Financing Agreements

12 Months Ended

May 02, 2020

Note 10. Financing Agreements

On November 15, 2019, we entered into an amendment to extend the maturity date of our credit agreement and a related revolving bank note from November 15, 2019 to November 15, 2022 and to modify certain other terms and financial covenants. The revolving amount of the agreement and note remains at $35,000, including up to $15,000 for commercial and standby letters of credit. The interest rate ranges from the London Interbank Offered Rate ("LIBOR") plus 145 basis points to LIBOR plus 195 basis points depending on the ratio of our interest-bearing debt to EBITDA. EBITDA is defined as net income before deductions for interest expense, income taxes, depreciation and amortization, all as determined in accordance with GAAP. The effective interest rate was 2.0 percent at May 2, 2020. We are assessed a loan fee equal to 0.125 percent per annum on any unused portion of the loan. As of May 2, 2020, $15,000 had been advanced to us under the loan portion of the line of credit, and the balance of letters of credit outstanding was approximately $4,196.

The credit agreement is unsecured and requires us to be in compliance with the following financial ratios:

•

A minimum fixed charge coverage ratio of at least 2 to 1 at the end of any fiscal quarter. The ratio is equal to (a) EBITDA minus the sum of dividends or other distributions (unless the bank approves), share repurchases, a maintenance capital expenditure reserve in the amount of $6,000, and income tax to (b) all principal and interest payments with respect to indebtedness, excluding principal payments on the line of credit; and


•	A ratio of funded debt, excluding any marketing obligations, to EBITDA of greater than 2 to 1 at the end of any fiscal quarter.

We are sometimes required to obtain bank guarantees or other financial instruments for display installations. If we are unable to meet the terms of the arrangement, our customer would draw on the banking arrangement, and the bank would subrogate its loss to Daktronics. As of May 2, 2020, we had $8,894 of such instruments outstanding.

As of May 2, 2020, we were in compliance with all applicable bank loan covenants.