Unum 2007 Annual Report Download - page 29

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Unum 2007 Annual Report 27
Financing
The scheduled remarketing of the senior note element of our 2003 units occurred in February 2006, as stipulated by the terms of the original
offering, and we reset the interest rate on $575.0 million of senior notes due May 15, 2008 to 5.997%. We purchased $400.0 million of
the senior notes in the remarketing which were subsequently retired. In May 2006, we settled the purchase contract element of the units
by issuing 43.3 million shares of common stock. We received proceeds of approximately $575.0 million from the transaction.
In the second quarter of 2006, we purchased and retired $50.0 million aggregate liquidation amount of our outstanding 7.405%
junior subordinated debt securities due 2038 and $250.0 million aggregate principal amount of our outstanding 7.625% notes due 2011.
In the fourth quarter of 2006, we purchased $32.0 million aggregate principal amount of our outstanding 6.850% notes due 2015.
The cost related to the early retirement of debt decreased our 2006 annual income approximately $25.8 million before tax, or
$16.9 million after tax.
In November 2006, Tailwind Holdings, a Delaware limited liability company and a wholly-owned subsidiary of Unum Group, issued
$130.0 million of floating rate, insured, senior, secured notes in a private offering. The payment of principal, interest, and other amounts
due on the notes will be dependent principally on the receipt of dividends from Tailwind Reinsurance Company (Tailwind Re), the sole
subsidiary of Tailwind Holdings. The ability of Tailwind Re to pay dividends to Tailwind Holdings will depend on its satisfaction of applicable
regulatory requirements and on the performance of the reinsured claims of Unum America reinsured by Tailwind Re. None of Unum Group,
Unum America, Tailwind Re, or any other affiliate of Tailwind Holdings is an obligor or guarantor on the notes. See “Liquidity and Capital
Resources” contained herein and Notes 9 and 16 of the “Notes to Consolidated Financial Statements” for additional information on
Tailwind Holdings and Tailwind Re.
Income Tax
Included in 2006 operating results is income of $2.6 million before tax and approximately $3.9 million after tax attributable to the receipt
of interest and tax refunds on prior year tax items in excess of what was previously provided.
Additionally, in 2006 we recognized an income tax benefit of approximately $91.9 million as the result of the reversal of tax liabilities
related primarily to group relief benefits recognized from the use of net operating losses in a foreign jurisdiction in which our businesses
operate.
Accounting Pronouncements
Effective January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123 (revised 2004) (SFAS 123(R)), Share-Based
Payment, which is a revision to Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting for Stock-Based Compensation.
SFAS 123(R) focuses primarily on accounting for transactions in which an entity obtains employee service in exchange for share-based
payments. Under SFAS 123(R), share-based awards that do not require future service (i.e., vesting awards) are expensed immediately.
Share-based employee awards that require future service are amortized over the relevant service period. We adopted SFAS 123(R) using
the modified prospective transition method. Under this method, the provisions are generally applied only to share-based awards granted
after adoption. The adoption of SFAS 123(R) did not have a material effect on our financial position or results of operations. Additional
information concerning the adoption of SFAS 123(R) can be found in Notes 1 and 12 of the “Notes to Consolidated Financial Statements.”
Effective January 1, 2006, we adopted the provisions of Financial Accounting Standards Board (FASB) Staff Position No. FAS 115-1
(FSP 115-1), The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, which addresses the determination
of when an investment is considered impaired, whether the impairment is other than temporary, and the measurement of an impairment
loss. FSP 115-1 also includes accounting considerations subsequent to the recognition of other-than-temporary impairment and requires
certain disclosures about unrealized losses. The adoption of FSP 115-1 did not have a material effect on our financial position or results
of operations.