Borrowings
The following table summarizes the Company’s short-term debt (in millions, except percentages):
|
| | | | | | | | | | | | | |
| July 27, 2013 | | July 28, 2012 |
| Amount | | Weighted-Average Interest Rate | | Amount | | Weighted-Average Interest Rate |
Current portion of long-term debt | $ | 3,273 |
| | 0.63 | % | | $ | — |
| | — | % |
Other notes and borrowings | 10 |
| | 2.52 | % | | 31 |
| | 6.72 | % |
Total short-term debt | $ | 3,283 |
| | | | $ | 31 |
| |
|
In fiscal 2011, the Company established a short-term debt financing program of up to $3.0 billion through the issuance of commercial paper notes. The Company uses the proceeds from the issuance of commercial paper notes for general corporate purposes. The Company had no commercial paper notes outstanding as of each of July 27, 2013 and July 28, 2012.
Other notes and borrowings consisted of the short-term portion of secured borrowings associated with customer financing arrangements as well as notes and credit facilities with a number of financial institutions that are available to certain of the Company’s foreign subsidiaries. These notes and credit facilities were subject to various terms and foreign currency market interest rates pursuant to individual financial arrangements between the financing institution and the applicable foreign subsidiary.
As of July 27, 2013 and July 28, 2012, the estimated fair value of the short-term debt approximates its carrying value due to the short maturities.
The following table summarizes the Company’s long-term debt (in millions, except percentages):
|
| | | | | | | | | | | |
| July 27, 2013 | | July 28, 2012 |
| Amount | | Effective Rate | | Amount | | Effective Rate |
Senior notes: | | | | | | | |
Floating-rate notes, due 2014 | $ | 1,250 |
| | 0.62% | | $ | 1,250 |
| | 0.81% |
1.625% fixed-rate notes, due 2014 | 2,000 |
| | 0.64% | | 2,000 |
| | 0.84% |
2.90% fixed-rate notes, due 2014 | 500 |
| | 3.11% | | 500 |
| | 3.11% |
5.50% fixed-rate notes, due 2016 | 3,000 |
| | 3.07% | | 3,000 |
| | 3.16% |
3.15% fixed-rate notes, due 2017 | 750 |
| | 0.84% | | 750 |
| | 1.03% |
4.95% fixed-rate notes, due 2019 | 2,000 |
| | 4.70% | | 2,000 |
| | 5.08% |
4.45% fixed-rate notes, due 2020 | 2,500 |
| | 4.15% | | 2,500 |
| | 4.50% |
5.90% fixed-rate notes, due 2039 | 2,000 |
| | 6.11% | | 2,000 |
| | 6.11% |
5.50% fixed-rate notes, due 2040 | 2,000 |
| | 5.67% | | 2,000 |
| | 5.67% |
Other long-term debt | 21 |
| | 1.46% | | 10 |
| | 0.19% |
Total | 16,021 |
| | | | 16,010 |
| | |
Unaccreted discount | (65 | ) | | | | (70 | ) | | |
Hedge accounting fair value adjustments | 245 |
| | | | 357 |
| | |
Total | $ | 16,201 |
| | | | $ | 16,297 |
| | |
| | | | | | | |
Reported as: | | | | | | | |
Current portion of long-term debt | $ | 3,273 |
| | | | $ | — |
| | |
Long-term debt | 12,928 |
| | | | 16,297 |
| | |
Total | $ | 16,201 |
| | |
| $ | 16,297 |
| | |
To achieve its interest rate risk management objectives, the Company has entered into interest rate swaps with an aggregate notional amount of $5.25 billion designated as fair value hedges of certain of its fixed-rate senior notes. In effect, these swaps convert the fixed interest rates of the fixed-rate notes to floating interest rates based on the London InterBank Offered Rate (LIBOR). The gains and losses related to changes in the fair value of the interest rate swaps substantially offset changes in the fair value of the hedged portion of the underlying debt that are attributable to the changes in market interest rates. See Note 11.
The effective rates for the fixed-rate debt include the interest on the notes, the accretion of the discount, and, if applicable, adjustments related to hedging. Interest is payable semiannually on each class of the senior fixed-rate notes and payable quarterly on the floating-rate notes. Each of the senior fixed-rate notes is redeemable by the Company at any time, subject to a make-whole premium.
The senior notes rank at par with the commercial paper notes that may be issued in the future pursuant to the Company’s short-term debt financing program, as discussed above under “(a) Short-Term Debt.” As of July 27, 2013, the Company was in compliance with all debt covenants.
Future principal payments for long-term debt as of July 27, 2013 are summarized as follows (in millions):
|
| | | |
Fiscal Year | Amount |
2014 | $ | 3,260 |
|
2015 | 507 |
|
2016 | 3,003 |
|
2017 | 751 |
|
2018 | — |
|
Thereafter | 8,500 |
|
Total | $ | 16,021 |
|
On February 17, 2012, the Company entered into a credit agreement with certain institutional lenders that provides for a $3.0 billion unsecured revolving credit facility that is scheduled to expire on February 17, 2017. Any advances under the credit agreement will accrue interest at rates that are equal to, based on certain conditions, either (i) the higher of the Federal Funds rate plus 0.50%, Bank of America’s “prime rate” as announced from time to time, or one-month LIBOR plus 1.00% or (ii) LIBOR plus a margin that is based on the Company’s senior debt credit ratings as published by Standard & Poor’s Financial Services, LLC and Moody’s Investors Service, Inc. The credit agreement requires the Company to comply with certain covenants, including that it maintains an interest coverage ratio as defined in the agreement. As of July 27, 2013, the Company was in compliance with all such required covenants, and the Company had not borrowed any funds under the credit facility.
The Company may also, upon the agreement of either the then-existing lenders or additional lenders not currently parties to the agreement, increase the commitments under the credit facility by up to an additional $2.0 billion and/or extend the expiration date of the credit facility by up to two additional years, or up to February 17, 2019.
