| DEBT | DEBT Long-term debt comprises the following (in thousands): September 29, 2023 December 31, 2022 Principal Amount UnamortizedDiscounts and Issuance Costs Net Carrying Amount Principal Amount UnamortizedDiscounts and Issuance Costs Net Carrying Amount Senior Secured Credit Facilities: Revolving credit facilities $ 81,247 $ — $ 81,247 $ 140,300 $ — $ 140,300 Term loan A 375,000 (1,776) 373,224 455,313 (2,172) 453,141 Term loan B — — — 335,625 (3,805) 331,820 Convertible Senior Notes due 2028 500,000 (13,088) 486,912 — — — Total $ 956,247 $ (14,864) $ 941,383 $ 931,238 $ (5,977) $ 925,261 Current portion of long-term debt — (18,188) Long-term debt $ 941,383 $ 907,073 Senior Secured Credit Facilities On September 2, 2021, the Company entered into a credit agreement (the “2021 Credit Agreement”), governing the Company’s senior secured credit facilities (the “Senior Secured Credit Facilities”). As of December 31, 2022, the Senior Secured Credit Facilities consisted of a five-year $400 million revolving credit facility (the “Revolving Credit Facility”), a five-year “term A” loan (the “TLA Facility”) and a seven-year “term B” loan (the “TLB Facility” and, together with the TLA Facility, the “Term Loan Facilities”). The TLB Facility was issued at a 0.50% discount. Amendments to the 2021 Credit Agreement On January 30, 2023, the Company entered into a first amendment (the “First Amendment”) to the 2021 Credit Agreement to, among other things: (i) permit the Company to issue the notes (described below under 2028 Convertible Note s and Related Capped Call Transactions) and incur indebtedness thereunder in an aggregate principal amount of up to $600 million at any time outstanding; (ii) permit the Company to enter into bond hedge and capped call transactions; (iii) permit the Company to issue call options, warrants or purchase rights relating to the Company’s common stock; provided, in each case, that the terms of any such transaction are customary for transactions of such type. On February 15, 2023, the Company entered into a second amendment (the “Second Amendment”) to the 2021 Credit Agreement to, among other things: (i) increase the maximum borrowing capacity under the Revolving Credit Facility by $100 million from $400 million to $500 million, (ii) extend the maturity date for both the Revolving Credit Facility and the TLA Facility to February 15 , 2028, (iii) allow for borrowings by the Company under the Revolving Credit Facility denominated in Euros, subject to a sublimit equal to 50% of the maximum borrowing capacity under the Revolving Credit Facility, (iv) replace the London Interbank Offered Rate (“LIBOR”) based reference interest rate option with a forward-looking term rate based on the secured overnight financing rate (“SOFR”) for the applicable interest period plus an adjustment of 0.10% per annum (“Adjusted Term SOFR”), and (v) add carveouts to certain negative covenants included within the 2021 Credit Agreement to permit the expansion of capacity in Ireland by the Company and incur indebtedness related thereto. The information provided below reflects the First Amendment and Second Amendment (collectively the “2023 Amendments”) described above. Details of our Long-term debt as of December 31, 2022 can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Revolving Credit Facility The Revolving Credit Facility matures on February 15 , 2028 . As of September 29, 2023, the Company had available borrowing capacity on the Revolving Credit Facility of $415.3 million after giving effect to $81.2 million of outstanding borrowings and $3.5 million of outstanding standby letters of credit. Borrowings under the Revolving Credit Facility will bear interest at a rate of Adjusted Term SOFR, in relation to any loan in U.S. dollars, and the Euro Interbank Offered Rate (“EURIBOR”), in relation to any loan in Euros, plus a margin based on the Company’s Secured Net Leverage Ratio (as defined in the Senior Secured Credit Facilities agreement). In addition, the Company is required to pay a commitment fee on the unused portion of the Revolving Credit Facility, which will range between 0.15% and 0.25%, depending on the Company’s Secured Net Leverage Ratio. As of September 29, 2023, the weighted average interest rate on outstanding borrowings under the Revolving Credit Facility was 6.47% and the commitment fee on the unused portion of the Revolving Credit Facility was 0.18%. (6.) DEBT (Continued) Term Loan Facilities The TLA Facility matures on February 15 , 2028 , and requires quarterly installments. The quarterly principal installments under the TLA Facility increase over the term of the loan. The interest rate terms for the TLA Facility are the same as those above for the Revolving Credit Facility borrowings in U.S. dollars. As of September 29, 2023, the interest rate on the TLA Facility was 6.92%. In February 2023, the Company used a portion of the proceeds from its notes offering (see 2028 Convertible Senior Notes and Related Capped Call Transactions ) to settle in full principal and interest due under the TLB Facility. Deferred Debt Issuance Costs and Discounts Debt issuance costs are either deferred and amortized over the term of the associated debt or expensed as incurred. In connection with the 2023 Amendments , the Company incurred and capitalized an aggregate of $1.0 million of debt issuance costs. In connection with the 2023 Amendments, for each separate debt instrument on a lender by lender basis, in accordance with ASC 470-50, Debt Modifications and Extinguishment , the Company performed an assessment of whether the transaction was deemed to be new debt, a modification of existing debt, or an extinguishment of existing debt. Based on this assessment, $3.8 million of unamortized deferred debt issuance costs related to the Revolving Credit Facility and TLA Facility were deemed to be related to the issuance of new debt, or the modification of existing debt, and therefore will continue to be deferred and amortized over the term of the associated debt. The remaining $0.6 million of unamortized deferred debt issuance costs related to the Revolving Credit Facility and TLA Facility were deemed to be related to the extinguishment of debt and were expensed and included in Interest expense during the nine months ended September 29, 2023. Additionally, i n connection with the full repayment of the TLB Facility and prepayments of portions of the TLA Facility, the Company incurred a $3.9 million loss on extinguishment of debt from the write-off of the remaining deferred debt issuance costs and original issue discount, which were expensed and included in Interest expense during the nine months ended September 29, 2023. Covenants The Senior Secured Credit Facilities agreement contains customary terms and conditions, including representations and warranties and affirmative and negative covenants, as well as financial covenants for the benefit of the lenders under the Revolving Credit Facility and the TLA Facility, which require that (i) the Company maintain a Total Net Leverage Ratio not to exceed 5.00:1.00, subject to increase in certain circumstances following qualified acquisitions, but shall not exceed 5.50:1.00 and (ii) the Company maintain an interest coverage ratio of at least 2.50:1.00. As of September 29, 2023, the Company was in compliance with these financial covenants. Contractual maturities under the Senior Secured Credit Facilities for the remainder of 2023 and through maturity, excluding any discounts or premiums, as of September 29, 2023 are as follows (in thousands): Remainder of 2023 2024 2025 2026 2027 After 2027 Future minimum principal payments $ — $ — $ 10,000 $ 27,500 $ 30,000 $ 888,747 2028 Convertible Senior Notes and Related Capped Call Transactions In February of 2023, the Company issued $500 million aggregate principal amount of Convertible Senior Notes due in 2028 (“2028 Notes”) in a private offering, which aggregate principal amount included the exercise in full of the initial purchasers’ option to purchase up to an additional $65 million principal amount of the 2028 Notes. The 2028 Notes mature on February 15, 2028 and bear interest at a fixed rate of 2.125% per annum, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2023. The total net proceeds from the issuance of the 2028 Notes (which includes the additional proceeds from the purchasers’ option), after deducting initial purchasers' discounts and commissions and debt issuance costs, were approximately $485 million. Conversion and Redemption Terms of the 2028 Notes Each $1,000 principal amount of the 2028 Notes is initially convertible into 11.4681 shares of the Company’s common stock (the “2028 Conversion Option”), which is equivalent to an initial conversion price of approximately $87.20 per share of common stock, subject to standard anti-dilutive adjustments and adjustments upon the occurrence of specified events. The initial conversion price represents a premium of approximately 32.5% to the $65.81 per share closing price of the Company’s common stock on January 31, 2023. (6.) DEBT (Continued) The 2028 Notes are convertible, in multiples of $1,000 principal amount, at the option of the holders prior to the close of business on the business day immediately preceding November 15, 2027, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2023 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the “Measurement Period”) in which the trading price (as defined in the Indenture governing the 2028 Notes) per $1,000 principal amount of the 2028 Notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate in effect on each such trading day; (3) if the Company calls any or all of the 2028 Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On or after November 15, 2027 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their 2028 Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances. Upon conversion, the 2028 Notes will be settled in cash up to the aggregate principal amount of the 2028 Notes to be converted, and in cash, shares of the Company’s common stock or a combination thereof, at the Company’s option, in respect of the remainder, if any, of the Company’s conversion obligation in excess of the aggregate principal amount of the 2028 Notes being converted. If the Company undergoes a fundamental change (as defined in the indenture governing the 2028 Notes), subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their 2028 Notes, in principal amounts of $1,000 or a multiple thereof, at a fundamental change repurchase price equal to 100% of the principal amount of the 2028 Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. In addition, following certain corporate events or if the Company issues a notice of redemption, it will, under certain circumstances, increase the conversion rate for holders who elect to convert their notes in connection with such corporate event or during the relevant redemption period. As of September 29, 2023, the conditions allowing holders of the Convertible Notes to convert had not been met and, therefore, the Convertible Notes are classified as a long-term liability on the Condensed Consolidated Balance Sheets at September 29, 2023. The Company may not redeem the 2028 Notes prior to February 20, 2026. The Company may redeem for cash all or any portion of the 2028 Notes, at its option, on or after February 20, 2026 and prior to February 15, 2028, if the last reported sale price of its common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending not more than two Seniority of the 2028 Notes The 2028 Notes are the Company’s senior unsecured obligations and rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the 2028 Notes; equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries. Indenture The Company issued the Notes pursuant to an indenture dated as of February 3, 2023 (the “Indenture”) by and between the Company and Wilmington Trust, National Association, as trustee. The Indenture provides for customary events of default, which include (subject in certain cases to grace and cure periods), among others: nonpayment of principal or interest; failure by the Company to comply with its conversion obligations upon exercise of a holder’s conversion right under the Indenture; breach of covenants or other agreements in the Indenture; defaults by the Company or any significant subsidiary (as defined in the Indenture) with respect to other indebtedness in excess of a threshold amount; failure by the Company or any significant subsidiary to pay final judgments in excess of a threshold amount; and the occurrence of certain events of bankruptcy, insolvency or reorganization with respect to the Company or any significant subsidiary. Generally, if an event of default occurs and is continuing under the Indenture, either the Indenture trustee or the holders of at least 25% in aggregate principal amount of the (6.) DEBT (Continued) 2028 Notes then outstanding may declare the principal amount plus accrued and unpaid interest on the Notes to be immediately due and payable. Covenants The 2028 Notes do not contain financial maintenance covenants. Deferred Debt Issuance Costs and Discounts The 2028 Notes are accounted for as a single liability measured at amortized cost. The discount and issuance costs related to the 2028 Notes are being amortized to interest expense over the contractual term of the 2028 Notes at an effective interest rate of 2.76%. Fair Value of the 2028 Notes The estimated fair value of the 2028 Notes was approximately $545 million as of September 29, 2023. The estimated fair value of the 2028 Notes was determined through consideration of quoted market prices. The fair value of the 2028 Notes are categorized in Level 2 of the fair value hierarchy. Capped Call Transactions In connection with the issuance of the 2028 Notes, the Company entered into privately negotiated capped call transactions (the “Capped Calls”) with certain financial institutions. The Capped Calls are expected generally to reduce the potential dilution to the Company’s common stock in connection with any conversion of the 2028 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted 2028 Notes, as the case may be, with such reduction and/or offset subject to a cap based on strike price of written warrants. The initial upper strike price of the Capped Calls is $108.59 per share and is subject to certain adjustments under the terms of the Capped Calls. The Capped Calls cover, subject to anti-dilution adjustments, approximately 5.7 million shares of the Company’s common stock, the same number of shares initially underlying the 2028 Notes. For accounting purposes, the Capped Calls are separate transactions, and not integrated with the issuance of the 2028 Notes. As these transactions meet certain accounting criteria, the Capped Calls are recorded in stockholders’ equity and are not accounted for as derivatives. The 2028 Notes and the Capped Calls will be integrated for tax purposes. The accounting impact of this tax treatment results in the Capped Calls being deductible as original issue discount for tax purposes over the term of the 2028 Notes, which generates an $8.8 million deferred tax asset recognized through equity. The cost to the Company of the Capped Calls was $35 million, which was recorded, net of tax, as a reduction to additional paid-in capital. Deferred Debt Issuance Costs and Discounts The change in deferred debt issuance costs related to the Company’s Revolving Credit Facility is as follows (in thousands): December 31, 2022 $ 2,387 Financing costs incurred 579 Write-off of deferred debt issuance costs (260) Amortization during the period (401) September 29, 2023 $ 2,305 The change in unamortized discount and deferred debt issuance costs related to the Term Loan Facilities and 2028 Convertible Senior Notes is as follows (in thousands): Deferred Debt Issuance Costs Unamortized Discount Total December 31, 2022 $ 4,569 $ 1,408 $ 5,977 Financing costs incurred 1,602 13,750 15,352 Write-off of deferred debt issuance costs and unamortized discount (2,867) (1,391) (4,258) Amortization during the period (492) (1,715) (2,207) September 29, 2023 $ 2,812 $ 12,052 $ 14,864 |
