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Debt And Interest Expense | 12 Months Ended
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Dec. 31, 2017
Debt Disclosure [Abstract] |
Debt And Interest Expense | Debt and Interest Expense Senior Notes As of December 31, 2017, the Company had senior notes outstanding of $1.8 billion, net of unamortized issuance costs. The balance of the senior notes includes the $550.0 million principal amount of 4.75% senior unsecured notes which were issued in July 2017. All of the outstanding senior notes were issued at par and are senior unsecured obligations of the Company. Interest is payable on each of the senior notes semi-annually. Each of the senior notes issuances is redeemable, in whole or in part, at the Company’s option at times and redemption prices specified in the indentures. The following table summarizes information related to our Senior notes (in thousands, except interest rates):
|  |  |  |  | As of December 31,
|  |  |  |  | 2017 |  | 2016
|  | Issuance Date | Maturity Date | Interest Rate | Principal
Senior notes due 2023 |  | April 16, 2013 | May 1, 2023 | 4.625 | % | $ | 750,000 |  |  | $ | 750,000 |
Senior notes due 2025 |  | March 27, 2015 | April 1, 2025 | 5.250 | % | 500,000 |  |  | 500,000 |
Senior notes due 2027 |  | July 5, 2017 | July 15, 2027 | 4.750 | % | 550,000 |  |  | — |
Unamortized issuance costs |  |  |  |  | (17,471 | ) |  | (12,811 | )
Total senior notes |  |  |  |  | $ | 1,782,529 |  |  | $ | 1,237,189 |
The indenture governing the 2023 Senior Notes contains covenants that limit the ability of the Company and/or its restricted subsidiaries, under certain circumstances, to, among other things: (i) pay dividends or make distributions on, or redeem or repurchase, its capital stock; (ii) make certain investments; (iii) create liens on assets; (iv) enter into sale/leaseback transactions and (v) merge or consolidate or sell all or substantially all of its assets. These covenants are subject to a number of important limitations and exceptions. The Indenture also provides for events of default, which, if any of them occurs, may permit or, in certain circumstances, require the principal, premium, if any, accrued and unpaid interest and any other monetary obligations on all the then outstanding Notes to be due and payable immediately. The Company has remained in compliance with these covenants and no events of default have occurred over the term of the Notes. 2015 Credit Facility On March 31, 2015, the Company entered into a credit agreement for a $200.0 million committed senior unsecured revolving credit facility (the “2015 Credit Facility”). The 2015 Credit Facility includes financial covenants requiring that the Company’s interest coverage ratio not be less than 3.0 to 1.0 for any period of four consecutive quarters and the Company’s leverage ratio not exceed 2.5 to 1.0. As of December 31, 2017, there were no borrowings outstanding under the facility and the Company was in compliance with the financial covenants. The 2015 Credit Facility expires on April 1, 2020 at which time any outstanding borrowings are due. Verisign may from time to time request lenders to agree on a discretionary basis to increase the commitment amount by up to an aggregate of $150.0 million. Subordinated Convertible Debentures In August 2007, Verisign issued $1.25 billion principal amount of 3.25% subordinated convertible debentures due August 15, 2037, in a private offering. The Subordinated Convertible Debentures are initially convertible, subject to certain conditions, into shares of the Company’s common stock at a conversion rate of 29.0968 shares of common stock per $1,000 principal amount of Subordinated Convertible Debentures, representing an initial effective conversion price of approximately $34.37 per share of common stock. The Company’s common stock price exceeded the current conversion price threshold trigger of $44.68 during the fourth quarter of 2017. Accordingly, the Subordinated Convertible Debentures were convertible at the option of each holder during the first quarter of 2018. Further, in the event of conversion, the Company intends, and has the ability, to settle the principal amount of the Subordinated Convertible Debentures in cash, and therefore, classified the debt component of the Subordinated Convertible Debentures, net of unamortized debt issuance costs as a current liability, as of December 31, 2017. As of December 31, 2017, the if-converted value of the Subordinated Convertible Debentures exceeded its principal amount. Based on the if-converted value of the Subordinated Convertible Debentures as of December 31, 2017, the conversion spread could have required the Company to issue up to an additional 25.4 million shares of common stock. At issuance, the Company calculated the carrying value of the liability component as the present value of its cash flows using a discount rate of 8.5% (borrowing rate for similar non-convertible debt with no contingent payment options), adjusted for the fair value of the contingent interest feature, yielding an effective interest rate of 8.39%. The excess of the principal amount of the debt over the carrying value of the liability component is also referred to as the “debt discount” or “equity component” of the Subordinated Convertible Debentures. The debt discount has been amortized using the Company’s effective interest rate of 8.39% over the 30 year term of the Subordinated Convertible Debentures as a non-cash charge included in Interest expense. Interest is paid semiannually in arrears on August 15 and February 15. Proceeds upon issuance of the Subordinated Convertible Debentures were as follows (in thousands):
Principal value of Subordinated Convertible Debentures |  | $ | 1,250,000 |
Less: Issuance costs |  | (25,777 | )
Net proceeds, Subordinated Convertible Debentures |  | $ | 1,224,223 |
Amounts recognized at issuance: |  |
Subordinated Convertible Debentures, including contingent interest derivative (net of issuance costs of $11,328) |  | $ | 546,915 |
Additional paid-in capital |  | 418,996 |
Long-term deferred tax liabilities |  | 267,225 |
Non-operating loss |  | (8,913 | )
Net proceeds, Subordinated Convertible Debentures |  | $ | 1,224,223 |
The table below presents the carrying amounts of the liability and equity components:
| As of December 31,
| 2017 |  | 2016
| (In thousands)
Debt discount upon issuance (net of issuance costs of $14,449) | $ | 686,221 |  |  | $ | 686,221 |
Deferred taxes associated with the debt discount upon issuance | (267,225 | ) |  | (267,225 | )
Carrying amount of equity component | $ | 418,996 |  |  | $ | 418,996 |
Principal amount of Subordinated Convertible Debentures | $ | 1,250,000 |  |  | $ | 1,250,000 |
Unamortized discount of liability component | (612,303 | ) |  | (624,315 | )
Unamortized debt issuance costs associated with the liability component | (10,081 | ) |  | (10,260 | )
Carrying amount of liability component | 627,616 |  |  | 615,425 |
Contingent interest derivative | — |  |  | 14,339 |
Subordinated Convertible Debentures, including contingent interest derivative | $ | 627,616 |  |  | $ | 629,764 |
The Company evaluated its debt obligations, including the Subordinated Convertible Debentures subsequent to the enactment of the Tax Act which lowers the U.S. federal income tax rate and imposes a new limitation on interest deductibility for tax purposes. On February 15, 2018, the Company called for the redemption of all of the outstanding Subordinated Convertible Debentures. The debentures will be redeemed on May 1, 2018 at a redemption price equal to 100% of the principal, plus accrued but unpaid interest up to, but not including, the redemption date. The Subordinated Convertible Debentures called for redemption may be converted at any time before the close of business on Monday, April 30, 2018. If holders elect to convert their debentures, the Company intends to settle the $1.25 billion principal value in cash, and the excess value will be settled in shares of the Company’s stock. The following table presents the components of the Company’s interest expense:
| Year Ended December 31,
2017 |  | 2016 |  | 2015
| (In thousands)
Contractual interest on Subordinated Convertible Debentures | $ | 47,432 |  |  | $ | 40,625 |  |  | $ | 40,625 |
Contractual interest on Senior Notes | 73,638 |  |  | 60,938 |  |  | 54,667 |
Amortization of debt discount on the Subordinated Convertible Debentures | 12,012 |  |  | 11,094 |  |  | 10,218 |
Amortization of debt issuance costs and other interest expense | 3,254 |  |  | 2,907 |  |  | 2,121 |
Total interest expense | $ | 136,336 |  |  | $ | 115,564 |  |  | $ | 107,631 |

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
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