Quarterly report pursuant to Section 13 or 15(d)

DEBT AND FINANCING ARRANGEMENTS

v3.19.3
DEBT AND FINANCING ARRANGEMENTS
9 Months Ended
Sep. 30, 2019
Debt Disclosure [Abstract]  
DEBT AND FINANCING ARRANGEMENTS DEBT AND FINANCING ARRANGEMENTS
The carrying value of our outstanding debt as of September 30, 2019 and December 31, 2018 consists of the following (in millions):
 
Principal
Amount
 
 
 
Carrying Value
 
 
Maturity
 
2019
 
2018
Commercial paper
$
2,054

 
2019-2020
 
$
2,054

 
$
2,662

 
 
 
 
 
 
 
 
Fixed-rate senior notes:
 
 
 
 
 
 
 
5.125% senior notes
1,000

 
2019
 

 
998

3.125% senior notes
1,500

 
2021
 
1,528

 
1,492

2.050% senior notes
700

 
2021
 
698

 
698

2.450% senior notes
1,000

 
2022
 
1,007

 
1,023

2.350% senior notes
600

 
2022
 
598

 
597

2.500% senior notes
1,000

 
2023
 
995

 
994

2.800% senior notes
500

 
2024
 
497

 
496

2.200% senior notes
400

 
2024
 
398

 

2.400% senior notes
500

 
2026
 
498

 
498

3.050% senior notes
1,000

 
2027
 
992

 
991

3.400% senior notes
750

 
2029
 
745

 

2.500% senior notes
400

 
2029
 
396

 

6.200% senior notes
1,500

 
2038
 
1,483

 
1,482

4.875% senior notes
500

 
2040
 
490

 
490

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

 
1,136

4.250% senior notes
750

 
2049
 
742

 

3.400% senior notes
700

 
2049
 
687

 

Floating-rate senior notes:


 

 


 


Floating-rate senior notes
350

 
2021
 
349

 
349

Floating-rate senior notes
400

 
2022
 
399

 
399

Floating-rate senior notes
500

 
2023
 
499

 
499

Floating-rate senior notes
1,041

 
2049-2067
 
1,028

 
1,029

8.375% Debentures:
 
 
 
 
 
 
 
8.375% debentures
424

 
2020
 
429

 
419

8.375% debentures
276

 
2030
 
281

 
274

Pound Sterling notes:
 
 
 
 
 
 
 
5.500% notes
82

 
2031
 
81

 
84

5.125% notes
559

 
2050
 
530

 
546

Euro senior notes:
 
 
 
 
 
 
 
0.375% notes
763

 
2023
 
759

 
797

1.625% notes
763

 
2025
 
759

 
798

1.000% notes
545

 
2028
 
542

 
570

1.500% notes
545

 
2032
 
541

 
569

Floating-rate senior notes
545

 
2020
 
544

 
572

Canadian senior notes:
 
 
 
 
 
 
 
2.125% notes
566

 
2024
 
564

 
548

Finance lease obligations
466

 
2019-3005
 
466

 
534

Facility notes and bonds
320

 
2029-2045
 
319

 
320

Other debt
8

 
2019-2022
 
8

 
13

Total debt
$
25,032

 
 
 
23,901

 
22,736

Less: Current maturities
 
 
 
 
(2,161
)
 
(2,805
)
Long-term debt
 
 
 
 
$
21,740

 
$
19,931

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, 2019: $1.020 billion with an average interest rate of 2.24% and €949 million ($1.034 billion) with an average interest rate of -0.37%. As of September 30, 2019, we have classified the entire commercial paper balance as a current liability on our consolidated balance sheets.
Debt Classification
We have classified both our 8.375% debentures due April 2020 with a principal balance of $424 million, and our €500 million ($545 million) floating-rate senior notes due July 2020, as long-term debt based on our intent and ability to refinance the debt as of September 30, 2019. 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 Issuance
On March 13, 2019 we issued two series of notes, both in the principal amounts of $750 million. These fixed-rate notes bear interest at the rates of 3.40% and 4.25% and will mature on March 15, 2029 and March 15, 2049, respectively. Interest on the fixed-rate senior notes is payable semi-annually, beginning September 2019. The 3.40% fixed-rate senior notes are callable at our option at a redemption price equal to the greater of 100% of the principal amount, or the sum of the present values of remaining scheduled payments of principal and interest due from the redemption date until three months prior to maturity, discounted to the redemption date on a semi-annual basis at the discount rate of the Treasury Rate plus 15 basis points, plus accrued and unpaid interest. The 4.25% fixed-rate senior notes are callable at our option at a redemption price equal to the greater of 100% of the principal amount, or the sum of the present values of remaining scheduled payments of principal and interest due from the redemption date until six months prior to maturity discounted to the redemption date on a semi-annual basis at the discount rate of the Treasury Rate plus 20 basis points, plus accrued and unpaid interest.
On August 13, 2019 we issued three series of notes, two with principal amounts of $400 million and one in the principal amount of $700 million. These notes bear interest at the rates of 2.20%, 2.50% and 3.40%, respectively, and will mature on September 1, 2024, September 1, 2029 and September 1, 2049, respectively. Interest on the notes is payable semi-annually, beginning March 2020. The 2.20% senior notes are callable at our option at a redemption price equal to the greater of 100% of the principal amount, or the sum of the present values of scheduled payments of principal and interest due from the redemption date until one month prior to maturity, discounted to the redemption date on a semi-annual basis at the discount rate of the Treasury Rate plus 10 basis points, plus accrued and unpaid interest. The 2.50% senior notes are callable at our option at a redemption price equal to the greater of 100% of the principal amount, or the sum of the present values of scheduled payments of principal and interest due from the redemption date until three months prior to maturity discounted to the redemption date on a semi-annual basis at the discount rate of the Treasury Rate plus 15 basis points, plus accrued and unpaid interest. The 3.40% senior notes are callable at our option at a redemption price equal to the greater of 100% of the principal amount, or the sum of the present values of scheduled payments of principal and interest due from the redemption date until six months prior to maturity, discounted to the redemption date on a semi-annual basis at the discount rate of the Treasury Rate plus 20 basis points, plus accrued and unpaid interest.
Sources of Credit
We maintain two credit agreements with a consortium of banks. One of these agreements provides a revolving credit facility of $1.5 billion and expires on December 10, 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. The applicable margin is 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, 2019.
The second agreement provides a revolving credit facility of $3.0 billion, and expires on December 11, 2023. 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. 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 for the applicable interest rate. There were no amounts outstanding under this facility as of September 30, 2019.
Debt Covenants
Our existing debt instruments and credit facilities subject us to certain financial covenants. As of September 30, 2019 and for all 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, 2019, 10% of net tangible assets was equivalent to $3.453 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 us for debt with similar terms and maturities, the fair value of long-term debt, including current maturities, was approximately $25.668 and $23.293 billion as of September 30, 2019 and December 31, 2018, 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.