Annual report pursuant to Section 13 and 15(d)

NOTE 8: - SHORT-TERM BANK CREDIT AND LOANS

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NOTE 8: - SHORT-TERM BANK CREDIT AND LOANS
12 Months Ended
Dec. 31, 2012
Short-term Debt [Text Block]
NOTE 8:–                  SHORT-TERM BANK CREDIT AND LOANS

The Company has $10,723,000 authorized in credit lines from certain banks, of which $723,000 is denominated in NIS ($168,000 was outstanding as of December 31, 2012) and carries various interest rates up to 8.2%. The primary line of $10,000,000, subject to borrowing base limitations and outstanding letters of credit, is denominated in U.S. dollars. This line carries an interest rate of 30 day LIBOR plus 375 basis points which was 3.96% as of December 31, 2012. As of December 31, 2012, $9,620,000 was borrowed under the Company’s primary line. Approximately $380,000 of credit on the primary line was available at December 31, 2012. The Company’s primary credit facility and the Company’s building mortgage with the same bank contains certain covenants, including limiting the Company’s distributions to Arotech affiliates to $4,000,000, and meeting a Fixed Charge Coverage Ratio of not less than 1.1 to 1.0. The Company was in compliance with both of these covenants at December 31, 2012. Additionally, the loan is collateralized by the assets of Arotech and its subsidiaries.

In February 2013, to support the Company’s growth, our primary bank increased the Company’s credit line by 50%, from $10,000,000 to $15,000,000, and the expiration of the credit line was extended to May 31, 2015. The new credit agreement carries an interest rate of 30 day LIBOR plus 375 basis points and an unused line of credit fee of 0.35%. The new credit agreement also contains certain covenants, which are measured on a rolling twelve-month basis, limiting the Maximum Increase in Net Advance to Affiliates to less than 90% of EBITDA and meeting a Fixed Charge Coverage Ratio of not less than 1.1 to 1.0. It is expected that the Company will be in compliance with these covenants during 2013.

Previously, the Company had a $10.0 million credit facility with another bank that expired April 30, 2012 and a building mortgage with the same bank which contained certain covenants, including limiting the Company’s distributions to Arotech affiliates, limiting the Company’s operating cash flow to total fixed charges to a ratio of 1.25 to 1.00 and limiting the Company’s total liabilities to adjusted tangible net worth to a ratio of 2.50 to 1.00.