Amgen 2012 Annual Report Download - page 139

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F-40
The effective portion of the unrealized gain/(loss) recognized in other comprehensive income for our derivative instruments
designated as cash flow hedges was as follows (in millions):
Years ended December 31,
Derivatives in cash flow hedging relationships 2012 2011 2010
Foreign currency contracts $(63) $ (25) $ 191
Cross-currency swap contracts 85 (26) —
Forward interest rate contracts (7) — (5)
Total $ 15 $ (51) $ 186
The location in the Consolidated Statements of Income and the effective portion of the gain/(loss) reclassified from AOCI
into earnings for our derivative instruments designated as cash flow hedges were as follows (in millions):
Years ended December 31,
Derivatives in cash flow hedging relationships Statements of Income location 2012 2011 2010
Foreign currency contracts Product sales $ 74 $ (108) $ 47
Cross-currency swap contracts Interest and other income, net 61 (3) —
Forward interest rate contracts Interest expense, net (1)(1)(1)
Total $ 134 $ (112) $ 46
No portions of our cash flow hedge contracts are excluded from the assessment of hedge effectiveness, and the ineffective
portions of these hedging instruments were approximately $1 million of losses for both the years ended December 31, 2012 and
2010, and approximately $1 million of gain for the year ended December 31, 2011. As of December 31, 2012, the amounts expected
to be reclassified from AOCI into earnings over the next 12 months are approximately $20 million of net losses on our foreign
currency and cross-currency swap contracts and approximately $1 million of losses on forward interest rate contracts.
Fair value hedges
To achieve a desired mix of fixed and floating interest rates on our long-term debt, we entered into interest rate swap contracts,
which qualified and were designated as fair value hedges. The terms of these interest rate swap contracts corresponded to the
related hedged debt instruments and effectively converted a fixed interest rate coupon to a floating LIBOR-based coupon over the
lives of the respective notes. While outstanding, the rates on these swaps ranged from LIBOR plus 0.3% to LIBOR plus 2.6%. As
of December 31, 2011 and 2010, we had interest rate swap contracts with aggregate notional amounts of $3.6 billion with respect
to our 4.85% 2014 Notes, 5.85% 2017 Notes, 6.15% 2018 Notes and 5.70% 2019 Notes. Due to historically low interest rates, in
May 2012 we terminated all of these interest rate swap contracts resulting in the receipt of $397 million from the counterparties,
which was included in Net cash provided by operating activities in the Consolidated Statements of Cash Flows for the current
year period. This amount is being recognized in Interest expense, net in the Consolidated Statements of Income over the remaining
lives of the related debt issuances.
For derivative instruments that are designated and qualify as fair value hedges, the unrealized gain or loss on the derivative
resulting from the change in fair value during the period as well as the offsetting unrealized loss or gain of the hedged item resulting
from the change in fair value during the period attributable to the hedged risk is recognized in current earnings. While the interest
rate swaps were outstanding during the year ended December 31, 2012, and the years ended December 31, 2011 and 2010, we
included unrealized losses on the hedged debt of $20 million, $182 million and $105 million, respectively, in the same line item,
Interest expense, net, in the Consolidated Statements of Income, as the offsetting unrealized gains of $20 million, $182 million
and $105 million, respectively, on the related interest rate swap agreements.
Derivatives not designated as hedges
We enter into foreign currency forward contracts that are not designated as hedging transactions to reduce our exposure to
foreign currency fluctuations of certain assets and liabilities denominated in foreign currencies. These exposures are hedged on a
month-to-month basis. As of December 31, 2012, 2011 and 2010, the total notional amounts of these foreign currency forward
contracts were $629 million, $389 million and $670 million, respectively.