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Long-Term Obligations

12 Months Ended

Dec. 31, 2011

6.	Long-Term Obligations

Long-term obligations consisted of the following at December 31, 2011 and 2010 (in thousands):


		2011			2010
Senior term notes	Notes payable, maturing in 2016, secured by assets, variable interest rate (LIBOR + 1.75% or 2.0% at December 31, 2011)	$	573,984		$	—

Senior term notes	Notes payable, secured by assets, variable interest rate (LIBOR + 2.25% or 2.5% at December 31, 2010), repaid in 2011		—			493,750

Revolving credit	Revolving line of credit, maturing in 2016, secured by assets, variable interest rate		—			—

Secured seller notes	Notes payable, various maturities through 2013, secured by assets and stock of certain subsidiaries, various interest rates ranging from 9.0% to 10.0%		346			868


	Total debt obligations		574,330			494,618

	Capital lease obligations		44,523			32,418

			618,853			527,036

	Less — current portion		(32,571	)		(28,101	)

		$	586,282		$	498,935

The annual aggregate scheduled maturities of our long-term obligations for the five years subsequent to December 31, 2011 are presented below (in thousands):


	Debt Obligations		Capital Lease Obligations		Total
2012	$	29,372	$	3,199	$	32,571
2013		32,731		3,374		36,105
2014		43,594		3,430		47,024
2015		47,227		3,625		50,852
2016		421,406		3,395		424,801
Thereafter		—		27,500		27,500

Total	$	574,330	$	44,523	$	618,853

Senior Credit Facility

In August 2010, we entered into a new senior credit facility with various lenders for $600 million of senior secured credit facilities with Bank of America, N.A. as the syndication agent and Wells Fargo Bank, N.A. as the administrative agent, collateral agent, issuing bank and swing line lender. At the time of entering into the senior credit facility, it included $500 million of senior term notes and $100 million revolving credit facility, which may be used to borrow, on a same-day notice under a swing line, the lesser of $10 million and the aggregate unused amount of the revolving credit facility then in effect. In connection with this transaction, we paid financing costs in the amount of $9.1 million, of which $2.1 million, or $1.3 million after tax were recognized as part of income from continuing operations, the remainder was capitalized as deferred financing costs.

In August 2011, we amended and restated our existing senior credit facility to allow for additional senior term notes in the amount of $100 million and an additional $25 million aggregate principal amount of revolving commitments. Bank of America, N.A. and JP Morgan Chase Bank, N.A. are co-syndication agents for the amended senior credit facility, while Wells Fargo, N.A. remains the administrative agent, collateral agent, issuing bank and swing line lender. The amended senior credit facility called for $581.3 million in senior term notes and a $125 million revolving credit facility. The funds borrowed from the additional senior term notes were used to repay in full, amounts borrowed in connection with the acquisition of Vetstreet on August 9, 2011. The terms of the amended and restated senior credit facility are discussed below in this footnote. In connection with the amendment we incurred $2.9 million in financing costs, of which approximately $865,000 were recognized as part of income from continuing operations and approximately $2.0 million was capitalized as deferred financing costs. In addition, we expensed $1.1 million of previously capitalized deferred financing costs associated with lenders who exited the syndicate on the amendment date or those that were determined to be extinguished.

Interest Rate. In general, borrowings under the senior term notes and the revolving credit facility bear interest, at our option, on either:

•

the base rate (as defined below) plus the applicable margin. The applicable margin for a base rate loan is an amount equal to the applicable margin for Eurodollar rate (as defined below) minus 1.00%; or

•

the adjusted Eurodollar rate (as defined below) plus a margin of 1.50% per annum for the senior term notes existing from May 2005 to August 2010, for the senior term notes existing from August 2010 to August 2011 a margin of 2.25% per annum and for the senior term notes existing since August 2011 until the date of delivery of the compliance certificate and the financial statements for the period ending September 30, 2011, a percentage, per annum, determined by reference to the following table as if the Leverage Ratio then in effect were in Level II below, and thereafter, a percentage, per annum, determined by reference to the Leverage Ratio in effect from time to time as set forth in the following table:


Level	Leverage Ratio	Applicable Margin for Eurodollar Rate Loans			Applicable Revolving Commitment Fee %
I	³ 2.50:1.00		2.25	%		0.50	%
II	< 2.50:1.00 and ³ 1.75:1.00		1.75	%		0.375	%
III	< 1.75:1.00 and ³ 1.00:1.00		1.50	%		0.25	%
IV	< 1.00:1.00		1.25	%		0.20	%

The base rate for the previous senior term notes existing from May 2005 to August 2010 is the higher of (a) Wells Fargo’s prime rate or (b) the Federal funds rate plus 0.5%. The base rate for the senior term notes, existing from August 2010 to August 2011, and the amended notes existing since August 2011, is a rate per annum equal to the greatest of Wells Fargo’s prime rate in effect on such day, the Federal funds effective rate in effect on such day plus 0.5% and the adjusted Eurodollar rate for a one-month interest period commencing on such day plus 1.0%. The adjusted Eurodollar rate is defined as the rate per annum obtained by dividing (1) the rate of interest offered to Wells Fargo on the London interbank market by (2) a percentage equal to 100% minus the stated maximum rate of all reserve requirements applicable to any member bank of the Federal Reserve System in respect of “Eurocurrency liabilities.”

Maturity and Principal Payments. The amended and restated senior term notes mature on August 19, 2016. Principal payments on the senior term notes are paid quarterly in the amount of $7.3 million for the first two years beginning on December 31, 2011, quarterly payments of $10.9 million for the two years following, and quarterly payments of $14.5 million for the three quarters prior to maturity at which time the remaining balance is due. The following table sets forth the remaining scheduled principal payments for our senior term notes (in thousands):


	2012		2013		2014		2015		2016
Senior term notes	$	29,063	$	32,695	$	43,594	$	47,227	$	421,405

The revolving credit facility has a per annum commitment fee determined by reference to the Leverage Ratio in effect from time to time as set forth in the table above and is applied to the unused portion of the commitment. The revolving credit facility matures on August 19, 2016. Principal payments on the revolving credit facility are made at our discretion with the entire unpaid amount due at maturity. At December 31, 2011, we had no borrowings under our revolving credit facility.

Guarantees and Security. We and each of our wholly-owned subsidiaries guarantee the outstanding debt under the senior credit facility. These borrowings, along with the guarantees of the subsidiaries, are further secured by substantially all of our consolidated assets. In addition, these borrowings are secured by a pledge of substantially all of the capital stock, or similar equity interests, of our wholly-owned subsidiaries.

Debt Covenants. The senior credit facility contains certain financial covenants pertaining to fixed charge coverage and leverage ratios. In addition, the senior credit facility has restrictions pertaining to capital expenditures, acquisitions and the payment of cash dividends on all classes of stock. At December 31, 2011, we had a fixed charge coverage ratio of 1.78 to 1.00, which was in compliance with the required ratio of no less than 1.20 to 1.00, and a leverage ratio of 2.14 to 1.00, which was in compliance with the required ratio of no more than 3.00 to 1.00.

Interest Rate Swap Agreements

In the past we have entered into interest rate swap agreements whereby we pay the counterparty amounts based on a fixed interest rate and set notional principal amount in exchange for the receipt of payments from the counterparty based on current LIBOR and the same set notional principal amount. We use interest rate swap agreements to mitigate our exposure to increasing interest rates as well as to maintain an appropriate mix of fixed-rate and variable-rate debt.

During 2010, all of our interest rate swap agreements had expired and we have not entered into any new agreements.

The following table summarizes cash received or cash paid and unrealized gains or losses recognized as a result of our interest rate swap agreements (in thousands):


	For Years Ended December 31,
	2011		2010		2009
Cash paid(1)	$	—	$	382	$	9,784
Recognized gain from ineffectiveness(2)	$	—	$	—	$	(70	)

(1)

Our interest rate swap agreements effectively converted a certain amount of our variable-rate debt under our senior credit facility to fixed-rate debt for purposes of hedging against the risk of increasing interest rates. The above table depicts cash payments to the counterparties on our swap agreements. These payments are offset by a corresponding decrease in interest paid on our variable-rate debt under our senior credit facility. These amounts are included in interest expense in our consolidated income statements.

(2)	These recognized gains are included in other expense (income) in our consolidated income statements.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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