Quarterly report pursuant to Section 13 or 15(d)

Long Term Debt

v3.23.2
Long Term Debt
 6 Months Ended
Jun. 30, 2023
Debt Disclosure [Abstract]  
Long Term Debt

8. Long Term Debt

 

Long-term debt consists of the following:

 

(Amounts in Thousands)   June 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, 2024. Effective interest rate for first six months of 2023 was 9.7%. (1)   $ - (3)   $ -  
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 first six months of 2023 was 9.7%. (1)   $ — (3)   $ —  
Term Loan dated May 8, 2020, payable in equal monthly installments of principal, balance due on May 15, 2024. Effective interest rate for first six months of 2023 was 9.2% (1)     345 (2) (3)     552 (2)
Capital Line dated May 4, 2021, payable in equal monthly installments of principal,                
balance due on May 15, 2024. Effective interest rate for first six months of 2023                
was 8.3% (1)     410 (3)     463  
Notes Payable to 2023 and 2025, annual interest rate of 5.6% and 9.1%.     17       24  
Total debt     772       1,039  
Less current portion of long-term debt     456       476  
Long-term debt   $ 316     $ 563  

 

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

 

(2) Net of debt issuance costs of ($82,000) and ($88,000) at June 30, 2023 and December 31, 2022, respectively.

 

(3) As discussed in “Note 15 – Subsequent Events – Credit Facility,” on July 31, 2023, the Company entered into an amendment to the Loan Agreement dated May 8, 2020, as amended, which extended the existing credit facility with a maturity date of May 15, 2024 to May 15, 2027. In accordance with ASC 470, “Debt,” this post balance-sheet date agreement demonstrated the Company’s ability to refinance its short-term obligations under its credit facility on a long-term basis; therefore, the Company has reclassified the current portion of the outstanding debt under the credit facility to long-term except for approximately $105,000 in principal payments under the Capital Line that will be due by June 30, 2024. The remaining principal balance of the Term Loan balance is classified as current as the balance will be paid-in-full by June 30, 2024 (see “Note 15 - Subsequent Events – Credit Facility” for further details of this amendment dated July 31, 2023).

 

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, provides the Company with the following credit facility with a maturity date of May 15, 2024 (see “Note 15 - Subsequent Event – Credit Facility” for a discussion of an amendment that the Company entered into with PNC which extended the maturity date to May 15, 2027, and provided a new term loan of $2,500,000 to the Company, among other things): (a) up to $12,500,000 revolving credit (“revolving credit”) (see a discussion of an amendment that the Company entered into with its lender on March 21, 2023 below, which reduced the maximum revolving credit to $12,500,000 from the previous amount of $18,000,000). The maximum that the Company can borrow under the revolving credit was 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”) of approximately $1,742,000, requiring monthly installments of $35,547; and (c) a capital expenditure line (“capital loan”) 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 was payable on advances during the Borrowing Period. Amount advanced under the capital line at the end of the Borrowing Period totaled approximately $524,000 which requires monthly installments in principal of approximately $8,700 plus interest, starting June 1, 2022.

 

 

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

 

  ● removed the quarterly fixed charge coverage ratio (“FCCR”) testing requirement for the fourth quarter of 2022 and removes the FCCR testing requirement the first quarter of 2023;
  ● reduced the maximum revolving credit line under the credit facility from $18,000,000 to $12,500,000;
  ● reinstates 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
  ● 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 June 30, 2023 has been met and certified to the lender.

 

In connection with the 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.

 

Pursuant to the Loan Agreement, as amended, payment of annual rate of interest due on the revolving credit is at prime (8.25% at June 30, 2023) plus 2% or Term Secured Overnight Finance Rate (“SOFR”) (as defined in the Loan Agreement, as amended) plus 3.00% plus an SOFR Adjustment applicable for an interest period selected by the Company and payment of annual rate of interest due on the term loan and the capital 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. A 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.

 

At June 30, 2023, the borrowing availability under the Company’s revolving credit was approximately $10,368,000 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. The Company’s borrowing availability of $10,368,000 at June 30, 2023 included a requirement from our lender that we maintain a minimum of $3,000,000 in borrowing availability 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. otherwise, it met all of its other financial covenant requirements. The Company met all of its covenant requirements in the second quarter of 2023. See “Note 15 - Subsequent Event – Credit Facility” for a discussion of an amendment that the Company entered into with its lender on July 31, 2023, that provided, among other things, a new term loan to the Company.