Apple 1998 Annual Report Download - page 48

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--FINANCIAL INSTRUMENTS (CONTINUED)
The $100 million interest rate swap not qualifying as an accounting hedge held as of September 26, 1997, required the Company to pay
Japanese yen at a fixed 0.6% interest rate and receive Japanese yen at a floating rate based on three month LIBOR. This swap was intended to
hedge against the interest rate risk related to the Company's yen-denominated notes payable to banks. As most of the notes payable to banks
were not renewed, the swap was no longer effective as a hedge and was allowed to expire during 1998.
NOTES PAYABLE TO BANKS
The weighted-average interest rate for Japanese yen-denominated notes payable to banks as of September 26, 1997, was approximately 1.3%.
The Company had no U.S. dollar-denominated notes payable to banks as of September 25, 1998, or September 26, 1997. The carrying amount
of notes payable to banks as of September 26, 1997, approximated their fair value due to their less than 90-day maturities.
LONG-TERM DEBT
During 1996, the Company issued $661 million aggregate principal amount of 6% unsecured convertible subordinated notes (the Notes) to
certain qualified parties in a private placement. The Notes were sold at 100% of par. The Notes pay interest semiannually and mature on June
1, 2001. The Notes are convertible by their holders at any time after September 5, 1996, at a conversion price of $29.205 per share subject to
adjustments as defined in the Note agreement. No Notes had been converted as of September 25, 1998. The Notes are redeemable by the
Company at 102.4% of the principal amount, plus accrued interest, for the 12 month period beginning June 1, 1999, and at 101.2% of the
principal amount, plus accrued interest, for the 12 month period beginning June 1, 2000. The Notes are subordinated to all present and future
senior indebtedness of the Company as defined in the Note agreement. In addition, the Company incurred approximately $15 million of costs
associated with the issuance of the Notes. These costs are accounted for as a deduction from the face amount of the Notes and are being
amortized over the life of the Notes. In October 1996, the Company registered with the Securities and Exchange Commission (SEC) $569
million of the aggregate principal amount of the Notes, including the related shares of common stock issuable upon conversion of these Notes.
During 1994, the Company issued $300 million aggregate principal amount of 6.5% unsecured notes in a public offering registered with the
SEC. The notes were sold at 99.925% of par, for an effective yield to maturity of 6.51%. The notes pay interest semiannually and mature on
February 15, 2004.
The carrying amounts and estimated fair values of the Company's long-term debt are as follows (in millions):
(a) The carrying amount of the convertible subordinated notes is prior to consideration of the related issuance costs and is reflective of the
underlying conversion feature of the Notes.
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CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- --------- ----------- ---------
SEPTEMBER 26, 1997
SEPTEMBER 25, 1998 ----------------------
----------------------
Ten-year unsecured notes................................................. $ 300 $ 266 $ 300 $ 269
Convertible subordinated notes (a)....................................... $ 661 $ 887 $ 661 $ 656
Other.................................................................... $ 1 $ 1 $ 3 $ 3