Financial Commitments

12 Months Ended

Dec. 31, 2019

7. Financial Commitments

Long-Term Debt

Long-term debt as reported on the Consolidated Balance Sheets consisted of the following:



	As of December 31,
(in thousands)	2019		2018
2017 Senior Notes	$	494,365	$	493,521
2017 Credit Facility		114,000		41,000
Convertible Notes		182,292		171,481
Equipment financing and mortgages		39,159		50,904
Other indebtedness		4,660		4,598
Total debt		834,476		761,504
Less: Current maturities		124,054		16,767
Long-term debt, net	$	710,422	$	744,737

The following table reconciles the outstanding debt balance to the reported debt balances as of December 31, 2019 and 2018:



	As of December 31, 2019						As of December 31, 2018
(in thousands)	Outstanding Long-Term Debt		Unamortized Discount and Issuance Costs		Long-Term Debt, as reported		Outstanding Long-Term Debt		Unamortized Discount and Issuance Costs		Long-Term Debt, ‎as reported
2017 Senior Notes	$	500,000	$	(5,635)	$	494,365	$	500,000	$	(6,479)	$	493,521
Convertible Notes		200,000		(17,708)		182,292		200,000		(28,519)		171,481

The unamortized issuance costs related to the 2017 Credit Facility were $3.7 million and $4.8 million as of December 31, 2019 and 2018, respectively, and are included in other assets in the Consolidated Balance Sheets.

2017 Senior Notes

On April 20, 2017, the Company issued $500 million in aggregate principal amount of 6.875% Senior Notes due 2025 (the “2017 Senior Notes”) in a private placement offering. Interest on the 2017 Senior Notes is payable in arrears semi-annually in May and November of each year, beginning in November 2017.

Prior to May 1, 2020, the Company may redeem the 2017 Senior Notes at a redemption price equal to 100% of their principal amount plus a “make-whole” premium described in the indenture. In addition, prior to May 1, 2020, the Company may redeem up to 40% of the original aggregate principal amount of the notes at a redemption price of 106.875% of their principal amount with the proceeds received by the Company from any offering of the Company’s equity. After May 1, 2020, the Company may redeem the 2017 Senior Notes at specified redemption prices described in the indenture. Upon a change of control, holders of the 2017 Senior Notes may require the Company to repurchase all or part of the 2017 Senior Notes at 101% of the principal amount thereof, plus accrued and unpaid interest to the redemption date.

The 2017 Senior Notes are senior unsecured obligations of the Company and are guaranteed by substantially all of the Company’s existing and future subsidiaries that also guarantee obligations under the Company’s 2017 Credit Facility, as defined below. In addition, the indenture for the 2017 Senior Notes provides for customary covenants, including events of default and restrictions on the payment of dividends and share repurchases.

2017 Credit Facility

On April 20, 2017, the Company entered into a credit agreement (the “2017 Credit Facility”) with SunTrust Bank, now known as Truist Bank, as Administrative Agent, Swing Line Lender and L/C Issuer and a syndicate of other lenders. The 2017 Credit Facility provides for a $350 million revolving credit facility (the “2017 Revolver”) and a sublimit for the issuance of letters of credit and swingline loans up to the aggregate amount of $150 million and $10 million, respectively, both maturing on April 20, 2022 unless any of the Convertible Notes, as defined below, are outstanding on December 17, 2020, in which case all such borrowings will mature on December 17, 2020, provided that (i) if the Convertible Notes are refinanced in full with the proceeds of permitted refinancing indebtedness in accordance with the terms of the 2017 Credit Facility, the maturity date for the 2017 Credit Facility will remain April 20, 2022 and (ii) if the Company issues “New Convertible Notes” (as defined in the 2017 Credit Facility), the maturity date for the 2017 Credit Facility will be the earlier of (x) April 20, 2022 or December 17, 2020 if Convertible Notes are outstanding on December 17, 2020 and (y) 90 days prior to the maturity date for such New Convertible Notes. The 2017 Credit Facility also permits additional borrowings in an aggregate amount of $150 million, which can be in the form of increased capacity on the 2017 Revolver or the establishment of one or more term loans.

Borrowings under the 2017 Revolver bear interest, at the Company’s option, at a rate equal to (a) the London Interbank Offered Rate (“LIBOR”) plus a margin of between 1.50% and 3.00% or (b) a base rate (determined by reference to the highest of (i) the administrative agent’s prime lending rate, (ii) the federal funds effective rate plus 50 basis points, (iii) the LIBOR rate for a one-month interest period plus 100 basis points and (iv) 0%), plus a margin of between 0.50% and 2.00%, in each case based on the Consolidated Leverage Ratio (as defined in the 2017 Credit Facility). In addition to paying interest on outstanding principal under the 2017 Credit Facility, the Company will pay a commitment fee to the lenders under the 2017 Revolver in respect of the unutilized commitments thereunder. The Company will pay customary letter of credit fees. If an event of default occurs and is continuing, the otherwise applicable margin and letter of credit fees will be increased 2% per annum. The weighted-average annual interest rate on borrowings under the 2017 Revolver was approximately 4.96% during the year ended December 31, 2019.

The 2017 Credit Facility contains customary covenants for credit facilities of this type, including maximum consolidated leverage ratios ranging from 4.00:1.00 to 3.25:1.00 over the life of the facility and a minimum consolidated fixed charge coverage ratio of 1.25:1.00. On May 7, 2019, certain provisions of the 2017 Credit Facility were amended, including setting the maximum leverage ratio at 3.50:1.00 for the remainder of its term, thus eliminating the step down from 3.50:1:00 to 3.25:1.00. Substantially all of the Company’s subsidiaries unconditionally guarantee the obligations of the Company under the 2017 Credit Facility; additionally, the obligations are secured by a lien on all personal property of the Company and its subsidiaries guaranteeing these obligations.

As of December 31, 2019, there was $236 million available under the 2017 Revolver, and the Company had not utilized the 2017 Credit Facility for letters of credit. The Company was in compliance with the financial covenants under the 2017 Credit Facility as of December 31, 2019.

As a result of the aforementioned provision in the 2017 Credit Facility whereby the maturity date of the 2017 Credit Facility may be moved forward from April 20, 2022, the facility will mature on December 17, 2020 if the Convertible Notes remain outstanding at that time (the “spring-forward” provision). While the Company does not have call rights that allow it to unilaterally redeem the

Convertible Notes, it intends to repurchase or exchange the Convertible Notes and/or modify or replace the 2017 Credit Facility during 2020. Various alternatives are under consideration to determine the financing arrangement that is best suited to the Company’s needs and provides the most favorable terms. The Company is currently in discussions with lenders regarding its options. Due to the spring-forward provision in the 2017 Credit Facility, all borrowings under the facility are included in “Current maturities of long-term debt” on the Consolidated Balance Sheet as of December 31, 2019.

Convertible Notes

On June 15, 2016, the Company issued $200 million of 2.875% Convertible Senior Notes due June 15, 2021 (the “Convertible Notes”) in a private placement offering. The Convertible Notes are unsecured obligations of the Company 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 semi-annually in June and December.

To account for the Convertible Notes, the Company applied the provisions of ASC 470-20, Debt with Conversion and Other Options (“ASC 470-20”). 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 initially 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 shown 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 ($5.1 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 are not amortized.

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


(in thousands)	December 31, 2019		December 31, 2018
Liability component:
Principal	$	200,000	$	200,000
Conversion feature		(46,800)		(46,800)
Allocated debt issuance costs		(5,051)		(5,051)
Amortization of discount and debt issuance costs (non-cash interest expense)		34,143		23,332
Net carrying amount	$	182,292	$	171,481

Equity component:
Conversion feature	$	46,800	$	46,800
Allocated debt issuance costs		(1,543)		(1,543)
Deferred taxes		(18,815)		(18,815)
Net carrying amount	$	26,442	$	26,442

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 the Company’s common stock and the conversion rate on each such trading day; (2) 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 rate of 33.0579 (or $39.32) 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 their Convertible Notes in connection with such a corporate event including customary conversion rate adjustments in connection with a “make-whole fundamental change” described in the indenture. Upon conversion, and at the Company’s election, the Company may satisfy its conversion obligation with cash, shares of its common stock or a combination thereof. As of December 31, 2019, the conversion provisions of the Convertible Notes have not been triggered.

Equipment Financing and Mortgages

The Company has certain loans entered into for the purchase of specific property, plant and equipment and secured by the assets purchased. The aggregate balance of equipment financing loans was approximately $27.7 million and $38.6 million at December 31, 2019 and 2018, respectively, with interest rates ranging from 2.62% to 3.89% with equal monthly installment payments over periods up to ten years with additional balloon payments of $12.4 million in 2021 and $6.3 million in 2022 on the remaining loans outstanding at December 31, 2019. The aggregate balance of mortgage loans was approximately $11.5 million and $12.3 million at December 31, 2019 and 2018, respectively, with interest rates ranging from a fixed 3.50% to LIBOR plus 3% and equal monthly installment payments over periods up to ten years with additional balloon payments of $2.9 million in 2021 and $7.0 million in 2023.

The following table presents the future principal payments required under all of the Company’s debt obligations, discussed above:



Year (in thousands)
2020	$	124,054
2021		218,967
2022		7,546
2023		7,164
2024		88
Thereafter		500,000
		857,819
Less: Unamortized discount and issuance costs		23,343
Total	$	834,476

Interest Expense

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



	For the year ended December 31,
(in thousands)	2019		2018		2017
Cash interest expense:
Interest on 2017 Senior Notes	$	34,375	$	34,375	$	23,967
Interest on 2017 Credit Facility		11,990		8,575		5,517
Interest on Convertible Notes		5,750		5,750		5,750
Interest on 2010 Senior Notes		—		—		6,926
Interest on 2014 Credit Facility		—		—		4,455
Other interest		2,172		2,747		3,261
Cash portion of loss on extinguishment		—		—		1,913
Total cash interest expense		54,287		51,447		51,789

Non-cash interest expense^(a):
Amortization of discount and debt issuance costs on Convertible Notes		10,811		9,846		8,967
Amortization of debt issuance costs on 2017 Credit Facility		1,552		1,439		962
Amortization of debt issuance costs on 2017 Senior Notes		844		787		516
Amortization of debt issuance costs on 2014 Credit Facility		—		—		1,703
Amortization of discount and debt issuance costs on 2010 Senior Notes		—		—		308
Non-cash portion of loss on extinguishment		—		—		5,139
Total non-cash interest expense		13,207		12,072		17,595

Total interest expense	$	67,494	$	63,519	$	69,384

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(a) The combination of cash and non-cash interest expense produces effective interest rates that are higher than contractual rates. Accordingly, the effective interest rates for the 2017 Senior Notes and the Convertible Notes were 7.13% and 9.39%, respectively, for the year ended December 31, 2019.