Amgen 2015 Annual Report Download - page 109

F-31
0.375% 2013 Convertible Notes upon conversion. As a result of the conversion of the 0.375% 2013 Convertible Notes, we received
$99 million of cash from the counterparty to offset the corresponding amount paid to the note holders.
On May 1, 2013, warrants to acquire 32 million shares of our common stock at an exercise price of $104.80 originally sold
in connection with the issuance of the 0.375% 2013 Convertible Notes were exercised resulting in a net cash payment of $100
million.
Because the convertible note hedges and warrants could have been settled at our option in cash or shares of our common
stock, and these contracts met all of the applicable criteria for equity classification under the applicable accounting standards, the
cost of the convertible note hedges, the net proceeds from the sale of the warrants and the settlement of these contracts were
classified in Stockholders’ equity in the Consolidated Balance Sheets. In addition, because both of these contracts are classified
in Stockholders’ equity and were indexed to our common stock, they were not accounted for as derivatives.
Because these convertible notes were cash settleable, their debt and equity components were bifurcated and accounted for
separately. The discounted carrying value of the debt component resulting from the bifurcation was accreted back to the principal
amount over the period the notes were outstanding. Interest expense recognized during the year ended December 31, 2013, prior
to the maturity/conversion of the 0.375% 2013 Convertible Notes was not material. The carrying amount of the equity component
of this debt remains at $829 million.
Other notes
Other notes include our notes due in 2097 with a carrying value of $100 million.
Interest rate swaps
To achieve a desired mix of fixed and floating interest rate debt, we entered into interest rate swap contracts that effectively
converted a fixed-rate interest coupon for certain of our debt issuances to a floating LIBOR-based coupon over the life of the
respective note. These interest rate swap contracts qualified and are designated as fair value hedges. As of December 31, 2015 and
2014, we had $6.65 billion notional amount of interest rate swap contracts outstanding, The effective interest rates on these notes
after giving effect to the related interest rate swap contracts and the related notional amounts of the contracts were as follows as
of December 31, 2015 (dollar amounts in millions):
Notes Effective interest rate Notional amount
1.25% 2017 Notes LIBOR + 0.4% $ 850
2.20% 2019 Notes LIBOR + 0.6% 1,400
3.45% 2020 Notes LIBOR + 1.1% 900
4.10% 2021 Notes LIBOR + 1.7% 1,000
3.875% 2021 Notes LIBOR + 2.0% 1,750
3.625% 2022 Notes LIBOR + 1.6% 750
$ 6,650
Cross-currency swaps
In order to hedge our exposure to foreign currency exchange rate risk associated with certain of our long-term notes
denominated in foreign currencies, we entered into cross-currency swap contracts. The terms of these contracts effectively convert
the interest payments and principal repayment on our 2.125% 2019 euro Notes, 5.50% 2026 pound sterling Notes and 4.00% 2029
pound sterling Notes from euros/pounds sterling to U.S. dollars. These cross-currency swap contracts have been designated as
cash flow hedges. For information regarding the terms of these contracts, see Note 17, Derivative instruments.
Shelf registration statements and other facilities
As of December 31, 2015, we have a commercial paper program that allows us to issue up to $2.5 billion of unsecured
commercial paper to fund our working capital needs. At December 31, 2015 and 2014, we had no amounts outstanding under our
commercial paper program.
In July 2014, we entered into a $2.5 billion syndicated, unsecured, revolving credit agreement which is available for general
corporate purposes or as a liquidity backstop to our commercial paper program. The commitments under the revolving credit
agreement may be increased by up to $500 million with the agreement of the banks. Each bank which is a party to the agreement
has an initial commitment term of five years. This term may be extended for up to two additional one-year periods with the
agreement of the banks. Annual commitment fees for this agreement are 0.1% based on our current credit rating. Generally, we