Debt and Other Financing Arrangements

3 Months Ended

Apr. 03, 2021

Debt and Other Financing Arrangements [Text Block]

Note 7. Debt and Other Financing Arrangements


	Effective Interest Rate at April 3,		April 3,		December 31,
(Dollars in millions)	2021		2021		2020


2.15% 7-Year Senior Notes, Due 7/21/2022 (euro-denominated)			$	—	$	611
3.00% 7-Year Senior Notes, Due 4/15/2023			—		1,000
4.15% 10-Year Senior Notes, Due 2/1/2024			—		1,000
0.75% 8-Year Senior Notes, Due 9/12/2024 (euro-denominated)	0.95	%	1,176		1,222
0.125% 5.5-Year Senior Notes, Due 3/1/2025 (euro-denominated)	0.42	%	940		977
4.133% 5-Year Senior Notes, Due 3/25/2025	4.32	%	1,100		1,100
2.00% 10-Year Senior Notes, Due 4/15/2025 (euro-denominated)	2.10	%	752		782
3.65% 10-Year Senior Notes, Due 12/15/2025	3.77	%	350		350
1.40% 8.5-Year Senior Notes, Due 1/23/2026 (euro-denominated)	1.53	%	823		855
2.95% 10-Year Senior Notes, Due 9/19/2026	3.19	%	1,200		1,200
1.45% 10-Year Senior Notes, Due 3/16/2027 (euro-denominated)	1.67	%	589		611
1.75% 7-Year Senior Notes, Due 4/15/2027 (euro-denominated)	1.98	%	706		733
3.20% 10-Year Senior Notes, Due 8/15/2027	3.39	%	750		750
0.50% 8.5-Year Senior Notes, Due 3/1/2028 (euro-denominated)	0.78	%	940		977
1.375% 12-Year Senior Notes, Due 9/12/2028 (euro-denominated)	1.46	%	706		733
1.95% 12-Year Senior Notes, Due 7/24/2029 (euro-denominated)	2.08	%	823		855
2.60% 10-Year Senior Notes, Due 10/1/2029	2.74	%	900		900
4.497% 10-Year Senior Notes, Due 3/25/2030	5.31	%	1,100		1,100
0.875% 12-Year Senior Notes, Due 10/1/2031 (euro-denominated)	1.14	%	1,058		1,099
2.375% 12-Year Senior Notes, Due 4/15/2032 (euro-denominated)	2.56	%	706		733
2.875% 20-Year Senior Notes, Due 7/24/2037 (euro-denominated)	2.94	%	823		855
1.50% 20-Year Senior Notes, Due 10/1/2039 (euro-denominated)	1.73	%	1,058		1,099
5.30% 30-Year Senior Notes, Due 2/1/2044	5.37	%	400		400
4.10% 30-Year Senior Notes, Due 8/15/2047	4.23	%	750		750
1.875% 30-Year Senior Notes, Due 10/1/2049 (euro-denominated)	1.99	%	1,176		1,222
Other			17		12
Total Borrowings at Par Value			18,843		21,926
Fair Value Hedge Accounting Adjustments			—		25
Unamortized Discount			(93)		(102)
Unamortized Debt Issuance Costs			(105)		(114)
Total Borrowings at Carrying Value			18,645		21,735
Less: Short-term Obligations and Current Maturities			4		2,628
Long-term Obligations			$	18,641	$	19,107

The effective interest rates for the fixed-rate debt include the stated interest on the notes, the accretion of any discount or amortization of any premium, the amortization of any debt issuance costs and, if applicable, adjustments related to hedging.

See Note 10 for fair value information pertaining to the company’s long-term obligations.

In connection with the agreement to acquire PPD (Note 2), the company obtained, but does not currently expect to utilize, up to $9.5 billion of committed financing. The company intends to finance the purchase price with cash on hand and the net proceeds from issuance of debt. The company is currently evaluating future debt financings and the timing of such transactions is subject to market and other conditions.

Credit Facilities

The company has a revolving credit facility (the Facility) with a bank group that provides for up to $3.00 billion of unsecured multi-currency revolving credit. The Facility expires on December 4, 2025. The revolving credit agreement calls for interest at either a LIBOR-based rate (or LIBOR successor rate), a EURIBOR-based rate (for funds drawn in euro) or a rate based on the prime lending rate of the agent bank, at the company’s option. The agreement contains affirmative, negative and financial covenants, and events of default customary for facilities of this type. The covenants in the Facility include a Consolidated Net Interest Coverage Ratio (Consolidated EBITDA to Consolidated Net Interest Expense), as such terms are defined in the Facility. Specifically, the company has agreed that, so long as any lender has any commitment under the Facility, any letter of credit is outstanding under the Facility, or any loan or other obligation is outstanding under the Facility, it will maintain a minimum Consolidated Interest Coverage Ratio of 3.5:1.0 as of the last day of any fiscal quarter. As of April 3, 2021, no borrowings were outstanding under the Facility, although available capacity was reduced by approximately $31 million as a result of outstanding letters of credit.

Commercial Paper Programs

The company has commercial paper programs pursuant to which it may issue and sell unsecured, short-term promissory notes (CP Notes). Under the U.S. program, a) maturities may not exceed 397 days from the date of issue and b) the CP Notes are issued on a private placement basis under customary terms in the commercial paper market and are not redeemable prior to maturity nor subject to voluntary prepayment. Under the euro program, maturities may not exceed 183 days and may be denominated in euro, U.S. dollars, Japanese yen, British pounds sterling, Swiss franc, Canadian dollars or other currencies. Under both programs, the CP Notes are issued at a discount from par (or premium to par, in the case of negative interest rates), or, alternatively, are sold at par and bear varying interest rates on a fixed or floating basis. As of April 3, 2021, there were no outstanding borrowings under these programs.

Senior Notes

Interest is payable annually on the euro-denominated senior notes and semi-annually on all other senior notes. Each of the notes may be redeemed at a redemption price of 100% of the principal amount plus a specified make-whole premium and accrued interest. The company is subject to certain affirmative and negative covenants under the indentures governing the senior notes, the most restrictive of which limits the ability of the company to pledge principal properties as security under borrowing arrangements. The company was in compliance with all covenants at April 3, 2021.

In the first quarter of 2021, the company redeemed some of its existing senior notes. In connection with these redemptions, the company incurred $197 million of losses on the early extinguishment of debt included in Other (Expense) Income on the accompanying statement of income. Upon redemption of the senior notes, the company terminated the related fixed to floating rate interest rate swap arrangements and received $22 million, included in other financing activities, net, in the accompanying statement of cash flows.