DEBT

12 Months Ended

Sep. 30, 2021

DEBT

DEBT

7. DEBT:

The Company primarily finances its operations through a credit facility agreement (the “Facility”) and long-term debt agreements with banks. The Facility is provided through Bank of America acting as the senior agent and with BMO Harris Bank (“BMO”) participating in a loan syndication.

CREDIT FACILITY

	2021		2020
Revolving portion of the Facility, interest payable at 1.89% at September 2021	$	43,650,865	$	61,971,682

The Facility included the following significant terms at September 2021:

● A March 2025 maturity date without a penalty for prepayment.

● $110.0 million revolving credit limit.

● Loan accordion allowing the Company to increase the size of the Facility by $25.0 million.

● A provision providing an additional $10.0 million of credit advances for certain inventory purchases.

● Evergreen renewal clause automatically renewing the agreement for one year unless either the borrower or lender provides written notice terminating the agreement at least 90 days prior to the end of any original or renewal term of the agreement.

● The Facility bears interest at either the bank’s prime rate, or at LIBOR (or equivalent successor rate index) plus 125 - 150 basis points depending on certain credit facility utilization measures, at the election of the Company. For these purposes, in no event shall LIBOR be less than 50 basis points.

● Lending limits subject to accounts receivable and inventory limitations.

● An unused commitment fee equal to one-quarter of one percent (¹/₄%) per annum on the difference between the maximum loan limit and average monthly borrowings.

● Secured by collateral including all of the Company’s equipment, intangibles, inventories, and accounts receivable.

● A financial covenant requiring a fixed charge coverage ratio of at least 1.0 as measured by the previous twelve month period then ended only if excess availability falls below 10% of the maximum loan limit as defined in the credit agreement. The Company’s fixed charge coverage ratio was over 1.0 for the trailing twelve months.

● Provides that the Company may use up to $3.5 million annually, on a collective basis, for the payment of dividends on its common stock, or other distributions or investments, provided the Company is not in default before or after such dividends, distributions or investments. Additionally, the Company may pay dividends on its common stock, or make other distributions or investments in excess of $3.5 million annually provided the Company meets certain excess availability and proforma fixed charge coverage ratios and is not in default before or after such dividends, distributions or investments.

During fiscal 2021, total borrowings and repayments on the Facility were approximately $1.7 billion and $1.7 billion, respectively, resulting in net payments of $18.3 million. Total borrowings and repayments on the Facility during fiscal 2020 were approximately $1.5 billion and $1.5 billion, respectively, resulting in net advances of $1.6 million.  

The amount available for use on the Facility at any given time is subject to a number of factors including eligible accounts receivable and inventory balances that fluctuate day-to-day. Based on our collateral and loan limits as defined in the Facility agreement, the credit limit of the Facility at September 2021 was $109.5 million, of which $43.7 million was outstanding, leaving $65.8 million available.

LONG-TERM DEBT

In addition to the Facility, the Company also had the following long-term obligations at September 2021 and September 2020.

	2021		2020
Real Estate Loan, interest payable at a fixed rate of 3.625% with monthly installments of principal and interest of $47,399 through February 2025 with remaining principal due March 2025, collateralized by three distribution facilities	$	4,498,213	$	1,866,231
Note payable, interest payable at a fixed rate of 4.50% with quarterly installments of principal and interest of $49,114 through June 2023 with remaining principal due September 2023		1,117,254		1,259,413
		5,615,467		3,125,644
Less current maturities		(561,202)		(516,850)
	$	5,054,265	$	2,608,794

The aggregate minimum principal maturities of the long-term debt for each of the next five fiscal years are as follows:

Fiscal Year Ending
2022	$	561,202
2023		1,396,332
2024		443,508
2025		3,214,425
2026		—
	$	5,615,467

Market rate risk for fixed rate debt is estimated as the potential increase in fair value of debt obligations resulting from decreases in interest rates. Based on the borrowing rates currently available to the Company for bank loans with similar terms and average maturities, the fair value of the Company’s long-term debt approximated its carrying value at September 2021.

Cross Default and Co-Terminus Provisions

The Company owns real estate in Bismarck, ND, Quincy, IL, and Rapid City, SD, which is financed through a single term Real Estate Loan with BMO which is also a participant lender on the Company’s revolving line of credit. The Real Estate Loan contains cross default provisions which cause the loan to be considered in default if the loans where BMO is a lender, including the revolving credit facility, is in default. There were no such cross defaults at September 2021. In addition, the Real Estate Loan contains co-terminus provisions which require all loans with BMO to be paid in full if any of the loans are paid in full prior to the end of their specified terms.

Other

The Company has issued a letter of credit for $0.5 million to its workers’ compensation insurance carrier as part of its self-insured loss control program.