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Borrowings and Credit Arrangements | 6 Months Ended
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Mar. 30, 2013
Debt Disclosure [Abstract] |
Borrowings and Credit Arrangements | (5) Borrowings and Credit Arrangements The Company had total debt with a carrying value of $5.00 billion and $5.04 billion at March 30, 2013 and September 29, 2012, respectively. The Company’s borrowings consisted of the following:
|  | March 30, 2013 |  |  | September 29, 2012 |
Current debt obligations, net of debt discount: |  |  |  |  |  |  |  |
Convertible Notes |  | $ | 389,139 |  |  | $ | — |
Term Loan A |  |  | 49,676 |  |  |  | 49,582 |
Term Loan B |  |  | 14,862 |  |  |  | 14,853 |
Total current debt obligations |  |  | 453,677 |  |  |  | 64,435 |
Long-term debt obligations, net of debt discount: |  |  |  |  |  |  |  |
Term Loan A |  |  | 919,029 |  |  |  | 942,065 |
Term Loan B |  |  | 1,463,907 |  |  |  | 1,470,454 |
Senior Notes |  |  | 1,000,000 |  |  |  | 1,000,000 |
Convertible Notes |  |  | 1,168,083 |  |  |  | 1,558,660 |
Total long-term debt obligations |  |  | 4,551,019 |  |  |  | 4,971,179 |
Total debt obligations |  | $ | 5,004,696 |  |  | $ | 5,035,614 |
Credit Agreement On August 1, 2012, the Company and certain domestic subsidiaries (the “Guarantors”) entered into a credit and guaranty agreement (the “Credit Agreement”) with Goldman Sachs Bank USA, in its capacity as administrative and collateral agent (“Goldman Sachs”), and the lenders party thereto (collectively, the “Lenders”). The credit facilities under the Credit Agreement consisted of:
| • |  | $1.0 billion senior secured tranche A term loan (“Term Loan A”) with a final maturity date of August 1, 2017;
| • |  | $1.5 billion secured tranche B term loan (“Term Loan B”) with a final maturity date of August 1, 2019; and
| • |  | $300.0 million secured revolving credit facility (“Revolving Facility”) with a final maturity date of August 1, 2017.
On March 20, 2013, the Company, the Guarantors, Goldman Sachs, and the Lenders entered into a Refinancing Amendment No. 1 (the “Credit Agreement Amendment”). The Credit Agreement Amendment (i) refinanced the Company’s original Term Loan A with a new senior secured tranche A term loan facility with the same principal amount, maturity date and amortization schedule but with an applicable margin 1.00% less than the original Term Loan A (at each margin level) (“New Term Loan A”), (ii) refinanced the Company’s original Revolving Facility with a new senior secured revolving credit facility with the same principal amount and maturity date, but with an applicable margin 1.00% less than the original Revolving Facility (at each margin level) (the “New Revolving Facility”), and (iii) amended certain covenants and terms of the Credit Agreement. As of the date of this refinancing, the principal amount outstanding under the Term Loan A was $975.0 million, and the Company had no borrowings under the Revolving Facility. Effective as of the date of the Credit Agreement Amendment, amounts outstanding under the New Term Loan A and the New Revolving Facility will initially bear interest, at the Company’s option: (i) at the Base Rate plus 1.00% per annum, or (ii) at the Adjusted Eurodollar Rate (i.e., the Libor rate) plus 2.00% per annum. The applicable margin with respect to the New Term Loan A and the New Revolving Facility are subject to specified changes depending on the Company’s total net leverage ratio, as defined in the Credit Agreement. Pursuant to ASC 470, Debt, the accounting for this refinancing is required to be evaluated on a creditor-by-creditor basis to determine whether each transaction should be accounted for as a modification or extinguishment. Certain creditors under the Credit Agreement did not participate in this refinancing transaction and ceased being creditors of the Company. As a result, the Company recorded a debt extinguishment loss of $3.2 million to write-off the pro-rata amount of unamortized debt discount and deferred issuance costs related to these creditors for the initial borrowings under the Term Loan A facility. For the remainder of the creditors, this transaction has been accounted for as a modification. Pursuant to ASC 470, subtopic 50-40, third-party costs incurred directly related to the exchange were expensed as incurred. As such, the Company recorded issuance costs related to the refinancing of $2.4 million to interest expense in the second quarter of fiscal 2013. Borrowings outstanding under the Credit Agreement for the three and six months ended March 30, 2013 had a weighted average interest rate of 3.78% and 3.88%, respectively. The interest rates on the outstanding Term Loan A and Term Loan B borrowings at March 30, 2013 were 2.2% and 4.5%, respectively. Interest expense under the Credit Agreement totaled $28.5 million and $58.6 million for the three and six months ended March 30, 2013, respectively, which includes non-cash interest expense of $4.1 million and $7.8 million related to the amortization of the deferred financing costs and accretion of the debt discount. The Credit Agreement contains affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenants restricting the ability of the Company and the Guarantors, subject to negotiated exceptions, to: incur additional indebtedness and additional liens on their assets; engage in mergers or acquisitions or dispose of assets; enter into sale-leaseback transactions; pay dividends or make other distributions; voluntarily prepay other indebtedness; enter into transactions with affiliated persons; make investments; and change the nature of their businesses. The credit facilities also contain total net leverage ratio and interest coverage ratio financial covenants measured as of the last day of each fiscal quarter, which are effective in our second quarter of fiscal 2013. The Company was in compliance with the Credit Agreement’s covenants as of March 30, 2013. The Company has evaluated the Credit Agreement for derivatives pursuant to ASC 815, Derivatives and Hedging, and identified embedded derivatives that require bifurcation as the features are not clearly and closely related to the host instrument. The embedded derivatives are a default provision, which could require additional interest payments, and provision requiring contingent payments to compensate the lenders for changes in tax deductions. The Company has determined that the fair value of these embedded derivatives was nominal as of March 30, 2013. Senior Notes The Company’s 6.25% senior notes due 2020 (the “Senior Notes”) mature on August 1, 2020 and bear interest at the rate of 6.25% per year, payable semi-annually on February 1 and August 1 of each year, commencing on February 1, 2013. The Company recorded interest expense of $16.0 million and $32.1 million in the three and six months ended March 30, 2013, respectively, which includes non-cash interest expense of $0.4 million and $0.8 million, respectively, related to the amortization of the deferred financing costs related to the Senior Notes. Convertible Notes On December 10, 2007, the Company issued and sold $1.725 billion, at par, of 2.00% Convertible Senior Notes due 2037 (the “2007 Notes”). The Company recorded the 2007 Notes net of the unamortized debt discount, which was attributable to the fair value of the embedded conversion option, as required by U.S. generally accepted accounting principles. On November 18, 2010, the Company entered into separate, privately-negotiated exchange agreements under which it retired $450.0 million in aggregate principal of the 2007 Notes for $450.0 million in aggregate principal of new 2.00% Convertible Exchange Senior Notes due 2037 (the “2010 Notes”). On February 29, 2012, the Company entered into separate, privately-negotiated exchange agreements under which it retired $500.0 million in aggregate principal of the 2007 Notes for $500.0 million in aggregate principal of new 2.00% Convertible Senior Notes due 2042 (the “2012 Notes”). In connection with this exchange transaction for the 2012 Notes, the Company recorded a loss on extinguishment of debt of $42.3 million in the second quarter of fiscal 2012. For additional information pertaining to the terms and provisions and related accounting for the 2007 Notes, 2010 Notes and 2012 Notes, refer to Note 5 to the consolidated financial statements for the year ended September 29, 2012 included in the Company’s Form 8-K filed with the Securities and Exchange Commission on January 28, 2013. On February 14, 2013, the Company entered into separate, privately-negotiated exchange agreements under which it retired $370.0 million in aggregate principal of the 2007 Notes for $370.0 million in aggregate principal of new 2.00% Convertible Senior Notes due 2043 (the “2013 Notes”). Following this transaction, $405.0 million in principal amount of the 2007 Notes remain outstanding. The 2007 Notes, the 2010 Notes, the 2012 Notes and the 2013 Notes are collectively referred to herein as the “Convertible Notes.” Pursuant to ASC 470-50, this exchange transaction is being accounted for as a modification and not an extinguishment because the terms of the two debt instruments are not substantially different. As a result, there is no gain or loss from this exchange recorded to the statement of operations. As required, the Company has recorded the increase in the fair value of the conversion option of $32.5 million from this exchange to additional paid-in-capital, net of deferred taxes. The Company determined the fair value of the conversion option for each debt instrument on the date of modification by calculating the fair value of each debt instrument using the binomial model and subtracting the fair value of the respective debt’s liability component. The fair value of the liability component for each debt instrument was determined by using a discounted cash flow technique with an effective interest rate of 3.25% and 5.42% for the 2007 Notes and 2013 Notes, respectively. These rates represent the estimated nonconvertible borrowing rate with a maturity as of the measurement date consistent with the first put dates of each debt instrument. The difference between the debt’s fair value and the fair value of its liability component represents the value allocated to the debt’s conversion option. In addition, direct costs incurred for this exchange of $4.1 million have been expensed as incurred within interest expense. Holders may require the Company to repurchase the 2013 Notes on each of December 15, 2017, 2022, 2027, 2032 and 2037, or upon a fundamental change, as provided in the indenture for the 2013 Notes, at a repurchase price equal to 100% of their accreted principal amount, plus accrued and unpaid interest. The Company may redeem any of the 2013 Notes beginning December 15, 2017. The Company may redeem the 2013 Notes either in whole or in part at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest, including contingent interest and liquidated damages, if any, to, but excluding, the redemption date. The 2013 Notes bear interest at a rate of 2.00% per year on the original principal amount, payable semi-annually in arrears in cash on June 15 and December 15 of each year, ending on December 15, 2013. The 2013 Notes accrete principal from their date of issuance at a rate of 4.00% per year until and including December 15, 2017, and 2.00% per year thereafter. Beginning with the six month interest period commencing December 15, 2017, the Company will pay contingent interest to the holders of 2013 Notes during any six month interest period if the “trading price,” as defined, of the 2013 Notes for each of the five trading days ending on the second trading day immediately preceding the first day of the applicable six month interest period equals or exceeds 120% of the accreted principal amount of the 2013 Notes. The holders of the 2013 Notes may convert the notes into shares of the Company’s common stock at a conversion price of approximately $38.59 per share, subject to adjustment, prior to the close of business on September 15, 2043 under any of the following circumstances: (1) during any calendar quarter if the last reported sale price of the Company’s common stock exceeds 130% of the conversion price for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding calendar quarter; (2) during the five business day period after any five consecutive trading day period in which the trading price per note for each day of such period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such day; (3) if the notes have been called for redemption; or (4) upon the occurrence of specified corporate events. At the option of the holder, regardless of the foregoing circumstances, holders may convert the 2013 Notes at any time on or after September 15, 2043 through the close of business on the second scheduled trading day immediately preceding the maturity date. The conversion rate will not be adjusted for accrued interest or accreted principal in excess of the original $1,000 principal amount, as accrued interest and accreted principal will not be convertible into common stock. None of these triggering events had occurred as of March 30, 2013. In lieu of delivery of shares of the Company’s common stock in satisfaction of the Company’s obligation upon conversion of the 2013 Notes, the Company may elect to deliver cash or a combination of cash and shares of its common stock. If the Company elects to satisfy its conversion obligation in a combination of cash and shares of the Company’s common stock, the Company is required to deliver a specified dollar amount of cash per $1,000 original principal amount of 2013 Notes, and will settle the remainder of its conversion obligation in shares of its common stock, in each case based on the daily conversion value calculated as provided in the respective indentures for the 2013 Notes. This net share settlement election is in the Company’s sole discretion and does not require the consent of holders of the 2013 Notes. It is the Company’s current intent and policy to settle any conversion of the 2013 Notes as if the Company had elected to make the net share settlement election. The 2013 Notes are the Company’s senior unsecured obligations and rank equally with all of its existing and future senior unsecured debt. The 2013 Notes are effectively subordinated to any future secured indebtedness to the extent of the collateral securing such indebtedness, and structurally subordinated to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries. The Convertible Notes and related equity components (recorded in additional paid-in-capital, net of deferred taxes) consisted of the following:
|  | March 30, 2013 |  |  | September 29, 2012 |
2007 Notes principal amount |  | $ | 405,000 |  |  | $ | 775,000 |
Unamortized discount |  |  | (15,861 | ) |  |  | (50,591 | )
Net carrying amount |  | $ | 389,139 |  |  | $ | 724,409 |
Equity component, net of taxes |  | $ | 121,946 |  |  | $ | 233,353 |
2010 Notes principal amount |  | $ | 450,000 |  |  | $ | 450,000 |
Unamortized discount |  |  | (66,314 | ) |  |  | (74,062 | )
Net carrying amount |  | $ | 383,686 |  |  | $ | 375,938 |
Equity component, net of taxes |  | $ | 60,054 |  |  | $ | 60,054 |
2012 Notes principal amount |  | $ | 500,000 |  |  | $ | 500,000 |
Unamortized discount |  |  | (38,221 | ) |  |  | (41,687 | )
Net carrying amount |  | $ | 461,779 |  |  | $ | 458,313 |
Equity component, net of taxes |  | $ | 49,195 |  |  | $ | 49,195 |
2013 Notes principal amount |  | $ | 370,000 |  |  | $ | — |
Principal accretion |  |  | 1,789 |  |  |  | — |
Unamortized discount |  |  | (49,171 | ) |  |  | — |
Net carrying amount |  | $ | 322,618 |  |  | $ | — |
Equity component, net of taxes |  | $ | 131,451 |  |  | $ | — |
Interest expense under the Convertible Notes was as follows:
|  | Three Months Ended |  |  | Six Months Ended |
|  | March 30, 2013 |  |  | March 24, 2012 |  |  | March 30, 2013 |  |  | March 24, 2012 |
Amortization of debt discount |  | $ | 13,621 |  |  | $ | 17,946 |  |  | $ | 29,265 |  |  | $ | 36,899 |
Amortization of deferred financing costs |  |  | 790 |  |  |  | 975 |  |  |  | 1,698 |  |  |  | 1,982 |
Principal accretion |  |  | 1,789 |  |  |  | — |  |  |  | 1,789 |  |  |  | — |
Non-cash interest expense |  |  | 16,200 |  |  |  | 18,921 |  |  |  | 32,752 |  |  |  | 38,881 |
2.00% accrued interest |  |  | 8,616 |  |  |  | 8,567 |  |  |  | 17,226 |  |  |  | 17,145 |
|  | $ | 24,816 |  |  | $ | 27,488 |  |  | $ | 49,978 |  |  | $ | 56,026 |

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 19, 20, 22 -Article 5 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 129 -Paragraph 2, 4 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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