Revolver Amendment No. 2, among other things, extends the period during which certain relief is provided with respect to the financial covenant contained in the Existing Revolving Credit Agreement through December 31, 2024 or such earlier date on which the Company elects to terminate such period (the “Revolver Covenant Relief Period”), by providing that during the Revolver Covenant Relief Period, the Company’s Leverage Ratio (as defined in the Revolving Credit Agreement) shall not exceed as of the end of the fiscal quarter for the period of the four fiscal quarters then ended: (i) 5.25 to 1.00 for any fiscal quarter ending on or before June 30, 2023, (ii) 5.00 to 1.00 for the fiscal quarter ending September 30, 2023, (iii) 4.75 to 1.00 for any subsequent fiscal quarter ending on or before March 31, 2024, (iv) 4.50 to 1.00 for the fiscal quarter ending June 30, 2024, (v) 4.25 to 1.00 for the fiscal quarter ending September 30, 2024 and (vi) 4.00 to 1.00 for the fiscal quarter ending December 31, 2024. During the Revolver Covenant Relief Period, Revolver Amendment No. 2 prohibits the Loan Parties from (i) effecting any share repurchases and (ii) creating liens to secure debt in excess of the greater of $400,000,000 and 5.00% of Consolidated Net Tangible Assets (as defined in the Revolving Credit Agreement), in each case subject to certain exceptions set forth therein.
Revolver Amendment No. 3, among other things, replaces the London interbank offered rate with Term SOFR (as defined in the Revolving Credit Agreement) as the reference rate for U.S. dollar-denominated loans. Loans under the Revolving Credit Agreement will bear interest at a base rate or, in the case of U.S. dollar-denominated loans, a rate equal to Term SOFR plus an adjustment of 0.10% per annum or, in the case of euro-denominated loans, the Euro interbank offered rate, plus, in each case, an applicable margin based on the Company’s Public Debt Rating (as defined in the Revolving Credit Agreement). Loans may be prepaid without premium or penalty, subject to customary breakage costs.
The descriptions of the Term Loan Amendments and the Revolver Amendments contained in this Item 1.01 do not purport to be complete and are subject to, and qualified in their entirety by, the full text of Term Loan Amendment No. 3, Term Loan Amendment No. 4, Revolver Amendment No. 2 and Revolver Amendment No. 3, filed as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, hereto and incorporated herein by reference.
| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement or Registrant. |
The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03.
| Item 7.01. | Regulation FD Disclosure |
On March 27, 2023 the Company reconfirmed its first quarter guidance as it expects sales to be approximately $2.95 to $3.0 billion and adjusted operating EBITDA of approximately $470 to $490 million. In addition, the Company reaffirmed its commitment to portfolio optimization to further support the achievement of its net debt to credit adjusted EBITDA target of below 3x by the end of 2024.
The reaffirmation of the first quarter guidance and the sales and adjusted operating EBITDA ranges provided are based on information available to the Company as of this report and are subject to completion of the Company’s quarter-end financial closing procedures. Accordingly, the final results and other disclosures for the quarter ended March 31, 2023 may differ materially from this preliminary estimated data. This preliminary estimated financial data should not be viewed as a substitute for financial statements prepared in accordance with US GAAP.
The Company cannot reconcile its expected adjusted operating EBITDA without unreasonable effort because certain items that impact net income and other reconciling metrics are out of the Company’s control and/or cannot be reasonably predicted at this time. These items include but are not limited to gains (losses) on sale of fixed assets, shareholder activism related costs, business divestiture costs including the anticipated Savory Solutions, employee separation costs, N&B inventory step-up costs, N&B transaction related costs, integration related costs and the impact of the merger with N&B. In addition, the Company cannot reconcile net debt to credit adjusted EBITDA without reasonable effort because certain items that impact total debt, net income and other reconciling measures are out of the Company’s control and/or cannot be reasonably predicted at this time, to which unavailable information could have a significant impact on the Company’s GAAP financial results.
Forward-looking Statements
This Current Report on Form 8-K contains forward-looking statements that reflect management’s expectations about future events and the Company’s operating plans and speak only as of the date hereof. You can identify these forward-looking statements by the use of forward-looking words such as “will,” “may,” “plan,” “estimate,” “expect,” “intention,” or the negative version of those words or other comparable words. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, are forward-looking statements. Any forward-looking statements contained in this Current Report on Form 8-K are based upon our historical performance and on our current plans, estimates and expectations of the Company’s future performance and the future performance of the markets in which the Company operates in light of information currently available to us. The inclusion of this forward-looking information should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will be achieved. These forward-looking statements are subject to various risks, uncertainties and assumptions relating to our operations, financial results, financial condition, business, prospects, business strategy and liquidity. For additional discussion of these risks and uncertainties, please refer to those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, and the Company’s other filings with the SEC.
