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Debt | 3 Months Ended
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Apr. 03, 2021
Debt |
Debt | 6. Debt ​ 0.625% Convertible Senior Notes ​ On June 1, 2020, the Company completed a private offering of $535 million principal amount convertible senior notes (the “2025 Notes”). The 2025 Notes bear interest semi-annually at a rate of 0.625% per year and mature on June 15, 2025. ​ The 2025 Notes are convertible at an initial conversion rate of 8.1498 shares of common stock per $1,000 principal amount of the 2025 Notes, or approximately 4.4 million shares of common stock, which is equivalent to a conversion price of approximately $122.70 per share. The conversion rate is subject to adjustment under certain circumstances. Holders may convert the 2025 Notes under the following circumstances: during any calendar quarter after the calendar quarter ended on September 30, 2020 if the closing price of the Company’s common stock for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding calendar quarter is greater than or equal to $159.51 per share, representing 130% of the conversion price of the 2025 Notes; during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the closing sale price of our common stock and the conversion rate on each such trading day; if specified distributions or corporate events occur; if the Notes are called for redemption; or at any time after March 15, 2025. The Company may redeem all or any portion of the 2025 Notes, at its option, on or after June 20, 2023, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period. Upon conversion, the 2025 Notes may be settled in cash, shares of the Company’s common stock or a combination of cash and shares, at the Company’s election. ​ The Company incurred debt issuance costs of approximately $10.4 million, which was allocated to the liability and equity components in proportion to the allocation of the proceeds. The costs allocated to the liability component are being amortized as interest expense over the term of the 2025 Notes using the effective interest method. ​ 1.375% Convertible Senior Notes ​ On March 6, 2017, the Company completed a private offering of $400 million principal amount convertible senior notes (the “2022 Notes”). The Notes bore interest semi-annually at a rate of 1.375% per year and were scheduled to mature on March 1, 2022. ​ On January 6, 2021, the Company issued a notice of redemption for the remaining $140.6 million principal amount of the 2022 Notes. Prior to the redemption, the Company received conversion notices representing $130.4 million principal amount of the notes. The Company paid $130.4 million in cash and issued 528,022 shares of common stock for the conversions. Notes representing $10.2 million principal amount were redeemed at par, plus accrued interest. All note conversions and redemptions were completed by March 22, 2021. The Company recognized a loss on debt extinguishment of $3.4 million during the three months ended April 3, 2021, which was recorded in interest expense in the Condensed Consolidated Statements of Income. ​ Convertible Debt, Net ​ The principal balances of the 2025 Notes and 2022 Notes (together, the “Notes”) were separated into liability and equity components, and recorded initially at fair value. The excess of the principal amounts of the liability components over their carrying amounts represent the debt discount, which are amortized to interest expense over the term of the Notes using the effective interest method. The carrying amounts of the liability components was estimated by discounting the contractual cash flows of similar non-convertible debt at an appropriate market rate at the date of issuance. ​ 6. Debt (Continued) ​ The carrying amount of the Notes consisted of the following (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | April 3, |  | January 2,
​ | ​ | 2021 | ​ | 2021
Liability component | ​ | ​ |  |  | ​ |
Principal | ​ | $ | 535,000 | ​ | $ | 675,567
Unamortized debt discount | ​ |  | (93,693) | ​ |  | (103,953)
Unamortized debt issuance costs | ​ |  | (7,019) | ​ |  | (8,189)
Net carrying amount | ​ | $ | 434,288 | ​ | $ | 563,425
​ | ​ | ​ | ​ | ​ | ​ | ​
Equity component | ​ |  | ​ | ​ |  | ​
Net carrying amount | ​ | $ | 107,927 | ​ | $ | 108,438
​ The liability components of the Notes are recorded in convertible debt on the Consolidated Balance Sheet. The equity components of the Notes are recorded in additional paid-in capital. The effective interest rate for the liability component was 5.336% for the 2025 Notes and 4.75% for the 2022 Notes. As of April 3, 2021, the remaining period over which the debt discount and debt issuance costs will be amortized was 4.2 years for the 2025 Notes. ​ Interest expense related to the Notes was comprised of the following (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended
​ | ​ | April 3, |  | April 4,
​ |  | 2021 |  | 2020
Contractual interest expense | ​ | $ | 1,163 | ​ | $ | 1,467
Amortization of debt discount | ​ | ​ | 5,938 | ​ |  | 3,246
Amortization of debt issuance costs | ​ | ​ | 518 | ​ |  | 490
​ | ​ | $ | 7,619 | ​ | $ | 5,203
​ Credit Facility ​ The Company and certain of its domestic subsidiaries (the “Guarantors”) have a $400 million revolving credit facility with a maturity date of August 7, 2024. The credit facility includes a $25 million letter of credit sublimit and a $10 million swingline loan sublimit. The Company also has an option to increase the size of the borrowing capacity by up to the greater of an aggregate of $250 million and 100% of EBITDA, plus an amount that would not cause a secured leverage ratio (funded debt secured by assets/EBITDA) to exceed 3.25 to 1.00, subject to certain conditions. ​ The credit facility, other than swingline loans, will bear interest at the Eurodollar rate plus an applicable margin or, at the option of the Company, a base rate (defined as the highest of the Wells Fargo prime rate, the Federal Funds rate plus 0.50% and the Eurodollar Base Rate plus 1.00%) plus an applicable margin. Swingline loans accrue interest at the base rate plus the applicable margin for base rate loans. The applicable margins for the Eurodollar rate loans range from 1.00% to 1.75% and for base rate loans range from 0.00% to 0.75%, depending in each case, on the leverage ratio as defined in the credit facility. ​ The credit facility contains various conditions, covenants and representations with which the Company must be in compliance in order to borrow funds and to avoid an event of default, including financial covenants that the Company must maintain a net leverage ratio (funded indebtedness/EBITDA) of no more than 4.25 to 1, a secured leverage ratio of no more than 3.50 to 1, and a minimum interest coverage ratio (EBITDA/interest payments) of no less than 2.50 to 1. As of April 3, 2021, the Company was in compliance with all covenants of the credit facility. The Company’s obligations under the credit facility are guaranteed by the Guarantors and are secured by a security interest in substantially all assets of the Company and the Guarantors. ​

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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