Debt |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt | Debt The Company maintains various credit facilities from time to time to finance acquisitions, the purchase of real estate, construction equipment, plants and other fixed assets, and for general working capital purposes. Debt at September 30, 2019 and 2018 consisted of the following (in thousands):
BBVA Credit Agreement
The Company and each of its subsidiaries are parties to a credit agreement with BBVA USA (formerly known as Compass Bank), as agent, issuing bank and a lender, and certain other lenders (as amended, the “BBVA Credit Agreement”). The BBVA Credit Agreement provides for a term loan (the “Term Loan”) and a revolving credit facility (the “Revolving Credit Facility”). At September 30, 2019 and 2018, there was $44.7 million and $57.3 million, respectively, of principal outstanding under the Term Loan, $5.0 million and $5.0 million, respectively, of principal outstanding under the Revolving Credit Facility, and availability of $14.4 million and $14.0 million, respectively, under the Revolving Credit Facility, including reduction for outstanding letters of credit. The obligations of the borrower entities under the Term Loan and the Revolving Credit Facility are secured by a first priority security interest in substantially all of the Company’s assets and are guaranteed by the Company, as the ultimate parent company of the borrower entities.
In August 2019, the BBVA Credit Agreement was amended to, among other things, modify the interest rate and fee structure, as well as the repayment schedule and amounts. Currently, the BBVA Credit Agreement provides for a four-tier escalating interest rate for both the Term Loan and the Revolving Credit Facility that is tied to the London Interbank Offered Rate (“LIBOR”). The baseline rate for such borrowings is LIBOR plus 1.20%, and the rate may increase up to LIBOR plus 1.70% if the Company’s consolidated leverage ratio exceeds 2.00%. Prior to the August 2019 amendment, the interest rate on any particular borrowing was calculated based on one of several indices set forth in the agreement, plus an applied markup of 2.0% to 2.25%. At September 30, 2019 and 2018, the interest rate on outstanding borrowings under the Term Loan and Revolving Credit Facility was 3.24% and 4.24%, respectively. Principal repayments under the Term Loan are made in quarterly installments in an amount equal to 2.50% of the original amount borrowed, a reduction from the 5.00% rate that the Company paid prior to the August 2019 amendment. The Company pays a commitment fee of 0.20% per annum on the aggregate unused commitment amount under the Revolving Credit Facility, a reduction from 0.35% prior to the August 2019 amendment, as well as fees with respect to any letters of credit issued thereunder. As of September 30, 2019, all amounts borrowed under the BBVA Credit Agreement were scheduled to mature on July 1, 2022.
The BBVA Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited to, restrictions on the Company’s ability to make acquisitions, make loans or advances, make capital expenditures and investments, pay dividends, create or incur indebtedness, create liens, wind up or dissolve, consolidate, merge or liquidate, or sell, transfer or dispose of assets. The BBVA Credit Agreement also requires the Company to satisfy certain financial covenants, including a minimum fixed
charge coverage ratio of 1.20-to-1.00 and a maximum consolidated leverage ratio of 2.75-to-1.00, subject to certain adjustments. Prior to the August 2019 amendment, the maximum consolidated leverage ratio was 2.00 to 1.00. At September 30, 2019 and 2018, the Company’s fixed charge coverage ratio was 4.04-to-1.00 and 1.51-to-1.00, respectively, and the Company’s consolidated leverage ratio was 0.66-to-1.00 and 0.88-to-1.00, respectively. At both September 30, 2019 and 2018, the Company was in compliance with all covenants under the BBVA Credit Agreement.
From time to time, the Company has entered into interest rate swap agreements to hedge against the risk of changes in interest rates. On June 30, 2017, the Company entered into an interest rate swap agreement with a notional amount of $25.0 million, under which the Company pays a fixed percentage rate of 2.02% and receives a credit based on the applicable LIBOR rate. On May 15, 2018, the Company entered into an additional $11.0 million notional interest rate swap agreement applicable to the $22.0 million amount borrowed under the Term Loan on that date, under which the Company pays a fixed percentage rate of 3.01% and receives a credit based on the applicable LIBOR rate. These interest rate swap agreements do not meet the criteria for hedge accounting treatment in accordance with GAAP. At September 30, 2019 and 2018, the aggregate notional value of these interest rate swap agreements was $21.5 million and $28.7 million, respectively, and the fair value was $(0.3) million and $0.3 million, respectively, which is included within other liabilities or other assets on the Company’s Consolidated Balance Sheets.
The BBVA Credit Agreement was amended subsequent to September 30, 2019. For more information about the amendment, see Note 22 - Subsequent Events.
Acquired Debt
In connection with the acquisition of Scruggs, the Company assumed $1.1 million of debt that had been used to finance equipment purchases and was collateralized by the purchased equipment. These loans, included in other long-term debt in the table above, include (i) three zero-interest notes having an aggregate estimated fair value at the acquisition date of approximately $0.4 million (determined in accordance with the methodology described under “Fair Value Measurements” in Note 2 - Significant Accounting Policies) that require monthly payments and have maturity dates between February 2020 and May 2020, and (ii) approximately $0.7 million in other loans with fixed interest rates ranging from 4.50% to 5.95% that require monthly payments and have maturity dates ranging from 2019 through 2023.
The scheduled contractual repayment terms of long-term debt at September 30, 2019 were as follows:
Interest expense was $3.3 million and $2.0 million for the fiscal years ended September 30, 2019 and 2018, respectively. Amortization of deferred issuance costs and debt discounts included in interest expense was $0.1 million for the fiscal years ended September 30, 2019 and 2018, respectively.
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