|9 Months Ended|
Mar. 31, 2018
|Debt Disclosure [Abstract]|
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. As of March 31, 2018, the Trading Credit Facility provided the Company with access up to $275.0 million, featuring a $225.0 million base (which included a $15.0 million temporary increase in line of credit that expired April 30, 2018), with a $50.0 million accordion option. The Trading Credit Facility is scheduled to mature on March 29, 2019. As of March 31, 2018, the Company incurred $1.9 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 March 31, 2018 and June 30, 2017, the remaining unamortized balance was approximately $0.7 million and $0.1 million, respectively.
The Company routinely uses the Trading Credit Facility to purchase and finance precious metals 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 1.88% and 1.17% as of March 31, 2018 and June 30, 2017, respectively. Borrowings are due on demand and totaled $210.0 million and $180.0 million at March 31, 2018 and at June 30, 2017, 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 $10.2 million and $45.6 million as determined on the Friday before March 31, 2018 and on Friday, June 30, 2017, respectively.
The Trading Credit Facility has certain restrictive financial covenants, including one requiring the Company to maintain a minimum tangible net worth. As of March 31, 2018 the minimum tangible net worth financial covenant under the Trading Credit Facility was $47.5 million. The Company is in compliance with all restrictive financial covenants as of March 31, 2018.
Interest expense related to the Company’s lines of credit totaled $2.1 million and $1.7 million, which represents 57.9% and 64.5% of the total interest expense recognized, for the three months ended March 31, 2018 and 2017, respectively. Our lines of credit carried a daily weighted average effective interest rate of 3.97% and 3.22%, respectively, for the three months ended March 31, 2018 and 2017.
Interest expense related to the Company’s lines of credit totaled $5.8 million and $4.8 million, which represents 59.9% and 64.3% of the total interest expense recognized, for the nine months ended March 31, 2018 and 2017, respectively. Our lines of credit carried a daily weighted average effective interest rate of 3.85% and 3.08%, respectively, for the nine months ended March 31, 2018 and 2017.
On August 28, 2017, in connection with the closing of the Goldline acquisition (see Note 1), Goldline, then known as Goldline Acquisition Corp., entered into a privately placed credit facility in the amount of $7.5 million (the “Goldline Credit Facility”) with various lenders (the "Goldline Lenders"). Borrowings under the Goldline Credit Facility were used to finance a portion of the consideration payable pursuant to the Goldline acquisition.
The Goldline Credit Facility is secured by a first priority lien on substantially all of the assets of Goldline , and is guaranteed by the Company. Interest on the Goldline Credit Facility is payable quarterly in arrears at the rate of 8.5% per annum, and the Goldline Lenders under the Goldline Credit Facility are entitled to an additional funding fee payment at maturity equal to the greater of 3.0% of the principal amount of the Goldline Credit Facility and 10.0% of cumulative EBITDA (for the periods ending June 30, 2018, 2019 and 2020) of Goldline in excess of $10.0 million, on a pro rata basis. The Goldline Credit Facility has a three-year maturity, and all outstanding principal and unpaid interest is due upon maturity (August 28, 2020).
As of March 31, 2018, the carrying balance of the Goldline Credit facility was $7.0 million, and the remaining unamortized loan cost balance was approximately $0.5 million, which is amortized ratably through the maturity date. As of March 31, 2018, the balance of the loan fee payable was $0.5 million, of which $0.3 million was estimated based on discounted cash flow model of Goldline's projected results.
Interest expense related to the Goldline Credit Facility (including debt loan amortization costs) totaled $226,000 which represents 6.2% of the total interest expense recognized, for the three months ended March 31, 2018. The Goldline Credit Facility's weighted average effective interest rate was 9.19% for the three months ended March 31, 2018.
Interest expense related to the Goldline Credit Facility (including debt loan amortization costs) totaled $505,000 which represents 5.2% of the total interest expense recognized, for the nine months ended March 31, 2018. The Goldline Credit Facility's weighted average effective interest rate was 9.30% for the nine months ended March 31, 2018.
The obligations of Goldline and the Company under the Goldline Credit Facility are subordinated to the Company’s obligations under the Trading Credit Facility (see Lines of Credit, above in Note 14). Under the subordination agreements, the Goldline Lenders are permitted to collect regularly scheduled payments of principal and interest, provided that no event of default is continuing under the Trading Credit Facility and the Company is in pro-forma compliance with the financial covenants under the Trading Credit Facility.
The following table shows the directors, executive officer and principal stockholder that participated in the Goldline Credit Facility transaction, and provides related information:
Liability on Borrowed Metals
The Company's inventories included borrowed precious metals with market values totaling $243.3 million and $5.6 million as of March 31, 2018 and June 30, 2017, respectively, with the corresponding liability on borrowed metals reflected on the condensed consolidated balance sheets.
Metals held as collateral on advanced pool metals
The Company borrows precious metals from its suppliers and customers under short-term agreements. Amounts under these arrangements require repayment either in a similar type of precious metals borrowed or cash. The Company has the ability to sell the precious metals borrowed during the time such obligation is outstanding as long as such precious metals are repurchased, if needed under the terms of the arrangement, to make repayment of the obligation in kind (i.e., deliver precious metals in exchange for the specified precious metal collateral held by the customer).
Liability on borrowed metals - Others
Liabilities also arise from: (1) unallocated metal positions held by customers in the Company’s inventory, (2) amounts due to suppliers for the use of consigned inventory, and (3) shortages in unallocated metal positions held by the Company in the supplier’s inventory.
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 condensed 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 condensed consolidated statements of income. Such obligation totaled $97.4 million and $135.3 million as of March 31, 2018 and June 30, 2017, respectively.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://www.xbrl.org/2003/role/presentationRef