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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[[X]] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
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)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (303) 978-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock ($.01 par value) New York Stock Exchange, Inc.
Cumulative Preference Stock,
Series B ($1.00 par value) New York Stock Exchange, Inc.
Warrants for the Purchase of
Common Stock New York Stock Exchange, Inc.
9% Interest Deferred Sinking
Fund Debentures New York Stock Exchange, Inc.
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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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Yes [x] No
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Based solely on the New York Stock Exchange, Inc. closing price as of March 15,
1994, the aggregate market value of the common stock held by non-affiliates of
the registrant was approximately $225,020,145.
As of March 15, 1994, there were 122,385,436 shares of the registrant's sole
class of common stock outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE.
The following documents or portions thereof filed with the Securities and
Exchange Commission are incorporated herein by reference:
The Selected Five-year Financial Data, Management's Discussion and Analysis
of Financial Condition and Results of Operations and Financial Statements
and Supplementary Data of the Company's 1993 Annual Report are
incorporated by reference into Part II of this report.
The Company's 1994 proxy statement filed pursuant to Regulation 14A is
incorporated by reference into Part III of this report.
(ii)
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TABLE OF CONTENTS TO FORM 10-K
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PART I PAGE
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ITEM 1. BUSINESS........................................... 1
Introduction....................................... 1
Significant Developments........................... 1
Major Business Segments............................ 2
Riverwood International Corporation............. 3
Schuller International, Inc..................... 9
Corporate Assets................................ 14
Discontinued Operations......................... 14
Patents............................................ 15
Research........................................... 15
Environmental and Safety Regulations............... 15
Employees.......................................... 16
ITEM 2. PROPERTIES......................................... 17
Headquarters and Mountain Technical Center......... 17
Manufacturing Facilities........................... 17
Mining............................................. 26
Timber Resources................................... 26
ITEM 3. LEGAL PROCEEDINGS.................................. 27
Plan of Reorganization and Related Injunction...... 27
Environmental Proceedings.......................... 28
Other Litigation................................... 29
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS.................................. 29
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS................... 29
ITEM 6. SELECTED FINANCIAL DATA............................ 30
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............... 30
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........ 30
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE............ 30
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. 30
ITEM 11. EXECUTIVE COMPENSATION............................. 30
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT............................. 30
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..... 30
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K............................ 30
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The "Company" when used in this Form 10-K refers to Manville Corporation,
incorporated in the State of Delaware in 1981, and including, where
applicable, its consolidated subsidiaries. "Manville" refers solely to
Manville Corporation, excluding its subsidiaries.
(iii)
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PART I
ITEM 1. BUSINESS
INTRODUCTION
Manville Corporation, an international holding company with two principal
operating subsidiaries, Riverwood International Corporation ("Riverwood") and
Schuller International, Inc. ("Schuller"), was incorporated in Delaware in
1981 to continue businesses begun by its predecessors in 1858. The Company
owns or operates 62 facilities in the United States and eight other countries,
approximately 540,000 acres of timberland in the United States and 174,000
acres in Brazil, and one mine.
Riverwood is an international packaging and paper products company of which
Manville owns approximately 81.5% of the outstanding capital stock. The
operations of Riverwood and its affiliated companies are organized into three
business segments: Coated Board System, Containerboard and U.S.
Timberlands/Wood Products.
Schuller constitutes the Company's fiberglass-based business and includes both
the Building Products and Engineered Products business segments. Subsegments
comprising the Building Products business segment include building insulation,
roofing systems and mechanical insulations. The Engineered Products business
segment includes Schuller GmbH, a German subsidiary, and the mats &
reinforcements and equipment insulations and filtration products subsegments.
Schuller is a wholly-owned subsidiary of Manville.
In addition to the foregoing, Manville holds an equity interest in platinum
and palladium mining operations located in Montana.
SIGNIFICANT DEVELOPMENTS
On November 19, 1990, the Company and the Manville Personal Injury Settlement
Trust (the "PI Trust") entered into formal agreements with respect to an
arrangement (the "Refinancing Arrangement") which, if consummated, would have
enhanced the PI Trust's liquidity. Also 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. On November 26, 1990, the
Company filed a separate motion asking the Courts and the United States
Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court") to issue orders reaffirming the Injunction issued in connection with
the Company's Plan of Reorganization (the "Plan"). The Injunction prohibits
any suits against the Company and its subsidiaries for any asbestos-related
claim. The Injunction requires that all such claims be made against and
administered by the PI Trust or the Manville Property Damage Settlement Trust
(the "PD Trust"). Certain provisions of the Refinancing Arrangement were
subject to numerous approvals and conditions, including, among other things,
a final order approving the Restructuring Settlement.
The Courts and the Bankruptcy Court entered an order in May 1991, as modified
in July 1991 (the "Order"), which, among other things, reaffirmed the
Injunction (the "Reaffirmation Order") and approved the settlement of the
Class Action (the "Restructuring Settlement"). Thirteen appeals of the Order
were filed. 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 for
further proceedings. 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. As a result, various aspects of the Refinancing
Arrangement have terminated. Attempts by the parties to the Class Action to
reach a new settlement are continuing. One day of trial of the Class Action
was held on March 15, 1994, and in the absence of a settlement, the trial will
resume following a conference before the Courts currently scheduled for April
18, 1994.
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On August 25, 1993, Manville and the PI Trust entered into a Bond Prepayment
Agreement (the "Agreement") pursuant to which Manville made a partial
prepayment of certain of its obligations to the PI Trust under the bonds
issued to the PI Trust. The partial prepayment consisted of a cash payment of
approximately $150 million and an assignment to the PI Trust of $100 million
principal amount of Riverwood's currently outstanding notes held by Manville
(the "Notes"), plus accrued interest. Under the terms of the Agreement, the
PI Trust was granted certain registration rights with respect to the Notes
pursuant to which Riverwood registered the Notes under the Securities Act of
1933, as amended (the "Act"). On October 14, 1993, the PI Trust completed a
public secondary sale of the Notes. Neither the Company nor Riverwood
received any proceeds from the public offering by the PI Trust.
Further information concerning the Refinancing Arrangement, the Company's
Chapter 11 proceedings consummated in 1988, and related matters, is found in
Notes 2 and 4 to Consolidated Financial Statements of the Company's 1993
Annual Report and in this Form 10-K under ITEM 3, LEGAL PROCEEDINGS - Plan of
Reorganization and Related Injunction.
On September 17, 1993, Riverwood completed a private placement of $125 million
aggregate principal amount of its 6 3/4% Convertible Subordinated Notes due
2003 (the "Convertible Notes") in transactions exempt from registration under
the Act (the "Private Placement"). On November 5, 1993, Riverwood filed a
registration statement with respect to the Convertible Notes and the common
stock into which the Convertible Notes may be converted. Neither Riverwood
nor the Company will receive any proceeds from any sales of the Convertible
Notes or such common stock pursuant to the registration statement.
Concurrent with the completion of the Private Placement on September 17, 1993,
Manville purchased 3,448,276 shares of Riverwood's common stock at a price of
$14.50 per share, for an aggregate investment of approximately $50 million.
Manville now owns approximately 81.5% of Riverwood's outstanding common stock.
On January 16, 1994, Schuller completed the exchange of its North American
residential roofing business for the North American commercial and industrial
roofing businesses of Owens-Corning Fiberglas Corp. ("O-C"). As a result of
the exchange, Schuller acquired O-C's commercial and industrial roofing plant
in Oklahoma City, Oklahoma, and O-C's modified bitumen equipment located in
Canada. Schuller will produce Perma Ply-R(R) at its Oklahoma City plant and
will market fiberglass roof insulation produced by O-C in Kansas City, Kansas.
O-C has acquired Schuller's residential roofing plant facility in Savannah,
Georgia and its residential roofing equipment in Waukegan, Illinois.
On September 15, 1993, Riverwood Energy Resources, Inc., a wholly-owned
subsidiary of Manville ("RERI"), completed its sale of all rights, titles and
interests in the Petit Zone Unit, Black Lake Field, located in Natchitoches
and Winn Parishes, Louisiana, and all facilities related to the Black Lake -
Olla Carbon Dioxide Pipeline.
MAJOR BUSINESS SEGMENTS
The Company is currently divided into five separate business segments
reflecting the Company's major product groups. Financial information on the
business segments, including information based on geographic areas, may be
found in the Company's 1993 Annual Report. Property descriptions for each
business segment may be found under ITEM 2, PROPERTIES.
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RIVERWOOD INTERNATIONAL CORPORATION
OPERATING UNITS
Riverwood consists of three of the Company's business segments: Coated Board
System, Containerboard and U.S. Timberlands/Wood Products. The Coated Board
System segment includes the production of coated unbleached kraft paperboard
("CUK Board") on three paper machines at Riverwood's West Monroe, Louisiana
mill and a recycled paperboard mill in Sweden, beverage and folding carton
converting facilities in Australia, Brazil, Europe, the U.K. and the U.S.,
Riverwood's worldwide packaging machinery operations, and its joint venture
operations in Denmark and Japan. In July 1992, in order to increase its U.S.
paperboard production capacity, Riverwood purchased substantially all of the
assets of Macon Kraft, Inc. (the "Macon Mill"), a manufacturer of linerboard
for corrugated box applications located in Macon, Georgia. At the end of
1992, Riverwood began to supplement its production of CUK Board grades through
the process of producing a small amount of base stock at the Macon Mill and
coating it off-line in West Monroe, Louisiana. The Containerboard segment
includes linerboard, bag kraft and corrugating medium produced at two mills in
the U.S., linerboard and corrugating medium produced at two mills in Brazil,
three corrugated box plants in Brazil and approximately 174,000 acres of owned
and leased timberlands in Brazil, used exclusively for wood chip and energy
requirements of the paper mills. The U.S. Timberlands/Wood Products business
segment includes two U.S. lumber mills, a U.S. plywood plant and approximately
540,000 acres of owned and leased timberland in Arkansas, Louisiana and Texas.
COATED BOARD SYSTEM
The principal products of the Coated Board System segment are:
Beverage Cartons Coated Recycled Paperboard
Coated Unbleached Kraft Paperboard, Folding Cartons
including Carrierboard, Cartonboard Packaging Machinery
and Pre-Print Linerboard
Riverwood's Coated Board System segment consists of the manufacture and sale
of CUK Board to its own divisions and external customers, the conversion of
CUK Board to beverage and folding cartons, and the design and assembly of
proprietary packaging machinery. Of Riverwood's three business segments, the
Coated Board System segment accounted for approximately 65% of Riverwood's net
sales (excluding intersegment sales) and 75% of Riverwood's income from
operations (excluding corporate expenses) in 1993.
Riverwood's Coated Board System strategy is to provide its customers with a
system-based packaging solution responsive to their packaging, distribution
and promotional needs, and to expand its position as a leader in CUK Board-
based paperboard packaging by: (i) continuing to focus on serving the
packaging needs of multinational beverage and consumer products companies;
(ii) further developing Riverwood's international operations where it believes
growth opportunities are greatest; and (iii) increasing Riverwood's placement
of its proprietary packaging machinery with its customers. As part of the
implementation of such strategy, Riverwood has pursued an expansion program
that has included the acquisition of the Macon Mill, a paperboard facility in
Sweden and converting and/or packaging machinery operations in Australia,
Brazil, Europe and the U.S.
CUK Board is a specialized grade of paperboard representing approximately 4%
of total U.S. paperboard tonnage. The primary end uses of CUK Board are as
beverage cartons ("carrierboard") for beer and soft drink handling and as
folding cartons ("cartonboard") for confectionery, frozen food, dry goods and
other consumer products. CUK Board is well-suited as secondary packaging for
the beverage and consumer product industries due to its strength, moisture
resistance and stiffness. The board surface is desirable for high-quality
printing, allowing manufacturers to add high impact logos, pictures and
promotional elements to their packages. In addition, the production of CUK
Board does not require a bleaching process, thereby eliminating environmental
concerns arising in connection with chlorine bleached products.
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The conversion of CUK Board into packaging products begins with rolls of CUK
Board which are then cut and printed to customer specifications on multi-color
printing presses. In the case of CUK Board used to manufacture a majority of
Riverwood's beverage carton products, the CUK Board rolls are fed into
printing presses which, in one integrated process, print and cut the CUK Board
into beverage cartons to customer specifications. The printed cartons are
then shipped to customers' plants where they are placed in packaging machines.
The packaging machines then erect the beverage cartons, insert the customers'
products and close or seal the package.
Three trends which have developed over the past decade have increased the
demand in the U.S. for beverage carrierboard. First, cans have become a
preferred form of primary beverage container packaging due to their ease of
transportation, handling and storage. Second, CUK Board has emerged as the
preferred form of secondary packaging for cans and bottles as a result of an
increase in the size of container multipacks, such as 6-packs growing to 12-
packs, 24-packs and even 36-can units. Finally, the use of CUK Board has
increased because of the importance of secondary packaging for marketing and
promotional purposes. As a result of its physical and promotional attributes,
the CUK Board product used by the beverage industry has been a relatively high
growth segment of the U.S. paperboard industry over the last decade.
Riverwood believes that the three trends described above are beginning to
develop in Europe, as cans gain wider consumer acceptance, and in Japan,
albeit at a slower pace. Riverwood believes that its acquisitions in Europe,
its joint venture with the Rengo Company Limited ("Rengo") in Japan and its
joint venture with Danapak Holding A/S ("Danapak") in Denmark position
Riverwood to benefit from the increasing international usage of carrierboard.
In July 1992, Riverwood acquired the Macon Mill as part of its efforts to
increase its U.S. paperboard production capacity. Riverwood is in the process
of converting one of the Macon Mill's linerboard machines to CUK Board
production. Riverwood believes that the conversion of one of the two
linerboard machines at the Macon Mill is on schedule and on budget. Riverwood
has improved the quality of the paperboard produced, as well as the efficiency
and level of safety at the Macon Mill since its acquisition.
At the end of 1992, Riverwood began to supplement its production of CUK Board
grades through the process of producing a small amount of base stock at the
Macon Mill and coating it off-line in West Monroe, Louisiana. The final
conversion of one of the Macon Mill's linerboard machines is scheduled for the
second half of 1994. Riverwood's plan is to retrofit the linerboard machine
at the Macon Mill with a new coating section during the first half of 1994 for
the production of some CUK Board in time for the 1994 beverage season. The
machine is anticipated to be fully converted by the end of 1994. Riverwood
will then have the flexibility to produce coated beverage carrierboard,
folding cartonboard and linerboard on the new three-ply machine. Efficient
start-up and production of saleable CUK Board is dependent upon many
manufacturing process and engineering factors. During the final phase of
conversion, the linerboard machine will be shut down to complete final
construction. While Riverwood believes the final phase of the conversion will
be completed within a reasonable shut-down period, there can be no assurance
that a longer-than-anticipated delay will not be experienced before saleable
CUK Board is produced, during which time Riverwood will continue to rely on a
single U.S. CUK Board production facility and, therefore, will experience
delay in the realization of benefits of full conversion. As originally
anticipated, Riverwood continues to estimate that it will take several years
of marketing development activities to redirect the full capacity of the
converted machine to the beverage carton market. Pending such redirection,
excess capacity will be directed into the general folding carton and
linerboard markets. The Company believes that it will be able to sell the
additional CUK Board output at satisfactory prices. There can be no
assurance, however, that the additional output can be sold at current market
prices.
During 1993, Riverwood continued its development of proprietary packaging
machines with the development and introduction of four new paperboard
packaging systems -- Quikflex(TM), Twin-Stack(TM), Eclipse(TM) and
Light-Tite(TM)--to the beverage industry. These systems combine innovative
package design with high-speed, reliable packaging machinery. Riverwood
believes that the range of packaging systems it offers to its beverage
customers is among the broadest available in the industry.
The Twin-Stack system can insert 12, 18, 24, 30 or 36 cans in two tiers or 9,
12, 15 or 18 cans in a single tier. Can stacking creates a defined package
top and bottom with large side and end billboards for maximum point-of-sale
impact. The double-stacked design for larger multipacks is compact and easy
to carry, and Twin-Stack machines can combine two brands -- such as diet and
regular -- in a "variety pack" with a paperboard divider pad that can be
printed for use in promotions. The beverage industry's interest in the Twin-
Stack packaging system
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has been favorable. While targeted primarily at the U.S. beverage market,
Riverwood has orders or made installations on four continents.
Riverwood principally markets CUK Board-based packaging products to large
multinational brewers, soft drink bottlers and food companies which use
printed packaging for retail display, multiple packaging and shipment of their
products. Although the beverage carton segment of the paperboard packaging
market is an important focus, Riverwood's CUK Board, sold directly to
customers and through third party converters, has also found specific
applications in the folding carton segment such as frozen and dry food, toy
and hardware packaging. Major customers for Riverwood's CUK Board in the
folding carton segment of the paperboard packaging market include M&M Mars (a
division of Mars, Inc.), Sara Lee Corporation and Unilever N.V. By working
directly with customers to develop new packaging applications and integrated
solutions, Riverwood is attempting to further penetrate this market.
U.S. Operations. Riverwood's U.S. CUK Board is produced at its West Monroe,
Louisiana mill, which produced approximately 645,000 tons of CUK Board during
1993. Riverwood markets CUK Board under the names Aquakote(R) (carrierboard),
Pearlkote(R) (cartonboard) and Krafbrite(R) (pre-print linerboard). In
addition to Riverwood's 100% recycled capabilities in Europe described below,
Riverwood has increased its U.S. capacity to produce products with recycled
fiber. Riverwood has spent approximately $11 million to expand the recycling
capacity at the West Monroe facility. The expansion allows Riverwood to
increase the post-consumer recycled content of Aquakote(R) carrierboard to
20%. The Macon Mill has the capability of producing certain products with a
recycled content of up to 50%.
In 1993, approximately 39% of Riverwood's overall U.S. CUK Board shipped by
its West Monroe, Louisiana mill was used by Riverwood's U.S. converting
operations, 48% was sold to other U.S. converters and the balance was sold to
international converters, including Riverwood's overseas subsidiaries.
Riverwood owns beverage carton plants in Bakersfield, California; West Monroe,
Louisiana; Clinton, Mississippi; and Cincinnati, Ohio. Riverwood owns a
folding carton plant in Kankakee, Illinois. Riverwood also has a supply
arrangement with an unaffiliated beverage carton plant in Lansdowne,
Pennsylvania used to service the Northeast.
Worldwide Packaging Machinery. Riverwood's packaging design and packaging
machinery design, manufacturing and administrative sites are located near
Smithfield, New South Wales, Australia; Sao Paulo, Brazil; Atlanta, Georgia;
Koln, Germany; West Monroe, Louisiana; Crosby, Minnesota; Saddlebrook, New
Jersey; Barcelona, Spain; and Bristol, United Kingdom. Riverwood has a
substantial number of proprietary packaging machines installed at customer
production sites worldwide. Riverwood leases substantially all of its
packaging machinery to its customers. The machines are designed to
efficiently process the CUK Board produced and converted by Riverwood. In
March 1991, Riverwood acquired from Federal Paper Board Company the machinery
portfolio and related patents, trademarks and trade names known as Jak-et-
Pak(R). The machinery portfolio consisted of machines located in Australia,
Europe, Japan and North America. In September 1991, Riverwood acquired
Minnesota Automation, Inc., a designer and producer of high-speed packaging
machinery and equipment. In August 1992, Riverwood opened the Product
Development Center near Atlanta, Georgia, where worldwide packaging solutions,
including machinery design, packaging concepts and related packaging systems,
are being developed, tested and manufactured. The Product Development Center
coordinates worldwide integration of the machinery and carton development.
Riverwood has an aggressive program of protecting new machinery and packages
by appropriate patents and trademarks filed throughout the world.
In 1992, Riverwood opened a facility in Koln, Germany, for the purpose of
developing products offering engineering solutions for European customers. At
this facility, Riverwood designs and develops packaging and related packaging
machines and assembles these machines for shipment to CUK Board customers.
International Operations. Riverwood's international Coated Board System
segment includes a mill in Sweden, seven converting plants located in Europe
and Australia, and 19 sales offices located in 14 countries, excluding the
U.S. All international coated board production facilities have been acquired
or formed by Riverwood since 1990 in a program aimed at expanding Riverwood's
role in the packaging industry in international markets.
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Riverwood expanded its base of paperboard production with its June 1990
acquisition of Fiskeby Board AB. The 105,000 metric tons per year mill
located in Norrkoping, Sweden produces 100% recycled coated paperboard,
enabling Riverwood to serve the growing needs of its customer base that
requires recycled packaging.
Riverwood developed its international folding carton converting base through
the acquisition of DRG Cartons (now known as Riverwood International Limited
("RIL")), Visypack Pty. Ltd., (now known as Multiboard Packaging Pty. Ltd.
("Multiboard")) and Jorba, S.A. ("Jorba"). These operations provide Riverwood
with local converting capacity to serve Australasian, continental European and
U.K. markets. RIL is a major beverage and folding carton converter in the
U.K. and manufactures cartons primarily for the beverage, frozen food,
confectionery and detergent markets. Multiboard has five plants in eastern
Australia manufacturing cartons for the food, consumer products and beverage
industries. Riverwood Packaging Systems Pty. Ltd., a wholly-owned subsidiary
of Riverwood, acquired the assets of Multiboard's packaging machinery division
in December 1992. Jorba is a beverage and folding carton packaging supplier
in Spain. These facilities provide outlets for paperboard tonnage from the
West Monroe and Norrkoping operations.
In 1991, Riverwood acquired two additional packaging machinery operations. In
August, it acquired Syspack, S.A., located in Spain, to complement its
European converting operations. Syspack, S.A. was merged with Jorba,
effective July 29, 1993. In December, Igaras Papeis e Embalagens Ltda.
("Igaras"), Riverwood's integrated Brazilian paperboard subsidiary, acquired
the assets of M.E.A.D. Ltda., a packaging machinery company, which competes in
the South American multiple packaging markets. Machine placements in Brazil
are currently supported by Riverwood's U.S. CUK Board and converting
facilities and its worldwide packaging machinery operations.
Riverwood has also formed joint venture arrangements with Rengo to market
machinery-based packaging systems in Japan. The joint venture arrangements
cover paperboard supply and marketing and distribution of packaging systems.
Eventually the arrangements will also cover carton converting. In addition,
in December 1993, Riverwood entered into a joint venture with Danapak for the
purpose of marketing machinery-based packaging systems and cartons in
Scandinavia.
Competition. CUK Board competes with recycled clay-coated newsprint ("CCN")
board, solid bleached sulphate ("SBS") board and other box board in the
folding carton segment of the paperboard packaging market. In the folding
carton segment, cartonboard grades compete based on price and quality as
measured by strength and printability. CUK Board has better tear strength
characteristics than SBS and better tear strength and cross-direction
stiffness than CCN. In terms of price and quality, CUK Board is positioned
between CCN and SBS. Historically, CUK Board has been priced higher than CCN
and lower than SBS. Recently, corrugated material has begun to make some
inroads in the beverage carton segment of the paperboard packaging market.
Riverwood's Krafbrite(R) product is one of several products used in this
corrugated material.
Riverwood estimates that during 1993 it had approximately 50% of the U.S.
carrierboard segment of the paperboard packaging market. In contrast,
Riverwood estimates that it has approximately 3% of the folding carton segment
of the U.S. paperboard packaging market. There are two major U.S. producers
of CUK Board for beverage carton applications -- Riverwood and The Mead
Corporation. There are a large number of producers of paperboard for folding
carton applications.
CONTAINERBOARD
The principal products of the Containerboard segment are:
Corrugated Boxes Kraft Linerboard
Corrugating Medium Kraft Paper
The Containerboard segment accounted for approximately 22% of Riverwood's net
sales (excluding intersegment sales) and Riverwood had a $32 million loss
from operations in 1993, which corresponds to a 24% loss from operations.
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U.S. Operations. In the U.S., Riverwood is a producer of linerboard,
corrugating medium and unbleached kraft paper which are commodity paperboard
products. Corrugating medium, an unbleached paperboard, is combined with
linerboard to make corrugated containers. Kraft paper is used primarily to
make grocery bags and sacks. Riverwood has, on an annual basis, approximately
525,000 tons of linerboard capacity at the Macon Mill plus 142,000 tons of
medium and 39,000 tons of bag kraft capacity at West Monroe, Louisiana. With
1993 sales of approximately 134,000 tons of medium, Riverwood represented
approximately 2% of the U.S. corrugating medium market. With 1993 sales of
37,000 tons of bag kraft, Riverwood accounted for approximately 2% of the U.S.
unbleached bag and sack kraft paper market. Riverwood had approximately 2% of
the U.S. linerboard market in 1993.
The acquisition of the Macon Mill increased Riverwood's worldwide production
of linerboard from 284,000 tons to 809,000 tons per year. The dedicated
linerboard capacity will be reduced by approximately 275,000 tons after the
conversion of one of the Macon Mill's two linerboard machines to CUK Board
production is completed, which Riverwood anticipates will occur in 1994.
Brazilian Operations. Riverwood's principal international containerboard
operations are conducted through Igaras, an integrated containerboard
producer, which was acquired by Riverwood's predecessor companies in 1958.
Igaras is Brazil's fourth largest paperboard company, operating two mills and
three corrugated box plants and owning and leasing approximately 174,000 acres
of timberlands. Igaras' Otacilio Costa mill operates three paper machines and
has a production capacity of approximately 284,000 tons per year of kraft
linerboard as well as small amounts of coated paper and kraft paper. Its
Angatuba mill produces approximately 56,000 tons per year of corrugating
medium on one machine. The timberlands are primarily pine plantations,
supplying substantially all of the mills' softwood fiber requirements. Igaras
also maintains eucalyptus plantations which are used as a source of energy for
the mills.
Igaras' strategy is to focus primarily on the export markets where it had
approximately 84% of its 1993 linerboard sales. Riverwood believes that
Igaras' competitive strengths include its low fiber costs, which are primarily
due to Brazil's accelerated tree growth cycle and planting patterns, and its
relatively low labor costs. Brazil's accelerated tree growth cycle results in
substantially higher timberland yields than similar U.S. southern pine
timberlands.
The Brazilian currency has experienced devaluations following periods of
overvaluation relative to other convertible currencies. Such devaluations and
overvaluations may affect the financial condition and results of operations of
Igaras. Brazil continues to experience high rates of inflation. In an
attempt to control inflation, the Brazilian government, which has recently
experienced political changes, has at times instituted policies, such as wage
and price controls, which have at times adversely affected Igaras' operating
results. Additionally, the Brazilian government has from time to time
restricted the remittance of capital abroad. There can be no assurance that
the Brazilian government will not institute similar policies or impose such
restrictions again in the future.
Competition. The Containerboard segment operates within a highly fragmented
industry structure. Many products within this industry are viewed as
commodities and selling prices tend to be cyclical, rising during periods of
strong economic activity and declining in periods of economic weakness. Over
the past several years, worldwide prices for Containerboard have significantly
declined based on weak economic activity, the strengthening of the U.S. dollar
and the continued increase in industry capacity.
U.S. TIMBERLANDS/WOOD PRODUCTS
The U.S. Timberlands/Wood Products segment accounts for approximately 13% of
Riverwood's net sales (excluding intersegment sales) and 49% of Riverwood's
income from operations (excluding corporate expenses) in 1993.
Riverwood owns and leases approximately 540,000 acres of timberland in
Arkansas, Louisiana and Texas. In December 1993, Riverwood completed the sale
and assignment for cash, of approximately 60,000 acres of non-strategic
timberlands located in Louisiana and Texas. In 1972, Riverwood initiated a
forestry program to increase the yield from its U.S. southern pine forests.
Riverwood expects to complete its transition from natural forests to pine
plantations by approximately the year 2001. As Riverwood uses a greater
recycled content in
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its CUK Board, it will become less reliant on its timberland base.
Riverwood's timberlands supplied approximately 42% of the wood fiber
requirements for the West Monroe, Louisiana mill in 1993.
Riverwood has two sawmills and one plywood plant for manufacturing products
from southern pine. Riverwood's lumber products include dimensional lumber
and boards, while its plywood products include sheathing and specialty grades.
The residual chips from these operations and pulpwood from the forest are
shipped to the West Monroe paperboard mill for processing into paper and
paperboard.
MARKETING AND DISTRIBUTION
Riverwood sells packaging, paperboard and wood products in both industrial and
consumer markets. Distribution of board products is primarily accomplished
through direct sales offices in Australia, Brazil, Canada, Denmark, France,
Germany, Holland, Hong Kong, Italy, Japan, Singapore, Spain, Sweden, the U.K.
and in several locations in the U.S. The Containerboard segment sells
linerboard and corrugating medium through direct sales offices in Brazil and
the U.S. Outside of Brazil and the U.S., linerboard is primarily distributed
through independent sales representatives. Lumber and plywood products of the
U.S. Timberlands/Wood Products segment are distributed by direct sales to
retailers and wholesalers primarily in Southern and Central U.S. markets.
OCCUPATIONAL HEALTH AND SAFETY ASPECTS OF RIVERWOOD PRODUCTS
The manufacture of lumber, plywood, pulp, paperboard and paper products and
their use may involve the generation of wood dust. Wood dust has been
associated with health problems, primarily irritation or allergic reaction of
the skin or lungs. European studies have also associated wood dust exposure
with a rare form of nasal cancer in some industries. Although these studies
showing a link to nasal cancer have primarily been conducted in industries
using hard wood, exposure to soft wood is implicated as well. Two of the
major industries in which the Company is involved -- paper products and wood
products -- use predominantly soft wood.
On January 19, 1989, the Occupational Safety & Health Administration ("OSHA")
published its final rule on Air Contaminants that lowered 212 of OSHA's
existing permissible exposure limits ("PELs") for toxic substances and set
PELs for 164 new substances which included wood dusts. On July 7, 1992, the
Eleventh Circuit Court of Appeals issued a decision stating that the revised
air contaminant standard was vacated, and that wood dusts would no longer have
specific standards. Riverwood continues to list the more stringent PEL that
was established in 1989 of 5 milligrams per cubic meter (mg/M/3/) for an 8-
hour exposure, with a limit of 10 mg/M/3/ set for short term exposures not to
exceed fifteen minutes for wood dust, all soft and hard woods, except western
red cedar, on its material safety data sheets ("MSDS").
Modifications to the Hazard Communication Standard have been made and went
into effect on March 11, 1994, that specifically address wood dust. OSHA is
technically amending the rule to clarify that the wood dust is not generally a
wood "product," and a MSDS and a label are required. It is the responsibility
of the first employer who handles or processes the raw material in such a way
that the hazardous chemical is "produced" and released into the work
environment.
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SCHULLER INTERNATIONAL, INC.
Schuller, and its affiliated companies, include two of the Company's business
segments, Building Products and Engineered Products. The Building Products
business segment manufactures and sells building and mechanical insulations
and roofing systems from 19 manufacturing plants in the U.S. and Canada. The
Engineered Products business segment manufactures and sells insulation,
reinforcement and filtration products from ten manufacturing plants in the
U.S. and three manufacturing plants in Germany.
BUILDING PRODUCTS
The principal products of the Building Products business segment are:
Commercial, Mobile Home and Industrial Pipe and
Metal Building Insulation Block Insulations
Commercial and Industrial Pipe and Mechanical Equipment
Roofing Products and Systems Insulation and Coverings
Duct Board, Duct Wrap and Liner Residential Insulation
Insulation for Air Duct Systems for Walls and Attics
U.S. and Canadian Operations. The Building Products business segment
manufactures and sells thermal and acoustical fiberglass insulation products
(fiberglass wool) for walls and attics which are used in the construction and
retrofitting of residences (including manufactured housing) and commercial,
industrial and institutional buildings. These insulation products are
typically sold directly to users (applicators, fabricators, contractors and
manufacturers) and to distributors (dealers, retailers and wholesalers).
The majority of the Company's building insulation products are made using
patented rotary manufacturing technology at locations in California,
Georgia, Kansas and New Jersey, with two support facilities in Arizona and
Virginia. A facility in Indiana was closed during 1992, but was reopened in
1993. In addition, Schuller's affiliate, Manville Canada Inc. ("Manville
Canada") manufactures residential building insulation in Alberta, Canada.
The mechanical insulation business of the Building Products business segment
manufactures and sells industrial and commercial products used to insulate
mechanical piping and equipment, as well as fiberglass air duct systems and
thermal acoustical blankets used to wrap and line metal duct systems.
Mechanical insulation products are typically sold directly to distributors,
contractors and HVAC (heating, ventilating and air conditioning) wholesalers.
Production facilities for the mechanical insulation business are located in
California, Colorado, Illinois, New Jersey, Ohio and Texas.
The mechanical insulation business also includes the production of calcium
silicate industrial insulations which are used when mechanical strength and
the capacity to withstand high temperatures are required, such as in the
insulation of petrochemical and power plants. Calcium silicate insulations
contain, among other things, trace amounts of crystalline silica. Schuller
has labeled its calcium silicate insulations to reflect the International
Agency for Research on Cancer ("IARC") finding that crystalline silica is
"probably carcinogenic to humans" and has amended its Material Safety Data
Sheets ("MSDS") for this product. See the discussion below under Occupational
Health and Safety Aspects of Mining and Mineral Group Products.
Production of fiberglass materials is maintained at an approximately level
rate throughout the year. Overall, demand for this segment's products tends
to be seasonal, resulting in inventory increases during late winter and spring
and decreases during the construction season and the late fall, early winter
insulating months. The principal raw materials used to manufacture fiberglass
are discussed below. Fiberglass wool has been classified by IARC as a
possible cause of cancer in humans. See the discussion below regarding
Occupational Health and Safety Aspects of Schuller Products.
The roofing system business includes commercial and industrial roofing
products and systems produced in California, Georgia, Illinois, Maine,
Mississippi, Oklahoma and Virginia, and supported by research facilities in
Colorado. In addition to selling roofing products and systems, Schuller
offers certain guarantees on installed roofing systems. In connection with
the exchange of Schuller's North American residential roofing business for
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the commercial and industrial roofing business of O-C completed January 16,
1994, Schuller has acquired O-C's commercial and industrial roofing plant in
Oklahoma City, as well as O-C's modified bitumen equipment in Canada.
In 1993, the roofing business also included residential roofing products
manufactured by Schuller in California, Georgia and Illinois, which served
residential markets in the midwest, southeast, west and portions of the
northeast region of the country. In connection with the O-C transaction
described above, O-C has acquired Schuller's residential roofing plant
facility in Savannah, Georgia and its residential roofing equipment in
Waukegan, Illinois.
The principal raw materials used to manufacture roofing products are asphalt
and fiberglass mat (manufactured by the Engineered Products business segment).
Schuller's roofing systems products are sold to dealers, distributors,
retailers and roofing contractors. Industrial and commercial, as well as
residential roofing products, are make-to-stock businesses. The demand for
roofing products is divided between re-roofing existing buildings and new
construction. Re-roofing demand is seasonal but relatively stable, while the
demand for roofing products for new structures is both seasonal (inventory
normally increases during the winter and spring months and decreases during
the construction season) and cyclical. Schuller's sales are split
approximately 85% to re-roofing and 15% to new construction.
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 manufactured by the Company 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 an 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. As of December 31, 1993, the total costs to the
Company for inspections and claims sampling totaled approximately $2.5 million
and the total costs of remediation were approximately $2.8 million. The exact
number of phenolic-related claims the Company may receive is dependent on a
number of variables and cannot be determined at this time.
Based on its experience to date and the information currently available, the
Company has recorded an estimated loss of approximately $19.7 millon for
anticipated sampling, inspection and remediation costs. It is possible the
ultimate loss, which cannot be determined at this time, could exceed this
estimate.
Any determination of the ultimate cost to the Company for phenolic-related
deck corrosion must take into consideration insurance which is available to
address such claims as well as other sources of indemnification. The Company
has substantial 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. 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 recorded in the Company's financial statements at December 31, 1993.
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. Because of the uncertainties
involved in pending litigation, no assurances are possible.
During 1993 the Company filed a lawsuit against Beazer. The Company seeks
recovery from Beazer for all costs and damages incurred as a result of the
acquisition of the phenolic business. Additionally, to the extent negligence
of others (contractors, architects, manufacturers of other roofing system
components) is a
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contributing factor to roof deck corrosion, the Company may have rights in
contribution for recovery of a substantial 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 December 31, 1993 cannot be quantified at this time.
The ultimate amount and timing of the expected payouts for these expenses and
corresponding receipt of insurance recoveries cannot be determined. The
Company expects to fund any currently unreimbursed costs from cash on hand and
cash generated from operations.
Competition. The principal methods of competition for the Building Products
business segment include quality, service, distribution, price and product
performance. Schuller believes that its products are competitive in each of
these areas. Also, Schuller's regional production system provides a
competitive cost and strong service position in the building insulation market
in the U.S. and Canada. Based upon available industry statistics, Schuller
believes it is one of the top three producers of fiberglass insulation in the
U.S. Other large fiberglass and mechanical insulation producers in the U.S.
include Owens-Corning Fiberglas Corp. and CertainTeed Corporation. In
addition, there are several small fiberglass producers as well as numerous
non-fiberglass insulation manufacturers which compete in the same markets.
Primary competitors in the roofing system business include GAF Corporation and
Tamko.
ENGINEERED PRODUCTS
The principal products of the Engineered Products business segment are:
Acoustical Insulation for Fine Fibers for Filtration
Office Partitions HVAC Equipment and Appliance Insulation
Air Filtration Media Liquid Filtration Cartridges and Tubes
Aircraft and Aerospace Insulation Metal Encapsulated Aerospace and
Automotive Headliners, Automotive Insulation Products
Hoodliners, Molded Parts Roofing Fiber and Mat
and Uncured Fiberglass Specialty Fiber and Specialty Mat
for Molding
Chopped Strands and Roving
Products for Fiberglass
Reinforced Plastics
U.S. and Foreign Operations. The Engineered Products business segment
manufactures and sells fiberglass and other products used generally for
insulation, reinforcement and filtration purposes. During 1993, these
products were produced by Schuller at ten manufacturing plants in the U.S.
(located in California, Indiana, Ohio, Tennessee, Texas and West Virginia) and
by its subsidiary Schuller GmbH at three fiberglass manufacturing plants in
Germany. In addition, the Engineered Products business segment is supported
by research and development facilities located in Colorado, Ohio and Germany.
The fiberglass insulations produced by Schuller's Engineered Products business
segment include products used to insulate aircraft, HVAC equipment,
appliances, office partitions, automobiles and space vehicles. These
fiberglass insulation products are manufactured to customer specifications
using proprietary technology.
Chopped fiberglass is used by Schuller to produce and reinforce mats for
roofing manufacturers including certain roofing products manufactured by the
Building Products business segment discussed above. In addition, chopped
glass fiber is sold directly to other roofing mat manufacturers and into the
gypsum wallboard market. Specialty fibers manufactured by Schuller are used
widely in the production of commercial wall coverings to achieve exceptional
endurance and safety characteristics. Specialty mats produced from such glass
fibers are incorporated into battery separators, carpeting and vinyl flooring,
and facers for foam insulation.
Schuller's reinforcement products include fiberglass chopped strand and roving
which are sold to the reinforced plastics industry. These products are used
primarily to reinforce resin systems in filament wound, pultruded and
compression and injection molded plastic parts. Long term license agreements
allow Schuller to use the
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reinforcement technology of Nippon Electric Glass Co. Ltd., located in Otsu,
Japan, in the production of reinforcement products in North America.
Filtration products include Schuller's fine fiber filtration products which
are typically sold to specialty paper manufacturers who convert the glass
fibers into a finished specialty paper product for applications in the
battery, pharmaceutical and semiconductor industries. Schuller's filter media
products are used in air filtration systems for non-residential buildings. In
addition, glass fibers are used in liquid filtration applications such as oil
and fuel filters.
The products produced by the Engineered Products business segment are
typically sold directly to users (applicators, fabricators, contractors and
manufacturers) and to distributors (dealers and wholesalers).
The principal raw materials used to manufacture fiberglass are aluminous
materials, borate minerals, lime, sand and soda ash. Phenol-formaldehyde,
urea-formaldehyde and other resins are used to make various fiberglass
products.
Production of engineered products is maintained at an approximately level rate
throughout the year. Overall, demand for these products tends to be seasonal,
resulting in inventory increases during winter and spring and decreases during
the construction season.
Though the Engineered Products business segment no longer manufactures
refractory ceramic fiber ("RCF"), it does continue to use limited amounts of
RCF produced by third parties in the processing of certain automotive
products. RCF has been classified by IARC as a possible cause of cancer. See
the discussion below regarding Occupational Health and Safety Aspects of
Schuller Products.
Competition. The principal methods of competition for the Engineered Products
business segment include quality, service, product performance, distribution
and price. Schuller believes that its products are competitive in each of
these areas. Based upon available industry statistics, Schuller believes it
is the largest producer of fiberglass mat in the world. Owens-Corning
Fiberglas Corp., PPG Industries, Inc. and CertainTeed Corporation are the
Company's principal competitors in the Engineered Products markets. In
addition, there are several small companies which compete with Schuller in the
filtration media markets.
OCCUPATIONAL HEALTH AND SAFETY ASPECTS OF SCHULLER PRODUCTS
Schuller manufactures, processes and sells products which contain chemicals or
substances classified by IARC as potential human carcinogens. During IARC's
1987 assessment of man-made vitreous fibers ("MMVF"), fiberglass wool, RCF,
and mineral wool were each classified as "possibly carcinogenic to humans."
Continuous glass filament (chopped strand) was "not classifiable as to human
carcinogenicity."
From its review of epidemiological studies involving occupational exposure to
fiberglass wool, IARC concluded that the evidence of cancer in humans was
"inadequate." The evidence from animal studies was viewed as "sufficient."
IARC's finding on animal data, however, was based entirely on positive
laboratory results achieved through injection or other artificial techniques
of exposing animals to fibrous materials. Most scientists, including the
World Health Organization, agree that animal studies using natural routes of
inhalation are the most appropriate means to assess potential risks to humans.
No animal inhalation study of fiberglass wool, including the most recent which
was concluded in 1992, has resulted in lung fibrosis, mesothelioma or any
significant increase in lung tumors.
In 1991, the authors of a U.S. epidemiology study of more than 14,000
fiberglass industry workers noted a small, but statistically significant,
excess in respiratory cancer deaths. However, after looking at the cumulative
evidence of all factors that might support a causal relationship, the
researchers concluded that the evidence of an association between exposure to
fiberglass wool and respiratory cancer appeared "somewhat weaker" than was the
case when that study was reviewed by IARC in 1987 when it was found to be
"inadequate."
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As a result of the IARC classification, in 1988, the Company voluntarily
labeled its products containing fiberglass wool and mineral wool as possible
carcinogens. Since 1991, the OSHA Hazard Communication Standard has required
cancer warning labels for all products containing fiberglass wool. Some
states also have similar worker or community "right to know" labeling
requirements. For purposes of occupational exposure, OSHA continues, however,
to regulate all MMVF as inert or nuisance dusts. The Company's hazard
communication labels and MSDS for products containing MMVF are current and in
compliance with all state and federal regulatory requirements. The language
on these labels not only advises of the possible cancer and irritation
hazards, but includes proper handling and protective measures to be followed.
The Company sold most of its RCF operations in 1990. RCF products have been
labeled as a possible cause of cancer since 1985. Subsequently, RCF product
labels were revised to also warn of the potential hazards associated with
exposure to crystalline silica which can be formed after use of RCF products
at high temperatures. The Engineered Products business segment continues to
use limited amounts of RCF produced by third parties in the processing of
certain automotive parts.
The Company has instituted a comprehensive product stewardship communication
program to supply customers and employees with up-to-date information
regarding relevant medical and scientific developments. Additionally,
since 1988, the Company funded, in conjunction with other companies in the
industry, several epidemiological and chronic animal inhalation studies to
assess the cancer-causing potential of MMVF.
Results from these studies are periodically reported to the United States
Environmental Protection Agency ("EPA") under the Toxic Substances Control Act
("TSCA") and copies of such submissions regarding MMVF may be obtained from
the EPA by writing to Freedom of Information Act Officer, Environmental
Protection Agency, Room A101, 401 M Street, S.W., Washington, DC 20460.
Copies of the Company's brochure, "Health and Safety Aspects of Fibrous
Glass," may be obtained by writing to Manville Corporation, Product
Information Center, P.O. Box 5108, Denver, CO 80217-5108.
The Company is continuing to assess the potential health aspects of MMVF.
Based upon its analysis to date, the Company does not believe that the IARC
classification or the action taken by federal and state regulatory agencies
will have a material adverse effect on the Company.
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CORPORATE ASSETS
CORPORATE ASSETS
The Company's equity interest in platinum and palladium mining operations is
more fully described under ITEM 2, PROPERTIES. Platinum Group Metals Mining
Claims were previously included in the Mining and Minerals Group business
segment but are now classified as a corporate asset. In April 1990, the
Company announced the possible sale of this property but determined in 1991 to
no longer actively solicit bids due to unfavorable market conditions for
precious metals.
In March 1993, JACP, Inc., now known as IACP, Inc., a wholly-owned subsidiary
of the Company, and Jet Holding Corp. ("Jet"), a subsidiary of Jet Composites
Corp., formed a Delaware general partnership (the "Partnership") to continue
the Company's business of producing automotive acoustical parts. During the
fourth quarter of 1993, the Partnership was reorganized. In October, Pres
Glas Holding Corporation, a Michigan corporation ("Pres Glas"), joined the
Partnership and in November, Jet's interest in the Partnership was redeemed by
the Partnership. As a result, IACP, Inc. now has an 86% interest in the
Partnership and acts as its managing general partner and Pres Glas owns a 14%
interest in the Partnership.
DISCONTINUED OPERATIONS
Prior to the divestiture in July 1991 of the Company's U.S. and foreign
filtration and industrial minerals businesses, known as Celite Corporation,
the Company produced the following products under its Mining and Minerals
Group business segment.
Diatomite Filter Aids and Perlite Ore and
Filler Materials Filter Aids
Schuller still utilizes perlite in its business.
OCCUPATIONAL HEALTH AND SAFETY ASPECTS OF MINING AND MINERALS GROUP PRODUCTS
Crystalline silica is one of the earth's most abundant minerals, appearing in
such forms as quartz, sandstone and sand. Sand and gravel compose perhaps the
largest commercial use of crystalline silica. Some of the Company's current
products contain small amounts of amorphous or crystalline silica.
Historically, however, the filter aids and filler materials manufactured by
Celite Corporation represented the Company's principal silica-containing
products.
In 1988, IARC published its evaluation of the carcinogenic risk of silica and
silicates. Crystalline silica was classified as a substance "probably
carcinogenic to humans" based on IARC's assessment that the evidence was
"sufficient" with respect to laboratory animal studies and "limited" as to
humans. The evidence for amorphous silica in both animal and human studies
was determined to be "inadequate." As a result, IARC determined amorphous
silica to be "not classifiable in humans."
In 1992, the authors of a University of Washington mortality study of 1,700
current and former diatomaceous earth ("DE") workers reported statistically
significant increases of lung cancer and non-malignant respiratory disease
among the population studied -- particularly among those workers whose
exposure occurred before the 1950's. The Company continues to be involved in
this research program.
Beginning in the 1950's, the Company's DE product labels warned of a potential
silicosis risk involved in the use of those products. In response to the 1988
IARC action, the Company modified the labels on its DE and other silica-
containing products to conform to the IARC classification. Product MSDS were
also revised to reflect the IARC evaluation. Additionally, the Company
implemented a customer and employee communications program regarding IARC's
conclusions pertaining to crystalline silica through the distribution of MSDS
and other related materials.
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In 1988, the Company instituted a DE indemnification program under which the
Company agreed to indemnify its customers if bodily injury claims are filed
against the customer alleging disease as a result of exposure to DE produced
by the Company. Under the terms of the indemnity, the Company is only
responsible for that portion of the claim that arises out of exposure to the
Company DE. The indemnification excludes claims arising under workers'
compensation, claims for consequential and punitive damages, and claims which
result from negligence, misuse or intentional acts of the customer.
Copies of the Company's brochure, "Health and Safety Aspects of Diatomaceous
Earth," may be obtained by writing to Manville Corporation, Product
Information Center, P.O. Box 5108, Denver, CO 80217-5108.
Based upon its analysis to date, the Company does not believe that the IARC
classification or other subsequent events discussed above will have a material
adverse effect on the Company.
PATENTS
The Company presently owns, controls or holds licenses to approximately 3,000
U.S. and foreign patents and patent applications.
RESEARCH
The Company spent approximately $31.3 million in 1993, $34.0 million in 1992
and $33.7 million in 1991 on Company-sponsored research activities, excluding
engineering and exploration, related to the development and improvement of its
products and services.
ENVIRONMENTAL AND SAFETY REGULATIONS
All of the Company's domestic operations are subject to a variety of federal,
state and local environmental laws and regulations. The most significant of
the federal laws are the Clean Air Act, the Clean Water Act, TSCA, the
Resource Conservation and Recovery Act ("RCRA") and the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), and
the Emergency Planning and Community Right-to-Know Act ("EPCRA"), in each case
including the regulations promulgated thereunder, all of which are
administered by the EPA or various states. These laws and regulations
establish potential liability for costs incurred in cleaning up waste sites
and impose limitations on atmospheric emissions, discharges to navigable
waters and disposal of wastes. In addition, certain state and local
jurisdictions have adopted equivalent or more stringent regulations, or have
enacted their own parallel environmental programs, which are enforced through
various state administrative agencies. These laws and regulations affect the
Company because they impose limitations on atmospheric emissions, discharges
to navigable waters and disposition of wastes; control the use, storage and
disposal of hazardous substances; require public disclosure regarding the
presence on manufacturing sites of certain substances and of the nature of
certain such emissions; and establish potential liability for costs incurred
in cleaning up waste sites.
The Company's plants and certain products which it ships into commerce are
subject to OSHA's Hazard Communication Standard. Several states have also
enacted and adopted "right to know" laws and regulations which require notice
to workers, as well as to the general public, of the hazards associated with
chemicals in the workplace.
In 1990, amendments to the Clean Air Act required the EPA to issue regulations
limiting the emission of certain hazardous air pollutants. Until these
regulations are promulgated, the Company cannot determine how and when the
Clean Air Act will affect its operations. The Company does not believe the
new Clean Air Act glass fiber manufacturing regulations will be issued before
1997. The Company believes that the anticipated regulations will require the
Company to reduce air emissions from its manufacturing processes. The Company
currently believes that compliance with the regulations under the Clean Air
Act will not have a material adverse effect on the Company's operations,
financial condition or liquidity.
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In addition, the EPA 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. The Company estimates that capital spending
that may be required to comply with the Proposed Regulations could reach
between $20 million and $40 million to be spent over a three year period
beginning in 1996.
The Company has on-going programs to ensure its compliance with existing
environmental laws and regulations and to anticipate and design programs
necessary to manage the impacts of future environmental regulations. The
Company believes that it is in substantial compliance with all applicable
environmental and occupational health laws and regulations. The Company also
believes it has all permits and other governmental authorizations to carry on
all activities related to the business.
Compliance with the specific laws and regulations referenced above and others
have resulted in certain expenditures by the Company, including those
necessary to improve or replace environmental quality control equipment, to
secure federal and state permits for expansion of existing facilities and
construction of new facilities, and to study and remediate certain waste
disposal sites. The exact nature of environmental control and safety
compliance issues which the Company may encounter in the future cannot be
predicted, primarily because of the increasing number, complexity and changing
character of the standards being promulgated by federal, state and local
authorities. For a discussion of legal proceedings related to environmental
matters and activities see ITEM 3, LEGAL PROCEEDINGS.
EMPLOYEES
During 1993, the Company employed approximately 16,000 persons worldwide, of
which approximately 9,200 were covered by collective bargaining agreements.
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ITEM 2. PROPERTIES
HEADQUARTERS AND MOUNTAIN TECHNICAL CENTER
Manville and Schuller are headquartered in approximately 252,000 square feet
of leased space at Manville Plaza, a downtown Denver, Colorado office
building. Mountain Technical Center, Schuller's primary research and
development facility, consists of 308,000 square feet of floor space located
in Littleton, Colorado. Riverwood is headquartered and leases approximately
75,000 square feet of office space in Atlanta, Georgia.
MANUFACTURING FACILITIES
A listing of the major plants and properties owned, leased and operated by the
Company's principal operating subsidiaries is set forth below. Additional
information on the Company's mining operations is provided in the subsection
following the description of manufacturing facilities. Substantially all of
the buildings are adequate and suitable for the business of the Company, have
been well maintained and are in sound operating condition and regular use.
The Company's pulp and paper mill and related facilities located near West
Monroe, Louisiana are subject to aggregate mortgage loans of approximately
$195 million. In addition, the Company's Macon Mill is subject to mortgage
loans aggregating approximately $179 million.
The Company leases certain facilities, warehouses and office space throughout
the U.S. and in foreign countries. Except for the Lakewood, Colorado;
Jacksonville, Florida; Marietta, Georgia; Elkhart, Indiana; Clinton,
Mississippi (underlying real estate only); Saddlebrook, New Jersey; and Ennis,
Texas facilities, which are controlled under leases, all of the following
facilities are owned in fee. A portion of the Company's facility at
Laurinburg, North Carolina was leased to Railroad Friction Products
Corporation ("RFPC") when the Company divested its interest in RFPC.
<TABLE>
<CAPTION>
APPROX.
NO. OF
SQ. FEET
OF FLOOR PRODUCTS MANUFACTURED
LOCATION AND NATURE OF PROPERTY SPACE BUSINESS SEGMENT OR USE OF FACILITY
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(I) UNITED STATES AND CANADA
INNISFAIL, ALBERTA
1 one-story manufacturing and warehouse 275,500 Building Products Commercial, mobile home,
building; 1 two-story office building; metal building, and
1 one-story warehouse building; 8 silos residential insulation.
HUTTIG, AR
8 one-story manufacturing buildings with 520,000 U.S. Timberlands/ Lumber.
offices; 1 one-story office building Wood Products
TUCSON, AZ
1 one-story manufacturing and office 50,000 Engineered and Support facility for building
building Building insulation and mats and
Products reinforcements.
BAKERSFIELD, CA
1 one-story manufacturing and office 230,000 Coated Board System Beverage and folding
building; 1 one-story office building cartons.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
APPROX.
NO. OF
SQ. FEET
OF FLOOR PRODUCTS MANUFACTURED
LOCATION AND NATURE OF PROPERTY SPACE BUSINESS SEGMENT OR USE OF FACILITY
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORONA, CA
1 multi-story manufacturing, office and 396,000 Engineered Products Aerospace insulation;
warehouse building; 1 two-story service insulation for original
building equipment manufacturers; pipe
insulation; duct wrap and liner
insulation for air duct systems;
replaceable filter tubes.
PITTSBURG, CA
2 one-story manufacturing buildings; 303,100 Building Products Commercial and industrial
1 two-story office building with attached roofing products and
one-story warehouse; 3 one-story systems; residential roofing
warehouses products.
WILLOWS, CA
1 one-story manufacturing building and 593,800 Building Products Commercial, mobile home,
warehouse; 1 one-story office building; metal building, and
storage silos residential insulation.
LAKEWOOD, CO
1 one-story manufacturing building with 25,000 Building Products Pipe and structural
offices coverings.
JACKSONVILLE, FL
1 one-story manufacturing building 50,000 Containerboard Laminated slip sheets.
MACON, GA
1 multi-story manufacturing building; 700,000 Coated Board System/ Kraft linerboard; and kraft
4 one-story office buildings; other Containerboard specialty boards.
miscellaneous buildings
MARIETTA, GA
2 one-story buildings; 1 one-story 133,877 Coated Board System Product development
manufacturing building center; packaging
machinery.
SAVANNAH, GA
2 one-story manufacturing buildings; 309,801 Building Products Commercial and industrial
1 one-story boiler house; 1 one-story roofing products and
office building; 3 one-story warehouses; systems; residential roofing
1 one-story maintenance facility products (sold 1/94).
1 one-story operations building;
1 concrete slab utilized as storage facility
WINDER, GA
1 one-story manufacturing, office, storage 610,000 Building Products Commercial, mobile home
silos and warehouse building and metal building, and
residential insulation; liner
insulation for air duct
systems.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
APPROX.
NO. OF
SQ. FEET
OF FLOOR PRODUCTS MANUFACTURED
LOCATION AND NATURE OF PROPERTY SPACE BUSINESS SEGMENT OR USE OF FACILITY
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KANKAKEE, IL
1 one-story manufacturing and office 172,856 Coated Board System Beverage and folding
building cartons.
ROCKDALE, IL
1 one-story manufacturing, office and 389,600 Building Products Commercial and industrial
warehouse building roofing products and
systems.
WAUKEGAN, IL
2 one-story manufacturing buildings; 1,900,000 Building Products Calcium silicate insulations
1 one-story office building; 9 one-story and accessories;
warehouses; 1 steam generating plant commercial and industrial
roofing products and
systems; residential roofing
products.
BLUFFTON, IN
1 one-story manufacturing and office 392,850 Engineered Products Automotive headliners,
building hoodliners, and molded
parts.
ELKHART, IN
1 one-story manufacturing building 132,000 Engineered Products High temperature insulation
systems for aerospace,
industrial and automotive
markets.
GREENFIELD, IN
1 one-story office and manufacturing 60,900 Engineered Products Thermal and acoustical
building fiberglass insulation
components for off-the-
road machinery;
automotive hoodliners;
miscellaneous fiberglass
insulated products.
RICHMOND, IN
1 multi-story manufacturing building; 505,440 Building Products Climate Pro(tm) blowing wool
miscellaneous office buildings and production facility;
warehouses distribution warehouse;
fiberglass process
development center.
MCPHERSON, KS
1 multi-story manufacturing and 650,000 Building Products Commercial, mobile home,
warehouse building; 1 one-story office metal building, and
building; storage silos residential insulation;
fabrication department for
laminated roll and board
insulation; insulation for
original equipment
manufacturers.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
APPROX.
NO. OF
SQ. FEET
OF FLOOR PRODUCTS MANUFACTURED
LOCATION AND NATURE OF PROPERTY SPACE BUSINESS SEGMENT OR USE OF FACILITY
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
JOYCE, LA
10 one-story manufacturing buildings; 583,000 U.S. Timberlands/ Lumber; plywood.
2 one-story office buildings; other Wood Products
miscellaneous buildings
WEST MONROE, LA
1 multi-story manufacturing building; 2,156,000 Coated Board System/ Beverage cartons; clay
4 one-story manufacturing buildings; Containerboard coated unbleached kraft
1 two-story office building; 2 one-story carrierboard, cartonboard
office buildings; 1 one-story research and pre-print linerboard;
facility; other miscellaneous buildings corrugating medium;
folding cartons; kraft
paper; uncoated
paperboard.
LEWISTON, ME
1 one-story manufacturing, office and 36,200 Building Products Commercial and industrial
warehouse building roofing products and
systems.
CROSBY, MN
1 one-story office building; 1 two-story 188,200 Coated Board System Packaging machinery.
manufacturing building; 2 one-story
manufacturing buildings
CLINTON, MS
1 one-story manufacturing and office 203,000 Coated Board System Beverage and folding
building; 1 warehouse cartons.
NATCHEZ, MS
2 one-story manufacturing buildings; 534,670 Building Products Commercial and industrial
1 one-story office building; 2 one-story roofing products and
warehouses; boiler house systems.
EDISON, NJ
1 one-story manufacturing, office and 86,540 Building Products Pipe insulation fitting
warehouse building covers and jackets.
PENBRYN, NJ
1 multi-story manufacturing, office and 633,700 Building Products Commercial, mobile home,
warehouse building; silo storage buildings metal building and
residential insulation.
SADDLEBROOK, NJ
1 one-story office, warehouse and 17,978 Coated Board System Packaging machinery.
machine shop building
CINCINNATI, OH
1 one-story manufacturing and warehouse 283,000 Coated Board System Beverage and folding
building; 1 one-story office building cartons.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
APPROX.
NO. OF
SQ. FEET
OF FLOOR PRODUCTS MANUFACTURED
LOCATION AND NATURE OF PROPERTY SPACE BUSINESS SEGMENT OR USE OF FACILITY
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DEFIANCE, OH
3 one-story manufacturing buildings; 1,027,000 Engineered and Automotive uncured
2 one-story warehouses; 2 three-story Building fiberglass for molding;
warehouses; 3 two-story office buildings; Products insulation for original
2 one-story office buildings; 1 one-story equipment manufacturing;
maintenance building; several pipe insulation; duct board,
miscellaneous buildings duct wrap and liner
insulation for air duct
systems; glass marbles;
replaceable filter cartridges
and tubes.
WATERVILLE, OH
1 two-story manufacturing building with 760,000 Engineered Products Aerospace insulation;
attached one-story warehouse; 1 batch chopped strand and roving
storage building and silos; 1 water products; roofing fiber and
treatment building; 1 one-story scrap mat; sliver and yarn;
glass reclamation building; 1 furnace specialty fiber; specialty
abatement facility; 1 gas meter building; mat; fine fibers for
25 one-story laboratory, manufacturing, filtration.
office and warehouse buildings; other
miscellaneous buildings
OKLAHOMA CITY, OK
1 multi-story manufacturing building with 134,000 Building Products Commercial and industrial
attached warehouse roofing products and
systems.
ETOWAH, TN
1 multi-story manufacturing building with 361,980 Engineered Products Roofing fiber and mat.
attached one-story office building;
1 one-story scrap glass reclamation
building; several miscellaneous buildings
MEMPHIS, TN
1 one-story warehouse building 162,410 Coated Board System Warehouse facility for
paperboard, beverage and
folding cartons.
CLEBURNE, TX
1 multi-story manufacturing, office and 434,158 Engineered and Duct board, duct wrap and
warehouse building; 1 mixing building Building liner insulation for air duct
with silo storage Products systems; insulation for
original equipment
manufacturing; glass
marbles.
ENNIS, TX
1 one-story manufacturing building 85,000 Engineered Products Roofing mat.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
APPROX.
NO. OF
SQ. FEET
OF FLOOR PRODUCTS MANUFACTURED
LOCATION AND NATURE OF PROPERTY SPACE BUSINESS SEGMENT OR USE OF FACILITY
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FT. WORTH, TX
1 one-story manufacturing building; 106,580 Building Products Distribution Center and
4 warehouses; 1 office building; 1 boiler Sales Office
house; 2 storage buildings; miscellaneous (manufacturing facility
buildings closed 2/94).
EDINBURG, VA
1 one-story manufacturing, office and 328,000 Building Products Commercial and industrial
warehouse building roofing products and
systems.
RICHMOND, VA
1 one-story manufacturing building with 88,000 Building Products Laminated and coated
attached two-story office building facings for use on
fiberglass products.
PARKERSBURG, WV
1 two-story office and storage building; 430,000 Engineered Products Aerospace insulation;
1 two-story warehouse; 4 one-story automotive headliners,
manufacturing buildings; 1 one-story molded parts and uncured
warehouse; 1 batch mixing building with fiberglass for molding;
storage silos filtration media.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
APPROX.
NO. OF
SQ. FEET
OF FLOOR PRODUCTS MANUFACTURED
LOCATION AND NATURE OF PROPERTY SPACE BUSINESS SEGMENT OR USE OF FACILITY
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(II) INTERNATIONAL
DANDENONG, VICTORIA, AUSTRALIA
1 one-story manufacturing and warehouse 59,000 Coated Board System Beverage and folding
building with attached two-story office cartons.
building
MARSDEN, QUEENSLAND, AUSTRALIA
1 one-story manufacturing, warehouse 55,952 Coated Board System Beverage and folding
and office building cartons.
RESERVOIR, VICTORIA, AUSTRALIA
1 one-story manufacturing, warehouse 105,000 Coated Board System Beverage and folding
and office building; 1 one-story cartons; litho laminated
warehouse and engineer shop; products; material storage.
1 one-story warehouse
SMITHFIELD, NEW SOUTH
WALES, AUSTRALIA
1 one-story manufacturing, warehouse 230,460 Coated Board System Beverage and folding
and office building; 1 one-story ink store; cartons; litho laminated
1 one-story warehouse building; products; flexibles and
1 one-story work shop with attached gravure printing;
two-story office building equipment storage;
packaging systems.
WOODVILLE NORTH, SOUTH
AUSTRALIA, AUSTRALIA
1 one-story manufacturing, warehouse 70,586 Coated Board System Beverage, folding and litho
and office building; 1 one-story laminated cartons.
warehouse building
OTACILIO COSTA, STATE OF
SANTA CATARINA, BRAZIL
5 multi-story manufacturing buildings; 410,000 Containerboard Clay coated and
1 one-story office building; miscellaneous unbleached kraft
office and support facilities paperboard; kraft
linerboard.
ANGATUBA, STATE OF
SAO PAULO, BRAZIL
1 manufacturing building; 1 office building 110,000 Containerboard Corrugating medium; test
linerboard.
JUNDIAI, STATE OF
SAO PAULO, BRAZIL
2 one-story manufacturing buildings with 178,000 Containerboard Corrugated containers.
offices
OSASCO, STATE OF
SAO PAULO, BRAZIL
1 warehouse and assembly building 5,000 Coated Board System Multiple packaging
systems.
</TABLE>
23
<PAGE>
<TABLE>
<COLUMN>
APPROX.
NO. OF
SQ. FEET
OF FLOOR PRODUCTS MANUFACTURED
LOCATION AND NATURE OF PROPERTY SPACE BUSINESS SEGMENT OR USE OF FACILITY
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ITAJAI, STATE OF SANTA
CATARINA, BRAZIL
1 one-story manufacturing and office 86,000 Containerboard Corrugated containers.
building
SAO MIGUEL PAULISTA, STATE OF
SAO PAULO, BRAZIL
1 manufacturing building with offices 197,000 Containerboard Corrugated containers.
SAO PAULO, STATE OF
SAO PAULO, BRAZIL
1 six-story office building 44,058 Containerboard Brazilian corporate office.
KARLSTEIN (MAIN),
BAVARIA, GERMANY
1 one-story manufacturing building; 62,100 Engineered Products Roofing and specialty mat.
1 one-story warehouse
KOLN, GERMANY
1 two-story building; 1 one-story research 14,854 Coated Board System Research and development
and manufacturing building center; packaging
machinery; engineering
design; fabrication.
STEINACH, THURINGEN, GERMANY
3 multi-story manufacturing buildings; 501,800 Engineered Products Fiberglass mats for roofing;
4 multi-story office buildings; 1 one-story binder-free insulation mats.
manufacturing building with warehouse
WERTHEIM (MAIN), BADEN-
WUERTTEMBERG, GERMANY
4 multi-story office buildings; 741,700 Engineered Products Roofing and specialty mat;
12 one-story manufacturing buildings; specialty fiber; engineering
1 multi-story warehouse; 9 one-story services.
warehouses; several miscellaneous
buildings
IGUALADA, CATALONIA, SPAIN
1 one-story manufacturing building; 12,000 Coated Board System Packaging machinery;
1 two-story office building engineering design;
fabrication.
IGUALADA, CATALONIA, SPAIN
1 one-story manufacturing, office and 131,320 Coated Board System Beverage and folding
warehouse building cartons.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
APPROX.
NO. OF
SQ. FEET
OF FLOOR PRODUCTS MANUFACTURED
LOCATION AND NATURE OF PROPERTY SPACE BUSINESS SEGMENT OR USE OF FACILITY
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NORRKOPING, SWEDEN
1 one-story manufacturing building with 417,488 Coated Board System Paperboard and
attached two-story office building; coated
1 office/workshop building; 1 boiler paperboard based on
house; 2 storage buildings; miscellaneous recycled paper.
buildings
BRISTOL, AVON, UNITED KINGDOM
1 manufacturing and office building 428,000 Coated Board System Beverage and folding
cartons.
</TABLE>
25
<PAGE>
MINING
Platinum Group Metals Mining Claims. In 1984, Manville, Chevron U.S.A., Inc.
("Chevron") and Anaconda Minerals Company ("Anaconda") entered into a three-
way venture known as Stillwater Mining Company. In late 1988, Manville and
Chevron purchased the remaining one-third interest in the Stillwater Complex
from LAC Mineral Exploration (Texas), Inc. (which had purchased it from
Anaconda in 1986), and, as a result, Manville and Chevron each held one-half
interest in the Stillwater Mining Company Venture. During 1993, Manville and
Chevron reorganized the Stillwater Mining Company and Stillwater PGM Resources
partnerships. The assets of the two partnerships were transferred into a new
corporation, Stillwater Mining Company ("SMC"). The shares of SMC are held by
Manville and Chevron, each owning one-half of the shares. In addition,
Manville transferred to SMC its interest in most of the patented and
unpatented mining claims along the approximate 28 mile mineralized zone in the
Stillwater Complex in Park, Stillwater and Sweetgrass counties in Montana. In
exchange for the transfer, SMC conveyed to Manville a 5% net profits interest
in most of the claims.
SMC currently operates at a mining and milling rate of 1,000 tons per day.
SMC has obtained final approval from federal and state authorities to expand
its capacity to 2,000 tons per day. The Company is not able to state when or
under what conditions this expansion will commence.
Platinum group metals, which consist of iridium, osmium, palladium, platinum,
rhodium and ruthenium, are among the scarcest of metallic elements and are
used in the electrical and electronics industries, petroleum refining, the
production of catalytic exhaust systems, and for many other manufacturing
operations and uses.
The independent minerals industry consulting firm of Behre Dolbear & Company,
Inc. of New York, New York has calculated the ore reserves, as of July 1,
1993, of the Stillwater Complex at 22,573,000 tons of proven and probable
mining reserves. Such reserves have an average grade of 0.78 ounces of
platinum and palladium per ton, containing approximately 17,658,000 troy
ounces of platinum and palladium (at about 3.5 parts of palladium per 1 part
of platinum). These tonnage, grade and metal content estimates do not reflect
losses due to processing.
In April 1990, the Company announced the possibility of the sale of its equity
interest in its Stillwater mining operations. Due to unfavorable conditions
in the precious metals markets, the Company suspended active solicitation of
bids for this property in 1991.
TIMBER RESOURCES
Riverwood owns approximately 534,000 acres of timberland in Arkansas,
Louisiana and Texas which it manages as a raw material base for its domestic
paper and wood products operations. Riverwood operates its southern pine
forests on a sustained yield basis. In 1972, Riverwood initiated a forestry
program to increase the yield from its domestic pine forests. For 1993, this
program involved approximately 18,000 acres. As a result of this program, it
is expected that the cubic foot volume growth of Riverwood's pine timberlands
will more than double during a 30-year cycle. Riverwood also holds long-term
leases to approximately 6,000 acres of timberland in Louisiana and Texas.
Riverwood's Brazilian operations own or control under long-term leases
approximately 144,000 acres of land in the State of Santa Catarina, Brazil,
and 30,000 acres of land in the State of Sao Paulo, Brazil. This timberland,
which is located approximately 2,200 miles south of the Brazilian rain forest,
is capable of supplying substantially all of the pulpwood requirements of
Riverwood's Brazilian paper mills based on current consumption levels.
26
<PAGE>
ITEM 3. 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, CO 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, was confirmed by 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. During the fourth quarter of 1988, the
Company made various distributions to creditors and equity holders as required
under the Plan.
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 PI Trust
or the PD Trust, which are funded by the Company pursuant to the Plan. Only
claims filed by May 31, 1985 may be brought against the PD Trust. The Plan,
the Injunction 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. 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 the Injunction will be unsuccessful.
On November 19, 1990, the Company and the PI Trust entered into the
Refinancing Arrangement which, if consummated, would have enhanced the PI
Trust's liquidity. Also on November 19, 1990, five asbestos plaintiffs filed
the Class Action against the Trustees of the PI Trust in 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. On November 26,
1990, the Company filed a separate motion asking the Courts and the Bankruptcy
Court to issue orders reaffirming the Injunction. Certain provisions of the
Refinancing Arrangement were subject to numerous approvals and conditions,
including, among other things, a final order approving the Restructuring
Settlement.
In May 1991, the Courts and the Bankruptcy Court entered the Order, which,
among other things, reaffirmed the Injunction and approved 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 Second Circuit heard the various appeals of
the Order.
27
<PAGE>
On December 4, 1992, the Second Circuit vacated and remanded the Order. The
Second Circuit found, among other things, 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. As a result, various aspects of the
Refinancing Arrangement have terminated. Attempts by the parties to the Class
Action to reach a new settlement are continuing. One day of trial of the
Class Action was held on March 15, 1994, and in the absence of a settlement,
the trial will resume following a conference before the Courts currently
scheduled for April 18, 1994.
Those aspects of the Refinancing Arrangement which terminated when the Appeals
Court Decision became final and non-appealable include:
1) Payment of the remaining special dividends: $.42 per share payable
not earlier than 1996; $.42 per share payable one year later; and,
depending on the Company's performance, additional annual dividends
with a cumulative cap of $300 million over four years commencing not
earlier than 1996;
2) Restructuring of the two bonds of the Company issued to the PI Trust
under the Plan; and
3) Modification of certain restrictive covenants contained in contracts
between the Company and the PI Trust.
Certain of the aspects of the Refinancing Arrangement referred to in (2) and
(3) of the preceding paragraph were addressed in the Agreement dated August
25, 1993, pursuant to which Manville made a partial prepayment of certain of
its obligations to the PI Trust under the bonds issued to the PI Trust. The
partial prepayment consisted of a cash payment of $150 million and an
assignment to the PI Trust of $100 million principal amount of the Notes held
by Manville, plus accrued interest. The Agreement also provided for certain
registration rights with respect to the Notes pursuant to which Riverwood
registered the Notes under the Act. On October 14, 1993, the PI Trust
completed a public secondary sale of the Notes. Neither the Company nor
Riverwood received any of the proceeds from the offering made by the PI Trust.
Manville is committed to the general principles underlying the terminated
Refinancing Arrangement and to fulfilling its obligations to the PI Trust and
to all stockholders under the Plan.
ENVIRONMENTAL PROCEEDINGS
The Company's landfill at its Waukegan, Illinois facility continues to be
included on the National Priorities List ("NPL") pursuant to CERCLA. Remedial
action began during the fourth quarter of 1988 and was completed during the
third quarter of 1991. During the first quarter of 1993, the EPA issued a
supplemental CERCLA decision document, i.e., an Explanation of Significant
Differences ("ESD"), to reflect that, inter alia, remedial action was taken
onsite which was in addition to that described in the Record of Decision and
the Consent Decree. The EPA is now seeking both a modification to the Consent
Decree to incorporate the additional remedial action described in the ESD as
well as appropriate deed restrictions for the site. The Company has been
informed that the Consent Decree modification and the deed restrictions should
be approved in the second quarter of 1994. After these approvals, the Company
will apply for the Certificate of Completion (the "Certificate") and the
Company is informed that the EPA will likely issue the Certificate in 1994.
After the Certificate is issued, the Company will seek to have the site
deleted from the NPL.
Regarding a landfill located in Manville, New Jersey, the Company has
submitted a revised closure plan to the New Jersey Department of Environmental
Protection and Energy ("NJDEPE"). Closure of the landfill will follow
NJDEPE's approval of the plan.
In connection with the Macon paper mill acquisition, Riverwood International
Georgia, Inc. ("RVW Georgia"), a wholly-owned subsidiary of Riverwood, has
made appropriate applications and requests for all necessary permits for the
operation of the Macon 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 was entered into by RVW Georgia and
28
<PAGE>
GDNR (the "RVW Consent Order") 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 RVW
Georgia 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 RVW Georgia to GDNR. RVW Georgia anticipates that the recovery
boiler project will be completed on or before September 29, 1994.
The Company has also been informed of certain environmental problems
associated with former disposal sites (most of which were never owned or
operated by the Company), in California, Colorado, Florida, Georgia, Illinois,
Indiana, Louisiana, Maine, Massachusetts, Michigan, Mississippi, New
Hampshire, New Jersey, New York, North Carolina, Ohio, Oklahoma, Tennessee,
Utah and Wisconsin. These problems include, in certain cases, the purported
application of CERCLA, RCRA, and their state law equivalents.
OTHER LITIGATION
Manville Canada and Schuller had been named in certain personal injury and
property damage lawsuits filed in the Supreme Court of British Columbia which
alleged unspecified damages from the presence of asbestos. Pursuant to an
agreement dated August 31, 1993, plaintiffs to the asbestos litigation,
Manville Canada, Schuller and Manville agreed to settle the lawsuits to avoid
further litigation costs. The terms of the agreement are confidential.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1993, there were no matters submitted to a vote
of security holders.
PART II
ITEM 5. MARKET PRICE FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Manville had approximately 16,513 common stockholders of record at March 15,
1994. Manville's stock is listed on the New York Stock Exchange, Inc. (symbol
MVL), and its stock is traded on the Boston, Midwest, Pacific and Philadelphia
exchanges. The Company has scheduled the 1994 Annual Meeting of Stockholders
for June 3, 1994 in Denver, Colorado.
A two-year history of high and low sale prices for the Company's common stock
based on the sales transactions reported by the New York Stock Exchange, Inc.
is provided below. On June 4, 1993, a dividend of $1.04 was declared on the
Company's common stock, payable June 24, 1993, to stockholders of record on
June 14, 1993.
COMPARATIVE STOCK DATA
Market Prices Per Common Share
<TABLE>
<CAPTION>
For the Quarters Ended 1992 1993
- ---------------------- ---- ----
Common Stock Common Stock
---------------- ----------------
High Low High Low
----- ----- ----- -----
<S> <C> <C> <C> <C>
March 31 9 3/8 8 1/4 9 3/4 8 3/4
June 30 10 7/8 8 1/2 9 1/2 6 7/8
September 30 8 1/2 7 6/8 7 5/8 6 7/8
December 31 10 1/8 8 1/8 8 3/4 8 1/8
</TABLE>
29
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Information with respect to this item is incorporated by reference to Selected
Five-year Financial Data in the Company's 1993 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information with respect to this item is incorporated by reference to
Management's Discussion and Analysis of Financial Condition and Results of
Operations in the Company's 1993 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information with respect to this item is incorporated by reference to the
Financial Statements and Supplementary Data in the Company's 1993 Annual
Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in, nor disagreements with, accountants on accounting or
financial disclosures.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to this item is incorporated by reference to the
Company's 1994 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this item is incorporated by reference to the
Company's 1994 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to this item is incorporated by reference to the
Company's 1994 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to this item is incorporated by reference to the
Company's 1994 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS FILED IN
THIS REPORT:
1. Index to Financial Statements and Supplementary Data. Information
with respect to this item is incorporated by reference to the
Financial Statements and Supplementary Data in the Company's 1993
Annual Report.
2. Index to Financial Statement Schedules. See page 39.
3. Index to Exhibits required by Form 10-K. See pages 31 through 37.
30
<PAGE>
4. Executive Compensation Plans and Arrangements.
Exhibits 4(a)-(i) are filed as exhibits to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993 and are
incorporated herein by reference.
(a) Supplemental Pension Plan.
(b) Key Man Supplemental Retirement Agreements.
(c) Annual Executive Incentive Compensation Plan.
(d) 1991 Long-Term Cash Incentive Compensation Plan.
(e) Amendment to Long-Term Cash Incentive Compensation Plan.
(f) Executive Long-Term Disability Plan.
(g) Form of Employment Agreement with the Five Most Highly
Compensated Executive Officers of Registrant.
(h) Manville Corporation Stock Incentive Plan.
(i) Amendment to Manville Corporation Stock Incentive Plan.
(B) REPORTS ON FORM 8-K
None.
(C) EXHIBIT INDEX TO MANVILLE CORPORATION ANNUAL REPORT ON FORM 10-K FOR
FISCAL YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
Exhibit Cross Reference
------- ---------------
<S> <C>
2. (a) Asset Purchase Agreement Filed as an exhibit to the Company's
among Celite Holdings 1991 Annual Report on Form 10-K,
Corporation, Celite filed March 30, 1992, and
Corporation and Manville incorporated herein by reference.
Sales Corporation dated
July 1, 1991.
(b) Stock Purchase Agreement Filed as an exhibit to the Company's
among Celite Holdings 1991 Annual Report on Form 10-K,
Corporation, Celite filed on March 30, 1992, and
Corporation and Manville incorporated herein by reference.
International B.V. dated
July 1, 1991.
(c) Joint Venture Stock Filed as an exhibit to the Company's
Purchase Agreement among 1991 Annual Report on Form 10-K,
Celite Holdings Corporation, filed on March 30, 1992, and
Celite Corporation and incorporated herein by reference.
Manville Corporation dated
July 1, 1991.
3. (a) Restated Certificate of Refiled as an exhibit to the Company
Incorporation. 1992 Annual Report on Form 10-K filed
March 30, 1993, and incorporated
herein by reference.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Exhibit Cross Reference
------- ---------------
<S> <C>
(b) Bylaws, as amended on Refiled as an exhibit to the
December 7, 1984. Company's 1990 Annual Report on Form
10-K, filed March 20, 1991, and
incorporated herein by reference.
(c) Bylaws, as amended on Filed as an exhibit to the
December 4, 1992. Company's 1992 Annual Report on Form
10-K filed March 30, 1993, and
incorporated herein by reference.
4. (a) Manville Corporation Refiled as an exhibit to the
Second Amended and Restated Company's 1992 Annual Report on Form
Plan of Reorganization 10-K filed March 30, 1993, and
confirmed by the United incorporated herein by reference.
States Bankruptcy Court for
the Southern District of New
York on December 22, 1986.
(b) Class 6 Interest Refiled as an exhibit to the
Indenture between Registrant Company's 1992 Annual Report on Form
and Bank of New York, 10-K filed March 30, 1993, and
formerly known as Irving incorporated herein by reference.
Trust Company, Trustee,
dated November 28, 1988.
(c) Indenture of Riverwood Filed as an exhibit to Riverwood
International Corporation International Corporation's Amendment
for $250,000,000 of 11 1/4% No. 3 to Form S-1, filed on June 17,
Senior Subordinated Notes 1992, and incorporated herein by
due 2002, dated June 24, reference.
1992.
(d) Indenture of Riverwood Filed as an exhibit to Riverwood
International Corporation International Corporation's Amendment
for $150,000,000 of 10 3/4% No. 3 to Form S-1, filed on June 17,
Senior Notes due 2000, dated 1992, and incorporated herein by
June 24, 1992. reference.
(e) Receivables Purchase Refiled as an exhibit to the
Agreement among Schuller Company's 1992 Annual Report on Form
Funding Corporation, as 10-K filed March 30, 1993, and
transferor, Schuller incorporated herein by reference.
International, Inc., as
servicer, the Financial
Institutions listed therein,
as Buyers, Morgan Guaranty
Trust Company of New York,
as Agent Bank and Letter of
Credit Issuing Bank and J.P.
Morgan, as Collateral Agent,
dated April 15, 1992.
(f) Indenture of Riverwood Filed as an exhibit to the Company's
International Corporation Registration Statement on Form S-3
for $125 million of 6 3/4% filed November 5, 1993, and
Convertible Subordinated incorporated herein by reference.
Notes due 2003, dated
September 15, 1993.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Exhibit Cross Reference
------- ---------------
<S> <C>
(g) Indenture of Riverwood Filed as an exhibit to the Company's
International Corporation Registration Statement on Form S-3
for $37.5 million of 10 3/4% filed September 14, 1993, and
Senior Notes II due 2000, incorporated herein by reference.
dated as of June 24, 1992,
as amended and restated on
October 14, 1993.
(h) Indenture of Riverwood Filed as an exhibit to the Company's
International Corporation Registration Statement on Form S-3
for $62.5 million of 11 1/4% filed September 14, 1993, and
Senior Subordinated Notes II incorporated herein by reference.
due 2002, dated as of June
24, 1992, as amended and
restated on October 14, 1993.
10. (a) Manville Personal Refiled as an exhibit to the
Injury Settlement Trust Company's 1992 Annual Report on Form
Agreement between Registrant 10-K filed March 30, 1993, and
and the persons listed incorporated herein by reference.
therein as Trustees of the
Manville Personal Injury
Settlement Trust dated
November 28, 1988.
(b) Supplemental Agreement Refiled as an exhibit to the
between Registrant and the Company's 1992 Annual Report on Form
Manville Personal Injury 10-K filed March 30, 1993, and
Settlement Trust dated incorporated herein by reference.
November 28, 1988.
(c) Fourth Amendment, dated Filed as an exhibit to the
August 6, 1992, to the Company's 1992 Annual Report on Form
Manville Personal Injury 10-K filed March 30, 1993, and
Settlement Trust Agreement incorporated herein by reference.
among Johns-Manville
Corporation et al, as
Trustors, Donald M. Blinken
et al, as Former Trustees
and Christian E. Markey Jr.
as Trustee for the Manville
Personal Injury Settlement
Trust.
(d) Fifth Amendment, dated Filed as an exhibit to the
December 9, 1992, to the Company's 1992 Annual Report on Form
Manville Personal Injury 10-K filed March 30, 1993, and
Settlement Trust Agreement incorporated herein by reference.
among Johns-Manville
Corporation et al, as
Trustors, Donald M. Blinken
et al, as Former Trustees
and Christian E. Markey Jr.
as Trustee for the Manville
Personal Injury Settlement
Trust.
(e) Agreements between Refiled as an exhibit to the
Registrant and the Manville Company's 1992 Annual Report on Form
Personal Injury Settlement 10-K filed March 30, 1993, and
Trust, dated November 15, incorporated herein by reference.
1990.
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Exhibit Cross Reference
------- ---------------
<S> <C>
(f) Manville Property Damage Refiled as an exhibit to the
Settlement Trust Agreement Company's 1992 Annual Report on Form
between Registrant and the 10-K filed March 30, 1993, and
persons listed therein as incorporated herein by reference.
Trustees of the Manville
Property Damage Settlement
Trust dated November 28,
1988.
(g) Supplemental Agreement Refiled as an exhibit to the
between Registrant and the Company's 1992 Annual Report on Form
Manville Property Damage 10-K filed March 30, 1993, and
Settlement Trust Agreement incorporated herein by reference.
dated November 28, 1988.
(h) Manville Employees Filed as an exhibit to Riverwood
Retirement Plan. International Corporation's Form S-1,
filed April 17, 1992, and
incorporated herein by reference.
(i) Supplemental Pension Refiled as an exhibit to the
Plan. Company's 1992 Annual Report on Form
10-K filed March 30, 1993, and
incorporated herein by reference.
(j) Key Man Supplemental Refiled as an exhibit to the
Retirement Agreements. Company's 1992 Annual Report on Form
10-K filed March 30, 1993, and
incorporated herein by reference.
(k) Annual Executive Refiled as an exhibit to the
Incentive Compensation Plan. Company's 1992 Annual Report on Form
10-K filed March 30, 1993, and
incorporated herein by reference.
(l) 1991 Long-Term Cash Refiled as an exhibit to the
Incentive Compensation Plan. Company's 1992 Annual Report on Form
10-K filed March 30, 1993, and
incorporated herein by reference.
(m) Amendment to Long-Term Refiled as an exhibit to the
Cash Incentive Compensation Company's 1992 Annual Report on Form
Plan. 10-K filed March 30, 1993, and
incorporated herein by reference.
(n) Executive Long-Term Refiled as an exhibit to the
Disability Plan. Company's 1992 Annual Report on Form
10-K filed March 30, 1993, and
incorporated herein by reference.
(o) Form of Employment Refiled as an exhibit to the
Agreements with the Five Company's 1992 Annual Report on Form
Most Highly Compensated 10-K filed March 30, 1993, and
Executive Officers of incorporated herein by reference.
Registrant.
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Exhibit Cross Reference
------- ---------------
<S> <C>
(p) Manville Corporation Refiled as an exhibit to the
Stock Incentive Plan. Company's 1992 Annual Report on Form
10-K filed March 30, 1993, and
incorporated herein by reference.
(q) Amendment to Manville Refiled as an exhibit to the
Corporation Stock Incentive Company's 1992 Annual Report on Form
Plan. 10-K filed March 30, 1993, and
incorporated herein by reference.
(r) Asset Purchase Agreement Filed separately as an exhibit to the
by and among Pratt Company's 1991 Annual Report on Form
Industries (USA), Inc., 10-K, filed March 30, 1992, and
Macon Kraft, Inc., Macon incorporated herein by reference.
Kraft Laminates, Inc., Waste Portions of such agreement have been
Recovery and Paper, Inc., omitted pursuant to Rule 406
Riverwood International promulgated under the Securities Act
Corporation and XYZ of 1933, as amended, and Rule 246-2
Acquisition Corporation, promulgated under the Exchange Act of
dated as of March 20, 1992. 1934, as amended.
(s) Amendment No. 1, dated Filed as an exhibit to Riverwood
April 29, 1992, to Asset International Corporation's Amendment
Purchase Agreement, dated as No. 1 to Form S-1, filed on May 27,
of March 20, 1992, by and 1992, and incorporated herein by
among Pratt Industries reference.
(USA), Inc., Macon Kraft,
Inc., Macon Kraft Laminates,
Inc., Waste Recovery and
Paper, Inc., Riverwood
International Corporation
and XYZ Acquisition
Corporation.
(t) Amendment No. 2, dated Filed as an exhibit to Riverwood
May 22, 1992, to Asset International Corporation's Amendment
Purchase Agreement, dated as No. 1 to Form S-1, filed on May 27,
of March 20, 1992, by and 1992, and incorporated herein by
among Pratt Industries reference.
(USA), Inc., Macon Kraft,
Inc., Macon Kraft Laminates,
Inc., Waste Recovery and
Paper, Inc., Riverwood
International Corporation
and XYZ Acquisition
Corporation.
(u) Intercompany Agreement Filed as an exhibit to Riverwood
between Riverwood International Corporation's Form S-1,
International Corporation filed April 17, 1992, and
and Manville Corporation, incorporated herein by reference.
dated June 1, 1992.
(v) Treasury Management Filed as an exhibit to Riverwood
Agreement between Riverwood International Corporation's Form S-1,
International Corporation filed April 17, 1992, and
and Manville Corporation, incorporated herein by reference.
dated June 17, 1992.
(w) Tax Sharing Agreement Filed as an exhibit to Riverwood
between Riverwood International Corporation's Form S-1,
International Corporation filed April 17, 1992, and
and Manville Corporation, incorporated herein by reference.
dated June 17, 1992.
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
Exhibit Cross Reference
------- ---------------
<S> <C>
(x) Corporate Agreement, Filed as an exhibit to Riverwood
between Riverwood International Corporation's Form S-1,
International Corporation filed May 27, 1992, and incorporated
and Manville Corporation, herein by reference.
dated June 24, 1992.
(y) Agreement between Filed as an exhibit to Riverwood
Manville Personal Injury International Corporation's Form S-1,
Settlement Trust and filed May 27, 1992, and incorporated
Manville Corporation, dated herein by reference.
June 24, 1992.
(z) Purchase Agreement dated Filed as an exhibit hereto.
September 10, 1993 by and
among Riverwood
International Corporation
and Manville Corporation.
(aa) Bond Prepayment Filed as an exhibit to the Company's
Agreement, dated as of Current Report on Form 8-K, dated
August 25, 1993, between August 25, 1993, and incorporated
Manville Corporation and herein by reference.
Manville Personal Injury
Settlement Trust.
(ab) Manville Trust Consent Filed as an exhibit to Riverwood
and Waiver Agreement, dated International Corporation's Amendment
as of September 1, 1993, No. 1 to the Registration Statement
between Manville Corporation on Form S-3, filed October 1, 1993,
and the Manville Personal and incorporated herein by reference.
Injury Settlement Trust.
(ac) Company Waiver Filed as an exhibit to Riverwood
Agreement dated as of International Corporation's Amendment
September 1, 1993, between No. 1 to the Registration Statement
Manville Corporation and on Form S-3, filed October 1, 1993,
Riverwood International and incorporated herein by reference.
Corporation.
(ad) Sixth Amendment, dated Filed as an exhibit to Riverwood
as of November 5, 1993 to International Corporation's Amendment
the Manville Personal Injury No. 1 to the Registration Statement
Settlement Trust Agreement, on Form S-3, filed November 29, 1993,
dated November 28, 1988, and incorporated herein by reference.
between Manville Corporation
and the Manville Personal
Injury Settlement Trust.
13. 1993 Annual Report. Pages 9 through 70 of the Company's
1993 Annual Report filed separately as
an exhibit hereto.
22. Subsidiaries of Registrant. Pages 45-46.
24. (a) Consent of Coopers & Filed separately as an exhibit hereto.
Lybrand.
(b) Consent of Behre Dolbear Filed separately as an exhibit hereto.
& Company, Inc.
25. Power of Attorney. Page 47.
</TABLE>
36
<PAGE>
Pursuant to the Securities Exchange Act of 1934, Item 601(b)(4)(iii) of
Regulation S-K, the Company hereby agrees to furnish a copy of each document
set forth below upon request of the Securities and Exchange Commission.
Amended and Restated Note Purchase Agreement of Riverwood
International Georgia, Inc. for $103,444,379 of 11.15% Senior Notes due
2000, dated June 30, 1992.
Indenture of Riverwood International Corporation for $150 million of
10 3/4% Senior Notes Due 2000, dated June 24, 1992.
Indenture of Riverwood International Corporation for $250 million of
11 1/4% Senior Subordinated Notes Due 2002, dated June 24, 1992.
Indenture of Riverwood International Corporation for $125 million of
6 3/4% Convertible Subordinated Notes Due 2003, dated September 15, 1993.
Indenture of Riverwood International Corporation for $37.5 million
of 10 3/4% Senior Notes II Due 2000, dated as of June 24, 1992, as
amended and restated on October 14, 1993.
Indenture of Riverwood International Corporation for $62.5 million
of 11 1/4% Senior Subordinated Notes II Due 2002, dated as of June 24,
1992, as amended and restated on October 14, 1993.
Agreement amending and restating Note Agreements among Riverwood
International USA, Inc., as Borrower; Riverwood International
Corporation, as Guarantor; and The Prudential Insurance Company of
America, as Servicer of The Chase Manhattan Bank, National Association,
as Trustee for Private Placement Trust Series 1984F, Metropolitan Life
Insurance Company, Aetna Life Insurance Company, The Mutual Life
Insurance Company of New York, MONY Life Insurance Company of America, as
Lenders, dated as of May 25, 1993.
$50 million Credit Agreement, among Riverwood International
Corporation; Riverwood International USA, Inc.; various listed banks; and
Morgan Guaranty Trust Company of New York, dated December 10, 1992.
$100 million Amended and Restated Credit Agreement of Riverwood
International Georgia, Inc. with Midland Bank PLC, New York Branch, as
Agent, dated June 30, 1992.
60 million (Australian Dollars) Secured Facility Agreement between
Multiboard Packaging Pty. Ltd. and Australia and New Zealand Banking
Group Limited, dated September 21, 1992.
37
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Directors of Manville Corporation:
Our report on the consolidated financial statements of Manville Corporation has
been incorporated by reference in this Form 10-K from page 67 of the 1993 Annual
Report to Stockholders of Manville Corporation. In connection with our audits of
such financial statements, we have also audited the related financial statement
schedules listed in the Index to Financial Statement Schedules on page 39 of
this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
/s/ Coopers & Lybrand
---------------------
Coopers & Lybrand
Denver, Colorado
February 4, 1994
38
<PAGE>
MANVILLE CORPORATION
INDEX TO FINANCIAL STATEMENT SCHEDULES
TO FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1993
Schedule Page
- -------- ----
V - Property, plant and equipment, for each of the three
years in the period ended December 31, 1993.............. 40
VI - Accumulated depreciation, depletion and amortization
of property, plant and equipment, for each of the
three years in the period ended December 31, 1993........ 41
VIII - Valuation and qualifying accounts and reserves, for
each of the three years in the period ended
December 31, 1993........................................ 42
IX - Short-term borrowings, for each of the three years in the
period ended December 31, 1993........................... 43
X - Supplementary income statement information, for
each of the three years in the period ended
December 31, 1993........................................ 44
39
<PAGE>
MANVILLE CORPORATION
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
OTHER
BALANCE AT ADDITIONS, CHANGES BALANCE AT
BEGINNING AT COST RETIREMENTS ADD (DEDUCT) END OF
CLASSIFICATION OF YEAR (a),(d) (b),(d) (c),(d) YEAR
- ------------------ ---------- ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
1993
----
Land, including
mineral proper-
ties, and land
improvements $ 152,435 $ 7,512 $ 43,491 $ (432) $ 116,024
Buildings 350,519 30,972 3,634 (3,776) 374,081
Machinery and
equipment 2,088,309 307,694 31,545 (27,057) 2,337,401
---------- -------- -------- -------- ----------
2,591,263 346,178 78,670 (31,265) 2,827,506
Timber and
timberlands 338,426 5,316 28,086 (12,355) 303,301
---------- -------- -------- -------- ----------
$2,929,689 $351,494 $106,756 $(43,620) $3,130,807
========== ======== ======== ======== ==========
1992
----
Land, including
mineral proper-
ties, and land
improvements $ 178,399 $ 8,116 $ 30,461 $ (3,619) $ 152,435
Buildings 335,071 22,475 1,263 (5,764) 350,519
Machinery and
equipment 1,775,889 374,636 28,839 (33,377) 2,088,309
---------- -------- -------- -------- ----------
2,289,359 405,227 60,563 (42,760) 2,591,263
Timber and
timberlands 346,765 5,860 (14,199) 338,426
---------- -------- -------- -------- ----------
$2,636,124 $411,087 $ 60,563 $(56,959) $2,929,689
========== ======== ======== ======== ==========
1991
----
Land, including
mineral proper-
ties, and land
improvements $ 173,556 $ 17,392 $ 12,171 $ (378) $ 178,399
Buildings 333,356 18,331 15,868 (748) 335,071
Machinery and
equipment 1,787,312 137,150 138,501 (10,072) 1,775,889
---------- -------- -------- -------- ----------
2,294,224 172,873 166,540 (11,198) 2,289,359
Timber and
timberlands 352,923 6,534 (12,692) 346,765
---------- -------- -------- -------- ----------
$2,647,147 $179,407 $166,540 $(23,890) $2,636,124
========== ======== ======== ======== ==========
- -------------------------------------------------------------------------------------
</TABLE>
See Notes on page 41.
40
<PAGE>
MANVILLE CORPORATION
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
ADDITIONS
CHARGED TO OTHER
BALANCE AT COSTS AND CHANGES BALANCE AT
BEGINNING EXPENSES RETIREMENTS ADD (DEDUCT) END OF
CLASSIFICATION OF YEAR (a),(d) (b),(d) (c),(d) YEAR
-------------- ---------- ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
1993
----
Mineral properties and
land improvements $ 68,295 $ 7,651 $27,268 $ (124) $ 48,554
Buildings 131,345 12,392 1,301 (957) 141,479
Machinery and equipment 737,233 115,307 22,363 (3,032) 827,145
-------- -------- ------- ------- ----------
$936,873 $135,350 $50,932 $(4,113) $1,017,178
======== ======== ======= ======= ==========
1992
----
Mineral properties and
land improvements $ 69,108 $ 8,981 $ 9,650 $ (144) $ 68,295
Buildings 121,414 12,355 1,266 (1,158) 131,345
Machinery and equipment 658,453 105,345 21,918 (4,647) 737,233
-------- -------- ------- ------- ----------
$848,975 $126,681 $32,834 $(5,949) $ 936,873
======== ======== ======= ======= ==========
1991
----
Mineral properties and
land improvements $ 65,633 $ 10,962 $ 7,533 $ 46 $ 69,108
Buildings 116,994 12,079 7,537 (122) 121,414
Machinery and equipment 622,590 96,793 73,528 12,598 658,453
-------- -------- ------- ------- ----------
$805,217 $119,834 $88,598 $12,522 $ 848,975
======== ======== ======= ======= ==========
- ----------------------------------------------------------------------------------------
</TABLE>
NOTES:
(a) Additions in 1992 and 1991 include $201 million and $22 million,
respectively, related to the acquisition of Riverwood businesses.
(b) Includes amounts applicable to discontinued operations.
(c) Includes the current year translation effect of the Company's foreign
operations, amounts for the cost of timber harvested, write-downs of assets
no longer in use and provisions for the disposition of certain assets.
(d) The Company has reclassified the presentation of certain prior year
information to conform with the current presentation format.
41
<PAGE>
MANVILLE CORPORATION
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
ADDITIONS
--------------------------------------------------------
CHARGED
BALANCE AT CHARGED TO TO OTHER BALANCE AT
BEGINNING COSTS AND ACCOUNTS DEDUCTIONS END OF
CLASSIFICATION OF YEAR EXPENSES (a) (b) YEAR
- ------------------------- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1993
----
Allowances Reducing
the Assets in the
Balance Sheet:
Doubtful accounts
receivable $ 7,546 $ 2,604 $ 2,888 $ 7,262
Cash discounts 1,457 $15,119 15,087 1,489
Other allowances 13,094 26,323 25,602 13,815
Deferred tax
assets 87,795 7,000 94,795
-------- ------- ------- ------- --------
Total $109,892 $ 9,604 $41,442 $43,577 $117,361
======== ======= ======= ======= ========
1992
----
Allowances Reducing
the Assets in the
Balance Sheet:
Doubtful accounts
receivable $ 8,057 $ 2,494 $ 3,005 $ 7,546
Cash discounts 1,225 $14,685 14,453 1,457
Other allowances 7,566 30,998 25,470 13,094
Deferred tax
assets 68,663 16,283 2,849 87,795
-------- ------- ------- ------- --------
Total $ 85,511 $18,777 $48,532 $42,928 $109,892
======== ======= ======= ======= ========
1991
----
Allowances Reducing
the Assets in the
Balance Sheet:
Doubtful accounts
receivable $ 9,123 $ 2,824 $ 3,890 $ 8,057
Cash discounts 1,955 $12,688 13,418 1,225
Other allowances 9,341 23,137 24,912 7,566
Deferred tax
assets 68,663 68,663
-------- ------- ------- ------- --------
Total $ 20,419 $71,487 $35,825 $42,220 $ 85,511
======== ======= ======= ======= ========
</TABLE>
- --------------------------------------------------------------------------------
NOTES:
(a) Charged against sales, except for adjustments to deferred tax assets and the
related valuation allowance which were charged to income taxes.
(b) Principally charges for which reserves were provided, net of recoveries.
42
<PAGE>
MANVILLE CORPORATION
SCHEDULE IX - SHORT-TERM BORROWINGS
FOR THE YEARS ENDED DECEMBER 31
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
WEIGHTED
MAXIMUM AVERAGE AVERAGE
CATEGORY OF WEIGHTED AMOUNT AMOUNT INTEREST
AGGREGATE BALANCE AT AVERAGE OUTSTANDING OUTSTANDING RATE
SHORT-TERM END OF INTEREST DURING THE DURING THE DURING THE
BORROWINGS PERIOD RATE PERIOD PERIOD PERIOD (A)
- ----------- --------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1993
----
Foreign Banks $26,461 7.7% $39,956 $28,406 8.1%
======= ==== ======= ======= ====
1992
----
Foreign Banks $13,738 9.1% $20,614 $16,574 9.3%
======= ==== ======= ======= ====
1991
----
Foreign Banks $15,350 9.7% $29,900 $10,386 8.6%
======= ==== ======= ======= ====
- ------------------------------------------------------------------------
</TABLE>
NOTE:
(A) The weighted average interest rate during the period was calculated by
dividing the related interest expense by the average short-term borrowings
outstanding during the year.
43
<PAGE>
MANVILLE CORPORATION
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
ITEM CHARGED TO COSTS AND EXPENSES (A)
---- ---------------------------------
1993 1992 1991
---------------------------------
<S> <C> <C> <C>
Maintenance and repairs $159,420 $152,851 $143,236
Taxes other than income and payroll $ 44,188 $ 41,395 $ 40,743
- -------------------------------------------------------------------
</TABLE>
NOTE:
(a) Does not include amounts applicable to discontinued operations, which were
excluded from the determination of income from continuing operations.
44
<PAGE>
EXHIBIT 22.
SUBSIDIARIES OF THE REGISTRANT
Subsidiaries of Manville and the jurisdiction in which each company was
incorporated are listed below. All of the voting securities of each
subsidiary are owned directly or indirectly by Manville. Certain companies
not important to an understanding of Manville's businesses have been omitted
and which, if aggregated, would not constitute a significant subsidiary. The
following subsidiaries are included in the Company's consolidated financial
statements.
JURISDICTION OF
SUBSIDIARY INCORPORATION
---------- ---------------
AGROK AGRO-FLORESTAL LTDA. --Brazil
DANAPAK RIVERWOOD MULTIPACK A/S --Denmark
EUROPEAN OVERSEAS CORPORATION --Delaware
FISKEBY BOARD AB --Sweden
FISKEBY BOARD A/S --Denmark
FISKEBY BOARD LTD. --United Kingdom
FISKEBY BOARD S.a.r.l. --France
GFE IMPORT-EXPORT G.m.b.H. --Germany
IGARAS AGRO-FLORESTAL LTDA. --Brazil
IGARAS PAPEIS E EMBALAGENS LTDA. --Brazil
IACP, INC. --Delaware
JOHNS-MANVILLE INDIA LIMITED --Delaware
JORBA, S.A. --Spain
MANVILLE (U.K.) LTD. --United Kingdom
MANVILLE CANADA INC. --Ontario
MANVILLE DE FRANCE S.a.r.l. --France
MANVILLE DO BRASIL ISOLANTES TERMICOS LTDA. --Brazil
MANVILLE EUROPE CORPORATION --Delaware
MANVILLE JAPAN K.K. --Japan
MANVILLE MEXICANA S.A. DE C.V. --Mexico
MANVILLE MINING COMPANY --Delaware
MULTIBOARD PACKAGING PTY LTD. --Australia
NEW MATERIALS LTD. --United Kingdom
P.C. EMPREENDIMENTOS PARTICIPACOES E COMERCIO LTDA. --Brazil
PAPELOK S.A. INDUSTRIA E COMERCIO --Brazil
PINE PIPELINE, INC. --Louisiana
RIVERWOOD ENERGY RESOURCES, INC. --Delaware
RIVERWOOD INTERNATIONAL ASIA PTE LTD. --Singapore
RIVERWOOD INTERNATIONAL B.V. --Netherlands
RIVERWOOD INTERNATIONAL CANADA INC. --Canada
RIVERWOOD INTERNATIONAL CORPORATION --Delaware
RIVERWOOD INTERNATIONAL GEORGIA, INC. --Delaware
RIVERWOOD INTERNATIONAL JAPAN K.K. --Japan
RIVERWOOD INTERNATIONAL LIMITED --United Kingdom
RIVERWOOD INTERNATIONAL PACKAGING, ASIA PACIFIC, LIMITED --Hong Kong
RIVERWOOD INTERNATIONAL, S.A. --France
RIVERWOOD INTERNATIONAL USA, INC. --Delaware
RIVERWOOD MEHRSTUCKVERPACKUNG G.m.b.H. --Germany
RIVERWOOD PACKAGING SYSTEMS PTY LTD. --Australia
RIVERWOOD RENGO MACHINERY K.K. --Japan
ROCKY MOUNTAIN INTERNATIONAL INSURANCE LTD. --Bermuda
SCHULLER FUNDING CORPORATION --Delaware
SCHULLER GROUP, INC. --Delaware
SCHULLER G.m.b.H. --Germany
SCHULLER INTERNATIONAL B.V. --Netherlands
SCHULLER INTERNATIONAL, INC. --Delaware
SCHULLER INTERNATIONAL JAPAN Y.K. --Japan
45
<PAGE>
SEVENTEENTH STREET REALTY, INC. --Colorado
SLEVIN SOUTH COMPANY --Arkansas
STILLWATER MINING COMPANY --Delaware
TERMOACUSTICOS S.A. DE C.V. --Mexico
46
<PAGE>
POWER OF ATTORNEY
Know all men by these present that each person whose signature appears below
does hereby constitute and appoint W. THOMAS STEPHENS, ROBERT E. COLE AND
RICHARD B. VON WALD, and each of them, with full power to act without the
other, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign all amendments to this report, and to file the
same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission granting unto said attorney-in-
fact and agent, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them, or his substitute or substitutes, lawfully do or cause
to be done by virtue hereof.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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 AS OF THE 28TH OF MARCH,
1994.
MANVILLE CORPORATION
(Registrant)
By: /s/ W. Thomas Stephens
------------------------------------
W. Thomas Stephens
Chairman of the Board, President,
Chief Executive Officer and Director
47
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated as of March 28, 1994.
SIGNATURE TITLE
--------- -----
PRINCIPAL EXECUTIVE OFFICER:
/s/ W. Thomas Stephens
---------------------------------- Chairman of the Board, President,
(W. Thomas Stephens) Chief Executive Officer and Director
PRINCIPAL FINANCIAL OFFICER:
/s/ Robert E. Cole
---------------------------------- Senior Vice President,
(Robert E. Cole) Corporate Finance
DIRECTORS (OTHER THAN ABOVE OFFICER-DIRECTOR):
/s/ Bette B. Anderson
---------------------------------- Director
(Bette B. Anderson)
/s/ John C. Burton
---------------------------------- Director
(John C. Burton)
/s/ Ernest H. Drew
---------------------------------- Director
(Ernest H. Drew)
/s/ Robert A. Falise
---------------------------------- Director
(Robert A. Falise)
/s/ Robert E. Fowler, Jr.
---------------------------------- Director
(Robert E. Fowler, Jr.)
/s/ Todd Goodwin
---------------------------------- Director
(Todd Goodwin)
/s/ Michael N. Hammes
---------------------------------- Director
(Michael N. Hammes)
/s/ John Nils Hanson
---------------------------------- Director
(John Nils Hanson)
/s/ Louis Klein, Jr.
---------------------------------- Director
(Louis Klein, Jr.)
/s/ Stanley J. Levy
---------------------------------- Director
(Stanley J. Levy)
/s/ Christian E. Markey, Jr.
---------------------------------- Director
(Christian E. Markey, Jr.)
/s/ Will M. Storey
---------------------------------- Director
(Will M. Storey)
/s/ Raymond S. Troubh
---------------------------------- Director
(Raymond S. Troubh)
48
<PAGE>
ADDITIONAL INFORMATION
Individuals interested in receiving additional information may contact the
following:
For Company Information For Product Information
- ----------------------- -----------------------
Call (303) 978-2000 Call (303) 978-4900 or (800) 654-3103
or write to: or write to:
Manville Corporation Manville Corporation
Investor Relations Product Information
P. O. Box 5108 P. O. Box 5108
Denver, CO 80217-5108 Denver, CO 80217-5108
Transfer Agent and Registrar Independent Accountants
- ---------------------------- -----------------------
First Chicago Trust Company of New York Coopers & Lybrand
P. O. Box 2532, Suite 2532 370 Seventeenth Street, Suite 3300
Jersey City, NJ 07303-2532 Denver, CO 80202-5633
49
<PAGE>
EXHIBIT 10(Z).
PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is made on September 10,
1993, by and among Riverwood International Corporation, a Delaware corporation
(the "Company") and Manville Corporation, a Delaware corporation ("Manville").
1. Manville hereby agrees to purchase 3,448,276 shares (the "Shares")
of common stock, par value $.01 per share, of the Company, at a price of $14.50
per share for an aggregate purchase price of $50,000,000 (the "Purchase Price")
on the following terms and conditions:
2. The Company has taken all necessary action to authorize the
issuance of the Shares and the Shares, when issued and paid for in accordance
with the terms of this Agreement, will be validly issued, fully paid and
non-assessable.
3. Settlement of the sale and purchase of the Shares shall take place
on September 17, 1993 ("Closing Date").
4. On the Closing Date, Manville shall pay to the Company the
Purchase Price by wire transfer of immediately available or good value funds and
the Company shall deliver to Manville a certificate or certificates representing
the Shares.
5. Both the Company and Manville acknowledge that the Shares are
being sold by the Company to Manville in a transaction that is exempt from
registration under the Securities Act of 1933 as amended (the "Securities Act"),
and, that the Shares being purchased hereunder will not be registered under the
Securities Act.
6. Manville agrees not to transfer the Shares unless such transfer is
made pursuant to an effective registration statement under the Securities Act
and relevant state securities laws or unless such transfer is made in accordance
with an exemption from the registration requirements of the Securities Act and
relevant state securities laws, the availability of which exemptions having been
demonstrated to the satisfaction of the
50
<PAGE>
General Counsel of the Company in such General Counsel's sole reasonable
discretion.
7. Each of the Company and Manville further acknowledge that its
respective Board of Directors has approved the transactions contemplated hereby
and that it has taken all necessary and requisite corporate action in connection
with the consummation of the transactions contemplated by this Agreement.
8. Any and all notices and other communications pertaining to this
Agreement shall be made by hand delivery, first-class mail (registered or
certified, return receipt requested), telex, telecopier, or overnight air
courier guaranteeing next day delivery:
(a) if to the Company at:
Riverwood International Corporation
3350 Cumberland Circle
Suite 1400
Atlanta, Georgia 30339
Attention: J. Steven Beabout, Esq.
(b) if to Manville at:
Manville Corporation
717 17th Street
Denver, Colorado 80202
Attention: Richard B. Von Wald, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five Business Days after
being deposited in the mail, postage prepaid, if mailed; when confirmed, if
telexed or telecopied; and on the next Business Day if timely delivered to an
air courier guaranteeing overnight delivery.
9. This Agreement is intended by the parties as a final expression of
their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. There are no restrictions, promises,
warranties or undertakings other than those set forth or referred to herein and
therein. This Agreement supersedes all prior arrange-
51
<PAGE>
ments and understandings between the parties with respect to such subject
matter.
10. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to the conflicts
of laws provisions thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
MANVILLE CORPORATION
/s/ Richard B. Von Wald
By: ---------------------------
Name: Richard B. Von Wald
Title: Senior Vice President
AGREED TO AND ACCEPTED
AS OF THE DATE FIRST WRITTEN ABOVE.
RIVERWOOD INTERNATIONAL CORPORATION
/s/ Frank R. McCauley
By: ----------------------------------
Name: Frank R. McCauley
Title: Sr. Vice President, Finance
52
<PAGE>
EXHIBIT 13.
ITEM 6. SELECTED FIVE-YEAR FINANCIAL DATA
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------
INCOME (LOSS)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales (Note A) $2,275,935 $2,203,953 $2,009,878 $2,126,673 $2,081,421
Income from Operations (Note A) 135,948 202,216 70,817 227,805 303,856
Income (Loss) from Continuing
Operations (Note A) 61,071 50,579 (30,499) 88,298 157,492
Income (Loss) before Minority Interest,
Extraordinary Item and Cumulative
Effect of Accounting Changes 61,071 50,579 (12,697) 110,718 196,825
Net Income (Notes B, C, D, and E) 47,782 35,949 34,700 110,718 196,825
================================================================================================================
FINANCIAL POSITION
(AS OF DECEMBER 31)
- ----------------------------------------------------------------------------------------------------------------
Total Assets $3,616,237 $3,630,363 $3,002,545 $2,795,916 $2,644,839
Long-Term Debt, less current portion 1,390,988 1,191,061 822,632 870,289 802,306
Stockholders' Equity (Note B) 846,069 825,293 779,515 1,140,615 993,532
================================================================================================================
ADDITIONAL DATA
- ----------------------------------------------------------------------------------------------------------------
Additions to Property, Plant and Equipment $ 351,494 $ 411,087 $ 179,407 $ 344,464 $ 350,692
Research, Development and Engineering (Note A) 37,358 34,563 35,988 40,791 38,866
================================================================================================================
PRIMARY EARNINGS (LOSS) PER COMMON SHARE (NOTE F)
- ----------------------------------------------------------------------------------------------------------------
Income (Loss) from Continuing
Operations (Note A) $.31 $.25 $(.39) $.61 $1.16
Income (Loss) before Minority Interest,
Extraordinary Item and Cumulative
Effect of Accounting Changes .31 .25 (.24) .79 1.48
Net Income (Notes B, C, D, and E) .21 .13 .15 .79 1.48
================================================================================================================
FULLY DILUTED EARNINGS (LOSS) PER COMMON SHARE (NOTE F)
- ----------------------------------------------------------------------------------------------------------------
Income (Loss) from Continuing
Operations (Note A) $.31 $.25 $(.39) $.61 $1.09
Income (Loss) before Minority Interest,
Extraordinary Item and Cumulative
Effect of Accounting Changes .31 .25 (.24) .79 1.39
Net Income (Notes B, C, D, and E) .21 .13 .15 .79 1.39
================================================================================================================
</TABLE>
See notes on page 54.
53
<PAGE>
SELECTED FIVE-YEAR FINANCIAL DATA
NOTES:
(A) Excludes the operating results of Celite Corporation, which was sold in 1991
and the Holophane lighting systems division and sealing components businesses
which were sold in 1989. Accordingly, the operating results of these
discontinued operations have been excluded from the determination of income from
continuing operations for all periods presented.
(B) In September of 1993, the Manville holding company purchased an additional
3,448,276 shares of Riverwood's common stock increasing the Manville holding
company's ownership percentage to approximately 81.5 percent from 80.5 percent.
On June 24, 1992, Riverwood completed an initial public offering of 12.1 million
shares, or 19.5 percent of its common stock. As a result of these transactions,
the Company's December 31, 1993 Consolidated Balance Sheet and Consolidated
Statement of Income reflect the minority stockholders' interest in Riverwood's
net assets and net earnings of $92.4 million and $0.3 million, respectively.
The Company's December 31, 1992 Consolidated Balance Sheet and Consolidated
Statement of Income reflect the minority stockholders' interest in Riverwood's
net assets and net earnings of $93.1 million and $3.1 million, or $.03 per
common share, respectively.
(C) In 1993, the Company made a prepayment on its outstanding bond obligations
to the Manville Personal Injury Settlement Trust (the "PI Trust"). The
prepayment consisted of $150 million of cash, net of certain costs, and the
assignment to the PI Trust of $100 million, plus accrued interest, of currently
outstanding Riverwood notes held by Manville. An extraordinary gain of $0.9
million, net of related income taxes of $0.5 million, was recorded in August
1993 to adjust the estimated extraordinary loss recorded in 1992. In 1992, the
Company recorded an estimated loss of $11.5 million, net of related income tax
benefit of $5.9 million, in anticipation of this prepayment and exchange.
(D) Effective January 1, 1993 the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits." As a result, the Company recorded a charge in the first quarter of
1993 of $13.9 million, net of taxes of $8.6 million, or $.11 per common share,
against net income to reflect the accumulated postemployment benefit obligation.
(E) Effective January 1, 1991, the Company changed its method of accounting for
employee postretirement benefits other than pensions to comply with the
provisions of Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." As a result, the
Company recorded a charge against net income in 1991 of $173.4 million, net of
tax of $91.4 million, or $1.44 per common share, to reflect the cumulative
effect on prior years of the accounting change. In accordance with the
provisions of that statement, postretirement benefit information for prior
periods has not been restated. Previously, retiree medical and life insurance
benefits were expensed as incurred. Also effective January 1, 1991, the Company
changed its method of accounting for income taxes to comply with the provisions
of Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." As a result, the Company recorded a credit in 1991 of $220.8 million,
or $1.83 per common share, to net income to reflect the cumulative effect on
prior years of the accounting change. Financial statements presented for 1989
54
<PAGE>
through 1990 reflect income taxes using the method required by Statement of
Financial Accounting Standards No. 96, "Accounting for Income Taxes".
(F) Primary and fully diluted earnings (loss) per common share amounts in 1993,
1992, 1991, 1990 and 1989 are based on the weighted average number of common and
common equivalent shares outstanding during each year assuming the conversion of
the Series A Convertible Preferred Stock. All earnings (loss) per share amounts
presented in the above table were calculated after the deduction for preference
stock accretion. The 1989 fully diluted earnings (loss) per common share
computation further assumes that the common stock equivalents related to the
warrants and their dilutive effect on Common Stock were outstanding at the
beginning of the year. The dilutive effect of warrants on Common Stock does not
impact the 1993, 1992, 1991 and 1990 earnings (loss) per common share
computations because the underlying Common Stock market value did not exceed the
warrant exercise price. In 1993, 1992, 1991, 1990 and 1989, primary earnings
(loss) per common share amounts are based on 122,480,000 shares, 123,048,000
shares, 120,685,000 shares, 120,516,000 shares and 123,033,000 shares,
respectively, and fully diluted earnings (loss) per common share are based on
122,504,000 shares, 123,048,000 shares, 120,770,000 shares, 120,516,000 shares
and 131,229,000 shares, respectively. Refer to Note 15 in Notes to the
Consolidated Financial Statements for a discussion of the earnings (loss) per
common share computation.
The Company declared and paid common stock dividends of $1.04 per share in 1993
and 1992. At December 31, 1993, the Company has accrued noncurrent common and
preference stock dividends of $152.7 million. These dividends have not been
declared by the Board of Directors and, as discussed in Note 4 to the
consolidated financial statements, no assurance can be given that these
dividends will be paid.
55
<PAGE>
ITEM 7.
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 ("Schuller"), (collectively referred to as "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 of pulpwood to the
U.S. mill operations, and the manufacture of lumber and plywood.
Schuller operates 35 manufacturing facilities in the United States, Canada and
Germany and reports its results in two business segments: Building Products and
Engineered Products. The Building Products segment manufactures building
insulation products, roofing products and mechanical insulation products at
plants in both the United States and Canada. Building insulation products
manufactured by Schuller include thermal and acoustical fiberglass insulation
products that are suitable for use in various residential and commercial
building applications. Roofing products manufactured by Schuller include roof
insulations, membranes and accessories for use in various commercial and
industrial building applications. Mechanical insulation products manufactured
by Schuller include fiberglass air duct systems, thermal acoustical blankets and
mechanical piping insulation. The Engineered Products segment is comprised of
Schuller's mats and reinforcements business, including Schuller GmbH, Schuller's
German subsidiary, and the equipment insulations and filtration businesses. The
mats and reinforcements business manufactures continuous filament fiberglass
products, including mats and fibers for roofing applications, fiberglass for
plastics reinforcements, textile glass products used primarily for wall
coverings, and nonwoven fiberglass mats for specialty applications. The
equipment insulations
56
<PAGE>
business manufactures insulation for heating, ventilating and air conditioning
equipment; aircraft; appliances; and for acoustic applications; and fiberglass
wool for automotive headliner and hoodliner parts. Filtration products include
air filtration media for commercial and industrial buildings and microfibers for
use in battery separators and clean room air filters.
Financial results for the Manville holding company's oil and gas properties
(which were sold in the third quarter of 1993 and the second quarter of 1992)
and its equity investment in the Stillwater platinum and palladium mining
operations are included in Corporate and Eliminations for business segment
reporting purposes.
1993 VS 1992
RESULTS BY SEGMENT
- ------------------
Riverwood's net sales increased in 1993 by $2.1 million compared with 1992 due
to an increase in sales in the Containerboard segment resulting from the Macon
mill acquisition in mid-1992 and an increase in net sales in the U.S.
Timberlands/Wood Products segment, offset by lower net sales in the Coated Board
System segment. Net sales in the Coated Board System segment decreased by $53.9
million, or 7 percent, in 1993. The effect of stronger U.S. dollar currency
exchange rates in 1993 compared with 1992 resulted in approximately $41 million
lower reported U.S. dollar net sales from international operations. Net sales
of paperboard used in folding carton applications decreased due to weak
worldwide demand, while worldwide net sales of beverage cartons increased in
1993 compared with 1992 due mainly to volume increases. Net sales of beverage
cartons sold in North America increased 11 percent in 1993. Net sales increased
$35.7 million, or 17 percent, in the Containerboard segment principally due to
the acquisition of the Macon mill on July 1, 1992, which reported Containerboard
segment net sales of $97.7 million in 1993 compared with $57.5 million for the
six months of 1992. This increase in Containerboard net sales was primarily due
to increased volume but was partially offset by a decrease in worldwide
linerboard prices. Additionally, volume growth in Brazil was offset by lower
prices of medium sold in the United States. Net sales in the U.S.
Timberlands/Wood Products segment increased by $21 million, or 17 percent, as a
result of increases in selling prices of lumber and plywood related primarily to
a stronger housing market and a decrease in supply of lumber and plywood.
Riverwood's gross profit for 1993 decreased $38.1 million, or 15 percent, from
1992. The gross profit margin decreased to 20 percent for 1993 from 23 percent
in 1992 principally as a result of lower containerboard prices and a decline in
the Coated Board System segment's gross profit margin, offset in part by an
increase in the U.S. Timberlands/Wood Products segment's gross profit margin.
Excluding the results of the Macon mill, Riverwood's gross margin would have
been 24 percent in 1993 and 25 percent in 1992.
57
<PAGE>
The Coated Board System segment's gross profit margin decreased primarily due to
weak markets worldwide for both folding cartons and folding carton board in 1993
compared with 1992. Lower prices in worldwide linerboard markets during 1993
adversely affected the gross profit margin of the Containerboard segment. The
U.S. Timberlands/Wood Products segment reported higher margins as a result of
improved selling prices.
Total board shipments for the years ended December 31 were as follows:
(In thousands of tons)
1993 1992
---- ----
Coated Board 765.3 755.8
Containerboard 950.5 716.6
------- -------
1,715.8 1,472.4
======= =======
Riverwood is in the process of converting over half of the Macon mill linerboard
production capacity to on-line coated board. Initial production of on-line
coated board is scheduled to commence during 1994, with limited coated board
production available to meet the 1994 beverage season.
Selling, general and administrative expense increased $17.1 million, or 16
percent, in 1993 compared with 1992, and as a percentage of net sales increased
by 1.5 percentage points to 11 percent. The increase was due principally to
expenses associated with additional infrastructure established to support
packaging machinery operations and the expansion into worldwide multiple
packaging markets, as well as the full-year impact of selling and administrative
expenses of the Macon mill acquired on July 1, 1992. Research, development and
engineering expenses increased by $3 million, or 52 percent, primarily due to a
higher level of packaging machinery engineering costs associated with expanding
packaging machinery operations.
Riverwood's 1993 results reflect a net restructuring loss of $8 million,
including 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. In recent years,
Riverwood has experienced rapid growth primarily through acquisitions, creating
certain areas with overlapping responsibilities and duplicated efforts.
Accordingly, Riverwood has implemented an ongoing restructuring plan designed
to streamline operations, increase efficiency and cost effectiveness and enhance
worldwide customer service capability. Approximately $20 million of the
restructuring charge relates to provisions for cash expenditures that will
result in ongoing cost and expense savings. These expenditures are expected to
occur through 1995 and will be funded from existing cash, operations and
anticipated savings. In addition, the remainder of the reserve will be used to
write down the book value of certain
58
<PAGE>
related assets. Riverwood estimates that the restructuring program will reduce
its 1994 expenses by approximately $5 million to $7 million, with additional
benefits to be realized in later years. This charge was partially offset by a
$17 million gain on the sale and assignment, for cash, of approximately 60,000
acres of nonstrategic timberlands located in Louisiana and Texas. For 1993
business segment reporting purposes, the $25 million restructuring charge was
included in the Riverwood Corporate and Eliminations section of income from
operations. The $17 million gain was included in the U.S. Timberlands/Wood
Products business segment.
Other income, net, increased $3.5 million to $4.9 million in 1993 from $1.4
million in 1992. The change is primarily a result of $2.5 million in gains
recognized in 1993 on final purchase price settlements of previous acquisitions.
Riverwood's income from operations in 1993 decreased by $62.6 million, or 43
percent, compared with 1992, as operating margins declined to eight percent from
13 percent of net sales. The operating income of the Containerboard segment
declined by $40.6 million due principally to weak containerboard prices
worldwide. Riverwood announced a U.S. linerboard price increase effective in
October 1993. The Company anticipates that it will realize the benefits of the
price increase in 1994. In addition, income from operations of the Brazilian
operations declined by 16 percent from 1992. The decrease in the Coated Board
System segment's earnings of $26.6 million resulted primarily from higher
marketing and packaging machinery product development expenditures, weak
worldwide folding carton markets, and price declines resulting from new capacity
additions of competing paperboard grades for folding carton markets. Partially
offsetting these Coated Board System decreases was an increase in volume,
improved sales mix and favorable fixed cost variances for beverage carton
products. Income from operations in the U.S. Timberlands/Wood Products segment
increased by $33.4 million resulting from the $17 million gain on the sale of
timberlands and higher selling prices for lumber and plywood products.
For the Building Products segment, 1993 net sales increased by $56.4 million, or
nine percent, when compared with 1992 as a result of higher volume associated
with increased construction activity and market share gains, as well as an
improving pricing environment. Gross profit margins rose three percentage
points to 22 percent, primarily due to increased operating leverage and
continual improvements in manufacturing efficiencies. Operating expenses; which
include selling, general and administrative; and research, development, and
engineering expenses; increased three percent over 1992 and remained constant as
a percent of sales at 13 percent. The restructuring of operations loss in 1993
of $20.4 million included charges for sampling, inspection and remediation
expenses associated with a former phenolic roofing insulation business, offset
in part by expected insurance recoveries; a
59
<PAGE>
provision for additional severance costs for ongoing programs to reduce costs;
and a charge for estimated costs associated with the exchange of the Company's
residential roofing business for Owens-Corning Fiberglas Corporation's ("Owens-
Corning") North American commercial and industrial roofing business, completed
in January 1994. Substantially all of these 1993 restructuring charges will
result in future cash expenditures, except for approximately $2 million related
to the write-down of assets in conjunction with the Company's exchange of
roofing businesses. The 1992 restructuring loss of $5.8 million included a $7.7
million adjustment to increase previously established reserves for the exit from
the phenolic roofing insulation business and a $2 million reversal of previously
established separation reserves that were no longer considered necessary.
Substantially all of the restructuring loss of $7.7 million recorded in 1992
will result in future cash expenditures. For the year ended December 31, 1993,
the Building Products segment reported income from operations of $44.7 million,
a 39 percent increase from 1992.
The Engineered Products segment's net sales in 1993 increased $15.1 million, or
three percent, over 1992 due primarily to higher sales volume and improved
selling prices of domestic roofing fiber and mat, offset in part by weakness in
European markets. The segment's gross profit margin rose to 21 percent, up two
percentage points from 1992. The improvement was attributable to higher selling
prices of roofing fiber and mat, increased operating leverage, manufacturing
efficiencies and the reversal of a provision for the early rebuild of a portion
of a glass furnace, offset in part by higher operating losses of an automotive
joint venture. Operating expenses increased three percent over 1992 and
remained constant as a percent of sales at 11 percent. The $8 million decrease
in other income reflects a gain on the sale of excess nonstrategic precious
metals that occurred in 1992. In 1993 this segment recorded a $6.1 million
restructuring charge for employee severance, outplacement and relocation costs,
which generally will result in cash outlays. A $5.8 million restructuring of
operations gain on an environmental remediation settlement and a reversal of
previously established separation reserves no longer deemed necessary was
reflected in 1992. For the year ended December 31, 1993, the Engineered
Products segment reported income from operations of $45.5 million, a $10.4
million decrease from 1992.
TOTAL COMPANY RESULTS
Total Company net sales of $2.28 billion in 1993 were $72 million, or three
percent, above the $2.20 billion reported in 1992. The 1993 gross profit margin
of approximately 21 percent decreased from 22 percent in 1992. Selling, general
and administrative expense increased by eight percent in 1993 when compared with
1992. However, expense as a percent of sales remained relatively constant year
to year. Research, development and engineering expense increased by eight
percent in 1993 over 1992.
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The 1993 restructuring of operations loss of $40.5 million includes a $25
million charge by Riverwood. The charge was partially offset by a $17 million
gain on Riverwood's sale of nonstrategic timberlands. Schuller recorded $26.5
million of restructuring charges in 1993, including a $19.7 million charge for
sampling, inspection and remediation expenses associated with its former
phenolic roofing insulation business, offset in part by $7 million of expected
insurance recoveries; a $7.5 million charge for additional severance costs for
ongoing programs to reduce costs; and $6.7 million of estimated costs associated
with the exchange of Schuller's residential roofing business for Owens-Corning's
North American commercial and industrial roofing business, completed in January
1994. Other restructuring charges in the Manville holding company for 1993
totaling approximately $6 million primarily related to cash expenses associated
with former business operations and a loss on the sale of an oil and gas
property.
During 1992, the Manville holding company sold certain oil and gas properties at
a loss of $7 million and an investment in a joint venture at a gain of $7.7
million. These amounts, offset in part by other restructuring adjustments, are
included in the restructuring of operations gain of $0.7 million reported for
the year ended December 31, 1992.
The $6.2 million decrease in other income (loss) for 1993 was due primarily to a
reduction in income from the sale of excess precious metals.
Compared with 1992, interest income in 1993 increased by $9.6 million, due
primarily to $13 million of interest income received on the income tax refund
described below, partially offset by lower interest rates and lower average cash
balances.
Interest expense in 1993 increased by $13.9 million, or 11 percent, which
represented interest expense incurred on Riverwood's public debt issued during
the third quarter of 1993 and the second quarter of 1992 and on debt assumed in
connection with Riverwood's acquisition of the Macon mill. Partially offsetting
these increases were higher levels of capitalized interest in 1993 and lower
interest expense due to a prepayment of a portion of the Trust Bonds (defined
below) in 1993.
In 1993, the Company recorded $13 million of profit sharing expense to be paid
in 1994 to the Manville Personal Injury Settlement Trust (the "PI Trust"), as
required in the Plan of Reorganization ("the Plan"). Profit sharing expense for
1992 totaled $12.1 million and was paid in 1993.
As a result of the above, income from continuing operations before income taxes
decreased by $71.5 million to $6.4 million in 1993 from $77.8 million in 1992.
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The 1993 income tax benefit of $54.7 million includes the effect of a number of
unusual items that are described more fully below.
For income tax purposes, the Company is entitled to a tax benefit on the amount
of Common Stock 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. For financial reporting purposes, the Company records a tax
benefit on the amount of common dividends paid to the PI Trust at the time the
dividends are paid.
Accordingly, the Company recognized a $34 million tax benefit in 1993 on the
portion of the $1.04 Common Stock dividend that was paid to the PI Trust,
partially offset by an additional deferred tax asset valuation allowance of $7
million. In accordance with Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" ("SFAS No. 109"), the Company's valuation
allowance on all deferred tax assets is subject to change as forecasts of future
years' earnings and the estimated timing of the utilization of the Company's tax
benefits are revised.
As a result of a retroactive change in U.S. income tax regulations regarding the
payment of add-on minimum tax and the treatment of certain tax preference items
for the years 1977 through 1986, the Company was entitled to a federal income
tax refund plus accrued interest. During the first and second quarters of 1993,
the Company received a total of $32 million from the U.S. Internal Revenue
Service, which was recorded as a reduction to income tax expense of $19 million
and an increase to interest income of $13 million.
U.S. and foreign tax rate changes provided the Company a $20 million tax benefit
in 1993. This included a benefit of approximately $12 million due to the change
in the U.S. federal tax rate to 35 percent from 34 percent, increasing the value
of the Company's U.S. deferred tax asset. Effective January 1, 1993, the
government of Brazil enacted new tax provisions that reduced the statutory
federal tax rate to 35 percent from 40 percent and also allowed for the
accelerated liquidation of future tax liabilities on inflationary profits at
reduced rates. As a result of these changes to Brazilian tax law, the Company
recognized a net deferred income tax benefit of $5 million in the first quarter
of 1993. In addition, a $3 million benefit was recognized as a result of a
reduction in German tax rates.
Exclusive of the unusual items above, the 1993 tax rate on income from
continuing operations was 169 percent. This is higher than the U.S. federal
statutory tax rate principally due to taxes on earnings derived from overseas
operations and taxes on expected repatriations of undistributed foreign
earnings, neither of which was totally offset by tax benefits from losses in the
U.S.
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The Company's 1992 effective tax rate on income from continuing operations of 35
percent primarily resulted from higher foreign effective income tax rates and an
increase in the deferred tax asset valuation allowance, offset in part by an
income tax benefit on that portion of a Common Stock dividend paid to the PI
Trust.
The Company will need a cumulative total of approximately $1 billion of U.S.
federal taxable income to realize its net U.S. deferred tax asset. Based on the
Company's historical earnings levels, projected future earnings, and the
expected timing of the taxable deductions principally related to the PI Trust
deductions, the Company believes it will realize its net deferred tax asset.
See Note 22 of the Notes to the Consolidated Financial Statements for further
discussion of income taxes.
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY
On June 24, 1992, Riverwood completed an initial public offering of 12.1 million
shares, or 19.5 percent, of its common stock. The Manville holding company
purchased approximately 3.4 million additional shares of Riverwood's common
stock at a price of $14.50 per share in September 1993. This increased the
Manville holding company's ownership percentage of Riverwood to approximately
81.5 percent from 80.5 percent. The Manville holding company currently intends
to maintain at least an 80 percent ownership interest in Riverwood in order to
preserve the consolidated tax entity and take advantage of existing tax
benefits.
EXTRAORDINARY GAIN (LOSS) ON EARLY EXTINGUISHMENT OF DEBT
Pursuant to the Bond Prepayment Agreement (see "Personal Injury Trust
Refinancing Arrangement" section below), on August 25, 1993, the Company made a
prepayment on its outstanding bond obligations ("Trust Bonds") to the PI Trust.
The prepayment consisted of $150 million of cash, net of certain costs, and the
assignment to the PI Trust of $100 million, plus accrued interest, of currently
outstanding Riverwood notes (the "Intercompany Notes") held by the Manville
holding company. An extraordinary gain of $0.9 million, net of related income
taxes of $0.5 million, was recorded in August 1993 to adjust the estimated
extraordinary loss previously recorded in 1992. In 1992, the Company recorded
an estimated extraordinary loss of $11.5 million, net of related income tax
benefit of $5.9 million, in anticipation of the prepayment and exchange of a
portion of the Trust Bonds.
CUMULATIVE EFFECT OF ACCOUNTING CHANGE
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("SFAS
No. 112"). SFAS No. 112 generally requires that in certain circumstances
postemployment benefit costs and obligations be recognized over the active
service lives of
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employees. These obligations include, but are not limited to, benefits provided
to former (but not yet retired) or inactive employees and their dependents
contingent upon disability, death, layoff or other termination. The Company
recognized an accumulated postemployment benefit obligation of $13.9 million,
net of taxes of $8.6 million. This cumulative adjustment is primarily
attributable to the effects of the accrual of certain accumulated disability-
related benefits, recognition of additional workers' compensation expenses and
the reduction of the discount rate used to measure the present value of the
Company's workers' compensation liabilities to 7.5 percent from approximately 10
percent.
The Company will continue to recognize certain postemployment benefit expenses
at the time an employee is terminated or becomes inactive as such amounts cannot
be reasonably estimated before that time. Income before cumulative effect of
accounting changes after adopting SFAS No. 112 is not significantly different
from the amount the Company previously recognized for all periods presented.
Restatement of postemployment information for prior periods is not required by
SFAS No. 112. Accordingly, the Company made no restatement other than the
reclassification from interest expense to income from operations related to the
annual present value accretion of its workers' compensation liabilities.
EARNINGS PER COMMON SHARE
Primary and fully diluted earnings per common share for 1993 were both $.21 as
compared with the primary and fully diluted earnings per common share of $.13
each for 1992. The net charge to recognize the cumulative effect of the
adoption of SFAS No. 112 reduced primary and fully diluted earnings per common
share by $.11. In addition, the extraordinary net gain from the early
extinguishment of debt increased primary and fully diluted earnings per common
share by $.01.
The 1992 earnings per common share amounts included a charge to recognize the
minority interest in Riverwood's earnings, which reduced primary and fully
diluted earnings per common share by $.03. In addition, 1992 net income
applicable to common stock included an extraordinary net loss from the early
extinguishment of debt that reduced primary and fully diluted earnings per
common share by $.09.
Earnings per common share amounts are calculated after deducting preference
stock accretion on the Cumulative Preference Stock, Series B. Each share of the
Manville holding company's Series A Convertible Preferred Stock was convertible
by its terms into 10 shares of Common Stock. On December 9, 1992, the PI Trust
converted all issued and outstanding Series A Convertible Preferred Stock into
72 million shares of Common Stock. All earnings (loss) per common share
computations assume that the preferred stock had been converted to Common Stock
and was outstanding as of the beginning of the earliest period presented.
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1992 VS 1991
RESULTS BY SEGMENT
Riverwood's net sales in 1992 increased by $125 million, or 13 percent, from
1991. The Coated Board System segment's net sales increased $34.1 million, or
five percent, in 1992 compared with 1991 primarily from increased volume of
beverage cartons and packaging machinery operations and slightly higher selling
prices for coated board. Volume growth was achieved through the 1991
acquisitions of a converting operation in Spain and four packaging machinery
operations, increased soft drink packaging shipments and higher packaging
machinery placements. This volume growth, however, was partially offset by a
reduction in net sales of $18.3 million due to the sale of two U.S. folding
carton plants in 1991 and an external volume decrease due to higher integration
of Riverwood's coated board production and converting operations. As a result,
mill shipments to external customers were down despite the increase in total
mill shipments in 1992. The Containerboard segment's net sales increased by
$67.3 million, or 47 percent, of which $57.5 million represented linerboard
sales from the Macon mill. Higher prices for U.S. corrugating medium in 1992
compared with 1991 were partially offset by lower linerboard prices in 1992.
Net sales in the U.S. Timberlands/Wood Products segment increased by $27.5
million, or 28 percent, in 1992 compared with 1991, primarily as a result of
increased selling prices for lumber and plywood.
Gross profit increased $33.7 million, or 15 percent, in 1992 from 1991.
Approximately one-third of this increase related to the Coated Board System
segment and over half to the U.S. Timberlands/Wood Products segment.
Riverwood's gross profit margin for 1992 of 23 percent increased slightly from
1991 primarily due to the volume growth in beverage cartons and higher selling
prices for lumber, plywood and U.S. corrugating medium, partially offset by
lower linerboard prices.
Total board shipments for the years ended December 31 were as follows:
(In thousands of tons)
1992 1991
---- ----
Coated Board 755.8 737.2
Containerboard 716.6 452.4
------- -------
1,472.4 1,189.6
======= =======
Selling, general and administrative expenses increased $7.9 million, or eight
percent, in 1992 when compared with 1991, but as a percent of sales remained
relatively constant. The Coated Board System segment's operating expenses
increased primarily as a result of continued market penetration and expansion
efforts and the operations acquired in late 1991, partially offset by the
effects
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of the sale of two folding carton facilities in 1991. Selling, general and
administrative expenses in the Containerboard segment increased principally due
to the Macon mill acquisition in 1992. Research, development and engineering
expenses increased by $1 million, or 21 percent, primarily due to additional
machine development costs associated with the continuing expansion of packaging
machinery operations.
Other income, net, decreased $6.3 million in 1992 compared with 1991. This
decrease is primarily attributable to a reduction of approximately $2.5 million
of rental income and $1.4 million of income from nonconsolidated subsidiaries in
1992.
Income from operations increased $18.5 million in 1992 compared with 1991 while
operating margins increased slightly. The primary reason for the improvement in
income from operations was the effect of higher selling prices for lumber and
plywood products included in the U.S. Timberlands/Wood Products segment. Income
from operations in the Coated Board System segment remained relatively flat as
improvement in the U.S. portion of the Coated Board System segment was offset by
the effect of the sale of two folding carton operations in 1991. Income from
operations in the Containerboard segment decreased $4 million, or 32 percent, in
1992 compared with 1991 due primarily to the operating losses at the Macon mill,
the recession in Brazil and lower worldwide linerboard prices, partially offset
by higher selling prices for U.S. corrugating medium.
For the Building Products segment, 1992 net sales increased by eight percent
when compared with 1991. This improvement reflects higher volume and share
gains in construction markets served by the building insulation and roofing
businesses, despite some decrease in pricing during 1992. The segment's gross
profit margin rose approximately five percentage points to 19 percent for 1992,
primarily due to increased sales volume, cost reductions and increased
production efficiencies realized during the year. Other operating expenses
decreased six percent during 1992, reflecting cost savings from rationalization
of overhead levels. The restructuring of operations losses in 1992 and 1991 of
$5.8 million and $45 million, respectively, represented costs related to the
rationalization of operations and overhead levels, the write-down of assets,
adjustments to previously established restructuring reserves and provisions for
employee severance, outplacement and relocation costs. Other income decreased
by 54 percent in 1992 due principally to the receipt of award proceeds from a
favorable patent infringement judgment in 1991, partially offset by reduced
charges in 1992 for provisions relating to roofing guarantees. In 1991, the
Company received approximately $40 million, including accrued interest, in
connection with a patent infringement judgment. The original $15 million
judgment, net of $2 million of deferred litigation costs, was reflected in
other income in the Building Products segment for 1991. Interest income,
recorded at
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the corporate level, reflected $25 million of the proceeds. As a result of
higher volumes, market share gains and increased productivity, income from
operations in the Building Products segment increased to $32.1 million in 1992
from a $46.4 million loss for 1991.
The Engineered Products segment's net sales in 1992 increased eight percent over
1991 due primarily to higher volume in domestic roofing fiber and mat. The
segment's gross profit margin increased slightly to 19 percent for 1992 as a
result of production efficiencies, offset by pricing pressures and the weakening
economic environment in Europe. Other operating expenses in 1992 increased six
percent over 1991 primarily as a result of an increase in product and business
development costs. The $5.8 million restructuring of operations gain reported
in 1992 was a result of an environmental remediation settlement and the reversal
of a portion of previously established separation reserves no longer deemed
necessary. The restructuring of operations loss reported in 1991 of $12.6
million included a provision for severance and related costs attributable to the
rationalization of operations and a charge for the write-down of assets. The
decrease in other income of 18 percent in 1992 was due primarily to income from
the licensing of technology in 1991. These factors resulted in an increase in
1992 income from operations of $26.5 million, or 90 percent, from 1991.
TOTAL COMPANY RESULTS
Total Company net sales of $2.20 billion in 1992 were $194 million, or ten
percent, above the $2.01 billion reported in 1991. The 1992 gross profit margin
of 22 percent increased from 19 percent in 1991. Selling, general and
administrative expense increased by ten percent in 1992 when compared with 1991.
Selling, general and administrative expense as a percentage of sales remained
relatively constant during 1992 when compared with 1991.
The restructuring of operations gain of $0.7 million reported in 1992 included a
loss of $7 million on the sale of certain oil and gas properties, and a gain of
$7.7 million on the sale of an investment in a joint venture.
The 1991 restructuring of operations loss of $64.1 million included a $61
million charge for the write-down of assets and provisions for severance and
related costs as the Company rationalized its operations and overhead levels
primarily in the Building Products and Engineered Products segments, a $3
million provision for asbestos-related workers' compensation claims and a net
provision for environmental cleanup costs of $1 million. These charges were
offset in part by an overall gain on the sales of two folding carton plants and
a small railroad company. The majority of these restructuring charges will
result in cash outlays.
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The $8.8 million decrease in other income (loss) for 1992 was due primarily to
the receipt of award proceeds from a patent infringement judgment received in
1991, and a decrease in income from the licensing of technology, partially
offset by reduced charges in 1992 for provisions relating to roofing guarantees.
Compared with 1991, interest income in 1992 decreased by $20.8 million. This
reduction in interest income was due mainly to the interest portion of the
patent infringement proceeds recorded in 1991, offset in part by increased
interest income earned on higher average cash and marketable securities
balances.
Interest expense in 1992 increased by 21 percent primarily as a result of
additional interest associated with $400 million of Riverwood debt raised
through a public offering and $154 million in net debt assumed by Riverwood in
the Macon linerboard mill acquisition.
In 1992, the Company recorded $12.1 million of profit sharing expense that was
paid in 1993 to the PI Trust, as required in the Plan. Profit sharing expense
for 1991 totaled $10.3 million and was paid in 1992.
As a result of the previously mentioned factors, income (loss) from continuing
operations before income taxes increased by $86 million to income of $77.8
million in 1992 from a loss of $8.2 million in 1991.
The 1992 effective tax rate on income from continuing operations of 35 percent
was higher than the U.S. federal statutory tax rate primarily because of
earnings derived from overseas operations taxed at higher effective rates plus
an increase in the deferred tax asset valuation allowance, offset in part by an
income tax benefit on that portion of a Common Stock dividend paid to the PI
Trust. The Company's 1991 effective tax rate on income from continuing
operations of 272 percent was principally due to earnings derived from overseas
operations, which were taxed at higher effective rates that were not offset by
tax benefits from losses in the U.S. Furthermore, the Company was subject to
U.S. alternative minimum tax in 1991 despite a loss from continuing operations
before income taxes.
DISCONTINUED OPERATIONS
Income from discontinued operations reflects the operating results of the
Company's former worldwide filtration and industrial minerals businesses known
as Celite Corporation. Effective July 31, 1991, the Company sold Celite
Corporation for cash and the assumption of certain liabilities, resulting in a
net gain of $13.5 million after income tax expense of $8.8 million. The
operating results of the discontinued operations for 1991 were excluded from
continuing operations.
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MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY
During the second quarter of 1992, Riverwood completed an initial public
offering of 12.1 million shares, or 19.5 percent, of Riverwood's common stock.
As a result of this transaction, the Company recorded an increase in Capital in
Excess of Par Value of $65.1 million and a minority interest in the net assets
of Riverwood of $93.1 million to reflect the 19.5 percent interest in Riverwood
no longer owned by the Company. During the third and fourth quarters of 1992,
the Company recorded a $3.1 million reduction of net income to recognize the
minority stockholders' proportionate share of Riverwood's net income.
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT
In 1992, the Company recorded an estimated extraordinary loss of $11.5 million,
net of related income tax benefit of $5.9 million, in anticipation of the early
redemption of a portion of the bonds payable to the PI Trust.
CUMULATIVE EFFECT OF ACCOUNTING CHANGES
Effective January 1, 1991, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" ("SFAS No. 106"), for its U.S. and Canadian postretirement medical and
life insurance benefit plans. In accordance with the provisions of that
statement, postretirement medical and life insurance benefit information for
prior years has not been restated. Upon adoption of SFAS No. 106, the Company
elected to immediately recognize the accumulated postretirement benefit
obligation of $173.4 million, net of taxes of $91.4 million. Previously,
retiree medical and life insurance coverage benefits were expensed as incurred.
Also in 1991, the Company recorded a $220.8 million increase in net income to
reflect the cumulative effect on prior years of a change in method of accounting
for income taxes that resulted from the adoption of SFAS No. 109, effective
January 1, 1991.
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 appropriate debt and equity financing and to convert into cash
those assets that are no longer required to meet existing obligations.
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 be considered
in analyzing liquidity.
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Cash flow provided by operating activities during 1993 was $183 million, of
which $60 million was generated by Riverwood. As a result of the Riverwood
public offerings completed during the second quarter of 1992 (see below), the
Manville holding company no longer has unrestricted access to cash flows
generated by Riverwood. Regarding Riverwood's Brazilian subsidiary, no
assurance can be given that changes in government regulations or economic
conditions in Brazil will not result in restrictions on or a prohibition of the
repatriation of dividends. 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. The Manville holding company's ability to generate
sufficient cash in 1994 and beyond is dependent upon funds generated from a tax
sharing agreement with Riverwood, dividends declared by Riverwood, Schuller
operations, asset dispositions, and capital raised through external sources.
Cash and marketable securities decreased by $215 million in 1993. This decrease
is primarily attributable to the $150 million prepayment on the Trust Bonds,
payment of a $127 million common dividend, and cash used on the conversion
project at the Macon linerboard mill, offset in part by cash received in
connection with the sale of the Riverwood Convertible Notes (defined below) and
the U.S. income tax refund and related accrued interest.
On September 17, 1993, Riverwood completed a private placement of $125 million
of 6.75 percent Convertible Subordinated Notes ("Convertible Notes") in
transactions exempt from registration under the Securities Act of 1933, as
amended. The Convertible Notes mature on September 15, 2003, unless previously
converted or redeemed, with interest payable semiannually on March 15 and
September 15, commencing in 1994. The Convertible Notes are general unsecured
obligations of Riverwood and are subordinated in right of payment to all Senior
Indebtedness, as defined in the indenture under which the Convertible Notes were
issued. As of December 31, 1993, Riverwood had $500 million aggregate principal
amount of indebtedness senior to the Convertible Notes.
On November 5, 1993, Riverwood filed a registration statement with respect to
the Convertible Notes and the common stock into which the Convertible Notes may
be converted. That registration statement, as amended, was declared effective
on November 29, 1993. Riverwood will not receive any additional proceeds from
subsequent sales of the Convertible Notes or underlying common stock pursuant to
the registration statement.
Riverwood intends to use a portion of the net proceeds from the Convertible
Notes offering, together with the proceeds from the Manville holding company
purchase of Riverwood common stock, to further the implementation of its Coated
Board System strategy by funding certain capital expenditures related to the
completion of
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the conversion of one of the two linerboard machines at the Macon mill, the
expansion of worldwide converting capacity, the manufacture and installation of
packaging machinery, and for general corporate purposes. Additionally,
Riverwood used a portion of these proceeds to repay $25 million of indebtedness
to the Manville holding company during September 1993.
During the second quarter of 1993, Riverwood renegotiated payments of certain
private placement debt that deferred approximately $63 million of its 1993 and
1994 scheduled principal payments to 1997. In addition, the renegotiation
eliminated the Manville holding company cross-default and guarantee provisions.
Scheduled amortization payments in 1995 and 1996, as well as Riverwood's desire
to modify certain covenants contained in subsidiary financing agreements, will
be part of Riverwood's 1994 refinancing analysis.
On December 20, 1993, Riverwood sold approximately 60,000 acres of nonstrategic
timberlands in Louisiana and Texas. This sale resulted in a gain of $17
million. The cash proceeds received in 1993 will primarily be reinvested in
Riverwood's Coated Board System business.
On June 24, 1992, Riverwood completed an initial public offering of 12.1 million
common shares. After the initial offering, the Manville holding company owned
approximately 80.5 percent of Riverwood's common stock and now owns
approximately 81.5 percent as a result of the purchase of additional Riverwood
shares in September 1993 (see "Minority Interest in Consolidated Subsidiary"
section above). The net proceeds of the June 24, 1992 equity offering of
approximately $160 million were used to pay the cash portion of the acquisition
price and a portion of the capital expenditures related to the Macon mill.
On June 24, 1992, Riverwood completed an offering of $150 million of 10.75
percent Senior Notes due 2000 (the "Senior Notes") and $250 million of 11.25
percent Senior Subordinated Notes due 2002 (the "Senior Subordinated Notes").
Interest on these notes is payable semiannually. These notes may be redeemed on
or after June 15, 1997, at a specified redemption price plus accrued interest.
The net proceeds of the debt offering were used, in part, to prepay $300 million
of a $400 million promissory note payable by Riverwood to the Manville holding
company, and were used in part to fund certain capital expenditures related to
the Macon mill, and for general corporate purposes. After the $300 million
prepayment, the remaining $100 million note payable to the Manville holding
company was exchanged during 1993 for the Intercompany Notes, which in turn were
assigned to the PI Trust pursuant to the Bond Prepayment Agreement.
The notes issued by Riverwood in its public offerings (the "RVW Notes") are
general unsecured obligations of Riverwood. The
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indentures relating to the RVW Notes (the "Note Indentures") contain a provision
that requires Riverwood, upon a Change of Control Triggering Event (as defined
in the Note Indentures), to offer to purchase the RVW Notes at 100 percent of
the principal amount thereof, plus accrued interest to the date of purchase, in
accordance with the procedures set forth in the Note Indentures.
The debt and credit agreements of Riverwood and its subsidiaries contain a
number of financial and operating covenants that include, among other things,
restrictions on borrowings, investments, stock issuances and repurchases,
dividends and other distributions by Riverwood and its subsidiaries. For
example, the agreements governing Riverwood's Senior Indebtedness require that,
with certain exceptions, including but not limited to approximately $96 million
of revolving credit facilities, additional indebtedness may be incurred only if,
after giving effect to the incurrence thereof, Riverwood's pro forma
consolidated interest coverage ratio is greater than 2 to 1 until April 1995, at
which time the pro forma consolidated interest coverage ratio increases to 2.25
to 1. As of December 31, 1993, Riverwood's pro forma consolidated interest
coverage ratio was less than 2 to 1. In addition, Riverwood's ability to incur
debt is also restricted pursuant to agreements between the Manville holding
company and the PI Trust and PD Trust (defined below). Noncompliance with
covenants could result in the termination of existing credit agreements or the
accelerated payment of debt owed by Riverwood and its subsidiaries.
In July 1992, Riverwood consummated an agreement with Pratt Industries (USA),
Inc., an indirect wholly owned subsidiary of Pratt Holdings Pty. Limited,
pursuant to which a newly formed subsidiary of Riverwood ("RVW Georgia")
acquired substantially all of the assets of Macon Kraft, Inc. ("MKI"), including
the assets of two of its subsidiaries. The purchase price for the assets of MKI
was approximately $219 million and included the assumption of third-party debt
of approximately $169 million and the payment of the balance in cash.
Immediately following the acquisition, approximately $15 million of the assumed
debt was prepaid. The acquisition was accounted for using the purchase method of
accounting.
The Macon mill currently produces linerboard for corrugated box applications.
To meet the growing demand for paperboard packaging by multinational beverage
and consumer products customers, RVW Georgia is in the process of converting one
of the Macon mill's two paper machines to produce coated board. Total capital
expenditures for the conversion and a new recovery boiler are expected to be
approximately $250 million. Approximately $135 million of the estimated $250
million of capital expenditures were made during 1993 for a total of
approximately $179 million since the acquisition of the mill. Coated board
production is scheduled to begin in 1994, with limited production available to
meet the 1994 beverage season. As of December 31, 1993, outstanding purchase
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commitments relating to these projects and other Macon mill spending totaled
approximately $39 million. Excluding capitalized interest, Riverwood's 1994
capital expenditures are expected to be approximately $210 million and include
expenditures at the Macon mill, the cost of additional packaging machinery
placements in 1994, projects which will add worldwide press and converting
capacity, and costs for environmental compliance.
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.
During 1993, Schuller initiated a program to expand its fiberglass wool capacity
used for building insulation products. The planned expansion is estimated to
cost approximately $100 million and will increase Schuller's building insulation
capacity by approximately 20 percent. Schuller believes that such a capacity
expansion will enable its building insulation business to maintain or modestly
gain market share through 1996. In total, Manville's 1994 capital expenditures
are expected to be approximately $315 million.
In January 1994, the Company completed a simultaneous sale and purchase of
certain roofing businesses with Owens-Corning. Pursuant to the transaction, the
Company acquired Owens-Corning's commercial and industrial roofing business and
sold its residential roofing business to Owens-Corning. In addition, Schuller
will have the right to market Owens-Corning's fiberglass roof insulation and
other proprietary products. The transaction also extends the Company's
geographic coverage into the Canadian market. As a result of this transaction,
the Company no longer sells residential roofing products.
On June 4, 1993 and December 8, 1992, the Company's Board of Directors declared
cash dividends of $1.04 per share on the Company's Common Stock. The dividends
of approximately $127 million each were paid on June 24, 1993 and December 28,
1992, to stockholders of record.
Riverwood paid its first quarterly cash dividend of $.04 per share to the
stockholders of record at the close of business on December 3, 1992. Riverwood
continued to pay quarterly dividends throughout 1993. Riverwood currently
intends to continue paying quarterly dividends of $.04 per share on its common
stock subject to a number of conditions, including declaration by Riverwood's
Board of Directors and compliance with covenants in debt instruments and other
agreements. As such dividends are paid, the Manville holding company will
receive approximately $2 million quarterly from Riverwood.
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On February 4, 1994, the Company's Board of Directors declared the first
dividend on the Company's Cumulative Preference Stock, Series B. This dividend,
which represents a two-month period, January 1 through February 28, 1994, will
pay $0.45 per preference share, or approximately $4.2 million.
Bonds issued to the PI Trust under the Plan previously required payments twice a
year of $37.5 million. These payments began in August 1991. Upon consummation
of the Bond Prepayment Agreement (see the "Personal Injury Trust Refinancing
Agreement" section below), and the corresponding prepayment and exchange in
1993, each of these twice-a-year payments was reduced to approximately $20.7
million except for the payments due in the years 2001 to 2002 and 2013 to 2014,
which will be twice-a-year payments of $37.5 million.
The Company's agreements with its lenders and other agreements with the PI Trust
and PD Trust (defined below), including the Manville Trust Consent and Waiver
Agreement between the PI Trust and the Company dated September 1, 1993, (the
"Trust Consent"), entered into in connection with Riverwood's issuance of the
Convertible Notes, contain a number of financial and general covenants. These
include, among other things, restrictions on borrowings, investments, stock
issuances and repurchases, dividends and other distributions, and restrictions
on the movement of cash from Riverwood to the Manville holding company.
Noncompliance with any of these or other covenants, or the occurrence of any
other event of default, could result in the termination of existing credit
agreements or the acceleration of substantially all currently outstanding debt.
Riverwood anticipates that it will need to refinance or restructure certain
subsidiary debt to amend or eliminate certain covenant restrictions. Depending
upon the structure of any such refinancing or restructuring, the costs of such
refinancing or restructuring could be up to $20 million. Riverwood believes
that it will be able to refinance or restructure such debt on terms and at costs
satisfactory to Riverwood.
The Company's senior unsecured debt is rated B2 by Moody's Investors Service,
Inc. ("Moody's"). Schuller's industrial revenue bonds are rated B1 by Moody's,
which also rates the Senior Notes, Senior Subordinated Notes and Convertible
Notes issued by Riverwood at Ba2, B1 and B2, respectively. Standard and Poor's
Corporation rates the Company's senior unsecured debt at B- and all Riverwood
and Schuller debt at B.
The Company had net working capital of $322 million, including cash and
marketable securities of $228 million, at December 31, 1993. Approximately $23
million of cash and marketable securities are located outside of the United
States and Canada, and approximately $144 million are held by Riverwood, of
which $9 million are located outside of the United States.
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Overall, the Company's debt increased during 1993 by $40 million, principally as
a result of the Convertible Notes offering and additional borrowings by foreign
subsidiaries, offset in part by the prepayment of a portion of the Trust Bonds.
Principal reductions on long-term debt payable to lenders other than the PI
Trust are expected to be approximately $15.8 million during 1994, prior to any
refinancings. Total anticipated debt payments to the PI Trust during 1994 are
$41 million of principal and accrued interest pertaining to the regularly
scheduled payments.
In April 1992, the Company established a $100 million receivables sale facility
for Schuller's domestic operations to replace a former revolving credit
facility. The receivables sale facility requires, among other things, that the
Company maintain a specified level of tangible net worth. In addition, during
1992, the Company established approximately $90 million of local credit lines
for two foreign subsidiaries and established an additional $75 million of credit
lines for Riverwood's domestic subsidiaries.
At December 31, 1993, the Company had commitments of approximately $252 million
under the domestic receivables sale facility and various foreign and domestic
revolving credit facilities, of which approximately $239 million were available
for use. The Company's use of these credit facilities for its domestic
subsidiaries is subject to restrictions contained in the Trust Consent. In
addition, the Company has arrangements with certain foreign banks for
discounting receivables; approximately $28 million of receivables had been
discounted as of December 31, 1993. Generally, letters of credit are
collateralized by cash or are issued under revolving credit facilities.
A tax sharing agreement between the Manville holding company and Riverwood (the
"Tax Sharing Agreement") provides that Riverwood's U.S. taxes be calculated as
if it were a fully independent entity and that such tax amounts are to be
remitted to the Manville holding company. The Company is able to apply tax
benefits to reduce the consolidated domestic tax obligation, allowing the
Manville holding company to retain a large portion of the cash remitted by
Riverwood. The Manville holding company currently intends to maintain at least
an 80 percent ownership interest in Riverwood in order to preserve the
consolidated tax entity and utilize existing tax benefits. Payments to be made
to the Manville holding company for Riverwood's 1993 U.S. federal and state
income taxes total approximately $13 million.
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
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manufactured by the Company 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 an 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 have been 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. As of December 31, 1993, the total costs
to the Company for inspections and claims sampling totaled approximately $2.5
million, and the total costs of remediation were approximately $2.8 million.
The exact number of phenolic-related claims the Company may receive is dependent
on a number of variables and cannot be determined at this time.
Based on its experience to date and the information currently available, the
Company has recorded an estimated loss of approximately $19.7 million for
anticipated sampling, inspection and remediation costs. It is possible the
ultimate loss, which cannot be determined at this time, could exceed this
estimate.
Any determination of the ultimate cost to the Company for phenolic-related deck
corrosion must take into consideration insurance that is available to address
such claims as well as other sources of indemnification. The Company has
substantial insurance that 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. 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 recorded in
the Company's financial statements at December 31, 1993. 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. Because of the uncertainties involved in pending
litigation, no assurances are possible.
During 1993, the Company filed a lawsuit against Beazer. The Company seeks
recovery from Beazer for all costs and damages incurred as a result of the
acquisition of the phenolic business. Additionally, to the extent negligence of
others (contractors, architects, manufacturers of other roofing system
components) is a contributing factor to roof deck corrosion, the Company may
have rights in contribution for recovery of a substantial portion of its costs
from such third parties.
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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 December 31, 1993, cannot be quantified at this time.
The ultimate amount and timing of the expected payouts for these expenses and
corresponding receipt of insurance recoveries cannot be determined. The Company
expects to fund any currently unreimbursed costs from cash on hand and cash
generated from operations.
The Company believes there are certain areas that may require financial
commitments in excess of liabilities currently reflected on the consolidated
balance sheet, though such amounts are not expected to have a material impact on
the financial position of the Company. With respect to environmental costs, the
Company is committed to full compliance with all applicable environmental laws
and regulations. Environmental law at the present is dynamic, and 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. For example, the Company is currently awaiting
the federal Environmental Protection Agency's implementation of the 1990
Amendments to the Clean Air Act to determine their impact on the Company's
business segments. 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 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. During 1993 and 1992, the
Company paid approximately $2.8 million and $12 million, respectively, for
environmental cleanup, almost entirely for properties owned by the Company, and
had reserves totaling approximately $39 million for environmental cleanup at
December 31, 1993, of which $4.7 million were classified as current liabilities.
The Company expects the cash outlays related to these reserves to occur over the
next several years. The Company periodically
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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.
Manville Canada, Inc. ("MvL Canada"), a wholly owned subsidiary of the Manville
holding company, and Schuller were named in certain personal injury and property
damage lawsuits filed in the Supreme Court of British Columbia that alleged
unspecified damages from the presence of asbestos. Pursuant to an agreement
dated August 31, 1993, plaintiffs to the Canadian litigation, MvL Canada,
Schuller, and the Company agreed to settle the lawsuits to avoid further
litigation costs. The terms of the agreement are confidential.
The Company believes that with its current cash position and existing credit
facilities, cash generated from operations, its access to private and public
capital markets, and proceeds from the sale of nonstrategic assets, it can
adequately fund normal debt service requirements, its planned capital spending
programs and its other commitments.
PROFIT SHARING OBLIGATION
Beginning in 1992, the Company was obligated to pay annually to the PI Trust 20
percent of net earnings (adjusted as specified in the definition of "Profits" in
the Amended and Restated Supplemental Agreement between the PI Trust and the
Manville holding company). Payments are due each year based on the prior year's
net earnings. The profit sharing right of the PI Trust is a right to annual
payments if and when the Company has income and is not a right or lien against
the assets of the Company. The amount of the profit sharing becomes probable
and reasonably estimable only when the Company has earnings. The profit sharing
obligation is a period cost based on actual results of the period in which
earned. The profit sharing obligation will continue for as long as the PI Trust
is in existence and any asbestos personal injury claims filed against the PI
Trust remain unpaid. After termination of the PI Trust, an independent profit
sharing obligation arises in favor of the Manville Property Damage Settlement
Trust (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 obligation
at some future date. During 1993, the Company recorded $13 million of profit
sharing expense to be paid in 1994, as required by the Plan. See Note 3 of
Notes to the Consolidated Financial Statements for further discussion of the
profit sharing obligation.
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RELATIONSHIP OF MANVILLE TO THE PERSONAL INJURY TRUST
On December 9, 1992, the PI Trust converted all of the 7.2 million issued and
outstanding shares of Series A Convertible Preferred Stock into 72 million
shares of the Company's Common Stock. As a result of the conversion, the PI
Trust now owns approximately 80 percent of the Company's Common Stock.
As the owner of approximately 80 percent of the Company's common shares, the PI
Trust has effective voting control over the Company. In its capacity as the
majority stockholder, however, the PI Trust may have legal and fiduciary
responsibilities to the other stockholders of the Company. Because of its
liquidity needs, the PI Trust may have a different perspective than other
investors. In maximizing the value of all of its Manville securities, the PI
Trust may have a conflict of interests with other security holders.
Nevertheless, as the PI Trust is both the Company's majority stockholder and one
of the Company's largest creditors, it has an interest in maximizing the total
value of the Company. The Company conducts all negotiations with the PI Trust
on an arm's-length basis, with both parties being represented by their own legal
and financial advisors. Significant transactions with the PI Trust are reviewed
by the Board of Directors, after consultation with appropriate external advisors
and experts, to determine that the transactions are fair. In addition, the
Audit Committee of the Board of Directors reviews the accounting treatment for
such transactions. Since November 6, 1992, three trustees of the PI Trust,
Robert A. Falise, Chairman and Managing Trustee, Louis Klein, Jr. and Christian
E. Markey, Jr., have been members of the Company's Board of Directors.
The Manville holding company and Riverwood entered into an agreement dated June
24, 1992 (the "Corporate Agreement"), which provides that: (i) Riverwood will
not issue any preferred stock or options or other rights to acquire preferred
stock; (ii) Riverwood will not issue any common stock or options or other rights
to acquire common stock if after any such issuance Riverwood would not be a
member of the Company's combined consolidated group for tax purposes; (iii)
Riverwood will nominate at least two candidates to Riverwood's Board of
Directors who are designated by the PI Trust; and (iv) Riverwood will not
amend its Restated Certificate of Incorporation or Amended and Restated Bylaws;
in each case, without the consent of the Manville holding company. The Manville
holding company has agreed with the PI Trust not to grant such consent without
PI Trust consent and has further agreed to vote its shares of Riverwood stock
for the two PI Trust designees proposed by Riverwood. The Corporate Agreement
terminates on the earlier of the date when the PI Trust or its assignee owns
less than a majority of the Company's common stock or the date when the Manville
holding company owns less than a majority of Riverwood.
The Company and the PI Trust entered into an agreement dated June 24, 1992 (the
"Manville-Trust Agreement"), which also terminates on the earlier of the date
when the PI Trust or its assignee owns less
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than a majority of the Company's common stock or the date when the Manville
holding company owns less than a majority of Riverwood. Under the Manville-
Trust Agreement, the Company agrees: (i) to vote for the two Riverwood Board
nominees designated by the PI Trust or its assignee; (ii) not to amend or waive
the Corporate Agreement without the PI Trust's consent; (iii) not to vote in
favor of amending Riverwood's Restated Certificate of Incorporation or Amended
and Restated Bylaws without the PI Trust's consent; (iv) not to waive or amend
the Tax Sharing Agreement in a manner that would be adverse to the Company
without the PI Trust's consent; and (v) not to dispose of Riverwood's common or
preferred stock without the consent of the PI Trust if to do so would cause
Riverwood not to be included in the Company's consolidated tax group.
Shortly after the completion of the Riverwood public offerings, Robert A.
Falise, Chairman and Managing Trustee, and Louis Klein, Jr., trustee of the PI
Trust, were appointed to the Riverwood Board of Directors. In addition, during
1993, Christian E. Markey, Jr., trustee of the PI Trust, was appointed to the
Riverwood Board of Directors.
In connection with Riverwood's issuance of the Convertible Notes, the PI Trust
and the Manville holding company entered into the Trust Consent. At the same
time, Riverwood and the Manville holding company entered into an agreement (the
"Company Waiver Agreement") which permitted Riverwood to issue the Convertible
Notes by waiving restrictions contained in the Corporate Agreement. As
consideration for such permission, Riverwood agreed to subject the terms of the
Convertible Notes, the Convertible Note Indenture and other documents related to
the Convertible Notes to the prior express approval of the Manville holding
company and prohibited Riverwood from agreeing to alter or amend the Convertible
Notes or the Convertible Note Indenture without the prior express written
consent of the Manville holding company. The Company Waiver Agreement also
contained procedures by which Riverwood must notify the Manville holding company
and consult with the Manville holding company in the event that Convertible
Notes are tendered for conversion and, as a result, Riverwood would no longer be
included in the Company's consolidated federal tax return. The Company Waiver
Agreement also contains certain reporting and other requirements by Riverwood.
The Trust Consent permitted the Manville holding company to enter into the
Company Waiver Agreement and required the Manville holding company to ensure
Riverwood's compliance with the Company Waiver Agreement. In addition, the
Manville holding company must provide notice to and cooperate with the PI Trust
in the event Convertible Notes are tendered that would result in the issuance of
common stock, the effect of which would be to cause Riverwood to no longer be
included in the Company's consolidated income tax return. The Trust Consent
also requires the Manville holding company to provide the PI Trust with written
notice within two business days after the occurrence of certain borrowings and
the execution and delivery of
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any agreement relating to certain borrowings. Finally, pursuant to the Trust
Consent, the PI Trust agreed to grant certain waivers to the Bond Prepayment
Agreement to permit the issuance of the Convertible Notes and to make additional
subsidiary debt available, subject to certain restrictions. As a result, of the
approximately $122.6 million of debt capacity available to the Manville holding
company's U.S. subsidiaries at December 31, 1993, approximately $116.2 million
may only be used for the working capital or maintenance requirements of
Riverwood and Schuller. In addition, the Company had available at December 31,
1993, a $100 million receivables sale facility for Schuller's domestic
operations.
PERSONAL INJURY TRUST REFINANCING ARRANGEMENT
On November 19, 1990, the Company and the PI Trust entered into formal
agreements with respect to a refinancing arrangement (the "Refinancing
Arrangement") that was designed to enhance the PI Trust's liquidity, including
the payment of a series of special dividends (the "Special Dividends") to all
stockholders of up to $650 million over seven years.
Also in November 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 sought to restructure the methods by which the
PI Trust administers and pays claims. The Company is not a party to the Class
Action. On November 26, 1990, the Company filed a separate motion asking the
Courts and the Bankruptcy Court to issue orders reaffirming the Injunction.
On June 27, 1991, the Courts and the Bankruptcy Court issued amended orders
reaffirming the Injunction (the "Reaffirmation Order") and approving the
settlement of the Class Action (the "Restructuring Settlement"). Thirteen
appeals of the decision were filed by various parties; however, none of the
appeals challenged the Reaffirmation Order.
On December 4, 1992, the United States Court of Appeals for the Second Circuit
(the "Court of Appeals") vacated and remanded for further proceedings the
decision of the Courts that had approved the Restructuring Settlement (the
"Appeals Court Decision"). The Court of Appeals 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 a
part of the Class Action. The Appeals Court Decision did not address the
Reaffirmation Order. The Appeals Court Decision, as subsequently modified, has
become final, and accordingly, those aspects of the Refinancing Arrangement
conditioned upon affirmative resolution have terminated. Attempts by parties to
the Class
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Action to reach a new settlement are continuing. One day of trial of the Class
Action was held on March 15, 1994, and in the absence of a settlement, the trial
will resume following a conference before the Courts currently scheduled for
April 18, 1994.
Even though the Court of Appeals remanded the Restructuring Settlement, with the
consent of the PI Trust, the Company's Board of Directors, on December 9, 1992,
declared a dividend of $1.04 per share on the Company's Common Stock
outstanding, which would have satisfied the Company's obligation to pay the
first dividend pursuant to the Refinancing Arrangement. This dividend was paid
on December 28, 1992. Prior to and in connection with the dividend declaration,
the PI Trust converted its 7.2 million shares of Series A Convertible Preferred
Stock into 72 million shares of Common Stock. As a result of the conversion,
the PI Trust currently owns 96 million shares, or approximately 80 percent, of
the Company's issued and outstanding Common Stock.
On June 4, 1993, the Company's Board of Directors, with the consent of the PI
Trust, declared a dividend of $1.04 per share on the Company's outstanding
Common Stock, which would have satisfied the Company's obligation to pay the
second Special Dividend pursuant to the Refinancing Arrangement. This dividend
was paid on June 14, 1993. The Company is entitled to a tax benefit, for the
amount of dividends paid to the PI Trust. See Note 22 of the Notes to the
Consolidated Financial Statements for further discussion of income taxes.
Presently, $102.9 million of Common Stock Dividends Accrued Not Declared are
reflected in the December 31, 1993 consolidated balance sheet. This accrual
represents the amount of the third and fourth Special Dividends under the
Refinancing Arrangement. Even though the Refinancing Arrangement is no longer
in effect, the Company believes that special dividends could be in the interest
of all Manville stockholders. Therefore, from time to time, the Company's Board
of Directors will consider declaring and paying common dividends. In making
such decisions, the Board will evaluate the Company's capital needs, its debt
levels and the economic environment of the markets served by the Company's
businesses. Although the common stock dividends remain accrued, no assurance
can be given that these dividends will be declared and paid by the Company.
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 have been met. Payment of dividends to common
stockholders beginning in 1994 entitles the holders of the Cumulative Preference
Stock, Series B, to cash dividends accumulated to the date of the common
dividend payment. An accrual of $72.7 million, which represents the amount of
the anticipated 1994, 1995 and 1996 dividends payable to Series
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B cumulative preference stockholders, was reflected in liabilities as of
December 31, 1993, as part of the accounting for the Refinancing Arrangement.
This accrual is being maintained on the same basis as the common stock
dividends. The Company declared the first dividend, representing a two-month
period, on its Cumulative Preference Stock, Series B, on February 4, 1994. In
conjunction with the declaration, the full year 1994 Series B dividends totaling
$22.8 million of the $72.7 million were classified as a current liability at
December 31, 1993.
Although accrued for financial reporting purposes, neither the third or fourth
Special Dividends nor the Series B preference dividends, other than the first
Series B dividend, has been declared by the Company's Board of Directors.
On August 25, 1993, the Manville holding company and the PI Trust entered into
the Bond Prepayment Agreement, which was previously called the "Second Bond
Exchange Agreement" (the "Agreement"). Pursuant to the Agreement, on August 25,
1993, the Company made a prepayment on its outstanding bond obligations to the
PI Trust. The prepayment consisted of $150 million of cash, net of certain
costs, and the assignment to the PI Trust of the Intercompany Notes. The
assignment of the Intercompany Notes was pursuant to an option in the Agreement
that the PI Trust exercised on August 25, 1993. Following the prepayment, the
carrying value of the Company's remaining outstanding bond obligations owed to
the PI Trust is approximately $323 million.
The Agreement incorporated and modified certain provisions of the First Bond
Exchange Agreement between the Manville holding company and the PI Trust,
amended certain provisions of the Amended and Restated Supplemental Agreement
between the Company and the PI Trust, and provided for the execution and
delivery into escrow of an amendment to the Amended and Restated Property Damage
Supplemental Agreement.
Among other things, the covenants contained in the Agreement generally provide
limitations on the amount of debt the Company may incur and on the Company's
ability to declare and pay dividends on its capital stock. The debt limitations
have been further restricted pursuant to the Trust Consent described above.
The Agreement also granted the PI Trust the right to require the Manville
holding company to cause Riverwood to file with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Registration
Statement") covering the Intercompany Notes. The Registration Statement was
filed with the Commission on September 14, 1993. The Registration Statement, as
amended, was declared effective by the Commission on October 6, 1993. The PI
Trust sold the Intercompany Notes in a public offering on October 14, 1993.
Neither the Company nor Riverwood received any proceeds from the PI Trust's
public offering of the Riverwood notes.
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IMPACT OF INFLATION
In the United States, where the average inflation rate has ranged from three to
four percent in each of the last three years, 1993 U.S. net sales were $1.8
billion, or approximately 79 percent of the Company's total net sales. Although
inflation is not a significant factor domestically, the Company takes steps to
maintain its profit margins through implementation of cost reduction and
productivity improvement programs and timely price increases within the
constraints of highly competitive markets. In addition, the Company's use of
the LIFO method of accounting for substantially all domestic inventories results
in reporting the costs of products sold at approximately current cost.
In foreign countries where the Company has manufacturing facilities, the
weighted average inflation rate was approximately three percent for Europe and
two percent for Australia, while the inflation rate in Brazil was well over
2,000 percent during 1993. Net sales from the overseas locations during 1993
amounted to $478 million, or approximately 21 percent, of the Company's total
net sales, including $109 million of sales from Brazilian operations.
Operations in Brazil are maintained in a highly inflationary economy with
rapidly changing prices in the local currency. These conditions, combined with
the continued recession, have caused a decline in the operating margins of the
Company's Brazilian subsidiary compared with recent years. The Company's
Brazilian subsidiary attempts to mitigate the impact of inflation in Brazil
through export sales to countries with stable economies. In addition, the
Brazilian subsidiary is hedging the impact of rising prices through increased
cash sales and through finance charges to cover projected inflation on term
sales.
Inventories in foreign countries are primarily accounted for on the FIFO method;
thus, the charge to cost of sales does not necessarily reflect current costs.
However, the Company believes that if its foreign operations were restated to
reflect higher cost of sales based on inventories valued at current cost,
reported gross profit would not be significantly decreased. The strength of the
U.S. dollar versus foreign currencies has lowered 1993 results from the
Company's foreign operations as reported in U.S. dollars.
Due to currency fluctuations, inflation and changes in political and economic
conditions, earnings from Brazilian operations have been subject to significant
volatility. The Company is cautious about the future economic conditions in
Brazil and their effects on the Containerboard segment's results.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
----
Consolidated Balance Sheet, December 31, 1993 and 1992............... 86
Consolidated Statement of Income, for each of the
three years in the period ended December 31, 1993.................. 88
Consolidated Statement of Cash Flows, for each of the three
years in the period ended December 31, 1993........................ 90
Consolidated Statement of Stockholders' Equity, for each
of the three years in the period ended December 31, 1993........... 92
Notes to the Consolidated Financial Statements....................... 95
Management's Report.................................................. 136
Report of Independent Accountants.................................... 137
Supplementary Data (Unaudited):
Selected Quarterly Financial Data, for each of the two years
in the period ended December 31, 1993.............................. 138
The Effect of Changes in General Price Level, for each of
the five years in the period ended December 31, 1993................ 141
85
<PAGE>
MANVILLE CORPORATION
CONSOLIDATED BALANCE SHEET
DECEMBER 31
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Assets 1993 1992
- ---------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and equivalents (Notes 1 and 6) $ 153,093 $ 392,172
Marketable securities, at cost which
approximates market (Note 6) 75,062 50,734
Receivables (Notes 5, 6 and 8) 304,114 300,511
Inventories (Notes 1, 7 and 8) 207,702 198,083
Prepaid expenses 26,747 22,373
Deferred tax assets (Notes 1 and 22) 50,179 42,573
- ---------------------------------------------------------------------------------
Total Current Assets 816,897 1,006,446
- ---------------------------------------------------------------------------------
Property, Plant and Equipment, at cost (Notes 1 and 10)
Land and mineral properties 116,024 152,435
Buildings 374,081 350,519
Machinery and equipment 2,337,401 2,088,309
- ---------------------------------------------------------------------------------
2,827,506 2,591,263
Less accumulated depreciation and depletion 1,017,178 936,873
- ---------------------------------------------------------------------------------
1,810,328 1,654,390
Timber and timberlands, less cost of timber
harvested 303,301 338,426
- ---------------------------------------------------------------------------------
Property, Plant and Equipment, net 2,113,629 1,992,816
- ---------------------------------------------------------------------------------
Deferred Tax Assets (Notes 1 and 22) 331,292 285,327
Other Assets (Notes 6 and 17) 354,419 345,774
- ---------------------------------------------------------------------------------
Total Assets $3,616,237 $3,630,363
=================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
86
<PAGE>
MANVILLE CORPORATION
CONSOLIDATED BALANCE SHEET (CONTINUED)
DECEMBER 31
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Liabilities 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C>
Current Liabilities
Short-term debt (Notes 6 and 8) $ 42,364 $ 63,185
Anticipated extinguishment of bonds payable to the
Manville Personal Injury Settlement Trust
(Notes 4, 6, 10 and 24) 139,150
Accounts payable 165,704 145,195
Compensation and employee benefits (Notes 9,
17 and 18) 135,024 140,858
Income taxes (Notes 1 and 22) 21,770 27,889
Accrued dividends - Cumulative Preference Stock,
Series B (Notes 4 and 13) 22,846
Other accrued liabilities (Notes 3, 6, 9 and 19) 107,440 115,557
- --------------------------------------------------------------------------------
Total Current Liabilities 495,148 631,834
Long-Term Debt, less current portion (Notes 6, 8
and 10) 1,390,988 1,191,061
Deferred Income Taxes (Notes 1 and 22) 91,656 99,984
Postretirement Benefits Other Than
Pensions (Note 18) 246,525 245,088
Other Noncurrent Liabilities (Notes 17 and 19) 300,775 249,598
Common Stock Dividends Accrued Not Declared
(Notes 4 and 13) 102,856 231,040
Cumulative Preference Stock Dividends Accrued
Not Declared (Notes 4 and 13) 49,845 63,409
- --------------------------------------------------------------------------------
Total Liabilities 2,677,793 2,712,014
- --------------------------------------------------------------------------------
Profit Sharing Obligation (Notes 3 and 6)
Contingencies and Commitments (Notes 2, 4, 6 and 12)
Minority Interest in Consolidated Subsidiary
(Notes 1 and 11) 92,375 93,056
Stockholders' Equity (Notes 1, 2, 3, 4, 13, 14, 15,
16 and 17)
- --------------------------------------------------------------------------------
Cumulative Preference Stock, Series B, $1.00 par
value, authorized 11,109,170 shares, issued and
outstanding 9,230,583 shares in 1993 and
9,159,365 shares in 1992 (aggregate
liquidation value - $230,765) 105,947 92,684
Common Stock, $.01 par value, authorized
175,000,000 shares, issued and outstanding
122,335,722 shares in 1993 and 122,600,827
shares in 1992 1,224 1,229
Capital in Excess of Par Value 900,562 902,188
Unearned Restricted Stock Compensation (2,663) (6,788)
Accumulated Deficit (142,467) (167,704)
Pension Liability Adjustment (4,345) (4,016)
Cumulative Currency Translation Adjustment (12,189) 7,700
- --------------------------------------------------------------------------------
Total Stockholders' Equity 846,069 825,293
- --------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $3,616,237 $3,630,363
===============================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
87
<PAGE>
MANVILLE CORPORATION
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $2,275,935 $2,203,953 $2,009,878
Cost of Sales 1,798,259 1,728,551 1,630,188
Selling, General and Administrative 259,632 241,411 219,602
Research, Development and Engineering 37,358 34,563 35,988
Restructuring of Operations Gain
(Loss), net (Note 20) (40,539) 746 (64,148)
Other Income (Loss), net (Note 21) (4,199) 2,042 10,865
- -------------------------------------------------------------------------------
Income from Operations 135,948 202,216 70,817
Interest Income (Notes 21 and 22) 27,378 17,766 38,523
Interest Expense 143,980 130,054 107,250
Profit Sharing Expense (Note 3) 12,993 12,123 10,282
- -------------------------------------------------------------------------------
Income (Loss) from Continuing
Operations before Income Taxes 6,353 77,805 (8,192)
Income Taxes (Benefit) (Notes 1 and 22) (54,718) 27,226 22,307
- -------------------------------------------------------------------------------
Income (Loss) from Continuing
Operations 61,071 50,579 (30,499)
Income from Discontinued Operations,
net of tax (Note 23) 4,290
Gain on Disposal of Discontinued
Operations, net of tax (Note 23) 13,512
- -------------------------------------------------------------------------------
Income (Loss) before Minority
Interest, Extraordinary Item
and Cumulative Effect of Accounting
Changes 61,071 50,579 (12,697)
Minority Interest in Consolidated
Subsidiary (Notes 1 and 11) (299) (3,114)
- -------------------------------------------------------------------------------
Income (Loss) before Extraordinary
Item and Cumulative Effect of
Accounting Changes 60,772 47,465 (12,697)
Extraordinary Gain (Loss) on Early
Extinguishment of Debt, net of tax
(Notes 4, 10 and 24) 891 (11,516)
Cumulative Effect of a Change
in Accounting for Postemployment
Benefits, net of tax (Note 25) (13,881)
Cumulative Effect of a Change in
Accounting for Postretirement
Benefits Other Than
Pensions, net of tax (Note 25) (173,398)
Cumulative Effect of a Change in
Accounting for Income Taxes
(Note 25) 220,795
- -------------------------------------------------------------------------------
Net Income 47,782 35,949 34,700
Preference Stock Accretion (Note 13) (22,545) (19,982) (17,099)
- -------------------------------------------------------------------------------
Net Income Applicable to
Common Stock (Notes 13 and 15) $ 25,237 $ 15,967 $ 17,601
===============================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
88
<PAGE>
MANVILLE CORPORATION
CONSOLIDATED STATEMENT OF INCOME (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Earnings (Loss) Per Common Share
(Notes 13 and 15) 1993 1992 1991
- -----------------------------------------------------------------
<S> <C> <C> <C>
Primary and Fully Diluted:
Income (Loss) from Continuing Operations $ .31 $ .25 $(.39)
Income from Discontinued Operations,
net of tax (Note 23) .04
Gain on Disposal of Discontinued
Operations, net of tax (Note 23) .11
- -----------------------------------------------------------------
Income (Loss) before Minority Interest,
Extraordinary Item and Cumulative
Effect of Accounting Changes .31 .25 (.24)
Minority Interest in Consolidated
Subsidiary (Notes 1 and 11) (.03)
- -----------------------------------------------------------------
Income (Loss) before Extraordinary Item
and Cumulative Effect
of Accounting Changes .31 .22 (.24)
Extraordinary Gain (Loss) on Early
Extinguishment of Debt, net of tax
(Notes 4, 10 and 24) .01 (.09)
Cumulative Effect of a Change
in Accounting for Postemployment
Benefits, net of tax (Note 25) (.11)
Cumulative Effect of a Change
in Accounting for Postretirement
Benefits Other Than Pensions,
net of tax (Note 25) (1.44)
Cumulative Effect of a Change in Accounting
for Income Taxes (Note 25) 1.83
- -----------------------------------------------------------------
Net Income Applicable to Common Stock $ .21 $ .13 $ .15
=================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
89
<PAGE>
MANVILLE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Cash Flows from Operating
Activities (Note 26) 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $ 47,782 $ 35,949 $ 34,700
Non-cash items included in net income:
Depreciation, depletion and
amortization 157,108 148,914 138,826
Deferred taxes (37,900) 49,090 (34,765)
Restructuring of operations (gain) loss 33,614 (746) 60,379
Pension expense 6,459 3,048 7,927
Other postretirement benefits expense 27,280 26,578 24,916
Cumulative effect of accounting
changes 13,881 (47,397)
Translation loss 13,050 6,756 2,249
Profit sharing expense 12,993 12,123 10,282
Roofing guarantee income 5,685 5,079 3,910
Interest accretion 3,237 2,846 2,504
Other non-cash adjustments (4,232) (1,000) 27,933
Extraordinary (gain) loss on early
extinguishment of debt, net of tax (891) 11,516
Minority interest in net income
of consolidated subsidiary 299 3,114
Gain on disposal of discontinued
operations (22,280)
Other, net 9,279 1,368 5,244
(Increase) decrease in current assets:
Receivables (35,341) (58,040) 10,731
Inventories (14,188) (2,279) (8,894)
Prepaid expenses (4,358) (12,894) 14,646
Increase (decrease) in current
liabilities:
Accounts payable 34,036 30,060 (18,245)
Compensation and employee benefits (1,231) 3,423 (24,729)
Income taxes (18,568) (46,811) 4,437
Other accrued liabilities (25,964) (36,948) (29,970)
Decrease in postretirement benefits
other than pensions (24,505) (22,601) (24,635)
Decrease in other noncurrent
liabilities (14,446) (16,588) (13,811)
- --------------------------------------------------------------------------------
Net cash provided by operating
activities 183,079 141,957 123,958
- --------------------------------------------------------------------------------
Cash Flows from Investing Activities
- --------------------------------------------------------------------------------
Purchases of property, plant and
equipment (341,283) (205,028) (157,365)
Proceeds from sales of assets 73,143 38,110 180,157
Acquisitions (6,496) (43,117) (18,508)
Purchases of marketable securities (92,886) (60,869) (17,399)
Proceeds from sales or maturities
of marketable securities 68,558 18,274 29,642
Increase in other assets (15,906) (9,163) (21,078)
- --------------------------------------------------------------------------------
Net cash used in investing activities (314,870) (261,793) (4,551)
- --------------------------------------------------------------------------------
</TABLE>
90
<PAGE>
MANVILLE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Cash Flows from Financing
Activities 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Issuance of debt 267,001 518,249 32,428
Payments on debt (237,476) (156,195) (109,387)
Proceeds from minority interest offering by
subsidiary, net of offering costs 159,965
Dividends paid (127,496) (127,500)
Debt issuance cost (5,601) (9,486)
Dividends paid to minority stockholders
of consolidated subsidiary (1,936) (484)
Stock options and warrants exercised 523 72 384
- --------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities (104,985) 384,621 (76,575)
- --------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash (2,303) 379 7,055
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and
Equivalents (239,079) 265,164 49,887
Cash and Equivalents at Beginning
of Year 392,172 127,008 77,121
- --------------------------------------------------------------------------------
Cash and Equivalents at End of Year $ 153,093 $ 392,172 $ 127,008
================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
91
<PAGE>
MANVILLE CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31
(In thousands of dollars)
<TABLE>
<CAPTION>
Series A Cumulative Unearned
Convertible Preference Capital in Restricted
Preferred Stock, Common Excess of Stock Accumulated
Stock Series B Stock Par Value Compensation Deficit
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1990 $ 417,600 $119,012 $ 484 $ 765,043 $ (684) $(201,272)
Net income for the year 34,700
Currency translation (Note 16)
Issuance of 581,946 shares of
Common Stock for
acquisition of a business 6 4,144
Forfeiture of 21,186 shares of
restricted Common Stock
in connection with the Stock
Incentive Plan (Note 14) (163) 163
Amortization of unearned restricted
stock compensation 384
Accrual of dividends on Cumulative
Preference Stock, Series B, and on
Common Stock (Note 4) (33,068) (358,596)
Accretion on preference stock
dividend accrual (Note 13) (3,204)
Preference stock accretion (Note 13) 13,895 (13,895)
Pension liability adjustment (Note 17)
- ---------------------------------------------------------------------------------------------------------------------
BALANCES AT DECEMBER 31, 1991 417,600 99,839 490 410,428 (137) (183,671)
Net income for the year 35,949
Currency translation (Note 16)
Exercise of warrants for 378 shares
of Common Stock (Note 13) 4
Initial public offering of
Riverwood common shares (Note 11) 65,092
Conversion of Series A
Convertible Preferred Stock
into Common Stock (Notes 2 and 4) (417,600) 720 416,880
Issuance of 1,856,003 shares of
restricted Common Stock in
connection with the Stock
Incentive Plan (Note 14) 19 9,744 (6,761)
Forfeiture of 2,838 shares of
restricted Common Stock
in connection with the Stock
Incentive Plan (Note 14) (16) 16
Amortization of unearned restricted
stock compensation 94
Accrual of and adjustment to dividends
on Cumulative Preference Stock,
Series B, and on Common Stock (Note 4) (20,999) 56
Accretion on preference stock
dividend accrual (Note 13) (6,138)
Preference stock accretion (Note 13) 13,844 (13,844)
Pension liability adjustment (Note 17)
- ---------------------------------------------------------------------------------------------------------------------
BALANCES AT DECEMBER 31, 1992 92,684 1,229 902,188 (6,788) (167,704)
</TABLE>
92
<PAGE>
<TABLE>
<CAPTION>
Cumulative
Pension Currency Total
Liability Translation Stockholders'
(continued) Adjustment Adjustment Equity
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCES AT DECEMBER 31, 1990 $ 40,432 $1,140,615
Net income for the year 34,700
Currency translation (Note 16) (3,835) (3,835)
Issuance of 581,946 shares of
Common Stock for
acquisition of a business 4,150
Forfeiture of 21,186 shares of
restricted Common Stock
in connection with the Stock
Incentive Plan (Note 14)
Amortization of unearned restricted
stock compensation 384
Accrual of dividends on Cumulative
Preference Stock, Series B, and on
Common Stock (Note 4) (391,664)
Accretion on preference stock
dividend accrual (Note 13) (3,204)
Preference stock accretion (Note 13)
Pension liability adjustment (Note 17) $(1,631) (1,631)
- --------------------------------------------------------------------------------
BALANCES AT DECEMBER 31, 1991 (1,631) 36,597 779,515
Net income for the year 35,949
Currency translation (Note 16) (28,897) (28,897)
Exercise of warrants for 378 shares
of Common Stock (Note 13) 4
Initial public offering of
Riverwood common shares (Note 11) 65,092
Conversion of Series A
Convertible Preferred Stock
into Common Stock (Notes 2 and 4)
Issuance of 1,856,003 shares of
restricted Common Stock in
connection with the Stock
Incentive Plan (Note 14) 3,002
Forfeiture of 2,838 shares of
restricted Common Stock
in connection with the Stock
Incentive Plan (Note 14)
Amortization of unearned restricted
stock compensation 94
Accrual of and adjustment to dividends
on Cumulative Preference Stock,
Series B, and on Common Stock (Note 4) (20,943)
Accretion on preference stock
dividend accrual (Note 13) (6,138)
Preference stock accretion (Note 13)
Pension liability adjustment (Note 17) (2,385) (2,385)
- --------------------------------------------------------------------------------
BALANCES AT DECEMBER 31, 1992 (4,016) 7,700 825,293
</TABLE>
93
<PAGE>
MANVILLE CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31
(In thousands of dollars)
<TABLE>
<CAPTION>
Series A Cumulative Unearned Cumulative
Convertible Preference Capital in Restricted Pension Currency Total
Preferred Stock, Common Excess of Stock Accumulated Liability Translation Stockholders'
Stock Series B Stock Par Value Compensation Deficit Adjustment Adjustment Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER
31, 1992 92,684 1,229 902,188 (6,788) (167,704) (4,016) 7,700 825,293
Net income for the
year 47,782 47,782
Currency translation
(Note 16) (19,889) (19,889)
Issuance of 121,581
shares of restricted
Common Stock in
connection with the
Stock Incentive Plan
(Note 14) 1 874 (320) 555
Cancellation of
553,967 shares of
unvested restricted
Common Stock held by
Riverwood employees
under the Manville
Stock Incentive Plan
(Note 14) (6) (2,983) 3,014 25
Forfeiture of 58,796
shares of restricted
Common Stock in
connection with the
Stock Incentive Plan
(Note 14) (205) 205
Amortization of
unearned restricted
stock compensation 1,226 1,226
Accrual of and
adjustment to
dividends on Common
Stock (Note 4) 688 688
Accretion on
preference stock
dividend accrual
(Note 13) (9,282) (9,282)
Preference stock
accretion (Note 13) 13,263 (13,263)
Pension liability
adjustment (Note 17) (329) (329)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCES AT DECEMBER
31, 1993 $ $105,947 $1,224 $900,562 $(2,663) $(142,467) $ (4,345) $(12,189) $846,069
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
94
<PAGE>
MANVILLE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Manville Corporation is an international holding company with two principal
operating subsidiaries, Riverwood International Corporation ("Riverwood") and
Schuller International ("Schuller"), (collectively referred to as "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.
(A) Principles of Consolidation
The consolidated financial statements include the accounts of Manville
Corporation and its majority-owned subsidiaries. All significant inter-company
transactions have been eliminated. Certain foreign subsidiaries are
consolidated on the basis of fiscal years ended November 30.
(B) Cash and Equivalents
Cash and equivalents include time deposits, certificates of deposit and other
marketable securities with original maturities of three months or less.
(C) Inventories
Inventories are stated at the lower of cost or market. Cost is determined
principally on the last-in, first-out basis ("LIFO"). In addition, the first-
in, first-out ("FIFO"), average and actual cost bases are used to determine the
cost of certain inventories.
(D) Property, Plant and Equipment
Expenditures for replacements and betterments are capitalized, while maintenance
and repairs are charged against operations as incurred. Gains and losses
arising from abnormal dispositions are included in operations currently. The
carrying value of normal retirements of property, plant and equipment is charged
to accumulated depreciation, less any amounts realized from disposition, and
continues to be depreciated over the remaining book life.
Interest is capitalized on major projects when construction takes considerable
time and entails major expenditures. Interest cost capitalized during 1993,
1992 and 1991 totaled approximately $18.8 million, $6.2 million and $4.8
million, respectively. The higher levels of capitalized interest in 1993 and
1992 are primarily due to the Macon mill conversion project at Riverwood.
95
<PAGE>
(E) Depreciation, Depletion and Amortization
Depreciation and amortization are computed using the straight-line method based
on estimated useful lives of the related assets.
Cost of timber harvested is based on the unit cost rates calculated using the
total estimated yield of timber to be harvested and the unamortized timber
costs.
Goodwill represents the excess of cost over the fair value of identifiable
assets acquired and is amortized on a straight-line basis principally over 20
years.
(F) Capitalization and Amortization of Certain Costs
The Company incurs certain preoperating and start-up costs during the process of
bringing major projects into production. Such costs are deferred until the
project becomes commercially operational. These costs are then amortized over a
five-year period.
(G) Foreign Currency Translation
The functional currency for most of the Company's international subsidiaries is
the local currency for the country in which the subsidiaries own their primary
assets. The translation of the applicable currencies into U.S. dollars is
performed for balance sheet accounts using current exchange rates in effect at
the balance sheet date and for revenue and expense accounts using a weighted
average exchange rate during the period. Any related translation adjustments
are recorded directly to stockholders' equity.
The Company's Brazilian operations are in a highly inflationary economy and use
the U.S. dollar as the functional currency. Therefore, in accordance with
accounting standards, certain assets of this entity are translated at historical
exchange rates and all translation adjustments are reflected in the consolidated
statement of income.
(H) Income Taxes
Effective January 1, 1991, the Company changed its method of accounting for
income taxes to comply with the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109").
Investment tax credits granted by various countries are accounted for as
reductions of income tax expense in the year in which the related expenditures
become eligible for investment benefit under applicable tax regulations.
96
<PAGE>
(I) Workers' Compensation
It is the Company's policy to self-insure or fund a portion of certain expected
losses related to workers' compensation. The Company's workers' compensation
liability is reflected on a present value basis.
(J) Reclassifications
The Company has reclassified the presentation of certain prior year information
to conform with the current presentation format.
NOTE 2 - PLAN OF REORGANIZATION, RELATED INJUNCTION AND PERSONAL INJURY 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. A separate Plan of Reorganization for Riverwood International USA,
Inc., a principal Riverwood operating subsidiary, was confirmed by the
Bankruptcy Court in 1984. In December 1986, the Company's Plan of
Reorganization (the "Plan") was confirmed by the Bankruptcy Court. The order
confirming the Plan became final in August 1988 and the Plan was consummated on
November 28, 1988. During the fourth quarter of 1988, the Company made various
distributions to creditors and equity holders as required under the Plan.
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 have been and will continue to
be funded by the Company pursuant to the Plan. Only claims filed by May 31,
1985 may be brought against the PD Trust. The Plan, a court order (the
"Injunction") 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. The Injunction and the Plan
also prohibit the assertion of punitive damage claims by asbestos claimants
against the Company, the PI Trust and 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 the Injunction will be unsuccessful.
Consummation of the Plan in 1988 resulted in substantial alteration of the
Company's consolidated financial position. Stockholders' equity was
significantly adjusted to reflect the cancellation of old preferred, common and
treasury shares and the issuance of new Series A Convertible Preferred Stock,
new Cumulative Preference Stock, Series B, and new Common Stock. The new equity
securities were recorded on the balance sheet based upon their respective market
values at consummation.
97
<PAGE>
On December 9, 1992, the PI Trust converted all of the 7.2 million issued and
outstanding shares of Series A Convertible Preferred Stock into 72 million
shares of the Company's Common Stock. As a result of the conversion, the PI
Trust now owns approximately 80 percent of the Company's Common Stock.
As the owner of approximately 80 percent of the Company's common shares, the PI
Trust has effective voting control over the Company. Since November 6, 1992,
three trustees of the PI Trust, Robert A. Falise, Chairman and Managing Trustee,
Louis Klein, Jr. and Christian E. Markey, Jr., have been members of the
Company's Board of Directors.
NOTE 3 - PROFIT SHARING OBLIGATION
Beginning in 1992, the Company is obligated to pay annually to the PI Trust 20
percent of net earnings (adjusted as specified in the definition of "Profits" in
the Amended and Restated Supplemental Agreement between the PI Trust and the
Manville holding company). Payments are due each year based on the prior year's
net earnings. The profit sharing right of the PI Trust is a right to annual
payments if and when the Company has income and is not a right or lien against
the assets of the Company. The amount of the profit sharing becomes probable
and reasonably estimable only when the Company has earnings. The profit sharing
obligation is a period cost based on actual results of the period in which
earned. The profit sharing obligation will continue for as long as the PI Trust
is in existence and any asbestos personal injury claims filed against the PI
Trust remain unpaid. After termination of the PI Trust, an independent profit
sharing obligation 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 obligation at some future date.
During 1993, the Company recorded $13 million of profit sharing expense to be
paid in 1994, as required by the Plan. The corresponding liability is included
in other accrued liabilities at December 31, 1993. Net after-tax adjustments to
consolidated net income in arriving at profits, as defined, include: (a) adding
losses/subtracting gains on the sale, disposition or write-down of assets not in
the ordinary course of business; (b) adding goodwill amortization; (c) adding
the accrual of interest accretion related to the 9 percent interest deferred
sinking fund debentures; and (d) adding losses/subtracting gains arising from
transactions between the Company and the trusts. The Company will recognize a
tax benefit for financial reporting purposes on the amount of profit sharing
accrued. Income tax impacts of the profit sharing charge on the Company's
effective tax rate are not considered in arriving at profits as defined in the
Plan.
The following PI Trust claims data is being presented solely to illustrate the
likelihood that the Company will remain obligated to make profit sharing
payments in virtual perpetuity. The Company has not independently confirmed the
PI Trust's figures and assumptions. The amounts shown are not the liabilities
of the Company. The amount at which claims will be settled in the future will
depend on numerous factors, including, but not limited to, type of disease,
severity of illness, extent of exposure to Manville product, jurisdiction and
personal circumstances of the claimant.
98
<PAGE>
Based on the PI Trust's 1991, 1992 and 1993 audited financial statements, the PI
Trust had received approximately 184,000, 201,000 and 215,000 claims as of
December 31, 1991, 1992 and 1993, respectively, which were eligible for
settlement. The PI Trust reported that through December 31, 1991, it had
settled over 28,000 of the approximately 184,000 pending claims for
approximately $1.3 billion. Furthermore, the PI Trust reported that through
December 31, 1992, it had settled more than 29,000 of the approximately 201,000
pending claims for approximately $1.37 billion. Through December 31, 1993, the
PI Trust reported that it has settled 29,600 of the approximately 215,000
pending claims for approximately $1.42 billion (before discounting). During
1991, the PI Trust settled $45.2 million of claims and paid out approximately
$18.3 million, leaving a settled but not fully paid claim balance at December
31, 1991 of $522.5 million. During 1992, the PI Trust settled $112.3 million of
claims and paid out approximately $4.4 million, leaving a settled but not fully
paid claims balance at December 31, 1992 of $630.4 million. During 1993, the PI
Trust settled $46.4 million of claims and paid out approximately $4.1 million.
Based on information contained in the PI Trust's financial statements at
December 31, 1993, the settled but not fully paid claims balance before
discounting were $672.7 million.
NOTE 4 - PI TRUST REFINANCING ARRANGEMENT
On November 19, 1990, the Company and the PI Trust entered into formal
agreements with respect to a refinancing arrangement (the "Refinancing
Arrangement") that was designed to enhance the PI Trust's liquidity, including
the payment of a series of special dividends (the "Special Dividends") to all
stockholders of up to $650 million over seven years.
Also in November 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 sought to restructure the methods by which the
PI Trust administers and pays claims. The Company is not a party to the Class
Action. On November 26, 1990, the Company filed a separate motion asking the
Courts and the Bankruptcy Court to issue orders reaffirming the Injunction.
On June 27, 1991, the Courts and the Bankruptcy Court issued amended orders
reaffirming the Injunction (the "Reaffirmation Order") and approving the
settlement of the Class Action (the "Restructuring Settlement"). Thirteen
appeals of the decision were filed by various parties; however, none of the
appeals challenged the Reaffirmation Order.
On December 4, 1992, the United States Court of Appeals for the Second Circuit
(the "Court of Appeals") vacated and remanded for further proceedings the
decision of the Courts that had approved the Restructuring Settlement (the
"Appeals Court Decision"). The Court of Appeals 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 a
part of the Class Action. The Appeals Court Decision did not address the
Reaffirmation Order. The Appeals Court Decision, as subsequently modified, has
become final, and accordingly, those aspects of the Refinancing Arrangement
conditioned upon affirmative resolution have terminated. Attempts by the
parties to the Class Action to reach a new settlement are continuing. One day
of trial of the Class Action was held on March 15, 1994, and in the
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<PAGE>
absence of a settlement, the trial will resume following a conference before the
Courts currently scheduled for April 18, 1994.
Even though the Court of Appeals remanded the Restructuring Settlement, with the
consent of the PI Trust, the Company's Board of Directors, on December 9, 1992,
declared a dividend of $1.04 per share on the Company's Common Stock
outstanding, which would have satisfied the Company's obligation to pay the
first dividend pursuant to the Refinancing Arrangement. This dividend was paid
on December 28, 1992. Prior to and in connection with the dividend declaration,
the PI Trust converted its 7.2 million shares of Series A Convertible Preferred
Stock into 72 million shares of Common Stock. As a result of the conversion,
the PI Trust currently owns 96 million shares, or approximately 80 percent, of
the Company's issued and outstanding Common Stock.
On June 4, 1993, the Company's Board of Directors, with the consent of the PI
Trust, declared a dividend of $1.04 per share on the Company's outstanding
Common Stock, which would have satisfied the Company's obligation to pay the
second Special Dividend pursuant to the Refinancing Arrangement. This dividend
was paid on June 14, 1993. The Company is entitled to a tax benefit, for the
amount of dividends paid to the PI Trust (see Note 22).
Presently, $102.9 million of Common Stock Dividends Accrued Not Declared are
reflected in the December 31, 1993 consolidated balance sheet. This accrual
represents the amount of the third and fourth Special Dividends under the
Refinancing Arrangement. Even though the Refinancing Arrangement is no longer
in effect, the Company believes that special dividends could be in the interest
of all Manville stockholders. Therefore, from time to time, the Company's Board
of Directors will consider declaring and paying common dividends. In making
such decisions, the Board will evaluate the Company's capital needs, its debt
levels and the economic environment of the markets served by the Company's
businesses. Although the common stock dividends remain accrued, no assurance
can be given that these dividends will be declared and paid by the Company.
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 have been met. Payment of dividends to common
stockholders beginning in 1994 entitles the holders of the Cumulative Preference
Stock, Series B, to cash dividends accumulated to the date of the common
dividend payment. An accrual of $72.7 million, which represents the amount of
the anticipated 1994, 1995 and 1996 dividends payable to Series B cumulative
preference stockholders, was reflected in liabilities as of December 31, 1993,
as part of the accounting for the Refinancing Arrangement. This accrual is
being maintained on the same basis as the common stock dividends. The Company
declared the first dividend, representing a two-month period, on its Cumulative
Preference Stock, Series B, on February 4, 1994. In conjunction with the
declaration, the full year 1994 Series B dividends totaling $22.8 million of the
$72.7 million were classified as a current liability at December 31, 1993.
100
<PAGE>
Although accrued for financial reporting purposes, neither the third or fourth
Special Dividends nor the Series B preference dividends, other than the first
Series B dividend, has been declared by the Company's Board of Directors.
On August 25, 1993, the Manville holding company and the PI Trust entered into
the Bond Prepayment Agreement, which was previously called the "Second Bond
Exchange Agreement" (the "Agreement"). Pursuant to the Agreement, on August 25,
1993, the Company made a prepayment on its outstanding bond obligations to the
PI Trust. The prepayment consisted of $150 million of cash, net of certain
costs, and the assignment to the PI Trust of $100 million, plus accrued
interest, of the Riverwood intercompany notes ("Intercompany Notes"). The
assignment of the Intercompany Notes was pursuant to an option in the Agreement
that the PI Trust exercised on August 25, 1993. Following the prepayment, the
carrying value of the Company's remaining outstanding bond obligations owed to
the PI Trust is approximately $323 million.
The Agreement incorporated and modified certain provisions of the First Bond
Exchange Agreement between the Manville holding company and the PI Trust,
amended certain provisions of the Amended and Restated Supplemental Agreement
between the Company and the PI Trust, and provided for the execution and
delivery into escrow of an amendment to the Amended and Restated Property Damage
Supplemental Agreement.
Among other things, the covenants contained in the Agreement generally provide
limitations on the amount of debt the Company may incur and on the Company's
ability to declare and pay dividends on its capital stock. In addition,
pursuant to the Agreement and the Manville Trust Consent and Waiver Agreement
between the PI Trust and the Company dated September 1, 1993, (the "Trust
Consent"), of the approximately $122.6 million of debt capacity available to the
Manville holding company's U.S. subsidiaries at December 31, 1993, approximately
$116.2 million may only be used for working capital or maintenance requirements
of Riverwood and Schuller.
The Agreement also granted the PI Trust the right to require the Manville
holding company to cause Riverwood to file with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Registration
Statement") covering the Intercompany Notes. The Registration Statement was
filed with the Commission on September 14, 1993. The Registration Statement, as
amended, was declared effective by the Commission on October 6, 1993. The PI
Trust sold the Intercompany Notes in a public offering on October 14, 1993.
NOTE 5 - RECEIVABLES
The components of receivables are as follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C>
Trade $304,385 $284,624
Less allowances 22,566 22,097
- -------------------------------------------------------------------------------
281,819 262,527
Other 22,295 37,984
- -------------------------------------------------------------------------------
$304,114 $300,511
===============================================================================
</TABLE>
Included in allowances are doubtful accounts of $7.3 million and $7.5 million at
December 31, 1993 and 1992, respectively. The Company generally requires
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<PAGE>
no collateral on receivables. The provision for doubtful accounts charged to
costs and expenses was $2.6 million for 1993, $2.5 million for 1992, and $2.8
million for 1991.
NOTE 6 - FINANCIAL INSTRUMENTS
The Company is a party to financial instruments with off-balance sheet risk in
the normal course of business. These financial instruments include foreign
currency forward contracts, standby letters of credit and financial guarantees.
These instruments involve, to varying degrees, elements of market and credit
risk in excess of the amount recognized in the consolidated balance sheet.
The Company enters into foreign exchange contracts to hedge against currency
fluctuations on certain foreign currency denominated balance sheet positions.
Market value gains and losses are recognized, and the resulting credit or debit
offsets foreign exchange gains or losses on those positions. At December 31,
1993 and 1992, the Company had contracts to purchase $48.3 million and $34.6
million, respectively, in foreign currency. The carrying value of these
contracts approximates their fair value.
As of December 31, 1993, the Company had outstanding letters of credit totaling
$4 million and financial guarantees totaling $3.5 million. As of December 31,
1992, the Company had outstanding letters of credit totaling $4.2 million and
financial guarantees totaling $3.5 million. Generally, letters of credit are
collateralized by cash or are issued under revolving credit facilities.
The Company invests excess cash in a diversified portfolio of high-quality money
market instruments consistent with the preservation of capital and the
maintenance of liquidity. Primary investment constraints include restrictions
on maturity, credit quality and diversification. The Company has not
experienced any material losses related to these investments.
The carrying amount and estimated fair values of the Company's financial
instruments at December 31 are as follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
Carrying Fair
1993 Amount Value
- ----------------------------------------------------------------------------
<S> <C> <C>
Cash and marketable securities $ 228,155 $ 228,182
Notes, loans and other non-trade receivables $ 31,071 $ 31,079
Long-term debt and short-term borrowings $1,427,692 $1,507,120
- ----------------------------------------------------------------------------
1992
- ----------------------------------------------------------------------------
Cash and marketable securities $ 442,906 $ 442,935
Notes, loans and other non-trade receivables $ 35,387 $ 35,427
Long-term debt and short-term borrowings $1,384,947 $1,404,327
============================================================================
</TABLE>
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
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<PAGE>
Cash and Marketable Securities
- ------------------------------
Generally, the carrying value of these instruments approximates fair value due
to their short-term nature. Quoted market prices were used to determine fair
value for certain instruments.
Notes, Loans and Other Non-trade Receivables
- --------------------------------------------
The fair value of notes and loans receivable was estimated utilizing the
discounted cash flow method.
Short-Term Debt
- ---------------
The carrying amount of these instruments approximates fair value due to their
short-term nature.
Bonds Payable to the PI Trust
- -----------------------------
The fair value of the Company's bonds payable to the PI Trust was estimated in
consultation with an investment banker. Because of the unique features of these
financial instruments, valuation is complex. The Company believes that the
current carrying value represents a reasonable estimate of their fair value (see
Note 10).
Unsecured Senior or Convertible Notes
- -------------------------------------
Quoted market prices for these notes payable were used to determine fair value.
This debt is not callable until June 15, 1997.
Other Long-Term Debt
- --------------------
The fair value of the Company's other long-term debt is an estimate based on
quoted market prices, when available, or the discounted cash flow method.
Floating-rate debt was valued at carrying value. The determination of the fair
value of a portion of the Company's long-term debt assumes the debt would be
paid off and reissued at current rates.
Profit Sharing Obligation
- -------------------------
As described in Note 3, the Company has an obligation to pay to the PI Trust 20
percent of net earnings (adjusted as specified in the definition of "Profits" in
the Plan). Because the amount of the profit sharing obligation cannot be
reasonably estimated for future years, it is not practicable to estimate the
fair value of those future payments.
NOTE 7 - INVENTORIES
The major classes of inventories are as follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $ 86,664 $ 83,661
Work-in-process 19,703 17,344
Raw materials 55,883 52,652
Supplies 45,452 44,426
- -------------------------------------------------------------------------------
$207,702 $198,083
===============================================================================
</TABLE>
Inventories were principally valued using LIFO. However, inventories in the
amounts of $92.2 million and $87.7 million at December 31, 1993 and 1992,
respectively, were valued using FIFO, average or actual cost. The excess of
current values over amounts for financial reporting purposes was $79.6 million
and $84.7 million at December 31, 1993 and 1992, respectively.
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<PAGE>
NOTE 8 - SHORT-TERM DEBT AND CREDIT FACILITIES
Short-term debt consists of the following:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992
- -----------------------------------------------------------------------------
<S> <C> <C>
Short-term borrowings $26,598 $13,738
Current portion of long-term debt 15,766 49,447
- -----------------------------------------------------------------------------
$42,364 $63,185
=============================================================================
</TABLE>
Short-term borrowings consist primarily of amounts drawn under bank lines of
credit for the Company's foreign subsidiaries for foreign export trade
financing.
In April 1992, the Company established a $100 million receivables sale facility
for Schuller's domestic operations to replace a former revolving credit
facility. The receivables sale facility requires, among other things, that the
Company maintain a specified level of tangible net worth. In addition, during
1992, the Company established approximately $90 million of local credit lines
for two foreign subsidiaries and established an additional $75 million of credit
lines for Riverwood's domestic subsidiaries.
At December 31, 1993, the Company had commitments of approximately $252 million
under the domestic receivables sale facility and various foreign and domestic
revolving credit facilities, of which approximately $239 million were available
for use. The Company's use of these credit facilities for its domestic
subsidiaries is subject to restrictions contained in the Trust Consent. In
addition, the Company has arrangements with certain foreign banks for
discounting receivables; approximately $28 million of receivables had been
discounted as of December 31, 1993.
NOTE 9 - COMPENSATION AND EMPLOYEE BENEFITS AND OTHER ACCRUED LIABILITIES
The Company has accruals for future compensated absences, principally vacations,
of $41.7 million and $41.6 million at December 31, 1993 and 1992, respectively,
which are included in its compensation and employee benefits liability in the
consolidated balance sheet.
Other accrued liabilities include restructuring reserves of $26.4 million and
$20.5 million as of December 31, 1993 and 1992, respectively. The restructuring
liabilities relate principally to environmental cleanup activities, certain
shutdown costs and other costs associated with divestments.
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<PAGE>
NOTE 10 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
In thousands of dollars)
1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C>
UNSECURED:
Bonds payable to the PI Trust,
discounted at 13 percent, payable
through 2014 (see Note 24) $ 322,751 $ 537,688
10.75 percent Senior Notes, due 2000 150,000 150,000
11.25 percent Senior Subordinated Notes, due 2002 250,000 250,000
10.75 percent Senior Notes II, due 2000 37,500
11.25 percent Senior Subordinated Notes II,
due 2002 62,500
6.75 percent Convertible Subordinated Notes,
due 2003 125,000
9 percent sinking fund debentures, due 1994-2003 27,895 24,658
Foreign export financing and other 2,161
COLLATERALIZED:
Notes payable to insurance companies and banks
with interest from 4.8 to 11.15 percent,
payable through 2003 372,735 355,215
Industrial revenue bonds with interest from
5.625 to 8.625 percent, payable through 2007 12,625 14,253
Capitalized leases with interest from 10 to
16.9 percent, payable through 2002 5,660 7,934
Foreign notes payable to banks with interest
from 4.82 to 12 percent plus a currency index 37,752 36,969
Other 2,336 780
- -------------------------------------------------------------------------------
1,406,754 1,379,658
Less current portion 15,766 188,597
- -------------------------------------------------------------------------------
$1,390,988 $1,191,061
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
Long-term debt maturities at December 31, 1993 are as follows:
(In thousands of dollars)
<S> <C>
1994 $ 16,448
1995 81,003
1996 80,525
1997 136,944
1998 38,218
After 1998 1,061,830
- --------------------------------------------------
Total 1,414,968
Less amounts representing interest
on capital leases 3,153
Less interest accruing to principal 5,061
- --------------------------------------------------
$1,406,754
==================================================
</TABLE>
During the second quarter of 1993, Riverwood renegotiated payments of certain
private placement debt that deferred approximately $63 million of its 1993 and
1994 scheduled principal payments to 1997. In addition, the renegotiation
eliminated the Manville holding company cross-default and guarantee provisions.
105
<PAGE>
BONDS PAYABLE TO THE PI TRUST
At consummation of the Plan, the PI Trust received noninterest-bearing bonds
totaling $1.8 billion. The bonds, discounted at 13 percent, consist of a
series of fixed payments twice a year for 24 years, which began August 31,
1991. The balance outstanding on these bonds at December 31, 1993 was
approximately $323 million, with a current face value of $1 billion.
SENIOR NOTES AND SENIOR SUBORDINATED NOTES
On June 24, 1992, Riverwood completed an offering of $150 million of 10.75
percent Senior Notes due 2000, and $250 million of 11.25 percent Senior
Subordinated Notes due 2002. Interest on these notes is payable semiannually.
These notes may be redeemed on or after June 15, 1997 at a specified
redemption price plus accrued interest.
SENIOR NOTES II AND SENIOR SUBORDINATED NOTES II
As discussed in Note 4, the Company made a prepayment on its outstanding bond
obligations to the PI Trust that included the assignment of $100 million of
Riverwood notes held by Manville. The $100 million of Riverwood notes
assigned to the PI Trust that were previously eliminated in consolidation with
Manville are now reflected in external debt as the unsecured Senior Notes II
and Senior Subordinated Notes II. These notes may be redeemed on or after
June 15, 1997, at a specified redemption price plus accrued interest.
CONVERTIBLE SUBORDINATED NOTES
On September 17, 1993, Riverwood completed a private placement of $125 million
of 6.75 percent Convertible Subordinated Notes ("Convertible Notes") in
transactions exempt from registration under the Securities Act of 1933, as
amended. The Convertible Notes mature on September 15, 2003, unless
previously converted or redeemed, with interest payable semiannually on March
15 and September 15, commencing in 1994. The Convertible Notes are
convertible at the holders' option into shares of Riverwood's common stock at
an initial conversion rate of 57.01 shares of common stock per $1,000
principal amount, subject to adjustment in certain circumstances and subject
to Riverwood's right to pay cash equal to the market price of the shares of
common stock otherwise deliverable upon conversion. The Convertible Notes
will be convertible on the earliest to occur of: (i) September 15, 1996, (ii)
a change in control, as defined, and (iii) a tender offer for Riverwood's
common stock under certain circumstances. The Convertible Notes may not be
redeemed prior to September 15, 1997. The Convertible Notes are general
unsecured obligations of Riverwood and are subordinated in right of payment to
all senior indebtedness.
106
<PAGE>
9 PERCENT SINKING FUND DEBENTURES
For financial reporting purposes, these debentures have an effective interest
rate of 12.6 percent. The interest debentures will not accumulate or pay
interest until 1994. Beginning on January 1, 1994, the interest debentures
will bear interest at a stated rate of nine percent and will be paid at a rate
of $2.5 million semiannually in principal and interest through December 31,
2003.
The notes payable to insurance companies and banks are collateralized
principally by the fixed assets of the Company's pulp and paper mills located in
Louisiana and Georgia. The notes payable to insurance companies require that a
specified minimum level of net worth be maintained by Riverwood, which owns the
pulp and paper mills through its subsidiaries.
The Company's agreements with its lenders and other agreements with the trusts,
including the Trust Consent, entered into in connection with Riverwood's
issuance of the Convertible Notes, contain a number of financial and general
covenants. These include, among other things, restrictions on borrowings,
investments, stock issuances and repurchases, dividends and other distributions,
and restrictions on the movement of cash from Riverwood to the Manville holding
company. Noncompliance with any of these or other covenants, or the occurrence
of any other event of default, could result in the termination of existing
credit agreements or the acceleration of substantially all currently outstanding
debt. Riverwood anticipates that it will need to refinance or restructure
certain subsidiary debt to amend or eliminate certain covenant restrictions.
Depending upon the structure of any such refinancing or restructuring, the costs
of such refinancing or restructuring could be up to $20 million. Riverwood
believes that it will be able to refinance or restructure such debt on terms and
at costs satisfactory to Riverwood.
NOTE 11 - MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY
On June 24, 1992, Riverwood completed an initial public offering of 12.1 million
shares, or 19.5 percent, of its common stock. As a result of this transaction,
the Company recorded an increase to Capital in Excess of Par Value of $65.1
million.
The Manville holding company purchased an additional 3,448,276 shares of
Riverwood's common stock at a price of $14.50 per share in September 1993. This
increased the Manville holding company's ownership percentage of Riverwood to
approximately 81.5 percent from 80.5 percent. The Manville holding company
currently intends to maintain at least an 80 percent ownership interest in
Riverwood in order to preserve the consolidated tax entity and take advantage of
existing tax benefits.
107
<PAGE>
NOTE 12 - CONTINGENCIES AND COMMITMENTS
Total rental expense was $25.9 million in 1993, $24.9 million in 1992 and $24.1
million in 1991.
At December 31, 1993, minimum rental commitments of the Company under long-term,
noncancelable operating leases are as follows:
(In thousands of dollars)
1994 $11,375
1995 12,083
1996 11,504
1997 8,777
1998 8,041
After 1998 15,237
- -----------------------------------------------
$67,017
===============================================
Minimum rental commitments of the Company have not been reduced by anticipated
sublease income of approximately $0.6 million.
In connection with the acquisition of a linerboard mill in Macon, Georgia (see
Note 27), Riverwood is in the process of converting one of two linerboard
machines to coated board production. Total capital expenditures for the paper
machine conversion, a new recovery boiler and other upgrades at the Georgia mill
are expected to be approximately $250 million. Approximately $135 million of
the estimated $250 million in capital expenditures were made during 1993. As of
December 31, 1993, outstanding purchase commitments relating to this project and
other Macon mill projects totaled approximately $39 million.
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 manufactured by the Company 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 an 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 have been 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. As of December 31, 1993, the total costs
to the Company for inspections and claims sampling totaled approximately $2.5
million, and the total costs of remediation were approximately $2.8 million.
The exact number of phenolic-related claims the Company may receive is dependent
on a number of variables and cannot be determined at this time.
108
<PAGE>
Based on its experience to date and the information currently available, the
Company has recorded an estimated loss of approximately $19.7 million for
anticipated sampling, inspection and remediation costs. It is possible the
ultimate loss, which cannot be determined at this time, could exceed this
estimate.
Any determination of the ultimate cost to the Company for phenolic-related deck
corrosion must take into consideration insurance that is available to address
such claims as well as other sources of indemnification. The Company has
substantial insurance that 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. 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 recorded in
the Company's financial statements at December 31, 1993. 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. Because of the uncertainties involved in pending
litigation, no assurances are possible.
During 1993, the Company filed a lawsuit against Beazer. The Company seeks
recovery from Beazer for all costs and damages incurred as a result of the
acquisition of the phenolic business. Additionally, to the extent negligence of
others (contractors, architects, manufacturers of other roofing system
components) is a contributing factor to roof deck corrosion, the Company may
have rights in contribution for recovery of a substantial 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 December 31, 1993, 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 enacted, and/or the environmental agencies promulgate or
revise regulations in furtherance of such legislation. For example, the Company
is currently awaiting the federal Environmental Protection Agency's
implementation of the 1990 Amendments to the Clean Air Act to determine their
impact on the Company's business segments. In addition, the federal
Environmental Protection Agency has issued new proposed regulations for the pulp
and paper industry, although it is expected that the earliest time for industry
compliance with these 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 pulp and paper industry proposed regulations
could be between $20 and $40 million.
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
109
<PAGE>
contingent environmental costs, the Company has established appropriate accruals
where such costs are probable and can be reasonably estimated. During 1993 and
1992, the Company paid approximately $2.5 million and $12 million, respectively,
for environmental cleanup, almost entirely for properties owned by the Company,
and had reserves totaling approximately $39 million for environmental cleanup at
December 31, 1993, of which $4.7 million were classified as current liabilities.
The Company expects the cash outlays related to these reserves to occur over the
next several years. 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 13 - STOCKHOLDERS' EQUITY
Upon consummation of the Plan in 1988, all of the Company's then-outstanding
publicly traded securities (not including those securities trading on a "when
issued" basis) were canceled. These securities consisted of the old $5.40
Series Cumulative Preferred Stock, the old $2.50 par value Common Stock and two
old public debentures that were part of the Class 6 unsecured creditor claims.
The old securities were replaced by a set of new securities, as described below:
(A) Common Stock $.01 Par Value
Of the original 48 million shares issuable at consummation, approximately 47.9
million shares were issued through December 31, 1993. The right to receive the
remaining shares issuable at consummation expired on November 28, 1993, pursuant
to the Plan. Because it had been assumed that all old shares would be tendered
before the expiration date, all 48 million shares have been reflected in
stockholders' equity as issued. On December 9, 1992, the PI Trust converted all
of its Series A Convertible Preferred Stock into 72 million shares of Common
Stock. The Common Stock was reflected on the balance sheet based upon the book
value of old shares and the market value of common shares issued to the PI Trust
and unsecured creditors.
Under the Bond Prepayment Agreement with the PI Trust dated August 25, 1993,
except for the Special Dividends, the Company is restricted from making dividend
payments in excess of certain net income tests.
As of December 31, 1993, the common dividend accrual of $102.9 million
represents the third and fourth Special Dividends under the Refinancing
Arrangement. Although accrued for financial reporting purposes, the common
dividends have not been declared by the Company's Board of Directors (see
Note 4).
(B) Warrants to Purchase Common Stock, $.01 Par Value
Warrants to purchase seven million shares of the $.01 par value Common Stock are
exercisable for seven years beginning June 6, 1989, at an exercise price of
$9.40 per share.
110
<PAGE>
(C) Series A Convertible Preferred Stock, $1.00 Par Value
The 7.2 million shares of Series A Convertible Preferred Stock issued to the PI
Trust were each convertible into ten shares of $.01 par value Common Stock,
subject to certain antidilution provisions. On December 9, 1992, in connection
with the declaration of the first special common stock dividend, the PI Trust
converted all of its Series A Convertible Preferred Stock into 72 million shares
of Common Stock.
(D) Cumulative Preference Stock, Series B, $1.00 Par Value
Approximately 4.6 million shares of Cumulative Preference Stock, Series B, were
issuable to the holders of the old $5.40 Series Cumulative Preferred Stock. An
additional 4.7 million shares were issuable to unsecured creditors at
consummation.
Of the 9.3 million shares of Cumulative Preference Stock, Series B, issuable,
approximately 9.2 million shares were issued through December 31, 1993. The
right to receive the remaining shares issuable at consummation expired on
November 28, 1993, pursuant to the Plan. The preference stock was recorded on
the balance sheet based upon its market value at consummation. The Cumulative
Preference Stock, Series B, has a $25.00 stated liquidation value. The 9.2
million shares of Cumulative Preference Stock, Series B, issued through
December 31, 1993 have been used in determining the aggregate liquidation value
reflected in stockholders' equity.
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 after other funding
requirements under the Plan have been met. Under the Bond Prepayment Agreement,
the Company is restricted from making dividend payments on Cumulative Preference
Stock, Series B, in excess of certain net income tests. Payment of the
dividends to common stockholders beginning in 1994 entitles the holders of the
Cumulative Preference Stock, Series B, to cash dividends accumulated to the date
of the common dividend payment. As described more fully in Note 4, the
Refinancing Arrangement, which was conditioned upon the final resolution of the
Class Action, terminated. In anticipation of the payment of Special Dividends
under the Refinancing Arrangement, an accrual of $72.7 million, which represents
the amount of the anticipated 1994, 1995 and 1996 dividends payable to Series B
cumulative preference stockholders, had been reclassified from equity to
liabilities. This accrual is being maintained on the same basis as the common
stock dividends. Although accrued for financial reporting purposes, the Series
B preference dividends have not been declared by the Company's Board of
Directors except for one dividend payable March 1, 1994 (see Note 4).
The carrying value of the preference stock and the preference stock dividend
accrual was increased periodically to reflect accretion based on the interest
method. The preference stock is fully accreted at December 31, 1993, and
dividends begin accumulating in 1994. Such accretion, which was deducted from
net income to arrive at net income applicable to common stockholders, amounted
to $22.5 million in 1993, $20 million in 1992 and $17.1 million in 1991.
111
<PAGE>
The following is a summary of shares outstanding:
<TABLE>
<CAPTION>
Series A Cumulative
Convertible Preference
Preferred Stock, Common
Stock Series B Stock
- ------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1990 7,200,000 9,130,321 48,032,551
Conversion of old common and
preferred stock to new Common
Stock and Cumulative
Preference Stock, Series B 14,874 85,786
Issuance of Common Stock
for acquisition of a
business 581,946
Forfeiture of Common Stock
issued in connection with
the Stock Incentive Plan (21,186)
- ------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1991 7,200,000 9,145,195 48,679,097
Conversion of old common and
preferred stock to new Common
Stock and Cumulative
Preference Stock, Series B 14,170 68,187
Issuance of Common Stock
upon exercise of warrants 378
Issuance of Common Stock in
connection with the Stock
Incentive Plan 1,856,003
Forfeiture of Common Stock
issued in connection with
the Stock Incentive Plan (2,838)
Conversion of Series A
Convertible Preferred Stock
into Common Stock (7,200,000) 72,000,000
- ------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1992 9,159,365 122,600,827
Conversion of old common and
preferred stock to new Common
Stock and Cumulative
Preference Stock, Series B 71,218 226,077
Issuance of Common Stock in
connection with the Stock
Incentive Plan 121,581
Forfeiture of Common Stock
issued in connection with
the Stock Incentive Plan (58,796)
Cancellation of Common Stock
in conjunction with the
formation of the Riverwood
Stock Incentive Plan (553,967)
- ------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1993 9,230,583 122,335,722
========================================================================
</TABLE>
112
<PAGE>
NOTE 14 - STOCK INCENTIVE PLAN
The Company has registered and reserved 4.8 million shares of $.01 par value
Common Stock for issuance under the Manville Corporation Stock Incentive Plan
(the "Incentive Plan").
A summary of the stock incentive transactions for the three years ended December
31, 1993 is as follows:
<TABLE>
<CAPTION>
Restricted Shares Stock
Common Stock Available Appreciation
Stock Options for Grant Rights
- ------------------------------------------------------------------------------- ------------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1990 479,192 753,700 3,567,108 1,507,400
Exercised (7,000)
Forfeited (21,186) (67,200) 88,386 (134,000)
- ------------------------------------------------------------------------------- -----------
BALANCE AT DECEMBER 31, 1991 458,006 686,500 3,655,494 1,366,400
Granted 1,846,003 (1,846,003)
Exercised (10,000) (10,000) (290,300)
Forfeited (2,838) (92,600) 95,438 (563,400)
- ------------------------------------------------------------------------------- -----------
BALANCE AT DECEMBER 31, 1992 2,301,171 583,900 1,894,929 512,700
Granted 49,581 (49,581)
Exercised (72,000) (72,000) (101,000)
Forfeited (612,763) (109,100) 844,899 (132,500)
- ------------------------------------------------------------------------------- -----------
BALANCE AT DECEMBER 31, 1993 1,737,989 402,800 2,618,247 279,200
=============================================================================== ===========
</TABLE>
Included in the 1993 forfeitures are 553,967 shares of restricted common stock
held by Riverwood employees under the Manville Corporation Stock Incentive Plan
that were cancelled upon receipt of awards by the Riverwood employees under a
Riverwood plan.
During 1991 and 1992, rights to receive approximately 1.8 million shares of
restricted common stock ("Performance Shares") were awarded under the Incentive
Plan at grant prices ranging from $4.50 per share to $9.75 per share. In
December 1992, approximately 1.8 million shares of restricted common stock were
issued to Company employees in place of Performance Shares. In 1993,
approximately 50,000 shares of restricted common stock were issued to Company
employees at grant prices ranging from $4.50 to $9.63 per share. Compensation
expense on restricted stock is based on the fair market value of the Company's
Common Stock at the date of grant.
The stock options were awarded at exercise prices ranging from $5.75 per share
to $10.50 per share. Options were exercised at prices ranging from $6.88 to
$7.63 per share in 1993 and at $6.88 per share in 1992. Each option is
exercisable for one share of the Company's Common Stock.
113
<PAGE>
Stock appreciation rights have been awarded at prices ranging from $5.75 to
$10.50 per share. The stock appreciation rights were exercised at prices
ranging from $6.88 to $7.63 per share in 1993, from $5.75 to $7.63 per share in
1992 and at $5.75 per share in 1991. Compensation expense for the stock
appreciation rights is based on the difference between the current fair market
value of the Company's Common Stock and the fair market value at the date of
grant.
NOTE 15 - EARNINGS (LOSS) PER COMMON SHARE
The Company's Series A preferred stock was convertible into an additional 72
million shares of Common Stock. On December 9, 1992, the PI Trust converted all
issued and outstanding Series A Convertible Preferred Stock for 72 million
shares of Common Stock. All earnings (loss) per common share computations
assume that the preferred stock had been converted to Common Stock and was
outstanding as of the beginning of the earliest period presented.
The Company has issued stock options and stock appreciation rights. In
addition, warrants issued upon consummation of the Plan became exercisable
during 1989. These common stock equivalents were considered in determining
earnings (loss) per common share amounts. Primary and fully diluted earnings
(loss) per common share amounts are based on the weighted average number of
common and common equivalent shares outstanding during the year. The fully
diluted earnings (loss) per common share computation further assumes that the
common stock equivalents were outstanding at the beginning of the year. The
1993, 1992 and 1991 primary and fully diluted earnings (loss) per common share
amounts are determined using the following common equivalent shares:
114
<PAGE>
<TABLE>
<CAPTION>
1993 1992 1991
------------------------ ------------------------ ------------------------
Fully Fully Fully
Primary Diluted Primary Diluted Primary Diluted
- ---------------------------------------------------- ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
Post-consummation shares
outstanding assuming
conversion of Series A
Convertible Preferred
Stock in 1991 119,932,000 119,932,000 120,000,000 120,000,000 120,000,000 120,000,000
Weighted average number
of shares issued since
December 31, 1988 2,490,000 2,490,000 2,867,000 2,867,000 669,000 669,000
Warrants, stock options
and stock appreciation
rights 58,000 82,000 181,000 181,000 16,000 101,000
- ---------------------------------------------------- ------------------------ ------------------------
122,480,000 122,504,000 123,048,000 123,048,000 120,685,000 120,770,000
==================================================== ======================== ========================
</TABLE>
Earnings (loss) per common share amounts were calculated after the deduction for
preference stock accretion.
115
<PAGE>
NOTE 16 - FOREIGN CURRENCY EXCHANGE AND TRANSLATION
An analysis of changes in the Cumulative Currency Translation Adjustment
included in Stockholders' Equity at December 31, 1993, 1992 and 1991 is as
follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992 1991
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative currency translation
adjustment at beginning of year $ 7,700 $ 36,597 $40,432
For the year ended December 31:
Currency translation adjustments (19,928) (28,937) (6,195)
Income taxes related to currency
translation adjustments 39 29 13
Amounts related to the disposal of
operations 11 2,347
- ---------------------------------------------------------------------
Cumulative currency translation
adjustment at end of year $(12,189) $ 7,700 $36,597
=====================================================================
</TABLE>
NOTE 17 - PENSIONS
U.S. Pension Plans:
Substantially all of the Company's U.S. employees are covered by
noncontributory defined benefit pension plans. The pension expense (benefit) is
based primarily on years of service and the employee's compensation or pension
rate near retirement. The Company's funding policy is to contribute funds to a
trust as necessary to at least meet the minimum funding requirements of the
Internal Revenue Code. Plan assets are invested primarily in fixed income
securities and equities.
(A) Pension Expense (Benefit)
The pension expense (benefit) related to the U.S. defined benefit pension plans
for the years ended December 31 consisted of the following:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992 1991
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned during
the year $ 12,321 $ 12,536 $ 11,250
Interest cost on projected benefit
obligation 55,784 55,510 57,334
Estimated return on assets
-actual (gain) loss (115,251) (36,633) (132,697)
-deferred gain (loss) 48,678 (31,239) 70,712
Net amortization and deferral 5 (1,464) (1,624)
- -----------------------------------------------------------------------
Total Pension Expense (Benefit) $ 1,537 $ (1,290) $ 4,975
=======================================================================
</TABLE>
116
<PAGE>
Certain assumptions used in determining the pension expense (benefit) for the
years ended December 31 are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
- --------------------------------------------------------------
Discount rates 7.50% 7.50% 8.60%
Rates of increase in future compensation
levels 5.75% 5.75% 6.30%
Expected long-term rates of return on
assets 9.00% 9.00% 9.00%
- --------------------------------------------------------------
</TABLE>
The Company incurred a curtailment gain of $1.1 million on the U.S. salaried
plan and a curtailment loss of $0.8 million on a U.S. hourly plan in 1991 as a
result of the sale of discontinued operations, and these were included in the
gain on sale of discontinued operations.
(B) Funded Status
The funded status of the Company's defined benefit plans covering U.S. employees
in which assets exceed accumulated benefits as of December 31 is as follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992
- ----------------------------------------------------------------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $693,028 $659,420
================================================================
Accumulated benefit obligation $720,448 $684,801
================================================================
Projected benefit obligation $762,567 $729,278
Plan assets at fair value 783,134 731,105
- ----------------------------------------------------------------
Plan assets in excess of projected
benefit obligation 20,567 1,827
Unrecognized net loss 135,477 166,125
Prior service costs 10,830 8,738
Unrecognized transition adjustment (53,040) (62,597)
- ----------------------------------------------------------------
Total prepaid pension asset $113,834 $114,093
================================================================
</TABLE>
In addition, the funded status of the Company's defined benefit plans covering
U.S. employees in which accumulated benefits exceed assets as of December 31 is
as follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992
<S> <C> <C>
- ----------------------------------------------------------------
Actuarial present value of:
Vested benefit obligation $46,094 $43,265
================================================================
Accumulated benefit obligation $46,542 $43,493
================================================================
Projected benefit obligation $48,010 $44,631
Plan assets at fair value 40,378 37,511
- ----------------------------------------------------------------
Plan assets less than projected
benefit obligation (7,632) (7,120)
Unrecognized net loss 8,278 10,323
Prior service costs 3,988 2,292
Unrecognized transition adjustment (3,015) (3,995)
Additional minimum liability (7,168) (7,301)
- ----------------------------------------------------------------
Pension liability $(5,549) $(5,801)
================================================================
</TABLE>
117
<PAGE>
The projected benefit obligations for the above plans were determined in 1993
and 1992 using a discount rate of seven percent and 7.5 percent, respectively,
and a rate of increase in future compensation levels for salary-related plans of
5.5 percent and 5.75 percent in 1993 and 1992, respectively. The vested benefit
obligation is calculated on the benefits the employees are entitled to receive
if they were to separate immediately.
At December 31, 1993 and 1992, certain plans' accumulated benefits covering
hourly employees and directors exceeded their assets, requiring charges to
stockholders' equity prior to adjustment for minority interest in consolidated
subsidiary of $0.3 million and $2.9 million, respectively.
As of December 31, 1993 and 1992, accrued retirement contributions included in
compensation and employee benefits on the balance sheet were $11.3 million and
$11.6 million, respectively.
Canadian Pension Plans:
Canadian employees are covered by a defined contribution plan. Contributions to
this plan are based on each participant's monthly earnings. Plan assets are
invested primarily in fixed income marketable securities. Company contributions
to the defined contribution plan were $0.5 million in 1993, $0.9 million in 1992
and $0.7 million in 1991.
Canadian employees previously participated in defined benefit plans. During
1988 and 1990, annuities were purchased by the defined benefit plans to settle
obligations to current pensioners. In addition, the defined benefit plans were
converted to defined contribution plans and active participants' benefit
balances were transferred to an existing Canadian defined contribution plan.
After settlement of the accumulated benefit obligations, the defined benefit
plans held surplus assets of approximately $40 million as of December 31, 1993.
The Company has recognized a prepaid pension asset related to these discontinued
Canadian defined benefit plans of $15 million and $15.8 million as of December
31, 1993 and 1992, respectively.
The Company has applied to the Court of Queen's Bench of Alberta for a
declaration of the Company's right to withdraw $33 million of the estimated
surplus. A number of present and former employees of the Company and previously
related companies are disputing the Company's surplus entitlement as parties to
the court application. The Company believes that it will be successful in the
application; however, the matter is still before the court, and the outcome
cannot be determined at this time.
118
<PAGE>
Overseas Pension Plans:
Certain overseas locations of the Company provide defined benefit plans. The
majority of these plans are noncontributory and unfunded or partially funded in
accordance with applicable local laws. Assets of the funded plans are invested
primarily in equities and fixed income securities. The pension or termination
benefits are based primarily on years of service and the employee's
compensation.
(A) Pension Expense
The pension expense related to the overseas plans for the years ended
December 31 consisted of the following:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned during the year $ 3,242 $ 3,079 $ 2,976
Interest cost on projected benefit obligation 5,409 4,767 4,408
Estimated return on assets
-actual (gain) loss (10,837) (4,762) (4,475)
-deferred gain 7,151 1,333 1,595
Net amortization and deferral 239 234 316
- ----------------------------------------------------------------------------------------------------------------------
Total pension expense $ 5,204 $ 4,651 $ 4,820
======================================================================================================================
Certain assumptions used in determining the pension expense for the years
ended December 31 are as follows:
1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
Discount rates 5.0-9.0% 5.0-9.0% 5.0-9.0%
Rates of increase in future compensation
levels 4.0-7.5% 4.0-7.5% 4.0-7.5%
Expected long-term rates of return on assets 5.0-9.5% 5.0-10.0% 5.0-10.0%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Approximately 320 employees participated in a multiemployer pension plan that
provides defined benefits to employees under certain union-employer organization
agreements. Pension expense for this plan was $2.2 million in 1993, $3.2
million in 1992 and $3.2 million in 1991.
The Company provides defined contribution plans for certain eligible overseas
employees. Hourly employees may contribute up to five percent of their
compensation. The Company matches up to 50 percent of such contributions and
contributed an additional five percent of all eligible hourly employees'
compensation for both 1993 and 1992. The salaried plan is noncontributory. The
Company contributed up to six percent and 4.7 percent of all eligible salaried
employees' compensation in 1993 and 1992, respectively. Company contributions
to these plans were $1.1 million in 1993, $0.9 million in 1992 and $1.1 million
in 1991.
119
<PAGE>
(B) Funded Status
The funded status of the Company's overseas plans in which assets exceed
accumulated benefits as of December 31 is as follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $23,459 $17,778
===============================================================================
Accumulated benefit obligation $25,791 $19,229
===============================================================================
Projected benefit obligation $51,575 $41,871
Plan assets at fair value 52,277 38,016
- -------------------------------------------------------------------------------
Plan assets greater (less) than projected benefit
obligation 702 (3,855)
Unrecognized net (gain) loss (4,064) 4,367
Unrecognized transition adjustment 1,972
Prior service costs 56
- -------------------------------------------------------------------------------
Prepaid pension asset (liability) $(1,334) $ 512
===============================================================================
</TABLE>
In addition, the funded status of the Company's overseas plans in which
accumulated benefits exceed assets as of December 31 is as follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $ 19,133 $ 21,106
================================================================================
Accumulated benefit obligation $ 20,305 $ 23,433
================================================================================
Projected benefit obligation $ 22,607 $ 28,619
Plan assets at fair value 2,881
- --------------------------------------------------------------------------------
Plan assets less than projected benefit obligation (22,607) (25,738)
Unrecognized net gain (1,476) (1,128)
Prior service costs 59
Unrecognized transition adjustment 1,116 3,374
- --------------------------------------------------------------------------------
Pension liability $(22,967) $(23,433)
================================================================================
</TABLE>
Projected benefit obligations were determined using discount rates ranging from
five to nine percent in 1993 and 1992. The rate of increase in future
compensation levels for salary-related plans ranged from four to 7.5 percent in
1993 and 1992. The vested benefit obligation is calculated on the benefits the
employees are entitled to receive if the employees were to separate immediately.
Voluntary Savings Plans
The Company also sponsors voluntary savings plans for eligible U.S. employees.
Employees may make contributions of up to 16 percent of their compensation. The
Company matches up to six percent of certain contributions at rates ranging from
15 percent to 100 percent, depending on the Company's performance. Company
contributions to the savings plans were $7.8 million in 1993, $4.8 million in
1992 and $8.1 million in 1991.
120
<PAGE>
NOTE 18 - OTHER POSTRETIREMENT BENEFITS
The Company sponsors defined benefit postretirement health care plans that
provide medical and life insurance coverage to salaried and certain hourly
retired U.S. and Canadian employees and their dependents. The base level of
medical coverage is provided to the retiree at no cost. On January 1, 1986, the
Company changed its standard retiree medical plan from a Basic plus Major
Medical plan to a Comprehensive plan with a $200 deductible. On January 2,
1989, the Comprehensive plan was modified to vary the cost-sharing provisions
(deductibles and coinsurance) based on age and years of service of the retiree.
Additionally, contributions were instituted for retirees who wished to cover
their dependents or obtain a richer benefit structure.
Effective January 1, 1991, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" ("SFAS No. 106"), for its U.S. and Canadian plans. In accordance with
the provisions of that statement, postretirement benefit information for prior
years has not been restated. The Company elected to immediately recognize the
pretax accumulated postretirement benefit obligation of $264.8 million,
calculated using a discount rate of 8.6 percent, upon adoption (see Note 25).
The postretirement benefit expense for the years ended December 31 consisted of
the following:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992 1991
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned during the year $ 4,100 $ 3,820 $ 3,129
Interest cost on accumulated postretirement
benefit obligation 22,367 21,976 21,787
Net amortization and deferral 813 782
- -------------------------------------------------------------------------
Total postretirement benefit expense $27,280 $26,578 $24,916
=========================================================================
</TABLE>
The postretirement benefit expense was calculated using a discount rate of 7.5
percent in 1993 and 1992 and 8.6 percent in 1991. Previously, retiree health
and life insurance coverage benefits were expensed as incurred.
The effect of adopting SFAS No. 106 on 1991 income before extraordinary item and
cumulative effect of accounting changes is not significantly different from the
amount that the Company would have recognized on the expense-as-incurred method.
The Company incurred a curtailment gain of $2.1 million in 1991 as a result of
the sale of discontinued operations. This gain was included in the gain on sale
of discontinued operations.
121
<PAGE>
The Company's unfunded postretirement benefit obligation reconciled with the
amounts shown in the Company's consolidated balance sheet as of December 31 is
as follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992
- ------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of the accumulated
postretirement benefit obligation:
Retirees $223,717 $210,803
Fully eligible plan participants 14,681 29,748
Other active plan participants 63,594 69,474
- ------------------------------------------------------------------------
301,992 310,025
Unrecognized net loss (30,789) (41,529)
- ------------------------------------------------------------------------
Postretirement benefit obligation $271,203 $268,496
========================================================================
</TABLE>
The current portions of $24.7 million and $23.4 million of the postretirement
benefit obligation are recorded in compensation and employee benefits as of
December 31, 1993 and 1992, respectively.
The accumulated postretirement benefit obligations were determined in 1993 and
1992 using discount rates of seven percent and 7.5 percent, respectively. For
measurement purposes, a nine percent annual rate of increase in the per capita
cost of covered medical benefits was assumed for 1993; the rate was assumed to
decrease gradually to 5.5 percent for 2002 and remain at that level thereafter.
The health care cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
benefit obligation as of December 31, 1993, by $24.3 million and the aggregate
of the service and interest cost components of the periodic cost for the year
then ended by $2.8 million.
NOTE 19 - POSTEMPLOYMENT BENEFITS
The Company's postemployment benefit obligation includes workers' compensation
reserves. The present value of those reserves reflected in liabilities as of
December 31, 1993 and 1992, was $76.6 million and $63.8 million at a seven
percent and ten percent discount rate, respectively. On a gross basis, the
reserves were $148.7 million at December 31, 1993, and $136.6 million at
December 31, 1992 (see Note 25).
NOTE 20 - RESTRUCTURING OF OPERATIONS GAIN (LOSS)
The 1993 restructuring of operations loss of $40.5 million includes a $25
million charge by Riverwood for the write-down of assets and provisions for
severance, relocation and related costs to restructure and consolidate certain
operations and infrastructure levels. Approximately $20 million of this
restructuring charge relates to provisions for cash expenditures that will
result in ongoing expense savings. The charge was partially offset by a $17
million gain on Riverwood's sale of approximately 60,000 acres of nonstrategic
timberlands in Louisiana and Texas. In addition, Schuller recorded $26.5
million of restructuring charges, including a $19.7 million charge for sampling,
inspection and remediation expenses associated with its former phenolic roofing
insulation business, offset in part by $7 million of expected insurance
recoveries (see Note 12), a $7.5 million charge for additional severance costs
for ongoing programs to reduce costs and $6.7 million of
122
<PAGE>
estimated costs associated with the exchange of Schuller's residential roofing
business for a commercial and industrial roofing business, completed in January
1994. Other restructuring charges for 1993 totaling approximately $6 million
primarily related to cash expenses associated with former business operations
and a loss on the sale of an oil and gas property.
During 1992, the Company sold certain oil and gas properties at a loss of $7
million and an investment in a joint venture at a gain of $7.7 million. These
amounts, offset in part by other restructuring adjustments, are included in the
restructuring of operations gain of $0.7 million reported for the year ended
December 31, 1992.
The 1991 restructuring of operations loss of $64.1 million included a $61
million charge for the write-down of assets and provisions for severance and
related costs as the Company rationalized its operations and overhead levels
primarily in the Building Products and Engineered Products segments, a $3
million provision to increase a reserve for asbestos-related workers'
compensation claims and a net provision for environmental cleanup costs of $1
million. These charges were offset in part by an overall gain on the sales of
two folding carton plants and a small railroad company.
NOTE 21 - OTHER INCOME (LOSS), NET
Included in 1993, 1992 and 1991 other income were gains on the sale of excess
nonstrategic precious metals of $0.1 million, $7.6 million and $7.5 million,
respectively.
Net foreign currency transaction gains (losses) included in determining other
income for 1993, 1992 and 1991 were $(1.4) million, $2.1 million and $4.3
million, respectively.
In July 1989, a lawsuit filed by the Company against Guardian Industries
Corporation culminated in the Company being awarded approximately $15 million in
a patent infringement judgment. In January 1991, a U.S. appeals court upheld
the judgment. The proceeds, approximately $40 million including accrued
interest, were received in February 1991. The original $15 million judgment,
net of approximately $2 million of deferred litigation costs, was reflected in
1991 other income. Approximately $25 million of the proceeds were reflected in
interest income.
NOTE 22 - INCOME TAXES
Income taxes consists of the following:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992
- ------------------------------------------------------------------
<S> <C> <C>
U.S. federal and foreign income taxes $10,134 $21,761
Deferred income taxes 10,347 5,357
State and local taxes 1,289 771
- ------------------------------------------------------------------
$21,770 $27,889
==================================================================
</TABLE>
123
<PAGE>
The approximate tax effect of the temporary differences and carryforwards giving
rise to the net deferred tax asset is as follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992
- ---------------------------------------------------------------------------------
<S> <C> <C>
U.S. Deferred Tax Assets:
PI Trust deductions $407,437 $394,577
Postretirement benefits other than pensions 94,117 90,425
Net operating loss carryforward 75,431 46,654
Workers' compensation and postemployment benefits 27,337 17,512
Foreign tax credit carryforward 26,521 26,521
General business credit carryforward 18,274 18,274
Credit for prior year minimum
tax carryforward 16,405 16,405
Environmental reserves 13,456 13,368
Vacation and holiday wages and salaries 9,393 9,231
Deferred state and local taxes 8,852
Provision for major equipment overhaul 7,555 8,478
State and local net operating loss carryforward 6,086 935
Other 75,615 61,843
- ---------------------------------------------------------------------------------
786,479 704,223
- ---------------------------------------------------------------------------------
Foreign Deferred Tax Assets:
Brazilian inflationary profits 5,418 12,502
Brazil net operating loss carryforward 3,402 1,568
Other 4,625 4,212
- ---------------------------------------------------------------------------------
13,445 18,282
- ---------------------------------------------------------------------------------
Total Deferred Tax Assets 799,924 722,505
- ---------------------------------------------------------------------------------
U.S. Deferred Tax Liabilities:
Property, plant and equipment 194,820 171,596
Timber 69,741 76,068
Prepaid pension cost 44,332 43,055
Other 14,421 15,527
- ---------------------------------------------------------------------------------
323,314 306,246
- ---------------------------------------------------------------------------------
Foreign Deferred Tax Liabilities 344 564
- ---------------------------------------------------------------------------------
Total Deferred Tax Liabilities 323,658 306,810
- ---------------------------------------------------------------------------------
Net Deferred Tax Asset, before valuation allowances 476,266 415,695
Valuation Allowances (94,795) (87,795)
- ---------------------------------------------------------------------------------
Net Deferred Tax Asset $381,471 $327,900
=================================================================================
</TABLE>
The current portion of the net deferred tax asset as of December 31, 1993 and
1992, was $50.2 million and $42.6 million, respectively.
The PI Trust deductions deferred tax asset primarily represents consummation
charges related to stock and bonds issued to the PI Trust, recorded in 1988 for
financial reporting purposes and subsequent dividend and profit sharing payments
made to the PI Trust that are not yet deductible for income tax purposes. The
charge related to the bonds becomes deductible as principal and interest
payments are made to the PI Trust or when the bonds are sold by the PI Trust and
funds are distributed to claimants or deposited in a specific settlement fund
within the PI Trust. The PI Trust deductions deferred tax asset includes $207.1
million generated from the issuance of preferred and common stock to the PI
Trust and is based on the market-related value of the stock at consummation. If
the PI Trust were to sell the stock at a price greater than the value recorded
at consummation, the Company may receive a tax benefit in excess of the deferred
tax asset reflected for financial reporting
124
<PAGE>
purposes. Likewise, if the PI Trust were to sell the stock at a price lower
than the value recorded at consummation, the Company would receive a tax benefit
less than the deferred tax asset. At December 31, 1993, the trading price of
the Company's common stock exceeded the market-related value used to record the
stock issued at consummation. The charge related to the issuance of stock will
become deductible when the PI Trust converts its shares to cash and distributes
the proceeds to asbestos claimants. The dividend and profit sharing payments to
the PI Trust also represent a future tax benefit to the Company (subject to
valuation allowance discussed below) that will become a current deduction when
paid to claimants or transferred to the settlement fund.
The PI Trust transferred $172 million and $185 million in 1993 and 1992,
respectively, to the specific settlement fund within the PI Trust generating
corresponding current tax deductions for the Company. This was the primary
reason for the net operating loss carryforward deferred tax assets in 1993 and
1992. In addition, the monies transferred were adequate to eliminate any
alternative minimum tax liability.
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 forecasts of future years' earnings and the
estimated timing of the utilization of the Company's tax benefits are revised.
The Company's U.S. deferred tax asset increased by approximately $12 million due
to an increase in the U.S. federal tax rate to 35 percent from 34 percent in
1993.
The Company believes, based upon its past earnings, forecasts of future earnings
and potential tax planning strategies, that as of December 31, 1993, $94.8
million of the deferred tax asset will not be realized. This amount primarily
relates to foreign tax credits, general business credits and future deductible
amounts that the Company believes will expire unused. Accordingly, a valuation
allowance has been provided for these amounts. The $7 million increase in the
valuation allowance primarily relates to the additional tax benefit realized on
the common dividends paid to the PI Trust in 1993, which the Company anticipates
will not be fully realized due to the significant tax deductions generated from
the payments to the PI Trust.
125
<PAGE>
The approximate tax effect of the temporary differences giving rise to a
significant portion of the net deferred tax liability is as follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C>
Foreign Deferred Tax Assets:
Capital lease obligation $ 1,198 $ 1,616
Relocation provision 1,031 1,249
Postretirement benefits other
than pensions 582 744
Other 1,870 1,358
- --------------------------------------------------------------------------------
Total Deferred Tax Assets 4,681 4,967
- --------------------------------------------------------------------------------
U.S. Deferred Tax Liabilities:
Deferred state and local taxes 29,638 30,775
Other 7,375
- --------------------------------------------------------------------------------
37,013 30,775
- --------------------------------------------------------------------------------
Foreign Deferred Tax Liabilities:
Property, plant and equipment 43,455 47,688
Brazilian inflationary profits and other reserves 9,303 17,964
Pensions 5,879 6,216
Undistributed earnings of foreign subsidiaries 7,559 4,621
Precious metals 1,160 1,404
Other 2,315 1,640
- --------------------------------------------------------------------------------
69,671 79,533
- --------------------------------------------------------------------------------
Total Deferred Tax Liabilities 106,684 110,308
- --------------------------------------------------------------------------------
Net Deferred Tax Liability $102,003 $105,341
================================================================================
</TABLE>
The current portion of the net deferred tax liability as of December 31, 1993
and 1992, was $10.3 million and $5.4 million, respectively.
The Company's deferred tax liability decreased by approximately $3 million due
to a reduction in German tax rates in 1993.
In addition, the government of Brazil enacted new tax provisions that reduced
the statutory federal tax rate to 35 percent from 40 percent and also allowed
for the accelerated liquidation of future tax liabilities on inflationary
profits at reduced rates. As a result of these changes to Brazilian tax law,
Manville recognized a net deferred income tax benefit of $5 million in 1993.
The U.S. and foreign components of income (loss) from continuing operations
before income taxes consist of the following:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992 1991
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. $(26,591) $37,288 $(70,939)
Foreign 32,944 40,517 62,747
- ----------------------------------------------------------------------------
$ 6,353 $77,805 $ (8,192)
============================================================================
</TABLE>
126
<PAGE>
The provision for income tax expense (benefit) on continuing operations consists
of the following:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992 1991
- --------------------------------------------------------
<S> <C> <C> <C>
Current
U.S. federal $(38,441) $(45,724) $ 14,376
U.S. state and local 6,739 4,407 7,193
Foreign 14,884 19,453 35,503
- --------------------------------------------------------
(16,818) (21,864) 57,072
- --------------------------------------------------------
Deferred
U.S. (33,115) 40,375 (36,601)
Foreign (4,785) 8,715 1,836
- --------------------------------------------------------
(37,900) 49,090 (34,765)
- --------------------------------------------------------
$(54,718) $ 27,226 $ 22,307
========================================================
</TABLE>
As a result of a retroactive change in U.S. income tax regulations regarding the
payment of add-on minimum tax and the treatment of certain tax preference items
for the years 1977 through 1986, the Company was entitled to a federal income
tax refund plus accrued interest. During the first and second quarters of 1993,
the Company received a total of $32 million from the U.S. Internal Revenue
Service, which was recorded as a reduction to current income tax expense of $19
million and an increase to interest income of $13 million.
The 1991 deferred tax benefit primarily arose from restructuring reserves
partially offset by investment tax credit usage.
The reported amount of income tax expense on consolidated pretax income from
continuing operations differs from the amount of income tax expense that would
result from applying domestic federal statutory tax rates to consolidated pretax
income from continuing operations for the following reasons:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992 1991
- -------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. federal statutory expense (benefit) $ 2,224 $ 26,454 $(2,785)
Increase (decrease) resulting from:
Deduction for the Special Dividend
paid to the PI Trust (33,946) (33,946)
Change in income tax rates (19,815)
Tax refund (18,699)
Foreign income taxed at higher rates 14,903 18,738 16,201
Recognition of U.S. state and local
deferred tax assets (9,102)
Increase in the deferred tax asset
valuation allowance 7,000 16,283
Adjustment of estimated income tax
benefit (liability) for prior years 5,280 (6,324)
Increase in the state deferred
income tax rate 4,071
U.S. state and local taxes, net of
federal benefit (999) 2,963 5,711
U.S. alternative minimum tax impact 2,560
Other, net (1,564) (1,013) 620
- -------------------------------------------------------------------------
$(54,718) $ 27,226 $22,307
=========================================================================
</TABLE>
127
<PAGE>
The 1991 taxes on continuing operations primarily arose from the geographic mix
of earnings. A U.S. loss from continuing operations of $70.9 million generated
tax benefits at relatively low U.S. rates while foreign income from continuing
operations of $62.7 million generated taxes at higher foreign rates. In
addition, the U.S. operations were subject to alternative minimum taxes in 1991
despite the loss from continuing operations for financial reporting purposes.
As of December 31, 1993, the Company had U.S. federal general business and
foreign tax credit carryforwards of $18.3 million and $26.5 million,
respectively, for income tax reporting purposes. The general business credits
expire at various dates beginning in 1994, and the foreign tax credits expire at
various dates beginning in 1995. The Company also has $16.4 million of U.S.
federal credit for prior year minimum tax for income tax reporting purposes.
There is no expiration date with respect to this credit and it may only be
applied against regular tax.
Undistributed earnings intended to be reinvested indefinitely by the foreign
subsidiaries totaled $191 million at December 31, 1993. The determination of
the deferred tax liability related to these undistributed earnings is not
practicable. Accordingly, no U.S. deferred income tax has been recorded.
NOTE 23 - DISCONTINUED OPERATIONS
In June 1991, the Board of Directors adopted a formal plan to dispose of a
significant portion of the Company's Mining and Minerals business segment.
Effective July 31, 1991, the Company sold its worldwide filtration and
industrial minerals businesses, known as Celite Corporation, for cash and the
assumption of certain liabilities. A net gain on the sale of $13.5 million,
after income tax expense of $8.8 million, was recorded in the third quarter of
1991. Accordingly, the operating results of the discontinued operations for
1991 were excluded from the determination of income from continuing operations.
Net sales applicable to the discontinued operations amounted to $57.6 million in
1991. The operating results of the discontinued operations for 1991 were
presented net of taxes of $2.1 million. The Company's equity investment in the
Stillwater platinum and palladium mining operations is the only significant
asset of the former Mining and Minerals business segment that was not included
in the disposal.
NOTE 24 - EARLY EXTINGUISHMENT OF DEBT
In conjunction with the bond prepayment as discussed in Note 4, the Company
recorded an extraordinary gain of $0.9 million, net of related income taxes of
$0.5 million, in August 1993 to adjust the estimated extraordinary loss
previously recorded in 1992. In 1992, the Company recorded an estimated
extraordinary loss of $11.5 million, net of related income tax benefit of $5.9
million, in anticipation of the prepayment of a portion of the bonds payable to
the PI Trust.
In anticipation of the prepayment, the Company reclassified a portion of the
long-term bonds payable to the PI Trust to short-term debt in 1992.
128
<PAGE>
NOTE 25 - CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("SFAS
No. 112"). SFAS No. 112 generally requires that in certain circumstances
postemployment benefit costs and obligations be recognized over the active
service lives of employees. These obligations include, but are not limited to,
benefits provided to former (but not yet retired) or inactive employees and
their dependents contingent upon disability, death, layoff or other termination.
The Company recognized an accumulated postemployment benefit obligation of $13.9
million, net of taxes of $8.6 million. This cumulative adjustment is primarily
attributable to the accrual of certain accumulated disability-related benefits,
recognition of additional workers' compensation expenses and the reduction of
the discount rate used to measure the present value of the Company's workers'
compensation liabilities to 7.5 percent from approximately ten percent.
The Company will continue to recognize certain postemployment benefit expenses
at the time an employee is terminated or becomes inactive as such amounts cannot
be reasonably estimated before that time. Income before cumulative effect of
accounting changes after adopting SFAS No. 112 is not significantly different
from the amount the Company previously recognized for all periods presented.
Restatement of postemployment information for prior periods is not required by
SFAS No. 112. Accordingly, the Company made no restatement other than the
reclassification from interest expense to income from operations related to the
annual present value accretion of its workers' compensation liabilities.
Effective January 1, 1991, the Company adopted SFAS No. 106 for its U.S. and
Canadian postretirement medical and life insurance benefit plans. In accordance
with the provisions of that statement, postretirement benefit information for
prior years has not been restated. The Company elected to immediately recognize
the accumulated postretirement benefit obligation of $173.4 million, net of tax
of $91.4 million, upon adoption of SFAS No. 106 (see Note 18). Previously,
retiree medical and life insurance coverage benefits were expensed as incurred.
Also in 1991, the Company recorded a $220.8 million increase in net income to
reflect the cumulative effect on prior years of a change in method of accounting
for income taxes that resulted from the adoption of SFAS No. 109 effective
January 1, 1991 (see Note 22).
NOTE 26 - SUPPLEMENTAL CASH FLOW INFORMATION
In connection with the Consolidated Statement of Cash Flows, cash paid for
interest during 1993, 1992 and 1991 was $140.1 million, $126.8 million and $97
million, respectively. Cash refunded for income taxes during 1993 was $4.6
million. Cash paid for income taxes during 1992 and 1991 was $38 million and
$59.8 million, respectively.
As discussed in Note 4, the Company made a prepayment on its outstanding bond
obligations to the PI Trust that included the assignment of $100 million of
Riverwood notes held by Manville.
129
<PAGE>
NOTE 27 - ACQUISITIONS
On July 1, 1992, Riverwood acquired substantially all of the assets of Macon
Kraft, Inc., including a linerboard mill located in Macon, Georgia. The
purchase price of the assets was approximately $219 million, of which $169
million represented indebtedness assumed by Riverwood. Immediately following
the acquisition, approximately $15 million of the assumed debt was prepaid. The
acquisition was accounted for using the purchase method of accounting. The
consolidated statement of income for the year ended December 31, 1992, included
the operations of the linerboard mill for the period July 1, 1992 through
December 31.
NOTE 28 - BUSINESS SEGMENTS AND GEOGRAPHIC AREA INFORMATION
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 of pulpwood to the
U.S. mill operations, and the manufacture of lumber and plywood.
Schuller operates 35 manufacturing facilities in the United States, Canada and
Germany and reports its results in two business segments: Building Products and
Engineered Products. The Building Products segment manufactures building
insulation products, roofing products and mechanical insulation products at
plants in both the United States and Canada. Building insulation products
manufactured by Schuller include thermal and acoustical fiberglass insulation
products that are suitable for use in various residential and commercial
building applications. Roofing products manufactured by Schuller include roof
insulations, membranes and accessories for use in various commercial and
industrial building applications. Mechanical insulation products manufactured
by Schuller include fiberglass air duct systems, thermal acoustical blankets and
mechanical piping insulation. The Engineered Products segment is comprised of
Schuller's mats and reinforcements business, including Schuller GmbH, Schuller's
German subsidiary, and the equipment insulations and filtration businesses. The
mats and reinforcements business manufactures continuous filament fiberglass
products, including mats and fibers for roofing applications, fiberglass for
plastics reinforcements, textile glass products used primarily for wall
coverings and nonwoven fiberglass mats for specialty applications. The
equipment insulations business manufactures insulation for heating, ventilating
and air conditioning equipment; aircraft; appliances; and acoustic applications;
and fiberglass wool for automotive headliner and hoodliner parts. Filtration
products include air filtration media for commercial and industrial buildings
and microfibers for use in battery separators and clean room air filters.
130
<PAGE>
Financial results for the Manville holding company's oil and gas properties
(which were sold in the third quarter of 1993 and the second quarter of 1992)
and its equity investment in the Stillwater platinum and palladium mining
operations are included in Corporate and Eliminations for business segment
reporting purposes.
<TABLE>
<CAPTION>
MANVILLE CORPORATION
CONSOLIDATED MAJOR BUSINESS SEGMENTS
(IN THOUSANDS OF DOLLARS) YEARS ENDED DECEMBER 31
1993 1992 1991
- ------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Riverwood International:
Coated Board System $ 890,679 $ 759,150 $ 749,538
Containerboard 647,574 568,605 252,336
U.S. Timberlands/Wood Products 296,244 333,101 340,917
Corporate 232,770 243,183 63,338
- ------------------------------------------------------------------------------
2,067,267 1,904,039 1,406,129
- ------------------------------------------------------------------------------
Schuller International:
Building Products 457,583 446,020 455,598
Engineered Products 557,205 558,191 569,501
- ------------------------------------------------------------------------------
1,014,788 1,004,211 1,025,099
Corporate (Note D) 597,617 781,875 634,737
Eliminations and Adjustments (Note E) (63,435) (59,762) (63,420)
- ------------------------------------------------------------------------------
Total $3,616,237 $3,630,363 $3,002,545
==============================================================================
</TABLE>
See notes on page 135.
131
<PAGE>
<TABLE>
<CAPTION>
MANVILLE CORPORATION
CONSOLIDATED MAJOR BUSINESS SEGMENTS
(IN THOUSANDS OF DOLLARS) YEARS ENDED DECEMBER 31
1993 1992 1991
- -------------------------------------------------------------------------------
DEPRECIATION, DEPLETION AND AMORTIZATION
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Riverwood International:
Coated Board System $ 45,729 $ 42,780 $ 36,108
Containerboard 31,548 24,297 18,456
U.S. Timberlands/Wood Products 14,887 16,337 14,844
Corporate 1,803 1,379 1,004
- -------------------------------------------------------------------------------
93,967 84,793 70,412
- -------------------------------------------------------------------------------
Schuller International:
Building Products 23,759 24,977 26,082
Engineered Products 32,754 30,488 28,855
- -------------------------------------------------------------------------------
56,513 55,465 54,937
Corporate (Note C) 6,628 8,656 13,477
- -------------------------------------------------------------------------------
Total $157,108 $148,914 $138,826
===============================================================================
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
- -------------------------------------------------------------------------------
Riverwood International:
Coated Board System $188,598 $ 77,046 $ 88,684
Containerboard 93,574 293,092 27,969
U.S. Timberlands/Wood Products 2,981 4,876 2,810
Corporate 3,698 3,578 4,161
- -------------------------------------------------------------------------------
288,851 378,592 123,624
- -------------------------------------------------------------------------------
Schuller International:
Building Products 19,454 12,577 11,562
Engineered Products 40,421 18,429 38,726
- -------------------------------------------------------------------------------
59,875 31,006 50,288
Corporate (Note C) 2,768 1,489 5,495
- -------------------------------------------------------------------------------
Total $351,494 $411,087 $179,407
===============================================================================
</TABLE>
See notes on page 135.
132
<PAGE>
MANVILLE CORPORATION
CONSOLIDATED MAJOR BUSINESS SEGMENTS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1993 1992 1991
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES
- ----------------------------------------------------------------------------
Riverwood International:
Coated Board System $ 746,102 $ 799,997 $ 765,907
Containerboard 246,439 210,734 143,413
U.S. Timberlands/Wood Products 146,879 125,857 98,337
Corporate and Eliminations (19,054) (18,361) (14,447)
- ----------------------------------------------------------------------------
1,120,366 1,118,227 993,210
- ----------------------------------------------------------------------------
Schuller International:
Building Products 664,566 608,140 564,741
Engineered Products 527,052 511,968 476,046
- ----------------------------------------------------------------------------
1,191,618 1,120,108 1,040,787
Corporate and Eliminations (Note A) (36,049) (34,382) (24,119)
- ----------------------------------------------------------------------------
Total Company Net Sales $2,275,935 $2,203,953 $2,009,878
============================================================================
INCOME FROM OPERATIONS (Note B)
- ----------------------------------------------------------------------------
Riverwood International:
Coated Board System $ 99,361 $ 126,010 $ 126,416
Containerboard (31,864) 8,693 12,739
U.S. Timberlands/Wood Products 64,313 30,867 10,325
Corporate and Eliminations (48,313) (19,478) (21,850)
- ----------------------------------------------------------------------------
83,497 146,092 127,630
- ----------------------------------------------------------------------------
Schuller International:
Building Products 44,666 32,126 (46,433)
Engineered Products 45,533 55,970 29,421
- ----------------------------------------------------------------------------
90,199 88,096 (17,012)
Corporate and Eliminations (37,748) (31,972) (39,801)
- ----------------------------------------------------------------------------
Total Company Income from
Operations $ 135,948 $ 202,216 $ 70,817
============================================================================
</TABLE>
See notes on page 135.
133
<PAGE>
MANVILLE CORPORATION
CONSOLIDATED GEOGRAPHIC AREAS INFORMATION
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1993 1992 1991
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES
- ------------------------------------------------------------------------------
United States $1,814,113 $1,725,870 $1,510,228
Brazil 109,351 98,899 100,300
Other Foreign 397,284 432,140 420,890
Corporate and Eliminations (Note A) (44,813) (52,956) (21,540)
- ------------------------------------------------------------------------------
Total Company Net Sales $2,275,935 $2,203,953 $2,009,878
==============================================================================
INCOME FROM OPERATIONS (Note B)
- ------------------------------------------------------------------------------
United States $ 137,303 $ 196,758 $ 47,050
Brazil 9,198 10,998 16,133
Other Foreign 37,038 28,661 47,671
Corporate and Eliminations (47,591) (34,201) (40,037)
- ------------------------------------------------------------------------------
Total Company Income from Operations $ 135,948 $ 202,216 $ 70,817
==============================================================================
ASSETS
- ------------------------------------------------------------------------------
United States $2,165,383 $1,993,213 $1,703,322
Brazil 256,600 228,197 212,764
Other Foreign 431,390 445,806 450,961
Corporate (Note D) 830,387 1,025,058 698,075
Eliminations and Adjustments (Note E) (67,523) (61,911) (62,577)
- ------------------------------------------------------------------------------
Total $3,616,237 $3,630,363 $3,002,545
==============================================================================
</TABLE>
See notes on page 135.
134
<PAGE>
NOTES TO BUSINESS SEGMENTS AND GEOGRAPHIC AREA INFORMATION:
(A) Net sales included in Corporate and Eliminations relate primarily to the
elimination of intersegment and intergeographic sales (at prices
approximating market).
(B) Restructuring gains and losses are included in operations of the related
geographic areas and industry segments where they can be identified to a
specific segment. The $25 million restructuring charge taken by Riverwood
in 1993 is included in Riverwood's Corporate and Eliminations. The $17
million gain on sale of timberlands is included in the U.S. Timberlands/Wood
Products segment. The Building Products segment includes restructuring
charges of $20.4 million, $5.8 million and $45 million in 1993, 1992 and
1991, respectively. The Engineered Products segment includes a
restructuring charge of $6.1 million in 1993, a restructuring gain of $5.8
million in 1992 and a restructuring charge of $12.6 million in 1991.
Corporate and Eliminations reflects a restructuring charge of $6.1 million
in 1993, a restructuring gain of $0.7 million in 1992 and a restructuring
charge of $5.6 million in 1991.
(C) Corporate depreciation and depletion includes amounts attributable to
discontinued operations. Corporate additions to property, plant and
equipment include amounts associated with discontinued operations.
(D) Corporate assets are principally cash and equivalents and marketable
securities, prepaid income taxes, certain investments (including the
Company's equity investment in Stillwater), certain long-term receivables,
a portion of deferred tax assets, a portion of prepaid pension assets and a
portion of property, plant and equipment.
(E) Includes the elimination of intersegment and intergeographic inventory
profits and the adjustment of business segment and geographic inventories,
which are carried at standard costs, to the historical inventory bases used
in consolidation.
135
<PAGE>
MANAGEMENT'S REPORT
The accompanying consolidated financial statements have been prepared by
Management in conformity with generally accepted accounting principles
appropriate under the circumstances. The representations in the financial
statements and the fairness and integrity of such statements are the
responsibility of Management. All of the other financial information in the
Annual Report and Form 10-K is consistent with that in the financial statements.
The financial statements necessarily include some amounts that are based on
Management's best estimates and judgments. Management believes that the
financial statements reflect, in all material respects, the substance of
transactions that should be included and appropriately account for or disclose
all material uncertainties.
The consolidated financial statements prepared by Management have been
audited in accordance with generally accepted auditing standards by Coopers &
Lybrand, Independent Accountants, whose report is also presented.
Manville maintains internal accounting control systems to provide reliable
financial information for the preparation of financial statements, to safeguard
assets against loss or unauthorized use and to ensure proper authorization and
accounting for all transactions. Management is responsible for maintenance of
these systems, which is accomplished through communication of established
written codes of conduct, systems, policies and procedures; employee training;
and appropriate delegation of authority and segregation of responsibilities. To
further ensure compliance with established standards and procedures, the Company
maintains a substantial program of internal audits.
In establishing and maintaining its internal accounting control systems,
Management considers the inherent limitations of the various control procedures
and weighs their cost against the benefits derived. Management believes that
existing internal accounting control systems are achieving their objectives and
that they provide reasonable assurance concerning the accuracy of the financial
statements.
Oversight of Management's financial reporting and internal accounting control
responsibilities is exercised by the Board of Directors, through an Audit
Committee that consists solely of outside directors. The Audit Committee meets
periodically with financial management, internal auditors and the independent
accountants to review how each is carrying out its responsibilities and to
discuss matters concerning auditing, internal accounting control and financial
reporting. The independent accountants and the Company's internal audit
department have free access to meet with the Audit Committee without
Management's presence.
[signature appears here] [signature appears here]
W. T. Stephens R. E. Cole
President, CEO and Senior Vice President
Chairman of the Board Corporate Finance
136
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Directors of Manville Corporation:
We have audited the accompanying consolidated balance sheet of Manville
Corporation as of December 31, 1993 and 1992 and the related consolidated
statements of income, cash flows and stockholders' equity for each of the three
years in the period ended December 31, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Manville
Corporation as of December 31, 1993 and 1992, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1993 in conformity with generally accepted accounting
principles.
In accordance with statements issued by the Financial Accounting Standards
Board, as discussed in Note 25 to the consolidated financial statements, the
Company changed its method of accounting for postemployment benefits in 1993 and
for employee postretirement benefits other than pensions and income taxes in
1991.
/s/ Coopers & Lybrand
- ---------------------
Coopers & Lybrand
Denver, Colorado
February 4, 1994
137
<PAGE>
MANVILLE CORPORATION
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993 (Note A)
- ------------------------------------------------------------------------------------------------
Net Sales $504,311 $587,516 $601,324 $582,784 $2,275,935
Income from Operations 35,858 49,948 44,855 5,287 135,948
Income (Loss) before Extraordinary
Item and Cumulative Effect
of Accounting Change 29,666 27,369 11,712 (7,975) 60,772
Net Income (Loss) (Note C) 15,785 27,369 12,603 (7,975) 47,782
- ------------------------------------------------------------------------------------------------
PRIMARY AND FULLY DILUTED EARNINGS PER
COMMON SHARE (Note E)
- ------------------------------------------------------------------------------------------------
Income (Loss) before Extraordinary
Item and Cumulative Effect
of Accounting Change $.20 $.18 $.05 $(.11) $.31
Net Income (Loss) (Note C) .08 .18 .06 (.11) .21
================================================================================================
YEAR ENDED DECEMBER 31, 1992 (Note A)
- ------------------------------------------------------------------------------------------------
Net Sales $492,495 $550,633 $587,836 $572,989 $2,203,953
Income from Operations 47,422 61,759 50,110 42,925 202,216
Income before Extraordinary Item 9,265 15,424 5,845 16,931 47,465
Net Income (Notes B and C) 9,265 6,039 5,845 14,800 35,949
- ------------------------------------------------------------------------------------------------
PRIMARY AND FULLY DILUTED EARNINGS PER
COMMON SHARE (Note E)
- ------------------------------------------------------------------------------------------------
Income before Extraordinary Item $.04 $.09 $.01 $.10 $.22
Net Income (Notes B and C) .04 .01 .01 .08 .13
================================================================================================
</TABLE>
NOTES:
(A) The Company adopted Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits," in the fourth quarter of
1993, effective January 1, 1993. Accordingly, the Company restated its results
for the first three quarters to reflect the cumulative effect of adoption of
$13.9 million, net of taxes of $8.6 million, and the corresponding impacts on
profit sharing and minority interest. In addition, a reclassification from
interest expense to income from operations related to the annual present value
accretion of its workers' compensation liabilities was made for 1993 and 1992.
In the first quarter of 1993, the Company contributed a portion of its
automotive business to a joint venture. During the second and third quarters of
1993, the Company's share of the joint venture's net earnings was reported in
other income (loss). In the fourth quarter of 1993, the joint venture agreement
was amended and the Company became operating partner of the joint venture.
Accordingly, second and third quarter results have been restated to reflect the
joint venture's sales and costs and expenses on a fully consolidated basis in
order to maintain consistent quarterly presentation.
Beginning in the fourth quarter of 1993, to more accurately reflect the U.S.
dollar economic effect of transactions in Brazil, certain amounts previously
reported as exchange gains and losses associated with the Company's Brazilian
operations have been reflected on a gross basis against net sales and cost of
sales as opposed to a net presentation in other income (loss). The effect of
this reclassification is to decrease net sales and cost of sales for Brazilian
operations, thereby reflecting actual U.S. dollar prices and terms and
eliminating the financial reporting effects of hyperinflation. Amounts for
prior years have been reclassified to conform to the 1993 presentation. Income
from
138
<PAGE>
operations was not affected by these reclassifications.
The following table reconciles amounts previously reported on Form 10-Q/10-K to
amounts as reclassified:
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
- ------------------------------------------------------------------------------------------
Net Sales
As originally reported $508,548 $581,998 $600,172 $582,784 $2,273,502
Adjustments (4,237) 5,518 1,152 2,433
- ------------------------------------------------------------------------------------------
As restated $504,311 $587,516 $601,324 $582,784 $2,275,935
==========================================================================================
Income from Operations
As originally reported $ 37,229 $ 51,315 $ 46,219 $ 5,287 $ 140,050
Adjustments (1,371) (1,367) (1,364) (4,102)
- ------------------------------------------------------------------------------------------
As restated $ 35,858 $ 49,948 $ 44,855 $ 5,287 $ 135,948
==========================================================================================
Net Income (Loss)
As originally reported $ 28,051 $ 27,674 $ 13,037 $ (7,975) $ 60,787
Adjustments (12,266) (305) (434) (13,005)
- ------------------------------------------------------------------------------------------
As restated $ 15,785 $ 27,369 $ 12,603 $ (7,975) $ 47,782
==========================================================================================
Earnings (Loss) Per Common Share
As originally reported $0.20 $0.18 $0.05 $(0.11) $0.31
Adjustments (0.12) 0.01 (0.11)
- ------------------------------------------------------------------------------------------
As restated $0.08 $0.18 $0.06 $(0.11) $0.21
==========================================================================================
YEAR ENDED DECEMBER 31, 1992
- ------------------------------------------------------------------------------------------
Net Sales
As originally reported $496,937 $555,334 $592,642 $578,853 $2,223,766
Adjustments (4,442) (4,701) (4,806) (5,864) (19,813)
- ------------------------------------------------------------------------------------------
As restated $492,495 $550,633 $587,836 $572,989 $2,203,953
==========================================================================================
Income from Operations
As originally reported $ 48,693 $ 63,028 $ 51,381 $ 44,195 $ 207,297
Adjustments (1,271) (1,269) (1,271) (1,270) (5,081)
- ------------------------------------------------------------------------------------------
As restated $ 47,422 $ 61,759 $ 50,110 $ 42,925 $ 202,216
==========================================================================================
</TABLE>
(B) On June 24, 1992, Riverwood International Corporation, the Company's
paperboard and packaging products subsidiary, completed an initial public
offering of 12.1 million shares, or 19.5 percent, of its common stock. In
September of 1993, the Manville holding company purchased an additional
3,448,276 shares of Riverwood's common stock, increasing the Manville holding
company's ownership percentage to approximately 81.5 percent from 80.5 percent.
As a result of these transactions, the Company's December 31, 1993 Consolidated
Statement of Income reflects the minority stockholders' interest in Riverwood's
net earnings of $0.3 million. The Company's December 31, 1992 Consolidated
Statement of Income reflects the minority stockholders' interest in Riverwood's
net earnings of $3.1 million, or $.03 per common share.
139
<PAGE>
(C) During the third quarter of 1993, the Company made a prepayment on its
outstanding bond obligations to the Manville Personal Injury Settlement Trust
(the "PI Trust"). The prepayment consisted of $150 million of cash, net of
certain costs, and the assignment to the PI Trust of $100 million, plus accrued
interest, of currently outstanding Riverwood notes held by Manville. An
extraordinary gain of $0.9 million, net of related income taxes of $0.5 million,
or $.01 per common share, was recorded in August 1993 to adjust the estimated
extraordinary loss recorded in 1992. In 1992, the Company recorded an estimated
extraordinary loss of $11.5 million, net of related income tax benefit of $5.9
million, or $.09 per common share, in anticipation of this prepayment and
exchange.
(D) The fourth quarter 1993 income from operations includes a restructuring
charge of $30.7 million. This includes a $25 million charge by Riverwood for
the write-down of assets and provisions for severance, relocation and related
costs to restructure and consolidate certain operations and infrastructure
levels, partially offset by a $17 million gain on Riverwood's sale of
approximately 60,000 acres of nonstrategic timberlands. In addition, Schuller
recorded $22.4 million of restructuring charges related to sampling, inspection
and remediation expenses associated with its former phenolic roofing insulation
business, severance costs and costs associated with the exchange of Schuller's
residential roofing business for a commercial and industrial roofing business.
(E) Earnings (loss) per share amounts were computed on a weighted average number
of shares outstanding basis and were calculated after the deduction for
preference stock accretion. Refer to Note 15 in Notes to the Consolidated
Financial Statements for discussion of the earnings (loss) per common share
computation.
140
<PAGE>
MANVILLE CORPORATION
THE EFFECT OF CHANGES IN THE GENERAL PRICE LEVEL (UNAUDITED)
Presented below is historical cost/constant dollar information to indicate the
impact of changes in the general price level on certain items that are shown in
the primary financial statements based on dollar values determined as of varying
historical dates.
Net sales for 1993 are assumed to have occurred ratably in relation to the
change in the Consumer Price Index during the year and are, therefore, already
expressed in average 1993 dollars. The presentation also shows the gain in
purchasing power as a result of holding more monetary liabilities than monetary
assets during periods of rising prices. All information is shown in terms of
average 1993 dollars as measured by the Consumer Price Index for all Urban
Consumers (CPI-U, 1982-1984 = 100). The preparation of these numbers requires
the use of certain assumptions and estimates, and these disclosures should,
therefore, be viewed in that context.
FIVE-YEAR COMPARISON OF SELECTED SUPPLEMENTARY FINANCIAL DATA
ADJUSTED FOR THE EFFECT OF CHANGES IN THE GENERAL PRICE LEVEL
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
YEARS ENDED DECEMBER 31
1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales:
Historical $2,275,935 $2,203,953 $2,009,878 $2,126,673 $2,081,421
Constant Dollar Basis $2,275,935 $2,269,930 $2,132,360 $2,351,218 $2,425,527
Gain from Increase in
Purchasing Power of Net
Monetary Liabilities
Held $33,762 $32,563 $28,388 $44,079 $30,931
Market Price per Common
Share (at December 31):
Historical $8.50 $8.63 $7.88 $4.63 $9.13
Constant Dollar Basis $8.50 $8.86 $8.33 $5.04 $10.55
Average Consumer Price
Index (CPI-U) 144.5% 140.3% 136.2% 130.7% 124.0%
</TABLE>
141
<PAGE>
EXHIBIT 24(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Manville Corporation on Form S-8 (File No. 33-29389) and Form S-3 (File No.
33-43912) of our report dated February 4, 1994, on our audits of the
consolidated financial statements and financial statement schedules of Manville
Corporation as of December 31, 1993 and 1992 and for the years ended December
31, 1993, 1992, and 1991, which report is included in this Annual Report on Form
10-K.
/s/ Coopers & Lybrand
---------------------
Coopers & Lybrand
Denver, Colorado
March 28, 1994
142
<PAGE>
Exhibit 24(b)
March 22, 1994
Manville Corporation
717 17th Street
Denver, Colorado 80202
Dear Sirs:
We refer to the report Form 10-K for the fiscal year ended December 31, 1993, of
Manville Corporation. The referenced report is to be filed with the Securities
and Exchange Commission.
We hereby consent to the reference to our firm and to our report of July, 1993
in the referenced Form 10-K under "PROPERTIES, Mining, Platinum Group Metals
Mining Claims".
We also confirm to you that we have no reason to believe that there is any
misrepresentation in the information contained in such Form 10-K that is derived
from our report or known to us as a result of preparing such report.
Sincerely,
BEHRE DOLBEAR & COMPANY, INC.
Hans W. Schreiber
President
143
