XML 27 R16.htm IDEA: XBRL DOCUMENT v3.3.1.900
Short-Term Debt
6 Months Ended
Dec. 31, 2015
LONG-TERM DEBT [Abstract]  
Short-Term Debt

NOTE 9. SHORT-TERM DEBT

     At December 31, 2015, the Company had a $300 million revolving Credit Facility with a syndicate of banks, for which JPMorgan Chase Bank is the administrative agent, which generally provides for borrowings on a revolving basis, with a sub-limit of $25 million for letters of credit. Under the terms of the Credit Facility, the Company may, at any time, increase the size of the Credit Facility up to $375 million without entering into a formal amendment requiring the consent of all of the banks, subject to the Company's satisfaction of certain conditions. The Credit Facility matures in December 2019.

     The Credit Facility is guaranteed by all of the Company's U.S. subsidiaries and is collateralized by a first priority lien on all of the Company's U.S. accounts receivable and inventory. Borrowings under the Credit Facility are limited to 85% of eligible accounts receivable and 85% of the appraised net liquidation value of the Company's inventory, as determined pursuant to the terms of the Credit Facility; provided, however, that from August 15 to October 31 of each year the Company's borrowing base may be temporarily increased by up to $25 million.

     The Credit Facility has only one financial maintenance covenant, which is a debt service coverage ratio that must be maintained at not less than 1.1 to 1 if (a) average borrowing base capacity (calculated on a rolling three-day basis) is equal to or less than ten percent (10%) of total borrowing availability under the Credit Facility, or (b) the Company's borrowing availability under the Credit Facility, plus domestic cash and cash equivalents, is less than $20 million at any time. The Company's average borrowing base capacity and borrowing availability for the quarter ended December 31, 2015, did not fall below the applicable thresholds noted above. Accordingly, the debt service coverage ratio did not apply for the quarter ended December 31, 2015. The Company's debt service coverage ratio was less than 1.1 to 1 as of December 31, 2015.

     Under the terms of the Credit Facility, the Company may pay dividends or repurchase common stock if (a) it maintains a debt service coverage ratio of not less than 1.1 to 1.0 and maintains borrowing base capacity plus domestic cash and cash equivalents, in each case after giving effect to the applicable payment, of (i) at least $30 million from February 1 to August 31, and (ii) at least $35 million from September 1 to January 31, or (b) it maintains borrowing base capacity plus domestic cash and cash equivalents of (i) at least $40 million from February 1 to August 31, and (ii) at least $45 million from September 1 to January 31.

     Borrowings under the credit portion of the Credit Facility bear interest at a floating rate based on an "Applicable Margin" that is determined by reference to a debt service pricing ratio. At the Company's option, the Applicable Margin may be applied to either the London InterBank Offered Rate (LIBOR) or the base rate. The Applicable Margin charged on LIBOR loans ranges from 1.50% to 2.50% and ranges from 0% to 1.0% for base rate loans. The Applicable Margin on the first $25 million of borrowings from August 15 to October 31 of each year, while the temporary increase in the Company's borrowing base is in effect, is 1.0% higher. The unused commitment fee under the Credit Facility rate is 0.375% per annum and is based on quarterly average utilization.

     At December 31, 2015, the Applicable Margin was 2.50% for LIBOR loans and 1.00% for base rate loans. For the six months ended December 31, 2015 and 2014, the weighted average annual interest rate on borrowings under the Credit Facility was 2.9% and 2.8%, respectively.

     The Company also has a $25 million Second Lien Credit Agreement with JPMorgan Chase Bank, N.A. On October 2, 2015, the Company entered into an amendment (the "Amendment") of the Second Lien Credit Agreement, which, among other things, extended the maturity date of the Second Lien Credit Agreement from January 2016 to October 15, 2016. On October 2, 2015, the Company borrowed $25 million in a single advance under the terms of the Amendment and used the proceeds to reduce outstanding borrowings under the Credit Facility.

     The Second Lien Credit Agreement is collateralized by a second priority lien on all of the Company's U.S. accounts receivable and inventories. In connection with the Amendment, the Company also entered into security agreements (the "Security Agreements") in favor of JP Morgan Chase Bank, N.A. and the lenders under the Company's Credit Facility, granting a lien against the Company's U.S. trademarks relating to its Curve fragrance brand and certain related assets to secure the Company's obligations under both the Second Lien Credit Agreement and the Credit Facility (collectively, the "Curve Security Interest"). With respect to the Credit Facility, the Curve Security Interest will be released upon payment in full of the Company's obligations under the Second Lien Credit Agreement, provided that the Company's minimum debt service coverage ratio (as calculated pursuant to the Credit Facility) as of the end of the most recently ended fiscal quarter for the preceding twelve months is greater than 1.0 to 1.0 and no default or event of default exists immediately prior to or after giving effect to the release of such Curve Security Interest.

     As amended, the Second Lien Credit Agreement provides that borrowings will bear interest at a floating rate based on an "Applicable Margin" that is determined by reference to a debt service pricing ratio. At the Company's option, the Applicable Margin may be applied to either the London InterBank Offered Rate (LIBOR) or the base rate. As amended, the Applicable Margin charged on LIBOR loans ranges from 3.00% to 5.00% and for base rate loans ranges from 1.5% to 3.5%. To the extent the Company borrows amounts under the Second Lien Credit Agreement, the Company has the option to prepay all or a portion of such borrowings, provided the borrowing base capacity under the Credit Facility is in excess of $35 million after giving effect to the applicable prepayment each day for the 30 day period ending on the date of the prepayment.

     In connection with the Amendment, the Company incurred approximately $0.4 million of bank related costs, and such amounts have been capitalized and are reflected in debt financing costs, net, on the consolidated balance sheet.

     At December 31, 2015, the Company had $1.7 million in borrowings and $3.3 million in letters of credit outstanding under the Credit Facility, compared with $8.3 million in borrowings and $3.1 million in letters of credit outstanding under the Credit Facility at June 30, 2015. At December 31, 2015 the Company had $25 million in borrowings under the Second Lien Credit Agreement, compared with no outstanding borrowings at June 30, 2015. At December 31, 2015, based on eligible accounts receivable and inventory available as collateral, the aggregate borrowing availability under the Credit Facility and Second Lien Credit Agreement was $167.1 million. In periods when there are outstanding borrowings, the Company classifies the Credit Facility and Second Lien Credit Agreement as short term debt on its balance sheet because it expects to reduce outstanding borrowings over the next twelve months.