Note G - Bank Lines Of Credit And Other Debt

12 Months Ended

Dec. 31, 2011

Debt Disclosure [Text Block]

NOTE G – BANK LINES OF CREDIT AND OTHER DEBT

At December 31, 2011 and 2010, the Company had debt outstanding of $10,114,000 and $970,000 (2010 balance was attributable to outstanding borrowings by Palladium under its lines of credit facilities and term loans), respectively, (excluding outstanding letters of credit of $280,000 and $2,362,000 at December 31, 2011 and 2010, respectively).

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 $9,716,000 at December 31, 2011 and there were no borrowings at December 31, 2010.  The terms of and current borrowings under the Loan Agreement as of December 31, 2011 were as follows (dollars in thousands):

Amount Outstanding		Outstanding Letters of Credit		Unused Lines of Credit (3)		Total		Interest Rate			Expiration Date
$	9,716	$	280	$	11,004	$	21,000		2.69	% (1)	January 2012 to March 2012 (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.

(3) In January 2012, the Company entered into the Second Amendment with the Bank which reduces the amount of availability by any obligations owed for using the Bank’s treasury or cash management services up to $1,500,000.

Pursuant to the Loan Agreement dated as of June 30, 2010, and as subsequently amended to the present date, the Bank has agreed to provide the Company with a revolving line of credit in an aggregate principal amount not to exceed (i) $21,000,000 minus (ii) the aggregate amount of borrowings by certain foreign subsidiaries of the Company (the “Foreign Subsidiary Borrowers”) under credit facilities with the Bank or any affiliate of the Bank (such revolving line of credit, the “Facility”) plus (iii) the obligations owed for using the Bank’s treasury or cash management services up to $1,500,000, with sublimits for letters of credit and bankers acceptances, in each case not to exceed $5,000,000.  The Facility expires on July 1, 2013, unless earlier terminated pursuant to the terms of the Loan Agreement.  At the Bank’s option, the availability of the Facility may be extended beyond 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 B) 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.

On January 24, 2012, the Company entered into the Second Amendment to the Loan Agreement with the Bank which reduces the amount of availability by any obligations owed for using the Bank’s treasury or cash management services up to $1,500,000.

Interest under the Facility is payable on the first day of each month, commencing on July 1, 2010, at an annual rate of, at the Company’s option, (i) the Bank’s prime rate minus 0.75 percentage points, or (ii) IBOR plus 1.25 percentage points, subject to the terms specified in the Loan Agreement.  The Facility carries an unused commitment fee of 0.125% per year, payable on the first day of each quarter, commencing on July 1, 2010.

The Loan Agreement contains covenants that prevent the Company from, among other things, incurring other indebtedness, granting liens, selling assets outside of the ordinary course of business, making other investments and engaging in any consolidation, merger or other combination.  At December 31, 2011, the Company was in compliance with its debt covenants with the Bank.

The Loan Agreement contains certain events of default, including payment defaults, a cross-default upon a default under any credit facility extended by the Bank or any of its affiliates to a subsidiary of the Company, a defined change of control, certain bankruptcy and insolvency events and certain covenant defaults.  If an event of default occurs, the Bank may stop making any additional credit available to the Company, require the Company to repay its entire debt under the Loan Agreement immediately and exercise remedies against any Collateral Account.

At December 31, 2011 and 2010, Palladium debt outstanding under its lines of credit and term loans was $398,000 and $970,000, respectively.  There were no letters of credit outstanding under these facilities at December 31, 2011 or 2010.  The breakdown of the debt outstanding at December 31 is as follows (dollars and Euros in thousands):

	2011		2010
Secured Fixed Rate Term Loans with Financial Institutions of €1,320 (or approximately $1,710 and $1,754 at December 31, 2011 and 2010, respectively), at interest rates ranging from 5.42% to 5.84% at December 31, 2011 and 2010, due between February 2012 and February 2013 (1)	$	394	$	689
Secured Variable Rate Lines of Credit with Financial Institutions (1):
Facility of €4,000 (or approximately $5,182 and $5,314 at December 31, 2011 and 2010, respectively) at approximately 2.13% and 1.69% at December 31, 2011 and 2010, respectively, due December 31, 2012 and 2011, respectively		0		205
Facilities of €1,000 (or approximately $1,296 and $1,328 at December 31, 2011 and 2010, respectively), at interest rates ranging from approximately 2.56% to 3.12% at December 31, 2011 and ranging from approximately 2.21% to 2.99% at December 31, 2010, due June 30, 2012 and 2011, respectively (2)		0		68
Accrued interest		4		8
Total	$	398	$	970
Short-term	$	250	$	566
Long-term	$	148	$	404

(1) These are secured by Palladium’s assets including accounts receivable and/or intellectual property rights (i.e. trademarks), as well as Palladium common stock.

(2) These lines of credit are renewable every six months.  The amount available under these facilities was €1,000 (or approximately $1,296) during the six month period July 1 through December 31, 2011 and the amount available during the sixth month period July 1 through December 31, 2010 was €1,000 (or approximately $1,328), depending on Palladium’s cash needs.  The lines of credit facility amounts in the table above are the maximum amounts that could be borrowed upon at December 31, 2011 and 2010.  Subsequent to December 31, 2011 and 2010, these lines of credit were renewed until June 30, 2012 and 2011, respectively, and the maximum facility amount available between January 1 through June 30, 2012 is €1,000 (or approximately $1,296) and the maximum facility amount available between January 1 through June 30, 2011 ranged from €1,150 to €1,350 (or approximately $1,528 to $1,793).

In accordance with these financing arrangements with the financial institutions, Palladium must meet minimum working capital requirements and is restricted as to the amount of dividends it can pay.  At December 31, 2011, Palladium was in compliance with these debt covenants.

Interest expense of $266,000, $118,000 and $214,000 was incurred on the Company’s bank loans and lines of credit during the years ended December 31, 2011, 2010 and 2009, respectively.  Amounts due under the Company’s lines of credit and term loans as of December 31, 2011 were as follows (in thousands):

Year ending December 31,
2012	$	9,966
2013		148
2014		0
2015		0
Thereafter		0
	$	10,114