Debt

Debt Exchange

In February 2012, we completed an exchange of our 5.71% Zero Coupon Notes due 2023 with an accreted book value at the date of the exchange of $303, for $362 of our 4.50% Senior Notes due 2021. Accordingly, this increased the principal amount for our 4.50% Senior Notes due 2021 from $700 to $1,062. The exchange was conducted to retire high-interest, long-dated debt in a favorable interest rate environment. The debt exchange was accounted for as a non-revolving debt modification and, therefore, it did not result in any gain or loss. The difference between the book value of our Zero Coupon Notes and the principal value of the Senior Notes issued in exchange will be accreted over the remaining term of the Senior Notes. Upfront fees paid to third parties in connection with the exchange were not material and were expensed as incurred.

Senior Notes

In March 2012, we issued $600 of Floating Rate Senior Notes due 2013 (the “2013 Floating Rate Notes”) and $500 of 2.95% Senior Notes due 2017 (the “2017 Senior Notes”). The 2013 Floating Rate Notes were issued at par and the 2017 Senior Notes were issued at 99.875% of par, resulting in aggregate net proceeds for both notes of approximately $1,093. The 2013 Floating Rate Notes accrue interest at a rate per annum, reset quarterly, equal to the three-month LIBOR plus 1.400% and are payable quarterly. The 2017 Senior Notes accrue interest at a rate of 2.95% per annum and are payable semi-annually. As a result of the discount, they have a weighted average effective interest rate of 2.977%. In connection with the issuance of these Senior Notes, debt issuance costs of $6 were deferred. This debt issuance partially pre-funded the May 2012 maturity of our $1,100 of 5.59% Senior Notes.

Interest Expense and Income

Interest expense and interest income were as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Interest expense⁽¹⁾	$	109	$	124	$	218	$	251
Interest income⁽²⁾	147		168		298		337

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(1)	Includes Equipment financing interest, as well as non-financing interest expense that is included in Other expenses, net in the Condensed Consolidated Statements of Income.


(2)	Includes Finance income, as well as other interest income that is included in Other expenses, net in the Condensed Consolidated Statements of Income.

Net (Payments) Proceeds on Debt

Net proceeds on debt as shown on the Condensed Consolidated Statements of Cash Flows was as follows:



	Six Months Ended June 30,
	2012			2011
Net proceeds (payments) on short-term debt	$	550		$	(297	)
Net proceeds from issuance of long-term debt	1,105			1,018
Net payments on long-term debt	(1,112		)	(18		)
Net Proceeds on Debt	$	543		$	703