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Debt and Other Obligations | 9 Months Ended
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Oct. 03, 2020
Debt Disclosure [Abstract] |
Debt and Other Obligations | 12. DEBT AND OTHER OBLIGATIONS Long-term debt (net of issuance costs and debt discounts excluding line-of-credit arrangements) (leases are separately discussed in Note 4, Leases) consisted of the following at October 3, 2020 and December 28, 2019, respectively (amounts in thousands):
|  | October 3, 2020 |  |  | December 28, 2019 |
Unsecured credit facility |  | $ | 100,000 |  |  | $ | 41,750 |
2026 notes |  |  | 396,562 |  |  |  | 396,122 |
2022 notes |  |  | 399,277 |  |  |  | 398,906 |
Accounts receivable securitization facility |  |  | 114,000 |  |  |  | 26,000 |
Other notes payable |  |  | — |  |  |  | 3,730 |
|  |  | 1,009,839 |  |  |  | 866,508 |
Less current maturities of long-term debt |  |  | — |  |  |  | (3,730 | )
Total long-term debt |  | $ | 1,009,839 |  |  | $ | 862,778 |
Bank overdrafts occur when checks have been issued but have not been presented to the bank for payment. Certain of our banks allow us to delay funding of issued checks until the checks are presented for payment. The delay in funding results in a temporary source of financing from the bank. The activity related to bank overdrafts is shown as a financing activity in our Condensed Consolidated Statements of Cash Flows. Bank overdrafts are included in other accrued liabilities on our Condensed Consolidated Balance Sheets. The company also had standby letters of credit (“LOCs”) outstanding of $8.4 million at October 3, 2020 and December 28, 2019, which reduce the availability of funds under the credit facility. The outstanding LOCs are for the benefit of certain insurance companies and lessors. None of the outstanding LOCs are recorded as a liability on the Condensed Consolidated Balance Sheets. 2026 Notes, Accounts Receivable Securitization Facility, 2022 Notes, and Credit Facility 2026 Notes. On September 28, 2016, the company issued $400.0 million of senior notes. The company pays semiannual interest on the 2026 notes on each April 1 and October 1 and the 2026 notes will mature on October 1, 2026. The notes bear interest at 3.500% per annum. The 2026 notes are subject to interest rate adjustments if either Moody’s or S&P downgrades (or downgrades and subsequently upgrades) the credit rating assigned to the 2026 notes. On any date prior to July 1, 2026, the company may redeem some or all of the notes at a price equal to the greater of (1) 100% of the principal amount of the notes redeemed and (2) a “make-whole” amount plus, in each case, accrued and unpaid interest. The make-whole amount is equal to the sum of the present values of the remaining scheduled payments of principal and interest on the 2026 notes to be redeemed that would be due if such notes matured July 1, 2026 (exclusive of interest accrued to, but not including, the date of redemption), discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the treasury rate (as defined in the indenture governing the notes), plus 30 basis points, plus in each case accrued and unpaid interest. At any time on or after July 1, 2026, the company may redeem some or all of the 2026 notes at a price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest. If the company experiences a “change of control triggering event” (which involves a change of control of the company and the related rating of the notes below investment grade), it is required to offer to purchase the notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest thereon unless the company exercised its option to redeem the notes in whole. The 2026 notes are also subject to customary restrictive covenants for investment grade debt, including certain limitations on liens and sale and leaseback transactions. The face value of the 2026 notes is $400.0 million. There was a debt discount of $2.1 million representing the difference between the net proceeds, after expenses, received upon issuance of debt and the amount repayable at its maturity. The company also paid issuance costs of $3.6 million (including underwriting fees and legal fees) on the 2026 notes. Debt issuance costs and the debt discount are being amortized to interest expense over the term of the 2026 notes. As of October 3, 2020, and December 28, 2019, respectively, the company was in compliance with all restrictive covenants under the indenture governing the 2026 notes. Accounts Receivable Securitization Facility. On July 17, 2013, the company entered into an accounts receivable securitization facility (the “facility”). The company has amended the facility eight times since execution, most recently on September 23, 2020. These eight amendments include provisions that (i) increased the revolving commitments under the facility to $200.0 million from $150.0 million, (ii) added a leverage pricing grid, (iii) added an additional bank to the lending group, (iv) made certain other conforming changes, (v) removed a bank from the lending group, and (vi) most recently, extended the term by one additional year to September 27, 2022. The amendment that added the additional bank was accounted for as an extinguishment of the debt. The remaining amendments were accounted for as modifications. Under the facility, a wholly-owned, bankruptcy-remote subsidiary purchases, on an ongoing basis, substantially all trade receivables. As borrowings are made under the facility, the subsidiary pledges the receivables as collateral. In the event of liquidation of the subsidiary, its creditors would be entitled to satisfy their claims from the subsidiary’s pledged receivables prior to distributions of collections to the company. We include the subsidiary in our Condensed Consolidated Financial Statements. The facility contains certain customary representations and warranties, affirmative and negative covenants, and events of default. As of October 3, 2020 and December 28, 2019, respectively, the company was in compliance with all restrictive covenants under the facility. The table below presents the borrowings and repayments under the facility during the forty weeks ended October 3, 2020:
|  | Amount (thousands) |
Balance at December 28, 2019 |  | $ | 26,000 |
Borrowings |  |  | 207,500 |
Payments |  |  | (119,500 | )
Balance at October 3, 2020 |  | $ | 114,000 |
The table below presents the net amount available for working capital and general corporate purposes under the facility as of October 3, 2020:
|  | Amount (thousands) |
Gross amount available |  | $ | 200,000 |
Outstanding |  |  | (114,000 | )
Available for withdrawal |  | $ | 86,000 |
Amounts available for withdrawal under the facility are determined as the lesser of the total commitments and a formula derived amount based on qualifying trade receivables. The table below presents the highest and lowest outstanding balance under the facility during the forty weeks ended October 3, 2020:
|  | Amount (thousands) |
High balance |  | $ | 154,000 |
Low balance |  | $ | 19,000 |
Optional principal repayments may be made at any time without premium or penalty. Interest is due two days after our reporting periods end in arrears on the outstanding borrowings and is computed as the cost of funds rate plus an applicable margin of 85 basis points. An unused fee of 30 basis points is applicable on the unused commitment at each reporting period. Financing costs paid at inception of the facility and at the time amendments are executed are being amortized over the life of the facility. The balance of unamortized financing costs was $0.3 million on October 3, 2020 and $0.2 million on December 28, 2019, respectively, and is recorded in other assets on the Condensed Consolidated Balance Sheets. 2022 Notes. On April 3, 2012, the company issued $400.0 million of senior notes. The company pays semiannual interest on the 2022 notes on each April 1 and October 1 and the 2022 notes will mature on April 1, 2022. The 2022 notes bear interest at 4.375% per annum. On any date prior to January 1, 2022, the company may redeem some or all of the 2022 notes at a price equal to the greater of (1) 100% of the principal amount of the notes redeemed and (2) a “make-whole” amount plus, in each case, accrued and unpaid interest. The make-whole amount is equal to the sum of the present values of the remaining scheduled payments of principal thereof (not including any interest accrued thereon to, but not including, the date of redemption), discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the treasury rate (as defined in the indenture governing the notes), plus 35 basis points, plus in each case, unpaid interest accrued thereon to, but not including, the date of redemption. At any time on or after January 1, 2022, the company may redeem some or all of the 2022 notes at a price equal to 100% of the principal amount of the 2022 notes redeemed plus accrued and unpaid interest. If the company experiences a “change of control triggering event” (which involves a change of control of the company and the related rating of the notes below investment grade), it is required to offer to purchase the 2022 notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest thereon unless the company exercised its option to redeem the 2022 notes in whole. The 2022 notes are also subject to customary restrictive covenants for investment grade debt, including certain limitations on liens and sale and leaseback transactions. The face value of the 2022 notes is $400.0 million and the debt discount on the 2022 notes at issuance was $1.0 million. The company paid issuance costs (including underwriting fees and legal fees) on the 2022 notes of $3.9 million. The issuance costs and the debt discount are being amortized to interest expense over the term of the 2022 notes. As of October 3, 2020 and December 28, 2019, the company was in compliance with all restrictive covenants under the indenture governing the 2022 notes. Credit Facility. The company is party to an amended and restated credit agreement, dated as of October 24, 2003, with the lenders party thereto and Deutsche Bank AG New York Branch, as administrative agent, the swingline lender and issuing lender. Under the amended and restated credit agreement, our credit facility (the “credit facility”) is a five-year, $500.0 million senior unsecured revolving loan facility with the following terms and conditions: (i) a maturity date of November 29, 2022; (ii) an applicable margin for revolving loans maintained as (1) base rate loans and swingline loans with a range of 0.00% to 0.575% and (2) Eurodollar loans with a range of 0.575% to 1.575%, in each case, based on the leverage ratio of the company and its subsidiaries; (iii) an applicable facility fee with a range of 0.05% to 0.30%, due quarterly on all commitments under the amended and restated credit agreement, based on the leverage ratio of the company and its subsidiaries; and (iv) a maximum leverage ratio covenant to permit the company, at its option, in connection with certain acquisitions and investments and subject to the terms and conditions provided in the amended and restated credit agreement, to increase the maximum ratio permitted thereunder on one or more occasions to 4.00 to 1.00 for a period of four consecutive fiscal quarters, including and/or immediately following the fiscal quarter in which such acquisitions or investments were completed (the “covenant holiday”), provided that each additional covenant holiday will not be available to the company until it has achieved and maintained a leverage ratio of at least 3.75 to 1.00 and has been complied with for at least two fiscal quarters. In addition, the credit facility contains a provision that permits the company to request up to $200.0 million in additional revolving commitments, for a total of up to $700.0 million, subject to the satisfaction of certain conditions. Proceeds from the credit facility may be used for working capital and general corporate purposes, including capital expenditures, acquisition financing, refinancing of indebtedness, dividends and share repurchases. The credit facility includes certain customary restrictions, which, among other things, require maintenance of financial covenants and limit encumbrance of assets and creation of indebtedness. Restrictive financial covenants include such ratios as a minimum interest coverage ratio and a maximum leverage ratio. The company believes that, given its current cash position, its cash flow from operating activities and its available credit capacity, it can comply with the current terms of the amended credit facility and can meet its presently foreseeable financial requirements. As of October 3, 2020 and December 28, 2019, respectively, the company was in compliance with all restrictive covenants under the credit facility. Financing costs paid at inception of the credit facility and at the time amendments are executed are being amortized over the life of the credit facility. The balance of unamortized financing costs was $0.7 million and $0.9 million on October 3, 2020 and December 28, 2019, respectively, and are recorded in other assets on the Condensed Consolidated Balance Sheets. Amounts outstanding under the credit facility vary daily. Changes in the gross borrowings and repayments can be caused by cash flow activity from operations, capital expenditures, acquisitions, dividends, share repurchases, and tax payments, as well as derivative transactions, which are part of the company’s overall risk management strategy as discussed in Note 8, Derivative Financial Instruments, of Notes to Condensed Consolidated Financial Statements of this Form 10-Q. The table below presents the borrowings and repayments under the credit facility during the forty weeks ended October 3, 2020.
|  | Amount (thousands) |
Balance at December 28, 2019 |  | $ | 41,750 |
Borrowings |  |  | 272,600 |
Payments |  |  | (214,350 | )
Balance at October 3, 2020 |  | $ | 100,000 |
The table below presents the net amount available under the credit facility as of October 3, 2020:
|  | Amount (thousands) |
Gross amount available |  | $ | 500,000 |
Outstanding |  |  | (100,000 | )
Letters of credit |  |  | (8,400 | )
Available for withdrawal |  | $ | 391,600 |
The table below presents the highest and lowest outstanding balance under the credit facility during the forty weeks ended October 3, 2020:
|  | Amount (thousands) |
High balance |  | $ | 235,000 |
Low balance |  | $ | 6,400 |
Aggregate maturities of debt outstanding as of October 3, 2020 are as follows (excluding unamortized debt discount and issuance costs) (amounts in thousands):
Remainder of 2020 |  | $ | — |
2021 |  |  | — |
2022 |  |  | 614,000 |
2023 |  |  | — |
2024 |  |  | — |
2025 and thereafter |  |  | 400,000 |
Total |  | $ | 1,014,000 |
Debt discount and issuance costs are being amortized straight-line (which approximates the effective method) over the term of the underlying debt outstanding. The table below reconciles the debt issuance costs and debt discounts to the net carrying value of each of our debt obligations (excluding line-of-credit arrangements) at October 3, 2020 (amounts in thousands):
|  |  |  |  |  | Debt Issuance Costs |  |  |  |  |
|  | Face Value |  |  | and Debt Discount |  |  | Net Carrying Value |
2026 notes |  | $ | 400,000 |  |  | $ | 3,438 |  |  | $ | 396,562 |
2022 notes |  |  | 400,000 |  |  |  | 723 |  |  |  | 399,277 |
Total |  | $ | 800,000 |  |  | $ | 4,161 |  |  | $ | 795,839 |
The table below reconciles the debt issuance costs and debt discounts to the net carrying value of each of our debt obligations (excluding line-of-credit arrangements) at December 28, 2019 (amounts in thousands):
|  |  |  |  |  | Debt Issuance Costs |  |  |  |  |
|  | Face Value |  |  | and Debt Discount |  |  | Net Carrying Value |
2026 notes |  | $ | 400,000 |  |  | $ | 3,878 |  |  | $ | 396,122 |
2022 notes |  |  | 400,000 |  |  |  | 1,094 |  |  |  | 398,906 |
Other notes payable |  |  | 3,750 |  |  |  | 20 |  |  |  | 3,730 |
Total |  | $ | 803,750 |  |  | $ | 4,992 |  |  | $ | 798,758 |

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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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