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Debt and Financing Arrangements | 9 Months Ended
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Sep. 30, 2015
Debt Disclosure [Abstract] |
Debt and Financing Arrangements |
5. | Debt and Financing Arrangements
CBIZ had two primary financing arrangements at September 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:
| 1. | $400.0 million unsecured credit facility (the “credit facility”)
| 2. | 4.875% Convertible Senior Subordinated Notes (the “2010 Notes”)
On October 16, 2015, CBIZ entered into a Second 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 incorporate swap obligations in the Agreement. 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. 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 $48.4 million outstanding principal amount of the 2010 Notes became due October 1, 2015. Holders will receive $1,000 in cash for each $1,000 principal amount of 2010 Notes along with any premium of the conversion value over par value. The $71.8 million conversion value of the 2010 Notes was determined by a cash averaging period that began on October 5, 2015 and ended on October 30, 2015. CBIZ expects to settle all payments in cash on November 4, 2015 with the funds available under the credit facility. At September 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. Beginning October 1, 2015, the common stock equivalents related to the 2010 Notes will have less of an impact on diluted weighted average shares outstanding due to the maturation of the 2010 Notes. The common stock equivalent impact during the three and nine months ended September 30, 2015 was 1.6 million shares and 1.3 million shares, respectively. Prior to the October 1, 2015 maturity date, CBIZ issued approximately 5.1 million shares of CBIZ common stock and paid cash consideration in exchange for $49.3 million of the Company’s 2010 Notes, in two privately negotiated transactions during the second quarter of 2015. Notes repurchased are deemed to be extinguished.
| • |  | 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 for the nine months ended September 30, 2015.
The carrying amount of the 2010 Notes at September 30, 2015 and December 31, 2014 were as follows (in thousands):
|  | September 30, |  |  | December 31, |
|  | 2015 |  |  | 2014 |
Principal amount of notes |  | $ | 48,373 |  |  | $ | 97,650 |
Unamortized discount |  |  | — |  |  |  | (1,831 | )
Net carrying amount |  | $ | 48,373 |  |  | $ | 95,819 |
The discount on the liability component of the 2010 Notes was 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 was being amortized over the term of the 2010 Notes which is five years from the date of issuance. 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 $151.0 million and $107.4 million at September 30, 2015 and December 31, 2014, respectively. Rates for the nine months ended September 30, 2015 and 2014 were as follows:
|  | Nine Months Ended September 30, |
|  | 2015 |  |  | 2014 |
Weighted average rates |  |  | 2.04 | % |  |  | 2.55 | %
Range of effective rates |  |  | 1.65% - 3.25 | % |  |  | 1.87% - 3.25 | %
CBIZ had approximately $144.0 million of available funds under the credit facility at September 30, 2015, net of outstanding letters of credit and performance guarantees of $3.2 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 was in compliance with its debt covenants at September 30, 2015. 2006 Notes At September 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 nine months ended September 30, 2015 and 2014, CBIZ recognized interest expense as follows (in thousands):
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2015 |  |  | 2014 |  |  | 2015 |  |  | 2014 |
2010 Notes (1) |  | $ | 808 |  |  | $ | 2,132 |  |  | $ | 4,455 |  |  | $ | 7,188 |
Credit facility (2) |  |  | 1,032 |  |  | $ | 991 |  |  |  | 3,210 |  |  |  | 2,945 |
Total interest expense |  | $ | 1,840 |  |  | $ | 3,123 |  |  | $ | 7,665 |  |  | $ | 10,133 |
(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 insignificant.
(2) | Components of interest expense related to the credit facility include amortization of deferred financing costs, commitment fees and line of credit fees.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
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