Debt and lines of credit

6 Months Ended

Jun. 30, 2012

Long-term Debt, Unclassified [Abstract]

Short-term borrowings

We maintain a line of credit to support commercial paper borrowings and to provide additional liquidity through bank loans. On March 9, 2012, we replaced our existing lines of credit with a new five-year variable-rate revolving credit facility that allows us to borrow up to $2 billion through March 2017. This variable-rate credit facility is indexed to the London Interbank Offered Rate (LIBOR). As of June 30, 2012, we have an aggregate $500 million balance of commercial paper outstanding, which was supported by the new revolving credit facility. In the second quarter of 2012, we repaid $200 million of commercial paper borrowings. The weighted-average borrowing rate for the commercial paper outstanding at the end of the quarter was 0.28 percent.

Long-term debt

In May 2011, we issued fixed- and floating-rate long-term debt to help fund the National acquisition. The proceeds of the offering were $3.497 billion, net of the original issuance discount. We also incurred $12 million of issuance costs that are included in Other assets and are being amortized to Interest and debt expense over the term of the debt.

In connection with this issuance, we also entered into an interest rate swap transaction related to the $1.0 billion floating-rate debt due 2013. Under this swap agreement, we will receive variable payments based on three-month LIBOR rates and pay a fixed rate through May 15, 2013. Changes in the cash flows of the interest rate swap are expected to exactly offset the changes in cash flows attributable to fluctuations in the three-month LIBOR-based interest payments. We have designated this interest rate swap as a cash flow hedge and record changes in its fair value in AOCI. As of June 30, 2012, the fair value of the swap agreement is a $2 million liability. The net effect of this swap is to convert the $1.0 billion floating-rate debt to a fixed-rate obligation bearing a rate of 0.922 percent.

At the acquisition date, we assumed $1.0 billion of outstanding National debt with a fair value of $1.105 billion. The excess of the fair value over the stated value is being amortized as a reduction of Interest and debt expense over the term of the related debt. In the second quarter of 2012, we repaid $375 million of this debt.

The following table summarizes the total long-term debt outstanding as of June 30, 2012 and December 31, 2011:



	June 30, 2012			December 31, 2011
Notes due 2012 at 6.15% (assumed with National acquisition)	$	—		$	375
Floating-rate notes due 2013 (swapped to a 0.922% fixed rate)	1,000			1,000
Notes due 2013 at 0.875%	500			500
Notes due 2014 at 1.375%	1,000			1,000
Notes due 2015 at 3.95% (assumed with National acquisition)	250			250
Notes due 2016 at 2.375%	1,000			1,000
Notes due 2017 at 6.60% (assumed with National acquisition)	375			375
	4,125			4,500
Add net unamortized premium (assumed with National acquisition)	78			93
Less current portion of long-term debt	(1,500		)	(382		)
Total long-term debt	$	2,703		$	4,211

For the three months and six months ended June 30, 2012, interest incurred on debt and amortization of debt expense was $20 million and $41 million, respectively. Capitalized interest was not material.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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