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1996 ANNUAL REPORT |
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Notes to Consolidated Financial Statements |
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1996 ANNUAL REPORT |
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Notes to Consolidated Financial Statements |
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4. Bank Borrowings
At the end of 1995, the Company had available, through a two-bank group, a revolving line of credit of $35,000,000 bearing interest at the bank’s base rate plus 0.5% (9%), secured by the Company’s interests in certain oil and gas properties and general partner interests. This facility also allowed, at the Company’s option, draws which bear interest for specific periods at the London Interbank Offered Rate ("LIBOR") plus 2.25%. There was no outstanding balance under this line of credit at December 31, 1995.
Effective April 30, 1996, this credit agreement was restated. The facility was increased to $100,000,000 and is now unsecured. The available borrowing base at December 31, 1996, was $5,000,000 and will be redetermined periodically. Prior to December 1, 1996, the borrowing base was $30,000,000. At the Company’s request, it was reduced to the $5,000,000 amount effective December 1, 1996. This was requested in order to reduce the amount of commitment fees paid on this facility, the calculation of which is described below. Depending on the level of outstanding debt, the interest rate will be either the bank’s base rate (8.25% at December 31, 1996) or the bank’s base rate plus 0.25%. This facility also allows, at the Company’s option, draws which bear interest for specific periods at LIBOR. The LIBOR option will now vary from plus 1% to plus 1.5%. There was no outstanding balance under this line of credit at December 31, 1996.
The terms of the revolving line of credit include, among other restrictions, a limitation on the level of cash dividends (not to exceed $2,000,000 in any fiscal year), requirements as to maintenance of certain minimum financial ratios (principally pertaining to working capital, debt, and equity ratios) and limitations on incurring other debt. Since inception, no cash dividends have been declared on the Company’s common stock. The Company presently intends to continue a policy of using retained earnings for expansion of its business. For all periods presented, the Company was in compliance with the provisions of these agreements.
At December 31, 1995, the Company’s second credit facility was an amended and restated revolving line of credit with the lead bank for $5,000,000, bearing interest at the bank’s base rate (8.5%), secured by certain Company receivables. There were no outstanding amounts under this facility at December 31, 1995. Effective April 30, 1996, this facility was amended to $7,000,000, with interest at the bank’s base rate less 0.25% (8% at December 31, 1996). The available borrowing base is $2,000,000 at December 31, 1996, and will be redetermined periodically. This borrowing base decrease from $7,000,000 was also effective December 1, 1996, at the Company’s request. There were no outstanding amounts under this facility at December 31, 1996. The restated credit facility extends through September 30, 1999.
In addition to interest on these credit facilities, the Company pays a commitment fee to compensate the banks for making funds available. The fee on the revolving line of credit is calculated on the average daily remainder, if any, of the commitment amount less the aggregate principal amounts outstanding, plus the amount of all letters of credit outstanding during the period. The aggregate amounts of commitment fees paid by the Company were $120,000 in 1996 and $154,000 in 1995.
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