Note 7 — Long-Term Debt and Revolving Line of Credit

In April 2015, the Company amended its credit facility with U.S. Bank National Association (“U.S. Bank”) to add $40 million of borrowing capacity under a delayed draw term loan. In June 2015, the Company entered into Amendment No. 2 to obtain additional borrowing capacity. This amendment combined $20.0 million outstanding under an existing revolving line of credit and $27.3 million outstanding under an existing term loan into a $47.3 million term loan, increased the delayed draw facility from $40 million to $115 million, extended the maturity of the delayed draw facility from August 2015 to June 2020 and added a $50 million accordion feature. Proceeds from the delayed draw term loan must be used solely to finance the purchase and installation of new equipment and construction at our South Carolina facility. In January 2017, the Company entered into Amendment No. 3, which increased the total loan commitment, modified the pricing grid applicable to interest rates and the unused commitment fee, amended the financial covenant related to the maintenance of a maximum total leverage ratio by increasing the permitted total leverage ratio for fiscal quarters ending on or prior to March 31, 2018, and amended the terms of the draw loan to provide for additional advance amounts available to the Company for the purposes of acquiring or improving real estate. In April 2017, the Company entered into Amendment No. 4, which waived the permitted total leverage ratio for the first two quarters of 2017 and increased the permitted total leverage ratio for the last two quarters of 2017, lowered the required fixed charge coverage ratio for the second and third quarters of 2017, and extended the period during which funds may be drawn under the delayed draw loan to December 25, 2017. (The delayed draw loan of $108.5 million was fully drawn in October of 2017.) The resultant covenants, which are currently still in effect, are summarized in the following paragraph. In June 2017, the Company entered into Amendment No. 5, which, among other things, waived the required fixed charge coverage ratio for the period ended June 30, 2017. Additionally, the Company agreed not to make any dividend or other distribution payment with respect to its equity unless the Company has achieved a Leverage Ratio of less than 4.0:1.0 for two consecutive fiscal quarters and no Default or Event of Default (as defined in the Credit Agreement) exists or would exist following such payment. The amount and timing of dividend payments otherwise remains subject to the judgment and approval of the Board of Directors.

At September 30, 2017, the Company was not in compliance with certain financial covenants under its Credit Agreement and New Market Tax Credit Financing Agreement. The financial covenants under the Credit Agreement, as amended, required the Company to maintain a minimum fixed charge coverage ratio of 1.05 to 1.0 and a maximum leverage ratio of 5.5 to 1.0 at September 30, 2017. The Company’s leverage ratio was 10.9, and the fixed charge coverage ratio was (1.4) as of September 30, 2017. On November 7, 2017, the Company entered into Amendment No. 6, which, in addition to providing a waiver for the existing defaults, provides for a minimum EBITDA covenant, amends the pricing schedule, and amends certain reporting requirements. Including the amendments incorporated into this waiver, the Company’s credit facilities have been amended for each of the last four quarters. The financial covenant requirements in effect at this time require the Company to maintain the following: fixed charge coverage ratios of 1.05 to 1 at September 30, 2017 and 1.2 to 1 at December 31, 2017 and quarter-ends thereafter, leverage ratios of 5.5 to 1, 4.5 to 1, and 3.5 to 1 at September 30, 2017, December 31, 2017, and March 31, 2018 and quarter-ends thereafter, respectively; minimum EBITDA for the most recent three-month period of $4.0 million, $4.8 million, and $5.0 million at October 31, 2017, November 30, 2017, and December 31, 2017 and as of the last day of each month thereafter, respectively.

The Company is seeking to refinance its existing long-term debt obligations within the fourth quarter of 2017. The Company may also need to seek another waiver of these and other financial covenants for the fourth quarter of 2017 in order to continue operating under the existing terms of the credit facilities. If the Company is unable to obtain another waiver of these financial covenants and/or a refinancing is not completed, the bank syndicate could declare a default. There can be no assurance that the Company’s lenders will agree to further waivers or amendments to the existing debt covenants. While management intends to amend or refinance the debt, there can be no assurance that the Company will be able to obtain additional financing on terms that are satisfactory to it or at all. As of September 30, 2017, the borrowings under the Credit Agreement and the term loan otherwise due in 2022 were classified as current on the balance sheet due to these uncertainties regarding the Company’s ability to meet the existing debt covenants over the next twelve-month period.

The terms of the Credit Agreement, as amended, consist of the following:

	·	a $25.0 million revolving credit line due June 2020;
	·	a $47.3 million Term Loan with a 5-year term due June 2020 and payable in quarterly installments of $675,000 through June 2016 and $1.0 million per quarter thereafter;
	·	a $115.0 million delayed draw term loan with a 2-year draw period due June 2020 and payable beginning in September 2017 in quarterly installments of 1.5% of the outstanding balance as of defined measurement dates through the extended draw period ending December 25, 2017. The maximum borrowing capacity was reduced from $115.0 million to $99.6 million in December 2015, in connection with the NMTC transaction (see Note 13), and was increased to $108.5 million in January 2017 under the terms of Amendment No. 3; and
	·	an accordion feature allowing the revolving credit line and/or delayed draw commitment under the Credit Agreement to be increased by up to $50.0 million at any time on or before the expiration date of the Credit Agreement.

Under the terms of the Credit Agreement, as amended, amounts outstanding will bear interest at a variable rate of LIBOR plus a specified margin, or the base rate plus a specified margin, at the Company’s option. The specified margin is based on the Company’s quarterly Leverage Ratio, as defined in the Credit Agreement, as amended. The following table outlines the specified margins and the commitment fees payable under the Credit Agreement:

	LIBOR			Base			Commitment
Leverage Ratio	Margin			Margin			Fee
Less than 1.00		1.25	%		0.00	%		0.15	%
Greater than or equal to 1.00 but less than 2.00		1.50	%		0.00	%		0.20	%
Greater than or equal to 2.00 but less than 3.00		1.75	%		0.00	%		0.25	%
Greater than or equal to 3.00 but less than 3.50		2.25	%		0.00	%		0.30	%
Greater than or equal to 3.50 but less than 4.00		2.50	%		0.25	%		0.35	%
Greater than or equal to 4.00 but less than 4.50		3.00	%		0.75	%		0.40	%
Greater than or equal to 4.50 but less than 5.00		3.50	%		1.25	%		0.45	%
Greater than or equal to 5.00 but less than 6.00		4.00	%		1.75	%		0.50	%
Greater than or equal to 6.00		6.00	%		3.75	%		0.55	%

Additionally, in connection with the NMTC transaction, the Company entered into an $11.1 million term loan with U.S. Bank. This loan bears interest at a fixed rate of 4.4% and matures on December 29, 2022. The loan requires quarterly payments of principal and interest of approximately $255,000, beginning in March 2016, with a balloon payment due on the maturity date.

As of September 30, 2017, the Company’s weighted-average interest rate was 5.19%.

Long-term debt at September 30, 2017 and December 31, 2016 consists of:

	September 30,		December 31,
	2017		2016
	(In thousands)
Revolving line of credit, maturing on June 25, 2020	$	16,791	$	16,447
Delayed draw term loan, maturing on June 25, 2020		104,937		72,342
Term loan, maturing on June 25, 2020, due in quarterly installments of $675,000 for the first year and $1,000,000 thereafter, excluding interest paid separately		39,600		42,600
Term loan, maturing on December 29, 2022, due in quarterly installments of $255,006, including interest		10,162		10,577
Capital lease obligations		33		-
Less: unamortized debt issuance costs		(2,098)		(1,249)
		169,425		140,717
Less current portion		169,392		6,728
	$	33	$	133,989

Unamortized debt issuance costs consist of:

	September 30,		December 31,
	2017		2016
	(In thousands)
Revolving line of credit	$	505	$	229
Delayed draw term loan, maturing on June 25, 2020		722		283
Term loan, maturing on June 25, 2020		320		146
Term loan, maturing on December 29, 2022		551		591
	$	2,098	$	1,249

The amount available under the revolving credit line may be reduced in the event that the Company's borrowing base, which is based upon qualified receivables and qualified inventory, is less than $25.0 million. As of September 30, 2017, the Company’s borrowing base was $22.4 million, including $12.4 million of eligible accounts receivable and $10.0 million of eligible inventory. The amount available under the revolving credit line was $5.6 million as of September 30, 2017.

Obligations under the Credit Agreement and the NMTC loan are secured by substantially all of the Company's assets. The Credit Agreement contains representations and warranties, and affirmative and negative covenants customary for financings of this type, including, but not limited to, limitations on additional borrowings, additional investments and asset sales. The Company has the right to prepay borrowings under the Credit Agreement at any time without penalty.