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Note 7 - Debt and Credit Agreements
 9 Months Ended
Sep. 30, 2021
Notes to Financial Statements  
Debt Disclosure [Text Block]

NOTE 7 — DEBT AND CREDIT AGREEMENTS

 

The Company’s outstanding debt balances as of September 30, 2021 and December 31, 2020 consisted of the following:

 

  

September 30,

  

December 31,

 
  

2021

  

2020

 

Line of credit

 $5,284  $1,245 

PPP Loans

  —   9,151 

Other notes payable

  161   163 

Long-term debt

  228   228 

Less: Current portion

  (5,445)  (1,406)

Long-term debt, net of current maturities

 $228  $9,381 

 

Credit Facility

 

On October 26, 2016, the Company established a three-year secured revolving line of credit with CIBC Bank USA (“CIBC”). This line of credit has been amended from time to time. On February 25, 2019, the line of credit was expanded and extended for three years when the Company and its subsidiaries entered into an Amended and Restated Loan and Security Agreement (the “Amended and Restated Loan Agreement”), with CIBC as administrative agent and sole lead arranger and the other financial institutions party thereto, providing the Company and its subsidiaries with a $35,000 secured credit facility (as amended to date, the “Credit Facility”). The obligations under the Credit Facility are secured by, subject to certain exclusions, (i) a first priority security interest in all accounts receivable, inventory, equipment, cash and investment property, and (ii) a mortgage on the Abilene, Texas tower and Pittsburgh, Pennsylvania gearing facilities.

 

On October 29, 2020, the Company executed the First Amendment to the Amended and Restated Loan Agreement, implementing a payoff of a syndicated lender and a pricing grid based on the Company’s trailing twelve month EBITDA under which applicable margins range from 2.25% to 2.75% for London Interbank Offering Rate (“LIBOR”) rate loans and 0.00% and 0.75% for base rate loans, and extending the term of the Credit Facility to  July 31, 2023.

 

On February 23, 2021, the Company executed the Second Amendment to the Amended and Restated Loan Agreement, which waived testing of the fixed charge coverage covenant for the quarters ended March 31, 2021 and June 20, 2021, added a new liquidity covenant applicable to the quarter ended March 31, 2021 and new minimum EBITDA covenants applicable to the quarters ended March 31, 2021 and June 30, 2021. As of September 30, 2021, the Company transitioned back to a fixed charge coverage covenant.

 

On November 8, 2021, the Company executed the Third Amendment to the Amended and Restated Loan Agreement (the “Third Amendment”) which waived the fixed charge coverage ratio default for the quarter ended September 30, 2021, suspended testing of the fixed charge coverage ratio covenant through September 30, 2022, added a minimum EBITDA covenant applicable to the three-month period ending December 31, 2021, the six-month period ending March 31, 2022, the nine-month period ending June 30, 2022 and the twelve-month period ending September 30, 2022 and added a reserve of $5,000,000 to the Revolving Loan Availability through December 31, 2022. For a more detailed description of the Third Amendment, refer to Item 5 of Part II of this Form 10-Q.

 

The Credit Facility is an asset-based revolving credit facility, pursuant to which the CIBC advances funds against a borrowing base consisting of approximately (a) 85% of the face value of eligible receivables of the Company and the subsidiaries, plus (b) the lesser of (i) 50% of the lower of cost or market value of eligible inventory of the Company, (ii) 85% of the orderly liquidation value of eligible inventory and (iii) $12.5 million, plus (c) the lesser of (i) the sum of (A) 75% of the appraised net orderly liquidation value of the Company’s eligible machinery and equipment plus (B) 50% of the fair market value of the Company’s mortgaged property and (ii) $12 million. Subject to certain borrowing base conditions, the aggregate Credit Facility limit under the Amended and Restated Loan Agreement is $35 million with a sublimit for letters of credit of $10 million. Borrowings under the Credit Facility bear interest at a per annum rate equal to, at the option of the Company, the one, two or three-month LIBOR rate or the base rate, plus a margin. The Company must also pay an unused facility fee equal to 0.50% per annum on the unused portion of the Credit Facility along with other standard fees. With the exception of the balance impacted by the interest rate swap (as described below), the Company is allowed to prepay in whole or in part advances under the Credit Facility without penalty or premium other than customary “breakage” costs with respect to LIBOR loans.

 

The Credit Facility contains customary representations and warranties applicable to the Company and its subsidiaries. It also contains a requirement that the Company, on a consolidated basis, maintain a minimum quarterly fixed charge coverage ratio, along with other customary restrictive covenants, certain of which are subject to materiality thresholds, baskets and customary exceptions and qualifications. 

 

In conjunction with the Amended and Restated Loan Agreement, during June 2019, the Company entered into a floating to fixed interest rate swap with CIBC. The swap agreement has a notional amount of $6,000 and a schedule matching that of the underlying loan that synthetically fixes the interest rate on LIBOR borrowings for the entire term of the Credit Facility at 2.13%, before considering the Company’s risk premium. The interest rate swap is accounted for using mark-to-market accounting. Accordingly, changes in the fair value of the swap each reporting period are adjusted through earnings, which may subject the Company’s results of operations to non-cash volatility. The interest rate swap liability is included in the “Accrued liabilities” line item of the Company’s condensed consolidated financial statements as of September 30, 2021 and December 31, 2020.

 

As of September 30, 2021, there was $5,284 of outstanding indebtedness under the Credit Facility, with the ability to borrow an additional $18,743.

 

Other 

 

In 2016, the Company entered into a $570 loan agreement with the Development Corporation of Abilene which is included in the “Long-term debt, less current maturities” line item of our condensed consolidated financial statements as of September 30, 2021 and December 31, 2020. The loan is forgivable upon the Company meeting and maintaining specific employment thresholds. During each of the years 2020, 2019, and 2018, $114 of the loan was forgiven. As of September 30, 2021, the loan balance was $228. In addition, the Company has outstanding notes payable for capital expenditures in the amount of $161 and $163 as of September 30, 2021 and December 31, 2020, respectively, with $161 included in the “Line of credit and other notes payable” line item of the Company’s condensed consolidated financial statements as of September 30, 2021 and December 31, 2020. The notes payable have monthly payments that range from $1 to $16 and an interest rate of approximately 4%. The equipment purchased is utilized as collateral for the notes payable. The outstanding notes payable have maturity dates that range from March 2022 to September 2024.

​

On April 15, 2020, the Company received funds under notes and related documents with CIBC, under the Paycheck Protection Program (the “PPP”) which was established under the CARES Act enacted on March 27, 2020 in response to the COVID-19 pandemic and is administered by the SBA. The Company received total proceeds of $9,530 from the PPP Loans and made repayments of $379 on May 13, 2020. Under the terms of the CARES Act, as amended by the Paycheck Protection Program Flexibility Act of 2020 enacted on June 5, 2020 (the “Flexibility Act”), the PPP Loans, and accrued interest and fees are eligible to be forgiven following a period of twenty-four weeks after PPP Loan proceeds are received (the “covered period”) if they are used for qualifying expenses as described in the CARES Act including payroll costs and certain employee benefits (which must equal or exceed 60% of the amount requested to be forgiven), rent, mortgage interest, and utilities. The amount of loan forgiveness is reduced if the borrower terminates employees or significantly reduces salaries during such period, subject to certain exceptions. The Company used at least 60% of the amount of the PPP Loans proceeds to pay for payroll costs and the balance on other eligible qualifying expenses consistent with the terms of the PPP and submitted its forgiveness applications to CIBC during the first quarter of 2021. During the quarter ended June 30, 2021, all loans were forgiven by the SBA and a gain of $9,151 was recorded in “Other income (expense), net” in the Company's condensed consolidated statements of operations.