Loans Payable, Long-Term Debt and Other Commitments
Loans payable at December 31, 2013 included $2.1 billion of notes due in 2014, $1.6 billion of commercial paper, $402 million of short-term foreign borrowings and $370 million of long-dated notes that are subject to repayment at the option of the holder. Loans payable at December 31, 2012 included $1.8 billion of notes due in 2013, $1.7 billion of commercial paper, $454 million of short-term foreign borrowings and $328 million of long-dated notes that are subject to repayment at the option of the holders. The weighted-average interest rate of the commercial paper borrowings was 0.09% and 0.15% at December 31, 2013 and 2012, respectively.
Long-term debt at December 31 consisted of:
|
| | | | | | | |
| 2013 | | 2012 |
2.80% notes due 2023 | $ | 1,749 |
| | $ | — |
|
6.50% notes due 2033 | 1,306 |
| | 1,310 |
|
5.00% notes due 2019 | 1,293 |
| | 1,294 |
|
4.15% notes due 2043 | 1,246 |
| | — |
|
3.875% notes due 2021 | 1,148 |
| | 1,147 |
|
6.55% notes due 2037 | 1,143 |
| | 1,146 |
|
6.00% notes due 2017 | 1,095 |
| | 1,112 |
|
4.00% notes due 2015 | 1,029 |
| | 1,049 |
|
4.75% notes due 2015 | 1,023 |
| | 1,044 |
|
2.40% notes due 2022 | 1,000 |
| | 1,000 |
|
Floating-rate borrowing due 2018 | 1,000 |
| | — |
|
1.10% notes due 2018 | 998 |
| | 998 |
|
0.70% notes due 2016 | 997 |
| | — |
|
1.30% notes due 2018 | 975 |
| | — |
|
2.25% notes due 2016 | 866 |
| | 874 |
|
5.85% notes due 2039 | 749 |
| | 749 |
|
Floating-rate borrowing due 2016 | 500 |
| | — |
|
6.40% debentures due 2028 | 499 |
| | 499 |
|
5.75% notes due 2036 | 498 |
| | 498 |
|
5.95% debentures due 2028 | 498 |
| | 498 |
|
3.60% notes due 2042 | 492 |
| | 492 |
|
6.30% debentures due 2026 | 249 |
| | 248 |
|
5.375% euro-denominated notes due 2014 | — |
| | 2,058 |
|
Other | 186 |
| | 238 |
|
| $ | 20,539 |
| | $ | 16,254 |
|
Other (as presented in the table above) included $119 million and $165 million at December 31, 2013 and 2012, respectively, of borrowings at variable rates averaging 0.0% for 2013 and 0.1% for 2012. Other also included foreign borrowings of $64 million and $70 million at December 31, 2013 and 2012, respectively, at varying rates up to 4.5% and 8.5%, respectively.
With the exception of the 6.3% debentures due 2026, the notes listed in the table above are redeemable in whole or in part, at Merck’s option at any time, at varying redemption prices.
In May 2013, the Company completed an underwritten public offering of $6.5 billion senior unsecured notes consisting of $1.0 billion aggregate principal amount of 0.70% notes due in 2016, $500 million aggregate principal amount of floating rate notes due in 2016, $1.0 billion aggregate principal amount of 1.30% notes due in 2018, $1.0 billion aggregate principal amount of floating rate notes due in 2018, $1.75 billion aggregate principal amount of 2.80% notes due in 2023 and $1.25 billion aggregate principal amount of 4.15% notes due in 2043. Interest on the notes is payable semi-annually. The notes of each series are redeemable in whole or in part at any time at the Company’s option at varying redemption prices. A substantial portion of the net proceeds from the notes were used to repurchase the Company’s common stock pursuant to an accelerated share repurchase agreement in May 2013 (see Note 11).
Effective as of November 3, 2009, the Company executed a full and unconditional guarantee of the then existing debt of its subsidiary Merck Sharp & Dohme Corp. (“MSD”) and MSD executed a full and unconditional guarantee of the then existing debt of the Company (excluding commercial paper), including for payments of principal and interest. These guarantees do not extend to debt issued subsequent to that date.
Certain of the Company’s borrowings require that Merck comply with financial covenants including a requirement that the Total Debt to Capitalization Ratio (as defined in the applicable agreements) not exceed 60%. At December 31, 2013, the Company was in compliance with these covenants.
The aggregate maturities of long-term debt for each of the next five years are as follows: 2014, $2.1 billion; 2015, $2.1 billion; 2016, $2.4 billion; 2017, $1.1 billion; 2018, $3.0 billion.
In May 2012, the Company entered into a $4.0 billion, five-year credit facility maturing in May 2017. The facility provides backup liquidity for the Company’s commercial paper borrowing facility and is to be used for general corporate purposes. The Company has not drawn funding from this facility.
Rental expense under operating leases, net of sublease income, was $367 million in 2013, $396 million in 2012 and $411 million in 2011. The minimum aggregate rental commitments under noncancellable leases are as follows: 2014, $259 million; 2015, $208 million; 2016, $132 million; 2017, $91 million; 2018, $64 million and thereafter, $144 million. The Company has no significant capital leases.
