Salesforce.com 2015 Annual Report Download - page 103
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The 0.25% Senior Notes and the 0.75% Senior Notes (the “Notes”), consisted of the following (in
thousands):
As of
January 31,
2015
January 31,
2014
Liability component :
Principal:
0.75% Senior Notes (1) ................ $ 0 $ 568,864
0.25% Senior Notes (1) ................ 1,150,000 1,150,000
Less: debt discount, net
0.75% Senior Notes ................... 0 (26,705)
0.25% Senior Notes (2) ................ (79,308) (103,070)
Net carrying amount .......................... $1,070,692 $1,589,089
(1) The effective interest rates of the 0.75% Senior Notes and 0.25% Senior Notes are 5.86% and 2.53%,
respectively. These interest rates were based on the interest rates of a similar liability at the time of issuance
that did not have an associated convertible feature.
(2) Included in the consolidated balance sheets within Convertible 0.25% Senior Notes (which is classified as a
noncurrent liability) and is amortized over the life of the 0.25% Senior Notes using the effective interest rate
method.
The total estimated fair values of the Company’s 0.25% Senior Notes at January 31, 2015 was $1.3 billion.
The fair value was determined based on the closing trading price per $100 of the 0.25% Senior Notes as of the
last day of trading for fiscal 2015.
Based on the closing price of the Company’s common stock of $56.45 on January 31, 2015, the if-converted
value of the 0.25% Senior Notes was less than their principal amount.
Note Hedges
To minimize the impact of potential economic dilution upon conversion of the Notes, the Company entered
into convertible note hedge transactions with respect to its common stock (the “Note Hedges”).
(in thousands, except for shares) Date Purchase Shares
0.75% Note Hedges ...................... January 2010 $126,500 26,943,812
0.25% Note Hedges ...................... March 2013 $153,800 17,308,880
The Note Hedges cover shares of the Company’s common stock at a strike price that corresponds to the
initial conversion price of the respective Notes, also subject to adjustment, and are exercisable upon conversion
of the Notes. The Note Hedges will expire upon the maturity of the Notes. The Note Hedges are intended to
reduce the potential economic dilution upon conversion of the Notes in the event that the market value per share
of the Company’s common stock, as measured under the Notes, at the time of exercise is greater than the
conversion price of the Notes. The Note Hedges are separate transactions and are not part of the terms of the
Notes. Holders of the Notes will not have any rights with respect to the Note Hedges. The Note Hedges do not
impact earnings per share.
As a result of the conversions and maturity of the 0.75% Senior Notes during fiscal 2015, the Company
exercised its rights on the 0.75% Note Hedges and received approximately 17.1 million shares of the Company’s
common stock during the twelve months ended January 31, 2015 and the 0.75% Note Hedges expired.
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