Debt

3 Months Ended

Mar. 27, 2020

Debt Disclosure [Abstract]

Debt

6. Debt

The Company has a credit and security agreement (the “Credit and Security Agreement”) with its bank, which provides for a three-year revolving credit facility in an aggregate principal amount of $45.0 million, including a sublimit of $10.0 million for letters of credit and a $10.0 million sublimit for swing line loans.  

The Credit and Security Agreement expires in December 2022, and has interest rates ranging from 150 to 200 basis points over LIBOR or the greater of (i) the prime rate, (ii) the federal funds effective rate plus 50 basis points, and (iii) adjusted LIBOR plus 100 basis points plus a spread ranging from 50 to 100 basis points based on the amounts outstanding under the Credit and Security Agreement. The Company can borrow under the agreement with either rate at its discretion. At March 27, 2020 and December 31, 2019, there was $12.0 million and $5.3 million outstanding under the Credit and Security Agreement, respectively. The Company borrows or repays its debt as needed based upon its working capital obligations, including the timing of the U.S. bi-weekly payroll.

The maximum amounts outstanding under its credit agreement in the 2020 and 2019 first quarters were $12.0 million and $18.0 million, respectively, while borrowings during those quarters averaged $3.1 million and $10.3 million, respectively, and carried weighted average interest rates of 2.5% and 3.0%, respectively.

Under the Credit and Security Agreement, the Company is required to meet certain financial covenants in order to maintain borrowings under its revolving credit line, pay dividends, and make acquisitions. The covenants are measured quarterly, and at March 27, 2020, included a fixed charge coverage ratio, which must be greater than 1.10 times consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) adjusted for equity-based compensation and severance expenses, must be no less than $5.0 million for the trailing twelve months, and capital expenditures for property, plant, equipment, and capitalized software must be no more than $5.0 million in any annual period. The fixed charge coverage ratio is only tested if availability on a measurement date is less than $5.625 million. Actual borrowings by CTG under the Credit and Security Agreement are subject to a borrowing base, which is a formula based on certain eligible receivables and reserves. Total availability as of March 27, 2020 was approximately $5.4 million. The Company was in compliance with these covenants at March 27, 2020 as the fixed charge ratio was 35.0 to 1, the adjusted EBITDA for the trailing twelve months was $12.9 million, and capital expenditures for property, equipment and capitalized software were $0.7 million in the first quarter of 2020. The Company was also in compliance with its covenants at March 29, 2019.