XML 26 R13.htm IDEA: XBRL DOCUMENT v3.6.0.2
Lines of Credit and Long-Term Debt
12 Months Ended
Dec. 31, 2016
Debt Disclosure [Abstract]  
Lines of Credit and Long-Term Debt
LINES OF CREDIT AND LONG–TERM DEBT
The Company's loan and security agreement, as amended, with Wells Fargo Bank, National Association and the other lenders party thereto provides a maximum available borrowing capacity of $120.0 million. In addition, at the Company's option and subject to certain conditions, the Company may increase its borrowing capacity up to an additional $25.0 million. All other material terms of the amended and restated loan and security agreement remained unchanged. The amount available to be borrowed is based on a percentage of certain of the Company's inventory (excluding capitalized indirect costs) and accounts receivable.
The revolving credit facility is guaranteed by West Marine, Inc. and West Marine Canada Corp. (an indirect subsidiary of West Marine, Inc.) and secured by a security interest in all of the Company's accounts receivable and inventory, certain other related assets, and all proceeds thereof. The revolving credit facility is available for general working capital and general corporate purposes.
At the Company’s election, borrowings under the revolving credit facility will bear interest at one of the following options:
1.The prime rate, which is defined in the loan agreement as the highest of:
a.Federal funds rate, as in effect from time to time, plus one-half of one percent;
b.LIBOR rate for a one-month interest period plus one percent; or
c.The rate of interest in effect for such day as publicly announced from time to time by Wells Fargo as its “prime rate;” or
2.The LIBOR rate quoted by the British Bankers Association for the applicable interest period.
In each case, the applicable interest rate is increased by a margin imposed by the loan agreement. The applicable margin for any date will depend upon the amount of available credit under the revolving credit facility. The margin range for option (1) above is between 0.5% to 1.0% and for option (2) above is between 1.5% and 2.0%.
The loan agreement also imposes a fee on the unused portion of the revolving credit facility available. For 2016, the weighted-average interest rate on all of our outstanding borrowings was 4.0%. For 2015 and 2014, the weighted-average interest rate on all of our outstanding borrowings was 3.8%.
Although the loan agreement contains customary covenants, including, but not limited to, restrictions on the Company’s ability to incur liens, make acquisitions and investments, pay dividends and sell or transfer assets, it does not contain debt or other similar financial covenants, such as maintaining certain specific leverage, debt service or interest coverage ratios. Instead, the loan is asset-based (which means the Company’s lenders maintain a security interest in the Company’s inventory and accounts receivable which serve as collateral for the loan), and the amount the Company may borrow under its revolving credit facility at any given time is determined by the estimated value of these assets as determined by the lenders’ appraisers. Additionally, the Company must maintain minimum revolving credit availability equal to the greater of $7 million or 10% of the borrowing base. In addition, there are customary events of default under our loan agreement, including failure to comply with our covenants. If we fail to comply with any of the covenants contained in the loan agreement, an event of default occurs which, if not waived by our lenders or cured within the applicable time periods, results in the lenders having the right to accelerate repayment of all outstanding indebtedness under the loan agreement before the stated maturity date and the revolving credit facility could be terminated. As of December 31, 2016, the Company was in compliance with the covenants under this loan agreement.
At the end of fiscal year 2016, there were no amounts outstanding under this revolving credit facility, $104.3 million was available for future borrowings, and there was $0.2 million in unamortized loan costs. At the end of fiscal year 2015, there were no amounts outstanding under this revolving credit facility, $105.3 million was available for future borrowings, and there was $0.4 million in unamortized loan costs. At the end of fiscal years 2016 and 2015, the Company had $4.2 million and $4.8 million of outstanding commercial and stand-by letters of credit, respectively. The highest outstanding balance during 2016 and 2015 was $0.3 million and $0.2 million, respectively.