Debt Financing Arrangements
|
| | | | | | | |
| December 31, 2013 | | December 31, 2012 |
| (In millions) |
| | | |
0.875% Convertible Senior Notes $1.15 billion face amount, due in 2014 | $ | 1,144 |
| | $ | 1,095 |
|
| | | |
4.479% Debentures $750 million face amount, due in 2021 | 746 |
| | 754 |
|
| | | |
5.45% Notes $700 million face amount, due in 2018 | 699 |
| | 700 |
|
| | | |
5.765% Debentures $596 million face amount, due in 2041 | 600 |
| | 600 |
|
| | | |
5.375% Debentures $600 million face amount, due in 2035 | 588 |
| | 588 |
|
| | | |
5.935% Debentures $420 million face amount, due in 2032 | 416 |
| | 416 |
|
| | | |
4.016% Debentures $570 million face amount, due in 2043 | 376 |
| | 374 |
|
| | | |
4.535% Debentures $528 million face amount due in 2042 | 373 |
| | 371 |
|
| | | |
8.375% Debentures $295 million face amount, due in 2017 | 294 |
| | 293 |
|
| | | |
7.5% Debentures $187 million face amount, due in 2027 | 186 |
| | 186 |
|
| | | |
7.0% Debentures $185 million face amount, due in 2031 | 184 |
| | 184 |
|
| | | |
6.625% Debentures $182 million face amount, due in 2029 | 182 |
| | 182 |
|
| | | |
6.95% Debentures $172 million face amount, due in 2097 | 170 |
| | 170 |
|
| | | |
6.45% Debentures $154 million face amount, due in 2038 | 153 |
| | 153 |
|
| | | |
6.75% Debentures $124 million face amount, due in 2027 | 122 |
| | 122 |
|
| | | |
7.125% Debentures $243 million face amount, due in 2013 | — |
| | 243 |
|
| | | |
Other | 279 |
| | 293 |
|
Total long-term debt including current maturities | 6,512 |
| | 6,724 |
|
Current maturities | (1,165 | ) | | (268 | ) |
Total long-term debt | $ | 5,347 |
| | $ | 6,456 |
|
In October 2012, the Company issued $570 million of 4.016% debentures due in 2043 (2012 Debentures) in exchange of its previously issued and outstanding debentures. The Company paid $196 million of debt premium to certain bondholders associated with these exchanges. The discount and debt premium paid to the bondholders is being amortized over the life of the 2012 Debentures using the effective interest method. Discount amortization expense of $2 million for the year ended December 31, 2013 was included in interest expense related to the 2012 Debentures.
In February 2007, the Company issued $1.15 billion principal amount of convertible senior notes due in 2014 (the Notes) in a private placement. The Notes were issued at par and bear interest at a rate of 0.875% per year, payable semiannually. The Notes are convertible based on an initial conversion rate of 22.8423 shares per $1,000 principal amount of Notes (which is equal to a conversion price of approximately $43.78 per share). The Notes may be converted, subject to adjustment, only under the following circumstances: 1) during any calendar quarter beginning after March 31, 2007, if the closing price of the Company’s common stock for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the immediately preceding quarter is more than 140% of the applicable conversion price per share, which is $1,000 divided by the then applicable conversion rate, 2) during the five consecutive business day period immediately after any five consecutive trading day period (the note measurement period) in which the average of the trading price per $1,000 principal amount of Notes was equal to or less than 98% of the average of the product of the closing price of the Company’s common stock and the conversion rate at each date during the note measurement period, 3) if the Company makes specified distributions to its common stockholders or specified corporate transactions occur, or 4) at any time on or after January 15, 2014, through the business day preceding the maturity date. Upon conversion, a holder would receive an amount in cash equal to the lesser of 1) $1,000 and 2) the conversion value, as defined. If the conversion value exceeds $1,000, the Company will deliver, at the Company’s election, cash or common stock or a combination of cash and common stock for the conversion value in excess of $1,000. If the Notes are converted in connection with a change in control, as defined, the Company may be required to provide a make-whole premium in the form of an increase in the conversion rate, subject to a stated maximum amount. In addition, in the event of a change in control, the holders may require the Company to purchase all or a portion of their Notes at a purchase price equal to 100% of the principal amount of the Notes, plus accrued and unpaid interest, if any. In accordance with applicable accounting standards, the Company recognized the Notes proceeds received in 2007 as long-term debt of $853 million and equity of $297 million. The discount on the long-term debt is being amortized over the life of the Notes using the effective interest method. Discount amortization expense of $49 million, $47 million, $24 million, $22 million, $45 million, and $43 million for the years ended December 31, 2013 and 2012, the six months ended December 31, 2012 and 2011, and the years ended June 30, 2012 and 2011, respectively, were included in interest expense related to the Notes.
Concurrent with the issuance of the Notes, the Company purchased call options in private transactions at a cost of $300 million. The purchased call options allow the Company to receive shares of its common stock and/or cash from the counterparties equal to the amounts of common stock and/or cash related to the excess of the current market price of the Company’s common stock over the exercise price of the purchased call options. In addition, the Company sold warrants in private transactions to acquire, subject to customary anti-dilution adjustments, 26.3 million shares of its common stock at an exercise price of $62.56 per share and received proceeds of $170 million. If the average price of the Company’s common stock during a defined period ending on or about the respective settlement dates exceeds the exercise price of the warrants, the warrants will be settled, at the Company’s option, in cash or shares of common stock. The purchased call options and warrants are intended to reduce the potential dilution upon future conversions of the Notes by effectively increasing the initial conversion price to $62.56 per share. The net cost of the purchased call options and warrant transactions of $130 million was recorded as a reduction of shareholders’ equity. The purchased call options expire on the maturity date of the Notes and the warrants expire shortly thereafter.
As of December 31, 2013, none of the conditions permitting conversion of the Notes had been satisfied. As of December 31, 2013, no share amounts related to the conversion of the Notes or exercise of the warrants are included in diluted average shares outstanding. On February 18, 2014, the convertible senior notes were repaid with available funds.
Discount amortization expense net of premium of $54 million, $46 million, $23 million, $26 million, $49 million, and $50 million for the years ended December 31, 2013 and 2012, the six months ended December 31, 2012 and 2011, and the years ended June 30, 2012 and 2011, respectively, were included in interest expense related to the Company's long-term debt.
At December 31, 2013, the fair value of the Company’s long-term debt exceeded the carrying value by $0.9 billion, as estimated using quoted market prices (a Level 2 measurement under applicable accounting standards).
The aggregate maturities of long-term debt for the five years after December 31, 2013, are $1.2 billion, $19 million, $15 million, $305 million, and $709 million, respectively.
At December 31, 2013, the Company had lines of credit totaling $6.9 billion, of which $6.6 billion was unused. The weighted average interest rates on short-term borrowings outstanding at December 31, 2013 and 2012, were 4.24% and 0.70%, respectively. Of the Company’s total lines of credit, $4.0 billion support a commercial paper borrowing facility, against which there was no commercial paper outstanding at December 31, 2013.
The Company’s credit facilities and certain debentures require the Company to comply with specified financial and non-financial covenants including maintenance of minimum tangible net worth as well as limitations related to incurring liens, secured debt, and certain other financing arrangements. The Company is in compliance with these covenants as of December 31, 2013.
The Company has outstanding standby letters of credit and surety bonds at December 31, 2013 and 2012, totaling $795 million and $911 million, respectively.
The Company has an accounts receivable securitization program (the “Program”). The Program provides the Company with up to $1.1 billion in funding resulting from the sale of accounts receivable. As of December 31, 2013, the Company utilized all of its $1.1 billion facility under the Program (see Note 20 for more information on the Program).
