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Note 4 - Credit Facilities
 12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Debt Disclosure [Text Block]
4.
Credit Facilities
 
Domestic
Credit Facilities
 
On
April 10, 2019,
the Company repaid and replaced its
2018
credit facility with PNC Bank, National Association ("PNC") with a new secured revolving credit facility in the United States and Canada (the "NM Credit Facility") with North Mill, LLC ("NM").
 
In order to obtain, document and govern the new NM Credit Facility: SGRP and certain of its direct and indirect subsidiaries in the United States and Canada, namely SPAR Marketing Force ("SMF"), Inc., and SPAR Canada Company ("SCC")  (each, a "NM Borrower" and collectively, the "NM Borrowers"), and SPAR Canada, Inc., SPAR Acquisition, Inc., SPAR Assembly and Installation, Inc., and SPAR Trademarks, Inc. (together with SGRP, each a "NM Guarantor" and collectively, the "NM Guarantors), entered into 
eighteen
(
18
) month individual Loan and Security Agreements with NM dated as of
April 10, 2019 (
the "NM Loan Agreements") which secures the obligations of the NM Loan Parties to NM with pledges of substantially all of the assets of the NM Loan Parties (other than SGRP's foreign subsidiaries, certain designated domestic subsidiaries, and their respective equity and assets); the SMF Borrower issued its
$10.5
million Revolving Credit Master Promissory Note to NM dated
April 10, 2019
and the SCC Borrower issued its
$1.5
million Revolving Credit Master Promissory Note to NM dated
April 10, 2019 (
the "Original NM Notes"), which evidences the NM Borrowers' loans and other obligations to NM; the NM Guarantors entered into a Guaranty Agreement with NM dated as of
April 10, 2019 (
the "NM Guaranty"), which guaranties the NM Borrowers' loans and other obligations to NM. The NM Loan Agreements have an approved borrowing capacity of
$12.5
million for the SMF Borrower and
$2.5
million for the SCC Borrower.
 
On
April 10, 2019,
the Company drew down an initial advance under the NM Credit Facility of approximately
$9.8
million, which was used to repay the Company's existing credit facility with PNC.
 
The NM Note currently requires the NM Borrowers to pay interest on the loans thereunder equal to (A) Prime Rate designated by Wells Fargo Bank, plus (B)
one hundred twenty
five
basis points (
1.25%
). In addition, the Company is paying a fee to NM in the amount of
1.5%
of the Promissory Notes or
$180,000
payable at
$10,000
per month over the term of the agreement.  The Company utilized a broker to assist in this financing and has paid a fee of
$120,000
for their services,
 
Revolving loans are available to the Borrowers under the NM Credit Facility based upon the borrowing base formula defined in the NM Loan Agreement (principally
85%
of "eligible" accounts receivable less certain reserves and
60%
of eligible unbilled accounts receivable at a maximum limit of
$4.5
million).
 
The NM Credit Facility contains certain financial and other restrictive covenants and also limits certain expenditures by the NM Loan Parties, including, maintaining a positive trailing EBITDA for each Borrower and limits on capital expenditures and other investments.
 
In
January 2018,
the Company repaid and replaced its credit facility with Sterling Bank with a secured revolving credit facility in the United States and Canada (as amended the "PNC Credit Facility") with PNC Bank, National Association.
 
In order to obtain, document and govern the PNC Credit Facility: SGRP and certain of its direct and indirect subsidiaries in the United States and Canada, namely SPAR Marketing Force ("SMF"), Inc., SPAR Assembly & Installation, Inc., and SPAR Canada Company (each, a "PNC Borrower" and collectively, the "PNC Borrowers"), and SPAR Canada, Inc., SPAR Acquisition, Inc., SPAR Group International, Inc., and SPAR Trademarks, Inc. (together with SGRP, each a "PNC Guarantor" and collectively, the "PNC Guarantors), entered into a Loan Agreement with PNC dated as of
January 16, 2018 (
the "PNC Loan Agreement"); the PNC Borrowers issued their
$9
million Committed Line Of Credit Note to PNC dated
January 16, 2018 (
the "Original PNC Note"), which evidences the PNC Borrowers' loans and other obligations to PNC; the PNC Guarantors entered into a Guaranty and Suretyship Agreement with PNC dated as of
January 16, 2018 (
the "PNC Guaranty"), which guaranties the PNC Borrowers' loans and other obligations to PNC; and the PNC Borrowers and PNC Guarantors (each, a "PNC Loan Party" and collectively, the "PNC Loan Parties") entered into a Security Agreement with PNC dated as of
January 16, 2018 (
the "PNC Security Agreement"), which secures the obligations of the PNC Loan Parties to PNC with pledges of substantially all of the assets of the PNC Loan Parties (other than SGRP's foreign subsidiaries, certain designated domestic subsidiaries, and their respective equity and assets).
 
An amendment to the PNC Credit Facility dated as of
July 3, 2018,
among other things, increased the maximum principal amount of the Revolving Loans to
$9.5
million.
 
The PNC Note currently requires the PNC Borrowers to pay interest on the loans thereunder equal to (A) the Daily LIBOR Rate (as defined therein) per annum, plus (B)
two hundred fifty
basis points (
2.50%
). On
December 31, 2018,
the aggregate interest rate under that formula was
5.02%
per annum, and the outstanding loan balance was
$8.8
million.
 
Revolving loans of up to
$9.5
million are available to the Company under the PNC Credit Facility based upon the borrowing base formula defined in the PNC Loan Agreement (principally
85%
of "eligible" accounts receivable less certain reserves) rendering a maximum borrowing amount of
$9.5
million as of
December 31, 2018.
 
The PNC Credit Facility contains certain financial and other restrictive covenants and also limits certain expenditures by the PNC Loan Parties, including, maintaining a minimum Tangible Net Worth of
$13.4
million and limits on capital expenditures and other investments.
 
On
December 31, 2018,
the PNC Loan Parties were
not
in compliance with the minimum Tangible Net Worth covenant, PNC Bank did
not
issue a waiver for the reporting period and as a result, the Company had entered into the NM Credit Facility effective
April 2019.
 
Fifth Third Credit
Facility
 
On
January 9, 2018,
the Company completed its acquisition of a
51%
interest in its new subsidiaries, Resource Plus of North Florida, Inc., and related companies (collectively, "Resource Plus"). See Note
13
to the Company's Consolidated Financial Statements –
Purchase of Interests in Subsidiaries
–
Resource Plus Acquisition
, below. When acquired, Resource Plus was a party to a revolving line of credit facility it secured on
May 23, 2016, (
the "Fifth Third Credit Facility") from Fifth Third Bank for
$3.5
million, which was scheduled to expire on
May 23, 2018.
Effective
April 11, 2018,
the term of the Fifth Third Credit Facility was extended and is currently scheduled to become due on
April 23, 2020.
As there are
no
provisions (other than defaults) requiring the pay down of the loan until
April 23, 2020,
any amounts outstanding are classified as long-term debt.
 
Revolving loans of up to
$3.5
million are available to Resource Plus under the Fifth Third Credit Facility based upon the borrowing base formula defined in the agreement (principally
80%
of "eligible" accounts receivable less certain reserves). As of
December 31, 2018,
there was
no
outstanding balance. The Fifth Third Credit Facility is secured by substantially all assets of Resource Plus.
 
The Fifth Third Credit Facility currently requires Resource Plus to pay interest on the loans thereunder equal to (A) the Daily LIBOR Rate (as defined in the agreement) per annum, plus (B)
two hundred fifty
basis points (
2.50%
). On
December 31, 2018,
the aggregate interest rate under that formula was
4.975%
per annum.
 
Other Debt
 
Effective with the closing of the Resource Plus acquisition, the Company entered into promissory notes with the sellers totaling
$2.3
million. The notes are payable in annual installments at various amounts due on
December
31st
of each year starting with
December 31, 2018
and continuing through
December 31, 2023.
As such these notes are classified as both short term and long term for the appropriate amounts. The total balance owed at
December 31, 2018
was
$1.97
million.
 
International Credit Facilities:
 
 
SPARFACTS Australia Pty. Ltd. has a secured line of credit facility with National Australia Bank, effective
October 31, 2017,
for
$800,000
(Australian) or approximately
$564,000
USD (based upon the exchange rate at
December 31, 2018).
The facility provides for borrowing based upon a formula, as defined in the agreement (principally
80%
of eligible accounts receivable less certain deductions). The outstanding balance with National Australia Bank as of
December 31, 2018
was
$462,000
(Australian) or
$326,000
USD and is due on demand.
 
SPAR Todopromo has secured a line of credit facility with BBVA Bancomer Bank for
5.0
million Mexican Pesos or approximately
$255,000
USD (based upon the exchange rate at
December 31, 2018).
The revolving line of credit was secured on
March 15, 2016,
and originally expired
March 2018.
The facility has been amended to extend the terms to
March 2020.
The variable interest rate is TIIE (Interbank Interest Rate) +
4%,
which resulted in an annual interest rate of
12.23%
as of
December 31, 2018.
The outstanding balance at
December 31, 2018
was
3
million Mexican Pesos or approximately
$153,000
USD.
 
On
November 29, 2016,
SPAR Brazil established a line of credit facility with Itau Bank for
4.0
million Brazilian Real or approximately
$1,031,000
USD (based upon the exchange rate at
December 31, 2018).
The facility provides for borrowing with
no
formal guarantees. This account was closed as of
July 1, 2018.
 
On
December 26, 2016,
SPAR Brazil secured a line of credit facility with Daycoval Bank for
5.0
million Brazilian Real or approximately
$1.3
million USD (based upon the exchange rate at
December 31, 2018).
The facility provides for borrowing based upon a formula, as defined in the agreement (principally
80%
of eligible accounts receivable less certain deductions). This account was closed as of
October 5, 2018.
 
On
May 29, 2018,
SPAR Brazil established a line of credit facility with Banco Bradesco for
1.2
million Brazilian Real or approximately
$309,000
USD (based upon the exchange rate at
December 31, 2018).
The facility provides for borrowing with
no
formal guarantees. The agreement expires on
November 29, 2019.
The outstanding balance at
December 31, 2018,
was approximately
147,000
Brazilian Real or approximately
$38,000
USD.
 
On
May 25, 2018,
SPAR Brazil established a temporary line of credit facility with Banco Safra for
3.0
million Brazilian Real or approximately
$774,000
USD (based upon the exchange rate at
December 31, 2018).
The agreement was from month to month at the Company's request. This account was closed as of
August 13, 2018.
 
On
October 5, 2018
SPAR Brazil secured a line of credit facility with Branco Bradesco for approximately
3.5
million Brazilian Real or approximately
$910,000
USD (based upon the exchange rate at
December 31, 2018).
The outstanding balance as of
December 31, 2018
was approximately
3.4
million Brazilian Real or approximately
$872,000
USD. The note is due
December 19, 2019,
with varying monthly payments.
 
On
October 5, 2018
SPAR Brazil secured a line of credit facility with Branco Santander for approximately
381,000
Brazilian Real or approximately
$98,000
USD (based upon the exchange rate at
December 31, 2018).
The outstanding balance as of
December 31, 2018
was approximately
381,000
Brazilian Real or approximately
$98,000
USD.
 
 
Interest Rate as of
  
 
    
 
    
 
    
 
    
 
  
 
December 31, 2018
  
2019
 
  
2020
 
  
2021
 
  
2022
 
  
2023
 
Brazil - Bradesco
0.37%
-
0.92%
    
910
      
–
      
–
      
–
      
–
  
Brazil – Santander
 
1.38%
 
    
98
      
–
      
–
      
–
      
–
  
USA - PNC Bank
 
5.02%
 
    
8,747
      
–
      
–
      
–
      
–
  
USA - Fifth Third Bank
 
4.97%
 
    
–
      
–
      
–
      
–
      
–
  
USA - Resource Plus Sellers
 
1.85%
 
    
333
      
334
      
300
      
300
      
700
  
National Australia Bank
 
6.60%
 
    
326
      
–
      
–
      
–
      
–
  
Mexico - BBVA / Shareholder
 
12.23%
 
    
–
      
153
      
–
      
–
      
–
  
Total
 
 
 
   $
10,414
     $
487
     $
300
     $
300
     $
700
  
 
Summary of
Unused
Company Credit and Other Debt Facilities (in thousands)
:
 
   
December 31, 2018
    
December 31, 2017
  
Unused Availability:
                
United States
   $
4,253
     $
3,530
  
Australia
    
238
      
731
  
Brazil
    
304
      
1,554
  
Mexico
    
102
      
254
  
Total Unused Availability
   $
4,897
     $
6,069
  
 
Management believes that based upon the continuation of the Company's existing credit facilities, projected results of operations, vendor payment requirements and other financing available to the Company (including amounts due to affiliates), sources of cash availability should be manageable and sufficient to support ongoing operations over the next year. However, delays in collection of receivables due from any of the Company's major clients, or a significant reduction in business from such clients could have a material adverse effect on the Company's cash resources and its ongoing ability to fund operations.