Note 14 - Subsequent Events

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Subsequent Events [Text Block]

14. SUBSEQUENT EVENT

Due to the potential impacts of COVID-19 on the Company’s business and the uncertainties associated with the duration of the pandemic, the Company reviewed its current forecasts for liquidity and future compliance with existing debt covenants. In response to this ongoing uncertainty, on April 29, 2020, the Company amended its current credit facility to provide additional liquidity and to ensure ongoing debt covenant compliance with the amended ratios. The amended Credit Facility now consists of a $175.0 million revolving line of credit and a $245.0 million term loan facility, each with a maturity date in February 2023, which remained unchanged. Under the amended Credit Facility, interest charged is initially fixed at the British Bankers Association LIBOR rate plus 3.50% from April 29, 2020 until the Company delivers its compliance certificate to the administrative agent for the first calendar quarter of 2021. Thereafter, interest is charged at the British Bankers Association LIBOR rate plus an applicable rate ranging from 1.75% to 3.50% depending on the Company’s consolidated leverage ratio. The amended Credit Facility also provided a 75 basis point floor for the base LIBOR rate and updated the defined terms to allow for the add-back of certain restructuring and divestiture charges when calculating the Company’s compliance with the financial covenants.

The amended Credit Facility also places certain limits on the Company’s open market share repurchase program and repurchases of common stock in connection with the Company’s equity compensation programs for employees. Open market repurchases of the Company’s common stock are limited through June 30, 2021 to: (i) unlimited if the Company’s consolidated financial leverage ratio is less than 2.50 to 1.00; (ii) $20.0 million while the Company’s consolidated financial leverage ratio is greater than or equal to 2.50 to 1.00, but less than 3.00 to 1.00; and (iii) zero while the Company’s consolidated financial leverage ratio is greater than or equal to 3.00 to 1.00. Purchases of the Company’s common stock in connection with equity compensation programs are limited to $5.0 million through June 30, 2021.

The Company paid approximately $2.1 million for arranging fees, up-front lending fees and other expenses associated with the amended Credit Facility.

The amended Credit Facility now includes more flexible financial covenants, which based on current projections, provide the Company with additional expected borrowing capacity over the next twelve months of more than $100 million. Subject to the specifically defined terms and methods of calculation as set forth in the amended Credit Facility, the financial covenant requirements, as of each quarterly reporting period end beginning with June 30, 2020, are defined as follows:

• Consolidated financial leverage ratio compares consolidated funded indebtedness to amended Credit Facility defined income. The maximum amount is not to exceed 4.00 to 1.00 at June 30, 2020, 4.75 to 1.00 at September 30, 2020, 4.50 to 1.00 at December 31, 2020, 4.00 to 1.00 at March 31, 2021, 3.50 to 1.00 at June 30, 2021, and not more than 3.00 to 1.00 beginning with the quarter ending September 30, 2021.

• Consolidated fixed charge coverage ratio compares amended Credit Facility defined income to amended Credit Facility defined fixed charges. The minimum permitted ratio is not less than 1.10 to 1.00 at June 30, 2020 and will increase to 1.15 to 1.00 at March 31, 2021 and 1.25 to 1.00 beginning with the quarter ending June 30, 2021.

Due to the speed with which the COVID-19 pandemic is developing and the uncertainties created, including the depth and duration of any disruptions to customers and suppliers, its future effect on the Company’s business, results of operations and financial condition cannot be predicted. While management is unable to accurately foresee these future impacts, the Company believes that its financial resources and liquidity levels, along with various contingency plans to reduce costs are sufficient to manage the impact currently anticipated from the COVID-19 pandemic, which will likely include reduced revenues and operating profits in all segments and lower operating cash flows for at least the second quarter of 2020.

Because the COVID-19 pandemic is a rapidly evolving situation, management will continue to monitor the business impact and may take further actions that are deemed appropriate in light of the circumstances.