2016 (in thousands, except for ratios):
For the Twelve Months ended December 31, 2016 |  | Leverage Ratio |
Income before taxes |  | $ | 9,674 |
Before tax loss attributable to noncontrolling interest |  |  | 886 |
Interest expense |  |  | 15,564 |
Depreciation and amortization |  |  | 29,994 |
Stock compensation expense |  |  | 3,580 |
(A) Defined EBITDA |  | $ | 59,698 |
As of December 31, 2016 |  |  |  |
Total long-term debt, including current maturities |  | $ | 224,685 |
Unamortized debt issuance costs |  |  | 992 |
(B) Defined indebtedness |  | $ | 225,677 |
Leverage Ratio (B)/(A) |  |  | 3.78 |
The following table sets forth the computation of the Fixed Charge Coverage Ratio as of December 31, 2016 (in thousands, except for ratios):
For the Twelve Months ended December 31, 2016 |  |  |
Defined EBITDA |  | $ | 59,698 |
Cash paid for income taxes |  |  | 4,780 |
Capital expenditures |  |  | 4,868 |
(A) Defined EBITDA minus capital expenditures & cash income taxes |  | $ | 50,050 |
Cash interest payments |  | $ | 13,708 |
Dividends |  |  | 90 |
Scheduled principal payments |  |  | 50,831 |
(B) Fixed Charges |  | $ | 64,629 |
Fixed Charge Coverage Ratio (A)/(B) |  |  | 0.77 |
The following table sets forth the computation of the Asset Coverage Ratio as of December 31, 2016 (in thousands, except for ratios):
Credit facility outstanding balance |  | $ | 147,600 |
Outstanding letters of credit |  |  | 5,564 |
Defined indebtedness |  | $ | 153,164 |
Accounts receivable (net), valued at 85% of gross |  | $ | 126,581 |
Inventory, valued at 65% of gross |  |  | 54,405 |
|  | $ | 180,986 |
Asset Coverage Ratio |  |  | 1.18 |
As of December 31, 2016, the maturities of long-term debt for the next five years and thereafter were as follows (in thousands):
2017 |  | $ | 51,354 |
2018 |  |  | 172,479 |
2019 |  |  | 905 |
2020 |  |  | 940 |
Thereafter |  |  | - |

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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 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
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