Red Lobster 2012 Annual Report Download - page 30

Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Darden
26 Darden Restaurants, Inc. 2012 Annual Report
under a registration statement filed with the SEC on October 6, 2010. Discount
and issuance costs, which totaled $5.1 million, are being amortized over the term
of the New Senior Notes using the straight-line method, the results of which
approximate the effective interest method. Interest on the New Senior Notes
is payable semi-annually in arrears on April 15 and October 15 of each year,
commencing April 15, 2012. We may redeem the New Senior Notes at any time
in whole or from time to time in part, at the principal amount plus a make-whole
premium. If we experience a change in control triggering event, unless we have
previously exercised our right to redeem the New Senior Notes, we may be
required to purchase the New Senior Notes from the holders at a purchase price
equal to 101 percent of their principal amount plus accrued and unpaid interest.
At May 27, 2012, our long-term debt consisted principally of:
฀ •฀฀$100.0฀million฀of฀unsecured฀7.125฀percent฀debentures฀due฀in฀
February฀2016;
฀ •฀฀$500.0฀million฀of฀unsecured฀6.200฀percent฀senior฀notes฀due฀in฀
October฀2017;
฀ •฀฀$400.0฀million฀of฀unsecured฀4.500฀percent฀senior฀notes฀due฀in฀
October฀2021;
฀ •฀฀$150.0฀million฀of฀unsecured฀6.000฀percent฀senior฀notes฀due฀in฀
August฀2035;
฀ •฀฀$300.0฀million฀of฀unsecured฀6.800฀percent฀senior฀notes฀due฀in฀
October฀2037;฀and
฀ •฀฀An฀unsecured,฀variable฀rate฀$5.9฀million฀commercial฀bank฀loan฀due฀in฀
December 2018 that is used to support a loan from us to the Employee
Stock Ownership Plan (ESOP) portion of the Darden Savings Plan.
We also have $350.0 million of unsecured 5.625 percent senior notes due
in October 2012 included in current liabilities as current portion of long-term debt.
Upon maturity of the notes due October 2012, we expect to issue unsecured debt
securities that will effectively refinance the notes due October 2012.
On June 18, 2012, we agreed to issue and sell $80.0 million unsecured
3.790 percent senior notes due in August 2019 and $220.0 million unsecured
4.520 percent senior notes due August 2024 (collectively, the “Notes”), pursuant
to the provisions of a Note Purchase Agreement among us and the purchasers
named therein. The sale and purchase of the Notes will occur at a closing in
August 2012. We intend to use the net proceeds from the offering of the Notes
for the repayment of existing indebtedness, and for other general corporate pur-
poses. The Notes were offered in a private placement transaction exempt from
the SEC registration requirements. Additional information regarding terms and
conditions of the Note Purchase Agreement is incorporated by reference from
Note 9 to our consolidated financial statements in Part II, Item 8 of this report.
The interest rates on our $350.0 million senior notes due October 2012,
$500.0 million senior notes due October 2017 and $300.0 million senior notes
due October 2037 are subject to adjustment from time to time if the debt rating
assigned to such series of notes is downgraded below a certain rating level
(or subsequently upgraded). The maximum adjustment is 2.000 percent above
the initial interest rate and the interest rate cannot be reduced below the initial
interest rate. As of May 27, 2012, no adjustments to these interest rates had
been made.
All of our long-term debt currently outstanding is expected to be repaid
entirely at maturity with interest being paid semi-annually over the life of the
debt. The aggregate maturities of long-term debt for each of the five fiscal years
subsequent to May 27, 2012 and thereafter are $350.0 million in fiscal 2013,
$0.0 million in fiscal 2014, $0.0 million in fiscal 2015, $100.0 million in fiscal
2016, $0.0 million in fiscal 2017 and $1,355.9 million thereafter.
From time to time we enter into interest rate derivative instruments
to manage interest rate risk inherent in our operations. See Note 10 to our
consolidated financial statements in Part II, Item 8 of this report, incorporated
herein by reference.
Through our shelf registration statement on file with the Securities and
Exchange Commission (SEC), depending on conditions prevailing in the public
capital markets, we may issue unsecured debt securities from time to time in
one or more series, which may consist of notes, debentures or other evidences
of indebtedness in one or more offerings.
We may from time to time repurchase our outstanding debt in privately
negotiated transactions. Such repurchases, if any, will depend on prevailing
market conditions, our liquidity requirements and other factors.