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Note 3 - Financing Arrangements
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6 Months Ended |
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Sep. 30, 2012
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| 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.
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