Quarterly report pursuant to Section 13 or 15(d)

Note 8 - Debt

v3.19.1
Note 8 - Debt
9 Months Ended
Mar. 31, 2019
Notes to Financial Statements  
Debt Disclosure [Text Block]
(
8
)
Debt
 
Total debt obligations at
March 31, 2019
and
June 30, 2018
consist of the following (in thousands):
 
   
March 31,
   
June 30,
 
   
2019
   
2018
 
                 
Borrowings under revolving credit facility
  $
8,000
    $
-
 
Capital leases
   
1,202
     
1,680
 
Total debt
   
9,202
     
1,680
 
Less current maturities
   
544
     
584
 
Total long-term debt
  $
8,658
    $
1,096
 
 
 
Revolving Credit Facility
 
On
December 21, 2018,
the Company and most of its domestic subsidiaries (the “Loan Parties”) entered into a Second Amended and Restated Credit Agreement (the “Facility”). The Facility amends and restates the existing Amended and Restated Credit Agreement, dated as of
October 21, 2014,
as amended. The Facility provides a revolving credit line of up to
$165
million, subject to borrowing base availability, and extends the maturity of the Facility to
December 21, 2023.
We incurred financing costs of
$0.6
million under the Facility, which are being amortized over the remaining life of the Facility using the effective interest method.
 
At the Company’s option, revolving loans under the Facility bear interest, based on the average availability, at an annual rate of either (a) the London Interbank Offered rate (“LIBOR”) plus
1.5%
to
2.0%,
or (b) the higher of (i) the prime rate, (ii) the federal funds effective rate plus
0.5%,
or (iii) LIBOR plus
1.0%
plus in each case
0.5%
to
1.0%.
 
The availability of credit at any given time under the Facility will be constrained by the terms and conditions of the Facility, including the amount of collateral available, a borrowing base formula based upon numerous factors including the value of eligible inventory and eligible accounts receivable, and other restrictions contained in the Facility. All obligations under the Facility are secured by assets of the Loan Parties including inventory, receivables and certain types of intellectual property.
 
Borrowings
under the Facility
 
To fund a portion of the special cash dividend paid to shareholders in
January 2019,
we borrowed
$16.0
million from the Facility having a maturity date of
December 21, 2023.
By
March 31, 2019,
we had repaid
$8.0
million of the total borrowed from cash generated from operating activities. The debt bears interest on the outstanding principal amount at a rate equal to the
one
-month LIBOR rate of
2.5%
plus a spread using a debt leverage pricing grid currently at
1.5%.
Interest on the loan outstanding is payable monthly in arrears and on the maturity date. 
 
The outstanding borrowing amount of
$8.0
million is reported as
Long-term debt
within the consolidated balance sheet at
March 31, 2019.
For the
nine
months ended
March 31, 2019,
we recorded interest expense of
$0.1
million on our outstanding debt amount. The principal balance is payable in full on the maturity date.
 
Debt Obligations
 
The following table summarizes, as of
March 31, 2019,
the timing of cash payments related to our outstanding long-term debt obligations for the remaining
three
months of fiscal
2019,
and each of the
five
fiscal years subsequent to
June 30, 2019,
and thereafter (in thousands).
 
Periods ending June 30,
 
2019 (remaining three months)
  $
135
 
2020
   
550
 
2021
   
437
 
2022
   
60
 
2023
   
20
 
2024 and thereafter
   
8,000
 
Total scheduled debt payments
  $
9,202
 
 
Covenants and Other Ratios
 
The Facility contains various restrictive and affirmative covenants, including required financial reporting, limitations on the ability to grant liens, make loans or other investments, incur additional debt, issue additional equity, merge or consolidate with or into another person, sell assets, pay dividends or make other distributions or enter into transactions with affiliates, along with other restrictions and limitations similar to those frequently found in credit agreements of this type and size. Loans under the Facility
may
become immediately due and payable upon certain events of default (including failure to comply with covenants, change of control or cross-defaults) as set forth in the Facility.
 
The Facility does
not
contain any significant financial ratio covenants or coverage ratio covenants other than a fixed charge coverage ratio covenant based on the ratio of (a) EBITDA, plus cash Rentals, minus Unfinanced Capital Expenditures to (b) Fixed Charges, as such terms are defined in the Facility (the “FCCR Covenant”). The FCCR Covenant only applies in certain limited circumstances, including when the unused availability under the Facility drops below
$18.5
million. The FCCR Covenant ratio is set at
1.0
and measured on a trailing
twelve
-month basis.
 
At both
March 31, 2019
and
June 30, 2018,
there was
$6.2
million of standby letters of credit outstanding under the Facility. Total availability under the Facility was
$150.8
million at
March 31, 2019
and
$108.8
at
June 30, 2018.
At both
March 31, 2019
and
June 30, 2018,
we were in compliance with all the covenants under the Facility.