Intel 2013 Annual Report Download - page 87

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82
Convertible Debentures
In 2009, we issued $2.0 billion of junior subordinated convertible debentures (the 2009 debentures). In 2005, we
issued $1.6 billion of junior subordinated convertible debentures (the 2005 debentures). Both the 2009 and 2005
debentures pay a fixed rate of interest semiannually.
2009
Debentures 2005
Debentures
Annual coupon interest rate 3.25% 2.95%
Annual effective interest rate 7.20% 6.45%
Maximum amount of contingent interest that will accrue per year 0.50% 0.40%
The effective interest rate is based on the rate for a similar instrument that does not have a conversion feature.
Both the 2009 and 2005 debentures have a contingent interest component that requires us to pay interest based on
certain thresholds or for certain events, commencing on August 1, 2019 for the 2009 debentures. As of
December 28, 2013, we have not met any of the thresholds or events related to the 2005 debentures. The fair
values of the related embedded derivatives were $10 million and $9 million as of December 28, 2013, for the 2009
and 2005 debentures, respectively ($6 million and zero as of December 29, 2012 for the 2009 and 2005
debentures, respectively).
Both the 2009 and 2005 debentures are convertible, subject to certain conditions, into shares of our common stock.
Holders can surrender the 2009 debentures for conversion if the closing price of Intel common stock has been at
least 130% of the conversion price then in effect for at least 20 trading days during the 30 consecutive trading-day
period ending on the last trading day of the preceding fiscal quarter. Holders can surrender the 2005 debentures for
conversion at any time. We will settle any conversion or repurchase of the 2009 debentures in cash up to the face
value, and any amount in excess of face value will be settled in cash or stock at our option. However, we can settle
any conversion or repurchase of the 2005 debentures in cash or stock at our option. On or after August 5, 2019, we
can redeem, for cash, all or part of the 2009 debentures for the principal amount, plus any accrued and unpaid
interest, if the closing price of Intel common stock has been at least 150% of the conversion price then in effect for
at least 20 trading days during any 30 consecutive trading-day period prior to the date on which we provide notice of
redemption. We can redeem, for cash, all or part of the 2005 debentures for the principal amount, plus any accrued
and unpaid interest, if the closing price of Intel common stock has been at least 130% of the conversion price then
in effect for at least 20 trading days during any 30 consecutive trading-day period prior to the date on which we
provide notice of redemption. If certain events occur in the future, the indentures governing the 2009 and 2005
debentures provide that each holder of the debentures can, for a pre-defined period of time, require us to
repurchase the holder’s debentures for the principal amount plus any accrued and unpaid interest. Both the 2009
and 2005 debentures are subordinated in right of payment to any existing and future senior debt and to the other
liabilities of our subsidiaries. We have concluded that both the 2009 and 2005 debentures are not conventional
convertible debt instruments and that the embedded stock conversion options qualify as derivatives. In addition, we
have concluded that the embedded conversion options would be classified in stockholders’ equity if they were
freestanding derivative instruments. As such, the embedded conversion options are not accounted for separately as
derivatives.
2009 Debentures 2005 Debentures
(In Millions, Except Per Share Amounts) Dec 28,
2013 Dec 29,
2012 Dec 28,
2013 Dec 29,
2012
Outstanding principal $ 2,000 $ 2,000 $ 1,600 $ 1,600
Equity component carrying amount $ 613 $ 613 $ 466 $ 466
Unamortized discount $ 910 $ 922 $ 643 $ 656
Net debt carrying amount $ 1,075 $ 1,063 $ 946 $ 932
Conversion rate (shares of common stock per $1,000
principal amount of debentures) 45.57 45.05 34.60 33.86
Effective conversion price (per share of common stock) $ 21.94 $ 22.20 $ 28.90 $ 29.53
In the preceding table, the remaining amortization periods for the unamortized discounts for the 2009 and 2005
debentures are approximately 26 and 22 years, respectively, as of December 28, 2013.
Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)