NOTE 8 – LONG TERM DEBT
On May 7, 2014, the Company and a bank syndicate entered into a loan agreement providing for a senior secured term loan of $350,000 and revolving loan of $100,000 (collectively referred to as the “loans”). On February 1, 2016, $65,000 of the revolving loan was used to fund the Albion International, Inc. acquisition (see Note 2). In addition, on June 1, 2017, $20,000 of the revolving loan was used to fund the Innovative Food Processors, Inc. acquisition (see Note 2). At December 31, 2017, the Company had a total of $219,500 of debt outstanding. The term loan is payable in quarterly installments of $8,750 which commenced on September 30, 2014, with the outstanding principal due on the maturity date. The Company may draw on the revolving loan at its discretion. The revolving loan does not have installments and all outstanding amounts are due on the maturity date. The loans may be voluntarily prepaid in whole or in part without premium or penalty and have a maturity date of May 7, 2019. The loans are subject to an interest rate equal to LIBOR or a fluctuating rate as defined by the loan agreement, at the Company’s discretion, plus an applicable rate. The applicable rate is based upon the Company’s consolidated leverage ratio, as defined in the loan agreement, and the interest rate was 3.07% at December 31, 2017. The Company has $100,000 of undrawn revolving loan at December 31, 2017 that is subject to a commitment fee, which is based on the Company’s consolidated leverage ratio as defined in the loan agreement. The loan agreement contains quarterly covenants requiring the consolidated leverage ratio to be less than a certain maximum ratio and the consolidated fixed charge coverage ratio to exceed a certain minimum ratio. At December 31, 2017, the Company was in compliance with these covenants. Indebtedness under the Company’s loan agreements are secured by assets of the company.
The following table summarizes the future minimum debt payments as of December 31, 2017:
Year | | Term loan | | | Revolving loan | | | Total | |
2018 | | $ | 35,000 | | | $ | - | | | $ | 35,000 | |
2019 | | | 184,500 | | | | - | | | | 184,500 | |
Future principle payments | | | 219,500 | | | | - | | | | 219,500 | |
Less unamortized debt financing costs | | | 536 | | | | - | | | | 536 | |
Less current portion of long-term debt | | | 35,000 | | | | - | | | | 35,000 | |
Total long-term debt | | $ | 183,964 | | | $ | - | | | $ | 183,964 | |
Costs associated with the issuance of debt instruments are capitalized as debt discount and amortized over the terms of the respective financing arrangements using the effective interest method. If debt is retired early, the related unamortized costs are expensed in the period the debt is retired. Capitalized costs net of accumulated amortization total $536 at December 31, 2017 and are shown net against outstanding principle on the accompanying balance sheet. Amortization expense pertaining to these costs totaled $474 and $526 for the years ended December 31, 2017 and 2016, respectively, and is included in interest expense in the accompanying condensed consolidated statements of earnings.
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.