Invacare 2013 Annual Report Download - page 57

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leverage ratio exceeds 3.50 to 1.00. The initial restructuring charge limitation of $15,000,000 for the life of the agreement was
reached in the fourth quarter of 2012. Compliance with the ratios is tested at the end of the quarter in accordance with the Credit
Agreement. As a result of the Amendment, the Company incurred $436,000 in fees in the second quarter of 2013 which were
capitalized and are being amortized through October, 2015. In addition, as a result of reducing the capacity of the facility from
$400,000,000 to $250,000,000, the Company wrote-off $1,216,000 in fees previously capitalized in the second quarter of 2013,
which is reflected in the expense of the North America / HME segment.
The Credit Agreement also provides for the issuance of swing line loans. Borrowings under the Credit Agreement bear
interest, at the Company's election, at (i) the London Inter-Bank Offer Rate (“LIBOR”) plus a margin; or (ii) a Base Rate Option
plus a margin. The applicable margin is currently 2.25% per annum for LIBOR loans and 1.25% for the Base Rate Option loans
based on the Company's leverage ratio. In addition to interest, the Company is required to pay commitment fees on the unused
portion of the Credit Agreement. The commitment fee rate is currently 0.35% per annum. Like the interest rate spreads, the
commitment fee is subject to adjustment based on the Company's leverage ratio. The obligations of the borrowers under the Credit
Agreement are secured by substantially all of the Company's U.S. assets and are guaranteed by substantially all of the Company's
material domestic and foreign subsidiaries.
During 2013, the Company completed the sale of its ISG business for net proceeds of $144,680,000 in cash and on August
6, 2013, the Company sold Champion, its domestic medical recliner business for dialysis clinics, for net proceeds of $42,872,000
in cash. The net proceeds from these divestitures were used to repay amounts outstanding under the credit facility and other current
payables and thereby improve the Company's leverage ratio.
As of December 31, 2013, the Company's leverage ratio was 2.30 and the Company's interest coverage ratio was 7.51
compared to a leverage ratio of 2.66 and an interest coverage ratio of 19.00 as of December 31, 2012. As of December 31, 2013,
the Company was in compliance with all covenant requirements and under the most restrictive covenant of the Company's borrowing
arrangements, the Company had the capacity to borrow up to an additional $40,143,000.
Amended and Restated Credit Agreement. On January 31, 2014, the Company entered into an Amended and Restated Credit
Agreement (the “Amended and Restated Credit Agreement”). The Amended and Restated Credit Agreement, among other things,
provides for the following:
• An increase in the maximum leverage ratio for the first three quarters of 2014, with quarterly ratios, as described in
the following table:
Fiscal Quarter Ending Maximum Leverage Ratio
March 31, 2014 . . . . . . . . . . . . . . . . . . . . 4.75 to 1.00
June 30, 2014. . . . . . . . . . . . . . . . . . . . . . 4.5 to 1.00
September 30, 2014. . . . . . . . . . . . . . . . . 4.0 to 1.00
December 31, 2014 and thereafter. . . . . . 3.5 to 1.00
The minimum interest coverage ratio of 3.5 to 1.0 was not changed in the Amended and Restated Credit Agreement.
• In calculating the Company’s EBITDA for purposes of determining the leverage and interest coverage ratios, the
Amended and Restated Credit Agreement allows the Company to add back to EBITDA up to $20,000,000 for one-
time cash restructuring charges incurred after May 30, 2013, which is an incremental increase of $5,000,000 from
the terms of the Prior Credit Agreement.
• A decrease in the aggregate principal amount of the revolving credit facility to $100,000,000 from $250,000,000
through the maturity date of the facility in October 2015, as well as reductions in the facility’s swing line loan,
optional currency and foreign borrower sublimits.
• Reductions in the allowances under the facility for capital expenditures (reduced to $25,000,000 annually), dividends,
other indebtedness and liens.
• Further restrictions on acquisitions, share repurchases, certain investments and repurchases of convertible debt until
after the Company confirms compliance with the Amended and Restated Credit Agreement following the quarter
ending December 31, 2014.
• An increase of 25 basis points in the margin applicable to determining the interest rate on borrowings under the
revolving credit facility.