Quarterly report pursuant to Section 13 or 15(d)

Debt

v3.22.2
Debt
6 Months Ended
Jun. 30, 2022
Debt Disclosure [Abstract]  
Long-Term Debt

Note 11. Debt

The components of long-term debt were as follows:

 

 

June 30,

 

 

December 31,

 

(in thousands)

 

2022

 

 

2021

 

3.25% Convertible Senior Notes

 

$

240,000

 

 

$

240,000

 

New Market Tax Credit Transactions

 

 

21,000

 

 

 

21,000

 

Subordinated Term Loan

 

 

10,205

 

 

 

10,205

 

Commercial Premium Finance Note

 

 

2,092

 

 

 

-

 

Vehicle and Equipment Notes

 

 

419

 

 

 

407

 

Mortgage Notes

 

 

232

 

 

 

242

 

Asset-based Lending Arrangement

 

 

-

 

 

 

-

 

Total

 

$

273,948

 

 

$

271,854

 

Less: Total unamortized debt issuance costs

 

 

(9,674

)

 

 

(10,563

)

Less: Current maturities of long-term debt

 

 

(2,242

)

 

 

(357

)

Total long-term debt

 

$

262,032

 

 

$

260,934

 

3.25% Convertible Senior Notes

On December 21, 2021, we issued $240 million principal amount of our 3.250% Convertible Senior Notes due 2026 (“Notes”), subject to an indenture.

The Notes are our senior, unsecured obligations and accrue interest at a rate of 3.250% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2022. The terms of the Notes are complex and can be found in greater detail in our Annual Report for the year ended December 31, 2021. We will settle the Notes by paying or delivering, as applicable, cash, shares of common stock or a combination of cash and shares, at our election. The initial conversion rate, which is subject to change, is approximately $10.79 per share of common stock. If certain liquidity conditions are met, we may redeem the Notes between December 19, 2024, and October 20, 2026. The Notes will mature on December 15, 2026.

Capped Calls

Also in December 2021, in connection with the Notes, we purchased capped calls (“Capped Calls”) with certain well-capitalized financial institutions for $35 million. The Capped Calls are call options that permit us, at our option, to require the counterparties to deliver to us shares of our common stock. We may also net-settle the Capped Calls and receive cash instead of shares. The Capped Calls are indexed to our own common stock and qualify for equity classification and have no effect on operating results. We have not exercised any of the Capped Calls at June 30, 2022, and the Capped Calls expire on April 12, 2027.

Asset-based Lending Arrangement

On April 29, 2021, we entered into a credit facility (“Credit Agreement”), which we amended December 15, 2021, with Truist Bank that includes a $20.0 million variable interest rate asset-based lending arrangement. The amount of the revolving commitment available for borrowing at any given time is subject to a borrowing base formula that is based upon our qualifying accounts receivable and inventory. Any borrowings are secured by these assets. These arrangements mature on April 29, 2026.

Interest on any borrowings is payable monthly and is calculated, at our election, using either a base rate (as defined in the Credit Agreement) plus an applicable margin of 1.50% for revolving loans and 1.75% for equipment loans, or a LIBOR market index rate (“LMIR”) (as defined in the Credit Agreement) plus an applicable margin of 2.50% for revolving loans and 2.75% for equipment loans. If we maintain a trailing twelve month consolidated fixed charge coverage ratio (as defined in the Credit Agreement) of 1.1:1.0 or better and no event of default exists, then the applicable margins for base rate revolving loans and LMIR rate loans are 1.00% and 2.00%, respectively.

The Credit Agreement contains customary affirmative and negative covenants, and after October 29, 2023, we are required to maintain a trailing twelve month consolidated fixed charge coverage ratio of at least 1.1:1.0.

At June 30, 2022, we had no borrowings outstanding under the Credit Agreement and estimated that we had no availability under this arrangement.

As also disclosed in Note 16, on August 5, 2022, we entered into an agreement with Truist Bank to pay off our existing Credit Agreement and terminate Truist’s lending obligations thereunder. Given the restrictive covenants contained in the Credit Agreement, this facility did not provide sufficient liquidity to justify the ongoing costs of maintaining it. We expect to incur a loss on early extinguishment of debt in the quarter ending September 30, 2022 in connection with the write off of $1.4 million of unamortized debt issuance costs.

Subordinated Term Loan

In March 2019, we, through a subsidiary, entered into a subordinated second credit agreement (“Subordinated Term Loan”) for $10 million in term loans. The term loans mature on February 13, 2024 and require monthly interest only payments, with the outstanding principal balance due at maturity. The Subordinated Term Loan provides for “springing” financial covenants including a maximum capital expenditures limit, leverage ratio, fixed charge coverage ratio and adjusted EBITDA covenants, certain of which became more restrictive over time, and which do not apply as long as the borrowing subsidiary maintains an unrestricted cash deposit of at least $10 million.

The Subordinated Term Loan remains secured by all real and personal property of the borrowing subsidiary and its subsidiaries but is subordinated to all other existing lenders. At June 30, 2022, we were in compliance with all financial covenants.

New Markets Tax Credit Transactions

We entered into financing arrangements under the New Markets Tax Credit (“NMTC”) program during 2019 with various unrelated third-party financial institutions (individually and collectively referred to as “Investors”), which then invest in certain "Investment Funds.

In each of the financing arrangements, we loaned money to the Investment Funds. These loans of $13.4 million are recorded as leveraged loan receivables as of June 30, 2022 and December 31, 2021. Each Investment Fund then contributed the funds from our loan and the Investor’s investment to a special purpose entity, which then in turn loaned the contributed funds to a wholly owned subsidiary of the Company.

We expect these borrowings, and our related loans to the Investment Funds, will be forgiven in 2026.

Commercial Premium Finance Note

In June 2022, we entered into a financing agreement related to premiums of certain insurance policies. This note bears interest at 3.99% with a maturity date of June 2023.

Vehicle and Equipment Notes

We have seventeen vehicle and equipment notes outstanding at June 30, 2022 primarily relating to motor vehicles and warehouse equipment. We make monthly payments on these notes at interest rates ranging from 5.11% to 8.49%.

Mortgage Notes

We have two mortgage notes secured by residential property. These notes bear interest at 6.5% and 5.25% with maturity dates in October 2023 and March 2025.