Note 5. Debt and Capital Lease Obligations

Debt at June 3, 2017 and September 3, 2016 consisted of the following:


	June 3,		September 3,
	2017		2016
	(Dollars in thousands)
Credit Facility:
Revolver	$	314,000	$	217,000
Term loan		-		187,500
Private Placement Debt:
Senior notes, series A		75,000		75,000
Senior notes, series B		100,000		100,000
Capital lease and financing obligations		28,100		28,268
Less: unamortized debt issuance costs		(1,953)		(946)
Total debt	$	515,147	$	606,822
Less: short-term debt(1)		(314,171)		(267,050)
Long-term debt	$	200,976	$	339,772

____________________

(1)

Net of unamortized debt issuance costs expected to be amortized in the next twelve months.

Credit Facility

In April 2017, the Company entered into a new $600 million credit facility (the “New Credit Facility”). The New Credit Facility, which matures on April 14, 2022, provides for a five-year unsecured revolving loan facility in the aggregate amount of $600 million. The New Credit Facility replaced the Company’s previous $650 million credit facility (the “Previous Credit Facility”), dated April 22, 2013.

The New Credit Facility permits up to $50 million to be used to fund letters of credit. The New Credit Facility also permits the Company to request one or more incremental term loan facilities and/or increase the revolving loan commitments in an aggregate amount not to exceed $300 million. Subject to certain limitations, each such incremental term loan facility or revolving commitment increase will be on terms as agreed to by the Company, the Administrative Agent and the lenders providing such financing.

Borrowings under the New Credit Facility bear interest, at the Company’s option, either at (i) the LIBOR (London Interbank Offered Rate) rate plus the applicable margin for LIBOR loans ranging from 1.00% to 1.375%, based on the Company’s consolidated leverage ratio; or (ii) the greatest of (a) the Administrative Agent’s prime rate in effect on such day, (b) the federal funds effective rate in effect on such day, plus 0.50% and (c) the LIBOR rate that would be calculated as of such day in respect of a proposed LIBOR loan with a one-month interest period, plus 1.00%, plus, in the case of each of clauses (a) through (c), an applicable margin ranging from 0.00% to 0.375%, based on the Company’s consolidated leverage ratio. The Company is required to pay a quarterly undrawn fee ranging from 0.10% to 0.20% per annum on the unutilized portion of the New Credit Facility, based on the Company’s consolidated leverage ratio. The Company is also required to pay quarterly letter of credit usage fees ranging between 1.00% to 1.375% (based on the Company’s consolidated leverage ratio) on the amount of the daily average outstanding letters of credit, and a quarterly fronting fee of 0.125% per annum on the undrawn and unexpired amount of each letter of credit. The weighted average applicable borrowing rate for the Company for any borrowings outstanding under the New Credit Facility at June 3, 2017 was 2.12% which represents LIBOR plus 1.125%. Based on the interest period the Company selects, interest may be payable every one, two, three or six months. Interest is reset at the end of each interest period. The Company currently elects to have loans under the New Credit Facility bear interest based on LIBOR with one-month interest periods. Borrowings under the New Credit Facility are guaranteed by certain of the Company’s subsidiaries.

During the thirty-nine week period ended June 3, 2017, the Company borrowed $109,000 under the revolving loan facility and repaid $147,000 and $37,500 of the revolving loan facility and the term loan facility, respectively. In addition, as a result of entering into the New Credit Facility, the Company borrowed $330,000 under the New Credit Facility and used an additional $16,706 in cash on hand to pay down and close the $345,000 outstanding balance under the Previous Credit Facility plus the applicable interest and fees.

Private Placement Debt

In July 2016, in connection with the Company’s “modified Dutch auction” tender offer, the Company completed the issuance and sale of the following unsecured senior notes (collectively “Private Placement Debt”):

$75,000 aggregate principal amount of 2.65% Senior Notes, Series A, due July 28, 2023 (“Senior notes, series A”); and

$100,000 aggregate principal amount of 2.90% Senior Notes, Series B, due July 28, 2026 (“Senior notes, series B”).

The Private Placement Debt is due, in full, on the stated maturity dates. Interest is payable semiannually at the fixed stated interest rates.

The New Credit Facility and Private Placement Debt contain several restrictive covenants including the requirement that the Company maintain a maximum consolidated leverage ratio of total indebtedness to EBITDA (earnings before interest expense, taxes, depreciation, amortization and stock-based compensation) of no more than 3.00 to 1.00 (or, at the election of the Company after it consummates a material acquisition, a four-quarter temporary increase to 3.50 to1.00), and a minimum consolidated interest coverage ratio of EBITDA to total interest expense of at least 3.00 to 1.00, during the terms of the New Credit Facility and Private Placement Debt.

At June 3, 2017, the Company was in compliance with the operating and financial covenants of the New Credit Facility and Private Placement Debt.

Capital Lease and Financing Obligations

In connection with the construction of the Company’s customer fulfillment center in Columbus, Ohio, the Finance Authority holds the title to the building and entered into a long-term lease with the Company. The lease has a 20-year term with a prepayment option without penalty between 7 and 20 years. At the end of the lease term, the building’s title is transferred to the Company for a nominal amount when the principal of and interest on the bonds have been fully paid. The lease has been classified as a capital lease in accordance with ASC Topic 840. At June 3, 2017 and September 3, 2016, the capital lease obligation was approximately $27,025.