<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 1999
REGISTRATION NO. 333-42745
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BIG FLOWER PRESS HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 13-3768322
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
</TABLE>
------------------------
3 EAST 54TH STREET
NEW YORK, NEW YORK 10022
(212) 521-1600
(Address, including Zip Code, and Telephone Number, including Area Code, of
Registrant's Principal Executive Offices)
------------------------------
MARK A. ANGELSON, ESQ.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND
SECRETARY OF THE BOARD OF DIRECTORS
BIG FLOWER PRESS HOLDINGS, INC.
3 EAST 54TH STREET
NEW YORK, NEW YORK 10022
(212) 521-1600
(Name, Address, including Zip Code, and Telephone Number, including Area Code,
of Agent for Service)
------------------------------
COPIES TO:
ROBERT E. BUCKHOLZ, JR., ESQ.
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
(212) 558-4000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(2)
<S> <C> <C> <C> <C>
8 5/8% Senior Subordinated Notes
due December 1, 2008........................... $250,000,000 $1,025 $256,250,000 $71,237.50
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f); the proposed maximum offering price is based on the
average of the bid and asked prices of the notes on February 3, 1999.
(2) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED - , 1999
PROSPECTUS
OFFER TO EXCHANGE
$250,000,000 8 5/8% SENIOR SUBORDINATED NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933
FOR
[LOGO]
ALL OUTSTANDING UNREGISTERED
8 5/8% SENIOR SUBORDINATED NOTES DUE 2008
BIG FLOWER PRESS HOLDINGS, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON - , 1999
UNLESS EXTENDED.
BIG FLOWER PRESS--
- issued $250,000,000 aggregate principal amount of
its unregistered 8 5/8% senior subordinated notes
due December 1, 2008 on December 9, 1998, and will
exchange them as described in this prospectus for
an equal amount of registered exchange notes
having the same terms.
THE EXCHANGE NOTES--
- have a stated maturity of December 1, 2008;
- will receive interest payments on each January 1
and July 1, commencing July 1, 1999;
- may be redeemed on or after December 1, 2003 by
Big Flower Press;
- may be redeemed in part, up to 35% of the issue,
until December 1, 2001 with the net proceeds from
issuances of equity interests of Big Flower Press;
- may also be redeemed if Big Flower Press undergoes
a change of control prior to December 1, 2003;
- will be unsecured and subordinated to all existing
and future senior debt of Big Flower Press;
- will be effectively subordinated to all
liabilities of Big Flower Press' subsidiaries,
including trade payables;
- will rank equally with the $350,000,000 aggregate
principal amount of Big Flower Press' 8 7/8%
senior subordinated notes due 2007 that are
currently outstanding;
- currently have no public market; and
- will not be listed on any national securities
exchange.
INVESTING IN THE EXCHANGE NOTES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS," BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS THAT YOU
SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER AND AN INVESTMENT IN THE
EXCHANGE NOTES.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE
OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is - , 1999
<PAGE>
REFERENCES TO ADDITIONAL INFORMATION
This prospectus incorporates important business and financial information
about Big Flower Press from documents that are not included in or delivered with
this document. You can obtain documents incorporated by reference in this
prospectus (other than certain exhibits to those documents) by requesting them
in writing or by telephone from us at the following address:
Big Flower Press Holdings, Inc.
3 East 54th Street
New York, New York 10022
Attention: Irene B. Fisher, Esq.
Telephone: (212) 521-1600
YOU WILL NOT BE CHARGED FOR ANY OF THESE DOCUMENTS THAT YOU REQUEST. IF YOU
WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY - , 1999 IN ORDER TO RECEIVE
THEM BEFORE THE EXCHANGE OFFER EXPIRES ON - , 1999.
Financial and other information relating to Big Flower Press is contained in
this prospectus, including "Selected Financial Data" on page 7.
See "Where You Can Find More Information" on page 58.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL BIG FLOWER PRESS ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF PRIVATE NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER WOULD CONTRAVENE SECURITIES OR BLUE SKY LAWS.
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS. IT DOES
NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. WE URGE YOU TO READ
CAREFULLY THE ENTIRE PROSPECTUS, THE DOCUMENTS INCORPORATED IN THIS PROSPECTUS
BY REFERENCE AND THE OTHER DOCUMENTS TO WHICH THIS PROSPECTUS REFERS, INCLUDING
THE CONSOLIDATED FINANCIAL STATEMENTS OF BIG FLOWER PRESS, AND THE NOTES TO SUCH
FINANCIAL STATEMENTS (COLLECTIVELY, THE "CONSOLIDATED FINANCIAL STATEMENTS")
INCORPORATED IN THIS PROSPECTUS BY REFERENCE.
BIG FLOWER PRESS
Big Flower Press was incorporated in Delaware in 1993. Our operations are
conducted through several subsidiaries. In 1997, we became a wholly-owned
subsidiary of Big Flower Holdings, Inc. as a result of a holding company
reorganization. We are a leading advertising and marketing services company with
four business segments: insert advertising and newspaper services, direct
marketing services, digital services, and specialty products and commercial
printing.
- Through Treasure Chest Advertising Company, Inc., we produce more than 30
billion multi-page advertising inserts for leading regional and national
retailers. We also produce Sunday magazines, TV listing guides and special
supplements for over 300 newspapers in the United States.
- Through Webcraft, Inc., we offer personalized direct mail advertising
products. These are mailed to targeted individuals selected through the
use of computer databases. These databases can include information derived
from recent purchases by individuals.
We also offer ancillary services such as database management and response
fulfillment. Database management includes the creation of computer
databases and manipulation of customer databases to facilitate targeting of
direct mail. Response fulfillment is the provision of telemarketing or
internet services to facilitate consumer response to direct mail
advertising.
Through acquisitions, we have expanded our services to include data
analysis, telemarketing, response fulfillment and digitized
print-on-demand. Digitized print-on-demand is the creation of customized
computer-generated images of products reflecting individual customer
preferences which are then delivered to the customer by direct mail. The
primary customers of Webcraft's direct marketing products and services are
consumer goods manufacturers, financial institutions, non-profit
organizations and government agencies.
- Our third business segment is conducted through Big Flower Digital
Services, Inc.. We offer an array of digital image management and software
management services principally through our two primary subsidiaries in
this segment: Laser Tech Color, Inc., the image management unit, and
Columbine JDS Systems, Inc., the software management group.
-- Laser Tech's core competency is premedia, or the digital process of
preparing graphics and text for a wide variety of advertising
impressions for outdoor billboards, magazine advertisements, Websites,
CD-Rom and consumer packages. In addition to preparation, Laser Tech
transmits and archives these advertising materials on behalf of its
customers which include advertising agencies, consumer packaging
companies, retail advertisers and commercial products manufacturers.
-- Columbine is a leading provider of computer software systems that
support the buying and selling of advertising time. Primary customers
include advertising agencies, cable operators and satellite and
terrestrial broadcasters both in the United States and internationally.
- Our fourth and smallest business segment, specialty products and
commercial printing, is also conducted through Webcraft. This segment
includes commercial printing, the production of specialty chemicals,
adhesives and coatings, and the production of fragrance samplers. We are
placing less emphasis on this segment and plan to reallocate the assets
associated with this segment.
1
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The exchange offer........................... We are offering to exchange
- $1,000 principal amount of our
registered 8 5/8% senior subordinated
notes due December 1, 2008, which we
refer to as exchange notes,
for
- each $1,000 principal amount of our
unregistered 8 5/8% senior subordinated
notes due December 1, 2008, which we
refer to as private notes.
We sometimes will refer to the exchange notes
and the private notes together as the notes.
Currently, $250,000,000 aggregate principal
amount of private notes are outstanding.
Expiration date.............................. The exchange offer will expire at 5:00 p.m.,
New York City time, on -, 1999, unless we
extend it. In that case the phrase
"expiration date" will mean the latest date
and time to which we extend the exchange
offer. We will issue exchange notes on the
expiration date or as soon as possible after
that date.
Procedures for participating in the exchange
offer...................................... If you wish to participate in the exchange
offer, you must complete, sign and date an
original or faxed letter of transmittal in
accordance with the instructions contained in
the letter of transmittal accompanying this
prospectus. Then you must mail, fax or
deliver the completed letter of transmittal,
together with the notes you wish to exchange
and any other required documentation to State
Street Bank and Trust Company, which is
acting as exchange agent. Its address appears
on the letter of transmittal. By signing the
letter of transmittal, you will represent to
and agree with Big Flower Press that,
- you are acquiring the exchange notes in the
ordinary course of your business,
- you have no arrangement or understanding
with anyone to participate in a distribution
of the exchange notes, and
- you are not an "affiliate," as defined in
Rule 405 under the Securities Act, of Big
Flower Press.
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
If you are a broker-dealer that will receive
exchange notes for your own account in
exchange for private notes that you acquired
as a result of your market-making or other
trading activities, you will be required to
acknowledge in the letter of transmittal that
you will deliver a prospectus in connection
with any resale of such exchange notes.
Resale of exchange notes..................... We believe that you can resell and transfer
your exchange notes without registering them
under the Securities Act and delivering a
prospectus, if you can make the same three
representations that appear above under the
heading "Procedures for participating in the
exchange offer." But, our belief is based on
interpretations of the SEC for other exchange
offers that the SEC expressed in some of
SEC's no-action letters to other issuers in
exchange offers like ours.
We cannot guarantee that the SEC would make a
similar decision about this exchange offer.
If our belief is wrong, or if you cannot
truthfully make the representations mentioned
above, and you transfer any exchange note
issued to you in the exchange offer without
meeting the registration and prospectus
delivery requirements of the Securities Act,
or without an exemption from such
requirements, you could incur liability under
the Securities Act. We are not indemnifying
you for any such liability.
A broker-dealer can only resell or transfer
exchange notes if it will deliver a
prospectus.
Special procedures for beneficial owners..... If your private notes are held through a
broker, dealer, commercial bank, trust
company or other nominee and you wish to
surrender such notes, you should contact your
intermediary promptly and instruct it to
surrender your notes on your behalf.
Guaranteed delivery procedures............... If you cannot meet the expiration date
deadline, or you cannot deliver your private
notes, the letter of transmittal or any other
documentation on time, then you must
surrender your private notes according to the
guaranteed delivery procedures appearing
below under "The Exchange Offer-- Guaranteed
Delivery Procedures."
Acceptance of your private notes and
delivery of the exchange notes............. We will accept for exchange any and all
private notes that are surrendered in the
exchange offer prior to the expiration date
if you comply with the
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
procedures of the offer. The exchange notes
will be delivered as soon as practicable
after the expiration date.
Withdrawal rights............................ You may withdraw the surrender of your
private notes at any time prior to the
expiration date.
Certain federal income tax considerations.... You will not have to pay federal income tax
as a result of your participation in the
exchange offer.
Exchange agent............................... State Street Bank and Trust Company is
serving as the exchange agent in connection
with the exchange offer. State Street Bank
and Trust Company also serves as trustee
under the indenture and the indenture for our
existing 8 7/8% notes.
Failure to exchange private notes
will adversely affect you.................. If you are eligible to participate in this
exchange offer and you do not surrender your
private notes as described in this
prospectus, you will not have any further
registration or exchange rights. In that case
your private notes will continue to be
subject to restrictions on transfer. As a
result of such restrictions and the
availability of registered exchange notes,
the private notes are likely to be a much
less liquid security than before.
Neither the General Corporation Law of the
State of Delaware nor the indenture relating
to the notes, gives you any appraisal or
dissenters' rights or any other right to seek
monetary damages in court if you do not
participate in the exchange offer.
</TABLE>
THE EXCHANGE NOTES
The exchange notes have the same financial terms and covenants as the
private notes, which are as follows:
<TABLE>
<S> <C>
Issuer.......................... Big Flower Press Holdings, Inc.
Securities offered.............. $250,000,000 principal amount of 8 5/8% senior
subordinated notes due 2008.
Maturity........................ December 1, 2008.
Interest rate................... 8 5/8% per year.
Interest payment dates.......... January 1 and July 1, beginning on July 1, 1999. Interest
began accruing from December 9, 1998, when we first issued
the private notes.
Ranking......................... The exchange notes will be unsecured senior subordinated
obligations of Big Flower Press and will rank junior to
our
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
existing and future senior debt. We are a holding company
and, as a result, the exchange notes will be effectively
subordinated to all liabilities of our subsidiaries,
including trade payables. See "Risk Factors" and
"Description of the Exchange Notes-- Subordination" for
further information regarding the subordination provisions
of the indenture and the levels of outstanding
indebtedness of Big Flower Press and our subsidiaries.
Optional redemption............. We cannot redeem the exchange notes until December 1,
2003. After December 1, 2003, we may redeem some or all of
the exchange notes at the redemption prices listed in the
"Description of the Exchange Notes" section under the
heading "Optional redemption," plus accrued interest.
Optional redemption after equity
issuances..................... At any time, which may be more than once, prior to
December 1, 2001, we can choose to redeem up to 35% of the
outstanding exchange notes with the proceeds from one or
more equity issuances. In order to do so, we have to:
- pay 108.625% of the face amount of the exchange notes,
plus interest;
- redeem the exchange notes within 180 days of completing
the equity issuance; and
- ensure that immediately after the redemption, at least
65% of the notes issued under the indenture remain
outstanding.
Optional redemption upon a
change of control............. If a change of control of Big Flower Press occurs before
December 1, 2003, we may redeem all, but not less than
all, of the exchange notes. In that event, we have to pay
a price equal to the outstanding principal amount, plus
accrued interest, plus a premium as described in
"Description of the Exchange Notes-- Optional Redemption."
Change of control offer......... If a change of control of Big Flower Press occurs, we must
give holders of the exchange notes the opportunity to sell
us their exchange notes at 101% of their face amount, plus
accrued interest, if we do not redeem the notes.
We might be unable to pay you the required price for
exchange notes you present to us at the time of a change
of control because:
- we might not have enough cash at that time; or
- the terms of our senior debt may prevent us from paying.
However, we will not be required to repurchase exchange
notes if, after giving effect to the change of control
transaction Big Flower Press has a fixed charge coverage
ratio -- that is, a ratio of consolidated earnings before
interest, taxes, depreciation and amortization to
consolidated fixed charges -- of 3 to 1 or greater.
Additional explanation of this provision appears under
"Description of the Exchange Notes--Change of Control"
below.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Asset sale proceeds............. If we engage in the types of asset sales described below
under "Description of the Exchange Notes--Limitation on
Asset Sales", we cannot freely use the proceeds of those
sales. Generally speaking, we must either invest the net
cash proceeds from these asset sales in our business
within a specified period of time, repay senior debt or
make an offer to purchase a principal amount of private
notes, exchange notes and our existing 8 7/8% Senior
Subordinated Notes due 2007 equal to the excess net cash
proceeds. The price we would pay for repurchasing the
exchange notes would be 100% of their principal amount,
plus accrued interest. The covenants, as well as the
limitation on asset sales described above, apply to our
"restricted subsidiaries" as well as to Big Flower Press.
Substantially all of our current subsidiaries are
restricted subsidiaries. But we could designate these or
future subsidiaries as unrestricted, as explained in more
detail below in "Description of the Exchange
Notes--Certain Definitions."
Further selected indenture
provisions.................... The indenture contains covenants limiting our ability to:
- incur additional debt;
- pay dividends or make distributions on Big Flower Press'
capital stock or repurchase Big Flower Press' capital
stock;
- make certain investments;
- create liens;
- enter into transactions with affiliates;
- merge or consolidate with another company; and
- transfer and sell assets.
These covenants are subject to a number of important
limitations and exceptions.
</TABLE>
For additional information regarding the exchange notes, see "Description of the
Exchange Notes" and "Certain United States Federal Income Tax Consequences."
6
<PAGE>
SELECTED FINANCIAL DATA
On October 17, 1997, Big Flower Press completed a reorganization of its
legal structure pursuant to Section 251(g) of the Delaware General Corporation
Law. As a result, Big Flower Holdings became the new parent holding company of
Big Flower Press, which became a wholly-owned subsidiary. The common stock of
Big Flower Press was automatically exchanged for common stock of the new holding
company. Big Flower Holdings' operations are conducted through Big Flower Press,
which, in turn, conducts its operations through its operating subsidiaries.
Prior to the formation of Big Flower Holdings, all of our corporate overhead
expenses were incurred by Big Flower Press. Subsequent to the reorganization,
these expenses have been incurred by Big Flower Holdings and fully allocated to
Big Flower Press and its subsidiaries.
The following table sets forth summary financial data of Big Flower Press
and its subsidiaries. On March 21, 1996, Big Flower Press' board of directors
elected to change our fiscal year from a 12-month period ending June 30th to a
calendar year, effective with the period ended December 31, 1995. The summary
financial data of Big Flower Press were derived from its audited consolidated
financial statements. On October 4, 1996, Big Flower Press consummated the
acquisition of Scanforms, Inc. in a transaction accounted for as a pooling of
interests. Accordingly, the Big Flower Press financial information has been
restated for prior periods to include the results of Scanforms for all periods
presented. The table should be read in conjunction with those consolidated
financial statements which are incorporated in this document by reference.
Earnings per share data are not provided for the operating results of Big
Flower Press and its subsidiaries because Big Flower Press is a wholly-owned
subsidiary of Big Flower Holdings.
Interest expense excludes amortization of deferred financing fees. Interest
expense for the year ended December 31, 1996 includes the amortization of
interest rate swap fees of $1.2 million.
Big Flower Press' net loss for the six months ended December 31, 1995
includes an extraordinary loss of $19.2 million, net of tax, on early
extinguishment of debt and termination of a swap agreement. The net loss for the
year ended December 31, 1996 includes an extraordinary loss of $2.1 million, net
of tax, and the net loss for the year ended December 31, 1997 includes an
extraordinary loss of $13.5 million net of tax, both relating to the early
extinguishment of debt.
Earnings were inadequate to cover fixed charges by $0.8 million for the 323
days ended June 30, 1994. Earnings were also insufficient to cover fixed charges
by $11.8 million for the year ended December 31, 1997, primarily due to the
non-recurring $58.2 million write-off of in-process technology resulting from
the acquisition of Columbine. Adjusted to eliminate non-cash charges of
depreciation and amortization of $28.8 million for the 323 days ended June 30,
1994 and $67.3 million for the year ended December 31, 1997, such earnings would
have exceeded fixed charges by $27.9 million for the 323 days ended June 30,
1994 and $55.5 million for the year ended December 31, 1997.
Pro forma data adjusts the historical financial data to reflect the
following events as if they had occurred at the beginning of 1997:
- inclusion of all acquisitions, including the 1999 acquisition of
Colorgraphic Direct Response Limited;
- exclusion of sales under a production arrangement with an
unconsolidated printing venture in which Big Flower Press had a
minority interest, and the profits related to those sales. Big
Flower Press sold its minority interest in April 1998 and terminated
the production agreement;
- exclusion of non-recurring costs related to acquisitions, Big Flower
Press' 1997 secondary stock offering and termination costs for
executive positions eliminated in 1998, as well as
7
<PAGE>
extraordinary losses related to the termination of a credit facility
and early extinguishment of debt; and
- the issuance of the notes, the application of the net proceeds from
that issuance to reduce borrowings under the Big Flower Press credit
facility and related impact on interest expense.
On October 4, 1996, Big Flower Press entered into a six-year securitization
agreement pursuant to which it may sell beneficial interests in a pool of
eligible accounts receivable. The maximum amount of receivables authorized for
sale is $150.0 million and the amount outstanding at any measurement date varies
based upon the level of eligible receivables. Working capital balances since
1996 reflect the effect of that program. At December 31, 1998, interests of
$117.6 million had been sold and were outstanding under this securitization.
This amount is not reflected in Big Flower Press' long-term debt.
<TABLE>
<CAPTION>
BIG FLOWER PRESS
-----------------------------------------------------------------------------
SIX MONTHS
323 DAYS YEAR TRANSITION YEAR YEAR YEAR
ENDED ENDED PERIOD ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1995 1995 1996 1997 1998
--------- --------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
OPERATING DATA:
Net sales..................................... $ 587,630 $ 920,149 $ 546,840 $1,201,860 $1,376,706 $1,739,715
Operating income.............................. 25,488 50,712 39,739 69,343 38,502 137,822
Interest expense.............................. 19,735 37,452 19,076 36,165 40,380 56,458
Income (loss) before income taxes and
extraordinary items......................... (549) 5,268 12,694 4,998 (10,330) 77,598
Income (loss) before extraordinary item....... (3,277) (1,612) 6,491 (3,285) (32,666) 42,232
Extraordinary item, net....................... (19,248) (2,078) (13,463)
Net income (loss)............................. (3,277) (1,612) (12,757) (5,363) (46,129) 42,232
Ratio of earnings to fixed charges(a)......... -- 1.1x 1.5x 1.1x -- 2.1x
OTHER DATA:
EBITDA(b)..................................... $ 54,238 $ 93,699 $ 58,372 $ 122,588 $ 164,016 $ 223,503
Net cash provided by operating activities..... 31,514 47,597 27,881 135,936 118,088 116,833
Net cash used in investing activities......... 270,223 7,013 19,050 170,849 316,601 225,352
Net cash provided by (used in) financing
activities.................................. 241,975 (39,789) (4,326) 29,941 199,620 112,111
Capital expenditures.......................... 6,133 8,496 16,812 55,391 74,045 93,938
PRO FORMA DATA:
Net sales..................................... $1,729,200 $1,841,700
Operating income.............................. 130,700 151,600
Income before extraordinary items............. 25,400 42,400
EBITDA........................................ 228,200 246,600
Interest expense.............................. 68,900 69,500
Ratio of EBITDA to interest expense........... 3.31x 3.55x
BALANCE SHEET DATA (AT PERIOD END):
Working capital............................... $ 25,198 $ 34,173 $ 29,797 $ (30,821) $ (16,608) $ (6,248)
Net property, plant and equipment............. 152,306 137,081 145,323 296,426 384,850 454,004
Total assets.................................. 521,461 502,939 573,393 749,742 1,054,268 1,313,160
Long-term debt, net of current portion........ 331,940 301,935 274,161 430,766 590,045 731,080
Redeemable preferred stock of a subsidiary.... 16,913 19,357
Accumulated deficit........................... (1,782) (3,394) (16,151) (21,514) (67,643) (36,511)
Other stockholder's equity.................... 21,231 19,987 100,627 117,864 246,885 261,400
Total stockholder's equity.................... 19,449 16,593 84,476 96,350 179,242 224,889
</TABLE>
FOOTNOTES ON FOLLOWING PAGE
8
<PAGE>
(FOOTNOTES FROM PRECEDING PAGE)
(a) For purposes of this computation, fixed charges consist of interest expense
and amortization of deferred financing fees, capitalized interest and
one-third of rental expenses, representative of that portion of rental
expenses attributable to interest and preferred stock dividends. Earnings
consist of income before income taxes plus fixed charges, other than
capitalized interest, but including the amortization thereof.
(b) "EBITDA" represents the sum of operating income, depreciation, amortization
of intangibles, in process acquired technology write-offs and merger costs.
EBITDA does not include costs associated with the securitization of accounts
receivable under the agreement mentioned above and is presented here to
provide additional information about Big Flower Press' ability to meet its
future debt service, capital expenditure and working capital requirements.
It should not be construed as a better indicator of operating performance
than operating income as determined in accordance with generally accepted
accounting principles ("GAAP"), or a better indicator of liquidity than cash
flow from operating activities as determined in accordance with GAAP. Big
Flower Press' definition of EBITDA might not be the same as that of other
companies.
9
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS DESCRIBED BELOW BEFORE
DECIDING TO SURRENDER YOUR PRIVATE NOTES IN EXCHANGE FOR EXCHANGE NOTES PURSUANT
TO THIS EXCHANGE OFFER. THESE RISKS APPLY TO BOTH THE PRIVATE NOTES AND THE
EXCHANGE NOTES. IN PREPARING THIS DOCUMENT, WE HAVE MADE CERTAIN ASSUMPTIONS AND
PROJECTIONS. WE GENERALLY USE WORDS LIKE "EXPECT," "BELIEVE" AND "INTEND" TO
INDICATE THESE ASSUMPTIONS AND PROJECTIONS, AS WE EXPLAIN IN "SPECIAL NOTE
REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 59. OUR ASSUMPTIONS AND
PROJECTIONS COULD BE WRONG FOR MANY REASONS, INCLUDING THE REASONS DISCUSSED IN
THIS SECTION. WE DO NOT PROMISE TO NOTIFY YOU IF WE LEARN THAT OUR ASSUMPTIONS
OR PROJECTIONS IN THIS PROSPECTUS ARE WRONG.
WE HAVE SIGNIFICANT LEVELS OF DEBT WHICH COULD LIMIT THE FLEXIBILITY OF OUR
OPERATIONS. AS A RESULT, WE MIGHT BE UNABLE TO OBTAIN ADDITIONAL FINANCING
THAT WE MAY NEED FOR WORKING CAPITAL, CAPITAL EXPENDITURES OR ACQUISITIONS.
As of December 31, 1998, we had consolidated indebtedness of approximately
$735.8 million, including the notes and capitalized lease obligations. Of this
amount, $135.7 million was senior debt, including $108.8 million of
subsidiaries' borrowings under the credit facility that are guaranteed by Big
Flower Press, and $350 million was the principal amount of our outstanding
8 7/8% notes, which will rank equally with the exchange notes.
As of December 31, 1998, we also had additional availability of
approximately $409.9 million under the credit facility. However, we are subject
to leverage ratio restrictions in the credit facility, which are restrictions
determined by reference to the ratio of debt to a figure based generally on
earnings. These restrictions may significantly curtail our ability to incur such
indebtedness. See "Description of the Credit Facility" for further information
regarding the leverage ratio restrictions. Of the amount available,
approximately $81 million was used in January 1999 when we acquired Colorgraphic
Direct Response Limited.
As of December 31, 1998, we also had significant commitments under operating
leases and approximately $117.6 million was outstanding under the accounts
receivable securitization, which is referred to in greater detail below and
defined in the indenture as the A/R securitization. In addition, on October 20,
1997, Big Flower Holdings issued $118.6 million of debentures in connection with
the issuance of the 6% convertible quarterly income preferred securities of Big
Flower Trust I.
Our level of debt could have important consequences for you. For example, we
may need to use up a significant portion of the cash we generate just to make
the interest and other payments that our debt obligations require. We would
therefore not be able to use that money for other purposes. This could limit our
flexibility in reacting to changes in our industry and economic conditions
generally, including our ability to obtain additional debt financing to
undertake future acquisitions or to expand our business.
Although our credit agreement and other instruments allow us to incur
additional indebtedness for a variety of purposes, including to finance
acquisitions or capital expenditures, in 1998 we paid approximately 22% of our
cash flows provided by operating activities to service our existing debt. Had we
completed all of our acquisitions to date on January 1, 1998, and had the
related debt and the notes we are currently registering been outstanding since
then, we estimate that approximately 25% of our pro forma operating cash flows
would have been paid as interest on all our existing debt, including the notes.
This calculation is based on numerous assumptions and estimates and is not
necessarily indicative of cash flows that the acquired companies might have
produced if we had owned them for all of 1998.
Some of our competitors currently operate on a less leveraged basis, and
therefore have significantly greater operating and financing flexibility than we
do.
10
<PAGE>
OUR LEVEL OF DEBT MAY LIMIT OUR ABILITY TO MAKE PAYMENTS WHEN DUE OR TO
REFINANCE EXISTING DEBT.
As described above, we already have a significant level of existing
indebtedness. This level of indebtedness, together with existing limitations
under our credit agreement and other debt instruments, may in the future limit
our ability to make payments when due on the exchange notes and our other
indebtedness or to refinance existing indebtedness.
HOLDING COMPANY STRUCTURE--OUR OPERATING SUBSIDIARIES PROVIDE OUR CASH FLOW BUT
THEY ARE NOT OBLIGATED TO MAKE PAYMENTS ON THE EXCHANGE NOTES. THIS HAS THE
EFFECT OF SUBORDINATING THE EXCHANGE NOTES TO DEBT OF THESE SUBSIDIARIES.
Big Flower Press is a holding company. Our only material assets are the
capital stock of our subsidiaries. We are the sole obligor on the exchange
notes. The exchange notes are not guaranteed by any of our subsidiaries or by
Big Flower Holdings. Therefore, the exchange notes are structurally subordinated
to all indebtedness of our subsidiaries.
We must rely on dividends and other transfers of funds from our subsidiaries
to provide the funds necessary to meet our debt service obligations under the
notes and the 8 7/8% notes and to pay dividends to Big Flower Holdings. Big
Flower Holdings has to rely on dividend payments from us to be able to make
interest payments on its debentures. The ability of our subsidiaries to pay
dividends and make transfers will be subject to state laws regulating the
payment of dividends. Creditors of our subsidiaries, including general
creditors, will generally have preferential rights to satisfy their claims from
the assets of our subsidiaries before us. Therefore, you as a holder of the
notes may satisfy your claims only from the assets of our subsidiaries that
remain after the creditors of our subsidiaries have been completely repaid.
At December 31, 1998 our subsidiaries had approximately $488.2 million of
liabilities, which included trade payables and amounts outstanding under the
credit facility. In addition, at December 31, 1998, some of our subsidiaries had
significant commitments under operating leases. Therefore, the level of
creditors' claims against our subsidiaries is significant relative to their
assets.
COMPETITION--WE FACE SIGNIFICANT COMPETITION IN ALL FOUR OF OUR BUSINESS
SEGMENTS, WHICH AMONG OTHER THINGS LIMITS THE PRICES WE CAN CHARGE FOR OUR
PRODUCTS AND MAY CAUSE US TO LOSE SALES.
The advertising insert sector is highly fragmented. TC Advertising competes
with many regional and local companies for the production of advertising insert
programs. There is also competition for national accounts with several large
producers, some of which have greater capacity than we do. In the production of
Sunday newspaper comics, TC Advertising competes with American Color Graphics,
other regional and local companies and those newspapers which print their own
comics and others which can do so. TC Advertising's newspaper TV listing guides,
Sunday magazine and newspaper supplement operations also face competition from
both other printers and newspapers. TC Advertising's major competitors in these
areas are R.R. Donnelley & Sons Company, Quebecor, Inc., American Color Graphics
and World Color Press.
In the direct mail business, we compete with a number of different firms in
each of the principal lines of our direct mail business. In the personalized
direct mail product category, our major competitors are R.R. Donnelley Specialty
Products; Moore Response Marketing Services, a division of Moore Business Forms,
Inc.; and World Color Press, Inc. In the database and response management
business categories, we compete with companies like Harte-Hanks, Inc., Acxiom
Corporation and Experian. The primary competitive factors in the specialty
products business are quality, flexibility, service, timeliness of delivery and
price. However, in some non-specialty products business such as enhanced
envelopes and printing of government documents, price is often the dominant
factor.
11
<PAGE>
Within the digital services segment, the premedia business carried out by
Laser Tech is also highly fragmented and is undergoing a period of
consolidation. Our competitors in this sector are Applied Graphics Technologies,
Inc., Wace Group and Schawk, Inc. The competitive factors in the pre-media
business are diversification of services, quality of finished products,
distribution capabilities, ongoing customer service and availability of time on
equipment which is appropriate in size and function for a given project. While
creating opportunities for us to increase volume, the consolidation also creates
pricing pressures. In the broadcast television business, Columbine competes with
Enterprise Software, Inc., a number of other smaller software companies involved
in the automated buying, selling, and placement of advertising for electronic
media, and television networks that provide their own automation services or
those that can do so. The other part of digital services, the provision of
software products and related services to the advertising agency industries, is
also highly fragmented, with a number of relatively small suppliers, including
Donovan Data Systems.
In the fragrance sampler line of business, we believe that our major
competitors are Orlandi, Inc., Retail Communications, Arcade, Inc. and Quebecor
Inc. In the non-specialty, commercial printing category, the products produced
do not have the same complexity as products produced in Webcraft's direct mail
business. Because of this lack of complexity, there are a number of printers
that compete with us in this area. Competitors in the non-specialty products
include Cyril-Scott Company, Double Envelope Corp. (Convertagraphics) and R.R.
Donnelley Specialty Products. Increases in printing press capacity in this
segment have led to over-capacity in recent years, with resulting pricing
pressures.
We may not be able to adequately respond to any of these competitive
pressures in the future. Especially during recent periods of economic downturn,
excess production capacity in our business sectors has resulted in more
competitive pricing.
RAW MATERIALS--SOME OF OUR PRODUCTS HAVE A HIGH PAPER CONTENT, AND THE PRICE AND
AVAILABILITY OF PAPER COULD MATERIALLY ADVERSELY AFFECT OUR RESULTS OF
OPERATIONS.
The prices that we charge for our products that contain paper depend, in
part, on the price we pay for paper. TC Advertising is our largest operating
unit, and it uses large quantities of paper in its operation. As a result, the
cost of paper significantly affects our net sales. TC Advertising is generally
able to pass increases in the cost of paper on to its customers, while decreases
in paper costs generally result in lower prices to customers.
Volatility in paper costs results in a corresponding volatility in our net
sales. However, volatility in paper costs generally has not affected our
production volume or profits to any significant extent. If there are future
paper cost increases, and we are not able to pass these increases on to our
customers, or our customers reduce the size of their print advertising programs,
our results of operations, primarily those of TC Advertising, could be
materially adversely affected.
Production capacity in the paper industry has remained relatively stable in
recent years. Increases or decreases in demand for paper have led to
corresponding pricing changes. In periods of high demand, this has in turn led
to limitations on the availability of a number of grades of paper, including
grades of paper that we use. If the paper industry is disrupted or fails to meet
our product needs on a timely basis, we would, at a minimum, face temporary
shortages in needed materials, which could have a material adverse effect on our
results of operations.
We actively manage our paper supply and have established strong
relationships with our suppliers, which include many of the leading paper
companies in North America. However, we cannot assure you that our sources of
supply for paper will be adequate. In the event that such sources are not
adequate, we cannot assure you that we will be able to develop alternative
sources in a timely manner.
12
<PAGE>
MANAGEMENT OF GROWTH--ACQUISITIONS ARE A KEY ELEMENT OF OUR BUSINESS STRATEGY.
BUT WE CANNOT GUARANTEE THAT WE WILL BE ABLE TO IDENTIFY APPROPRIATE
ACQUISITION TARGETS IN THE FUTURE. THERE IS ALSO A RISK THAT WE MAY NOT
SUCCESSFULLY INTEGRATE ANY FUTURE ACQUISITIONS INTO OUR EXISTING OPERATIONS.
Our primary objective is to be the leading provider of marketing and
advertising services for retailers, national manufacturers and advertising
agencies, among others. One of the key elements of our strategy includes
strategic acquisitions to expand and diversify our products and services in the
advertising and marketing services industry. Over the past five years, we have
completed 27 acquisitions to increase and diversify our industry position. We
continue to seek similar or complementary businesses and intend to continue our
acquisition program. However, we cannot guarantee that we will be able to
identify appropriate acquisition targets in the future. We may not be able to
successfully integrate any future acquisitions with our existing operations.
Our acquisition program may require significant management time and capital
resources. In order to complete any future acquisitions, we are likely to need
to incur and/or assume indebtedness and other obligations, issue equity
securities or undertake some combination of these financing techniques. We
cannot assure you that we will be able to successfully arrange such financing in
the future.
While we anticipate that our acquisitions will be beneficial, we cannot
predict whether our transactions will be consummated, the terms or forms of
consideration required in any of our transactions, nor whether the acquired
businesses will be successfully integrated into our operations. If we fail to
implement our acquisition strategy, it may have a material adverse effect on our
performance.
CERTAIN FINANCIAL AND OPERATING RESTRICTIONS-- WE ARE SUBJECT TO RESTRICTIONS
UNDER EXISTING AGREEMENTS THAT MAY LIMIT OUR ABILITY TO ENGAGE IN CERTAIN
BUSINESS TRANSACTIONS OR TO MAKE PRINCIPAL AND INTEREST PAYMENTS ON THE
EXCHANGE NOTES.
Under the terms of our credit facility, the indenture for the 8 7/8% notes,
the indenture and our other outstanding debt instruments we are subject to
operating and financial restrictions affecting, and in some cases limiting our
ability to:
- incur additional indebtedness or create liens on our assets,
- pay dividends,
- sell assets,
- engage in mergers or acquisitions, or
- make investments.
The future is uncertain, and it may be the case at some time that as a result of
unforeseen adverse developments in the markets for our services and products our
operating results and financial position may be adversely affected. If as a
result of such developments we fail to comply with any of those restrictions,
our ability to borrow funds could be limited or we may be in default under the
terms of these instruments. We might, for instance, not be able to carry out a
key acquisition or we may be in default which could result in all loans and
other amounts owed to our lenders becoming due. Our subsidiaries and companies
in which we have invested might not be able to repay in full the accelerated
loans.
We cannot assure you that we will be able to comply with these restrictions.
Our inability to consummate any business transaction could have an adverse
effect on our operations and our ability, and the ability of our subsidiaries,
to make principal and interest payments on our outstanding debt, including the
notes.
LIMITATION ON A CHANGE OF CONTROL--WE MAY NOT HAVE THE FINANCIAL ABILITY TO
PURCHASE THE EXCHANGE NOTES IF A CHANGE OF CONTROL OCCURS.
If a change of control were to occur, we would be required to make offers to
purchase all
13
<PAGE>
outstanding notes and 8 7/8% notes at a price equal to 101% of the principal
amount to be purchased, plus accrued and unpaid interest.
However, under the terms of the credit facility, we are prohibited from
purchasing any notes or 8 7/8% notes. The credit facility also provides that the
occurrence of some events that constitute a change of control of Big Flower
Press constitutes a default under the credit facility. As a result, in the event
of a change of control, we must offer to repay all borrowings under the credit
facility at the same time as we would offer to purchase the notes and the 8 7/8%
notes. In the alternative, we must obtain the consent of our lenders under the
credit facility to purchase the exchange notes and 8 7/8% notes. If we do not
obtain their consent or repay our borrowings, our failure to purchase exchange
notes and 8 7/8% notes surrendered to us would constitute a default under the
indenture and the indenture for the 8 7/8% notes, each of which, in turn, would
constitute a default under the credit facility.
We cannot assure you that we would have the financial ability to purchase
the exchange notes and 8 7/8% notes if a change of control were to occur. We
cannot assure you that we would be able to comply with all of our obligations
under the credit facility, any one of the indentures and the other indebtedness
if a change of control were to occur.
ENVIRONMENTAL REGULATIONS--ENVIRONMENTAL AND OTHER GOVERNMENTAL REGULATIONS MAY
HAVE A MATERIAL ADVERSE EFFECT ON US.
We are subject to regulation relating to the protection of the environment
and human health and safety. In particular, we have to comply with regulations
concerning the use and disposal of hazardous materials. These regulations can
impose significant fines and liability for violations and releases of hazardous
substances.
From time to time, we are subject to liability for non-compliance or cleanup
pursuant to these laws. In addition, TC Advertising and Webcraft have been
identified as potentially responsible parties under the Federal Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 and under
certain analogous state laws for several sites to which TC Advertising or
Webcraft, among others, sent waste in the past. We believe that any
non-compliance with or liability under current environmental laws will not have
a material adverse effect on our results of operations and financial condition,
but we cannot assure you that this will be the case. Also, we cannot predict
what environmental laws will be enacted in the future and how existing or future
laws will be enforced, administered or interpreted. In addition, we do not know
the amount of future expenditures we may need to make in order to comply with
future environmental laws.
RELIANCE ON KEY PERSONNEL--WE RELY ON A SMALL NUMBER OF KEY MANAGEMENT AND
OPERATING PERSONNEL. ALSO, WE NEED TO HIRE AND RETAIN HIGHLY QUALIFIED
PERSONNEL, AND WE CANNOT ASSURE YOU THAT WE WILL BE ABLE TO HIRE OR RETAIN
SUCH PERSONNEL IN THE FUTURE.
We are a relatively new company with a small highly qualified group of key
management and operating personnel. Our success will largely be determined by
the efforts of this group. The loss of any of these key personnel could
adversely affect us.
A crucial factor in the success of all of our business segments is both
innovation and technical sophistication. Our success therefore also depends in
part upon our ability to hire and retain highly qualified operating, marketing,
financial and technical personnel.
The market for outstanding employees continues to be very competitive. Our
failure or inability to recruit, retain and train adequate numbers of qualified
personnel on a timely basis would adversely affect our ability to develop,
manufacture, install and support our systems. In the highly competitive
environment for our businesses, customers rely on the quality of our products
and services to precisely deliver their advertising and marketing messages. Lack
of qualified key personnel could have an effect on the quality of products and
services we provide. This may adversely affect our customer relationships.
14
<PAGE>
RAPID TECHNOLOGICAL CHANGE AND NEW PRODUCTS--OUR BUSINESS, OPERATING RESULTS AND
FINANCIAL POSITION MAY BE MATERIALLY ADVERSELY AFFECTED IF COLUMBINE DOES NOT
MEET THE CHALLENGES POSED BY RAPID TECHNOLOGICAL CHANGE AND THE NEED TO
INTRODUCE NEW PRODUCTS.
Columbine, which is our business most dependent on the rapidly changing
software technology, must continually modify and improve its products in
response to the many and increasingly rapid adjustments in operating systems,
application and networking software, computer and communications hardware,
programming tools and computer language technology. Our future operating results
may be affected by Columbine's ability to enhance its current products and to
develop and introduce new products. These products need to address the
increasingly sophisticated needs of Columbine's customers and to keep pace with
technological developments, new competitive product offerings and emerging
industry standards. If Columbine does not respond adequately to these needs in a
timely manner, that may materially adversely affect our business, operating
results and financial condition.
"YEAR 2000" READINESS AND RISKS--"YEAR 2000" PROBLEMS MAY DISRUPT OUR
OPERATIONS.
"Year 2000" problems result from the inability of computer programs or
computerized equipment to accurately calculate, store or use a date subsequent
to December 31, 1999. The erroneous date can be interpreted in a number of
different ways. Typically, the year 2000 is interpreted as the year 1900. This
could result in a system failure or miscalculations causing disruptions of
operations, such as a temporary inability to process transactions, send invoices
or engage in similar normal business activities.
We have undertaken a comprehensive "Year 2000 Project" to address the issue
of computer software and embedded microchips which are unable to distinguish
between the year 1900 and the year 2000. We are also addressing Year 2000
problems in the products and services we purchase from our material suppliers.
We have established Year 2000 teams at TC Advertising, Webcraft, Laser Tech and
Columbine, as well as at our corporate headquarters. As of December 31, 1998,
the estimated total cost of the Year 2000 Project was approximately $5.0
million. Approximately $2.8 million of that amount reflected allocation of
internal costs and approximately $2.2 million reflected amounts for external
consultants, equipment, hardware and software. The total amount spent on the
Year 2000 Project through December 31, 1998 was approximately $3.0 million, of
which approximately $2.3 million reflected allocation of internal costs and
approximately $0.7 million related to external costs, principally consultants.
If we fail to address a material Year 2000 problem, some of our normal
business activities or operations could be interrupted, or fail. Due to the
diversity and decentralized nature of our operations, there are few systems the
failure of which would have a material adverse effect on us as a whole.
Nonetheless, we rely upon utility companies, telecommunication services
providers, the United States Postal Service, the financial services industry and
other suppliers outside of our control, and we cannot assure you that these
suppliers or other third parties will not suffer a Year 2000 business
disruption.
We believe that the most reasonably likely worst-case scenario is that the
systems or equipment of one or more third parties fail. If a failure occurs, one
or more of our operations could be reduced or suspended and this could have a
material adverse effect on our consolidated financial position or results of
operations. Because of the general uncertainty inherent in the Year 2000 issue,
resulting in part from the uncertainty of the Year 2000 readiness of our
material vendors and customers and their respective customers, we cannot
determine at this time whether the consequences of Year 2000 failures will have
a material impact on our consolidated financial condition or results of
operations.
15
<PAGE>
LACK OF PUBLIC MARKET FOR THE EXCHANGE NOTES-- THERE IS CURRENTLY NO MARKET FOR
THE EXCHANGE NOTES. WE CANNOT GIVE YOU ANY GUARANTEE AS TO THE DEVELOPMENT OR
LIQUIDITY OF ANY MARKET FOR THE EXCHANGE NOTES AND THE PRICE OF YOUR EXCHANGE
NOTES MAY BE ADVERSELY AFFECTED.
The exchange notes are new securities for which there is currently no
market. We can give you no assurance as to the development or liquidity of any
market for the exchange notes. If a market for the exchange notes does develop,
the exchange notes could trade at prices that may be higher or lower than their
principal amount depending upon many factors. These factors would include:
- prevailing interest rates;
- our operating results; and
- the markets for similar securities.
Historically, the market for non-investment grade debt, such as the notes, has
been subject to disruptions that have caused substantial volatility in the
prices of securities similar to the exchange notes. If a market for the exchange
notes does develop, such a market may be subject to similar disruptions.
In addition, to the extent that private notes are surrendered and accepted
in the exchange offer, the trading market for unsurrendered and surrendered but
unaccepted private notes could be adversely affected due to the limited amount,
or "float," of the private notes that are expected to remain outstanding
following the exchange offer. Generally, a lower "float" of a security could
result in less demand to purchase such security and could, therefore, result in
lower prices for such security. For the same reason, to the extent that a large
amount of private notes is not surrendered or is surrendered and not accepted in
the exchange offer, the trading market for the exchange notes could be adversely
affected. See "Plan of Distribution" and "The Exchange Offer" for further
information regarding the distribution of the exchange notes and the
consequences of failure to participate in the exchange offer.
USE OF PROCEEDS
This exchange offer is intended to satisfy certain obligations of Big Flower
Press under our registration rights agreement. We will not receive any proceeds
from the issuance of the exchange notes. We used the proceeds from the sale of
the private notes to repay borrowings under the credit facility, which were
incurred primarily in connection with acquisitions.
We have agreed to pay for the expenses of the exchange offer. In exchange
for issuing the exchange notes as contemplated in this prospectus, we will
receive private notes in the same principal amount. The form and terms of the
exchange notes are identical in all material respects to the form and terms of
the private notes, except as described below under the heading "The Exchange
Offer--Terms of the Exchange Offer." The private notes surrendered in exchange
for the exchange notes will be retired and cancelled and cannot be reissued.
Accordingly, issuance of the exchange notes will not result in any increase in
our outstanding debt.
16
<PAGE>
CAPITALIZATION
This table describes our capitalization on December 31, 1998. You should
read this table in conjunction with the Summary Financial Data and our
Consolidated Financial Statements incorporated by reference in this prospectus.
<TABLE>
<CAPTION>
DECEMBER 31,
1998
--------------
(IN THOUSANDS)
<S> <C>
Long-term debt (a):
Credit facility (b)......................................................... $ 108,758
8 7/8% notes................................................................ 350,110
The notes................................................................... 250,000
Other debt.................................................................. 26,908
--------------
Total long-term debt........................................................ 735,776
Total stockholder's equity.................................................... 224,889
--------------
Total capitalization.......................................................... $ 960,665
--------------
--------------
</TABLE>
- - ------------------------
(a) Includes current portion of long-term debt in the amount of $4.7 million and
does not include $117.6 million outstanding under our accounts receivable
securitization program.
(b) Based on the Credit Facility of $530.0 million, total availability would
have been $409.9 million which reflects $530.0 million less borrowings of
$108.8 million outstanding as of December 31, 1998, less letters of credit
of $11.3 million. Of the amount available, approximately $81 million was
used in January 1999 when we acquired Colorgraphic Direct Response Limited.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
We sold the private notes on December 9, 1998, to BT Alex. Brown
Incorporated, Chase Securities Inc., and Goldman, Sachs & Co. pursuant to a
purchase agreement. These initial purchasers subsequently sold the private notes
to
- "qualified institutional buyers" ("QIBs"), as defined in Rule 144A under
the Securities Act, in reliance on Rule 144A, and to
- persons in offshore transactions in reliance on Regulation S under the
Securities Act.
As a condition to the initial sale of the private notes, Big Flower Press
and the initial purchasers entered into a registration rights agreement.
Pursuant to the registration rights agreement, we agreed to
- file with the SEC by February 7, 1999 a registration statement under the
Securities Act with respect to the exchange notes and
- use our reasonable best efforts to cause the registration statement to
become effective under the Securities Act by April 9, 1999.
We agreed to issue and exchange the exchange notes for all private notes
properly surrendered and not withdrawn before the expiration of the exchange
offer. A copy of the registration rights agreement has been filed as an exhibit
to the registration statement which includes this prospectus. The registration
statement is intended to satisfy some of our obligations under the registration
rights agreement and the purchase agreement.
TERMS OF THE EXCHANGE OFFER
Based on the terms and conditions in this prospectus and in the letter of
transmittal, we will issue $1,000 principal amount of exchange
17
<PAGE>
notes in exchange for each $1,000 principal amount of outstanding private notes
properly surrendered pursuant to the exchange offer and not withdrawn prior to
the expiration date. Private notes may be surrendered only in integral multiples
of $1,000.
The form and terms of the exchange notes are the same as the form and terms
of the private notes except that
- the exchange notes will be registered for the exchange offer under the
Securities Act and, therefore, the exchange notes will not bear legends
restricting the transfer of the exchange notes and
- holders of the exchange notes will not be entitled to any of the
registration rights of holders of private notes under the registration
rights agreement, which will terminate upon the consummation of the
exchange offer.
The exchange notes will evidence the same indebtedness as the private notes,
which they replace, and will be issued under, and be entitled to the benefits
of, the same indenture, which authorized the issuance of the private notes. As a
result both series of notes will be treated as a single class of debt securities
under the indenture.
As of the date of this prospectus, $250,000,000 in aggregate principal
amount of the private notes is outstanding. All of it is registered in the name
of Cede & Co., as nominee for The Depository Trust Company ("DTC"). Solely for
reasons of administration, we have fixed the close of business on - , 1999 as
the record date for the exchange offer for purposes of determining the persons
to whom this prospectus and the letter of transmittal will be mailed initially.
There will be no fixed record date for determining holders of the private notes
entitled to participate in this exchange offer.
In connection with the exchange offer, neither the General Corporation Law
of the State of Delaware nor the indenture governing the notes, gives you any
appraisal or dissenters' rights nor any other right to seek monetary damages in
court. We intend to conduct the exchange offer in accordance with the provisions
of the registration rights agreement and the applicable requirements of the
Exchange Act and the related SEC rules and regulations.
For all relevant purposes we will be regarded as having accepted properly
surrendered private notes if and when we give oral or written notice of our
acceptance to the exchange agent. The exchange agent will act as agent for the
surrendering holders of private notes for the purposes of receiving the exchange
notes from us.
If you surrender private notes in the exchange offer, you will not be
required to pay brokerage commissions or fees. In addition, subject to the
instructions in the letter of transmittal, you will not have to pay transfer
taxes for the exchange of private notes. We will pay all charges and expenses,
other than certain applicable taxes described under "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The "expiration date" is 5:00 p.m., New York City time on - , 1999,
unless we extend the exchange offer, in which case the expiration date is the
latest date and time to which we extend the exchange offer.
In order to extend the exchange offer, we will
- notify the exchange agent of any extension by oral or written notice and
- issue a press release or other public announcement which will include
disclosure of the approximate number of private notes deposited; such
press release or announcement would be issued prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled
expiration date.
We reserve the right
- to delay accepting any private notes,
- to extend the exchange offer, or
- if, in the opinion of counsel for us, the consummation of the exchange
offer would violate any law or interpretation of the staff of the SEC, to
terminate or
18
<PAGE>
amend the exchange offer by giving oral or written notice to the exchange
agent.
Any delay in acceptance, extension, termination or amendment will be
followed as soon as practicable by a press release or other public announcement.
If the exchange offer is amended in a manner determined by us to constitute
a material change, we will promptly disclose that amendment by means of a
prospectus supplement that will be distributed to the holders. We will also
extend the exchange offer for a period of five to ten business days, depending
upon the significance of the amendment and the manner of disclosure to the
holders, if the exchange offer would otherwise expire during the five to ten
business day period.
We will have no obligation to publish, advertise, or otherwise communicate
any public announcement of any delay, extension, amendment or termination that
we may choose to make, other than by making a timely release to an appropriate
news agency.
INTEREST ON THE EXCHANGE NOTES
The exchange notes will accrue cash interest on the same terms as the
private notes, i.e., at the rate of 8 5/8% per year from December 9, 1998,
payable semi-annually in arrears on January 1 and July 1 of each year,
commencing July 1, 1999.
RESALE OF THE EXCHANGE NOTES
We believe that you will be allowed to resell the exchange notes to the
public without registration under the Securities Act, and without delivering a
prospectus that satisfies the requirements of Section 10 of the Securities Act,
if you can make the three representatives set forth above under "Summary--The
Exchange Offer-- Procedures for participating in the exchange offer." However,
if you intend to participate in a distribution of the exchange notes, you must
comply with the registration requirements of the Securities Act and deliver a
prospectus, unless an exemption from registration is otherwise available. In
addition, you cannot be an "affiliate" of Big Flower Press as defined under Rule
405 of the Securities Act. You have to represent to Big Flower Press in the
letter of transmittal accompanying this prospectus that you meet these
conditions exempting you from the registration requirements.
We base our view on interpretations by the staff of the SEC in no-action
letters issued to other issuers in exchange offers like ours. However, we have
not asked the SEC to consider this particular exchange offer in the context of a
no-action letter. Therefore, you cannot be sure that the SEC will treat it in
the same way it has treated other exchange offers in the past.
A broker-dealer that has bought private notes for market-making or other
trading activities has to deliver a prospectus in order to resell any exchange
notes it has received for its own account in the exchange. This prospectus may
be used by a broker-dealer to resell any of its exchange notes. We have agreed
in the registration rights agreement to send this prospectus to any
broker-dealer that requests copies in the letter of transmittal for a period of
up to 180 days after the registration statement relating to this exchange offer
is declared effective. See "Plan of Distribution" for more information regarding
broker-dealers.
PROCEDURES FOR TENDERING
If you wish to surrender private notes you must
- complete, sign and date the letter of transmittal, or facsimile thereof,
- have the signatures guaranteed if required by the letter of transmittal,
and
- mail or deliver the letter of transmittal or the facsimile to the exchange
agent at the address appearing below under "-- Exchange Agent" for receipt
prior to the expiration date.
In addition, either:
- certificates for such private notes must be received by the exchange agent
along with the letter of transmittal,
- a timely confirmation of a book-entry transfer of the private notes into
the
19
<PAGE>
exchange agent's account at DTC pursuant to the procedure for book-entry
transfer described below, must be received by the exchange agent prior to
the expiration date, or
- you must comply with the procedures described below under "--Guaranteed
Delivery Procedures."
THE METHOD OF DELIVERY OF PRIVATE NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR ELECTION AND RISK.
INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT YOU USE AN OVERNIGHT OR HAND
DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT
TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. DO NOT
SEND THE LETTER OF TRANSMITTAL OR ANY PRIVATE NOTES TO US. YOU MAY REQUEST THAT
YOUR BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR NOMINEE PERFORM THESE
TRANSACTIONS FOR YOU.
If you do not withdraw your surrender of private notes prior to the
expiration date, you will be regarded as agreeing to surrender the exchange
notes in accordance with the terms and conditions in this offer.
If you are a beneficial owner of the private notes and your private notes
are held through a broker, dealer, commercial bank, trust company or other
nominee and you want to surrender your private notes, you should contact your
intermediary promptly and instruct it to surrender the private notes on your
behalf.
Signatures on a letter of transmittal or a notice of withdrawal described
below under "--Withdrawal of Tendering", as the case may be, must generally be
guaranteed by an eligible institution. You can submit a letter of transmittal
without guarantee if you surrender your private notes (a) as a registered holder
and you have not completed the box titled "Special Delivery Instruction" on the
letter of transmittal or (b) for the account of an eligible institution. In the
event that signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, the guarantee must be made by:
- a member firm of a registered national securities exchange or of the NASD,
- a commercial bank or trust company having an office or correspondent in
the United States, or
- an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Exchange Act which is a member of one of the recognized
signature guarantee programs identified in the letter of transmittal.
If you sign the letter of transmittal even though you are not the registered
holder of any private notes listed in the letter of transmittal, your notes must
be endorsed or accompanied by a properly completed bond power, signed by the
registered holder exactly as the registered holder's name appears on the private
notes.
In connection with any surrender of private notes in definitive certificated
form, if you sign the letter of transmittal or any private notes or bond powers
in your capacity as trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or if you are otherwise acting in a
fiduciary or representative capacity, you should indicate this when signing.
Unless waived by us, you must submit with the letter of transmittal evidence
satisfactory to us of your authority to act in the particular capacity.
The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may utilize DTC's automated tender offer
program to surrender private notes.
All questions as to the validity, form, eligibility, including time of
receipt, acceptance and withdrawal of surrendered private notes will be
determined by us in our sole discretion, which will be final and binding.
We reserve the absolute right to reject any and all private notes not
properly surrendered. Nor will we accept any private notes if our acceptance of
them would, in the opinion of our counsel, be unlawful. We also reserve the
right to waive any defects, irregularities or conditions of surrender as to
particular private notes.
20
<PAGE>
Unless waived, you must cure any defects or irregularities in connection
with surrenders of private notes within the time period we will determine.
Although we intend to notify holders of defects or irregularities in connection
with surrenders of private notes, neither we, the exchange agent nor anyone else
will be liable for failure to give such notice. Surrenders of private notes will
not be deemed to have been made until any defects or irregularities have been
cured or waived.
We do not currently intend to acquire any private notes that are not
surrendered in the exchange offer or to file a registration statement to permit
resales of any private notes that are not surrendered pursuant to the exchange
offer. We reserve the right in our sole discretion to purchase or make offers
for any private notes that remain outstanding after the expiration date. To the
extent permitted by law, we also reserve the right to purchase private notes in
the open market, in privately negotiated transactions or otherwise. The terms of
any future purchases or offers could differ from the terms of the exchange
offer.
By surrendering private notes pursuant to the exchange offer, you will be
telling us that, among other things,
- you have full power and authority to surrender, sell, assign and transfer
the private notes surrendered,
- we will acquire good title to the private notes being surrendered, free
and clear of all security interests, liens, restrictions, charges,
encumbrances, conditional sale agreements or other obligations relating to
their sale or transfer, and not subject to any adverse claim when the
private notes are accepted by us,
- you are acquiring the exchange notes in the ordinary course of your
business,
- you have no arrangement or understanding with any person to participate in
the distribution of the exchange notes,
- you acknowledge and agree that if you are a broker-dealer registered under
the Exchange Act or you are participating in the exchange offer for the
purposes of distributing the exchange notes, you must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale of the exchange notes. You cannot rely
on the position of the SEC's staff in their no-action letters,
- you understand that a secondary resale transaction described above and any
resales of exchange notes obtained by you in exchange for private notes
acquired by you directly from us should be covered by an effective
registration statement containing the selling security holder information
required by Item 507 or Item 508 of Regulation S-K of the SEC, and
- you are not an "affiliate", as defined in Rule 405 under the Securities
Act, of Big Flower Press.
If you are a broker-dealer and you will receive exchange notes for your own
account in exchange for private notes that were acquired as a result of
market-making activities or other trading activities, you will be required to
acknowledge in the letter of transmittal that you will deliver a prospectus in
connection with any resale of such exchange notes.
RETURN OF PRIVATE NOTES
If any surrendered private notes are not accepted for any reason described
here or if private notes are withdrawn or are submitted for a greater principal
amount than you desire to exchange, those private notes will be returned without
expense to (a) the person who surrendered them or (b) in the case of private
notes surrendered by book-entry transfer into the exchange agent's account at
DTC. The private notes will be credited to an account maintained with DTC as
promptly as practicable.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with respect
to the private notes at DTC for purposes of the exchange offer within two
business days after the date of this prospectus. Any financial institution that
is a
21
<PAGE>
participant in DTC's systems may make book-entry delivery of private notes by
causing DTC to transfer the private notes into the exchange agent's account at
DTC in accordance with DTC's procedures for transfer. However, although delivery
of private notes may be effected through book-entry transfer at DTC, you have to
transmit the letter of transmittal with any required signature guarantees and
any other required documents to the exchange agent at the address appearing
below under "--Exchange Agent" for its receipt on or prior to the expiration
date or pursuant to the guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
If you wish to surrender your private notes and (a) your private notes are
not readily available so you can meet the expiration date deadline or (b) you
cannot deliver your private notes, the letter of transmittal or any other
required documents to the exchange agent prior to the expiration date, you may
still participate in the exchange offer if:
- the surrender is made through an eligible institution;
- prior to the expiration date, the exchange agent receives from such
eligible institution a properly completed and duly executed notice of
guaranteed delivery substantially in the form provided by us, by facsimile
transmission, mail or hand delivery, containing the name and address of
the holder, the certificate number(s) of the private notes, if applicable,
and the principal amount of private notes surrendered. The notice of
guaranteed delivery must also state that the surrender is being made
thereby and guarantee that, within five New York Stock Exchange trading
days after the expiration date, the letter of transmittal, together with
the certificate(s) representing the private notes in proper form for
transfer or a book-entry confirmation, and any other required documents,
will be deposited by the eligible institution with the exchange agent; and
- the properly executed letter of transmittal, as well as the certificate(s)
representing all surrendered private notes in proper form for transfer or
a book-entry confirmation, and all other documents required by the letter
of transmittal are received by the exchange agent within five New York
Stock Exchange trading days after the expiration date.
The exchange agent will send you a notice of guaranteed delivery upon your
request if you wish to surrender your private notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, you may withdraw your
surrender of private notes at any time prior to the expiration date.
To withdraw a surrender of private notes in the exchange offer, the exchange
agent must receive a written or facsimile transmission notice of withdrawal at
its address set forth herein prior to the expiration date. Any notice of
withdrawal must
- specify the name of the person having deposited the private notes to be
withdrawn,
- identify the private notes to be withdrawn, including the certificate
number or numbers, if applicable, and principal amount of the private
notes, and
- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which the private notes were tendered.
All questions as to the validity, form, eligibility and time of receipt of
notices will be determined by us, in our sole discretion, and our determination
shall be final and binding on all parties. Any private notes so withdrawn will
be deemed not to have been validly surrendered for purposes of the exchange
offer, and no exchange notes will be issued unless the private notes so
withdrawn are validly retendered. Properly withdrawn private notes may be
resurrendered by following one of the procedures described above under
22
<PAGE>
"--Procedures for Tendering" at any time prior to the expiration date.
TERMINATION OF CERTAIN RIGHTS
All registration rights under the registration rights agreement benefiting
the holders of the private notes will terminate when we consummate the exchange
offer. That includes all rights to receive additional interest in the event of a
registration default under the registration rights agreement. In any case we are
under a continuing obligation, for a period of up to 180 days after the
registration statement is declared effective, to keep the registration statement
effective and to provide copies of the latest version of the prospectus to any
broker-dealer that requests copies in the letter of transmittal for use in a
resale.
EXCHANGE AGENT
State Street Bank and Trust Company is the exchange agent for the exchange
offer. You should direct any questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for notice of guaranteed delivery to the exchange agent, addressed as
follows:
BY MAIL:
State Street Bank and Trust Company
Corporate Trust Department
P.O. Box 778
Boston, MA 02102-0078
Attn.: Kellie Mullen
(For Eligible Institutions Only)
Confirm by Telephone:
(617) 664-5587
BY HAND/OVERNIGHT DELIVERY:
State Street Bank and Trust Company
Corporate Trust Department
4th Floor
Two International Place
Boston, MA 02110
Attn.: Kellie Mullen
By Facsimile:
(617) 664-5290
State Street Bank and Trust Company also serves as trustee under the indenture
and the 8 7/8% indenture.
FEES AND EXPENSES
We will pay for the expenses of this exchange offer. The principal
solicitation is being made by mail. However, additional solicitation may be made
by telegraph, facsimile transmission, e-mail, telephone or in person by our
officers and regular employees.
We have not retained a dealer-manager for the exchange offer, and will not
make any payments to brokers, dealers or others soliciting acceptances of the
exchange offer. We will, however, pay the exchange agent reasonable and
customary fees and out-of-pocket expenses.
We will pay any transfer taxes applicable to the exchange of private notes.
If, however, a transfer tax is imposed for any reason other than the exchange,
then the amount of any transfer taxes will be payable by the person surrendering
the notes. If you do not submit satisfactory evidence of payment of taxes or of
an exemption with the letter of transmittal, the amount of those transfer taxes
will be billed directly to you.
CONSEQUENCE OF FAILURE TO EXCHANGE
Participation in the exchange offer is voluntary. You are urged to consult
your financial and tax advisors in making your decisions on what action to take.
Private notes that are not exchanged will remain "restricted securities"
within the meaning of Rule 144(a)(3)(iv) of the Securities Act. Accordingly,
they may not be offered, sold, pledged or otherwise transferred except:
- to a person who the seller reasonably believes is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities
Act purchasing for its own account or for the account of a qualified
institutional buyer in a transaction meeting the requirements of Rule
144A,
- in an offshore transaction complying with Rule 903 or Rule 904 of
Regulation S under the Securities Act,
23
<PAGE>
- pursuant to an exemption from registration under the Securities Act
provided by Rule 144, if available,
- pursuant to an effective registration statement under the Securities Act,
or
- pursuant to another available exemption from the registration requirements
of the Securities Act,
and in accordance with all other applicable securities laws.
ACCOUNTING TREATMENT
For accounting purposes, we will recognize no gain or loss as a result of
the exchange offer. The expenses of the exchange offer will be amortized over
the remaining term of the notes.
24
<PAGE>
DESCRIPTION OF THE CREDIT FACILITY
On June 12, 1997, Big Flower Press entered into its credit facility with a
group of banks and Bankers Trust Company, as administrative agent and collateral
agent, and Credit Suisse First Boston, as documentation agent. The credit
facility was amended and restated on June 22, 1998. Pursuant to the credit
facility, some of our existing and future domestic subsidiaries may borrow up to
$530 million on a revolving credit basis. Of this amount $30.0 million is
available as US dollar denominated swingline loans and up to $45.0 million is
available as US dollar denominated letters of credit.
The credit facility includes a sub-facility denominated in pounds sterling
of up to $162 million on a US dollar equivalent basis. This permits some of our
existing and future U.K. subsidiaries to borrow funds in pounds sterling on a
revolving credit basis. Up to L20.0 million is available as pounds sterling
denominated swingline loans and up to $45.0 million on a US dollar equivalent
basis is available as letters of credit denominated in pounds sterling.
Borrowings under the credit facility are available for general corporate
purposes, permitted acquisitions and investments.
Each of Big Flower Holdings, Big Flower Press and each other wholly-owned
domestic subsidiary of Big Flower Holdings guaranteed all obligations of all of
the subsidiaries borrowing under the credit facility. A number of wholly-owned
U.K. subsidiaries of Big Flower Holdings guaranteed all obligations of the U.K.
subsidiary borrowers under the credit facility. The domestic subsidiaries are
joint and several borrowers under the credit facility, which means that the
creditors may sue one or more subsidiaries separately or all together, at the
creditor's option, for obligations under the credit facility, even if the
subsidiary that is being sued for collection did not get the benefit from the
extension of credit to the original borrowing subsidiary. The U.K. subsidiaries
are joint and several borrowers under the pounds sterling sub-facility, for all
obligations under the credit facility.
Big Flower Holdings and each of its wholly-owned domestic subsidiaries,
including Big Flower Press, have, subject to certain exceptions for
insignificant holdings, pledged all of the stock and other equity interests and
intercompany notes owned by them as collateral under the terms of the credit
facility to secure their respective obligations under the credit facility or
guaranty. However, no more than 65% of the voting common stock or other equity
interests entitled to vote of each first-tier foreign subsidiary has been
pledged. The U.K. subsidiary borrowers and certain of their wholly-owned U.K.
subsidiaries have pledged all of the stock and other equity interests and
intercompany notes owned by them as collateral under the terms of the credit
facility to secure their respective obligations under the credit facility or
guaranty, subject to some exceptions.
The credit facility provides that the revolving credit facility terminates
and all loans must be repaid on June 12, 2002. Under the credit facility, all
outstanding loans other than swingline loans and loans denominated in pounds
sterling bear interest at the applicable margin described below over, at our
option, (a) base rate or (b) LIBOR. Base rate is defined as the higher of (x)
1/2 of 1% in excess of the "federal funds rate", as defined in the credit
facility, and (y) the prime lending rate of Bankers Trust Company in effect from
time to time.
The applicable margin varies depending on Big Flower Holdings' leverage
ratio, as tested on a rolling four quarter basis, and defined generally as the
ratio of debt to a figure, including net income plus interest, as defined,
taxes, depreciation and amortization, which is adjusted to include acquisitions,
exclude non-recurring items and exclude gains or losses on asset sales (the
"leverage ratio"). Each component of the leverage ratio has a specific
definition which is contained in the credit facility. The applicable margin for
LIBOR loans ranges from 0.50% to 1.75%. For base rate loans the applicable
margin varies from 0.00% to 0.75%. Swingline loans denominated in US dollars
bear interest at the applicable margin over base rate and letter of credit fees
are charged at a rate, varying with
25
<PAGE>
the leverage ratio, from 0.50% to 1.75%. Outstanding loans denominated in pounds
sterling, except for swingline loans denominated in pounds sterling, bear
interest at the applicable margin for LIBOR loans over the Sterling Euro Rate
plus the MLA Costs, as defined in the credit facility, incurred by the banks in
order to comply with U.K. mandatory liquid asset requirements. Swingline loans
denominated in pounds sterling bear interest at the Applicable Margin for LIBOR
loans plus the overnight LIBOR rate plus MLA Costs.
Big Flower Holdings may voluntarily terminate the banks' commitments under
the credit facility at any time, subject to three business days' notice. The
credit facility also provides for mandatory reductions of the banks' commitments
in the event Big Flower Holdings, Big Flower Press or any of our respective
subsidiaries incurs debt or issues preferred stock (other than certain permitted
debt or preferred stock).
The credit facility contains restrictions that include limitations on Big
Flower Holdings and its subsidiaries with respect to:
- the incurrence, creation and maintenance of liens (other that permitted
liens),
- the incurrence and maintenance of additional debt, subject to certain
exceptions and an available basket amount,
- mergers, acquisitions, purchases and sales of assets, subject to certain
exceptions and an available basket amount,
- sale and leaseback transactions,
- changes in business conducted, and
- dividends and other restricted payments (subject to available baskets).
In addition, the credit facility contains a leverage ratio requirement of no
greater than 4.25 to 1.0 until December 31, 1999 and thereafter no greater than
4.00 to 1.0. The minimum net interest coverage ratio is 2.25 to 1.0.
The credit facility contains customary events of default, including:
- failure by a subsidiary borrower to make principal payments or interest
and fee payments within certain grace periods,
- inaccuracy of representations and warranties in any material respects when
made,
- breach of covenants, in certain cases subject to grace periods,
- failure by Big Flower Holdings, Big Flower Press or any of their
respective subsidiaries to make payments in respect of certain
indebtedness,
- bankruptcy, insolvency or similar events with respect to Big Flower
Holdings, Big Flower Press or any of their respective significant
subsidiaries,
- certain ERISA defaults,
- material judgments that remain unsatisfied or unstayed for certain time
periods, or
- a change in control, as defined in the credit facility of Big Flower
Holdings, Big Flower Press or any subsidiary borrower.
DESCRIPTION OF THE 8 7/8% NOTES
The $350 million aggregate principal amount of the 8 7/8% notes were issued
under the indenture dated as of June 20, 1997 between us and the trustee named
therein. The 8 7/8% notes mature on July 1, 2007 and are not redeemable at our
option until July 1, 2002. Thereafter, the 8 7/8% notes are redeemable at our
option at various premiums declining to par on July 1, 2005.
The 8 7/8% indenture contains provisions, substantially similar to those
contained in the indenture, permitting optional redemption in the event of
issuances of specified equity interests of Big Flower Press and any change of
control and also requiring that we offer to purchase 8 7/8% notes in certain
specified instances following a change of control or an asset sale, as defined
in the indenture. In addition, the 8 7/8% indenture contains restrictive
covenants, events of default and other provisions substantially similar to those
contained in the indenture for the notes, as are described below under
"Description of the Exchange Notes."
26
<PAGE>
DESCRIPTION OF THE EXCHANGE NOTES
GENERAL
The private notes were, and the exchange notes will be, issued under the
indenture dated as of December 9, 1998 between Big Flower Press and State Street
Bank and Trust Company, as trustee. The following description of the material
provisions of the indenture is a summary only. More specific terms as well as
the definitions of relevant terms can be found in the indenture and the Trust
Indenture Act of 1939 that which is applicable to the indenture. Capitalized
terms used in this prospectus and not otherwise defined shall have the meanings
given to them in the indenture. For definitions of some terms used in this
section, see "--Certain Definitions" below. References in this section to Big
Flower Press include only Big Flower Press and Big Flower Holdings and not any
subsidiaries of Big Flower Press. References in this section to the "notes" are
references to both the private notes and the exchange notes.
The private notes and the exchange notes will be considered collectively to
be a single class for all purposes under the indenture, including waivers,
amendments, redemptions and offers to purchase.
PRINCIPAL, MATURITY AND INTEREST
The notes will be general unsecured obligations of Big Flower Press limited
to $350.0 million in aggregate principal amount, of which $250.0 million were
issued on December 9, 1998, in the form of private notes. In this prospectus we
offer exchange notes in aggregate principal amount of $250.0 million in exchange
for the private notes. Additional notes may be issued in one or more series,
from time to time, subject to the limitations described below in
"--Covenants--Limitation on Additional Indebtedness." The exchange notes will be
issued only in fully registered form without coupons in denominations of $1,000
and any integral multiple.
The exchange notes will mature on December 1, 2008. The exchange notes will
bear interest at the yearly rate of 8 5/8% from the date of issuance, payable
semiannually on January 1 and July 1 of each year, commencing July 1, 1999, to
the registered holders of the exchange notes at the close of business on the
June 15 or December 15 immediately before the interest payment date.
Principal, any premium and interest on each of the exchange notes will be
payable, and the exchange notes may be presented for registration of transfer or
exchange, at the corporate trust office of the trustee or another office or
agency of Big Flower Press as determined by us. At our option, payment of
interest may be made by check mailed to the holders at the addresses appearing
in the registry books maintained by the trustee, who will initially act as
registrar for the exchange notes.
OPTIONAL REDEMPTION
The exchange notes are not redeemable at our option before December 1, 2003,
unless they are redeemed out of the net proceeds of certain issuances of equity
interests of Big Flower Press, or in the case of a change of control. After
December 1, 2003, the exchange notes can be redeemed partially or completely at
our option, upon not less than 30 nor more than 60 days' notice, at the
redemption prices expressed as percentages of the principal amount as described
in the following table, plus accrued interest to the redemption date, if
redeemed during the twelve-month period beginning December 1 of the years
indicated in the table below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- - ---------------------- -----------
<S> <C>
2003.................. 104.313%
2004.................. 102.875%
2005.................. 101.438%
2006 and afterwards... 100.000%
</TABLE>
At any time before December 1, 2001, we may also redeem up to 35% of the
principal amount of the notes issued under the indenture with the net proceeds
from issuances of its equity interests, other than redeemable stock, at a
redemption price equal to 108.625% of principal amount, plus accrued interest to
the redemption date. But, at least 65% of the principal
27
<PAGE>
amount of the notes issued under the indenture must remain outstanding after
each redemption. Any redemption will be required to occur within 180 days after
the receipt of the proceeds of the issuance of any equity interests. Equity
interest means capital stock, warrants, options or other rights to acquire
capital stock, excluding any debt security which is convertible into, or
exchangeable for, capital stock.
In addition, at any time on or before December 1, 2003, when a change of
control occurs that has been approved by a majority of our board of directors as
the board was constituted immediately before the change of control, we may
redeem the exchange notes, only in whole at a redemption price equal to the
principal amount of the notes plus the applicable premium, as described below,
plus any accrued and unpaid interest to the date of redemption. We will mail
notice of redemption of the exchange notes to holders of the exchange notes not
more than 30 days following the occurrence of a change of control. We may not
redeem the exchange notes pursuant to this paragraph if we have made an offer to
repurchase the exchange notes with respect to the change of control.
"applicable premium", with respect to an exchange note means the greater of:
- 4.313% of the then outstanding principal amount of such exchange note and
- (a) the present value of all remaining required interest and principal
payments due on the exchange note and all premium payments relating to the
exchange note, assuming a redemption date of December 1, 2003, computed
using a discount rate equal to the Treasury rate plus 75 basis points
minus (b) the then outstanding principal amount of the exchange note minus
(c) accrued interest paid on the redemption date.
"Treasury rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity, as it is compiled
and published in the most recent Federal Reserve Statistical Release H.15(519)
which has become publicly available at least two business days before the date
fixed for redemption, most nearly equal to the then remaining term to December
1, 2003. If this Statistical Release is no longer published, any publicly
available source of similar market data will be used. This is subject to the
exception that if the then remaining term to December 1, 2003 is not equal to
the constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury rate shall be obtained by linear
interpolation, calculated to the nearest one-twelfth of a year, from the weekly
average yields of United States Treasury securities for which such yields are
given. However, if the then remaining term to December 1, 2003 is less than one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year will be used.
SELECTION AND NOTICE
If we are not redeeming all of the exchange notes, the trustee will select
exchange notes or portions of the notes for redemption by lot, proportionately
or in a manner that it regards as appropriate and fair and in a manner that
complies with any applicable legal requirements. Exchange notes may be redeemed
in part in multiples of $1,000 principal amount only. Notice of redemption will
be sent, by first class mail, postage prepaid, at least 30 days and not more
than 60 days prior to the date fixed for redemption to each holder whose
exchange notes are to be redeemed at its address then shown on the registry
books.
If any exchange note is to be redeemed in part only, the notice of
redemption that relates to such exchange note must state the portion of the
principal amount of the note to be redeemed. A new exchange note in principal
amount equal to the unredeemed portion of the note will be issued in the name of
its holder when the original exchange note is cancelled. On and after any
redemption date, interest will cease to accrue on the exchange notes or part of
the notes called for redemption as long as we have deposited with the paying
agent funds in satisfaction of the redemption price pursuant to the indenture.
28
<PAGE>
CHANGE OF CONTROL
In the event of a change of control, the date of such occurrence being the
"change of control date", if either
- Big Flower Press does not redeem the exchange notes as described under
"--Optional Redemption," or
- the change of control occurs after December 1, 2003,
Big Flower Press must notify the holders in writing of the occurrence and must
make an offer to purchase, called the "change of control offer." This offer has
to be made on a business day, the "change of control payment date", not later
than 60 days following the occurrence of the change of control date. The offer
must be for all notes then outstanding at a purchase price, the "change of
control purchase price", equal to 101% of the principal amount of the notes,
plus any accrued and unpaid interest to the change of control payment date.
We must mail a notice of a change of control offer not less than 30 days nor
more than 45 days before the change of control payment date. The change of
control offer is required to remain open from the time of mailing for at least
20 business days and until the close of business on the third business day prior
to the change of control payment date.
The 8 7/8% indenture contains the same provisions with respect to a change of
control. The definition of change of control is provided under "-- Certain
Definitions -- Change of Control" below.
If a change of control offer is made, we cannot guarantee that we will have
available funds sufficient to pay the change of control purchase price for all
of the notes that might be delivered by holders seeking to accept the change of
control offer. In the event we are required to purchase outstanding notes
pursuant to a change of control offer, we expect that we would seek third-party
financing to the extent we do not have available funds to meet our purchase
obligations. However, we cannot guarantee that we would be able to obtain the
required financing. We are not required to make a change of control offer upon a
change of control if a third party makes the change of control offer in
compliance with the requirements applicable to a change of control offer made by
Big Flower Press and purchases all notes validly surrendered and not withdrawn
under such change of control offer.
We will comply, to the extent applicable, with the requirements of Section
14(e) under the Exchange Act and any other securities laws or regulations in
connection with the repurchase of the exchange notes pursuant to a change of
control offer. To the extent that the provisions of any securities laws or
regulations conflict with the "CHANGE OF CONTROL" provisions of the indenture,
we will comply with the applicable securities laws and regulations and will not
be deemed to have breached its obligations under the "CHANGE OF CONTROL"
provisions of the indenture.
Neither our board of directors nor the trustee may waive the covenant
relating to a holder's right to redemption when a change of control occurs. The
restrictions in the indenture on the ability of Big Flower Press and its
restricted subsidiaries to incur additional indebtedness, to grant liens on
their respective properties, to make restricted payments and to make asset sales
may also make a takeover of Big Flower Press more difficult or discourage it,
whether favored or opposed by our management. Carrying out change of control
offers may sometimes require redemption or repurchase of the notes, and we
connot guarantee that we or the acquiring party will have sufficient financial
resources to do so.
These restrictions and the restrictions on transactions with affiliates may,
in certain circumstances, make more difficult or discourage any leveraged buyout
of Big Flower Press or any of its subsidiaries by our management. While the
restrictions cover a wide variety of arrangements which have traditionally been
used to effect highly leveraged transactions, the indenture may not afford the
holders of exchange notes protection in all circumstances from the adverse
29
<PAGE>
aspects of a highly leveraged transaction, reorganization, restructuring, merger
or similar transaction.
SUBORDINATION
The payment of the principal of, premium, if any, and interest on the
exchange notes will be subordinated in right of payment, as described in the
indenture, to the prior payment in full in cash or cash equivalents of all
senior indebtedness, whether outstanding on December 9, 1998 or incurred later.
The payment includes any interest accruing subsequent to a bankruptcy or other
similar proceeding, whether or not such interest is an allowed claim enforceable
against Big Flower Press in a bankruptcy case.
If any of our assets are distributed upon any dissolution, winding up, total
or partial liquidation or reorganization of Big Flower Press, the holders of
senior indebtedness will first be entitled to receive payment in full in cash or
cash equivalents of all amounts payable under senior indebtedness. The payments
will include interest after the commencement of any proceeding at the rate
specified in the applicable Senior Indebtedness whether or not interest is an
allowed claim enforceable against Big Flower Press in any such proceeding. Only
then will the holders be entitled to receive any payment with respect to the
notes. Until all obligations with respect to senior indebtedness are paid in
full in cash or cash equivalents, any distribution to which the holders of the
notes would be entitled will be made to the holders of senior indebtedness. This
would also apply in any bankruptcy, insolvency, or receivership proceedings or
upon any assignment for the benefit of creditors or any other marshalling of Big
Flower Press' assets and liabilities,
No direct or indirect payment by or on behalf of Big Flower Press of
principal of, premium if any, or interest on the exchange notes will be made, if
at the time of the payment, there exists a default in the payment of principal
of, premium if any, or interest on any senior indebtedness, unless the default
has been cured or waived by or on behalf of the holders of senior indebtedness
or they waive the benefits of this provision. In addition, during the
continuance of any other event of default with respect to any designated senior
indebtedness, as described in the indenture, pursuant to which the maturity may
be accelerated, upon the occurance of:
- receipt by the trustee of written notice from the holders of a majority of
the outstanding principal amount of the designated senior indebtedness or
their representative, or
- if such event of default results from the acceleration of the notes, the
date of such acceleration,
no payment may be made by us upon or in respect of the exchange notes for a
period, called the "payment blockage period", commencing on the earlier of the
date of receipt of the notice or the date of acceleration and ending 179 days
later.
The payment blockage period can be terminated by written notice to the
trustee from the holders of a majority of the outstanding principal amount of
the designated senior indebtedness or their representative who delivered such
notice. Despite anything in the indenture to the contrary, in no event will a
payment blockage period last for more than 179 days. Not more than one payment
blockage period may be commenced with respect to the exchange notes during any
period of 360 consecutive days. For all purposes of this paragraph, no event of
default which existed or was continuing on the date of the commencement of any
payment blockage period can be the basis for a second payment blockage period by
the holders of the same designated senior indebtedness or their representative
whether or not within a period of 360 consecutive days unless the event of
default was cured or waived for a period of not less than 90 consecutive days.
If, despite the above, any payment or distribution of assets or securities
of Big Flower Press is received by the trustee or the holders or any paying
agent on account of principal of, premium if any, or interest on the exchange
notes before all senior indebtedness is paid in full in
30
<PAGE>
cash or cash equivalents, the payment or distribution must be received and held
in trust. This trust will be for the benefit of the holders of senior
indebtedness according to the respective amounts of senior indebtedness held or
represented by each. These amounts must be paid over or delivered to the holders
of the senior indebtedness remaining unpaid to the extent necessary to make
payment in full of all senior indebtedness remaining unpaid after giving effect
to all concurrent payments and distributions to or for the holders of the senior
indebtedness.
As a result of these subordination provisions, in the event of a liquidation
or insolvency, holders may recover less than creditors of Big Flower Press who
are holders of senior indebtedness. The indenture will limit, subject to certain
financial tests and specific exceptions, the amount of additional indebtedness,
including senior indebtedness, that Big Flower Press and its subsidiaries can
incur, as described in "-- Covenants--Limitation on Additional Indebtedness."
The exchange notes will be structurally subordinated to all liabilities,
including trade payables and capitalized lease obligations, of Big Flower Press'
subsidiaries. Any right of Big Flower Press to receive assets of any subsidiary
upon its liquidation or reorganization and the consequent right of the holders
to participate in those assets will be structurally subordinated to the claims
of the subsidiary's creditors. At December 31, 1998,
- Big Flower Press and its subsidiaries had, on a consolidated basis,
approximately $735.8 million of debt, including capitalized lease
obligations. This debt included $135.7 million of Senior Indebtedness,
which included $108.8 million of subsidiaries' borrowings under the credit
facility that are guaranteed by Big Flower Press, $350 million principal
amount of 8 7/8% notes which will rank equally with the notes and $250
million principal amount of the private notes; and
- the aggregate amount of liabilities including trade payables and amounts
outstanding under the credit facility of our subsidiaries that effectively
ranked senior to the notes was approximately $488.2 million.
In addition, at December 31, 1998, some of our subsidiaries had significant
commitments under operating leases and approximately $117.6 million was
outstanding under the accounts receivable securitization.
However, this structural subordination would not apply to the extent that
Big Flower Press is itself recognized as a creditor of the subsidiary. In that
case the claims of Big Flower Press would still be subject to any security
interests in the assets of the subsidiary and any of its liabilities senior to
those held by Big Flower Press. In addition Big Flower Press' claims may
otherwise be challenged in a liquidation or reorganization proceeding of such a
subsidiary. As of December 31, 1998, our subsidiaries owed us $633.1 million.
COVENANTS
In the indenture, we agreed to restrictions that limit our own, as well as
our restricted subsidiaries' ability to:
- make restricted payments;
- incur additional debt;
- limit restricted subsidiaries' ability to pay dividends and make
restricted payments;
- create liens;
- make asset sales that result in net proceeds over $1.5 million;
- enter into transactions with affiliates;
- merge or consolidate with another corporate entity or sell assets; and
- create senior subordinated debt.
There are various exceptions to all of these covenants. In addition, they
are "restrictive covenants"--promises that we make to you about how we will run
our business, or business actions that we promise not to take. A more detailed
31
<PAGE>
description of the restrictive covenants and the exceptions to them follows
below.
LIMITATION ON RESTRICTED PAYMENTS. We will not, and will not permit any of
our restricted subsidiaries to, directly or indirectly,
(a) declare or pay any dividend or make any distribution on account of our
capital stock which includes any shares, interests, participations, rights or
other equivalents of corporate stock, or other equity interests, except for
dividends or distributions payable in equity interests, other than redeemable
stock of Big Flower Press,
(b) purchase, redeem or otherwise acquire or retire for value any equity
interests of Big Flower Press or
(c) make any investment, except for a Permitted Investment, each of the
actions in paragraphs (a) through (c) above sometimes are referred to as
"Restricted Payments", if:
(x) a Default or Event of Default has occurred and is continuing at the
time of the Restricted Payment or will occur immediately after giving effect
to it; or
(y) immediately after the Restricted Payment and after giving effect to
it on a PRO FORMA basis, we could not incur at least $1.00 of additional
Indebtedness pursuant to the first paragraph of the "LIMITATION ON
ADDITIONAL INDEBTEDNESS" covenant without giving effect to clauses (a)
through (p) of the second paragraph thereof; or
(z) such Restricted Payment, together with the aggregate of all other
Restricted Payments made after June 20, 1997, exceeds the sum of:
- 50% of the amount of the Adjusted Consolidated Net Income of Big
Flower Press for the period from January 1, 1997 through the end of Big
Flower Press' fiscal quarter ending immediately prior to the time of the
Restricted Payment; taken as one accounting period, or, if Adjusted
Consolidated Net Income for that period is a deficit, 100% of the
deficit, plus
- 100% of the aggregate amounts contributed to the capital of Big
Flower Press from and after June 20, 1997, plus
- 100% of the aggregate net cash proceeds and the fair market value,
as determined in good faith by our board of directors, of property other
than cash received by Big Flower Press from and after June 20, 1997 from
the issue or sale of equity interests of Big Flower Press. This excludes
equity interests issued or sold to a restricted subsidiary and
redeemable stock or any Indebtedness or security convertible into or
exchangeable for any such equity interest that has been so converted or
exchanged, excluding the net cash proceeds from issuances and sales of
Equity Interests financed, directly or indirectly, using borrowed funds
from Big Flower Press or any restricted subsidiary until and to the
extent the borrowing is repaid, plus
- $75.0 million.
As of December 31, 1998, the amount available for Restricted Payments
pursuant to this clause (z) was approximately $201.6 million.
The foregoing provisions will not prohibit:
(a) the payment of any dividend within 60 days after the date of its
declaration, if at the date the payment would have complied with the
provisions of the indenture;
(b) (A) the retirement of any equity interests of Big Flower Press (the
"Retired Equity Interests") either in exchange for or out of the net
proceeds of the substantially concurrent sale, other than to a Restricted
Subsidiary, of other Equity Interests of Big Flower Press (the "Refunding
Equity Interests") other than any redeemable stock and
32
<PAGE>
(B) if the Retired Equity Interest constituted Qualified Preferred Stock,
the declaration and payment of dividends on the Refunding Equity Interest in
an aggregate amount per year no greater than the aggregate amount of
dividends per year that was declarable and payable on the Retired Equity
Interest immediately prior to such retirement to the extent such Refunding
Equity Interest is designated to be Qualified Preferred Stock by Big Flower
Press at the time of its issuance;
(c) the repurchase, redemption or other acquisition or retirement for
value of any equity interests of Big Flower Press issued to employees,
officers or directors of Big Flower Press and its Subsidiaries pursuant to
agreements containing provisions for the repurchase of the Equity Interests
upon death, disability or termination of employment or directorship of the
persons, or in accordance with Big Flower Press' insider trading policy, not
to exceed $5.0 million in any fiscal year plus the aggregate cash pro-
ceeds from any reissuance during such fiscal year of equity interests by Big
Flower Press to employees, officers or directors of Big Flower Press and its
Subsidiaries plus the aggregate cash proceeds from any payments on life
insurance policies with respect to any employees, officers or directors of
Big Flower Press and its Subsidiaries which proceeds are used to purchase
the equity interests of Big Flower Press held by any such employees,
officers or directors;
(d) the declaration and payment of dividends to holders of any class or
series of Big Flower Press' preferred stock issued after December 9, 1998,
which will include the declaration and payment of dividends on Refunding
Equity Interests in excess of the dividends declarable and payable thereon
pursuant to clause (b) of this paragraph; except that at the time of the
issuance Big Flower Press' Fixed Charge Coverage Ratio for the four full
fiscal quarters ending immediately prior to the date of the issuance would
have been at least 1.25 to 1, determined on a pro forma basis as if the
issuance was at the beginning of the four-quarter period, and at the time of
issuance, the preferred stock is designated by Big Flower Press to be
Qualified Preferred Stock; and
(e) an investment in any Unrestricted Subsidiary either in exchange for
equity interests of Big Flower Press (other than redeemable stock) or out of
the proceeds of the sale (other than to a restricted subsidiary) of equity
interests of Big Flower Press (other than redeemable stock) received by Big
Flower Press not more than 12 months prior to the date of the Investment to
the extent such sale of equity interests has not previously been included in
any calculation under clause (z) above for purposes of permitting a
Restricted Payment; provided that in the cases of clauses (c), except with
respect to the repurchase of equity interests with insurance proceeds, (d)
and (e), so long as no Default or Event of Default has occurred and is
continuing at the time of the Restricted Payment or will occur immediately
after giving effect to it.
In determining the aggregate amount of Restricted Payments in accordance
with clause (z) above, (1) no amounts expended under clause (c), only with
respect to the use of insurance proceeds to repurchase equity interests, of the
immediately preceding paragraph shall be included and (2) 100% of the amounts
expended under clauses (a), (b), (c) (other than with respect to the repurchase
of equity interests with insurance proceeds), (d) and (e) of the immediately
preceding paragraph will be included.
LIMITATION ON ADDITIONAL INDEBTEDNESS. We will not, and will not permit any
of our restricted subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable with respect
to any indebtedness unless our Fixed Charge Coverage Ratio for the four full
fiscal quarters ending immediately prior to the date the additional indebtedness
incurred would have been at least 2.25 to 1, determined on a pro forma basis as
if the additional Indebtedness had been created, incurred, issued, assumed or
guaranteed at
33
<PAGE>
the beginning of the four-quarter period. This includes a pro forma application
of the net proceeds of such indebtedness.
The foregoing limitations will not apply to the incurrence of
(a) indebtedness pursuant to the credit facility in an amount equal to
$475.0 million;
(b) Existing Indebtedness, including the 8 7/8% notes;
(c) indebtedness represented by the notes in an aggregate principal
amount equal to $250.0 million;
(d) Capital Lease Obligations;
(e) indebtedness constituting purchase money obligations for property
acquired in the ordinary course of business or other similar financing
transactions;
(f) indebtedness incurred in connection with capital expenditures not to
exceed 6% of net sales of Big Flower Press and its restricted subsidiaries
in any fiscal year;
(g) indebtedness constituting reimbursement obligations with respect to
letters of credit, including, without limitation, letters of credit in
respect of workers' compensation claims, issued for the account of Big
Flower Press or a restricted subsidiary in the ordinary course of business,
or other Indebtedness with respect to reimbursement-type obligations
regarding workers' compensation claims;
(h) additional indebtedness in an aggregate principal amount up to $45.0
million at any one time outstanding for Big Flower Press and its restricted
subsidiaries;
(i) indebtedness created, incurred, issued, assumed or given in exchange
for, or the proceeds of which are used, to extend, refinance, renew,
replace, substitute or refund any Indebtedness permitted under the indenture
or any Indebtedness so issued, including any additional Indebtedness
incurred to pay premiums and fees to refinance its indebtedness the
("Refinancing Indebtedness"); provided that
(A) the principal amount of such Refinancing Indebtedness cannot
exceed the outstanding principal amount of Indebtedness (including
unused commitments) so extended, refinanced, renewed, replaced,
substituted or refunded plus any amounts incurred to pay premiums and
fees in connection therewith,
(B) in the case of Refinancing Indebtedness for Indebtedness
permitted under clause (b) of this paragraph (other than Senior
Indebtedness), the Refinancing Indebtedness shall have an Average Life
equal to or greater than the Average Life of the indebtedness being
extended, refinanced, renewed, replaced, substituted or refunded and
(C) to the extent such Refinancing indebtedness refinances
Indebtedness subordinated to the notes, such Refinancing Indebtedness is
subordinated to the notes at least to the same extent as the
Indebtedness being extended, refinanced, renewed, replaced, substituted
or refunded;
(j) intercompany indebtedness incurred in connection with Investments in
Unrestricted Subsidiaries; provided that such Investments are permitted by
the "LIMITATION ON RESTRICTED PAYMENTS" covenant;
(k) Indebtedness under raw material hedge agreements;
(l) indebtedness under Currency Agreements and Interest Rate Agreements;
provided that in the case of Currency Agreements which relate to other
Indebtedness, such Currency Agreements do not increase the Indebtedness of
Big Flower Press outstanding other than as a result of fluctuations in
foreign currency exchange rates;
34
<PAGE>
(m) indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently drawn
against insufficient funds in the ordinary course of business;
(n) indebtedness between Big Flower Press and any restricted subsidiary
or between restricted subsidiaries;
(o) guarantees by restricted subsidiaries of indebtedness of Big Flower
Press or any restricted subsidiary if the Indebtedness so guaranteed is
permitted under the indenture; and
(p) Big Flower Press' obligations arising from the repurchase,
redemption or other acquisitions of equity interests from employees,
officers and directors of Big Flower Press and its Subsidiaries to the
extent permitted by the "LIMITATION ON RESTRICTED PAYMENTS" covenant.
Despite anything in the indenture to the contrary, the consummation of the
transactions contemplated by the A/R securitization will not be deemed to be
incurrence of indebtedness by Big Flower Press or by any restricted subsidiary.
DIVIDENDS AND PAYMENT RESTRICTIONS. We will not, and will not permit any of
our restricted subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any restricted subsidiary to:
(a) pay dividends or make any other distributions on its capital stock,
or any other interest or participation in, or measured by, its profits,
owned by Big Flower Press or any of its restricted subsidiaries, or pay any
indebtedness owed to Big Flower Press or any of its restricted subsidiaries,
(b) make loans or advances to Big Flower Press or any of its restricted
subsidiaries or
(c) transfer any of its properties or assets to Big Flower Press or any
of its restricted subsidiaries, except for encumbrances or restrictions
existing under or by reason of:
(A) the terms (as in effect on December 9, 1998) of Existing
Indebtedness,
(B) the terms (as in effect on December 9, 1998) of the credit
facility,
(C) the terms of indebtedness of Big Flower Press or any of its
restricted subsidiaries incurred in accordance with the "LIMITATION ON
ADDITIONAL INDEBTEDNESS" covenant; PROVIDED that the terms of any such
indebtedness constitute no greater encumbrance or restriction on the
ability of any restricted subsidiary to pay dividends or make
distributions, make loans or advances or transfer properties or assets
than the encumbrances or restrictions imposed by the terms of the credit
facility as in effect on December 9, 1998,
(D) the terms of the indenture and the notes,
(E) applicable law,
(F) customary non-assignment provisions entered into in the ordinary
course of business and consistent with past practices,
(G) the terms of purchase money obligations for property acquired in
the ordinary course of business, but only to the extent that such
purchase money obligations restrict or prohibit the transfer of the
property so acquired,
(H) any encumbrance or restriction with respect to a Restricted
Subsidiary that was not a restricted subsidiary on December 9, 1998,
which encumbrance or restriction is in existence at the time such person
becomes a restricted subsidiary or is created on the date it becomes a
restricted subsidiary,
35
<PAGE>
(I) any encumbrance or restriction with respect to a restricted
subsidiary imposed pursuant to an agreement which has been entered into
for the sale or disposition of all or substantially all the capital
stock or assets of such restricted subsidiary,
(J) the terms of the A/R securitization, or
(K) any encumbrance or restriction existing under any amendment to,
and any agreement which refinances or replaces, the agreements described
in clauses (A), (B), (C), (D), (H) and (J);
except that the terms and conditions of any encumbrances or restrictions
contained in any amendment or agreement as determined in good faith by our board
of directors constitute no greater encumbrance or restriction on the ability of
any restricted subsidiary to pay dividends or make distributions, make loans or
advances or transfer properties or assets than those under or pursuant to the
agreement evidencing the Indebtedness or obligations as amended, refinanced or
replaced.
Nothing contained in this covenant will prevent Big Flower Press or a
restricted subsidiary from entering into any agreement permitting or providing
for the incurrence of Liens otherwise permitted by the "LIMITATION ON LIENS"
covenant.
LIMITATION ON LIENS. We will not, and will not permit any of our restricted
subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any lien, other than Permitted Liens, upon any asset now owned or later
acquired by us, or any income or profits from it nor assign or convey any right
to receive income from it. Despite the above limitation, we or any of our
restricted subsidiaries may create or assume any Lien upon our properties or
assets if we will cause the notes to be equally and ratably secured with all
other indebtedness secured by that Lien for so long as the other indebtedness is
so secured.
LIMITATION ON ASSET SALES. We will not, and will not permit any of our
restricted subsidiaries to, directly or indirectly, consummate any Asset Sale
that results in Net Proceeds in excess of $1.5 million. This prohibition
includes the sale of any of the capital stock of any restricted subsidiary.
However, an Asset Sale is allowed if it is for fair market value as determined
by our board of directors acting reasonably and in good faith and we or the
relevant restricted subsidiary apply the Net Proceeds from the Asset Sale to one
or more of the following in a combination we choose
(a) an investment in assets, including Capital Stock or other securities
purchased in connection with the acquisition of Capital Stock or property of
another person, used or useful in businesses similar or ancillary to the
business of Big Flower Press or its restricted subsidiaries as conducted at
the time of such Asset Sale; provided that the investment occurs on or
before to the 366th day after the date of the Asset Sale (the "Asset Sale
Payment Date");
(b) a Net Proceeds Offer expiring on or before the Asset Sale Payment
Date; or
(c) in the case of an Asset Sale by us, the purchase, redemption or
other prepayment or repayment of outstanding Senior Indebtedness on or
before the Asset Sale Payment Date and, in the case of an Asset Sale by any
restricted subsidiary, the purchase, redemption or other prepayment or
repayment of any Indebtedness of the restricted subsidiary on or before the
Asset Sale Payment Date. However, any prepayment or repayment of amounts
outstanding under the credit facility in excess of $20 million in the
aggregate after December 9, 1998 will permanently reduce the commitment.
Despite these restrictions, in the event such Net Proceeds, after
giving effect to any investment or payment permitted by clause (a) or (c)
above (the "Excess Proceeds"), are less than $15.0 million, the application
of these Excess Proceeds to a Net Proceeds Offer may be deferred until the
Excess Proceeds, plus the aggregate amount of any subsequent Net Proceeds
not
36
<PAGE>
otherwise invested or applied to repay amounts outstanding under the Senior
Indebtedness of Big Flower Press or under the Indebtedness of any restricted
subsidiary are at least equal to $15.0 million. At that time, we must apply
all the Excess Proceeds to a Net Proceeds Offer. Upon completion of a Net
Proceeds Offer, the amount of Excess Proceeds will be reset at zero.
For purposes of clause (b) of the preceding paragraph, we will apply that
portion of the Net Proceeds of the Asset Sale required to make a tender offer in
accordance with applicable law (a "Net Proceeds Offer") to repurchase notes at a
price not less than 100% of the principal amount plus accrued and unpaid
interest to the date of repurchase. That date must be at least 30 days and not
more than 45 days after the date of mailing of the Net Proceeds Offer (the "Net
Proceeds Payment Date"). We may, at our option, receive credit against any Net
Proceeds Offer for the principal amount of notes acquired by Big Flower Press or
any of its Subsidiaries and surrendered for cancellation within six months prior
to or at any time after the date of the Asset Sale relating to the Net Proceeds
Offer and before the Net Proceeds payment date. Any Net Proceeds Offer will be
made by us only if and to the extent permitted under, and subject to prior
compliance with, the terms of any agreement governing Senior Indebtedness of Big
Flower Press or indebtedness of a restricted subsidiary.
If we commence a Net Proceeds Offer and our securities ranking equally in
right of payment with the notes are outstanding at the commencement of the Net
Proceeds Offer, and the terms of the securities provide that a similar offer
must be made, as is the case with the 8 7/8% notes, then the Net Proceeds Offer
for the notes must be made concurrently with the other offer. Securities of each
issue will then be accepted pro rata in proportion to the aggregate principal
amount of securities of each issue which the holders of securities of that issue
elect to have purchased. After the last date on which holders are permitted to
surrender their notes in a Net Proceeds Offer, we will not be restricted under
the "LIMITATION ON ASSET SALES" covenant of the indenture to use any remaining
Net Proceeds available to make the Net Proceeds Offer that were not used to
redeem notes.
Despite the above, if, at the time of an Asset Sale by Big Flower Press or
any restricted subsidiary, Big Flower Press' Fixed Charge Coverage Ratio for the
four fiscal quarter period ending immediately before the date of the Asset Sale
would have been at least 2.75 to 1, determined on a pro forma basis as if the
Asset Sale occurred at the beginning of that four-quarter period, then any Net
Proceeds received will not be subject to the "LIMITATION ON ASSET SALES"
covenant.
Each Net Proceeds Offer will be mailed to the record holders within 15 days
following our determination to make the Net Proceeds Offer and must comply with
the procedures described in the indenture. We will provide the trustee with
written notice of the determination as soon as we have it made. Upon receiving
notice of the Net Proceeds Offer, holders may elect to surrender their notes in
whole or in part in integral multiples of $1,000 in exchange for cash. To the
extent holders properly surrender notes in an amount exceeding the holders'
proportionate share of the Net Proceeds, notes of surrendering holders will be
repurchased on a proportionate basis. We will make adjustments as we may deem
appropriate so that only notes in denominations of $1,000 or integral multiples
of $1,000 shall be acquired. A Net Proceeds Offer will remain open from the time
of mailing for at least 20 business days and until the close of business on the
third business day before to the Net Proceeds Payment Date.
We will comply with the applicable requirements of Section 14(e) under the
Exchange Act and any other securities laws or regulations in connection with the
repurchase of notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "LIMITATION
ON ASSET SALES" provision of the indenture, we will comply with the applicable
securities laws and will not be deemed to have breached our obligations under
the "LIMITATION ON ASSET SALES" provisions of the indenture by doing so.
37
<PAGE>
TRANSACTIONS WITH AFFILIATES. We will not, and will not permit any of our
restricted subsidiaries to, directly or indirectly, enter into any transaction,
such as the purchase, sale, lease or exchange of any property or the rendering
of any service, with any affiliate, except for
- transactions, including any investments, loans or advances by or to any
affiliate, the terms of which in good faith are fair and reasonable to us
or such restricted subsidiary and are at least as favorable as the terms
that could be obtained by us or the restricted subsidiary in a comparable
transaction made on an arms' length basis between unaffiliated parties.
This must be determined by our board of directors acting reasonably and in
good faith and as evidenced by a resolution of the board of directors.
There are the following exceptions in the case of any transaction with an
affiliate which involves more than $10.0 million, if:
(A) such transaction is entered into in the ordinary course of business
of Big Flower Press or its restricted subsidiaries,
(B) a majority of the directors of Big Flower Press unaffiliated with
the affiliate or, if there are no such directors, a majority of the
directors of Big Flower Press approve the transaction or
(C) we or the restricted subsidiary delivers to the trustee and the
holders a written opinion of a nationally recognized investment banking firm
stating that such transaction is fair to Big Flower Press or the restricted
subsidiary from a financial point of view,
- payments by us or any of our restricted subsidiaries made pursuant to any
financial advisory, financing, underwriting or placement agreement.
However, the terms of any such arrangement or agreement must, in good
faith, be fair and reasonable to Big Flower Press or such Restricted
Subsidiary, again as determined by our board of directors,
- any Restricted Payment not otherwise prohibited under the "LIMITATION ON
RESTRICTED PAYMENTS" covenant,
- the payment of reasonable and customary regular fees to directors of Big
Flower Press and its subsidiaries who are not employees of Big Flower
Press or its subsidiaries,
- advances or loans to employees, officers and directors of Big Flower Press
and its Subsidiaries permitted by clauses (iii) and (iv) of the definition
of Permitted Investments, and
- transactions between or among any of Big Flower Press and its restricted
subsidiaries.
LIMITATION ON MERGERS, CONSOLIDATIONS OR SALES OF ASSETS. We will not in, a
single transaction or a series of related transactions, consolidate with, or
merge with or into another person, or directly or indirectly sell, transfer,
lease or convey substantially all of our properties and assets, to another
person, except any restricted subsidiary. In connection with a merger of Big
Flower Press with any restricted subsidiary, no consideration, other than common
stock in the surviving corporation or Big Flower Press can be issued or
distributed to the stockholders of Big Flower Press. Nor will we permit any
person to merge with or into us unless:
(a) We are the continuing person, or the person--if other than Big
Flower Press--formed by such consolidation or into which Big Flower Press is
merged or to which the properties and assets of Big Flower Press are
transferred is a corporation or partnership organized and existing under the
laws of the United States or any State thereof or the District of Columbia
and must expressly assume, by signing a supplemental indenture and
delivering it to the trustee, in form reasonably satisfactory to the
trustee, all of the obligations of Big Flower Press under the notes and the
indenture;
(b) immediately before and immediately after giving effect to such
transaction or series of transactions, no Default or
38
<PAGE>
Event of Default under the indenture exists; and
(c) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis, including any
Indebtedness incurred or assumed in anticipation of or in connection with
such transaction or series of transactions, we could incur $1.00 of
additional Indebtedness under the first paragraph of the "LIMITATION ON
ADDITIONAL INDEBTEDNESS" covenant described above. This will not give effect
to clauses (a) through (p) of the second paragraph of the "LIMITATION ON
ADDITIONAL INDEBTEDNESS."
LIMITATION ON CREATION OF SENIOR SUBORDINATED DEBT. We will not incur,
create, issue, assume, guarantee or otherwise become liable for any Indebtedness
that is expressly by its terms subordinate or junior in right of payment to any
Senior Indebtedness and senior in any respect in right of payment to the notes.
SUPPLEMENTAL INDENTURES
We and the trustee, can without notice to or the consent of the holders,
enter into one or more supplemental indentures for specified reasons, including
the following:
(a) to cure ambiguities, defects or inconsistencies;
(b) to add additional covenants for the benefit of the holders or to
surrender any right or power given to Big Flower Press in the indenture or
to make any other change that does not adversely affect the rights of any
holder. Yet in making such change, the trustee may rely upon an opinion of
counsel stating that the change does not adversely affect the rights of any
holder,
(c) to provide for collateral for the notes,
(d) to evidence the succession of another person to Big Flower Press
and the assumption by any such successor of the obligations of Big Flower
Press in accordance with the indenture and the notes,
(e) to provide for uncertificated notes and
(f) to effect or maintain the qualification of the indenture under the
Trust Indenture Act.
Without impairing the absolute and unconditional right of holders to receive
principal, premium, if any, and interest, other modifications, amendments or
supplements to the indenture or the notes may be made with the consent of the
holders of not less than a majority in aggregate principal amount of the then
outstanding notes. These modifications, amendments or supplemental indentures
will be binding on every holder, whether or not the holder has consented
thereto.
However, no modification, amendment or supplemental indenture can, without
the consent of holders of each outstanding note affected thereby, among other
things,
(a) reduce the percentage of principal amount of notes whose holders
must consent to an amendment, supplement or waiver of any provision of the
indenture or the notes;
(b) reduce the rate or extend the time for payment of interest on any
note;
(c) reduce the principal amount of any note or reduce the redemption or
repurchase price thereof;
(d) change the Maturity Date, the Net Proceeds Payment Date or the
Change of Control Payment Date;
(e) alter the purchase price in connection with any repurchase of notes
described in the "LIMITATION ON ASSET SALES" covenant or under the "CHANGE
OF CONTROL" provisions in any manner adverse to any holder;
(f) make any changes in the provisions concerning waivers of Defaults
or Events of Default by holders or the rights of holders to recover the
principal of, or any premium, or interest on, or redemption payment with
respect to, any note;
(g) make any changes relating to
39
<PAGE>
(1) the right of the trustee to file proof of claim in any
bankruptcy or similar proceeding, or
(2) the limitation on the right of holders to direct the trustee to
institute legal proceedings with respect to the indenture or to that
provision;
(h) waive a Default or Event of Default in the payment of principal of
or premium, if any or interest on the notes or that resulted from a failure
to make the payments required by the "LIMITATION ON ASSET SALES" covenant or
the "CHANGE OF CONTROL" provisions;
(i) make the principal of, or the interest on, any note payable with
anything or in any manner other than as provided for in the indenture and
the notes as in effect on the Issue Date; or
(j) make any change in the subordination provisions of the indenture
and the notes in a manner that adversely affects the holders.
EVENTS OF DEFAULT AND REMEDIES
Events of Default under the indenture include the following:
(a) default in the payment of interest on any notes when they are due
and the continuance of the default for a period of 30 days;
(b) default in the payment of all or any part of the principal of, or
any premium on, any notes when and as they are due at maturity, or upon
acceleration, redemption or otherwise, including default in the payment of
the purchase price required to be offered in a Net Proceeds Offer or a
change of control offer;
(c) failure by Big Flower Press and its subsidiaries to comply with any
of the other agreements or covenants in or provisions of the notes or the
indenture which failure continues for a period of 45 days after written
notice specifying it and demanding that Big Flower Press remedy it has been
given
(1) to Big Flower Press by the trustee or
(2) to Big Flower Press and the trustee by holders of at least 25%
in aggregate principal amount of notes then outstanding;
(d) default under any mortgage, indenture or instrument under which
there may be issued or evidenced any indebtedness for borrowed money by Big
Flower Press or any of its restricted subsidiaries, or the payment of which
is guaranteed by Big Flower Press or any of its restricted subsidiaries
whether it already exists or is created later, if either
(1) the default results from the failure to pay the final scheduled
principal installment in an amount of at least $15.0 million in respect
of any such indebtedness on the stated maturity date, after giving
effect to any applicable grace periods, or
(2) as a result of the default the maturity of the indebtedness has
been accelerated prior to its express maturity. And the principal amount
of the indebtedness, together with the principal amount of any other
indebtedness which remains unpaid upon its final maturity after the
expiration of any applicable grace period, or the maturity of which has
been so accelerated, aggregates $15.0 million or more;
(e) a final judgment or final judgments for the payment of money, or
the issuance of any warrant of attachment against any portion of the
property or the assets of Big Flower Press or any of its restricted
subsidiaries, that in the aggregate, equal or exceed $15.0 million at any
one time, is entered against Big Flower Press or any of its restricted
subsidiaries, and the judgment or judgments or warrant of attachment is not
discharged, satisfied, stayed, annulled or rescinded within 60 days; or
(f) specified events of bankruptcy, insolvency or reorganization with
respect to
40
<PAGE>
Big Flower Press or a Significant Restricted Subsidiary.
If a Default or an Event of Default occurs and is continuing and if it is
known to the trustee, the trustee must mail to each holder a notice of the
Default or Event of Default within 30 days after it occurs or, if later, within
10 days after such Default or Event of Default becomes known to the trustee,
unless the Default or Event of Default has been cured. Except in the case of a
Default or Event of Default in the payment of principal of, premium, if any, or
interest on, any note, the trustee may withhold the notice if and for as long as
a committee of its trust officers in good faith determines that withholding the
notice is in the interest of the holders.
If an Event of Default, other than an Event of Default described in clause
(f) of the second preceding paragraph with respect to Big Flower Press, happens,
then, and in every such case either the trustee or the holders of not less than
25% in aggregate principal amount of the then outstanding notes, by notice in
writing to Big Flower Press, and to the trustee if given by holders, may declare
all of the unpaid principal of, premium, if any, and accrued interest to be due
and payable immediately. This will not apply if the principal of all notes has
already become due, in the event of a declaration of acceleration because of an
Event of Default described in clause (d) above has occurred and is continuing.
That declaration will be automatically annulled if
- the payment default is cured or waived or the holders of the indebtedness
which is the subject of the event of default have rescinded their
declaration of acceleration in respect of the indebtedness within 60 days
and the trustee has received written notice of the cure, waiver or
rescission, and
- no other Event of Default described in clause (d) above has occurred that
has not been cured or waived within 60 days of the declaration of
acceleration, and
- (1) the repayment of indebtedness or annulment of acceleration would not
conflict with any judgment or decree of a court of competent jurisdiction
and (2) all existing Events of Default, except non-payment of principal or
interest which have become due solely due to such acceleration, have been
cured or waived. If an Event of Default specified in clause (f) above with
respect to Big Flower Press occurs, all unpaid principal of, any premium,
applicable to, and accrued interest due and payable on all the outstanding
notes will become immediately due without any declaration or other act on
the part of the trustee or any holder.
The provisions described above, however, are limited by the condition that
if, at any time after a declaration of acceleration has been made and before a
judgment or decree for payment of the money due has been obtained, the holders
of a majority in aggregate principal amount of the then outstanding notes, by
written notice to Big Flower Press and the trustee, may waive, on behalf of all
holders, a Default or an Event of Default if:
(a) we have paid or deposited with the trustee a sum sufficient to pay
(1) all overdue interest on all notes,
(2) the principal of and any premium, applicable to any notes which
would become due otherwise than by such declaration of acceleration, and
interest thereon at the rate borne by the notes,
(3) to the extent that payment of interest is lawful, interest on
overdue interest at the rate borne by the notes and
(4) all sums paid or advanced by the trustee under the indenture
and the compensation, expenses, disbursements and advances of the
trustee, its agents and counsel, and
(b) all Events of Default, other than the nonpayment of the principal
of the
41
<PAGE>
notes which have become due solely by declaration of acceleration, have been
cured or waived. Despite the previous sentence, no waiver will be effective
for any Default or Event of Default in the payment of the principal of, any
premium, or interest on any note held by a nonconsenting holder or any
Default or Event of Default with respect to any covenant or provision which
cannot be modified or amended without the consent of the holder of each then
outstanding note, unless all affected holders agree, in writing, to waive
the Default or Event of Default. No such waiver will cure or waive any
subsequent default or impair any right consequent thereon.
Prior to the declaration of acceleration of the maturity of the notes, the
holder or holders of not less than a majority in aggregate principal amount of
the notes at the time outstanding by written notice to Big Flower Press and the
trustee may waive on behalf of all the holders any past default under the
indenture and its consequence. However, a default in the payment of principal,
any premium, or interest on any note or a default with respect to any covenant
or provision which cannot be modified or amended without the consent of the
holder of each outstanding note affected cannot be waived.
The trustee is under no obligation to exercise any of its rights or powers
under the indenture at the request, order or direction of any of the holders
unless the holders have offered to the trustee reasonable security or indemnity.
The holders of a majority in aggregate principal amount of the notes at the time
outstanding 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 upon the trustee, limited however by all the provisions of
the indenture and applicable law.
We are required to furnish the trustee, after having become aware of any
Default or Event of Default under the indenture:
- an officers' certificate specifying the default and
- within 120 days after the end of each fiscal year an officers' certificate
to the effect that the officers executing the same have conducted, or
supervised, a review of the activities of Big Flower Press and its
Subsidiaries and of performance under the indenture and that, to the
officers' knowledge, based on their review, Big Flower Press has fulfilled
all of its obligations under the indenture, or, if there has been a
failure to comply with the obligations, describing the failure with
particularity.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Big Flower Press may, at its option and at any time, elect to have its
obligations discharged with respect to the outstanding notes, this is referred
to as legal defeasance. Legal defeasance means that Big Flower Press is deemed
to have paid and discharged the entire indebtedness represented by the
outstanding notes, except for:
- the rights of holders to receive payments in respect of the principal,
premium, if any, and interest when and to the extent such payments are
due,
- Big Flower Press' obligations with respect to registration of notes,
mutilated, destroyed, lost or stolen notes and the maintenance of an
office or agency for payments,
- the rights, powers, trust, duties and immunities of the trustee and Big
Flower Press' obligations in connection therewith and
- the legal defeasance provisions of the indenture.
In addition, Big Flower Press may, at its option and at any time, elect to
have the obligations of Big Flower Press released with respect to certain
covenants that are described in the indenture, this is referred to as "covenant
defeasance." After that any omission to comply with the obligations shall not
constitute a Default or Event of Default with respect to the notes. In the event
covenant defeasance occurs, certain events, but not including non-payment,
bankruptcy, receivership, reorganization and insolvency events, described under
"Events of Default
42
<PAGE>
and Remedies" will no longer constitute an Event of Default with respect to the
notes.
In order to exercise either legal defeasance or covenant defeasance,
(a) We must irrevocably deposit with the trustee, in trust, for the
benefit of the holders cash in U.S. dollars, non-callable U.S. government
obligations, or a combination of the two, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest
on the notes on the stated date for payment thereof or on the applicable
redemption date, as the case may be;
(b) in the case of legal defeasance, we must deliver to the trustee an
opinion of counsel reasonably acceptable to the trustee confirming that (A)
we have received from, or there has been published by, the IRS a ruling or
(B) since the date of the indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and
based on such ruling or change the opinion of counsel shall confirm that,
the holders will not recognize income, gain or loss for federal income tax
purposes as a result of such legal defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if the legal defeasance had not occurred;
(c) in the case of covenant defeasance, we must deliver to the trustee
an opinion of counsel reasonably acceptable to the trustee confirming that
the holders will not recognize income, gain or loss for federal income tax
purposes as a result of the covenant defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred;
(d) no Default or Event of Default exists on the date of such deposit
or insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date
of deposit;
(e) the legal defeasance or covenant defeasance will not result in a
breach or violation of, or constitute a default under the indenture or any
other material agreement or instrument to which Big Flower Press or any of
its restricted subsidiaries is a party or by which Big Flower Press or any
of its restricted subsidiaries is bound;
(f) we must deliver to the trustee an officers' certificate stating
that the deposit was not made by us with the intent of preferring the
holders over any other creditors of Big Flower Press or with the intent of
defeating, hindering, delaying or defrauding any other creditors of Big
Flower Press or others;
(g) we must deliver to the trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent provided for
or relating to the legal defeasance or the covenant defeasance have been
complied with;
(h) we must deliver to the trustee an opinion of counsel to the effect
that (A) the trust funds will not be subject to any rights of holders of
Senior Indebtedness, including those arising under the indenture and (B)
after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; and
(i) certain other customary conditions precedent are satisfied.
Despite the above, the opinion of counsel required by clause (b) above need
not be delivered if all notes not previously delivered to the trustee for
cancellation (x) have become due, (y) will become due and payable on the
maturity date within one year or (z) are to be called for redemption within one
year under arrangements satisfactory to the trustee for the giving of notice of
redemption by the trustee in our name and at our expense.
43
<PAGE>
SATISFACTION AND DISCHARGE
The indenture will be discharged and will cease to be of further effect,
except as to surviving rights or registration of transfer or exchange of the
notes, as expressly provided for in the indenture, as to all outstanding notes
when
(a) either
(1) all the notes previously authenticated and delivered, except
lost, stolen or destroyed notes which have been replaced or paid and
notes for whose payment money has previously been deposited in trust or
segregated and held in trust by us and afterwards repaid to us or
discharged from such trust, have been delivered to the trustee for
cancellation, or
(2) all notes not theretofore delivered to the trustee for
cancellation have become due and we have irrevocably deposited or caused
to be deposited with the trustee funds in an amount sufficient to pay
and discharge the entire Indebtedness on the notes not previously
delivered to the trustee for cancellation, for principal of, premium, if
any, and interest on the notes to the date of deposit together with
irrevocable instructions from Big Flower Press directing the trustee to
apply the funds to the payment at maturity or redemption;
(b) we have paid all other sums payable under the indenture by us; and
(c) we have delivered to the trustee an officers' certificate and an opinion
of counsel stating that all conditions precedent under the indenture
relating to the satisfaction and discharge of the indenture have been
complied with.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No past, present or future director, officer, employee, incorporator or
stockholder of Big Flower Press, in that capacity, will have any liability for
any obligations of Big Flower Press under the indenture or the notes or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each holder of the notes by accepting a note waives and releases all
of that liability. The waiver and release are part of the consideration for
issuance of the notes. Such waiver may not be effective to waive liabilities
under the federal securities laws. It is the view of the SEC that such a waiver
is against public policy.
TRANSFER AND EXCHANGE
A holder may transfer or exchange notes in accordance with the indenture.
The registrar and the trustee may require a holder to furnish appropriate
endorsements and transfer documents. We may require a holder to pay any taxes
and fees required by law or permitted by the indenture. We are not required to
transfer or exchange any note selected for redemption. Also, we are not required
to transfer or exchange any note for a period of 15 days before a selection of
notes to be redeemed. For more specific information, see "Book-Entry; Delivery
and Form."
The registered holder of a note will be treated as the owner of it for all
purposes.
CONCERNING THE TRUSTEE
The indenture contains some limitations on the rights of the trustee, should
it become a creditor of Big Flower Press, to obtain payment of claims in some
cases, or to realize on some property received in respect of any claim as
security or otherwise. The trustee will be permitted to engage in other
transactions. However, if it acquires any conflicting interest, it must
eliminate such conflict within ninety days, apply to the SEC for permission to
continue, or resign.
The holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an uncured event of
Default shall occur, the trustee will be required, in the exercise of its power,
to use the degree of care of a prudent person in the conduct of his or her own
affairs.
44
<PAGE>
Subject to these provisions, the trustee will be under no obligation to exercise
any of its rights or powers under the indenture at the request of any of the
holders, unless they shall have offered to the trustee security and indemnity
satisfactory to it against any loss, liability or expense.
ADDITIONAL INFORMATION
The indenture provides that Big Flower Press will deliver to the trustee
within 15 days after the filing of the same with the SEC, copies of the
quarterly and annual report and of the information, documents and any other
reports, which Big Flower Press is required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act. The indenture further provides that,
despite the fact that Big Flower Press may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, Big Flower Press will
file with the SEC, to the extent permitted, and provide the trustee and holders
with those annual reports and information, documents and other reports specified
in Sections 13 and 15(d) of the Exchange Act. Big Flower Press will also comply
with the other provisions of Section 314(a) of the Trust Indenture Act.
CERTAIN DEFINITIONS
Set out below are the definitions of certain terms contained in the
indenture.
"ADJUSTED CONSOLIDATED NET INCOME" means, with respect to any person for any
period, (a) the Consolidated Net Income of such person for such period plus (b)
in the case of Big Flower Press and its Restricted Subsidiaries,
(A) all cash received during such period by Big Flower Press or any
Restricted Subsidiary from its Unrestricted Subsidiaries but only to the
extent that Big Flower Press elects to so include such cash payments (in
whole or in part) in Adjusted Consolidated Net Income and not as a
reduction in the carrying value of the Investment in such Unrestricted
Subsidiary (whether or not in accordance with GAAP), such election is to
be made prior to the making of a Restricted Payment based upon such cash
received, and
(B) amortization, depreciation and other non-cash charges relating to
acquisitions by Big Flower Press since its formation, including
goodwill, non-compete agreements, the stepped-up basis on assets
acquired and deferred financing costs, in each case to the extent such
items reduced Consolidated Net Income. Each item of Adjusted
Consolidated Net Income will be determined in conformity with GAAP,
except as set forth in this definition and except that, for purposes of
the application of Accounting Principles Board Opinions Nos. 16 and 17,
such person may select an amortization practice allowable by GAAP up to
40 years, notwithstanding the use of a different amortization in such
person's consolidated financial statements. Any designation of a
Subsidiary of Big Flower Press as a Restricted Subsidiary or
Unrestricted Subsidiary at or prior to the time of the calculation of
Adjusted Consolidated Net Income of a Subsidiary will be treated as if
it had occurred at the beginning of the applicable period.
"AFFILIATE" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. A person shall be deemed to "control"
(including the correlative meanings, the terms "controlling," "controlled by,"
and "under common control with") another person if the controlling person
possesses, directly or indirectly, the power to direct or cause the direction of
the management or policies, of the controlled person, whether through ownership
of voting securities, by agreement or otherwise.
"A/R SECURITIZATION" means the receivables facility in effect on the Issue
Date in the amount of $150 million, pursuant to which (x) Big Flower Press'
Subsidiaries from time to time sell or otherwise transfer accounts receivable
and related assets to a special-purpose corporation (the "Receivables
Subsidiary") and (y) the Receivables Subsidiary sells or otherwise transfers
accounts receivable and related assets (or interests therein) to the purchasers,
as the same
45
<PAGE>
may be amended, modified, supplemented, extended, renewed, refunded, refinanced,
restructured or replaced from time to time (including, without limitation, any
extention of maturity thereof, or the inclusion of additional purchasers
thereunder).
"ASSET SALE" means, with respect to any person, in one or a series of
related transactions, the sale, lease, conveyance, disposition or other transfer
by the referent person of any of its assets (including by way of sale and
leaseback and including the sale or other transfer or issuance of any of the
Capital Stock of any Subsidiary of the referent person); PROVIDED that
notwithstanding the foregoing, the term "Asset Sale" shall not include the sale,
lease, conveyance, disposition or other transfer of
(a) all or substantially all of the assets of Big Flower Press, as permitted
pursuant to the "LIMITATION ON MERGERS, CONSOLIDATIONS OR SALES OF
ASSETS" covenant,
(b) any assets between Big Flower Press and any Restricted Subsidiary,
(c) (A) cash and cash equivalents, (B) inventory and (C) any other tangible
or intangible asset, in each case in the ordinary course of business of
Big Flower Press or its Restricted Subsidiaries,
(d) the sale of accounts receivable pursuant to the A/R Securitization, or
(e) the sale or discount, in each case without recourse, of accounts
receivable arising in the ordinary course of business, but only in
connection with the compromise or collection thereof.
"AVERAGE LIFE" means, as of the date of determination, with respect to any
security or instrument, the quotient obtained by dividing (a) the sum of the
products of the numbers of years from the date of determination to the dates of
each successive scheduled principal payment or, in the case of Redeemable Stock,
each successive scheduled mandatory redemption payment of such security or
instrument multiplied by the amount of such principal payment or, in the case of
Redeemable Stock, mandatory redemption payment by (b) the sum of all such
principal payments or, in the case of Redeemable Stock, mandatory redemption
payment.
"CAPITAL LEASE OBLIGATION" means, with respect to any person, at the time
any determination thereof is to be made, the amount of the liability in respect
of a capital lease which would at such time be required to be capitalized on the
balance sheet of such person in accordance with GAAP.
"CAPITAL STOCK" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock.
"CHANGE OF CONTROL" means (a) an event or series of events by which any
Person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is
or becomes the beneficial owner (as defined under Rule 13d-3 under the Exchange
Act) directly or indirectly of more than 50% of the combined voting power of the
then outstanding securities of Big Flower Press ordinarily (and apart from
rights accruing under certain circumstances) having the right to vote in the
election of directors or (b) the replacement of a majority of the Board of
Directors of Big Flower Press over a one-year period from the directors who
constituted the Board of Directors at the beginning of such period, which
replacement shall not have been approved by the Board of Directors as so
constituted at the beginning of such period or (1) by directors whose nomination
for election by the stockholders of Big Flower Press was approved by such Board
of Directors or (2) by directors elected by such Board of Directors or (3) by
directors approved in the same manner as (1) or (2) above that were nominated or
elected by directors approved as set forth in (1) or (2) above. Notwithstanding
the foregoing, a Change of Control shall not be deemed to have occurred if one
or more of the above events occurs or circumstances exist and, after giving
effect to the transaction giving rise to such events or circumstances, Big
Flower Press' Fixed Charge Coverage Ratio is 3.0 to 1 or greater.
"CONSOLIDATED EBITDA" means, with respect to any person for any period and
without duplication, the Adjusted Consolidated Net Income of such person for
such period plus (a) provision
46
<PAGE>
for taxes based on income or profits to the extent such provision for taxes was
included in computing Adjusted Consolidated Net Income, plus (b) consolidated
Interest Expense, whether paid or accrued, to the extent such expense was
deducted in computing Adjusted Consolidated Net Income (including amortization
of original issue discount and non-cash interest payments), plus (c)
depreciation, amortization and other non-cash charges to the extent such
depreciation, amortization and other non-cash charges were deducted in computing
Adjusted Consolidated Net Income (including amortization of goodwill and other
intangibles).
"CONSOLIDATED FIXED CHARGES" means, with respect to any person for any
period, the (a) consolidated Interest Expense, whether paid or accrued, to the
extent such expense was deducted in computing Adjusted Consolidated Net Income
(including amortization of original issue discount and non-cash interest
payments) and (b) aggregate amount of all dividends paid or accumulated by such
person during such period on Qualified Preferred Stock and all cash dividend
payments by such person during such period on all series of other preferred
stock of such person and its Subsidiaries, other than dividends paid by such
person during such period on preferred stock of Unrestricted Subsidiaries and
dividends paid to such person or its Subsidiaries (other than in the case of Big
Flower Press and its Restricted Subsidiaries, Unrestricted Subsidiaries) times a
fraction, the numerator of which is one and the denominator of which is one
minus the then Current Effective Consolidated Tax Rate of such person during
such period.
"CONSOLIDATED NET INCOME" means, with respect to any person for any period,
the aggregate net income (or loss) of such person and its Subsidiaries (other
than, in the case of Big Flower Press and its Subsidiaries, Unrestricted
Subsidiaries) for such period, on a consolidated basis, determined in accordance
with GAAP; PROVIDED that
(a) the net income (or loss) of any person which is not a Subsidiary of
the referent person or is accounted for by the equity method of accounting
by such referent person shall be included only to the extent of the amount
of cash dividends or distributions (including tax sharing payments) paid to
the referent person during such period or a Subsidiary of the referent
person (other than, in the case of Big Flower Press and its Restricted
Subsidiaries, Unrestricted Subsidiaries),
(b) except to the extent includible pursuant to the foregoing clause
(a), the income (or loss) of any person accrued prior to the date it becomes
a Subsidiary of such person or is merged into or consolidated with such
person or any of its Subsidiaries or that person's assets are acquired by
such person or any of its Subsidiaries shall be excluded,
(c) any gains or losses of such person for such period attributable to
Asset Sales net of related tax costs or tax benefits, as the case may be,
shall be excluded and
(d) all extraordinary gains or losses of such person for such period
shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any person, at any date of
determination, the sum of the Capital Stock and additional paid-in capital plus
retained earnings (or minus accumulated deficit) of such person and its
Subsidiaries on a consolidated basis, less amounts attributable to Redeemable
Stock of such person, each item to be determined in conformity with GAAP
(excluding the effects of
(a) foreign currency exchange adjustments under Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 52 and
(b) the application of Accounting Principles Board Opinions Nos. 16 and
17 and related interpretations).
47
<PAGE>
"CONSOLIDATED TANGIBLE ASSETS" means, with respect to any person, at any
time, the total consolidated assets of such person less the consolidated assets
of such person which constitute goodwill, in each case as set forth on such
person's most recent balance sheet.
"CREDIT FACILITY" means that certain amended and restated credit agreement
dated as of June 22, 1998, by and among Big Flower Press, certain of its
subsidiaries, Big Flower Holdings, certain financial institutions parties
thereto and Bankers Trust Company and Credit Suisse First Boston, as agents
providing for a revolving credit facility, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, supplemented,
extended, renewed, refunded, refinanced, restructured or replaced from time to
time (including, without limitation, any extension of maturity thereof, or the
inclusion of additional borrowers or guarantors thereunder), in each case in
whole or in part, whether by the same or any other lender or group of lenders.
"CURRENCY AGREEMENT" means the obligations of any person pursuant to any
foreign exchange contract, currency swap agreement or other similar agreement or
arrangement designed to protect such person or any of its Subsidiaries against
fluctuations in currency values.
"CURRENT EFFECTIVE CONSOLIDATED TAX RATE" means, with respect to any person
for any period, cash income taxes paid or payable by such person for such period
DIVIDED by the amount of income used in determining the amount of such cash
income taxes paid or payable, in each case without giving effect to any gains on
Asset Sales.
"DESIGNATED SENIOR INDEBTEDNESS" means
(a) all Senior Indebtedness under the Credit Facility and
(b) any Senior Indebtedness permitted under the Indenture having a
principal amount of at least $15.0 million that is designated as "Designated
Senior Indebtedness" by written notice from Big Flower Press to the Trustee.
"8 7/8% NOTES" means the $350 million aggregate principal amount of Big
Flower Press's 8 7/8% Senior Subordinated Notes due 2007.
"EQUITY INTERESTS" means Capital Stock, warrants, options or other rights to
acquire Capital Stock (but excluding any debt security which is convertible
into, or exchangeable for, Capital Stock).
"EXISTING INDEBTEDNESS" means Indebtedness of Big Flower Press and its
Restricted Subsidiaries (other than Indebtedness under the Credit Facility) in
existence on the Issue Date.
"FIXED CHARGE COVERAGE RATIO" means, with respect to any person for any
period, the ratio of Consolidated EBITDA for such person for such period to
Consolidated Fixed Charges for such person for such period. For purposes of the
foregoing computation, in calculating Consolidated EBITDA and Consolidated Fixed
Charges,
(a) the transaction giving rise to the need to calculate the Fixed
Charge Coverage Ratio shall be assumed to have occurred on the first day of
the four-quarter period for which the Fixed Charge Coverage Ratio is being
determined, (the "Reference Period"),
(b) any acquisition or divestiture of assets or the Capital Stock of
any Subsidiary of such person (Restricted Subsidiary, in the case of Big
Flower Press) which occurred during the Reference Period or subsequent to
the Reference Period and prior to the date of the transaction referenced in
clause (a) above, (the "Transaction Date") shall be assumed to have occurred
on the first day of the Reference Period, excluding, in the case of an
acquisition of assets or Capital Stock, any operating expense or cost
reduction of such person or the person to be acquired which, in the good
faith estimate of management, will be eliminated or realized, as the case
may be, as a result of such acquisition, as if such acquisition of assets or
Capital Stock (including the incurrence of any Indebtedness in connection
with any such acquisition and the application of the proceeds thereof) took
place on the first day of the Reference Period and as if the
48
<PAGE>
elimination of such operating expense and the realization of such cost
reductions were achieved on the first day of the Reference Period; provided
that the foregoing eliminations of operating expenses and realizations of
cost reductions shall be of the types permitted to be given effect to in
accordance with Article 11 of Regulation S-X under the Exchange Act as in
effect on the Issue Date,
(c) the incurrence of any Indebtedness during the Reference Period or
subsequent to the Reference Period and on or prior to the Transaction Date
and the application of the proceeds therefrom shall be assumed to have
occurred on the first day of the Reference Period,
(d) Consolidated Fixed Charges attributable to any Indebtedness
(whether existing or being incurred) computed on a pro forma basis and
bearing a floating interest rate shall be computed as if the rate in effect
on the Transaction Date had been the applicable rate for the entire period,
unless such person or any of its Subsidiaries (Restricted Subsidiaries, in
the case of Big Flower Press) is party to an Interest Rate Agreement which
will remain in effect for the twelve-month period after the Transaction Date
and which has the effect of fixing the interest rate on the date of
computation, in which case such rate (whether higher or lower) shall be used
and
(e) there shall be excluded from Consolidated Fixed Charges any portion
of such Consolidated Fixed Charges related to any amount of Indebtedness
that was outstanding during or subsequent to the Reference Period but is not
outstanding on the Transaction Date, except for Consolidated Fixed Charges
actually incurred with respect to Indebtedness borrowed (as adjusted
pursuant to clause (d)) under a revolving credit or similar arrangement to
the extent the commitment thereunder remains in effect on the Transaction
Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board ("FASB") or in such other statements by
such other entity as approved by a significant segment of the accounting
profession which are in effect in the United States at the time and for the
period as to which such accounting principles are to be applied; PROVIDED,
HOWEVER, that for purposes of determining compliance with covenants in the
Indenture, "GAAP" means such generally accepted accounting principles as in
effect as of the Issue Date.
"HOLDER" means a person in whose name a Note is registered. The holder of a
Note will be treated as the owner of such Note for all purposes.
"INDEBTEDNESS" means, with respect to any person, any indebtedness, in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such person or only to a portion thereof), or evidenced
by bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement obligations with respect thereto) or representing the balance
deferred and unpaid of the purchase price of any property (including pursuant to
financing leases), if and to the extent any of the foregoing indebtedness would
appear as a liability upon a balance sheet of such person prepared in accordance
with GAAP (except that any such balance that constitutes a trade payable and/or
an accrued liability arising in the ordinary course of business shall not be
considered Indebtedness), and shall also include, to the extent not otherwise
included, any Capital Lease Obligations, the maximum fixed repurchase price of
any Redeemable Stock or preferred stock of any Subsidiary (Restricted
Subsidiary, in the case of Big Flower Press) of such person (except, with
respect to Big Flower Press, to the extent such Restricted Subsidiary guarantees
the obligations under the Notes), indebtedness secured by a Lien to which the
property or assets owned or held by such person are subject, whether or not the
obligations secured thereby shall have been assumed, and guarantees of items
that would be included within this definition to the extent of such guarantees
(exclusive of whether such items would appear upon such balance sheet). For
purposes of the preceding sentence, the maximum
49
<PAGE>
fixed repurchase price of any Redeemable Stock or preferred stock of any
Restricted Subsidiary of such person which does not have a fixed repurchase
price shall be calculated in accordance with the terms of such Redeemable Stock
or such preferred stock as if such Redeemable Stock or such preferred stock were
repurchased on any date on which Indebtedness shall be required to be determined
pursuant to the Indenture; PROVIDED that if such Redeemable Stock or such
preferred stock is not then permitted to be repurchased, the repurchase price
shall be the book value of such Redeemable Stock or such preferred stock. The
amount of Indebtedness of any person at any date shall be, in the case of
Indebtedness of others secured by a Lien to which the property or assets owned
or held by such person are subject, the lesser of the fair market value at such
date of any asset subject to a Lien securing the Indebtedness of others and the
amount of the Indebtedness secured.
"INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal, investment
banking or consulting firm of nationally recognized standing that is, in the
reasonable and good faith judgment of the board of directors of Big Flower
Press, qualified to perform the task for which such firm has been engaged and
disinterested and independent with respect to Big Flower Press and its
Affiliates.
"INTEREST EXPENSE" means, with respect to any person, for any period, the
aggregate amount of interest in respect of Indebtedness (including all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing and the net cost (benefit)
associated with Interest Rate Agreements, and excluding amortization of deferred
finance fees) and all but the principal component of rentals in respect of
Capital Lease Obligations, paid, accrued or scheduled to be paid or accrued by
such person during such period.
"INTEREST RATE AGREEMENTS" means the obligations of any person pursuant to
any interest rate swap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to protect such person or any of its
Subsidiaries against fluctuations in interest rates.
"INVESTMENT" means any direct or indirect advance, loan (other than advances
to customers in the ordinary course of business, which are recorded as accounts
receivable on the balance sheet of any person or its Subsidiaries) or other
extension of credit or capital contribution to (by means of any transfer of cash
or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
bonds, notes, debentures or other securities issued by any other person; in each
case, other than as a result of the issuance of Capital Stock of such person or
the delivery of Capital Stock of such person's direct or indirect parent. For
the purposes of the "LIMITATION ON RESTRICTED PAYMENTS" covenant:
(a) "Investment" shall include and be valued at the fair market value
of the net assets of any Restricted Subsidiary at the time that such
Restricted Subsidiary is designated an Unrestricted Subsidiary and shall
exclude the fair market value of the net assets of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary and
(b) the amount of any Investment shall be the original cost of such
Investment plus the cost of all additional Investments by Big Flower Press
or any of its Restricted Subsidiaries, without any adjustments for increases
or decreases in value, or write-ups, write-downs or write-offs with respect
to such Investment, reduced by the payment of dividends or distributions
(including tax sharing payments) in connection with such Investment to the
extent such distribution constitutes a return on capital in accordance with
GAAP; PROVIDED, HOWEVER, that in the case of an Investment in an
Unrestricted Subsidiary, Big Flower Press may elect to include such cash
payments (in whole or in part) in Adjusted Consolidated Net Income and not
as a reduction in the carrying value of the Investment in such Unrestricted
Subsidiary (whether or not in accordance with GAAP), such election to be
made prior to the making of a Restricted Payment based upon such dividend or
distribution.
50
<PAGE>
"ISSUE DATE" means December 9, 1998.
"LIEN" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give any security interest in and any filing or other agreement to give
any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"MATURITY DATE" means, when used with respect to any Note, the date
specified in such Note as the fixed date on which the final installment of
principal of such Note is due and payable (in the absence of any acceleration
thereof pursuant to provisions of the Indenture regarding acceleration of
Indebtedness or any Net Proceeds Offer or Change of Control Offer).
"NET PROCEEDS" means, with respect to any Asset Sale, the aggregate amount
of U.S. Legal Tender (including any cash received by way of deferred payment
pursuant to a note receivable issued in connection with such Asset Sale, other
than the portion of such deferred payment constituting interest, and including
any amounts received as disbursements or withdrawals from any escrow or similar
account established in connection with any such Asset Sale, but, in each such
case, only as and when so received) received by Big Flower Press or any of its
Restricted Subsidiaries in respect of such Asset Sale, net of
(a) the cash expenses of such sale (including, without limitation, the
payment of principal, premium, if any, and interest on Indebtedness required
to be paid as a result of such Asset Sale (other than pursuant to the
"LIMITATION ON ASSET SALE" covenant) and legal, accounting and investment
banking fees and sales commissions),
(b) taxes paid or payable as a result thereof,
(c) any portion of cash proceeds which Big Flower Press determines in
good faith should be reserved for post-closing adjustments, it being
understood and agreed that on the day that all such post-closing adjustments
have been determined, the amount (if any) by which the reserved amount in
respect of such Asset Sale exceeds the actual post-closing adjustments
payable by Big Flower Press or any of its Subsidiaries shall constitute Net
Proceeds on such date and
(d) any relocation expenses and pension, severance and shutdown costs
incurred as a result thereof.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"PERMITTED INVESTMENTS" means:
(a) cash or Cash Equivalents,
(b) investments that are in persons (including Unrestricted
Subsidiaries) who derive substantial revenues from operations similar or
ancillary to the business of Big Flower Press or its Restricted Subsidiaries
as conducted at the time of such Investment and that have the purpose of
furthering the operations of Big Flower Press and its Restricted
Subsidiaries; PROVIDED that Investments of the type described in this clause
(b) shall not exceed $25.0 million at any one time outstanding in the case
of persons which are not Restricted Subsidiaries or which do not in
connection with such Investment become a Restricted Subsidiary,
(c) advances to employees and officers of Big Flower Press and its
Subsidiaries not in excess of $1.0 million at any one time outstanding,
(d) loans to employees, officers and directors of Big Flower Press and
its Subsidiaries to finance the purchase of Equity Interests in Big Flower
Press,
(e) accounts receivable created or acquired in the ordinary course of
business,
(f) obligations or shares of Capital Stock received in connection with
any good faith settlement or bankruptcy proceeding
51
<PAGE>
involving a claim relating to a Permitted Investment,
(g) Currency Agreements and Interest Rate Agreements and other similar
agreements designed to hedge against fluctuations in foreign exchange rates
and interest rates entered into in the ordinary course of business in
connection with the operation of Big Flower Press's or its Restricted
Subsidiaries' businesses and
(h) agreements designed to hedge against fluctuations in the cost of
raw materials entered into in the ordinary course of business in connection
with the operation of Big Flower Press's and its Restricted Subsidiaries'
business ("Raw Material Hedge Agreements").
"PERMITTED LIEN" means:
(a) Liens for taxes, assessments, governmental charges or claims not
yet due or which are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and if a reserve or
other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made therefor;
(b) statutory Liens of landlords and carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business, deposits made to obtain the
release of such Liens, and with respect to amounts not yet delinquent for a
period of more than 60 days or being contested in good faith by appropriate
proceedings, if a reserve or other appropriate provision, if any, as shall
be required in conformity with GAAP shall have been made therefor;
(c) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security;
(d) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
government contracts, performance and return of money bonds and other
obligations of a like nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money);
(e) easements, rights-of-way, zoning or other restrictions, minor
defects or irregularities in title and other similar charges or encumbrances
not interfering in any material respect with the business of Big Flower
Press or any of its Restricted Subsidiaries incurred in the ordinary course
of business;
(f) Liens (including extensions, renewals and replacements thereof)
upon real or tangible personal property acquired after the date of the
Indenture whether or not such Lien existed on the date of acquisition of
such property; PROVIDED that
(1) any such Lien is created solely for the purpose of securing
Indebtedness representing, or incurred to finance, refinance or refund,
the cost (including the cost of construction) of the item of property
subject thereto,
(2) the principal amount of the Indebtedness secured by such Lien
does not exceed 100% of such cost,
(3) such Lien does not extend to or cover any other property other
than such item of property and any improvements on such item and
(4) the incurrence of such Indebtedness is permitted by the
"LIMITATION ON ADDITIONAL INDEBTEDNESS" covenant;
(g) Liens securing reimbursement obligations with respect to letters of
credit which encumber documents and other property relating to such letters
of credit and the products and proceeds thereof;
(h) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(i) judgment and attachment Liens not giving rise to an Event of
Default;
52
<PAGE>
(j) leases or subleases granted to others not interfering in any
material respect with the business of Big Flower Press or any of its
Restricted Subsidiaries;
(k) Liens encumbering customary initial deposits and margin deposits,
and other Liens incurred in the ordinary course of business and which are
within the general parameters customary in the industry, in each case
securing Indebtedness under Interest Rate Agreements, Currency Agreements
and Raw Material Hedge Agreements;
(l) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements of Big Flower
Press or its Subsidiaries;
(m) Liens arising out of consignment or similar arrangements for the
sale of goods entered into by Big Flower Press or any of its Restricted
Subsidiaries in the ordinary course of business of Big Flower Press and its
Restricted Subsidiaries;
(n) any interest or title of a lessor in the property subject to any
Capital Lease Obligations or operating lease;
(o) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(p) Liens permitted or required by the Credit Facility as in effect on
the Issue Date;
(q) Liens securing Senior Indebtedness and Liens on assets of
Restricted Subsidiaries securing Indebtedness of such Restricted
Subsidiaries;
(r) Liens between Big Flower Press and any Restricted Subsidiary or
between Restricted Subsidiaries;
(s) Liens on assets of Restricted Subsidiaries securing letters of
credit issued in the ordinary course of business of such Restricted
Subsidiaries;
(t) additional Liens at any one time outstanding with respect to assets
of Big Flower Press and its Restricted Subsidiaries the fair market value of
which does not exceed $15.0 million on the date of determination;
(u) Liens existing on the Issue Date and any extensions, renewals or
replacements thereof;
(v) Liens deemed to arise from the A/ R Securitization; and
(w) the Lien granted to the any trustee under the Indenture and any
substantially equivalent Lien granted to any trustee or similar institution
under any indenture for Indebtedness permitted by the terms of the
indenture.
"QUALIFIED PREFERRED STOCK" means preferred stock of Big Flower Press that
is designated as such pursuant to clause (b) or (d) of the second paragraph of
the "LIMITATION ON RESTRICTED PAYMENTS" covenant.
"REDEEMABLE STOCK" means any Equity Interest which, by its terms (or by
terms of any security into which it is convertible or for which it is
exchangeable before the stated maturity of the Notes), or upon the happening of
any event, matures or is mandatorily redeemable (other than for Capital Stock
not constituting Redeemable Stock), in whole or in part, prior to the Maturity
Date, or is, by its terms or upon the happening of any event, redeemable at the
option of the holder thereof, in whole or in part, at any time prior to the
Maturity Date, except for Equity Interests of Big Flower Press issued to
employees, officers and directors of Big Flower Press and its Subsidiaries
pursuant to agreements containing provisions for the repurchase of such Equity
Interest upon death, disability or termination of employment or directorship of
such persons, provided that any Equity Interest that is considered to be
Redeemable Stock solely because it is redeemable upon the occurrence of the same
events that would require a redemption or repurchase of the Notes shall not be
deemed to be Redeemable Stock, provided, further, that such Equity Interest is
not convertible or exchangeable into debt.
53
<PAGE>
"RESTRICTED SUBSIDIARY" means any Subsidiary of Big Flower Press which at
the time of determination is not an Unrestricted Subsidiary. The Board of
Directors of Big Flower Press may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary only if, immediately after giving effect to such
designation, Big Flower Press could incur at least $1.00 of additional
Indebtedness pursuant to the first paragraph of the "LIMITATION ON ADDITIONAL
INDEBTEDNESS" covenant (without giving effect to clauses (a) through (p) of the
second paragraph thereof), on a PRO FORMA basis taking into account such
designation.
"SENIOR INDEBTEDNESS" means any Indebtedness permitted to be incurred under
the terms of the Indenture, unless the instrument under which such Indebtedness
is incurred expressly provides that it is on a parity with or subordinated in
right of payment to the Notes. Notwithstanding anything to the contrary in the
foregoing, Senior Indebtedness shall not include:
(a) Indebtedness that is expressly subordinate or junior in right of
payment to any Indebtedness of Big Flower Press,
(b) Indebtedness that is represented by Redeemable Stock,
(c) any liability for Federal, state, local or other taxes owed or
owing by Big Flower Press,
(d) Indebtedness of Big Flower Press to any Subsidiary of Big Flower
Press,
(e) trade payables and
(f) Indebtedness that is incurred in violation of the Indenture (but,
as to any such Indebtedness, no such violation shall be deemed to exist for
purposes of this definition if the holder(s) of such obligation or their
representative or Big Flower Press shall have furnished to the trustee an
opinion of counsel unqualified in all material respects, addressed to the
Trustee (which legal counsel may, as to matters of fact, rely upon an
officers' certificate of Big Flower Press) to the effect that the incurrence
of such Indebtedness does not violate the provisions of the Indenture).
"SIGNIFICANT RESTRICTED SUBSIDIARY" means any Restricted Subsidiary which
accounted for more than 10% of Big Flower Press's Consolidated Tangible Assets
or more than 10% of Big Flower Press' consolidated revenues or more than 10% of
Big Flower Press' Consolidated EBITDA, in each case as of the end of Big Flower
Press's most recent fiscal year.
"SUBSIDIARY" with respect to any person, means:
(a) any corporation of which the outstanding Capital Stock having at
least a majority of the votes entitled to be cast in the election of
directors under ordinary circumstances shall at the time be owned, directly
or indirectly, by such person or
(b) any other person of which at least a majority of the voting
interest under ordinary circumstances is at such time, directly or
indirectly, owned by such person.
"UNRESTRICTED SUBSIDIARY" means:
(a) any Subsidiary of Big Flower Press which at the time of
determination is an Unrestricted Subsidiary and
(b) any Subsidiary of an Unrestricted subsidiary. The Board of
Directors of Big Flower Press may designate any Subsidiary of Big Flower
Press (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary, unless such Subsidiary owns any Capital Stock of,
or owns, or holds any Lien on, any property of, any other Subsidiary of Big
Flower Press which is not a Subsidiary of the Subsidiary to be so
designated; PROVIDED that (a) Big Flower Press certifies that such
designation complies with the "LIMITATION ON RESTRICTED PAYMENTS" covenant
and (b) each Subsidiary to be so designated and each of its Subsidiaries has
not at the time of designation, and does not thereafter, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable
with respect to any Indebtedness pursuant to which the lender has recourse
to any of the assets of Big Flower Press or any of its Restricted
Subsidiaries. The Board of Directors of Big Flower Press may designate any
Unrestricted Subsidiary
54
<PAGE>
to be a Restricted Subsidiary only if, immediately after giving effect to
such designation, Big Flower Press could incur at least $1.00 of additional
Indebtedness pursuant to the first paragraph of the "LIMITATION ON
ADDITIONAL INDEBTEDNESS" covenant (without giving effect to clauses (a)
through (p) of the second paragraph thereof) on a PRO FORMA basis taking
into account such designation.
BOOK-ENTRY; DELIVERY AND FORM
The exchange notes initially will be represented by one or more permanent
global certificates in definitive, fully registered form (the "Global notes").
The Global notes will be deposited upon issuance with The Depository Trust
Company, New York, New York ("DTC") and registered in the name of a nominee of
DTC.
THE GLOBAL NOTE. We expect that pursuant to procedures established by DTC
(a) upon the issuance of the Global notes, DTC or its custodian will credit, on
its internal system, the principal amount of exchange notes of the individual
beneficial interests represented by such Global notes to the respective accounts
of persons who have accounts with such depositary and (b) ownership of
beneficial interests in the Global notes will be shown on, and the transfer of
such ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants).
Ownership of beneficial interests in the Global notes will be limited to persons
who have accounts with DTC ("participants") or persons who hold interests
through participants.
So long as DTC, or its nominee, is the registered owner or holder of the
exchange notes, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the exchange notes represented by such Global notes for
all purposes under the indenture. No beneficial owner of an interest in the
Global notes will be able to transfer that interest except in accordance with
DTC's procedures, in addition to those provided for under the indenture with
respect to the exchange notes.
Payments of the principal of, premium, if any, and interest, including
Additional Interest, on, the Global notes will be made to DTC or its nominee as
the registered owner of the notes. None of Big Flower Press, the trustee or any
Paying Agent will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global notes or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interest.
We expect that DTC or its nominee, upon receipt of any payment of principal,
any premium, if any, any interest (including Additional Interest) on the Global
notes, will credit participants' accounts with payments in amounts proportionate
to their respective beneficial interests in the principal amount of the Global
notes as shown on the records of DTC or its nominee. We also expect that
payments by participants to owners of beneficial interests in the Global notes
held through such participants will be governed by standing instructions and
customary practice, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payments
will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same-day funds.
DTC has advised us that it will take any action permitted to be taken by a
holder of exchange notes, including the presentation of exchange notes for
exchange as described below, only at the direction of one or more participants
to whose account the DTC interests in the Global notes are credited and only in
respect of such portion of the aggregate principal amount of notes as to which
such participant or participants has or have given such direction. However, if
there is an Event of Default under the indenture, DTC will exchange the Global
notes for certificated securities, which it will distribute to its participants.
DTC has advised us as follows: DTC is a limited purpose trust company
organized under
55
<PAGE>
the laws of the State of New York, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the Uniform Commercial Code and a
"Clearing Agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its participants and
facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and certain other organizations. Indirect
access to the DTC system is available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither Big Flower Press nor the trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
CERTIFICATED SECURITIES. If DTC is at any time unwilling or unable to
continue as a depositary for the global note and a successor depositary is not
appointed by us within 90 days, certificated securities will be issued in
exchange for the global notes.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The exchange of private notes for exchange notes will not be treated as a
taxable transaction for United States Federal income tax purposes because the
terms of the exchange notes will not be considered to differ materially in kind
or in extent from the terms of the private notes. Rather, the exchange notes
received by a holder of private notes will be treated as a continuation of such
holder's investment in the private notes. As a result, there will be no material
United States Federal income tax consequences to holders exchanging private
notes for exchange notes.
PERSONS CONSIDERING THE EXCHANGE OF THE PRIVATE NOTES FOR EXCHANGE NOTES
SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE TAX CONSEQUENCES ARISING
UNDER STATE, LOCAL, OR FOREIGN LAWS OF SUCH AN EXCHANGE.
56
<PAGE>
PLAN OF DISTRIBUTION
We are not using any underwriters for this exchange offer. We are also
bearing the expenses of the exchange.
This prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with resales of any exchange notes
received in exchange for private notes acquired by such broker-dealer as a
result of market-making or other trading activities. Each such broker-dealer
that receives exchange notes for its own account in exchange for such private
notes pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. We have agreed
that for a period of up to 180 days after the registration statement is declared
effective, we will make this prospectus, as amended or supplemented, available
to any such broker-dealer that requests copies of this prospectus in the letter
of transmittal for use in connection with any such resale.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers or any other persons. Exchange notes received by broker-dealers
for their own account pursuant to the exchange offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions or through the writing of options on the exchange notes, or a
combination of such methods of resale, at market prices prevailing at the time
of resale or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such exchange notes. Any broker-dealer that resells exchange
notes that were received by it for its own account pursuant to the exchange
offer in exchange for private notes acquired by such broker-dealer as a result
of market-making or other trading activities and any broker-dealer that
participates in a distribution of such exchange notes may be deemed to be an
"underwriter" within the meaning of the Securities Act. Any profit on these
resales of exchange notes and any commissions or concessions received by any
persons may be deemed to be underwriting compensation under the Securities Act.
The letter of transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
We have agreed to pay all expenses incident to our performance of, or
compliance with, the registration rights agreement and will indemnify the
holders of private notes, including any broker-dealers, and certain parties
related to these holders, against various liabilities, including liabilities
under the Securities Act.
VALIDITY OF THE EXCHANGE NOTES
The validity of the exchange notes will be passed upon for us by Sullivan &
Cromwell, New York, New York.
EXPERTS
The financial statements and related financial schedules incorporated in
this prospectus by reference from Big Flower Press' Annual Report on Form 10-K
for the year ended December 31, 1998 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting.
57
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, and other information with
the SEC jointly with Big Flower Holdings. Big Flower Holdings also files proxy
statements with the SEC. These filings are available to the public at prescribed
rates at the Public Reference Section of the SEC at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the SEC's regional offices at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World
Trade Center, Suite 1300, New York, New York 10048. These filings are available
to the public over the Internet at the SEC's web site located at
http://www.sec.gov.
The common stock of Big Flower Holdings is traded on The New York Stock
Exchange. Reports and other information concerning Big Flower Press and Big
Flower Holdings can also be inspected at the offices of the NYSE, 20 Broad
Street, New York, New York 10005.
Market data used throughout this prospectus was obtained from industry
publications and our internal estimates. While we believe this information is
reliable, its accuracy has not been independently verified and cannot be
guaranteed.
The SEC allows us to incorporate into this prospectus information that we
have filed with it or will file in the future. This means that we can disclose
important information to you by referring you to our SEC filings. We are
incorporating the Annual Report on Form 10-K for the fiscal year ended December
31, 1998, filed on March 31, 1999, of Big Flower Press (File No. 1-4084) and its
parent company, Big Flower Holdings (File No. 0-29474):
Information that we file later with the SEC will automatically update and
supersede the information in this prospectus. That is why we are also
incorporating into this prospectus any future filings of Big Flower Press and
Big Flower Holdings made with the SEC under Sections 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934.
Copies of all documents incorporated by reference will be provided to you,
upon request, at no cost from Big Flower Press Holdings, Inc., 3 East 54th
Street, New York, New York 10022, Attention: Irene B. Fisher, Esq., telephone:
(212) 521-1600. In order to ensure timely delivery of the documents, any request
should be made at least five days prior to the expiration of this exchange offer
on - .
58
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS AND THE INCORPORATED DOCUMENTS CONTAIN FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933. YOU
CAN FIND DISCUSSIONS CONTAINING FORWARD-LOOKING STATEMENTS IN THE "SUMMARY," AS
WELL AS WITHIN THIS PROSPECTUS GENERALLY. WE USE THE WORDS "BELIEVES,"
"ANTICIPATES," "EXPECTS," "ESTIMATES," "PLANS," "INTENDS" AND SIMILAR
EXPRESSIONS SO AS TO IDENTIFY FORWARD-LOOKING STATEMENTS. ALL FORWARD-LOOKING
STATEMENTS INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES. THERE MAY BE EVENTS IN
THE FUTURE THAT WE ARE NOT ACCURATELY ABLE TO PREDICT, OR OVER WHICH WE HAVE NO
CONTROL. SOME FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER FROM PROJECTED
RESULTS ARE:
- FLUCTUATIONS IN THE COST OF RAW MATERIALS USED BY BIG FLOWER PRESS,
- CHANGES IN THE ADVERTISING, MARKETING AND INFORMATION SERVICES MARKETS,
- THE FINANCIAL CONDITION OF OUR CUSTOMERS,
- THE GENERAL CONDITION OF THE UNITED STATES AND OTHER ECONOMIES,
- THE AVAILABILITY OF QUALIFIED PERSONNEL AND OTHER INFORMATION TECHNOLOGY
RESOURCES, AND
- CHANGES IN INTEREST AND FOREIGN CURRENCY EXCHANGE RATES.
FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, OUR EXPECTATION AS
TO WHEN WE WILL COMPLETE THE REMEDIATION AND TESTING PHASES OF OUR YEAR 2000
PROGRAM AS WELL AS OUR YEAR 2000 CONTINGENCY PLANS, OUR ESTIMATED COST OF
ACHIEVING YEAR 2000 READINESS AND OUR BELIEF THAT OUR INTERNAL SYSTEMS AND
EQUIPMENT WILL BE YEAR 2000 COMPLIANT IN A TIMELY MANNER.
FACTORS WHICH MAY AFFECT OUR YEAR 2000 READINESS INCLUDE, BUT ARE NOT
LIMITED TO,
- THE ABILITY TO IDENTIFY AND REMEDIATE ALL DATE SENSITIVE LINES OF COMPUTER
CODE BEFORE THE YEAR 2000,
- THE ABILITY TO REPLACE EMBEDDED COMPUTER CHIPS IN SYSTEMS OR EQUIPMENT
AFFECTED BY ANY PROBLEMS ASSOCIATED WITH THE YEAR 2000, AND
- THE ACTIONS OF GOVERNMENT AGENCIES OR OTHER THIRD PARTIES WITH RESPECT TO
YEAR 2000 ISSUES.
CONSEQUENTLY, YOU SHOULD ONLY REGARD FORWARD-LOOKING STATEMENTS AS OUR
CURRENT PLANS, ESTIMATES AND BELIEFS. WE DO NOT PROMISE TO NOTIFY YOU IF WE
LEARN THAT OUR ASSUMPTIONS OR PROJECTIONS ARE WRONG FOR ANY REASON. BEFORE YOU
DECIDE TO EXCHANGE YOUR NOTES, YOU SHOULD BE AWARE THAT THE FACTORS WE DISCUSS
IN THE "RISK FACTORS" SECTION AND ELSEWHERE IN THIS PROSPECTUS COULD CAUSE OUR
ACTUAL RESULTS TO DIFFER FROM ANY FORWARD-LOOKING STATEMENTS.
59
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS OR THAT WE
HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. NEITHER THE MAKING OF THE EXCHANGE OFFER PURSUANT
TO THIS PROSPECTUS NOR THE ACCEPTANCE OF PRIVATE NOTES FOR SURRENDER FOR
EXCHANGE PURSUANT THERETO SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF BIG FLOWER PRESS SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
EACH BROKER-DEALER WHO HOLDS PRIVATE NOTES ACQUIRED FOR ITS OWN ACCOUNT AS A
RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES AND WHO RECEIVES EXCHANGE
NOTES FOR ITS OWN ACCOUNT IN EXCHANGE FOR SUCH PRIVATE NOTES PURSUANT TO THE
EXCHANGE OFFER MUST DELIVER A COPY OF THIS PROSPECTUS IN CONNECTION WITH ANY
RESALE OF SUCH EXCHANGE NOTES.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Summary......................................... 1
Risk Factors.................................... 10
Use of Proceeds................................. 16
Capitalization.................................. 17
The Exchange Offer.............................. 17
Description of the Credit Facility.............. 25
Description of the 8 7/8% Notes................. 26
Description of the Exchange Notes............... 27
Book-Entry; Delivery and Form................... 55
Certain United States Federal Income Tax
Considerations................................ 56
Plan of Distribution............................ 57
Validity of the Exchange Notes.................. 57
Experts......................................... 57
Where You Can Find More Information............. 58
Special Note Regarding Forward-Looking
Statements.................................... 59
</TABLE>
BIG FLOWER PRESS
HOLDINGS, INC.
OFFER TO EXCHANGE
$250,000,000
8 5/8% SENIOR SUBORDINATED NOTES
DUE 2008
FOR ALL OUTSTANDING UNREGISTERED
8 5/8% SENIOR SUBORDINATED NOTES
DUE 2008
[LOGO]
- , 1999
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware empowers
a Delaware corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of such
corporation or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, provided that such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful. A Delaware corporation may indemnify directors, officers, employees
and other agents of such corporation in an action by or in the right of the
corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the person to be indemnified has been
adjudged to be liable to the corporation. Where a director, officer, employee or
agent of the corporation is successful on the merits or otherwise in the defense
of any action, suit or proceeding referred to above or in defense of any claim,
issue or matter therein, the corporation must indemnify such person against the
expenses (including attorneys' fees) which he or she actually and reasonably
incurred in connection therewith.
The Bylaws contain provisions that provide for indemnification of officers
and directors and their heirs and distributees to the fullest extent permitted
by, and in the manner permissible under, the General Corporation Law of the
State of Delaware.
As permitted by Section 102(b)(7) of the General Corporation Law of the
State of Delaware, Big Flower Press' Certificate of Incorporation contains a
provision eliminating the personal liability of a director to Big Flower Press
or its stockholders for monetary damages for breach of fiduciary duty as a
director, subject to certain exceptions.
Big Flower Press maintains policies insuring its officers and directors
against certain civil liabilities, including liabilities under the Securities
Act.
Pursuant to the Registration Rights Agreement, Big Flower Press has agreed
to indemnify holders of registrable notes against certain liabilities. Also
pursuant to the Registration Rights Agreement, Big Flower Press and certain
broker-dealers, including certain persons associated with such broker-dealers,
have agreed to indemnify each other against certain liabilities.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL SCHEDULES
<TABLE>
<C> <S>
(a) Exhibits
4.1 Form of Exchange Note (included in exhibit 4.2)
4.2 Indenture, dated as of December 9, 1998 (the "indenture"), between Big Flower Press
Holdings, Inc., as Issuer, and State Street Bank and Trust Company, as trustee**
4.3 Registration Rights Agreement, dated as of December 9, 1998, between Big Flower
Press and BT Alex. Brown Incorporated, Chase Securities Inc. and Goldman, Sachs &
Co.**
5.1 Opinion of Sullivan & Cromwell regarding the validity of the exchange notes*
12.1 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends*
23.1 Consent of Sullivan & Cromwell (included in Exhibit 5.1)
23.2 Consent of Deloitte & Touche LLP*
24.1 Power of Attorney (included on Page II-4 of this Registration Statement)**
25.1 Statement of Eligibility of State Street Bank and Trust Company, as trustee**
99.1 Form of Letter of Transmittal**
99.2 Form of Notice of Guaranteed Delivery**
99.3 Form of Exchange Agent Agreement**
</TABLE>
- - ------------------------
* Filed herewith
** Previously filed
+ To be filed by amendment
ITEM 22. UNDERTAKINGS
1. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
2. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suite or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
offered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
3. The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail
II-2
<PAGE>
or other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
4. The undersigned registrant hereby undertakes:
(i) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such information in the
registration statement;
(ii) That, for the purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof;
(iii) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unexchanged at the termination
of the offering.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York, State of
New York, on March 31, 1999.
<TABLE>
<S> <C> <C>
BIG FLOWER PRESS HOLDINGS, INC.
By: /s/ R. THEODORE AMMON
--------------------------------------
R. Theodore Ammon
Chairman
</TABLE>
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
SIGNATURE TITLE DATE
- - ------------------------------ --------------------------- -------------------
/s/ R. THEODORE AMMON Chairman and Director
- - ------------------------------ (Principal Executive March 31, 1999
R. Theodore Ammon Officer)
* President, Chief Executive
- - ------------------------------ Officer and Director March 31, 1999
Edward T. Reilly
Executive Vice President
* and
- - ------------------------------ Chief Financial Officer March 31, 1999
Richard L. Ritchie (Principal Financial and
Accounting Officer)
* Director
- - ------------------------------ March 31, 1999
Mark A. Angelson
<TABLE>
<S> <C> <C> <C>
*By: /s/ R. THEODORE AMMON
-------------------------
R. Theodore Ammon
(Attorney in fact)
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- - ----------- ---------------------------------------------------------------------------------------------------------
<C> <S>
4.1 Form of Exchange Note (included in Exhibit 4.2)
4.2 Indenture, dated as of December 9, 1998 (the "indenture"), between Big Flower Press Holdings, Inc., as
Issuer, and State Street Bank and Trust Company, as trustee**
4.3 Registration Rights Agreement, dated as of December 9, 1998, between Big Flower Press and BT Alex. Brown
Incorporated, Chase Securities Inc. and Goldman, Sachs & Co.**
5.1 Opinion of Sullivan & Cromwell regarding the validity of the exchange notes*
12.1 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends*
23.1 Consent of Sullivan & Cromwell (included in Exhibit 5.1)
23.2 Consent of Deloitte & Touche LLP*
24.1 Power of Attorney (included on Page II-4 of this Registration Statement)**
25.1 Statement of Eligibility of State Street Bank and Trust Company, as trustee**
99.1 Form of Letter of Transmittal**
99.2 Form of Notice of Guaranteed Delivery**
99.3 Form of Exchange Agent Agreement**
</TABLE>
- - ------------------------
* Filed herewith
** Previously filed
+ To be filed by amendment
<PAGE>
EXHIBIT 5.1
SULLIVAN & CROMWELL
New York Telephone: (212) 558-4000
Telex: 62694 (International) 127816 (Domestic) 125 Broad Street, New York
10004-2498
Cable Address: Ladycourt, New York
Facsimile: (212) 558-3588 (125 Broad Street) 375 Park Avenue, New York 10152
1701 Pennsylvania Ave., N.W. Washington, D.C. 20006-5805
444 South Flower Street, Los Angeles 90071-2901
8, Place Vendome, 75001 Paris
St. Olave's House, 9a Ironmonger Lane, London EC2V 8EY
101 Colllins Street, Melbourne 300D
2-1, Marunouchi I-Chome, Chiyoda-Ku, Tokyo 100
Nine Queen's Road, Central, Hong Kong
March 29, 1999
Big Flower Press Holdings, Inc.,
3 East 54th Street, 17th Floor,
New York, NY 10022.
Dear Sirs:
In connection with the registration under the Securities Act of 1933 (the
"Act") of $250 million aggregate principal amount of 8 5/8% Senior Subordinated
Notes due 2008 (the "Exchange Notes") of Big Flower Press Holdings, Inc. (the
"Company") to be issued in exchange for the Company's outstanding 8 5/8% Senior
Subordinated Notes due 2008 pursuant to (i) the Indenture, dated as of December
9, 1998 (the "Indenture"), between the Company and State Street Bank and Trust
Company as trustee (the "Trustee"), and (ii) the Registration Rights Agreement,
dated as of December 9, 1998 (the "Registration Rights Agreement"), by and among
the Company and BT Alex. Brown Incorporated, Chase Securities Inc. and Goldman,
Sachs & Co., we, as your special counsel, have examined such corporate records,
certificates and other documents, and such questions of law, as we have
considered necessary or appropriate for the purposes of this opinion.
Upon the basis of such examination, we advise you that, in our opinion, the
Exchange Notes have been duly authorized by the Company; and when the Securities
and Exchange Commission declares the Company's Registration Statement on Form
S-4 (File No. 333-42745) effective and the Exchange Notes have been duly
executed, authenticated, issued and delivered in accordance with the terms of
the Registration Rights Agreement and the Indenture, the Exchange Notes will
constitute valid and legally binding obligations of the Company enforceable in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
The foregoing opinion is limited to the Federal laws of the United States,
the laws of the State of New York and the General Corporation Law of the State
of Delaware, and we are expressing no opinion as to the effect of the laws of
any other jurisdiction.
In connection with the foregoing, we have assumed that at the time of the
issuance and delivery of the Exchange Notes there will not have occurred any
change in law affecting the validity, legally binding character or
enforceability of the Exchange Notes and that the issuance and delivery of the
Exchange Notes, all of the terms of the Exchange Notes and the performance by
the Company of its obligations thereunder will comply with applicable law and
with each requirement or restriction imposed by any court or governmental body
having jurisdiction over the Company and will not result in a default under or a
breach of any agreement or instrument then binding upon the Company.
<PAGE>
Big Flower Press Holdings, Inc.
In rendering the foregoing opinion, we have relied as to certain matters on
information obtained from public officials, officers of the Company and other
sources believed by us to be responsible, and we have assumed (i) that the
Indenture has been duly authorized, executed and delivered by the Trustee, (ii)
that the Exchange Notes will conform to the specimens thereof examined by us,
(iii) that the Trustee's certificates of authentication of the Exchange Notes
will be manually signed by one of the Trustee's authorized officers and (iv)
that the signatures on all documents examined by us are genuine, assumptions
which we have not independently verified.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Validity of
the Exchange Notes" in the Prospectus. In giving such consent, we do not hereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Act.
Very truly yours,
/s/ Sullivan & Cromwell
<PAGE>
Exhibit 12.1
BIG FLOWER PRESS HOLDINGS, INC.
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS
<TABLE>
<CAPTION>
BIG FLOWER PRESS
--------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
12/31/98 12/31/97 12/31/96
------------ ----------- -----------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
FIXED CHARGES AND PREFERRED DIVIDENDS:
Interest expense................................................................ $ 56,458 $ 40,380 $ 36,165
Amortization of deferred financing costs........................................ 1,728 1,660 1,802
Capitalized interest............................................................ 1,430 1,463 168
Interest component of rent expense.............................................. 14,558 11,169 10,897
Preferred dividends of a subsidiary............................................. -- -- --
------------ ----------- -----------
Total fixed charges and preferred dividends..................................... 74,174 54,672 49,032
Less: Capitalized interest...................................................... 1,430 1,463 168
------------ ----------- -----------
Adjusted fixed charges and preferred dividends.................................. $ 72,744 $ 53,209 $ 48,864
------------ ----------- -----------
------------ ----------- -----------
EARNINGS:
Income (loss) before income taxes and extraordinary items....................... $ 77,598 $ (10,330) $ 4,998
Adjusted fixed charges and preferred dividends.................................. 72,744 53,209 48,864
------------ ----------- -----------
Adjusted earnings............................................................... $ 150,342 $ 42,879 $ 53,862
------------ ----------- -----------
------------ ----------- -----------
Ratio of earnings to combined fixed charges and preferred dividends............. 2.1 0.8 1.1
------------ ----------- -----------
------------ ----------- -----------
<CAPTION>
SIX MONTHS 323 DAYS
ENDED YEAR ENDED ENDED
12/31/95 6/30/95 6/30/94
----------- ----------- ---------
<S> <C> <C> <C>
FIXED CHARGES AND PREFERRED DIVIDENDS:
Interest expense................................................................ $ 19,076 $ 37,452 $ 19,735
Amortization of deferred financing costs........................................ 1,594 3,437 1,936
Capitalized interest............................................................ -- 295 260
Interest component of rent expense.............................................. 5,694 9,414 5,138
Preferred dividends of a subsidiary............................................. 1,068 2,444 1,913
----------- ----------- ---------
Total fixed charges and preferred dividends..................................... 27,432 53,042 28,982
Less: Capitalized interest...................................................... -- 295 260
----------- ----------- ---------
Adjusted fixed charges and preferred dividends.................................. $ 27,432 $ 52,747 $ 28,722
----------- ----------- ---------
----------- ----------- ---------
EARNINGS:
Income (loss) before income taxes and extraordinary items....................... $ 12,694 $ 5,268 $ (549)
Adjusted fixed charges and preferred dividends.................................. 27,432 52,747 28,722
----------- ----------- ---------
Adjusted earnings............................................................... $ 40,126 $ 58,015 $ 28,173
----------- ----------- ---------
----------- ----------- ---------
Ratio of earnings to combined fixed charges and preferred dividends............. 1.5 1.1 1.0
----------- ----------- ---------
----------- ----------- ---------
</TABLE>
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Big Flower Press Holdings, Inc. on Form S-4 of our report dated February 8,
1999 appearing in the Annual Report on Form 10-K of Big Flower Press Holdings,
Inc. for the year ended December 31, 1998 and to the reference to us under the
heading "Experts" in the Prospectus, which is part of this Registration
Statement.
DELOITTE & TOUCHE LLP
New York, New York
March 31, 1999
