Intel Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Borrowings

Borrowings

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Abstract]

Borrowings [Text Block]

Note 14: Borrowings

Short-Term Debt



(In Millions)	Dec 31, 2016			Dec 26, 2015
Drafts payable	$	25		$	41
Current portion of long-term debt	4,618			2,602
Less: debt issuance costs associated with the current portion of long-term debt	(9		)	(9		)
Total short-term debt	$	4,634		$	2,634

Our current portion of long-term debt includes our 2009 junior subordinated convertible debentures due 2039, our acquired Altera senior notes due 2017, and our 2012 senior notes due 2017.

We have an ongoing authorization from our Board of Directors to borrow up to $5.0 billion under our commercial paper program. We had no commercial paper outstanding for all periods presented.

Long-Term Debt

Our indebtedness is carried at amortized cost net of applicable hedge adjustments.



(In Millions)	Maturity Date	Stated Interest Rate	Dec 31, 2016			Dec 26, 2015
Second quarter 2016 debt issuance of $2.8 billion
Senior notes	May 2021	1.70%	$	499		$	—
Senior notes	May 2026	2.60%	983			—
Senior notes	May 2046	4.10%	1,243			—
First quarter 2016 acquired Altera debt of $1.5 billion
Senior notes	May 2017	1.75%	501			—
Senior notes	November 2018	2.50%	604			—
Senior notes	November 2023	4.10%	424			—
Fourth quarter 2015 debt issuance of $915 million
Senior notes	December 2045	4.70%	894			908
Fourth quarter 2015 Australian-dollar-denominated debt issuance of A$800 million
Senior notes¹	December 2019	3.25%	180			181
Senior notes¹	December 2022	4.00%	394			397
Third quarter 2015 debt issuance of $1.0 billion
Senior notes	August 2045	4.90%	995			1,009
Third quarter 2015 debt issuance of $7.0 billion
Senior notes	July 2020	2.45%	1,749			1,748
Senior notes	July 2022	3.10%	987			996
Senior notes	July 2025	3.70%	2,148			2,247
Senior notes	July 2045	4.90%	1,999			1,998
2012 debt issuance of $6.2 billion
Senior notes	December 2017	1.35%	2,999			2,999
Senior notes	December 2022	2.70%	1,480			1,492
Senior notes	December 2032	4.00%	745			744
Senior notes	December 2042	4.25%	924			924
2011 debt issuance of $5.0 billion
Senior notes	October 2016	1.95%	—			1,499
Senior notes	October 2021	3.30%	1,988			1,997
Senior notes	October 2041	4.80%	1,491			1,490
2009 debt issuance of $2.0 billion
Junior subordinated convertible debentures	August 2039	3.25%	1,118			1,103
2005 debt issuance of $1.6 billion
Junior subordinated convertible debentures	December 2035	2.95%	992			975
Long-term debt			25,337			22,707
Less: current portion of long-term debt			(4,618		)	(2,602		)
Less: debt issuance costs			(70		)	(69		)
Total long-term debt			$	20,649		$	20,036


¹	To manage foreign currency risk associated with the Australian-dollar-denominated notes issued in 2015, we entered into currency interest rate swaps with an aggregate notional amount of $577 million, which effectively converted these notes to U.S.-dollar-denominated notes. For further discussion on our currency interest rate swaps, see "Note 17: Derivative Financial Instruments."

Senior Notes

During the second quarter of 2016, we issued a total of $2.8 billion aggregate principal amount of senior unsecured notes to refinance existing indebtedness, including our 1.95% senior notes due 2016 and a portion of our 1.35% senior notes due 2017.

During the first quarter of 2016, in connection with our completed acquisition of Altera, we acquired a total of $1.5 billion aggregate principal amount of senior unsecured notes.

During 2015, we issued a total of $9.5 billion aggregate principal amount of senior unsecured notes to fund a portion of the cash consideration for our acquisition of Altera. For more information on our Altera acquisition, see "Note 10: Acquisitions and Divestitures."

All of our senior notes pay a fixed rate of interest semiannually. We may redeem the notes prior to their maturity at our option at specified redemption prices and subject to certain restrictions. The obligations under the notes rank equally in right of payment with all of our other existing and future senior unsecured indebtedness and will effectively rank junior to all liabilities of our subsidiaries.

Convertible Debentures

In 2009 and 2005, we issued junior subordinated convertible debentures due 2039 (2009 debentures) and 2035 (2005 debentures), respectively. Both the 2009 and 2005 debentures pay a fixed rate of interest semiannually.



	2009 Debentures		2005 Debentures
Annual stated coupon interest rate	3.25	%	2.95	%
Annual effective interest rate	7.20	%	6.45	%

The effective interest rate is based on the rate, at inception, for a similar instrument that does not have a conversion feature.

2009 Debentures. The 2009 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. After such date, if the 10-day average trading price of $1,000 principal amount of the bond immediately preceding any six-month interest period is less than or equal to $650 or greater than or equal to $1,500, we are required to pay contingent 0.25% or 0.50% annual interest, respectively.

The 2009 debentures are convertible, subject to certain conditions. 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. We will settle any conversion 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. 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. In addition, if certain events occur in the future, the indenture governing the 2009 debentures provides 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 2009 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 2009 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 and are not accounted for separately as derivative liabilities.

During the fourth quarter of 2016, the closing stock price conversion right condition of the 2009 debentures continued to be met and the debentures will be convertible at the option of the holders during the first quarter of 2017. As a result, the $1.1 billion carrying amount of the 2009 debentures was classified as short-term debt on our consolidated balance sheet as of December 31, 2016 ($1.1 billion as of December 26, 2015). The excess of the amount of cash payable if converted over the carrying amount of the 2009 debentures of $882 million has been classified as temporary equity on our consolidated balance sheet as of December 31, 2016 ($897 million as of December 26, 2015). 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.

2005 Debentures. The 2005 debentures have a contingent interest component that requires us to pay interest based on certain thresholds or for certain events. If the 10-day average trading price of $1,000 principal amount of the bond immediately preceding any six-month interest period is less than or equal to $800 or greater than or equal to $1,300, we are required to pay contingent 0.25% or 0.40% annual interest, respectively. As of December 31, 2016, we met the upside contingent interest threshold for the six-month interest payment period from December 15, 2016 to June 15, 2017.

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 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. During the fourth quarter of 2016, the closing stock price redemption right condition of the 2005 debentures was met and we have the option to redeem, for cash, all or part of the 2005 debentures for the principal amount, plus any accrued and unpaid interest. We currently do not intend to redeem any of the 2005 debentures. In addition, if certain events occur in the future, the indenture governing the 2005 debentures provides 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 and not accounted for separately as derivative liabilities.



	2009 Debentures				2005 Debentures
(In Millions, Except Per Share Amounts)	Dec 31, 2016		Dec 26, 2015		Dec 31, 2016		Dec 26, 2015
Outstanding principal	$	2,000	$	2,000	$	1,600	$	1,600
Equity component (including temporary equity) carrying amount	$	613	$	613	$	466	$	466
Unamortized discount¹	$	882	$	897	$	608	$	625
Net debt carrying amount	$	1,118	$	1,103	$	992	$	975
Conversion rate (shares of common stock per $1,000 principal amount of debentures)	47.72		46.58		36.20		35.82
Effective conversion price (per share of common stock)	$	20.95	$	21.47	$	27.62	$	27.92


¹	The unamortized discounts for the 2009 and 2005 debentures are amortized over the remaining life of the debt.

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.

Debt Maturities

Our aggregate debt maturities based on outstanding principal as of December 31, 2016, by year payable, were as follows:



(In Millions)
2017	$	3,500
2018	600
2019	180
2020	1,750
2021	2,500
2022 and thereafter	18,492
Total	$	27,022

In the preceding table, the 2009 debentures are classified based on their stated maturity date, regardless of their classification on the consolidated balance sheet.