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LONG TERM DEBT
 12 Months Ended
Dec. 31, 2013
Notes to Financial Statements  
NOTE 9. LONG TERM DEBT

Mortgage Note Payable

 

At December 31, 2013, we had approximately $3.3 million outstanding industrial revenue bonds which were previously used for the purchase and renovation of our Clearwater, Florida facility.  These bonds were refinanced in October 2011 through PNC Bank, N.A. The bonds, which had a 20-year amortization term, bear interest at a fixed interest rate of 5.6%.  Scheduled maturities of this indebtedness are approximately $72,000, $3.2 million for 2013 and 2014, which included additional monthly principal payments and an accelerated balloon payment date pursuant to the forbearance amendment to our credit agreement dated October 22, 2013 mentioned below.

 

On October 22, 2013, we entered into an amendment to our credit facilities with PNC Bank.  Pursuant the amendment, we terminated our revolving line of credit. In addition, the amendment provided for changes to our mortgage note credit facility and previous amendment: (a) the definition of “adjusted EBITDA” contained in our credit agreement dated October 31, 2011, as amended, relating to $4,000,000 in Pinellas County Industrial Development Revenue Bonds Series 2008 was amended to exclude the one-time payment on the judgment in favor of Leonard Keen in the approximate amount of $848,000, effective as of June 30, 2013; (b) in addition to the payments of principal and interest otherwise required under the bonds, from November 1, 2013 through and including September 1, 2014, the Company shall make additional principal payments of $12,000 per month and redeem the bonds in full on October 1, 2014; and (c) amended the covenant containing the adjusted EBITDA targets, as more fully set forth in the fourth amendment. The amendment also grants PNC a security interest in all of our property and equipment (excluding patents) as additional collateral to secure our obligations under the credit agreement. All other terms of our remaining credit agreement, as amended, remain in full force and effect.

 

Pursuant to the terms of the our previous amendment to our credit facility, we were required, among other things, to maintain a minimum adjusted EBITDA in at least the following amounts, for the following periods: (a) ($525,000) for the three months including March 31, 2013; (b) ($1,100,000) for the six months ending June 30, 2013; (c) ($1,400,000) for the nine months ended September 30, 2013; and (d) ($1,550,000) for the twelve months ended December 31, 2013. We also were to maintain a Fixed Charge Coverage Ratio of at least the following at the end of the following periods: (i) 1.25:1.0 for the three months ended March 31, 2014; (ii) 1.25:1.0 for the six months ended June 30, 2014; (iii) 1.25:1.0 for the nine months ended September 30, 2014.

 

At December 31, 2013, we were in full compliance with the amended loan covenants and ratios for our credit facility.

 

On March 20, 2014, the Company entered into a transaction with The Bank of Tampa, a Florida banking corporation (“Lender”) wherein Lender extended to the Company a mortgage loan in the principal amount of $3,592,000 (the “Loan”). The obligations under the Loan are secured by a first mortgage and security interest in the Company’s Clearwater, Florida facility as well as an assignment of the Company’s accounts receivable.  In addition, the Company pledged and interest in a certificate of deposit in the amount of $898,000 as additional collateral which declines on a pro rata basis as principal is paid.  The initial maturity date of the Loan is March 20, 2017; however the Company has an option to extend the maturity date until March 20, 2022.

 

Borrowings under the Loan bear interest at LIBOR plus 3.5%, with a fixed monthly principal payment of $19,956.

 

The Loan documents contain customary financial covenants, including a covenant that the Company maintain a minimum liquidity of $750,000.  Although there is no Debt Service Coverage Ratio (as defined in the Loan Agreement) for the initial term of the Loan, should the Company desire to extend the Loan beyond three years, the Company must maintain a Debt Service Coverage Ratio for each of the preceding four quarters of not less than 1.0 to 1.0.  In the event the Loan is extended, the Debt Service Coverage Ratio must not be less than 1.2 to 1.0.

 

Simultaneously with the closing of the Loan, the Company redeemed those certain Industrial Revenue Bonds issued by the Pinellas County Industrial Development Authority and satisfied its obligations to its prior lender, PNC Bank, N.A (“PNC Bank”).  In connection with the redemption of the Bonds, the Company paid PNC Bank $3,188,332.51 to satisfy its existing credit facility.  In connection with the termination of the interest rates swap agreement with PNC Bank, the Company paid PNC Bank an additional $410,275.

 

Our future contractual obligations for agreements with initial terms greater than one year and agreements to purchase materials in the normal course of business are summarized as follows (in thousands):

 

Description   Years Ending December 31,  
    2014     2015     2016     2017     2018     Thereafter  
Long-term debt    $ 3,257       -       -       -       -       -