Convertible Debt, Net |
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Debt, Net | Convertible Debt, Net The Company had outstanding convertible debt and related debt issuance costs on its consolidated balance sheet as follows:
The carrying amount and the estimated fair value of the Company's convertible debt, which is based on the Level 2 quoted market prices as of September 30, 2019 and December 31, 2018 were as follows:
0.375% Convertible Senior Notes In September 2019, the Company issued $800.0 million aggregate principal amount of 0.375% Convertible Senior Notes due September 2026 (the “0.375% Notes”). The interest rate on the notes is 0.375% per annum, payable semi-annually in arrears in cash in March and September of each year. The 0.375% Notes are convertible into the Company's common stock at an initial conversion rate of 4.4105 shares of common stock per $1,000 principal amount of the 0.375% Notes, which is equivalent to a conversion price of approximately $226.73 per share, subject to adjustment under certain circumstances. The 0.375% Notes will be convertible prior to the close of business on the business day immediately preceding June 1, 2026 only under certain circumstances and during certain periods, and will be convertible on or after June 1, 2026 until the close of business on the second scheduled trading day immediately preceding the maturity date (September 1, 2026). The Company recorded a debt discount of $213.0 million related to the 0.375% Notes resulting from the allocation of a portion of the proceeds to the fair value of the conversion feature reflecting a nonconvertible debt borrowing rate of 5.29% per annum. This debt discount was recorded as additional paid-in capital and is being amortized as non-cash interest expense over the seven-year term of the 0.375% Notes. The Company also incurred debt issuance costs and other expenses related to the 0.375% Notes of approximately $19.8 million, of which $5.3 million was reclassified as a reduction to the value of the conversion feature allocated to equity. The remaining $14.5 million of debt issuance costs is presented as a reduction of debt in the consolidated balance sheet and is being amortized using the effective interest method as non-cash interest expense over the seven year term of the 0.375% Notes. The net proceeds of $780.2 million were used to fund the redemption of the Company's 1.25% Convertible Senior Notes due September 2021 and for the purchase of capped call options (“Capped Calls”), both of which are discussed below. The 0.375% Notes contain provisions that allow for additional interest to holders of the notes upon failure to timely file documents or reports that the Company is required to file with the Securities and Exchange Commission. The additional interest is at a rate of 0.5% per annum of the principal amounts of the notes outstanding for a period of 360 days. If the Company merges or consolidates with a foreign entity, then additional taxes may be required to be paid by the Company under the terms of the 0.375% Notes. The Company determined that the higher interest payments required and tax payments required in certain circumstances are considered embedded derivatives and should be bifurcated and accounted for at fair value. The Company assesses the value of the embedded derivatives at each balance sheet date. The derivatives had nominal value at the balance sheet date. In conjunction with the issuance of the Convertible Senior Notes, the Company paid $85.4 million to enter into Capped Calls on the Company’s common stock with certain counterparties, which was recorded as a reduction to additional paid-in capital on the consolidated balance sheet. By entering into the Capped Calls, the Company expects to reduce the potential dilution to its common stock (or, in the event the conversion is settled in cash, to provide a source of cash to settle a portion of its cash payment obligation) in the event that at the time of conversion its stock price exceeds the conversion price under the Convertible Senior Notes. The Capped Calls have an initial strike price of $335.90 per share, which represents a premium of 100% over the last reported sale price of the Company’s common stock of $167.95 per share on the date of the transaction (September 3, 2019). The Capped Calls cover 3.5 million shares of common stock. 1.25% Convertible Senior Notes During the three months ended September 30, 2019, the Company repurchased $225.0 million in principal of 1.25% Convertible Senior Notes due September 2021 ($202.9 million net of discount and issuance costs) for total consideration of $648.0 million. The total consideration was comprised of $453.6 million in cash and $194.4 million representing the fair value of the 1.16 million shares issued. The Company allocated $438.6 million of the settlement to the fair value of the equity component and $209.4 million to the debt component, which resulted in a $6.5 million loss on extinguishment for both the three and nine months ended September 30, 2019. In October 2019, the Company repurchased the remaining $120.0 million in principal of 1.25% Convertible Senior Notes due September 2021 ($108.3 million net of discount and issuance costs) for total consideration of $315.0 million. The total consideration was comprised of $210.0 million in cash and $105.0 million representing the fair value of the 0.7 million shares issued. The Company allocated $203.7 million of the settlement to the fair value of the equity component and $111.4 million to the debt component, which resulted in a $3.1 million loss on extinguishment, which will be recorded during the fourth quarter of 2019.
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