Note 10 - Revolving Credit Facility

12 Months Ended

Oct. 03, 2015

Notes to Financial Statements

Debt Disclosure [Text Block]

10.  REVOLVING CREDIT FACILITY

In May 2015, we renewed our revolving credit facility from a bank.  As part of the renewal, we extended the line for three years until April 30, 2018. The maximum principal amount we can borrow at any one time was reduced to $5.0 million. There is no longer an unused commitment fee charged for the credit facility. The previously included covenant that restricted dividend payments to 50% of net income was eliminated.

The credit agreement is unsecured and accrues interest at a variable rate equal to 30-day LIBOR plus a margin ranging from 85 to 165 basis points, depending on our leverage ratio (as defined in the credit agreement). The interest rate, including the margin of 85 basis points, was 1.0422% in November 2015. Interest-only payments are required monthly. We have pledged to grant the bank a security interest in our accounts, instruments, and chattel paper upon its request in the event of a default as defined in the credit agreement. Our obligations under the credit agreement are guaranteed by Span-Canada.

The credit facility includes financial covenants relating to tangible net worth and leverage ratios, and restricts mergers and acquisitions, assets sales, indebtedness, liens and capital expenditures without prior written consent of or waiver by the lending bank. Also, our subsidiary is not restricted in its ability to pay dividends or make distributions to us. Violation of loan covenants could result in the acceleration of the term of the credit agreement. The lending bank waived any event of default in connection with (1) our regular quarterly dividend payments of $1.8 million during fiscal year 2015, which represented 46% of our net income for the fiscal year and (2) the special dividend of $1.00 per share declared in November 2014 and paid on January 7, 2015. The bank also granted a consent dated September 29, 2015 to our repurchase of an aggregate of 261,310 shares of Company common stock at a price of $17.49 per share from Robert Johnston, a former director of the Company, and his affiliate, The Jerry Zucker Revocable Trust.

We incurred approximately $6,000, $13,000, and $15,000 of interest expense in 2015, 2014 and 2013, respectively. No amounts were outstanding under the credit facility at October 3, 2015.