Rocky Mountain Chocolate Factory, Inc.RMCF

Rocky Mountain Chocolate Factory, Inc. Debt Disclosure

10-KFiled May 15, 20182 min read
NOTE
4
- LINE OF CREDIT AND LONG-TERM DEBT
 
Line of Credit
 
At
February 28, 2018,
the Company had a
$5
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%
(
3.9%
at
February 28, 2018).
At
February 28, 2018,
$5
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. At
February 28, 2018,
the Company was in compliance with all such covenants. The credit line is subject to renewal in
September 2019
and the Company believes it is likely to be renewed on terms similar to current terms.
 
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 is at a fixed rate of
3.75%
and the maturity date is
January 15, 2020.
The Wells Fargo Loan
may
be prepaid without penalty at any time by the Company. The Wells Fargo Loan is collateralized by substantially all of the Company’s assets, including the SWRL Loan Agreement. Additionally, the Wells Fargo Loan is subject to various financial ratio and leverage covenants. The Wells Fargo Loan Agreement also contains customary representations and warranties, covenants and acceleration provisions in the event of a default by the Company.
 
Long-term debt consists of the following at
February 28:
 
   
2018
    
2017
  
Note payable in monthly installments of principal and interest at 3.75% per annum through December 2019 collateralized by substantially all business assets.
   $
2,529,309
     $
3,831,741
  
Less current maturities
    
1,352,893
      
1,302,501
  
Long-term obligations
   $
1,176,416
     $
2,529,240
  
 
The following is a schedule by year of maturities of long-term debt for the years ending
February 28
or
29:
 
2019
   $
1,352,893
  
2020    
1,176,416
  
Total   $
2,529,309
  
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Historical Timeline

Fiscal YearFiled
2018May 15, 2018Showing above
2017May 23, 2017

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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