7. LONG-TERM DEBT

3 Months Ended

Mar. 31, 2013

Debt Disclosure [Abstract]

NOTE 7: LONG-TERM DEBT

Long-term debt consisted of the following:

	March 31, 2013			December 31, 2012
Secured credit agreement - Whitney	$	3,408		$	2,909
Capital lease obligations		162			707
Total long-term debt		3,570			3,616
Less: Current portion of long-term debt		(210	)		(680	)
Long-term debt, net of current portion	$	3,360		$	2,936

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.  Our credit facility has been amended and/or restated five times, most recently on March 5, 2013. Under the Fifth Amendment, the Company and Whitney agreed:

· To increase the committed amount under the revolving credit facility (“Revolving Credit Facility”) to $5,000, and extend the maturity date of such Revolving Credit Facility to April 15, 2014;

· To increase the committed amount under the real estate term facility (“RE Term Facility”) to $2,000, and extend the maturity date of such RE Term Facility to April 15, 2018, and the Company is obligated to make increasing monthly repayments of principal (along with accrued and unpaid interest thereon) starting at $8, beginning April 1, 2013;

· To make a new single-advance term loan to Deep Down in the original principal amount of $250 (“Equipment Term Loan”) for the purpose of effecting a purchase of two tensioners (the “Equipment”). The Equipment Term Loan has an interest rate of 4.0 percent per annum and maturity date of April 15, 2018, and the Company is obligated to make increasing monthly repayments of principal (along with accrued and unpaid interest thereon) starting at $4, beginning April 1, 2013;

· To change the definition of EBITDA to allow a non-recurring expense in the amount of $117 for closing the operations of Mako and consolidating with Deep Down Delaware in the fiscal quarter ended December 31, 2012, and to allow a non-recurring charge of $2,156, for the write-off related to impairment of long-lived assets associated with consolidating the operations of Mako, also in the fiscal quarter ended December 31, 2012.

As of the effective date of the Fifth Amendment, the outstanding principal balance of the RE Term Facility was $1,730. Whitney agreed to make a single advance to the Company in an amount equal to $270 (bringing the balance of the RE Term Facility as of the effective date of the Fifth Amendment to $2,000) to assist in effecting the purchase of the Equipment. As with Deep Down’s other outstanding indebtedness under the credit agreement, outstanding amounts of the Equipment Term Loan are secured by a security interest in all of Deep Down’s assets. The interest rate in all of the loans remains the same at 4.0 percent per annum.

As of March 31, 2013, the outstanding indebtedness to Whitney under the Fifth Amendment consisted of $1,992 under the RE Term Facility, $246 under the Equipment Term Loan and $1,170 under the Revolving Credit Facility.

Our credit agreement with Whitney obligates us to comply with the following financial covenants:

· Leverage Ratio - The ratio of total debt to total consolidated EBITDA for the four most recent quarterly periods must be less than 3.0 to 1.0; actual Leverage Ratio as of March 31, 2013: 1.32 to 1.0.

· Fixed Charge Coverage Ratio - The ratio of total consolidated EBITDA for the four most recent quarterly periods to total consolidated net interest expense plus principal payments for the four most recent quarterly periods on total debt must be greater than 1.5 to 1.0; actual Fixed Charge Coverage Ratio as of March 31, 2013: 1.69 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 (if positive), after provision for income taxes, for each whole or partial fiscal year completed after June 30, 2011, must be in excess of $13,000; actual Tangible Net Worth as of March 31, 2013: $18,021.

· 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.

As of March 31, 2013, we were in compliance with all of these financial covenants.

Other Debt

We had 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 had a fixed annual interest rate of 6.0 percent per annum, and interest was 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. On February 8, 2012, we settled the remaining $160 balance of the subordinated debenture for a cash payment of $150. The holder of the subordinated debenture forgave the remaining $10 principal balance.