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Note 4 - Long-term debt
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Jul. 03, 2011
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| Debt Disclosure [Text Block] |
The
Company has a loan agreement with Wells Fargo Capital Finance
Corporation Canada (“Wells Fargo”) (formerly
Wachovia Capital Finance Corporation (Canada)) and Export
Development Canada (“EDC”), to be referred to
collectively as the “Wells Fargo EDC Facilities”,
dated August 2008.
On
April 2, 2009, the Company and its lenders amended the
lending agreements to revise the EBITDA and leverage
covenants, eliminate the fixed charge coverage ratio for the
five quarters beginning January 5, 2009 and increase the
interest rate by 200 to 300 basis points. On August 4, 2009,
a further amendment was obtained, effectively extending the
terms of the April agreement to July 2010. On May 18, 2010,
the Company and its lenders signed an amendment to extend the
repayment schedule and the term of the debt agreement to
August 2013, to reset the EBITDA and leverage covenants, to
eliminate the fixed charge coverage ratio covenant, and to
reduce interest rates. On August 3, 2011, the Company and its
lenders amended the debt agreement to revise the EBITDA
covenant for the trailing twelve month period ending June 30,
2012. In the event that the EBITDA covenant for the 2012
fiscal year is not reset in writing by June 30, 2012, a
minimum fixed charge coverage ratio covenant is to become
applicable. The revolving line of credit bears interest at
prime to prime plus 1%, the term loan to EDC bears interest
at LIBOR plus 2.5% to 3.5 %, and the term loan to Wells Fargo
bore interest at LIBOR plus 3% to 4%, depending on the
achievement of financial performance levels as specified in
the debt agreement.
The
Company incurred costs of $100 related to the amendment of
the Wells Fargo EDC Facilities in 2010. These costs were
recorded as a non-current deferred charge and are being
amortized as additional interest expense over the remaining
term of the credit facility.
Under
the May 2010 amendment, repayments of the term loan to EDC
for fiscal 2010 were postponed. In addition, the April 1,
2011 payment of $926 was postponed and payments are scheduled
to recommence on July 15, 2011 with quarterly installments of
$926, and the remaining amount outstanding due at
maturity.
The
Wells Fargo EDC Facilities are 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
Company elects to use a “lock-box” arrangement,
whereby remittances from customers are swept daily to reduce
the borrowings under the revolving credit facilities.
At
July 3, 2011 and January 2, 2011, there were Canadian dollar
denominated cash balances of $10,591 and $78, respectively,
which were classified as offsets to debt balances as they
were used to reduce the outstanding revolving credit
facilities.
The
Company is in compliance with the financial covenants
included in the amended Wells Fargo EDC Facilities as at July
3, 2011. Management believes that the Company will be in
compliance with these covenants for the foreseeable future.
Accordingly, the outstanding balances under the lending
agreements continue to be classified as long-term. Continued
compliance with its covenants, however, is dependent on the
Company achieving certain forecasts. 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. In the event of non-compliance, the
Company’s lenders have the right to demand repayment of
the amounts outstanding under the lending agreements or
pursue other remedies or, if the Company can reach an
agreement with its lenders to amend or waive the financial
covenants.
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