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Credit Agreement and Long-Term Debt | 9 Months Ended
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Nov. 02, 2024
Debt Disclosure [Abstract] |
Credit Agreement and Long-Term Debt | Note 9 – Credit Agreement and Long-Term Debt In connection with our purchase of MTEX, on May 6, 2024, we entered a Third Amendment to Amended and Restated Credit Agreement (the “Amendment”) with Bank of America, N.A., as lender (the “Lender”). The Amendment amended the Amended and Restated Credit Agreement dated as of July 30, 2020, as amended by the First Amendment to Amended and Restated Credit Agreement, dated as of March 24, 2021, the LIBOR Transition Amendment, dated as of December 14, 2021, the Second Amendment to Amended and Restated Credit Agreement dated as of August 4, 2022, and the Joinder Agreement relating to our subsidiary Astro Machine Corporation (“Astro Machine”) dated as of August 26, 2022 (as so amended, the “Existing Credit Agreement”; the Existing Credit Agreement as amended by the Amendment, the “Amended Credit Agreement”), between AstroNova, Inc. as the borrower, Astro Machine as a guarantor, and the Lender. The Amended Credit Agreement provides for (i) a new term loan to AstroNova, Inc. in the principal amount of EUR 14.0 million (the “Term A-2 Loan”), which term loan is in addition to the existing term loan (the “Existing Term Loan”) outstanding under the Existing Credit Agreement in the principal amount of approximately $12.3 million as of the effective date of the Amendment, and (ii) an increase in the aggregate principal amount of the revolving credit facility available to AstroNova, Inc. from $25.0 million to $30.0 million until January 31, 2025, upon and after which the aggregate principal amount of the revolving credit facility will reduce to $25.0 million. At the closing of the Amendment, we borrowed the entire EUR 14.0 million Term A-2 Loan, EUR 3.0 million under the revolving credit facility and a US dollar amount under the revolving credit facility that was converted to Euros to satisfy the entire purchase price payable on the closing date pursuant to the Purchase Agreement. The revolving credit facility may otherwise be used for general corporate purposes. The Amended Credit Agreement requires that the Term A-2 Loan be paid in quarterly installments on the last day of each of our fiscal quarters through April 30, 2027 in the principal amount of EUR 583,333 each, and the entire then-remaining principal balance of the Term A-2 Loan is required to be paid on August 4, 2027. The Amended Credit Agreement requires that the remaining balance of the Existing Term Loan be paid in quarterly installments on the last day of each of our fiscal quarters through April 30, 2027 in the principal amount of $675,000 each, and the entire then remaining principal balance of the term loan is required to be paid on August 4, 2027. We may voluntarily prepay the Term A-2 Term Loan or the Existing Term Loan, in whole or in part, from time to time without premium or penalty (other than customary breakage costs, if applicable). We may repay borrowings under the revolving credit facility at any time without premium or penalty (other than customary breakage costs, if applicable), but in any event no later than August 4, 2027, and any outstanding revolving loans thereunder will be due and payable in full, and the revolving credit facility will terminate, on such date. We may reduce or terminate the revolving line of credit at any time, subject to certain thresholds and conditions, without premium or penalty. The Term A-2 Loan bears interest at a rate per annum equal to the EURIBOR rate as defined in the Amended Credit Agreement, plus a margin that varies within a range of 1.60% to 2.50% based on our consolidated leverage ratio. The Existing Term Loan and revolving credit loans bear interest at a rate per annum equal to, at our option, either (a) the Term SOFR rate as defined in the Amended Credit Agreement (or, in the case of revolving credit loans denominated in Euros or another currency other than U.S. Dollars, the applicable quoted rate), plus a margin that varies within a range of 1.60% to 2.50% based on our consolidated leverage ratio, or (b) a fluctuating reference rate equal to the highest of (i) the federal fund rate plus 0.50%, (ii) Bank of America’s publicly announced prime rate, (iii) the Term SOFR Rate plus 1.00%, or (iv) 0.50%, plus a margin that varies within a range of 0.60% to 1.50% based on our consolidated leverage ratio. In addition to certain other fees and expenses that we are required to pay to the Lender, we are required to pay a commitment fee on the undrawn portion of the revolving credit facility that varies within a range of 0.15% and 0.35% based on our consolidated leverage ratio. The loans under the Amended Credit Agreement are subject to certain mandatory prepayments, subject to various exceptions, from net cash proceeds from certain dispositions of property, certain issuances of equity, certain issuances of additional debt and certain extraordinary receipts. Amounts repaid under the revolving credit facility may be reborrowed, subject to our continued compliance with the Amended Credit Agreement. No amount of the Term A-2 Loan or the Existing Term Loan that is repaid may be reborrowed. We must comply with various customary financial and non-financial covenants under the Amended Credit Agreement. The financial covenants under the Amended Credit Agreement consist of a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio, certain of the provisions of which were modified by the Amendment; the minimum consolidated asset coverage ratio under the Existing Credit Agreement was eliminated by the Amendment. The primary non-financial covenants limit our and our subsidiaries’ ability to incur future indebtedness, to place liens on assets, to pay dividends or distributions on our or our subsidiaries’ capital stock, to repurchase or acquire our or our subsidiaries’ capital stock, to conduct mergers or acquisitions, to sell assets, to alter our or our subsidiaries’ capital structure, to make investments and loans, to change the nature of our or our subsidiaries’ business, and to prepay subordinated indebtedness, in each case subject to certain exceptions and thresholds as set forth in the Amended Credit Agreement, certain of which provisions were modified by the Amendment. As of November 2, 2024, we believe we are in compliance with all of the covenants in the Amended Credit Agreement. The Lender is entitled to accelerate repayment of the loans and to terminate its revolving credit commitment under the Amended Credit Agreement upon the occurrence of any of various customary events of default, which include, among other events, the following (which are subject, in some cases, to certain grace periods): failure to pay when due any principal, interest or other amounts in respect of the loans, breach of any of our covenants or representations under the loan documents, default under any other of our or our subsidiaries’ significant indebtedness agreements, a bankruptcy, insolvency or similar event with respect to us or any of our subsidiaries, a significant unsatisfied judgment against us or any of our subsidiaries, or a change of control. Our obligations under the Amended Credit Agreement continue to be secured by substantially all of our personal property assets (including a pledge of the equity interests we hold in ANI Scandinavia ApS, AstroNova GmbH, AstroNova SAS and the Purchaser), subject to certain exceptions, and by a mortgage on our owned real property in West Warwick, Rhode Island, and are guaranteed by, and secured by substantially all of the personal property assets of Astro Machine. Equipment Financing In January 2024, we entered into a secured equipment loan facility agreement with Banc of America Leasing & Capital, LLC and borrowed a principal amount of $0.8 million thereunder for the purpose of financing our purchase of production equipment. This loan matures on January 23, 2029 and bears interest at a fixed rate of 7.06%. Under this loan agreement, equal monthly payments including principal and interest of $16,296 commenced on February 23, 2024, and will continue through the maturity of the equipment loan facility on January 23, 2029. Assumed Financing Obligations of MTEX In connection with our acquisition of MTEX, on the May 6, 2024 closing date of this acquisition we assumed certain existing financing obligations of MTEX that remain outstanding as of November 2, 2024. The long-term debt obligations of MTEX that remain outstanding include a term loan (the “MTEX Term Loan”) pursuant to an agreement dated December 22, 2023 (the “MTEX Term Loan Agreement”) between MTEX and Caixa Central de Crédito Agricola Mutuo. The MTEX Term Loan, which provides for a term loan in the principal amount of EUR 1.5 million ($1.6 million) and bears interest at a fixed rate of 6.022% per annum, requires monthly principal and interest payments totaling EUR 17,402 ($18,795) commencing in October 2024 and continuing through maturity on December 21, 2033. MTEX has also received government assistance in the form of interest-free loans from government agencies located in Portugal (the “MTEX Government Grant Term Loans”). The MTEX Government Grant Term Loans are to be repaid to the applicable government agencies and are classified as long-term debt. The current balance of the MTEX Government Grants Term Loans as of November 2, 2024 is EUR 1.0 million ($1.1 million). The MTEX Government Grant Term Loans provide interest-free financing so long as monthly principal payments are made. In the event that MTEX and the applicable government agency renegotiate the payment dates, interest will be calculated according to a rate determined by the government agency as of the date of renegotiation and added to the outstanding principal payments. The MTEX Government Grant Term Loans mature between December 2024 and January 2027. Additionally, we assumed short-term financing obligations of MTEX that remain outstanding as of November 2, 2024, including letters of credit, maturing term loans, and financing arrangements for working capital classified as debt. Summary of Outstanding Debt Revolving Credit Facility At November 2, 2024, we had an outstanding balance of $20.1 million under our revolving credit facility. The balance outstanding under the revolving credit facility bore interest at a weighted average annual rate of 7.30% and 8.38%, and we incurred $327,000 and $713,000 for interest on this obligation, during the three and nine months ended November 2, 2024, respectively. Additionally, during the three and nine months ended November 2, 2024, we incurred $9,000 and $34,000, respectively, of commitment fees on the undrawn portion of our revolving credit facility. The balance outstanding under the revolving line of credit bore interest at a weighted average rate of 7.94% and 7.60%, respectively, for the three and nine months ended October 28, 2023, and we incurred $311,000 and $936,000, respectively, for interest on this obligation during the three and nine months ended October 28, 2023. Additionally, during the nine months ended October 28, 2023, we incurred $23,000 of commitment fees on the undrawn portion of our revolving credit facility. Both the interest expense and commitment fees are included as interest expense in the accompanying condensed consolidated statements of income for all periods presented. At November 2, 2024, there was $9.9 million remaining available for borrowing under our revolving credit facility. Additionally, MTEX has a EUR 0.5 million ($0.5 million) available line of credit with Caixa Central de Crédito Agricola Mutuo. This credit line was established in December 2023 and is renewable every six months. There was EUR 0.1 million ($0.1 million) outstanding on this line of credit as of November 2, 2024. Long-Term Debt Long-term debt in the accompanying condensed consolidated balance sheets is as follows:
(In thousands) |  | November 2, 2024 |  |  | January 31, 2024 |
USD Term Loan (7.22% as of November 2, 2024 and 7.56% as of January 31, 2024); maturity date of August 4, 2027 |  | $ | 10,125 |  |  | $ | 12,150 |
Euro Term Loan (5.58% as of November 2, 2024); maturity date of August 4, 2027 |  |  | 13,902 |  |  |  | — |
MTEX Euro Term Loan (6.022% Fixed Rate as of November 2, 2024); maturity date of December 21, 2033 |  |  | 1,614 |  |  |  | — |
MTEX Euro Government Grant Term Loan (0% as of November 2, 2024); maturity dates December 2024 - January 2027 |  |  | 1,136 |  |  |  | — |
Equipment Loan (7.06% Fixed Rate); maturity date of January 23, 2029 |  |  | 716 |  |  |  | 822 |
Total Debt |  |  | 27,493 |  |  |  | 12,972 |
Less: Debt Issuance Costs, net of accumulated amortization |  |  | 93 |  |  |  | 80 |
Current Portion of Debt |  |  | 6,328 |  |  |  | 2,842 |
Long-Term Debt |  | $ | 21,072 |  |  | $ | 10,050 |
During the three and nine months ended November 2, 2024, we recognized interest expense on term debt of $460,000 and $1,201,000, respectively, and during the three and nine months ended October 28, 2023, we recognized interest expense on debt of $254,000 and $768,000, respectively, which is recognized in the accompanying condensed consolidated statements of income for all periods presented. The schedule of required principal payments remaining during the next five years on long-term debt outstanding as of November 2, 2024 is as follows:
(In thousands) |  |  |
Fiscal 2025, remainder |  | $ | 1,599 |
Fiscal 2026 |  |  | 6,251 |
Fiscal 2027 |  |  | 5,713 |
Fiscal 2028 |  |  | 12,607 |
Fiscal 2029 |  |  | 1,323 |
|  | $ | 27,493 |

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