Humana 2009 Annual Report Download - page 102

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Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The IRS commenced an examination of our U.S. income tax returns for 2007 and 2008 during 2009.
Beginning with the 2009 tax year, we entered into the Compliance Assurance Process (CAP) with the IRS. Under
CAP, the IRS does advance reviews during the tax year and as the return is being prepared for filing, thereby
eliminating the need for post-filing examinations. We expect the IRS will conclude its audits of the 2007, 2008,
and 2009 tax years in 2010. As of December 31, 2009, we are not aware of any material adjustments the IRS may
propose.
The liability for unrecognized tax benefits was $16.8 million and $16.0 million at December 31, 2008 and
2007, respectively. The only change to the liability during the twelve months ended December 31, 2008 was
accrued interest. This liability, which was released in 2009 as a result of settlements associated with the
completion of the audit of our U.S. income tax returns for 2005 and 2006, reduced tax expense $16.8 million in
2009. As of December 31, 2009, we do not have material uncertain tax positions reflected in our consolidated
balance sheet.
11. DEBT
The carrying value of long-term debt outstanding was as follows at December 31, 2009 and 2008:
December 31,
2009
December 31,
2008
(in thousands)
Long-term debt:
Senior notes:
$500 million, 6.45% due June 1, 2016 ................ $ 540,907 $ 546,206
$500 million, 7.20% due June 15, 2018 ............... 508,799 509,540
$300 million, 6.30% due August 1, 2018 ............. 323,862 325,984
$250 million, 8.15% due June 15, 2038 ............... 267,070 267,234
Total senior notes ............................ 1,640,638 1,648,964
Credit agreement ................................ — 250,000
Other long-term borrowings ....................... 37,528 38,068
Total long-term debt ......................... $1,678,166 $1,937,032
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 $92.9 million as of December 31, 2009 and $100.7 million as of
December 31, 2008.
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