Note 10 - Debt |
6 Months Ended |
|---|---|
Jul. 31, 2025 | |
| Notes to Financial Statements | |
| Debt Disclosure [Text Block] |
Note 10 - Debt
Debt totaled $31.3 million and $24.5 million at July 31, 2025 and January 31, 2025, respectively.
Revolving lines - North America. On September 20, 2018, and as amended, extended, or renewed subsequently thereafter, the Company and certain of its U.S. and Canadian subsidiaries (collectively the “North American Loan Parties”) entered into a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association ("PNC"), as administrative agent and lender, providing for a -year $18 million senior secured revolving credit facility, subject to a borrowing base including various reserves (the “Senior Credit Facility”). The Credit Agreement with PNC was subsequently extended on September 17, 2021, providing for a new -year $18 million senior secured revolving credit facility, subject to a borrowing base including various reserves (the "Renewed Senior Credit Facility"). The Renewed Senior Credit Facility matures on September 20, 2026.
As of July 31, 2025, the Company had borrowed an aggregate of $9.7 million at a rate of 9.0% and had $3.0 million available under the Renewed Senior Credit Facility. As of January 31, 2025, the Company had borrowed an aggregate of $6.8 million and had $3.7 million available under the Renewed Senior Credit Facility.
The Company was in compliance with respect to the covenants under the Credit Agreement as of July 31, 2025.
Finance obligation - buildings and land.
On April 14, 2021, the Company entered into a purchase and sale agreement, pursuant to which the Company sold its land and buildings in Lebanon, Tennessee (the "Property") for $10.4 million. The transaction generated net cash proceeds of $9.1 million. Concurrently with the sale, the Company paid off the approximately $0.9 million mortgage note on the Property to its lender. The Company used the remaining proceeds to repay its borrowings under the Senior Credit Facility, for strategic investments, and for general corporate needs. Concurrent with the sale of the Property, the Company entered into a -year lease agreement (the “Lease Agreement”), whereby the Company leases back the Property at an annual rental rate of approximately $0.8 million, subject to annual rent increases of 2.0%. Under the Lease Agreement, the Company has consecutive options to extend the term of the lease by years for each such option.
In accordance with ASC 842, Leases, this transaction was recorded as a failed sale and leaseback as the present value of lease payments exceeded substantially all of the fair value of the underlying assets. The Company utilized an incremental borrowing rate of 8.0% to determine the finance obligation to record for the amounts received and will continue to depreciate the assets. The current portion of the finance obligation of $0.2 million is recognized in current maturities of long-term debt and the long-term portion of $8.7 million is recognized in long-term finance obligation on the Company's consolidated balance sheets as of July 31, 2025
. The net carrying amount of the financial liability and remaining assets will be zero at the end of the lease term.
Revolving lines - foreign. The Company also has credit arrangements used by its Middle Eastern subsidiaries in the U.A.E., Egypt and Saudi Arabia as discussed further below.
United Arab Emirates
The Company has a revolving line for
8.0
million U.A.E. Dirhams (approximately $
2.2
million at
July 31, 2025
) from a bank in the U.A.E. As of
July 31, 2025
, the facility has an interest rate of approximately
7.6%
and expires in November 2025, of which, the Company has started the process to renew and extend this credit arrangement. The Company had no borrowings outstanding under the credit facility
as of July 31, 2025
, and $0.4 million
as of January 31, 2025
, respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets. As of
July 31, 2025 and January 31, 2025
, the Company had unused borrowing availability of approximately $2.2 million and $1.6 million, respectively.
The Company has a revolving line for
17.5
million U.A.E. Dirhams (approximately $
4.8
million at
July 31, 2025
) from a bank in the U.A.E. As of
July 31, 2025
, the facility has an interest rate of approximately
7.6%
and expires in November 2025, of which, the Company has started the process to renew and extend this credit arrangement. The
Company had borrowed an aggregate of $2.4 million
as of July 31, 2025
and $0.1 million
as of January 31, 2025
, respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets. The Company had unused borrowing availability of approximately $0.3 million and $2.5 million as of
July 31, 2025 and January 31, 2025
, respectively.
The Company has a revolving line for
47.7 million U.A.E. Dirhams (approximately
$13.0 million at
July 31, 2025) from a bank in the U.A.E. As of
July 31, 2025, the facility has a minimum
8% interest rate and expires in
December 2025. The Company had unused borrowing availability
$5.3 million and
$6.5 million as of
July 31, 2025 and
January 31, 2025, respectively.
The Company has a guarantee for
48.6 million U.A.E. Dirhams (approximately
$13.2 million at
July 31, 2025) from a bank in the U.A.E. There is
no interest rate on this facility, however, it earns a
1% commission. As of
July 31, 2025, approximately
$11.0 million has been utilized in the form of a bank guarantee, with
$2.2 million of availability remaining. Additionally, in
August 2025, a line of credit was added to the agreement for
51.4 million U.A.E Dirhams (approximately
$14.0 million at
July 31, 2025) which will incur an additional
commission.
Egypt
In June 2021, and as renewed or amended subsequently thereafter, the Company's Egyptian subsidiary entered into a credit arrangement with a bank in Egypt for a revolving line of
100.0
million Egyptian Pounds (approximately $
2.0
million at
July 31, 2025
). This credit arrangement is in the form of project financing, for which the line is secured by certain assets (such as accounts receivable) of the Company's Egyptian subsidiary. Among other covenants, the credit arrangement established a maximum leverage ratio allowable and restricted the Company's Egyptian subsidiary's ability to undertake any additional debt. As of
July 31, 2025
, the facility has an interest rate of approximately
20.8%
and expires in November 2025. As of July 31, 2025 and January 31, 2025, the Company had an immaterial amount outstanding, which is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets. Further, as of
July 31, 2025
and
January 31, 2025
, the Company had approximately $2.0 million of unused borrowing capacity with respect to this credit arrangement.
In December 2021, the Company entered into a credit arrangement for project financing with a bank in Egypt for 28.2 million Egyptian Pounds. As this project has progressed and the Company has received collections, the facility has decreased to a current amount of
2.1
million Egyptian Pounds (approximately $0.1 million at
July 31, 2025
). This credit arrangement is in the form of project financing at rates competitive in Egypt. The line is secured by the contract for a project being financed by the Company's Egyptian subsidiary. The facility has an interest rate of approximately
15.0%
and, as of November 2022, is no longer available for borrowings by the Company. The facility will expire in connection with final customer balance collections and the completion of the project. The Company had no outstanding balance
as of
July 31, 2025 and January 31, 2025
.
Saudi Arabia
In March 2022, the Company's Saudi Arabian subsidiary entered into a credit arrangement with a bank in Saudi Arabia for a revolving line of 37.0 million Saudi Riyals (approximately $9.9 million at July 31, 2025). This credit arrangement is in the form of project financing at rates competitive in Saudi Arabia. The line is secured by certain assets (such as accounts receivable) of the Company's Saudi Arabian subsidiary, and expires in April 2026. As of July 31, 2025, the facility has an interest rate of approximately 9.0%. The Company had borrowed an aggregate of $3.3 million and $1.5 million as of July 31, 2025 and January 31, 2025, respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets. The unused borrowing availability attributable to this credit arrangement at July 31, 2025 and January 31, 2025, was $2.9 million and $3.0 million, respectively.
These credit arrangements are in the form of overdraft facilities and project financing at rates competitive in the countries in which the Company operates. The lines are secured by certain equipment, certain assets (such as accounts receivable and inventory), and in some cases, a guarantee by the Company. Some credit arrangement covenants require a minimum tangible net worth to be maintained, including maintaining certain levels of intercompany subordinated debt. In addition, some of the revolving credit facilities restrict payment of dividends or undertaking of additional debt. The Company guarantees only a portion of the subsidiaries' debt, including foreign debt. As of July 31, 2025 and January 31, 2025, the amount of foreign subsidiary debt guaranteed by the Company was approximately $8.6 million and $4.8 million, respectively.
The Company was in compliance with respect to the covenants under the credit arrangements in the U.A.E., Egypt, and Saudi Arabia as of July 31, 2025. Although certain arrangements are set to expire and the borrowings could be required to be repaid immediately by the bank, the Company is in regular communication with the bank throughout the renewal process and the arrangements have continued without interruption or penalty. On July 31, 2025, interest rates were based on (i) the Emirates Inter Bank Offered Rate plus 3.0% to 3.5% per annum for the U.A.E. credit arrangements, two of which have a minimum interest rate of 4.5% per annum; (ii) either the Central Bank of Egypt corporate loan rate plus 1.5% to 3.5% per annum or the stated interest rate in the agreements for the Egypt credit arrangements; and (iii) the Saudi Inter-Bank Offered Rate plus 3.5% for the Saudi Arabia credit arrangement. Based on these base rates, as of July 31, 2025, the Company's interest rates ranged from 7.6% to 20.8%, with a weighted average rate of 8.4%, and the Company had facility limits totaling $45.0 million under these credit arrangements. As of July 31, 2025, $24.4 million of availability was used to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees. Additionally, as of July 31, 2025, the Company had borrowed $5.8 million and had an additional $14.9 million of borrowing availability remaining under the foreign revolving credit arrangements. The foreign revolving lines balances were included as a component of current maturities of long-term debt in the Company's consolidated balance sheets as of July 31, 2025 and January 31, 2025.
In June 2023, the Company assumed a promissory note of approximately $2.8 million in connection with the formation of the joint venture with Gulf Insulation Group (see Note 15). In accordance with the promissory note, all principal is due and payable on the maturity date of April 9, 2026, with the option to prepay, in whole or in part, at any time prior to the maturity date, without premium or penalty. This amount is presented as a component of current liabilities in the Company's consolidated balance sheets.
Mortgages. On July 28, 2016, the Company entered into a mortgage agreement secured by the Company's manufacturing facility located in Alberta, Canada that matures on December 2042. As of July 31, 2025, the remaining balance on the mortgage in Canada is approximately CAD 5.6 million (approximately $4 million at July 31, 2025). The interest rate is variable, and was 6.8% at July 31, 2025. The principal balance is included as a component of long-term debt, less current maturities in the Company's consolidated balance sheets and is presented net of issuance costs of $0.1 million as of July 31, 2025 and January 31, 2025.
|