Interest Expense

In 2010, interest expense was $156 million, an increase of $76 million, or 95%, compared to 2009. Net losses for the three years ended September 30, 2010 have resulted in higher debt levels. Although long-term debt carries higher interest rates than prevailing rates for short-term debt, long-term obligations were issued in 2009 at historically favorable rates and represent a prudent restructuring of our debt portfolio. Financing a portion of debt at fixed rates decreases interest rate risk and interest expense volatility in future years. At September 30, 2010, $4.5 billion of these long-term obligations remain outstanding. A combination of higher debt levels and higher rates, due to the addition of long-term debt in 2009, led to higher interest expense in 2010 versus prior years. In 2009 and 2008, with less debt outstanding throughout the year, interest expense totaled $80 million and $36 million, respectively.