Item 1.01 Entry into a Material Definitive Agreement.
On June 5, 2018, Patrick Industries, Inc. (the "Company" or "Patrick") entered
into a Second Amended and Restated Credit Agreement, dated as of June 5, 2018,
(the "2018 Credit Agreement") by and among the Company, the Lenders party
thereto, and Wells Fargo Bank, National Association, as Administrative Agent.
The 2018 Credit Agreement amends and restates the Company's previous credit
agreement dated April 28, 2015 (the "2015 Credit Agreement").
The 2018 Credit Agreement provides for an $800 million revolving credit facility
and a $100 million term loan (the "2018 Credit Facility"). The March 17, 2022
maturity date for borrowings under both the revolving credit facility and the
term loan remains unchanged. The 2018 Credit Agreement continues to be secured
by substantially all personal property assets of the Company and any domestic
subsidiary guarantors. The proceeds of the term loan and the revolving credit
facility will be used to finance ongoing working capital needs of the Company.
The Company used initial borrowings under the 2018 Credit Facility (i) to repay
in full at par the $63.0 million outstanding under the then current term loan.
Immediately after the closing, the Company had outstanding $310.0 million of
revolving loans, all of which initially bear interest at LIBOR plus 1.75%. The
$100 million term loan also initially bears interest at LIBOR plus 1.75%. The
interest rate spreads above LIBOR or the base rate are subject to adjustments
based on the Company's total leverage ratio, ranging from 1.50% to 2.25% in the
case of loans bearing interest at LIBOR, and from 0.50% to 1.25% in the case of
loans bearing interest at the base rate. In addition, a non-use fee is payable
quarterly on the average unused credit line under the revolver ranging from
0.20% to 0.30% per annum, based on the Company's total leverage ratio. The
interest rate spreads above LIBOR or the base rate and the non-use fee
percentage on the average unused credit line remain unchanged from those
contained in the 2015 Credit Agreement.
The term loan will be repaid in consecutive quarterly installments on the last
business day of each of March, June, September and December in the following
amounts: (i) beginning June 30, 2018, through and including March 31, 2019,
$1,250,000, (ii) beginning June 30, 2019, through and including March 31, 2021,
$2,500,000, and (iii) beginning June 30, 2021, and each quarter thereafter,
$3,750,000, with the remaining balance due at maturity. The 2018 Credit
Agreement contains customary limits and restrictions concerning investments,
sales of assets, liens on assets, dividends and other payments. The two
financial covenants included in the 2018 Credit Agreement are a maximum total
leverage ratio of 3.00:1.00 and a minimum fixed charge coverage ratio of
The events of default under the 2018 Credit Agreement include, but are not
limited to, the following: failure to pay outstanding principal or interest,
failure of applicable representations or warranties to be correct in any
material respects, failure to perform any other term, covenant or agreement and
such failure is not remedied after notice of such failure within the applicable
grace period with respect thereto, if any, a cross-default with other debt in
certain circumstances, certain defaults upon obligations under the Employee
Retirement Income Security Act or bankruptcy. Such events of default would
require the repayment of any outstanding borrowings and the termination of the
right to borrow additional funds under the 2018 Credit Facility.
A copy of the 2018 Credit Agreement is attached hereto as Exhibit 10.1 and
incorporated herein by reference. The 2018 Credit Agreement is secured by a
pledge of substantially all of the assets of the Company pursuant to an Amended
and Restated Security Agreement, dated June 5, 2018, between the Company and
Wells Fargo, as agent (the "2018 Security Agreement"). A copy of the 2018
Security Agreement is attached hereto as Exhibit 10.2 and incorporated herein by
The foregoing descriptions of the 2018 Credit Agreement and the 2018 Security
Agreement are qualified in their entirety by the actual agreements, which are
attached to this Form 8-K as Exhibits 10.1 and 10.2 and incorporated herein.
Item 2.03 Creation of A Direct Financial Obligation under an Off-Balance Sheet
Arrangement of a Registrant.
The information set forth under Item 1.01 above with respect to the 2018 Credit
Agreement is incorporated herein by reference into this Section 2.03 of this
Item 7.01 Regulation FD Disclosure.
On June 11, 2018, the Company announced the completion of the acquisition of
Marine Accessories Corporation ("MAC"), a manufacturer, distributor and
aftermarket supplier of custom tower and canvas products and other related
accessories to OEMs, dealers, retailers and distributors, as well as direct to
consumers within the marine market. MAC is headquartered in Maryville, Tennessee
and has eight manufacturing and distribution facilities located primarily in the
U.S. MAC's trailing 12-months revenue through May 2018 was approximately $50
million and the Company expects the acquisition to be immediately accretive to
net income per share. The total cash consideration paid for MAC, which was
funded under the Company's 2018 Credit Facility, was approximately $57 million.
The acquisition of MAC included the acquisition of accounts receivable,
inventory, prepaid expenses, and machinery and equipment. MAC will continue to
operate on a stand-alone basis under its brand names in its existing facilities.
On June 11, 2018, the Company issued a press release (the "Press Release")
related to the information set forth under Items 1.01 and 7.01 of this Report. A
copy of the Press Release is furnished herewith as Exhibit 99.1.
The information referenced pursuant to Item 7.01, "Regulation FD Disclosure," in
this Form 8-K, including the Exhibit attached hereto, shall not be deemed
"filed" for purposes of Section 18 of the Securities Act of 1934, nor shall it
be deemed incorporated by reference in any filing under the Securities Act of
1933, except as shall be expressly set forth by specific reference in such
Item 9.01 Financial Statements and Exhibits.
Exhibit 10.1 - Second Amended and Restated Credit Agreement, dated as of June
5, 2018, among Patrick Industries, Inc., the Lenders party thereto and Wells
Fargo Bank, National Association, as the Agent.
Exhibit 10.2 - Amended and Restated Security Agreement, dated as of June 5,
2018, between Patrick Industries, Inc., the other Grantor's party thereto and
Wells Fargo Bank, National Association, as the Agent.
Exhibit 99.1 - Press Release issued June 11, 2018.
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