Intel 2002 Annual Report Download - page 48

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short-term debt at December 28, 2002.
In April 2001, the company issued zero coupon senior exchangeable notes (Intel notes) with a principal amount of $200 million for net
proceeds of $208 million in a private placement. The note holders have the right to exchange their Intel notes for Samsung Electronics Co., Ltd.
convertible notes (Samsung notes) owned by Intel. The exchangeable notes were issued in order to partially mitigate the equity market risk of
Intel's investment in the Samsung notes, and the exchange option is accounted for as an equity derivative and marked-to-market with the fair
value recorded in long-term debt. During 2002, the holders exchanged Intel notes with a principal amount of $122 million. In accordance with
the terms of the Intel notes, the company delivered a portion of its investment in the Samsung notes with a face value of approximately
$61 million to the holders in exchange for Intel notes. The carrying value of the debt instrument, excluding the portion allocated to the equity
derivative, is being accreted to its remaining principal amount of $78 million through interest expense over the period to its maturity. The
remaining Intel note holders may exercise their exchange option any time prior to January 12, 2004, and the notes are redeemable by Intel,
provided specified market price criteria are met, through February 1, 2004.
The Euro borrowings were made in connection with the financing of manufacturing facilities in Ireland, and Intel has invested the proceeds
in Euro-denominated instruments of similar maturity to hedge currency and interest rate exposures.
As of December 28, 2002, aggregate debt maturities were as follows: 2003—$141 million; 2004—$152 million; 2005—$39 million;
2006—$45 million; 2007—$48 million; and thereafter—$645 million.
57
Note 6: Investments
Trading Assets
Trading assets outstanding at fiscal year-ends were as follows:
Net realized marked-to-market gains (losses) on fixed income debt instruments classified as trading assets were $79 million in 2002 and
$(21) million in 2001. These amounts were included in interest and other, net in the consolidated statements of income. There were no debt
instruments classified as trading assets in 2000.
Net realized marked-to-market gains (losses) on equity security trading assets were $57 million in 2002 and $72 million in 2001. The
$57 million net gain includes a gain of $120 million, resulting from the designation of formerly restricted equity investments as trading assets as
they became marketable. The cumulative difference between their cost and fair market value at the time they became marketable was recorded as
a gain in 2002. Gains and losses on the related derivatives were $110 million in 2002 and $18 million in 2001. These gains and losses were
included within gains (losses) on equity securities, net in the consolidated statements of income. There were no equity securities classified as
trading assets in 2000.
Certain equity securities within the trading asset portfolio are maintained to generate returns that partially offset changes in liabilities related
to certain deferred compensation arrangements. These deferred compensation liabilities were $336 million in 2002 and $399 million in 2001, and
are included in other accrued liabilities on the consolidated balance sheets. Net realized marked-to-market gains (losses) on equity securities
offsetting deferred compensation arrangements were $(64) million in 2002, $(45) million in 2001 and $(41) million in 2000, which were
included within interest and other, net in the consolidated statements of income.
Available
-for-Sale Investments
Available-for-sale investments at December 28, 2002 were as follows:
2002
2001
(In Millions)
Net
Unrealized
Gains
(Losses)
Estimated
Fair
Value
Net
Unrealized
Gains
(Losses)
Estimated
Fair
Value
Debt instruments
$
$
1,460
$
(15
)
$
836
Equity securities
98
72
Equity securities offsetting deferred compensation
(1
)
243
66
314
Total trading assets
$
126
$
1,801
$
123
$
1,224
Gross
Gross
Estimated