Item 2.03 Creation of a Direct Financial Obligation under an Off-Balance Sheet Agreement of a Registrant.
On April 1, 2020, Regal Beloit Corporation (the “Company”) proactively borrowed $255 million as a precautionary measure under its Amended and Restated Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as Administrative Agent and the lenders named therein. Cash and cash investments were approximately $862 million immediately following the draw down.
The Credit Agreement dated August 27, 2018 provides for a (i) 5-year unsecured term loan facility in the principal amount of $900 million and (ii) a 5-year unsecured multicurrency revolving facility in the principal amount of $500 million (the “Multicurrency Revolving Facility”), including a $50 million letter of credit sub facility, available for general corporate purposes. Borrowings under the Credit Agreement bear interest at floating rates based upon indices determined by the currency of the borrowing, plus an applicable margin determined by reference to the Company’s consolidated funded debt to consolidated EBITDA ratio or at an alternative base rate. The current weighted average interest rate for the borrowings under the Multicurrency Revolving Facility is 2.3%.
Combined with prior borrowings, the Company has borrowed the full $500 million under the Multicurrency Revolving Facility; accordingly, there remains no additional borrowing capacity under the Multicurrency Revolving Facility. These recent borrowings were done as a proactive measure to increase the Company’s cash position and preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 pandemic. The Company has a strong balance sheet and does not currently intend to use the borrowed proceeds, but believes an abundance of caution regarding its cash position is prudent at this time.
Cautionary Statement.
Certain statements made in this Current Report on Form 8-K are “forward-looking statements” intended qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management’s expectations, beliefs, current assumptions, and projections. When used in this Current Report on Form 8-K, words such as “may,” “will,” “expect,” “intend,” “estimate,” “forecast,” “anticipate,” “believe,” “should,” “project” or “plan” or the negative of thereof or other similar words are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Those factors include, but not limited to: uncertainties regarding our ability to execute our restructuring plans within expected costs and timing; actions taken by our competitors and our ability to effectively compete in the increasingly competitive global electric motor and controls, power generation and power transmission industries; our ability to develop new products based on technological innovation, such as the Internet of Things, and marketplace acceptance of new and existing products, including products related to technology not yet adopted or utilized in certain geographic locations in which we do business; fluctuations in commodity prices and raw material costs; our dependence on significant customers; risks associated with global manufacturing, including risks associated with public health crises; issues and costs arising from the integration of acquired companies and businesses and the timing and impact of purchase accounting adjustments; effects on earnings of any significant impairment of goodwill or intangible assets; prolonged declines or disruption in one or more markets we serve, such as heating, ventilation, air conditioning, refrigeration, power generation, oil and gas, unit material handling or water heating; economic changes in global markets where we do business, such as reduced demand for the products we sell, currency exchange rates, inflation rates, interest rates, recession, government policies, including policy changes affecting taxation, trade, tariffs, immigration, customs, border actions and the like, and other external factors that we cannot control; product liability and other litigation, or claims by end users, government agencies or others that our products or our customers’ applications failed to perform as anticipated, particularly in high volume applications or where such failures are alleged to be the cause of property or casualty claims; our overall debt levels and our ability to repay principal and interest on our outstanding debt; changes in the method of determining London Interbank Offered Rate (“LIBOR”), or the replacement of LIBOR with an alternative reference rate; unanticipated liabilities of acquired businesses; unanticipated adverse effects or liabilities from business exits or divestitures; unanticipated costs or expenses we may incur related to product warranty issues; our dependence on key suppliers and the potential effects of supply disruptions; infringement of our intellectual property by third parties, challenges to our intellectual property, and claims of infringement by us of third party technologies;
losses from failures, breaches, attacks or disclosures involving our information technology infrastructure and data; effects on earnings of any significant impairment of goodwill or intangible assets; losses from failures, breaches, attacks or disclosures involving our information technology infrastructure and data; cyclical downturns affecting the global market for capital goods; and other risks and uncertainties including but not limited to those described in “ Part I - Item 1A - Risk Factors” of the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on February 26, 2020 and from time to time in the Company’s reports filed with the US Securities and Exchange Commission. Shareholders, potential investors, and other readers are urged to consider these factors in evaluation the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this current report on Form 8-K are made only as of the date of this report, and we undertake no obligation to update these statements to reflect subsequent events or circumstances. Additional information regarding these and other risks and uncertainties is included in “Part I - Item IA - Risk Factors” of the Company’s Annual Report on Form 10-K filed with the SEC on February 26, 2020.