Business Context and Reporting Period
This Form 8-K was filed by Landec Corporation (not Lifecore Biomedical, Inc., which is a subsidiary party to the agreement) on July 15, 2020. The filing reports the entry into a Material Definitive Agreement, specifically the "Limited Waiver and Eighth Amendment to Credit Agreement," with JPMorgan Chase Bank, N.A., BMO Harris Bank, N.A., and City National Bank.
Key Financial Metrics and Debt Terms
- Total Leverage Ratio: As of May 31, 2020, the ratio was 5.93:1.0.
- Interest Rate Adjustment: The Applicable Rate increased by 50 basis points. The new spread ranges are Prime + 0.75% to 3.50% or Eurodollar + 1.75% to 4.50%, plus a commitment fee of 0.15% to 0.55%.
- Capital Expenditure (CapEx) Limits:
- $12,000,000 for the period June 1, 2020, to November 29, 2020.
- $35,270,000 for the period June 1, 2020, to May 31, 2021.
- Transaction Costs: The Company paid $312,000 in aggregate bank fees (including arrangement, amendment, and related fees).
- EBITDA Definition: Modified to allow exclusions for unusual/one-time cash items up to 20% of EBITDA for quarters ending on or after February 28, 2021 (10% limit retained for Total Leverage Ratio calculations).
Material Changes Versus Prior Period
The primary material change is the amendment of the Credit Agreement originally entered into on September 23, 2016. Key changes include:
- Implementation of stricter CapEx covenants for the 2020-2021 fiscal periods.
- Modification of the EBITDA calculation to permit higher exclusions for specific cash items.
- Immediate increase in borrowing costs via a 50 basis-point hike in the interest rate spread.
Outlook, Risks, and Contingencies
The Credit Agreement remains secured by substantially all personal property assets of the Company and its subsidiaries, with the exception of Curation Foods' equity interest in Windset Holdings 2010 Ltd. The agreement contains customary events of default, including breaches of financial covenants, which could lead to acceleration of obligations or further interest rate increases. The filing does not provide specific forward-looking revenue or profit guidance beyond the amended debt terms.
Investor Verification Checklist
- Verify the Company's ability to meet the new 5.93:1.0 leverage ratio covenant and the revised interest rate obligations.
- Confirm adherence to the strict CapEx limits ($12M and $35.27M) to avoid covenant breaches.
- Review the specific "unusual, extraordinary or one-time cash items" excluded from EBITDA to assess the quality of earnings.
- Monitor the impact of the 50 basis-point interest rate increase on future net income and cash flow.
- Check for any subsequent filings regarding the status of the credit facility or additional amendments.