Note 3 - Financing Arrangements
|12 Months Ended|
Mar. 31, 2019
|Notes to Financial Statements|
|Debt Disclosure [Text Block]||
- Financing Arrangements
Master Stand-by Claims Purchase Agreements:On
May 16, 2017,the Company entered into an agreement (the “First Agreement”) with Chase wherein the Company had the right to sell, and Chase had the obligation to purchase, certain claims that could arise if accounts receivable amounts owed by Toys R Us-Delaware, Inc. (“Toys-Delaware”), an affiliated company of TRU, to the Company became uncollectible. The First Agreement would have expired on
September 20, 2018and carried a fee of
1.65%per month of the limit of
$1.8million of accounts receivable due from Toys-Delaware. On
September 18, 2017,TRU and Toys-Delaware filed voluntary petitions for relief under Chapter
11of the U.S. Bankruptcy Code (the “Bankruptcy Filing”). Pursuant to the terms of the First Agreement, the Bankruptcy Filing allowed the Company to exercise its right to sell to Chase the claim that arose as a result of the Bankruptcy Filing (the “First Exercise”), which amounted to
$866,000and which was paid in full to the Company by Chase. The First Exercise resulted in the acceleration of the recognition of the remaining unpaid fees owed under the First Agreement. During fiscal year
2018,the Company recognized
$480,000in fees under the First Agreement, which are included in marketing and administrative expenses in the accompanying consolidated statements of income.
September 19, 2017,the Company entered into an agreement (the “Second Agreement”) with Chase wherein the Company had the right to sell, and Chase had the obligation to purchase, certain accounts receivable claims that could arise if Toys-Delaware converted its Chapter
11case to Chapter
7of the U.S. Bankruptcy Code or had taken certain other specified actions. The Second Agreement would have expired on
March 31, 2018and carried a fee of
1.50%per month of the limit of
$1.8million of accounts receivable due from Toys-Delaware. During fiscal year
2018,the Company recognized
$173,000in fees under the Second Agreement, which are included in marketing and administrative expenses in the accompanying consolidated statements of income.
The Second Agreement was scheduled to have expired on
March 31, 2018but on
March 14, 2018,TRU filed a motion with the Court seeking authority to close the remaining Toys-Delaware stores and distribution centers in the U.S., and to otherwise discontinue, liquidate and wind-down all U.S. operations of Toys-Delaware. Pursuant to the terms of the Second Agreement, the liquidation filing allowed the Company to exercise its right to sell to Chase the claim under the Second Agreement that arose as a result of the liquidation filing, which amounted to
$1.8million and which was paid in full to the Company by Chase during fiscal year
:The Company assigns the majority of its trade accounts receivable to CIT pursuant to factoring agreements, which have expiration dates that are coterminous with that of the financing agreement described below. Under the terms of the factoring agreements, CIT remits customer payments to the Company as such payments are received by CIT. Credit losses are borne by CIT with respect to assigned accounts receivable from approved shipments, while the Company bears the responsibility for adjustments from customers related to returns, allowances, claims and discounts. CIT
mayat any time terminate or limit its approval of shipments to a particular customer. If such a termination or limitation occurs, the Company either assumes (and
mayseek to mitigate) the credit risk for shipments to the customer after the date of such termination or limitation or discontinues shipments to the customer. Factoring fees, which are included in marketing and administrative expenses in the accompanying consolidated statements of income, were
$223,000during fiscal years
2018,respectively. There were
noadvances on the factoring agreements at either
March 31, 2019or
April 1, 2018.
March 31, 2019consisted of a revolving line of credit under a financing agreement with CIT of up to
$26.0million, which includes a
$1.5million sub-limit for letters of credit, bearing interest at the rate of prime minus
0.5%or LIBOR plus
1.75%.The financing agreement matures on
July 11, 2022and is secured by a
firstlien on all assets of the Company. As of
March 31, 2019,the Company had elected to pay interest on balances owed under the revolving line of credit under the LIBOR option, which was
March 31, 2019.The financing agreement also provides for the payment by CIT of interest at the rate of prime as of the beginning of the calendar month minus
March 31, 2019,on daily negative balances, if any, held at CIT.
March 31, 2019,there was a balance of
$4.5million owed on the revolving line of credit, there was
noletter of credit outstanding and
$19.4million was available under the revolving line of credit based on the Company’s eligible accounts receivable and inventory balances. As of
April 1, 2018,there was a balance of
$9.5million owed on the revolving line of credit, there was
noletter of credit outstanding and
$13.2million was available under the revolving line of credit based on the Company’s eligible accounts receivable and inventory balances.
The financing agreement contains usual and customary covenants for agreements of that type, including limitations on other indebtedness, liens, transfers of assets, investments and acquisitions, merger or consolidation transactions, transactions with affiliates, and changes in or amendments to the organizational documents for the Company and its subsidiaries. The Company believes it was in compliance with these covenants as of
March 31, 2019.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef