Note 5. Long-Term Debt and Other Financial Instruments

3 Months Ended

Mar. 31, 2013

Long Term Debt Financial Instruments And Derivatives [Text Block]

5.        Long-term debt at March 31, 2013, and December 31, 2012, was as follows:

(In thousands)	Mar. 31, 2013			Dec. 31, 2012
Term loan:
Face value	$	301,537		$	301,537
Remaining original issue discount		(30,974	)		(32,058	)
Remaining warrant discount		(11,608	)		(12,013	)
Carrying value		258,955			257,466
Revolving credit facility ($45 million remaining availability)		-			-
Senior notes:
Face value		299,800			299,800
Remaining original issue discount		(3,842	)		(4,091	)
Carrying value		295,958			295,709
Capital lease liability		6			12
Total carrying value	$	554,919		$	553,187

As of March 31, 2013, and December 31, 2012, the Company had in place a term loan with a face value of $302 million and a revolving credit facility with no outstanding balance and maximum availability of $45 million. Also outstanding were 11.75% senior notes with a face value of $300 million that were issued at a price equal to 97.69% of face value.  The term loan with Berkshire Hathaway matures in May 2020 and bears an interest rate of 10.5%, but could decrease to 9% based on the Company’s leverage ratio, as defined in the agreement.  The Company was in compliance with all provisions of both agreements at March 31, 2013.

In May of 2012, the Company consummated a financing arrangement with BH Finance LLC, an affiliate of Berkshire Hathaway, that provided the Company with a $400 million term loan and a $45 million revolving credit facility.  The term loan was issued at a discount of 11.5% and was secured pari passu with the Company’s existing 11.75% senior secured notes due 2017.   While the financing arrangement does not contain financial covenants, there are restrictions, in whole or in part, on certain activities including the incurrence of additional debt, repurchase of shares and the payment of dividends.  The term loan may be voluntarily repaid prior to maturity, in whole or in part, at a price equal to 100% of the principal amount repaid plus accrued and unpaid interest, plus a premium, which starts at 14.5% and steps down over time, as set forth in the agreement.  Other factors, such as the sale of assets, may result in a mandatory prepayment or an offer to prepay a portion of the term loan without premium or penalty.  The Company considers the prepayment feature to be an embedded derivative which it bifurcates from the term loan when the fair value is determinable.  The term loan and revolving credit facility will mature in May 2020 and are guaranteed by the Company’s subsidiaries.  The revolving credit facility bears interest at a rate of 10% and is subject to a 2% commitment fee.  The Company also issued common stock warrants to purchase 4.6 million shares of common stock to Berkshire Hathaway in conjunction with the financing, the warrants were subsequently exercised.

In March of 2012, the Company amended its previous bank credit agreement which resulted in $10.4 million of debt modification and extinguishment costs including certain advisory, arrangement and legal fees related to that refinancing.  The previous bank credit facility had an interest rate of LIBOR (with a 1.5% floor) plus a margin of 7% and commitment fees of 2.5%.  In addition to this cash interest, the Company accrued payment-in-kind (PIK) interest of 1.5%.  The Company recorded PIK interest of approximately $100 thousand in the first quarter 2012.  This PIK interest was treated as additional bank term loan principal and was paid in cash upon repayment of the entire facility.

The following table includes information about the carrying values and estimated fair values of the Company’s financial instruments at March 31, 2013, and December 31, 2012:

	March 31, 2013				December 31, 2012
(In thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Investments
Trading	$	161	$	161	$	198	$	198
Liabilities:
Long-term debt:
Revolving credit facility ($45 million available)		-		-		-		-
Term loan		258,955		349,022		257,466		343,746
11.75% senior notes		295,958		340,273		295,709		346,269

Trading securities held by the Supplemental 401(k) Plan are carried at fair value and are determined by reference to quoted market prices.  The fair value of the term loan was determined using a discounted cash flow analysis and an estimate of the current borrowing rate.  The fair value of the 11.75% senior notes was valued by reference to the most recent trade prior to the end of the applicable period.  Under the fair value hierarchy, the Company’s trading securities fall under Level 1 (quoted prices in active markets), its senior notes fall under Level 2 (other observable inputs) and its term loan falls under Level 3 (unobservable inputs).