<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________
Commission file number 1-8247
MANVILLE CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 84-0856796
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
717 17th Street
Denver, Colorado 80202
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(303) 978-2000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No .
--- ---
At November 9, 1995, there were 122,999,571 shares of the registrant's
common stock outstanding.
<PAGE> 2
*PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
* "Manville" or the "Company" when used in this report refers to
Manville Corporation, incorporated in the State of Delaware in 1991,
and includes where applicable its consolidated subsidiaries.
I-1
<PAGE> 3
MANVILLE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and equivalents $ 307,125 $ 322,003
Marketable securities, at cost which
approximates market 102,441 20,311
Receivables, net of allowances 407,586 335,772
Inventories 278,494 212,774
Prepaid expenses 29,252 28,015
Deferred tax assets 40,723 44,854
-----------------------------------
Total Current Assets 1,165,621 963,729
Property, Plant and Equipment,
net of accumulated depreciation
and depletion of $1,045,176 and
$963,603, respectively 2,155,513 2,063,557
Deferred Tax Assets 216,234 281,874
Other Assets 487,792 490,451
-----------------------------------
$4,025,160 $3,799,611
=========================================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
I-2
<PAGE> 4
MANVILLE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
(Thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
LIABILITIES 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Liabilities
Accounts and notes payable $ 288,920 $ 295,510
Compensation and employee benefits 154,813 157,574
Income taxes 29,735 28,739
Other accrued liabilities 159,194 130,748
---------------------------------
Total Current Liabilities 632,662 612,571
Long-Term Debt, less current portion 1,452,883 1,423,995
Postretirement Benefits Other Than Pensions 244,667 243,986
Deferred Income Taxes and Other Noncurrent
Liabilities 384,805 359,978
---------------------------------
2,715,017 2,640,530
- -----------------------------------------------------------------------------------------------------
Profit Sharing Obligation (Notes 2 and 8)
Commitments and Contingencies (Note 2)
Minority Interest in Consolidated
Subsidiary 104,854 95,610
STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------
Cumulative Preference Stock, Series B 178,638 178,638
Common Stock 1,228 1,228
Treasury Stock, at cost (1,039) (407)
Capital in Excess of Par Value 1,012,387 1,011,310
Unearned Restricted Stock Compensation (3,906) (6,013)
Accumulated Deficit (2,646) (130,394)
Pension Liability Adjustment (435) (435)
Cumulative Currency Translation
Adjustment 21,062 9,544
---------------------------------
1,205,289 1,063,471
---------------------------------
$4,025,160 $3,799,611
=====================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
I-3
<PAGE> 5
MANVILLE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS)
AND ACCUMULATED DEFICIT
(Thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
--------------------------------------------------------------------
1995 1994 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $705,313 $682,083 $2,067,206 $1,850,925
Cost of Sales 531,093 513,585 1,536,012 1,403,173
Selling, General and
Administrative 71,890 66,525 226,172 196,818
Research, Development
and Engineering 9,205 10,609 29,709 29,115
Other Income (Loss), net (131) (3,998) (8,928) (12,153)
--------------------------------------------------------------------
Income from Operations 92,994 87,366 266,385 209,666
Gain on Sale of Equity
Investment 74,889 74,889
Interest Income 4,760 2,768 13,856 7,105
Interest Expense 36,951 33,804 114,081 99,954
Profit Sharing Expense
(Notes 2 and 8) 8,666 5,145 24,224 12,455
--------------------------------------------------------------------
Income before Income Taxes 127,026 51,185 216,825 104,362
Income Taxes 49,677 22,073 90,086 44,701
--------------------------------------------------------------------
Income before Equity in
Earnings of Affiliate,
Minority Interest and
Extraordinary Item 77,349 29,112 126,739 59,661
Equity in Earnings of
Affiliate, net of taxes 9,384 28,037
Minority Interest in
Consolidated Subsidiary (3,115) (130) (8,336) (2,632)
--------------------------------------------------------------------
Income before Extraordinary
Item 83,618 28,982 146,440 57,029
Extraordinary Loss on
Early Extinguishments of
Debt, net of tax (34,707) (34,707)
--------------------------------------------------------------------
Net Income (Loss) 83,618 (5,725) 146,440 22,322
Preference Stock Dividends (6,231) (6,231) (18,692) (18,692)
--------------------------------------------------------------------
Net Income (Loss) Applicable
to Common Stock $ 77,387 $(11,956) $ 127,748 $ 3,630
===================================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
I-4
<PAGE> 6
MANVILLE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS)
AND ACCUMULATED DEFICIT (Continued)
(Thousands of dollars, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
--------------------------------------------------------------------
ACCUMULATED DEFICIT 1995 1994 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accumulated Deficit at
Beginning of Period $(80,033) $(126,881) $(130,394) $(142,467)
Net Income (Loss) 83,618 (5,725) 146,440 22,322
Preference Stock Dividends (6,231) (6,231) (18,692) (18,692)
--------------------------------------------------------------------
Accumulated Deficit at
End of Period $ (2,646) $(138,837) $ (2,646) $(138,837)
===================================================================================================================
EARNINGS (LOSS) PER COMMON
SHARE (AFTER PREFERENCE
STOCK DIVIDENDS)
- -------------------------------------------------------------------------------------------------------------------
Primary:
Income before Extraordinary
Item $.62 $ .18 $1.03 $ .31
Extraordinary Loss on
Early Extinguishments of
Debt, net of tax (.28) (.28)
----------------------------------------------------------------
Net Income (Loss) Applicable
to Common Stock $.62 $(.10) $1.03 $ .03
===================================================================================================================
Fully Diluted:
Income before Extraordinary
Item $.61 $ .18 $1.01 $ .31
Extraordinary Loss on
Early Extinghishments of
Debt, net of tax (.28) (.28)
----------------------------------------------------------------
Net Income (Loss) Applicable
to Common Stock $.61 $(.10) $1.01 $ .03
===================================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
I-5
<PAGE> 7
MANVILLE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
--------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income (before Preference Stock Dividends) $ 146,440 $ 22,322
Non-cash items included in net income:
Depreciation, depletion and amortization 114,961 110,660
Deferred taxes 68,673 21,347
Roofing guarantee income 6,518 4,789
Pensions and postretirement benefits expense 15,694 21,953
Provision for furnance rebuild 6,183 6,609
Gain on sale of asset (74,889)
Interest expense 1,310 3,702
Profit sharing expense 24,224 12,455
Translation loss 6,636
Equity earnings of affiliate, net of dividends (24,032)
Minority interest in net income of
consolidated subsidiary 8,336 2,632
Extraordinary loss on early
extinguishments of debt, net 26,835
Other, net 5,740 4,682
Profit sharing paid (18,259) (12,933)
Debt issuance cost (4,997)
(Increase) decrease in current assets:
Receivables (63,072) (62,430)
Inventories (55,520) (8,168)
Prepaid expenses (791) (563)
Increase (decrease) in current liabilities:
Accounts payable 11,854 9,224
Compensation and employee benefits (9,774) (5,272)
Income taxes 1,330 (1,656)
Other accrued liabilities 19,750 25,891
Decrease in postretirement benefits
other than pensions (13,482) (12,072)
Increase (decrease) in other noncurrent liabilities 2,148 (9,558)
--------------------------
Net Cash Provided by Operating Activities 173,342 162,088
--------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------------------------------------------------------------------------------------
Purchases of property, plant and equipment (199,154) (237,459)
Proceeds from sales of assets 127,698 37,367
Proceeds from sales of held-to-maturity
marketable securities 72,332 141,449
Purchases of held-to-maturity
marketable securities (153,960) (77,647)
Increase in other assets (3,233) (29,486)
--------------------------
Net Cash Used in Investing Activities (156,317) (165,776)
--------------------------
</TABLE>
I-6
<PAGE> 8
MANVILLE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
(Thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
--------------------------
CASH FLOWS FROM FINANCING ACTIVITIES: 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Issuance of debt $ 6,622 $ 178,053
Payments on debt (7,607) (259,145)
Net increase (decrease) in notes payable (13,000) 100,000
Dividends on Preference Stock (18,692) (16,615)
Dividends to minority stockholders of
consolidated subsidiary (1,470) (1,452)
Treasury stock (633) (407)
Other stock transactions 2,575
--------------------------
Net Cash Provided by (Used in) Financing Activities (32,205) 434
--------------------------
Effect of Exchange Rate Changes on Cash 302 531
--------------------------
Net Decrease in Cash and Equivalents (14,878) (2,723)
Cash and Equivalents at Beginning of Period 322,003 153,093
--------------------------
Cash and Equivalents at End of Period $ 307,125 $ 150,370
===================================================================================================================
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
I-7
<PAGE> 9
MANVILLE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Manville Corporation is an international holding company with two principal
operating subsidiaries, Riverwood International Corporation ("Riverwood") and
Schuller International Group, Inc. ("Schuller"), collectively referred to as
the "Company". When referring to the holding company only, Manville
Corporation is defined as the "Manville holding company." The Manville holding
company owns 100 percent of Schuller and approximately 81.3 percent of
Riverwood. In October 1995, the Company announced that Riverwood entered into
a definitive merger agreement providing for the acquisition of Riverwood by a
group of investors (see Note 7).
Manville Personal Injury Settlement Trust (the "PI Trust") owns approximately
78 percent of the Company's Common Stock. In addition, the Company has a debt
obligation to the PI Trust and an obligation to pay annually 20 percent of its
net earnings, as adjusted, to the PI Trust (see Notes 2 and 8).
On December 29, 1994, Riverwood sold just under 50 percent of its investment in
its Brazilian operations (Igaras) after first spinning off a wholly owned
subsidiary to operate Riverwood's packaging machinery operations in Brazil.
Prior to that date, Riverwood owned 100 percent of Igaras and included the
results of operations of Igaras in the Containerboard business segment through
the date of sale. Subsequent to December 29, 1994, Riverwood no longer
consolidates Igaras, but instead reports its investment in Igaras using the
equity method of accounting.
The condensed consolidated financial statements as of September 30, 1995 and
December 31, 1994 and for the three and nine month periods ended September 30,
1995 and 1994 reflect all normal, recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of the financial
condition and the results of operations for the periods presented. The
year-end condensed consolidated balance sheet was derived from audited
financial statements, and as presented does not include all disclosures
required by generally accepted accounting principles.
The Company has reclassified the presentation of certain prior period
information to conform with the current presentation format.
Additional information regarding the Company's accounting policies, operations,
financial position, reorganization proceedings and the PI Trust is contained or
incorporated in the Company's Form 10-K for the year ended December 31, 1994
filed with the Securities and Exchange Commission.
I-8
<PAGE> 10
Note 1 - Inventories
The major classes of inventories were as follows:
<TABLE>
<CAPTION>
(Thousands of dollars)
September 30, December 31 ,
1995 1994
--------------------------------------
<S> <C> <C>
Finished goods $114,697 $ 83,922
Work-in-process 33,559 28,517
Raw materials 83,033 56,934
Supplies 47,205 43,401
-------------------------------------
$278,494 $212,774
=====================================
</TABLE>
Note 2 - Commitments and Contingencies
The Company has an obligation to pay annually 20 percent of its net earnings
(as adjusted) to the PI Trust. Payments to the PI Trust are due each year
based on the prior year's net earnings and will continue for as long as the PI
Trust is in existence. After termination of the PI Trust, an independent
profit sharing obligation on the same terms arises in favor of Manville
Property Damage Settlement Trust, if it is in existence after the termination
of the PI Trust. Based upon a review of the existing and potential claims
facing the two trusts, the Company believes that profit sharing, for all
practical purposes, will be payable for the foreseeable future unless the
Company and one or both of the trusts agree to a restructuring or modification
of the profit sharing obligation at some future date. In October 1995, the
Company and the PI Trust entered into a profit sharing exchange agreement (see
Note 8). In the first nine months of 1995, the Company recorded $24.2 million
of profit sharing expense to be paid in 1996.
Between 1988 and 1992, the Company manufactured phenolic roofing insulation
which may, under certain circumstances, contribute to the corrosion of metal
decks on which it is installed. Subsequently, the Company began a voluntary
program to inspect such metal decks and remediate where appropriate. The
Company has accrued for costs relating to future inspections, remediation and
anticipated claims. These accruals are based on the Company's historical
experience regarding the incidence of corrosion and the cost of remediation and
include a number of assumptions related to the types of roofs on which phenolic
insulation has been installed as well as the assumption that the Company's past
remediation experience will continue over the remaining lives of roofs
insulated with the Company's phenolic roofing insulation.
During the first quarter of 1995, the Company and its liability insurance
carriers reached a settlement with respect to the extent of coverage to be
provided by such carriers. In addition, during the third quarter of 1995 the
Company and the former owner of the phenolic roofing insulation business
reached an agreement
I-9
<PAGE> 11
with respect to the costs to be reimbursed by the former owner. Pursuant to
these agreements, the Company has been reimbursed for a portion of historical
costs incurred and is entitled to receive reimbursement for a substantial
portion of future costs to be incurred by the Company for inspection and
remediation.
The Company has reviewed its historical inspection and remediation experience
and the terms and collectibility of amounts payable under the reimbursement
agreements. Subject to the assumptions described above, if additional costs
are incurred in excess of the accrued amounts, such costs are not expected to
have a material adverse effect on the Company's financial condition, liquidity
or results of operations.
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 potential responsible party at a
number of non-Company owned or operated 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 the costs of
remediating these sites. The Company's actual final cost in some instances
cannot be estimated until the remediation process is substantially completed.
Environmental law is dynamic, and as a result, costs that are unforeseeable at
this time may be incurred when new laws are enacted and when environmental
agencies promulgate or revise regulations in furtherance of such legislation.
In response to the implementation of the 1990 amendments to the federal Clean
Air Act and requirements of various state air emissions regulations, the
Company will be obligated to monitor emissions at its manufacturing sites.
Because many of the anticipated regulations have not yet been proposed, neither
the costs nor timing of compliance can be reasonably anticipated at this time.
Provisions of the 1990 amendments and the related regulations will likely
require capital expenditures in the years 1995 to 2001, with most of the
expenditures occurring in the latter part of that time frame. In addition, the
federal Environmental Protection Agency will soon issue 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 2000. Riverwood estimates the capital
spending that may be required to comply with the pulp and paper industry
proposed regulations could reach between $20 million and $40 million to be
spent over a three-year period beginning in 1997.
The Company periodically reviews and, as appropriate, revises its environmental
accruals. Based on current information and
I-10
<PAGE> 12
regulatory requirements, the Company believes that to the extent additional
costs may be incurred that might exceed the accrued amounts, such amounts are
not expected to have a material adverse effect on the Company's financial
condition, liquidity or results of operations.
Note 3 - Sale of Equity Investment
In August 1995, the Company sold its remaining investment of 5.4 million shares
in Stillwater Mining Company ("Stillwater") for net cash proceeds of $110.5
million resulting in a pretax gain on the sale of equity securities of $74.9
million. Although the Company no longer has an equity interest in Stillwater,
the Company retains a five percent net smelter royalty on certain Stillwater
mining claims.
Note 4 - Income Taxes
The Company's 1995 and 1994 tax rates on operations for the first nine months
were approximately 42 percent and 43 percent, respectively. These are higher
than the U.S. federal statutory rate primarily due to higher foreign effective
tax rates and U.S. state and local taxes.
Note 5 - Early Extinguishments of Debt
In the third quarter of 1994, the Company completed two debt refinancings that
resulted in an aggregate extraordinary loss on early extinguishments of debt of
$34.7 million, net of income taxes of $16.4 million.
Riverwood completed a refinancing program in the third quarter of 1994 and used
the proceeds of the new borrowings to prepay approximately $179 million of
principal of notes payable and to pay related accrued interest and expenses of
the refinancing. The extraordinary charge for this early retirement of debt
was $7.9 million, net of income taxes of $5 million.
On September 22, 1994, (with further adjustments in the fourth quarter of 1994
in accordance with the agreement related to the prepayment), the Company
prepaid $343 million of its bond obligations, including accrued interest, to
the PI Trust with the exchange of an aggregate principal amount of $379 million
of 10-3/8 percent Senior Notes due 2004 of its wholly owned subsidiary,
Schuller. The transaction resulted in an extraordinary loss on the early
extinguishment of debt of $26.8 million, net of income taxes of $11.4 million.
I-11
<PAGE> 13
Note 6 - Earnings Per Common Share
Primary and fully diluted earnings per common share amounts were determined
using the following common equivalent shares:
<TABLE>
<CAPTION>
Third Quarter First Nine Months
1995 1994 1995 1994
-------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Primary 125,382,000 122,336,000 124,310,000 122,362,000
Fully Diluted 125,382,000 122,341,000 125,389,000 122,362,000
</TABLE>
Earnings per share amounts were calculated after the deduction for preference
stock dividends. In addition the 1995 fully diluted earnings per common share
calculation assumes the conversion of Riverwood's 6.75 percent Convertible
Subordinated Notes.
Note 7 - Subsequent Event - Riverwood Disposition
In October 1995, the Company announced that Riverwood entered into a definitive
merger agreement providing for the acquisition of Riverwood by a group
including funds managed by Clayton, Dubilier & Rice, Inc. and Brown Brothers
Harriman & Co., and senior management of Riverwood. Based on the merger price
of $20.25 per share of Riverwood common stock, Manville would receive gross
proceeds from the merger of approximately $1.08 billion for its Riverwood
investment with the transaction expected to close in the first quarter of 1996.
Although the Company expects a gain on the sale, the effective book tax rate on
the disposition is expected to exceed normal statutory rates. In accordance
with Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes", certain tax consequences of the disposition may be recognized by
the Company in the fourth quarter of 1995. However, the cash taxes on the sale
should be lower than normal statutory rates due to the Company's net operating
loss carryforwards and deductions related to the transactions described in
Note 8.
The merger is subject to the receipt of all necessary financing, as well as
the receipt of regulatory approvals, and other customary conditions. The
merger is also subject to approval by the holders of a majority of the
outstanding shares of Riverwood common stock. Manville has agreed to vote its
Riverwood shares for the merger, subject to, among other things, approval by
the stockholders of Manville of the disposition of its Riverwood investment,
receipt of necessary consents from the PI Trust and the satisfaction of certain
of the conditions to the Exchange (defined below) and the dividend described
in Note 8. For a more complete description of the transaction and related
documents, please refer to the Company's Form 8-K filed with the Securities and
Exchange Commission on November 1, 1995.
I-12
<PAGE> 14
Note 8 - Subsequent Event - Profit Sharing
In October 1995, the Company and the PI Trust entered into a profit sharing
exchange agreement (the "Agreement") which provides for the PI Trust to
exchange (the "Exchange") its right to receive annually 20 percent of the
Company's net earnings for common stock of the Company representing 20 percent
of the common stock of Manville assuming exercise of all outstanding options
and warrants and after giving effect to the Exchange. The Exchange is subject
to a number of conditions, including bankruptcy court approval and
consummation of a sale or other disposition of Riverwood. It is contemplated
that the Exchange would take place in connection with a pro rata dividend to
all stockholders of the net proceeds to Manville from the disposition of
Riverwood. The closing of the Exchange (the "Closing"), which is expected to
occur in the first quarter of 1996, would take place after the declaration
date of, but prior to the record date for, such dividend.
The Company will pay a partial-year profit sharing payment to the PI Trust for
the fiscal year during which the Exchange occurs through the day before the
Closing. The payment will be 20 percent of net earnings (as adjusted) for the
partial-year period.
Based on the current number of Manville common shares, warrants and stock
options, the Company estimates that it will issue approximately 32.6 million
shares of the Company's Common Stock in satisfaction of the profit sharing
obligation. The Company will record an extraordinary loss at Closing for the
fair market value of the common stock exchanged. For a more complete
description of the Exchange and related documents please refer to the Company's
Form 8-K filed with the Securities and Exchange Commission on November 1, 1995.
I-13
<PAGE> 15
Note 9 - Business Segment Information
<TABLE>
<CAPTION>
(Thousands of dollars)
Manville Corporation Three Months
Consolidated Major Business Segments Ended September 30,
1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales
- ----------------------------------------------------------------------------------------------------
Riverwood International:
Coated Board System $273,223 $215,804
Containerboard 33,559 73,688
U.S. Timberlands/Wood Products 38,450 43,184
Corporate and Eliminations (3,013) (4,729)
- ----------------------------------------------------------------------------------------------------
342,219 327,947
- ----------------------------------------------------------------------------------------------------
Schuller International:
Building Products 219,328 213,318
Engineered Products 149,736 148,202
Corporate and Eliminations (5,970) (7,391)
- ----------------------------------------------------------------------------------------------------
363,094 354,129
- ----------------------------------------------------------------------------------------------------
Manville Corporate and Eliminations 7
- ----------------------------------------------------------------------------------------------------
Total Company Net Sales $705,313 $682,083
====================================================================================================
Income (Loss) from Operations
- ----------------------------------------------------------------------------------------------------
Riverwood International:
Coated Board System $ 38,290 $ 22,489
Containerboard 1,007 1,098
U.S. Timberlands/Wood Products 8,793 15,667
Corporate and Eliminations (9,774) (4,780)
- ----------------------------------------------------------------------------------------------------
38,316 34,474
- ----------------------------------------------------------------------------------------------------
Schuller International:
Building Products 35,243 40,907
Engineered Products 28,695 21,049
Corporate and Eliminations (5,992) (5,540)
- ----------------------------------------------------------------------------------------------------
57,946 56,416
- ----------------------------------------------------------------------------------------------------
Manville Corporate and Eliminations (3,268) (3,524)
- ----------------------------------------------------------------------------------------------------
Total Company Income from
Operations $ 92,994 $ 87,366
====================================================================================================
</TABLE>
Net sales included in Corporate and Eliminations relate
primarily to the elimination of intersegment sales (at prices approximating
market).
I-14
<PAGE> 16
<TABLE>
<CAPTION>
(Thousands of dollars)
Manville Corporation Nine Months
Consolidated Major Business Segments Ended September 30,
1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales
- ----------------------------------------------------------------------------------------------------
Riverwood International:
Coated Board System $ 763,851 $ 597,153
Containerboard 148,766 203,529
U.S. Timberlands/Wood Products 122,352 119,995
Corporate and Eliminations (13,309) (13,827)
- ----------------------------------------------------------------------------------------------------
1,021,660 906,850
- ----------------------------------------------------------------------------------------------------
Schuller International:
Building Products 596,795 544,832
Engineered Products 468,309 418,624
Corporate and Eliminations (19,558) (19,126)
- ----------------------------------------------------------------------------------------------------
1,045,546 944,330
- ----------------------------------------------------------------------------------------------------
Manville Corporate and Eliminations (255)
- ----------------------------------------------------------------------------------------------------
Total Company Net Sales $2,067,206 $1,850,925
====================================================================================================
Income (Loss) from Operations
- ----------------------------------------------------------------------------------------------------
Riverwood International:
Coated Board System $ 85,117 $ 77,501
Containerboard 21,831 (4,679)
U.S. Timberlands/Wood Products 39,520 42,337
Corporate and Eliminations (40,600) (17,408)
- ----------------------------------------------------------------------------------------------------
105,868 97,751
- ----------------------------------------------------------------------------------------------------
Schuller International:
Building Products 99,678 85,446
Engineered Products 92,507 58,302
Corporate and Eliminations (19,881) (22,332)
- ----------------------------------------------------------------------------------------------------
172,304 121,416
- ----------------------------------------------------------------------------------------------------
Manville Corporate and Eliminations (11,787) (9,501)
- ----------------------------------------------------------------------------------------------------
Total Company Income from
Operations $ 266,385 $ 209,666
====================================================================================================
</TABLE>
Net sales included in Corporate and Eliminations relate
primarily to the elimination of intersegment sales (at prices approximating
market).
I-15
<PAGE> 17
Report of Independent Accountants
To the Stockholders and Directors
of Manville Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of
Manville Corporation as of September 30, 1995 and the related condensed
consolidated statement of income and accumulated deficit for the three month
and nine month periods ended September 30, 1995 and 1994 and condensed
consolidated statement of cash flows for the nine month periods ended September
30, 1995 and 1994. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1994, and the
related consolidated statements of income, stockholders' equity and cash flows
for the year then ended (not presented herein); and in our report dated
February 6, 1995, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 1994, is
fairly stated in all material respects in relation to the consolidated balance
sheet from which it has been derived.
/s/ COOPERS & LYBRAND L.L.P.
- ----------------------------
COOPERS & LYBRAND L.L.P.
Denver, Colorado
November 14, 1995
I-16
<PAGE> 18
ITEM 2.
MANVILLE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Manville Corporation is an international holding company with two principal
operating subsidiaries, Riverwood International Corporation ("Riverwood") and
Schuller International Group, Inc. ("Schuller"), collectively referred to as
the "Company". When referring to the holding company only, Manville
Corporation is defined as the "Manville holding company". The Manville holding
company owns 100 percent of Schuller and approximately 81.3 percent of
Riverwood. The Company reports the results of Riverwood's and Schuller's
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 and sale of coated board from paperboard mills
in the United States and Europe; converting operations at 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 the production and sale of linerboard,
corrugating medium and kraft paper from paperboard mills in the United States.
The U.S. Timberlands/Wood Products segment includes timberlands and operations
engaged in the supply of pulpwood to the West Monroe, Louisiana mill from
Riverwood's
I-17
<PAGE> 19
U.S. timberlands, as well as the manufacture and sale of lumber and plywood.
Prior to December 29, 1994, the Containerboard business segment included
timberlands and associated containerboard mills and corrugated box plants at
Igaras Papeis e Embalagens S.A. ("Igaras") in Brazil. At that date, Riverwood
owned 100 percent of Igaras and included the results of operations of Igaras in
the Containerboard business segment. On December 29, 1994, Riverwood sold just
under 50 percent of its investment in Igaras, after first spinning off a wholly
owned subsidiary to operate Riverwood's packaging machinery operations in
Brazil. Subsequent to that date, Riverwood no longer reports the results of
operations of Igaras on a consolidated basis, but instead reports its
investment in Igaras using the equity method of accounting since Riverwood no
longer controls Igaras.
In 1994, Riverwood completed a two-year construction project to convert over
half of the 525,000 ton annual linerboard capacity at its Macon, Georgia,
paperboard mill to coated board production (the "Macon Conversion"). With this
accomplished, Riverwood's dedicated annual linerboard capacity was decreased by
275,000 tons and will gradually be replaced as Riverwood's production of coated
board at the Macon mill reaches the machine's design capacity of 300,000 tons.
Riverwood's coated board capacity can also be used for linerboard production
when market conditions warrant.
I-18
<PAGE> 20
Schuller manufactures and markets insulation for buildings and equipment,
commercial roofing systems, high-efficiency air filtration media, and fibers
and nonwoven mats used as reinforcements in building and industrial
applications. Schuller operates 35 manufacturing facilities in the United
States, Canada and Germany, and is comprised of two principal business
segments: Building Products and Engineered Products. The Building Products
segment consists of Schuller's building insulation business, which manufactures
fiber glass wool insulation for walls and attics in residential and commercial
buildings; the commercial and industrial roofing systems business, which
supplies roofing membranes, insulations, accessories and related guarantees;
and the mechanical insulations business, which manufactures pipe and duct
insulation for use in commercial buildings, factories, refineries and other
industrial applications. The Engineered Products segment consists of
Schuller's specialty insulations and filtration business which manufactures
thermal and acoustic insulation for aircraft, appliances, automobiles and
heating, ventilating and air conditioning equipment; air filtration media for
commercial and industrial buildings; and microfibers for clean room air
filters. The Engineered Products segment also includes Schuller's mats and
fibers business which manufactures continuous filament fiber glass based
products used for reinforcing roofing, flooring, wall covering and plastic
products. The mats and fibers business includes Schuller's German subsidiary,
Schuller GmbH.
I-19
<PAGE> 21
Financial results for the Manville holding company's interest in Stillwater
Mining Company, a company engaged in the exploration, development, mining and
production of palladium, platinum and associated metals, which was sold in the
third quarter of 1995, are included in Manville Corporate and Eliminations for
business segment reporting purposes.
RIVERWOOD RESULTS OF OPERATIONS BY SEGMENT
Riverwood reported its results of operations in its third quarter 1995 Form
10-Q substantially as presented below.
Third Quarter 1995 Compared with Third Quarter 1994
- ---------------------------------------------------
Net sales in the third quarter of 1995 increased $14.3 million, or 4.4 percent,
compared with the third quarter of 1994. Net sales in the Coated Board System
segment increased $57.4 million in the third quarter of 1995, or 26.6 percent,
due principally to increased volume and selling prices in worldwide coated
board open markets, increased volume in worldwide beverage markets and the
effect of recent converting operation acquisitions. These increases were
partially offset by decreased volume in the European folding carton markets and
a reduction in packaging machinery leasing revenues due to the introduction of
a new packaging machinery program in 1994. Net sales in the Containerboard
segment in the third quarter of 1995 decreased $40.1 million, or 54.5 percent,
compared with the third quarter of 1994. Excluding the operations of Igaras
which were included in this business segment
I-20
<PAGE> 22
in the third quarter of 1994, net sales in the Containerboard segment decreased
$4.4 million, or 11.6 percent, primarily due to volume decreases as a result of
softening industry trends which were somewhat offset by selling price increases
in worldwide Containerboard markets. Net sales in the U.S. Timberlands/Wood
Products segment decreased by $4.7 million, or 11 percent, compared with the
third quarter of 1994 as a result of lower selling prices for lumber and lower
plywood sales volume which was partially offset by increased selling prices for
plywood.
Gross profit for the third quarter of 1995 increased $8.9 million, or 13.3
percent, from the third quarter of 1994. The gross profit margin increased to
22.3 percent for the third quarter of 1995 from 20.5 percent for the same
period of 1994. Gross profit in the Coated Board System segment increased
$21.5 million, or 48.9 percent, while its gross profit margin increased to 24
percent in the third quarter of 1995 from 20.4 percent in the third quarter of
1994. The increase in gross profit margin was primarily a result of increased
selling prices in coated board open markets and lower domestic converting costs
as Riverwood incurred higher costs in 1994 to meet U.S. beverage market demand
that exceeded Riverwood's U.S. converting capacity. In 1995, Riverwood
increased its converting capacity through the addition of new converting
presses and equipment that significantly reduced costs incurred from
subcontracting carton production. These increases were offset somewhat by
lower packaging machinery leasing revenues and by
I-21
<PAGE> 23
certain cost increases resulting principally from increased recycled fiber
costs and higher fixed costs at the Macon mill. In the Containerboard segment,
gross profit decreased $5.5 million from the third quarter of 1994 because the
operations of Igaras were included in this business segment during 1994.
Excluding this effect, gross profit increased $5.3 million from a $2.5 million
loss in the third quarter of 1994. The increase in gross profit was due
primarily to higher containerboard selling prices worldwide which were
partially offset by higher costs of recycled fiber, higher fixed costs at the
Macon mill and unabsorbed fixed costs at both the West Monroe and Macon mills
as a result of machine outages to reduce containerboard inventories in the
third quarter of 1995. Gross profit in the U.S. Timberlands/Wood Products
segment decreased by $6.7 million, or 44.5 percent, compared with the third
quarter of 1994, and the gross profit margin decreased to 21.8 percent for the
third quarter of 1995 from 35 percent for the third quarter of 1994. This
decrease was a result of lower selling prices for lumber and higher log costs
as Riverwood purchased more wood from outside sources rather than using timber
from its own timberlands in the third quarter of 1995 as compared to the third
quarter of 1994. Partially offsetting these decreases was the increase in
plywood selling prices for the third quarter of 1995 as compared to the third
quarter of 1994.
Total board mill shipments for the third quarters of 1995 and 1994, including
shipments to Riverwood's integrated converting plants and
I-22
<PAGE> 24
including 78,100 tons of containerboard shipments from Igaras in 1994, were as
follows:
<TABLE>
<CAPTION>
(In thousands of tons)
-----------------------
1995 1994
----- -----
<S> <C> <C>
Coated Board 292.5 226.1
Containerboard 77.7 211.1
----- -----
370.2 437.2
===== =====
</TABLE>
Excluding the stock-based compensation and accrued expenses discussed below and
the operations of Igaras, which were reported on a consolidated basis in the
third quarter of 1994, selling, general and administrative expenses increased
$5.3 million, or 19.9 percent for the third quarter of 1995 compared with the
third quarter of 1994, while net sales increased 17.1 percent for the third
quarter of 1995 compared to the same period of 1994. The increase in selling,
general and administrative expenses was primarily due to increases in selling,
marketing and administrative expenses to penetrate worldwide coated board
markets. Additionally, other costs and expenses associated with stock-based
compensation plans and accrued expenses related to Riverwood's review of
strategic alternatives for the third quarter of 1995 increased $3 million from
the third quarter of 1994. The closing price of Riverwood's common stock on
the New York Stock Exchange decreased from $23.25 per share at the end of the
second quarter of 1995 to $22.50 per share at the end of the third quarter of
1995.
I-23
<PAGE> 25
Despite this decrease, an increase in stock-based compensation expense occurred
primarily as a result of the timing of stock-based compensation benefits
exercised during the third quarter.
Income from operations in the third quarter of 1995 increased $3.8 million, or
11.1 percent, compared with the third quarter of 1994, while the operating
margin as a percent of net sales increased to 11.2 percent for the third
quarter of 1995 from 10.5 percent for the third quarter of 1994. The Coated
Board System segment's income from operations increased $15.8 million, or 70.3
percent, to $38.3 million in the third quarter of 1995 compared with the same
period of 1994. The operating margin increased to 14 percent from 10.4
percent. These increases were the result of increased volume and selling
prices in certain coated board markets and lower domestic converting costs
which were partially offset by certain paperboard manufacturing-related cost
increases and lower packaging machinery leasing revenues, as well as increased
selling, marketing and administrative expenses to penetrate worldwide coated
board markets. Income from operations in the Containerboard segment remained
flat in the third quarter of 1995 when compared to the third quarter of 1994.
Excluding the operations of Igaras, which were included in this business
segment in the third quarter of 1994, income from operations increased $5.7
million in the third quarter of 1995 from the 1994 third quarter loss of $4.7
million, due principally to increased selling prices that were partially offset
by lower volume, cost increases for recycled fiber, higher
I-24
<PAGE> 26
fixed costs and unabsorbed fixed costs as a result of the machine outages at
the West Monroe and Macon mills in the third quarter of 1995. Income from
operations in the U.S. Timberlands/Wood Products segment decreased $6.9 million
in the third quarter of 1995 from the third quarter of 1994. The operating
margin decreased to 22.9 percent in the third quarter of 1995 from 36.3 percent
in the third quarter of 1994 due principally to lower selling prices for lumber
and higher log costs as a result of Riverwood purchasing greater amounts of
wood from outside sources instead of using its own timberlands.
Fluctuations in U.S. dollar currency exchange rates did not have a significant
impact on net sales, gross profit, operating expenses or income from operations
of Riverwood or any of its business segments during the third quarter of 1995
when compared to the same period of 1994.
First Nine Months of 1995 Compared with First Nine Months of 1994
- -----------------------------------------------------------------
Net sales in the first nine months of 1995 increased $114.8 million, or 12.7
percent, compared with the same period of 1994. Net sales in the Coated Board
System segment increased $166.7 million in the first nine months of 1995, or
27.9 percent, due principally to increased worldwide volume in most coated
board markets, selling price increases in coated board open markets and the
effect of recent acquisitions. These increases were partially offset by
decreased volume in European folding carton markets and
I-25
<PAGE> 27
lower packaging machinery leasing revenues. Net sales in the Containerboard
segment in the first nine months of 1995 decreased $54.8 million, or 26.9
percent, compared with the first nine months of 1994. Excluding the operations
of Igaras which were included in this business segment in 1994, net sales in
the Containerboard segment increased $32.9 million, or 28.4 percent, primarily
due to selling price increases which more than offset the volume decrease
resulting from the Macon Conversion and softening industry trends occurring in
the Containerboard market worldwide. Net sales in the U.S. Timberlands/Wood
Products segment increased by $2.4 million, or 2 percent, due principally to
increased sales volume for lumber and plywood and selling price increases for
plywood. These increases were largely offset by lower selling prices for
lumber.
Gross profit for the first nine months of 1995 increased $31.6 million, or 15.8
percent, from the first nine months of 1994. The gross profit margin increased
to 22.6 percent for the first nine months of 1995 from 22 percent for the first
nine months of 1994. Gross profit in the Coated Board System segment increased
$24.8 million, or 17.5 percent, while its gross profit margin decreased to 21.7
percent from 23.6 percent. The increase in gross profit was attributable to
selling price increases in the coated board open market, higher sales volume in
worldwide coated board beverage markets, the effects of recent acquisitions and
lower domestic converting costs. These increases were offset by certain cost
increases and lower packaging machinery revenues which resulted in
I-26
<PAGE> 28
the decrease in gross profit margin. The cost increases were principally the
result of increased recycled fiber costs and higher fixed costs at the Macon
mill. In the Containerboard segment, gross profit in the first nine months of
1995 increased $10.6 million. Excluding the operations of Igaras, which were
included in this business segment in 1994, gross profit increased $34.6 million
from a $7.6 million loss in 1994. The increase in gross profit was due
primarily to higher containerboard selling prices worldwide which were offset
in part by the increased cost of recycled fiber, the volume decrease that
resulted from the Macon Conversion and unabsorbed fixed costs at both the West
Monroe and Macon mills as a result of machine outages. Gross profit in the
U.S. Timberlands/Wood Products segment decreased by $2.9 million, or 6.7
percent, and the gross profit margin decreased to 32.4 percent from 35.5
percent. Gross profit and the gross profit margin in this business segment
decreased due principally to the decrease in lumber selling prices which was
partially offset by volume increases for plywood and lumber, and selling price
increases for plywood.
Total board mill shipments for the first nine months of 1995 and 1994,
including shipments to Riverwood's integrated converting plants and including
247,400 tons of containerboard shipments from Igaras in 1994, were as follows:
I-27
<PAGE> 29
<TABLE>
<CAPTION>
(In thousands of tons)
-------------------------
1995 1994
------- -------
<S> <C> <C>
Coated Board 820.0 642.3
Containerboard 328.2 697.9
------- -------
1,148.2 1,340.2
======= =======
</TABLE>
Excluding the stock-based compensation and accrued expenses discussed below and
the operations of Igaras, which were reported on a consolidated basis in 1994,
selling, general and administrative expenses increased $11.7 million, or 14
percent, while net sales increased 24.7 percent. The increase in selling,
general and administrative expenses was primarily due to increases in selling,
marketing and administrative expenses to penetrate worldwide coated board
markets. Additionally, other costs and expenses associated with stock-based
compensation plans and accrued expenses related to Riverwood's review of
strategic alternatives for the first nine months of 1995 increased $18.5
million from the first nine months of 1994. The closing price of Riverwood's
common stock on the New York Stock Exchange increased from $15.625 per share at
December 31, 1994, to $22.50 per share at the close of the third quarter of
1995, resulting in an increase in stock-based compensation expense. In
addition, increases in the stock-based compensation expense resulted from the
exercise of stock-based benefits at prices that exceeded the December 31, 1994
and the third quarter of 1995 closing prices. Research, development and
engineering expenses increased by $1.4 million to $8.2 million,
I-28
<PAGE> 30
primarily due to a higher level of packaging machinery engineering costs
associated with expanding packaging machinery operations.
Other income (loss), net, increased $1.9 million to a net loss of $2.5 million
in the first nine months of 1995, resulting primarily from increased
amortization expense on certain intangible assets and lower income from oil and
gas mineral rights, which were offset by lower net exchange losses on foreign
currency transactions.
Income from operations in the first nine months of 1995 increased $8.1 million,
or 8.3 percent, compared with the first nine months of 1994, while the
operating margin as a percent of net sales decreased to 10.4 percent from 10.8
percent. The Coated Board System segment's income from operations increased
$7.6 million, or 9.8 percent, to $85.1 million in the first nine months of
1995, and the operating margin decreased to 11.1 percent from 13 percent. The
increase in income from operations was the result of higher selling prices in
coated board open markets, increased worldwide coated board volume, exclusive
of European folding carton markets, the effect of recent acquisitions and lower
domestic converting costs. These increases were offset somewhat by paperboard
manufacturing-related cost increases, lower packaging machinery leasing
revenues and increased selling, marketing and administrative expenses to
penetrate worldwide coated board markets which resulted in a decrease in
operating margin. Income from operations in the Containerboard segment
increased $26.5 million to
I-29
<PAGE> 31
$21.8 million in the first nine months of 1995 from a loss of $4.7 million in
the first nine months of 1994. Excluding the operations of Igaras, which were
included in this business segment in 1994, income from operations increased
$37.9 million from a loss of $16.1 million for the first nine months of 1994,
due principally to increased selling prices that more than offset cost
increases in recycled fiber, the decrease in containerboard volume at the Macon
mill and unabsorbed fixed costs at both the West Monroe and Macon mills as a
result of machine outages. Income from operations in the U.S. Timberlands/Wood
Products segment decreased $2.8 million, or 6.7 percent, in the first nine
months of 1995, and the operating margin decreased to 32.3 percent from 35.3
percent in the first nine months of 1994. These decreases were due principally
to the decrease in lumber selling prices and a decrease in income from oil and
gas mineral rights. These decreases were offset in part by volume increases
for plywood and lumber, and selling price increases for plywood.
Fluctuations in U.S. dollar currency exchange rates did not have a significant
impact on net sales, gross profit, operating expenses or income from operations
of Riverwood or any of its business segments for the nine months ended
September 30, 1995.
I-30
<PAGE> 32
SCHULLER RESULTS OF OPERATIONS BY SEGMENT
Schuller reported its results of operations in its third quarter 1995 Form 10-Q
substantially as presented below.
Third Quarter 1995 Compared with Third Quarter 1994
- ---------------------------------------------------
Income from operations for the third quarter of 1995 increased $2 million, or 3
percent, on a $9 million, or 3 percent, increase in net sales compared with the
same period of 1994. Gross profit for the third quarter of 1995 decreased $3
million, or 3 percent, compared with the third quarter of 1994. Improvements
in the gross profit margin for the Engineered Products segment were more than
offset by a number of factors which adversely affected the gross profit margin
of the Building Products segment.
The Building Products segment reported an increase in net sales of $6 million,
or 3 percent, reflecting increased sales volume of building insulation and
market share gains in the mechanical insulations business, partially offset by
the effects of lower housing starts in Canada and declines in the selling
prices of commercial roofing products. Compared with the same period of 1994,
income from operations for the Building Products segment decreased $6 million,
or 14 percent. In the building insulation business, operating profits were
comparable to amounts reported for the third quarter of 1994 despite increased
sales, due to higher costs incurred to incrementally boost capacity to satisfy
regional demand and production inefficiencies caused by an unusually high
I-31
<PAGE> 33
number of electrical power outages. Operating results of the roofing systems
business decreased significantly, compared with the same period of 1994,
reflecting higher raw material costs, decreased selling prices and other
nonrecurring expenses.
In the Engineered Products segment, income from operations increased $8
million, or 36 percent, on a $2 million, or 1 percent, increase in net sales
compared with the same period of 1994. These improvements were primarily
attributable to the Company's mats and fibers business which experienced
increased sales volumes and higher selling prices reflecting strong worldwide
demand for continuous filament fiber glass as the industry continued to operate
at full capacity. Improvements reported for the quarter in both sales and
operating income were partially offset by the effect of continued weakness in
the automotive market.
Other operating expenses include selling, general, administrative, research,
development and engineering expenses. These expenses were essentially flat for
the quarter and remained constant as a percentage of net sales at 11 percent
compared with the same period of 1994.
For the third quarter of 1995, Schuller reported other income of $0.6 million
compared with other loss of $4 million reported for the third quarter of 1994.
Amounts reported in 1995 included a gain of $2 million attributable to a price
concession on raw
I-32
<PAGE> 34
materials purchased in the prior year and an environmental remediation
settlement, while amounts reported in 1994 included $2 million for the writeoff
of certain assets.
First Nine Months of 1995 Compared with First Nine Months of 1994
- -----------------------------------------------------------------
Schuller reported an increase in income from operations of $51 million, or 42
percent, and an increase in net sales of $101 million, or 11 percent, for the
nine months ended September 30, 1995 compared with the same period of 1994.
Gross profit for the period increased $52 million, or 21 percent.
The Building Products segment reported an increase in income from operations of
$14 million, or 17 percent, and an increase in net sales of $52 million, or 10
percent, compared with the same period of 1994. This segment's businesses
benefited from increases in commercial construction and favorable energy
conservation trends during the first nine months of 1995 compared with the same
period of 1994. This strong demand also resulted in selling price increases
for all Building Products' businesses. Additional factors contributing to the
improved performance included an increase in production capacity for building
insulation due to technological improvements, and market share gains in the
mechanical insulations business due to new product introductions and the exit
of a competitor from this market. While the roofing systems business benefited
from higher sales, raw material cost
I-33
<PAGE> 35
increases, equipment startup costs and other nonrecurring expenses more than
offset the effect of these additional sales.
The Engineered Products segment reported an increase in income from operations
of $34 million, or 59 percent, and an increase in net sales of $50 million, or
12 percent, compared with the same period of 1994. The increase was primarily
attributable to Schuller's mats and fibers business, which experienced
increased sales volume and higher selling prices, reflecting higher levels of
U.S. and European construction activity as well as the continuing high capacity
utilization of continuous filament fiber glass. Operating results of
Schuller's filtration business also increased during the first nine months of
1995 compared with 1994 reflecting continued strong demand for Schuller's
microfibers.
Other operating expenses increased $6 million during the first nine months of
1995 and remained constant as a percentage of net sales at 12 percent compared
with the same period of 1994.
Other loss, net, decreased $5 million to $7 million for the first nine months
of 1995 from $12 million recorded in the same period of 1994. Other loss
reported for 1994 included $2 million for the writeoff of assets while amounts
reported in 1995 included a gain of $2 million attributable to a price
concession on raw materials purchased in the prior year and an environmental
remediation settlement.
I-34
<PAGE> 36
TOTAL COMPANY RESULTS
Total Company net sales increased $23.2 million to $705.3 million in the third
quarter and increased $216.3 million to $2,067.2 million for the first nine
months of 1995 over the same periods of 1994. Income from operations increased
$5.6 million to $93 million in the third quarter and increased $56.7 million to
$266.4 million for the first nine months of 1995 over the same periods of 1994.
These improvements were due to increases at both Riverwood and Schuller.
In August 1995, the Company sold its remaining investment in Stillwater Mining
Company for net cash proceeds of $110.5 million resulting in a pretax gain on
the sale of equity securities of $74.9 million.
Compared with the corresponding periods of 1994, interest income for the third
quarter and first nine months of 1995 increased by $2 million and $6.8
million, respectively, primarily due to higher average cash and marketable
securities balances and higher interest rates during 1995.
Interest expense increased $3.1 million to $37 million for the third quarter of
1995 and increased $14.1 million to $114.1 million for the first nine months of
1995 over the corresponding periods of 1994. During the third quarter and
first nine months of 1995, the Company capitalized interest totaling $2 million
and $4.3 million,
I-35
<PAGE> 37
respectively, on construction projects. During the third quarter and first
nine months of 1994, the Company capitalized interest totaling $7 million and
$19.9 million, respectively, of which the majority was capitalized in
connection with the Macon Conversion, which was completed in late 1994. Gross
interest expense incurred, before capitalization of interest, was $118.4
million for the first nine months of 1995, a $1.5 million decrease when
compared with $119.8 million for the same period in 1994.
Profit sharing expense for the third quarters of 1995 and 1994 totaled $8.7
million and $5.1 million, respectively. Year-to-date profit sharing expense
for 1995 totaled $24.2 million compared with $12.5 million for the same period
in 1994, an increase of $11.7 million. Both the quarterly and year-to-date
increases in profit sharing expense are principally due to higher operating
income in 1995 over 1994.
The Company's 1995 and 1994 tax rates on operations for the first nine months
were approximately 42 percent and 43 percent, respectively. These are higher
than the U.S. federal statutory rate primarily due to higher foreign effective
tax rates and U.S. state and local taxes.
The Company's equity in earnings of affiliate, which was $9.4 million and $28
million for the third quarter and first nine
I-36
<PAGE> 38
months of 1995, respectively, is comprised of Riverwood's proportionate share
of the net earnings of Igaras.
In the third quarter of 1994, the Company completed two debt refinancings that
resulted in an aggregate extraordinary loss on early extinguishments of debt of
$34.7 million, net of income taxes of $16.4 million.
Riverwood completed a refinancing program in the third quarter of 1994 and used
the proceeds of the new borrowings to prepay approximately $179 million of
principal of notes payable and to pay related accrued interest and expenses of
the refinancing. The extraordinary charge for this early retirement of debt
was $7.9 million, net of income taxes of $5 million.
On September 22, 1994, (with further adjustments in the fourth quarter of 1994
in accordance with the agreement related to the prepayment), the Company
prepaid $343 million of its bond obligations, including accrued interest, to
the PI Trust with the exchange of an aggregate principal amount of $379 million
of 10-3/8 percent Senior Notes due 2004 of its wholly owned subsidiary,
Schuller. The transaction resulted in an extraordinary loss on the early
extinguishment of debt of $26.8 million, net of income taxes of $11.4 million.
I-37
<PAGE> 39
Net income applicable to common stock for the third quarter of 1995 increased
$89.3 million to $77.4 million from the same period in 1994. Year-to-date net
income applicable to common stock for 1995 increased $124.1 million to $127.7
million from the same period in 1994.
Primary and fully diluted earnings per common share for the third quarter of
1995 were $0.62 and $0.61, respectively, as compared with a primary and fully
diluted loss per common share of $0.10 each for the same period in 1994.
Primary and fully diluted earnings per common share for the nine month period
ended September 30, 1995 were $1.03 and $1.01, respectively, as compared with
primary and fully diluted earnings per common share of $0.03 each for the same
period in 1994. Earnings per common share amounts were calculated after
deducting preference stock dividends. In addition, the 1995 fully diluted
earnings per common share calculation assumes the conversion of Riverwood's
6.75 percent Convertible Subordinated Notes.
Excluding the charge for early extinguishments of debt and its effect on
profit sharing expense from reported results, the Company would have reported
net income applicable to common stock for the first nine months of 1994 of
approximately $36 million, or $0.29 per share.
I-38
<PAGE> 40
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 strategic and
financial objectives. Therefore, liquidity should not 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 Manville Personal
Injury Settlement Trust (the "PI Trust") should be considered in analyzing
liquidity.
As a result of the Riverwood public offerings completed during 1992 and
issuance of Schuller Senior Notes in 1994, the Manville holding company no
longer has unrestricted access to cash flows generated by Riverwood and
Schuller. In addition, certain of the Company's foreign 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 1995 and beyond is dependent upon funds generated from tax
sharing agreements with Riverwood and Schuller, dividends declared by
I-39
<PAGE> 41
Riverwood and Schuller, asset dispositions and capital raised through external
sources.
Tax sharing agreements between the Manville holding company and Riverwood and
Schuller provide that their U.S. federal and state income taxes be calculated
as if they were independent entities and that such tax amounts 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 and
Schuller.
Riverwood's ability to generate cash in 1995 and beyond is dependent upon funds
generated from operations, including the flow of funds from subsidiaries.
While Igaras has strong liquidity, Riverwood shares control of Igaras with its
joint venture partner and future dividend payments from Igaras, if any, would
be subject to restrictions in the joint venture agreement and would reflect
only Riverwood's remaining interest of just over 50 percent.
Riverwood's cash flows from operations are influenced by selling prices and
costs and are subject to moderate seasonality with demand usually increasing in
the spring and summer. Riverwood's beverage carton products historically have
experienced stable pricing while folding cartons and open market coated board
sold to folding carton markets have experienced some moderate cyclical
I-40
<PAGE> 42
pricing. Linerboard and wood products prices have also experienced
cyclicality. Linerboard prices increased significantly during the first nine
months of 1995 compared with the first nine months of 1994. The cost of
recycled fiber used in Riverwood's paperboard production has also increased in
1995 compared with 1994. The U.S. Timberlands/Wood Products segment has
experienced higher prices for plywood and lower prices for lumber in the first
nine months of 1995 compared with the same period of 1994.
During the third quarter of 1995, Riverwood took paper machine outages at its
West Monroe and Macon mills to begin to correct imbalances in containerboard
inventories that resulted from weakness in the containerboard industry. During
October 1995, Riverwood took additional paper machine outages at both the West
Monroe and Macon mills and Riverwood expects to take additional paper machine
outages in the fourth quarter of 1995.
Schuller's cash flows generated by operating activities are primarily
influenced by sales volume and selling prices. During the first nine months of
1995, most of Schuller's businesses benefited from higher sales volume while
the businesses in Schuller's Building Products segment and its mats and fibers
business also benefited from higher selling prices.
Demand for Schuller's products has historically been cyclical due to
macroeconomic factors affecting residential and commercial
I-41
<PAGE> 43
construction markets. Schuller estimates that approximately half of its annual
sales are made to commercial and industrial construction markets, while
approximately one-third are made to residential markets, and the remainder are
made to original equipment manufacturers. Although 1995 U.S. housing starts
have declined slightly from 1994 levels, energy conservation trends, repair and
remodel activity, growing commercial and industrial construction activity and
continued strong worldwide demand for continuous filament fiber glass are
expected to offset the effects of such a decline.
Changes in Schuller's accounts receivable and inventory balances reflect the
cyclical nature of demand for Schuller's products and the corresponding changes
in actual and anticipated sales levels. Compared with the increase in accounts
receivable for the first nine months of 1994, the increase in accounts
receivable for the same period of 1995 reflects a slower rate of growth in 1995
sales than was experienced during the first nine months of 1994. In addition,
strong demand throughout the entire year of 1994 resulted in a decrease in
inventory levels during the first nine months of 1994, while increased
production capacity coupled with a slowing rate of growth in 1995 sales
resulted in an increase in inventory balances during the first nine months of
1995.
Riverwood has paid quarterly cash dividends of $0.04 per share on its common
stock during the first nine months of both 1995 and
I-42
<PAGE> 44
1994. As a result, the Manville holding company received $2.1 million during
both the third quarters of 1995 and 1994 and $6.4 million in both the first
nine months of 1995 and 1994 in connection with the payment of Riverwood common
dividends. Riverwood currently intends to continue paying quarterly dividends
of $0.04 per share on its common stock subject to a number of conditions,
including declaration by Riverwood's Board of Directors and compliance with
covenants in debt instruments and other agreements.
Manville paid a cash dividend of $6.2 million, or $0.675 per share, in both the
third quarters of 1995 and 1994 to Cumulative Preference Stock, Series B,
stockholders. Manville paid cash dividends totaling $18.7 million and $16.6
million during the first nine months of 1995 and 1994, respectively, to
Cumulative Preference Stock, Series B, stockholders.
At September 30, 1995, the Company had net working capital of $533 million,
including cash and marketable securities of $409.6 million. Total cash and
marketable securities located outside of the United States and Canada were
approximately $56.7 million. Approximately $42.5 million of cash and
marketable securities is held by Riverwood and $124.8 million is held by
Schuller.
I-43
<PAGE> 45
Cash and equivalents decreased by $14.9 million during the first nine months of
1995. This decrease is primarily attributable to cash used for capital
spending, net purchases of marketable securities and payments of dividends,
offset in part by cash generated by operating activities and proceeds from the
sale of assets.
At September 30, 1995, Riverwood and its U.S. and international subsidiaries
had approximately $230 million in revolving credit facilities, of which
approximately $84 million was available for borrowing. In addition, Riverwood
had arrangements with certain international banks for discounting receivables.
As of September 30, 1995, approximately $1 million of overseas receivables were
discounted.
At September 30, 1995, Schuller had a $100 million domestic receivables sale
facility (the "Receivables Facility") available for its short-term working
capital needs. There have been no borrowings under the Receivables Facility.
Schuller's foreign subsidiaries also had working capital facilities totaling
$70 million, all of which was available for borrowing at September 30, 1995.
The Manville holding company had no credit facilities as of September 30, 1995.
However, as of September 30, 1995 the Manville holding company had $242.2
million of cash and marketable
I-44
<PAGE> 46
securities and had a total of $37.6 million of intercompany notes receivable
from Riverwood and Schuller. The Manville holding company has no debt or other
agreements that place significant restrictions on its or its operating
subsidiaries' ability to incur additional indebtedness.
Excluding capitalized interest, Riverwood's 1995 capital expenditures are
expected to be approximately $145 million to $165 million, related primarily to
increasing paper production efficiencies, increasing converting capacity and
producing packaging machinery. In April 1995, Riverwood announced plans to
invest approximately $30 million to build a new carton converting plant in
Georgia. The new carton plant is anticipated to start up in March 1996 and
produce cartons for the 1996 beverage season.
Schuller currently estimates capital spending in 1995 of approximately $110
million, half of which will be used in capacity expansion programs. Capital
expenditures for the nine months ended September 30, 1995 totaled $80 million,
of which approximately $48 million were attributable to capacity expansion
projects. Schuller plans to fund future capital spending from existing cash
balances and cash flows generated by operations.
In total, Manville's 1995 capital expenditures are expected to be approximately
$255 million to $275 million, exclusive of capitalized interest.
I-45
<PAGE> 47
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
a number of non-Company owned or operated 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 the costs of
remediating these sites. The Company's actual final costs in some instances
cannot be estimated until the remediation process is substantially completed.
Environmental law is dynamic, and as a result, costs that are unforeseeable at
this time may be incurred when new laws are enacted and when environmental
agencies promulgate or revise regulations in furtherance of such legislation.
In response to the implementation of the 1990 amendments to the federal Clean
Air Act and requirements of various state air emissions regulations, the
Company will be obligated to monitor and reduce air emissions at its
manufacturing sites. The regulations will likely require capital expenditures
in the years 1995 to 2001, with most of the expenditures occurring in the
latter part of that time frame. Because many of the anticipated regulations
have not yet been proposed, neither the costs nor timing of compliance can be
reasonably estimated at this time. In addition, the federal Environmental
Protection Agency will soon issue new proposed
I-46
<PAGE> 48
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 2000. At this time,
Riverwood estimates capital spending that may be required to comply with the
Proposed Regulations could be between $20 million and $40 million to be spent
over a three-year period beginning in 1997.
The Company periodically reviews and, as appropriate, revises its environmental
accruals. Based on current information and regulatory requirements, the
Company believes that to the extent additional costs may be incurred that might
exceed the accrued amounts, such amounts are not expected to have a material
adverse effect on the Company's financial condition, liquidity or results of
operations.
The Company believes that with its current cash position and existing credit
facilities, cash generated from operations, proceeds from the sale of
nonstrategic assets, and access to private and public capital markets, it can
adequately fund normal debt service requirements, its planned capital spending
program, environmental compliance and its other commitments.
RELATIONSHIP OF MANVILLE TO THE PERSONAL INJURY SETTLEMENT TRUST
The PI Trust owns approximately 78 percent of Manville's Common Stock. The PI
Trust is an irrevocable trust formed under the laws
I-47
<PAGE> 49
of the State of New York, pursuant to a trust agreement dated as of November
28, 1988, as amended (the "Trust Agreement"), to implement certain portions of
the Company's Second Amended and Restated Plan of Reorganization (the "Plan"),
in particular, those relating to the settlement of asbestos health claims
against Manville and certain of its affiliates. As the owner of approximately
78 percent of Manville's Common Stock, the PI Trust has effective voting
control over the Company, including the power to nominate and elect Manville
directors as the trustees of the PI Trust determine. Three trustees of the PI
Trust currently serve as members of Manville's Board of Directors.
In furtherance of its purposes under the Trust Agreement of enhancing and
preserving its trust estate and providing compensation to bona fide asbestos
health claimants, the PI Trust has an interest in maximizing the value of, and
at times increasing the liquidity of, its investment in the Company. The PI
Trust may from time to time consider and discuss with management various means
by which the Company might seek to maximize stockholder value and enhance
stockholder liquidity. 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
I-48
<PAGE> 50
are fair. In addition, the Audit Committee of the Board of Directors reviews
the accounting treatment for such transactions.
Beginning in 1992, the Company became obligated under the Plan 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 Manville). Payments to the PI Trust are due each year
based on the prior year's net earnings and will continue for as long as the PI
Trust is in existence. After termination of the PI Trust, an independent
profit sharing obligation on the same terms arises in favor of Manville
Property Damage Settlement Trust, if it is in existence after the termination
of the PI 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 for the foreseeable future unless the
Company and one or both of the trusts agree to a restructuring or modification
of the profit sharing obligation at some future date. In October 1995, the
Company and the PI Trust entered into a profit sharing exchange agreement (See
Subsequent Events). The Company paid $18.3 million to the PI Trust in April
1995 related to 1994 profit sharing.
SUBSEQUENT EVENTS
In October 1995, the Company announced that Riverwood entered into a definitive
merger agreement providing for the acquisition of Riverwood by a group
including funds managed by Clayton, Dubilier
I-49
<PAGE> 51
& Rice, Inc. and Brown Brothers Harriman & Co., and senior management of
Riverwood. Based on the merger price of $20.25 per share of Riverwood common
stock, Manville would receive gross proceeds from the merger of approximately
$1.08 billion for its Riverwood investment with the transaction expected to
close in the first quarter of 1996. Although the Company expects a gain on the
sale, the effective book tax rate on the disposition is expected to exceed
normal statutory rates. In accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes", certain tax consequences of
the disposition may be recognized by the Company in the fourth quarter of 1995.
However, the cash taxes on the sale should be lower than normal statutory rates
due to the Company's net operating loss carryforwards and deductions related to
the profit sharing exchange described below.
The merger is subject to the receipt of all necessary financing, as well as
the receipt of regulatory approvals, and other customary conditions. The
merger is also subject to approval by the holders of a majority of the
outstanding shares of Riverwood common stock. Manville has agreed to vote its
Riverwood shares for the merger, subject to,
I-50
<PAGE> 52
among other things, approval by the stockholders of Manville of the disposition
of its Riverwood investment, receipt of necessary consents from the PI Trust
and the satisfaction of certain of the conditions to the Exchange (defined
below) and the dividend described below. For a more complete description of
the transaction and related documents, please refer to the Company's Form 8-K
filed with the Securities and Exchange Commission on November 1, 1995.
In October 1995, the Company and the PI Trust entered into a profit sharing
exchange agreement (the "Agreement") which provides for the PI Trust to
exchange (the "Exchange") its right to receive annually 20 percent of the
Company's net earnings for common stock of the Company representing 20 percent
of the common stock of Manville assuming exercise of all outstanding options
and warrants and after giving effect to the Exchange. The Exchange is subject
to a number of conditions, including bankruptcy court approval and
consummation of a sale or other disposition of Riverwood. It is contemplated
that the Exchange would take place in connection with a pro rata dividend to
all stockholders of the net proceeds to Manville from the disposition of
Riverwood. Under the Agreement, before paying any dividend, the Company may
elect to apply a portion of the proceeds from the disposition of Riverwood to
the redemption of all or part of its outstanding Cumulative Preference Stock,
Series B, having an aggregate liquidation preference of approximately $231
million plus accrued dividends, and its outstanding $26 million of 9 percent
Sinking Fund Debentures. The closing of the Exchange (the "Closing") which is
expected to occur in the first quarter of 1996, would take place
I-51
<PAGE> 53
after the declaration date of, but prior to the record date for, such dividend.
The Company will pay a partial-year profit sharing payment to the PI Trust for
the fiscal year during which the Exchange occurs through the day before the
Closing. The payment will be 20 percent of net earnings (as adjusted) for the
partial-year period.
Based on the current number of Manville common shares, warrants and stock
options, the Company estimates that it will issue approximately 32.6 million
shares of the Company's Common Stock in satisfaction of the profit sharing
obligation. The Company will record an extraordinary loss at Closing for the
fair market value of the common stock exchanged. For a more complete
description of the Exchange and related documents, please refer to the
Company's Form 8-K filed with the Securities and Exchange Commission on
November 1, 1995.
Additional information regarding the Company's accounting policies, operations,
financial position, reorganization proceedings and the PI Trust is contained or
incorporated in the Company's Form 10-K for the year ended December 31, 1994
filed with the Securities and Exchange Commission.
I-52
<PAGE> 54
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit 10(a), Eighth Amendment, dated as of August 15, 1995,
to the Manville Personal Injury Settlement Trust Agreement
among Johns-Manville Corporation et al, as Trustors, Donald M.
Blinken et al, as Former Trustees, and Christian E. Markey,
Jr., as Trustee of the Manville Personal Injury Settlement
Trust.
Exhibit 15, Letter of Coopers and Lybrand L.L.P.
Exhibit 27.2, Financial Statement Schedules, dated as of
September 30, 1995.
(b) Form 8-K.
Form 8-K dated October 25, 1995 and filed with the Securities
and Exchange Commission on November 1, 1995, regarding the
Agreement and Plan of Merger among Riverwood International
Corporation, CDRO Holding Corporation and CDRO Acquisition
Corporation and the Profit Sharing Exchange Agreement between
Manville Corporation and Manville Personal Injury Settlement
Trust.
II-1
<PAGE> 55
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MANVILLE CORPORATION
(Registrant)
Date: November 14, 1995 By: /s/ R. B. Von Wald
-----------------------------------
R. B. Von Wald
Senior Vice President,
General Counsel and Secretary
Date: November 14, 1995 By: /s/ R. E. Cole
-----------------------------------
R. E. Cole
Senior Vice President and
Chief Financial Officer
II-2
<PAGE> 56
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE
- ------ ------------------- ----
<S> <C> <C>
10(a) Eighth Amendment, dated as of August 15, 1995, to the Manville
Personal Injury Settlement Trust Agreement among
Johns-Manville Corporation et al, as Trustors, Donald M.
Blinken et al, as Former Trustees, and Christian E. Markey,
Jr., as Trustee of the Manville Personal Injury Settlement
Trust.
15 Letter of Coopers and Lybrand L.L.P.
27.2 Financial Statement Schedules, dated as of September 30, 1995.
</TABLE>
<PAGE> 1
EIGHTH AMENDMENT TO
MANVILLE PERSONAL INJURY
SETTLEMENT TRUST AGREEMENT
EIGHTH AMENDMENT, dated as of August 15, 1995 (the "Eighth
Amendment") to the Trust Agreement, dated as of November 28, 1988 by and among
Johns-Manville Corporation, Manville Corporation (the "Company"), Manville
Sales Corporation, Manville Canada, Inc., Manville Investment Corporation,
Ken-Caryl Ranch Corporation and SAL Contract & Supply, Inc. as Trustors
(collectively, the "Trustors") and Donald M. Blinken, Daniel Fogel, Francis H.
Hare, Jr., John C. Sawhill (the "Former Trustees") and Christian E. Markey,
Jr., as Trustees for the Manville Personal Injury Settlement Trust (the
"Trust"), as amended by the First, Second and Third Amendments to the Trust
Agreement dated as of February 14, 1989, November 15, 1990, and December 6,
1991, respectively between the Company, Mr. Markey and the Former Trustees, and
as further amended by the Fourth, Fifth and Sixth Amendments to the Trust
Agreement dated as of August 6, 1992, December 9, 1992, and November 5, 1993,
respectively between the Company, Mr. Markey, Robert A. Falise, Louis Klein,
Jr., and Frank Macchiarola, as trustees of the Trust, and as further amended by
the Seventh Amendment to the Trust Agreement dated as of September 22, 1994,
between the Company, Mr. Falise, Mr. Klein, Mr. Macchiarola, Mr. Markey, and
Charles To. Hagel, as trustees of the Trust, (the Trust Agreement and all seven
prior Amendments being collectively referred to herein as the "Trust
Agreement").
WHEREAS, Section 6.03(a) of the Trust Agreement provided for
the amendment of the Trust Agreement by the Company (as successor to the
Trustors for such purpose) and the Trustees of the Trust after consultation
with Selected Counsel for the Beneficiaries (as defined in Exhibit A to the
Second Amended and Restated Plan of Reorganization of the Company and the other
Debtors (as therein defined)); and
WHEREAS, the Trustees of the Trust and the Company (as
successor to the Trustors for this purpose pursuant to Section 6.03(a) of the
Trust Agreement) wish to amend the Trust Agreement in the manner provided
herein; and
WHEREAS, the Selected Counsel for the Beneficiaries have been
consulted and have given their concurrence with respect to the amendment to the
Trust Agreement effectuated hereby.
NOW, THEREFORE, the parties hereto agree to amend the Trust
Agreement as follows:
1. Section 5.01 of the Trust Agreement is hereby amended to read
in its entirety as follows:
Number. Except during the period contemplated by Section 5.03(b),
there shall be no fewer than four Trustees and no more than six Trustees.
<PAGE> 2
2. Except as specifically amended pursuant to Paragraph 1 above,
the Trust Agreement shall remain in full force and effect and is ratified and
confirmed in all respects.
3. This Eight Amendment shall be governed by and construed in
accordance with the laws of the State of New York and for all purposes shall be
governed by and construed in accordance with the laws of such State applicable
to contracts to be made and performed entirely within such State.
4. This Eighth Amendment may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute one and the same instrument. Terms not defined herein
shall, unless the context otherwise requires, have the meanings assigned to
such terms in the Trust Agreement.
5. If any term, provision, covenant or restriction of this Eighth
Amendment is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Eight Amendment, and of the Trust Agreement,
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
6. The terms of this Eight Amendment shall be effective as of the
date first above written.
IN WITNESS WHEREOF, the Company, as successor to the Trustors, has
caused this Eight Amendment to be executed by its duly authorized officer and
attested by another duly authorized officer and the Trustees of the Trust have
executed this Eight Amendment, all as of the day and year first above written.
MANVILLE CORPORATION
By: /s/ Richard B. Von Wald
----------------------------------
Name: Richard B. Von Wald
Title: Senior Vice President,
General Counsel and Secretary
Attest:
/s/ Dion Persson
- ------------------------------
TRUSTEES
/s/ Robert A. Falise
--------------------------------------
Robert A. Falise
/s/ Louis Klein, Jr.
--------------------------------------
Louis Klein, Jr.
/s/ Christian E. Markey, Jr.
--------------------------------------
Christian E. Markey, Jr.
/s/ Frank Macchiarola
--------------------------------------
Frank Macchiarola
2
<PAGE> 1
[COOPERS & LYBRAND LETTERHEAD]
November 14, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Manville Corporation
Registrations: on Form S-8 (File No. 33-29389)
on Form S-3 (File No. 33-43912)
Gentlemen:
We are aware that our report dated November 14, 1995 on our review of interim
financial information of Manville Corporation for the three and nine month
periods ended September 30, 1995 and included in the Company's quarterly report
on Form 10-Q for the quarter then ended is incorporated by reference in the
above referenced registration statements. Pursuant to Rule 436(c) under the
Securities Act of 1933, this report should not be considered a part of the
registration statements prepared or certified by us within the meaning of
Sections 7 and 11 of that Act.
/s/ COOPERS & LYBRAND L.L.P.
- ------------------------------
COOPERS & LYBRAND L.L.P.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1995 FORM 10Q OF MANVILLE CORPORATION AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 307,125
<SECURITIES> 102,441
<RECEIVABLES> 411,613
<ALLOWANCES> 8,496
<INVENTORY> 278,494
<CURRENT-ASSETS> 1,165,621
<PP&E> 3,200,689
<DEPRECIATION> 1,045,176
<TOTAL-ASSETS> 4,025,160
<CURRENT-LIABILITIES> 632,662
<BONDS> 1,452,883
<COMMON> 1,228
0
178,638
<OTHER-SE> 1,025,423
<TOTAL-LIABILITY-AND-EQUITY> 4,025,160
<SALES> 2,067,206
<TOTAL-REVENUES> 2,067,206
<CGS> 1,536,012
<TOTAL-COSTS> 1,536,012
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,408
<INTEREST-EXPENSE> 114,081
<INCOME-PRETAX> 216,825
<INCOME-TAX> 90,086
<INCOME-CONTINUING> 126,739
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 146,440
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.01
</TABLE>
