Debt and Notes Payable

12 Months Ended

Dec. 31, 2014

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 as of December 31, 2014 and 2013:

(In thousands)	December 31,
	2014		2013
Fixed rate term note payable to a U.S. bank, with an interest rate of 5.5% at December 31, 2014, due January 1, 2016, secured by real estate, leasehold improvements, property, plant and equipment, inventory and accounts receivable of our U.S. operation.	$	486	$	911
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 3.85% at December 31, 2014, due July 1, 2029, secured by TPT’s land and office building. (€236)		286		351
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 3.3% at December 31, 2014, due January 31, 2030, secured by TPT’s land and building. (€262)		316		386
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.05% at December 31, 2014, due July 31, 2015. Paid in full December 30, 2014.		-		80
Fixed rate Euro term note payable to a Netherlands bank. Paid in full on June 30, 2014.		-		139
Malaysian Ringgit term note payable to a Malaysian bank, with an interest rate 2% above the bank base lending rate, 5.2% at December 31, 2014, due March 1, 2015, secured by TMM’s property, plant and equipment. (RM 1,458)		417		801
Malaysian Ringgit term note payable to a Malaysian bank, with an interest rate 2% above the bank base lending rate, 5.2% at December 31, 2014, due October 25, 2018, secured by TMM’s property, plant and equipment. (RM 4,250)		1,215		1,290
Total		2,720		3,958
Less current maturities		1,113		1,040
Total long-term debt - financial institutions	$	1,607	$	2,918

United States Operations

U.S. Credit Agreement and Term Loan
On December 31, 2010, the Company entered into a credit agreement (the “Agreement”) with American Bank, N.A. (the “Lender”). The Agreement consists of a $2 million term loan, which matures January 1, 2016 and a $2 million line of credit. The term loan bears interest at a fixed rate of 5.5% per annum. Monthly principal and interest payments commenced on February 1, 2011. The monthly principal and interest payment is $38,620. At December 31, 2014, the balance on the term loan was $486,000.

The Agreement is secured by certain assets of the Company which are located in the United States or which arise from the Company’s operations in the United States. Collateral under the Agreement does not include the Company’s ownership or other interests in TMM and TPT, any assets or operations of either TMM or TPT or any proceeds thereof.

On January 17, 2014, the Company entered into the third amendment (the “Third Amendment”) to the Agreement, 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 ended June 30, 2014, nine month period ended September 30, 2014, and twelve month period ended 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 twelve month period ended December 31, 2014.

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. The Company was in compliance with the affirmative and negative covenants at December 31, 2014.

European Operations
On July 7, 2004, TPT entered into a mortgage loan (the “First Mortgage”) with Rabobank. The First Mortgage, in the amount of €485,000, is to be repaid over 25 years and the interest rate is to be adjusted every five years. Under the terms of the First Mortgage, the interest was adjusted to a fixed rate of 3.85%, effective August 1, 2013, for a period of five years. Thereafter, the rate will change to Rabobank prime plus 1.75%. TPT utilized €325,000 of the loan to finance the July 14, 2004, purchase of land and an office building, as well as to remodel the office building. The balance of the loan proceeds, €160,000, was used for the expansion of TPT’s existing building. Monthly principal and interest payments commenced on September 1, 2004, and will continue through July 1, 2029. The monthly principal payment is €1,616. The loan balance at December 31, 2014 was €236,000 ($286,000). The First Mortgage is secured by the land and office building purchased on July 7, 2004.

On January 3, 2005, TPT entered into a second mortgage loan (the “Second Mortgage”) with Rabobank to fund the acquisition of a 10,000 square foot warehouse with a loading dock that is located adjacent to TPT’s existing production facility. The Second Mortgage, in the amount of €470,000, is to be repaid over 25 years and the interest rate is to be adjusted every five years. Under the terms of the Second Mortgage, the interest was adjusted to a fixed rate of 3.3%, effective January 3, 2013, for a period of five years. Thereafter, the rate will change to Rabobank prime plus 1.75%. Monthly principal and interest payments commenced on February 28, 2005 and will continue through January 31, 2030. The monthly principal payment is €1,566. The Second Mortgage is secured by the land and building purchased by TPT on January 3, 2005. The loan balance at December 31, 2014 was €262,000 ($316,000).

On July 19, 2005, TPT entered into a new term loan (the “Term Loan”) with Rabobank to fund the completion of its building expansion. The Term Loan, in the amount of €500,000, will be repaid over 10 years with interest fixed at 6.1% per year for the first five years. Under the terms of the Term Loan, the interest was adjusted to a fixed rate of 4.05%, effective July 19, 2010, for a period of five years. Thereafter, the rate will change to Rabobank prime plus 1.75%. Monthly principal and interest payments commenced on August 31, 2005. The Term Loan, which was scheduled to mature on July 31, 2015, was paid in full as of December 31, 2014.

On July 5, 2011, TPT entered into a three year term loan (the “Additional Term Loan”) in the amount of €700,000 with a fixed interest rate of 4.25%. The proceeds of the Additional Term Loan were used to fund TPT’s plant expansion and is secured by TPT’s assets. Monthly principal and interest payments began on August 5, 2011. The Additional Term Loan, which matured on July 5, 2014, was paid in full as of December 31, 2014.

Asian Operations
On March 2, 2012, our subsidiary, TMM amended their banking facility (the “HSBC Facility”) with HSBC Bank Malaysia Berhad (“HSBC”), a Malaysian Bank, to include a new term loan, funded in Malaysian Ringgits (“RM”), in the amount of RM 3,500,000 ($1,000,000) for the purpose of upgrading the operation’s SR production process. Under the terms of the HSBC Facility, the loan will be paid in 35 equal monthly installments of RM97,223 (excluding interest) and a final installment of RM97,195 or approximately $27,790 and $27,782, respectively, commencing one month after full drawdown or 18 months after initial drawdown, whichever is earlier. The interest rate is 2.0% per annum above the HSBC’s base lending rate, which is currently 5.2% per annum and is payable monthly. The loan balance at December 31, 2014 was RM 1,458,000 ($417,000).

On October 25, 2013, TMM entered into an agreement (the “HSBC Facility Amendment”) with HSBC to amend the HSBC Facility. Under the terms of the HSBC Facility Amendment, HSBC granted a new term loan to TMM in the amount of RM 5,000,000 ($1,429,000). Under the terms of the HSBC Facility Amendment, the term loan will be amortized over a period of five (5) years, and the interest rate is 2.0% per annum above the HSBC’s base lending rate, which is currently 5.2% per annum. Monthly principal payments, in the amount of RM 83,333 ($23,820), will commence one month after the loan is fully funded or 12 months after the initial drawdown, whichever is earlier. The funds will be used to finance part of the cost of plant improvements to increase efficiency and production capacity. The loan balance at December 31, 2014 was RM 4,250,000 ($1,215,000).

Short-term Debt

U.S. Operations
On December 31, 2010, the Company entered into the Agreement with 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 to the Agreement which reduced the minimum interest rate floor from 5.5% to 4.5%. On August 1, 2014, the Company and the Lender entered into the fourth amendment to the Agreement which extended the Line from October 15, 2014 to October 15, 2015. Under the terms of the Agreement, as amended, 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 4.5%. At December 31, 2014, no funds were outstanding on the Line.

European Operations
On March 20, 2007, 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 3.323%), is secured by TPT’s accounts receivable and inventory. At December 31, 2014, TPT had utilized €487,000 ($590,000) of the Credit Facility.

TPT’s loan agreements covering the Credit Facility, the First Mortgage and the Second Mortgage 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 August 31, 2014, TMM amended its short term banking facility with 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 ($143,000); (2) an import/export line (“ECR”) of RM 10,460,000 ($2,990,000); and (3) a foreign exchange contract limit of RM 5,000,000 ($1,429,000).

On August 15, 2014, TMM amended its short term 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 ($286,000); (2) an ECR of RM 7,300,000 ($2,087,000); (3) a bank guarantee of RM 1,200,000 ($343,000); and (4) a foreign exchange contract limit of RM 25,000,000 ($7,146,000). At December 31, 2014, the outstanding balance on the foreign exchange contract was RM 1,037,000 ($296,000) at a current interest rate of 2.15%.

The banking facilities with both HSBC and RHB bear an interest rate on the respective overdraft facilities at 1.25% over bank prime and the respective ECR facilities bear interest at 1.0% above the funding rate stipulated by the Export-Import Bank of Malaysia Berhad. The ECR facilities, 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, 2014, the outstanding balance on the ECR facilities was RM 9,717,000 ($2,777,000) at a current interest rate of 4.62%.

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. While repatriation is allowed in the form of dividends, the credit facilities prohibit TMM from paying dividends, and the HSBC facility further prohibits loans to related parties without the prior consent of HSBC.

Liquidity
Management believes that it has adequate liquidity for fiscal year 2015 and expects to maintain compliance with all financial covenants throughout 2015.

The following is a summary of the future maturities of long-term debt to financial institutions as of December 31, 2014:

Years Ending December 31,
(In thousands)
	2015	$	1,113
	2016		454
	2017		332
	2018		332
	2019		118
	Thereafter		371
	Total	$	2,720