Long-Term Debt

9 Months Ended

Jan. 01, 2012

Long-Term Debt

Long-Term Debt

11.Long-Term Debt

Long-term debt, including the current portion, consisted of the following:

	January 1, 2012		March 31, 2011
Senior Credit Facility dated October 7, 2010 (1):
Term A Loan due 2015	$	375,000	$	390,000
Revolving Credit Facility due 2015	—		—
2.75% Convertible Senior Subordinated Notes due 2011 (2)	—		300,000
6.75% Senior Subordinated Notes due 2016	400,000		400,000
6.875% Senior Subordinated Notes due 2020 (3)	350,000		350,000
3.00% Convertible Senior Subordinated Notes due 2024 (4)	199,453		199,453
Principal amount of long-term debt	1,324,453		1,639,453
Less: Unamortized discounts	19,093		29,744
Carrying amount of long-term debt	1,305,360		1,609,709
Less: current portion	25,000		320,000
Carrying amount of long-term debt, excluding current portion	$	1,280,360	$	1,289,709

(1)On October 7, 2010, ATK entered into a Second Amended and Restated Credit Agreement (“the Senior Credit Facility”), which is comprised of a Term A Loan of $400,000 and a $600,000 Revolving Credit Facility, both of which mature in 2015.  The Term A Loan is subject to annual principal payments of $20,000 in each of the first and second years and $40,000 in each of the third, fourth, and fifth years, paid on a quarterly basis, with the balance due on October 7, 2015.  Substantially all domestic tangible and intangible assets of ATK and its subsidiaries are pledged as collateral under the Senior Credit Facility.  Borrowings under the Senior Credit Facility bear interest at a rate equal to either the sum of a base rate plus a margin or the sum of a Eurodollar rate plus a margin.  Each margin is based on ATK’s senior secured credit ratings.  Based on ATK’s current credit rating, the current base rate margin is 1.25% and the current Eurodollar margin is 2.25%.  The weighted average interest rate for the Term A Loan was 2.68% at January 1, 2012.  ATK pays an annual commitment fee on the unused portion of the Revolving Credit Facility based on its senior secured credit ratings.  Based on ATK’s current rating, this fee is 0.35% at January 1, 2012.  As of January 1, 2012, ATK had no borrowings against its $600,000 Revolving Credit Facility and had outstanding letters of credit of $174,631 which reduced amounts available on the Revolving Credit Facility to $425,369.  ATK has had no short term borrowings under its Revolving Credit Facility since the date of issuance.  Debt issuance costs of approximately $12,800 are being amortized over the term of the Senior Credit Facility.

(2)In fiscal 2007, ATK issued $300,000 aggregate principal amount of 2.75% Convertible Senior Subordinated Notes (“the 2.75% Convertible Notes due 2011”) that matured on September 15, 2011. During the quarter ended July 3, 2011, ATK purchased $50,427 aggregate principal amount from holders of the notes at market price.  All but $3 of the remaining $249,573 was repaid in the quarter ended October 2, 2011.  Holders of the remaining $3 chose to convert their notes at a conversion rate of 10.4208 shares of ATK’s common stock per $1 principal amount (a conversion price of $95.96), as allowed during the last month prior to maturity.  The remaining $3 was paid in cash in October 2011.  The contingently issuable shares had no impact on the number of ATK’s diluted shares outstanding during any of the periods presented because ATK’s average stock price during those periods was below the conversion price.

(3)In September 2010, ATK issued $350,000 aggregate principal amount of 6.875% Senior Subordinated Notes (“the 6.875% Notes”) that mature on September 15, 2020. These notes are general unsecured obligations.  Interest on these notes is payable on March 15 and September 15 of each year.  ATK has the right to redeem some or all of these notes from time to time on or after September 15, 2015, at specified redemption prices. Prior to September 15, 2015, ATK may redeem some or all of these notes at a price equal to 100% of their principal amount plus accrued and unpaid interest to the date of redemption and a specified make-whole premium. In addition, prior to September 15, 2013, ATK may redeem up to 35% of the aggregate principal amount of these notes, at a price equal to 106.875% of their principal amount plus accrued and unpaid interest to the date of redemption, with the proceeds of certain equity offerings. Debt issuance costs of approximately $7,100 related to these notes are being amortized to interest expense over ten years.

(4)In fiscal 2005, ATK issued $200,000 aggregate principal amount of 3.00% Convertible Senior Subordinated Notes (“the 3.00% Convertible Notes”) that mature on August 15, 2024. Interest on these notes is payable on February 15 and August 15 of each year. Under select conditions, ATK will pay contingent interest on these notes, which is treated as an embedded derivative; the fair value of this feature was insignificant at January 1, 2012 and March 31, 2011.  ATK may redeem some or all of these notes in cash, for 100% of the principal amount plus any accrued but unpaid interest, at any time on or after August 20, 2014. Holders of these notes may require ATK to repurchase in cash, for 100% of the principal amount plus any accrued but unpaid interest, some or all of these notes on August 15, 2014 and August 15, 2019. Under specified conditions, holders may also convert their 3.00% Convertible Notes at a conversion rate of 12.7013 shares of ATK’s common stock per $1 principal amount of 3.00% Convertible Notes (a conversion price of $78.73 per share).  The stock price condition was met during fiscal 2009 and $547 of these notes were converted in fiscal 2009.  The stock price condition was not satisfied during the quarter ended January 1, 2012; therefore the remaining principal amount was classified as long-term.  These contingently issuable shares did not impact the number of ATK’s diluted shares outstanding during any of the periods presented because ATK’s average stock price during those periods was below the conversion price.

The current authoritative accounting literature requires that issuers of convertible debt instruments that may be settled in cash upon conversion separately account for the liability and equity components in a manner that reflects the entity’s nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods.  This provision applies to the convertible debt instruments discussed above.  The unamortized discount is amortized through interest expense into earnings over the expected term of the convertible notes.  The following tables provide additional information about ATK’s convertible notes:

	3.00% due 2024
As of January 1, 2012:
Carrying amount of the equity component	$	56,849
Principal amount of the liability component	199,453
Unamortized discount of liability component	19,093
Net carrying amount of liability component	180,360
Remaining amortization period of discount	152 months
Effective interest rate on liability component	7.000		%

	2.75% due 2011			3.00% due 2024			Total
As of March 31, 2011:
Carrying amount of the equity component	$	50,779		$	56,849		$	107,628
Principal amount of the liability component	300,000			199,453			499,453
Unamortized discount of liability component	5,875			23,869			29,744
Net carrying amount of liability component	294,125			175,584			469,709
Remaining amortization period of discount	6 months			161 months
Effective interest rate on liability component	6.800		%	7.000		%

Based on ATK’s closing stock price of $57.16 on January 1, 2012, the if-converted value of these notes does not exceed the aggregate principal amount of the notes.

See Note 9 to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2011 for additional information regarding the terms and conditions of the Company’s outstanding debt agreements.

Rank and Guarantees

The 3.00% Convertible Notes, the 6.875% Notes, and the 6.75% Notes rank equal in right of payment with each other and all of ATK’s future senior subordinated indebtedness and are subordinated in right of payment to all existing and future senior indebtedness, including the Senior Credit Facility. The outstanding notes are guaranteed on an unsecured basis, jointly and severally and fully and unconditionally, by substantially all of ATK’s domestic subsidiaries. The parent company has no independent assets or operations.  Subsidiaries of ATK other than the subsidiary guarantors are minor.  All of these guarantor subsidiaries are 100% owned by ATK. These guarantees are senior subordinated obligations of the applicable subsidiary guarantors.

Scheduled Minimum Loan Payments

As of January 1, 2012, the scheduled minimum payments on outstanding long-term debt are as follows:

Remainder of fiscal 2012	$	5,000
Fiscal 2013	30,000
Fiscal 2014	40,000
Fiscal 2015	239,453
Fiscal 2016	260,000
Thereafter	750,000
Total payments	$	1,324,453

ATK’s total debt (current portion of debt and long-term debt) as a percentage of total capitalization (total debt and stockholders’ equity) was 50% as of January 1, 2012 and 58% as of March 31, 2011.

Covenants and Default Provisions

ATK’s Senior Credit Facility and the indentures governing the 6.75% Notes, the 6.875% Notes, and the 3.00% Convertible Notes impose restrictions on ATK, including limitations on its ability to incur additional debt, enter into capital leases, grant liens, pay dividends and make certain other payments, sell assets, or merge or consolidate with or into another entity. In addition, the Senior Credit Facility limits ATK’s ability to enter into sale-and-leaseback transactions. The Senior Credit Facility also requires that ATK meet and maintain specified financial ratios, including a minimum interest coverage ratio and a maximum consolidated senior leverage ratio, and a maximum consolidated leverage ratio.  Many of ATK’s debt agreements contain cross-default provisions so that non-compliance with the covenants within one debt agreement could cause a default under other debt agreements as well.  ATK’s ability to comply with these covenants and to meet and maintain the financial ratios may be affected by events beyond its control. Borrowings under the Senior Credit Facility are subject to compliance with these covenants. As of January 1, 2012, ATK was in compliance with the financial covenants.

Cash Paid for Interest on Debt

Cash paid for interest totaled $39,211 in the nine months ended January 1, 2012 and $30,467 during the nine months ended January 2, 2011.