Financing Arrangements

Senior Convertible Notes

In April 2006, the Company issued $2.200 billion of 1.625 percent Senior Convertible Notes due 2013 (2013 Senior Convertible Notes). The 2013 Senior Convertible Notes were issued at par and pay interest in cash semi-annually in arrears on April 15 and October 15 of each year. The 2013 Senior Convertible Notes are unsecured unsubordinated obligations and rank equally with all other unsecured and unsubordinated indebtedness.

Concurrent with the issuance of the 2013 Senior Convertible Notes, the Company purchased call options on its common stock in private transactions. The call options allow the Company to receive shares of the Company’s common stock and/or cash from counterparties equal to the amounts of common stock and/or cash related to the excess conversion value that it would pay to the holders of the 2013 Senior Convertible Notes upon conversion.

In separate transactions, the Company sold warrants to issue shares of the Company’s common stock at an exercise price of $76.56 per share in private transactions. Pursuant to these transactions, warrants for 41 million shares of the Company’s common stock may be settled over a specified period beginning in July 2013.

Based on existing guidance, the purchased call option contracts were recorded as a reduction of equity and the warrants were recorded as an addition to equity as of the trade date. Existing guidance states that a reporting entity shall not consider contracts to be derivative instruments if the contract issued or held by the reporting entity is both indexed to its own stock and classified in shareholders’ equity in its statement of financial position. The Company concluded that the purchased call options and sold warrants were indexed to its own stock and should be classified in shareholders’ equity and not separated as a derivative.

The Company accounted for the 2013 Senior Convertible Notes in accordance with the authoritative guidance for convertible debt, which requires the proceeds from the issuance of the 2013 Senior Convertible Notes to be allocated between a liability component (issued at a discount) and an equity component. The resulting debt discount is amortized over the period the 2013 Senior Convertible Notes are expected to be outstanding as additional non-cash interest expense.

The following table provides equity and debt information for the 2013 Senior Convertible Notes under the convertible debt guidance:



(in millions)	January 25, 2013			April 27, 2012
Carrying amount of the equity component	$	547		$	547
Principal amount of the 2013 Senior Convertible Notes	$	2,200		$	2,200
Unamortized discount	(20		)	(90		)
Net carrying amount	$	2,180		$	2,110

As of January 25, 2013, the unamortized balance of the debt discount will be amortized over the remaining life of the 2013 Senior Convertible Notes, which is approximately three months. The following tables provide interest rate and interest expense amounts related to the 2013 Senior Convertible Notes:



	Three months ended
(in millions, except interest rate)	January 25, 2013			January 27, 2012
Effective interest rate	6.03		%	6.03		%
Interest cost related to contractual interest coupon	$	9		$	9
Interest cost related to amortization of the discount	$	23		$	22



	Nine months ended
(in millions, except interest rate)	January 25, 2013			January 27, 2012
Effective interest rate	6.03		%	6.03		%
Interest cost related to contractual interest coupon	$	27		$	27
Interest cost related to amortization of the discount	$	69		$	65

Commercial Paper

The Company maintains a commercial paper program that allows the Company to have a maximum of $2.250 billion in commercial paper outstanding, with maturities up to 364 days from the date of issuance. As of January 25, 2013 and April 27, 2012, outstanding commercial paper totaled $1.635 billion and $950 million, respectively. During the three and nine months ended January 25, 2013, the weighted average original maturity of the commercial paper outstanding was approximately 104 days and 84 days, respectively, and the weighted average interest rate was 0.20 percent and 0.18 percent, respectively. The issuance of commercial paper reduces the amount of credit available under the Company’s existing lines of credit.

Bank Borrowings

Bank borrowings consist primarily of borrowings from non-U.S. banks at interest rates considered favorable by management and where natural hedges can be gained for foreign exchange purposes and borrowings from U.S. banks.

Lines of Credit

The Company has a $2.250 billion syndicated credit facility dated December 17, 2012 which expires on December 17, 2017 (Credit Facility). The Credit Facility provides the Company with the ability to increase its capacity by an additional $750 million at any time during the term of the agreement. The Company can also request a maximum of two one-year extensions of the Credit Facility maturity date, at each anniversary date of the Credit Facility. The Credit Facility provides backup funding for the commercial paper program, and therefore, the issuance of commercial paper reduces the amount of credit available under the committed lines of credit. The Credit Facility replaced the Company's four-year $2.250 billion syndicated credit facility which was scheduled to expire on December 9, 2014. As of January 25, 2013 and April 27, 2012, no amounts were outstanding on the committed lines of credit.

Interest rates are determined by a pricing matrix, based on the Company’s long-term debt ratings, assigned by Standard & Poor’s Ratings Services and Moody’s Investors Service. Facility fees are payable on the credit facilities and are determined in the same manner as the interest rates. The agreements also contain customary covenants, all of which the Company remains in compliance with as of January 25, 2013.

Long-term debt consisted of the following:



(in millions, except interest rates)	Maturity by Fiscal Year	Payable as of January 25, 2013		Payable as of April 27, 2012
4.500 percent five-year 2009 senior notes	2014	$	550	$	550
3.000 percent five-year 2010 senior notes	2015	1,250		1,250
4.750 percent ten-year 2005 senior notes	2016	600		600
2.625 percent five-year 2011 senior notes	2016	500		500
5.600 percent ten-year 2009 senior notes	2019	400		400
4.450 percent ten-year 2010 senior notes	2020	1,250		1,250
4.125 percent ten-year 2011 senior notes	2021	500		500
3.125 percent ten-year 2012 senior notes	2022	675		675
6.500 percent thirty-year 2009 senior notes	2039	300		300
5.550 percent thirty-year 2010 senior notes	2040	500		500
4.500 percent thirty-year 2012 senior notes	2042	400		400
Interest rate swaps	2015 - 2022	168		167
Gains from interest rate swap terminations	-	66		102
Capital lease obligations	2014 - 2025	155		165
Total Long-Term Debt		$	7,314	$	7,359

Senior Notes

The Company has outstanding unsecured senior obligations including those indicated as "senior notes" in the long-term debt table above (collectively, the Senior Notes). The Senior Notes rank equally with all other unsecured and unsubordinated indebtedness of the Company. The indentures under which the Senior Notes were issued contain customary covenants, all of which the Company remains in compliance with as of January 25, 2013. The Company used the net proceeds from the sale of the Senior Notes primarily for working capital and general corporate uses, which include the repayment of other indebtedness of the Company. For additional information regarding the terms of these agreements, refer to Note 9 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended April 27, 2012.

As of January 25, 2013, the Company had interest rate swap agreements designated as fair value hedges of certain underlying fixed rate obligations including the Company’s $1.250 billion 3.000 percent 2010 Senior Notes due 2015, $600 million 4.750 percent 2005 Senior Notes due 2015, the Company’s $500 million 2.625 percent 2011 Senior Notes due 2016, the Company’s $500 million 4.125 percent 2011 Senior Notes due 2021, and the Company’s $675 million 3.125 percent 2012 Senior Notes due 2022. For additional information regarding the interest rate swap agreements, refer to Note 10.