DPDW.. $0.10 before $1.00 is in the filings...
The bank has them on a short leash but will it continue to tighten..?? I think so just to save the exposure to the bank.. Its like some that pay down their credit cards and their credit limits have now been reduced to the amount after the payoff.. Tough love in the banking Industry...
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a requirement that we maintain a compensating balance of $3,900 in our existing interest-bearing account at Whitney, to continue until such time as we have regained compliance with all of our covenants under the Facility subsequent to the quarter ended December 31, 2014.
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Liquidity and Capital Resources
Overview
Historically, we have supplemented the financing of our capital needs through debt and equity financings.
Credit Facility
Since 2008, we have maintained a credit facility (the “Facility”) with Whitney. The Facility has been amended and restated several times, most recently effective March 30, 2015 when we entered into the seventh amendment (“Seventh Amendment”).
The relevant terms of the Seventh Amendment include:
· a change to the definition of earnings before interest, taxes, depreciation and amortization (“EBITDA”) to permit in the calculation, in the quarter ended December 31, 2014, the add-back of a non-recurring charge of $4,916 related to the impairment of our goodwill;
· a waiver, for the quarter ended December 31, 2014, for our noncompliance with the fixed charge coverage ratio covenant under the Facility;
· a requirement that we maintain a compensating balance of $3,900 in our existing interest-bearing account at Whitney, to continue until such time as we have regained compliance with all of our covenants under the Facility subsequent to the quarter ended December 31, 2014.
Other current relevant terms of the Facility include:
· a committed amount of $5,000 under the revolving credit facility (“Revolving Credit Facility”), maturing June 30, 2015, subject to a borrowing base limitation based on eligible trade accounts receivable; the Revolving Credit Facility may be used to borrow cash (at an interest rate of 3.5 percent per annum) or to issue bank letters of credit (at a fee of 1 percent per annum); both cash borrowings and the issuance of bank letters of credit reduce the available capacity under the commitment; the available borrowing and letter of credit capacity under the Revolving Credit Facility at March 31, 2015 was $1,585;
· a real estate term facility (“RE Term Facility”) of $2,000, at an interest rate of 4.0 percent per annum, maturing April 15, 2018, with the Company being obligated to make monthly increasing repayments of principal (along with accrued and unpaid interest thereon) starting at $8, beginning April 1, 2013;
· a carousel term facility (“Carousel Term Facility”) of $2,200, at an interest rate of 3.5 percent per annum, maturing October 15, 2016, with the Company being obligated to make monthly repayment of principal of $65 (along with accrued and unpaid interest thereon) beginning July 1, 2014;
· outstanding balances under the Facility are secured by all of the Company’s assets.
As of March 31, 2015, the Company had indebtedness under the Facility consisting of the Revolving Credit Facility, the RE Term Facility, and the Carousel Term Facility, in amounts equal to $3,000, $1,797, and $ 1,615, respectively. Additionally, a bank letter of credit issued under the Revolving Credit Facility in the amount of $415 was outstanding at March 31, 2015 and December 31, 2014. See Note 9 “Commitments and Contingencies”, of the notes to unaudited condensed consolidated financial statements.
As mentioned above, our Facility obligates us to comply with certain financial covenants. They are as follows:
· Leverage Ratio - The ratio of total debt to consolidated EBITDA must be less than 3.0 to 1.0; actual Leverage Ratio as of March 31, 2015: 4.69 to 1.0.
· Fixed Charge Coverage Ratio - The ratio of consolidated EBITDA to consolidated net interest expense, plus principal payments on total debt, must be greater than 1.5 to 1.0; actual Fixed Charge Coverage Ratio as of March 31, 2015: 1.15 to 1.0.
· Tangible Net Worth - Our consolidated net worth, after deducting other assets as are properly classified as “intangible assets,” plus 50 percent of net income, after provision for taxes, must be in excess of $16,700; actual Tangible Net Worth as of March 31, 2015: $24,715.
· Moreover, we continue to have obligations for other covenants, including, among others, limitations on issuance of common stock, liens, transactions with affiliates, additional indebtedness and permitted investments.
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As of March 31, 2015, we were in partial compliance with our financial covenants, except for the Leverage Ratio and Fixed Charge Coverage Ratio requirements. Whitney has provided us with a waiver for our noncompliance with these covenants. Because we do not believe that it is probable that we will be in compliance with all of our covenants under the Facility for the fiscal quarter ending June 30, 2015 we have classified all of our debt under the Facility as current as of March 31, 2015.
As a result of the Credit Facility and cash we expect to generate from operations, we believe we will have adequate liquidity to meet our future operating requirements.
Inflation and Seasonality
We do not believe that our operations are significantly impacted by inflation. Our business is not significantly seasonal in nature.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Critical Accounting Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The most significant estimates used in our financial statements relate to revenue recognition where we use percentage-of completion accounting on our large fixed-price contracts, the allowance for doubtful accounts, and the valuation allowance for deferred income tax assets. These estimates require judgments, which we base on historical experience and on various other assumptions, as well as specific circumstances. Estimates may change as new events occur, additional information becomes available or operating environments change.
Refer to Part II. Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2014 for a discussion of our Critical Accounting Policies.
