Quarterly report pursuant to Section 13 or 15(d)

Long Term Debt

v3.23.3
Long Term Debt
 9 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
Long Term Debt

8. Long Term Debt

 

Long-term debt consists of the following:

  

(Amounts in Thousands)   September 30, 2023     December 31, 2022  
Revolving Credit facility dated May 8, 2020, borrowings based upon eligible accounts receivable, subject to monthly borrowing base calculation, balance due on May 15, 2027. Effective interest rate for first nine months of 2023 was 9.7%. (1)   $ -     $ -  
Revolving Credit facility dated May 8, 2020, borrowings based upon eligible accounts receivable, subject to monthly borrowing base calculation, balance due on May 15, 2027. Effective interest rate for first nine months of 2023 was 9.7%. (1)   $ -     $ -  
Term Loan 1 dated May 8, 2020, payable in equal monthly installments of principal, balance due on May 15, 2027. Effective interest rate for first nine months of 2023 was 9.1% (1)     320       640  
Term Loan 2 dated July 31, 2023, payable in equal monthly installments of principal, balance due on May 15, 2027. Effective interest rate for first nine months of 2023 was 9.9% (1)     2,458       -  
Capital Line dated May 4, 2021, payable in equal monthly installments of principal, balance due on May 15, 2027. Effective interest rate for first nine months of 2023 was 8.5% (1)     384       463  
Debt Issuance Costs     (182 )(2)     (88 )(2)
Notes Payable to 2023 and 2025, annual interest rate of 5.6% and 9.1%.     15       24  
Total debt     2,995       1,039  
Less current portion of long-term debt     880       476  
Long-term debt   $ 2,115     $ 563  

 

(1) Our revolving credit facility is collateralized by our accounts receivable, and our term loans and capital line are collateralized by our property, plant, and equipment.
   
(2) Aggregate unamortized debt issuance costs in connection with the Company’s credit facility, which consists of the Revolving Credit Facility, Term loan 1, Term loan 2 and Capital Line, as applicable.

 

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, as amended from time to time and including the March 21, 2023 and the July 31, 2023 amendments as discussed below), provides the Company with the following credit facility with a maturity date of May 15, 2027: (a) up to $12,500,000 revolving credit (“revolving credit”), with the maximum that the Company can borrow under the Revolving Credit based on a percentage of eligible receivables (as defined) at any one time reduced by outstanding standby letters of credit and borrowing reductions that the Company’s lender may impose from time to time; (b) a term loan (“Term Loan 1”) of approximately $1,742,000, requiring monthly installments of $35,547; (c) a term loan (“Term Loan 2”) of $2,500,000, requiring monthly installments of $41,667; and (d) a capital expenditure line (“Capital 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”), with interest only payable on advances during the Borrowing Period. Amounts advanced under the Capital Line at the end of the Borrowing Period totaled approximately $524,000, requiring monthly installments of principal of approximately $8,700 plus interest, commencing June 1, 2022.

 

On March 21, 2023, the Company entered into an amendment to its Loan Agreement, as amended, with its lender which provided, among other things, the following:

 

  ● removed the quarterly fixed charge coverage ratio (“FCCR”) testing requirement for the fourth quarter of 2022 and removed the FCCR testing requirement for the first quarter of 2023;
  ● reduced the maximum revolving credit line under the credit facility from $18,000,000 to $12,500,000;
  ● reinstated the quarterly FCCR testing requirement starting in the second quarter of 2023 using a trailing twelve-month period (with no change to the minimum 1.15:1 ratio requirement for each quarter); and
  ● required maintenance of a minimum of $3,000,000 in borrowing availability under the revolving credit until the minimum FCCR requirement for the quarter ended June 30, 2023 has been met and certified to the lender (the Company met its FCCR in the second quarter of 2023 which was certified to its lender and therefore, this requirement is no longer applicable under the Loan Agreement, as amended).

 

 

In connection with the March 2023 amendment, the Company paid its lender a fee of $25,000 which is being amortized over the remaining term of the Loan Agreement, as amended, as interest expense-financing fees.

 

On July 31, 2023, the Company entered into a further amendment of the Loan Agreement, as amended, which provided, among other things, the following:

 

  ● extended the maturity date of the Loan Agreement, as amended, to May 15, 2027, from May 15, 2024;
  ● an additional term loan (“Term Loan 2”) to the Company in the amount of $2,500,000, requiring monthly installments of approximately $41,667. The annual rate of interest due on Term Loan 2 is at prime plus 3.00% or Secured Overnight Finance Rate (“SOFR”) (as defined in the Loan Agreement, as amended) plus 4.00% plus an SOFR Adjustment applicable for an interest period selected by the Company. A SOFR Adjustment rate of 0.10% and 0.15% is applicable for a one-month interest period and three-month period, respectively, that may be selected by the Company;
  ● removed the minimum Tangible Adjusted Net Worth (as defined in the Loan Agreement) covenant requirement;
  ● placed an indefinite reduction in borrowing availability of $750,000; and
  ● allows for up to $2,500,000 in capital expenditure made in fiscal year 2023 and thereafter to be treated as financed capital expenditure in the Company’s quarterly FCCR covenant calculation requirement.

 

At maturity of the Loan Agreement, as amended, any unpaid principal balance plus interest, if any, will become due.

 

Pursuant to the amendment dated July 31, 2023 as discussed above, the Company has agreed to pay PNC 1.0% of the total financing under the Loan Agreement, as amended, in the event the Company pays off its obligations on or before July 31, 2024, and 0.5% of the total financing if the Company pays off its obligations after July 31, 2024, to and including July 31, 2025. No early termination fee shall apply if the Company pays off its obligations under the amended Loan Agreement after July 31, 2025.

 

In connection with the amendment dated July 31, 2023, the Company paid its lender a fee of $100,000 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, the annual rate of interest due on the revolving credit is at prime (8.50% at September 30, 2023) plus 2% or SOFR plus 3.00% plus an SOFR Adjustment applicable for an interest period selected by the Company. The annual rate of interest due on Term Loan 1 and the Capital Line loan is at prime plus 2.50% or Term SOFR Rate plus 3.50% plus an SOFR Adjustment applicable for an interest period selected by the Company. SOFR Adjustment rates of 0.10% and 0.15% are applicable for a one-month interest period and three-month period, respectively, that may be selected by the Company. See payment of annual rate of interest due on Term Loan 2 as provided under the amendment dated July 31, 2023.

 

At September 30, 2023, the borrowing availability under the Company’s revolving credit was approximately $10,378,000 which included our cash and was based on our eligible receivables and is net of approximately $3,200,000 in outstanding standby letters of credit and net of the $750,000 indefinite reduction in borrowing availability imposed by the Company’s lender pursuant to the amendment dated July 31, 2023 as discussed above.

 

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 our 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 was not required to perform testing of the FCCR requirement in the first quarter of 2023 pursuant to the March 21, 2023 amendment as discussed above. It otherwise met all of its other financial covenant requirements. The Company met all of its covenant requirements in the second and third quarters of 2023.