<PAGE>
FILED PURSUANT TO RULE 424(b)(2)
REGISTRATION NO. 333-62105
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE +
+ CHANGED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION. DATED NOVEMBER 4, 1998.
Prospectus Supplement to Prospectus dated October 30, 1998.
$150,000,000
PREMARK INTERNATIONAL, INC.
% Notes due
-----------
Premark International, Inc. will pay interest on the Notes on and
of each year. The first interest payment will be made on . The Notes will
mature on and are not redeemable before maturity. The Notes will be issued
only in denominations of $1,000 and integral multiples of $1,000.
-----------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-----------
<TABLE>
<CAPTION>
Per Note Total
-------- --------
<S> <C> <C>
Initial public offering price................................. % $
Underwriting discount......................................... % $
Proceeds, before expenses, to Premark International, Inc...... % $
</TABLE>
The initial public offering price set forth above does not include accrued
interest, if any. Interest on the Notes will accrue from and must be
paid by the purchaser if the Notes are delivered after .
-----------
The underwriters expect to deliver the Notes in book-entry form only through
the facilities of The Depository Trust Company against payment in New York, New
York on November , 1998.
GOLDMAN, SACHS & CO. MORGAN STANLEY DEAN WITTER
-----------
Prospectus Supplement dated November , 1998.
<PAGE>
THE COMPANY
Premark International, Inc. (the "Company") is a Delaware corporation that
was organized on August 29, 1986, in connection with the corporate
reorganization of Kraft, Inc. ("Kraft"). On October 31, 1986, the Company
became a publicly held company through the pro rata distribution by Kraft to
its shareholders of all of the outstanding shares of common stock of the
Company. On May 31, 1996, the Company distributed on a pro rata basis to its
shareholders all of the stock of Tupperware Corporation, a direct seller of
consumer products. On June 28, 1996, the Company sold all of its stock in
Hartco Flooring Company to Triangle Pacific Corp.
The Company is a multinational manufacturer of commercial and consumer
products with three principal business segments: Food Equipment Group,
Decorative Products Group and Consumer Products Group. The Company markets
commercial food equipment, decorative surfacing products, small appliances and
fitness products in more than 100 countries under leading brand names such as
Hobart(R), Wilsonart(R), West Bend(R), Florida Tile(R) and Precor(R).
Sales in North America and Europe contributed approximately 78% and 19% to
the Company's 1997 revenues, respectively, while the Latin American and Asian
Pacific regions accounted for the remaining 3%.
The Company is focused on two strategic initiatives: leveraging the
leadership position of the Food Equipment Group and Wilsonart International
("Wilsonart") and improving underperforming businesses. Strategic acquisitions,
primarily by the Food Equipment Group and Wilsonart, that offer either product
or channel alternatives, or that augment manufacturing and distribution
capabilities in the United States or abroad, are key elements of the Company's
growth strategy. Since April 1997, the Company has acquired eleven companies
that meet these criteria.
FOOD EQUIPMENT GROUP
The Food Equipment Group is the largest international manufacturer and
marketer of the broadest product line of commercial food equipment. It is the
only major food equipment supplier with a global service network. The Food
Equipment Group manufactures, sells and services an extensive range of products
for warewashing and for weighing, wrapping, preparing, cooking, baking and
refrigerating food in a fragmented $9 billion worldwide industry. The largest
and most visible brand name marketed by the Food Equipment Group is the 100-
year old Hobart(R) name, which in 1997 represented approximately 72% of the
Food Equipment Group's revenues. The Food Equipment Group's other leading
brands include: Vulcan, Traulsen, Wolf, Stero, Foster, Elettrobar, MBM,
Tasselli, Baxter, Adamatic, Still, Inoxyform, Ungermann, Somat, Wittco, GBG,
Sencotel, Colged and Promag.
Food equipment products are sold to the foodservice industry, including
restaurants, hotels, resorts, hospitals, health care facilities, correctional
facilities, schools, bakeries, cafeterias and airlines, as well as to the food
retail industry, including supermarkets, grocery stores, delicatessens and
convenience stores. Equipment sales represent approximately 70% of the Food
Equipment Group's revenues and are approximately evenly divided between the new
and replacement markets. Sales to the foodservice industry account for
approximately 70% of total equipment sales, while sales to the food retail
industry account for the remaining 30%. The Food Equipment Group's products are
sold primarily through a company sales force with distribution coverage in more
than 100 countries.
Service sales from a worldwide, primarily company-owned network of 2,700
technicians generate approximately 30% of the Food Equipment Group's revenues
through long-life maintenance contracts and time and material billings. In the
United States, the Food Equipment Group has 185 service locations. The Food
Equipment Group services an estimated 85% of Hobart(R) equipment in the food
retail industry segment, and when other brands are included, the Food Equipment
Group services about half of the total available segment. In the foodservice
industry segment, the Food Equipment Group services somewhat
S-2
<PAGE>
less than half of Hobart(R) equipment and around 15% when all brands in the
segment are considered.
The Food Equipment Group's business strategy focuses on accelerating sales
growth through internal and external measures and reducing production costs.
Recent product introductions have reinforced the Company's leadership position
in its traditional equipment markets. The Company intends to continue to
leverage its sales and service strengths to open new product and market
segments to accelerate future growth. Since April 1997, the Food Equipment
Group has acquired six companies in the United States and abroad to extend its
geographic and product reach. The acquisitions of Eurotec SrL (one of Europe's
largest manufacturers of warewash equipment), The Baxter Mfg. Co. Inc. (a
leading manufacturer of commercial baking equipment), Traulsen & Co., Inc. (a
leader in commercial refrigeration equipment), Wittco Foodservice Equipment,
Inc. (a U.S. manufacturer of warming, holding and display cabinets), Somat
Corporation (a U.S. producer of commercial waste systems) and M.B.M. S.p.A. (a
leading Italian cooking equipment company) are expected to strengthen the
Company's position in the foodservice and food retail segments.
On the cost side, the Food Equipment Group is streamlining manufacturing
processes worldwide. In North America, the Food Equipment Group enhanced the
utilization of high-productivity, low-cost plants by closing two facilities in
Ohio, opening a plant in Kentucky and expanding production at three existing
plants, as a result of which U.S. pretax margins are expected to improve
approximately one percentage point. Internationally, the Food Equipment Group
is in the latter stages of a manufacturing cost reduction program that
includes: adding low-cost and flexible manufacturing facilities in Italy
through the acquisitions of Eurotec SrL and M.B.M. S.p.A.; closing an
Australian plant; and ceasing production in France planned for the end of 1998.
In 1997, the Food Equipment Group incurred a $13.7 million pretax provision for
the European portion of the manufacturing realignment. Annualized pretax cost
savings of approximately $4 million are expected to begin improving European
margins in the second half of 1999.
In fiscal years 1995, 1996 and 1997, the Food Equipment Group generated
revenues of $1,237.8 million, $1,238.4 million and $1,286.0 million,
respectively, and segment profit of $91.9 million, $77.9 million and $71.9
million, respectively. Before non-recurring charges of $5.2 million and $20.6
million in 1996 and 1997, respectively, segment profit would have been $83.1
million and $92.5 million. The Food Equipment Group contributed 56%, 55% and
53% to the Company's consolidated revenues for fiscal years 1995, 1996 and
1997, respectively. Sales in North America and Europe contributed approximately
62% and 33% to the Food Equipment Group's 1997 revenues, respectively, while
the Latin American and Asian Pacific regions accounted for the remaining 5%.
DECORATIVE PRODUCTS GROUP
The Decorative Products Group is composed of two businesses: Wilsonart and
Florida Tile.
Wilsonart manufactures and distributes decorative surfacing products,
primarily high-pressure decorative laminate for various interior surfacing
applications, as well as specialty-grade laminates, including chemical, fire
and wear resistant laminates. In addition to high-pressure laminate and related
products such as adhesives, which accounted for approximately 85% of
Wilsonart's 1997 revenues, Wilsonart manufactures and sells solid surfacing and
high-pressure laminate flooring, each of which contributed approximately
equally to the balance of Wilsonart's revenues.
Wilsonart is a world leader in decorative surfacing products. Wilsonart(R)
high pressure laminate, the flagship product, is the leading residential and
commercial choice for kitchen countertops, bathroom vanities, cabinets, office
equipment, furniture and store fixtures. During the past 25 years, Wilsonart
has more than doubled its share of high-pressure laminate in the United States
to more than 50%. Wilsonart has low-cost, flexible manufacturing and an
extensive network of 17 regional distribution centers and more than 200
independent distributors, enabling it to provide 24-hour turnaround on a
standard line of 240 colors and patterns and a seven-day turnaround on factory
orders.
S-3
<PAGE>
Wilsonart distributes approximately 50% of its laminate and solid surfacing
products through wholesale building material distributors, with the remainder
sold directly to original equipment manufacturers. Wilsonart(R) high-pressure
flooring is distributed through a network of approximately 10,000 floor
covering dealers in the United States. End-use applications for Wilsonart(R)
products are split approximately evenly between four markets: commercial new
construction; residential new construction; commercial remodeling; and
residential remodeling. International sales, including exports from the United
States, accounted for approximately 15% and 23% of revenues in 1997 and the
first nine months of 1998, respectively.
Wilsonart's domestic strategy is focused on accelerating sales growth by
increasing its sales and adding new products and categories. Wilsonart is
expanding its presence in the rapidly growing laminate flooring and solid
surfacing markets. Sales of these two new products accounted for approximately
40% of the sales growth in 1997. Flooring and solid surfacing sales are
integral elements of The Smart Source(R) program that establishes Wilsonart as
the single source for decorative surfacing by providing one-stop shopping for
all surfacing needs at a variety of price points.
Wilsonart's international growth strategy represents an opportunity for
growth into the next decade. It is aimed at extending the Company's presence in
the international high-pressure laminate segment, which is estimated to be
significantly larger than the U.S. segment. During the past year, Wilsonart
expanded its global reach through the acquisitions of: certain assets of Direct
Worktops Limited, the largest and most efficient manufacturer of residential
countertops in the United Kingdom; Resopal, the second largest high-pressure
decorative laminate company in Germany; and Arborite, the third largest high-
pressure laminate supplier in Canada. In addition, Wilsonart acquired
manufacturing capacity in Thailand through a majority position in a joint
venture and expects to expand its manufacturing capacity in China in the
future.
Florida Tile manufactures and sells ceramic wall and floor tiles for
residential and commercial uses in a highly competitive U.S. market. Florida
Tile sells to this 1.6 billion square foot segment through independent
distributors and through its network of 40 company-owned distribution centers.
In fiscal years 1995, 1996 and 1997, the Decorative Products Group generated
revenues of $686.6 million, $730.4 million and $790.2 million, respectively,
and segment profit of $50.4 million, $28.5 million and $82.4 million,
respectively. Excluding the impact of the $43.1 million pretax loss associated
with the sale of Hartco Flooring Company, 1996 segment profit would have been
$71.6 million. The Decorative Products Group contributed 31%, 32% and 33% to
the Company's sales for fiscal years 1995, 1996 and 1997, respectively.
CONSUMER PRODUCTS GROUP
The Consumer Products Group is composed of two businesses: West Bend and
Precor.
West Bend is a leading supplier of small electric appliances, such as bread
makers, skillets, mixers, slow cookers, woks, corn poppers and drip coffee
makers. West Bend(R) products are sold primarily in the United States and
Canada through mass merchandisers, department and hardware stores, as well as
warehouse clubs and catalog showrooms. In a highly competitive retail
environment, West Bend competes effectively through its reputation for customer
service and on-time order fill rate, as well as through productive alliances
with mass merchant retailers like Wal-Mart. In its Premiere(R) line of direct-
to-the-home products, West Bend sells high-quality stainless steel cookware and
home water distillation products in the United States and in parts of the Asian
Pacific and Latin American regions.
Precor manufactures cardiovascular fitness equipment such as treadmills and
elliptical crosstrainers and markets them through specialty fitness dealers as
well as directly to fitness clubs. Recognized in the industry as the leader in
high-end cardiovascular fitness equipment for home use, Precor has leveraged
S-4
<PAGE>
aggressive new product development efforts to expand its presence in fitness
clubs and international markets. In 1995, Precor introduced a new category of
fitness equipment with the low-impact EFX(TM) elliptical fitness crosstrainer.
The recent acquisition of the assets of Pacific Fitness Corporation, a leading
manufacturer of high-end strength equipment, enables Precor to be a "total
fitness" supplier of a full range of cardiovascular, strength and flexibility
training equipment to specialty fitness dealers and the commercial equipment
market.
In fiscal years 1995, 1996 and 1997, the Consumer Products Group generated
revenues of $289.0 million, $298.8 million and $330.6 million, respectively,
and segment profit of $25.3 million $32.6 million and $36.3 million,
respectively. Before a non-recurring charge of $8.0 million in 1995, segment
profit would have been $33.3 million. The Consumer Products Group contributed
13%, 13% and 14% to the Company's consolidated revenues for fiscal years 1995,
1996 and 1997, respectively.
USE OF PROCEEDS
The Company estimates that its net proceeds from the sale of the Notes, after
deducting the estimated underwriting discount and offering expenses payable by
the Company, will be approximately $ . The Company intends to use a
portion of the net proceeds from the sale of the Notes to retire approximately
$65 million of short-term borrowings incurred primarily in connection with the
acquisition of Direct Worktops Limited in the fourth quarter. The effective
interest rate on these short-term borrowings is approximately 5.7%. The Company
intends to use the balance of the net proceeds from the sale of the Notes for
general corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratio of earnings
to fixed charges for the periods shown. Earnings available for fixed charges
represent earnings before income taxes and fixed charges (excluding capitalized
interest). Fixed charges represent interest incurred plus that portion of
rental expense deemed to be the equivalent of interest.
<TABLE>
<CAPTION>
39 WEEKS ENDED FISCAL YEAR ENDED
--------------------------- ----------------------------------------------------------------
SEPTEMBER 26, SEPTEMBER 27, DECEMBER 27, DECEMBER 28, DECEMBER 30, DECEMBER 31, DECEMBER 25,
1998 1997 1997 1996 1995 1994 1993
------------- ------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges 9.0 8.6 8.1 5.0* 4.1 4.5 3.7
</TABLE>
- --------
*For the fiscal year ended December 28, 1996, pre-tax income was reduced by
$43.1 million related to the loss on the sale of the Company's Hartco
subsidiary. Excluding this charge, the ratio would have been 6.5.
S-5
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at September
26, 1998, and as adjusted to give effect to the sale of the Notes. This table
should be read in conjunction with the Company's consolidated financial
statements and related notes thereto incorporated by reference in the
accompanying prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 26,
1998
--------------------
ACTUAL AS ADJUSTED
-------- -----------
($ IN MILLIONS)
<S> <C> <C>
Short-Term Debt............................................ $ 27.0 $ 27.0
Long-Term Debt:
10 1/2% notes due 2000................................... 100.0 100.0
Long-term debt offering.................................. -- 150.0
Other.................................................... 12.1 12.1
-------- --------
Total Long-Term Debt....................................... 112.1 262.1
Shareholders' Equity....................................... 969.9 969.9
-------- --------
Total Capitalization....................................... $1,109.0 $1,259.0
======== ========
</TABLE>
S-6
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated unaudited financial
information for the Company for each of the three fiscal years ended December
27, 1997, December 28, 1996 and December 30, 1995, and for the 39 weeks ended
September 26, 1998 and September 27, 1997, respectively. This data is based
upon and should be read in conjunction with the Company's consolidated
financial statements and related notes thereto incorporated by reference in the
accompanying prospectus.
<TABLE>
<CAPTION>
39 WEEKS ENDED FISCAL YEAR ENDED
--------------------------- --------------------------------------
SEPTEMBER 26, SEPTEMBER 27, DECEMBER 27, DECEMBER 28, DECEMBER 30,
1998 1997 1997 1996 1995
------------- ------------- ------------ ------------ ------------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net Sales.............. $1,990.2 $1,741.4 $2,406.8 $2,267.6 $2,213.4
Costs of products sold
(1)................... 1,264.7 1,089.8 1,525.8 1,443.8 1,420.9
Delivery, sales and
administrative
expense (2)........... 566.8 514.1 704.3 660.2 648.0
Interest expense....... 9.9 8.9 12.1 16.3 26.6
Interest income........ (2.8) (6.3) (7.2) (7.0) (2.0)
Loss on disposition of
business.............. 0.0 0.0 0.0 43.1 0.0
Other income, net...... (1.5) 0.1 (2.9) (1.7) (0.4)
-------- -------- -------- -------- --------
Total costs and
expenses.............. 1,837.1 1,606.6 2,232.1 2,154.7 2,093.1
-------- -------- -------- -------- --------
Income before income
taxes................. 153.1 134.8 174.7 112.9 120.3
Provision for income
taxes................. 58.2 51.8 70.9 56.2 41.4
-------- -------- -------- -------- --------
Net income (Continuing
operations)........... 94.9 83.0 103.8 56.7 78.9
======== ======== ======== ======== ========
BALANCE SHEET DATA
Cash and cash
equivalents (3)....... 74.7 189.7 151.3 130.2 19.8
Working capital........ 511.7 588.1 532.1 594.4 276.6
Total assets (4)....... 1,904.0 1,720.8 1,765.8 1,660.8 1,961.3
Short-term borrowings
and current portion
of long-term debt..... 27.0 9.1 14.7 3.5 133.0
Long-term debt......... 112.1 112.5 112.3 115.9 121.7
Shareholders' equity... 969.9 910.6 907.9 875.9 1,008.8
Total capitalization... 1,109.0 1,032.2 1,034.9 995.3 1,263.5
CASH FLOW DATA
Cash provided by
operations............ 107.1 114.0 165.9 162.4 53.4
Capital expenditures... 78.5 57.6 81.4 84.1 85.7
Payment of dividends... 17.4 15.7 21.3 56.8 58.0
Purchase of treasury
stock................. 29.4 31.7 53.4 10.0 169.7
BUSINESS SEGMENT DATA
Net sales
Food Equipment Group. 1,030.9 942.6 1,286.0 1,238.4 1,237.8
Decorative Products
Group............... 745.3 589.4 790.2 730.4 686.6
Consumer Products
Group............... 214.0 209.4 330.6 298.8 289.0
-------- -------- -------- -------- --------
1,990.2 1,741.4 2,406.8 2,267.6 2,213.4
Segment profit
Food Equipment Group
(5)................. 76.3 59.1 71.9 77.9 91.9
Decorative Products
Group............... 75.0 67.4 82.4 28.5 50.4
Consumer Products
Group (6)........... 17.7 19.5 36.3 32.6 25.3
-------- -------- -------- -------- --------
169.0 146.0 190.6 139.0 167.6
OTHER DATA
Ratio of earnings to
fixed charges:
With unusual charges. 9.0 8.6 8.1 5.0 4.1
Without unusual
charges............. 9.0 8.6 8.1 6.5 4.1
Debt to total capital
(7)................... 12.5% 11.8% 12.3% 12.0% 20.2%
Depreciation........... 53.4 45.6 62.2 62.6 63.1
Amortization........... 5.8 3.5 5.7 5.5 8.3
</TABLE>
- --------
(1) Includes non-recurring charges of $3.0, $13.8, $4.0 and $8.0 for the
periods ended September 27, 1997, December 27, 1997, December 28, 1996 and
December 30, 1995, respectively.
(2) Includes non-recurring charges of $3.1, $6.8 and $1.2 for the periods ended
September 27, 1997, December 27, 1997 and December 28, 1996, respectively.
(3) Does not include $84.3 of short-term investments in 1996.
(4) Includes net assets of discontinued operations of $415.2 in 1995.
(5) Includes non-recurring charges of $6.1, $20.6, and $5.2 for the periods
ended September 27, 1997, December 27, 1997 and December 28, 1996,
respectively.
(6) Includes non-recurring charges of $8.0 for the period ended December 30,
1995.
(7) Excludes debt allocated to discontinued operations in 1995.
S-7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
The following is a discussion of the results of operations of the Company for
the 13 weeks and 39 weeks ended September 26, 1998, compared with the 13 weeks
and 39 weeks ended September 27, 1997, and changes in financial condition
during the 39 weeks ended September 26, 1998.
NET SALES
Net sales for the third quarter of 1998 were a record $698.5 million, an
increase of 16% compared with net sales of $601.4 million in 1997. In the first
three quarters of 1998, net sales rose to $1,990.2 million, which was an
improvement of 14% from 1997's net sales of $1,741.4 million. For both the
third quarter and the first nine months, sales rose at all groups, except for
the year-to-date sales at West Bend, which declined modestly. Excluding the
effects of foreign exchange rates, sales rose 16% and 15% for the third quarter
and first nine months of 1998, respectively.
COSTS AND EXPENSES
Cost of products sold as a percentage of net sales was 64.1% for the third
quarter of 1998 compared with 62.6% in the third quarter of 1997. For the first
nine months, the rates in 1998 and 1997 were 63.5% and 62.6%, respectively. The
increase in both periods was due to higher manufacturing costs at Wilsonart's
first quarter 1998 acquisitions, coupled with lower production levels at
Florida Tile.
Delivery, sales and administrative expense as a percentage of net sales was
26.9% and 28.5% for the third quarter and first nine months of 1998,
respectively, compared with the 1997 ratios of 28.2% and 29.5%, respectively.
The improvement for both periods was due to an overall decline in expenses as a
percentage of sales at Wilsonart and Florida Tile, along with lower costs at
the Food Equipment Group's European sector resulting from lower marketing
expenses as a percentage of sales, as well as benefits from previous reductions
in personnel. These items more than offset higher new product development costs
at Precor. The non-repeat of a provision in 1997 for reduction in force at Food
Equipment Europe was also a contributing factor in the year-to-date positive
variance.
NET INTEREST EXPENSE
Interest expense, net of interest income, was $2.4 million in the third
quarter of 1998 versus $1.8 million in the third quarter of 1997. For the year-
to-date period of 1998, net interest expense was $7.1 million versus $2.6
million in 1997. The increase in net interest expense for both periods in 1998
was due to a lower cash position. In addition, a change in the investment
vehicles chosen for cash, resulting in less cash being invested in interest-
bearing instruments affects the year-to-date comparison. The majority of income
on cash investments is included in other income in 1998.
TAX RATE
The Company's effective tax rate was 37.3% for the third quarter of 1998
compared with a tax rate of 37.2% for the same period in 1997. For the first
nine months of 1998, the effective tax rate was 38.0% versus 38.4% for the
first nine months of 1997 and 40.6% for the year ended December 27, 1997. The
lower rate for the first nine months of 1998 reflects the partial utilization
of a capital loss. The full year 1997 rate represents the Company's inability
to realize fully the tax benefit of a charge associated with the global
restructuring of the Food Equipment Group.
NET INCOME
For the third quarter, net income improved 14% to $38.7 million, or 60 cents
per diluted share, in 1998 from $33.9 million, or 52 cents per diluted share,
in 1997. For the nine-month period, net income grew 14% to $94.9 million, or
$1.47 per diluted share, in 1998 from $83.0 million, or $1.27 per diluted
share, in 1997. For both periods, an improvement in profitability at
S-8
<PAGE>
Wilsonart and the Food Equipment Group more than offset a significant shortfall
at Florida Tile, a modest decline at Precor and higher net interest expense.
SEGMENT RESULTS
FOOD EQUIPMENT GROUP
Net sales for the third quarter of 1998 were $363 million, an increase of 12%
from $323.5 million in 1997. The impact of foreign exchange rates upon results
was minimal. For the first nine months, net sales improved 9% from $942.6
million in 1997 to $1,030.9 million in 1998. Excluding exchange rate impacts,
sales for the first nine months of 1998 rose 11%. For both the third quarter
and the first nine months, sales growth was driven by improvements in both the
United States and Europe, which, along with the effect of U.S. acquisitions,
more than offset a decline in the Asian Pacific region. International
operations accounted for 38% and 39% of segment sales for the third quarter and
first nine months of 1998, respectively.
For the third quarter, segment profit of $30.4 million was 10% higher than
1997's $27.7 million. For the first nine months, segment profit rose
significantly to $76.3 million from $59.1 million in 1997. Increases occurred
in both the United States and Europe, aided by the effect of recent
acquisitions. International operations accounted for 24% and 28% of segment
profit for the third quarter and year-to-date, respectively.
U.S. sales rose 19% to $225.3 million for the third quarter of 1998. For the
first nine months, sales rose 14% to $627.8 million. For both periods, the
impact of recent acquisitions, improvements in all of Hobart's channels, as
well as growth at Vulcan-Hart, Wolf Range, Adamatic and Stero more than offset
lower export volume. Excluding acquisitions, sales grew 6% and 4% for the third
quarter and first nine months, respectively. U.S. segment profit of $23.2
million in the third quarter of 1998 rose 21% from the third quarter of 1997.
For the first nine months of 1998, U.S. segment profit rose 18% to $54.7
million. For both the quarter and year-to-date results, the growth in U.S.
segment profit was due to higher sales and the impact of recent acquisitions,
which more than offset increases in marketing and administrative expenses.
European sales rose 8% for the third quarter of 1998 to $112.9 million. On a
local currency basis, European sales improved by 5% for the third quarter as a
result of gains in several countries, notably the U.K., Italy (Eurotec) and
Germany, which more than offset a decline in sales in France, resulting from
the announcement of the pending closure of its major manufacturing plant.
European segment profit was $6.7 million for the third quarter of 1998, versus
$6.0 million for the same period last year. The change was due to the higher
sales, as well as an improved cost structure. For the first nine months of
1998, sales climbed 6% to $330.3 million, or 8% on a local currency basis.
Growth in the U.K. and Germany, coupled with the inclusion of Eurotec, which
contributed nine months of sales in 1998 versus six months last year, were the
major factors for the improvement. For the 1998 year-to-date period, segment
profit of $19.8 million was almost double the amount for the same period last
year. The growth in profit was due to the higher sales and the absence in 1998
of a $4.1 million provision for organizational changes and manufacturing
realignments.
Sales for the other international operations of $24.8 million fell by 17% in
the third quarter of 1998. Year-to-date, sales of $72.8 million dropped 8%. On
a local currency basis, sales decreased 9% and 1% for the third quarter and
first nine months, respectively. The decline in the quarter was due to weakness
in the Asian Pacific markets, especially Hong Kong, where a major project was
completed last year, offsetting slight growth in Latin America. For the year-
to-date period, strength in Canada and Latin America, especially Mexico and
Argentina, offset a decline in the Asian Pacific region. Other international
segment profit for both the third quarter and year-to-date period fell
significantly, to $0.5 million and $1.8 million, respectively. Lower Canadian
production volume and the weak Asian markets hurt profitability in both
periods. Year-to-date profit declined despite the non-repeat of a 1997
provision of $2 million to close the Australian plant.
S-9
<PAGE>
DECORATIVE PRODUCTS
Net sales were $256.2 million for the third quarter of 1998, an improvement
of 24% compared with $206.3 million in the same period in 1997. For the first
nine months, sales grew 26% to $745.3 million from $589.4 million in 1997.
Record sales at Wilsonart, aided by the acquisitions made early in the first
quarter of 1998, were responsible for the growth in both periods. Segment
profit of $29.6 million in the third quarter of 1998 was a 24% improvement from
a profit of $23.9 million in the same period in 1997. Year-to-date, segment
profit grew 11% to $75 million.
Wilsonart reported record sales and profit for both the third quarter and
first nine months of 1998. Sales increased 27% versus the third quarter of
1997, and 32% over the first nine months of last year. The growth in both
periods reflects an increase in domestic laminate volume, significant growth in
international sales, continued strength in new products, as well as the impact
of the acquisitions of Arborite and Resopal. Absent the acquisitions, sales
would have grown 10% and 15% for the third quarter and first nine months,
respectively. Wilsonart segment profit rose 27% and 25% for the quarter and
year-to-date, respectively, on higher volume and improved pricing, despite
somewhat higher manufacturing costs and increased operating expenses due to
international expansion, domestic distribution and information services.
Increased marketing expense associated with new product introductions was an
additional negative factor in the year-to-date comparison.
Florida Tile's sales rose 10% and 3% for the third quarter and the first nine
months of 1998, respectively, as a result of higher sales of imported products
and increased sales through company-owned distribution centers. A significantly
higher segment loss at Florida Tile was reported for both periods, reflecting
lower production intended to reduce inventory levels.
CONSUMER PRODUCTS
Net sales were $79.3 million for the third quarter of 1998, an increase of
11% compared with $71.6 million in 1997. Year-to-date, sales rose 2% from
$209.4 million to $214 million in 1998. Segment profit for the third quarter
was essentially flat versus last year at $7.0 million. For the first nine
months, segment profit declined 10% to $17.7 million from $19.5 million last
year.
For the quarter, West Bend sales grew 3% from 1997, but year-to-date sales
fell 8% from last year. Housewares sales improved 2% for the quarter,
reflecting growth in slow cooker volume. First nine months 1998 sales fell 13%
from the same period last year as a result of lower breadmaker volume and
pricing. Direct-to-the-home products sales rose 7% and 2% for the third quarter
and the first nine months of 1998, respectively, as a result of higher volume
and pricing. West Bend's segment profit increased modestly for the quarter,
mainly reflecting higher volume. For the year-to-date comparison, lower
Housewares volume more than offset improved cookware manufacturing efficiencies
and lower operating expenses, resulting in a significant decline from 1997.
Precor sales grew 28% and 23% to record levels for the third quarter and the
first nine months of 1998, respectively. For both periods, a continued increase
in sales of the elliptical crosstrainer product, higher volume in club
treadmills and growth in international volume drove the increase. For the year-
to-date comparison, the growth was achieved despite a decline in treadmills for
home use. Precor's segment profit decreased somewhat for both the quarter and
the first nine months as a result of intensified new product development
efforts.
FINANCIAL CONDITION
In early fiscal 1998, the Company completed the acquisition of the Resopal
and Arborite decorative laminate businesses from Forbo Holdings AG for
approximately $16 million including the assumption of $6 million of debt. In
addition, the Company purchased Somat Corporation for approximately $4 million
and Wittco Foodservice Equipment, Inc. for approximately $6 million. In the
second quarter, the Company completed the acquisition of Traulsen & Co., Inc.
for approximately $42 million including the assumption of $4 million of
S-10
<PAGE>
debt. In the early part of the fourth quarter, the Company acquired: M.B.M.
S.p.A. for approximately $30 million, including the assumption of $4 million of
debt; the assets of Pacific Fitness Corporation for $7 million; and certain
assets of Direct Worktops Limited for approximately $60 million. Funds used to
purchase these companies came from available cash and commercial paper.
Net cash provided by operating activities in the first nine months of 1998
was $107.1 million compared with $114 million in the first nine months of 1997.
Lower 1998 cash generation primarily resulted from a decrease in accounts
payable and accrued liability balances in 1998 versus an increase in 1997, as
well as higher net income tax payments. This more than offset an increase in
net income, as well as a lower growth in inventories, primarily at Florida Tile
and Wilsonart.
Net cash used in investing activities in 1998 was $141.8 million versus cash
provided by investing activities of $3.6 million in 1997. This reflects the
acquisitions made to date during 1998 of Arborite, Resopal, Somat, Wittco and
Traulsen, versus only Eurotec in 1997. Capital expenditures increased to $78.5
million in 1998 versus $57.6 million in 1997, due to higher spending at
Wilsonart. Net cash provided by investing activities last year was driven by
sales of short-term investments.
Net cash used in financing activities was $41 million for the first nine
months of 1998 versus $55.5 million in 1997. The decrease between years in cash
used for financing activities reflects a slight increase in borrowings during
1998 versus a paydown of short-term debt last year.
The total debt-to-capital ratio at the end of the third quarter of 1998 was
12.5%, compared with 11.8% at the end of the third quarter of 1997, and 12.3%
at December 27, 1997. The increase in 1998 was due to higher foreign short-term
debt levels.
Working capital as of September 26, 1998 decreased by $20.4 million from
December 27, 1997. Cash and cash equivalents decreased, reflecting several
acquisitions in 1998. Accrued liabilities increased, offsetting higher accounts
and notes receivable and net inventories, all due to the balance sheet effects
of the recent acquisitions. In addition, inventories rose due to a seasonal
inventory build.
As of September 26, 1998, unused lines of credit were approximately $411.1
million, including $250 million under a revolving credit agreement that expires
in October 2002. In August 1998, the Company filed with the Securities and
Exchange Commission a shelf registration statement increasing to $250 million
the amount of debt securities registered for issuance from time to time. The
funds raised would be used for general corporate purposes. Cash generated from
the issuance of long-term debt, future cash flows, lines of credit and other
short-term financing is expected to be adequate to fund operating and investing
activities.
In August 1996, the Company announced that it would repurchase 6 million of
its shares, with volume and timing to depend on market conditions. Purchases
will be made in the open market or through other transactions and will be
financed through available cash, cash flow from operations or issuance of
additional debt. Under this plan, through September 26, 1998, and November 2,
1998, respectively, the Company has repurchased 3,100,400 shares and 3,244,900
shares at an average cost of $28 per share for both periods.
ACCOUNTING PRONOUNCEMENTS
Effective for fiscal year 1998, the Company adopted the American Institute of
Certified Public Accountants' Statement of Position (SOP) 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use." The
statement requires capitalization of certain costs incurred in the development
of internal-use software, including external direct material and service costs,
employee payroll and payroll-related costs, and capitalized interest. Prior to
adoption of SOP 98-1, the Company expensed these costs as incurred. The effect
of this change in accounting principle on earnings in 1998 is immaterial.
S-11
<PAGE>
In June 1998, Statement of Financial Accounting Standards No. 133 (SFAS No.
133), "Accounting for Derivative Instruments and Hedging Activities," was
issued. This statement is required to be adopted for fiscal years beginning
after June 15, 1999. The statement requires that all derivatives be recorded at
fair value (marked to market) on the balance sheet. Accounting for gains and
losses arising from changes in the fair value of a derivative would depend upon
the intended use of the derivative. For a derivative designated as a hedge of
an asset, liability or a firm commitment which is subject to exposure to
changes in fair value, the gain or loss would be recognized in earnings in the
period of change, together with the offsetting loss or gain on the hedged item.
For a derivative designated as a hedge of cash flows of a forecasted
transaction, the gain or loss would be included in comprehensive income and
subsequently recognized in earnings in the same period the scheduled
transaction occurs. For a derivative designated as a hedge of the net
investment in a foreign operation, the gains and losses would be included in
comprehensive income. Finally, gains and losses for all other derivatives that
cannot be designated as a hedge would be recognized in earnings in the period
of change. The Company does not anticipate that there will be a material impact
on the results of operations or financial position as a result of the adoption
of SFAS No. 133.
YEAR 2000
The Company continues to evaluate and adjust all known date-sensitive systems
and equipment for Year 2000 compliance. The assessment phase of the Company's
Year 2000 project includes both information technology as well as non-
information technology equipment.
The Company is using both internal and external resources to identify and
test the systems for Year 2000 compliance, and to reprogram or replace them
when necessary. It is presently anticipated that such efforts will be completed
by mid-1999. The Company expects to spend approximately $14.5 million in 1998
and 1999 to modify its systems. These costs will be expensed as incurred. All
of these costs are being funded through operating cash flows.
As part of its remediation efforts, the Company has initiated formal
communications with significant suppliers and customers to determine the extent
to which the Company's systems and operations are vulnerable to any failure by
those third parties to remediate their Year 2000 problems. There can be no
guarantee, however, that the systems of those other companies will be converted
in a timely fashion and would not have an adverse effect on the Company.
Management believes, however, that ongoing communication with and assessment of
these third parties will minimize these risks.
The Company will also evaluate the extent of contingency plans needed based
upon communications with suppliers and customers and assessment of outside
risks. Contingency plans would be finalized during 1999.
The costs of the compliance effort and the date by which the Company believes
it will complete the Year 2000 modifications are based upon management's best
estimates. There can be no guarantee that these estimates will be achieved,
however, and actual results could differ materially from those anticipated.
DESCRIPTION OF THE NOTES
The following description of the Notes supplements the more general
description of the Debt Securities that appears in the accompanying prospectus.
You should read this section together with the section entitled "Description of
Debt Securities" in the prospectus. If there are any inconsistencies between
the information in this section and the information in the prospectus, the
information in this section controls. Any capitalized terms that are defined in
the prospectus have the same meanings in this section unless a different
definition appears in this section.
S-12
<PAGE>
GENERAL
The Notes are an issue of the Company's Debt Securities under an existing
Indenture with The First National Bank of Chicago, as trustee, as described in
the prospectus. The Notes will mature on , and will be limited to
$150,000,000 aggregate principal amount.
The Notes will bear interest from , 1998 at an annual rate of
%. Interest will be payable semi-annually in arrears on each
and , beginning on , 1999, to the persons in whose
names the Notes are registered at the close of business on the or
, as the case may be, next preceding such interest payment dates.
The Notes will be the Company's unsecured general obligations, ranking
equally with all of the Company's other unsecured and unsubordinated
indebtedness (including pursuant to guarantees). However, since the Company is
a holding company which conducts substantially all of its operations through
subsidiaries, the right of the Company and its creditors (including the holders
of the Notes) to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is necessarily
subject to the prior claims of creditors of such subsidiary, except to the
extent that claims of the Company as a creditor of the subsidiary may be
recognized.
The Notes will not be convertible into or exchangeable for the Company's
common stock and will not be entitled to the benefit of any sinking fund. In
addition, the Notes will not be redeemable prior to their stated maturity date.
The Company may buy Notes in the open market or otherwise at any time, but it
makes no assurance as to the existence or liquidity of trading markets for the
Notes.
BOOK-ENTRY SYSTEM, DELIVERY AND FORM
The Company will issue the Notes in registered form only, without interest
coupons attached. The Company will not issue bearer notes or notes in temporary
form. The Notes will be represented by one or more Registered Global Securities
registered in the name of The Depository Trust Company, as Depositary, or its
nominee. No Registered Global Security may be transferred except as a whole by
the Depositary or its nominee to the Depositary or another nominee, or to a
successor of the Depositary or a nominee of such successor.
So long as the Depositary or its nominee is the registered owner of a
Registered Global Security, the Depositary or its nominee, as the case may be,
will be the sole holder of the Notes represented by such Registered Global
Security for all purposes under the Indenture. Except as otherwise provided in
this section, owners of beneficial interests in a Registered Global Security
representing the Notes will not be entitled to receive physical delivery of
certificated Notes and will not be considered the holders of the Notes for any
purpose under the Indenture.
The Company will issue certificated Notes in exchange for Registered Global
Securities representing the Notes only if (i) the Depositary notifies the
Company that it is unwilling or unable to continue as Depositary for the
Registered Global Securities and the Company does not appoint a successor
Depositary within 90 days or (ii) the Company in its sole discretion determines
that the Registered Global Securities shall be exchangeable for certificated
Notes. Upon such exchange, the certificated Notes will be registered in the
names of the owners of beneficial interests in the Registered Global Security
representing the Notes, as provided by the Depositary's relevant participants
to the Trustee.
The following is based on information furnished by the Depositary:
The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The Depositary holds securities that its participants deposit with the
Depositary.
S-13
<PAGE>
The Depositary also facilitates the settlement among participants of
securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes to participants'
accounts, thereby eliminating the need for physical movement of securities
certificates. Direct participants of the Depositary include securities brokers
and dealers (including the underwriters), banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). The
Depositary is owned by a number of its Direct Participants and by the New York
Stock Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. Access to the Depositary's system is
also available to others, such as securities brokers and dealers, banks and
trust companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect Participants").
The rules applicable to the Depositary and its participants are on file with
the Securities and Exchange Commission.
Purchases of Notes under the Depositary's system must be made by or through
Direct Participants, which will receive credit for such Notes on the
Depositary's records. The ownership interest of each actual purchaser of each
Note represented by a Registered Global Security (a "beneficial owner") is in
turn to be recorded on the Direct and Indirect Participants' records.
Beneficial owners will not receive written confirmation from the Depositary of
their purchase, but are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their holdings,
from the Direct or Indirect Participants through which such beneficial owners
entered into the transaction. Transfers of ownership interests in the
Registered Global Securities representing the Notes will be accomplished by
entries made on the books of participants acting on behalf of beneficial
owners.
To facilitate subsequent transfers, all Registered Global Securities
representing the Notes which are deposited with, or on behalf of, the
Depositary are registered in the name of the Depositary's nominee, Cede & Co.
The deposit of Registered Global Securities with, or on behalf of, the
Depositary and their registration in the name of Cede & Co. effect no change
in beneficial ownership. The Depositary has no knowledge of the actual
beneficial owners of the Registered Global Securities representing the Notes;
the Depositary's records reflect only the identity of the Direct Participants
to whose accounts such Notes are credited, which may or may not be the
beneficial owners. The participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to beneficial owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with respect to
the Registered Global Securities representing the Notes. Under its usual
procedure, the Depositary mails an omnibus proxy to the Company as soon as
possible after the applicable record date. The omnibus proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Notes are credited on the applicable record date (identified in a
listing attached to the omnibus proxy).
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that the Company believes
to be reliable, but the Company assumes no responsibility for the accuracy
thereof.
SAME DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the underwriters in immediately
available funds. All payments of principal and interest will be made by the
Company in immediately available funds. The Notes will trade in the
Depositary's
S-14
<PAGE>
settlement system until maturity, and secondary market trading activity in the
Notes will therefore be required by the Depositary to settle in immediately
available funds.
UNDERWRITING
The Company and the underwriters for the offering (the "Underwriters") named
below have entered into a pricing agreement which incorporates the provisions
of the related underwriting agreement, with respect to the Notes. Subject to
certain conditions, each Underwriter has severally agreed to purchase the
principal amount of Notes indicated in the following table.
<TABLE>
<CAPTION>
Principal Amount
Underwriters of Notes
- ------------ ----------------
<S> <C>
Goldman, Sachs & Co........................................... $
Morgan Stanley & Co. Incorporated.............................
------------
Total..................................................... $150,000,000
============
</TABLE>
----------------
Notes sold by the Underwriters to the public will initially be offered at the
initial public offering price set forth on the cover of this Prospectus. Any
Notes sold by the Underwriters to securities dealers may be sold at a discount
from the initial public offering price of up to % of the principal amount of
the Notes. Any such securities dealers may resell any Notes purchased from the
Underwriters to certain other brokers or dealers at a discount from the initial
public offering price of up to % of the principal amount of the Notes. If all
the Notes are not sold at the initial public offering price, the Underwriters
may change the offering price and the other selling terms.
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 they 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.
In connection with the offering, the Underwriters may purchase and sell Notes
in the open market. These transactions may include short sales, stabilizing
transactions and purchases to cover positions created by short sales. Short
sales involve the sale by the Underwriters of a greater aggregate principal
amount of Notes than they are required to purchase from the Company in the
offering. Stabilizing transactions consist of certain bids or purchases for the
purpose of preventing or retarding a decline in the market price of the Notes
while the offering is in progress.
The Underwriters may also impose a penalty bid. This occurs when a particular
Underwriter repays to the Underwriters a portion of the underwriting discount
received by it because the Underwriters have repurchased Notes sold by or for
the account of such Underwriter in stabilizing or short covering transactions.
These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the Notes. As a result, the price of the Notes may
be higher than the price that otherwise might exist in the open market. If
these activities are commenced, they may be discontinued by the Underwriters at
any time. These transactions may be effected in the over-the-counter market or
otherwise.
The Company estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately $ .
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
In the ordinary course of their respective businesses, the Underwriters and
their affiliates have engaged, and may in the future engage, in investment
banking transactions with the Company or its affiliates.
S-15
<PAGE>
PROSPECTUS
PREMARK INTERNATIONAL, INC.
DEBT SECURITIES
----------------
Premark International, Inc. (the "Company"), may from time to time offer
debentures, notes and/or other unsecured evidences of indebtedness
(collectively, the "Debt Securities") at an aggregate initial offering price
not to exceed U.S. $250,000,000 or its equivalent in any other currency or
units based on or relating to foreign currencies. The Debt Securities may be
offered in one or more series in amounts, at prices and on terms to be
determined at the time of sale. When a particular series of Debt Securities
(the "Offered Securities") are offered, a supplement to this Prospectus (a
"Prospectus Supplement") will be delivered with this Prospectus setting forth
the terms of such Offered Securities, including, if applicable, the specific
designation, aggregate principal amount, denominations, currency, purchase
price, maturity, rate (which may be fixed or variable) and time of payment of
interest, redemption terms, and any listing on a securities exchange of the
Offered Securities.
The Debt Securities may be issued in registered form or bearer form with
coupons attached or both. In addition, all or a portion of the Debt Securities
of any series may be issuable in permanent registered global form which will
be exchangeable only under certain conditions into definitive Debt Securities.
The Company may sell Debt Securities to or through underwriters, and also
may sell Debt Securities to other purchasers directly or through agents. The
accompanying Prospectus Supplement sets forth the names of any underwriters or
agents involved in the sale of the Offered Debt Securities, the principal
amounts, if any, to be purchased by the underwriters and the compensation of
such underwriters or agents.
----------------
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.
----------------
The date of this Prospectus is October 30, 1998.
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
OR ANY PROSPECTUS SUPPLEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY UNDERWRITER OR AGENT. NEITHER THIS PROSPECTUS NOR ANY
PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES OFFERED HEREBY OR AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION TO
SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY ACCOMPANYING
PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREBY SHALL UNDER ANY CIRCUMSTANCE
IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
----------------
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements, information statements and other
information with the Securities and Exchange Commission (the "Commission").
Copies of reports, proxy statements and other information concerning the
Company may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
and at the following Regional Offices of the Commission: Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies can be obtained by mail
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Such material may also be
inspected on the Internet at the Commission's website (http://www.sec.gov). In
addition, reports, proxy materials, information statements and other
information concerning the Company can also be inspected at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005 and
the Pacific Stock Exchange, Inc., 301 Pine Street, San Francisco, California
94104, on which exchanges the Company's Common Stock is listed.
The Company has filed with the Commission a registration statement on Form
S-3 (the "Registration Statement") (which term encompasses any amendments
thereto) under the Securities Act of 1933, as amended (the "Securities Act")
with respect to the Debt Securities. This Prospectus does not contain all of
the information set forth in such Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. Reference is made to such Registration Statement and to the
exhibits thereto for further information with respect to the Company and the
Debt Securities. Statements made in this Prospectus as to the contents of any
documents referred to are not necessarily complete, and in each instance
reference is made to such exhibit for a more complete description and each
such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company are
incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 27, 1997, as amended by Form 10-K/A filed on March 23, 1998; and
(2) The Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 28, 1998, June 27, 1998 and September 26, 1998.
The Company's Commission File No. is 1-9256.
2
<PAGE>
All other documents filed by the Company pursuant to Section 13(a), 13(c),
14 and 15(d) of the Exchange Act after the date of this Prospectus and prior
to the termination of the offering made by this Prospectus shall be deemed to
be incorporated by reference in this Prospectus from the date of filing of
such documents. Any statement contained herein or in a document incorporated
by reference herein shall be deemed to be modified or superseded for purposes
of this Prospectus to the extent that a statement contained in any
subsequently filed document which also is, or is deemed to be, incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
Upon request, the Company will furnish without charge to each person,
including any beneficial owners, to whom this Prospectus is delivered a copy
of any or all of the documents described above (without exhibits other than
exhibits specifically incorporated by reference into such documents). Requests
should be directed to: Corporate Secretary's Office, Premark International,
Inc., 1717 Deerfield Road, Deerfield, Illinois 60015; telephone (847) 405-
6000.
3
<PAGE>
THE COMPANY
The Company is a multinational commercial and consumer products company with
three principal business segments: the Food Equipment Group, the Decorative
Products Group and the Consumer Products Group. The Company is a Delaware
corporation that was organized on August 29, 1986, in connection with the
corporate reorganization of Kraft, Inc. ("Kraft"). On October 31, 1986, the
Company became a publicly held company through the pro rata distribution by
Kraft to its shareholders of all the outstanding shares of common stock of the
Company. On May 31, 1996, the Company distributed on a pro rata basis to its
shareholders all of the issued and outstanding stock of Tupperware
Corporation, a direct seller of consumer products.
The Food Equipment Group is engaged in the design, manufacture, distribution
and service of commercial equipment for food preparation, cooking, baking,
warewashing, weighing, wrapping and refrigeration. The Food Equipment Group's
core products include warewashing equipment; food preparation machines, such
as mixers, slicers, cutters, meat saws and grinders; weighing and wrapping
equipment and related systems; baking and cooking equipment, such as ovens,
ranges, fryers, griddles and broilers; and refrigeration equipment. Products
are marketed under trademarks including Hobart, Stero, Vulcan-Hart, Wolf,
Tasselli, Adamatic, Still, Foster, Inoxyform, Ungermann, Baxter, Somat,
Wittco, Traulsen, Elettrobar, GBG, Sencotel, Colged and Promag. Food equipment
products are sold to the retail food industry, including supermarket chains,
independent grocers, delicatessens, convenience and other food stores, and to
the foodservice industry, including independent restaurants, restaurant
chains, hospitals, healthcare facilities, correctional facilities, schools,
bakeries, hotels, resorts and airlines. Food equipment products are
distributed through company-owned operations or through dealers, agents and
distributors. The Food Equipment Group contributed 53%, 55% and 56% to the
Company's sales for fiscal years 1997, 1996 and 1995, respectively.
The Decorative Products Group is composed of two businesses: Wilsonart and
Florida Tile. Wilsonart designs, manufactures and distributes decorative
surfacing products, primarily high pressure decorative laminates for numerous
interior surfacing applications such as cabinetry, countertops, and flooring,
and specialty-grade laminates, including chemical-resistant, wear-resistant
and fire-retardant laminates. In addition to laminate products, Wilsonart
sells solid surfacing products, panels and sinks, contact adhesives,
decorative metal surfacing products, wood and laminate-clad decorative edge
moldings for countertops and furniture, and threshold transitions for use with
its flooring products. Wilsonart products are sold through wholesale building
material distributors, original equipment manufacturers and dealers. Florida
Tile manufactures glazed ceramic wall and floor tile products for residential
and commercial uses, and unglazed porcelain mosaic tile primarily for
commercial applications. Florida Tile products are sold through company-owned
and independent distributors. The Decorative Products Group contributed 33%,
32% and 31% of the sales of the Company's businesses for the fiscal years
1997, 1996 and 1995, respectively.
The Consumer Products Group is composed of two businesses: West Bend and
Precor. West Bend designs, manufactures and sells small electric appliances,
such as bread makers, electric skillets, slow cookers, woks, corn poppers,
beverage makers, mixers, electronic timers, high-quality stainless steel
cookware, and a line of household water distillers. West Bend small appliances
are sold directly to mass merchandisers, department stores, hardware stores,
warehouse clubs and catalog showrooms. West Bend's stainless steel cookware
and household water distillers are sold to consumers by independent
distributors through dinner parties and by other direct sales methods. Precor
manufactures aerobic physical fitness equipment, such as treadmills,
elliptical crosstrainers, low-impact climbers and exercise cycles. Precor
equipment for home use is sold primarily through specialty fitness equipment
retail stores. Precor commercial equipment is sold through specialty fitness
dealers and directly to major fitness clubs. The Consumer Products Group
contributed 14%, 13% and 13% of the sales of the Company's business for the
fiscal years 1997, 1996 and 1995, respectively.
RECENT DEVELOPMENTS
On October 19, 1998, the Company announced that the Company's net income for
the third quarter ended September 26, 1998 rose 14.1% to $38.7 million, or
$0.60 per share, from $33.9 million or $0.52 per share, in the corresponding
period in 1997. Sales advanced 16% to a record $698 million.
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Wilsonart's continued outstanding performance, as well as a significant
increase in the Food Equipment Group's U.S. operations, led the advance in
quarterly net income. These factors, combined with continued improvement in
the European results of the Food Equipment Group and an increase at West Bend,
more than offset the impact of weak Asian Pacific markets and a loss at
Florida Tile due to lower production levels.
For the first nine months of 1998, the Company's net income of $94.9
million, or $1.47 per diluted common share, increased 14.3% from last year's
$83.0 million, or $1.27 per diluted common share, as sales increased 14% to a
record $2.0 billion.
Separately, the Company announced that it acquired certain operating assets
from Direct Worktops Limited. Located in northeastern England, Direct Worktops
is a manufacturer and distributor of high-pressure laminate countertops in the
United Kingdom.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratio of earnings
to fixed charges for the periods shown.
<TABLE>
<CAPTION>
26 WEEKS ENDED FISCAL YEAR ENDED
----------------- ----------------------------------------------------------------
JUNE 27, JUNE 28, DECEMBER 27, DECEMBER 28, DECEMBER 30, DECEMBER 31, DECEMBER 25,
1998 1997 1997 1996 1995 1994 1993
-------- -------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges.......... 8.1 7.8 8.1 5.0* 4.1 4.5 3.7
</TABLE>
*For the fiscal year ended December 28, 1996, pre-tax income was reduced by
$43.1 million related to the loss on the sale of the Company's Hartco
subsidiary. Excluding this charge, the ratio would have been 6.5.
Earnings available for fixed charges represent earnings before income taxes
and fixed charges (excluding capitalized interest). Fixed charges represent
interest incurred plus that portion of rental expense deemed to be the
equivalent of interest.
USE OF PROCEEDS
Except as otherwise set forth in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Debt Securities
for general corporate purposes.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued in one or more series under an Indenture
(the "Indenture") between the Company and The First National Bank of Chicago,
as Trustee (the "Trustee"), the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The following
statements with respect to the Indenture and the Securities (as hereinafter
defined) are brief summaries of the material provisions of the Indenture and
do not purport to be complete; such statements are subject to the detailed
referenced provisions of the Indenture, including the definition of
capitalized terms used under this caption. Whenever particular sections or
defined terms of the Indenture are referred to, such sections or defined terms
are incorporated herein by reference as a part of the statement made, and the
statement is qualified in its entirety by such reference. The term
"Securities", as used under this caption, refers to all securities issued
under the Indenture, including the Debt Securities.
GENERAL
The Indenture does not limit the aggregate principal amount of Securities
(which may include debentures, notes and other evidences of indebtedness)
which may be issued thereunder, and Securities may be issued
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<PAGE>
thereunder from time to time in one or more series and may be denominated and
payable in foreign currencies or units based on or relating to foreign
currencies, including European Currency Units. Special United States federal
income tax considerations applicable to any Securities so denominated will be
described in the Prospectus Supplement relating thereto. Unless otherwise
indicated in the applicable Prospectus Supplement, the Indenture also permits
the Company to increase the principal amount of any series of Securities
previously issued and to issue such increased principal amount. (Section 2.3)
The Prospectus Supplement will set forth the following terms relating to the
Offered Securities: (1) the specific designation of the Offered Securities;
(2) any limit on the aggregate principal amount of the Offered Securities; (3)
the date or dates, if any, on which the Offered Securities will mature; (4)
the rate or rates per annum (which may be fixed or variable) at which the
Offered Securities will bear interest, if any, the date or dates on which any
such interest will be payable and the Record Dates for any interest payable on
the Offered Securities which are Registered Securities; (5) any mandatory or
optional redemption or sinking fund provisions, including the period or
periods within which, the price or prices at which and the terms and
conditions upon which the Offered Securities may be redeemed or purchased at
the option of the Company or otherwise; (6) whether the Offered Securities
will be issuable in registered form or bearer form or both, and, if issuable
in bearer form, the restrictions as to the offer, sale and delivery of the
Offered Securities in bearer form and as to exchanges between registered and
bearer form; (7) whether the Offered Securities will be issuable in the form
of one or more temporary or permanent Global Securities and, if so, the
identity of the Depositary for such Global Securities; (8) the denominations
in which any of the Offered Securities which are in registered form will be
issuable, if other than denominations of $1,000 and any multiple thereof, and
the denominations in which any of the Offered Securities which in bearer form
will be issuable, if other than the denominations of $1,000 and $5,000; (9)
each office or agency where the principal of and any premium and interest on
the Offered Securities will be payable, and each office or agency where the
Offered Securities may be presented for registration of transfer or exchange;
(10) if other than United States dollars, the foreign currency or the units
based on or relating to foreign currencies in which the Offered Securities are
denominated and/or in which the payment of the principal of and any premium
and interest on the Offered Securities will or may be payable; (11) any
applicable United States federal income tax consequences, including whether
and under what circumstances the Company will pay additional amounts with
respect to the Offered Securities to a non-United States Person (as defined in
such Prospectus Supplement) on account of any tax, assessment or governmental
charge withheld or deducted and, if so, whether the Company will have the
option to redeem such Offered Securities rather than pay such additional
amounts; and (12) any other terms of the Offered Securities not inconsistent
with the Indenture, including covenants and events of default relating solely
to the Offered Securities.
Securities may be issued under the Indenture bearing no interest or interest
at a rate below the prevailing market rate at the time of issuance, to be
offered and sold at a discount below their stated principal amount. United
States federal income tax consequences and other special considerations
applicable to any such discounted Securities or to other Securities offered
and sold at par which are treated as having been issued at a discount for
United States federal income tax purposes will be described in the Prospectus
Supplement relating thereto.
The Securities and any coupons appertaining thereto will be unsecured and
will rank pari passu with all other unsecured and unsubordinated indebtedness
of the Company. However, since the Company is a holding company, the right of
the Company, and hence the right of the creditors of the Company (including
the Holders of Securities), to participate in any distribution of the assets
of any subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of such subsidiary,
except to the extent that claims of the Company as a creditor of such
subsidiary may be recognized.
EXCHANGE AND TRANSFER
Securities may be presented for exchange and registered Securities may be
presented for registration of transfer at the offices and subject to the
restrictions set forth therein and in the applicable Prospectus Supplement
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<PAGE>
without service charge, but upon payment of any taxes or other governmental
charges due in connection therewith, subject to any applicable limitations
contained in the Indenture. The Company has appointed the Trustee as Security
Registrar. Securities in bearer form and the coupons appertaining thereto, if
any, will be transferable by delivery. (Sections 2.8 and 3.2)
PAYMENT
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of the principal of and the premium and interest, if any, on all Securities
(other than a Registered Global Security) in registered form will be made at
the office or agency of the Trustee in the Borough of Manhattan, The City of
New York or Chicago, Illinois, except that, at the option of the Company,
payment of any interest may be made (i) by check mailed to the address of the
Person entitled thereto as such address shall appear in the Security Register
or (ii) by wire transfer to an account maintained by the Person entitled
thereto as specified in the Security Register. (Sections 3.1 and 3.2). Unless
otherwise indicated in the applicable Prospectus Supplement, payment of any
interest due on Securities in registered form will be made to the Person in
whose name such Registered Securities are registered at the close of business
on the Record Date for such interest payment. (Section 2.7)
REGISTERED GLOBAL SECURITIES
The registered Securities of a particular series may be issued in the form
of one or more Registered Global Securities which will be deposited with a
Depositary, or its nominee, each of which will be identified in the Prospectus
Supplement relating to such series. Unless and until exchanged, in whole or in
part, for Securities in definitive Registered form, a Registered Global
Security may not be transferred except as a whole by the Depositary for such
Registered Global Security to a nominee of such Depositary, by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or by
such Depositary or any such nominee to a successor of such Depositary or a
nominee of such successor. (Section 2.8)
The specific terms of the depositary arrangement with respect to any portion
of a particular series of Securities to be represented by a Registered Global
Security will be described in the Prospectus Supplement relating to such
series. The Company anticipates that the following provisions will apply to
all depositary arrangements.
Upon the issuance of a Registered Global Security, the Depositary therefor
or its nominee will credit, on its book entry and registration system, the
respective principal amounts of the Securities represented by such Registered
Global Security to the accounts of such persons having accounts with such
Depositary ("participants"), as shall be designated by the underwriters or
agents participating in the distribution of such Securities or by the Company
if such Securities are offered and sold directly by the Company. Ownership of
beneficial interests in a Global Security will be limited to participants or
persons that may hold beneficial interests through participants. Ownership of
beneficial interests in such Registered Global Security will be shown on, and
the transfer of such ownership will be effected only through, records
maintained by such Depositary therefor or its nominee (with respect to
interests of participants) or by participants or persons that hold through
participants (with respect to interests of persons other than participants).
The laws of some states require certain purchasers of securities to take
physical delivery thereof in definitive form. Such depositary arrangements and
such laws may impair the ability to transfer beneficial interests in a
Registered Global Security.
So long as the Depositary for a Registered Global Security or its nominee is
the registered owner thereof, such Depositary or such nominee, as the case may
be, will be considered the sole owner or Holder of the Securities represented
by such Registered Global Security for all purposes under the Indenture.
Except as provided below, owners of beneficial interests in a Registered
Global Security will not be entitled to have Securities of the series
represented by such Registered Global Security registered in their names, will
not receive or be entitled to receive physical delivery of Securities of such
series in definitive form and will not be considered the owners or Holders
thereof under the Indenture.
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<PAGE>
Principal, premium, if any, and interest payments on a Registered Global
Security registered in the name of a Depositary or its nominee will be made to
such Depositary or its nominee, as the case may be, as the registered owner of
such Registered Global Security. None of the Company, the Trustee, or any
paying agent for Securities of the series represented by such Registered
Global Security will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial interests in
such Registered Global Security or for maintaining, supervising or reviewing
any records relating to such beneficial interests.
The Company expects that the Depositary for a Registered Global Security 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 such Registered Global Security as shown on the records of such Depositary
or its nominee. The Company also expects that payments by participants to
owners of beneficial interests in such Registered Global Security held through
such participants will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers
registered in "street name", and will be the responsibility of such
participants.
If a Depositary for a Registered Global Security representing Securities of
a particular series is at any time unwilling or unable to continue as
Depositary and a successor Depositary is not appointed by the Company within
90 days, the Company will issue Securities of such series in definitive form
in exchange for such Registered Global Security. In addition, the Company may
at any time and in its sole discretion determine not to have the Securities of
a particular series represented by a Registered Global Security and, in such
event, will issue Securities of such series in definitive form in exchange for
all of the Registered Global Securities representing Securities of such
series.
CERTAIN COVENANTS OF THE COMPANY
Limitation on Liens. Neither the Company nor any Restricted Subsidiary will
incur, assume or guarantee any indebtedness for borrowed money secured by a
mortgage, pledge, security interest or other lien or encumbrance (any such
mortgage, pledge, security interest or other lien or encumbrance being
hereinafter called a "Mortgage" and any such indebtedness being hereinafter
called "Secured Debt") on any Principal Property or on any shares of stock or
indebtedness of any Restricted Subsidiary without effectively providing that
the Securities (together with, if the Company shall so determine, any other
indebtedness for borrowed money ranking equally with or prior to the
Securities incurred, assumed or guaranteed by the Company or any Restricted
Subsidiary, whether then or thereafter existing) shall be secured equally and
ratably with (or, at the option of the Company, prior to) such Secured Debt,
unless after giving effect thereto the aggregate principal amount of all
Secured Debt, plus the aggregate amount of all Attributable Debt in respect of
sale and leaseback transactions involving Principal Properties (with certain
exceptions), would not exceed 10% of Consolidated Net Tangible Assets. This
restriction will not apply to, and there will be excluded in computing Secured
Debt for the purposes of such restriction, indebtedness secured by (a)
Mortgages on property of, or on any shares of stock or indebtedness of, any
corporation existing at the time it is merged into or consolidated with the
Company or any Restricted Subsidiary, at the time of a sale or other
disposition of its properties (or any division thereof) as an entirety or
substantially as an entirety to the Company or any Restricted Subsidiary or at
the time it becomes a Restricted Subsidiary; (b) Mortgages securing
indebtedness of a Restricted Subsidiary to the Company or to another
Restricted Subsidiary; (c) Mortgages on any Principal Property, shares of
stock or indebtedness existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary; (d) certain Mortgages created, incurred
or assumed within 180 days after the latest to occur of the acquisition, the
completion of construction or improvement or the commencement of commercial
operation of any property acquired, constructed or improved after the date of
the Indenture to secure the payment of any part of the purchase price of such
property or the cost of such construction or improvement; (e) Mortgages in
favor of the United States of America or other governmental bodies to secure
partial, progress, advance or other payments, or other obligations, or to
secure any indebtedness incurred for the purpose of financing all or any part
of the cost of acquiring, constructing or improving the property subject
thereto (including Mortgages incurred in connection with industrial revenue
and pollution control bonds); (f) Mortgages existing at the date of the
Indenture; and (g) Mortgages for the sole purpose of extending, renewing or
replacing indebtedness secured by or described in the foregoing clauses (a)
through (f). (Section 3.6)
8
<PAGE>
The term "Subsidiary" means a corporation a majority of the outstanding
voting stock of which is owned, directly or indirectly, by the Company and/or
one or more of its Subsidiaries. The term "Restricted Subsidiary" means a
Subsidiary substantially all of whose assets are located or substantially all
of whose business is carried on within the United States of America (and its
territories and possessions) and which owns any Principal Property. The term
"Principal Property" means any manufacturing or processing plant or warehouse
located in the United States of America owned by the Company or any Restricted
Subsidiary and having a gross book value in excess of 3% of Consolidated Net
Tangible Assets, other than (a) any such plant or warehouse which, in the
opinion of the Board of Directors, is not of material importance to the total
business conducted by the Company and its Subsidiaries as an entirety or (b)
any portion of any such plant or warehouse which, in the opinion of such
Board, is not of material importance to the use or operation of such plant or
warehouse. The term "Attributable Debt" means, with respect to any lease
constituting part of a sale and leaseback transaction, the lesser of (a) the
fair value of the Principal Property subject to such lease (as determined by
the Board of Directors) and (b) the total net amount of rent (excluding rent
contingent on the amount of sales) required to be paid by the lessee under
such lease during the remaining primary term thereof (discounted at the rate
of interest implicit in such lease). The term "Consolidated Net Tangible
Assets" means the aggregate amount of assets (less applicable reserves and
other properly deductible items), after deducting therefrom: (a) all current
liabilities (including the current portion of Funded Debt), (b) all other
liabilities except deferred income taxes, Funded Debt and stockholders'
equity, (c) all goodwill, trade names, trademarks, patents, organization
expenses, unamortized debt discount and expense less unamortized debt premium
and other like intangibles (other than deferred charges and prepaid expenses),
(d) adjustments for minority interests and (e) equity in and net advances to
Subsidiaries (other than Restricted Subsidiaries), all as set forth on the
most recent consolidated balance sheet of the Company and its Restricted
Subsidiaries and computed in accordance with generally accepted accounting
principles. "Funded Debt" means all indebtedness for borrowed money owed or
guaranteed by the Company or any of its Restricted Subsidiaries, and any other
indebtedness which would appear as indebtedness on the most recent
consolidated balance sheet of the Company and its Restricted Subsidiaries,
which matures, or is renewable or extendible at the option of the borrower so
that it matures, more than 12 months from the date of such consolidated
balance sheet. (Section 1.1)
Restrictions on Sale and Leaseback Transactions. Neither the Company nor any
Restricted Subsidiary may enter into any sale and leaseback transaction
involving any Principal Property if the latest to occur of the acquisition,
the completion of construction and the commencement of commercial operation of
such Principal Property shall have occurred more than 180 days prior thereto,
unless (a) the Company or such Restricted Subsidiary could create Secured Debt
secured by such Principal Property under the restrictions described above
under "Limitation on Liens" in an amount equal to the Attributable Debt with
respect to such sale and leaseback transaction without equally and ratably
securing the Securities or (b) the Company, within 90 days from the effective
date of such sale and leaseback transaction, shall apply an amount not less
than the greater of (i) the net proceeds of the sale of such Principal
Property or (ii) the fair value (as determined by the Board of Directors) of
such Principal Property to (x) the retirement of Funded Debt or (y) the
purchase of other property which will constitute a Principal Property having a
fair value (as so determined) at least equal to the fair value of the
Principal Property leased in such sale and leaseback transaction. This
restriction will not apply to any sale and leaseback transaction (a) between
the Company and a Restricted Subsidiary or between Restricted Subsidiaries or
(b) involving the taking back of a lease for a period of less than three
years. (Section 3.7)
EVENTS OF DEFAULT
The occurrence of any of the following events with respect to the Securities
of any series will constitute an "Event of Default" with respect to the
Securities of such series: (a) default for 30 days in the payment of any
interest upon any of the Securities of such series; (b) default in the payment
of any principal of or the premium, if any, on any of the Securities of such
series, whether at maturity, upon redemption, by declaration or otherwise; (c)
default in the deposit of any sinking fund payment in respect of any
Securities of such series; (d) default for 90 days by the Company in the
observance or performance of any other covenant or agreement contained in the
Indenture relating to the Securities of such series after written notice
thereof as provided in the Indenture; or (e)
9
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certain events of bankruptcy, insolvency or reorganization relating to the
Company. (Section 5.1) Additional Events of Default may be prescribed for the
benefit of the Holders of a particular series of Securities as described in
the Prospectus Supplement relating thereto.
If an Event of Default due to a default in the payment of the principal of
or the premium or interest, if any, on, or in the deposit of any sinking fund
payment with respect to, any series of Securities shall have occurred and be
continuing, either the Trustee or the Holders of not less than 25% in
aggregate principal amount of the Securities of such series then Outstanding
may declare the principal of all Securities of such series and the interest,
if any, accrued thereon to be due and payable immediately. If any Event of
Default due to a default in the observance or performance of any other
covenant or agreement of the Company contained in the Indenture and applicable
to the Securities of one or more (but less than all) series then Outstanding
shall have occurred and be continuing, either the Trustee or the Holders of
not less than 25% in aggregate principal amount of the Securities of the
affected series then Outstanding (voting as one class) may declare the
principal of all Securities of each such affected series and the interest, if
any, accrued thereon to be due and payable immediately. If an Event of Default
due to a default in the observance or performance of any other covenant or
agreement of the Company contained in the Indenture applicable to all
Securities then Outstanding or due to certain events of bankruptcy, insolvency
or reorganization relating to the Company shall have occurred and be
continuing, either the Trustee or the Holders of not less than 25% in
aggregate principal amount of all Securities then Outstanding (voting as one
class) may declare the principal of all Securities and the interest, if any,
accrued thereon to be due and payable immediately. Upon certain conditions,
any such declarations may be rescinded and annulled if all Events of Default,
other than the nonpayment of accelerated principal, with respect to the
Securities of all such affected series then Outstanding shall have been cured
or waived as provided in the Indenture by the Holders of a majority in
aggregate principal amount of the Securities of the affected series then
Outstanding (voting as one class, except in the case of Events of Default
described in clauses (a), (b) and (c) of the preceding paragraph, as to which
each series so affected will vote as a separate class). See "Modification of
the Indenture" below. Reference is made to the Prospectus Supplement relating
to any series of Original Issue Discount Series for the particular provisions
relating to the acceleration of a portion of the principal amount thereof upon
the occurrence and continuance of an Event of Default with respect thereto.
(Section 5.1)
The Indenture provides that, subject to the duty of the Trustee to act with
the requisite standard of care in case a default with respect to a series of
Securities shall have occurred and be continuing, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of the Holders of the Securities, unless such
Holders shall have offered to the Trustee reasonable security or indemnity.
(Sections 5.6 and 6.2) Subject to such provisions for indemnity and certain
other limitations contained in the Indenture, the Holders of a majority of the
aggregate principal amount of the Securities of each Outstanding series then
Outstanding 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
Securities of such affected series. (Section 5.9)
The Indenture provides that no Holder of Securities may institute any action
against the Company under the Indenture (except actions for payment of overdue
principal, premium or interest) unless such Holder previously shall have given
to the Trustee written notice of default and continuance thereof and unless
the Holders of not less than 25% in aggregate principal amount of the
Securities of the affected series then Outstanding (voting as one class) shall
have requested the Trustee to institute such action and shall have offered the
Trustee reasonable indemnity, the Trustee shall not have instituted such
action within 60 days of such request and the Trustee shall have received
direction inconsistent with such request by the Holders of a majority in
aggregate principal amount of the Securities of the affected series then
Outstanding (voting as one class). (Sections 5.6 and 5.9)
The Indenture requires the Company to furnish to the Trustee annually a
statement as to the absence of certain defaults under the Indenture. (Section
3.5) The Indenture provides that the Trustee may withhold notice to the
Holders of the Securities of any series of any default affecting such series
(except defaults as to payment of principal, premium or interest on the
Securities of such series or as to sinking fund payments) if it considers such
withholding to be in the interests of the Holders of the Securities of such
series. (Section 5.11)
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CONSOLIDATION, MERGER OR SALE OF ASSETS
The Company may consolidate with or merge into, or sell, lease or convey its
property as an entirety or substantially as an entirety to, any other
corporation if (a) such corporation assumes the obligations of the Company
under the Securities and the Indenture and is organized and existing under the
laws of the United States of America, any state thereof or the District of
Columbia and (b) immediately after such consolidation, merger, sale, lease or
conveyance, no Event of Default, and no event which, after notice, lapse of
time or both, would become an Event of Default, shall have occurred and be
continuing. If, upon any such consolidation, merger, sale, lease or
conveyance, any Principal Property or any shares of stock or indebtedness of
any Restricted Subsidiary owned by the Company or a Restricted Subsidiary
immediately prior thereto would become subject to any mortgage, security
interest, pledge, lien or other encumbrance (unless such mortgage, security
interest, pledge, lien or other encumbrance would be permitted by the
provisions described above under "Limitation on Liens"), the Securities must
be secured (together with, if the Company shall so determine, any other
indebtedness for borrowed money ranking equally with or prior to the
Securities incurred, assumed or guaranteed by the Company or any Restricted
Subsidiary, whether then or thereafter existing) by a direct lien on such
Principal Property, shares of stock or indebtedness prior to all liens other
than any theretofore existing thereon. (Sections 9.1 and 9.2)
MODIFICATION OF THE INDENTURE
The Indenture permits the Company and the Trustee to enter into supplemental
indentures without the consent of the Holders of the Securities to: (a) secure
the Securities of one or more series, (b) evidence the assumption by a
successor corporation of the obligations of the Company under the Indenture
and the Securities then Outstanding, (c) add covenants for the protection of
the Holders of the Securities, (d) cure any ambiguity or correct any
inconsistency in the Indenture, (e) establish the form and terms of the
Securities of any series and (f) evidence the acceptance of appointment by a
successor Trustee. (Section 8.1)
The Indenture also permits the Company and the Trustee, with the consent of
the Holders of not less than a majority in aggregate principal amount of the
Securities of each series then Outstanding and affected, to add any provisions
to, or change in any manner or eliminate any of the provisions of, the
Indenture or modify in any manner the right of the Holders of the Securities
of each such affected series; provided, however, that the Company and the
Trustee may not, without the consent of the Holder of each Security then
Outstanding and affected thereby: (a) extend the time of payment of the
principal (or any installment) of any Security, or reduce the principal amount
thereof, reduce the rate or extend the time of payment of interest thereon, or
reduce any amount payable on the redemption thereof, or change the currency in
which the principal thereof or the interest thereon is payable, or reduce the
amount payable on any Original Issue Discount Security upon acceleration or
provable in bankruptcy, or alter certain provisions of the Indenture relating
to Securities not denominated in United States dollars, or impair the right to
institute suit for the enforcement of any payment on any Security when due; or
(b) reduce the percentage in principal amount of the Securities of the
affected series, the consent of whose Holders is required for any such
modification or for any waiver provided for in the Indenture. (Section 8.2)
Prior to the acceleration of the maturity of any Securities, the Holders of
a majority in aggregate principal amount of the Securities of all series at
the time Outstanding with respect to which a default or an Event of Default
shall have occurred and be continuing (voting as one class) may on behalf of
the Holders of all such affected Securities waive any past default or Event of
Default and its consequences, except a default or an Event of Default in
respect of a covenant or provision of the Indenture or of any Security which
cannot be modified or amended without the consent to the Holder of each
Security affected.
DEFEASANCE AND DISCHARGE
The Indenture provides that, at the option of the Company: (a) the Company
will be discharged from any and all obligations in respect of the Securities
of a particular series then Outstanding (except for certain
11
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obligations to register the transfer of or exchange the Securities of such
series, to replace stolen, lost or mutilated Securities of such series, to
maintain paying agencies and to maintain the trust described below) or (b) the
Company need not comply with certain restrictive covenants of the Indenture
(including those described under "Certain Covenants of the Company" and
"Consolidation, Merger or Sale of Assets"), in each case if the Company
irrevocably deposits in trust with the Trustee money, and/or securities of the
government which issued the currency in which the Securities of such series
are payable or securities backed by the full faith and credit of such
government which, through the payment of the principal thereof and the
interest thereon in accordance with their terms, will provide money in an
amount sufficient to pay all the principal of (and premium, if any) and
interest on the Securities of such series on the stated maturity of such
Securities (which may include one or more redemption dates designated by the
Company) in accordance with the terms thereof. To exercise such option, the
Company is required, among other things, to deliver to the Trustee an opinion
of independent counsel of nationally-recognized standing to the effect that
the exercise of such option would not cause the Holders of the Securities of
such series to recognize income, gain or loss for United States federal income
tax purposes as a result of such defeasance, and such Holders will be subject
to United States federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such defeasance had not
occurred, and, in the case of a discharge as described in clause (a) of the
preceding sentence, such opinion is to be accompanied by a private letter
ruling to the same effect received from the Internal Revenue Service, a
revenue ruling to such effect pertaining to a comparable form of transaction
published by the Internal Revenue Service or appropriate evidence that since
the date of the Indenture there has been a change in the applicable federal
income tax law. (Section 10.1)
In the event the Company exercises its option to effect a covenant
defeasance with respect to the Securities of any series as described in the
preceding paragraph and the Securities of such series are thereafter declared
due and payable because of the occurrence of any Event of Default other than
an Event of Default caused by failing to comply with the covenants which are
defeased, and the amount of money and securities on deposit with the Trustee
would be insufficient to pay amounts due on the Securities of such series at
the time of their accelerated maturity, the Company would remain liable for
such amounts.
The Company may also obtain a discharge of the Indenture with respect to all
Securities then Outstanding (except for certain obligations to register the
transfer of or exchange such Securities, to replace stolen, loss or mutilated
Securities, to maintain paying agencies and to maintain the trust described
below) by irrevocably depositing in trust with the Trustee money, and/or
securities of the government which issued the currency in which such
Securities are payable or securities backed by the full faith and credit of
such government which, through the payment of the principal thereof or the
interest thereon in accordance with their terms, will provide money in an
amount sufficient to pay all the principal of (and premium, if any) and
interest on the Securities on the stated maturities thereof (including one or
more redemption dates), provided that such Securities are by their terms due
and payable, or are to be called for redemption, within one year. (Section
10.1)
CONCERNING THE TRUSTEE
The First National Bank of Chicago, the trustee under the Indenture, is one
of a number of banks with which the Company and its subsidiaries maintain
ordinary banking relationships, including, in certain cases, credit
facilities.
GOVERNING LAW
The Indenture and the Debt Securities shall be governed by, and for all
purposes shall be construed in accordance with, the laws of the State of New
York, except as may otherwise be required by mandatory provisions of law.
PLAN OF DISTRIBUTION
The Company may sell Debt Securities in a public offering to or through
underwriters and may also sell Debt Securities directly to one or more other
purchasers or through agents.
12
<PAGE>
The Company may sell Debt Securities as soon as practicable after the
effectiveness of the Registration Statement of which this Prospectus forms a
part. The names of any underwriters involved in the sale of the Debt
Securities in respect of which this Prospectus is delivered, the amount or
number of Debt Securities to be purchased by any such underwriters and any
applicable commissions or discounts will be set forth in the applicable
Prospectus Supplement.
The distribution of the Debt Securities may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, or
at market prices prevailing at the time of sale, at prices relating to such
prevailing market prices or at negotiated prices. The Prospectus Supplement
will describe the method of distribution of the Offered Debt Securities.
In connection with the sale of Debt Securities, underwriters or agents may
receive compensation from the Company or from purchasers of Debt Securities
for whom they may act as agents in the form of discounts, concessions or
commissions. Underwriters may sell Debt Securities to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents. Underwriters, dealers and agents that participate
in the distribution of Debt Securities may be deemed to be underwriters, and
any discounts or commissions received by them from the Company and any profit
on the resale of Debt Securities by them may be deemed to be underwriting
discounts and commissions, under the Securities Act. Any such underwriter or
agent will be identified, and any such compensation received from the Company
will be described, in the Prospectus Supplement.
Under agreements that may be entered into by the Company, underwriters,
dealers and agents who participate in the distribution of Debt Securities may
be entitled to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act, or to contribution with
respect to payments which such underwriters, dealer or agents may be required
to make in respect thereof.
In connection with any offering of Debt Securities, the Company may grant to
the underwriters an option to purchase additional Debt Securities to cover
over-allotments, if any, at the initial public offering price (with an
additional underwriting commission), as may be set forth in the accompanying
Prospectus Supplement. If the Company grants any such option, the terms of
such option will be set forth in the applicable Prospectus Supplement.
If so indicated in the accompanying Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase the Offered Securities from
the Company pursuant to contracts providing for payment and delivery on a
future date. Institutions with which such contracts may be made include
commercial and savings banks, insurance companies, pension funds, educational
and charitable institutions and others, but in all cases such institutions
must be approved by the Company. The obligations of any purchaser under any
such contract will be subject to the condition that the purchase of the
Offered Securities shall not at the time of delivery be prohibited under the
laws of the jurisdiction to which such purchaser is subject. The underwriters
and such other agents will not have any responsibility in respect of the
validity or performance of such contracts.
Certain of the underwriters or agents and their associates may be customers
of, or engage in transactions with and perform services for the Company in the
ordinary course of business.
All Debt Securities will be issues of new securities with no established
trading market. Any underwriters to whom Debt Securities are sold by the
Company for public offering and sale may make a market in such Debt
Securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given concerning the liquidity of the trading market for any Debt Securities.
13
<PAGE>
LEGAL OPINIONS
The validity of the Debt Securities offered hereby will be passed upon for
the Company by John M. Costigan, in his capacity as Senior Vice President,
General Counsel and Secretary of the Company, and Sidley & Austin, Chicago,
Illinois, and for any underwriters, dealers or agents by Sullivan & Cromwell,
New York, New York. Mr. Costigan, in his capacity as Senior Vice President,
General Counsel and Secretary of the Company, is paid a salary by the Company
and is a participant in various employee benefits plans offered to employees
of the Company.
EXPERTS
The financial statements as of and for the fiscal year ended December 27,
1997 incorporated in this Prospectus by reference to the Annual Report on Form
10-K of the Company for the fiscal year ended December 27, 1997 have been so
incorporated in reliance on the report of Ernst & Young LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting. The financial statements as of December 28, 1996 and for each of
the two years in the fiscal period ended December 28, 1996 incorporated in
this Prospectus by reference to the Annual Report on Form 10-K of the Company
for the fiscal year ending December 27, 1997 have been so incorporated in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firms as experts in auditing and accounting.
NOTE REGARDING FORWARD LOOKING STATEMENTS
Section 21E of the Exchange Act provides a "safe harbor" for forward-looking
statements to encourage companies to provide prospective information about
their companies, so long as those statements are identified as forward-looking
and are accompanied by meaningful cautionary statements identifying important
factors that could cause actual results to differ materially from those
discussed in the statements. The Company desires to take advantage of the
"safe harbor" provisions of the Exchange Act with regard to forward-looking
statements contained in this Prospectus and any document incorporated by
reference herein. The forward-looking statements are and will be based on
management's then current views and assumptions regarding future events and
financial performance. The factors identified by the Company include, among
other things, the factors noted in the "Narrative Description of Business" in
the Company's Annual Report on Form 10-K for the fiscal year ended December
27, 1997 ("Annual Report"), and "Management's Discussion and Analysis of
Financial Condition and Results of Operation" in the Annual Report and in the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 27,
1998. Other risk factors include the following: general economic and business
conditions in the domestic and global markets; actions of competitors,
including competitive pricing; changes in customer preferences and spending
patterns; changes in social and demographic trends; changes in laws and
regulations, including changes in taxation and accounting standards; foreign
economic conditions, including currency exchange rate fluctuations; interest
rate fluctuations; the effects of changing cost and availability of raw
materials; outcome of litigation; adequacy of reserves; and the effectiveness
of the Company's marketing and sales programs.
14
<PAGE>
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No dealer, salesperson or other person is authorized to give any information or
to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the Notes offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
Prospectus Supplement
<S> <C>
The Company............................................................... S-2
Use of Proceeds........................................................... S-5
Ratio of Earnings to Fixed Charges........................................ S-5
Capitalization............................................................ S-6
Selected Consolidated Financial Data...................................... S-7
Management's Discussion and Analysis of Financial Condition and Results of
Operation................................................................ S-8
Description of the Notes.................................................. S-12
Underwriting.............................................................. S-15
Prospectus
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
The Company............................................................... 4
Recent Developments....................................................... 4
Ratio of Earnings to Fixed Charges........................................ 5
Use of Proceeds........................................................... 5
Description of Debt Securities............................................ 5
Plan of Distribution...................................................... 12
Legal Opinions............................................................ 14
Experts................................................................... 14
Note Regarding Forward Looking Statements................................. 14
</TABLE>
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$150,000,000
PREMARK INTERNATIONAL, INC.
% Notes due
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PROSPECTUS SUPPLEMENT
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GOLDMAN, SACHS & CO.
MORGAN STANLEY DEAN WITTER
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