FINANCING ARRANGEMENTS

9 Months Ended

Sep. 30, 2011

FINANCING ARRANGEMENTS

FINANCING ARRANGEMENTS

NOTE 3.  FINANCING ARRANGEMENTS

Our credit agreement with Wells Fargo Bank (WFB) provides for a line of credit arrangement of $13.5 million, which expires on May 31, 2013, if not renewed.  The credit arrangement also has a real estate term note with a maturity date of May 31, 2012, a new $475,000 equipment term loan tied to equipment purchased in the Mankato acquisition (Note 6), and a new term loan of up to $1.0 million for capital expenditures to be made in 2011.

Both the line of credit and real estate term note are subject to variations in LIBOR rates.  The weighted-average interest rate on our line of credit was 3.6% and 3.8% for the three and nine months ended September 30, 2011, respectively, while the weighted-average rate on our real estate term loan was 3.6% and 4.4% for the same periods, respectively.  The line of credit, real estate term note, and equipment term loans with WFB contain certain covenants which, among other things, require us to adhere to regular reporting requirements, abide by annual shareholder dividend limitations, maintain certain financial performance, and limit the amount of annual capital expenditures.  On September 30, 2011, we had an outstanding balance of $9.3 million under the line of credit, with unused availability of $4.0 million supported by our borrowing base and we were in compliance with all covenants.  As of September 30, 2011 the entire $1.0 million for capital expenditure is available.