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Debt | 6 Months Ended
--- | ---
May 31, 2021
Line of Credit Facility [Abstract] |
Debt | Debt As of May 31, 2021, future maturities of the Company's long-term debt were as follows:
(In thousands) | 2026 Notes |  | Credit Facility Maturing in 2024 |  | Total
Remainder of 2021 | $ | — |  |  | $ | 11,288 |  |  | $ | 11,288 |
2022 | — |  |  | 26,338 |  |  | 26,338 |
2023 | — |  |  | 33,863 |  |  | 33,863 |
2024 | — |  |  | 206,937 |  |  | 206,937 |
2025 | — |  |  | — |  |  | — |
2026 | 360,000 |  |  | — |  |  | 360,000 |
Total face value of long-term debt | 360,000 |  |  | 278,426 |  |  | 638,426 |
Unamortized discount and issuance costs | (71,977) |  |  | (1,664) |  |  | (73,641) |
Less current portion of long-term debt, net | — |  |  | (22,005) |  |  | (22,005) |
Long-term debt | $ | 288,023 |  |  | $ | 254,757 |  |  | $ | 542,780 |
Notes Payable Convertible Senior Notes and Capped Calls In April 2021, the Company issued, in a private placement to certain initial purchasers in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act in transactions not involving any public offering, for resale by the initial purchasers to persons whom the initial purchasers believe are qualified institutional buyers pursuant to Rule144A under the Securities Act, Convertible Senior Notes (the "Notes") with an aggregate principal amount of $325 million, due April 15, 2026, unless earlier repurchased, redeemed or converted. The proceeds from the Notes were used or are anticipated to be used for the Capped Call Transactions (described below), working capital, and other general corporate purposes, including acquisitions. There are no required principal payments prior to the maturity of the Notes. In addition, the Company also granted the initial purchasers of the Notes an option to purchase up to an additional $50.0 million aggregate principal amount of the Notes, for settlement within a 13-day period beginning on, and including, April 13, 2021, of which $35 million of additional Notes were purchased for total proceeds of $360 million. The Notes bear interest at an annual rate of 1%, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2021. Proceeds from the Notes:
(In thousands) |
Principal | $ | 360,000 |
Less: issuance costs | (10,804) |
| $ | 349,196 |
Conversion Rights Before January 15, 2026, Noteholders may convert their Notes in the following circumstances: •During any fiscal quarter (and only during such fiscal quarter) commencing after the fiscal quarter ending on May 31, 2021, if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for each of at least twenty trading days (whether or not consecutive) during the thirty consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter; •During the five consecutive business days immediately after any ten consecutive trading day period (the “Measurement Period”), if 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 last reported sale price per share of Company’s common stock on such trading day and the conversion rate on such trading day; or •Upon the occurrence of certain corporate events or distributions on the Company’s common stock, or if the Company calls such Notes for redemption, then the Noteholder of any Note may convert such Note at any time before the close of business on the business day immediately before the related redemption date. From and after January 15, 2026, Noteholders may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. The Company will satisfy its conversion obligations by paying cash up to the aggregate principal amount of Notes to be converted, by issuing shares of its common stock or a combination of cash and shares of its common stock, at its election. The initial conversion rate is 17.4525 shares of common stock per $1,000 principal amount of the Notes, representing an initial conversion price of approximately $57.30 per share of common stock. The conversion rate will be adjusted upon the occurrence of certain events, including spin-offs, tender offers, exchange offers, make-whole fundamental change and certain stockholder distributions. Repurchase Rights On or after April 20, 2024, and on or before the 50th scheduled trading day immediately before the maturity date, the Company may redeem for cash all or part of the Notes, subject to the partial redemption limitation, at a repurchase price equal to 100% of the principal amount, plus accrued and unpaid interest, if the last reported sale price per share of the Company’s common stock exceeded 130% of the conversion price on (1) each of at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides a redemption notice and (2) the trading day immediately before the date the Company sends such notice. Pursuant to the partial redemption limitation, the Company may not elect to redeem less than all of the outstanding Notes unless at least $100.0 million aggregate principal amount of Notes are outstanding and not subject to redemption as of the time it sends the related redemption notice. If certain corporate events that constitute a “fundamental change” (as described below) occur at any time, holders may, subject to certain exceptions, require the Company to purchase their Notes in whole or in part for cash at a price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. A fundamental change relates to events such as business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock. Capped Call Transactions On April 8, 2021, in connection with the pricing of the Notes, the Company entered into privately negotiated capped call transactions (“Capped Call Transactions”) with one or more of the initial purchasers and/or their respective affiliates and/or other financial institutions. The Capped Call Transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the Notes, approximately 6.3 million shares (representing the number of shares of common stock initially underlying the Notes) of the Company’s common stock. The Capped Call Transactions are generally expected to reduce potential dilution to our common stock upon any conversion of Notes and/or offset any potential cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap. The cap price of the Capped Call Transactions will initially be $89.88 per share of common stock, which represents a premium of 100% over the last reported sale price of the common stock of $44.94 per share on April 8, 2021, and is subject to certain adjustments under the terms of the Capped Call Transactions. The cost of the purchased capped calls of $43.1 million was recorded as a reduction to additional paid-in-capital. We elected to integrate the capped call options with the applicable Notes for federal income tax purposes pursuant to applicable U.S. Treasury Regulations. Accordingly, the $43.1 million gross cost of the purchased capped calls will be deductible for income tax purposes as original discount interest over the term of the Notes. We recorded deferred tax assets of $10.6 million with respect to the capped calls which represents the tax benefit of these deductions with an offsetting entry to additional paid-in capital. Accounting for the Notes In accounting for the transaction, the Notes have been separated into liability and equity components. •The conversion option of the Notes does not require bifurcation as an embedded derivative. •The initial carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that does not have an associated conversion feature. The excess of the Notes’ principal amount over the initial carrying amount of the liability component, referred to as the debt discount, is amortized as interest expense over the Notes’ contractual term. •The equity component, which represents the difference between the gross proceeds and the initial liability component, was recorded as an increase to additional paid-in capital and is not remeasured as long as it continues to meet the conditions for equity classification. The Company incurred issuance costs of $10.8 million related to the Notes, allocated between the Notes’ liability and equity components proportionate to the initial carrying amount of the liability and equity components. •Issuance costs attributable to the liability component of $8.9 million are recorded as an offset to the Notes’ principal balance. They are amortized as interest expense using the effective interest method over the contractual term of the Notes. •Issuance costs attributable to the equity component of $1.9 million are recorded as an offset to the equity component in additional paid-in capital and are not amortized. Net carrying amount of the liability component:
(In thousands) | May 31, 2021
Principal | $ | 360,000 |
Conversion option allocated to equity | (64,800) |
Unamortized discount | (7,177) |
| $ | 288,023 |
Net carrying amount of the equity component, included in additional paid-in capital:
(In thousands) | May 31, 2021
Conversion options(1) | $ | 62,855 |
Capped call | (43,056) |
| $ | 19,799 |
(1) Net of issuance costs
Interest expense related to the Notes:
| Three and Six Months Ended
(In thousands) | May 31, 2021 |  | May 31, 2020
Contractual interest expense (1% coupon) | $ | 470 |  |  | $ | — |
Amortization of debt discount(1) | 1,480 |  |  | — |
Amortization of issuance costs(1) | 202 |  |  | — |
| $ | 2,152 |  |  | $ | — |
(1) Amortized based upon an effective interest rate of 5.7%.
Credit Facility Our credit facility provides for a $301.0 million secured term loan and a $100.0 million secured revolving line of credit. The revolving line of credit is available in U.S. Dollars and certain other currencies and may be increased by up to an additional $125.0 million if the existing or additional lenders are willing to make such increased commitments. The revolving line of credit has sublimits for swing line loans up to $25.0 million and for the issuance of standby letters of credit in a face amount up to $25.0 million. The term loan was used to partially fund our acquisition of Ipswitch in April 2019 and we partially funded our acquisition of Chef by drawing down $98.5 million under the revolving line of credit in October 2020 (Note 6). The credit facility matures on April 30, 2024, when all amounts outstanding will be due and payable in full. The revolving line of credit does not require amortization of principal. The outstanding balance of the term loan as of May 31, 2021 was $278.4 million, with $22.6 million due in the next 12 months. The term loan requires repayment of principal at the end of each fiscal quarter, beginning with the fiscal quarter ended August 31, 2019. The principal repayment amounts are in accordance with the following schedule: (i) four payments of $1.9 million each, (ii) four payments of $3.8 million each, (iii) four payments of $5.6 million each, (iv) four payments of $7.5 million each, (v) three payments of $9.4 million each, and (vi) the last payment is of the remaining principal amount. Any amounts outstanding under the term loan thereafter would be due on the maturity date. The term loan may be prepaid before maturity in whole or in part at our option without penalty or premium. As of May 31, 2021, the carrying value of the term loan approximates the fair value, based on Level 2 inputs (observable market prices in less than active markets), as the interest rate is variable over the selected interest period and is similar to current rates at which we can borrow funds. The interest rate as of May 31, 2021 was 1.75%. Costs incurred to obtain our long-term debt of $2.9 million are recorded as debt issuance costs as a direct deduction from the carrying value of the debt liability on our condensed consolidated balance sheets as of May 31, 2021. These costs are being amortized over the term of the debt agreement using the effective interest rate method. Amortization expense related to the debt issuance costs was $0.1 million for each of the three months ended May 31, 2021 and May 31, 2020. Amortization expense related to the debt issuance costs was $0.3 million and for each of the six months ended May 31, 2021 and May 31, 2020. These amounts are recorded in interest expense on our condensed consolidated statements of operations. Revolving loans may be borrowed, repaid, and reborrowed until April 30, 2024, at which time all amounts outstanding must be repaid. We repaid in full the outstanding balance of the revolving line of credit during the fiscal quarter ended May 31, 2021. As of May 31, 2021, there were no amounts outstanding under the revolving line of credit and $2.5 million of letters of credit outstanding.

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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 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1B -Subparagraph (h) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1C -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1I -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1I -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(c)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1B -Subparagraph (g) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1C -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1C -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1E -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495348-112611 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1I -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1B -Subparagraph (i) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611 + Details
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