(4)

INDEBTEDNESS

Revolving Credit and Term Loan Agreement

Borrowings under the company’s $575 million amended and restated revolving credit facility (“credit facility”), which includes a $125.0 million term loan (“term loan”) and a $450 million revolving line of credit (“revolver”) bear interest at the company’s option at the greater of (i) prime or the federal funds rate plus 0.50 to 1.25%, or (ii) Eurodollar rates plus margins ranging from 1.50 to 2.25%, based on the company’s consolidated funded debt to total capitalization ratio. Commitment fees on the unused portion of the facilities range from 0.15 to 0.35% based on the company’s funded debt to total capitalization ratio. The facilities provide for a maximum ratio of consolidated debt to consolidated total capitalization of 55% and a minimum consolidated interest coverage ratio (essentially consolidated earnings before interest, taxes, depreciation and amortization, or EBITDA, for the four prior fiscal quarters to consolidated interest charges for such period) of 3.0. All other terms, including the financial and negative covenants, are customary for facilities of its type and consistent with the prior agreement in all material respects. The company’s credit facility matures in January 2016.

In January 2012, the company borrowed the entire $125 million available under the term loan facility and used the proceeds to fund working capital and for general corporate purposes. Principal repayments on the term loan borrowings are payable in quarterly installments beginning in the quarter ending September 30, 2013 in amounts equal to 1.25% (currently estimated to be approximately $1.6 million per quarter) of the total outstanding borrowings as of July 26, 2013.

The company has $125 million in term loan borrowings outstanding at March 31, 2013 (whose fair value approximates the carrying value because the borrowings bear interest at variable Eurodollar rates plus a margin on leverage). As of March 31, 2013 the company had $110.0 million in outstanding borrowings under the revolver, whose fair value approximates carrying value per above, and $340.0 million of availability for future financing needs. The company had $125 million of term loan borrowings and no outstanding borrowings under the revolver at March 31, 2012. These estimated fair values are based on Level 2 inputs.

Senior Debt Notes

The determination of fair value includes an estimated credit spread between our long term debt and treasuries with similar matching expirations. The credit spread is determined based on comparable publicly traded companies in the oilfield service segment with similar credit ratings. These estimated fair values are based on Level 2 inputs.

August 2011 Senior Notes

On August 15, 2011, the company issued $165 million of senior unsecured notes to a group of institutional investors. A summary of these notes outstanding at March 31, is as follows:


(In thousands, except weighted average data)		2013		2012
Aggregate debt outstanding	$	165,000		165,000
Weighted average remaining life in years		7.6		8.6
Weighted average coupon rate on notes outstanding		4.42	%	4.42	%
Fair value of debt outstanding		179,802		166,916

The multiple series of notes were originally issued with maturities ranging from approximately eight to 10 years. The notes may be retired before their respective scheduled maturity dates subject only to a customary make-whole provision. The terms of the notes require that the company maintain a minimum ratio of debt to consolidated total capitalization that does not exceed 55%.

September 2010 Senior Notes

On October 15, 2010, the company completed the sale of $310 million of senior unsecured notes, and the sale of an additional $115 million of the notes was completed on December 30, 2010. A summary of the aggregate amount of these notes outstanding at March 31, is as follows:


(In thousands, except weighted average data)		2013		2012
Aggregate debt outstanding	$	425,000		425,000
Weighted average remaining life in years		6.6		7.6
Weighted average coupon rate on notes outstanding		4.25	%	4.25	%
Fair value of debt outstanding		458,520		430,339

The multiple series of these notes were originally issued with maturities ranging from five to 12 years. The notes may be retired before their respective scheduled maturity dates subject only to a customary make-whole provision. The terms of the notes require that the company maintain a minimum ratio of debt to consolidated total capitalization that does not exceed 55%.

Included in accumulated other comprehensive income at March 31, 2013 and 2012, is an after-tax loss of $2.9 million ($4.4 million pre-tax), and $3.4 million ($5.3 million pre-tax), respectively, relating to the purchase of interest rate hedges, which are cash flow hedges, in July 2010 in connection with the September 2010 senior notes offering. The interest rate hedges settled in August 2010 concurrent with the pricing of the senior unsecured notes. The hedges met the effectiveness criteria and their acquisition costs are being amortized over the term of the individual notes matching the term of the hedges to interest expense.

July 2003 Senior Notes

In July 2003, the company completed the sale of $300 million of senior unsecured notes. A summary of the aggregate amount of remaining senior unsecured notes that were issued in July 2003 and outstanding at March 31, are as follows:


(In thousands, except weighted average data)		2013		2012
Aggregate debt outstanding	$	175,000		235,000
Weighted average remaining life in years		0.7		1.4
Weighted average coupon rate on notes outstanding		4.47	%	4.43	%
Fair value of debt outstanding		178,227		240,585

The multiple series of notes were originally issued with maturities ranging from seven to 12 years. These notes can be retired in whole or in part prior to maturity for a redemption price equal to the principal amount of the notes redeemed plus a customary make-whole premium. The terms of the notes provide for a maximum ratio of consolidated debt to total capitalization of 55%.

Current Maturities of Long Term Debt

Principal repayments of approximately $144.7 million due during the twelve months ending March 31, 2014 are classified as long term debt in the accompanying balance sheet at March 31, 2013 because the company has the ability and intent to fund the repayments with the credit facility which matures in January 2016.

Summary of Long-Term Debt Outstanding

The following table summarizes debt outstanding at March 31:


(In thousands)		2013	2012
4.31% July 2003 senior notes due fiscal 2013	$	—	60,000
4.44% July 2003 senior notes due fiscal 2014		140,000	140,000
4.61% July 2003 senior notes due fiscal 2016		35,000	35,000
3.28% September 2010 senior notes due fiscal 2016		42,500	42,500
3.90% September 2010 senior notes due fiscal 2018		44,500	44,500
3.95% September 2010 senior notes due fiscal 2018		25,000	25,000
4.12% September 2010 senior notes due fiscal 2019		25,000	25,000
4.17% September 2010 senior notes due fiscal 2019		25,000	25,000
4.33% September 2010 senior notes due fiscal 2020		50,000	50,000
4.51% September 2010 senior notes due fiscal 2021		100,000	100,000
4.56% September 2010 senior notes due fiscal 2021		65,000	65,000
4.61% September 2010 senior notes due fiscal 2023		48,000	48,000
4.06% August 2011 senior notes due fiscal 2019		50,000	50,000
4.54% August 2011 senior notes due fiscal 2022		65,000	65,000
4.64% August 2011 senior notes due fiscal 2022		50,000	50,000
Term Loan		125,000	125,000
Revolving line of credit		110,000	—
	$	1,000,000	950,000
Less: Current maturities of long-term debt		—	—
Total	$	1,000,000	950,000

Debt Costs

The company capitalizes a portion of its interest costs incurred on borrowed funds used to construct vessels. Interest and debt costs incurred, net of interest capitalized, for the years ended March 31, are as follows:


(In thousands)	2013		2012		2011
Interest and debt costs incurred, net of interest capitalized	$	29,745		22,308		10,769
Interest costs capitalized		10,602		14,743		14,878
Total interest and debt costs	$	40,347		37,051		25,647