Debt

The table below presents the components of our debt for the past two years (in thousands):



	December 31,
	2013		2012
Long-term debt, variable rate:
Revolving Credit Facility (described below)	$	194,418	$	230,882
Receivables Securitization Facility (described below)	52,000		—
Total debt	$	246,418	$	230,882

Revolving Credit Facility

On September 20, 2013, we, along with our wholly owned subsidiaries, SCP Distributors Canada Inc., as the Canadian Borrower, and SCP Pool B.V., as the Dutch Borrower, executed an amendment (the Amendment) to our unsecured syndicated senior credit facility (the Credit Facility). The Credit Facility provides us with borrowing capacity under a five year revolving credit facility, and the Amendment amended certain terms, including extending the maturity date to September 20, 2018, increasing the borrowing capacity to $465.0 million and providing additional capacity under certain negative covenants, including indebtedness, liens, investments, sale of assets and dividends.

The Credit Facility includes sublimits for the issuance of swingline loans and standby letters of credit. Pursuant to an accordion feature, the aggregate maximum principal amount of the commitments under the Credit Facility may be increased at our request and with agreement by the lenders by up to $75.0 million, to a total of $540.0 million. The Amendment amended and restated our Credit Facility agreement dated October 19, 2011, which provided for $430.0 million in borrowing capacity and was scheduled to mature on October 19, 2016.

Our obligations under the Credit Facility are guaranteed by substantially all of our existing and future direct and indirect domestic subsidiaries. The Credit Facility contains terms and provisions (including representations, covenants and conditions) and events of default customary for transactions of this type. If we default under the Credit Facility, the lenders may terminate their obligations under the Credit Facility and may require us to repay all amounts.

At December 31, 2013, there was $194.4 million outstanding and $267.4 million available for borrowing under the Credit Facility. The weighted average effective interest rate for the Credit Facility as of December 31, 2013 was approximately 2.1%, excluding commitment fees.

Revolving borrowings under the Credit Facility bear interest, at our option, at either of the following and, in each case, plus an applicable margin:


a.	a base rate, which is the highest of (i) the Wells Fargo Bank, National Association prime rate, (ii) the Federal Funds Rate plus 0.500% and (iii) the London Interbank Offered Rate (LIBOR) Market Index Rate plus 1.000%; or


b.	LIBOR.

Borrowings by the Canadian Borrower bear interest, at the Canadian Borrower’s option, at either of the following and, in each case, plus an applicable margin:


a.	a base rate, which is the greatest of (i) the Canadian Reference Bank prime rate and (ii) the annual rate of interest equal to the sum of the Canadian Dealer Offered Rate (CDOR) plus 1.000%; or


b.	CDOR.

Borrowings by the Dutch Borrower bear interest at LIBOR plus an applicable margin.

The interest rate margins on the borrowings and letters of credit are based on our leverage ratio and will range from 1.150% to 1.625% on CDOR, LIBOR and swingline loans, and from 0.150% to 0.625% on Base Rate and Canadian Base Rate loans. Borrowings under the swingline loans are based on the LIBOR Market Index Rate (LMIR) plus any applicable margin. We are also required to pay an annual facility fee ranging from 0.100% to 0.250%, depending on our leverage ratio.

Receivables Securitization Facility

On October 11, 2013, we and certain of our subsidiaries entered into a new, two year accounts receivable securitization facility (the Receivables Facility) with a peak seasonal funding capacity of up to $120.0 million between March 1 and August 31 and up to $80.0 million between September 1 and February 28. An additional seasonal facility limit of up to $40.0 million may be available between April 1 and June 30.

The Receivables Facility provides for the sale of certain of our receivables to a wholly owned subsidiary (the Securitization Subsidiary). The Securitization Subsidiary transfers variable undivided percentage interests in the receivables and related rights to certain third party financial institutions in exchange for cash proceeds, limited to the applicable funding capacities. Upon payment of the receivables by customers, rather than remitting to the financial institutions the amounts collected, we retain such collections as proceeds for the sale of new receivables until payments become due.

The Receivables Facility is subject to terms and conditions (including representations, covenants and conditions precedent) customary for transactions of this type. Failure to maintain certain ratios or meet certain of these covenants could trigger an amortization event.

At December 31, 2013, there was $52.0 million outstanding under the Receivables Facility at a weighted average effective interest rate of 0.9%, excluding commitment fees.

Depending on the funding source used by the financial institutions to purchase the receivables, borrowings under the Receivables Facility bear interest at one of the following and, in each case, plus an applicable margin of 0.75%:


a.	for financial institutions using the commercial paper market, commercial paper rates based on the applicable variable rates in the commercial paper market at the time of issuance;


b.	for financial institutions not using the commercial paper market, LMIR

We also pay an unused fee of 0.35% on the excess of the facility limit over the average daily capital outstanding. We pay this fee monthly in arrears.

Floating Rate Senior Notes

On February 12, 2007, we issued and sold $100.0 million aggregate principal amount of Floating Rate Senior Notes (the Notes) in a private placement offering pursuant to a Note Purchase Agreement. We paid off the Notes at maturity on February 12, 2012 as reflected on our Statements of Cash Flows.

Interest Rate Swaps

As of December 31, 2013, we had five interest rate swap contracts in place to reduce our exposure to fluctuations in interest rates on the Credit Facility. These swaps convert the variable interest rates to fixed interest rates on borrowings under the Credit Facility. Each of these swap contracts terminates on October 19, 2016. The following table provides additional details related to each of these swap contracts:



Derivative	Effective Date	Notional Amount (in millions)		Fixed Interest Rate
Interest rate swap 1	November 21, 2011	$	25.0	1.185	%
Interest rate swap 2	November 21, 2011	$	25.0	1.185	%
Interest rate swap 3	December 21, 2011	$	50.0	1.100	%
Interest rate swap 4	January 17, 2012	$	25.0	1.050	%
Interest rate swap 5	January 19, 2012	$	25.0	0.990	%

Since inception, we have not recognized any gains or losses on these swaps through income and there has been no effect on income from hedge ineffectiveness. The net difference between interest paid and interest received related to our swap agreements resulted in incremental interest expense of $1.4 million in 2013, $1.3 million in 2012 and $3.6 million in 2011.

Failure of our swap counterparties would result in the loss of any potential benefit to us under our swap agreements. In this case, we would still be obligated to pay the variable interest payments underlying our debt agreements. Additionally, failure of our swap counterparties would not eliminate our obligation to continue to make payments under our existing swap agreements if we continue to be in a net pay position.

We had two previous interest rate swap agreements in effect that reduced our exposure to fluctuations in interest rates on the Notes and our previous credit facility. One interest rate swap agreement converted the variable interest rate on the Notes to a fixed rate of 5.088% on a notional amount of $50.0 million. This swap agreement was effective February 12, 2007 and was scheduled to terminate on February 12, 2012. Our other interest rate swap agreement converted the variable interest rate on the previous credit facility to a fixed rate of 1.725% on a notional amount of $50.0 million. This swap agreement was effective January 27, 2010 and was scheduled to terminate on January 27, 2012. We de-designated this interest rate swap when we replaced our previous credit facility on October 19, 2011. In December 2011, we terminated both of these interest rate swaps and realized a loss of $0.3 million.

Financial and Other Covenants

Financial covenants on the Credit Facility and Receivables Facility are closely aligned and include a minimum fixed charge coverage ratio and maintenance of a maximum average total leverage ratio, which are our most restrictive covenants. The Credit Facility also limits the declaration and payment of dividends on our common stock to no more than 50% of the preceding year’s Net Income (as defined in the Credit Facility), provided no default or event of default has occurred and is continuing, or would result from the payment of dividends. Additionally, we may declare and pay quarterly dividends notwithstanding that the aggregate amount of dividends paid would be in excess of the 50% limit described above so long as (i) the amount per share of such dividends does not exceed the amount per share paid during the most recent fiscal year in which we were in compliance with the 50% limit and (ii) our Average Total Leverage Ratio is less than 3.00 to 1.00 both immediately before and after giving pro forma effect to such dividends. Further, dividends must be declared and paid in a manner consistent with our past practice.

Under the Credit Facility, we may repurchase shares of our common stock provided no default or event of default has occurred and is continuing, or would result from the repurchase of shares, and our maximum average total leverage ratio (determined on a pro forma basis) is less than 2.50 to 1.00. Other covenants include restrictions on our ability to grant liens, incur indebtedness, make investments, merge or consolidate, and sell or transfer assets. Failure to comply with any of our financial covenants or any other terms of the Credit Facility could result in penalty payments, higher interest rates on our borrowings or the acceleration of the maturities of our outstanding debt.

As of December 31, 2013, we were in compliance with all covenants and financial ratio requirements related to the Credit Facility and the Receivables Facility.

Deferred Financing Costs

We capitalize financing costs we incur related to implementing and amending our debt arrangements. We record these costs as Other assets, net on our Consolidated Balance Sheets and amortize them over the contractual life of the related debt arrangement. The table below summarizes changes in deferred financing costs for the past two years (in thousands):



	2013			2012
Deferred financing costs:
Balance at beginning of year	$	3,055		$	3,451
Financing costs deferred	1,044			—
Write-off fully amortized deferred financing costs	—			(396		)
Balance at end of year	4,099			3,055

Accumulated amortization of deferred financing costs:
Balance at beginning of year	(1,573		)	(1,581		)
Amortization of deferred financing costs	(412		)	(388		)
Write-off fully amortized deferred financing costs	—			396
Balance at end of year	(1,985		)	(1,573		)
Deferred financing costs, net of accumulated amortization	$	2,114		$	1,482