Quarterly report pursuant to Section 13 or 15(d)

DEBT AND FINANCING ARRANGEMENTS

v2.4.0.6
DEBT AND FINANCING ARRANGEMENTS
 3 Months Ended
Mar. 31, 2012
Debt Disclosure [Abstract]  
DEBT AND FINANCING ARRANGEMENTS
DEBT AND FINANCING ARRANGEMENTS
The carrying value of our outstanding debt as of March 31, 2012 and December 31, 2011 consists of the following (in millions):
 
Maturity
 
2012
 
2011
Commercial paper
2012
 
$
885

 
$
—

4.50% senior notes
2013
 
1,773

 
1,778

3.875% senior notes
2014
 
1,048

 
1,050

5.50% senior notes
2018
 
837

 
841

5.125% senior notes
2019
 
1,109

 
1,119

8.375% debentures
2020
 
498

 
504

3.125% senior notes
2021
 
1,629

 
1,641

8.375% debentures
2030
 
283

 
284

6.20% senior notes
2038
 
1,480

 
1,480

4.875% senior notes
2040
 
489

 
489

Floating rate senior notes
2049-2053
 
376

 
376

Facility notes and bonds
2015-2036
 
320

 
320

Pound Sterling notes
2031/2050
 
793

 
777

Capital lease obligations
2012-3004
 
476

 
469

Other debt
2022
 
2

 
—

Total Debt
 
 
11,998

 
11,128

Less: Current Maturities
 
 
(919
)
 
(33
)
Long-term Debt
 
 
$
11,079

 
$
11,095


Debt Classification
We have classified our 4.50% senior notes with a principal balance of $1.750 billion due in January 2013 as a long-term liability, based on our intent and ability to refinance the debt as of March 31, 2012.
Sources of Credit
We are authorized to borrow up to $10.0 billion under the U.S. commercial paper program we maintain. We had $885 million outstanding under this program as of March 31, 2012, with an average interest rate of 0.04%. As of March 31, 2012, we have classified the entire commercial paper balance as a current liability in our consolidated balance sheets. We also maintain a European commercial paper program under which we are authorized to borrow up to €1.0 billion in a variety of currencies, however there were no amounts outstanding under this program as of March 31, 2012.
We maintain two credit agreements with a consortium of banks. One of these agreements provides revolving credit facilities of $1.5 billion, and expires on April 11, 2013. Generally, amounts outstanding under this facility bear interest at a periodic fixed rate equal to LIBOR for the applicable interest period and currency denomination, plus an applicable margin. Alternatively, a fluctuating rate of interest equal to Citibank’s publicly announced base rate, plus an applicable margin, may be used at our discretion. In each case, the applicable margin for advances bearing interest based on LIBOR is a percentage determined by quotations from Markit Group Ltd. for our 1-year credit default swap spread, subject to a minimum rate of 0.10% and a maximum rate of 0.75%. The applicable margin for advances bearing interest based on the base rate is 1.00% below the applicable margin for LIBOR advances (but not lower than 0.00%). We are also able to request advances under this facility based on competitive bids for the applicable interest rate. There were no amounts outstanding under this facility as of March 31, 2012.

The second agreement provides revolving credit facilities of $1.0 billion, and expires on April 12, 2017. Generally, amounts outstanding under this facility bear interest at a periodic fixed rate equal to LIBOR for the applicable interest period and currency denomination, plus an applicable margin. Alternatively, a fluctuating rate of interest equal to Citibank’s publicly announced base rate, plus an applicable margin, may be used at our discretion. In each case, the applicable margin for advances bearing interest based on LIBOR is a percentage determined by quotations from Markit Group Ltd. for our credit default swap spread, interpolated for a period from the date of determination of such credit default swap spread in connection with a new interest period until the latest maturity date of this facility then in effect (but not less than a period of one year). The applicable margin is subject to certain minimum rates and maximum rates based on our public debt ratings from Standard & Poor’s Rating Service and Moody’s Investors Service. The minimum applicable margin rates range from 0.100% to 0.375%, and the maximum applicable margin rates range from 0.750% to 1.250%. The applicable margin for advances bearing interest based on the base rate is 1.00% below the applicable margin for LIBOR advances (but not less than 0.00%). We are also able to request advances under this facility based on competitive bids. There were no amounts outstanding under this facility as of March 31, 2012.
Debt Covenants
Our existing debt instruments and credit facilities subject us to certain financial covenants. As of March 31, 2012 and for all prior periods, we have satisfied these financial covenants. These covenants limit the amount of secured indebtedness that we may incur, and limit the amount of attributable debt in sale-leaseback transactions, to 10% of net tangible assets. As of March 31, 2012, 10% of net tangible assets is equivalent to $2.561 billion, however we have no covered sale-leaseback transactions or secured indebtedness outstanding. Additionally, we are required to maintain a minimum net worth, as defined, of $5.0 billion on a quarterly basis. As of March 31, 2012, our net worth, as defined, was equivalent to $10.443 billion. We do not expect these covenants to have a material impact on our financial condition or liquidity.
Fair Value of Debt
Based on the borrowing rates currently available to the Company for long-term debt with similar terms and maturities, the fair value of long-term debt, including current maturities, is approximately $12.970 and $12.035 billion as of March 31, 2012 and December 31, 2011, respectively. We utilized Level 2 inputs in the fair value hierarchy of valuation techniques to determine the fair value of all of our debt instruments.