Financing Arrangements

The following table reflects the carrying value of the Company’s convertible debt as of October 2, 2011 and January 2, 2011:



	October 2, 2011			January 2, 2011
	(In thousands)
1% Notes due 2013	$	1,150,000		$	1,150,000
Less: Notes redeemed (valued at par)	(221,939		)	—
Unamortized interest discount	(88,837		)	(156,801		)
Net carrying amount of 1% Notes due 2013	839,224			993,199

1.5% Notes due 2017	1,000,000			1,000,000
Less: Unamortized interest discount	(256,066		)	(282,167		)
Net carrying amount of 1.5% Notes due 2017	743,934			717,833
Total convertible long-term debt	$	1,583,158		$	1,711,032

1% Convertible Senior Notes Due 2013. In May 2006, the Company issued and sold $1.15 billion in aggregate principal amount of 1% Convertible Senior Notes due May 15, 2013 (the “1% Notes due 2013”) at par and has subsequently repurchased $221.9 million of principal amount of these notes during the three months ended October 2, 2011. The 1% Notes due 2013 may be converted, under certain circumstances, based on an initial conversion rate of 12.1426 shares of common stock per $1,000 principal amount of notes (which represents an initial conversion price of approximately $82.36 per share). The net proceeds to the Company from the offering of the 1% Notes due 2013 were $1.13 billion. As of October 2, 2011, the Company had $928.1 million outstanding in aggregate principal amount at par.

The Company separately accounts for the liability and equity components of the 1% Notes due 2013. The principal amount of the liability component of $753.5 million as of the date of issuance was recognized at the present value of its cash flows using a discount rate of 7.4%, the Company’s borrowing rate at the date of the issuance for a similar debt instrument without the conversion feature. The carrying value of the equity component was $394.3 million and $396.5 million as of October 2, 2011 and January 2, 2011, respectively.

The following table presents the amount of interest cost recognized relating to the contractual interest coupon, amortization of bond issuance costs and amortization of the discount on the liability component of the 1% Notes due 2013 for the three and nine months ended October 2, 2011 and October 3, 2010.



	Three months ended				Nine months ended
	October 2, 2011		October 3, 2010		October 2, 2011		October 3, 2010
	(In thousands)
Contractual interest coupon	$	2,504	$	2,874	$	8,254	$	8,624
Amortization of bond issuance cost	1,935		857		3,649		2,572
Amortization of bond discount	13,456		14,444		43,743		42,572
Total interest cost recognized	$	17,895	$	18,175	$	55,646	$	53,768

The effective interest rate on the liability component was 7.4% for the three and nine months ended October 2, 2011 and October 3, 2010. The remaining unamortized interest discount of $88.8 million as of October 2, 2011 will be amortized over the remaining life of the 1% Notes due 2013, which is approximately 1.6 years.

Concurrent with the issuance of the 1% Notes due 2013, the Company sold warrants to acquire shares of its common stock at an exercise price of $95.03 per share. As of October 2, 2011, the warrants had an expected life of approximately 1.9 years and will expire on 20 different dates from August 23, 2013 through September 20, 2013. At expiration, the Company may, at its option, elect to settle the warrants on a net share basis. In addition, at issuance, counterparties agreed to sell to the Company up to approximately 14.0 million shares of its common stock, which is the number of shares initially issuable upon conversion of the 1% Notes due 2013 in full, at a conversion price of $82.36 per share. As of October 2, 2011, due to the repurchase of a portion of the outstanding 1% Notes due 2013, the Company unwound a pro-rata portion of the convertible bond hedge. The Company may now purchase up to 11.3 million shares of its common stock at a conversion price of $82.36 per share. This convertible bond hedge transaction will be settled in net shares and will terminate upon the earlier of the maturity date of the 1% Notes due 2013 or the first day that none of the 1% Notes due 2013 remain outstanding due to conversion or otherwise. Settlement of the convertible bond hedge in net shares on the expiration date would result in the Company receiving net shares equivalent to the number of shares issuable by it upon conversion of the 1% Notes due 2013.

Bond Repurchase. In the three months ended October 2, 2011, the Company repurchased $221.9 million principal amount of its 1% Notes due 2013 in private transactions with a limited number of bondholders for cash consideration of $211.1 million. The repurchase was economically beneficial given the notes were repurchased below the principal amount and given that interest rates on cash and marketable securities were lower than the 1% coupon rate of the notes. In accordance with current accounting guidance, at settlement, the fair value of the liability component of the convertible debt immediately prior to repurchase is measured using current interest rates, and the difference between the fair value of the aggregate consideration remitted to the holders and the fair value of the liability component of the convertible debt immediately prior to repurchase is attributed to the reacquisition of the equity component. The difference between the fair value of the liability component of the convertible debt immediately prior to the repurchase and the carrying value of the debt redeemed was recorded as expense on extinguishment of debt in Interest (expense) and other income (expense), net, in the Condensed Consolidated Statements of Operations.

The components of the repurchase and related loss on early extinguishment of a portion of the 1% Notes due 2013 are as follows:



	Three months ended October 2, 2011
	(In thousands)
Allocation of consideration paid:
Fair value of debt redeemed	$	208,958
Reacquisition of equity component	2,161
Total consideration related to principal amount of debt redeemed	$	211,119

Loss on extinguishment:
Fair value of debt redeemed	$	208,958
Less: Carrying value of debt redeemed	(198,563		)

Loss on extinguishment of debt	10,395
Reacquisition costs	318
Extinguishment of related unamortized debt issuance costs	780
Total loss on early extinguishment of debt before tax	$	11,493

In connection with the repurchase of a portion of the 1% Notes due 2013, the Company unwound a portion of the convertible bond hedge and warrants. As a result of this unwinding, the Company received net proceeds of $0.3 million which was recorded in equity. As of October 2, 2011, none of the remaining warrants had been exercised nor had the Company purchased any shares under the remaining convertible bond hedge.

1.5% Convertible Senior Notes Due 2017. In August 2010, the Company issued and sold $1.0 billion in aggregate principal amount of 1.5% Convertible Senior Notes due August 15, 2017 (the “1.5% Notes due 2017”) at par. The 1.5% Notes due 2017 may be converted, under certain circumstances, based on an initial conversion rate of 19.0931 shares of common stock per $1,000 principal amount of notes (which represents an initial conversion price of approximately $52.37 per share). The net proceeds to the Company from the sale of the 1.5% Notes due 2017 were $981.0 million.

The Company separately accounts for the liability and equity components of the 1.5% Notes due 2017. The principal amount of the liability component of $706.0 million as of the date of issuance was recognized at the present value of its cash flows using a discount rate of 6.85%, the Company’s borrowing rate at the date of the issuance for a similar debt instrument without the conversion feature. The carrying value of the equity component was $294.0 million as of October 2, 2011, unchanged from the date of issuance.

The following table presents the amount of interest cost recognized relating to the contractual interest coupon, amortization of bond issuance costs and amortization of the discount on the liability component of the 1.5% Notes due 2017 for the three and nine months ended October 2, 2011 and October 3, 2010.



	Three months ended				Nine months ended
	October 2, 2011		October 3, 2010		October 2, 2011		October 3, 2010
	(In thousands)
Contractual interest coupon	$	3,750	$	1,458	$	11,250	$	1,458
Amortization of bond issuance cost	667		281		2,028		281
Amortization of bond discount	8,594		3,540		25,505		3,540
Total interest cost recognized	$	13,011	$	5,279	$	38,783	$	5,279

The effective interest rate on the liability component was 6.85% for the three and nine months ended October 2, 2011. The remaining unamortized interest discount of $256.1 million as of October 2, 2011 will be amortized over the remaining life of the 1.5% Notes due 2017, which is approximately 5.9 years.

Concurrent with the issuance of the 1.5% Notes due 2017, the Company sold warrants to acquire shares of its common stock at an exercise price of $73.33 per share. As of October 2, 2011, the warrants had an expected life of approximately 6.2 years and will expire on 40 different dates from November 13, 2017 through January 10, 2018. At each expiration date, the Company may, at its option, elect to settle the warrants on a net share basis. As of October 2, 2011, the warrants had not been exercised and remain outstanding. In addition, counterparties agreed to sell to the Company up to approximately 19.1 million shares of the Company’s common stock, which is the number of shares initially issuable upon conversion of the 1.5% Notes due 2017 in full, at a price of $52.37 per share. This convertible bond hedge transaction will be settled in net shares and will terminate upon the earlier of the maturity date of the 1.5% Notes due 2017 or the first day that none of the 1.5% Notes due 2017 remain outstanding due to conversion or otherwise. Settlement of the convertible bond hedge in net shares 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 1.5% Notes due 2017. As of October 2, 2011, the Company had not purchased any shares under this convertible bond hedge agreement.