| Long-term Debt and Letters of Credit | (6)
Long-term Debt and Letters of Credit The following table summarizes the long-term debt of the
Company as of July 3, 2017 and January 2,
2017:
Average Effective 2017 July 3, 2017 Average Effective January 2,
(In
thousands)
Term loan due May
2021 5.48% $ 650,000 5.25% $ 700,000
U.S. ABL revolving loan
due May 2020 2.73% 80,000 2.27% 80,000
Asia ABL revolving loan
due May 2020 2.63% 30,000 2.17% 30,000
Convertible Senior Notes
due December 2020 1.75% 249,985 1.75% 250,000
Capital lease 6.43% 1,844 6.43% 1,798
1,011,829 1,061,798
Less: Long-term debt
unamortized discount (33,174 ) (37,392 )
Long-term debt
unamortized debt issuance costs (4,139 ) (4,724 )
974,516 1,019,682
Less: current
maturities (110,669 ) (110,652 )
Long-term debt, less
current maturities $ 863,847 $ 909,030
Term
and Revolving Loans The Company maintains a Term Loan Credit Agreement (Term Loan),
a $200,000 U.S. Asset-Based Lending Credit Agreement (U.S. ABL),
and a $150,000 Asia Asset-Based Lending Credit Agreement (Asia ABL)
(collectively the ABL Revolving Loans). The Term Loan bears interest at a floating rate of LIBOR, with
a 1.0% LIBOR floor, plus an applicable interest margin of 4.25%, or
JP Morgan Chase Bank’s prime rate, with a 2% floor, plus a
margin of 3.25%, at the Company’s option. At July 3,
2017 the weighted average interest rate on the outstanding
borrowings under the Term Loan was 5.48%. There is no provision,
other than an event of default, for the interest margin to
increase. The Term Loan will mature on May 31, 2021. The Term
Loan is secured by a significant amount of the assets of the
Company and a pledge of 65% of voting stock of the Company’s
first tier foreign subsidiaries and is structurally senior to the
Company’s convertible senior notes. See Convertible Senior
Notes below. The U.S. ABL consists of three tranches comprised of a
revolving credit facility of up to $200,000, a letter of credit
facility of up to $50,000, and swingline loans of up to $30,000,
provided that at no time may amounts outstanding under the tranches
exceed in aggregate $200,000 or the applicable borrowing base,
which is a percentage of the principal amount of Eligible Accounts,
as defined in the U.S. ABL agreement. Borrowings under the U.S. ABL
bear interest at either a floating rate of LIBOR plus a margin of
150 basis points or JP Morgan Chase Bank’s prime rate plus a
margin of 50 basis points, at the Company’s option. At
July 3, 2017, the weighted average interest rate on the
outstanding borrowings under the U.S. ABL was 2.73%. The applicable
margin can vary based on the remaining availability of the
facility, from 125 to 175 basis points for LIBOR-based loans and
from 25 to 75 basis points for JP Morgan Chase Bank’s prime
rate-based loans. Other than availability and an event of default,
there are no other provisions for the interest margin to increase.
The U.S. ABL will mature on May 31, 2020. Loans made under the
U.S. ABL are secured first by all of the Company’s domestic
cash, receivables and inventories as well as by a second position
against a significant amount of the assets of the Company and a
pledge of 65% of voting stock of the Company’s first tier
foreign subsidiaries and are structurally senior to the
Company’s convertible senior notes. See Convertible Senior
Notes below. At July 3, 2017, $80,000 of the U.S. ABL was
outstanding and classified as short-term debt. The Company and its
domestic subsidiaries have fully and unconditionally guaranteed the
full and timely payment of all Term Loan and U.S. ABL related
obligations. The Asia ABL consists of two tranches comprised of a revolving
credit facility of up to $150,000 and a letter of credit facility
of up to $100,000, provided that at no time may amounts outstanding
under both tranches exceed in aggregate $150,000 or the applicable
borrowing base, which is a percentage of the principal amount of
Eligible Accounts, as defined in the Asia ABL agreement. Borrowings
under the Asia ABL bear interest at a floating rate of LIBOR plus
140 basis points. At July 3, 2017, the weighted average
interest rate on the outstanding borrowings under the Asia ABL was
2.63%. There is no provision, other than an event of default, for
the interest margin to increase. The Asia ABL will mature on
May 22, 2020. Loans made under the Asia ABL are secured by a
portion of the Company’s Asia Pacific cash and receivables
and are structurally senior to the Company’s domestic
obligations, including the convertible senior notes. See
Convertible Senior Notes below. The Company’s Asia Pacific
subsidiary and certain of its subsidiaries have fully and
unconditionally guaranteed the full and timely payment of all Asia
ABL related obligations. At July 3, 2017, $30,000 of the Asia
ABL was outstanding. The Company is no longer required to make any quarterly
scheduled payments for the remaining term of the outstanding Term
Loan balance due to mandatory payments and optional loan
prepayments applied to date. Additionally, based on certain
parameters defined in the Term Loan agreement, including a secured
leverage ratio, the Company is also not required to make any
additional principal payments for fiscal year 2017 as our secured
leverage ratio is less than or equal to 1.5. The Company may be
required to make additional principal payments in future years, if
the Company’s secured leverage ratio is greater than 1.5. Any
remaining outstanding balances under the Term Loan are due at the
maturity date of May 31, 2021. During the quarter ended
July 3, 2017, the Company made an optional debt principal
prepayment totaling $50,000. Borrowings under the Term Loan are
subject to financial and operating covenants including maintaining
a maximum total leverage ratio. Under the occurrence of certain
events, the U.S. ABL and the Asia ABL are subject to financial and
operational covenants, including maintaining minimum fixed charge
coverage ratios. At July 3, 2017, the Company was in
compliance with the covenants under the Term Loan, the U.S. ABL and
the Asia ABL. As of July 3, 2017 and January 2, 2017, remaining
unamortized debt issuance costs of $815 and $977, respectively,
related to the Term Loan. These debt issuance costs are recorded as
a reduction of the Term Loan at July 3, 2017 and
January 2, 2017, respectively, and are amortized over the
duration of the Term Loan into interest expense using an effective
interest rate of 5.48%. Additionally, remaining unamortized debt issuance costs related
to the ABL Revolving Loans were $2,922 and $3,423 as of
July 3, 2017 and January 2, 2017, respectively. These
debt issuance costs are included in
other non-current
The Company is required to pay a commitment fee of 0.25% to
0.375% per annum on any unused portion of the U.S. ABL or Asia
ABL. The Company incurred total commitment fees related to unused
borrowing availability of $180 and $150 for the quarters ended
July 3, 2017 and June 27, 2016, respectively, and $367
and $344 for the two quarters ended July 3, 2017 and
June 27, 2016, respectively. As of July 3, 2017, the
outstanding amount of the Term Loan was $650,000 which is included
as long-term debt. Additionally, $80,000 of the U.S. ABL and
$30,000 of the Asia ABL was outstanding as of July 3, 2017.
Available borrowing capacity under the U.S. ABL and Asia ABL was
$112,388 and $78,310, which considers letters of credit outstanding
of $7,612 and $41,690 mentioned below, respectively, at
July 3, 2017.
Letters
of Credit The Company has up to $50,000 and $100,000 Letters of Credit
Facilities under the U.S. ABL and the Asia ABL, respectively, as
mentioned above. As of July 3, 2017, letters of credit in the
amount of $7,612 were outstanding under the U.S. ABL and $41,690
were outstanding under the Asia ABL with various expiration dates
through September 2018.
Convertible Senior Notes due 2020 The Company maintains 1.75% convertible senior notes in the
amount of $249,985 due December 15, 2020. The convertible
senior notes bear interest at a rate of 1.75% per annum.
Interest is payable semiannually in arrears on June 15 and
December 15 of each year. The convertible senior notes are
senior unsecured obligations and rank equally to the
Company’s future unsecured senior indebtedness and are senior
in right of payment to any of the Company’s future
subordinated indebtedness. Conversion: On or after March 15, 2020 until the close of business on
the third scheduled trading day preceding the maturity date,
holders may convert their notes at any time, regardless of the
foregoing circumstances. Upon conversion, for each $1 principal
amount of notes, the Company will pay shares of our common stock,
cash or a combination of cash and shares of our common stock at its
election, if applicable, based on a daily conversion value
calculated on a proportionate basis for each day of the 80 trading
day observation period. All conversions occurring on the same date
or on or after March 15, 2020 shall be settled using the same
settlement method. Additionally, in the event of a fundamental
change as defined in the indenture governing the notes, or other
conversion rate adjustments such as share splits or combinations,
other distributions of shares, cash or other assets to
stockholders, including self-tender transactions (Other Conversion
Rate Adjustments), the conversion rate may be modified to adjust
the number of shares per $1 principal amount of the notes. As of
July 3, 2017, none of the criteria for a fundamental change or
a conversion rate adjustment had been met. The maximum number of shares issuable upon conversion,
including the effect of a fundamental change and subject to Other
Conversion Rate Adjustments, would be 32,423. Note Repurchase:
Convertible Note Hedge and Warrant
Transaction: As of July 3, 2017 and January 2, 2017, the following
summarizes the equity components of the convertible senior notes
included in additional paid-in
As of July 3,
2017 As of January 2,
2017
Embedded Embedded Total Embedded Embedded Total
(in
thousands)
Convertible senior notes
due 2020 $ 60,216 $ (1,916 ) $ 58,300 $ 60,227 $ (1,916 ) $ 58,311
The components of interest expense resulting from the
convertible senior notes for the quarters and two quarters ended
July 3, 2017 and June 27, 2016 are as follows:
For the Quarter Ended For the Two Quarters Ended
July 3, June 27, July 3, June 27,
(In
thousands)
Contractual coupon
interest $ 1,093 $ 1,093 $ 2,187 $ 2,187
Amortization of debt
discount $ 2,125 $ 1,992 $ 4,216 $ 3,952
Amortization of debt
issuance costs $ 214 $ 200 $ 423 $ 396
As of July 3, 2017 and January 2, 2017, there remains
unamortized debt discount of $33,174 and $37,392, respectively, and
debt issuance costs of $3,324 and $3,747, respectively, related to
the convertible senior notes. These debt discount and debt discount
issuance costs are recorded as a reduction of the convertible
senior notes and are being amortized to interest expense over the
term of the convertible senior notes using the effective interest
rate method. At July 3, 2017, the remaining weighted average
amortization period for the unamortized senior convertible note
discount and debt issuance costs was 3.5 years. For the quarters and two quarters ended July 3, 2017 and
June 27, 2016, the amortization of the convertible senior
notes due 2020 debt discount and debt issuance costs is based on an
effective interest rate of 6.48%.
Other
Credit Facility Additionally, the Company is party to a revolving loan credit
facility (Chinese Revolver) with a lender in China. Under this
arrangement, the lender has made available to the Company
approximately $31,000 in unsecured borrowing with all terms of the
borrowing to be negotiated at the time the Chinese Revolver is
drawn upon. There are no commitment fees on the unused portion of
the Chinese Revolver, and this arrangement expires in January 2018.
As of July 3, 2017, the Chinese Revolver had not been drawn
upon. |
