Crucial 2011 Annual Report Download - page 61

Convertible Notes With Debt And Equity Components
The accounting standards for convertible debt instruments that may be fully or partially settled in cash upon conversion require the debt and
equity components to be stated separately. The amount recorded as debt is based on the fair value of the debt component as a standalone
instrument, determined using an average interest rate for similar nonconvertible debt issued by entities with credit ratings comparable to ours at
the time of issuance. The difference between the debt recorded at inception and its principal amount is to be accreted to principal through interest
expense through the estimated life of the note. Accordingly, the debt and equity components are required to be stated separately for the following
notes:
The debt and equity components of our 4.25% Convertible Senior Notes due 2013 (the "2013 Notes") are not required to be stated separately
as they must be settled in shares of our common stock upon conversion. Information related to our convertible notes with debt and equity
components is as follows:
As of September 2, 2010, the 2014 Notes had $ 1,300 million of outstanding principal and $ 1,058 million of net carrying value (net of
unamortized discount of $ 242 million ).
Information related to interest rates and expense of our convertible notes with debt and equity components is as follows:
Interest expense for 2010 included $ 24 million for the contractual interest rate and $ 56 million from the amortization of discount and
issuance costs from the 2014 Notes and interest expense for 2009 included $ 25 million for the contractual interest rate and $ 52 million from the
amortization of discount and issuance costs from the 2014 Notes.
Debt Restructure
On November 3, 2010, we completed the following series of debt restructure transactions in connection with separate privately negotiated
agreements entered into on October 28, 2010 with certain holders of our convertible notes:
58
• 1.875% Convertible Senior Notes due 2014 (the "2014 Notes")
• 1.5% Convertible Senior Notes due 2031 (the "2031A Notes")
• 1.875% Convertible Senior Notes due 2031 (the "2031B Notes" and together with the 2031A Notes, the "2031 Notes")
• 1.875% Convertible Senior Notes due 2027 (the "2027 Notes")
As of 2011
2014 Notes 2031A Notes 2031B Notes 2027 Notes
Outstanding principal
$
949
$
345
$
345
$
175
Unamortized discount
(134
)
(90
)
(111
)
(40
)
Net carrying amount of debt
815
255
234
135
Carrying amount of equity component
368
89
109
40
Remaining discount amortization period (in years)
2.8
6.9
8.9
5.8
For the year ended 2011 2014 Notes 2031A Notes 2031B Notes 2027 Notes
Effective interest rate
7.9
%
6.5
%
7.0
%
6.9
%
Interest cost related to contractual interest rate
$
19
$
1
$
1
$
3
Interest costs related to amortization of discount and
issuance costs
46
1
1
5
• Exchanged $ 175 million in aggregate principal amount of our 2014 Notes for $ 175 million in aggregate principal amount of the 2027
Notes (the "Exchange Transaction").
• Repurchased $ 176 million in aggregate principal amount of our 2014 Notes for $ 171 million in cash (the "Partial Repurchase of 2014
Notes").
• Repurchased $ 91 million in aggregate principal amount of our 2013 Notes for $ 166 million in cash (the "Partial Repurchase of 2013
Notes").