Note 7 - Bank Lines of Credit and Other Debt

9 Months Ended

Sep. 30, 2011

7.	Bank Lines of Credit and Other Debt

At September 30, 2011 and December 31, 2010, the Company had debt outstanding of $15,449,000 and $970,000, respectively (excluding outstanding letters of credit of $758,000 at September 30, 2011 and $2,362,000 at December 31, 2010).

Debt outstanding under the Company’s Loan Agreement (the “Loan Agreement”) with Bank of America, N.A. (the “Bank”) (not including borrowings by Palladium) was $10,197,000 at September 30, 2011 and there were no borrowings at December 31, 2010. The terms of and current borrowings under the Loan Agreement as of September 30, 2011 were as follows (dollars in thousands):

Amount Outstanding				Outstanding Letters of Credit				Unused Lines of Credit				Total				Interest Rate			Expiration Date
$	10,197			$	758			$	10,045			$	21,000				2.86	% (1)	October 2011 to December 2011 (2)

(1)	This represents the weighted average interest rate of the current borrowings under the Loan Agreement. The interest is at the Company’s option at (i) the Bank’s prime rate minus 0.75 percentage points, or (ii) IBOR plus 1.25 percentage points.

(2)	This represents the maturity dates of the current borrowings under the Loan Agreement. The Loan Agreement expires July 1, 2013.

Pursuant to the Loan Agreement, the Company has agreed to secure its obligations under the Facility with securities and other investment property owned by the Company in certain securities accounts (the “Collateral Accounts,” or the Company’s restricted cash and cash equivalents and restricted investments available for sale, see Note 3) and to guarantee the obligations of certain of the Company’s foreign subsidiaries under their credit facilities with the Bank, or any affiliate of the Bank. The obligations of the Company under the Loan Agreement are guaranteed by its wholly owned subsidiary, K•Swiss Sales Corp. On April 18, 2011, the Company and K•Swiss Sales Corp. entered into the First Amendment to the Loan Agreement with the Bank which permits the Company, among other things, to incur borrowings denominated in Euros, Pound Sterling and Canadian Dollars, in addition to borrowings denominated in U.S. Dollars.

Palladium debt outstanding under its lines of credit and term loans was $5,302,000 and $970,000 at September 30, 2011 and December 31, 2010, respectively. The terms of and current borrowings under Palladium’s lines of credit facilities and term loans at September 30, 2011 was as follows (dollars and Euros in thousands):

	Amount Outstanding		Outstanding Letters of Credit		Unused Lines of Credit		Total		Interest Rate	Expiration Date
Secured lines of credit (1)	$	226	$	0	$	1,134	$	1,360	Variable, 2.75% to 3.50%	December 31, 2011
Secured line of credit		4,637		0		801		5,438	Variable, 2.20%	December 31, 2011
Fixed rate loans (2)		435		0		0		435	5.42% to 5.84%	2012 to 2013
Accrued interest (2)		4		0		0		4
	$	5,302	$	0	$	1,935	$	7,237

(1)	Under these lines of credit, the facility amount available July 1 through December 31, 2011 is €1,000 (or approximately $1,360).

(2)	At September 30, 2011, the amount classified on the Consolidated Balance Sheet as the current portion of long-term debt was $284, which includes accrued interest, and the amount classified as long-term debt was $155.

Interest expense of $177,000 and $94,000 was incurred on all bank loans and lines of credit during the nine months ended September 30, 2011 and 2010, respectively. Interest expense of $106,000 and $26,000 was incurred on all bank loans and lines of credit during the three months ended September 30, 2011 and 2010, respectively.