DEBT

3 Months Ended

Mar. 31, 2012

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

NOTE 8 - DEBT

SHORT-TERM LOANS

P&F, along with Florida Pneumatic, Hy-Tech and Nationwide, as borrowers, entered into a Loan and Security Agreement (“Credit Agreement”) with Capital One Leverage Finance Corporation, as agent (“COLF”) in October 2010. The Credit Agreement had a three year term, with maximum borrowings of $22,000,000 at inception.  The Credit Agreement provides for a Revolver Loan (“Revolver”) with an original maximum borrowing of $15,910,000.  Direct borrowings under the Revolver are secured by the Company’s accounts receivable, mortgages on our real property located in Cranberry, PA, Jupiter, FL and Tampa, FL (“Real Property”),  inventory and equipment, and are cross-guaranteed by certain of our subsidiaries (the “Subsidiary Guarantors”). Revolver borrowings bear interest at LIBOR (London InterBank Offered Rate) or the Base Rate, as defined in the Credit Agreement (“Base Rate”), plus the Applicable Margin (the “Applicable Margin”), as defined in the Credit Agreement. The Applicable Margin on Revolver borrowings is 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 Loan and Security Agreement, (“Amendment 2”). Amendment 2, among other things: (i) increased the total commitment by COLF for the Credit Agreement to $24,500,000; (ii) reduced the Applicable Margin on Revolver borrowings; (iii) increased the maximum aggregate amount of permitted Capital Expenditures (as defined in the Loan Agreement) for 2012 and 2013 to an aggregate of $2,500,000 and (iv) 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 Amendment 2) (each, a “Capex Term Loan”) to the Company under the terms set forth in Amendment 2.

On December 19, 2012, the Company and COLF entered into a new Amendment to Loan and Security Agreement (“Amendment 3”), which among other things:

· Increased the total commitment by COLF from $24,500,000 to $29,453,000.

· Extended the term of the Credit Agreement through December 19, 2017 (“Maturity Date”), on which date all principal, interest and other amounts owing with respect to this Credit Agreement shall be due and payable in full.

· Increased the maximum borrowings on the Revolver from $15,910,000 to $20,000,000.

· Increased the Term Loan, as defined below, to $7,000,000 from $6,090,000, the original principal amount, of which $4,610,822 was outstanding immediately prior to the effectiveness of Amendment 3.

· Extended the rate of amortization on the Term Loan from 20 years to 25 years.

· Increased the amount of borrowings for Capex Term Loans to $2,453,000 from $1,601,000, which was the net amount available to borrow immediately preceding this Amendment.

· Reduced the unused line fee to 0.375% from a range of 0.5% to 0.75%.

· Removed the requirement of a prepayment on the Term Loan from Excess Cash Flows, as defined in the Credit Agreement. (In 2012, the Company was required to make a $633,000 prepayment toward its Term Loan.)

· Reduced the Applicable Margin on all borrowings.

The balance of Revolver borrowings outstanding was $10,683,000 at March 31, 2013, and $2,793,000 at December 31, 2012. Applicable Margins added to Revolver borrowings at LIBOR and the Base Rate were 2.00% and 1.00%, respectively, at March 31, 2013, and December 31, 2012.

The Company is required to provide, among other things, monthly financial statements, monthly borrowing base certificates and certificates of compliance with various financial covenants. The Company is in compliance with all 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.

The Credit Agreement also provides for a Term Loan (the “Term Loan”), which is secured by mortgages on the Real Property, accounts receivable, inventory and equipment.  The balance due on the Term Loan at March 31, 2013 and December 31, 2012 was $6,930,000 and $7,000,000, respectively. The Term Loan, effective January 2013, is repaid $23,000 each month, with the remaining balance due at the Maturity Date.  Term Loan borrowings incur interest at LIBOR or the Base Rate plus the Applicable Margins, which were 3.00% and 2.00%, respectively, at March 31, 2013 and December 31, 2012.

Additionally, the Company borrowed $380,000 and $519,000, in March 2012 and September 2012, respectively, as Capex Term Loans. The repayment of these two loans is based on sixty month amortization periods, resulting in repayments of $6,000 and $9,000, respectively. Applicable Margins added to these Capex Term Loans at March 31, 2013 and December 31, 2012 were 3.00% and 2.00%, for borrowings at LIBOR and the Base Rate, respectively.

Long-term debt consists of:

	March 31, 2013		December 31, 2012
Term loan - $23,000 payable monthly January 1, 2013 through December 1, 2017, balance due December 19, 2017.  (NOTE: in 2012, monthly payment was $34,000.)	$	6,930,000	$	7,000,000
Capex Term Loan - $6,000 payable monthly May 1, 2012 through April 1, 2017.		311,000		330,000
Capex Term Loan - $9,000 payable monthly October 1, 2012 through September 1, 2017.		467,000		493,000
		7,708,000		7,823,000
Less current maturities		460,000		460,000
	$	7,248,000	$	7,363,000