NOTES PAYABLE AND LONG-TERM DEBT

3 Months Ended

Sep. 30, 2017

On March 29, 2017, the Company entered into to a credit agreement with a commercial bank (“Credit Agreement”). The Credit Agreement, which replaced the Company’s prior credit agreement, provides for a $14.0 million credit facility, the proceeds of which may be utilized as follows: (i) $6.0 million for working capital, letters of credit (up to $2.0 million) and general corporate purposes and (ii) $8.0 million for acquisitions. Indebtedness under the Credit Agreement is secured by substantially all of the Company’s assets with advances outstanding under the working capital portion of the credit facility at any time limited to a Borrowing Base (as defined in the Credit Agreement) equal to 80% of eligible accounts receivable plus the lessor of 50% of eligible inventory and $3.0 million. Advances under the acquisition portion of the credit facility are limited to 75% of the purchase price of an acquired company and convert to a five-year term note at the time of the borrowing. Borrowings bear interest at the greater of (a) zero percent or (b) the One Month ICE LIBOR plus a LIBOR Margin of 2.5%. The LIBOR Margin may increase to as high as 3.0% depending on the Company’s cash flow leverage ratio. The interest rate as of September 30, 2017 was approximately 3.75%. The Company pays a fee of 0.25% per annum on the unused amount of the line of credit.

At September 30, 2017, long-term debt consisted of the following (in thousands):



Non-interest bearing, unsecured note payable assumed in acquisition, monthly payments of $7; maturing September 2018.	$	83

Term loan, bearing interest at 3.75%, monthly payments of $43; maturing March 2022.	2,370

Total long-term debt	2,453
Less: current portion	600
Long-term debt, net of current portion	$	1,853

The Company has availability under the Credit Agreement of $11.6 million ($6.0 million for the working capital and $5.6 million for the acquisitions) as of September 30, 2017 which may be limited by its leverage covenant. The Company also has $10,000 in letters of credit outstanding as of September 30, 2017.

The Credit Agreement contains affirmative and negative covenants that, among other things, require the Company to maintain, beginning with the twelve-month period ending September 30, 2017, a maximum cash flow leverage ratio of no more than 3.5 to 1.0 and a minimum debt service coverage ratio of not less than 1.15 to 1.00. The maximum cash flow leverage ratio decreases to 3.25 to 1.0 on December 31, 2017 and to 3.0 to 1.0 on March 31, 2018. The Credit Agreement, which expires on March 29, 2019, also contains customary events of default which, if uncured, may terminate the Credit Agreement and require immediate repayment of all indebtedness to the lenders.

Payments due on long-term debt during each of the five years subsequent to September 30, 2017 are as follows (in thousands):



Twelve Months Ending September 30,
2018	$	600
2019	517
2020	517
2021	517
2022	302
	$	2,453

The Company utilizes performance bonds to support operations based on certain state requirements. At September 30, 2017, the Company had performance bonds outstanding covering financial assurance up to $0.6 million.