Aflac 2006 Annual Report Download - page 67

63
7. NOTES PAYABLE
A summary of notes payable as of December 31 follows:
(In millions) 2006 2005
Yen-denominated Uridashi notes:
1.52% notes due September 2011 (principal amount ¥15 billion) $ 126 $–
2.26% notes due September 2016 (principal amount ¥10 billion) 84 –
Variable interest rate notes due September 2011 (.71% at December 2006,
principal amount ¥20 billion) 168 –
Yen-denominated Samurai notes:
.87% notes paid June 2006 (principal amount ¥40 billion) –339
.96% notes due June 2007 (principal amount ¥30 billion) 252 254
.71% notes due July 2010 (principal amount ¥40 billion) 336 339
6.50% senior notes due April 2009 450 450
Capitalized lease obligations payable through 2012 10 13
Total notes payable $ 1,426 $ 1,395
In August 2006, the Parent Company filed a Shelf Registration
Statement (SRS) with Japanese regulatory authorities to issue
up to ¥100 billion of yen-denominated Uridashi notes in
Japan. In September 2006, the Parent Company issued three
tranches of Uridashi notes totaling ¥45 billion. The first
tranche totaled ¥15 billion and has a five-year maturity. The
second tranche totaled ¥10 billion and has a 10-year maturity.
The third tranche totaled ¥20 billion and has a five-year
maturity and a variable interest coupon of six-month yen
LIBOR plus a spread. We have entered into interest rate swaps
related to the ¥20 billion variable interest rate notes (see
Note 4). Each tranche of Uridashi notes pays interest
semiannually, may only be redeemed prior to maturity upon
the occurrence of a tax event as specified in the respective
bond agreement and is not available to U.S. persons. If issued,
the ¥55 billion of Uridashi notes remaining under the August
2006 SRS will not be available to U.S. persons.
In 2001, 2002, and 2005, the Parent Company issued yen-
denominated Samurai notes, each with five-year maturities.
Each series of Samurai notes pays interest semiannually, may
only be redeemed prior to maturity upon the occurrence of a
tax event as specified in the respective bond agreement and is
not available to U.S. persons. In June 2006, we paid in full the
.87% Samurai notes issued in 2001.
For our yen-denominated loans, the principal amount as stated
in dollar terms will fluctuate from period to period due to
changes in the yen/dollar exchange rate. We have designated
all of our yen-denominated notes payable as a hedge of the
foreign currency exposure of our investment in Aflac Japan.
We have also designated the interest rate swaps on our variable
interest rate Uridashi notes as a hedge of the variability in our
interest cash flows associated with these notes.
The SRS we filed with Japanese regulatory authorities in 2003
expired in December 2005. As a result, the Parent Company
filed a new SRS with Japanese regulatory authorities in
February 2006 to issue up to ¥100 billion of yen-denominated
Samurai notes in Japan. If issued, these securities will not be
available to U.S. persons.
In 1999, we issued $450 million of senior notes. These notes
pay interest semiannually and are redeemable at our option at
any time with a redemption price equal to the principal
amount of the notes redeemed plus a make-whole premium.
We have entered into cross-currency swaps related to these
notes (see Note 4).
The aggregate contractual maturities of notes payable during
each of the years after December 31, 2006, are as follows:
Capitalized Total
Long-term Lease Notes
(In millions) Debt Obligations Payable
2007 $ 252 $ 4 $ 256
2008 – 3 3
2009 450 2 452
2010 336 1 337
2011 294 – 294
Thereafter 84 – 84
Total $ 1,416 $ 10 $ 1,426
We were in compliance with all of the covenants of our notes
payable at December 31, 2006. No events of default or
defaults occurred during 2006 and 2005.
8. INCOME TAXES
The components of income tax expense (benefit) applicable
to pretax earnings for the years ended December 31 were as
follows:
(In millions) Japan U.S. Total
2006:
Current $ 398 $ 21 $ 419
Deferred 229 133 362
Total income tax expense $ 627 $ 154 $ 781
2005:
Current $ 485 $ 14 $ 499
Deferred 159 119 278
Release of valuation allowance on
deferred tax assets – (34) (34)
Total income tax expense $ 644 $ 99 $ 743
2004:
Current $ 357 $ 34 $ 391
Deferred 148 96 244
Release of valuation allowance on
deferred tax assets – (128) (128)
Total income tax expense $ 505 $ 2 $ 507