DEBT

3 Months Ended

Mar. 31, 2020

Revolving Credit Facility

In August 2019, the Company entered into a $2.0 billion five-year unsecured revolving credit facility with a group of lenders. Borrowings under the revolving credit facility will bear interest, at the Company’s option, at a rate per annum equal to either (i) the London Inter-bank Offer Rate, or if such London Inter-bank Offer Rate is no longer available, the agreed alternate rate of interest ("LIBOR") (but no less than 0%) for the interest period in effect for such borrowing plus an applicable margin ranging from 0.875% to 1.50%; or (ii) for U.S. Dollar-denominated loans only, the sum of (x) the greatest of (a) JPMorgan Chase Bank, N.A.'s prime lending rate, (b) the U.S. federal funds rate plus 0.50% and (c) LIBOR (but no less than 0%) for an interest period of one month plus 1.00%, plus (y) an applicable margin ranging from 0% to 0.50%. Undrawn balances available under the revolving credit facility are subject to commitment fees at the applicable rate ranging from 0.07% to 0.20%.

The revolving credit facility provides for the issuance of up to $80 million of letters of credit as well as borrowings of up to $100 million on same-day notice, referred to as swingline loans. Other than swingline loans, which are available only in U.S. Dollars, borrowings and letters of credit under the revolving credit facility may be made in U.S. Dollars, Euros, British Pounds Sterling and any other foreign currency agreed to by the lenders. The proceeds of loans made under the facility can be used for working capital and general corporate purposes, including acquisitions, share repurchases and debt repayments. There were no borrowings outstanding and $5 million of letters of credit issued under this revolving credit facility at March 31, 2020 and December 31, 2019.

Upon entering into this revolving credit facility, the Company terminated its prior $2.0 billion five-year revolving credit facility entered into in June 2015. During the three months ended March 31, 2019, the Company made short-term borrowings under the prior revolving credit facility totaling $250 million with a weighted-average interest rate of 3.5%, which were repaid during the three months ended June 30, 2019.

The current revolving credit facility contains a maximum leverage ratio covenant, compliance with which is a condition to the Company's ability to borrow thereunder. In April 2020, the Company amended the revolving credit facility, pursuant to which the maximum leverage ratio covenant has been suspended through and including the quarter ending March 31, 2021, and has been replaced with a minimum liquidity covenant based on unrestricted cash, cash equivalents, short-term investments and unused capacity under this revolving credit facility. Beginning with the quarter ending June 30, 2021, the minimum liquidity covenant will cease to apply and the maximum leverage ratio covenant will again be in effect.

Outstanding Debt

Outstanding debt at March 31, 2020 consists of the following (in millions):



March 31, 2020	Outstanding Principal Amount		Unamortized Debt Discount and Debt Issuance Cost			Carrying Value
Current liabilities:
0.35% Convertible Senior Notes due June 2020	$	1,000	$	(5	)	$	995
Long-term debt:
0.9% Convertible Senior Notes due September 2021	$	1,000	$	(33	)	$	967
0.8% (€1 Billion) Senior Notes due March 2022	1,097		(3		)	1,094
2.15% (€750 Million) Senior Notes due November 2022	824		(2		)	822
2.75% Senior Notes due March 2023	500		(2		)	498
2.375% (€1 Billion) Senior Notes due September 2024	1,097		(8		)	1,089
3.65% Senior Notes due March 2025	500		(2		)	498
3.6% Senior Notes due June 2026	1,000		(5		)	995
1.8% (€1 Billion) Senior Notes due March 2027	1,097		(4		)	1,093
3.55% Senior Notes due March 2028	500		(3		)	497
Total long-term debt	$	7,615	$	(62	)	$	7,553

Outstanding debt at December 31, 2019 consists of the following (in millions):



December 31, 2019	Outstanding Principal Amount		Unamortized Debt Discount and Debt Issuance Cost			Carrying Value
Current Liabilities:
0.35% Convertible Senior Notes due June 2020	$	1,000	$	(12	)	$	988
Long-term debt:
0.9% Convertible Senior Notes due September 2021	1,000		(39		)	961
0.8% (€1 Billion) Senior Notes due March 2022	1,123		(3		)	1,120
2.15% (€750 Million) Senior Notes due November 2022	842		(3		)	839
2.75% Senior Notes due March 2023	500		(2		)	498
2.375% (€1 Billion) Senior Notes due September 2024	1,123		(9		)	1,114
3.65% Senior Notes due March 2025	500		(2		)	498
3.6% Senior Notes due June 2026	1,000		(5		)	995
1.8% (€1 Billion) Senior Notes due March 2027	1,123		(5		)	1,118
3.55% Senior Notes due March 2028	500		(3		)	497
Total long-term debt	$	7,711	$	(71	)	$	7,640

Based on the closing price of the Company's common stock for the prescribed measurement periods for the three months ended March 31, 2020 and December 31, 2019, the contingent conversion thresholds on the 2020 Notes (as defined below) and 2021 Notes (as defined below) were not exceeded. The 2021 Notes were not convertible at the option of the holder at March 31, 2020 and December 31, 2019. However, starting on March 15, 2020, the 2020 Notes became convertible at the option of the holder, regardless of the Company's stock price. At March 31, 2020, the 2020 Notes are convertible at the option of the holders and the principal amount is required to be paid in cash. The Company reclassified the equity component in the amount of $4 million at March 31, 2020, from additional paid-in-capital to convertible debt in the mezzanine section in the Company's Consolidated Balance Sheet.

Fair Value of Debt

At March 31, 2020 and December 31, 2019, the estimated fair value of the outstanding Senior Notes was approximately $8.7 billion and $9.8 billion, respectively, and was considered a "Level 2" fair value measurement (see Note 6). Fair value was estimated based upon actual trades at the end of the reporting period or the most recent trade available as well as the Company's stock price at the end of the reporting period. The fair value of the Company's debt in excess of the outstanding principal amount primarily relates to the conversion premium on the Convertible Senior Notes.

Convertible Senior Notes

If the note holders exercise their option to convert, the Company delivers cash to repay the principal amount of the notes and delivers shares of common stock or cash, at its option, to satisfy the conversion value in excess of the principal amount. If the Company's convertible debt is redeemed or converted prior to maturity, a gain or loss on extinguishment is recognized. The gain or loss is the difference between the fair value of the debt component immediately prior to extinguishment and its carrying value. To estimate the fair value of the debt at the conversion date, the Company estimates the borrowing rate, considering the credit rating and similar debt of comparable corporate issuers without the conversion feature.

Description of Convertible Senior Notes

In August 2014, the Company issued in a private placement $1.0 billion aggregate principal amount of Convertible Senior Notes due September 15, 2021, with an interest rate of 0.9% (the "2021 Notes"). The Company paid $11 million in debt issuance costs during the year ended December 31, 2014 related to this offering. The 2021 Notes are convertible, subject to certain conditions, into the Company's common stock at a conversion price of $2,055.50 per share. The 2021 Notes are convertible, at the option of the holder, prior to September 15, 2021, upon the occurrence of specific events, including but not limited to a change in control, or if the closing sales price of the Company's common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is more than 150% of the conversion price in effect for the notes on the last trading day of the immediately preceding quarter. In the event that all or substantially all of the Company's common stock is acquired on or prior to the maturity of the 2021 Notes in a transaction in which the consideration paid to holders of the Company's common stock consists of all or substantially all cash, the Company would be required to make additional payments in the form of additional shares of common stock to the holders of the 2021 Notes in an aggregate value ranging from $0 to $375 million depending upon the date of the transaction and the then current stock price of the Company. Starting on June 15, 2021, holders will have the right to convert all or any portion of the 2021 Notes, regardless of the Company's stock price. The 2021 Notes may not be redeemed by the Company prior to maturity. The holders may require the Company to repurchase the 2021 Notes for cash in certain circumstances. Interest on the 2021 Notes is payable on March 15 and September 15 of each year. At March 31, 2020, the if-converted value of the 2021 Notes did not exceed the aggregate principle amount.

In May 2013, the Company issued in a private placement $1.0 billion aggregate principal amount of Convertible Senior Notes due June 15, 2020, with an interest rate of 0.35% (the "2020 Notes"). The 2020 Notes were issued with an initial discount of $20 million. The Company paid $1 million in debt issuance costs during the year ended December 31, 2013 related to this offering. The 2020 Notes are convertible, subject to certain conditions, into the Company's common stock at a conversion price of $1,315.10 per share. The 2020 Notes are convertible, at the option of the holder, prior to June 15, 2020, upon the occurrence of specific events, including but not limited to a change in control, or if the closing sales price of the Company's common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is more than 150% of the conversion price in effect for the notes on the last trading day of the immediately preceding quarter. In the event that all or substantially all of the Company's common stock is acquired on or prior to the maturity of the 2020 Notes in a transaction in which the consideration paid to holders of the Company's common stock consists of all or substantially all cash, the Company would be required to make additional payments in the form of additional shares of common stock to the holders of the 2020 Notes in an aggregate value ranging from $0 to $397 million depending upon the date of the transaction and the then current stock price of the Company. Since March 15, 2020, holders have had the right to convert all or any portion of the 2020 Notes, regardless of the Company's stock price. The 2020 Notes may not be redeemed by the Company prior to maturity. The holders may require the Company to repurchase the 2020 Notes for cash in certain circumstances. Interest on the 2020 Notes is payable on June 15 and December 15 of each year. At March 31, 2020, the if-converted value of the 2020 Notes exceeded the aggregate principle amount by $92 million.

Cash-settled convertible debt, such as the Company's convertible senior notes, is separated into debt and equity components at issuance and each component is assigned a value. The value assigned to the debt component is the estimated fair value, at the issuance date, of a similar bond without the conversion feature. The difference between the bond cash

proceeds and this estimated fair value, representing the value assigned to the equity component, is recorded as a debt discount. Debt discount is amortized using the effective interest rate method over the period from the origination date through the stated maturity date. The Company estimated the borrowing rates at debt origination to be 3.18% for the 2021 Notes and 3.13% for the 2020 Notes, considering its credit rating and similar debt of comparable corporate issuers without the conversion feature. The yield to maturity was estimated at an at-market coupon priced at par.

Debt discount after tax of $83 million ($143 million before tax) related to the 2021 Notes and $92 million ($154 million before tax) related to the 2020 Notes less financing costs associated with the equity component of the respective convertible notes was recorded in "Additional paid-in capital" in the balance sheet at debt origination.

For both the three months ended March 31, 2020 and 2019, the Company recognized interest expense of $15 million related to convertible notes, which is almost entirely comprised of the amortization of debt discount of $12 million and the contractual coupon interest of $3 million for each period. For the three months ended March 31, 2020 and 2019, included in the amortization of debt discount mentioned above is $1 million of original issuance discount related to the 2020 Notes for each period. The remaining interest expense relates to the amortization of debt issuance costs. The remaining period for amortization of debt discount and debt issuance costs is the period until the stated maturity date for the respective debt. The weighted-average effective interest rates for both the three months ended March 31, 2020 and 2019 were 3.2%.

In April 2020, the Company issued a private placement of $863 million aggregate principal amount of Convertible Senior Notes due May 1, 2025 with an interest rate of 0.75% (the "May 2025 Notes"). The May 2025 Notes are convertible, subject to certain conditions, into the Company's common stock at a conversion price of $1,886.44 per share. The May 2025 Notes are convertible, at the option of the holder, prior to November 1, 2024, upon the occurrence of specific events, including but not limited to a change in control, or if the closing sales price of the Company's common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is more than 130% of the conversion price in effect for the notes on the last trading day of the immediate preceding quarter. In the event that all or substantially all of the Company's common stock is acquired on or prior to the maturity of the May 2025 Notes in a transaction in which the consideration paid to holders of the Company's common stock consists of all or substantially all cash, the Company would be required to make additional payments in the form of additional shares of common stock to the holders of the May 2025 Notes in an aggregate value ranging from $0 to $273 million depending upon the date of the transaction and the then current stock price of the Company. Starting on November 1, 2024, holders will have the right to convert all or any portion of the May 2025 Notes, regardless of the Company's stock price. The May 2025 Notes may not be redeemed by the Company prior to maturity. The holders may require the Company to repurchase the May 2025 Notes for cash in certain circumstances. Interest on the May 2025 Notes is payable on May 1 and November 1 of each year, beginning on November 1, 2020.

The proceeds from the issuance of the May 2025 Notes can be used for general corporate purposes, which may include repayment of debt, including the repayment, at maturity or upon conversion prior thereto, of the Company’s 2020 Notes and 2021 Notes.

Other Long-term Debt

Other long-term debt had a total carrying value of $6.6 billion and $6.7 billion at March 31, 2020 and December 31, 2019, respectively. Debt discount is amortized using the effective interest rate method over the period from the origination date through the stated maturity date. The following table summarizes the information related to other long-term debt at March 31, 2020:



Other Long-term Debt	Period of Issuance	Effective Interest Rate at Debt Origination		Timing of Interest Payments
0.8% Senior Notes due March 2022	March 2017	0.84	%	Annually in March
2.15% Senior Notes due November 2022	November 2015	2.20	%	Annually in November
2.75% Senior Notes due March 2023	August 2017	2.78	%	Semi-annually in March and September
2.375% Senior Notes due September 2024	September 2014	2.48	%	Annually in September
3.65% Senior Notes due March 2025	March 2015	3.68	%	Semi-annually in March and September
3.6% Senior Notes due June 2026	May 2016	3.62	%	Semi-annually in June and December
1.8% Senior Notes due March 2027	March 2015	1.80	%	Annually in March
3.55% Senior Notes due March 2028	August 2017	3.56	%	Semi-annually in March and September

For both the three months ended March 31, 2020 and 2019, the Company recognized interest expense of $42 million related to other long-term debt, which is almost entirely comprised of $40 million related to the contractual coupon interest for each period. The remaining interest expense relates to the amortization of debt discount and debt issuance costs. The remaining period for amortization of debt discount and debt issuance costs is the period until the stated maturity dates for the respective debt.

Historically, the aggregate principal value of the Euro-denominated Senior Notes maturing in March 2022, November 2022, September 2024 and March 2027 (collectively the "Euro-denominated debt") and accrued interest thereon had been designated as a hedge of the Company's net investment in a Euro functional currency subsidiary. Beginning in the second quarter of 2019, the Company has only designated certain portions of the aggregated principal value of the Euro-denominated debt as a hedge. For the three months ended March 31, 2020, the carrying value of the portion of Euro-denominated debt designated as a net investment hedge ranged from $2.1 billion to $3.2 billion. The foreign currency transaction gains or losses on these Euro-denominated liabilities are measured based upon changes in spot rates. The foreign currency transaction gains or losses on the Euro-denominated debt that is designated as a hedging instrument for accounting purposes are recorded in "Accumulated other comprehensive loss" in the Consolidated Balance Sheets. The net assets of this Euro functional currency subsidiary are translated into U.S. Dollars at each balance sheet date, with the effects of foreign currency changes also reported in "Accumulated other comprehensive loss" in the Consolidated Balance Sheets. The foreign currency transaction gains or losses on the Euro-denominated debt that is not designated as a hedging instrument are recognized in "Foreign currency transactions and other" in the Unaudited Consolidated Statements of Operations.

In April 2020, the Company issued Senior Notes due April 13, 2025 with an interest rate of 4.10% for an aggregate principal amount of $1 billion, Senior Notes due April 13, 2027 with an interest rate of 4.50% for an aggregate principal amount of $750 million and Senior Notes due April 13, 2030 with an interest rate of 4.625% for an aggregate principal amount of $1.5 billion. Interest on these Senior Notes is payable on April 13 and October 13 of each year, beginning on October 13, 2020. The proceeds from the issuance of the Senior Notes can be used for general corporate purposes, which may include repayment of debt, including the repayment, at maturity or upon conversion prior thereto, of the Company’s 2020 Notes and 2021 Notes.