FINANCING

The components of the Company’s debt as of December 31 were as follows ($ in millions):



	2015		2014
U.S. dollar-denominated commercial paper	$	920.0	$	450.0
Euro-denominated commercial paper (€2.8 billion and €260.0 million, respectively)	3,096.9		314.6
2.3% senior unsecured notes due 2016	500.0		500.0
4.0% senior unsecured bonds due 2016 (CHF 120.0 million aggregate principal amount)	122.6		129.9
Floating rate senior unsecured notes due 2017 (€500.0 million aggregate principal amount)	544.8		—
0.0% senior unsecured bonds due 2017 (CHF 100.0 million aggregate principal amount)	99.7		—
1.65% senior unsecured notes due 2018	497.1		—
5.625% senior unsecured notes due 2018	500.0		500.0
1.0% senior unsecured notes due 2019 (€600.0 million aggregate principal amount)	651.0		—
5.4% senior unsecured notes due 2019	750.0		750.0
2.4% senior unsecured notes due 2020	495.9		—
5.0% senior unsecured notes due 2020	410.7		—
Zero-coupon LYONs due 2021	72.6		110.6
3.9% senior unsecured notes due 2021	600.0		600.0
1.7% senior unsecured notes due 2022 (€800.0 million aggregate principal amount)	866.8		—
0.5% senior unsecured bonds due 2023 (CHF 540.0 million aggregate principal amount)	541.6		—
2.5% senior unsecured notes due 2025 (€800.0 million aggregate principal amount)	867.9		—
3.35% senior unsecured notes due 2025	495.3		—
1.125% senior unsecured bonds due 2028 (CHF 110.0 million aggregate principal amount)	110.7		—
4.375% senior unsecured notes due 2045	499.3		—
Other	227.5		118.3
Subtotal	12,870.4		3,473.4
Less: currently payable	845.2		71.9
Long-term debt	$	12,025.2	$	3,401.5

Financing for the Pall Acquisition

The Company financed the approximately $13.6 billion acquisition price of Pall with approximately $2.5 billion of available cash, approximately $8.1 billion of net proceeds from the issuance and sale of U.S. dollar and Euro-denominated commercial paper and €2.7 billion (approximately $3.0 billion based on currency exchange rates as of the date of issuance) of net proceeds from the issuance and sale of Euro-denominated senior unsecured notes. Subsequent to the Pall Acquisition, the Company used the approximately $2.0 billion of net proceeds from the issuance of U.S. dollar-denominated senior unsecured notes and the approximately CHF 755 million ($732 million based on currency exchange rates as of date of issuance) of net proceeds, including the related premium, from the issuance and sale of Swiss franc-denominated senior unsecured bonds to repay a portion of the commercial paper issued to finance the Pall Acquisition. Further details regarding the Pall Acquisition financing are set forth below.

Commercial Paper Programs and Credit Facilities

On July 10, 2015, the Company expanded the aggregate capacity of its U.S. and Euro commercial paper programs to $11.0 billion and expanded its credit facility borrowing capacity to $11.0 billion to provide liquidity support for issuances under such programs. The Company replaced its existing $2.5 billion unsecured multi-year revolving credit facility (the “Superseded Credit Facility”) with an amended and restated $4.0 billion unsecured multi-year revolving credit facility with a syndicate of banks that expires on July 10, 2020, subject to a one-year extension option at the request of the Company with the consent of the lenders (the “5-Year Credit Facility”), and entered into a new $7.0 billion 364-day unsecured revolving credit facility with a syndicate of banks that expires on July 8, 2016, subject to the Company’s option to convert any then-outstanding borrowings into term loans that are due and payable one year following such expiration date (the “364-Day Facility” and together with the 5-Year Credit Facility, the “Credit Facilities”). The Company reduced the commitment amount under the 364-Day Facility from $7.0 billion to $4.0 billion effective as of October 15, 2015 and from $4.0 billion to $2.0 billion effective as of December 28, 2015, as permitted by the 364-Day Facility, and the capacity under the Company’s U.S. and Euro commercial paper programs effectively decreased by the same amount.

The increase in the size of the Company’s commercial paper programs provided necessary capacity for the Company to use proceeds from the issuance of commercial paper to fund a portion of the purchase price for the Pall Acquisition. Under the Company’s U.S. and Euro commercial paper programs, the Company or a subsidiary of the Company, as applicable, may issue and sell unsecured, short-term promissory notes. Interest expense on the notes is paid at maturity and is generally based on the ratings assigned to the Company by credit rating agencies at the time of the issuance and prevailing market rates measured by reference to LIBOR. The Credit Facilities provide liquidity support for issuances under the Company’s commercial paper programs, and can also be used for working capital and other general corporate purposes. The availability of the Credit Facilities as standby liquidity facilities to repay maturing commercial paper is an important factor in maintaining the existing credit ratings of the Company’s commercial paper programs. The Company expects to limit any borrowings under the Credit Facilities to amounts that would leave sufficient available borrowing capacity under such facilities to allow the Company to borrow, if needed, to repay all of the outstanding commercial paper as it matures. As commercial paper obligations mature, the Company may issue additional short-term commercial paper obligations to refinance all or part of these borrowings. As of December 31, 2015, borrowings outstanding under the Company’s U.S. and Euro commercial paper programs had a weighted average annual interest rate of 0.2% and a weighted average remaining maturity of approximately 38 days. The Company has classified $4.0 billion of its borrowings outstanding under the commercial paper programs as of December 31, 2015 as long-term debt in the accompanying Consolidated Balance Sheet as the Company had the intent and ability, as supported by availability under the 5-Year Credit Facility referenced above, to refinance these borrowings for at least one year from the balance sheet date.

Under the Credit Facilities, borrowings (other than bid loans under the 5-Year Credit Facility) bear interest at a rate equal to (at the Company’s option) either (1) a LIBOR-based rate (the “LIBOR-Based Rate”), or (2) the highest of (a) the Federal funds rate plus 1/2 of 1%, (b) the prime rate and (c) the LIBOR-Based Rate plus 1%, plus in each case a margin that, in the case of the 5-Year Credit Facility, varies according to the Company’s long-term debt credit rating. In addition to certain initial fees the Company paid with respect to the 5-Year Credit Facility at inception of the facility, the Company is obligated to pay an annual commitment or facility fee under each Credit Facility that, in the case of the 5-Year Credit Facility, varies according to the Company’s long-term debt credit rating. Each of the Credit Facilities requires the Company to maintain a consolidated leverage ratio (as defined in the respective facility) of 0.65 to 1.00 or less, and also contains customary representations, warranties, conditions precedent, events of default, indemnities and affirmative and negative covenants. As of December 31, 2015, no borrowings were outstanding under either of the Credit Facilities and the Company was in compliance with all covenants under each facility. The non-performance by any member of either Credit Facility syndicate would reduce the maximum capacity of such Credit Facility by such member's commitment amount.

The Company’s ability to access the commercial paper market, and the related costs of these borrowings, is affected by the strength of the Company’s credit rating and market conditions. Any downgrade in the Company’s credit rating would increase the cost of borrowings under the Company’s commercial paper program and the Credit Facilities, and could limit or preclude the Company’s ability to issue commercial paper. If the Company’s access to the commercial paper market is adversely affected due to a downgrade, change in market conditions or otherwise, the Company expects it would rely on a combination of available cash, operating cash flow and the Credit Facilities to provide short-term funding. In such event, the cost of borrowings under the Credit Facilities could be higher than the cost of commercial paper borrowings.

In addition to the Credit Facilities, the Company has also entered into reimbursement agreements with various commercial banks to support the issuance of letters of credit.

Long-Term Indebtedness

Long-Term Indebtedness Related to Pall Acquisition

On July 8, 2015, DH Europe Finance S.A., a wholly-owned finance subsidiary of the Company, completed the underwritten public offering of each of the following series of Euro-denominated senior unsecured notes (collectively, the “Pall Financing Euronotes”):


•	€500 million aggregate principal amount of floating rate senior notes due 2017 (the “2017 Euronotes”). The 2017 Euronotes were issued at 100% of their principal amount, will mature on June 30, 2017 and bear interest at a floating rate equal to three-month EURIBOR plus 0.45% per year.


•	€600 million aggregate principal amount of 1.0% senior notes due 2019 (the “2019 Euronotes”). The 2019 Euronotes were issued at 99.696% of their principal amount, will mature on July 8, 2019 and bear interest at the rate of 1.0% per year.


•	€800 million aggregate principal amount of 1.7% senior notes due 2022 (the “2022 Euronotes”). The 2022 Euronotes were issued at 99.651% of their principal amount, will mature on January 4, 2022 and bear interest at the rate of 1.7% per year.


•	€800 million aggregate principal amount of 2.5% senior notes due 2025 (the “2025 Euronotes”). The 2025 Euronotes were issued at 99.878% of their principal amount, will mature on July 8, 2025 and bear interest at the rate of 2.5% per year.

The Pall Financing Euronotes are fully and unconditionally guaranteed by the Company. The Company received net proceeds, after underwriting discounts and commissions and offering expenses, of approximately €2.7 billion (approximately $3.0 billion based on currency exchange rates as of the date of issuance) and used the net proceeds from the offering to pay a portion of the purchase price for the Pall Acquisition. Interest on the Pall Financing Euronotes is payable: on the 2017 Euronotes quarterly in arrears on March 30, June 30, September 30 and December 30 of each year, commencing on September 30, 2015; on the 2019 Euronotes and 2025 Euronotes annually in arrears on July 8 of each year, commencing on July 8, 2016; and on the 2022 Euronotes annually in arrears on January 4 of each year, commencing on January 4, 2016.

On September 15, 2015, the Company completed the underwritten public offering of each of the following series of U.S. dollar-denominated senior unsecured notes (collectively, the “Pall Financing U.S. Notes”):


•	$500 million aggregate principal amount of 1.65% senior notes due 2018. These notes were issued at 99.866% of their principal amount, will mature on September 15, 2018 and bear interest at the rate of 1.65% per year.


•	$500 million aggregate principal amount of 2.4% senior notes due 2020. These notes were issued at 99.757% of their principal amount, will mature on September 15, 2020 and bear interest at the rate of 2.4% per year.


•	$500 million aggregate principal amount of 3.35% senior notes due 2025. These notes were issued at 99.857% of their principal amount, will mature on September 15, 2025 and bear interest at the rate of 3.35% per year.


•	$500 million aggregate principal amount of 4.375% senior notes due 2045. These notes were issued at 99.784% of their principal amount, will mature on September 15, 2045 and bear interest at the rate of 4.375% per year.

The Company received net proceeds, after underwriting discounts and commissions and offering expenses, of approximately $2.0 billion and used the net proceeds from the offering to repay a portion of the commercial paper issued to pay a portion of the purchase price for the Pall Acquisition. Interest on the Pall Financing U.S. Notes is payable semi-annually in arrears on March 15 and September 15 of each year, commencing on March 15, 2016.

On December 8, 2015, DH Switzerland Finance S.A., a wholly-owned finance subsidiary of the Company, completed the underwritten public offering and sale of each of the following series of Swiss franc-denominated senior unsecured bonds (collectively, the “Pall Financing Swiss Bonds” and together with the Pall Financing Euronotes and Pall Financing U.S. Notes, the “Pall Financing Debt”):


•	CHF 100 million aggregate principal amount of 0.0% senior bonds due 2017. The bonds were issued at 100.14% of their principal amount and will mature on December 8, 2017.


•	CHF 540 million aggregate principal amount of 0.5% senior notes due 2023. The bonds were issued at 100.924% of their principal amount, will mature on December 8, 2023 and bear interest at the rate of 0.5% per year.


•	CHF 110 million aggregate principal amount of 1.125% senior notes due 2028. The bonds were issued at 101.303% of their principal amount, will mature on December 8, 2028 and bear interest at the rate of 1.125% per year.

The Pall Financing Swiss Bonds are fully and unconditionally guaranteed by the Company. The Company received net proceeds, including the related premium, and after underwriting discounts and commissions and offering expenses, of approximately CHF 755 million ($732 million based on currency exchange rates as of date of issuance) and used the net proceeds from the offering to repay a portion of the commercial paper issued to finance the Pall Acquisition. Interest on the Pall Financing Swiss Bonds that mature in 2023 and 2028 is payable annually in arrears on December 8, commencing on December 8, 2016.

In addition, in connection with the Pall Acquisition, the Company acquired senior unsecured notes previously issued by Pall (the “Assumed Pall Notes”) with an aggregate principal amount of $375 million and a stated interest rate of 5.0% per year. In accordance with accounting for business combinations, the Assumed Pall Notes were recorded at their fair value of $417 million on the date of acquisition and for accounting purposes, interest charges on these notes recorded in the Company's Consolidated Statement of Earnings reflect an effective interest rate of approximately 2.9% per year. The Company pays interest on the Assumed Pall Notes semi-annually in arrears on June 15 and December 15 of each year (based on the stated 5.0% interest rate). The Assumed Pall Notes mature on June 15, 2020. The Company has fully and unconditionally guaranteed the Assumed Pall Notes.

Other Long-Term Indebtedness

2016 Notes —In June 2011, the Company completed the underwritten public offering of the 2.3% senior unsecured notes due 2016 (the “2016 Notes”). The 2016 Notes were issued at 99.84% of their principal amount, will mature on June 23, 2016 and accrue interest at the rate of 2.3% per year. The net proceeds, after expenses and the underwriters’ discount, from these notes were used to fund a portion of the purchase price for the acquisition of Beckman Coulter. The Company pays interest on these notes semi-annually in arrears, on June 23 and December 23 of each year.

2016 Bonds—In connection with the acquisition of Nobel Biocare in December 2014, the Company acquired senior unsecured bonds with an aggregate principal amount of CHF 120 million and a stated interest rate of 4.0% per year (the “2016” Bonds”). In accordance with accounting for business combinations, the bonds were recorded at their fair value of CHF 127 million ($133 million based on exchange rates in effect at the time of the acquisition), as such, for accounting purposes interest charges recorded in the Company’s Consolidated Statement of Earnings reflect an effective interest rate of approximately 0.2% per year. The Company pays interest on the 2016 Bonds annually in arrears on October 10 of each year (based on the stated 4.0% interest rate). The 2016 Bonds mature on October 10, 2016.

2018 Notes—In December 2007, the Company completed an underwritten public offering of the 5.625% senior unsecured notes due 2018 (the “2018 Notes”), which were issued at 99.39% of their principal amount, will mature on January 15, 2018 and accrue interest at the rate of 5.625% per year. The net proceeds, after expenses and the underwriters’ discount, were approximately $493 million, which were used to repay a portion of the commercial paper issued to finance the acquisition of the Tektronix business. The Company pays interest on the 2018 Notes semi-annually in arrears, on January 15 and July 15 of each year.

2019 Notes—In March 2009, the Company completed an underwritten public offering of the 5.4% senior unsecured notes due 2019 (the “2019 Notes”), which were issued at 99.93% of their principal amount, will mature on March 1, 2019 and accrue interest at the rate of 5.4% per year. The net proceeds, after expenses and the underwriters’ discount, were approximately $745 million. A portion of the net proceeds were used to repay a portion of the Company’s outstanding commercial paper and the balance was used for general corporate purposes, including acquisitions. The Company pays interest on the 2019 Notes semi-annually in arrears, on March 1 and September 1 of each year.

2021 Notes—In June 2011, the Company completed the underwritten public offering of the 3.9% senior unsecured notes due 2021 (the “2021 Notes”). The 2021 Notes were issued at 99.975% of their principal amount, will mature on June 23, 2021 and accrue interest at the rate of 3.9% per year. The net proceeds, after expenses and the underwriters’ discount, from these notes were used to fund a portion of the purchase price for the acquisition of Beckman Coulter. The Company pays interest on these notes semi-annually in arrears, on June 23 and December 23 of each year.

LYONs—In 2001, the Company issued $830 million (value at maturity) in LYONs. The net proceeds to the Company were $505 million, of which approximately $100 million was used to pay down debt and the balance was used for general corporate purposes, including acquisitions. The LYONs carry a yield to maturity of 2.375% (with contingent interest payable as described below). Holders of the LYONs may convert each $1,000 of principal amount at maturity into 29.0704 shares of the Company’s common stock (in the aggregate for all LYONs that were originally issued, approximately 24 million shares of the Company’s common stock) at any time on or before the maturity date of January 22, 2021. As of December 31, 2015, an aggregate of approximately 21 million shares of the Company’s common stock had been issued upon conversion of LYONs. As of December 31, 2015, the accreted value of the outstanding LYONs was lower than the traded market value of the underlying common stock issuable upon conversion. The Company may redeem all or a portion of the LYONs for cash at any time at scheduled redemption prices.

Under the terms of the LYONs, the Company pays contingent interest to the holders of LYONs during any six month period from January 23 to July 22 and from July 23 to January 22 if the average market price of a LYON for a specified measurement period equals 120% or more of the sum of the issue price and accrued original issue discount for such LYON. The amount of contingent interest to be paid with respect to any quarterly period is equal to the higher of either 0.0315% of the bonds’ average market price during the specified measurement period or the amount of the common stock dividend paid during such quarterly period multiplied by the number of shares issuable upon conversion of a LYON. The Company paid $1 million, $2 million and $1 million of contingent interest on the LYONs for each of the years ended December 31, 2015, 2014 and 2013, respectively. Except for the contingent interest described above, the Company will not pay interest on the LYONs prior to maturity.

Debt discounts and debt issuance costs totaled $9 million as of December 31, 2015 and have been netted against the aggregate principal amounts of the related debt in the components of debt table above. As discussed in Note 1, the Company did not reclassify debt issuance costs to be netted against the related debt liability for debt offerings prior to 2015 as the impact to the financial statements was not material.

Covenants and Redemption Provisions Applicable to Notes

With respect to the 2016 Notes, the 2018 Notes, the 2019 Notes, the 2021 Notes, the Assumed Pall Notes, the Pall Financing Euronotes (except the 2017 Euronotes) and the Pall Financing U.S. Notes, at any time prior to the applicable maturity date (or in certain cases three months prior to the maturity date), the Company may redeem the applicable series of notes in whole or in part, by paying the principal amount and the “make-whole” premium specified in the applicable indenture, plus accrued and unpaid interest. With respect to each of the Pall Financing Swiss Bonds and the 2016 Bonds, at any time after 85% or more of the applicable bonds have been redeemed or purchased and canceled, the Company may redeem some or all of the remaining bonds for their principal amount plus accrued and unpaid interest. With respect to the Pall Financing Euronotes and the Pall Financing Swiss Bonds, the Company may redeem such notes and bonds upon the occurrence of specified, adverse changes in tax laws, or interpretations under such laws, at a redemption price equal to the principal amount of the bonds to be redeemed.

If a change of control triggering event occurs with respect to any of the 2016 Notes, the 2016 Bonds, the 2018 Notes, the 2019 Notes, the 2021 Notes, the Assumed Pall Notes or the Pall Financing Debt, each holder of such notes may require the Company to repurchase some or all of such notes and bonds at a purchase price equal to 101% (or in the case of the 2016 Bonds, 100%) of the principal amount of the notes and bonds, plus accrued and unpaid interest. A change of control triggering event means the occurrence of both a change of control and a rating event, each as defined in the applicable indenture. Except in connection with a change of control triggering event, the Company does not have any credit rating downgrade triggers that would accelerate the maturity of a material amount of outstanding debt.

The respective indentures under which the above-described notes and bonds were issued contain customary covenants including, for example, limits on the incurrence of secured debt and sale/leaseback transactions. None of these covenants are considered restrictive to the Company’s operations and as of December 31, 2015, the Company was in compliance with all of its debt covenants.

Other

The minimum principal payments during the next five years are as follows: 2016 - $845 million, 2017 - $646 million, 2018 - approximately $1.0 billion, 2019 - approximately $1.4 billion, 2020 - approximately $4.9 billion and approximately $4.1 billion thereafter.

The Company made interest payments of $126 million, $118 million and $151 million in 2015, 2014 and 2013, respectively.