NOTE 6—CREDIT FACILITIES

A summary of borrowings at period end follows:



			December 27, 2019					September 30, 2019
Credit Facility Debt	Fixed/Variable Rate	Maturity Date	Balance			Interest Rate		Balance			Interest Rate
(in thousands)
M&T Bank credit facilities:
Revolving Credit Facility	v	5/5/2022	$	24,490		4.06	%	$	26,646		4.31	%
Term Loan B	v	5/5/2022	2,565			4.21		2,779			4.59
Equipment Line Term Note	v	Various	997			4.31		1,125			4.56
Total debt, gross			28,052					30,550
Unamortized debt issuance costs			(249		)			(269		)
Total debt, net			27,803					30,281
Less: current portion			(1,371		)			(1,371		)
Long-term debt			$	26,432				$	28,910

M&T Bank Credit Facilities

Effective as of July 8, 2019, the Company and M&T Bank entered into the Ninth Amendment to the Fifth Amended and Restated Credit Facility Agreement, which amended the Fifth Amended and Restated Credit Facility Agreement dated as of December 14, 2015, as amended by various amendments (collectively, the “Credit Facility, as amended”).

The Credit Facility, as amended, is secured by a general security agreement covering the assets of the Company and its subsidiaries, a pledge of the Company’s equity interest in its subsidiaries, a negative pledge on the Company’s real property, and a guarantee by the Company’s subsidiaries, all of which restrict use of these assets to support other financial instruments.

Individual debt facilities provided under the Credit Facility, as amended, are described below:


a)	Revolving Credit Facility (“Revolver”): At December 27, 2019, up to $35.0 million is available through May 5, 2022. The maximum amount the Company may borrow is determined based on a borrowing base calculation described below.

Term Loan B: $14.0 million was borrowed on January 18, 2013. Principal was being repaid in 120 equal monthly installments of $117 thousand. As part of an amendment to the Credit Facility, as amended, the principal was modified from $8.0 million to $6.0 million and principal is being repaid in equal monthly installments of $71 thousand plus a balloon payment of $0.6 million. The maturity date of the loan is May 5, 2022.


c)	Equipment Line Advances: Up to $1.5 million is available through May 5, 2022. Interest only is paid until maturity. Principal is due in three or six months after borrowing or can be converted to an Equipment Line Term Loan.

Equipment Line Term Note: On July 26, 2018, $0.8 million was converted from an Equipment Line Advance, principal is being repaid in 36 equal monthly installments of $21 thousand and matures July 26, 2021. On September 27, 2018, $0.1 million was converted from an Equipment Line Advance, principal is being repaid in 36 equal monthly installments of $2 thousand and matures September 27, 2021. On March 18, 2019, $0.3 million was converted from an Equipment Line Advance, principal is being repaid in 36 equal monthly installments of $9 thousand and matures March 18, 2022. On May 6, 2019, $0.4 million was converted from an Equipment Line Advance, principal is being repaid in 36 equal monthly installments of $11 thousand and matures May 6, 2022.

Borrowing Base

At December 27, 2019 and September 30, 2019, under the Credit Facility, as amended, the maximum amount the Company can borrow under the Revolver was the lesser of (i) 85% of eligible receivables plus a percentage of eligible inventories (up to a cap of $14.0 million) or (ii) $35.0 million.

At December 27, 2019, the upper limit on Revolver borrowings was $35.0 million and $10.5 million was available. At September 30, 2019, the upper limit on Revolver borrowings was $35.0 million and $8.4 million was available. Average Revolver balances amounted to $24.5 million and $15.0 million during the three months ended December 27, 2019 and December 28, 2018, respectively.

Interest Rates

Under the Credit Facility, as amended, variable rate debt accrues interest at LIBOR plus the applicable marginal interest rate that fluctuates based on the Company’s Fixed Charge Coverage Ratio, as defined below. At December 27, 2019 and September 30, 2019, the applicable marginal interest rate was 2.50% for the Revolver and 2.75% for Term Loan B and Equipment Line Advances. Changes to applicable margins and unused fees resulting from the Fixed Charge Coverage Ratio generally become effective mid-way through the subsequent quarter.

The Company incurs quarterly unused commitment fees ranging from 0.25% to 0.375% of the excess of $27.0 million over average borrowings under the Revolver. Fees incurred amounted to $5.8 thousand and $8.2 thousand during the three months ended December 27, 2019 and December 28, 2018, respectively. The fee percentage varies based on the Company’s Fixed Charge Coverage Ratio, as defined below.

Financial Covenants

The Credit Facility, as amended, contains various affirmative and negative covenants including financial covenants. As of December 27, 2019, the Company had to maintain a minimum fixed charge coverage ratio (“Fixed Charge Coverage Ratio”). The Fixed Charge Coverage Ratio compares (i) EBITDAS minus unfinanced capital expenditures minus income tax expense, to (ii) the sum of interest expense, principal payments, payments on all capital lease obligations and dividends, if any (fixed charges). “EBITDAS” is defined as earnings before interest, income taxes, depreciation, amortization and non-cash stock compensation expense. The Fixed Charge Coverage Ratio was measured for a trailing twelve months ended December 27, 2019 as a minimum of 1.10 times. The Fixed Charge Coverage Ratio was the only covenant in effect at December 27, 2019. The Credit Facility, as amended, also provides for customary events of default, subject in certain cases to customary cure periods, in which the outstanding balance and any unpaid interest would become due and payable.

The Company was in compliance with the financial debt covenant at December 27, 2019.

Contractual Principal Payments

A summary of contractual principal payments under IEC’s borrowings at December 27, 2019 for the next three years taking into consideration the Credit Facility, as amended, is as follows:



Debt Repayment Schedule		Contractual Principal Payments
(in thousands)
Twelve months ending December
2020		$	1,371
2021		1,260
2022	⁽¹⁾	25,421
		$	28,052

⁽¹⁾ Includes Revolver balance of $24.5 million at December 27, 2019.