XML 38 R18.htm IDEA: XBRL DOCUMENT v2.4.0.8
Credit Facilities
12 Months Ended
Sep. 30, 2013
Debt Disclosure [Abstract]  
Credit Facilities
Credit Facilities

On November 11, 2010, we entered into a Credit and Security Agreement (credit facility) with Wells Fargo Bank. The credit facility, as it has been amended through its five amendments, currently provides us with a revolving credit of up to $35 million through November 2015 that can be used for working capital requirements, letters of credit, and other general corporate purposes. The credit facility is secured by the Company's assets and is subject to a borrowing base formula based on the Company's eligible accounts receivable, inventory, and machinery and equipment accounts.

The credit facility contains customary representations and warranties, and affirmative and negative covenants, including, among other things, cash balance and excess availability requirements, and limitations on liens and certain additional indebtedness and guarantees, in addition to minimum tangible net worth, fixed charge coverage, and EBITDA covenants. The covenants are written such that as long as we maintain the minimum cash balance and excess availability requirement, the other covenants are not required to be met. As of September 30, 2013, we were in compliance with the financial covenants contained in the credit facility since cash on deposit and excess availability exceeded the $2.5 million minimum financial covenant requirement.

The credit facility also contains certain events of default, including a subjective acceleration clause. Under this clause, Wells Fargo may declare an event of default if it believes in good faith that our ability to pay all or any portion of our indebtedness with Wells Fargo or to perform any of our material obligations under the credit facility has been impaired, or if it believes in good faith that there has been a material adverse change in the business or financial condition of the Company. If an event of default is not cured within the grace period (if applicable), then Wells Fargo may, among other things, accelerate repayment of amounts borrowed under the credit facility, cease making advances under the credit facility, or take possession of the Company's assets that secure its obligations under the credit facility. We do not anticipate at this time any change in the business or financial condition of the Company that could be deemed a material adverse change by Wells Fargo.

The credit facility includes in the borrowing availability approximately $4.5 million provided by machinery and equipment, which is reduced monthly by approximately $91,000. The borrowing base also includes accounts which are not yet earned by the final rendition of services by the Company including progress billings and that portion of those accounts earned but not yet invoiced. The borrowing base for these accounts will be the lesser of (1) 60% of these accounts, or (2) $5.0 million.

The credit facility established the Company's minimum cash balance and excess liquidity requirement at $2.5 million until June 30, 2014, when it will increase by $750,000 and thereafter on the first day of each quarter until it reaches $5.0 million. If the minimum cash balance and excess liquidity requirement falls below the specified amounts, certain financial covenants are triggered which relate to minimum tangible net worth, minimum EBITDA amounts, fixed charge coverage and limitations on capital expenditures.

On August 26, 2013, we entered into a Fifth Amendment to the credit facility, which amended among other things the borrowing base of the credit facility, by adding certain real estate as collateral in the borrowing base calculation, pursuant to which Wells Fargo agrees, subject to the terms and conditions of the Fifth Amendment and the credit facility, to provide up to $7.5 million in secured financing to the Company. This change to the borrowing base calculation was not implemented as of September 30, 2013 as not all conditions required had been completed. We expect the change in the borrowing base calculation to be effective by no later than December 31, 2013.

As of September 30, 2013, we had a $21.7 million LIBOR rate loan outstanding, with an interest rate of 3.3%, and approximately $1.2 million reserved for four outstanding stand-by letters of credit under the credit facility. We now expect at least 72% of the $35.0 million credit facility to be available for use during fiscal year 2014.