Financing Agreements |
12 Months Ended |
|---|---|
Jun. 30, 2017 | |
| Debt Disclosure [Abstract] | |
| Financing Agreements |
FINANCING AGREEMENTS
Lines of Credit
The Company has an uncommitted demand revolving credit facility ("Trading Credit Facility”) provided to the Company by a syndicate of financial institutions, with Coöperatieve Rabobank U.A. ("Rabobank") acting as lead lender and administrative agent and Natixis, New York Branch acting as syndication agent. The Trading Credit Facility is secured by substantially all of the Company’s assets on a first priority basis. Currently, the Trading Credit Facility provides the Company with access up to $275.0 million, featuring a $225.0 million base with a $50.0 million accordion option, and is scheduled to mature on March 31, 2018. As of June 30, 2017, the Company incurred $1.2 million of loan costs in connection with the Trading Credit Facility, which was capitalized and is being amortized over the term of the Trading Credit Facility. As of June 30, 2017 and June 30, 2016, the remaining unamortized balance was approximately $0.1 million and $0.6 million, respectively.
The Company routinely uses the Trading Credit Facility to purchase precious metals from suppliers and for operating cash flow purposes. Amounts under the Trading Credit Facility bear interest based on London Interbank Offered Rate (“LIBOR”) plus a 2.50% margin for revolving credit line loans and a 4.50% margin for bridge loans (that is, for loans that exceed the available revolving credit line). The one-month LIBOR rate was approximately 1.17% and 0.47% as of June 30, 2017 and June 30, 2016, respectively. Borrowings are due on demand and totaled $180.0 million and $212.0 million at June 30, 2017 and at June 30, 2016, respectively. The amounts available under the respective borrowing facilities are determined at the end of each week following a specified borrowing base formula. The Company is able to access additional credit as needed to finance operations, subject to the overall limits of the borrowing facilities and lender approval of the revised borrowing base calculation. Based on the latest approved borrowing bases in effect, the amounts available under the Trading Credit Facility after taking into account current borrowings, totaled $45.6 million and $17.8 million as determined on Friday June 30, 2017 and on the Friday before June 30, 2016, respectively.
The Trading Credit Facility has certain restrictive financial covenants, including one requiring the Company to maintain a minimum tangible net worth and one restricting the Company's ability to make dividend payments. As of June 30, 2017 the minimum tangible net worth financial covenant under the Trading Credit Facility was $38.9 million. Also, the Company has a covenant which limits annual dividend payments to 35% of consolidated net income. The Company is in compliance with all restrictive financial covenants as of June 30, 2017.
Interest expense related to the Company’s lines of credit totaled $6.4 million and $4.9 million, which represents 63.6% and 77.9% of the total interest expense recognized, for the years ended June 30, 2017 and 2016, respectively. Our lines of credit carried a daily weighted average effective interest rate of 3.18% and 2.83%, respectively, for the years ended June 30, 2017 and 2016.
Liability on Borrowed Metals
The Company borrows precious metals from its suppliers under short-term agreements with our suppliers. Amounts under these arrangements require delivery either in the form of precious metals or cash. The Company's inventories included borrowed metals with market values totaling $5.6 million and $4.4 million as of June 30, 2017 and June 30, 2016, respectively, with the corresponding liability on borrowed metals reflected on the consolidated balance sheets.
Product Financing Arrangements
The Company has agreements with financial institutions (third parties) that allows the Company to transfer its gold and silver inventory at an agreed-upon price based on the spot price with these third parties. Such agreements allow the Company to repurchase this inventory at an agreed-upon price based on the spot price on the repurchase date. The third party charges a monthly fee as percentage of the market value of the outstanding obligation; such monthly charges are classified in interest expense. These transactions do not qualify as sales, and therefore have been accounted for as financing arrangements and reflected in the consolidated balance sheet as product financing arrangements. The obligation is stated at the amount required to repurchase the outstanding inventory. Both the product financing obligation and the underlying inventory (which is entirely restricted) are carried at fair value, with changes in fair value recorded as a component of cost of sales in the consolidated statements of income. Such obligation totaled $135.3 million and $59.4 million as of June 30, 2017 and June 30, 2016, respectively.
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