Business Context and Reporting Period
This Form 8-K Current Report was filed by Apogee Enterprises, Inc. on June 14, 2017, covering events occurring on June 9, 2017, and June 12, 2017. The filing details a material amendment to the Company's credit facility and the completion of a significant acquisition.
Key Financial Metrics and Debt
- Credit Facility Expansion: The revolving credit facility was increased from $175 million to $335 million.
- Outstanding Borrowings: As of June 14, 2017, the Company had $268 million in outstanding borrowings under the amended facility.
- Acquisition Cost: The purchase price for EFCO Corporation was $192.3 million, consisting of a $184.8 million cash payment at closing and three future installments of $2.5 million each.
- Letter of Credit Facility: The facility includes a letter of credit component of up to $70 million.
Material Changes
- Debt Covenant Relaxation: Amendment No. 1 to the Credit Agreement made the indebtedness covenant less restrictive, specifically increasing the permitted amount available for letters of credit.
- Acquisition Completion: The Company completed the acquisition of all outstanding shares of EFCO Corporation, a subsidiary of Pella Corporation, on June 12, 2017.
- Financing Structure: The acquisition was funded through borrowings under the newly expanded credit facility.
Guidance, Risks, and Contingencies
- Dividend Restrictions: The Amended Agreement prohibits the declaration of cash dividends or share repurchases if such actions would result in a Default or Event of Default.
- Event of Default: Borrowings may be accelerated upon events such as bankruptcy or breach of covenants.
- Future Filings: Financial statements for the acquired business and pro forma financial information are not included in this filing and will be submitted within 71 calendar days.
- Interest Rate Structure: Borrowings bear interest based on either LIBOR or a Base Rate (Prime, Federal Funds, or LIBOR + 1.00%) plus an Applicable Margin tied to the debt-to-EBITDA ratio.
Investor Verification Checklist
- Verify the specific terms of the "Applicable Margin" calculation based on the debt-to-EBITDA ratio in the full text of Amendment No. 1 (Exhibit 10.1).
- Monitor the upcoming filing (within 71 days) for EFCO Corporation's financial statements and pro forma impact on Apogee's consolidated results.
- Confirm the status of the three $2.5 million installment payments due on the anniversaries of the closing date.
- Review the definition of "Material Adverse Effect" within the Amended Agreement to understand limitations on future asset dispositions or subsidiary dissolutions.