12. DEBT

12 Months Ended

Oct. 31, 2016

Debt Disclosure [Abstract]

12. DEBT

Senior Debt

On May 20, 2015 the Company amended its Credit Agreement (the "Agreement") with Bank of America to provide a senior financing facility consisting of term debt and a revolving line of credit.  Under the Agreement, the Company became obligated on $12,000,000 of debt in the form of a term note to refinance the previous senior term debt and to fund repayment of a portion of its outstanding subordinated debt. Additionally, the Agreement includes a $5,000,000 revolving line of credit that can be used for the purchase of fixed assets, to fund acquisitions, to collateralize letters of credit, and for operating capital.

The Agreement amortizes the term debt over a five year period with 59 equal monthly installments of $133,333 and a final payment of $4,133,333 due in May 2020. The revolving line of credit matures in May 2018.  There are various restrictive covenants under the Agreement, and the Company is prohibited from entering into other debt agreements without the bank's consent.  The Agreement also prohibits the Company from paying dividends without the prior consent of the bank.

At October 31, 2016, there was no balance outstanding on the line of credit and a letter of credit has been issued for $1,415,000 to collateralize the Company's liability insurance program as of that date.  Consequently, as of October 31, 2016, there was $3,585,000 available to borrow from the revolving line of credit. There was $9,733,000 outstanding on the term note as of October 31, 2016.

Effective September 12, 2016, the Company amended its Credit Agreement with the Bank of America (as so amended, the "Second Amendment").  Under the Second Amendment, interest is paid at a rate of one-month LIBOR plus a margin based on the achievement of a specified leverage ratio.  As of October 31, 2016, the margin was 2.50% for the term note and 2.25% for the revolving line of credit.  The Company fixed the interest rate on a portion of its term debt by entering into an interest rate swap.  As of October 31, 2016, the Company had $4,866,000 of the term debt subject to variable interest rates.  The one-month LIBOR was 0.53% on October 31, 2016 resulting in total variable interest rates of 3.03% and 2.78%, for the term note and the revolving line of credit, respectively, as of October 31, 2016.

The Second Amendment requires the Company to be in compliance with certain financial covenants as follows: (i) a maximum annual limit for capital expenditures of $4,000,000 each fiscal year, (ii) consolidated adjusted operating cash flows to consolidated total debt service ratio, as defined, to be no less than 1.5 to 1 for any reference period ending on or after October 31, 2016 and (iii) senior funded debt to consolidated adjusted EBITDA, as defined, to be no greater than 2.5 to 1 as of the end of any fiscal quarter ending on or after October 31, 2016.  As of October 31, 2016, the Company was in compliance with these financial covenants.

Subordinated Debt

In addition to the senior debt, as of October 31, 2016, the Company has subordinated debt owed to Henry, Peter and John Baker in the aggregate principal amount of $9,000,000 that is due November 20, 2020.  The interest rate on each of these notes is 12% per annum.

The notes are secured by all of the assets of the Company but specifically subordinated, with a separate agreement between the debt holders, to the senior credit facility described above.

Notes Payable

In March 2015, the Company completed the Old Mill Pond Springs acquisition that resulted in the Company issuing a promissory note to the seller in the principal amount of $7,500. Payment in full was made on the note in August 2015.

Annual Maturities

Annual maturities of debt as of October 31, 2016 are summarized as follows:

	Senior		Subordinated		Total
Fiscal year ending October 31,
2017	$	1,600,000	$	-	$	1,600,000
2018		1,600,000		-		1,600,000
2019		1,600,000		-		1,600,000
2020		4,933,000		-		4,933,000
2021		-		9,000,000		9,000,000
Total Debt	$	9,733,000	$	9,000,000	$	18,733,000