Amgen 2000 Annual Report Download - page 24

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Quantitative and Qualitative Disclosures about Market Risk
Interest income earned on the Company’s investment portfolio is
affected by changes in the general level of U.S. interest rates. The
Company’s short-term borrowings effectively bear interest at
variable rates and therefore, changes in U.S. interest rates affect
interest expense incurred thereon. The Company had reduced this
exposure to interest rate changes by entering into an interest rate
swap agreement, which expired during 2000, that effectively
changed the interest expense incurred on a portion of its short-term
borrowings to a fixed rate. Changes in interest rates do not affect
interest expense incurred on the Company’s long-term borrowings
because they all bear interest at fixed rates. The following tables
provide information about the Company’s financial instruments that
are sensitive to changes in interest rates. For the Company’s invest-
ment portfolio and debt obligations, the tables present principal
cash flows and related weighted-average interest rates by expect-
ed maturity dates. Additionally, the Company has assumed its
available-for-sale debt securities, comprised primarily of corporate
debt instruments and treasury securities, are similar enough to
aggregate those securities for presentation purposes. For the
interest rate swap, the tables present the notional amount and
weighted-average interest rates by contractual maturity date. The
notional amount is used to calculate the contractual cash flows to
be exchanged under the contract.
The Company is exposed to equity price risks on the marketable portion of equity securities included in its portfolio of investments
entered into for the promotion of business and strategic objectives. These investments are generally in small capitalization stocks in the
biotechnology industry sector. The Company typically does not attempt to reduce or eliminate its market exposure on these securities.
An 80% adverse change in equity prices would result in a decrease of approximately $178 million and $72 million in the fair value of the
Company’s available-for-sale marketable equity securities at December 31, 2000 and 1999, respectively.
Interest Rate Sensitivity
Principal Amount by Expected Maturity as of 12/31/99
Dollars in Millions, Fair Value
Average Interest Rate 2000 2001 2002 2003 2004 Thereafter Total 12/31/99
Available-for-sale debt securities $ 376.8 $ 721.8 $ 177.7 $ 17.0 $ 5.0 —$ 1,298.3 $ 1,293.6
Interest rate 6.3% 6.4% 6.5% 6.0% 5.6% —
Commercial paper $ 100.0 —————$ 100.0 $ 100.0
Interest rate 6.4% —————
Long-term debt — ——$ 23.0 —$ 200.0 $ 223.0 $ 216.6
Interest rate — ——6.2% —7.3%
Interest rate swap related to
commercial paper issuances:
Pay fixed/receive variable $ 50.0 —————$ 50.0 $ 0.3
Avg. pay rate 5.3% —————
Avg. receive rate 6.0% —————
Principal Amount by Expected Maturity as of 12/31/00
Dollars in Millions, Fair Value
Average Interest Rate 2001 2002 2003 2004 2005 Thereafter Total 12/31/00
Available-for-sale debt securities $ 780.4 $ 740.6 $ 232.3 $ 118.5 $ 60.0 — $ 1,931.8 $ 1,950.2
Interest rate 6.6% 6.7% 7.0% 6.5% 7.0% —
Commercial paper $ 100.0 —————$ 100.0 $ 100.0
Interest rate 6.7% —————
Long-term debt ——$ 23.0 ——$ 200.0 $ 223.0 $ 222.0
Interest rate ——6.2% ——7.3%