8. Debt and Financing Arrangements

At December 31, 2015, CBIZ’s primary financing arrangement was the $400.0 million credit facility which provides 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. A previous financing arrangement, the 4.875% 2010 Convertible Senior Subordinated Notes (the “2010 Notes”), became due on October 1, 2015, as is discussed more fully below.

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 $205.8 million and $107.4 million at December 31, 2015 and December 31, 2014, respectively. Rates for the years ended December 31, 2015 and 2014 were as follows (includes bank debt and interest rate swaps):


	2015		2014
Weighted average rates		2.02%		2.44%

Range of effective rates		1.65% - 3.50%		1.87% - 4.00%

CBIZ had approximately $88.0 million of available funds under the credit facility at December 31, 2015, net of outstanding letters of credit and performance guarantees of $3.2 million.

•

Available funds under the credit facility are based on a multiple of earnings before interest, taxes, depreciation and amortization as defined in the credit facility, and are reduced by letters of credit and outstanding borrowings on the credit facility.

•

Under the credit facility, loans are charged an interest rate consisting of a base rate or Eurodollar rate plus an applicable margin, letters of credit are charged based on the same applicable margin, and a commitment fee is charged on the unused portion of the credit facility.

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.

Debt Covenant Compliance

The credit facility is subject to certain financial covenants that may limit CBIZ’s ability to borrow up to the total commitment amount. Covenants require CBIZ to meet certain requirements with respect to (i) a total leverage ratio and (ii) minimum fixed charge coverage ratio. As of December 31, 2015, CBIZ was in compliance with its debt covenants.

The credit facility also places restrictions on CBIZ’s ability to create liens or other encumbrances, to make certain payments, investments, loans and guarantees and to sell or otherwise dispose of a substantial portion of assets, or to merge or consolidate with an unaffiliated entity. According to the terms of the credit facility, CBIZ is not permitted to declare or make any dividend payments, other than dividend payments made by one of its wholly-owned subsidiaries to the parent company. The credit facility contains a provision that, in the event of a defined change in control, the credit facility may be terminated.

Amendments to Credit Agreement

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 facility (other than as described above), the accompanying Consolidated Balance Sheets, Consolidated Statements of Comprehensive Income and Consolidated Statements of Cash Flows.

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 facility (other than as described above), the accompanying Consolidated Balance Sheets, Consolidated Statements of Comprehensive Income and Consolidated Statements of Cash Flows.

2010 Notes

The $48.4 million outstanding principal amount of the 2010 Notes matured on October 1, 2015. Holders received $1,000 in cash for each $1,000 principal amount of 2010 Notes along with the 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. Cash payments were settled on November 4, 2015 with funds available under the credit facility.

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.

•

During the nine months ended September 30, 2014, the Company issued 1.5 million shares of CBIZ common stock plus cash consideration in privately negotiated transactions in exchange for retiring $32.4 million of its 2010 Notes.

•

The Company recorded non-operating charges of approximately $0.8 million and $1.5 million related to the privately negotiated transactions and are included in “Other income, net” in the accompanying Consolidated Statements of Comprehensive Income for the years ended December 31, 2015 and 2014, respectively.

The common stock equivalents related to the 2010 Notes had 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 year ended December 31, 2015 was 1.2 million shares. During the same period in 2014, the common stock equivalent impact was 2.0 million shares.

The carrying amount of the 2010 Notes at December 31, 2015 and 2014 was as follow (in thousands):


	2015		2014
Principal amount of notes	$	—	$	97,650
Unamortized discount		—		(1,831	)

Net carrying amount	$	—	$	95,819

3.125% Convertible Senior Subordinated Notes (the “2006 Notes”)

At December 31, 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

For the years ended December 31, 2015 and 2014, CBIZ recognized interest expense as follows (in thousands):


	2015		2014		2013
2010 Notes (1)	$	4,559	$	9,068	$	9,898
Credit facility		4,320		4,033		5,453
2006 Notes		23		23		23

Balance at December 31	$	8,902	$	13,124	$	15,374

(1)	Components of interest expense related to the 2010 Notes include the contractual coupon interest, amortization of discount and amortization of deferred financing costs.

(2)	Components of interest expense related to the credit facility include amortization of deferred financing costs, commitment fees and line of credit fees.