Note 2 - Recently Issued Accounting Pronouncements

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Accounting Standards Update and Change in Accounting Principle [Text Block]

2.  Recently Issued Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for convertible instruments resulting in accounting for convertible debt instruments as a single liability measured at its amortized cost. This change will also reduce reported interest expense and increase reported net income as we issued a convertible instrument that was bifurcated according to previously existing rules. In addition, the ASU requires the application of the if-converted method for calculating diluted earnings per share and eliminates the treasury stock method for convertible debt. The ASU is effective commencing with our quarter ending  March 31, 2022. We currently anticipate adopting this ASU using the modified retrospective transition approach.

Upon issuance of the 2.75% convertible senior notes due 2024 (“2.75% Convertible Notes”), cash received was separated into a $192.6 million debt component and a $27.9 million (net of $9.5 million in taxes) equity component. We have been increasing the debt component for the difference between the principal amount and the $192.6 million (“debt discount”) with an offset to interest expense over the life of the loan using an effective interest rate. Upon adoption of ASU 2020-06, interest expense previously recorded and remaining to be recorded from the debt discount will be reversed through retained earnings with an offset to debt, net of tax. We estimate this impact to long-term debt and retained earnings to be between $20 million and $40 million. In addition, using the if-converted method as compared to the treasury stock method may have a material impact to diluted earnings per share if the Company is in a net income position.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance to ease the potential burden in accounting for the effects of the transition away from LIBOR and other reference rates. Also, in January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which provided clarification guidance to ASU 2020-04. These ASUs are effective at our option beginning with our quarter ended March 31, 2020 through December 31, 2022, and we expect to adopt in the second quarter of 2022. As our Third Amended and Restated Credit Agreement dated May 18, 2021, as subsequently amended (the “Credit Agreement”) currently incorporates the use of the secured overnight financing rate as an alternative to LIBOR, we do not expect the adoption of these ASUs to have a material impact on our condensed consolidated financial statements.