Note 9. Senior Secured Credit Facilities

On July 2, 2012, the Company, together with certain of its subsidiaries acting as guarantors, entered into a senior secured credit agreement which was subsequently amended and restated on July 18, 2012, on August 1, 2012, and again on August 2, 2013 (as amended and restated, the “Credit Agreement”). The Credit Agreement originally provided for (i) a term loan A in an aggregate principal amount of $275 million (the “Term Loan A Facility”), (ii) a term loan B in an aggregate principal amount of $250 million (the “Term Loan B Facility” and together with the Term Loan A Facility, the “Term Facilities”) and (iii) a $100 million revolving credit facility (the “Revolving Credit Facility”, and together with the Term Facilities, the “Original Senior Secured Credit Facilities”). The Term Loan A Facility and the Revolving Credit Facility were scheduled to mature on August 2, 2017 and the Term Loan B Facility was scheduled to mature on August 2, 2019.

On August 2, 2012, in connection with the closing of the SHL acquisition, the full amounts of the Term Loan A Facility and the Term Loan B Facility were drawn and $30 million under the Revolving Credit Facility was drawn. In addition, approximately $6 million of availability under the Revolving Credit Facility was used to cover letters of credit that were issued to replace similar letters of credit previously issued under the Company’s prior senior unsecured credit facility which was terminated concurrently with the drawings under the Senior Secured Credit Facilities. The Company repaid $10 million of the principal amount outstanding under the Revolving Credit Facility in December 2012 and the remaining outstanding amount of $20 million in January 2013.

On August 2, 2013, the Company entered into Amendment No. 3 (the “Amendment”) to the Credit Agreement. The Amendment (i) replaced the existing Term Loan A Facility with new refinancing term A-1 loans (the “Refinancing Term A-1 Loans”) in an aggregate principal amount of $269.9 million, which was fully drawn on August 2, 2013, (ii) established a new tranche of incremental term A-1 loans (the “Incremental Term A-1 Loans” and together with the Refinancing Term A-1 Loans, the “Term A-1 Loans”) in an aggregate principal amount of $253.8 million, which was fully drawn on August 2, 2013, and (iii) increased the existing revolving commitments with new tranche A revolving commitments (the “Tranche A Revolving Commitments” and the loans thereunder, the “Tranche A Revolving Loans”) in an aggregate principal amount of $100 million for a total aggregate principal amount of $200 million, none of which was drawn in connection with the closing of the Amendment. The Company refers to the Original Senior Secured Credit Facilities, as modified by the Amendment, as the Senior Secured Credit Facilities.

Amounts drawn under the Refinancing Term A-1 Loan tranche were used to prepay and terminate the Company’s existing Term Loan A Facility. Amounts drawn under the Incremental Term A-1 Loan tranche were used to prepay and terminate the Company’s existing Term Loan B Facility and pay transaction related fees and expenses.

The maturity date of all Term A-1 Loans is August 2, 2018. The principal amount of the Term A-1 Loans amortizes in quarterly installments equal to (i) for the first two years after the closing of the Amendment, approximately 2% of the original principal amount of the Term A-1 Loans and (ii) for the next three years thereafter, approximately 4% of the original principal amount of the Term A-1 Loans, with the balance payable at maturity. The termination date of all revolving commitments under the Credit Agreement, including the new Tranche A Revolving Commitments, is August 2, 2018. The Term A-1 Loans and Tranche A Revolving Loans will, at the option of the Company, bear interest at the Eurodollar Rate plus 2.25% or a base rate plus 1.25%, as applicable, with future “step-downs” upon achievement of specified first lien net leverage ratios, which the Company achieved during the nine months ended September 30, 2014. As a result, the annual interest rate on the Term A-1 Loans was the Eurodollar Rate plus 2.00%, or 2.15%, at September 30, 2014.

The Credit Agreement contains customary representations and warranties, affirmative and negative covenants, and events of default. The Company is required to comply with a net leverage ratio covenant on a quarterly basis. Mandatory prepayments attributable to excess cash flows will be based on the Company’s net leverage ratio and will be determined at the end of each fiscal year. Pursuant to the Amendment on August 2, 2013, a net leverage ratio of 2.0x or higher will trigger mandatory prepayments of 25% and a net leverage ratio of 2.5x or higher will trigger mandatory prepayments of 50% of excess cash flows. Based on current projections, the Company does not believe that any mandatory prepayments will be required for the year ended December 31, 2014. Thus, no amounts have been reclassified to current debt at September 30, 2014. In the event actual results trigger the mandatory prepayment, such prepayment amount will be reclassified from long-term debt to current debt in the Company’s condensed consolidated balance sheets. The Company was in compliance with all of the covenants of the Credit Agreement at September 30, 2014.

In applying debt modification accounting in 2013, the Company recorded $12.9 million in loan origination fees and deferred financing costs, of which $10.6 million related to investors of the Term Facilities that reinvested in the Term A-1 Loans and the Revolving Credit Facility and $2.3 million related to costs associated with the refinancing. These loan origination fees and deferred financing costs are being amortized into interest expense over the term of the Term A-1 Loans using the effective interest method.

Total amortization expense of loan origination fees and deferred financing costs was $0.7 million in the three months ended September 30, 2014 and 2013 and $2.0 million and $2.3 million in the nine months ended September 30, 2014 and 2013, respectively. The Company paid interest of $3.8 million and $5.4 million in the three months ended September 30, 2014 and 2013, respectively, and $11.7 million and $16.2 million in the nine months ended September 30, 2014 and 2013, respectively.

The future minimum payments for the Senior Secured Credit Facilities are as follows for the years ended December 31 (in thousands):


2014 (1)	$	2,688
2015		15,750
2016		20,750
2017		20,750
2018		450,000

Total principal payments		509,938
Less: unamortized original issue discount		1,816

Present value of principal payments		508,122
Less: current portion		12,769

Debt – long term	$	495,353

(1)	For the three months ended December 31, 2014.

The Company believes the carrying value of its long term debt approximates its fair value as the terms and interest rates approximate market rates.