Long-Term Debt

12 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

Long-Term Debt

12. Long-Term Debt

The Company had no long-term debt outstanding at September 30, 2021 and 2020.                                                              

On March 2, 2011, the Company entered into a credit agreement with Frost Bank (the “Original Credit Agreement”).  The Original Credit Agreement has been amended periodically since 2011 (as so amended, the “Credit Agreement”).  In November 2019, the credit agreement was amended to (i) extend the maturity date from April 2020 to April 2022, (ii) increase the unencumbered liquid assets covenant threshold from $5 million to $10 million effective in the first quarter of fiscal year 2021, (iii) to increase the tangible net worth requirement from $140 million to $145 million in the first quarter of fiscal year 2021 and (iv) remove the requirement that we obtain the consent of Frost Bank prior to paying dividends or repurchasing stock so long as we are in compliance with the covenants of the credit agreement.  In March 2021, the Company further amended the Credit Agreement to reduce the maximum amount of available borrowing from $30 million to $20 million.  The March 2021 amendment also altered the tangible net worth requirement to decrease the minimum threshold from $145 million to $132 million commencing with the fiscal quarter ended March 31, 2021 and for each fiscal quarter thereafter.  Additionally, the March 2021 amendment added a funded debt to EBITDA ratio financial covenant which requires the Company to maintain, for a twelve-month period ending on the last day of each fiscal quarter commencing with the fiscal quarter ended March 31, 2021, and for each fiscal quarter thereafter, a ratio of funded debt to EBITDA not exceeding 1.50 to 1.00.  The March 2021 amendment also amended the definition of “Eligible Accounts” to include certain unbilled receivables, and reduced the limit on the amount of “Eligible Inventory” that may be included in the borrowing base from $20 million to $15 million.  The borrowing base is determined based upon certain of the Company’s assets which include (i) 80% of certain accounts receivable plus (ii) 50% of certain notes receivable (such result not to exceed $10 million) plus (iii) 25% of certain inventories (such result not to exceed $20 million).  Several of the Company’s domestic subsidiaries have guaranteed the obligations of the Company under the Credit Agreement and such subsidiaries have secured their obligations under such guarantees by the pledge of substantially all of the assets of such subsidiaries.  The Company is required to make monthly interest payments on borrowed funds.  The Credit Agreement limits the incurrence of additional indebtedness and contains other covenants customary in agreements of this type.  The interest rate for borrowings under the Credit Agreement is based on the Wall Street Journal prime rate, which was 3.25% at September 30, 2021.  

In October 2021, Frost Bank notified the Company that they will not be extending the credit agreement upon its expiration in April 2022, and in November 2021 we elected to cancel the credit agreement.  We are currently in negotiations with multiple lenders for a new credit facility arrangement; however, we may not be successful in obtaining a credit facility on terms that are favorable to us.