Humana 2006 Annual Report Download - page 94

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At December 31, 2006, we had $450 million of borrowings under the credit agreement outstanding at an
interest rate of 5.73%. In addition, we have outstanding letters of credit of $3.4 million secured under the credit
agreement. No amounts have ever been drawn on these letters of credit. As of December 31, 2006, we had $546.6
million of remaining borrowing capacity under the credit agreement. We have other relationships, including
financial advisory and banking, with some parties to the credit agreement.
Other Long-Term Borrowings
Other long-term borrowings of $3.1 million at December 31, 2006 represent financing for the renovation of
a building, bear interest at 2% per annum, are collateralized by the building, and are payable in various
installments through 2014.
Shelf Registration
On March 31, 2006, we filed a universal shelf registration statement with the SEC. We are considered a
“well known seasoned issuer” under the Securities Offering Reform Act that became effective in December
2005. The universal shelf registration allows us to sell our debt or equity securities, from time to time, with the
amount, price and terms to be determined at the time of the sale. The net proceeds from any future sales of our
securities under the universal shelf registration may be used for our operations and for other general corporate
purposes, including repayment or refinancing of borrowings, working capital, capital expenditures, investments,
acquisitions, or the repurchase of our outstanding securities.
11. EMPLOYEE BENEFIT PLANS
Employee Savings Plan
We have defined contribution retirement and savings plans covering eligible employees. Our contribution to
these plans is based on various percentages of compensation, and in some instances, on the amount of our
employees’ contributions to the plans. The cost of these plans amounted to approximately $56.0 million in 2006,
$42.9 million in 2005, and $37.6 million in 2004, all of which was funded currently to the extent it was
deductible for federal income tax purposes. Based on the year end closing stock price of $55.31, approximately
26% of the retirement and savings plan’s assets were invested in our common stock representing 3% of the
shares outstanding as of December 31, 2006. Through December 31, 2006, the Company match was invested in
the Humana common stock fund. However, a participant could reinvest any funds, including the Company match
in the Humana common stock fund, in any other plan investment option at any time. Beginning January 1, 2007,
the Company match in cash is invested in the same way as a participant’s contributions to the plan as directed by
the participant.
Severance Benefits
We provide severance and related employee benefits based upon our existing employee benefit plans and
policies. Severance benefits are generally determined based on years of service and salary. We accrue severance
benefits when payment is probable and reasonably estimable in accordance with SFAS No. 112, Employers’
Accounting for Postemployment Benefits. The cost of this benefit amounted to approximately $2.7 million in
2006, $0.7 million in 2005 and $15.5 million in 2004. Severance is paid bi-weekly resulting in payments in
periods subsequent to termination. We continually review estimates of future payments for probable severance
benefits and make necessary adjustments to our liability for severance benefits.
Stock-Based Compensation
We have plans under which options to purchase our common stock and restricted stock awards have been
granted to executive officers, directors, key employees and consultants. The terms and vesting schedules for
stock-based awards vary by type of grant. Generally, the awards vest upon time-based conditions. Upon exercise,
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