Note 6 - Notes Payable, Long-term Debt and Lines of Credit

12 Months Ended

Nov. 30, 2019

Notes to Financial Statements

Debt Disclosure [Text Block]

Note 6: Notes Payable, Long-Term Debt and Lines of Credit

Notes Payable

Notes payable were $15,732 and $14,770 at November 30, 2019 and December 1, 2018, respectively. This amount primarily represents various foreign subsidiaries’ other short-term borrowings that were not part of committed lines. The weighted-average interest rates on short-term borrowings were 8.9 percent, 9.6 percent and 11.0 percent in 2019, 2018 and 2017, respectively. Fair values of these short-term obligations approximate their carrying values due to their short maturity. There were no funds drawn from the short-term committed lines at November 30, 2019.

Long-Term Debt
	Weighted-Average
	Interest Rate at		Fiscal Year		Balance at			Balance at
Long-Term Debt	November 30, 2019		Maturity Date		November 30, 2019			December 1, 2018
Revolving credit facility		3.70%		2022	$	-		$	-
Term Loan B1		4.06%		2024		1,675,650			1,964,250
Public Notes2		3.78%		2027		300,000			300,000
Other, including debt issuance cost and discount						(12,266	)		(31,493	)
Total debt					$	1,963,384		$	2,232,757
Less: current maturities						(65,000	)		(91,225	)
Total long-term debt, excluding current maturities					$	1,898,384		$	2,141,532

¹ Term Loan B, due on October 20, 2024, $2,150,000 variable rate at the London Interbank Offered Rate (LIBOR) plus 2.00 percent (3.72 percent at November 30, 2019); $1,350,000 swapped to various fixed rates as detailed below.

² Public Notes, due February 15, 2027, $300,000 4.00 percent fixed; $150,000 swapped to a variable rate of 1-month LIBOR plus 1.86 percent

Term Loans

On October 20, 2017, we entered into a secured term loan credit agreement (“Term Loan B Credit Agreement”) with a consortium of financial institutions under which we established a $2,150,000 term loan (“Term Loan B”) that we used to repay existing indebtedness, finance working capital needs, finance acquisitions, and for general corporate purposes. The Term Loan B Credit Agreement is secured by a security interest in substantially all of the personal property assets of the Company and each Guarantor, including 100% of the equity interests in certain domestic subsidiaries and 65% of the equity interests of first-tier foreign subsidiaries together with certain domestic material real property. At November 30, 2019, a balance of $1,675,650 was drawn on the Term Loan B. The interest rate on the Term Loan B is payable at the LIBOR rate plus 2.00 percent (3.72 percent at November 30, 2019). The interest rate is based on a leverage grid. The Term Loan B Credit Agreement expires on October 20, 2024. 

On March 9, 2018, we entered into an interest rate swap agreement to convert $100,000 of our Term Loan B to a fixed interest rate of 4.490 percent. On February 27, 2018, we entered into an interest rate swap agreement to convert $200,000 of our Term Loan B to a fixed rate of 4.589 percent. On October 20, 2017, we entered into interest rate swap agreements to convert $1,050,000 of our Term Loan B to a fixed interest rate of 4.0275%. See Note 13 for further discussion of these interest rate swaps.

We are subject to mandatory prepayments in the first quarter of each fiscal year equal to 50% of Excess Cash Flow, as defined in the Term Loan B Credit Agreement, of the prior fiscal year less any voluntary prepayments made during that fiscal year. The Excess Cash Flow Percentage (ECF Percentage) shall be reduced to 25% when our Secured Leverage Ratio is below 4.25:1.00 and to 0% when our Secured Leverage Ratio is below 3.75:1.00. The prepayment for the 2019 measurement period was satisfied through amounts prepaid during 2019. We have estimated the 2020 prepayment as shown in the table above, and have classified it as current maturities of long-term debt as of November 30, 2019.

On December 16, 2016 and February 24, 2017, our Senior Notes, Series A and B matured, respectively. On October 20, 2017, we repaid the Term Loan A and Senior Notes, Series C, D and E, with proceeds from the Term Loan B issuance. Interest rate swaps associated with Senior Notes, Series C and E, were terminated with the repayment of these instruments. We recognized a $168 net gain related to the termination of these interest rate swaps which was recorded as other income, net in our Consolidated Statement of Income as of December 2, 2017. We paid a make whole premium of $25,535 which was recorded as other expense, net in our Consolidated Statement of Income as of December 2, 2017. Proceeds from the issuance of the Term Loan B were also used to acquire Royal Adhesives. See Note 2 for further discussion of our acquisition of Royal Adhesives.

Public Notes

On February 14, 2017, we issued $300,000 aggregate principal of 10-year unsecured public notes (“Public Notes”) due February 15, 2027 with a fixed coupon of 4.00 percent. Proceeds from this debt issuance were used to repay $138,000 outstanding under the revolving credit facility at that time and prepay $158,750 of our Term Loan A. On February 14, 2017, we entered into interest rate swap agreements to hedge $150,000 of the $300,000 Public Notes to a variable interest rate of 1-month LIBOR plus 1.86 percent. As a result of applying the hypothetical derivative method of assessing hedge effectiveness in our fair value hedge accounting, the change in the fair value of the interest rate swap and an equivalent amount for the change in the fair value of the debt will be reflected in other income (expense), net. See Note 13 for further discussion of this interest rate swap.

Fair Value of Long-Term Debt

Long-term debt had an estimated fair value of $2,016,516 and $2,123,447 as of November 30, 2019 and December 1, 2018, respectively. The fair value of long-term debt is based on quoted market prices for the same or similar issues or on the current rates offered for debt of similar maturities. The estimated fair value of these long-term obligations is not necessarily indicative of the amount that would be realized in a current market exchange.

Long-term Debt Maturities

Maturities of long-term debt for the next five fiscal years are as follows:

Fiscal Year	2020		2021		2022		2023		2024		Thereafter
Long-term debt obligations	$	65,000	$	-	$	-	$	-	$	1,610,650	$	300,000

Revolving Credit Facility

On September 29, 2017, we amended our revolving credit facility to become effective with consummation of our acquisition of Royal Adhesives. The revolving credit facility is now secured along with the Term Loan B Credit Agreement, by a first-priority security interest in substantially all of the personal property assets of the Company and each Guarantor, including 100% of the equity interests in certain domestic subsidiaries and 65% of the equity interests of first-tier foreign subsidiaries. Interest on the revolving credit facility is payable at the LIBOR plus 2.00 percent (3.70 percent at November 30, 2019). A facility fee of 0.30 percent of the unused commitment under the revolving credit facility is payable quarterly. The interest rates and the facility fee are based on a leverage grid. The revolving credit facility matures April 12, 2022.

As of November 30, 2019, amounts related to our revolving credit facility was as follows:

	Committed		Drawn		Unused
Revolving credit facility	$	400,000	$	-	$	393,054

The secured, multi-currency revolving credit facility can be drawn upon for general corporate purposes up to a maximum of $400,000, less issued letters of credit. At November 30, 2019, letters of credit reduced the available amount under the revolving credit facility by $6,946.

Covenants

The secured Term Loan B Credit Agreement and secured revolving credit facility are subject to certain covenants and restrictions. Restrictive covenants include, but are not limited to, limitations on secured and unsecured borrowings, intercompany transfers and investments, third party investments, dispositions of assets, leases, liens, dividends and distributions, and contains a maximum secured debt to trailing twelve months EBITDA requirement.  Certain covenants becomes less restrictive after meeting leverage or other financial ratios. In addition, we cannot be a member of any consolidated group as defined for income tax purposes other than with our subsidiaries. At November 30, 2019 and December 1, 2018, all financial covenants were met.