Long-Term Debt and Notes Payable

6 Months Ended

Jul. 31, 2012

Long-Term Debt and Notes Payable [Abstract]

Long-Term Debt and Notes Payable

7. Long-Term Debt and Notes Payable

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

	July 31, 2012			January 31, 2012
Revolving line of credit	$	12,400		$	12,550
Equipment note		—			638
MCL notes		31			785
SAP equipment notes		274			210
		12,705			14,183
Less current portion		(175	)		(1,399	)
Long-term debt	$	12,530		$	12,784

In July 2011, 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, 2013 (the “revolving credit facility”). 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 under the revolving credit facility 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 revolving credit 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 July 31, 2012. Up to $7,000,000 of available borrowings under the revolving credit facility may be utilized to secure letters of credit. The revolving credit facility 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 revolving credit facility 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 revolving credit facility. The Company was in compliance with each of these provisions as of and for the quarter ended July 31, 2012. The Company’s average borrowings under the revolving credit facility for the six months ended July 31, 2012 and 2011 were approximately $15,756,000 and $17,628,000, respectively.

In August 2012, the Company entered into an amendment to the revolving credit facility. The revolving credit facility provides for the following amended terms:

• Borrowings of up to $50 million, subject to borrowing base limitations;

• Interest at the prime rate, with a floor of 3.25%;

• Up to $10.0 million of available borrowings available to secure letters of credit;

• Limitations on other debt of up to $10.0 million without the prior consent of the Bank;

• Allows for the guaranty of subsidiary debt of up to $5.0 million without the prior consent of the Bank; and

• Maturity of August 31, 2015.

All other terms and covenants remain unchanged.

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, which was repaid in March 2012, was repayable in 18 monthly installments, bore interest at 8% annually and was 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 2010, MCL entered into two promissory notes related to the purchase of Absolute Equipment Solutions, Inc. The notes bore interest at 6.0% per year with the first of two equal installments paid in March 2011 and the balance in March 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.