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Notes Payable, Long-term Debt, Lease Obligations and Interest Rate Caps
 6 Months Ended
Jun. 30, 2011
Notes Payable, Long-term Debt, Lease Obligations and Interest Rate Caps [Abstract]  
Notes Payable, Long-term Debt, Lease Obligations and Interest Rate Caps
(7) Notes Payable, Long-term Debt, Lease Obligations and Interest Rate Caps
                 
    June 30,     December 31,  
Obligations (in thousands)   2011     2010  
$100.0 million revolving line of credit
  $ —     $ —  
Term loan facility
    101,250       103,250  
Facility lease obligation
    3,365       3,657  
Equipment capital leases and other notes payable
    657       1,753  
 
           
Total
    105,272       108,660  
Current portion of notes payable, long-term debt and lease obligations
    (5,119 )     (6,073 )
 
           
Non-current portion of notes payable, long-term debt and lease obligations
  $     100,153     $ 102,587  
 
           
     Revolving Line of Credit and Term Loan Facility
     In March 2010, ION, its Luxembourg subsidiary, ION International S.à r.l. (“ION Sàrl”), and certain of its other U.S. and foreign subsidiaries entered into a new credit facility (the “Credit Facility”). The terms of the Credit Facility are set forth in a credit agreement dated as of March 25, 2010 (the “Credit Agreement”), by and among ION, ION Sàrl and China Merchants Bank Co., Ltd., New York Branch (“CMB”), as administrative agent and lender. The obligations of ION under the Credit Facility are guaranteed by certain of ION’s material U.S. subsidiaries and the obligations of ION Sàrl under the Credit Facility are guaranteed by certain of ION’s material U.S. and foreign subsidiaries, in each case that are parties to the Credit Agreement. In addition, in June 2010, INOVA Geophysical also entered into an agreement to guarantee the indebtedness under the Credit Facility.
     The Credit Facility provides ION with a revolving line of credit of up to $100.0 million in borrowings (including borrowings for letters of credit) and refinanced ION’s outstanding term loan with a new term loan in the original principal amount of $106.3 million. As of June 30, 2011, ION had no indebtedness outstanding under the revolving line of credit.
     The revolving credit facility and term loan under the Credit Facility are each scheduled to mature on March 24, 2015. The $106.3 million original principal amount under the term loan is subject to scheduled quarterly amortization payments that commenced on June 30, 2010, of $1.0 million per quarter until the maturity date, with the remaining unpaid principal amount of the term loan due upon the maturity date. The indebtedness under the Credit Facility may sooner mature on a date that is 18 months after the earlier of (i) any dissolution of INOVA Geophysical, or (ii) the administrative agent determining in good faith that INOVA Geophysical is unable to perform its obligations under its guarantee.
     The interest rate per annum on borrowings under the Credit Facility will be, at ION’s option:
  •   An alternate base rate equal to the sum of (i) the greatest of (a) the prime rate of CMB, (b) a federal funds effective rate plus 0.50%, or (c) an adjusted LIBOR-based rate plus 1.0%, and (ii) an applicable interest margin of 2.5%; or
 
  •   For eurodollar borrowings and borrowings in euros, pounds sterling or canadian dollars, the sum of (i) an adjusted LIBOR-based rate, and (ii) an applicable interest margin of 3.5%.
     As of June 30, 2011, the $101.3 million in outstanding term loan indebtedness under the Credit Facility accrued interest at a rate of 3.8% per annum.
     The Credit Facility requires compliance with certain financial covenants. Certain of these financial covenants became effective on June 30, 2011, and will continue in effect for each fiscal quarter thereafter over the term of the Credit Facility. These financial covenants require ION and its U.S. subsidiaries to:
  •   Maintain a minimum fixed charge coverage ratio in an amount equal to at least 1.125 to 1;
 
  •   Not exceed a maximum leverage ratio of 3.25 to 1; and
 
  •   Maintain a minimum tangible net worth of at least 60% of ION’s tangible net worth as of March 31, 2010, as defined in the Credit Agreement.
     The fixed charge coverage ratio is defined as the ratio of (i) ION’s consolidated EBITDA less cash income tax expense and non-financed capital expenditures, to (ii) the sum of scheduled payments of lease payments and payments of principal indebtedness, interest expense actually paid and cash dividends, in each case for the four consecutive fiscal quarters most recently ended. The leverage ratio is defined as the ratio of (x) total funded consolidated debt, capital lease obligations and issued letters of credit (net of cash collateral) to (y) consolidated EBITDA of ION for the four consecutive fiscal quarters most recently ended. The Company was in compliance with these financial covenants when they became effective on June 30, 2011, and expects to remain in compliance with these financial covenants throughout the remainder of 2011.
     Interest Rate Caps
     In August 2010, the Company entered into an interest rate cap agreement and purchased interest rate caps (the “August 2010 Caps”) having an initial notional amount of $103.3 million with a three-month average LIBOR cap of 2.0%. If and when the three-month average LIBOR rate exceeds 2.0%, the LIBOR portion of interest owed by the Company would be capped at 2.0%. The initial notional amount was set to equal the projected outstanding balance under the Company’s term loan facility at December 31, 2010. The notional amount was then set so as not to exceed the Company’s outstanding balance of its term loan facility over a period extending through March 29, 2013. The Company purchased these interest rate caps for approximately $0.4 million.
     In July 2011, the Company purchased additional interest rate caps (the “July 2011 Caps”) related to its term loan facility. The notional amounts, together with the notional amounts of the August 2010 Caps, were set so as not to exceed the outstanding balance of the Company’s term loan facility over a period that extends through March 31, 2014. The Company purchased these interest rate caps for an amount equal to approximately $0.3 million.
     As of July 2011, the Company held interest rate caps as follows (amounts in thousands):
                                 
            Notional Amounts
Payment Date   Cap Rate   August 2010 Caps   July 2011 Caps   Total
September 29, 2011
    2.0 %   $   91,125     $     —     $   91,125  
December 29, 2011
    2.0 %   $ 90,225     $   —     $ 90,225  
March 29, 2012
    2.0 %   $ 89,325     $   —     $ 89,325  
June 29, 2012
    2.0 %   $ 68,775     $   18,850     $ 87,625  
September 28, 2012
    2.0 %   $ 68,075     $   18,650     $ 86,725  
December 31, 2012
    2.0 %   $ 67,375     $   18,450     $ 85,825  
March 29, 2013
    2.0 %   $ 66,675     $   18,250     $ 84,925  
June 28, 2013
    2.0 %   $ —     $   63,175     $ 63,175  
September 30, 2013
    2.0 %   $ —     $   62,475     $ 62,475  
December 31, 2013
    2.0 %   $ —     $   61,775     $ 61,775  
March 31, 2014
    2.0 %   $ —     $   61,075     $ 61,075  
     These interest rate caps have been designated as cash flow hedges according to ASC 815 (“Derivatives and Hedging”) and, accordingly, the effective portion of the change in fair value of these interest rate caps are recognized in other comprehensive income in the Company’s consolidated financial statements. As of June 30, 2011, the total fair value of the August 2010 Caps was $0.1 million, which was based on Level 2 inputs such as interest rates and yield curves that are observable at commonly quoted intervals. For both the three and six months ended June 30, 2011, there was approximately $0.1 million, net of tax, related to the change in fair value included in other comprehensive income.