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Note 6 - Indebtedness
 9 Months Ended
Dec. 31, 2021
Notes to Financial Statements  
Debt Disclosure [Text Block]

Note 6. Indebtedness

 

Credit Facility

On  March 5, 2021, we entered into a four-year senior secured credit agreement that includes 1) a revolving credit facility in an aggregate principal amount of up to $75,000, 2) a swingline loan in an aggregate principal amount not exceeding $5,000, and 3) letters of credit in an aggregate stated amount not exceeding $2,500 at any time. The Credit Facility also provides for an incremental term loan or an increase in revolving commitments in an aggregate principal amount of at a minimum $25,000 and at a maximum $75,000, subject to the satisfaction of certain conditions and lender considerations (together, the available facilities are referred to as the "Credit Facility").

 

Amounts borrowed under the Credit Facility bear interest at either a base rate or a Eurodollar rate, plus an applicable spread. The weighted average interest rate on borrowing under our line of credit during the third quarter of fiscal year 2022 was 1.5%. We are obligated to pay quarterly unused commitment fees of between 0.15% and 0.35% of the Credit Facility’s aggregate principal amount, based on our leverage ratio. Since the Credit Facility's inception, the rate applied to our unused commitment fees has been 0.15%. We incurred unused commitment fees of $13 and $70 during the three and nine months ended December 31, 2021, respectively, and the balance of unamortized customary lender fees was $526 and $650 as of December 31, 2021 and  March 31, 2021, respectively. On our Consolidated Balance Sheets, the short term portion of unamortized fees is recorded within prepaid expenses and other, and the long term portion is recorded in other assets. The fees are being expensed on a straight line basis over the life of the agreement. 

 

The financial covenants in the Credit Facility include a maximum leverage ratio of 5.50 to 1.00 for the first four testing dates on which the line of credit is outstanding; 5.0 to 1.0 on each of the fifth, sixth, seventh, and eighth testing dates; and 4.5 to 1.0 on each testing date following the eighth testing date, except that we  may have a leverage ratio of 5.75 to 1.0 for a period of four consecutive quarters following a permitted acquisition. The Credit Facility also stipulates a minimum fixed charge coverage ratio of 1.25 to 1.0. Other covenants include restrictions on our ability to incur debt, grant liens, make fundamental changes, engage in certain transactions with affiliates, or conduct asset sales. As of  December 31, 2021, we were in compliance with all required covenants.

 

On October 18, 2021, we borrowed $70,000 under the Credit Facility to provide a portion of the cash needed to complete the Agena Acquisition as further discussed in Note 11. "Significant Transactions." Subsequent to the Agena Acquisition, we repaid $10,000 against our outstanding balance during the third quarter of fiscal year 2022. As of December 31, 2021, the outstanding balance under our Credit Facility was $60,000. In January 2022, we repaid $4,000 of the outstanding balance on our Credit Facility. 

 

Convertible Notes 

On August 12, 2019, we issued an aggregate principal amount of $172,500 of convertible senior notes. The Notes mature on August 15, 2025, unless earlier repurchased or converted, and bear interest at a rate of 1.375% payable semi-annually in arrears on February 15 and August 15 each year beginning on February 15, 2020. The Notes are initially convertible at a conversion rate of 3.5273 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $283.50 per share of common stock. Noteholders may convert their Notes at their option only in the following circumstances:

 

(i)  during any calendar quarter commencing after the calendar quarter ended on December 31, 2019 (and only during such calendar quarter), if the last reported sale price per share of our common stock exceeds 130% of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;
(ii)  during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 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 last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day;
(iii)  upon the occurrence of certain corporate events or distributions on our common stock, including certain distributions, the occurrence of a fundamental change (as defined in the indenture governing the Notes) or a transaction resulting in the Company’s common stock converting into other securities or property or assets; and
(iv)  at any time from, and including, April 15, 2025 until the close of business on the second scheduled trading day immediately before the maturity date. 

 

Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election. Our current intent is to settle conversions entirely in shares of common stock. We will reevaluate this policy from time to time as we receive conversion notices from note holders. The circumstances necessary for conversion were not met during the three or nine months ended December 31, 2021. As of December 31, 2021, the Notes are classified as a long-term liability on our Condensed Consolidated Balance Sheets as the circumstances necessary for conversion were not satisfied as of the end of the period. The if-converted value of the Notes did not exceed the principal balance as of  December 31, 2021.

 

Debt issuance costs related to the Notes are comprised of discounts and commissions payable to the initial purchasers of $5,175 and third party offering costs of $255. The debt issuance costs are being amortized to interest expense using the effective interest method over the six-year contractual term of the Notes.

 

Due to our adoption of ASU 2020-06 on April 1, 2021, we no longer bifurcate the Notes into a liability and an equity component in our Condensed Consolidated Balance Sheets (see Note 1. "Description of Business and Summary of Significant Accounting Policies"). The Notes are accounted for entirely as a liability, and the issuance costs of the Notes are accounted for wholly as debt issuance costs. The equity conversion feature that was recorded to common stock, as well as the unamortized debt discount and amortization expense attributable to equity, have been derecognized.

 

The net carrying amount of the Notes was as follows:

 

  

December 31, 2021

  

March 31, 2021

 

Principal outstanding

 $172,500  $172,500 

Unamortized debt discount attributable to equity

  -   (23,497)

Unamortized debt issuance costs

  (3,360)  (3,328)

Net carrying value

 $169,140  $145,675 

 

We recognized interest expense on the Notes as follows:

 

  

Three Months Ended December 31,

  

Nine Months Ended December 31,

 
  

2021

  

2020

  

2021

  

2020

 

Coupon interest expense at 1.375%

 $593  $593  $1,779  $1,779 

Amortization of debt discounts and issuance costs

  223   1,357   666   4,024 

Total

 $816  $1,950  $2,445  $5,803 

 

The effective interest rate on the notes is approximately 1.9%. Prior to the adoption of ASU 2020-06, the effective interest rate was approximately 5.5%.