AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 1994
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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REEVES HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 3069 57-0994551
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
HIGHWAY 29 SOUTH
P.O. BOX 1898
SPARTANBURG, SOUTH CAROLINA 29304
(803) 576-1210
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
DAVID L. DEPHTEREOS, ESQ.
1120 BOSTON POST ROAD
DARIEN, CONNECTICUT 06820
(203) 655-6855
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
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COPIES TO:
Louis J. Bevilacqua, Esq. John J. Schuster, Esq.
Frederick C. Rieck, Esq. Cahill Gordon & Reindel
Cadwalader, Wickersham & Taft 80 Pine Street
100 Maiden Lane New York, New York 10005
New York, New York 10038 (212) 701-3000
(212) 504-6000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of the securities on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. / /
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CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER DEBENTURE* OFFERING PRICE* FEE
% Senior Discount
Debentures due 2006.......... $170,000,000 58.8% $100,000,000 $34,483.00
<FN>
*Estimated solely for the purpose of calculating the registration fee.
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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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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CROSS REFERENCE SHEET
PURSUANT TO ITEM 501 OF REGULATION S-K
S-1 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
- ----------------------------------------------------------------- ------------------------------------------------------
1. Forepart of the Registration Statement and Outside Facing Page; Outside Front Cover Page
Front Cover Page of Prospectus.......................
2. Inside Front and Outside Back Cover Pages of Inside Front and Outside Back Cover Pages
Prospectus...........................................
3. Summary Information, Risk Factors and Ratio of Prospectus Summary; Investment Considerations; The
Earnings to Fixed Charges............................ Issuer and the Company; Selected Consolidated
Financial Data
4. Use of Proceeds....................................... Use of Proceeds
5. Determination of Offering Price....................... Not Applicable
6. Dilution.............................................. Not Applicable
7. Selling Security Holders.............................. Not Applicable
8. Plan of Distribution.................................. Underwriting
9. Description of Securities to be Registered............ Outside Front Cover Page; Prospectus Summary;
Description of Debentures
10. Interests of Named Experts and Counsel................ Not Applicable
11. Information with Respect to the Registrant............ Prospectus Summary; Investment Considerations; The
Issuer and the Company; Capitalization; Selected
Consolidated Financial Data; Management's Discussion
and Analysis of Financial Condition and Results of
Operations; Business; Management; Description of
Other Indebtedness; Consolidated Financial State-
ments
12. Disclosure of Commission Position on Indemnification Not Applicable
for Securities Act Liabilities.......................
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED MARCH 31, 1994
PROSPECTUS
, 1994
$
REEVES HOLDINGS, INC.
% SENIOR DISCOUNT DEBENTURES DUE 2006
The % Senior Discount Debentures due 2006 (the "Debentures") offered
hereby are being issued by Reeves Holdings, Inc., a Delaware corporation (the
"Issuer"). The Issuer was recently formed to hold the capital stock of Reeves
Industries, Inc., a Delaware corporation ("Reeves" or the "Company") and to
issue the Debentures.
The Debentures will mature on , 2006. The Debentures will be
issued at a substantial discount to their aggregate principal amount to generate
gross proceeds of approximately $100,000,000. See "Description of Debentures"
and "Certain Federal Income Tax Considerations Concerning The Debentures." The
Debentures will accrete at a rate of %, compounded semi-annually, to an
aggregate principal amount of $ by , 1999. Interest will not
accrue on the Debentures prior to , 1999. Thereafter, interest on
the Debentures will accrue at the rate of % per annum and will be payable in
cash semi-annually on and , commencing , 1999.
The Debentures are not redeemable prior to , 1999, except that
during the first 36 months after the offering the Issuer may redeem up to
one-half in aggregate face amount of the Debentures at the premium to Accreted
Value (as defined) set forth herein with the proceeds of certain issuances of
capital stock; PROVIDED that at least one-half of the aggregate face amount of
Debentures initially issued remains outstanding. After , 1999, the
Debentures will be redeemable at any time at the option of the Issuer, in whole
or in part, at the redemption prices set forth herein, together with accrued
interest, to the date of redemption.
The Debentures will be senior unsecured obligations of the Issuer and will
rank PARI PASSU in right of payment with all senior unsecured indebtedness which
the Issuer may incur. Upon a Change of Control (as defined), holders of the
Debentures will have the right to require the Issuer to repurchase their
Debentures at 101% of the Accreted Value thereof, plus, if occurring after
, 1999, accrued interest, if any, to the date of purchase.
All of the Issuer's operating assets are held through its subsidiaries. As
indebtedness of the Issuer, the Debentures will be effectively subordinated to
all indebtedness and other obligations of the Issuer's subsidiaries. As of
December 31, 1993, after giving effect to the repayment of indebtedness with the
proceeds of the offering, consolidated obligations of such subsidiaries,
consisting of certain outstanding indebtedness, trade payables and accrued
liabilities, but excluding intercompany obligations, would have been
approximately $170.7 million.
SEE "INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN FACTORS WHICH
PROSPECTIVE INVESTORS SHOULD CONSIDER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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UNDERWRITING
PRICE DISCOUNTS PROCEEDS
TO THE AND TO THE
PUBLIC(1) COMMISSIONS(2) ISSUER(3)
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Per Debenture.......................... % % %
Total.................................. $ $ $
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<FN>
(1) PLUS ACCRUED AMORTIZATION OF ORIGINAL ISSUE DISCOUNT, IF ANY, FROM THE DATE
OF ISSUANCE.
(2) SEE "UNDERWRITING" FOR INDEMNIFICATION ARRANGEMENTS WITH THE UNDERWRITERS.
(3) THE ISSUER WILL BE REQUIRED TO PAY EXPENSES OF THE OFFERING ESTIMATED AT
$ .
The Debentures are offered by the Underwriters, subject to prior sale, when,
as and if delivered to and accepted by the Underwriters and subject to various
prior conditions, including their right to reject orders in whole or in part. It
is expected that delivery of the Debentures will be made in New York, New York
on or about , 1994.
DONALDSON, LUFKIN & JENRETTE MERRILL LYNCH & CO.
SECURITIES CORPORATION
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEBENTURES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET, OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Issuer has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a registration statement on Form S-1
(together with all amendments, exhibits and schedules thereto, hereinafter
referred to as the "Registration Statement") under the Securities Act of 1933,
as amended (the "Securities Act"), with respect to the Debentures offered by
this Prospectus. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the Rules and Regulations of the Commission. For further
information with respect to the Issuer, the Company and the Debentures offered
hereby, reference is made to the Registration Statement. The Company is, and the
Issuer will be, subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files, or will file, periodic and current reports and other
information with the Commission. The Registration Statement, as well as such
reports and other information, may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and should also be available for inspection and copying
at the regional offices of the Commission located at 500 West Madison Street,
14th Floor, Chicago, Illinois 60661 and 7 World Trade Center, New York, New York
10048. Copies may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
2
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO)
APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES,
REFERENCES TO THE "ISSUER" IN THIS PROSPECTUS REFER TO REEVES HOLDINGS, INC.
TOGETHER WITH ITS SUBSIDIARIES AND REFERENCES TO "REEVES" OR THE "COMPANY" REFER
TO REEVES INDUSTRIES, INC. TOGETHER WITH ITS SUBSIDIARIES. ALL OF THE
OUTSTANDING CAPITAL STOCK OF REEVES WILL BE TRANSFERRED TO THE ISSUER PRIOR TO
THE ISSUANCE OF THE DEBENTURES. SINCE REEVES WILL BE THE SOLE SUBSIDIARY OF THE
ISSUER, THE CONSOLIDATED FINANCIAL DATA OF THE ISSUER ARE THOSE OF REEVES.
THE ISSUER AND THE COMPANY
The Issuer, through its subsidiary, Reeves, is a diversified industrial
company with operations in two principal business segments, industrial coated
fabrics, conducted through its Industrial Coated Fabrics Group ("ICF"), and
apparel textiles, conducted through its Apparel Textile Group ("ATG"). In 1993,
ICF contributed approximately 49.6% of the Company's net sales and approximately
71.7% of its operating income and ATG contributed approximately 50.4% of the
Company's net sales and approximately 28.3% of its operating income (in each
case, excluding corporate expenses, goodwill amortization and facility
restructuring charges). Throughout its businesses, the Company emphasizes
specialty products, product quality, technological innovation, and rapid
responses to the changing needs of its customers.
ICF specializes in the coating of various substrate fabrics with a variety
of products, such as synthetic rubber, vinyl, neoprene, urethane and other
elastomers, to produce a diverse line of products for industrial applications.
ICF's principal products include: (1) a complete line of printing blankets used
in offset lithography, (2) coated automotive airbag materials, (3) specialty
coated fabrics, including fluid control diaphragm materials, tank seals, ducting
materials and coated fabric materials used for military and commercial life
rafts and vests, aircraft escape slides, flexible fuel tanks and general
aviation products, and (4) coated fabrics used in industrial coverings,
including fabrics coated with rubber and vinyl which are used to make
tarpaulins, loading dock shelters and other industrial products.
The Company believes that ICF is one of the world's leading producers of
offset printing blankets and that ICF has the leading share of the domestic
market for coated automotive airbag materials. The Company also believes that
ICF is a leading domestic producer of specialty coated fabrics used for a broad
range of industrial applications. ICF's products generally involve significant
amounts of technological expertise and precise production tolerances. The
Company believes that ICF's product development, formulation and production
methods are among the most sophisticated in the coated fabrics industry.
ATG manufactures, processes and sells specialty textile fabrics to apparel
and other manufacturers. Through its Greige Goods Division, ATG processes raw
materials into greige goods (I.E., undyed woven fabrics). Through its Finished
Goods Division, ATG functions as a converter and commission finisher, purchasing
greige goods from the Greige Goods Division and others and contracting to have
the goods dyed and finished for use in various end-products or dyeing and
finishing the goods itself.
The Company believes that ATG has developed strong positions in niche
markets in the apparel textile industry by offering unique custom-designed
fabrics to leading apparel and specialty garment manufacturers. ATG emphasizes
"short-run" product orders and targets market segments in which its
manufacturing flexibility, rapid response time, superior service and quality and
ability to supply exclusive blends are key competitive factors.
The Company's business strategy has focused on the sale of higher-margin
niche products and the establishment of leading positions in its principal
markets. The Company believes that this strategy,
3
combined with its diverse product and customer base, the development of new
products and substantial capital investment, has helped the Company increase its
sales and profitability in spite of adverse economic conditions in its U.S. and
European markets during 1990-1993.
Since 1991, the Company has significantly increased its level of capital
investment in its businesses to modernize and expand capacity, reduce its
overall cost structure, increase productivity and enhance its competitive
position. The Company intends to substantially increase its capital investment
in its businesses to approximately $140 million during the 1994-1997 period. In
addition, as opportunities arise, the Issuer may seek to augment its growth
through strategic acquisitions, joint ventures and investments in other
industrial companies where the Issuer believes that it can apply its
professional management techniques to enhance a company's operating performance.
THE OFFERING
Securities Offered............ $ aggregate principal amount of % Senior Discount
Debentures due 2006.
Maturity Date................. , 2006.
Interest Rate................. The Debentures will accrete at a rate of %, compounded
semi-annually, to an aggregate principal amount of $ by
, 1999. Interest will not accrue on the
Debentures prior to , 1999. Commencing , 1999,
interest on the Debentures will accrue at the rate of %
per annum, payable in cash semi-annually on and
, commencing , 1999.
Original Issue Discount....... For federal income tax purposes, the Debentures will be
treated as having been issued with "original issue discount"
equal to the difference between the issue price of the
Debentures and the sum of all cash payments (whether
denominated as principal or interest) to be made thereon.
Each holder of a Debenture must include in gross income for
federal income tax purposes a portion of such original issue
discount for each day during each taxable year in which a
Debenture is held, whether or not cash interest payments are
made. See "Certain Federal Income Tax Considerations
Concerning the Debentures."
Optional Redemption........... The Debentures will not be redeemable prior to ,
1999, except that during the first 36 months after the
offering made hereby (the "Offering"), the Issuer may redeem
up to one-half in aggregate face amount of the Debentures at
% of Accreted Value with the net proceeds of public
sales of common stock by the Issuer (or of its parent, Hart
Holding Company Incorporated ("Hart Holding"), to the extent
such net proceeds are contributed as a capital contribution
in exchange for capital stock of the Issuer). The Debentures
will be redeemable at the option of the Issuer, in whole or
in part, after , 1999, at the premiums set forth
herein, together with accrued interest, if any, to the date
of redemption.
4
Ranking....................... The Debentures will be senior unsecured indebtedness of the
Issuer and will rank PARI PASSU in right of payment with all
senior unsecured indebtedness which the Issuer may incur and
senior to any subordinated indebtedness which the Issuer may
incur. The Debentures will be effectively subordinated to
claims of the creditors of the Issuer's subsidiaries,
including the $122.5 million principal amount of 11% Senior
Notes due 2002 of Reeves (the "11% Senior Notes"). As of
December 31, 1993, after giving effect to the repayment of
indebtedness with the proceeds of the Offering, consolidated
obligations of the Issuer's subsidiaries, consisting of
certain indebtedness, trade payables and accrued
liabilities, but excluding intercompany obligations, would
have been approximately $170.7 million.
Change of Control............. Upon a Change of Control (as defined), holders of the
Debentures will have the right to require the Issuer to
purchase the Debentures at a price of 101% of the Accreted
Value thereof, plus, if occurring after , 1999,
accrued interest, if any, to the date of purchase.
Certain Restrictions.......... The indenture pursuant to which the Debentures are issued
(the "Indenture") will restrict the Issuer's ability to
pledge subsidiary stock and, subject to certain exceptions,
the ability of the Issuer and its subsidiaries to incur
additional indebtedness, pay dividends, redeem capital
stock, make certain investments, enter into transactions
with affiliates, merge or consolidate with any other person,
or sell, transfer or lease all or substantially all of their
assets. See "Description of Debentures -- Certain
Covenants."
Use of Proceeds............... Proceeds of the Offering will be used to repay Reeves'
outstanding 13 3/4% Subordinated Debentures due 2001 (the
"Subordinated Debentures") in the approximate aggregate
principal amount of $11 million and for other general
corporate purposes which may include the funding of
anticipated capital expenditures, repayment of bank debt and
acquisitions or joint ventures. See "Use of Proceeds."
5
REEVES HOLDINGS, INC.
SUMMARY CONSOLIDATED FINANCIAL DATA
YEAR ENDED DECEMBER 31,
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1989(1) 1990 1991 1992 1993
(IN THOUSANDS, EXCEPT RATIOS)
STATEMENT OF OPERATIONS DATA:
Net sales.................................. $ 257,348 $ 257,859 $ 269,559 $ 271,104 $ 283,653
Operating income........................... 29,810 24,666 25,626 25,767 28,094
Interest expense, net (2).................. 17,227 18,199 20,709 17,198 16,236
Income from continuing operations.......... 6,100 5,757 4,544 5,976 7,857
Ratio of earnings to fixed charges (3)..... 1.6x 1.3x 1.2x 1.5x 1.7 x
OTHER DATA:
EBITDA (4)................................. $ 36,040 $ 31,303 $ 32,734 $ 33,883 $ 38,125
Capital expenditures (5)................... 6,718 7,007 11,015 15,788 16,506
Depreciation............................... 5,090 5,497 5,951 6,776 7,204
Ratio of EBITDA to interest expense, net... 2.1x 1.7x 1.6x 2.0x 2.4 x
PRO FORMA DATA: (6)
Cash interest expense, net (7)............. $ 10,919
Interest expense, net (7).................. 23,338
Ratio of EBITDA to cash interest expense,
net....................................... 3.5 x
Ratio of EBITDA to interest expense, net... 1.6 x
Ratio of net debt to EBITDA (8)............ 3.3 x
DECEMBER 31, 1993
--------------------------
ACTUAL AS ADJUSTED(9)
BALANCE SHEET DATA:
Cash and cash equivalents...................................... $ 12,015 $ 97,242
Total assets................................................... 203,025 291,424
Total debt (10)................................................ 132,677 221,753
Stockholder's equity........................................... 21,411 20,991
<FN>
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(1) The year ended December 31, 1989 has been restated to reflect the exclusion
of the discontinued operations of the ARA Automotive Group. See Note 3 to
the Consolidated Financial Statements.
(2) Interest expense, net deducts interest income but includes amortization of
financing costs and debt discounts of $1,382, $1,227, $1,280, $1,031 and
$728 for the years ended December 31, 1989, 1990, 1991, 1992 and 1993,
respectively.
(3) For the purpose of calculating the ratio of earnings to fixed charges,
earnings consist of income from continuing operations before income taxes,
plus fixed charges. Fixed charges consist of interest on all indebtedness,
which includes amortization of financing costs and debt discounts, and
one-third of all rentals, which is considered representative of the
interest portion included therein, after adjustments for amounts related to
discontinued operations.
(4) EBITDA is income from continuing operations before interest expense, net,
income taxes, depreciation, amortization, and, in 1993, facility
restructuring charges of $1,003 and a reserve for costs related to a
discontinued plant included in corporate expenses of $484. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The Issuer has included information concerning EBITDA herein
because it understands that such information is
6
used by certain investors as one measure of an issuer's historical ability
to service debt. EBITDA should not be considered as an alternative to, or
more meaningful than, earnings from operations or other traditional
indications of the Issuer's operating performance.
(5) Does not include the cost of equipment (leased under operating leases) of
$3.0 million and $5.8 million in 1992 and 1993, respectively.
(6) As adjusted to give effect to the sale of the Debentures offered hereby and
the application of the proceeds to redeem the Subordinated Debentures, pay
related premiums and reinvest the balance of such proceeds in three-month
U. S. Treasury bills (at 3.61%, the rate borne by such instruments as of
March 21, 1994) as if such transactions had occurred as of January 1, 1993.
(7) The following table presents a reconciliation of pro forma interest
expense, net and cash interest expense, net:
YEAR ENDED
DECEMBER 31,
1993
Historical interest expense and amortization of financing costs and debt discounts.......... $ 16,394
Historical interest income.................................................................. (158)
-------------
Interest expense, net....................................................................... 16,236
-------------
Plus: Amortization of original issue discount and financing costs on the Debentures....... 11,754
Less: Interest expense and amortization of financing costs and debt discount on the
Subordinated Debentures.............................................................. (1,575)
Less: Interest income on reinvestment of excess proceeds from the sale of the
Debentures............................................................................... (3,077)
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Total pro forma adjustments........................................................... 7,102
-------------
Pro forma interest expense, net............................................................. $ 23,338
-------------
-------------
Less: Amortization of original issue discount and financing costs on the Debentures....... (11,754)
Less: Amortization of financing costs and debt discounts on existing debt................. (665)
-------------
Pro forma cash interest expense, net........................................................ $ 10,919
-------------
-------------
<FN>
(8) Net debt is defined as total debt less cash and cash equivalents.
(9) As adjusted to give effect to the sale of the Debentures offered hereby,
and the application of the proceeds to redeem the Subordinated Debentures
and pay related premiums as if such transactions had occurred as of
December 31, 1993. The adjustments to stockholder's equity consist of the
payment of premiums of $303 and the write-off of financing costs and debt
discounts of $374, net of an income tax benefit of $257 related to the
redemption of the Subordinated Debentures.
(10) Total debt consists of long-term debt, including current portion and
short-term debt.
7
INVESTMENT CONSIDERATIONS
HOLDING COMPANY STRUCTURE
The Issuer is a holding company which currently derives all of its operating
income from its subsidiaries. The Issuer owns all of the issued capital stock of
Reeves (90% on a fully diluted basis, see "Controlling Stockholder"), which is
its only subsidiary. The Issuer must ultimately rely upon distributions from the
Company or other investments to generate the funds necessary to meet its
obligations, including the payment of principal and interest on the Debentures.
The Company's bank loan agreement (as amended, the "Bank Credit Agreement") and
the indenture pursuant to which the 11% Senior Notes were issued (the "11%
Senior Note Indenture") contain restrictions that could prevent the payment of
dividends or other distributions by Reeves to the Issuer. In addition, the
ability of Reeves to make such payments will be subject to, among other things,
applicable state laws. Reeves cannot currently make any distributions to the
Issuer.
Claims of creditors of the Issuer's subsidiaries, including trade creditors,
will generally have priority as to the subsidiaries' assets over the claims of
the Issuer and the holders of the Issuer's indebtedness. Consequently, the
Debentures are effectively subordinated to the creditors of such subsidiaries.
As of December 31, 1993, after giving effect to the repayment of indebtedness
with the proceeds of the Offering, the consolidated obligations of the Issuer's
subsidiaries, consisting of certain indebtedness, trade payables and accrued
liabilities, but excluding intercompany obligations, would have been
approximately $170.7 million.
LEVERAGE
After giving effect to the Offering and the application of the proceeds
therefrom, the Issuer's total consolidated indebtedness on December 31, 1993,
would have been $221.8 million, its stockholder's equity would have been $21.0
million and its cash and cash equivalents would have been $97.2 million. The
degree to which the Issuer is leveraged could have important consequences to the
holders of the Debentures. Such consequences include the following, any of which
could affect the ability of the Issuer's subsidiaries to make distributions to
the Issuer and the Issuer's ability to make payments with respect to the
Debentures: (1) the Issuer's ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions or general
corporate purposes may be impaired; (2) a substantial portion of the Issuer's
consolidated cash flow from operations must be dedicated to the payment of
interest on indebtedness; and (3) the Issuer's leverage may make it more
vulnerable to economic downturns and may limit its ability to withstand
competitive pressures. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources." The
Indenture will, among other things, limit the incurrence of additional
indebtedness by the Issuer and its subsidiaries and the issuance of preferred
stock by the Issuer's subsidiaries. However, these limitations are subject to a
number of important qualifications.
CONTROLLING STOCKHOLDER
Hart Holding currently owns 100% of the issued and outstanding common stock
of the Issuer. Therefore, Hart Holding controls all actions requiring
stockholder approval, including the election of directors, ensuring its ability
to control the future direction and management of the Issuer, including
effecting a change of control. James W. Hart beneficially owns 94.6% of Hart
Holding's common stock and holds an option to acquire approximately 10% of the
Company's common stock. See "Management -- Ownership of Common Stock of the
Issuer and Reeves."
CHANGE OF CONTROL
The Indenture will provide that, upon the occurrence of any Change of
Control, the Issuer will be required to make an offer (a "Change of Control
Offer") to purchase all of the Debentures issued and then outstanding under the
Indenture at a purchase price equal to 101% of the Accreted Value thereof on the
date of purchase, plus, if such Change of Control occurs after ,
1999, accrued and unpaid interest thereon to the date of purchase. Due to
restrictions in the Bank Credit Agreement, the 11% Senior Note Indenture and
certain equipment leases, the Company may not be able to distribute
8
funds to the Issuer to fulfill this requirement. The lenders under the Bank
Credit Agreement, the holders of the 11% Senior Notes and certain equipment
lessors have a right to demand repayment upon a "Change of Control" as such term
is defined in the applicable documents. Upon a Change of Control, such persons
would be entitled to receive payment of all outstanding obligations under their
respective agreements before any of the Debentures tendered in a Change of
Control Offer could be purchased. See "Description of Debentures" and
"Description of Other Indebtedness". If a Change of Control were to occur, it is
unlikely that the Company and the Issuer would be able to repay or refinance all
of their respective obligations.
ABSENCE OF PUBLIC MARKET FOR THE DEBENTURES
There is no existing market for the Debentures and there can be no assurance
as to the liquidity of any markets that may develop for the Debentures, the
ability of the holders of the Debentures to sell their Debentures or the price
at which such holders would be able to sell their Debentures. If such a market
were to develop, the Debentures could trade at prices that might be higher or
lower than the initial offering price thereof depending upon many factors,
including prevailing interest rates, the Company's operating results and the
markets for similar securities. The Underwriters have advised the Issuer that
they currently intend to make a market in the Debentures; however, they are not
obligated to do so and any market making may be discontinued at any time without
notice. The Issuer does not intend to apply for listing of the Debentures on any
securities exchange.
ORIGINAL ISSUE DISCOUNT CONSEQUENCES
The Debentures will be considered to bear original issue discount for
federal income tax purposes. As a result, the holders will be required to
include in income original issue discount as it accrues on a yield-to-maturity
basis, whether or not cash payments of interest or principal are made and
regardless of the holder's method of accounting. See "Certain Federal Income Tax
Considerations Concerning the Debentures."
If a bankruptcy case is commenced by or against the Issuer under the United
States Bankruptcy Code after the issuance of the Debentures, the claim of a
holder of the Debentures with respect to the principal amount thereof may be
limited to an amount equal to the sum of (i) the initial public offering price
and (ii) that portion of the original issue discount which is not deemed to
constitute "unmatured interest" for purposes of the United States Bankruptcy
Code. Any original issue discount that was not amortized as of any such
bankruptcy filing would constitute "unmatured interest."
9
THE ISSUER AND THE COMPANY
The Issuer, through its subsidiary, Reeves, is a diversified industrial
company with operations in two principal business segments, industrial coated
fabrics, conducted through its Industrial Coated Fabrics Group ("ICF"), and
apparel textiles, conducted through its Apparel Textile Group ("ATG"). In 1993,
ICF contributed approximately 49.6% of the Company's net sales and approximately
71.7% of its operating income and ATG contributed approximately 50.4% of the
Company's net sales and approximately 28.3% of its operating income (in each
case, excluding corporate expenses, goodwill amortization and facility
restructuring charges). Throughout its businesses, the Company emphasizes
specialty products, product quality, technological innovation and rapid
responses to the changing needs of its customers.
ICF specializes in the coating of various substrate fabrics with a variety
of products, such as synthetic rubber, vinyl, neoprene, urethane and other
elastomers, to produce a diverse line of products for industrial applications.
ICF's principal products include: (1) a complete line of printing blankets used
in offset lithography, (2) coated automotive airbag materials, (3) specialty
coated fabrics, including fluid control diaphragm materials, tank seals, ducting
materials and coated fabric materials used for military and commercial life
rafts and vests, aircraft escape slides, flexible fuel tanks and general
aviation products, and (4) coated fabrics used in industrial coverings,
including fabrics coated with rubber and vinyl which are used to make
tarpaulins, loading dock shelters and other industrial products.
The Company believes that ICF is one of the world's leading producers of
offset printing blankets and that ICF has the leading share of the domestic
market for coated automotive airbag materials. The Company also believes that
ICF is a leading domestic producer of specialty coated fabrics used for a broad
range of industrial applications. ICF's products generally involve significant
amounts of technological expertise and precise production tolerances. The
Company believes that ICF's product development, formulation and production
methods are among the most sophisticated in the coated fabrics industry.
ATG manufactures, processes and sells specialty textile fabrics to apparel
and other manufacturers. Through its Greige Goods Division, ATG processes raw
materials into greige goods (I.E., undyed woven fabrics). Through its Finished
Goods Division, ATG functions as a converter and commission finisher, purchasing
greige goods from the Greige Goods Division and others and contracting to have
the goods dyed and finished for use in various end-products or dyeing and
finishing the goods itself.
The Company believes that ATG has developed strong positions in niche
markets in the apparel textile industry by offering unique custom-designed
fabrics to leading apparel and specialty garment manufacturers. ATG emphasizes
"short-run" product orders and targets market segments in which its
manufacturing flexibility, rapid response time, superior service and quality and
ability to supply exclusive blends are key competitive factors.
The Company's business strategy has focused on the sale of higher-margin
niche products and the establishment of leading positions in its principal
markets. The Company believes that this strategy, combined with its diverse
product and customer base, the development of new products and substantial
capital investment, has helped the Company increase its sales and profitability
in spite of adverse economic conditions in its U.S. and European markets during
1990-1993.
Since 1991, the Company has significantly increased its level of capital
investment in its businesses to modernize and expand capacity, reduce its
overall cost structure, increase productivity and enhance its competitive
position. The Company intends to substantially increase its capital investment
in its businesses to approximately $140 million during the 1994-1997 period. In
addition, as opportunities arise, the Issuer may seek to augment its growth
through strategic acquisitions, joint ventures and investments in other
industrial companies where the Issuer believes that it can apply its
professional management techniques to enhance a company's operating performance.
10
The Issuer is a recently formed, wholly-owned subsidiary of Hart Holding.
All of the Issuer's and Reeves' operations are conducted through Reeves
Brothers, Inc. ("Reeves Brothers"), a wholly-owned subsidiary of Reeves. Upon
completion of the Offering, the Issuer intends to cause Reeves and Reeves
Brothers to be merged.
The principal executive offices of the Issuer, the Company and Reeves
Brothers are located at Highway 29 South, P.O. Box 1898, Spartanburg, South
Carolina 29304. Telephone: (803) 576-1210.
USE OF PROCEEDS
The net proceeds to the Issuer from the issuance of the Debentures are
expected to be $ million. The Issuer will use approximately $11.3 million of
such proceeds to redeem all of Reeves' outstanding Subordinated Debentures
(including the payment of redemption premiums of $303,000). The Issuer intends
to use the balance of the proceeds of the Offering, together with funds
generated from Reeves' operations, for general corporate purposes, which may
include funding anticipated capital expenditures (estimated to be approximately
$140 million between 1994 and 1997), repayment of bank debt and investments in
other businesses which may include strategic acquisitions, joint ventures and
investments in other industrial companies where the Issuer believes that it can
apply its professional management techniques to enhance a company's operating
performance. Although it is not currently a party to any acquisition agreement,
the Company regularly reviews acquisition and joint venture opportunities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
CAPITALIZATION
The following table sets forth the cash and cash equivalents, short-term
debt and capitalization of the Issuer as of December 31, 1993 and as adjusted to
give effect to the issuance of the Debentures and the application of the
proceeds therefrom. See "Use of Proceeds." This table should be read in
conjunction with the Consolidated Financial Statements and related notes
thereto.
DECEMBER 31, 1993
---------------------------
ACTUAL AS ADJUSTED
(IN THOUSANDS)
Cash and cash equivalents............................................................ $ 12,015 $ 97,242
----------- --------------
----------- --------------
Short-term debt...................................................................... $ -- $ --
----------- --------------
----------- --------------
Long-term debt: (1)
11% Senior Notes due 2002 of Reeves................................................ $ 121,753 $ 121,753
13 3/4% Subordinated Debentures Due 2001 of Reeves................................. 10,924 --
% Senior Discount Debentures due 2006 of the Issuer.............................. -- 100,000
----------- --------------
Total long-term debt............................................................. 132,677 221,753
Total stockholder's equity........................................................... 21,411 20,991(2)
----------- --------------
Total capitalization................................................................. $ 154,088 $ 242,744
----------- --------------
----------- --------------
<FN>
- ------------------------
(1) The Company has a $35 million line of credit under the Bank Credit
Agreement under which $5.1 million was borrowed and $1.3 million was drawn
under standby letters of credit at March 31, 1994. See Note 7 to the
Consolidated Financial Statements.
(2) The adjustments to stockholder's equity consist of the payment of premiums
of $303 and the write-off of financing costs and debt discounts of $374 net
of an income tax benefit of $257 related to the redemption of the
Subordinated Debentures.
11
REEVES HOLDINGS, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below with respect to the
years ended December 31, 1989, 1990, 1991, 1992 and 1993 and at the end of such
periods has been derived from the consolidated financial statements of the
Company which have been audited by Price Waterhouse, independent accountants.
All of the outstanding capital stock of Reeves will be transferred to the Issuer
prior to the issuance of the Debentures. Since Reeves will be the sole
subsidiary of the Issuer, the consolidated financial data of the Issuer are
those of Reeves. The financial data set forth below is qualified by and should
be read in conjunction with the Consolidated Financial Statements and the
related notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus.
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1989(1) 1990 1991 1992 1993
(IN THOUSANDS, EXCEPT RATIOS)
STATEMENT OF OPERATIONS DATA:
Net sales:
Industrial Coated Fabrics Group................................... $ 114,313 $ 119,749 $ 121,264 $ 126,576 $ 140,735
Apparel Textile Group............................................. 143,035 138,110 148,295 144,528 142,918
--------- --------- --------- --------- ---------
Total net sales..................................................... $ 257,348 $ 257,859 $ 269,559 $ 271,104 $ 283,653
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Operating income:
Industrial Coated Fabrics Group................................... $ 24,715 $ 23,250 $ 23,940 $ 24,732 $ 29,287
Apparel Textile Group............................................. 11,513 10,059 10,121 10,693 11,583
Corporate expenses................................................ (5,278) (7,503) (7,278) (8,318) (10,433)
Goodwill amortization............................................. (1,140) (1,140) (1,157) (1,340) (1,340)
Facility restructuring charges (2)................................ -- -- -- -- (1,003)
--------- --------- --------- --------- ---------
Total operating income.......................................... 29,810 24,666 25,626 25,767 28,094
Interest expense, net (3)........................................... (17,227) (18,199) (20,709) (17,198) (16,236)
--------- --------- --------- --------- ---------
Income from continuing operations before income taxes, extraordinary
item and cumulative effect of a change in accounting principle..... 12,583 6,467 4,917 8,569 11,858
Income taxes........................................................ 6,483 710 373 2,593 4,001
--------- --------- --------- --------- ---------
Income from continuing operations................................... $ 6,100 $ 5,757 $ 4,544 $ 5,976 $ 7,857
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Ratio of earnings to fixed charges (4).............................. 1.6x 1.3x 1.2x 1.5x 1.7x
OTHER DATA:
EBITDA (5).......................................................... $ 36,040 $ 31,303 $ 32,734 $ 33,883 $ 38,125
Capital expenditures (6)............................................ 6,718 7,007 11,015 15,788 16,506
Depreciation........................................................ 5,090 5,497 5,951 6,776 7,204
Amortization........................................................ 2,522 2,367 2,437 2,370 2,068
Ratio of EBITDA to interest expense, net............................ 2.1x 1.7x 1.6x 2.0x 2.4x
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents........................................... $ 11,824 $ 22,013 $ 20,992 $ 4,165 $ 12,015
Total assets........................................................ 246,910 228,256 214,987 192,931 203,025
Total long-term debt................................................ 149,863 148,837 148,960 132,576 132,677
Stockholder's equity................................................ 40,890 13,195 20,477 15,565 21,411
<FN>
- ------------------------------
(1) The year ended December 31, 1989 has been restated to reflect the exclusion
of the discontinued operations of the ARA Automotive Group. See Note 3 to
the Consolidated Financial Statements.
(2) Facility restructuring charges in 1993 relate primarily to the cessation of
weaving activities at the Company's Woodruff, South Carolina plant.
(3) Interest expense, net deducts interest income but includes amortization of
financing costs and debt discounts of $1,382, $1,227, $1,280, $1,031 and
$728 for the years ended December 31, 1989, 1990, 1991, 1992 and 1993,
respectively.
(4) For the purpose of calculating the ratio of earnings to fixed charges,
earnings consist of income from continuing operations before income taxes,
plus fixed charges. Fixed charges consist of interest on all indebtedness,
which includes amortization of financing costs and debt discounts, and
one-third of all rentals, which is considered representative of the
interest portion included therein, after adjustments for amounts related to
discontinued operations.
(5) EBITDA is income from continuing operations before interest expense, net,
income taxes, depreciation, amortization, and, in 1993, facility
restructuring charges of $1,003 and a reserve for costs related to a
discontinued plant included in corporate expenses of $484. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The Issuer has included information concerning EBITDA herein
because it understands that such information is used by certain investors
as one measure of an issuer's historical ability to service debt. EBITDA
should not be considered as an alternative to, or more meaningful than,
earnings from operations or other traditional indications of the Issuer's
operating performance.
(6) Excludes the cost of equipment (leased under operating leases) of $3.0
million and $5.8 million in 1992 and 1993, respectively.
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Issuer is a newly formed entity which is a wholly-owned subsidiary of
Hart Holding. The Issuer's principal assets consist of its ownership of 100% of
the stock of Reeves (approximately 90% on a fully-diluted basis) and, after the
Offering, will include the excess proceeds remaining after the sale of the
Debentures and the application of the proceeds therefrom. See "Use of Proceeds."
The Issuer currently derives all of its operating income from Reeves. It must
ultimately rely upon distributions from Reeves or other investments to generate
funds sufficient to meet the debt service requirements of the Debentures.
Hart Holding acquired Reeves in 1986. Under the direction of Hart Holding's
management, the Company's operations have benefited from new product
developments and a series of productivity improvements, including improved
manufacturing processes and information systems, work force reductions and
technological upgrading of facilities and production methods. Between 1991 and
1993, the Company invested approximately $52.1 million in its businesses,
including the cost of equipment leased under operating leases of $8.8 million,
in order to modernize and expand capacity, reduce its overall cost structure,
increase productivity and enhance its competitive position. Between 1990 and
1993, Reeves' sales and operating income increased from $257.9 million to $283.7
million and from $24.7 million to $29.6 million (before facility restructuring
charges of $1.0 million and other charges of $.5 million in 1993), respectively.
The Company's operating results have improved primarily due to increased sales
and profits related to coated automotive airbag materials and productivity
improvements achieved through increased capital investment. These results have
been achieved despite the continuation of recessionary influences which have
adversely affected sales of Reeves' apparel textile and printing blanket
products in its U.S. and European markets.
RESULTS OF OPERATIONS (1991-1993)
SALES
Consolidated sales increased from $269.6 million in 1991 to $283.7 million
in 1993 (5.2%) due to increased sales of the Industrial Coated Fabrics Group
(16.0%) related primarily to growth in coated automotive airbag materials,
partially offset by a decline in sales of the Apparel Textile Group (3.6%) due
to a shift to basic, lower margin products, price competition, adverse
recessionary influences affecting domestic textile markets and the cessation of
ATG's weaving operations at its Woodruff, South Carolina facility in 1993.
INDUSTRIAL COATED FABRICS GROUP. ICF's sales were $121.3 million, $126.6
million and $140.7 million in 1991, 1992 and 1993, respectively. The 16.0%
increase during the period was due to increased sales of specialty coated
fabrics, primarily coated automotive airbag materials, partially offset by a
decline in offset printing blanket volume. The increase in coated automotive
airbag materials sales was due to an increase in unit volume caused by the
increased use of driver-side airbags primarily in cars manufactured in the
United States. The decline in domestic printing blanket sales was primarily due
to reduced demand as a result of the slowdown in the printing industry. Sales of
Reeves' Italian subsidiary ("Reeves S.p.A.") fluctuated during the period
primarily due to movements in foreign currency exchange rates.
APPAREL TEXTILE GROUP. ATG's sales were $148.3 million, $144.5 million and
$142.9 million in 1991, 1992 and 1993, respectively. The 2.6% sales decline in
1992 as compared to 1991 was evenly distributed between ATG's greige and
finishing divisions. The decline in each division was primarily due to unusually
strong sales in 1991 to the U.S. military as a result of Operation Desert Storm
and, to a lesser extent, the economic recession in the United States in 1992.
ATG's products experienced both a decline in unit volume as well as a shift to
more basic, lower margin products in 1992 as compared to 1991. The 1.1% decline
experienced in 1993 as compared to 1992 resulted from a decrease in greige
13
goods sales as a result of the cessation of weaving operations at the Woodruff,
South Carolina facility due to declining sales to the U.S. military, offset
partially by increased sales of finished goods due to greater demand for higher
quality and more varied product offerings and styles.
OPERATING INCOME
Consolidated operating income was $25.6 million, $25.8 million and $28.1
million in 1991, 1992 and 1993, respectively. The 9.8% increase between 1991 and
1993 resulted primarily from increased profits contributed by ICF's specialty
materials products (predominantly coated automotive airbag materials) and to a
lesser extent, increased profits contributed by ATG (in spite of reduced sales
volume) as a result of cost reductions and productivity gains achieved during
the period related to its capital investment program. The operating income
increase experienced during the period was partially offset by increased
corporate expenses and, in 1993, by facility restructuring charges of $1.0
million. Operating income, as a percentage of sales, increased from 9.5% in 1991
and 1992 to 9.9% in 1993.
INDUSTRIAL COATED FABRICS GROUP. ICF's operating income was $23.9 million,
$24.7 million and $29.3 million in 1991, 1992 and 1993, respectively, and
represented 19.7%, 19.5% and 20.8% of ICF's sales in such years. Operating
income growth in 1992 as compared to 1991 was due primarily to increased sales
of coated automotive airbag materials and, to a lesser extent, the elimination
of certain lower-margin specialty coated fabric products. The 18.6% increase in
operating income in 1993 as compared to 1992 was primarily due to the benefits
of economies of scale realized in connection with increased sales of coated
automotive airbag materials. Operating income from printing blankets declined in
1992 and 1993 reflecting the worldwide slowdown in the printing industry
partially offset by efficiencies experienced by Reeves S.p.A. primarily related
to increased material yields.
APPAREL TEXTILE GROUP. ATG's operating income was $10.1 million, $10.7
million and $11.6 million in 1991, 1992 and 1993, respectively, and represented
6.8%, 7.4% and 8.1% of ATG's sales in such years. The operating income and
margin improvement experienced during the period was achieved in spite of an
overall 3.6% sales decline reflecting the benefits of cost reductions and
productivity improvements realized from ATG's capacity modernization program
initiated at its Chesnee and Bishopville, South Carolina facilities.
CORPORATE EXPENSES. Corporate expenses were $7.3 million, $8.3 million and
$10.4 million in 1991, 1992 and 1993, respectively, and represented 2.7%, 3.1%
and 3.7% of consolidated sales in such years. The increase in corporate expenses
during the period related primarily to increased staffing and compensation
expense necessary to support corporate development activities. In 1993,
corporate expenses included a provision for costs related to the Company's
discontinued Buena Vista, Virginia facility of $.5 million.
GOODWILL AMORTIZATION AND FACILITY RESTRUCTURING CHARGES. The Company
recorded provisions for goodwill amortization of $1.2 million in 1991 and $1.3
million in 1992 and 1993. In 1993, Reeves also recorded facility restructuring
charges of $1.0 million. The one-time charges related primarily to the cessation
of weaving activities at the Company's Woodruff, South Carolina facility due to
declining sales to the U.S. military, the conversion of that facility into a
captive yarn mill and consolidation of weaving capacity at ATG's remaining
facilities.
INTEREST EXPENSE, NET
Interest expense, net consists of consolidated interest expense plus
amortization of financing costs and debt discounts less interest income on
investments. Interest expense, net was $20.7 million, $17.2 million and $16.2
million in 1991, 1992 and 1993, respectively. Included in such net amounts are
provisions for the amortization of financing costs and debt discounts totaling
$1.3 million, $1.0 million and $.7 million in 1991, 1992 and 1993, respectively.
The decline in interest expense, net during the period resulted primarily from
the repayment of bank debt, the refinancing of Reeves' long-term debt in 1992
with proceeds from the sale of the 11% Senior Notes and the repurchase of a
portion of the Subordinated Debentures.
14
INCOME TAXES
The Company's effective income tax rate on income from continuing operations
before income taxes for 1991, 1992 and 1993 was 7.6%, 30.3% and 33.7%,
respectively. The effective income tax rate on income from continuing operations
for 1991 and 1992 differed from the federal statutory rate of 34% primarily due
to the impact of goodwill amortization and Reeves S.p.A.'s lower effective tax
rate. The higher effective income tax rate in 1992 as compared to 1991 was
primarily due to an increase in domestic taxable income which is taxed at a
higher rate than income earned at Reeves S.p.A., a new Italian tax affecting
Reeves S.p.A.'s tax liability and the adoption of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS 109").
During 1993, Reeves established a $.8 million valuation reserve against the
Company's deferred tax assets reflecting estimated utilization of foreign tax
credits. The Company has foreign tax credit carryforwards of $1.9 million of
which $1.7 million expire in 1994 and $.2 million expire at varying dates
through 1997. The valuation reserve was established based on the Company's
estimate of foreign source taxable income expected to be received from Reeves
S.p.A. during the foreign tax credit carryover period.
INCOME FROM CONTINUING OPERATIONS
Income from continuing operations was $4.5 million, $6.0 million and $7.9
million in 1991, 1992 and 1993, respectively. Income from continuing operations
excluded (i) a gain on disposal of discontinued operations, net of taxes,
aggregating $2.8 million in 1991, (ii) an extraordinary loss of $6.1 million in
1992 from the write-off of financing costs and debt discounts related to the
early extinguishment of long-term debt in the Company's 1992 refinancing and
(iii) a gain of $3.2 million in 1992 related to the cumulative effect of
adopting a change in accounting principle (FAS 109).
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL EXPENDITURES
The Company has made substantial capital investments in its businesses
(approximately $83 million) since its acquisition by Hart Holding in 1986.
Commencing in 1991, the Company began significantly increasing its levels of
capital investment in its businesses in order to modernize and expand capacity,
reduce its overall cost structure, increase productivity and enhance its
competitive position. Between 1991 and 1993, the Company invested approximately
$52.1 million in aggregate ($11.0 million in 1991, $15.8 million in 1992, $16.5
million in 1993 and $8.8 million, representing the cost of manufacturing
equipment leased under operating leases, in 1992 and 1993).
Between 1991 and 1993, the Company invested approximately $13 million in
ICF's domestic facilities in order to purchase new production equipment,
increase productivity and expand capacity in its traditional lines of business
as well as to enter the coated automotive airbag materials market. In addition,
ICF spent approximately $12 million in its Reeves S.p.A. facilities to construct
an 80,000 square foot addition and purchase related equipment. Such investment
increased capacity to manufacture offset printing blankets and installed coated
fabrics capacity in Europe to meet anticipated demand for sophisticated
specialty materials. Between 1991 and 1993, the Company invested approximately
$24.2 million in ATG's facilities at Chesnee and Bishopville, South Carolina to
increase productivity and manufacturing flexibility, expand capacity for more
sophisticated fabrics and allow more rapid response to market demand and a
broader product offering. Of such $24.2 million, approximately $8.8 million
represents the cost of manufacturing equipment leased under operating leases.
The Company intends to substantially increase its capital investment in its
existing businesses during the 1994-1997 period. The Company currently
anticipates in excess of $40 million of capital expenditures in 1994 and in
excess of $100 million of aggregate spending between 1995 and 1997. In 1994, the
Company anticipates spending approximately $17 million to construct, furnish and
equip a state-of-the-art plant in Spartanburg, South Carolina to weave
automotive airbag materials, approximately $5 million to complete the capacity
expansion of ATG's Chesnee, South Carolina plant and
15
approximately $16 million to expand the capacity of and improve productivity at
ICF's worldwide coated fabrics and offset printing blanket facilities. Projected
capital expenditures beyond 1994 are expected to complete ATG's modernization
and expansion of its textile capacity, expand ICF's automotive airbag materials
capacity in response to anticipated domestic and international market
requirements and enhance the profitability and competitive position of ICF's
printing blanket and traditional coated fabrics businesses through additional
spending for cost reductions and productivity improvements.
As a result of the nature of the Company's business and its substantial
expenditures for capital improvements over the last several years, current and
future capital expenditure requirements are flexible as to both timing and
amount of capital required. In the event that cash flow proves inadequate to
fund currently projected expenditures, such expenditures can be adjusted so as
not to exceed available funds.
LIQUIDITY
The Company's EBITDA (before facility restructuring and other charges) was
$32.7 million, $33.9 million and $38.1 million in 1991, 1992 and 1993,
respectively. The Company's net cash provided by operating activities increased
from $7.6 million in 1991 to $15.2 million in 1992 and $25.2 million in 1993.
The improvement in net cash provided by operating activities resulted from
higher levels of income from continuing operations and significant improvements
in working capital management.
The Company anticipates that it will be able to meet its projected working
capital, capital expenditure and debt service requirements through internally
generated funds, borrowings available under its existing $35 million Bank Credit
Agreement and a portion of the net proceeds from the sale of the Debentures.
In August 1992, in conjunction with the refinancing of the Company's bank
and institutional indebtedness, the Company entered into the Bank Credit
Agreement which provides the Company with an aggregate $35 million revolving
line of credit and letter of credit facility. The Bank Credit Agreement expires
on December 31, 1995 and is secured by accounts receivable and inventories. As
of March 31, 1994, the Company had available borrowing capacity (net of $1.3
million of outstanding letters of credit) of $28.6 million under the Bank Credit
Agreement.
IMPACT OF INFLATION
The Company does not believe that its financial results have been materially
impacted by the effects of inflation.
OTHER MATTERS
In February 1992, the Company received approximately $17 million from the
federal government in payment of a tax refund. The refund resulted from the
Company carrying back tax operating losses generated in 1991, primarily related
to the disposal of the ARA Automotive Group, to offset previous years' taxable
income.
In 1992, Reeves adopted FAS 109 effective as of the beginning of 1992. Under
FAS 109, in the year of adoption, previously reported results of operations for
the year are restated to reflect the effects of applying FAS 109, and the
cumulative effect of adoption on prior years' results of operations is shown in
the income statement in the year of change. The cumulative effect of this change
in accounting principle increased net income by $3.2 million in 1992.
16
BUSINESS
GENERAL
The Issuer, through its subsidiary, Reeves, is a diversified industrial
company with operations in two principal business segments, industrial coated
fabrics, conducted through its Industrial Coated Fabrics Group, and apparel
textiles, conducted through its Apparel Textile Group. In 1993, ICF contributed
approximately 49.6% of the Company's net sales and approximately 71.7% of its
operating income, and ATG contributed approximately 50.4% of the Company's net
sales and approximately 28.3% of its operating income (in each case, excluding
corporate expenses, goodwill amortization and facility restructuring charges).
Throughout its businesses, the Company emphasizes specialty products, product
quality, technological innovation and rapid responses to the changing needs of
its customers.
ICF specializes in the coating of various substrate fabrics with a variety
of products such as synthetic rubber, vinyl, neoprene, urethane and other
elastomers, to produce a diverse line of products for industrial applications.
ICF's principal products include: (1) a complete line of printing blankets used
in offset lithography, (2) coated automotive airbag materials, (3) specialty
coated fabrics and (4) coated fabrics used in industrial coverings.
The Company believes that ICF is one of the world's leading producers of
offset printing blankets and that ICF has the leading share of the domestic
market for coated automotive airbag materials. The Company also believes that
ICF is a leading domestic producer of specialty coated fabrics used for a broad
range of industrial applications. ICF's products generally involve significant
amounts of technological expertise and precise production tolerances. The
Company believes that ICF's product development, formulation and production
methods are among the most sophisticated in the coated fabrics industry.
ATG manufactures, processes and sells specialty textile fabrics to apparel
and other manufacturers. Through its Greige Goods Division, ATG processes raw
materials into griege goods (I.E., undyed woven fabrics). Through its Finished
Goods Division, ATG functions as a converter and commission finisher, purchasing
greige goods (from the Griege Goods Division and others) and contracting to have
the goods dyed and finished or dyeing and finishing the goods itself. The dyed
and finished goods are then sold for use in a variety of end-products.
The Company believes that ATG has developed strong positions in niche
markets in the apparel textile industry by offering unique, custom-designed
fabrics to leading apparel and specialty garment manufacturers. ATG emphasizes
"short-run" product orders and targets market segments in which its
manufacturing flexibility, rapid response time, superior service and quality and
the ability to supply exclusive blends are key competitive factors.
The Company's business strategy has focused on the sale of higher-margin
niche products and the establishment of leading positions in its principal
markets. The Company believes that this strategy, combined with its diverse
product and customer base, the development of new products and substantial
capital investment, has helped the Company increase its sales and profitability
in spite of adverse economic conditions in its U.S. and European markets during
1990-1993.
Since 1991, the Company has significantly increased its level of capital
investment in its businesses to modernize and expand capacity, reduce its
overall cost structure, increase productivity and enhance its competitive
position. The Company intends to substantially increase its capital investment
in its businesses to approximately $140 million during the 1994-1997 period. In
addition, as opportunities arise, the Issuer may seek to augment its growth
through strategic acquisitions, joint ventures and investments in other
industrial companies where the Issuer believes that it can apply its
professional management techniques to enhance a company's operating performance.
17
The following table shows the amount of total revenue contributed by product
lines which accounted for 10% or more of the Company's consolidated revenues in
any of the last three fiscal years.
YEAR ENDED DECEMBER 31,
-------------------------------------
1991 1992 1993
(IN THOUSANDS)
Industrial Coated Fabrics Group:
Specialty Materials............................................ $ 55,581 $ 61,684 $ 78,151
Graphic Arts................................................... 65,683 64,892 62,584
----------- ----------- -----------
$ 121,264 $ 126,576 $ 140,735
----------- ----------- -----------
----------- ----------- -----------
Apparel Textile Group:
Finished Goods and Dyeing and Finishing........................ $ 74,893 $ 72,977 $ 77,416
Greige Goods................................................... 73,402 71,551 65,502
----------- ----------- -----------
$ 148,295 $ 144,528 $ 142,918
----------- ----------- -----------
----------- ----------- -----------
INDUSTRIAL COATED FABRICS GROUP
The Industrial Coated Fabrics Group specializes in the coating of various
substrate fabrics with a variety of products, such as synthetic rubber, vinyl,
neoprene, urethane, and other elastomers, to produce a diverse line of products
for industrial applications.
ICF's products comprise four categories: (1) a complete line of printing
blankets used in offset lithography, (2) coated automotive airbag materials, (3)
specialty coated fabrics, including fluid control diaphragm materials, tank
seals, ducting materials and coated fabric materials used for military and
commercial life rafts and vests, aircraft escape slides, flexible fuel tanks and
general aviation products, and (4) coated fabrics used in industrial coverings,
including fabrics coated with rubber and vinyl which are used to make
tarpaulins, loading dock shelters and other industrial products.
ICF's products require significant amounts of technological expertise and
the Company believes that ICF's product development, formulation and production
methods are among the most sophisticated in the coated fabrics industry. Since
1990, ICF has been awarded six patents with respect to polyurethane coatings and
has nine pending patent applications relating to printing blankets, airbag
fabric and specialty coatings. Approximately eight other patent applications are
in process.
ICF generally manufactures specialty coated fabrics according to a
production backlog. ICF's products, other than printing blankets and coated
automotive airbag material, involve relatively short runs and custom
manufacturing. Printing blankets are sold primarily to distributors and dealers.
ICF's other products are sold directly to end users and fabricators by its
direct sales force.
PRINTING BLANKETS
The Company believes that ICF is one of the world's leading producers of
printing blankets used in offset lithography, the predominant printing process
for the commercial, financial, publication and industrial printing markets.
Offset printing blankets are used in the printing process to transfer a
printed image from a metal printing plate onto paper or other printing material.
ICF markets a complete line of conventional, compressible and sticky-back
blankets under the VULCAN-R- name. The Company's line includes the 714-R-, the
first compressible printing blanket, the 2,000-R- PLUS, an advanced general
purpose blanket, the VISION SR-TM-, a premium blanket targeted at the sheet-fed
market, and the MARATHON-R-, a blanket targeted to the high-speed web press
market. Each blanket in the product line is designed for a specific printing
need and ICF sells an appropriate blanket for most types of commercial,
financial, publication and industrial printing applications.
18
The Company believes that ICF's blankets consistently offer high performance
and quality. This performance is due to a number of proprietary features of the
blankets, many of which are the subject of pending patent applications.
Distinctive characteristics of ICF's blankets include unique printing surface
compounds, improved composition and placement of compressible layers, surface
buffing and water and solvent-resistant back plies.
Purchasers of ICF's blankets include commercial, financial and industrial
printers and publishers of newspapers and magazines. ICF's blankets are sold to
over 10,000 U.S. printers and more than 15,000 foreign printers, in 64 countries
worldwide.
ICF has established a network of over 60 distributors and 125 dealers in the
United States, Canada and Latin America to market its printing blankets. In
addition, ICF is represented by a distributor in most of the other countries in
which it does business. The Company's distributors typically purchase rolls of
uncut blankets from ICF and then cut, finish and package the blankets prior to
delivery to dealers or end-users. Internationally, ICF's relationships with
distributors tend to be long-standing and exclusive, with most distributors
dealing only in ICF's printing blankets and ICF selling only to such
distributors in their respective territories. Domestic distributors tend to
carry printing blankets from a number of manufacturers. Dealers generally
purchase finished blankets from distributors for resale. ICF services all of its
customers, and its direct sales force actively markets and promotes ICF's
printing blankets.
AUTOMOTIVE AIRBAG MATERIALS
Reeves believes that ICF has the leading share of the domestic market for
coated automotive airbag materials. ICF is a significant supplier of such
material to TRW, Inc. ("TRW") and the Safety Restraints Division of
Allied-Signal, Inc. ("Allied-Signal"). Allied-Signal supplies Morton
International ("Morton") with airbag components. TRW and Morton are two of four
major domestic manufacturers of airbag systems and, together with Allied-Signal,
supply all of the domestic automobile manufacturers and many of the European and
Japanese automobile manufacturers. The Company believes that TRW and Morton
account for in excess of 50% of the worldwide market for airbag systems.
National Highway Traffic Safety Administration regulations currently mandate
the use of both driver-side and passenger-side airbags for all 1998 model year
passenger cars and 1999 model year light trucks, vans and multipurpose vehicles
("LTVs"). A phase-in schedule establishes that at least 95% of a manufacturer's
passenger cars built on or after September 1, 1996 for sale in the United
States, must be equipped with an airbag at the driver's and the right front
passenger's seating positions. All LTVs built after September 1, 1997, must have
some form of automatic occupant protection, and at least 80% must have either
driver-side or driver-side and passenger-side airbags.
Due to market demand for airbag-equipped vehicles, automobile manufacturers
have been installing airbags (primarily driver-side) more extensively than
required by the foregoing regulations. The Company expects sales of airbag
systems and coated airbag fabric to increase substantially in future years and
believes that ICF is well-positioned to benefit from such growth.
Following the lead of the U.S. automobile manufacturers, European and Asian
automobile manufacturers have begun installation of automobile airbags. No
legislation or regulation presently requires the installation of airbags outside
of the United States market. Reeves S.p.A. has sufficient capacity for
production of coated airbag material if demand develops outside of the United
States for such products.
Company participation in the airbag market to date has been through the use
of coated airbag fabric in driver-side applications where coated airbag fabric
offers certain advantages such as greater thermal insulation to withstand the
rapid inflation of the airbag by means of hot gases and impermeability to
prevent the escape of gases. Side-impact airbags (presently offered on certain
models of Volvo and Mercedes Benz) are expected to use coated airbag fabric.
19
Most passenger-side airbags are currently designed to use uncoated fabrics.
Passenger-side airbags deploy more slowly than driver-side airbags.
Consequently, they can be manufactured at a lower cost using uncoated fabric.
The Company does not presently produce an uncoated airbag fabric. Although there
can be no assurance that it will be able to do so, the Company plans to
participate in the growth of passenger-side applications through an expansion
program capitalizing on its textile expertise and research and development
efforts. As part of this program, the Company is constructing an approximately
100,000 square foot facility in Spartanburg, South Carolina for weaving both
coated and uncoated airbag fabric. The facility is expected to be operational by
the end of 1994.
Through its research and development activities, the Company is continuously
working to develop new proprietary fabric technologies and procedures for the
next generation of driver-side and passenger-side airbags. Airbag fabrics must
meet rigorous specifications, testing and certification requirements and airbag
fabric contracts tend to be awarded several years in advance. These factors may
deter the entry of other manufacturers into this business.
SPECIALTY COATED FABRICS
The Company believes that ICF is a leading domestic producer of specialty
coated fabrics used for a broad range of industrial applications. ICF's
specialty coated fabrics business is largely customer or "job shop" oriented. In
1993, more than 90% of ICF's sales of specialty coated fabrics were derived from
fabrics manufactured to meet particular customers' specifications.
Specialty coated fabrics generally consist of a fabric base, or substrate
layer, and an elastomer coating (I.E., coating consisting of an elastic
substance, such as rubber) which is applied to the fabric base. The Company
believes that ICF's line of elastomer-fabric combinations is the most
comprehensive in the industry, enabling it to design products to satisfy its
customers' needs. Fabric bases used in ICF's specialty coated fabrics include
polyester, nylon, cotton, fiberglass and silk. ICF's elastomers include natural
rubber, nitrile, THIOKOL-R-, NEOPRENE-R-, silicone, HYPALON-R-, VITON-R- and
polyurethane.
ICF sells its specialty coated fabrics under the registered trademark
REEVECOTE-R-. The Company believes that ICF has established a reputation for
quality and product innovation in specialty coated fabrics by virtue of ICF's
technological capability, advanced plant and equipment, research and development
facilities and specialized chemists and engineers.
ICF's specialty coated fabrics are separated into five product lines:
GENERAL PURPOSE GOODS. This product line includes air cells, tank seals,
gaskets, compressor valves, aerosol seals and washers and coated fabrics used by
other manufacturers in the production of insulation materials, soundproofing and
inflatable "lifting bags" used to jack up automobiles or trucks.
GAS METER DIAPHRAGMS. ICF manufactures a line of rubber diaphragm material
for use in gas meters which are the primary mechanisms in gas meters for
controlling gas flow. ICF's products are sold to most of the major manufacturers
of gas meters.
SYNTHETIC DIAPHRAGMS. The Company's synthetic diaphragms are used in
carburetors, controls, meters, compressors, fuel pumps and other applications.
SPECIALTY PRODUCTS. ICF manufactures a large number of miscellaneous
specialty coated products, including v-cups for oil rig drills, expansion joints
and urethane specialty items, such as fuel containers, commercial diaphragms and
desiccant bags.
MILITARY, MARINE AND AEROSPACE PRODUCTS. ICF produces coated fabrics used
in truck and equipment covers, waterproof duffel bags, pneumatic air mattresses,
collapsible tanks for fuel and water storage, temporary shelters, rafts,
inflatable boats, various types of safety devices, pneumatic and electrical
plane de-icers, specialty molded aircraft parts, aerospace fuel cells, aircraft
evacuation slides, helicopter floats, surveillance balloons and miscellaneous
items. A portion of ICF's work in this area is performed as a subcontractor on
United States government contracts.
20
ICF's direct sales force sells primarily to fabricators who use ICF's
specialty coated fabrics in products sold to end-users.
INDUSTRIAL COVERINGS FABRICS
ICF sells coated fabrics to customers that produce a wide variety of
industrial coverings, including truck tarpaulins, trailer covers, cargo covers,
agricultural covers, hangar curtains, industrial curtains, boat covers, athletic
field covers, temporary shelters, semi-bulk containers and specialized flotation
devices used for the containment of oil spills and other environmental
pollutants. ICF's industrial coverings fabrics are produced by the same methods
as its specialty coated fabrics and are sold under the COVERLIGHT-R- registered
trademark.
The industrial coverings fabrics business also includes coated fabric for
loading dock shelters, which are pads or bumpers placed around the exterior of a
loading dock door for weathersealing. ICF sells to manufacturers of loading dock
shelter systems and believes it is the leading supplier of loading dock shelter
material produced with rubber and other special elastomers.
ICF's sales force sells primarily to fabricators of industrial coverings who
in turn sell to end-users. Sales personnel concentrate on the largest producers
of industrial coverings and loading dock shelter systems in the United States.
COMPETITION
ICF's competitive environment varies by product line. For graphic arts
products, the Company's principal competitors are Day International and W.R.
Grace. To a lesser extent, the Company also competes with a number of other
firms, including David M, Kinyo, Zippy, Sumitomo, DYC and Meiji. The specialty
materials product line, except for airbag materials, competes in a number of
highly fragmented market segments where competition varies by product. In the
United States, competition comes from Chemprene, Archer Rubber, Seaman Corp.,
Cooley, Fairprene and selected foreign suppliers. Airbag products compete
against those of Milliken and Highland Industries as well as several other small
manufacturers. Quality, compliance with exacting product specifications,
delivery terms and price are important factors in competing effectively in ICF's
markets.
APPAREL TEXTILE GROUP
The Apparel Textile Group consists of two divisions, Greige Goods and
Finished Goods. ATG concentrates on segments of the market where its
manufacturing flexibility, rapid response time, superior service, quality and
the ability to supply customers with exclusive blends are key competitive
factors.
ATG's Greige Goods Division processes raw materials into undyed woven
fabrics known as greige goods. The Greige Goods Division manufactures greige
goods of synthetic fibers, wool, silk, flax and various combinations of these
fibers. Products of the Greige Goods Division are primarily utilized for apparel
and the Greige Good Division's most significant customers are outside converters
and, to a lesser extent, ATG's Finished Goods Division.
The Company believes that the Greige Goods Division is distinguished from
its competitors by its ability to efficiently manufacture small yardage runs,
its rapid response time, the high quality of its products and its ability to
produce samples rapidly on demand. ATG's greige goods plants engage principally
in short production runs producing specialty fabrics requiring a variety of
blends and textures. Fabrics are produced by the Greige Goods Division according
to an order backlog and are typically "sold ahead" three to four months in
advance. Most of the Greige Goods Division's sales are sold under firm
contracts. In comparison to manufacturers of large volume commodity fabrics such
as print cloth, corduroy and denim, the Greige Goods Division has been less
adversely affected in recent years by foreign imports because of its position as
a small quantity, specialty fabric producer.
ATG's Finished Goods Division functions as a converter and commission
finisher. The Finished Goods Division purchases greige goods from the Greige
Goods Division and other greige suppliers and either contracts to have such
goods converted into finished fabrics of varying weights, colors, designs
21
and finishes or converts them itself. The dyed and finished fabrics are used in
various end-products and sold primarily to apparel manufacturers in the women's
wear, rainwear/outerwear, men's/boys' wear and career apparel markets.
The Company believes that ATG's Finished Goods Division is one of the most
flexible operations of its kind in the United States due to the variety of
products it can finish and the broad range of dyeing processes and finishes it
is able to offer. The Finished Goods Division focuses on high value-added
fabrics with unique colors and specialty finishes. The Finished Goods Division's
fabrics are currently being used by a number of the leading men's and women's
sportswear manufacturers and its dyeing and finishing services are sold to major
domestic converters.
A wide variety of fabrics can be woven at the Greige Goods Division's two
weaving plants. The dyeing and finishing plant of the Finished Goods Division is
equipped to do a variety of piece dyeing, as well as to provide specialty
finishings. This manufacturing flexibility increases ATG's ability to respond
rapidly to changes in market demand.
Substantially all of the Apparel Textile Group's products are sold directly
to customers through its own sales force. The balance is sold through brokers
and agents.
PRINCIPAL CUSTOMERS
ATG markets its fabrics to a wide range of customers including H.I.S., the
Thompson-R- men's pants division of Salant Corporation, Eddie Haggar Ltd. and
V.F. Corporation. ATG also markets its fabrics to major retailers, including
J.C. Penney, which specify the Company's fabrics. ATG is a direct supplier of
rainwear fabric to Londontown Corporation, the maker of London Fog-R-, and also
markets its fabrics to specialty catalogue houses such as Patagonia, L.L. Bean
and Eddie Bauer.
COMPETITION
The textile industry is highly competitive. While there are a number of
integrated textile companies, many larger than ATG, no single company dominates
the United States market. Competition from imported fabrics and garments
continues to be a significant factor adversely affecting much of the domestic
textile industry. Because of the nature of ATG's markets, the Company believes
it is less susceptible to foreign imports than the industry as a whole and is
more insulated from the risk of foreign imports than high-volume commodity
producers. The most important factors in competing effectively in ATG's product
markets are service, price, quality, styling, texture, pattern design and color.
ATG seeks to maintain its market position in the industry through a high degree
of manufacturing flexibility, product quality and competitive pricing policies.
The Greige Goods Division distinguishes itself from its competitors by its
ability to manufacture runs as small as 40,000 square yards, its rapid response
time and the high quality of the products manufactured. The Greige Goods
Division has extensive proprietary technical knowledge in the structure of its
spinning and weaving operations, which the Company believes represents a
significant competitive advantage.
The Finished Goods Division is capable of finishing a wide variety of
products and offers a broad range of dyeing processes and finishes. This
manufacturing flexibility increases the Finished Goods Division's ability to
respond rapidly to changes in market demand, which the Company believes enhances
its competitive position.
RAW MATERIALS, MANUFACTURERS AND SUPPLIERS
The principal raw materials used by ICF include polymeric resins, natural
and synthetic elastomers, organic and inorganic pigments, aromatic and aliphatic
solvents, polyurethanes, polyaramids and calendered fabrics. ATG principally
utilizes wool, flax, specialty yarn, man-made fibers, including acrylics,
polyesters, acetates, rayon and nylon and a wide variety of dyes and chemicals.
Such raw materials are largely purchased in domestic markets and are available
from a variety of sources. The Company is not presently experiencing any
difficulty in obtaining raw materials. However, the Company has from time to
time experienced difficulty in obtaining the substrate fabric that it uses to
22
produce coated automotive airbag materials. The Company anticipates that the
completion of its new weaving facility in Spartanburg, South Carolina may reduce
the risk of such supply shortages. Airbag fabric produced by the new facility
will be subject to rigorous testing and certification before it will be
available for production.
FOREIGN OPERATIONS
All of Reeves' foreign operations are conducted through Reeves S.p.A., a
wholly-owned subsidiary located in Lodi Vecchio, Italy. Reeves S.p.A. forms a
part of Reeves' ICF Group. The financial data of Reeves S.p.A. is as follows :
1991 1992 1993
(IN THOUSANDS)
Sales................................................ $ 35,437 $ 38,444 $ 36,932
Net income........................................... 6,808 9,165 7,446
Assets............................................... 33,011 31,608 33,092
The financial results of Reeves S.p.A. do not include any allocations of
corporate expenses or consolidated interest expense.
BACKLOG
The following is a comparison of open order backlogs at December 31 of each
year presented:
1991 1992 1993
(IN THOUSANDS)
Industrial Coated Fabrics Group...................... $ 16,942 $ 16,824 $ 17,072
Apparel Textile Group................................ 47,129 32,994 39,390
--------- --------- ---------
Totals........................................... $ 64,071 $ 49,818 $ 56,462
--------- --------- ---------
--------- --------- ---------
The increase in ICF's backlog from 1992 to 1993 is due to growth in the
coated automotive airbag materials business. The decrease in the Apparel Textile
Group backlog from 1991 to 1992 was the result of a decrease in government
business and reduced orders due to market uncertainty. The increase in the ATG
backlog from 1992 to 1993 is due to the addition of several new customers in the
Finished Goods Division.
The December 31, 1993 backlogs for the Industrial Coated Fabrics Group and
the Apparel Textile Group are reasonably expected to be filled in 1994. Under
certain circumstances, orders may be canceled at the Company's discretion prior
to the commencement of manufacturing. Any significant decrease in backlog
resulting from lost customers could adversely affect future operations if these
customers are not replaced in a timely manner.
ENVIRONMENTAL MATTERS
The Company is subject to a number of federal, state and local laws and
regulations pertaining to air emissions, water discharges, waste handling and
disposal, workplace exposure and release of chemicals. During 1993, expenditures
in connection with the Company's compliance with federal, state and local
environmental laws and regulations did not have a material adverse effect on its
earnings, capital expenditures or competitive position. Although the Company
cannot predict what laws, regulations and policies may be adopted in the future,
based on current regulatory standards, the Company does not expect such
expenditures to have a material adverse effect on its operations.
EMPLOYEES
On February 1, 1994, the Company employed approximately 2,289 people, of
whom 1,855 were in production, 183 were in general and administrative functions,
52 were in sales and 199 were at Reeves S.p.A. At such date, ICF had
approximately 639 employees and ATG had approximately 1,398 employees, with the
remainder of the Company's employees in general and administrative positions.
23
PROPERTIES
The Company's principal facilities, their primary functions and their
locations are as follows:
SIZE (SQ. FT.)
----------------------
LOCATION FUNCTION OWNED LEASED
MANUFACTURING FACILITIES
Industrial Coated Fabrics
Group
Rutherfordton, NC Specialty Materials............. 215,000
Spartanburg, SC Graphic Arts.................... 308,364
Lodi Vecchio, Italy Graphic Arts and Specialty
Materials...................... 160,000 4,900
--------- -----------
Subtotal........................ 683,364 4,900
--------- -----------
Apparel Textile Group
Woodruff, SC Greige Goods.................... 368,587
Chesnee, SC Greige Goods.................... 303,100
Bessemer City, NC Greige Goods.................... 218,992
Bishopville, SC Finished Goods.................. 226,684 2,400
Bishopville, SC Warehouse....................... 72,650
--------- -----------
Subtotal........................ 1,117,363 75,050
--------- -----------
Total Manufacturing Facilities.............................. 1,800,727 79,950
--------- -----------
NON-MANUFACTURING FACILITIES
New York, NY Administrative and Sales........ 12,000
Spartanburg, SC Administrative and Sales........ 43,000
Darien, CT Administrative.................. 6,800
--------- -----------
Total Non-Manufacturing Facilities.......................... 43,000 18,800
--------- -----------
TOTAL........................................................... 1,843,727 98,750
--------- -----------
--------- -----------
The Company is a party to leases with terms ranging from month-to-month to
fifteen years, with rental expense aggregating $1.5 million for the twelve
months ended December 31, 1993. The Company believes that all of its facilities
are suitable and adequate for the current conduct of its operations.
LEGAL PROCEEDINGS
The Issuer believes that there are no legal proceedings, other than ordinary
routine litigation incidental to the business of the Company, to which the
Issuer or any of its subsidiaries is a party. Management is of the opinion that
the ultimate outcome of existing legal proceedings would not have a material
adverse effect on the Issuer's consolidated financial position or results of
operations.
24
MANAGEMENT
DIRECTOR AND EXECUTIVE OFFICERS
The sole director of the Issuer, Reeves and Reeves Brothers is James W.
Hart. The following table sets forth the name, age, positions with the Issuer,
Reeves and Reeves Brothers and principal business experience during the past
five years of each executive officer of the Issuer, Reeves and Reeves Brothers.
Any executive officer, unless otherwise stated, holds the identical position or
positions in the Issuer, Reeves and Reeves Brothers.
NAME AGE POSITION
Richard W. Ball 47 Treasurer
Anthony L. Cartagine 59 Vice President of Reeves and Reeves Brothers; President --
Apparel Textile Group
David L. Dephtereos 39 Vice President and General Counsel
Jennifer H. Fray 29 Secretary and Assistant General Counsel
Douglas B. Hart 31 Senior Vice President -- Operations
James W. Hart 60 Chairman of the Board
James W. Hart, Jr. 40 President, Chief Executive Officer and Chief Operating
Officer
Steven W. Hart 37 Executive Vice President and Chief Financial Officer
V. William Lenoci 58 Vice President of Reeves and Reeves Brothers; President and
Chief Executive Officer -- Industrial Coated Fabrics Group
Joseph P. O'Brien 53 Vice President -- Finance
Patrick M. Walsh 53 Vice President -- Administration of Reeves and Reeves
Brothers
Mr. Ball joined Reeves and Reeves Brothers in January 1992 as Treasurer. Mr.
Ball became Treasurer of the Issuer in March 1994. He served as Treasurer of
Hart Holding from June 1992 to December 1992. From 1990 through 1991, Mr. Ball
was Corporate Treasurer for Turner Corporation, a world-wide construction and
development company. From 1988 through 1989, Mr. Ball was Vice President and
Chief Financial Officer of Nuclear Energy Services, Inc., an engineering
services subsidiary of Penn Central Corporation.
Mr. Cartagine has been with Reeves Brothers since 1964. He was named
President-Greige Goods Division of the Apparel Textile Group in 1984 and
President of the Apparel Textile Group in 1986. He was named Vice President of
Reeves and Reeves Brothers in 1988.
Mr. Dephtereos joined Hart Holding, Reeves and Reeves Brothers in May 1991
as Vice President, General Counsel and Secretary. He became Vice President and
General Counsel of the Issuer in March 1994. He served as Vice President and
Secretary of Hart Holding from 1991 to 1992 and Secretary of Reeves and Reeves
Brothers from 1991 until 1992. From 1985 through May 1991, Mr. Dephtereos was
Vice President, General Counsel and Secretary of Air Express International
Corporation, a publicly-held, international transportation company.
Ms. Fray joined Hart Holding, Reeves and Reeves Brothers in September 1992
as Assistant General Counsel. In 1992, she was named Secretary of Hart Holding,
Reeves and Reeves Brothers. She became Secretary and Assistant General Counsel
of the Issuer in March 1994. From 1990 to 1992, Ms. Fray was engaged in studies
leading to a Master of Laws Degree in Taxation from Boston University, from 1990
to 1991 she was employed as a Tax Associate at Coopers & Lybrand, certified
public accountants, in Boston, Massachusetts and from 1987 to 1990 she was
engaged in studies leading to a Juris Doctor Degree from Suffolk University.
Mr. Douglas B. Hart served as a Director of Reeves and Reeves Brothers from
1991 to 1992. He was named Vice President -- Real Estate in 1989, Senior Vice
President in 1991 and Senior Vice
25
President -- Operations in 1992 of Reeves and Reeves Brothers. He became Senior
Vice President of the Issuer in March 1994. Mr. Hart served as a Director of
Hart Holding from 1991 to 1992, as Vice President -- Real Estate of Hart Holding
from 1989 to 1991 and as Senior Vice President of Hart Holding from 1991 to
1992. In 1992, Mr. Hart became President, Chief Executive Officer and Chief
Operating Officer of Hart Investment Properties Corporation, a wholly-owned
diversified corporate investment entity of Hart Holding, with current holdings
in real estate. Prior to 1989, Mr. Hart was an Assistant Vice President at
Sentinel Real Estate Corporation in New York, an owner/developer of malls,
shopping centers, office buildings and single family residential communities
throughout the United States.
Mr. James W. Hart has been a Director of Reeves and Reeves Brothers since
1986 and became Chairman of the Board in 1987. He was named Chairman of the
Board of the Issuer in March 1994. Mr. Hart served as President and Chief
Executive Officer of Reeves and Reeves Brothers from 1988 until 1992. Mr. Hart
has been a Director, President, Chief Executive Officer and Chairman of the
Board of Hart Holding since 1975 and became Chief Operating Officer and Chief
Financial Officer of Hart Holding in 1992.
Mr. James W. Hart, Jr. served as a Director of Reeves and Reeves Brothers
from 1986 to 1992. Mr. Hart became Vice President of Reeves and Reeves Brothers
in 1987 and was named Senior Vice President -- Operations in 1988 and Executive
Vice President and Chief Operating Officer in 1989. In 1992, he was named
President, Chief Executive Officer and Chief Operating Officer of Reeves and
Reeves Brothers. He became President, Chief Executive Officer and Chief
Operating Officer of the Issuer in March 1994. Mr. Hart served as a Director of
Hart Holding from 1984 to 1992. He served as Vice President of Hart Holding from
1984 to 1992, Senior Vice President -- Operations of Hart Holding from 1988 to
1992 and as Executive Vice President and Chief Operating Officer of Hart Holding
from 1989 to 1992.
Mr. Steven W. Hart served as a Director of Reeves and Reeves Brothers from
1986 to 1992. He became Vice President of Reeves and Reeves Brothers in 1987 and
was named Senior Vice President and Chief Financial Officer in 1988 and
Executive Vice President and Chief Financial Officer in 1989. He became
Executive Vice President and Chief Financial Officer of the Issuer in March
1994. Mr. Hart served as a Director, Treasurer and Chief Financial Officer of
Hart Holding from 1984 to 1992, Vice President of Hart Holding from 1984 to
1988, Senior Vice President of Hart Holding from 1988 to 1989 and Executive Vice
President of Hart Holding from 1989 to 1992. Mr. Hart joined Hart Holding in
1983 as Vice President -- Strategic Planning.
Mr. Lenoci has been with Reeves since 1967. He was named President --
Industrial Coated Fabrics Group in 1986 and Vice President of Reeves and Reeves
Brothers in 1988. In 1990 he became Chief Executive Officer of the Industrial
Coated Fabrics Group.
Mr. O'Brien joined Reeves and Reeves Brothers in 1993 as Vice President --
Finance. He became Vice President -- Finance of the Issuer in March 1994. From
1980 to 1993, Mr. O'Brien served as Vice President -- Finance of Howmet
Corporation, an integrated manufacturer of components for gas turbine jet
engines and aircraft structural parts.
Mr. Walsh has been with Reeves since 1987, as Director of Human Resources.
In 1990, he was elected Vice President -- Administration of Reeves Brothers and,
in 1993, Vice President -- Administration of Reeves.
Mr. James W. Hart is the father of Ms. Fray and Messrs. Douglas B. Hart,
James W. Hart, Jr. and Steven W. Hart.
Directors of the Issuer, Reeves and Reeves Brothers are elected at each
annual meeting of the stockholders. The term of office of each director is from
the time of his election and qualification until the next annual meeting of
stockholders and until his successor shall have been duly elected and qualified,
unless such director shall have earlier been removed. Executive officers serve
at the discretion of the Boards of Directors of the Issuer, Reeves and Reeves
Brothers.
26
EXECUTIVE COMPENSATION
The Issuer has not heretofore paid or accrued any compensation for any of
its officers, directors or other employees. The following table sets forth
information concerning the cash compensation and cash equivalent remuneration
paid or accrued by the Company for the years ended December 31, 1993, 1992 and
1991 for those persons who were at December 31, 1993 (i) the chief executive
officer and (ii) the other four most highly compensated executive officers of
the Company.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION ALL
----------------------------------- OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION
Anthony L. Cartagine 1993 $ 256,357 $ 92,000 --
Vice President; President -- 1992 235,144 100,000 --
Apparel Textile Group 1991 205,430 112,500 --
Douglas B. Hart 1993 204,500 125,000 --
Senior Vice President -- 1992 -- 100,000 --
Operations 1991 -- 70,000 --
James W. Hart, Jr. 1993 398,750 380,000 --
President, Chief Executive 1992 365,000 200,000 --
Officer and Chief 1991 355,000 185,000 --
Operating Officer
Steven W. Hart 1993 398,750 230,000 --
Executive Vice President 1992 365,000 200,000 31,819(2)
and Chief Financial Officer 1991 355,000 185,000 --
V. William Lenoci 1993 293,750 142,000 --
Vice President; President and 1992 240,249 105,000 --
Chief Executive Officer -- 1991 204,079 87,500 19,272(3)
Industrial Coated Fabrics Group
<FN>
- ------------------------
(1) Annual bonus amounts are earned and accrued under the Management Incentive
Bonus Plan during the years indicated and paid subsequent to the end of
each year except for a portion of those amounts awarded and paid to the
executive officers during 1993. Also, a portion of those amounts awarded
during 1992 for James W. Hart, Jr., Steven W. Hart and Anthony L.
Cartagine were paid in 1992.
(2) Represents reimbursement of certain moving expenses.
(3) Represents the payment of certain life insurance premiums.
EMPLOYMENT CONTRACTS
Reeves Brothers entered into employment agreements with Messrs. Cartagine
and Lenoci during 1991 that provide for base compensation and participation in
the Management Incentive Bonus Plan, plus certain other benefits.
DIRECTORS' COMPENSATION
The Issuer, Reeves and Reeves Brothers pay no remuneration to directors for
serving as such.
27
PENSION PLANS
ANNUAL PENSION AT AGE 65 AFTER YEARS OF SERVICE
REMUNERATION 15 20 25 30 35
$125,000 $21,357 $30,732 $40,107 $49,482 $58,857
150,000 26,982 38,232 49,482 60,732 71,982
175,000 32,607 45,732 58,857 71,982 85,107
200,000 38,232 53,232 68,232 83,232 98,232
225,000 43,857 60,732 77,607 94,482 111,357
250,000 49,482 68,232 86,982 105,732 118,800
300,000 60,732 83,232 105,732 118,800 118,800
350,000 71,982 98,232 118,800 118,800 118,800
<FN>
- ------------------------
Notes to Pension Plan Table
(A)(1) Compensation covered by the tax-qualified salaried employees pension
plan each year is generally all compensation reported on a participant's Form
W-2. The plan's formula is based on average compensation for the participant's
highest five consecutive calendar years. However, except in the cases of Messrs.
Cartagine and Lenoci, compensation for any year is limited by the compensation
cap for that year under section 401(a)(17) of the Internal Revenue Code. For
1993, that limit is $235,840. A supplemental plan provides Messrs. Cartagine and
Lenoci the benefits limited under the tax-qualified plan.
(2) Starting in 1994, the maximum annual compensation that may be taken into
account is $150,000. Participants in the pension plan prior to 1994 may have
accrued higher benefits than those shown in the table to the extent their
average highest compensation exceeded $150,000. Those higher accrued benefits
are preserved by law.
(3) For 1994, the maximum benefit under the pension plan is $118,800.
(B) Years of service for named executive officers:
OFFICER YEARS OF SERVICE
Anthony L. Cartagine 30.02
Douglas B. Hart 4.42
James W. Hart, Jr. 9.68
Steven W. Hart 10.59
V. William Lenoci 26.63
(C) Benefits are computed on the basis of a straight life annuity and are reduced by 50%
of the participant's primary Social Security benefit.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Issuer's, Reeves' and Reeves Brothers' Boards of Directors do not have
compensation committees, and all final compensation decisions are made by the
respective Boards of Directors. The Reeves Brothers Salary Compensation
Committee, which is comprised of Douglas B. Hart, James W. Hart, Jr., Steven W.
Hart and Patrick M. Walsh, all of whom are officers of Reeves Brothers, advises
Reeves Brothers' Board with respect to compensation. See "Certain Transactions"
regarding transactions involving Douglas B. Hart, James W. Hart (as sole
director and principal stockholder of Hart Holding) and Steven W. Hart.
OWNERSHIP OF COMMON STOCK OF THE ISSUER AND REEVES
The Issuer is a wholly-owned subsidiary of Hart Holding. The following table
sets forth certain information at March 31, 1994 with respect to ownership of
Reeves and Hart Holding common stock by each person who is known to own
beneficially, or who may be deemed to own beneficially, more than
28
5% of the outstanding shares of common stock, directors, the chief executive
officer, the other four most highly compensated executive officers and all
directors and executive officers as a group. Unless otherwise stated, common
stock is directly owned.
REEVES
-----------------------------
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ---------------------------------------------------------------------------------- ------------------ ---------
Hart Holding Company Incorporated................................................. 35,021,666 100%
1120 Boston Post Road
Darien, CT 06820
Anthony L. Cartagine (1).......................................................... 0 0.0%
104 West 40th Street
New York, NY 10018
Douglas B. Hart................................................................... 0 0.0%
1120 Boston Post Road
Darien, CT 06820
James W. Hart (2)................................................................. 36,421,666 100%
1120 Boston Post Road
Darien, CT 06820
James W. Hart, Jr. (3)............................................................ 0 0.0%
1120 Boston Post Road
Darien, CT 06820
Steven W. Hart (4)................................................................ 0 0.0%
1120 Boston Post Road
Darien, CT 06820
V. William Lenoci (5)............................................................. 0 0.0%
Highway 29 South
Spartanburg, SC 29304
Directors and Executive Officers as a Group (6)................................... 36,421,666 100%
<FN>
- ------------------------
(1) As of March 31, 1994, Anthony L. Cartagine is the indirect beneficial
owner of 1,000 shares of Hart Holding's common stock, representing less
than 1% of such outstanding common stock.
(2) On January 26, 1994, James W. Hart was granted an option to purchase up to
3,800,000 shares of common stock of Reeves, which has an expiration date
of December 31, 2023. The option is exercisable at $.56 per share for
1,400,000 shares (exercisable immediately), $.75 per share for 1,400,000
shares (exercisable one year from grant date) and $1.00 per share for
1,000,000 shares (exercisable two years from grant date). Mr. James W.
Hart and Hart Holding may be deemed to be controlling persons of the
Issuer.
As of March 31, 1994, James W. Hart is the beneficial owner of 13,623,507
shares of Hart Holding common stock (94.6%), of which (i) 12,123,507
shares are owned directly, and (ii) 1,500,000 shares are subject to a
presently exercisable option (the "Hart Holding Option") issued in
November 1993. The Hart Holding Option expires on December 31, 2028 and
provides for the issuance of up to 4,000,000 shares upon exercise of
options as follows: 1,500,000 immediately exercisable at $2.25 per share;
1,500,000 exercisable one year from grant date at $2.50 per share; and
1,000,000 exercisable two years from grant date at $2.75 per share.
(3) As of March 31, 1994, James W. Hart, Jr. is the beneficial owner of 60,300
shares of Hart Holding common stock (representing less than 1% of such
outstanding common stock), of which 300 shares are owned directly and the
balance is subject to a presently exercisable option.
29
(4) As of March 31, 1994, Steven W. Hart is the beneficial owner of 240,300
shares of Hart Holding common stock (1.9%), of which 180,300 shares are
owned directly and the balance is subject to a presently exercisable
option.
(5) As of March 31, 1994, V. William Lenoci is the beneficial owner of 5,000
shares of Hart Holding common stock, representing less than 1% of such
outstanding common stock.
(6) As of March 31, 1994, the directors and executive officers of Hart Holding
as a group beneficially own an aggregate of 13,930,107 shares of Hart
Holding common stock (96%).
CERTAIN TRANSACTIONS
In connection with the acquisition of the Company, Hart Holding, the
Company, Reeves Brothers and three subsidiaries of Reeves Brothers entered into
a Tax Allocation Agreement dated as of May 1, 1986, which has been amended and
restated from time to time including to add the Issuer as a party (the "Tax
Agreement"). The Tax Agreement provides that Hart Holding and its subsidiaries
will file consolidated federal income tax returns as long as they remain members
of the same affiliated group. The Issuer also may be included in certain state
and local tax returns of Hart Holding. Pursuant to the Tax Agreement, the
Company and its subsidiaries generally will pay to the Issuer amounts equal to
the taxes that the Company and its subsidiaries would otherwise have to pay if
they were to file separate federal, state or local income tax returns but for
the use of tax deductible items of the Issuer.
Hart Holding charges a management fee and allocates portions of its
corporate expenses to Reeves on a monthly basis. The management fee and expense
allocation aggregated $1.2 million, $1.9 million and $1.8 million for the years
ended December 31, 1991, 1992 and 1993, respectively.
Effective December 31, 1991, Hart Holding exchanged its 1,000 shares of
Reeves' Series I Preferred Stock, par value $1.00 per share, valued in the
aggregate at $9,410,000, for 18,820,000 shares of Reeves' common stock, valued
at $.50 per share. This transaction resulted in Hart Holding's percentage
ownership in Reeves' common stock increasing from 86.7% to 93.5%.
During 1992, Reeves purchased from three officers of Reeves, Ms. Fray,
Douglas B. Hart, and Steven W. Hart, their residences for $215,000, $225,000 and
$575,000, respectively. In each case, the price paid was less than a current
appraisal on such property or, in the case of Ms. Fray, less than the cost of
such property in 1990 plus the cost of improvements. The Board of Directors
determined at the time that the price for each residence was not greater than
the fair market value for such property. During 1993, two of the residences were
sold by the Company and the remaining residence which has a carrying value of
$244,000 at December 31, 1993, is presently being marketed for sale.
Effective October 25, 1993, HHCI, Inc., a newly formed, wholly-owned
subsidiary of Hart Holding, merged with and into Reeves with Reeves surviving
the merger. HHCI, Inc. was formed as a shell corporation (no operations) with a
$300,000 capital contribution from Hart Holding. As a result of this merger,
Hart Holding obtained ownership of 100% of the outstanding shares of common
stock of Reeves and the other stockholders of Reeves received $.56 in cash for
each share held by such stockholders.
In November 1993, James W. Hart was granted the Hart Holding Option. The
Hart Holding Option grants Mr. Hart the right to purchase up to 4,000,000 shares
of Hart Holding's common stock and is exercisable (i) immediately, with respect
to 1,500,000 shares at an exercise price of $2.25 per share; (ii) from and after
November 1994, with respect to 1,500,000 shares at an exercise price of $2.50
per share; and (iii) from and after November 1995, with respect to 1,000,000
shares at an exercise price of $2.75 per share. The Hart Holding Option expires
on December 31, 2028. The Hart Holding Option was granted in consideration of
cancellation of outstanding options entitling Mr. Hart to purchase an aggregate
of 3,050,000 shares of common stock at an exercise price of $.375 per share for
2,000,000 shares exercisable through June 13, 2000 and an exercise price of
$1.88 per share for 1,050,000 shares exercisable through December 31, 2002. The
Hart Holding Option was the only stock option granted by Hart Holding during
1993. Hart Holding does not believe that it is possible to determine a
meaningful market price of its common stock as of the date of grant of the Hart
Holding Option or any subsequent date.
30
DESCRIPTION OF DEBENTURES
The Debentures are to be issued under an indenture dated as of , 1994
(the "Indenture") between the Issuer and The First National Bank of Boston, as
Trustee (the "Trustee"), a copy of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The following summary
of certain provisions of the Indenture does not purport to be complete and is
qualified in its entirety by reference to the Indenture. Wherever particular
sections or defined terms of the Indenture are referred to, such sections or
defined terms are incorporated herein by reference. Capitalized terms not
otherwise defined below or elsewhere in this Prospectus have the meanings given
to them in the Indenture.
GENERAL
The Debentures will represent senior unsecured obligations of the Issuer and
rank PARI PASSU with all senior debt obligations which the Issuer may incur and
senior to all subordinated debt obligations which the Issuer may incur and be
limited to $ in aggregate principal amount at maturity ($100 million
initially, fully accreting to face amount on , 1999).
All of the Issuer's assets are held through its subsidiaries, and the
Debentures will be effectively subordinated to all rights of third party
creditors of the Issuer's subsidiaries. As of December 31, 1993, after giving
effect to the Offering and the application of the proceeds therefrom as
described in "Use of Proceeds", the amount of obligations of the Issuer's
subsidiaries, excluding intercompany obligations, would have been approximately
$170.7 million. The Indenture will contain certain limitations on the ability of
the Issuer and its Restricted Subsidiaries to incur additional Indebtedness.
The Debentures will mature on , 2006. Although for federal income tax
purposes a significant amount of original issue discount, taxable as ordinary
income, will be recognized by a holder of Debentures, no cash interest will be
payable with respect to the Debentures prior to , 1999. See "Certain
Federal Income Tax Considerations Concerning The Debentures." Commencing
, 1999, interest on the Debentures will be payable in cash semi-annually,
in arrears, on each and (each an "Interest Payment Date") to the
persons in whose names the Debentures are registered at the close of business on
the preceding and . Interest will accrue from the most recent
Interest Payment Date to which interest has been paid or duly provided for or,
if no interest has been paid or duly provided for, from , 1999. Interest
will be computed on the basis of a 360-day year of twelve 30-day months. The
Debentures will bear interest until maturity at the rate set forth on the cover
page of the Prospectus.
The Debentures are issuable only in registered form, without coupons.
Principal and premium, if any, and interest on each Debenture will be payable,
and the Debentures may be presented for transfer or exchange, at the office or
agency of the Issuer maintained for such purpose. At the option of the Issuer,
payment of interest may be made by check mailed to registered holders of the
Debentures at the addresses set forth on the registry books maintained by the
Trustee, who will initially act as registrar for the Debentures. No service
charge will be made for any exchange or registration of transfer of Debentures,
but the Issuer may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Unless otherwise designated
by the Issuer, the Issuer's office or agency will be the Corporate Trust Office
of the Trustee.
31
OPTIONAL REDEMPTION
The Issuer, at its option, may redeem the Debentures as a whole, or from
time to time in part, on or after , 1999 at the redemption prices
(expressed as a percentage of the principal amount thereof) set forth below (in
each case together with accrued and unpaid interest to the redemption date):
IF REDEEMED DURING THE 12-MONTH PERIOD
BEGINNING , REDEMPTION PRICE
1999........................................................... %
2000........................................................... %
2001........................................................... %
2002 and thereafter............................................ 100.000%
Notwithstanding the foregoing, during the first 36 months after the
completion of the Offering, the Issuer may redeem up to one-half of the
aggregate face amount of the Debentures with the net proceeds of public sales of
common stock of the Issuer (or of Hart Holding, to the extent the net proceeds
thereof are contributed as a capital contribution in exchange for common or
preferred stock of the Issuer) at a redemption price of % of the Accreted
Value thereof; PROVIDED that after giving effect thereto at least one-half of
the aggregate face amount of Debentures initially issued remains outstanding.
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 of Debentures to be redeemed at the last address for such holder
then shown on the registry books. On and after the redemption date, interest
will cease to accrue on the Debentures or part thereof called for redemption. In
case of a partial redemption, selection of the Debentures or portions thereof
for redemption shall be made by the Trustee by lot, pro rata or in such manner
as it shall deem appropriate and fair.
CERTAIN COVENANTS
The Indenture contains, among other things, the following covenants:
CHANGE OF CONTROL
Upon the occurrence of a Change of Control (as defined) (the "Change of
Control Date"), each holder of a Debenture will have the right to require the
repurchase of such holder's Debentures pursuant to the offer described in the
next paragraph (the "Change of Control Offer") at a purchase price equal to 101%
of the Accreted Value thereof, plus, if occurring after , 1999,
accrued and unpaid interest, if any, to the date of purchase.
Within 30 days following any Change of Control, the Issuer will mail a
notice to each Debentureholder, with a copy to the Trustee, stating, among other
things: (1) that a Change of Control has occurred and that such holder has the
right to require the Issuer to repurchase such holder's Debentures at a
repurchase price in cash equal to 101% of the Accreted Value thereof, plus, if
occurring after , 1999, accrued and unpaid interest, if any, to the
date of repurchase; (2) the circumstances and relevant facts regarding such
Change of Control (including relevant information with respect to the
transaction giving rise to such Change of Control); (3) the repurchase date
specified by the Issuer (which shall be not earlier than 45 days or later than
60 days after the date such notice is mailed) (the "Repurchase Date"); and (4)
the instructions determined by the Issuer consistent with the Indenture that a
holder of Debentures must follow in order to have its Debentures repurchased.
Holders of Debentures will have the right to have their Debentures repurchased
by the Issuer if such Debentures are tendered for repurchase at any time prior
to the close of business on the second business day prior to the Repurchase
Date. Holders may withdraw their election, in whole or in part, at any time
prior to a date specified by the Issuer in such notice which shall be no earlier
than the close of business on the fifth business day prior to the applicable
Repurchase Date (or such shorter period as may be required by applicable law).
32
"Change of Control" means the occurrence of an event whereby a Person or
group of Persons acting in concert as a partnership or other group (a "Group")
(other than the Control Group or an Affiliate of the Control Group) shall, as a
result of a tender or exchange offer, open market purchases, privately
negotiated purchases or otherwise, have become the direct or indirect beneficial
owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of
the Issuer, Reeves or Reeves Brothers (a) representing 50% or more of the
combined voting power of the then outstanding securities of the Issuer
ordinarily (and apart from rights accruing under special circumstances) having
the right to vote in the election of directors ("Voting Securities") or (b) if
the Control Group or its Affiliates shall beneficially own less than 50% of the
outstanding Voting Securities, representing a percentage greater than the
percentage of Voting Securities so owned by the Control Group or its Affiliates.
The "Control Group" will mean Jennifer H. Fray, Douglas B. Hart, James W. Hart,
James W. Hart, Jr., Steven W. Hart and their respective heirs and Affiliates.
In the event a Change of Control occurs and any repurchase pursuant to the
foregoing constitutes a "tender offer" for purposes of Rule 14e-1 under the
Exchange Act, the Issuer will comply with the requirements of Rule 14e-1 as then
in effect, to the extent applicable, and any other applicable securities laws or
regulations with respect to such repurchase.
The Issuer could, in the future, enter into certain significant transactions
that would not constitute a Change of Control with respect to the Change of
Control purchase feature of the Debentures. Among the transactions that would
not necessarily constitute a Change of Control are a merger or consolidation or
the sale or transfer of all or substantially all of the Issuer's assets. In
addition, the Change of Control provisions of the Indenture will have limited
applicability to transactions involving the members of the Control Group and
their Affiliates as participants. Accordingly, all of the Issuer's assets could
be sold, or the Issuer could be merged or consolidated with another Affiliate of
the members of the Control Group, without the Change of Control provisions being
triggered. Any such transaction could have an adverse effect on the holders of
the Debentures. However, certain of such transactions, including mergers,
consolidations and the sale of all or substantially all of the Issuer's assets
(other than such a transaction with a Restricted Subsidiary of the Issuer)
cannot be effected except in compliance with other provisions of the Indenture.
See "Limitation on Consolidation and Merger" and "Certain Definitions."
LIMITATION ON INDEBTEDNESS
The Indenture provides that the Issuer will not create, incur, assume,
guarantee or otherwise become liable for, and will not permit any of its
Restricted Subsidiaries to create, incur, assume, guarantee or otherwise become
liable for, any Indebtedness, except for Permitted Indebtedness; PROVIDED that
the accrual of interest and accretion of original issue discount shall not be
deemed an incurrence of Indebtedness.
Notwithstanding the foregoing, the Issuer and its Restricted Subsidiaries
may create, incur, assume, guarantee or otherwise become liable for Indebtedness
(other than guarantees of Indebtedness the incurrence of which would not be
permitted under the Indenture) if, at the time such Indebtedness is so created,
incurred or assumed and after giving effect thereto and the application of the
proceeds therefrom as reasonably anticipated by the Issuer, the Fixed Charge
Coverage Ratio of the Issuer for the four most recent fiscal quarters for which
financial information is available shall not be less than 1.6 to 1.0 in respect
of Indebtedness incurred prior to June 30, 1995 and 1.75 to 1.0 in respect of
Indebtedness incurred thereafter.
For purposes of calculating the Fixed Charge Coverage Ratio referred to
above, (i) if the Indebtedness to be created, incurred or assumed is
Indebtedness of an entity which is to be acquired by, and made a Restricted
Subsidiary of, the Issuer or of a Restricted Subsidiary (whether or not such
Indebtedness was incurred by such entity in connection with such acquisition),
or is Indebtedness incurred by the Issuer or any Restricted Subsidiary in
connection with such acquisition, then the Fixed Charge Coverage Ratio of the
Issuer shall be determined on a pro forma basis giving effect to both the Fixed
Charges related to such additional Indebtedness as well as the Consolidated Cash
Flow
33
of the entity to be acquired and (ii) there shall be excluded from Fixed Charges
any interest expense (including amortization of original issue discount and
non-cash interest payments or accruals) or dividend expense related to any
Indebtedness repaid during the pro forma period or at the time of such
acquisition and which is not outstanding at the time of such calculation or is
required to be repaid as a result of such transaction, other than Fixed Charges
related to Indebtedness incurred, created or assumed pursuant to clause (i) of
the definition of Permitted Indebtedness (but only with respect to Indebtedness
which may be incurred, created or assumed subsequent to the date of the
Indenture and as of the date of such calculation).
LIMITATION ON RESTRICTED PAYMENTS
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, make any Restricted Payment if, after giving
effect thereto (i) an Event of Default, or an event that through the passage of
time or the giving of notice, or both, would become an Event of Default, shall
have occurred and be continuing, (ii) the Issuer could not incur an additional
$1.00 of Indebtedness (other than Permitted Indebtedness) in accordance with the
"Limitation on Indebtedness" or (iii) the aggregate amount of all Restricted
Payments made and the amount of Investments then outstanding pursuant to clause
(vi)(y) under "Limitation on Investments" by the Issuer and its Restricted
Subsidiaries (the amount expended, distributed or invested for such purposes, if
other than in cash, to be determined in good faith by a resolution of the Board
of Directors of the Issuer) from and after the date of the Indenture shall
exceed the sum of (a) 50% of Consolidated Net Income of the Issuer accrued for
the period (taken as one accounting period) commencing with the date of the
Indenture to and including the date of such calculation (or, in the event
Consolidated Net Income is a deficit, then minus 100% of such deficit); and (b)
the aggregate net proceeds, including the fair market value of property other
than cash (as determined in good faith by a resolution of the Board of Directors
of the Issuer), received by the Issuer from the issuance or sale (other than to
a Subsidiary of the Issuer) of its capital stock (other than Redeemable Stock),
including the issuance of its capital stock upon conversion of securities other
than its capital stock, and options, warrants and rights to purchase its capital
stock (other than Redeemable Stock), from and after the date of the Indenture.
The foregoing clauses (ii) and (iii) will not prevent (x) the making of
Restricted Payments in an amount not in excess of $15,000,000 or (y) Investments
permitted to be made pursuant to clause (vi)(x) of the "Limitation on
Investments." The provisions of the foregoing paragraph will not prevent (a) the
payment of any dividend within 60 days after the date of its declaration if such
dividend could have been made on the date of its declaration in compliance with
the foregoing provisions, (b) the repurchase, redemption or retirement or other
acquisition of shares of capital stock of the Issuer or a Restricted Subsidiary
in exchange for or out of the proceeds of a substantially concurrent issue and
sale (other than to a Subsidiary) of other shares of capital stock (other than
Redeemable Stock) of such person, or (c) the repurchase, redemption, retirement
or other acquisition of Indebtedness of the Issuer with the proceeds of
Indebtedness of the Issuer incurred pursuant to and in accordance with the
"Limitation on Indebtedness"; PROVIDED that the Indebtedness incurred shall be
subordinated to the Debentures to the same extent as the Indebtedness being
repurchased, redeemed, retired or otherwise acquired, and shall not shorten the
maturity of such Indebtedness or provide that any such new Indebtedness shall
have an average life to maturity shorter than the remaining average life to
maturity of the Debentures. In the cases of clauses (b) and (c) above, the net
proceeds received shall not be included in the calculation of net proceeds in
clause (iii)(b) of the preceding paragraph and any repurchase, redemption,
retirement or other acquisition of Indebtedness permitted therein shall not
constitute a Restricted Payment.
LIMITATION ON LIENS
The Indenture provides that the Issuer will not, directly or indirectly,
create, incur, assume or permit to exist any Lien (including Liens on the
capital stock of Reeves) except for Permitted Liens upon or with respect to any
of its property, whether owned at the date of the Indenture or thereafter
acquired, or on any income or profits therefrom or assign or otherwise convey
any right to receive
34
income, unless the Debentures are secured equally and ratably simultaneously
with or prior to the creation, incurrence or assumption of such Lien. This
provision does not preclude Liens on the assets of the Issuer's subsidiaries.
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Issuer will not, and will not permit any
Restricted Subsidiary to, enter into any Sale and Leaseback Transaction unless
(i) the Issuer would be able to incur Indebtedness (other than Permitted
Indebtedness) in an amount equal to the Attributable Debt with respect to such
Sale and Leaseback Transaction or (ii) where the Issuer or such Restricted
Subsidiary receives consideration from such Sale and Leaseback Transaction at
least equal to the fair market value of the property subject thereto (which
shall be determined in good faith by a resolution of the Board of Directors) and
applies the Net Proceeds of such Sale and Leaseback Transaction in accordance
with the provisions set forth in "Limitation on Dispositions of Assets."
LIMITATION ON DISPOSITIONS OF ASSETS
The Indenture provides that the Issuer will not, and will not permit any
Restricted Subsidiary to, (i) sell, transfer, lease, convey or otherwise dispose
of any assets (other than (a) an asset disposition in the ordinary course of
business consistent with past practice or (b) permitted under "Limitation on
Consolidation and Merger" which constitutes a transfer, conveyance, sale, lease
or other disposition of all or substantially all of the Issuer's assets or (c) a
disposition of assets in exchange for assets of a like kind having an equivalent
value) or (ii) issue or sell Equity Interests in any of its Restricted
Subsidiaries other than sales of preferred stock permitted by "Limitation on
Indebtedness," in the case of either (i) or (ii) above, unless (A) the
consideration to be received by the Issuer (or the Restricted Subsidiary, as the
case may be), measured at the date of the execution of a definitive agreement
relating to such disposition, is at least equal to the fair market value of the
assets disposed of (which shall be determined in good faith by a resolution of
the Board of Directors of the Issuer), and (B) the consideration for such
disposition consists of at least 75% cash, PROVIDED, HOWEVER, that if, after
giving effect to such asset disposition and the anticipated use of the proceeds
thereof as reasonably determined by the Board of Directors, the Fixed Charge
Coverage Ratio of the Issuer is at least 3.5 to 1.0, at least 65% of the
consideration received is required to be in cash, and PROVIDED, FURTHER, that
for purposes of this provision the amount of any Indebtedness assumed by the
transferee and any notes or other obligations received by the Issuer or a
Restricted Subsidiary which are immediately converted into cash shall be deemed
to be "cash." Within 12 months from the date of such disposition, the Net
Proceeds thereof shall be (x) applied to capital expenditures of the Issuer and
the Restricted Subsidiaries, or committed to such use by a definitive contract,
and such Net Proceeds shall actually be so applied within 18 months from the
date of such disposition, (y) used by the Issuer or a Restricted Subsidiary to
acquire additional assets or to make an Investment in entities which, after
giving effect to such Investment, will become Restricted Subsidiaries, or
committed to any such use by a definitive contract, and such Net Proceeds shall
actually be so applied within 18 months from the date of such disposition, or
(z) applied to repurchase or redeem Indebtedness of the Issuer permitted by
clause (i) of the definition of Permitted Indebtedness or Indebtedness of a
Restricted Subsidiary. To the extent that Net Proceeds from such disposition are
not so applied, the Issuer (or the Restricted Subsidiary, as the case may be)
shall use the remaining Net Proceeds (less any amount of Net Proceeds used to
pay reasonable fees and expenses connected with an offer to purchase hereunder)
to make an offer to purchase Debentures (together with any bank or secured debt
which ranks PARI PASSU with the Debentures, on a pro rata basis) pursuant to an
offer to purchase at a price of not less than 100% of the Accreted Value
thereof. If at any time any non-cash consideration received by the Issuer or a
Restricted Subsidiary in respect of a disposition of assets is converted into or
sold or otherwise disposed of for cash, then such cash shall constitute Net
Proceeds for purposes of this provision and shall be applied in accordance with
the preceding two sentences. No offer to purchase shall be required to be made
in respect of an asset disposition or series of related asset dispositions with
Net Proceeds of $2,500,000 or less.
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Notwithstanding the foregoing, if at the time an offer to purchase the
Debentures is required to be made by a Restricted Subsidiary, to the extent that
any or all of the Net Proceeds of any disposition of assets is prohibited (by
law or by contract) from being used to make such an offer, the portion of such
Net Proceeds so affected will not be required to be applied to such an offer
pursuant to this provision but may be retained for so long, but only for so
long, as such restriction exists (the Issuer will agree in the Indenture to
promptly take all reasonable actions, not involving undue burden or expense, to
remove such restriction), and once the use of any affected Net Proceeds is
permitted, such Net Proceeds will be applied in the manner set forth above as if
such disposition of assets had occurred on the date the restrictions were
removed.
LIMITATION ON RESTRICTING SUBSIDIARY DIVIDENDS
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, create, assume or suffer to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to pay dividends or make any other distributions in
respect of such Restricted Subsidiary's capital stock or otherwise transfer cash
or assets or make loans or advances to the Issuer or any other Restricted
Subsidiary, or pay Indebtedness owing to the Issuer or any other Restricted
Subsidiary except: (i) restrictions contained in Liens permitted by the
Indenture securing Indebtedness permitted by the Indenture to the extent such
restrictions restrict the transfer of property subject to such Liens; (ii) any
encumbrance or restriction consisting of customary non-assignment provisions in
leases to the extent such provisions restrict the transfer of the leases; (iii)
any encumbrance or restriction with respect to Indebtedness of the Issuer or any
Restricted Subsidiary that is no less favorable to the Issuer and its Restricted
Subsidiaries than those in effect on the date of the Indenture; or (iv)
consensual encumbrances or restrictions binding upon any person at the time such
person becomes a Restricted Subsidiary of the Issuer, if such encumbrance or
restriction is not created, incurred or assumed in contemplation of such person
becoming a Restricted Subsidiary of the Issuer. The 11% Senior Note Indenture
and the Bank Credit Agreement currently prohibit dividends and other
distributions to the Issuer. Consequently the Company and Restricted
Subsidiaries will be able to enter into encumbrances and restrictions that may
prevent or restrict the payment of dividends or other distributions to the
Issuer. See "Description of Other Indebtedness."
LIMITATION ON TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, enter into transactions with Affiliates of the
Issuer (other than the Issuer and its Wholly-owned Restricted Subsidiaries)
except for Permitted Transactions, transactions in respect of Restricted
Payments made in accordance with the "Limitation on Restricted Payments" and
transactions the terms of which the Board of Directors of the Issuer (including
a majority, if any, of the disinterested directors) determines, by resolution,
are fair and reasonable to the Issuer or, if the Issuer is not a party to such
transaction, such Restricted Subsidiary, as the case may be, and are at least as
favorable as the terms which could be obtained by the Issuer or, if the Issuer
is not a party to such transaction, such Restricted Subsidiary, as the case may
be, in a comparable transaction made on an arm's length basis between
unaffiliated parties; PROVIDED that, with respect to the purchase or disposition
of assets of the Issuer or any of its Restricted Subsidiaries, other than the
purchase of inventory in the ordinary course of business, having a purchase
price in excess of $15 million, the Issuer shall, in addition to obtaining such
approval of its Board of Directors, obtain a written opinion of an Independent
Financial Advisor stating that the terms of such transaction are fair and
reasonable to the Issuer or its Restricted Subsidiary, as the case may be, and
are at least as favorable to the Issuer or such Restricted Subsidiary, as the
case may be, as could have been obtained on an arm's length basis between
unaffiliated parties.
LIMITATION ON INVESTMENTS
The Indenture provides that the Issuer will not, and will not permit any
Restricted Subsidiary to, make any Investments in any other person, except (i)
Investments in the Issuer or in any other Restricted Subsidiary by any
Restricted Subsidiary or by the Issuer in a Restricted Subsidiary;
36
(ii) receivables owing to the Issuer or its Restricted Subsidiaries created in
the ordinary course of business and payable or dischargeable substantially in
accordance with customary trade terms; (iii) Permitted Transactions; (iv)
Investments made in Cash Equivalents; (v) Investments permitted to be made
pursuant to the "Limitation on Dispositions of Assets"; and (vi) Investments in
Unrestricted Subsidiaries (or an entity (or entities) which, after giving effect
to such Investment becomes an Unrestricted Subsidiary), or any partnership or
joint venture of which less than a majority of the equity ownership thereof is
directly or indirectly owned by the Issuer or a Restricted Subsidiary (or an
entity (or entities) which, after giving effect to such transaction, becomes
such a partnership or joint venture), not otherwise permitted by clauses (i)
through (v) above, in an aggregate amount not exceeding at any time outstanding
the sum of (x) $15,000,000 and (y) an amount which is equal to the amount of
Restricted Payments permitted at such time to be made pursuant to the
"Limitation on Restricted Payments."
LIMITATION ON CONSOLIDATION AND MERGER
The Indenture provides that the Issuer will not consolidate with or merge
with or into another person or directly or indirectly sell, transfer, lease or
convey all or substantially all of its assets to another person unless: (i)(a)
the Issuer is the continuing corporation in the case of a merger or (b) the
resulting, surviving or transferee entity (the "Surviving Entity") is a
corporation or partnership organized under the laws of the United States, any
state thereof or the District of Columbia and expressly assumes by supplemental
indenture in a form reasonably satisfactory to the Trustee all of the
obligations of the Issuer under the Indenture and the Debentures; (ii) no Event
of Default (or event or condition which after notice or lapse of time or both
would become an Event of Default) shall have occurred and be continuing
immediately after giving effect to such transaction; (iii) the Consolidated Net
Worth of the Issuer or the Surviving Entity, as the case may be, on a pro forma
basis after giving effect to such consolidation, merger or sale, transfer, lease
or conveyance of assets (but prior to any purchase accounting adjustments
resulting from the transaction) is at least as great as the Consolidated Net
Worth of the Issuer immediately prior to the date of the transaction, and (iv)
immediately after giving effect to such transaction, the Issuer or the Surviving
Entity, as the case may be, would be able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under the "Limitation on
Indebtedness" as if, in the case of the Surviving Entity, such Person were the
Issuer.
Notwithstanding the foregoing, clauses (iii) and (iv) shall not prohibit (i)
a transaction, the principal purpose of which is (as determined in good faith by
the Board of Directors of the Issuer and evidenced by a resolution thereof) to
change the state of incorporation of the Issuer, and such transaction does not
have as one of its purposes the evasion of the restrictions of this section; or
(ii) a merger or consolidation by the Issuer with or into, or sale of all or
substantially all of the assets of the Issuer to, a Restricted Subsidiary.
SUPPLEMENTAL INDENTURES
The Indenture permits the Issuer and the Trustee, without notice to or the
consent of the holders of the Debentures, to amend or supplement the Indenture
or the Debentures for certain specified purposes, including curing ambiguities,
defects or inconsistencies, providing for the assumption of the Issuer's
obligations to the holders under certain circumstances, providing for
uncertificated Debentures, to maintain compliance with the Trust Indenture Act
of 1939, as amended, and to make any change that does not adversely affect the
rights of the holders. Other amendments or supplements to the Indenture or the
Debentures may be made with the consent of the holders of not less than a
majority in principal amount of the Debentures at the time outstanding, and such
amendments or supplemental indentures will be binding on every holder whether or
not such holder has consented thereto, provided that no such modification,
amendment or supplemental indenture shall, without the consent of holders of all
Debentures then outstanding, (a) extend the final maturity of any Debenture, or
reduce the principal amount thereof (including the amount payable upon
redemption), reduce the rate or extend the time of payment of interest thereon,
or impair or affect the right of any holder of
37
Debentures to institute suit for the payment of any of the Debentures or (b)
reduce the aforesaid percentage of Debentures, the consent of holders of which
is required for any such supplemental indenture.
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an Event of Default as being: (a) any failure to pay
an installment of interest on the Debentures as and when the same becomes due
and payable and such failure continues for 30 days; (b) failure to pay all or
any part of the principal on the Debentures when and as the same shall become
due and payable at maturity, redemption or repurchase, by declaration or
otherwise; (c) failure by the Issuer duly to observe or perform any covenant or
agreement contained in the Debentures or the Indenture which failure continues
for a period of 30 days after written notice specifying such failure and
demanding that the Issuer remedy the same has been given to the Issuer by the
Trustee or to the Issuer and the Trustee by holders of at least 25% in aggregate
principal amount of Debentures then outstanding; (d) certain events of
bankruptcy, insolvency or reorganization in respect of the Issuer or any
Restricted Subsidiary; (e) any default in Indebtedness (whether such
Indebtedness now exists or is hereafter created) by the Issuer or a Restricted
Subsidiary if either (i) such default results from the failure to pay when due
(including upon acceleration) interest (after giving effect to any applicable
grace period provided for in such Indebtedness) or principal under any such
Indebtedness if such default has not been waived by or on behalf of the holders
of such Indebtedness or (ii) as a result of such default, the maturity of such
Indebtedness has been accelerated prior to its stated maturity and the
outstanding aggregate principal amount of all such defaulted or accelerated
Indebtedness exceeds $5,000,000 if such default has not been waived or such
acceleration has not been rescinded by or on behalf of the holders of such
Indebtedness; and (f) the rendering of final judgments not covered by insurance
aggregating in excess of $5,000,000 against the Issuer or any of its Restricted
Subsidiaries which are not stayed, satisfied or discharged within 60 days after
such judgments become final and nonappealable. The Indenture provides that if a
default (the term "default" for purposes of this provision being defined as any
event or condition which is, or with notice or lapse of time or both would be,
an Event of Default) occurs and is continuing and if it is known to the Trustee,
the Trustee must, within 90 days after the occurrence of such default, give to
the holders of Debentures notice of such default, PROVIDED that, except in the
case of a default in payment of principal or interest in respect of such
Debentures, the Trustee will be protected in withholding such notice if it in
good faith determines that the withholding of such notice is in the interests of
the holders of Debentures.
If an Event of Default shall occur and be continuing (other than an Event of
Default described in clause (d) of the preceding paragraph relating to the
Issuer), unless the principal of all the Debentures shall have already become
due and payable, either the Trustee or the holders of not less than 25% in
aggregate principal amount of the Debentures then outstanding, by notice in
writing to the Issuer (and to the Trustee if given by holders of Debentures),
may declare the Accreted Value of all Debentures and, if after ,
1999, any interest accrued thereon, to be due and payable immediately and upon
any such declaration the same shall become due and payable. If an Event of
Default specified in clause (d) above relating to the Issuer occurs, the
Accreted Value of and, if after , 1999, accrued interest on all
outstanding Debentures shall become immediately due and payable without any
declaration or other act on the part of the Trustee or any holder of Debentures.
The provisions described in the preceding paragraph, however, are subject to
the condition that if, at any time after the Accreted Value of the Debentures
shall have been so declared due and payable, and before any judgment or decree
for the payment of the monies due shall have been obtained or entered, the
Issuer shall pay or shall deposit with the Trustee a sum sufficient to pay all
matured installments of interest, if any, upon all the Debentures and the
Accreted Value of any and all Debentures which shall have become due other than
by acceleration (with interest, if any, upon such Accreted Value and, to the
extent that payment of such interest is enforceable under applicable law, on
overdue installments of interest, at the rate borne by the Debentures, to the
date of such payment or
38
deposit) and such amount as shall be sufficient to cover reasonable compensation
to the Trustee and each predecessor Trustee, their respective agents, attorneys
and counsel, and all other reasonable expenses and liabilities incurred, and all
reasonable advances made, by the Trustee and each predecessor Trustee and such
agents, attorneys and counsel except as a result of negligence or bad faith, and
if any and all Events of Default under the Indenture, other than the non-payment
of the Accreted Value of Debentures which shall have become due by acceleration,
shall have been cured, waived or otherwise remedied as provided in the
Indenture, then and in every such case, holders of a majority in aggregate
principal amount of the Debentures then outstanding, by written notice to the
Issuer and the Trustee, may waive all defaults or Events of Default and rescind
and annul such declaration and its consequences, but no such waiver or
rescission and annulment shall extend to or shall affect any subsequent default
or impair any right consequent thereon.
Prior to the declaration of acceleration of the maturity of the Debentures,
the holders of a majority in aggregate principal amount of the Debentures at the
time outstanding may waive on behalf of all the holders of Debentures any past
default, or Event of Default, except a default in the payment of principal of or
interest on any Debentures 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 Debenture affected. 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 of Debentures unless such holders of
Debentures have offered to the Trustee adequate indemnity. Subject to all the
provisions of the Indenture and applicable law, the holders of a majority in
aggregate principal amount of the Debentures 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 on
the Trustee.
The Issuer is required to furnish the Trustee, promptly upon becoming aware
of any default under the Indenture, an officer's certificate specifying such
default and within 120 days after the end of each fiscal year, an officers'
certificate signed by its principal executive officer, principal financial
officer or principal accounting officer to the effect that such officers have
conducted, or supervised, a review of the activities of the Issuer and its
Restricted Subsidiaries and of performance under the Indenture and that, to the
best of such officers' knowledge, based on their review, the Issuer has
fulfilled all of its obligations under the Indenture, or, if there has been a
default, specifying each default known to them, its nature and its status.
DEFEASANCE
Under the terms of the Indenture and the Debentures, the Issuer, at its
option, (a) will be Discharged (as defined in the Indenture) from any and all
obligations in respect of the Debentures (except in each case for certain
obligations to register the transfer or exchange of Debentures, replace stolen,
lost or mutilated Debentures, maintain paying agencies and hold moneys for
payment in trust) or (b) need not comply with the covenants of the Indenture nor
be subject to the operation of the cross acceleration provisions described under
"Events of Default and Remedies," in each case, if the Issuer irrevocably
deposits with the Trustee, in trust, money or U.S. Government Obligations (as
defined in the Indenture) which through the payment of interest thereon and
principal thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of and interest on the Debentures on the dates
such payments are due in accordance with the terms of the Debentures.
To exercise the option under clause (a) above, the Issuer is required to
deliver to the Trustee (i) an opinion of counsel, based upon a ruling of the
Internal Revenue Service or a change in applicable federal income tax law
occurring after the date of this Prospectus, that the holders of the Debentures
will not recognize income, gain or loss for federal income tax purposes as a
result of such defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such defeasance had not occurred, and (ii) an officers' certificate and opinion
of counsel stating that all conditions precedent to such defeasance have been
satisfied. No such opinion of counsel is required to effect a defeasance under
clause (b) above. Under current federal
39
income tax law, it is possible that a defeasance under clause (b) might be
treated as a taxable exchange of the Debentures for an interest in the trust.
For a discussion of the federal income tax consequences of such a deemed taxable
exchange, see "Certain Federal Income Tax Considerations Concerning The
Debentures -- Sale, Exchange, Redemption, Retirement, Defeasance or Other
Disposition." Prospective investors are urged to consult their own tax advisors
as to the specific consequences of such a defeasance.
In the event the Issuer exercises its option under clause (b) of the second
preceding paragraph and the Debentures are declared due and payable because of
the occurrence of any Event of Default (other than the cross acceleration
provisions described under "Events of Default and Remedies" which will be
inapplicable), the amount of money and U.S. Government Obligations on deposit
with the Trustee will be sufficient to pay amounts due on the Debentures at the
time of their stated maturity but may not be sufficient to pay amounts due on
the Debentures at the time of the acceleration resulting from such Event of
Default. However, the Issuer shall remain liable for such payments.
REPORTS
So long as the Debentures are outstanding, the Issuer will furnish to the
holders thereof such quarterly and annual consolidated financial reports as the
Issuer is required to file with the Commission under the Exchange Act or similar
reports in the event the Issuer is not at the time required to file such reports
with the Commission.
CERTAIN DEFINITIONS
In addition to the terms defined above, the Indenture contains, among other
things, the following definitions:
"Accreted Value" as of any date of determination (i) prior to , 1999
means the sum of (a) the initial offering price of each of the Debentures and
(b) the portion of the original issue discount per Debenture (which for this
purpose shall be deemed to be the excess of the principal amount over the
initial offering price) which shall be amortized with respect to such Debenture
through such date, such original issue discount to be so amortized at the rate
of % per annum (such percentage being expressed as a percentage of the sum
of the initial offering price plus previously amortized original issue discount)
using semi-annual compounding of such rate on each and ,
commencing , 1994, from the date of issuance of the Debentures through
the date of determination, and (ii) subsequent to , 1999, 100% of the
principal amount thereof.
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Attributable Debt" in respect of a Sale and Leaseback Transaction means, at
the time of determination, the present value (discounted at the interest rate
implicit in the lease, compounded semiannually) of the obligation of the lessee
of the property subject to such Sale and Leaseback Transaction for rental
payments during the remaining term of the lease included in such transaction
including any period for which such lease has been extended or may, at the
option of the lessor, be extended or until the earliest date on which the lessee
may terminate such lease without penalty or upon payment of penalty (in which
case the rental payments shall include such penalty), after excluding all
amounts required to be paid on account of maintenance and repairs, insurance,
taxes, assessments, water, utilities and similar charges.
"Capitalized Lease Obligation" means Indebtedness represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with generally accepted accounting principles and the
amount of such Indebtedness shall be the capitalized amount of such obligations
determined in accordance with such principles.
40
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof), (ii) dollar and eurodollar
time deposits and certificates of deposit or bankers' acceptances of any
domestic commercial bank or domestic or foreign branch office or agency of a
foreign commercial bank of recognized standing having capital and surplus in
excess of $100,000,000 (a "Qualified Bank"), (iii) repurchase obligations with a
term of not more than 14 days for underlying securities of the types described
in clauses (i), (ii) and (iv) hereof entered into with any Qualified Bank, (iv)
commercial paper issued by any Qualified Bank and commercial paper of any other
issuer rated at least A-2 or the equivalent thereof by Standard & Poor's
Corporation or at least P-2 or the equivalent thereof by Moody's Investors
Service, Inc. and in each case maturing within one year from the date of
acquisition, (v) bonds, notes, debentures or other forms of Indebtedness of any
person rated at least A or the equivalent thereof by Standard & Poor's
Corporation and at least A or the equivalent thereof by Moody's Investors
Service, Inc., (vi) investments in money market or mutual funds registered under
the Investment Company Act of 1940, as amended, whose sole investments are
comprised of securities and other instruments described in clauses (i) through
(v) above and (vii) with respect to foreign operations of the Issuer and its
Restricted Subsidiaries, deposits in the ordinary course of business with
foreign commercial banks and certificates of deposit or bankers' acceptances of
foreign commercial banks of recognized standing having capital and surplus in
excess of $250,000,000.
"Consolidated Cash Flow" of any person, for any period, means (i) the
Consolidated Net Income of such person plus, to the extent deducted in computing
Consolidated Net Income, (ii) the sum of (a) income taxes of such person and its
Restricted Subsidiaries, (b) Fixed Charges of such person and its Restricted
Subsidiaries, (c) depreciation and amortization expense of such person and its
Restricted Subsidiaries and (d) all other non-cash items deducted from net
revenues in determining Consolidated Net Income for such period (other than
reserves or expenses established in anticipation of future cash requirements
such as reserves for taxes and uncollectible accounts receivable) and less (iii)
any non-cash items added to net revenues in determining Consolidated Net Income
for such period, all determined on a consolidated basis in accordance with
generally accepted accounting principles.
"Consolidated Net Income" of any person, for any period, means the net
income (loss) of such person and its Restricted Subsidiaries for such period,
determined in accordance with generally accepted accounting principles, provided
that (i) the net income (determined as set forth above) of any Unrestricted
Subsidiary or any other person, other than a Restricted Subsidiary, in which
such person or any of its Restricted Subsidiaries has a joint interest with a
third party shall be included only to the extent of the amount of dividends or
distributions actually paid or other payments actually made for services to such
person or Restricted Subsidiary during such period, (ii) the net income (loss)
of any person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition shall be excluded and (iii) the net income
(loss) of such person shall be adjusted by excluding (to the extent otherwise
included) any extraordinary gains and extraordinary losses during any such
period. For purposes of any calculation of Consolidated Net Income of any person
to determine whether a Restricted Payment may be made pursuant to the
"Limitation on Restricted Payments" (other than for purposes of determining
whether an investment may be made pursuant to clause (vi)(y) of the "Limitation
on Investments"), the net income of any Restricted Subsidiary of such person
shall be excluded in whole or in part to the extent such Restricted Subsidiary
is prohibited, directly or indirectly, from distributing such net income or any
portion thereof to such person.
"Consolidated Net Worth" of any person, at any date, means the aggregate of
capital, surplus and retained earnings of such person and its Restricted
Subsidiaries as would be shown on a consolidated balance sheet of such person
and its Restricted Subsidiaries prepared in accordance with generally accepted
accounting principles.
"Eligible Accounts Receivable" means all accounts receivable which are not
more than 180 days past due under their normal payment terms.
41
"Equity Interests" means capital stock and all warrants, options or other
rights to acquire capital stock or that are measured by the value of capital
stock (but excluding any Indebtedness that is convertible into or exchangeable
for capital stock).
"Fixed Charges" for any person, for any period, are the consolidated
interest expense, including amortization of original issue discount and non-cash
interest payments or accruals, the interest component of capital leases and
one-third of the rental expense attributable to operating leases, but excluding
the amortization of debt issuance costs plus the product of (x) the sum of (i)
cash dividends paid on any preferred stock of such person plus (ii) cash and the
fair market value (as determined by the Issuer's Board of Directors in good
faith) of any non-cash dividends paid on any preferred stock of any Restricted
Subsidiary (other than a Wholly-owned Restricted Subsidiary), times (y) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current effective aggregate federal, state and local tax rate of
such person, expressed as a decimal. For purposes of this definition, interest
on a capital lease shall be deemed to accrue at the rate of interest implicit in
such capital lease in accordance with generally accepted accounting principles
(including Statement of Financial Accounting Standards No. 13 "Accounting for
Leases" of the FASB).
"Fixed Charge Coverage Ratio" means for any person, for any period, such
person's ratio of Consolidated Cash Flow to Fixed Charges for such period.
"Indebtedness" means, as to any person, without duplication, (a) all
obligations of such person, including accrued and unpaid interest, for borrowed
money (including any net overdraft in any bank which overdraft is not satisfied
within three consecutive business days from its occurrence), (b) all obligations
of such person evidenced by bonds (other than performance bonds issued in the
ordinary course of business), debentures, notes, letters of credit or
reimbursement agreements (other than letters of credit or reimbursement
agreements in respect of accounts payable to trade creditors incurred in the
ordinary course of business in connection with the obtaining of materials or
services) or similar instruments, (c) all obligations of such person to pay the
deferred purchase price of property or services (other than accounts payable to
trade creditors arising in the normal management of the Issuer's business), (d)
all Capitalized Lease Obligations of such person, (e) Indebtedness of others
secured by a Lien on any assets of such person, whether or not such Indebtedness
is assumed by such person or guaranteed by such person, (f) all Indebtedness of
others guaranteed by such person, (g) Attributable Debt of such person, (h)
preferred stock issued by a Subsidiary of such person, (i) Redeemable Stock
issued by such person, and (j) obligations under interest rate swaps and caps
and currency swaps or options and other derivative or hedging arrangements
(other than such arrangements entered into in the ordinary course of business);
and the amount of any such Indebtedness on the date of determination thereof
shall be the outstanding balance of any such unconditional obligations as
described above and the maximum liability of any such contingent obligation at
such date and, with respect to clauses (h) and (i), the amount of Indebtedness
shall equal the liquidation preference.
"Independent Financial Advisor" means, with respect to any person, a
nationally recognized investment banking firm (i) which does not (and whose
directors, officers and Affiliates do not) have a direct or indirect financial
interest in such person or any of its Restricted Subsidiaries that is material
to such person, any such Restricted Subsidiary or such investment banking firm,
(ii) which has not been and, at the time it is called upon to give independent
financial advice to such person or any such Restricted Subsidiary, as the case
may be, is not (and none of whose directors, officers, employees or Affiliates
is) a promoter, director or officer with respect to such person or any such
Restricted Subsidiary and (iii) which, in the judgment of the board of directors
of such person or the board of directors, general partner or partners or
individuals in the case of any such Restricted Subsidiary, is otherwise
qualified to serve as an independent financial advisor. Any such person may be
compensated and indemnified by such person and any such Restricted Subsidiary,
as the case may be, and such compensation and indemnity shall not of itself be
considered a direct material financial interest within the meaning of clause (i)
of the next preceding sentence.
42
"Investments" means, collectively, any direct or indirect loan, advance or
other extension of credit, capital contribution, transfer of cash, property or
other assets to, acquisitions of capital stock or equity interests, securities
or other evidences of Indebtedness including by way of guarantee or similar
arrangement of, any other person. Investments shall not include the obligations
described in clause (j) of the definition of "Indebtedness."
"Lien" means, with respect to any property, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
property. The Issuer shall be deemed to own subject to a Lien any property which
it has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property.
"Net Proceeds" from any asset sale by any person means cash received
therefrom by such person, net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses incurred and all federal,
state, provincial, foreign and local taxes required to be accrued as a liability
as a consequence of such asset sale, and (ii) all payments made by such person
on any Indebtedness which is secured by such asset in accordance with the terms
of any Lien upon or with respect to such assets or which must by the terms of
such Lien, or in order to obtain a necessary consent to such asset sale or by
applicable law, be repaid out of the proceeds from such asset sale.
"Permitted Indebtedness" means, without duplication, (i) Indebtedness
consisting of inventory or receivable-based financing in an aggregate principal
amount at any one time outstanding not to exceed the sum of 85% of Eligible
Accounts Receivable and 50% of the book value of the inventory (determined on a
first-in-first-out basis) of the Issuer and its Restricted Subsidiaries; (ii)
Indebtedness evidenced by the Debentures, the 11% Senior Notes and, from the
Closing Date to 120 days thereafter, Indebtedness evidenced by the Subordinated
Debentures; (iii) Indebtedness of the Issuer to any Restricted Subsidiary or of
any Restricted Subsidiary to the Issuer or to any other Restricted Subsidiary;
(iv) Indebtedness (x) evidenced by standby letters of credit which are issued in
the ordinary course of business in support of self-insurance obligations or
operating leases or (y) evidenced by standby letters of credit (not covered by
(x)), industrial revenue bonds or agreements to reimburse the issuers of
industrial revenue bonds, in an aggregate principal amount not to exceed
$5,000,000 at any time; (v) Indebtedness (A) in respect of Capitalized Lease
Obligations or (B) that is secured by a Lien on real or personal property, which
Indebtedness constitutes all or part of the purchase price of the property
subject thereto or is incurred prior to, at the time of or within 30 days after
the acquisition of such property for the purpose of financing all or any part of
the purchase price thereof, PROVIDED that such secured Indebtedness does not
exceed the purchase price of such property; PROVIDED, HOWEVER, that the
aggregate of all Indebtedness incurred under the foregoing clauses (A) and (B)
does not at any time exceed $10,000,000; (vi) Indebtedness, the net proceeds of
which will be used to repay, repurchase or redeem Debentures or other
Indebtedness of the Issuer or a Restricted Subsidiary incurred under clause (ii)
or (vii) hereof, PROVIDED that the Indebtedness incurred shall not increase the
principal amount of any Indebtedness then outstanding after giving effect to
such repayment, repurchase or redemption, and, if the Indebtedness to be repaid,
repurchased or redeemed is Indebtedness of the Issuer, the Indebtedness incurred
shall be incurred by the Issuer and shall not shorten the maturity of such
Indebtedness or provide that any such new Indebtedness shall have an average
life to maturity shorter than the remaining average life to maturity of the
Debentures; (vii) Attributable Debt in respect of Sale and Leaseback
Transactions engaged in pursuant to and in accordance with clause (ii) under
"Limitation on Sale and Leaseback Transactions"; and (viii) Indebtedness other
than Indebtedness permitted under clauses (i) through (vii) provided that the
aggregate amount of such Indebtedness may not exceed $20,000,000 at any time
outstanding.
"Permitted Liens" means (i) Liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings, PROVIDED that adequate
reserves with respect thereto are maintained on the books of the Issuer or its
Restricted Subsidiaries, as the case may be, in conformity with generally
accepted accounting principles; (ii) carrier's, warehouseman's, mechanics',
materialmen's, repairmen's, or other like Liens arising in the ordinary course
of business and not overdue for a period of more than 60 days or which are being
contested in good faith by appropriate proceedings; (iii) pledges
43
or deposits in connection with workers' compensation, unemployment insurance and
other social security legislation; (iv) deposits to secure the performance of
bids, trade contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature incurred in the ordinary course of business; (v) easements,
rights-of-way, restrictions and other similar encumbrances and any title defects
which do not, individually or in the aggregate, materially detract from the
value of the property subject thereto or materially interfere with the ordinary
course of business of the Issuer or its Restricted Subsidiaries, as the case may
be; (vi) any attachment or judgment Lien, unless the judgment it secures shall
not, within 60 days after the entry thereof, have been discharged or execution
thereof stayed pending appeal, or shall not have been discharged within 60 days
after the expiration of any such stay; (vii) any other Liens imposed by
operation of law which do not materially affect the Issuer's ability to perform
its obligations under the Debentures and the Indenture; (viii) Liens existing on
the date of the Indenture and renewals and extensions thereof; (ix) Liens on
accounts receivable and inventory in connection with Indebtedness permitted to
be incurred pursuant to clause (i) of "Permitted Indebtedness"; (x) rights of
banks to set off deposits against debts owed to said banks; (xi) purchase money
mortgages and purchase money security interests incurred in the normal and
ordinary course of the Issuer's and its Restricted Subsidiaries' business to the
extent related to Indebtedness incurred pursuant to clause (v) of "Permitted
Indebtedness"; (xii) Liens securing Indebtedness of any entity existing at the
time such assets are acquired by the Issuer or a Restricted Subsidiary other
than Reeves Brothers, whether by merger, consolidation, purchase of assets or
otherwise (whether or not such Liens are created, incurred or assumed in
contemplation of the acquisition thereof by the Issuer or a Restricted
Subsidiary), PROVIDED such Liens do not extend to any other assets of the Issuer
or any other Restricted Subsidiaries, and Liens securing refinancings of such
Indebtedness PROVIDED that such Liens do not extend to any assets other than
assets securing such Indebtedness to be refinanced; (xiii) Liens securing
standby letters of credit and industrial revenue bonds and related reimbursement
obligations, in each case incurred pursuant to clause (iv) of "Permitted
Indebtedness" and Liens securing trade letters of credit and related
reimbursement obligations to the extent excluded from the definition of
Indebtedness; (xiv) any customary retention of title of a lessor under any
capital lease obligation; (xv) Liens on initial deposits and margin accounts and
other Liens securing obligations arising out of interest rate swaps and caps and
currency swaps or options and other derivative or hedging arrangements entered
into in the ordinary course of business; and (xvi) Liens other than those
described above with respect to obligations not in excess of $1,000,000 in the
aggregate at any time.
"Permitted Transactions" means (i) reasonable and customary fees,
compensation and benefits paid to officers, directors, employees or consultants
of the Issuer or any Restricted Subsidiary or their respective Affiliates
(including Hart Holding) for services rendered to the Issuer or any Restricted
Subsidiary in the ordinary course of business consistent with past practice,
(ii) transfers of goods and services by or among the Issuer and its Restricted
Subsidiaries and their respective Affiliates in the ordinary course of business
consistent with past practice, PROVIDED that if any such transaction or series
of related transactions involves in excess of $1,500,000, the Board of Directors
of the Issuer shall determine in good faith by resolution that such transaction
is on terms fair and reasonable to the Issuer and (iii) payments made pursuant
to the Tax Agreement.
"Person" or "person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Redeemable Stock" means any series or class of capital stock of any Person
which by its terms is redeemable at the option of the holder or is subject to
mandatory redemption prior to the maturity of the Debentures.
"Restricted Payments" means, collectively, with respect to any person (i)
any dividend or other distribution on shares of such person's or a Restricted
Subsidiary's capital stock (except dividends or distributions in additional
shares of capital stock, other than Redeemable Stock, any dividend or
distribution on shares of capital stock of a Restricted Subsidiary to such
person or to one of its Wholly-
44
owned Restricted Subsidiaries and any allocations pursuant to the Tax
Agreement), (ii) any payment on account of the purchase, redemption, retirement
or other acquisition of any shares of such person's or a Restricted Subsidiary's
capital stock or any option, warrant or other right to acquire such shares, or
(iii) any defeasance, redemption, repurchase or other acquisition or retirement
for value prior to scheduled maturity, scheduled repayment, or scheduled sinking
fund payment of any Indebtedness of such person subordinate in right of payment
to the Debentures.
"Restricted Subsidiary" means (i) any Subsidiary of the Issuer which exists
on the date of the Indenture and (ii) any other such Subsidiary which the Issuer
has not classified as an Unrestricted Subsidiary. The Issuer by resolution of
its Board of Directors may classify a Subsidiary as an Unrestricted Subsidiary
until such time as the Issuer may, by further resolution of its Board of
Directors, classify such Subsidiary as a Restricted Subsidiary.
"Sale and Leaseback Transaction" of any person means an arrangement with any
lender or investor or to which such lender or investor is a party providing for
the leasing by such person of any property or asset of such person which has
been or is being sold or transferred by such person more than 270 days after the
acquisition thereof or the completion of construction or commencement of
operation thereof to such lender or investor or to any person to whom funds have
been or are to be advanced by such lender or investor on the security of such
property or asset. The stated maturity of such arrangement shall be the date of
the last payment of rent or any other amount due under such arrangement prior to
the first date on which such arrangement may be terminated by the lessee without
payment of a penalty.
"Subsidiary" means, with respect to any person, (i) any corporation or other
entity of which a majority of the total voting power of the shares of capital
stock or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
is at the time owned directly or indirectly by such person or (ii) any
partnership or joint venture at least a majority of the voting power of which is
directly or indirectly owned by such person, whether in the form of membership,
general, special or limited partnership interests or otherwise.
"Unrestricted Subsidiary" means any Subsidiary of the Issuer which the
Issuer by resolution of its Board of Directors shall classify as an Unrestricted
Subsidiary and any such Subsidiary of an Unrestricted Subsidiary until such time
as (i) the Issuer may, by further resolution of its Board of Directors classify
such Subsidiary as a Restricted Subsidiary or (ii) the Issuer or any of its
Restricted Subsidiaries becomes directly or indirectly liable in respect of any
contractual obligation or Indebtedness of such Unrestricted Subsidiary. A
Subsidiary of the Issuer may only be classified as an Unrestricted Subsidiary if
immediately after such classification, there would not be a default or Event of
Default under the Indenture and the Issuer and its Restricted Subsidiaries would
have only Investments in such Subsidiary which would be permitted by the
"Limitation on Investments". An Unrestricted Subsidiary of the Issuer may only
be reclassified as a Restricted Subsidiary if immediately after giving effect to
such reclassification, there would be no default or Event of Default under the
Indenture and the Issuer could create, assume, guarantee or suffer to exist
$1.00 of additional Indebtedness (other than Permitted Indebtedness). No
Restricted Subsidiary may be reclassified as an Unrestricted Subsidiary. Any
valid classification shall be effective as of the date specified in the
applicable resolution of the Issuer's Board of Directors, which shall not be
prior to the date such resolution is made.
"Wholly-owned Restricted Subsidiary" means, with respect to any person, a
Restricted Subsidiary all of whose capital stock (other than directors'
qualifying shares) or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions and other equity interests are at the time owned directly or
indirectly by such person.
45
DESCRIPTION OF OTHER INDEBTEDNESS
After giving effect to the use of the proceeds of the Offering to repay
existing indebtedness as described under "Use of Proceeds," the Issuer's
consolidated long-term debt will be comprised of the Debentures and $122.5
million principal amount of the 11% Senior Notes. The Company and Reeves
Brothers are also party to the Bank Credit Agreement. The following is a summary
of certain provisions of the 11% Senior Notes and the Bank Credit Agreement.
This summary does not purport to be complete, and such provisions, including
definitions of certain terms are qualified in their entirety by reference to the
11% Senior Note Indenture and the Bank Credit Agreement. Copies of the 11%
Senior Note Indenture and the Bank Credit Agreement are exhibits to the
Registration Statement of which this Prospectus is a part.
11% SENIOR NOTES
The 11% Senior Notes, $122.5 million aggregate principal amount of which are
outstanding, bear interest at the rate of 11% per year, payable on January 15
and July 15 of each year in arrears. The 11% Senior Notes mature July 15, 2002
and are not subject to any mandatory redemption or sinking fund requirement.
The Company, at its option, may redeem the 11% Senior Notes in whole, or
from time to time in part, on or after July 15, 1997 at the redemption prices
(expressed as a percentage of the principal amount thereof) set forth below (in
each case together with accrued and unpaid interest to the redemption date):
IF REDEEMED DURING THE 12-MONTH PERIOD BEGINNING JULY 15, REDEMPTION PRICE
1997........................................................................ 104.125%
1998........................................................................ 102.750%
1999........................................................................ 101.375%
2000 and thereafter......................................................... 100.000%
The 11% Senior Notes are senior unsecured indebtedness of the Company,
ranking PARI PASSU with all existing and future senior unsecured indebtedness of
the Company and senior to any subordinated indebtedness. Upon a Change of
Control (as defined in 11% Senior Note Indenture, which definition is
substantially the same as that applicable to the Debentures), holders of the 11%
Senior Notes will have the right to require the Company to purchase their 11%
Senior Notes at 101% of the principal amount thereof, plus accrued interest, if
any, to the date of purchase. The 11% Senior Note Indenture contains numerous
financial covenants and prohibitions, some of which are, in some respects, more
restrictive than those in the Indenture.
BANK CREDIT AGREEMENT
In August 1992, the Company and Reeves Brothers entered into the Bank Credit
Agreement with a group of banks, which provides the Company and Reeves Brothers
with an aggregate $35,000,000 revolving line of credit (the "Revolving Loan")
and letter of credit facility. The Revolving Loan bears interest at the
Alternate Base Rate (as defined below) plus 1 1/2% or Eurodollar Rate plus
2 1/2%, at the election of the borrower. The Alternate Base Rate is defined as
the higher of the Prime Rate (6% at December 31, 1993), Base CD Rate plus 1%, or
the Federal Funds Effective Rate plus 1/2%. The applicable rates above the
Alternate Base Rate and Eurodollar Rate decline based on a ratio of earnings to
fixed charges, as defined. The Revolving Loan is due December 31, 1995. The
Revolving Loan is secured by, and availability of borrowings under the Revolving
Loan is based on, Reeves Brothers' accounts receivable and inventory. As of
December 31, 1993, the Company and Reeves Brothers had available borrowing
capacity, net of $1,415,000 of outstanding letters of credit, of $33,585,000. A
commitment fee of 1/2% per annum is required on the unused portion of the
Revolving Loan.
The Bank Credit Agreement contains certain restrictive covenants with
respect to the Company and Reeves Brothers including, among other things,
maintenance of working capital, limitations on the payments of dividends, the
incurrence of additional indebtedness and certain liens, restrictions on
46
capital expenditures, mergers or acquisitions, investments and transactions with
affiliates, and requires the maintenance of certain financial ratios and
compliance with certain financial tests and limitations.
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS CONCERNING THE DEBENTURES
The following discussion is a summary of certain federal income tax
considerations relevant to the purchase, ownership and disposition of the
Debentures by holders acquiring Debentures on original issue for cash, but does
not purport to be a complete analysis of all potential tax effects. The
discussion is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), applicable Treasury Regulations promulgated and proposed thereunder
(including recently finalized Treasury Regulations interpreting the original
issue discount provisions of section 1271 through 1275 of the Code which were
published on February 2, 1994 (the "OID Regulations")), Internal Revenue Service
("IRS") rulings and pronouncements and judicial decisions now in effect, all of
which are subject to change at any time by legislative, judicial or
administrative action. Any such changes may be applied retroactively in a manner
that could adversely affect a holder of the Debentures. The discussion also
assumes that holders will hold the Debentures as "capital assets" within the
meaning of section 1221 of the Code.
The Issuer has not sought and will not seek any rulings from the IRS with
respect to the positions of the Issuer discussed below. There can be no
assurance that the IRS will not take a different position concerning the tax
consequences of the purchase, ownership or disposition of the Debentures or that
any such position would not be sustained. Furthermore, the OID Regulations are
subject to varying interpretations and do not address all of the issues that
could affect holders of the Debentures.
The following is for general information only. The tax treatment of a holder
of Debentures may vary depending on such holder's particular situation or
status. Certain holders (including insurance companies, tax-exempt
organizations, financial institutions, broker-dealers and foreign entities and
individuals) may be subject to special rules not discussed below. In addition,
the description does not consider the effect of any applicable foreign, state,
local or other tax laws.
PURCHASERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF THE DEBENTURES, INCLUDING
THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
AMOUNT OF ORIGINAL ISSUE DISCOUNT
The succeeding discussion, and the discussions under "Taxation of Original
Issue Discount" and "Effect of Offer to Redeem and Optional Redemption on
Original Issue Discount," constitute a general discussion of original issue
discount followed by a description of reasonable positions that will be taken by
the Issuer (or that may be taken by the IRS) in applying the original issue
discount provisions of the Code and the OID Regulations to the Debentures.
The Debentures will be issued with original issue discount for federal
income tax purposes. As a result, a holder who purchases a Debenture generally
will be required to include original issue discount in gross income, for federal
income tax purposes, as it accrues, in advance of the receipt of cash payments
on Debentures (regardless of whether the holder is a cash or accrual basis
taxpayer). See "Taxation of Original Issue Discount" below.
The aggregate amount of original issue discount with respect to each
Debenture will be the excess of the "stated redemption price at maturity" of
such Debenture over its "issue price." The "issue price" of each Debenture will
be the first price at which a substantial amount of the Debentures is sold for
money (ignoring sales to bond houses, brokers, or similar persons or
organizations acting in the
47
capacity of underwriters, placement agents, or wholesalers). The "stated
redemption price at maturity" of each Debenture will include all cash payments
(including principal and interest) required to be made thereunder until
maturity, and each Debenture will therefore be issued subject to a substantial
amount of original issue discount.
TAXATION OF ORIGINAL ISSUE DISCOUNT
Each holder of a Debenture will be required to include in gross income an
amount equal to the sum of the "daily portions" of the original issue discount
of the Debenture for all days during the taxable year in which such Debenture is
held, including the purchase date and excluding the disposition date. The daily
portions of original issue discount required to be included in a holder's gross
income in a taxable year will be determined upon a constant interest rate basis
by allocating to each day during the taxable year in which the holder holds the
Debenture a PRO RATA portion of the original issue discount thereon which is
attributable to the "accrual period" in which such day is included. The amount
of the original issue discount attributable to each full accrual period will be
the product of the "adjusted issue price" of the Debenture at the beginning of
the accrual period and the yield to maturity of the Debenture (as determined by
semi-annual compounding). The adjusted issue price of a Debenture is the
original issue price of the Debenture plus the aggregate amount of original
issue discount that has previously accrued, and less any cash payments on the
Debenture. The yield to maturity is the discount rate that, when used in
computing the present value of all principal and interest payments to be made
under a Debenture, produces an amount equal to the issue price of the Debenture.
The "accrual periods" of a Debenture are each of the six-month periods
during the term of the Debenture that end on and of each year. The
initial accrual period of a Debenture is the short period beginning on the issue
date and ending on the day before the first day of the first full accrual
period. The amount of original issue discount attributable to such initial
accrual period may be computed under any reasonable method.
The Issuer is required to furnish certain information to the IRS, and will
furnish annually to record holders of the Debentures, information with respect
to original issue discount accruing during the calendar year (as well as
interest paid during that year). Because this information will be based upon the
adjusted issue price of the debt instrument as if the holder had purchased the
debt instrument on the issue date at the issue price, holders who purchase the
Debentures for an amount other than the adjusted issue price will be required to
determine for themselves the amount of original issue discount, if any, they are
required to report.
A subsequent purchaser of a Debenture having original issue discount will be
required to include annual accruals of original issue discount in gross income,
for federal income tax purposes, in accordance with the rules described above,
but the amount of the original issue discount or ordinary income required to be
reported may vary depending upon the amount paid for the debt instrument by the
subsequent purchaser. See "Acquisition Premium" and "Market Discount" below.
EFFECT OF OFFER TO REDEEM AND OPTIONAL REDEMPTION ON ORIGINAL ISSUE DISCOUNT
In the event of a Change of Control, the Issuer will be required to offer to
redeem all of the Debentures. The OID Regulations provide that the redemption of
the Debentures upon the occurrence of a Change of Control will not affect the
yield to maturity or the maturity date of the Debentures unless, based on all
the facts and circumstances as of the issue date, it is more likely than not
that a Change of Control giving rise to the redemption will occur. The Issuer
has no present intention of treating the redemption provisions of the Debentures
as affecting the computation of the yield to maturity of any Debenture.
The Issuer may redeem up to 50% of the Debentures at a premium above
Accreted Value under certain conditions during the first 36 months after the
Offering. Additionally, the Issuer may redeem the Debentures at any time on or
after , 1999. The Issuer has no present intention to exercise either
optional redemption right. The OID Regulations set forth special rules for
determining the "maturity date" and the "stated redemption price at maturity" of
a debt instrument that may be
48
redeemed prior to its stated maturity date at the option of the issuer. These
rules should not apply to treat the Issuer as exercising its optional redemption
rights with respect to the Debentures and, hence, should not affect the
determination of the yield to maturity of any Debenture.
ACQUISITION PREMIUM
If a purchaser purchases a Debenture at a cost that is in excess of its
"adjusted issue price" (I.E., its original issue price increased by the portion
of original issue discount previously includible in the gross income of prior
holders (determined without regard to any reduction of original issue discount
attributable to any acquisition premium paid by prior holders) and decreased by
all payments previously made on the Debenture) immediately after the Debenture's
acquisition by the purchaser and less than the stated redemption price at
maturity of the Debenture, the includible original issue discount (as otherwise
determined) for a taxable period will be reduced by an amount equal to the sum
of the daily portions of original issue discount (as otherwise determined to be
includible) for such taxable period multiplied by a fraction (a) the numerator
of which is such excess and (b) the denominator of which is the excess of the
sum of all amounts payable on the Debenture after the purchase date over the
Debenture's adjusted issue price. The OID Regulations permit the holder of a
Debenture purchased at an acquisition premium to elect to compute original issue
discount accruals by treating the purchase as a purchase at original issue and
applying the constant yield method.
MARKET DISCOUNT
Purchasers of Debentures (other than original public purchasers purchasing
at the issue price) should be aware that the gain on sale with respect to such
securities may be affected by the market discount provisions of the Code. The
market discount rules generally provide that if a holder of a debt instrument
purchases it at a "market discount" and thereafter realizes gain upon a
disposition or a retirement of the debt instrument, the lesser of such gain or
the portion of the market discount that has accrued on a straight-line basis (or
on a constant interest rate basis, if such basis of accrual has been elected by
the holder under section 1276(b) of the Code) while the debt instrument was held
by such holder will be taxed as ordinary income at the time of such disposition.
"Market discount" with respect to a Debenture is the amount by which the
"revised issue price" of a Debenture (I.E., the issue price increased by the
portion of original issue discount previously included in the gross income of
prior holders (determined without regard to any reduction of original issue
discount attributable to any acquisition premium) and decreased by all payments
previously made on the Debentures) exceeds the holder's basis in the Debenture
immediately after acquisition (unless such excess is less than .25% of the
stated redemption price at maturity of the Debenture times the number of
complete years from the acquisition by such holder to maturity, in which case
there is no "market discount"). If a holder makes a gift of a Debenture, accrued
market discount, if any, will be recognized as if such holder had sold such
Debenture for a price equal to its fair market value. The disposition of a
Debenture at the death of a holder, however, should not result in the
recognition of income under the market discount rules. The market discount rules
also provide that a holder who acquires a Debenture at a market discount may be
required to defer a portion of any interest expense that otherwise may be
deductible on any indebtedness incurred or maintained to purchase or carry such
Debenture until the holder disposes of the Debenture in a taxable transaction.
The Debentures provide for optional redemption, in whole or in part, and, in
the case of a Change of Control mandatory offer to redeem, prior to maturity. If
the Debentures were redeemed, a holder generally would be required to include in
gross income as ordinary income, for federal income tax purposes, the portion of
the payment which is attributable to accrued market discount on the Debentures,
if any.
A holder of Debentures acquired at a market discount may elect to include
market discount in gross income, for federal income tax purposes, as the
discount accrues either on a straight-line basis or on a constant interest rate
basis. This current inclusion election, once made, applies to all market
discount obligations acquired on or after the first day of the first taxable
year to which the election applies, and may not be revoked without the consent
of the IRS. If a holder of Debentures makes such
49
an election, the foregoing rules with respect to the recognition of ordinary
income on sales and other dispositions of such debt instruments, and with
respect to the deferral of interest deductions on indebtedness incurred or
maintained to purchase or carry such debt instruments, would not apply.
SALE, EXCHANGE, REDEMPTION, RETIREMENT, DEFEASANCE OR OTHER DISPOSITION
In general, the holder of a Debenture will recognize gain or loss upon the
sale, exchange, redemption, retirement or other disposition of such debt
instrument measured by the difference between (a) the amount of cash and fair
market value of property received in exchange therefor and (b) the holder's
adjusted tax basis in such debt instrument.
A holder's initial tax basis in a Debenture will be equal to the price paid
by such holder for such Debenture. The holder's initial tax basis in a Debenture
will be increased from time to time by the portion of original issue discount
previously included in gross income to the date of disposition (and the accruals
of market discount, if any, which the holder has previously elected to include
in gross income on an annual basis) and decreased from time to time to reflect
the receipt of any payments on such Debenture.
If the Issuer exercises its right to defease its obligations under the
Debentures (as more fully described in "Description of the Debentures --
Defeasance"), but does not satisfy the requirements necessary to be Discharged
(as defined in the Indenture), it is possible that such a defeasance might be
treated for federal income tax purposes as a taxable exchange of the Debentures
for beneficial interests in the trust. If a taxable exchange is deemed to have
occurred, then each holder of a Debenture would recognize gain or loss equal to
the difference between (a) the holder's adjusted tax basis in the Debenture and
(b) the fair market value of the holder's interest in the trust, and thereafter
such holder would be required to include in income a pro rata share of the
income, gain and loss of the trust.
Any gain or loss on the sale, exchange, redemption, retirement, defeasance
or other disposition of a Debenture should be capital gain or loss (except as
discussed in "Market Discount" above), provided the Debenture was a capital
asset in the hands of the holder. Any capital gain or loss would be long-term
capital gain or loss if the debt instrument had been held for more than one year
and otherwise would be short-term capital gain or loss.
BACKUP WITHHOLDING
The backup withholding rules require a payor to deduct and withhold a tax if
(a) the payee fails to furnish a taxpayer identification number ("TIN") to the
payor, (b) the IRS notifies the payor that the TIN furnished by the payee is
incorrect, (c) the payee has failed to report properly the receipt of
"reportable payments" on several occasions and the IRS has notified the payor
that withholding is required, or (d) there has been a failure of the payee to
certify under the penalty of perjury that a payee is not subject to withholding
under section 3406 of the Code. As a result, if any one of the events discussed
above occurs, the Issuer, the Company, its paying agent or other withholding
agent will be required to withhold a tax equal to 31% of any "reportable
payment" made in connection with the Debentures. A "reportable payment"
includes, among other things, interest actually paid, original issue discount
and amounts paid through brokers in retirement of securities. Any amounts
withheld from a payment to a holder under the backup withholding rules will be
allowed as a refund or credit against such holder's federal income tax, provided
that the required information is furnished to the IRS. Certain holders
(including, among others, corporations and certain tax exempt organizations) are
not subject to the backup withholding and information reporting requirements.
HIGH YIELD DISCOUNT OBLIGATIONS
The deduction by the Issuer of original issue discount and interest payments
with respect to the Debentures would be limited by section 163(e)(5) of the Code
if the Debentures were "applicable high yield discount obligations," as defined
in section 163(i) of the Code. The Issuer anticipates that the Debentures will
not be applicable high yield discount obligations because it is expected that
the yield to maturity on the Debentures will be less than the sum of the
applicable federal long-term rate in
50
effect at the time of issuance of the Debentures (the "AFR," which is 6.64% for
April 1994), plus five percentage points. If the Debentures were applicable high
yield discount obligations, then no amount of the original issue discount on the
Debentures would be deductible by the Issuer until paid, and no deduction would
be allowed for the portion of the original issue discount that represents the
excess of the yield to maturity of the Debentures over the sum of the AFR plus
six percentage points. For corporate holders, the non-deductible portion of the
original issue discount will be treated as a dividend for purposes of sections
243, 246 and 246A of the Code (relating to dividends received deductions) to the
extent that such amount would have been treated as a dividend if it had been a
distribution made by the Issuer with respect to its stock.
THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF UNITED STATES FEDERAL
INCOME TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER. ACCORDINGLY,
PURCHASERS OF THE DEBENTURES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT
TO THE TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE
DEBENTURES, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement among the
Issuer, the Company, Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ")
and Merrill Lynch, Pierce, Fenner & Smith Incorporated (together with DLJ, the
"Underwriters"), the Underwriters severally have agreed to purchase from the
Issuer and the Issuer has agreed to sell to the Underwriters the following
respective principal amounts of the Debentures:
UNDERWRITER
Donaldson, Lufkin & Jenrette Securities Corporation......................... $
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.....................................................
-------------
Total................................................................... $
-------------
-------------
The Underwriting Agreement provides that the obligations of the Underwriters
thereunder are subject to certain conditions precedent. The Underwriting
Agreement also provides that the Issuer and the Company will indemnify the
Underwriters against certain liabilities and expenses, including liabilities
under the Securities Act, or will contribute to payments that the Underwriters
may be required to make in respect thereof. The nature of the Underwriters'
obligations is such that they are committed to purchase all of the Debentures if
any Debentures are purchased.
The Underwriters propose to offer the Debentures directly to the public
initially at the public offering price of the Debentures set forth on the cover
page of this Prospectus. After the initial public offering of the Debentures,
the offering price and other selling terms may be changed by the Underwriters.
The Underwriters have advised the Issuer that sales of the Debentures may be
made to certain selected dealers at a concession not in excess of % of the
principal amount of Debentures and that the Underwriters may allow, and such
dealers may re-allow, concessions not to exceed % of the principal amount of
Debentures to certain other dealers.
The Underwriters have advised the Issuer that they do not intend to confirm
sales to accounts over which they exercise discretionary authority.
The Debentures will not be listed on any securities exchange nor will they
be qualified for inclusion on the National Association of Securities Dealers
Automated Quotation System. The Debentures will be tradable in the secondary
market, but any such trading may be limited and sporadic. The Underwriters have
advised the Issuer that they intend to act as market makers for the Debentures.
However, any such market-making may be discontinued by the Underwriters at any
time in the Underwriters' sole discretion. No assurance can be given as to the
liquidity of the trading market for the Debentures.
51
The Underwriters acted as underwriters for the public offering of the 11%
Senior Notes and may render other services to the Issuer and its subsidiaries
from time to time.
LEGAL MATTERS
Certain legal matters with respect to the Debentures offered hereby will be
passed upon for the Issuer by Cadwalader, Wickersham & Taft, New York, New York
and for the Underwriters by Cahill Gordon & Reindel, a partnership including a
professional corporation, New York, New York.
EXPERTS
The balance sheet of Reeves Holdings, Inc. as of March 9, 1994 and the
consolidated financial statements of Reeves Industries, Inc. as of December 31,
1992 and 1993, and for each of the three years in the period ended December 31,
1993 included in this Prospectus have been so included in reliance on the report
of Price Waterhouse, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
52
EXPLANATORY NOTE:
All of the outstanding capital stock of Reeves will be transferred to the
Issuer prior to the issuance of the Debentures. Since Reeves will be the sole
subsidiary of the Issuer, the consolidated financial data of the Issuer are
those of Reeves.
REEVES HOLDINGS, INC.
INDEX TO FINANCIAL STATEMENTS
PAGE
REEVES HOLDINGS, INC.
Report of Independent Accountants........................................................................ F-2
Balance Sheet at March 9, 1994........................................................................... F-3
Notes to Balance Sheet................................................................................... F-4
REEVES INDUSTRIES, INC.
Report of Independent Accountants........................................................................ F-5
Consolidated Balance Sheet at December 31, 1992 and 1993................................................. F-6
Consolidated Statement of Income for the years ended December 31, 1991, 1992 and 1993.................... F-7
Consolidated Statement of Changes in Stockholder's Equity for the years ended December 31, 1991, 1992 and
1993.................................................................................................... F-8
Consolidated Statement of Cash Flows for the years ended December 31, 1991, 1992 and 1993................ F-9
Notes to Consolidated Financial Statements............................................................... F-10
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Reeves Holdings, Inc.
In our opinion, the accompanying balance sheet presents fairly, in all material
respects, the financial position of Reeves Holdings, Inc. at March 9, 1994 in
conformity with generally accepted accounting principles. This financial
statement is the responsibility of the Issuer's management; our responsibility
is to express an opinion on this financial statement based on our audit. We
conducted our audit in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Atlanta, Georgia
March 9, 1994, except as to Note 2,
which is as of March 31, 1994
F-2
REEVES HOLDINGS, INC.
BALANCE SHEET
MARCH 9, 1994
- --------------------------------------------------------------------------------
MARCH 9,
1994
-----------
ASSETS
Cash.................................................................................................... $ 1,000
-----------
-----------
STOCKHOLDER'S EQUITY
Preferred stock, $.01 par value, 100,000 shares authorized
Common stock, $.01 par value, 1,000 shares authorized;
100 shares issued and outstanding...................................................................... $ 1
Capital in excess of par value.......................................................................... 999
-----------
Total stockholder's equity........................................................................ $ 1,000
-----------
-----------
The accompanying notes are an integral part of this financial statement.
F-3
REEVES HOLDINGS, INC.
NOTES TO BALANCE SHEET
MARCH 9, 1994
- --------------------------------------------------------------------------------
1. BUSINESS AND ORGANIZATION
Reeves Holdings, Inc., (the "Issuer") a wholly-owned subsidiary of Hart
Holding Company Incorporated, is a Delaware corporation organized on March 9,
1994 through a capital contribution of $1,000 for the purpose of holding all of
the outstanding capital stock of Reeves Industries, Inc.
Reeves Industries, Inc. is a wholly-owned subsidiary of Hart Holding Company
Incorporated whose principal asset is the common stock of its wholly-owned
subsidiary Reeves Brothers, Inc. Reeves Brothers, Inc. is a diversified
industrial company engaged in two business segments; industrial coated fabrics
and apparel textiles.
2. SUBSEQUENT EVENT
On March 31, 1994 the Issuer filed a Registration Statement on Form S-1
under the Securities Act of 1933, as amended, for the purpose of offering Senior
Discount Debentures due 2006 anticipated to yield proceeds of approximately
$100,000,000. As of March 31, 1994 the Reeves Industries, Inc.'s common stock
has not been contributed to the Issuer.
F-4
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Reeves Industries, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in stockholder's equity and of
cash flows present fairly, in all material respects, the financial position of
Reeves Industries, Inc. and its subsidiary at December 31, 1992 and 1993, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1993, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Notes 2 and 8 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1992.
PRICE WATERHOUSE
Atlanta, Georgia
February 11, 1994, except as to Note 16,
which is as of March 31, 1994
F-5
REEVES INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------
DECEMBER 31,
------------------------
1992 1993
----------- -----------
ASSETS
Current assets
Cash and cash equivalents of $3,936 and $7,222..................................... $ 4,165 $ 12,015
Accounts receivable, less allowance for doubtful accounts of $1,570 and $1,467..... 38,876 45,925
Inventories (Note 4)............................................................... 35,310 33,969
Deferred income taxes (Note 8)..................................................... 6,477 5,442
Other current assets............................................................... 9,814 3,300
Investment in discontinued operations (Note 3)..................................... 2,466
----------- -----------
Total current assets............................................................. 97,108 100,651
Property, plant and equipment, at cost less accumulated depreciation (Note 5)........ 43,526 51,415
Unamortized financing costs, less accumulated amortization of $550 and $1,177........ 4,390 3,946
Goodwill, less accumulated amortization of $8,091 and $9,431......................... 44,697 43,357
Deferred income taxes (Note 8)....................................................... 1,951 2,153
Other assets......................................................................... 603 1,503
Investment in discontinued operations (Note 3)....................................... 656
----------- -----------
Total assets..................................................................... $ 192,931 $ 203,025
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable................................................................... $ 15,352 $ 22,810
Accrued expenses and other liabilities (Note 6).................................... 18,991 21,197
Liabilities related to discontinued operations (Note 3)............................ 3,367
----------- -----------
Total current liabilities........................................................ 37,710 44,007
Long-term debt (Note 7).............................................................. 132,576 132,677
Deferred income taxes (Note 8)....................................................... 4,505 4,367
Other liabilities.................................................................... 563
Liabilities related to discontinued operations (Note 3).............................. 2,575
----------- -----------
Total liabilities................................................................ 177,366 181,614
----------- -----------
Stockholder's equity (Note 10)
Common stock, $.01 par value, 50,000,000 shares authorized; 34,967,973 and
35,021,666 shares issued and outstanding.......................................... 350 350
Capital in excess of par value..................................................... 5,069 5,099
Retained earnings.................................................................. 12,107 19,964
Equity adjustments from translation................................................ (1,961) (4,002)
----------- -----------
Total stockholder's equity....................................................... 15,565 21,411
----------- -----------
Commitments and contingencies (Note 15)
----------- -----------
Total liabilities and stockholder's equity....................................... $ 192,931 $ 203,025
----------- -----------
----------- -----------
The accompanying notes are an integral part of these financial statements.
F-6
REEVES INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------
1991 1992 1993
----------- ----------- -----------
Net sales.................................................................. $ 269,559 $ 271,104 $ 283,653
Cost of sales.............................................................. 216,179 216,043 222,016
----------- ----------- -----------
Gross profit on sales...................................................... 53,380 55,061 61,637
Selling, general and administrative expenses............................... 27,754 29,294 32,540
Facility restructuring charges (Note 3).................................... 1,003
----------- ----------- -----------
Operating income........................................................... 25,626 25,767 28,094
Other income (expense)
Other income, net........................................................ 1,068 435 158
Interest expense and amortization of financing costs and debt
discounts............................................................... (21,777) (17,633) (16,394)
----------- ----------- -----------
(20,709) (17,198) (16,236)
----------- ----------- -----------
Income from continuing operations before income taxes, extraordinary item
and cumulative effect of a change in accounting principle................. 4,917 8,569 11,858
Income taxes (Note 8)...................................................... 373 2,593 4,001
----------- ----------- -----------
Income from continuing operations.......................................... 4,544 5,976 7,857
Discontinued operations
Net gain on disposal of discontinued operations, less applicable income
tax provision of $1,732 (Note 3)........................................ 2,830
----------- ----------- -----------
2,830
----------- ----------- -----------
Income before extraordinary item and cumulative effect of a change in
accounting principle...................................................... 7,374 5,976 7,857
Extraordinary loss from early extinguishment of debt, less applicable
income tax benefits of $3,148 (Note 7).................................... (6,112)
Cumulative effect of a change in accounting for income taxes (Note 8)...... 3,221
----------- ----------- -----------
Net income................................................................. $ 7,374 $ 3,085 $ 7,857
----------- ----------- -----------
----------- ----------- -----------
Earnings per common share (Note 10)
Primary and fully diluted
Income from continuing operations...................................... $ .23 $ .16 $ .22
Income before extraordinary item and cumulative effect of a change in
accounting principle.................................................. .39 .16 .22
Cumulative effect of a change in accounting for income taxes........... .09
Net income............................................................. .39 .08 .22
Weighted average number of common shares outstanding
Primary and fully diluted................................................ 18,118 36,724 34,978
The accompanying notes are an integral part of these financial statements.
F-7
REEVES INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
(IN THOUSANDS)
- --------------------------------------------------------------------------------
CAPITAL
SERIES I IN
PREFERRED STOCK COMMON STOCK EXCESS EQUITY
$1.00 PAR VALUE $0.01 PAR VALUE OF ADJUSTMENTS
----------------- ----------------- PAR RETAINED FROM
SHARES AMOUNT SHARES AMOUNT VALUE EARNINGS TRANSLATION TOTAL
------- ------- ------- ------- ------- ------- ------- -------
Balance at December 31, 1990.................. 1 $5,001 18,066 $ 181 $1,608 $1,648 $4,757 $13,195
Net income.................................... 7,374 7,374
Exchange of preferred stock for common
stock........................................ (1) (5,001 ) 18,820 188 4,813
Translation adjustments....................... (92 ) (92)
------- ------- ------- ------- ------- ------- ------- -------
Balance at December 31, 1991 36,886 369 6,421 9,022 4,665 20,477
Net income.................................... 3,085 3,085
Translation adjustments....................... (6,626 ) (6,626)
Purchase and cancellation of common stock..... (1,918) (19 ) (1,352 ) (1,371)
------- ------- ------- ------- ------- ------- ------- -------
Balance at December 31, 1992 34,968 350 5,069 12,107 (1,961 ) 15,565
Net income.................................... 7,857 7,857
Translation adjustments....................... (2,041 ) (2,041)
Issuance of common stock...................... 535 5 295 300
Purchase and cancellation of common stock..... (481) (5 ) (265 ) (270)
------- ------- ------- ------- ------- ------- ------- -------
Balance at December 31, 1993.................. 35,022 $ 350 $5,099 $19,964 $(4,002) $21,411
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
The accompanying notes are an integral part of these financial statements.
F-8
REEVES INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------
1991 1992 1993
--------- ------------ ----------
Cash flows from operating activities
Net income................................................................ $ 7,374 $ 3,085 $ 7,857
Adjustments to reconcile net income to net cash provided by operating
activities
Write-off of financing costs due to early extinguishment of debt........ 6,112
Cumulative effect of a change in accounting for income taxes............ (3,221)
Net gain on disposal of discontinued operations......................... (2,830)
Depreciation and amortization........................................... 8,388 9,146 9,272
Deferred income taxes................................................... 601 (112) 694
Changes in operating assets and liabilities
Decrease (increase) in accounts receivable............................ 565 2,574 (7,049)
Decrease in inventories............................................... 486 4,200 1,341
(Increase) decrease in other current assets........................... (1,949) (9,167) 6,514
(Increase) decrease in other assets................................... (254) 134 (900)
Increase (decrease) in accounts payable............................... 492 (546) 7,458
(Decrease) increase in accrued expenses and other liabilities......... (4,920) 6,451 133
Equity adjustments from translation................................... (356) (3,450) (117)
--------- ------------ ----------
Net cash provided by operating activities................................. 7,597 15,206 25,203
--------- ------------ ----------
Cash flows from investing activities
Purchases of property, plant and equipment................................ (11,015) (15,788) (16,506)
Net proceeds (payments) from disposal of discontinued operations.......... 2,331 12,438 (536)
--------- ------------ ----------
Net cash used by investing activities..................................... (8,684) (3,350) (17,042)
--------- ------------ ----------
Cash flows from financing activities
Principal payments of long-term debt...................................... (56) (108,726)
Net payments on revolving loans........................................... (30,000)
Borrowings of long-term debt.............................................. 121,644
Debt issuance costs....................................................... (5,115)
Premium on early retirement of debt....................................... (4,876)
Purchases of common stock................................................. (1,075) (270)
Issuance of common stock.................................................. 300
--------- ------------ ----------
Net cash (used) provided by financing activities.......................... (56) (28,148) 30
--------- ------------ ----------
Effect of exchange rate changes on cash..................................... 122 (535) (341)
--------- ------------ ----------
(Decrease) increase in cash and cash equivalents............................ (1,021) (16,827) 7,850
Cash and cash equivalents, beginning of year................................ 22,013 20,992 4,165
--------- ------------ ----------
Cash and cash equivalents, end of year...................................... $ 20,992 $ 4,165 $ 12,015
--------- ------------ ----------
--------- ------------ ----------
The accompanying notes are an integral part of these financial statements.
F-9
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1993
- --------------------------------------------------------------------------------
1. BUSINESS AND ORGANIZATION
Reeves Industries, Inc. ("Reeves" or the "Company"), a wholly-owned
subsidiary of Hart Holding Company Incorporated ("Hart Holding"), is a holding
company whose principal asset is the common stock of its wholly-owned
subsidiary, Reeves Brothers, Inc. ("Reeves Brothers"). The Company was acquired
by Hart Holding on May 6, 1986. Reeves Brothers is a diversified industrial
company engaged in two business segments: industrial coated fabrics and apparel
textiles.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Reeves Brothers. All significant intercompany
balances and transactions have been eliminated.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost for
approximately 29% and 27% of total inventories was determined on the last-in,
first-out (LIFO) method at December 31, 1992 and 1993, respectively. With
respect to the remainder of the inventories, cost is determined principally on
the first-in, first-out (FIFO) method. Market is determined on the basis of
replacement costs or selling prices less costs of disposal. The application of
Accounting Principles Board Opinion No. 16, "Business Combinations," for the
acquisition of Reeves caused the inventories in the accompanying consolidated
balance sheet to exceed inventories used for income tax purposes by
approximately $7,320,000 as of December 31, 1993.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Improvements which extend
the useful lives of the assets are capitalized while repairs and maintenance are
charged to operations as incurred. Depreciation is provided using primarily the
straight-line method for financial reporting purposes while accelerated methods
are used for income tax purposes. When assets are replaced or otherwise disposed
of, the cost and related accumulated depreciation are removed from the accounts
and any gain or loss is reflected in income.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash, accounts receivable, accounts payable and accrued expenses and other
liabilities are reflected in the financial statements at fair value because of
the short-term maturity of these instruments. The fair value of the Company's
debt instruments is determined based upon a recent market price quote and is
disclosed in Note 7. The fair value of the foreign exchange contracts (used for
hedging purposes) is estimated using quoted exchange rates and is disclosed in
Note 11.
FOREIGN CURRENCY EXCHANGE AND TRANSLATION
For Reeves Brothers' wholly-owned foreign subsidiary, the local currency of
the country of operation is used as the functional currency for purposes of
translating the local currency asset and liability accounts at current exchange
rates into the reporting currency. The resulting translation adjustments are
accumulated as a separate component of stockholder's equity reflected in the
equity adjustments from translation account in the accompanying consolidated
financial statements. Gains and losses resulting from translating asset and
liability accounts that are denominated in currencies other than the functional
currency are included in income.
F-10
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1993
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
AMORTIZATION POLICY
The Company is amortizing goodwill on a straight-line basis over forty
years. Financing costs and debt discounts are being amortized by the interest
method over the life of the respective debt securities. Pre-operating costs
associated with the start-up of significant new operations are deferred and
amortized over five years.
REVENUE RECOGNITION
Sales are generally recorded when the goods are shipped. At the customer's
request, shipment of the completed product is sometimes delayed. In such
instances, revenues are recognized when the customer acknowledges transfer of
title and accepts the related billing.
INCOME TAXES
The Company is a member of an affiliated group of which Hart Holding is the
common parent. Pursuant to a tax allocation agreement with Hart Holding, the
Company files a consolidated federal income tax return with Hart Holding. Under
the agreement, the Company's tax liability is determined on a separate return
basis and any taxes payable are remitted to Hart Holding.
During 1992, the Company adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" (FAS 109). Income tax accounting
information is disclosed in Note 8 to the consolidated financial statements.
For the years ended December 31, 1992 and 1993, the provision for income
taxes was based on reported earnings before income taxes, and includes
appropriate provisions for deferred income taxes resulting from the tax effect
of the differences between the tax basis of assets and liabilities and their
carrying amounts for financial reporting purposes. Prior to January 1, 1992,
deferred income taxes arose from the reporting of certain expenses, principally
depreciation, pension costs and other expenses, differently for financial
reporting purposes than for income tax reporting purposes.
At December 31, 1993, unremitted earnings of Reeves Brothers' foreign
subsidiary were approximately $19,500,000. United States income taxes have not
been provided on these unremitted earnings as it is the Company's intention to
indefinitely reinvest these earnings. However, Reeves Brothers' foreign
subsidiary has, in previous years, remitted a portion of its current year
earnings as dividends and expects to continue this practice in the future.
PENSION PLANS
The Company has noncontributory pension plans covering all eligible domestic
employees (Note 9).
EARNINGS PER SHARE
Earnings per share are computed based on the weighted average number of
common and common equivalent shares, where dilutive, outstanding during each
period. A deduction has been made for cumulative preferred dividends earned
during such periods the preferred stock was outstanding even though such
dividends were not declared or paid. Fully diluted earnings per share are
computed assuming that outstanding warrants, where dilutive, were exercised at
the beginning of the period or date of issuance, if later. Supplemental earnings
per share data is provided giving effect to the exchange of preferred stock for
common stock as discussed in Note 10.
STATEMENT OF CASH FLOWS
For purposes of the statement of cash flows, cash equivalents are defined as
highly liquid investment securities with an original maturity of three months or
less.
F-11
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1993
- --------------------------------------------------------------------------------
3. DISCONTINUED OPERATIONS AND FACILITY RESTRUCTURING CHARGES
During 1990 the Company elected to dispose of the operations of its ARA
Automotive Group. The Company has realized all of the significant assets and
continues to settle remaining estimated liabilities related to the discontinued
operation. The remaining estimated amounts to settle such liabilities have been
included in accrued expenses and other liabilities as of December 31, 1993.
During 1993, a facility restructuring plan was implemented to reduce the
Company's overall cost structure and to improve productivity. The Consolidated
Statement of Income includes a charge of approximately $1,003,000 related to
this plan. The plan included the cessation of weaving activities at one location
and conversion of that facility into a captive yarn mill, consolidating weaving
capacity at remaining facilities and implementing cost saving/state-of-the-art
finishing technology.
4. INVENTORIES
Inventories at December 31, 1992 and 1993, are comprised of the following
(in thousands):
1992 1993
Raw materials....................................................... $ 7,084 $ 6,815
Work in process..................................................... 8,777 8,792
Manufactured and finished goods..................................... 19,449 18,362
--------- ---------
$ 35,310 $ 33,969
--------- ---------
--------- ---------
If inventories had been calculated on a current cost basis, they would have
been valued higher by approximately $2,933,000 and $2,038,000 at December 31,
1992 and 1993, respectively.
5. PROPERTY, PLANT AND EQUIPMENT
The principal categories of property, plant and equipment at December 31,
1992 and 1993, are as follows (in thousands):
1992 1993
Land and land improvements........................................ $ 794 $ 797
Buildings and improvements........................................ 14,355 16,654
Machinery and equipment........................................... 56,801 65,400
---------- ----------
71,950 82,851
Less -- Accumulated depreciation and amortization................. (28,424) (31,436)
---------- ----------
$ 43,526 $ 51,415
---------- ----------
---------- ----------
F-12
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1993
- --------------------------------------------------------------------------------
6. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities at December 31, 1992 and 1993, are
comprised of the following (in thousands):
1992 1993
Accrued salaries, wages and incentives.............................. $ 3,013 $ 3,145
Product claims reserve.............................................. 1,277 1,237
Interest payable.................................................... 6,493 6,512
Income taxes payable................................................ 530 548
Deferred compensation............................................... 1,322 1,187
Accrued costs related to discontinued operations.................... 145 1,390
Italian severance pay program....................................... 2,405 2,391
Other............................................................... 3,806 4,787
--------- ---------
$ 18,991 $ 21,197
--------- ---------
--------- ---------
7. LONG-TERM DEBT
Long-term debt at December 31, 1992 and 1993, consists of the following (in
thousands):
1992 1993
11% Senior Notes due July 15, 2002, net of unamortized discount
of $835 and $747................................................ $ 121,665 $ 121,753
13 3/4% Subordinated Debentures due May 1, 2000, net of
unamortized discount of $89 and $76............................. 10,911 10,924
----------- -----------
$ 132,576 $ 132,677
----------- -----------
----------- -----------
In June 1992, the Company completed a public offering of $122,500,000 of 11%
Senior Notes due 2002 (the "Senior Notes"). Proceeds of the offering were used
to redeem all of the Company's then outstanding 12 1/2% Senior Notes and 13%
Senior Subordinated Debentures and to pay and terminate the revolving loan
outstanding under a prior loan agreement.
In connection with the liquidation of the 12 1/2% Senior Notes, the 13%
Senior Subordinated Debentures and the prior revolving loan, the Company paid
early payment premiums of $4,601,000 and wrote off related debt issuance costs
and debt discounts of $3,016,000. In addition, during 1992, the Company
purchased $5,000,000 face value of its 13 3/4% Subordinated Debentures for
$5,275,000. As a result of these transactions, the Company recognized an
extraordinary loss of $5,775,000 ($.16 per share), net of applicable income tax
benefits of $2,974,000.
The Company is required to make sinking fund payments with respect to the
remaining 13 3/4% Subordinated Debentures of $6,000,000 on May 1, 1999 and
$5,000,000 on May 1, 2000.
On August 7, 1992, the Company and Reeves Brothers entered into the Bank
Credit Agreement with a group of banks, which was amended in 1993, and which
provides the Company and Reeves Brothers with an aggregate $35,000,000 revolving
line of credit (the "Revolving Loan") and letter of credit facility. The
Revolving Loan bears interest at the Alternate Base Rate (defined below) plus
1 1/2% or Eurodollar Rate plus 2 1/2%, at the election of the borrower. The
Alternate Base Rate is defined as the higher of the Prime Rate (6% at December
31, 1993), Base CD Rate plus 1%, or the Federal Funds Effective Rate plus 1/2%.
The applicable rates above the Alternate Base Rate and Eurodollar Rate decline
based on a ratio of earnings to fixed charges, as defined. The Revolving Loan is
due December 31, 1995. The Revolving Loan is secured by Reeves Brothers'
accounts receivable and inventories.
F-13
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1993
- --------------------------------------------------------------------------------
7. LONG-TERM DEBT (CONTINUED)
As of December 31, 1993, the Company and Reeves Brothers had available
borrowings, net of $1,415,000 of outstanding letters of credit, of $33,585,000.
A commitment fee of 1/2% per annum is required on the unused portion of the
Revolving Loan.
The Senior Notes, Revolving Loan, and 13 3/4% Subordinated Debentures
contain certain restrictive covenants with respect to Reeves and Reeves Brothers
including, among other things, maintenance of working capital, limitations on
the payments of dividends, the incurrence of additional indebtedness and certain
liens, restrictions on capital expenditures, mergers or acquisitions,
investments and transactions with affiliates, and require the maintenance of
certain financial ratios and compliance with certain financial tests and
limitations.
Interest paid amounted to $18,155,000, $12,350,000 and $15,306,000 in 1991,
1992 and 1993, respectively.
The estimated fair value of the Company's 11% Senior Notes and 13 3/4%
Subordinated Debentures at December 31, 1993 is $131,075,000 and $12,980,000,
respectively.
8. INCOME TAXES
During the third quarter of 1992, the Company adopted FAS 109 effective as
of the beginning of 1992. Under FAS 109, in the year of adoption, previously
reported results of operations for the year are restated to reflect the effects
of applying FAS 109, and the cumulative effect of adoption on prior years'
results of operations is shown in the income statement in the year of change.
The adoption of FAS 109 did not have a material effect on the Company's 1992
income from continuing operations before income taxes.
The provision (benefit) for income taxes from continuing operations is
comprised of the following (in thousands):
1991 1992 1993
Current
Federal..................................................... $ (2,698) $ (401) $ 1,278
Foreign..................................................... 354 954 811
State....................................................... 147 174 138
--------- --------- ---------
(2,197) 727 2,227
--------- --------- ---------
Deferred
Federal..................................................... 1,770 983 945
Foreign..................................................... 641 826
State....................................................... 800 242 3
--------- --------- ---------
2,570 1,866 1,774
--------- --------- ---------
$ 373 $ 2,593 $ 4,001
--------- --------- ---------
--------- --------- ---------
F-14
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1993
- --------------------------------------------------------------------------------
8. INCOME TAXES (CONTINUED)
The provision (benefit) for income taxes from continuing operations differs
from taxes computed using the statutory federal income tax rate as follows (in
thousands):
1991 1992 1993
Consolidated computed statutory taxes......................... $ 1,672 $ 2,914 $ 4,050
State income taxes, net of federal income tax benefit......... 412 275 93
Amortization of goodwill...................................... 393 456 456
Foreign tax rate less than statutory rate..................... (2,081) (868) (1,451)
Valuation reserve............................................. 800
Other, net.................................................... (23) (184) 53
--------- --------- ---------
$ 373 $ 2,593 $ 4,001
--------- --------- ---------
--------- --------- ---------
In 1990, Reeves Brothers' foreign subsidiary implemented a reorganization
allowed under the applicable country's income tax laws. This transaction
resulted in the foreign subsidiary revaluing upward its net assets for income
tax purposes. Additional depreciation and amortization relating to this
revaluation is deductible in determining income tax expense for both financial
and income tax reporting. The effect of this revaluation resulted in the foreign
subsidiary's effective income tax rate declining from its statutory rate of
approximately 46% to 5% for 1991. Due to tax rate increases, other tax law
changes, and the adoption of FAS 109, the foreign subsidiary's effective income
tax rate for both 1992 and 1993 is approximately 22% versus the statutory rate
of 52.2%.
The provision from continuing operations for deferred federal income taxes
for 1991, the year prior to the effective date of adoption of FAS 109, is
comprised of timing differences related to provisions for items not deductible
until incurred, principally product claims, bad debts and insurance,
depreciation and amortization, compensation agreements and pension costs.
Deferred tax liabilities and assets under FAS 109 are comprised of the
following temporary differences (in thousands):
1992 1993
Deferred tax liabilities
Inventories......................................................... $ 2,523 $ 2,584
Depreciation........................................................ 1,982 1,783
--------- ---------
Total deferred tax liabilities.................................... $ 4,505 $ 4,367
--------- ---------
--------- ---------
Deferred tax assets
Current
Tentative minimum tax credits..................................... $ 854 $ 854
Accrued expenses.................................................. 3,677 3,490
Foreign tax credit carryforwards.................................. 1,946 1,898
Valuation reserve................................................. (800)
--------- ---------
6,477 5,442
--------- ---------
Long-term
Depreciation on foreign subsidiary assets......................... 1,951 1,219
Foreign exchange.................................................. 934
--------- ---------
1,951 2,153
--------- ---------
Total deferred tax assets....................................... $ 8,428 $ 7,595
--------- ---------
--------- ---------
F-15
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1993
- --------------------------------------------------------------------------------
8. INCOME TAXES (CONTINUED)
In adopting FAS 109, the Company recorded deferred tax assets which included
foreign tax credit carryovers and the benefits of future depreciation related to
Reeves Brothers' foreign subsidiary. The realization of these deferred tax
assets is evaluated annually based on expected future taxable income and the
carryover period of the credits. During 1993, the Company established an
$800,000 valuation reserve against the benefit for utilization of foreign tax
credits. The Company has foreign tax credit carry forwards of $1,898,000 of
which $1,680,000 expire in 1994 and $218,000 expire at varying dates through
1997. The valuation reserve was established based on the Company's estimate of
foreign source taxable income expected to be received from Reeves Brothers'
foreign subsidiary during the foreign tax credit carryover period.
The sources of income (loss) from continuing operations before income taxes
are as follows (in thousands):
1991 1992 1993
Domestic..................................................... $ (2,245) $ 1,327 $ 2,774
Foreign...................................................... 7,162 7,242 9,084
--------- --------- ---------
$ 4,917 $ 8,569 $ 11,858
--------- --------- ---------
--------- --------- ---------
Income taxes paid amounted to approximately $0, $2,406,000 and $1,686,000 in
1991, 1992 and 1993, respectively.
9. PENSION PLANS
The Company sponsors two noncontributory defined benefit pension plans
covering substantially all of its domestic salaried and hourly employees. The
Reeves Brothers salaried pension plan benefits are based on an employee's years
of accredited service. The Reeves Brothers hourly pension plan provides
benefits, exclusive of benefits related to former ARA Automotive Group
retirement plan participants, of stated amounts based on years of accredited
service. The Reeves Brothers hourly pension plan also provides benefits to both
the ARA union and non-union employees in accordance with their separate benefit
calculations. The ARA non-union plan was merged with the Reeves Brothers hourly
pension plan effective December 1990; the ARA union plan was merged with the
Reeves Brothers hourly pension plan effective April 1993. The Company's funding
policy is to fund at least the minimum amount required by the Employee
Retirement Income Security Act of 1974.
F-16
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1993
- --------------------------------------------------------------------------------
9. PENSION PLANS (CONTINUED)
COMBINED DATA
The following table presents the combined funded status of the Company's
plans at December 31, 1992 and 1993 (in thousands):
1992 1993
Actuarial present value of accumulated benefit obligation
Vested............................................................ $ 13,731 $ 19,300
Nonvested......................................................... 866 914
--------- ---------
Accumulated benefit obligation...................................... $ 14,597 $ 20,214
--------- ---------
--------- ---------
Plan assets at fair value........................................... $ 24,148 $ 25,450
Projected benefit obligation for services rendered to date.......... 19,129 24,553
--------- ---------
Plan assets greater than projected benefit obligation............... 5,019 897
Unrecognized net transition obligation.............................. 2,132 1,955
Unrecognized net gain subsequent to transition...................... (7,097) (3,696)
--------- ---------
Pension asset (liability) recognized in the consolidated balance
sheet.............................................................. $ 54 $ (844)
--------- ---------
--------- ---------
Plan assets consist primarily of fixed income securities, equity securities,
and certificates of deposit.
Pension cost includes the following components (in thousands):
1991 1992 1993
Service cost -- benefits earned during the period........... $ 929 $ 942 $ 936
Interest cost on projected benefit obligation............... 1,409 1,456 1,643
Actual return on plan assets................................ (3,700) (2,961) (2,531)
Net amortization and deferral............................... 2,283 1,351 754
--------- --------- ---------
Pension cost................................................ $ 921 $ 788 $ 802
--------- --------- ---------
--------- --------- ---------
A weighted average discount rate of 8.5% and 7.25%, and rate of increase in
future compensation of 5.5% and 5.0% were used in determining the actuarial
present value of the projected benefit obligation in 1992 and 1993,
respectively. The long-term expected rate of return on assets was 8.0% in both
1992 and 1993.
In December 1990, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" (FAS 106), which requires accrual,
during an employee's active years of service, of the expected costs of providing
postretirement benefits to employees and their beneficiaries and dependents. The
Company adopted FAS 106 in 1992, the effect of which was not material to the
consolidated financial statements.
10. STOCKHOLDER'S EQUITY
CAPITAL STOCK
The capitalization of Reeves consists of one class of common stock, $.01 par
value (the "Common Stock"). The previously outstanding Series I Preferred Stock,
$1.00 par value with a stated value of $5,001,000 (the "Preferred Stock") was
wholly-owned by Hart Holding. Effective December 31, 1991,
F-17
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1993
- --------------------------------------------------------------------------------
10. STOCKHOLDER'S EQUITY (CONTINUED)
the Company's Board of Directors approved the exchange of all the outstanding
Preferred Stock held by Hart Holding for 18,820,000 shares of the Company's
Common Stock. 250,000 shares of Preferred Stock remain authorized, with no
Preferred Stock currently outstanding.
SUPPLEMENTAL EARNINGS PER SHARE DATA
The following supplemental earnings per share data is presented for the year
ended December 31, 1991 as if the exchange of Preferred Stock for Common Stock
described above occurred on January 1, 1991:
1991
Income from continuing operations........................................ $ .12
Income before extraordinary item and cumulative effect of a change in
accounting principle.................................................... .20
Net income............................................................... .20
Weighted average number of common shares outstanding -- primary and fully
diluted (in thousands).................................................. 36,886
SETTLEMENT OF LITIGATION
In November 1992, pursuant to a court ordered settlement of a lawsuit
brought by the Company against Drexel Burnham Lambert and certain of its
affiliates (collectively, the "Defendants"), Reeves received 1,918,132 shares of
its common stock from the Defendants which were subsequently canceled and
retired.
MERGER WITH HHCI, INC.
Effective October 25, 1993, HHCI, Inc., a newly formed, wholly-owned
subsidiary of Hart Holding, merged with and into the Company with the Company
surviving the merger. HHCI, Inc. was formed as a shell corporation (no
operations) with a $300,000 capital contribution from Hart Holding. As a result
of the merger, Hart Holding was issued 535,000 shares of the Company's common
stock and acquired the 481,307 shares of its common stock not held by Hart
Holding. These shares were subsequently canceled and retired. As a result of
this merger, Hart Holding obtained ownership of 100% of the outstanding shares
of the common stock of the Company and the other stockholders of Reeves received
$.56 per share in cash.
11. FOREIGN EXCHANGE
The Company enters into foreign exchange forward contracts to hedge risk of
changes in foreign currency exchange rates associated with certain assets and
future foreign currency transactions, primarily cash flows from accounts
receivable and firm purchase commitments. The Company does not engage in
speculation. While the forward contracts affect the Company's results of
operations, they do so only in connection with the underlying transactions.
Gains and losses on these contracts are deferred until the underlying hedged
transaction is completed. The cash flows from the forward contracts are
classified consistent with the cash flows from the transactions being hedged. As
a result, they do not subject the Company to risk from foreign exchange rate
movements, because gains and losses on these contracts offset losses and gains
on the transactions being hedged.
At December 31, 1993, the Company had foreign currency hedge contracts
outstanding, equivalent to $14,883,000, to exchange various currencies,
including the U.S. dollar, Japanese yen, pound sterling, Deutsche mark, and
French franc into Italian Lire. The contracts mature during 1994. The December
31, 1993 fair value of these foreign currency hedge contracts was $14,407,000.
F-18
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1993
- --------------------------------------------------------------------------------
12. CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk with respect to trade receivables are limited
due to the wide variety of customers and markets into which the Company's
products are sold, as well as their dispersion across many different geographic
areas. As a result, at December 31, 1993, the Company does not consider itself
to have any significant concentrations of credit risk.
13. RELATED PARTY TRANSACTIONS
During the years ended December 31, 1991, 1992 and 1993, the Company and its
subsidiary paid management fees to Hart Holding of $1,200,000, $1,910,000 and
$1,804,000, respectively.
During 1992, Reeves Brothers purchased the residences of three officers of
Reeves Brothers for an aggregate amount of $1,015,000. During 1993, the Company
recognized a loss of approximately $161,000 on the sale of two of the properties
including related expenses. The remaining residence, which has a carrying value
of $244,000 at December 31, 1993, is presently being marketed for sale.
14. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company, through Reeves Brothers, operates in two principal industry
segments: industrial coated fabrics and apparel textiles. The Industrial Coated
Fabrics Group manufactures newspaper and graphic art printing press blankets,
protective coverings, inflatable aerospace and survival equipment, diaphragms
for meters, pump and tank seals and material used in automotive airbags. The
Apparel Textiles Group manufactures, dyes and finishes greige goods.
The products of the Industrial Coated Fabrics Group and the Apparel Textiles
Group are sold in the United States and in certain foreign countries primarily
by Reeves Brothers' merchandising and sales personnel and through a network of
independent distributors to a variety of customers including converters, apparel
manufacturers, industrial users and contractors. Sales offices are maintained in
New York, New York, Dallas, Texas, Spartanburg, South Carolina and Milan, Italy.
F-19
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1993
- --------------------------------------------------------------------------------
14. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS (CONTINUED)
The following table presents certain information concerning each segment (in
thousands):
1991 1992 1993
Net sales
Industrial coated fabrics............................ $ 121,264 $ 126,576 $ 140,735
Apparel textiles..................................... 148,295 144,528 142,918
----------- ----------- -----------
$ 269,559 $ 271,104 $ 283,653
----------- ----------- -----------
----------- ----------- -----------
Operating income
Industrial coated fabrics............................ $ 23,940 $ 24,732 $ 29,287
Apparel textiles..................................... 10,121 10,693 11,583
Corporate expenses................................... (8,435) (9,658) (11,773)
Facility restructuring charges....................... (1,003)
----------- ----------- -----------
Operating income................................... 25,626 25,767 28,094
Other income, net...................................... 1,068 435 158
Interest expense and amortization of financing costs... (21,777) (17,633) (16,394)
----------- ----------- -----------
Income from continuing operations before income taxes,
extraordinary item and cumulative effect of a change
in accounting principle............................... $ 4,917 $ 8,569 $ 11,858
----------- ----------- -----------
----------- ----------- -----------
Depreciation
Industrial coated fabrics............................ $ 2,598 $ 3,175 $ 3,632
Apparel textiles..................................... 2,983 2,913 3,465
Corporate............................................ 370 688 107
----------- ----------- -----------
$ 5,951 $ 6,776 $ 7,204
----------- ----------- -----------
----------- ----------- -----------
Capital expenditures
Industrial coated fabrics............................ $ 7,579 $ 6,353 $ 11,459
Apparel textiles..................................... 2,994 8,623 4,693
Corporate............................................ 442 812 354
----------- ----------- -----------
$ 11,015 $ 15,788 $ 16,506
----------- ----------- -----------
----------- ----------- -----------
Identifiable assets
Industrial coated fabrics............................ $ 68,403 $ 65,752 $ 75,625
Apparel textiles..................................... 60,410 65,111 63,822
Corporate, principally discontinued operations (in
1991 and 1992), goodwill and debt issuance costs.... 86,174 62,068 63,578
----------- ----------- -----------
$ 214,987 $ 192,931 $ 203,025
----------- ----------- -----------
----------- ----------- -----------
F-20
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1993
- --------------------------------------------------------------------------------
14. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS (CONTINUED)
Financial data of Reeves Brothers' foreign subsidiary is as follows (in
thousands):
1991 1992 1993
Sales.................................................... $ 35,437 $ 38,444 $ 36,932
Net income............................................... 6,808 9,165 7,446
Assets................................................... 33,011 31,608 33,092
Intersegment sales are not material.
15. COMMITMENTS AND CONTINGENCIES
The Company leases certain operating facilities and equipment under
long-term operating leases. At December 31, 1993 future minimum rentals, related
to continuing operations, required by operating leases having initial or
remaining noncancellable lease terms in excess of one year are as follows:
1994-$1,853,000; 1995-$1,811,000; 1996-$1,800,000; 1997-$1,800,000;
1998-$1,800,000; thereafter-$2,945,000.
Rental expense charged to continuing operations was approximately
$1,187,000, $1,420,000 and $1,473,000 during the years ended December 31, 1991,
1992 and 1993, respectively.
There are various lawsuits and claims pending against the Company and its
subsidiary, including those relating to commercial transactions. The outcome of
these matters is not presently determinable but, in the opinion of management,
the ultimate resolution of these matters will not have a material adverse effect
on the results of operations and financial position of the Company.
16. SUBSEQUENT EVENTS
On January 26, 1994, the Board of Directors approved a non-qualified stock
option agreement between the Company and the Chairman of the Board of Directors.
The agreement grants an option to purchase up to 3,800,000 shares of common
stock of the Company, par value $.01 per share, and has an expiration date of
December 31, 2023. The option is exercisable at $.56 per share for 1,400,000
shares (exercisable immediately), $.75 per share for 1,400,000 shares
(exercisable one year from grant date) and $1.00 per share for 1,000,000 shares
(exercisable two years from grant date).
On March 9, 1994 Hart Holding organized Reeves Holdings, Inc. as a
wholly-owned subsidiary (the "Issuer") through a capital contribution of $1,000.
The Issuer was formed for the purpose of holding all of the outstanding common
stock of the Company. On March 31, 1994 the Issuer filed a Registration
Statement on Form S-1 under the Securities Act of 1933, as amended, for the
purpose of offering Senior Discount Debentures due 2006 anticipated to yield
proceeds of approximately $100,000,000. As of March 31, 1994 the Company's
common stock has not been contributed to the Issuer.
F-21
- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE HEREBY. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY ISSUER OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY IN ANY
JURISDICTION IN WHICH OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION SET FORTH HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
---------------------
TABLE OF CONTENTS
PAGE
Available Information.......................... 2
Prospectus Summary............................. 3
Investment Considerations...................... 8
The Issuer and the Company..................... 10
Use of Proceeds................................ 11
Capitalization................................. 11
Selected Consolidated Financial Data........... 12
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 13
Business....................................... 17
Management..................................... 25
Description of Debentures...................... 31
Description of Other Indebtedness.............. 46
Certain Federal Income Tax Considerations
Concerning the Debentures..................... 47
Underwriting................................... 51
Legal Matters.................................. 52
Experts........................................ 52
Index to Financial Statements.................. F-1
UNTIL , 1994, (90 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING) ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
$
[REEVES-TM-
LOGO
REEVES HOLDINGS, INC.
% SENIOR
DISCOUNT DEBENTURES
DUE 2006
-----------------
P R O S P E C T U S
-----------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
, 1994
Lithographed from a Vulcan-R- Offset Printing Blanket manufactured
by the Industrial Coated Fabrics Group of Reeves Holdings, Inc.
- -------------------------------------------------------------
-------------------------------------------------------------
- -------------------------------------------------------------
-------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by the Company in
connection with the sale of the Debentures being registered hereby, other than
underwriting commissions. All the amounts shown are estimates, except for the
Commission registration fee and the fee for the National Association of
Securities Dealers, Inc. ("NASD").
ITEM
- -----------------------------------------------------------------------------------
Commission registration fee........................................................ $ 34,483
NASD fee........................................................................... 10,500
Blue Sky fees and expenses......................................................... *
Legal fees and expenses............................................................ *
Accountants' fees and expenses..................................................... *
Printing and engraving fees and expenses........................................... *
Trustee fees and expenses.......................................................... *
Miscellaneous...................................................................... *
---------
Total.......................................................................... $ *
---------
---------
<FN>
- ------------------------
*To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant is a Delaware corporation. Section 145 of the General
Corporation Law of Delaware empowers a corporation to indemnify, subject to the
standards set forth therein, any person who is a party in any action in
connection with any action, suit or proceeding brought or threatened by reason
of the fact that the person was a director, officer, employee or agent of such
corporation, or is or was serving as such with respect to another entity at the
request of such corporation. The General Corporation Law of Delaware also
provides that a corporation may purchase insurance on behalf of any such
director, officer, employee or agent.
Section VII of the Bylaws of the Registrant provides for the indemnification
by the registrant of each director and officer of the registrant to the fullest
extent permitted by applicable law. The Registrant maintains directors' and
officers' liability insurance.
The Underwriting Agreement provides for the indemnification of the
registrant's officers, directors and controlling persons under certain
circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In connection with its organization, the Registrant issued 100 shares of its
common stock (constituting all of its outstanding capital stock) to Hart
Holding. The transaction was exempt from registration under Section 5 of the
Securities Act by virtue of Section 4(2) of the Securities Act.
II-1
ITEM 16(A). EXHIBITS
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ---------- ------------------------------------------------------------------------------------------------------
1** Form of Underwriting Agreement.
3.1* Certificate of Incorporation of Reeves Holdings, Inc.
3.2* Bylaws of Reeves Holdings, Inc.
4.1(2) Purchase Agreement, dated as of May 1, 1986, among Schick Acquisition Corp., A.R.A. Manufacturing
Company of Delaware, Inc. and each of the Purchasers named therein.
4.2(2) Subordinated Debenture Indenture, dated as of May 1, 1986, between Schick Acquisition Corp. and Fleet
National Bank, as Trustee (the "Subordinated Debenture Trustee").
4.3(2) First Supplemental Indenture, dated as of May 6, 1986, between Reeves Industries, Inc. and the
Subordinated Debenture Trustee.
4.4(2) Second Supplemental Indenture, dated as of October 15, 1986, between Reeves Industries, Inc. and the
Subordinated Debenture Trustee.
4.5(3) Third Supplemental Indenture, dated as of March 24, 1988, between Reeves Industries, Inc. and the
Subordinated Debenture Trustee.
4.6(4) Fourth Supplemental Indenture, dated as of May 7, 1991, between Reeves Industries, Inc. and the
Subordinated Debenture Trustee.
4.7(1) Fifth Supplemental Indenture, dated as of June 30, 1992, between Reeves Industries, Inc. and the
Subordinated Debenture Trustee.
4.8(2) Registration Rights Agreement, dated as of May 1, 1986, among Schick Acquisition Corp. and the
purchasers.
4.9(5) Senior Note Indenture, dated as of June 1, 1992, between Reeves Industries, Inc. and Chemical Bank, as
Trustee.
4.10** Form of Debenture Indenture (including Form of Debenture).
5** Opinion and consent of Cadwalader, Wickersham & Taft.
10.01(1) Credit Agreement, dated as of August 6, 1992 (the "Credit Agreement") among Reeves Brothers, Inc.,
Reeves Industries, Inc., the Banks signatory thereto and Chemical Bank, as Agent.
10.02(6) First Amendment, Waiver and Consent, dated as of October 25, 1993, to the Credit Agreement.
10.03** Second Amendment, dated as December 28, 1993, to the Credit Agreement.
10.04(7) Tax Allocation Agreement, effective as of January 1, 1992, by and among Hart Holding Company
Incorporated, Reeves Industries, Inc., Reeves Brothers, Inc., Fenchurch, Inc., Turner Trucking
Company, Reeves Penna, Inc., A.R.A. Manufacturing Company, Hart Investment Properties Corporation and
Hart Capital Corporation.
10.05(8) Reeves Corporate Management Incentive Bonus Plan.
10.06(4) Employment Agreement, dated July 1, 1991, between Reeves Brothers, Inc. and
Anthony L. Cartagine.
10.07* Employment Agreement, dated November 1, 1991 and amended May 18, 1993, between Reeves Brothers, Inc.,
and Vito W. Lenoci.
10.08* Reeves Brothers, Inc. 401(a)(17) Plan, effective January 1, 1989.
10.09* Non-Qualified Stock Option Agreement, dated as of January 26, 1994, between Reeves Industries, Inc.
and James W. Hart.
II-2
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ---------- ------------------------------------------------------------------------------------------------------
10.10(6) Agreement and Plan of Merger, dated as of October 22, 1993, between Reeves Industries, Inc. and HHCI,
Inc.
10.11(4) Lease Agreement, dated March 28, 1991, between Springs Industries, Inc. Lessor, and Reeves Brothers,
Inc., Lessee.
11* Calculation of earnings per common share.
12* Statement of Computation of Ratio of Earnings to Fixed Charges.
21* Subsidiaries of Reeves Holdings, Inc.
23.1** Consent of Cadwalader, Wickersham & Taft (filed as part of Exhibit 5).
23.2* Consent of Price Waterhouse.
25* Statement of Eligibility of The First National Bank of Boston, as Trustee.
<FN>
- ------------------------
(1) Previously filed by Reeves Industries, Inc. as an exhibit to Reeves
Industries' Annual Report on Form 10-K dated March 31, 1993, which is
incorporated by reference herein.
(2) Previously filed by Reeves Industries, Inc. as an exhibit to Newreeveco's
Registration Statement on Form S-1, Registration No. 33-8192, dated August
21, 1986, as amended October 20, 1986, which is incorporated by reference
herein.
(3) Previously filed by Reeves Industries, Inc. as an exhibit to Reeves
Industries' Annual Report on Form 10-K dated April 12, 1988, which is
incorporated by reference herein.
(4) Previously filed by Reeves Industries, Inc. as an exhibit to Reeves
Industries' Annual Report on Form 10-K dated March 30, 1992, which is
incorporated by reference herein.
(5) Previously filed by Reeves Industries, Inc. as an exhibit to Reeves
Industries' Quarterly Report on Form 10-Q dated August 12, 1992, which is
incorporated by reference herein.
(6) Previously filed by Reeves Industries, Inc. as an exhibit to Reeves
Industries' Quarterly Report on Form 10-Q dated November 10, 1993, which is
incorporated by reference herein.
(7) Previously filed by Reeves Industries, Inc. as an exhibit to Reeves
Industries' Registration Statement on Form S-2, Registration No. 33-47254,
dated April 16, 1992, as amended May 28, 1992, which is incorporated by
reference herein.
(8) Previously filed by Reeves Industries, Inc. as an exhibit to Reeves
Industries' Annual Report on Form 10-K dated March 28, 1991, which is
incorporated by reference herein.
* Filed herewith.
** To be filed by amendment.
ITEM 16(B). FINANCIAL STATEMENT SCHEDULES
Schedule V -- Reeves Industries, Inc.-- Property, Plant and Equipment
Schedule VI -- Reeves Industries, Inc.-- Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment
Reeves Industries, Inc.-- Analysis of the Allowance for Doubtful
Schedule VIII -- Accounts
Schedule X -- Reeves Industries, Inc.-- Supplementary Income Statement Information
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in response to Item 14 above, 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
II-3
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant for expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or Rule
497(h) under the Securities Act shall be deemed to be a part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized at Darien, Connecticut.
Dated: March 31, 1994
REEVES HOLDINGS, INC.
By: ________/s/ STEVEN W. HART________
Name: Steven W. Hart
Title: Executive Vice President and
Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSON IN THEIR
RESPECTIVE CAPACITIES WITH THE REGISTRANT ON THE DATES INDICATED.
/s/ James W. Hart
- --------------------------------- Director March 31, 1994
James W. Hart
/s/ James W. Hart, President, Chief Executive Officer
Jr. and Chief Operating Officer March 31, 1994
- --------------------------------- (Principal Executive Officer)
James W. Hart, Jr.
/s/ Steven W. Hart Executive Vice President and Chief
- --------------------------------- Financial Officer (Principal March 31, 1994
Steven W. Hart Financial Officer)
/s/ Joseph P.
O'Brien Vice President -- Finance March 31, 1994
- --------------------------------- (Principal Accounting Officer)
Joseph P. O'Brien
II-5
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
REEVES INDUSTRIES, INC. AND SUBSIDIARY
(IN THOUSANDS)
BALANCE BALANCE
BEGINNING END
OF PERIOD ADDITIONS RETIREMENTS OTHER(1) OF PERIOD
--------- --------- ----------- --------- ---------
1991 Land and land improvements..................... $ 886 $ 39 $ 925
9,768 $ 1,548 $ (20) (52) 11,244
Buildings and improvements.....................
43,790 9,467 (2,275) (137) 50,845
Machinery and equipment........................
--------- --------- ----------- --------- ---------
$ 54,444 $ 11,015 $ (2,295) $ (150) $ 63,014
Total..........................................
--------- --------- ----------- --------- ---------
--------- --------- ----------- --------- ---------
1992 Land and land improvements..................... $ 925 $ 50 $ (181) $ 794
11,244 4,406 (1,295) 14,355
Buildings and improvements.....................
50,845 11,332 $ (2,397) $ (2,979) 56,801
Machinery and equipment........................
--------- --------- ----------- --------- ---------
$ 63,014 $ 15,788 $ (2,397) $ (4,455) $ 71,950
Total..........................................
--------- --------- ----------- --------- ---------
--------- --------- ----------- --------- ---------
1993 Land and land improvements..................... $ 794 $ 65 $ (62) $ 797
14,355 2,699 (400) 16,654
Buildings and improvements.....................
56,801 13,742 $ (2,973) (2,170) 65,400
Machinery and equipment........................
--------- --------- ----------- --------- ---------
$ 71,950 $ 16,506 $ (2,973) $ (2,632) $ 82,851
Total..........................................
--------- --------- ----------- --------- ---------
--------- --------- ----------- --------- ---------
<FN>
- ------------------------
(1) Primarily a result of fluctuations in exchange rates.
S-1
SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
REEVES INDUSTRIES, INC. AND SUBSIDIARY
(IN THOUSANDS)
BALANCE BALANCE
BEGINNING END
OF PERIOD ADDITIONS RETIREMENTS OTHER(1) OF PERIOD
--------- ----------- ----------- --------- ---------
1991 Buildings and improvements...................... $ 3,411 $ 639 $ (20) $ (29) $ 4,001
20,088 5,312 (2,275) (745) 22,380
Machinery and equipment.........................
--------- ----------- ----------- --------- ---------
$ 23,499 $ 5,951 $ (2,295) $ (774) $ 26,381
Total...........................................
--------- ----------- ----------- --------- ---------
--------- ----------- ----------- --------- ---------
1992 Buildings and improvements...................... $ 4,001 $ 660 $ (236) $ 4,425
22,380 6,116 $ (2,397) (2,100) 23,999
Machinery and equipment.........................
--------- ----------- ----------- --------- ---------
$ 26,381 $ 6,776 $ (2,397) $ (2,336) $ 28,424
Total...........................................
--------- ----------- ----------- --------- ---------
--------- ----------- ----------- --------- ---------
1993 Buildings and improvements...................... $ 4,425 $ 949 $ (199) $ 5,175
23,999 6,255 $ (2,973) (1,020) 26,261
Machinery and equipment.........................
--------- ----------- ----------- --------- ---------
$ 28,424 $ 7,204 $ (2,973) $ (1,219) $ 31,436
Total...........................................
--------- ----------- ----------- --------- ---------
--------- ----------- ----------- --------- ---------
<FN>
- ------------------------
(1) Primarily a result of fluctuations in exchange rates.
S-2
SCHEDULE VIII -- ANALYSIS OF THE ALLOWANCE FOR DOUBTFUL ACCOUNTS
REEVES INDUSTRIES, INC. AND SUBSIDIARY
COLUMN C
ADDITIONS COLUMN E
COLUMN B -------------------------------------- --------
------------- CHARGED CHARGED COLUMN D BALANCE
COLUMN A BALANCE AT (CREDITED) TO TO OTHER --------- AT END
- -------------------------------------------------- BEGINNING OF COSTS AND ACCOUNTS -- DEDUCTIONS OF
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
- -------------------------------------------------- ------------- ----------------- ------------------ --------- --------
(IN THOUSANDS)
December 31, 1990 Balance......................... $ 2,477
Provision......................................... $ (49)
Recoveries........................................ $110
Write-offs........................................ $(457)
------------- ------ ----- --------- --------
December 31, 1991 Balance......................... $ 2,477 $ (49) $110 $(457) $2,081
------------- ------ ----- --------- --------
------------- ------ ----- --------- --------
Provision......................................... $(148)
Recoveries........................................ $ 23
Write-offs........................................ $(386)
------------- ------ ----- --------- --------
December 31, 1992 Balance......................... $ 2,081 $(148) $ 23 $(386) $1,570
------------- ------ ----- --------- --------
------------- ------ ----- --------- --------
Provision......................................... $ 427
Recoveries........................................ $108
Write-offs........................................ $(638)
------------- ------ ----- --------- --------
December 31, 1993 Balance......................... $ 1,570 $ 427 $108 $(638) $1,467
------------- ------ ----- --------- --------
------------- ------ ----- --------- --------
S-3
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
REEVES INDUSTRIES, INC. AND SUBSIDIARY
COLUMN A
- ------------------------------------------------------------
ITEM (1)
- ------------------------------------------------------------ COLUMN B
------------------
CHARGED TO
COSTS AND EXPENSES
------------------
(IN THOUSANDS)
Maintenance and repairs
Year ended December 31, 1991.............................. $7,922
-------
-------
Year ended December 31, 1992.............................. $7,745
-------
-------
Year ended December 31, 1993.............................. $6,328
-------
-------
<FN>
- ------------------------
(1) Other items are less than 1% of revenues or not applicable.
S-4
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION OF EXHIBIT PAGE NO.
- ---------- ----------------------------------------------------------------------------------------- ---------------
1** Form of Underwriting Agreement.
3.1* Certificate of Incorporation of Reeves Holdings, Inc.
3.2* Bylaws of Reeves Holdings, Inc.
4.1(2) Purchase Agreement, dated as of May 1, 1986, among Schick Acquisition Corp., A.R.A.
Manufacturing Company of Delaware, Inc. and each of the Purchasers named therein.
4.2(2) Subordinated Debenture Indenture, dated as of May 1, 1986, between Schick Acquisition
Corp. and Fleet National Bank, as Trustee (the "Subordinated Debenture Trustee").
4.3(2) First Supplemental Indenture, dated as of May 6, 1986, between Reeves Industries, Inc.
and the Subordinated Debenture Trustee.
4.4(2) Second Supplemental Indenture, dated as of October 15, 1986, between Reeves Industries,
Inc. and the Subordinated Debenture Trustee.
4.5(3) Third Supplemental Indenture, dated as of March 24, 1988, between Reeves Industries, Inc.
and the Subordinated Debenture Trustee.
4.6(4) Fourth Supplemental Indenture, dated as of May 7, 1991, between Reeves Industries, Inc.
and the Subordinated Debenture Trustee.
4.7(1) Fifth Supplemental Indenture, dated as of June 30, 1992, between Reeves Industries, Inc.
and the Subordinated Debenture Trustee.
4.8(2) Registration Rights Agreement, dated as of May 1, 1986, among Schick Acquisition Corp.
and the purchasers.
4.9(5) Senior Note Indenture, dated as of June 1, 1992, between Reeves Industries, Inc. and
Chemical Bank, as Trustee.
4.10** Form of Debenture Indenture (including Form of Debenture).
5** Opinion and consent of Cadwalader, Wickersham & Taft.
10.01(1) Credit Agreement, dated as of August 6, 1992 (the "Credit Agreement") among Reeves
Brothers, Inc., Reeves Industries, Inc., the Banks signatory thereto and Chemical Bank,
as Agent.
10.02(6) First Amendment, Waiver and Consent, dated as of October 25, 1993, to the Credit
Agreement.
10.03** Second Amendment, dated as December 28, 1993, to the Credit Agreement.
10.04(7) Tax Allocation Agreement, effective as of January 1, 1992, by and among Hart Holding
Company Incorporated, Reeves Industries, Inc., Reeves Brothers, Inc., Fenchurch, Inc.,
Turner Trucking Company, Reeves Penna, Inc., A.R.A. Manufacturing Company, Hart
Investment Properties Corporation and Hart Capital Corporation.
10.05(8) Reeves Corporate Management Incentive Bonus Plan.
10.06(4) Employment Agreement, dated July 1, 1991, between Reeves Brothers, Inc. and
Anthony L. Cartagine.
10.07* Employment Agreement, dated November 1, 1991 and amended May 18, 1993, between Reeves
Brothers, Inc., and Vito W. Lenoci.
10.08* Reeves Brothers, Inc. 401(a)(17) Plan, effective January 1, 1989.
EXHIBIT
NO. DESCRIPTION OF EXHIBIT PAGE NO.
- ---------- ----------------------------------------------------------------------------------------- ---------------
10.09* Non-Qualified Stock Option Agreement, dated as of January 26, 1994, between Reeves
Industries, Inc. and James W. Hart.
10.10(6) Agreement and Plan of Merger, dated as of October 22, 1993, between Reeves Industries,
Inc. and HHCI, Inc.
10.11(4) Lease Agreement, dated March 28, 1991, between Springs Industries, Inc. Lessor, and
Reeves Brothers, Inc., Lessee.
11* Calculation of earnings per common share.
12* Statement of Computation of Ratio of Earnings to Fixed Charges.
21* Subsidiaries of Reeves Holdings, Inc.
23.1** Consent of Cadwalader, Wickersham & Taft (filed as part of Exhibit 5).
23.2* Consent of Price Waterhouse.
25* Statement of Eligibility of The First National Bank of Boston, as Trustee.
<FN>
- ------------------------
(1) Previously filed by Reeves Industries, Inc. as an exhibit to Reeves
Industries' Annual Report on Form 10-K dated March 31, 1993, which is
incorporated by reference herein.
(2) Previously filed by Reeves Industries, Inc. as an exhibit to Newreeveco's
Registration Statement on Form S-1, Registration No. 33-8192, dated August
21, 1986, as amended October 20, 1986, which is incorporated by reference
herein.
(3) Previously filed by Reeves Industries, Inc. as an exhibit to Reeves
Industries' Annual Report on Form 10-K dated April 12, 1988, which is
incorporated by reference herein.
(4) Previously filed by Reeves Industries, Inc. as an exhibit to Reeves
Industries' Annual Report on Form 10-K dated March 30, 1992, which is
incorporated by reference herein.
(5) Previously filed by Reeves Industries, Inc. as an exhibit to Reeves
Industries' Quarterly Report on Form 10-Q dated August 12, 1992, which is
incorporated by reference herein.
(6) Previously filed by Reeves Industries, Inc. as an exhibit to Reeves
Industries' Quarterly Report on Form 10-Q dated November 10, 1993, which is
incorporated by reference herein.
(7) Previously filed by Reeves Industries, Inc. as an exhibit to Reeves
Industries' Registration Statement on Form S-2, Registration No. 33-47254,
dated April 16, 1992, as amended May 28, 1992, which is incorporated by
reference herein.
(8) Previously filed by Reeves Industries, Inc. as an exhibit to Reeves
Industries' Annual Report on Form 10-K dated March 28, 1991, which is
incorporated by reference herein.
* Filed herewith.
** To be filed by amendment.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
EXHIBITS
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
REEVES HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------