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Line of Credit
12 Months Ended
Dec. 31, 2011
Line of Credit [Abstract]  
Line of Credit

10. Line of Credit

The Company has a line of credit agreement with a total availability of $10.0 million. The line is secured by the Company’s accounts receivable and inventory and bears interest at varying rates of interest, currently LIBOR plus 1.5%. The line of credit, which was amended and renewed in June 2011, primarily to remove the borrowing base restriction, matures on June 30, 2013, and requires monthly payments of interest only. At December 31, 2011 and 2010, there were no amounts outstanding under the line of credit. There have been no borrowings under the line of credit to date. The Company’s agreement with the bank requires compliance with certain financial and other covenants including maintenance of minimum tangible net worth and a fixed charge coverage ratio. The ratio of total liabilities to tangible net worth can be no greater than 1:1, and the fixed coverage charge ratio can be no less than 1.25:1, based upon a trailing twelve-month period. At December 31, 2011, the Company’s tangible net worth ratio was 0.28:1 and its fixed charge coverage ratio was 0.17:1. Accordingly, the Company was in violation of the fixed charge coverage ratio. During March 2012, the Company obtained a waiver of this violation, at which time availability of the $10.0 million revolving line of credit was restored. This waiver also provides relief to effectively exclude the $5.7 million charge discussed above when calculating the fixed charge coverage ratio covenant in the future, as well as waive a separate violation relative to the amount of treasury stock purchased during 2011. Excluding the impact of the $5.7 million charge, the fixed charge coverage ratio was 3.27:1.