Note 5 - Bank Debt

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Debt Disclosure [Text Block]

(5)     BANK DEBT

On  March 25, 2022, we executed an amendment to our credit agreement with PNC Bank, National Association (in its capacity as administrative agent, "PNC"), administrative agent for our lenders under our credit agreement.  The primary purpose of the amendment was to return the allowable leverage ratio and debt service coverage ratio to their  December 31, 2021 levels through  September 30, 2022, with the debt service coverage waived for  March 31, 2022.

On  May 20, 2022, we executed an additional amendment to our credit agreement with PNC.  The primary purpose of this amendment was to modify the allowable leverage ratio and debt service coverage ratio through  June 30, 2022, to provide relief for current and anticipated covenant violations.

On  August 5, 2022, we executed an additional amendment to our credit agreement with PNC.  The primary purpose of this amendment was to modify the allowable leverage ratio and debt service coverage ratio through  September 30, 2022, to provide relief for anticipated covenant violations.

On March 13, 2023, we executed an additional amendment to our credit agreement with PNC. The primary purpose of the amendment is to convert $35 million of the outstanding balance on the revolver into a new term loan with a maturity of March 31, 2024 and extend the maturity date of the revolver to May 31, 2024.  The amendment also reduced the total capacity under the revolver to $85 million and waives the maximum annual capital expenditure covenant for 2022 and increases the covenant for 2023 to $75 million.  Subsequent to December 31, 2022, and prior to the effective date of this amendment, we had borrowed an additional $17.0 million under the revolver.

The interest rate per the amendment will transition from LIBOR to SOFR based pricing with ranges from SOFR plus 4.00% to SOFR plus 5.00%, depending on the Company’s leverage ratio. The Company expects the interest rate to be SOFR plus 4.00% for the majority of  2023.

Bank debt was reduced by $26.5 million during the year ended December 31, 2022.  Prior to the latest amendment, bank debt was comprised of term debt ($5.5 million as of December 31, 2022) and a $120 million revolver ($79.7 million borrowed as of December 31, 2022).  The term debt amortization was to conclude with the final payment in  March 2023.  The revolver was to mature in  September 2023. Under the provision of the latest amendment, bank debt is comprised of term debt ($40.5 million as of December 31, 2022) and a $85 million revolver ($44.7 million borrowed as of December 31, 2022). The term debt requires payment of $5.5 million in March 2023 and $10 million each quarter thereafter in 2023 and $5.0 million by March 31, 2024.  Our debt is recorded at amortized cost, which approximates fair value due to the variable interest rates in the agreement, and is collateralized primarily by our assets.

Liquidity

As of December 31, 2022, we had additional borrowing capacity of $29.1 million under the revolver and total liquidity of $32.1 million.  Our additional borrowing capacity is net of $11.2 million in outstanding letters of credit as of December 31, 2022 that were required to maintain surety bonds.  Liquidity consists of our additional borrowing capacity and cash and cash equivalents.

We entered new contracts during the three months ended  June 30, 2022, with significantly higher prices, that began shipping during the three months ended  September 30, 2022.  These contracts substantially increased our cash flow for the remainder of 2022 and 2023.

Fees

Unamortized bank fees and other costs incurred in connection with the initial facility and subsequent amendments totaled $4.0 million as of  December 31, 2021. Additional costs incurred with the  March 25, 2022,  May 20, 2022, and  August 5, 2022 amendments totaled $2.1 million.  These costs were deferred and are being amortized over the term of the loan. Unamortized costs as of December 31, 2022, and  December 31, 2021, were $2.5 million and $4.0 million, respectively.

Bank debt, less debt issuance costs, is presented below (in thousands):

	December 31,
	2022			2021
Current bank debt	$	35,500		$	25,725
Less unamortized debt issuance cost		(2,469	)		(2,627	)
Net current portion	$	33,031		$	23,098
Long-term bank debt	$	49,713		$	86,013
Less unamortized debt issuance cost		—			(1,346	)
Net long-term portion	$	49,713		$	84,667
Total bank debt	$	85,213		$	111,738
Less total unamortized debt issuance cost		(2,469	)		(3,973	)
Net bank debt	$	82,744		$	107,765

Covenants

The credit facility includes a Maximum Leverage Ratio (consolidated funded debt / trailing twelve months adjusted EBITDA), calculated as of the end of each fiscal quarter for the trailing twelve months, not to exceed the amounts below:

Fiscal Periods Ending	Ratio
December 31, 2022	2.50 to 1.00
March 31, 2023, and each fiscal quarter thereafter	2.25 to 1.00

As of December 31, 2022, our Leverage Ratio of 2.05 was in compliance with the requirements of the credit agreement.

Beginning December 31, 2022, the credit facility requires a Minimum Debt Service Coverage Ratio (consolidated adjusted EBITDA/annual debt service) calculated as of the end of each fiscal quarter for the trailing 12 months of 1.25 to 1.00 through the maturity of the credit facility.

As of December 31, 2022, our Debt Service Coverage Ratio of 1.49 was in compliance with the requirements of the credit agreement.

Interest Rate

The interest rate on the facility ranges from LIBOR plus 2.75% to LIBOR plus 4.00%, depending on our Leverage Ratio, with a LIBOR floor of 0.50%.  We entered into swap agreements to fix the LIBOR component of the interest rate at 2.92% on the declining term loan balance and on $52.7 million of the revolver.  The swap agreements matured in  May 2022.  On  December 31, 2022, we are paying LIBOR plus 4.0% on the outstanding bank debt.

Future Maturities (in thousands):
2023		35,500
2024		49,713
Total	$	85,213

Paycheck Protection Program

As previously reported in the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 16, 2020, we entered into a Paycheck Protection Program Promissory Note and Agreement on April 15, 2020, evidencing an unsecured $10 million loan (the “PPP Loan”) under the Paycheck Protection Program (or “PPP”) made through First Financial Bank, N.A., (the "Lender"). The PPP was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration (the “SBA”).

Under the terms of the CARES Act, PPP loan recipients can apply for forgiveness. The SBA can grant forgiveness of all, or a portion of, loans made under the PPP if the recipients use the PPP loan proceeds for eligible purposes, including payroll costs, mortgage interest, rent or utility costs, and meet other requirements regarding, among other things, the maintenance of employment and compensation levels. The Company used the PPP Loan proceeds for qualifying expenses and applied for the forgiveness of the PPP Loan in accordance with the terms of the CARES Act.

On July 23, 2021, we received a notification from the Lender that the SBA approved our PPP Loan forgiveness application for the entire PPP Loan balance of $10 million, together with interest accrued thereon. The Lender notified us that the forgiveness payment was received on July 26, 2021.  The forgiveness of the PPP Loan is recognized as other income.

The SBA retains the right to review the Company's loan file for a period subsequent to the date the loan is forgiven, with the potential for the SBA to pursue legal remedies at its discretion.