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Notes Payable, net
 12 Months Ended
Aug. 31, 2021
Debt Disclosure [Abstract]  
Notes Payable, net

Note 12 — Notes Payable, net

 

 

 

As of August 31,

 

(In thousands)

 

2021

 

 

2020

 

Term loans

 

$

492,319

 

 

$

498,858

 

2.875% Convertible senior notes, due 2028

 

 

373,750

 

 

 

—

 

2.875% Convertible senior notes, due 2024

 

 

47,746

 

 

 

275,000

 

2.25% Convertible senior notes, due 2024

 

 

—

 

 

 

50,000

 

Other notes payable

 

 

1,710

 

 

 

10,135

 

 

 

$

915,525

 

 

$

833,993

 

Debt discount and issuance costs

 

 

(89,019

)

 

 

(29,905

)

 

 

$

826,506

 

 

$

804,088

 

 

 

 

 

 

 

 

 

 

 

Term loans are primarily composed of:

 

 

•

$291.9 million of senior term debt, with a maturity date of August 2026. The debt bears a floating interest rate of LIBOR plus 1.5% with principal of $3.65 million paid quarterly in arrears and a balloon payment of $222.6 million due at maturity. An interest rate swap agreement covers approximately 50% of the initial balance to swap the floating interest rate of LIBOR plus 1.5% to a fixed rate of 3.19%. The principal balance as of August 31, 2021 was $291.9 million.

 

 

•

$200.0 million of senior term debt, with a maturity date of August 2027, which is secured by a pool of leased railcars. The debt bears a floating interest rate of LIBOR plus 1.625% with principal of $1.75 million paid quarterly in arrears and a balloon payment of $158.0 million due at maturity. An interest rate swap agreement covers approximately 50% of the initial balance to swap the floating interest rate of LIBOR plus 1.625% to a fixed rate of 4.62%. The principal balance as of August 31, 2021 was $200.0 million.

 

•

Other term loan with an aggregate balance of $0.4 million as of August 31, 2021 and a maturity date of September 2022.

 

 


In April 2021, the Company issued $373.8 million of convertible senior notes, due 2028 which bear interest at a fixed rate of 2.875%. These interest payments are payable semiannually in arrears on April 15 and October 15, commencing October 15, 2021. The convertible notes will mature on April 15, 2028, unless earlier repurchased, redeemed or converted in accordance with their terms prior to such date. The convertible notes are senior unsecured obligations and rank equally with other senior unsecured debt. The notes are convertible into shares of the Company’s common stock, at an initial conversion rate of 18.0317 shares of common stock per $1,000 principal amount which is equivalent to an initial conversion price of approximately $55.46 per share. The conversion rate and the resulting conversion price are subject to adjustment in certain events, such as distributions, dividends or stock splits. Conversion of the par value of the note will be settled in cash, with any premium convertible in cash or shares at the Company’s option. Upon a conversion of the notes, the Company may elect to pay or deliver, as the case may be, cash and, if applicable, shares of the Company’s common stock, as provided in the 2028 Notes Indenture (as defined below). There were $73.6 million of initial debt discount and $12.0 million of original debt issuance costs included in Notes Payable, net on the Company’s Consolidated Balance Sheet. The debt discount represents the difference between the debt principal and the value of a similar debt instrument that does not have a conversion feature at issuance.  The debt discount is being amortized using the effective interest rate method through April 2028 and the amortization expense is included in Interest and Foreign exchange on the Company’s Consolidated Statement of Income. In accordance with ASC 470-20, the Company separately accounts for the liability component (debt principal net of debt discount) and equity component. The liability component is recognized as the fair value of a similar instrument that does not have a conversion feature at issuance. To determine the fair value of the liability component, the Company assumed an interest rate of approximately 5.75% which resulted in a fair value of $300.2 million. The equity component, which is the conversion feature at issuance, is recognized as the difference between the proceeds from the issuance of the notes ($373.8 million) and the fair value of the liability component ($300.2 million). As of August 31, 2021, the equity component was $73.6 million which was recorded on the Company’s Consolidated Balance Sheet in Additional paid-in capital, net of tax of $17.3 million. As of August 31, 2021, the Company has reserved approximately 8.8 million shares for issuance upon conversion of these notes.

 

The 2028 Convertible Notes are subject to an indenture entered into on April 20, 2021 by the Company and Wells Fargo Bank, National Association, as trustee, as amended and restated by the first supplemental indenture dated June 1, 2021 (2028 Notes Indenture). The 2028 Convertible Notes are convertible at the option of the holders prior to January 15, 2028, under certain circumstances as described in the 2028 Notes Indenture. Additionally, the Company may elect to call the notes on or after April 15, 2025 and on or before the 40th trading day prior to April 15, 2028, at a cash redemption price described in the 2028 Notes Indenture if the stock price exceeds 130% of the conversion price during certain trading days as defined in the 2028 Notes Indenture. Calling any Convertible Note for redemption will constitute a make-whole fundamental change with respect to that Convertible Note, in which case the conversion rate applicable to the conversion of that Convertible Note will be increased in certain circumstances if it is converted after it is called for redemption. 

 

During fiscal 2021, the Company retired $227.3 million of its 2.875% Convertible senior notes due 2024, and all of its 2.25% Convertible senior notes due 2024. The proceeds were allocated between the repurchase of the liability and the equity components with the remaining accounted for as a repurchase of the equity component, reducing Additional paid-in capital. The difference between the fair value of the debt component and the carrying value, net of the pro-rata portion of unamortized debt issuance costs, resulted in a loss on extinguishment of $5.8 million.

 

Convertible senior notes, due 2024, bear interest at a fixed rate of 2.875%, paid semi-annually in arrears on February 1st and August 1st. The convertible notes mature on February 1, 2024, unless earlier repurchased by the Company or converted in accordance with their terms. Upon the satisfaction of certain conditions, holders may convert at their option at any time prior to the business day immediately preceding the stated maturity date. The convertible notes are senior unsecured obligations and rank equally with other senior unsecured debt. The convertible notes are convertible into shares of the Company’s common stock, at an initial conversion rate of 16.6234 shares per $1,000 principal amount of the notes (which is equal to an initial conversion price of $60.16 per share). The initial conversion rate and conversion price are subject to adjustment upon the occurrence of certain events, such as distributions, dividends or stock splits. There were $33.1 million of initial debt discount and $8.0 million of original debt issuance costs included in Notes Payable, net on the Company’s Consolidated Balance Sheet. The debt discount represents the difference between the debt principal and the value of a similar debt instrument that does not have a conversion feature at issuance. The debt discount is being amortized using the effective interest rate method through February 2024 and the amortization expense is included in Interest and Foreign exchange on the Company’s Consolidated Statement of

Income. In accordance with ASC 470-20, the Company separately accounts for the liability component (debt principal net of debt discount) and equity component. The liability component is recognized as the fair value of a similar instrument that does not have a conversion feature at issuance. To determine the fair value of the liability component, the Company assumed an interest rate of approximately 5% which resulted in a fair value of $241.9 million. The equity component, which is the conversion feature at issuance, is recognized as the difference between the proceeds from the issuance of the notes ($275 million) and the fair value of the liability component ($241.9 million). As of August 31, 2021 and 2020, the equity component was $2.6 million and $33.1 million, respectively, which was recorded on the Company’s Consolidated Balance Sheet in Additional paid-in capital. As of August 31, 2021 the Company has reserved approximately 1.0 million shares for issuance upon conversion of these notes.

 

Other notes payable includes $1.7 million of unsecured debt with maturity dates ranging from January 2022 to April 2026.

 

The notes payable, along with the revolving and operating lines of credit, contain certain covenants with respect to the Company and various subsidiaries, the most restrictive of which, among other things, limit the ability to: incur additional indebtedness or guarantees; pay dividends or repurchase stock; enter into capital leases; create liens; sell assets; engage in transactions with affiliates, including joint ventures and non U.S. subsidiaries, including but not limited to loans, advances, equity investments and guarantees; enter into mergers, consolidations or sales of substantially all the Company’s assets; and enter into new lines of business. The covenants also require certain maximum ratios of debt to total capitalization and minimum levels of fixed charges (interest and rent) coverage.  

As of August 31, 2021 principal payments on the notes payable are expected as follows:

 

(In thousands)

 

 

 

 

Year ending August 31,

 

 

 

 

2022

 

$

18,907

 

2023

 

 

22,147

 

2024 (1)

 

 

69,632

 

2025

 

 

21,831

 

2026

 

 

244,258

 

Thereafter (1)

 

 

538,750

 

 

 

$

915,525

 

 

 

 

 

 

 

 

(1)

The repayment of the $47.7 million of Convertible senior notes due February 2024 and the $373.8 million of Convertible senior notes due April 2028 is assumed to occur at the scheduled maturity instead of assuming an earlier conversion by the holders.