<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 12, 1998
REGISTRATION NO. 333-42481
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BLOUNT, INC.
BLOUNT INTERNATIONAL, INC.
(EXACT NAME OF EACH REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
63-0593908
DELAWARE 63-0780521
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBERS)
</TABLE>
4520 EXECUTIVE PARK DRIVE
MONTGOMERY, AL 36116-1602
(334) 244-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
------------------------
HAROLD E. LAYMAN
BLOUNT INTERNATIONAL, INC.
4520 EXECUTIVE PARK DRIVE
MONTGOMERY, ALABAMA 36116-1602
(334) 244-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
DAVID LOPEZ, ESQ. MARY A. BERNARD, ESQ.
CLEARY, GOTTLIEB, STEEN & HAMILTON KING & SPALDING
ONE LIBERTY PLAZA 1185 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10006 NEW YORK, NEW YORK 10036
(212) 225-2000 (212) 556-2100
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable following the effective date of this
Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration 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. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
% Senior Notes Due 2005 of Blount,
Inc. $150,000,000 100% $150,000,000 $44.250(2)
- -----------------------------------------------------------------------------------------------------------------------------
Blount International, Inc. Guarantee -- -- -- (3)
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
(2) This amount was previously paid in connection with the initial filing of the
Registration Statement on December 17, 1997.
(3) No fee required to Rule 457(h).
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THIS POST-EFFECTIVE AMENDMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 12, 1998
PROSPECTUS
[BLOUNT INC. LOGO]
BLOUNT, INC.
$150,000,000
% Senior Notes due June , 2005
Fully and Unconditionally Guaranteed by
BLOUNT INTERNATIONAL, INC.
Interest payable June and December
ISSUE PRICE: %
Interest on the % Senior Notes due June , 2005 (the "Notes") of Blount,
Inc. (the "Company") is payable semi-annually on June and December of each
year, beginning December , 1998. The Notes are being offered by the Company
and will be fully and unconditionally guaranteed (the "Guarantee") by Blount
International, Inc. ("Blount" or the "Guarantor"). The Notes are redeemable, in
whole or in part, at the option of the Company, at any time, at a redemption
price equal to the greater of (i) 100% of the principal amount of such Notes and
(ii) as determined by the Quotation Agent (as defined herein), the sum of the
present values of the remaining scheduled payments of principal and interest
thereon (not including any portion of such payments of interest accrued as of
the date of redemption) discounted to the date of redemption on a semi-annual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Adjusted Treasury Rate (as defined herein), plus basis points plus, in each
case, accrued and unpaid interest thereon to the date of redemption. See
"Description of Notes -- Optional Redemption" herein.
The Notes will be represented by one or more Global Securities registered in the
name of The Depository Trust Company (the "Depositary") or its nominee.
Interests in the Global Securities will be shown on, and transfers thereof will
be effected only through, records maintained by the Depositary and its
participants. Except as provided herein, Notes will not be issued in definitive
form. See "Description of Notes."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
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<S> <C> <C> <C>
Per Note % % %
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Total $ $ $
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</TABLE>
(1) Plus accrued interest, if any, from June , 1998.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $393,750.
The Notes are offered, subject to prior sale, when, as and if accepted by the
Underwriters and subject to approval of certain legal matters by King &
Spalding, counsel for the Underwriters. It is expected that delivery of the
Notes will be made on or about June , 1998 through the facilities of the
Depositary, against payment therefor in immediately available funds.
J.P. MORGAN & CO. SALOMON SMITH BARNEY
June , 1998
<PAGE> 3
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SPECIFICALLY,
THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND MAY BID FOR
AND PURCHASE THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by Blount, the Company or any Underwriter. This Prospectus does not constitute
an offer to sell or the solicitation of an offer to buy the Notes by anyone in
any jurisdiction in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not qualified to do so or
to any person to whom it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus, nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of Blount or the Company since the date hereof or that the information
contained or incorporated by reference herein is correct as of any time
subsequent to the date of such information.
------------------------
TABLE OF CONTENTS
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PAGE
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<S> <C>
Available Information....................................... 3
Incorporation of Certain Documents by Reference............. 3
The Company................................................. 5
Federal Cartridge Acquisition............................... 7
Use of Proceeds............................................. 8
Capitalization.............................................. 9
Selected Financial Data..................................... 10
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 12
Description of Notes........................................ 15
Underwriting................................................ 24
Legal Matters............................................... 25
Experts..................................................... 25
</TABLE>
2
<PAGE> 4
AVAILABLE INFORMATION
Blount is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information concerning Blount can be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices at Seven World Trade Center, 13th Floor, New York, New York 10048, and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained from the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates, or
at the Commission's worldwide website at http://www.sec.gov. Blount's Class A
Common Stock and Class B Common Stock are listed on the New York Stock Exchange,
Inc., and such material may also be inspected at the offices of such Exchange,
20 Broad Street, New York, New York 10005.
Although the Company, a wholly-owned subsidiary of Blount, was not subject
to the informational requirements of the Exchange Act immediately prior to the
date hereof, the Company presently is required to file reports with the
Commission pursuant to the Indenture dated as of July 1, 1993 governing its 9%
Senior Subordinated Notes due 2003 ("Subordinated Notes"), which the Company
plans to repay with a portion of the net proceeds from the sale of the Notes
offered hereby. See "Use of Proceeds." Upon repayment of the Subordinated Notes,
the Company will no longer be obligated to file reports with the Commission
pursuant to such Indenture. As a result of the filing of the Registration
Statement (as defined herein) with the Commission, the Company will nevertheless
become subject to the informational requirements of the Exchange Act and in
accordance therewith will be required to file reports and other information with
the Commission. The Company intends to seek a letter from the staff of the
Commission relieving the Company from the informational requirements of the
Exchange Act pursuant to Staff Accounting Bulletin No. 53 and Rule 12(h) under
the Exchange Act.
Blount and the Company have filed with the Commission a registration
statement on Form S-3 (herein, together with all amendments and exhibits,
referred to as the "Registration Statement") under the Securities Act of 1933,
as amended (the "Securities Act"), relating to the Notes. This Prospectus does
not contain all the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is hereby made to the
Registration Statement and to the exhibits thereto. Statements contained herein
concerning the provisions of certain documents are not necessarily complete, and
in each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed with the Commission pursuant to Section 13
of the Exchange Act, are incorporated herein by reference as of their respective
dates: (i) the Annual Reports on Form 10-K of Blount and the Company for the
period ended December 31, 1997, (ii) the Current Reports on Form 8-K/A of Blount
and the Company dated January 20, 1998, (iii) the Annual Report on Form 10-K/A
of Blount dated March 27, 1998 and (iv) the Quarterly Reports on Form 10-Q of
Blount and the Company for the period ended March 31, 1998.
All reports and definitive proxy or information statements filed by Blount
and the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date of this Prospectus and prior to the termination of
this offering shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from date of the filing of such documents.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such
3
<PAGE> 5
statement. Any statements so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
Blount and the Company will provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus is delivered,
on the written or oral request of any such person, a copy of any or all of the
documents incorporated by reference herein, except the exhibits to such
documents (unless such exhibits are specifically incorporated by reference in
such documents). Requests for such copies should be directed to Executive Vice
President -- Administration, Blount International, Inc., P.O. Box 949,
Montgomery, Alabama 36101-0949 (telephone number: (334) 244-4000).
4
<PAGE> 6
THE COMPANY
The Company is an international industrial company with operations in three
business segments: Outdoor Products, Industrial and Power Equipment and Sporting
Equipment. The Company's focus is on manufacturing and distributing products
which hold leading market share positions in a number of attractive niche
markets. The Company is a wholly-owned subsidiary of the Guarantor, which is a
holding company conducting all of its operations through the Company. The
principal offices of the Company and the Guarantor are located at 4520 Executive
Park Drive, Montgomery, Alabama 36116 (telephone number: (334) 244-4000).
OUTDOOR PRODUCTS
The Company's Outdoor Products segment (44.5% of consolidated sales for the
year ended December 31, 1997) is comprised of the Oregon Cutting Systems
Division ("Oregon"), Dixon Industries, Inc. ("Dixon") and Frederick
Manufacturing Corporation ("Frederick") (which includes the operations conducted
by Orbex, Inc. ("Orbex") prior to its merger into Frederick on March 24, 1998).
Oregon produces a wide variety of saw chain, chain saw guide bars, saw chain
drive sprockets and accessories for use primarily on portable gasoline and
electric chain saws, and mechanical timber harvesting equipment. The Oregon
trademark is well known to end-users and the Company believes that it is the
world leader in the production of saw chain. Oregon's saw chain and related
products are used primarily by professional loggers, construction workers,
farmers, arborists and homeowners. Oregon also markets an Industrial Cutting
System ("ICS"), a diamond-segmented chain cutting system for concrete (including
steel-reinforced concrete). ICS is a faster and more flexible concrete cutting
method than others currently employed in the construction and demolition
industries.
Oregon sells its products to distributors, dealers and mass merchandisers
serving the retail replacement market. In addition, Oregon currently sells its
products to more than 50 original equipment manufacturers ("OEMs"). The use of
Oregon cutting chain as original equipment on chain saws is promoted through
cooperation with OEMs in improving the design and specifications of chain and
saws. Due to the high level of technical expertise and capital investment
required to manufacture saw chain and guide bars, the Company believes that it
is able to produce durable, high-quality saw chain and guide bars more
efficiently than most of its competitors.
The Company has Oregon marketing personnel throughout the United States and
in a number of foreign countries. Sales derived from operations outside the
United States accounted for 37%, and export sales accounted for an additional
22%, of Oregon's sales during the year ended December 31, 1997.
Dixon, acquired by the Company in early fiscal 1991, has manufactured ZTR
(zero turning radius) lawn mowers and related attachments since 1973. Dixon
pioneered the development of ZTR lawn mowers and is the only manufacturer to
offer a full line of ZTR lawn mowers for both homeowner and commercial
applications.
The key element which differentiates lawn mowers manufactured by Dixon from
those of its competitors is Dixon's unique mechanical transaxle. The transaxle
transmits power independently to the rear drive wheels and enables the operator
to move the back wheels at different speeds and turn the mower in a circle no
larger than the machine, a "zero radius turn." This transmission enables the
Dixon mower to out-maneuver conventional ride-on mowers available in the market
today and provides a cost advantage over the more expensive hydrostatic drives
used by competitors in the market.
Dixon sells its products through full-service dealers, North American
distributors and export distributors. Sales by Dixon accounted for 14% of sales
attributable to the Outdoor Products segment in the year ended December 31,
1997.
In January 1997 the Company acquired Frederick and Orbex for an aggregate
of $19 million in cash plus the assumption of certain indebtedness. Frederick is
(and Orbex, prior to its merger into Frederick in March 1998, was) a supplier of
outdoor products, primarily accessories for lawn mowers, and sporting goods. The
sales of Frederick and Orbex for 1997 accounted for approximately 7% of sales of
the Outdoor Products segment.
5
<PAGE> 7
In 1997, approximately 16.8% of the sales of the Outdoor Products segment
were to one customer. See Note 10 of Notes to Consolidated Financial Statements
contained in the 1997 Forms 10-K incorporated herein by reference.
INDUSTRIAL AND POWER EQUIPMENT
The Company's Industrial and Power Equipment segment (33.4% of consolidated
sales for the year ended December 31, 1997) manufactures equipment for timber
harvesting and log loading, industrial tractors and loaders, rotation bearings
and mechanical power transmission components. The Company believes that it is a
world leader in the manufacture of hydraulic timber harvesting equipment, which
includes a line of truck-mounted, trailer-mounted, stationary-mounted and
self-propelled loaders and crawler feller bunchers (tractors with hydraulic
attachments for felling timber) under the Prentice brand name; a line of
rubber-tired feller bunchers and related attachments under the Hydro-Ax brand
name; and a line of delimbers and slashers under the CTR brand name. Major users
of these products include logging contractors, harvesters, lumber and pulp
mills, land reclamation companies, utility contractors, building material
distributors, scrap yard operators and waste treatment facilities.
The Company sells this segment's products through a network of
approximately 250 dealers in over 400 locations in the United States and
currently has an additional 20 dealers overseas, primarily in the timber
harvesting regions of South America and Southeast Asia. Over 85% of the sales
attributable to the Industrial and Power Equipment segment for the year ended
December 31, 1997 were in the United States, primarily in the southeastern and
south central states.
The Company emphasizes the quality, safety, comfort, durability and
productivity of its products and the after-market service provided by its
distribution and support network. The Company's Industrial and Power Equipment
segment competes primarily on the basis of quality with a number of domestic and
foreign manufacturers of log loaders and feller bunchers.
The Company attempts to capitalize on its technological and manufacturing
expertise as a means of increasing its participation in the market for
replacement parts for products which it manufactures, as well as of developing
new product applications both within and beyond the timber, material handling,
scrap, land clearing and gear industries. The Company is committed to continuing
research and development in this segment to respond quickly to increasing
mechanization and environmental awareness in the timber harvesting industry.
Approximately 20% of total sales attributable to the Industrial and Power
Equipment segment during the year ended December 31, 1997 were derived from Gear
Products, Inc. ("Gear"), acquired by the Company in March 1991, and CTR
Manufacturing, Inc. ("CTR"), acquired by the Company in April 1994. Gear
designs, manufactures and distributes rotation bearings and mechanical power
transmission components for manufacturers of equipment that serve the utility,
man-lift, construction, forestry and marine industries.
SPORTING EQUIPMENT
In November 1997, the Company acquired the Federal Cartridge Company
("Federal"), a subsidiary of Pentair, Inc., which manufactures and markets
shotshell, centerfire, and rimfire cartridges, ammunition and clay targets. The
Federal Acquisition (as defined herein) complements and significantly expands
the product offerings of the Company's Sporting Equipment segment. See "Federal
Cartridge Acquisition."
The Company's Sporting Equipment segment (which, including the contribution
of Federal following the Federal Acquisition, accounted for 22.1% of
consolidated sales for the year ended December 31, 1997) manufactures small arms
ammunition, reloading equipment, primers, gun care products and accessories, and
is a distributor of imported sports optical products under the Simmons and
Weaver brand names. Sales by Simmons Outdoor Corporation, acquired in December
1995, accounted for 22% of sales attributable to the Sporting Equipment segment
for the year ended December 31, 1997. Principal products in this segment include
CCI and Speer ammunition sold for use by hunters, sportsmen and law enforcement
and military personnel; RCBS reloading equipment for use by hunters and
sportsmen who prefer to reload their own ammunition; Outers gun care and
trap-shooting products; Ram-Line synthetic
6
<PAGE> 8
stocks and other shooting sports accessories; Weaver mounting systems; and
Simmons and Weaver optics. The Company believes that it is a market leader in
the domestic gun care and reloading markets with high levels of brand name
recognition in each of these areas. The Sporting Equipment segment also produces
industrial powerloads which are used in the construction industry to drive
fastening pins into metal or concrete.
The market for Sporting Equipment products is characterized by a high
degree of customer loyalty to brand names and historically has remained
relatively stable notwithstanding adverse economic conditions. A continuing
focus on new and better technologies has enabled the Company to introduce a
number of new and improved products in recent years. These products include new
rifle ammunition, which was previously available only to handloaders, Speer Gold
Dot high performance pistol ammunition, which the Company believes is gaining
favor with law enforcement agencies around the world, and Clean-Fire and
non-toxic ammunition used extensively for indoor training. The Company's
exclusive aluminum case technology continues to provide low cost Blazer
ammunition to consumers for law enforcement training applications. New for 1998
is a series of fully automatic electric traps specifically designed for
commercial trap, skeet and sporting clays applications.
FEDERAL CARTRIDGE ACQUISITION
On November 4, 1997 the Company acquired Federal (the "Federal
Acquisition") for a purchase price of approximately $129 million in cash
(including post-closing adjustments and acquisition expenses of approximately
$17 million). The Federal Acquisition was funded with borrowings under the $150
million unsecured revolving credit agreement (the "Credit Agreement") between
the Company, Blount (as guarantor) and a syndicate of banks, other short-term
borrowings and internally-generated funds. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
Federal manufactures and markets shotshell, centerfire, and rimfire
cartridges, ammunition components, and clay targets. These products are
distributed throughout the United States through a network of distributors and
directly to large retail chains, the U.S. government and law enforcement
agencies. The acquisition of Federal, which in 1997 had sales in the ammunition
business of approximately $140 million (including approximately $14 million
subsequent to the Federal Acquisition), represented an increase of approximately
95% in annual sales attributable to the Company's Sporting Equipment segment for
the year ended December 31, 1997 and places the Company among the leading United
States producers of ammunition products.
The Federal Acquisition both complements and significantly expands the
Sporting Equipment segment's product offerings. Shotgun shells, a product not
previously manufactured or sold by the Company, represented approximately 42% of
Federal's sales for the year ended December 31, 1997. Federal is also a
significant producer and marketer of centerfire rifle ammunition, products as to
which the Company's market share is much smaller. In addition, Federal has
strong sales to the law enforcement market, a market on which the Company only
recently began to focus.
A significant portion of Federal's sales is to mass merchandisers, such as
Wal-Mart Stores, Inc., to whom the Company's Sporting Equipment sales have been
much less significant. The Company believes that as a result of the Federal
Acquisition, the Company's Sporting Equipment product lines, particularly its
optical products, may gain greater access to such mass merchandisers.
The Company believes that in recent years Federal's margins for its
products generally have been lower than those of the Company's Sporting
Equipment segment. The Company believes that the profitability of the Sporting
Equipment segment (including Federal) can be improved through cost savings to be
phased in over several years. Such savings are expected to result primarily from
the specialization and rationalization of production activities, combined
purchasing of goods and services and more efficient marketing and distribution.
7
<PAGE> 9
USE OF PROCEEDS
The net proceeds from the sale of the Notes offered hereby are estimated to
be approximately $148.6 million. The Company will use approximately $58 million
of such net proceeds to repay outstanding indebtedness incurred in connection
with the Federal Acquisition under the Credit Agreement. See "Federal Cartridge
Acquisition." Morgan Guaranty Trust Company of New York ("Morgan Guaranty"), an
affiliate of J.P. Morgan Securities Inc. which is one of the Underwriters, is
one of the banks and acts as agent under the Credit Agreement. See
"Underwriting." The Credit Agreement provides for interest rates to be
determined at the time of borrowings based on a choice of formulas specified in
the Credit Agreement. Interest rates and commitment fees may vary based on the
ratio of cash flow to debt as defined in the Credit Agreement or on the
Company's credit rating. As of June 1, 1998 the Company had an aggregate of
approximately $58 million outstanding under the Credit Agreement, which
borrowings bore interest at such date at a weighted average rate of
approximately 5.89% per annum. The Credit Agreement terminates in April 2002.
The Company also plans to use a portion of the net proceeds from the sale
of the Notes to redeem all of the outstanding Subordinated Notes of the Company,
which become redeemable by the Company on June 15, 1998. If the Company redeems
the Subordinated Notes, the redemption price per Subordinated Note, as specified
in the governing indenture, will be the principal amount thereof plus a premium
equal to 3.375% of such principal amount, plus accrued and unpaid interest to
the date of redemption. If the Company repurchases Subordinated Notes through a
tender offer or open market or negotiated purchases, the purchase price per
Subordinated Note will be a negotiated price or the prevailing market price. As
of June 1, 1998, the Company had $68.8 million aggregate principal amount of
Subordinated Notes outstanding.
The Company will use the remaining net proceeds for general corporate
purposes, which may include future acquisitions.
Pending application of the net proceeds as described above, the Company
intends to invest the net proceeds in short-term, interest-bearing,
investment-grade obligations.
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<PAGE> 10
CAPITALIZATION
The following table sets forth the consolidated short-term debt and
capitalization of Blount at March 31, 1998, and as adjusted to give effect to
the sale of the Notes offered hereby and the application of the net proceeds
therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------------
ACTUAL AS ADJUSTED
------ -----------
(in millions)
<S> <C> <C>
SHORT-TERM NOTES AND CURRENT MATURITIES OF LONG-TERM DEBT... $ 7.7 $ 7.7
====== ======
LONG-TERM DEBT:
Credit Agreement(1)....................................... $ 58.0 $ --
Other (less current maturities)........................... 13.6 13.6
Notes offered hereby...................................... -- 150.0
9% Subordinated Notes due 2003............................ 68.8 --
------ ------
Total long-term debt................................... 140.4 163.6
------ ------
STOCKHOLDERS' EQUITY:
Common stock, par value $0.01 per share:
Class A -- 60 million shares authorized, 27,281,739
shares issued, 25,925,228 shares outstanding.......... 0.3 0.3
Class B -- 14 million shares authorized, 11,619,936
shares issued and outstanding......................... 0.1 0.1
Capital in excess of par value of stock................... 37.7 37.7
Retained earnings......................................... 310.7 308.7
Accumulated other comprehensive income.................... 7.0 7.0
Less Class A treasury stock at cost, 1,356,511 shares..... (27.3) (27.3)
------ ------
Total stockholders' equity............................. 328.5 326.5
------ ------
Total capitalization.............................. $468.9 $490.1
====== ======
</TABLE>
- ---------------
(1) As of June 1, 1998, Blount had approximately $58 million of long-term debt
outstanding under the Credit Agreement, primarily reflecting borrowings to
fund normal, recurring seasonal cash needs and the Federal Acquisition,
which borrowings bore interest at such date at a weighted average rate of
approximately 5.89% per annum. See "Federal Cartridge Acquisition."
9
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SELECTED FINANCIAL DATA
The following selected consolidated financial data of Blount and its
subsidiaries (including the Company) for the years ended the last day of
February 1994 through 1996, for the ten months ended December 31, 1996 and for
the year ended December 31, 1997 are derived from the consolidated financial
statements of Blount and its subsidiaries (including the Company) for such years
and period, which have been audited by Coopers & Lybrand L.L.P., independent
accountants. The selected consolidated financial data for the twelve months
ended December 31, 1996 and for the three months ended March 31, 1997 and 1998
are derived from unaudited consolidated financial statements of Blount and, in
the opinion of management, reflect all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the data presented for such
periods. The following information should be read in conjunction with the
consolidated financial statements and notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included or
incorporated by reference herein.
<TABLE>
<CAPTION>
FOR THE THREE
FOR THE YEARS ENDED THE FOR THE TEN FOR THE TWELVE MONTHS MONTHS ENDED
LAST DAY OF FEBRUARY, MONTHS ENDED ENDED DECEMBER 31, MARCH 31,
------------------------ DECEMBER 31, ---------------------- ---------------
1994 1995 1996 1996(1) 1996(1) 1997 1997 1998
------ ------ ------ ------------ ------------ ------- ------ ------
(Unaudited) (Unaudited)
(Dollar amounts in millions, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Sales............................ $488.0 $588.4 $644.3 $526.7 $649.3 $716.9 $170.1 $199.7
Cost of sales.................... 330.1 390.8 427.3 346.5 426.9 482.9 113.8 139.2
Selling, general and
administrative expenses........ 114.1 121.0 126.5 105.2 130.0 134.6 33.2 35.6
Income from operations........... 43.9 76.6 90.5 75.0 92.4 99.4 23.1 24.9
Interest expense, net............ (9.5) (8.5) (7.4) (5.6) (7.5) (7.0) (1.6) (2.7)
Income from continuing operations
before income taxes............ 33.9 67.4 83.7 69.6 85.4 93.7 21.5 22.3
Income from continuing
operations..................... 21.6 40.7 53.6 44.0 53.8 59.1 13.6 13.7
Net income....................... 11.3 40.7 53.6 45.4 55.2 59.1 13.6 13.7
Per Share:
Basic:
Income from continuing
operations................... .58 1.08 1.41 1.14 1.40 1.57 0.36 0.37
Net income..................... .30 1.08 1.41 1.18 1.44 1.57 0.36 0.37
Diluted:
Income from continuing
operations................... .56 1.05 1.38 1.13 1.38 1.53 0.35 0.36
Net Income..................... .29 1.05 1.38 1.16 1.41 1.53 0.35 0.36
Cash dividends declared per
common share:
Class A........................ 0.154 0.173 0.198 0.228 0.228 0.261 0.063 0.071
Class B........................ 0.138 0.156 0.181 0.212 0.212 0.244 0.059 0.067
OTHER DATA:
EBITDA(2)........................ $ 67.6 $101.0 $116.3 $ 96.6 $118.2 $127.9 $ 29.7 $ 32.6
Depreciation and amortization.... 22.8 22.9 22.2 19.2 23.3 25.0 6.1 7.4
Property, plant and equipment
additions(3)................... 14.7 14.7 19.3 18.7 21.3 78.5 7.3 6.1
Ratio of earnings to fixed
charges(4)(5).................. 3.5x 6.2x 7.4x 8.2x 8.1x 9.2x 8.9x 7.4x
Long-term debt to total
capitalization(6).............. 38.3% 32.1% 27.3% 22.5% 22.5% 30.5% 22.7% 29.9%
BALANCE SHEET DATA (AT PERIOD END):
Working capital.................. $105.1 $123.3 $136.2 $166.2 $166.2 $171.1 $155.6 $185.7
Total assets..................... 499.6 520.8 546.5 533.8 533.8 637.8 534.2 664.9
Short-term notes and current
maturities of long-term debt... 6.1 7.8 11.7 1.2 1.2 1.5 1.7 7.7
Long-term debt (less current
maturities).................... 106.2 98.3 95.9 84.6 84.6 138.8 85.1 140.4
Stockholders' equity............. 171.0 207.7 255.0 290.8 290.8 316.1 289.7 328.5
</TABLE>
- ---------------
(1) In April 1996, Blount and the Company changed their fiscal year from one
ending on the last day of February to one ending on December 31. Unaudited
financial data for the twelve months ended December 31, 1996 is presented in
the table above for comparative purposes only.
10
<PAGE> 12
(2) Represents income from continuing operations before income taxes, interest
expense and depreciation and amortization. EBITDA should not be considered
as an alternative to, or more meaningful than, (i) operating income (as
determined in accordance with generally accepted accounting principles) as
an indicator of operating performance or (ii) cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) as a measure of liquidity. EBITDA is presented to provide
information with respect to debt service capability.
(3) Includes property, plant and equipment of acquired companies at date of
purchase of $5.0 million, $0.6 million and $59.8 million in the twelve
months ended the last day of February 1995 and 1996 and the twelve months
ended December 31, 1997, respectively, and $3.8 million in the three months
ended March 31, 1997.
(4) The ratio of earnings to fixed charges is determined by dividing pretax
income from continuing operations before interest expense, debt expense
amortization and the portion of rental expense deemed representative of the
interest factor by the sum of interest expense, capitalized interest, debt
expense amortization and the portion of rental expense deemed representative
of the interest factor.
(5) The following unaudited pro forma ratios of earnings to fixed charges
reflect the sale of the Notes offered hereby and the application of the net
proceeds therefrom, as described under "Use of Proceeds."
<TABLE>
<CAPTION>
FOR THE TWELVE MONTHS ENDED FOR THE THREE MONTHS ENDED
DECEMBER 31, 1997 MARCH 31, 1998
--------------------------- ---------------------------
ACTUAL PRO FORMA ACTUAL PRO FORMA
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Ratio of earnings to fixed
charges..................... 9.2x 10.5x 7.4x 7.8x
</TABLE>
(6) Total capitalization is defined as the sum of long-term debt (excluding
current maturities) and stockholders' equity.
11
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the consolidated financial statements and notes thereto of Blount incorporated
by reference in this Prospectus.
RESULTS OF OPERATIONS
In April 1996, Blount changed its fiscal year from one ending on the last
day of February to one ending on December 31. As a result of the change in
fiscal year, the audited financial statements, incorporated in this Prospectus
by reference, include the results for the ten-month transition period ended
December 31, 1996 ("transition period"). The following discussion and analysis
includes a discussion of the year ended December 31, 1997 compared to the
similar period for the prior calendar year. Per share amounts for periods prior
to 1997 have been restated to reflect a 2-for-1 stock split effected on December
8, 1997. All references to earnings per share in the following discussion are to
diluted earnings per share in accordance with Statement of Financial Accounting
Standards No. 128.
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
Sales for the three months ended March 31, 1998, were $199.7 million
compared to $170.1 million for the comparable period of the prior year. Net
income for the first quarter of 1998 was $13.7 million ($.36 per share) compared
to net income of $13.6 million ($.35 per share) for the comparable period of the
prior year. These operating results reflect improved operating income from the
Industrial and Power Equipment and the Sporting Equipment segments, and lower
income from the Outdoor Products segment. Selling, general and administrative
expenses were higher during the first quarter of 1998, reflecting the addition
of Federal, acquired during the fourth quarter of the prior year. Higher
interest expense during the three months ended March 31, 1998, reflects higher
debt levels during the current year, principally due to the Federal Acquisition.
The principal reasons for these results and the status of Blount's financial
condition are set forth below and should be read in conjunction with Blount's
Annual Report on Form 10-K for the year ended December 31, 1997.
Sales for the Outdoor Products segment for the first quarter of 1998 were
$77.5 million compared to $82.2 million during the first three months of 1997.
Operating income was $16.0 million during the first quarter of 1998 compared to
$17.4 million in the first three months of 1997. The lower sales and operating
income resulted principally from a lower volume of saw chain sales, primarily
due to poor economic conditions in Asia, and lower lawn mower sales, reflecting
unfavorable weather conditions.
Sales for the Industrial and Power Equipment segment were a first quarter
record of $60.9 million during the first quarter of 1998 compared to $54.3
million during the comparable period of the prior year. Operating income was
$10.0 million for the first quarter compared to $6.8 million for the comparable
period of the prior year. The improved sales and operating income resulted
primarily from higher sales of forestry harvesting equipment due to improved
market conditions.
Sales for the Sporting Equipment segment were $61.3 million in the first
quarter of 1998 compared to $33.6 million in the comparable period of the prior
year. Operating income was $4.1 million during the first three months of the
current year compared to $3.5 million during the comparable period of the prior
year. The improved results are primarily due to the additional sales and income
from Federal whose principal selling season and income normally occurs later
during the year.
Blount's total backlog at March 31, 1998 was $90.9 million compared to
$117.9 million at December 31, 1997 and $75.3 million at March 31, 1997.
TWELVE MONTHS ENDED DECEMBER 31, 1997 (AUDITED) COMPARED TO TWELVE MONTHS ENDED
DECEMBER 31, 1996 (UNAUDITED)
Sales in 1997 were $716.9 million compared to $649.3 million in 1996.
Income from continuing operations improved to $59.1 million ($1.53 per share) in
1997 from $53.8 million ($1.38 per share)
12
<PAGE> 14
during 1996. Net income for 1996 included income of $1.4 million ($.03 per
share) from discontinued operations. The sales increase reflected higher sales
in 1997 by each operating segment, while the income increase resulted primarily
from improved performance by the Outdoor Products segment.
Selling, general and administrative expenses were 19% of sales in 1997
compared to 20% in 1996. Total selling, general and administrative expenses
increased by $4.6 million in 1997 principally due to the Federal Acquisition and
the acquisitions of Frederick and Orbex. Other income was higher in 1997 as a
result of gains on sales of securities.
Total backlog was $117.9 million at December 31, 1997 compared to $74.2
million at December 31, 1996, reflecting improved backlogs at each operating
segment, particularly at the Industrial and Power Equipment segment due to
improved market conditions. In 1998, Blount believes that the difficult economic
conditions in certain international markets and the adverse impact of a strong
U.S. dollar will likely continue to affect Blount's operations. However, Blount
expects continued sales and income growth in 1998, aided by the recent
acquisition of Federal.
Sales and operating income for the Outdoor Products segment for 1997 were
$319.3 million and $67.1 million, respectively, compared to $292.7 million and
$61.4 million during 1996. The operating results for this segment reflect an
increase in sales and operating income of $25.7 million and $7.2 million,
respectively, at Oregon and flat sales and lower operating income at Dixon.
Oregon's results reflect a 7% increase in the sales volume of saw chain and a
15% increase in the sales volume of saw bars, Oregon's two principal products,
partially offset by lower average selling prices, due to a higher percentage of
lower priced sales to original equipment manufacturers and unfavorable exchange
rates. Additionally, the acquisition of Frederick and Orbex increased sales by
8.8% in 1997. Oregon has foreign manufacturing or distribution operations in
Canada, Europe, Brazil, Japan and Russia and, as a result, fluctuations in
foreign exchange rates impact the amount of reported sales and operating
margins. Approximately 24% and 36% of Oregon's sales and operating costs and
expenses, respectively, were transacted in foreign currencies in 1997. Blount
estimates that unfavorable exchange rates in 1997, as compared to 1996, reduced
operating income by approximately $2.0 million. Operations in Brazil have
historically been significantly affected by high inflation, currency devaluation
and resulting governmental policies. During 1997, operating income from Brazil
was $2.6 million compared to $0.3 million during 1996, principally as a result
of improved economic conditions. Dixon's sales and operating income were $45.4
million and $7.1 million, respectively, in 1997 compared to $44.9 million and
$8.4 million during 1996 as the effects of reduced volume and higher costs were
partially offset by higher average selling prices.
Sales and operating income for the Industrial and Power Equipment segment
were $239.1 million and $32.7 million, respectively, in 1997 compared to $209.5
million and $31.9 million in 1996. The higher sales during 1997 were principally
due to a higher volume of forestry equipment sold as a result of improving
market conditions and higher average selling prices. The improved demand is
reflected in the Industrial and Power Equipment segment's backlog, which has
increased by 92% since the end of 1996. Operating income increased by $0.8
million during 1997 as higher forestry equipment product and warranty costs
offset much of the effect of the sales increase. The operating results of the
Industrial and Power Equipment segment's Gear subsidiary continued to improve in
1997 as its sales and operating income increased by 8% and 15%, respectively,
primarily due to higher volume.
Sales for the Sporting Equipment segment were $158.5 million in 1997
compared to $147.1 million in 1996. Operating income was $18.1 million during
1997, compared to $19.8 million during 1996. Sales reflect a higher volume of
ammunition products sales and the contribution by Federal since it was acquired
in November 1997, partially offset by a lower volume of sales of sports optics.
Operating income was lower in 1997 as lower sports optics sales offset the
effect of higher ammunition products sales. Additionally, operating income for
1996 included the positive effect of reduced environmental cost estimates of
$1.9 million resulting from the resolution of an environmental matter.
13
<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had approximately $58 million outstanding
under the Credit Agreement primarily representing amounts borrowed in connection
with the Federal Acquisition and $68.8 million aggregate principal amount of the
Subordinated Notes were outstanding which mature in 2003. The long-term debt to
equity ratio was .4 to 1 at March 31, 1998 and December 31, 1997. The Company
plans to use the proceeds of the Notes to repay outstanding indebtedness under
the Credit Agreement and to redeem all of its outstanding Subordinated Notes.
The balance of the proceeds will be used for general corporate purposes. See
Note 3 of Notes to the Consolidated Financial Statements included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997, for
the terms and conditions of the Credit Agreement and the Subordinated Notes.
Cash balances at March 31, 1998 were $4.3 million compared to $4.8 million
at December 31, 1997. Working capital was $185.7 million at March 31, 1998
compared to $171.1 million at December 31, 1997, reflecting increases in
accounts receivable, inventory and accounts payable, principally reflecting
seasonal selling patterns and the related inventory buildup. At March 31, 1998,
borrowings under short-term lines to meet short-term seasonal needs were $6.8
million.
On November 4, 1997, the Company acquired Federal for approximately $129
million in cash (including post-closing adjustments and acquisition expenses of
approximately $17 million). See "Federal Cartridge Acquisition." The sources of
the $112 million paid at closing consisted of borrowings under the Credit
Agreement, other short-term borrowings and internally-generated funds. A portion
of the net proceeds from the sale of the Notes offered hereby will be used to
repay borrowings outstanding under the Credit Agreement. See "Use of Proceeds."
Management believes that the net proceeds from the sale of the Notes
offered hereby, together with borrowings available under the Credit Agreement
and cash from operations, will be sufficient to fund Blount's cash needs for the
foreseeable future.
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information." Statement No. 131 establishes standards for public business
enterprises reporting information about operating segments in annual and interim
financial statements. It also establishes standards for related disclosures
about products and services and geographic areas.
This statement is effective for fiscal years beginning after December 15,
1997. Blount does not believe that this statement will have a material effect on
its results of operations, financial condition or cash flows.
14
<PAGE> 16
DESCRIPTION OF NOTES
The Notes are to be issued under an Indenture, to be dated as of June ,
1998 (the "Indenture"), among the Company, the Guarantor, and LaSalle National
Bank, as Trustee (the "Trustee"), a copy of which is filed as an exhibit to the
Registration Statement. The following summaries of certain provisions of the
Indenture do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all of the provisions of the Indenture,
including the definitions therein of certain terms. Wherever particular Sections
or defined terms of the Indenture are referred to herein, such Sections or
defined terms are incorporated herein by reference.
The following sets forth certain general terms and provisions of the Notes
offered hereby.
GENERAL
The Notes will be unsecured and unsubordinated obligations of the Company,
will be limited to $150,000,000 aggregate principal amount and will mature on
June , 2005. Payment of principal of (and premium, if any) and interest on
the Notes will be fully, unconditionally and irrevocably guaranteed by the
Guarantor.
The Notes will bear interest at % per annum, payable semiannually in
arrears on June and December of each year, commencing December , 1998,
to the persons in whose names the Notes are registered at the close of business
on the and , as the case may be, next preceding such interest
payment dates. Interest on the Notes will be computed on the basis of a 360-day
year of twelve 30-day months.
Payment of the principal of (and premium, if any) and interest on the Notes
will be made at the office or agency of the Company maintained for that purpose
in the Borough of Manhattan, The City of New York or at such other office or
agency of the Company as may be maintained for such purpose, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
option of the Company payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register.
The Notes will be sold in minimum denominations of $1,000 and integral
multiples thereof.
The Notes will not be subject to any sinking fund.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in same-day
funds. All payments of principal and interest will be made by the Company in
immediately available funds.
GLOBAL NOTES
The Notes may be issued in the form of one or more fully registered Global
Notes (referred to herein as the "Global Securities") that will be deposited
with, or on behalf of, the Depositary and registered in the name of the
Depositary's nominee. Unless and until it is exchanged in whole or in part for
Notes in definitive registered form, a Global Security may not be registered for
transfer or exchange except as a whole by the Depositary to a nominee of such
Depositary. (Sections 202 and 305).
The Depositary has advised the Company as follows: The Depositary is a
limited purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code, as amended, and a "Clearing Agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depositary was created to hold securities for its participating organizations
(collectively, "participants") and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical transfer and delivery of certificates. Participants include securities
brokers and dealers, banks, trust companies and clearing
15
<PAGE> 17
corporations and may include certain other organizations. Indirect access to the
Depositary system is available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly ("indirect participants").
Upon the issuance of a Global Security, the Depositary will credit, on its
internal system, the respective principal amount of the individual beneficial
interests represented by such Global Securities to the accounts of participants
or persons who hold interests through participants. Ownership of beneficial
interests in the Global Securities will be shown on, and the transfer of that
ownership will be effected only through, records maintained by the Depositary or
its nominee (with respect to interests of participants) or by the participants
and the indirect participants (with respect to other owners of beneficial
interests in Global Securities).
The laws of some states require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such laws, as well as
the limits on participation in the Depositary's book-entry system, may impair
the ability to transfer beneficial interests in a Global Security.
So long as the Depositary or its nominee is the registered owner of a
Global Security, such Depositary or such nominee will be considered the sole
owner or holder of the Notes represented by such Global Security for all
purposes under the Indenture. Except as provided below, owners of beneficial
interests in a Global Security will not be entitled to have Notes represented by
such Global Security registered in their names, will not receive or be entitled
to receive physical delivery of such Notes in definitive form, and will not be
considered the owners or holders thereof under the Indenture.
Payments of principal of (and premium, if any) and interest on Notes
registered in the name of the Depositary or its nominee will be made to the
Depositary or its nominee, as the case may be, as the registered owner of the
Global Security representing such Notes. The Company expects that the Depositary
or its nominee, upon receipt of any payment of principal, premium or interest,
will credit immediately participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the Global Security for such Notes, as shown on the records of the Depositary
or its nominee. The Company also expects that payments by participants and
indirect participants to owners of beneficial interests in such Global Security
held through such persons will be governed by standing instructions and
customary practices, as is now the case with securities registered in "street
name," and will be the responsibility of such participants and indirect
participants. None of the Company, the Guarantor and the Trustee will have any
responsibility or liability for any aspect of the records relating to, or
payments made on account of, beneficial ownership interests in the Global
Security for such Notes or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests. (Section 308).
If the Depositary at any time notifies the Company that it is unwilling or
unable to continue as Depositary or ceases to be a clearing agency registered
under the Exchange Act and any other applicable statute or regulation, the
Company has agreed to appoint a successor depositary. If such a successor is not
appointed by the Company within 90 days, the Company will issue Notes in
definitive form (having endorsed thereon Guarantees duly executed by the
Guarantor) in exchange for the Global Security representing such Notes. In
addition, the Company may at any time and in its sole discretion determine not
to have the Notes represented by a Global Security, and, in such event, the
Company will issue Notes in definitive form (having endorsed thereon Guarantees
duly executed by the Guarantor) in exchange for the Global Security representing
such Notes. Further, if the Company so specifies with respect to the Notes, an
owner of a beneficial interest in a Global Security representing Notes may, on
terms acceptable to the Company, the Trustee and the Depositary for such Global
Security, receive Notes in definitive form (having endorsed and thereon
Guarantees duly executed by the Guarantor). In any such instance, an owner of a
beneficial interest in a Global Security will be entitled to physical delivery
in definitive form of Notes represented by such Global Security (having endorsed
and thereon Guarantees duly executed by the Guarantor) equal in principal amount
to such beneficial interest and to have such Notes registered in its name.
(Section 305). Notes so issued in definitive form will be issued in
denominations of $1,000 and integral multiples thereof.
16
<PAGE> 18
GUARANTEE
The Guarantor will irrevocably and unconditionally guarantee (the
"Guarantee") the punctual payment when due, whether at maturity, upon redemption
or by acceleration or otherwise, the principal of (and premium, if any) and
interest on the Notes. The Guarantee will be a continuing guaranty and shall (a)
remain in full force and effect until payment in full of the guaranteed
obligations, (b) be binding upon Guarantor and (c) inure to the benefit of and
be enforceable by the Trustee, the Holders and their successors, transferees and
assigns.
OPTIONAL REDEMPTION
The Notes will be redeemable, in whole or in part, at the option of the
Company at any time at a redemption price equal to the greater of (i) 100% of
the principal amount of such Notes or (ii) as determined by the Quotation Agent
(as defined below), the sum of the present values of the remaining scheduled
payments of principal and interest thereon (not including any portion of such
payments of interest accrued as of the date of redemption) discounted to the
date of redemption on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate plus
basis points, plus, in each case, accrued and unpaid interest thereon to the
date of redemption.
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the remaining
term of the Notes to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of such Notes.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest of such Reference Treasury Dealer
Quotations, or (ii) if the Trustee obtains fewer than three such Reference
Treasury Dealer Quotations, the average of all such Quotations.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Company.
"Reference Treasury Dealer" means (i) each of J.P. Morgan Securities Inc.
and Salomon Brothers Inc and their respective successors; provided, however,
that if either of the foregoing shall cease to be a primary U.S. Government
securities dealer in New York City (a "Primary Treasury Dealer"), the Company
shall substitute another Primary Treasury Dealer; and (ii) any other Primary
Treasury Dealer selected by the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Company, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third Business Day preceding such redemption date.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of the Notes to be redeemed.
Unless the Company defaults in payment of the redemption price, on and
after the redemption date, interest will cease to accrue on the Notes or
portions thereof called for redemption.
17
<PAGE> 19
CERTAIN COVENANTS
RESTRICTION ON SECURED DEBT
The Indenture provides that so long as any Notes are Outstanding, the
Company and the Guarantor will not, and will not permit any Subsidiary to,
incur, issue, assume or guarantee any Debt secured by a Mortgage on any
Principal Property of the Company, the Guarantor or any Subsidiary or any shares
of Capital Stock or Debt of any Subsidiary, without effectively providing that
the Notes then Outstanding (together with, if the Company or the Guarantor shall
so determine, any other Debt of the Company, the Guarantor or such Subsidiary
then existing or thereafter created which is not subordinate to the Notes then
Outstanding) shall be secured equally and ratably with (or, at the option of the
Company and the Guarantor, prior to) such secured Debt, for so long as such
secured Debt shall be so secured; provided, however, that this restriction will
not apply to:
(i) Mortgages on Principal Property, shares of Capital Stock or Debt
of any corporation existing at the time such corporation becomes a
Subsidiary;
(ii) Mortgages on Principal Property or shares of Capital Stock
existing at the time of the acquisition of such Principal Property or
Capital Stock by the Company, the Guarantor or a Subsidiary;
(iii) Mortgages to secure the payment of all or any part of the price
of acquisition, construction or improvement of Principal Property or
Capital Stock by the Company, the Guarantor or a Subsidiary, or to secure
any Debt incurred by the Company, the Guarantor or a Subsidiary, prior to,
at the time of, or within 180 days after, the later of the acquisition or
completion of construction (including any improvements on an existing
property), which Debt is incurred for the purpose of financing all or any
part of the purchase, construction or improvement of such Principal
Property;
(iv) Mortgages securing any Debt of a Subsidiary owing to the
Guarantor or the Company or to another Subsidiary;
(v) Mortgages on property or assets of a corporation existing at the
time such corporation is merged into or consolidated with the Company, the
Guarantor or a Subsidiary or at the time of a sale, lease or other
disposition of the properties of a corporation as an entirety or
substantially as an entirety to the Company, the Guarantor or a Subsidiary
in accordance with the terms of the Indenture;
(vi) Mortgages on property or assets of a Person existing at the time
the Guarantor or the Company is merged into or consolidated with such other
Person or at the time of a sale, lease or other disposition of the
properties of the Guarantor or the Company as an entirety or substantially
as an entirety to such other Person in accordance with the terms of the
Indenture;
(vii) Mortgages on property or assets of the Company, the Guarantor or
a Subsidiary securing Debt issued by the United States of America or any
State thereof or any department, agency or instrumentality or political
subdivision thereof, or by any other country or any political subdivision
thereof, for the purpose of financing all or any part of the purchase price
of (or, in the case of real property, the cost of construction on or
improvement of) any property or assets subject to such Mortgages
(including, but not limited to, Mortgages incurred in connection with
pollution control, industrial revenue or similar financings);
(viii) any extension, renewal or replacement (or successive
extensions, renewals or replacements), as a whole or in part, of any
Mortgages referred to in the foregoing clauses (i) to (vii) inclusive;
provided, that the principal amount of the Debt being extended, renewed or
replaced shall not be increased and such extension, renewal or replacement,
in the case of Debt secured by a Mortgage, shall be limited to all or a
part of the same property, shares of Capital Stock or Debt that secured the
Mortgage extended, renewed or replaced (plus improvements on such
property); and
18
<PAGE> 20
(ix) Mortgages not permitted by clauses (i) through (viii) above if at
the time of and after giving effect to, the creation or assumption of any
such Mortgage, the aggregate amount of all Debt of the Company, the
Guarantor and the Subsidiaries secured by such Mortgages not so permitted
by clauses (i) through (viii) above together with the Attributable Debt in
respect of Sale and Lease-Back Transactions permitted by the Indenture does
not exceed 15% of Consolidated Net Tangible Assets. (Section 1006).
The Indenture will not restrict the incurrence of unsecured Debt by the
Guarantor or any Subsidiary.
RESTRICTION ON SALE AND LEASE-BACK TRANSACTIONS
The Indenture provides that so long as any Notes are Outstanding, the
Company and the Guarantor will not, and will not permit any Subsidiary to, enter
into any Sale and Lease-Back Transaction unless:
(i) the Company, the Guarantor or such Subsidiary would, at the time
of entering into such Sale and Lease-Back Transaction, be entitled, as
described in clauses (i) through (ix) set forth under "Restriction on
Secured Debt," above, to incur Debt secured by a Mortgage on the Principal
Property to be leased in an amount at least equal to the Attributable Debt
in respect of such Sale and Lease-Back Transaction without equally and
ratably securing the Notes then Outstanding;
(ii) the direct or indirect proceeds of the sale of the Principal
Property to be leased are at least equal to the fair value of such
Principal Property (as determined by the Board of Directors of the
Guarantor) and an amount at least equal to the net proceeds from the sale
of the Principal Property so leased is applied, within 180 days of the
effective date of any such Sale and Lease-Back Transaction, (a) to the
purchase or acquisition of (or, in the case of real property, the
commencement of construction on or improvement of) property or assets, or
(b) to the retirement or repayment (other than at maturity or pursuant to a
mandatory sinking fund or mandatory redemption provision) of (1) Notes or
Funded Debt of the Company or the Guarantor ranking on a parity with or
senior to the Notes, or Funded Debt of a Subsidiary or (2) Debt incurred by
the Company, the Guarantor or a Subsidiary within 180 days prior to the
effective date of any such Sale and Lease-Back Transaction that (A) was
used solely to finance the acquisition of the Principal Property that is
the subject of such Sale and Lease-Back Transaction and (B) is secured by a
Mortgage on the Principal Property that is the subject of such Sale and
Lease-Back Transaction; provided, however, that the amount to be so applied
will be reduced by (x) the principal amount of Notes delivered to the
Trustee for retirement and cancellation (other than at maturity or pursuant
to a mandatory sinking fund or mandatory redemption provision) within 180
days before or after such sale or transfer and (y) the principal amount of
any such Debt of the Company, the Guarantor or a Subsidiary (other than
Notes) voluntarily retired (other than at maturity or pursuant to a
mandatory sinking fund or mandatory redemption provision) by the Company,
the Guarantor or such Subsidiary within 180 days before or after such sale
or transfer; or
(iii) the lease in such Sale and Lease-Back Transaction secures or
relates to Debt or other obligations issued by the United States of America
or any State thereof or any department, agency or instrumentality or
political subdivision thereof, or by any other country or any political
subdivision thereof, for the purpose of financing all or any part of the
purchase price of (or, in the case of real property, the cost of
construction on or improvement of) any property or assets subject to such
leases (including, but not limited to, leases incurred in connection with
pollution control, industrial revenue or similar financings). (Section
1007).
CERTAIN DEFINITIONS
"Attributable Debt" means, as to any particular lease under which any
Person is at the time liable, at any date as of which the amount thereof is to
be determined, the total net amount of rent required to be paid by such Person
under such lease during the remaining term thereof (excluding any subsequent
renewal or other extension options held by the lessee), discounted from the
respective due dates thereof to such date of determination at the rate of
interest per annum implicit in the terms of such lease, as
19
<PAGE> 21
determined in good faith by the Guarantor, compounded annually. The net amount
of rent required to be paid under any such lease for any such period shall be
the amount of the rent payable by the lessee with respect to such period, after
excluding amounts required to be paid on account of maintenance and repairs,
reconstruction, insurance, taxes, assessments, water rates and similar charges
and contingent rents (such as those based on sales). In the case of any lease
which is terminable by the lessee upon the payment of a penalty, such net amount
shall also include the amount of such penalty, but no rent shall be considered
as required to be paid under such lease subsequent to the first date upon which
it may be so terminated.
"Capital Stock," as applied to the stock of any corporation, means the
capital stock of every class whether now or hereafter authorized, regardless of
whether such capital stock shall be limited to a fixed sum or percentage with
respect to the rights of the holders thereof to participate in dividends and in
the distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of such corporation.
"Consolidated Net Tangible Assets" means, with respect to any Person, on
the date on which the determination is being made, the aggregate amount of
assets (less applicable reserves and other properly deductible items) after
deducting therefrom (i) all current liabilities (excluding current maturities of
long-term debt and capitalized lease obligations), and (ii) all goodwill, trade
names, trademarks, patents, unamortized debt discount and expense and other like
intangibles, all as set forth on the most recent quarterly balance sheet of such
Person and its consolidated Subsidiaries and computed in accordance with
generally accepted accounting principles.
"Debt" means indebtedness for money borrowed.
"Funded Debt" means, on the date on which the determination is being made,
any Debt maturing by its terms more than 12 months from such date, including any
Debt renewable or extendible at the option of the borrower to a date later than
12 months from such date of determination.
"Mortgage" means and includes any mortgage, pledge, lien, security
interest, conditional sale or other title retention agreement or other similar
encumbrance.
"Principal Property" means, on any date of determination, any manufacturing
plant or manufacturing facility (i) owned by the Company, the Guarantor or any
Subsidiary of either of the foregoing, (ii) located in the continental United
States of America and (iii) having a gross book value, on such date, in excess
of (a) with respect to any such plant or facility owned as of such date by the
Guarantor or a Subsidiary of the Guarantor, 2% of the Consolidated Net Tangible
Assets of the Guarantor or (b) if the Company is not a Subsidiary of the
Guarantor as of such date, with respect to any such plant or facility owned by
the Company or a Subsidiary of the Company, 2% of the Consolidated Net Tangible
Assets of the Company; provided, however, that the term "Principal Property"
shall not include (x) any plant or facility described in clause (a) of this
sentence if, in the opinion of the Board of Directors of the Guarantor, or (y)
any plant or facility described in clause (b) of this sentence, if, in the
opinion of the Board of Directors of the Company, in either case, as set forth
in, and effective as of the date of, a Board Resolution, such plant or facility
is not of material importance to the business conducted by the Guarantor and its
Subsidiaries or the Company and its Subsidiaries, respectively, taken as a
whole.
"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by the Company, the Guarantor or any Subsidiary of any
Principal Property, whether owned at the date of the Indenture or thereafter
acquired (except for temporary leases for a term, including any renewal thereof,
of not more than three years and except for leases between the Company or the
Guarantor and any Subsidiary, between any Subsidiary and the Company or the
Guarantor or between Subsidiaries (in each case, including the Company)), which
Principal Property has been or is to be sold or transferred by the Guarantor or
such Subsidiary to such Person with the intention of taking back a lease of such
Principal Property.
"Significant Subsidiary" means, with respect to any Person, any Subsidiary
that would be a "Significant Subsidiary" of such Person within the meaning of
Rule 1-02 under Regulation S-X promulgated by the Commission.
20
<PAGE> 22
"Subsidiary" means a corporation of which more than 50% of the outstanding
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote generally in the election of directors
thereof is owned, directly or indirectly, by the Company or the Guarantor, as
the context requires, or by one or more other Subsidiaries, or by the Company or
the Guarantor, as the context requires, and one or more other Subsidiaries.
EVENTS OF DEFAULT
Any one of the following events will constitute an Event of Default under
the Indenture with respect to Notes: (a) failure to pay any interest on any Note
when due at its Stated Maturity, continued for 30 days; (b) failure to pay
principal of (or premium, if any, on) any Note at its Maturity; (c) failure to
perform, or breach of any other covenant or warranty of the Guarantor or the
Company in the Indenture, continued for 90 days after written notice as provided
in the Indenture; (d) default under any bond, debenture, note or other evidence
of indebtedness for money borrowed by the Guarantor, the Company or any
Subsidiary of the Guarantor or under any mortgage, indenture or instrument under
which there may be secured or evidenced any indebtedness for money borrowed by
the Guarantor or any Subsidiary of the Guarantor, which default constitutes the
failure to pay indebtedness in a principal amount in excess of $20 million when
due and payable at the final maturity thereof, after the expiration of any
applicable grace period, or which shall have resulted in such indebtedness in a
principal amount in excess of $20 million becoming or being declared due and
payable prior to the date on which it would otherwise have become due and
payable, without such indebtedness having been discharged, or such acceleration
having been rescinded or annulled, within a period of 30 days after written
notice as provided in the Indenture specifying such default and requiring the
Guarantor or the Company, as the case may be, to cause such indebtedness to be
discharged or such acceleration to be rescinded or annulled; or (e) certain
events of bankruptcy, insolvency or reorganization of the Guarantor or any
Significant Subsidiary. (Section 501).
If an Event of Default with respect to the Notes occurs and is continuing,
either the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Notes may declare the principal amount of all the Notes to be
due and payable immediately. At any time after a declaration of acceleration
with respect to Notes has been made, but before a judgment or decree based on
acceleration has been obtained, the Holders of a majority in principal amount of
Outstanding Notes may, under certain circumstances, rescind and annul such
acceleration. (Section 502).
Under the Indenture, the Trustee shall, within 90 days after the occurrence
of a default with respect to the Notes, give the holders of the Notes notice of
such default known to it (the term "default" to mean the events specified above
without notice or grace periods); provided that, except in the case of a default
in the payment of principal of (or premium, if any) or interest on any of the
Notes, the Trustee shall be protected in withholding such notice if it in good
faith determines the withholding of such notice is in the interests of the
holders of the Notes; and provided, further, that the Trustee will not give such
notice with respect to certain defaults until at least 60 days after the
occurrence thereof. (Section 602).
The Indenture provides that, subject to the duty of the Trustee during a
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee indemnity reasonably satisfactory to it. (Sections 601,
603). Subject to such provisions for the indemnification of the Trustee and to
certain other conditions, the Holders of at least a majority in principal amount
of the Outstanding Notes will have the right to direct the time, method, and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Notes. (Section 512).
No Holder of Notes will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee a written notice of a continuing Event of
Default and unless the Holders of not less than 25% in principal amount of the
Outstanding Notes shall have made a written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as Trustee, and the
Trustee shall not have received from the Holders of a
21
<PAGE> 23
majority in principal amount of the Outstanding Notes a direction inconsistent
with such request and shall have failed to institute such a proceeding within 60
days. (Section 507). However, such limitations do not apply to a suit instituted
by a Holder of a Note for enforcement of payment of the principal of and any
premium or interest on such Note on or after the respective due dates expressed
in such Note. (Section 508).
Each of the Company and the Guarantor is required to furnish to the Trustee
annually a statement as to any default by the Company or the Guarantor as the
case may be, in the performance of certain of its respective obligations under
the Indenture. (Section 1004).
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company or
the Guarantor and the Trustee with the consent of the Holders of not less than a
majority in principal amount of the Outstanding Notes affected by such
modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each Note affected thereby,
(i) change the Stated Maturity of the principal of or interest on, any Note;
(ii) reduce the principal amount of, the rate of interest on, or premium payable
on any redemption of any Note; (iii) change any Place of Payment where, or the
coin or currency in which, any Note or any premium or interest thereon is
payable; (iv) impair the right to institute suit for the enforcement of any
payment on any Note on or after the Stated Maturity thereof; (v) reduce the
percentage in principal amount of Outstanding Notes, the consent of whose
Holders is required for modification or amendment of the Indenture or for waiver
of compliance with certain provisions of the Indenture or for waiver of certain
defaults; or (vi) modify any of the provisions described in this paragraph or
set forth in certain other sections of the Indenture, except to increase any
such percentage or to limit the ability of Holders to modify or waive certain
other provisions of the Indenture. (Section 902).
The Holders of at least a majority in principal amount of the Outstanding
Notes may, on behalf of all Holders, waive compliance by the Company with
certain restrictive provisions of the Indenture. (Section 1008). The Holders of
not less than a majority in principal amount of the Outstanding Notes may, on
behalf of all Holders, waive any past default under the Indenture, except a
default in the payment of principal of or any premium or interest on any Note
and in respect of a covenant or provision of the Indenture that cannot be
modified or amended without the consent of the Holder of each Outstanding Note
affected thereby. (Section 513).
CONSOLIDATION, MERGER AND SALE OF ASSETS
Neither the Guarantor nor the Company may consolidate with or merge into
any other Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person and may not permit any Person to
consolidate with or merge into the Guarantor or the Company or convey, transfer
or lease its properties and assets substantially as an entirety to the Guarantor
or the Company, unless (i) any successor or purchaser is a corporation,
partnership or trust organized under the laws of the United States of America,
or any State thereof or the District of Columbia, and any such successor or
purchaser expressly assumes the Guarantor's or the Company's obligations on the
Guaranty or the Notes, as the case may be, under a supplemental indenture and
the performance or observance of every covenant of the Indenture to be performed
by the Guarantor or the Company, as the case may be, (ii) immediately after
giving effect to the transaction and treating any indebtedness which becomes an
obligation of the Guarantor, the Company or a Subsidiary as a result of such
transaction as having been incurred by the Guarantor, the Company or such
Subsidiary at the time of such transaction, no Event of Default, and no event
which, after notice or lapse of time or both, would become an Event of Default,
shall have occurred and be continuing, (iii) if as a result of such transaction
properties or assets of the Guarantor or the Company could become subject to a
Mortgage not permitted by the Indenture, the Guarantor or the Company or such
successor Person, as the case may be, takes such steps as shall be necessary
effectively to secure the Notes equally and ratably with (or prior to) all
indebtedness secured thereby, and (iv) the
22
<PAGE> 24
Guarantor or the Company, as the case may be, has delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel stating compliance with these
provisions. (Section 801).
DEFEASANCE AND COVENANT DEFEASANCE
The Company and the Guarantor, at their option, (a) will be discharged from
any and all obligations in respect of the Notes (except for certain obligations
to register the transfer or exchange of Notes, replace stolen, lost or mutilated
Notes, maintain paying agencies and hold moneys for payment in trust) or (b)
need not comply with certain restrictive covenants of the Indenture, including
those described under "Certain Covenants," and "Consolidation, Merger and Sale
of Assets" and the occurrence of an event described in clause (c) or clause (d)
under "Events of Default" shall no longer be an Event of Default, in each case,
if the Company irrevocably deposits, in trust, with the Trustee money and/or
U.S. Government Obligations, which through the scheduled payment of interest
thereon and principal thereof in accordance with their terms will provide money
in an amount sufficient, without reinvestment, in the written opinion of a
nationally recognized firm of independent public accountants, to pay all the
principal of (and premium, if any) and interest (to the Maturity or to the
redemption date, as the case may be) on the Outstanding Notes or analogous
payments on the dates such payments are due in accordance with the terms of the
Outstanding Notes and the Indenture. The option described above may only be
exercised if, among other things, (i) no Event of Default or event which with
the giving of notice or lapse of time or both would become an Event of Default
under the Indenture shall have occurred and be continuing on the date of such
deposit, and (ii) the Company shall have delivered an Opinion of Counsel to the
effect that the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such defeasance and will be subject to
federal income tax in the same manner as if such defeasance had not occurred. In
the event the Company omits to comply with its remaining obligations under the
Indenture after a defeasance of the Indenture with respect to the Notes as
described under clause (b) above and the Notes are declared due and payable
because of the occurrence of any Event of Default, the amount of money and U.S.
Government Obligations on deposit with the Trustee may not be sufficient to pay
amounts due on the Notes at the time of the acceleration resulting from such
Event of Default. However, the Company and the Guarantor will remain liable with
respect to such payments. (Article 12).
GOVERNING LAW
The Indenture and the Notes will be governed by and construed in accordance
with the laws of the State of New York. (Section 112).
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<PAGE> 25
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to each of the Underwriters named
below, and each of the Underwriters has severally agreed to purchase, the
principal amount of the Notes set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT OF NOTES
----------- ---------------
<S> <C>
J.P. Morgan Securities Inc. ................................ $
Salomon Brothers Inc........................................
------------
Total.................................................. $150,000,000
============
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to purchase all of the Notes if any are purchased.
The Underwriters initially propose to offer the Notes to the public at the
initial public offering price set forth on the cover page of this Prospectus and
to certain dealers at such price less a concession not in excess of % of
the principal amount of the Notes. The Underwriters may allow, and such dealers
may reallow, a concession not in excess of % of the principal amount of the
Notes to certain other dealers. After the initial public offering, the public
offering price and such concession may be changed by the Underwriters.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriters that the Underwriters intend to
make a market in the Notes but are not obligated to do so and may discontinue
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the Notes or the price at which the Notes
will trade.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Company expects to use a portion of the net proceeds from the sale of
the Notes to repay indebtedness owed to a bank syndicate in which Morgan
Guaranty, an affiliate of J.P. Morgan Securities Inc., is a lender and acts as
agent. Morgan Guaranty is expected to receive approximately 8% of such net
proceeds. See "Use of Proceeds."
In connection with the offering of the Notes, the Underwriters may engage
in transactions that stabilize, maintain or otherwise affect the price of the
Notes. Specifically, the Underwriters may overallot in connection with the
offering of the Notes, creating a syndicate short position. In addition, the
Underwriters may bid for, and purchase, Notes in the open market to cover
syndicate short positions or to stabilize the price of the Notes. Finally, the
underwriting syndicate may reclaim selling concessions allowed for distributing
the Notes in the offering of the Notes, if the syndicate repurchases previously
distributed Notes in syndicate covering transactions, stabilization transactions
or otherwise. Any of these activities may stabilize or maintain the market price
of the Notes above independent market levels. The Underwriters are not required
to engage in any of these activities, and may end any of them at any time.
In the ordinary course of their respective businesses, the Underwriters and
certain of their affiliates have provided, and may in the future provide,
investment banking and/or commercial banking services to the Company and have
received and will receive customary fees and compensation therefor.
24
<PAGE> 26
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the
Company and Blount by Cleary, Gottlieb, Steen & Hamilton, New York, New York and
for the Underwriters by King & Spalding, New York, New York.
EXPERTS
The consolidated financial statements and financial statement schedules of
Blount and the Company incorporated by reference in this Prospectus have been
audited by Coopers & Lybrand L.L.P., independent accountants, to the extent and
for the periods indicated in their reports thereon which appear in Blount's and
the Company's Annual Reports on Form 10-K for the period ended December 31,
1997. The financial statements of Federal incorporated by reference in this
Prospectus have been audited by Deloitte & Touche LLP, independent auditors, to
the extent and for the periods indicated in their report thereon which appear in
Blount's and the Company's Current Reports on Form 8-K/A dated January 20, 1998.
The consolidated financial statements and financial statement schedules covered
by the reports of Coopers & Lybrand L.L.P. have been incorporated by reference
herein in reliance upon the reports of said firm and upon the authority of said
firm as experts in accounting and auditing. The financial statements of Federal
covered by the reports of Deloitte & Touche LLP have been incorporated by
reference herein in reliance upon the reports of said firm and upon the
authority of said firm as experts in accounting and auditing.
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<PAGE> 27
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
<TABLE>
<S> <C>
Commission Registration Fee................................. $ 44,250
Accounting Fees and Expenses................................ $ 50,000
Trustees' Fees and Expenses................................. $ 2,000
Printing Fees............................................... $ 35,000
Rating Agency Fees.......................................... $ 82,500
Legal Fees and Expenses..................................... $170,000
Miscellaneous............................................... $ 10,000
--------
Total.................................................. $393,750
========
</TABLE>
- ---------------
* All amounts are estimated except for the Commission registration fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware Corporation Law authorizes a court to award, or
a corporation to grant, indemnity to directors and officers in terms
sufficiently broad to permit indemnification under certain circumstances against
liabilities (including expenses incurred) arising under the securities laws.
Article VI of the By-laws of each of Blount and the Company provides for
indemnification of the respective company's directors and officers against
certain liabilities, including certain liabilities under the securities laws,
incurred in their capacity as such.
The Underwriting Agreement (Exhibit 1 hereto) provides for indemnification
by each Underwriter of the Company and Blount and, each of their directors, each
of their officers who signs this Registration Statement and each person who
controls the Company or Blount within the meaning of the Securities Act of 1933,
as amended, from certain liabilities under the securities laws.
In addition, the Company and Blount maintain officers' and directors'
liability insurance.
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
*1 Form of Underwriting Agreement.
2 Stock Purchase Agreement, dated November 4, 1997, by and
among Blount, Inc., Hoffman Enclosures Inc., Pentair, Inc.
and Federal-Hoffman, Inc., relating to the acquisition of
Federal Cartridge Company (filed by incorporation by
reference to Exhibit 2 to Form 8-K dated November 4, 1997,
file no. 001-11549).
*4(a) Form of Indenture relating to the Notes and Guarantee
between the Company, the Guarantor and LaSalle National
Bank, as Trustee.
4(b) Form of Note and Guarantee (included in Sections 202 and 203
of Exhibit 4(a) above).
*5 Opinion of Cleary, Gottlieb, Steen & Hamilton as to legality
of the Notes and Guarantee.
*12 Computation of ratio of earnings to fixed charges.
23(a) Consent of Coopers & Lybrand L.L.P., Independent
Accountants.
23(b) Consent of Deloitte & Touche LLP, Independent Auditors.
23(c) Consent of Cleary, Gottlieb, Steen & Hamilton (included in
their opinion filed as Exhibit 5).
</TABLE>
II-1
<PAGE> 28
<TABLE>
<C> <S>
*24 Powers of Attorney.
*25 Form T-1 Statement of Eligibility and Qualification of
LaSalle National Bank under the Trust Indenture Act of 1939.
</TABLE>
- ---------------
* Previously filed.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under Item 15
above, or otherwise, the registrants have been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in such 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 registrants 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 hereby, the registrants will,
unless in the opinion of their counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by them is against public policy as
expressed in such Act and will be governed by the final adjudication of such
issue.
The undersigned registrants hereby undertake that:
For purposes of determining any liability under the Securities Act of
1933, as amended, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrants pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
For the purpose of determining any liability under the Securities Act
of 1933, as amended, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
For purposes of determining any liability under the Securities Act of
1933, each filing of the registrants' annual reports pursuant to Section
13(a) or 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.
II-2
<PAGE> 29
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANTS
CERTIFY THAT THEY HAVE REASONABLE GROUNDS TO BELIEVE THAT THEY MEET ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAVE DULY CAUSED THIS REGISTRATION
STATEMENT OR AMENDMENT THERETO TO BE SIGNED ON THEIR BEHALF BY THE UNDERSIGNED
THEREUNTO DULY AUTHORIZED, IN THE CITY OF MONTGOMERY, STATE OF ALABAMA, ON THE
12TH DAY OF JUNE, 1998.
<TABLE>
<S> <C>
BLOUNT INTERNATIONAL, INC. BLOUNT, INC.
By: /s/ HAROLD E. LAYMAN By: /s/ HAROLD E. LAYMAN
------------------------------------------------- -------------------------------------------------
Name: Harold E. Layman Name: Harold E. Layman
Title: Executive Vice President -- Finance Title: Executive Vice President -- Finance Operations
Operations and Chief Financial Officer and Chief Financial Officer
</TABLE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT OR AMENDMENT THERETO HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS IN THE CAPACITIES (FOR BOTH REGISTRANTS) AND ON THE DATES
INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
* Chairman of the Board and June 12, 1998
- ------------------------------------------------ Director
Winton M. Blount
* President and Chief Executive June 12, 1998
- ------------------------------------------------ Officer and Director
John M. Panettiere
* Director June 12, 1998
- ------------------------------------------------
Haley Barbour
Director June 12, 1998
- ------------------------------------------------
Samuel R. Blount
* Director June 12, 1998
- ------------------------------------------------
W. Houston Blount
* Director June 12, 1998
- ------------------------------------------------
R. Eugene Cartledge
* Director June 12, 1998
- ------------------------------------------------
C. Todd Conover
</TABLE>
II-3
<PAGE> 30
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
* Director June 12, 1998
- ------------------------------------------------
H. Corbin Day
* Director June 12, 1998
- ------------------------------------------------
Emory M. Folmar
* Director June 12, 1998
- ------------------------------------------------
Mary D. Nelson
* Director June 12, 1998
- ------------------------------------------------
Arthur P. Ronan
* Director June 12, 1998
- ------------------------------------------------
Andrew A. Sorensen
/s/ HAROLD E. LAYMAN Executive Vice June 12, 1998
- ------------------------------------------------ President -- Finance Operations
Harold E. Layman and Chief Financial Officer
/s/ RODNEY W. BLANKENSHIP Vice President and Controller June 12, 1998
- ------------------------------------------------ (Chief Accounting Officer)
Rodney W. Blankenship
*By: /s/ RICHARD H. IRVING, III Attorney-in-fact June 12, 1998
------------------------------------------
Richard H. Irving, III
</TABLE>
II-4
<PAGE> 31
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
<C> <S> <C>
*1 Form of Underwriting Agreement..............................
2 Stock Purchase Agreement, dated November 4, 1997, by and
among Blount, Inc., Hoffman Enclosures Inc., Pentair, Inc.
and Federal-Hoffman, Inc., relating to the acquisition of
Federal Cartridge Company (filed by incorporation by
reference to Exhibit 2 to Form 8-K dated November 4, 1997,
file no. 001-11549).........................................
*4(a) Form of Indenture relating to the Notes and Guarantee
between the Company and LaSalle National Bank, as Trustee...
4(b) Form of Note and Guarantee (included in Sections 202 and 203
of Exhibit 4(a) above)......................................
*5 Opinion of Cleary, Gottlieb, Steen & Hamilton as to legality
of the Notes and Guarantee..................................
*12 Computation of ratio of earnings to fixed charges...........
23(a) Consent of Coopers & Lybrand L.L.P., Independent
Accountants.................................................
23(b) Consent of Deloitte & Touche LLP, Independent Auditors......
23(c) Consent of Cleary, Gottlieb, Steen & Hamilton (included in
their opinion filed as Exhibit 5)...........................
*24 Powers of Attorney..........................................
*25 Form T-1 Statement of Eligibility and Qualification of
LaSalle National Bank under the Trust Indenture Act of
1939........................................................
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 23.A
<PAGE> 2
EXHIBIT 23(A)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
on Form S-3 (No. 333-42481) of our reports dated January 26, 1998, on our audits
of the consolidated financial statements and financial statement schedules of
Blount International, Inc. and Blount, Inc. as of the last day of December, 1997
and December, 1996 and for the years ended December 31, 1997 and February 29,
1996, and for the ten months ended December 31, 1996. We also consent to the
reference to our Firm under the caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
------------------------------------
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
June 12, 1998
<PAGE> 1
EXHIBIT 23.B
<PAGE> 2
EXHIBIT 23(B)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 1 to Registration Statement No. 333-42481 of Blount Inc. and Blount
International, Inc. on Form S-3 of our reports dated January 15, 1998 on the
financial statements of Federal as of and for the year ended December 31, 1996,
appearing in the Reports on Form 8-K/A of Blount Inc. and Blount International,
Inc. and to the reference to us under the heading "Experts" in this Prospectus,
which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
- ----------------------------------------------------
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
June 8, 1998
