Supercuts 2011 Annual Report Download - page 122

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. FINANCING ARRANGEMENTS (Continued)
of varying maturities and $30.0 million of additional senior term notes under a Private Shelf Agreement.
As a result of the repayment of a portion of the senior term notes during the twelve months ended June 30, 2010, the Company incurred
$12.8 million in make-whole payments and other fees along with $5.2 million in interest rate swap settlements, as discussed in Note 9 of the
Consolidated Financial Statements, totaling $18.0 million that was recorded as interest expense within the Consolidated Statement of Operations.
Convertible Senior Notes
In July 2009, the Company issued $172.5 million aggregate principal amount of 5.0 percent convertible senior notes due July 2014. The
notes are unsecured, senior obligations of the Company and interest will be payable semi-annually in arrears on January 15 and July 15 of each
year at a rate of 5.0 percent per year. The notes will be convertible subject to certain conditions further described below at an initial conversion
rate of 64.6726 shares of the Company's common stock per $1,000 principal amount of notes (representing an initial conversion price of
approximately $15.46 per share of the Company's common stock). As of June 30, 2011, the conversion rate was 64.8263 shares of the
Company's common stock per $1,000 principal amount of notes (representing a conversion price of approximately $15.43 per share of the
Company's common stock).
Holders may convert their notes at their option prior to April 15, 2014 if the Company's stock price meets certain price triggers or upon the
occurrence of specified corporate events as defined in the convertible senior note agreement. On or after April 15, 2014, holders may convert
each of their notes at their option at any time prior to the maturity date for the notes.
The Company has the choice of net-cash settlement, settlement in its own shares or a combination thereof and concluded the conversion
option is indexed to its own stock. As a result, in July 2009 the Company allocated $24.7 million of the $172.5 million principal amount of the
convertible senior notes to equity, which resulted in a $24.7 million debt discount. The allocation was based on measuring the fair value of the
convertible senior notes using a discounted cash flow analysis. The discount rate was based on an estimated credit rating for the Company. In
July 2009, the estimated fair value of the convertible senior notes was $147.8 million. The resulting $24.7 million debt discount will be
amortized over the period the convertible senior notes are expected to be outstanding, which is five years, as additional non-cash interest
expense. The combined debt discount amortization and the contractual interest coupon resulted in an effective interest rate on the convertible
debt of 8.9 percent.
The following table provides equity and debt information for the convertible senior notes:
117
Convertible Senior Notes
Due 2014 at
(Dollars in thousands)
June 30, 2011
June 30, 2010
Principal amount on the convertible
senior notes
$
172,500
$
172,500
Unamortized debt discount
(16,252
)
(20,740
)
Net carrying amount of convertible
debt
$
156,248
$
151,760