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Borrowings and Credit Arrangements | 9 Months Ended
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Jun. 27, 2015
Debt Disclosure [Abstract] |
Borrowings and Credit Arrangements | Borrowings and Credit Arrangements The Company’s borrowings consisted of the following:
| June 27, 2015 |  | September 27, 2014
Current debt obligations, net of debt discount: |  |  |
Term Loan | 74.7 |  |  | — |
Revolver | 175.0 |  |  | — |
Term Loan A | — |  |  | 99.6 |
Term Loan B | — |  |  | 14.9 |
Convertible Notes | 421.8 |  |  | — |
Total current debt obligations | 671.5 |  |  | 114.5 |
Long-term debt obligations, net of debt discount: |  |  |
Term Loan | 1,418.1 |  |  | — |
Term Loan A | — |  |  | 796.7 |
Term Loan B | — |  |  | 1,120.9 |
Senior Notes | 1,000.0 |  |  | 1,000.0 |
Convertible Notes | 852.7 |  |  | 1,235.6 |
Total long-term debt obligations | 3,270.8 |  |  | 4,153.2 |
Total debt obligations | 3,942.3 |  |  | 4,267.7 |
The debt maturity schedule for the Company's obligations as of June 27, 2015 was as follows:
| Remainder 2015 |  | 2016 |  | 2017 |  | 2018 |  | 2019 |  | 2020 and Thereafter |  | Total
Term Loan | $ | 18.7 |  |  | $ | 75.0 |  |  | $ | 84.4 |  |  | $ | 121.9 |  |  | $ | 150.0 |  |  | $ | 1,050.0 |  |  | $ | 1,500.0 |
Revolver | — |  |  | 175.0 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 175.0 |
Senior Notes | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,000.0 |  |  | 1,000.0 |
Convertible Notes (1) | 450.0 |  |  | — |  |  | — |  |  | 906.4 |  |  | — |  |  | — |  |  | 1,356.4 |
| $ | 468.7 |  |  | $ | 250.0 |  |  | $ | 84.4 |  |  | $ | 1,028.3 |  |  | $ | 150.0 |  |  | $ | 2,050.0 |  |  | $ | 4,031.4 |
(1) Classified based on the earliest date of redemption for each respective issuance with the exception of the 2010 Notes which are convertible by their respective holders as further discussed below. In addition, the balance in fiscal 2018 reflects accretion on the 2013 Notes through June 27, 2015. Credit Agreement On May 29, 2015, the Company entered into a Credit and Guaranty Agreement (the “Credit Agreement”) with Bank of America, N.A., in its capacity as Administrative Agent, Swing Line Lender and L/C Issuer, and certain other lenders party thereto (collectively, the "Lenders"). This Credit Agreement replaced the Company's existing senior secured credit facility with Goldman Sachs Bank USA, in its capacity as administrative and collateral agent and the lenders party thereto ("Prior Credit Agreement") entered into on August 1, 2012, and the proceeds under the Credit Agreement of $1.68 billion were used to pay off the amounts outstanding under the Prior Credit Agreement. The credit facilities under the Credit Agreement consist of:
• | A $1.5 billion secured term loan to Hologic with a final maturity date of May 29, 2020 (the “Term Loan”); and
• | A secured revolving credit facility under which the Borrowers (as defined below) may borrow up to $1 billion, subject to certain sublimits, with a final maturity date of May 29, 2020 (the “Revolver”).
Hologic and one of its subsidiaries, Hologic GGO 4 Ltd ("Hologic U.K.") are the initial borrowers (the “Borrowers”) under the Credit Agreement. Hologic’s obligations under the Credit Agreement are guaranteed by certain of Hologic's domestic subsidiaries (the "Subsidiary Guarantors"). Hologic U.K.’s obligations under the Credit Agreement are guaranteed by Hologic and the Subsidiary Guarantors. In addition to the Term Loan, the Company borrowed $175.0 million under the Revolver. Borrowings under the Revolver may be made in certain alternative currencies pursuant to the terms of the Credit Agreement. The Company has the ability, subject to the terms of the Credit Agreement, to designate any additional wholly-owned foreign subsidiary of Hologic as a Designated Borrower (as defined in the Credit Agreement) to receive loans up to a $100 million sublimit. The obligations of any Designated Borrower under such sublimit would be guaranteed by Hologic and the Subsidiary Guarantors. Borrowings under the Credit Facilities bear interest, at the Company's option and in each case plus an applicable margin, as follows:
• | Term Loan: the Base Rate (as defined in the Credit Agreement) or the Eurocurrency Rate (i.e., the Libor rate); and
• | Revolver: if funded in U.S. Dollars, the Base Rate or the Eurocurrency Rate, and, if funded in an alternative currency, the Eurocurrency Rate; and if requested under the swing line sublimit, the Base Rate.
The applicable margin to the Base Rate and the Eurocurrency Rate is subject to specified changes depending on the total net leverage ratio as defined in the Credit Agreement. Current borrowings outstanding under the Credit Agreement bear interest at the Eurocurrency Rate plus the applicable margin of 1.75% per annum. The Company is also required to pay a quarterly commitment fee on the undrawn committed amount available under the Revolver. The Company is required to make scheduled principal payments under the Term Loan in increasing amounts ranging from $18.75 million per three-month period commencing with the three-month period ending on September 25, 2015 to $37.5 million per three-month period commencing with the three-month period ending on September 28, 2018. The remaining balance of the Term Loan is due at maturity. Any amounts outstanding under the Revolver are due at maturity. In addition, subject to the terms and conditions set forth in the Credit Agreement, the Company is required to make certain mandatory prepayments from specified excess cash flows from operations (to the extent the Company’s net senior secured leverage ratio exceeds a certain ratio) and from the net proceeds of specified types of asset sales (subject to certain reinvestment rights), debt issuances and insurance recoveries (subject to certain reinvestment rights) (“Mandatory Prepayments”). Mandatory Prepayments are required to be applied by the Company, first, to the Term Loan, second, to any outstanding amount under the swing line sublimit, third, to the Revolver, and fourth to any outstanding amount under a letter of credit sublimit. Subject to certain limitations, the Company may voluntarily prepay any of the credit facilities under the Credit Agreement without premium or penalty. Borrowings outstanding under the Credit Agreement and the Prior Credit Agreement for the three and nine months ended June 27, 2015 had weighted-average interest rates of 2.39% and 2.59%, respectively. The interest rate on the outstanding Term Loan borrowing at June 27, 2015 was 1.94%. Interest expense under the Credit Agreement and Prior Credit Agreement aggregated $12.8 million and $44.7 million for the three and nine months ended June 27, 2015, respectively, which includes non-cash interest expense of $2.2 million and $8.0 million related to the amortization of the deferred issuance costs and accretion of the debt discount, respectively. Interest expense totaled $17.9 million and $57.5 million for the three and nine months ended June 28, 2014, respectively, which includes non-cash interest expense of $3.1 million and $9.6 million related to the amortization of the deferred issuance costs and accretion of the debt discount, respectively. The Credit Agreement contains affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenants restricting the ability of the Borrowers and the Subsidiary Guarantors, subject to negotiated exceptions, to incur additional indebtedness and additional liens on their assets, engage in mergers or acquisitions or dispose of assets, enter into sale-leaseback transactions, pay dividends or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments, and change the nature of their businesses. The Credit Agreement also contains customary representations and warranties and events of default, including payment defaults, breach of representations and warranties, covenant defaults, cross defaults and an event of default upon a change of control of the Company. Borrowings are secured by first-priority liens on, and a first-priority security interest in, substantially all of the assets of the Company, with certain exceptions. The Credit Agreement contains total net leverage ratio and interest coverage ratio financial covenants measured as of the last day of each fiscal quarter. The total net leverage ratio is 5.50:1.00 beginning on the Company's fiscal quarter ending September 26, 2015, and then decreases over time to 4.00:1.00 for the quarter ending March 28, 2020. The interest coverage ratio is 3.75:1.00 beginning on the Company's fiscal quarter ending September 26, 2015, and will remain as such for each quarter thereafter. The total net leverage ratio is defined as the ratio of the Company's consolidated net debt as of the quarter end to its consolidated adjusted EBITDA (as defined in the Credit Agreement) for the four-fiscal quarter period ending on the measurement date. The interest coverage ratio is defined as the ratio of the Company's consolidated adjusted EBITDA for the prior four-fiscal quarter period ending on the measurement date to adjusted consolidated cash interest expense for the same measurement period. These terms, and the calculation thereof, are defined in further detail in the Credit Agreement. Although the covenant calculations were not required as of June 27, 2015, the Company would have been in compliance. The Company has evaluated the Credit Agreement for derivatives pursuant to ASC 815, Derivatives and Hedging, and identified embedded derivatives that require bifurcation as the features are not clearly and closely related to the host instrument. The embedded derivatives are a default provision, which could require additional interest payments, and a provision requiring contingent payments to compensate the lenders for changes in tax deductions. The Company has determined that the fair value of these embedded derivatives was nominal as of June 27, 2015. Pursuant to ASC 470, Debt (ASC 470), the accounting for the Credit Agreement was evaluated on a creditor-by-creditor basis with regard to the Prior Credit Agreement to determine whether each transaction should be accounted for as a modification or extinguishment. Certain creditors under the Prior Credit Agreement did not participate in this refinancing transaction and ceased being creditors of the Company. As a result, the Company recorded a debt extinguishment loss of $18.2 million in the third quarter of fiscal 2015 to write-off the pro-rata amount of unamortized debt discount and deferred issuance costs related to these creditors. For the remainder of the creditors, this transaction has been accounted for as a modification because on a creditor-by-creditor basis the present value of the cash flows between the two debt instruments before and after the transaction was less than 10%. Pursuant to ASC 470, subtopic 50-40, third-party costs of $4.6 million related to this transaction were recorded as interest expense and $3.8 million were recorded as deferred issuance costs to be amortized over the term of the agreement. In addition, fees paid directly to the Lenders of $4.9 million were recorded as a debt discount. Prior Credit Agreement On December 24, 2014, the Company voluntarily pre-paid $300.0 million of its Term Loan B facility. Pursuant to ASC 470, the Company recorded a debt extinguishment loss of $6.7 million in the first quarter of fiscal 2015 to write-off the pro-rata amount of unamortized debt discount and deferred issuance costs related to this voluntary prepayment. On October 31, 2013, the Company voluntarily pre-paid $100.0 million of its Term Loan B facility, which was reflected in current debt obligations as of September 28, 2013. Pursuant to ASC 470, the Company recorded a debt extinguishment loss of $3.0 million in the first quarter of fiscal 2014 to write-off the pro-rata amount of unamortized debt discount and deferred issuance costs related to this voluntary prepayment. During the second quarter of fiscal 2014, the Company, the Guarantors, Goldman Sachs, and the Lenders entered into Refinancing Amendment No. 3 to the Prior Credit Agreement and reduced the applicable interest rates. In connection with this refinancing, the Company voluntarily prepaid $25.0 million of the new senior secured tranche B term loan facility (the "Amended Term Loan B"). Pursuant to ASC 470, the accounting for this refinancing was evaluated on a creditor-by-creditor basis to determine whether each transaction should be accounted for as a modification or extinguishment. Certain creditors under the Prior Credit Agreement did not participate in this refinancing transaction and ceased being creditors of the Company. As a result, the Company recorded a debt extinguishment loss of $4.4 million in the second quarter of fiscal 2014 to write-off the pro-rata amount of unamortized debt discount and deferred issuance costs related to these creditors. For the remainder of the creditors, this transaction was accounted for as a modification because on a creditor-by-creditor basis the present value of the cash flows between the two debt instruments before and after the transaction was less than 10%. Pursuant to ASC 470, subtopic 50-40, third-party costs of $1.0 million related to this transaction were recorded to interest expense. Senior Notes As of June 27, 2015, the Company had outstanding $1.0 billion of 6.25% senior notes due 2020 (the “Senior Notes”). The Senior Notes had a maturity date of August 1, 2020 and bore interest at the rate of 6.25% per year, payable semi-annually on February 1 and August 1 of each year, commencing on February 1, 2013. The Company recorded interest expense of $16.0 million and $48.0 million in both the three and nine month periods ended June 27, 2015 and June 28, 2014, respectively, which includes non-cash interest expense of $0.4 million and $1.2 million in both the three and nine month periods ended June 27, 2015 and June 28, 2014, respectively, related to the amortization of the deferred issuance costs. On July 2, 2015, the Company completed a private placement of $1.0 billion aggregate principal amount of its 5.250% Senior Notes due 2022 (the “2022 Notes”) at an offering price of 100% of the aggregate principal amount of the 2022 Notes. The 2022 Notes mature on July 15, 2022 and bear interest at the rate of 5.250% per year, payable semi-annually on January 15 and July 15 of each year, commencing on January 15, 2016. The Company used the net proceeds of the 2022 Notes, plus available cash to discharge the outstanding Senior Notes and will redeem such Senior Notes, in the aggregate principal amount of $1.0 billion on August 1, 2015 at an aggregate redemption price of $1.03125 billion, reflecting a premium payment of $31.25 million. In addition, the Company will make a final interest payment in the amount of $31.25 million for interest accrued to August 1, 2015, to holders of record of the Senior Notes as of July 15, 2015. As a result of this transaction, the Company will record a debt extinguishment loss in the fourth quarter of fiscal 2015, which will include the premium payment and pro-rata debt issuance costs. Debt issuance costs related to the Senior Notes were $8.4 million as of June 27, 2015. The Company is required to evaluate the accounting under ASC 470 at the creditor-by-creditor level to determine modification versus extinguishment accounting. The 2022 Notes were not registered, and will not registered, under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws, and were offered only to qualified institutional buyers in reliance on Rule 144A under the Securities Act and outside the United States in accordance with Regulation S under the Securities Act. The 2022 Notes are general senior unsecured obligations of the Company and are guaranteed on a senior unsecured basis by certain domestic subsidiaries of Hologic (the “Guarantors”). The 2022 Notes were issued pursuant to an indenture (the "Indenture"), dated as of July 2, 2015, among the Company, the Guarantors and Wells Fargo Bank, National Association, as trustee. The Indenture contains covenants which limit, among other things, the ability of the Company and the Guarantors to incur additional indebtedness and additional liens on their assets, engage in mergers or acquisitions or dispose of assets, pay dividends or make other distributions, enter into certain transactions with affiliated persons and to make certain investments. These covenants are subject to a number of exceptions and qualifications, including the suspension of certain of these covenants upon the 2022 Notes receiving an investment grade credit rating. The Company is not required to maintain any financial covenants with respect to the 2022 Notes. The Company may redeem the 2022 Notes at any time prior to July 15, 2018 at a price equal to 100% of the aggregate principal amount so redeemed, plus accrued and unpaid interest, if any, to the redemption date and a make-whole premium set forth in the Indenture. The Company may also redeem up to 35% of the aggregate principal amount of the 2022 Notes with the net cash proceeds of certain equity offerings at any time and from time to time before July 15, 2018, at a redemption price equal to 105.250% of the aggregate principal amount so redeemed, plus accrued and unpaid interest, if any, to the redemption date. The Company also has the option to redeem the 2022 Notes on or after: July 15, 2018 through July 14, 2019 at 102.625% of par; July 15, 2019 through July 14, 2020 at 101.313% of par; and July 15, 2020 and thereafter at 100% of par. In addition, if the Company undergoes a change of control, as provided in the Indenture, the Company will be required to make an offer to purchase each holder’s 2022 Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the repurchase date. Convertible Notes During the third quarter of fiscal 2015, the closing price of the Company's common stock exceeded 130% of the applicable conversion price of its 2010 Notes on at least 20 of the last 30 consecutive trading days of the quarter; therefore, holders of 2010 Notes may convert their notes during the fourth quarter of fiscal 2015. As such, the Company classified the $421.8 million carrying value of its 2010 Notes (which have a principal value of $450.0 million) as a current debt obligation. In the event the closing price conditions are met in the fourth quarter of fiscal 2015 or a future fiscal quarter, the 2010 Notes will be convertible at a holder's option during the immediately following fiscal quarter. As of June 27, 2015, the if-converted value of the 2010 Notes exceeded the aggregate principal amount by approximately $296.2 million. It is the Company's current intent and policy to settle any conversion of the Convertible Notes as if the Company had elected to make either a net share settlement or all cash election, such that upon conversion, the Company intends to pay the holders in cash for the principal amount of the 2010 Notes and, if applicable, shares of its common stock or cash to satisfy the premium based on a calculated daily conversion value. Interest expense under the Convertible Notes is as follows:
| Three Months Ended |  | Nine Months Ended
| June 27, 2015 |  | June 28, 2014 |  | June 27, 2015 |  | June 28, 2014
Amortization of debt discount | $ | 9.2 |  |  | $ | 8.5 |  |  | $ | 27.0 |  |  | $ | 28.4 |
Amortization of deferred financing costs | 0.4 |  |  | 0.4 |  |  | 1.3 |  |  | 1.5 |
Principal accretion | 4.0 |  |  | 3.9 |  |  | 11.9 |  |  | 11.4 |
Non-cash interest expense | 13.6 |  |  | 12.8 |  |  | 40.2 |  |  | 41.3 |
2.00% accrued interest (cash) | 4.7 |  |  | 4.7 |  |  | 14.2 |  |  | 17.6 |
| $ | 18.3 |  |  | $ | 17.5 |  |  | $ | 54.4 |  |  | $ | 58.9 |

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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 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 19, 20, 22 -Article 5 + Details
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