5.	Debt and Financing Arrangements

CBIZ had two primary financing arrangements and one additional financing arrangement at June 30, 2015 that provided the Company with the capital necessary to meet its working capital needs as well as the flexibility to continue with its strategic initiatives, including business acquisitions and share repurchases:

4.875% Convertible Senior Subordinated Notes (the “2010 Notes”)

$400.0 million unsecured credit facility (the “credit facility”)

3.125% Convertible Senior Subordinated Notes (the “2006 Notes”)

The 2010 Notes and the credit facility are the Company’s two primary financing arrangements.

On April 10, 2015, CBIZ entered into an Amendment to the Credit Agreement that governs the credit facility dated as of July 28, 2014, by and among the Company and Bank of America, N.A., as administrative agent and bank, and other participating banks, to remove certain events from the definition of Change of Control contained therein. This amendment had no impact on the terms of the Credit Agreement (other than as described above), the accompanying Consolidated Balance Sheets, Consolidated Statements of Comprehensive Income and Consolidated Statements of Cash Flows.

In addition to the discussion below, refer to the Annual Report on Form 10-K for the year ended December 31, 2014 for additional details of CBIZ’s debt and financing arrangements.

2010 Notes

The 2010 Notes mature on October 1, 2015. At June 30, 2015 and December 31, 2014, the 2010 Notes were classified as a non-current liability due to management’s intention to retire the 2010 Notes during the year ended December 31, 2015 with the funds available under the credit facility.

During the three months ended June 30, 2015 the Company paid cash of $17.2 million and issued 5.1 million shares of CBIZ common stock valued at approximately $48.0 million in exchange for retiring $49.3 million of its outstanding 2010 Notes in two privately negotiated transactions. These transactions will result in lower interest expense of approximately $3.2 million on an annualized basis. A non-operating charge of approximately $0.8 million was recorded in the second quarter of 2015 related to the two privately negotiated transactions and is included in “Other income (expense), net” in the accompanying Consolidated Statements of Comprehensive Income. Notes repurchased are deemed to be extinguished. The Company may repurchase additional 2010 Notes in privately negotiated transactions before the maturity date, but there can be no assurance that additional transactions will be completed or on what terms.

The carrying amount of the 2010 Notes at June 30, 2015 and December 31, 2014 were as follows (in thousands):


	June 30,			December 31,
	2015			2014
Principal amount of notes	$	48,373		$	97,650
Unamortized discount		(306	)		(1,831	)

Net carrying amount	$	48,067		$	95,819

The discount on the liability component of the 2010 Notes is being amortized using the effective interest method based upon an annual effective rate of 7.5%, which represented the market rate for similar debt without a conversion option at the issuance date. The discount is being amortized over the term of the 2010 Notes which is five years from the date of issuance. At June 30, 2015, the unamortized discount had a remaining amortization period of approximately three months.

Bank Debt

CBIZ has a $400.0 million unsecured credit facility with Bank of America as agent for a group of eight participating banks that matures in July 2019. The balance outstanding under the credit facility was $153.0 million and $107.4 million at June 30, 2015 and December 31, 2014, respectively. Rates for the six months ended June 30, 2015 and 2014 (with respect to the Company’s prior credit facility which was terminated on July 28, 2014) were as follows:


	Six Months Ended June 30,
	2015	2014
Weighted average rates	2.17%	2.70%

Range of effective rates	1.88% - 3.25%	1.87% - 3.41%

CBIZ had approximately $139.5 million of available funds under the credit facility at June 30, 2015, net of outstanding letters of credit and performance guarantees of $4.2 million. The credit facility provides CBIZ with operating flexibility and funding to support seasonal working capital needs and other strategic initiatives such as acquisitions and share repurchases. CBIZ is in compliance with its debt covenants at June 30, 2015.

2006 Notes

At June 30, 2015, CBIZ had $750,000 aggregate principal amount outstanding of its 2006 Notes. The 2006 Notes mature on June 1, 2026 unless earlier redeemed, repurchased or converted.

Interest Expense

During the three and six months ended June 30, 2015 and 2014, CBIZ recognized interest expense as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
2010 Notes (1)	$	1,683	$	2,534	$	3,609	$	5,041
Credit facility (2)		1,165		1,043		2,216		1,969

Total interest expense	$	2,848	$	3,577	$	5,825	$	7,010

(1)	Components of interest expense related to the 2010 Notes include the contractual coupon interest, amortization of discount and amortization of deferred financing costs. The portion related to the 2006 Notes is included but is minimal.

(2)	Components of interest expense related to the credit facility include amortization of deferred financing costs, commitment fees and line of credit fees