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Note 4 - Loan Payable to Bank
3 Months Ended
Jul. 03, 2011
Debt Disclosure [Text Block]
4.           Loan Payable to Bank

Our revolving credit facility with Bank of America, N.A. (the “Lender”) provides for advances up to $65.0 million increasing to $70.0 million, from September 1st of each year through December 31st of each year.  This facility also provides for up to $10.0 million in authorized letters of credit.  The amount we may borrow under this credit facility (the “Line Amount”) is limited to a percentage of the value of accounts receivable and eligible inventory, minus certain reserves.  A significant decrease in eligible inventory due to our vendors’ unwillingness to ship us merchandise, the aging of inventory and/or an unfavorable inventory appraisal could have an adverse effect on our borrowing capacity under our credit facility, which may adversely affect the adequacy of our working capital.  Interest accrues at the Lender’s prime rate plus 1.75% (5.00% at July 3, 2011), or at our option we can fix the rate for a period of time at LIBOR plus 2.75%.  In addition, there is an unused commitment fee of 0.25% per year, based on a weighted average formula.  This credit facility expires in October 2014.  Our obligation to the Lender is presently secured by a first priority lien on substantially all of our non-real estate assets, and we are subject to, among others, a covenant that we maintain a minimum monthly cumulative EBITDA on a trailing 12-month basis.  The covenant would only apply if our availability falls below the greater of (x) $5.0 million and (y) 10% of the Line Amount or the borrowing base, whichever is less.  In the event of a significant decrease in availability under our credit facility, it is highly likely that the EBITDA covenant would be violated.

On July 3, 2011, the bank credit facility had a borrowing capacity of $65.0 million, of which we utilized $47.1 million (including a letter of credit of $2.6 million) and had $16.2 million in availability, $9.9 million above the EBITDA covenant availability requirement.  We reduced our borrowings under the bank credit facility by 12% or $5.9 million to $44.5 million at July 3, 2011 from $50.4 million at June 27, 2010.