FINANCING OBLIGATIONS

9 Months Ended

Sep. 30, 2013

Financing Obligations [Abstract]

FINANCING OBLIGATIONS

2.         FINANCING OBLIGATIONS

The Company has a revolving credit facility (the “Credit Facility”) with SunTrust Bank (the “Bank”) which has a maximum borrowing limit of $25 million, which includes a $5 million stand-by letter of credit subfacility.  The Credit Facility is used to fund the Company’s capital expenditures, potential acquisitions and working capital.  The Company entered into the Credit Facility on June 13, 2013, replacing the previous bank facilities held with Wells Fargo, N.A.  The Credit Facility has a maturity date of June 14, 2016 and the Bank maintains a first priority security interest in substantially all of the Company’s assets.

Interest on borrowings pursuant to the Credit Facility is payable monthly at the LIBOR Rate plus between 1.50% and 2.50% per annum, depending on the Company’s Senior Leverage Ratio (as defined in the Credit Facility).  In an event of default, the Bank has the right to charge interest at the otherwise applicable rate plus 2.00% per annum.  The facility carries a quarterly commitment fee calculated based upon average daily undrawn availability under the Credit Facility multiplied by an applicable percentage ranging between 0.25% and 0.50% per annum depending on the Company’s Senior Leverage Ratio (as defined in the Credit Facility), and letter of credit fees are payable for issued and outstanding letters of credit as specified in the Credit Facility.

The Credit Facility contains financial, affirmative and negative covenants by the Company as are usual and customary for financings of this kind, which can result in the acceleration of the maturity of amounts borrowed under the Credit Facility, including, a restriction on cash dividends, a change in ownership control covenant and financial covenants.  The Credit Facility includes financial covenants that require the Company to maintain a minimum Fixed Charge Coverage Ratio of 1.05 to 1.00, limit capital expenditures, maintain a Minimum Adjusted EBITDA of at least $5,000,000, and a Maximum Senior Leverage Ratio of either 2.5 to 1.00 or 3.0 to 1.00, based on the Company’s trailing EBITDA.   The provisions of the Credit Facility allow the Bank to declare any outstanding borrowings to be immediately due and payable as a result of noncompliance with any of the covenants. As of September 30, 2013, the Company was in compliance with all terms of the Credit Facility.

For the three months ended September 30, 2013, interest expense was $2,000 on bank facilities at a weighted average interest rate of 2.69%.  There were no borrowings on the facility at September 30, 2013, but the applicable rate of interest on any borrowing at September 30, 2013 would have been 1.68%.  For the three months ended September 30, 2012, interest expense was less than $1,000 on the bank facility at a weighted average interest rate of 3.27%.  The Company also incurred unused bank facility fees of approximately $15,000 and $23,000 for the three months ended September 30, 2013 and 2012, respectively, which unused bank facility fees are included in the total interest expense of $41,000 and $90,000 for the three months ended September 30, 2013 and 2012, respectively.

For the nine months ended September 30, 2013, interest expense was $3,000 on the bank facility at a weighted average interest rate of 2.09%.  For the nine months ended September 30, 2012, interest expense was $7,000 on the bank facility at a weighted average interest rate of 3.28%.  The Company also incurred unused bank facility fees of approximately $60,000 and $75,000 for the nine months ended September 30, 2013 and 2012, respectively, which unused bank facility fees are included in the total interest expense of $196,000 and $212,000 for the nine months ended September 30, 2013 and 2012, respectively.

The Company has entered into capital leases for the purchase of forklift trucks, conveyors, racking, computer technology equipment and computer software.  These capital leases have a term of 3 - 5 years.  The amortization of these assets is included in depreciation expense.  The total amount of remaining lease payments to be paid on capital leases, including interest and taxes, was $2.0 million and $1.1 million at September 30, 2013 and December 31, 2012, respectively.  For the three months ended September 30, 2013, the Company repaid $106,000 of principal outstanding and $14,000 of interest expense related to capital leases.  For the three months ended September 30, 2012, the Company repaid $105,000 of principal outstanding and $25,000 of interest expense related to capital leases.  For the nine months ended September 30, 2013, the Company repaid $326,000 of principal outstanding and $48,000 of interest expense related to capital leases.  For the nine months ended September 30, 2012, the Company repaid $321,000 of principal outstanding and $52,000 of interest expense related to capital leases.