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Subordinated Convertible Debentures
12 Months Ended
Dec. 31, 2011
Subordinated Convertible Debentures Disclosure [Abstract]  
Subordinated Convertible Debentures
Subordinated Convertible Debentures
The subordinated convertible debentures included in our consolidated balance sheets reflect the obligation to the Trust. This subsidiary is not consolidated in our financial statements because we are not the primary beneficiary of the Trust.
In August 1998, the Trust issued and sold $300 of QUIPS in a private offering. The Trust used the proceeds from the offering to purchase the Debentures, which resulted in Holdings receiving all of the net proceeds of the offering. The QUIPS are non-voting securities, carry a liquidation value of $50 (fifty dollars) per security and are convertible into Holdings’ common stock. The initial convertible rate was 1.146 shares of common stock per preferred security (equivalent to an initial conversion price of $43.63 per share). In July 2008, following the completion of a modified “Dutch auction” tender offer, the conversion price of the QUIPS was adjusted to $41.02 and, accordingly, each $50 (fifty dollars) in liquidation preference is now convertible into 1.219 shares of common stock. During the years ended December 31, 2011 and 2009, we purchased an aggregate of $69 and $22, respectively, of QUIPS for $68 and $9, respectively. In connection with these transactions, in 2011 and 2009, we retired $69 and $22, respectively, principal amount of our subordinated convertible debentures and recognized a loss of $2 and a gain of $13, respectively, inclusive of the write-off of capitalized debt issuance costs. These losses/gains are reflected in interest expense-subordinated convertible debentures, net, in our consolidated statements of income. As of December 31, 2011 and 2010, the aggregate amount of Debentures outstanding was $55 and $124, respectively.
Holders of the QUIPS are entitled to preferential cumulative cash distributions from the Trust at an annual rate of 6 1/2 percent of the liquidation value, accruing from the original issue date and payable quarterly in arrears beginning February 1, 1999. The distribution rate and dates correspond to the interest rate and payment dates on the Debentures. Holdings may defer quarterly interest payments on the Debentures for up to twenty consecutive quarters, but not beyond the maturity date of the Debentures. If Holdings’ quarterly interest payments on the Debentures are deferred, so are the corresponding cash distribution payments on the QUIPS. During any period in which Holdings is deferring its quarterly interest payments, Holdings will be prohibited from paying dividends on any of its capital stock or making principal, interest or other payments on debt securities that rank pari passu with or junior to the Debentures.
Holdings has executed a guarantee with regard to payment of the QUIPS to the extent that the Trust has insufficient funds to make the required payments.