Long-term Debt | Note 6: Long-term Debt On June 2, 2015, the Company and its operating subsidiary, The Tile Shop, LLC, entered into a credit agreement with Fifth Third Bank, Bank of America, N.A., and Huntington National Bank (the “Credit Agreement”). The Credit Agreement provides the Company with a $125.0 million senior secured credit facility, comprised of a five -year $50.0 million term loan and a $75.0 million revolving line of credit. The Credit Agreement is secured by virtually all of the assets of the Company, including but not limited to, inventory, receivables, equipment and real property. Borrowings pursuant to the Credit Agreement bear interest at either a base rate or a LIBOR-based rate, at the option of the Company. The LIBOR-based rate will range from LIBOR plus 1.50% to 2.00% , depending on The Tile Shop’s leverage ratio. The base rate is equal to the greatest of: (a) the Federal funds rate plus 0.50% , (b) the Fifth Third Bank “prime rate,” and (c) the Eurodollar rate plus 1.00% , in each case plus 0.50% to 1.00% depending on The Tile Shop’s leverage ratio. At March 31, 2016 the base interest rate was 4.25% and the LIBOR-based interest rate was 2.19% . Borrowings outstanding consisted of $40.5 million on the term loan as of March 31, 2016 . The Company can elect to prepay the term loan without incurring a penalty. Additional borrowings pursuant to the Credit Agreement may be used to support the Company’s growth and for working capital purposes. The Company incurred $1.0 million of debt issuance costs in connection with the Credit Agreement and will be amortized over the five-year life of the Credit Agreement. Debt issuance costs attributable to the term loan are classified as a reduction of debt in the Consolidated Balance Sheet. Debt issuance costs attributable to the revolving line of credit are classified as assets in the Consolidated Balance Sheet. The term loan requires quarterly principal payments as follows (in thousands): Period June 30, 2016 to June 30, 2017 $ 1,250 September 30, 2017 to June 30, 2018 1,875 September 30, 2018 to March 31, 2020 2,500 The Credit Agreement contains customary events of default, conditions to borrowings, and restrictive covenants, including restrictions on the Company’s ability to dispose of assets, make acquisitions, incur additional debt, incur liens, make investments, or enter into transactions with affiliates on other than terms that could be obtained in an arm’s length transaction. The Credit Agreement also includes financial and other covenants including covenants to maintain certain fixed charge coverage ratios and rent adjusted leverage ratios. In addition, except with respect to pro rata payments made by The Tile Shop or other subsidiaries to Holdings or any other equity owner of such entity, the Credit Agreement prohibits the payments of cash dividends. The Company was in compliance with the covenants as of March 31, 2016 . Long-term debt consists of the following at March 31, 2016 and December 31, 2015 (in thousands): March 31, 2016 December 31, 2015 Unamortized Unamortized Debt Issuance Debt Issuance Principal Costs Principal Costs Term note payable - interest at 2.19% and 2.18% at March 31, 2016 and December 31, 2015, respectively $ 40,450 $ (317) $ 47,450 $ (428) Commercial bank credit facility - - 8,000 - Variable interest rate bonds ( 0.35% at both March 31, 2016 and December 31, 2015), which mature April 1, 2023, collateralized by buildings and equipment 900 - 900 - Total debt obligations 41,350 (317) 56,350 (428) Less: current portion 5,095 (289) 5,095 (351) Debt obligations, net of current portion $ 36,255 $ (28) $ 51,255 $ (77) |