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Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
13. COMMITMENTS, GUARANTEES AND CONTINGENCIES
Leases
We lease facilities, computer hardware, and other equipment under long-term operating leases that are
noncancelable and expire on various dates through 2017. We sublease facilities or partial facilities to third party
tenants for space not used in our operations. Rent expense and sublease rental income for all operating leases was
as follows for the years ended December 31, 2003, 2002, and 2001:
2003 2002 2001
(in thousands)
Rent expense ................................. $70,815 $ 81,292 $ 80,124
Sublease rental income .......................... (12,007) (14,417) (16,035)
Net rent expense ........................... $58,808 $ 66,875 $ 64,089
Future annual minimum payments due subsequent to December 31, 2003 under all of our noncancelable
operating leases with initial terms in excess of one year are as follows:
Minimum
Lease
Payments
Sublease
Rental
Receipts
Net Lease
Commitments
(in thousands)
For the years ending December 31:
2004 ................................. $ 63,392 $ (3,835) $ 59,557
2005 ................................. 54,403 (3,443) 50,960
2006 ................................. 38,667 (2,521) 36,146
2007 ................................. 31,643 (2,264) 29,379
2008 ................................. 23,326 (863) 22,463
Thereafter ............................. 45,791 — 45,791
Total ............................. $257,222 $(12,926) $244,296
Indemnifications and Guarantees
Our 5-year and 7-year airplane operating leases provide for a residual value payment of no more than
$9.2 million at the end of the lease terms, which expire December 29, 2004 for the 5-year lease and January 1,
2010 for the 7-year lease. We have the right to exercise a purchase option with respect to the leased airplanes or
the airplanes can be sold to a third party. If we decide not to exercise our purchase option at the end of the lease,
we must pay the lessor a maximum amount of $4.4 million related to the 5-year lease and $4.8 million related to
the 7-year lease. The amount will be reduced by the net sales proceeds of the airplanes to a third party. After
considering the current fair value of the airplanes, we recorded a $1.5 million provision during 2003 for the
exposure from the residual value guarantee. During 2003, we terminated two 5-year airplane leases early. The
impact of these transactions was not material.
Through indemnity agreements approved by the state regulatory authorities, certain of our regulated
subsidiaries generally are guaranteed by Humana Inc., our parent company, in the event of insolvency for
(1), member coverage for which premium payment has been made prior to insolvency; (2), benefits for members
then hospitalized until discharged; and (3), payment to providers for services rendered prior to insolvency. Our
parent also has guaranteed the obligations of our TRICARE subsidiaries.
In the ordinary course of business, we enter into contractual arrangements under which we may agree to
indemnify a third party to such arrangement from any losses incurred relating to the services they perform on
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