Note 9—Debt

Short Term Borrowings

At June 30, 2014 and 2013, we had $3.7 million and $4.9 million of short-term borrowings outstanding, respectively. At June 30, 2014, we maintained lines of credit of $64.6 million primarily in India, China, Hungary, Brazil and Denmark. At June 30, 2013, we maintained lines of credit of $55.7 million primarily in Denmark, Hungary, the U.S., Austria, Brazil and India.

We classify our debt based on the contractual maturity dates of the underlying debt instruments. We defer costs associated with debt issuance over the applicable term of the debt. These costs are amortized to Interest expense, net in our Consolidated Statements of Income.

New Credit Agreement

On October 10, 2012, we and our wholly-owned subsidiary Harman Holding GmbH & Co. KG (“Harman KG”), entered into a Multi-Currency Credit Agreement (the “New Credit Agreement”) with a group of banks. The New Credit Agreement provides for (i) a five-year unsecured multi-currency revolving credit facility (the “New Revolving Credit Facility”) in the amount of $750.0 million (the “Aggregate Revolving Commitment”) with availability in currencies other than the United States Dollar of up to $550.0 million and (ii) a five-year unsecured United States Dollar term loan facility (the “Term Facility” and collectively with the New Revolving Credit Facility, the “Facilities”) in the amount of $300.0 million (the “Aggregate Term Commitment” and collectively with the Aggregate Revolving Commitment, the “Aggregate Commitment”). Up to $60.0 million of the Aggregate Revolving Commitment is available for letters of credit. Subject to certain conditions set forth in the New Credit Agreement, the Aggregate Commitment may be increased by up to $250.0 million. We may select interest rates for the Facilities equal to (i) LIBOR plus an applicable margin or (ii) a base rate plus an applicable margin, which in each case is determined based on our credit rating. We pay a facility fee on the Aggregate Revolving Commitment, whether drawn or undrawn, which is determined based on our credit rating. Any proceeds from borrowings under the Facilities may be used for general corporate purposes.

The New Credit Agreement includes certain financial condition covenants, including covenants that do not permit us to allow (i) our ratio of consolidated EBITDA to consolidated cash interest expense to be less than 3.5:1.0 or (ii) our ratio of consolidated total debt to consolidated EBITDA to exceed 3.5:1.0, or following certain acquisitions, 4.0:1.0, each calculated as of the end of the applicable fiscal quarter on a rolling four-quarter basis. The terms “consolidated EBITDA,” “consolidated cash interest expense,” and “consolidated total debt” are defined in the New Credit Agreement.

The New Credit Agreement also contains certain negative covenants that limit, among other things, our ability to pay dividends, permit certain of our subsidiaries to incur debt, incur liens, make fundamental changes, sell assets, undertake transactions with affiliates or undertake sale and leaseback transactions. The Facilities are subject to acceleration upon certain specified events of default, including failure to make timely payments, breaches of representations or covenants or a change of control, as such term is defined in the New Credit Agreement.

On October 10, 2012, in connection with the execution of the New Credit Agreement, we, Harman KG, and certain of our subsidiaries, entered into a guarantee agreement (the “New Guarantee Agreement”), that provides that the obligations under the New Credit Agreement are guaranteed by us and each of the subsidiary guarantors named therein.

Upon the signing of the New Credit Agreement, we voluntarily terminated the Multi-Currency Credit Agreement, entered into on December 1, 2010, as amended on December 15, 2011 and July 2, 2012 (the “Credit Agreement”), as well as the guarantee and collateral agreement entered into in connection with the Credit Agreement. There were no outstanding borrowings under the Credit Agreement as of October 10, 2012, and no early termination penalties were incurred by us as a result of the termination of the Credit Agreement. All of the approximately $8.7 million of letters of credit that were previously outstanding under the Credit Agreement were deemed to be issued and outstanding under the New Credit Agreement.

On October 10, 2012, we borrowed $300.0 million under the Term Facility to finance, in part, the repayment of all the outstanding $400.0 million principal amount of Convertible Senior Notes and accrued and unpaid interest thereon. In June 2014, we borrowed $300.0 million under the New Revolving Credit Facility to partially finance our acquisitions of AMX and yurbuds. Refer to Note 2—Acquisitions for more information.

At June 30, 2014, there was $300.0 million of outstanding borrowings and approximately $4.6 million of outstanding letters of credit under the New Revolving Credit Facility and $255.0 million of outstanding borrowings under the Term Facility, of which $35.6 million is included in our Consolidated Balance Sheet as Current portion of long-term debt and $219.4 million is classified as Long-term debt. At June 30, 2014, unused available credit under the New Revolving Credit Facility was $445.4 million. In connection with the New Credit Agreement, we incurred $6.1 million of fees and other expenses which are included within Other assets in our Consolidated Balance Sheet at June 30, 2014. These costs will be amortized over the term of the New Credit Agreement to Interest expense, net in our Consolidated Statements of Income on a straight-line basis. In addition, during the year ended June 30, 2013, we wrote off $1.1 million of debt issuance costs, to Interest expense, net, associated with the Credit Agreement, which represented the portion of these costs that were attributed to the Credit Agreement.

Convertible Senior Notes

On October 15, 2012, the maturity date for the Convertible Senior Notes, we repaid all of the outstanding $400.0 million principal amount of Convertible Senior Notes and accrued and unpaid interest thereon held by affiliates of Kohlberg Kravis Roberts & Co. and Goldman Sachs Capital Partners and other investors. The repayment of principal was funded by $300.0 million of borrowings under the Term Facility and $100.0 million of cash on hand.

Long-Term Debt and Current Portion of Long-Term-Debt

At June 30, 2014 and 2013, long-term debt and current portion of long-term debt consisted of the following:


	Fair Value at June 30, 2014			Book Value at June 30, 2014			Fair Value at June 30, 2013			Book Value at June 30, 2013
Borrowings under revolving credit facility	$	300,000		$	300,000		$	0		$	0
Term facility		255,000			255,000			285,000			285,000
Other obligations		32			32			43			43

Total debt		555,032			555,032			285,043			285,043
Less: current portion of long-term debt		(35,625	)		(35,625	)		(30,000	)		(30,000	)

Total long-term debt	$	519,407		$	519,407		$	255,043		$	255,043

At June 30, 2014, long-term debt maturing in each of the next five fiscal years and thereafter is as follows:


2015	$	35,625
2016		43,157
2017		135,000
2018		341,250
2019		0
Thereafter		0

Total	$	555,032

If we do not meet the forecast in our budgets, we could violate our debt covenants and, absent a waiver from our lenders or an amendment to the New Credit Agreement, we could be in default under the New Credit Agreement. As a result, our debt under the New Credit Agreement could become due, which would have a material adverse effect on our financial condition and results of operations. As of June 30, 2014, we were in compliance with all the financial covenants of the New Credit Agreement.

Interest expense is reported net of interest income in our Consolidated Statements of Income. Interest expense, net was $8.0 million, $12.9 million and $20.1 million for the fiscal years ended June 30, 2014, 2013 and 2012, respectively. Gross interest expense was $10.1 million, $15.3 million and $27.0 million for the fiscal years ended June 30, 2014, 2013 and 2012, respectively. The non-cash portion of interest expense was $2.2 million, $8.5 million and $19.1 million for the fiscal years ended June 30, 2014, 2013 and 2012, respectively. The cash portion of gross interest expense was $7.9 million, $6.8 million and $7.9 million for the fiscal years ended June 30, 2014, 2013 and 2012, respectively. Interest income was $2.1 million, $2.4 million and $6.9 million for the fiscal years ended June 30, 2014, 2013 and 2012, respectively.

Non-cash interest expense for the fiscal year ended June 30, 2014 relates to the amortization of debt issuance costs on the New Credit Agreement. Non-cash interest expense for the fiscal year ended June 30, 2013 relates to the amortization of debt issuance costs on the New Credit Agreement, amortization of the debt discount and debt issuance costs on the Convertible Senior Notes and amortization of debt issuance costs on the Credit Agreement. Non-cash interest expense for the fiscal year ended June 30, 2012 relates to amortization of the debt discount and debt issuance costs on the Convertible Senior Notes and amortization of debt issuance costs on the Credit Agreement.

Cash interest expense in the fiscal year ended June 30, 2014 primarily relates to interest on the New Credit Agreement and our short-term borrowings. Cash interest expense in the fiscal year ended June 30, 2013 primarily relates to interest on the New Credit Agreement, the Convertible Senior Notes, the Credit Agreement and our short-term borrowings. Cash interest expense in the fiscal year ended June 30, 2012 primarily relates to interest on the Convertible Senior Notes, the Credit Agreement and our short-term borrowings.

Interest income primarily relates to interest earned on our cash and cash equivalents, short-term investment balances and the variances from year to year are due to fluctuations in those balances and changes in interest rates.

Cash paid for interest, net of cash received was $6.5 million, $6.8 million and $3.1 million in the fiscal years ended June 30, 2014, 2013 and 2012, respectively.