Annual report pursuant to Section 13 and 15(d)


12 Months Ended
Sep. 30, 2015

6. Debt

Credit Facilities

        On March 9, 2015, we entered into an amendment to our unsecured credit agreement (the "Credit Agreement"). The Credit Agreement, as amended, provides for a revolving line of credit up to $400 million that may be used for revolving loans, swingline loans (subject to a sublimit of $5 million), and to request letters of credit, subject to a sublimit of $30 million. The line of credit is available for general corporate purposes, including working capital, capital expenditures and acquisitions. The arrangement will terminate on March 9, 2020, at which time all outstanding borrowings must be repaid.

        On April 1, 2015, we borrowed $225 million under the Credit Agreement in order to fund our acquisition of Acentia. Additional borrowings and repayments were subsequently made to fund working capital and capital expenditure requirements. The Credit Agreement permits us to make borrowings in currencies other than the United States Dollar. At September 30, 2015, we have U.S. Dollar borrowings of $202 million and Canadian Dollar borrowings of $7.7 million (10.3 million Canadian Dollars). In addition to borrowings under the Credit Facility, we have an outstanding loan of $0.9 million (1.2 million Canadian Dollars) with the Atlantic Innovation Fund of Canada. There is no interest charge on this loan. The Atlantic Innovation Fund loan is repayable over 27 remaining quarterly installments.

        At September 30, 2015, we held three letters of credit under the Credit Agreement totaling $0.8 million. Each of these letters of credit may be called by vendors in the event that the Company defaults under the terms of a contract, the probability of which we believe is remote. In addition, two letters of credit totaling $3.0 million, secured with restricted cash balances, are held with another financial institution to cover similar obligations to customers.

        The Credit Agreement requires us to comply with certain financial covenants and other covenants including a maximum total leverage ratio and a minimum fixed charge coverage ratio. We were in compliance with all covenants as of September 30, 2015. Our obligations under the Credit Agreement are guaranteed by material domestic subsidiaries of the Company. The Credit Facility is currently unsecured. In the event that our total leverage ratio, as defined in the credit agreement, exceeds 2.5 to 1, the Credit Agreement will become secured by the assets of the parent company and certain of its subsidiaries. At September 30, 2015, our total leverage ratio was less than 1.0:1.0.

        The Credit Agreement provides for an annual commitment fee payable on funds not borrowed or utilized for letters of credit. This charge is based upon our leverage and varies between 0.15% and 0.3%. Borrowings under the Credit Agreement bear interest at our choice at either (a) a Base Rate plus a margin that varies between 0.0% and 0.75% per year, (b) a Eurocurrency Rate plus an applicable margin that varies between 1.0% and 1.75% per year or (c) an Index Rate plus an applicable margin which varies between 1.0% and 1.75% per year. The Base Rate, Eurocurrency Rate and Index Rate are defined by the Credit Agreement. As of September 30, 2015, interest accrued at a rate of 1.19%.

Derivative Arrangement

        In order to add stability to our interest expense and manage our exposure to interest rate movements, we entered into a derivative arrangement to fix payments on part of our outstanding loan balance. We will pay a fixed rate of interest to a financial institution and receive a balance equivalent to the floating rate payable. At September 30, 2015, payments on $53.3 million of our principal balance are fixed. The principal balance subject to this derivative arrangement will decline through September 30, 2016.

        At September 30, 2015, the fair value of this derivative instrument was less than $0.1 million and included in accounts payable and accrued liabilities in the consolidated balance sheets. As this cash flow hedge is considered effective, the loss related to the decline in the fair value of this derivative instrument is reported in Accumulated Other Comprehensive Income (AOCI) in the Statement of Comprehensive Income.

        We have agreements with each of our interest rate swap counterparties that contain a provision providing that we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness.

        During the year ended September 30, 2015, we made interest payments of $1.2 million.

Capital Leases

        As of September 30, 2015, we recorded capital lease obligations of $0.4 million, which represent liabilities due under capital leases for fixed assets acquired with Acentia. The gross amount of assets recorded under capital leases was $0.5 million with accumulated amortization of $0.2 million as of September 30, 2015.The future minimum lease payments required to be made under the capital leases as of September 30, 2015 are approximately $0.2 million per fiscal year for the next two years.