Note 6 - Line of Credit and Notes Payable

12 Months Ended

Sep. 30, 2011

Debt Disclosure [Text Block]

Note 6 – Line of Credit and Notes Payable

Line of Credit

The Company has a $7.0 million Revolving Line of Credit (“Line of Credit”) under the Amended and Restated Revolving Credit and Term Loan Agreement with its primary financial lender.  At September 30, 2011 and 2010, the Company had no amount outstanding under the Line of Credit.  The Line of Credit requires quarterly interest payments based on the prevailing 30-day LIBOR rate plus 2.75% (2.97% at September 30, 2011), and the interest rate is reset monthly.    Any outstanding balance under the Line of Credit is due on November 30, 2011.  Borrowings under the Line of Credit are limited to the lesser of $7.0 million or the net balance of 80% of qualified accounts receivable plus 50% of qualified inventory less any outstanding term note balances and less the fair value of the interest rate swap agreement in excess of $900,000.  Under these limitations, the Company’s total Line of Credit borrowing base was $6.6 million at September 30, 2011.  Among other financial covenants, the Line of Credit agreement provides that the Company must maintain a fixed charge ratio of coverage (EBITDA to total fixed charges) of not less than 1.25 to 1.0, determined quarterly, and restricts the payment of dividends to no more than 50% of the Company’s net income.  The Line of Credit is collateralized by inventory, accounts receivable, equipment and fixtures and general intangibles.

Notes Payable

The Amended and Restated Revolving Credit and Term Loan Agreement includes two separate term loans, which are also collateralized by inventory, accounts receivable, equipment and fixtures and general intangibles.  The first term loan is a $2.8 million term loan.  The outstanding balance under this note was $1.9 million and $2.1 million at September 30, 2011 and 2010, respectively.  This note is due on November 20, 2021, with monthly principal payments of $15,334 plus accrued interest.  The interest rate is the prevailing 30-day LIBOR rate plus 1.4% (1.62% at September 30, 2011) and is reset monthly.

The second term loan under the Amended and Restated Revolving Credit and Term Loan Agreement is a $16.3 million term loan.  The outstanding balance of this term loan was $10.2 million and $11.8 million at September 30, 2011 and 2010, respectively.  This note is due November 30, 2012, with quarterly payments of approximately $0.4 million plus accrued interest.  The interest rate is the prevailing 30-day LIBOR rate plus 1.4% (1.62% at September 30, 2011).

Subsequent to September 30, 2011, the Company signed the First Amendment to the Amended and Restated Revolving Credit and Term Loan Agreement with its primary financial lender dated November 30, 2011.  Among other things, this amendment extended the Line of Credit maturity to November 30, 2012.  The Line of Credit remains at $7.0 million, and the interest rate remains at the prevailing 30-day LIBOR rate plus 2.75%.  In addition, the second term loan was modified to extend the maturity date from November 30, 2012 to November 30, 2014, and the interest rate will change effective November 30, 2012 from the prevailing 30-day LIBOR rate plus 1.4% to the prevailing LIBOR rate plus 2.4%.

The carrying value of the Company’s borrowings approximates fair value as the interest rate fluctuates periodically based on a floating interest rate.

The aggregate minimum maturities of notes payable and the line of credit for each of the next five years are as follows:

2012	$	1,814,008
2013		8,741,508
2014		184,008
2015		184,008
2016		184,008
Thereafter		950,588
Total	$	12,058,128