Note 5 - Bank Debt

3 Months Ended

Mar. 31, 2021

Notes to Financial Statements

Debt Disclosure [Text Block]

(5) BANK DEBT

Bank debt is comprised of term debt ($58.8 million as of March 31, 2021) and a $120 million revolver ($77.3 million borrowed as of March 31, 2021).  The term debt amortization concludes with the final payment in March 2023.  The revolver matures September 2023.  Our debt is recorded at amortized cost, which approximates fair value due to the variable interest rates in the agreement and is collateralized primarily by our assets.

Liquidity

As of March 31, 2021, we had additional borrowing capacity of $24.0 million and total liquidity of $27.9 million.  Our additional borrowing capacity is net of $5.7 million in outstanding letters of credit as of March 31, 2021 that were required to maintain surety bonds.  Liquidity consists of our additional borrowing capacity and cash and cash equivalents.

Fees

Unamortized bank fees and other costs incurred in connection with the initial facility and subsequent amendments totaled $7.9 million as of our amendment in April 2020. These costs were deferred and are being amortized over the term of the loan. Unamortized costs as of March 31, 2021, and December 31, 2020, were $5.5 million and $6.1 million, respectively.

Bank debt, less debt issuance costs, is presented below (in thousands):

	March 31,			December 31,
	2021			2020
Current bank debt	$	36,750		$	36,750
Less unamortized debt issuance costs		(2,439	)		(2,439	)
Net current portion	$	34,311		$	34,311
Long-term bank debt	$	99,300		$	100,988
Less unamortized debt issuance costs		(3,070	)		(3,681	)
Net long-term portion	$	96,230		$	97,307
Total bank debt	$	136,050		$	137,738
Less total unamortized debt issuance costs		(5,509	)		(6,120	)
Net bank debt	$	130,541		$	131,618

Covenants

The credit facility includes a Maximum Leverage Ratio (consolidated funded debt/trailing twelve months adjusted EBITDA), calculated as of the end of each fiscal quarter for the trailing twelve months, not to exceed the amounts below:

Fiscal Periods Ending	Ratio
March 31, 2021 and June 30, 2021	3.25 to 1.00
September 30, 2021 and December 31, 2021	3.00 to 1.00
March 31, 2022 and each fiscal quarter thereafter	2.50 to 1.00

As of March 31, 2021, our Leverage Ratio of 2.78 was in compliance with the requirements of the credit agreement.

The credit facility also requires a Minimum Debt Service Coverage Ratio (consolidated adjusted EBITDA / annual debt service) calculated as of the end of each fiscal quarter for the trailing twelve months of 1.05 to 1.00 through December 31, 2021, at which time it increases to 1.25 to 1.00 through the maturity of the credit facility.

As of March 31, 2021, our Debt Service Coverage Ratio of 1.13 was in compliance with the requirements of the credit agreement.

Interest Rate

The interest rate on the facility ranges from LIBOR plus 2.75% to LIBOR plus 4.00%, depending on our Leverage Ratio, with a LIBOR floor of 0.50%.  We entered into swap agreements to fix the LIBOR component of the interest rate at 2.92% on the declining term loan balance and on $53 million of the revolver. At March 31, 2021, we are paying LIBOR at the swap rate of 2.92% plus 4.0% for a total interest rate of 6.92% on the hedged amount ($111.8 million) and 4.0% on the remainder ($24.3 million).

Paycheck Protection Program

On  April 16, 2020, we entered into an unsecured promissory note in the amount of $10 million under the Paycheck Protection Program (the “PPP Note”). The Paycheck Protection Program was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration (the "SBA"). The PPP note was funded through First Financial Bank, N.A. (the “Lender”).    

The annual interest rate on the PPP Note is 1.00%. Monthly principal and interest payments were originally deferred for six months after the date of the loan, but the deferral has been extended to 2021. If the note is not forgiven, monthly payments of ~$1.1 million will commence in  August 2021 with maturity of  April 2022. The PPP Note contains customary events of default relating to, among other things, payment defaults, making materially false and misleading representations to the SBA or Lender, or breaching the terms of the Loan Documents. The occurrence of an event of default  may result in the repayment of all amounts outstanding, collection of all amounts owing from the Company, or filing suit and obtaining a judgment against the Company.

Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of the loan granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and any covered payments of mortgage interest, rent, and utilities. In the event the PPP Loan, or any portion thereof, is forgiven pursuant to the PPP, the amount forgiven is applied to outstanding principal. The Company used all proceeds from the PPP Loan to maintain payroll and utility payments.

If the SBA determines that the Company was not initially eligible under the program or concludes that the Company did not have an adequate basis for making the good-faith certification of the necessity of the loan at the time of application, the loan could become payable on demand.  The SBA retains the right to review the Company's loan file for a period subsequent to the date the loan is forgiven or paid in full, with the potential for the SBA to pursue legal remedies at its discretion.

At March 31, 2021, the PPP loan totaling $10 million is presented as current and long-term liabilities on the condensed consolidated balance sheets based upon the schedule of repayments and excluding any possible forgiveness of the loan.

 

In  December 2020, we applied for forgiveness of the full $10 million promissory note.  On  January 8, 2021, we were notified by the Lender that they had approved the application for the full forgiveness of the $10 million note and had forwarded on to the SBA for final approval.  The SBA has 90 days from receipt of application from the Lender to make its determination as to the amount of forgiveness.  There can be no assurance that any portion of the PPP loan will be forgiven.  The determination was expected by April 8, 2021, however, we are told the SBA is running behind on loan forgiveness applications.  Thus, we are patiently awaiting the decision from the SBA as to their determination as to the amount of the forgiveness.