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Long Term Debt | 12 Months Ended
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Jun. 30, 2011
Long Term Debt |
Long Term Debt | NOTE 13. LONG TERM DEBT Long-term debt consisted of the following (in thousands):
|  | June 30, |
|  | 2011 |  |  | 2010 |
Convertible notes payable |  | $ | 300,000 |  |  | $ | 300,000 |
Bank credit facility—term loans |  |  | 146,250 |  |  |  | 278,653 |
Principal amount of long-term debt |  |  | 446,250 |  |  |  | 578,653 |
Less unamortized discount |  |  | (36,313 | ) |  |  | (47,549 | )
Total long-term debt |  |  | 409,937 |  |  |  | 531,104 |
Less current portion |  |  | (7,500 | ) |  |  | (278,653 | )
Long-term debt, net of current portion |  | $ | 402,437 |  |  | $ | 252,451 |
Bank Credit Facility The Company has a $750.0 million credit facility (the Credit Facility), which consists of a $600.0 million revolving credit facility (the Revolving Facility) and a $150.0 million term loan (the Term Loan). The Revolving Facility has subfacilities of $50.0 million for same-day swing line loan borrowings and $25.0 million for stand-by letters of credit. The Credit Facility was entered into on October 21, 2010 and replaced the Company's then outstanding term loan and revolving credit facility. The Revolving Facility is a secured facility that permits continuously renewable borrowings of up to $600.0 million, with an expiration date of October 21, 2015. As of June 30, 2011, the Company had no borrowings outstanding under the Revolving Facility and no outstanding letters of credit. The Company pays a quarterly facility fee for the unused portion of the Revolving Facility. The Term Loan is a five-year secured facility under which principal payments are due in quarterly installments of $1.9 million through December 31, 2013 and $3.8 million from January 1, 2014 through September 30, 2015, with the balance due in full on October 21, 2015. At any time and so long as no default has occurred, the Company has the right to increase the Term Loan or Revolving Facility in an aggregate principal amount of up to $200.0 million with applicable lender approvals. The Credit Facility is available to refinance existing indebtedness and for general corporate purposes, including working capital expenses and capital expenditures. The interest rates applicable to loans under the Credit Facility are floating interest rates that, at the Company's option, equal a base rate or a Eurodollar rate plus, in each case, an applicable margin based upon the Company's consolidated total leverage ratio. As of June 30, 2011, the effective interest rate, excluding the effect of amortization of debt financing costs, for the outstanding borrowings under the Credit Facility was 2.21 percent. The Credit Facility requires the Company to comply with certain financial covenants, including a maximum senior secured leverage ratio, a maximum total leverage ratio and a minimum fixed charge coverage ratio. The Credit Facility also includes customary negative covenants restricting or limiting the Company's ability to guarantee or incur additional indebtedness, grant liens or other security interests to third parties, make loans or investments, transfer assets, declare dividends or redeem or repurchase capital stock or make other distributions, prepay subordinated indebtedness and engage in mergers, acquisitions or other business combinations, in each case except as expressly permitted under the Credit Facility. Since the inception of the Credit Facility, the Company has been in compliance with all of the financial covenants. A majority of the Company's assets serve as collateral under the Credit Facility. The Company capitalized $6.0 million of debt issuance costs associated with the origination of the Credit Facility. All debt issuance costs are being amortized from the date incurred to the expiration date of the Credit Facility. The unamortized balance of $5.2 million at June 30, 2011 is included in other assets. As of June 30, 2010 the Company had a $590.0 million credit facility (the 2004 Credit Facility), consisting of a $240.0 million revolving credit facility (the 2004 Revolving Facility) and a $350.0 million term loan (the 2004 Term Loan). The 2004 Revolving Facility was a seven-year, secured facility that permitted continuously renewable borrowings of up to $240.0 million, with an expiration date of May 3, 2011. The 2004 Term Loan was a seven-year secured facility under which principal payments were due in quarterly installments of $0.7 million at the end of each fiscal quarter through March 2011, and the balance would have been due in full on May 3, 2011. Borrowings under both the 2004 Revolving Facility and the 2004 Term Loan bore interest rates based on the London Inter-Bank Offered Rate (LIBOR) or the higher of the prime rate or the federal funds rate plus 0.5 percent, as elected by the Company, in each case plus applicable margins based on the Company's total leverage ratio as determined quarterly. On October 21, 2010 the 2004 Credit Facility was replaced by the Credit Facility described above. Convertible Notes Payable Effective May 16, 2007, the Company issued the Notes in a private placement. The Notes were issued at par value and are subordinate to the Company's senior secured debt. Interest on the Notes is payable on May 1 and November 1 of each year. Holders may convert their notes at a conversion rate of 18.2989 shares of CACI common stock for each $1,000 of note principal (an initial conversion price of $54.65 per share) under the following circumstances: 1) if the last reported sale price of CACI stock is greater than or equal to 130 percent of the applicable conversion price for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter; 2) during the five consecutive business day period immediately after any ten consecutive trading day period (the note measurement period) in which the average of the trading price per $1,000 principal amount of convertible note was equal to or less than 97 percent of the average product of the closing price of a share of the Company's common stock and the conversion rate of each date during the note measurement period; 3) upon the occurrence of certain corporate events constituting a fundamental change, as defined in the indenture governing the Notes; or 4) during the last three-month period prior to maturity. CACI is required to satisfy 100 percent of the principal amount of these notes solely in cash, with any amounts above the principal amount to be satisfied in common stock. As of June 30, 2011, none of the conditions permitting conversion of the Notes had been satisfied. In the event of a fundamental change, as defined in the indenture governing the Notes, holders may require the Company to repurchase the Notes at a price equal to the principal amount plus any accrued interest. Also, if certain fundamental changes occur prior to maturity, the Company will in certain circumstances increase the conversion rate by a number of additional shares of common stock or, in lieu thereof, the Company may in certain circumstances elect to adjust the conversion rate and related conversion obligation so that these notes are convertible into shares of the acquiring or surviving company. The Company is not permitted to redeem the Notes. The Company separately accounts for the liability and the equity (conversion option) components of the Notes and recognizes interest expense on the Notes using an interest rate in effect for comparable debt instruments that do not contain conversion features. The effective interest rate for the Notes excluding the conversion option was determined to be 6.9 percent. The fair value of the liability component of the Notes was calculated to be $221.9 million at May 16, 2007, the date of issuance. The excess of the $300.0 million of gross proceeds over the $221.9 million fair value of the liability component, or $78.1 million, represents the fair value of the equity component, which was recorded, net of income tax effect, as additional paid-in capital within shareholders' equity. This $78.1 million difference represents a debt discount that is amortized over the seven-year term of the Notes as a non-cash component of interest expense. The components of interest expense related to the Notes were as follows (in thousands):
|  | Year Ended June 30, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Coupon interest |  | $ | 6,375 |  |  | $ | 6,375 |  |  | $ | 6,375 |
Non-cash amortization of discount |  |  | 11,235 |  |  |  | 10,499 |  |  |  | 9,809 |
Amortization of issuance costs |  |  | 820 |  |  |  | 820 |  |  |  | 820 |
Total |  | $ | 18,430 |  |  | $ | 17,694 |  |  | $ | 17,004 |
The balance of the unamortized discount as of June 30, 2011 and 2010, was $36.3 million and $47.5 million, respectively. The discount will continue to be amortized as additional, non-cash interest expense over the remaining term of the Notes (through May 1, 2014) using the effective interest method as follows (in thousands):
Fiscal year ending June 30, |  | Amount Amortized During Period |
2012 |  | $ | 12,024 |
2013 |  |  | 12,868 |
2014 |  |  | 11,421 |
|  | $ | 36,313 |
The fair value of the Notes as of June 30, 2011 was $379.5 million based on quoted market values. The contingently issuable shares that may result from the conversion of the Notes were included in CACI's diluted share count for the fiscal year ended June 30, 2011 because CACI's average stock price during the third and fourth quarters of the year ended June 30, 2011 was above the conversion price of $54.65 per share. The contingently issuable shares were not included in CACI's diluted share count for the years ended June 30, 2010 or 2009 because CACI's average stock price during each three month period in those years was below the conversion price. Of total debt issuance costs of $7.8 million, $5.8 million is being amortized to interest expense over seven years. The remaining $2.0 million of debt issuance costs attributable to the embedded conversion option was recorded in additional paid-in capital. Upon closing of the sale of the Notes, $45.5 million of the net proceeds was used to concurrently repurchase one million shares of CACI's common stock. In connection with the issuance of the Notes, the Company purchased in a private transaction at a cost of $84.4 million call options (the Call Options) to purchase approximately 5.5 million shares of its common stock at a price equal to the conversion price of $54.65 per share. The cost of the Call Options was recorded as a reduction of additional paid-in capital. The Call Options allow CACI to receive shares of its common stock from the counterparties equal to the amount of common stock related to the excess conversion value that CACI would pay the holders of the Notes upon conversion. For income tax reporting purposes, the Notes and the Call Options are integrated. This created an original issue discount for income tax reporting purposes, and therefore the cost of the Call Options is being accounted for as interest expense over the term of the Notes for income tax reporting purposes. The associated income tax benefit of $32.8 million to be realized for income tax reporting purposes over the term of the Notes was recorded as an increase in additional paid-in capital and a long-term deferred tax asset. The majority of this deferred tax asset is offset in the Company's balance sheet by the $30.7 million deferred tax liability associated with the non-cash interest expense to be recorded for financial reporting purposes. In addition, the Company sold warrants (the Warrants) to issue approximately 5.5 million shares of CACI common stock at an exercise price of $68.31 per share. The proceeds from the sale of the Warrants totaled $56.5 million and were recorded as an increase to additional paid-in capital. On a combined basis, the Call Options and the Warrants are intended to reduce the potential dilution of CACI's common stock in the event that the Notes are converted by effectively increasing the conversion price of these notes from $54.65 to $68.31. The Call Options are anti-dilutive and are therefore excluded from the calculation of diluted shares outstanding. The Warrants will result in additional diluted shares outstanding if CACI's average common stock price exceeds $68.31. The Call Options and the Warrants are separate and legally distinct instruments that bind CACI and the counterparties and have no binding effect on the holders of the Notes. JV Bank Credit Facility eVentures, a joint venture between the Company and ActioNet, Inc. (see Note 17), entered into a $1.5 million revolving credit facility (the JV Facility). The JV Facility is a four-year, guaranteed facility that permits continuously renewable borrowings of up to $1.5 million with an expiration date of the earliest of September 14, 2011; the date of any restatement, refinancing, or replacement of the Credit Facility without the lender acting as the sole and exclusive administrative agent; or termination of the Credit Facility. Borrowings under the JV Facility bear interest at the lender's prime rate plus 1.0 percent. eVentures pays a fee of 0.25 percent on the unused portion of the JV Facility. As of June 30, 2011, eVentures had no borrowings outstanding under the JV Facility. Cash Flow Hedges The Company periodically uses derivative financial instruments as part of a strategy to manage exposure to market risks associated with interest rate fluctuations. In 2007, the Company entered into two interest rate swap agreements and in 2008, the Company entered into an interest rate cap agreement. Both agreements qualified as effective hedges and both expired during the Company's fiscal year ended June 30, 2010. The Company does not hold or issue derivative financial instruments for trading purposes. The effect of derivative instruments in the consolidated statements of operations and accumulated other comprehensive loss for the years ended June 30, 2011, 2010 and 2009 is as follows (in thousands):
|  | Interest Rate Swaps |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Gain (loss) recognized in other comprehensive income (loss) (effective portion) |  | $ | — |  |  | $ | 1,045 |  |  | $ | (332 | )
Loss reclassified to earnings from accumulated other comprehensive loss (effective portion) |  | $ | — |  |  | $ | (1,817 | ) |  | $ | (1,795 | )
Gain recognized in earnings (ineffective portion) |  |  | — |  |  |  | — |  |  |  | — |
|  | $ | — |  |  | $ | (1,817 | ) |  | $ | (1,795 | )
As of June 30, 2011, the Company had no outstanding derivative instruments. The aggregate maturities of long-term debt at June 30, 2011 are as follows (in thousands):
Year ending June 30, |  |  |  |
2012 |  | $ | 7,500 |
2013 |  |  | 7,500 |
2014 |  |  | 311,250 |
2015 |  |  | 15,000 |
2016 |  |  | 105,000 |
Principal amount of long-term debt |  |  | 446,250 |
Less unamortized discount |  |  | (36,313 | )
Total long-term debt |  | $ | 409,937 |

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- Definition The entire disclosure for long-term debt. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 22 -Article 5 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
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