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Note 9 - Term Loans and Line of Credit Agreements | 9 Months Ended
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Sep. 30, 2020
Notes to Financial Statements |
Debt Disclosure [Text Block] | Note 9. Term Loan s and Line of Credit Agreements New Term Loan Agreement On December 20, 2019, Avalon and certain direct and indirect wholly owned subsidiaries entered into a loan and security agreement (the “New Term Loan Agreement”) with Laurel Capital Corporation which provided for a $23.0 million term loan. The New Term Loan Agreement proceeds were utilized to pay off and refinance the Company's existing term loan and commercial mortgage agreements, pay down the outstanding balance and associated interest on the Company's line of credit agreement and pay related transaction costs. The remaining proceeds were deposited into a project fund account for which those proceeds are required to fund future costs of renovating and expanding both The Grand Resort and Avalon Field Club at New Castle. At closing, $10.3 million of the proceeds were used to pay off and refinance amounts outstanding under our term loan agreement with Laurel Capital Corporation, dated December 20, 2016 ( “2016 Term Loan Agreement”), $2.9 million of the proceeds were used to pay off and refinance amounts outstanding under our term loan agreement with Laurel Capital Corporation, dated March 29, 2019 ( “2019 Term Loan Agreement”), $1.7 million of the proceeds were used to pay down the outstanding balance and associated interest on our existing line of credit agreement with Premier Bank (formerly Home Savings Bank), dated May 31, 2018, as amended, $0.6 million of the proceeds were used to pay off amounts outstanding under our commercial mortgage agreement with Mercer County State Bank, dated May 13, 2019 ( “Commercial Mortgage”) and $0.3 million of the proceeds were utilized to pay transaction costs. The remaining proceeds of approximately $7.2 million were deposited into a project fund account. At September 30, 2020 and December 31, 2019, loan proceeds of $4.2 million and $7.2 million, respectively, are presented in the Condensed Consolidated Balance Sheets as “Restricted cash.” The 2016 Term Loan Agreement, 2019 Term Loan Agreement and the Commercial Mortgage Agreement were terminated in conjunction with the New Term Loan Agreement. The $23.0 million outstanding under the New Term Loan Agreement is payable in 119 equal monthly installments of principal and interest , based on a fifteen ( 15 ) year maturity schedule which commenced January 20, 2020 followed by one final balloon payment of all remaining principal, interest and fees due on the maturity date of December 20, 2029. Borrowings under the New Term Loan Agreement bear interest at a fixed rate of 5.00% until the fifth anniversary date of the closing at which time the interest rate will be reset to a fixed rate equal to the greater of (a) 5.00% per annum or (b) the sum of the five year treasury rate on the date two ( 2 ) business days prior to the reset date plus 3.60%, provided that the applicable rate shall in no event exceed 7.35% per annum. Avalon has the right to prepay the amount outstanding under the New Term Loan Agreement, in whole or in part, at any time upon payment of the principal amount of the loan to be prepaid plus accrued unpaid interest thereon to the prepayment date, plus an applicable prepayment penalty. The prepayment penalty, expressed as a percentage of the principal of the loan being prepaid, is five percent ( 5% ) on any prepayment in the first five years; four percent ( 4% ) on any prepayment in the sixth and seventh year; three percent ( 3% ) on any prepayment in the eighth and ninth year; and two percent ( 2% ) on any prepayment in the tenth year. Borrowings under the New Term Loan Agreement are secured by certain real property and related business assets as defined in the agreement. The New Term Loan Agreement contains a Fixed Charge Coverage Ratio requirement of at least 1.20 tested on an annual basis on December 31 of each year commencing December 31, 2020. The New Term Loan also contains other nonfinancial covenants, customary representations, warranties and events of default. Avalon was in compliance with the New Term Loan Agreement covenants at September 30, 2020 and December 31, 2019. The Company capitalized approximately $0.4 million of debt issuance costs in connection with the New Term Loan Agreement. The Company will amortize these costs over the life of the New Term Loan Agreement. In accordance with ASU 2015 - 03, Simplifying the Presentation of Debt Issuance Costs , these costs are presented in the Condensed Consolidated Balance Sheets as a direct reduction from the carrying amount of the term loan liability. Line of Credit Agreement On May 31, 2018, Avalon entered into a business loan agreement with Premier Bank (formerly Home Savings Bank), (the “Line of Credit Agreement”) which provides for a line of credit of up to $5.0 million. On August 5, 2020, the Company amended the Line of Credit Agreement to extend the maturity date to July 31, 2022. Under the Line of Credit Agreement, borrowings in excess of $1.0 million are subject to a borrowing base which is calculated based off a specific level of eligible accounts receivable of the waste management business as defined in the agreement. At December 20, 2019, the outstanding balance of $1.7 million under the Line of Credit Agreement was paid down with a portion of the proceeds from the New Term Loan Agreement. No amounts were drawn under the Line of Credit Agreement at September 30, 2020 and December 31, 2019. Outstanding borrowings under the Line of Credit Agreement bear interest at Prime Rate plus .25%. At September 30, 2020, the interest rate on the Line of Credit Agreement was 3.50%. Borrowings under the Line of Credit Agreement are secured by certain business assets of the Company including accounts receivable, inventory and equipment. The Line of Credit Agreement contains a Fixed Charge Coverage Ratio requirement of at least 1.20 tested on an annual basis on December 31 of each year. The Line of Credit Agreement also contains other nonfinancial covenants, customary representations, warranties and events of default. Avalon was in compliance with the Line of Credit Agreements covenants at September 30, 2020 and December 31, 2019. Paycheck Protection Program Loan The Coronavirus Aid, Relief, and Economic Security Act, or (“CARES”) Act, was signed into law on March 27, 2020, and provides over $2.0 trillion in emergency economic relief to individuals and businesses impacted by the COVID- 19 pandemic. The CARES Act authorized the Small Business Administration to temporarily guarantee loans under a new loan program called the Paycheck Protection Program (the “Program”). The Program provides for 100% federally guaranteed loans to small businesses to allow employers to keep workers employed and maintain payroll during the pandemic and economic downturn. Under the Program, qualified companies are eligible for a loan in an amount equal to the lesser of $10 million or 2.5x the business's average monthly payroll. Collateral or guarantor support is not required for the loan. Under the Program, the borrower is eligible for loan forgiveness up to the amount the borrower spends on certain eligible costs during the 8 week period beginning on the date the proceeds were received on the loan. Eligible costs under the Program include payroll costs, interest on mortgage obligations incurred before the covered period, rent on leasing agreements and utility services. The amount of loan forgiveness is reduced if there is a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees. Under the Program, proceeds that are not forgiven convert to a loan bearing interest at a fixed rate of 1% payable in 18 equal monthly installments commencing after the forgiveness period. The Program was subsequently amended to allow the borrower to use an extended forgiveness period of 24 weeks beginning on the date the proceeds were received on the loan and to extend the repayment period to 54 months commencing after the 24 week forgiveness period. In the second quarter of 2020, certain wholly-owned subsidiaries of Avalon entered into agreements and received a total of approximately $2.8 million in loans under the Program. The Company utilized the loan proceeds under the 24 week loan forgiveness period and subsequently applied for forgiveness in accordance with the Program's guidelines. The Company is accounting for the loans in accordance with Accounting Standards Codification (“ASC”) 470 – Debt . Under ASC 470, the debt will be derecognized when the debt is extinguished in accordance with the guidance in ASC 405 - 20, Liabilities: Extinguishments of Liabilities . When the debt is forgiven in accordance with the Program, any amount that is forgiven will be recognized in the Condensed Consolidated Statements of Operations as a gain on debt extinguishment. The Company will repay amounts that are not forgiven. During the three months ended September 30, 2020 and 2019, the weighted average interest rate on outstanding borrowings was 4.57% and 5.53%, respectively. During the nine months ended September 30, 2020 and 2019, the weighted average interest rate on outstanding borrowings was 4.74% and 5.48%, respectively. Obligations under the Company's debt agreements at September 30, 2020 and December 31, 2019 consist of the following (in thousands):
|  | September 30, 2020 |
|  | Gross Amount |  |  | Debt Issuance Costs |  |  | Net Amount |
Term Loan Agreement |  | $ | 22,213 |  |  | $ | (384 | ) |  | $ | 21,829 |
Paycheck Protection Program Loans |  |  | 2,765 |  |  |  | - |  |  |  | 2,765 |
Total |  |  | 24,978 |  |  |  | (384 | ) |  |  | 24,594 |
Less current portion |  |  | 2,664 |  |  |  | (42 | ) |  |  | 2,622 |
Long-term debt |  | $ | 22,314 |  |  | $ | (342 | ) |  | $ | 21,972 |
|  | December 31, 2019 |
|  | Gross Amount |  |  | Debt Issuance Costs |  |  | Net Amount |
Term Loan Agreement |  | $ | 23,000 |  |  | $ | (415 | ) |  | $ | 22,585 |
Less current portion |  |  | 1,057 |  |  |  | (42 | ) |  |  | 1,015 |
Long-term debt |  | $ | 21,943 |  |  | $ | (373 | ) |  | $ | 21,570 |
At September 30, 2020, future maturities of long-term debt are as follows (in thousands):
2021 |  | $ | 2,664 |
2022 |  |  | 2,351 |
2023 |  |  | 1,212 |
2024 |  |  | 1,274 |
2025 |  |  | 1,339 |
Thereafter |  |  | 16,138 |
Total |  | $ | 24,978 |

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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