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Line Of Credit And Notes Payable | 12 Months Ended
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Aug. 31, 2012
Line Of Credit And Notes Payable [Abstract] |
Line Of Credit And Notes Payable | 5. LINE OF C REDIT AND NOTES PAYABLE During fiscal 2011, we entered into an amended and restated secured credit agreement (the Restated Credit Agreement) with our existing lender. The Restated Credit Agreement provides a revolving line of credit facility (the Revolving Line of Credit) with a maximum borrowing amount of $10.0 million and a term loan (the Term Loan) with maximum available borrowing of up to $5.0 million. Both credit facilities may be used for general business purposes. Revolving Line of Credit On March 13, 2012, we entered into the First Modification Agreement to the existing R estated C redit Agreement. The primary purpose of the First Modification Agreement was to extend the maturity date of the Restated Credit Agreement, which originally expired on March 14, 2012. The First Modification Agreement extended the maturity date of the Restated Credit Agreement to March 31, 2013. During the fourth quarter of fiscal 2012, we entered into the Second Modification Agreement to the Restated Credit Agreement. The primary purpose of the Second Modification Agreement was to extend the maturity date of the Restated Credit Agreement from March 31, 2013 to March 31, 2015. We entered into the Second Modification Agreement to ensure the availability of our line of credit facility over the next thr ee years so that we may use our excess cash to pursue special initiatives, such as the potential repurchase of shares of our common stock, and for other growth opportunities. The key terms and conditions of the Second Modification Agreement remain substantially the same as the Restated Credit Agreement. The key terms and conditions of the Revo lving Line of Credit under the Second Modification Agreement are as follows:
· | Available Credi t – The Revolving Line of Credit has a maximum borrowing amount of $10.0 million, which remains unchang ed from the Restated Credit Agreement.
· | Maturity Date – The maturity date of the Revolving Line of Credit is March 31, 201 5.
· | Interest Rate – The effective interest rate continues to be LIBOR plus 2.50 percent per annum. However, t he unused credit fee on the facility increased slightly from .25 percent to .33 percent.
· | Financial Covenants – The Revolving Line of Credit requires us to be in compliance with specified financial covenants, including (a) a funded debt to EBITDAR (earnings before interest, taxes, depreciation, amortization, and rental expense) ratio of less than 3.00 to 1.00; (b) a fixed charge coverage ratio greater than 1.5 to 1.0; and (c) an annual limit on capital expenditures (not including capitalized curriculum development) of $8.0 million. The previously existing minimum net worth covenant was eliminated.
In the event of noncompliance with these financial covenants and other defined events of default, the lender is entitled to certain remedies, including acceleration of the repayment of amounts o utstanding on the Revolving Line of Credit and the Term Loan. At August 31, 201 2, we believe that we were in compliance with the terms and covenants applicable to the Second Modification Agreement. The effective interest rate on our Revolving Line of Credit was 2.7 percent at August 31, 201 2 and August 31, 20 11. In connection with the Restated Credit Agreement, we entered into a promissory note, a security agreement, repayment guaranty agreements, and a pledge and security agreement. These agreements pledge substantially all of our assets located in the United States to the lender as collateral for borrowings under the Restated Credit Agreement and subsequent amendments. We had no outstanding borrowings on the line of credit facility at August 31, 201 2 or August 31, 2011. Term Loan Payable We borrowed $5.0 million on the term loan payable that is being repaid in 24 equal monthly installments, beginning on October 1, 2011 and concluding on September 1, 2013. The effective interest rate on the term loan is LIBOR plus 2.65 percent per annum and was 2.9 percent at August 31, 201 2 and August 31, 2011.

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