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Debt

12 Months Ended

Dec. 26, 2020

Debt:

The following table summarizes the Company’s outstanding debt as of the dates indicated (in millions):


	December 26, 2020		December 28, 2019
1.75% Senior Notes due 2030	$	650.0	$	—
3.70% Senior Notes due 2029	150.0		150.0
Senior Credit Facility:
February 2016 Term Loan	—		145.0
June 2017 Term Loan	—		87.5
November 2020 Term Loan	200.0		—
Revolving credit loans	—		15.0
Total outstanding borrowings	1,000.0		397.5
Less: unamortized debt discounts and issuance costs	(15.7)		(1.0)
Total debt	984.3		396.5
Less: current portion of long-term debt	—		(30.0)
Long-term debt	$	984.3	$	366.5

Outstanding letters of credit	$	48.7	$	32.0

1.75% Senior Notes due 2030

On October 30, 2020, the Company issued and sold, in a public offering, $650 million in aggregate principal amount of senior unsecured notes due November 1, 2030 bearing interest at 1.75% per annum (the “1.75% Senior Notes”). The entire principal amount of the 1.75% Senior Notes is due in full on November 1, 2030. Interest is payable semi-annually in arrears on each November 1 and May 1. The terms of the 1.750% Notes are governed by an indenture dated as of October 30, 2020 (the “Base

Indenture”) between the Company and Regions Bank, as trustee, as amended and supplemented by a first supplemental indenture dated as of October 30, 2020 (the “Supplemental Indenture”) between the Company and Regions Bank, as trustee.

The 1.75% Senior Notes are senior unsecured debt obligations of the Company and will rank equally with the Company’s other senior unsecured liabilities and senior to any future subordinated indebtedness of the Company. The 1.75% Senior Notes are subject to customary covenants restricting the Company’s ability, subject to certain exceptions, to incur debt secured by liens, to enter into sale and leaseback transactions or to merge or consolidate with another entity or sell substantially all of its assets to another person.

At any time prior to August 1, 2030, the Company will have the right, at its option, to redeem the 1.75% Senior Notes, in whole or in part, at any time and from time to time, by paying the greater of 100% of the principal amount of the 1.75% Senior Notes to be redeemed, or the sum of the present values of the remaining scheduled payments of principal and interest through the par call date, plus, in each case, accrued and unpaid interest to, but not including, the date of redemption. In addition, on or after August 1, 2030, the Company will have the right, at its option, to redeem the 1.75% Senior Notes, in whole or in part, at any time and from time to time, at a redemption price equal to 100% of the principal amount of the 1.75% Senior Notes to be redeemed, plus accrued and unpaid interest to, but not including, the date of redemption.

If a Change of Control Triggering Event (as defined in the Supplemental Indenture) occurs, unless the Company has exercised its right to redeem the 1.75% Senior Notes, holders of the 1.75% Senior Notes may require the Company to repurchase all or any part of such holder’s 1.75% Senior Notes at a purchase price of 101% of the principal amount, plus accrued and unpaid interest, if any, on such 1.75% Senior Notes to, but not including, the purchase date. Upon the occurrence of an event of default with respect to the 1.75% Senior Notes, which includes payment defaults, defaults in the performance of certain covenants, cross defaults, and bankruptcy and insolvency related defaults, the Company’s obligations under the 1.75% Senior Notes may be accelerated, in which case the entire principal amount of the 1.75% Senior Notes would be due and payable immediately.

Senior Note Facility (including 3.70% Senior Notes due 2029)

On August 14, 2017, the Company entered into a note purchase and private shelf agreement (the “Note Purchase Agreement”), as amended from time to time, pursuant to which the Company agreed to sell, in a private placement, $150 million aggregate principal amount of senior unsecured notes due August 14, 2029 bearing interest at 3.70% per annum (the “3.70% Senior Notes”). The entire principal amount of the 3.70% Senior Notes is due in full on August 14, 2029. Interest is payable semi-annually in arrears on each annual and semi-annual anniversary of the issuance date. The obligations under the Note Purchase Agreement are unsecured.

The Company may from time to time issue and sell additional senior unsecured notes (the “Shelf Notes”) pursuant to the Note Purchase Agreement, in an aggregate principal amount of up to $300 million minus the aggregate principal amount of all Notes outstanding and issued under the Note Purchase Agreement. The Shelf Notes will have a maturity date of no more than 12 years after the date of original issuance and may be issued through November 4, 2023, unless earlier terminated in accordance with the terms of the Note Purchase Agreement.

Pursuant to the Note Purchase Agreement, the 3.70% Senior Notes and any Shelf Notes (collectively, the "Senior Note Facility") are redeemable by the Company, in whole at any time or in part from time to time, at 100% of the principal amount of the Senior Note Facility being redeemed, together with accrued and unpaid interest thereon and a make whole amount calculated by discounting all remaining scheduled payments on the Senior Note Facility by the yield on the U.S. Treasury security with a maturity equal to the remaining average life of the Senior Note Facility plus 0.50%.

Senior Credit Facility

On February 19, 2016, the Company entered into a senior credit facility, as amended from time to time, and as amended and restated on November 4, 2020 (the “Senior Credit Facility”), which provides borrowing capacity under term loan facilities as well as a revolving credit facility. There are no compensating balance requirements associated with the Senior Credit Facility.

The Senior Credit Facility contains a $500 million revolving credit facility (the “Revolver”) with a sublimit of $50 million for swingline loans and a sublimit of $150 million for letters of credit. This agreement is unsecured and matures on November 4, 2023, which, subject to satisfaction of certain terms and conditions, may be extended at the option of the Company to November 4, 2024 (as may be extended, the “ Senior Credit Facility Maturity Date”).

Under the Senior Credit Facility, on November 4, 2020, a $200 million term loan (the “November 2020 Term Loan”) was extended to the Company. The November 2020 Term Loan is unsecured and the entire principal amount is due in full on the Senior Credit Facility Maturity Date.

Borrowings under both the Revolver and the November 2020 Term Loan each bear interest either at the bank’s base rate (3.250% at December 26, 2020) plus an additional amount ranging from 0.000% to 0.375% (0.125% at December 26, 2020) or at the London Inter-Bank Offer Rate (“LIBOR”) (0.146% at December 26, 2020) plus an additional amount ranging from 0.875% to 1.375% per annum (1.125% at December 26, 2020), adjusted based on the Company's public credit ratings. The Company is also required to pay, quarterly in arrears, a commitment fee related to unused capacity on the Revolver ranging from 0.090% to 0.200% per annum (0.125% at December 26, 2020), adjusted based on the Company's public credit ratings.

As further described in Note 5, the Company has entered into an interest rate swap agreement in order to hedge our exposure to variable rate interest payments associated with the Senior Credit Facility.

On February 19, 2016, the Company entered into a $200 million term loan agreement (the “February 2016 Term Loan”). This agreement was repaid in full on November 4, 2020 and is no longer in effect.

On June 15, 2017, the Company entered into a $100 million incremental term loan agreement (the “June 2017 Term Loan”). This agreement was repaid in full on November 4, 2020 and is no longer in effect.

On March 12, 2020, the Company entered into a $200 million incremental term loan agreement (the “March 2020 Term Loan”). This agreement was repaid in full on November 4, 2020 and is no longer in effect.

On April 22, 2020, the Company entered into a $350 million incremental term loan agreement (the "April 2020 Term Loan"). This agreement was repaid in full on October 30, 2020 and is no longer in effect.

Covenants and Default Provisions of the Debt Agreements

The Senior Credit Facility and the Note Purchase Agreement (collectively, the “Debt Agreements”) require quarterly compliance with respect to two material covenants: a fixed charge coverage ratio and a leverage ratio. Both ratios are calculated on a trailing twelve-month basis at the end of each fiscal quarter. The fixed charge coverage ratio compares earnings before interest, taxes, depreciation, amortization, share-based compensation and rent expense (“consolidated EBITDAR”) to the sum of interest paid and rental expense (excluding any straight-line rent adjustments). The fixed charge coverage ratio shall be greater than or equal to 2.00 to 1.0 as of the last day of each fiscal quarter. The leverage ratio compares total funded debt to consolidated EBITDAR. The leverage ratio shall be less than or equal to 4.00 to 1.0 as of the last day of each fiscal quarter. The Debt Agreements also contain certain other restrictions regarding additional subsidiary indebtedness, business operations, subsidiary guarantees, mergers, consolidations and sales of assets, transactions with subsidiaries or affiliates, and liens. As of December 26, 2020, the Company was in compliance with all debt covenants.

The Debt Agreements contain customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, certain events of bankruptcy and insolvency, material judgments, certain ERISA events and invalidity of loan documents. Upon certain changes of control, payment under the Debt Agreements could become due and payable. In addition, under the Note Purchase Agreement, upon an event of default or change of control, the make whole payment described above may become due and payable.

The Note Purchase Agreement also requires that, in the event the Company amends its Senior Credit Facility, or any subsequent credit facility of $100 million or greater, such that it contains covenant or default provisions that are not provided in the Note Purchase Agreement or that are similar to those contained in the Note Purchase Agreement but which contain percentages, amounts, formulas or grace periods that are more restrictive than those set forth in the Note Purchase Agreement or are otherwise more beneficial to the lenders thereunder, the Note Purchase Agreement shall be automatically amended to include such additional or amended covenants and/or default provisions.

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Share-Based Compensation:

Share-based compensation includes stock options, restricted stock units, performance-based restricted share units, and certain transactions under the Company’s ESPP. Share-based compensation expense is recognized based on the grant date fair value of all stock options, restricted stock units, and performance-based restricted share units. Share based compensation expense is also recognized for the value of the 15% discount on shares purchased by employees as a part of the ESPP. The discount under the ESPP represents the difference between the purchase date market value and the employee’s purchase price.

There were no significant modifications to the Company's share-based compensation plans since the adoption of the 2018 Omnibus Incentive Plan (the “2018 Plan”) on May 10, 2018, which replaced the 2009 Stock Incentive Plan. Following the adoption of the 2018 Plan, no further grants may be made under the 2009 Stock Incentive Plan.

Under our share-based compensation plans, awards may be granted to officers, non-employee directors, other employees, and independent contractors. The per share exercise price of options granted shall not be less than the fair market value of the stock on the date of grant and such awards will expire no later than ten years from the date of grant. Vesting of awards commences at various anniversary dates following the dates of each grant and certain awards will vest only upon established performance conditions being met. At December 26, 2020, the Company had approximately 10.6 million shares available for future equity awards under the Company’s 2018 Plan.

Share-based compensation expense, including changes in expense for modifications, if any, of awards, was $37.3 million, $31.1 million, and $28.9 million for fiscal 2020, 2019, and 2018, respectively.

Stock Options

The fair value is separately estimated for each option grant. The fair value of each option is recognized as compensation expense ratably over the vesting period. The Company has estimated the fair value of all stock option awards as of the date of the grant by applying a Black-Scholes pricing valuation model. The application of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of compensation expense. The ranges of key assumptions used in determining the fair value of options granted during fiscal 2020, 2019, and 2018, as well as a summary of the methodology applied to develop each assumption, are as follows:


	Fiscal Year
	2020		2019		2018
Expected price volatility	26.7 - 30.0%		26.4 - 27.6%		26.4 - 27.0%
Risk-free interest rate	0.2 - 1.3%		1.6 - 2.5%		2.5 - 3.0%
Weighted average expected term (in years)	4.3		4.5		4.5
Forfeiture rate	7.0	%	7.3	%	7.3	%
Dividend yield	1.5	%	1.4	%	1.6	%

Expected Price Volatility — This is a measure of the amount by which a price has fluctuated or is expected to fluctuate. The Company applies a historical volatility rate. To calculate historical changes in market value, the Company uses daily market value changes from the date of grant over a past period generally representative of the expected life of the options to determine volatility. The Company believes the use of historical price volatility provides an appropriate indicator of future volatility. An increase in the expected volatility will increase compensation expense.

Risk-Free Interest Rate — This is the U.S. Treasury Constant Maturity rate over a term equal to the expected term of the option. An increase in the risk-free interest rate will increase compensation expense.

Weighted Average Expected Term — This is the period of time over which the options granted are expected to remain outstanding and is based on historical experience. Options granted generally have a maximum term of ten years. An increase in the expected term will increase compensation expense.

Forfeiture Rate — This is the estimated percentage of options granted that are expected to be forfeited or canceled before becoming fully vested. This estimate is based on historical experience. An increase in the forfeiture rate will decrease compensation expense.

Dividend Yield — This is the estimated dividend yield for the weighted average expected term of the option granted. An increase in the dividend yield will decrease compensation expense.

The Company issues shares for options when exercised. A summary of stock option activity is as follows:


Stock Option Activity	Options	Weighted Average Exercise Price		Weighted Average Fair Value		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (in thousands)










Outstanding at December 28, 2019	2,817,519	$	75.34			6.8	$	47,834
Granted	443,967	94.62		$	19.97
Exercised	(1,269,533)	74.17
Canceled	(59,543)	78.93
Outstanding at December 26, 2020	1,932,410	$	80.44			5.8	$	128,411

Exercisable at December 26, 2020	1,199,968	$	75.21			4.1	$	86,005

The aggregate intrinsic values in the table above represent the total difference between the Company’s closing stock price at each year-end and the option exercise price, multiplied by the number of in-the-money options at each year-end. As of December 26, 2020, total unrecognized compensation expense related to non-vested stock options was approximately $8.5 million with a weighted average expense recognition period of 1.8 years.

There were no material modifications to options in fiscal 2020, 2019, or 2018.

Other information relative to options activity during fiscal 2020, 2019, and 2018 is as follows (in thousands):


	Fiscal Year
	2020		2019		2018
Total fair value of stock options vested	$	12,546	$	16,060	$	18,247
Total intrinsic value of stock options exercised	$	64,395	$	45,101	$	43,476

Restricted Stock Units

The Company issues shares for restricted stock units once vesting occurs and related restrictions lapse. The fair value of the restricted stock units is the closing price of the Company’s common stock the day preceding the grant date, discounted for the expected dividend yield over the term of the award. The units generally vest over a one to three-year term; some plan participants have elected to defer receipt of shares of common stock upon vesting of restricted stock units, and as a result, those shares are not issued until a later date. A summary of restricted stock unit activity is presented below:


Restricted Stock Unit Activity	Restricted Stock Units	Weighted Average Grant Date Fair Value










Restricted at December 28, 2019	543,406	$	73.55
Granted	322,485	96.41
Vested	(238,987)	75.05
Forfeited	(31,259)	80.90
Restricted at December 26, 2020	595,645	$	85.27

Other information relative to restricted stock unit activity during fiscal 2020, 2019, and 2018 is as follows (in thousands):


	Fiscal Year
	2020		2019		2018
Total grant date fair value of restricted stock units vested and issued	$	17,935	$	8,301	$	5,325
Total intrinsic value of restricted stock units vested and issued	$	23,011	$	10,623	$	5,364

There were no material modifications to restricted stock units in fiscal 2020, 2019, or 2018.

As of December 26, 2020, total unrecognized compensation expense related to non-vested restricted stock units was approximately $28.2 million with a weighted average expense recognition period of 1.9 years.

Performance-Based Restricted Share Units

We issue performance-based restricted share units to senior executives that represent shares potentially issuable in the future, subject to the achievement of specified performance goals. The performance metrics for the units are growth in net sales and growth in earnings per diluted share over a specified performance period. Issuance is based upon the level of achievement of the relative performance targets. The fair value of the performance-based restricted share units is the closing price of the Company’s common stock the day preceding the grant date, discounted for the expected dividend yield over the term of the awards. A summary of performance-based restricted share unit activity is presented below:


Performance-Based Restricted Share Unit Activity	Performance-Based Restricted Share Units	Weighted Average Grant Date Fair Value










Restricted at December 28, 2019	93,461	$	75.97
Granted (a)	83,368	88.76

Vested	(29,710)	63.77
Forfeited	(3,851)	74.91
Restricted at December 26, 2020	143,268	$	87.94

(a)Assumes 100% target level achievement of the relative performance targets. The actual number of shares that will be issued, which may be higher or lower than the target, will be determined by the level of achievement of the relative performance targets.

Other information relative to performance-based restricted stock unit activity during fiscal 2020 is as follows (in thousands):


	Fiscal Year
	2020		2019		2018
Total grant date fair value of performance-based restricted stock units vested and issued	$	1,895	$	2,035	$	—
Total intrinsic value of performance-based restricted stock units vested and issued	$	2,826	$	2,666	$	—

There were no material modifications to performance-based restricted share units in fiscal 2020, 2019, or 2018.

As of December 26, 2020, total unrecognized compensation expense related to non-vested performance-based restricted share units was approximately $8.5 million with a weighted average expense recognition period of 1.5 years.

Shares Withheld to Satisfy Tax Withholding Requirements

For the majority of restricted stock units and performance-based restricted share units granted, the number of shares issued on the date these stock awards vest is net of shares withheld by the Company to satisfy the minimum statutory tax withholding requirements, which the Company pays on behalf of its employees. The Company issued 186,751, 103,124, and 53,714 shares as a result of vested restricted stock units and performance-based restricted share units during fiscal 2020, 2019, and 2018, respectively. Although shares withheld are not issued, they are treated similar to common stock repurchases as they reduce the number of shares that would have been issued upon vesting. The amounts are net of 81,946, 41,786, and 17,131 shares withheld to satisfy $7.8 million, $3.8 million, and $1.4 million of employees’ tax obligations during fiscal 2020, 2019, and 2018, respectively.

Employee Stock Purchase Plan

The ESPP provides Company employees the opportunity to purchase, through payroll deductions, shares of common stock at a 15% discount. Pursuant to the terms of the ESPP, the Company issued 63,704, 61,678, and 77,458 shares of common stock during fiscal 2020, 2019, and 2018, respectively. The total cost related to the ESPP, including the compensation expense calculations, was approximately $1.4 million, $1.1 million, and $1.1 million in fiscal 2020, 2019, and 2018, respectively. There is a maximum of 16.0 million shares of common stock that are reserved under the ESPP. At December 26, 2020, there were approximately 11.8 million remaining shares of common stock reserved for future issuance under the ESPP.