LONG-TERM DEBT (Block)

9 Months Ended

Sep. 30, 2015

4. LONG-TERM DEBT

(A) Senior Debt

The Credit Facility

As of September 30, 2015, the amount outstanding under the term loan component (the “Term B Loan”) of the Company’s senior secured credit facility (the “Credit Facility”) was $247.8 million and the amount outstanding under the revolving credit facility (the “Revolver”) of the Credit Facility was $39.0 million. The amount available under the Revolver, which includes the impact of outstanding letters of credit, was $10.3 million as of September 30, 2015.

On November 23, 2011, the Company entered into a credit agreement with a syndicate of lenders for a $425 million Credit Facility that was initially comprised of: (a) a $50 million Revolver that matures on November 23, 2016; and (b) a $375 million Term B Loan that matures on November 23, 2018.

The Term B Loan requires mandatory prepayments equal to 50% of Excess Cash Flow, as defined within the agreement, subject to incremental step-downs depending on the Consolidated Leverage Ratio. The Excess Cash Flow payment is due in the first quarter of each year for the prior year. An estimate of this payment that is due next year, net of any prepayments made through September 30, 2015, is included under the current portion of long-term debt. The Company expects to fund the payment using cash from operating activities.

As of September 30, 2015, the Company is in compliance with all financial covenants and all other terms of the Credit Facility in all material respects. The Company’s ability to maintain compliance with its covenants under the Credit Facility is highly dependent on its results of operations. Management believes that over the next 12 months the Company can continue to maintain compliance. The Company’s operating cash flow is positive, and management believes that it is adequate to fund the Company’s operating needs. The Company has not been required to rely upon the Revolver, and the Company does not anticipate being required to rely upon the Revolver, to fund its operations. During the quarter, the Company used the Revolver to fund a portion of the cash needed to close on an acquisition, including working capital, as described under Note 9, Business Combinations. Management believes that cash on hand and cash from operating activities, together with available borrowings under the Revolver, will be sufficient to permit the Company to meet its liquidity requirements over the next 12 months, including its debt repayments. The amount of the Revolver actually available to the Company is a function of covenant compliance at the time of borrowing.

Failure to comply with the Company’s financial covenants or other terms of its Credit Facility and any subsequent failure to negotiate and obtain any required relief from its lenders could result in a default under the Company’s Credit Facility. Any event of default could have a material adverse effect on the Company’s business and financial condition. In addition, a default under either the Company’s Credit Facility or the indenture governing the Company’s 10.5% senior unsecured notes (the “Senior Notes”) could cause a cross default in the other and result in the acceleration of the maturity of all outstanding debt. The acceleration of the Company’s debt could have a material adverse effect on its business. The Company may seek from time to time to amend its Credit Facility or obtain other funding or additional funding, which may result in higher interest rates on its debt.

(B) Senior Unsecured Debt

The Senior Notes

On November 23, 2011, the Company issued $220.0 million of 10.5% unsecured Senior Notes which mature on December 1, 2019. The Company received net proceeds of $212.7 million, which included a discount of $2.9 million, and incurred deferred financing costs of $6.1 million. These amounts are amortized over the term under the effective interest rate method. Interest on the Senior Notes is payable semi-annually in arrears on June 1 and December 1 of each year. The Senior Notes may be redeemed at any time on or after December 1, 2015 at a redemption price of 105.25%. The redemption price decreases over time.

The components of net interest expense are as follows:

	Net Interest Expense
	Nine Months Ended
	September 30,
	2015		2014
	(amounts in thousands)

Interest expense	$	25,919	$	26,076
Amortization of deferred financing costs		2,153		3,165
Amortization of original issue discount of senior notes		251		226
Total net interest expense	$	28,323	$	29,467

	Net Interest Expense
	Three Months Ended
	September 30,
	2015		2014
		(amounts in thousands)

Interest expense	$	8,915	$	8,644
Amortization of deferred financing costs		730		1,031
Amortization of original issue discount of senior notes		86		77
Total net interest expense	$	9,731	$	9,752