Amgen 2013 Annual Report Download - page 108

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,
resulting in the recognition of non-cash interest expense. The total aggregate amount repaid, including the amount related to the debt discount, is included in
Cash flows from financing activities in the Consolidated Statement of Cash Flows. After giving effect to this bifurcation, the effective interest rate on the
0.375% 2013 Convertible Notes was 6.35%. For the years ended December 31, 2013, 2012 and 2011, total interest expenses for the 0.375% 2013 Convertibles
Notes were $13 million, $151 million and $143 million, respectively, including non-cash interest expenses of $12 million, $142 million and $133 million,
respectively. The carrying amount of the equity component of this debt was $829 million as of December 31, 2013 and 2012.
Other notes
Other notes include our notes due in 2097 with carrying value of $100 million and debt assumed in the acquisition of MN with a carrying value of $5
million and $9 million at December 31, 2013 and 2012, respectively.
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
were designated as fair value hedges. During the year ended December 31, 2013, we entered into interest rate swap contracts with respect to certain of our
outstanding notes. The effective interest rates on these notes after giving effect to the related interest rate swap contracts and the notional amounts of the
contracts were as follows as of December 31, 2013 (dollar amounts in millions):


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
$4,400
We previously had interest rate swap contracts with an aggregate notional amount of $3.6 billion outstanding with rates that ranged from LIBOR plus
0.3% to LIBOR plus 2.6%. Due to historically low interest rates, we terminated all of these swap contracts in May 2012. See Note 17, Derivative instruments.
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, 2013, 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, 2013 and 2012, we had no amounts outstanding under our commercial paper program.
In December 2011, 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 would be charged interest at LIBOR plus 0.9% for any amounts borrowed under this facility. As of December 31, 2013 and 2012, no amounts
were outstanding under this facility.
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