| Debt | 6. Debt
On March 23, 2015, the Company and its direct and indirect
subsidiaries (the “Borrowers”) entered into a credit
agreement (the “Credit Agreement”) with JPMorgan Chase
Bank, N.A., as lender (the “Lender”). The Credit
Agreement consists of a $27.0 million Term Loan A, up to an $8.0
million Term Loan B and a $10.0 million revolving credit facility
(the “Revolver”), all of which mature on March 23, 2020
(collectively, the “Credit Facility”).
On March 23, 2015, the Borrowers drew $27.0 million under the Term
Loan A to repay and terminate the previously existing credit
facility under the credit agreement dated November 30, 2012, as
amended, by and among the Company, its direct and indirect
subsidiaries, Wells Fargo Bank, National Association, as
administrative agent, and certain lenders party thereto (the
“WF Facility”). As of June 30, 2016, Term Loan B
had a balance of $5.9 million. As of June 30, 2016, interest
on the Credit Facility is payable at the Borrower’s choice as
a (i) Eurodollar Loan, which bears interest at a per annum rate
equal to LIBOR plus a margin ranging from 2.00% to 2.50% or (ii)
CBFR Loan, which bears interest at a per annum rate equal to (a)
the Lender’s prime rate or (b) LIBOR for a 30-day interest
period plus 2.50%, in each case, plus a margin ranging from -0.75%
to -0.25%. The actual rate at June 30, 2016 was 2.95% (LIBOR
of 0.45% plus 2.50%) on both Term Loan A and B and 3.25% (JPM Chase
Prime Rate of 3.5% less 0.25%) on the Revolver.
The availability under the Revolver is based upon the
Borrowers’ eligible accounts receivable and eligible
inventory and is comprised as follows (in thousands):
June 30,
December 31,
2016 2015
Revolver:
Gross Availability $ 10,000 $ 10,000
Outstanding Draws (6,618 )
—
Letter of Credit
— (81 )
Landlord Reserves (45 ) (37 )
Availability on Revolver $ 3,337 $ 9,882
To secure repayment of the obligations of the Borrowers, each
Borrower has granted to the Lender, for the benefit of various
secured parties, a first priority security interest in
substantially all of the personal property assets of each of the
Borrowers. In addition, the Company has pledged the shares of
InfuSystem Holdings USA, Inc. (“Holdings USA”) and
Holdings USA has pledged the shares of each of InfuSystem, Inc. and
First Biomedical, Inc. and the equity interests of IFC, LLC to the
Lender, for the benefit of the secured parties, to further secure
the obligations under the Credit Agreement.
In addition, the Credit Agreement requires the Borrowers to
maintain the following financial covenant obligations:
(i) a minimum fixed charge coverage ratio
of 1.25:1.00;
(ii) a maximum total leverage ratio
ranging from 3.00:1.00 to 2.25:1.00 during specified periods;
and
(iii) a minimum net worth of $37.5
million.
The restatement error and the Company’s decision to prepay
debt, would have resulted in the Company being non-compliant with
its fixed charge coverage ratio covenant as of March 31, 2016,
however, as of June 30, 2016, the Company would have been in
compliance. As a result of the Company’s restatement of prior
consolidated financial statements described herein, the following
Events of Default occurred:
(i) an Event of Default that results from
breach of the Fixed Charge Coverage covenant as of March 31, 2016
as required under Section 6.12(b); and
(ii) an Event of Default that results from
the unintentional misrepresentations made prior to the date of the
First Amendment in connection with the certification as to the
accuracy of the financial statements and compliance certificate
delivered pursuant to Section 5.01 as they relate solely to the
source of the error that has necessitated the restatement discussed
herein.
In order to cure these violations, the Company entered into the
First Amendment to Credit Agreement and Waiver on December 5,
2016. This First Amendment amends the Credit Agreement in the
following material respects:
(i) a waiver of the Event of Default that
results from the failure to timely deliver the unaudited financial
statements for the fiscal quarter ended September 30, 2016 as
required under Section 5.01(b) and (c);
(ii) a waiver of the Event of Default that
results from breach of the Fixed Charge Coverage covenant as of
March 31, 2016 as required under Section 6.12(b);
(iii) a waiver of the Event of Default that
results from the unintentional misrepresentations made prior to the
date of the First Amendment in connection with the certification as
to the accuracy of the financial statements and compliance
certificate delivered pursuant to Section 5.01 as they relate
solely to the source of the error that has necessitated the
restatement discussed herein;
(iv) a restructuring of the credit
facility that will effectively consolidate Term Loan A and Term
Loan B into a single Term Loan resulting in a new total drawn
amount of $32 million under the Term Loan with the approximately
$5 million excess over the current aggregate drawn amounts
under Term Loan A and Term Loan B to be available to reduce the
Company’s drawings under the revolving credit line;
(v) set the maturity of the new Term Loan
described in item (iv) and the revolving credit line to five years
from the effective date of the First Amendment;
(vi) set the quarterly mandatory principal
payment due on the Term Loan to $1.3 million due on the last
business day of each fiscal quarter with any remaining unpaid and
outstanding amount due at maturity;
(vii) amend the deadline for delivery of
consolidated financial statements to allow for the delivery of such
statements for the quarter ended September 30, 2016 by December 16,
2016;
(viii) amend the deadline for delivery of
the Company’s annual financial plan and forecast to 30 days
after the end of each fiscal year;
(ix) amend the Leverage Ratio covenant to
provide for the following schedule of maximum permitted ratios: (i)
3.0 to 1.0 at any time on or after the effective date but prior to
December 31, 2015, (ii) 2.75 to 1.0 at any time on or after
December 31, 2015 but prior to March 31, 2017, (iii) 2.50 to 1.0 at
any time on or after March 31, 2017 but prior to March 31, 2018 or
(iv) 2.25 to 1.00 at any time on or after March 31, 2018;
(x) amend the definition of EBITDA to
provide for the exclusion of certain one-time expenses directly
related to the financial restatement described herein;
(xi) amend Section 8.01(a) to replace
references to “Jonathan Foster” with “Christopher
Downs”.
As a result of the waivers of Events of Default contained within
the First Amendment to Credit and Waiver Agreement described
herein, as of June 30, 2016, the Company was in compliance with all
such covenants.
The Company had approximate future maturities of loans and capital
leases as of June 30, 2016 as follows (in thousands):
2016 2017 2018 2019 2020 Total
Term Loan A (a) $
— $ 3,860 $ 3,860 $ 3,860 $ 9,630 $ 21,210
Term Loan B 454 908 1,136 1,136 2,261 5,895
Unamortized value of the debt issuance costs (b) (17 ) (31 ) (31 ) (31 ) (8 ) (118 )
Revolver
—
—
—
— 6,618 6,618
Capital Leases 1,650 2,591 1,393 166 16 5,816
Total $ 2,087 $ 7,328 $ 6,358 $ 5,131 $ 18,517 $ 39,421
(a) The Company has prepaid its Term Loan
A principal payments due on September 30, 2016 and December 31,
2016. Each of these payments is $965, representing a total
prepayment of $1,930
(b) Includes the reclassification of the
debt issuance costs as a result of the Company adopting ASU 2015-03
(see Note 11)
The following is a breakdown of the Company’s current and
long-term debt (including capital leases) as of June 30, 2016 and
December 31, 2015 (in thousands):
June 30, 2016
December 31, 2015
Current Long-Term Long-Term Total Current Long-Term Long-Term Total
Term Loans $ 2,838 $ 24,267 $ 27,105 Term Loans $ 1,873 $ 26,651 $ 28,524
Unamortized value of the debt issuance costs (a) $
— $ (118 ) (118 ) Unamortized value of the debt issuance
costs (a) $
— $ (134 ) (134 )
Revolver
— 6,618 6,618 Revolver
—
—
—
Capital Leases 3,101 2,715 5,816 Capital Leases 3,187 3,233 6,420
Total $ 5,939 $ 33,482 $ 39,421 Total $ 5,060 $ 29,750 $ 34,810
(a) Includes the reclassification of the
debt issuance costs as a result of the Company adopting ASU 2015-03
(see Note 11) |
