Long-Term Obligations

12 Months Ended

Dec. 31, 2011

Long-Term Obligations [Abstract]

Long-Term Obligations

Note 8 — Long-Term Obligations

Long-term obligations consisted of the following:

	December 31,
	2011			2010
First lien term loan due 2017(a)	$	660,905		$	666,644
Mortgage obligation (b)		3,465			4,539
Capital lease obligations(c)		3,606			3,975
8.75% senior subordinated notes(d)		175,000			175,000
Total long-term obligations		842,976			850,158
Less: current portion		(8,666	)		(9,046	)
Long-term obligations, excluding current portion	$	834,310		$	841,112

New Term Loan Credit Agreement

(a) On December 2, 2010, the Company and its parent company, PCHI, entered into a $675,000 Term Loan Agreement. The Company used the proceeds from the New Term Loan Credit Agreement to terminate the previously existing $342,000 term loan guaranty credit agreement and pay a distribution of $311,199 to its stock, warrant and vested option holders (see Note 9). The New Term Loan Credit Agreement was issued at a 1% discount that is being amortized by the effective interest method over the term of the loan.

The New Term Loan Credit Agreement provides for two pricing options: (i) an alternate base rate (“ABR”) for any day, a rate per annum equal to the greater of (a) Credit Suisse’s prime rate in effect on such day, (b) the federal funds effective rate in effect on such day plus 1/2 of 1% and (c) the adjusted LIBOR rate plus 1% or (ii) the LIBOR rate, adjusted for certain additional costs, with a LIBOR floor of 1.5%, in each case plus an applicable margin. The applicable margin is 4.25% with respect to ABR borrowings and 5.25% with respect to LIBOR borrowings.

The New Term Loan Credit Agreement provides that the term loans may be prepaid any time prior to their maturity. The term loans are subject to mandatory prepayment out of (i) 100% of net proceeds arising from asset sales and insurance and condemnation proceeds, subject to reinvestment provisions, (ii) 50% of Excess Cash Flow, as defined in the New Term Loan Credit Agreement, if any (which percentage will be reduced to 25% or 0% if the Company’s total leverage ratio is less than specified ratios) and (iii) net proceeds arising from any debt issued by the Company or its subsidiaries, other than debt permitted under the New Term Loan Credit Agreement.

The Company is required to repay installments on the term loans in quarterly principal amounts of 0.25% of their funded total principal amount through September 30, 2017, with the remaining amount payable on the maturity date of December 2, 2017 (or January 30, 2014, if the senior subordinated notes are not refinanced with indebtedness permitted to be incurred under the New Term Loan Credit Agreement that matures at least 91 days after the maturity date of the term loans). The Company is required to repay installments on the term loans in quarterly principal amounts of 0.25%, with the remaining amount payable on the maturity date.

The obligations of the Company under the New Term Loan Credit Agreement are jointly and severally guaranteed by PCHI and each domestic subsidiary of the Company. The Company and each guarantor has secured its obligations, subject to certain exceptions and limitations, including obligations under the guaranty, as applicable, by a first-priority lien on substantially all of its assets, including a pledge of all of the capital stock held by the Company and each guarantor (which, in the case of capital stock of any foreign subsidiary, is limited to 65% of the voting stock of such foreign subsidiary and 100% of the non-voting stock of such foreign subsidiary), with the exception of accounts receivable, inventories, cash and the proceeds and assets related thereto, which are under a second-priority lien.

The Company may, by written notice to the Administrative Agent from time to time, request additional incremental term loans, in an aggregate amount not to exceed $175,000 and to refinance, replace or extend the maturity date of all or a portion of the then existing term loans under the New Term Loan Credit Agreement.

The lenders under the New Term Loan Credit Agreement are not under any obligation to provide any such additional term loans, provide such refinancing or replacement term loans, or agree to extend the maturity date of existing term loans held by them, and transactions to effect any additional refinancing, replacement or extended term loans are subject to several conditions precedent and limitations.

The New Term Loan Credit Agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company and its Subsidiaries to incur additional indebtedness; pay dividends or distributions on capital stock or redeem, repurchase or retire capital stock of the Company or any of its restricted subsidiaries; make payments on, or redeem, repurchase or retire any subordinated indebtedness; create, incur or suffer to exist liens on any of their property or assets; make investments or enter into joint venture arrangements; engage in mergers, consolidations and sales of all or substantially all their assets; sell assets; make capital expenditures; enter into agreements restricting dividends and advances by the Company’s subsidiaries; and engage in transactions with affiliates.

The New Term Loan Credit Agreement also contains certain customary affirmative covenants and events of default, including a change in control provision and a cross-default provision in the case of a default according to the terms of any indebtedness with an aggregate principal amount of $20,000 or more.

In connection with the New Term Loan Credit Agreement, the Company incurred $12,977 in finance costs that have been capitalized and will be amortized over the life of the loan.

At December 31, 2011, the balance of the New Term Loan Credit Agreement was $660,905, which includes an original issue discount of $5,657, net of $1,093 of accumulated amortization. At December 31, 2010, the balance of the New Term Loan Credit Agreement was $666,644, which includes an original issue discount of $6,668, net of $82 of accumulated amortization. At December 31, 2011, the interest rate on term loan borrowings was 6.75%.

(b) In conjunction with the construction of a new distribution facility, the Company borrowed $10,000 from the New York State Job Development Authority on December 21, 2001, pursuant to the terms of a second lien mortgage note. On December 18, 2009 the mortgage note was amended, extending the fixed monthly payments of principal and interest for a period of 60 months up to and including December 31, 2014. The interest rate under the amended mortgage note remains variable and subject to review and adjustment semi-annually based on the New York State Job Development Authority’s confidential internal protocols. At December 31, 2011, the amended mortgage note bears at an interest rate of 2.37%. The principal amounts outstanding under the mortgage note as of December 31, 2011 and 2010, were $3,465 and $4,539, respectively. At December 31, 2011, the distribution facility had a carrying value of $38,731.

(c) The Company has entered into various capital leases for machinery and equipment and automobiles with implicit interest rates ranging from 3.24% to 17.40% which extend to 2016.

(d) The $175,000 senior subordinated notes due 2014 bear interest at a rate of 8.75% per annum. Interest is payable semi-annually on May 1 and November 1 of each year. The senior subordinated notes are redeemable at the option of the Company, in whole or in part, at any time on or after May 1, 2009, at redemption prices ranging from 101.458% to 100%, plus accrued and unpaid interest to the date of redemption. If a Change of Control, as defined in the note indenture, were to occur, the Company would be obligated to make an offer to purchase the senior subordinated notes, in whole or in part, at a price equal to 101% of the aggregate principal amount of the senior subordinated notes, plus accrued and unpaid interest, if any, to the date of purchase.

If a Change of Control were to occur, the Company may not have the financial resources to repay all of its obligations under the New Term Loan Credit Agreement, the note indenture and the other indebtedness that would become payable upon the occurrence of such Change of Control.

In addition, subject to certain exceptions, the Company may not make restricted payments, including the payment of dividends to its shareholders, unless certain conditions are met under the terms of the indenture governing the 8.75% senior subordinated notes, the New ABL Facility and the New Term Loan Credit Agreement. As of December 31, 2011, the most restrictive of these conditions was the requirement under the New Term Loan Credit Agreement of a senior leverage ratio (as defined therein) of no greater than 4 to 1 on a pro forma basis after giving effect to such restricted payment. Under such condition, restricted net assets were $60,721 at December 31, 2011. As a result, $265,370 of the Company’s $326,091 of net assets was unrestricted at December 31, 2011.

At December 31, 2011, maturities of long-term obligations consisted of the following:

	Long-term Debt		Capital Lease
	Obligations		Obligations		Totals
2012	$	6,833	$	1,833	$	8,666
2013		6,872		447		7,319
2014		182,004		456		182,460
2015		5,766		356		6,122
2016		5,773		514		6,287
Thereafter		632,122		—		632,122
Long-term obligations	$	839,370	$	3,606	$	842,976