Quarterly report pursuant to Section 13 or 15(d)

Long Term Debt

v3.21.2
Long Term Debt
 9 Months Ended
Sep. 30, 2021
Debt Disclosure [Abstract]  
Long Term Debt


8. Long Term Debt

 

Long-term debt consists of the following:

 

(Amounts in Thousands)   September 30, 2021     December 31, 2020  
Total debt     1,098       6,729  
Revolving Credit facility dated May 8, 2020, borrowings based upon eligible accounts receivable, subject to monthly borrowing base calculation, balance due on May 15, 2024. Effective interest rate for the first nine month of 2021 was 5.3%. (1)   $ —     $ —  

Term Loan dated May 8, 2020, payable in equal monthly installments of principal, balance due on May 15, 2024. Effective interest rate for the first nine months of 2021 was 4.4%. (1)

     1,056 (2)     1,388 (2)
Promissory Note dated April 14, 2020, balance of loan forgiven. Interest accrued at  annual rate of 1.0%. (3)     — (4)     5,318 (4)
Notes Payable to 2023 and 2025, annual interest rate of 5.6% and 9.1%.     42       23  
Total debt     1,098       6,729  
Less current portion of long-term debt     396       3,595  
Long-term debt   $ 702     $ 3,134  

 

(1) Our revolving credit facility is collateralized by our accounts receivable and our term loan is collateralized by our property, plant, and equipment.

(2) Net of debt issuance costs of ($117,000) and ($105,000) at September 30, 2021 and December 31, 2020, respectively.

(3) Uncollateralized note.
(4) Entered into with the Company’s credit facility lender under the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) (see “PPP Loan” below for information regarding forgiveness on the entire loan balance, along with accrued interest, effective June 15, 2021).

 

Revolving Credit and Term Loan Agreement

 

The Company entered into a Second Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated May 8, 2020 (“Loan Agreement”), with PNC National Association (“PNC”), acting as agent and lender. The Loan Agreement provides the Company with the following credit facility with a maturity date of March 15, 2024: (a) up to $18,000,000 revolving credit (“revolving credit”) and (b) a term loan (“term loan”) of approximately $1,742,000, requiring monthly installments of $35,547. The maximum that the Company can borrow under the revolving credit is based on a percentage of eligible receivables (as defined) at any one time reduced by outstanding standby letters of credit and borrowing reductions that our lender may impose from time to time.

 

On May 4, 2021, the Company entered into an amendment to the Loan Agreement with its lender which provided the following, among other things:

 

  ● revised the Company’s fixed charge coverage ratio (“FCCR”) calculation requirement which allows for the add-back of approximately $5,318,000 in eligible expenses that were incurred and covered by the PPP Loan that the Company received in 2020. The add-back is to be applied retroactively to the second and third quarters of 2020. (see below for a discussion of the PPP Loan); and
  ● a capital expenditure line of up to $1,000,000 with advances on the line, subject to certain limitations, permitted for up to twelve months starting May 4, 2021 (the “Borrowing Period”). Only interest is payable on advances during the Borrowing Period (see annual rate of interest below on the capital expenditure line). At the end of the Borrowing Period, the total amount advanced under the line will amortize equally based on a five-year amortization schedule with principal payment due monthly plus interest. At the maturity date of the Loan Agreement, any unpaid principal balance plus interest, if any, will become due. No advance on the capital line has been made as of September 30, 2021.

 

 

In connection with the amendment, the Company paid its lender a fee of $15,000 which is being amortized over the remaining term of the Loan Agreement, as amended, as interest expense-financing fees.

 

On August 10, 2021, the Company entered into another amendment to the Loan Agreement with its lender which provided, among other things, the following:

 

  ● waived the Company’s failure to meet the minimum quarterly FCCR requirement for the second quarter of 2021;
  ● removes the quarterly FCCR testing requirement for the third quarter of 2021;
  ● reinstates the quarterly FCCR testing requirement starting for the fourth quarter of 2021 and revises the methodology to be used in calculating the FCCR for the quarters ending December 31, 2021, March 31, 2022, and June 30, 2022 (with no change to the minimum 1.15:1 ratio requirement for each quarter); and
  ● requires maintenance of a minimum of $3,000,000 in borrowing availability under the revolving credit until the minimum FCCR requirement for the quarter ended December 31, 2021 has been met and certified to the lender.

 

In connection with the amendment, the Company paid its lender a fee of $15,000 which is being amortized over the remaining term of the Loan Agreement, as amended, as interest expense-financing fees.

 

Pursuant to the Loan Agreement, as amended, payment of annual rate of interest due on the revolving credit is at prime (3.25% at September 30, 2021) plus 2% or London InterBank Offer Rate (“LIBOR”) plus 3.00% and the term loan and the capital expenditure line at prime plus 2.50% or LIBOR plus 3.50%. Under the LIBOR option of interest payment, a LIBOR floor of 0.75% applies in the event that LIBOR falls below 0.75% at any point in time.

 

The Company may terminate its Loan Agreement, as amended upon 90 days’ prior written notice upon payment in full of our obligations under the Loan Agreement. The Company agreed to pay PNC 1.0% of the total financing had the Company paid off its obligations on or before May 7, 2021 and 0.5% of the total financing if the Company pays off its obligations after May 7, 2021 but prior to or on May 7, 2022. No early termination fee will apply if the Company pays off its obligations under the Loan Agreement after May 7, 2022.

 

At September 30, 2021, the borrowing availability under the Company’s revolving credit was approximately $10,804,000 based on our eligible receivables and includes a reduction in borrowing availability of approximately $3,020,000 from outstanding standby letters of credit.

 

The Company’s credit facility under its Loan Agreement, as amended, with PNC contains certain financial covenants, along with customary representations and warranties. A breach of any of these financial covenants, unless waived by PNC, could result in a default under the credit facility allowing our lender to immediately require the repayment of all outstanding debt under our credit facility and terminate all commitments to extend further credit. The Company met its financial covenant requirements in the first quarter of 2021. The Company’s FCCR calculation in the first quarter of 2021 included the add-back of approximately $5,318,000 in eligible expenses that were incurred and covered by the PPP Loan that the Company received in 2020 as permitted by the amendment dated May 4, 2021 to the Company’s Loan Agreement as discussed above. The Company did not meet its FCCR requirement in the second quarter of 2021. However, this FCCR non-compliance was waived by the Company’s lender pursuant to the amendment dated August 10, 2021 to the Company’s Loan Agreement as discussed above. The Company was not required to test its FCCR for the third quarter 2021 pursuant to the August 10, 2021 amendment to the Loan Agreement.

 

 

PPP Loan

 

On April 14, 2020, the Company entered into a promissory note under the PPP with PNC, our credit facility lender, which had a balance of approximately $5,318,000 (the “PPP Loan”). The PPP was established under the CARES Act and is administered by the U.S. Small Business Administration (“SBA”). The CARES Act was subsequently amended by the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”). Proceeds from the promissory note was used by the Company for eligible payroll costs, mortgage interest, rent and utility costs as permitted under the Flexibility Act. The annual interest rate on the PPP Loan is 1.0%

 

On October 5, 2020, the Company applied for forgiveness on repayment of the PPP Loan as permitted under the Flexibility Act. On July 1, 2021, the Company was notified by PNC that the entire balance of the PPP Loan of approximately $5,318,000, along with accrued interest of approximately $63,000 was forgiven by the SBA, effective June 15, 2021. Accordingly, the Company recorded the entire forgiven PPP Loan balance, along with accrued interest, totaling approximately $5,381,000 as “Gain on extinguishment of debt” on its Consolidated Statement of Operations in the second quarter of 2021.