Debt (Details) (USD $) | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 |
Long-term Debt, Unclassified [Abstract] | ' | ' | ' |
Repayments of Debt | ' | $6,300,000 | ' |
Line of Credit Facility, Maximum Borrowing Capacity | 155,200,000 | ' | ' |
Components of long-term debt | ' | ' | ' |
Revolving credit facility borrowings | 130,000,000 | ' | 175,000,000 |
Term loans | 249,116,000 | ' | 260,107,000 |
Debt and capital lease obligation of PBL | 2,981,000 | ' | 2,881,000 |
Total debt | 382,097,000 | ' | 437,988,000 |
Less current maturities | -15,076,000 | ' | -15,016,000 |
Long-term debt, net of current maturities | $367,021,000 | ' | $422,972,000 |
Weighted average interest rate at end of period | 2.67% | ' | 2.68% |
Debt, Weighted Average Interest Rate | 3.12% | ' | ' |
Long-term Debt [Text Block] | ' | ' | ' |
NOTE 6: DEBT |
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Debt consisted of the following: |
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Debt | September 30, | | December 31, |
(Amounts in thousands) | 2014 | | 2013 |
Revolving credit facility | $ | 130,000 | | | $ | 175,000 | |
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Term loans | 249,116 | | | 260,107 | |
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Capital lease obligations | 2,981 | | | 2,881 | |
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Total debt | 382,097 | | | 437,988 | |
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Less current maturities | (15,076 | ) | | (15,016 | ) |
Long-term debt, net of current maturities | $ | 367,021 | | | $ | 422,972 | |
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Weighted average interest rate at end of period | 2.67 | % | | 2.68 | % |
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The Company has entered into a series of interest rate swap agreements as required by the senior credit facility agreement. The interest rate swap agreements 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 swap agreements were effective in June 2013 and mature on varying dates between December 2014 and August 2016. The weighted average interest rate at September 30, 2014, including the effect of the interest rate swap agreements, is 3.12%. See Note 15 for further discussion of the interest rate swap agreements. |
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Senior Credit Facilities. The Company, through its wholly-owned subsidiary, Blount, Inc., maintains senior credit facilities 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 September 30, 2014 and December 31, 2013, the senior credit facilities consisted of a revolving credit facility and a term loan. |
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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 transaction costs in connection with this amendment, of which $1.5 million was deferred to be amortized over the remaining term of the credit facilities. |
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March 2014 Amendment of Senior Credit Facilities. On March 28, 2014, the senior credit facilities were amended to extend the due date to provide audited financial statements for the year ended December 31, 2013 by an additional 60 days to May 30, 2014. The Company incurred no fees or transaction costs in connection with this amendment. The Company met the extended due date by providing the audited financial statements for the year ended December 31, 2013 on April 24, 2014. |
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Terms of Senior Credit Facilities as of September 30, 2014. The revolving credit facility provides for total available borrowings of up to $400.0 million, reduced by outstanding letters of credit, and further limited by a specific leverage ratio. As of September 30, 2014, the Company had the ability to borrow an additional $155.2 million under the terms of the revolving credit agreement. The revolving credit facility bears interest at a floating rate, which, at the option of the Company, may be either LIBOR or an Index Rate, as defined in the credit agreement, plus an additional amount as outlined in the table below. |
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Maximum Leverage Ratio | | | |
Less than 4.00 | | Between 4.00 and 4.50 | | 4.50 or above | | | |
LIBOR + 2.50% | | LIBOR + 3.00% | | LIBOR + 3.50% | | | |
Index Rate + 1.50% | | Index Rate + 2.00% | | Index Rate + 2.50% | | | |
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As of September 30, 2014, the Company's leverage ratio was below the 4.00 threshold. 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 of August 31, 2016. The principal amounts outstanding under the revolving credit facility are classified as long-term debt because the Company has the intent and ability to refinance these loans through the maturity date. |
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The term loan facility bears interest under the same terms as the revolving credit facility and also matures on August 31, 2016. The term loan facility 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. |
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The amended and restated senior credit facilities contain financial covenants, including, as of September 30, 2014: |
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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 1.15. | | | | | | |
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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 4.00 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. | | | | | | |
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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, the Company was in compliance with all financial covenants as of September 30, 2014. 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. |
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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 defined in the credit agreement. No additional mandatory payments were required in the nine months ended September 30, 2014 under these credit agreement requirements. However, during the nine months ended September 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. |
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The senior credit facility debt is incurred by the Company's wholly-owned subsidiary, Blount, Inc. The Company 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. |
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Capital Lease Obligations. The Company has entered into various equipment and building leases which are classified as capital leases under U.S. GAAP. All current capital leases have terms ending in 2019. Minimum annual lease payments total $0.6 million. The weighted average implied interest rate on our capital leases is 5.18%, resulting in a total of $0.6 million of imputed interest over the terms of the lease obligations. The equipment lease terms include early buyouts after five and six years, at the Company's option, at the fair value of the equipment at that time. The leased assets and the lease obligations were recorded at their fair values on the Consolidated Balance Sheets at the commencement of each lease term. |