Humana 2010 Annual Report Download - page 68

In June 2008, we issued $500 million of 7.20% senior notes due June 15, 2018 and $250 million of 8.15%
senior notes due June 15, 2038. Our net proceeds, reduced for the original issue discount and cost of the offering,
were $742.6 million. We used the net proceeds from the offering for the repayment of the outstanding balance
under our then existing credit agreement.
In exchange for terminating interest-rate swap agreements in 2008, we received cash of $93.0 million.
The remainder of the cash used in or provided by financing activities in 2010, 2009, and 2008 primarily
resulted from the change in the securities lending payable. The decrease in securities lending since 2008 resulted
from lower margins earned under the program.
Future Sources and Uses of Liquidity
Stock Repurchase Authorization
In December 2009, the Board of Directors authorized the repurchase of up to $250 million of our common
shares exclusive of shares repurchased in connection with employee stock plans. Under this share repurchase
authorization, shares may be purchased from time to time at prevailing prices in the open market, by block
purchases, or in privately-negotiated transactions, subject to certain regulatory restrictions on volume, pricing,
and timing. During 2010, we repurchased 1.99 million shares in open market transactions for $100.0 million at an
average price of $50.17. As of February 4, 2011, the remaining authorized amount totaled $150.0 million and the
authorization expires on December 31, 2011.
Senior Notes
During 2008, we issued $500 million of 7.20% senior notes due June 15, 2018 and $250 million of 8.15%
senior notes due June 15, 2038. 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 also previously issued $300
million of 6.30% senior notes due August 1, 2018 and $500 million of 6.45% senior notes due June 1, 2016. All
four series of 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. Concurrent with the senior notes
issuances, we entered into interest-rate swap agreements to exchange the fixed interest rate under these senior
notes for a variable interest rate based on LIBOR. During 2008, we terminated all of our swap agreements. We
may re-enter into interest-rate swap agreements in the future depending on market conditions and other factors.
Our senior notes and related swap agreements are more fully discussed in Notes 11 and 12 to the consolidated
financial statements included in Item 8.—Financial Statements and Supplementary Data.
Credit Agreement
In December 2010, we replaced our 5-year $1.0 billion unsecured revolving credit agreement which was set
to expire in July 2011 with a 3-year $1.0 billion unsecured revolving agreement expiring December 2013. Under
the new credit agreement, at our option, we can borrow on either a competitive advance basis or a revolving
credit basis. The revolving credit portion bears interest at either LIBOR or the base rate plus a spread. The
spread, currently 200 basis points, varies depending on our credit ratings ranging from 150 to 262.5 basis points.
We also pay an annual facility fee regardless of utilization. This facility fee, currently 37.5 basis points, may
fluctuate between 25 and 62.5 basis points, depending upon our credit ratings. 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 based on LIBOR, at our option.
The terms of the new credit agreement include standard provisions related to conditions of borrowing,
including a customary material adverse event clause which could limit our ability to borrow additional funds. In
58