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Aug. 27, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financing [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financing |
Note I — Financing
The Company’s long-term debt consisted of the following:
As of August 27, 2011, the commercial paper borrowings mature in the next twelve months but are
classified as long-term in the Company’s Consolidated Balance Sheets, as the Company has the
ability and intent to refinance them on a long-term basis. Specifically, excluding the effect of
commercial paper borrowings, the Company had $996.6 million of availability under its new $1.0
billion revolving credit facility, expiring in September 2016 that would allow it to replace these
short-term obligations with long-term financing.
In addition to the long-term debt discussed above, the Company had $34.1 million of short-term
borrowings that are scheduled to mature in the next twelve months as of August 27, 2011. The
short-term borrowings are unsecured, peso denominated borrowings and accrue interest at 4.85% as of
August 27, 2011.
In September 2011, the Company amended and restated its $800 million revolving credit facility,
which was scheduled to expire in July 2012. The capacity under the revolving credit facility was
increased to $1.0 billion. This credit facility is available to primarily support commercial paper
borrowings, letters of credit and other short-term, unsecured bank loans. The capacity of the
credit facility may be increased to $1.250 billion prior to the maturity date at the Company’s
election and subject to bank credit capacity and approval, may include up to $200 million in
letters of credit, and may include up to $175 million in capital leases each fiscal year. Under
the revolving credit facility, the Company may borrow funds consisting of Eurodollar loans or base
rate loans. Interest accrues on Eurodollar loans at a defined Eurodollar rate, defined as LIBOR
plus the applicable percentage, as defined in the revolving credit facility, depending upon the
Company’s senior, unsecured, (non-credit enhanced) long-term debt rating. Interest accrues on base
rate loans as defined in the credit facility. The Company also has the option to borrow funds
under the terms of a swingline loan subfacility. The revolving credit facility expires in
September 2016.
The revolving credit facility agreement requires that the Company’s consolidated interest coverage
ratio as of the last day of each quarter shall be no less than 2.50:1. This ratio is defined as
the ratio of (i) consolidated earnings before interest, taxes and rents to (ii) consolidated
interest expense plus consolidated rents. The Company’s consolidated interest coverage ratio as of
August 27, 2011 was 4.44:1.
In June 2010, the Company entered into a letter of credit facility that allows the Company to
request the participating bank to issue letters of credit on the Company’s behalf up to an
aggregate amount of $100 million. The letter of credit facility is in addition to the letters of
credit that may be issued under the revolving credit facility. As of August 27, 2011, the Company
has $92.9 million in letters of credit outstanding under the letter of credit facility, which
expires in June 2013.
On November 15, 2010, the Company issued $500 million in 4.000% Senior Notes due 2020 under the
Company’s shelf registration statement filed with the Securities and Exchange Commission on July
29, 2008 (the “Shelf Registration”). The Shelf Registration allows the Company to sell an
indeterminate amount in debt securities to fund general corporate purposes, including repaying,
redeeming or repurchasing outstanding debt and for working capital, capital expenditures, new store
openings, stock repurchases and acquisitions. The Company used the proceeds from the issuance of
debt to repay the principal due relating to the $199.3 million in 4.750% Senior Notes that matured
on November 15, 2010, to repay a portion of the commercial paper borrowings and for general
corporate purposes.
The 5.750% Senior Notes issued in July 2009 and the 6.500% and 7.125% Senior Notes issued during
August 2008, (collectively, the “Notes”), are subject to an interest rate adjustment if the debt
ratings assigned to the Notes are downgraded. The Notes, along with the 4.000% Senior Notes issued
in during November 2010, also contain a provision that repayment of the notes may be accelerated if
the Company experiences a change in control (as defined in the agreements). The Company’s
borrowings under its other senior notes contain minimal covenants, primarily restrictions on liens.
Under the revolving credit facility, covenants include limitations on total indebtedness,
restrictions on liens, a maximum debt to earnings ratio, and a change of control provision that may
require acceleration of the repayment obligations under certain circumstances. These covenants are
in addition to the consolidated interest coverage ratio discussed above. All of the repayment
obligations under the borrowing arrangements may be accelerated and come due prior to the scheduled
payment date if covenants are breached or an event of default occurs.
As of August 27, 2011, the Company was in compliance with all covenants related to its borrowing
arrangements. All of the Company’s debt is unsecured.
Scheduled maturities of long-term debt are
as follows:
The fair value of the Company’s debt was estimated at $3.633 billion as of August 27, 2011, and
$3.182 billion as of August 28, 2010, based on the quoted market prices for the same or similar
issues or on the current rates available to the Company for debt of the same remaining maturities.
Such fair value is greater than the carrying value of debt by $281.0 million and $273.5 million at
August 27, 2011 and August 28, 2010, respectively.
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