Microsoft 2012 Annual Report Download - page 32

The components of our long-term debt, including the current portion, and the associated interest rates and semi-annual
interest record and payment dates were as follows as of June 30, 2012:
Due Date
Face Value
Stated
Interest
Rate
Effective
Interest
Rate
Interest
Record Date
Interest
Pay Date
Interest
Record Date
Interest
Pay Date
(In millions)
Notes
September 27, 2013
$
1,000
0.875%
1.000%
March 15
March 27
September 15
September 27
June 1, 2014
2,000
2.950%
3.049%
May 15
June 1
November 15
December 1
September 25, 2015
1,750
1.625%
1.795%
March 15
March 25
September 15
September 25
February 8, 2016
750
2.500%
2.642%
February 1
February 8
August 1
August 8
June 1, 2019
1,000
4.200%
4.379%
May 15
June 1
November 15
December 1
October 1, 2020
1,000
3.000%
3.137%
March 15
April 1
September 15
October 1
February 8, 2021
500
4.000%
4.082%
February 1
February 8
August 1
August 8
June 1, 2039
750
5.200%
5.240%
May 15
June 1
November 15
December 1
October 1, 2040
1,000
4.500%
4.567%
March 15
April 1
September 15
October 1
February 8, 2041
1,000
5.300%
5.361%
February 1
February 8
August 1
August 8
Total
10,750
Convertible Debt
June 15, 2013
1,250
0.000%
1.849%
Total face value
$
12,000
As of June 30, 2012, the aggregate unamortized discount for our long-term debt, including the current portion, was $56
million.
Notes
The Notes are senior unsecured obligations and rank equally with our other unsecured and unsubordinated debt
outstanding.
Convertible Debt
In June 2010, we issued $1.25 billion of zero coupon convertible unsecured debt due on June 15, 2013 in a private
placement offering. Proceeds from the offering were $1.24 billion, net of fees and expenses, which were capitalized.
Initially, each $1,000 principal amount of notes was convertible into 29.94 shares of Microsoft common stock at a
conversion price of $33.40 per share. The conversion ratio is adjusted periodically for dividends in excess of the initial
dividend threshold as defined in the debt agreement. As of June 30, 2012, the net carrying amount of our convertible debt
was $1.2 billion and the unamortized discount was $19 million.
Prior to March 15, 2013, the notes will be convertible, only in certain circumstances, into cash and, if applicable, cash,
shares of Microsoft’s common stock, or a combination thereof, at our election. On or after March 15, 2013, the notes will
be convertible at any time. Upon conversion, we will pay cash up to the aggregate principal amount of the notes and pay
or deliver cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election.
Because the convertible debt may be wholly or partially settled in cash, we are required to separately account for the
liability and equity components of the notes in a manner that reflects our nonconvertible debt borrowing rate when interest
costs are recognized in subsequent periods. The net proceeds of $1.24 billion were allocated between debt for $1.18
billion and stockholders’ equity for $58 million with the portion in stockholders’ equity representing the fair value of the
option to convert the debt.
In connection with the issuance of the notes, we entered into capped call transactions with certain option counterparties
who are initial purchasers of the notes or their affiliates. The capped call transactions are expected to