Redbox 2012 Annual Report Download - page 72

Subject to applicable conditions, we may elect interest rates on our revolving borrowings calculated by reference
to (i) the British Bankers Association LIBOR rate (“LIBOR Rate”) fixed for given interest periods or (ii) Bank of
America’s prime rate (or, if greater, the average rate on overnight federal funds plus one half of one percent or
the LIBOR Rate plus one percent) (the “Base Rate”), plus the margin determined by our consolidated net
leverage ratio. For borrowings made under the LIBOR Rate, the margin ranges from 125 to 200 basis points,
while for borrowing made under the Base Rate, the margin ranges from 25 to 100 basis points. In 2012, the
applicable LIBOR Rate margin was fixed at 125 basis points and the applicable Base Rate margin was fixed at 25
basis points. The interest rate on amounts outstanding under the term loan at December 31, 2012 was 1.46%.
The Credit Facility contains standard negative covenants and restrictions on actions including, without limitation,
restrictions on indebtedness, liens, fundamental changes or dispositions of our assets, payments of dividends,
capital expenditures, investments, and mergers, dispositions and acquisitions, among other restrictions. In
addition, the Credit Facility requires that we meet certain financial covenants, ratios and tests, including
maintaining a maximum consolidated net leverage ratio and a minimum interest coverage ratio, as defined in the
Credit Facility. As of December 31, 2012, we were in compliance with the covenants of the Credit Facility.
Convertible Debt
The aggregate outstanding principal of our 4.0% Convertible Senior Notes (the “Notes”) was $185.0 million on
December 31, 2012. The Notes bear interest at a fixed rate of 4% per annum, payable semi-annually in arrears on
each March 1 and September 1, and mature on September 1, 2014. The effective interest rate at issuance was
8.5%. As of December 31, 2012, we were in compliance with all covenants.
The Notes become convertible (the “Conversion Event”) when the closing price of our common stock exceeds
$52.38, 130% of the Notes’ conversion price, for at least 20 trading days during the 30 consecutive trading days
prior to each quarter-end date. If the Notes become convertible and should the Note holders elect to convert, we
will be required to pay them up to the full face value of the Notes in cash as well as deliver shares of our
common stock for any excess conversion value. The number of potentially issued shares increases as the market
price of our common stock increases. As of March 31, 2012 and June 30, 2012, such early conversion event was
met. Certain Notes were submitted for conversion in the second and the third quarter of 2012 and settled in
accordance with the terms of the indenture governing the Notes. The loss from such early conversion event was
inconsequential. In the fourth quarter of 2012, we repurchased 15,000 Notes or $15 million in face value of Notes
for $20.7 million, including the accrued interest of $0.2 million, in cash. The loss from early extinguishment of
these Notes was approximately $1.0 million. As of December 31, 2012, the Conversion Event was not met and
the Notes remained classified as a long-term liability on our Consolidated Balance Sheets.
The following interest expense was recorded related to the Notes:
Dollars in thousands Year Ended December 31,
2012 2011 2010
Contractual interest expense ....................... $ 8,000 $ 8,000 $ 8,000
Amortization of debt discount ...................... 7,109 6,551 6,037
Total interest expense related to the Notes ........ $15,109 $14,551 $14,037
The remaining unamortized debt discount is expected to be recognized as non-cash interest expense as follows
(in thousands):
Year
Non-cash
Interest
Expense
2013 ............................................................. $ 7,134
2014 ............................................................. 5,039
Total unamortized discount ....................................... $12,173
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