Long-Term Debt |
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Long-Term Debt | Note 4: Long-Term Debt Long-term debt consists of the following:
Credit Facility On January 21, 2016, we entered into a new Revolving Credit, Term Loan and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association, as administrative agent and co-collateral agent, Bank of America, N.A., as co-collateral agent, and PNC Capital Markets LLC, as sole lead arranger and sole bookrunner. The Credit Agreement provides for a senior secured revolving credit facility not to exceed $65.0 million (the “Revolving Credit Facility”) and a senior secured term loan facility (the “Term Loan”) in the amount of $30.0 million (together with the Revolving Credit Facility, the “Facilities”). The Credit Agreement also provides for a letter of credit sub-facility not to exceed $10.0 million and a swing loan sub-facility not to exceed $6.5 million. The Company may request to increase the maximum aggregate principal amount of borrowings under the Revolving Credit Facility by $25.0 million prior to January 21, 2020. The Credit Agreement replaced the previous credit agreement that was in place prior to January 21, 2016. The Company was in compliance with all applicable financial covenants set forth in the previous credit agreement as of the date of its entrance into the Credit Agreement. The Facilities, which expire upon the earlier of (i) January 21, 2021 or (ii) the date that is 90 days prior to the scheduled maturity date of the Notes (as defined below) (in either case, the “Expiration Date”), are collateralized by a first lien in substantially all of the assets of the Company and its subsidiaries, except that no real property is collateral under the Facilities other than the Company’s real property in North Jackson, Ohio. Availability under the Revolving Credit Facility is based on eligible accounts receivable and inventory. The Company is required to pay a commitment fee of 0.25% based on the daily unused portion of the Revolving Credit Facility. With respect to the Term Loan, the Company makes quarterly installment payments of principal of approximately $1.1 million, plus accrued and unpaid interest, on the first day of each fiscal quarter. To the extent not previously paid, the Term Loan will become due and payable in full on the Expiration Date. Amounts outstanding under the Facilities, at the Company’s option, will bear interest at either a base rate plus a margin or a rate based on LIBOR plus a margin, in either case calculated in accordance with the terms of the Credit Agreement. Interest under the Credit Agreement is payable monthly. We elected to use the LIBOR based rate for the majority of the debt outstanding under the Facilities for the twelve months ended December 31, 2017, which was 3.37% on our Revolving Credit Facility and 3.87% for the Term Loan at December 31, 2017. On October 23, 2017, the Company announced that it obtained a favorable amendment to the Credit Agreement that lowers the Company’s interest on its senior bank borrowings by 75 basis points. At current borrowing levels, this change will reduce annual interest expense by approximately $0.4 million. In addition, several terms of the Credit agreement were amended and will provide additional liquidity to the Company. The Credit Agreement contains customary affirmative and negative covenants. As of December 31, 2016, and as of the end of each fiscal quarter ending thereafter, the Company must maintain a fixed charge coverage ratio of not less than 1.10 to 1.0, in each case measured on a rolling four-quarter basis calculated in accordance with the terms of the Credit Agreement. The October 23, 2017 amendment made no changes to the financial covenants. We were in compliance with our covenants under the Credit Agreement at December 31, 2017and 2016. At December 31, 2017, we had deferred financing costs of approximately $0.7 million, and amortized $0.3 million of deferred financing costs for the twelve months ended December31, 2017. For the twelve months ended December 31, 2016, we paid deferred financing costs of $0.8 million related to the Credit Agreement, wrote off $0.8 million of fees related to the previous credit agreement and amortized $0.2 million of deferred financing costs. Pursuant to the terms of the Credit Agreement, the Company completed the issuance of 73,207 shares of the Company’s common stock to certain directors and officers of the Company on February 2, 2016. The aggregate purchase price of the stock was $0.5 million based on the average of the high and low reported trading prices for the Company’s common stock on The NASDAQ Stock Market on February 1, 2016. The aggregate annual principal payments due under our Credit Agreement at December 31, 2017, are as follows:
Notes On January 21, 2016, the Company entered into the Notes in the aggregate principal amount of $20.0 million, each in favor of Gorbert Inc. (the “Holder”). The Notes amended and restated the Convertible Notes. The Company’s obligations under the Notes are collateralized by a second lien on the same assets of the Company that collateralize the obligations of the Company under the Facilities. The Notes mature on March 17, 2019, and the maturity date may be extended, at the Company’s option, to March 17, 2020 and further to March 17, 2021. If the Company elects to extend the maturity date of the Notes to March 17, 2020, principal payments in the aggregate of $2.0 million will be required within 10 days of March 7, 2019. If the Company elects to extend the maturity date of the Notes further to March 17, 2021, principal payments in the aggregate of $2.0 million will be required within 10 days of March 7, 2020. The Notes bore interest at a rate of 4.0% per year through and including August 17, 2016. The Notes bear interest at a rate of 5.0% per year from August 18, 2016 through and including August 17, 2017 and a rate of 6.0% per year from and after August 18, 2017. Through and including June 18, 2017, all accrued and unpaid interest is payable semi-annually in arrears on each June 18 and December 18. After June 18, 2017, all accrued and unpaid interest is payable quarterly in arrears on each September 18, December 18, March 18 and June 18. The Holder could have elected at any time on or prior to August 17, 2017 to convert all or any portion of the outstanding principal amount of the Notes which is an integral multiple of $100,000. The Notes are convertible into shares of common stock and, in certain circumstances, cash, securities and/or other assets. The Notes were convertible based on an initial conversion rate of 21.2 shares of Common Stock per $1,000 principal amount of the Notes (equivalent to an initial conversion price of $47.1675 per share). The conversion rate and the conversion price associated with the Notes could have been adjusted in certain circumstances. The Holder did not exercise the conversion rights prior to their expiration, and the rights are now void. In conjunction with the issuance of the Notes on January 21, 2016, we made principal prepayments on the Notes totaling $1.0 million.
Capital Leases
Throughout 2017, the company entered into four capital leases for office and manufacturing equipment, with lease terms between three and six years. The assets are included in Property, plant and equipment, net on the Consolidated Balance Sheet and are depreciated over the term of each lease. The long-term component of the capital lease obligations is included in Long-term debt and the current component is included in Current portion of long-term debt. These amounts have been excluded from the Consolidated Statement of Cash Flows as they are non-cash. The net present value of the minimum lease payments, at inception, was $0.5 million.
On February 1, 2016 and March 1, 2016, the Company entered into capital leases for equipment, each with a term of five years. The net present value of the minimum lease payments, at inception, was $2.0 million.
As of December 31, 2017, future minimum lease payments applicable to capital leases were as follows:
There were no capital lease obligations at December 31, 2015. Accumulated amortization of capital lease assets as of December 31, 2017 was $0.7 million, of which $0.4 million and $0.3 million was amortized for the twelve months ended December 31, 2017 and 2016, respectively. Capital lease amortization is included in cost of products sold in the Consolidated Statement of Operations.
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