Business Context and Reporting Period
Company: Harvard Bioscience, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: January 31, 2018
Reporting Period: Events occurring on January 31, 2018.
Harvard Bioscience, Inc. reported the completion of a material acquisition and the entry into a significant financing agreement to fund the transaction and support future operations.
Key Financial Metrics and Capital Structure
Acquisition Consideration: Approximately $70 million (subject to net working capital and customary adjustments) for the acquisition of Data Sciences International, Inc. (DSI).
Financing Agreement Details:
- Total Facility Size: $89 million comprised of a $64 million term loan and a $25 million revolving line of credit.
- Use of Proceeds: Funded a portion of the DSI Merger, paid related fees and expenses, and closed the Senior Secured Credit Facilities. $4.8 million of the revolving line was utilized at closing.
- Maturity: Five years.
- Interest Rates: Base Rate + 4.75% or LIBOR + 6.25% (subject to floors of 4.25% and 1.25% respectively).
- Amortization: Quarterly installments starting March 31, 2018, ranging from $400,000 to $800,000 per quarter, with a balloon payment at maturity.
- Collateral: First-priority lien on substantially all tangible and intangible assets of the Borrower and subsidiary guarantors.
Revenue, Profit, and Cash Flow: The filing text does not provide specific revenue, profit, cash flow, or margin figures for the reporting period. Pro forma financial information is scheduled to be filed within 71 days.
Material Changes Versus Prior Period
Acquisition: The Company completed the merger with Data Sciences International, Inc. (DSI), making DSI a wholly-owned subsidiary. This represents a significant expansion of the Company's asset base and operations.
Debt Structure: The Company incurred new senior secured debt totaling $89 million in capacity, significantly altering its capital structure compared to the prior period. This includes new restrictive covenants regarding additional debt, liens, acquisitions, dividends, and asset sales.
Guidance, Outlook, and Risks
Management Commentary: The financing agreement is intended to fund the Merger and provide liquidity for general corporate and working capital needs.
Risks and Contingencies:
- Covenants: The new Financing Agreement imposes restrictive covenants limiting the Company's ability to incur additional debt, create liens, make acquisitions, pay dividends, or engage in asset sales without lender consent.
- Default Provisions: The agreement contains customary events of default.
- Appraisal Rights: Certain DSI stockholders who did not vote in favor of the Merger may exercise appraisal rights, potentially affecting the final cash consideration paid.
- Financial Reporting: Required financial statements for the acquired business and pro forma information are not yet available and will be filed by amendment.
Investor Verification Checklist
- Verify the final purchase price of Data Sciences International, Inc. after net working capital adjustments.
- Review the upcoming pro forma financial information (due within 71 days) to assess the impact of the acquisition and new debt on leverage and liquidity.
- Confirm the specific restrictive covenants in the Financing Agreement (Exhibit 10.1) that may limit future strategic flexibility.
- Monitor the status of any DSI stockholders exercising appraisal rights and the resulting impact on cash outflows.
- Assess the Company's ability to meet the quarterly amortization payments starting March 31, 2018.