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Note 4 - Debt and Capital Leases
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Dec. 30, 2012
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| Debt Disclosure [Text Block] |
(a)
Revolving credit facility
On
September 22, 2011, the Company signed a Revolving Credit
and Security Agreement with PNC Bank, National Association
and its Canadian branch (collectively, “PNC”).
This revolving credit facility, in both the United States
and Canada (collectively, the “PNC Facility”),
has a term of three years expiring in September,
2014. Advances made under the PNC Facility bear
interest at the base commercial lending rate of PNC in the
United States plus one quarter of one percent, and the base
commercial lending rate in Canada. The base commercial
lending rate of each respective country of borrowing,
should approximate prime rate. The previous revolving loan
agreement with Wells Fargo Capital Finance Corporation
(“Wells Fargo”) was repaid on September 22,
2011.
At
December 30, 2012, $12,896 was outstanding under the
facility and is classified as a current liability based on
the terms of the PNC Facility, as discussed further below
(January 1, 2012 - $12,454 was outstanding under the
facility and is classified as a current liability, as
restated (note 4(b)). At December 30, 2012 there was a
Canadian dollar denominated debt balance of $1,245. At
January 1, 2012, there was a Canadian dollar denominated
debt balance of $1,312.
The
maximum amount of funds available under the PNC Facility is
$45 million. Availability under the revolving credit
facility is subject to certain conditions, including
borrowing base conditions based on the eligible inventory
and accounts receivable, and certain conditions which are
not objectively determinable. The Company is
required to use a “lock-box” arrangement for
the PNC Facility, whereby remittances from customers are
swept daily to reduce the borrowings under the revolving
credit facility.
The
PNC Facility is jointly and severally guaranteed by the
Company and secured by the assets and capital stock of each
of the Company’s subsidiaries and its future
subsidiaries.
The
PNC agreement contains certain financial and non-financial
covenants (note 4(d)).
(b)
Restatement of January 1, 2012 classification of revolving
credit facility
In
the consolidated financial statements for the period ended
January 1, 2012 as previously reported, the amount
outstanding under the PNC Facility was classified on the
consolidated balance sheet as at January 1, 2012 as
long-term debt. Upon further review of the terms
of the PNC Facility in 2012, the Company determined that
the provision of future advances by PNC under the PNC
facility is subject to certain conditions which are not
objectively determinable and, considering the
“lock-box” arrangement (note 4(a)), the Company
concluded that the borrowings under the PNC Facility should
be classified as a current liability. The
consolidated balance sheet as at January 1, 2012 has been
restated to correct the balance sheet classification of the
PNC facility, resulting in an increase in total current
liabilities of $12,454 and a corresponding decrease in
Long-term debt as at January 1, 2012 from the amounts
previously reported.
(c)
Term facility
The
following table shows the classification of the term
facility as at:
The
Company has a term debt facility with Export Development
Canada expiring in October, 2013 (“EDC”, and
the “EDC Facility”). Remaining
principal repayments of the term loan to EDC consist of
four quarterly installments of $1,158 until the maturity
date of October 13, 2013. The EDC Facility bears interest
at LIBOR plus 2.5% to 3.5% depending on the achievement of
financial performance levels as specified in the amended
debt agreement.
The
EDC Facility is jointly and severally guaranteed by the
Company and secured by the assets and capital stock of each
of the Company’s subsidiaries and its future
subsidiaries.
The
EDC agreement contains certain financial and non-financial
covenants (note 4(d)).
(d)
Covenants
The
PNC and EDC agreements contain certain financial and
non-financial covenants, including certain cross-default
provisions.
The
Company violated certain covenants included in the PNC and
EDC agreements as of December 30,
2012. Subsequent to December 30, 2012, the
Company secured waivers from PNC and EDC covering these
events of default. In addition, the Company and its lenders
have amended the lending agreements.
Under
the amended PNC Facility, the financial covenants require
the Company to maintain minimum amounts of earnings before
interest, taxes and depreciation and amortization and
specified maximum cash conversion cycle days, and limit
unfunded capital expenditures (all as defined in the PNC
agreement). Under the amended EDC facility, the
financial covenants require the Company to maintain minimum
amounts of earnings before interest, taxes and depreciation
and amortization (as defined in the EDC agreement) and
specified maximum cash conversion cycle days (as defined in
the EDC agreement).
Management
believes that it is probable the Company will be in
compliance with these covenants for at least the next 12
months. While management is confident in its
plans, market conditions have been difficult to predict and
there is no assurance that the Company will achieve its
forecasts. A failure to comply with covenants could result
in an event of default. If an event of default occurs and
is not cured or waived, it could result in all amounts
outstanding, together with accrued interest, becoming
immediately due and payable.
(e)
Obligations under capital leases
Minimum
lease payments for capital leases due within each of the
next three years consist of the following:
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