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DEBT AND OTHER COMMITMENTS | 12 Months Ended
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Dec. 29, 2024
Debt Disclosure [Abstract] |
DEBT AND OTHER COMMITMENTS |
6. DEBT AND OTHER COMMITMENTS
Summary of Term Debt Obligations
In millions | December 29, 2024 |  | December 31, 2023
Principal amount of 2025 Term Notes outstanding | $ | 500 |  |  | $ | 500 |
Principal amount of 2026 Term Notes outstanding | 500 |  |  | — |
Principal amount of 2027 Term Notes outstanding | 500 |  |  | 500 |
Principal amount of 2031 Term Notes outstanding | 500 |  |  | 500 |
Unamortized discounts and debt issuance costs | (11) |  |  | (11) |
Net carrying amount of term debt | 1,989 |  |  | 1,489 |
Less: current portion | 499 |  |  | — |
Term debt, non-current | $ | 1,490 |  |  | $ | 1,489 |
Fair value of term debt outstanding (Level 2) | $ | 1,940 |  |  | $ | 1,440 |
Interest expense recognized on our term notes and delayed draw term loan, which included amortization of debt discounts and issuance costs, was $99 million, $74 million, and $21 million in 2024, 2023 and 2022, respectively. 4.650% Term Notes due 2026 (2026 Term Notes) On September 9, 2024, we issued $500 million aggregate principal amount of 2026 Term Notes. After deducting discounts and issuance costs, we received net proceeds of $497 million, which were used to repay a portion of the outstanding debt under the Delayed Draw Credit Agreement. The 2026 Term Notes, which mature on September 9, 2026, accrue interest at a rate of 4.650% per annum, payable semi-annually on March 9 and September 9 of each year, beginning on March 9, 2025. We may redeem for cash all or any portion of the 2026 Term Notes, at our option, at any time prior to maturity at make-whole premium redemption prices as defined in the form of the notes. 5.800% Term Notes due 2025 (2025 Term Notes) and 5.750% Term Notes due 2027 (2027 Term Notes) In December 2022, we issued $500 million aggregate principal amount of 2025 Term Notes and $500 million aggregate principal amount of 2027 Term Notes. After deducting discounts and issuance costs, we received net proceeds of $991 million. The 2025 Notes, which mature on December 12, 2025, and the 2027 Notes, which mature on December 13, 2027, accrue interest at a rate of 5.800% and 5.750% per annum, respectively, payable semi-annually. Interest for the 2025 Notes is payable on June 12 and December 12 of each year and interest for the 2027 Notes is payable on June 13 and December 13 of each year, beginning in June 2023. We may redeem for cash all or any portion of the 2025 or 2027 Term Notes, at our option, at any time prior to maturity. Prior to November 12, 2025 for the 2025 Notes and prior to November 13, 2027 for the 2027 Notes, the notes are redeemable at make-whole premium redemption prices as defined in the applicable forms of note. After November 12, 2025 and November 13, 2027, respectively, the notes are redeemable at a redemption price equal to 100% of the principal to be redeemed, plus accrued and unpaid interest up to, but excluding, the redemption date. 0.550% Term Notes due 2023 (2023 Term Notes) and 2.550% Term Notes due 2031 (2031 Term Notes) In March 2021, we issued $500 million aggregate principal amount of 2023 Term Notes and $500 million aggregate principal amount of 2031 Term Notes. After deducting discounts and issuance costs, we received net proceeds of $992 million. The 2023 Notes matured and were repaid in cash on March 23, 2023. The 2031 Notes, which mature on March 23, 2031, accrue interest at a rate of 2.550% per annum, payable semi-annually on March 23 and September 23 of each year. We may redeem for cash all or any portion of the 2031 Term Notes, at our option, at any time prior to maturity. Prior to December 23, 2030, the notes are redeemable at make-whole premium redemption prices as defined in the form of the notes. After December 23, 2030, the notes are redeemable at a redemption price equal to 100% of the principal to be redeemed, plus accrued and unpaid interest up to, but excluding, the redemption date. Delayed Draw Term Loan due 2025 On June 17, 2024, we entered into a 364-day delayed draw credit agreement (the Delayed Draw Credit Agreement), which provided us with a senior unsecured term loan credit facility in an aggregate principal amount of up to $750 million (the Delayed Draw Credit Facility). On June 20, 2024, we borrowed $750 million on the credit facility in order to provide a portion of the Disposal Funding to GRAIL as part of the Spin-Off. The delayed draw term loan incurred interest at a rate of 6.7%. On September 9, 2024, we repaid the full principal outstanding on the Delayed Draw Credit Facility, as well as accrued interest, in an aggregate amount of $761 million and terminated the Delayed Draw Credit Agreement. We recognized a loss on debt extinguishment of $5 million in 2024, included in interest expense in the consolidated statements of operations, related to the write-off of unamortized debt issuance costs. 0% Convertible Senior Notes due 2023 (2023 Convertible Notes) In August 2018, we issued $750 million aggregate principal amount of 2023 Convertible Notes. The notes were convertible into cash, shares of common stock or a combination of cash and shares of common stock, at our election, based on conversion rates as defined in the indenture. The 2023 Convertible Notes matured on August 15, 2023, at which time the principal was repaid in cash. We did not issue any shares of common stock. The 2023 Convertible Notes were initially accounted for in accordance with authoritative guidance for convertible debt instruments that may be settled in cash upon conversion. The guidance required the carrying amount of the liability component to be estimated by estimating the fair value of a similar liability that does not have an associated conversion feature. Because at issuance we had no outstanding non-convertible public debt, we determined that market-traded senior, unsecured corporate bonds represented a similar liability without a conversion option. Based on market data available for publicly traded, senior, unsecured corporate bonds issued by companies in our industry, and with similar maturities to the 2023 Convertible Notes, we estimated an implied interest rate of 3.7%, assuming no conversion option. The estimated implied interest rate was applied to the 2023 Convertible Notes, which resulted in a fair value of the liability component in aggregate of $624 million upon issuance, calculated as the present value of implied future payments based on the $750 million aggregate principal amount. The $126 million difference ($93 million, net of tax) between the aggregate principal amount of $750 million and the estimated fair value of the liability component was recorded in additional paid-in capital as the 2023 Convertible Notes were not considered redeemable. As of January 3, 2022, we adopted ASU 2020-06, which removed the requirement to separate the embedded conversion feature from the notes and requires the notes to be accounted for as a single liability measured at amortized cost. Accordingly, we reclassified the unamortized debt discount from additional paid-in capital to convertible senior notes in the consolidated balance sheets on January 3, 2022. This resulted in an increase to retained earnings and a decrease to additional paid-in capital of $61 million and $93 million, respectively. Interest expense recognized on our 2023 Convertible Notes was immaterial in both 2023 and 2022. Revolving Credit Agreement On January 4, 2023, we entered into a new credit agreement (the Revolving Credit Agreement), which provides us with a $750 million senior unsecured five-year revolving credit facility, including a $40 million sublimit for swingline borrowings and a $50 million sublimit for letters of credit (the Revolving Credit Facility). Proceeds of the loans under the Revolving Credit Facility may be used to finance working capital needs and for general corporate purposes. The credit agreement dated as of March 8, 2021 and the commitments thereunder were terminated as of January 4, 2023. The Revolving Credit Facility matures, and all amounts outstanding become due and payable in full, on January 4, 2028, subject to two one-year extensions at our option, the consent of the extending lenders and certain other conditions. We may prepay amounts borrowed and terminate commitments under the Revolving Credit Facility at any time without premium or penalty. As of December 29, 2024, there were no borrowings or letters of credit outstanding under the credit facility, and we were in compliance with all financial and operating covenants. Loans under the Revolving Credit Facility will have a variable interest rate based on either the term secured overnight financing rate (SOFR) or the alternate base rate, plus an applicable rate that varies with our debt rating and, in the case of loans bearing interest based on term SOFR, a credit spread adjustment equal to 0.10% per annum. The Revolving Credit Agreement includes an option for us to elect to increase commitments under the credit facility or enter into one or more tranches of term loans in the aggregate principal amount of up to $250 million, subject to consent of the lenders providing the additional commitments or loans and certain other conditions. The Revolving Credit Agreement contains financial and operating covenants. Pursuant to the Revolving Credit Agreement, we are required to maintain a ratio of total debt to adjusted annual earnings before interest, taxes, depreciation and amortization (EBITDA), calculated based on the four consecutive fiscal quarters ending with the most recent fiscal quarter, of not greater than 3.50 to 1.00 as of the end of each fiscal quarter. Upon the consummation of any Qualified Acquisition (as defined in the Revolving Credit Agreement) and us providing notice to the Administrative Agent, the ratio increases to 4.00 to 1.00 for the fiscal quarter in which the acquisition is consummated and the three consecutive fiscal quarters thereafter. The operating covenants include, among other things, limitations on (i) the incurrence of indebtedness by our subsidiaries, (ii) liens on our and our subsidiaries assets, and (iii) certain fundamental changes and the disposition of assets by us and our subsidiaries. The Credit Agreement contains other customary covenants, representations and warranties, and events of default. Leases As of December 29, 2024, the maturities of our operating lease liabilities were as follows:
In millions |
2025 | $ | 105
2026 | 105
2027 | 103
2028 | 84
2029 | 81
Thereafter | 275
Total remaining lease payments | 753
Less: imputed interest | (120)
Total operating lease liabilities | 633
Less: current portion | (79)
Long-term operating lease liabilities | $ | 554
Weighted-average remaining lease term | 8.0 years
Weighted-average discount rate | 4.4 | %
The components of our lease costs were as follows:
In millions | 2024 |  | 2023 |  | 2022
Operating lease costs | $ | 93 |  |  | $ | 116 |  |  | $ | 112 |
Sublease income | (19) |  |  | (20) |  |  | (20) |
Variable lease costs(1) | 25 |  |  | 27 |  |  | 20 |
Total lease costs | $ | 99 |  |  | $ | 123 |  |  | $ | 112 |
_____________ (1)Variable lease costs include non-fixed maintenance charges and property taxes. Purchase Obligations In the normal course of business, we enter into agreements to purchase goods or services that are not cancelable without penalty, primarily related to licensing and supply arrangements. For those agreements with variable terms, we do not estimate the total obligation beyond any minimum quantities or pricing as of the reporting date. Licensing agreements under which we commit to minimum royalty payments, some of which are subject to adjustment, may be terminated prior to the expiration of underlying intellectual property under certain circumstances. Annual minimum payments for noncancelable purchase obligations as of December 29, 2024 totaled $212 million, approximately half of which are due within the next twelve months.

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