| Debt |
The components of debt and a reconciliation to the carrying
amount of current and long-term debt are presented in the table
below.
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July 1,
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December 31,
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2011
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2010
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(in millions)
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L-3 Communications:
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Borrowings under Revolving Credit
Facility(1)
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$
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—
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$
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—
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5.20% Senior Notes due 2019
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1,000
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1,000
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4.75% Senior Notes due 2020
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800
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800
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4.95% Senior Notes due 2021
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650
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—
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5 7/8% Senior Subordinated Notes due 2015
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—
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650
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6 3/8% Senior Subordinated Notes due 2015
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1,000
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1,000
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Subtotal
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3,450
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3,450
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L-3 Holdings:
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3% Convertible Contingent Debt Securities due
2035(2)
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689
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700
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Principal amount of long-term debt
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4,139
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4,150
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Less: Unamortized discounts
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(13
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(13
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Carrying amount of long-term debt
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4,126
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4,137
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Less: Current portion of long-term
debt(3)
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—
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(11
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Carrying amount of long-term debt, excluding current portion
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$
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4,126
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$
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4,126
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(1) |
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The Company’s Revolving Credit
Facility, which matures on October 23, 2012, provides for
total aggregate borrowings of up to $1 billion. At
July 1, 2011, available borrowings under the Revolving
Credit Facility were $989 million after reductions for
outstanding letters of credit of $11 million.
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(2) |
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Under select conditions, including
if L-3 Holdings common stock price is more than 120% (currently
$117.35) of the then current conversion price ($97.79 as of
March 1, 2011) for a specified period, the conversion
feature of the CODES will require L-3 Holdings, upon conversion,
to pay the holders of the CODES the principal amount in cash,
and if the settlement amount exceeds the principal amount, the
excess will be settled in cash or stock or a combination
thereof, at the Company’s option. At the current conversion
price of $97.79, the aggregate consideration to be delivered
upon conversion would be determined based on 7.0 million
shares of L-3 Holdings’ common stock. See Note 10 to
the audited consolidated financial statements for the year ended
December 31, 2010, included in the Company’s Annual
Report on
Form 10-K
for additional information regarding the CODES, including
conditions for conversion. L-3 Holdings’ closing stock
price on August 3, 2011 was $73.19 per share. Through
February 1, 2011, the effective interest rate on the CODES
was 6.33% and interest expense related to both the contractual
coupon interest and amortization of the discount on the
liability components. The Company amortized the discount on the
liability component of the CODES through February 1, 2011
which was the first date that the holders of the CODES had a
contractual right to require L-3 Holdings to repurchase the
CODES. Interest expense for the CODES after February 1,
2011 relates only to the contractual coupon interest. Interest
expense recognized was $5 million and $11 million for
the second quarter periods ended July 1, 2011 and
June 25, 2010, respectively and $12 million and
$21 million for the first half periods ended July 1,
2011 and June 25, 2010, respectively. The following table
provides additional information about the Company’s CODES:
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July 1,
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December 31,
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2011
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2010
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(in millions)
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Carrying amount of the equity component (conversion feature)
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$
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64
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$
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64
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Unamortized discount of liability component amortized through
February 1, 2011
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$
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—
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$
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2
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Net carrying amount of liability component
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$
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689
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$
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698
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(3) |
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On February 2, 2011, L-3
Holdings repurchased approximately $11 million of the CODES
as a result of the exercise by the holders of their contractual
right to require L-3 Holdings to repurchase their CODES. At
July 1, 2011 and December 31, 2010, the remaining
$689 million principal amount of CODES are classified as
long-term debt.
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On February 7, 2011, L-3 Communications issued
$650 million in principal amount of 4.95% Senior Notes
that mature on February 15, 2021 (2021 Senior Notes). The
2021 Senior Notes were issued at a discount of $4 million.
The discount was recorded as a reduction to the principal amount
of the notes and will be amortized as interest expense over the
term of the notes. The effective interest rate of the 2021
Senior Notes is 5.02%. Interest on the 2021 Senior Notes is
payable semi-annually on February 15 and August 15 of each year,
commencing August 15, 2011. The net cash proceeds from this
offering amounted to approximately $639 million after
deducting the discounts, commissions and estimated expenses. On
March 9, 2011, the Company used the net proceeds from this
offering, together with cash
on hand, to redeem L-3 Communications’ $650 million
57/8% Senior
Subordinated Notes due 2015
(57/8%
2015 Notes). In connection with the redemption of the
57/8%
2015 Notes, the Company recorded a debt retirement charge in the
quarterly period ended April 1, 2011 of $18 million
($11 million after income tax, or $0.10 per diluted share).
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