Financing Arrangements

12 Months Ended

May 31, 2014

Financing Arrangements

Financing Arrangements

2. Financing Arrangements

Debt Outstanding

        A summary of the carrying amount of our debt is as follows:

	May 31,
	2014			2013
Revolving credit facility expiring April 24, 2018 with interest payable monthly	$	130.0		$	120.0
Secured credit facility (secured by aircraft and related engines and components) due April 23, 2015 with floating interest rate, payable monthly		29.9			39.2
Note payable due March 9, 2017 with floating interest rate, payable semi-annually on June 1 and December 1		30.0			40.0
Notes payable due January 15, 2022 with interest at 7.25% payable semi-annually on January 15 and July 15		332.6			333.4
Convertible notes payable due March 1, 2014 with interest at 1.625% payable semi-annually on March 1 and September 1		—			65.9
Convertible notes payable due March 1, 2016 with interest at 2.25% payable semi-annually on March 1 and September 1		45.7			43.5
Other1		65.8			66.6
Total debt		634.0			708.6
Current maturities of debt		(69.7	)		(86.4	)
Long-term debt	$	564.3		$	622.2

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Included in Other is a mortgage loan (secured by Wood Dale, Illinois facility) due August 1, 2015 of $11.0 million and $11.0 million, 1.75% convertible notes due February 1, 2015 of $29.8 million and $29.4 million, and an industrial revenue bond (secured by property, plant and equipment) due August 1, 2018 of $25.0 million and $25.0 million at May 31, 2014 and 2013, respectively.

        The aggregate principal amount of debt maturing during each of the next five fiscal years is $69.9 million in 2015, $70.8 million in 2016, $10.0 million in 2017, $130.0 million in 2018, and $25.0 million in 2019.

        At May 31, 2014, the carrying value of our 7.25% bonds, 1.75% convertible notes and 2.25% convertible notes was $408.1 million and the estimated fair value was approximately $434.8 million. These debt issuances are classified as Level 2 in the fair value hierarchy. This classification is defined as a fair value determined using market-based inputs other than quoted prices that are observable for the liability, either directly or indirectly.

        At May 31, 2014, the remaining variable rate and fixed rate debt had a fair value that approximates the carrying value of $225.9 million. These debt instruments are classified as Level 3 in the fair value hierarchy which is defined as a fair value determined based upon one or more significant unobservable inputs.

Credit Facilities

        On April 24, 2013, we amended our agreement with various financial institutions, as lenders, and Bank of America, N.A., as administrative agent for the lenders (as amended, the "Credit Agreement"), reducing the aggregate revolving credit commitment under the Credit Agreement from $580.0 million to $475.0 million, and extending the maturity by approximately two years to April 24, 2018. Borrowings under the Credit Agreement bear interest at the offered Eurodollar Rate (defined as the British Bankers Association LIBOR Rate) plus 125 to 225 basis points based on certain financial measurements if a Eurodollar Rate loan, or at the offered fluctuating Base Rate plus 25 to 125 basis points based on certain financial measurements if a Base Rate loan. Borrowings outstanding under this facility at May 31, 2014 were $130.0 million and there were approximately $14.8 million of outstanding letters of credit, which reduced the availability of this facility to $330.2 million. There are no other terms or covenants limiting the availability of this facility. We also have $5.4 million available under a foreign line of credit.

        Borrowing activity under the Credit Agreement during fiscal 2014, 2013 and 2012 is as follows:

	For the Year Ended May 31,
	2014			2013			2012
Maximum amount borrowed	$	190.0		$	395.0		$	525.0
Average daily borrowings		135.8			312.3			288.3
Average interest rate during the year		1.77	%		2.03	%		1.90	%

        On March 28, 2013, we amended our secured credit facility with The Huntington National Bank (the "Huntington Loan Agreement"). The amendment to the Huntington Loan Agreement reduced our secured facility from $65.0 million to $40.0 million while also reducing the interest rate from 325 basis points to 175 basis points over LIBOR. Borrowings under the Huntington Loan Agreement are secured by aircraft and related engines and components owned by us. The Huntington Loan Agreement expires on April 23, 2015. As of May 31, 2014 and 2013, $29.9 million and $39.2 million, respectively, were outstanding under this agreement.

        The Credit Agreement requires us to comply with certain financial covenants, including a fixed charge coverage ratio and a leverage ratio. The Credit Agreement contains certain affirmative and negative covenants, including those relating to financial reporting and notification, payment of indebtedness, taxes and other obligations, compliance with applicable laws, and limitations on additional liens, indebtedness, acquisitions, investments and disposition of assets. The Credit Agreement also requires our significant domestic subsidiaries, and any subsidiaries that guarantee our other indebtedness, to provide a guarantee of payment under the Credit Agreement.

        The Huntington Loan Agreement requires us to comply with certain financial covenants which are consistent with our Credit Agreement and it is not guaranteed by our subsidiaries. The Huntington Loan Agreement also contains certain affirmative and negative covenants, including those relating to financial reporting and notification, payment of indebtedness, taxes and other obligations, compliance with applicable laws, and limitations on additional liens, indebtedness, acquisitions, investments and disposition of assets.

        At May 31, 2014, we were in compliance with the financial and other covenants in these agreements.

Debt Issuances

        On April 15, 2013, we completed an add-on offering of $150.0 million aggregate principal amount of our 7.25% Senior Notes due 2022 (the "Notes"). The Notes were sold at a price equal to 107.5% of the principal amount thereof, for a yield to maturity of 6.128%. The net proceeds of the offering of the Notes after expenses were $157.6 million, and were used to repay a portion of the borrowings under our unsecured revolving credit agreement.

        The Notes were issued under the indenture dated January 23, 2012, as supplemented as of November 30, 2012 (the "Indenture"), pursuant to which we issued $175.0 million aggregate principal amount of our 7.25% Senior Notes due 2022 (the "Original Notes" and collectively with the Notes, the "Senior Notes"). The Senior Notes were originally sold in private placements to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended (the "Securities Act") and were subsequently exchanged for substantially identical notes that were registered under the Securities Act. The Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by substantially all of our existing domestic and foreign subsidiaries. The Senior Notes are treated as a single series and will vote as one class under the Indenture.

        On February 14, 2013, we completed an exchange agreement with an institutional holder to exchange $22.7 million aggregate principal amount of our 1.75% Convertible Senior Notes, plus cash in the amount of $7.3 million for a new $30.0 million convertible note (the "New Note"). The New Note was issued in a private placement, is subject to customary resale restrictions, and has no registration rights. The New Note matures on February 1, 2015 unless redeemed earlier by us with 30 days' notice to the holder at a call price reflecting a yield to maturity of 3.75% from inception. We may redeem the New Note at any time with a call price at maturity of 104.038%. Upon conversion, the holder of the New Note shall be entitled to receive only cash and not shares of common stock. The New Note bears interest at a coupon rate of 1.75% per year, payable semi-annually on February 1 and August 1.

Debt Retirements

        We did not retire any convertible notes during fiscal 2014 except for the remaining 1.625% convertible notes which reached maturity on March 1, 2014. During fiscal 2013 and 2012, we retired a portion of the following convertible notes before their maturity date:

	Principal Amount				Cash Paid				Loss on Repurchase
	2013		2012		2013		2012		2013		2012
1.625% convertible notes due March 1, 2014	$	6.4	$	9.4	$	6.1	$	8.9	$	0.1	$	0.2
2.25% convertible notes due March 1, 2016		5.5		9.1		4.9		8.1		0.2		0.3
1.75% convertible notes due February 1, 2026		11.0		20.6		11.0		20.3		—		0.2
	$	22.9	$	39.1	$	22.0	$	37.3	$	0.3	$	0.7

        The loss on repurchase, after consideration for unamortized discount and debt issuance costs, is recorded in Loss on extinguishment of debt on the Consolidated Statements of Income.

        In addition to the aforementioned debt retirements, during fiscal 2013, pursuant to the terms of the applicable indenture, certain holders of our 1.75% Convertible Senior Notes due 2026 (the "Securities") exercised the right to surrender their Securities for purchase by us (the "Put Option"). The Put Option entitled each holder of the Securities to surrender to us for purchase all or any part of such holder's Securities at a purchase price equal to 100% of the principal amount, plus accrued interest. The aggregate purchase price including principal, accrued and unpaid interest for the Securities surrendered for purchase pursuant to the Put Option was $66.2 million. The purchases were funded primarily by cash on hand and free cash flow during the third quarter of fiscal 2013. There was no gain or loss on the repurchase of these notes.

Convertible Notes

        As of May 31, 2014 and 2013, the short-term and long-term debt and equity component (recorded in capital surplus, net of income tax benefit) consisted of the following:

	May 31,
	2014			2013
Long-term debt:
Principal amount	$	79.8		$	148.3
Unamortized discount		(4.4	)		(9.5	)
Net carrying amount	$	75.4		$	138.8
Equity component, net of tax	$	75.3		$	75.3

        The discount on the liability component of long-term debt is being amortized using the effective interest method based on an effective rate. For fiscal years 2014 and 2013, the effective interest rate for our convertible debt was as follows:

	May 31,
	2014			2013
1.75% convertible notes due February 1, 2015		5.00	%		5.00	%
2.25% convertible notes due March 1, 2016		7.41	%		7.41	%

        As of May 31, 2014 and 2013, for each of our convertible note issuances, the "if converted" value does not exceed its principal amount.

        The interest expense associated with the convertible notes was as follows:

	For the Year Ended May 31,
	2014		2013		2012
Coupon interest	$	3.1	$	3.7	$	4.9
Amortization of deferred financing fees		0.3		0.5		0.7
Amortization of discount		5.1		9.3		13.1
Interest expense related to convertible notes	$	8.5	$	13.5	$	18.7

        We are subject to a number of covenants under our financing arrangements, including restrictions that relate to the payment of cash dividends, maintenance of minimum net working capital and tangible net worth levels, fixed charge coverage ratio, sales of assets, additional financing, purchase of our shares and other matters. We are in compliance with all financial and other covenants under our financing arrangements.