December 29, 2019				December 30, 2018
Revolving credit facility		$	34,701			$	25,020
Term loans:
Term loan A facility		$	38,750			$	50,000
Term loan B facility			—				12,000
			38,750				62,000
Less deferred debt issue costs			(2,286	)			(2,750	)
Less unamortized discount on debt			(1,464	)			(1,843	)
Total term loans		$	35,000			$	57,407
Less current portion			(1,250	)			(1,368	)
Long term portion		$	33,750			$	56,039

 

The Company borrows money under an Amended and Restated Revolving Credit and Security Agreement with PNC Bank, National Association (“PNC”), which governs the Company’s Revolving Credit Facility (“PNC Facility”). The PNC Facility has a term ending on Advances made under the PNC Facility bear interest at the U.S. base rate plus an applicable margin ranging from to or LIBOR plus an applicable margin ranging from to The base commercial lending rate should approximate U.S. prime rate.

 

The Company also borrows money under a Financing Agreement (the “Financing Agreement”). The lenders party to the Financing Agreement from time to time (collectively, the “Lenders”), and TCW Asset Management Company LLC, as collateral agent for the Lenders (“TCW”), govern a term loan A facility (“Term A Loan Facility” and, together with the PNC Facility, the “Credit Facilities”) and previously governed a term loan B facility (the “Term Loan B Facility”) until it was paid in full on The Term A Loan Facility matures on the “Maturity Date”). The Term Loan A Facility bears interest LIBOR plus an applicable margin of through and borrowings under the Financing Agreement will thereafter bear interest at LIBOR plus an applicable margin ranging from to Payments made under the Term Loan A Facility at any time prior to the Maturity Date (other than scheduled amortization payments and mandatory prepayments) are subject to an applicable premium equal to the amount of such payment multiplied by (i) in the event that such payment occurs before ii) in the event that such payment occurs after and on or before and (iii) in the event that such payment occurs after and on or before such applicable premium is payable for any payment of loans made under the Term Loan A Facility occurring after

 

Below table outlines the Term A Loan Facility scheduled amortization payments and the balance which would be due at maturation on

 

2020		$	1,250
2021			2,500
2022			2,500
2023			32,500
Total			38,750

 

On the Company entered into Amendment to the PNC Facility and the Financing Agreement. The Amendments, among other things, amends the required senior leverage ratio initially set forth in the PNC Facility and the Financing Agreement by increasing the senior debt leverage ratio from to

 

On the Company, entered into Amendment to Financing Agreement. The Amendment, among other things, provides that the net cash proceeds received by the loan parties from the Company’s (i) offering of subscription rights to the Company’s stockholders and holders of the Company’s outstanding warrants that closed in and (ii) registered direct offering of shares of the Company’s common stock directly to certain investors that closed in shall be applied (a) first, to the Company’s term loan B facility (and the accrued and unpaid interest thereon) until paid in full in the aggregate amount of and (b) second, to the borrowers under the Agreement in the remaining amount thereof for working capital and general corporate purposes.

 

On the Company and certain of its subsidiaries entered into that certain Amendments to the Amended and Restated Revolving Credit and Security Agreement (the “PNC Amendment ) and that certain Amendment to the Financing Agreement (the “TCW Amendment ). The PNC Amendment among other things, (i) increased the total amount available for borrowings under the PNC Facility to (ii) provided for borrowings of up to on assets located in Mexico, (iii) provided that borrowings under the PNC Facility bear interest at the U.S. base rate plus an applicable margin ranging from to or LIBOR plus an applicable margin ranging from to (iv) reset the financial covenants, and (v) permitted the pay down of the Term A Loan Facility by up to The TCW Amendment among other things, (i) provided for a increase in the total amount available for borrowings under the PNC Facility, (ii) provided for the pay down of the Term A Loan Facility by up to (iii) provided that the interest rate for borrowings under the Financing Agreement was reset to LIBOR plus an applicable margin of through and borrowings under the Financing Agreement will thereafter bear interest at LIBOR plus an applicable margin ranging from to (iv) deleted the senior leverage ratio covenant, (v) amended the total leverage ratio covenant, including the definition of total leverage ratio, to increase the maximum total leverage on a quarterly basis beginning with the fiscal quarter ended vi) amended the fixed charge coverage ratio covenant to decrease the minimum fixed charge coverage ratio on a quarterly basis beginning with the fiscal quarter ending through the fiscal quarter ending and (vii) reset the call protection on the Term Loan A Facility.

 

On the Company and certain of its subsidiaries entered into that certain Amendments to the Amended and Restated Revolving Credit and Security Agreement (the “PNC Amendment ) and that certain Amendment to the Financing Agreement (the “TCW Amendment ). The PNC Amendment among other things, amended the (i) definition of “Consolidated EBITDA” by permitting an addback for restructuring and transition costs and charges incurred on or before in connection with the Company’s previously announced closure of business operations in Dongguan, China, subject to certain exceptions, to exceed (a) with respect to cash restructuring costs, (b) with respect to write-offs of accounts receivable, and (c) with respect to write-offs of Inventory (as defined in the Amended and Restated Revolving Credit and Security Agreement), (ii) definition of “Permitted Intercompany Investments” by permitting certain investments by a Domestic Loan Party (as defined in the Amended and Restated Revolving Credit and Security Agreement) to or in SMTC Electronics Dongguan Company Limited, a limited liability company organized under the laws of China (“SMTC Dongguan”), solely to facilitate the closure of business operations in Dongguan, China, so long as, among other things, (a) such Investments (as defined in the PNC Agreement) are made prior to b) the aggregate amount of all such Investments does exceed during the term of the Amended and Restated Revolving Credit and Security Agreement, (c) the Borrowers (as defined in the Amended and Restated Revolving Credit and Security Agreement) maintain certain minimum liquidity requirements and (iii) negative covenant regarding excess cash. The TCW Amendment among other things, amended the (i) definition of “Consolidated EBITDA” by permitting an addback for restructuring and transition costs and charges incurred on or before in connection with the closure of business operations in Dongguan, China, subject to certain exceptions, to exceed (a) with respect to cash restructuring costs, (b) with respect to write-offs of accounts receivable, and (c) with respect to write-offs of Inventory (as defined in the Financing Agreement), (ii) definition of “Permitted Intercompany Investments” by permitting certain investments by a Domestic Loan Party (as defined in the Financing Agreement) to or in SMTC Dongguan solely to facilitate the closure of business operations in Dongguan, China, so long as, among other things, (a) such Investments (as defined in the Financing Agreement) are made prior to b) the aggregate amount of all such Investments does exceed during the term of the Financing Agreement and (c) the Borrowers (as defined in the Financing Agreement) maintain certain minimum liquidity requirements and (iii) negative covenant regarding excess cash.

 

At ( ) was outstanding under the PNC Facility and is classified as a current liability based on the requirement to hold a “lock-box” under the terms of the PNC Facility. As at the funds available to borrow under the PNC Facility after deducting the current borrowing base conditions was ( ). The maximum amount of funds that could be available under the PNC Revolving Credit Facility is However, availability under the PNC Revolving Credit Facility is subject to certain conditions, including borrowing base conditions based on eligible inventory and accounts receivable, and certain conditions as determined by PNC. The Company is required to use a “lock-box” arrangement for the PNC Facility, whereby remittances from customers are swept daily to reduce the borrowings under this facility.

 

At ( ) was outstanding under the TCW Term Loan A Facility and ( ) under the TCW Term Loan B Facility. The Term Loan A Facility is reported on the consolidated balance sheet net of deferred financing fees of ( ) and a discount on debt of ( ) related to the outstanding warrants described below. On the Company repaid the TCW Term Loan B Facility in full. On the Company repaid an additional on the TCW Term Loan A Facility. In addition, the Company made scheduled amortization payments of on the Term Loan A Facility during

 

The Credit Facilities are joint and several obligations of the Company and its subsidiaries that are borrowers under the Credit Facilities and are jointly and severally guaranteed by certain other subsidiaries of the Company. Repayments under the PNC Facility and the Term A Loan Facility are collateralized by the assets of the Company and each of its subsidiaries. 

 

  

The Credit Facilities contain certain financial and non-financial covenants, including restrictions on dividend payments. The financial covenants under each Credit Facility require the Company to maintain a fixed charge coverage ratio and a total leverage ratio quarterly during the term of the Credit Facilities.

 

The Company was in compliance with the covenants included in the Credit Facilities as at Management projects compliance with the financial covenants included in the Credit Facilities, however note that there are key assumptions included in these cash flow projections to support covenant calculations specifically related to earnings before interest, income taxes and depreciation, as well as anticipated debt levels.  The estimate of cash flows are sensitive to these key assumptions, for instance, when considering our anticipated earnings before interest, income taxes, depreciation and amortization over the next month period, a reduction of approximately and respectively, could result in the breach of a covenant relative to its impact on our trailing months results used in calculating covenant compliance for our and quarter results.  The Company safeguards against this through taking measures to reduce its inventory, revolving credit facility and term debt balances accordingly in order to comply with lenders covenants.

 

Unless our underlying customers demand changes as a result of the coronavirus outbreak, we expect to see minimal impact on our business in the quarters of Beyond that as a result of the measures being taken that are designed to contain the spread of the virus, our suppliers have the materials, capacity or capability to supply our components according to our schedule and specifications if the outbreak continues which could delay our release or delivery of our customers products or require us or our customers to make unexpected changes to such products which materially affect our business and operating results and future compliance with our financial covenants for  

 

The Company continues to monitor operations and results closely and manage debt levels relative to our operational results to ensure compliance with its lenders covenants.

 

On warrants were issued to TCW in connection with the Financing Agreement and outstanding as at As a result of the anti-dilution provision contained in the warrants that were triggered in connection with the Rights Offering and the Registered Direct Offering in the warrants were exercisable to purchase an additional shares of common stock (or a total of ) at These warrants are exercisable on a cashless basis, or for an exercise price of The Company initially recorded the value of the warrants as a warrant liability with a corresponding discount on the long-term debt in the amount of The fair value has been assessed at per unit or as at per unit or – The fair value of the warrant obligation is presented as a warrant liability on the consolidated balance sheet with changes to the fair value recorded each reporting period as either a gain or a loss in the consolidated statement of operations and comprehensive loss. 

  

 

The Company leases certain facility leases in various jurisdictions, including office space, manufacturing and warehouse space. The Company also leases certain production equipment. Leases with an initial term of months or less are recorded on the balance sheet. Operating lease expense is recognized on a straight-line basis over the lease term. Total short-term lease costs for the and months ended was significant.

 

Most leases contain renewal options, which are exercisable at the Company’s sole discretion. The extension terms are typically to years. Some leases include options to purchase the leased property. The depreciable life is limited to the lease term unless title transfers or it is reasonably certain that a purchase option will be exercised. Operating lease liabilities recognized do include related to options to extend lease terms that were reasonably certain of being exercised as at Finance lease liabilities do include related to options to extend lease terms that were reasonably certain of being exercised as at

 

We rent and sublease facility lease that is occupied by SMTC.

 

Leases		Classification		December 29 , 2019 ($)
Assets
Operating lease assets		Operating lease right-of-use-asset			3,330
Finance lease assets (a)		Property, plant and equipment			9,778
Total leased assets					13,108
Liabilities
Current
Operating leases		Current portion of operating lease obligations			1,128
Finance leases		Current portion of finance lease obligations			1,226
Noncurrent
Operating leases		Operating lease obligations			2,615
Finance leases		Finance lease obligations			8,838
Total lease liabilities					13,807

 

 

Lease Cost		Classification		December 29 , 2019 ($)
Operating lease costs
Fixed lease costs		Cost of sales			2,609
Finance lease costs
Depreciation of leased assets		Cost of sales			1,446
Interest on lease liabilities		Interest expense			843
Sublease income		Selling, general and administrative expenses			244

 

 

Maturity of lease liabilities as at December 29, 2019		Operating leases				Finance leases				Total
2020			1,371				1,985				3,356
2021			930				1,667				2,597
2022			632				1,325				1,957
2023			606				1,263				1,869
2024			621				1,252				1,873
Thereafter			251				6,742				6,993
Total lease payments			4,411				14,234				18,645
Less: Interest			(668	)			(4,170	)			(4,838	)
Present value of lease liabilities			3,743				10,064				13,807

 

The company’s future minimum lease payments as of in accordance with legacy lease accounting standards, under non-cancelable operating and financing lease agreements were as follows:

 

Operating lease obligations as at December 30, 2018		$	7,056
Less: Effect of election for “short-term”			(98)
Discounting at 8.0%			(1,043)
Total operating lease liability as at December 31, 2018			5,915

 

Lease term and discount rate		December 29 , 2019
Weighted average remaining term (years)
Operating leases			4.4
Finance leases			9.0
Weighted average discount rate
Operating leases			8.0%
Finance leases			8.0%

 

Other information		December 29, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases			2,196
Operating cash flows from finance leases			N/A
Financing cash flows from finance leases			1,565
Leased assets obtained in exchange for new operating lease liabilities			—
Leased assets obtained in exchange for new finance lease liabilities			135