Financial Instruments

9 Months Ended

Sep. 26, 2021

Debt Disclosure [Abstract]

Financial Instruments

Financial Instruments

The Company's financial instruments include cash and cash equivalents, accounts receivable, short-term borrowings, accounts payable and certain accrued liabilities. At September 26, 2021, September 27, 2020 and December 27, 2020, the carrying cost of these instruments approximated their fair value. The Company's financial instruments at September 26, 2021, September 27, 2020 and December 27, 2020 also include certain assets and liabilities measured at fair value (see Notes 11 and 12) as well as long-term borrowings. The carrying costs, which are equal to the outstanding principal amounts, and fair values of the Company's long-term borrowings as of September 26, 2021, September 27, 2020 and December 27, 2020 are as follows:

	September 26, 2021			September 27, 2020			December 27, 2020
	Carrying Cost		Fair Value	Carrying Cost		Fair Value	Carrying Cost		Fair Value
3.90% Notes Due 2029	$	900.0	1,001.7	$	900.0	947.5	$	900.0	1,011.2
3.55% Notes Due 2026	675.0		737.2	675.0		716.1	675.0		752.7
3.00% Notes Due 2024	500.0		529.1	500.0		531.9	500.0		540.6
6.35% Notes Due 2040	500.0		702.3	500.0		587.4	500.0		636.5
3.50% Notes Due 2027	500.0		546.2	500.0		518.8	500.0		544.5
2.60% Notes Due 2022 (1)	—		—	300.0		310.7	300.0		311.5
5.10% Notes Due 2044	300.0		375.0	300.0		313.4	300.0		338.1
3.15% Notes Due 2021 (2)	—		—	300.0		303.5	300.0		302.3
6.60% Debentures Due 2028	109.9		137.2	109.9		130.3	109.9		137.4
Variable % Notes Due December 30, 2022 (3)	—		—	400.0		400.0	300.0		300.0
Variable % Notes Due December 30, 2024 (4)	505.0		505.0	577.5		577.5	577.5		577.5
Production Financing Facilities	204.7		204.7	121.4		121.4	165.5		165.5
Total long-term debt	$	4,194.6	4,738.4	$	5,183.8	5,458.5	$	5,127.9	5,617.8
Less: Deferred debt expenses	29.6		—	36.8		—	35.3		—
Less: Current portion	187.6		—	369.3		—	432.6		—
Long-term debt	$	3,977.4	4,738.4	$	4,777.8	5,458.5	$	4,660.0	5,617.8

(1) During the third quarter of 2021, the Company repaid in full its 2.60% Notes, in the aggregate principal amount of $300.0 million due in November 2022.

(2) During the first quarter of 2021, the Company repaid in full its 3.15% Notes, in the aggregate principal amount of $300.0 million due in May 2021.

(3) During the second quarter of 2021, the Company repaid $250.0 million of the Variable % Notes Due December 30, 2022 and during the third quarter of 2021, the Company repaid the remaining balance of $50.0 million of the Variable % Notes Due December 30, 2022.

(4) During the third quarter of 2021, the Company repaid $50.0 million of the Variable % Notes Due December 30, 2024.

In November 2019, in conjunction with the Company's acquisition of eOne, the Company issued an aggregate of $2.4 billion of senior unsecured debt securities (the "Notes") consisting of the following tranches: $300.0 million of notes due 2022 (the "2022 Notes") that bear interest at a fixed rate of 2.60%, $500.0 million of notes due 2024 (the "2024 Notes") that bear interest at a fixed rate of 3.00%, $675.0 million of notes due 2026 (the "2026 Notes") that bear interest at a fixed rate of 3.55% and $900.0 million of notes due 2029 (the "2029 Notes") that bear interest at a fixed rate of 3.90%. Net proceeds from the issuance of the Notes, after deduction of $20.0 million of underwriting discount and fees, totaled $2.4 billion. These costs are being amortized over the life of the Notes outstanding, which range from five years to ten years from the date of issuance. During the third quarter of 2021, the Company repaid in full the $300.0 million of 2022 Notes and recorded $9.1 million of debt extinguishment costs within other expense (income) in the Consolidated Statements of Operations.

The Notes bear interest at the stated rates but may be subject to upward adjustment if the credit rating of the Company is reduced by Moody's or Standard & Poors. The adjustment can be from 0.25% to 2.00% based on the extent of the ratings decrease. The Company may redeem the Notes at its option at the greater of the principal amount of the Notes or the present

value of the remaining scheduled payments discounted using the effective interest rate on applicable U.S. Treasury bills at the time of repurchase, plus (1) 25 basis points (in the case of the 2024 Notes); (2) 30 basis points (in the case of the 2026 Notes); and (3) 35 basis points (in the case of the 2029 Notes). In addition, on and after October 19, 2024 for the 2024 Notes, September 19, 2026 for the 2026 Notes and August 19, 2029 for the 2029 Notes, such series of Notes will be redeemable, in whole at any time or in part from time to time, at the Company's option at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus any accrued and unpaid interest.

In September 2019, the Company entered into a $1.0 billion Term Loan Agreement (the "Term Loan Agreement”) with Bank of America N.A. (“Bank of America”), as administrative agent, and certain financial institutions as lenders, pursuant to which such lenders committed to provide, contingent upon the completion of the eOne Acquisition and certain other customary conditions to funding, (1) a three-year senior unsecured term loan facility in an aggregate principal amount of $400.0 million (the “Three-Year Tranche”) and (2) a five-year senior unsecured term loan facility in an aggregate principal amount of $600.0 million (the “Five-Year Tranche” and together with the Three-Year Tranche, the “Term Loan Facilities”). The full amount of the Term Loan Facilities were drawn down on December 30, 2019, the closing date of the eOne Acquisition. During 2020, the Company made $122.5 million in payments towards the $1.0 billion term loan notes consisting of $100.0 million on the principal balance of the Three-Year Tranche loans in addition to the required quarterly principal amortization payments totaling $22.5 million on the Five-Year Tranche loans. During the first nine months of 2021, the Company paid $372.5 million toward the $1.0 billion term loan notes consisting of the remaining $300.0 million of the principal balance of the Three-Year Tranche loans as well as $50.0 million principal balance and principal amortization payments totaling $22.5 million on the Five-Year Tranche loans.

Loans under the remaining Five-Year Tranche bear interest at the Company’s option, at either the Eurocurrency Rate or the Base Rate, plus a per annum applicable rate that fluctuates between 100.0 basis points and 187.5 basis points, in the case of loans priced at the Eurocurrency Rate, and between 0.0 basis points and 87.5 basis points, in the case of loans priced at the Base Rate, in each case, based upon the non-credit enhanced, senior unsecured long-term debt ratings of the Company by Fitch Ratings Inc., Moody’s Investor Service, Inc. and S&P Global Rankings, subject to certain provisions taking into account potential differences in ratings issued by the relevant rating agencies or a lack of ratings issued by such rating agencies. Loans under the Five-Year Tranche require principal amortization payments that are payable in equal quarterly installments of 5.0% per annum of the original principal amount thereof for each of the first two years after funding, increasing to 10.0% per annum of the original principal amount thereof for each subsequent year. The Term Loan Agreement contains affirmative and negative covenants typical of this type of facility, including: (i) restrictions on the Company’s and its domestic subsidiaries’ ability to allow liens on their assets, (ii) restrictions on the incurrence of indebtedness, (iii) restrictions on the Company’s and certain of its subsidiaries’ ability to engage in certain mergers, (iv) the requirement that the Company maintain a Consolidated Interest Coverage Ratio of no less than 3.00:1.00 as of the end of any fiscal quarter and (v) the requirement that the Company maintain a Consolidated Total Leverage Ratio of no more than, depending on the gross proceeds of equity securities issued after the effective date of the acquisition of eOne, 5.65:1.00 or 5.40:1.00 for each of the first, second and third fiscal quarters ended after the funding of the Term Loan Facilities, with periodic step downs to 3.50:1.00 for the fiscal quarter ending December 31, 2023 and thereafter.

The Company may redeem its 5.10% notes due in 2044 (the "2044 Notes") at its option, at the greater of the principal amount of the notes or the present value of the remaining scheduled payments, discounted using the effective interest rate on applicable U.S. Treasury bills at the time of repurchase.

Current portion of long-term debt at September 26, 2021 of $187.6 million, as shown on the consolidated balance sheet, represents the current portion of required quarterly principal amortization payments for the Term Loan Facilities and production financing facilities. All of the Company’s other long-term borrowings have contractual maturities that occur subsequent to the third quarter of 2024.

The fair values of the Company's long-term debt are considered Level 3 fair values (see Note 11 for further discussion of the fair value hierarchy) and are measured using the discounted future cash flows method. In addition to the debt terms, the valuation methodology includes an assumption of a discount rate that approximates the current yield on a similar debt security. This assumption is considered an unobservable input in that it reflects the Company's own assumptions about the inputs that market participants would use in pricing the asset or liability. The Company believes that this is the best information available for use in the fair value measurement.

Production Financing

In addition to the Company's financial instruments, the Company uses production financing to fund certain of its television and film productions which are typically arranged on an individual production basis by special purpose production subsidiaries.

Production financing facilities are secured by the assets and future revenue of the individual production subsidiaries and are non-recourse to the Company's assets.

Production financing facilities typically have maturities of less than two years, while the titles are in production, and are repaid once delivered and all credits, broadcaster pre-sales and international sales have been received. The production financing facilities as of September 26, 2021, September 27, 2020 and December 27, 2020 are as follows:

	September 26, 2021		September 27, 2020		December 27, 2020
Production financing held by production subsidiaries	$	204.7	$	121.4	$	165.5
Other loans (1)	—		9.0		5.4
Total	$	204.7	$	130.4	$	170.9
Production financing included in the consolidated balance sheet as:
Non-current	$	47.0	$	82.2	$	62.9
Current	157.7		39.2		102.6
Total	$	204.7	$	121.4	$	165.5

(1) Other loans consist of production related demand loans, and are recorded within Short-term Borrowings in the Company's consolidated balance sheets.

Interest is charged at bank prime rate plus a margin based on the risk of the respective production. The weighted average interest rate on all production financing as of September 26, 2021 was 2.9%.

The Company has Canadian dollar and U.S. dollar production credit facilities with various banks. The carrying amounts are denominated in the following currencies:

	Canadian Dollars		U.S. Dollars		Total
As of September 26, 2021	$	37.0	$	167.7	$	204.7

The following table represents the movements in production financing and other related loans during the first nine months of 2021:

	Production Financing		Other Loans		Total
December 27, 2020	$	165.5	$	5.4	$	170.9
Drawdowns	127.6		16.7		144.3
Repayments	(89.6)		(22.9)		(112.5)
Foreign exchange differences	1.2		0.8		2.0
Balance at September 26, 2021	$	204.7	$	—	$	204.7