Cigna 2010 Annual Report Download - page 132

CIGNA CORPORATION  2010 Form 10K
112
PART II
ITEM 8 Financial Statements and Supplementary Data
In the fourth quarter of 2010, the Company entered into the
following transactions related to its long-term debt:
•On December 1, 2010 the Company off ered to settle its 8.5% Notes
due 2019, including accrued interest from November 1 through
the settlement date.  e tender price equaled the present value of
the remaining principal and interest payments on the Notes being
redeemed, discounted at a rate equal to the 10-year treasury rate plus
a fi xed spread of 100 basis points.  e tender off er priced at a yield of
4.128% and principal of $99 million was tendered, with $251 million
remaining outstanding.  e Company paid $130 million, including
accrued interest and expenses, to settle the Notes, resulting in an after-
tax loss on early debt extinguishment of $21 million.
•On December 9, 2010 the Company off ered to settle its 6.35% Notes
due 2018, including accrued interest from September 16 through
the settlement date.  e tender price equaled the present value of
the remaining principal and interest payments on the Notes being
redeemed, discounted at a rate equal to the 10-year treasury rate plus
a fi xed spread of 45 basis points.  e tender off er priced at a yield of
3.923% and principal of $169 million was tendered, with $131 million
remaining outstanding.  e Company paid $198 million, including
accrued interest and expenses, to settle the Notes, resulting in an after-
tax loss on early debt extinguishment of $18 million.
•On December 8, 2010, the Company issued $250 million of 4.375%
Notes ($249 million net of debt discount, with an eff ective interest
rate of 5.1%).  e diff erence between the stated and eff ective interest
rates primarily refl ects the eff ect of treasury locks. See Note 13 to the
Consolidated Financial Statements for further information. Interest is
payable on June 15 and December 15 of each year beginning in 2010.
 ese Notes will mature on December 15, 2020.  e proceeds of this
debt were used to fund the tender off er for the 8.5% Senior Notes due
2019 and the 6.35% Senior Notes due 2018 described above.
During 2010, the 7% Notes and 6.375% Notes due 2011 were
reclassifi ed into current maturities of long-term debt since they will
mature in less than one year.
On May 12, 2010, the Company issued $300 million of 5.125% Notes
($299 million, net of debt discount, with an eff ective interest rate of
5.36% per year). Interest is payable on June 15 and December 15 of
each year beginning December 15, 2010.  ese Notes will mature
on June 15, 2020.  e proceeds of this debt were used for general
corporate purposes.
On May 4, 2009 the Company issued $350 million of 8.5% Notes
($349 million, net of debt discount, with an eff ective interest rate of
9.90% per year).  e diff erence between the stated and eff ective interest
rates primarily refl ects the eff ect of treasury locks. See Note 13 for
further information. Interest is payable on May 1 and November 1
of each year beginning November 1, 2009.  ese Notes will mature
on May 1, 2019. As described above, a portion of these Notes were
settled in 2010 through a tender off er.
 e Company may redeem the Notes issued in 2010 and 2009 at any
time, in whole or in part, at a redemption price equal to the greater of:
•100% of the principal amount of the Notes to be redeemed; or
•the present value of the remaining principal and interest payments on
the Notes being redeemed discounted at the applicable Treasury Rate
plus 25 basis points for the 4.375% and 5.125% Notes due 2020 and
50 basis points for the 8.5% Notes due 2019.
Maturities of debt and capital leases are as follows (in millions): $452
in 2011, $3 in 2012 and 2013, $23 in 2014 and the remainder in
years after 2014. Interest expense on long-term debt, short-term debt
and capital leases was $182 million in 2010, $166 million in 2009, and
$146 million in 2008.
On March 14, 2008, the Company entered into a commercial paper
program (“the Program”). Under the Program, the Company is
authorized to sell from time to time short-term unsecured commercial
paper notes up to a maximum of $500 million.  e proceeds are used
for general corporate purposes, including working capital, capital
expenditures, acquisitions and share repurchases.  e Company uses the
credit facility entered into in June 2007, as back-up liquidity to support
the outstanding commercial paper. If at any time funds are not available
on favorable terms under the Program, the Company may use its credit
facility for funding. In October 2008, the Company added an additional
dealer to its Program. As of December 31, 2010, the Company had
$100 million in commercial paper outstanding, at a weighted average
interest rate of 0.38%.
In June 2007, the Company amended and restated its fi ve-year revolving
credit and letter of credit agreement for $1.75 billion, which permits up
to $1.25 billion to be used for letters of credit.  e agreement includes
options, which are subject to consent by the administrative agent and
the committing bank, to increase the commitment amount up to
$2.0 billion and to extend the term of the agreement.  e Company
entered into the agreement for general corporate purposes, including the
support for the issuance of commercial paper and to obtain statutory
reserve credit for certain reinsurance arrangements.  ere were letters of
credit issued in the amount of $82 million as of December 31, 2010. As
of December 31, 2010, the Company had an additional $1.7 billion of
borrowing capacity within the maximum debt leverage covenant in the
line of credit agreement in addition to the $2.8 billion of short-term and
long-term debt outstanding.
NOTE 17 Common and Preferred Stock
As of December 31, the Company had issued the following shares:
(Shares in thousands) 2010 2009
Common: Par value $0.25
600,000 shares authorized
Outstanding — January 1 274,257 271,036
Issued for stock option and other benefi t plans 3,805 3,221
Repurchase of common stock (6,182) —
Outstanding — December 31 271,880 274,257
Treasury stock 79,066 76,689
ISSUED DECEMBER31 350,946 350,946