FY2021 10-K Document - FINAL 11 15 21 - Flipbook - Page 35
Table of Contents
CAPITAL STRUCTURE AND RESOURCES
We maintain bank credit facilities to fund our short and long-term capital requirements, including acquisitions. From
time to time, we also sell debt and equity securities to fund acquisitions or take advantage of favorable market
conditions.
On October 15, 2019, we amended and restated our U.S. revolving credit facility, which matures on October 15, 2024.
Our U.S. revolving credit facility has a capacity of $1.1 billion and also provides an expansion option, which permits us
to request an increase of up to $400 million to the credit facility upon satisfaction of certain conditions. The U.S.
revolving credit facility had an outstanding balance of $322 million at October 2, 2021. The weighted-average interest
rate on the majority of the outstanding credit facility borrowings was 1.59% and is principally based on LIBOR plus the
applicable margin, which was 1.5% at October 2, 2021. The credit facility is secured by substantially all of our U.S.
assets.
The U.S. revolving credit facility contains various covenants. The minimum for the interest coverage ratio, defined as
the ratio of EBITDA to interest expense for the most recent four quarters, is 3.0. The maximum for the leverage ratio,
defined as the ratio of net debt to EBITDA for the most recent four quarters, is 4.0. We are in compliance with all
covenants. EBITDA is defined in the loan agreement as (i) the sum of net income, interest expense, income taxes,
depreciation expense, amortization expense, other non-cash items reducing consolidated net income and non-cash
equity-based compensation expenses minus (ii) other non-cash items increasing consolidated net income.
We are generally not required to obtain the consent of lenders of the U.S. revolving credit facility before raising
significant additional debt financing; however, certain limitations and conditions may apply that would require consent
to be obtained. In recent years, we have demonstrated our ability to secure consents to access debt markets. We
have also been successful in accessing equity markets from time to time. We believe that we will be able to obtain
additional debt or equity financing as needed.
The SECT has a revolving credit facility with a borrowing capacity of $35 million, maturing on July 26, 2024. Interest
was 2.21% as of October 2, 2021 and is based on LIBOR plus a margin of 2.13%. As of October 2, 2021, there were
$7 million of outstanding borrowings.
On December 13, 2019, we completed the sale of $500 million aggregate principal amount of 4.25% senior notes due
December 15, 2027 with interest paid semiannually on June 15 and December 15 of each year, which commenced on
June 15, 2020. The senior notes are unsecured obligations, guaranteed on a senior unsecured basis by certain
subsidiaries and contain normal incurrence-based covenants and limitations such as the ability to incur additional
indebtedness, pay dividends, make other restricted payments and investments, create liens and certain corporate
acts such as mergers and consolidations. The aggregate net proceeds of $492 million were used to repay
indebtedness under our U.S. revolving credit facility, thereby increasing the unused portion of our U.S. revolving credit
facility. The effective interest rate for these notes after considering the amortization of deferred debt issuance costs is
4.60%.
On December 13, 2019, we issued a notice of redemption to the holders of our 5.25% senior notes due on
December 1, 2022, to redeem and retire all of the outstanding notes. The notes were redeemed on January 13, 2020
at 101.313% pursuant to an early redemption right. We redeemed the aggregate principal amount of $300 million
using proceeds drawn from our U.S. revolving credit facility. The associated loss on redemption includes $4 million of
call premium paid to external bondholders.
We have a trade receivables securitization facility (the "Securitization Program") that matures on October 29, 2021.
The Securitization Program provides up to $80 million of borrowing capacity and lowers our cost to borrow funds as
compared to the U.S. revolving credit facility. Under the Securitization Program, we sell certain trade receivables and
related rights to an affiliate, which in turn sells an undivided variable percentage ownership interest in the trade
receivables to a financial institution, while maintaining a subordinated interest in a portion of the pool of trade
receivables. We had an outstanding balance of $80 million at October 2, 2021. The Securitization Program has a
minimum borrowing requirement, which was $64 million at October 2, 2021. Interest on the secured borrowings under
the Securitization Program was 0.95% at October 2, 2021 and is based on 30-day LIBOR plus an applicable margin.
At October 2, 2021, we had $786 million of unused capacity, including $746 million from the U.S. revolving credit
facility after considering standby letters of credit. Our leverage ratio covenant limits our unused borrowing capacity to
$609 million as of October 2, 2021.
Net debt to capitalization was 36% at October 2, 2021 and 40% at October 3, 2020. The decrease in net debt to
capitalization is primarily due to our net earnings, which has increased the total capitalization.
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