Long-Term Debt

Debt as of December 31, 2014 and 2013 consisted of the following (in thousands):



	2014			2013
Senior secured revolving credit facility, due in October 2015	$	4,000		$	28,109
Convertible senior subordinated debentures at 4.125%, due in February 2027	11,351			10,641
Other notes and lease obligations	4,993			6,536
	20,344			45,286
Less current maturities of long-term debt	(967		)	(14,102		)
	$	19,377		$	31,184

The Company had outstanding letters of credit of $7,063,000 and $6,422,000 as of December 31, 2014 and 2013, respectively.

On January 31, 2014, the Company entered into an Amended and Restated Credit Agreement (the "Amended and Restated Credit Agreement") by and among the Company, the other Borrowers party thereto, the Guarantors party thereto, the Lenders party thereto and PNC Bank, National Association, as administrative agent, which amended and restated the Credit Agreement, dated as of October 28, 2010, by and among the Company and the other parties named therein, as amended (the “Prior Credit Agreement”).

The Amended and Restated Credit Agreement contained certain covenants that are customary for similar credit arrangements, including covenants relating to, among other things, financial reporting and notification, compliance with laws, preservation of existence, maintenance of books and records, use of proceeds, maintenance of properties and insurance, and limitations on liens, dispositions, issuance of debt, investments, payment of dividends, repurchases of capital stock, acquisitions, transactions with affiliates, and capital expenditures. There also were financial covenants that required the Company to maintain a maximum leverage ratio (consolidated funded indebtedness to consolidated EBITDA, each as defined in the Amended and Restated Credit Agreement, as amended) and a minimum interest coverage ratio (consolidated EBITDA to consolidated interest charges, each as defined in the Amended and Restated Credit Agreement, as amended).

On September 30, 2014, the Company entered into a First Amendment to the Amended and Restated Credit Agreement (the "Amendment") which provided the Company with additional flexibility on its financial covenants through the duration of the Amended and Restated Credit Agreement. The Amended and Restated Credit Agreement, as amended by the Amendment, among other things, provided for the following:


•	An increase in the maximum leverage ratio for the first three quarters of 2014 and a ratio of 3.50 to 1.00 as of December 31, 2014. The quarterly minimum interest coverage ratio remained 3.5 to 1.00 in the Amended and Restated Credit Agreement.

•

In calculating the Company’s EBITDA for purposes of determining the leverage and interest coverage ratios, the Amended and Restated Credit Agreement allowed the Company to add back to EBITDA up to $20,000,000 for one-time cash restructuring charges incurred after May 30, 2013, which was an incremental increase of $5,000,000 from the terms of the Prior Credit Agreement. The Amendment on September 30, 2014 allowed for an additional add back to EBITDA for warranty expense accrued up to $10,000,000 and subtraction of related cash payments when made in future periods.


•	A decrease in the aggregate principal amount of the revolving credit facility to $100,000,000 from $250,000,000 through the maturity date of the facility in October 2015, as well as reductions in the facility’s swing line loan, optional currency and foreign-borrower sublimits.


•	Reductions in the allowances under the facility for capital expenditures (down to $25,000,000 annually), dividends, other indebtedness and liens.


•	An increase of 25 basis points in the margin applicable to determining the interest rate on borrowings under the revolving credit facility.

As a result of the Amended and Restated Credit Agreement, the Company incurred $351,000 in fees in the first quarter of 2014 which were capitalized and are being amortized through October, 2015. In addition, as a result of reducing the capacity of the facility from $250,000,000 to $100,000,000, the Company wrote-off $1,070,000 in previously capitalized fees in the first quarter of 2014, which is reflected in the expense of the North America / HME segment.

The Amended and Restated Credit Agreement also provided for the issuance of swing line loans with borrowings under the Credit Agreement bearing interest, at the Company's election, at (i) the London Inter-Bank Offer Rate (“LIBOR”) plus a margin; or (ii) a Base Rate Option plus a margin. The applicable margin, as of December 31, 2014, was 2.00% per annum for LIBOR loans and 1.00% for the Base Rate Option loans based on the Company's leverage ratio. In addition to interest, the Company was required to pay commitment fees on the unused portion of the Credit Agreement. The commitment fee rate, as of December 31, 2014, was 0.30% per annum. Like the interest rate spreads, the commitment fee was subject to adjustment based on the Company's leverage ratio. As of December 31, 2014, the obligations of the borrowers under the Credit Agreement were secured by substantially all of the Company's U.S. assets and were guaranteed by substantially all of the Company's material domestic and foreign subsidiaries.

As of December 31, 2014, the Company's leverage ratio was 1.59 and the Company's interest coverage ratio was 7.02 compared to a leverage ratio of 2.30 and an interest coverage ratio of 7.51 as of December 31, 2013. As of December 31, 2014, the Company was in compliance with all covenant requirements and, under the most restrictive covenant of the Company's borrowing arrangements, the Company had the capacity to borrow up to an additional $35,303,000.

On January 16, 2015, the Company entered into a Revolving Credit and Security Agreement (the “New Credit Agreement”). The proceeds of the New Credit Agreement were used to repay and terminate the Company’s Amended and Restated Credit Agreement, which was scheduled to mature in October 2015. See Subsequent Events in the Notes to these Consolidated Financial Statements for more details regarding the New Credit Agreement.

The Company's New Credit Agreement prohibits the Company from retiring or purchasing its 4.125% Convertible Senior Subordinated Debentures due 2027. The Company did not repurchase and extinguish any of its Convertible Senior Subordinated Debentures in 2014 or 2013 compared to repurchase and extinguishment of a principal amount of $500,000 in 2012. As of December 31, 2014, the Company had $13,350,000 remaining of Convertible Senior Subordinated Debentures.

While there is general concern about the potential for rising interest rates, the Company believes that its exposure to interest rate fluctuations is manageable given that portions of the Company's debt are at fixed rates, the Company has the ability to utilize swaps to exchange variable rate debt to fixed rate debt, if needed, and the Company's borrowing capacity should allow it to absorb any modest rate increases in the months ahead without any material impact on its liquidity or capital resources. As of December 31, 2014, the weighted average floating interest rate on revolving credit borrowing was 2.25% compared to 2.39% as of December 31, 2013.

In 2007, the Company issued $135,000,000 principal amount of Convertible Senior Subordinated Debentures due 2027. The debentures are unsecured senior subordinated obligations of the Company guaranteed by substantially all of the Company’s domestic subsidiaries, pay interest at 4.125% per annum on each February 1 and August 1, and are convertible upon satisfaction of certain conditions into cash, common shares of the Company, or a combination of cash and common shares of the Company, subject to certain conditions. The debentures allow the Company to satisfy the conversion using any combination of cash or stock, and at the Company’s discretion. The Company intends to satisfy the accreted value of the debentures using cash. Assuming adequate cash on hand at the time of conversion, the Company also intends to satisfy the conversion spread using cash, as opposed to stock. As of December 31, 2014, the principal amount of the Company’s Convertible Notes exceeded the if-converted value of those notes by $4,624,000. The Company retired a principal amount of $500,000 in 2012 of Convertible Notes at a premium above par. In accordance with ASC 470-20, Convertible Debt, the Company utilized the inducement method of accounting to calculate the loss associated with the early retirement of the convertible debt. The Company recorded expense of $312,000 in 2012 related to the loss on the debt extinguishment including the write-off of $11,000 of deferred financing fees, which were previously capitalized in 2012.

The Company includes the dilutive effect of shares necessary to settle the conversion spread in the Net Earnings per Share- Assuming Dilution calculation unless such amounts are anti-dilutive as was the case in 2014, 2013 and 2012. The initial conversion rate is 40.3323 shares per $1,000 principal amount of debentures, which represents an initial conversion price of approximately $24.79 per share. Holders of the debentures can convert the debt to common stock if the Company’s common stock price is at a level in excess of $32.23, a 30% premium to the initial conversion price for at least 20 trading days during a period of thirty consecutive trading days preceding the date on which the notice of conversion is given. At a conversion price of $32.23 (30% premium over $24.79), the full conversion of the convertible debt equates to 539,000 shares. The debentures are redeemable at the Company’s option, subject to specified conditions, on or after February 6, 2012 through and including February 1, 2017. The Company may redeem some or all of the debentures for cash on or after February 1, 2017. Holders have the right to require the Company to repurchase all or some of their debentures upon the occurrence of certain circumstances on February 1, 2017 and 2022. The Company evaluated the terms of the call, redemption and conversion features under the applicable accounting literature, including Derivatives and Hedging, ASC 815, and determined that the features did not require separate accounting as derivatives. The notes, debentures and common shares issuable upon conversion of the debentures have been registered under the Securities Act.

The components of the Company’s convertible debt as of December 31, 2014 and 2013 consist of the following (in thousands):



	2014			2013
Carrying amount of equity component	$	25,381		$	25,381

Principal amount of liability component	$	13,350		$	13,350
Unamortized discount	(1,999		)	(2,709		)
Net carrying amount of liability component	$	11,351		$	10,641

The unamortized discount of $1,999,000 is to be amortized through February 2017. The effective interest rate on the liability component was 11.5% for 2007 through 2014. Non-cash interest expense of $710,000, $633,000 and $577,000 was recognized in 2014, 2013 and 2012, respectively, in comparison to actual interest expense paid of $551,000, $551,000 and $560,000 based on the stated coupon rate of 4.125%, for each of the same periods. The convertible debt was not convertible as of December 31, 2014 nor was the convertible debt conversion price threshold of $32.23 met during 2014.

Included in the senior secured revolving credit facility, there were no borrowings denominated in foreign currencies as of December 31, 2014 or December 31, 2013. For 2014 and 2013, the weighted average interest rate on all borrowings was 2.87% and 2.73%, respectively.

The aggregate minimum maturities of long-term debt for each of the next five years are as follows: $967,000 in 2015, $5,076,000 in 2016, $1,143,000 in 2017, $637,000 in 2018, and $408,000 in 2019. Interest paid on all borrowings was $3,302,000, $4,046,000 and $8,866,000 in 2014, 2013 and 2012, respectively.