Note 6 - Revolving Line of Credit and Long-term Debt

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Debt Disclosure [Text Block]

6. Revolving Line of Credit and Long-term Debt

In connection with the acquisition of the Artegraft biologic graft business, we incurred debt in the amount of $65 million under a senior secured credit facility with a group of banks. This credit arrangement included a $25 million revolving credit line that was fully drawn at inception, as well as a $40 million five-year term loan. During the year ended December 31, 2020, we made scheduled principal payments on the term loan of $1.0 million and repaid the revolving line of credit in full. During the nine months ended September 30, 2021, we made scheduled principal payments on the term loan of $1.0 million, and repaid the loan in full. Cash paid for interest during the nine months ended September 30, 2021 was $0.9 million.

Under the terms of the agreement, the loans bear interest at a rate per annum of, at our option, either (i) the Base Rate plus an applicable margin of from 1.25% to 1.75% depending on our consolidated leverage ratio, or (ii) the Eurodollar Rate plus an applicable margin of from 2.25% to 2.75% depending on our consolidated leverage ratio. Base Rate is defined in the credit agreement as a fluctuating rate per annum of the Federal Funds rate plus 0.5% or the prime rate of interest established from time to time by KeyBank National Association.

We incurred debt issuance costs in connection with this credit arrangement of approximately $1.8 million. These costs were allocated between the revolving line of credit and the term loans, with the portion related to the revolving line of credit of $0.7 million recorded in other assets on our balance sheet, and the portion allocated to the term loan recorded as a deduction from the amount of the debt. All of these transaction costs are or were being amortized into interest expense on a straight-line basis as the result would not be materially different from using the interest method, over the five-year term of the arrangement. This resulted in an effective interest rate of approximately 4.2%. During the three months ended September 30, 2021, in connection with prepaying the term loan in full, we expensed the remaining unamortized transaction costs allocated to the term loan of $0.6 million. The issuance costs allocated to the revolver of $0.5 million as of September 30, 2021 will continue to be amortized on a straight-line basis as the line of credit is still available to us.

The term of the revolving line of credit is five years, with all outstanding amounts due on June 22, 2025. As of September 30, 2021, we had no borrowings outstanding under our revolving line of credit.

Because the revolving line of credit is still available to us, we must comply with various financial and non-financial covenants, which are set forth in the Credit Agreement governing the credit facility. The primary financial covenant consists of a maximum consolidated leverage ratio. The lenders are entitled to accelerate repayment of the loans and terminate the revolving credit commitment upon the occurrence of any of various events of default as described in the Credit Agreement. We were in compliance with the covenants as of September 30, 2021. Borrowings under the secured credit facility are secured by 100% of the stock of our domestic subsidiaries, portions of the stock of certain of our foreign subsidiaries, and substantially all of our and our subsidiaries’ other property and assets, in each case subject to various exceptions.

We are required to make mandatory prepayments of any revolving credit loans in various amounts if we have Excess Cash Flow (as defined in the Credit Agreement, and commencing in respect of our fiscal year ending December 31, 2021), if we make certain sales of assets outside the ordinary course of business above certain thresholds or if we suffer certain property loss events above certain thresholds.