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Note 4 - Line of Credit and Term Loans
 12 Months Ended
Dec. 31, 2025
Notes to Financial Statements  
Debt Disclosure [Text Block]

Note 4 – Line of Credit and Term Loans

 

Revolving Credit Agreement with Bank of America, N.A.

On  February 28, 2023 the Company and all of its subsidiaries as borrowers entered into a Revolving Credit Agreement with Bank of America, N.A. for a $50 million revolving facility (the “Senior Credit Facility”), which includes a $20 million sublimit for the issuance of standby letters of credit. The Company also has a one-time right, upon at least ten Business Days’ prior written notice to the Bank to increase the maximum amount of the Senior Credit Facility to $60 million. As of December 31, 2025 this has not been exercised. The Senior Credit Facility provides for certain financial covenants including maintaining an Asset Coverage Ratio of at least 1.0:1.0 at all times; maintaining a Total Funded Debt to Adjusted EBITDA Ratio not exceeding 3.0:1.0; and maintaining, on a consolidated basis, a Fixed Charge Coverage Ratio of at least 1.25:1.0. As of December 31, 2025, we were in compliance with all financial covenants. 

 

Interest will accrue on the outstanding balance of the Line of Credit at a variable rate equal to (a) the BSBY Daily Floating Rate plus a margin between 1.00% and 1.75% per annum. In each case, the applicable margin is determined by the Company's Total Funded Debt to Adjusted EBITDA, as defined in the Credit Agreement. At  December 31, 2025 the effective interest rate was approximately 3.7%. The Senior Credit Facility will mature on  February 28, 2028. 

 

The obligations under the Credit Agreement and other loan documents are secured by substantially all of the assets of the Company as collateral including, without limitation, their accounts and notes receivable, intellectual property and the real estate owned by HQ Real Property Corporation.

 

At  December 31, 2025, approximately $9.2 million of availability under the Senior Credit Facility was utilized by outstanding letters of credit that secure our obligations to our workers’ compensation insurance carrier, and $500 thousand was utilized by a letter of credit that secures our paycard funding account. For additional information related to the letter of credit securing our workers’ compensation obligations see Note 5 - Workers’ Compensation Insurance and Reserves.

 

Term Loan

In connection with the Northbound acquisition, we entered into an amortizing term loan from the seller for $1.5 million that matured on  March 1, 2025 and bore interest at 4.0%. The Northbound term loan was unsecured and subordinated to the Senior Credit Facility. The Northbound term loan was payable in 36 monthly installments beginning on  April 1, 2022 and was fully paid in March 2025.