Humana 2008 Annual Report Download - page 97

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Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
We adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes,on
January 1, 2007. We recognize interest accrued related to unrecognized tax benefits and penalties in tax expense.
The liability for unrecognized tax benefits was $16.8 million and $16.0 million at December 31, 2008 and 2007,
respectively all of which would affect the effective tax rate if recognized. The only change to the liability during
the twelve months ended December 31, 2008, was accrued interest. The Company believes it is reasonably
possible that its liability for unrecognized tax benefits will decrease in the next twelve months by approximately
$16.8 million as a result of audit settlements.
11. DEBT
The carrying value of long-term debt outstanding was as follows at December 31, 2008 and 2007:
December 31,
2008
December 31,
2007
(in thousands)
Long-term debt:
Senior notes:
$500 million, 6.45% due June 1, 2016 ................ $ 546,206 $ 533,083
$500 million, 7.20% due June 15, 2018 ............... 509,540 —
$300 million, 6.30% due August 1, 2018 ............. 325,984 316,132
$250 million, 8.15% due June 15, 2038 ............... 267,234 —
Total senior notes ............................ 1,648,964 849,215
Credit agreement ................................ 250,000 800,000
Other long-term borrowings ....................... 38,068 38,608
Total long-term debt ......................... $1,937,032 $1,687,823
Senior Notes
Our senior notes, which are unsecured, may be redeemed at our option at any time at 100% of the principal
amount plus accrued interest and a specified make-whole amount. The 7.20% and 8.15% senior notes are subject
to an interest rate adjustment if the debt ratings assigned to the notes are downgraded (or subsequently upgraded)
and contain a change of control provision that may require us to purchase the notes under certain circumstances.
We had been parties to interest-rate swap agreements to exchange the fixed interest rate under our senior
notes for a variable interest rate based on LIBOR. As a result, the carrying value of the senior notes had been
adjusted to reflect changes in value caused by an increase or decrease in interest rates. During 2008, we
terminated all of our swap agreements. The cumulative adjustment to the carrying value of our senior notes was
$103.4 million as of the termination date which is being amortized as a reduction to interest expense over the
remaining term of the senior notes, resulting in a weighted-average effective interest rate fixed at 6.08%. The
unamortized carrying value adjustment was $100.7 million as of December 31, 2008.
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, currently 35 basis points, varies depending on our credit ratings ranging 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
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