Debt

6 Months Ended

Jun. 30, 2013

Debt Disclosure [Abstract]

Debt

Note 2. Debt

Long-term Debt – Financial Institutions

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

		(Unaudited)
(In thousands)		June 30,		December 31,
		2013		2012
Fixed Rate term note payable to a U.S. bank, with an interest rate of 5.5% at June 30, 2013, due January 1, 2016, secured by real estate, leasehold improvements, property, plant and equipment, inventory and accounts receivable of our U.S. operation.	$	1,114	$	1,309
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 7.8% at June 30, 2013, due July 1, 2029, secured by TPT's land and office building purchased July 2004.  (€265)		345		363
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 3.3% at June 30, 2013, due January 31, 2030, secured by TPT's land and building purchased January 2005.  (€290)		377		395
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.05% at June 30, 2013, due July 31, 2015, secured by TPT's assets.  (€83)		108		143
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.25% at June 30, 2013, due July 5, 2014, secured by TPT's assets.  (€218)		283		442
Malaysian Ringgit term note payable to a Malaysian bank, with an interest rate of 5.2% at June 30, 2013, due March 1, 2015, secured by TMM's property, plant and eqiupment. (RM 3,208)		1,016		866
Total		3,243		3,518
Less current maturities		1,180		1,202
Total long-term debt - financial institutions	$	2,063	$	2,316

Short-term Debt

U.S. Operation

On December 31, 2010, the Company entered into a credit agreement (the “Agreement”) with American Bank, N.A. (the “Lender”) which established a $1,000,000 line of credit (the “Line”), and on March 1, 2012, the Line was increased from $1,000,000 to $2,000,000.  On May 7, 2013, the Company and the Lender entered into the second amendment which extended the maturity date from October 15, 2013 to October 15, 2014 and reduced the minimum interest rate floor from 5.5% to 4.5%.  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 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 4.50%.  At June 30, 2013, the Company had an outstanding balance on the Line of $700,000.

Under the terms of 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 June 30, 2013, the ratio of cash flow to debt service was 2.92 to 1.0.

European Operation

On March 20, 2007, our subsidiary, TPT, entered into a short-term credit facility (the “Credit Facility”) with Rabobank which increased TPT’s line of credit from €650,000 to €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 3.42%), is secured by TPT’s accounts receivable and inventory.  At June 30, 2013, TPT had utilized €794,000 ($1,033,000) 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 Operation

On May 21, 2013, our subsidiary, TMM, amended its banking facility with HSBC Bank Malaysia Berhad (“HSBC”) to extend the maturity date from April 30, 2013 to April 30, 2014.  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; and (3) a foreign exchange contract limit of RM 5,000,000 ($158,000, $2,044,000 and $1,582,000, respectively).

On April 17, 2013, TMM amended its banking facility with RHB Bank Berhad (“RHB”) to extend the maturity date from March 5, 2013 to March 24, 2014 and grant a multi-trade line of RM 5,000,000 ($1,582,000).  In addition, 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 ($316,000, $2,943,000, $379,000 and $7,913,000, respectively).  At June 30, 2013, the outstanding balance on the line of credit was RM 700,000 ($221,000) at a current interest rate of 4.83% and RM 9,181,000 ($1,442,000) was outstanding on the foreign exchange contract at a current interest rate of 2.80%.

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 June 30, 2013, the outstanding balance on the ECR facilities was RM 5,918,000 ($1,873,000) 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.