Quarterly report pursuant to Section 13 or 15(d)

Note 5 - Debt

v3.7.0.1
Note 5 - Debt
3 Months Ended
Apr. 02, 2017
Notes to Financial Statements  
Debt Disclosure [Text Block]
5
.
Debt
 
(a) Revolving credit and long-term debt facilities
 
The Company borrows money under a Revolving Credit and Security Agreement with PNC Bank, National Association (“PNC”) which governs the PNC Facilities. The PNC Facilities have a term ending on
January
2,
2021.
Advances made under the PNC Revolving Credit Facility bear interest at the U.S. base rate plus
0.75%.
The applicable interest rate for the Long-Term Debt Facility is U.S. base rate plus
1.25%.
The base commercial lending rate should approximate prime rate.  
 
The maximum amount of funds available under the PNC Revolving Credit Facility is
$30,000.
Availability under the PNC Revolving Credit Facility is subject to certain conditions, including borrowing base conditions based on eligible inventory and accounts receivable, and certain conditions as determined by the lender. The Company is required to use a “lock-box” arrangement for the PNC Revolving Credit Facility, whereby remittances from customers are swept daily to reduce the borrowings under this facility. As at
April
2,
2017
the funds available to borrow under the PNC Revolving Credit Facility after deducting the current borrowing base conditions was
$5,401
(January
1,
2017
-
$7,377).
 
On
May
15,
2017,
the Company entered into the Twelfth Amendment (“Twelfth Amendment”) of the Revolving Credit and Security Agreement, which was initially entered into on
September
14,
2011
with PNC Bank, National Association, as agent for the Lender.
 
Pursuant to the Twelfth Amendment, the Lender has modified the definition of EBITDA (as defined in the Twelfth Amendment) to include additional exclusions and limits.
 
In addition, the Lender has increased the interest rates as disclosed above; however if the Company maintains a specified fixed charge coverage ratio for a predetermined period of time and maintains its compliance with the terms of the PNC Facilities, interest rates will be reduced to the U.S. base rate plus
0.25%
on advances made under the PNC Revolving Credit Facility and U.S. base rate plus
0.75%
on advances made under the Long-Term Debt Facility.
 
   The PNC Long-Term Debt Facility of
$10,000
matures on
January
2,
2021
with quarterly principal payments of
$500
with the remaining balance due at maturity.
 
At
April
2,
2017,
$5,475
(January
1,
2017
-
$2,731)
was outstanding under the PNC Revolving Credit Facility and is classified as a current liability based on the requirement to hold a “lock-box” under the terms of the PNC Revolving Credit Facility.
 
At
April
2,
2017,
$9,500
(January
1,
2017
$10,000)
was outstanding under the PNC Long-Term Debt Facility.
 
The PNC Facilities are a joint and several obligations of the Company and its subsidiaries that are borrowers under the facilities and are jointly and severally guaranteed by other subsidiaries of the Company. Repayment under the PNC Facilities is collateralized by the assets of the Company and each of its subsidiaries.
 
(b) Covenants
 
The PNC Facilities agreement contains certain financial and non-financial covenants.
 
The financial covenants require the Company to maintain minimum consolidated fixed charge coverage ratio and limit unfunded capital expenditures (all as defined in the credit agreement governing the PNC Facilities).  The Company must maintain a minimum EBITDA (as defined under the Twelfth Amendment) for the
twelve
months ended
July
2,
2017
and the
three
months ended
October
1,
2017.
Subsequent thereafter, the financial covenant relating to a minimum consolidated fixed charge coverage ratio is in effect for the
three
months ended
December
31,
2017,
six
months ended
April
1,
2018,
nine
months ended
July
1,
2018,
twelve
months ended
September
30,
2018
and thereafter on a rolling
twelve
month basis until
January
2,
2021.
 
The Company is in compliance with the financial covenants included in the PNC Facilities as of
April
2,
2017.