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Borrowings and Lines of Credit | 12 Months Ended
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Dec. 31, 2016
Debt Disclosure [Abstract] |
Borrowings and Lines of Credit | 12. Borrowings Borrowings (net of debt issuance costs, debt discount and amortization) consist of the following:
(in millions) | December 31, 2016 |  | December 31, 2015
3.25% Convertible Senior Notes | $ | 135.1 |  |  | $ | — |
Term loan and revolving credit facility | 163.1 |  |  | 428.8 |
Total | 298.2 |  |  | 428.8 |
Less: current maturities | 9.7 |  |  | 29.6 |
Total long-term debt | $ | 288.5 |  |  | $ | 399.2 |
Total debt principal payments over the next five years are as follows:
(in millions) | 2017 |  | 2018 |  | 2019 |  | 2020 |  | 2021
Debt principal payments (1) | $ | 10.8 |  |  | $ | 14.4 |  |  | $ | 138.3 |  |  | $ | — |  |  | $ | 172.5 |
(1) There are no required principal payments due under the 3.25% Convertible Senior Notes ("Notes") or the revolving credit facility until maturities in November 2021 and January 2019, respectively. 3.25% Convertible Senior Notes Due November 1, 2021 In May 2016, the Company issued $172.5 million aggregate principal amount of 3.25% convertible senior notes due November 1, 2021, unless earlier repurchased by the Company or converted pursuant to their terms. Interest is payable semiannually in arrears on May 1 and November 1 of each year and commenced on November 1, 2016. The Notes are governed by an Indenture (the "Indenture") between the Company, as issuer, and U.S. Bank National Association as trustee. Upon conversion, the Company will pay or deliver cash, shares of the Company's common stock or a combination of cash and shares of common stock, at the Company's election. The initial conversion rate is 54.2741 shares of common stock per $1,000 principal amount of Notes. The initial conversion price is $18.4250 per share of common stock. The conversion rate will be subject to adjustment upon the occurrence of certain specified events but will not be adjusted for accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change (as defined in the Indenture), the Company may be required, in certain circumstances, to increase the conversion rate by a number of additional shares for a holder that elects to convert its Notes in connection with such make-whole fundamental change. Prior to the close of business on the business day immediately preceding August 1, 2021, the Notes will be convertible only under the following circumstances:
= | during any 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 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;
= | 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 was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; or upon the occurrence of specified corporate events.
On or after August 1, 2021 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 Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances. A s of December 31, 2016, no event has occurred that would permit the conversion of the Notes. The Notes are the Company’s senior unsecured obligations. In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components. The carrying amount of the liability component of $36.6 million was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component of $29.9 million representing the conversion option was determined by deducting the fair value of the liability component from the face value of the Notes as a whole. The excess of the principal amount of the liability component over its carrying amount is amortized to interest expense over the term of the Notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. In accounting for the transaction costs related to the Note issuance, the Company allocated the total amount incurred to the liability and equity components based on their relative values. Issuance costs attributable to the liability component, $5.0 million, are being amortized to expense over the term of the Notes, and issuance costs attributable to the equity component, totaling $1.3 million, were netted with the equity component in stockholders' equity. Additionally, the Company recorded a deferred tax asset of $0.5 million on a portion of the equity component transaction costs which are deductible for tax purposes and immediately recorded a valuation allowance against this deferred tax asset. The Notes consist of the following:
(in millions) | December 31, 2016
Liability component: |
Principal | $ | 172.5 |
Less: debt issuance costs, debt discount, net of amortization | (37.4 | )
Total | 135.1 |
Less: current maturities(1) | (0.9 | )
Long-term portion | $ | 136.0 |
Equity component (2) | $ | 29.9 |
(1) No short-term principal with $0.9 million of short-term debt issuance costs. (2) Recorded in the consolidated balance sheets within additional paid-in capital, inclusive of the $1.3 million of issuance costs in equity. The total estimated fair value of the Notes at December 31, 2016 was $202.6 million. The fair value was determined based on the closing trading price of the Notes as of the last trading day of 2016. The following table sets forth total interest expense recognized related to the Notes:
| Year Ended December 31,
(in millions) | 2016
3.25% coupon | $ | 3.7 |
Amortization of debt issuance costs | 0.6 |
Amortization of debt discount | 3.6 |
Total | $ | 7.9 |
Note Hedges To minimize the impact of potential economic dilution upon conversion of the Notes, the Company entered into convertible note hedge transactions (the “Note Hedges”) with respect to its common stock. In the second quarter of 2016, the Company paid an aggregate amount of $44.5 million for the Note Hedges. The Note Hedges will expire upon maturity of the Notes. The Note Hedges are intended to offset the potential dilution upon conversion of the Notes and/or offset any cash payments the Company is required to make in excess of the principal amount upon conversion of the Notes in the event that the market value per share of the Company's common stock, as measured under the Note Hedges, is greater than the strike price of $18.4250. This strike price corresponds to the initial conversion price of the Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the Notes. The Note Hedges are separate transactions entered into by the Company, and are not part of the Notes or the Warrants, and have been accounted for as part of additional paid-in capital. Holders of the Notes do not have any rights with respect to the Note Hedges. Warrants In addition to the Note Hedges, in the second quarter of 2016, the Company entered into warrant transactions, whereby the Company sold warrants (the “Warrants”) to acquire shares of the Company's common stock at a strike price of $21.1050 per share. The Company received aggregate proceeds of $39.1 million from the sale of the Warrants. If the market price per share of the Company's common stock for the reporting period, as measured under the Warrants, exceeds the strike price of the Warrants, the shares issued and sold pursuant to the Warrants could have a dilutive effect on the Company's common stock, unless the Company elects, subject to certain conditions, to settle the Warrants in cash. The Warrants are separate transactions entered into by the Company, and are not part of the Notes or the Note Hedges, and have been accounted for as part of additional paid-in capital. Holders of the Notes and Note Hedges do not have any rights with respect to the Warrants. Term Loan and Revolving Credit Facility Term loan and revolving credit facility borrowings consist of the following:
(in millions) | December 31, 2016 |  | December 31, 2015
Term loan due January 2019 | $ | 118.5 |  |  | $ | 285.0 |
$300.0 million revolving credit facility due January 2019 | 45.0 |  |  | 145.0 |
Less: debt issuance costs, net of amortization | (0.4 | ) |  | (1.2 | )
Total | 163.1 |  |  | 428.8 |
Less: current maturities (1) | 10.6 |  |  | 29.6 |
Long-term portion | $ | 152.5 |  |  | $ | 399.2 |
(1) Inclusive of $0.2 million of short-term debt issuance costs. The $300.0 million five-year senior secured revolving credit facility, as well as a five-year senior secured term loan facility, which are referred to collectively as the "Credit Facilities," includes requirements, to be tested quarterly, that the Company maintains (i) a minimum ratio of Consolidated EBITDA to consolidated interest expense of 3.25 to 1.0, (the "Interest Coverage Ratio"), (ii) a maximum ratio of Consolidated total indebtedness to Consolidated EBITDA of 3.75 to 1.0 ("the Leverage Ratio") and (iii) a maximum ratio of senior secured indebtedness to Consolidated EBITDA of 3.25 to 1.0 (the "Senior Secured Leverage Ratio"). For these ratios, Consolidated EBITDA and consolidated interest expense are calculated using the most recent four consecutive fiscal quarters in a manner defined in the credit agreement governing the Credit Facilities. At December 31, 2016, the Company was in compliance with these covenants and it expects to remain in compliance with all of its debt covenants over the next twelve months. On January 27, 2014, the Company entered into a $200.0 million five-year senior secured revolving credit facility, as well as a $300.0 million five-year senior secured term loan facility pursuant to the Original Credit Agreement. In connection with the Separation from Dover, the Company incurred $100.0 million of borrowings under the revolving credit facility and $300.0 million of borrowings under the term loan facility, in each case to finance a cash payment to Dover immediately prior to the Separation. On December 31, 2014, the Company amended its Credit Facilities to (i) increase the amount of the revolving credit facility in the Original Credit Agreement to $350.0 million from $200.0 million, (ii) increase the amount of the letter of credit subfacility in the Original Credit Agreement to $50.0 million from $25.0 million, (iii) eliminate the swing line subfacility in the amount of up to $35.0 million in the Original Credit Agreement and (iv) reduce to $100.0 million from $250.0 million the amount of additional incremental revolving or term loans in the Original Credit Agreement. All other terms and conditions of the Credit Facilities remained essentially the same. On July 1, 2015, the Company amended its Credit Facilities to facilitate its ability to consummate the Audience acquisition, which became effective upon the closing of the transaction. The amendment, among other things (i) amended the definition of “Consolidated EBITDA” in the credit agreement to allow the Company to make certain adjustments attributable to cash items in excess of the 15% cap set forth therein for any fiscal quarter occurring in the fiscal year 2014 (except with regard to calculating the leverage ratio for purposes of determining the interest rate under the facilities), (ii) provided that pro forma calculations with respect to the acquisition (except with regard to calculating the leverage ratio for purposes of determining the interest rate under the facilities) shall disregard the consolidated EBITDA attributable to Audience for all periods prior to the first day of the first fiscal quarter following the acquisition and (iii) provided that all calculations as to whether the acquisition is a “Permitted Acquisition” under the credit agreement will be made as of the date of the agreement, but after giving effect to the amendment. All other terms and conditions of the Credit Facilities remained essentially the same. On November 19, 2015, the Company entered into a second amendment to its Credit Facilities in which it amended the definition of “change in control” to allow the incumbent board to approve a slate of directors. On February 9, 2016, the Company entered into a third amendment to its Credit Facilities. The third amendment, among other things, amended the definition of “Consolidated EBITDA” in the Credit Facilities to allow adjustments for (i) the amount by which consolidated net income has been reduced by net losses attributable to the "Speaker and Receiver Discontinued Operations" (defined as the operations (including assets held for sale) comprising the speaker and receiver product line) for any fiscal quarter ended on or prior to December 31, 2016 and (ii) cash costs and expenses incurred in connection with the Speaker and Receiver Discontinued Operations on or prior to March 31, 2017, with an aggregate cap on adjustments attributable to such cash costs and expenses of $45.0 million; provided that, in each case, such adjustments to Consolidated EBITDA attributable to the Speaker and Receiver Discontinued Operations are disregarded in calculating the Leverage Ratio for purposes of determining the Applicable Rate (as defined in the Credit Facilities). The third amendment also includes permanent reduction by the Company of the aggregate revolving commitment under the Credit Facilities from $350.0 million to $300.0 million. On April 27, 2016, the Company entered into a fourth amendment to its Credit Facilities in connection with the Company's offering of the Notes. The fourth amendment, among other things (i) added language to permit the Company to execute the offering of the Notes and the related transactions, (ii) amended the requirement of the Leverage Ratio for it not to exceed 3.75 to 1.0 (previously 3.25 to 1.0) and (iii) added a definition for the Senior Secured Leverage Ratio and set a requirement for it not to exceed 3.25 to 1.0. The interest rate under the Credit Facilities is variable based on LIBOR at the time of the borrowing and the Company's leverage as measured by a total indebtedness to Consolidated EBITDA ratio. Based upon the Company's total indebtedness to Consolidated EBITDA ratio, the Company's borrowing rate could range from LIBOR + 1.25% to LIBOR + 2.25%. In addition, a commitment fee accrues on the average daily unused portion of the revolving facility at a rate of 0.2% to 0.4%. The weighted-average interest rate on the Company's borrowings under the Credit Facilities was 3.23% and 2.32% for the years ended December 31, 2016 and 2015, respectively. The weighted-average interest rate on the Company's borrowings under the Credit Facilities for the year ended December 31, 2016 includes interest expense related to the monthly interest rate swap settlements. The weighted-average commitment fee on the revolving line of credit was 0.39% and 0.38% for the years ended December 31, 2016 and 2015, respectively. Interest expense and interest income for the years ended December 31, 2016, 2015 and 2014 were as follows:
| Years Ended December 31,
(in millions) | 2016 |  | 2015 |  | 2014
Interest expense(1) | $ | 20.5 |  |  | $ | 12.8 |  |  | $ | 6.7 |
Interest income | (0.1 | ) |  | (0.1 | ) |  | (0.1 | )
Interest expense, net | $ | 20.4 |  |  | $ | 12.7 |  |  | $ | 6.6 |
(1) The Company wrote off $0.7 million of debt issuance costs to interest expense in connection with the third amendment to its Credit Facilities effective on February 9, 2016. See Note 11. Hedging Transactions and Derivative Instruments for information on derivatives used to manage interest rate risk.

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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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