<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 25, 1998
REGISTRATION STATEMENT NO. 333-60661
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
BACOU USA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 05-0470688
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
10 THURBER BOULEVARD
SMITHFIELD, RI 02917
(401) 233-0333
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
WINFIELD W. MAJOR, ESQ.
GENERAL COUNSEL
BACOU USA, INC.
10 THURBER BOULEVARD
SMITHFIELD, RI 02917
(401) 233-0333
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
Please address a copy of all communications to:
<TABLE>
<S> <C>
LAURA N. WILKINSON, ESQ. JOHN S. D'ALIMONTE, ESQ.
EDWARDS & ANGELL, LLP WILLKIE FARR & GALLAGHER
ONE BANKBOSTON PLAZA 787 SEVENTH AVENUE
PROVIDENCE, RI 02903 NEW YORK, NY 10019
(401) 274-9200 (212) 728-8000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 145 under the Securities Act of
1933 (the "Securities Act"), other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a)
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
AUGUST 25, 1998
2,300,000 SHARES
[BACOU LOGO]
COMMON STOCK
---------------------------
[UVEX LOGO] [HOWARD LEIGHT LOGO] [SURVIVAIR LOGO] [BIOSYSTEMS LOGO]
[LASE-R SHIELD LOGO] [TITMUS LOGO] [PRO-TECH LOGO]
All of the shares of Common Stock, $.001 par value per share (the "Common
Stock"), of Bacou USA, Inc. (together with its subsidiaries, the "Company")
offered hereby (the "Offering") are being sold by certain stockholders of the
Company (the "Selling Stockholders"). The Company will not receive any of the
proceeds from the sale of shares of Common Stock in the Offering. See "Selling
Stockholders."
The Common Stock is listed on The New York Stock Exchange ("NYSE") under
the symbol "BAU." On August 24, 1998, the last reported sale price of the Common
Stock as reported on the NYSE composite tape was $20 11/16 per share. See "Price
Range of Common Stock."
---------------------------
SEE "RISK FACTORS" COMMENCING ON PAGE 7 HEREOF FOR A DISCUSSION OF CERTAIN
MATTERS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
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</TABLE>
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS TO
TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS STOCKHOLDERS(1)
<S> <C> <C> <C>
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Per Share................................... $ $ $
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Total(2).................................... $ $ $
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</TABLE>
(1) Does not include expenses of the Offering, including Underwriting Discounts
and Commissions, which will be paid by the Company.
(2) One of the Selling Stockholders has granted the Underwriters a 30-day option
to purchase up to 345,000 additional shares of Common Stock solely to cover
over-allotments, if any. To the extent that the option is exercised, the
Underwriters will offer the additional shares at the Price to Public shown
above. If the option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Selling Stockholders
will be $ , $ and $ , respectively. See "Underwriting."
---------------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
the rights of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the offices
of BT Alex. Brown Incorporated, Baltimore, Maryland, on or about
, 1998.
---------------------------
BT ALEX. BROWN
A.G. EDWARDS & SONS, INC.
PAINEWEBBER INCORPORATED
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE> 3
BACOU USA...
A Leader In Personal Protection Equipment.
[Bacou USA logo surrounded by names and logos of operating divisions]
Headquartered in Smithfield, RI - NYSE: BAU
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements contained in this Prospectus that are not historical facts are
forward-looking statements that are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. In addition, words such
as "believes," "anticipates," "expects" and similar expressions are intended to
identify forward-looking statements. The Company cautions that a number of
important factors could cause the Company's actual results to differ materially
from those expressed in any forward-looking statements made by, or on behalf of,
the Company. Forward-looking statements involve a number of risks and
uncertainties including, but not limited to, continued demand for current
product lines, the success of new product introductions, the success of the
Company's acquisition strategy, continued availability and favorable pricing of
raw materials, the ability of the Company and its key vendors to successfully
respond to year 2000 issues, competitive pressures, general economic conditions
and regulatory matters. The Company cannot assure that it will be able to
anticipate or respond timely to changes in any of the factors listed above,
which could adversely affect the operating results in one or more fiscal
periods. Results of operations in any past period should not be considered
indicative of the results to be expected for future periods. Fluctuations in
operating results may also result in fluctuations in the price of the Company's
Common Stock.
THE UNDERWRITERS AND CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY
ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF
THE COMMON STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING AND SYNDICATE
SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY
BID. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere or incorporated by reference in this Prospectus. Unless the context
otherwise requires, (i) all market share data contained herein have been
obtained from a report dated March 31, 1998 of Frost & Sullivan (the "Frost &
Sullivan Report"), a market research firm with experience in the personal
protective equipment market, and refers to the Company's market share in the
United States industrial market for the year 1997 on a net sales basis; (ii) all
references to "pro forma" results of operations refer to the Company's results
of operations on a pro forma basis assuming that the acquisitions of Howard S.
Leight & Associates, Inc. (consummated in February 1998) and Survivair, Inc.
(consummated in May 1997) were each consummated on January 1, 1997; and (iii)
all references to "Uvex Safety" herein are collectively to the Uvex Safety
Division of the Company and its Uvex Safety Manufacturing, Inc. subsidiary
("Uvex Manufacturing"). Investors should carefully consider the information set
forth under the heading "Risk Factors."
THE COMPANY
OVERVIEW
The Company designs, manufactures and sells market-leading products that
are designed to protect the sight, hearing and respiratory systems of workers
against occupational hazards, as well as related instrumentation including
vision screeners, gas monitors and test equipment for self-contained breathing
apparatus. The Company's products, which are marketed under the brand names
UVEX(R), Howard Leight(R), Survivair(R), Pro-Tech(R), Biosystems, Titmus(R),
Lase-R Shield and LaserVision, are sold principally to industrial safety and
fire service distributors and optical laboratories.
The Company's goal is to expand its strong position in the United States
personal protective equipment market and to become a global leader in the
manufacture and sale of safety and security products through selective
acquisitions and internal growth. Since the Company's platform investments in
1993 and 1994 in Uvex Safety, Inc., a leading manufacturer of non-prescription
safety eyewear, the Company has made the following acquisitions (collectively,
the "Acquisitions"):
Howard Leight. In February 1998, the Company acquired Howard S.
Leight & Associates, Inc. ("Howard Leight"), a manufacturer of hearing
protection products, including disposable, reusable and banded ear plugs,
and ear muffs.
Biosystems. In September 1997, the Company acquired Biosystems, Inc.
("Biosystems"), a manufacturer of gas monitors and test equipment for
self-contained breathing apparatus.
Lase-R Shield. In June 1997, the Company acquired Lase-R Shield, Inc.
("Lase-R Shield"), a manufacturer of laser protective eyewear.
Survivair. In May 1997, the Company acquired Survivair, Inc.
("Survivair"), a manufacturer of respiratory system protection products.
Titmus. In September 1995, the Company acquired Titmus Optical, Inc.
("Titmus"), a manufacturer of frames for prescription safety eyewear and
vision screening equipment.
Pro-Tech. In March 1995, the Company acquired Pro-Tech Respirators,
Inc. ("Pro-Tech"), a manufacturer of respiratory system protection
products.
The Acquisitions added businesses with leadership positions in the hearing
and respiratory system protection markets, while also significantly expanding
the Company's safety eyewear business. The Acquisitions increased net sales from
$72.0 million in fiscal 1995 to $130.9 million in 1997 and $108.4 million for
the first six months of 1998 and, on a pro forma basis, to $189.9 million in
1997 and $115.7 million for the first six months of 1998.
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3
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The Company believes that industrial safety distributors, its primary
distribution channel for personal protective equipment, increasingly favor
suppliers that provide a broad range of market-leading products. Accordingly, a
key element of the Company's strategy is to acquire businesses that add new
categories of market-leading products and thereby increase its share of its
distributors' product offerings. The Company's market shares rank among the top
five competitors in all of its major product categories; it is number one in
prescription, non-prescription and laser safety eyewear categories and number
two in disposable and reusable ear plugs and ear muffs.
The Company believes that the safety and security equipment industry
remains highly fragmented, creating opportunities for additional acquisitions
and consolidation. The Company plans to continue to diversify into other types
of safety products, as well as security equipment, that protect workers or
monitor the safety of the work environment. In addition, the Company will
continue to strengthen its existing product lines through selective acquisitions
and internal development of new products. The Company believes that its existing
distribution networks are well suited for selling additional product offerings.
STRATEGY
The Company's goal is to expand its strong position in the United States
personal protective equipment market and to become a global leader in the
manufacture and sale of safety and security products through selective
acquisitions and internal growth. The Company is pursuing a business strategy to
achieve these goals which includes the following principal elements:
Broaden Product Categories Through Acquisitions. The Company's acquisition
strategy represents a continuation of the strategy which has made it a leading
consolidator in the personal protective equipment industry. The Company plans to
continue its acquisition strategy by:
- Enhancing growth by continuing to acquire companies with products that
increase the number of categories of personal protective equipment the
Company offers and extend the product lines within the Company's
existing product categories;
- Continuing to diversify into other types of safety products, as well as
security equipment, that it believes are well suited for sale through
its existing distribution networks and that protect workers or monitor
the safety of the work environment; and
- Focusing primarily on opportunities in which the target company has high
brand recognition, a reputation for quality products, compatible
channels of distribution, strong end-user acceptance and significant
market share.
Internal Growth Based on Quality, Reputation and Brand Loyalty. A number
of the Company's personal protective equipment products and brands have a high
degree of market acceptance and an excellent reputation for quality, comfort and
style among industrial purchasers and product users. The Company intends to
enhance its current brand loyalty and market position by:
- Continuing to introduce innovative new products and encouraging
industrial users to upgrade to, or replace competing products with, the
Company's new products;
- Designing innovative disposable and reusable products as well as
products with unique replacement parts; and
- Continuing to build awareness and stimulate demand for all of its
product lines through direct communication with industrial purchasers.
Continue to Improve Operating Efficiencies. The Company intends to
continue to improve operating efficiencies by:
- Tailoring its improvement programs to the type of manufacturing process
most suitable for each product line, and focusing on automation whenever
possible and cost justified;
- Continuing to integrate its marketing and sales teams to enhance
cross-selling opportunities across product lines in order to generate
and pursue more sales leads in every product line; and
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4
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- Consolidating divisional and subsidiary administrative and accounting
functions and implementing common personnel policies and procedures,
employee benefits and information systems.
Explore New Market Opportunities. The Company has an active program to
develop new market opportunities beyond the United States personal protective
equipment market. Elements of this program include:
- Pursuing opportunities to increase exports to markets outside of the
Company's traditional United States industrial market -- exports
represented 14.9% of net sales during the first six months of 1998,
compared to 10.8% in the first six months of 1997; and
- Increasing sales in the do-it-yourself retail markets for home safety
products.
-------------------------------
The Company's executive offices are located at 10 Thurber Boulevard,
Smithfield, Rhode Island 02917, and its telephone number is (401) 233-0333.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Selling Stockholders............ 2,300,000 shares(1)
Common Stock outstanding after the Offering................. 17,604,465 shares(2)
New York Stock Exchange symbol.............................. BAU
</TABLE>
- ---------------
(1) Does not include 345,000 shares subject to the underwriters' over-allotment
option.
(2) Excludes an aggregate of 1,327,000 shares of Common Stock reserved for
issuance as of June 30, 1998 pursuant to the Bacou USA, Inc. 1996 Stock
Incentive Plan (the "Employee Plan"), 300,000 shares of Common Stock
reserved for issuance pursuant to the Bacou USA, Inc. 1996 Non-Employee
Director Stock Option Plan (the "Director Plan") and 50,000 shares of Common
Stock reserved for issuance pursuant to the 1998 Howard S. Leight Stock
Option Plan (the "Leight Plan").
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5
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SUMMARY ACTUAL AND PRO FORMA FINANCIAL DATA
The summary actual and pro forma financial data set forth below should be
read in conjunction with the consolidated financial statements of the Company
and the related notes thereto, Unaudited Pro Forma Consolidated Statements of
Income, Selected Consolidated Historical and Pro Forma Financial Information and
Management's Discussion and Analysis of Financial Condition and Results of
Operations, all of which are included elsewhere or incorporated by reference in
this Prospectus. See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------- ------------------------------
1996 1997 1997(1) 1998
-------- -------------------- ------- --------------------
PRO PRO
ACTUAL(1) FORMA(2) ACTUAL(3) FORMA(2)
--------- -------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales.............................................. $109,268 $130,869 $189,945 $58,710 $108,379 $115,737
Gross profit(4)........................................ 61,913 66,402 99,649 31,467 55,833 59,816
Operating income(4).................................... 31,624 24,634 36,160 13,683 13,957 14,663
Income before income taxes............................. 31,579 25,010 27,694 14,256 11,272 10,687
Net income(4).......................................... $ 19,377 $ 14,422 $16,067 $8,377 $ 7,231 $ 6,868
Earnings per share(4):
Basic and diluted.................................... $ 1.18 $ 0.83 $ 0.92 $ 0.48 $ 0.41 $ 0.39
Weighted average shares outstanding:
Basic................................................ 16,406 17,383 17,383 17,312 17,596 17,596
Diluted.............................................. 16,436 17,410 17,410 17,318 17,688 17,688
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
1998
---------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Working capital....................................................................................... $ 30,541
Total assets........................................................................................ 289,624
Total long-term debt, excluding current installments................................................ 103,657
Common stock subject to a put option................................................................ 9,450
Stockholders' equity................................................................................ 130,674
</TABLE>
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(1) With respect to the year ended December 31, 1997, amounts include operating
results of Survivair from June 1, 1997 and operating results of Biosystems
from September 30, 1997.
(2) Pro forma statement of income data for the six months ended June 30, 1998
and the year ended December 31, 1997 give pro forma effect to the Howard
Leight acquisition as if such transaction had been consummated on January 1,
1997. Pro forma statement of income data for the year ended December 31,
1997 also gives pro forma effect to the Survivair acquisition as if such
transaction had been consummated on January 1, 1997.
(3) Includes the operating results of Howard Leight from February 27, 1998.
(4) Excluding non-recurring items relating to certain of the Acquisitions and a
severance charge recorded in 1998 in connection with the June 1998
resignation of the President and Chief Operating Officer of the Company's
Bacou USA Safety, Inc. subsidiary, and including the operating results of
the acquired companies as described above, the Company's gross profit,
operating income, net income and earnings per share would have been as
follows for each of the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
----------------------------- -----------------------------
1996 1997 1997 1998
------- ------------------- ------- -------------------
ACTUAL PRO FORMA ACTUAL PRO FORMA
------ --------- ------ ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Gross profit................................................ $61,913 $68,455 $101,702 $32,017 $56,846 $60,829
Operating income............................................ 31,624 30,558 42,084 15,533 24,113 24,819
Net income.................................................. 19,377 19,498 21,143 10,015 13,621 13,258
Earnings per share:
Basic..................................................... $ 1.18 $ 1.12 $ 1.22 $ 0.58 $ 0.77 $ 0.75
Diluted................................................... 1.18 1.12 1.21 0.58 0.77 0.75
</TABLE>
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
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6
<PAGE> 8
RISK FACTORS
The following risk factors should be considered carefully in addition to
the other information contained in this Prospectus before purchasing the Common
Stock offered hereby.
CONTROL BY PRINCIPAL STOCKHOLDER
Following the consummation of the Offering, Bacou S.A., a French
corporation (the "Principal Stockholder"), will own approximately 59.2% (57.2%
if the Underwriters' overallotment option is exercised in full) of the
outstanding Common Stock. Mr. Philippe Bacou, the Chairman of the Board of
Directors of the Company, has authority to vote such shares. Consequently, Mr.
Philippe Bacou indirectly will control the election of directors and the results
of other matters submitted to a vote of stockholders. Such concentration of
ownership may have the effect of preventing a change in control of the Company.
Any change in the control of the Principal Stockholder could have a significant
effect on the composition of the Board of Directors of the Company which in turn
could have a significant effect on the management and operation of the Company.
Additionally, as a result of the present intention of the Principal Stockholder
to retain majority control of the Company, the ability of the Company to raise
equity capital or to fund any future acquisitions through the issuance of
additional shares of capital stock is limited. See "Business -- Strategy."
UNCERTAINTIES OF ACQUISITION STRATEGY
The Company has pursued and intends to continue to pursue acquisitions of
safety and security businesses as an important component of its strategy. See
"Business -- Strategy." No assurance can be given that suitable acquisition
candidates can be acquired on acceptable terms or that future acquisitions, if
completed, will be successful. Future acquisitions by the Company could result
in the incurrence of debt, the potentially dilutive issuance of equity
securities and the incurrence of contingent liabilities and amortization
expenses related to goodwill and other intangible assets, which could materially
adversely affect the Company's business, operating results and financial
condition. While the Company regularly reviews and expresses interest in
acquisitions, the Company has no present understandings, commitments or
agreements with respect to any acquisition. The success of any completed
acquisition, including the Biosystems, Survivair and Howard Leight acquisitions,
will depend on the Company's ability to integrate effectively the acquired
businesses into the Company. The process of integrating acquired businesses may
involve numerous risks, including difficulties in the assimilation of operations
and products, the diversion of management's attention from other business
concerns, risks of entering markets in which the Company has limited or no
direct prior experience and the potential loss of key employees of the acquired
businesses. Although the Company believes that there are no specific integration
issues with respect to its completed acquisitions, there can be no assurance
that the Company will be able to successfully integrate the businesses it
acquires.
RELIANCE ON PRINCIPAL PRODUCT LINE
During the year ended December 31, 1997, on a pro forma basis, sales of the
astrospec family of protective eyewear products would have accounted for 27.3%
of the Company's consolidated net sales. The Company's astrospec family of
eyewear products has enjoyed significant success resulting in many competitive
copies produced overseas, imported to the United States and sold at lower price
points than the Company's astrospec products. The Company continues to promote
the value offered by its astrospec products and has taken steps to introduce
new, lower-priced products to compete in that market segment. However, astrospec
copies may continue to enjoy success in the marketplace against the astrospec
family of eyewear products. A decline in demand for the astrospec family of
products or a decline in the price of such products would adversely affect the
Company's business, financial condition and results of operations. See
"Business -- Products."
DEPENDENCE ON KEY PERSONNEL
The operations of the Company depend significantly upon the efforts of
certain members of senior management. The extended loss of the services of these
key personnel without adequate replacement could have a material adverse effect
upon the Company's operations. The Company's agreement with its Vice
7
<PAGE> 9
Chairman, President and Chief Executive Officer, Mr. Stepan, is expected to
expire on December 31, 1999, after which time he intends to continue as active
Vice Chairman and Director of the Company and Chairman of its operating
subsidiaries.
DEPENDENCE UPON NEW PRODUCT INTRODUCTIONS
The Company's future success will depend in part on its ability to enhance
its existing products and to introduce new products. However, there can be no
assurance of the Company's ability to do so. Innovative designs and technology
are often not successful, and successful product designs and technology can be
displaced by subsequently introduced product designs and technology. As a result
of these and other factors, there can be no assurance that the Company will
successfully maintain its market position. See "Business -- Product Development
and Introduction."
SIGNIFICANT RELATIONSHIPS
The Company has significant relationships under various material
agreements. The Principal Stockholder and certain of its affiliates (the "Bacou
Group") are parties to a corporate opportunities agreement with the Company
covering potential conflicts of interest with respect to future business
opportunities, including the geographic allocation of sales of products of the
Company and the Bacou Group, the allocation of acquisition opportunities, the
basis for cooperation between the Company and the Bacou Group with respect to
product development, intellectual property rights, research and development and
manufacturing processes and the terms and conditions for sale of products by one
party to the other. The Company is also a party to a consulting agreement with
Mr. Howard S. Leight, a director of the Company, which, in addition to requiring
consulting services from Mr. Leight, requires the Company to pay royalties to
Mr. Leight for hearing protection products developed by Mr. Leight. Because
these agreements allow, among other matters, the Company to obtain access to new
developments and processes, the termination of, or a material dispute under, any
of these agreements could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
Company is obligated under this consulting agreement to nominate, and the
Principal Stockholder has agreed to vote all of its shares to elect, Mr. Leight
to the Board of Directors of the Company. Any material dispute under any of the
Company's agreements with the Bacou Group or Mr. Leight and his affiliated
entities could present a conflict of interest between such parties and the
Company which in turn could have a material adverse effect on the Company's
business, financial condition and results of operations. See "-- Reliance on
Single Sources of Supply."
MARKET LIMITATIONS ON UVEX(R) BRANDS
The Company is a party to agreements with Uvex Arbeitsschutz GmbH and
certain of its affiliates (together, "Uvex Germany"), which cover
territoriality, the sharing of new product developments, intellectual property
rights, research and development, manufacturing processes and optical coating
technology. Under this Agreement, the Company may sell personal protective
equipment, including the astrospec family of products, under the UVEX(R) brand
name only in North, Central and South America and Uvex Germany has agreed not to
sell any of its uvex safety products in these geographic areas. The agreement
also prohibits the Company from selling sports products, such as sunglasses or
protective eyewear for sports activities, under the UVEX(R) brand name
regardless of geographic area. Because this agreement limits which products the
Company can sell and where, the Company's penetration into certain markets may
be limited. In addition, as a result of the cooperative nature of the agreement,
the inability of Uvex Germany to develop new products may hinder the Company's
ability to introduce these products in its markets. See "Business -- Product
Development and Introduction" and "Business -- Intellectual Property."
RELIANCE ON SINGLE SOURCES OF SUPPLY
Although the Company relies primarily on single sources for the supply of
several raw materials, all of the Company's raw materials are currently readily
available. The Company currently satisfies substantially all of its requirements
for (i) polycarbonate resin (the primary raw material used in the production of
the Company's non-prescription optical lenses), (ii) polyurethane pre-polymer
(the primary raw material for production of foam hearing protection products)
and (iii) certain sensors (the primary component of gas
8
<PAGE> 10
detection equipment) through single sources of supply. The Company has agreed to
enter into a supply agreement with Howard Leight Enterprises, Inc. ("HLE") (a
corporation which is principally owned by Mr. Leight and two employees of the
Company) pursuant to which the Company has agreed, subject to certain terms, to
purchase its requirements of polyurethane pre-polymer from HLE for a period of
five years. HLE is not currently producing polyurethane pre-polymer and,
therefore, a supply agreement has not been executed. At present, the Company has
no long-term supply contract for polyurethane pre-polymer. The loss of any
single source for its raw materials, any disruption in such source's business or
failure by it to meet the Company's needs on a timely basis could cause
shortages in raw materials and could have a material adverse effect on the
Company's business, financial condition or results of operations. Although the
Company has plans in place to deal with such contingencies, there can be no
assurance that such precautions will be adequate or that alternative sources of
supply can be located or developed in a timely manner. See "Business -- Raw
Materials."
POTENTIAL ADVERSE EFFECTS ON SALES RESULTING FROM CHANGES IN ECONOMIC AND
REGULATORY CONDITIONS
The primary users of the Company's personal protective equipment products
are industrial workers in the United States. As a result, decreases in general
employment levels of industrial workers in the United States may adversely
affect the Company's sales. The Company's sales also may be adversely affected
by changes in safety regulations covering industrial workers in the United
States and in the level of enforcement of such regulations. Changes in
regulations could reduce the need for, and the utility of, certain products
manufactured by the Company. See "Business -- Government Regulation and
Industrial Standards."
LIMITED PROTECTION OF INTELLECTUAL PROPERTY
The Company attempts to protect its intellectual property rights through a
range of measures, including trademarks, patents and confidentiality agreements.
There can be no assurance that the Company's actions to protect its intellectual
property rights will be adequate to protect its technology and prevent imitation
of its products by competitors. In addition, there can be no assurance that
infringement or invalidity claims will not be asserted against the Company in
the future. The costs of defending such claims or an adverse determination with
respect to litigation based on such claims could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Business -- Intellectual Property."
COMPETITION
The personal protective equipment industry is fragmented and includes many
competitors. Competitors in the industry, some of which have greater financial
or other resources than the Company, range from small manufacturers offering
single product lines to a limited number of large competitors offering multiple
product lines. To maintain its market position, the Company must be competitive
in the areas of brand image, distribution, design, style, customer service,
quality and price. Individual competitors have advantages and strengths in
different sectors of the industry, in different products and in different areas,
including manufacturing and distribution systems, geographic market presence,
customer service and support, breadth of applications, delivery time and price.
There can be no assurance that the Company will be able to compete successfully
against current and future competitors or that the competitive pressures faced
by the Company will not adversely affect its business, financial condition and
results of operations. See "-- Reliance on Principal Product Line" and
"Business -- Competition."
RELIANCE OF COMPANY ON DIVIDENDS AND OTHER PAYMENTS FROM SUBSIDIARIES
The Company is a holding company, the principal assets of which are shares
of the capital stock of its subsidiaries. As a holding company without
independent means of generating operating revenues, the Company depends on
dividends and other permitted payments from its subsidiaries to fund its
obligations and meet its cash needs. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
9
<PAGE> 11
REDUCED PROBABILITY OF CHANGE OF CONTROL OR ACQUISITION OF COMPANY DUE TO
EXISTENCE OF ANTI-TAKEOVER PROVISIONS
The Company's Amended and Restated Certificate of Incorporation (the
"Restated Certificate of Incorporation") and By-Laws (the "By-Laws") contain
certain provisions that reduce the probability of any change of control or
acquisition of the Company, even if the Principal Stockholder were to reduce
significantly its percentage ownership of the Common Stock. See "-- Control by
Principal Stockholder." These provisions include, but are not limited to, the
ability of the Board of Directors to issue preferred stock in one or more series
with such rights, obligations and preferences as the Board of Directors may
determine without any further vote or action by the stockholders, and advance
notice procedures for stockholders to nominate candidates for election as
directors of the Company and for stockholders to submit proposals for
consideration at stockholders' meetings. In addition, the Company is subject to
Section 203 of the Delaware General Corporation Law, which limits transactions
between a publicly held company and "interested stockholders" (generally, those
stockholders who, together with their affiliates and associates, own 15% or more
of a company's outstanding capital stock). This provision of Delaware law also
may have the effect of deterring certain potential acquisitions of the Company.
YEAR 2000 COMPLIANCE
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without consideration
of the impact of the upcoming change in century. If not corrected, many computer
applications could fail or create erroneous results at or before the year 2000.
The Company has completed an assessment of its primary information systems and
has identified applications, principally at its Survivair and Uvex Safety
divisions, that are not currently year 2000 compliant. During 1997 the Company
initiated a project to install and implement common software at all of its
business units. The Company signed a license agreement with J.D. Edwards &
Company for such software in September 1997. Full implementation at the
Survivair and Uvex Safety divisions, including a significant period of
pre-testing, is expected to be completed during or prior to the second quarter
of 1999. The Company believes that this software is year 2000 compliant and
that, upon full implementation of this software at its Survivair and Uvex Safety
business units within such time frame, all of the Company's material year 2000
deficiencies will have been corrected. There can be no assurance that the
Company will successfully complete implementation of the common software at its
Survivair and Uvex Safety business units by dates critical for year 2000
compliance. Failure to complete implementation on a timely basis may have
material adverse financial and operational impacts on the Company. In addition,
there can be no assurance that year 2000 deficiencies in other applications of
the Company with embedded software (manufacturing equipment, telephone systems,
security systems, etc.) or in the systems of other companies on which the
Company's systems rely, in particular significant vendors, also will be
corrected in a timely manner or that any such failure to correct such
deficiencies would not have a material adverse effect on the Company's business,
financial condition or results of operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Year 2000
Compliance."
10
<PAGE> 12
PRICE RANGE OF COMMON STOCK
From March 27, 1996 until July 22, 1998, the Common Stock traded on the
Nasdaq National Market under the symbol "BACU." On July 23, 1998, the Common
Stock began trading on the NYSE under the symbol "BAU." At August 24, 1998,
there were 17,604,465 shares of Common Stock outstanding.
The following table sets forth the high bid and low ask prices for the
Common Stock as reported on the Nasdaq National Market through July 22, 1998 and
the high and low sales prices on the NYSE composite tape since July 23, 1998.
<TABLE>
<CAPTION>
CALENDAR YEAR HIGH LOW
------------- ---- ---
NASDAQ
------
<S> <C> <C>
1996
Second Quarter............................................ $19 1/8 $15
Third Quarter............................................. 18 7/8 16 1/
Fourth Quarter............................................ 17 15 1/
1997
First Quarter............................................. $16 5/8 $15
Second Quarter............................................ 16 1/4 14 3/
Third Quarter............................................. 18 15 3/
Fourth Quarter............................................ 18 1/2 17
1998
First Quarter............................................. $18 1/8 $15 3/4
Second Quarter............................................ 22 3/4 15 7/
Third Quarter (through July 22, 1998)..................... 25 3/8 20 3/
NYSE
------------------
Third Quarter (July 23, 1998 through August 24, 1998)..... $22 1/2 $20 1/2
</TABLE>
On August 24, 1998, the last reported sale price of the Common Stock as
reported on the NYSE composite tape was $20 11/16 per share.
DIVIDEND POLICY
The Company intends to retain any future earnings for use in the operation
and expansion of its business. As a result, the Company does not anticipate
declaring any cash dividends on its Common Stock in the foreseeable future. Any
future determination with regard to the payment of dividends will be at the
discretion of the Company's Board of Directors and will be dependent upon the
Company's future earnings, financial condition, capital requirements and other
relevant factors.
11
<PAGE> 13
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1998. This table should be read in conjunction with the Consolidated
Financial Statements and notes thereto incorporated by reference herein. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
<TABLE>
<CAPTION>
JUNE 30, 1998
--------------
(IN THOUSANDS)
<S> <C>
Total current installments of long-term debt................ $ 15,714
========
Total long-term debt, excluding current installments........ $103,657
Common Stock subject to a put option(1)..................... 9,450
--------
Stockholders' equity:
Preferred Stock, $.001 par value, 5,000,000 shares
authorized, no shares issued and outstanding........... --
Common Stock, $.001 par value, 25,000,000 shares
authorized, 17,602,365 shares issued and
outstanding(2)......................................... 17
Additional paid-in capital................................ 63,129
Retained earnings......................................... 67,528
--------
Total stockholders' equity............................. 130,674
--------
Total capitalization................................... $243,781
========
</TABLE>
- ---------------
(1) In connection with the Company's acquisition of Biosystems in September
1997, the Company issued to the sellers 826,514 shares of Common Stock as
part of the initial purchase price, 578,560 of which may be put to the
Company at any time until September 1999 at a price of approximately $16.38
per share, and accordingly are not included in stockholders' equity.
(2) Excludes an aggregate of 1,327,000 shares of Common Stock reserved for
issuance as of June 30, 1998 pursuant to the Employee Plan, 300,000 shares
of Common Stock reserved for issuance pursuant to the Director Plan and
50,000 shares of Common Stock reserved for issuance pursuant to the Leight
Plan.
12
<PAGE> 14
SELECTED CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following table sets forth selected consolidated financial information
of the Company for the periods indicated. Effective August 1, 1995, the Company
elected to change its fiscal year end from July 31 to December 31. Selected
consolidated financial information for each of the years ended July 31, 1994 and
1995, the five months ended December 31, 1995 and the years ended December 31,
1996 and 1997 was derived from financial statements of the Company which were
audited by KPMG Peat Marwick LLP, independent certified public accountants. The
financial statements of the Company as of December 31, 1997 and 1996, and for
the fiscal years ended December 31, 1997 and 1996, the five months ended
December 31, 1995, and the fiscal year ended July 31, 1995, are incorporated by
reference herein to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997. Selected consolidated financial information for the six
months ended June 30, 1997 and 1998 is derived from unaudited financial
statements of the Company which are incorporated by reference herein to the
Company's Quarterly Report on Form 10-Q filed for the quarter ended June 30,
1998. In the opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
position and results of operations have been included in such unaudited
financial statements. Such results may not be indicative of the results expected
for a full year. Pro forma statement of income data for the six months ended
June 30, 1998 and the year ended December 31, 1997 give pro forma effect to the
Howard Leight and Survivair acquisitions as if such transactions had been
consummated on January 1, 1997 and are derived from pro forma financial
statements of the Company which are incorporated by reference to the Company's
Current Report on Form 8-K dated August 5, 1998. The selected consolidated
historical and pro forma financial information should be read in conjunction
with the financial information incorporated herein by reference to other
documents and "Management's Discussion and Analysis of Financial Condition and
Results of Operations." See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
FIVE MONTHS
YEAR ENDED ENDED YEAR ENDED
JULY 31, DECEMBER 31, DECEMBER 31,
----------------- ------------ --------------------------------------
1994 1995(1) 1995(2) 1996 1997
---- ------- ------- ---- ---------------------------
ACTUAL(3) PRO FORMA
------ ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales.................................... $53,927 $71,988 $ 36,827 $109,268 $130,869 $189,945
Cost of sales................................ 22,186 31,016 18,525 47,355 64,467 90,296
------- ------- -------- -------- -------- --------
Gross profit................................. 31,741 40,972 18,302 61,913 66,402 99,649
Operating expenses:
Selling.................................... 8,719 9,781 5,891 17,074 21,658 30,612
General and administrative................. 3,206 4,080 2,609 9,176 11,184 19,094
Research and development................... -- -- -- -- 1,110 2,110
Purchased in-process research and
development.............................. -- -- -- -- 3,721 3,721
Amortization of intangibles assets......... 1,467 2,506 1,515 4,039 4,095 7,952
------- ------- -------- -------- -------- --------
Total operating expenses............... 13,392 16,367 10,015 30,289 41,768 63,489
------- ------- -------- -------- -------- --------
Operating income............................. 18,349 24,605 8,287 31,624 24,634 36,160
Other expense (income), net.................. 333 1,287 1,054 45 (376) 8,466
------- ------- -------- -------- -------- --------
Income before income taxes and minority
interest................................... 18,016 23,318 7,233 31,579 25,010 27,694
Minority interest share of income............ 6,164 1,920 -- -- -- --
Income taxes................................. 4,371 8,343 2,917 12,202 10,588 11,627
------- ------- -------- -------- -------- --------
Net income(5)................................ $ 7,481 $13,055 $ 4,316 $ 19,377 $ 14,422 $ 16,067
======= ======= ======== ======== ======== ========
Earnings per share:
Basic and diluted(5)(6).................... $ 0.57 $ 0.94 $ 0.31 $ 1.18 $ 0.83 $ 0.92
Weighted average shares outstanding:
Basic...................................... 13,167 13,860 13,860 16,406 17,383 17,383
Diluted.................................... 13,167 13,860 13,860 16,436 17,410 17,410
BALANCE SHEET DATA (END OF PERIOD):
Working capital.............................. $13,856 $11,838 $ 4,406 $ 40,820 $ 34,509
Total assets................................. 51,173 76,526 104,469 125,109 152,351
Total long-term debt, excluding current
installments............................... 9,170 27,800 49,000 -- --
Common stock subject to a put option......... -- -- -- -- 9,450
Stockholders' equity......................... 28,327 41,382 45,698 112,407 122,902
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------------------
1997(3) 1998
-------- --------------------------
ACTUAL(4) PRO FORMA
------ ---------
<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales.................................... $ 58,710 $108,379 $115,737
Cost of sales................................ 27,243 52,546 55,921
-------- -------- --------
Gross profit................................. 31,467 55,833 59,816
Operating expenses:
Selling.................................... 9,939 17,410 18,587
General and administrative................. 4,628 12,059 13,533
Research and development................... 97 1,732 1,762
Purchased in-process research and
development.............................. 1,300 7,118 7,118
Amortization of intangibles assets......... 1,820 3,557 4,153
-------- -------- --------
Total operating expenses............... 17,784 41,876 45,153
-------- -------- --------
Operating income............................. 13,683 13,957 14,663
Other expense (income), net.................. (573) 2,685 3,976
-------- -------- --------
Income before income taxes and minority
interest................................... 14,256 11,272 10,687
Minority interest share of income............ -- -- --
Income taxes................................. 5,879 4,041 3,819
-------- -------- --------
Net income(5)................................ $ 8,377 $ 7,231 $ 6,868
======== ======== ========
Earnings per share:
Basic and diluted(5)(6).................... $ 0.48 $ 0.41 $ 0.39
Weighted average shares outstanding:
Basic...................................... 17,312 17,596 17,596
Diluted.................................... 17,318 17,688 17,688
BALANCE SHEET DATA (END OF PERIOD):
Working capital.............................. $ 29,841 $ 30,541
Total assets................................. 143,804 289,624
Total long-term debt, excluding current
installments............................... -- 103,657
Common stock subject to a put option......... -- 9,450
Stockholders' equity......................... 120,784 130,674
</TABLE>
- ---------------
(1) Includes the operating results of Pro-Tech from April 1, 1995. Amounts also
reflect the acquisition of a one-third minority interest in the business of
Uvex Safety effective October 31, 1994.
(2) Includes the operating results of Titmus from October 1, 1995.
(3) With respect to the year ended December 31, 1997, amounts include operating
results of Survivair from June 1, 1997 and operating results of Biosystems
from September 30, 1997.
(4) Includes the operating results of Howard Leight from February 27, 1998.
(5) Excluding non-recurring items relating to certain of the Acquisitions and a
severance charge recorded in 1998 in connection with the June 1998
resignation of the President and Chief Operating Officer of the Company's
Bacou USA Safety, Inc. subsidiary, and including the operating results of
the acquired companies as described above, the Company's net income, and
both basic and diluted earnings per share, would have been as follows for
each of the periods presented:
<TABLE>
<CAPTION>
FIVE MONTHS
YEAR ENDED ENDED YEAR ENDED
JULY 31, DECEMBER 31, DECEMBER 31,
----------------- ------------ --------------------------------------
1994 1995 1995 1996 1997
---- ---- ---- ---- ---------------------------
ACTUAL PRO FORMA
------ ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Net income............................... $ 7,481 $14,096 $ 5,811 $ 19,377 $ 19,498 $ 21,143
Earnings per share:
Basic.................................. $ 0.57 $ 1.02 $ 0.42 $ 1.18 $ 1.12 $ 1.22
Diluted................................ 0.57 1.02 0.42 1.18 1.12 1.21
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------------------
1997 1998
---- --------------------------
ACTUAL PRO FORMA
------ ---------
<S> <C> <C> <C>
Net income............................... $ 10,015 $ 13,621 $ 13,258
Earnings per share:
Basic.................................. $ 0.58 $ 0.77 $ 0.75
Diluted................................ 0.58 0.77 0.75
</TABLE>
(6) There were no cash dividends declared or paid by the Company during any of
the periods presented.
13
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion of the Company's financial condition and results
of operations should be read in conjunction with the Company's consolidated
financial statements and notes thereto, as well as the selected financial data,
all appearing elsewhere or incorporated by reference herein. Statements
contained in this discussion or elsewhere herein that are not historical facts
are forward-looking statements that are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. In addition,
words such as "believes," "anticipates," "expects" and similar expressions are
intended to identify forward-looking statements. The Company cautions that a
number of important factors could cause the Company's actual results to differ
materially from those expressed in any forward-looking statements made by, or on
behalf of, the Company. See "Special Note Regarding Forward-Looking Statements"
and "Risk Factors."
BACKGROUND
Effect of Acquisitions
The Company is pursuing a business strategy which includes acquisitions as
an important element. As described more fully below, the Company completed the
Acquisitions during the past three years, significantly increasing the Company's
product offerings and size. Annual net sales volume has increased from $72.0
million (actual) for the fiscal year ended July 31, 1995 to net sales on a pro
forma basis equal to $189.9 million for the year ended December 31, 1997.
The Company's gross margin and operating margin for the fiscal year ended
July 31, 1995, were 56.9% and 34.2%, respectively. Historical margins
attributable to the operations of businesses acquired by the Company have
generally been lower than margins at the Company's platform Uvex Safety
business. In addition, intangible assets totaling $146.2 million have been
recorded subsequent to July 31, 1995, resulting in a significant increase in
amortization expense. Integration of these businesses into the Company's
existing business, and an increase in amortization expense, have each resulted
in a decline in the Company's margins from the fiscal year ended July 31, 1995.
Effective February 27, 1998, the Company acquired substantially all assets
and assumed substantially all liabilities of Howard Leight, a manufacturer of
hearing protection products including disposable, reusable and banded ear plugs,
and ear muffs, for cash consideration of $125.9 million, $5.9 million of which
represented the refinancing of Howard Leight indebtedness (the "Leight
Acquisition"). Operating results of Howard Leight have been included in the
consolidated financial statements of the Company beginning with the acquisition
date.
The Company acquired all of the outstanding capital stock of Comasec
Holdings, Inc. ("Comasec") on May 30, 1997 for cash consideration of $27.4
million. The assets of Comasec consisted primarily of its wholly owned
subsidiary, Survivair, a manufacturer of respiratory protection products. The
Company also acquired all of the capital stock of Biosystems, a manufacturer of
gas monitors and equipment for testing self-contained breathing apparatus, on
September 30, 1997. The initial acquisition price was approximately $13.5
million payable in common stock of the Company; however, the initial acquisition
price may be increased if the operating results of Biosystems in the year 2000
exceed certain defined thresholds. Finally, the Company acquired Lase-R Shield
for $1.0 million in June of 1997. The acquisitions of Survivair, Biosystems and
Lase-R Shield are referred to collectively in the following discussion as the
"1997 Acquisitions." Operating results for the 1997 Acquisitions have been
included in the consolidated financial statements of the Company beginning with
the respective acquisition dates.
The Company acquired (i) all of the outstanding capital stock of Titmus
effective September 29, 1995 for approximately $27.3 million and (ii)
substantially all of the assets of Pro-Tech effective March 31, 1995 for
approximately $6.8 million (collectively, the "1995 Acquisitions"). Operating
results for the 1995 Acquisitions have been included in the consolidated
financial statements of the Company beginning with the respective acquisition
dates.
14
<PAGE> 16
In connection with the Leight Acquisition and certain of the 1997
Acquisitions, a portion of the acquisition price was allocated to the fair value
of purchased in-process research and development. These amounts were charged to
operating expenses in full upon the date \of acquisition and are referred to in
the accompanying discussion as "Acquisition-Related R&D Charges." In connection
with each of the Acquisitions, acquired inventories were adjusted to fair
values, and these adjustments were subsequently charged to cost of sales when
the acquired inventories were sold. These amounts are referred to in the
accompanying discussion as "Acquisition-Related Inventory Adjustments." Cash
bonuses in the amount of $0.6 million were paid to certain senior executives of
Howard Leight in connection with the Leight Acquisition and have been included
with general and administrative expenses (the "Acquisition-Related Bonuses").
The Company also recorded acquisition-related charges during 1997 totaling
$150,000 that are included with general and administrative expenses. These items
are referred to collectively in the following discussion as "Acquisition-
Related Adjustments."
Other Information
In March 1996 the Company completed an initial public offering of its
common stock. Proceeds from the sale of 3,450,000 shares, totaling $47.3
million, net of expenses of issuance, were used primarily to repay outstanding
bank indebtedness.
Effective August 1, 1995 the Company changed its fiscal year end from July
31 to December 31. The following discussion compares operating results for the
six months ended June 30, 1998 and 1997, the years ended December 31, 1997 and
1996, and the years ended December 31, 1996 and July 31, 1995.
RESULTS OF OPERATIONS
The following table presents selected operating data of the Company as
percentages of net sales for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED SIX MONTHS ENDED
JULY 31, DECEMBER 31, DECEMBER 31, JUNE 30,
------------- ----------------- ----------------- --------------------
1995 1996 1997 1997 1998
------------- ----------------- ----------------- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales.................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales (1)............ 43.1 43.3 49.3 46.4 48.5
----- ----- ----- ----- -----
Gross profit................. 56.9 56.7 50.7 53.6 51.5
----- ----- ----- ----- -----
Operating expenses:
Selling.................... 13.6 15.6 16.6 16.9 16.0
General and
administrative(2)........ 5.6 8.4 8.6 7.9 11.1
Research and development... -- -- 0.8 0.2 1.6
Purchased in-process
research and
development(3)........... -- -- 2.8 2.2 6.6
Amortization of intangible
assets................... 3.5 3.7 3.1 3.1 3.3
----- ----- ----- ----- -----
Total operating
expenses.......... 22.7 27.7 31.9 30.3 38.6
----- ----- ----- ----- -----
Operating income............. 34.2 29.0 18.8 23.3 12.9
Other expense (income),
net........................ 1.8 0.1 (0.3) (1.0) 2.5
----- ----- ----- ----- -----
Income before income taxes
and minority interest...... 32.4 28.9 19.1 24.3 10.4
Minority interest share of
income..................... 2.7 -- -- -- --
Income taxes................. 11.6 11.2 8.1 10.0 3.7
----- ----- ----- ----- -----
Net income................... 18.1% 17.7% 11.0% 14.3% 6.7%
===== ===== ===== ===== =====
</TABLE>
- ---------------
(1) Includes Acquisition-Related Inventory Adjustments totaling $1,013,000 (0.9%
of net sales) for the six months ended June 30, 1998, $2,053,000 (1.6% of
net sales) for the year ended December 31, 1997, $550,000 (0.9% of net
sales) for the six months ended June 30, 1997, and $1,707,000 (2.4% of net
sales) for the year ended July 31, 1995.
(2) Includes non-recurring charges for termination benefits totaling $1,425,000
(1.3% of net sales) and Acquisition-Related Bonuses totaling $600,000 (0.6%
of net sales) for the six months ended June 30, 1998, and acquisition-
related charges totaling $150,000 (0.1% of net sales) for the year ended
December 31, 1997.
(3) Amounts for all periods represent Acquisition-Related R&D Charges.
15
<PAGE> 17
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
Net Sales. Net sales increased 84.7% from $58.7 million for the six months
ended June 30, 1997 to $108.4 million for the six months ended June 30, 1998,
principally as a result of acquired businesses. Of this increase, $47.7 million
was attributable to net sales of Howard Leight, which were included for four
months in 1998 and net sales of Survivair and Biosystems, which were included
for the full six months in 1998, compared to the 1997 period which only included
$2.4 million of net sales of Survivair for one month. The remainder of the
increase resulted principally from increased shipments of the Company's UVEX(R)
brand eyewear.
Export sales represented 14.9% of net sales in the 1998 period and 10.8% of
net sales in the 1997 period, and increased by 155.8% from 1997 to 1998. Export
sales of the Company's eyewear product lines, which represented the majority of
the Company's export sales during the six months ended June 30, 1997, increased
by 31.6% from the 1997 period to the 1998 period.
Cost of Sales. Cost of sales increased 92.9% from $27.2 million for the
six months ended June 30, 1997, to $52.5 million for the six months ended June
30, 1998, primarily as a result of higher sales volume attributable to acquired
businesses.
Gross Profit. Gross profit increased 77.4% from $31.5 million for the six
months ended June 30, 1997, to $55.8 million for the six months ended June 30,
1998. Excluding Acquisition-Related Inventory Adjustments, the Company's gross
margin declined from 54.6% in the 1997 period to 52.6% in the 1998 period. Gross
margins attributable to the operations of the 1997 Acquisitions historically
have been lower, and gross margins for Howard Leight historically have been
greater, than the Company's gross margin for the 1997 period. The Company
expects that its combined gross margin for the full year in 1998, including
operating results of acquired businesses and prior to Acquisition-Related
Inventory Adjustments, will approximate 52.0%.
Operating Expenses. Operating expenses increased 135.5% from $17.8 million
for the six months ended June 30, 1997 to $41.9 million for the six months ended
June 30, 1998, primarily as a result of operating expenses attributable to
acquired businesses.
In June 1998, the Company announced the resignation of the president and
chief operating officer of Bacou USA Safety, Inc. ("Bacou Safety"). The 1998
period includes a non-recurring charge (the "Severance Charge") equal to $1.4
million for estimated termination benefits owed to this former officer. In
addition to the Severance Charge, the 1998 period includes Acquisition-Related
R&D Charges totaling $7.1 million and Acquisition-Related Bonuses totaling $0.6
million. The 1997 period includes Acquisition-Related R&D Charges totaling $1.3
million. Excluding these charges, operating expenses as a percentage of net
sales increased from 28.1% for the six months ended June 30, 1997 to 30.2% for
the six months ended June 30, 1998. This increase was due primarily to higher
levels of spending for research and development at acquired businesses and
increased amortization expense. Amortization expense increased 95.4% from $1.8
million in the 1997 period to $3.6 million in the 1998 period as a result of
increases in intangible assets recorded in connection with acquired businesses.
Operating Income. As a result of the foregoing, the Company's operating
income increased 2.2% from $13.7 million for the six months ended June 30, 1997
to $14.0 million for the six months ended June 30, 1998. Excluding the Severance
Charge in the 1998 period and all Acquisition-Related Adjustments in both
periods, the Company's operating income increased 55.2% from $15.5 million for
the six months ended June 30, 1997 to $24.1 million for the six months ended
June 30, 1998. Excluding the aforementioned items, the Company's operating
margin declined from 26.5% for the six months ended June 30, 1997 to 22.2% for
the six months ended June 30, 1998. The Company expects that its combined
operating margin for the full year in 1998, including operating results of
acquired businesses and prior to both the Severance Charge and 1998
Acquisition-Related Adjustments, will approximate 22.0%.
Other Expense (Income), Net. Other expense (income), net was $2.7 million
for the six months ended June 30, 1998 and ($0.6) million for the six months
ended June 30, 1997. The 1998 period includes net interest expense totaling $2.7
million, whereas the 1997 period includes net interest income totaling ($0.3)
million. The increase in net interest expense from the 1997 period to the 1998
period is due principally to debt incurred in connection with the Leight
Acquisition. See "-- Liquidity and Capital Resources."
16
<PAGE> 18
Income Taxes. The Company's effective income tax rate was 35.8% in the
1998 period and 41.2% in the 1997 period. The effective rate in both periods was
higher than the federal statutory rate of 35.0% due to state and local income
taxes. In addition, the effective rate in the 1997 period was higher because a
tax benefit could not be recorded for Acquisition-Related R&D Charges totaling
$1.3 million.
Net Income. Principally as a result of the Severance Charge and 1998
Acquisition-Related Adjustments, the Company's net income declined from $8.4
million in the 1997 period to $7.2 million in the 1998 period. Excluding the
Severance Charge in the 1998 period, and excluding Acquisition-Related
Adjustments incurred during both periods, the Company's net income increased
36.0% from $10.0 million in the 1997 period to $13.6 million in the 1998 period.
Fiscal Year Ended December 31, 1997 Compared to Fiscal Year Ended December 31,
1996
Net Sales. Net sales increased 19.8% from $109.3 million for the year
ended December 31, 1996 to $130.9 million for the year ended December 31, 1997.
Sales during 1997 resulting from the 1997 Acquisitions totaled $21.5 million.
During the fourth quarter of 1996 the Company withdrew from the business of
selling completed prescription eyewear. As a result, net sales declined from the
1996 period to the 1997 period by approximately $3.2 million. Excluding sales
from the 1997 Acquisitions and excluding sales in 1996 from the discontinued
product line, the Company's net sales increased by 3.6%, principally as a result
of increased units shipped. Export sales totaled $15.2 million or 11.6% of net
sales for the 1997 period. Excluding sales resulting from the 1997 Acquisitions,
export sales increased by 50.0% from 1996 to 1997.
Cost of Sales. Cost of sales increased 36.1% from $47.4 million for the
year ended December 31, 1996 to $64.5 million for the year ended December 31,
1997. The increase was primarily attributable to increased sales volume and
Acquisition-Related Inventory Adjustments resulting from the 1997 Acquisitions.
Gross Profit. Gross profit increased 7.2% from $61.9 million for the year
ended December 31, 1996 to $66.4 million for the year ended December 31, 1997.
Excluding the effect of Acquisition-Related Inventory Adjustments, the Company's
gross margin would have been 52.3% in the 1997 period compared with 56.7% in the
1996 period. The Company's gross margin declined from the 1996 period to the
1997 period principally as a result of lower margins at acquired businesses.
Inclusion of operating results for the 1997 Acquisitions for a full year in 1998
will, and any future acquisitions may, further reduce the Company's gross
margin; however, the acquisition of Howard Leight is expected to favorably
influence (exclusive of non-recurring adjustments) the gross margin in 1998.
During 1997 the Company experienced a reduction in the average selling
price of many of its eyewear product lines as a response to lower priced
competitive products. Lower average selling prices resulted in a reduction of
the gross margin from 1996 to 1997 of about one percentage point. The Company
believes competitive pressures may limit its ability to increase prices to
previous levels.
In addition to the above factors, the Company's gross margin during 1997
was reduced by higher production costs at Titmus. These higher costs occurred
primarily during the first quarter of 1997 and resulted from disruption in
production caused by relocation to a new facility and, interruption in
production and quality problems both associated with a newly acquired plating
line.
Operating Expenses. Operating expenses increased 37.9% from $30.3 million
for the year ended December 31, 1996 to $41.8 million for the year ended
December 31, 1997. Excluding Acquisition-Related R&D Charges totaling $3.7
million, operating expenses increased 25.6% from $30.3 million for the year
ended December 31, 1996 to $38.0 million for the year ended December 31, 1997.
This increase resulted principally from the 1997 Acquisitions. In addition,
selling expenses as a percentage of sales increased from 15.6% in the 1996
period to 16.6% in the 1997 period, principally as a result of expansion of the
Company's international sales force, higher advertising and promotion costs, and
somewhat higher product development costs.
Operating Income. As a result of the foregoing, the Company's operating
income decreased 22.1% from $31.6 million for the year ended December 31, 1996
to $24.6 million for the year ended December 31, 1997. Excluding 1997
Acquisition-Related Adjustments, operating income decreased 3.4% from $31.6
million in 1996 to $30.5 million in 1997.
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<PAGE> 19
Other Expense (Income), Net. Other expense (income), net was $(0.4)
million for the year ended December 31, 1997 and $0.1 million for the year ended
December 31, 1996. The Company had lower average levels of debt outstanding
during the 1997 period, and the change in other expense (income) is primarily
due to a decline in net interest expense from 1996 to 1997.
Income Taxes. The Company's effective income tax rate was 42.3% during the
1997 period and 38.6% during the 1996 period. The effective rate was higher than
the federal statutory rate due to state and local income taxes and, in the 1997
period, because a tax benefit cannot be recorded for the Acquisition-Related R&D
Charges totaling $3.7 million. Excluding the effect of Acquisition-Related R&D
Charges, the effective income tax rate for 1997 would have been 37.1%.
Net Income. As a result of the foregoing, the Company's net income
decreased 25.6% from $19.4 million for the year ended December 31, 1996 to $14.4
million for the year ended December 31, 1997. Excluding 1997 Acquisition-Related
Adjustments, net income increased from $19.4 million in 1996 to $19.5 million in
1997.
Fiscal Year Ended December 31, 1996 Compared to Fiscal Year Ended July 31,
1995
Net Sales. Net sales increased 51.8% from $72.0 million for the year ended
July 31, 1995 to $109.3 million for the year ended December 31, 1996. This
increase was primarily the result of inclusion of the operations of Titmus.
Sales of non-prescription eyewear, including sales of products introduced late
in the second quarter of 1996, also contributed to increased sales during 1996.
Net sales were reduced by the effect of the discontinuation of original
equipment manufacture sales of ski goggles and sales of a certain respiratory
product line. Export sales, excluding export sales of Titmus, increased by
approximately 64% from the 1995 period to the 1996 period. Export sales
represented 7.3% of net sales in the 1996 period and 5.8% of net sales in the
1995 period.
Cost of Sales. Cost of sales increased 52.7% from $31.0 million for the
year ended July 31, 1995 to $47.4 million for the year ended December 31, 1996.
The increase was primarily attributable to increased sales volume resulting from
the acquisition of Titmus, which was partially offset by reduced costs
associated with the discontinuation of ski goggle and respiratory products
discussed above.
Gross Profit. Gross profit increased 51.1% from $41.0 million for the year
ended July 31, 1995 to $61.9 million for the year ended December 31, 1996.
Excluding the effect of Acquisition-Related Inventory Adjustments, the Company's
gross margin would have been 56.7 % in the 1996 period and 59.3% in the 1995
period. The Company's gross margin declined from the 1995 period to the 1996
period as a result of including the operations of Titmus, which have lower gross
margins than the combined gross margin of the Company's other subsidiaries. The
decrease in gross margin resulting from the acquisition of Titmus was offset in
part by labor and other cost reductions at other subsidiaries.
Operating Expenses. Operating expenses increased 85.1% from $16.4 million
for the year ended July 31, 1995 to $30.3 million for the year ended December
31, 1996. The increase resulted primarily from the 1995 Acquisitions and to a
lesser extent from additional administrative costs which became necessary as a
result of the Company becoming a public reporting company.
Operating Income. As a result of the foregoing, the Company's operating
income increased 28.5% from $24.6 million for the year ended July 31, 1995 to
$31.6 million for the year ended December 31, 1996.
Other Expense, Net. Other expense, net was $1.3 million for the year ended
July 31, 1995 and $0.1 million for the year ended December 31, 1996. The 1995
period included net interest expense which totaled $1.5 million. Indebtedness of
the Company was repaid in full during April 1996 and therefore net interest
expense during the 1996 period was reduced to $0.4 million.
Minority Interest Share of Income. The minority interest share of income
represented the income attributable to the holder of the one-third minority
interest in Uvex Safety. Subsequent to October 31, 1994, the Company owned the
entire business of Uvex Safety. As a result, no minority interest share of
income has been recorded for any periods after October 31, 1994.
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<PAGE> 20
Income Taxes. The Company's effective income tax rate approximated 39.0%
during both periods, and was higher than the federal statutory rate due
primarily to state and local income taxes.
Net Income. As a result of the foregoing, the Company's net income
increased by 48.4% from $13.1 million for the year ended July 31, 1995 to $19.4
million for the year ended December 31, 1996.
EFFECTS OF INFLATION
Inflation during recent years has been modest and has not had a material
impact upon the results of the Company's operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity historically has been derived from cash flow
provided by operations and, periodically, from bank borrowings utilized to
finance acquisitions of businesses. The Company utilizes EBITDA (earnings before
interest, taxes, depreciation and amortization) as a measure of cash flow
provided by operations. EBITDA increased 57.5% from $19.6 million for the six
months ended June 30, 1997 to $30.8 million for the six months ended June 30,
1998, excluding the Severance Charge in the 1998 period, and excluding
Acquisition-Related Adjustments in both periods. This increase was principally
due to inclusion of the operating results of acquired businesses. EBITDA totaled
$39.2 million for the year ended December 31, 1997 and $39.1 million for the
year ended December 31, 1996, excluding Acquisition-Related Adjustments in the
1997 period.
Excluding trade accounts receivable attributable to the Howard Leight
division, the Company's trade accounts receivable increased $7.9 million from
$16.1 million at December 31, 1997 to $24.0 million at June 30, 1998. This
increase resulted primarily from sales volume during the months prior to June
30, 1998, that was significantly higher than sales volume during the months
prior to December 31, 1997.
Cash used in investing activities totaled $126.5 million for the six months
ended June 30, 1998, and $30.8 million for the six months ended June 30, 1997.
Cash used in investing activities totaled $35.4 million for the year ended
December 31, 1997, and $10.9 million for the year ended December 31, 1996. The
six-month period ended June 30, 1998, includes cash payments for the Leight
Acquisition totaling $120.0 million. Cash payments for the acquisition of
Survivair, totaling $27.4 million, are included in both the six-month period
ended June 30, 1997, and the year ended December 31, 1997. Capital expenditures
totaled $5.4 million for the six months ended June 30, 1998, $2.4 million for
the six months ended June 30, 1997, $6.8 million for the year ended December 31,
1997, and $10.7 million for the year ended December 31, 1996.
In connection with the Biosystems acquisition the Company provided former
shareholders of Biosystems put options covering 578,560 of the shares issued in
connection with that acquisition. The put options may be exercised at any time
through September 30, 1999, at a price equal to approximately $16.38 per share.
If the put options were exercised in full the Company would be required to make
cash payments totaling approximately $9.5 million to repurchase these shares,
and expects that such payment would be funded by bank borrowings.
In February 1998 the Company entered into an agreement with Banque
Nationale de Paris pursuant to which the bank made a term loan to the Company
(the "BNP Loan") in the principal amount of $110.0 million. The BNP Loan
requires quarterly payments at an effective annual rate equal to three month
LIBOR plus 0.5% and requires principal repayments in equal quarterly
installments over seven years. The Company also maintains a $31.0 million
revolving line of credit facility (the "Revolving Facility") with Citizens Bank
of Rhode Island. The Revolving Facility is available to fund acquisitions and
for other general corporate purposes, bears interest at a rate per annum equal
to three month LIBOR plus 0.7% and is due in full on May 31, 2000.
In connection with the Leight Acquisition the Company borrowed a total of
$124.3 million, consisting of the $110.0 million BNP Loan and $14.3 million on
the Revolving Facility. Principal repayments during the six months ended June
30, 1998, totaled $10.9 million, and included repayment of $5.9 million of
indebtedness assumed in connection with the Leight Acquisition. At June 30,
1998, the Company had debt outstanding
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<PAGE> 21
totaling $119.4 million consisting of $106.1 million on the BNP Loan and $13.3
million on the Revolving Facility.
The Company is pursuing a business strategy which includes acquisitions as
an important element. As a result, the Company may incur additional
indebtedness, may be required to negotiate additional credit facilities, or may
issue additional common or preferred stock in order to fund potential future
investments resulting from its acquisition strategy. The Company believes it
would have access to sufficient capital to consummate future acquisitions.
Except for cash requirements to fund acquisitions, the Company believes that its
cash flow provided by operating activities together with unused borrowing
capacity will be sufficient to fund working capital requirements, debt service
requirements and capital expenditures for the foreseeable future.
SEASONALITY
The Company's business has been subject to slight seasonal variations which
the Company has attributed to fluctuations in industrial activity and annual
weather patterns. Historically, net sales from October through December have
been somewhat lower than other periods due to anticipated lower demand in the
more inclement winter months and planned inventory reductions by major
distributors. In addition to seasonality, the Company's business has been
variable period to period due to other factors, including promotional activity
undertaken by the Company in response to competitive pressures, market demand,
production capacity, inventory levels and other considerations.
YEAR 2000 COMPLIANCE
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without consideration
of the impact of the upcoming change in century. If not corrected, many computer
applications could fail or create erroneous results at or before the year 2000.
The Company initiated a comprehensive project in June 1997 to address its year
2000 compliance. The project consists of four phases, including (i) assessment
phase -- identification of areas of non-compliance (based upon a combination of
the Company's own analysis and direct communication with the vendor that
developed and supports the software) and evaluation of risk; (ii) planning
phase -- development of specific steps to correct non-compliance, including a
timetable; (iii) implementation phase -- execution of steps developed during the
planning phase and (iv) testing phase -- conducting tests to validate year 2000
compliance. The project considers both the Company's primary information systems
(software for all financial systems, network software and equipment, personal
computers and incumbent software, etc.) and other applications dependent upon
embedded software (manufacturing equipment, telephone systems, security systems,
etc.).
The Company has completed the assessment and planning phases of its
evaluation of its primary information systems and has identified applications,
principally at its Survivair and Uvex Safety divisions, that are not currently
year 2000 compliant. During 1997, the Company initiated a project to install and
implement common software at all of its business units and signed a license
agreement with J.D. Edwards & Company for such software in September 1997. Full
implementation at the Survivair and Uvex Safety divisions, including a
significant period of pre-testing, is expected to be completed during or prior
to the second quarter of 1999. J.D. Edwards & Company has represented that this
software is year 2000 compliant and that its processes used to achieve year 2000
readiness are certified by the Information Technology Association of America.
The Company believes that, upon full implementation of this software at its
Survivair and Uvex Safety business units within such time frame, all of the
Company's material year 2000 deficiencies will have been corrected. The Company
has incurred costs totalling approximately $1.5 million through June 30, 1998
for implementation of the software at the Survivair and Uvex Safety business
units, and estimates the remaining costs necessary to complete full
implementation to be approximately $1.1 million. Except for the cost of
training, these costs will be capitalized and depreciated over the estimated
useful life of the software. The cost of training is estimated to be $0.2
million and will be expensed as incurred.
Although there can be no assurance that the Company will successfully
complete implementation of the common software at its Survivair and Uvex Safety
business units by dates critical for year 2000 compliance, these projects are
currently progressing in accordance with timetables established by the Company.
Although failure to complete implementation on a timely basis may have material
adverse financial and operational impacts on the Company, the Company believes
such failure is not reasonably likely. The possible effects of
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<PAGE> 22
unsuccessful implementation of this software by Survivair and Uvex Safety
include the following for those business units: (i) an inability to process
transactions, (ii) a temporary inability to order raw materials or (iii) a
temporary inability to timely process orders and billings, and to deliver
finished products to customers.
The assessment and planning phases for other applications with embedded
software is substantially complete. Implementation is ongoing and expected to be
completed by the end of the second quarter of 1999. The cost of modifying or
correcting deficiencies in these applications is currently estimated to be
immaterial and such costs will principally be expensed as incurred.
The Company's business is also dependent upon the systems of third parties.
With the exception of a few significant vendors, the Company believes that year
2000 deficiencies in these systems would not represent a material financial or
business risk to the Company. With regard to these few vendors, the Company is
assessing their year 2000 readiness based upon direct communication with each
such vendor.
The Company believes that its most reasonably likely worst case result
relating to year 2000 would be the failure of certain of its applications with
embedded software, or failure of third party systems on which the Company's
systems rely. Failure of applications with embedded software could result in
temporary disruption to an aspect of the Company's operations, such as
disruption in operation of certain manufacturing equipment. Failure of the
information systems of a vendor could result in the temporary interruption of
supply of material or services to the Company. Although there can be no
assurance that these failures would not have an adverse effect on the Company's
business, the Company believes the effect of such failure would not be material
to its business. The Company has informal contingency plans relating to any such
failure which include reliance upon redundant systems of the Company, short-term
reliance upon manual systems and reliance upon alternate vendors.
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<PAGE> 23
BUSINESS
OVERVIEW
The Company designs, manufactures and sells market-leading products that
are designed to protect the sight, hearing and respiratory systems of workers
against occupational hazards, as well as related instrumentation including
vision screeners, gas monitors and test equipment for self-contained breathing
apparatus. The Company's products, which are marketed under the brand names
UVEX(R), Howard Leight(R), Survivair(R), Pro-Tech(R), Biosystems, Titmus(R),
Lase-R Shield and LaserVision, are sold principally to industrial safety and
fire service distributors and optical laboratories.
The Company's goal is to expand its strong position in the United States
personal protective equipment market and to become a global leader in the
manufacture and sale of safety and security products through selective
acquisitions and internal growth. Since the Company's platform investments in
1993 and 1994 in Uvex Safety, Inc., a leading manufacturer of non-prescription
safety eyewear, the Company has made the following Acquisitions:
Howard Leight. In February 1998, the Company acquired Howard Leight, a
manufacturer of hearing protection products, including disposable, reusable
and banded ear plugs, and ear muffs.
Biosystems. In September 1997, the Company acquired Biosystems, a
manufacturer of gas monitors and test equipment for self-contained
breathing apparatus.
Lase-R Shield. In June 1997, the Company acquired Lase-R Shield, a
manufacturer of laser protective eyewear.
Survivair. In May 1997, the Company acquired Survivair, a manufacturer
of respiratory system protection products.
Titmus. In September 1995, the Company acquired Titmus, a manufacturer
of frames for prescription safety eyewear and vision screening equipment.
Pro-Tech. In March 1995, the Company acquired Pro-Tech, a manufacturer
of respiratory system protection products.
The Acquisitions added businesses with leadership positions in the hearing
and respiratory system protection markets, while also significantly expanding
the Company's safety eyewear business. The Acquisitions increased net sales from
$72.0 million in fiscal 1995 to $130.9 million in 1997 and $108.4 million for
the first six months of 1998 and, on a pro forma basis, to $189.9 million in
1997 and $115.7 million for the first six months of 1998.
The Company believes that industrial safety distributors, its primary
distribution channel for personal protective equipment, increasingly favor
suppliers that provide a broad range of market-leading products. Accordingly, a
key element of the Company's strategy is to acquire businesses that add new
categories of market-leading products and thereby increase its share of its
distributors' product offerings. The Company's market shares rank among the top
five competitors in all of its major product categories; it is number one in
prescription, non-prescription and laser safety eyewear categories and number
two in disposable and reusable ear plugs and ear muffs.
The Company believes that the safety and security equipment industry
remains highly fragmented, creating opportunities for additional acquisitions
and consolidation. The Company plans to continue to diversify into other types
of safety products, as well as security equipment, that protect workers or
monitor the safety of the work environment. In addition, the Company will
continue to strengthen its existing product lines through selective acquisitions
and internal development of new products. The Company believes that its existing
distribution networks are well suited for selling additional product offerings.
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<PAGE> 24
PERSONAL PROTECTIVE EQUIPMENT MARKET
Personal protective equipment encompasses all categories of equipment and
clothing worn for the purpose of protecting against bodily injury, including
safety glasses and goggles, ear plugs and ear muffs, air purifying and supplied
air respirators, hard hats, gloves, safety clothing, safety shoes and fall
protection equipment. Products are generally categorized according to the senses
or body parts protected (i.e., sight, hearing, respiratory system, face, head,
body/legs, hands and feet) or their ergonomic effect. Personal protective
equipment is purchased by industrial users primarily from industrial safety and
fire service distributors and, to a lesser extent, from manufacturers. According
to the Frost & Sullivan Report, sales in the United States industrial market of
personal protective equipment that protects the sight, hearing and respiratory
functions of workers were estimated to be approximately $1.1 billion in 1997
with estimated annual growth projected at approximately 3.8% through the year
2003. Within this market, eye protection products accounted for approximately
$266.0 million, air purifying respirators and supplied air respirators accounted
for approximately $598.0 million and disposable, reusable and banded ear plugs,
and ear muffs represented approximately $197.8 million of such sales.
Demand for personal protective equipment is driven by a number of factors,
including regulatory requirements and the desire to contain direct and indirect
costs related to on the job injuries (including lost time, workers'
compensation, training of new workers and insurance premiums). Demand for
non-prescription eyewear, filters and cartridges for air purifying respirators
and disposable and reusable ear plugs is also driven by replacement needs. The
Company estimates that certain of its products are replaced by regular users on
an annual basis, as follows: non-prescription protective eyewear, six pairs;
aftermarket filters and cartridges for air purifying respirators, five pairs;
disposable ear plugs, 250 pairs; and reusable ear plugs, 50 pairs.
Product users prefer comfortable and fashionable personal protective
equipment. Therefore, the Company believes that industrial purchasers will often
select functional products which combine the characteristics of comfort and
fashion whenever available because product users are more likely to wear such
products regularly, thereby increasing regulatory compliance and reducing the
risk of injury.
In addition, the Company has observed that industrial safety distributors
continue to consolidate their sources of supply and to focus attention on
products with strong brand names while reducing the number of duplicative
products in their lines. The Company believes that such a trend toward
consolidation creates an opportunity to enhance sales of existing and new
products as a result of adding a wide range of market-leading branded products,
and increase the Company's importance to industrial safety and fire service
distributors.
Other markets for personal protective equipment include exports and the
consumer do-it-yourself retail market. During the past two years, the Company
has experienced an increase in demand for personal protective equipment in
connection with emerging industrial economies, including Mexico and certain
South American countries. In addition, the Company believes that there is a
lower utilization rate of safety equipment in Europe and other industrial
regions compared to that in the United States which provides attractive growth
opportunities for the Company's products. In the United States market, retail
home centers and mass merchandisers are offering a greater variety of personal
protective equipment products for home safety applications.
STRATEGY
The Company's goal is to expand its strong position in the United States
personal protective equipment market and to become a global leader in the
manufacture and sale of safety and security products through selective
acquisitions and internal growth. The Company is pursuing a business strategy to
achieve these goals which includes the following principal elements:
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<PAGE> 25
Broaden Product Categories Through Acquisitions. The Company's acquisition
strategy represents a continuation of the strategy which has made it a leading
consolidator in the personal protective equipment industry. The Company plans to
continue its acquisition strategy by:
- Enhancing growth by continuing to acquire companies with products that
increase the number of categories of personal protective equipment the
Company offers and extend the product lines within the Company's existing
product categories;
- Continuing to diversify into other types of safety products, as well as
security equipment, that it believes are well suited for sale through its
existing distribution networks and that protect workers or monitor the
safety of the work environment; and
- Focusing primarily on opportunities in which the target company has high
brand recognition, a reputation for quality products, compatible channels
of distribution, strong end-user acceptance and significant market share.
Internal Growth Based on Quality, Reputation and Brand Loyalty. A number
of the Company's personal protective equipment products and brands have a high
degree of market acceptance and an excellent reputation for quality, comfort and
style among industrial purchasers and product users. The Company intends to
enhance its current brand loyalty and market position by:
- Continuing to introduce innovative new products and encouraging
industrial users to upgrade to, or replace competing products with, the
Company's new products;
- Designing innovative disposable and reusable products as well as
products with unique replacement parts; and
- Continuing to build brand awareness and stimulate demand for all of its
product lines through direct communication with industrial purchasers.
Continue to Improve Operating Efficiencies. The Company intends to
continue to improve operating efficiencies by:
- Tailoring its improvement programs to the type of manufacturing process
most suitable for each product line, focusing on automation whenever
possible and cost justified;
- Continuing to integrate its marketing and sales teams to enhance
cross-selling opportunities across product lines in order to generate
and pursue more sales leads in every product line; and
- Consolidating divisional and subsidiary administrative and accounting
functions and implementing common personnel policies and procedures,
employee benefits and information systems.
Explore New Market Opportunities. The Company has an active program to
develop new market opportunities beyond the United States personal protective
equipment market. Elements of this program include:
- Pursuing opportunities to increase exports to markets outside of the
Company's traditional United States industrial market -- exports
represented 14.9% of net sales during the first six months of 1998,
compared to 10.8% in the first six months of 1997; and
- Increasing sales in the do-it-yourself retail markets for home safety
products.
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<PAGE> 26
THE ACQUISITIONS
Following the strategy described above, the Company has completed the
following acquisitions which have resulted in its progressing from a single
product company to a diversified manufacturer of industrial safety products. See
"Strategy -- Broaden Product Categories Through Acquisition."
<TABLE>
<CAPTION>
COMPANY DATE PRODUCTS
------- ---- --------
<S> <C> <C>
Howard S. Leight & Associates, Inc. February - Disposable, reusable and banded ear
1998 plugs, and ear muffs
Biosystems, Inc. September - Gas monitors and detectors
1997 - Test equipment for self-contained
breathing apparatus
Lase-R Shield, Inc. June 1997 - Laser protective eyewear
Survivair, Inc. May 1997 - Self-contained breathing apparatus
used in industrial and U.S. municipal
and volunteer fire service markets
- Air purifying respirators
Titmus Optical, Inc. September - Safety frames for prescription
1995 protective eyewear
- Vision screening equipment
Pro-Tech Respirators, Inc. March 1995 - Air purifying respirators
Uvex Safety, Inc. 1993 and - Platform company
1994 - Non-prescription protective eyewear,
including spectacles, goggles and
laser protective eyewear
</TABLE>
PRODUCTS
Protective Eyewear and Vision Screening Equipment
The Company sells a wide range of protective eyewear products including:
(i) UVEX(R) brand spectacles and goggles with polycarbonate lenses protected by
proprietary coatings which provide superior resistance to scratches and fogging;
(ii) application specific protective eyewear including laser protective eyewear
under the UVEX(R), LaserVision and Lase-R Shield brands, and (iii) Titmus(R)
brand metal and plastic safety frames which accommodate corrective lenses and,
when completed with lenses, meet the standards for protective eyewear. The
Company also manufactures and sells Titmus(R) brand vision screening equipment
which is used to determine whether an eye exam should be administered for
prescribing corrective lenses. In 1997, the Company was ranked first in market
share in non-prescription safety glasses, laser protective eyewear and safety
frames for prescription protective eyewear, and third in market share in safety
goggles.
Hearing Protection
The Company sells a full range of Howard Leight(R) brand hearing protection
products, which reduce the risk of long-term hearing loss from exposure to
excessive noise levels. Products include disposable, reusable and banded ear
plugs, and ear muffs. Additionally, the Company sells Howard Leight(R) brand ear
plug dispensers for easy distribution of hearing protection products to workers.
In 1997, the Company was ranked second in market share in disposable and
reusable ear plugs and ear muffs.
Air Purifying Respirators and Supplied Air Respirators
The Company sells a complete line of reusable half mask and full-face mask
air purifying respirators under the Survivair(R) and Pro-Tech(R) brand names, as
well as hazard specific cartridges and filters for removing various contaminants
from the air. Self-contained breathing apparatus for industrial and fire
protection applications, as well as air line respirators are also sold by the
Company under the Survivair(R) brand name.
25
<PAGE> 27
Supplied-air respirators provide an independent source of breathable air for
workers in atmospheres immediately dangerous to their life or health.
Gas Detectors and Test Equipment for Self-Contained Breathing Apparatus
The Company sells Biosystems brand gas monitors and detectors, which sense
and report the levels of certain gases in the atmosphere of a work site and
identify hazardous conditions. The Company is the only U.S. manufacturer of
self-contained breathing apparatus test-benches, which are computer controlled,
automatic test-systems used to dynamically evaluate the proper performance of
self-contained breathing apparatus and are sold under the PosiChek name.
PRODUCT DEVELOPMENT AND INTRODUCTION
The Company is continuously engaged in the development of new products.
Within the past twelve months, the Company has introduced several new products,
including: (i) the UVEX(R) lines of astrospec 3000 non-prescription protective
eyewear with the colors and logos of National Football League teams, bandit,
bandido and spitfire safety eyewear, rare earth laser eyewear and uvextreme(R)
AF -- anti-fog coating for non-prescription eyewear; (ii) the Survivair 7000
series air purifying respirator line, Panther self-contained breathing apparatus
and ADAM digital gauge and electronic alarm for self-contained breathing
apparatus; (iii) Titmus Titanium Collection frames for prescription safety
eyewear; (iv) the Howard Leight Multi-Max ear plugs and QB1HYG banded ear plugs;
and (v) the Biosystems PhD Lite hand-held confined space gas detector and ExPlus
single sensor combustible gas detector.
In addition to internally developed new products, the Company has the
opportunity to evaluate products which are produced and sold in other markets by
the Bacou Group and Uvex Germany. If such products appear promising for the
Company's geographic markets, the Company considers adapting those products and
importing sufficient quantities to conduct market tests. Such market tests
enable the Company to determine the likely success of the specific product
without the commitment of significant capital. If the market tests prove to be
successful, the products may be imported or production capacity developed in the
United States.
With respect to the evaluation of new protective eyewear products developed
by Uvex Germany, all of Uvex Germany's new developments must be disclosed to
Uvex Safety, and Uvex Safety has the exclusive right to use such developments in
the personal protective equipment markets of North, Central and South America.
Such right is part of an agreement between Uvex Safety and Uvex Germany which
creates reciprocal obligations between the parties and provides a framework for
cooperation and exchanges of information regarding product development,
intellectual property rights, research and development, manufacturing processes
and lens coating development. Pursuant to the agreement, Uvex Safety is
obligated to disclose to Uvex Germany Uvex Safety's new protective eyewear
product developments and Uvex Germany has the exclusive right to use such
developments everywhere in the world except in North, Central and South America.
See "Risk Factors -- Dependence upon New Product Introductions" and "-- Market
Limitations on UVEX(R) Brands."
MARKETING, SALES AND DISTRIBUTION
The Company's products are sold principally through industrial safety and
fire service distributors. Additional channels of distribution differ by product
line. Laser protective eyewear products are sold in markets serving medicine,
industry, research laboratories and universities, and worldwide by laser
manufacturers as accessories with their products. Optical laboratories and
optical retailers are the main channels for distribution of the Company's frames
for prescription protective eyewear. Fire service distributors sell Survivair(R)
brand self-contained breathing apparatus and Biosystems brand gas detectors and
respiratory device test equipment. UVEX(R), Howard Leight(R), and Pro-Tech(R)
brand products are also marketed in the do-it-yourself retail markets for home
safety products. Howard Leight products are also sold in the sport shooting
market. All of the Company's products are marketed internationally, with UVEX(R)
brand products contractually limited to sales in North, South and Central
America and the export of the Company's products into France restricted under an
agreement with the Bacou Group. See "Risk Factors -- Significant Relationships."
26
<PAGE> 28
MANUFACTURING OPERATIONS
The Company's diverse product lines utilize different manufacturing
processes. Accordingly, the Company tailors its improvement programs to the type
of manufacturing process most suitable for each product line, focusing on
automation whenever possible and cost justified. The Company's Uvex
Manufacturing, Howard Leight, Survivair, Biosystems and Titmus manufacturing
facilities are ISO 9001 certified.
Eye Protection Products
The Company uses a highly automated injection molding process to
manufacture the frames and lenses of its UVEX(R) brand non-prescription
protective eyewear. Frame components are molded in nylon, propionate and
polyvinylchloride, and the lenses are molded from polycarbonate resin pellets.
Manufacturing and assembling operations for the Company's astrospec family of
products are linked by a work-in-process inventory management system. Parts are
moved from this system to a highly automated, integrated assembly and packaging
system for the Company's high volume astrospec products. The Company
manufactures Titmus(R) brand frames for prescription protective eyewear in both
metal and plastic. Metal products are made from wire in a process that includes
cutting, bending, shaping, soldering, plating and colorizing. Plastic frames are
produced by a computer controlled milling operation. Vision screeners are
assembled using component parts manufactured by outside vendors.
Disposable, Reusable and Banded Ear Plugs, and Ear Muffs
The Company manufactures its ear plug products using proprietary, high
volume automated machinery and equipment which molds polyurethane foam and
polyvinylchloride into ear plugs. Injection molding is used by the Company to
produce head bands for its banded ear plug products and ear muff bodies. All
products are assembled by the Company, except for two product lines of completed
ear muffs which are manufactured by outside vendors.
Air Purifying Respirators and Supplied Air Respirators
The Company manufactures respirator bodies, cartridge and filter bodies,
and certain other parts using injection and compression molding techniques. The
Company produces most of its metal regulator parts using computer assisted
machining operations. Finished respirators are assembled using these
manufactured parts and components manufactured by outside vendors. Cartridges
and filters for air purifying respirators are filled using high-speed, automated
folding, filling and sealing machines.
Gas Detectors and Test Equipment for Self-Contained Breathing Apparatus
The Company's gas detection products and test equipment for self-contained
breathing apparatus are assembled using component parts manufactured by outside
vendors. Component parts are requisitioned using a just-in-time approach, and
material tracking is based on a work-in-process inventory management system and
electronically initiated inventory replenishment. The Company utilizes work
cells for assembly of these products.
RAW MATERIALS
Although the Company relies primarily on single sources for the supply of
several raw materials, all of the Company's raw materials are currently readily
available. The Company currently satisfies substantially all of its requirements
for (i) polycarbonate resin (the primary raw material used in the production of
the Company's non-prescription optical lenses), (ii) polyurethane pre-polymer
(the primary raw material for production of foam hearing protection products)
and (iii) certain sensors (the primary component of gas detection equipment)
through single sources of supply. See "Risk Factors -- Reliance on Single
Sources of Supply" and "-- Significant Relationships."
PRINCIPAL CUSTOMERS
The Company had no individual customers that accounted for 10.0% or more of
consolidated net sales during the six months ended June 30, 1998 or either of
the fiscal years ending December 31, 1997 or 1996.
27
<PAGE> 29
COMPETITION
The personal protective equipment industry is highly fragmented, with
industry participants ranging in size from small companies focusing on single
types of personal protective equipment, to a few large multinational
corporations which manufacture and supply many types of personal protective
equipment. The Company believes that participants in the personal protective
equipment industry compete primarily on the basis of product characteristics
(such as design, style, fashion and functional performance), brand name
recognition, service and price.
The Company's astrospec family of eyewear products has enjoyed significant
success resulting in many competitive copies produced overseas, imported to the
United States and sold at lower price points than comparable UVEX(R) brand
products. Although the Company has taken steps to introduce new, lower-priced
products to compete in that market segment, astrospec copies may continue to
enjoy success in the marketplace against the astrospec family of eyewear
products. See "Risk Factors -- Competition."
To maintain its market position, the Company must be competitive in the
area of brand image, distribution, design, style, customer service, quality and
price. Individual competitors have advantages and strength in different sectors
of the industry, in different products and in different areas, including
manufacturing and distribution systems, geographic market presence, customer
service and support, breadth of applications, delivery time and price. There can
be no assurance that the Company will be able to compete successfully against
current and future competitors or that the competitive pressures faced by the
Company will not adversely affect its financial condition or operations.
INTELLECTUAL PROPERTY
It is the Company's policy to protect its intellectual property through a
range of measures, including trademarks, patents and confidentiality agreements.
These rights are protected through the filing of applications for and
registrations of trademarks and patents whenever such filings would provide
greater protection than maintaining such information as trade secrets.
The Company has the right to use the trademark UVEX(R) in connection with
protective eyewear and other safety products in all countries in North, Central
and South America. Uvex Germany and its affiliates have the right to use the
UVEX(R) name in connection with sports products throughout the world and
personal protective equipment in countries outside of North, Central and South
America. Pursuant to its agreement with Uvex Germany, the Company may sell
personal protective equipment under the UVEX(R) brand name only in North,
Central and South America. The agreement also prohibits the Company from selling
sports products, such as sunglasses or protective eyewear for sport activities,
under the UVEX(R) brand name regardless of geographic area.
The Company also owns a number of other patents and trademarks as a result
of its acquisitions of Survivair and Howard Leight. In particular, the
Survivair(R) name is registered in the United States, Canada and Mexico and
thirteen other countries in Europe and South America. The "Leight(R)" name and
numerous other product names associated with Howard Leight are registered in the
United States. The Company's Titmus subsidiary owns numerous trademarks under
the Titmus(R) name for many of its products in the United States and throughout
the world.
The Company also relies upon unpatented trade secrets for the protection of
certain intellectual property rights. The Company protects its trade secrets by
requiring certain of its employees, consultants and other suppliers, customers,
agents and advisors to execute confidentiality agreements upon the commencement
of employment or other relationships with the Company. These agreements provide
that all confidential information developed by or made known to the individual
or entity during the course of the relationship with the Company is to be kept
confidential and not disclosed to third parties except in certain circumstances.
There can be no assurance, however, that these agreements will provide
meaningful protection for the Company's proprietary information or adequate
remedies in the event of the unauthorized use or disclosure of such information.
In addition, no assurance can be given that others will not independently
develop substantially equivalent proprietary information and technologies,
otherwise gain access to the Company's
28
<PAGE> 30
trade secrets or disclose such technology or that the Company can meaningfully
protect its rights to unpatented trade secrets. Further, there can be no
assurance that infringement or invalidity claims will not be asserted against
the Company in the future. The costs of defending such claims, or an unfavorable
determination with respect to litigation based on such claims, could have a
material adverse effect on the Company's business and financial condition. See
"Risk Factors -- Limited Protection of Intellectual Property."
EMPLOYEES
At June 30, 1998, the Company employed 1,839 people on a full-time basis,
of which approximately 250 employees comprise a bargaining unit at Titmus
Optical that is represented by a labor union under contract through September
13, 2000. The Company considers its relationship with its employees to be good
and the Company has not experienced any work stoppages.
GOVERNMENT REGULATION AND INDUSTRIAL STANDARDS
Government regulation mandating the use of personal protective equipment
for certain job classifications and work site environments is the most
significant factor in the creation and continuation of demand for personal
protective equipment in the United States. The Occupational Safety and Health
Administration ("OSHA") generally regulates the workplace environments in the
United States in which personal protective equipment must be worn and specifies
the standards which such equipment must meet. Other United States governmental
agencies further regulate the use of personal protective equipment and issue
standards concerning the design and functionality of such equipment. The Company
believes that its products are in compliance in all material respects with the
regulations and standards of these agencies.
The United States and Canadian regulatory agencies each mandate that the
Company's products meet performance standards established by private groups,
such as the American National Standards Institute ("ANSI") and the Canadian
Standards Association ("CSA"), respectively. The Company's eyewear products are
subject to the latest series of applicable standards, which currently include
ANSI Industrial Standard Z87.1-1989 and CSA Z94.3-1992. These standards require
that protective eyewear be tested for optical performance, high velocity impact,
high mass impact and other integral product performance features. The Company
maintains and operates on-site testing labs at its Smithfield, Rhode Island and
Petersburg, Virginia facilities which are equipped to perform necessary tests.
The Company's hearing protection products are subject to ANSI Industrial
Standard S12.6-1984. The Company's facility in San Diego, California includes a
certified audiometric testing lab which exceeds standards and procedures
outlined by regulatory requirements and the Audiology Society of America.
OSHA specifies that respiratory protective equipment must meet
application-specific performance standards which are set by the National
Institute for Occupational Safety and Health. In addition, many respiratory
products require approval by the National Fire Protection Association. In order
to achieve regulatory approval, the Company maintains and operates an on-site
lab at its Santa Ana, California facility which is equipped to conduct most
necessary tests.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local environmental laws,
regulations and ordinances that (i) govern activities or operations that may
have adverse environmental effects (such as emissions to air, discharges to
water, and the generation, handling, storage and disposal of solid and hazardous
wastes) or (ii) impose liability for the costs of cleanup or other remediation
of contaminated property, including damages from spills, disposals or other
releases of hazardous substances or wastes, in certain circumstances without
regard to fault. The Company's manufacturing operations routinely involve the
handling of chemicals and wastes, some of which are or may become regulated as
hazardous substances. The Company has not incurred, and does not expect to
incur, any significant expenditures or liabilities for environmental matters. As
a result, the Company believes its obligations to comply with environmental
regulations will not have a material adverse effect on its business or financial
condition.
29
<PAGE> 31
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of the Common Stock as of the date of this Prospectus and
as adjusted to reflect the sale of the Common Stock being offered hereby, by
each Selling Stockholder. Unless otherwise indicated, each has sole voting and
investment power with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
NUMBER OF
SHARES BENEFICIALLY NUMBER OF SHARES HELD AFTER OFFERING
OWNED PRIOR TO SHARES TO BE --------------------------
NAME OFFERING OFFERED NUMBER PERCENTAGE
- ---- ------------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Bacou S.A............................... 12,612,600 2,200,000(1) 10,412,600(1) 59.2%(1)
John F. Burt, Jr.(2).................... 278,060 10,000 268,060 1.5
Walter Stepan(3)........................ 360,360 90,000 270,360 1.5
</TABLE>
- ---------------
(1) Does not include 345,000 shares subject to the underwriters' over-allotment
option which, if exercised, will be sold by Bacou S.A.
(2) Mr. Burt currently serves as President of the Company's Biosystems division.
(3) Mr. Stepan currently serves as Vice Chairman, President and Chief Executive
Officer of the Company; Chairman and Chief Executive Officer of Bacou
Safety; Chairman, President and Chief Executive Officer of Uvex
Manufacturing; and Chairman of Titmus.
30
<PAGE> 32
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters") through their representatives, BT
Alex. Brown Incorporated, A.G. Edwards & Sons, Inc. and PaineWebber Incorporated
(together, the "Representatives") have severally agreed to purchase from the
Selling Stockholders, the following respective numbers of shares of Common Stock
at the public offering price less the underwriting discounts and commissions
shown on the cover page of this Prospectus.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
UNDERWRITERS ---------
<S> <C>
BT Alex. Brown Incorporated.................................
A.G. Edwards & Sons, Inc....................................
PaineWebber Incorporated....................................
---------
Total............................................. 2,300,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all shares of Common Stock offered hereby if any of
such shares are purchased.
The Company and the Selling Stockholders have been advised by the
Representatives that the Underwriters propose to offer the shares of Common
Stock to the public at the public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per share to certain other dealers.
After commencement of the public offering, the public offering price and other
selling terms may be changed by the Representatives.
The Principal Stockholder has granted the Underwriters an option,
exercisable not later than 30 days after the date of this Prospectus, to
purchase up to 345,000 additional shares of Common Stock at the public offering
price less the underwriting discounts and commissions set forth on the cover
page of the Prospectus. To the extent that the Underwriters exercise such
option, each of the Underwriters will have a firm commitment to purchase
approximately the same percentage thereof that the number of shares of Common
Stock to be purchased by it shown in the above table bears to the initial
commitment of the Underwriters, as indicated in the preceding table, and the
Principal Stockholder will be obligated, pursuant to such option, to sell such
shares to the Underwriters. The Underwriters may exercise such option only to
cover over-allotments made in connection with the sale of the shares of Common
Stock offered pursuant to the Offering. If purchased, the Underwriters will
offer such additional shares on the same terms as those on which the shares are
being offered in the Offering.
To facilitate this Offering of the Common Stock, the Underwriters may
engage in transactions that stabilize, maintain or otherwise affect the market
price of the Common Stock. Specifically, the Underwriters may over-allot shares
of the Common Stock in connection with this Offering, thereby creating a short
position in the Underwriters' syndicate account. Additionally, to cover such
over-allotments or to stabilize the market price of the Common Stock, the
Underwriters may bid for, and purchase, shares of Common Stock in the open
market. Any of these activities may maintain the market price of the Common
Stock at a level above that which might otherwise prevail in the open market.
The Underwriters are not required to engage in these activities, and, if
commenced, any such activities may be discontinued at any time. The
Representatives, on behalf of the Underwriters, also may reclaim selling
concessions allowed to an Underwriter or dealer if the syndicate repurchases
shares of Common Stock distributed by that Underwriter or dealer.
The Underwriting Agreement contains covenants of indemnity and contribution
among the Underwriters, the Company and the Selling Stockholders regarding
certain liabilities, including liabilities under the Securities Act of 1933 (the
"Securities Act").
The Company, its directors and executive officers, and the Selling
Stockholders have agreed not to offer, sell or otherwise dispose of any shares
of Common Stock, except upon the exercise of currently outstanding stock
options, for a period of 120 days from the date of this Prospectus without the
prior written consent of BT Alex. Brown Incorporated.
31
<PAGE> 33
The Representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm sales to any accounts over which they
exercise discretionary authority.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby have been passed
upon for the Company by Edwards & Angell, LLP, Providence, Rhode Island. Willkie
Farr & Gallagher, New York, New York is acting as counsel for the Underwriters
in connection with certain legal matters relating to the shares of Common Stock
offered hereby.
EXPERTS
The consolidated financial statements and schedule of the Company as of
December 31, 1996 and December 31, 1997 and for the fiscal year ended July 31,
1995, for the five months ended December 31, 1995 and for the fiscal years ended
December 31, 1996 and 1997 have been incorporated by reference herein in
reliance upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, given on the authority of said firm as experts in accounting and
auditing.
The consolidated financial statements of Howard Leight and subsidiaries as
of December 31, 1997 and 1996 and for each of the three years in the period
ended December 31, 1997, incorporated in this Prospectus by reference to the
audited historical financial statements included in the Company's Form 8-K/A
dated April 15, 1998 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The consolidated financial statements of Comasec and subsidiary as of and
for the year ended December 31, 1996 incorporated in this Prospectus by
reference to the audited historical financial statements included in the
Company's Form 8-K/A dated August 14, 1997 have been so incorporated in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Proxy statements, reports
and other information concerning the Company can be inspected and copied at the
Commission's office at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and the Commission's Regional Offices in New York (Suite
1300, Seven World Trade Center, New York, New York 10048) and Chicago
(Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661), and copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates or by accessing the Commission's World Wide Web site
at http://www.sec.gov. The Common Stock is listed on the NYSE. Reports, proxy
material, and other information concerning the Company also may be inspected at
the offices of NYSE, 20 Broad Street, New York, New York 10005. This Prospectus
does not contain all the information set forth in the Registration Statement and
Exhibits thereto which the Company has filed with the Commission under the
Securities Act, which may be obtained from the Public Reference Section of the
Commission at its principal office at 450 Fifth Street, N.W., Washington, D.C.
20549, upon payment of the prescribed fees, and to which reference is hereby
made.
32
<PAGE> 34
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents and information filed with the Commission by the
Company are incorporated by reference in this Prospectus:
(a) Annual Report on Form 10-K for the year ended December 31, 1997;
(b) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998
and June 30, 1998;
(c) Current Reports on Form 8-K dated February 27, 1998 (as amended by a
Form 8-K/A filed April 15, 1998), June 16, 1998 and August 5, 1998;
(d) Exhibit 99(b) of the Company's Current Report on Form 8-K/A filed
August 14, 1997 (amending the Company's Current Report on Form 8-K dated June
16, 1997); and
(e) The description of the Common Stock contained in a Registration
Statement on Form 8-A dated July 16, 1998, and any amendment or report filed for
the purpose of updating such description.
Such incorporation by reference shall not be deemed to specifically
incorporate by reference the information referred to in Item 402(a)(8) of
Regulation S-K.
All documents filed with the Commission by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to this termination of the Offering are incorporated herein
by reference and such documents shall be deemed to be a part hereof from the
date of filing of such documents. Any statement contained in this Prospectus or
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A COPY OF
THIS PROSPECTUS HAS BEEN DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH
PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS REFERRED TO ABOVE WHICH HAVE BEEN
OR MAY BE INCORPORATED BY REFERENCE HEREIN (OTHER THAN EXHIBITS TO SUCH
DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE IN
SUCH DOCUMENTS). WRITTEN REQUESTS SHOULD BE MAILED TO GENERAL COUNSEL, BACOU
USA, INC., 10 THURBER BOULEVARD, SMITHFIELD, RI 02917. TELEPHONE REQUESTS MAY BE
DIRECTED TO (401) 233-0333.
33
<PAGE> 35
[BACOU USA LOGO]
MARKET LEADING BRANDS
<TABLE>
<S> <C>
Uvex [photo of non-prescription protective eyewear and
Non-prescription protective eyewear lessens the risk safety goggles]
of eye injury.
Goggles provide added benefits, including splash
protection.
Uvex LaserVision/Lase-R Shield
[photo of laser protective eyewear] Laser protective eyewear utilizes sophisticated
filters to block the harmful wavelengths of laser
light for scientists, surgeons, and other laser
users.
Titmus [photo of frames for prescription protective eyewear]
Frames for prescription protective eyewear
accommodate corrective lenses and, when completed
with lenses, meet the standards for protective
eyewear.
[photo of air purifying and supplied air Survivair/Pro-Tech
respirators] Air purifying respirators use hazard specific filters
and cartridges to remove vapors, particulates, and
other contaminants from the air.
Supplied air respirators provide an independent
source of breathable air for workers in atmospheres
immediately dangerous to their life or health.
Biosystems [photo of gas detector and monitor]
Gas detectors and monitors sense the levels of
certain gases in the atmosphere of a work site and
identify hazardous conditions.
[photo of earplugs and ear muffs] Howard Leight Industries
Ear plugs and ear muffs reduce the risk of long-term
hearing loss from exposure to excessive noise levels.
</TABLE>
<PAGE> 36
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
---------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Price Range of Common Stock........... 11
Dividend Policy....................... 11
Capitalization........................ 12
Selected Consolidated Historical and
Pro Forma Financial Information..... 13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 14
Business.............................. 22
Selling Stockholders.................. 30
Underwriting.......................... 31
Legal Matters......................... 32
Experts............................... 32
Available Information................. 32
Incorporation of Certain Documents By
Reference........................... 33
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
2,300,000 SHARES
[BACOU LOGO]
COMMON STOCK
---------------------
PROSPECTUS
---------------------
BT ALEXS BROWN
A.G. EDWARDS & SONS, INC.
PAINEWEBBER INCORPORATED
, 1998
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 37
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses (other than underwriting
discounts and commissions) expected to be incurred in connection with the
offerings described in this Registration Statement. All of such expenses of the
offerings will be paid by the Company. All amounts are estimated except the
registration and NASD fees.
<TABLE>
<S> <C>
Registration Fee............................................ $ 17,385
NASD Fee.................................................... 6,393
Printing Costs.............................................. 115,000
Accounting Fees and Expenses................................ 80,000
Legal Fees and Expenses..................................... *
Miscellaneous...............................................
--------
Total............................................. $ *
========
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law, as amended, provides
in regard to indemnification of directors and officers as follows:
"145. INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE. -- (a) A corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
II-1
<PAGE> 38
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative or investigative action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the corporation as
authorized in this section. Such expenses (including attorneys' fees) incurred
by other employees and agents may be so paid upon such terms and conditions, if
any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a
II-2
<PAGE> 39
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees)."
The Company's bylaws provide that officers and directors of the Company
shall be indemnified to the full extent permitted under subsections (a) through
(e) of Section 145 of Title 8 of the Delaware General Corporation Law.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <C> <S>
1 -- Form of Underwriting Agreement(1)
2.1 -- Stock Purchase Agreement dated as of April 14, 1997 among
Bacou S.A. and Francis Berend, Pierre Alain Berend, Philippe
Berend, Pascal Berend and the other sellers parties thereto
(incorporated by reference to Exhibit 2(a) of the Company's
Form 8-K filed May 12, 1997)
2.2 -- Agreement dated April 14, 1997 between Bacou S.A. and Bacou
USA, Inc. (incorporated by reference to Exhibit 2(b) of the
Company's Form 8-K filed May 12, 1997)
2.3 -- First Amendment to Stock Purchase Agreement dated May 30,
1997 (incorporated by reference to Exhibit 2(c) of the
Company's Form 8-K filed June 16, 1997)
2.4 -- Stock Redemption Agreement dated May 30, 1997 between
Comasec International, S.A. and Pro-Tech Respirators, Inc.
(incorporated by reference to Exhibit 2(d) of the Company's
Form 8-K filed June 16, 1997)
2.5 -- Agreement and Plan of Merger dated as of September 30, 1997
by and among Bacou USA, Inc., ISH Transaction, Inc.,
Biosystems, Inc. and the Shareholders of Biosystems, Inc.
(incorporated by reference to Exhibit 2(a) of the Company's
Form 8-K filed October 15, 1997)
2.6 -- Asset Purchase Agreement dated December 31, 1997 between
Bacou USA Safety, Inc. and Howard S. Leight & Associates,
Inc. (d/b/a Howard Leight Industries) (incorporated by
reference to Exhibit 2(a) of the Company's Form 8-K filed on
March 13, 1998)
2.7 -- Letter Agreement by and between Howard S. Leight and Bacou
USA, Inc. (incorporated by reference to Exhibit 2(b) of the
Company's Form 8-K filed on March 13, 1998)
2.8 -- Letter Agreement by and among Howard S. Leight, Bacou S.A.
and Engineering Bacou S.A. (incorporated by reference to
Exhibit 2 (c) of the Company's Form 8-K filed on March 13,
1998)
2.9 -- First Amendment to Asset Purchase Agreement dated February
27, 1998 (incorporated by reference to Exhibit 2(d) of the
Company's Form 8-K filed on March 13, 1998)
2.10 -- Stock Purchase Agreement dated February 27, 1998 among Bacou
USA Safety, Inc., Howard S. Leight & Associates, Inc. (d/b/a
Howard Leight Industries), Howard S. Leight and John Dean
(incorporated by reference to Exhibit 2(e) of the Company's
Form 8-K filed on March 13, 1998)
2.11 -- Stock Purchase Agreement dated February 27, 1998 among Bacou
USA Safety, Inc., Howard S. Leight & Associates, Inc. (d/b/a
Howard Leight Industries) and Howard S. Leight (incorporated
by reference to Exhibit 2(f) of the Company's Form 8-K filed
on March 13, 1998)
3.1 -- Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3(a) of the Company's
Registration Statement filed on Form S-1 (Commission File
No. 333-00470) (the "Company's Registration Statement"))
3.2 -- By-Laws (incorporated by reference to Exhibit 3(b) of the
Company's Registration Statement)
5 -- Opinion of Edwards & Angell, LLP(2)
</TABLE>
II-3
<PAGE> 40
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <C> <S>
11 -- Statement re: Computation of Per Share Earnings
(incorporated by reference to Exhibit 11 of the Company's
Annual Report on Form 10-K for the year ended December 31,
1997 and Exhibit 11 of the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998)
23.1 -- Consent of KPMG Peat Marwick LLP regarding the Company
23.2 -- Consent of PricewaterhouseCoopers LLP regarding Howard S.
Leight & Associates, Inc.
23.3 -- Consent of PricewaterhouseCoopers LLP regarding Comasec
Holdings, Inc.
23.4 -- Consent of Edwards & Angell, LLP (included in Exhibit 5)
24 -- Power of Attorney(2)
27 -- Financial Data Schedule (incorporated by reference to
Exhibit 27 of the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998).
</TABLE>
- ---------------
(1) To be filed by amendment.
(2) Previously filed.
(B) FINANCIAL STATEMENT SCHEDULES
Financial Statement Schedule
Incorporated by reference to the Company's Form 10-K filed March 27, 1998.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in this registration
statement shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 41
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Bacou USA, Inc.
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of Smithfield, State of
Rhode Island, on this 24th day of August, 1998.
BACOU USA, INC.
By /s/ PHILIP B. BARR
........................................
PHILIP B. BARR
EXECUTIVE VICE PRESIDENT, CHIEF
FINANCIAL OFFICER
AND SECRETARY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on August 24, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* Chairman of the Board
........................................
PHILIPPE BACOU
/s/ WALTER STEPAN Vice Chairman of the Board, President and
........................................ Chief Executive Officer; Director
WALTER STEPAN
/s/ PHILIP B. BARR Executive Vice President, Chief Financial
........................................ Officer and Secretary; Director
PHILIP B. BARR
/s/ JEFFREY T. BROWN Treasurer and Chief Accounting Officer
........................................
JEFFREY T. BROWN
* Director
........................................
CHRISTOPHE BACOU
* Director
........................................
KARL F. ERICSON
* Director
........................................
HOWARD S. LEIGHT
* Director
........................................
HERBERT A. WERTHEIM
</TABLE>
*By /s/ PHILIP B. BARR
...............................
PHILIP B. BARR
EXECUTIVE VICE PRESIDENT, CHIEF
FINANCIAL OFFICER
AND SECRETARY
ATTORNEY-IN-FACT
II-5
<PAGE> 42
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <C> <S>
23.1 -- Consent of KPMG Peat Marwick LLP regarding the Company
23.2 -- Consent of PricewaterhouseCoopers LLP regarding Howard S.
Leight & Associates, Inc.
23.3 -- Consent of PricewaterhouseCoopers LLP regarding Comasec
Holdings, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 23.1
ACCOUNTANTS' CONSENT
The Board of Directors
Bacou USA, Inc.:
We consent to incorporation by reference in this Registration Statement on Form
S-3 of Bacou USA, Inc. of our report dated February 17, 1998, except as to
notes 2(b) and 7(b) which are as of February 27, 1998, relating to the
consolidated balance sheets of Bacou USA, Inc. and subsidiaries as of December
31, 1997 and 1996 and the related consolidated statements of income,
stockholders' equity and cash flows for the fiscal years ended December 31,
1997 and 1996, for the five months ended December 31, 1995, and for the fiscal
year ended July 31, 1995, and our report on the related financial statement
schedule dated February 17, 1998, which reports appear in the December 31, 1997
annual report on Form 10-K of Bacou USA, Inc.
We consent to the reference to our firm under the headings "Selected
Consolidated Historical and Pro Forma Financial Information," and "Experts" in
this Registration Statement on Form S-3.
/s/ KPMG Peat Marwick LLP
-------------------------------
KPMG Peat Marwick LLP
Providence, Rhode Island
August 21, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference from Bacou USA Inc.'s Form
8-KA dated April 15, 1998 in this Amendment No. 1 to the registration statement
on Form S-3 of Bacou USA, Inc. dated August 24, 1998 of our report dated
February 9, 1998 on our audits of the consolidated financial statements of
Howard S. Leight & Associates, Inc. and subsidiaries (d/b/a/ Howard Leight
Industries) as of December 31, 1997 and 1996 and for each of the three years in
the period ended December 31, 1997. We also consent to the reference to our
Firm under the caption "Experts".
/s/ PricewaterhouseCoopers LLP
San Diego, California
August 24, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of Bacou USA, Inc.
of our report dated June 17, 1997 relating to the consolidated financial
statements of Comasec Holdings, Inc. and subsidiary, which appears in Exhibit
99(b) of the Current Report on Form 8-K/A of Bacou USA, Inc. dated August 14,
1997. We also consent to the reference to us under the heading "Experts" in
such Prospectus.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Costa Mesa, California
August 24, 1998
