
9.	Debt

The components of debt and a reconciliation to the carrying amount of current and long-term debt are presented in the table below.


	July 1,			December 31,
	2011			2010
	(in millions)

L-3 Communications:
Borrowings under Revolving Credit Facility⁽¹⁾	$	—		$	—
5.20% Senior Notes due 2019		1,000			1,000
4.75% Senior Notes due 2020		800			800
4.95% Senior Notes due 2021		650			—
5 7/8% Senior Subordinated Notes due 2015		—			650
6 3/8% Senior Subordinated Notes due 2015		1,000			1,000

Subtotal		3,450			3,450


L-3 Holdings:
3% Convertible Contingent Debt Securities due 2035⁽²⁾		689			700

Principal amount of long-term debt		4,139			4,150
Less: Unamortized discounts		(13	)		(13	)

Carrying amount of long-term debt		4,126			4,137
Less: Current portion of long-term debt⁽³⁾		—			(11	)

Carrying amount of long-term debt, excluding current portion	$	4,126		$	4,126


⁽¹⁾		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.

⁽²⁾		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:


	July 1,		December 31,
	2011		2010
	(in millions)

Carrying amount of the equity component (conversion feature)	$	64	$	64
Unamortized discount of liability component amortized through February 1, 2011	$	—	$	2
Net carrying amount of liability component	$	689	$	698


⁽³⁾		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.

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).