Item 1.01 Entry into a Material Definitive Agreement.
On March 17, 2011, CSS Industries, Inc. (the “Company” or “CSS”) entered into a Credit Agreement
(“Agreement”) with Wells Fargo Bank, National Association, as administrative agent and as a lender,
and Citizens Bank of Pennsylvania, as a lender. The Agreement provides for a new revolving credit
facility that replaces the Company’s $110 million revolving credit facility that had been due to
expire on November 20, 2011, and its accounts receivable securitization facility that had been due
to expire on July 5, 2011. The accounts receivable securitization facility had a funding limit
that automatically adjusted on February 1, 2011 from $60 million to $15 million.
The following description of the Agreement is qualified in its entirety by the provisions of the
Agreement, which is filed herewith as Exhibit 10.1.
The Agreement has a five-year term expiring on March 17, 2016, and it provides for a revolving line
of credit under which the maximum credit available to CSS at any one time automatically adjusts
upwards and downwards on a periodic basis among “low”, “medium” and “high” levels (each a
“Commitment Level”), as follows:
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| Commitment Period Description |
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Commitment Period Time Frame |
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Commitment Level |
Low
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February 1 to June 30 (5 months)
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$50 million |
Medium
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July 1 to October 31 (4 months)
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$100 million |
High
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November 1 to January 31 of the following year (3 months)
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$150 million |
CSS has the option to increase the Commitment Level during part of any Low Commitment Period (as
defined in the Agreement) from $50 million to an amount not less than $62.5 million and not in
excess of $125 million; provided, however, that the Commitment Level must remain at $50 million for
at least three (3) consecutive months during each Low Commitment Period. CSS has the option to
increase the Commitment Level during all or part of any Medium Commitment Period (as defined in the
Agreement) from $100 million to an amount not in excess $125 million.
Fifteen (15) days prior written notice is required for the Company to exercise an option to
increase the Commitment Level with respect to a particular Low Commitment Period or Medium
Commitment Period. The Company may exercise an option to increase the Commitment Level no more
than three (3) times each calendar year.
The facility may be used for the Company’s working capital needs, general corporate purposes
(including Permitted Acquisitions (as defined in the Agreement)), and the issuance of commercial
and standby letters of credit. There is a $20 million sublimit for letters of credit. Loans (as
defined in the Agreement) may be repaid and re-borrowed from time to time, provided that the
aggregate amount of Loans and letters of credit outstanding under the Agreement at any one time
cannot exceed the Commitment Level that is applicable at such time.
Loans under the Agreement incur interest at per annum rates equal to either the LIBOR Rate (as
defined in the Agreement) plus 0.95%, or the LIBOR Market Index Rate (as defined in the Agreement)
plus 0.95%, as selected by the Company. For each LIBOR Rate Loan, the Company may select an
Interest Period (as defined in the Agreement) of either one (1), two (2) or three (3) months. The
interest rates otherwise applicable under the Agreement may be increased by 2% per annum upon the occurrence and
continuance of an Event of Default (as defined in the Agreement).
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In addition to interest, the Company is required to pay “unused” fees equal to 0.25% per annum on
the average daily unused amount of the Commitment Level that is then applicable. The Company paid
a closing fee of $100,000 at the time that the Agreement was executed and delivered.
The Agreement contains financial covenants requiring the Company to maintain as of the last day of
each fiscal quarter: (i) a Tangible Net Worth (as defined in the Agreement) of not less than $140
million, and (ii) an Interest Coverage Ratio (as defined in the Agreement) of not less than 3.50 to
1.00.
The Agreement contains various additional covenants with which the Company is required to comply.
These covenants address, among other things, the ability of the Company and its subsidiaries to
incur additional indebtedness; grant liens on their assets; engage in mergers, acquisitions,
divestitures and/or sale/leaseback transactions; make Investments, Restricted Payments and Capital
Expenditures (each, as defined in the Agreement); and enter into “negative pledge” agreements with
respect to their assets.
Subject to applicable provisions of the Agreement, upon the occurrence and during the continuance
of an Event of Default, the Company’s obligation to repay Loans under the Agreement may be
accelerated, and the lenders’ obligations to make further Loans under the Agreement may terminate
prior to the March 17, 2016 maturity date.
The following direct and indirect domestic subsidiaries of CSS are parties to the Agreement as
guarantors of the obligations thereunder of CSS: Berwick Offray LLC; Paper Magic Group, Inc.; Cleo
Inc; C.R. Gibson, LLC; Lion Ribbon Company, Inc.; Berwick Delaware, Inc.; The Paper Magic Group,
Inc.; Cleo Delaware, Inc.; LLM Holdings, Inc.; Philadelphia Industries, Inc.; W.J.S. Furniture,
Inc.; LR Texas Corp.; Don Post Studios, Inc.; Berwick Management LLC; Paper Magic Distribution,
Inc.; BOC Distribution, Inc. and CRG Distribution, Inc.
Sixty-five percent (65%) of the outstanding capital stock of certain direct and indirect foreign
subsidiaries of CSS has been pledged as collateral security for the obligations of CSS under the
Agreement. The obligations of CSS under the new revolving credit facility are otherwise unsecured.
Item 1.02 Termination of a Material Definitive Agreement.
On March 17, 2011, the following agreements were terminated and replaced with the new Agreement
described in Item 1.01 of this report: (i) the Amended and Restated Loan Agreement dated as of
November 21, 2008, as amended, among CSS, the lenders party thereto and PNC Bank, National
Association (“PNC Bank”), as administrative agent for the lenders party thereto; (ii) the
Receivables Purchase Agreement dated as of April 30, 2001, as amended, among CSS, CSS Funding LLC,
Market Street Funding LLC (f/k/a Market Street Funding Corporation) and PNC Bank; and (iii) the
Purchase and Sale Agreement dated as of April 30, 2001, as amended, among Berwick Offray LLC, Paper
Magic Group, Inc., Cleo Inc and Lion Ribbon Company, Inc., as originators, CSS Industries, Inc. and
CSS Funding LLC.
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Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet
Arrangement of a Registrant.
On March 17, 2011, CSS entered into the Agreement described in Item 1.01 of this report, providing
for a revolving credit facility in favor of CSS. The information set forth in Item 1.01 of this
report pertaining to the Agreement is incorporated by reference into this Item 2.03.
Item 9.01 Financial Statements and Exhibits.
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Exhibits |
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| 10.1 |
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Credit Agreement dated March 17, 2011 among CSS Industries, Inc., as
borrower, certain subsidiaries of CSS Industries, Inc., as
guarantors, Wells Fargo Bank, National Association, as administrative
agent and as a lender, and Citizens Bank of Pennsylvania, as a
lender.* |
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* |
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A listing describing each Exhibit and Schedule to the Credit
Agreement is provided herewith as part of Exhibit 10.1. The
registrant hereby undertakes to furnish to the Commission
supplementally upon request a copy of omitted Exhibits and Schedules
to the Credit Agreement. |
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