Long-Term Debt and Notes Payable

3 Months Ended

Mar. 31, 2019

Debt Disclosure [Abstract]

Long-Term Debt and Notes Payable

6. Long-Term Debt and Notes Payable

On March 2, 2017, the Company entered into an Amended and Restated Credit Agreement (the “New Credit Agreement”), as last amended on June 7, 2018, with Wilks Brothers, LLC (“Wilks”) to replace its term loan with Wells Fargo Bank, National Association (“Wells Fargo”) and provide the Company with additional liquidity for a longer term.  The New Credit Agreement is a $65,000 facility maturing on December 31, 2022, that consists of a $52,651 term loan that was made at closing to pay off Wells Fargo and an additional term loan of $12,349 that was made to the Company after the Company satisfied certain post-closing conditions.  The $52,651 term loan was a non-cash transaction to the Company as Wilks directly paid Wells Fargo and assumed the New Credit Agreement.  The Company’s obligations bear interest at 9.00% and are guaranteed by its two operating subsidiaries.  No principal repayments are required until maturity (except in certain circumstances), and there are no financial covenants.

The loan cannot be prepaid during the first three years without making the lenders whole for interest that would have been payable over the entire remaining term of the loan.  The Company’s obligations under the New Credit Agreement are secured by: (i) a pledge of all accounts receivable and inventory, (ii) cash in certain accounts, (iii) domestic distribution assets residing on owned real property, (iv) the Company’s Marshfield, Wisconsin and Toomsboro, Georgia plant facilities and equipment, and (v) certain real property interests in mines and minerals.  Other liens previously in favor of Wells Fargo were released.  

As of March 31, 2019, the Company’s outstanding debt under its New Credit Agreement was $65,000.  Within 270 days of completion of all post-closing matters relating to the sale of its Millen, Georgia plant, the Company is required to use 100% of the Net Cash Proceeds (as defined in the New Credit Agreement) from the sale to either (1) prepay the outstanding principal amount of the Term Loans or (2) reinvest in fixed or capital assets of any Credit Party (as defined in the New Credit Agreement).  The Company continues to evaluate these options, and the Company is currently in negotiations with its lenders with respect to other options.  As of March 31, 2019, the Company has classified $15,733 of the outstanding debt as current liabilities, which represents an estimate of the Net Cash Proceeds that the Company would be required to prepay if it did not reinvest in fixed or capital assets.  As of March 31, 2019, the fair value of the Company’s long-term debt approximated the carrying value.

As of March 31, 2019, the Company had $640 of unamortized debt issuance costs relating to the New Credit Agreement that are presented as a direct reduction from the carrying amount of the long-term debt obligation.  The Company had $4,625 and $2,625 in standby letters of credit issued through its banks as of March 31, 2019 and December 31, 2018, respectively, primarily as collateral relating to railcar leases.

On March 2, 2017, in connection with entry into the New Credit Agreement, the Company issued a Warrant (the “Warrant”) to Wilks.  Subject to the terms of the Warrant, the Warrant entitles the holder thereof to purchase up to 523,022 shares of the Common Stock, at an exercise price of $14.91 per share, payable in cash.  The Warrant expires on December 31, 2022.   Based on a Form 13F filing with the SEC on February 7, 2019 as of December 31, 2018, Wilks owned approximately 10.7% of the Company’s outstanding common stock as of March 31, 2019, and should Wilks fully exercise the Warrant to purchase an additional 523,022 shares, it would hold approximately 12.3% of the Company’s outstanding common stock.  Upon issuance of the Warrant, the Company recorded an increase to additional paid-in capital of $3,871.  As of March 31, 2019, the unamortized original issue discount was $2,808.

In May 2016, the Company received proceeds of $25,000 from the issuance of separate unsecured Promissory Notes (the “Notes”) to two of the Company’s Directors.  Each Note matured on April 1, 2019 and beared interest at 7.00%.  On March 2, 2017, in connection with the New Credit Agreement, the Notes were amended to provide for payment-in-kind, or PIK, interest payments at 8.00% until the lenders under the New Credit Agreement receive two consecutive semi-annual cash interest payments.  On April 1, 2017, the Company made a $997 interest payment as PIK, and capitalized the resulting amount to the outstanding principal balance.  On October 1, 2017, the Company made a $1,043 interest payment as PIK, and capitalized the resulting amount to the outstanding principal balance.  As of March 31, 2019, the outstanding principal balance of the Notes of $27,040 was recorded within current liabilities.  On April 1, 2019, the Company made a $27,040 payment to repay the Notes.  As of April 25, 2019, the outstanding principal balance of the Notes was $0.

Interest cost for the three months ended March 31, 2019 and 2018 was $2,077 and $2,035, respectively.  Interest cost primarily includes interest expense relating to the Company’s debts as well as amortization and the write-off of debt issuance costs and amortization of the original issue discount associated with the New Credit Agreement and Warrant.