Long Term Debt and Other Borrowings

12 Months Ended

Jun. 28, 2020

As of June 28, 2020, and June 30, 2019, the Company’s outstanding debt consisted of the following:



	June 28, 2020						June 30, 2019
	Amount (in thousands)				Effective Interest Rate		Amount (in thousands)				Effective Interest Rate
Fixed-rate 2.75% Senior Notes Due March 15, 2020 (“2020 Notes”)	$	—			—		$	500,000			2.88	%
Fixed-rate 2.80% Senior Notes Due June 15, 2021 (“2021 Notes”)	800,000				2.95	%	800,000				2.95	%
Fixed-rate 3.80% Senior Notes Due March 15, 2025 (“2025 Notes”)	500,000				3.87	%	500,000				3.87	%
Fixed-rate 3.75% Senior Notes Due March 15, 2026 ("2026 Notes")	750,000				3.86	%	750,000				3.86	%
Fixed-rate 4.00% Senior Notes Due March 15, 2029 ("2029 Notes")	1,000,000				4.09	%	1,000,000				4.09	%
Fixed-rate 1.90% Senior Note Due June 15, 2030 ("2030 Notes")	750,000				2.01	%	—				—
Fixed-rate 2.625% Convertible Notes Due May 15, 2041 (“2041 Notes”)	48,460			(1)	4.28	%	212,349			(1)	4.28	%
Fixed-rate 4.875% Senior Notes Due March 15, 2049 ("2049 Notes")	750,000				4.93	%	750,000				4.93	%
Fixed-rate 2.875% Senior Note Due June 15, 2050 ("2050 Notes")	750,000				2.93	%	—				—
Fixed-rate 3.125% Senior Note Due June 15, 2060 ("2060 Notes")	500,000				3.18	%	—				—
Total debt outstanding, at par	5,848,460						4,512,349
Unamortized discount	(53,086		)				(73,191		)
Fair value adjustment - interest rate contracts	8,405			(2)			(3,612		)
Unamortized bond issuance costs	(8,301		)				(5,535		)
Total debt outstanding, at carrying value	$	5,795,478					$	4,430,011
Reported as:
Current portion of long-term debt	$	836,107					$	662,308
Long-term debt	4,959,371						3,767,703
Total debt outstanding, at carrying value	$	5,795,478					$	4,430,011

(1)

As of the report date, these notes were convertible at the option of the bondholder. This is a result of the following condition being met: the market value of the Company’s Common Stock was greater than 130% of the convertible notes conversion price for 20 or more of the 30 consecutive trading days preceding the quarter-end. As a result, the 2041 Notes were classified in current liabilities and a portion of the equity component associated with the convertible notes, representing the unamortized discount, was classified in temporary equity on the Company’s Consolidated Balance Sheets. Upon closure of the conversion period, the notes not converted will be reclassified back into noncurrent liabilities and the temporary equity will be reclassified into permanent equity.


(2)	This amount represents a cumulative fair market gain for discontinued hedging relationships, net of an immaterial amount of amortization for the year ended June 28, 2020.

The Company’s contractual cash obligations relating to its outstanding debt as of June 28, 2020, were as follows:



Payments Due by Fiscal Year:
	(in thousands)
2021 ⁽¹⁾	$	848,460
2022	—
2023	—
2024	—
2025	500,000
Thereafter	4,500,000
Total	$	5,848,460


(1)	As noted above, the conversion period for the 2041 Notes is open as of June 28, 2020. As there is the potential for conversion at the option of the holder, the principal balance of the 2041 Notes has been included in the one-year payment period.

Convertible Senior Notes

In June 2012, with the acquisition of Novellus, the Company assumed $700 million in aggregate principal amount of 2.625% Convertible Senior Notes due May 15, 2041 (the “2041 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 2041 Notes. The initial debt components of 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 table below, respectively. The equity component was initially valued equal to the principle value of the notes, less 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 a conversion feature, which equated to the initial debt discount.

The 2041 Notes may be redeemed by the Company on or after May 21, 2021 at a price equal to outstanding principal plus accrued and unpaid interest if the last reported sales price of common shares has been equal to or more than 150% of the then applicable conversion price for at least 20 trading days during the 30 consecutive trading days prior to the redemption notice date.

Under certain circumstances, the 2041 Notes may be converted into shares of the Company’s Common Stock. The number of shares each debenture is convertible into is based on conversion rates, disclosed in the table below. The principal value of the 2041 Note conversions in the fiscal year ended June 28, 2020, was $163.9 million. During the quarter ended June 28, 2020 and in the subsequent period through August 18, 2020, the Company received notice of conversion for an additional $18.1 million principal value of 2041 Notes, which will settle in the quarter ending September 27, 2020. As a result of the cumulative conversions, as of June 28, 2020, $48.5 million of the 2041 notes remain outstanding.

Selected additional information regarding the 2041 Notes outstanding as of June 28, 2020, and June 30, 2019, is as follows:



	2041 Notes
	June 28, 2020		June 30, 2019
	(in thousands, except years, percentages, conversion rate, and conversion price)
Carrying amount of permanent equity component, net of tax	$	161,467	$	160,604
Carrying amount of temporary equity component, net of tax	$	10,995	$	49,439
Remaining amortization period (years)	20.9		21.9
Fair Value of Notes (Level 2)	$	462,857
Conversion rate (shares of common stock per $1,000 principal amount of notes)	31.5206
Conversion price (per share of common stock)	$	31.73
If-converted value in excess of par value	$	413,636
Estimated share dilution using average quarterly stock price of $270.53 per share	1,348

Senior Notes

On May 5, 2020, the company completed a public offering of $750 million aggregate principal amount of the Company’s Senior Notes due June 15, 2030 (the “2030 Notes”), $750 million aggregate principal amount of the Company’s Senior Notes due June 15, 2050 (the “2050 Notes”), and $500 million aggregate principal amount of the Company’s Senior Notes due June 15, 2060 (the “2060 Notes”). The Company will pay interest at an annual rate of 1.90%, 2.875%, and 3.125%, on the 2030, 2050, and 2060 Notes, respectively, on a semi-annual basis on June 15 and December 15 of each year beginning December 15, 2020.

On March 4, 2019, the company completed a public offering of $750 million aggregate principal amount of the Company’s Senior Notes due March 15, 2026 (the “2026 Notes”), $1.0 billion aggregate principal amount of the Company’s Senior Notes due March 15, 2029 (the “2029 Notes”), and $750 million aggregate principal amount of the Company’s Senior Notes due March 15, 2049 (the “2049 Notes”). The Company pays interest at an annual rate of 3.75%, 4.00%, and 4.875%, on the 2026, 2029, and 2049 Notes, respectively, on a semi-annual basis on March 15 and September 15 of each year.

On March 12, 2015, the Company completed a public offering of $500 million aggregate principal amount of the Company’s Senior Notes due March 15, 2020 (the “2020 Notes”) and $500 million aggregate principal amount of the Company’s Senior Notes due March 15, 2025 (the “2025 Notes”). The Company pays interest at an annual rate of 3.80% on the 2025 Notes on a semi-annual basis on March 15 and September 15 of each year. During the year ended June 26, 2016, the Company entered into a series of interest rate contracts hedging the fair value of a portion of the 2025 Notes par value, whereby the Company received a fixed rate and paid a variable rate based on a certain benchmark interest rate. During the year ended June 28, 2020, the Company terminated and consequently discontinued the hedging relationship of these interest rate contracts. Refer to Note 9 - Financial Instruments for additional information regarding

these interest rate contracts. During the year ended June 28, 2020, the Company settled the 2020 Notes at par upon their maturity. Prior to settlement, the Company paid interest at an annual rate of 2.75% on the 2020 Notes.

On June 7, 2016, the Company completed a public offering of $800 million aggregate principal amount of Senior Notes due June 2021 (the “2021 Notes”). The Company pays interest at an annual rate of 2.80% on the 2021 Notes on a semi-annual basis on June 15 and December 15 of each year.

The Company may redeem the 2021, 2025, 2026, 2029, 2030, 2049, 2050, and 2060 Notes (collectively the “Senior Notes”) at a redemption price equal to 100% of the principal amount of such series (“par”), plus a “make whole” premium as described in the indenture in respect to the Senior Notes and accrued and unpaid interest before May 15, 2021 for the 2021 Notes, before December 15, 2024 for the 2025 Notes, before January 15, 2026 for the 2026 Notes, before December 15, 2028 for the 2029 Notes, before March 15, 2030 for the 2030 Notes, before September 15, 2048 for the 2049 Notes, before December 15, 2049 for the 2050 Notes, and before December 15, 2059 for the 2060 Notes. The Company may redeem the Senior Notes at par, plus accrued and unpaid interest at any time on or after May 15, 2021 for the 2021 Notes, on or after December 24, 2024 for the 2025 Notes, on or after January 15, 2026 for the 2026 Notes, on or after December 15, 2028 for the 2029 Notes, on or after March 15, 2030 for the 2030 Notes, on or after September 15, 2048 for the 2049 Notes, on or after December 15, 2049 for the 2050 Notes, and on or after December 15, 2059 for the 2060 Notes. In addition, upon the occurrence of certain events, as described in the indenture, the Company will be required to make an offer to repurchase the Senior Notes at a price equal to 101% of the principal amount of the respective note, plus accrued and unpaid interest.

Selected additional information regarding the Senior Notes outstanding as of June 28, 2020, is as follows:



	Remaining Amortization period	Fair Value of Notes (Level 2)
	(years)	(in thousands)
2021 Notes	1.0	$	815,560
2025 Notes	4.7	$	565,985
2026 Notes	5.7	$	859,560
2029 Notes	8.7	$	1,185,430
2030 Notes	10.0	$	763,793
2049 Notes	28.7	$	1,045,035
2050 Notes	30.0	$	773,603
2060 Notes	40.0	$	527,825

Revolving Credit Facility

On March 12, 2014, the Company established an unsecured Credit Agreement. This agreement was amended on November 10, 2015 (the “Amended and Restated Credit Agreement”), October 13, 2017 (the “2nd Amendment”), and February 25, 2019 (the “3rd Amendment”). Under the Amended and Restated Credit Agreement (as amended by the 2nd and 3rd Amendment), the Company has a revolving credit facility of $1.25 billion with a syndicate of lenders with an expansion option that will allow the Company, subject to certain requirements, to request an increase in the facility of up to an additional $600.0 million, for a potential total commitment of $1.85 billion. The facility matures on October 13, 2022.

Interest on amounts borrowed under the credit facility is, at the Company’s option, based on (1) 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 (2) LIBOR multiplied by the statutory rate, 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 credit rating. The Amended and Restated Credit Agreement contains affirmative covenants, negative covenants, financial covenants, and events of default. As of June 28, 2020, the Company had no borrowings outstanding under the credit facility and was in compliance with all financial covenants.

Commercial Paper Program

On November 13, 2017, the Company established a commercial paper program under which the Company may issue unsecured commercial paper notes on a private placement basis up to a maximum aggregate principal amount of $1.25 billion. The net proceeds from the CP Program will be used for general corporate purposes, including repurchases of the Company’s Common Stock from time to time under the Company’s stock repurchase program. Amounts available under the CP Program may be re-borrowed. The CP Program is backstopped by the Company’s Revolving Credit Arrangement. As of June 28, 2020, the Company had no outstanding borrowings under the CP Program.

Interest Cost

The following table presents the amount of interest cost recognized relating to both the contractual interest coupon and amortization of the debt discount, issuance costs, and effective portion of interest rate contracts with respect to the Senior Notes, convertible notes, commercial paper, and the revolving credit facility during the fiscal years ended June 28, 2020, June 30, 2019, and June 24, 2018.



	Year Ended
	June 28, 2020		June 30, 2019		June 24, 2018
	(in thousands)
Contractual interest coupon	$	169,483	$	100,712	$	77,091
Amortization of interest discount	4,280		3,937		12,225
Amortization of issuance costs	1,632		1,426		2,034
Effect of interest rate contracts, net	1,037		4,086		3
Total interest cost recognized	$	176,432	$	110,161	$	91,353