XML 23 R13.htm IDEA: XBRL DOCUMENT v3.22.2.2
Note 7 - Debt and Credit Agreements
 9 Months Ended
Sep. 30, 2022
Notes to Financial Statements  
Debt Disclosure [Text Block]

NOTE 7 — DEBT AND CREDIT AGREEMENTS

 

The Company’s outstanding debt balances as of September 30, 2022 and December 31, 2021 consisted of the following:

 

  

September 30,

  

December 31,

 
  

2022

  

2021

 

Line of credit

 $14,406  $6,350 

Current portion of term loan

  1,083   — 

Other notes payable

  2,198   274 

Long-term debt

  6,431   203 

Less: Current portion

  (15,629)  (6,650)

Long-term debt, net of current maturities

 $8,489  $177 

 

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 “2016 Credit Facility”). The obligations under the 2016 Credit Facility were 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 2016 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 to the revolving loan availability through December 31, 2022. 

 

On February 28, 2022, the Company executed the Fourth Amendment to the Amended and Restated Loan Agreement (the “Fourth Amendment”) which reduced the line of credit from $35,000 to $30,000, extended the maturity date until January 31, 2024, waived the minimum EBITDA covenant for the three-month period ended December 31, 2021, revised the fixed charge coverage ratio covenant as of December 31, 2022 for the trailing nine-month period after March 31, 2022, revised the minimum EBITDA covenant applicable to the three-month period ending March 31, 2022, the six-month period ending June 30, 2022 and the nine-month period ending September 30, 2022, revised the liquidity reserve to $2,500 and amended certain other provisions in connection with the discontinuation of LIBOR and replacement with the forward-looking term Secured Overnight Financing Rate (Term SOFR) administered by CME Group, Inc.

 

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 fixed the interest rate on LIBOR borrowings for the entire original term of the 2016 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  December 31, 2021. The interest rate swap expired in  February 2022. 

 

On August 4, 2022, the Company entered into a credit agreement (the “2022 Credit Agreement”) with Wells Fargo Bank, National Association, as lender (“Wells Fargo”), providing the Company and its subsidiaries with a $35,000 senior secured revolving credit facility (which may be further increased by up to an additional $10,000 upon the request of the Company and at the sole discretion of Wells Fargo) and a $7,578 senior secured term loan (collectively, the “2022 Credit Facility”). The proceeds of the 2022 Credit Facility are available for general corporate purposes, including strategic growth opportunities. The 2022 Credit Facility replaced the 2016 Credit Facility. All obligations outstanding under the 2016 Credit Facility were refinanced by the 2022 Credit Facility on August 5, 2022.

 

The 2022 Credit Facility contains customary covenants limiting the Company’s and its subsidiaries’ ability to, among other things, incur liens, make investments, incur indebtedness, merge or consolidate with others or dispose of assets, change the nature of its business, and enter into transactions with affiliates.  In addition, the 2022 Credit Facility contains financial covenants requiring the Company to have a Fixed Charge Coverage Ratio (as defined in the 2022 Credit Facility) (i) as of the twelve-month period ending July 31, 2023 through and including December 31, 2023 of 1.0 to 1.0; and (ii) as of each twelve-month period thereafter to be greater than 1.1 to 1.0 and minimum EBITDA (as defined in the 2022 Credit Facility) on a month-end basis of $0 for the six month period ending June 30, 2022, $1,500 for the nine-month period ending September 30, 2022, $2,500 for the twelve-month period ending December 31, 2022, $3,600 for the twelve-month period ending March 31, 2023, and $5,100 for the twelve-month period ending June 30, 2023. The initial term of the revolving credit facility matures August 4, 2027. The term loan also matures on August 4, 2027, with monthly payments based on an 84-month amortization.

 

Borrowings under the 2022 Credit Facility bear interest at the following rates depending on the classification of the borrowing:

 

• term loan - Daily Simple SOFR (a rate per annum equal to the secured overnight financing rate published by the SOFR administrator on the website of the Federal Reserve Bank of New York or any successor source), plus an applicable margin of 2.50%; and

 

• revolving credit loan - Daily Simple SOFR, plus an applicable margin of 2.00% to 2.50% depending on the excess availability on the revolving loan facility.

 

The 2022 Credit Agreement also contains customary events of default including, without limitation, non-payment of obligations, non-performance of covenants and obligations, material judgments, bankruptcy or insolvency, change of control, breaches of representations and warranties, limitation or termination of any guarantee with respect to the 2022 Credit Agreement or unenforceability of documentation related to the 2022 Credit Agreement. The Company is allowed to prepay in whole or in part advances under the 2022 Credit Facility without penalty or premium.

 

The obligations under the 2022 Credit Agreement are secured by, subject to certain exclusions, (i) a first priority security interest in all accounts, inventory, equipment, general intangibles, intellectual property, money and investment property, and (ii) a deed of trust, assignment of leases and rents and security agreement and fixture filing on the Abilene, Texas facility.

 

In connection with the 2022 Credit Facility, on August 4, 2022, the Company and its subsidiaries (collectively, the “Guarantors”) entered into a guaranty (the “Guaranty”) in favor of Wells Fargo, whereby the Guarantors guaranteed the full payment of all the obligations of the Company and its subsidiaries under the 2022 Credit Facility. Each of the Company’s additional subsidiaries, if any, upon becoming a direct or indirect subsidiary, will be required to become a party to the Guaranty. Additionally, in connection with the 2022 Credit Facility, the Company incurred deferred financing costs in the amount of $470 primarily related to the revolving credit loan. These costs are included in the “Other assets” line item of the Company's condensed consolidated financial statements as of September 30, 2022. 

 

As of September 30, 2022, there was $21,893 of outstanding indebtedness under the 2022 Credit Facility, with the ability to borrow an additional $13,315. As of September 30, 2022, the Company was in compliance with all financial covenants under the 2022 Credit Facility.

 

Other 

 

In 2016, the Company entered into a $570 loan agreement with the Development Corporation of Abilene which is included in the “Line of credit and other notes payable” line item of the Company’s condensed consolidated financial statements as of September 30, 2022 and December 31, 2021. The loan is forgivable upon the Company meeting and maintaining specific employment thresholds. During each of the years 2021, 2020, 2019, and 2018, $114 of the loan was forgiven. As of September 30, 2022, the loan balance was $114. In addition, the Company has outstanding notes payable for capital expenditures in the amount of $2,111 and $363 as of September 30, 2022 and December 31, 2021, respectively, with $26 and $186 included in the “Line of credit and other notes payable” line item of the Company’s condensed consolidated financial statements as of September 30, 2022 and December 31, 2021. The notes payable have monthly payments that range from $3 to $16 and an interest rate of approximately 6%. The equipment purchased is utilized as collateral for the notes payable. The outstanding notes payable mature in  September 2028.