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BORROWINGS | 12 Months Ended
--- | ---
Sep. 27, 2024
Debt Disclosure [Abstract] |
BORROWINGS | BORROWINGS The following table summarizes the Company's short-term and long-term debt:
| September 27, 2024 |  | September 29, 2023 |  |
(In millions, except for percentages) | Amount |  | Weighted-Avg Effective Interest Rate |  | Amount |  | Weighted-Avg Effective Interest Rate |  | $ Change
Current maturities of long-term debt: |  |  |  |  |  |  |  |  |
Convertible Senior Unsecured Notes | $ | 45.0 |  |  | 4.8% |  | $ | — |  |  |  |  | $ | 45.0 |
Other debt | 1.5 |  |  |  |  | 1.5 |  |  |  |  | — |
Total current maturities of long-term debt | $ | 46.5 |  |  |  |  | $ | 1.5 |  |  |  |  | $ | 45.0 |
Non-current maturities of long-term debt: |  |  |  |  |  |  |  |  |
Convertible Senior Unsecured Notes(1) | $ | 155.0 |  |  | 4.8% |  | $ | 200.0 |  |  | 4.8% |  | $ | (45.0) |
Senior Secured Notes | 243.0 |  |  | 8.2% |  | 243.0 |  |  | 8.2% |  | — |
Other debt | 2.1 |  |  |  |  | 3.5 |  |  |  |  | (1.4) |
Total non-current maturities of long-term debt | $ | 400.1 |  |  |  |  | $ | 446.5 |  |  |  |  | $ | (46.4) |
Unamortized issuance costs and debt discounts: |  |  |  |  |  |  |  |  |
Unamortized issuance costs - Convertible Notes | $ | (1.0) |  |  |  |  | $ | (2.5) |  |  |  |  | $ | 1.5 |
Debt issuance costs - Senior Secured Notes | (2.2) |  |  |  |  | (2.9) |  |  |  |  | 0.7 |
Total | (3.2) |  |  |  |  | (5.4) |  |  |  |  | 2.2 |
Total debt outstanding, net | $ | 443.4 |  |  |  |  | $ | 442.6 |  |  |  |  | $ | 0.8 |
(1) This amount has been excluded from current liabilities as it is supported by the Revolving Credit Facility (as defined below) and is expected to remain outstanding for an uninterrupted period extending beyond one year from the balance sheet date. Future principal payments of long-term debt outstanding as of September 27, 2024 are as follows:
(In millions) |
Fiscal Years: |
2025 | $ | 201.5 |
2026 | 1.4 |
2027 | 243.7 |
2028 | — |
2029 | — |
Thereafter | — |
Total debt outstanding | $ | 446.6 |
Less: current maturities of long-term debt | (46.5) |
Non-current portion of long-term debt | $ | 400.1 |
The following table summarizes the Company's interest expense:
| Twelve Months Ended
| September 27, 2024 |  | September 29, 2023 |  | September 30, 2022
Contractual interest coupon and other | $ | 26.8 |  |  | $ | 26.7 |  |  | $ | 27.6 |
Amortization/extinguishment of debt issuance costs | 3.4 |  |  | 2.6 |  |  | 3.4 |
Amortization of debt discounts | — |  |  | — |  |  | 8.8 |
Total interest expense | $ | 30.2 |  |  | $ | 29.3 |  |  | $ | 39.8 |
Senior Secured Revolving Credit Facility On March 26, 2024, the Company entered into a senior secured revolving credit agreement (the "Credit Agreement") providing for a senior secured revolving credit facility of up to $155.0 million (the “Revolving Credit Facility”). Simultaneous with its entry into the Revolving Credit Facility, the Company terminated its $100.0 million asset-based loan revolving credit facility (the "ABL Facility"), dated as of September 30, 2020. As of September 27, 2024, the Revolving Credit Facility remains undrawn. The maximum availability under the Revolving Credit Facility is $155.0 million, which is available to the Company for revolving loans in U.S. dollars and for the issuance of letters of credit. The Company may make and repay borrowings from time to time until the maturity of the Revolving Credit Facility. Borrowings under the Revolving Credit Facility will mature, and lending commitments thereunder will terminate, on September 26, 2027. The interest rate for Revolving Credit Facility borrowings is the Secured Overnight Financing Rate (“SOFR”) (subject to a floor of 0.00%) plus a margin of 2.00% to 2.75%, depending on the consolidated total net leverage ratio of the Company (as defined in the Credit Agreement). Alternatively, the Company has the option of selecting a base rate equal to the highest of (a) the prime rate, (b) the Federal Funds Rate plus 0.50% and (c) the one-month SOFR (subject to a floor of 0.00%) plus a margin of 1.00%. An unused commitment fee of 0.375% per annum was payable from March 26, 2024 until June 28, 2024, and thereafter an unused commitment fee of between 0.30% to 0.40% per annum is payable quarterly on the actual daily unused portion of the Revolving Credit Facility, depending on the consolidated total net leverage ratio of the Company. Debt issuance costs, including unamortized deferred costs for continuing lenders under the previously existing ABL Facility, of $2.3 million were capitalized and are included within other assets on the Consolidated Balance Sheets. These costs are being amortized over the term of the new agreement and are being recorded within interest expense in the Consolidated Statements of Operations. The Credit Agreement contains customary covenants restricting the Company’s activities, as well as those of its subsidiaries, including limitations on the ability to sell assets, engage in mergers, or other fundamental changes, enter into capital leases or certain leases not in the ordinary course of business, enter into transactions involving related parties or derivatives, incur or prepay indebtedness, grant liens or negative pledges on its assets, make loans or other investments, pay dividends or repurchase stock or other securities, guarantee third-party obligations, engage in sale leasebacks, and make changes in its corporate structure, though there are certain exceptions and carveouts related to these restrictions. One such covenant involves maintaining compensating cash balances. The Company must maintain the lesser of an average quarterly balance of $80.0 million and 80% of the U.S. cash availability in certain deposit accounts; provided that the amounts maintained must not be less than $80.0 million prior to June 30, 2025. The compensating balances may be withdrawn but the availability of the Revolving Credit Facility is dependent upon maintenance of such compensating balances. In addition, the Credit Agreement includes financial covenants related to the Company’s consolidated total net leverage ratio and its consolidated fixed charge coverage ratio. The Company’s obligations under the Revolving Credit Facility are guaranteed by the Company and a number of Company subsidiaries. These guarantees are secured on a first lien basis by specified assets, including inventory, accounts receivable, cash, intercompany accounts and loans, and certain real property. In addition, the Revolving Credit Facility is secured by second liens on certain assets securing the Company’s 7.875% Senior Secured Notes due 2027. An intercreditor agreement governs how the collateral securing the respective debt obligations will be treated among the secured parties. Equipment Credit Agreement On April 26, 2024, the Company entered into a secured delayed draw term loan credit agreement (the “Equipment Credit Agreement”), providing for a secured equipment credit facility of up to $20.0 million (the “Equipment Credit Facility”). As of September 27, 2024, there was no principal balance outstanding under the Equipment Credit Facility. The maximum availability under the Equipment Credit Facility is $20.0 million, available to the Company for delayed draw term loans drawn on or before June 30, 2025, in U.S. dollars. The Company may make and repay borrowings from time to time until the maturity of the Equipment Credit Facility, but once repaid, loans may not be reborrowed. The Company may make voluntary prepayments of borrowings at any time. Borrowings under the Equipment Credit Facility will mature on September 26, 2027. The interest rate for borrowings by the Company under the Equipment Credit Facility is the SOFR (subject to a floor of 0.00%) plus a margin of 2.00% to 2.75%, depending on the consolidated total net leverage ratio of the Company. Alternatively, Equipment Borrowers have the option of selecting a base rate equal to the highest of (a) the prime rate, (b) the Federal Funds Rate plus 0.50% and (c) SOFR (subject to a floor of 0.00%) plus a margin of 1.00%, in each case plus a margin of 1.00% to 1.75%, depending on the consolidated total net leverage ratio of the Company. A commitment fee of 0.375% per annum was paid from April 26, 2024 until June 28, 2024, and thereafter a commitment fee of between 0.30% to 0.40% per annum is payable quarterly on the actual daily unused portion of the Equipment Credit Facility, depending on the consolidated total net leverage ratio of the Company. The proceeds of the Equipment Credit Facility will be used for purchases of eligible equipment and associated software costs for the Company and its subsidiaries. The Company’s obligations under the Equipment Credit Agreement are secured by the equipment and associated software financed by the Equipment Credit Facility and are guaranteed by a number of Company subsidiaries on an unsecured basis. The Equipment Credit Agreement contains customary covenants restricting the Company’s activities, as well as those of its subsidiaries, including limitations on the ability to sell financed equipment or all or substantially all assets, engage in mergers or other fundamental changes, grant liens or negative pledges on financed equipment, make changes in its corporate structure, though there are certain exceptions and carveouts related to these restrictions. In addition, the Equipment Credit Agreement includes financial covenants related to the Company’s consolidated total net leverage ratio and its consolidated fixed charge coverage ratio. Convertible Senior Unsecured Notes On June 9, 2020, Varex issued $200.0 million in aggregate principal amount of 4.00% convertible senior unsecured notes due 2025 (“Convertible Notes”). The net proceeds from the issuance of the Convertible Notes, after deducting transaction fees and offering expense payable by the Company, were approximately $193.1 million. The Convertible Notes bear interest at the annual rate of 4.00%, payable semiannually on June 1 and December 1 of each year, beginning on December 1, 2020, and will mature on June 1, 2025, unless earlier converted or repurchased by Varex. The Convertible Notes are convertible into cash, shares of Varex common stock or a combination thereof, at Varex’s election, at an initial conversion rate of 48.048 shares of common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $20.81 per share, subject to adjustment pursuant to the terms of the indenture governing the Convertible Notes. The Convertible Notes may be converted at any time after, and including, December 15, 2024, until the close of business on the second scheduled trading day immediately before the maturity date. The maximum number of shares issuable upon conversion of the Convertible Notes is 9.6 million. In accordance with the applicable accounting standards, a short-term debt obligation should be excluded from current liabilities if the entity has both the intent and ability to refinance the obligation on a long-term basis. The intent and ability can be demonstrated by the issuance of a long-term obligation to refinance the short-term obligation on a long-term basis after the date of an entity’s balance sheet but before that balance sheet is issued. Due to the entry into the Revolving Credit Facility, the Company classified $155.0 million of debt outstanding as of September 27, 2024 as long-term debt, net of current portion. The remaining principal amount totaling $45.0 million is classified as current portion of long-term debt as of September 27, 2024. Call Spread On June 4, 2020 and June 5, 2020, in connection with the offering of the Convertible Notes, Varex entered into privately negotiated convertible note hedge transactions (collectively, the “Hedge Transactions”). The Hedge Transactions cover, subject to customary anti-dilution adjustments, the number of shares of Varex common stock that initially underlie the Convertible Notes. The Hedge Transactions are expected generally to reduce the potential dilution and/or offset any cash payments Varex is required to make in excess of the principal amount due upon conversion of the Convertible Notes in the event that the market price of Varex common stock is greater than the strike price of the Hedge Transactions, which was initially $20.81 per share (subject to adjustment under the terms of the Hedge Transactions). The strike price of $20.81 corresponds to the initial conversion price of the Convertible Notes. The number of shares underlying the Hedge Transactions is 9.6 million. On June 4, 2020 and June 5, 2020, Varex also entered into privately negotiated warrant transactions (collectively, the “Warrant Transactions” and, together with the Hedge Transactions, the “Call Spread Transactions”), whereby the Company sold warrants at a higher strike price relating to the same number of shares of Varex common stock that initially underlie the Convertible Notes, subject to customary anti-dilution adjustments. The initial strike price of the warrants is $24.975 per share (subject to adjustment under the terms of the Warrant Transactions), which is 50% above the last reported sale price of Varex common stock on June 4, 2020. The Warrant Transactions could have a dilutive effect to the Company's stockholders to the extent that the market price per share of Varex common stock, as measured under the terms of the Warrant Transactions, exceeds the applicable strike price of the warrants. The number of shares underlying the Warrant Transactions is 9.6 million. The number of warrants outstanding as of September 27, 2024, was 9.6 million. Senior Secured Notes Varex issued $300.0 million aggregate principal amount of 7.875% Senior Secured Notes due 2027 (the "Senior Secured Notes") pursuant to an indenture dated September 30, 2020, among Varex, certain of its direct or indirect wholly-owned subsidiaries as guarantors, and Wells Fargo Bank, National Association as trustee and collateral agent. Interest payments are paid semiannually on April 15 and October 15 of each year, beginning on April 15, 2021. The Senior Secured Notes are secured by a first priority lien on substantially all of the assets of Varex and the assets and capital stock of its subsidiary guarantors (subject to exceptions), except for assets for which a first priority security interest is pledged for the Revolving Credit Facility, in which the Senior Secured Notes will have a second lien security interest. The Senior Secured Notes include negative covenants, subject to certain exceptions, restricting or limiting Varex's ability and the ability of its restricted subsidiaries to, among other things, incur liens on collateral; sell certain assets; incur additional indebtedness; pay dividends; issue preferred shares; consolidate, merge, or sell all or substantially all of its assets; and enter into certain transactions with their affiliates. On July 15, 2021, the Company redeemed $30 million of Senior Secured Notes, in accordance with the terms and conditions of the governing indenture, by paying cash of $31.5 million, inclusive of the redemption premium and accrued interest, and recognized a $1.4 million loss related to the redemption premium and the write-off of previously recorded debt issuance costs. The redemption price of the redeemed notes was 103% of the principal amount, plus accrued and unpaid interest from, and including, April 15, 2021 to, but excluding, the redemption date of July 15, 2021. On March 18, 2022, the Company redeemed $27 million of Senior Secured Notes, in accordance with the terms and conditions of the governing indenture, by paying cash of $28.7 million, inclusive of the redemption premium and accrued interest, and recognized a $1.2 million loss related to the redemption premium and the write-off of previously recorded debt issuance costs. The redemption price of the redeemed notes was 103% of the principal amount, plus accrued and unpaid interest from, and including, October 15, 2021 to, but excluding, the redemption date of March 18, 2022. As of September 27, 2024, the aggregate principal amount of the outstanding Senior Secured Notes was $243.0 million. Asset-Based Loan On September 30, 2020, the Company entered into a revolving credit agreement consisting of a $100.0 million asset-based loan revolving credit facility. On March 26, 2024, the Company terminated the ABL Facility and recognized $0.6 million of the remaining unamortized issuance costs in interest expense in the Consolidated Statements of Operations, which excludes costs related to lenders that continued under the Revolving Credit Facility. There was no principal balance outstanding under the ABL Facility when it was terminated.

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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/disclosureRef -Topic 470 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147481544/470-10-50-6 Reference 2: 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