Humana 2007 Annual Report Download - page 93

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Credit Agreement
Our 5-year $1.0 billion unsecured revolving credit agreement expires in July 2011. Under the credit
agreement, at our option, we can borrow on either a revolving credit basis or a competitive advance basis. The
revolving credit portion bears interest at either a fixed rate or floating rate based on LIBOR plus a spread. The
spread, which varies depending on our credit ratings, ranges from 27 to 80 basis points. We also pay an annual
facility fee regardless of utilization. This facility fee, currently 10 basis points, may fluctuate between 8 and 20
basis points, depending upon our credit ratings. In addition, a utilization fee of 10 basis points is payable for each
day in which borrowings under the facility exceed 50% of the total $1 billion commitment. The competitive
advance portion of any borrowings will bear interest at market rates prevailing at the time of borrowing on either
a fixed rate or a floating rate basis, at our option. The credit agreement contains customary restrictive and
financial covenants as well as customary events of default, including financial covenants regarding the
maintenance of a minimum level of net worth and a maximum leverage ratio.
At December 31, 2007, we had $800 million of borrowings under the credit agreement outstanding at an
interest rate, which varies with LIBOR, of 5.30%. In addition, we have outstanding letters of credit of $2.0
million secured under the credit agreement. No amounts have ever been drawn on these letters of credit. As of
December 31, 2007, we had $198.0 million of remaining borrowing capacity under the credit agreement. We
have other customary, arms-length relationships, including financial advisory and banking, with some parties to
the credit agreement.
Other Long-Term Borrowings
Other long-term borrowings of $38.6 million at December 31, 2007 represent junior subordinated debt
assumed in the KMG acquisition of $36.1 million and financing for the renovation of a building of $2.5 million.
The junior subordinated debt, which is due in 2037, may be called by us in 2012 and bears a fixed annual interest
rate of 8.02% payable quarterly until 2012, and then payable at a floating rate based on LIBOR plus 310 basis
points. The debt associated with the building renovation bears interest at 2.00%, is collateralized by the building,
and is payable in various installments through 2014.
Shelf Registration
We have a universal shelf registration statement filed with the SEC which 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 $69.7 million in 2007,
$56.0 million in 2006, and $42.9 million in 2005, 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 $75.31, 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, 2007. Through December 31, 2006, the Company match was invested in
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