Financing Arrangements and Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Financing Arrangements and Fair Value of Financial Instruments

Financing Arrangements and Fair Value of Financial Instruments

Financing arrangements consisted of the following:

	June 30, 2021						December 31, 2020
(In thousands)	Principal Amount		Unamortized Discount and Debt Issuance Costs		Total Debt		Principal Amount		Unamortized Discount and Debt Issuance Costs		Total Debt
Convertible Notes	$	48,567	$	(1,459)	$	47,108	$	66,912	$	(4,221)	$	62,691
ABL Facility	14,000		—		14,000		19,100		—		19,100
Term loan	7,247		(157)		7,090		—		—		—
Other debt	9,602		—		9,602		5,371		—		5,371
Total debt	79,416		(1,616)		77,800		91,383		(4,221)		87,162
Less: Current portion	(11,255)		—		(11,255)		(71,693)		4,221		(67,472)
Long-term debt	$	68,161	$	(1,616)	$	66,545	$	19,690	$	—	$	19,690

Convertible Notes. In December 2016, we issued $100.0 million of unsecured convertible senior notes (“Convertible Notes”) that mature on December 1, 2021, of which $48.6 million principal amount was outstanding at June 30, 2021. The notes bear interest at a rate of 4.0% per year, payable semiannually in arrears on June 1 and December 1 of each year.

At any time prior to the close of business on the business day immediately preceding June 1, 2021, holders could have converted their notes only under certain circumstances. On or after June 1, 2021 until the close of business on the business day immediately preceding the maturity date, holders may convert their notes at any time. If any notes are converted on or after June 1, 2021, we will settle the converted notes at the maturity date with a combination of cash and shares of common stock in accordance with the terms of the indenture governing the Convertible Notes. The conversion rate is 107.1381 shares of our common stock per $1,000 principal amount of notes (equivalent to an initial conversion price of $9.33 per share of common stock), subject to adjustment in certain circumstances. We may not redeem the notes prior to their maturity date. As of August 2, 2021, no holders have converted their notes. The Convertible Notes are classified as long-term debt in the June 30, 2021 balance sheet as we intend to settle the notes at maturity utilizing borrowings under our ABL Facility, as discussed further below.

In accordance with accounting guidance for convertible debt with a cash conversion option, we separately accounted for the debt and equity components of the notes in a manner that reflected our estimated nonconvertible debt borrowing rate. As of June 30, 2021, the carrying amount of the debt component was $47.1 million, which is net of the unamortized debt discount and debt issuance costs of $1.5 million. Including the impact of the unamortized debt discount and debt issuance costs, the effective interest rate on the notes is approximately 11.3%.

During the first half of 2021, we repurchased $18.3 million of our Convertible Notes in the open market for a total cost of $18.1 million, and recognized a net loss of $0.8 million reflecting the difference in the amount paid and the net carrying value of the extinguished debt, including original issue discount and debt issuance costs.

Asset-Based Loan Facility. In May 2016, we entered into an asset-based revolving credit agreement, which was amended in October 2017 and March 2019 (as amended, the “ABL Facility”). The ABL Facility provides financing of up to $200.0 million available for borrowings (inclusive of letters of credit) and can be increased up to a maximum capacity of $275.0 million, subject to certain conditions. As of June 30, 2021, our total availability under the ABL Facility was $85.2 million, of which $14.0 million was drawn and $0.7 million was used for outstanding letters of credit, resulting in remaining availability of $70.5 million. This availability under the ABL Facility excludes $24.7 million related to eligible rental mats as we failed to satisfy the required minimum consolidated fixed charge coverage ratio, as measured on the trailing twelve-month period ended March 31, 2021.

The ABL Facility terminates in March 2024; however, the ABL Facility has a springing maturity date that will accelerate the maturity of the ABL Facility to September 1, 2021 if, prior to such date, the Convertible Notes have not been repurchased, redeemed, refinanced, exchanged or otherwise satisfied in full or we have not escrowed an amount of funds, that together with the amount that we establish as a reserve against our borrowing capacity, is sufficient for the future settlement of the Convertible Notes at their maturity. The ABL Facility requires a minimum consolidated fixed charge coverage ratio of 1.25 to 1.0 calculated based on the trailing twelve-month period ended June 30, 2021 and remaining unused availability of at least $25.0 million to utilize borrowings or assignment of availability under the ABL Facility towards funding the repayment of the Convertible Notes. As measured on the trailing twelve-month period ended June 30, 2021, we have satisfied the minimum consolidated fixed charge coverage ratio as required to include eligible rental mats in the borrowing availability under the ABL

Facility and have satisfied the ABL Facility requirements to utilize the ABL Facility for the future settlement of the Convertible Notes. Prior to September 1, 2021, we will establish a reserve against our borrowing capacity under the ABL Facility for the future settlement of the Convertible Notes and intend to utilize borrowings to fund the repayment of the Convertible Notes at their December 1, 2021 maturity. As of August 2, 2021, we had $21.1 million outstanding under the ABL Facility, including letters of credit. After giving effect to satisfying the ABL Facility requirements, total availability is $107.9 million, inclusive of $24.4 million in eligible rental mats.

Borrowing availability under the ABL Facility is calculated based on eligible U.S. accounts receivable, inventory, and, subject to satisfaction of certain financial covenants as described below, composite mats included in the rental fleet, net of reserves and limits on such assets included in the borrowing base calculation. To the extent pledged by us, the borrowing base calculation also includes the amount of eligible pledged cash. The lender may establish such reserves, in part based on appraisals of the asset base, and other limits at its discretion which could reduce the amounts otherwise available under the ABL Facility. Availability associated with eligible rental mats will also be subject to maintaining a minimum consolidated fixed charge coverage ratio of 1.5 to 1.0 and at least $1.0 million of operating income for the Site and Access Solutions business, each calculated based on a trailing twelve-month period.

Under the terms of the ABL Facility, we may elect to borrow at a variable interest rate based on either, (1) LIBOR subject to a floor of zero or (2) a base rate equal to the highest of: (a) the federal funds rate plus 50 basis points, (b) the prime rate of Bank of America, N.A. and (c) LIBOR, subject to a floor of zero, plus 100 basis points, plus, in each case, an applicable margin per annum. The applicable margin ranges from 150 to 200 basis points for LIBOR borrowings, and 50 to 100 basis points for base rate borrowings, based on the consolidated fixed charge coverage ratio as defined in the ABL Facility. As of June 30, 2021, the applicable margin for borrowings under our ABL Facility was 200 basis points with respect to LIBOR borrowings and 100 basis points with respect to base rate borrowings, with the applicable margins reducing to 150 basis points and 50 basis points, respectively, in August 2021. The weighted average interest rate for the ABL Facility was 2.1% at June 30, 2021. In addition, we are required to pay a commitment fee on the unused portion of the ABL Facility ranging from 25 to 37.5 basis points, based on the level of outstanding borrowings, as defined in the ABL Facility. As of June 30, 2021, the applicable commitment fee was 37.5 basis points.

The ABL Facility is a senior secured obligation, secured by first liens on substantially all of our U.S. tangible and intangible assets, and a portion of the capital stock of our non-U.S. subsidiaries has also been pledged as collateral. The ABL Facility contains customary operating covenants and certain restrictions including, among other things, the incurrence of additional debt, liens, dividends, asset sales, investments, mergers, acquisitions, affiliate transactions, stock repurchases and other restricted payments. The ABL Facility also requires a minimum consolidated fixed charge coverage ratio of 1.0 to 1.0 calculated based on a trailing twelve-month period if availability under the ABL Facility falls below $22.5 million. In addition, the ABL Facility contains customary events of default, including, without limitation, a failure to make payments under the facility, acceleration of more than $25.0 million of other indebtedness, certain bankruptcy events, and certain change of control events.

Other Debt. In February 2021, a U.K. subsidiary entered a £6.0 million (approximately $8.3 million) term loan facility that matures in February 2024, the proceeds of which were used to pay down the ABL Facility. The term loan bears interest at a rate of LIBOR plus a margin of 3.4% per year, payable in quarterly installments of £375,000 plus interest beginning March 2021 and a £1.5 million payment due at maturity. We had $7.2 million outstanding under this arrangement at June 30, 2021.

Certain of our other foreign subsidiaries maintain local credit arrangements consisting primarily of lines of credit or overdraft facilities which are generally renewed on an annual basis. We utilize local financing arrangements in our foreign operations in order to provide short-term local liquidity needs. We had $5.8 million and $3.5 million outstanding under these arrangements at June 30, 2021 and December 31, 2020, respectively.

In addition, at June 30, 2021, we had $45.4 million in outstanding letters of credit, performance bonds, and other guarantees for which certain of the letters of credit are collateralized by $5.9 million in restricted cash.

Our financial instruments include cash and cash equivalents, receivables, payables, and debt. We believe the carrying values of these instruments, with the exception of our Convertible Notes, approximated their fair values at June 30, 2021 and December 31, 2020. The estimated fair value of our Convertible Notes was $48.6 million at June 30, 2021 and $61.1 million at December 31, 2020, based on quoted market prices at these respective dates.