Revolving and Other Lines of Credit and Notes Payable

12 Months Ended

Jun. 30, 2020

Notes Payable and Lines of Credit [Abstract]

Notes Payable and Lines of Credit

AND OTHER LINES OF CREDIT AND NOTES PAYABLE

Credit Agreement The five-year, multi-currency, revolving credit facility, as amended and restated in June 2018 (Credit Agreement) provides for revolving credit loans of up to $700.0 million for working capital, capital expenditures and general corporate purposes. The Credit Agreement matures in June 2023 and allows for borrowings in U.S. dollars, euros, Canadian dollars, pounds sterling and Japanese yen. Interest payable under the Credit Agreement is based upon the type of borrowing under the facility and may be (1) LIBOR plus an applicable margin, (2) the greater of the prime rate or the Federal Funds effective rate plus an applicable margin, or (3) fixed as negotiated by us.

The Credit Agreement requires us to comply with various restrictive and affirmative covenants, including two financial covenants: 1.) a maximum leverage ratio where debt, net of domestic cash in excess of $25 million, must be less than or equal to 3.5 times trailing twelve months EBITDA, adjusted for certain non-cash expenses and which may be further adjusted, at our discretion, to include up to $80 million of cash restructuring charges through December 31, 2021; and 2.) a minimum consolidated interest coverage ratio of EBITDA to interest of 3.5 times (as the aforementioned terms are defined in the Credit Agreement). Borrowings under the Credit Agreement are guaranteed by our significant domestic subsidiaries.

As of June 30, 2020, we were in compliance with all covenants of the Credit Agreement and we had $500.0 million of borrowings outstanding and $200.0 million of additional availability. There were no borrowings outstanding as of June 30, 2019. The weighted average interest rate on borrowings under the Credit Agreement was 2.17 percent as of June 30, 2020.

On June 9, 2020 the Company announced a 10 percent reduction in its salaried workforce to occur in the first half of fiscal 2021 as part of its simplification/modernization initiative. The Company also announced that effective July 1, 2020, the compensation of salaried employees would be temporarily reduced by 10 to 20 percent, based on the job level, due to the market headwinds from COVID-19. The compensation adjustment replaced the furloughs and similar actions that were in place for our salaried workforce during the fourth quarter of fiscal 2020.

The Company continues to assess the expected conditions in its primary end markets, including the effects of COVID-19 on the Company’s business, financial condition, operating results and cash flows. Because the extent and duration of the COVID-19 pandemic are uncertain, the effects of the pandemic could materially affect our availability to borrow under the Credit Agreement and our compliance with the maximum leverage ratio covenant of the Credit Agreement. We are currently evaluating whether or not to access the capital markets or seek an amendment to the Credit Agreement, including modification of the covenant restrictions, among other terms. If over the course of the next year, market conditions do not improve or further deteriorate, the Company may need to take one or a combination of the following additional actions to ensure the Company has adequate access to liquidity and remains in compliance with the maximum leverage ratio covenant of the Credit Agreement, all of which are within the Company’s control: implement additional short-term cost-control actions, temporarily reduce or suspend the dividend, and undertake new restructuring programs. We have concluded that we will remain in compliance with the covenants of the Credit Agreement and, as a result, will have adequate access to liquidity to satisfy our obligations within one year after the date the financial statements are issued.

Other lines of credit and notes payable to banks were $0.4 million and $0.2 million at June 30, 2020 and 2019, respectively. This represented short-term borrowings under credit lines with commercial banks in the various countries in which we operate. These credit lines, translated into U.S. dollars at June 30, 2020 exchange rates, totaled $92.2 million at June 30, 2020.