|6 Months Ended|
Jun. 30, 2019
|Debt Disclosure [Abstract]|
NOTE 10. LONG-TERM DEBT
Long-term debt consisted of the following at June 30, 2019 and December 31, 2018:
Nevada State Bank credit agreement. On April 24, 2018 (the “Closing Date”), we entered into a credit agreement with ZB, N.A. dba Nevada State Bank (“NSB” and the “Credit Agreement”), which provides for a $11.0 million five-year term loan (the “Term Loan”) and a $1.0 million one-year revolving credit facility (the “Revolving Loan”). On April 22, 2019, we entered into a First Amendment to the Credit Agreement (the “First Amendment”) to extend the Revolving Loan Maturity Date from April 24, 2019 to April 24, 2021. $1.0 million was available under the Revolving Loan at June 30, 2019 and the filing date of this Quarterly Report on Form 10-Q.
Effective May 1, 2018, we entered into an interest rate swap agreement with an affiliate of NSB (the “Swap Agreement”) to lock the interest rate on the Term Loan at 6.43% (assuming a Leverage Ratio less than 2.0) for three years. The notional amount of the Swap Agreement is initially $10.9 million but will decrease over time as a result of the anticipated principal paydowns.
On May 6, 2019, we entered into a Second Amendment to the Credit Agreement (the “Second Amendment”) to (i) provide an additional $10 million of availability under the Term Loan; and (ii) waive for a period of 180 days the breach of any covenant in the Credit Agreement that might occur as a result of the redemption of common stock held by Triangulum.
Outstanding balances under the Term Loan and the Revolving Loan accrue interest based on one-month US dollar London interbank offered rate (“LIBOR”) plus an Applicable Margin of 3.50%, or 4.00%, depending on our Leverage Ratio (as defined in the Credit Agreement).
We are required to make monthly principal and interest payments on the Term Loan, both of which are calculated over a seven-year term, with a balloon payment due on April 24, 2023. Borrowings under the Credit Agreement are secured by a lien on substantially all our assets.
The Credit Agreement contains affirmative and negative financial covenants and other restrictions customary for borrowings of this nature. In particular, we are required to maintain (i) a minimum trailing-four-quarters Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of 1.25; (ii) a maximum Leverage Ratio of 3.00 and (iii) a maximum Senior Leverage Ratio of 3.00. The Credit Agreement allows us to make share repurchases and to incur up to an additional $1.0 million of unsecured indebtedness provided that we are in compliance with the covenants in the Credit Agreement on a pro forma basis. We were in compliance with the Fixed Charge Coverage Ratio as of June 30, 2019. However, our Leverage Ratio and Senior Leverage Ratio exceeded the 3.00 maximum as of June 30, 2019 as a result of the addition of the Triangulum Promissory Note. Such non-compliance was waived by NSB in accordance with the Second Amendment.
Triangulum Promissory Note. On May 6, 2019, we issued the Triangulum Promissory Note in the face amount of $39,096,401. The Triangulum Promissory Note has no mandatory amortization, matures on May 5, 2029, and bears interest at a rate of 2% per annum, with accrued interest payable annually in arrears. It is unsecured and is subordinated to our existing and future indebtedness in accordance with its terms. We may prepay principal and any accrued interest in full or in part at any time (Note 1).
As of June 30, 2019, future maturities of our long-term debt obligations are as follows:
No definition available.
The entire disclosure for long-term debt.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef