Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Debt

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Debt
12 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
Debt Debt
The following table summarizes the long term debt, net at December 31, 2019 and 2018 (in thousands):
 
  2019 2018
Term loan $ 97,500    $ 96,750   
Revolving credit facility —    5,000   
Financing obligations 8,631    11,548   
Total debt $ 106,131    $ 113,298   
Less: Unamortized debt issuance costs (671)   (997)  
Less: Current portion of term loan and financing obligations (10,432)   (14,171)  
Total long-term debt, net $ 95,028    $ 98,130   

The carrying value of the Company’s long-term financing obligations and term debt approximates its fair value based on the current market conditions for similar instruments.
Senior Secured Credit Agreement
On June 27, 2019 (the “Closing Date”), the Company entered into a new senior secured credit agreement (the “New Credit Agreement”) with PNC Bank National Association (“PNC”), as administrative agent, and the lenders party thereto. The New Credit Agreement provides for a $100.0 million revolving credit facility (the “Revolving Credit Facility”), a $100.0 million term loan facility (the “Term Loan Facility”), and a $50.0 million delayed draw term loan which has an availability period beginning on the Closing Date and ending on December 27, 2020 (the “Delayed Draw Term Loan”). The Term Loan Facility and amounts borrowed under the Revolving Credit Facility are secured on a first priority basis by a security interest in substantially all of the tangible and intangible assets of the Company.
Borrowings under the New Credit Agreement bear interest at a rate per annum equal to an applicable margin plus, at the Company’s option, either (1) the Adjusted LIBOR rate for the relevant interest period, as defined within the agreement (2) an alternate base rate determined by reference to the greatest of (a) the federal funds rate for the relevant interest period plus 0.5% per annum, (b) the prime lending rate of PNC and (c) the daily LIBOR rate plus 1% per annum, or (3) a combination of (1) and (2). The applicable margin will range from 1.25% to 2.25% for LIBOR loans and 0.25% to 1.25% for base rate loans, in each case based on NeoGenomics’ consolidated leverage ratio, (“Consolidated Leverage Ratio”). Interest on borrowings under the New Credit Agreement is payable on the last day of each month, in the case of each base rate loan, and on the last day of each interest period (but no less frequently than every three months), in the case of LIBOR loans. The Company has previously entered into interest rate swap agreements to hedge against changes in the variable rate for a portion of our long term debt. See Note I, Derivative Instruments and Hedging Activities, for more information on these instruments.
The Revolving Credit Facility includes a $10.0 million swing loan sublimit, with swing loans bearing interest at the alternate base rate plus the applicable margin. Any principal outstanding under the Revolving Credit Facility is due and payable on June 27, 2024 or such earlier date as the obligations under the New Credit Agreement become due and payable pursuant to the terms of the New Credit Agreement. No amounts were outstanding under the Revolving Credit Facility as of December 31, 2019.
Principal payments on the Term Loan Facility will be due on the last day of each fiscal quarter beginning September 30, 2019, with an annual principal amortization of 5% in the first year, 5% in the second year, 7.5% in the third year, 7.5% in the fourth year, and 10% in each year thereafter, with the remainder due upon maturity on June 27, 2024 or such earlier date as the obligations under the New Credit Agreement become due and payable pursuant to the terms of the New Credit Agreement.
On December 31, 2019, the Company had current outstanding borrowings under the Term Loan Facility of approximately $5.0 million, and long-term outstanding borrowings of approximately $91.8 million, net of unamortized debt issuance costs of $0.7 million. These costs were recorded as a reduction in the carrying amount of the related liability and are being amortized over the life of the loan.
In addition to paying interest on outstanding principal under the New Credit Agreement, the Company is required to pay a commitment fee in respect of the unutilized portion of the commitments under the Revolving Credit Facility and the Delayed Draw Term Loan. The commitment fee rate will initially be 0.25% per annum, and, beginning in the fourth quarter of 2019, and will range from 0.15% to 0.35% depending on NeoGenomics’ Consolidated Leverage Ratio. The Company will also pay customary letter of credit and agency fees.
The Term Loan Facility contains various covenants including incurring certain indebtedness; ability to incur liens and encumbrances; make certain restricted payments, including paying dividends on its equity securities or payments to redeem,
repurchase or retire its equity securities; enter into certain restrictive agreements; make investments, loans and acquisitions; merge or consolidate with any other person; dispose of assets; enter into certain sale and leaseback transactions; engage in transactions with its affiliates, and materially alter the business it conducts. In addition, the Company must meet certain maximum leverage ratios and fixed charge coverage ratios as of the end of each fiscal quarter.
The Term Loan Facility requires the Company to mandatorily prepay the Term Loan Facility and amounts borrowed under the Revolving Credit Facility with (i) 100.0% of net cash proceeds from certain sales and dispositions, subject to certain reinvestment rights, and (ii) 100.0% of net cash proceeds from certain issuances or incurrences of additional debt.
Prior Financing Agreement
Simultaneous with entering into the New Credit Agreement on June 27, 2019, the Company terminated its prior financing agreement and repaid all outstanding amounts owed thereunder.
The prior financing agreement, originally entered into on December 22, 2016, with Regions Bank as administrative agent and collateral agent, provided for a $75.0 million term loan facility (the “Prior Term Loan Facility”) and a $75.0 million revolving credit facility (the “Prior Revolving Credit Facility”). On June 21, 2018, the Company entered into an amendment to the Prior Credit Agreement (the “Amendment”) which provided for an additional term loan in the amount of $30.0 million, for which revised terms are included below.
At December 31, 2018, the Company had current outstanding borrowings under the Prior Term Loan Facility, as amended, of approximately $7.9 million, and long-term outstanding borrowings of approximately $88.9 million, net of unamortized debt issuance costs of $1.0 million. At December 31, 2018 the Company had $5.0 million outstanding related to the Prior Revolving Credit Facility. The Prior Term Loan Facility and Prior Revolving Credit Facility were terminated on June 27, 2019. In association with the early termination of debt, the Company incurred a loss on the extinguishment of debt of $1.0 million.
Borrowings under the Prior Term Loan Facility bore interest at a rate per annum equal to an applicable margin plus, at the Company’s option, either (1) the Adjusted LIBOR rate for the relevant interest period, as defined within the Credit Agreement, (2) an alternate base rate determined by reference to the greatest of (a) the prime lending rate of Regions, (b) the federal funds rate for the relevant interest period plus 0.5% per annum and (c) the one month LIBOR rate plus 1% per annum (the “Alternate Base Rate”), or (3) a combination of (1) and (2). The applicable margin ranged from 2.25% to 4.00% for LIBOR loans and 1.25% to 3.00% for base rate loans, in each case based on NeoGenomics’ consolidated leverage ratio (as defined in the Prior Financing Agreement and revised in the Amendment). Interest on borrowings was payable on the last day of each month, in the case of each base rate loan, and on the last day of each interest period (but no less frequently than every three months), in the case of Adjusted LIBOR loans.
The Prior Revolving Credit Facility included a $10.0 million swing loan sublimit, with swingline loans bearing interest at an alternate base rate plus the applicable margin, as defined in the Agreement.
The Prior Term Loan Facility and amounts borrowed under the Prior Revolving Credit Facility were secured on a first priority basis by a security interest in substantially all of the tangible and intangible assets of the Company. The Prior Term Loan Facility contained various affirmative and negative covenants including ability to incur liens and encumbrances; make certain restricted payments, including paying dividends on its equity securities or payments to redeem, repurchase or retire its equity securities; enter into certain restrictive agreements; make investments, loans and acquisitions; merge or consolidate with any other person; dispose of assets; enter into sale and leaseback transactions; engage in transactions with its affiliates, and materially alter the business it conducts. In addition, the Company was required to meet certain maximum leverage ratios and fixed charge coverage ratios as of the end of each fiscal quarter.
The Amendment required the Company to mandatorily prepay the Prior Term Loan Facility and amounts borrowed under the Prior Revolving Credit Facility with (i) 100% of net cash proceeds from certain sales and dispositions, subject to certain reinvestment rights, (ii) 100% of net cash proceeds from certain issuances or incurrences of additional debt, (iii) beginning with the fiscal year ended December 31, 2018, 75% of consolidated excess cash flow (as defined) if the Company’s consolidated leverage ratio was greater than or equal to 3.25:1.0 or 50% of consolidated excess cash flow (as defined) if the Company’s consolidated leverage ratio was less than or equal to 3.25:1.0 but greater than or equal to 2.75:1.0 and (iv) 100% of net cash proceeds from issuances of permitted equity securities by the Company made in order to cure a failure to comply with the financial covenants.
Financing Obligations
The Company has entered into financing obligations with various banks for the purchase of laboratory equipment, office equipment and leasehold improvements. These assets are included as part of property, plant and equipment and related depreciation is included in depreciation expense. The obligations mature at various dates through 2022 and the weighted average interest rate under such loans was approximately 4.64% as of December 31, 2019 and 4.56% as of December 31, 2018. The Company’s obligations under these contracts are collateralized by the equipment purchased.
Maturities of Long-Term Debt
Maturities of long-term debt at December 31, 2019 are summarized as follows (in thousands):
 
  Term Loan Financing Obligations Total Long-Term Debt
2020 $ 5,000    $ 5,432    $ 10,432   
2021 6,250    2,662    8,912   
2022 7,500    537    8,037   
2023 8,750    —    8,750   
2024 70,000    —    70,000   
Total Debt 97,500    8,631    106,131   
Less: Debt issuance costs (671)   —    (671)  
Less: Current portion of long-term debt (5,000)   (5,432)   (10,432)  
Total long-term debt, net $ 91,829    $ 3,199    $ 95,028