SHORT-TERM BORROWINGS AND LONG-TERM DEBT

9 Months Ended

Sep. 30, 2011

SHORT-TERM BORROWINGS AND LONG-TERM DEBT

SHORT-TERM BORROWINGS AND LONG-TERM DEBT

11. SHORT-TERM BORROWINGS AND LONG-TERM DEBT

Short-Term Borrowings

There were no short-term borrowings as of September 30, 2011. Short-term borrowings were $1.2 million as of December 31, 2010, and consisted of short-term loans.

On June 17, 2011, the Company entered into a five-year revolving credit facility agreement (2011 Credit Facility). The 2011 Credit Facility replaces the Company’s three-year revolving credit facility agreement dated February 17, 2009 (2009 Credit Facility). Borrowings from the 2011 Credit Facility are to be used for working capital and other general corporate purposes. The 2011 Credit Facility is unsecured and repayable at maturity in June 2016, subject to annual extensions if a sufficient number of lenders agree. The maximum amount of outstanding borrowings and letters of credit permitted at any one time under the 2011 Credit Facility is $500.0 million, which amount may be increased from time to time up to $750.0 million at the Company’s request and with the consent of the lenders, subject to satisfaction of customary conditions. The 2011 Credit Facility contains financial covenants whereby the ratio of consolidated total debt to consolidated Earnings Before Interest, Income Taxes, Depreciation and Amortization (EBITDA) cannot exceed 3.25 to 1.0, and the ratio of consolidated EBITDA to consolidated interest expense cannot be less than 3.0 to 1.0. As of September 30, 2011, the Company was in compliance with these covenants. Borrowings under the 2011 Credit Facility bear interest at a rate that is determined as a base rate plus a margin. The base rate is either (a) LIBOR for a specified interest period, or (b) a floating rate based upon JPMorgan Chase Bank’s prime rate, the Federal Funds rate or LIBOR. The margin is determined by reference to the Company’s credit rating. The margin can range from 0.075% to 1.45% over the base rate. In addition, the Company incurs an annual 0.2% facility fee on the entire facility commitment of $500.0 million.

There were no borrowings under the 2011 Credit Facility as of September 30, 2011. The borrowings from the 2011 Credit Facility during the three and nine months ended September 30, 2011 had a weighted-average interest rate of 1.60%. There were no borrowings under the 2009 Credit Facility during the nine months ended September 30, 2011. The borrowings from the 2009 Credit Facility during the three and nine months ended September 30, 2010 had a weighted-average interest rate of 2.59% and 2.63%, respectively. There were no borrowings under the 2009 Credit Facility as of December 31, 2010.

Long-Term Debt

The components of long-term debt were as follows:

(Dollars in millions)	September 30,  2011			December 31,  2010
Principal Value:
3.50% Notes due 2014	$	500.0		$	500.0
4.90% Notes due 2019	700.0			700.0
5.90% Notes due 2039	300.0			300.0
Subtotal	1,500.0			1,500.0
Adjustments to Principal Value:
Basis adjustment for fair value of outstanding interest rate swaps	—			20.1
Unamortized basis adjustment for terminated interest rate swaps	37.7			16.5
Unamortized bond discount	(3.6		)	(4.1		)
Long-term debt	$	1,534.1		$	1,532.5

Based on the Company’s assessment of current market conditions for debt of similar maturity, structure and risk, the estimated fair value of the Company’s debt was $1,637.6 million as of September 30, 2011.

Interest expense and interest income for the three months ended September 30, 2011, were $15.6 million and $2.5 million, respectively, compared with $13.3 million and $1.3 million, respectively, for the same period in 2010. Interest expense and interest income for the nine months ended September 30, 2011, was $44.5 million and $6.1 million, respectively, compared with $39.2 million and $3.5 million, respectively, for the same period in 2010.