Quarterly report pursuant to Section 13 or 15(d)

Borrowings

v2.4.0.8
Borrowings
9 Months Ended
Sep. 27, 2014
Borrowings [Abstract]  
Debt Disclosure [Text Block]
Note 12: Borrowings
Short-Term Debt
Our short-term debt at the end of each period was as follows:
(In Millions)
 
Sep 27,
2014
 
Dec 28,
2013
Drafts payable
 
$
79

 
$
257

Notes payable
 

 
24

Current portion of long-term debt
 
1,085

 

Short-term debt
 
$
1,164

 
$
281


We have an ongoing authorization from our Board of Directors to borrow up to $3.0 billion, which was fully available for use as of September 27, 2014. This ongoing authorization includes borrowings under our commercial paper program. Maximum borrowings under our commercial paper program were $2.1 billion during the first nine months of 2014 ($300 million during the first nine months of 2013). Our commercial paper was rated A-1+ by Standard & Poor’s and P-1 by Moody’s as of September 27, 2014.
Long-Term Debt
Our long-term debt at the end of each period was as follows:
(In Millions)
 
Sep 27,
2014
 
Dec 28,
2013
2012 Senior notes due 2017 at 1.35%
 
$
2,998

 
$
2,997

2012 Senior notes due 2022 at 2.70%
 
1,495

 
1,494

2012 Senior notes due 2032 at 4.00%
 
744

 
744

2012 Senior notes due 2042 at 4.25%
 
924

 
924

2011 Senior notes due 2016 at 1.95%
 
1,499

 
1,499

2011 Senior notes due 2021 at 3.30%
 
1,997

 
1,996

2011 Senior notes due 2041 at 4.80%
 
1,490

 
1,490

2009 Junior subordinated convertible debentures due 2039 at 3.25%
 
1,085

 
1,075

2005 Junior subordinated convertible debentures due 2035 at 2.95%
 
956

 
946

Total debt
 
$
13,188

 
$
13,165

Less: current portion of long-term debt
 
(1,085
)
 

Long-term debt
 
$
12,103

 
$
13,165


Senior Notes
In the fourth quarter of 2012, we issued $6.2 billion aggregate principal amount of senior unsecured notes for general corporate purposes and to repurchase shares of our common stock pursuant to our authorized common stock repurchase program. In the third quarter of 2011, we issued $5.0 billion aggregate principal amount of senior unsecured notes, primarily to repurchase shares of our common stock pursuant to our authorized common stock repurchase program, and for general corporate purposes.
Our senior notes pay a fixed rate of interest semiannually. We may redeem our senior notes, in whole or in part, at any time at our option at specified redemption prices. The senior 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, we issued $2.0 billion of 2009 debentures. In 2005, we issued $1.6 billion of 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 September 27, 2014 and December 28, 2013, we had not met any of the thresholds or events related to the 2005 debentures. The fair values of the related contingent interest embedded derivatives were $8 million and zero as of September 27, 2014, for the 2009 and 2005 debentures, respectively ($10 million and $9 million as of December 28, 2013 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)
 
Sep 27,
2014
 
Dec 28,
2013
 
Sep 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
 
$
915

 
$
925

 
$
644

 
$
654

Net debt carrying amount
 
$
1,085

 
$
1,075

 
$
956

 
$
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 September 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 third 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 fourth quarter of 2014. As a result of the conversion period during the fourth quarter of 2014, the $1.1 billion carrying amount of the 2009 debentures was reclassified from long-term debt to short-term debt on our consolidated condensed balance sheets as of September 27, 2014. The excess of the amount of cash payable if converted over the carrying amount of the 2009 debentures of $915 million was reclassified from stockholders’ equity to temporary equity on our consolidated condensed balance sheets as of September 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 condensed balance sheets. The 2009 debentures were not convertible for the fourth quarter of 2013, 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.