Annual report pursuant to Section 13 and 15(d)

Note 3 - Financing Arrangements

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Note 3 - Financing Arrangements
12 Months Ended
Mar. 31, 2013
Debt Disclosure [Text Block]

Note 3 - Financing Arrangements


Factoring Agreements: The Company assigns the majority of its trade accounts receivable to CIT pursuant to factoring agreements whose expiration dates are coterminous with that of the financing agreement described below. 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 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 in fiscal 2012 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 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 must 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 $455,000 and $469,000 during fiscal years 2013 and 2012, respectively. There were no advances from the factor at either March 31, 2013 or April 1, 2012.


Credit Facility:     The Company’s credit facility at March 31, 2013 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%. The financing agreement matures on July 11, 2013 and is secured by a first lien on all assets of the Company. As of March 31, 2013, 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 March 31, 2013, on daily cash balances held at CIT.


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 (the “Commitment Fee”). The Commitment Fee amounted to $64,000 and $61,000 during fiscal years 2013 and 2012, respectively. At March 31, 2013, there was no balance owed on the revolving line of credit, there was no letter of credit outstanding and the Company had $24.3 million available under the revolving line of credit based on its eligible accounts receivable and inventory balances.


The financing agreement was amended on May 21, 2013 to extend its maturity date to July 11, 2016 and to provide for certain other modifications, including, effective as of July 11, 2013, (i) a reduction of the interest rates on the revolving line of credit to prime minus 0.50% or LIBOR plus 2.00%, (ii) a reduction of the Commitment Fee to 0.125% of the average unused portion of the revolving line of credit and (iii) a reduction of the interest rate on daily cash balances held at CIT to prime minus 2.00%.


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. The Company was in compliance with these covenants as of March 31, 2013.