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DEBT | 3 Months Ended
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May 03, 2020
Debt Disclosure [Abstract] |
DEBT | 9. DEBT Short-Term Borrowings The Company has the ability to draw revolving borrowings under the senior unsecured credit facilities discussed below in the section entitled “2019 Senior Unsecured Credit Facilities.” The Company had $168.0 million outstanding under these facilities as of May 3, 2020. The weighted average interest rate on funds borrowed as of May 3, 2020 was 1.93%. The maximum amount of revolving borrowings outstanding under these facilities during the thirteen weeks ended May 3, 2020 was $745.7 million. The Company also has the ability to draw revolving borrowings under its new 364-day unsecured revolving credit facility, as discussed in the section entitled “2020 Unsecured Revolving Credit Facility” below. The Company had no borrowings outstanding under this facility as of or during the thirteen weeks ended May 3, 2020. Additionally, the Company has the ability to borrow under short-term lines of credit, overdraft facilities and short-term revolving credit facilities denominated in various foreign currencies. These facilities provided for borrowings of up to $174.4 million based on exchange rates in effect on May 3, 2020 and are utilized primarily to fund working capital needs. The Company had $73.8 million outstanding under these facilities as of May 3, 2020. The weighted average interest rate on funds borrowed as of May 3, 2020 was 1.94%. The maximum amount of borrowings outstanding under these facilities during the thirteen weeks ended May 3, 2020 was $73.8 million. Commercial Paper The Company has the ability to issue, from time to time, unsecured commercial paper notes with maturities that vary but do not exceed 397 days from the date of issuance primarily to fund working capital needs. The Company had $80.3 million of borrowings outstanding under the commercial paper note program as of May 3, 2020, all of which matured in May 2020. The weighted average interest rate on funds borrowed under the program as of May 3, 2020 was 2.05%. The maximum amount of borrowings outstanding under the program during the thirteen weeks ended May 3, 2020 was $165.0 million. The commercial paper program allows for borrowings of up to $675.0 million to the extent that the Company has borrowing capacity under the United States dollar-denominated revolving credit facility included in the 2019 facilities (as defined below). Accordingly, the combined aggregate amount of (i) borrowings outstanding under the commercial paper note program and (ii) the revolving borrowings outstanding under the United States dollar-denominated revolving credit facility at any one time cannot exceed $675.0 million. The maximum aggregate amount of borrowings outstanding under the commercial paper program and the United States dollar-denominated portion of the revolving credit facility during the thirteen weeks ended May 3, 2020 was $659.9 million. 2020 Unsecured Revolving Credit Facility On April 8, 2020, the Company entered into a 364-day $275.0 million United States dollar-denominated unsecured revolving credit facility (the “2020 facility”). The Company may increase the commitment under the 2020 facility by an aggregate amount not to exceed $100.0 million, subject to certain customary conditions. The 2020 facility will mature on April 7, 2021. The Company incurred $2.0 million of debt issuance costs during the first quarter of 2020, which are being amortized over the term of the debt agreement. Currently, the Company’s obligations under the 2020 facility are unsecured and are not guaranteed by any of the Company’s subsidiaries. However, within 120 days after the occurrence of a specified credit ratings decrease (as set forth in the 2020 facility), (i) the Company must cause each of its wholly owned United States subsidiaries (subject to certain customary exceptions) to become a guarantor under the 2020 facility and (ii) the Company and each subsidiary guarantor will be required to grant liens, as collateral agent, on substantially all of their respective assets (subject to customary exceptions). The outstanding borrowings under the 2020 facility are prepayable at any time without penalty (other than customary breakage costs). The borrowings under the 2020 facility bear an interest rate equal to an applicable margin plus, as determined at the Company’s option, either (a) a base rate determined by reference to the greater of (i) the prime rate, (ii) the United States federal funds effective rate plus 1/2 of 1.00% and (iii) a one-month reserve adjusted Eurocurrency rate plus 1.00% or (b) an adjusted Eurocurrency rate, calculated in a manner set forth in the 2020 facility. The initial applicable margin with respect to the borrowings will be 2.250% for adjusted Eurocurrency rate loans and 1.250% for base rate loans. The applicable margin for borrowings will be adjusted based upon the Company’s public debt rating after the date of delivery of notice of a change in the Company’s public debt rating by Standard & Poor’s and Moody’s. The Company had no borrowings outstanding under the 2020 facility during the thirteen weeks ended May 3, 2020. The 2020 facility requires the Company to comply with customary affirmative, negative and financial covenants, including a minimum interest coverage ratio and maximum net leverage ratio, which are subject to change in the event that, and in the same manner as, the minimum interest coverage ratio and maximum net leverage ratio covenants under the 2019 facilities are amended. Refer to the section entitled “2019 Senior Unsecured Credit Facilities” below for discussion of an amendment to the 2019 facilities in June 2020. A breach of any of these operating or financial covenants would result in a default under the 2020 facility. If an event of default occurs and is continuing, the lenders could elect to declare all amounts then outstanding, together with accrued interest, to be immediately due and payable, which would result in acceleration of the Company’s other debt. The 2020 facility contains other customary events of default in addition to violations of covenants discussed above, including but not limited to nonpayment; material inaccuracy of representations and warranties; certain bankruptcies and liquidations; cross-default to material indebtedness; certain material judgments; certain events related to the Employee Retirement Income Security Act of 1974, as amended; and a change in control (as defined in the 2020 facility). Long-Term Debt The carrying amounts of the Company’s long-term debt were as follows:
(In millions) | 5/3/20 |  | 2/2/20 |  | 5/5/19 |
Senior unsecured Term Loan A facilities due 2024 (1)(2) | $ | 1,558.4 |  |  | $ | 1,569.5 |  |  | $ | 1,644.0 |  |
7 3/4% debentures due 2023 | 99.7 |  |  | 99.7 |  |  | 99.6 |  |
3 5/8% senior unsecured euro notes due 2024 (2) | 564.3 |  | (3)(4) | 382.9 |  | (3) |  | 385.8 |  | (3) |
3 1/8% senior unsecured euro notes due 2027 (2) | 645.4 |  |  | 655.6 |  |  | 661.0 |  |
Total | 2,867.8 |  |  | 2,707.7 |  |  | 2,790.4 |  |
Less: Current portion of long-term debt | 13.6 |  |  | 13.8 |  |  | 31.0 |  |
Long-term debt | $ | 2,854.2 |  |  | $ | 2,693.9 |  |  | $ | 2,759.4 |  |
(1) The outstanding principal balance for the United States dollar-denominated Term Loan A facility and the euro-denominated Term Loan A facility was $1,029.6 million and €490.6 million, respectively, as of May 3, 2020. (2) The carrying amount of the Company’s euro-denominated Term Loan A facility and senior unsecured euro notes includes the impact of changes in the exchange rate of the United States dollar against the euro. (3) Includes €350.0 million principal amount of 3 5/8% senior unsecured euro notes due 2024 that were issued on June 20, 2016. (4) Includes an additional €175.0 million principal amount of 3 5/8% senior unsecured euro notes due 2024 that were issued on April 24, 2020. Please see Note 12, “Fair Value Measurements,” for the fair value of the Company’s long-term debt as of May 3, 2020, February 2, 2020 and May 5, 2019. As of May 3, 2020, the Company’s mandatory long-term debt repayments for the remainder of 2020 through 2025 were as follows:
(In millions) |
Fiscal Year | Amount (1)
Remainder of 2020 | $ | 10.2 |
2021 | 38.7 |
2022 | 102.3 |
2023 | 222.8 |
2024 | 1,860.2 |
2025 | — |
(1) A portion of the Company’s mandatory long-term debt repayments are denominated in euro and subject to changes in the exchange rate of the United States dollar against the euro. Total debt repayments for the remainder of 2020 through 2025 exceed the total carrying amount of the Company’s Term Loan A facilities, 7 3/4% debentures due 2023 and 3 5/8% senior euro notes due 2024 as of May 3, 2020 because the carrying amount reflects the unamortized portions of debt issuance costs and the original issue discounts. As of May 3, 2020, after taking into account the effect of the Company’s interest rate swap agreements discussed in the section entitled “2019 Senior Unsecured Credit Facilities,” which were in effect as of such date, approximately 65% of the Company’s long-term debt had fixed interest rates, with the remainder at variable interest rates. 2016 Senior Secured Credit Facilities On May 19, 2016, the Company entered into an amendment to its senior secured credit facilities (as amended, the “2016 facilities”). The Company replaced the 2016 facilities with new senior unsecured credit facilities on April 29, 2019 as discussed in the section entitled “2019 Senior Unsecured Credit Facilities” below. The 2016 facilities, as of the date they were replaced, consisted of a $2,347.4 million United States dollar-denominated Term Loan A facility and senior secured revolving credit facilities consisting of (i) a $475.0 million United States dollar-denominated revolving credit facility, (ii) a $25.0 million United States dollar-denominated revolving credit facility available in United States dollars and Canadian dollars and (iii) a €185.9 million euro-denominated revolving credit facility available in euro, British pound sterling, Japanese yen and Swiss francs. 2019 Senior Unsecured Credit Facilities The Company refinanced the 2016 facilities on April 29, 2019 (the “Closing Date”) by entering into senior unsecured credit facilities (the “2019 facilities”), the proceeds of which, along with cash on hand, were used to repay all of the outstanding borrowings under the 2016 facilities, as well as the related debt issuance costs. The 2019 facilities consist of a $1,093.2 million United States dollar-denominated Term Loan A facility (the “USD TLA facility”), a €500.0 million euro-denominated Term Loan A facility (the “Euro TLA facility” and together with the USD TLA facility, the “TLA facilities”) and senior unsecured revolving credit facilities consisting of (i) a $675.0 million United States dollar-denominated revolving credit facility, (ii) a CAD $70.0 million Canadian dollar-denominated revolving credit facility available in United States dollars or Canadian dollars, (iii) a €200.0 million euro-denominated revolving credit facility available in euro, British pound sterling, Japanese yen, Swiss francs, Australian dollars and other agreed foreign currencies and (iv) a $50.0 million United States dollar-denominated revolving credit facility available in United States dollars or Hong Kong dollars. The 2019 facilities are due on April 29, 2024. In connection with the refinancing of the senior credit facilities, the Company paid debt issuance costs of $10.4 million (of which $3.5 million was expensed as debt modification costs and $6.9 million is being amortized over the term of the debt agreement) and recorded debt extinguishment costs of $1.7 million to write off previously capitalized debt issuance costs. Each of the senior unsecured revolving facilities, except for the $50.0 million United States dollar-denominated revolving credit facility available in United States dollars or Hong Kong dollars, also include amounts available for letters of credit and have a portion available for the making of swingline loans. The issuance of such letters of credit and the making of any swingline loan reduces the amount available under the applicable revolving credit facility. So long as certain conditions are satisfied, the Company may add one or more senior unsecured term loan facilities or increase the commitments under the senior unsecured revolving credit facilities by an aggregate amount not to exceed $1,500.0 million. The lenders under the 2019 facilities are not required to provide commitments with respect to such additional facilities or increased commitments. The Company had loans outstanding of $1,558.4 million, net of debt issuance costs and based on applicable exchange rates, under the TLA facilities, $168.0 million of borrowings outstanding under the senior unsecured revolving credit facilities and $24.2 million of outstanding letters of credit under the senior unsecured revolving credit facilities as of May 3, 2020. The terms of the TLA facilities require the Company to make quarterly repayments of amounts outstanding under the 2019 facilities, which commenced with the calendar quarter ended September 30, 2019. Such required repayment amounts equal 2.50% per annum of the principal amount outstanding on the Closing Date for the first eight calendar quarters following the Closing Date, 5.00% per annum of the principal amount outstanding on the Closing Date for the four calendar quarters thereafter and 7.50% per annum of the principal amount outstanding on the Closing Date for the remaining calendar quarters, in each case paid in equal installments and in each case subject to certain customary adjustments, with the balance due on the maturity date of the TLA facilities. The outstanding borrowings under the 2019 facilities are prepayable at any time without penalty (other than customary breakage costs). Any voluntary repayments made by the Company would reduce the future required repayment amounts. The Company made payments of $3.4 million on its term loans under the 2019 facilities during the thirteen weeks ended May 3, 2020. The Company made no payments on its term loans under the 2019 facilities and 2016 facilities during the thirteen weeks ended May 5, 2019 other than the repayment of the 2016 facilities in connection with the refinancing of the 2016 senior credit facilities. The United States dollar-denominated borrowings under the 2019 facilities bear interest at a rate equal to an applicable margin plus, as determined at the Company's option, either (a) a base rate determined by reference to the greater of (i) the prime rate, (ii) the United States federal funds effective rate plus 1/2 of 1.00% and (iii) a one-month reserve adjusted Eurocurrency rate plus 1.00% or (b) an adjusted Eurocurrency rate, calculated in a manner set forth in the 2019 facilities. The Canadian dollar-denominated borrowings under the 2019 facilities bear interest at a rate equal to an applicable margin plus, as determined at the Company’s option, either (a) a Canadian prime rate determined by reference to the greater of (i) the rate of interest per annum that Royal Bank of Canada establishes as the reference rate of interest in order to determine interest rates for loans in Canadian dollars to its Canadian borrowers and (ii) the average of the rates per annum for Canadian dollar bankers' acceptances having a term of one month or (b) an adjusted Eurocurrency rate, calculated in a manner set forth in the 2019 facilities. Borrowings available in Hong Kong dollars under the 2019 facilities bear interest at a rate equal to an applicable margin plus an adjusted Eurocurrency rate, calculated in a manner set forth in the 2019 facilities. The borrowings under the 2019 facilities in currencies other than United States dollars, Canadian dollars or Hong Kong dollars bear interest at a rate equal to an applicable margin plus an adjusted Eurocurrency rate, calculated in a manner set forth in the 2019 facilities. The applicable margin with respect to the TLA facilities and each revolving credit facility as of May 3, 2020 was 1.250% for adjusted Eurocurrency rate loans and 0.250% for base rate or Canadian prime rate loans. The applicable margin for borrowings under the TLA facilities and the revolving credit facilities is subject to adjustment (i) after the date of delivery of the compliance certificate and financial statements, with respect to each of the Company’s fiscal quarters, based upon the Company’s net leverage ratio or (ii) after the date of delivery of notice of a change in the Company’s public debt rating by Standard & Poor’s or Moody’s. The Company entered into interest rate swap agreements designed with the intended effect of converting notional amounts of its variable rate debt obligation to fixed rate debt. Under the terms of the agreements, for the outstanding notional amount, the Company’s exposure to fluctuations in the one-month London interbank offered rate (“LIBOR”) is eliminated and the Company pays a fixed rate plus the current applicable margin. The following interest rate swap agreements were entered into or in effect during the thirteen weeks ended May 3, 2020 and/or May 5, 2019:
(In millions) |  |  |  |  |  |  |  |  |  |
Designation Date |  | Commencement Date |  | Initial Notional Amount |  | Notional Amount Outstanding as of May 3, 2020 |  | Fixed Rate |  | Expiration Date
March 2020 |  | February 2021 |  | $ | 50.0 |  |  | $ | — |  |  | 0.562% |  | February 2023
February 2020 |  | February 2021 |  | 50.0 |  |  | — |  |  | 1.1625% |  | February 2023
February 2020 |  | February 2020 |  | 50.0 |  |  | 50.0 |  |  | 1.2575% |  |  | February 2023
August 2019 |  | February 2020 |  | 50.0 |  |  | 50.0 |  |  | 1.1975% |  | February 2022
June 2019 |  | February 2020 |  | 50.0 |  |  | 50.0 |  |  | 1.409% |  |  | February 2022
June 2019 |  | June 2019 |  | 50.0 |  |  | 50.0 |  |  | 1.719% |  | July 2021
January 2019 |  | February 2020 |  | 50.0 |  |  | 50.0 |  |  | 2.4187% |  | February 2021
November 2018 |  | February 2019 |  | 139.2 |  |  | 126.6 |  |  | 2.8645% |  | February 2021
October 2018 |  | February 2019 |  | 115.7 |  |  | 159.8 |  |  | 2.9975% |  | February 2021
June 2018 |  | August 2018 |  | 50.0 |  |  | 50.0 |  |  | 2.6825% |  | February 2021
June 2017 |  | February 2018 |  | 306.5 |  |  | — |  |  | 1.566% |  | February 2020
The notional amounts of the outstanding interest rate swaps that commenced in February 2019 are adjusted according to pre-set schedules during the terms of the swap agreements such that, based on the Company’s projections for future debt repayments, the Company’s outstanding debt under the USD TLA facility is expected to always equal or exceed the combined notional amount of the then-outstanding interest rate swaps. The 2019 facilities require the Company to comply with customary affirmative, negative and financial covenants, including a minimum interest coverage ratio and a maximum net leverage ratio. As of May 3, 2020, the Company was in compliance with all applicable financial and non-financial covenants under these facilities. Given the disruption to the Company’s business caused by the COVID-19 pandemic and to ensure financial flexibility, the Company amended these facilities in June 2020 to provide temporary relief of certain financial covenants until the date on which a compliance certificate is delivered for the second quarter of 2021 (the “relief period”) unless the Company elects to terminate the relief period and satisfies the conditions for doing so (the “June 2020 Amendment”). The June 2020 Amendment provides for the following during the relief period, among other things: (i) suspension of compliance with the maximum net leverage ratio through and including the first quarter of 2021, (ii) suspension of the minimum interest coverage ratio through and including the first quarter of 2021, (iii) addition of a minimum liquidity covenant of $400.0 million, (iv) addition of a restricted payment covenant and (v) imposition of stricter limitations on the incurrence of indebtedness and liens. The limitation on restricted payments require that the Company suspend payments of dividends on its common stock and purchases of shares under its stock repurchase program during the relief period. The June 2020 Amendment also provides that during the relief period the applicable margin will be increased 0.25%. In addition, under the June 2020 Amendment, in the event there is a specified credit ratings downgrade by Standard & Poor’s and Moody’s during the relief period (as set forth in the June 2020 Amendment), within 120 days thereafter (i) the Company must cause each of its wholly owned United States subsidiaries (subject to certain customary exceptions) to become a guarantor under the 2019 facilities and (ii) the Company and each subsidiary guarantor will be required to grant liens, as collateral agent, on substantially all of their respective assets (subject to customary exceptions). The Company expects to maintain compliance with the financial covenants (as amended) under the 2019 facilities for at least the next 12 months based on its current forecasts. If the adverse impacts of the COVID-19 pandemic on the Company’s business worsen and its earnings and operating cash flows do not start to recover as currently estimated by management, there can be no assurance that the Company will be able to maintain compliance with these financial covenants (as amended) in the future. There can be no assurance that the Company would be able to obtain future waivers in a timely manner, on terms acceptable to the Company, or at all. If the Company was not able to maintain compliance or obtain a future covenant waiver under its credit facilities, there can be no assurance that the Company would be able to raise sufficient debt or equity capital, or divest assets, to refinance or repay such facilities. 7 3/4% Debentures Due 2023 The Company has outstanding $100.0 million of debentures due November 15, 2023 that accrue interest at the rate of 7 3/4%. The debentures are not redeemable at the Company’s option prior to maturity. 3 5/8% Euro Senior Notes Due 2024 The Company has outstanding €525.0 million euro-denominated principal amount of 3 5/8% senior notes due July 15, 2024, of which €175.0 million principal amount was issued on April 24, 2020. Interest on the notes is payable in euros. The Company incurred €2.8 million (approximately $3.0 million based on exchange rates in effect on the payment date) of fees during the first quarter of 2020 in connection with the issuance of the additional €175.0 million notes, which are being amortized over the term of the notes. The Company may redeem some or all of these notes at any time prior to April 15, 2024 by paying a “make whole” premium plus any accrued and unpaid interest. In addition, the Company may redeem some or all of these notes on or after April 15, 2024 at their principal amount plus any accrued and unpaid interest. 3 1/8% Euro Senior Notes Due 2027 The Company has outstanding €600.0 million euro-denominated principal amount of 3 1/8% senior notes due December 15, 2027. Interest on the notes is payable in euros. The Company may redeem some or all of these notes at any time prior to September 15, 2027 by paying a “make whole” premium plus any accrued and unpaid interest. In addition, the Company may redeem some or all of these notes on or after September 15, 2027 at their principal amount plus any accrued and unpaid interest. The Company’s financing arrangements contain financial and non-financial covenants and customary events of default. As of May 3, 2020, the Company was in compliance with all applicable financial and non-financial covenants under its financing arrangements. The Company also has standby letters of credit outside of its 2019 facilities primarily to collateralize the Company's insurance and lease obligations. The Company had $36.3 million of these standby letters of credit outstanding as of May 3, 2020. Please see Note 9, “Debt,” in the Notes to Consolidated Financial Statements included in Item 8 of the Company’s Annual Report on Form 10-K for the year ended February 2, 2020 for further discussion of the Company’s debt.

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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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