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Term Loan and Revolving Credit Facility

6 Months Ended

Jun. 30, 2015

Term Loan and Revolving Credit Facility [Abstract]

Term Loan and Revolving Credit Facility

5.	Term Loan and Revolving Credit Facility

The Company is party to the Second Amended and Restated Revolving Credit and Term Loan Agreement dated November 9, 2012 (the “Existing Credit Facility”), providing for a $100.0 million revolving credit facility and $125.0 million term loan facility. As discussed in Note 11 below, the Existing Credit Facility was amended on July 2, 2015, and all outstanding borrowings were prepaid in full. The Existing Credit Facility matures on December 31, 2016, and amends and refinances the Company’s original Credit Facility. The term loan portion of the Existing Credit Facility includes required quarterly amortization payments in the amount of $781,250 in the case of each payment made during calendar years 2013 and 2014 (0.625% of the aggregate original principal amount of the term loan facility), and $1,562,500 in the case of each payment made during calendar years 2015 and 2016 (1.25% of the aggregate original principal amount of the term loan facility). The Existing Credit Facility is guaranteed by the Company’s subsidiary and is secured by substantially all of the personal property and assets of the Company and the guarantor.

Borrowings under the Existing Credit Facility bear interest at LIBOR or a base rate, plus a margin ranging from 2.00% to 2.50%, depending on the Company’s leverage ratio. The Company is party to an interest rate swap arrangement that fixes its interest rate on the entire term loan facility at an effective rate ranging from 2.85% to 3.35%, depending on the Company’s leverage ratio. In addition, an unused commitment fee ranging from 0.30% to 0.40%, depending on the Company’s leverage ratio, accrues on unused amounts under the revolving portion of the Existing Credit Facility. The Existing Credit Facility contains customary affirmative and negative covenants, representations, warranties, events of default and remedies upon default, including acceleration and rights to foreclose on the collateral securing the Existing Credit Facility. In addition, the Existing Credit Facility requires that the Company satisfy certain financial maintenance covenants, including:

	●	a leverage ratio of not greater than 2 to 1. Leverage ratio is defined as the ratio of total debt to trailing four-quarter EBITDA (earnings before interest, taxes, depreciation, amortization and non-cash charges such as stock-based compensation).

	●	a coverage ratio of not less than 1.75 to 1. Coverage ratio is defined as the ratio of trailing four-quarter EBITDA and rent expense to trailing four-quarter interest and rent expense.

	●	a Department of Education Financial Responsibility Composite Score of not less than 1.5.

The Company was in compliance with all the terms of the Existing Credit Facility as of June 30, 2015.

During both the three and six months ended June 30, 2015 and 2014, the Company paid cash interest of $1.1 million and $2.2 million, respectively. As of June 30, 2015, the Company had $115.6 million outstanding under the term loan facility and no balance outstanding under the revolving credit facility.

Debt and short-term borrowings consist of the following as of June 30, 2015 (in thousands):

Term loan		$	115,625
Revolving credit facility			—
Total debt			115,625
Less: Current portion of long-term debt			6,250
Long-term debt		$	109,375

Aggregate debt maturities as of June 30, 2015 are as follows:

2015		$	3,125
2016			112,500
		$	115,625

Interest Rate Swap

The Company is party to an interest rate swap on the outstanding balance of the Existing Credit Facility in order to minimize the interest rate exposure on the balance of the term loan facility (the “Swap”). The Swap effectively fixes the variable interest rate on the associated term loan at a rate ranging from 2.85% to 3.35%, depending on the Company’s leverage ratio, rather than being subject to fluctuations in the LIBOR rate. The term of the Swap effectively matches the term of the underlying term loan facility. The Swap has been designated as a cash flow hedge and has been deemed effective in accordance with the Derivatives and Hedging Topic, ASC 815. As discussed in Note 11 below, the Swap was terminated and settled in full upon prepayment of the term loan balance of the Existing Credit Facility. The fair value of the Swap as of June 30, 2015 is included in other long-term liabilities in the Company’s unaudited condensed consolidated balance sheets.