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Note 6 - Financing Arrangements
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Jul. 03, 2011
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| Debt Disclosure [Text Block] |
Note
6 – Financing Arrangements
Factoring
Agreement: The Company assigns the majority
of its trade accounts receivable to CIT under factoring
agreements. Under the terms of the factoring
agreements, which expire in July 2013, CIT remits payments to
the Company on the average due date of each group of invoices
assigned. If a customer fails to pay CIT on the
due date, then the Company is charged interest at prime plus
1.0%, which was 4.25% at July 3, 2011, until payment is
received. The Company incurred interest expense of
$17,000 for each of the three-month periods ended July 3,
2011 and June 27, 2010 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 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 $83,000
and $134,000 for the three-month periods ended July 3, 2011
and June 27, 2010, respectively. There were no
advances from the factor at either July 3, 2011 or June 27,
2010.
Notes Payable
and Other Credit Facilities: At July 3, 2011 and April
3, 2011, long-term debt of the Company consisted of (in
thousands):
The
Company’s credit facilities at July 3, 2011 consisted
of the following:
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 July 3, 2011, or LIBOR plus 3.00%, which
was 3.19% at July 3, 2011, maturing on July 11, 2013 and
secured by a first lien on all assets of the
Company. As of July 3, 2011, 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 $16,000
and $10,000 for the three-month periods ended July 3, 2011
and June 27, 2010, respectively. At July 3, 2011,
there was a balance due on the revolving line of credit of
$427,000, there was a $500,000 letter of credit outstanding
and the Company had $21.5 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 July 3, 2011.
Subordinated
Notes totaling $2.0 million. The notes do
not bear interest and are due on July 11,
2011. The original issue discount of $12,000 on
these non-interest bearing obligations at a market interest
rate of 7.25% is being amortized over the life of the
notes.
Minimum
annual maturities as of July 3, 2011 are as follows (in
thousands):
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