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As filed with the Securities and Exchange Commission on January 27, 1999
Registration No. 033-54211
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 14 TO
REGISTRATION STATEMENT
ON FORM S-2
UNDER
THE SECURITIES ACT OF 1933
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WAXMAN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
34-0899894
(I.R.S. Employer Identification Number)
24460 Aurora Road
Bedford Heights, Ohio 44146
(440) 439-1830
(Address, including zip code, and telephone number,
including area code, of registrant's principal offices)
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ARMOND WAXMAN
24460 Aurora Road
Bedford Heights, Ohio 44146
(440) 439-1830
(Name, address, including zip code, and telephone number,
including area code, of agents for service)
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Copies to:
SCOTT M. ZIMMERMAN, ESQ.
Swidler Berlin Shereff Friedman, LLP
919 Third Avenue
New York, New York 10022
(212) 758-9500
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APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE
PUBLIC: As soon as practicable after this registration statement becomes
effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box: [X]
If the registrant elects to deliver its latest annual report to
security holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this Form, 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, please 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 the Registration Statement
shall become effective on such date as the SEC acting pursuant to said section
8(a), may determine.
The information in this prospectus is not complete and may be
changed. The holders of the warrants and the common stock may not sell these
securities until the registration statement filed with the SEC is effective.
This prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state or territory where the
offer and sale is not permitted.
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WAXMAN INDUSTRIES, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM OF FORM S-2 PROSPECTUS CAPTION OR LOCATION
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<S> <C>
1. Forepart of the Registration Statement Outside Front Cover Page of Prospectus
and Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover About This Prospectus; Where You Can Find
Page of Prospectus More Information; Inside Front Cover and
Outside Back Cover Pages of Prospectus
3. Summary Information, Risk Factors and Prospectus Summary; Incorporation of
Ratio of Earnings to Fixed Charges Certain Information by Reference; Risk
Factors
4. Use of Proceeds Inside Front Cover Page of Prospectus;
Prospectus Summary; Use of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Selling Security Holders; Plan of
Distribution
8. Plan of Distribution Outside Front Cover Page of Prospectus;
Plan of Distribution
9. Description of Securities to be Outside Front Cover Page of Prospectus;
Registered Prospectus Summary; Description of
Warrants; Description of Capital Stock
10. Interests of Named Experts and Counsel Legal Matters
11. Information with Respect to the Outside Front Cover Page of Prospectus;
Registrant About This Prospectus; Where You Can Find
More Information; Incorporation of Certain
Information by Reference; Prospectus
Summary; Risk Factors; Pro Forma
Consolidated Financial Information
12. Incorporation of Certain Information Where You Can Find More Information;
by Reference Incorporation of Certain Information by
Reference
13. Disclosure of SEC Position on Not Applicable
Indemnification for Securities Act
Liabilities
</TABLE>
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The information in this Prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS, SUBJECT TO COMPLETION, DATED JANUARY 27, 1999
WAXMAN INDUSTRIES, INC.
2,734,800 WARRANTS TO PURCHASE SHARES OF COMMON STOCK
2,950,000 SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE
This prospectus allows the security holders listed on page 15 to offer
and sell up to (1) 2,734,800 warrants to purchase shares of common stock of
Waxman Industries, Inc., a Delaware corporation and (2) up to 2,950,000 shares
of common stock issuable upon exercise of the 2,734,800 warrants and an
additional 215,200 warrants of like terms which have previously been sold by
their holders. See "Selling Security Holders" on page 15.
Each warrant holder has the right to buy one share of common stock upon
the exercise of each of their warrants, at an exercise price of $2.45 in cash
per share. The purchase and the exercise price are subject to adjustment in
certain circumstances that are discussed more fully in this prospectus. The
warrants are currently exercisable and expire on June 1, 2004. The warrants were
originally issued by us in a private placement to certain institutional
investors.
Holders of the warrants or the common stock may offer and sell their
securities in private or market transactions at any time and for any reason, at
prevailing market or privately negotiated prices. In addition, they may sell
their securities either directly or indirectly, through designated dealers or
underwriters. If the holders of the warrants or the common stock choose to use
an agent to sell their securities, they may be required to pay traditional or
negotiated brokerage fees, commissions or discounts.
We will not receive any of the proceeds from the sale of the warrants
or the common stock, but we will receive all of the proceeds from the exercise
of the warrants. We will pay all expenses of the registration of the sale of the
warrants and the common stock, except that each security holder will pay its own
selling commissions and fees. See "Plan of Distribution" on page 17.
Our common stock is traded on the New York Stock Exchange under the
symbol "WAX." On January 19, 1999, the closing bid price was $1.25 per share of
common stock.
WE URGE YOU TO READ CAREFULLY THE "RISK FACTORS" SECTION, BEGINNING ON
PAGE 10, WHERE WE DESCRIBE SPECIFIC RISKS ASSOCIATED WITH WAXMAN INDUSTRIES AND
THESE SECURITIES, TOGETHER WITH THIS PROSPECTUS, BEFORE YOU MAKE YOUR INVESTMENT
DECISION.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THESE SECURITIES HAVE NOT BEEN AND WILL NOT BE QUALIFIED FOR SALE UNDER
THE SECURITIES LAWS OF CANADA OR ANY PROVINCE OR TERRITORY OF CANADA. THE
SECURITIES ARE NOT BEING OFFERED FOR SALE AND MAY NOT BE OFFERED OR SOLD,
DIRECTLY OR INDIRECTLY, IN CANADA, OR TO ANY RESIDENT THEREOF, IN VIOLATION OF
THE SECURITIES LAWS OF CANADA OR ANY PROVINCE OR TERRITORY OF CANADA.
THIS PROSPECTUS MAY NOT BE PASSED ON IN THE UNITED KINGDOM TO ANY
PERSON UNLESS THAT PERSON IS OF A KIND DESCRIBED IN ARTICLE 9(3) OF THE
FINANCIAL SERVICES ACT 1986 (INVESTMENT ADVERTISEMENTS) (EXEMPTIONS) ORDER 1988
OR IS A PERSON TO WHOM THIS PROSPECTUS MAY OTHERWISE LAWFULLY BE ISSUED OR
PASSED ON.
NOTICE TO NEW HAMPSHIRE RESIDENTS
THE SECRETARY OF STATE OF NEW HAMPSHIRE HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS _________, 1999
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission. It does not contain all of the
information included in the registration statement. We have omitted parts of the
registration statement in accordance with the rules of the SEC. For further
information, we refer you to the registration statement on Form S-2, including
its exhibits. Statements contained in this prospectus about the provisions or
contents of any agreement or other document are not necessarily complete and are
qualified in all respects by the terms of the referenced agreement or document.
If the SEC rules and regulations require that such agreement or other document
be filed as an exhibit to the registration statement, please see such agreement
or prospectus for a complete description of these matters. You should not assume
that the information contained in this prospectus is accurate as of any date
other than the date on the front of this prospectus.
This prospectus provides you with a general description of the specific
warrants and shares of common stock that may be offered and sold by the holders
of such warrants and common stock. To the extent required, each time the holders
of such securities offer and sell such securities, we will provide you with a
supplement to this prospectus (or, if required, a post-effective amendment to
the registration statement of which this prospectus forms a part) that will
contain specific information about the terms of that offering. This supplement
may also add, update or change any information contained in this prospectus. You
should read both this prospectus and any supplement hereto together with
additional information described under the heading "Where You Can Find More
Information."
No person is authorized to give any information or to make any
representation with respect to the matters described in this document other than
those contained herein or in the documents incorporated by reference herein and,
if given or made, such information or representation must not be relied upon as
having been authorized by Waxman Industries. This document does not constitute
an offer to sell, or a solicitation of an offer to purchase, the securities
offered hereby, in any jurisdiction in which, or to any person to whom, it is
unlawful to make such offer or solicitation of an offer. Neither the delivery of
this document nor any sale made hereby shall, under any circumstances, create
any implication that there has been no change in the affairs of Waxman
Industries since the date hereof, or that the information herein is correct as
of any time subsequent to its date.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy materials that we have
filed with the SEC, including the registration statement, at the following SEC
public reference rooms:
450 Fifth Street, N.W. Northwest Atrium Center 7 World Trade Center
Room 1024 500 West Madison Street Suite 1300
Washington, D.C. 20549 Suite 1400 New York, New York 10048
Chicago, Illinois 60661
Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms.
Our SEC filings can also be read at the following address:
New York Stock Exchange
20 Broad Street
New York, New York 10005
Our SEC filings are also available to the public on the SEC's Web Site
at http://www.sec.gov.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus. We incorporate by reference our Annual
Report on Form 10-K for the fiscal year ended June 30, 1998 filed with the SEC
on September 16, 1998 (File No. 0-5888), our Definitive Proxy Statement filed
with the SEC on October 14, 1998, our Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998 filed with the SEC on November 12, 1998
(File No. 0-5888), and our Current Report on Form 8-K filed with the SEC on
January 15, 1999 (File No. 0-5888). In addition,
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we incorporate by reference any filings we have made since June 30, 1998, and on
or prior to the date of this prospectus, with the SEC under Sections 13(a) or
15(d) of the Securities Exchange Act.
You may request a copy of these filings (except for the exhibits, other
than exhibits specifically incorporated by reference in such filings), at no
cost, by writing to us or telephoning us at the following address and phone
number:
Waxman Industries, Inc.
24460 Aurora Road
Bedford Heights, Ohio 44146
Attention: Vice President-Finance
Telephone No: (440) 439-1830
In addition, we will deliver a copy of our (i) Annual Report on Form
10-K for the fiscal year ended June 30, 1998 and (ii) most recent Quarterly
Report on Form 10-Q, without charge, to each person receiving a copy of this
Prospectus.
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PROSPECTUS SUMMARY
This section highlights some of the information contained in this
prospectus. You should read this summary along with the more detailed
information and the financial information and the notes thereto appearing in
other sections of this prospectus. Any references in this prospectus to a
particular fiscal year refer to the 12-month period ended on June 30 in that
year. Unless otherwise stated or where the context otherwise requires,
references in this prospectus to we, our, the Company or Waxman Industries refer
to Waxman Industries, Inc.
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. In addition to historical
information, this prospectus and other materials filed or to be filed by us with
the SEC and incorporated by reference in this prospectus contain forward-looking
statements that are based on the current beliefs of Waxman Industries and Waxman
Industries' management. When used in this prospectus, the words "anticipate,"
"believe," "continue," "estimate," "expect," "intend," "may," "should," and
similar expressions are intended to identify forward-looking statements. Such
statements include information relating to our intent, belief or current
expectations regarding our business. The forward looking information involves
important risks and uncertainties that could cause our actual results,
performance or achievements to differ materially from our anticipated results,
performance or achievements expressed or implied in this prospectus. These
risks, uncertainties and assumptions include, but are not limited to:
o the risk that we may not be able to implement our deleveraging
strategy in the intended manner;
o risks associated with currently unforeseen competitive
pressures;
o risks affecting our industry, such as decreased consumer
spending, customer concentration issues and the effects of
general economic conditions; and
o risks associated with our continued inability to meet the
listing requirements of the New York Stock Exchange and other
securities exchanges.
Although we believe the expectations reflected in such forward-looking
statements are based upon reasonable assumptions, we can give you no assurance
that such expectations will be attained or that any deviations will not be
material. Some of the preceding factors are discussed more fully under the
caption "Risk Factors" beginning on page 10 of this prospectus. We undertake no
obligation to publicly update any of these forward-looking statements to reflect
new information or future events.
WAXMAN INDUSTRIES, INC.
We believe that we are one of the leading suppliers of specialty
plumbing, security hardware and other products to the repair and remodeling
market in the United States. We distribute our products to a wide variety of
large national and regional retailers and independent retail customers. Our
consolidated net sales were $105.7 million and $28.2 million in fiscal 1998 and
for the three months ended September 30, 1998, respectively.
The Company conducts its business primarily through its wholly-owned
subsidiaries, Waxman Consumer Products Group Inc., WOC Inc. and TWI,
International, Inc. WOC is comprised of two divisions, U.S. Lock, a distributor
of a full line of security hardware products and Medal Distributing, a supplier
of hardware products. TWI includes the Company's foreign sourcing operations,
including manufacturing, packaging and sourcing operations in China and Taiwan,
and an operation in Mexico that threads galvanized, black, brass and chrome pipe
and imports malleable fittings. Consumer Products, WOC and Barnett Inc. utilize
the Company's and non-affiliated foreign sourcing suppliers. See "Recent
Developments" for a discussion of the Company's sale of U.S. Lock for an
aggregate purchase price of approximately $33.0 million. Such sale became
effective as of January 1, 1999.
Consumer Products markets and distributes approximately 6,200 products
to a wide variety of retailers, primarily "do-it-yourself" warehouse home
centers, home improvement centers, mass merchandisers and hardware stores.
Consumer Products' customers include large national retailers such as Kmart,
Wal-Mart, Sears and Hechinger / Builders Square, as well as several large
regional "do-it-yourself" retailers. According to rankings of the largest
"do-it-yourself" retailers published in National Home Center News, an industry
trade publication, Consumer Products' customers include 12 of the 25 largest
"do-it-yourself" retailers in the United States. Consumer Products works closely
with its customers to develop comprehensive marketing and merchandising programs
designed to improve their profitability, efficiently manage shelf space, reduce
inventory levels and maximize floor stock turnover. Consumer Products also
offers certain of its customers the option of private label programs and
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direct import programs for their plumbing and floor care products. Consumer
Products' net sales for fiscal 1998 and for the three months ended September 30,
1998 were $55.2 million and $14.0 million, respectively.
Consumer Products' marketing strategy includes offering mass
merchandisers and "do-it-yourself" retailers a comprehensive merchandising
program which includes design, layout and setup of selling areas. Sales and
service personnel assist the retailer in determining the proper product mix in
addition to designing department layouts to effectively display products and
optimally utilize available floor and shelf space. Consumer Products supplies
displays for both bulk and packaged products, including color-coded product
category signs and color-coordinated bin labels to help identify products, and
backup tags to identify products that require reordering. In-house design,
assembly and packaging capabilities enable Consumer Products to react quickly
and effectively to service its customers' changing needs. In addition, Consumer
Products' products are packaged and designed for ease of use, with "how to"
instructions included to simplify installation, even for the uninitiated
"do-it-yourself" consumer.
Consumer Products' sales and service representatives visit stores
regularly to take reorders and recommend program improvements. These
representatives also provide reports to Consumer Products, enabling it to stay
abreast of changing consumer demand and identify developing trends. In order to
support its customers' "just-in-time" requirements, Consumer Products has
sophisticated EDI capabilities, enabling customers to reduce inventory levels
and increase return on investment. During fiscal 1998, Consumer Products
completed the modifications of all of its information systems to be Year 2000
compliant. Consumer Products operates and distributes its products through two
strategically located distribution facilities near Columbus, Ohio and in Dallas,
Texas. In November 1998, Consumer Products moved its distribution warehouse from
Cleveland, Ohio to a more modern and efficient center in Grove Port, Ohio, a
suburb of Columbus. Upon the announcement of this move, in the first quarter of
fiscal 1999, the Company recorded a non-recurring charge associated with this
move of approximately $1.4 million, including the write-off of specific tangible
assets at our Cleveland warehouse. We expect that the cost savings of the new
facility will offset these charges in less than two years. We will continue to
perform our non-warehouse functions in Cleveland.
In recent years, the rapid growth of large mass merchandisers and
"do-it-yourself" retailers has contributed to a significant consolidation of the
United States retail industry and the formation of large, dominant, product
specific and multi- category retailers. These retailers demand suppliers who can
offer a broad range of quality products and can provide strong marketing and
merchandising support. Due to the consolidation in the "do-it-yourself" retail
industry, a substantial portion of Consumer Products' net sales are generated by
a small number of customers. In July 1997, Kmart agreed to sell its Builders
Square chain to Leonard Green & Partners, a merchant-banking firm ("Leonard
Green"). Leonard Green also acquired another home improvement retailer,
Hechinger Co. ("Hechinger"), and has combined the two companies to form the
nation's third largest home improvement chain. In fiscal 1997, Builders Square
accounted for 21.9% of Consumer Products' net sales. The combined operations of
Hechinger / Builders Square is Consumer Products' largest customer, accounting
for approximately $11.7 million, or 21.1%, of Consumer Products' net sales in
fiscal 1998. Net sales to the combined operations declined during fiscal 1998,
with $5.1 million being sold in the last six months of fiscal 1998. In August
1998, Consumer Products was informed that the Hechinger / Builders Square
operations were consolidating their supplier relationships and Consumer Products
would retain only the bulk plumbing business of approximately $2.3 million
annually. The supplier relationship continued through December 1998, although
sales to Hechinger/Builders Square were lower throughout the quarter. Due to the
loss of this revenue base, Consumer Products has developed plans to reduce its
cost structure to be more in line with its revenue base. We expect the impact to
our operating income to be approximately $0.8 million in fiscal 1999.
Furthermore, one of Consumer Products' largest customers, Kmart, accounted for
approximately 18.2%, 16.5% and 17.6% of Consumer Products' net sales in fiscal
1998, fiscal 1997 and fiscal 1996, respectively. If Consumer Products loses any
additional large retail accounts as a customer or one of its largest accounts
significantly curtails its purchases from Consumer Products, our business would
be materially adversely affected until we further modify Consumer Products' cost
structure to be more in line with its revenue base. Consumer Products would
probably incur significant charges if a materially adverse change in its
customer relationships occurred.
Two of our operations are conducted through WOC. WOC's significant
operation is U.S. Lock, a full line supplier of security hardware products.
WOC's other operation is its Medal Distributing division, a supplier of hardware
products. In late fiscal 1997 and early fiscal 1998, WOC sold two of its
divisions. These divisions included the Madison Equipment division, a supplier
of electrical products, which was sold in April 1997, and substantially all of
the business of the LeRan Gas Products division, a supplier of copper tubing,
brass fittings and other related products, which was sold to Barnett on July 1,
1997. WOC's net sales amounted to $28.0 million in fiscal 1998 and $7.8 million
for the three months ended September 30, 1998. See "Recent Developments" below
for a discussion of our recently consummated sale of U.S. Lock.
We also own approximately 44.4% of the outstanding common stock of
Barnett, our formerly wholly-owned subsidiary. Barnett is a direct marketer and
distributor of an extensive line of plumbing, electrical, hardware and other
products to approximately 65,000 active customers throughout the United States
and Puerto Rico. Barnett offers and promotes approximately 11,900 name brand and
private label products through its industry recognized Barnett(R) catalogs and
telesales
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operations. Barnett markets its products through five distinct, comprehensive
catalogs that target professional contractors, independent hardware stores,
maintenance managers and liquid propane gas dealers. Barnett's net sales for
fiscal 1998 and for the three months ended September 30, 1998 were $199.6
million and $52.4 million, respectively. In fiscal 1998 and for the three months
ended September 30, 1998, Waxman Industries recognized $6.3 million and $1.5
million, respectively, in equity income from this investment.
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Our current corporate structure is as follows:
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| WAXMAN INDUSTRIES, INC. |
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| WAXMAN USA INC. |
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| BARNETT | | WAXMAN | | WOC INC. | | TWI, INTERNATIONAL, INC.|
| INC.(1) | | CONSUMER | | | | AND SUBSIDIARIES |
| | | PRODUCTS | | | | |
| | |GROUP INC. | | | | |
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(1) Waxman USA Inc., a wholly-owned subsidiary of Waxman Industries, owns
approximately 44.4% of Barnett's common stock.
RECENT DEVELOPMENTS
Our current credit agreement with BankAmerica Business Credit, Inc.,
which was to expire on May 31, 1999, has been extended by BankAmerica until July
15, 1999. This credit agreement provides, among other things, for revolving
credit loans of up to $30 million and term loans of up to $5.0 million. Under
the revolving credit facility, as Waxman USA repays a portion of the loan, an
amount equal to the repayment can be borrowed again under the terms of the
agreement. As of September 30, 1998, we can borrow approximately $8.8 million
under this credit agreement.
Since Barnett consummated its initial public offering in April 1996, we
no longer have access to the cash flow generated by Barnett's operations. After
consummation of the sale of U.S. Lock to Barnett, we now rely primarily on
Consumer Products for cash flow. Consumer Products' customers include
"do-it-yourself" warehouse home centers, home improvement centers, mass
merchandisers and hardware stores. Consumer Products may be adversely affected
by prolonged economic downturns or significant declines in consumer spending.
There can be no assurance that any such prolonged economic downturn or
significant decline in consumer spending will not have a material adverse impact
on Consumer Products' business and its ability to generate cash flow.
Furthermore, Consumer Products has a high proportion of its sales with a
concentrated number of customers. One of Consumer Products' largest customers,
Kmart, accounted for approximately 18.2%, 16.5% and 17.6% of Consumer Products'
net sales in fiscal 1998, fiscal 1997 and fiscal 1996, respectively. During
fiscal 1997, we were advised by Kmart that, after it had completed a vendor
review, Consumer Products had successfully retained the supply arrangements for
plumbing and hardware products. In July 1997, Kmart agreed to sell its Builders
Square chain to Leonard Green. Leonard Green also acquired another home
improvement retailer, Hechinger, and has combined the two companies to form the
nation's third largest home improvement chain. In fiscal 1997, Builders Square
accounted for 21.9% of Consumer Products' net sales. The combined operations of
Hechinger / Builders Square is Consumer Products' largest customer, accounting
for approximately $11.7 million, or 21.1%, of Consumer Products' net sales in
fiscal 1998. Net sales to the combined operations declined during fiscal 1998,
with $5.1 million being sold in the last six months of fiscal 1998. In August
1998, Consumer Products was informed that the Hechinger / Builders Square
operations were consolidating their supplier relationships and Consumer Products
would retain only the bulk plumbing business of approximately $2.3 million
annually. The supplier relationship continued through December 1998, although
sales to Hechinger/Builders Square were lower throughout the quarter. Due to the
loss of these revenues, Consumer Products has developed plans to reduce its cost
structure to be more in line with its revenues. We expect the impact to
operating income to be approximately $0.8 million in fiscal 1999. If Consumer
Products loses any additional large retail accounts as a customer or one of its
largest accounts significantly curtails its purchases from Consumer Products, we
would experience additional material adverse effects until we could further
modify Consumer Products' cost structure to be more in line with its
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anticipated revenues. Consumer Products would probably incur significant charges
if a materially adverse change in its customer relationships occurred.
In November 1998, Consumer Products completed the move of its
distribution warehouse in Cleveland, Ohio to Grove Port, Ohio, a suburb of
Columbus. The Company expects the move to a more modern and efficient center
will allow it to continue serving its customers' needs and the savings will
offset the charges associated with the move in approximately two years. In the
first quarter of fiscal 1999, the Company recorded a non-recurring charge of
$1.4 million associated with the move and the write-off of specific tangible
assets at its Cleveland warehouse.
Our current business strategy includes the reduction of our leverage
through the sale of selected assets and the refinancing of our remaining debt
whenever possible. To that end, we sold Madison for $2.0 million in April 1997
and substantially all of the business of LeRan for $3.2 million in cash and
24,730 shares of Barnett common stock (with a value of $0.6 million at the time
of the transaction) in July 1997.
On December 18, 1998, WOC entered into an agreement with Barnett
providing for the sale of the business of U.S. Lock to Barnett for a total cash
purchase price of approximately $33.0 million. U.S. Lock's net sales in fiscal
1998 and for the three month period ended September 30, 1998 were $22.8 million
and $6.5 million, respectively. The sale of U.S. Lock was consummated on January
7, 1999, effective as of January 1, 1999. We believe that the sale should
provide us with the capital and flexibility to achieve more appropriate values
for the other assets we may utilize to deleverage Waxman Industries.
Year 2000
The Company utilizes management information systems and software
technology that may be affected by Year 2000 issues throughout its businesses.
During fiscal 1998, the Company began to implement plans at certain of its
operations to ensure those systems continue to meet its internal and external
requirements. During fiscal 1998, the Company's largest division, Consumer
Products, completed the modifications and testing of its information systems and
is Year 2000 compliant. Consumer Products utilizes an IBM AS400 system, along
with the latest version of Year 2000 compliant J.D. Edwards software. The
Company's corporate office is in the process of converting to this J.D. Edwards
package and should complete the conversion in the third quarter of fiscal 1999.
In August 1998, WAMI's PC-based Year 2000 software upgrade was installed
and is being tested. Based on information from software vendors, the PC-based
information systems at TWI and CWI will require the installation of a minor
upgrade to be Year 2000 compliant. These modifications are expected to be
complete in fiscal 1999 and financed through working capital with minimal cost.
The Company's operations have developed questionnaires and contacted key
suppliers and customers regarding their Year 2000 compliance to determine any
impact on its operations. In general, the suppliers and customers have developed
or are in the process of developing plans to address Year 2000 issues. The
Company will continue to monitor and evaluate the progress of its suppliers and
customers on this critical matter. The Company is also reviewing its
non-information technology systems to determine the extent of any changes that
may be necessary and believes that there will be minimal changes necessary for
compliance.
Based on the progress the Company has made in addressing its Year 2000
issues and the Company's plan and timeline to complete its compliance program,
the Company does not foresee significant risks associated with its Year 2000
compliance at this time. As the Company's plan is to address its significant
Year 2000 issues prior to being affected by them, it has not developed a
comprehensive contingency plan. However, if the Company identifies significant
risks related to its Year 2000 compliance or its progress deviates from the
anticipated timeline, the Company will develop contingency plans as deemed
necessary at that time.
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THE OFFERING
Securities Offered......... 2,734,800 warrants to purchase shares of
common stock. In addition, this prospectus
relates to the 2,950,000 shares of common
stock issuable upon exercise of the
2,734,800 warrants and an additional
215,200 warrants of like terms which have
been previously sold by their holders,
subject to adjustment in the event of any
recapitalization, reclassification, stock
dividend, stock split, reverse stock
split, stock issuance below fair market
value or other similar transaction.
Underlying Common Stock.... Each warrant is exercisable to purchase
one share of common stock subject to
adjustment under certain circumstances.
See "Description of Warrants."
Exercise Price............. $2.45 per share, subject to adjustment in
certain circumstances. See "Description of
Warrants."
Exercise Period............ The warrants are currently exercisable and
expire at 5:00 p.m. New York City time on
June 1, 2004. See "Description of
Warrants."
Warrant Agent.............. The Huntington National Bank is serving as
Warrant Agent under the Warrant Agreement.
Common Stock
Number of Shares........... 2,950,000 shares, subject to adjustment in
certain circumstances, of common stock
issuable upon the exercise of the
warrants.
Common Stock Outstanding... 12,057,297 shares as of January 8, 1999
(including 9,912,176 shares of common
stock and 2,145,121 shares of Class B
Common Stock).
NYSE symbol for
the Common Stock........... WAX
Proceeds of the Offering... The holders of the warrants and the common
stock will receive all of the proceeds
from the sale of the securities offered
under this prospectus. The Company will
not receive any of the proceeds from this
offering.
If all of the 2,734,800 warrants offered
under this prospectus are exercised at the
initial exercise price of $2.45 per share,
the Company would receive $6,700,260,
which would be added to the Company's
working capital and used for general
corporate purposes, including repayment of
debt.
For more complete information regarding the warrants, see "Description
of Warrants."
RISK FACTORS
You should carefully consider the information set forth under "Risk
Factors," as well as the other information included in this prospectus, before
investing in these securities.
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RISK FACTORS
You should carefully consider the following factors and other
information in this prospectus before you make your decision whether to become a
security holder in Waxman Industries.
LEVERAGE
We have a significant amount of indebtedness. As of September 30, 1998,
our consolidated debt (excluding trade payables and accrued liabilities) was
approximately $139.3 million. We have outstanding:
o $895,000 principal amount of 13 3/4% Senior Subordinated Notes
due June 1999, which we refer to as the "Senior Subordinated
Notes."
o 12 3/4% Senior Secured Deferred Coupon Notes due June 2004,
which we refer to as the "Deferred Coupon Notes." These notes
begin to accrue interest in June 1999, at which time the
outstanding principal amount of such notes will be $92.75
million. Cash interest of approximately $6.0 million will be
payable semi-annually beginning in December 1999.
o $35.9 million principal amount of 11 1/8% Senior Notes due
September 2001, which we refer to as the "Senior Notes." These
notes currently require semi-annual cash interest payments of
approximately $2.0 million.
We believe that our operating cash flow and the net proceeds from the
sale of U.S. Lock will be sufficient in the short term to fund:
o working capital requirements;
o capital expenditures; and
o the first few interest payments on the Deferred Coupon Notes.
However, because we are a holding company with no operations of our own,
our ability to satisfy our debt obligations, to refinance our debt obligations,
to continue interest payments on the Deferred Coupon Notes in the long term and
to deleverage ourself will be dependent upon:
o the future performance of our operating subsidiaries;
o our ability to raise more capital through public or private
financings, sales of certain assets or other arrangements;
o our ability to increase our cash flow from current levels; or
o our ability to substantially reduce our debt level.
Our future performance is subject to prevailing economic, financial and
industry conditions, and other factors, many of which are beyond our control.
This high level of debt has significant consequences for us. High
leverage may, among other things:
o impair our ability to obtain additional capital investments and
financing;
o impair our ability to take advantage of business opportunities;
o place us at a competitive disadvantage relative to
less-leveraged competitors;
o leave us vulnerable to economic and industry downturns; and
o require us to use a substantial portion of our cash flow from
operations to satisfy our debt service obligations.
We currently intend to pursue a sale of assets or other capital raising
transaction to satisfy our future cash requirements. However, we cannot assure
you that we will be able to raise capital on terms to our satisfaction, that we
will be able to increase our cash flow or that we will be able to reduce our
debt level. We also cannot assure you that we will be able to refinance the
Deferred Coupon Notes or the Senior Notes at or prior to their respective
maturities.
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To our knowledge, our high degree of leverage has not resulted in the
refusal by any of our customers, suppliers or manufacturers to do business with
us or in the alteration of material terms which have had a material impact on
our business.
RESTRICTIONS IMPOSED BY TERMS OF DEBT; CONSEQUENCES OF FAILURE TO COMPLY
Covenants in our debt agreements restrict our ability to:
o incur debt;
o pay dividends;
o make acquisitions;
o create liens;
o sell assets;
o make certain investments;
o materially change the nature or conduct of our business; and
o conduct general corporate activities.
Our ability to comply with these covenants and restrictions may be
affected by events beyond our control, including economic, financial and
industry conditions. A failure to comply with the covenants and restrictions
contained in our debt agreements or any other agreements with respect to any
additional financing could result in the acceleration of the amount we owe under
our debt arrangements or could leave us without an available source of cash. We
cannot assure you that we will be able to make such accelerated payments. As of
September 30, 1998, the Company was in compliance with or had obtained a waiver
for all covenants.
In connection with the prospective sale of U.S. Lock, we will be
negotiating modifications to our current bank credit facility. However, we
cannot assure you that such negotiations will be successfully completed.
CONTROL BY PRINCIPAL STOCKHOLDERS; CERTAIN ANTI-TAKEOVER EFFECTS
Melvin and Armond Waxman, brothers and the Chairman of the Board and
Co-Chief Executive Officer and President and Co-Chief Executive Officer,
respectively, of Waxman Industries have sufficient voting power to:
o elect our entire Board of Directors;
o in general, to determine the outcome of any corporate transaction
or other matter submitted to the stockholders for approval,
including any merger, consolidation, sale of all or substantially
all of the Company's assets or "going private" transactions; and
o prevent or cause a change in control of the Company.
The Waxman brothers together own approximately 20.6% (and 16.1%,
assuming the exercise of 2,950,000 warrants) of the outstanding shares of the
common stock and 83.8% of the outstanding shares of the Class B Common Stock.
These holdings represent 62.5% (and 57.2%, assuming the exercise of 2,950,000
warrants) of the outstanding voting power of the Company.
In addition, certain provisions in our certificate of incorporation,
by-laws and debt instruments may discourage a third party from pursuing a
non-negotiated takeover of Waxman Industries or prevent certain changes in
control.
DEFICIENCY OF EARNINGS TO FIXED CHARGES
Excluding the gains from our sales of the Barnett common stock, equity
earnings of Barnett and restructuring and other non-recurring charges, our
earnings were insufficient to cover our fixed charges by $10.1 million, $17.8
million, $20.4 million and $3.5 million for fiscal 1998, 1997, 1996 and the
three months ended September 30, 1998, respectively. We believe that if we
successfully implement our deleveraging strategy described in this prospectus,
we will be able to reduce or
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eliminate our deficiency of earnings to fixed charges. However, we cannot
assure you whether or not, or when, such deficiencies will be reduced or
eliminated or that the deficiencies experienced in the past will not reoccur.
FOREIGN SOURCING
We purchase many products from sources outside of the United States. For
fiscal 1998, such purchases accounted for approximately 24.0% of our total
product purchases. Foreign sourcing involves a number of risks, which could have
a significant adverse effect on our business, including:
o the availability of letters of credit;
o maintenance of quality standards;
o work stoppages;
o transportation delays and interruptions;
o political and economic disruptions;
o foreign currency fluctuations;
o expropriation;
o nationalization;
o the imposition of tariffs and import and export controls; and
o changes in governmental policies (including the United States'
policy toward the foreign country where the products are
produced).
The occurrence of any of these factors might delay or prevent the
delivery of goods ordered by our customers. Such delay or inability to meet
delivery requirements could have an adverse effect on our results of operations
and could hurt our relationships with our customers. In addition, the loss of a
foreign manufacturer could have a short-term adverse effect on our business.
Such effect would continue until we could find alternative supply arrangements.
RELIANCE ON KEY CUSTOMERS
Our ten largest customers in fiscal 1998, 1997 and 1996 accounted for
approximately 42.7%, 36.5% and 23.0%, respectively, of our net sales. If we
lose, or experience a substantial decrease in, the business of one or more of
our largest customers, our operations could be significantly affected. One of
Consumer Products' largest customers, Kmart, accounted for approximately 18.2%,
16.5% and 17.6% of Consumer Products' net sales in fiscal 1998, fiscal 1997 and
fiscal 1996, respectively. During fiscal 1997, we were advised by Kmart that,
after it had completed a vendor review, Consumer Products had successfully
retained the supply arrangements for plumbing and hardware products. In July
1997, Kmart agreed to sell its Builders Square chain to Leonard Green &
Partners, a merchant-banking firm. Leonard Green also acquired another home
improvement retailer, Hechinger, and has combined the two companies to form the
nation's third largest home improvement chain. In fiscal 1997, Builders Square
accounted for 21.9% of Consumer Products' net sales. The combined operations of
Hechinger / Builders Square is Consumer Products' largest customer, accounting
for approximately $11.7 million, or 21.1%, of Consumer Products' net sales in
fiscal 1998. Net sales to the combined operations declined during fiscal 1998,
with $5.1 million being sold in the last six months of fiscal 1998. In August
1998, Consumer Products was informed that the Hechinger / Builders Square
operations were consolidating their supplier relationships and Consumer Products
would retain only the bulk plumbing business of approximately $2.3 million
annually. The supplier relationship continued through December 1998, although
sales to Hechinger/Builders Square were lower throughout the quarter. Due to the
loss of these revenues, Consumer Products has developed plans to reduce its cost
structure. We expect the impact to operating income to be approximately $0.8
million in fiscal 1999. If Consumer Products loses any additional large retail
accounts as a customer or one of its largest accounts significantly curtails its
purchases from Consumer Products, we would experience additional material
adverse effects until we could further modify Consumer Products' cost structure
to be more in line with its anticipated revenues. Consumer Products would
probably incur significant charges if a materially adverse change in its
customer relationships occurred.
After consummation of the sale of U.S. Lock to Barnett, we now rely
primarily on Consumer Products for cash flow. Consumer Products' customers
include "do-it-yourself" warehouse home centers, home improvement centers, mass
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merchandisers and hardware stores. Consumer Products may be adversely affected
by prolonged economic downturns or significant declines in consumer spending.
There can be no assurance that any such prolonged economic downturn or
significant decline in consumer spending will not have a material adverse impact
on the Consumer Products' business and its ability to generate cash flow.
PROCEEDS OF THE OFFERING
We will not receive any of the proceeds of this offering. All of the
proceeds of this offering will be received by the holders of the warrants and
common stock.
POSSIBLE DELISTING OF THE COMMON STOCK FROM THE NEW YORK STOCK EXCHANGE
We do not currently meet, and have not for the past several years met,
several of the requirements for continued listing of our common stock on the New
York Stock Exchange. Additionally, we do not currently meet any of the listing
requirements for the Nasdaq Stock Market or the American Stock Exchange. The
inability to have our common stock listed on any of the New York Stock Exchange,
the Nasdaq Stock Market or the American Stock Exchange could cause the market
price of the common stock to decline and could make it much more difficult to
buy or sell the common stock on the open market.
If our common stock is delisted from the New York Stock Exchange and we
are unable to have our common stock listed on the American Stock Exchange or the
Nasdaq Stock Market, sales of our common stock would become subject to state
securities or "blue sky" laws requiring us to register such sales or to obtain
an exemption before such sales may be made. If our common stock is not able to
be listed on any of the foregoing exchanges, it would likely be quoted on the
OTC Bulletin Board.
ABSENCE OF PUBLIC MARKET; EFFECT OF MARKET PRICE OF BARNETT COMMON STOCK
Currently, a small number of investors own the warrants. There is no
active trading market for the warrants. If an active trading market does not
develop, purchasers of the warrants may have difficulty liquidating their
investment and the warrants may not be readily accepted as collateral for loans.
Accordingly, we cannot assure you of any specific price at which holders of the
warrants will be able to sell such warrants, or whether or not they will be able
to sell such warrants at all.
The liquidity of and the market prices for the warrants and common stock
will be affected by:
o changes in market and economic conditions;
o the financial condition and prospects of the Company; and
o other factors that generally influence the market prices of
securities, including fluctuations in the market for warrants
and common stock generally.
In addition, the market price of the common stock may be affected by the
market price of the Barnett common stock, which may be affected by the factors
enumerated above.
POSSIBLE FUTURE SALES OF SHARES BY THE SELLING SECURITY HOLDERS
The holders of the warrants or the common stock may sell any or all of
the warrants or underlying shares of common stock they own, subject to the
restrictions described under "Risk Factors -- Shares Eligible for Future Sale"
and applicable law, upon the effectiveness of the Registration Statement of
which this prospectus forms a part. The holders of the warrants or the common
stock may determine to sell the warrants or the underlying shares of common
stock from time to time for any reason. Although we can make no prediction as to
the effect, if any, that sales of warrants or shares of common stock owned by
the holders would have on the market price of common stock prevailing from time
to time, sales of substantial amounts of warrants or common stock, or the
availability of such warrants or shares of common stock for sale in the public
market, could adversely affect prevailing market prices of the common stock.
SHARES ELIGIBLE FOR FUTURE SALE
As of January 8, 1999, there were 9,912,176 shares of common stock
outstanding and 2,145,121 shares of Class B Common Stock outstanding
(convertible into 2,145,121 shares of common stock). The securities offered by
this prospectus are eligible for sale in the public market to the extent that
they are not subject to restrictions on resale, including those
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<PAGE>
imposed by federal securities laws. Although we can make no prediction as to the
effect, if any, that sales of the warrants and shares of common stock referred
to above would have on the market price of the common stock prevailing from time
to time, sales of a substantial amount of warrants or common stock, or the
availability of such warrants or shares of common stock for sale in the public
market could adversely affect prevailing market prices of the common stock.
YEAR 2000 COMPLIANCE
The Company utilizes management information systems and software
technology that may be affected by Year 2000 issues throughout its businesses.
During fiscal 1998, the Company began to implement plans at certain of its
operations to ensure those systems continue to meet its internal and external
requirements. During fiscal 1998, the Company's largest division, Consumer
Products, completed the modifications and testing of its information systems and
is Year 2000 compliant. Consumer Products utilizes an IBM AS400 system, along
with the latest version of Year 2000 compliant J.D. Edwards software. The
Company's corporate office is in the process of converting to this J.D. Edwards
package and should complete the conversion in the fourth quarter of calendar
1998. In August 1998, WAMI's PC-based Year 2000 software upgrade was installed
and is being tested. Based on information from software vendors, the PC-based
information systems at TWI and CWI will require the installation of a minor
upgrade to be Year 2000 compliant. These modifications are expected to be
complete in fiscal 1999 and financed through working capital with minimal cost.
The Company's operations have developed questionnaires and contacted key
suppliers and customers regarding their Year 2000 compliance to determine any
impact on its operations. In general, the suppliers and customers have developed
or are in the process of developing plans to address Year 2000 issues. The
Company will continue to monitor and evaluate the progress of its suppliers and
customers on this critical matter. The Company is also reviewing its
non-information technology systems to determine the extent of any changes that
may be necessary and believes that there will be minimal changes necessary for
compliance.
Based on the progress the Company has made in addressing its Year 2000
issues and the Company's plan and timeline to complete its compliance program,
the Company does not foresee significant risks associated with its Year 2000
compliance at this time. As the Company's plan is to address its significant
Year 2000 issues prior to being affected by them, it has not developed a
comprehensive contingency plan. However, if the Company identifies significant
risks related to its Year 2000 compliance or its progress deviates from the
anticipated timeline, the Company will develop contingency plans as deemed
necessary at that time.
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USE OF PROCEEDS
All of the proceeds from the sale of the securities offered hereby will
be received by the holders of warrants and common stock. The Company will not
receive any of the proceeds from this offering.
If all of the 2,734,800 warrants offered hereby are exercised at the
initial exercise price of $2.45 per share, the Company would receive $6,700,260,
which would be added to the Company's working capital and used for general
corporate purposes, including repayment of debt.
SELLING SECURITY HOLDERS
The following table sets forth certain information with respect to the
securities beneficially owned and offered hereby by each holder of warrants.
Name Warrants Owned
- - ---- --------------
and Offered
-----------
Bank Of New York 277,000
Bear Stern Securities Corp. 593,000
Goldman, Sachs & Co. 64,000
UMB Bank, N.A./IFTC 1,152,447
Lehman Brothers, Inc. 89,853
Merrill Lynch, Pierce, Fenner & Smith, Inc. 150,000
Morgan Stanley & Co., Incorporated 84,000
SSB Custodian 324,500
Total 2,734,800
- - ---------------
The Company is registering, on behalf of each holder of warrants, the
offer and sale of the number of warrants set forth opposite such holder's name
under the column captioned "Warrants Owned and Offered" and the same number of
shares of common stock, subject to adjustment in certain circumstances, issuable
upon exercise of the warrants. As of the date hereof, no warrants have been
exercised. In addition, the Company is registering on behalf of Bear Stearn
Securities Corp. and Donaldson, Lufkin & Jenrette, respectively, the offer and
sale of 145,500 and 39,700, respectively, shares of common stock issuable upon
the exercise of warrants that have previously been transferred and are no longer
restricted.
Because the holders may offer all or some part of the securities
pursuant to this prospectus and because this offering is not being underwritten
on a firm commitment basis, no estimate can be given as to the amount of
securities to be offered for sale by the holders nor the amount of securities
that will be held by the holders upon termination of this offering. See "Plan of
Distribution." To the extent required, the specific amount of securities to be
sold by the holders in connection with a particular offer will be set forth in
an accompanying prospectus supplement.
DESCRIPTION OF THE WARRANTS
The warrants were issued pursuant to the terms of a Warrant Agreement,
dated as of May 20, 1994 (the "Warrant Agreement"), by and between the Company
and The Huntington National Bank, as warrant agent (the "Warrant Agent"), on
behalf of the original purchasers of the warrants. The following summary of the
material provisions of the Warrant Agreement and the Warrant Certificate
attached thereto (the "Warrant Certificate") does not purport to be complete,
and where reference is made to particular provisions of the Warrant Agreement or
the Warrant Certificate, such provisions, including the definitions of certain
terms, are qualified in their entirety by reference to all of the provisions of
the Warrant Agreement and Warrant Certificate, which have been filed or
incorporated by reference as exhibits to the Registration Statement of which
this prospectus forms a part.
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<PAGE>
The warrants are currently exercisable and will expire June 1, 2004.
Upon exercise, each warrant entitles the holder to receive one share of the
common stock of the Company (the "Warrant Share") at a cash exercise price of
$2.45, subject to adjustment in certain circumstances.
Holders of the warrants do not have any of the rights or privileges of
the stockholders of the Company, including voting rights or rights to receive
dividends, prior to exercise of the warrants. The Company has reserved out of
its authorized but unissued shares a sufficient number of shares of common stock
for issuance upon exercise of the warrants. The common stock issuable upon
exercise of the warrants will be, when issued, fully paid and nonassessable.
ANTI-DILUTION
The warrants contain customary anti-dilution provisions, including
adjustments in the event of a reclassification, recapitalization, stock
dividend, stock split, reverse stock split, stock issuance below fair market
value or other similar transaction, and including protections in the event of a
transaction in which the Company is not the surviving entity.
METHOD OF EXERCISE
The warrants may be exercised by surrendering to the Warrant Agent the
Warrant Certificates evidencing such warrants, with the accompanying form of
election to purchase properly completed and executed. Upon surrender of the
Warrant Certificates and payment in cash of the exercise price, the Warrant
Agent will deliver, or cause to be delivered, to or upon the written order of
such holder, certificates representing the Warrant Shares to which such holder
is entitled.
Warrant Certificates will be issued in registered form only and no
service charge shall be made for registration of transfer or exchange upon
surrender of any Warrant Certificate at the office of the Warrant Agent
maintained for that purpose. The Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Warrant Certificates.
AMENDMENT
From time to time, the Company and the Warrant Agent, without the
consent of the holders of the warrants, may amend or supplement the Warrant
Agreement for certain purposes, including curing defects or inconsistencies or
making any change that does not adversely affect the rights of any holder. Any
amendment or supplement to the warrant Agreement that has an adverse effect on
the interests of holders or that affects the anti-dilution provisions contained
therein shall require the written consent of registered holders of a majority of
the then outstanding warrants. The consent of each holder of a warrant affected
shall be required for any amendment pursuant to which the number of Warrant
Shares which could be acquired upon exercise of warrants would be decreased or
the exercise period for the warrants would be modified in any manner.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 2,000,000 shares
of preferred stock, $.01 par value, 22,000,000 shares of common stock, $.01 par
value, and 6,000,000 shares of Class B Common Stock, $.01 par value. As of
January 8, 1999, no shares of preferred stock, 9,912,176 shares of common stock
and 2,145,121 shares of Class B Common Stock were issued and outstanding.
COMMON STOCK AND CLASS B COMMON STOCK
Each share of common stock entitles the holder to one vote on all
matters submitted to the stockholders, including the election of directors, and
each share of Class B Common Stock entitles the holder to ten votes on all such
matters. Except as set forth below, all actions submitted to a vote of
stockholders are voted on by holders of common stock and Class B Common Stock
voting together as a single class. The holders of common stock and Class B
Common Stock vote separately as classes with respect to any amendments to the
Company's certificate of incorporation that alter or change the powers,
preferences or special rights of their respective classes of stock so as to
affect them adversely, and with respect to such other matters as may require
class votes under the Delaware General Corporation Law (the "DGCL").
Dividends on the Class B Common Stock may not exceed those on the common
stock. Each share of common stock and Class B Common Stock is equal in respect
of rights to dividends and other distributions in stock or property of the
Company (including distributions upon liquidation of the Company), except that
in the case of dividends or other distributions payable on the common stock and
the Class B Common Stock in shares of such stock, including distributions
pursuant to split-ups or divisions of the common stock or the Class B Common
Stock, only common stock will be distributed with respect to common stock and
only Class B Common Stock will be distributed with respect to Class B common
stock.
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In no event will either the common stock or the Class B Common Stock be split,
divided or combined unless the other is split, divided or combined equally.
The Class B Common Stock is not transferable by a holder except to or
among such holder's spouse, certain of such holder's relatives and certain
trusts established for their benefit. The Class B Common Stock is convertible
into common stock on a share-for-share basis at any time.
If the number of outstanding shares of Class B Common Stock at any time
falls below 250,000 (as adjusted for any stock splits, combinations, stock
dividends or further issuances of Class B Common Stock), the outstanding shares
of Class B Common Stock will automatically be converted into shares of common
stock.
The Class B Common Stock may tend to have an anti-takeover effect. Since
voting control of the Company is vested primarily in the holders of the Class B
Common Stock, the issuance of the Class B Common Stock could render more
difficult, or discourage, a hostile merger proposal, a tender offer or a proxy
contest, even if such actions were favored by a majority of the holders of
common stock. As of January 8, 1999, Melvin Waxman and Armond Waxman
beneficially owned an aggregate of approximately 83.1% of the outstanding Class
B Common Stock and 62.5% of the aggregate outstanding voting power of the
Company.
The transfer agent and registrar for the common stock and Class B Common
Stock is American Stock Transfer & Trust Company, New York, New York.
PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more
series, and the Board of Directors is authorized to fix the dividend rights and
terms, any conversion rights, any voting rights, any redemption rights and terms
(including sinking fund provisions), the rights in the event of liquidation and
any other rights, preferences, privileges and restrictions of any series of
Preferred Stock, as well as the number of shares constituting such series and
the designation thereof. The Preferred Stock, if issued, will rank senior to the
common stock as to dividends and as to liquidation preference. Holders of
Preferred Stock will have no preemptive rights. The issuance of shares of
Preferred Stock could have an anti-takeover effect under certain circumstances.
The issuance of shares of Preferred Stock could enable the Board of Directors to
render more difficult or discourage an attempt to obtain control of the Company
by means of a merger, tender offer or other business combination transaction
directed at the Company by, among other things, placing shares of Preferred
Stock with investors who might align themselves with the Board of Directors,
issuing new shares to dilute stock ownership of a person or entity seeking
control of the Company or creating a class or series of Preferred Stock with
voting rights. The issuance of shares of the Preferred Stock as an anti-takeover
device might preclude stockholders from taking advantage of a situation which
they believed could be favorable to their interests. No shares of Preferred
Stock are outstanding, and the Company has no present plans to issue any shares
of Preferred Stock.
PLAN OF DISTRIBUTION
The securities being sold hereby may be offered to purchasers by any
means permitted by the Securities Act directly by any of the holders of such
securities or through underwriters, brokers, dealers or agents from time to time
in one or more of the following types of transactions: (a) block trades in which
the broker or dealer will attempt to sell the securities as agent but may
position and resell a portion of the block as principal to facilitate the
transaction, (b) purchases by a broker or dealer as principal for resale by such
broker or dealer for its account, (c) ordinary brokerage transactions and
transaction in which the broker solicits purchasers, (d) privately negotiated
transactions and (e) short sales. Such transactions may occur (1) in the
over-the-counter market, (2) other than in the over-the-counter market or (3)
through the writing of options (whether such options are listed on an options
exchange or otherwise). Any such transactions may be at market prices prevailing
at the time of sale, at prices related to such prevailing market prices, at
varying prices determined at the time of sale or at negotiated or fixed prices,
in each case as determined by the holders of such securities and such
underwriters, brokers, dealers or agents or purchasers. If the holders of such
securities effect such transactions by selling securities to or through
underwriters, brokers, dealers or agents, such underwriters, brokers, dealers,
or agents may receive compensation in the form of discounts, concessions or
commissions from the holders and/or the purchasers of securities for whom they
may act as agent (which discounts, concessions or commission as to particular
underwriters, brokers, dealers or agents may be in excess of those customary in
the types of transactions involved). The holders of such securities and any
dealers or agents that participate in the distribution of the securities offered
hereby may be deemed to be underwriters, and any profit on the sale of such
securities by them and any discounts, commissions, or concessions received by
any such dealers or agents might be deemed to be underwriting discounts and
commissions under the Securities Act.
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The securities offered hereby may be sold pursuant to this document or
pursuant to an available exemption from the registration requirements of the
Securities Act, such as the provisions of Rule 144 promulgated under the
Securities Act, to the extent applicable. Under the securities law of certain
states, the securities offered hereby may be sold in such states only through
registered or licensed brokers or dealers. In addition, if the common stock is
delisted from the New York Stock Exchange, in certain states it is possible that
the securities may not be sold unless the securities have been registered or
qualified for sale in such state or an exemption from registration or
qualification is available and is complied with.
At the time a particular offer of securities is made, to the extent
required, a supplement to this prospectus will be distributed (or, if required,
a post-effective amendment to the Registration Statement of which this
prospectus is a part will be filed), which will identify the specific securities
being offered and set forth the aggregate amount of securities being offered,
the purchase price and the terms of the offering, including the name or names of
the holders and of any underwriters, dealers or agents, the purchase price paid
by any underwriter for securities purchased from the holders, any discounts,
commissions and other items constituting compensation from the holders and/or
the Company and any discounts, commissions or concessions allowed or reallowed
or paid to dealers, including the proposed selling price to the public. In
addition, an underwritten offering will require clearance by the National
Association of Securities Dealers, Inc. of the underwriter's compensation
arrangements. The Company will not receive any of the proceeds from the sale by
the holders of the securities offered hereby. All of the filing fees and other
expenses of this Registration Statement will be borne in full by the Company,
other than any underwriting fees, discounts and commissions relating to this
offering.
Pursuant to the registration rights agreement (the "Equity Registration
Rights Agreement"), dated as of May 20, 1994, between Waxman Industries and the
Huntington National Bank, as Warrant Agent, under the Warrant Agreement, Waxman
Industries will use its best efforts to keep the Registration Statement of which
this prospectus forms a part effective under the Act for a period of three years
following the initial effective date of such Registration Statement (or such
shorter period as permitted under the Equity Registration Rights Agreement). The
Equity Registration Rights Agreement provides for cross-indemnification of the
holders of the warrants and the common stock and the Company, to the extent
permitted by law, for losses, claims, damages, liabilities and expenses arising,
under certain circumstances, out of any registration of the securities. The
Equity Registration Rights Agreement also provides that in connection with an
underwriting offering, the Company will indemnify the underwriters thereof,
their officers and directors and each person who controls such underwriters
(within the meaning of the Securities Act) to the same extent as provided with
respect to the indemnification of the holders signatory to such agreement,
except with respect to information provided by such underwriters specifically
for inclusion within the appropriate registration statement. The period
beginning on the date the Equity Registration Statement is first declared
effective by the SEC and ending on the date which is three years after the
expiration of the warrants or, if earlier, the date on which all warrants and
Warrant Shares have been sold pursuant to the Equity Registration Statement or
the date three years after all warrants have been exercised, is referred to as
the "Effectiveness Period." In the event that the Equity Registration Statement
is not filed or effective by, or continuously effective through, the dates
referred to above or prior to the end of the Effectiveness Period, the SEC shall
have issued a stop order suspending the effectiveness of the Equity Registration
Statement or the prospectus contained in the Equity Registration Statement, as
amended or supplemented, shall (x) not contain current information required by
the Securities Act and the rules and regulations promulgated thereunder or (y)
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they are made, not misleading, the
Company agreed to pay, or cause to be paid, as liquidated damages and not as a
penalty, to each holder of a warrant or Warrant Share, an amount equal to
$0.0025 per week per warrant or Warrant Share, as the case may be, for each week
beginning on such date and ending 90 days thereafter. Such liquidated damages
shall be increased by $0.0025 per week per warrant or Warrant Share, as the case
may be, at the beginning of each subsequent 90-day period up to a maximum
aggregate amount of $0.01 per week per warrant or Warrant Share, as the case may
be.
Each holder of the warrants or the common stock will be subject to
applicable provisions, if any, of the Exchange Act and rules and regulations
thereunder, including those provisions which limit the timing of purchases and
sales of any of the securities by the holders. All of the foregoing may affect
the marketability of the securities.
The warrants, originally issued by the Company in 1994 contained legends
as to their restricted transferability. In addition, the certificates for common
stock issuable upon exercise of the warrants would contain legends as to their
restricted transferability. Upon the effectiveness of the Registration Statement
of which this prospectus forms a part and the transfer of the securities
pursuant thereto, these legends will no longer be necessary, and accordingly,
new certificates representing such securities will be issued to the transferee
without any such legends unless otherwise required by law.
LEGAL MATTERS
The legality of the securities covered by this prospectus has been
passed upon by Swidler Berlin Shereff Friedman, LLP, New York, New York, counsel
to the Company.
18
<PAGE>
EXPERTS
The consolidated financial statements of the Company as of June 30, 1997
and June 30, 1998 and for each of the three years in the period ended June 30,
1998 appearing in the Company's Annual Report and incorporated by reference in
this prospectus and elsewhere in this Registration Statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports. Reference is made to
said report, which includes an emphasis of matter paragraph that described the
maturities of certain of the Company's debt obligations and that management's
projections indicate that there will not be sufficient cash flow from operations
to fund these obligations and an explanatory paragraph with respect to the
change in the method of accounting for certain long-lived assets and procurement
costs as discussed in Notes 3 and 5 to the consolidated financial statements.
19
<PAGE>
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
PAGE
----
Description of Transaction F-2
Pro Forma Financial Information:
Condensed Consolidated Balance Sheet as of September 30, 1998 F-3
Condensed Consolidated Statement of Operations for the Three Months
Ended September 30, 1998 F-4
Notes to Condensed Consolidated Financial Information F-5
Condensed Consolidated Balance Sheet as of June 30, 1998 F-6
Condensed Consolidated Statement of Operations for the
Year Ended June 30, 1998 F-7
Notes to Condensed Consolidated Financial Information F-8
F-1
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The accompanying unaudited pro forma condensed consolidated financial
information gives effect to: (i) the sale of certain assets and liabilities of
U.S. Lock, a division of WOC Inc. ("WOC"), an indirect wholly-owned subsidiary
of Waxman Industries, Inc. ("Waxman" or the "Company") (the "U.S. Lock Sale"),
(ii) the application of the estimated net proceeds of the U.S. Lock Sale,
including a reduction of a portion of WOC's outstanding debt under the credit
agreement with BankAmerica Business Credit and the investment of the remaining
net proceeds in short-term investments pending the reinvestment of such funds in
the remaining core businesses or further reduction of the Company's debt, (iii)
the additional equity earnings from the purchase of U.S. Lock by Barnett Inc.
("Barnett"), in which the Company has a 44.4% ownership interest, and (iv) the
adjustment for the deferred gain on the U.S. Lock Sale. The unaudited pro forma
condensed consolidated statement of operations for the year ended June 30, 1998
has been prepared as if the U.S. Lock Sale occurred on July 1, 1997. The
accompanying unaudited pro forma condensed consolidated balance sheet of the
Company as of June 30, 1998 has been prepared as if the U.S. Lock Sale occurred
as of that date. The unaudited pro forma condensed consolidated statement of
operations for the three months ended September 30, 1998 has been prepared as if
the U.S. Lock Sale occurred on July 1, 1998. The accompanying unaudited pro
forma condensed consolidated balance sheet of the Company as of September 30,
1998 has been prepared as if the U.S. Lock Sale occurred as of that date.
This information is not necessarily indicative of future consolidated
results of operations or financial position and it should be read in conjunction
with the separate historical financial statements and related notes of Waxman,
incorporated herein by reference. In addition, while a significant amount of
liquidity has been created as a result of the sale of U.S. Lock by the Company,
a significant amount of cash flow from continuing operations that was available
to the Company will no longer be available.
F-2
<PAGE>
WAXMAN INDUSTRIES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
WAXMAN U.S. LOCK PROCEEDS PRO FORMA PRO FORMA
INDUSTRIES SALE (1) FROM SALE ADJUSTMENTS WAXMAN
---------- --------- --------- ----------- ------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash $ 263 $ 0 $ 22,788(3c) $ 23,051
Trade Receivables, net 16,542 (2,574) 13,968
Other Receivables 2,546 (60) 2,486
Inventories 24,099 (5,115) 18,984
Prepaid Expenses 3,495 8 3,503
-------- --------- -------- --------- ---------
Total Current Assets 46,945 (7,741) 22,788 0 61,992
-------- --------- -------- --------- ---------
Investment in Barnett 31,168 -- -- 88(4) 31,256
-------- --------- -------- --------- ---------
Property and Equipment:
Land 1,379 -- -- -- 1,379
Buildings 7,654 (3,877) -- 3,777
Equipment 14,606 (1,724) -- -- 12,882
-------- --------- -------- --------- ---------
23,639 (5,601) 0 0 18,038
Less Accumulated Depreciation
and Amortization (9,732) 2,773 -- (6,959)
Property and Equipment, net 13,907 (2,828) 0 0 11,079
Cost of Businesses in Excess of
Net Assets Acquired, net 8,122 -- -- -- 8,122
Unamortized Debt Issuance Costs, net 3,333 -- -- -- 3,333
Other Assets 4,484 (22) -- 4,462
--------- --------- -------- --------- ---------
Total Assets $ 107,959 ($ 10,591) $ 22,788 $ 88 $ 120,244
========= ========= ======== ========= =========
LIABILITIES
Current Liabilities:
Current Portion of
Long - Term Debt $ 17,662 -- ($ 5,937)(3b) -- $ 11,725
Senior Subordinated Notes 895 -- -- -- 895
Accounts Payable 9,539 (1,839) -- -- 7,700
Accrued Liabilities 6,770 (792) -- -- 5,978
Accrued Taxes 227 -- 227
Accrued Interest 368 -- -- -- 368
--------- --------- --------- --------- ---------
Total Current Liabilities 35,461 (2,631) (5,937) 0 26,893
--------- --------- --------- --------- ---------
Long-Term Debt, net of
current portion 796 -- -- -- 796
Senior Secured Deferred Coupon
Notes, net 84,043 -- -- -- 84,043
Senior Notes 35,855 -- -- -- 35,855
Deferred Gain -- -- -- 9,220(6) 9,220
Stockholders' Equity:
Preferred Stock -- -- -- -- --
Common Stock 98 -- -- -- 98
Class B Common Stock 21 -- -- -- 21
Paid-in Capital 21,731 -- -- -- 21,731
Retained Deficit (68,909) (7,960) 28,725(3a) (9,132) (57,276)
---------- --------- --------- --------- ---------
(47,059) (7,960) 28,725 (9,132) (35,426)
Cumulative Currency
Translation Adjustment (1,137) -- -- -- (1,137)
---------- --------- --------- --------- ---------
Total Stockholders' Equity (48,196) (7,960) 28,725 (9,132) (36,563)
---------- --------- --------- --------- ---------
Total Liabilities and Equity $ 107,959 ($ 10,591) $ 22,788 $ 88 $ 120,244
========== ========= ========= ========= =========
</TABLE>
F-3
<PAGE>
WAXMAN INDUSTRIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
WAXMAN U.S. LOCK PROCEEDS PRO FORMA PRO FORMA
INDUSTRIES SALE (1) FROM SALE ADJUSTMENTS WAXMAN
---------- --------- --------- ----------- ------
<S> <C> <C> <C> <C> <C>
Net Sales $ 28,229 ($ 6,549) $ 0 $ 0 $ 21,680
Cost of Sales 19,141 (4,392) 0 0 14,749
---------- -------- ----- ------- ----------
Gross Profit 9,088 (2,157) 0 0 6,931
Operating Expenses 8,247 (1,331) -- -- 6,916
Restructuring and
Non-recurring charges 1,350 -- -- -- 1,350
---------- -------- ----- ------- ----------
Operating Loss (509) (826) 0 0 (1,335)
Equity Earnings of Barnett 1,527 88(4) 1,615
Interest Expense, net 4,310 (443)(5) 3,867
---------- -------- ----- ------- ----------
Loss before Income Taxes (3,292) (826) 0 531 (3,587)
Provision for Income Taxes 186 (31) -- -- 155
---------- -------- ----- ------- ----------
Net Loss ($ 3,478) ($ 795) $ 0 $ 531 ($ 3,742)
========== ======== ===== ======= ==========
Basic and Diluted Loss
Per Share ($ 0.29) ($ 0.31)
========== ==========
Weighted Average Shares
and Equivalents 12,057 12,057
</TABLE>
F-4
<PAGE>
WAXMAN INDUSTRIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
(1) Represents the U.S. Lock assets sold to and
liabilities assumed by Barnett Inc.
(2) Represents the U.S. Lock income statement, excluding
an allocated corporate charge, but including an
adjusted federal tax provision.
(3) Represents the following proceeds, expenses and payments:
Gross proceeds $33,000
Compensation to Co-Chief Executive Officers (3,800)
Bonuses to other management personnel (375)
Legal, accounting and other fees (100)
---------
(3a) Proceeds, net of expenses 28,725
(3b) Reduction in bank credit facility collateralized
by U.S. Lock assets (5,937)
---------
(3c) Excess cash $22,788
=========
(4) Represents the additional equity earnings for U.S.
Lock's net income based on the 44.4% ownership
interest in Barnett by the Company. The operating
income of U.S. Lock has been adjusted for interest
expense incurred by Barnett to fund the purchase and
Barnett's tax provision.
US Lock operating income $826
Estimated interest expense 495
---------
Pretax income 331
Estimated tax 132
---------
US Lock net income $199
Waxman's ownership interest 44.40%
---------
Additional equity income $88
---------
(5) Represents the reduction in interest expense from the
partial repayment of the bank credit facility and
interest income from the investment of the cash
balance in a short term cash management program
earning 5.5%.
Net cash invested $22,788
Investment income rate 5.50%
---------
Investment income per year $1,253
---------
Investment income per quarter $313
---------
Interest savings on bank credit facility:
Loan repaid $5,937
Interest rate 8.76%
---------
Annualized savings $520
---------
Quarterly Savings $130
---------
F-5
<PAGE>
(6) Represents the deferral of 44.4% of the gain on the
sale of U.S. Lock due to the Company's equity
ownership interest in Barnett. The deferred gain will
be recognized as Barnett amortizes its goodwill
created in the acquisition of U.S. Lock or as the
Company reduces its equity interest in Barnett.
Gross proceeds $33,000
Expenses (4,275)
---------
Subtotal 28,725
Net assets sold (7,960)
---------
Gain on sale 20,765
Percentage owned of Barnett 44.40%
---------
Deferred gain $9,220
---------
</TABLE>
F-6
<PAGE>
WAXMAN INDUSTRIES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
WAXMAN U.S. LOCK PROCEEDS PRO FORMA PRO FORMA
INDUSTRIES SALE (1) FROM SALE ADJUSTMENTS WAXMAN
---------- --------- --------- ----------- ------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current Assets:
Cash $ 72 $ 0 $ 22,788(3c) $ -- $ 22,860
Trade Receivables, net 15,503 (2,478) 13,025
Other Receivables 3,152 (82) 3,070
Inventories 26,162 (5,655) 20,507
Prepaid Expenses 3,060 (57) 3,003
---------- ---------- --------- ---------- ----------
Total Current Assets 47,949 (8,272) 22,788 0 62,465
---------- ---------- --------- ---------- ----------
Investment in Barnett 29,641 -- -- 220(4) 29,861
---------- ---------- --------- ---------- ----------
Property and Equipment:
Land 1,379 -- -- -- 1,379
Buildings 7,397 (3,857) -- -- 3,540
Equipment 13,541 (1,322) -- -- 12,219
---------- ---------- --------- ---------- ----------
22,317 (5,179) 0 0 17,138
Less Accumulated Depreciation
and Amortization (9,346) 2,718 -- -- (6,628)
---------- ---------- --------- ---------- ----------
Property and Equipment, net 12,971 (2,461) 0 0 10,510
---------- ---------- --------- ---------- ----------
Cost of Businesses in Excess of
Net Assets Acquired, net 8,189 -- -- -- 8,189
Unamortized Debt Issuance
Costs, net 3,524 -- -- -- 3,524
Other Assets 3,469 (137) -- -- 3,332
---------- ---------- --------- ---------- ----------
Total Assets $ 105,743 ($ 10,870) $ 22,788 $ 220 $ 117,881
========== ========== ========= ========== ==========
LIABILITIES:
Current Liabilities:
Current Portion of
Long - Term Debt $ 14,969 $ -- ($ 5,937)(3b) $ -- $ 9,032
Senior Subordinated Notes 895 -- -- -- 895
Accounts Payable 8,473 (1,590) -- -- 6,883
Accrued Liabilities 6,500 (743) -- -- 5,757
Accrued Taxes 250 -- -- -- 250
Accrued Interest 1,339 -- -- -- 1,339
---------- ---------- --------- ---------- ----------
Total Current Liabilities 32,426 (2,333) (5,937) 0 24,156
---------- ---------- --------- ---------- ----------
Long-Term Debt, net of current
portion 838 -- -- - 838
Senior Secured Deferred Coupon
Notes, net 81,368 -- -- -- 81,368
Senior Notes 35,855 -- -- -- 35,855
Deferred Gain -- -- -- 8,963(6) 8,963
Stockholders' Equity:
Preferred Stock -- -- -- -- --
Common Stock 98 -- -- -- 98
Class B Common Stock 21 -- -- -- 21
Paid-in Capital 21,731 -- -- -- 21,731
Retained Deficit (65,431) (8,537) 28,725(3a) (8,743) (53,986)
---------- ---------- --------- --------- ----------
(43,581) (8,537) 28,725 (8,743) (32,136)
Cumulative Currency
Translation Adjustment (1,163) -- -- -- (1,163)
---------- ---------- --------- --------- ----------
Total Stockholders' Equity (44,744) (8,537) 28,725 (8,743) (33,299)
---------- ---------- --------- --------- ----------
Total Liabilities
and Equity $ 105,743 ($ 10,870) $ 22,788 $ 220 $ 117,881
========== ========== ========= ========= ==========
</TABLE>
F-7
<PAGE>
WAXMAN INDUSTRIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
WAXMAN U.S. LOCK PROCEEDS PRO FORMA PRO FORMA
INDUSTRIES SALE (2) FROM SALE ADJUSTMENTS WAXMAN
---------- --------- --------- ----------- ------
<S> <C> <C> <C> <C> <C>
Net Sales $ 105,662 ($ 22,762) $ 0 $ 0 $ 82,900
Cost of Sales 69,429 (15,177) 0 0 54,252
---------- --------- -------- -------- ----------
Gross Profit 36,233 (7,585) 0 0 28,648
Operating Expenses 30,290 (4,780) -- -- 25,510
Restructuring and
Non-recurring charges 24 -- -- -- 24
---------- --------- -------- -------- ----------
Operating Income 5,919 (2,805) 0 0 3,114
Equity Earnings of Barnett 6,341 220(4) 6,561
Interest Expense, net 16,031 (1,773)(5) 14,258
---------- --------- -------- -------- ----------
Loss before Income Taxes and
Extraordinary Charge (3,771) (2,805) 0 1,993 (4,583)
Provision for Income Taxes 537 (104) -- -- 433
Extraordinary Charge 192 192
---------- --------- -------- -------- ----------
Net Loss ($ 4,500) ($ 2,701) $ 0 $ 1,993 ($ 5,208)
========== ========= ======== ======== ==========
Basic and Diluted Loss Per Share:
From Continuing Operations
before
Extraordinary Charge ($ 0.35) ($ 0.41)
Extraordinary Charge (0.02) (0.02)
---------- ----------
Net Loss ($ 0.37) ($ 0.43)
========== ==========
Weighted Average Shares
and Equivalents 12,026 12,026
</TABLE>
F-8
<PAGE>
WAXMAN INDUSTRIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
JUNE 30, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
(1) Represents the U.S. Lock assets sold to and liabilities
assumed by Barnett Inc.
(2) Represents the U.S. Lock income statement, excluding an
allocated corporate charge, but including an adjusted federal
tax provision.
(3) Represents the following proceeds, expenses and payments:
Gross proceeds $33,000
Compensation to Co-Chief Executive Officers (3,800)
Bonuses to other management personnel (375)
Legal, accounting and other fees (100)
---------
(3a) Proceeds, net of expenses 28,725
(3b) Reduction in bank credit facility collateralized by
U.S. Lock assets (5,937)
---------
(3c) Excess cash $22,788
=========
(4) Represents the additional equity earnings for U.S. Lock's net
income based on the 44.4% ownership interest in Barnett by the
Company. The operating income of U.S. Lock has been adjusted
for interest expense incurred by Barnett to fund the purchase
and Barnett's tax provision.
US Lock operating income $2,805
Estimated interest expense 1,980
---------
Pretax income 825
Estimated tax 330
---------
US Lock net income $495
Waxman's ownership interest 44.40%
---------
Additional equity income $220
---------
(5) Represents the reduction in interest expense from the partial
repayment of the bank credit facility and interest income from
the investment of the cash balance in a short term cash
management program earning 5.5%.
Net cash invested $22,788
Investment income rate 5.50%
---------
Investment income per year $1,253
---------
Interest savings on bank credit facility:
Loan repaid $5,937
Interest rate 8.76%
---------
Annualized savings $520
---------
F-9
<PAGE>
(6) Represents the deferral of 44.4% of the gain on the sale of
U.S. Lock due to the Company's equity ownership interest in
Barnett. The deferred gain will be recognized as Barnett
amortizes its goodwill created in the acquisition of U.S. Lock
or as the Company reduces its equity interest in Barnett.
Gross proceeds $33,000
Expenses (4,275)
---------
Subtotal 28,725
Net assets sold (8,537)
------
Gain on sale 20,188
Percentage owned of Barnett 44.40%
---------
Deferred gain $8,963
---------
</TABLE>
F-10
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS
DOCUMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS
DOCUMENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER TO
BUY ANY SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
TABLE OF CONTENTS
PAGE
ABOUT THIS PROSPECTUS...................................................... 2
WHERE YOU CAN FIND MORE INFORMATION........................................ 2
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.......................... 2
PROSPECTUS SUMMARY......................................................... 4
RISK FACTORS............................................................... 10
USE OF PROCEEDS............................................................ 15
SELLING SECURITY HOLDERS................................................... 15
DESCRIPTION OF THE WARRANTS................................................ 15
DESCRIPTION OF CAPITAL STOCK............................................... 16
PLAN OF DISTRIBUTION....................................................... 17
LEGAL MATTERS.............................................................. 18
EXPERTS .................................................................. 19
INDEX TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION ..................... F-1
WAXMAN INDUSTRIES, INC.
2,734,800
Warrants to
Purchase Common Stock
---------------
2,950,000
Shares of
Common Stock
Par Value $.01 Per Share
---------------
Prospectus
---------------
, 1999
---------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following expenses incurred in connection with this Registration
Statement will be paid by the Company. The Selling Security Holders will not
bear any of such expenses.
Filing Fees - Securities and Exchange Commission $ --
Accounting Fees and Expenses 5,000*
Legal Fees and Expenses 15,000*
Printing Fees and Expenses 2,500*
Miscellaneous Expenses 2,500*
-----------
Total $ 25,000*
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The indemnification of officers and directors of the Registrant is
governed by Section 145 of the DGCL and the Certificate of Incorporation of the
Company (the "Certificate"). Among other things, the DGCL permits
indemnification of a director, officer, employee or agent in civil, criminal,
administrative or investigative actions, suits or proceedings (other than an
action by or in the right of the corporation) to which such person is a party or
is threatened to be made a party by reason of the fact of such relationship with
the corporation or the fact that such person is or was serving in a similar
capacity with another entity at the request of the corporation against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action if such
person 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, if he had no reasonable cause to believe his
conduct was unlawful. No indemnification may be made in any such suit to any
person adjudged to be liable to the corporation unless and only to the extent
that the Delaware Court of Chancery or the court in which the action was brought
determines that, despite the adjudication of liability but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper. Under the DGCL,
to the extent that a director, officer, employee or agent is successful, on the
merits or otherwise, in the defense of any action, suit or proceeding or any
claim, issue or matter therein (whether or not the suit is brought by or in the
right of the corporation), he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith. In all cases in which indemnification is permitted (unless ordered by
a court), it may be made by the corporation only as authorized in the specific
case upon a determination that the applicable standard of conduct has been met
by the party to be indemnified. The determination must be made by a majority of
the directors who were not parties to the action, suit or proceeding, even
though less than a quorum, or if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or by
the stockholders. The statute authorizes the corporation to pay expenses
(including attorneys' fees) incurred by an officer or director in advance of a
final disposition of a proceeding upon receipt of an undertaking by or on behalf
of the person to whom the advance will be made, to repay the advances if it
shall ultimately be determined that he was not entitled to indemnification. Such
expenses (including attorneys' fees) incurred by other employees and agents may
be paid upon such terms and conditions, if any, as the Board may determine. The
DGCL provides that indemnification and advances of expenses permitted thereunder
are not to be exclusive of any rights to which those seeking indemnification or
advancement of expenses may be entitled under any By-law, agreement, vote of
stockholders or disinterested directors, or otherwise. The DGCL also authorizes
the corporation to purchase and maintain liability insurance on behalf of its
directors, officers, employees and agents regardless of whether the corporation
would have the statutory power to indemnify such persons against the liabilities
insured.
The Certificate of Incorporation of the Company provides that each
person who is a party to or involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
or she was a director or officer of the Company, shall be indemnified and held
harmless by the Company to the fullest extent authorized by the DGCL against all
expense, liability and loss reasonably incurred by such person in connection
therewith. The Certificate of Incorporation provides that the right to
indemnification contained therein is a contract right and includes the right to
be paid by the Company the expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that if the DGCL requires,
the payment of such expenses incurred in advance of the final disposition of a
proceeding shall be made only upon delivery to the Company of an undertaking to
repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified. The Company maintains
directors' and officers' liability insurance covering certain liabilities
incurred by the directors and officers of the Company in connection with the
performance of their duties.
ITEM 16. EXHIBITS
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4.1(1) Indenture, dated as of May 20, 1994, by and between Waxman
Industries, Inc. and The Huntington National Bank, as Trustee, with
respect to the Senior Secured Deferred Coupon Notes, including the
form of Senior Secured Deferred Coupon Notes (Exhibit 4.1 to Waxman
Industries, Inc.'s Form S-4 filed June 20, 1994, incorporated herein
by reference).
4.2(2) First Supplemental Indenture, dated as of January 19, 1996, by and
between Waxman Industries, Inc. and The Huntington National Bank, as
Trustee.
4.3(1) Warrant Agreement, dated as of May 20, 1994, by and between Waxman
Industries, Inc. and The Huntington National Bank, as Warrant Agent
(Exhibit 4.2 to Waxman Industries, Inc.'s Form S-4 filed June 20,
1994, incorporated herein by reference).
4.4(1) Warrant Certificate (Exhibit 4.3 to Waxman Industries, Inc.'s Form
S-4 filed June 20, 1994, incorporated herein by reference).
5.1(1) Opinion of Shereff, Friedman, Hoffman & Goodman, LLP regarding
legality (filed as Exhibit 5.1 to this Registration Statement).
10.1(1) Lease between Waxman Industries, Inc. as Lessee and Aurora Investment
Co. as Lessor dated June 30, 1992 (Exhibit 10.1 to Waxman Industries,
Inc.'s Annual Report on Form 10-K for the year ended June 30, 1992,
File No. 0-5888, incorporated herein by reference).
10.2(1) Policy Statement (revised as of June 1, 1980) regarding Waxman
Industries, Inc.'s Profit Incentive Plan (Exhibit 10(c)-1 to Waxman
Industries, Inc.'s Annual Report on Form 10-K for the year ended June
30, 1984, File No. 0-5888, incorporated herein by reference).
10.3(1) Form of Stock Option Agreement between Waxman Industries, Inc. and
its Directors (Exhibit 10.5 to Waxman Industries, Inc.'s Annual
Report on Form 10-K for the year ended June 30, 1991, File No.
0-5888, incorporated herein by reference).
10.4(1) Employment Contract dated January 1, 1992 between Waxman Industries,
Inc. and John S. Peters (Exhibit 10.6 to Waxman Industries, Inc.'s
Annual Report on Form 10-K for the year ended June 30, 1992, File No.
0-5888, incorporated herein by reference).
10.5(1) Employment Agreement dated November 1, 1994 between Waxman Consumer
Products Group Inc. and Laurence Waxman. (Exhibit 10.6 to Waxman
Industries, Inc.'s Amendment No. 4 on Form S-2 to Form S-1 filed
October 10, 1995, Registration No. 33-54211, incorporated herein by
reference).
10.6(1) Tax Sharing Agreement dated May 20, 1994 among Waxman Industries,
Inc., Waxman USA, Barnett Inc., Waxman Consumer Products Group Inc.,
WOC Inc. and Western American Manufacturing, Inc. (Exhibit 10.6 to
Waxman Industries, Inc.'s Form S-4 filed June 20, 1994, incorporated
herein by reference).
10.7(1) Intercorporate Agreement dated May 20, 1994 among Waxman Industries,
Inc., Waxman USA, Barnett Inc., Waxman Consumer Products Group Inc.,
WOC Inc. and Western American Manufacturing, Inc. (Exhibit 10.7 to
Waxman Industries, Inc.'s Form S-4 filed June 20, 1994, incorporated
herein by reference).
10.8(2) Intercorporate Agreement dated March 28, 1996 among Barnett Inc.,
Waxman Industries, Inc., Waxman USA Inc., Waxman Consumer Products
Group Inc., WOC Inc. and TWI, International Inc.
10.9(1) Credit Agreement dated as of May 20, 1994 among Waxman USA, Inc.,
Barnett Inc., Waxman Consumer Products Group Inc. and WOC Inc., the
Lenders and Issuers party thereto and Citicorp USA, Inc. as Agent,
and certain exhibits thereto (Exhibit 10.8 to Waxman Industries,
Inc.'s Form S-4 filed June 20, 1994, incorporated herein by
reference).
10.10(1) Term Loan Credit Agreement dated as of May 20, 1994 among Waxman USA
Inc., Barnett Inc., Waxman Consumer Products Group Inc. and WOC Inc.,
the Lenders and Issuers party thereto and Citibank, N.A., as Agent
(Exhibit 10.9 to Waxman Industries, Inc.'s Form S-4 filed June 20,
1994, incorporated herein by reference).
10.11(1) Amendment No. 2 to the Term Loan Agreement and Amendment No. 1 to the
Revolving Credit Agreement among Waxman USA Inc., Barnett Inc.,
Waxman Consumer Products Group Inc. and WOC Inc., the Lenders and
Issuers party thereto and Citibank, N.A., as Agent. (Exhibit 10.11 to
Waxman Industries, Inc.'s Amendment No. 4 on Form S-2 to Form S-1
filed October 10, 1995, Registration No. 33-54211, incorporated
herein by reference).
10.12(2) Amended and Restated Credit Agreement dated as of April 3, 1996 among
Waxman USA Inc., Waxman Consumer Products Group Inc., WOC Inc., the
Lenders and Issuers party thereto and Citibank, N.A., as agent, and
certain exhibits thereto.
10.13(2) Standstill Agreement dated March 28, 1996 between Waxman Industries,
Inc. and Barnett Inc.
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10.14(2) Indenture, dated as of April 3, 1996, by and between Waxman USA Inc.
and the United States Trust Company of New York, as Trustee, with
respect to the 111/8% Senior Notes due 2001 of Waxman USA Inc.,
including the form of Senior Notes.
10.15(2) Registration Rights Agreement, dated as of April 3, 1996, by and
between Waxman USA Inc. and the United States Trust Company of New
York.
10.16(1) Loan and Security Agreement dated as of June 28, 1996 among the
Financial Institutions named therein and BankAmerica Business Credit,
Inc., as the Agent, Waxman Consumer Products Group Inc. and WOC Inc.,
including certain exhibits thereto (Exhibit 4.33 to Waxman
Industries, Inc.'s Annual Report on Form 10-K for the year ended June
30, 1996, File No. 001-10273, incorporated herein by reference).
10.17(1) Waxman Industries, Inc. 1996 Non-Employee Directors' Restricted Share
Plan (Exhibit A to Waxman Industries, Inc. 1996 Proxy Statement, File
No. 001-10273, incorporated herein by reference).
10.18(3) SAR Agreement, dated as of March 29, 1996, between Waxman Industries,
Inc. and Armond Waxman.
10.19(3) SAR Agreement, dated as of March 29, 1996, between Waxman Industries,
Inc. and Melvin Waxman.
10.20(3) SAR Agreement, dated as of September 27, 1996, between Waxman
Industries, Inc. and Laurence Waxman.
10.21(1) Asset Purchase Agreement, dated as of December 18, 1998, among Waxman
Industries, Inc., WOC Inc. and Barnett Inc. (Exhibit 3 to Waxman
Industries, Inc.'s Current Report on Form 8-K filed with the
Securities and Exchange Commission on January 15, 1998, File No.
0-5888, incorporated by reference herein).
12.1(1) Statement re: computation of ratio (Exhibit 12.1 to Waxman
Industries, Inc.'s Form S-1 filed July 18, 1995, incorporated herein
by reference).
13.1(1) Waxman Industries, Inc.'s Annual Report on Form 10-K for its fiscal
year ended June 30, 1998 (File No. 0-5888, incorporated herein by
reference).
13.2(1) Waxman Industries, Inc.'s Quarterly Report on Form 10-Q for its first
quarter ended September 30, 1998 (File No. 0- 5888, incorporated
herein by reference).
23.1 Consent of Arthur Andersen LLP.
23.2(1) Consent of Shereff, Friedman, Hoffman & Goodman, LLP (contained in
its opinion filed as Exhibit 5.1 to this Registration Statement).
24.1(3) Power of Attorney.
- - ------------------
(1) Incorporated herein by reference as indicated.
(2) Filed on April 15, 1996.
(3) Filed on January 24, 1997.
(b) Financial Statement Schedules
All schedules have been omitted because the required
information is not present or not present in amounts sufficient to require
submission of the schedule, or because the information required is included in
the consolidated financial statements including notes thereto.
ITEM 17. UNDERTAKINGS
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value in securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
maximum
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<PAGE>
offering range may be reflected on the form of prospectus
filed with the Commission pursuant Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more
than a 20% change in maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
B. The undersigned registrant hereby undertakes that,
for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section
15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement 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.
C. The undersigned registrant hereby undertakes to
deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest
annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of
Regulation S-X are not set forth in the prospectus, to
deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that
is specifically incorporated by reference in the prospectus to
provide such interim financial information.
D. 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.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Waxman
Industries, Inc. certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Cleveland, State of Ohio on the 26th day of
January, 1999.
WAXMAN INDUSTRIES, INC.
By: /s/ Armond Waxman
-------------------------------
Armond Waxman
President, Co-Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman of the Board, January 26, 1999
- - ---------------------------- Co-Chief Executive Officer
Melvin Waxman and Director
/s/ Armond Waxman President, Co-Chief Executive January 26, 1999
- - ---------------------------- Officer and Director
Armond Waxman
* Senior Vice President January 26, 1999
- - ---------------------------- and Director
Laurence Waxman
* Vice-President-Finance and January 26, 1999
- - ---------------------------- Chief Financial
Mark Wester Officer
* Director January 26, 1999
- - ----------------------------
William R. Pray
* Director January 26, 1999
- - ----------------------------
Irving Friedman
* Director January 26, 1999
- - ----------------------------
Judy Robins
by: /s/ Armond Waxman
-------------------------
Attorney-In-Fact
<PAGE>
EXHIBIT 23.1
CONSENT OF ARTHUR ANDERSEN LLP
[Letterhead of Arthur Andersen LLP]
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated August 21, 1998
included in Waxman Industries, Inc.'s Form 10-K for the year ended June 30, 1998
and to all references to our Firm included in this Registration Statement (File
No. 33-54211).
Cleveland, Ohio,
January 22, 1999.
