Invacare 2014 Annual Report Download - page 90

INVACARE CORPORATION AND SUBSIDIAIRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
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On January 31, 2014, the Company entered into an Amended and Restated Credit Agreement (the "Amended and Restated
Credit Agreement") by and among the Company, the other Borrowers party thereto, the Guarantors party thereto, the Lenders
party thereto and PNC Bank, National Association, as administrative agent, which amended and restated the Credit Agreement,
dated as of October 28, 2010, by and among the Company and the other parties named therein, as amended (the “Prior Credit
Agreement”).
The Amended and Restated Credit Agreement contained certain covenants that are customary for similar credit arrangements,
including covenants relating to, among other things, financial reporting and notification, compliance with laws, preservation of
existence, maintenance of books and records, use of proceeds, maintenance of properties and insurance, and limitations on liens,
dispositions, issuance of debt, investments, payment of dividends, repurchases of capital stock, acquisitions, transactions with
affiliates, and capital expenditures. There also were financial covenants that required the Company to maintain a maximum leverage
ratio (consolidated funded indebtedness to consolidated EBITDA, each as defined in the Amended and Restated Credit Agreement,
as amended) and a minimum interest coverage ratio (consolidated EBITDA to consolidated interest charges, each as defined in
the Amended and Restated Credit Agreement, as amended).
On September 30, 2014, the Company entered into a First Amendment to the Amended and Restated Credit Agreement (the
"Amendment") which provided the Company with additional flexibility on its financial covenants through the duration of the
Amended and Restated Credit Agreement. The Amended and Restated Credit Agreement, as amended by the Amendment, among
other things, provided for the following:
• An increase in the maximum leverage ratio for the first three quarters of 2014 and a ratio of 3.50 to 1.00 as of
December 31, 2014. The quarterly minimum interest coverage ratio remained 3.5 to 1.00 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 allowed the Company to add back to EBITDA up to $20,000,000 for one-
time cash restructuring charges incurred after May 30, 2013, which was an incremental increase of $5,000,000 from
the terms of the Prior Credit Agreement. The Amendment on September 30, 2014 allowed for an additional add back
to EBITDA for warranty expense accrued up to $10,000,000 and subtraction of related cash payments when made
in future periods.
• 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 (down to $25,000,000 annually), dividends,
other indebtedness and liens.
• An increase of 25 basis points in the margin applicable to determining the interest rate on borrowings under the
revolving credit facility.
As a result of the Amended and Restated Credit Agreement, the Company incurred $351,000 in fees in the first quarter of
2014 which were capitalized and are being amortized through October, 2015. In addition, as a result of reducing the capacity of
the facility from $250,000,000 to $100,000,000, the Company wrote-off $1,070,000 in previously capitalized fees in the first
quarter of 2014, which is reflected in the expense of the North America / HME segment.
The Amended and Restated Credit Agreement also provided for the issuance of swing line loans with borrowings under the
Credit Agreement bearing 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, as of December 31, 2014, was 2.00% per annum for LIBOR loans
and 1.00% for the Base Rate Option loans based on the Company's leverage ratio. In addition to interest, the Company was required
to pay commitment fees on the unused portion of the Credit Agreement. The commitment fee rate, as of December 31, 2014, was
0.30% per annum. Like the interest rate spreads, the commitment fee was subject to adjustment based on the Company's leverage
ratio. As of December 31, 2014, the obligations of the borrowers under the Credit Agreement were secured by substantially all of
the Company's U.S. assets and were guaranteed by substantially all of the Company's material domestic and foreign subsidiaries.
As of December 31, 2014, the Company's leverage ratio was 1.59 and the Company's interest coverage ratio was 7.02
compared to a leverage ratio of 2.30 and an interest coverage ratio of 7.51 as of December 31, 2013. As of December 31, 2014,
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 $35,303,000.