Long-term Debt and Derivatives

6 Months Ended

Jun. 30, 2011

Long-term Debt and Derivatives

Long-term Debt and Derivatives

8.  Long-term Debt and Derivatives

Long-term debt, net of current maturities, is as follows:

	June 30, 2011			December 31, 2010
	(in thousands)
Senior secured credit facility due October 2012	$	1,518,125		$	1,589,125
$250 million 6 3/4% senior subordinated notes due March 2015	250,000			250,000
$325 million 8 ¾% senior subordinated notes due August 2019	325,000			325,000
Other long-term obligations	1,890			3,782
Capital leases	3,121			3,216
	2,098,136			2,171,123
Less current maturities of long-term debt	(3,052		)	(357,927		)
	$	2,095,084		$	1,813,196

The following is a schedule of future minimum repayments of long-term debt as of June 30, 2011 (in thousands):

Within one year	$	3,052
1-3 years	165
3-5 years	250,193
Over 5 years	1,844,726
Total minimum payments	$	2,098,136

Senior Secured Credit Facility

The Company’s senior secured credit facility had an outstanding balance of $1,518.1 million at June 30, 2011, consisting of a term loan of $1,518.1 million. Additionally, at June 30, 2011, the Company was contingently obligated under letters of credit issued pursuant to the senior secured credit facility with face amounts aggregating $26.5 million, resulting in $614.1 million of available borrowing capacity as of June 30, 2011. The term loan had a quarterly principal payment of $354.9 million in December 2011, followed by payments of $387.8 million in March 2012, June 2012 and October 2012. The revolving credit facility was scheduled to mature on July 3, 2012.

In July 2011, the Company entered into a new $2.15 billion senior secured credit facility, which is comprised of a $700 million revolving credit facility that will mature in July 2016, a $700 million variable rate Term Loan A due in July 2016 and a $750 million variable rate Term Loan B due in July 2018. The Company utilized the proceeds of the two term loan borrowings and cash on hand to retire its existing senior secured credit facility obligation and pay transaction costs and accrued interest and fees on the retired debt.  Due to the closing of this transaction, the Company has classified the outstanding balance of its senior secured credit facility at June 30, 2011 as a long-term obligation in accordance with the guidance in ASC 470-10 “Debt-Intent and Ability to Refinance on a Long-Term Basis.”  See Note 15 for further details.

During the six months ended June 30, 2011, the senior secured credit facility amount outstanding decreased by $71.0 million primarily due to repayments on the revolving credit facility using available cash.

6 3/4% Senior Subordinated Notes

In July 2011, the Company announced its intention to redeem all of its $250 million senior subordinated notes due March 2015. See Note 15 for further details.

Covenants

The Company’s senior secured credit facility and $325 million 83/4% and $250 million 63/4% senior subordinated notes require it, among other obligations, to maintain specified financial ratios and to satisfy certain financial tests, including fixed charge coverage, senior leverage and total leverage ratios. In addition, the Company’s senior secured credit facility and $325 million 83/4% and $250 million 63/4% senior subordinated notes restrict, among other things, the Company’s ability to incur additional indebtedness, incur guarantee obligations, amend debt instruments, pay dividends, create liens on assets, make investments, make acquisitions, engage in mergers or consolidations, make capital expenditures, and otherwise restricts corporate activities.

At June 30, 2011, the Company was in compliance with all required covenants.

Interest Rate Swap Contracts

In accordance with the terms of its senior secured credit facility that was outstanding at June 30, 2011, the Company was required to enter into fixed-rate debt or interest rate swap agreements in an amount equal to 50% of the Company’s consolidated indebtedness, excluding the revolving credit facility, within 100 days of the closing date of the senior secured credit facility.

The effect of derivative instruments on the consolidated statement of income for the three months ended June 30, 2011 was as follows (in thousands):

Derivatives in a Cash Flow Hedging Relationship	Gain (Loss) Recognized in OCI on Derivative (Effective Portion)			Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Gain (Loss) Reclassified from AOCI into Income (Effective Portion)			Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)	Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)
Interest rate swap contracts	$	(332	)	Interest expense	$	(3,625	)	None	$	—
Total	$	(332	)		$	(3,625	)		$	—

Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivative	Gain (Loss) Recognized in Income on Derivative
Interest rate swap contracts	Interest expense	$	(1	)
Total		$	(1	)

The effect of derivative instruments on the consolidated statement of income for the six months ended June 30, 2011 was as follows (in thousands):

Derivatives in a Cash Flow Hedging Relationship	Gain (Loss) Recognized in OCI on Derivative (Effective Portion)			Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Gain (Loss) Reclassified from AOCI into Income (Effective Portion)			Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)	Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)
Interest rate swap contracts	$	(672	)	Interest expense	$	(8,173	)	None	$	—
Total	$	(672	)		$	(8,173	)		$	—

Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivative	Gain (Loss) Recognized in Income on Derivative
Interest rate swap contracts	Interest expense	$	(4	)
Total		$	(4	)

The effect of derivative instruments on the consolidated statement of income for the three months ended June 30, 2010 was as follows (in thousands):

Derivatives in a Cash Flow Hedging Relationship	Gain (Loss) Recognized in OCI on Derivative (Effective Portion)			Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Gain (Loss) Reclassified from AOCI into Income (Effective Portion)			Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)	Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)
Interest rate swap contracts	$	(2,792	)	Interest expense	$	(6,364	)	None	$	—
Total	$	(2,792	)		$	(6,364	)		$	—

Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivative	Gain (Loss) Recognized in Income on Derivative
Interest rate swap contracts	Interest expense	$	(4	)
Total		$	(4	)

The effect of derivative instruments on the consolidated statement of income for the six months ended June 30, 2010 was as follows (in thousands):

Derivatives in a Cash Flow Hedging Relationship	Gain (Loss) Recognized in OCI on Derivative (Effective Portion)			Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Gain (Loss) Reclassified from AOCI into Income (Effective Portion)			Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)	Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)
Interest rate swap contracts	$	(10,178	)	Interest expense	$	(12,859	)	None	$	—
Total	$	(10,178	)		$	(12,859	)		$	—

Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivative	Gain (Loss) Recognized in Income on Derivative
Interest rate swap contracts	Interest expense	$	(38	)
Total		$	(38	)

In addition, during the three and six months ended June 30, 2011, the Company amortized $0.6 million and $2.5 million, respectively, in OCI related to the derivatives that were de-designated as hedging instruments under ASC 815, “Derivatives and Hedging,” as compared to $4.2 million and $8.5 million for the three and six months ended June 30, 2010, respectively.

In the coming twelve months, the Company anticipates that losses of approximately $4.6 million will be reclassified from OCI to earnings, as part of interest expense. As this amount represents effective hedge results, a comparable offsetting amount of incrementally lower interest expense will be realized in connection with the variable funding being hedged.

The following table sets forth the fair value of the interest rate swap contract liabilities included in accrued interest within the consolidated balance sheets at June 30, 2011 and December 31, 2010:

	June 30, 2011			December 31, 2010
	(in thousands)
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments
Interest rate swap contracts	Accrued interest	$	4,645	Accrued interest	$	13,034
Total derivatives designated as hedging instruments		$	4,645		$	13,034
Derivatives not designated as hedging instruments
Interest rate swap contracts	Accrued interest	$	—	Accrued interest	$	3,712
Total derivatives not designated as hedging instruments		$	—		$	3,712
Total derivatives		$	4,645		$	16,746