9.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 in fiscal 2011 using a portion of its existing cash and marketable securities balances. On May 1, 2014 the Company executed the conversion of the remaining principal amount of $845.1 million of its 2027A notes. On such date, each $1,000 principal amount of the 2027A notes was convertible at a rate of 24.582 shares (which is equivalent to a conversion price of approximately $40.68 per share) of the Company’s common stock. The first $1,000 in conversion value of $845.1 million was paid in cash and the remaining conversion premium of $138.9 million was settled in common stock, as provided in the Indenture for the 2027A Notes. As a result of the conversion, holders of the 2027A notes received the principal amount of $845.1 million in cash and the remaining conversion premium was settled in shares of the Company’s common stock totaling approximately 2.9 million shares. There was no gain or loss recognized as a result of the conversion.

The 2027A notes paid cash interest of 3.00% semiannually in arrears on May 1 and November 1. In accordance with the provisions of ASC 470-20-10 to 35, the Company recognized an effective interest rate of 5.69% on the carrying value of the 2027A notes. The effective rate was based on the interest rates of similar instruments issued at the time of issuance of the 2027A notes that did not have conversion features such as the 2027A notes. The difference between the effective interest rate of 5.69% and the coupon rate of 3.00%, resulted in non-cash interest expense.

Prior to the conversion, interest expense related to the Notes included in the interest expense on the consolidated statement of income for the quarter ended September 29, 2013 was as follows:


In thousands	September 29,
	2013
Contractual coupon interest	$	6,338
Amortization of debt discount		5,446
Amortization of debt issuance costs		475
Total interest expense related to the Notes	$	12,259