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Credit Facilities | 9 Months Ended
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Jun. 30, 2020
Debt Disclosure [Abstract] |
Credit Facilities | Credit Facilities A summary of this loan facility as of June 30, 2020, is as follows:
|  | Arrangement |  | Loan Balance |  |  | Interest |  | Maturity Date
|  | Secured term loan $70 million (a) |  | $ | 44.5 |  | million |  | LIBOR* + 3.5% |  | June 7, 2024
|  | Secured revolving line of credit $25 million ceiling (b) |  | $ | — |  | million |  | LIBOR* + 3.5% |  | June 7, 2024
*LIBOR rate as of June 30, 2020 was 0.17% (a) Represents the principal amounts payable on our secured term loan. The $70.0 million secured term loan was secured by liens on substantially all of the assets of the Company. The principal of the term loan is payable in quarterly installments with the remaining balance due on June 7, 2024. Required amortization is 7.5% in years 1 and 2 of the term loan, 10.0% in years 3 and 4, and 12.5% in year 5, with the balance due at maturity. The Credit Agreement requires compliance with a number of financial covenants and contains restrictions on our ability to engage in certain transactions. Among other matters, we must comply with limitations on the following: granting liens; incurring other indebtedness; maintenance of assets; investments in other entities and extensions of credit; mergers and consolidations; and changes in nature of business. The loan agreement also requires us to comply with certain quarterly financial covenants including: (i) a minimum fixed charge coverage ratio of at least 1.25 to 1.00 commencing with the quarter ending September 30, 2019, and for all subsequent periods, and (ii) a Funded Indebtedness to Adjusted EBITDA ratio not exceeding the ratio of 4.25:1.0 to 3.25:1.0 through maturity. Adjusted EBITDA ratio is calculated by dividing the Company's total interest-bearing debt by net income adjusted to exclude (i) interest and other expenses, (ii) provision for or benefit from income taxes, if any, (iii) depreciation and amortization, and (iv) non-recurring charges, losses or expenses to include transaction and non-cash equity expense. The term loan has an interest rate spread range from 2.5% to 4.5% depending on the funded indebtedness to adjusted EBITDA ratio. We are in compliance with all loan covenants and restrictions. We are required to pay quarterly amortization payments, which commenced in September 2019 and ends in March 2024. The quarterly payments are equal installments which started in September 2019 at $1,312,500. The amortization amount will increase every two years by $437,500; the first will occur September 2021 and the final increase will occur in September 2023. In addition to quarterly payments of the outstanding indebtedness, the loan agreement also requires annual payments of a percentage of excess cash flow, as defined in the loan agreement. The loan agreement states that an excess cash flow recapture payment must be made equal to (a) 75% of the excess cash flow for the immediately preceding fiscal year in which indebtedness to consolidated EBITDA ratio is greater than or equal to 2.50:1.0; (b) 50% of the excess cash flow for the immediately preceding fiscal year in which the funded indebtedness to consolidated EBITDA Ratio is less than 2.50:1.0 but greater than or equal to 1.5:1.0; or (c) 0% of the excess cash flow for the immediately preceding fiscal year in which the funded indebtedness to consolidated EBITDA Ratio is less than 1.5:1.0. In addition, the Company must make additional mandatory prepayment of amounts outstanding based on proceeds received from asset sales and sales of certain equity securities or other indebtedness. The Company has made voluntary principal prepayments that satisfy mandatory principal amortization until September 2023. For additional information regarding the schedule of future payment obligations, please refer to Note 11, Commitments and Contingencies. On September 30, 2019, we executed a floating-to-fixed interest rate swap with First National Bank ("FNB") as counter party. The notional amount in the floating-to-fixed interest rate swap is $36 million that matures in 2024. The remaining outstanding balance of our term loan is subject to interest rate fluctuations. On the notional amount, the Company pays a base fixed rate of 1.61%, plus applicable credit spread. As a result, for the nine months ended June 30, 2020, interest expense has been increased by less than $0.1 million. (b) The secured revolving line of credit has a ceiling of up to $25.0 million. Borrowing on the line of credit is secured by liens on substantially all of the assets of the Company. The Company accessed funds from the revolving credit facility during the quarter but has no outstanding balance at June 30, 2020. The Company's total borrowing availability, based on eligible accounts receivables at June 30, 2020, was $19.3 million. As part of the revolving credit facility, the lenders agreed to a sublimit of $3 million for letters of credit for the account of the Company, subject to applicable procedures. The revolving line of credit has a maturity date of June 7, 2024 and is subject to loan covenants as described above. DLH is fully compliant with those covenants.

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