DEBT

12 Months Ended

Dec. 31, 2011

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

NOTE 9—DEBT

SHORT-TERM LOANS

P&F along with Florida Pneumatic, Hy-Tech and Nationwide, as borrowers, entered into a Credit Agreement, (“Credit Agreement”) with Capital One Leverage Finance Corporation, as agent (“COLF”). The Credit Agreement, entered into in October 2010, has a three-year term, with maximum borrowings of $22,000,000 at that time.  The Credit Agreement provides for a Revolving Credit Facility (“Revolver”) with a maximum borrowing of $15,910,000. At December 31, 2011 and 2010, the balances owing on the Revolver were $5,648,000 and $9,996,000, respectively.  Direct borrowings under the Revolver are secured by the Company’s accounts receivable, mortgages on the Company’s real property located in Cranberry, PA, Jupiter, FL and Tampa, FL (“Real Property”),  inventory and equipment and are cross-guaranteed by certain of the Company’s subsidiaries (the “Subsidiary Guarantors”). Revolver borrowings bear interest at LIBOR (London InterBank Offered Rate) or the Base Rate, as defined in the Credit Agreement, plus the currently applicable margin rates. Beginning April 1, 2011, the loan margins applicable to borrowings on the Revolver are determined based upon the computation of total debt divided by earnings before interest, taxes, depreciation and amortization (“EBITDA”).

On November 21, 2011, the Company and COLF entered into the Second Amendment to Credit Agreement, (the “Amendment”). The Amendment, among other things, (i) further reduced the applicable loan margins for Revolver borrowings by 0.25% or 0.50%, depending on the applicable leverage ratio, (ii) increased the maximum aggregate amount of permitted Capital Expenditures (as defined in the Loan Agreement) for each of 2012 and 2013 from $1,000,000 to $2,500,000 and (iii) established a $2,500,000 Capital Expenditure loan commitment by COLF, pursuant to which COLF may make one or more Capex Loans (as defined in the Amendment) to the Company under the terms set forth in the Amendment. As such, pursuant to the Amendment, the total commitment by COLF increased from $22,000,000 to $24,500,000. Further, as a result of the Amendment, the applicable loan margins range from 2.50% to 3.50% for LIBOR borrowings and from 1.50% to 2.50% for borrowings at Base Rate. Loan margins added to Revolver borrowings at December 31, 2011 were 2.75% and 1.75%, respectively, for borrowings at LIBOR and the Base Rate. Loan margins added to Revolver borrowings at December 31, 2010 were 3.75% and 2.75%, respectively, for borrowings at LIBOR and the Base Rate.

The Company incurs an unused line fee ranging from one-half percent (0.50%) to three-quarters percent (0.75%), depending on the percentage of the Revolver to the Credit Facility.  The Company is also required to provide, among other things, monthly financial statements and monthly borrowing base certificates.  The Company is subject to and in compliance with various financial covenants. As part of the Credit Agreement, if an event of default occurs, the interest rate would increase by two percent per annum during the period of default.

Prior to the effective date of the Credit Agreement, the Company and its subsidiaries, other than WMC, as co-borrowers, were parties to a credit agreement, (“Prior Credit Agreement”) as amended, with Citibank, N.A., as agent. The Prior Credit Agreement, among other things, included a revolving credit loan facility (“revolving loan”). Direct borrowings under the revolving loan were secured by the Company’s accounts receivable, inventory, equipment and real property, and were cross-guaranteed by each of the Company’s subsidiaries, except WMC. These borrowings incurred interest at LIBOR or the prime interest rate, plus applicable loan margins.

Concurrent with entering into the new Credit Agreement with COLF, the Company paid the lenders under the Prior Credit Agreement $14,610,000 as full settlement of all of its obligations, including a then revolving loan, a term note and accrued interest.  Further, the Company paid in their entirety, two mortgage loans with Wachovia Bank, aggregating $1,504,000, including fees and other related expenses.  Additionally, the Company paid $685,000, representing 50% of the outstanding loan amount, plus accrued interest, to the previous owners of Hy-Tech. With the approval of COLF, the Company and the previous owners of Hy-Tech entered into a Termination of Promissory Note and Mutual Releases dated October 31, 2011, (the “Subordinated Debt Termination Agreement”), which was effective as of November 1, 2011. Pursuant to the Subordinated Debt Termination Agreement, the Company paid $550,000 in full satisfaction of the approximately $573,000 in subordinated debt outstanding, plus approximately $4,000 in accrued interest, to the previous owners of Hy-Tech and the parties terminated the related subordinated promissory note and exchanged releases.

LONG-TERM LOANS

Long-term debt consists of:

	December 31,
	2011		2010
Term loan—$33,833 (plus interest)  payable monthly December 1, 2010 through October 1,  2013, with all remaining principal payable on October 25, 2013	$	5,650,000	$	6,056,000
Note payable to former owners of Hy-Tech Machine, Inc		----		573,000
Subordinated note payable to officer		250,000		250,000
Subordinated note payable to unrelated party		----		500,000
		5,900,000		7,379,000
Less current maturities		1,039,000		406,000
	$	4,861,000	$	6,973,000

The Credit Facility also contains a $6,090,000 term loan (the “Term Loan”), which is secured by mortgages on the Real Property, accounts receivable, inventory and equipment.  The Term Loan amortizes $33,833 each month with a balloon payment at maturity of the Credit Agreement.  The Credit Agreement requires the Company to make prepayments, to be applied to the Term Loan, of 25% of excess annual cash flow, as defined in the Credit Agreement, or in the event of a sale of any real estate assets. Based on 2011 excess cash flows, the Company will make a payment of approximately $633,000 in the second quarter of 2012. This amount is included in current maturities of long-term debt on the consolidated balance sheet. Term Loan borrowings bear interest at LIBOR or the prime interest rate plus the currently applicable margin rates, which were 5.75% and 4.75%, respectively, at December 31, 2011 and 2010.

In April 2010, as part of an amendment to the Company’s prior credit agreement, the Company was required to obtain subordinated loans of $750,000, (the “Subordinated Loans”). The Subordinated Loans were provided by the Company’s Chief Executive Officer (“CEO”), in the amount of $250,000, and an unrelated party, in the amount of $500,000, each with a maturity date of October 25, 2013. These Subordinated Loans bear interest at 8% per annum. The Company paid interest of $20,000 and $10,000 in 2011 and 2010, respectively, to the CEO. As of the date of this filing, all interest earned through December 31, 2011 has been paid. Pursuant to a subordination agreement with COLF, the principal amount owed to the unrelated third party was paid in full from excess cash flows, as defined in such subordination agreement.

The aggregate amounts of long-term debt scheduled to mature in each of the years ended December 31, are approximately as follows: 2012—$1,039,000; 2013—$656,000; and 2014—$4,205,000. Interest expense on long-term debt was approximately $359,000 and $346,000 for the years ended December 31, 2011 and 2010, respectively