Debt

9 Months Ended

Sep. 30, 2011

Debt

Debt

NOTE 3—DEBT

Our debt consisted of the following on the dates indicated:

	September 30,			December 31,
	2011			2010
Term loan	$	210,765		$	237,464
Less discount on term loan		(1,467	)		(1,973	)
Total debt		209,298			235,491
Current maturities		(2,145	)		(2,399	)
Total long-term debt	$	207,153		$	233,092

On January 27, 2010, the Company entered into a new Credit Agreement (the "Credit Agreement"), by and among the Company, as borrower, and several banks and other financial institutions or entities from time to time parties to the Credit Agreement, as lenders, consisting of:

• a $265,000 six year term loan facility that matures on January 27, 2016; and

• a $30,000 three year revolving credit facility that matures on January 27, 2013.

The proceeds were used to repay the Company's $170,000 seven year term loan that was due in May 2012 with a then outstanding balance of $139,600 and the $185,000 seven year delayed-draw term loan facility that was due in May 2012 with a then outstanding balance of $111,150. The $30,000 revolving credit facility replaced the Company's prior $50,000 revolving credit facility that was scheduled to mature in May 2010.

The $265,000 senior secured term loan facility has an interest rate of LIBOR (subject to a floor of 2.0%) plus a margin of 3.5%, or the base rate (subject to a floor of 3.0%) plus a margin of 2.5%, as the Company may elect. The Credit Agreement (as amended) provides that if the Company's leverage ratio exceeds 4.50 to 1.00 for any period of four consecutive fiscal quarters, the interest rate on outstanding term loans would increase by 25 basis points (0.25%), and if the leverage ratio exceeds 5.00 to 1.00 for any period of four consecutive fiscal quarters, the interest rate on outstanding term loans would increase by an additional 25 basis points (0.25%).

The debt was issued with a discount of approximately $2,600, which is being amortized to interest expense using the effective interest method over the life of the debt. The Company is currently required to make principal repayments of the senior secured term loan in the amount of $536 on the last day of each calendar quarter, with a balance of $202,185 due at final maturity on January 27, 2016. During the nine months ended September 30, 2011, the Company voluntarily repaid $25,000 of principal on its term loan. For the nine months ended September 30, 2011 and 2010, the average interest rate on the Company's debt was 5.50%.

The $30,000 revolving credit facility has an interest rate of LIBOR (subject to a floor of 2.0%) plus a margin of 4.0%, or base rate (subject to a 3.0% floor) plus a margin 3.0%, as the Company may elect. Thereafter, the applicable margins are subject to adjustment based on the Company's ratio of total debt to EBITDA as reflected in the Company's quarterly or annual financial statements, with the margins ranging from 3.50% to 4.00% on LIBOR based loans, and from 2.50% to 3.00% on base rate based loans. In addition, the Company is required to pay commitment fees on the unused portion of the revolving credit facility. The commitment fee rate is initially 0.75% per annum, and is also subject to adjustment thereafter based on the Company's ratio of total debt to EBITDA, with the rates ranging from 0.50% to 0.75%. There was no outstanding balance on the revolving credit facilities at September 30, 2011 or 2010.

The Credit Agreement requires that mandatory prepayments be made from (1) 100% of the net cash proceeds from certain asset sales, dispositions or issuances of certain debt obligations, (2) 100% of the net cash proceeds from sales-leaseback transactions, and (3) various percentages (ranging from 0% to 75% depending on our consolidated leverage ratio) of excess annual cash flow as defined in the credit agreement. In addition, the first amendment to the Credit Agreement imposes a prepayment fee of 1% of the amount prepaid in connection with certain refinancings and repricings occurring prior to March 3, 2012.

The senior secured term loan and revolving credit facilities are guaranteed by each of the Company's subsidiaries and secured by a perfected first priority security interest in substantially all of the Company's present and future assets.

The fair value of the senior secured term loan is estimated based on quoted market prices as follows:

	As of September 30,		As of December 31,
	2011		2010
Carrying amount	$	209,298	$	235,491
Fair value	$	205,194	$	239,244

Interest Rate Cap Agreement

The Company is required as part of its senior secured term loan facility to enter into interest rate protection to the extent necessary to provide that at least 50% of the term loan is subject to either a fixed interest rate or interest rate protection for a period of not less than three years. On April 15, 2010, the Company entered into a three-year interest rate cap agreement which was not designated as a hedging instrument. This agreement caps the interest rate on $125,000 of aggregate principal amount of the Company's outstanding term loan at 9.5%. As of September 30, 2011 and December 31, 2010, the fair value of the interest rate cap was immaterial.

Debt Covenants

The senior secured term loan and revolving credit facilities contain covenants which, among other things, restrict the Company's ability, and that of its restricted subsidiaries, to:

• pay dividends or make any other restricted payments to parties other than to the Company;

• incur additional indebtedness and financing obligations;

• create liens on their assets;

• make certain investments;

• sell or otherwise dispose of their assets other than in the ordinary course of business;

• consolidate, merge or otherwise transfer all or any substantial part of their assets;

• enter into transactions with their affiliates; and

• engage in businesses other than those in which the Company is currently engaged or those reasonably related thereto.

The Credit Agreement for the term loan and revolving credit facilities imposes an annual limit of $25,000 on capital expenditures, plus a carryforward of $5,000 of any unused capital expenditures from the prior year. In addition to the dollar limitation, the Company may not make any capital expenditure if any default or event of default under the credit agreement has occurred and is continuing, or if a breach of the financial covenants contained in the credit agreement would result on a pro forma basis after giving effect to the capital expenditure.

The Credit Agreement also contains financial covenants that require the Company to maintain a ratio of funded debt to adjusted EBITDA ("leverage ratio") below a specified maximum ratio, a ratio of adjusted EBITDA to interest expense ("interest coverage ratio") above a specified minimum ratio and a ratio of total adjusted debt (adjusted for certain leases and financing obligations) to adjusted EBITDA plus rental expense ("EBITDAR ratio") below a specified maximum ratio. The financial covenants contain normal and customary periodic changes in the required ratios over the life of the senior secured term loan and revolving credit facilities.

Leverage Ratio- The maximum leverage ratio as of the last day of any four consecutive fiscal quarters may not exceed: (a) 5.50 to 1.00 for any four quarter period ending March 31, 2011 through June 30, 2012; (b) 5.00 to 1.00 for any four quarter period ending September 30, 2012 through December 31, 2012; (c) 4.50 to 1.00 for any four quarter period ending March 31, 2013 through December 31, 2013; (d) 4.25 to 1.00 for any four quarter period ending March 31, 2014 through December 31, 2014; and (e) 4.00 to 1.00 for any four quarter period ending March 31, 2015 or thereafter.

Interest Coverage Ratio- The minimum interest coverage ratio as of the last day of any four consecutive fiscal quarters may not be less than: (a) 1.50 to 1.00 for any four quarter period ending March 31, 2011 through December 31, 2011; (b) 1.60 to 1.00 for any four quarter period ending March 31, 2012 through December 31, 2012; (c) 1.75 to 1.00 for any four quarter period ending March 31, 2013 through December 31, 2013; (d) 1.85 to 1.00 for any four quarter period ending March 31, 2014 through December 31, 2014; and (e) 2.00 to 1.00 for any four quarter period ending March 31, 2015 or thereafter.

EBITDAR Ratio- The maximum EBITDAR ratio as of the last day of any four consecutive fiscal quarters may not exceed: (a) 8.00 to 1.00 for any four quarter period ending March 31, 2011 through December 31, 2011; (b) 7.50 to 1.00 for any four quarter period ending March 31, 2012 through December 31, 2012; (c) 7.00 to 1.00 for any four quarter period ending March 31, 2013 through December 31, 2013; (d) 6.75 to 1.00 for any four quarter period ending March 31, 2014 through December 31, 2014; and (e) 6.50 to 1.00 for any four quarter period ending March 31, 2015 or thereafter.

As of September 30, 2011, the Company was in compliance with all of the financial covenants in the amended Credit Agreement for the term loan and revolving credit facilities. As of September 30, 2011, the Company's leverage, interest coverage, and EBITDAR ratios were 3.18, 2.55, and 5.77, respectively.

The Company's financial results depend to a substantial degree on the availability of suitable motion pictures for screening in its theatres and the appeal of such motion pictures to patrons in its specific theatre markets. The complete motion picture release schedule for 2012 and beyond is not yet known. Based on current projections and our current financial covenant ratios, the Company believes it will remain in compliance with its financial covenants for the foreseeable future. However, it is possible that the Company may not comply with some or all of its financial covenants in the future.

The Company could seek waivers or additional amendments to the Credit Agreement if a violation did occur. However, the Company can provide no assurance that it will successfully obtain such waivers or amendments from its lenders. If the Company is unable to comply with some or all of the financial or non-financial covenants and if it fails to obtain future waivers or amendments to the Credit Agreement, the lenders may terminate the revolving credit facility with respect to additional advances and may declare all or any portion of the obligations under the revolving credit facility and the term loan facility due and payable.