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Note 6 - Financing Arrangements
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Jan. 01, 2012
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| Note 6 - Financing Arrangements Disclosure | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Note 6 - Financing Arrangements |
Note
6 – Financing Arrangements
Factoring
Agreement: The Company assigns the majority of
its trade accounts receivable to CIT under factoring
agreements. Under the terms of the factoring
agreements, which expire in July 2013, CIT remits payments to the
Company on the average due date of each group of invoices
assigned. If a customer fails to pay CIT on the due
date, then the Company is charged interest at prime plus 1.0%,
which was 4.25% at January 1, 2012, until payment is
received. The Company incurred interest expense of
$17,000 and $19,000 for the three-month periods ended January 1,
2012 and December 26, 2010, respectively, and $50,000 and $54,000
for the nine-month periods ended January 1, 2012 and December 26,
2010, respectively, as a result of the failure of the
Company’s customers to pay CIT by the due
date. CIT bears credit losses with respect to assigned
accounts receivable from approved customers that are within
approved credit limits. The Company bears the
responsibility for adjustments from customers related to returns,
allowances, claims and discounts. CIT may at any time
terminate or limit its approval of shipments to a particular
customer. If such a termination were to occur, the
Company must either assume the credit risk for shipments after
the date of such termination or cease shipments to such
customer. Factoring fees, which are included in
marketing and administrative expenses in the accompanying
consolidated statements of income, were $137,000 and $114,000 for
the three-month periods ended January 1, 2012 and December 26,
2010, respectively, and $340,000 and $401,000 for the nine-month
periods ended January 1, 2012 and December 26, 2010,
respectively. There were no advances from the factor
at either January 1, 2012 or December 26, 2010.
Notes Payable
and Other Credit Facilities: At January 1, 2012 and April
3, 2011, long-term debt of the Company consisted of (in
thousands):
The
Company’s credit facility as of
January 1,
2012 consisted of a revolving line of credit under a
financing agreement with CIT of up to $26.0 million, which
includes a $1.5 million sub-limit for letters of credit, with an
interest rate of prime plus 1.00%, which was 4.25% at
January 1,
2012, or LIBOR plus 3.00%, which was 3.27% at
January 1,
2012, maturing on July 11, 2013 and secured by a first
lien on all assets of the Company. As of
January 1,
2012, the Company had elected to pay interest on the
revolving line of credit under the LIBOR option. Also
under the financing agreement, a monthly fee is assessed based on
0.25% of the average unused portion of the $26.0 million
revolving line of credit, less any outstanding letters of
credit. This unused line fee amounted to $15,000 and
$12,000 for the three-month periods ended
January 1,
2012 and December 26, 2010, respectively, and $45,000 and
$34,000 for the nine-month periods ended
January 1,
2012 and December 26, 2010, respectively. As of
January 1,
2012, there was no balance owed on the revolving line of
credit, there was no letter of credit
outstanding
and the Company had $23.3 million available under the revolving
line of credit based on its eligible accounts receivable and
inventory balances.
The
financing agreement for the revolving line of credit 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, dividends and transactions with
affiliates. The Company was in compliance with these
covenants as of January 1, 2012.
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