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Convertible Senior Notes | 12 Months Ended
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Dec. 31, 2020
Debt Disclosure [Abstract] |
Convertible Senior Notes | (9) Convertible Senior Notes In December 2020, the Company issued $650.0 million aggregate principal amount of 0.750% Convertible Senior Notes due 2025 (the “Notes”) in a private offering. The $650.0 million aggregate principal amount included the full exercise of the option provided to the initial purchaser to purchase an additional $100.0 million principal amount of the Notes. The Notes are senior unsecured obligations of the Company and bear interest at a fixed rate of 0.750% per annum, payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2021. Holders of the Notes may receive additional interest under specified circumstances as outlined in the indenture relating to the issuance of the Notes (the “Indenture”). The N otes will mature on December 15, 2025, unless earlier converted, redeemed or repurchased in accordance with their terms. The total net proceeds from the offering, after deducting initial purchaser discounts and issuance costs, were approximately $634.7 million. The Notes are senior unsecured obligations and rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries. The Notes are convertible into shares of the Company’s class A common stock at an initial conversion rate of 2.5126 shares per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $397.99 per share of class A common stock). The conversion rate is subject to customary anti-dilution adjustments. In addition, following certain events that occur prior to the maturity date or if the Company delivers a notice of redemption, the Company will increase the conversion rate for a holder who elects to convert its notes in connection with such corporate event or notice of redemption, as the case may be, in certain circumstances as provided in the Indenture. Prior to June 15, 2025, the Notes are convertible only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2021 (and only during such calendar quarter), if the last reported sale price of the Company’s class A common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, 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 five consecutive trading day period (the “measurement period”) in which the “trading price” (as defined in the Indendutre) 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 class A common stock and the conversion rate on each such trading day; (3) if the Company calls any or all of the Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceeding the redemption date; and (4) upon occurrence of specified corporate events as described in the Indenture. On or after June 15, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date of the Notes, holders may convert the Notes at any time. Upon conversion of the Notes, the Company will pay or deliver, as the case may be, cash, shares of the Company’s class A common stock or a combination of cash and shares of class A common stock, at the Company’s election. It is the Company’s current intent to settle the principal amount of the Notes with cash. Prior to December 20, 2023, the Company may not redeem the Notes. The Company may redeem for cash all or a portion of the Notes, at its option, on or after December 20, 2023 if the last reported sale price of the Company’s class A common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides a notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. The redemption price will be equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If the Company undergoes a “fundamental change,” as defined in the Indenture, prior to maturity, subject to certain conditions, 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 any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. The Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of at least 25% in principal amount of the outstanding Notes may declare 100% of the principal of, and accrued and unpaid interest, if any, on, all the Notes to be due and payable. During the three months ended December 31, 2020, none of the Notes’ conversion features were triggered and no conversions occurred during the three months ended December 31, 2020. The Notes may be convertible thereafter if one or more of the conversion conditions is satisfied during future measurement periods. In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components. The initial carrying amount of the liability component was determined by measuring the fair value of a similar debt instrument without any associated conversion features. The carrying amount of the equity component (representing the conversion option) was $153.5 million and was determined by deducting the fair value of the liability component from the par value of the Notes. The equity component was recorded in “additional paid-in-capital” in the Company’s Consolidated Balance Sheet and will not be remeasured as long as it continues to meet the conditions for equity classification. The Company incurred approximately $15.3 million in customary offering expenses associated with the Notes (“issuance costs”). In accounting for the issuance costs, the Company allocated the total costs incurred to the liability and equity components of the Notes based on their relative values. Issuance costs attributable to the liability component of $11.6 million were taken as a reduction to the principal amount of the Notes. Issuance costs attributable to the equity component of $3.6 million have been netted against the equity component of the Notes in “additional paid-in-capital” in the Company’s Consolidated Balance Sheet. The excess of the principal amount of the liability component over its carrying amount (the “debt discount”) and the issuance costs attributable to the liability component are amortized to interest expense over the contractual term of the Notes at an effective interest rate of 6.82%. As of December 31, 2020, the net carrying amount of the liablity component of the Notes is classified as a long-term liability in the “Convertible Senior Notes” line item in the Company’s Consolidated Balance Sheet as follows (in thousands):
|  | December 31, |
|  | 2020 |
Principal |  | $ | 650,000 |
Unamortized debt discount |  |  | (152,075 | )
Unamortized issuance costs |  |  | (11,559 | )
Net carrying amount of debt |  | $ | 486,366 |
As of December 31, 2020, the net carrying amount of the equity component of the Notes is classified as permanent equity and included in “additional paid in capital” in the Company’s Consolidated Balance Sheet as follows (in thousands):
|  | December 31, |
|  | 2020 |
Debt discount for conversion option |  | $ | 153,527 |
Issuance costs allocated to equity |  |  | (3,602 | )
Deferred tax liability, net of deferred tax asset, related to debt discount and issuance costs |  |  | (42,115 | )
Net carrying amount of equity |  | $ | 107,810 |
For the year ended December 31, 2020, interest expense related to the Notes was as follows (in thousands):
|  | Year Ended December 31, |
|  | 2020 |
Contractual interest expense |  | $ | 271 |
Amortization of debt discount |  |  | 1,452 |
Amortization of issuance costs allocated to debt |  |  | 91 |
Total interest expense |  | $ | 1,814 |

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