Note 8 - Long-term Debt and Credit Facility

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Debt Disclosure [Text Block]

8. LONG-TERM DEBT AND CREDIT FACILITY

Long-term debt consisted of the following (in thousands):

	March 31, 2020		December 31, 2019
Term note, due February 27, 2023, annualized rates of 3.35% and 4.09%, respectively	$	245,000	$	253,750
Line of credit, 3.11% and 4.01%, respectively		58,000		24,000
Other notes with interest rates from 3.3% to 7.8%		668		770
Subtotal		303,668		278,520
Less – Current maturities of long-term debt		29,735		32,803
Less – Unamortized loan costs		1,923		2,088
Total	$	272,010	$	243,629

In October 2015, the Company entered into an amended and restated $650.0 million senior secured credit facility with a syndicate of banks. In February 2018 and December 2018, the Company amended this facility (the “amended Credit Facility”). At March 31, 2020, the amended Credit Facility consisted of a $225.0 million five-year revolving line of credit and a $308.4 million five-year term loan facility, each with a maturity date in February 2023.

Based on the 2018 amendments, interest is charged on the principal amounts outstanding under the amended Credit Facility at the British Bankers Association LIBOR rate plus an applicable rate ranging from 1.25% to 2.25% depending on the Company’s consolidated leverage ratio. The Company can also opt for an interest rate equal to a base rate (as defined in the credit documents) plus an applicable rate, which also is based on the Company’s consolidated leverage ratio. The applicable LIBOR borrowing rate (LIBOR plus Company’s applicable rate) as of March 31, 2020 was approximately 3.11%.

The Company’s indebtedness at March 31, 2020 consisted of $245.0 million outstanding from the term loan under the amended Credit Facility and $58.0 million on the line of credit under the amended Credit Facility. Additionally, the Company had $0.7 million of debt held by its joint ventures (representing funds loaned by its joint venture partners). During the first quarter of 2020, the Company had net borrowings of $34.0 million on the line of credit for domestic working capital needs and to ensure the Company had sufficient liquidity during the first quarter of 2020 due to COVID-19 business impacts.

As of March 31, 2020, the Company had $25.1 million in letters of credit issued and outstanding under the amended Credit Facility. Of such amount, $12.2 million was collateral for the benefit of certain of our insurance carriers and $12.9 million was for letters of credit or bank guarantees of performance or payment obligations of foreign subsidiaries.

The Company’s indebtedness at December 31, 2019 consisted of $253.8 million outstanding from the term loan under the amended Credit Facility, $24.0 million on the line of credit under the amended Credit Facility and $0.8 million of third-party notes and bank debt.

At March 31, 2020 and December 31, 2019, the estimated fair value of the Company’s long-term debt was approximately $294.0 million and $286.9 million, respectively. Fair value was estimated using market rates for debt of similar risk and maturity and a discounted cash flow model, which are based on Level 2 inputs as defined in Note 2.

In October 2015, the Company entered into an interest rate swap agreement for a notional amount of $262.5 million, which is set to expire in October 2020. The notional amount of this swap mirrors the amortization of a $262.5 million portion of the Company’s $350.0 million term loan drawn from the original Credit Facility. The swap requires the Company to make a monthly fixed rate payment of 1.46% calculated on the amortizing $262.5 million notional amount, and provides for the Company to receive a payment based upon a variable monthly LIBOR interest rate calculated on the same amortizing $262.5 million notional amount. The receipt of the monthly LIBOR-based payment offsets a variable monthly LIBOR-based interest cost on a corresponding $262.5 million portion of the Company’s term loan from the original Credit Facility. After considering the impact of the interest rate swap agreement, the effective borrowing rate on the Company’s term note as of March 31, 2020 was approximately 3.71%. This interest rate swap is used to partially hedge the interest rate risk associated with the volatility of monthly LIBOR rate movement and is accounted for as a cash flow hedge. See Note 13.

On March 12, 2018, the Company entered into an interest rate swap forward agreement that begins in October 2020 and expires in February 2023 to coincide with the amortization period of the amended Credit Facility. The swap will require the Company to make a monthly fixed rate payment of 2.937% calculated on the then amortizing $170.6 million notional amount, and provides for the Company to receive a payment based upon a variable monthly LIBOR interest rate calculated on the same amortizing $170.6 million notional amount. The receipt of the monthly LIBOR-based payment will offset the variable monthly LIBOR-based interest cost on a corresponding $170.6 million portion of the Company’s term loan from the amended Credit Facility. This interest rate swap will be used to partially hedge the interest rate risk associated with the volatility of monthly LIBOR rate movement and accounted for as a cash flow hedge. See Note 13.

The amended Credit Facility is subject to certain financial covenants, including a consolidated financial leverage ratio and consolidated fixed charge coverage ratio. Subject to the specifically defined terms and methods of calculation as set forth in the amended Credit Facility’s credit agreement, the financial covenant requirements as of March 31, 2020 were defined as follows:

• Consolidated financial leverage ratio compares consolidated funded indebtedness to amended Credit Facility defined income with a maximum amount not to exceed 3.25 to 1.00. At March 31, 2020, the Company’s consolidated financial leverage ratio was 3.12 to 1.00 and, using the amended Credit Facility defined income, the Company had the capacity to borrow up to $12.7 million of additional debt.

• Consolidated fixed charge coverage ratio compares amended Credit Facility defined income to amended Credit Facility defined fixed charges with a minimum permitted ratio of not less than 1.25 to 1.00. At March 31, 2020, the Company’s fixed charge ratio was 1.38 to 1.00.

At March 31, 2020, the Company was in compliance with all of its debt and financial covenants as required under the amended Credit Facility.

See Note 14 for additional information on further amendments to the amended Credit Facility, effective April 29, 2020.