Note 10 - Debt

9 Months Ended

Oct. 31, 2024

Notes to Financial Statements

Debt Disclosure [Text Block]

Note 10 - Debt

Debt totaled $27.0 million and $25.7 million at October 31, 2024 and January 31, 2024, respectively.

Revolving lines - North America. On September 20, 2018, and as amended, extended, or renewed subsequently thereafter, the Company and certain of its U.S. and Canadian subsidiaries (collectively the “North American Loan Parties”) entered into a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association ("PNC"), as administrative agent and lender, providing for a three-year $18 million senior secured revolving credit facility, subject to a borrowing base including various reserves (the “Senior Credit Facility”). The Credit Agreement with PNC was subsequently extended on September 17, 2021, providing for a new five-year $18 million senior secured revolving credit facility, subject to a borrowing base including various reserves (the "Renewed Senior Credit Facility"). The Renewed Senior Credit Facility matures on September 20, 2026. 

As of October 31, 2024, the Company had borrowed an aggregate of $7.8 million at a rate of 9.5% and had $3.5 million available under the Renewed Senior Credit Facility. As of January 31, 2024, the Company had borrowed an aggregate of $5.5 million and had $4.0 million available under the Renewed Senior Credit Facility.  

The Company was in compliance with respect to the covenants under the Credit Agreement as of  October 31, 2024.

Finance obligation - buildings and land. On April 14, 2021, the Company entered into a purchase and sale agreement, pursuant to which the Company sold its land and buildings in Lebanon, Tennessee (the "Property") for $10.4 million. The transaction generated net cash proceeds of $9.1 million. Concurrently with the sale, the Company paid off the approximately $0.9 million mortgage note on the Property to its lender.  The Company used the remaining proceeds to repay its borrowings under the Senior Credit Facility, for strategic investments, and for general corporate needs. Concurrent with the sale of the Property, the Company entered into a fifteen-year lease agreement (the “Lease Agreement”), whereby the Company leases back the Property at an annual rental rate of approximately $0.8 million, subject to annual rent increases of 2.0%. Under the Lease Agreement, the Company has four consecutive options to extend the term of the lease by five years for each such option.  

In accordance with ASC 842, Leases, this transaction was recorded as a failed sale and leaseback as the present value of lease payments exceeded substantially the fair value of the underlying assets. The Company utilized an incremental borrowing rate of 8.0% to determine the finance obligation to record for the amounts received and will continue to depreciate the assets. The current portion of the finance obligation of $0.2 million is recognized in current maturities of long-term debt and the long-term portion of $8.9 million is recognized in long-term finance obligation on the Company's consolidated balance sheets as of October 31, 2024. The net carrying amount of the financial liability and remaining assets will be zero at the end of the lease term.

Revolving lines - foreign. The Company also has credit arrangements used by its Middle Eastern subsidiaries in the U.A.E., Egypt and Saudi Arabia as discussed further below.

United Arab Emirates

The Company has a revolving line for 8.0  million U.A.E. Dirhams (approximately $ 2.2  million at October 31, 2024 ) from a bank in the U.A.E. As of October 31, 2024 , the facility has an interest rate of approximately  7.7%  and expired in July 2024. The facility was subsequently renewed in November 2024 with substantially the same terms and conditions and expires in July 2025.  The Company had borrowed an aggregate of $1.1 million  as of October 31, 2024 and $0.2 million  as of January 31, 2024 , respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets. As of  October 31, 2024 and January 31, 2024 , the Company had unused borrowing availability of approximately $1.0 million and $1.9 million, respectively.

The Company has a revolving line for 20.5  million U.A.E. Dirhams (approximately $ 5.6  million at October 31, 2024 ) from a bank in the U.A.E. As of October 31, 2024 , the facility has an interest rate of approximately  8.6%  and expired in August 2024. The facility was subsequently renewed in November 2024 with substantially the same terms and conditions, except for the revolving line, which decreased to 17.5 million U.A.E. Dirhams (approximately $4.8 million at  October 31, 2024 ) and expires in August 2025. The reduction in the revolving line was due primarily to the removal of 2 million U.A.E. Dirhams (approximately $0.5 million) in connection with a capital expenditure component that is no longer applicable to the revolving credit facility and, to a lesser extent, 1 million U.A.E. Dirhams (approximately $0.3 million) due to a decrease in revolver capacity. The Company had borrowed an aggregate of $0.7 million  as of October 31, 2024 and $0.1 million  as of January 31, 2024 , respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets. The Company had unused borrowing availability of approximately $1.0 million as of  October 31, 2024 and January 31, 2024 , respectively.

Egypt

In June 2021, and as renewed or amended subsequently thereafter, the Company's Egyptian subsidiary entered into a credit arrangement with a bank in Egypt for a revolving line of 100.0  million Egyptian Pounds (approximately $ 2.0  million at October 31, 2024 ). This credit arrangement is in the form of project financing, for which the line is secured by certain assets (such as accounts receivable) of the Company's Egyptian subsidiary. Among other covenants, the credit arrangement established a maximum leverage ratio allowable and restricted the Company's Egyptian subsidiary's ability to undertake any additional debt. As of October 31, 2024 , the facility has an interest rate of approximately  20.8%  and expired in November 2024. The Company has started the process to renew and extend this credit agreement and the credit facility has continued without interruption or penalty.  As of  October 31, 2024 , the Company had an immaterial amount outstanding with respect to this credit arrangement, and approximately $1.4 million outstanding at  January 31, 2024 , which is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets. Further, as of  October 31, 2024  and  January 31, 2024 , the Company had unused borrowing capacity of $2.0 million and $3.2 million, respectively. 

In December 2021, the Company entered into a credit arrangement for project financing with a bank in Egypt for 28.2 million Egyptian Pounds. As this project has progressed and the Company has made collections, the facility has decreased to a current amount of  2.1  million Egyptian Pounds (approximately $0.1 million at October 31, 2024 ). This credit arrangement is in the form of project financing at rates competitive in Egypt. The line is secured by the contract for a project being financed by the Company's Egyptian subsidiary. The facility has an interest rate of approximately  11.0%  and, as of  November 2022, is no longer available for borrowings by the Company. The facility will expire in connection with final customer balance collections and the completion of the project. The Company had approximately $0.1 million outstanding  as of October 31, 2024 and January 31, 2024 , respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.

Saudi Arabia

In March 2022, the Company's Saudi Arabian subsidiary entered into a credit arrangement with a bank in Saudi Arabia for a revolving line of 37.0 million Saudi Riyals (approximately $9.9 million at  October 31, 2024). This credit arrangement is in the form of project financing at rates competitive in Saudi Arabia. The line is secured by certain assets (such as accounts receivable) of the Company's Saudi Arabian subsidiary. The facility was renewed in May 2024 with substantially the same terms and conditions and expires in May 2025. As of October 31, 2024, the facility has an interest rate of approximately 9.5%. The Company had borrowed an aggregate of $1.3 million and $3.2 million as of October 31, 2024 and January 31, 2024, respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets. The unused borrowing availability attributable to this credit arrangement at  October 31, 2024 and  January 31, 2024, was $3.3 million and $6.1 million, respectively. 

These credit arrangements are in the form of overdraft facilities and project financing at rates competitive in the countries in which the Company operates. The lines are secured by certain equipment, certain assets (such as accounts receivable and inventory), and in some cases, a guarantee by the Company. Some credit arrangement covenants require a minimum tangible net worth to be maintained, including maintaining certain levels of intercompany subordinated debt. In addition, some of the revolving credit facilities restrict payment of dividends or undertaking of additional debt. The Company guarantees only a portion of the subsidiaries' debt, including foreign debt. The amount of foreign subsidiary debt guaranteed by the Company was approximately $1.1 million and $0.1 million at  October 31, 2024 and  January 31, 2024, respectively. 

The Company was in compliance with respect to the covenants under the credit arrangements in the U.A.E., Egypt, and Saudi Arabia as of October 31, 2024, with the exception of an arrangement that has expired and has not yet been renewed. Although a certain arrangement has expired and the borrowings could be required to be repaid immediately by the bank, the Company is in regular communication with the bank throughout the renewal process and the arrangement has continued without interruption or penalty. On October 31, 2024, interest rates were based on (i) the Emirates Inter Bank Offered Rate plus 3.0% to 3.5% per annum for the U.A.E. credit arrangements, two of which have a minimum interest rate of 4.5% per annum; (ii) either the Central Bank of Egypt corporate loan rate plus 1.5% to 3.5% per annum or the stated interest rate in the agreements for the Egypt credit arrangements; and (iii) the Saudi Inter-Bank Offered Rate plus 3.5% for the Saudi Arabia credit arrangement. Based on these base rates, as of October 31, 2024, the Company's interest rates ranged from 7.7% to 20.8%, with a weighted average rate of 10.6%, and the Company had facility limits totaling $19.7 million under these credit arrangements. As of October 31, 2024, $11.0 million of availability was used to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees. Additionally, as of October 31, 2024, the Company had borrowed $3.2 million and had an additional $8.3 million of borrowing remaining available under the foreign revolving credit arrangements. The foreign revolving lines balances were included as a component of current maturities of long-term debt in the Company's consolidated balance sheets as of October 31, 2024 and January 31, 2024.

In June 2023, the Company assumed a promissory note of approximately $2.8 million in connection with the formation of the joint venture with Gulf Insulation Group (see Note 16). In accordance with the promissory note, all principal is due and payable on the maturity date of April 9, 2026, with the option to prepay, in whole or in part, at any time prior to the maturity date, without premium or penalty.

Mortgages. On July 28, 2016, the Company entered into a mortgage agreement secured by the Company's manufacturing facility located in Alberta, Canada that matures on December 23, 2042. As of October 31, 2024, the remaining balance on the mortgage in Canada is approximately CAD 5.8 million (approximately $4.2 million at October 31, 2024). The interest rate is variable, and was 7.8% at October 31, 2024. The principal balance is included as a component of long-term debt, less current maturities in the Company's consolidated balance sheets and is presented net of issuance costs of $0.1 million as of October 31, 2024 and January 31, 2024, respectively.