Note 7 - Notes Payable, Long-term Debt and Lines of Credit

12 Months Ended

Dec. 03, 2022

Notes to Financial Statements

Debt Disclosure [Text Block]

Note 7: Notes Payable, Long-Term Debt and Lines of Credit

Notes Payable

Notes payable were $28,860 and $24,983 at December 3, 2022 and November 27, 2021, 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 16.2 percent in 2022 and 8.1 percent in 2021 and 2020. 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 December 3, 2022.

Long-Term Debt

	Weighted-Average			Fiscal Year		Balance at			Balance at
	Interest Rate at			Maturity		December 3,			November 27,
Long-Term Debt	December 3, 2022			Date		2022			2021
Revolving credit facility		5.94	%		2024	$	175,500		$	-
Term Loan B		6.19	%		2024		1,001,150			1,001,150
Public Notes2		4.00	%		2027		300,000			300,000
Public Notes3		4.25	%		2028		300,000			300,000
Other, including debt issuance cost and discount							(40,394	)		(9,671	)
Total debt						$	1,736,256		$	1,591,479
Less: current maturities							-			-
Total long-term debt, excluding current maturities						$	1,736,256		$	1,591,479

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 (6.19 percent at December 3, 2022).

² Public Notes, due February 15, 2027, $300,000 4.00 percent fixed.

³ Public Notes, due October 15, 2028, $300,000 4.25 percent fixed; swapped to a floating rate as detailed below.

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 December 3, 2022, a balance of $1,001,150 was outstanding on the Term Loan B. The interest rate on the Term Loan B is payable at the LIBOR rate plus 2.00 percent (6.19 percent at December 3, 2022). The interest rate is based on a leverage grid. The Term Loan B Credit Agreement matures on October 20, 2024. 

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. During the second quarter of 2021, we settled a portion of this interest rate swap as the debt underlying this swap was less than the swap value due to debt paydown. We settled the ineffective portion of the interest rate swap by making a cash payment of $378 and recorded that payment to interest expense in our Consolidated Statements of Income during the second quarter of 2021. On October 20, 2017, we entered into interest rate swap agreements to convert $1,050,000, which was amortized down to $800,000 on October 20, 2021, of our Term Loan B to a fixed interest rate of 4.0275%. These interest rate swap agreements matured on October 20, 2022 and we have no interest rate swap agreements on our Term Loan B as of December 3, 2022. See Note 12 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 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 2022 measurement period was satisfied through amounts prepaid during 2022. We have estimated the 2023 prepayment to be zero.

Public Notes

On February 14, 2017, we issued $300,000 aggregate principal of 10-year unsecured public notes (“10-year 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 an interest rate swap agreement to convert $150,000 of the 10-year Public Notes to a variable interest rate of 1-month LIBOR plus 1.86 percent and on May 1, 2020, we terminated the swap. See Note 12 for further discussion of this interest rate swap.

On October 20, 2020, we issued $300,000 aggregate principal of 8-year unsecured public notes (“8-year Public Notes”) due October 15, 2028 with a fixed coupon of 4.25 percent. Proceeds from this debt issuance were used to prepay $300,000 of our Term Loan B. On February 12, 2021, we entered into interest rate swap agreements to convert our 8-year Public Notes to a variable interest rate of 1-month LIBOR plus 3.28 percent.

The Public Notes are senior unsecured obligations of the company and will rank equally with the company’s other unsecured and unsubordinated debt from time to time outstanding.

Fair Value of Long-Term Debt

Long-term debt had an estimated fair value of $1,713,257 and $1,618,291 as of December 3, 2022 and November 27, 2021, 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	2023		2024		2025		2026		2027		Thereafter
Long-term debt obligations	$	-	$	1,001,150	$	-	$	-	$	300,000	$	300,000

Revolving Credit Facility

On October 20, 2020, we amended and restated our revolving credit facility. On January 24, 2022, we relied on the accordion feature in our credit agreement to increase the commitment under the existing credit facility from $400,000 to $600,000. On February 28, 2022, we executed an amendment to amend and restate the revolving credit agreement to move from borrowing under LIBOR to borrowing under SOFR along with further upsizing the revolving credit facility by $100,000 to $700,000 in total aggregate commitments.

The revolving credit facility is 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 SOFR plus a credit spread adjustment (0.11448 percent) plus 1.75 percent (5.94 percent at December 3, 2022). A facility fee of 0.25 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 on July 22, 2024.

As of December 3, 2022, amounts related to our revolving credit facility was as follows:

	Committed		Drawn		Unused
Revolving credit facility	$	700,000	$	175,500	$	515,186

The secured, multi-currency revolving credit facility can be drawn upon for general corporate purposes up to a maximum of $700,000, less issued letters of credit. At December 3, 2022, letters of credit reduced the available amount under the revolving credit facility by$9,314.

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, interest coverage, 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 become 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 December 3, 2022 and November 27, 2021, all financial covenants were met.

The Indenture under which the Public Notes have been issued contains covenants imposing certain limitations on the ability of the company to incur liens or enter into sales and leaseback transactions. It also provides for customary events of default (subject in certain cases to customary grace and cure periods), which include among other things nonpayment, breach of covenants in the Indenture and certain events of bankruptcy and insolvency. If an event of default occurs and is continuing with respect to the Public Notes, the Trustee or holders of at least 25% in principal amount outstanding of the Public Notes may declare the principal and the accrued and unpaid interest, if any, on all of the outstanding Public Notes to be due and payable. These covenants and events of default are subject to a number of important qualifications, limitations and exceptions that are described in the Indenture.