Quarterly report pursuant to Section 13 or 15(d)

Note 7 - Debt

v3.20.2
Note 7 - Debt
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Debt Disclosure [Text Block]
7
.
Debt
 
On
February 5, 2019,
the Company and its primary lender entered into the
fifth
amendment (the “Fifth Amendment”) to its Credit Agreement, entered into on
March 23, 2015 (
as amended, the “Credit Agreement”). The Fifth Amendment amended the Credit Agreement to, among other things:
 
 
increase our borrowing capacity under the equipment line to
$8.0
million, which allows for capital expenditure financing to the Company for the sole purpose of purchasing medical equipment (the “Equipment Line”);
 
revise the definition of earnings before interest, taxes, depreciation and amortization (“EBITDA”), a non-GAAP financial measure, to include additional add-back adjustments for the years ended
December 31, 2018
and
2019;
 
revise the definition of fixed charge coverage ratio for the year ended
December 31, 2019
to include an unfinanced portion of capital expenditures of up to
$7.0
million for the year ended
December 31, 2019;
 
revise the Credit Agreement's maximum permitted indebtedness to finance the acquisition, construction or improvement of any fixed or capital assets; and
 
revise the maximum leverage ratio for each of the quarters during
December 31, 2018
and
December 31, 2019.
 
On
April 15, 2019,
the Company sold for
$2.0
million and immediately leased back certain medical equipment in rental service to a
third
party specializing in such transactions. The leaseback term is
36
months. Because the arrangement contains a purchase option that the Company is reasonably certain to exercise, this transaction did
not
qualify for the sale-leaseback accounting under ASC
842.
The medical equipment remains recorded on the accompanying condensed consolidated balance sheet and the proceeds received have been classified as an Other Financing liability, which is being paid off monthly over the term of the lease. The balance of Other Financing as of
June 30, 2020
was
$1.3
million.
 
On
November 7, 2019,
the Company and its primary lender entered into the
sixth
amendment (the “Sixth Amendment”) to its Credit Agreement. The Sixth Amendment amended the Credit Agreement to, among other things:
 
 
provide for a
2019
capital expenditure loan (the
“2019
Equipment Line”) commitment of
$10.0
million (in addition to the existing Equipment Line of
$8.0
million), which
may
be drawn upon until the earlier of the full commitment being advanced or
December 31, 2020,
to be used solely to purchase eligible equipment to be used in the Company's business and in amounts
not
to exceed
90.0%
of the invoiced hard costs of such acquired equipment;
 
increase the commitment for the revolving credit facility (the “Revolver”) under the Credit Agreement to
$11.8
million;
 
revise the definition of EBITDA to include the following additional or revised add-back adjustments: (i)
one
-time charges in an aggregate amount
not
to exceed
$0.3
million and incurred prior to
December 31, 2019
relating to the Company's integration of business previously served by another major provider of electronic oncology pumps; (ii)
one
-time charges in an aggregate amount
not
to exceed
$0.3
million and incurred prior to
December 31, 2019
relating to the Company's facility move; (iii) lease buyout expenses
not
to exceed: (
x
)
$0.1
million incurred on or prior to
December 31, 2018; (
y)
$0.2
million incurred after
December 31, 2018
but on or prior to
March 31, 2019;
and (z)
$0.2
million incurred after
September 30, 2019
but on or prior to
December 31, 2020;
and (iv) any other non-cash charges for such period (but excluding certain non-cash charges);
 
revise the definition of Fixed Charge Coverage Ratio to mean, for any period, the ratio of (a) EBITDA minus Maintenance Capital Expenditures (defined to mean, for any period,
50.0%
of depreciation expense) to (b) Fixed Charges, all calculated for the Company and its subsidiaries on a consolidated basis in accordance with GAAP;
 
revise the definitions of Revolving Credit Maturity Date and Term Maturity Date to mean the date
five
years after the Sixth Amendment Effective Date and add a definition for the
2019
Equipment Line Maturity Date to provide for the same maturity date;
 
reflect the refinancing of the Term A Loans, Term B Loans and Term C Loan as a single Term Loan on the Sixth Amendment Effective Date and, commencing on the last Business Day of
December 2019,
the consecutive quarterly principal installment payments changed to approximately
$1.2
million; and
 
revise Section
5.01
(e) of the Credit Agreement, which governs the Company's obligation to deliver financial statements to the lender, to require the Company to provide financial statements (
x
) as soon as possible but in any event within
30
days of the end of each fiscal quarter, or within
30
days of the end of each calendar month if any revolving loans were outstanding in the month, (y) in connection with, and prior to, requesting any letter of credit and (z) at such other times as
may
be requested by the lender.
 
These debt amendments were accounted for as debt modifications. As of
June 30, 2020,
the Company was in compliance with all debt-related covenants under the Credit Agreement.
 
As of
June 30, 2020,
the Company's term loan, Equipment Line and
2019
Equipment Line under the Credit Agreement had balances of
$24.2
million,
$6.8
million and
$4.3
million, respectively. The availability under the Revolver is subject to a borrowing base, which is calculated as the sum of the Company's eligible accounts receivable and eligible inventory as defined by the Credit Agreement. As of
June 30, 2020,
the borrowing base was approximately
$17.9
million, which exceeded the gross available borrowing amount of
$11.8
million. The following table illustrates the net availability under the Revolver as of the balance sheet date (in thousands):
 
   
June 30,
   
December 31,
 
   
2020
   
2019
 
Revolver:
               
Gross availability
  $
11,750
    $
11,750
 
Outstanding draws
   
(4,361
)    
-
 
Letters of credit
   
(1,750
)    
(1,750
)
Landlord reserves
   
(161
)    
(150
)
Availability on Revolver
  $
5,478
    $
9,850
 
 
The Company had future maturities of loans and other financing as of
June 30, 2020
as follows (in thousands):
 
   
2020
   
2021
   
2022
   
2023
   
2024 and
thereafter
   
Total
 
Term Loan
  $
2,308
    $
4,615
    $
4,615
    $
4,615
    $
8,074
    $
24,227
 
Equipment Line
   
800
     
1,600
     
1,600
     
1,600
     
1,200
     
6,800
 
2019 Equipment Line
   
214
     
855
     
855
     
855
     
1,495
     
4,274
 
Unamortized value of the debt issuance costs
   
(9
)    
(17
)    
(17
)    
(17
)    
(15
)    
(75
)
Other financing
   
334
     
725
     
222
     
-
     
-
     
1,281
 
Revolver
   
-
     
-
     
-
     
-
     
4,361
     
4,361
 
Total
  $
3,647
    $
7,778
    $
7,275
    $
7,053
    $
15,115
    $
40,868
 
 
The following is a breakdown of the Company's current and long-term debt (in thousands):
 
June 30, 2020
 
December 31, 2019
 
                                                   
   
Current Portion
   
Long-Term Portion
   
Total
     
Current Portion
   
Long-Term Portion
   
Total
 
Term Loan
  $
4,615
    $
19,612
    $
24,227
 
Term Loan
  $
5,768
    $
21,919
    $
27,687
 
Equipment Line
   
1,600
     
5,200
     
6,800
 
Equipment Line
   
1,600
     
6,000
     
7,600
 
2019 Equipment Line
   
641
     
3,633
     
4,274
 
2019 Equipment Line
   
79
     
1,495
     
1,574
 
Unamortized value of debt issuance costs
   
(17
)    
(58
)    
(75
)
Unamortized value of debt issuance costs
   
(17
)    
(66
)    
(83
)
Other financing
   
687
     
594
     
1,281
 
Other financing
   
652
     
947
     
1,599
 
Revolver
   
-
     
4,361
     
4,361
 
Revolver
   
-
     
-
     
-
 
Total
  $
7,526
    $
33,342
    $
40,868
 
Total
  $
8,082
    $
30,295
    $
38,377
 
 
As of
June 30, 2020,
interest on the credit facility is payable at our option as a (i) Eurodollar Loan, which bears interest at a per annum rate equal to the applicable
30
-day London Interbank Offered Rate (“LIBOR”) plus an applicable margin ranging from
2.00%
to
3.00%
or (ii) CB Floating Rate (“CBFR”) Loan, which bears interest at a per annum rate equal to the greater of (a) the lender's prime rate or (b) LIBOR plus
2.50%,
in each case, plus a margin ranging from -
1.00%
to
0.25%
based on our leverage ratio as defined in the Credit Agreement. The actual Eurodollar Loan rate at
June 30, 2020
was
2.75%
(LIBOR of
0.25%
plus
2.50%
). The actual CBFR Loan rate at
June 30, 2020
was
2.75%
(lender's prime rate of
3.25%
minus
0.50%
).