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CAPITAL STOCK | 12 Months Ended
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Dec. 31, 2022
Equity [Abstract] |
CAPITAL STOCK | CAPITAL STOCKEARNINGS PER SHARE — The following table reconciles net earnings attributable to common shareowners and the weighted-average shares outstanding used to calculate basic and diluted earnings per share for the fiscal years ended December 31, 2022, January 1, 2022, and January 2, 2021.
| 2022 |  | 2021 |  | 2020
Numerator (in millions): |  |  |  |  |
Net Earnings from Continuing Operations Attributable to Common Shareowners | $ | 164.3 |  |  | $ | 1,538.3 |  |  | $ | 1,129.8 |
Add: Contract adjustment payments accretion | 1.2 |  |  | 1.3 |  |  | 1.7 |
Net Earnings from Continuing Operations Attributable to Common Shareowners - Diluted | 165.5 |  |  | 1,539.6 |  |  | 1,131.5 |
Net earnings from discontinued operations | 892.4 |  |  | 136.7 |  |  | 79.9 |
Net Earnings Attributable to Common Shareowners - Diluted | $ | 1,057.9 |  |  | $ | 1,676.3 |  |  | $ | 1,211.4 |
| 2022 |  | 2021 |  | 2020
Denominator (in thousands): |  |  |  |  |
Basic weighted-average shares outstanding | 148,170 |  |  | 158,760 |  |  | 154,176 |
Dilutive effect of stock contracts and awards | 8,383 |  |  | 6,264 |  |  | 8,251 |
Diluted weighted-average shares outstanding | 156,553 |  |  | 165,024 |  |  | 162,427 |
Earnings per share of common stock: |  |  |  |  |
Basic earnings per share of common stock: |  |  |  |  |
Continuing operations | $ | 1.11 |  |  | $ | 9.69 |  |  | $ | 7.33 |
Discontinued operations | $ | 6.02 |  |  | $ | 0.86 |  |  | $ | 0.52 |
Total basic earnings per share of common stock | $ | 7.13 |  |  | $ | 10.55 |  |  | $ | 7.85 |
Diluted earnings per share of common stock: |  |  |  |  |
Continuing operations | $ | 1.06 |  |  | $ | 9.33 |  |  | $ | 6.97 |
Discontinued operations | $ | 5.70 |  |  | $ | 0.83 |  |  | $ | 0.49 |
Total dilutive earnings per share of common stock | $ | 6.76 |  |  | $ | 10.16 |  |  | $ | 7.46 |
The following weighted-average stock options were not included in the computation of weighted-average diluted shares outstanding because the effect would be anti-dilutive (in thousands):
| 2022 |  | 2021 |  | 2020
Number of stock options | 4,019 |  |  | 1,039 |  |  | 2,376 |
In November 2019, the Company issued 7,500,000 Equity Units with a total notional value of $750.0 million (“2019 Equity Units”). Each unit had a stated amount of $100 and initial ly consisted of a three-year forward stock purchase contract (“2022 Purchase Contracts”) for the purchase of a variable number of shares of common stock, on November 15, 2022, for a price of $100 and a 10% beneficial ownership interest in one share of 0% Series D Cumulative Perpetual Convertible Preferred Stock, without par, with a liquidation preference of $1,000 per share (“Series D Preferred Stock”). The shares associated with the forward stock purchase contracts component of the 2019 Equity Units have been reflected in diluted earnings per share using the if-converted method. In November 2022, the Company generated cash proceeds of $750 million from the successful remarketing of the Series D Preferred Stock (the "Remarketed Series D Preferred Stock"). Upon completion of the remarketing, the holders of the 2019 Equity Units received 4,723,500 common shares and the Company issued 750,000 shares of Remarketed Series D Preferred Stock. Holders of the Remarketed Series D Preferred Stock were entitled to receive cumulative dividends, if declared by the Board of Directors, at an initial fixed rate equal to 7.5% per annum of the $1,000 per share liquidation preference (equivalent to $75.00 per annum per share). On November 15, 2022, the Company informed holders that it would redeem all outstanding shares of the Remarketed Series D Preferred Stock on December 22, 2022 at $1,007.71 per share in cash, which was equal to 100% of the liquidation preference of a share of Remarketed Series D Preferred Stock, plus accumulated and unpaid dividends to, but excluding December 22, 2022. In December 2022, the Company redeemed the Remarketed Series D Preferred Stock, paying $750 million in cash. Upon the adoption of ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), beginning in the first quarter of 2022, the common shares that would be required to settle the applicable conversion value of the Series D Preferred Stock were included in the denominator of diluted earnings per share using the if-converted method. In accordance with the standard, the Company increased weighted-average shares outstanding used to calculate diluted earnings per share for the year ended December 31, 2022 by 3.6 million shares. In May 2017, the Company issued 7,500,000 Equity Units with a total notional value of $750.0 million (“2017 Equity Units”). Each unit had a stated amount of $100 and initially consisted of a three-year forward stock purchase contract (“2020 Purchase Contracts”) for the purchase of a variable number of shares of common stock, on May 15, 2020, for a price of $100, and a 10% beneficial ownership interest in one share of 0% Series C Cumulative Perpetual Convertible Preferred Stock, without par, with a liquidation preference of $1,000 per share (“Series C Preferred Stock”). The shares associated with the forward stock purchase contracts component of the 2017 Equity Units have been reflected in diluted earnings per share using the if-converted method. In May 2020, the Company successfully remarketed the Series C Preferred Stock (the “Remarketed Series C Preferred Stock”) resulting in cash proceeds of $750.0 million. Upon completion of the remarketing, the holders of the 2017 Equity Units received 5,463,750 common shares and the Company issued 750,000 shares of Remarketed Series C Preferred Stock, without par, with a liquidation preference of $1,000 per share. Holders of the Remarketed Series C Preferred Stock were entitled to receive cumulative dividends, if declared by the Board of Directors, at an initial fixed rate equal to 5.0% per annum of the $1,000 per share liquidation preference (equivalent to $50.00 per annum per share). Beginning on May 15, 2020, the holders had the option to convert the Remarketed Series C Preferred Stock into common stock. At the election of the Company, upon conversion, the Company could deliver cash, common stock, or a combination thereof. In connection with the remarketing, the conversion rate was reset to 6.7352 shares of the Company's common stock per one share of Remarketed Series C Preferred Stock, which was equivalent to a conversion price of approximately $148.47 per share of common stock. On April 28, 2021, the Company informed holders that it would redeem all outstanding shares of the Remarketed Series C Preferred Stock on June 3, 2021 at $1,002.50 per share in cash, which was equal to 100% of the liquidation preference of a share of Remarketed Series C Preferred Stock, plus accumulated and unpaid dividends to, but excluding June 3, 2021. If a holder elected to convert its shares of Remarketed Series C Preferred Stock prior to June 3, 2021, the Company elected a combination settlement with a specified cash amount of $1,000 per share. In June 2021, the Company redeemed the Remarketed Series C Preferred Stock and settled all conversions, paying $750 million in cash and issuing 1,469,055 common shares. The conversion rate used was 6.7548 (equivalent to a conversion price set at $148.04 per common share). Prior to the Series C redemption date, the Remarketed Series C Preferred Stock was excluded from the denominator of the diluted earnings per share calculation on the basis that the Remarketed Series C Preferred Stock would be settled in cash except to the extent that the conversion value exceeded its liquidation preference. Therefore, before any redemption or conversion, the common shares that would be required to settle the applicable conversion value in excess of the liquidation preference were included in the denominator of diluted earnings per share in periods in which they were dilutive. See “Other Equity Arrangements” below for further details of the above transactions. COMMON STOCK ACTIVITY — Common stock activity for 2022, 2021 and 2020 was as follows:
| 2022 |  | 2021 |  | 2020
Outstanding, beginning of year | 163,328,776 |  |  | 160,752,262 |  |  | 153,506,409 |
Issued from treasury | 5,711,974 |  |  | 3,105,587 |  |  | 7,474,394 |
Returned to treasury | (16,057,220) |  |  | (529,073) |  |  | (228,541) |
Outstanding, end of year | 152,983,530 |  |  | 163,328,776 |  |  | 160,752,262 |
Shares subject to the forward share purchase contract | (3,645,510) |  |  | (3,645,510) |  |  | (3,645,510) |
Outstanding, less shares subject to the forward share purchase contract | 149,338,020 |  |  | 159,683,266 |  |  | 157,106,752 |
In March 2022, the Company executed accelerated share repurchase ("ASR") agreements with a notional amount of $2.0 billion, which was funded through borrowings under one of its existing 364-Day committed credit facilities. The ASR terms provided for an initial delivery of 85% of the total notional share equivalent at execution or 10,756,770 shares of common stock. In May 2022, the Company received an additional 3,211,317 shares in aggregate, determined by the volume-weighted average price of the Company’s common stock during the term of the transaction. The final shares delivered reflect a blended settlement price of $143.18 per share for the entire transaction. In February 2022, the Company also executed open market share repurchases for a total of 1,888,601 shares of common stock for $300.0 million. Upon completion of the remarketing of the Series D Preferred Stock in November 2022, the holders of the 2019 Equity Units received 4,723,500 common shares and the Company issued 750,000 shares of Remarketed Series D Preferred Stock. Upon completion of the remarketing of the Series C Preferred Stock in May 2020, the holders of the 2017 Equity Units received 5,463,750 shares of common stock and the Company issued 750,000 shares of Remarketed Series C Preferred Stock. In June 2021, the Company redeemed the Remarketed Series C Preferred Stock and settled all conversions, paying $750 million in cash and issuing 1,469,055 common shares. In March 2015, the Company entered into a forward share purchase contract with a financial institution counterparty for 3,645,510 shares of common stock. The contract obligates the Company to pay $350.0 million, plus an additional amount related to the forward component of the contract. In November 2022, the Company amended the forward share purchase contract and updated the final settlement date to November 2024, or earlier at the Company's option. The reduction of common shares outstanding was recorded at the inception of the forward share purchase contract in March 2015 and factored into the calculation of weighted-average shares outstanding at that time. COMMON STOCK RESERVED — Common stock shares reserved for issuance under various employee and director stock plans at December 31, 2022 and January 1, 2022 are as follows:
| 2022 |  | 2021
Employee stock purchase plan | 1,251,699 |  |  | 1,388,655 |
Other stock-based compensation plans | 8,403,765 |  |  | 5,260,005 |
Total shares reserved | 9,655,464 |  |  | 6,648,660 |
STOCK-BASED COMPENSATION PLANS — The Company has stock-based compensation plans for salaried employees and non-employee members of the Board of Directors. The plans provide for discretionary grants of stock options, restricted stock units and other stock-based awards. On February 16, 2022, the Board of Directors adopted the 2022 Omnibus Award Plan (the “2022 Plan”) and authorized the issuance of 9,800,000 shares of the Company’s common stock in connection with awards pursuant to the 2022 Plan and no further awards will be issued under the Company’s 2018 Omnibus Award Plan (the “2018 Plan”). As discussed further below, the Company has granted stock options, restricted share units and awards, performance stock units, and long-term performance awards, under the 2022 Plan and 2018 Plan to senior management employees and non-employee members of the Board of Directors. The plans are generally administered by the Compensation and Talent Development Committee of the Board of Directors, consisting of non-employee directors. Stock Option Valuation Assumptions: Stock options are granted at the fair market value of the Company’s common stock on the date of grant and have a maximum 10-year term. Generally, stock option grants vest ratably over three or four years from the date of grant. The following describes how certain assumptions affecting the estimated fair value of stock options are determined: the expected volatility is based on an average of the market implied volatility and historical volatility for the expected life; the dividend yield is computed as the annualized dividend rate at the date of the grant divided by the strike price of the stock option; the risk-free interest rate is based on U.S. Treasury securities with maturities equal to the expected life of the option; and a forfeiture rate of seven to nine percent is assumed. The Company uses historical data in order to estimate forfeitures and holding period behavior for valuation purposes. The fair value of stock option grants is estimated on the date of grant using the Black-Scholes option pricing model. The following weighted-average assumptions were used to value grants made in 2022, 2021 and 2020:
| 2022 |  | 2021 |  | 2020
Average expected volatility | 38.6 | % |  | 34.0 | % |  | 35.0 | %
Dividend yield | 3.7 | % |  | 1.6 | % |  | 1.6 | %
Risk-free interest rate | 3.2 | % |  | 1.3 | % |  | 0.4 | %
Expected life | 4.2 years |  | 5.3 years |  | 5.3 years
Fair value per option | $ | 20.00 |  |  | $ | 52.39 |  |  | $ | 48.36 |
Weighted-average vesting period | 1.7 years |  | 2.9 years |  | 2.8 years
Stock Options: The number of stock options and weighted-average exercise prices as of December 31, 2022 are as follows:
| Options |  | Price
Outstanding, beginning of year | 5,573,672 |  |  | $ | 151.46 |
Granted | 868,139 |  |  | 78.83 |
Exercised | (295,451) |  |  | 86.30 |
Forfeited | (864,647) |  |  | 169.79 |
Outstanding, end of year | 5,281,713 |  |  | $ | 140.22 |
Exercisable, end of year | 3,591,149 |  |  | $ | 145.59 |
At December 31, 2022, the range of exercise prices on outstanding stock options was $77.83 to $193.97 per share. Stock option expense was $27.1 million, $36.4 million and $31.6 million for the years ended December 31, 2022, January 1, 2022 and January 2, 2021, respectively. At December 31, 2022, the Company had $40.5 million of unrecognized pre-tax compensation expense for stock options. This expense will be recognized over the remaining vesting periods which are 2.3 years on a weighted-average basis. During 2022, the Company received $25.5 million in cash from the exercise of stock options. The related cash tax benefit from the exercise of these options wa s $1.2 million. During 2022, 2021 and 2020, the total intrinsic value of options exercised was $4.6 million, $85.3 million and $104.3 million, respectively. When options are exercised, the related shares are issued from treasury stock. An excess tax benefit is generated on the extent to which the actual gain, or spread, an optionee receives upon exercise of an option exceeds the fair value determined at the grant date; that excess spread over the fair value of the option times the applicable tax rate represents the excess tax benefit. During 2022, the shortfall recognized was $0.1 million. During 2021 and 2020, the excess tax benefit arising from tax deductions in excess of recognized compensation cost totaled $14.1 million and $17.6 million, respectively, and was recorded in income tax expense. Outstanding and exercisable stock option information at December 31, 2022 follows:
| Outstanding Stock Options |  | Exercisable Stock Options
Exercise Price Ranges | Options |  | Weighted- Average Remaining Contractual Life |  | Weighted- Average Exercise Price |  | Options |  | Weighted- Average Remaining Contractual Life |  | Weighted- Average Exercise Price
$100.00 and below | 1,045,223 |  |  | 8.29 |  | $ | 80.46 |  |  | 207,890 |  |  | 1.69 |  | $ | 91.05 |
100.01 — 165.00 | 2,257,043 |  |  | 5.24 |  | 132.05 |  |  | 2,078,188 |  |  | 5.05 |  | 131.04 |
165.01 — higher | 1,979,447 |  |  | 7.10 |  | 181.09 |  |  | 1,305,071 |  |  | 6.37 |  | 177.45 |
| 5,281,713 |  |  | 6.54 |  | $ | 140.22 |  |  | 3,591,149 |  |  | 5.34 |  | $ | 145.59 |
Compensation cost for new grants is recognized on a straight-line basis over the vesting period. The expense for retirement eligible employees (those aged 55 and over and with 10 or more years of service) is recognized by the date they become retirement eligible, as such employees may retain their options for the 10-year contractual term in the event they retire prior to the end of the vesting period stipulated in the grant. As of December 31, 2022, both the aggregate intrinsic value of stock options outstanding and stock options exercisable was zero. Employee Stock Purchase Plan: The Employee Stock Purchase Plan (“ESPP”) enables eligible employees in the United States, Canada and Israel to purchase shares of the Company's common stock at the lower of 85.0% of the fair market value of the shares on the grant date ($151.46 per share for fiscal year 2022 purchases) or 85.0% of the fair market value of the shares on the last business day of each month. A maximum of 1,600,000 shares are authorized for subscription. During 2022, 2021 and 2020, 136,956 shares, 92,307 shares and 119,038 shares, respectively, were issued under the plan at average prices of $96.09, $150.21, and $110.97 per share, respectively, and the intrinsic value of the ESPP purchases was $2.3 million, $3.9 million and $3.3 million, respectively. For 2022, the Company received $13.2 million in cash from ESPP purchases, and there was no related tax benefit. The fair value of ESPP shares was estimated using the Black-Scholes option pricing model. ESPP compensation cost is recognized ratably over the one-year term based on actual employee stock purchases under the plan. The fair value of the employees’ purchase rights under the ESPP was estimated using the following assumptions for 2022, 2021 and 2020, respectively: dividend yield of 1.7%, 1.6% and 1.7%; expected volatility of 25.0%, 55.0% and 28.0%; risk-free interest rates of 0.2%, 0.1%, and 1.6%; and expected lives of one year. The weighted-average fair value of those purchase rights granted in 2022, 2021 and 2020 was $38.51, $45.46 and $41.02, respectively. Total compensation expense recognized for ESPP was $3.3 million in 2022, $4.4 million in 2021 and $3.9 million in 2020. Restricted Share Units and Awards: Compensation cost for restricted share units and awards, including restricted shares granted to French employees in lieu of RSUs, (collectively “RSUs”) granted to employees is recognized ratably over the vesting term, which varies but is generally three or four years. RSU grants totaled 870,848 shares, 463,084 shares and 325,448 shares in 2022, 2021 and 2020, respectively. The weighted-average grant date fair value of RSUs granted in 2022, 2021 and 2020 was $85.05, $193.66 and $165.44 per share, respectively. Total compensation expense recognized for RSUs amounted to $50.6 million, $47.3 million and $35.6 million in 2022, 2021 and 2020, respectively. The actual tax benefit received related to the shares that were delivered in 2022 was $6.2 million. The shortfall recognized in 2022 was $3.6 million. The e xcess tax benefit recognized in 2021 and 2020 was $2.5 million and $2.3 million, respectively. As of December 31, 2022, unrecognized compensation expense for RSUs amounted to $94.1 million and will be recognized over a weighted-average period of 1.9 years. A summary of non-vested restricted share units and award activity as of December 31, 2022, and changes during the year then ended is as follows:
| Restricted Share Units & Awards |  | Weighted-Average Grant Date Fair Value
Non-vested at January 1, 2022 | 978,351 |  |  | $ | 173.06 |
Granted | 870,848 |  |  | 85.05 |
Vested | (308,783) |  |  | 163.11 |
Forfeited | (273,954) |  |  | 171.08 |
Non-vested at December 31, 2022 | 1,266,462 |  |  | $ | 115.02 |
The total fair value of vested RSUs (market value on the date vested) during 2022, 2021 and 2020 was $38.9 million, $53.3 million and $58.5 million, respectively. Prior to 2020, non-employee members of the Board of Directors received annual restricted share-based grants which must be cash settled and accordingly mark-to-market accounting is applied. In 2022, the Company recognized $9.8 million of income for these awards. In 2021 and 2020, the Company recognized $1.1 million and $1.6 million of expense for these awards, respectively. Beginning in 2020, the annual grant issued to non-employee members of the Board of Directors is stock settled. The expense related to the annual grant in 2022, 2021, and 2020 was $1.8 million, $2.0 million, and $1.4 million respectively. Additionally, members of the Board of Directors were granted restricted share units for which compensation expense of $1.2 million, $1.4 million, and $1.0 million was recognized for 2022, 2021 and 2020, respectively. Management Incentive Compensation Plan Performance Stock Units: In 2020 and 2019, the Company granted Performance Stock Units (collectively "MICP-PSUs") under the Management Incentive Compensation Plan ("MICP") to participating employees. Awards are payable in shares of common stock and generally no award is made if the employee terminates employment prior to the settlement dates. The delivery of the shares related to the 2020 and 2019 MICP-PSU grant will occur ratably in 2021, 2022, and 2023 for the 2020 MICP and in 2020, 2021, and 2022 for the 2019 MICP. The total shares to be delivered are based on actual 2020 and 2019 performance in relation to the established goals. A summary of the activity pertaining to the maximum number of shares that may be issued is as follows:
| MICP PSUs |  | Weighted-Average Grant Date Fair Value
Non-vested at January 1, 2022 | 249,730 |  |  | $ | 100.73 |
Granted | — |  |  | — |
Vested | (144,923) |  |  | 104.32 |
Forfeited | (37,109) |  |  | 99.75 |
Non-vested at December 31, 2022 | 67,698 |  |  | $ | 93.58 |
Compensation cost for these performance awards is recognized ratably over the vesting term of three years. Total expense recognized in 2022, 2021 and 2020 related to these MICP-PSUs approximated $9.1 million, $15.7 million and $18.5 million, respectively. The actual tax benefit received related to the shares that were delivered in 2022 and 2021 was $3.6 million a nd $5.6 million, respectively. Long-Term Performance Awards: The Company has granted Long-Term Performance Awards (“LTIP”) under its 2022 Omnibus Award Plan and 2018 Omnibus Award Plan to senior management employees for achieving Company performance measures. Awards are payable in shares of common stock, which may be restricted if the employee has not achieved certain stock ownership levels, and generally no award is made if the employee terminates employment prior to the settlement date. LTIP grants were made in 2020, 2021 and 2022. Each grant has two separate annual performance goals for each year within the respective three-year performance period and one market-based metric measured over the three-year performance period. Earnings per share and cash flow return on investment represent 75% of the grant value. The market-based metric, representing 25% of the total grant value measures the Company’s common stock return relative to peers over the three-year performance period. The ultimate delivery of shares will occur in 2023, 2024, and 2025 for the 2020, 2021 and 2022 grants, respectively. Share settlements are based on actual performance in relation to these goals. In 2022, income of $2.4 million was recognized related to these performance awards. Expense recognized for these performance awards amounted to $11.1 million in 2021 and $17.1 million in 2020. With the exception of the market-based metric comprising 25% of the award, in the event performance goals are not met, compensation cost is not recognized and any previously recognized compensation cost is reversed. The actual tax benefit received related to the shares that were delivered in 2022 and 2021 was $1.3 million and $0.8 million, respectively. The shortfall recognized in 2022 was less than $0.1 million. The excess tax benefit recognized was $0.1 million and $0.7 million in 2021 and 2020, respectively. A summary of the activity pertaining to the maximum number of shares that may be issued is as follows:
| LTIP Units |  | Weighted-Average Grant Date Fair Value
Non-vested at January 1, 2022 | 649,806 |  |  | $ | 145.90 |
Granted | 250,518 |  |  | 157.05 |
Vested | (92,589) |  |  | 123.56 |
Forfeited | (273,149) |  |  | 139.67 |
Non-vested at December 31, 2022 | 534,586 |  |  | $ | 158.18 |
OTHER EQUITY ARRANGEMENTS 2019 Equity Units and Capped Call Transactions In November 2019, in conjunction with the issuance of the 2019 Equity Units, as further discussed above, the Company received approximately $734.5 million in cash proceeds, net of offering expenses and underwriting costs and commissions. The proceeds were attributed to the issuance of 750,000 shares of Series D Preferred Stock for $620.3 million and $114.2 million for the present value of the quarterly payments to holders of the 2022 Purchase Contracts (“Contract Adjustment Payments”), as discussed further below. The proceeds were used, together with cash on hand, to redeem long-term debt. The Company also used $19.2 million of the proceeds to enter into capped call transactions utilized to hedge potential economic dilution as described in more detail below. The 2019 Equity Units were accounted for as one unit of account based on the economic linkage between the 2022 Purchase Contracts and Series D Preferred Stock, as well as the combination criteria outlined in ASC 815. The 2019 Equity Units represented mandatorily convertible preferred stock. In November 2019, the Company issued 750,000 shares of Series D Preferred Stock, without par, with a liquidation preference of $1,000 per share. The convertible preferred stock initially did not bear any dividends and the liquidation preference of the convertible preferred stock did not accrete. The convertible preferred stock had no maturity date and remained outstanding unless converted by holders or redeemed by the Company. Holders of shares of the convertible preferred stock generally had no voting rights. The Series D Preferred Stock was pledged as collateral to support holders’ purchase obligations under the 2022 Purchase Contracts. In November 2022, upon completion of the remarketing, the holders of the 2019 Equity Units converted their Series D Preferred Stock, valued at $620.3 million, and received 4,723,500 common shares using a reference price of $131.32 per common share. The Company generated cash proceeds of $750.0 million from the successful remarketing and issued 750,000 shares of Remarketed Series D Preferred Stock. The Company paid Contract Adjustment Payments to holders of the 2022 Purchase Contracts at a rate of 5.25% per annum, payable quarterly in arrears on February 15, May 15, August 15 and November 15, which commenced on February 15, 2020. The $114.2 million present value of the Contract Adjustment Payments reduced the Series D Preferred Stock at inception. As each quarterly Contract Adjustment Payment was made, the related liability was reduced and the difference between the cash payment and the present value accreted to interest expense, approximately $1.3 million per year over the three-year term. On November 15, 2022, the Company paid the final contract adjustment payment related to the 2022 Purchase Contracts. Capped Call Transactions In order to offset the potential economic dilution associated with the common shares issuable upon conversion of the Series D Preferred Stock, to the extent that the conversion value of the convertible preferred stock exceeds its liquidation preference, the Company entered into capped call transactions with three major financial institutions. The Company paid $19.2 million, or an average of $4.90 per option, to enter into capped call transactions on 3.9 million shares of common stock. The $19.2 million premium paid was recorded as a reduction of Shareowners’ Equity. The capped call transactions had a term of approximately three years and were intended to cover the number of shares issuable upon conversion of the Series D Preferred Stock. Subject to customary anti-dilution adjustments, the capped call had an initial lower strike price of $191.34, which corresponded to the minimum 5.2263 settlement rate of the Series D Preferred Stock, and an upper strike price of $207.29, which was approximately 30% higher than the closing price of the Company’s common stock on November 7, 2019. In November 2022, the capped call options expired out of the money. 2017 Equity Units and Capped Call Transactions In conjunction with the issuance of the 2017 Equity Units in May 2017, as further discussed abo ve, t he Company received approximately $727.5 million in cash proceeds, net of offering expenses and underwriting costs and commissions. The proceeds were attributed to the issuance of 750,000 shares of Series C Preferred Stock for $605.0 million, $117.1 million for the present value of the Contract Adjustment Payments, and a beneficial conversion feature of $5.4 million. The proceeds were used for general corporate purposes, including repayment of short-term borrowings. The Company also used $25.1 million of the proceeds to enter into capped call transactions utilized to hedge potential economic dilution as described in more detail below. The 2017 Equity Units were accounted for as one unit of account based on the economic linkage between the 2020 Purchase Contracts and the Series C Preferred Stock, as well as the combination criteria outlined in ASC 815. The 2017 Equity Units represented mandatorily convertible preferred stock. In May 2017, the Company issued 750,000 shares of Series C Preferred Stock, without par, with a liquidation preference of $1,000 per share. The convertible preferred stock initially did not bear any dividends and the liquidation preference of the convertible preferred stock did not accrete. The convertible preferred stock had no maturity date and remained outstanding unless converted by holders or redeemed by the Company. Holders of shares of the convertible preferred stock generally had no voting rights. The Series C Preferred Stock was pledged as collateral to support holders’ purchase obligations under the 2020 Purchase Contracts. As discussed further above, the Company successfully remarketed the Series C Preferred Stock in May 2020. Subsequent to the remarketing, holders of the Remarketed Series C Preferred Stock were entitled to receive, if declared by the Board of Directors, cumulative dividends (i) from, and including May 15, 2020 to, but excluding, May 15, 2023 (the "dividend step-up date”) at a fixed rate equal to 5.0% per annum of the $1,000 per share liquidation preference (equivalent to $50.00 per annum per share) and (ii) from, and including, the dividend step-up date at a fixed rate equal to 10.0% per annum of the $1,000 per share liquidation preference (equivalent to $100.00 per annum per share). Dividends were cumulative on the $1,000 liquidation preference per share and were payable, as declared by the Board of Directors, quarterly in arrears on February 15, May 15, August 15 and November 15 of each year, beginning on August 15, 2020. Dividends accrued on the Remarketed Series C Preferred Stock reduced net earnings for purposes of calculating earnings per share. In May 2020, the Company generated cash proceeds of $750.0 million from the successful remarketing of the Series C Preferred Stock. Upon completion of the remarketing in May 2020, the holders of the 2017 Equity Units received 5,463,750 common shares using the maximum settlement rate of 0.7285 (equivalent to a reference price of $137.26 per common share), and the Company issued 750,000 shares of Remarketed Series C Preferred Stock. The Company paid Contract Adjustment Payments to the holders of the 2020 Purchase Contracts at a rate of 5.375% per annum, payable quarterly in arrears on February 15, May 15, August 15 and November 15, which commenced August 15, 2017. The $117.1 million initial present value of these Contract Adjustment Payments reduced the Series C Preferred Stock at inception. As each quarterly Contract Adjustment Payment was made, the related liability was reduced and the difference between the cash payments and the present value accreted to interest expense, approximately $1.3 million per year over the three-year term. On May 15, 2020, the Company paid the final contract adjustment payment related to the 2020 Purchase Contracts. Capped Call Transactions In May 2017, the Company entered into capped call transactions with three major financial institutions (the “counterparties”) in order to offset the potential economic dilution associated with the common shares issuable upon conversion of the Series C Preferred Stock, to the extent that the conversion value of the convertible preferred stock exceeds its liquidation preference. The Company paid $25.1 million, or an average of $5.43 per option, to enter into capped call transactions on 4.6 million shares of common stock. The $25.1 million premium paid was recorded as a reduction of Shareowners' Equity. The capped call transactions had a term of approximately three years and were intended to cover the number of shares issuable upon conversion of the Series C Preferred Stock. Subject to customary anti-dilution adjustments, the capped call had an initial lower strike price of $162.27, which corresponded to the minimum 6.1627 settlement rate of the Series C Preferred Stock at inception, and an upper strike price of $179.53, which was approximately 30% higher than the closing price of the Company’s common stock on May 11, 2017. In June 2020, the capped call options expired out of the money. 2018 Capped Call Transactions In March 2018, the Company purchased from a financial in stitution “at-the money” ca pped call options with an approximate term of three years, on 3.2 million shares of its common stock (subject to customary anti-dilution adjustments) for an aggregate premium of $57.3 million, or an average of $17.96 per share. The premium paid was recorded as a reduction of Sha reowners’ Equity. The purpose of the capped call options was to hedge the risk of stock price appreciation between the lower and upper strike prices of the capped call options for a future share repurchase. In February 2020, the Company net-share settled 0.6 million of the 3.2 million capped call options on its common stock and received 61,767 shares using an average reference price of $162.26 per common share. On June 9, 2020, the Company amended the 2018 capped call options to align with and offset the potential economic dilution associated with the common shares issuable upon conversion of the Remarketed Series C Preferred Stock, as further discussed above. Subsequent to the amendment, the capped call options, subject to anti-dilution, had an initial lower strike price of $148.34 and an upper strike price of $165.00, which was approximately 30% higher than the closing price of the Company’s common stock on June 9, 2020. During the second quarter of 2021, the Company net-share settled the remaining capped call options on its common stock and received 344,004 shares using an average reference price of $209.80 per common share.

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