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Debt | 12 Months Ended
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Dec. 31, 2020
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Debt | 9. Debt Long-term debt consists of the following at: December 31, 2020 December 31, 2019 Wells Fargo term loans payable $ 16,390,000 $ — FGI term loans payable 13,148,000 — Leaf Capital term loan payable 152,000 — KeyBank term loans payable — 38,250,000 KeyBank revolving loan — 12,008,000 Total 29,690,000 50,258,000 Less: deferred loan costs (1,957,000) (807,000) Less: current portion (2,535,000) (49,451,000) Long-term debt $ 25,198,000 $ — Term Loans Wells Fargo Term Loans On October 27, 2020, the Company entered into a credit agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent, lead arranger and book runner, and the lenders party thereto (the “Lenders”). Pursuant to the terms of the Credit Agreement, the Lenders made available to the Company secured term loans (the “WF Term Loans”) in the maximum aggregate principal amount of $18,500,000 ($16,790,000 of which was advanced to the Company on October 28, 2020). The proceeds from the WF Term Loans were used to pay off the Company’s existing outstanding indebtedness with KeyBank National Association, and to pay certain fees and expenses associated with the financing. At the option of the Company, the WF Term Loans bears interest at a per annum rate equal to LIBOR plus a margin of 300 basis points or base rate plus a margin of 200 basis points. LIBOR rate means the greater of (a) 0.75% per annum and (b) the per annum published LIBOR rate for interest periods of one, three or six months as chosen by the Company. Base rate is the greater of (a) 1.0% per annum, (b) the Federal Funds Rate plus 0.5%, (c) LIBOR Rate plus 100 basis or (d) prime rate. The weighted average interest rate was 3.77% as of December 31, 2020. The WF Term Loans are to be repaid in monthly installments of $200,000 plus interest, with the remaining outstanding balance due on November 30, 2024, subject to certain optional and mandatory repayment terms. The Company’s obligations under the WF Term Loans are unconditionally guaranteed by each of the Company’s U.S. and Canadian subsidiaries, with such obligations of the Company and such subsidiaries being secured by a lien on substantially all of their U.S. and Canadian assets. The WF Term Loans contains reporting, indebtedness, and financial covenants. The Company is in compliance with its covenants as of December 31, 2020. Voluntary prepayments of amounts outstanding under the WF Term Loans are permitted at any time without premium or penalty. To the extent applicable, LIBOR breakage fees may be charged in connection with any prepayment. FGI Equipment Finance LLC Term Loan On October 20, 2020, the Company entered into a Master Security Agreement and a Promissory Note, among FGI Equipment Finance LLC, (“FGI”) the Company as debtor, and each of Core Composites Corporation, a subsidiary of the Company organized in Delaware, and CC HPM, S. de R.L. de C.V., a subsidiary of the Company organized in Mexico, as guarantors, a term loan in the principal amount of $13,200,000 (the “FGI Term Loan”). On October 27, 2020, FGI advanced to the Company $ 12,000,000 which proceeds were used to pay off the Company’s existing outstanding indebtedness with KeyBank National Association, and to pay certain fees and expenses associated with the transactions, and $ 1,200,000 which proceeds were used to fund a security deposit to be held by FGI. Interest on the FGI Term Loan is a fixed rate of 8.25% and is payable monthly. The Company notes that the security deposit of $ 1,200,000 is located in prepaid expenses and other current assets on the balance sheet. Following the advance of funds by FGI, the FGI Term Loans are to be repaid in monthly principal and interest installments of $117,000 for the first 12 months, $246,000 for the subsequent 59 months and $1,446,000 due on October 31, 2026, subject to certain optional and mandatory repayment terms. The Company’s obligations under the Master Security Agreement are secured by certain machinery and equipment of the guarantors located in Mexico, and real property of Core composites de Mexico, S. de R.L. de C.V., also a subsidiary of the Company organized in Mexico, located in Matamoros, Mexico. The Company may prepay in full or in part (but not less than the amount equal to 20% of the original principal amount of the loan) outstanding amounts before they are due on any scheduled Payment Date upon at least thirty (30) days’ prior written notice. The Company will pay a “Prepayment Fee” in an amount equal to an additional sum equal to the following percentage of the principal amount to be prepaid for prepayments occurring in the indicated period: four percent (4.0%) (for prepayments occurring prior to the first anniversary of the Loan); three percent (3.0%) (for prepayments occurring on and thereafter and prior to the second anniversary of the Loan); two percent (2.0%) (for prepayments occurring on and thereafter and prior to the third anniversary of the Loan ); and one percent (1.0%) (for prepayments occurring any time thereafter). Leaf Capital Funding On April 24, 2020 the Company entered into a finance agreement with Leaf Capital Funding of $175,000 for equipment. The parties agreed to a fixed interest rate of 5.5% and a term of 60 months. The amount outstanding at December 31, 2020 was $ 152,000 of which, $ 120,000 was classified as long-term debt. Revolving Loans Wells Fargo Revolving Loan On October 27, 2020, the Company entered into a credit agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent, lead arranger and book runner, and the lenders party thereto (the “Lenders”). Pursuant to the terms of the Credit Agreement, the Lenders made available to the Company a revolving loan commitment (the “WF Revolving Loan”) of $25,000,000 ($8,745,000 of which was advanced to the Company on October 28, 2020). The proceeds from the WF Revolving Loan were used to pay off the Company’s existing outstanding indebtedness with KeyBank National Association, and to pay certain fees and expenses associated with the financing. The Credit Agreement also makes available to the Company an incremental revolving commitment in the maximum amount of $10,000,000 at the Company’s option at any time during the three (3) year period following the closing. The borrowing availability under the line of credit is the lesser of (a) the loan commitment of $25,000,000 or (b) the sum of 90% of eligible investment grade accounts receivable, 85% of non-investment grade eligible accounts receivable and 65% of eligible inventory. At the option of the Company, the WF Revolving Loan bears interest at a per annum rate equal to LIBOR plus a margin of 200 to 250 basis points or base rate plus a margin of 100 to 150 basis points, with the margin rate being based on the excess availability amount under the line of credit. LIBOR rate means the greater of (a) 0.75% per annum and (b) the per annum published LIBOR rate for interest periods of one, three or six months as chosen by the Company. Base rate is the greater of (a) 1.0% per annum, (b) the Federal Funds Rate plus 0.5%, (c) LIBOR Rate plus 100 basis and (d) prime rate. The weighted average interest rate was 4.75% as of December 31, 2020. The WF Revolving Loan commitment terminates, and all outstanding borrowings thereunder must be repaid, by November 30, 2024. The Company has available $ 19,223,000 of available rate revolving loans of which $ 420,000 is outstanding as of December 31, 2020. The WF Revolving Loan contains the same covenants as the WF Term Loans. Wells Fargo Bank will issue up to $ 2,000,000 of Letters of Credit in accordance with the terms of the Credit Agreement upon the Company’s request. As of December 31, 2020, the Company had one Letter of Credit outstanding for $ 160,000 . In conjunction with the October debt refinancing, the Company incurred debt origination fees of $ 1,730,000 related to the Wells Fargo financing, which is being amortized over the life of the Credit Agreement, which expires on November 30, 2024. In addition, the Company incurred debt origination fees of $ 308,000 related to the FGI Term Loan, which is being amortized over the life of the FGI Term Loan, which expires on October 31, 2026. The aggregate unamortized deferred financing fees as of December 31, 2020 totaled $ 1,957,000 . Annual maturities of long-term debt are as follows: 2021 $ 3,019,000 2022 4,428,000 2023 4,601,000 2024 11,585,000 2025 and thereafter 6,057,000 Total $ 29,690,000 KeyBank Loan On December 31, 2019, the Company had a term loan and revolving loan balance of $ 38,250,000 and $ 12,008,000 with KeyBank National Association, respectively. The Company’s term loan and revolving loan had variable interest rates of 6.30 % and 6.04 %, respectively at December 31, 2019. On November 22, 2019 the Company entered into a forbearance agreement with KeyBank and on October 27, 2020 the Company fully repaid all outstanding amounts. As a result of the forbearance agreement not extending beyond a year, the Company’s remaining long-term debt balance was classified as a current liability in the Company’s consolidated balance sheet as of December 31, 2019. Interest Rate Swaps The Company entered into two interest rate swap agreements that became effective January 18, 2018, one of which was designated as a cash flow hedge for $ 25,000,000 and the other designated as a cash flow hedge for $ 10,000,000 to the Company’s subsidiary. Under these agreements, the Company paid a fixed rate of 2.49 % to the counterparty and received a 30 day LIBOR for both cash flow hedges. Concurrent with the closing of the KeyBank credit agreement , the Company settled both outstanding interest rate swaps, which resulted in a loss and cash outflow of $ 1,253,000 . These results were categorized as interest expense and operating activities in the Statement of Operations and Statement of Cash Flow, respectively. Due to the settlement, the fair value of the interest rate swaps was $0 at December 31, 2020 compared to a liability of $ 706,000 at December 31, 2019. Bank Covenants The Company is required to meet certain financial covenants included in the Credit Agreement with respect to fixed coverage charge ratio. The following table presents the financial covenants specified in the Credit Agreement and the actual covenant calculations as of December 31, 2020: Financial Covenants Actual Covenants as of December 31, 2020 Fixed Charge Coverage Ratio Minimum 1.10 2.6

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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