Debt Disclosure | Debt Convertible Debt 1.00 % Convertible Senior Notes Due 2018 On December 2, 2013, we issued $1.50 billion of 1.00% convertible senior notes, or the Convertible Notes, due 2018. The Convertible Notes are unsecured, unsubordinated obligations of the Company, which pay interest in cash semi-annually at a rate of 1.00% per annum. The Convertible Notes will mature on December 1, 2018 unless repurchased or converted prior to such date. The Convertible Notes were initially convertible at a rate of 49.5958 shares of common stock per $1,000 principal amount of the Convertible Notes (equivalent to an initial conversion price of $20.1630 per share of common stock). The conversion rate and conversion price are adjusted upon the occurrence of certain events, including our cash dividends or distributions exceeding $0.085 per share. Accordingly, as of October 30, 2016 , the conversion rate has been adjusted to 49.8058 shares of common stock per $1,000 principal amount of the Convertible Notes (equivalent to an adjusted conversion price of $20.0780 per share of common stock) for dividend increases. We separately accounted for the liability and equity components of the Convertible Notes at issuance and the value assigned to the debt component was the estimated fair value, as of the issuance date, of a similar debt without the conversion feature. The difference between the net cash proceeds and this estimated fair value represented the value assigned to the equity component and was recorded as a debt discount. The debt discount is amortized using the effective interest method from the origination date through its stated contractual maturity date. The initial debt component of the Convertible Notes was valued at $1.35 billion based on the contractual cash flows discounted at an appropriate market rate for a non-convertible debt at the date of issuance, which was determined to be 3.15% . The initial carrying value of the permanent equity component reported in additional paid-in-capital was valued at $126 million and recorded as a debt discount. This amount, together with the $23 million purchaser's discount to the par value of the Convertible Notes, represented the total unamortized debt discount of $148 million we recorded at the time of issuance of the Convertible Notes. The aggregate debt discount is amortized as interest expense over the contractual term of the Convertible Notes using the effective interest method using an interest rate of 3.15% . The following table presents the carrying value of the Convertible Notes: October 30, January 31, 2016 2016 (In millions) 1.00% Convertible Senior Notes Due 2018 $ 1,056 $ 1,500 Unamortized debt discount (1) (45 ) (87 ) Net carrying amount $ 1,011 $ 1,413 (1) As of October 30, 2016 , the remaining period over which the unamortized debt discount will be amortized is 2.1 years. The following table presents interest expense for the contractual interest and the accretion of debt discount and issuance costs related to the Convertible Notes: Three Months Ended Nine Months Ended October 30, October 25, October 30, October 25, 2016 2015 2016 2015 (In millions) Contractual coupon interest expense $ 3 $ 4 $ 10 $ 11 Amortization of debt discount and issuance costs 5 7 20 22 Total interest expense related to Convertible Notes $ 8 $ 11 $ 30 $ 33 Holders may convert all or any portion of their Convertible Notes at their option at any time prior to August 1, 2018 only under the following circumstances: (1) during any fiscal quarter, if the last reported sale price of the common stock for at least 20 trading days during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the measurement period) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events. On or after August 1, 2018 to the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Convertible Notes regardless of the foregoing conditions. The Convertible Notes first became convertible as of February 1, 2016. As of October 30, 2016, the Convertible Notes continued to be convertible at the holders’ option through January 29, 2017 as the price of our common stock was greater than or equal to 130% of the conversion price for at least 20 trading days during the 30 consecutive trading days ending on the last trading day of our fiscal quarter ended October 30, 2016. As such, the $1,011 million carrying value of the Convertible Notes continued to be classified as a current liability and the $45 million difference between the principal amount and the carrying value of the Convertible Notes continued to be classified as convertible debt conversion obligation in the mezzanine equity section of our Condensed Consolidated Balance Sheet, and will remain there for as long as the Convertible Notes are convertible. The determination of whether or not the Convertible Notes are convertible must continue to be performed on a quarterly basis. Consequently, the Convertible Notes may be reclassified as long-term debt and the convertible debt conversion obligation may be reclassified within shareholders' equity if the conversion threshold is not met in future quarters. Upon conversion of the Convertible Notes, we will pay cash up to the aggregate principal amount of the Convertible Notes. We may pay or deliver cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted. Based on the closing price of our common stock on October 28, 2016 (the last trading day of the third quarter of fiscal year 2017) of $70.56 , the if-converted value of our Convertible Notes exceeded their principal amount by approximately $2.66 billion . During both the three and nine months ended October 30, 2016, we paid cash to settle $444 million in principal amount, issued 15 million shares of our common stock with respect to the conversion obligation in excess of the principal amount, and recognized a loss of $15 million on early conversions, of the Convertible Notes. Further, we received additional conversion notices for an aggregate of $229 million in principal amount of the Convertible Notes during the third quarter of fiscal year 2017. Settlements of these conversion requests are expected to be completed in the fourth quarter of fiscal year 2017. Note Hedges and Warrants Concurrently with the issuance of the Convertible Notes, we entered into a convertible note hedge transaction, or the Note Hedges, with a strike price equal to the initial conversion price of the Convertible Notes, or $20.1630 per share. Adjusting for dividends paid through October 30, 2016, the strike price of the Note Hedges has been adjusted to $20.0780 per share. The Note Hedges allow us to receive shares of our common stock and/or cash related to the excess conversion value that we would deliver and/or pay, respectively, to the holders of the Convertible Notes upon conversion. Through October 30, 2016, we had received 15 million shares of our common stock from the exercise of a portion of the Note Hedges related to the settlement of an aggregate of $444 million in principal amount of the Convertible Notes. In addition, concurrent with the offering of the Convertible Notes and the purchase of the Note Hedges, we entered into a separate warrant transaction, or the Warrants, with an initial strike price to the holders of the Warrants of $27.1425 per share. Under the terms of the Warrants, the strike price is adjusted upon the occurrence of certain events, including our cash dividends or distributions that deviate from $0.085 per share. Accordingly, as of October 30, 2016, the strike price was adjusted to $27.0281 per share, reflecting adjustments for our dividend increases made to that date. The Warrants are net share settled and cover, subject to customary anti-dilution adjustments, 75 million shares of our common stock. As of October 30, 2016, the Warrants had not been exercised and remained outstanding. The value of the Warrants was initially recorded in equity and continues to be classified as equity. Long-Term Debt 2.20% Notes Due 2021 and 3.20% Notes Due 2026 On September 16, 2016, we issued $1.00 billion of 2.20% notes due September 16, 2021 and $1.00 billion of 3.20% notes due September 16, 2026 (collectively, the Notes). Interest on the Notes is payable on March 16 and September 16 of each year, beginning on March 16, 2017. Upon 30 days' notice to holders of the Notes, we may redeem the Notes for cash prior to maturity, at redemption prices that include accrued and unpaid interest, if any, and a make-whole premium. However, no make-whole premium will be paid for redemptions of the 2.20% Notes Due 2021 on or after August 16, 2021, or for redemptions of the 3.20% Notes Due 2026 on or after June 16, 2026. The Notes are our unsecured senior obligations and rank equally in right of payment with all of our existing and future unsecured and unsubordinated indebtedness. The Notes are structurally subordinated to the liabilities of our subsidiaries and are effectively subordinated to any secured indebtedness to the extent of the value of the assets securing such indebtedness. All existing and future liabilities of our subsidiaries will be effectively senior to the Notes. The net proceeds from the Notes were $1.99 billion , after deducting debt discount and issuance costs. We intend to use the net proceeds from the Notes to prefund the repayment of the principal amount of our Convertible Notes and for general corporate purposes such as dividend payments or share repurchases. The carrying value of our long-term debt and the associated interest rates were as follows: Expected Remaining Term (years) Effective Interest Rate October 30, 2016 (In millions) 2.20% Notes Due 2021 4.9 2.38% $ 1,000 3.20% Notes Due 2026 9.9 3.31% 1,000 Unamortized debt discount and issuance costs (18 ) Net carrying amount $ 1,982 Revolving Credit Facility On October 7, 2016, we entered into a credit agreement, or the Credit Agreement, under which we may borrow, repay and re-borrow amounts from time to time, up to $575 million , for working capital and other general corporate purposes. The commitments under the Credit Agreement are available for a 5-year period ending on October 7, 2021, on which all outstanding obligations would be due and payable. The Credit Agreement also permits us to obtain additional revolving loan commitments up to $425 million , subject to certain conditions. As of October 30, 2016, we had not borrowed any amounts under the Credit Agreement. |