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Note 8 - Indebtedness
 12 Months Ended
Mar. 31, 2023
Notes to Financial Statements  
Debt Disclosure [Text Block]

Note 8. Indebtedness

 

Credit Facility

On  March 5, 2021, we entered into a four-year senior secured credit agreement that includes 1) a revolving credit facility in an aggregate principal amount of up to $75,000, 2) a swingline loan in an aggregate principal amount not exceeding $5,000, and 3) letters of credit in an aggregate stated amount not exceeding $2,500 at any time. The agreement also provides for an incremental term loan or an increase in revolving commitments in an aggregate principal amount of at a minimum $25,000 and at a maximum $75,000, subject to the satisfaction of certain conditions and lender considerations. We refer to the facility and related agreement as the “Credit Facility”. 

 

We borrowed $70,000 under the Credit Facility during fiscal year 2022 to provide a portion of the cash needed to complete the Agena Acquisition. We repaid $36,000 against our outstanding balance during the year ended March 31, 2023. As of  March 31, 2023, the outstanding balance under our Credit Facility was $13,000. In April 2023 we repaid $3,000 on our line of credit. 

 

On  December 22, 2022, Mesa and the lenders amended the Credit Facility to replace references to the Eurodollar Rate with references to the Secured Overnight Financing Rate ("SOFR").

 

Amounts borrowed under the Credit Facility bear interest at either a base rate or a SOFR rate, plus an applicable spread. The interest rate on borrowings under our line of credit as of March 31, 2023 was 6.7%. We are obligated to pay quarterly unused commitment fees of between 0.15% and 0.35% of the Credit Facility’s aggregate principal amount, based on our leverage ratio. We incurred unused commitment fees of $107 and $78 for the years ended March 31, 2023, and March 31, 2022, respectively. The balance of unamortized customary lender fees was $312 and $484 as of March 31, 2023 and 2022, respectively.

 

The financial covenants in the Credit Facility include a maximum leverage ratio of 5.50 to 1.00 for the first four testing dates on which the line of credit is outstanding; 5.0 to 1.0 on each of the fifth, sixth, seventh, and eighth testing dates; and 4.5 to 1.0 on each testing date following the eighth testing date, except that we  may have a leverage ratio of 5.75 to 1.0 for a period of four consecutive quarters following a permitted acquisition. The Credit Facility also stipulates a minimum fixed charge coverage ratio of 1.25 to 1.0. Other covenants include restrictions on our ability to incur debt, grant liens, make fundamental changes, engage in certain transactions with affiliates, or conduct asset sales. As of  March 31, 2023, we were in compliance with all required covenants.

 

Convertible Notes

On  August 12, 2019, we issued an aggregate principal amount of $172,500 of 2025 Notes. The 2025 Notes mature on  August 15, 2025, unless earlier repurchased or converted, and bear interest at a rate of 1.375% payable semi-annually in arrears on  February 15 and  August 15 each year beginning on  February 15, 2020. The 2025 Notes are initially convertible at a conversion rate of 3.5273 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $283.50 per share of common stock. Noteholders  may convert their 2025 Notes at their option only in the following circumstances:

 

(i) 

during any calendar quarter commencing after the calendar quarter ended on December 31, 2019 (and only during such calendar quarter), if the last reported sale price per share of our common stock exceeds 130% of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

(ii)

during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day;

(iii)

upon the occurrence of certain corporate events or distributions on our common stock, including certain distributions, the occurrence of a fundamental change (as defined in the indenture governing the 2025 Notes) or a transaction resulting in the Company’s common stock converting into other securities or property or assets; and

(iv)

at any time from, and including,  April 15, 2025 until the close of business on the second scheduled trading day immediately before the maturity date. 

 

Upon conversion, we will pay or deliver, as the case  may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election. We will reevaluate this policy from time to time as we receive conversion notices from note holders. The circumstances necessary for conversion were not met during the year ended March 31, 2023. As of  March 31, 2023, the 2025 Notes are classified as a long-term liability on our Consolidated Balance Sheets as the circumstances necessary for conversion were not satisfied as of the end of the period. The if-converted value of the 2025 Notes did not exceed the principal balance as of  March 31, 2023.

 

Debt issuance costs related to the 2025 Notes are comprised of discounts and commissions payable to the initial purchasers of $5,175 and third party offering costs of $255. The debt issuance costs are being amortized to interest expense using the effective interest method over the six-year contractual term of the 2025 Notes.

 

The net carrying amount of the 2025 Notes was as follows:

 

  

March 31, 2023

  

March 31, 2022

 

Principal outstanding

 $172,500  $172,500 

Unamortized debt issuance costs

  (2,228)  (3,135)

Net carrying value

 $170,272  $169,365 

 

We recognized interest expense on the 2025 Notes as follows:

 

  

Year Ended March 31,

 
  

2023

  

2022

  

2021

 

Coupon interest expense at 1.375%

 $2,372  $2,372  $2,372 

Amortization of debt discounts and issuance costs

  907   890   5,397 

Total

 $3,279  $3,262  $7,769 

 

The effective interest rate of the liability component of the 2025 Notes is approximately 1.9%. Interest expense and amortization of debt discount was lower for the year ended March 31, 2022 compared to the year ended March 31, 2021 due to our adoption of ASU 2020-06.