DEBT

9 Months Ended

Sep. 30, 2024

Debt Disclosure [Abstract]

DEBT

DEBT

Debt is presented net of debt discounts and issuance costs in the Company's balance sheets and consisted of the following (in thousands):

	September 30,		December 31,
	2024		2023
Credit Facilities	$	71,052	$	70,140
Less current maturities	(3,093)		(5,912)
Long-term debt, net of current maturities	$	67,959	$	64,228

For the three and nine months ended September 30, 2024, the Company made principal payments under the Credit Facilities totaling $0.9 million and $2.6 million, respectively. For the three and nine months ended September 30, 2023, the Company made quarterly principal payments under the Original Credit Facility totaling $1.7 million and $3.9 million, respectively.

On April 30, 2024, the Company refinanced its Original Credit Facility, which had an outstanding principal balance of $70.9 million, with the 2024 Credit Facility, a new five-year senior secured credit facility consisting of a $75.0 million term loan and a $35.0 million revolving line of credit. For the term loan, the Company has a choice of interest rates between (a) the Secured Overnight Financing Rate (“SOFR”) and (b) a Base Rate (as defined in the 2024 Credit Facility), in each case plus an

applicable margin. The applicable margin is based on the Company’s Consolidated Total Leverage Ratio (as defined in the 2024 Credit Facility) and whether the Company elects SOFR (ranging from 2.75% to 3.5%) or Base Rate (ranging from 1.75% to 2.5%). The revolving line of credit bears interest on the unused portion of the credit line at rates of 25 to 40 basis points, depending on the Company’s Consolidated Total Leverage Ratio. Annual minimum principal payments over the five-year term for the 2024 Credit Facility are 5%, 5%, 7.5%, 7.5%, and 10%, respectively, with the remaining balance due at the end of the term.

The refinancing was accounted for as a debt modification under ASC 470-50 as the terms of the 2024 Credit Facility were not substantially different than the terms of the Original Credit Facility. Under debt modification accounting, third party costs are expensed as incurred. During the nine months ended September 30, 2024, the Company expensed $0.2 million in third party transaction costs in connection with the modification. Fees paid to the creditor of $1.1 million were included with the remaining unamortized discount from the Original Credit Facility and are being amortized as an adjustment to interest expense over the remaining term of the 2024 Credit Facility.

Pursuant to a Guaranty and Security Agreement, dated April 30, 2024, among the Credit Parties (as defined in the 2024 Credit Facility) and Capital One, National Association, as agent (the “2024 Guaranty and Security Agreement”), the obligations under the 2024 Credit Facility are guaranteed by certain of the Company’s subsidiaries and are secured, subject to customary permitted liens and exceptions, by a lien on substantially all assets of the Credit Parties.

The 2024 Credit Facility contains certain financial covenants, including a minimum fixed charge coverage ratio greater than 1.25, a total leverage ratio less than 3.75, and a minimum liquidity balance of at least $20 million in U.S. cash.

In February 2023, the Company amended its Original Credit Facility. The amendment implemented, among other things, certain changes in the reference rate from the London Interbank Offered Rate (“LIBOR”) to SOFR. As of February 28, 2023, the Company had a choice of interest rates between (a) Adjusted Term SOFR and (b) Base Rate (as defined in the Original Credit Facility), in each case plus an applicable margin. The applicable margin was based on the Company’s Consolidated Leverage Ratio (as defined in the Original Credit Facility) and whether the Company elected Adjusted Term SOFR (ranging from 1.75 to 2.50%) or Base Rate (ranging from 0.75 to 1.50%).

For the three months ended September 30, 2024 and 2023, the average interest rate under both the 2024 Credit Facility and the Original Credit Facility was 8.1% and 7.1%, respectively. For the nine months ended September 30, 2024 and 2023, the average interest rate under both the 2024 Credit Facility and the Original Credit Facility was 7.7% and 6.8%, respectively.

The fair value of the 2024 Credit Facility was $75.0 million (Level 2 inputs) as of September 30, 2024 compared to the carrying value of $71.1 million as of September 30, 2024. The fair value of the Original Credit Facility was $73.1 million (Level 2 inputs) as of December 31, 2023 compared to the carrying value of $72.3 million as of December 31, 2023.

Effective April 30, 2024, the Company’s interest rate swap agreement was amended in connection with the 2024 Credit Facility to match the new five-year term. The new interest rate swap agreement has a notional value of $40.0 million, with a fixed payer SOFR rate of 3.71% and an initial floating SOFR rate of 5.32%. The floating rate is reset at each month end and the term of the interest rate swap agreement coincides with that of the 2024 Credit Facility. See Note 11 for further information regarding the fair value accounting for the interest rate swap agreement. The modification of the interest rate swap agreement did not have a material impact on the Company’s Unaudited Condensed Consolidated Financial Statements.

Under the 2024 Credit Facility, the Company has $35.0 million in available borrowings under the revolving line of credit as of September 30, 2024. There were no borrowings under the revolving line of credit during the three months ended September 30, 2024.

Interest Expense

The components of interest expense are presented below (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Credit Facilities:
Interest expense	$	1,378	$	1,147	$	3,723	$	3,351
Accretion expense related to discount and issuance costs	166		245		600		728
Interest on finance leases and other	33		21		78		60
	$	1,577	$	1,413	$	4,401	$	4,139

For both the three months ended September 30, 2024 and 2023, interest expense included a reduction related to interest rate swap payments received of $0.2 million, respectively.

For both the nine months ended September 30, 2024 and 2023, interest expense included a reduction related to the interest rate swap payments received of $0.6 million, respectively.