Debt

The Company's outstanding debt consisted of the following:



(in thousands)	As of December 31,
							2015			2014
Description of Debt	2017			2016			(Restated)			(Restated)
Short-Term Debt:
Current portion of Wells Fargo Term Loan	$	—		$	—		$	—		$	1,667
Current portion of TPG Term Loan	—			750			—			—
Wells Fargo Revolving Credit Facility	37,055			12,774			—			—
Total Short-Term Debt	$	37,055		$	13,524		$	—		$	1,667

Long-Term Debt:
Senior Secured Credit Facility - Wells Fargo Revolving Credit Facility	$	—		$	—		$	97,299		$	78,030
Wells Fargo Term Loan	—			—			—			2,361
Unsecured Senior Notes	55,000			55,000			55,000			—
TPG Term Loan	—			70,650			—			—
Less Unamortized Debt Issuance Costs ^*	(561		)	(15,258		)	(1,195		)	—
Total Long-Term Debt	$	54,439		$	110,392		$	151,104		$	80,391

Unamortized financing costs and deferred fees on the Wells Fargo revolving credit facility are not presented in the above table as they are classified as “Current Assets” on the Consolidated Balance Sheets. Debt issuance costs incurred, including gross waiver fees (primarily paid to the lenders), were $0.9 million, $17.2 million, $1.5 million and $0.2 million in 2017, 2016, 2015 and 2014, respectively.

The Company paid $7.8 million, $6.7 million, $3.3 million and $1.1 million in cash for interest in 2017, 2016, 2015 and 2014, respectively.

The Company's debt includes restrictive covenants that, if not met, could lead to renegotiation of its revolving credit facility, notes and indentures, a requirement to repay the Company's borrowings and/or a significant increase in the cost of financing. These restrictive covenants may include, among other items, financial covenants pertaining to availability, permitted indebtedness, restrictions on dividends and various events of default.

Certain events of default (including delinquent filing of annual and periodic reports with the SEC, failure to maintain EBITDA requirements, material weaknesses in the control environment and failure to disclose litigation) have occurred with respect to the Company's credit agreements. While waivers have been obtained or debt renegotiated with the respective lenders, in particular after March 31, 2017, absent such waivers, the debt would have been in breach of covenants. The Company and its subsidiaries pledged substantially all of their tangible and intangible assets, including inventory, receivables and fixed assets, as collateral under the Wells Fargo Credit Agreement.

The schedule of remaining principal maturities of Long-Term Debt is as follows:



(in thousands)
Year Ending December 31,	Maturities of Long-Term Debt
2018	$	—
2019	—
2020	55,000
Total	$	55,000

Subsequent to December 31, 2017, the Unsecured Senior Notes and the Wells Fargo Credit Agreement were amended.

The maturity date of the Unsecured Senior Notes was extended to January 1, 2020 and the interest rate was increased effective October 1, 2018 from 6.50% to 8.50% per annum. The interest rate will decrease to 7.50% per annum upon filing this 2017 Form 10-K with the SEC.

The maturity of the Wells Fargo revolving credit facility was extended to the earlier of March 31, 2021 or 60 days prior to the final maturity of the Unsecured Senior Notes (resulting in a current maturity date of November 2, 2019). Additionally, the facility will continue to bear interest at a per annum rate equal to 1% above the per annum rate applicable under the credit agreement until the Company has completed all filings required to be made with the SEC.

Wells Fargo Credit Agreement

On June 28, 2013, the Company entered into the Wells Fargo Credit Agreement. The Wells Fargo Credit Agreement enabled the Company to borrow under a revolving credit facility secured by substantially all of the Company's tangible and intangible assets, other than real property. The Wells Fargo Credit Agreement had an initial maturity date of June 28, 2018 and:


•	Provided an initial maximum $75.0 million revolving line of credit to the Company, with flexibility to increase up to $100.0 million;


•	Bore interest at Wells Fargo’s prime rate plus a margin ranging from 0% to 0.50% per annum or at the London Interbank Offered Rate (“LIBOR”) plus a margin ranging from 1.50% to 2.00% per annum at the Company’s option;


•	Had an unused line fee of 0.25%;


•	Required the Company to meet a minimum fixed charge coverage ratio of 1.0 to 1.0 and to report such coverage ratio if availability was below the greater of $9.4 million or 12.5% of the maximum revolver amount;


•	Limited borrowings to the lesser of the maximum revolving line of credit and the borrowing base, which is defined as a percentage of the Company’s eligible accounts receivable and inventory.

Information regarding amounts borrowed under the Wells Fargo Credit Agreement includes the following:



(in thousands, except interest rate)	As of December 31,
							2015			2014
Description	2017			2016			(Restated)			(Restated)
Average borrowings under Wells Fargo Revolving Credit Facility	$	26,662		$	44,335		$	96,390		$	53,250
Average Interest Cost on Wells Fargo Revolving Credit Facility	6.85		%	2.75		%	1.96		%	2.36		%
Accrued and unpaid interest	$	90		$	24		$	86		$	105
LIBOR loan interest rate	4.51		%	2.71		%	1.84		%	1.66		%
Wells Fargo Prime Rate (Base Rate) loan interest rate	6.00		%	4.25		%	3.50		%	3.25		%

As of December 31, 2017, the Company had adjusted available borrowing capacity under the revolving line of credit of approximately $13 million.

The Wells Fargo Credit Agreement was amended a number of times. The most significant changes are summarized in the table below:



Amendment Date and Title	Reason for Amendment	Significant Changes to the Wells Fargo Credit Agreement
April 1, 2014. Amended Wells Fargo Credit Agreement	To finance acquisition of 3PI	• Increased maximum borrowing under the under the revolving credit facility to $90.0 million; • Added a $5.0 million term loan with interest at either Wells Fargo's prime rate plus 3.00% per annum or LIBOR plus 4.50% per annum payable in 36 equal monthly installments beginning June 1, 2014; • Added a letter of credit sub-facility; • Increased fixed charge coverage ratio minimum to 1.2 to 1.0; added debt leverage ratio cap of 4.0 to 1.0 for as long as term loan is outstanding.
September 30, 2014 and February 11, 2015. Wells Fargo Credit Agreement II	To increase capacity of Wells Fargo Credit Agreement	• Increased maximum borrowing under the under the revolving credit facility to $100.0 million on September 30, 2014. • Increased maximum borrowing under the under the revolving credit facility to $125.0 million on February 11, 2015.
April 29, 2015. Amended Wells Fargo Credit Agreement III	To facilitate Issuance of the Unsecured Senior Notes	• Accelerated maturity date to no earlier than December 31, 2016 and no later than January 31, 2018, to ensure that it matures prior to repayment of the Unsecured Senior Notes; • $5.0 million Wells Fargo term loan was repaid.
June 28, 2016. Second Amended and Restated Credit Agreement (the “June 28, 2016 Agreement”)	To facilitate issuance of TPG Term Loan	• Decreased maximum borrowing under the revolving credit facility to $75.0 million from $125.0 million in response to issuance of TPG Term Loan; • Increased the margin on LIBOR loans to plus 1.75% - 2.25% per annum; • Eliminated the fixed charge coverage ratio covenant; • Amended maturity date to the earliest of (i) June 28, 2021, (ii) the maturity date of the Term Loan Credit Agreement or (iii) 90 days prior to the final maturity of the Unsecured Senior Notes (January 31, 2018); • Required cash collections from customers to be swept from the Company’s controlled accounts to Wells Fargo’s accounts on a daily basis; • The Company paid an amendment fee of $0.2 million.
August 22, 2016. First Amendment and Waivers to the June 28, 2016 Agreement	To consider implications of various events of default	• Provided for certain waivers related to the failure to disclose litigation and the Company’s delay in filing its Form 10-Q for the period ended June 30, 2016; • Reduced borrowing base by $12.5 million to be reduced to $7.5 million upon filing the Form 10-Q for the period ended June 30, 2016.
December 16, 2016. Waiver to June 28, 2016 Agreement	To consider implications of various events of default	• Provided for certain waivers for events of default due to the Company's failure to timely deliver the monthly financial statements and required certificates for the month ended October 31, 2016, provided that such documents were delivered by December 19, 2016.
December 19, 2016. Second Amendment and Waivers to the June 28, 2016 Agreement	To consider implications of various events of default	• Made the $12.5 million borrowing base reserve permanent; • Provided for certain waivers related to the Company’s non-compliance with the TPG Agreement’s minimum trailing twelve months EBITDA maintenance covenant; • The Company paid an amendment fee of $0.1 million.



February 10, 2017, effective as of February 6, 2017. Limited Waiver Agreement to the June 28, 2016 Agreement (“Limited Waiver”)	To consider implications of various events of default	• Provided waiver for various events of default including identified material weaknesses in internal control through February 28, 2017; • Wells Fargo reserved the right to increase the interest rate by 200 basis points (2%) effective January 27, 2017, though the interest rate was not increased; • Provided Wells Fargo with access to additional financial information including cash flow forecasts and budgets.
February 28, 2017, effective as of February 6, 2017. First Amendment to Limited Waiver	To refine provisions of Limited Waiver to June 28, 2016 Agreement	• Established minimum financial metrics related to liquidity and cash which were required to be maintained through March 3, 2017; • Extended the Limited Waiver to March 3, 2017.
March 9, 2017, effective as of February 6, 2017. Second Amendment to Limited Waiver	To refine provisions of Limited Waiver to June 28, 2016 Agreement	• Extended the Limited Waiver to March 10, 2017.
March 31, 2017, effective as of February 7, 2017. Third Amendment to Limited Waiver	To facilitate changes necessary due to Weichai SPA	• Modified certain changes in control and other definitions to permit issuance of securities to Weichai and pay off TPG Term Loan; • Increased the interest rate by 200 basis points (2%) effective April 1, 2017 until the Company’s restated 2016 audited financial statements are filed; • Reduced available borrowing under the revolving credit facility to $40.0 million (maximum borrowing amount of $65.0 million less a reserve of $25.0 million); • Deferred loan maturity date to March 31, 2018 (or February 15, 2018 if Series B Convertible Preferred Stock issued to Weichai has not converted into Common Stock); • Made certain adjustments to the borrowing base provisions to the assets against which borrowings may be made; • Permanently waived certain representations, required information and other defaults; • Extended the deadline for the Company to file delinquent SEC periodic and annual reports; • Required the Company to retain third-party adviser to assist with developing and providing certain financial data; • The Company paid an amendment fee of $0.7 million.
July 17, 2017. Fourth Amendment to the June 28, 2016 Agreement	To facilitate changes to availability, commitment fee and interest rate terms	• Increases available borrowing under the revolving credit facility to $52.5 million (maximum borrowing amount of $65.0 million less a reserve of $12.5 million); • Reduced the incremental interest rate by 100 basis points (1%) from 200 basis points (2%) until the Company’s 2016 audited financial statements have been provided.
October 3, 2017. Consent and Fifth Amendment to the June 28, 2016 Agreement	To facilitate an acquisition	• Increased available borrowing under the revolving credit facility to $58.75 million (maximum borrowing amount of $65.0 million less a reserve of $6.25 million).
March 29, 2018. Sixth Amendment and Waiver to the June 28, 2016 Agreement	To consider implications of various events of default	• Increased the maximum borrowing under the revolving credit facility to $75.0 million from $65.0 million; • Modified the reserve against the maximum borrowing under the revolving credit facility to the greater of $6.5 million and 10% of borrowing base, but no more than $7.5 million on or prior to September 30, 2018 and thereafter equal to $9.0 million; • Extended the maturity date of the facility to the earlier of March 31, 2021 or 60 days prior to the final maturity of the Unsecured Senior Notes, which were extended to January 1, 2020, resulting in a maturity date of November 2, 2019 on the Wells Fargo revolving credit facility. • The revolving credit facility will continue to bear interest at a per annum rate equal to 100 basis points (1%) above the per annum rate otherwise applicable under the credit agreement until the Company has completed all filings required to be made with the SEC; • The Company paid an amendment fee of $0.8 million.

The Company evaluated modifications to all of its debt amendments between 2014 and 2017 according to FASB guidance.

As a result of the aforementioned amendments, consents and waivers related to the Wells Fargo Credit Agreement, the Company accelerated the recognition of previously deferred debt issuance costs and third-party fees totaling $0.1 million and $0.1 million for the modifications in 2017 and 2016, respectively. Third-party fees were immaterial in 2015. In addition, new-lender fees totaled $0.7 million, $0.3 million and $0.1 million in 2017, 2016 and 2014, respectively, and were deferred and amortized through the anticipated maturity date of the Wells Fargo Credit Agreement. Lender-related fees were immaterial in 2015.

The Wells Fargo revolving credit facility is presented as a “Current liability” on the Consolidated Balance Sheets as of December 31, 2017 and 2016, reflecting the provisions of the June 28, 2016 amendment which included a subjective acceleration clause and a lockbox arrangement that sweeps cash receipts to pay down the revolver balance, without requiring the Company's specific consent, and provides advances up to current limits to cover outlays. Prior to that amendment, the revolving line of credit was presented as a “Non-current liability.”

The Company’s term loan, which bore interest at 4.67% per annum (LIBOR rate plus 4.50% margin), had $3.5 million outstanding at the time of repayment on April 29, 2015.

Unsecured Senior Notes

On April 29, 2015, the Company entered into an agreement with certain institutional investors for a private sale of its Unsecured Senior Notes for the aggregate amount of $55.0 million with an interest rate of 5.50% per annum. Concurrently, in connection with the issuance of the Unsecured Senior Notes, the Company entered into an indenture agreement (“Indenture”), by and among the Company and its subsidiaries as guarantors and the Bank of New York Mellon, as Trustee. The Company received net proceeds of $53.5 million after financing costs of $1.5 million. As discussed previously in Note 1. Summary of Significant Accounting Policies and Other Information, the Company has presented issuance costs associated with its Unsecured Senior Notes as a direct deduction from the carrying value of the obligation on its Consolidated Balance Sheets.

The Unsecured Senior Notes are unsecured debt of the Company and are effectively subordinated to its existing and future secured debt, including the debt in connection with the Third Amended Wells Fargo Credit Agreement. The Unsecured Senior Notes originally had the following key terms:

•

Matures on May 1, 2018, provided that a mandatory offer to purchase must be made for all Unsecured Senior Notes at a purchase price of 100% of the principal amount, plus accrued and unpaid interest, in the event the Company does not certify certain financial metrics related to pro-forma EBITDA and EBITDA-to-fixed charges ratios prior to March 15, 2017 (the offer was eliminated by the Second Supplemental Indenture on April 1, 2016, see table below);


•	Accrues interest at 5.50% per annum, payable semiannually in arrears on May 1 and November 1 of each year beginning November 1, 2015;


•	Redeemable at the Company’s option, in whole or in part, at any time on or after May 1, 2016, together with accrued and unpaid interest to the date of redemption (expressed as percentages of the principal amount), at 101.0% plus a “make whole” premium as further defined in the Unsecured Senior Notes;


•	Redeemable by the holders in whole or in part upon a change in control at a purchase price of 101% of the principal amount, plus accrued and unpaid interest;


•	Contains restrictive covenants that, among other things, limit the ability of the Company and its subsidiaries to incur additional debt, prepay subordinated indebtedness, pay dividends or make other distributions on capital stock; and


•	Provides for customary events of default (subject in certain cases to customary grace and cure periods).

The indenture was amended from time to time as follows:



Amendment Date and Title	Reason for Amendment	Significant Changes to the Unsecured Senior Notes
November 2, 2015. First Supplemental Indenture	To add subsidiaries unconditional guarantee of the Unsecured Senior Notes	• Added each guaranteeing subsidiary as a party to the Indenture on a joint and several basis.
April 1, 2016. Second Supplemental Indenture	To facilitate increase in indebtedness	• Increased permitted indebtedness from $125.0 million to $145.0 million, with such amount reducing to $135.0 million, effective February 1, 2017; • Increased the interest rate from 5.50% to 6.50% per annum; • Eliminated special mandatory purchase offer requirement; • The Company paid a consent fee of $0.3 million.
March 31, 2017. Third Supplemental Indenture	To facilitate the changes necessary due to the Weichai SPA	• Extended maturity date to January 1, 2019; • Amended certain provisions to permit the issuance of the securities to Weichai under the SPA, and provisions to permit ongoing transactions with an affiliate of Weichai under the Collaboration Arrangement; • Waived any defaults occurring prior to March 31, 2017 with respect to the failure to file periodic and annual reports; • Extended the deadline for the Company to file its delinquent SEC periodic and annual reports; • The Company paid a consent fee of $0.2 million and legal fees of $0.1 million.
April 19, 2018. Fourth Supplemental Indenture	To amend certain covenants and waive certain events of default	• Extended the maturity date to January 1, 2020; • Waived defaults with respect to the failure to file with the Trustee and the SEC for 2015 through 2019; • Increased the interest rate from 6.50% to 8.50% per annum effective October 1, 2018. The interest rate decreases to 7.50% per annum upon filing this 2017 Form 10-K with the SEC; • The Company paid a consent fee of $0.3 million.

As a result of the supplemental indenture amendments, charges of $0.1 million were incurred in 2017 related to legal fees and other third-party costs, which were expensed to “Loss on debt extinguishment and modifications” in the Consolidated Statement of Operations. Additional debt issuance costs of $0.2 million and $0.3 million incurred in 2017 and 2016, respectively, were deferred and amortized to Interest expense through the anticipated maturity date of the Unsecured Senior Notes. There were no fees incurred related to the amendments made in 2015.

The Unsecured Senior Notes are presented as a “Non-current liability” on the Consolidated Balance Sheets. As of December 31, 2017, 2016 and 2015, the accrued, but unpaid, interest on the Unsecured Senior Notes was $0.6 million, $0.6 million and $0.5 million, respectively.

TPG Term Loan

On June 28, 2016, the Company entered into a $135.0 million senior secured credit facility, which consisted of a new $60.0 million TPG Term Loan and a $75.0 million revolving credit facility with Wells Fargo, as discussed in the Wells Fargo Credit Agreement section above. A related “Side Letter” was also executed at the time, in which the Company agreed to certain amounts as meeting certain borrowing limit calculations.

The TPG Term Loan was executed with the following terms:


•	Bore interest at LIBOR plus 9.75% per annum (or 10.75% per annum at June 28, 2016) or at the Base Rate, as defined in the TPG Term Loan;


•	Required quarterly principal repayments of (i) $0.4 million, commencing September 30, 2017 and ending on June 30, 2018, and (ii) $0.8 million thereafter, with any remaining unpaid principal or interest due on the maturity date;


•	Permitted prepayment at any time after December 31, 2017;


•	Required a minimum EBITDA covenant of trailing twelve-month EBITDA commencing October 31, 2016;


•	Permitted the lender to require the Company to pay additional interest of 2.00% per annum during an event of default;


•	Redeemable by the lender in an event of default or various other situations; and

•

Matured on the earlier of (i) June 28, 2021, (ii) the maturity date of the Wells Fargo Credit Agreement, which at the time of issuance of the TPG Term Loan was January 31, 2018, because the Wells Fargo Credit Agreement matures 90 days prior to the maturity of the Unsecured Senior Notes, or (iii) 90 days prior to the final maturity of the Unsecured Senior Notes, which at the time of issuance of the TPG Term Loan was May 1, 2018. Therefore, the TPG Term Loan maturity date upon issuance was January 31, 2018.

The proceeds received from the TPG Term Loan were used to reduce the Wells Fargo revolving credit facility borrowings. The Company paid $1.3 million of lender fees and $1.6 million of other deferred costs in connection with the original TPG Term Loan.

The TPG Term Loan was amended as follows:



Amendment Date and Title	Reason for Amendment	Significant Changes to the TPG Term Loan
August 22, 2016. TPG First Amendment	To facilitate waiver of events of default triggered by the Company's delay in filing Form 10-Q for the period ended June 30, 2016 and failure to disclose a litigation	• Provided certain waivers under the credit agreements related to the delayed Form 10-Q filing for the period ended June 30, 2016 and a failure to disclose litigation; • Required the establishment of a separate reserve of $12.5 million against borrowing base availability under the Wells Fargo Credit Agreement until the Company’s aforementioned Form 10-Q is filed with the SEC, at which time the amount of the reserve is reduced to $7.5 million; and • The Company agreed to pay an amendment fee of $3.0 million payable on the TPG Term Loan maturity date.
December 19, 2016. TPG Second Amendment	To facilitate waiver of event of default triggered by the Company's failure to meet minimum EBITDA required for the month ended October 31, 2016	• Made permanent the $12.5 million reserve against the Wells Fargo borrowing base availability as discussed in the Wells Fargo Credit Agreement section above; • Provided the Company with a prepayment right upon 10 business days’ notice; • Required the Company to engage a third-party consulting firm to confirm various forecasts and projections for the benefit of the lenders; • Required the Company to pay a waiver fee of $2.3 million payable on December 19, 2016 and an amendment fee of $8.4 million payable on the TPG Term Loan maturity date which would be reduced to (i) $6.1 million if principal and interest was paid in full on or prior to March 31, 2017 or (ii) $5.1 million if paid in full by February 28, 2017; and • The Company paid a legal fee of $0.4 million.
February 6, 2017. Limited Waiver Agreement	To facilitate waiver of various Events of Default triggered by resignation of the Company's auditor and removal of audit opinion on the Company's 2015 and 2014 consolidated financial statements	• Waived various events of default related to resignation of the Company's external auditors; • Provided the lenders with the right to charge additional interest of 2% per annum even though events of default had been waived; and • Agreed that the outstanding principal amount of the TPG Term Loan was $71.4 million, comprised of the original amount of $60.0 million, the $3.0 million fee from the August 22, 2016 Amendment and the $8.4 million fee from the December 19, 2016 Amendment.

The Company incurred lender-related fees of $2.3 million in 2016, which were deferred and amortized to “Interest expense” in the Consolidated Statements of Operations over the remaining term of the TPG Loan. In addition, the amendment fees of $11.4 million that the Company agreed to pay upon maturity of the TPG Loan were accrued and amortized as “Interest expense” over the remaining term of the TPG Loan. There were no such fees incurred in 2017.

Third-party fees of $0.4 million and $0.4 million were incurred in 2017 and 2016, respectively. These costs were expensed to “Loss on debt extinguishment and modifications” in the Consolidated Statements of Operations.

At December 31, 2016, the accrued and unpaid interest on the TPG Term Loan, which bore interest at 10.84% per annum (LIBOR plus 9.75% margin), was $1.2 million.

In March 2017, the Company repaid the TPG Term Loan using the proceeds of the Weichai investment as discussed in Note 3. Weichai Transactions. In conjunction with this repayment, the Company recorded an $11.9 million (including third-party fees of $0.4 million mentioned above) loss on debt extinguishment based on the difference between the amount repaid to the lender and the net carrying value of the TPG Term Loan immediately preceding repayment, including accrued and unpaid interest. This item is reflected within “Loss on debt extinguishment and modifications” in the Company's 2017 Consolidated Statement of Operations.