Quarterly report pursuant to Section 13 or 15(d)

DEBT AND FINANCING ARRANGEMENTS

v3.10.0.1
DEBT AND FINANCING ARRANGEMENTS
9 Months Ended
Sep. 30, 2018
Debt Disclosure [Abstract]  
DEBT AND FINANCING ARRANGEMENTS DEBT AND FINANCING ARRANGEMENTS
The carrying value of our outstanding debt as of September 30, 2018 and December 31, 2017 consists of the following (in millions):
 
Principal
Amount
 
 
 
Carrying Value
 
 
Maturity
 
2018
 
2017
Commercial paper
$
2,815

 
2018 - 2019
 
$
2,815

 
$
3,203

Fixed-rate senior notes:
 
 
 
 
 
 
 
5.500% senior notes
750

 
2018
 

 
751

5.125% senior notes
1,000

 
2019
 
1,004

 
1,019

3.125% senior notes
1,500

 
2021
 
1,509

 
1,549

2.050% senior notes
700

 
2021
 
697

 
696

2.450% senior notes
1,000

 
2022
 
952

 
979

2.350% senior notes
600

 
2022
 
597

 
597

2.500% senior note
1,000

 
2023
 
994

 
992

2.800% senior note
500

 
2024
 
496

 
495

2.400% senior note
500

 
2026
 
497

 
497

3.050% senior note
1,000

 
2027
 
991

 
990

6.200% senior notes
1,500

 
2038
 
1,482

 
1,482

4.875% senior notes
500

 
2040
 
490

 
489

3.625% senior notes
375

 
2042
 
368

 
368

3.400% senior notes
500

 
2046
 
491

 
491

3.750 % senior notes
1,150

 
2047
 
1,136

 
1,135

Floating-rate senior notes:


 

 


 


Floating-rate senior notes
350

 
2021
 
348

 
348

Floating-rate senior notes
400

 
2022
 
399

 
398

Floating-rate senior notes
500

 
2023
 
499

 
496

Floating-rate senior notes
1,043

 
2049-2067
 
1,030

 
1,032

8.375% Debentures:
 
 
 
 
 
 
 
8.375% debentures
424

 
2020
 
434

 
447

8.375% debentures
276

 
2030
 
281

 
282

Pound Sterling notes:
 
 
 
 
 
 
 
5.500% notes
87

 
2031
 
86

 
84

5.125% notes
593

 
2050
 
561

 
586

Euro senior notes:
 
 
 
 
 
 
 
0.375% notes
811

 
2023
 
805

 
832

1.625% notes
811

 
2025
 
806

 
833

1.000% notes
579

 
2028
 
575

 
595

1.500% notes
579

 
2032
 
575

 
594

Floating-rate senior notes
579

 
2020
 
578

 
598

Canadian senior notes:
 
 
 
 
 
 
 
2.125% notes
575

 
2024
 
572

 
593

Capital lease obligations
900

 
2018-3005
 
900

 
500

Facility notes and bonds
320

 
2029-2045
 
320

 
319

Other debt
13

 
2018-2022
 
13

 
19

Total debt
$
24,230

 
 
 
23,301

 
24,289

Less: Current maturities
 
 
 
 
(3,200
)
 
(4,011
)
Long-term debt
 
 
 
 
$
20,101

 
$
20,278

Commercial Paper
We are authorized to borrow up to $10.0 billion under a U.S. commercial paper program and €5.0 billion (in a variety of currencies) under a European commercial paper program. We had the following amounts outstanding under these programs as
of September 30, 2018: $2.267 billion with an average interest rate of 2.01% and €473 million ($548 million) with an average interest rate of -0.37%. As of September 30, 2018, we have classified the entire commercial paper balance as a current liability on our consolidated balance sheets.

Debt Classification
We have classified our 5.125% senior notes due April 2019 with a principal balance of $1.0 billion as long-term debt based on our intent and ability to refinance the debt as of September 30, 2018. We have classified certain floating-rate senior notes that are putable by the note holders as long-term debt, due to our intent and ability to refinance the debt if the put option is exercised by the note holders.
Debt Repayments
On January 15, 2018, our $750 million 5.500% senior notes matured and were repaid in full.
Sources of Credit
We maintain two credit agreements with a consortium of banks. One of these agreements provides revolving credit facilities of $4.5 billion, and expires on March 22, 2019. 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 the highest of (1) JPMorgan Chase Bank’s publicly announced prime rate; (2) the Federal Funds effective rate plus 0.50%; and (3) LIBOR for a one month interest period plus 1.00%, 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 prime 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 September 30, 2018.
The second agreement provides revolving credit facilities of $3.0 billion, and expires on March 24, 2022. 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 the highest of (1) JPMorgan Chase Bank’s publicly announced prime rate; (2) the Federal Funds effective rate plus 0.50%; and (3) LIBOR for a one month interest period plus 1.00%, 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, 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 minimum applicable margin rate is 0.10% and the maximum applicable margin rate is 0.75% per annum. The applicable margin for advances bearing interest based on the prime 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 September 30, 2018.
Debt Covenants
Our existing debt instruments and credit facilities subject us to certain financial covenants. As of September 30, 2018 and for all prior periods presented, we were in compliance with all applicable 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 September 30, 2018, 10% of net tangible assets was equivalent to $2.857 billion; however, we have no covered sale-leaseback transactions or secured indebtedness outstanding. 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 debt with similar terms and maturities, the fair value of long-term debt, including current maturities, was approximately $23.857 and $25.206 billion as of September 30, 2018 and December 31, 2017, 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.