Red Lobster 2013 Annual Report Download - page 30

Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Darden
26 Darden Restaurants, Inc. 2013 Annual Report
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 customary
for credit facilities of this type. As of May 26, 2013, we were in compliance with
the covenants under the Revolving Credit Agreement.
The Revolving Credit Agreement matures on October 3, 2016, and the proceeds
may be used for commercial paper back-up, working capital and capital expen-
ditures, 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 higher of the
BOA prime rate or the Federal Funds rate plus 0.500 percent) plus the Applicable
Margin. Assuming a “BBB” equivalent credit rating level, the Applicable Margin
under the Revolving Credit Agreement will be 1.075 percent for LIBOR loans and
0.075 percent for base rate loans.
As of May 26, 2013, we had no outstanding balances under the Revolving
Credit Agreement. As of May 26, 2013, $164.5 million of commercial paper was
outstanding, which was backed by this facility. After consideration of commercial
paper backed by the Revolving Credit Agreement, as of May 26, 2013, we had
$585.5 million of credit available under the Revolving Credit Agreement.
On October 4, 2012, we issued $450.0 million aggregate principal amount
of unsecured 3.350 percent senior notes due November 2022 (the New Senior
Notes) under a registration statement filed with the Securities and Exchange
Commission (SEC) on October 6, 2010. Discount and issuance costs, which
totaled $4.7 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 May 1 and November 1 of each year, and commenced May 1, 2013. 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.
On August 22, 2012, we entered into a Term Loan Agreement (the Term Loan
Agreement) with BOA, as administrative agent, and the lenders and other agents
party thereto. During the second quarter of fiscal 2013, we made borrowings
under this agreement in a total aggregate principal amount of $300.0 million.
The Term Loan Agreement is a senior unsecured term loan commitment to the
Company and contains customary representations, events of default and affirma-
tive 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) for facilities of this type.
The Term Loan Agreement matures on August 22, 2017, and the proceeds
may be used for the refinancing of certain indebtedness, certain acquisitions and
general corporate purposes. The loans under the Term Loan Agreement are subject
to annual amortization of principal of 5 percent, 5 percent, 5 percent and 85 percent,
payable on the second, third, fourth and fifth anniversaries, respectively, of the
effective date of the Term Loan Agreement. Additional information regarding
terms and conditions of the Term Loan Agreement is incorporated by reference
from Note 9 to our consolidated financial statements in Part II, Item 8 of this report.
On August 28, 2012, we closed on the issuance of $80.0 million unsecured
3.790 percent senior notes due August 2019 and $220.0 million unsecured
4.520 percent senior notes due August 2024, pursuant to a Note Purchase Agreement
dated June 18, 2012. The Note Purchase Agreement contains customary represen-
tations, events of default and affirmative and negative covenants (including
limitations on liens and priority debt and a maximum consolidated total debt to
capitalization ratio of 0.75 to 1.00, as such may be adjusted in certain circumstances)
for facilities of this type.
On May 15, 2013 we repaid, prior to maturity, a $4.9 million unsecured
commercial bank loan which was used to support a loan from us to the Employee
Stock Ownership Plan portion of the Darden Savings Plan.
At May 26, 2013, our long-term debt consisted principally of:
 • $100.0millionofunsecured7.125percentdebenturesdueinFebruary2016;
 • $300.0millionunsecured,variable-ratetermloanmaturinginAugust2017;
 • $500.0millionofunsecured6.200percentseniornotesdueinOctober2017;
 • $80.0millionofunsecured3.790percentseniornotesdueinAugust2019;
 • $400.0millionofunsecured4.500percentseniornotesdueinOctober2021;
 • $450.0millionofunsecured3.350percentseniornotesdueinNovember2022;
 • $220.0millionofunsecured4.520percentseniornotesdueinAugust2024;
 • $150.0millionofunsecured6.000percentseniornotesdueinAugust
2035;and
 • $300.0millionofunsecured6.800percentseniornotesdueinOctober2037.
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. As of
May 26, 2013, 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 26, 2013 and thereafter are $0.0 million in fiscal 2014,
$15.0 million in fiscal 2015, $115.0 million in fiscal 2016, $15.0 million in
fiscal 2017, $755.0 million in fiscal 2018 and $1.6 billion 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 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.