Financing Arrangements

3 Months Ended

Mar. 31, 2012

Financing Arrangements [Abstract]

Financing Arrangements

(7) FINANCING ARRANGEMENTS

The Company entered into a Credit Agreement (the "Credit Agreement") among the Company, BMO Harris Bank N.A., as administrative agent (the "Administrative Agent"), and the lenders party thereto from time to time (the "Lenders") on July 16, 2010. The Company amended the Credit Agreement to increase the borrowings available under the revolving loan facility from $25.0 million to $30.0 million on September 14, 2011. On April 16, 2012, the Credit Agreement was further amended to increase the letter of credit sublimit from $5.0 million to $10.0 million. The revolving loan facility remained unchanged at $30.0 million.

The Company's Credit Agreement matures on July 16, 2013. Pursuant to the terms of its Credit Agreement, the Company is required to make mandatory prepayments on the amounts outstanding thereunder in the event that the Company receives proceeds under certain circumstances or in connection with other specified events. Future changes in the applicable interest rate affect the interest expense incurred on the Company's outstanding indebtedness. Borrowings under the Credit Agreement bear interest at either the base rate or the LIBOR lending rate (each as defined in the Credit Agreement), as applicable, plus the applicable margin set forth in the Credit Agreement. The Company will also pay certain fees and expenses, including a (i) commitment fee equal to 0.50 percent per annum on the unused portion of the Lenders' aggregate revolving commitment and (ii) a letter of credit fee equal to the product of the applicable margin set forth in the Credit Agreement times the face amount of the standby letters of credit and the commercial letters of credit outstanding at such time. The Credit Agreement contains customary covenants, including but not limited to financial covenants requiring the Company to maintain a Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of 1.10 to 1.00 for the periods set forth in the Credit Agreement and providing that annual capital expenditures cannot exceed $3.5 million. Commencing in 2011, the Company may pay dividends to shareholders up to an aggregate amount of $1,250,000 in any fiscal year, subject to compliance with certain covenants and conditions. The Company's Fixed Charge Coverage Ratio, which is based on adjusted EBITDA less capital expenditures and cash tax payments in relation to interest expense, for the first quarter of 2012, exceeded the required minimum ratio of 1.10 to 1.00 and all financial covenants for the three-month period ending March 31, 2012 were satisfied.

As a condition to the extension of the loans and the issuance of the letters of credit under the Credit Agreement, the Company has granted a security interest to the Administrative Agent, for the benefit of the Lenders, in substantially all the assets of the Company except (i) life insurance policies not collaterally assigned to the Lenders, (ii) any equipment subject to liens permitted under the Credit Agreement if such equipment is also subject to an agreement prohibiting the pledge of such equipment to the Lenders, (iii) deposit accounts used exclusively by the Company for payroll and employee retiree benefit purposes and (iv) the Company's interest in the outstanding voting equity securities of any of its directly-owned foreign subsidiaries to the extent such interests exceed 65 percent of the outstanding voting equity securities of such foreign subsidiary.

At March 31, 2012, the Company had interest bearing debt outstanding of $13.4 million borrowed under the Credit Agreement and credit availability was approximately $10.8 million based on the borrowing base formula that includes the following: 85 percent of eligible accounts receivable, the lesser of 65 percent of lower of cost or market of eligible inventory or 85 percent of the appraised net orderly liquidation value of eligible inventory, and 65 percent of commercial letters of credit issued for the purchase of inventory, subject to certain limitations and reserves established at the Lenders discretion. If necessary, the Credit Agreement permits an "overadvance" of up to $1.0 million for sixty consecutive days. The weighted average interest rate for the three months ending March 31, 2012 and 2011 (which includes the amortization charges associated with the terminated interest rate swap, refer to Note 9, Derivatives for additional information) was 5.0 percent and 5.4 percent, respectively.