Debt and Notes Payable

9 Months Ended

Sep. 30, 2014

Debt Disclosure [Abstract]

Debt and Notes Payable

Long-term Debt – Financial Institutions

Following is a summary of our long-term debt to financial institutions as of September 30, 2014 and December 31, 2013, in thousands:

		September 30,
		2014		December 31,
		(Unaudited)		2013
Fixed Rate term note payable to a U.S. bank, with an interest rate of 5.5% at September 30, 2014, due January 1, 2016, secured by real estate, leasehold improvements, property, plant and equipment, inventory and accounts receivable of our U.S. operation.	$	595	$	911
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 3.85% at September 30, 2014, due July 1, 2029, secured by TPT's land and office building purchased July 2004.  (€240)		304		351
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 3.3% at September 30, 2014, due January 31, 2030, secured by TPT's land and building purchased January 2005.  (€266)		337		386
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.05% at September 30, 2014, due July 31, 2015, secured by TPT's assets.  (€21)		26		80
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.25% at September 30, 2014. Paid in full on June 30, 2014.		-		139
Malaysian Ringgit term note payable to a Malaysian bank, with a fixed interest rate of 5.2% at September 30, 2014, due March 1, 2015, secured by TMM's property, plant and equipment. (RM 1,750)		533		801
Malaysian Ringgit term note payable to a Malaysian bank, with a fixed interest rate of 5.2% at September 30, 2014, due October 25, 2018, secured by TMM's property, plant and equipment. (RM 4,500)		1,372		1,290
Total		3,167		3,958
Less current maturities		1,159		1,040
Total long-term debt - financial institutions	$	2,008	$	2,918

 Short-term Debt

U.S. Operations

On December 31, 2010, the Company entered into a credit agreement, as amended, (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 15, 2013, the Company and the Lender entered into the second amendment which reduced the minimum interest rate floor on the Line from 5.5% to 4.5%.

On January 14, 2014, the Company entered into the third amendment (the “Third Amendment”) with the Lender.  Under the terms of the Third Amendment, the Company is required to maintain a ratio of cash flow to debt service of 1.0 to 1.0 for the four month period ended April 30, 2014, six month period ending June 30, 2014, nine month period ending September 30, 2014, and twelve month period ending December 31, 2014.  Thereafter, the required ratio of cash flow to debt service shall be 1.25 to 1.0 measured on a rolling four quarter basis as originally detailed in the Agreement.  The Company was in compliance with the ratio of cash flow to debt service for  the nine month period ended September 30, 2014.

On August 1, 2014, the Company and the Lender entered into the fourth amendment which extended the maturity date on the Line from October 15, 2014 to October 15, 2015 and released as collateral the $350,000 certificate of deposit pledged as additional security in the Third Amendment to the agreement.  Under the terms of the Agreement, as amended, the amount the Company is entitled to borrow under the Line is subject to a defined borrowing base, which is based on the Company’s eligible accounts receivable and inventory.  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 4.5%.  At September 30, 2014, no funds were outstanding on the Line.

European Operations

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 3.316%), is secured by TPT’s accounts receivable and inventory.  At September 30, 2014, TPT had utilized €53,000 ($68,000) 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 Rabobank, 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 Rabobank could foreclose on the assets of TPT.

Asian Operations

On August 31, 2014, our subsidiary, TMM, amended its banking facility with HSBC Bank of Malaysia Berhad (“HSBC”) to extend the maturity date from April 30, 2014 to June 30, 2015.  The HSBC facility includes the following in RM:  (1) overdraft of RM 500,000 ($152,000); (2) an import/export line (“ECR”) of RM 10,460,000 ($3,188,000; and (3) a foreign exchange contract limit of RM 5,000,000 ($1,524,000).

On August 15, 2014, TMM amended its banking facility with RHB Bank Berhad (“RHB”) to extend the maturity date from March 24, 2014 to April 1, 2015.  The RHB facility includes the following:  (1) an overdraft line of credit up to RM 1,000,000 ($304,000); (2) an ECR of RM 7,300,000 (2,225,000); (3) a bank guarantee of RM 1,200,000 ($365,000); and (4) a foreign exchange contract limit of RM 25,000,000 ($7,621,000).  At September 30, 2014, the outstanding balance on the foreign exchange contract was RM 1,172,000 ($357,000) at a current interest rate of 2.20%.

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 September 30, 2014, the outstanding balance on the ECR facilities was RM 7,645,000 ($2,330,000) at a current interest rate of 5.2%.

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.