Note 10 - Long-term Debt

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Debt Disclosure [Text Block]

10. LONG-TERM DEBT

On March 15, 2021, we entered into a senior secured term loan facility ("Term Facility") with TCW Asset Management Company, LLC, as agent, for the lenders party thereto in the amount of $130 million. The Term Facility provides for quarterly payments of principal and bears interest of LIBOR plus 7.00% through June 30, 2021. After this date, interest will be assessed quarterly based on our total leverage ratio. The total leverage ratio is calculated as (a) Total Debt to (b) EBITDA. If our total leverage ratio is greater than or equal to 3.25, the effective interest rate will be LIBOR plus 7.00% (or at our option, Prime Rate plus 6.00%). If our total leverage ratio is less than 3.25, the effective interest rate will be LIBOR plus 6.50% (or at our option, Prime Rate plus 5.50%). The Term Facility also has a LIBOR floor rate of 1.00%.

Our Term Facility is collateralized by a second-lien on accounts receivable, inventory, cash and related assets and a first-lien on substantially all other assets. The Term Facility matures on March 15, 2026.

On March 15, 2021, we also entered into a senior secured asset-based credit facility ("ABL Facility") with Bank of America, N.A. ("Bank of America") as agent, for the lenders party thereto. The ABL Facility provides a new senior secured asset-based revolving credit facility up to a principal amount of $150 million, which includes a sub-limit for the issuance of letters of credit up to $5 million. The ABL Facility may be increased up to an additional $50 million at the Borrowers’ request and the Lenders’ option, subject to customary conditions. The ABL Facility includes a separate first in, last out (FILO) tranche, which allows the Company to borrow at higher advance rates on eligible accounts receivables and inventory balances. As of  September 30, 2021, we had borrowing capacity of $35.8 million.

The ABL Facility is collateralized by first-lien on accounts receivable, inventory, cash and related assets and a second-lien on substantially all other assets. The ABL Facility matures on March 15, 2026. Interest on the ABL Facility is based on the amount available to be borrowed as set forth on the following chart:

	Average Availability as a
Revolver Pricing Level(1)	Percentage of Commitments	Base Rate			LIBOR Rate			Base Rate for FILO			LIBOR Rate for FILO
I	> 66.7%		0.00	%		1.25	%		0.50	%		1.75	%
II	>33.3% and < or equal to 66.7%		0.00	%		1.50	%		0.50	%		2.00	%
III	< or equal to 33.3%		0.25	%		1.75	%		0.75	%		2.25	%

⁽¹⁾ Until June 30, 2021, Tier II applied.

In connection with the Term Facility and ABL Facility, we had to pay certain fees that were capitalized and will be amortized over the life of each respective loan. In addition, the ABL Facility requires us to pay an annual collateral management fee in the amount of $75,000 due on each anniversary of the ABL Facility issuance date, until it matures.

Current and long-term debt consisted of the following:

	September 30,
($ in thousands)	2021
Term Facility that matures in 2026 with an effective interest rate of 7.50%	$	128,375
ABL Facility that matures in 2026:
LIBOR borrowings with an effective interest rate of 1.63%		110,000
Prime borrowings with an effective interest rate of 3.25%		4,185
Total debt		242,560
Less: Unamortized debt issuance costs		(3,804	)
Total debt, net of debt issuance costs		238,756
Less: Debt maturing within one year		(3,250	)
Long-term debt	$	235,506

Credit Facility Covenants

The Term Facility contains restrictive covenants which requires us to maintain a maximum total leverage ratio and a minimum fixed charge coverage ratio, as defined in the agreement. We believe we are in compliance with all credit facility covenants as of September 30, 2021.

Our ABL Facility contains a restrictive covenant which requires us to maintain a fixed charge coverage ratio upon a triggering event taking place (as defined in the ABL Facility agreement). During the three and nine months ended September 30, 2021, there were no triggering events and the covenant was not in effect.

Both the Term Facility and the ABL Facility contain restrictions on the amount of dividend payments.

Huntington Credit Facility

On February 13, 2019, we entered into a Revolving Credit, Guaranty, and Security Agreement (“Credit Agreement”) with the Huntington National Bank (“Huntington”) as administrative agent. The Credit Agreement provided for a new senior secured asset-based revolving credit facility up to a principal amount of $75 million, which included a sublimit for the issuance of letters of credit up to $7.5 million (the “Huntington Credit Facility”). The Huntington Credit Facility permitted increases up to an additional $25 million at our request and the lenders’ option, subject to customary conditions.

					Applicable
					Spread Rates for
		Applicable Spread Rates			Domestic Rate
	Average Excess Revolver Availability	for Eurodollar Rate			Revolving
Revolver Pricing Level	for Previous Quarter	Revolving Advances			Advances
I	$25,000,000+		1.00	%		0.50	%
II	$17,500,000 to < 25,000,000		1.25	%		0.50	%
III	$10,000,000 to < 17,500,000		1.50	%		2.50	%
IV	$< 10,000,000		1.75	%		0.00	%

The total amount available under the Huntington Credit Facility was subject to a borrowing base calculation based on various percentages of accounts receivable and inventory.

As of  December 31, 2020 and  September 30, 2021 we had no outstanding borrowings against the Huntington Credit Facility. The Huntington Credit Facility was paid off and closed as part of the Acquisition and new ABL Facility with Bank of America.

Credit Facility Covenants

The Huntington Credit Facility contained restrictive covenants which required us to maintain a fixed charge coverage ratio. These restrictive covenants were only in effect upon a triggering event taking place. The Huntington Credit Facility contained restrictions on the amount of dividends that may be paid. During the three and nine months ended September 30, 2021, there were no triggering events and the covenant was not in effect.