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Note 12 - Long Term Debt | 3 Months Ended
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Mar. 31, 2020
Notes to Financial Statements |
Long-term Debt [Text Block] |
12. |  | Long term Debt
On January 31, 2018, the Company entered into a financing agreement by and among the Company and certain subsidiaries of the Company as borrowers (collectively, the Borrower), certain subsidiaries of the Company as guarantors, various lenders from time to time (the Lenders), and Cerberus Business Finance, LLC, as collateral agent and administrative agent for the Lenders (the Financing Agreement). On August 16, 2018, the Company and Cerberus Business Finance, LLC entered into a First Amendment to the Financing Agreement, which such amendment modified certain provisions related to the borrowing base and reporting, among other things. On November 4, 2019, the Company and Cerberus Business Finance, LLC entered into a Second Amendment to the Financing Agreement, which modified certain provisions effective as of September 30, 2019 related to the Company’s quarterly leverage ratio financial covenant amongst other provisions. The Financing Agreement provided for senior secured credit facilities (the Senior Secured Credit Facilities) comprised of a $64.0 million term loan and up to a $25.0 million revolving line of credit subject to available borrowing base. The revolving facility is available for use by the Company and its subsidiaries for general corporate and working capital needs, and other purposes to the extent permitted by the Financing Agreement. Borrowings available under the revolving line of credit are limited to a borrowing base derived from the Company’s eligible accounts receivable and inventory, as defined in the Financing Agreement. As of March 31, 2020, borrowings available under the revolving facility were $4.6 million. Commencing on March 31, 2018, the outstanding term loans began to amortize in equal quarterly installments equal to $0.4 million per quarter on such date and during each of the next three quarters thereafter, $0.6 million per quarter during the next four quarters thereafter and $0.8 million per quarter thereafter, with a balloon payment at maturity in 2023. Furthermore, within ten days of the Company’s delivery of its audited annual financial statements each year, the term loans are permanently reduced pursuant to certain mandatory prepayment events including an annual “excess cash flow sweep” of 50% of the consolidated excess cash flow; provided that, in any fiscal year, any voluntary prepayments of the term loans shall be credited against the Company’s “excess cash flow” prepayment obligations on a dollar-for-dollar basis for such fiscal year. During the three months ended March 31, 2020, the Company made an excess cash flow payment of $4.0 million. During the year ended December 31, 2019, the Company made an excess cash flow payment of $4.0 million and a payment of $1.0 million in connection with the release of an escrow amount associated with the Denville Transaction. as required by the Financing Agreement. The obligations of the Borrower under the Senior Secured Credit Facilities are unconditionally guaranteed by the Company and certain of the Company’s existing and subsequently acquired or organized subsidiaries. The Senior Secured Credit Facilities and related guarantees are secured on a first -priority basis (subject to certain liens permitted under the Financing Agreement) by a lien on substantially all the tangible and intangible assets of the Borrower and the subsidiary guarantors, including all of the capital stock held by such obligors (subject to a 65% limitation on pledges of capital stock of foreign subsidiaries), subject to certain exceptions. Interest on all loans under the Senior Secured Credit Facilities is paid monthly. Borrowings under the Financing Agreement accrue interest at a per annum rate equal to, at the Borrower’s option, a base rate plus 4.75% or a London Interbank Offered Rate (LIBOR) rate plus 6.25%. The loans are also subject to a 1.25% interest rate floor for LIBOR loans and a 4.25% interest rate floor for base rate loans. The LIBOR index is expected to be discontinued by the end of calendar year 2021. The terms of the revolving credit facility allow for a replacement rate if the LIBOR index is discontinued. The Financing Agreement contains customary representations and warranties and affirmative covenants applicable to the Company and its subsidiaries and also contains certain restrictive covenants, including, among others, limitations on the incurrence of additional debt, liens on property, acquisitions and investments, loans and guarantees, mergers, consolidations, liquidations and dissolutions, asset sales, dividends and other payments in respect of the Company’s capital stock, prepayments of certain debt, transactions with affiliates and modifications of organizational documents, material contracts, affiliated practice agreements and certain debt agreements. The Financing Agreement contains customary events of default and is subject to covenant and working capital borrowing restrictions. The Company is compliant with all covenants under the Financing Agreement as of March 31, 2020. The Company’s covenants include a requirement to maintain a maximum leverage ratio among other financial and non-financial covenants, as defined in the Financing Agreement. The maximum permitted leverage is the ratio of total debt to consolidated EBITDA, as defined in the Financing Agreement, with a maximum ratio of 3.50 as of March 31, 2020, stepping down to 3.25 for the three months ended June 30, 2020 and all quarters thereafter. Due to the negative impact of COVID- 19 on revenue and consolidated EBITDA, the Company’s leverage ratio has increased, and the gap between the leverage ratio and maximum permitted leverage has reduced. Based on the Company’s current operating plans, including actions taken to mitigate the impact of COVID- 19, it expects that available cash, cash generated from current operations and debt capacity will be sufficient to finance current operations, any costs associated with restructuring activities and capital expenditures. This assessment includes consideration of the Company’s best estimates of the impact of the COVID- 19 pandemic on its financial results. If the negative impact of COVID- 19 is more significant than anticipated it may impact the Company’s ability to comply with financial covenants in the future, which would require the Company to seek an amendment or waivers from its lenders, limit access to or require accelerated repayment of the existing credit facilities, or require the Company to pursue alternative financing. There are no assurances that any such alternative financing, if required, could be obtained at terms acceptable to the Company, or at all. As of March 31, 2020, the weighted effective interest rate, net of the impact of the Company’s interest rate swap, on its borrowings was 8.40%. The carrying value of the debt approximates fair value because the interest rate under the obligation approximates market rates of interest available to the Company for similar instruments. As of March 31, 2020, and December 31, 2019, the Company’s borrowings were comprised of:
|  | March 31, |  | December 31,
|  | 2020 |  | 2019
|  | (in thousands)
Long-term debt: |  |  |  |  |  |  |  |
Term loan |  | $ | 50,168 |  |  |  | 54,997 |
Revolving line |  |  | - |  |  |  | - |
Total unamortized deferred financing costs |  |  | (1,081 | ) |  |  | (1,180 | )
Total debt |  |  | 49,087 |  |  |  | 53,817 |
Less: current installments |  |  | (3,200 | ) |  |  | (3,200 | )
Less: excess cash flow sweep |  |  | - |  |  |  | (4,093 | )
Current unamortized deferred financing costs |  |  | 393 |  |  |  | 393 |
Long-term debt |  | $ | 46,280 |  |  | $ | 46,917 |

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