Annual report pursuant to Section 13 and 15(d)

Note 8 - Financing Arrangements

Note 8 - Financing Arrangements
12 Months Ended
Apr. 01, 2012
Debt Disclosure [Text Block]
Note 8 - Financing Arrangements

Factoring Agreements:  The Company assigns the majority of its trade accounts receivable to CIT pursuant to factoring agreements which expire in July 2013.  Under the terms of the factoring agreements in effect as of April 1, 2012, CIT would remit payments to the Company on the average due date of each group of invoices assigned.  If a customer failed to pay CIT by the due date, the Company was charged interest at prime plus 1.0%, which was 4.25% at April 1, 2012, until payment was received.  The Company incurred interest expense of $67,000 and $77,000 in fiscal years 2012 and 2011, 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 shipments, while 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 or limitation were to occur, the Company would either assume the credit risks for shipments to the customer after the date of such termination or limitation or cease shipments to the customer.  Factoring fees, which are included in marketing and administrative expenses in the accompanying consolidated statements of income, were $469,000 and $539,000 during fiscal years 2012 and 2011, respectively.  There were no advances from the factor at either April 1, 2012 or April 3, 2011.

The factoring agreements were amended and restated effective as of April 2, 2012 to provide that CIT will remit customer payments to the Company as such payments are received by CIT.

Notes Payable and Other Credit Facilities: At April 1, 2012 and April 3, 2011, long term debt of the Company consisted of (in thousands):

April 1, 2012
April 3, 2011
Revolving line of credit
  $ -     $ 4,336  
Non-interest bearing notes
    -       2,000  
Original issue discount
    -       (48 )
      -       6,288  
Less current maturities
    -       1,952  
    $ -     $ 4,336  

The Company’s credit facility as of April 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 April 1, 2012, or LIBOR plus 3.00%, which was 3.24% at April 1, 2012, maturing on July 11, 2013 and secured by a first lien on all assets of the Company.  As of April 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 $61,000 and $47,000 during fiscal years 2012 and 2011, respectively.  At April 1, 2012, there was no balance owed on the revolving line of credit, there was no letter of credit outstanding and the Company had $24.5 million available under the revolving line of credit based on its eligible accounts receivable and inventory balances.

The financing agreement was amended effective as of April 2, 2012 to provide for the payment by CIT to the Company of interest at the rate of prime minus 1.00%, which was 2.25% at April 2, 2012, on daily negative balances outstanding under the revolving line of credit.

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.