Convertible Debt

3 Months Ended

Mar. 31, 2021

6. Convertible Debt

0 Percent Convertible Senior Notes and Call Spread

In April 2021, we completed a $632.5 million offering of convertible senior notes. We used a portion of the net proceeds from the issuance of the 0 percent convertible senior notes, or 0% Notes, to repurchase $247.9 million in principal of our 1% Notes for $257.0 million.

Following the closing of the debt transaction in April 2021, we had the following 0% Notes outstanding (amounts in millions except interest rate and price per share data):

	0% Notes
Outstanding principal balance	$	632.5
Maturity date	April 2026
Interest rate	0 percent
Conversion price per share	$	57.84
Effective conversion price per share with call spread	$	76.39
Total shares of common stock subject to conversion		10.9

In conjunction with the April 2021 offering, we entered into a call spread transaction, which was comprised of purchasing note hedges and selling warrants, to minimize the impact of potential economic dilution upon conversion of our 0% Notes by increasing the effective conversion price on our 0% Notes. We increased our effective conversion price to $76.39 with the same number of underlying shares as our 0% Notes. The call spread cost us $46.9 million, of which $136.7 million was for the note hedge purchase, offset by $89.8 million we received for selling the warrants. Similar to our 0% Notes, our note hedges are subject to adjustment. Additionally, our note hedges are exercisable upon conversion of the 0% Notes. The note hedges will expire upon maturity of the 0% Notes, or April 2026. The note hedges and warrants are separate transactions and are not part of the terms of our 0% Notes. The holders of the 0% Notes do not have any rights with respect to the note hedges and warrants.

0.125 Percent Convertible Senior Notes and Call Spread

At March 31, 2021, we had the following 0.125% Notes outstanding with interest payable semi-annually (amounts in millions except interest rate and price per share data):

	0.125% Notes
Outstanding principal balance	$	548.8
Maturity date	December 2024
Interest rate	0.125 percent
Conversion price per share	$	83.28
Effective conversion price per share with call spread	$	123.38
Total shares of common stock subject to conversion		6.6
Unamortized debt issuance costs	$	8.1

In conjunction with the issuance of our 0.125% Notes in December 2019, we entered into a call spread transaction, which was comprised of purchasing note hedges and selling warrants, to minimize the impact of potential economic dilution upon conversion of our 0.125% Notes by increasing the effective conversion price on our 0.125% Notes. We increased our effective conversion price to $123.38 with the same number of underlying shares as our 0.125% Notes. The call spread cost us $52.6 million, of which $108.7 million was for the note hedge purchase, offset by $56.1 million we received for selling the warrants. Similar to our 0.125% Notes, our note hedges are subject to adjustment. Additionally, our note hedges are exercisable upon conversion of the 0.125% Notes. The note hedges will expire upon maturity of the 0.125% Notes, or December 2024. The note hedges and warrants are separate transactions and are not part of the terms of our 0.125% Notes. The holders of the 0.125% Notes do not have any rights with respect to the note hedges and warrants.

We recorded the amount paid for the note hedges and the amount received for the warrants in additional paid-in capital in our condensed consolidated balance sheet. See our Call Spread accounting policy in Note 2, Significant Accounting Policies, in the Notes to the Condensed Consolidated Financial Statements. We reassess our ability to continue to classify the note hedges and warrants in shareholders’ equity at each reporting period.

1 Percent Convertible Senior Notes

At March 31, 2021, we had the following 1% Notes outstanding with interest payable semi-annually (amounts in millions except interest rate and price per share data):

	1% Notes
Outstanding principal balance	$	309.9
Maturity date	November 2021
Interest rate	1 percent
Conversion price per share	$	66.81
Total shares of common stock subject to conversion		4.6
Unamortized debt issuance costs	$	0.8

In April 2021, we repurchased $247.9 million in aggregate principal amount of our 1% Notes in privately negotiated transactions. As a result, in April 2021, the remaining principal outstanding for our 1% Notes was $62.0 million, resulting in 0.9 million shares of common stock subject to conversion. As a result of the repurchase, we reclassified the repurchased portion of our 1% Notes from current to non-current liabilities on our condensed consolidated balance sheet as of March 31, 2021 because we replaced this portion of our outstanding debt with long-term debt.

Other Terms of Convertible Senior Notes

The 0%, 0.125% and 1% Notes are convertible under certain conditions, at the option of the note holders. We can settle conversions of the notes, at our election, in cash, shares of our common stock or a combination of both. We may not redeem the notes prior to maturity, and we do not have to provide a sinking fund for them. Holders of the notes may require us to purchase some or all of their notes upon the occurrence of certain fundamental changes, as set forth in the indentures governing the notes, at a purchase price equal to 100 percent of the principal amount of the notes to be purchased, plus any accrued and unpaid interest.