(5) Financial Commitments

Long-Term Debt

Long-term debt consists of the following:



	June 30,		December 31,
(in thousands)	2016		2015
Term Loan	$	83,911	$	222,120
Revolver		148,070		155,815
Senior Notes		297,616		297,118
Convertible Notes		148,606		—
Equipment financing, mortgages and acquisition-related notes		116,179		133,288
Other indebtedness		6,139		9,343
Total debt		800,521		817,684
Less – current maturities		(120,256)		(88,917)
Long-term debt, net	$	680,265	$	728,767

The following table reconciles the outstanding debt balance to the reported debt balances as of June 30, 2016 and December 31, 2015.



	June 30, 2016						December 31, 2015
(in thousands)	Outstanding Long-Term Debt		Unamortized Discount and Issuance Cost		Long-Term Debt, as reported		Outstanding Long-Term Debt		Unamortized Discount and Issuance Cost		Long-Term Debt, as reported
Term Loan	$	87,500	$	(3,589)	$	83,911	$	223,750	$	(1,630)	$	222,120
Revolver		154,000		(5,930)		148,070		158,000		(2,185)		155,815
Senior Notes		300,000		(2,384)		297,616		300,000		(2,882)		297,118
Convertible Notes		200,000		(51,394)		148,606		—		—		—

Convertible Notes

On June 15, 2016, the Company issued $200 million of 2.875% Convertible Senior Notes (the “Convertible Notes”) due June 15, 2021. The Company used the proceeds to prepay $125 million of its Term Loan, pay down $69 million of its Revolver and pay $6 million of debt issuance fees.

To account for the Convertible Notes, the Company applied the provisions of ASC 470-20, Debt with Conversion and Other Options. ASC 470-20 requires issuers of certain convertible debt instruments that may be settled in cash upon conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate. This is done by allocating the proceeds from issuance to the liability component based on the fair value of the debt instrument excluding the conversion feature, with the residual allocated to the equity component and classified in additional paid in capital. The $46.8 million difference between the principal amount of the Convertible Notes ($200.0 million) and the proceeds allocated to the liability component ($153.2 million) is treated as a discount on the Convertible Notes. This difference is being amortized as non-cash interest expense using the interest method, as discussed further below under Interest Expense. The equity component, however, is not subject to amortization nor subsequent remeasurement.

In addition, ASC 470-20 requires that the debt issuance costs associated with a convertible debt instrument be allocated between the liability and equity components in proportion to the allocation of the debt proceeds between these two components. The debt issuance costs attributable to the liability component of the Convertible Notes ($4.9 million) are also treated as a discount on the Convertible Notes and amortized as non-cash interest expense. The debt issuance costs attributable to the equity component ($1.5 million) were netted with the equity component and will not be amortized.

The following table presents information related to the liability and equity components of the Convertible Notes:



(in thousands)	June 30, 2016
Liability component:
Principal	$	200,000
Conversion feature		(46,800)
Allocated debt issuance costs		(4,934)
Amortization of discount and debt issuance costs (non-cash interest expense)		340
Net carrying amount	$	148,606

Equity component:
Conversion feature	$	46,800
Allocated debt issuance costs		(1,507)
Net deferred tax liability		(18,787)
Net carrying amount	$	26,506

The Convertible Notes, governed by the terms of an indenture between the Company and Wilmington Trust, National Association, as trustee, are unsecured obligations and do not contain any financial covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by the Company. The Convertible Notes bear interest at a rate of 2.875% per year, payable in cash semiannually in June and December, unless earlier purchased by the Company or converted.

Prior to January 15, 2021, the Convertible Notes will be convertible only under the following circumstances: (1) during the five business day period after any ten consecutive trading day period in which the trading price per $1,000 principal amount of Convertible Notes for such trading day was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; (2) during any calendar quarter commencing after the calendar quarter ending on September 30, 2016, if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; or (3) upon the occurrence of specified corporate events. On or after January 15, 2021 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.

The Convertible Notes will be convertible at an initial conversion rate of 33.0579 shares of the Company’s common stock per $1,000 principal amount of the Convertible Notes, which is equivalent to an initial conversion price of approximately $30.25. The conversion rate will be subject to adjustment for some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, the Company is required to increase, in certain circumstances, the conversion rate for a holder who elects to convert its Convertible Notes in connection with such a corporate event including customary conversion rate adjustments in connection with a “make-whole fundamental change” as defined. Upon conversion, and at the Company’s election, the Company may satisfy its conversion obligation by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock.

Credit Facility

On June 5, 2014, the Company entered into a Sixth Amended and Restated Credit Agreement, (the “Original Facility”; with subsequent amendments discussed herein, the “Credit Facility”) with Bank of America, N.A. as Administrative Agent, Swing Line Lender and L/C Issuer and a syndicate of other lenders. The Credit Facility, provides for a $300 million revolving credit facility (the “Revolver”), a $250 million term loan (the “Term Loan”) and a sublimit for the issuance of letters of credit up to the aggregate amount of $150 million, all maturing on May 1, 2018. Borrowings under both the Revolver and the Term Loan bear interest based either on Bank of America’s prime lending rate or the London Interbank Offered Rate (“LIBOR”), each plus an applicable margin.

During the first half of 2016, the Company entered into two amendments to the Original Facility (the “Amendments”): Waiver and Amendment No. 1, entered into on February 26, 2016 (“Amendment No.1”), and Consent and Amendment No. 2, entered into on June 8, 2016 (“Amendment No. 2”). In Amendment No. 1, the lenders waived the Company’s violation of its consolidated leverage ratio covenant and consolidated fixed charge coverage ratio covenant. These violations were the result of the Company’s financial results for the fiscal year ended December 31, 2015, which included the previously reported $23.9 million non-cash, pre-tax charge related to an adverse ruling on the Brightwater litigation matter in the third quarter of 2015 as well as $45.6 million of pre-tax charges in the third and fourth quarters of 2015 for various Five Star Electric projects. In Amendment No. 2, the lenders consented to the issuance of the Convertible Notes subject to certain conditions, including the prepayment of $125 million on the Term Loan and the paydown of $69 million on the Revolver, and consented to a potential sale transaction of one of the Company’s business units in its Building segment.

In addition to the Amendments’ provisions discussed above, the Amendments also modified other provisions and added new provisions to the Original Facility, and Amendment No. 2 superseded and modified some of the provisions of Amendment No. 1. The following reflects the more significant changes to the Original Facility and the results of the Amendments that are now reflected in the Credit Facility. Unless otherwise noted, the changes below were primarily the result of Amendment No. 1: (1) The Company may utilize LIBOR-based borrowings. (Amendment No. 1 precluded the use of LIBOR-based borrowings until the Company filed its compliance certificate for the fourth quarter of 2016; however, Amendment No. 2 negated this preclusion.) (2) The Company is subject to an increased rate on borrowings, with such rate being 100 basis points higher than the highest rate under the Original Facility if the Company’s consolidated leverage ratio is greater than 3.50:1.00 but not more than 4.00:1.00, and an additional 100 basis points higher if the Company’s consolidated leverage ratio is greater than 4.00:1.00. (3) The Company will be subject to increased commitment fees if the Company’s consolidated leverage ratio is greater than 3.50:1.00. (4) The impact of the Brightwater litigation matter is to be excluded from the calculation of the Company’s consolidated leverage ratio and consolidated fixed charge coverage ratio covenants. (5) Interest payments are due on a monthly basis; however, if the Company is in compliance with its consolidated leverage ratio and consolidated fixed charge coverage ratio covenants provided in the Original Facility as of December 31, 2016, the timing of interest payments will revert to the terms of the Original Facility. (6) The accordion feature of the Original Facility, which would have allowed either an increase of $300 million in the Revolver or the establishment of one or more new term loan commitments, is no longer available. (7) The Company’s maximum allowable consolidated leverage ratio was increased to 4.25:1.00 for the first, second and third quarters of 2016 after which it returns to the Original Facility’s range of 3.25:1.00 to 3.00:1.00. (Amendment No. 1 increased the Company’s maximum allowable consolidated leverage ratio covenant requirements to 4.25:1.00 for the first quarter of 2016 and 4.0:1.0 for the second and third quarters of 2016. Amendment No. 2 increased the maximum allowable consolidated leverage ratio covenant requirements to 4.25:1.00 for the second and third quarters of 2016.) (8) The Company is subject to additional covenants regarding its liquidity, including a cap on the cash balance in the Company’s bank account and a weekly minimum liquidity requirement (based on specified available cash balances and availability under the Revolver). (9) The Company is required to achieve certain quarterly cash collection milestones, which were eased somewhat in Amendment No. 2. (10) The Company is required to make additional quarterly principal payments, which will be applied to the Term Loan balloon payment, with some of the payments based on a percentage of certain forecasted cash collections for the prior quarter. This change will be effective beginning in the fourth quarter of 2016. (11) The lenders’ collateral package was increased by pledging to the lenders (i) the equity interests of each direct domestic subsidiary of the Company and (ii) 65% of the stock of each material first-tier foreign restricted subsidiary of the Company. (12) The Credit Facility will now mature on May 1, 2018, as opposed to maturity date of the Original Facility of June 5, 2019.

As of June 30, 2016 there was $145.8 million available under the Revolver and the Company had utilized the Credit Facility for letters of credit in the amount of $0.2 million. The Company was in compliance with the financial covenants under the Credit Facility for the period ended June 30, 2016.

Interest Expense

Interest expense as reported in the Condensed Consolidated Statements of Operations consists of the following:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)	2016		2015		2016		2015
Cash interest expense:
Interest on Credit Facility	$	7,051	$	3,633	$	12,389	$	7,229
Interest on Senior Notes		5,719		5,719		11,438		11,438
Interest on Convertible Notes		240		—		240		—
Other interest		863		1,393		2,199		2,959
Total cash interest expense		13,873		10,745		26,266		21,626

Non-cash interest expense:(a)
Amortization of debt issuance costs on Original Facility and Amendments		1,071		279		2,510		558
Amortization of discount and debt issuance costs on Senior Notes		250		244		498		487
Amortization of discount and debt issuance costs on Convertible Notes		340		—		340		—
Total non-cash interest expense		1,661		523		3,348		1,045

Total cash and non-cash interest expense	$	15,534	$	11,268	$	29,614	$	22,671

(a)

Non-cash interest expense in the table above was the result of the amortization of debt discounts and debt issuance costs associated with the Credit Facility, the Senior Notes and the Convertible Notes. As a result, this amortization produces an effective interest rate for these liabilities that is greater than the contractual rate per their respective debt indenture agreements; accordingly, the effective interest rates for the Credit Facility, Senior Notes and Convertible Notes are 9.66%, 7.99% and 9.37%, respectively.