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Convertible Subordinated Notes | 12 Months Ended
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Dec. 31, 2018
Debt Disclosure [Abstract] |
Convertible Subordinated Notes | CONVERTIBLE SUBORDINATED NOTES On March 19, 2014, we issued $143.75 million aggregate principal amount of our Convertible Notes. The Convertible Notes have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and were offered only to “qualified institutional buyers” in compliance with Rule 144A under the Securities Act. The Convertible Notes are governed by an indenture dated as of March 19, 2014 between Wilmington Trust, National Association, as Trustee, and us. The Convertible Notes bear interest at 2.75% per year. Interest on the Convertible Notes began to accrue on March 19, 2014 and is payable semi-annually in arrears on March 15 and September 15 of each year. On May 7, 2018, we completed our exchange (the “Exchange”) of approximately $115.0 million in aggregate principal amount of Convertible Notes, which represented approximately 80% of the aggregate principal amount of our Convertible Notes then outstanding, in privately-negotiated exchange agreements with a limited number of convertible noteholders, for $74.8 million in cash (plus accrued interest of $0.4 million totaling $75.2 million) and 2,822,859 newly issued shares of our common stock, par value $.01 per share, pursuant to a private placement in reliance on Section 4(a)(2) of the Securities Act. The cash portion of the exchange consideration was funded from our Former Credit Agreement as amended by the Eighth Amendment. Following the settlement of the Convertible Notes exchange, the aggregate principal amount of our Convertible Notes outstanding was reduced to $28.8 million. See Note 14 to the Consolidated Financial Statements included herein for further discussion of our Former Credit Agreement. On December 24, 2018, we completed privately-negotiated repurchases of an additional $22.4 million in aggregate principal amount of Convertible Notes, which represented 78% of the aggregate principal amount of our Convertible Notes then outstanding for $22.9 million in cash (plus accrued interest of approximately $0.2 million totaling $23.0 million). The consideration for the repurchases was funded from our New Credit Facility. Following these repurchases, the aggregate principal amount of our Convertible Notes outstanding was reduced to $6.3 million. We recognized a net gain of $1.7 million, which was recorded in Net loss on early extinguishment of debt, related to the May exchange and December repurchases of our Convertible Notes. The gain is composed of a difference of $3.1 million between the fair value and the carrying amount of the liability component of our Convertible Notes immediately preceding each exchange and repurchase, as applicable, partially offset by a write-off of $1.4 million in unamortized debt issuance costs related to the exchange and repurchase of our Convertible Notes. The gain does not include the impact of any transaction costs we incurred to exchange and repurchase the Convertible Notes. We incurred $0.9 million in transactions costs related to the exchange and repurchase of our Convertible Notes, of which $0.6 million was expensed and recorded in Net loss on early extinguishment of debt and $0.3 million was allocated to the equity component and recorded in Additional paid-in capital. The Convertible Notes are general unsecured obligations and are subordinated in the right of payment to all of our existing and future senior indebtedness and equal in right of payment with our other existing and future subordinated indebtedness. The initial conversion rate of the Convertible Notes as of March 19, 2014, was 44.3169 shares of our common stock per $1,000 principal amount of Convertible Notes, equivalent to an initial conversion price of $22.56 per share of common stock. The conversion rate is subject to adjustment upon the occurrence of certain events, as described in the indenture governing the Convertible Notes. During 2017, an adjustment to the conversion rate of the Convertible Notes was triggered when our Board increased the dividends declared per common share from $0.05 per share to $0.075 per share. At December 31, 2018, the adjusted conversion rate of the Convertible Notes is 45.0228 shares of our common stock per $1,000 principal amount of Convertible Notes, equivalent to an adjusted conversion price of $22.21 per share of common stock. Equity issuance costs are included in Additional paid-in capital on our Consolidated Balance Sheet and are not amortized. Additionally, the recognition of the Convertible Notes as two separate components results in a basis difference associated with the liability component which represents a temporary tax difference. As a result, we recognized a deferred tax liability of $12.7 million related to this temporary difference which was recorded as a reduction to Additional paid-in capital and an increase to our deferred tax liability. The deferred tax liability is being amortized over the seven year term of the Convertible Notes. At December 31, 2018, the balance of our deferred tax liability related to our Convertible Notes was $0.1 million. The carrying values of the liability and equity components of the Convertible Notes at December 31, 2017 and 2018 are reflected on our Consolidated Balance Sheet as follows (in thousands):
| December 31, 2017 |  | December 31, 2018
Long-term liabilities: |  |  |
Principal amount | $ | 143,750 |  |  | $ | 6,346 |
Unamortized discount of liability component | (17,559 | ) |  | (560 | )
Convertible Notes issuance costs, net of accumulated amortization of $1,877 and $106, respectively | (1,750 | ) |  | (54 | )
Carrying value of the liability component | $ | 124,441 |  |  | $ | 5,732 |
Carrying value of the equity component | $ | 17,973 |  |  | $ | 789 |
The Carrying value of the liability component and the Carrying value of the equity component are recorded in Convertible subordinated notes due 2021 and Additional paid-in capital, respectively, on our Consolidated Balance Sheet at December 31, 2017 and 2018. The fair value of the Convertible Notes, which are Level 2 measurements, was $6.2 million at December 31, 2018. Interest expense on the Convertible Notes included contractual coupon interest expense of $4.0 million, $4.0 million and $1.9 million for the years ended December 31, 2016, 2017 and 2018, respectively. Accretion of the discount on the Convertible Notes was $3.9 million, $4.3 million and $2.2 million for the years ended December 31, 2016, 2017 and 2018, respectively. Amortization of debt issuance costs related to our Convertible Notes was $0.5 million, $0.5 million and $0.2 million for the years ended December 31, 2016, 2017 and 2018, respectively. The remaining unamortized debt discount and the remaining unamortized debt issuance costs are being amortized using the effective interest method over the remaining term of approximately 26 month of the Convertible Notes. The effective interest rate on the unamortized debt discount for the years ended December 31, 2017 and 2018 was 11.3% and 11.4%, respectively. The effective interest rate on the unamortized discount and the debt issuance costs for both years ended December 31, 2017 and 2018 was 3.2%. The aggregate maturities of our Convertible Notes for the five years subsequent to December 31, 2018 are as follows (in thousands):
|  | Principal Maturity |  | Discount Amortization |  | Present Value
Years ending December 31, |  |  |  |  |  |
2019 |  | $ | — |  |  | $ | (242 | ) |  | $ | (242 | )
2020 |  | — |  |  | (270 | ) |  | (270 | )
2021 |  | 6,346 |  |  | (48 | ) |  | 6,298 |
2022 |  | — |  |  | — |  |  | — |
2023 |  | — |  |  | — |  |  | — |
Total |  | $ | 6,346 |  |  | $ | (560 | ) |  | $ | 5,786 |

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