LONG-TERM OBLIGATIONS

6 Months Ended

Jun. 30, 2011

LONG-TERM OBLIGATIONS

LONG-TERM OBLIGATIONS

NOTE 3:   LONG-TERM OBLIGATIONS

The following is a summary of long-term obligations outstanding (in thousands):

	June 30, 2011			December 31, 2010
	(in thousands)
Senior revolving loan	$	180,000		$	67,000
Capital leases	6,694			7,055
Acquisition-related liabilities	12,633			15,750
Total long-term obligations, including current portion	199,327			89,805
Current maturities of long-term obligations	(11,859		)	(2,945		)
Long-term obligations	$	187,468		$	86,860

Credit Facilities

On April 25, 2011, we entered into an amended senior credit facility, with KeyBank National Association as administrative agent, and a syndicate of banks as lenders.  The amendment to the credit facility, which continues to provide for a senior revolving loan, increased the aggregate amount of funds available from $140.0 million to $325.0 million, and extended the maturity date from June 2014 to December 2015. During the term of the credit facility, we have the right, subject to compliance with the covenants as set forth in the credit facility agreement, to increase the borrowings to a maximum of $375.0 million, an increase from the $200.0 million maximum in our previous facility.  The credit facility is secured by liens on our land and buildings and substantially all of our personal property.

Borrowings under the senior revolving loan bear interest at various rates based on our leverage ratio with two rate options at the discretion of management as follows:  (1) for base rate advances, borrowings bear interest at prime rate plus 75 to 175 basis points; (2) for LIBOR rate advances, borrowings bear interest at LIBOR rate plus 175 to 275 basis points. At June 30, 2011, borrowings of $180.0 million under this facility had a weighted average interest rate of 2.22%. The average amount of borrowings under this facility in the second quarter of 2011 was $180.0 million, at a weighted average interest rate of 3.02%.  The maximum month-end amount outstanding during the second quarter of 2011 was $182.0 million. At June 30, 2011, the amount available for borrowings under the credit facility is reduced by the $180.0 million outstanding and $1.1 million in outstanding letters of credit.

The financial covenants contained in the credit facility are a total debt leverage ratio and a fixed charge coverage ratio (all as defined in our credit facility agreement).  As of June 30, 2011, the financial covenants were, a leverage ratio not to exceed 3.00 to 1.00 and a fixed charge coverage ratio of not less than 1.25 to 1.00.  As of June 30, 2011 and December 31, 2010, we were in compliance with all financial covenants.

Other restrictive covenants contained in our credit facility include limitations on incurring additional indebtedness and completing acquisitions.  We generally cannot incur indebtedness outside the credit facility, with the exception of capital leases, with a limit of $15.0 million, and subordinated debt, with a limit of $100 million of aggregate subordinated debt.  Generally, for acquisitions we must be able to demonstrate that, on a pro forma basis, we would be in compliance with our covenants during the four quarters prior to the acquisition, and bank permission must be obtained for acquisitions in which cash consideration exceeds $125.0 million or total consideration exceeds $175.0 million.  The total consideration for all acquisitions consummated during the term of our credit facility may not exceed $300.0 million in the aggregate without bank permission.

Contingent Convertible Subordinated Notes

On or about June 11, 2010, prior to the maturity date, $27.2 million of contingent convertible subordinated notes (“convertible notes”) were converted into 2.3 million shares of common stock at a conversion price of $11.67. On June 15, 2010, the convertible notes matured, resulting in a cash payment of $22.8 million, plus accrued interest. The original $50.0 million of convertible notes were issued in June 2004 with a fixed 4% per annum interest rate and an original maturity of June 15, 2007.  The holders of the convertible notes had the right to extend the maturity date by up to three years.  In April 2007, the holders exercised this right and the maturity date of the convertible notes was extended to June 15, 2010.

The right to extend the maturity of the convertible notes was accounted for as an embedded option subject to bifurcation.  The embedded option was initially valued at $1.2 million and the convertible notes balance was reduced by the same amount.  In April 2007, the holders of the convertible notes exercised their right to extend and we performed a final valuation to estimate the fair value of the embedded option as of the approximate date of the extension.  The estimated fair value of the embedded option at that date, included as a component of the convertible notes, was approximately $4.8 million. The $4.8 million estimated fair value of the embedded option was fully amortized as a credit to “Interest expense” on the Condensed Consolidated Statements of Income over the period to the extended maturity, which was June 15, 2010.

Upon conversion of $27.2 million of the notes, we recognized a nominal gain related to the remaining unamortized embedded option value associated with the converted notes in the year ended December 31, 2010.  The above changes related to the carrying value of the convertible notes, the estimated fair value of the embedded option, the amortization of the fair value of the embedded option, and recognition of nominal gain upon conversion did not affect our cash flow.

Capital Leases

We lease certain property and software under capital leases that expire during various years through 2014.

Acquisition-related Liabilities

We have made acquisitions for which a portion of the purchase price has been deferred.  These deferred payments, which are either non-interest bearing or have a below market interest rate, have been discounted using an appropriate imputed interest rate.

In the fourth quarter of 2010, in connection with the acquisition of Jupiter eSources, we incurred a liability related to contingent consideration for an earn-out opportunity based on future revenue growth. The potential undiscounted amount of all future payments that we could be required to make under the earn-out opportunity is between $0 and $20.0 million over a four year period. We estimated the fair value of the contingent consideration using probability assessments of projected revenue over the earn-out period, and applied an appropriate discount rate based upon the weighted average cost of capital.  This fair value is based on significant inputs not observable in the market. We have recognized the fair value of $1.0 million and $3.4 million of the contingent consideration in “Current maturities of long-term obligations” and “Long-term obligations”, respectively, on the Condensed Consolidated Balance Sheet at June 30, 2011 and $7.2 million of the contingent consideration in “Long-term obligations” at December 31, 2010. Subsequent fair value changes, measured quarterly, up to the ultimate amount paid, will be recognized in earnings.  During the second quarter 2011, we recognized a decrease in the fair value of $2.8 million which is reflected in “Other operating expense” on the Condensed Consolidated Statements of Income as of the three month and six month periods ended June 30, 2011.

In addition to the earn-out opportunity, in connection with the acquisition of Jupiter eSources, we withheld a portion of the purchase price for any claims for indemnification and purchase price adjustments.  This holdback has been discounted using an appropriate imputed interest rate and $8.2 million and $8.1 million is recorded in “Current maturities of long-term obligations” and “Long-term obligations” on the Condensed Consolidated Balance Sheet at June 30, 2011 and December 31, 2010, respectively.