Debt

6 Months Ended

Jun. 28, 2019

Debt Disclosure [Abstract]

Debt

6. Debt

The Company has a credit and security agreement (the “Credit and Security Agreement”) with its bank, which provides for a three-year revolving credit facility in an aggregate principal amount of $45.0 million, including a sublimit of $10.0 million for letters of credit and a $10.0 million sublimit for swing line loans.  

The Credit and Security Agreement expires in December 2020, and has interest rates ranging from 150 to 200 basis points over LIBOR or the greater of (i) the prime rate, (ii) the federal fund effective rate plus 50 basis points, and (iii) adjusted LIBOR plus 100 basis points plus a spread ranging from 50 to 100 basis points based on the amounts outstanding under the Credit and Security Agreement. The Company can borrow under the agreement with either rate at

its discretion. At June 28, 2019 and June 29, 2018, there was $17.0 million and $6.3 million outstanding under the Credit and Security Agreement, respectively. The Company borrows or repays its debt as needed based upon its working capital obligations, including the timing of the U.S. bi-weekly payroll.

The maximum amounts outstanding under its credit agreement in the 2019 and 2018 second quarters were $22.3 million and $10.4 million, respectively, while borrowings during those quarters averaged $15.1 million and $3.5 million, respectively, and carried weighted average interest rates of 3.2% and 3.3%, respectively.

Under the Credit and Security Agreement, the Company is required to meet certain financial covenants in order to maintain borrowings under its revolving credit line, pay dividends, and make acquisitions. The covenants are measured quarterly, and at June 28, 2019, included a fixed charge coverage ratio, which must be less than 1.10 to 1.00, consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) adjusted for equity-based compensation and severance expenses, must be no less than $5.0 million for the trailing twelve months, and capital expenditures for property, plant, equipment, and capitalized software must be no more than $5.0 million in any annual period. The fixed charge coverage ratio is only tested if availability on a measurement date is less than $5.625 million. Actual borrowings by CTG under the Credit and Security Agreement are subject to a borrowing base, which is a formula based on certain eligible receivables and reserves. Total availability as of June 28, 2019 was approximately $22.6 million. The Company was in compliance with these covenants at June 28, 2019 as adjusted EBITDA for the trailing twelve months was $8.6 million and capital expenditures for property, equipment and capitalized software were $0.7 million in the first two quarters of 2019. The Company was also in compliance with its covenants at June 29, 2018.