DEBT

As of December 31, 2014 and 2013 the Company’s debt consisted of the following (in thousands):



	December 31,
	2014		2013
Revolving Credit Facility	$	5,000	$	40,003
Term Loan Facilities	222,757		395,000
2021 Notes, net of unamortized discount	195,462		—
Capital leases	584		576
Total Debt	423,803		435,579
Less: Current portion	5,395		60,257
Long-term debt, net of current portion	$	418,408	$	375,322

Senior Credit Facilities

On July 31, 2013, the Company entered into (i) a senior secured first-lien revolving credit facility in an aggregate principal amount of $75.0 million (the “Revolving Credit Facility”), (ii) a senior secured first-lien term loan B in an aggregate principal amount of $250.0 million (the “Term Loan B Facility”) and (iii) a senior secured first-lien delayed draw term loan B in an aggregate principal amount of $150.0 million (the “Delayed Draw Term Loan Facility” and, together with the Revolving Credit Facility and the Term Loan B Facility, the “Senior Credit Facilities”) with SunTrust Bank, Jefferies Finance LLC and Morgan Stanley Senior Funding, Inc.

Advances under the Senior Credit Facilities bear interest at a floating rate or rates equal to the Eurodollar rate plus 5.25% or the base rate plus 4.25% specified in the Senior Credit Facilities agreement. The Eurodollar rate used in the interest rate calculation for Term Loan B Facility and the Delayed Draw Term Loan Facility (collectively, the “Term Loan Facilities”) is subject to a floor of 1.25%. There is no floor applied to interest rate calculation for the Revolving Credit Facility. In addition, there is a 0.50% commitment fee on the unused portion of the Revolving Credit Facility. As of December 31, 2014, the interest rate for the Term Loan Facilities is approximately 6.50% and the interest rate for the Revolving Credit Facility is approximately 7.50%. The interest rates may vary in the future depending on the Company’s consolidated net leverage ratio.

The Revolving Credit Facility matures on July 31, 2018, at which time all principal amounts outstanding are due and payable. The Term Loan Facilities each mature on July 31, 2020, and require equal consecutive quarterly repayments of 1.25% of the original principal amount funded commencing on December 31, 2013. Once repaid, amounts under Term Loan Facilities may not be re-borrowed. The Senior Credit Facilities are secured by substantially all of the Company’s and its subsidiaries’ assets.

The Senior Credit Facilities contain customary events of default that include, among others, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgments, cross-defaults to material indebtedness, events constituting a change of control and any other development that results in, or would reasonably be expected to result in, a material adverse effect to the debtor’s ability to perform its obligation under the facility. The occurrence of certain events of default may increase the applicable rate of interest by 2% and could result in the acceleration of the Company’s obligations under the Senior Credit Facilities to pay the full amount of the obligations. If the Company draws down in excess of 25% of the available borrowing capacity under the Revolving Credit Facility, the net leverage covenants under the Revolving Credit Facility will become applicable such that the Company’s consolidated net leverage ratio will not be permitted to exceed certain thresholds until maturity of the Revolving Credit Facility. The required maximum consolidated net leverage ratio thresholds for the Revolving Credit Facility are defined for each measurement quarter. The Term Loan Facilities are not subject to any financial covenants.

The proceeds of the Term Loan B Facility were used to refinance certain existing indebtedness of the Company, including the payment of the purchase price for the 10.25% senior unsecured notes (the “2015 Notes”) tendered and accepted for purchase in the Offer (defined below) and the payment of the redemption price for the 2015 Notes that remained outstanding after completion of the Offer. The Delayed Draw Term Loan Facility and the Revolving Credit Facility were used to fund a portion of the CarePoint Business acquisition and may be used for other general corporate purposes of the Company, including acquisitions, investments, capital expenditures and working capital needs.

On December 23, 2013, the Company entered into the First Amendment to the Senior Credit Facilities pursuant to which the Company obtained the required consent of the lenders to enter into the Settlement Agreements (see Note 10 - Commitments and Contingencies) and to begin making payments, in accordance with the payment terms, on the settlement amount of $15.0 million. In exchange for this consent, the Company paid the lenders a fee of $0.5 million and included this amount in loss from discontinued operations in the Consolidated Statements of Operations.

On January 31, 2014, the Company entered into the Second Amendment to the Senior Credit Facilities, which, among other things (i) provides additional flexibility with respect to compliance with the maximum net leverage ratio for the fiscal quarters ending December 31, 2013 through and including December 31, 2014, (ii) provides additional flexibility under the indebtedness covenants to permit the Company to obtain up to $150.0 million of second-lien debt and issue up to $250.0 million of unsecured bonds, provided that 100% of the net proceeds are applied first to the Revolving Credit Facility, with no corresponding permanent commitment reduction, and then on a pro rata basis to the Term Loan B Facility and the Delayed Draw Term Loan Facility (collectively, the “Term Loan Facilities”), (iii) provides the requisite flexibility to sell non-core assets, subject to the satisfaction of certain conditions, and (iv) increased the applicable interest rates for each of the Term Loan Facilities to the Eurodollar rate plus 6.00% or the base rate plus 5.00%, until the occurrence of certain pricing decrease triggering events, as defined in the amendment. Upon the occurrence of a pricing decrease triggering event, the interest rates for the Senior Credit Facilities may revert to the Eurodollar rate plus 5.25% or the base rate plus 4.25%.

As discussed below, the net proceeds of approximately $194.5 million from the issuance on February 11, 2014 of 8.875% senior notes due 2021 (the “2021 Notes”) were used to repay $59.3 million of the Revolving Credit Facility and $135.2 million of the Term Loan Facilities. In addition, approximately $54.2 million of the net proceeds from the sale of the Home Health Business (see Note 5 - Discontinued Operations) were used to repay $17.2 million of the Revolving Credit Facility and $37.0 million of the Term Loan Facilities. These repayments were used to prepay the required quarterly principal repayments such that no principal repayments will be required for the Term Loan Facilities until their maturity on July 31, 2020. Once repaid, amounts under Term Loan Facilities may not be reborrowed. The Senior Credit Facilities are secured by substantially all of the Company’s and its subsidiaries’ assets.

The partial repayments of the Senior Credit Facilities as a result of the issuance of the 2021 Notes and from the sale of the Home Health Business were pricing decrease triggering events that resulted in the interest rates reverting to the Eurodollar rate plus 5.25% or the base rate plus 4.25%.

At December 31, 2014, the Company had $70.0 million undrawn under its Revolving Credit Facility.

On March 1, 2015, the Company entered into the Third Amendment to the Senior Credit Facilities (see Note 17--Subsequent Events).

2021 Notes

On February 11, 2014, the Company issued $200.0 million aggregate principal amount of the 2021 Notes. The 2021 Notes are senior unsecured obligations of the Company and are fully and unconditionally guaranteed by all existing and future subsidiaries of the Company. The 2021 Notes were offered in the United States to qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States to non-U.S. persons in reliance on Regulation S under the Securities Act pursuant to an Indenture (the “2021 Notes Indenture”), dated February 11, 2014, by and among the Company, the guarantors named therein and U.S. Bank National Association, as trustee.

Interest on the 2021 Notes accrues at a fixed rate of 8.875% per annum and is payable in cash semi-annually, in arrears, on February 15 and August 15 of each year, commencing on August 15, 2014. The debt discount of $5.0 million at issuance is being amortized as interest expense through maturity which will result in the accretion over time of the outstanding debt balance to the principal amount. As of December 31, 2014, there are no quoted prices or active markets for the 2021 Notes. The 2021 Notes are the Company’s senior unsecured obligations and rank equally in right of payment with all of its other existing and future senior unsecured indebtedness and senior in right of payment to all of its existing and future subordinated indebtedness.

The 2021 Notes are guaranteed on a full, joint and several basis by each of the Company’s existing and future domestic restricted subsidiaries that is a borrower under any of the Company’s credit facilities or that guarantees any of the Company’s debt or that of any of its restricted subsidiaries, in each case incurred under the Company’s credit facilities.

The Company may redeem some or all of the 2021 Notes prior to February 15, 2017 by paying a “make-whole” premium. The Company may redeem some or all of the 2021 Notes on or after February 15, 2017 at specified redemption prices. In addition, prior to February 15, 2017, the Company may redeem up to 35% of the 2021 Notes with the net proceeds of certain equity offerings at a price of 108.875% plus accrued and unpaid interest, if any. The Company is obligated to offer to repurchase the 2021 Notes at a price of 101% of their principal amount plus accrued and unpaid interest, if any, as a result of certain change of control events. These restrictions and prohibitions are subject to certain qualifications and exceptions.

The 2021 Notes Indenture contains covenants that, among other things, limit the Company’s ability and the ability of certain of the Company’s subsidiaries to (i) grant liens on its assets, (ii) make dividend payments, other distributions or other restricted payments, (iii) incur restrictions on the ability of the Company’s restricted subsidiaries to pay dividends or make other payments, (iv) enter into sale and leaseback transactions, (v) merge, consolidate, transfer or dispose of substantially all of their assets, (vi) incur additional indebtedness, (vii) make investments, (viii) sell assets, including capital stock of subsidiaries, (ix) use the proceeds from sales of assets, including capital stock of restricted subsidiaries, and (x) enter into transactions with affiliates. In addition, the 2021 Notes Indenture requires, among other things, the Company to provide financial and current reports to holders of the 2021 Notes or file such reports electronically with the U.S. Securities and Exchange Commission (the “SEC”). These covenants are subject to a number of exceptions, limitations and qualifications set forth in the 2021 Notes Indenture.

Pursuant to the terms of the Second Amendment to the Senior Credit Facilities, the Company used the net proceeds of the 2021 Notes of approximately $194.5 million to repay $59.3 million of the Revolving Credit Facility and $135.2 million of the Term Loan Facilities.

In connection with the issuance of the 2021 Notes, the Company entered into a registration rights agreement on February 11, 2014 with certain guarantors of the 2021 Notes named therein and Jefferies LLC, on behalf of itself and the other initial purchasers named therein (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, the Company on February 6, 2015 filed on Form S-4 an exchange offer registration statement to exchange the 2021 Notes for substantially identical notes registered under the Securities Act. The Company has agreed to use commercially reasonable efforts to have the exchange offer registration statement declared effective within 450 days of the issue date and to complete the exchange offer with respect to the 2021 Notes within 30 days of effectiveness. If the Company fails to satisfy its registration obligations under the Registration Rights Agreement, it will be required to pay additional interest to the holders of the 2021 Notes under certain circumstances.

Prior Revolving Credit Facility

On July 3, 2012, the Company entered into a Third Amendment to the Second Amended and Restated Credit Agreement, by and among the Company, as borrower, all of its subsidiaries as guarantors thereto, the lenders, Healthcare Finance Group, LLC, an administrative agent, and the other parties thereto to provide an available line of credit of up to $125.0 million. The Prior Credit Facility bore interest at LIBOR rate plus 3.5%. On July 31, 2013, the Company entered into its Senior Credit Facilities and terminated this agreement. At the date of termination, no amounts were outstanding under this agreement.

2015 Notes

On June 3, 2013, the Company commenced an Offer to Purchase and Consent Solicitation (the “Offer”) to the holders of the Company’s outstanding $225.0 million aggregate principal 2015 Notes to purchase any and all of the 2015 Notes at $1,056.25 cash for each $1,000.00 of principal plus accrued but unpaid interest to the date of purchase.

On July 31, 2013, the Company received and accepted for purchase approximately 56.1% of the aggregate principal amount of its outstanding 2015 Notes that were validly tendered by the Offer’s expiration date of July 30, 2013. The $133.3 million aggregate repurchase price plus accrued but unpaid interest of $4.3 million, of the 2015 Notes tendered in connection with the Offer was paid from proceeds received under the Term Loan B Facility.

In connection with the Offer, the Company solicited and received sufficient consents from the holders of the 2015 Notes to amend certain provisions of the indenture governing the 2015 Notes (the “2015 Notes Indenture”) that would eliminate substantially all of the restrictive covenants, certain events of default and other provisions included in the Indenture. On July 31, 2013, the Company entered into a supplemental indenture with the trustee for the 2015 Notes, giving effect to the proposed amendments to the 2015 Notes Indenture and eliminating substantially all of the restrictive covenants and certain default provisions contained in the 2015 Notes Indenture.

On July 31, 2013, the Company satisfied and discharged its obligations under the 2015 Notes Indenture by depositing with the trustee approximately $107.8 million from proceeds received under the Term Loan B Facility. On August 19, 2013, the trustee paid all remaining outstanding 2015 Notes at a redemption price equal to $1,051.25 cash for each $1,000.00 of the principal amount plus accrued and unpaid interest as of such date.

Loss on Extinguishment of Debt

As a result of the $54.2 million repayment of the Senior Credit Facilities from the net proceeds of the sale of the Home Health Business on March 31, 2014, the Company recognized a partial extinguishment of debt and wrote off approximately $2.4 million of deferred financing costs during the three months ended December 31, 2014. During the year ended December 31, 2013, the Company recognized a $15.9 million loss on extinguishment of debt as a result of the repurchase and redemption of all outstanding principal and interest amounts under the 2015 Notes.

The accompanying Consolidated Statements of Operations include losses on extinguishment of debt during the years ended December 31, 2014 and 2013 as follows (in thousands):



	Year Ended December 31,
	2014		2013
2015 Note redemption premium	$	—	$	12,162
Write-off of deferred financing costs	2,373		3,501
Legal fees and other expenses	—		235
Loss on extinguishment of debt	$	2,373	$	15,898

Deferred Financing Costs

In connection with Senior Credit Facilities, the Company incurred underwriting fees, agent fees, legal fees and other expenses of $21.9 million that are being amortized over the terms of the Senior Credit Facilities. As discussed above, approximately $2.4 million of these deferred financing costs were written off during the three months ended December 31, 2014.

In connection with the issuance of the 2021 Notes, the Company incurred underwriting fees, agent fees, legal fees and other expenses of $0.5 million that are being amortized over the term of the 2021 Notes.

Future Maturities

The estimated future maturities of the Company’s long-term debt as of December 31, 2014, are as follows (in thousands):



Year Ending December 31,	Amount
2015	$	—
2016	—
2017	—
2018	—
2019	—
Thereafter	422,757
Total future maturities	$	422,757

Interest Expense, net

Interest expense consisted of the following for each of the three years ended December 31, 2014, 2013 and 2012 (in thousands):



	Year ended December 31,
	2014			2013			2012
Revolving Credit Facility	$	1,829		$	873		$	—
Term Loan Facilities	16,820			10,313			—
2021 Notes	15,926			—			—
Prior Credit Facility	—			765			2,675
2015 Notes	—			13,960			23,063
Amortization of deferred financing costs	3,691			2,259			1,261
Amortization of debt discount	462			—			—
Expense allocated to discontinued operations	—			41			(761		)
Other, net	(189		)	(13		)	(170		)
Interest expense, net	$	38,539		$	28,198		$	26,068

The weighted average interest rate on the Company’s short-term borrowings under its revolving credit facilities during the years ended December 31, 2014 and 2013 was 8.55% and 5.43%, respectively.

Liquidity

The Company expects that cash generated from operating activities combined with available borrowings under the Revolving Credit Facility will be sufficient to fund anticipated working capital, information technology systems investments, scheduled interest repayments and other cash needs for at least the next twelve months, based on historical levels.

Cash generated from operations turned positive in the second half of 2014 as the Company increased cash collections and reduced days sales outstanding (“DSO”). The Company’s plan in 2015 is to continue to reduce DSO and tightly manage operating expenses. Under the terms of its credit facility, a springing covenant becomes applicable if the Company’s borrowings on the revolver are over 25% of availability on the last day of the quarter. The covenant is a consolidated first lien net leverage ratio which uses first lien debt net of cash divided by last twelve months Adjusted EBITDA as defined in the credit facility. Should DSO rise, or if other unforeseen needs for liquidity develop, or if the Company does not manage cash to ensure compliance with debt covenants, the Company would pursue alternate financing arrangements to meet its working capital requirements. From time to time the Company may evaluate market conditions and financing options that would improve its current liquidity profile and enhance its financial flexibility. This may include, but is not limited to, opportunities to raise additional funds through the issuance of various forms of equity and/or debt securities or other instruments. However, there is no assurance that, if necessary, the Company would be able to raise capital to provide required liquidity.