SHORT-TERM AND LONG-TERM DEBT

3 Months Ended

Dec. 31, 2018

Debt Disclosure [Abstract]

SHORT-TERM AND LONG-TERM DEBT

10. SHORT-TERM AND LONG-TERM DEBT

Short-term debt consists of the following:

On March 21, 2018, the Company entered into a financing agreement (“Operating Line of Credit (2018)”) with United Bank, Inc. to provide the Company with a $15.0 million revolving line of credit. The interest rate on the line of credit is the “Wall Street Journal” Prime Rate (the index) with a floor of 4.99%. The effective date of this agreement was February 27, 2018 and it replaced the $15.0 million revolving line of credit (“Operating Line of Credit (2017)”) entered into with United Bank, Inc. effective February 27, 2017. The Company had borrowed $5.5 million against the Operating Line of Credit (2018) as of September 30, 2018 and had $7.0 million available to borrow per the Company’s borrowing base. The Company had borrowed $9.5 million against the Operating Line of Credit (2018) as of December 31, 2018 and had $3.0 million available to borrow per the Company’s borrowing base.

Major items excluded from the borrowing base calculation are receivables from bonded jobs and retainage as well as all items greater than ninety (90) days old. Line of credit borrowings are collateralized by the Company’s accounts receivable.

Cash available under the line is calculated based on 70.0% of the Company’s eligible accounts receivable. Major items excluded from the calculation are receivables from bonded jobs and retainage as well as items greater than 90 days old.

Under the terms of the agreement, the Company must meet the following loan covenants to access the first $12.5 million:

1. Minimum tangible net worth of $17.0 million to be measured quarterly

2. Minimum traditional debt service coverage of 1.50x to be measured quarterly on a rolling twelve- month basis

3. Minimum current ratio of 1.50x to be measured quarterly

4. Maximum debt to tangible net worth ratio (“TNW”) of 1.50x to be measured semi-annually.

Under the terms of the agreement, the Company must meet the following additional requirements for draw requests causing the borrowings to exceed $12.5 million:

1. Minimum tangible net worth of $19.0 million to be measured quarterly

2. Minimum traditional debt service coverage of 2.0x to be measured quarterly on a rolling twelve-month basis

3. Full review of accounts receivable aging report and work in progress. The results of the review shall be satisfactory to the lender in its sole and unfettered discretion.

The Company was in compliance with all covenants for the $12.5 million Operating Line of Credit (2018) at December 31, 2018. The Company does not anticipate borrowing above that amount.

The Company also finances insurance policy premiums on a short-term basis through a financing company. These insurance policies included: workers’ compensation, general liability, automobile, umbrella, and equipment policies. It is typical that the Company makes a down payment in January and finances the remaining premium amount over nine or ten monthly payments. In January 2018, The Company financed $3.1 million in insurance premium policies. At September 30, 2018, the balance of the remaining premiums to be paid was $570,000. At December 31, 2018, the remaining balance had been repaid in full.

A summary of short-term and long-term debt as of December 31, 2018 and September 30, 2018 is as follows:

	December 31,		September 30,
	2018		2018
Line of credit payable to bank, monthly interest at 4.99%, final payment due by February 27, 2019.	$	9,500,000	$	5,500,000
Notes payable to finance companies, due in monthly installments  totaling $62,355 including interest ranging from 0.0% to 7.62%, final payments due January 2019 through June 2019, secured by equipment.		1,153,021		1,332,993
Note payable to finance company for insurance premiums financed, due in monthly installments  totaling $288,581, including interest rate at 2.77%, final payment due November 2018.		-		569,247
Notes payable to bank, due in monthly installments totaling  $7,799, including interest at 4.82%, final  payment due November 2034 secured by  building and property.		1,043,930		1,054,248
Notes payable to bank, due in monthly installments totaling  $11,828, including interest at 5.0%, final  payment due November 2025 secured by  building and property.		827,075		851,768
Notes payable to bank, due in monthly installments totaling  $172,473, including interest at 6.5%, final  payment due February 2019 secured by  equipment.		193,248		702,097
Notes payable to bank, due in monthly installments totaling  $30,914, including interest at 5.0%, final  payment due February 2019 secured by  equipment.		62,889		154,116
Notes payable to bank, due in monthly installments totaling  $98,865, including interest at 4.99%, final  payment due September 2022 secured by  equipment.		3,798,428		4,045,025
Notes payable to bank, due in monthly installments totaling  $46,482, including interest at 5.00%, final  payment due September 2021 secured by  equipment.		1,382,801		1,549,651
Total debt		17,961,392		15,759,145
Less current maturities		12,129,999		9,290,515
Total long term debt	$	5,831,393	$	6,468,630