Debt

The Company’s outstanding debt consisted of the following:



(in thousands)	As of December 31,
	2019			2018
Short-term financing:
Wells Fargo revolving credit facility	$	39,527		$	54,613

Long-term debt:
Unsecured senior notes	$	55,000		$	55,000
Finance leases and other debt	1,087			456
Unamortized debt issuance costs ^*	(235		)	(288		)
Total long-term debt and finance leases	55,852			55,168
Less: Current maturities of long-term debt and finance leases	195			80
Long-term debt	$	55,657		$	55,088


*	Unamortized financing costs and deferred fees on the Wells Fargo Revolving Credit Facility are not presented in the above table as they are classified in Prepaid expenses and other current assets on the Consolidated Balance Sheets. Debt issuance costs incurred, including gross waiver fees (primarily paid to the lenders), were $0.3 million and $1.0 million in 2019 and 2018, respectively.

The Company paid $6.9 million and $6.1 million in cash for interest in 2019 and 2018, respectively.

The Company’s debt includes restrictive covenants that, if not met, could lead to renegotiation of its revolving credit facility, notes and indentures, a requirement to repay the Company’s borrowings and/or a significant increase in the cost of financing. These restrictive covenants may include, among other items, financial covenants pertaining to availability, permitted indebtedness, restrictions on dividends and various events of default.

Certain events of default (including delinquent filing of annual and periodic reports with the Securities and Exchange Commission (“SEC”) and material weaknesses in the control environment) occurred with respect to the Company’s credit agreements. While waivers were obtained or debt was renegotiated with the respective lenders, absent such waivers the debt would have been in breach of covenants. The Company pledged substantially all of its tangible and intangible assets, including inventory, receivables and fixed assets, as collateral under the Wells Fargo Credit Agreement.

Wells Fargo Credit Agreement

In June 2013, the Company entered into the Wells Fargo Credit Agreement. The Wells Fargo Credit Agreement enabled the Company to borrow under a revolving credit facility secured by substantially all of the Company’s tangible and intangible assets, including inventory, receivables and fixed assets. The Wells Fargo Credit Agreement has been amended several times since June 28, 2013, including in June 2016 when the agreement was amended and restated. Below are some of the current key terms of the Wells Fargo Credit Agreement:


•	matures on the earlier of March 31, 2021 or 60 days prior to the final maturity of the Unsecured Senior Notes (which currently mature on June 30, 2020 resulting in a current maturity date of May 1, 2020 for the Wells Fargo Credit Agreement);


•	includes a maximum $75.0 million revolving line of credit to the Company less a reserve of $9.0 million;


•	bears interest at Wells Fargo’s prime rate plus a margin ranging from 1.25% to 1.75% per annum or at the London Interbank Offered Rate (“LIBOR”) plus a margin ranging from 2.75% to 3.25% per annum at the Company’s option; interest rate margin will decrease by 1% per annum upon the Company becoming current with its SEC filings;


•	has an unused line fee of 0.25%;


•	contains restrictive covenants that, among other things, limit the ability of the Company and its subsidiaries to incur additional debt, prepay subordinated indebtedness, or make certain distributions on capital stock; and


•	limits borrowings to the lesser of the maximum revolving line of credit and the borrowing base, which is defined as a percentage of the Company’s eligible accounts receivable and inventory.

Information regarding amounts borrowed under the Wells Fargo Credit Agreement includes the following:



(in thousands, except interest rate)	Year ended December 31,
Description	2019			2018
Average borrowings under Wells Fargo Revolving Credit Facility	$	48,235		$	47,031
Average Interest Cost on Wells Fargo Revolving Credit Facility	6.30		%	6.51		%



(in thousands, except interest rate)	As of December 31,
Description	2019			2018
Accrued and unpaid interest	$	400		$	174
LIBOR loan interest rate	5.00		%	5.97		%
Wells Fargo Prime Rate (Base Rate) loan interest rate	6.25		%	7.25		%

As of December 31, 2019 and 2018, the Company had available borrowing capacity under the revolving line of credit of $14.9 million and $8.9 million, respectively.

Significant changes to the Wells Fargo Credit Agreement since January 1, 2018 are summarized in the table below:



Amendment Date and Title	Reason for Amendment	Significant Changes/Notes Regarding Amendment to the Wells Fargo Credit Agreement
March 29, 2018. Sixth Amendment and Waiver to the June 28, 2016 Agreement	To consider implications of various events of default	• Increased the maximum borrowing under the revolving credit facility to $75.0 million from $65.0 million • Modified the reserve against the maximum borrowing under the revolving credit facility to the greater of $6.5 million and 10% of borrowing base, but no more than $7.5 million on or prior to September 30, 2018 and thereafter equal to $9.0 million • Extended the maturity date of the facility to the earlier of March 31, 2021 or 60 days prior to the final maturity of the Unsecured Senior Notes, which were extended to January 1, 2020, resulting in a maturity date of November 2, 2019 on the Wells Fargo revolving credit facility • The revolving credit facility will continue to bear interest at a per annum rate equal to 100 basis points (1%) above the per annum rate otherwise applicable under the credit agreement until the Company is current with its SEC filings • The Company paid an amendment fee of $0.8 million.
May 16, 2019. Waiver to the June 28, 2016 Agreement	To consider implications of various events of default	• Waived any defaults that would arise from the failure to timely deliver annual audited financial statements for the fiscal year ended December 31, 2018 and the associated compliance certificate and the information required with it; provided that the financial statements and compliance certificate were delivered on or before December 31, 2019.

The aforementioned amendments, consents and waivers related to the Wells Fargo Credit Agreement in 2019 and 2018 were accounted for as debt modifications. There were no debt issuance costs or third-party fees incurred in 2019 related to the debt modifications during the year. The Company incurred fees of $0.8 million in 2018 related to the modification which were deferred and amortized through the anticipated maturity date of the Wells Fargo Credit Agreement. As of December 31, 2019, all deferred debt issuance costs related to the Wells Fargo Credit Agreement had been amortized.

The Wells Fargo revolving credit facility is presented as a current liability on the Consolidated Balance Sheets as of December 31, 2019 and 2018 because of a subjective acceleration clause and a “lockbox” arrangement that sweeps cash receipts to pay down the revolver balance, without requiring the Company’s specific consent, and provides advances up to current limits to cover outlays.

Unsecured Senior Notes

In April 2015, the Company entered into an agreement with certain institutional investors for a private sale of its Unsecured Senior Notes for the aggregate amount of $55.0 million with an interest rate of 5.50% per annum. Concurrently, in connection with the issuance of the Unsecured Senior Notes, the Company entered into an indenture agreement (“Indenture”), by and among the Company and its subsidiaries as guarantors and the Bank of New York Mellon, as Trustee. The Company received net proceeds of $53.5 million after financing costs of $1.5 million. As discussed previously in Note 1. Summary of Significant Accounting Policies and Other Information, the Company has presented issuance costs associated with its Unsecured Senior Notes as a direct deduction from the carrying value of the obligation on its Consolidated Balance Sheets.

The Unsecured Senior Notes are unsecured debt of the Company and are effectively subordinated to its existing and future secured debt, including the debt in connection with the Wells Fargo Credit Agreement. The following are some of the current key provisions of the Unsecured Senior Notes:


•	mature on June 30, 2020;


•	accrue interest at 7.50% per annum (reduced from 8.50% upon filing the 2017 Annual Report on Form 10-K in May 2019), payable semiannually in arrears on May 1 and November 1 of each year;


•	redeemable by the holders in whole or in part upon a change in control at a purchase price of 101% of the principal amount, plus accrued and unpaid interest;


•	contain restrictive covenants that, among other things, limit the ability of the Company and its subsidiaries to incur additional debt, prepay subordinated indebtedness, pay dividends or make other distributions on capital stock; and


•	provide for customary events of default (subject in certain cases to customary grace and cure periods).

Significant amendments to the Unsecured Senior Notes since January 1, 2018 are included in the table below:



Amendment Date and Title	Reason for Amendment	Significant Changes/Notes Related to Amendment to the Unsecured Senior Notes
April 19, 2018. Fourth Supplemental Indenture	To amend certain covenants and waive certain events of default	• Extended the maturity date to January 1, 2020 • Waived defaults with respect to the failure to file with the Trustee and the SEC for 2015 through 2019 • Increased the interest rate from 6.50% to 8.50% per annum effective October 1, 2018. The interest rate decreased to 7.50% per annum upon filing the 2017 Form 10-K with the SEC • the Company paid a consent fee of $0.3 million.
October 30, 2019. Fifth Supplemental Indenture	To extend the maturity date	• Extended maturity date to June 30, 2020 • The Company paid a fee of $0.3 million

Debt issuance costs of $0.3 million and $0.3 million incurred in 2019 and 2018, respectively, were deferred and amortized to interest expense through the anticipated maturity date of the Unsecured Senior Notes.

The interest rate on the Unsecured Senior Notes decreased to 7.50% per annum upon filing the 2017 Form 10-K with the SEC in May 2019. In addition, on October 30, 2019, the maturity date of the Unsecured Senior Notes was extended to June 30, 2020. By extending the maturity date of the Unsecured Senior Notes, the maturity date of the Wells Fargo Credit Agreement is extended to May 1, 2020.

The Unsecured Senior Notes are presented as a noncurrent liability on the Consolidated Balance Sheets as of December 31, 2019 and 2018. As of December 31, 2019 and 2018, the accrued, but unpaid, interest on the Unsecured Senior Notes was $0.7 million and $0.8 million, respectively.

Credit Agreement

On April 2, 2020, the Company closed on its new senior secured revolving credit facility pursuant to the Credit Agreement with Standard Chartered. The Credit Agreement allows the Company to borrow up to $130.0 million and matures on March 26, 2021 with an optional 60-day extension subject to certain conditions and payment of a 0.25% extension fee. Borrowings under the Credit Agreement shall bear interest at either the alternate base rate or LIBOR plus 2.00%, and the Company is required to pay a 0.25% commitment fee on the average daily unused portion of the revolving credit facility under the Credit Agreement. The Credit Agreement is secured by substantially all of the Company’s assets and includes certain financial covenants as well as a change of control provision. On April 2, 2020, the Company borrowed $95.0 million under the Credit Agreement and utilized the funds to (i) repay the outstanding balance of $16.8 million under the Wells Fargo Credit Agreement, (ii) fully redeem and discharge $55.0 million in aggregate principal amount of the Unsecured Senior Notes and pay related interest and (iii) for general corporate purposes. The Wells Fargo Credit Agreement was terminated in connection with the repayment of the outstanding balance. The Company will recognize a loss on the extinguishment of the Wells Fargo Credit Agreement and the Unsecured Senior Notes of $0.1 million related to unamortized debt issuance costs and will defer additional debt issuance costs related to the closing of the Credit Agreement of $2.0 million. The Wells Fargo Credit Agreement maturity date was the earlier of March 31, 2021, or 60 days prior to the final maturity of the Unsecured Senior Notes, which were to mature on June 30, 2020, resulting in a maturity date of May 1, 2020 for the Wells Fargo Credit Agreement.

The below schedule of remaining maturities of long-term debt excludes finance leases (refer to Note 7. Leases) and additional debt drawn under the Credit Agreement in April 2020 but reflects the Unsecured Senior Notes as due in 2021 due to the execution of the Credit Agreement in April 2020 and refinancing of the Unsecured Senior Notes.



(in thousands)
Year Ending December 31,	Maturities of Long-Term Debt
2020	$	107
2021	55,107
2022	101
2023	91
2024	91
Total	$	55,497