Apple 1999 Annual Report Download - page 50

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--FINANCIAL INSTRUMENTS (CONTINUED)
LONG-TERM DEBT
The carrying amounts and estimated fair values of the Company's long-term debt are as follows (in millions):
(a) The fair value of the ten-year unsecured notes is based on their listed market values as of September 25, 1999 and 1998.
(b) The carrying amount of the convertible subordinated notes is prior to consideration of the related issuance costs. Their fair value is
reflective of the underlying conversion feature of the Notes.
CONVERTIBLE NOTES
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, paid interest semiannually, and matured on June 1, 2001 if
not converted earlier. The Notes were 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 were
redeemable by the Company at 102.4% of the principal amount, plus accrued interest, for the twelve month period beginning June 1, 1999, and
at 101.2% of the principal amount, plus accrued interest, for the twelve month period beginning June 1, 2000. The Notes were 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 were accounted for as a deduction from the face amount of the
Notes and were 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.
On April 14, 1999, the Company called for redemption of the Notes. Not including approximately $7 million of unamortized debt issuance
costs, debentures in an aggregate principal amount outstanding totaled approximately $661 million as of March 27, 1999. During the third
quarter of 1999, debenture holders chose to convert virtually all of the outstanding debentures to common stock at a rate of $29.205 per share
resulting in the issuance of approximately 22.6 million shares of the Company's common stock.
UNSECURED 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.
EQUITY INVESTMENT AND RELATED GAINS
As of September 26, 1997, the Company owned 42.3% of the outstanding stock of ARM Holdings plc (ARM), a privately held company in the
United Kingdom involved in the design of high performance microprocessors and related technology. The Company had accounted for this
investment using the equity
46
SEPTEMBER 25, SEPTEMBER 25,
1999 1998
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
Ten-year unsecured notes(a)................... $300 $280 $300 $266
Convertible subordinated notes(b)............. $ -- $ -- $661 $887