UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 30, 2012
THE COAST DISTRIBUTION SYSTEM, INC.
(Exact name of registrant as specified in its charter)
Delaware | 1-9511 | 94-2490990 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) | ||
350 Woodview Avenue, Morgan Hill, California |
95037 | |||
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (408) 782-6686
N/A
(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)) |
Item 1.01 | Entry into a Material Definitive Agreement. |
As we have previously reported, the Company finances a substantial portion of its working capital requirements with borrowings under a long-term revolving bank line of credit, which is governed by that certain Third Amended and Restated Loan and Security Agreement, as amended (the Credit Line Agreement) entered into by the Company with Bank of America N. A., as lender (the Bank).
The Credit Line Agreement contains a single financial covenant which requires the Company to achieve a fixed charge coverage ratio of at least 1.10to-1.0 for successive rolling 12 month periods ending on the last day of each fiscal quarter. The first of those rolling 12-month periods to which the covenant was to have been applicable was the 12 month period ending June 30, 2012.
On July 30, 2012 the Company and the Bank entered into the 12th Amendment to the Credit Line Agreement (the 12th Amendment), which provides, instead, that the first of those rolling 12-month periods to which that financial covenant will apply will be the 12 month period ending September 30, 2012.
The 12th Amendment also provides for an increase, which became effective August 1, 2012, in the rate of interest on the Companys outstanding credit line borrowings by 0.25% per annum and that this higher interest rate will not be reduced to its prior level until the Company reports, as of the end of any subsequent quarter, a fixed charge coverage ratio of at least 1.10to-1.0 for the immediately preceding 12 month period. Even if the interest rate is so reduced in the future, the interest rate would still remain subject to (i) a possible 0.25% increase if the Companys fixed charge ratio for any future rolling 12 month period were to once again fall below 1.10to-1.0, or (ii) a possible further decrease if, for any future rolling 12 month period, the Companys fixed charge coverage ratio were to improve to more than 1.50-to-1.0 and its net earnings were to exceed $625,000.
The Company cannot predict the effect that this 0.25% increase will have on its interest expense in future periods, because that will depend on the amount of its credit line borrowings that are outstanding from time to time and on either the Libor rate or the Banks prime rate, as applicable, on which the interest rates on those borrowings are based and which fluctuate from time to time based on prevailing market conditions.
The foregoing summary of the 12th Amendment is not intended to be complete and is qualified in its entirety by reference to that Amendment, a copy of which is attached as Exhibit 99.1 to and, by this reference is incorporated into, this Current Report on Form 8-K.
Item 9.01 | Financial Statements and Exhibits. |
(d) | Exhibits. |
Exhibit No. |
Description of Exhibit | |
99.1 | Twelfth Amendment, dated as of July 30, 2012, to Third Amended & Restated Loan and Security Agreement between the Company and Bank of America, N. A. |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report to be signed on its behalf by the undersigned, hereunto duly authorized.
THE COAST DISTRIBUTION SYSTEM, INC. | ||||||
Dated: August 2, 2012 | By: | /s/ SANDRA A. KNELL | ||||
Sandra A. Knell, Executive Vice President & Chief Financial Officer | ||||||
S-1
EXHIBIT INDEX
Exhibit No. |
Description of Exhibit | |
99.1 | Twelfth Amendment, dated as of July 30, 2012, to Third Amended & Restated Loan and Security Agreement between the Company and Bank of America, N. A. |
E-1
Exhibit 99.1
July30, 2012 |
The Coast Distribution System, Inc.
350 Woodview Avenue
Morgan Hill, California 95037
Re: Twelfth Amendment
Ladies and Gentlemen:
The Coast Distribution System, Inc., a Delaware corporation (Coast Delaware), United Sales & Warehouse of Texas, Inc., a Texas corporation (United Sales), C/P Products Corp., an Indiana corporation (C/P), Mohawk Trailer Supply, Inc., a New York corporation (Mohawk), and Les Systemes De Distribution Coast (Canada) Inc. The Coast Distribution System (Canada) Inc., a corporation organized under the laws of the Province of Quebec (Coast Canada) (Coast Delaware, United Sales, C/P, Mohawk, and Coast Canada are referred to individually as Borrower and collectively as Borrowers), and Bank of America, N.A., (in its individual capacity, US Lender), acting by and through Bank of America, N.A., a national banking association, as agent for US Lender (in such capacity, Agent) and Bank of America, N.A. (acting through its Canada branch) (Canadian Lender), (US Lender, acting through Agent, and Canadian Lender are referred to collectively as Lender), have entered into that certain Third Amended and Restated Loan and Security Agreement dated August 30, 2005 (the Security Agreement). From time to time thereafter, Borrowers and Lender may have executed various amendments (each an Amendment and collectively the Amendments) to the Security Agreement (the Security Agreement and the Amendments hereinafter are referred to, collectively, as the Agreement). Borrowers and Lender now desire to further amend the Agreement as provided herein, subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual covenants and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. The Agreement hereby is amended as follows:
(a) The following definition in Section 1 of the Agreement is hereby amended and restated in its entirety:
Applicable Margin shall mean the margin set forth below, with respect to any LIBOR Rate Loan, Canadian Prime Rate Loan and US Prime Rate Loan (each, an Interest Type, as hereinafter defined) in effect from time to time. The Applicable Margin shall be adjusted quarterly on the first day of the month following receipt of Borrowers Form 10(Q) or Form 10(K), as applicable, based on Borrowers consolidated Net Profit for the 12 month period ending on the date of calculation and Borrowers c of calculation, in each case, as shown on Borrowers financial statements set forth in Borrowers Form 10(Q) or Form 10(K), as applicable (provided that, if Borrowers fail to deliver such Form 10(Q) or Form 10(K), as applicable, within the time period required by Subsection 9(f) of this Agreement, the Applicable Margin shall conclusively be presumed to be equal to the highest level set forth on the chart below from the date such Form 10(Q) or Form 10(K), as applicable, was required to be delivered until the first day of the month following receipt of such Form 10(Q) or Form 10(K), as applicable, as set forth on the following chart:
99-1
Level |
Trailing Twelve Month Net Profit |
Fix Charge Coverage Ratio |
Applicable Margin for LIBOR rate loans (in basis points) |
Applicable Margin for US Prime Rate Loans and Canadian Prime Rate Loans (in basis points) |
||||||||||||
(1) |
>$ | 1,250,000 | >3.0:1.0 | 250 bps | 100 bps | |||||||||||
(2) |
>$ <$ |
625,000 1,250,000 |
|
|
>1.50:1.0 <3.0:1.0 |
|
275 bps | 125 bps | ||||||||
(3) |
<$ | 625,000 |
|
>1.10:1.0 <1.50:1.0 |
|
300 bps | 150 bps | |||||||||
(4) |
<$ | 625,000 | <1.10 | 325 bps | 175 bps |
; provided, however, that after the occurrence and during the continuance of an Event of Default, the Applicable Margin shall be the default rate as provided in Section 4(a)(v). By way of example, and for purposes of clarification only, if the Applicable Margin is at Level 2 and Borrowers achieve a trailing twelve month Fixed Charge Coverage Ratio of 3.0:1.0 but the trailing twelve month Net Profit is $800,000, then the Applicable Margin would remain at Level 2. If, as a result of any restatement of or other adjustment to the financial statements, borrowing base certificates or Inventory or Accounts reports of Borrowers, or the results of audits or appraisals which do not confirm the information provided in borrowing base certificates or for any other reason, Lender determines that (a) the consolidated Net Profit for the 12 month period ending on the date of calculation or the consolidated Fixed Charge Coverage Ratio, for the 12 month period ending on the date of calculation, was inaccurate and (b) a proper calculation of the consolidated Net Profit for the 12 month period ending on the date of calculation or the consolidated Fixed Charge Coverage Ratio for the 12 month period ending on the date of calculation would have resulted in different pricing for any period, then (i) if the proper calculation of the consolidated Net Profit for the 12 month period ending on the date of calculation or the consolidated Fixed Charge Coverage Ratio for the 12 month period ending on the date of calculation would have resulted in higher pricing for such period, Borrowers shall automatically and retroactively be obligated to pay to Lender, promptly on demand by Lender, an amount equal to the excess of the amount of interest and fees that should have been paid for such period over the amount of interest and fees actually paid for such period; and (ii) if the proper calculation of the trailing twelve month Net Profit or Fixed Charge Coverage Ratio would have resulted in lower pricing for such period, Lender shall not have any obligation to repay any interest or fees to Borrowers; provided that if, as a result of any restatement or other event, a proper calculation of the trailing twelve month Net Profit or Fixed Charge Coverage Ratio would have resulted in higher pricing for one or more periods and lower pricing for one or more other periods (due to the shifting of income or expenses from one period to another period or any similar reason), then the amount payable by Borrowers pursuant to clause (i) above shall be based upon the excess, if any, of the amount of interest and fees that should have been paid for all applicable periods over the amount of interest and fees paid for all such periods.
(b) Subsection 4(c)(v) is hereby amended and restated in its entirety as follows:
(c)(v) Amendment Fee. Borrowers shall pay to Lender a one time fee of Ten Thousand and No/100 Dollars ($10,000.00), which shall be fully earned and payable on the date hereof.
99-2
(c) Subsection 14(a) of the Agreement is hereby amended and restated in its entirety as follows:
(a) Fixed Charge Coverage Ratio.
Borrowers shall not permit their Fixed Charge Coverage Ratio for each period set forth below to be less than the ratio set forth below for the corresponding period set forth below (it being understood that the Fixed Charge Coverage Ratio is not being measured for the fiscal quarter ending June 30, 2012):
Period |
Ratio | |||
For the 12 month period ending on September 30, 2012 and for each twelve (12) month period ending on the last day of each fiscal quarter thereafter |
1.10:1.0 |
2. Borrowers represent and warrant to Lender that this Amendment has been approved by all necessary corporate action, and each individual signing below represents and warrants that he or she is fully authorized to do so.
3. Except as expressly amended hereby and by any other supplemental documents or instruments executed by either party hereto in order to effectuate the transactions contemplated by this Amendment, the Agreement and all Exhibits thereto are ratified and confirmed by Borrowers and Lender and remain in full force and effect in accordance with their terms.
4. This Amendment may be executed in any number of counterparts, each of which shall be an original, but all of which, taken together, shall constitute one and the same agreement. This Amendment may be delivered by facsimile, and when so delivered will have the same force and effect as delivery of an original signature.
5. Borrowers shall reimburse Lender for all reasonable attorneys fees (whether for internal or outside counsel) incurred by Lender in connection with the documentation and consummation of this Twelfth Amendment to the Agreement.
(Remainder of page intentionally blank; signatures follow)
99-3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the date first set forth above.
LENDER:
BANK OF AMERICA, N.A., as Agent | ||
By: |
/s/ JOHN W. MUNDSTOCK | |
Title: |
Senior Vice President | |
BANK OF AMERICA, N.A., as US Lender | ||
By: |
/s/ JOHN W. MUNDSTOCK | |
Title: |
Senior Vice President | |
BANK OF AMERICA, N.A., acting through its Canada branch, as Canadian Lender | ||
By: |
/s/ MEDINA SALES De ANDRADE | |
Title: |
Vice President |
99-4
BORROWERS:
THE COAST DISTRIBUTION SYSTEM, INC. | ||
By: |
/s/ SANDRA A. KNELL | |
Title: | Executive Vice President |
UNITED SALES & WAREHOUSE OF TEXAS, INC. | ||
By: | /s/ SANDRA A. KNELL | |
Title: | Executive Vice President |
C/P PRODUCTS, CORP. | ||
By: | /s/ SANDRA A. KNELL | |
Title: | Executive Vice President |
MOHAWK TRAILER SUPPLY, INC. | ||
By: | /s/ SANDRA A. KNELL | |
Title: | Executive Vice President |
LES SYSTEMES DE DISTRIBUTION COAST (CANADA) INC. THE COAST DISTRIBUTION SYSTEM (CANADA) INC. | ||
By: | /s/ SANDRA A. KNELL | |
Title: | Executive Vice President |
99-5
GUARANTORS ACKNOWLEDGMENT
The undersigned guarantor acknowledges that Bank of America, N.A., (in its individual capacity, US Lender), acting by and through Bank of America, N.A., as agent for US Lender (in such capacity, Agent) and Bank of America, N.A. (acting through its Canada branch), (Canadian Lender) (US Lender, acting through Agent, and Canadian Lender are referred to collectively as Lender) have no obligation to provide it with notice of, or to obtain its consent to, the terms of the foregoing Eleventh Amendment (the Eleventh Amendment) to the Third Amended and Restated Loan and Security Agreement dated August 30, 2005, as amended, modified or supplemented from time to time. The undersigned guarantor nevertheless: (i) acknowledges and agrees to the terms and conditions of the Eleventh Amendment; and (ii) acknowledges that its guaranty remains fully valid, binding, and enforceable.
9002-1288 QUEBEC INC. | ||
By: | /s/ SANDRA A. KNELL | |
Title: | Executive Vice President |
99-6