Note 6 – Long-Term Debt
In May 2013, the Company issued floating- and fixed-rate notes with varying maturities for an aggregate principal amount of $17.0 billion (collectively the “Notes”). The Notes are senior unsecured obligations, and interest is payable in arrears, quarterly for the floating-rate notes and semi-annually for the fixed-rate notes.
The principal amounts and associated interest rates of the Notes as of September 28, 2013, are as follows:
| Amount (in millions) |
Effective Rate |
|||||||
|
Floating-rate notes, due 2016 |
$ | 1,000 | 0.51 | % | ||||
|
Floating-rate notes, due 2018 |
2,000 | 1.10 | % | |||||
|
Fixed-rate 0.45% notes due 2016 |
1,500 | 0.51 | % | |||||
|
Fixed-rate 1.00% notes due 2018 |
4,000 | 1.08 | % | |||||
|
Fixed-rate 2.40% notes due 2023 |
5,500 | 2.44 | % | |||||
|
Fixed-rate 3.85% notes due 2043 |
3,000 | 3.91 | % | |||||
|
|
|
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|
Total |
$ | 17,000 | ||||||
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|
|
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The floating-rate notes due 2016 and 2018 bear interest at the three-month London InterBank Offered Rate (“LIBOR”) plus 0.05% and 0.25%, respectively. To manage the risk of fluctuations in interest rates associated with the floating-rate notes, the Company entered into interest rate swaps with an aggregate notional amount of $3.0 billion designated as cash flow hedges of its floating-rate notes. These hedges effectively convert the floating interest rate on the floating-rate notes to a fixed interest rate. The gains and losses related to changes in the fair value of the interest rate swaps are recorded in OCI with a portion reclassified to interest expense each period to offset changes in interest rates on the floating-rate notes. The effective rates for the Notes include the interest on the Notes, amortization of the discount and, if applicable, adjustments related to hedging. The Company recognized $136 million of interest expense for the year ended September 28, 2013. As of September 28, 2013, the aggregate unamortized discount for the Company’s Notes was $40 million.
Future principal payments for the Company’s Notes as of September 28, 2013, are as follows (in millions):
|
2014 |
$ | 0 | ||
|
2015 |
0 | |||
|
2016 |
2,500 | |||
|
2017 |
0 | |||
|
2018 |
6,000 | |||
|
Thereafter |
8,500 | |||
|
|
|
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|
Total |
$ | 17,000 | ||
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As of September 28, 2013, the fair value of the Company’s Notes, based on Level 2 inputs, was $15.9 billion.