Annual report pursuant to Section 13 and 15(d)

Debt and Revolving Credit Facility

v3.22.0.1
Debt and Revolving Credit Facility
 12 Months Ended
Dec. 25, 2021
Debt Disclosure [Abstract]  
Debt Disclosure Debt and Revolving Credit Facility
Debt
The Company’s total debt as of December 25, 2021 and December 26, 2020 consisted of:
December 25,
2021		 December 26,
2020
  (In millions)
7.50% Senior Notes Due 2022 (7.50% Notes)
 $ 312  $ 312 
2.125% Convertible Senior Notes Due 2026 (2.125% Notes)
 1  26 
Total debt (principal amount) 313  338 
Unamortized debt discount and issuance costs —  (8)
Total debt (net) 313  330 
Less: current portion of long-term debt (312) — 
Total long-term debt, net of current portion $ 1  $ 330 
2.125% Convertible Senior Notes Due 2026
In September 2016, the Company issued $805 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. The interest is payable semi-annually in March and September of each year, commencing in March 2017. During 2021, holders of the 2.125% Notes converted $25 million principal amount of notes in exchange for approximately 3 million shares of the Company’s common stock at the conversion price of $8.00 per share. The Company recorded a loss of $7 million from these conversions in Other income (expense), net on its consolidated statements of operations. As of December 25, 2021, the outstanding aggregate principal amount of the 2.125% Notes was $1 million.
The Company’s current intent is to deliver shares of its common stock upon conversion of the 2.125% Notes. As such, no sinking fund is provided for the 2.125% Notes and the Company continued to classify the carrying value of the liability component of the 2.125% Notes as long-term debt and the equity component of the 2.125% Notes as permanent equity on its consolidated balance sheet as of December 25, 2021. The determination of whether or not the 2.125% Notes are convertible is performed on a calendar-quarter basis.
Based on the closing price of the Company’s common stock of $146.14 on December 23, 2021, the last trading day of 2021, the if-converted value of the 2.125% Notes exceeded its principal amount by approximately $15 million.
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 conversion features.
The following table sets forth total interest expense recognized related to the 2.125% Notes for the year ended December 25, 2021:
December 25,
2021		 December 26,
2020
(In millions)
Contractual interest expense $ —  $ 4 
Interest cost related to amortization of the debt discount $ —  $ 6 
The carrying amount of the equity component of the 2.125% Notes was $0 million and $10 million as of December 25, 2021 and December 26, 2020, respectively.
7.50% Senior Notes Due 2022
On August 15, 2012, the Company issued $500 million of its 7.50% Senior Notes due 2022 (7.50% Notes). The 7.50% Notes are general unsecured senior obligations of the Company. Interest is payable on February 15 and August 15 of each year beginning February 15, 2013 until the maturity date of August 15, 2022. The 7.50% Notes are governed by the terms of an indenture (the 7.50% Indenture) dated August 15, 2012 between the Company and Wells Fargo Bank, N.A., as trustee. As of December 25, 2021, the outstanding aggregate principal amount of the 7.50% Notes was $312 million.
Prior to August 15, 2022, the Company may redeem some or all of the 7.50% Notes at a price equal to 100% of the principal amount plus accrued and unpaid interest and a “make whole” premium (as defined in the 7.50% Indenture). Holders have the right to require the Company to repurchase all or a portion of the 7.50% Notes in the event that the Company undergoes a change of control as defined in the 7.50% Indenture, at a repurchase price of 101% of the principal amount plus accrued and unpaid interest. Additionally, an event of default (as defined in the 7.50% Indenture) may result in the acceleration of the maturity of the 7.50% Notes.
Debt Covenants and Seniority
The 7.50% Notes require the Company to comply with certain financial covenants and a number of restrictive covenants. The 7.50% Notes and 2.125% Notes rank equally with the Company’s existing and future senior debt and are senior to all of the Company’s future subordinated debt. The 7.50% Notes and 2.125% Notes rank junior to all of the Company’s future senior secured debt to the extent of the collateral securing such debt and are structurally subordinated to all existing and future debt and liabilities of the Company’s subsidiaries.
Potential Repurchase of Outstanding Notes
The Company may elect to purchase or otherwise retire the 7.50% Notes and 2.125% Notes with cash, stock or other assets from time to time in open market or privately negotiated transactions either directly or through intermediaries or by tender offer when the Company believes the market conditions are favorable to do so.
Revolving Credit Facility
The Company is party to a $500 million unsecured revolving credit facility (the Revolving Credit Facility), including a $50 million swingline sub-facility and a $75 million sublimit for letters of credit pursuant to a credit agreement with a syndicate of banks. The Revolving Credit Facility expires in June 2024. Borrowings under the Revolving Credit Facility bear interest at either the LIBOR rate or the base rate at the Company’s option (in each case, as customarily defined) plus an applicable margin. As of December 25, 2021, there were no borrowings outstanding under the Revolving Credit Facility and the Company was in compliance with all required covenants. As of December 25, 2021, the Company had $14 million of letters of credit outstanding under the Revolving Credit Facility.
Future Payments on Total Debt
As of December 25, 2021, the Company’s future debt payment obligations were as follows:
Term Debt
(Principal only)
 Year (In millions)
2022 $ 312 
2026 1 
Total $ 313