Short-Term Borrowings and Long-Term Debt

12 Months Ended

May 30, 2020

Short-Term Borrowings and Long-Term Debt

Long-term debt consisted of the following obligations:



(In millions)	May 30, 2020			June 1, 2019
Debt securities, 6.0%, due March 1, 2021	$	50.0		$	50.0
Debt securities, 4.95%, due May 20, 2030	49.9			—
Syndicated Revolving Line of Credit, due August 2024	490.0			225.0
Construction-Type Lease	—			6.9
Supplier financing program	1.4			3.1
Total debt	$	591.3		$	285.0
Less: Current debt	(51.4		)	(3.1		)
Long-term debt	$	539.9		$	281.9

As of June 1, 2019, the Company's syndicated revolving line of credit provided the Company with up to $400 million in revolving variable interest borrowing capacity and included an "accordion feature" allowing the Company to increase, at its option and subject to the approval of the participating banks, the aggregate borrowing capacity of the facility by up to $200 million. On August 28, 2019, the Company entered into an amendment and restatement of its existing

unsecured credit facility (the "Agreement"). The Agreement, which expires on August 28, 2024, provides the Company with up to $500 million in revolving variable interest borrowing capacity and includes an "accordion feature" allowing the Company to increase, at its option and subject to the approval of the participating banks, the aggregate borrowing capacity of the facility by up to $250 million. Outstanding borrowings bear interest at rates based on the prime rate, federal funds rate, LIBOR or negotiated rates as outlined in the agreement. Interest is payable periodically throughout the period if borrowings are outstanding.

In March 2020, the Company borrowed an additional $265 million from its syndicated revolving line of credit as a precautionary measure to provide additional near-term liquidity given the uncertainty related to COVID-19, which was subsequently repaid in June 2020.

Available borrowings under the syndicated revolving line of credit were as follows for the periods indicated:



(In millions)	May 30, 2020		June 1, 2019
Syndicated revolving line of credit borrowing capacity	$	500.0	$	400.0
Less: Borrowings under the syndicated revolving line of credit	490.0		225.0
Less: Outstanding letters of credit	9.4		10.0
Available borrowings under the syndicated revolving line of credit	$	0.6	$	165.0

The unsecured senior revolving credit facility restrict, without prior consent, the Company's borrowings, capital leases and the sale of certain assets. In addition, the Company has agreed to maintain certain financial performance ratios, which include a maximum leverage ratio covenant, which is measured by the ratio of debt to trailing four quarter adjusted EBITDA (as defined in the credit agreement) and is required to be less than 3.5:1, except that the Company may elect, under certain conditions, to increase the maximum Leverage Ratio to 4:1 for four consecutive fiscal quarter end dates. The covenants also require a minimum interest coverage ratio, which is measured by the ratio of trailing four quarter EBITDA to trailing four quarter interest expense (as defined in the credit agreement) and is required to be greater than 3.5:1. Adjusted EBITDA is generally defined in the credit agreement as EBITDA adjusted by certain items which include non-cash share-based compensation, non-recurring restructuring costs and extraordinary items. At May 30, 2020 and June 1, 2019, the Company was in compliance with all of these restrictions and performance ratios.

On May 20, 2020, the Company entered into a third amendment to its existing Private Shelf Agreement, dated December 14, 2010, as amended (together with the third amendment, the "Agreement"), between the Company and PGIM, Inc. (formerly known as Prudential Investment Management, Inc.) and certain of its affiliates (collectively, “Prudential”). The Agreement provides for a $150.0 million revolving facility, which includes $50.0 million of outstanding existing unsecured senior notes that are due on March 1, 2021 (the "Existing Notes") and an additional $50.0 million aggregate principal amount of unsecured senior notes issued on May 20, 2020 (the "2020 Notes"). The 2020 Notes are due on May 20, 2030 and bear interest at a fixed annual coupon rate of 4.95%. The Company intends to use the proceeds of the 2020 Notes for general corporate purposes and/or to refinance existing indebtedness, including the Existing Notes. The Agreement also establishes an uncommitted shelf facility (the “Facility”), under which Prudential will consider one or more requests from the Company to purchase up to an additional $50.0 million in aggregate amount of the Company’s senior unsecured notes from time to time. The interest rate on any future notes issued under the Facility will be based on the benchmark Treasury rate corresponding to the weighted average life of the notes, plus a spread as determined by Prudential. The Facility will expire on May 20, 2023.

Annual maturities of debt for the five fiscal years subsequent to May 30, 2020 are as shown in the table below.



(In millions)
2021	$	51.4
2022	$	—
2023	$	—
2024	$	—
2025	$	490.0
Thereafter	$	50.0

Supplier Financing Program

The Company has an agreement with a third-party financial institution that allows certain participating suppliers the ability to finance payment obligations from the Company. Under this program, participating suppliers may finance payment obligations of the Company, prior to their scheduled due dates, at a discounted price to the third-party financial institution.

The Company has lengthened the payment terms for certain suppliers that have chosen to participate in the program. As a result, certain amounts due to suppliers have payment terms that are longer than standard industry practice and as such, these amounts have been excluded from the caption “Accounts payable” in the Condensed Consolidated Balance Sheets as the amounts have been accounted for by the Company as a current debt obligation. Accordingly, $1.4 million and $3.1 million have been recorded within the caption “Short-term borrowings and current portion of long-term debt” for the periods ended May 30, 2020 and June 1, 2019, respectively.

Construction-Type Lease

During fiscal 2015, the Company entered into a lease agreement for the occupancy of a new studio facility in Palo Alto, California which runs through fiscal 2026. In fiscal 2017, the Company became the deemed owner of the leased building for accounting purposes as a result of the Company's involvement during the construction phase of the project. The lease was therefore accounted for as a financing lease and the building and related financing liability were initially recorded at fair value in the Consolidated Balance Sheets within Construction in progress and Other accrued liabilities. During the first quarter of fiscal 2019, the construction was substantially completed, and the property was placed in service. As a result, the Company began depreciating the assets over their estimated useful lives. The Company also reclassified the related financing liability to Long-term debt. The carrying value of the building was $6.7 million and the related financing liability was $6.9 million at June 1, 2019. As a result of the adoption of ASC 842 in the first quarter of fiscal 2020, the Company derecognized its construction-type lease asset and financing liability and there was no related cumulative adjustment to retained earnings.