Company Quick10K Filing
Tractor Supply
Price90.61 EPS3
Shares121 P/E26
MCap10,985 P/FCF27
Net Debt67 EBIT554
TEV11,053 TEV/EBIT20
TTM 2019-09-28, in MM, except price, ratios
10-Q 2020-03-28 Filed 2020-05-07
10-K 2019-12-28 Filed 2020-02-20
10-Q 2019-09-28 Filed 2019-11-07
10-Q 2019-06-29 Filed 2019-08-08
10-Q 2019-03-30 Filed 2019-05-09
10-K 2018-12-29 Filed 2019-02-21
10-Q 2018-09-29 Filed 2018-11-08
10-Q 2018-06-30 Filed 2018-08-09
10-Q 2018-03-31 Filed 2018-05-11
10-K 2017-12-30 Filed 2018-02-22
10-Q 2017-09-30 Filed 2017-11-09
10-Q 2017-07-01 Filed 2017-08-10
10-Q 2017-04-01 Filed 2017-05-10
10-K 2016-12-31 Filed 2017-02-23
10-Q 2016-09-24 Filed 2016-11-04
10-Q 2016-06-25 Filed 2016-08-04
10-Q 2016-03-26 Filed 2016-05-05
10-K 2015-12-26 Filed 2016-02-23
10-Q 2015-09-26 Filed 2015-11-05
10-Q 2015-06-27 Filed 2015-08-05
10-Q 2015-03-28 Filed 2015-05-07
10-K 2015-02-18 Filed 2015-02-18
10-Q 2014-11-03 Filed 2014-11-03
10-Q 2014-08-04 Filed 2014-08-04
10-Q 2014-05-05 Filed 2014-05-05
10-K 2014-02-19 Filed 2014-02-19
10-Q 2013-09-28 Filed 2013-11-04
10-Q 2013-06-29 Filed 2013-08-05
10-Q 2013-03-30 Filed 2013-05-06
10-K 2012-12-29 Filed 2013-02-20
10-Q 2012-09-29 Filed 2012-11-05
10-Q 2012-06-30 Filed 2012-08-06
10-Q 2012-05-07 Filed 2012-05-07
10-K 2012-02-29 Filed 2012-02-29
10-Q 2011-11-03 Filed 2011-11-03
10-Q 2011-08-04 Filed 2011-08-04
10-Q 2011-05-03 Filed 2011-05-03
10-K 2011-02-23 Filed 2011-02-23
10-Q 2010-09-25 Filed 2010-11-02
10-Q 2010-06-26 Filed 2010-08-03
10-Q 2010-03-27 Filed 2010-05-04
10-K 2009-12-26 Filed 2010-02-24
8-K 2020-05-26
8-K 2020-05-08
8-K 2020-05-07
8-K 2020-04-23
8-K 2020-04-07
8-K 2020-03-20
8-K 2020-03-18
8-K 2020-02-13
8-K 2020-02-06
8-K 2020-01-30
8-K 2020-01-13
8-K 2019-12-20
8-K 2019-12-06
8-K 2019-11-12
8-K 2019-11-07
8-K 2019-10-24
8-K 2019-09-06
8-K 2019-08-23
8-K 2019-08-08
8-K 2019-07-25
8-K 2019-05-31
8-K 2019-05-10
8-K 2019-05-09
8-K 2019-04-25
8-K 2019-03-01
8-K 2019-02-07
8-K 2019-02-06
8-K 2019-01-31
8-K 2018-11-14
8-K 2018-11-08
8-K 2018-10-25
8-K 2018-08-13
8-K 2018-08-09
8-K 2018-07-26
8-K 2018-05-14
8-K 2018-05-10
8-K 2018-05-10
8-K 2018-04-26
8-K 2018-02-16
8-K 2018-02-14
8-K 2018-02-08
8-K 2018-01-31

TSCO 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Note 1 - General:
Note 2 - Fair Value of Financial Instruments:
Note 3 - Share - Based Compensation:
Note 4 - Net Income per Share:
Note 5 - Debt:
Note 6 - Interest Rate Swaps:
Note 7 - Capital Stock and Dividends:
Note 8 - Treasury Stock:
Note 9 - Income Taxes:
Note 10 - Commitments and Contingencies:
Note 11 - Segment Reporting:
Note 12 - New Accounting Pronouncements:
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-3.1 ex31-fifthamendedandre.htm
EX-31.1 q1202010qex311.htm
EX-31.2 q1202010qex312.htm
EX-32.1 q1202010qex321.htm

Tractor Supply Earnings 2020-03-28

Balance SheetIncome StatementCash Flow
10.08.06.04.02.00.02012201420172020
Assets, Equity
2.41.91.41.00.50.02012201420172020
Rev, G Profit, Net Income
0.40.20.1-0.1-0.2-0.42012201420172020
Ops, Inv, Fin

tsco-20200328
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period endedMarch 28, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to 
Commission file number   000-23314
tsco-20200328_g1.jpg
TRACTOR SUPPLY COMPANY
(Exact Name of Registrant as Specified in Its Charter)
Delaware13-3139732
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
5401 Virginia Way, Brentwood, Tennessee 37027
(Address of Principal Executive Offices and Zip Code)
(615) 440-4000
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes      No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes     No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 Large accelerated filer
Accelerated filer
 Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)
Yes    No
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.008 par valueTSCONASDAQ Global Select Market
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
ClassOutstanding at April 25, 2020
Common Stock, $.008 par value115,630,120




TRACTOR SUPPLY COMPANY

INDEX


  Page No.
   



Page 2

Index
PART I.  FINANCIAL INFORMATION
Item 1. Financial Statements
TRACTOR SUPPLY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(Unaudited)
March 28,
2020
December 28,
2019
March 30,
2019
ASSETS 
Current assets:   
Cash and cash equivalents$461,473  $84,241  $102,215  
Inventories1,905,913  1,602,781  1,881,332  
Prepaid expenses and other current assets112,853  100,865  90,692  
Income taxes receivable    4,846  
Total current assets2,480,239  1,787,887  2,079,085  
Property and equipment, net1,143,189  1,163,956  1,120,869  
Operating lease right-of-use assets2,228,597  2,188,802  2,086,950  
Goodwill and other intangible assets124,492  124,492  124,492  
Other assets25,888  24,131  25,805  
Total assets$6,002,405  $5,289,268  $5,437,201  
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable$887,938  $643,036  $785,068  
Accrued employee compensation31,146  39,755  28,704  
Other accrued expenses234,460  247,690  204,797  
Current portion of long-term debt30,000  30,000  21,250  
Current portion of finance lease liabilities4,172  4,036  3,683  
Current portion of operating lease liabilities281,620  277,099  260,441  
Income taxes payable24,789  5,984  7,991  
Total current liabilities1,494,125  1,247,600  1,311,934  
Long-term debt989,074  366,480  605,695  
Finance lease liabilities, less current portion31,157  30,389  28,336  
Operating lease liabilities, less current portion2,051,885  2,001,162  1,929,520  
Deferred income taxes1,796  153  6,878  
Other long-term liabilities80,645  76,361  69,262  
Total liabilities4,648,682  3,722,145  3,951,625  
Stockholders’ equity:   
Preferred stock      
Common stock1,391  1,389  1,380  
Additional paid-in capital978,837  966,698  864,738  
Treasury stock(3,277,215) (3,013,996) (2,635,996) 
Accumulated other comprehensive (loss)/income(5,051) 199  3,067  
Retained earnings3,655,761  3,612,833  3,252,387  
Total stockholders’ equity1,353,723  1,567,123  1,485,576  
Total liabilities and stockholders’ equity$6,002,405  $5,289,268  $5,437,201  
Preferred Stock (shares in thousands): $1.00 par value; 40 shares authorized; no shares were issued or outstanding during any period presented.
Common Stock (shares in thousands): $0.008 par value; 400,000 shares authorized at all periods presented. 173,888, 173,608, and 172,457 shares issued; 115,592, 118,165, and 120,674 shares outstanding at March 28, 2020, December 28, 2019, and March 30, 2019, respectively.
Treasury Stock (at cost, shares in thousands): 58,296, 55,443, and 51,783 shares at March 28, 2020, December 28, 2019, and March 30, 2019, respectively.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
Page 3

Index
TRACTOR SUPPLY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(Unaudited)

 For the Fiscal Three Months Ended
 March 28,
2020
March 30,
2019
Net sales$1,959,188  $1,822,220  
Cost of merchandise sold1,297,939  1,207,236  
Gross profit661,249  614,984  
Selling, general and administrative expenses497,275  465,809  
Depreciation and amortization51,436  45,767  
Operating income112,538  103,408  
Interest expense, net5,049  4,930  
Income before income taxes107,489  98,478  
Income tax expense23,712  21,646  
Net income$83,777  $76,832  
Net income per share – basic$0.72  $0.63  
Net income per share – diluted$0.71  $0.63  
Weighted average shares outstanding:  
Basic116,738  121,211  
Diluted117,432  122,152  
Dividends declared per common share outstanding$0.35  $0.31  

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
Page 4

Index
TRACTOR SUPPLY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(Unaudited)

 For the Fiscal Three Months Ended
 March 28,
2020
March 30,
2019
Net income$83,777  $76,832  
Other comprehensive loss:
Change in fair value of interest rate swaps,
net of taxes
(5,250) (1,464) 
Total other comprehensive loss(5,250) (1,464) 
Total comprehensive income$78,527  $75,368  

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
Page 5

Index
TRACTOR SUPPLY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(Unaudited)
 Common Stock
Additional
Paid-in
Capital
Treasury
Stock
Accum. Other Comp. Income/(Loss)
Retained
Earnings
Total
Stockholders’
Equity
SharesDollars
Stockholders’ equity at
December 28, 2019
118,165  $1,389  $966,698  $(3,013,996) $199  $3,612,833  $1,567,123  
Common stock issuance under stock award plans & ESPP
280  2  10,601  10,603  
Share-based compensation expense6,945  6,945  
Repurchase of shares to satisfy tax obligations
(5,407) (5,407) 
Repurchase of common stock
(2,853) (263,219) (263,219) 
Cash dividends paid to stockholders(40,849) (40,849) 
Change in fair value of interest rate swaps, net of taxes
(5,250) (5,250) 
Net income83,777  83,777  
Stockholders’ equity at
March 28, 2020
115,592  $1,391  $978,837  $(3,277,215) $(5,051) $3,655,761  $1,353,723  




 Common Stock
Additional
Paid-in
Capital
Treasury
Stock
Accum. Other Comp. Income
Retained
Earnings
Total
Stockholders’
Equity
SharesDollars
Stockholders’ equity at
December 29, 2018
121,828  $1,375  $823,413  $(2,480,677) $3,814  $3,213,895  $1,561,820  
Common stock issuance under stock award plans & ESPP
570  5  34,727  34,732  
Share-based compensation expense9,624  9,624  
Repurchase of shares to satisfy tax obligations
(3,026) (3,026) 
Repurchase of common stock
(1,724) (155,319) (155,319) 
Cash dividends paid to stockholders(37,623) (37,623) 
Change in fair value of interest rate swaps, net of taxes
(1,464) (1,464) 
Net income76,832  76,832  
Cumulative adjustment as a result of ASU 2017-12 adoption717  (717)   
Stockholders’ equity at
March 30, 2019
120,674  $1,380  $864,738  $(2,635,996) $3,067  $3,252,387  $1,485,576  

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 


Page 6

Index
TRACTOR SUPPLY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 For the Fiscal Three Months Ended
 March 28,
2020
March 30,
2019
Cash flows from operating activities:  
Net income$83,777  $76,832  
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
Depreciation and amortization51,436  45,767  
Gain on disposition of property and equipment(315) (224) 
Share-based compensation expense6,945  9,624  
Deferred income taxes1,643  13,485  
Change in assets and liabilities:  
Inventories(303,132) (291,790) 
Prepaid expenses and other current assets(11,988) 23,755  
Accounts payable244,902  165,087  
Accrued employee compensation(8,609) (25,342) 
Other accrued expenses(12,352) (31,159) 
Income taxes18,805  5,488  
Other12,820  (4,547) 
Net cash provided by/(used in) operating activities83,932  (13,024) 
Cash flows from investing activities:  
Capital expenditures(29,648) (28,785) 
Proceeds from sale of property and equipment320  358  
Net cash used in investing activities(29,328) (28,427) 
Cash flows from financing activities:  
Borrowings under debt facilities809,000  385,000  
Repayments under debt facilities(186,500) (165,500) 
Principal payments under finance lease liabilities(1,000) (897) 
Repurchase of shares to satisfy tax obligations(5,407) (3,026) 
Repurchase of common stock(263,219) (155,319) 
Net proceeds from issuance of common stock10,603  34,732  
Cash dividends paid to stockholders(40,849) (37,623) 
Net cash provided by financing activities322,628  57,367  
Net change in cash and cash equivalents377,232  15,916  
Cash and cash equivalents at beginning of period84,241  86,299  
Cash and cash equivalents at end of period$461,473  $102,215  
Supplemental disclosures of cash flow information:  
Cash paid during the period for:  
Interest                                                                        $5,781  $6,137  
Income taxes1,358  2,080  
Supplemental disclosures of non-cash activities:
Non-cash accruals for construction in progress$7,046  $6,540  
Increase of operating lease assets and liabilities from new or modified leases108,872  64,519  
Increase of finance lease assets and liabilities from new or modified leases1,904    
Operating lease assets and liabilities recognized upon adoption of ASC 842  2,084,880  

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 
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TRACTOR SUPPLY COMPANY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – General:

Nature of Business

Founded in 1938, Tractor Supply Company (the “Company” or “we” or “our” or “us”) is the largest rural lifestyle retailer in the United States (“U.S.”). The Company is focused on supplying the needs of recreational farmers, ranchers, and all those who enjoy living the rural lifestyle (which we refer to as the “Out Here” lifestyle), as well as tradesmen and small businesses. Stores are located primarily in towns outlying major metropolitan markets and in rural communities. The Company also owns and operates Petsense, LLC (“Petsense”), a small-box pet specialty supply retailer focused on meeting the needs of pet owners, primarily in small and mid-sized communities, and offering a variety of pet products and services. At March 28, 2020, the Company operated a total of 2,043 retail stores in 49 states (1,863 Tractor Supply and Del’s retail stores and 180 Petsense retail stores) and also offered an expanded assortment of products online at TractorSupply.com and Petsense.com.

Basis of Presentation

The accompanying interim unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 28, 2019.  The results of operations for our interim periods are not necessarily indicative of results for the full fiscal year.

The COVID-19 pandemic has created significant public health concerns as well as economic disruption, uncertainty, and volatility which may negatively affect our business operations. As a result, if the pandemic persists or worsens, our accounting estimates and assumptions could be impacted in subsequent interim reports and upon final determination at year-end, and it is reasonably possible such changes could be significant (although the potential effects cannot be estimated at this time).

Note 2 – Fair Value of Financial Instruments:

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.  These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The Company’s financial instruments consist of cash and cash equivalents, short-term receivables, trade payables, debt instruments, and interest rate swaps.  Due to their short-term nature, the carrying values of cash and cash equivalents, short-term receivables, and trade payables approximate current fair value at each balance sheet date. As described in further detail in Note 5 to the Condensed Consolidated Financial Statements, the Company had $1.02 billion, $0.40 billion, and $0.63 billion in borrowings under its debt facilities at March 28, 2020, December 28, 2019, and March 30, 2019, respectively. Based on market interest rates (Level 2 inputs), the carrying value of borrowings in our debt facilities approximates fair value for each period reported. The fair value of the Company’s interest rate swaps is determined based on the present value of expected future cash flows using forward rate curves (a Level 2 input). As described in further detail in Note 6 to the Condensed Consolidated Financial Statements, the fair value of the interest rate swaps, excluding accrued interest, was a net liability of $6.8 million at March 28, 2020 and a net asset of $0.3 million and $3.9 million at December 28, 2019 and March 30, 2019, respectively.

Note 3 – Share-Based Compensation:

Share-based compensation includes stock options, restricted stock units, performance-based restricted share units, and certain transactions under our Employee Stock Purchase Plan (the “ESPP”). Share-based compensation expense is recognized based on grant date fair value of all stock options, restricted stock units, and performance-based restricted share units plus a 15% discount on shares purchased by employees as a part of the ESPP. The discount under the ESPP represents the difference between the purchase date market value and the employee’s purchase price.
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There were no significant modifications to the Company’s share-based compensation plans during the fiscal three months ended
March 28, 2020.

For the first quarter of fiscal 2020 and 2019, share-based compensation expense was $6.9 million and $9.6 million, respectively.

Stock Options

The following table summarizes information concerning stock option grants during the first three months of fiscal 2020:
 Fiscal Three Months Ended
 March 28,
2020
Stock options granted413,776  
Weighted average exercise price$91.10  
Weighted average grant date fair value per option$18.54  

As of March 28, 2020, total unrecognized compensation expense related to non-vested stock options was approximately $12.8 million with a remaining weighted average expense recognition period of 2.4 years.

Restricted Stock Units and Performance-Based Restricted Share Units

The following table summarizes information concerning restricted stock unit and performance-based restricted share unit grants during the first three months of fiscal 2020:
 Fiscal Three Months Ended
 March 28,
2020
Restricted stock units granted242,343  
Performance-based restricted share units granted (a)
80,057  
Weighted average grant date fair value per share$87.53  
(a) Assumes 100% target level achievement of the relative performance targets.

In fiscal 2020, the Company granted awards that are subject to the achievement of specified performance goals. The performance metrics for the units are growth in net sales and growth in earnings per diluted share. The number of performance-based restricted share units presented in the foregoing table represent the shares that can be achieved at the performance metric target value. The actual number of shares that will be issued under the performance share awards, which may be higher or lower than the target, will be determined by the level of achievement of the performance goals. If the performance targets are achieved, the units will be issued based on the achievement level and the grant date fair value and will cliff vest in full on the third anniversary of the date of the grant.

As of March 28, 2020, total unrecognized compensation expense related to non-vested restricted stock units and non-vested performance-based restricted share units was approximately $44.2 million with a remaining weighted average expense recognition period of 2.3 years.

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Note 4 – Net Income Per Share:

The Company presents both basic and diluted net income per share on the Condensed Consolidated Statements of Income.  Basic net income per share is calculated by dividing net income by the weighted average number of shares outstanding during the period.  Diluted net income per share is calculated by dividing net income by the weighted average diluted shares outstanding during the period. Dilutive shares are computed using the treasury stock method for share-based awards. Performance-based restricted share units are included in diluted shares only if the related performance conditions are considered satisfied as of the end of the reporting period. Net income per share is calculated as follows (in thousands, except per share amounts):
 Fiscal Three Months EndedFiscal Three Months Ended
March 28, 2020March 30, 2019
 IncomeSharesPer Share
Amount
IncomeSharesPer Share
 Amount
Basic net income per share:$83,777  116,738  $0.72  $76,832  121,211  $0.63  
Dilutive effect of share-based awards  694  (0.01)   941    
Diluted net income per share:$83,777  117,432  $0.71  $76,832  122,152  $0.63  

Anti-dilutive stock awards excluded from the above calculations totaled approximately 0.5 million and 0.3 million shares for the fiscal three months ended March 28, 2020 and March 30, 2019, respectively.

Note 5 – Debt:

The following table summarizes the Company’s outstanding debt as of the dates indicated (in millions):
March 28,
2020
December 28,
2019
March 30,
2019
Senior Notes$150.0  $150.0  $150.0  
Senior Credit Facility:
February 2016 Term Loan140.0  145.0  155.0  
June 2017 Term Loan85.0  87.5  91.3  
March 2020 Term Loan200.0      
Revolving credit loans445.0  15.0  232.0  
Total outstanding borrowings1,020.0  397.5  628.3  
Less: unamortized debt issuance costs(0.9) (1.0) (1.3) 
Total debt1,019.1  396.5  627.0  
Less: current portion of long-term debt(30.0) (30.0) (21.3) 
Long-term debt$989.1  $366.5  $605.7  
Outstanding letters of credit$39.0  $32.0  $35.4  

Senior Notes

On August 14, 2017, the Company entered into a note purchase and private shelf agreement (the “Note Purchase Agreement”), pursuant to which the Company agreed to sell $150 million aggregate principal amount of senior unsecured notes due August 14, 2029 (the “2029 Notes”) in a private placement. The 2029 Notes bear interest at 3.70% per annum with interest payable semi-annually in arrears on each annual and semi-annual anniversary of the issuance date. The obligations under the Note Purchase Agreement are unsecured, but guaranteed by each of the Company’s material subsidiaries.

The Company may from time to time issue and sell additional senior unsecured notes (the “Shelf Notes”) pursuant to the Note Purchase Agreement, in an aggregate principal amount of up to $150 million. The Shelf Notes will have a maturity date of no more than 12 years after the date of original issuance and may be issued through August 14, 2020, unless earlier terminated in accordance with the terms of the Note Purchase Agreement.

Pursuant to the Note Purchase Agreement, the 2029 Notes and any Shelf Notes (collectively, the “Notes”) are redeemable by the Company, in whole at any time or in part from time to time, at 100% of the principal amount of the Notes being redeemed,
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together with accrued and unpaid interest thereon and a make whole amount calculated by discounting all remaining scheduled payments on the Notes by the yield on the U.S. Treasury security with a maturity equal to the remaining average life of the Notes plus 0.50%.

Senior Credit Facility

On February 19, 2016, the Company entered into a senior credit facility (the “2016 Senior Credit Facility”) consisting of a $200 million term loan (the “February 2016 Term Loan”) and a $500 million revolving credit facility (the “Revolver”) with a sublimit of $50 million for swingline loans. This agreement is unsecured and matures on February 19, 2022.

On June 15, 2017, pursuant to an accordion feature available under the 2016 Senior Credit Facility, the Company entered into an incremental term loan agreement (the “June 2017 Term Loan”) which increased the term loan capacity under the 2016 Senior Credit Facility by $100 million. This agreement is unsecured and matures on June 15, 2022.

On March 12, 2020, pursuant to an accordion feature available under the 2016 Senior Credit Facility, the Company entered into an incremental term loan agreement (the “March 2020 Term Loan”) which increased the term loan capacity under the 2016 Senior Credit Facility by $200 million. This agreement is unsecured and matures on March 16, 2022.

The February 2016 Term Loan of $200 million requires quarterly payments totaling $10 million per year in years one and two and $20 million per year in years three through the maturity date, with the remaining balance due in full on the maturity date of February 19, 2022. The June 2017 Term Loan of $100 million requires quarterly payments totaling $5 million per year in years one and two and $10 million per year in years three through the maturity date, with the remaining balance due in full on the maturity date of June 15, 2022. The March 2020 Term Loan of $200 million is due in full on the maturity date of March 16, 2022. The 2016 Senior Credit Facility also contains a $500 million revolving credit facility (with a sublimit of $50 million for swingline loans).

Borrowings under the February 2016 Term Loan and Revolver bear interest at either the bank’s base rate (3.250% at March 28, 2020) or the London Inter-Bank Offer Rate (“LIBOR”) (0.989% at March 28, 2020) plus an additional amount ranging from 0.500% to 1.125% per annum (0.625% at March 28, 2020), adjusted quarterly based on our leverage ratio.  The Company is also required to pay, quarterly in arrears, a commitment fee for unused capacity ranging from 0.075% to 0.200% per annum (0.100% at March 28, 2020), adjusted quarterly based on the Company’s leverage ratio. Borrowings under the June 2017 Term Loan bear interest at either the bank’s base rate (3.250% at March 28, 2020) or LIBOR (0.989% at March 28, 2020) plus an additional 1.000% per annum. Borrowings under the March 2020 Term Loan bear interest at either the bank’s base rate (3.250% at March 28, 2020) or LIBOR (0.989% at March 28, 2020) plus an additional 0.750% per annum. As further described in Note 6 to the Condensed Consolidated Financial Statements, the Company has entered into interest rate swap agreements in order to hedge our exposure to variable rate interest payments associated with each of the term loans under the 2016 Senior Credit Facility.

Proceeds from the 2016 Senior Credit Facility may be used for working capital, capital expenditures, dividends, share repurchases, and other matters. There are no compensating balance requirements associated with the 2016 Senior Credit Facility.

Covenants and Default Provisions of the Debt Agreements

The 2016 Senior Credit Facility and the Note Purchase Agreement (collectively, the “Debt Agreements”) require quarterly compliance with respect to two material covenants: a fixed charge coverage ratio and a leverage ratio.  Both ratios are calculated on a trailing twelve-month basis at the end of each fiscal quarter. The fixed charge coverage ratio compares earnings before interest, taxes, depreciation, amortization, share-based compensation, and rent expense (“consolidated EBITDAR”) to the sum of interest paid and rental expense (excluding any straight-line rent adjustments).  The fixed charge coverage ratio shall be greater than or equal to 2.00 to 1.0 as of the last day of each fiscal quarter. The leverage ratio compares rental expense (excluding any straight-line rent adjustments) multiplied by a factor of six plus total debt to consolidated EBITDAR.  The leverage ratio shall be less than or equal to 4.00 to 1.0 as of the last day of each fiscal quarter. The Debt Agreements also contain certain other restrictions regarding additional indebtedness, capital expenditures, business operations, guarantees, investments, mergers, consolidations and sales of assets, prepayment of debts, transactions with subsidiaries or affiliates, and liens.  As of March 28, 2020, the Company was in compliance with all debt covenants.

The Debt Agreements contain customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, certain events of bankruptcy and insolvency, material judgments, certain ERISA events, and invalidity of loan documents. Upon certain changes of control, payment under
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the Debt Agreements could become due and payable. In addition, under the Note Purchase Agreement, upon an event of default or change of control, the make whole payment described above may become due and payable.

The Note Purchase Agreement also requires that, in the event the Company amends its 2016 Senior Credit Facility, or any subsequent credit facility of $100 million or greater, such that it contains covenant or default provisions that are not provided in the Note Purchase Agreement or that are similar to those contained in the Note Purchase Agreement but which contain percentages, amounts, formulas or grace periods that are more restrictive than those set forth in the Note Purchase Agreement or are otherwise more beneficial to the lenders thereunder, the Note Purchase Agreement shall be automatically amended to include such additional or amended covenants and/or default provisions.

Subsequent Event - Amendment to Credit Facility

On April 22, 2020, the Company entered into a second amendment to the 2016 Senior Credit Facility (the “Second Amendment”) to, among other things, increase the option to increase the aggregate principal amount of Revolving Loan Commitments and Incremental Term Loans up to an amount not to exceed $650 million. Simultaneously with the Second Amendment, the Company entered into an Incremental Term Loan Agreement (the “April 2020 Term Loan”) in the amount of $350 million, which is in addition to the 2016 Senior Credit Facility’s existing term loan and revolving credit facility. The April 2020 Term Loan is unsecured and has a term expiring on April 21, 2021. Borrowings under the April 2020 Term Loan (i) will bear interest at a variable rate, (ii) do not require principal payments prior to the maturity date, (iii) may be prepaid at any time, and (iv) have other terms materially identical to the existing term loans under the Senior Credit Facility other than the 364 day maturity date and LIBOR floor of 0.75%.

Note 6 – Interest Rate Swaps:

The Company entered into an interest rate swap agreement which became effective on March 31, 2016, with a maturity date of February 19, 2021. The notional amount of this swap agreement began at $197.5 million (the principal amount of the February 2016 Term Loan borrowings as of March 31, 2016) and will amortize at the same time and in the same amount as the February 2016 Term Loan borrowings, as described in Note 5 to the Condensed Consolidated Financial Statements, up to the maturity date of the interest rate swap agreement on February 19, 2021. As of March 28, 2020, the notional amount of the interest rate swap was $140.0 million.

The Company entered into a second interest rate swap agreement which became effective on June 30, 2017, with a maturity date of June 15, 2022. The notional amount of this swap agreement began at $100 million (the principal amount of the June 2017 Term Loan borrowings as of June 30, 2017) and will amortize at the same time and in the same amount as the June 2017 Term Loan borrowings, as described in Note 5 to the Condensed Consolidated Financial Statements. As of March 28, 2020, the notional amount of the interest rate swap was $85.0 million.

The Company entered into a third interest rate swap agreement which became effective on March 18, 2020, with a maturity date of March 18, 2025. The notional amount of this swap agreement is fixed at $200 million.

The Company’s interest rate swap agreements are executed for risk management and are not held for trading purposes. The objective of the interest rate swap agreements is to mitigate interest rate risk associated with future changes in interest rates. To accomplish this objective, the interest rate swap agreements are intended to hedge the variable cash flows associated with the variable rate term loan borrowings under the 2016 Senior Credit Facility. Both interest rate swap agreements entitle the Company to receive, at specified intervals, a variable rate of interest based on LIBOR in exchange for the payment of a fixed rate of interest throughout the life of the agreement, without exchange of the underlying notional amount.

The Company has designated its interest rate swap agreements as cash flow hedges and accounts for the underlying activity in accordance with hedge accounting. The interest rate swaps are presented within the Condensed Consolidated Balance Sheets at fair value. In accordance with hedge accounting, the gains and losses on interest rate swaps that are designated and qualify as cash flow hedges are recorded as a component of Other Comprehensive Income (“OCI”), net of related income taxes, and reclassified into earnings in the same income statement line and period during which the hedged transactions affect earnings.

As of March 28, 2020, amounts to be reclassified from Accumulated Other Comprehensive Income (“AOCI”) into interest during the next twelve months are not expected to be material. No significant amounts were excluded from the assessment of cash flow hedge effectiveness as of March 28, 2020.

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The assets and liabilities measured at fair value related to the Company’s interest rate swaps, excluding accrued interest, were as follows (in thousands):
Derivatives Designated
as Cash Flow Hedges
Balance Sheet LocationMarch 28,
2020
December 28,
2019
March 30,
2019
Interest rate swaps (short-term portion)Other current assets$  $558  $2,200  
Interest rate swaps (long-term portion)Other assets   91  1,676  
Total derivative assets$  $649  $3,876  
Interest rate swaps (short-term portion)Other accrued expenses$2,512  $90  $  
Interest rate swaps (long-term portion)Other long-term liabilities4,277  292    
Total derivative liabilities$6,789  $382  $  

The offset to the interest rate swap asset or liability is recorded as a component of equity, net of deferred taxes, in AOCI, and will be reclassified into earnings over the term of the underlying debt as interest payments are made.

The following table summarizes the changes in AOCI, net of tax, related to the Company’s interest rate swaps (in thousands):
March 28,
2020
December 28,
2019
March 30,
2019
Beginning fiscal year AOCI balance$199  $3,814  $3,814  
Current fiscal period loss recognized in OCI(5,250) (4,332) (1,464) 
Cumulative adjustment as a result of ASU 2017-12 adoption  717  717  
Other comprehensive loss, net of tax(5,250) (3,615) (