Debt |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 24, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt |
Debt
2.125% Convertible Senior Notes Due 2026
On September 14, 2016, the Company issued $700 million in aggregate principal amount of 2.125% Convertible Senior Notes due 2026 (2.125% Notes). The 2.125% Notes are general unsecured senior obligations of the Company and will mature on September 1, 2026, unless earlier repurchased or converted. Interest is payable in arrears on March 1 and September 1 of each year beginning on March 1, 2017. The 2.125% Notes are governed by the terms of a base indenture and a supplemental indenture (together the 2.125% Indentures) dated September 14, 2016 between the Company and Wells Fargo Bank, N.A., as trustee.
Holders may convert their notes at their option at any time prior to the close of business on the business day immediately preceding June 1, 2026 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2016 (and only during such calendar quarter), if the last reported sale price of the Company's common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events. On or after June 1, 2026 until the close of business on the business day immediately preceding the maturity date, holders may convert their notes at any time, regardless of the foregoing circumstances. 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 the Company's common stock, at the Company's election.
The Company may not redeem the notes prior to the maturity date, and no sinking fund is provided for the notes.
The conversion rate will initially be 125.0031 shares of common stock per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $8.00 per share of common stock). The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, the Company will increase the conversion rate for a holder who elects to convert its notes in connection with such a corporate event in certain circumstances.
If the Company undergoes a fundamental change prior to the maturity date of the notes, holders may require the Company to repurchase for cash all or any portion of their notes at a fundamental change repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
In accounting for the issuance of the 2.125% Notes, the Company separated the 2.125% Notes into liability and equity components. The carrying amounts of the liability component was calculated by measuring the fair value of a similar liability that does not have associated convertible features. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the 2.125% Notes as a whole. The excess of the principal amount of the liability component over its book value (debt discount) is accreted to interest expense over the term of the 2.125% Notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification.
In accounting for the issuance costs related to the 2.125% Notes, the Company allocated the total amount of issuance costs incurred to the liability and equity components based on their relative fair values. Issuance costs attributable to the liability component are being amortized to interest expense over the term of the 2.125% Notes, and the issuance costs attributable to the equity component are netted against the equity component in additional paid-in capital. The Company recorded liability issuance costs of $12 million and equity issuance costs of $8 million.
The 2.125% Notes consisted of the following:
As of September 24, 2016, the remaining life of the 2.125% Notes is approximately 120 months.
Based on the closing price of the Company's common stock of $6.55 on September 23, 2016, the last business day of the third fiscal quarter, the if-converted value of the 2.125% Notes was less than the principal amount thereof.
The effective interest rate of the liability component of the 2.125% Notes is 8%. This interest rate was based on the interest rates of similar liabilities at the time of issuance that did not have associated convertible features. The following table sets forth total interest expense recognized related to the 2.125% Notes for the three months ended September 24, 2016:
The Company also granted an option to the underwriters to purchase an additional $105 million aggregate principal amount of the 2.125% Notes. On September 28, 2016, this option was exercised in full and the Company issued an additional $105 million aggregate principal amount of the 2.125% Notes.
6.75% Senior Notes Due 2019
During the third quarter of 2016, the Company repurchased $404 million in aggregate principal amount of its 6.75% Senior Notes Due 2019 (6.75% Notes) pursuant to a partial tender offer for $442 million, which included payment of accrued and unpaid interest of $2 million. The Company incurred a total loss of $41 million in connection with the foregoing repurchase of the 6.75% Notes. As of September 24, 2016, the outstanding aggregate principal amount of the 6.75% Notes was $196 million.
7.75% Senior Notes Due 2020
During the third quarter of 2016, the Company repurchased $242 million in aggregate principal amount of its 7.75% Senior Notes Due 2020 (7.75% Notes) pursuant to a partial tender offer for $251 million, which included payment of accrued and unpaid interest of $3 million. The Company incurred a total loss of $9 million in connection with the foregoing repurchase of the 7.75% Notes. As of September 24, 2016, the outstanding aggregate principal amount of the 7.75% Notes was $208 million.
On September 28, 2016, the Company redeemed the remaining $208 million in aggregate principal amount of the 7.75% Notes.
7.50% Senior Notes Due 2022
During the third quarter of 2016, the Company repurchased $125 million in aggregate principal amount of its 7.50% Senior Notes Due 2022 (7.50% Notes) pursuant to a partial tender offer for $135 million, which included payment of accrued and unpaid interest of $1 million. The Company incurred a total loss of $10 million in connection with the foregoing repurchase of the 7.50% Notes. As of September 24, 2016, the outstanding aggregate principal amount of the 7.50% Notes was $350 million.
7.00% Senior Notes Due 2024
During the third quarter of 2016, the Company repurchased $25 million in aggregate principal amount of its 7.00% Senior Notes Due 2024 (7.00% Notes) pursuant to a partial tender offer for $26 million, which included payment of accrued and unpaid interest that was less than $1 million. The Company incurred a total loss of $1 million in connection with the foregoing repurchase of the 7.00% Notes. As of September 24, 2016, the outstanding aggregate principal amount of the 7.00% Notes was $475 million.
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