Amgen 2015 Annual Report Download - page 117

Download and view the complete annual report

Please find page 117 of the 2015 Amgen annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 132

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132

F-39
these contracts in AOCI on the Consolidated Balance Sheets and reclassify them to earnings in the same periods during which the
hedged transactions affect earnings.
To manage counterparty risk resulting from favorable movements in U.S. dollar/foreign currency exchange rates, we
effectively terminated outstanding foreign currency forward and option contracts with a notional amount of $2.3 billion during
the year ended December 31, 2015. We received $340 million from the counterparties, which was included in Net cash provided
by operating activities in the Consolidated Statement of Cash Flows. This amount remains in AOCI and will be recognized in
Product sales in the Consolidated Statements of Income when the related international product sales affect earnings. In addition,
during the year ended December 31, 2015, we entered into new foreign currency forward and option contracts that hedge these
forecasted international product sales. These contracts are included in the notional amounts of cash flow hedges outstanding as of
December 31, 2015.
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. Under the terms of these contracts, we paid euros/pounds
sterling and received U.S. dollars for the notional amounts at the inception of the contracts, and we exchange interest payments
based on these notional amounts at fixed rates over the lives of the contracts in which we pay U.S. dollars and receive euros/pounds
sterling. In addition, we will pay U.S. dollars to and receive euros/pounds sterling from the counterparties at the maturities of the
contracts for these same notional amounts. The terms of these contracts correspond to the related hedged notes, effectively converting
the interest payments and principal repayment on these notes from euros/pounds sterling to U.S. dollars. We have designated these
cross-currency swap contracts as cash flow hedges, and accordingly, the effective portions of the unrealized gains and losses on
these contracts are reported in AOCI on the Consolidated Balance Sheets and reclassified to earnings in the same periods during
which the hedged debt affects earnings.
The notional amounts and interest rates of our cross-currency swaps are as follows (notional amounts in millions):
Foreign currency U.S. dollars
Hedged notes Notional amount Interest rate Notional amount Interest rate
2.125% 2019 euro Notes € 675 2.125% $ 864 2.6%
5.50% 2026 pound sterling Notes £ 475 5.50% $ 747 6.0%
4.00% 2029 pound sterling Notes £ 700 4.00% $ 1,111 4.5%
In connection with the anticipated issuance of long-term fixed-rate debt, we occasionally enter into forward interest rate
contracts in order to hedge the variability in cash flows due to changes in the applicable Treasury rate between the time we enter
into these contracts and the time the related debt is issued. Gains and losses on such contracts, which are designated as cash flow
hedges, are reported in AOCI in the Consolidated Balance Sheets and amortized into earnings over the lives of the associated debt
issuances.
The effective portions of the unrealized gain/(loss) recognized in other comprehensive income for our derivative instruments
designated as cash flow hedges were as follows (in millions):
Years ended December 31,
Derivatives in cash flow hedging relationships 2015 2014 2013
Foreign currency contracts $ 425 $ 452 $ (44)
Cross-currency swap contracts (275)(154) 132
Total $ 150 $ 298 $ 88