| Item 1.01 | Entry into a Material Definitive Agreement |
On November 1, 2019, Armstrong Flooring, Inc. (the “Company”) entered into a First Amendment to Credit Agreement (the “Amendment”), by and among the Company, as borrower, the guarantors named therein, the lenders party thereto and Bank of America, N.A., as administrative agent, collateral agent, L/C issuer and swingline lender.
The Amendment amends that certain Credit Agreement, dated as of December 31, 2018, by and among the Company, the guarantors named therein, the lenders party thereto and Bank of America, N.A., as administrative agent, collateral agent, L/C issuer and swingline lender to, among other things, decrease the size of the credit facility to $100 million, consisting of a $75 million revolving facility and a $25 million term loan facility (the “Amended Credit Facility”), and converts term loans outstanding in excess of $25 million to revolver borrowings.
Borrowings under the Amended Credit Facility will bear interest at a rate per annum equal to, at the Company’s option, a base rate or a Eurodollar rate equal to the London interbank offered rate (“LIBOR”) for the relevant interest period, plus, in each case, an applicable margin determined in accordance with the provisions of the Amendment. The base rate will be the highest of (a) the federal funds rate plus 0.50%, (b) the prime rate of Bank of America, N.A., and (c) one month LIBOR plus 1.00%. The applicable margin for borrowings under the Amended Credit Facility will be determined based on the Company’s Consolidated Net Leverage Ratio (as defined in the Amendment) and will range from 0.75% to 2.00% with respect to base rate borrowings and 1.75% to 3.00% with respect to Eurodollar rate borrowings. In addition to paying interest on outstanding principal under the Amended Credit Facility, the Company will pay a commitment fee to the lenders under the Amended Credit Facility with respect to the unutilized revolving commitments thereunder at a rate ranging from 0.15% to 0.35% depending on the Company’s Consolidated Net Leverage Ratio.
The Amendment modifies a number of covenants that, among other things and subject to certain exceptions, further restrict the Company’s ability and the ability of its subsidiaries to repurchase the Company’s equity or pay dividends, to complete acquisitions, to make investments in foreign subsidiaries, to sell or dispose of assets and to make capital expenditures.
In addition, the Amendment also amends certain financial covenants applicable to the Company and its subsidiaries. Specifically, the Amended Credit Facility requires that the Company and its subsidiaries not:
| | • | | Permit the Consolidated Net Leverage Ratio (as defined in the Amendment) to be greater than: (i) 3.00 to 1.00 from the effective date of the First Amendment to December 31, 2019, (ii) 3.75 to 1.00 from January 1, 2020 through March 31, 2020, (iii) 2.50 to 1.00 from April 1, 2020 through June 30, 2020, and (iv) 2.00 to 1.00 from July 1, 2020 and thereafter; |
| | • | | Permit the Consolidated Fixed Charge Coverage Ratio (as defined in the Amendment) at any time to be less than 1.25 to 1.00, provided that (i) the aggregate amount of all Capital Expenditures for the period ending September 30, 2019 will be deemed to be $16,500,000 for purposes of calculating the Consolidated Fixed Charge Coverage Ratio and (ii) the Consolidated Fixed Charge Coverage Ratio will not be tested for the periods ending December 31, 2019 and March 31, 2020; and |
| | • | | Permit Consolidated EBITDA (as defined in the Amendment) to be less than (i) $20,000,000 for the period ending December 31, 2019 and (ii) $15,000,000 for the period ending March 31, 2020. |
The foregoing summary of the Amendment does not purport to be complete and is subject to and qualified in its entirety by reference to the Amendment, a copy of which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.
| Item 2.02 | Results of Operations and Financial Condition |
On November 5, 2019, the Company issued a press release announcing its third quarter 2019 financial results. The full text of the press release is attached hereto as Exhibit 99.1.
The information in Item 2.02 of this Current Report on Form8-K, including Exhibit 99.1, is being furnished herewith and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as expressly set forth by specific reference in such filing.
