NOTE 7

DEBT, CREDIT FACILITIES AND LEASE COMMITMENTS

Debt Outstanding

At December 31, 2013 and 2012, the company had the following debt outstanding.


as of December 31 (in millions)	2013		2012

Commercial paper	$	—	$	—
Other short-term debt		181		27

Short-term debt	$	181	$	27


as of December 31 (in millions)	Effective interest rate in 2013¹		2013²			2012²

1.8% notes due 2013		1.7%	$	—		$	301
4.0% notes due 2014		4.1%		351			358
Floating rate notes due 2014		0.7%		500			—
Variable-rate loan due 2015		0.9%		194			243
4.625% notes due 2015		4.8%		625			646
5.9% notes due 2016		6.0%		622			631
0.95% notes due 2016		1.1%		500			—
1.85% notes due 2017		2.0%		500			500
Variable-rate loan due 2017		1.1%		136			170
5.375% notes due 2018		5.5%		499			499
1.85% notes due 2018		1.9%		750			—
4.5% notes due 2019		4.6%		534			566
4.25% notes due 2020		4.4%		299			299
2.40% notes due 2022		2.5%		684			697
3.2% notes due 2023		3.2%		1,246			—
6.625% debentures due 2028		6.7%		133			133
6.25% notes due 2037		6.3%		499			499
3.65% notes due 2042		3.7%		298			298
4.5% notes due 2043		4.4%		500			—
Other		—		115			63

Total debt and capital lease obligations				8,985			5,903
Current portion				(859	)		(323	)

Long-term portion			$	8,126		$	5,580

¹	Excludes the effect of any related interest rate swaps.

²	Book values include any discounts, premiums and adjustments related to hedging instruments.

Significant Debt Issuances

In June 2013, the company issued $500 million of floating rate senior notes maturing in December 2014, $500 million of senior notes bearing a coupon rate of 0.95% and maturing in June 2016, $750 million of senior notes bearing a coupon rate of 1.85% and maturing in June 2018, $1.25 billion of senior notes bearing a coupon rate of 3.2% and maturing in June 2023, and $500 million of senior notes bearing a coupon rate of 4.5% and maturing in June 2043. The interest rate on the floating rate senior notes was 0.4126% as of December 31, 2013. Approximately $3.0 billion of the net proceeds from the June 2013 debt issuances was used to finance the acquisition of Gambro in 2013 and the remainder was used for general corporate purposes, including the repayment of commercial paper.

In August 2012, the company issued $1.0 billion of senior notes, with $700 million maturing in August 2022 and bearing a 2.40% coupon rate, and $300 million maturing in August 2042 and bearing a 3.65% coupon rate. In December 2011, the company issued $500 million of senior notes maturing in January 2017 and bearing a 1.85% coupon rate.

The net proceeds of the August 2012 debt issuance were used for general corporate purposes, which included capital expenditures associated with previously announced plans to expand capacity to support longer-term growth of the company’s plasma-based treatments. The net proceeds of the debt issuances from prior years were used for general corporate purposes, which in some cases included the refinancing of indebtedness. The debt instruments are unsecured and include certain covenants, including restrictions relating to the company’s creation of secured debt.

Commercial Paper

During 2013, the company issued and redeemed commercial paper, and there was no balance outstanding at December 31, 2013 and December 31, 2012.

Credit Facilities

The company had $2.7 billion of cash and equivalents at December 31, 2013, and $3.3 billion of cash and equivalents at December 31, 2012. The company’s primary revolving credit facility has a maximum capacity of $1.5 billion and matures in June 2015. The company also maintains a Euro-denominated revolving credit facility with a maximum capacity of approximately $413 million at December 31, 2013. In 2013, the company amended the agreement related to this facility to extend the maturity date to December 2014. The terms of the Euro-denominated credit facility did not substantially change, however certain provisions were amended to more closely align with the company’s primary credit facility. As of December 31, 2013 approximately $124 million was outstanding under the Euro-denominated facility and there were no outstanding borrowings under the primary revolving credit facility. In 2012, there were no outstanding borrowings under either of these facilities. The company’s facilities enable the company to borrow funds on an unsecured basis at variable interest rates, and contain various covenants, including a maximum net-debt-to-capital ratio. At December 31, 2013, the company was in compliance with the financial covenants in these agreements. The non-performance of any financial institution supporting either of the credit facilities would reduce the maximum capacity of these facilities by each institution’s respective commitment.

The company also maintains other credit arrangements, which totaled $587 million at December 31, 2013 and $332 million at December 31, 2012. Borrowings outstanding under these facilities totaled $181 million at December 31, 2013 and $27 million at December 31, 2012.

In January 2013, Baxter entered into an agreement related to a 364-day bridge loan facility with a maximum capacity of $3.1 billion in connection with the planned acquisition of Gambro. This facility was terminated in the second quarter of 2013 as a result of the company’s June 2013 issuance of debt. The company recognized a $13 million expense related to bridge loan facility structuring and commitment fees in other (income) expense, net during the second quarter of 2013.

Leases

The company leases certain facilities and equipment under capital and operating leases expiring at various dates. The leases generally provide for the company to pay taxes, maintenance, insurance and certain other operating costs of the leased property. Most of the operating leases contain renewal options. Operating lease rent expense was $214 million in 2013, $202 million in 2012 and $203 million in 2011.

Future Minimum Lease Payments and Debt Maturities


as of and for the years ended December 31 (in millions)	Operating leases	Debt maturities and capital leases
2014	$ 216	$	859
2015	180		813
2016	158		1,111
2017	140		647
2018	120		1,262
Thereafter	271		4,328

Total obligations and commitments	1,085		9,020
Interest on capital leases, discounts and premiums, and adjustments relating to hedging instruments	n/a		(35	)

Total debt and lease obligations	$1,085	$	8,985