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LONG-TERM DEBT AND OTHER BORROWINGS | 6 Months Ended
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Dec. 28, 2014
LONG-TERM DEBT AND OTHER BORROWINGS | NOTE 12 — LONG-TERM DEBT AND OTHER BORROWINGS Convertible Senior Notes In May 2011, the Company issued and sold $450.0 million in aggregate principal amount of 0.50% Convertible Senior Notes due May 2016 (the “2016 Notes”) at par. At the same time, the Company issued and sold $450.0 million in aggregate principal amount of 1.25% Convertible Senior Notes due May 2018 (the “2018 Notes”) at par. The Company pays cash interest at an annual rate of 0.5% and 1.25%, respectively, on the 2016 Notes and the 2018 Notes, on a semi-annual basis on May 15 and November 15 of each year. In June 2012, with the acquisition of Novellus, the Company assumed $700.0 million in aggregate principal amount of 2.625% Convertible Senior Notes due May 2041 (the “2041 Notes,” and collectively with the 2016 Notes and the 2018 Notes, the “Notes”). The Company pays cash interest at an annual rate of 2.625%, on a semi-annual basis on May 15 and November 15 of each year. The 2041 Notes also have a contingent interest payment provision that may require the Company to pay additional interest, up to 0.60% per year, based on certain thresholds, beginning with the semi-annual interest payment on May 15, 2021, and upon the occurrence of certain events, as outlined in the indenture governing the 2041 Notes. The Company separately accounts for the liability and equity components of the Notes. The initial debt components of the 2016 Notes, the 2018 Notes, and the 2041 Notes were valued based on the present value of the future cash flows using the Company’s borrowing rate at the date of the issuance or assumption for similar debt instruments without the conversion feature, which equals the effective interest rate on the liability component disclosed in the following table, respectively. As of December 28, 2014 and June 29, 2014, the Notes consisted of the following:
|  | December 28, 2014 |  |  | June 29, 2014 |
|  | 2016 Notes |  |  | 2018 Notes |  |  | 2041 Notes (1) |  |  | 2016 Notes |  |  | 2018 Notes |  |  | 2041 Notes (1) |
|  | (in thousands, except years, percentages, conversion rate, and conversion price) |
Carrying value, long-term |  | $ | 427,443 |  |  | $ | 394,732 |  |  | $ | — |  |  | $ | 419,561 |  |  | $ | 387,338 |  |  | $ | — |
Carrying value, current portion |  |  | — |  |  |  | — |  |  |  | 518,430 |  |  |  | — |  |  |  | — |  |  |  | 516,586 |
Unamortized discount |  |  | 22,557 |  |  |  | 55,268 |  |  |  | 181,505 |  |  |  | 30,439 |  |  |  | 62,662 |  |  |  | 183,349 |
Principal amount |  | $ | 450,000 |  |  | $ | 450,000 |  |  | $ | 699,935 |  |  | $ | 450,000 |  |  | $ | 450,000 |  |  | $ | 699,935 |
Remaining amortization period (years) |  |  | 1.4 |  |  |  | 3.4 |  |  |  | 26.4 |  |  |  |  |  |  |  |  |  |  |  |  |
Effective interest rate on liability component |  |  | 4.29 | % |  |  | 5.27 | % |  |  | 4.28 | % |  |  |  |  |  |  |  |  |  |  |  |
Carrying amount of equity component, net of tax |  | $ | 76,230 |  |  | $ | 104,895 |  |  | $ | 328,109 |  |  |  |  |  |  |  |  |  |  |  |  |
Fair Value of Notes (Level 1) |  | $ | 596,250 |  |  | $ | 645,188 |  |  | $ | 1,637,848 |  |  |  |  |  |  |  |  |  |  |  |  |
Conversion rate (shares of common stock per $1,000 principal amount of notes) |  |  | 15.9868 |  |  |  | 15.9868 |  |  |  | 28.6901 |  |  |  |  |  |  |  |  |  |  |  |  |
Conversion price (per share of common stock) |  | $ | 62.55 |  |  | $ | 62.55 |  |  | $ | 34.86 |  |  |  |  |  |  |  |  |  |  |  |  |
If-converted value in excess of par value |  | $ | 132,431 |  |  | $ | 132,431 |  |  | $ | 925,839 |  |  |  |  |  |  |  |  |  |  |  |  |
(1) | During the quarter-ended December 28, 2014 and June 29, 2014 the market value of the Common Stock was greater than or equal to 130% of the 2041 Note conversion price for 20 or more trading days of the 30 consecutive trading days preceding the quarter end. As a result, the 2041 Notes are convertible at the option of the holder. The carrying amount of the 2041 Notes was classified in current liabilities and the excess of the amount of cash payable, if converted, over the carrying amount of the 2041 Notes was classified as temporary equity in the Company’s Consolidated Balance Sheets as of December 28, 2014 and June 29, 2014. Upon closure of a conversion period, all 2041 Notes not converted will be reclassified back to noncurrent liabilities and the temporary equity is reclassified to permanent equity.
The following table presents the amount of interest cost recognized relating to both the contractual interest coupon and amortization of the discount on the liability component of the Notes during the three and six months ended December 28, 2014 and December 29, 2013.
|  | Three Months Ended |  |  | Six Months Ended |
|  | December 28, 2014 |  |  | December 29, 2013 |  |  | December 28, 2014 |  |  | December 29, 2013 |
|  | (in thousands) |
Contractual interest coupon |  | $ | 6,562 |  |  | $ | 6,562 |  |  | $ | 13,124 |  |  | $ | 13,124 |
Amortization of interest discount |  |  | 8,610 |  |  |  | 8,217 |  |  |  | 17,119 |  |  |  | 16,339 |
Amortization of issuance costs |  |  | 590 |  |  |  | 591 |  |  |  | 1,181 |  |  |  | 1,181 |
Total interest cost recognized |  | $ | 15,762 |  |  | $ | 15,370 |  |  | $ | 31,424 |  |  | $ | 30,644 |
Convertible Note Hedges and Warrants Concurrent with the issuance of the 2016 Notes and 2018 Notes, the Company sold warrants. At expiration, the Company may, at its option, elect to settle the warrants on a net share basis. As of December 28, 2014, the warrants had not been exercised and remained outstanding. The exercise price is adjusted for certain corporate events, including dividends on the Company’s Common Stock. In addition, counterparties agreed to sell to the Company shares of Common Stock equal to the number of shares issuable upon conversion of the 2016 Notes and 2018 Notes in full. The convertible note hedge transactions will be settled in net shares and will terminate upon the earlier of the maturity date or the first day none of the respective notes remain outstanding due to conversion or otherwise. Settlement of the convertible note hedge in net shares, based on the number of shares issued upon conversion of the Notes, on the expiration date would result in the Company receiving net shares equivalent to the number of shares issuable by the Company upon conversion of the 2016 Notes and 2018 Notes. The exercise price is adjusted for certain corporate events, including dividends on the Company’s Common Stock. The following table presents the details of the warrants and convertible note hedge arrangements as of December 28, 2014:
|  | 2016 Notes |  |  | 2018 Notes |
|  | (shares in thousands) |
Warrants: |  |  |  |  |  |  |  |
Number of shares to be delivered upon exercise |  |  | 7,194 |  |  |  | 7,194 |
Exercise price |  | $ | 70.81 |  |  | $ | 75.54 |
Expiration date range |  |  | August 15 - October 21, 2016 |  |  |  | August 15 - October 23, 2018 |
Convertible Note Hedge: |  |  |  |  |  |  |  |
Number of shares available from counterparties |  |  | 7,194 |  |  |  | 7,194 |
Exercise price |  | $ | 62.55 |  |  | $ | 62.55 |
Revolving Credit Facility On March 12, 2014, the Company entered into a $300 million revolving unsecured credit facility with a syndicate of lenders. The facility matures on March 12, 2019. The facility includes an option, subject to certain requirements, for the Company to request an increase in the facility of up to an additional $200 million, for a potential total commitment of $500 million. Proceeds from the credit facility can be used for general corporate purposes. Interest on amounts borrowed under the credit facility is, at the Company’s option, based on (i) a base rate, defined as the greatest of (a) prime rate, (b) Federal Funds rate plus 0.5%, or (c) one-month LIBOR plus 1.0%, plus a spread of 0.0% to 0.5%, or (ii) LIBOR plus a spread of 0.9% to 1.5%, in each case as the applicable spread is determined based on the rating of the Company’s non-credit enhanced, senior unsecured long-term debt. Principal and any accrued and unpaid interest is due and payable upon maturity. Additionally, the Company will pay the lenders a quarterly commitment fee that varies based on the Company’s rating described above. The credit facility contains certain restrictive covenants including maintaining a total consolidated indebtedness to consolidated capitalization ratio of no more than 0.5 to 1.0 and maintaining unrestricted or unencumbered cash and investments of no less than $1.0 billion. As of December 28, 2014, the Company had no borrowings outstanding under the credit facility and was in compliance with all financial covenants.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 19, 20, 22 -Article 5 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
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