Amgen 2002 Annual Report Download - page 65

Page 63
AMGEN 2002 ANNUAL REPORT
the federal funds rate, or a Eurodollar base rate. Under the
terms of the credit facility, the Company is required to
meet a minimum interest coverage ratio and maintain a
minimum level of tangible net worth. In addition, the
credit facility contains limitations on investments, liens, and
sale/leaseback transactions.
Medium and long-term notes
The Company has established a $500 million debt shelf
registration statement. In December 1997, pursuant to this
registration statement, the Company issued $100 million
of debt securities that bear interest at a fixed rate of 6.5%
and mature in 2007 (the “Notes”) and established a $400
million medium-term note program. The Company may
offer and issue medium-term notes from time to time with
terms to be determined by market conditions.
The Company had $100 million of debt securities out-
standing at December 31, 2002 and 2001 that bear inter-
est at a fixed rate of 8.1% and mature in 2097 (the “Century
Notes”). These securities may be redeemed in whole or in
part at the Company’s option at any time for a redemption
price equal to the greater of the principal amount to be
redeemed or the sum of the present values of the principal
and remaining interest payments discounted at a deter-
mined rate plus, in each case, accrued interest.
The Company also had $23 million of debt securities
outstanding at December 31, 2002 and 2001 that bear
interest at a fixed rate of 6.2% and mature in 2003. The
terms of the debt securities require the Company to meet
certain debt to tangible net asset ratios and place limita-
tions on liens and sale/leaseback transactions and, except with
respect to the Notes and the Century Notes, place limita-
tions on subsidiary indebtedness.
Convertible notes
On March 1, 2002, the Company issued $3.95 billion in
aggregate face amount at maturity ($1,000 face amount
per note) 30-year, zero-coupon senior convertible notes (the
“Convertible Notes”) with a yield to maturity of 1.125%.
The gross proceeds from the offering were approximately
$2.82 billion (a $714.23 per note original issue price). The
original issue discount of $1.13 billion (or $285.77 per
note) is being accreted to interest expense over the life of
the Convertible Notes using the effective interest method.
Debt issuance costs were approximately $56.5 million and
are being amortized on a straight-line basis over the life of
the notes.
Holders of the Convertible Notes may convert each of
their notes into 8.8601 shares of common stock of the
Company (the “conversion rate”) at any time on or before
the maturity date, approximately 35.0 million shares in
the aggregate. The conversion price per share at issuance was
$80.61. The conversion price per share as of any day will
equal the original issuance price plus the accrued original
issue discount to that day, divided by the conversion rate,
or $81.37 per share as of December 31, 2002. The holders
of the Convertible Notes may require the Company to pur-
chase all or a portion of their notes on March 1, 2005,
March 1, 2007, March 1, 2012, and March 1, 2017 at a price
equal to the original issuance price plus the accrued orig-
inal issue discount to the purchase dates. The Company
may choose to pay the purchase price in cash and/or shares
of common stock.
The Company may redeem all or a portion of the
Convertible Notes for cash at any time on or after March
1, 2007 at the original issuance price plus accrued original
issue discount as of the redemption date. In addition, the
Company will pay contingent cash interest during any six-
month period commencing on or after March 2, 2007 if the
average market price of a note for a five trading day mea-
surement period preceding the applicable six-month period
equals 120% or more of the sum of the original issuance
price and accrued original issue discount for such note. The
contingent cash interest in respect of any quarterly period
will equal the greater of 1) the amount of regular cash div-
idends paid by the Company per share multiplied by the
number of shares of common stock deliverable upon con-
version of the Convertible Notes at the then applicable con-
version rate or 2) 0.0625% of the average market price of
a note for a five trading day measurement period preced-
ing the applicable six-month period provided, that if the
Company does not pay cash dividends during a semi-
annual period it will pay contingent interest semiannually
at a rate of 0.125% of the average market price of a note
for a five trading day measurement period.