Annual report pursuant to Section 13 and 15(d)

Debt

v3.6.0.2
Debt
12 Months Ended
Dec. 31, 2016
Debt Disclosure [Abstract]  
Debt
Debt
On September 30, 2014, we entered into an agreement for a secured revolving credit facility (as amended by the Amendment discussed below, the “Credit Facility”) to refinance our outstanding revolving loans. The Credit Facility provides an aggregate principal amount of up to $200.0 million of revolving loans, with sublimits of $10.0 million for the issuance of letters of credit and $20.0 million for swingline loans ("Revolving Facility"). The Credit Facility also allowed us, subject to certain conditions, to request additional term loans or revolving commitments up to an aggregate principal amount of $150.0 million, plus an amount that would not cause our consolidated net leverage ratio, as defined below, to exceed 3.25 to 1.00. At our option, amounts outstanding under the Credit Facility accrued interest at a per annum rate equal to either LIBOR, plus a margin ranging from 1.25% to 1.75%, or the Base Rate, plus a margin ranging from 0.25% to 0.75% ("Applicable Margin"). The base LIBOR rate is, at our discretion, equal to either one, two, three, or six month LIBOR. The Base Rate is defined as the greater of Wells Fargo's prime rate, the Federal Funds Rate plus 0.50%, or one month LIBOR plus 1.00%. In each case, the Applicable Margin is determined based upon our consolidated net leverage ratio.
In February 2016, we entered into an amendment to the Credit Facility (the “Amendment”). The Amendment provides for an incremental term loan in the amount of $125.0 million (“Term Loan”) that is coterminous with the existing Credit Facility, reducing the amount of additional term loans or revolving commitments available under the Credit Facility to $25.0 million, plus an amount that would not cause us to exceed the consolidated net leverage ratio limitation. Under the terms of the Amendment, an additional tier was added such that the Applicable Margin now ranges from 1.25% to 2.00% for LIBOR loans, and 0.25% to 1.00% for Base Rate loans. We incurred debt issuance costs in the amount of $0.7 million in conjunction with the execution of the Amendment.
Revolving loans under the Credit Facility may be voluntarily prepaid and re-borrowed. Principal payments on the Term Loan are due in quarterly installments that began in June 2016 and such amounts may not be re-borrowed. Accumulated interest on amounts outstanding under the Credit Facility is due and payable quarterly, in arrears, for loans bearing interest at the Base Rate and at the end of the applicable interest period in the case of loans bearing interest at the adjusted LIBOR. All outstanding principal and accumulated interest is due upon the Credit Facility's maturity on September 30, 2019.
The Term Loan is subject to mandatory repayment requirements in the event of certain asset sales or if certain insurance or condemnation events occur, subject to customary reinvestment provisions. The Company may prepay the Term Loan in whole or in part at any time, without premium or penalty, with prepayment amounts to be applied to remaining scheduled principal amortization payments as specified by the Company.
The Credit Facility is secured by substantially all of our assets, and certain of our existing and future material domestic subsidiaries are required to guarantee obligations under the Credit Facility. We are also required to comply with customary affirmative and negative covenants, as well as a consolidated net leverage ratio and a consolidated interest coverage ratio. The consolidated net leverage ratio, which is the ratio of funded indebtedness on the last day of each fiscal quarter to the four previous consecutive fiscal quarters' consolidated EBITDA, cannot be greater than 3.50 to 1.00, provided that we can elect to increase the ratio to 3.75 to 1.00 for a specified period following a permitted acquisition. The Amendment permits the Company to elect to increase the maximum permitted consolidated net leverage ratio on a one-time basis to 4.00 to 1.00 following the issuance of convertible or high yield notes in an initial principal amount of at least $150.0 million. The consolidated interest coverage ratio, which is a ratio of our four previous fiscal consecutive quarters' consolidated EBITDA to our interest expense, cannot be less than 3.00 to 1.00 as of the last day of any fiscal quarter. As of December 31, 2016, we were in compliance with the covenants under our Credit Facility.
The Credit Facility contains customary events of default, subject to customary cure periods for certain defaults, that include, among others, non-payment defaults; covenant defaults; material judgment defaults; bankruptcy and insolvency defaults; cross-defaults to certain other material indebtedness; ERISA defaults; inaccuracy of representations and warranties; and a change in control default. In the event of a default on our Credit Facility, the obligations under the Credit Facility could be accelerated, the applicable interest rate under the Credit Facility could be increased, the loan commitments could be terminated, our subsidiaries that have guaranteed the Credit Facility could be required to pay the obligations in full, and our lenders would be permitted to exercise remedies with respect to all of the collateral that is securing the Credit Facility, including substantially all of our and our subsidiary guarantors’ assets. Any such default that is not cured or waived could have a material adverse effect on our liquidity and financial condition.
Future maturities of principal under the Term Loan are as follows for the years ending December 31, in thousands:
2017
$
5,469

2018
6,250

2019
110,918

 
$
122,637


We had $122.6 million outstanding under our Term Loan at December 31, 2016. As of December 31, 2016, we had no balance outstanding under our Revolving Facility, and we had a $40.0 million outstanding balance as of December 31, 2015. The weighted-average interest rate of short-term borrowings during the years ended December 31, 2016 and 2015, was 1.75% and 1.58%, respectively. As of December 31, 2016, $200.0 million was available under our Revolving Facility, of which $10.0 million was available for the issuance of letters of credit and $20.0 million for swingline loans. We had unamortized debt issuance costs of $1.3 million and $1.0 million at December 31, 2016 and 2015, respectively. At December 31, 2016, the Term Loan was carried net of unamortized debt issuance costs of $0.5 million in the accompanying Consolidated Balance Sheets.
On March 31, 2016, the Company entered into two interest rate swap agreements (“Swap Agreements”), which are designed to mitigate our exposure to interest rate risk associated with a portion of our variable rate debt. The Swap Agreements cover an aggregate notional amount of $75.0 million from March 2016 to September 2019 by replacing the obligation’s variable rate with a blended fixed rate of 0.89%. The Company designated the Swap Agreements as cash flow hedges of interest rate risk. See additional information related to the Swap Agreements at Note 14.
We entered into an amendment of the Credit Facility in February 2017 which, among other changes, provides for an incremental $200.0 million delayed draw term loan that is available to be drawn until May 31, 2017, extends the maturity of the Credit Facility to February 24, 2022, and amends the amortization schedule for the Term Loan. Under the amended amortization schedule, the Company will make quarterly principal payments of 0.6% of the Term Loan's and Delayed Draw Term Loan's respective outstanding balances beginning June 30, 2017. The quarterly payment amounts increase to 1.3% of their respective outstanding balances beginning on June 30, 2018, and to 2.5% beginning on June 30, 2020. Any remaining principal balance on Term Loan and Delayed Draw Term Loan is due on the date of maturity, February 24, 2022. With the new delayed draw term loan, the existing Term Loan, and the Revolving Facility, the Credit Facility now includes $522.6 million of drawn or available credit. See additional discussion of the amendment in Note 20, Subsequent Events.