Borrowing Arrangements

9 Months Ended

Sep. 30, 2011

Borrowing Arrangements [Abstract]

Borrowing Arrangements

5.	Borrowing Arrangements

CBIZ had two primary debt arrangements at September 30, 2011 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: the 2010 Convertible Senior Subordinated Notes (“2010 Notes”) totaling $130 million and a $275 million unsecured credit facility.

2010 Convertible Senior Subordinated Notes

On September 27, 2010, CBIZ sold and issued $130.0 million of 2010 Notes to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended. The 2010 Notes are direct, unsecured, senior subordinated obligations of CBIZ and rank (i) junior in right of payment to all of CBIZ’s existing and future senior indebtedness, (ii) equal in right of payment with any other future senior subordinated indebtedness, and (iii) senior in right of payment to all existing and future obligations, if any, that are designated as subordinated to the 2010 Notes. The 2010 Notes bear interest at a rate of 4.875% per annum, payable in cash semi-annually in arrears on April 1 and October 1 beginning April 1, 2011. The 2010 Notes mature on October 1, 2015 unless earlier redeemed, repurchased or converted. CBIZ separately accounts for the debt and equity components of the 2010 Notes.

The carrying amount of the debt and equity components at September 30, 2011 and December 31, 2010 were as follows (in thousands):


		September 30,				December 31,
		2011				2010
Principal amount of notes		$	130,000			$	130,000
Unamortized discount			(11,607	)			(13,423	)

Net carrying amount		$	118,393			$	116,577

Additional paid-in-capital, net of tax		$	8,555			$	8,555

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 represents 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 September 30, 2011, the unamortized discount had a remaining amortization period of approximately 48 months. Refer to the Annual Report on Form 10-K for the year ended December 31, 2010 for additional information on the 2010 Notes.

2006 Convertible Senior Subordinated Notes

On June 1, 2011, the note holders provided notice to the Company to redeem $39,250,000 of CBIZ’s 3.125% Convertible Senior Subordinated Notes issued in 2006 (the “2006 Notes”). The 2006 Notes were settled in cash for the principal amount and any accrued and unpaid interest. The remaining $750,000 of 2006 Notes may be redeemed by CBIZ at any time until the due date of June 1, 2026. In addition, holders of the 2006 Notes will have the right to require CBIZ to repurchase for cash all or a portion of their 2006 Notes on June 1, 2016 and June 1, 2021, at a repurchase price equal to 100% of the principal amount of the 2006 Notes to be repurchased plus accrued and unpaid interest, including contingent interest and additional amounts, if any, up to but not including, the date of repurchase. At September 30, 2011, the 2006 Notes were classified as a non-current liability since the remaining note holders cannot cause the redemption of their notes until June 1, 2016.

At December 31, 2010, there was $40.0 million in aggregate principal amount of 2006 Notes outstanding, which was the remaining balance of the $100.0 million originally issued on May 30, 2006. At December 31, 2010, the 2006 Notes were classified as a current liability based on the provision that allowed the note holders to deliver notice to the Company to redeem their notes on June 1, 2011.

CBIZ separately accounts for the debt and equity components of the 2006 Notes. The carrying amount of the debt and equity components at September 30, 2011 and December 31, 2010 were as follow (in thousands):


		September 30, 2011				December 31, 2010
Principal amount of notes		$	750			$	40,000
Unamortized discount			—				(750	)

Net carrying amount		$	750			$	39,250

Additional paid-in-capital, net of tax		$	11,425			$	11,425

The discount on the liability component of the 2006 Notes was amortized using the effective interest method based upon an annual effective rate of 7.8%, which represented the market rate for similar debt without a conversion option at the issuance date. The discount was amortized over five years from the date of issuance, which coincided with the first date that holders were able to require CBIZ to repurchase the 2006 Notes. At September 30, 2011, the discount was fully amortized. Refer to the Annual Report on Form 10-K for the year ended December 31, 2010 for additional information on the 2006 Notes.

During the three and nine months ended September 30, 2011 and 2010, CBIZ recognized interest expense on the 2010 Notes and 2006 Notes as follows (in thousands):


		THREE MONTHS ENDED SEPTEMBER 30,								NINE MONTHS ENDED SEPTEMBER 30,
		2011				2010				2011				2010
Contractual coupon interest		$	1,590			$	830			$	5,282			$	2,393
Amortization of discount			613				1,068				2,565				3,165
Amortization of deferred financing costs			180				148				629				415

Total interest expense		$	2,383			$	2,046			$	8,476			$	5,973

Bank Debt

CBIZ maintains a $275 million unsecured credit facility (“credit facility”) with Bank of America as agent for a group of seven participating banks. On April 11, 2011, the credit facility was amended to extend the maturity date one year to June 2015, reduce interest on outstanding balances, reduce commitment fees on the unused amount, and adjust the leverage ratio limits to provide CBIZ with more flexibility. The balance outstanding under the credit facility was $159.6 million and $118.9 million at September 30, 2011 and December 31, 2010, respectively. Rates for the nine months ended September 30, 2011 and 2010 were as follows:


		2011		2010
Weighted average rates		3.34%		3.49%

Range of effective rates		2.43% - 5.75%		2.71% - 6.40%

CBIZ had approximately $41.8 million of available funds under the credit facility at September 30, 2011. The credit facility provides CBIZ operating flexibility and funding to support seasonal working capital needs and other strategic initiatives such as acquisitions and share repurchases. CBIZ believes it is in compliance with its debt covenants at September 30, 2011. Refer to the Annual Report on Form 10-K for the year ended December 31, 2010 for additional information on the credit facility.