Credit Facility

6 Months Ended

Jun. 30, 2011

Credit Facility

Credit Facility

NOTE 4 — Credit Facility

On June 17, 2011, we entered into a $90,000,000 credit agreement with a new bank group.  The maximum borrowing limit under the facility reduces to $85,000,000 as of March 31, 2012, $80,000,000 as of March 31, 2013 and $75,000,000 as of March 31, 2014 and the facility expires June 17, 2014.  Interest is based upon LIBOR plus a margin that varies between 150 and 225 basis points (225 basis points at June 30, 2011) depending on the ratio of funded debt to earnings before interest, taxes, depreciation and amortization (the “leverage ratio”).  The credit facility contains certain covenants including minimum interest coverage, maximum funded debt to earnings before interest, taxes, depreciation and amortization and minimum tangible net worth.  Material adverse changes in our results of operations could impact our ability to satisfy these requirements.  In addition, the credit agreement includes a material adverse change clause and provides that if we default under any other loan agreement, that would be a default under this facility.  The credit facility provides for seasonal funding needs, capital improvements and other general corporate purposes.  At June 30, 2011, we were in compliance with all terms of the facility and there was $75,100,000 outstanding at a weighted average interest rate of 2.44%.  At June 30, 2011, $14,900,000 was available pursuant to the facility; however, in order to maintain compliance with the required quarterly debt covenant calculations as of June 30, 2011 $7,325,000 could have been borrowed as of that date.

Effective January 15, 2009, we entered into an interest rate swap agreement that effectively converts $35,000,000 of our variable-rate debt to a fixed-rate basis, thereby hedging against the impact of potential interest rate changes on future interest expense.  The agreement terminates on April 17, 2012.  Pursuant to this agreement, we pay a fixed interest rate of 1.74%, plus a margin that varies between 150 and 225 basis points depending on our leverage ratio (225 basis points at June 30, 2011).  In return, the issuing lender refunds to us the variable-rate interest paid to the bank group under our revolving credit agreement on the same notional principal amount, excluding the margin.  At June 30, 2011, the interest rate on our interest rate swap was 3.99%.