Note 3 - Financing Arrangements
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9 Months Ended |
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Dec. 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 $17,000 and $50,000 for the three and
nine-month periods ended
January 1, 2012, 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 for the remittance
of customer payments by CIT 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 condensed consolidated statements of income,
were $121,000 and $137,000 for the three-month periods ended
December 30, 2012 and January 1, 2012, respectively,
and were $313,000 and $340,000 for the nine-month
periods ended
December 30, 2012 and January 1, 2012,
respectively. There were no advances from the
factor at either December 30, 2012 or April 1, 2012.
Credit
Facility: The Company’s credit facility as of
December 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 December
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 December 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 $15,000 for the three months ended
December 30, 2012 and January 1, 2012, respectively,
and $48,000 and $45,000 for the nine months ended
December 30, 2012 and January 1, 2012,
respectively. As of December 30, 2012, there was
no balance owed on the revolving line of credit, there was no
letter of credit outstanding and the Company had $23.0
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 December 30, 2012.
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