Financing Activities

3 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

FINANCING ACTIVITIES

FINANCING ACTIVITIES

On May 1, 2020, the Company completed the public offering of $2.3 billion aggregate principal amount of Convertible Notes. The Convertible Notes bear interest at a rate of 1.25% and will mature on May 1, 2025. Interest on the notes is payable semi-annually in arrears on May 1 and November 1, beginning November 1, 2020.

Holders may convert their Convertible Notes at their option at any time prior to the close of business on the business day immediately preceding February 1, 2025, in the event certain conditions are met, as stated in the offering documents. As of March 31, 2022, the conditions were not met to convert.

Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of common stock, at the Company’s election. The Company intends to settle conversions by paying cash up to the principal amount of the Convertible Notes, with any excess conversion value settled in cash or shares of common stock. The initial conversion rate is 25.9909 shares of common stock per $1,000 principal amount of Convertible Notes (equivalent to an initial conversion price of approximately $38.48 per share of common stock).

Upon issuance, the Company bifurcated the Convertible Notes for accounting purposes between a liability component and an equity component utilizing applicable guidance. The liability component was determined by estimating the fair value of a hypothetical issuance of an identical offering excluding the conversion feature of the Convertible Notes. The initial carrying amount of the equity component was calculated as the difference between the liability component and the face amount of the Convertible Notes.

The Company adopted ASU 2020-06, as of January 1, 2022, utilizing the modified retrospective method approach. See Note 3 for further information. Upon adoption, the Company reclassified the remaining equity component, of $300 million, from Additional paid-in capital to Long-term debt associated with its Convertible Notes, and no longer records amortization of the debt discount to Interest expense. The following table details the equity and liability component recognized related to the Convertible Notes, prior to and following the adoption of ASU 2020-06:

(in millions)	March 31, 2022		December 31, 2021
Equity component:
Carrying amount of Convertible Notes	$	—	$	311
Carrying amount of issuance costs	—		(11)
Net carrying amount	$	—	$	300
Liability component:
Principal amount	$	1,933	$	2,097
Unamortized debt discount	—		(255)
Net carrying amount	$	1,933	$	1,842

The Company recognized interest expense associated with the Convertible Notes as follows:

	Three months ended March 31,
(in millions)	2022		2021
Non-cash amortization of the debt discount	$	—	$	19
Non-cash amortization of debt issuance costs	3		2
Contractual coupon interest	6		7
Total interest expense	$	9	$	28

The unamortized debt issuance costs have historically been recognized as non-cash interest expense based on the 5-year term of the notes, through May 1, 2025, less amounts that were or will be required to be accelerated immediately upon conversion or repurchases. The Company had no changes to conversion terms, contingencies, or exercise prices during the three months ended March 31, 2022.

During the three months ended March 31, 2022, the Company paid $323 million in debt and finance lease obligations, including the extinguishment of $164 million in principal of the Convertible Notes for $230 million in cash. The Company accounted for these repurchases as a partial debt extinguishment, which resulted in (i) a loss of $69 million reflected in Other (gains) losses, net, and (ii) a $3 million reduction in remaining unamortized debt issuance costs in the unaudited Condensed Consolidated Statement of Comprehensive Income (Loss) for the three months ended March 31, 2022. In addition the Company recorded the extinguishment of $30 million in principal of its 5.125% Notes due 2027 for a cash payment of $34 million, which resulted in a loss of $3 million reflected in Other (gains) losses, net, during the three months ended March 31, 2022