Note 4 - Line of Credit and Term Loans |
3 Months Ended |
|---|---|
Mar. 31, 2025 | |
| Notes to Financial Statements | |
| Debt Disclosure [Text Block] |
Note 4 - Line of Credit and Term Loans
Revolving Credit Agreement with Bank of America, N.A. On February 28, 2023 the Company and all of its subsidiaries as borrowers entered into a Revolving Credit Agreement (the "Credit Agreement") with Bank of America, N.A. for a $50,000,000 revolving facility (the “Senior Credit Facility”), which includes a $20,000,000 sublimit for the issuance of standby letters of credit. Approximately $5.4 million and $6.8 million was drawn on the Senior Credit Facility as of March 31, 2025 and December 31, 2024, respectively. The Company also has a one-time right, upon at least ten Business Days’ prior written notice to the bank to increase the maximum amount of the Senior Credit Facility to $60 million. As of March 31, 2025 this has not been exercised. The Senior Credit Facility provides for certain financial covenants including maintaining an Asset Coverage Ratio of at least at all times; maintaining a Total Funded Debt to Adjusted EBITDA Ratio not exceeding and maintaining, on a consolidated basis, a Fixed Charge Coverage Ratio of at least As of March 31, 2025 we were in compliance with all financial covenants.
Interest will accrue on the outstanding balance of the line of credit at a variable rate equal to (a) the Term SOFR Daily Floating Rate (as defined in the Credit Agreement) plus a margin between 1.00% and 1.75% per annum. In each case, the applicable margin is determined by the Company's Total Funded Debt to Adjusted EBITDA, as defined in the Credit Agreement. At March 31, 2025 the effective interest rate was approximately 5.7%. The Senior Credit Facility will mature on February 28, 2028.
The Credit Agreement and other loan documents contain customary representations and warranties, affirmative, and negative covenants, including without limitation, those covenants governing indebtedness, liens, fundamental changes, restricting certain payments including dividends unless certain conditions are met, transactions with affiliates, investments, engaging in business other than the current business of the Company and all of its subsidiaries and business reasonably related thereto, and sale/leaseback transactions. The Credit Agreement and other loan documents also contain customary events of default including, without limitation, payment default, material breaches of representations and warranties, breach of covenants, cross-default on material indebtedness, certain bankruptcies, certain ERISA violations, material judgments, change in control, termination or invalidity of any guaranty or security documents, and defaults under other loan documents. The obligations under the Credit Agreement and other loan documents are secured by substantially all of the assets of the Company and all of its subsidiaries as collateral including, without limitation, their accounts and notes receivable, intellectual property and the real estate owned by HQ Real Property Corporation.
At March 31, 2025, approximately $9.2 million of availability under the Senior Credit Facility was utilized by outstanding letters of credit that secure our obligations to our workers’ compensation insurance carrier, and $500 thousand was utilized by a letter of credit that secures our pay-card funding account. For additional information related to the letter of credit securing our workers’ compensation obligations see Note 5 - Workers’ Compensation Insurance and Reserves.
Term Loan In connection with the Northbound acquisition, we entered into an amortizing term loan from the seller for $1.5 million that matured on March 1, 2025 that bore interest at 4.0%. This note has been satisfied in full.
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