Fortinet, Inc. 10-Q form for quarterly period ended 2024-06-30, page 17: FORTINET, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)


The following weighted-average shares of common stock were excluded from the computation of diluted net income per share for the periods presented, as their effect would have been antidilutive (in millions):

|    |               |                    |                  |     |              |              |     |
|---:|:--------------|:-------------------|:-----------------|:----|:-------------|:-------------|:----|
|  1 |               | Three Months Ended | Six Months Ended |     |              |              |     |
|  2 |               | June 30,2024       | June 30,2023     |     | June 30,2024 | June 30,2023 |     |
|  3 | RSUs          | -                  |                  | -   |              | -            | 0.9 |
|  4 | Stock options | 3.6                |                  | 3.0 |              | 3.4          | 2.6 |
|  5 | PSUs          | 0.2                |                  | -   |              | 0.1          | -   |
|  6 | Total         | 3.6                |                  | 3.0 |              | 3.4          | 3.5 |


9. DEBT


2026 and 2031 Senior Notes

On March 5, 2021, we issued $1.0 billion aggregate principal amount of senior notes (collectively, the "Senior Notes"), consisting of $500.0 million aggregate principal amount of 1.0% notes due March 15, 2026 (the "2026 Senior Notes") and $500.0 million aggregate principal amount of 2.2% notes due March 15, 2031 (the "2031 Senior Notes"), in an underwritten registered public offering. The Senior Notes are senior unsecured obligations and rank equally with each other in right of payment and with our other outstanding obligations. We may redeem the Senior Notes at any time in whole or in part for cash, at specified redemption prices that include accrued and unpaid interest, if any, and a make-whole premium. However, no make-whole premium will be paid for redemptions of the 2026 Senior Notes on or after February 15, 2026, or the 2031 Senior Notes on or after December 15, 2030. Interest on the Senior Notes is payable on March 15 and September 15 of each year, beginning on September 15, 2021. As of June 30, 2024 and December 31, 2023, the Senior Notes were recorded as long-term debt, net of discount and issuance costs, which are amortized to interest expense over the respective contractual terms of these notes using the effective interest method.
The total outstanding debt is summarized below (in millions, except percentages):

|    |                                                    |            |             |                         |              |       |                  |         |    |       |
|---:|:---------------------------------------------------|:-----------|:------------|:------------------------|:-------------|:------|:-----------------|:--------|:---|:------|
|  1 |                                                    | Maturity   | Coupon Rate | Effective Interest Rate | June 30,2024 |       | December 31,2023 |         |    |       |
|  2 | Debt                                               |            |             |                         |              |       |                  |         |    |       |
|  3 | 2026 Senior Notes                                  | March 2026 | 1.0%        | 1.3%                    | $            | 500.0 |                  |         | $  | 500.0 |
|  4 | 2031 Senior Notes                                  | March 2031 | 2.2%        | 2.3%                    | 500.0        |       |                  | 500.0   |    |       |
|  5 | Total debt                                         |            |             |                         | 1,000.0      |       |                  | 1,000.0 |    |       |
|  6 | Less: Unamortized discount and debt issuance costs |            |             |                         | 6.7          |       |                  | 7.7     |    |       |
|  7 | Total long-term debt                               |            |             |                         | $            | 993.3 |                  |         | $  | 992.3 |

As of June 30, 2024 and December 31, 2023, we accrued interest payable of $4.7 million, and there are no financial covenants with which we must comply. During the three months ended June 30, 2024 and 2023, we recorded $4.5 million of total interest expense in relation to these Senior Notes in each period. During the six months ended June 30, 2024 and 2023, we recorded $9.0 million of total interest expense in relation to these Senior Notes in each period. No interest costs were capitalized for the six months ended June 30, 2024 and 2023, as the costs that qualified for capitalization were not material.
The total estimated fair value of the outstanding Senior Notes was approximately $880.6 million, including accrued and unpaid interest, as of June 30, 2024. The fair value was determined based on observable market prices of identical instruments in less active markets. The estimated fair values are based on Level 2 inputs.
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Question: How is Fortinet managing its debt obligations in the quarter ended June 30, 2024?
Answer: Fortinet manages its debt obligations through the issuance and maintenance of its Senior Notes. On March 5, 2021, the company issued $1.0 billion in aggregate principal amount of senior notes, consisting of $500 million of 1.0% notes due March 2026 (the "2026 Senior Notes") and $500 million of 2.2% notes due March 2031 (the "2031 Senior Notes"). These notes are senior unsecured obligations, ranking equally in right of payment with each other and with other outstanding obligations.

The company has the option to redeem these notes at specified redemption prices, which include accrued and unpaid interest along with a make-whole premium, although no premium is required for redemptions within a year of maturity (February 2026 for the 2026 Notes and December 2030 for the 2031 Notes). Interest on these notes is payable semi-annually. As of June 30, 2024, the total long-term debt was $993.3 million, net of unamortized discounts and issuance costs, which are amortized using the effective interest method. Fortinet also reports that there are no financial covenants associated with these notes, providing flexibility in their financial management.