Convertible Senior Notes

During the fourth quarter of fiscal year 2007, the Company issued $1.0 billion aggregate principal amount of its 3.00% Convertible Senior Notes due May 1, 2027 (the “2027A notes”) and $700.0 million aggregate principal amount of its 3.125% Convertible Senior Notes due May 1, 2027 (the “2027B notes” and, together with the 2027A notes, the “Notes”) to an initial purchaser in a private offering. The Company received net proceeds from the issuance of the Notes of $1,678.0 million after the deduction of issuance costs of $22.0 million. The Company used the entire net proceeds of the offering to fund a portion of its repurchase of $3.0 billion of its common stock pursuant to an accelerated stock repurchase transaction it entered into with an affiliate of the initial purchaser of the Notes simultaneously with the offering of the Notes. The Company redeemed for cash $395.8 million (the remaining principal amount) of its 2027B notes on November 1, 2010 using a portion of its existing cash and marketable securities balances. Through the third quarter of fiscal year 2014 the Company has repurchased $154.9 million (principal amount) of its 2027A notes, resulting in approximately $845.1 million (principal amount) of debt outstanding as of March 30, 2014. During the third quarter and the first nine months of fiscal year 2014, 2,422 thousand shares and 819 thousand shares, respectively, related to the Notes were included in the computation of diluted earnings per share.

At March 30, 2014, the conversion rate of the 2027A notes was 24.582 shares of common stock per $1,000 principal amount of the 2027A notes, subject to adjustment upon the occurrence of certain events as described in the Indenture for the 2027A notes (including the payment of dividends). On May 1, 2014, the Company redeemed all of the 2027A notes. For further information on the redemption see Note 15 of Notes to Consolidated Financial Statements.

The 2027A notes pay cash interest of 3.00% which is payable semiannually in arrears on May 1 and November 1. In accordance with the provisions of ASC 470-20-10 to 35 the Company recognizes an effective interest rate of 5.69% on the carrying value of the 2027A notes. The effective rate is based on the interest rates of similar instruments issued at the time of issuance of the Notes that do not have conversion features such as the Notes. The differences between the effective interest rates of 5.69% and the coupon rate of 3.00%, results in non-cash interest expense that will never be paid by the Company. All interest costs related to the Notes were terminated when the Notes were redeemed on May 1, 2014.

The carrying values of the liability and equity components of the Notes are reflected in the Company’s consolidated balance sheets as follows:



In thousands	March 30, 2014			June 30, 2013
Liability components
Principal amount of the Notes	$	845,088		$	845,088
Unamortized discount of liability component	(1,886		)	(18,459		)
Carrying value of liability component	$	843,202		$	826,629

Equity component-net carrying value	$	122,639		$	122,639

Interest expense related to the Notes included in interest expense on the consolidated statements of income was recognized as follows:



	Three Months Ended				Nine Months Ended
In thousands	March 30, 2014		March 31, 2013		March 30, 2014		March 31, 2013
Contractual coupon interest	$	6,338	$	6,338	$	19,014	$	19,014
Amortization of debt discount	5,603		5,294		16,573		15,659
Amortization of debt issuance costs	475		475		1,425		1,424
Total interest expense related to the Notes	$	12,416	$	12,107	$	37,012	$	36,097