Note 10 - Derivative Financial Instruments

6 Months Ended

Nov. 27, 2011

Derivative Instruments and Hedging Activities Disclosure [Text Block]

10.         Derivative Financial Instruments

In May 2010, the Company entered into a five-year interest rate swap agreement under the Company's Credit Agreement, which expires on April 30, 2015.  The interest rate swap was designated as a cash flow hedge of future interest payments and has a notional amount of $20 million. As a result of the interest rate swap transaction, the Company fixed for a five-year period the interest rate at 4.24%, subject to market based interest rate risk on $20 million of borrowings under its Credit Agreement.  The Company's obligations under the interest rate swap transaction are guaranteed and secured on the same basis as is its obligations under the Credit Agreement.   As of November 27, 2011, the Company recorded to Other Comprehensive Loss on the Consolidated Balance Sheets an unrealized loss of $235,000, net of taxes of $144,000, as a result of the interest rate swap.  If the interest rate swap is terminated or the debt borrowed is paid off prior to April 30, 2015, the amount of unrealized loss or gain included in Other Comprehensive Income (Loss) would be reclassified to earnings.  The Company has no intentions of terminating the interest rate swap or prepaying the debt in the next twelve months.  The interest rate swap liability is included in other non-current liabilities in the accompanying Consolidated Balance Sheets as of November 27, 2011 and May 29, 2011.