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Financial Instruments | 9 Months Ended
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Sep. 27, 2020
Debt Disclosure [Abstract] |
Financial Instruments | Financial Instruments The Company's financial instruments include cash and cash equivalents, accounts receivable, short-term borrowings, accounts payable and certain accrued liabilities. At September 27, 2020, September 29, 2019 and December 29, 2019, the carrying cost of these instruments approximated their fair value. The Company's financial instruments at September 27, 2020, September 29, 2019 and December 29, 2019 also include certain assets and liabilities measured at fair value (see Notes 10 and 11) as well as long-term borrowings. The carrying costs, which are equal to the outstanding principal amounts, and fair values of the Company's long-term borrowings as of September 27, 2020, September 29, 2019 and December 29, 2019 are as follows:
| September 27, 2020 |  | September 29, 2019 |  | December 29, 2019
| Carrying Cost |  | Fair Value |  | Carrying Cost |  | Fair Value |  | Carrying Cost |  | Fair Value
3.90% Notes Due 2029 | $ | 900,000 |  |  | 947,520 |  |  | $ | — |  |  | — |  |  | $ | 900,000 |  |  | 893,430 |
3.55% Notes Due 2026 | 675,000 |  |  | 716,108 |  |  | — |  |  | — |  |  | 675,000 |  |  | 680,670 |
3.00% Notes Due 2024 | 500,000 |  |  | 531,850 |  |  | — |  |  | — |  |  | 500,000 |  |  | 502,150 |
6.35% Notes Due 2040 | 500,000 |  |  | 587,400 |  |  | 500,000 |  |  | 587,850 |  |  | 500,000 |  |  | 581,600 |
3.50% Notes Due 2027 | 500,000 |  |  | 518,750 |  |  | 500,000 |  |  | 511,200 |  |  | 500,000 |  |  | 500,550 |
2.60% Notes Due 2022 | 300,000 |  |  | 310,680 |  |  | — |  |  | — |  |  | 300,000 |  |  | 300,960 |
5.10% Notes Due 2044 | 300,000 |  |  | 313,350 |  |  | 300,000 |  |  | 310,080 |  |  | 300,000 |  |  | 301,980 |
3.15% Notes Due 2021 | 300,000 |  |  | 303,540 |  |  | 300,000 |  |  | 303,300 |  |  | 300,000 |  |  | 303,900 |
6.60% Debentures Due 2028 | 109,895 |  |  | 130,324 |  |  | 109,895 |  |  | 133,555 |  |  | 109,895 |  |  | 130,610 |
Variable % Notes Due December 30, 2022 | 400,000 |  |  | 400,000 |  |  | — |  |  | — |  |  | — |  |  | — |
Variable % Notes Due December 30, 2024 | 577,500 |  |  | 577,500 |  |  | — |  |  | — |  |  | — |  |  | — |
Production Financing Facilities | 121,444 |  |  | 121,444 |  |  | — |  |  | — |  |  | — |  |  | — |
Total long-term debt | 5,183,839 |  |  | 5,458,466 |  |  | 1,709,895 |  |  | 1,845,985 |  |  | 4,084,895 |  |  | 4,195,850 |
Less: Deferred debt expenses | 36,763 |  |  | — |  |  | 13,691 |  |  | — |  |  | 38,438 |  |  | — |
Less: Current portion | 369,269 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Long-term debt | $ | 4,777,807 |  |  | 5,458,466 |  |  | $ | 1,696,204 |  |  | 1,845,985 |  |  | $ | 4,046,457 |  |  | 4,195,850 |
In November 2019, in conjunction with the Company's acquisition of eOne, the Company issued an aggregate of $2,375,000 of senior unsecured debt securities (the "Notes") consisting of the following tranches: $300,000 of notes due 2022 (the "2022 Notes") that bear interest at a fixed rate of 2.60%, $500,000 of notes due 2024 (the "2024 Notes") that bear interest at a fixed rate of 3.00%, $675,000 of notes due 2026 (the "2026 Notes") that bear interest at a fixed rate of 3.55% and $900,000 of notes due 2029 (the "2029 Notes") that bear interest at a fixed rate of 3.90%. Net proceeds from the issuance of the Notes, after deduction of $20,043 of underwriting discount and fees, totaled $2,354,957. These costs are being amortized over the life of the Notes, which range from three to ten years. The Notes bear interest at the stated rates but may be subject to upward adjustment if the credit rating of the Company is reduced by Moody's or Standard & Poors. The adjustment can be from 0.25% to 2.00% based on the extent of the ratings decrease. The Company may redeem the Notes at its option at the greater of the principal amount of the Notes or the present value of the remaining scheduled payments discounted using the effective interest rate on applicable U.S. Treasury bills at the time of repurchase, plus (1) 15 basis points (in the case of the 2022 Notes); (2) 25 basis points (in the case of the 2024 Notes); (3) 30 basis points (in the case of the 2026 Notes); and (4) 35 basis points (in the case of the 2029 Notes). In addition, on and after October 19, 2024 for the 2024 Notes, September 19, 2026 for the 2026 Notes and August 19, 2029 for the 2029 Notes, such series of Notes will be redeemable, in whole at any time or in part from time to time, at the Company's option at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus any accrued and unpaid interest. In September 2019, the Company entered into a $1.0 billion Term Loan Agreement (the "Term Loan Agreement”) with Bank of America N.A. (“Bank of America”), as administrative agent, and certain financial institutions as lenders, pursuant to which such lenders committed to provide, contingent upon the completion of the eOne Acquisition and certain other customary conditions to funding, (1) a three-year senior unsecured term loan facility in an aggregate principal amount of $400,000 (the “Three-Year Tranche”) and (2) a five-year senior unsecured term loan facility in an aggregate principal amount of $600,000 (the “Five-Year Tranche” and together with the Three-Year Tranche, the “Term Loan Facilities”). Loans under the Term Loan Facilities bear interest at the Company’s option, at either the Eurocurrency Rate or the Base Rate, in each case plus a per annum applicable rate that fluctuates (1) in the case of the Three-Year Tranche, between 87.5 basis points and 175.0 basis points, in the case of loans priced at the Eurocurrency Rate, and between 0.0 basis points and 75.0 basis points, in the case of loans priced at the Base Rate, and (2) in the case of the Five-Year Tranche, between 100.0 basis points and 187.5 basis points, in the case of loans priced at the Eurocurrency Rate, and between 0.0 basis points and 87.5 basis points, in the case of loans priced at the Base Rate, in each case, based upon the non-credit enhanced, senior unsecured long-term debt ratings of the Company by Fitch Ratings Inc., Moody’s Investor Service, Inc. and S&P Global Rankings, subject to certain provisions taking into account potential differences in ratings issued to the relevant rating agencies or a lack of ratings issued by such rating agencies. Loans under the Five-Year Tranche require principal amortization payments that are payable in equal quarterly installments of 5.0% per annum of the original principal amount thereof for each of the first two years after funding, increasing to 10.0% per annum of the original principal amount thereof for each subsequent year. The Term Loan Agreement contains affirmative and negative covenants typical of this type of facility, including: (i) restrictions on the Company’s and its domestic subsidiaries’ ability to allow liens on their assets, (ii) restrictions on the incurrence of indebtedness, (iii) restrictions on the Company’s and certain of its subsidiaries’ ability to engage in certain mergers, (iv) the requirement that the Company maintain a Consolidated Interest Coverage Ratio of no less than 3.00:1.00 as of the end of any fiscal quarter and (v) the requirement that the Company maintain a Consolidated Total Leverage Ratio of no more than, depending on the gross proceeds of equity securities issued after the effective date of the acquisition of eOne, 5.65:1.00 or 5.40:1.00 for each of the first, second and third fiscal quarters ended after the funding of the Term Loan Facilities, with periodic step downs to 3.50:1.00 for the fiscal quarter ending December 31, 2023 and thereafter. The notes were drawn down on December 30, 2019, the closing date of the eOne Acquisition. During the first nine months of 2020, the Company made its required quarterly principal amortization payments totaling $22,500 on the Five-Year Tranche loans. As of September 27, 2020, the Company was in compliance with the financial covenants contained in the Term Loan Agreement. Current portion long-term debt at September 27, 2020 o f $369,269, as shown on the consolidated balance sheet, represents the $300,000 of 3.15% Notes that mature during the second quarter of 2021, as well as the current portion of required quarterly principal amortization payments for the Term Loan Facilities and other production financing facilities. All of the Company’s other long-term borrowings have contractual maturities that occur subsequent to 2021 with the exception of certain of the Company’s production financing facilities. The fair values of the Company's long-term debt are considered Level 3 fair values (see Note 10 for further discussion of the fair value hierarchy) and are measured using the discounted future cash flows method. In addition to the debt terms, the valuation methodology includes an assumption of a discount rate that approximates the current yield on a similar debt security. This assumption is considered an unobservable input in that it reflects the Company's own assumptions about the inputs that market participants would use in pricing the asset or liability. The Company believes that this is the best information available for use in the fair value measurement. Production Financing In addition to the Company's financial instruments, the Company uses production financing to fund certain of its television and film productions which are arranged on an individual production basis by special purpose production subsidiaries. Production financing facilities are secured by the assets and future revenue of the individual production subsidiaries and are non-recourse to the Company's assets. Production financing facilities typically have maturities of less than two years, while the titles are in production, and are repaid once delivered and all credits, broadcaster pre-sales and international sales have been received.
| Quarter Ended
| September 27, 2020
Production financing held by production subsidiaries | $ | 121,444 |
Other loans | 8,998 |
Total | $ | 130,442 |
Production financing shown in the consolidated balance sheet as: |
Non-current | $ | 82,175 |
Current | 39,269 |
Total | $ | 121,444 |
Other loans of $8,998, consist of production related demand loans, and are recorded within Short-term Borrowings in the Company's consolidated balance sheets. Interest is charged at bank prime rate plus a margin based on the risk of the respective production. The weighted average interest rate on all production financing as of September 27, 2020 was 5.1%. The Company has Canadian dollar and U.S. dollar production credit facilities with various banks. The carrying amounts are denominated in the following currencies:
| Canadian Dollars |  | U.S. Dollars |  | Total
As of September 27, 2020 | $ | 57,317 |  |  | 73,125 |  |  | 130,442 |
The following table represents the movements in production financing and other related loans acquired as a result of the eOne Acquisition during the first nine months of 2020:
| Production Financing |  | Other Loans |  | Total
December 30, 2019 | $ | 209,651 |  |  | 9,102 |  |  | 218,753 |
Drawdowns | 38,871 |  |  | 22,853 |  |  | 61,724 |
Repayments | (124,824) |  |  | (22,668) |  |  | (147,492) |
Foreign exchange differences | (2,254) |  |  | (289) |  |  | (2,543) |
Balance at September 27, 2020 | $ | 121,444 |  |  | 8,998 |  |  | 130,442 |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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