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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): MAY 30, 1996
CABOT SAFETY HOLDINGS CORPORATION
(Exact name of Registrant as specified in charter)
DELAWARE 0-26942 13-3840450
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(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)
ONE WASHINGTON MALL, EIGHTH FLOOR, BOSTON, MASSACHUSETTS 02108-2610
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(Address of principal executive offices) (Zip Code)
(617) 371-4200
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(Registrant's telephone number, including area code)
There are 7 pages in this Report.
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Acquisition of Peltor
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On May 30, 1996, the Company, through one of its subsidiaries, acquired
all issued and outstanding capital stock of Peltor Holding AB, a Swedish
corporation ("Peltor"), from Active I Malmo AB of Malmo, Sweden, and certain of
its subsidiaries, for approximately $86.0 million, subject to possible decrease
based on changes in Peltor's net worth and working capital after December 31,
1995. The Company financed the Peltor acquisition using additional borrowings
under its bank facilities.
Peltor was founded in the early 1950s and is the world's leading
manufacturer of ear muff hearing protection devices, including specialty muffs
capable of two-way radio frequency communications. Peltor markets its products
worldwide through safety and industrial distributors to industry, government,
military and recreational markets. Its sales for the year ended December 31,1995
were approximately $41 million. Peltor is based in Varnamo, Sweden, has
manufacturing facilities in Sweden, Rhode Island and Germany and has sales
offices in Scandinavia, Germany, France, England, and the United States. Mr.
Leif Palmaer, the President of Peltor, and Mr. Leif Anderzon, the Executive Vice
President of Peltor, who have been the principal operating officers of Peltor
since 1981, will continue in the same capacities.
Peltor manufactures, assembles and sells a broad line of ear muffs,
hard caps/visors, noise attenuation headsets and wireless and hardwire
communication headsets. Peltor's products serve a variety of end user markets
where protection from harmful high and low frequency noise is sought or the need
for easy communication in noisy or remote environments exists, such as in the
construction, heavy machinery, airport, forestry, textile and mining industries.
Peltor has recently focused on the high-end communications market, which has
recently grown faster than the market for traditional ear muffs. Peltor's
leadership position in innovation and product quality was attested by the
selection of its ear muff products as the basis for the new, pan-European
standards for ear muff hearing protection.
ITEM 5. OTHER EVENTS
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Election of New Director
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On May 27, 1996, Samuel L. Hayes, III, was elected a director of the
Company and its wholly-owned subsidiary, Cabot Safety Corporation. Since 1971,
Professor Hayes has taught at the Harvard Business School, and he currently
holds the Jacob H. Schiff Chair in Investment Banking. His teaching and research
have focused on the capital markets and
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corporate financial management. Professor Hayes is also a director of Tiffany &
Co., Ernst Home Centers, and certain Eaton Vance mutual funds.
Change of Name
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On May 29, 1996, the Company changed its name from Cabot Safety
Holdings Corporation to Aearo Corporation.
Amended and Restated Credit Agreement
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On May 29, 1996, the Company entered into an amended and restated
credit agreement (the "Amended Credit Agreement") with Bankers Trust Company, as
administrative agent, to provide for additional borrowings to finance the
acquisition of Peltor. The Amended Credit Agreement provides for (a) a secured
term loan facility consisting of an A tranche and a B tranche providing for up
to $90 million of A term loans and $50 million of B term loans (collectively,
the "Term Loans") (a portion of the A tranche is denominated in an equivalent
amount of foreign currencies) and (b) a secured revolving credit facility (the
"Revolving Credit Facility") providing for up to $25 million of revolving loans
(a portion of which may be denominated in foreign currencies) for general
corporate purposes and, as to $15 million thereof, to finance permitted
acquisitions. As part of the Revolving Credit Facility, the Amended Credit
Agreement provides for the issuance of letters of credit in an aggregate face
amount of up to $5 million. The full amount of the Term Loans and no advances
under the Revolving Credit Facility were outstanding immediately after giving
effect to the acquisition of Peltor. The Term Loans will amortize quarterly over
a seven-year period as follows: $2.0 million for the balance of fiscal 1996;
$8.2 million in fiscal 1997; $10.6 million in fiscal 1998; $13.0 million in
fiscal 1999; $16.0 million in fiscal 2000; $20.7 million in fiscal 2001; $34.4
million in fiscal 2002; and $35.25 million in fiscal 2003. Amounts repaid or
prepaid in respect of the Term Loans may not be reborrowed. Loans and letters of
credit under the Revolving Credit Facility will be available at any time prior
to the maturity of the Term Loans.
The Company will be required to make mandatory prepayments of loans,
and letters of credit will be mandatorily reduced, in amounts and at times
subject to exceptions to be agreed upon, (a) in respect of 75% of consolidated
excess cash flow, or 50% if there is no default and if a certain leverage ratio
is met (after giving effect to debt service on senior and subordinated debt),
(b) in respect of 100% of the net cash proceeds from the sale or other
disposition of certain assets by the Company and (c) in respect of 100% of the
net cash proceeds from the issuance of debt or equity securities by the Company,
provided: (i) that the Company may make permitted acquisitions and capital
expenditures, subject to certain dollar limits; (ii) that the proceeds received
from an offering of common stock occurring on or prior to December 31, 1996 may
be used either to pay down senior subordinated notes pursuant to the so called
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"IPO clawback" provisions thereof or redeemable preferred stock, so long as the
first $25 million of such proceeds are used either to redeem senior subordinated
notes or to repay in part the Term Loans; (iii) that with respect to any other
equity issuance, $20 million may be used for permitted acquisitions; (iv) that
the Company may incur certain permitted indebtedness subordinated to the bank
debt of up to $25 million; and (v) that up to $15 million in excess cash flow
may be used to repay the senior subordinated notes. At the Company's option,
loans may be voluntarily prepaid, and revolving loan commitments and letter of
credit outstandings may be permanently reduced, in whole or in part, at any time
in certain minimum amounts.
At the Company's option, the interest rates per annum applicable to the
loans are either an adjusted rate based on the London Interbank Offered Rate
plus a margin of (x) 2.25% in the case of A Term Loans and Revolving Loans and
(y) 2.75% in the case of B Term Loans, or the Base Rate (as defined herein) plus
a margin of (x) 1.00% in the case of A Term Loans and Revolving Loans and (y)
1.50% in the case of B Term Loans (in the case of A Term and Revolving Loans,
these margins shall be decreased if the Company, on a consolidated basis,
achieves certain leverage ratios). The Base Rate is the higher of Bankers Trust
Company's announced prime lending rate and the Overnight Federal Funds rate plus
0.50%. The Company must pay certain fees in connection with the credit
facilities, including a commitment fee (ranging from 0.375% to 0.50%) on the
undrawn portion of the commitments in respect of the Revolving Credit Facility
based upon the Company's leverage ratio, and fees relating to the issuance of
letters of credit.
The Amended Credit Agreement contains a number of significant covenants
that, among other things, restrict the ability of the Company to dispose of
assets, incur additional indebtedness, repay other indebtedness or amend other
debt instruments, pay dividends, create liens on assets, enter into leases,
investments or acquisitions, engage in mergers or consolidations, make capital
expenditures, create subsidiaries, issue capital stock or engage in certain
transactions with subsidiaries and affiliates and otherwise restrict corporate
activities. In addition, under the Amended Credit Agreement the Company is
required to comply with specified financial ratios and tests, including a
minimum fixed charge coverage ratio, a minimum interest coverage ratio, a
maximum leverage ratio and a maximum capital expenditures test. The Amended
Credit Agreement also contains provisions that prohibit modifications to the
terms of the senior subordinated notes and prohibit the Company from refinancing
the senior subordinated notes, in each case, without the consent of the lenders
or as otherwise provided for in the Amended Credit Agreement.
Registration Statement with respect to Initial Public Offering of Common Stock
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On June 3, 1996, the Company filed with the Securities and Exchange
Commission a Registration Statement on Form S-1 under the Securities Act of
1933, as amended, with respect to the offering of 5,500,000 shares of common
stock (plus 825,000 shares to cover
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over-allotments, if any) through an underwriting group led by Goldman, Sachs &
Co. and Donaldson, Lufkin, & Jenrette Securities Corporation. The net proceeds
from the proposed offering, estimated to be approximately $70.3 million, will be
used as follows: (i) approximately $39.4 million will be used to redeem up to
$35.0 million principal amount of 12 1/2% senior subordinated notes due 2005 of
the Company's wholly-owned subsidiary Cabot Safety Corporation, (ii)
approximately $25.3 million will be used to retire outstanding shares of the
Company's 12 1/2% redeemable preferred stock, and (iii) the balance will be used
to reduce bank debt.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired
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At the time of filing of this Form 8-K it is impracticable for
the Company to provide financial statements of Peltor Holding
AB for the periods specified in Rule 3-05(b) of Regulation
S-X. Such financial statements will be filed by amendment not
later than August 13, 1996, in accordance with Item 7,
paragraph (a)(4) of Form 8-K.
(b) Pro Forma Financial Information
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At the time of filing of this Form 8-K it is impracticable for
the Company to provide the pro forma financial information
that would be required pursuant to Article 11 of Regulation
S-X with respect to the acquisition by the Company of Peltor
Holding AB. Such financial information will be filed by
amendment not later than August 13, 1996, in accordance with
Item 7, paragraph (b)(2) of Form 8-K.
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(c) Exhibits
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2.1 Stock Purchase Agreement by and among Cabot Safety
Corporation, Peltor Holding AB, Leif Palmaer Invest
AB, Leif Anderzon AB and Active I Malmo AB, dated May
25, 1996, as amended May 15, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: June 12, 1996 CABOT SAFETY HOLDINGS CORPORATION
/s/ Mark V.B. Tremallo
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Mark V.B. Tremallo
Vice President, General Counsel and Secretary
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