LIABILITIES AND LONG-TERM DEBT |
9 Months Ended |
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Sep. 30, 2011 | |
| LIABILITIES AND LONG-TERM DEBT [Abstract] | |
| LIABILITIES AND LONG-TERM DEBT |
7. LIABILITIES AND LONG-TERM DEBT
In September 2007 we entered into a $10.0 million term loan agreement with a domestic bank to finance the expansion of the petrochemical facility. An amendment was entered into in November 2008 which increased the term loan to $14.0 million due to the increased cost of the expansion. This note is collateralized by plant, pipeline and equipment. The agreement expires October 31, 2018. At September 30, 2011, there was a short-term amount of $1,400,000 and a long-term amount of $8,500,000 outstanding. At December 31, 2010, there was a short-term amount of $1,400,000 and a long-term amount of $9,550,000 outstanding. The interest rate on the loan varies according to several options. At September 30, 2011, and December 31, 2010, the rate was 2.75%. However, as discussed in Note 9, effective August 2008, the Company entered into a pay-fixed, receive-variable interest rate swap with the lending bank which has the effect of converting the interest rate on $10.0 million of the loan to a fixed rate. Principal payments of $350,000 are paid quarterly with interest paid monthly.
In May 2006 we entered into a $12.0 million revolving loan agreement with a domestic bank secured by accounts receivable and inventory. The loan was originally due to expire on October 31, 2008, but was amended to extend the termination date to June 30, 2013, and ultimately increase the availability of the line to $18.0 million based upon the Company's accounts receivable and inventory. At September 30, 2011, and December 31, 2010, there was a long-term amount outstanding of $13,489,488 and $10,489,488, respectively. The credit agreement contains a sub-limit of $3.0 million available to be used in support of the hedging program. The interest rate on the loan varies according to several options. At September 30, 2011, and December 31, 2010, the rate was 2.75%. The borrowing base is determined by a formula in the loan agreement. If the amount outstanding exceeds the borrowing base, a principal payment is due to reduce the amount outstanding to the calculated borrowing base. Interest is paid monthly. Loan covenants that must be maintained quarterly include EBITDA, capital expenditures, dividends payable to parent, and leverage ratio. Interest on the loan is paid monthly and a commitment fee of 0.25% is due quarterly on the unused portion of the loan. At September 30, 2011, approximately $4.5 million was available to be drawn, and the Company was in compliance with all covenants.
On November 30, 2010, as part of the acquisition of Silsbee Trading and Transportation Company (“STTC”), various notes payable by STTC to JPMorgan Chase bank were assumed. The total notes assumed equaled $584,186. Interest rates varied on these notes between 6.5% and 10%. In April 2011 five of the six notes were paid off. The interest rate on the outstanding note is 6.5%. Principal and interest are due monthly on the outstanding note for a total of approximately $8,400. At September 30, 2011, and December 31, 2010, there was a short-term amount of $90,064 and $271,526, respectively and a long-term amount of $135,048 and $293,102 outstanding, respectively.
On November 30, 2010, as part of the consideration paid for the acquisition of STTC, a note payable was issued to Nicholas Carter, previous owner of STTC, for $300,000. Principal of $100,000 plus accrued interest at 4.0% per annum is payable annually on November 30th of each year. At September 30, 2011, and December 31, 2010, there was a short-term amount of $100,000 and a long-term amount of $200,000 outstanding.
On December 7, 2010, STTC entered into a note agreement with JPMorgan Chase Bank for the purchase of transportation equipment which was subsequently assumed by South Hampton. The amount of the note was $396,752 with principal and interest at 4.0% per annum payable monthly over 48 months at approximately $9,000 per month. At September 30, 2011, and December 31, 2010, there was a short-term amount of $77,965 and $93,244, respectively and a long-term amount of $249,209 and $303,508 outstanding, respectively.
We currently have a supplier who is the sole provider of South Hampton's feedstock, although other sources are available. The account is on open status. In 2007 South Hampton and the supplier entered into an agreement, which expires 7 years from the date of initial operation, for construction of a tank and pipeline connection for the handling of feedstock. In the event of default, South Hampton is obligated to reimburse the supplier for the unamortized portion of the cost of the tank. The tank was placed in service in July 2007. Therefore, at September 30, 2011, 4.25 years of the 7 year agreement have elapsed.
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