Long-term Debt and Credit Facilities

6 Months Ended

Jun. 30, 2012

Long-term Debt and Credit Facilities

Long-term Debt and Credit Facilities

Note 6 — Long-term Debt and Credit Facilities

Long-term debt was comprised as follows (dollar amounts in thousands):

	June 30,		December 31,
	2012		2011
Bank Credit Facility:
Term loan	$	327,761	$	362,601
Revolving loan commitment	-		-
Capital leases	1,054		699
	328,815		363,300
Less current maturities	(12,877)		(10,395)
	$	315,938	$	352,905

Bank Credit Facility ¾  In April 2007, we entered into a $675.0 million bank Credit Facility, comprised of a $625.0 million term loan, which matures in April 2014, and a $50.0 million revolving loan commitment, which matures in April 2013.  The term loan originally required quarterly repayments of $1,562,500, which began September 30, 2007.  The term loan originally bore interest at our option of (1) the bank’s base rate plus a margin of 1.0% or (2) LIBOR plus a margin of 2.0%.  The term loan is collateralized by substantially all of the assets of the Company.

Effective March 22, 2011, we entered into a First Amendment (the “Amendment”) to the bank Credit Facility.  The Amendment modified certain terms of the Credit Facility, including an increase in the permitted consolidated leverage ratio, the creation of a specific preferred stock dividend payment basket and the potential to extend the term beyond its current expiration in April 2014.  The restricted payment basket within the Amendment allows for dividend payments not to exceed $5,750,000 per year.  In 2011, the Company incurred $2.7 million of debt issuance costs related to certain fees and expenses in connection with this Amendment.

Under the Amendment, the $50.0 million revolving loan commitment was reduced to $25.0 million.  The Amendment also requires us to make quarterly term loan repayments of $2.5 million, which began June 30, 2011, through December 31, 2012, and $3.75 million beginning March 31, 2013 through December 31, 2013.  The amended term loan and revolving loan commitment bear interest at our option of (1) the bank’s base rate plus a margin of 4.0% or (2) LIBOR plus a margin of 5.0%.  In addition, a LIBOR floor of 1.5% was established under the Amendment.

The Amendment includes terms and conditions which require compliance with leverage and interest coverage covenants.  As of June 30, 2012, our consolidated leverage ratio was 3.76 compared to 3.67 as of March 31, 2012, and the maximum allowable ratio was 4.00 for each quarter.  Our consolidated interest coverage ratio as of June 30, 2012 was 2.90 compared to the minimum allowable ratio of 2.25.  Per the Amendment, the maximum allowable consolidated leverage ratio will remain at 4.00 until September 30, 2012, when it will change to 3.75 for the quarters ending December 31, 2012 through June 30, 2013.  It will then drop to 3.50 for the quarter ending September 30, 2013 until maturity.  The minimum allowable consolidated interest coverage ratio will continue to be 2.25 until maturity.

With the leverage ratio changing to 3.75 for the quarter ending December 31, 2012, our ability to remain in compliance with those covenants will depend on our ability to generate sufficient Consolidated EBITDA (a term defined in the Amendment) and to manage our capital investment and debt levels.  We continue taking actions within our control to manage our debt level and remain in compliance with our debt covenants.  The actions within our control include our management of capital investment, working capital and operating costs.  In addition, we are exploring alternative forms of financing.  Our ability to continue to comply with our current covenants is subject to our revenue and margin, along with the general economic climate and business conditions beyond our control.  The uncertainties impacting travel and lodging, in addition to the constraints in the credit markets, consumer conservatism, competitive developments and other market dynamics, including technological changes, may continue to negatively impact our planned results and required covenants.  If we are not able to remain in compliance with our current debt covenants and our lenders will not amend or waive covenants with which we are not in compliance, the debt would be due, we would not be able to satisfy our financial obligations and we would need to seek alternative financing.  If we were not able to secure alternative financing, it is likely we would not be able to continue our operations.

During the first quarter of 2012, we made a prepayment of $15.0 million on the term loan, along with the required payment of $2.5 million.  We expensed $156,000 of debt issuance costs related to the prepayment.  During the second quarter of 2012, we prepaid $17.0 million on the term loan and made our required quarterly payment of $2.5 million.  We expensed $156,000 of debt issuance costs.

In the first quarter of 2011, we made our required quarterly payment of $1.0 million and prepaid $2.0 million on the term loan.  We expensed $158,000 of debt issuance costs related to the prepayment and the Amendment described above.  During the second quarter of 2011, we made the required payment of $2.5 million.

The Credit Facility originally provided for the issuance of letters of credit up to $15.0 million, subject to customary terms and conditions.  Under the terms of the Amendment, this amount was reduced to $7.5 million.  As of June 30, 2012, we had outstanding letters of credit totaling $350,000, which reduce amounts available under the revolving loan commitment.  During the second quarter of 2012, we borrowed $15.0 million under the revolving loan commitment and repaid the entire amount during the quarter.  The revolving loan commitment will expire during April 2013.  If we are not able to secure alternative financing, this would have a substantial adverse impact on the Company and our ability to continue our operations.

The Credit Facility also requires we notify the agent upon the occurrence of a “Material Adverse Effect” prior to any draw on the Company’s revolving loan commitment, as such terms are defined and used within our bank Credit Facility.  However, under the Credit Facility, the provision of such a notice is not an event of default, but if such an event occurred, it could restrict the Company’s ability to obtain additional financing under the revolving loan commitment.  The original Credit Facility also stipulated we enter into hedge agreements to provide at least 50% of the outstanding term loan into a fixed interest rate for a period not less than two years.  Our fixed rate swap agreements expired in June 2011 (see Note 13).  The Amendment did not require us to enter into any hedge agreements.  The term loan interest rate as of June 30, 2012 was 6.5%.  The weighted average interest rate for the quarter ended June 30, 2012 was 6.6%.  As of June 30, 2012, we were in compliance with all financial covenants required by our bank Credit Facility.

Capital Leases — As of June 30, 2012, we had total capital lease obligations of $1.0 million.  We acquired approximately $680,000 of equipment under capital lease arrangements during the six months ended June 30, 2012.  Our capital lease obligations consist primarily of vehicles used in our field service operations.

As of June 30, 2012, long-term debt had the following scheduled maturities for the six months remaining in 2012 and the full years ending December 31, 2013 and after (dollar amounts in thousands):

	2012		2013		2014		2015		2016
Long-term debt	$	5,000	$	15,000	$	307,761	$	-	$	-
Capital leases	237		313		269		232		48
	5,237		15,313		308,030		232		48
Less amount representing interest on capital leases	(14)		(17)		(10)		(4)		-
	$	5,223	$	15,296	$	308,020	$	228	$	48

We do not utilize special purpose entities or off-balance sheet financial arrangements.