Note 8 - Long-term Debt and Credit Facility

9 Months Ended

Sep. 30, 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):

	September 30, 2020		December 31, 2019
Term note, due February 27, 2023, annualized rates of 4.25% and 4.09%, respectively	$	227,500	$	253,750
Line of credit, 4.25% and 4.01%, respectively		—		24,000
Other notes with interest rates from 3.3% to 7.8%		692		770
Subtotal		228,192		278,520
Less – Current maturities of long-term debt		23,825		32,803
Less – Unamortized loan costs		2,767		2,088
Total	$	201,600	$	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, December 2018 and April 2020, the Company amended this facility (the “amended Credit Facility”). At September 30, 2020, the amended Credit Facility consisted 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.

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 amended its current credit facility on April 29, 2020 to provide additional liquidity and to ensure ongoing debt covenant compliance with the amended ratios. The amended Credit Facility now includes more flexible financial covenants and allows for the add-back of certain restructuring and divestiture charges. 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. See Note 9.

The Company paid expenses of $2.0 million associated with the amended Credit Facility, $1.5 million related to up-front lending fees and $0.5 million related to third-party arranging fees and expenses, the latter of which was recorded in “Interest expense” in the Consolidated Statement of Operations in the second quarter of 2020. In addition, the Company had $1.9 million in unamortized loan costs associated with the amended Credit Facility, of which $0.2 million was written off and recorded in “Interest expense” in the Consolidated Statement of Operations in the second quarter of 2020.

Based on the April 2020 amendments, interest is charged on the principal amounts outstanding under the amended Credit Facility 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. The applicable LIBOR borrowing rate (LIBOR plus Company’s applicable rate) as of September 30, 2020 was approximately 4.25%.

The Company’s indebtedness at September 30, 2020 consisted of $227.5 million outstanding from the term loan 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 nine months of 2020, the Company repaid $24.0 million on the line of credit as a result of focused working capital management and strong operating cash flows.

As of September 30, 2020, the Company had $31.6 million in letters of credit issued and outstanding under the amended Credit Facility. Of such amount, $11.2 million was collateral for the benefit of certain of our insurance carriers and $20.4 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 September 30, 2020 and December 31, 2019, the estimated fair value of the Company’s long-term debt was approximately $230.4 million and $286.8 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 expired in October 2020. The notional amount of this swap mirrored 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 required the Company to make a monthly fixed rate payment of 1.46% calculated on the amortizing $262.5 million notional amount, and provided 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 offset 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 September 30, 2020 was approximately 5.23%. This interest rate swap was used to partially hedge the interest rate risk associated with the volatility of monthly LIBOR rate movement and was accounted for as a cash flow hedge. See Note 13.

In March 2018, the Company entered into an interest rate swap forward agreement that began in October 2020 and expires in February 2023 to coincide with the amortization period of the amended Credit Facility. The swap requires the Company to make a monthly fixed rate payment of 2.937% calculated on the 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 offsets 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 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.

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 September 30, 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 4.75 to 1.00. At September 30, 2020, the Company’s consolidated financial leverage ratio was 2.31 to 1.00 and, using the amended Credit Facility defined income, the Company had the capacity to borrow up to $251.7 million of additional debt. This amount, however, is limited to the terms of the Company’s $175.0 million revolving line of credit. At September 30, 2020, the Company had $31.6 million in letters of credit issued and outstanding under the amended Credit Facility, which reduced the maximum borrowing availability to $143.4 million.

• 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 1.10 to 1.00. At September 30, 2020, the Company’s fixed charge ratio was 1.36 to 1.00.

At September 30, 2020, the Company was in compliance with all of its debt and financial covenants as required under the amended Credit Facility.