NOTE 10: Debt

Long-term debt at the end of fiscal 2013 and 2012 consisted of the following:


In Thousands	2013		2012

U.S. credit facility	$	130,000	$	240,000
Euro Term Loan, due July 2016		24,847		80,240
U.S. Term Loan, due July 2016		170,625		0
6.625% Senior Notes, due March 2017		0		175,000
7.00% Senior Notes, due August 2020		250,000		250,000
Government refundable advances		56,897		51,763
Obligations under capital leases		56,229		44,847
Other		540		6,820

		689,138		848,670

Less current maturities		21,279		10,610

Carrying amount of long-term debt	$	667,859	$	838,060

Long-term debt

In March 2011, the Company entered into a secured credit facility for $460 million made available through a group of banks. The credit facility is secured by substantially all of the Company’s assets and interest is based on standard inter-bank offering rates. The credit facility expires in July 2016. The interest rate will range from LIBOR plus 1.5% to LIBOR plus 2.25% depending on the leverage ratios at the time the funds are drawn. At October 25, 2013, the Company had $130.0 million outstanding under the secured credit facility at an interest rate of LIBOR plus 1.75%, which is currently 1.93%. An additional $66.2 million of unsecured foreign currency credit facilities have been extended by foreign banks for a total of $526.2 million available companywide. Available credit under the above credit facilities was $363.5 million at fiscal 2013 year end, when reduced by outstanding borrowings of $130.0 million and letters of credit of $32.7 million.

In July 2011, the Company amended the secured credit facility to provide for a €125.0 million term loan (Euro Term Loan). The interest rate on the Euro Term Loan will range from euro LIBOR plus 1.5% to Euro LIBOR plus 2.25%, depending on the leverage ratios at the time the funds are drawn. At October 25, 2013, the Company had €18.0 million outstanding or $24.8 million under the Euro Term Loan at an interest rate of euro LIBOR plus 1.75%, which is currently 1.84%. The loan amortizes at 1.25% of the original principal balance quarterly through March 2016, with the remaining balance due in July 2016.

In April 2013, the Company amended the secured credit facility to provide for $175.0 million term loan (U.S. Term Loan). The interest rate on the U.S. Term Loan ranges from LIBOR plus 1.5% to LIBOR plus 2.25%, depending on the leverage ratios at the time the funds are drawn. At October 25, 2013, the Company had $170.6 million outstanding under the U.S. Term Loan at an interest rate of LIBOR plus 1.75%, which is currently 1.93%. The loan amortizes at 1.25% of the original principal balance quarterly through March 2016, with the remaining balance due in July 2016.

In March 2007, the Company issued $175.0 million in 6.625% Senior Notes due March 2017 (2017 Notes), and requiring semi-annual interest payments in March and September of each year until maturity. The 2017 Notes are general unsecured senior obligations of the Company. The 2017 Notes are guaranteed, jointly and severally on a senior basis, by all the existing and future domestic subsidiaries of the Company unless designated as an “unrestricted subsidiary,” and those foreign subsidiaries that executed related subsidiary guarantees under the indenture covering the 2017 Notes. The 2017 Notes were also subject to redemption at the option of the Company, in whole or in part, on or after March 1, 2012, at redemption prices starting at 103.3125% of the principal amount plus accrued interest during the period beginning March 1, 2007, and declining annually to 100% of principal and accrued interest on or after March 1, 2015.

In November 2010, the Company entered into an interest rate swap agreement for $100.0 million on the 2017 Notes. The swap agreement exchanged the fixed interest rate of 6.625% for a variable interest rate, LIBOR plus 4.865%. The fair value of the Company’s interest rate swap was a $1.9 million asset at October 26, 2012.

In December 2010, the Company entered into an interest rate swap agreement for $75.0 million on the 2017 Notes. The swap agreement exchanged the fixed interest rate of 6.625% for a variable interest rate, LIBOR plus 4.47%. The fair value of the Company’s interest rate swap was a $2.2 million asset at October 26, 2012.

In April 2013, the Company redeemed the $175.0 million 2017 Notes. In connection with the redemption, the Company wrote off $1.3 million in unamortized debt issuance costs as a charge against interest expense. In addition, the Company incurred a $3.9 million redemption premium and received proceeds of $2.9 million from the termination of its $175.0 million interest rate swap agreements. As a result, the redemption of the 2017 Notes resulted in a net loss of $0.9 million on extinguishment of debt.

In August 2010, the Company issued $250.0 million in 7% Senior Notes due August 2020 (2020 Notes) and requiring semi-annual interest payments in March and September of each year until maturity. The net proceeds from the sale of the notes, after deducting $4.4 million of debt issuance cost, were $245.6 million. The 2020 Notes are general unsecured senior obligations of the Company. The 2020 Notes are guaranteed, jointly and severally on a senior basis, by all the existing and future domestic subsidiaries of the Company unless designated as an “unrestricted subsidiary,” and those foreign subsidiaries that executed related subsidiary guarantees under the indenture covering the 2020 Notes. The 2020 Notes are subject to redemption at the option of the Company at any time prior to August 1, 2015, at a price equal to 100% of the principal amount, plus any accrued interest to the date of redemption and a make-whole provision. The 2020 Notes are also subject to redemption at the option of the Company, in whole or in part, on or after August 1, 2015, at redemption prices starting at 103.500% of the principal amount plus accrued interest during the period beginning August 1, 2015, and declining annually to 100% of principal and accrued interest on or after August 1, 2018.

Based on quoted market prices, the fair value of the Company’s $250.0 million 2020 Notes was $272.5 million and $277.5 million as of October 25, 2013, and October 26, 2012, respectively. The fair value of the Company’s $175.0 million 2017 Notes was $181.3 million as of October 26, 2012. The carrying amounts of the secured credit facility, the Euro Term Loan due 2016, and the U.S. Term Loan due 2016 approximate fair value. Estimates of fair value for the 2020 Notes and 2017 Notes were based on Level 2 inputs as defined in the fair value hierarchy.

Government refundable advances consist of payments received from the Canadian government to assist in research and development related to commercial aviation. The repayment of this advance is based on year-over-year commercial aviation revenue growth at CMC beginning in 2014. Imputed interest on the advance was 4.61% at October 25, 2013. The discounted value of debt recognized was $56.9 million and $51.8 million as of October 25, 2013, and October 26, 2012, respectively.

Capital leases

In fiscal 2008, the Company entered into a land and building lease for a 216,000 square-foot manufacturing facility for an Avionics & Controls segment facility. The land and building lease has a fixed term of 30 years and includes an option to purchase the building at fair market value five years after construction is complete. The expected minimum lease payments include a 2% minimum annual rent increase. At October 25, 2013, the amount recorded as a capitalized lease obligation is $32.3 million. The imputed interest rate is 9.0%.

In fiscal 2009, the Company amended the building lease for an Avionics & Controls facility to extend the term of the lease to 2027. At October 25, 2013, the amount recorded as a capitalized lease obligation is $11.8 million. The imputed interest rate is 6.4%.

In fiscal 2013, the Company amended the building lease for an Avionics & Controls facility to extend the term of the lease to 2022. At October 25, 2013, the amount recorded as a capitalized lease obligation is $11.7 million. The imputed interest rate is 4.5%.

As of October 25, 2013, aggregate annual maturities of long-term debt and future non-cancelable minimum lease payments under capital lease obligations were as follows:

In Thousands


Fiscal Year

2014	$	25,143
2015		23,402
2016		296,026
2017		5,182
2018		5,182
2019 and thereafter		406,936

Total	$	761,871


Less: amount representing interest on capital leases		72,733

Total long-term debt	$	689,138

A number of underlying agreements contain various covenant restrictions which include maintenance of net worth, payment of dividends, interest coverage, and limitations on additional borrowings. The Company was in compliance with these covenants at October 25, 2013.