DEBT

Senior Notes—In 2013, we originally issued $150 million aggregate principal amount of senior notes (the "Notes") pursuant to a note purchase agreement entered into in August 2012. On October 31, 2016, we entered into a revised note purchase agreement governing the Notes.

As of March 31, 2017, after the repayment of $46 million of principal in the first quarter, we had outstanding $89 million of the Notes consisting of the following series:


•	$35.6 million of Senior Notes, Series A, due April 16, 2020


•	$26.7 million of Senior Notes, Series B, due April 14, 2023


•	$26.7 million of Senior Notes, Series C, due April 16, 2025

Under the revised agreement, we granted to the collateral agent for the noteholders a first lien on substantially all of our non-current assets and a second lien on substantially all of our current assets.

The revised agreement provides for the following:

•

The agreement requires us to maintain a minimum trailing twelve-month adjusted EBITDA, which adjusts over time and is measured quarterly through March 2018, ranging from negative $15 million in the period ended March 31, 2017 to negative $7.5 million in the period ending March 31, 2018. Adjusted EBITDA is a non-GAAP measure that is calculated as adjusted earnings before interest, income taxes, depreciation, amortization, and certain other expenses for the prior four quarters, as defined under the agreement. Our adjusted EBITDA as calculated under the agreement was $3.7 million for the four quarters ended March 31, 2017.

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The agreement requires us to maintain a minimum fixed charge coverage amount of negative $15 million and negative $10 million for the quarters ending June 30, 2018, and September 30, 2018, respectively. The agreement also includes requirements relating to a leverage ratio and a fixed charge coverage ratio to be tested on a quarterly basis commencing with the quarter ending June 30, 2018, with respect to the leverage ratio, and December 31, 2018, with respect to the fixed charge coverage ratio. The maximum leverage ratio will be 11.5 to 1.0 for the quarter ending June 30, 2018, and decreases to 3.5 to 1.0 for the quarter ending September 30, 2019, and each quarter thereafter. The minimum fixed charge coverage ratio will be 0.25 to 1.0 for the quarter ending December 31, 2018, and increases to 1.3 to 1.0 for the quarter ending September 30, 2019, and each quarter thereafter. In general, our fixed charge coverage amount is calculated as adjusted EBITDA for the prior four quarters, minus capital expenditures, cash paid for income taxes, and interest expense plus scheduled principal amortization of long-term funded indebtedness; our leverage ratio is calculated as the ratio of funded indebtedness to adjusted EBITDA for the prior four quarters; and our fixed charge coverage ratio is calculated as the ratio of adjusted EBITDA for the prior four quarters, minus capital expenditures and cash paid for income taxes, to interest expense plus scheduled principal amortization of long-term funded indebtedness.

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The interest rates for the Notes increased by 4.5% above the previous rates such that the Series A Senior Notes now bear interest at 7.73%, the Series B Senior Notes now bear interest at 8.63%, and the Series C Senior Notes now bear interest at 8.78%, which reflect the highest rates in a pricing grid under the agreement. The interest rates are adjusted quarterly based upon our financial performance and certain financial covenant levels. In addition, additional interest of 2%, which may be paid in kind, will begin to accrue on April 1, 2018, unless we satisfy certain financial covenant tests.


•	We are required to make certain offers to prepay the Notes with the proceeds of dispositions of certain specified property and with the proceeds of certain equity issuances, as set forth in the agreement. During the quarter ended March 31, 2017, we repaid the Notes by $5.5 million in conjunction with the sale of an asset and $40.5 million with the proceeds of an equity offering.

We were in compliance with the applicable covenants under the revised agreement as of March 31, 2017.

Our outstanding long-term debt, net, as of March 31, 2017, and December 31, 2016 (in thousands), is as follows:



	March 31, 2017		December 31, 2016
Senior Notes	$	89,000	$	135,000
Less deferred financing costs	983		1,566
Long-term debt, net	$	88,017	$	133,434

The obligations under the Notes are unconditionally guaranteed by several of our subsidiaries.

Interest expense is recorded net of any capitalized interest associated with investments in capital projects. We incurred gross interest expense of $4.5 million and $2.3 million for the three months ended March 31, 2017, and 2016, respectively.

Amounts included in interest expense for the three months ended March 31, 2017, and 2016 (in thousands) are as follows:



	Three Months Ended March 31,
	2017			2016
Interest on notes and line of credit commitment fees	$	2,836		$	1,536
Make-whole payment made March 31, 2017	794			—
Amortization of deferred financing costs	821			783
Gross interest expense	4,451			2,319
Less capitalized interest	(30		)	(90		)
Interest expense, net	$	4,421		$	2,229

Credit Facility—On October 31, 2016, we entered into a credit agreement with Bank of Montreal that provides an asset-based revolving credit facility of up to $35 million in aggregate principal amount. The amount available is subject to monthly borrowing base limits based on our inventory and receivables. If our total remaining availability under the credit facility was to fall below $6 million, we would be subject to a minimum fixed charge coverage ratio of 1 to 1, which we would not currently meet. Any borrowings on the credit facility bear interest at 1.75% to 2.25% above LIBOR (London Interbank Offered Rate), based on average availability under the credit facility. We have granted to Bank of Montreal a first lien on substantially all of our current assets and a second lien on substantially all of our non-current assets. The credit facility expires on October 31, 2018. We occasionally borrow and repay amounts under the facility for near-term working capital needs and may do so in the future. As of March 31, 2017, there were no amounts outstanding under the facility, other than $3.5 million in letters of credit. Considering the outstanding letters of credit and the fixed charge coverage ratio requirement described above, we have $25.5 million available under the facility as of March 31, 2017. We were in compliance with the applicable covenants under the facility as of March 31, 2017.