Intel 2009 Annual Report Download - page 96

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Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Both the 2005 and 2009 debentures are convertible, subject to certain conditions, into shares of our common stock. Holders
can surrender the 2005 debentures for conversion at any time. 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 trading-day
period ending on the last trading day of the preceding fiscal quarter. We can settle any conversion or
repurchase of the 2005 debentures in cash or stock at our option. However, 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. On or after December 15, 2012, 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. 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. If certain events occur in the future, the indentures governing the 2005 and 2009
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 2005 and 2009 debentures are
subordinated in right of payment to our existing and future senior debt and to the other liabilities of our subsidiaries. We have
concluded that both the 2005 and 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. As such, the embedded conversion
options are not accounted for separately as derivatives.
Arizona Bonds
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 principal amount, excluding the
premium, of the bonds issued in 2005 (2005 Arizona bonds) was $157 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. As such, the 2005 Arizona bonds were classified as short-term debt as of December 26, 2009.
85
2005 Debentures
2009 Debentures
Dec. 26,
Dec. 27,
Dec. 26,
(In Millions, Except Per Share Amounts)
2009
2008
2009
Outstanding principal
$
1,600
$
1,600
$
2,000
Equity component carrying amount
$
466
$
466
$
613
Unamortized discount
1
$
691
$
701
$
953
Net debt carrying amount
$
896
$
886
$
1,030
Conversion rate (shares of common stock per $1,000 principal amount
of debentures)
2
32.12
31.72
44.09
Effective conversion price (per share of common stock)
$
31.14
$
31.53
$
22.68
1
The remaining amortization periods for the 2005 and 2009 debentures are approximately 26 and 30 years, respectively,
as of December 26, 2009.
2
The conversion rate adjusts for certain events outlined in the indentures governing the 2005 and 2009 debentures, such
as quarterly dividend distributions in excess of $0.10 and $0.14 per share, for the 2005 and 2009 debentures,
respectively, but does not adjust for accrued interest. In addition, the conversion rate will increase for a holder of either
the 2005 or 2009 debentures who elects to convert the debentures in connection with certain share exchanges, mergers,
or consolidations involving Intel, as described in the indentures governing the 2005 and 2009 debentures.