Intel 2014 Annual Report Download - page 88

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INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The 2005 debentures are convertible into shares of our common stock. Holders can surrender the 2005 debentures for
conversion at any time. We can settle any conversion of the 2005 debentures in cash or stock at our option. The 2005 debentures
will become redeemable 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. Once this condition has been met, we can redeem, for
cash, all or part of the 2005 debentures for the principal amount, plus any accrued and unpaid interest. In addition, if certain
events occur in the future, the indentures governing the 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. The 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 the 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 derivative liabilities.
2009 Debentures 2005 Debentures
(In Millions, Except Per Share Amounts)
Dec 27,
2014
Dec 28,
2013
Dec 27,
2014
Dec 28,
2013
Outstanding principal ............................................. $ 2,000 $ 2,000 $ 1,600 $ 1,600
Equity component (including temporary equity) carrying amount . . ......... $ 613 $ 613 $ 466 $ 466
Unamortized discount ............................................ $ 912 $ 925 $ 640 $ 654
Net debt carrying amount .......................................... $ 1,088 $ 1,075 $ 960 $ 946
Conversion rate (shares of common stock per $1,000 principal amount of
debentures) .................................................. 46.06 45.57 34.95 34.60
Effective conversion price (per share of common stock) .................. $ 21.71 $ 21.94 $ 28.61 $ 28.90
In the preceding table, the remaining amortization periods for the unamortized discounts for the 2009 and 2005 debentures are
approximately 25 and 21 years, respectively, as of December 27, 2014.
The conversion rate adjusts for certain events outlined in the indentures governing the 2009 and 2005 debentures, such as
quarterly dividend distributions in excess of $0.14 and $0.10 per share for the 2009 and 2005 debentures, respectively, but it
does not adjust for accrued interest. In addition, the conversion rate will increase for a holder of either the 2009 or 2005
debentures who elects to convert the debentures in connection with certain share exchanges, mergers, or consolidations
involving Intel.
During the fourth quarter of 2014, the closing stock price conversion right condition of the 2009 debentures was met and the
debentures will be convertible at the option of the holders during the first quarter of 2015. As a result of the conversion period
during the first quarter of 2015, the $1.1 billion carrying amount of the 2009 debentures was classified as short-term debt on our
consolidated balance sheet as of December 27, 2014. The excess of the amount of cash payable if converted over the carrying
amount of the 2009 debentures of $912 million has been classified as temporary equity on our consolidated balance sheet as of
December 27, 2014. In future periods, if the closing stock price conversion right condition is no longer met, all outstanding 2009
debentures would be reclassified to long-term debt and the temporary equity would be reclassified to stockholders’ equity on our
consolidated balance sheet. The 2009 debentures were not convertible for the first quarter of 2014; therefore the liability and
equity components of the 2009 debentures were classified as long-term debt and stockholders’ equity, respectively, as of
December 28, 2013.
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