Debt Obligations

3 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Debt Obligations

Note 11. Debt Obligations

The following table summarizes the Company’s debt obligations:

				September 30, 2022				June 30, 2022
(In thousands)	Debt Origination Date	Maturity	Principal Borrowing Amount	Carrying Value		Weighted Average Interest Rate (1)		Carrying Value		Weighted Average Interest Rate
Revolver	Various	4/26/2027	N/A	$	67,000	3.98	%	$	63,000	2.75	%
Term Loan	8/31/2022	4/26/2027	$47,000	47,000				45,600
				114,000				108,600
Unamortized deferred debt financing costs				(1,018)				(1,677)
Total				112,982				$	106,923

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(1) The weighted average interest rate excludes the fixed rate on the de-designated Amended Rate Swap

Revolver Facility

On April 26, 2021, the Company entered into a senior secured facility which included a Revolver Credit Facility Agreement (the "Revolver Credit Facility"). The Revolver Credit Facility had a commitment of up to $80.0 million and a maturity date of April 25, 2025. On August 8, 2022, the Company and certain of its subsidiaries entered into the Increase Joinder and Amendment No. 2 to Credit Agreement (the “2nd Amendment”), with Wells Fargo, as administrative agent for each member of the lender group and as a lender. The 2nd Amendment amends certain terms and conditions of the Revolver Credit Facility by, among other things: (i) increasing the maximum revolver amount by $10.0 million to an aggregate maximum revolver commitment amount of $90.0 million; and (ii) replacing the London Interbank Offered Rate (LIBOR) interest rate benchmark (which had an applicable margin of 2.25% for LIBOR rate loans) with the secured overnight financing rate (SOFR) interest rate benchmark (which has an applicable margin of 1.75% for SOFR rate loans).

Availability under the Revolver Credit Facility is calculated as the lesser of (a) $90.0 million or (b) the amount equal to the sum of (i) 85% of eligible accounts receivable (less a dilution reserve), plus (ii) the lesser of: (a) 80% of eligible raw material inventory, eligible in-transit inventory and eligible finished goods inventory (collectively, “Eligible Inventory”), and (b) 85% of the net orderly liquidation value of eligible inventory, minus (c) applicable reserve.

The Revolver Credit Facility contains customary affirmative and negative covenants and restrictions typical for a financing of this type. Non-compliance with one or more of the covenants and restrictions could result in the full or partial principal balance of the Revolver Credit Facility becoming immediately due and payable and termination of the commitments.

Prior Term Loan Facility

On April 26, 2021, the Company borrowed $47.5 million of term loans from various financial institutions as part of a Credit Agreement, dated as of April 26, 2021 (the “Prior Term Loan Facility”). The following is a summary description of the Prior Term Loan Facility:

1.total commitment of $47.5 million in the form of a term loan;

2.maturity date of April 25, 2025 and scheduled payback required on the principal prior to the maturity date;

3.fully collateralized by all existing and future capital stock of the borrowers (other than the Company) and all of the borrowers' personal and real property;

4.interest under the Term Loan is either LIBOR + 6.5% per annum, or (b) base rate + 5.50% per annum, with a 3% floor on base rate; and

5.commencing on the fiscal quarter ending on March 31, 2022, quarterly minimum EBITDA and fixed charge coverage ratio requirements specified therein.

Principal payments on the Prior Term Loan Facility were due quarterly in the amount of $0.95 million.

New Term Loan Facility

On August 31, 2022, the Company entered into Amendment No. 3 to Credit Agreement (the “Term Loan Facility”), with the lenders party thereto, and Wells Fargo Bank, as administrative agent for each member of the lender group and as a lender. The 3rd Amendment amends certain terms and conditions of the Revolver Credit Facility by, among other things: (i) adding a new $47.0 million term loan (the “Term Loan”); (ii) extending the maturity date of the Company’s obligations under the Revolver Credit Facility from April 25, 2025 to April 26, 2027; provided, that if the maturity date of the Revolver Commitments is extended on or prior to April 1, 2027 to a date that is after April 26, 2027, then the maturity of the Term

Loan Facility shall be August 31, 2037; (iii) releasing liens securing the obligations under the Revolver Facility Credit on various real properties owned by the Company; (iv) commencing on or around June 30, 2023, obligating the Company to maintain a Fixed Charge Coverage Ratio, calculated for each 12-month period ending on the last day of each fiscal month, of at least 1:00 to 1:00; and (v) lowering the Letter of Credit Fee payable with respect to letters of credit issued under the Credit Agreement from 2.25% to 1.75% of the average amount of the Letter of Credit Usage during the immediately preceding month.

The proceeds of the Term Loan Facility were used to repay the outstanding term loans under the Term Credit Facility Agreement. With the repayment of the Company’s outstanding loans and other obligations under the Term Credit Facility Agreement, the Company is no longer subject to the minimum EBITDA covenants contained therein. As part of the refinancing transaction, the Company expensed $1.5 million in unamortized deferred financing costs, discount and payoff premium for the three months ended September 30, 2022, which are included in interest expense on the consolidated statement of operations.

The Term Loan Facility contains customary affirmative and negative covenants and restrictions typical for a financing of this type that, among other things, require the Company to satisfy certain financial covenants and restrict the Company's and its subsidiaries' ability to incur additional debt, pay dividends and make distributions, make certain investments and acquisitions, repurchase its stock and prepay certain indebtedness, create liens, enter into agreements with affiliates, modify the nature of its business, transfer and sell material assets and merge or consolidate. Non-compliance with one or more of the covenants and restrictions could result in the full or partial principal balance of the Term Loan Facility Agreement and the Revolver Credit Facility becoming immediately due and payable and termination of the commitments.

Covenant Compliance

As of September 30, 2022, the Company was in compliance with all of the financial covenants under the Revolver Credit Facility and the Term Loan Facility (collectively, the “Credit Facilities”). Furthermore, the Company believes it will be in compliance with the related financial covenants under these agreements for the next twelve months.

Interest Rate Swap

In connection with the Revolver Credit Facility and Prior Term Loan Facility , the Company executed the Amended Rate Swap. Under the terms of the Amended Rate Swap, the Company receives 1-month LIBOR, subject to a 0% floor, and makes payments based on a fixed rate of 2.4725%, an increase of 0.275% from its original interest rate swap fixed rate of 2.1975%. The Amended Rate Swap utilizes the same notional amount of $65.0 million and maturity date of October 11, 2023 as the original interest rate swap.

Beginning with the quarter ended December 31, 2022, the Company is required to make monthly principal payments on the Term Loan debt obligation in the amount of $261 thousand. At September 30, 2022, the Company had outstanding borrowings on the Revolver Credit Facility of $67.0 million and had utilized $4.1 million of the letters of credit sublimit. At September 30, 2022, we had $18.9 million available on our Revolver Credit Facility.