Red Lobster 2015 Annual Report Download - page 45

DARDEN RESTAURANTS, INC. | 2015 ANNUAL REPORT 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DARDEN
During fiscal 2015, with proceeds from the disposition of Red Lobster,
we retired approximately $1.01 billion aggregate principal of long-term debt,
comprised of $278.1 million aggregate principal of our 4.500 percent senior
notes due 2021, $338.9 million aggregate principal of our 3.350 percent
senior notes due 2022, $80.0 million aggregate principal amount of our
3.790 percent senior notes due 2019, $210.0 million aggregate principal
amount of our 4.520 percent senior notes due 2024 and $100.0 million
aggregate principal amount of our outstanding 7.125 percent debentures
due 2016.
In fiscal 2015, we recorded approximately $91.3 million of expenses
associated with the retirement. These expenses included cash components for
repurchase premiums and make-whole amounts of approximately $44.0 million
and non-cash charges associated with hedge and loan cost write-offs of
approximately $47.3 million. These amounts were recorded in interest, net
in our consolidated statements of earnings.
The interest rates on our $500.0 million 6.200 percent senior notes due
October 2017 and $300.0 million 6.800 percent 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. In
October 2014, Moody’s Investors Service downgraded our senior unsecured
ratings to “Ba1” from “Baa3” resulting in an increase of 0.250 percent in the
interest rates on our senior notes due in October 2017 and October 2037,
effective as of the first day of the interest period during which the ratings
change took place. Accordingly, our annual interest expense increased by
$2.0 million as a result of these rate adjustments.
In April 2015, the FASB issued ASU 2015-03, Interest – Imputation of
Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs.
This update requires debt issuance costs to be presented in the balance sheet
as a direct deduction from the carrying amount of the related debt. This guidance
is effective for us in the first quarter of fiscal 2017, however, we elected to early
adopt this guidance in the fourth quarter of fiscal 2015. As of May 31, 2015, we
have reclassified debt issuance costs associated with our long-term debt from
other assets to long-term debt, less current portion. Prior year amounts have
been reclassified to conform to the current year classification resulting in an
adjustment to long-term debt of $18.0 million for the year ended May 25, 2014.
The aggregate contractual maturities of long-term debt for each of the
five fiscal years subsequent to May 31, 2015, and thereafter are as follows:
(in millions)
Fiscal Year Amount
2016 $ 15.0
2017 15.0
2018 755.0
2019 —
2020 —
Thereafter 693.0
Long-term debt $1,478.0
We maintain a $750.0 million revolving Credit Agreement (Revolving Credit
Agreement), with Bank of America, N.A. (BOA) as administrative agent, and the
lenders and other agents party thereto. The Revolving Credit Agreement is a
senior unsecured credit commitment to the Company and contains customary
representations and affirmative and negative covenants (including limitations
on liens and subsidiary debt and a maximum consolidated lease adjusted
total debt to total capitalization ratio of 0.75 to 1.00) and events of default
usual for credit facilities of this type. As of May 31, 2015, we were in
compliance with all covenants under the Revolving Credit Agreement.
The Revolving Credit Agreement matures on October 24, 2018 and
the proceeds may be used for commercial paper back-up, working capital
and capital expenditures, the refinancing of certain indebtedness, certain
acquisitions and general corporate purposes. Loans under the Revolving
Credit Agreement bear interest at a rate of LIBOR plus a margin determined
by reference to a ratings-based pricing grid (Applicable Margin), or the base
rate (which is defined as the highest of the BOA prime rate, the Federal Funds
rate plus 0.500 percent, and the Eurocurrency Rate plus 1.00 percent) plus
the Applicable Margin. Assuming a “BBB-” equivalent credit rating level, the
Applicable Margin under the Revolving Credit Agreement will be 1.300 percent
for LIBOR loans and 0.300 percent for base rate loans.
The components of short-term debt are as follows:
(in millions) May 31, 2015 May 25, 2014
Commercial paper $ — $207.6
The weighted-average interest rate on commercial paper borrowings
as of May 25, 2014 was 0.80 percent.