<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------- ------------
Commission file number 1-8247
MANVILLE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 84-0856796
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
717 17th Street
Denver, Colorado 80202
(Address of principal executive offices)
(Zip Code)
(303) 978-2000
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No / /.
APPLICABLE ONLY TO CORPORATE ISSUERS:
At November 7, 1994, 122,414,086 shares of the registrant's common
stock were outstanding.
<PAGE> 2
*PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
* "Manville" or the "Company" when used in this report refers to
Manville Corporation, incorporated in the State of Delaware in 1981,
and includes where applicable its consolidated subsidiaries.
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MANVILLE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and equivalents $ 150,370 $ 153,093
Marketable securities, at cost which
approximates market 11,259 75,062
Receivables, net of allowances 361,464 304,114
Inventories 221,215 207,702
Prepaid expenses 26,492 26,747
Deferred tax assets 36,361 50,179
-----------------------------------
Total Current Assets 807,161 816,897
Property, Plant and Equipment,
net of accumulated depreciation
and depletion of $1,082,331 and
$1,017,178, respectively 2,231,638 2,113,629
Deferred Tax Assets 319,796 331,292
Other Assets 397,468 354,419
-----------------------------------
$3,756,063 $3,616,237
=========================================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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MANVILLE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
(Thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
LIABILITIES 1994 1993
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Liabilities
Accounts and notes payable $ 219,076 $ 208,068
Compensation and employee benefits 135,842 135,024
Income taxes 22,854 21,770
Other accrued liabilities 121,893 130,286
------------------------------------
Total Current Liabilities 499,665 495,148
Long-Term Debt, less current portion 1,481,745 1,390,988
Postretirement Benefits Other Than Pensions 252,986 246,525
Deferred Income Taxes and Other Noncurrent
Liabilities 380,696 392,431
Common Stock Dividends Accrued
Not Declared (Note 3) 102,856
Cumulative Preference Stock Dividends
Accrued Not Declared (Note 3) 49,845
------------------------------------
2,615,092 2,677,793
------------------------------------
Profit Sharing Obligation (Note 4)
Contingencies and Commitments (Notes 4 and 11)
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARY 96,331 92,375
STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------------
Cumulative Preference Stock, Series B 178,638 105,947
Common Stock 1,225 1,224
Treasury Stock, at cost (407)
Capital in Excess of Par Value 1,003,725 900,562
Unearned Restricted Stock Compensation (1,763) (2,663)
Accumulated Deficit (138,837) (142,467)
Pension Liability Adjustment (4,345) (4,345)
Cumulative Currency Translation
Adjustment 6,404 (12,189)
-----------------------------------
1,044,640 846,069
-----------------------------------
$3,756,063 $3,616,237
=================================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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MANVILLE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS)
AND ACCUMULATED DEFICIT
(Thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
--------------------------------------------------------------------
1994 1993 1994 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $681,400 $601,324 $1,849,083 $1,693,151
Cost of Sales 513,226 477,827 1,402,241 1,335,228
Selling, General and
Administrative 66,525 62,385 196,818 184,249
Research, Development
and Engineering 10,609 9,683 29,115 28,997
Restructuring of Operations
Gain (Loss), net (5,728) (9,795)
Other Income (Loss), net (3,551) (846) (11,243) (4,221)
--------------------------------------------------------------------
Income from Operations 87,489 44,855 209,666 130,661
Interest Income 2,768 2,586 7,105 24,709
Interest Expense 33,927 33,912 99,954 108,101
Profit Sharing Expense
(Note 4) 5,145 2,902 12,455 13,100
--------------------------------------------------------------------
Income before Income Taxes 51,185 10,627 104,362 34,169
Income Tax Expense (Benefit) 22,073 (756) 44,701 (35,699)
--------------------------------------------------------------------
Income before Minority
Interest, Extraordinary
Item and Cumulative Effect
of Accounting Change 29,112 11,383 59,661 69,868
Minority Interest in Net
(Income) Loss of
Consolidated Subsidiary (130) 329 (2,632) (1,121)
--------------------------------------------------------------------
Income before Extraordinary
Item and Cumulative Effect
of Accounting Change 28,982 11,712 57,029 68,747
Extraordinary Gain (Loss) on
Early Extinguishments of
Debt, net of tax (34,707) 891 (34,707) 891
Cumulative Effect of a
Change in Accounting for
Postemployment Benefits,
net of tax (13,881)
--------------------------------------------------------------------
Net Income (Loss) (5,725) 12,603 22,322 55,757
Preference Stock
Dividends/Accretion (6,231) (5,825) (18,692) (16,893)
--------------------------------------------------------------------
Net Income (Loss) Applicable
to Common Stock $(11,956) $ 6,778 $ 3,630 $ 38,864
===================================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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MANVILLE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS)
AND ACCUMULATED DEFICIT (Continued)
(Thousands of dollars, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
---------------------------------------------------------------------
ACCUMULATED DEFICIT 1994 1993 1994 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accumulated Deficit
at Beginning of Period $(126,881) $(135,618) $(142,467) $(167,704)
Net Income (Loss) (5,725) 12,603 22,322 55,757
Preference Stock
Dividends/Accretion (6,231) (5,825) (18,692) (16,893)
---------------------------------------------------------------------
Accumulated Deficit
at End of Period $(138,837) $(128,840) $(138,837) $(128,840)
===================================================================================================================
EARNINGS (LOSS) PER COMMON SHARE
(AFTER PREFERENCE STOCK
DIVIDENDS/ACCRETION)
- -------------------------------------------------------------------------------------------------------------------
Primary and Fully Diluted:
Income before Extraordinary
Item and Cumulative Effect
of Accounting Change $ .18 $.05 $ .31 $ .42
Extraordinary Gain (Loss) on
Early Extinguishments of
Debt, net of tax (.28) .01 (.28) .01
Cumulative Effect of a
Change in Accounting for
Postemployment Benefits,
net of tax (.11)
---------------------------------------------------------------------
Net Income (Loss) Applicable
to Common Stock $(.10) $.06 $ .03 $ .32
===================================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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MANVILLE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
--------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1994 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income (before Preference Stock
Dividends/Accretion) $ 22,322 $ 55,757
Non-cash items included in net income:
Depreciation, depletion and amortization 110,660 114,537
Extraordinary (gain) loss on
early extinguishments of debt, net 26,835 (891)
Deferred taxes 21,347 (33,918)
Other postretirement benefits expense 18,619 20,219
Pension expense 2,484 4,531
Cumulative effect of accounting change 13,881
Profit sharing expense 12,455 13,100
Translation loss 6,636 9,940
Debt issuance cost (4,997) (401)
Roofing guarantee income 4,789 3,641
Interest accretion 3,702 2,407
Minority interest in net income of
consolidated subsidiary 2,632 1,121
Restructuring (gain) loss 6,515
Other, net 4,682 (2,963)
Premium paid on retirement of debt (9,566)
(Increase) decrease in current assets:
Receivables (62,430) (39,730)
Inventories (8,168) (10,562)
Prepaid expenses (563) (6,153)
Increase (decrease) in current liabilities:
Accounts payable 9,224 4,921
Compensation and employee benefits (4,422) (6,389)
Income taxes (1,656) (4,160)
Other accrued liabilities 14,759 7,653
Decrease in postretirement benefits
other than pensions (12,072) (11,974)
Increase (decrease) in other non-current liabilities (4,750) 4,849
--------------------------
Net cash provided by operating activities 162,088 136,365
--------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------------------------------------------------------------------------------------
Purchases of property, plant and equipment (237,459) (230,009)
Proceeds from sales of assets 37,367 26,003
Proceeds from sale of marketable securities 141,449 68,548
Purchases of marketable securities (77,647) (85,297)
Increase in other assets (29,486) (25,110)
Acquisitions (6,275)
--------------------------
Net cash used in investing activities (165,776) (252,140)
--------------------------
</TABLE>
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MANVILLE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
(Thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
--------------------------
CASH FLOWS FROM FINANCING ACTIVITIES: 1994 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Issuance of debt $ 278,053 $ 246,921
Payments on debt (259,145) (205,683)
Dividends on Preference Stock (16,615)
Dividends on Common Stock (127,187)
Dividends to minority stockholders of
consolidated subsidiary (1,452) (1,452)
Treasury stock (407)
Restricted stock awards 523
--------------------------
Net cash provided by (used in) financing activities 434 (86,878)
--------------------------
Effect of Exchange Rate Changes on Cash 531 (892)
--------------------------
Net Increase (Decrease) in Cash and Equivalents (2,723) (203,545)
Cash and Equivalents at Beginning of Period 153,093 392,172
--------------------------
Cash and Equivalents at End of Period $ 150,370 $ 188,627
===================================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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MANVILLE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Manville Corporation is an international holding company with two principal
operating subsidiaries, Riverwood International Corporation ("Riverwood") and
Schuller International Group, Inc. ("Schuller"), collectively referred to as
"Manville" or "the Company". When referring to the parent company only,
Manville Corporation is defined as the "Manville holding company". The
Manville holding company owns approximately 81.5 percent of Riverwood and 100
percent of Schuller.
The Manville Personal Injury Settlement Trust (the "PI Trust") owns
approximately 80 percent of the Company's common stock. In addition the
Company has certain debt obligations to the PI Trust (see Note 2) and an
obligation to pay annually 20 percent of its net earnings, as adjusted to the
PI Trust (see Note 4).
Additional information regarding the Company's accounting policies, operations,
financial position, reorganization proceedings and the PI Trust is contained in
the Company's 1993 Annual Report and Form 10-K filed with the Securities and
Exchange Commission dated December 31, 1993.
The condensed consolidated financial statements as of September 30, 1994 and
December 31, 1993 and for the three and nine month periods ended September 30,
1994 and 1993 reflect all normal, recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of the financial
condition and the results of operations for the periods presented. The
year-end condensed consolidated balance sheet was derived from audited
financial statements, and as presented does not include all disclosures
required by generally accepted accounting principles.
The Company has reclassified the presentation of certain prior period
information to conform with the current presentation format.
Note 1 - Inventories
The major classes of inventories were as follows:
<TABLE>
<CAPTION>
(Thousands of dollars)
September 30, December 31,
1994 1993
--------------------------------------
<S> <C> <C>
Finished goods $ 89,949 $ 86,664
Work-in-process 27,900 19,703
Raw materials 52,506 55,883
Supplies 50,860 45,452
--------------------------------------
$221,215 $207,702
======================================
</TABLE>
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Note 2 - Long-Term Debt
On June 30, 1994, Riverwood completed a public offering through the sale of
$100 million face value of 10-3/8 percent Senior Subordinated Notes due 2004
and through the completion of a $125 million six year bank facility at an
initial variable interest rate equal to 1.875 percent over the London Interbank
Offered Rate (the "Riverwood Refinancing"). Riverwood borrowed $100 million
under the bank credit facility and used that amount together with the proceeds
of the Senior Subordinated Notes to prepay approximately $179 million of
principal of notes payable to insurance companies and banks, to pay
approximately $3 million of related accrued interest and to pay expenses of the
Riverwood Refinancing. This early retirement of debt resulted in an
extraordinary charge of $7.9 million, net of income taxes of approximately $5
million. Riverwood reports its interim quarterly results based generally on a
13-week period ending on a Saturday. Riverwood's 1994 second quarter ended on
June 25, 1994. Due to Riverwood's reporting period, this loss is reflected in
Manville's third quarter 1994 financial statements. Borrowings under the bank
credit facility are collateralized by substantially all of the fixed assets of
Riverwood's Macon, Georgia mill which were previously collateral for the notes
repaid.
The Senior Subordinated Notes due 2004 are redeemable by Riverwood in whole or
in part beginning in 1999 at redemption prices, expressed as a percent of the
principal amount redeemed, which range from 104.611 percent in 1999 to 100
percent in 2003. Prior to June 30, 1997, up to 35 percent of the principal
amount can be redeemed under specified conditions at 110.375 percent. Interest
is payable semiannually. The $125 million bank credit facility provides for
borrowings on a revolving basis through June 1996, whereupon it converts to a
term loan facility with principal installments payable from 1998 through 2000.
Under existing loan agreements, Riverwood is scheduled to repay principal of
approximately $15 million in 1994, $46 million in 1995, $47 million in 1996 and
$103 million in 1997.
At September 24, 1994, Riverwood had approximately $200 million in revolving
credit facilities for its U.S. and international subsidiaries, of which
approximately $89 million was available for borrowing. The credit facilities
include a $50 million U.S. credit facility with banks to be used for working
capital purposes through December 1995. This facility is collateralized by
certain U.S. inventories and receivables.
On September 22, 1994 (the "Prepayment Date"), the Company prepaid $343 million
of its bond obligations ("Trust Bonds"), including accrued interest, to the PI
Trust with the exchange of an aggregate principal amount of $379 million of
10-3/8 percent Senior Notes ("Senior Notes") due 2004 of its wholly owned
subsidiary, Schuller. The Senior Notes are general unsecured obligations of
Schuller. The transaction resulted in an
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extraordinary loss on the early extinguishment of debt of $26.8 million, net of
income taxes of $11.4 million.
In October 1994, Schuller filed a Form S-1 Registration Statement with the
Securities and Exchange Commission (Registration No.33-84600) relating to a
proposed sale of $250 million of the Senior Notes. The sale will be made by
the PI Trust as the selling securityholder. Neither Schuller nor Manville will
receive any proceeds from the sale. Upon the completion of such sale, the
interest rate of the Senior Notes will be reset to permit pricing of the Senior
Notes at face amount and the aggregate principal amount of Senior Notes will be
adjusted to reflect the pricing and any interim interest payment made at the
time of the offering.
The Company's bond obligation to the PI Trust, other than the Senior Notes,
consists of payments of $75 million per year in 2013 and 2014. This obligation
is included in the Company's long-term debt at a present value of $13.2 million
based upon a 13 percent discount rate. Prior to the exchange, principal and
interest payments under the Trust Bonds would have been $41.4 million per year
from 1994 to 2000, $75 million per year from 2001 to 2002 and $41.4 million
per year from 2003 to 2012. Interest payments on the $379 million of Senior
Notes will be approximately $39 million per year, payable semiannually, through
2004 or early redemption based upon the 10-3/8 percent interest rate.
The PI Trust has the option, exercisable at any time within six months of the
Prepayment Date, to exchange the Company's remaining bond obligation to the PI
Trust for additional Senior Notes based upon a calculation similar to that used
in the third quarter 1994 Trust Bond exchange. This could result in an
extraordinary loss on the early retirement of the remaining Trust Bonds.
Note 3 - Dividends Accrued Not Declared
At December 31, 1993, $102.9 million of Common Stock Dividends Accrued Not
Declared were reflected in the condensed consolidated balance sheet. These
special dividends were previously accrued based upon a refinancing arrangement,
since terminated, that had been negotiated between the Company and the PI
Trust. In the third quarter of 1994, the Company entered into a new
arrangement with the PI Trust in which the PI Trust exchanged most of its
remaining debt obligation from the Company for marketable notes of the
Company's wholly owned subsidiary, Schuller (see Note 2). In light of this new
agreement and its effect on the liquidity of the PI Trust, the Common Stock
Dividends Accrued not Declared were reversed in the third quarter of 1994. The
condensed consolidated balance sheet also reflected Cumulative Preference Stock
Dividends Accrued Not Declared of $72.7 million at December 31, 1993, as part
of the accounting for the refinancing arrangement. The Cumulative Preference
Stock Dividends Accrued Not Declared were reversed in the third quarter of
1994. Future
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<PAGE> 12
dividends, if any, will be paid at the discretion of the Company's Board of
Directors.
Note 4 - Contingencies and Commitments
The Company has an obligation to pay annually 20 percent of its net earnings
(as adjusted) to the PI Trust. Payments to the PI Trust are due each year
based on the prior year's net earnings and will continue for as long as the PI
Trust is in existence and any personal injury asbestos claims filed against the
PI Trust remain unpaid. After termination of the PI Trust, an independent
profit sharing obligation computed under the same terms arises in favor of the
Manville Property Damage Settlement Trust. Based upon a review of the existing
and potential claims facing the two trusts, the Company believes that the
profit sharing, for all practical purposes, will be payable in perpetuity
unless the Company and the trusts agree to a restructuring or modification of
the profit sharing obligations at some future date. In the first nine months
of 1994, the Company recorded $12.5 million of profit sharing expense to be
paid in 1995.
In the third quarter of 1994, Riverwood substantially completed the conversion
of one of the two linerboard machines at the Macon mill to coated board
production. Total capital expenditures for the paper machine conversion and
new recovery boiler were approximately $92 million during the first nine months
of 1994. As of September 24, 1994, outstanding commitments relating to the
Macon conversion and other related capital projects totaled approximately $4
million, which will be funded with operating cash flow and from existing cash
and marketable securities balances.
In December 1988 and January 1989, the Company acquired certain phenolic
roofing insulation assets and related technology from Beazer East, Inc.
("Beazer"), the successor to Koppers Company, Inc. The Company exited the
phenolic roofing business in February 1992. The Company has learned that
phenolic roofing insulation may, under certain circumstances, contribute to
corrosion of steel decks on which the insulation is installed. The Company
estimates that 2,900 metal roof decks are insulated with its phenolic product.
In 1992, the Company commenced a voluntary inspection and sampling program of
decks where its phenolic product was installed between 1989 and 1992. During
the last two years, hundreds of inspections have been conducted and thousands
of roof deck samples obtained. A small percentage of the deck population
inspected or sampled to date exhibited corrosion of sufficient severity to
require replacement, remediation or overlay of some portion of the existing
metal decking. In most of these cases only "spot remediation" has been
required to address the damage to the roof decks. Through September 30, 1994,
the cumulative cash expended by the Company for its inspection and sampling
program was approximately $4 million and the cumulative cash expended for
remediation was approximately $4 million. The exact
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number of phenolic-related claims the Company may receive is dependent upon a
number of variables and cannot be determined at this time.
Based on its claims experience and the information available from the Company's
voluntary inspection and sampling program conducted through 1993, Schuller
recorded an estimated loss in 1993 of approximately $19.7 million for future
anticipated sampling, inspection, remediation and other costs on an
undiscounted basis before giving effect to any potential insurance recoveries.
It is possible the ultimate loss, which cannot be determined at this time,
could exceed this estimate. However, in management's opinion the ultimate loss
will not have a material adverse effect on the Company's financial position,
although additional losses could be material to quarterly or annual operating
results in future periods.
Any determination of the ultimate cost to the Company for phenolic-related deck
corrosion must take into consideration insurance which may be available to
address such claims as well as other sources of indemnification. The Company
has insurance which applies to property damage resulting from metal deck
corrosion; however, the Company is presently engaged in litigation over the
extent of such coverage with its primary insurance carrier. Although there can
be no certainty, at this time the Company believes it will be successful by
verdicts or settlements in its efforts to recover from its insurance carriers
the receivable of $7 million included in other assets in the Company's
financial statements at September 30, 1994. The Company's belief that it will
be successful in this action is based on its interpretation of the language of
the relevant insurance policies and the Company's factual investigation to
date. Accordingly, for financial reporting purposes, the $7 million receivable
has been determined to be "probable" of collection, as defined in Statement of
Financial Accounting Standards No. 5, "Accounting for Contingencies." The
Company has not recorded any non-insurance indemnification receivables.
During 1993, the Company filed a lawsuit against Beazer. The Company seeks to
recover from Beazer all costs and damages incurred as a result of the
acquisition of the phenolic business. Additionally, to the extent negligence of
others is a contributing factor to roof deck corrosion, the Company may have
rights in contribution for recovery of a portion of its costs from such third
parties.
The extent of and ability of the Company to recover costs through insurance,
indemnification, contribution and damage claims beyond the $7 million
receivable recorded at September 30, 1994 cannot be quantified at this time.
The Company is committed to full compliance with all applicable environmental
laws and regulations. Environmental law at the present is dynamic rather than
static. As a result, costs that are unforeseeable at this time may be incurred
when new laws are
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<PAGE> 14
enacted, and/or the environmental agencies promulgate or revise regulations in
furtherance of such legislation. In response to the implementation of the 1990
amendments to the federal Clean Air Act and requirements of various state air
emissions regulations, the Company will be obligated to monitor and reduce air
emissions at its manufacturing sites. The regulations will likely require
capital expenditures in the years 1994-2001, with most of the expenditures
occurring in the latter part of that time frame. Because many of the
anticipated regulations have not yet been proposed, neither the costs nor
timing of compliance can be reasonably anticipated at this time. In addition,
the federal Environmental Protection Agency has issued new proposed regulations
for the pulp and paper industry (the "Proposed Regulations"). It is expected
that the earliest time for industry compliance with the Proposed Regulations
should not be prior to the first quarter of 1999. At this time, the Company
estimates capital spending that may be required to comply with the Proposed
Regulations could be between $20 million and $40 million to be spent over a
three-year period beginning in 1996.
The Company is engaged in environmental remediation projects for properties
currently owned or operated by the Company and properties divested by the
Company for which responsibility was retained for preexisting conditions. In
addition, the Company has been identified as a potentially responsible party at
certain sites under the federal Comprehensive Environmental Response,
Compensation, and Liability Act or similar state legislation, and as such could
be jointly and severally liable for remediation costs at these sites. The
Company's actual final costs in some instances cannot be estimated until the
remediation process is substantially completed. To address these contingent
environmental costs, the Company has established appropriate accruals where
such costs are probable and can be reasonably estimated. The Company
periodically reviews and, as appropriate, revises its environmental accruals.
Based on current information and regulatory requirements, the Company believes
accruals established for environmental expenditures are adequate.
Note 5 - Income Taxes
For the quarter ended September 30, 1993, the Company reported a net income tax
benefit of $0.8 million, which included a $14.8 million benefit due to changes
in U.S. and German tax rates, offset by foreign taxes and taxes on expected
repatriations of undistributed earnings.
The year-to-date income tax benefit at September 30, 1993 of $35.7 million also
included a $33.9 million tax benefit on the portion of the June 1993 special
common dividend that was paid to the PI Trust partially offset by an additional
deferred tax asset valuation allowance of $7 million. The Company records a
tax benefit, for financial reporting purposes, on the amount of common
dividends paid to the PI Trust in the years in which those dividends are paid.
For income tax purposes, the Company is
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entitled to a tax benefit on the amount of common dividends paid to the PI
Trust in the years in which those dividends are transferred to a specific
settlement fund within the PI Trust or paid to claimants. Accordingly, in
September 1993, the Company recorded an increase in deferred tax assets,
partially offset by an additional deferred tax asset valuation allowance of $7
million, due primarily to the income tax benefit attributable to payment of the
common dividend. In accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," the Company's valuation
allowance on all deferred tax assets is subject to change as earnings forecasts
and the estimated timing of the utilization of the Company's tax benefits are
revised.
In addition, during the first half of 1993, the Company received a U.S. income
tax refund of $32.1 million from the U.S. Internal Revenue Service due to a
retroactive change in U.S. income tax regulations, which was recorded as a
reduction to income tax expense of $18.7 million and an increase to interest
income of $13.4 million. The Company's first quarter 1993 income tax benefit
also included a $4.8 million tax benefit due to changes in Brazilian income tax
laws.
Exclusive of the unusual items and their effect on income taxes, the Company's
1994 and 1993 tax rates on operations for the first nine months were 43 percent
and 84 percent, respectively. The 1994 rate is higher than the U.S. federal
statutory rate primarily due to U.S. state and local taxes. The 1993 rate was
higher than the U.S. federal statutory rate primarily due to higher foreign
effective rates and taxes on expected repatriations of undistributed earnings,
compounded by low U.S. earnings.
Note 6 - Restructuring of Operations
During the third quarter of 1993, the Company reported a $4 million loss due to
an additional restructuring charge principally for the settlement of litigation
related to a former business, a $1 million loss on the sale of an oil and gas
property, and a $0.6 million write-down of a property in anticipation of sale.
These losses were offset by a $0.3 million gain on the sale of excess
properties. These amounts are included in the third quarter restructuring of
operations loss of $5.7 million.
The amount reported as a restructuring of operations loss for the first nine
months of 1993 includes the amounts discussed above as well as a $4.1 million
provision for severance, outplacement and relocation costs associated with the
restructuring of the Company's worldwide mats and reinforcement business,
recorded during the second quarter of 1993.
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<PAGE> 16
Note 7 - Early Extinguishment of Debt
In the third quarter of 1994 the Company completed two debt refinancings (see
Note 2) that resulted in an aggregate extraordinary loss on early
extinguishment of debt of $34.7 million, net of related income taxes of $16.4
million.
Riverwood completed a refinancing program in the third quarter of 1994 and
prepaid approximately $179 million of principal of notes payable. The
extraordinary charge for this early retirement of debt was $7.9 million, net of
income taxes of approximately $5 million.
In conjunction with the Trust Bond prepayment, the Company recorded an
extraordinary loss of $26.8 million, net of related income taxes of $11.4
million in the third quarter of 1994.
In the third quarter of 1993 the Company recorded an extraordinary gain of $0.9
million, net of related income taxes of $0.5 million, to adjust an estimated
extraordinary loss previously recorded in 1992 on a partial prepayment of the
Trust Bonds.
Note 8 - Cumulative Effect of a Change in Accounting Principle
In the fourth quarter of 1993, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits," effective January 1, 1993. Accordingly, the September 30, 1993
financial information has been restated to recognize an accumulated
postemployment benefit obligation of $13.9 million, net of income taxes of $8.6
million.
Note 9 - Preference Stock Dividends/Accretion
Dividends on the Company's Cumulative Preference Stock, Series B may be paid
beginning in 1994 at an annual rate of $2.70 per share, payable quarterly, but
only at the discretion of the Company's Board of Directors. The Preference
Stock Dividends/Accretion of $6.2 million and $18.7 million represents the
dividends for the third quarter and first nine months of 1994, respectively.
Three dividends have been declared and paid in 1994 totaling $16.6 million. At
September 30, 1994, there are no dividends in arrears. The Preference Stock
Dividends/Accretion of $5.8 million and $16.9 million for the third quarter and
nine months ended September 30, 1993, respectively, is the accretion to
increase the carrying values of the preference stock and the preference stock
dividend accrual based on the interest method, in accordance with APB Opinion
No. 21.
Note 10 - Earnings Per Common Share
For the third quarter of 1994, primary and fully diluted earnings per common
share amounts were based on 122,336,000 and 122,341,000 weighted average common
equivalent shares
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<PAGE> 17
outstanding, respectively. Primary and fully diluted earnings per common share
amounts for the first nine months of 1994 were based on 122,362,000 weighted
average common equivalent shares outstanding.
The 1993 third quarter primary and fully diluted earnings per common share
amounts were based on 122,403,000 weighted average common equivalent shares
outstanding. Primary and fully diluted earnings per common share amounts for
the first nine months of 1993 were based on 122,588,000 weighted average common
equivalent shares outstanding.
Earnings per share amounts were calculated after the deduction for preference
stock dividends/accretion.
Note 11 - Subsequent Events
In July 1994, Riverwood entered into an agreement in principle to sell just
under 50 percent of its Brazilian subsidiary, together with a 25 percent
interest in an entity holding the multiple packaging business in Brazil. The
sale, which is subject to negotiation of definitive agreements, Board of
Directors' and certain third party approvals, is expected to close in January
1995. The Company expects the Brazilian transaction to result in a significant
cash inflow. However, if consummated, the transaction will result in a
significant nonrecurring charge to net income in 1994 for financial reporting
purposes, principally due to charges for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."
In October 1994, Riverwood completed the sale of certain oil and gas mineral
rights which the Company estimates will increase Riverwood's net income by
approximately $5.4 million in the fourth quarter of 1994.
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<PAGE> 18
Note 12 - Business Segment Information
<TABLE>
<CAPTION>
(Thousands of dollars)
Manville Corporation Three Months
Consolidated Major Business Segments Ended September 30,
1994 1993
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales
- ----------------------------------------------------------------------------------------------------
Riverwood International:
Coated Board System $215,804 $192,564
Containerboard 73,688 64,396
U.S. Timberlands/Wood Products 43,184 37,680
Corporate and Eliminations (4,729) (4,597)
- ----------------------------------------------------------------------------------------------------
327,947 290,043
- ----------------------------------------------------------------------------------------------------
Schuller International:
Building Products 212,635 189,923
Engineered Products 148,202 133,096
Corporate and Eliminations (7,391) (10,090)
- ----------------------------------------------------------------------------------------------------
353,446 312,929
- ----------------------------------------------------------------------------------------------------
Manville Corporate and Eliminations 7 (1,648)
- ----------------------------------------------------------------------------------------------------
Total Company Net Sales $681,400 $601,324
====================================================================================================
Income (Loss) from Operations
- ----------------------------------------------------------------------------------------------------
Riverwood International:
Coated Board System $ 22,489 $ 27,869
Containerboard 1,098 (10,019)
U.S. Timberlands/Wood Products 15,667 11,485
Corporate and Eliminations (4,780) (5,432)
- ----------------------------------------------------------------------------------------------------
34,474 23,903
- ----------------------------------------------------------------------------------------------------
Schuller International:
Building Products 40,907 21,433
Engineered Products 21,049 12,245
Corporate and Eliminations (5,540) (10,494)
- ----------------------------------------------------------------------------------------------------
56,416 23,184
- ----------------------------------------------------------------------------------------------------
Manville Corporate and Eliminations (3,401) (2,232)
- ----------------------------------------------------------------------------------------------------
Total Company Income from
Operations $ 87,489 $ 44,855
====================================================================================================
</TABLE>
Net sales included in Corporate and Eliminations relate primarily to the
elimination of intersegment sales (at prices approximating market).
I-17
<PAGE> 19
<TABLE>
<CAPTION>
(Thousands of dollars)
Manville Corporation Nine Months
Consolidated Major Business Segments Ended September 30,
1994 1993
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales
- ----------------------------------------------------------------------------------------------------
Riverwood International:
Coated Board System $ 597,153 $ 562,643
Containerboard 203,529 175,756
U.S. Timberlands/Wood Products 119,995 109,077
Corporate and Eliminations (13,827) (13,894)
- ----------------------------------------------------------------------------------------------------
906,850 833,582
- ----------------------------------------------------------------------------------------------------
Schuller International:
Building Products 542,990 491,868
Engineered Products 418,624 396,937
Corporate and Eliminations (19,126) (23,681)
- ----------------------------------------------------------------------------------------------------
942,488 865,124
- ----------------------------------------------------------------------------------------------------
Manville Corporate and Eliminations (255) (5,555)
- ----------------------------------------------------------------------------------------------------
Total Company Net Sales $1,849,083 $1,693,151
====================================================================================================
Income (Loss) from Operations
- ----------------------------------------------------------------------------------------------------
Riverwood International:
Coated Board System $ 77,501 $ 78,366
Containerboard (4,679) (22,020)
U.S. Timberlands/Wood Products 42,337 34,690
Corporate and Eliminations (17,408) (17,581)
- ----------------------------------------------------------------------------------------------------
97,751 73,455
- ----------------------------------------------------------------------------------------------------
Schuller International:
Building Products 85,446 46,574
Engineered Products 58,302 41,623
Corporate and Eliminations (22,332) (25,529)
- ----------------------------------------------------------------------------------------------------
121,416 62,668
- ----------------------------------------------------------------------------------------------------
Manville Corporate and Eliminations (9,501) (5,462)
- ----------------------------------------------------------------------------------------------------
Total Company Income from
Operations $ 209,666 $ 130,661
====================================================================================================
</TABLE>
Net sales included in Corporate and Eliminations relate primarily to the
elimination of intersegment sales (at prices approximating market).
The Company has reclassified the presentation of previously disclosed business
segment information to conform with the current presentation format.
I-18
<PAGE> 20
Report of Independent Accountants
To the Stockholders and Directors
of Manville Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of
Manville Corporation as of September 30, 1994 and the related condensed
consolidated statement of income and accumulated deficit for the three month
and nine month periods ended September 30, 1994 and 1993 and cash flows for the
nine month periods ended September 30, 1994 and 1993. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1993, and the
related consolidated statements of income, stockholders' equity and cash flows
for the year then ended (not presented herein); and in our report dated
February 4, 1994, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 1993, is
fairly stated in all material respects in relation to the consolidated balance
sheet from which it has been derived.
/s/ COOPERS & LYBRAND L.L.P.
- ----------------------------
COOPERS & LYBRAND L.L.P.
Denver, Colorado
November 10, 1994
I-19
<PAGE> 21
ITEM 2.
MANVILLE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Manville Corporation is an international holding company with two principal
operating subsidiaries, Riverwood International Corporation ("Riverwood") and
Schuller International Group, Inc. ("Schuller"), collectively referred to as
"Manville" or "the Company". When referring to the parent company only,
Manville Corporation is defined as the "Manville holding company". The
Manville holding company owns approximately 81.5 percent of Riverwood and 100
percent of Schuller.
Riverwood and Schuller report the results of their operations in five business
segments. Riverwood reports its results in three business segments: Coated
Board System, Containerboard and U.S. Timberlands/Wood Products. The Coated
Board System segment includes the production of coated board at paperboard
mills in the United States and Europe; converting facilities in the United
States, Australia and Europe; and worldwide packaging machinery operations
related to the production and sale of beverage and folding cartons. The
Containerboard segment includes timberlands and associated containerboard mills
and corrugated box plants in Brazil as well as kraft paper, linerboard and
corrugating medium production at two U.S. mills. The U.S. Timberlands/Wood
Products segment includes timberlands and operations engaged in the supply
I-20
<PAGE> 22
of pulpwood to the U.S. mill operations, and the manufacture of lumber and
plywood.
Schuller's Building Products segment includes (i) building insulation, (ii)
commercial roofing systems and (iii) mechanical insulations. The building
insulation business manufactures fiberglass wool insulation for walls and
attics in residential and commercial buildings. Schuller is also a full-line
supplier of commercial roofing systems, which include roofing membranes,
insulations, accessories and related guarantees. The mechanical insulations
business manufactures pipe and duct insulation for use in commercial buildings,
factories, refineries and other industrial applications.
Schuller's Engineered Products segment includes (i) specialty insulations and
filtration products and (ii) mats and reinforcements. Specialty insulations
and filtration products include thermal and acoustic insulation for aircraft,
appliances, automobiles and HVAC (heating, ventilating and air conditioning)
equipment; air filtration media for commercial and industrial buildings; and
microfibers for clean room air filters. The mats and reinforcements business
manufactures continuous filament fiberglass-based products used for reinforcing
roofing, flooring, wall covering and plastics products.
I-21
<PAGE> 23
Financial results for the Manville holding company's oil and gas property
(which was sold in the third quarter of 1993) and its equity investment in the
Stillwater platinum and palladium mining operations are included in Manville
Corporate and Eliminations for business segment reporting purposes.
RESULTS BY SEGMENT - RIVERWOOD
Riverwood's net sales increased $37.9 million, or 13.1 percent, from the third
quarter of 1993 and $73.3 million, or 8.8 percent, from the first nine months
of 1993 due to higher sales in all segments of Riverwood. The Coated Board
System segment's net sales increased $23.2 million, or 12.1 percent, in the
third quarter and $34.5 million, or 6.1 percent, in the first nine months over
the same periods of 1993, due principally to revenues from increased volume in
U.S. beverage markets and international beverage and folding carton markets.
These increases were partially offset by selling price declines in folding
carton and coated board open markets. Net sales in the Containerboard segment
increased $9.3 million, or 14.4 percent, for the third quarter and $27.8
million, or 15.8 percent, for the nine months of 1994 over the same periods of
1993, primarily due to selling price increases. Net sales in the U.S.
Timberlands/Wood Products segment increased $5.5 million, or 14.6 percent, for
the third quarter and $10.9 million, or 10 percent, for the nine months of 1994
compared with 1993, due principally to higher selling prices for both lumber
and plywood.
I-22
<PAGE> 24
Riverwood's gross profit increased $11 million and $29.4 million for the third
quarter and first nine months of 1994, respectively, from the same periods of
1993. During the third quarter of 1994, the gross profit margin increased to
20.5 percent from 19.4 percent and increased to 22 percent from 20.4 percent
for the nine months over the same periods of 1993. The Coated Board System
segment's gross profit decreased by $3.9 million to $44 million for the third
quarter of 1994, while its gross profit margin decreased to 20.4 percent from
24.9 percent. This decrease in gross profit and gross profit margin was
primarily due to costs incurred to meet U.S. beverage market demand that
exceeded Riverwood's U.S. converting capacity. These costs resulted primarily
from subcontracting carton production, additional transportation, and
scheduling inefficiencies at Riverwood's U.S. converting plants. Riverwood is
in the process of increasing its U.S. converting capacity in response to the
demand of the U.S. beverage market. Gross profit in the Coated Board System
segment for the nine months increased $4.6 million to $141.2 million, and its
gross profit margin decreased to 23.6 percent from 24.3 percent. The increase
in gross profit was due primarily to higher volume in the U.S. beverage markets
and international folding carton and coated board open markets. The gross
profit margin decreased primarily due to costs incurred to meet U.S. beverage
market demand that exceeded Riverwood's U.S. converting capacity. Gross profit
in the Containerboard segment increased $10.4 million to $8.2 million in the
third quarter of 1994 from a loss in 1993, and increased
I-23
<PAGE> 25
$17.1 million to $16.3 million for the nine months of 1994, due primarily to
higher selling prices. Gross profit in the U.S. Timberlands/Wood Products
segment increased $4.2 million to $15.1 million in the third quarter of 1994
over 1993, and its gross profit margin increased to 35 percent from 29 percent
due principally to selling price increases in both lumber and plywood. The
U.S. Timberlands/Wood Products segment gross profit for the first nine months
of 1994 increased $7.5 million to $42.5 million and its gross profit margin
increased to 35.5 percent from 32.1 percent due principally to selling price
increases in lumber, which were partially offset by higher log costs.
Riverwood's selling, general and administrative expenses decreased $0.4 million
in the third quarter of 1994 compared with the same period of 1993. For the
first nine months of 1994 selling, general and administrative expenses
increased $3.3 million over the first nine months of 1993 due to increased
sales and marketing expenses resulting from continuing international market
penetration, partially offset by lower administrative expenses. As a percent
of net sales, selling, general and administrative expenses declined 1.4
percent in the third quarter and 0.5 percent for the nine months of 1994.
Riverwood's total income from operations increased by $10.6 million, or 44.2
percent, for the third quarter of 1994 and by $24.3 million, or 33.1 percent,
for the first nine months of
I-24
<PAGE> 26
1994, compared with the same periods of 1993. The Coated Board System
segment's income from operations decreased $5.4 million, or 19.3 percent, for
the third quarter of 1994 compared with 1993. Income from operations decreased
$0.9 million, or 1.1 percent, for the first nine months of 1994. Higher volume
was more than offset by increased converting costs in the U.S. beverage market
and selling price declines in international beverage and folding carton
markets. Income from operations in the Containerboard segment increased $11.1
million to $1.1 million in the third quarter of 1994 from a loss in 1993, due
primarily to increased selling prices. The operating loss in the first nine
months of 1994 in the Containerboard segment decreased $17.3 million to a loss
of $4.7 million compared with the same period of 1993 due primarily to
increased selling prices. Income from operations in the U.S. Timberlands/Wood
Products segment increased $4.2 million over the third quarter of 1993 to $15.7
million for the third quarter of 1994, due principally to selling price
increases in both lumber and plywood. The U.S. Timberlands/Wood Products
segment income from operations increased $7.6 million to $42.3 million in the
first nine months of 1994 over 1993 due principally to higher lumber selling
prices offset somewhat by higher log costs.
RESULTS BY SEGMENT - SCHULLER
Schuller's net sales increased $40.5 million, or 12.9 percent, from the third
quarter of 1993 and $77.4 million, or 8.9 percent, from the first nine months
of 1993 due to higher sales in both the
I-25
<PAGE> 27
Building Products and Engineered Products segments. Net sales for Schuller's
Building Products segment increased by $22.7 million, or 12 percent, in the
third quarter of 1994 and by $51.1 million, or 10.4 percent, in the first nine
months of 1994 compared with the same periods of 1993. These increases
resulted primarily from higher sales volumes associated with strong
construction activity as well as improved selling prices. Schuller's
Engineered Products segment net sales were $15.1 million, or 11.3 percent,
higher in the third quarter of 1994 compared with the third quarter of 1993 and
$21.7 million, or 5.5 percent, higher in the first nine months of 1994 compared
with the first nine months of 1993. The increase in 1994 sales for this
segment is due to improvements in both North American and European construction
markets.
Schuller's gross profit increased $33.7 million and $60.5 million for the third
quarter and first nine months of 1994, respectively, from the same periods of
1993. Gross profit margin for the third quarter of 1994 was 28.5 percent
compared with 21.5 percent for the same period of 1993. Gross profit margin
was 26.2 percent for the first nine months of 1994 versus 21.6 percent for the
same period of 1993. The Building Products segment's gross profit margin was
31 percent and 28 percent in the third
I-26
<PAGE> 28
quarter and first nine months of 1994, compared with 21.7 percent and 21.2
percent, respectively, for the same periods in 1993. The Engineered Products
segment's gross profit margin increased to 23.8 percent for the third quarter
of 1994 from 19.5 percent in the third quarter of 1993 and increased to 23
percent for the first nine months of 1994 from 21.5 percent for the same period
of 1993. The 1994 increase in gross profit for both segments was primarily
attributable to increased sales volume resulting from increased U.S.
construction activity, improved manufacturing efficiencies and higher 1994
selling prices. These manufacturing efficiencies are partially due to
restructuring programs initiated in 1993 and include the favorable impact of
the commercial and industrial roofing business acquired in January 1994 from a
competitor while simultaneously selling to that competitor the Company's
residential roofing business.
Schuller's selling, general and administrative expenses and research,
development and engineering expenses increased $3.4 million in the third
quarter and $7.4 million in the first nine months of 1994 over the same periods
of 1993 due to higher expenses for product development, environmental
compliance and information systems development. Combined, these expenses
remained relatively constant as a percentage of net sales for the first nine
months of 1994 compared with the same period of 1993.
Schuller reported a $3.6 million loss in the third quarter of 1993 due to the
settlement of litigation related to a former business. This charge was
included in Schuller's corporate and eliminations for business segment
purposes.
I-27
<PAGE> 29
Schuller's Engineered Products segment also reported a $4.1 million
restructuring loss in the second quarter of 1993 for severance, outplacement
and relocation costs associated with the restructuring of Schuller's worldwide
mats and reinforcements business.
Schuller's income from operations for all segments increased $33.2 million in
the third quarter of 1994 and $58.7 million in the first nine months of 1994
over the same periods of 1993. The Building Products segment reported income
from operations of $40.9 million in the third quarter of 1994, a $19.5 million
increase from the third quarter of 1993. For the first nine months of 1994,
income from operations was $85.4 million, up $38.9 million from the first three
quarters of 1993. Schuller's Engineered Products segment's income from
operations of $21 million in the third quarter of 1994 represents an increase
of $8.8 million from the $12.2 million in income from operations reported for
the third quarter of 1993. For the first nine months of 1994, income from
operations was $58.3 million, $16.7 million higher than the first three
quarters of 1993.
Total Company net sales increased $80.1 million to $681.4 million in the third
quarter and increased $155.9 million to $1,849.1 million for the first nine
months of 1994 over the same periods of 1993 due to increases at both Riverwood
and Schuller. Manville consolidated income from operations increased $42.6
million to $87.5 million in the third quarter and increased $79 million to
$209.7 million for the first nine months of 1994 over the same periods of 1993.
These improvements were due to increases at both Riverwood and Schuller offset
by higher Manville corporate expenses. The increase in Manville corporate
expenses is
I-28
<PAGE> 30
primarily due to oil and gas income included in Manville 1993 corporate
expenses not reflected in 1994 due to the sale of the oil and gas properties in
the third quarter of 1993.
INTEREST INCOME
Interest income for the third quarter of 1994 was relatively unchanged from the
same period of 1993. Compared with the corresponding period of 1993, interest
income for the first nine months of 1994 decreased by $17.6 million.
Year-to-date 1993 interest income included $13.4 million of interest income
received on the income tax refund described below.
INTEREST EXPENSE
Gross interest expense incurred, before capitalization of interest, was $119.8
million for the first nine months of 1994, a decrease of $1.7 million when
compared with $121.5 million for the same period in 1993. The decrease in
interest expense was primarily due to a partial prepayment in August 1993 of
debt owed to the Manville Personal Injury Settlement Trust (the "PI Trust") and
higher levels of capitalized interest in 1994, offset in part by Riverwood's
issuance of $125 million of 6.75 percent Convertible Subordinated Notes in
September 1993. During the first nine months of 1994 and 1993, the Company
capitalized interest totaling $19.9 million and $13.4 million, respectively, of
which the majority was capitalized in connection with expenditures for the
coated board capacity expansion program.
I-29
<PAGE> 31
PROFIT SHARING EXPENSE
Profit sharing expense for the third quarters of 1994 and 1993 totaled $5.1
million and $2.9 million, respectively (see RELATIONSHIP OF MANVILLE TO THE
PERSONAL INJURY SETTLEMENT TRUST). The $2.2 million increase is primarily due
to improved income from operations for the third quarter of 1994 over 1993,
offset by income tax related benefits in the third quarter of 1993.
Year-to-date profit sharing expense for 1994 totaled $12.5 million compared
with $13.1 million for the same period in 1993, a decrease of $0.6 million.
The year-to-date decrease in profit sharing expense is principally due to the
income tax related benefits reported during 1993, partially offset by improved
income from operations in 1994.
INCOME TAXES
For the quarter ended September 30, 1993, the Company reported a net income tax
benefit of $0.8 million, which included a $14.8 million benefit due to changes
in U.S. and German tax rates, offset by foreign taxes and taxes on expected
repatriations of undistributed earnings.
The year-to-date income tax benefit at September 30, 1993 of $35.7 million also
included a $33.9 million tax benefit on the portion of the June 1993 special
common dividend that was paid to the PI Trust, partially offset by an
additional deferred tax asset valuation allowance of $7 million. The Company
records a tax
I-30
<PAGE> 32
benefit, for financial reporting purposes, on the amount of common dividends
paid to the PI Trust in the years in which those dividends are paid. For
income tax purposes, the Company is entitled to a tax benefit on the amount of
common dividends paid to the PI Trust in the years in which those dividends are
transferred to a specific settlement fund within the PI Trust or paid to
claimants. Accordingly, the Company recorded an increase in deferred tax
assets during the second quarter of 1993. The Company believes, based upon its
past earnings, forecasts of future earnings and potential tax planning
strategies, that the additional valuation allowance of $7 million recorded in
1993 was necessary. In accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," the Company's valuation
allowance on all deferred tax assets is subject to change as earnings forecasts
and the estimated timing of the utilization of the Company's tax benefits are
revised.
In addition, during the first half of 1993, the Company received a U.S. income
tax refund of $32.1 million from the U.S. Internal Revenue Service due to a
retroactive change in U.S. income tax regulations, which was recorded as a
reduction to income tax expense of $18.7 million and an increase to interest
income of $13.4 million. The Company's first quarter 1993 income tax benefit
also included a $4.8 million tax benefit due to changes in Brazilian income tax
laws.
I-31
<PAGE> 33
Exclusive of the unusual items and their effect on income taxes, the Company's
1994 and 1993 tax rates for the first nine months on operations were 43 percent
and 84 percent, respectively. The 1994 rate is higher than the U.S. federal
statutory rate primarily due to U.S. state and local taxes. The 1993 rate was
higher than the U.S. federal statutory rate primarily due to higher foreign
effective rates and taxes on expected repatriations of undistributed earnings,
compounded by low U.S. earnings.
EXTRAORDINARY GAIN (LOSS) ON EARLY EXTINGUISHMENTS OF DEBT
In the third quarter of 1994, the Company completed two debt refinancings that
resulted in an aggregate extraordinary loss on early extinguishments of debt of
$34.7 million, net of related income taxes of $16.4 million.
Riverwood completed a refinancing program in the third quarter of 1994 and
prepaid approximately $179 million principal of notes payable. The
extraordinary charge for this early retirement of debt was $7.9 million, net of
income taxes of approximately $5 million.
In conjunction with the Trust Bond prepayment discussed below, the Company
recorded an extraordinary loss of $26.8 million, net of related income taxes of
$11.4 million, in the third quarter of 1994.
I-32
<PAGE> 34
In the third quarter of 1993 the Company recorded an extraordinary gain of $0.9
million, net of related income taxes of $0.5 million, to adjust an estimated
extraordinary loss previously recorded in 1992 on a partial prepayment of the
Trust Bonds.
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE
In the fourth quarter of 1993, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits," effective January 1, 1993. Accordingly, the September 30, 1993
financial information has been restated to recognize an accumulated
postemployment benefit obligation of $13.9 million, net of income taxes of $8.6
million.
NET INCOME
Net income applicable to common stock, which is after preference stock
dividends/accretion, for the third quarter of 1994 was a loss of $12 million
compared to income of $6.8 million from the same period in 1993. Year-to-date
net income applicable to common stock for 1994 decreased $35.2 million to $3.6
million from the same period in 1993.
EARNINGS PER COMMON SHARE
Primary and fully diluted earnings per common share for the third quarter of
1994 were both losses of $0.10 as compared with primary and fully diluted
earnings per common share of $0.06 each for the same period in 1993. Primary
and fully diluted earnings per common
I-33
<PAGE> 35
share for the nine month periods ended September 30, 1994 and 1993 were $0.03
and $0.32, respectively. Earnings per common share amounts were calculated
after deducting preference stock dividends/accretion.
As previously described, 1994 results included a charge for early
extinguishments of debt. In addition, 1993 year-to-date net income includes
the net favorable effect of various restructuring charges; tax benefits due to
U.S., Brazilian and German tax law changes; an income tax benefit on the
portion of the common dividend that was paid to the PI Trust; a U.S. income tax
refund and the related interest income; a gain on early extinguishment of debt
and a charge for the cumulative effect of an accounting change.
Excluding each of these items and their effect on profit sharing expense from
reported results, the Company would have reported net income applicable to
common stock for the first nine months of 1994 of approximately $36 million, or
$0.29 per share, compared with a net loss of $7.3 million, or $0.06 per share,
in the first nine months of 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company broadly defines liquidity as its ability to generate sufficient
cash flow to satisfy operating requirements, fund capital expenditures and meet
its existing obligations and commitments. In addition, liquidity includes the
ability to obtain
I-34
<PAGE> 36
appropriate debt and equity financing and to convert into cash those assets
that are no longer required to meet existing strategic and financial
objectives. Therefore, liquidity cannot be considered separately from capital
resources, which consist of current or potentially available funds for use in
achieving long-range business objectives and meeting debt service commitments.
Additionally, the Company's relationship with the PI Trust should also be
considered in analyzing liquidity.
The Manville holding company's ability to generate sufficient cash in 1994 and
beyond is dependent upon funds generated from tax sharing agreements with
Riverwood and Schuller, dividends declared by Riverwood and Schuller, asset
dispositions and capital raised through external sources. As a result of the
Riverwood public offerings completed during 1992 and issuance of Senior Notes
(defined below) by Schuller in 1994, the Manville holding company no longer has
unrestricted access to cash flows generated by Riverwood and Schuller. In
addition, certain of the Company's subsidiaries may be restricted in the amount
of dividends that can be repatriated due to governmental regulations, economic
conditions or provisions contained in financing agreements.
Tax-sharing agreements between the Manville holding company and its operating
subsidiaries, Riverwood and Schuller, provide that the subsidiaries' U.S.
federal and state income taxes be calculated as if they were independent
entities and that such tax amounts be
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remitted to the Manville holding company. The Company is able to apply its tax
benefits to reduce the consolidated domestic tax obligations, allowing the
Manville holding company to retain a large portion of the cash remitted by
Riverwood and Schuller. The Manville holding company currently intends to
maintain at least an 80 percent ownership interest in Riverwood and Schuller in
order to preserve the consolidated tax entity and utilize existing tax
benefits.
Riverwood's ability to generate cash in 1994 and beyond is dependent upon funds
generated from operations and the flow of funds from subsidiaries. Funds from
operations are dependent, in part, upon Riverwood's ability to successfully
market the additional capacity from the Macon mill at prices satisfactory to
Riverwood and Riverwood's ability to successfully implement its reengineering
and cost reduction programs.
Riverwood has paid quarterly cash dividends of $0.04 per share on its common
stock since December 1992. As Riverwood's majority shareholder, the Manville
holding company received $2.1 million during both the third quarters of 1994
and 1993 and $6.4 million in both the first nine months of 1994 and 1993 in
connection with the payment of Riverwood common dividends. Riverwood currently
intends to continue paying quarterly dividends of $0.04 per share on its common
stock subject to a number of conditions, including approval
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by Riverwood's Board of Directors and compliance with covenants in debt
instruments and other agreements.
Dividends on the Company's Cumulative Preference Stock, Series B may be paid
quarterly beginning in 1994 at an annual rate of $2.70 per share, but only at
the discretion of the Company's Board of Directors after other funding
requirements under the Plan (defined below) have been met. Manville paid a
cash dividend of $4.2 million, or $0.45 per share, on March 1, 1994 to
Cumulative Preference Stock, Series B stockholders. Manville also paid cash
dividends of $6.2 million, or $0.675 per share, on both June 1, 1994 and
September 1, 1994 to Cumulative Preference Stock, Series B stockholders. In
November 1994, the Company declared a dividend on its Cumulative Preference
Stock, Series B of $0.675 per share, payable December 1, 1994 to stockholders
of record on November 21, 1994.
At September 30, 1994, the Company had net working capital of $307.7 million,
including cash and marketable securities of $161.6 million. Total cash and
marketable securities located outside of the United States and Canada was
approximately $41 million. Approximately $58 million of cash and marketable
securities is held by Riverwood and $65 million is held by Schuller.
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Cash and marketable securities decreased by $66.5 million during the first nine
months of 1994. This decrease is primarily attributable to capital
expenditures, a large percentage of which related to the coated board capacity
expansion project and packaging machinery installations, offset in part by cash
generated from operations and from a sale and leaseback financing arrangement.
On June 22, 1994, Riverwood entered into a financing agreement structured as a
sale and leaseback transaction. Under terms of the agreement, Riverwood
received sales proceeds of $25 million. The assets sold have been leased back
by Riverwood under a one-year operating lease, which allows for four one-year
renewals for a maximum term of five years. Lease payments are comprised of a
fixed and variable component which, based on interest rates in effect at the
inception of the agreement, would approximate $4 million annually.
Overall, the Company's debt increased during the first nine months of 1994 by
$93.9 million principally as a result of the Company's third quarter 1994
refinancings and new borrowings by foreign subsidiaries. Principal reductions
on long-term debt payable to lenders other than the PI Trust are expected to be
approximately $17 million for 1994, after giving effect to Riverwood's
refinancing (discussed below).
In the third quarter of 1994, Riverwood completed a public offering through the
sale of $100 million face value of 10-3/8 percent
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Senior Subordinated Notes due 2004 and entered into a bank credit facility
which provides for borrowings of up to $125 million at an initial variable
interest rate equal to 1.875 percent over the London Interbank Offered Rate
(the "Riverwood Refinancing"). Riverwood borrowed $100 million under the bank
credit facility and used that amount together with the proceeds of the Senior
Subordinated Notes to prepay approximately $179 million principal of notes
payable to insurance companies and banks, to pay approximately $3 million of
related accrued interest and to pay expenses of the Riverwood Refinancing.
The extraordinary charge for this early retirement of debt was $7.9 million,
net of income taxes of approximately $5 million. Borrowings under the bank
credit facility are collateralized by substantially all of the fixed assets of
the Macon mill which were previously collateral for the notes repaid.
The Senior Subordinated Notes due 2004 are redeemable by Riverwood in whole or
in part beginning in 1999 at redemption prices expressed as a percent of the
principal amount redeemed, which range from 104.611 percent in 1999 to 100
percent in 2003. Prior to June 30, 1997, up to 35 percent of the principal
amount can be redeemed under specified conditions at 110.375 percent. Interest
is payable semiannually. The $125 million bank credit facility provides for
borrowings on a revolving basis through June 1996, whereupon it converts to a
term loan facility with principal installments payable from 1998 through 2000.
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Under existing loan agreements Riverwood is scheduled to repay principal of
approximately $15 million in 1994, $46 million in 1995, $47 million in 1996 and
$103 million in 1997. The Company currently anticipates that Riverwood's
indebtedness, its capital spending program and other ongoing operating costs
will be paid out of its operating cash flow, proceeds from the sale of
nonstrategic assets, access to private and capital markets and amounts
available under revolving credit facilities.
At September 30, 1994, Riverwood had approximately $200 million in revolving
credit facilities for its U.S. and international subsidiaries, of which
approximately $89 million was available for borrowing. As part of its
revolving credit facilities, Riverwood has a $50 million U.S. credit facility
with banks to be used for working capital purposes through December 1995. This
facility is collateralized by certain U.S. inventories and receivables. In
addition, Riverwood had arrangements with certain international banks for
discounting receivables. As of September 30, 1994, approximately $30 million
of overseas receivables were discounted.
At September 30, 1994, Schuller had credit facilities totaling approximately
$158 million including a $100 million domestic receivables sale facility and
international revolving credit facilities, of which approximately $157 million
was available for use.
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On September 22, 1994 (the "Prepayment Date"), the Company prepaid $343 million
of its bond obligations ("Trust Bonds"), including accrued interest, to the PI
Trust with the exchange of an aggregate principal amount of $379 million of
10-3/8 percent Senior Notes ("Senior Notes") due 2004 of its wholly owned
subsidiary, Schuller. The Senior Notes are general unsecured obligations of
Schuller. The transaction resulted in an extraordinary loss on the early
extinguishment of debt of $26.8 million, net of income taxes of $11.4 million.
In October 1994, Schuller filed a Form S-1 Registration Statement with the
Securities and Exchange Commission (Registration No. 33-84600) relating to a
proposed sale of $250 million of the Senior Notes. The sale will be made by
the PI Trust as the selling securityholder. Neither Schuller nor Manville will
receive any proceeds from the sale. Upon the completion of such sale, the
interest rate of the Senior Notes will be reset to permit pricing of the Senior
Notes at face amount and the aggregate principal amount of Senior Notes will be
adjusted to reflect the pricing and any interim interest payment made at the
time of the offering.
The Company's bond obligation to the PI Trust, other than the Senior Notes,
consists of payments of $75 million per year in 2013 and 2014. This obligation
is included in the Company's long-term debt at a present value of $13.2 million
based upon a 13 percent discount rate. Prior to the exchange of the Senior
Notes, principal and
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interest payments under the Trust Bonds would have totaled $41.4 million per
year from 1994 to 2000, $75 million per year from 2001 to 2002 and $41.4
million per year from 2003 to 2012. Interest payments on the $379 million of
Senior Notes will be approximately $39 million per year, payable semiannually,
through 2004 or early redemption based upon the 10-3/8 percent interest rate.
The PI Trust has the option, exercisable at any time within six months of the
Prepayment Date, to exchange the Company's remaining bond obligation to the PI
Trust for additional Senior Notes based upon a calculation similar to that used
in the third quarter 1994 Trust Bond exchange. This could result in an
extraordinary loss on the early retirement of the remaining Trust Bonds.
The Company's capital expenditures, exclusive of capitalized interest, for 1994
are expected to be approximately $280 million. In the third quarter of 1994,
Riverwood substantially completed the conversion of one of the two linerboard
machines at the Macon mill to coated board production. Included in the
Company's total capital expenditures for 1994 of $280 million are Riverwood
expenditures of approximately $200 million for: the Macon mill, the cost of
additional packaging machinery placements, projects that will add worldwide
press and converting capacity, and costs for environmental compliance. Total
capital expenditures for the paper machine conversion and new recovery boiler
were approximately
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$92 million during the first nine months of 1994. The conversion project
proceeded in stages with an initial production of 24,400 tons of on-line
coated board in the second quarter of 1994. The final phase of the paper
machine conversion was substantially completed in the third quarter of 1994 and
required a 47-day paper machine outage. Production of on-line coated board in
the third quarter of 1994 was approximately 16,000 tons and Riverwood expects
to produce approximately 80,000 tons of coated board at the Macon mill during
1994. The Company estimates that the 47-day production shut down and the
associated coated board production start-up reduced Riverwood's income from
operations by approximately $8 million in the third quarter of 1994. Riverwood
expects to capitalize approximately $23 million of interest expense during
1994. With the Macon mill paper machine conversion substantially completed in
1994, the Company does not expect to continue capitalizing interest at a
similar rate in 1995. Outstanding purchase commitments relating to the
conversion and other related projects under way at the Macon mill totaled
approximately $4 million at quarter-end.
As a result of recently improved economic conditions, new product introductions
and share gains in certain of its businesses, Schuller is currently operating
its fiberglass production facilities at or near their capacity limits.
Accordingly, Schuller has announced several capacity expansion programs which
will be completed incrementally over the next three to four years in order
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to provide additional capacity for building insulation, mechanical and
specialty insulations, and continuous filament roofing fiber. Schuller
periodically reevaluates its capacity expansion plans based on current economic
conditions and overall industry capacity. Schuller estimates its annual
capital spending in 1994 will approximate $80 million, approximately half of
which will be used in the capacity expansion programs described above.
In the fourth quarter of 1993, Riverwood recorded a $25 million charge for the
write-down of assets and provisions for severance, relocation and related costs
as Riverwood restructures and consolidates certain operations and
infrastructure levels. Riverwood is continuing its plan to streamline
operations, increase efficiency and cost effectiveness, and enhance worldwide
customer service capability. Approximately $20 million of the restructuring
reserve relates to provisions for cash expenditures that are expected to occur
through 1995 and will be funded from existing cash, operations and anticipated
savings. The remainder of the reserve is being used to write down the book
value of certain related assets. Through September 1994, approximately $12.6
million had been charged against the restructuring reserve, of which
approximately $9.6 million related to cash expenditures. Approximately $7.5
million and $0.3 million of the total charges related to the Coated Board
System and Containerboard segments, respectively, and $4.8 million were of a
corporate nature.
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During 1993 Schuller initiated various activities to restructure its domestic
and international operations in order to reduce its cost structure.
Accordingly, during the calendar year 1993, Schuller recorded a restructuring
charge aggregating $30.1 million related to (i) expenses for sampling,
inspection and remediation associated with a former phenolic roofing insulation
business, offset in part by expected insurance recoveries; (ii) additional
severance costs for ongoing programs to reduce costs; (iii) estimated costs
associated with the decision to exit the residential roofing business; and
(iv) a charge for the settlement of litigation related to a former business.
Approximately $28 million of these 1993 restructuring charges will result in
future cash expenditures that will be funded from existing cash, operations and
anticipated savings. Through September 30, 1994, these cash expenditures
totaled $20 million and the remaining cash expenditures are expected to occur
through 1997. At September 30, 1994, Schuller's program for the reduction of
salaried employees was substantially complete.
The Company has learned that phenolic roofing insulation may, under certain
circumstances, contribute to corrosion of steel decks on which the insulation
is installed. During the fourth quarter of 1993, Schuller recorded an
estimated loss of $19.7 million for future anticipated sampling, inspection,
remediation and other costs associated with its former phenolic roof insulation
business, offset in part by $7 million of expected insurance recoveries. It
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is possible the ultimate loss, which cannot be determined at this time, could
exceed this estimate. In addition, the timing and extent of the expected
payouts for these expenses and the corresponding receipt of recoveries through
insurance, indemnification, contribution and damage claims also cannot be
determined at this time. See Note 4, Contingencies and Commitments, to
Condensed Consolidated Financial Statements.
The Company is committed to full compliance with all applicable environmental
laws and regulations. Environmental law at the present is dynamic rather than
static. As a result, costs that are unforeseeable at this time may be incurred
when new laws are enacted, and/or the environmental agencies promulgate or
revise regulations in furtherance of such legislation. In response to the
implementation of the 1990 amendments to the federal Clean Air Act and
requirements of various state air emissions regulations, the Company will be
obligated to monitor and reduce air emissions at its manufacturing sites. The
regulations will likely require capital expenditures in the years 1994-2001,
with most of the expenditures occurring in the latter part of that time frame.
Because many of the anticipated regulations have not yet been proposed, neither
the costs nor timing of compliance can be reasonably anticipated at this time.
In addition, the federal Environmental Protection Agency has issued new
proposed regulations for the pulp and paper industry (the "Proposed
Regulations"). It is expected that the earliest time for industry compliance
with the
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Proposed Regulations should not be prior to the first quarter of 1999. At this
time, the Company estimates capital spending that may be required to comply
with the Proposed Regulations could be between $20 million and $40 million to
be spent over a three-year period beginning in 1996.
The Company is engaged in environmental remediation projects for properties
currently owned or operated by the Company and properties divested by the
Company for which responsibility was retained for preexisting conditions. In
addition, the Company has been identified as a potentially responsible party at
certain sites under the federal Comprehensive Environmental Response,
Compensation and Liability Act or similar state legislation, and as such could
be jointly and severally liable for remediation costs at these sites. The
Company's actual final costs in some instances cannot be estimated until the
remediation process is substantially completed. To address these contingent
environmental costs, the Company has established appropriate accruals where
such costs are probable and can be reasonably estimated. The Company
periodically reviews and, as appropriate, revises its environmental accruals.
Based on current information and regulatory requirements, the Company believes
accruals established for environmental expenditures are adequate.
The Company believes that with cash generated from operations, its current cash
and marketable securities position, proceeds from the
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sale of nonstrategic assets, and access to private and capital markets and
credit facilities, it can adequately fund normal debt service requirements, its
planned capital spending program and its other commitments.
RELATIONSHIP OF MANVILLE TO THE PERSONAL INJURY SETTLEMENT TRUST
In 1982, the Company and its principal U.S. and Canadian subsidiaries filed
petitions for reorganization under Chapter 11 of the federal Bankruptcy Code.
The filings were precipitated by contingent liabilities resulting from
litigation arising out of the Company's previous asbestos-related business
operations.
The Company's Plan of Reorganization (the "Plan") was confirmed in 1986 and
consummated on November 28, 1988. The Plan relieves the Company of the burden
of defending thousands of asbestos lawsuits through the creation of two
independent trusts created to assume, administer, settle and pay claims. The
Plan, a court order (the "Injunction"), recent legislation and the federal
Bankruptcy Code together operate to prohibit all persons from taking any
actions against the Company with respect to any past, present or future
asbestos-related liabilities.
In lieu of bringing actions against the Company, asbestos claimants may assert
their claims only against the PI Trust or the Manville Property Damage
Settlement Trust (the "PD Trust"), which have been and will continue to be
funded by the Company pursuant to the Plan.
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The PI Trust holds the Company's Senior Notes, Trust Bond and approximately 80
percent of the Company's common stock. In addition, the Company has an
obligation to pay 20 percent of its profits (as defined in the Amended and
Restated Supplemental Agreement between the PI Trust and the Manville holding
company) to the PI Trust. Profit sharing payments to the PI Trust are due each
year based on the prior year's net earnings and will continue for as long as
the PI Trust is in existence and any personal injury asbestos claims filed
against the PI Trust remain unpaid. After termination of the PI Trust, an
independent profit sharing obligation computed under the same terms arises in
favor of the PD Trust. Based upon a review of the existing and potential
claims facing the two trusts, the Company believes that the profit sharing, for
all practical purposes, will be payable in perpetuity unless the Company and
the trusts agree to a restructuring or modification of the profit sharing
obligations at some future date. The Company paid $13 million to the PI Trust
in April 1994 related to 1993 profit sharing.
REVERSAL OF DIVIDENDS ACCRUED NOT DECLARED
At December 31, 1993, $102.9 million of Common Stock Dividends Accrued Not
Declared were reflected in the condensed consolidated balance sheet. These
special dividends were previously accrued based upon a refinancing arrangement,
since terminated, that had been negotiated between the Company and the PI
Trust. In the third quarter of 1994, the Company entered into a new
arrangement with
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the PI Trust in which the PI Trust exchanged most of its remaining debt
obligation from the Company for marketable notes of the Company's wholly owned
subsidiary, Schuller. In light of this new agreement and its effect on the
liquidity of the PI Trust, the Common Stock Dividends Accrued Not Declared were
reversed in the third quarter of 1994. The condensed consolidated balance
sheet also reflected Cumulative Preference Stock Dividends Accrued Not
Declared of $72.7 million at December 31, 1993, as part of the accounting for
the refinancing arrangement. The Cumulative Preference Stock Dividends Accrued
Not Declared were reversed in the third quarter of 1994. Future dividends, if
any, will be paid at the discretion of the Company's Board of Directors.
Additional information regarding the Company's accounting policies, operations,
financial position, reorganization proceedings and the PI Trust is contained in
the Company's 1993 Annual Report and Form 10-K filed with the Securities and
Exchange Commission dated December 31, 1993.
SUBSEQUENT EVENTS
In July 1994, Riverwood entered into an agreement in principle to sell just
under 50 percent of its Brazilian subsidiary, together with a 25 percent
interest in an entity holding the multiple packaging business in Brazil. The
sale, which is subject to negotiation of definitive agreements, Board of
Directors' and certain third party approvals, is expected to close in January
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1995. The Company expects the Brazilian transaction to result in a significant
cash inflow. However, if consummated, the transaction will result in a
significant nonrecurring charge to net income in 1994 for financial reporting
purposes, principally due to charges for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."
In October 1994, Riverwood completed the sale of certain oil and gas mineral
rights which the Company estimates will increase Riverwood's net income by
approximately $5.4 million in the fourth quarter of 1994.
Additionally, Riverwood is in discussions regarding the potential sale of its
U.S. wood products business. This business consists of lumber and plywood
operations in Louisiana, lumber operations in Arkansas and approximately
150,000 acres of surrounding timberlands. Riverwood will, however, retain and
continue to operate this business if no suitable offer emerges from present
discussions. In any event, Riverwood will retain its plantation timberlands to
support production at its West Monroe paper mill.
On August 19, 1994, Riverwood signed a letter of intent with Miller Brewing
Company to purchase the assets of its Fort Packaging division, which
manufactures beverage cartons for Miller beer at a single manufacturing plant
with an annual converting capacity of
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40,000 tons. This agreement is subject to certain conditions, including
negotiation of a definitive agreement.
Riverwood has also entered into an agreement to acquire the Lemaire Group,
which owns four carton converting facilities in France, and supplies cartons in
France and central Europe. Riverwood expects to complete the Lemaire Group
transaction in the fourth quarter of 1994.
As of September 16, 1994, Stillwater Mining Company ("SMC"), a 50-percent owned
subsidiary of the Company, redeemed the 50-percent ownership interest owned by
Chevron U.S.A. Inc. The funding for the redemption was raised in a private
placement of shares of SMC's common stock representing a 50-percent ownership
interest in SMC and certain subordinated notes.
On October 25, 1994, SMC filed a Registration Statement on Form S-1 with the
Securities and Exchange Commission (Registration No. 33-85904) relating to the
proposed sale of up to 4,485,000 shares of its common stock.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company has provided detailed disclosures on its reorganization
proceedings, asbestos-health and asbestos property damage claims and other
material litigation in its earlier reports filed with the Securities and
Exchange Commission. Parties interested in obtaining the earlier reports may
contact the Company in care of Investor Relations, Manville Corporation, P.O.
Box 5108, Denver, Colorado 80217-5108, specifying the information desired. In
addition, the description below of the Company's Second Amended and Restated
Plan of Reorganization (the "Plan"), as modified, which was re-filed with the
Securities and Exchange Commission as an exhibit to the Company's Form 10-K for
the fiscal year ended December 31, 1992, is qualified in its entirety by
reference to the Plan. Copies of the Plan are also available from the Company
upon request.
PLAN OF REORGANIZATION AND RELATED INJUNCTION
In 1982, Manville and its principal U.S. and Canadian subsidiaries filed
petitions for reorganization under Chapter 11 of the United States Bankruptcy
Code. The filings were precipitated by contingent liabilities resulting from
litigation arising out of the Company's previous asbestos-related business
operations. A separate plan of reorganization for Riverwood International USA,
Inc., a principal subsidiary of Riverwood International Corporation
("Riverwood"), a majority-owned subsidiary of the Company, was confirmed by the
United States Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court") in 1984. In December 1986, the Plan was confirmed by the
Bankruptcy Court. The order confirming the Plan became final in 1988 and the
Plan was consummated on November 28, 1988.
The Plan relieves the Company of the burden of defending thousands of asbestos
lawsuits. This is accomplished through independent trusts created to assume,
administer, settle and pay claims. In lieu of bringing actions against the
Company, asbestos claimants may assert their claims only against the Manville
Personal Injury Settlement Trust (the "PI Trust") or the Manville Property
Damage Settlement Trust (the "PD Trust"), which are funded by the Company
pursuant to the Plan. The Plan, the Injunction issued in connection with the
Plan, the federal Bankruptcy Code and the Bankruptcy Reform Act of 1994 (the
"Act") together operate to prohibit all persons from taking any actions against
the Company with respect to any past, present or future asbestos-related
liabilities. The Injunction and the Plan also prohibit the assertion of
punitive damage claims by asbestos claimants against the Company, the PI Trust
or the PD Trust.
The Injunction is a unique feature of the Company's Chapter 11 proceedings and
could be challenged in future legal proceedings. The Company believes, and the
Bankruptcy Court has found, that the Injunction is essential to the Company's
ability to continue to operate its businesses and to make required payments to
the PI Trust and the PD Trust. The Company also believes that any attempt to
vacate or modify
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the Injunction will be unsuccessful. This belief is based on decisions and
results of various legal proceedings, including the Reaffirmation Order (as
defined below), as well as the Act discussed below.
On November 19, 1990, five asbestos plaintiffs filed a limited fund class
action lawsuit (the "Class Action") against the Trustees of the PI Trust in the
United States District Courts for the Eastern and Southern Districts of New
York (the "Courts"). The Class Action was filed on behalf of all beneficiaries
of the PI Trust and seeks to restructure the methods by which the PI Trust
administers and pays claims. The Company is not a party to the Class Action.
The Class Action was settled on November 23, 1990 (the "Restructuring
Settlement"). On November 26, 1990, the Company filed a separate motion asking
the Courts and the Bankruptcy Court to issue orders reaffirming the Injunction.
The Courts and the Bankruptcy Court entered an order, as modified in July 1991
(the "Order"), which, among other things, reaffirmed the Injunction (the
"Reaffirmation Order") and approved settlement of the Restructuring Settlement.
Thirteen appeals of the Order were filed by various parties; however, the
Reaffirmation Order was not challenged in the lower court or on appeal. On
February 24, 1992, the Court of Appeals for the Second Circuit (the "Second
Circuit") heard the various appeals of the Order.
On December 4, 1992, the Second Circuit vacated and remanded the Order. The
Second Circuit found, among other reasons for remanding the Restructuring
Settlement, that the representatives of the class may not have fairly
represented the interests of all persons who were made part of the Class
Action. The decision of the Second Circuit, as subsequently modified, has
become final.
On July 27, 1994, the PI Trust announced that, subject to one open issue
relating to the appropriate set-off rules to be applied to co-defendants in
Maryland, the parties to the Class Action had signed a stipulation of
settlement to resolve the Class Action. The proposed settlement was filed in
the Courts and the one open issue was tried. The Courts preliminarily approved
the settlement and recently completed fairness hearings in connection therewith.
The Courts have indicated their intention to render their decision before the
end of 1994.
On October 22, 1994, President Clinton signed into law the Act, which contains
a new provision that is intended to give the Injunction and similar permanent
injunctions issued in asbestos-related reorganization proceedings, direct
statutory protection from court challenges. The new provision, which was
included in the Act with the support of Manville and the PI Trust: (a) grants
bankruptcy courts express statutory authority, if certain conditions are met in
asbestos-related Chapter 11 proceedings under the Bankruptcy Code, to issue
injunctions prohibiting "present" and "future" asbestos claimants from suing
the reorganized debtor; and (b) provides that such injunctions, when they
become final and nonappealable, are permanent and not subject to modification
by a court. One of the legislative conditions is that a trust, established to
pay asbestos claims and meeting certain other requirements, must operate under
procedures that reasonably assure that "present" and "future" asbestos
claimants with similar injuries will receive similar payments, unless at the
time the Act was enacted the trust is subject to a court order
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staying payments to claimants, in which case such condition must be met when
the stay is lifted. The PI Trust, which meets the other statutory
requirements, has been subject to such a stay since 1990 and, as a result, the
Injunction currently qualifies as an injunction which the Act declares to be
permanent and not subject to modification by a court. In addition, the PI
Trust recently entered into the settlement of its class action litigation
discussed above which provides, among other things, for the PI Trust to pay
claims under a new trust distribution process which seeks to assure that
"present" and "future" asbestos claimants with similar injuries will receive
similar payments. If, at such time as the stay is lifted, the PI Trust resumes
its claim payment operations under the new trust distribution process mandated
by the settlement (or, if the settlement is not approved, under some other
procedures meeting the requirements of the legislative condition referred to
above), then, after the stay is lifted, the Injunction will continue to qualify
as an injunction which the Act declares to be permanent and not subject to
modification by a court.
ENVIRONMENTAL PROCEEDINGS
The Company's wholly owned subsidiary, Schuller International Group, Inc.
("Schuller") is engaged in environmental remediation projects for properties
currently owned or operated by the Company and properties divested by the
Company for which responsibility was retained for preexisting conditions. In
addition, Schuller has been identified as a potentially responsible party at
certain sites under the federal Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA") or similar state legislation and as
such could be jointly and severally liable for the remediation costs of these
sites.
In 1991, a lawsuit was instituted against the U.S. government in which a
judgment was sought declaring that all environmental liability of Schuller for
such disposals prior to confirmation of the Plan were discharged as a part of
the Plan. Recently a settlement of that litigation was entered into with the
U.S. government. The settlement agreement resolves Schuller's liability at all
sites where response costs and natural resource damages under both CERCLA and
the Resource Conservation and Recovery Act ("RCRA") are now known and
quantifiable. In satisfaction of its liabilities for all such known and
quantifiable costs and damages, Schuller will pay $1.7 million. Under the
settlement agreement, future liability for such historical disposals at sites
where the total response costs and natural resource damages are not yet known
or quantifiable will be based on a formula which discounts Schuller's maximum
CERCLA and RCRA liability at each site by 45%. Additionally, the settlement
agreement provides that the amount Schuller will be obligated to pay, in the
aggregate, for such sites shall never exceed $850,000 during any given year
with any excess being carried forward to subsequent years subject to the yearly
limitation. A court order approving the settlement agreement was entered on
October 28, 1994.
In 1989, Schuller disclosed to the State of West Virginia potential
environmental noncompliance with respect to the emission of particulate matter
(as measured by U.S. EPA method 5) from Schuller's Parkersburg, West Virginia,
plant. Despite emission reduction efforts and the installation of the
proprietary Fluid Management Program, further
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emission reductions are not feasible. The West Virginia Office of Air Quality
has informed Schuller that is will seek a penalty in excess of $60,000.
In connection with the acquisition of substantially all of the assets of Macon
Kraft, Inc. (the "Macon Mill"), Riverwood International USA, Inc. ("RIUSA"), a
wholly owned subsidiary of Riverwood, has made appropriate applications and
requests for all necessary permits for the operation of the Macon Mill
facility, including an air permit for operation of a recovery boiler that was
subject to a consent order previously issued to Macon Kraft, Inc. by the
Georgia Department of Natural Resources ("GDNR"). A consent order, dated
November 5, 1992 (the "RVW Consent Order"), was entered into by RIUSA and GDNR
which supersedes the original consent order between Macon Kraft, Inc. and GDNR.
The terms of the RVW Consent Order require that construction of a new recovery
boiler be completed, and compliance with GDNR's total reduced sulfur ("TRS")
emission limits be demonstrated no later than September 29, 1994. A payment of
$500,000 by RIUSA to GDNR was also required. If compliance with the TRS limits
is not demonstrated by September 29, 1994, an additional payment of $200,000
will be required from RIUSA to GDNR. The recovery boiler project has been
completed and the compliance test on TRS emissions was submitted to GDNR on
September 9, 1994.
On October 19, 1994, RIUSA informed the Georgia Environmental Protection
Division ("Georgia EPD") of unpermitted air emissions from its operations at
the Macon Mill. RIUSA expects a compliance order and penalty with respect to
these emissions. The terms of such order and the penalty amount have not been
finalized and are not currently estimable by RIUSA at this time. In accordance
with approval from Georgia EPD, RIUSA continues to operate at the Macon Mill
during the permitting process.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
As of September 16, 1994, Stillwater Mining Company ("SMC"), a 50-percent owned
subsidiary of the Company, redeemed the 50-percent ownership interest owned by
Chevron U.S.A. Inc. The funding for the redemption was raised in a private
placement of shares of SMC's common stock representing a 50-percent ownership
interest in SMC and certain subordinated notes.
II-4
<PAGE> 58
On October 25, 1994, SMC filed a Registration Statement on Form S-1 with the
Securities and Exchange Commission (Reg. No. 33-85904) relating to the proposed
sale of up to 4,485,000 shares of its common stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
1. Exhibits.
10(a) Intercompany Agreement, dated as of September 22,
1994, between Manville Corporation and Schuller
International Group, Inc.
10(b) Treasury Management Agreement, dated as of September
22, 1994, between Manville Corporation and Schuller
International Group, Inc.
10(c) Tax Sharing Agreement, dated as of January 1, 1994
between Manville Corporation and Schuller
International Group, Inc.
10(d) Corporate Agreement, dated as of September 22, 1994,
between Manville Corporation and Schuller
International Group, Inc.
10(e) Seventh Amendment, dated as of September 22, 1994, to
the Manville Personal Injury Settlement Trust
Agreement among Johns-Manville Corporation et al, as
Trustors, Donald M. Blinken et al, as Former
Trustees, and Christian E. Markey, Jr., as Trustee of
the Manville Personal Injury Settlement Trust.
27 Financial Data Schedule
2. Form 8-K.
Form 8-K dated September 22, 1994 and filed with the
Securities and Exchange Commission on October 6, 1994,
regarding the Bonds Repurchase Agreement between the Company
and the PI Trust and the debt offering of Schuller
International Group, Inc.
II-5
<PAGE> 59
SIGNATURE
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.
MANVILLE CORPORATION
--------------------
(Registrant)
Date: November 10, 1994 By: /s/ R. B. Von Wald
---------------------------------
R. B. Von Wald
Senior Vice President,
General Counsel and Secretary
Date: November 10, 1994 By: /s/ Robert E. Cole
---------------------------------
Robert E. Cole
Senior Vice President and
Chief Financial Officer
II-6
<PAGE> 60
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
- --------- ----------- ----
<S> <C> <C>
10(a) Intercompany Agreement, dated as of September 22,
1994, between Manville Corporation and Schuller
International Group, Inc.
10(b) Treasury Management Agreement, dated as of September
22, 1994, between Manville Corporation and Schuller
International Group, Inc.
10(c) Tax Sharing Agreement, dated as of January 1, 1994
between Manville Corporation and Schuller
International Group, Inc.
10(d) Corporate Agreement, dated as of September 22, 1994,
between Manville Corporation and Schuller
International Group, Inc.
10(e) Seventh Amendment, dated as of September 22, 1994, to
the Manville Personal Injury Settlement Trust
Agreement among Johns-Manville Corporation et al, as
Trustors, Donald M. Blinken et al, as Former
Trustees, and Christian E. Markey, Jr., as Trustee of
the Manville Personal Injury Settlement Trust.
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10(a)
INTERCOMPANY AGREEMENT
THIS INTERCOMPANY AGREEMENT (this "Agreement") is made and
entered into as of the 22nd day of September, 1994 by and between Schuller
International Group, Inc., a Delaware corporation ("Schuller"), and Manville
Corporation, a Delaware corporation ("MVL").
R E C I T A L S
WHEREAS, prior to the effective date of this Agreement, MVL
provided to Schuller and its U.S. and Canadian subsidiaries (collectively,
"SII") certain services, insurance coverage and employee benefit plans; and
WHEREAS, prior to the effective date of this Agreement, SII
provided to MVL and certain of its subsidiaries (including Riverwood
International Corporation) (collectively, the "MVL Group") certain services;
and
WHEREAS, the parties hereto desire to enter into this
Agreement to set forth the terms of the relationship between the MVL Group and
SII regarding such services, insurance coverage and employee benefit plans; and
WHEREAS, from and after the effective date of this Agreement,
MVL desires to provide to or obtain for SII on a fee basis (i) those services
set forth in Exhibit A hereto (the "MVL Services"), (ii) the opportunity for
SII's employees to participate in those MVL sponsored benefit plans set forth
in Exhibit B hereto, as may be amended from time to time (collectively, the
"Plans"), and (iii) the insurance coverage set forth in Exhibit D hereto (the
"Insurance"); and
WHEREAS, Schuller desires to provide to or obtain for the MVL
Group on a fee basis, those services set forth in Exhibit C hereto (the "SII
Services"); and
WHEREAS, Schuller, on behalf of SII, desires to acquire the
MVL Services and the Insurance and provide its employees with the opportunity
to participate in the Plans and MVL, on behalf of the MVL Group, desires to
acquire the SII Services pursuant to the terms and conditions set forth herein.
<PAGE> 2
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Services. Effective January 1, 1994 (the "Effective
Date"), MVL shall provide to SII all of the MVL Services, and Schuller, through
SII, shall provide to the MVL Group all of the SII Services. The cost of each
of the MVL Services and the SII Services (collectively, the "Services"), as
applicable, shall be allocated in a manner consistent with the parties' past
practices. The Services may be provided by (i) the party obligated to provide
the Service or any affiliate or employee of such party or its affiliates or
(ii) any other person at the sole discretion of the party obligated to provide
the Service. The person actually providing such services is referred to as the
"Service Provider."
2. Charges for Services. By the 15th business day of each
calendar month, the Service Provider shall submit to the party receiving the
benefit of the Services (the "Service Recipient") invoices describing in
reasonable detail the Services performed by the Service Provider during the
prior month and the charges for such Services in accordance with Section 1.
The Service Recipient shall remit payment to the Service Provider in full for
the invoiced charges within 30 days of the date the invoice is received.
3. Termination of Services. Either party hereto may
terminate all or any portion of the Services on 90 days' prior written notice
to the other party hereto and, if applicable, to the Service Provider;
provided, however, that no termination of any of such Services (or the
termination of this Agreement) shall cause the termination or disqualification
of the Plans.
4. Insurance. MVL shall use its reasonable best efforts to
cause SII to be covered under insurance policies which will provide the
Insurance. MVL shall not be responsible for obtaining or maintaining any other
insurance coverage for SII other than the Insurance. The portion of insurance
premiums payable by SII shall be allocated, and payments shall be made, in a
manner consistent with the parties' past practices or, at MVL's discretion,
actual cost. The Insurance shall be provided by insurance carriers and be
subject to such policies of insurance, or shall be provided by self-insurance,
in each case as MVL shall determine.
5. Termination of Insurance. Either Schuller or MVL may
terminate all, but not less than all, of the Insurance at any time on 90 days'
prior written notice to the other party hereto. If Schuller terminates the
Insurance, Schuller shall pay its share of the premiums for the Insurance for
any policies in force on the date of the termination notice until the earlier
of (i) the date when such policies expire or (ii) one
2
<PAGE> 3
year from the date of the termination notice, at which time all of MVL's
obligations hereunder regarding the Insurance shall automatically terminate.
If MVL terminates the Insurance, Schuller shall pay its share of the premiums
for the Insurance for any policies in force on the date of the termination
notice until the actual termination date.
6. Employee Benefit Plans. MVL shall allow employees of SII
(other than those employees covered by collective bargaining agreements which
set forth MVL benefit plans in which such employees may participate) (the "SII
Employees") to participate in the Plans. Schuller shall reimburse MVL for all
of MVL's costs and contributions relating to the SII Employees' participation
in the Plans. The amount of such costs and contributions and the timing and
manner in which Schuller is required to reimburse MVL for such costs and
contributions shall be determined in a manner consistent with the parties' past
practices.
7. MVL Indemnification. MVL shall indemnify, defend and hold
harmless Schuller and any of Schuller's affiliates, directors, officers,
employees, agents or permitted assigns (other than MVL) (each, a "SII Party")
from and against all liabilities, claims, damages, losses and expenses
(including, but not limited to, court costs and reasonable attorneys' fees)
(collectively, "Claims"), caused by or arising in connection with MVL's gross
negligence or willful misconduct in its fulfillment of its obligations
hereunder unless such Claims are attributable to the acts or omissions of any
SII Party. Notwithstanding the foregoing, MVL shall not be liable for any
special, indirect, incidental or consequential damages relating to any such
Claims. Except as provided above, MVL shall not be liable for any Claims of
the SII Parties relating to or arising from this Agreement.
8. Schuller Indemnification. Schuller shall indemnify,
defend and hold harmless MVL and its affiliates, directors, officers,
employees, agents or permitted assigns (other than Schuller) (each a "MVL
Party") from and against all Claims caused by or arising in connection with
Schuller's gross negligence or willful misconduct in its fulfillment of its
obligations hereunder; unless such Claims are attributable to the acts or
omissions of any MVL Party. Notwithstanding the foregoing, Schuller shall not
be liable for any special, indirect, incidental or consequential damages
relating to any such Claims. Except as provided above, Schuller shall not be
liable for any Claims of the MVL Parties relating to or arising from this
Agreement.
9. Information. Each party hereto hereby covenants and
agrees to provide the other party hereto with all information and other
assistance required for such other party or any Service Provider to comply with
all applicable federal, state, county and local laws, ordinances, regulations
and codes, including, but not limited to, securities laws, stock exchange rules
and other rules and regulations (the "Laws").
3
<PAGE> 4
10. Confidential Information. Schuller and MVL hereby
covenant and agree to hold in trust and maintain confidential all Confidential
Information relating to the other party or any of their affiliates, except for
such information as (i) becomes known to the public (other than through a
breach hereof) or (ii) is required to be disclosed by any Law. Confidential
Information shall mean all information disclosed by either party to the other
in connection with this Agreement whether orally, visually, in writing or in
any other tangible form, and includes, but is not limited to, technical,
economic and business data, know-how, flow sheets, drawings, business plans,
computer information data bases, and the like. Without prejudice to the rights
and remedies of any party to this Agreement, a party disclosing any
Confidential Information shall be entitled to equitable relief by way of an
injunction if any other party hereto breaches or threatens to breach any
provision of this Section 10.
11. Assignment. Except as specifically set forth herein,
neither party hereto shall assign or transfer any of its rights or duties under
this Agreement to any person or entity without the prior written consent of the
other party hereto.
12. Notices. Any notice, instruction, direction or demand
under the terms of this Agreement required to be in writing will be duly given
upon delivery, if delivered by hand or intercompany mail, or five (5) days
after posting if sent by certified mail, return receipt requested to the
following addresses:
MVL
Manville Corporation
P.O. Box 5108
Denver, Colorado 80217
Attention: Legal Department
and
Schuller
Schuller International Group, Inc.
P.O. Box 5108
Denver, Colorado 80217
Attention: Legal Department
or to such other address as either party may have furnished to the other in
writing in accordance with this Section 12.
13. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware, without
regard to its conflicts of law principles.
4
<PAGE> 5
14. Suspension. The obligations of any party to perform any
acts hereunder may be suspended if such performance is prevented by fires,
strikes, embargoes, riot, invasion, governmental interference, inability to
secure goods or materials, or other circumstances outside the control of such
party.
15. Severability. If any provision of this Agreement shall
be invalid or unenforceable, such invalidity or unenforceability shall not
render the entire Agreement invalid. Rather, the Agreement shall be construed
as if not containing the particular invalid or unenforceable provision, and the
rights and obligations of each party shall be construed and enforced
accordingly.
16. Rights Upon Termination. Upon termination or expiration
of this Agreement or any of the Services, Insurance or Plans described herein,
each party shall, upon request, forthwith return to the other party all
reports, papers, materials and other information provided pursuant to this
Agreement. In addition, each party shall assist the other in the orderly
termination of this Agreement or any of the Services, Insurance or Plans
described herein.
17. Amendment. This Agreement may only be amended by a
written agreement executed by all of the parties hereto.
18. Entire Agreement. This Agreement, including any
exhibits, constitutes the entire agreement between the parties, and supersedes
all prior agreements, representation, negotiations, statements or proposals
related to the subject matter hereof.
19. Counterparts. This Agreement may be executed in separate
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute one agreement.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this Agreement to
be signed by their duly authorized representatives.
SCHULLER INTERNATIONAL GROUP, INC. a
Delaware corporation
By: /s/ KENNETH L. JENSEN
-------------------------------------
Name: Kenneth L. Jensen
Title: Senior Vice President, Finance
MANVILLE CORPORATION, a
Delaware corporation
By: /s/ RICHARD B. VON WALD
-------------------------------------
Name: Richard B. Von Wald
Title: Senior Vice President,
General Counsel and Secretary
6
<PAGE> 7
EXHIBIT A
MVL SERVICES
PUBLIC AFFAIRS
Public Affairs Services will include:
- State issues/legislation monitoring and related
intervention
- National legislation and regulatory issue management
TAX DEPARTMENT
MVL's Tax Department will provide tax services to SII in the
following general areas:
- U.S. and Canadian federal, provincial, state and local
compliance for income, franchise, payroll and sales and
use taxes
- worldwide tax planning
- mergers, acquisitions, and divestments
- audit negotiation and support
- special computations in connection with the Tax Sharing
Agreement between the parties
CONTROL AND AUDIT
Internal Audit will provide Services in accordance with
approved Audit Plan.
Corporate Finance will serve in an oversight/advisory role and
provide assistance as requested.
LEGAL SERVICES
MVL's Legal Department will provide legal counsel and
assistance in the following areas:
<PAGE> 8
General counsel
Securities law
Operations representation
Corporate secretary services
Environmental
Labor and benefits
Intellectual property
Litigation
Workers' compensation (including administration of claims)
Corporate security
Closed records management
CORPORATE RELATIONS
The Corporate Relations department will provide public
relations, and investor and general and financial media relations services for
SII.
EXECUTIVE DEPARTMENT
A portion of MVL's Corporate Executive Department will be
charged to SII to cover the costs of the SII chairman of the board.
ADMINISTRATIVE SERVICES
MVL will maintain an office service unit providing general
administrative functions. Services include a center for printing, mailing,
copying and reprographics. Services also include office space management and
maintenance plus management of real estate.
2
<PAGE> 9
RISK AND INSURANCE
MVL will provide an insurance department that will determine
the amount and type of worldwide insurance coverage that is needed, on
substantially the same terms and conditions as provided to other subsidiaries
of MVL. This department will be responsible for negotiating with underwriters
to obtain that coverage. See EXHIBIT D for a more definitive list of the types
of coverage that will be included.
Where it is MVL's policy to maintain a self-insurance program,
SII will also be required to self-insure.
Services provided include all customary risk insurance
management functions, specifically:
- Determine amount and type of domestic and international
insurance coverage necessary
- Negotiate with underwriters and brokers for insurance
coverage and services
- Negotiate with claims adjusters for cost effective service
- Set deductibles and self-insured retention amounts
- Ensure compliance with loan covenants and agreements
- Arrange and coordinate property loss prevention
inspection of facilities
- Design insurance programs for special or new situations
- Review insurance language in construction contracts,
joint ventures, agreements, leases, etc.
- Determine financial ability of insurance carriers for
vendors
- Advise the scope and breadth of coverage available
- Arrange for certificates, ID cards and other proof of
insurance
- Prepare claims and Proof of Loss for submission to
insurers
- Complete various filings with appropriate state agencies
3
<PAGE> 10
- Gather, compile and submit underwriting data to various
insurers/underwriters to obtain coverage
- Handle requests for information
TREASURY
The Treasurer's department will provide general actuarial
services, investment, administration and custodial services necessary to manage
the assets of current employee benefit plans and any successor plans operated
or established in whole or in part for the benefit of the employees.
4
<PAGE> 11
EXHIBIT B
Employee Benefits
Salaried & Hourly (Except Where Noted)
i. Comprehensive Medical Plan
ii. HMO's
iii. Dental Plans
iv. Prescription Drug Plans (Hourly)
v. Accident and Sickness (Hourly)
vi. Dependent Care Spending Account
vii. Permanent Total Disability (Hourly)
viii. Health Care Spending Account Plan
ix. Life Insurance
(i) Basic
(ii) Supplemental (Salaried)
(iii)Accident Insurance
(iv) Business Travel
(v) Retiree (where appropriate)
(vi) Dependent
x. Long Term Disability (Salaried)
xi. Retiree Medical Plans
xii. Employees Thrift Plans
xiii. Employees Retirement Plans
xiv. Supplemental Retirement (Salaried)
xv. Annual Incentive Compensation Plan
xvi. Stock Incentive Plan
xvii. Executive Long Term Disability (Salaried)
<PAGE> 12
This Agreement is not intended to confer any rights in
any of the above plans for any unit that is subject to collective bargaining.
Parties acknowledge that certain locations participate in the above plans to
varying degrees.
The Parties also acknowledge that the funding ratios
applicable to the pension plan applicable to their employees shall be
maintained in an appropriate manner to reflect the relative liabilities
attributable to the Parties.
2
<PAGE> 13
EXHIBIT C
SII SERVICES
TELECOMMUNICATIONS
The Telecommunications Department will provide voice
communication network services as well as related monthly cost management
information.
In addition consulting and installation services for local
telephone systems and equipment are available.
COMPENSATION AND BENEFITS
SII's Compensation and Benefits Department will provide
benefit plan design and compliance services and administer the MVL sponsored
benefit plans. The types of plans include pension, thrift, and health and
welfare.
The Compensation and Benefits Department will also provide
payroll, compensation administration and design, and relocation services.
AVIATION DEPARTMENT
SII's Aviation Department will provide services relating to
the Company's aircraft.
INFORMATION TECHNOLOGY
The Information Technology Department will provide data access
and data communication network services.
ACCOUNTING
SII will provide accounting services for accounts payable,
cash, fixed assets, and employee benefits.
HEALTH, SAFETY & ENVIRONMENTAL MANAGEMENT
SII shall provide HS&E assistance to include:
- Environmental plant audits
<PAGE> 14
- Oversight of compliance with government and corporate
requirements
- Education of new regulatory requirements
- Due diligence on acquisitions
- Representation before domestic and international
regulatory authorities and representation on various
committees and at scientific and trade meetings
- Filings with regulatory authorities
- Train coordinators, including division specific programs
- Federal and corporate Occupational Health mandated
programs
- Medical surveillance programs
- Program support for State regulatory initiatives
- HS&E presentations (internal, BOD, external)
- Corporate Science Advisory Group
- Occupational exposure monitoring
- Assess potential toxicity of potential replacement
chemicals
- MSDS and labeling development and maintenance
- OSHA and corporate safety standards compliance
- Safety programs development
- Occupational and environmental risk assessment
- Product evaluations and stewardship programs
- Indoor Air Quality issues
- Maintain MVL's Environmental Safety and Health Information
- Stay abreast of pertinent literature and research
2
<PAGE> 15
OTHER
SII will provide administrative support in the following areas:
- Travel services
- Purchasing
- Transportation
- Credit (negotiation with Dunn and Bradstreet)
3
<PAGE> 16
EXHIBIT D
INSURANCE
This schedule provides a brief description of the major
insurance programs under which SII will be afforded coverages under MVL's
policies or under policies specifically purchased by MVL or its affiliates for
SII. Recovery under any of these policies is subject to the specific terms,
conditions, exclusions, limits, deductibles, etc. of the particular policy
involved.
MVL shall have responsibility for negotiating insurance
contracts, terms and conditions, selection and administration of insurance
brokers, underwriters, claims handling services and all other aspects of
insurance administration.
These policies are renewed on an annual basis and premiums are
subject to market conditions. In addition, if SII terminates the Insurance and
SII's loss experience has caused MVL's insurance premium to be higher than it
would have been without SII's loss experience, SII will be obligated to pay its
proportionate share of the increased premium until the SII loss experience is
no longer involved in MVL's premium determination.
CASUALTY
Provides coverage for damages which SII shall become legally
obligated to pay because of personal injury and/or property damage. This
coverage includes:
- Automobile liability
- Advertiser's liability
- Aviation liability
- Oil and gas liability
- Engineer's E&O
- General and products liability
- Workers' compensation/employer's liability
<PAGE> 17
PROPERTY
Provides coverage for all risks of direct physical loss or
damage to SII's plant, personal property and equipment as a result of an
occurrence (fire, explosion, storm, etc.), and business interruption resulting
therefrom. Also included are ocean cargo/inland transit and precious metals.
CRIME
Provides reimbursement to SII for loss due to the dishonest
acts of an employee(s).
DIRECTORS/OFFICERS/FIDUCIARIES
To pay on behalf of SII's Directors and Officers all losses
which such Directors and Officers shall become legally liable to pay as a
result of a wrongful act. Coverage will also reimburse Schuller for any loss
for which Schuller shall indemnify individual Directors and Officers resulting
from a wrongful act.
2
<PAGE> 1
EXHIBIT 10(b)
TREASURY MANAGEMENT AGREEMENT
THIS TREASURY MANAGEMENT AGREEMENT (this "Agreement") is made and
entered into as of the 22nd day of September, 1994 by and between Manville
Corporation, a Delaware corporation ("MVL"), and Schuller International Group,
Inc., a Delaware corporation ("Schuller").
RECITALS
WHEREAS, prior to the effective date of this Agreement, MVL
provided to Schuller and its U.S and Canadian subsidiaries ("SII") certain
treasury management services; and
WHEREAS, the parties hereto desire to enter into this
Agreement to set forth this agreement with respect to the terms of the
relationship between MVL and SII; and
WHEREAS, from and after the effective date of this Agreement,
MVL desires to provide to or obtain for SII on a fee basis those services set
forth in this Agreement (the "Treasury Services"); and
WHEREAS, Schuller, on behalf of SII, desires to acquire the
Treasury Services pursuant to the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Services. Effective January 1, 1994 (the
"Effective Date"), MVL shall provide to SII the Treasury Services. The
Treasury Services may be provided by (i) the party obligated to provide the
Treasury Service or any affiliate or employee of such party or its affiliates
or (ii) any other person at the sole discretion of the party obligated to
provide the service. In consideration for the payments described in Section 6
below, MVL shall:
(i) subject to Section 3 below, provide SII with
investment services for all of SII's cash balances;
(ii) provide SII with monthly reports summarizing
SII's cash transactions (the "Cash Management Report");
(iii) provide SII with banking services that
coordinate all SII relationships with banks, including the
establishment of bank accounts, to insure that SII receives the same
banking services that MVL receives;
<PAGE> 2
(iv) subject to Section 5 below, provide SII with
foreign currency exposure management services;
(v) prepare SII's loan compliance packages for
SII's loans, as amended from time to time, obtain funding on behalf of
SII through short-term credit lines or other credit facilities, make
all SII debt payments from SII's funds as required and assist SII in
preparing all due diligence packages for lenders; and
(vi) provide SII with a quarterly analysis
detailing the direct banking fees incurred by MVL.
2. Covenants of SII. In order for MVL to provide the
Treasury Services, SII hereby covenants and agrees to:
(i) collect all cash receipts payable to SII
through lockbox services or other collection services provided by
banks approved by MVL and thereafter transfer such cash receipts and
all other amounts collected by SII to the SII concentration accounts
established on behalf of SII by MVL;
(ii) make all required payments only through
banks approved by MVL;
(iii) notify MVL of SII's need for funds transfer,
together with any other information MVL may reasonably request in
connection with the funds transfer, at least one day prior to the date
SII needs such transfer and authorize MVL no later than 10:00 am. MT
on the date of such transfer;
(iv) provide MVL with an annual plan for cash flow
projections and payment schedules, including any modifications thereto
and any additional reports requested by MVL;
(v) accurately account for all cash transactions
relating to SII's operations;
(vi) reconcile, on a monthly basis, the activity
shown on the monthly statements received by SII and its banks and the
Cash Management Report and report any such discrepancies to the banks
or MVL, as applicable;
(vii) provide MVL with quarterly reports, no later
than 30 days after the end of each calendar quarter, which detail all
of SII's petty cash and local depository accounts described in Section
4 below, including the bank name, address, services received, current
balance of accounts, maximum balance of accounts, dollar value of
services and bank contact officer; and
(viii) promptly notify MVL of any default or
potential default under any financial or credit agreement or
arrangement.
2
<PAGE> 3
3. Investing. SII's cumulative cash balance in all
accounts, other than those described in Section 4 below, shall be netted daily
by MVL against SII's daily net cash activity (total cash receipts less total
cash disbursements). All excess SII funds shall be invested by MVL in separate
accounts on behalf of SII and shall not be commingled with any other funds
invested by MVL. All SII funds shall be invested in money market instruments
approved by MVL in accordance with the investment policies established by MVL
management for investment of MVL funds.
4. Additional Accounts. SII may establish petty cash
accounts and local depository accounts at local banks without MVL's approval to
ensure that funds are available to cover minor operating expenses. Such
accounts, however, shall only be established with mutually agreeable capped
balances and operated as imprest accounts that are replenished solely to the
extent vouchers and receipts are presented.
5. Foreign Currency Exposure Management In the event
that SII has scheduled U.S. based foreign currency sales or purchases of a
"significant size," MVL may hedge such transactions with forward contracts,
firmly committed. A significant size is deemed to be greater than or equal to
US $50,000.00 equivalent. Shipments to various customers or invoices from
various suppliers may be "bundled" into minimum material amounts for hedging
purposes. If the cost of hedging is deemed to be too expensive, or the
currency unacceptable, MVL will immediately notify SII of the exception. At
SII's request, MVL will buy or sell foreign currency on a spot basis, or issue
or collect foreign currency drafts.
6. Compensation for Services. By the 15th business day
of each calendar month, MVL shall submit to SII an invoice describing in
reasonable detail the Treasury Services provided by MVL during the prior month
and the charges for such Services. SII shall remit payment to MVL in full for
the invoiced charges within 30 days of the date the invoice is received.
7. Termination of Treasury Services. Either party hereto
may terminate all or any portion of the Treasury Services on 90 days' prior
written notice to the other party hereto.
8. MVL Indemnification. MVL shall indemnify, defend and
hold harmless Schuller and any of Schuller's affiliates, directors, officers,
employees, agents or permitted assigns (other than MVL) (each, a "SII Party")
from and against all liabilities, claims, damages, losses and expenses
(including, but not limited to, court costs and reasonable attorneys' fees)
(collectively, "Claims"), caused by or arising in connection with MVL's gross
negligence or willful misconduct in its fulfillment of its obligations
hereunder unless such Claims are attributable to the acts or omissions of any
SII Party. Notwithstanding the foregoing, MVL shall not be liable for any
special, indirect, incidental or consequential damages relating to any such
Claims. Except as provided above, MVL shall not be liable for any Claims of
the SII Parties, relating to or arising from this Agreement.
3
<PAGE> 4
9. Schuller Indemnification. Schuller shall indemnify,
defend and hold harmless MVL and any of MVL's affiliates, directors, officers,
employees, agents or permitted assigns (other than Schuller) (each a "MVL
Party") from and against all Claims caused by or arising in connection with
Schuller's gross negligence or willful misconduct in its fulfillment of its
obligations hereunder unless such Claims are attributable to the acts or
omissions of any MVL Party. Notwithstanding the foregoing, Schuller shall not
be liable for any special, indirect, incidental or consequential damages
relating to any such Claims. Except as provided above, Schuller shall not be
liable for any Claims of the MVL Parties, relating to or arising from this
Agreement.
10. Information. SII hereby covenants and agrees to
provide MVL with all information regarding SII and other assistance necessary
for MVL to comply with all applicable, federal, state, county and local laws,
ordinances, regulations and codes, including but not limited to, securities
laws, stock exchange rules and other rules and regulations (the "Laws").
11. Confidential Information. MVL and Schuller hereby
covenant and agree to hold in trust and maintain confidential all Confidential
Information relating to the other party or any of its subsidiaries, except for
such information as (i) becomes known to the public (other than through a
breach hereof) or (ii) is required to be disclosed by any Law. Confidential
Information shall mean all information disclosed by either party to the other
in connection with this Agreement whether orally, visually, in writing or in
any other tangible form, and includes, but is not limited to, technical,
economic and business data, know-how, flow sheets, drawings, business plans,
computer information data bases, and the like. Without prejudice to the rights
and remedies otherwise available to any party to this Agreement, a party
disclosing any Confidential Information shall be entitled to equitable relief
by way of an injunction if the other party hereto breaches or threatens to
breach any provision of this Section 11.
12. Assignment. Except as specifically set forth herein,
MVL shall not assign or transfer any of MVL's rights or duties under this
Agreement to any person or entity without the prior written consent of
Schuller.
13. Notices. Any notice, instruction, direction or
demand under the terms of this Agreement required to be in writing will be duly
given upon delivery, if delivered by hand or intercompany mail, or five (5)
days after posting if sent by certified mail, return receipt requested to the
following addresses:
MVL:
Manville Corporation
P.O. Box 5108
Denver, Colorado 80217
Attention: Treasury Department
4
<PAGE> 5
With a copy to:
Manville Corporation
P.O. Box 5108
Denver, Colorado 80217
Attention: Legal Department
Schuller:
Schuller International Group, Inc.
P.O. Box 5108
Denver, Colorado 80217
Attention: Senior Vice President-Finance
With a copy to:
Schuller International Group, Inc.
P.o. Box 5108
Denver, Colorado 80217
Attention: Legal Department
or to such other address as either party may have furnished to the other in
writing in accordance with this Section 13.
14. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware, without
regard to its conflicts of law principles.
15. Suspension. The obligations of any party to perform
any acts hereunder may be suspended if such performance is prevented by fires,
strikes, embargoes, riot, invasion, governmental interference, inability to
secure goods or materials, or other circumstances outside the control of the
parties.
16. Severability. If any provision of this Agreement
shall be invalid or unenforceable, such invalidity or unenforceability shall not
render the entire Agreement invalid. Rather, the Agreement shall be construed
as if not containing the particular invalid or unenforceable provision, and the
rights and obligations of each party shall be construed and enforced
accordingly.
17. Rights Upon Termination. Upon termination or
expiration of this Agreement or any portion of the Treasury Services described
herein, each party shall, upon request, forthwith return to the other party all
reports, paper, material and other information provided pursuant to this
Agreement. In addition, each party will assist the other in the orderly
termination of this Agreement or any portion of the Treasury Services described
herein.
5
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18. Amendment. This Agreement may only be amended by a
written agreement executed by both of the parties hereto.
19. Entire Agreement. This Agreement, including any
exhibits, constitutes the entire agreement between the parties, and supersedes
all prior agreements, representations, negotiations, statements or proposals
related to the subject matter thereof.
20. Counterparts This Agreement may be executed in
separate counterparts, each of which shall be deemed to be an original and all
of which, when taken together, shall constitute one agreement.
21. Transfer of Employees. To the extent employees of
MVL with the responsibility for the provision of Treasury Services are
transferred to SII, Schuller shall cause treasury services similar to those
previously provided by such employees to SII to be provided to MVL on the terms
and conditions contained herein, substituting MVL for SII and SII for MVL.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
signed by their duly authorized representatives.
MANVILLE CORPORATION, a Delaware
corporation
By /s/ RICHARD B. VON WALD
----------------------------------------
Name: Richard B. Von Wald
Title Senior Vice President,
General Counsel and Secretary
SCHULLER INTERNATIONAL GROUP, INC., a
Delaware corporation
By /s/ KENNETH L. JENSEN
----------------------------------------
Name: Kenneth L. Jensen
Title: Senior Vice President, Finance
7
<PAGE> 1
EXHIBIT 10(c)
TAX SHARING AGREEMENT
THIS TAX SHARING AGREEMENT (this "Agreement") dated as of January 1,
1994 is made and entered into by and between Manville Corporation, a Delaware
corporation ("Manville"), and Schuller International Group, Inc., a Delaware
corporation ("Schuller").
RECITALS
WHEREAS, Manville is the common parent corporation of an affiliated
group of corporations within the meaning of Section 1504(a) of the Internal
Revenue Code of 1986, as amended (the "Code") and Schuller is a member of such
affiliated group; and
WHEREAS, the affiliated group of which Manville is the common parent
and Schuller is a member files a consolidated federal income tax return as
defined in Section 1501 of the Code; and
WHEREAS, Manville and Schuller desire to provide for the allocation of
liabilities, procedures to be followed, and other matters with respect to
certain taxes for tax years beginning after December 31, 1993, in which
Schuller and its subsidiaries are included in a consolidated federal income tax
return filed for the Combined Consolidated Group (as defined below).
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
1. "Combined Consolidated Group" shall mean the Schuller
Consolidated Group together with the Manville Consolidated Group, and any other
corporations which may become a member of either.
2. "Combined Consolidated Return" shall mean a consolidated
<PAGE> 2
federal income tax return filed for the Combined Consolidated Group.
3. "Estimated Tax Sharing Payments" shall mean the periodic tax
sharing payments required under Article III, Section 2 of this Agreement.
4. "Federal Income Taxes" and "Federal Income Tax Liability"
shall mean the taxes imposed by sections 11, 55, 59A, and 1201(a) of the Code,
or any successor provisions to such sections and any other income based U.S.
federal taxes which are hereinafter imposed upon corporations.
5. "IRS" shall mean the Internal Revenue Service.
6. "Manville Consolidated Group" shall mean the affiliated group
of corporations of which Manville is the common parent, and any other
corporations which may become members of that affiliated group, but excluding
members of the Schuller Consolidated Group.
7. "Pro Forma Schuller Return" shall mean a pro forma
consolidated federal income tax return prepared for the Schuller Consolidated
Group pursuant to Article III, Section 1 or 4.
8. "Regulations" shall mean the Treasury regulations as in effect
from time to time.
9. "Schuller Consolidated Group" shall mean the affiliated group
of corporations of which Schuller would be the common parent if it were not a
subsidiary of Manville, and any other corporations which may become members of
that affiliated group.
10. "Trust Deduction" shall mean any deduction from taxable income
attributable to payments or transfers by or on behalf of any member of the
Combined Consolidated Group to the Manville Personal Injury Settlement Trust or
the Manville Property Damage Settlement Trust ("Trusts") or for the benefit of
any claimant against the Trusts.
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ARTICLE II
PROCEDURAL MATTERS
1. Manville shall have the sole and exclusive responsibility for
the preparation and filing of the consolidated U.S. federal income tax return
of the Combined Consolidated Group, including any amended returns and any other
returns, documents or statements required to be filed with the IRS with respect
to the determination of the Federal Income Tax Liability of the Combined
Consolidated Group. All returns shall be filed by Manville on a timely basis,
taking into account extensions of the due date for the filings of such returns.
2. The Schuller Consolidated Group shall continue to join in
filing a consolidated federal income tax return and consolidated or combined
state income tax returns with the Manville Consolidated Group for all such
taxable years for which the Schuller Consolidated Group is eligible to do so
under the Code, the Regulations and applicable state statutes, unless Manville
shall request otherwise.
3. Manville shall make all Federal Income Tax payments, including
estimated payments, with respect to tax returns prepared on behalf of all
companies included in the Combined Consolidated Group, and Manville shall have
the right to exercise all powers of a common parent with respect to filing the
consolidated federal income tax returns as are conferred on it by the
Regulations and applicable state statutes.
4. Manville shall be the sole and exclusive agent of the Schuller
Consolidated Group and any member of such group in any and all matters relating
to the U.S. Federal Income Tax Liability of the Combined Consolidated Group for
all consolidated return years. The same shall apply with respect to any state
income tax liability where the Schuller Consolidated Group files combined
returns with the Manville Consolidated Group. In its sole discretion, Manville
shall have the right with respect to any Combined Consolidated Returns which it
files (a) to determine (i) the manner in which such returns shall be prepared
and filed, including, without limitation, the manner in which any item of
income, gain, loss, deduction or credit shall be reported, (ii) whether any
extensions may be requested and (iii) the elections that will be made by any
member of the Combined Consolidated Group, (b) to contest, compromise or settle
any adjustment or deficiency proposed, asserted or assessed as a result of any
audit of such returns by the IRS, (c) to file, prosecute, compromise or settle
any claim for refund and (d) to determine whether any refunds, to which the
Combined Consolidated
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<PAGE> 4
Group may be entitled, shall be paid by way of refund or credited against the
tax liability of the Combined Consolidated Group. Schuller hereby irrevocably
appoints Manville as its agent and attorney-in-fact to take such action
(including the execution of documents) as Manville may deem appropriate to
effect the foregoing.
5. Manville shall honor all reasonable requests by Schuller to
participate in the audit process or any litigation relating to any Combined
Consolidated Returns. Manville shall indemnify Schuller and hold Schuller
harmless if Manville adjusts, compromises or settles without the consent of
Schuller an issue affecting the liability of the Schuller Consolidated Group
under this Agreement and there is a substantial likelihood that Schuller would
prevail.
6. Schuller shall reimburse Manville for any outside legal and
accounting expenses incurred by Manville in the course of the conduct of any
audit or contest regarding the tax liability of the Combined Consolidated
Group, and for any other expenses incurred by Manville in the course of any
litigation relating thereto, to the extent such costs are reasonably
attributable to a Schuller Consolidated Group issue.
7. Schuller shall furnish to Manville in a timely manner such
information and documents as Manville may reasonably request for purposes of
preparing the returns referred to in Section 1 of this Article.
ARTICLE III
CALCULATION AND PAYMENT OF TAX SHARING PAYMENTS
1. For each taxable year for which Manville files a Combined
Consolidated Return, Manville shall prepare a Pro Forma Schuller Return taking
into account elections, methods of accounting, and positions with respect to
specific items that are consistent with those made or used by Manville for
purposes of the Combined Consolidated Return. For purposes of the preceding
sentence, the application of Section 168(d)(3)of the Code to the Combined
Consolidated Return shall be deemed an election. Notwithstanding the above,
Manville may permit Schuller to make the election pursuant to Section 901 of
the Code to deduct foreign taxes or to take the foreign tax credit on the Pro
Forma Schuller Return independently and irrespective of any election made on
the Combined Consolidated Return. The Pro Forma Schuller Return shall not take
into account any Trust Deduction. The Pro Forma Schuller Return shall reflect
any carryovers of net operating losses, net capital losses, excess tax credits
or other tax attributes
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<PAGE> 5
from prior years' Pro Forma Schuller Returns (assuming that members of the
Schuller Consolidated Group had not been in existence before January 1, 1994)
which could have been utilized by the Schuller Consolidated Group if the
Schuller Consolidated Group had never been included in the Combined
Consolidated Group. The Pro Forma Schuller Return shall not, however, reflect
carryovers of any attributes from the Manville Consolidated Group. Any
provision of the Code that requires consolidated computations, such as Sections
861 and 1231, shall be applied separately to the Schuller Consolidated Group
for purposes of preparing the Pro Forma Schuller Return. Section 1.1502-13 of
the Regulations shall be applied as if the Schuller Consolidated Group and the
Manville Consolidated Group were separate affiliated groups, except that the
Pro Forma Schuller Return shall include all gains or losses recognized by the
Schuller Consolidated Group on transactions between members of the Schuller
Consolidated Group which are restored pursuant to Section 1.1502-13(f)(1)(iii)
of the Regulations and actually reflected on the Combined Consolidated Return
as a result of the Schuller Consolidated Group ceasing to be included in the
Combined Consolidated Group.
The Pro Forma Schuller Return shall be provided to Schuller no later
than 30 days after the due date (including extensions) for the return for the
Combined Consolidated Group.
2. For each taxable year in which a Combined Consolidated Return
is filed, Schuller shall make periodic payments ("Estimated Tax Sharing
Payments") to Manville in such amounts as, and no later than the dates on
which, tax payments would be due from the Schuller Consolidated Group under
Sections 6655 and 6151 of the Code if it were not included in the Combined
Consolidated Group. Schuller shall pay to Manville no later than 60 days after
the date on which a Combined Consolidated Return for any taxable year is filed,
an amount equal to the sum of (1) the sum of (i) the Federal Income Tax
Liability shown on the Pro Forma Schuller Return prepared for that taxable year
and (ii) the additions to tax, if any, under Section 6655 of the Code that
would have been imposed upon Schuller (treating the amount due to Manville
under (i) above as Schuller's Federal Income Tax Liability and treating any
Estimated Tax Sharing Payments as estimated tax payments with respect to such
liability), reduced by the sum of the Estimated Tax Sharing Payments and (2)
interest thereon as determined pursuant to Article IV of this Agreement
accruing from March 15 of the following year. If the Estimated Tax Sharing
Payments paid to Manville for any taxable year exceed the amount of the
liability under the preceding sentence, Manville shall refund such excess to
Schuller within 45 days after completion of the Pro Forma Schuller Return, plus
interest as determined in Article IV of this Agreement accruing from the date
on which
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the consolidated federal income tax return of the Combined Consolidated Group
is due, without regard to extensions.
3. If a Pro Forma Schuller Return reflects a net operating loss,
net capital loss, excess tax credit or other tax attribute, then Manville shall
pay to Schuller within 90 days of the due date (including extensions) for the
Combined Consolidated Return the refund which the Schuller Consolidated Group
would have received as a result of the carryback of such attribute to a Pro
Forma Schuller Return for any taxable year or years in which the Schuller
Consolidated Group is included in the Combined Consolidated Group. The amount
of refund will be determined as if the Schuller Consolidated Group had never
been included in the Combined Consolidated Group, Pro Forma Schuller Returns
had been actual returns and the members of the Schuller Consolidated Group had
not been in existence before January 1, 1994. All calculations of actual and
deemed refunds pursuant to Section 3 of this Article shall include interest
computed as if Schuller had filed a claim for refund or an application for a
tentative carryback adjustment pursuant to Section 6411(a) of the Code on the
date on which the consolidated federal income tax return of the Combined
Consolidated Group is due, without regard to extensions.
4. If, in any year after the Schuller Consolidated Group ceases
to be a member of the Combined Consolidated Group, a Schuller federal income
tax return reflects a net operating loss, net capital loss, excess credit or
any other tax attribute, and such attribute can be carried back to a Combined
Consolidated Return, Manville, upon Schuller's written request, shall file a
claim for a refund electing such carryback, and Manville shall pay to Schuller
the amount of any refund, credit or offset of tax liability (including interest
thereon) which Manville, as common parent for the former Combined Consolidated
Group, actually receives as a result of the carryback of such attribute;
provided, however, that the amount of any such refund paid to Schuller
(excluding interest thereon) shall not exceed the amount of the payments made
by Schuller to Manville in accordance with this agreement for the taxable years
of the Combined Consolidated Group to which the Schuller tax attributes
resulting in the refund could be carried. Manville shall pay the amount of any
such refund to Schuller within 30 days after receipt thereof.
5. To the extent that any audit, litigation, claim or refund with
respect to a Combined Consolidated Return results in an increase or decrease in
taxable income relating to the treatment of a Schuller Consolidated Group
issue, a corresponding adjustment shall be made to such item and to Schuller's
tax liability reflected on the applicable Pro Forma Schuller Return. Within 10
days after any such adjustment is finally
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determined, Schuller shall make additional tax sharing payments, plus interest,
including any penalties consistent with such adjustment, to Manville, or
Manville shall refund to Schuller any amounts received by Manville in
connection with such audit, litigation, claim or refund, plus interest pursuant
to Article IV of this agreement.
6. To the extent that any audit, litigation, claim or refund with
respect to a Combined Consolidated Return for a tax year beginning before
January 1, 1994 (i) results in a material increase, as determined by Manville,
in taxable income relating to the treatment of a Schuller Consolidated Group
issue, and (ii) has the effect of creating or enhancing a tax benefit (e.g.,
causing an increase in depreciable basis) of the Schuller Consolidated Group,
Schuller shall make additional tax sharing payments, plus interest, including
any penalties consistent with such adjustment, to Manville in the same manner
as if a Pro Forma Schuller Return for such tax year had been prepared and
adjusted, provided however, that such additional tax sharing payments shall not
exceed the net present value of the tax benefit to Schuller as determined by
Manville.
7. All calculations required to be made by Manville under this
Agreement shall be binding upon the parties hereto absent manifest error.
ARTICLE IV
INTEREST
Interest required to be paid by or to Schuller pursuant to this
Agreement shall, unless otherwise specified, be computed at the rate and in the
manner provided in the Code for interest on underpayments and overpayments,
respectively, of federal income tax for the relevant period.
ARTICLE V
STATE & LOCAL INCOME AND FRANCHISE TAXES
1. The principles expressed with respect to the Combined
Consolidated Group federal income tax matters in Articles I- III shall apply
with equal force to state and local income and franchise tax matters, including
the preparation and filing of state and local income tax and franchise tax
returns by the Combined Consolidated Group.
2. The principles expressed with respect to the Combined
Consolidated Group federal income tax matters in Articles I-III shall also
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apply with equal force to state and local income and franchise tax matters in
those cases in which combined returns are not filed. In applying the
principles of Article III, Manville shall prepare a pro forma state or local
income tax return for each member of the Schuller Consolidated Group required
to file such return. Tax sharing payments due with respect to any such pro
forma return for any taxable period shall be adjusted as appropriate to reflect
any actual payment of tax for such taxable period to the relevant taxing
authority.
3. In the case of any state income tax return filed by Schuller
International, Inc., on a separate company basis, Manville shall have the
right, in its sole discretion, to control the contest, compromise or settlement
of any adjustment or deficiency proposed, asserted or assessed as a result of
any audit of any such return by the relevant state taxing authority, to the
extent such adjustment or deficiency relates to any Trust Deduction claimed in
such return. Manville shall reimburse Schuller International, Inc., for any
state income taxes, interest, or penalties paid by Schuller International,
Inc., to the relevant state taxing authority with respect to any such
adjustment or deficiency.
4. The Pro Forma Schuller Return prepared in accordance with
Article III shall reflect deductions for state income taxes determined on the
basis of any pro forma state income tax returns prepared in accordance with
Article V.
5. Any interest charge required to be paid by or to Schuller
pursuant to this Agreement with respect to any state or local income tax or
franchise tax return shall be computed at the rate and in the manner as
provided under the applicable state or local statute for interest on
underpayments and overpayments of such tax for the relevant period.
ARTICLE VI
MISCELLANEOUS PROVISIONS
1. Manville and Schuller agree that any information furnished one
another pursuant to this Agreement is confidential and, except as, and to the
extent, required during the course of an audit or litigation or otherwise
required by law, shall not be disclosed to another person or entity.
2. This Agreement shall be binding upon and inure to the benefit
of any successor to any of the parties, by merger, acquisition of assets or
otherwise, to the same extent as if the successor had been an original party to
this Agreement.
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3. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to
conflicts of law principles thereof.
4. This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original, but all of which when
taken together shall constitute one and the same instrument.
5. The headings in this Agreement are for convenience only and
shall not be deemed for any purpose to constitute a part of or to affect the
interpretation of this Agreement.
6. This Agreement may be amended from time to time by agreement
in writing executed by all the parties hereto or all of the parties then bound
hereby. This Agreement constitutes the entire agreement with respect to the
subject matter hereof and supersedes all prior written and oral understandings
with respect thereto.
7. Any notice, request or other communication required or
permitted in this Agreement shall be in writing and shall be sufficiently given
if personally delivered or if sent by registered or certified mail, postage
prepaid, addressed as follows:
TO SCHULLER: Schuller International Group, Inc.
717 17th Street
Denver, Colorado 80202
Attn: Sr. Vice President of Finance
TO MANVILLE: Manville Corporation
P.O. Box 17086
Denver, Colorado 80217
Attn: Senior Director of Taxes
or to such other address as set forth in writing by either party to the other
in accordance with this section.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their authorized representatives.
MANVILLE CORPORATION, a Delaware
corporation
By: /s/ RICHARD B. VON WALD
----------------------------------
Name: Richard B. Von Wald
Title: Senior Vice President,
General Counsel and Secretary
SCHULLER INTERNATIONAL GROUP, INC.,
a Delaware corporation
By: /s/ KENNETH L. JENSEN
----------------------------------
Name: Kenneth L. Jensen
Title: Senior Vive President, Finance
Page 10
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EXHIBIT 10(d)
CORPORATE AGREEMENT
THIS CORPORATE AGREEMENT (this "Agreement") is made and entered into
as of the 22nd day of September, 1994, by and between Manville Corporation, a
Delaware corporation ("MVL"), and Schuller International Group, Inc., a
Delaware corporation ("Schuller").
RECITALS
WHEREAS, MVL is the common parent corporation of an affiliated group
of corporations (the "Combined Consolidated Group") within the meaning of
Section 1504(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and Schuller is a member of the Combined Consolidated Group; and
WHEREAS, the Combined Consolidated Group files a consolidated income
tax return as defined in Section 1501 of the Code; and
WHEREAS, MVL and Schuller desire that Schuller remain a member of the
Combined Consolidated Group and that certain actions not be taken, and certain
transactions not be entered into, by Schuller without MVL's prior consent.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Restrictions on Certain Stock Issuances.
(a) Schuller shall not during the term of this
Agreement issue any shares of Schuller's preferred stock or common
stock or any rights, warrants or options (including any instrument
which is or could be treated as an option in accordance with the
Treasury Regulations promulgated pursuant to Section 1504(a)(5)(A) and
(B) of the Code) to acquire Schuller's preferred or common stock
(collectively, the "Stock") without the approval of MVL's board of
directors.
(b) Notwithstanding anything to the contrary
contained in paragraph (a), Schuller shall not during the term of this
Agreement issue any Stock if, immediately after such issuance (and
taking into account any contemporaneous transfer, sale, grant or other
disposition of Stock by MVL or any other person or entity), Schuller
would not be a member of the Combined Consolidated Group.
(c) In the event that Schuller wishes to issue
any Stock (whether or not permitted to be issued pursuant to the
immediately preceding sentence), Schuller shall notify MVL in
<PAGE> 2
writing (addressed to the Secretary of MVL) of the proposed issuance,
setting forth all relevant information regarding such proposed
issuance, at least 30 days prior to the proposed date of issuance of
such Stock.
2. Amendment to Charter and Bylaws. Except as and to
the extent provided in the forms attached hereto as Exhibit A, Schuller shall
not during the term of this Agreement amend, supplement, restate, cancel,
modify or alter its Certificate of Incorporation or Bylaws in any manner
whatsoever without the prior written consent of MVL. Nothing in this Section 2
or in Exhibit A shall limit or otherwise affect the terms of Section 1 hereof.
3. Directors.
(a) At such time and for as long as less than
100% but more than 50% of Schuller's issued and outstanding common
stock is owned directly or indirectly by MVL and at least a majority
of MVL's issued and outstanding common stock is owned directly or
indirectly by Manville Personal Injury Settlement Trust (the "PI
Trust") or the PI Trust's direct or indirect assignee (the "Assignee")
under Section 7 of the agreement of even date herewith between MVL and
the PI Trust regarding certain matters referred to in or relating to
this Agreement, Schuller shall propose, at each election of directors,
a slate of directors or, in the case of vacancies, individual
directors, for election so that Schuller's board of directors includes
at least two persons designated by the PI Trust, each of whom may or
may not be a Trustee of the PI Trust, or by the Assignee; and
(b) At such time and for as long as any holders
of Schuller's preferred stock are entitled to elect one or more
persons to Schuller's board of directors as a result of their holding
of preferred stock (unless such right is not then exercisable),
Schuller shall promptly call a special stockholders meeting for the
purpose of electing (after increasing the number of directors, if
necessary), and shall propose, at such meeting and at each subsequent
meeting at which there is an election of directors, a slate of
directors or, in the case of vacancies, individual directors, for
election so that Schuller's board of directors includes at least two
the same number of persons designated by the PI Trust (each of whom
may or may not be a trustee of the PI Trust,) or by the Assignee as
the aggregate number of persons which all classes of preferred stock
are then entitled to elect to Schuller's board of directors; it being
understood that any persons designated by the PI Trust or the Assignee
who are then serving on Schuller's board of directors pursuant to the
terms of Section 3(a) above shall be included in determining the
number of persons that the PI Trust or the Assignee is entitled to
designate pursuant to this Section 3(b).
2
<PAGE> 3
4. Performance in Accordance with Bonds Repurchase
Agreement. Schuller hereby agrees with MVL to perform in accordance with and
comply with all terms of the Bonds Repurchase Agreement dated September 22,
1994 between MVL and the PI Trust that provide for MVL to cause Schuller to
take or forbear from taking action.
5. Application to Schuller's Subsidiaries. The terms of
Sections 1, 2 and 3 hereof shall apply to Schuller and to the following
entities (each, a "Schuller Subsidiary"): any direct or indirect Subsidiary
(as defined below) of MVL which directly or indirectly owns, or to which is
transferred direct or indirect ownership of, at least a substantial portion
(i.e., more than 50%) of the consolidated assets of Schuller and its
Subsidiaries. "Subsidiary" of a person means any corporation or other entity
of which securities or other ownership interest having ordinary voting power to
elect a majority of the board of directors (or other person performing similar
functions) are directly to indirectly owned by such person. The term
"Schuller" as used in Sections 1, 2 and 3 hereof shall be understood to refer
to and is hereby defined to include Schuller and each Schuller Subsidiary.
6. Term of Agreement. This Agreement shall
automatically terminate on the earlier of (i) the date on which MVL owns a
majority of neither Schuller's nor any Schuller Subsidiary's issued and
outstanding common stock or (ii) the date on which a majority of MVL's issued
and outstanding common stock is no longer owned by either the PI Trust or any
Assignee.
7. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware, without
regard to its conflicts of law principles.
8. Amendment. This Agreement may be amended only by a
written agreement executed by both of the parties hereto.
9. Assignment. Neither party may assign any rights,
duties or obligations hereunder without the prior written consent of the other.
10. Entire Agreement. This Agreement constitutes the
entire agreement between the parties related to the subject matter hereof, and
supersedes all prior agreements, representations, negotiations, statements or
proposals related to the subject matter hereof.
3
<PAGE> 4
11. Counterparts. This Agreement may be executed in
separate counterparts, each of which shall constitute an original, and all of
which when taken together, shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
MANVILLE CORPORATION, a
Delaware corporation
By: /s/ RICHARD B. VON WALD
----------------------------------
Name: Richard B. Von Wald
Title: Senior Vice President,
General Counsel and Secretary
SCHULLER INTERNATIONAL GROUP,
INC., a Delaware corporation
By: /s/ KENNETH L. JENSEN
-----------------------------------
Name: Kenneth L. Jensen
Title: Senior Vice President, Finance
4
<PAGE> 5
EXHIBIT A TO CORPORATE AGREEMENT
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SCHULLER INTERNATIONAL GROUP, INC.
ARTICLE I
NAME
The name of the corporation shall be Schuller International Group, Inc.
(the "Corporation").
ARTICLE II
PURPOSE
The purpose of the Corporation shall be to engage in any lawful act or
activity for which corporations may be now or hereafter organized under the
Delaware General Corporation Law.
ARTICLE III
CAPITAL
The total number of shares of Common Stock which the Corporation shall
have authority to issue is [up to Seventy-Five Million (75,000,000)] shares of
Common Stock having a par value of [up to one dollar ($1.00)] per share. The
total number of shares of Preferred Stock which the Corporation shall have
authority to issue is Twenty-Five Million (25,000,000) shares having a par
value of [up to one dollar ($1.00)] per share.
The Board of Directors is authorized, subject to limitations prescribed
by law, to provide for the issuance of the shares of Preferred Stock in series,
and by filing a certificate pursuant to the applicable law of the State of
Delaware, to establish from time to time the number of shares to be included in
each such series, and to fix the designation, powers, preferences and rights of
the shares of each such series and the qualifications, limitations or
restrictions thereof. The authority of the Board of Directors with respect to
each series shall include, but not be limited to, determination of the
following:
(i) The number of shares constituting that series and the
distinctive designation of that series;
<PAGE> 6
(ii) The dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates,
and the relative rights of priority, if any, of payment of dividends
on shares of that series;
(iii) Whether that series shall have voting rights, in
addition to the voting rights provided by law, and, if so, the terms
of such voting rights;
(iv) Whether that series shall have conversion or exchange
privileges, and, if so, the terms and conditions of such conversion or
exchange, including provision for adjustment of the conversion or
exchange rate in such events as the Board of Directors shall
determine;
(v) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption,
including the manner of selecting shares for redemption if less than
all shares are to be redeemed, the date or dates upon or after which
they shall be redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and at
different redemption dates;
(vi) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms
and amount of such sinking fund;
(vii) The right of the shares of that series to the benefit of
conditions and restrictions upon the creation of indebtedness of the
Corporation or any subsidiary, upon the issue of any additional stock
(including additional shares of such series or any other series) and
upon the payment of dividends or the making of other distributions on,
and the purchase, redemption or other acquisition by the Corporation
or any subsidiary of any outstanding stock of the Corporation;
(viii) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of
shares of that series; and
(ix) Any other relative, participating, optional or other
special rights, qualifications, limitations or restrictions of that
series.
2
<PAGE> 7
ARTICLE IV
REGISTERED OFFICE AND AGENT
The initial registered office of the Corporation shall be at
_____________________, and the name of the initial registered agent at such
address is _________________. Either the registered office or the registered
agent may be changed in the manner provided by law.
ARTICLE V
DIRECTOR LIABILITY AND INDEMNIFICATION
(1) A director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director to the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended.
(2) (a) Each person (and the heirs, executors or administrators of
such person) who was or is a party or is threatened to be made a party to, or
is involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was a director or officer of the Corporation or is or
was serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise,
shall be indemnified and held harmless by the Corporation to the fullest extent
permitted by applicable law as the same exists or may hereafter be amended. The
right to indemnification conferred in this Article shall also include the right
to be paid by the Corporation the expenses incurred in connection with any such
proceeding in advance of its final disposition to the fullest extent authorized
by applicable law as the same exists or may hereafter be amended. The right to
indemnification conferred in this Article shall be a contract right.
(b) The Corporation may, by action of the Board of Directors,
provide indemnification to such of the officers, employees and agents of the
Corporation to such extent and to such effect as the Board of Directors shall
determine to be appropriate and authorized by applicable law as the same
exists or may hereafter be amended.
(3) The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss incurred by such person in any such capacity or arising out
of his or her status as such, whether or not the
3
<PAGE> 8
Corporation would have the power to indemnify him or her against such liability
under applicable law as the same exists or may hereafter be amended.
(4) The rights and authority conferred in this Article shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statue, provision of this Certificate of Incorporation or the bylaws
of the Corporation, agreement, vote of stockholders or disinterested directors
or otherwise.
(5) Neither the amendment nor repeal of this Article, nor the adoption of
any provision of this Certificate of Incorporation or the bylaws of the
Corporation, nor, to the fullest extent permitted by applicable law, any
modification of law, shall eliminate or reduce the effect of this Article in
respect of any acts or omissions occurring prior to such amendment or repeal or
such adoption of an inconsistent provision.
ARTICLE VI
DIRECTORS
The number of directors of the Corporation shall be as fixed from time to
time by or in the manner provided in the bylaws of the Corporation. Election of
directors need not be by ballot.
ARTICLE VII
BYLAWS
In furtherance and not in limitation of the powers conferred by law, (a)
the Board of Directors is expressly authorized to adopt, amend or repeal the
bylaws of the Corporation in any manner not inconsistent with the laws of the
State of Delaware or the Certificate of Incorporation of the Corporation,
subject to the power of the stockholders to adopt, amend or repeal the bylaws or
to limit or restrict the power of the Board of Directors to adopt, amend or
repeal the bylaws and (b) the Corporation may in its bylaws confer powers and
authorities upon its Board of Directors in addition to those conferred upon it
by statute.
ARTICLE VIII
CHANGES IN AUTHORIZED CAPITAL STOCK AND
AMENDMENTS TO CERTIFICATE OF INCORPORATION
The Corporation reserves the right to increase or decrease its authorized
capital stock, or any class or series thereof, or to reclassify the same, and to
amend, alter, change or repeal any provision contained in this Certificate of
Incorporation or in any amendment thereof, in the manner now or hereafter
prescribed in this Certificate of
4
<PAGE> 9
Incorporation and by law, and all rights conferred upon stockholders in
said Certificate of Incorporation or any amendment thereto are granted subject
to this reservation.
ARTICLE IX
INCORPORATOR
The names and addresses of the incorporator are as follows:
[to come]
5
<PAGE> 1
EXHIBIT 10(e)
SEVENTH AMENDMENT TO
MANVILLE PERSONAL INJURY
SETTLEMENT TRUST AGREEMENT
SEVENTH AMENDMENT, dated as of September 22, 1994 (the "Seventh
Amendment") to the Trust Agreement, dated as of November 28, 1988 by and among
Johns-Manville Corporation, Manville Corporation (the "Company"), Manville
Sales Corporation, Manville Canada Inc., Manville Investment Corporation,
Ken-Caryl Ranch Corporation and SAL Contract & Supply, Inc. as Trustors
(collectively, the "Trustors") and Donald M. Blinken, Daniel Fogel, Francis H.
Hare, Jr., John C. Sawhill (the "Former Trustees") and Christian E. Markey,
Jr., as trustees for the Manville Personal Injury Settlement Trust (the
"Trust"), as amended by the First, Second and Third Amendments to the Trust
Agreement dated as of February 14, 1989, November 15, 1990, and December 6,
1991, respectively between the Company, Mr. Markey and the Former Trustees, and
as further amended by the Fourth, Fifth and Sixth Amendments to the Trust
Agreement dated as of August 6, 1992, December 9, 1992, and November 5, 1993,
respectively between the Company, Mr. Markey, Robert A. Falise, Louis Klein,
Jr., and Frank J. Macchiarola, as trustees of the Trust (the Trust Agreement
and all six prior Amendments being collectively referred to herein as the
"Trust Agreement").
WHEREAS, Section 6.03(a) of the Trust Agreement provides for the
amendment of the Trust Agreement by the Company (as successor to the Trustors
for such purpose) and the Trustees of the Trust after consultation with
Selected Counsel for the Beneficiaries (as defined in Exhibit A to the Second
Amended and Restated Plan of Reorganization of the Company and the other
Debtors (as therein defined)); and
WHEREAS, the Trustees of the Trust and the Company (as successor to
the Trustors for this purpose pursuant to Section 6.03(a) of the Trust
Agreement) wish to amend the Trust Agreement in the manner provided herein; and
WHEREAS, the Selected Counsel for the Beneficiaries have been
consulted and have given their concurrence with respect to the amendment to the
Trust Agreement effectuated hereby.
NOW, THEREFORE, the parties hereto agree to amend the Trust Agreement
as follows:
1. Section 4.03(i) of the Trust Agreement is hereby amended to
read in its entirety as follows:
<PAGE> 2
"(i) The Trust may acquire and hold any securities or instruments
issued by the Company and/or its Subsidiaries without regard to the limitations
set forth in Subsections (b) - (h) above, provided that in any Fiscal Year the
Trust may not loan funds to the Company and/or its Subsidiaries if, immediately
after making such loan, the aggregate amount of all such loans outstanding
would then exceed the Annual Contingent Amount for the most recent Fiscal Year
for which Annual Contingent Amount has been calculated (for the purposes of
this Subsection (i), the Bond, the Second Bond and the Trust Note, and any
securities of the Company or its Subsidiaries exchanged or otherwise
substituted therefor, shall not be deemed to be loans to the Company and/or its
Subsidiaries)."
2. Except as specifically amended pursuant to Paragraph 1 above,
the Trust Agreement shall remain in full force and effect and is ratified and
confirmed in all respects.
3. This Seventh Amendment shall be governed by and construed in
accordance with the laws of the State of New York and for all purposes shall be
governed by and construed in accordance with the laws of such State applicable
to contracts to be made and performed entirely within such State.
4. This Seventh Amendment may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute one and the same instrument. Terms not defined herein
shall, unless the context otherwise requires, have the meanings assigned to
such terms in the Trust Agreement.
5. If any term, provision, covenant or restriction of this
Seventh Amendment is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Seventh Amendment, and of the
Trust Agreement, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
6. The terms of this Seventh Amendment shall be effective as of
the date first above written.
IN WITNESS WHEREOF, the Company, as successor to the Trustors, has
caused this Seventh Amendment to be executed by its duly authorized officer and
attested by another duly
-2-
<PAGE> 3
authorized officer, and the Trustees of the Trust have executed this
Seventh Amendment, all as of the day and year first above written.
MANVILLE CORPORATION
By: /s/ RICHARD B. VON WALD
------------------------------------
Name: Richard B. Von Wald
Title: Senior Vice President,
General Counsel and Secretary
Attest:
- -----------------------
TRUSTEES
/s/ ROBERT A. FALISE as Trustee
----------------------------
Robert A. Falise
/s/ CHARLES T. HAGEL as Trustee
----------------------------
Charles T. Hagel
/s/ LOUIS KLEIN, JR. as Trustee
----------------------------
Louis Klein, Jr.
/s/ FRANK J. MACCHIAROLA as Trustee
----------------------------
Frank J. Macchiarola
/s/ CHRISTIAN E. MARKEY, JR. as Trustee
----------------------------
Christian E. Markey, Jr.
-3-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
September 30, 1994 Form 10-Q of Manville Corporation and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 150,370
<SECURITIES> 11,259
<RECEIVABLES> 366,475
<ALLOWANCES> 8,752
<INVENTORY> 221,215
<CURRENT-ASSETS> 807,161
<PP&E> 3,313,969
<DEPRECIATION> 1,082,331
<TOTAL-ASSETS> 3,756,063
<CURRENT-LIABILITIES> 499,665
<BONDS> 1,481,745
<COMMON> 1,225
0
178,638
<OTHER-SE> 864,777
<TOTAL-LIABILITY-AND-EQUITY> 3,756,063
<SALES> 1,849,083
<TOTAL-REVENUES> 1,849,083
<CGS> 1,402,241
<TOTAL-COSTS> 1,402,241
<OTHER-EXPENSES> 12,455
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 99,954
<INCOME-PRETAX> 104,362
<INCOME-TAX> 44,701
<INCOME-CONTINUING> 59,661
<DISCONTINUED> 0
<EXTRAORDINARY> (34,707)
<CHANGES> 0
<NET-INCOME> 22,322
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
