Long-term Debt and Notes Payable |
9 Months Ended |
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Sep. 28, 2024 | |
| Debt Disclosure [Abstract] | |
| Long-term Debt and Notes Payable | Long-term Debt and Notes Payable The Company amended the existing revolving credit facility on July 11, 2024 by entering into the Seventh Amended and Restated Credit Agreement (the “ABL Revolving Credit Facility”). The ABL Revolving Credit Facility set the maximum aggregate amount that the Company can borrow pursuant to the revolving credit line at $200 million, with borrowings subject to a borrowing base determined primarily by inventory, accounts receivable, machinery and equipment and real estate. The maturity date of borrowings under the ABL Revolving Credit Facility is July 11, 2027. Under the terms of the ABL Revolving Credit Facility, the Company pays interest on the unpaid principal amount of the credit facility at a rate equal to SOFR plus a term SOFR adjustment in the amount of 0.10% per annum (which collectively shall be at least 1.00%) plus an applicable margin ranging from 2.50% to 3.00% determined based upon the Company’s excess availability (as defined in the ABL Revolving Credit Facility). The Company is required to pay a quarterly commitment fee under the ABL Revolving Credit Facility on undrawn revolving credit commitments in an amount equal to 0.25% or 0.375% based on the Company’s average excess availability under the credit facility. On September 28, 2024, there was $126.0 million outstanding on the ABL Revolving Credit Facility and there remained $70.9 million available, net of outstanding letters of credit.
The Company also entered into a $55 million Term Loan Facility on July 11, 2024. The Term Loan Facility is secured primarily by the Company’s intellectual property and equity interests of the Company’s subsidiaries. The maturity date of the Term Loan Facility is July 11, 2027. The Company pays interest under the Term Loan Facility at a rate equal to SOFR plus a term SOFR adjustment in the amount of 0.10% per annum (which collectively shall be at least 1.00%) plus an applicable margin ranging from 5.50% to 6.75% determined based upon the Company’s consolidated leverage ratio (as defined in the Term Loan Facility). The Company paid a commitment fee to the lenders under the Term Loan Facility in the amount of 2.0% of the total aggregate commitment. The Company is required to repay the principal amount of the term loans under the Term Loan Facility in quarterly installments on the last day of each fiscal quarter in an amount equal to $0.1 million. The principal amount of the Term Loan Facility amortizes at a rate of 1.00% (or approximately $0.6 million) per year. The Term Loan Facility is subject to a call premium of 3.00% if called prior to January 12, 2026, and 0.00% thereafter until the maturity date on July 11, 2027. The Company has the option to prepay the outstanding amounts under the Term Loan Facility up to $12.0 million without penalty.
Total payments of $0.6 million are payable over the next twelve months, including the annual amortization of the Term Loan Facility, and as such, have been classified as current in the accompanying Consolidated Condensed Balance Sheet as of September 28, 2024. The interest rate on current maturities of long-debt was 8.2% at September 28, 2024 and 14.2% at December 31, 2023. The remaining balance of $54.5 million under the Term Loan Facility as of September 28, 2024, is recorded as long-term in the accompanying Consolidated Condensed Balance Sheet.
The Company repaid in full all outstanding indebtedness under the original term loan facility dated as of January 19, 2023. The payoff amount of approximately $84.5 million consisted of a repayment of the principal amount of approximately $80.3 million, plus accrued but unpaid interest, fees and expenses, including a call premium of 4.00% (or approximately $3.2 million) which satisfied all of the Company’s indebtedness obligations thereunder. The Company funded the repayment of its obligations under the previous agreement with borrowings under the ABL Revolving Credit Facility and the Term Loan Facility.
The Company incurred $5.9 million in incremental debt issuance costs during the nine months ended September 28, 2024, allocated between the original and revised ABL Revolving Credit Facilities and the original and revised Term Loan Facilities. All costs are amortized to interest expense over the term of the respective agreement. Unamortized deferred debt issuance costs associated with the ABL Revolving Credit Facility ($2.8 million as of September 28, 2024) are recorded within Other Assets and those associated with the Term Loan Facility ($2.0 million as of September 28, 2024) are recorded as a reduction of the carrying value of the debt on the Consolidated Condensed Balance Sheet.
In the three and nine months ended September 28, 2024, the Company recorded a loss on extinguishment of the debt of approximately $7.0 million below Income from Operations, which was comprised of the $3.2 million prepayment fee on the previous term loan and a write-off of $3.8 million of unamortized deferred financing costs. The Company also had a write-off of deferred financing costs of approximately $0.5 million related to the exiting ABL lender in Interest Expense within the Consolidated Condensed Statements of Operations.
Certain of the Company’s subsidiaries are borrowers under the ABL Revolving Credit Facility and the Term Loan Facility and the assets of such subsidiaries also secure the obligations under the Restated Agreement and the Term Loan Facility.
Pursuant to the ABL Revolving Credit Facility and the Term Loan Facility, the Company is subject to a minimum fixed charge coverage ratio of 1.10 to 1.00. The Company is also required to maintain minimum excess availability of the greater of 10% of the borrowing base under the ABL Revolving Credit Facility, or $15.0 million. Under the provisions of the ABL Revolving
Credit Facility, the Company has a cash dominion arrangement with the lead banking institution whereby eligible daily cash receipts are contractually utilized to pay down outstanding borrowings and any cash balances subject to the dominion arrangement collateralize the outstanding borrowings under the ABL Revolving Credit Facility. Eligible cash balances that have not yet been applied to outstanding debt balances are classified as restricted cash in the accompanying Consolidated Condensed Balance Sheets.
In the event of voluntary or involuntary bankruptcy of the Company or any subsidiary, all unpaid principal and other amounts owing under the credit facilities automatically become due and payable. Other events of default, such as failure to make payments as they become due and breach of financial and other covenants, change of control, cross default under other material debt agreements, and a going concern qualification for any reason other than loan maturity date give the agent the option to declare all such amounts immediately due and payable.
The Company expects its sales growth and reductions in working capital will provide sufficient cash flows to fund operations. However, the Company may also evaluate various actions and alternatives to enhance its profitability and cash generation from operating activities, which could include manufacturing efficiency initiatives, cost-reduction measures, working with vendors and suppliers to reduce lead times and expedite shipment of critical components, and working with customers to expedite receivable collections. Our ability to maintain sufficient liquidity and comply with financial debt covenants is highly dependent upon achieving expected operating results. Failure to achieve expected operating results could have a material adverse effect on our liquidity, our ability to obtain financing or access our existing financing, and our operations in the future and could allow our debt holders to demand payment of all outstanding amounts.
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