Note 3 - Financing Arrangements
|6 Months Ended|
Sep. 30, 2012
|Debt Disclosure [Text Block]||
Note 3 – Financing Arrangements
Factoring Agreements: The Company assigns the majority of its trade accounts receivable to CIT under factoring agreements which expire in July 2013. Under the terms of the factoring agreements in effect prior to April 2, 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 would be charged interest at prime plus 1.0% until payment was received. The Company incurred interest expense in the amount of $16,000 and $33,000 for the three and six-month periods ended October 2, 2011, respectively, as a result of the failure of the Company’s customers to pay CIT by the due date. The factoring agreements were amended effective as of April 2, 2012 to provide that CIT will remit payments to the Company as such payments are received by CIT.
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 $97,000 and $120,000 for the three months ended September 30, 2012 and October 2, 2011, respectively, and were $192,000 and $203,000 for the six months ended September 30, 2012 and October 2, 2011, respectively. There were no advances from the factor at either September 30, 2012 or April 1, 2012.
Credit Facility: The Company’s credit facility as of September 30, 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% or LIBOR plus 3.00%, maturing on July 11, 2013 and secured by a first lien on all assets of the Company. As of September 30, 2012, the Company had elected to pay interest on balances owed under the revolving line of credit, if any, under the LIBOR option. The financing agreement also provides for the payment by CIT to the Company of interest at the rate of prime minus 1%, which was 2.25% at September 30, 2012, on daily cash balances held at CIT.
Under the financing agreement, a 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 $16,000 and $14,000 for the three months ended September 30, 2012 and October 2, 2011, respectively, and $32,000 and $30,000 for the six months ended September 30, 2012 and October 2, 2011, respectively. As of September 30, 2012, there was no balance owed on the revolving line of credit, there was no letter of credit outstanding and the Company had $19.0 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 September 30, 2012.
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://www.xbrl.org/2003/role/presentationRef