Debt | 6 Months Ended |
Jun. 30, 2013 |
Long-term Debt, Unclassified [Abstract] | |
DEBT | NOTE 5: DEBT |
Debt consisted of the following: |
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Debt | June 30, | | December 31, |
(Amounts in thousands) | 2013 | | 2012 |
Revolving credit facility | $ | 219,500 | | | $ | 235,000 | |
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Term loans | 267,434 | | | 281,250 | |
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Capital lease obligation | 464 | | | 507 | |
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Total debt | 487,398 | | | 516,757 | |
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Less current maturities | (14,725 | ) | | (15,072 | ) |
Long-term debt, net of current maturities | $ | 472,673 | | | $ | 501,685 | |
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Weighted average interest rate at end of period | 2.69 | % | | 2.71 | % |
In October and November 2011, the Company entered into a series of interest rate swap contracts as required by the senior credit facility agreement. The interest rate swaps fix the interest rate the Company will pay at between 3.30% and 4.20% on $130.0 million of the term loan principal. The interest rate swaps went into effect in June 2013 and mature on varying dates between December 2014 and August 2016. The weighted average interest rate at June 30, 2013, including the effect of the interest rate swaps, would be 3.04%. See Note 14 for further discussion of the interest rate swaps. |
Senior Credit Facilities. The Company, through its wholly-owned subsidiary, Blount, Inc., maintains a senior credit facility with General Electric Capital Corporation as Agent for the Lenders and also as a lender, which has been amended and restated on several occasions. As of June 30, 2013 and December 31, 2012, the senior credit facilities consisted of a revolving credit facility and a term loan. |
August 2012 Amendment of Senior Credit Facilities. On August 3, 2012, the senior credit facilities were amended to modify the maximum leverage ratio covenant, as defined below. Certain other minor modifications to the credit agreement were also made. The Company incurred $1.2 million in fees and transaction costs in connection with this amendment, of which $42 thousand was expensed in the Consolidated Statement of Income. |
May 2013 Amendment of Senior Credit Facilities. On May 3, 2013, the senior credit facilities were amended to modify the minimum fixed charge coverage ratio covenant and the maximum leverage ratio covenant, as defined below. The amendment also included a mechanism that allows for adjustment to interest rates if the leverage ratio exceeds certain limits and made certain other modifications to the credit agreement. The Company incurred $1.6 million in fees and transactions costs in connection with this amendment, of which $0.1 million was expensed in the Consolidated Statement of Income. |
Terms of Senior Credit Facilities as of June 30, 2013. The revolving credit facility provides for total available borrowings of up to $400.0 million, reduced by outstanding letters of credit, and further restricted by a specific leverage ratio. As of June 30, 2013, the Company had the ability to borrow an additional $115.8 million under the terms of the revolving credit agreement. The revolving credit facility bears interest at LIBOR plus 2.50% or at an index rate, as defined in the credit agreement, plus 1.50% if the Company's maximum leverage ratio is less than 4.00, LIBOR plus 3.00% or at the index rate plus 2.00% if the Company's maximum leverage ratio is greater than or equal to 4.00 but less than 4.50, and LIBOR plus 3.50% or at the index rate plus 2.50% if the maximum leverage ratio is 4.50 or higher. The revolving credit facility matures on August 31, 2016. Interest is payable on the individual maturity dates for each LIBOR-based borrowing and monthly on index rate-based borrowings. Any outstanding principal is due in its entirety on the maturity date. |
The term loan facility bears interest under the same interest rate terms as the revolving credit facility. The term loan facility also matures on August 31, 2016 and requires quarterly principal payments of $3.7 million, with a final payment of $219.8 million due on the maturity date. Once repaid, principal under the term loan facility may not be re-borrowed. |
The amended and restated senior credit facilities contain financial covenants, including, as of June 30, 2013: |
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• | Minimum fixed charge coverage ratio, defined as earnings before interest, taxes, depreciation, amortization, and certain adjustments defined in the credit agreement (“Adjusted EBITDA”) divided by cash payments for interest, taxes, capital expenditures, scheduled debt principal payments, and certain other items, calculated on a trailing twelve-month basis. The minimum fixed charge coverage ratio is set at 1.05 through September 30, 2013, 1.10 through December 31, 2013, and 1.15 thereafter. | | | | | | |
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• | Maximum leverage ratio, defined as total debt divided by Adjusted EBITDA, calculated on a trailing twelve-month basis. The maximum leverage ratio is set at 4.60 through December 31, 2013, 4.35 through March 31, 2014, 4.25 through June 30, 2014, 4.00 through December 31, 2014, 3.75 through June 30, 2015, 3.50 through September 30, 2015, 3.25 through December 31, 2015, and 3.00 thereafter. | | | | | | |
In addition, there are covenants, restrictions, or limitations relating to acquisitions, investments, loans and advances, indebtedness, dividends on our stock, the sale or repurchase of our stock, the sale of assets, and other categories. In the opinion of management, we were in compliance with all financial covenants as of June 30, 2013. Non-compliance with these covenants is an event of default under the terms of the credit agreement, and could result in severe limitations to our overall liquidity, and the term loan lenders could require immediate repayment of outstanding amounts, potentially requiring sale of a sufficient amount of our assets to repay the outstanding loans. |
The amended and restated senior credit facilities may be prepaid at any time without penalty. There can also be additional mandatory repayment requirements related to the sale of Company assets, the issuance of stock under certain circumstances, or upon the Company’s annual generation of excess cash flow, as determined under the credit agreement. During the three months ended June 30, 2013, an additional principal payment was made on the term loan in the amount of $6.3 million under the generation of excess cash flow requirement. Our senior credit facility agreement does not contain any provisions that would require early payment due to any adverse change in our credit rating. |
The senior credit facility debt is incurred by the Company's wholly-owned subsidiary, Blount, Inc. Blount International, Inc. and all of its domestic subsidiaries other than Blount, Inc. guarantee Blount, Inc.’s obligations under the senior credit facilities. The obligations under the senior credit facilities are collateralized by a first priority security interest in substantially all of the assets of Blount, Inc. and its domestic subsidiaries, as well as a pledge of all of Blount, Inc.’s capital stock held by Blount International, Inc. and all of the stock of domestic subsidiaries held by Blount, Inc. Blount, Inc. has also pledged 65% of the stock of its direct non-domestic subsidiaries as additional collateral. |
Debt and Capital Lease Obligation of PBL. In conjunction with the acquisition of PBL we assumed $13.5 million of PBL’s debt, consisting of current and long-term bank obligations, revolving credit facilities, and $0.6 million in capital lease obligations. As of December 31, 2012, we had repaid all of PBL’s bank debt. |