Credit Facility

9 Months Ended

Jul. 31, 2019

CREDIT FACILITY

On September 1, 2017, we refinanced and replaced our then-existing $800.0 million credit facility with a new senior, secured five-year syndicated credit facility (the “Credit Facility”), consisting of a $900.0 million revolving line of credit and an $800.0 million amortizing term loan, scheduled to mature on September 1, 2022. In accordance with the terms of the Credit Facility, the line of credit was reduced to $800.0 million on September 1, 2018. The Credit Facility also provides for the issuance of up to $300.0 million for standby letters of credit and the issuance of up to $75.0 million in swingline advances. The obligations under the Credit Facility are secured on a first-priority basis by a lien on substantially all of our assets and properties, subject to certain exceptions.

Borrowings under the Credit Facility bear interest at a rate equal to 1-month LIBOR plus a spread that is based upon our leverage ratio. The spread ranges from 1.00% to 2.25% for Eurocurrency loans and 0.00% to 1.25% for base rate loans. At July 31, 2019, the weighted average interest rate on our outstanding borrowings was 4.32%. We also pay a commitment fee, based on our leverage ratio, ranging from 0.200% to 0.350% on the average daily unused portion of the line of credit that is paid quarterly in arrears. For purposes of this calculation, irrevocable standby letters of credit, which are issued primarily in conjunction with our insurance programs, and cash borrowings are included as outstanding under the line of credit.

The Credit Facility, as amended, contains certain covenants, including a maximum leverage ratio of 4.00 to 1.0, which steps down to 3.50 to 1.0 by July 2021, and a minimum fixed charge coverage ratio of 1.50 to 1.0, as well as other financial and non-financial covenants. In the event of a material acquisition, as defined in the Credit Facility, we may elect to increase the leverage ratio to 3.75 to 1.0 for a total of four fiscal quarters, provided the leverage ratio had already been reduced to 3.50 to 1.0. Our borrowing capacity is subject to, and limited by, compliance with the covenants described above. At July 31, 2019, we were in compliance with these covenants.

The Credit Facility also includes customary events of default, including failure to pay principal, interest, or fees when due, failure to comply with covenants, the occurrence of certain material judgments, or a change in control of the Company. If certain events of default occur, including certain cross-defaults, insolvency, change in control, or violation of specific covenants, the lenders can terminate or suspend our access to the Credit Facility, declare all amounts outstanding (including all accrued interest and unpaid fees) to be immediately due and payable, and require that we cash collateralize the outstanding standby letters of credit.

Total deferred financing costs related to the Credit Facility were $18.7 million, consisting of $13.4 million related to the term loan and $5.2 million related to the line of credit, which are being amortized to interest expense over the term of the Credit Facility.

Credit Facility Information



(in millions)	July 31, 2019			October 31, 2018
Current portion of long-term debt
Gross term loan	$	55.0		$	40.0
Unamortized deferred financing costs	(2.8		)	(3.0		)
Current portion of term loan	$	52.2		$	37.0

Long-term debt
Gross term loan	$	695.0		$	740.0
Unamortized deferred financing costs	(4.8		)	(6.9		)
Total noncurrent portion of term loan	690.2			733.1
Line of credit⁽¹⁾⁽²⁾	182.1			169.0
Long-term debt	$	872.2		$	902.0

⁽¹⁾Standby letters of credit amounted to $152.4 million at July 31, 2019.

⁽²⁾At July 31, 2019, we had borrowing capacity of $457.0 million; however, covenant restrictions limited our borrowing capacity to $261.5 million.

Term Loan Maturities

During the three and nine months ended July 31, 2019, we made principal payments under the term loan of $10.0 million and $30.0 million, respectively. As of July 31, 2019, the following principal payments are required under the term loan.



(in millions)	2019		2020		2021		2022
Debt maturities	$	10.0	$	60.0	$	120.0	$	560.0

Interest Rate Swaps

We enter into interest rate swaps to manage the interest rate risk associated with our floating-rate, LIBOR-based borrowings. Under these arrangements, we typically pay a fixed interest rate in exchange for LIBOR-based variable interest throughout the life of the agreement. We initially report the mark-to-market gain or loss on a derivative as a component of AOCI and subsequently reclassify the gain or loss into earnings when the hedged transactions occur and affect earnings. Interest payables and receivables under the swap agreements are accrued and recorded as adjustments to interest expense. All of our interest rate swaps have been designated and accounted for as cash flow hedges from inception. See Note 6, “Fair Value of Financial Instruments,” regarding the valuation of our interest rate swaps.



Notional Amounts	Fixed Interest Rates	Effective Dates	Maturity Dates
$ 90.0 million	2.83%	November 1, 2018	April 30, 2021
$ 90.0 million	2.84%	November 1, 2018	October 31, 2021
$ 130.0 million	2.86%	November 1, 2018	April 30, 2022
$ 130.0 million	2.84%	November 1, 2018	September 1, 2022

At July 31, 2019 and October 31, 2018, amounts recorded in AOCI for interest rate swaps were $4.8 million, net of taxes of $2.2 million, and $17.8 million, net of taxes of $7.1 million, respectively. These amounts included the gain associated with the interest rate swaps we terminated in 2018, which is being amortized to interest expense as interest payments are made over the term of our Credit Facility. During the three and nine months ended July 31, 2019, we amortized $1.0 million, net of taxes of $0.4 million, and $3.1 million, net of taxes of $1.2 million, respectively, of this gain to interest expense. At July 31, 2019, the total amount expected to be reclassified from AOCI to earnings during the next twelve months was $1.1 million, net of taxes of $0.5 million.