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. 30, 2017

Debt Disclosure [Abstract]

Borrowings [Text Block]

Note 14: Borrowings

SHORT-TERM DEBT



(In Millions)	Dec 30, 2017		Dec 31, 2016
Drafts payable	$	37	$	25
Current portion of long-term debt	1,739		4,609
Total short-term debt	$	1,776	$	4,634

Our current portion of long-term debt includes our 2009 junior subordinated convertible debentures due 2039, as well as debt classified as short-term based on contractual maturity.

We have an ongoing authorization from our Board of Directors to borrow up to $10.0 billion under our commercial paper program. This amount includes an increase of $5.0 billion in the authorization limit approved by our Board of Directors in April 2017.

LONG-TERM DEBT



	December 30, 2017				December 31, 2016
(In Millions)	Effective Interest Rate	Amount			Amount
Floating-rate senior notes:
Three-month LIBOR plus 0.08%, due May 2020	1.40%	$	700		$	—
Three-month LIBOR plus 0.35%, due May 2022	1.66%	800			—
Fixed-rate senior notes:
1.75%, due May 2017	n/a	—			500
1.35%, due December 2017	n/a	—			3,000
2.50%, due November 2018	2.14%	600			600
3.25%, due December 2019¹	2.19%	194			180
1.85%, due May 2020	1.90%	1,000			—
2.45%, due July 2020	2.50%	1,750			1,750
1.70%, due May 2021	1.78%	500			500
3.30%, due October 2021	2.69%	2,000			2,000
2.35%, due May 2022	1.86%	750			—
3.10%, due July 2022	2.50%	1,000			1,000
4.00%, due December 2022¹	2.98%	428			396
2.70%, due December 2022	2.08%	1,500			1,500
4.10%, due November 2023	3.23%	400			400
2.88%, due May 2024	2.36%	1,250			—
2.70%, due June 2024	2.12%	600			—
3.70%, due July 2025	3.20%	2,250			2,250
2.60%, due May 2026	1.66%	1,000			1,000
3.15%, due May 2027	2.82%	1,000			—
4.00%, due December 2032	4.10%	750			750
4.80%, due October 2041	4.86%	802			1,500
4.25%, due December 2042	4.39%	567			925
4.90%, due July 2045	4.92%	772			2,000
4.90%, due August 2045	n/a	—			1,007
4.70%, due December 2045	2.49%	915			915
4.10%, due May 2046	4.12%	1,250			1,250
4.10%, due May 2047	4.13%	1,000			—
4.10%, due August 2047	2.15%	640			—
3.73%, due December 2047	3.74%	1,967			—
Junior subordinated convertible debentures:
2.95%, due December 2035	n/a	—			1,600
3.25%, due August 2039²	4.03%	2,000			2,000
Total senior notes and other borrowings		28,385			27,023
Unamortized premium/discount and issuance costs		(1,357		)	(1,581		)
Hedge accounting fair value adjustments		(252		)	(184		)
Long-term debt		26,776			25,258
Current portion of long-term debt		(1,739		)	(4,609		)
Total long-term debt		$	25,037		$	20,649

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." Principal and unamortized discount/issuance costs for the Australian-dollar-denominated notes in the table above were calculated using foreign currency exchange rates as of December 30, 2017 and December 31, 2016.


²	Effective interest rate for the year ended December 31, 2016 was 4.01%.

In 2017, we began assessing fair value hierarchy levels for our short-term and long-term debt based on the underlying instrument type. The fair value of our convertible debentures is determined using discounted cash flow models with observable market inputs, and takes into consideration variables such as interest rate changes, comparable instruments, subordination discount, and credit-rating changes. As of December 30, 2017 and December 31, 2016, the fair value of short-term debt (excluding drafts payable) was $2.4 billion and $5.1 billion, respectively, and the fair value of long-term debt, excluding the current portion of long-term debt, was $27.0 billion and $22.0 billion, respectively. These liabilities are classified as Level 2 within the fair value hierarchy based on the nature of the fair value inputs.

Senior Notes

During 2017, we issued a total of $7.7 billion aggregate principal amount of senior notes, which excludes the private placement of $2.0 billion of senior notes issued in December 2017 as discussed in the following paragraph. We used the net proceeds from the offerings of the notes for general corporate purposes, which included refinancing of outstanding debt and repurchase of shares of our common stock. Additionally, we redeemed our $1.0 billion, 4.90% senior notes due August 2045.

In December 2017, we completed exchange and cash offers for our outstanding 4.80% senior notes due 2041, 4.25% senior notes due 2042, and 4.90% senior notes due 2045 (Old Notes). As a result of the exchange offer, we issued in a private placement $2.0 billion principal amount of 3.73% senior notes due 2047 and paid $293 million cash in exchange for $1.9 billion aggregate principal amount of the Old Notes. As a result of the cash offer, we paid $518 million to repurchase $425 million aggregate principal amount and recognized a $93 million loss on the extinguishment of the Old Notes.

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

Our senior floating-rate notes pay interest quarterly and our senior fixed-rate notes pay interest semiannually. We may redeem the fixed-rate 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 December 2017, we paid $2.8 billion to convert our $1.6 billion 2.95% junior subordinated convertible debentures due 2035. We recognized a loss of $385 million in interest and other, net and $1.4 billion as a reduction to stockholders' equity related to the conversion feature.

In 2009, we issued junior subordinated convertible debentures due 2039 (2009 debentures), which pay a fixed rate of interest semiannually. 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 2017, 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 2018. 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 30, 2017 ($1.1 billion as of December 31, 2016). The excess of the amount of cash payable if converted over the carrying amount of the 2009 debentures of $866 million has been classified as temporary equity on our consolidated balance sheet as of December 30, 2017 ($882 million as of December 31, 2016). 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.



	2009 Debentures
(In Millions, Except Per Share Amounts)	Dec 30, 2017		Dec 31, 2016
Outstanding principal	$	2,000	$	2,000
Equity component (including temporary equity) carrying amount	$	613	$	613
Unamortized discount¹	$	866	$	882
Net debt carrying amount	$	1,134	$	1,118
Conversion rate (shares of common stock per $1,000 principal amount of debentures)	48.37		47.72
Effective conversion price (per share of common stock)	$	20.68	$	20.95


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

The conversion rate adjusts for certain events outlined in the indentures governing the 2009 debentures, such as quarterly dividend distributions in excess of $0.14 per share, but it does not adjust for accrued interest. In addition, the conversion rate will increase for a holder of the 2009 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 30, 2017, by year payable, were as follows:



(In Millions)	2018		2019		2020		2021		2022		2023 and thereafter		Total
	$	600	$	194	$	3,450	$	2,500	$	4,478	$	17,163	$	28,385

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



Floating-rate senior notes:
Three-month LIBOR plus 0.08%, due May 2020	0.08	%
Three-month LIBOR plus 0.35%, due May 2022	0.35	%
Fixed-rate senior notes:
1.75%, due May 2017	N/A
1.35%, due December 2017	N/A
2.50%, due November 2018	2.50	%
3.25%, due December 2019¹	3.25	%
1.85%, due May 2020	1.85	%
2.45%, due July 2020	2.45	%
1.70%, due May 2021	1.70	%
3.30%, due October 2021	3.30	%
2.35%, due May 2022	2.35	%
3.10%, due July 2022	3.10	%
4.00%, due December 2022¹	4.00	%
2.70%, due December 2022	2.70	%
4.10%, due November 2023	4.10	%
2.88%, due May 2024	2.88	%
2.70%, due June 2024	2.70	%
3.70%, due July 2025	3.70	%
2.60%, due May 2026	2.60	%
3.15%, due May 2027	3.15	%
4.00%, due December 2032	4.00	%
4.80%, due October 2041	4.80	%
4.25%, due December 2042	4.25	%
4.90%, due July 2045	4.90	%
4.90%, due August 2045	N/A
4.70%, due December 2045	4.70	%
4.10%, due May 2046	4.10	%
4.10%, due May 2047	4.10	%
4.10%, due August 2047	4.10	%
3.73%, due December 2047	3.73	%
Junior subordinated convertible debentures:
2.95%, due December 2035	N/A
3.25%, due August 2039²	3.25	%