LONG-TERM DEBT

9 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

LONG-TERM DEBT

LONG-TERM DEBT

Long-term debt consisted of the following (in thousands):

	September 30, 2021		December 31, 2020
	(unaudited)
ABL Facility	$	54,100	$	9,000
Term Loan1	216,877		213,809
Total	270,977		222,809
Convertible notes1	86,859		84,534
Finance lease obligations	5,792		5,153
Total debt and finance lease obligations	363,628		312,496
Current portion of long-term debt and finance lease obligations	(663)		(337)
Total long-term debt and finance lease obligations, less current portion	$	362,965	$	312,159

_________________

1        Comprised of principal amount outstanding, less unamortized discount and issuance costs.

ABL Facility

On December 18, 2020, we entered into an asset-based credit agreement (the “ABL Facility”) led by Citibank, N.A., as agent, which provides for available borrowings up to $150 million. The ABL Facility matures and all outstanding amounts become due and payable on December 18, 2024, subject to certain conditions. The ABL Facility includes a $50 million sublimit for letters of credit issuance and $35 million sublimit for swingline borrowings. Additionally, subject to certain conditions, including obtaining additional commitments, the ABL Facility may be increased by an amount not to exceed $50 million.

Our obligations under the ABL Facility are guaranteed by certain of our direct and indirect subsidiaries, as set forth in the ABL Facility agreement. The ABL Facility is secured on a first priority basis by, among other things, our accounts receivable, deposit accounts, securities accounts and inventory, including those of our direct and indirect subsidiary guarantors, and on a second priority basis by substantially all other assets of our direct and indirect subsidiary guarantors. Borrowing availability under the ABL Facility is based on a percentage of the value of accounts receivable and inventory, reduced for certain reserves.

Borrowings under the ABL Facility bear interest through maturity at a variable rate based upon, at our option, an annual rate of either a base rate (“Base Rate”) or a LIBOR rate, plus an applicable margin. Borrowings made through a Base Rate do not have a stated maturity date, however, LIBOR borrowings are typically issued with terms of 90 days or less. For purposes of classification of borrowings and payments made under the ABL Facility in the Statement of Cash Flows, we report Base Rate borrowings on a gross basis, while LIBOR borrowings (and swingline borrowings, which are due on demand) are presented on a net basis.

At September 30, 2021, we had $17.0 million of cash on hand, of which, about $4.0 million of cash is located in countries where currency restrictions exist. We also had approximately $27.0 million of available borrowing capacity under the ABL Facility. Borrowing availability under the ABL Facility is based on a percentage of the value of accounts receivable and inventory, subject to eligibility criteria and customary reserves which may be modified in the agent’s permitted discretion. The ABL Facility also provides for the issuance of letters of credit, which further reduce the borrowing capacity thereunder. There were $24.4 million in letters of credit outstanding under the credit facility. The ABL Facility also contains a financial covenant which requires the Company to maintain a minimum FCCR of 1.0:1.0 upon the occurrence of an event of default or any date upon which excess availability is less than the greater of (a) 10% of the line cap and (b) $15.0 million, all of which we were in compliance with at September 30, 2021. In the event that our excess availability is less than the greater of $18.75 million and 12.5% of the line cap for five consecutive business days, then the Company is in a cash dominion period where the agent may have control of all funds deposited in certain blocked accounts. In the event excess availability is below $15.0 million then certain covenant requirements must be maintained including the requirement to maintain compliance with a FCCR of at least 1.00:1.00. As of September 30, 2021, if an accelerated triggering event had occurred, the Company would not be able to be in compliance with the FCCR requirement.

In order to secure our casualty insurance programs we are required to post letters of credit generally issued by a bank as collateral. A letter of credit commits the issuer to remit specified amounts to the holder, if the holder demonstrates that we failed to meet our obligations under the letter of credit. If this were to occur, we would be obligated to reimburse the issuer for any payments the issuer was required to remit to the holder of the letter of credit. We were contingently liable for outstanding stand-by letters of credit totaling $24.4 million at September 30, 2021 and $19.5 million at December 31, 2020. Outstanding letters of credit reduce amounts available under our ABL Facility and are considered as having been funded for purposes of calculating our financial covenants.

Atlantic Park Term Loan

On December 18, 2020, we also entered into a credit agreement with Atlantic Park Strategic Capital Fund, L.P., as agent, and APSC, as lender (the “Term Loan Credit Agreement”), pursuant to which we borrowed a $250.0 million term loan (the “Term Loan”). The Term Loan was issued with a 3% original issuance discount (“OID”), such that total proceeds received were $242.5 million. The Term Loan matures, and all outstanding amounts become due and payable on December 18, 2026, subject to certain conditions. The Term Loan is secured by substantially all of our assets, other than those secured on a first lien basis by the ABL Facility, and we may increase the Term Loan by an amount not to exceed $100 million.

The effective interest rate on the Term Loan at September 30, 2021 was 11.95%.

The Term Loan contains prepayment provisions, events of default and covenants, all of which we were in compliance with at September 30, 2021.

On October 19, 2021, we entered into Amendment No. 1 (the “First Amendment”) to the Term Loan Credit Agreement with the financial institutions party thereto from time to time (the “Lenders”) and APSC, as agent. The First Amendment to the Term Loan Credit Agreement, among other things, (i) defers an October 19, 2021 interest payment of $5.4 million until October 29, 2021; (ii) requires that the Company use commercially reasonable efforts to appoint an additional independent director to our Board of Directors who is acceptable to the agent; (iii) provides the Lenders with additional information rights; and (iv) tightens certain negative covenants included in the Term Loan Credit Agreement until the deferred interest is made current.

On October 29, 2021, we entered into Amendment No. 2 (the “Second Amendment”) to the Term Loan Credit Agreement with the Lenders and the Agent. The Second Amendment to the Term Loan Credit Agreement, among other things, (i) further defers an October 29, 2021 interest payment until November 15, 2021; (ii) contains certain milestones; (iii) provides the Lenders with a 10-day right of first refusal regarding any refinancing of the Company’s obligations under the ABL Facility; (iv) obligates the Company to establish, pursuant to a charter to be adopted by the our Board of Directors and reasonably acceptable to the Agent, a special committee that shall have exclusive responsibility and authority to make recommendations to our Board of Directors regarding certain transactions; and (v) provides that the Company will not permit a covenant trigger event under the ABL Facility to occur.

The deferred interest payment including catch up interest and fee totaling $7.0 million was paid on November 9, 2021.

On November 9, 2021, as part of the Recent Financing Transactions, we entered into Third Amendment to the Term Loan Credit Agreement. The Third Amendment to the Term Loan Credit Agreement, among other things, (i) waives certain covenants until September 30, 2022 and modifies covenants thereafter to provide us with more flexibility and (ii) requires us to seek shareholder approval (or an exception therefrom) to issue additional warrants to APSC, providing for the purchase of an

aggregate of 1,417,051 shares of our common stock, and to amend the Warrants currently held by APSC, to provide for, an exercise price of $1.50 per share.

Subordinated Term Loan Credit Agreement

On November 9, 2021, we entered into the Subordinated Term Loan Credit Agreement providing for the Subordinated Term Loan. Pursuant to the Subordinated Term Loan Credit Agreement, we borrowed $22.5 million on November 9, 2021, and we expect to borrow an additional $27.5 million on December 8, 2021, subject to certain conditions. The Subordinated Term Loan matures, and all outstanding amounts become due and payable, on the earlier of December 31, 2026 and the date that is two weeks later than the maturity or full repayment of the Term Loan. The stated interest rate on the Subordinated Term Loan is 12%.

Under the Subordinated Term Loan Credit Agreement, we are required to, among other things, (i) subject to certain conditions, issue the lenders New Warrants, (ii) amend our charter, bylaws, and all other necessary corporate governance documents to reduce the size of our Board of Directors to seven directors, one of whom will include our Chief Executive Officer, and (iii) reconstitute our Board of Directors. The Subordinated Term Loan also contains other customary prepayment provisions, events of default and covenants.

Warrants

On December 18, 2020, in connection with the execution of the Term Loan, we issued to APSC a warrant to purchase up to 3,582,949 shares of our common stock (the “Warrants”), which was initially exercisable at the holder’s option at any time, in whole or in part, until June 14, 2028, at an exercise price of $7.75 per share. On November 9, 2021, in connection with the Recent Financing Transactions, the Warrants were amended and restated to provide for the purchase of up to 4,082,949 shares of our common stock and to reduce the exercise price to $1.50 per share. The exercise price and the number of shares of common stock issuable on exercise of the Warrants are subject to certain anti-dilution adjustments.

Convertible Notes

On July 31, 2017, we issued $230.0 million principal amount of 5.00% Convertible Senior Notes due 2023 in a private offering to qualified institutional buyers (as defined in the Securities Act of 1933) pursuant to Rule 144A under the Securities Act. In December 2020, we retired $136.9 million par value of the Notes, and as of September 30, 2021, the principal amount outstanding was $93.1 million.

The Notes bear interest at a rate of 5.0% per year, payable semiannually in arrears on February 1 and August 1 of each year. The Notes will mature on August 1, 2023 unless repurchased, redeemed or converted in accordance with their terms prior to such date. The Notes will be convertible at an initial conversion rate of 46.0829 shares of our common stock per $1,000 principal amount of the Notes, which is equivalent to an initial conversion price of approximately $21.70 per share. The conversion rate, and thus the conversion price, may be adjusted under certain circumstances as described in the indenture governing the Notes.

    Holders may convert their Notes at their option prior to the close of business on the business day immediately preceding May 1, 2023, but only under the following circumstances:

•during any calendar quarter commencing after the calendar quarter ending on December 31, 2017 (and only during such calendar quarter), if the last reported sale price of our 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;

•during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of such measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on such trading day;

•if we call any or all of the Notes for redemption, at any time prior to the close of business on the business day immediately preceding the redemption date; or

•upon the occurrence of specified corporate events described in the indenture governing the Notes.

On or after May 1, 2023 until the close of business on the business day immediately preceding the maturity date, holders may, at their option, convert their Notes at any time, regardless of the foregoing circumstances.

As a result of the redemption and extinguishment of the Notes in December 2020, the Notes are convertible into 4,291,705 shares of our common stock. The Notes will be convertible into, subject to various conditions, cash or shares of our common stock or a combination of cash and shares of our common stock, in each case, at our election.

If holders elect to convert the Notes in connection with certain fundamental change transactions described in the indenture governing the Notes, we will, under certain circumstances described in the indenture governing the Notes, increase the conversion rate for the Notes so surrendered for conversion.

We have the option to redeem all or any portion of the Notes on or after August 5, 2021, if certain conditions (including that our common stock is trading at or above 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive)), including the trading day immediately preceding the date on which we provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provides notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

As of September 30, 2021 and December 31, 2020, the Notes were recorded in our condensed consolidated balance sheets as follows (in thousands):

	September 30, 2021		December 31, 2020
	(unaudited)
Liability component:
Principal	$	93,130	$	93,130
Unamortized issuance costs	(1,051)		(1,440)
Unamortized discount	(5,220)		(7,156)
Net carrying amount of the liability component1	$	86,859	$	84,534
Equity component:
Carrying amount of the equity component, net of issuance costs2	$	7,969	$	7,969
Carrying amount of the equity component, net of issuance costs3	$	37,276	$	37,276

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1        Included in the “Long-term debt and finance lease obligations” line of the condensed consolidated balance sheets.

2        Relates to the portion of the Notes accounted for under ASC 470-20 and is included in the “Additional paid-in capital” line of the condensed consolidated balance sheets.

2        Relates to the portion of the Notes accounted for under ASC 815-15 and is included in the “Additional paid-in capital” line of the condensed consolidated balance sheets.

The following table sets forth interest expense information related to the Notes (dollars in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Coupon interest	$	1,164		$	2,875		$	3,492		$	8,625
Amortization of debt discount and issuance costs	791			1,785			2,326			5,224
Total interest expense on Notes	$	1,955		$	4,660		$	5,818		$	13,849
Effective interest rate	9.12		%	9.12		%	9.12		%	9.12		%

As of September 30, 2021, the remaining amortization period for the debt discount and issuance costs is 22 months.