EPAM Systems, Inc. Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by EPAM Systems, Inc. on May 24, 2017. The filing discloses the entry into a new material definitive agreement regarding the company's credit facilities and the termination of a prior agreement.
Key Financial Metrics and Debt Structure
The filing details the establishment of a new unsecured revolving credit facility (the "2017 Revolving Facility") with the following terms:
- Facility Size: $300 million, with an option to increase to $400 million subject to lender approval and conditions.
- Term: Five years.
- Currency: Primarily U.S. Dollars, with up to $50 million available in British Pounds Sterling, Canadian Dollars, Euros, or Swiss Francs.
- Interest Rate: Base rate or Euro-rate plus a margin based on the Company's leverage ratio.
- Guarantors: EPAM's wholly-owned, first-tier U.S. subsidiaries.
The filing does not provide specific values for revenue, profit, cash flow, or current liquidity positions, as this report focuses solely on the credit agreement structure.
Material Changes Versus Prior Period
Effective May 24, 2017, the new 2017 Revolving Facility replaced the existing credit facility dated September 12, 2014. The new agreement introduces updated financial covenants and borrowing terms compared to the terminated 2014 agreement.
Covenants, Restrictions, and Risks
The 2017 Credit Agreement includes specific financial and business covenants that act as constraints on the company's operations:
- Financial Covenants:
- Maximum leverage ratio of 3.00 to 1.00 (temporarily adjustable to 3.50 to 1.00 for four quarters following a permitted acquisition exceeding $150 million).
- Minimum interest coverage ratio of 3.00 to 1.00.
- Acquisition Restrictions: Acquisitions are permitted provided the leverage ratio does not exceed 2.75 to 1.00 post-acquisition.
- Asset Dispositions: Restricted, with a $50 million basket for sales, transfers, or leases of assets at fair market value per fiscal year.
- Events of Default: Include cross-defaults, insolvency, change of control, and covenant breaches. Upon default, lenders may declare all loans due and payable.
Investor Verification Checklist
- Verify the full text of the Credit Agreement (Exhibit 10.1) for detailed definitions of leverage and interest coverage ratios.
- Confirm whether the company has exercised the option to increase the facility beyond $300 million.
- Monitor compliance with the 3.00 to 1.00 leverage ratio covenant, especially if significant acquisitions are planned.
- Review subsequent filings for any utilization of the $50 million asset disposition basket.