(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common
stock, $1.00 par value
LAWS
NASDAQ Global Select Market
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01 Entry into a Definitive Material Agreement
On October 11, 2019, Lawson Products, Inc. ("Lawson" or "the Company") and its subsidiaries
entered into a credit agreement (the "Credit Agreement") with J.P. Morgan Chase Bank, N.A. as administrative agent, and including CIBC Bank USA and Bank of America, N.A. as other lenders. The new Credit Agreement matures on October 11, 2024 and provides for $100 million of revolving commitments. The Credit Agreement allows borrowing capacity to increase to $150 million subject to meeting certain criteria and additional commitments from its lenders.
The Company will utilize the Credit Agreement to fund working capital requirements, acquisitions and its organic growth strategy. On the date of closing the Company
paid off its existing debt to CIBC Bank USA and BMO Bank of Montreal.
The Credit Agreement consists of borrowings as Alternate Base Rate ("ABR") loans, Canadian Prime Rate loans, Eurodollar loans, and Canadian Dollar Offered Rate ("CDOR") loans as the Company requests. The applicable interest rate spread is determined by the type of borrowing used and the Total Net Leverage Ratio as of the most recent fiscal quarter. The commitment fee rates associated with unused funds will be determined by the Total Net Leverage Ratio as of the most recent fiscal quarter. The interest rates spreads and commitment fee rates are shown in the table below:
Total
Net Leverage Ratio
Commitment ABR and Canadian Prime Rate Spread
Commitment Eurodollar/CDOR Rate Spread
Commitment Fee Rate
Category 1
> 3.25 to 1.00
1.50
%
2.50
%
0.30
%
Category
2 < 3.25 to 1.00 but
> 2.50 to 1.00
1.00
%
2.00
%
0.30
%
Category 3 < 2.50 to 1.00 but > 1.75 to 1.00
0.50
%
1.50
%
0.25
%
Category
4 < 1.75 to 1.00 but > 1.00 to 1.00
0.25
%
1.25
%
0.20
%
Category 5 < 1.00 to 1.00
0.00
%
1.00
%
0.15
%
The
covenants associated with the Credit Agreement restrict the ability of the Company to, among other things: incur additional indebtedness and liens, make certain investments, merge or consolidate, engage in certain transactions such as the disposition of assets and sales-leaseback transactions, and make certain restricted cash payments such as dividends in excess of defined amounts contained within the Credit Agreement. In addition to these items and other customary terms and conditions, the Credit Agreement requires the Company to comply with certain financial covenants as follows:
a.
The
Company is required to maintain an EBITDA to Fixed Charge Coverage Ratio of at least 1.15 to 1.00 for any period of four consecutive fiscal quarters ending on the last day of any fiscal quarter; and
b.
The Company is required to maintain a Total Net Leverage Ratio of no more than 3.25 to 1.00 on the last day of any fiscal quarter. The maximum Total Net Leverage Ratio will be allowed to increase to 3.75 to 1.00 after certain permitted acquisitions.
The
Credit Agreement also includes events of default for, among others, non-payment of obligations under the Credit Agreement, change of control, cross default to other indebtedness in an aggregate amount in excess of $5 million, failure to comply with covenants, and insolvency.
The Company and its subsidiaries also entered into a Pledge and Security Agreement providing the lenders with a security interest in substantially all of the Company's and its subsidiaries assets.
The
description of the terms of the Credit Agreement above is qualified in its entirety by reference to the full text of the Credit Agreement which is incorporated by reference to this Current Report on Form 8-K as Exhibit 10.1.
Item 1.02 Termination of Material Definitive Agreement
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
The information set forth above in Item 1.01 of this Current Report on Form 8-K with respect to the credit agreement is incorporated by reference into this Item 2.03.
Item 9.01 Financial Statements and Exhibits.
(d)
Exhibits
10.1
Credit Agreement dated October 11, 2019 by and among Lawson Products, Inc. and certain of its subsidiaries, the lenders party thereto, and J.P. Morgan Chase Bank, N.A. as administrative agent.
99.1
Press release dated
October 14, 2019 announcing the Credit Agreement
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
