Business Context and Reporting Period
Company: Brown Shoe Company, Inc. (Note: Metadata listed "Caleres Inc," but the filing text identifies the registrant as Brown Shoe Company, Inc.)
Filing Type: Form 8-K (Current Report)
Date of Report: January 7, 2011
Event: Entry into a Material Definitive Agreement regarding the amendment and restatement of the company's credit facility.
Key Financial Metrics and Debt Structure
This filing details the terms of a new credit facility rather than reporting operational financial results (revenue, profit, or cash flow) for a specific period.
- Facility Type: Senior secured revolving credit facility.
- Total Commitment: Up to $380.0 million.
- Expansion Options:
- Up to $150.0 million increase at any time (subject to lender approval).
- Additional $150.0 million increase available prior to February 28, 2011 (subject to lender approval).
- Sub-limits:
- Letters of Credit/Banker's Acceptances: Up to $100.0 million.
- Swingline Loans: Up to $35.0 million (increasable to $50.0 million).
- Outstanding Balance (as of Jan 7, 2011): Approximately $169.8 million (including letters of credit).
- Available Borrowing (as of Jan 7, 2011): Approximately $210.2 million.
- Maturity Date: January 7, 2016.
- Interest Rate: Variable (LIBOR or Prime plus a spread).
Material Changes Versus Prior Period
The company entered into a Third Amended and Restated Credit Agreement, replacing the Second Amended and Restated Credit Agreement dated January 21, 2009. The primary material change is the extension of the maturity date to 2016 and the establishment of the current borrowing base and availability limits.
Guidance, Risks, Covenants, and Unusual Items
Covenants and Restrictions:
- The agreement limits the company's ability to incur additional indebtedness, create liens, make investments, pay dividends, make capital expenditures, or merge/acquire assets.
- Fixed Charge Coverage Ratio: Additional covenants are triggered if "excess availability" falls below specified levels.
- Default Triggers: Default occurs if excess availability falls below the greater of 12.5% of the lesser of the borrowing base or total commitments, or $35.0 million, AND the fixed charge coverage ratio is less than 1.0 to 1.0.
- If excess availability falls below the greater of 15.0% of the lesser of the borrowing base or total commitments, or $35.0 million for three consecutive business days, lenders may assume control of the company's cash.
- This event is deemed continuing if it occurs twice in any 12-month period.
- Lenders will take a reserve for the outstanding principal of the 8-3/4% Senior Notes due 2012 if they are not repaid, repurchased, or defeased at least 45 days prior to maturity.
- Secured by a first priority security interest in accounts receivable, inventory, and certain other collateral.
- The filing incorporates a press release (Exhibit 99.1) announcing the amendment and extension of the credit facility.
Important Facts for Investor Verification
- Verify the current "excess availability" ratio to assess the risk of a cash dominion event or covenant default.
- Confirm the status of the 8-3/4% Senior Notes due 2012 and whether a reserve has been applied against the borrowing base.
- Review the full text of the Credit Agreement (Exhibit 10.1) for specific definitions of "eligible accounts receivable" and "inventory" used in the borrowing base calculation.
- Monitor the company's ability to maintain the fixed charge coverage ratio above 1.0 to 1.0 if liquidity tightens.