Lines of Credit

9 Months Ended

Sep. 30, 2024

Debt Disclosure [Abstract]

Lines of Credit

Lines of Credit

U.S. Line of Credit

On March 13, 2024, we executed an amendment to our Second Amended and Restated Credit Agreement ("Second Amended Credit Agreement") with U.S. Bank National Association ("U.S. Bank"), which provides for a revolving line of credit ("U.S. Credit Line") through April 30, 2025. We expect to renew our credit agreement with U.S. Bank prior to its expiration; however, no assurance can be given that future financing will be available or, if available, that we will be offered terms satisfactory to us. The U.S. Credit Line may be used for working capital and other general corporate purposes including acquisitions, share repurchases and capital expenditures.

The U.S. Credit Line has a maximum availability up to $100.0 million, subject to meeting certain financial conditions, including an accounts receivable coverage ratio ("AR Ratio"). This AR Ratio is calculated monthly and adjusts the current U.S. Credit Line total availability. At September 30, 2024, the U.S. Credit Line total availability was $65.6 million based upon the AR Ratio. At October 11, 2024, the U.S. Credit Line total availability was $67.0 million based upon the AR Ratio.

Amounts available for borrowing under the U.S. Credit Line are reduced by the balance of any outstanding letters of credit, of which there were none at September 30, 2024 and December 31, 2023.

All obligations under the U.S. Credit Line are secured by substantially all of our U.S. personal property and tangible and intangible assets, as well as a guaranty of the U.S. Credit Line by our wholly-owned subsidiary, Universal Electronics BV.

Under the Second Amended Credit Agreement, we may elect to pay interest on the U.S. Credit Line based on the Secured Overnight Financing Rate ("SOFR") plus a 3.00% margin. The amendment also introduces a facility fee of 0.25%. The interest rates in effect at September 30, 2024 and December 31, 2023 were 7.83% and 8.06%, respectively.

The Second Amended Credit Agreement includes financial covenants and contains other customary affirmative and negative covenants and events of default. From January 1, 2024 to September 30, 2024, our covenants are based upon EBITDA. From October 1, 2024 to December 31, 2024, our covenants will be based upon a minimum fixed charge coverage ratio. Subsequent to December 31, 2024, our covenants will be based upon a minimum fixed charge coverage ratio and a maximum cash flow leverage ratio. At September 30, 2024, we were in compliance with the covenants and conditions of the Second Amended Credit Agreement.

At September 30, 2024 and December 31, 2023, we had $37.0 million and $55.0 million outstanding under the U.S. Credit Line, respectively. At September 30, 2024, our remaining availability under our U.S. Credit Line was $28.6 million. Our total interest expense on borrowings under the U.S. Credit Line was $1.0 million and $1.6 million during the three months ended September 30, 2024 and 2023, respectively. Our total interest expense on borrowings under the U.S. Credit Line was $3.5 million and $4.5 million during the nine months ended September 30, 2024 and 2023, respectively.

China Line of Credit

On August 29, 2024, our subsidiary Gemstar Technology (Yangzhou) Co. Ltd. ("GTY"), executed a Line of Credit Agreement (the "Line of Credit Agreement") with the Bank of China, which provides for a revolving line of credit ("China Credit Line") through July 24, 2025. We expect to renew our Line of Credit Agreement with the Bank of China prior to its expiration; however, no assurance can be given that future financing will be available or, if available, that we will be offered terms satisfactory to us. The China Credit Line may be used for working capital purposes.

The China Credit Line has a maximum availability up to RMB 80.0 million (approximately $11.4 million), subject to meeting certain financial conditions.

Amounts available for borrowing under the China Credit Line are reduced by the balance of any outstanding letters of credit, of which there were none at September 30, 2024.

All obligations under the China Credit Line are secured by the mortgage of GTY's buildings and land use rights.

Under the Line of Credit Agreement, we may elect to pay interest on the China Credit Line based on the one-year rate from the National Interbank Funding Center less a 0.1% margin. There are no associated commitment fees on the China Credit Line. The interest rate in effect at September 30, 2024 was 3.10%.

The Line of Credit Agreement includes financial covenants and contains other customary affirmative and negative covenants and events of default. Our covenants are based on a debt to asset ratio and a dividends paid to net income ratio. At September 30, 2024, we were in compliance with the covenants and conditions of the Line of Credit Agreement.

At September 30, 2024, we had RMB 20.0 million (approximately $2.9 million) outstanding under the China Credit Line. At September 30, 2024, our remaining availability under our China Credit Line was RMB 60.0 million (approximately $8.6 million). Our total interest expense on borrowings under the China Credit Line was RMB 20.7 thousand (approximately $3.0 thousand) during the three and nine months ended September 30, 2024.