Line of Credit and Debt Obligations

6 Months Ended

Jul. 02, 2011

Line of Credit and Debt Obligations [Abstract]

Debt Disclosure [Text Block]

Line of Credit and Debt Obligations

Debt obligations consist of the following (in thousands):

	July 2, 2011			January 1, 2011
Debt Obligations
Milpitas building mortgage	$	9,754		$	10,039
Current portion of debt obligations	(603		)	(572		)
Long-term debt obligations	$	9,151		$	9,467

In February 2007, the Company entered into a two-year agreement for a revolving line of credit facility with a maximum principal amount of $15.0 million. On April 30, 2009, the Company re-negotiated this credit facility to extend the maturity date of the facility by an additional two years, to April 30, 2011. On June 15, 2009, the Company amended the financial covenants governing the credit facility to reduce the net tangible net worth requirements, effective as of June 27, 2009. On April 13, 2010, the Company amended the credit facility to (i) increase the maximum principal amount available thereunder from $15.0 million to $20.0 million, (ii) extend the maturity date of such facility by one year to April 30, 2012, and (iii) decrease the unused revolving line commitment fee from 0.25% per annum to 0.1875% per annum.

The instrument governing the facility includes certain financial covenants regarding tangible net worth. The revolving line of credit agreement includes a provision for the issuance of commercial or standby letters of credit by the bank on behalf of the Company. The value of all letters of credit outstanding reduces the total line of credit available. The revolving line of credit is collateralized by a blanket lien on all of the Company’s domestic assets excluding intellectual property and real estate. The minimum borrowing interest rate is 5.75% per annum. Borrowing is limited to the lesser of (a) $7.5 million plus the borrowing base, or (b) $20.0 million. The borrowing base available as of July 2, 2011 was $19.1 million, the lesser of $7.5 million plus the borrowing base or $20.0 million. As of July 2, 2011, the Company was not in breach of any restrictive covenants in connection with this line of credit. There are no outstanding amounts drawn on this facility as of July 2, 2011. Although management has no current plans to request advances under this credit facility, the Company may use the proceeds of any future borrowing for general corporate purposes, future acquisitions or expansion of the Company's business.

In July 2008, the Company entered into a mortgage agreement with General Electric Commercial Finance ("GE") pursuant to which it borrowed $13.5 million. The mortgage initially bears interest at the rate of 7.18% per annum, which rate will be reset after five years to 3.03% over the then weekly average yield of five-year U.S. Dollar Interest Rate Swaps as published by the Federal Reserve. Monthly principal and interest payments are based on a twenty year amortization for the first sixty months and fifteen year amortization thereafter. The remaining principal balance of the mortgage and any accrued but unpaid interest will be due on August 1, 2018. The mortgage is secured, in part, by a lien on and security interest in the building and land comprising the Company’s principal offices in Milpitas, California. GE subsequently sold the mortgage on March 31, 2011 to Sterling Savings Bank, however, no changes were made to the terms of the original loan agreement with GE as a result of the sale.

According to the terms of the loan agreement, the Company can make annual pre-payments of up to 20% of the outstanding principal balance without incurring any penalty. On July 26, 2011, the Company prepaid $1,950,000, representing 20% of the outstanding balance.

At July 2, 2011, future annual maturities of all debt obligations were as follows (in thousands):

Fiscal years
2011 (remaining six months)	$	535
2012	1,283
2013	1,126
2014	811
2015	811
Thereafter	8,497
Total obligations	13,063
(less) Interest	(3,309		)
Total loan amount	$	9,754

Based on the interest rates for similar debt instruments issued by other entities with credit ratings comparable to the Company's, the estimated fair value of the debt as of July 2, 2011 and January 1, 2011 was $10.0 million and $9.9 million, respectively.