MET PRO CORP - 10-K filing on 2013-03-21

DEBT

12 Months Ended

Jan. 31, 2013

NOTE 7: DEBT

The Company and its subsidiaries have domestic and foreign uncommitted, unsecured lines of credit totaling $4,407,340 which can be used for working capital. Of the total lines of credit available, the foreign unsecured line of credit totals $407,340 (300,000 Euro). As of January 31, 2013 and 2012 the Company had zero outstanding borrowings from its domestic line of credit. The Company's Mefiag B.V. subsidiary's line of credit, which is with a bank in The Netherlands, had zero outstanding borrowings as of January 31, 2013 and $265,581, or 202,997 Euro, as of January 31, 2012.

Short-term and long-term debt consisted of the following:

	January 31,
	2013		2012
Bond payable, bank, payable in quarterly installments of $58,460, plus interest at a rate equal to the greater of (i) 16 basis points below the ninety day LIBOR rate or (ii) 250 basis points (effective interest rate of 2.50% at both January 31, 2013 and 2012), maturing April, 2021, collateralized by the Telford, PA building	$	1,929,195	$	2,163,037

Note payable, bank, payable in quarterly installments of $33,945 (25,000 Euro), plus interest at a fixed rate of 3.82%, maturing January, 2016, collateralized by the Heerenveen, Netherlands building		407,340		523,320

Equipment note, payable in monthly installments of $13,482, no interest, matured March 2012		-		26,963

Line of credit, $265,581, or 202,997 Euro, payable upon demand, plus interest at a rate of 70 basis points over the thirty day EURIBOR rate (effective interest rate of 1.41% at January 31, 2012)		-		265,581

		2,336,535		2,978,901
Less current portion		369,622		657,216
		1,966,913		2,321,685
Fair market value of interest rate swap liability		302,972		366,286
Long-term portion	$	2,269,885	$	2,687,971

One of the notes payable and the bond payable are subject to certain covenants, including maintenance of prescribed amounts of leverage and fixed charge coverage ratios. As of January 31, 2013, the Company is in compliance with all applicable covenants.

The Company has an interest rate swap agreement to hedge against the potential impact on earnings from increases in market interest rates. Effective April 3, 2006, the Company entered into a fifteen-year interest rate swap agreement for a notional amount equal to the balance on the bond payable maturing in April 2021. The Company swapped the ninety-day LIBOR for a fixed rate of 4.87%. As of January 31, 2013, the effective interest rate was 7.01% as a result of the swap agreement plus the interest rate floor provision of 250 basis points. The interest rate swap agreement is accounted for as a cash flow hedge that qualifies for treatment under the short-cut method of measuring effectiveness in accordance with FASB ASC Topic 815, "Derivatives and Hedging". There was no hedge ineffectiveness as of January 31, 2013. The fair value of the interest rate swap agreement resulted in a decrease in equity of $190,873 (net of tax), $230,760 (net of tax), and $172,814 (net of tax) at January 31, 2013, 2012 and 2011, respectively. These results are recorded in the accumulated other comprehensive income (loss) section of shareholders' equity.

The bank has issued and has outstanding standby letters of credit to customers totaling $805,304 as of January 31, 2013, which have expiration dates during the fiscal years ending January 31, 2014.

Maturities of short-term and long-term debt are as follows:

Year Ending
January 31,
2014	$	369,622
2015		369,622
2016		369,622
2017		233,842
2018		233,842
Thereafter		759,985
	$	2,336,535