NOTE 6: LONG-TERM DEBT

12 Months Ended

Dec. 31, 2011

Debt Disclosure [Text Block]

NOTE 6:LONG-TERM DEBT

At December 31, 2011 and 2010 long-term debt consisted of the following:

	December 31, 2011			December 31, 2010
Secured credit agreement - Whitney Bank	$	2,342		$	2,917
6% Subordinated debenture		210			500
Capital lease obligations		514			635
Total bank debt		3,066			4,052
Less: Current portion of long-term debt		(2,893	)		(1,609	)
Long-term debt, net of current portion	$	173		$	2,443

Whitney Credit Agreement

We originally entered into our credit agreement with Whitney in November 2008 to provide us with revolving and letter of credit facilities for our operations.  In December 2008, we amended the credit agreement to add a term loan in the principal amount of $1,150 to purchase certain equipment.  Thereafter, we further amended the credit agreement in May 2009 to add another term loan in the principal amount of $2,100 to purchase our operating facility in Channelview, Texas.  Whitney possesses a first priority lien on all of our and our subsidiaries’ assets and properties, including the real property in Channelview, to secure all of the outstanding indebtedness under the credit agreement.

In April 2010, we amended and restated our credit agreement with Whitney.  As part of such amendment and restatement we generally established new maturity dates and payment terms regarding the outstanding indebtedness under the credit agreement.  Pursuant to the terms of such amendment and restatement, interest for all principal amounts outstanding under the credit agreement accrues at a rate of 6.5 percent per annum.

At the time of such amendment and restatement, we had $850 outstanding under the revolving line of credit.  Per the terms of the amended and restated credit agreement this amount was converted to a further term loan requiring repayment in monthly installments of $40, plus the amount of accrued and unpaid interest, with a final balloon payment of unpaid amounts to be made at maturity on April 15, 2011.

With regard to the May 2009 term loan, the amended and restated credit agreement further established a monthly payment of $18, and a final balloon payment of unpaid amounts to be made at maturity on April 15, 2011.

Under the amended and restated credit agreement, the repayment terms of the December 2008 term loan required a monthly payment of $35, and a final balloon payment of unpaid amounts to be made at maturity on April 15, 2011.

On April 14, 2011, we further amended the amended and restated credit agreement to extend the maturity dates of the indebtedness thereunder from April 15, 2011 to April 15, 2012.  Under such extensions, we expect the final payments of the December 2008 and April 2010 term loans to be made on January 2, 2012 and February 1, 2012, respectively; and these payments occurred as scheduled.  Under the terms of the extension, the May 2009 term loan will require a balloon payment of approximately $1,820 on April 15, 2012.

On June 9, 2011, we entered into the Third Amendment to the Amended and Restated Credit Agreement (the “Third Amendment”) with Whitney to extend further credit in the form of a single advance term loan in the amount of $800 for the purpose of effecting the purchase of 8,350 shares of the Company’s outstanding common stock. Once purchased, these shares were retired and removed from the number of shares outstanding. Outstanding principal of the additional term loan accrues interest at a rate of 6.5 percent per annum; the Company is obligated to make repayment in monthly installments of $65, plus the amount of accrued and unpaid interest beginning July 1, 2011.  This additional term loan is scheduled to mature on April 15, 2012 along with all of the indebtedness outstanding at such time under the amended and restated credit agreement. Under the Third Amendment, Whitney agreed to reduce the requirement of the tangible net worth covenant under the credit agreement to be $13,000 from a previous amount of $15,000.

As of December 31, 2011, the outstanding principal balances of the June 2011, April 2010, May 2009 and December 2008 term loans were $410, $50, $1,845 and $37, respectively.

Our credit agreement with Whitney obligates us to comply with the following financial covenants, which we were in compliance with as of December 31, 2011:

● Leverage Ratio - The ratio of total debt to consolidated EBITDA must be less than 3.0 to 1.0; actual Leverage Ratio as of December 31, 2011: 0.46 to 1.0.

● Fixed Charge Coverage Ratio - The ratio of consolidated EBITDA to consolidated net interest expense, plus principal payments on total debt, must be greater than 1.5 to 1.0; actual Fixed Charge Coverage Ratio as of December 31, 2011: 2.73 to 1.0.

● Tangible Net Worth - Our consolidated net worth, after deducting other assets as are properly classified as “intangible assets,” plus 50 percent of net income, after provision for taxes, must be in excess of $13,000; actual Tangible Net Worth as of December 31, 2011: $17,367.

● Moreover, we continue to have obligations for other covenants, including, among others, limitations on issuance of common stock, liens, transactions with affiliates, additional indebtedness and permitted investments.

We had previously amended the terms of the amended and restated credit agreement on December 31, 2010 to obtain the lender’s consent concerning (i) our contribution of Flotation’s net assets to CFT; (ii) our issuance of shares to Holdings and (iii) our use of proceeds from such issuance of shares to make a further cash contribution to CFT.  This amendment allowed us to complete the acquisition of Cuming and to form CFT, to which we contributed all of the operating assets and liabilities (including the bank debt, but excluding one intercompany corporate overhead payable) of Flotation.  See Note 3, “Investment in Joint Venture”, for further information.

A result of the consummation of the joint venture transaction on December 31, 2010 was that we were required to expense all acquisition costs and write down the value of contributed Flotation net assets as of such date in order to establish the fair value of our investment in CFT.  The recognition of such expenses and related write down caused us not to be in compliance with certain financial covenants under the amended and restated credit agreement as of December 31, 2010.  On March 25, 2011 we obtained a waiver for such noncompliance.

Other Debt

We have a subordinated debenture in the original outstanding principal amount of $500 that originated from the exchange of preferred stock in a prior year.  The subordinated debenture has a fixed interest rate of 6.0 percent per annum, and interest is required to be paid annually on March 31st.  The subordinated debenture matured on March 31, 2011 and we made the payment of accrued interest as required.  However, we agreed to terms for an extension of the maturity of the subordinated debenture to May 2012.  As of December 31, 2011, the principal balance of the subordinated debenture was $210.  We paid off the remaining balance of the subordinated debenture on February 8, 2012.