Quarterly report pursuant to Section 13 or 15(d)

DEBT AND FINANCING ARRANGEMENTS

v2.4.0.8
DEBT AND FINANCING ARRANGEMENTS
9 Months Ended
Sep. 30, 2013
Debt Disclosure [Abstract]  
DEBT AND FINANCING ARRANGEMENTS
DEBT AND FINANCING ARRANGEMENTS
The carrying value of our outstanding debt as of September 30, 2013 and December 31, 2012 consists of the following (in millions):
 
Principal
Amount
 
 
Carrying Value
 
Maturity
 
2013
 
2012
Commercial paper
$
1,652

2013
 
$
1,652

 
$

Fixed-rate senior notes:
 
 
 
 
 
 
4.50% senior notes

2013
 

 
1,751

3.875% senior notes
1,000

2014
 
1,014

 
1,033

1.125% senior notes
375

2017
 
368

 
373

5.50% senior notes
750

2018
 
824

 
851

5.125% senior notes
1,000

2019
 
1,093

 
1,140

3.125% senior notes
1,500

2021
 
1,605

 
1,655

2.45% senior notes
1,000

2022
 
934

 
996

6.20% senior notes
1,500

2038
 
1,481

 
1,480

4.875% senior notes
500

2040
 
489

 
489

3.625% senior notes
375

2042
 
367

 
367

8.375% Debentures:
 
 
 
 
 
 
8.375% debentures
424

2020
 
487

 
512

8.375% debentures
276

2030
 
283

 
284

Pound Sterling notes:
 
 
 
 
 
 
5.50% notes
107

2031
 
103

 
103

5.13% notes
731

2050
 
699

 
699

Floating rate senior notes
377

2049-2053
 
373

 
374

Capital lease obligations
488

2013-3004
 
488

 
440

Facility notes and bonds
320

2015-2036
 
320

 
320

Other debt
20

2013-2022
 
20

 
3

Total Debt
$
12,395

 
 
12,600

 
12,870

Less: Current Maturities
 
 
 
(1,703
)
 
(1,781
)
Long-term Debt
 
 
 
$
10,897

 
$
11,089



Debt Repayments
On January 15, 2013, our $1.75 billion 4.5% senior notes matured and were repaid in full.
Debt Classification
We have classified our 3.875% senior notes with a principal balance of $1.0 billion due in April 2014 as a long-term liability, based on our intent and ability to refinance the debt as of September 30, 2013.
Sources of Credit
We are authorized to borrow up to $10.0 billion under the U.S. commercial paper program we maintain. We had $1.652 billion outstanding under this program as of September 30, 2013, with an average interest rate of 0.06%. We also maintain a European commercial paper program under which we are authorized to borrow up to €5.0 billion in a variety of currencies. As of September 30, 2013, there were no amounts outstanding under this program. As of September 30, 2013, we have classified the entire commercial paper balance as a current liability in our consolidated balance sheet.
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 March 28, 2014. 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, 2013.
The second agreement provides revolving credit facilities of $1.0 billion, and expires on March 29, 2018. 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 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%, 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, 2013.
Debt Covenants
Our existing debt instruments and credit facilities subject us to certain financial covenants. As of September 30, 2013 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 September 30, 2013, 10% of net tangible assets was equivalent to $2.670 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 long-term debt with similar terms and maturities, the fair value of long-term debt, including current maturities, was approximately $13.572 and $14.658 billion as of September 30, 2013 and December 31, 2012, 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.