Intel 2007 Annual Report Download - page 75

Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Long
-Term Debt
Our long-term debt at fiscal year-ends was as follows:
In 2005, we issued $1.6 billion of 2.95% junior subordinated convertible debentures (the debentures) due 2035. The
debentures are convertible, subject to certain conditions, into shares of our common stock at an initial conversion rate of
31.7162 shares of common stock per $1,000 principal amount of debentures, representing an initial effective conversion price
of approximately $31.53 per share of common stock. Holders can surrender the debentures for conversion at any time. The
conversion rate will be subject to adjustment for certain events outlined in the indenture governing the debentures, but will not
be adjusted for accrued interest. In addition, the conversion rate will increase for a holder who elects to convert the debentures
in connection with certain share exchanges, mergers, or consolidations involving Intel, as described in the indenture governing
the debentures. The debentures, which pay a fixed rate of interest semiannually, have a contingent interest component that will
require us to pay interest based on certain thresholds and for certain events commencing on December 15, 2010, as outlined in
the indenture. The maximum amount of contingent interest that will accrue is 0.40% per year. The fair value of the related
embedded derivative was not significant as of December 29, 2007 or December 30, 2006.
We can settle any conversion or repurchase of the debentures in cash or stock at our option. On or after December 15, 2012,
we can redeem, for cash, all or part of the 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 indenture 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 debentures are
subordinated in right of payment to our existing and future senior debt and to the other liabilities of our subsidiaries. We
concluded that the debentures are not conventional convertible debt instruments and that the embedded stock conversion
option qualifies as a derivative under SFAS No. 133, “Accounting for Derivative Instruments and Hedging
Activities” (SFAS No. 133). In addition, in accordance with EITF 00-19, “Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Company’s Own Stock,” we have concluded that the embedded conversion option
would be classified in stockholders’ equity if it were a freestanding instrument. As such, the embedded conversion option is
not accounted for separately as a derivative.
In 2005, we guaranteed repayment of principal and interest on bonds issued by the Industrial Development Authority of the
City of Chandler, Arizona, which constitutes an unsecured general obligation for Intel. The aggregate principal amount,
including the premium, of the bonds issued in 2005 (2005 Arizona bonds) was $160 million. The bonds are due in 2035 and
bear interest at a fixed rate of 4.375% until 2010. The 2005 Arizona bonds are subject to mandatory tender on November 30,
2010, at which time we can re-market the bonds as either fixed-rate bonds for a specified period or as variable-rate bonds until
their final maturity on December 1, 2035.
66
(In Millions)
2007
2006
Junior subordinated convertible debentures due 2035 at 2.95%
$
1,586
$
1,586
2005 Arizona bonds due 2035 at 4.375%
159
160
2007 Arizona bonds due 2037 at 5.3%
125
—
Euro debt due 2008
–
2018 at 7%
–
11%
111
103
Other debt
1
1
1,982
1,850
Less:
current portion of long
-
term debt
(2
)
(2
)
Total long
-
term debt
$
1,980
$
1,848