Note 5 - Bank Debt

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Debt Disclosure [Text Block]

(5) BANK DEBT

On March 25, 2022, we executed an amendment to our credit agreement with PNC, administrative agent for our lenders.  The primary purpose of the amendment was to return the allowable leverage ratio and debt service coverage ratio to their December 31, 2021 levels through September 30, 2022, with the debt service coverage waived for March 31, 2022.

On May 20, 2022, we executed an additional amendment to our credit agreement with PNC, administrative agent for our lenders.  The primary purpose of this amendment was to modify the allowable leverage ratio and debt service coverage ratio through June 30, 2022 to provide relief for current and anticipated covenant violations.

Bank debt is comprised of term debt ($22.1 million as of March 31, 2022) and a $120 million revolver ($98.0 million borrowed as of March 31, 2022).  The term debt amortization concludes with the final payment in March 2023.  The revolver matures in September 2023.  As a result of anticipated covenant violations for the three months ending September 30 and December 31, 2021, our revolver has been classified as current in these financial statements.  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, 2022, with the provisions of the amendments, we had additional borrowing capacity of $16.3 million and total liquidity of $20.6 million.  Our additional borrowing capacity is net of $5.7 million in outstanding letters of credit as of March 31, 2022, 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 $4.0 million as of December 31, 2021. Additional costs incurred with the March 25, 2022 amendment were $0.6 million.  These costs were deferred and are being amortized over the term of the loan. Unamortized costs as of March 31, 2022, and December 31, 2021, were $3.9 million and $4.0 million, respectively.

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

	March 31,			December 31,
	2022			2021
Current bank debt	$	120,050		$	25,725
Less unamortized debt issuance cost		(3,872	)		(2,627	)
Net current portion	$	116,178		$	23,098
Long-term bank debt	$	—		$	86,013
Less unamortized debt issuance cost		—			(1,346	)
Net long-term portion	$	—		$	84,667
Total bank debt	$	120,050		$	111,738
Less total unamortized debt issuance cost		(3,872	)		(3,973	)
Net bank debt	$	116,178		$	107,765

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, 2022	3.50 to 1.00
June 30, 2022	6.00 to 1.00
September 30, 2022	3.00 to 1.00
December 31, 2022 and each fiscal quarter thereafter	2.50 to 1.00

As of March 31, 2022, our Leverage Ratio of 3.03 was in violation of the 3.0 covenant that was in place prior to the current amendment.  We are in compliance with the requirements of the amended credit agreement as noted in the above table.

Beginning September 30, 2022, 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 September 30, 2022, at which time it increases to 1.25 to 1.00 through the maturity of the credit facility.

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 entire amount of the declining term loan balance and on $52.7 million of the revolver. Those agreements mature in May 2022.  At March 31, 2022, 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 ($74.8 million) and 4.0% on the remainder ($45.3 million).

Paycheck Protection Program

As previously reported in the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 16, 2020, we entered into a Paycheck Protection Program Promissory Note and Agreement on April 15, 2020, evidencing an unsecured $10 million loan (the “PPP Loan”) under the Paycheck Protection Program (or “PPP”) made through First Financial Bank, N.A., (the "Lender"). The PPP 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”).

Under the terms of the CARES Act, PPP loan recipients can apply for forgiveness. The SBA can grant forgiveness of all or a portion of loans made under the PPP if the recipients use the PPP loan proceeds for eligible purposes, including payroll costs, mortgage interest, rent or utility costs, and meet other requirements regarding, among other things, the maintenance of employment and compensation levels. The Company used the PPP Loan proceeds for qualifying expenses and applied for the forgiveness of the PPP Loan in accordance with the terms of the CARES Act.

On July 23, 2021, we received a notification from the Lender that the SBA approved our PPP Loan forgiveness application for the entire PPP Loan balance of $10 million, together with interest accrued thereon. The Lender notified us that the forgiveness payment was received on July 26, 2021.  The forgiveness of the PPP Loan was recognized as other income.

The SBA retains the right to review the Company's loan file for a period subsequent to the date the loan is forgiven, with the potential for the SBA to pursue legal remedies at its discretion.