Debt and Notes Payable

12 Months Ended

Dec. 31, 2012

Debt Disclosure [Abstract]

Debt and Notes Payable

2. Debt and Notes Payable

Long-term Debt – Financial Institutions

Following is a summary of our long-term debt to financial institutions:

(In thousands)		December 31,
		2012		2011
Fixed Rate term note payable to a U.S. bank, with an interest rate of 6.65% at December 31, 2012, due January 1, 2016, secured by real estate, leasehold improvements, property, plant and equipment, inventory and accounts receivable of our U.S. operation.	$	1,309	$	1,680
Term note payable to a U.S. equipment financing company, with an interest rate of 5.24% at December 31, 2012, due April 1, 2013, secured by a Caterpillar front-end loader.		-		35
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 7.8% at December 31, 2012, due July 1, 2029, secured by TPT's land and office building purchased July 2004.  (€275)		363		413
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.6% at December 31, 2012, due January 31, 2030, secured by TPT's land and building purchased January 2005.  (€299)		395		412
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.05% at December 31, 2012, due July 31, 2015, secured by TPT's assets.  (€108)		143		205
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.25% at December 31, 2012, due July 5, 2014, secured by TPT's assets.  (€334)		442		736
Malaysian Ringgit term note payable to a Malaysian bank, with an interest rate of 5.2% at December 31, 2012, due March 1, 2015, secured by TMM's property, plant and eqiupment. (RM 2,647)		866		-
Total		3,518		3,481
Less current maturities		1,202		813
Total long-term debt and notes payable - financial institutions	$	2,316	$	2,668

United States Operation

U.S. Credit Agreement and Term Loan

On December 31, 2010, the Company entered into a new U.S. Credit Agreement (the “Agreement”) with American Bank, N.A. (the “Lender”). The Agreement includes various customary covenants, limitations and events of default.  Under the Agreement, the Company must maintain a ratio of cash flow to debt service of at least 1.25 to 1.0 measured on a rolling four quarter basis.  At December 31, 2012, the ratio of cash flow to debt service was 5.70 to 1.0.

The Agreement also includes certain additional affirmative and negative covenants, including limitations on incurring additional indebtedness, becoming a guarantor or surety, making loans or advances to other parties, except trade credit extended in the normal course of business, or changing the President or Board of Directors of the Company without the Lender’s written consent.

Borrowing under the Agreement may be used to support working capital requirements and for general corporate purposes.

Six-percent Convertible Subordinated Debentures 

As reported in the Company’s Forms 8-K filed with the SEC on May 6, 2009 and August 10, 2009, the Company’s Board of Directors authorized the issuance of its six-percent (6%) convertible subordinated debentures with detachable warrants (the “Debentures”) for the purpose of refinancing, in whole or in part, its debt to the bank and for general corporate purposes.  The Company received $1,500,000 from the sale of Debentures, due May 4, 2016, from nine accredited investors, four of whom are directors of the Company and another of whom is a greater than 5% shareholder.

On May 3, 2012, the five remaining holders, four of whom are directors of the Company and another whom is a greater than 5% shareholder, of our Debentures converted their Debentures, and the Company issued 547,172 shares of common stock upon conversion of such Debentures.

Liquidity

Management believes that it has adequate liquidity for fiscal year 2013 and expects to maintain compliance with all financial covenants throughout 2013.

The following is a summary of the future maturities of long-term debt to financial institutions as of December 31, 2012: 

Years Ending December 31,
(In thousands)
	2013	$	1,202
	2014	1,055
	2015	615
	2016	88
	2017	50
	Thereafter	508
	Total	$	3,518

Short-term Debt

U.S. Operations

On December 31, 2010, the Company entered into a U.S. credit agreement (the “Agreement”) with American Bank, N.A. (the “Lender”) which established a $1,000,000 line of credit (the “Line”).  On March 1, 2012, the Company entered into the first amendment to the Agreement with the Lender which increased the Line from $1,000,000 to $2,000,000 and extended the maturity date from July 1, 2012 to October 15, 2013.  Under the terms of the Agreement, the amount the Company is entitled to borrow under the Line is subject to a borrowing base, which is based on the loan value of the collateral pledged to the Lender to secure the indebtedness owing to the Lender by the Company.  Amounts advanced under the line of credit bear interest at a variable rate equal to one percent per annum point above the Wall Street Journal Prime Rate as such prime rate changes from time to time, with a minimum floor rate of 5.50%.  At December 31, 2012, the Company was not utilizing the Line.

European Operations

On March 20, 2007, our subsidiary, TPT, entered into a short-term credit facility (the “Credit Facility”) with Rabobank for a line of credit of €1,100,000. The Credit Facility was renewed on January 1, 2010 and has no stated maturity date. The Credit Facility, which has a variable interest rate of bank prime plus 2.8% (currently at 3.411%), is secured by TPT’s accounts receivable and inventory. At December 31, 2012, TPT had utilized €755,000 ($997,000) of its short-term credit facility.

TPT’s loan agreements covering both the Credit Facility and the term loans include subjective acceleration clauses that allow Rabobank to accelerate payment if, in the judgment of the bank, there are adverse changes in our business. We believe that such subjective acceleration clauses are customary in the Netherlands for such borrowings.  However, if demand is made by Rabobank, we may be unable to refinance the demanded indebtedness, in which case the bank could foreclose on the assets of TPT.

Asian Operations

On May 21, 2012, our subsidiary, TMM, amended its banking facility with HSBC Bank Malaysia Berhad (“HSBC”) to extend the maturity date from April 30, 2012 to April 30, 2013. The HSBC facility includes the following in Malaysian Ringgits (“RM”):  (1) overdraft of RM 500,000; (2) an import/export line (“ECR”) of RM 6,460,000; (3) a foreign exchange contract limit of RM 5,000,000 ($163,000, $2,112,000 and $1,635,000, respectively); and a term loan of RM 3,500,000 noted above.

On November 6, 2012, TMM amended its banking facility with RHB Bank Berhad (“RHB”) to extend the maturity date to February 27, 2013.  The Company is currently negotiating the renewal of this banking facility with RHB. The RHB facility includes the following:  (1) an overdraft line of credit up to RM 1,000,000; (2) an ECR of RM 9,300,000; (3) a bank guarantee of RM 1,200,000; and (4) a foreign exchange contract limit of RM 25,000,000 ($327,000, $3,042000, $392,000 and $8,175,000, respectively). At December 31, 2012, the outstanding balance on the line of credit was RM 300,000 ($99,000) at a current interest rate of 4.81% and RM 3,100,000 ($1,013,000) was outstanding on the foreign exchange contract at a current interest rate of 2.98%.

The banking facilities with both HSBC and RHB bear an interest rate on the overdraft facilities at 1.25% over bank prime and the ECR facilities bear interest at 1.0% above the funding rate stipulated by the Export-Import Bank of Malaysia Berhad.  The ECR, a government supported financing arrangement specifically for exporters, is used by TMM for short-term financing of up to 180 days against customers’ and inter-company shipments.  At December 31, 2012, the outstanding balance on the ECR facilities was RM 1,205,000 ($394,000) at a current interest rate of 5.0%.

The borrowings under both the HSBC and the RHB short term credit facilities are subject to certain subjective acceleration covenants based on the judgment of the banks and a demand provision that provide that the banks may demand repayment at any time.  We believe such a demand provision is customary in Malaysia for such facilities.  The loan agreements are secured by TMM’s property, plant and equipment.  However, if demand is made by HSBC or RHB, we may be unable to refinance the demanded indebtedness, in which case, the lenders could foreclose on the assets of TMM.  The credit facilities prohibit TMM from paying dividends and the HSBC facility further prohibits loans to related parties without the prior consent of HSBC.