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Long-term Debt | 9 Months Ended
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Mar. 31, 2014
Long-Term Debt [Abstract] |
Long-term Debt |
4. | Long-term Debt
Long-term debt consisted of the following (in thousands):
|  | March 31, 2014 |  |  | June 30, 2013 |
Convertible notes payable |  | $ | 300,000 |  |  | $ | 300,000 |
Bank credit facility – Term Loan |  |  | 831,250 |  |  |  | 131,250 |
Bank credit facility – Revolving Facility |  |  | 190,000 |  |  |  | 180,000 |
Principal amount of long-term debt |  |  | 1,321,250 |  |  |  | 611,250 |
Less unamortized discount |  |  | (1,176 | ) |  |  | (11,421 | )
Less unamortized debt issuance costs |  |  | (5,547 | ) |  |  | (3,522 | )
Total long-term debt |  |  | 1,314,527 |  |  |  | 596,307 |
Less current portion |  |  | (51,953 | ) |  |  | (295,517 | )
Long-term debt, net of current portion |  | $ | 1,262,574 |  |  | $ | 300,790 |
Bank Credit Facility As of March 31, 2014, the Company has a $1.7 billion credit facility (the Credit Facility), which consists of an $850.0 million revolving credit facility (the Revolving Facility) and an $831.3 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. At any time and so long as no default has occurred, the Company has the right to increase the Revolving Facility or the Term Loan in an aggregate principal amount of up to the greater of $400.0 million or an amount subject to 2.75 times senior secured leverage, calculated assuming the Revolving Facility is fully drawn, 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 Credit Facility was amended on November 15, 2013 in connection with the Company’s acquisition of Six3 Systems. See Note 2. Prior to the amendment, the Credit Facility consisted of a $750.0 million revolving credit facility and a $150.0 million term loan. In connection with the amendment, which allowed for the incurrence of $700.0 million of additional term loans and a $100.0 million increase in the Revolving Facility, the Company evaluated each creditor with ownership in the debt before and after the additional borrowings to determine whether the additional borrowings should be accounted for as a modification or an extinguishment of debt as it relates to each individual holder. As a result of this analysis, the Company recorded a $4.1 million loss on extinguishment within indirect costs and selling expenses in the three month period ended December 31, 2013. The Credit Facility matures on November 15, 2018. The Revolving Facility is a secured facility that permits continuously renewable borrowings of up to $850.0 million. As of March 31, 2014, the Company had $190.0 million outstanding under the Revolving Facility, no borrowings on the swing line and an outstanding letter of credit of $0.4 million. 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 $10.4 million through December 31, 2016 and $20.8 million thereafter until the balance is due in full on November 15, 2018. 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 March 31, 2014, the effective interest rate, including the impact of the Company’s floating-to-fixed interest rate swap agreements and excluding the effect of amortization of debt financing costs, for the outstanding borrowings under the Credit Facility was 2.29 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 has capitalized $18.1 million of debt issuance costs associated with the Credit Facility. All debt issuance costs are being amortized from the date incurred to the expiration date of the Credit Facility. As of March 31, 2014, $5.5 million of the unamortized balance is included in long-term debt and $6.6 million is included in other long-term assets. 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. The Notes mature on May 1, 2014. See Note 11. 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. For the three and nine months ended March 31, 2014 and 2013, the components of interest expense related to the Notes were as follows (in thousands):
|  | Three Months Ended March 31, |  |  | Nine Months Ended March 31, |
|  | 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Coupon interest |  | $ | 1,593 |  |  | $ | 1,594 |  |  | $ | 4,781 |  |  | $ | 4,781 |
Non-cash amortization of discount |  |  | 3,476 |  |  |  | 3,248 |  |  |  | 10,245 |  |  |  | 9,573 |
Amortization of issuance costs |  |  | 205 |  |  |  | 205 |  |  |  | 615 |  |  |  | 615 |
Total |  | $ | 5,274 |  |  | $ | 5,047 |  |  | $ | 15,641 |  |  | $ | 14,969 |
The balance of the unamortized discount as of March 31, 2014 and June 30, 2013, was $1.2 million and $11.4 million, respectively. The balance as of March 31, 2014 will be amortized as additional, non-cash interest expense over the remaining term of the Notes (through May 1, 2014). The fair value of the Notes as of March 31, 2014 was $418.5 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 three months ended March 31, 2014 and 2013 because CACI’s average stock price during both three month periods was above the conversion price of $54.65 per share. 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 was offset in the Company’s balance sheet by the $30.7 million deferred tax liability originally 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 result in additional diluted shares outstanding when 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. The Company has classified the Notes as long-term on the accompanying balance sheet as of March 31, 2014 as the Company has sufficient borrowing capacity under the Credit Facility to repay the Notes when they come due. 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. The Company has entered into several floating-to-fixed interest rate swap agreements for an aggregate notional amount of $400.0 million which hedge a portion of the Company’s floating rate indebtedness. The swaps mature at various dates through 2019. The Company has designated the swaps as cash flow hedges. Unrealized gains are recognized as assets while unrealized losses are recognized as liabilities. The interest rate swap agreements are highly correlated to the changes in interest rates to which the Company is exposed. Unrealized gains and losses on these swaps are designated as effective or ineffective. The effective portion of such gains or losses is recorded as a component of accumulated other comprehensive income or loss, while the ineffective portion of such gains or losses is recorded as a component of interest expense. Realized gains and losses in connection with each required interest payment are reclassified from accumulated other comprehensive income or loss to interest expense. The Company does not hold or issue derivative financial instruments for trading purposes. The effect of derivative instruments in the condensed consolidated statements of operations and accumulated other comprehensive loss for the three and nine months ended March 31, 2014 and 2013 is as follows (in thousands):
|  | Three Months Ended March 31, |  |  | Nine Months Ended March 31, |
|  | 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Loss recognized in other comprehensive income |  | $ | 1,175 |  |  | $ | 40 |  |  | $ | 1,370 |  |  | $ | 666 |
Loss reclassified to earnings from accumulated other comprehensive loss |  | $ | 336 |  |  | $ | — |  |  | $ | 1,010 |  |  | $ | — |
The aggregate maturities of long-term debt at March 31, 2014 are as follows (in thousands):
Twelve months ending March 31, |  |  |
2015 |  | $ | 51,953 |
2016 |  |  | 41,563 |
2017 |  |  | 51,953 |
2018 |  |  | 83,125 |
2019 |  |  | 1,092,656 |
Principal amount of long-term debt |  |  | 1,321,250 |
Less unamortized discount |  |  | (1,176 | )
Less unamortized debt issuance costs |  |  | (5,547 | )
Total long-term debt |  | $ | 1,314,527 |

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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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