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Notes Payable And Secured Credit Agreement
 12 Months Ended
Aug. 31, 2022
Notes Payable And Secured Credit Agreement [Abstract]  
Notes Payable And Secured Credit Agreement 6. NOTES PAYABLE AND SECURED CREDIT AGREEMENT

Notes Payable

At August 31, 2022 and 2021, our notes payable consisted of term notes payable to a bank from our amended and secured credit agreement and a note payable to the former owners of Strive Talent, Inc. (Note 3), which was acquired during fiscal 2021. The note payable to the former owners of Strive is recorded at net present value and accrues interest at 3.6 percent until the obligation is paid in full. The balances and classification of our notes payable were as follows at the dates indicated (in thousands):

Current Portion of Notes Payable

Notes Payable, Less Current Portion

August 31,

August 31,

August 31,

August 31,

Description

2022

2021

2022

2021

Bank term notes payable

$

5,000 

$

5,000 

$

5,000 

$

10,000 

Strive acquisition note payable

835 

835 

2,268 

2,975 

$

5,835 

$

5,835 

$

7,268 

$

12,975 

Principal payments of $1.25 million on our term notes payable are due and payable on the first day of each January, April, July, and October until the term loan liability is fully repaid in 2024. Interest on the term loans accrues at LIBOR plus 1.85 percent and is payable on the first day of each month. Under the terms of the Strive acquisition, we pay the former principal owner of Strive $0.8 million each April for the first five years following the acquisition. Principal payments on these notes payable are as follows over the next five years (in thousands):

YEAR ENDING

Term Notes

Strive Note

AUGUST 31,

Payable

Payable

Total

2023

$

5,000 

$

835 

$

5,835

2024

5,000 

835 

5,835

2025

-

835 

835

2026

-

835 

835

2027

-

-

-

$

10,000

$

3,340

$

13,340

Secured Credit Agreement

On August 7, 2019, we entered into a new credit agreement (the 2019 Credit Agreement) with our existing lender, which replaced the amended and restated credit agreement dated March 2011 (the Original Credit Agreement). The 2019 Credit Agreement provides up to $25.0 million in term loans and a $15.0 million revolving line of credit. Upon entering into the 2019 Credit Agreement, we borrowed $20.0 million of the available term loan and used the proceeds to repay all indebtedness under the Original Credit Agreement. During November 2019, we borrowed the remaining $5.0 million of available term loan capacity on the 2019 Credit Agreement.

The 2019 Credit Agreement is secured by substantially all of the assets of the Company and certain of our subsidiaries, and contains customary representations, warranties, and covenants.

Second Modification Agreement

To address potential covenant compliance issues associated with the uncertainties surrounding the economic recovery from the COVID-19 pandemic, on July 8, 2020, we entered into the First Modification Agreement to the 2019 Credit Agreement. The primary purpose of the First Modification Agreement was to provide temporary alternative borrowing covenants for the fiscal quarters ending August 31, 2020 through May 31, 2021. In connection with the acquisition of Strive, we entered into a Consent and Second Modification Agreement to the 2019 Credit Agreement. The primary purposes of the Consent and Second Modification Agreement were to:

Consent to the purchase of Strive Talent, Inc.

Reinstate the original debt covenants of the 2019 Agreement which were temporarily replaced by alternate debt covenants in the First Modification Agreement to the 2019 Agreement.

Reduce the interest rate for borrowings from LIBOR plus 3.0 percent to LIBOR plus 1.85 percent, which was the original rate on the 2019 Credit Agreement. The unused credit commitment fee also returns to the previously established 0.2 percent.

The Consent and Second Modification Agreement did not change any repayment or credit availability terms on the 2019 Credit Agreement. Our reinstated debt covenants consist of the following: (i) a Funded Indebtedness to Adjusted EBITDAR Ratio of less than 3.00 to 1.00; (ii) a Fixed Charge Coverage ratio not less than 1.15 to 1.00; (iii) an annual limit on capital expenditures (excluding capitalized curriculum development costs) of $8.0 million; and (iv) consolidated accounts receivable of not less than 150% of the aggregate amount of the outstanding borrowings on the revolving line of credit, the undrawn amount of outstanding letters of credit, and the amount of unreimbursed letter of credit disbursements.

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 any amounts outstanding on the 2019 Credit Agreement. At August 31, 2022, we believe that we were in compliance with the terms and covenants applicable to the 2019 Credit Agreement and subsequent modifications.

Interest on all borrowings under the 2019 Credit Agreement is due and payable on the first day of each month. The effective interest rate on our term loan obligations was 4.2 percent at August 31, 2022 and 2.4 percent at August 31, 2021.


‎

Revolving Line of Credit

The key terms and conditions of our revolving line of credit associated with the 2019 Credit Agreement are as follows:

Available Credit – $15.0 million less outstanding standby letters of credit, which totaled $10,000 at August 31, 2022.

Maturity Date – August 7, 2024.

Interest Rate – The effective interest rate is LIBOR plus 1.85 percent per annum and the unused commitment fee on the line of credit is 0.2 percent per annum.

We did not have any borrowings on the revolving line of credit at either of August 31, 2022 or 2021.