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NOTE 8-DEBT The Company's short-term and long-term debt and available financing consist of the following:
As of June 30, 2006, the Company had outstanding $230.0 million of 6% Senior Notes due January 2012 ("6% Senior Notes") consisting of $250.0 million principal, an unamortized debt discount of $0.6 million, and a $19.4 million adjustment to reflect the fair value of an outstanding interest rate swap. The 6% Senior Notes, when issued in January 2002, were priced at 99.538% with a yield of 6.062%. Interest payments are required to be made semi-annually on January 15 and July 15 of each year. In May 2003, the Company entered into an interest rate swap agreement with a notional amount of $250.0 million to effectively convert the fixed rate interest on its outstanding 6% Senior Notes to variable interest rates based on six-month LIBOR. As of June 30, 2006, the Company had outstanding $197.4 million of 5.75% Senior Notes due October 2033 ("5.75% Senior Notes") consisting of $200.0 million principal and unamortized debt discount of $2.6 million. Interest payments are required to be made semi-annually on April 15 and October 15 of each year. In May 2003, in anticipation of the issuance of the 5.75% Senior Notes, the Company entered into a series of treasury lock agreements on a notional amount totaling $195.0 million at a weighted average all-in rate of 4.53%. The treasury lock agreements were settled upon the issuance of the new debt and the Company received a payment of $15.0 million that will be amortized against interest expense over the life of the 5.75% Senior Notes. As a result of the treasury lock agreements, the debt discount and debt issuance costs, the effective interest rate on the 5.75% Senior Notes will be 5.395% over the life of the debt. In May 2006, the Company entered into a fixed rate promissory note agreement with a financial institution for the primary purpose of funding cash dividend repatriations from certain of its international affiliates to the United States as permitted by the AJCA. Under the agreement, the Company may borrow up to $150.0 million in the form of loan participation notes which were issued by one of the Company's subsidiaries in Europe. The interest rate on borrowings under this agreement will be an all-in fixed rate determined by the lender and agreed to by the Company at the date of each borrowing. At June 30, 2006, $38.0 million was outstanding under this agreement and the notes are being refinanced on a periodic basis as they mature at the then prevailing market interest rates. Debt issuance costs incurred related to this agreement were de minimis. In March 2006, the Company entered into a 3.0 billion yen revolving credit facility that expires on March 24, 2009. The interest rate on borrowings under the credit facility is based on TIBOR (Tokyo Interbank Offered Rate) and a 10 basis point facility fee is incurred on the undrawn balance. The Company borrowed 3.0 billion yen under the new facility on March 28, 2006 to repay the previously outstanding 1.45% Japan term loan that was to mature on that date. The outstanding balance at June 30, 2006 ($26.2 million at the exchange rate at June 30, 2006) is classified as short-term debt on the Company's consolidated balance sheet. In October 2005, the Company redeemed the remaining $68.4 million of the 2015 Preferred Stock. The Company has a $750.0 million commercial paper program under which it may issue commercial paper in the United States. The Company's commercial paper is currently rated A-1 by Standard & Poor's and P-1 by Moody's. The Company's long-term credit ratings are A+ with a stable outlook by Standard & Poor's and A1 with a stable outlook by Moody's. At June 30, 2006, the Company had no commercial paper outstanding. The Company also has an effective shelf registration statement covering the potential issuance of up to an additional $300.0 million in debt securities at June 30, 2006 and 2005. The Company has an unused $600.0 million senior revolving credit facility that expires on May 27, 2010. The facility may be used for general corporate purposes, including financing working capital, and also as credit support for the Company's commercial paper program. Up to the equivalent of $250.0 million of the facility is available for multi-currency loans. The interest rate on borrowings under the credit facility is based on LIBOR or on the higher of prime, which is the rate of interest publicly announced by the administrative agent, or the Federal funds rate plus 1/2%. The credit facility has an annual fee of $0.4 million, payable quarterly, based on the Company's current credit ratings. The Company incurred debt issuance costs of $0.3 million in fiscal 2005 which are being amortized over the term of the facility. The credit facility contains various covenants, including one financial covenant which requires the average of the debt of the Company to total capital ratio at the last day of each fiscal quarter to be less than 0.65:1. At June 30, 2006, the Company was in compliance with all financial covenants in the credit facility. The Company maintains uncommitted credit facilities in various regions throughout the world. Interest rate terms for these facilities vary by region and reflect prevailing market rates for companies with strong credit ratings. During fiscal 2006 and 2005, the monthly average amount outstanding was approximately $22.8 million and $10.7 million, respectively, and the annualized monthly weighted average interest rate incurred was approximately 5.56% and 4.95%, respectively. Refer to Note 14-Commitments and Contingencies for the Company's projected debt service payments over the next five fiscal years.
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