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Debt | 9 Months Ended
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Sep. 30, 2015
Debt [Abstract] |
Debt | 9. DEBT Canadian Credit Facilities In June 2013, the Company’s Canadian subsidiary, Pioneer Electrogroup Canada Inc., entered into an amended and restated letter loan agreement with Bank of Montreal (the “Canadian Facilities”) that replaced and superseded all of the Company’s prior financing arrangements with the bank. The Canadian Facilities provide for up to $22.0 million Canadian dollars (“CAD”) (approximately $17.6 million expressed in U.S. dollars) in revolving and term debt. The Canadian facilities consist of a $10.0 million demand revolving credit facility (“Facility A”), a $2.0 million term credit facility (“Facility B”) and a $10.0 million term credit facility (“Facility C”). Borrowings on Facility A are subject to margin criteria and are available in either U.S. or Canadian dollars. Pricing for U.S. Base Rate and Canadian Rate loans is the U.S. Base Rate or Canadian Rate plus 0.50% per annum. Borrowings of U.S. dollar LIBOR-based loans are priced at LIBOR plus 2.00%. Borrowings under Facility B bear interest at the bank’s prime rate plus 1.00% per annum with principal repayments becoming due on a five year amortization schedule maturing in May 2016. Borrowings under Facility C are repayable according to a five year principal amortization schedule maturing in June 2016 and bear interest for borrowings in U.S. dollars based on either LIBOR (plus 2.00% to 2.25%) or the U.S. Base Rate (plus 1.00% to 1.25%), depending on the Company’s leverage ratio. Facility C borrowings in Canadian dollars are priced at the Canadian Rate plus 1.00% to 1.25%, depending on the Company’s leverage ratio. On March 27, 2015, the Company elected to prepay in full the Canadian dollar portion of Facility C with $5.0 million Canadian dollars (approximately $4.0 million expressed in U.S. dollars) of cash available on-hand. The Canadian Facilities are guaranteed by the Company and are secured by a first-ranking lien in the amount of $30 million CAD on all of the present and future movable and immovable property of the Company’s Canadian subsidiary. The Canadian Facilities require the Company’s Canadian operations to comply with various financial covenants, including maintaining a minimum fixed charge coverage ratio, a maximum funded debt to EBITDA ratio and a limitation on funded debt to capitalization. In addition, the Canadian Facilities also restrict the ability of the Company’s Canadian operations to, among other things, (i) provide any funding to any person, including affiliates, in an aggregate amount exceeding $5.0 million CAD (“financial assistance”) or (ii) make distributions in an aggregate amount exceeding 50% of Pioneer Electrogroup Canada Inc.’s previous year’s net income. In July 2015, the Canadian Facilities were amended to provide for a $2.0 million loan under Facility A, which was used by the Company’s U.S. operations in connection with an acquisition. The loan was repaid on September 30, 2015. Pursuant to the waiver and consent letter dated November 18, 2015 (see Note 1 – Basis of Presentation), any amounts advanced to the Company’s Canadian subsidiary under Facility A to be further advanced to its U.S. operations (the “Intercompany Loan”) shall bear interest at the U.S. Base Rate plus 2.50% and, from and after November 16, 2015, all other borrowings outstanding under the Canadian Facilities bear interest at the default rate, which is the Canadian Rate or the U.S. Base Rate increased by 2.0% per annum, compounded monthly. Furthermore, the agreement modified the allowable amount of financial assistance to approximately U.S. $4.1 million plus the principal amount of the Intercompany Loan up to U.S. $3.0 million. As of September 30, 2015 the Company had approximately $1.4 million in U.S. dollar equivalents outstanding under the Canadian Facilities. The Company’s borrowings consisted of $0 outstanding under Facility A, $0.5 million outstanding under Facility B and $0.9 million outstanding under Facility C. United States Credit Facilities On June 28, 2013, the Company and its wholly-owned U.S. subsidiaries entered into a credit agreement with Bank of Montreal, Chicago Branch (the “U.S. Facilities”) consisting of a $10.0 million demand revolving credit facility. On December 2, 2014, the U.S. Facilities were amended in order to provide a $5.0 million term loan facility that was used for the acquisition of Titan. The term loan facility has principal repayments becoming due on a five year amortization schedule. The U.S. Facilities, as amended, require the Company to comply with a two-step test of financial covenants. First, the Company must comply with a maximum funded debt to adjusted EBITDA ratio of (a) 7.00 x for the quarter ended September 30, 2015, (b) 4.00x for the quarter ending December 31, 2015, (c) 3.25x for the quarter ending March 31, 2016 and (d) 2.75 x for the quarter ending June 30, 2016 and all testing periods thereafter. Secondly, if the funded debt to adjusted EBITDA tests above are met, and the Company’s fixed charge coverage ratio is at or above (a) 0.50x for the quarter ending September 30, 2015, (b) 1.00x for the quarter ending December 31, 2015, and (c) 1.25x for the quarter ending March 31, 2016 and all testing periods thereafter, then no further compliance tests are required. Alternatively, the Company may comply with the financial covenant requirements of the U.S. Facilities if its U.S. operations comply with various financial covenants, including (a) maintaining a minimum fixed charge coverage ratio of 1.35, (b) limiting funded debt to less than 50% of capitalization, and (c) maintaining a maximum funded debt to adjusted EBITDA ratio of (i) 3.75 for fiscal quarter ending September 30, 2015, and (ii) 3.00 for the fiscal quarters ending on or after December 31, 2015. The U.S. Facilities also restrict the ability of the Company and its U.S. subsidiaries to incur indebtedness, create or incur liens, make investments, make distributions or dividends and enter into merger agreements or agreements for the sale of any or all assets. Borrowings under the demand revolving credit facility bear interest, at the Company’s option, at the bank’s prime rate plus 1.00% per annum on U.S. prime rate loans, or an adjusted LIBOR rate plus 2.25% per annum on Eurodollar loans. Borrowings under the term loan facility bear interest, at the Company’s option, at the bank’s prime rate plus 1.25% per annum on U.S. prime rate loans, or an adjusted LIBOR rate plus 2.50% per annum on Eurodollar loans. Pursuant to the waiver and consent letter dated November 18, 2015, from and after November 16, 2015, the outstanding amounts borrowed under the U.S. Facilities bear the default rate of interest, which is, for any U.S. prime rate loan, the sum of 2.0% plus the Applicable Margin plus the U.S. Prime Rate from time to time in effect, and for any Eurodollar Loan, the sum of 2.0% plus the rate of interest in effect thereon at the time of event of default until the end of the interest period applicable thereto and, thereafter, at a rate per annum equal to the sum of 2.0% plus the Applicable Margin for U.S. prime rate loans plus the U.S. Prime Rate from time to time in effect. In connection with the U.S. Facilities, the Company and its U.S. subsidiaries and the bank entered into a security agreement, pursuant to which the Company granted a security interest in substantially all of its assets in the U.S., including 65% of the shares of Pioneer Electrogroup Canada Inc., to secure the Company’s obligations under the U.S. Facilities. As of September 30, 2015, the Company had $14.3 million of borrowings outstanding under the U.S. Facilities and the financial covenant requirements for the quarter ended September 30, 2015 were waived. The Company’s borrowings consisted of $9.5 million outstanding under its revolving credit facility and $4.8 million outstanding under its term loan facility. On November 18, 2015, Bank of Montreal consented to suspend testing of the existing defaults until January 31, 2016 and to allow the Company’s Canadian subsidiary to borrow up to $3.0 million under the Canadian Facilities to be further advanced to the Company’s U.S. operations for working capital purposes and to pay a portion of its federal payroll tax obligation (see Note 1 – Basis of Presentation). Nexus Promissory Note On July 25, 2012, the Company’s Mexican subsidiary, Nexus Magneticos de Mexico, S. de R.L. de C.V. (“Nexus”), entered into a $1.65 million term loan agreement with GE CF Mexico, S.A. de C.V. (“GE Capital Mexico”). The term loan is payable in 60 consecutive monthly installments and bears interest, payable monthly, at a rate of 6.93% per annum. The obligations of Nexus under the term loan are secured by certain machinery and equipment located in Mexico and by a corporate guaranty by the Company. As of September 30, 2015, there was approximately $0.4 million outstanding. Titan Notes Payable In connection with the acquisition of Titan, the Company assumed obligations to repay the remaining holders of unsecured notes, all of which were repurchased during the nine months ended September 30, 2015. Long-term debt consists of the following (in thousands):
| September 30, |  | December 31,
| 2015 |  | 2014
Term credit facilities | $ | 6,163 |  | $ | 11,165
Nexus promissory note |  | 386 |  |  | 587
Other notes payable |  | - |  |  | 260
Capital lease obligations |  | 8 |  |  | 10
Total debt |  | 6,557 |  |  | 12,022
Less current portion |  | (6,461) |  |  | (2,483)
Total long-term debt | $ | 96 |  | $ | 9,539

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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 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 19, 20, 22 -Article 5 + Details
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