Business Context and Reporting Period
Company: Flowserve Corporation
Filing Type: Form 8-K (Current Report)
Date of Report: September 4, 2020
Event: Amendment to Senior Credit Facility
Flowserve Corporation entered into a first amendment to its Credit Agreement dated July 16, 2019, to provide greater financial flexibility and maintain adequate liquidity in response to the market environment caused by the COVID-19 pandemic.
Key Financial Metrics
As of June 30, 2020, the Company reported the following liquidity position:
- Total Liquidity: Approximately $1.3 billion
- Cash and Cash Equivalents: $561.7 million
- Available Borrowings under Credit Facility: $722.2 million
Note: This filing does not provide specific revenue, profit, cash flow, or margin figures for the period.
Material Changes and Covenant Amendments
The Amendment modifies the financial covenants and capital return restrictions as follows:
- Leverage Ratio Covenant: Replaced the existing covenant with a new ratio of consolidated funded indebtedness (minus cash in excess of $250 million) to Consolidated EBITDA.
- Covenant Relief Period: The new leverage ratio cap is 4.00 to 1.00 through December 31, 2021.
- Testing Deferral: The leverage covenant will not be tested until the quarter ending March 31, 2022.
- Future Cap: Beginning March 31, 2022, the leverage ratio cannot exceed 4.00 to 1.00 (or 4.50 to 1.00 for certain acquisitions).
- Dividend and Repurchase Restrictions: During the Covenant Relief Period, dividends and share repurchases are limited to 115% of the total amount paid between January 1, 2019, and June 30, 2020.
Outlook and Management Commentary
Management stated that the Company expects to maintain adequate liquidity over the next 12 months. The amendment was executed proactively to ensure the ability to access available borrowings under the Credit Facility if necessary during the ongoing pandemic. All other material terms of the Credit Agreement remain unchanged.
Investor Verification Checklist
- Verify the full text of the First Amendment to the Credit Agreement (Exhibit 10.1) for detailed legal terms.
- Confirm the Company's Consolidated EBITDA figures from the most recent 10-Q to assess leverage ratio compliance.
- Review the total dividends and share repurchases made between January 1, 2019, and June 30, 2020, to calculate the specific cap on future capital returns.
- Monitor future filings for any further amendments or covenant waivers related to the COVID-19 impact.