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Note 11 - Long Term Debt | 12 Months Ended
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Dec. 31, 2021
Notes to Financial Statements |
Long-term Debt [Text Block] |
| 11. | Long Term Debt
As of December 31, 2021 and December 31, 2020, the Company’s borrowings were comprised of the following:
|  | December 31, |
(in thousands) |  | 2021 |  |  | 2020 |
Long-term debt: |  |  |  |  |  |  |  |
Term loan |  | $ | 38,000 |  |  | $ | 40,000 |
Revolving line |  |  | 11,450 |  |  |  | 9,400 |
Less unamortized deferred financing costs |  |  | (1,120 | ) |  |  | (1,393 | )
Total debt |  |  | 48,330 |  |  |  | 48,007 |
Current portion of long-term debt |  |  | (3,515 | ) |  |  | (2,000 | )
Current unamortized deferred financing costs |  |  | 280 |  |  |  | 279 |
Long-term debt |  | $ | 45,095 |  |  | $ | 46,286 |
The aggregate amounts of debt maturing during the next five years are as follows:
(in thousands) |  |  |  |
2022 |  | $ | 3,515 |
2023 |  |  | 3,000 |
2024 |  |  | 4,000 |
2025 |  |  | 38,935 |
|  | $ | 49,450 |
On December 22, 2020, the Company entered into a Credit Agreement (the “Credit Agreement”) with Citizens Bank, N.A., Wells Fargo Bank, National Association, and Silicon Valley Bank, (together, the “Lenders”). The Credit Agreement provides for a term loan of $40.0 million and a $25.0 million senior revolving credit facility (including a $10.0 million sub-facility for the issuance of letters of credit and a $10.0 million swingline loan sub-facility) (collectively, the “Credit Facility”). The Company’s obligations under the Credit Agreement are guaranteed by certain of the Company’s direct, domestic wholly-owned subsidiaries; none of the Company’s direct or indirect foreign subsidiaries has guaranteed the Credit Facility. The Company’s obligations under the Credit Agreement are secured by substantially all of the assets of Harvard Bioscience, Inc. and each guarantor (including all or a portion of the equity interests in certain of the Company’s domestic and foreign subsidiaries). The Credit Facility matures on December 22, 2025. Issuance costs of $1.3 million are amortized over the contractual term to maturity date on a straight-line basis, which approximates the effective interest method. As of December 31, 2021, available borrowing capacity under the revolving line of credit was $13.6 million. The Credit Facility replaced the Company’s prior credit agreement which consisted of a revolving credit facility and a term loan that was scheduled to expire on January 31, 2023. On December 22, 2020, the Company paid the prior credit facility outstanding borrowing balance of $46.7 million, paid $0.6 million in debt extinguishment costs, and wrote off the remaining balance of its unamortized debt issuance cost which amounted to $0.8 million. The write-off of the unamortized debt issuance costs is included in the Other expense – debt extinguishment and related costs in the Consolidated Statements of Operations. The Company financed the payoff of the outstanding borrowings under the prior credit facility with borrowings under the Credit Agreement. Borrowings under the Credit Facility will, at the option of the Company, bear interest at either (i) a rate per annum based on LIBOR for an interest period of one, two, three or six months, plus an applicable interest rate margin determined as provided in the Credit Agreement (a “LIBOR Loan”), or (ii) an alternative base rate plus an applicable interest rate margin, each as determined as provided in the Credit Agreement (an “ABR Loan”). LIBOR interest under the Credit Agreement is subject to applicable market rates and a floor of 0.50 %. The alternative base rate is based on the bank prime rate or the federal funds effective rate of the Federal Reserve Bank of New York and is subject to a floor of 1.0%. The applicable interest rate margin varies from 2.0% per annum to 3.25% per annum for LIBOR Loans, and from 1.5% per annum to 3.0% per annum for ABR Loans, in each case depending on the Company’s consolidated leverage ratio and is determined in accordance with a pricing grid set forth in the Credit Agreement (the “Pricing Grid”). Interest on LIBOR Loans is payable in arrears on the last day of each applicable interest period, and interest on ABR Loans is payable in arrears at the end of each calendar quarter. There are no prepayment penalties in the event the Company elects to prepay and terminate the Credit Facility prior to its scheduled maturity date, subject to LIBOR breakage and redeployment costs in certain circumstances. Commencing on March 31, 2021, the outstanding term loans amortizes in equal quarterly installments equal to $0.5 million per quarter on such date and during each of the next three quarters thereafter, $0.75 million per quarter during the next eight quarters thereafter and $1.0 million per quarter thereafter, with a balloon payment at maturity. Furthermore, within ninety days after the end of the Company’s fiscal year ended December 31, 2021 and for each fiscal year thereafter, the term loans may be permanently reduced pursuant to certain mandatory prepayment events including an annual “excess cash flow sweep” of 50% of the consolidated excess cash flow, as defined in the agreement; 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. Amounts outstanding under the revolving credit facility can be repaid at any time but are due in full at maturity. As of December 31, 2021, the current portion of long-term debt includes an excess cash flow sweep of $0.5 million to be paid by March 31, 2022. The Credit Agreement includes customary affirmative, negative, and financial covenants binding on the Company. The negative covenants limit the ability of the Company, among other things, to incur debt, incur liens, make investments, sell assets and pay dividends on its capital stock. The financial covenants include a maximum consolidated net leverage ratio and a minimum consolidated fixed charge coverage ratio. The Credit Agreement also includes customary events of default. As of December 31, 2021 and 2020, the weighted effective interest rate on the Credit Agreement borrowings was 3.0% and 3.25%, respectively. 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. On April 18, 2020, the Company entered into a promissory note with PNC Bank, National Association, which provided for a loan in the amount of $6.1 million (the “PPP Loan”) pursuant to the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the U.S. Small Business Administration (the “SBA”). On April 23, 2020, the SBA, in consultation with the U.S. Department of the Treasury issued guidance regarding consideration of alternate available sources of liquidity and its impact on qualification for PPP loans. The Company reassessed its business plans and liquidity available under its existing credit facility and elected to repay all PPP funds. The PPP Loan was repaid in full on May 4, 2020. Derivatives The Company monitors interest rate risk attributable to both its outstanding and forecasted debt obligations by the use of cash flow sensitivity analysis which estimates the expected impact of changes in interest rates on the Company’s future cash flows. On January 31, 2018, the Company entered into an interest rate swap contract with a notional amount of $36.0 million and a termination date of January 1, 2023. This swap contract, which converted specific variable-rate debt into fixed-rate debt and fixed the LIBOR rate associated with a portion of the term loan under the Company’s prior credit facility at 2.72% was cancelled on December 22, 2020, in connection with the new Credit Agreement as described above. The Company paid $0.5 million to cancel its outstanding interest rate swap agreement with PNC Bank (notional value of $23.0 million). The cancellation amount represented the fair value of the contracts at the time and was recorded as debt extinguishment and related costs in the Consolidated Statements of Operations. The Company structured this interest rate swap to be fully effective in accordance with ASC 815 “Derivatives and Hedging”, and therefore changes in the fair value of the swap offset the variability of cash flows associated with the variable-rate, long-term debt obligations and were reported in accumulated other comprehensive income (AOCI). These amounts subsequently were reclassified into interest expense as a yield adjustment of the hedged interest payments in the same period in which the related interest affects earnings. The following table summarizes the effect of interest rate swap derivatives designated as cash flow hedging instruments and their classification within the consolidated financial statements for the year ended December 31, 2020:
|  |  | Year Ended |
(in thousands) | Location |  | December 31, 2020 |
Amount of loss recognized in OCI | Other comprehensive loss |  | $ | (206 | )
Amount reclassified from AOCI into income | Interest expense |  |  | 319 |
| Debt extinguishment and related costs |  |  | 490 |
|  |  |  | 809 |
Total |  | $ | 603 |

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