Note 5 - Long Term Debt | 3 Months Ended |
Mar. 31, 2014 |
Disclosure Text Block [Abstract] | ' |
Long-term Debt [Text Block] | ' |
5. Long Term Debt |
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Convertible Senior Notes |
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On December 7, 2010, we issued $200 million in aggregate principal amount of 3.00% Convertible Senior Notes due December 15, 2015 unless earlier repurchased or converted (the “Notes”). The unsecured Notes were offered and sold only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The Notes are governed by the terms of an indenture (the “Indenture”) dated December 7, 2010, which was filed with the SEC on December 8, 2010. |
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The Notes bear interest at a rate of 3.00% per year, payable semiannually in arrears on June 15 and December 15 of each year, which payments began on June 15, 2011. We may in certain instances be required to pay additional interest if the Notes are not freely tradable by the holders thereof (other than our affiliates) beginning six months after the date of issuance and in connection with events of default, including events of default relating to our failure to comply with our reporting obligations to the trustee under the Indenture and to the SEC. After a default under the Indenture, if the trustee or the holders of at least 25% in aggregate principal amount of the Notes give us notice of, and direct us to cure, the default and the default is not cured within 60 days thereafter, then unless a waiver is obtained from the holders of more than 50% in aggregate principal amount of the Notes, an event of default will occur under the Indenture. Upon any such event of default, we may elect that for the first 180 days (or such lesser amount of time during which the event of default continues), the sole remedy be the payment of additional interest at an annual rate equal to 0.50%. In the event that such additional interest becomes payable because of our failure to timely file certain reports with the SEC and the trustee, the filing of such reports will cure the event of default and the interest rate will be reduced (so long as no other events of default then exist). If we elect to pay such additional interest and the event of default is not cured within the 180-day period, or if we do not make such an election to pay additional interest when the event of default first occurs, the trustee or the holders of at least 25% in aggregate principal amount of the Notes may declare the Notes to be due and payable immediately. |
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Amortization recorded to interest expense pertaining to deferred issuance costs for the three months ended March 31, 2014 and 2013 was $0.3 million and $0.3 million, respectively. |
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The Notes are convertible at any time prior to the close of business on the third business day immediately preceding the maturity date at the holder’s option, into shares of our common stock at an initial conversion rate of 51.4536 shares per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $19.43 per share. The conversion rate is subject to adjustment for certain events that occur prior to maturity, such as a change in control transaction as defined in the Indenture. |
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We may not redeem the Notes prior to the maturity date. If a fundamental change (such as a change in control event or if our Common Stock ceases to be listed or quoted on any of the New York Stock Exchange, the Nasdaq Global Select Market or the Nasdaq Global Market or any of their respective successors) occurs prior to the maturity date, holders may require us to repurchase for cash all or part of their Notes at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. |
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The Indenture provides for customary events of default (subject in certain cases to grace and cure periods) including, without limitation, (i) the failure to pay amounts due under the Notes, (ii) the failure to deliver the shares of our Common Stock due upon conversion of any Note, (iii) our failure to comply with other agreements contained in the Indenture or in the Notes, (iv) payment defaults on, or acceleration of, other indebtedness, (v) the failure to pay certain judgments, and (vi) certain events of bankruptcy, insolvency or reorganization with respect to the Company. An event of default under the Indenture (other than an event of default related to certain events of bankruptcy, insolvency or reorganization) will allow either the trustee under the Indenture or the holders of at least 25% in aggregate principal amount of the then outstanding Notes to cause the acceleration of the Notes. An event of default related to certain events of bankruptcy, insolvency or reorganization with respect to the Company will automatically cause the acceleration of the Notes, subject to the Company’s right, as described above, to elect to pay additional interest as a sole remedy for a period of up to 180 days. |
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On July 16, 2014, the trustee provided us with notice that we were in default under the Indenture because we had not timely filed this Form 10-Q with the trustee. In accordance with the terms of the Indenture, we had 60 days to cure such default. Such cure period expired on or about September 14, 2014, at which time the default became an event of default and gave the trustee and the holders of the Notes the right to exercise various remedies, including acceleration of the Notes. In accordance with the terms of the Indenture, we intend to notify the trustee, the paying agent and the holder(s) of the Notes, that we elect to pay additional interest on the Notes at a rate equal to 0.50% as the sole remedy available to the holders of the Notes for the 180-day period commencing on or about September 14, 2014. We will cure such event of default by filing this Form 10-Q with the SEC, which filing will, pursuant to the terms of the Indenture, also be deemed a filing with the trustee, at which point we will no longer be required to pay the additional interest on the Notes. |
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We are also delinquent in filing with the SEC our Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 (the “2014 Second Quarter Form 10-Q”), which was due to be filed with the SEC on August 11, 2014. On September 3, 2014, the trustee provided us with notice that we were in default under the Indenture because we had not timely filed our 2014 Second Quarter Form 10-Q with the trustee. We will cure such default by the filing of the 2014 Second Quarter Form 10-Q with the SEC, which filing will, pursuant to the terms of the Indenture, also be deemed a filing with the trustee. |
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Because we have been delinquent in the filing of certain of our periodic financial reports with the SEC, since November 19, 2013, we have not been in compliance with the Nasdaq listing rule that requires us to timely file such reports with the SEC. On May 2, 2014, the Listing Qualifications Department of The NASDAQ Stock Market LLC (“Nasdaq”) notified us that, due to our delay in filing with the SEC our Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 (the “2013 Third Quarter Form 10-Q”) and our 2013 Form 10-K, our common stock would be delisted unless we timely requested a hearing before a Nasdaq Hearings Panel (the “Panel”). On May 15, 2014, Nasdaq advised us that the delayed filing of this Form 10-Q served as an additional basis for the delisting determination. On August 19, 2014, Nasdaq advised us that our delayed filing of the 2014 Second Quarter Form 10-Q served as a further basis for the delisting determination. |
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Upon receiving the May 2, 2014 notice from Nasdaq, we timely requested a hearing before a Panel, and the hearing was held on June 12, 2014. At the hearing, we presented a plan to regain compliance with the listing rule and requested an extension of time in which to do so Thereafter, on June 23, 2014, we filed with the SEC certain delinquent reports that included our 2013 Third Quarter Form 10-Q and 2013 Form 10-K. Following the filing with the SEC of this Form 10-Q, our failure to comply with the Nasdaq listing rule will be due solely to the delayed filing of our 2014 Second Quarter Form 10-Q. |
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On July 9, 2014, we received a letter from Nasdaq indicating that the Panel had determined to continue the listing of our common stock subject to the condition that, on or before September 12, 2014, we became current in our periodic filings with the SEC. The letter further indicated that we would also be required to demonstrate at such time that we are in compliance with all other requirements for continued listing on The Nasdaq Stock Market. The Panel indicated that in the event we were unable to satisfy such conditions, our common stock would be delisted. |
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On September 5, 2014, following our request that the Panel extend the September 12th date, we were notified that the Panel had extended our date to become current in our periodic filings with the SEC to November 13, 2014. With the filing of this Form 10-Q and our 2014 Second Quarter Form 10-Q, we will become fully current with respect to our periodic filing obligations with the SEC on or before the November 13, 2014 date specified by the Panel. |
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As of March 31, 2014, the estimated fair value of our Notes was approximately $210.8 million. The fair value of the Notes was estimated using market prices of the Notes, which are based on Level 2 inputs (i.e. inputs, other than the quoted prices in active markets that are observable either directly or indirectly). |
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Senior Secured Revolving Credit Facility |
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On December 21, 2012, we entered into a credit agreement (the “Credit Facility Agreement”) establishing a senior secured revolving credit facility (the “Credit Facility”) with certain institutional lenders and Bank of America, N.A., as administrative agent and lender, that provides for an aggregate loan amount of up to $150 million. The Credit Facility is expected to mature on December 21, 2016, but may mature on September 14, 2015 if beginning on June 15, 2015 we do not have available liquidity (domestic cash and investments, plus availability under the Credit Facility) of $25 million in excess of the amount required to repay our Notes of $200 million in full. If we satisfy this requirement between June 15, 2015 and September 14, 2015, but fail to do so after September 15, 2015 and prior to December 15, 2015, the maturity date is the date on which the requirement is no longer satisfied. |
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The Credit Facility includes a sublimit of up to $25 million for the issuance of standby letters of credit and a swingline facility of up to $15 million, to be used, among other things, to fund our working capital needs, to fund capital expenditures and for other general corporate purposes (including acquisitions), stock repurchases and any partial refinancing of our Notes. We may from time to time request an increase to the Credit Facility by an amount of up to $50 million, which increase would be subject to the consent of the lender or lenders (if any) assuming the increased obligations. |
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Borrowings under the Credit Facility bear interest at either (i) the base rate, which is equal to the highest of (a) the administrative agent’s prime rate, (b) the federal funds rate plus 0.50% and (c) the London Interbank Offered Rate ("LIBOR") for a one month interest period plus 1.00% or (ii) LIBOR plus the applicable margin. The applicable margin ranges are from 1.75% to 2.25% for LIBOR loans and 0.75% to 1.25% for base rate loans, and depends on the Company’s total leverage ratio (as defined in the Credit Facility Agreement). Interest is payable quarterly. No amounts were drawn down under this Credit Facility as of March 31, 2014. |
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Our obligations under the Credit Facility are guaranteed by Net Optics, Inc., Anue Systems, Inc., BreakingPoint Systems, Inc., Catapult Communications Corporation and VeriWave, Inc., all of which are wholly owned domestic subsidiaries of Ixia, by Net Optics IL, LLC, which is a wholly owned domestic subsidiary of Net Optics,, and by any future domestic or foreign subsidiaries of Ixia or such guarantors, provided that no foreign subsidiary will be required to become a guarantor to the extent the guaranty would result in a material adverse tax consequence to the Company. The Credit Facility is secured by a first priority security interest in substantially all existing and after acquired tangible and intangible personal property of Ixia and of the guarantors and by the pledge by Ixia and by the guarantors of all outstanding equity securities of their respective domestic subsidiaries and 65% of the outstanding equity securities of directly owned foreign subsidiaries. |
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Amortization recorded to interest expense pertaining to deferred issuance costs for the three months ended March 31, 2014 and 2013 was $58,000 and $68,000, respectively. |
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We are required to pay a commitment fee on the unused portion of the Credit Facility of up to a maximum of $450,000 or 0.30% depending on the Company’s total leverage ratio. |
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The Credit Facility Agreement requires the Company to comply with certain covenants, including maintaining (i) an interest coverage ratio (as defined in the Credit Facility Agreement) of greater than 3.50 to 1.00, measured quarterly on a trailing twelve months basis and (ii) a maximum leverage ratio (as defined in the Credit Facility Agreement) of not greater than 3.50 to 1.00 through June 30, 2014 and 3.00 to 1.00 thereafter, measured quarterly on a trailing twelve months basis. The Credit Facility Agreement also requires us to timely provide certain periodic financial statements to the lenders. In connection with the delayed delivery to the lenders of our financial statements for the quarters ended September 30, 2013, December 31, 2013, March 31, 2014 and June 30, 2014 and of our audited financial statements for the fiscal year ended December 31, 2013, we entered into agreements with the lenders that amended the Credit Facility Agreement to extend the dates for such deliveries. As of the date of the filing of this Form 10-Q, we have completed all such deliveries other than the delivery of our financial statements for the quarter ended June 30, 2014. The lenders’ waiver of that late delivery expired on August 29, 2014, as discussed in more detail below. |
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On May 15, 2014, we entered into an amendment and waiver agreement with the lenders that included a waiver from the lenders of any breach of the Credit Facility Agreement (which requires us to comply with the Indenture governing our Notes) arising out of our failure to comply with the covenant in the Indenture that requires us to timely file with the trustee this Form 10-Q. This waiver is only effective as long as (i) no event of default occurs under the Indenture due to our failure to complete any necessary remedial action in respect of the delayed filing within 60 days of receipt of notice from either the trustee under the Indenture or the holders of 25% of the aggregate principal amount of our Notes demanding such remedial action (such a notice was received by the Company from the trustee on or about July 16, 2014) and (ii) no delisting of our common stock from the Nasdaq Global Select Market occurs. This waiver expired on or about September 14, 2014 in connection with the occurrence of an event of default under our Indenture as described above. |
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Under an amendment to the Credit Facility Agreement dated June 27, 2014, the date for delivery of our financial statements for the quarter ended June 30, 2014 was extended to August 29, 2014. We did not, however, deliver the financial statements on or before that date. On August 29, 2014, the administrative agent provided us with notice that we were in default under the Credit Facility Agreement because we had not timely provided the administrative agent with our financial statements for the quarter ended June 30, 2014 and a related compliance certificate and because we were in default under the Indenture for failing to timely file this Form 10-Q with the trustee. The administrative agent’s notice expressly reserved the rights of the administrative agent and the lenders to exercise their respective rights, powers, privileges and remedies in connection with such event or events of default. Due to the occurrence of such event or events of defaults, the Company is blocked from borrowing and obtaining letters of credit under the credit facility provided under the Credit Agreement. The administrative agent also has the right (with the consent of a majority of the lenders based on total credit exposure) or obligation (at the request of such a majority of the lenders) to terminate the Credit Facility Agreement, accelerate any amounts due thereunder and exercise all other available remedies. We do not have a contractual right to cure these defaults, and the defaults may be waived only with the consent of a majority of the lenders based on total credit exposure. As of the date of the filing of this Form 10-Q, no amounts are outstanding under the Credit Facility Agreement. |
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The Credit Facility Agreement also provides for customary events of default (subject to grace and cure periods in certain cases) including, without limitation, (a) failure to pay (with no grace period for the nonpayment of principal); (b) defaults under other documents executed and delivered in connection with the Credit Facility Agreement; (c) bankruptcy or the commencement of insolvency proceedings, including the appointment of a receiver; (d) changes of control; and (e) failure to perform or observe covenants contained in the Credit Facility Agreement or related documents. Upon the occurrence of an event of default, the principal and accrued interest under the Credit Facility then outstanding may be declared due and payable, the Credit Facility Agreement may under circumstances be terminated, and the administrative agent and the lenders may exercise all other available remedies. An event of default related to certain events of bankruptcy, insolvency or reorganization with respect to the Company will automatically cause the acceleration of payment of the unpaid principal and accrued interest on all outstanding loans. |