Long-Term Debt

9 Months Ended

Jun. 30, 2012

Long-Term Debt [Abstract]

Long-Term Debt

5. Long-Term Debt

The Company’s long-term debt consists of the following:

(in thousands)	June 30, 2012			September 30, 2011
Term loan, principal and interest due in quarterly installments through February 9, 2017	$	523,375		$	527,350
Original issue discount on term loan, net of accumulated amortization		(6,072	)		(7,081	)
Senior notes, due February 15, 2018; semi-annual cash interest payments due each February 15th and August 15th (interest rate of 12.50%)		250,000			250,000
Original issue discount and initial purchase discount on senior notes, net of accumulated amortization		(9,018	)		(10,227	)
Senior revolver, due February 9, 2016; quarterly cash interest payments at a variable interest rate		3,500			—
		761,785			760,042
Less current portion		8,800			5,300
Long-term debt	$	752,985		$	754,742

Senior Secured Credit Facilities

On February 9, 2011, the Company completed refinancing transactions (the “February 2011 Refinancing”) and entered into new senior secured credit facilities, consisting of a (i) six-year $530.0 million term loan facility (the “term loan”), of which $50.0 million was deposited in a cash collateral account in support of issuance of letters of credit under an institutional letter of credit facility (the “institutional letter of credit facility”) and a (ii) $75.0 million five-year senior secured revolving credit facility (the “senior revolver”). The Company refers to these facilities as the “senior secured credit facilities”.

In connection with the February 2011 Refinancing, the Company incurred $19.3 million of expenses, including (i) $10.8 million related to the tender premium and consent fees paid in connection with the repurchase of its 11.25% Senior Subordinated Notes due 2014 (the “Senior Subordinated Notes”), (ii) $7.9 million in connection with the acceleration of deferred financing costs related to the prior indebtedness and (iii) $0.6 million related to transaction costs. These expenses were recorded on the Company’s fiscal 2011 consolidated statements of operations as Extinguishment of debt.

Term loan

The $530.0 million term loan was issued at a price equal to 98.5% of its face value and amortizes one percent per year, paid quarterly, with the remaining balance payable at maturity. The senior credit agreement also includes an annual provision for the prepayment of a portion of the outstanding term loan amounts beginning in fiscal 2011 equal to an amount ranging from 0 to 50% of a calculated amount, depending on the Company’s leverage ratio, if the Company generates certain levels of cash flow. The Company was not required to make such a prepayment of its term loan during fiscal 2011. The variable interest rate on the term loan is equal to (i) a rate equal to the greater of (a) the prime rate, (b) the federal funds rate plus 1/2 of 1% and (c) the Eurodollar rate for an interest period of one-month beginning on such day plus 100 basis points, plus 4.25%; or (ii) the Eurodollar rate (provided that the rate shall not be less than 1.75% per annum), plus 5.25%, at the Company’s option. At June 30, 2012, the variable interest rate on the term loan was 7.0%.

Senior revolver

During the nine months ended June 30, 2012, the Company drew $494.1 million under the senior revolver and repaid $490.6 million during the period. At June 30, 2012, the Company had $3.5 million of outstanding borrowings under the senior revolver and $71.5 million of availability under the senior revolver. The Company had $38.4 million of standby letters of credit issued under the institutional letter of credit facility primarily related to the Company’s workers’ compensation insurance coverage. Letters of credit can be issued under the Company’s institutional letter of credit facility up to the $50.0 million limit and letters of credit in excess of that amount reduce availability under the Company’s senior revolver. The interest rates for any borrowings under the senior revolver are the same as the term loan.

The senior revolver includes borrowing capacity available for borrowings on same-day notice, referred to as the “swingline loans.” The outstanding borrowings at June 30, 2012 were borrowed under the swingline, which have maturities less than one year, and are reflected under Current portion of long-term debt on the Company’s consolidated balance sheets.

Senior Notes

In connection with the February 2011 Refinancing, the Company issued $250.0 million of the senior notes at a price equal to 97.737% of their face value, for net proceeds of $244.3 million. The net proceeds were reduced by an initial purchasers’ discount of $5.6 million. The senior notes are the Company’s unsecured obligations and are guaranteed by certain of the Company’s existing subsidiaries.

Covenants

The senior credit agreement and the indenture governing the senior notes contain negative financial and non-financial covenants, including, among other things, limitations on the Company’s ability to incur additional debt, transfer or sell assets, pay dividends, redeem stock or make other distributions or investments, and engage in certain transactions with affiliates. In addition, the senior credit agreement governing the Company’s senior secured credit facilities contains financial covenants that require the Company to maintain a specified consolidated leverage ratio and consolidated interest coverage ratio.

The Company is restricted from paying dividends to NMH Holdings, LLC (“Parent”) in excess of $15.0 million, except for dividends used for the repurchase of equity from former officers and employees and for the payment of management fees, taxes, and certain other expenses.

Derivatives

The Company entered into an interest rate swap in a notional amount of $400.0 million effective March 31, 2011, maturing on September 30, 2014. The Company entered into this interest rate swap to hedge the risk of changes in the floating rate of interest on borrowings under the term loan. Under the terms of the swap, the Company receives from the counterparty a quarterly payment based on a rate equal to the greater of 3-month LIBOR and 1.75% per annum, and the Company makes payments to the counterparty based on a fixed rate of 2.5% per annum, in each case on the notional amount of $400.0 million, settled on a net payment basis. Based on the applicable margin of 5.25% under the Company’s term loan, this swap effectively fixes the Company’s cost of borrowing for $400.0 million of the term loan at 7.8% per annum for the term of the swap.

The Company accounts for the interest rate swap as a cash flow hedge and the effectiveness of the hedge relationship is assessed on a quarterly basis. The fair value of the swap agreement, representing the price that would be paid to transfer the liability in an orderly transaction between market participants, was $6.1 million or $3.6 million after taxes at June 30, 2012 and $6.7 million or $4.0 million after taxes at September 30, 2011. The fair value was recorded in current liabilities (under Other accrued liabilities) and was determined based on pricing models and independent formulas using current assumptions. The entire change in fair market value is recorded in shareholder’s equity, net of tax, on the consolidated balance sheets as accumulated other comprehensive loss.