Long-Term Debt and Notes Payable

9 Months Ended

Oct. 31, 2011

Long-Term Debt and Notes Payable [Abstract]

Long-Term Debt and Notes Payable

8. Long-Term Debt and Notes Payable

Long-term debt and notes payable consist of the following (in thousands):

	October 31, 2011			January 31, 2011
Revolving line of credit	$	3,950		$	21,650
Equipment note		1,263			3,066
MCL notes		797			1,550
SAP equipment notes		244			254
		6,254			26,520
Less current portion		(2,033	)		(3,177	)
Long-term debt	$	4,221		$	23,343

On July 27, 2010, the Company entered into an amended credit agreement with First Victoria Bank (the “Bank”) that provides for borrowings of up to $35,000,000 on a revolving basis through May 31, 2012. In July 2011, the agreement was amended to extend the maturity date to May 31, 2013. The Company may, at its option, convert any or all balances outstanding under the revolving credit facility into a series of term notes with monthly amortization over 48 months.

Amounts available for borrowing are determined by a borrowing base. The borrowing base is computed based upon certain outstanding accounts receivable, certain portions of the Company’s lease pool and certain lease pool assets that have been purchased with proceeds from the facility. The revolving credit facility and any term loan are collateralized by essentially all of the Company’s domestic assets. Interest is payable monthly at the prime rate plus 50 basis points, which was 3.75% at October 31, 2011. Up to $7,000,000 of available borrowings under the revolving facility may be utilized to secure letters of credit. The credit agreement contains certain financial covenants that require, among other things, for the Company to maintain a debt to shareholders’ equity ratio of no more than 0.7 to 1.0, maintain a current assets to current liabilities ratio of not less than 1.25 to 1.0; and have quarterly earnings before interest, taxes, depreciation and amortization (“EBITDA”) of not less than $2,000,000. The credit agreement also provides that the Company may not incur or maintain indebtedness in excess of $1,000,000 without the prior written consent of the Bank, except for borrowings related to the credit agreement. The Company was in compliance with each of these provisions as of and for the quarter ended October 31, 2011. The Company’s average borrowings under the revolving credit agreement for the nine months ended October 31, 2011 and 2010 were approximately $12,725,000 and $15,138,000, respectively.

In October 2010, the Company entered into a $3.6 million secured promissory note with a supplier in connection with the purchase of certain lease pool equipment. The note is repayable in 18 monthly installments, bears interest at 8% annually and is secured by the equipment purchased. The Company received the consent of the Bank for this transaction, as required by the terms of the revolving line of credit.

In March of 2010, MCL entered into two promissory notes related to the purchase of AES (See Note 4). The notes bear interest at 6.0% per year with the first of two equal installments paid in March of 2011 and the balance due in March of 2012.

During the year ended January 31, 2010, SAP entered into two notes payable to finance the purchase of certain equipment, which are secured by the equipment purchased. One of these notes bears interest at 7.4% and is due in 2014. The other note bears interest at 8.35% and is due in March 2013.