Rocky Mountain Chocolate Factory, Inc.RMCF

Rocky Mountain Chocolate Factory, Inc. Debt Disclosure

10-KFiled May 29, 20202 min read
NOTE
8
- LINE OF CREDIT AND LONG-TERM DEBT
 
Line of Credit
 
At
February
29,
2020,
the Company had a
$5.0
million working capital line of credit from Wells Fargo Bank, N.A., collateralized by substantially all of the Company’s assets with the exception of the Company’s retail store assets. Draws
may
be made under the line at
50%
of eligible accounts receivable plus
50%
of eligible inventories. Interest on borrowings is at LIBOR plus
2.25%
(
3.8%
at
February
29,
2020
). At
February
29,
2020,
$5.0
million was available for borrowings under the line of credit, subject to borrowing base limitations. Additionally, the line of credit is subject to various financial ratio and leverage covenants. The credit line is subject to renewal in
September 2021
and the Company believes it is likely to be renewed on terms similar to current terms. At
February 28
or
29,
2020
and
2019
there was
no
amount outstanding under this line of credit. Note
19
contains information regarding the Company’s line of credit use subsequent to
February
29,
2020.
 
Effective
January 16, 2014,
the Company entered into a business loan agreement with Wells Fargo Bank, N.A. (the “Wells Fargo Loan Agreement”) for a
$7.0
million long-term line of credit to be used to loan money to SWRL to fund the purchase price of business acquisitions by SWRL (the “Wells Fargo Loan”). The Company made its
first
draw of approximately
$6.4
million on the Wells Fargo Loan on
January 16, 2014
and the
first
draw was the amount outstanding at
February 28, 2014.
Interest on the Wells Fargo Loan was at a fixed rate of
3.75%
and the maturity date was
January 15, 2020.
As of
February
29,
2020
there was
no
amount outstanding under this loan as all amounts owed were paid off at maturity.
 
Long-term debt consists of the following at
February 28
or
29:
 
   
2020
    
2019
  
Note payable in monthly installments of principal and interest at 3.75% per annum through December 2019 collateralized by sustantially all business assets
   $
-
     $
1,176,488
  
Less current maturities
    
-
      
1,176,488
  
Long-term obligations
   $
-
     $
-
  

Historical Timeline

Fiscal YearFiled
2020May 29, 2020Showing above
2019May 29, 2019
2018May 15, 2018
2017May 23, 2017
2016May 23, 2016

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.

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