<PAGE>
Filed pursuant to Rule 424(b)(5)
Registration No. 333-47519
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 20, 1998)
[LOGO]
$350,000,000
OWENS-ILLINOIS, INC.
7.15% SENIOR NOTES DUE 2005
---------------------
INTEREST PAYABLE MAY 15 AND NOVEMBER 15
------------------------
THE SENIOR NOTES DUE 2005 WILL NOT BE REDEEMABLE PRIOR TO MATURITY NOR WILL THEY
BE ENTITLED TO ANY SINKING FUND. THE NOTES WILL BE REPRESENTED BY A REGISTERED
GLOBAL SECURITY REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY (THE
"DEPOSITORY") OR ITS NOMINEE. BENEFICIAL INTERESTS IN THE REGISTERED GLOBAL
SECURITY WILL BE SHOWN ON, AND TRANSFERS WILL BE EFFECTED THROUGH,
RECORDS MAINTAINED BY THE DEPOSITORY OR ITS PARTICIPANTS. SEE
"DESCRIPTION OF THE NOTES."
CONCURRENTLY WITH THE OFFERING OF THE NOTES, THE COMPANY IS OFFERING (I) $250
MILLION AGGREGATE PRINCIPAL AMOUNT OF SENIOR NOTES DUE 2008, $250 MILLION
AGGREGATE PRINCIPAL AMOUNT OF SENIOR DEBENTURES DUE 2010 AND $250 MILLION
AGGREGATE PRINCIPAL AMOUNT OF SENIOR DEBENTURES DUE 2018 (TOGETHER WITH
THE NOTES, THE "NEW SENIOR DEBT SECURITIES," AND THE OFFERINGS OF SUCH
SECURITIES, THE "DEBT OFFERINGS"), (II) 13,800,000 SHARES OF COMMON
STOCK (THE "COMMON STOCK OFFERING") AND (III) 8,000,000 SHARES OF
CONVERTIBLE PREFERRED STOCK (THE "PREFERRED STOCK OFFERING," AND,
TOGETHER WITH THE COMMON STOCK OFFERING, THE "EQUITY
OFFERINGS," AND TOGETHER WITH THE DEBT OFFERINGS, THE
"OFFERINGS"). CONSUMMATION OF THE DEBT OFFERINGS IS
CONDITIONED UPON THE CONSUMMATION OF THE EQUITY OFFERINGS.
THE NOTES WILL BE SENIOR UNSECURED OBLIGATIONS OF THE COMPANY AND WILL RANK PARI
PASSU WITH ALL OTHER SENIOR UNSECURED OBLIGATIONS OF THE COMPANY, INCLUDING
ANY OBLIGATIONS UNDER THE AMENDED BANK CREDIT AGREEMENT (AS DEFINED
HEREIN), AND SENIOR IN RIGHT OF PAYMENT TO ALL EXISTING AND FUTURE
SUBORDINATED DEBT OF THE COMPANY. SUBSTANTIALLY ALL OF THE
OPERATIONS OF THE COMPANY ARE CONDUCTED THROUGH ITS SUBSIDIARIES.
THEREFORE, THE NOTES WILL BE EFFECTIVELY SUBORDINATED TO THE
CLAIMS OF CREDITORS OF SUCH SUBSIDIARIES.
SEE "RISK FACTORS" AND "DESCRIPTION OF THE
NOTES."
--------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE S-12 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
PRICE 99.817% AND ACCRUED INTEREST, IF ANY
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
---------------- --------------- ----------------
<S> <C> <C> <C>
PER NOTE......................................................... 99.817% 1.125% 98.692%
TOTAL............................................................ $349,359,500 $3,937,500 $345,422,000
</TABLE>
- ---------
(1) PLUS ACCRUED INTEREST, IF ANY, FROM MAY 20, 1998.
(2) THE COMPANY HAS AGREED TO INDEMNIFY THE SEVERAL UNDERWRITERS AGAINST
CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED. SEE "UNDERWRITERS."
(3) BEFORE DEDUCTION OF EXPENSES PAYABLE BY THE COMPANY IN CONNECTION WITH
THE DEBT OFFERINGS ESTIMATED AT $2.3 MILLION. SEE "UNDERWRITERS."
------------------------------
THE NOTES ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY
THE UNDERWRITERS AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS BY SIMPSON
THACHER & BARTLETT, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED THAT DELIVERY
OF THE NOTES WILL BE MADE ON OR ABOUT MAY 20, 1998 THROUGH THE BOOK-ENTRY
FACILITIES OF THE DEPOSITORY, AGAINST PAYMENT THEREFOR IN IMMEDIATELY AVAILABLE
FUNDS.
------------------------
MORGAN STANLEY DEAN WITTER
CREDIT SUISSE FIRST BOSTON
FIRST CHICAGO CAPITAL MARKETS, INC.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
SCOTIA CAPITAL MARKETS
MAY 14, 1998
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THIS PROSPECTUS
SUPPLEMENT NOR THE PROSPECTUS CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION IN WHICH IS IT UNLAWFUL TO MAKE ANY SUCH OFFER OR
SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREBY SHALL UNDER ANY
CIRCUMSTANCE IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Supplement Summary.............................................................................. S-3
Risk Factors............................................................................................... S-12
Use of Proceeds............................................................................................ S-16
Consolidated Capitalization................................................................................ S-17
Unaudited Pro Forma Condensed Consolidated Financial Information........................................... S-18
Selected Consolidated Financial Data....................................................................... S-25
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... S-28
Business................................................................................................... S-34
BTR Packaging.............................................................................................. S-40
Description of the Notes................................................................................... S-42
Certain United States Federal Income Tax Consequences...................................................... S-48
Underwriters............................................................................................... S-51
Legal Matters.............................................................................................. S-52
PROSPECTUS
Available Information...................................................................................... 2
Information Incorporated By Reference...................................................................... 2
Disclosure Regarding Forward-Looking Statements............................................................ 4
The Company................................................................................................ 4
Use of Proceeds............................................................................................ 5
Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Stock Dividends... 6
Description of Debt Securities............................................................................. 7
Description of Preferred Stock............................................................................. 14
Section 203 of the DGCL.................................................................................... 15
Plan of Distribution....................................................................................... 16
Legal Matters.............................................................................................. 17
Experts.................................................................................................... 17
</TABLE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
It is anticipated that delivery of the Notes will be made against payment
therefor on or about the date specified in the last paragraph of the cover page
of this Prospectus Supplement, which is the fourth business day following the
date hereof (such settlement cycle being herein referred to as "T+4").
Purchasers of Notes should note that trading of the Notes on the date hereof may
be affected by the T+4 settlement. See "Underwriters."
S-2
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING THE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY, THE
NOTES THERETO, AND THE OTHER FINANCIAL DATA CONTAINED ELSEWHERE OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH HEREIN
UNDER THE CAPTION "RISK FACTORS" AND ARE URGED TO READ THIS PROSPECTUS
SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND THE OTHER INFORMATION INCORPORATED
HEREIN OR THEREIN IN THEIR ENTIRETY. UNLESS OTHERWISE INDICATED, ALL INFORMATION
IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ASSUMES NO
EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION RELATING TO THE EQUITY
OFFERINGS. REFERENCES TO THE COMPANY IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS INCLUDE THE COMPANY AND ITS SUBSIDIARIES, UNLESS
OTHERWISE INDICATED.
THE COMPANY
The Company is one of the world's leading manufacturers of packaging
products and is the largest manufacturer of glass containers in the United
States, North America, South America and India and the second largest in Europe.
With the recent acquisition of the worldwide glass and plastics packaging
businesses of BTR plc ("BTR"), the Company is also the sole manufacturer of
glass containers in Australia and New Zealand. Approximately one of every two
glass containers made worldwide is made by the Company, its affiliates or
licensees. The Company is also a market leader in the plastic containers and
closures segments of the rigid packaging market in North America. The
Acquisition (as defined herein) has increased the range of products through
which the Company provides plastic packaging to its customers, particularly in
North America. The Acquisition also expanded the Company's international
plastics operations in several parts of the world, including the Asia-Pacific
region, Latin America, Europe and the Middle East. In 1992, the first full year
following the Company's initial public offering of its Common Stock, the Company
reported earnings from continuing operations of $78.3 million, or $0.66 per
share (basic). In 1997, reported earnings from continuing operations were $272.4
million, or $2.03 per share (basic). Excluding the effect of certain unusual
items, 1997 earnings from continuing operations were $1.97 per share (basic).
In 1997, on a pro forma basis after giving effect to the Acquisition, the
Company's international glass container operations contributed approximately
$2.4 billion, or 41%, of net sales, and its domestic glass container operations
contributed approximately $1.8 billion, or 30% of net sales. In the United
States, the Company has an approximate 45% share of the U.S. glass container
segment of the rigid packaging market. The Company's plastics packaging
business, which consists of plastic containers, plastic closures, plastic
prescription containers, labels, and multipack plastic carriers for beverage
containers, contributed approximately $1.7 billion, or 29% of the Company's net
sales in 1997, on a pro forma basis after giving effect to the Acquisition. The
Company competes in the rigid packaging market by emphasizing total package
supply (i.e. bottle, label, and closure system), diversified market positions,
proprietary technology and products, new package development and packaging
innovation.
The Company believes it is the technological leader in the worldwide glass
and plastics packaging segments of the rigid packaging market and the low-cost
producer in most segments in which it competes. Over the past five years, the
Company has invested more than $265 million in research, development and
engineering and more than $1.5 billion in capital expenditures (excluding
acquisition expenditures) to increase capacity in key locations, commercialize
its technology into new products and improve productivity. Through its
investments in capital equipment, processes and engineering for both its glass
and plastics businesses, the Company strives to increase machine productivity,
improve process quality and control costs. By utilizing a total-system approach
to production technology and process control improvements, the Company has been
able to achieve significant annual machine and labor productivity gains. As a
result, the Company believes it is able to maintain a service-based and
cost-based competitive advantage over most of its major competitors. The
Company's technical leadership also provides significant licensing opportunities
in the growing international glass segment of the rigid packaging market.
S-3
<PAGE>
The Company also manufactures glass container forming machinery and related
spare parts which it uses internally and sells to affiliates and licensees. The
Company believes it is one of the world's leading suppliers of glass container
forming machinery.
OVERVIEW OF BTR PACKAGING
As part of the Company's strategy to expand its international operations, on
April 30, 1998 the Company acquired the worldwide glass and plastics packaging
businesses of BTR plc (the "BTR Transaction"). In the BTR Transaction, the
Company acquired BTR's glass container operations in the Asia-Pacific region and
its plastics packaging operations in the United States and a number of other
countries around the world ("BTR Packaging"), as well as BTR's United Kingdom
glass container manufacturer ("Rockware Glass"). Pursuant to an agreement with
the Commission of the European Communities, the Company has committed to sell
Rockware Glass (the "Rockware Sale"). The BTR Transaction, assuming completion
of the Rockware Sale, is referred to herein as the "Acquisition."
The Acquisition significantly expands the Company's glass packaging business
internationally and positions the Company as a leading producer of glass
containers in the Asia-Pacific region. BTR Packaging is the sole glass container
manufacturer in Australia and New Zealand, with leading market positions in
those markets, and has operations in China and Indonesia. The Acquisition also
significantly expands the Company's customer base and enhances its capabilities
to serve as a global supplier for its customers. For over 30 years, the Company
has provided technology and equipment to BTR Packaging's glass container
operations under a series of technical assistance agreements.
BTR Packaging is the leading supplier of custom polyethylene terephthalate
("PET") containers in North America, Australia and New Zealand, and has
operations in the United Kingdom, the Netherlands, Mexico, Brazil, China,
Hungary and Saudi Arabia. In addition, it is a leading manufacturer of rigid
plastic containers, tubes and closures in Australia. In its plastics business,
BTR Packaging focuses on the custom PET market, excluding carbonated soft drinks
in the United States, and produces PET containers for a number of applications
that require special processing to ensure heat resistance for food and beverage
containers that are filled at high temperatures, and to enhance barrier
protection in order to increase shelf life. BTR Packaging developed proprietary
technologies for these heat-set, multi-layer barrier products and is recognized
as a worldwide leader in multi-layer plastic packaging technology and product
innovation, with more than 300 patents. BTR Packaging is a major supplier to a
number of international food and beverage companies.
BTR Packaging's international operations provide the Company with an
expanded base from which to pursue growth of its plastics business
internationally. Its product lines are complementary to the Company's existing
product lines and provide the Company with cross-selling opportunities for its
closures both domestically and internationally. Moreover, the Company intends to
pursue growth opportunities for custom, multi-layer PET packaging products in
the United States by broadening its customer base and internationally by using
the Company's existing presence to pursue expansion into new markets for these
products.
In 1997, BTR Packaging's glass business had sales of $652 million and
Adjusted EBITDA (as defined herein) of $232 million, resulting in an Adjusted
EBITDA margin of 36%, and its plastics business had sales of $565 million and
Adjusted EBITDA of $181 million, resulting in an Adjusted EBITDA margin of 32%.
S-4
<PAGE>
BUSINESS STRATEGY
The Company's business strategy is to:
EXPAND INTERNATIONAL GLASS CONTAINER OPERATIONS
The Company has expanded and intends to continue to expand its international
glass container operations by (i) selectively acquiring companies with leading
positions in growing markets, (ii) increasing the capacity of selected foreign
affiliates, and (iii) expanding the global network of glass container companies
that license the Company's technology. With the Acquisition, the Company has
significant ownership positions in companies located in 19 foreign countries. On
a pro forma basis, international glass net sales in 1997 were larger than
domestic glass net sales for the first time in the Company's history.
International glass net sales have grown from $640 million in 1992 to
approximately $2.4 billion in 1997, on a pro forma basis giving effect to the
Acquisition. The Company believes that demographic and economic trends in
certain developing regions of the world, particularly portions of Latin America,
Eastern Europe, India and China, where per capita glass container consumption is
relatively low but growing, will lead to an increase in the demand for glass
containers in these markets. These trends include rising disposable incomes,
increasing processed food and beverage consumption, additional investments in
such regions by multi-national food and beverage companies, many of which are
existing customers of the Company, and a trend from the use of returnable
containers to the purchase of one-way recyclable containers. In addition, the
Company's international glass manufacturing operations generally benefit from
lower production costs than its domestic manufacturing operations. Since 1991,
excluding the Acquisition, the Company has made 11 international glass container
acquisitions, including the acquisitions of manufacturing operations in India,
Hungary, Finland, Estonia, China, the Czech Republic, Italy and Spain in 1995,
1996 and 1997. The Company believes the addition of BTR Packaging positions the
Company to expand its global presence and to better serve the growing market for
glass containers in the Asia-Pacific region. The Company also participates in
regions of the world where it does not have an existing manufacturing presence
by entering into technical assistance agreements with glass container
manufacturers in such regions. In addition to the Company's consolidated
subsidiaries and BTR Packaging, the Company has technical assistance agreements
with 19 different companies in 19 countries covering services ranging from
manufacturing and engineering assistance to support functions such as marketing,
sales and administration.
GROW PLASTICS PACKAGING BUSINESS BOTH DOMESTICALLY AND INTERNATIONALLY
The Company intends to continue to grow its plastics packaging business both
domestically and internationally by focusing on those segments of the plastics
packaging market where customers seek to use distinctive packaging to
differentiate their products. The Company believes the addition of BTR Packaging
enhances its position as a leading producer of plastic containers and gives the
Company access to industry-leading PET technology for custom containers. The
Company believes it is the largest producer of rigid plastics packaging in North
America, excluding the plastic carbonated soft drink container segment, a
segment in which the Company has chosen not to participate. The Company believes
its plastic container (blow molding) operations have the leading share of this
segment of the rigid packaging market, with leading positions in household,
personal care and health care products, and significant positions in food and
automotive products. With the Acquisition, the Company also has the leading
market share in custom PET containers, excluding those for carbonated soft
drinks, in North America. The Company believes it is the largest producer of
injection molded plastics packaging in North America, with leading positions in
child resistant closures, tamper evident closures, dispensing packaging
components and prescription vials. The Company intends to pursue cross-selling
opportunities between its existing containers and closures businesses and BTR
Packaging. The Company also believes it is a leading producer of plastic in-mold
labels for the plastic container industry. Internationally, the Acquisition
expands the Company's plastics packaging operations in Europe, Mexico and South
America and add plastics packaging operations in Australia, New Zealand, Saudi
Arabia and China. The Company believes it is a leader in
S-5
<PAGE>
technology and development of custom rigid plastic packaging products and has
one of the shortest new product development cycles in the industry, enabling the
Company to provide superior service in the service-sensitive custom plastics
packaging market.
IMPROVE DOMESTIC GLASS CONTAINER MARGINS
The Company's domestic glass container strategy is focused on continuing to
improve margins through greater machine and labor productivity. The Company
believes that its internally developed machines are significantly more efficient
and productive than those used by its competitors, making it the low-cost
manufacturer and the recognized technological leader in the glass container
manufacturing industry.
The Company's glass container market strategy is to focus on growing or
stable segments of the domestic glass container segment of the rigid packaging
market, particularly those which can benefit from the Company's high
productivity machines and strategic plant locations. The Company believes that
glass containers are a preferred packaging alternative for many customers
marketing premium products with a high quality image. Customers marketing
premium beer, wine, liquor, juices and teas, baby food and many other food
products choose glass containers as their package material of choice to help
convey the high quality, purity and premium characteristics of their products.
The Company believes it is the leading producer of glass containers for the
beer, juices and teas, baby food and many other food markets. Unit shipments in
the U.S. to brewers and food producers, including producers of juices and teas,
approximated 90%, 90% and 87% of the Company's total U.S. glass container unit
shipments for 1997, 1996 and 1995, respectively.
AMENDED BANK CREDIT AGREEMENT; REPAYMENT OF TERM LOAN
The Company financed the approximately $3.6 billion purchase price for the
BTR Transaction with borrowings under a new Second Amended and Restated Credit
Agreement (the "Amended Bank Credit Agreement"). The Amended Bank Credit
Agreement provides up to $7.0 billion in credit facilities and consists of (i) a
$2.5 billion term loan to the Company (the "Term Loan") due by October 30, 1999
and (ii) a $4.5 billion revolving credit facility (the "Revolving Credit
Facility") available to the Company, including a $1.75 billion fronted offshore
loan revolving facility (the "Offshore Facility" and together with the Term Loan
and the Revolving Credit Facility, the "Credit Facilities") available, subject
to certain sublimits, to certain of the Company's foreign subsidiaries and
denominated in certain foreign currencies. The Revolving Credit Facility,
including the Offshore Facility, terminates on December 31, 2001. All of the
obligations of the Company's foreign subsidiaries under the Offshore Facility
are guaranteed by the Company. The Company intends to repay the Term Loan with
the proceeds from the Offerings and the Rockware Sale.
Loans under the Term Loan and the Revolving Credit Facility bear interest,
at the Company's option, at the prime rate or a reserve adjusted eurodollar rate
plus a margin linked to the Company's leverage ratio. Loans under the Offshore
Facility ("Offshore Loans") bear interest, at the applicable borrower's option,
at the applicable Offshore Base Rate (as defined in the Amended Bank Credit
Agreement) or the applicable reserve Adjusted Offshore Periodic Rate (as defined
in the Amended Bank Credit Agreement) plus a margin linked to the Company's
leverage ratio. The Company pays the lenders a facility fee, initially
established at 1/2% per annum on the outstanding principal amount of the Term
Loan and the total Revolving Credit Facility commitments, subject to reduction
(or increase, but not above 1/2%) based on attaining (or failing to attain)
certain leverage ratios. The Company also paid certain underwriting and other
fees to the lenders and agents upon the closing of the Amended Bank Credit
Agreement.
The Credit Facilities are unsecured. However, in the event the Company's
leverage ratio exceeds a specified level as of June 30, 1999, the Company is
required to (i) cause its direct wholly owned subsidiary, Owens-Illinois Group,
Inc. ("Group") and the first- and second-tier subsidiaries of Group to guaranty
the
S-6
<PAGE>
Credit Facilities and (ii) cause the Credit Facilities, the Company guaranty and
the subsidiary guarantees to be secured by pledges of the stock and intercompany
debt obligations of Group and the other subsidiary guarantors. See "Risk
Factors--Pledge Arrangements."
The Amended Bank Credit Agreement contains, among other things, restrictions
on the Company's and its subsidiaries' ability to incur indebtedness and liens,
pay dividends, make distributions or other payments, engage in mergers and
consolidations, make investments and acquisitions, sell assets and engage in
certain transactions with affiliates. In addition, the Company is required to
maintain compliance with certain covenants relating to interest coverage and
leverage. The Amended Bank Credit Agreement also contains customary events of
default, including upon a change of control.
The principal executive office of the Company is located at One SeaGate,
Toledo, Ohio 43666; the telephone number is (419) 247-5000.
S-7
<PAGE>
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Securities Offered.............................. $350,000,000 aggregate principal amount of Senior Notes due
2005 (the "Notes").
Maturity Date................................... The Notes will mature on May 15, 2005.
Interest Payment Dates.......................... May 15, and November 15, commencing November 15, 1998.
Optional Redemption............................. The Notes are not subject to redemption prior to maturity.
Ranking......................................... The Notes will be senior unsecured obligations of the Company
and will rank PARI PASSU with all other senior unsecured
obligations of the Company, including any obligations under the
Amended Bank Credit Agreement, and senior in right of payment
to all existing and future subordinated debt of the Company.
Substantially all of the operations of the Company are
conducted through its subsidiaries. Therefore, the Notes will
be effectively subordinated to the claims of creditors of such
subsidiaries. At March 31, 1998, on a pro forma basis after
giving effect to the Offerings and the Acquisition and related
financing, the Company, excluding its subsidiaries, would have
had approximately $5.0 billion of indebtedness outstanding and
the Company's subsidiaries would have had approximately $2.7
billion of liabilities.
Covenants....................................... The Indenture governing the Notes will contain covenants that,
among other things, (i) limit transactions by the Company and
its subsidiaries with affiliates, (ii) limit the ability of the
Company and its subsidiaries to create certain liens, (iii)
limit investments in Unrestricted Subsidiaries (as defined) and
(iv) limit the ability of the Company to consolidate or merge
with or into or transfer all or substantially all of its assets
to another person. The foregoing restrictions are subject to a
number of significant exceptions. See "Description of the
Notes."
Use of Proceeds................................. The net proceeds from the Debt Offerings, together with the net
proceeds from the Equity Offerings, will be used to repay a
portion of the Term Loan. See "Use of Proceeds."
</TABLE>
S-8
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The actual consolidated financial data presented below relate to each of the
three month periods ended March 31, 1998 and 1997 and each of the three years in
the period ended December 31, 1997. The actual financial data for the three
month periods ended March 31, 1998 and 1997 were derived from the unaudited
consolidated financial statements of the Company, which in the opinion of
management, reflect all adjustments necessary, which consist only of normal
recurring adjustments, for a fair presentation of the interim period financial
data. The results of the three months are not necessarily indicative of the
results to be expected for the full year. The actual consolidated financial data
related to each of the three years in the period ended December 31, 1997 have
been derived from the Company's Consolidated Financial Statements which were
audited by Ernst & Young LLP, independent auditors. The data set forth are
qualified in their entirety by, and should be read in conjunction with,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Consolidated Financial Statements, the notes
thereto and the other financial data and statistical information included or
incorporated by reference in this Prospectus Supplement and the accompanying
Prospectus. See "Selected Consolidated Financial Data."
The unaudited pro forma information presented below was derived from the
unaudited pro forma condensed consolidated financial statements and notes
thereto (the "Pro Forma Statements") included in this Prospectus Supplement
under "Unaudited Pro Forma Condensed Consolidated Financial Information."
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------------------
1998(A) 1997(A)
-------------------- --------------------
PRO FORMA ACTUAL PRO FORMA ACTUAL
--------- --------- --------- ---------
(MILLIONS OF DOLLARS, EXCEPT
RATIOS, SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED OPERATING RESULTS:
Revenues:
Net sales................................................... $ 1,383.9 $ 1,098.5 $ 1,367.2 $ 1,056.3
Other(b).................................................... 64.0 59.7 64.2 59.9
--------- --------- --------- ---------
1,447.9 1,158.2 1,431.4 1,116.2
Costs and expenses:
Manufacturing, shipping and delivery........................ 1,069.5 861.1 1,075.2 844.9
Research, engineering, selling, administrative and
other(c).................................................. 158.9 114.8 130.2 101.0
--------- --------- --------- ---------
Earnings before interest expense, income taxes and minority
share owners' interests................................... 219.5 182.3 226.0 170.3
Interest expense............................................ 104.6 65.2 124.2 85.9
--------- --------- --------- ---------
Earnings before income taxes and minority share owners'
interests................................................. 114.9 117.1 101.8 84.4
Provision for income taxes(d)............................... 35.8 28.8 33.3 23.4
Minority share owners' interests in earnings of
subsidiaries.............................................. 4.9 7.9 6.6 6.4
--------- --------- --------- ---------
Net earnings................................................ $ 74.2 $ 80.4 $ 61.9 $ 54.6
--------- --------- --------- ---------
--------- --------- --------- ---------
Net earnings per share of common stock:
Basic..................................................... $ 0.45 $ 0.57 $ 0.42 $ 0.44
Diluted................................................... 0.44 0.56 0.41 0.44
OTHER DATA:
EBITDA(e)................................................... 347.5 266.4 348.5 244.5
Adjusted EBITDA(f).......................................... 350.1 264.2 346.3 242.3
Depreciation................................................ 105.2 74.9 102.4 67.7
Amortization of excess cost and intangibles................. 28.7 15.1 27.9 14.3
Additions to property, plant and equipment.................. 141.1 103.6 113.8 76.6
Ratio of earnings to fixed charges.......................... 2.0x 2.6x 1.7x 1.8x
Ratio of earnings to combined fixed charges and preferred
stock dividends........................................... 1.9x 2.6x 1.6x 1.8x
Ratio of Adjusted EBITDA to interest expense................ 3.3x 4.1x 2.8x 2.8x
Weighted average shares outstanding (000's)................. 154,420 140,620 135,613 121,813
Weighted diluted average shares (000's)(g).................. 156,205 142,405 138,269 124,469
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital............................................. $ 932 $ 717 $ 650
Total assets................................................ 10,307 6,895 6,695
Total debt.................................................. 5,506 3,388 3,570
Share owners' equity........................................ 2,324 1,385 757
</TABLE>
(FOOTNOTES ON PAGE S-11)
S-9
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA--CONTINUED
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
PRO FORMA ACTUAL
--------- -------------------------------
1997(A) 1997(A) 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(MILLIONS OF DOLLARS, EXCEPT
RATIOS, SHARE AND PER SHARE DATA)
CONSOLIDATED OPERATING RESULTS:
Revenues:
Net sales.......................................................... $ 5,875.7 $ 4,658.5 $ 3,845.7 $ 3,763.2
Other(b)........................................................... 204.5 169.9 130.5 117.8
--------- --------- --------- ---------
6,080.2 4,828.4 3,976.2 3,881.0
Costs and expenses:
Manufacturing, shipping and delivery............................... 4,543.0 3,666.4 3,025.6 2,948.5
Research, engineering, selling, administrative and other(c)........ 570.6 407.0 323.9 322.9
--------- --------- --------- ---------
Earnings before interest expense, income taxes, minority share
owners' interests, and extraordinary items....................... 966.6 755.0 626.7 609.6
Interest expense................................................... 457.9 302.7 302.6 299.6
--------- --------- --------- ---------
Earnings before income taxes, minority share owners' interests and
extraordinary items.............................................. 508.7 452.3 324.1 310.0
Provision for income taxes......................................... 171.4 148.5 104.9 100.8
Minority share owners' interests in earnings of subsidiaries....... 24.4 31.4 28.1 40.1
--------- --------- --------- ---------
Earnings before extraordinary items................................ $ 312.9 $ 272.4 $ 191.1 $ 169.1
--------- --------- --------- ---------
--------- --------- --------- ---------
Earnings before extraordinary items per share of common stock:
Basic............................................................ $ 1.98 $ 2.03 $ 1.58 $ 1.40
Diluted.......................................................... 1.97 2.01 1.55 1.37
OTHER DATA:
EBITDA(e).......................................................... $ 1,464.4 $ 1,070.8 $ 871.0 $ 813.0
Adjusted EBITDA(f)................................................. 1,481.3 1,068.6 871.0 813.0
Depreciation....................................................... 411.2 283.5 219.8 188.3
Amortization of excess cost and intangibles........................ 110.2 55.9 46.8 44.8
Additions to property, plant and equipment......................... 627.2 471.3 388.4 283.6
Ratio of earnings to fixed charges................................. 2.0x 2.4x 2.0x 1.9x
Ratio of earnings to combined fixed charges and preferred stock
dividends........................................................ 1.9x 2.3x 1.9x 1.9x
Ratio of Adjusted EBITDA to interest expense....................... 3.2x 3.5x 2.9x 2.7x
Ratio of total debt to Adjusted EBITDA............................. 3.1x 3.9x 3.5x
Weighted average shares outstanding (000's)........................ 147,397 133,597 120,276 119,343
Weighted diluted average shares (000's)(g)......................... 149,476 135,676 123,567 123,161
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital.................................................... $ 604 $ 380 $ 328
Total assets....................................................... 6,845 6,105 5,439
Total debt......................................................... 3,324 3,395 2,833
Share owners' equity............................................... 1,342 730 532
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
S-10
<PAGE>
(FOOTNOTES FROM PREVIOUS PAGES)
- ------------------------------
(a) Results of operations since January 1997 include the acquisition of AVIR
S.p.A. ("AVIR"). Also during the period from May to October 1997, the
Company completed a refinancing plan. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
(b) Other revenues includes: (1) a net gain of $18.5 million ($11.4 million
after tax) related to the termination of a license agreement, including
charges for related equipment writeoffs and capacity adjustments in the
three months ended March 31, 1998 and (2) a gain from a divestiture of $16.3
million ($16.3 million after tax) in the three months ended March 31, 1997
and in the year ended December 31, 1997.
(c) In the first quarter of 1998, the Company recorded charges of $16.3 million
($10.1 million after tax) for the settlement of certain environmental
litigation and for severance costs at certain international affiliates. In
the first quarter of 1998, BTR Packaging recorded exchange losses of $4.2
million resulting from devaluation of the Indonesian currency and charges of
$4.8 million ($3.1 million after tax) for severance costs. In the first
quarter of 1997, the Company recorded a charge of $14.1 million ($8.7
million after tax) principally for the estimated cost of guaranteed lease
obligations of a previously divested business. In the fourth quarter of
1995, the Company recorded a charge of $40.0 million ($24.7 million after
tax) to write down the asbestos insurance asset and a net credit of $40.0
million ($24.7 million after tax) primarily from the reduction of previously
established restructuring reserves. In 1997, BTR Packaging recorded charges
of $19.1 million ($12.2 million after tax) for capacity curtailment and
restructuring.
(d) In the first quarter of 1998, the Company recorded a tax benefit of $15.1
million to adjust net deferred income tax liabilities as a result of changes
in Italy's tax laws.
(e) EBITDA is comprised of earnings from continuing operations before interest
expense, income taxes, minority share owners' interests and extraordinary
items and excludes depreciation, amortization of excess cost and intangibles
and interest income of $5.9 million (pro forma and actual) and $7.8 million
(pro forma and actual) in the three month periods ended March 31, 1998 and
1997, respectively, and $23.6 million (pro forma and actual), $22.3 million
and $29.7 million for the years ended December 31, 1997, 1996 and 1995,
respectively. EBITDA is a measure of the Company's ability to service its
debt. It is not an alternative to net income as a measure of the Company's
results of operations (as interest income, interest expense, depreciation,
amortization, income taxes, minority share owners' interests and
extraordinary items are included in the determination of net income) or to
cash flows as a measure of liquidity (as cash flows include the cash effects
of all operating, financing and investing activities). Rather, it is
included herein because EBITDA is a widely accepted financial indicator used
by certain investors and financial analysts to assess and compare companies
on the basis of operating performance. EBITDA as computed may not be
comparable to similarly-titled measures of other companies.
(f) Adjusted EBITDA excludes: (1) a net gain of $18.5 million in the three
months ended March 31, 1998; (2) unusual charges of $16.3 million in the
three months ended March 31, 1998 ($21.1 million on a pro forma basis); (3)
a gain from a divestiture of $16.3 million in the three months ended March
31, 1997 and in the year ended December 31, 1997 and (4) unusual charges of
$14.1 million in the three months ended March 31, 1997 and in the year ended
December 31, 1997 ($33.2 million on a pro forma basis in the year ended
December 31, 1997) (see footnotes (b) and (c) above).
(g) Shares of Common Stock issuable upon conversion of the Convertible Preferred
Stock in the pro forma periods and stock options to purchase 11,429, 146,975
and 781,290, weighted average shares of Common Stock which were outstanding
during the year end periods of 1997, 1996 and 1995, respectively, were not
included in the computation of diluted earnings per share because the effect
would be antidilutive.
S-11
<PAGE>
RISK FACTORS
PURCHASERS OF THE NEW SENIOR DEBT SECURITIES OFFERED HEREBY SHOULD CONSIDER
THE SPECIFIC FACTORS SET FORTH BELOW AS WELL AS THE OTHER INFORMATION SET FORTH
IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. THIS PROSPECTUS
SUPPLEMENT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A
OF THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT"). SUCH STATEMENTS ARE INDICATED BY WORDS OR PHRASES
SUCH AS "ANTICIPATE," "ESTIMATE," "PROJECTS," "MANAGEMENT BELIEVES," "THE
COMPANY BELIEVES," "INTENDS," "EXPECTS" AND SIMILAR WORDS OR PHRASES. SUCH
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES OR
ASSUMPTIONS AND MAY BE AFFECTED BY CERTAIN OTHER FACTORS, INCLUDING THE SPECIFIC
FACTORS SET FORTH BELOW. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES
MATERIALIZE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY MAY VARY MATERIALLY FROM ANY FUTURE
RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING
STATEMENTS ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON ITS BEHALF ARE
EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS IN THIS
PARAGRAPH. THE COMPANY DISCLAIMS ANY OBLIGATION TO PUBLICLY ANNOUNCE THE RESULTS
OF ANY REVISIONS TO ANY OF THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO
REFLECT FUTURE EVENTS OR DEVELOPMENTS.
LEVERAGE; RESTRICTIVE DEBT COVENANTS
At March 31, 1998, the Company had $3.4 billion of outstanding indebtedness.
At March 31, 1998, on a pro forma basis after giving effect to the Acquisition,
the Offerings and the anticipated use of proceeds, the Company's total
indebtedness would have been $5.5 billion. The Company has indebtedness that is
substantial in relation to its share owners' equity. At March 31, 1998, on a pro
forma basis after giving effect to the Acquisition, the Offerings and the
anticipated use of proceeds, the Company would have had a ratio of total debt to
share owners' equity of 2.4 to 1.0. See "Consolidated Capitalization" and
"Unaudited Pro Forma Condensed Consolidated Financial Information."
The Company's Amended Bank Credit Agreement contains, among other things,
certain restrictions on the ability of the Company and its subsidiaries to incur
additional indebtedness, pay dividends, make distributions or other payments and
create liens, and limitations on the Company's subsidiaries' abilities to make
certain payments and create liens. Under the Amended Bank Credit Agreement, the
Company will also be required to maintain compliance with certain financial
ratios and tests.
The pro forma financial information in this Prospectus Supplement assumes
that the Company will receive proceeds of $0.6 billion in connection with the
sale of Rockware Glass and will issue $1.1 billion of New Senior Debt
Securities. The actual proceeds from the Rockware Sale will be determined at the
time the Rockware Sale is completed and may be less than $0.6 billion. In
addition, consummation of the Equity Offerings is not subject to consummation of
the Debt Offerings. If the Company does not consummate the Debt Offerings (or
issues less than $1.1 billion of New Senior Debt Securities) and/or the Company
receives less than $0.6 billion in proceeds from the Rockware Sale, outstanding
borrowings under the Term Loan will be higher than the borrowings reflected in
the pro forma financial information. Any increase in the Company's leverage
could affect the Company's ability to meet its financial ratios under the
Amended Bank Credit Agreement. See "--Pledge Arrangements." Amounts outstanding
under the Term Loan must be repaid by October 30, 1999. The restrictions
contained in the Amended Bank Credit Agreement, combined with the short term
nature of the Term Loan and the leveraged nature of the Company, could limit the
ability of the Company to refinance borrowings under the Credit Facilities, to
effect future financings, to implement its acquisition strategy or otherwise may
restrict corporate activities. However, the Company does not believe that
existing levels of debt have had, or that anticipated levels of debt will have,
a material adverse effect on its ability to compete with its competitors.
Any failure by the Company to comply with the covenants and restrictions
contained in the Amended Bank Credit Agreement or any of the indentures relating
to its outstanding debt could result in a default
S-12
<PAGE>
thereunder, which in turn could cause such indebtedness (and by reason of
cross-default provisions, other indebtedness) to be declared immediately due and
payable. The ability of the Company to comply with these provisions may be
affected by events beyond its control.
HOLDING COMPANY STRUCTURE
The operations of the Company are conducted principally through its
indirectly owned operating subsidiaries, and therefore the Company is dependent
on the cash flow of its subsidiaries to meet its debt obligations, including its
obligations under the New Senior Debt Securities. The claims of holders of the
New Senior Debt Securities will be effectively subordinated to the prior claims
of creditors, including trade creditors, of the operating subsidiaries. At March
31, 1998, on a pro forma basis after giving effect to the Offerings and the
Acquisition and related financing, the total current and other liabilities and
long-term debt of the operating subsidiaries included in the Company's
consolidated liabilities would have been approximately $2.7 billion. The amount
of the direct liabilities of the operating subsidiaries may fluctuate
significantly depending on a number of factors, including the amount of
subsidiary borrowings and other liabilities. Although the Amended Bank Credit
Agreement will contain certain restrictions on the incurrence of indebtedness by
the Company's subsidiaries, the Indenture does not contain any such
restrictions. See "Description of the Notes--Covenants."
PLEDGE ARRANGEMENTS
The Credit Facilities are unsecured. However, in the event the Company's
leverage ratio exceeds a specified level as of June 30, 1999, the Company is
required to (i) cause Group and the first- and second-tier subsidiaries of Group
to guaranty the Credit Facilities and (ii) cause the Credit Facilities, the
Company guaranty and the subsidiary guarantees to be secured by pledges of the
stock and intercompany debt obligations of Group and the other subsidiary
guarantors (the "Pledged Collateral"). If these events occur, the Indenture for
the New Senior Debt Securities will provide, and the indenture for the Company's
$300 million aggregate principal amount of 7.85% Senior Notes due 2004 and $300
million aggregate principal amount of 8.10% Senior Notes due 2007 (collectively,
the "Other Senior Notes") provides, that the Company must make effective
provision for the New Senior Debt Securities and the Other Senior Notes to be
directly secured equally and ratably with the Indebtedness (as defined in the
Indenture) so secured. As a result, the Company's obligations under the New
Senior Debt Securities and the Other Senior Notes would be secured by the
Pledged Collateral. Under the pledge agreements and related intercreditor
arrangements, Bankers Trust Company, as collateral agent (the "Collateral
Agent") would agree to exercise any remedies with respect to the Pledged
Collateral as directed by the secured parties holding 51% or more of the sum of
(i) amounts outstanding under the Credit Facilities and all unused commitments
thereunder and (ii) the aggregate outstanding principal amount of New Senior
Debt Securities and Other Senior Notes. In addition, under the pledge
agreements, the lenders under the Credit Facilities would have the right to
release the Pledged Collateral. If these arrangements were effective as of the
closing of the Offerings, based on the amounts the Company expects to be
outstanding under the Credit Facilities after giving effect to the Offerings and
the use of proceeds therefrom, the lenders under the Credit Facilities would
have the ability to direct the Collateral Agent with respect to the exercise of
remedies with respect to, and releases of, the Pledged Collateral. Under these
circumstances, actions could be taken under the pledge agreements that might be
construed to be adverse to the interests of the holders of New Senior Debt
Securities and the Other Senior Notes. See "Prospectus Supplement Summary--
Amended Bank Credit Agreement; Repayment of Term Loan."
RISKS ASSOCIATED WITH THE INTEGRATION OF OTHER BUSINESSES
The Company's growth strategy includes the acquisition of complementary
businesses. The acquisition of BTR Packaging and any future acquisitions by the
Company are subject to various risks and uncertainties, including the inability
to assimilate effectively the operations, products, technologies and personnel
of
S-13
<PAGE>
the acquired companies (some of which are located in diverse geographic
regions), the potential disruption of the Company's existing business, the
inability to maintain uniform standards, controls, procedures and policies, the
need or obligation to divest portions of the acquired companies and the
potential impairment of relationships with customers. In addition, there can be
no assurance that the integration and consolidation of other businesses,
including BTR Packaging, will achieve cost savings and operating synergies.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
The Company operates manufacturing and other facilities on five continents
and sells its products in over 25 countries. In addition, the Company expects to
commit substantial resources to expand into new markets internationally. On a
pro forma basis after giving effect to the Acquisition, net sales of the
Company's international operations in 1997 totaled approximately $2.7 billion,
representing approximately 46% of the Company's net sales. As a result of its
international operations, the Company is subject to risks associated with
operating in foreign countries, including political, social and economic
instability; war and civil disturbances; taking of property by nationalization
or expropriation without fair compensation; changes in government policies and
regulations; devaluations and fluctuations in currency exchange rates;
imposition of limitations on conversions of foreign currencies into dollars or
remittance of dividends and other payments by foreign subsidiaries; imposition
or increase of withholding and other taxes on remittances and other payments by
foreign subsidiaries; hyperinflation in certain foreign countries and imposition
or increase of investment and other restrictions or requirements by foreign
governments. Although such risks have not had a material adverse effect on the
Company in the past, no assurance can be given that such risks will not have a
material adverse effect on the Company in the future. See "Business" and "BTR
Packaging."
SIGNIFICANT KKR EQUITY INVESTMENT
After giving effect to the Common Stock Offering, and based on shares of
Common Stock outstanding as of May 13, 1998, approximately 23.3% of the
outstanding shares of Common Stock of the Company will be held by three limited
partnerships (the "KKR Partnerships"), the general partner of each of which is
KKR Associates, L.P. ("KKR Associates"), an affiliate of Kohlberg Kravis Roberts
& Co. L.P. ("KKR"). KKR Associates has sole voting and investment power with
respect to such shares. Consequently, KKR Associates and its general partners
will be able to exercise significant influence over the business of the Company
by virtue of their existing majority representation on the Board of Directors of
the Company and their voting power with respect to the election of directors and
actions requiring stockholder approval. In addition, KKR renders consulting and
financial services to the Company and receives quarterly management fees.
TERMINATION OF KKR PARTNERSHIPS
The limited partnership agreements pursuant to which two of the KKR
Partnerships were organized will, by their terms, expire on December 31, 1999,
unless amended by all of the limited partners to extend the term beyond such
date. There can be no assurance that KKR Associates, as general partner of the
KKR Partnerships, will seek an amendment or, if sought, that an amendment will
be approved by the limited partners. If the partnership agreements expire, the
limited partnerships will dissolve. In the event of the dissolution and winding
up of the limited partnerships, KKR Associates will have sole discretion
regarding the timing (which may be one or more years after the expiration of the
partnership agreements) and manner of the disposition of any Common Stock held
by such limited partnerships, including public or private sales of such Common
Stock, the distribution of such Common Stock to the limited partners of the
limited partnerships or a combination of the foregoing.
S-14
<PAGE>
ABSENCE OF A PUBLIC MARKET FOR THE NEW SENIOR DEBT SECURITIES
Each series of the New Senior Debt Securities will be new securities for
which there currently is no market. Although the Underwriters have informed the
Company that they currently intend to make a market in the New Senior Debt
Securities, they are not obligated to do so, and any such market making may be
discontinued at any time without notice. If the Underwriters cease to act as
market makers for the New Senior Debt Securities for any reason, there can be no
assurance that another firm or person will make a market in the New Senior Debt
Securities. There can be no assurance that an active market for any series of
the New Senior Debt Securities will develop or, if a market does develop for one
or more series of New Senior Debt Securities, at what price those New Senior
Debt Securities will trade. The Company does not intend to apply for listing of
any series of the New Senior Debt Securities on any securities exchange or for
quotation through the Nasdaq National Market.
S-15
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offerings are estimated to be
$2,026.3 million after deducting underwriting discounts and estimated offering
expenses ($2,153.8 million if the over-allotment options with respect to the
Equity Offerings are exercised in full). The Company intends to use the net
proceeds for the repayment of a portion of the Term Loan incurred in connection
with the BTR Transaction. Borrowings under the Term Loan mature on October 30,
1999 and bear interest, at the Company's option, at the prime rate or a reserve
adjusted eurodollar rate plus a margin linked to the Company's leverage ratio.
If the over-allotment option is exercised with respect to the Common Stock
Offering, the Company intends to satisfy a portion of its obligations with
respect thereto by acquiring shares of Common Stock from a grantor trust that
was established by the Company and currently holds approximately 1.2 million
shares of Common Stock, which were acquired in 1991.
The following table sets forth a summary of the expected sources and uses of
funds (in millions of dollars):
<TABLE>
<S> <C>
SOURCES OF FUNDS
Common Stock Offering............................................................. $ 577.0
Preferred Stock Offering.......................................................... 400.0
$350 million aggregate principal amount of Senior Notes due 2005.................. 350.0
$250 million aggregate principal amount of Senior Notes due 2008.................. 250.0
$250 million aggregate principal amount of Senior Debentures due 2010............. 250.0
$250 million aggregate principal amount of Senior Debentures due 2018............. 250.0
---------
Total sources of funds........................................................ $ 2,077.0
---------
---------
USES OF FUNDS
Repayment of Term Loan............................................................ $ 1,982.1
Estimated Fees and Expenses (including underwriters' discounts)................... 94.9
---------
Total uses of funds........................................................... $ 2,077.0
---------
---------
</TABLE>
S-16
<PAGE>
CONSOLIDATED CAPITALIZATION
The following table sets forth as of March 31, 1998 (i) the historical
consolidated capitalization of the Company and (ii) the consolidated
capitalization of the Company giving pro forma effect to the Acquisition and
related financing and adjusted to give effect to the Offerings and the
application of the estimated net proceeds as described in "Use of Proceeds." The
table should be read in conjunction with the Consolidated Financial Statements,
the notes thereto and the other financial data and statistical information
included or incorporated by reference in this Prospectus Supplement and the
accompanying Prospectus. See "Unaudited Pro Forma Condensed Consolidated
Financial Information" and "Selected Consolidated Financial Data."
<TABLE>
<CAPTION>
AT MARCH 31, 1998
----------------------
<S> <C> <C>
PRO FORMA
ACTUAL AS ADJUSTED
--------- -----------
<CAPTION>
(MILLIONS OF DOLLARS,
EXCEPT SHARE
AND PER SHARE AMOUNTS)
<S> <C> <C>
Current debt:
Short-term loans....................................................................... $ 127.3 $ 127.3
Long-term debt due within one year..................................................... 52.9 52.9
--------- -----------
Total current debt................................................................. $ 180.2 $ 180.2
--------- -----------
--------- -----------
Long-term debt:
Bank credit agreements................................................................. 2,243.0 3,260.9(a)
11% Senior Debentures due 1999 to 2003................................................. 42.6 42.6
7.85% Senior Notes due 2004............................................................ 300.0 300.0
7.15% Senior Notes due 2005............................................................ 350.0
8.10% Senior Notes due 2007............................................................ 300.0 300.0
7.35% Senior Notes due 2008............................................................ 250.0
7.50% Senior Debentures due 2010....................................................... 250.0
7.80% Senior Debentures due 2018....................................................... 250.0
--------- -----------
Total notes and debentures......................................................... 642.6 1,742.6
Other.................................................................................. 322.1 322.1
--------- -----------
Total long-term debt............................................................... 3,207.7 5,325.6
Share owners' equity:
Convertible preferred stock............................................................ 387.7
Exchangeable preferred stock........................................................... 20.1 20.1
Common stock, par value $.01 per share, 140,766,753 shares outstanding, 154,566,753
shares outstanding as adjusted(b).................................................... 1.4 1.5
Capital in excess of par value......................................................... 1,568.9 2,125.6
Deficit................................................................................ (9.9) (15.6)(c)
Other accumulated comprehensive income................................................. (195.2) (195.2)
--------- -----------
Total share owners' equity......................................................... 1,385.3 2,324.1
--------- -----------
Total capitalization..................................................................... $ 4,593.0 $ 7,649.7
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(a) Includes $3.0 billion additional borrowings under the Amended Bank Credit
Agreement in connection with the Acquisition and $1,982.1 million repayment
of a portion of the Term Loan.
(b) Excludes 1,995,981 shares of Common Stock issuable pursuant to immediately
exercisable stock options outstanding as of March 31, 1998.
(c) The deficit has been increased by $5.7 million for the write-off of
unamortized finance fees associated with repayment of the Term Loan portion
of the Amended Bank Credit Agreement.
S-17
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma condensed consolidated statement of results of
operations contained in this Prospectus Supplement gives effect to the following
transactions and events as if they had occurred at the beginning of the period
presented: (i) the Acquisition and related financing; (ii) the sale and issuance
of 13,800,000 shares of Common Stock in the Common Stock Offering at an offering
price of $41.8125 per share; (iii) the sale and issuance of 8,000,000 shares of
Preferred Stock in the Preferred Stock Offering at an offering price of $50.00
per share; (iv) the sale and issuance of an aggregate $1.1 billion principal
amount of New Senior Debt Securities in the Debt Offerings and (v) repayment of
the Term Loan and payment of other fees and expenses in connection with the
Offerings. For further information on the Acquisition, see "Prospectus
Supplement Summary--The Company" and "--Overview of BTR Packaging."
The unaudited pro forma condensed consolidated balance sheet contained in
this Prospectus Supplement gives effect to the foregoing transactions and events
as if they had occurred on March 31, 1998.
THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS ARE PROVIDED FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED TO BE INDICATIVE OF THE
COMPANY'S CONSOLIDATED FINANCIAL POSITION OR RESULTS OF OPERATIONS HAD SUCH
EVENTS BEEN CONSUMMATED ON THE DATES ASSUMED. THE COMPANY'S ACTUAL CONSOLIDATED
FINANCIAL POSITION AND RESULTS OF OPERATIONS IN FUTURE PERIODS WILL BE AFFECTED
BY VARIOUS FACTORS, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL, INCLUDING
FLUCTUATIONS IN THE COMPANY'S EARNINGS AND INCREASES IN THE NUMBER OF
OUTSTANDING SHARES OF THE COMPANY'S COMMON STOCK. THE PRO FORMA STATEMENTS DO
NOT, THEREFORE, PROJECT THE COMPANY'S FINANCIAL POSITION OR RESULTS OF
OPERATIONS FOR ANY FUTURE DATE OR PERIOD. Notwithstanding the foregoing, the
Company believes that the assumptions made with respect to such events provide a
reasonable basis on which to present the Pro Forma Statements.
The unaudited pro forma condensed consolidated financial information and
accompanying notes should be read in conjunction with the Consolidated Financial
Statements, the notes thereto and the other financial data contained elsewhere
or incorporated by reference in this Prospectus Supplement and the accompanying
Prospectus.
S-18
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
---------------------------------------------------------
PRO FORMA
ACQUISITION OFFERINGS AS
ACTUAL ADJUSTMENTS(A) ADJUSTMENTS ADJUSTED(D)
-------- --------- ------- ------------
(MILLIONS OF DOLLARS, EXCEPT RATIOS, SHARE AND PER SHARE
DATA)
<S> <C> <C> <C> <C>
Revenues:
Net sales....................................................... $1,098.5 $ 285.4 $1,383.9
Other........................................................... 59.7 4.3 64.0
-------- --------- ------------
1,158.2 289.7 1,447.9
Costs and expenses:
Manufacturing, shipping and delivery............................ 861.1 208.4 1,069.5
Research, engineering, selling, administrative and other........ 114.8 44.1 158.9
-------- --------- ------------
975.9 252.5 1,228.4
-------- --------- ------------
Earnings before interest expense, income taxes and minority
share owners' interests....................................... 182.3 37.2 219.5
Interest expense................................................ 65.2 47.9 $ (8.5)(b) 104.6
-------- --------- ------- ------------
Earnings before income taxes and minority share owners'
interests..................................................... 117.1 (10.7) 8.5 114.9
Provision for income taxes...................................... 28.8 3.8 3.2(c) 35.8
Minority share owners' interests in earnings (losses) of
subsidiaries.................................................. 7.9 (3.0) 4.9
-------- --------- ------- ------------
Net earnings.................................................... 80.4 $ (11.5) $ 5.3 74.2
--------- -------
--------- -------
Exchangeable Preferred Stock dividends.......................... .4 .4
Convertible Preferred Stock dividends........................... 4.8(e)
-------- ------------
Earnings available to common share owners....................... $ 80.0 $ 69.0
-------- ------------
-------- ------------
Net earnings per share of common stock:
Basic....................................................... $ 0.57 $ 0.45
-------- ------------
-------- ------------
Diluted..................................................... $ 0.56 $ 0.44
-------- ------------
-------- ------------
Weighted average shares outstanding (000's)..................... 140,620 154,420
Weighted diluted average shares (000's)......................... 142,405 156,205(f)
Ratio of earnings to fixed charges.............................. 2.6x 2.0x
Ratio of earnings to combined fixed charges and preferred stock
dividends..................................................... 2.6x 1.9x
</TABLE>
S-19
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997
---------------------------------------------------------
PRO FORMA
ACQUISITION OFFERINGS AS
ACTUAL ADJUSTMENTS(A) ADJUSTMENTS ADJUSTED(D)
-------- --------- ------- ------------
(MILLIONS OF DOLLARS, EXCEPT RATIOS, SHARE AND PER SHARE
DATA)
<S> <C> <C> <C> <C>
Revenues:
Net sales....................................................... $1,056.3 $ 310.9 $1,367.2
Other........................................................... 59.9 4.3 64.2
-------- --------- ------------
1,116.2 315.2 1,431.4
Costs and expenses:
Manufacturing, shipping and delivery............................ 844.9 230.3 1,075.2
Research, engineering, selling, administrative and other........ 101.0 29.2 130.2
-------- --------- ------------
945.9 259.5 1,205.4
-------- --------- ------------
Earnings before interest expense, income taxes and minority
share owners' interests....................................... 170.3 55.7 226.0
Interest expense................................................ 85.9 44.7 $ (6.4)(b) 124.2
-------- --------- ------- ------------
Earnings before income taxes and minority share owners'
interests..................................................... 84.4 11.0 6.4 101.8
Provision for income taxes...................................... 23.4 7.5 2.4(c) 33.3
Minority share owners' interests in earnings (losses) of
subsidiaries.................................................. 6.4 .2 6.6
-------- --------- ------- ------------
Net earnings.................................................... 54.6 $ 3.3 $ 4.0 61.9
--------- -------
--------- -------
Exchangeable Preferred Stock dividends.......................... .4 .4
Convertible Preferred Stock dividends........................... 4.8(e)
-------- ------------
Earnings available to common share owners....................... $ 54.2 $ 56.7
-------- ------------
-------- ------------
Net earnings per share of common stock:
Basic....................................................... $ 0.44 $ 0.42
-------- ------------
-------- ------------
Diluted..................................................... $ 0.44 $ 0.41
-------- ------------
-------- ------------
Weighted average shares outstanding (000's)..................... 121,813 135,613
Weighted diluted average shares (000's)......................... 124,469 138,269(f)
Ratio of earnings to fixed charges.............................. 1.8x 1.7x
Ratio of earnings to combined fixed charges and preferred stock
dividends..................................................... 1.8x 1.6x
</TABLE>
S-20
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF RESULTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------------
PRO FORMA
ACQUISITION OFFERINGS AS
ACTUAL ADJUSTMENTS(A) ADJUSTMENTS ADJUSTED(D)
-------- --------- ------- ------------
(MILLIONS OF DOLLARS, EXCEPT RATIOS, SHARE AND PER SHARE
DATA)
<S> <C> <C> <C> <C>
Revenues:
Net sales....................................................... $4,658.5 $1,217.2 $5,875.7
Other........................................................... 169.9 34.6 204.5
-------- --------- ------------
4,828.4 1,251.8 6,080.2
Costs and expenses:
Manufacturing, shipping and delivery............................ 3,666.4 876.6 4,543.0
Research, engineering, selling, administrative and other........ 407.0 163.6 570.6
-------- --------- ------------
4,073.4 1,040.2 5,113.6
-------- --------- ------------
Earnings before interest expense, income taxes, minority share
owners' interests and extraordinary items..................... 755.0 211.6 966.6
Interest expense................................................ 302.7 183.3 $(28.1)(b) 457.9
-------- --------- ------- ------------
Earnings before income taxes, minority share owners' interests
and extraordinary items....................................... 452.3 28.3 28.1 508.7
Provision for income taxes...................................... 148.5 12.2 10.7(c) 171.4
Minority share owners' interests in earnings (losses) of
subsidiaries.................................................. 31.4 (7.0) 24.4
-------- --------- ------- ------------
Earnings before extraordinary items............................. 272.4 $ 23.1 $ 17.4 312.9
--------- -------
--------- -------
Exchangeable Preferred Stock dividends.......................... 1.5 1.5
Convertible Preferred Stock dividends........................... 19.0(e)
-------- ------------
Earnings available to common share owners....................... $ 270.9 $ 292.4
-------- ------------
-------- ------------
Earnings before extraordinary items per share of common stock:
Basic....................................................... $ 2.03 $ 1.98
-------- ------------
-------- ------------
Diluted..................................................... $ 2.01 $ 1.97
-------- ------------
-------- ------------
Weighted average shares outstanding (000's)..................... 133,597 147,397
Weighted diluted average shares (000's)......................... 135,676 149,476(f)
Ratio of earnings to fixed charges.............................. 2.4x 2.0x
Ratio of earnings to combined fixed charges and preferred stock
dividends..................................................... 2.3x 1.9x
</TABLE>
S-21
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF RESULTS OF OPERATIONS
(a) For purposes of the pro forma condensed consolidated statement of
results of operations, funding of the total purchase consideration of
approximately $3.6 billion for the BTR Transaction is assumed to be provided by
borrowings under the Amended Bank Credit Agreement. Net proceeds from the
Rockware Sale have been estimated at $0.6 billion and assumed used to repay a
portion of such borrowings. Interest on the remaining net amount of $3.0 billion
was calculated at weighted average rates in effect under the Company's existing
bank credit agreement during the applicable period. A tax benefit was provided
on such interest at the estimated statutory rate. The results of operations
amounts represent the historical results of BTR Packaging translated from
Australian dollars at average exchange rates of .68, .78 and .74 U.S. dollars
per Australian dollar for the three month periods ended March 31, 1998 and 1997
and the year ended December 31, 1997, respectively. The reported U.S. dollar
amounts for the three months ended March 31, 1998, were negatively impacted by a
weaker Australian dollar compared to the three months ended March 31, 1997. The
Company believes that a portion of the $1,894.2 million unallocated excess of
purchase cost over net assets acquired in the Acquisition will ultimately be
allocated to property, plant, and equipment and certain identifiable intangible
assets. The detailed allocation of such excess has not been finalized; however,
the Company believes that the composite average lives of the BTR Packaging
assets, including the remaining unallocated excess of purchase cost over net
assets acquired, will range from 30 to 40 years. The pro forma net earnings
reflect amortization over 35 years, the average of this range. Amortization over
30 years would decrease net earnings by $9.0 million. Amortization over 40 years
would increase net earnings by $6.7 million. These amounts are preliminary
estimates and are subject to further refinement upon final determination of the
detailed allocation of the purchase consideration for the Acquisition.
(b) Assumes that the estimated net proceeds of $2,026.3 million from the
Offerings will be used to repay $1,982.1 million outstanding under the Amended
Bank Credit Agreement and to pay other expenses related to the Offerings and the
Amended Bank Credit Agreement. The resulting pro forma adjustments to interest
expense consist of the following (in millions of dollars):
<TABLE>
<CAPTION>
THREE MONTHS YEAR
ENDED MARCH 31, ENDED
-------------------- DECEMBER 31,
1998 1997 1997
--------- --------- ------------
<S> <C> <C> <C>
(1) Elimination of interest related to repayments of borrowings under the
Amended Bank Credit Agreement.......................................... $ (31.7) $ (29.6) $ (121.2)
(2) Interest on the New Senior Debt Securities:
7.15% Senior Notes due 2005............................................ 6.3 6.3 25.0
7.35% Senior Notes due 2008............................................ 4.6 4.6 18.4
7.50% Senior Debentures due 2010....................................... 4.7 4.7 18.8
7.80% Senior Debentures due 2018....................................... 4.9 4.9 19.5
(3) Amortization of estimated deferred finance fees related to:
Amended Bank Credit Agreement.......................................... 2.3 2.3 9.7
New Senior Debt Securities............................................. 0.4 0.4 1.7
--------- --------- ------------
$ (8.5) $ (6.4) $ (28.1)
--------- --------- ------------
--------- --------- ------------
</TABLE>
(c) The provision for income taxes has been adjusted to reflect the
reduction in interest expense at the estimated statutory rates.
(d) The unaudited pro forma condensed consolidated statements of results of
operations do not include a charge of $9.3 million ($5.7 million after deducting
estimated tax benefits) for the write-off of unamortized deferred finance fees
associated with the assumed repayment of the Term Loan portion of the Amended
Bank Credit Agreement.
(e) Dividends on the Convertible Preferred Stock are based on a rate of
4.75%.
(f) The additional 7,592,800 shares of Common Stock assumed issuable upon
conversion of the Convertible Preferred Stock have been excluded from the
weighted diluted average shares because the impact, combined with the
elimination of the related dividends, would be antidilutive.
S-22
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT MARCH 31, 1998
<TABLE>
<CAPTION>
ACQUISITION OFFERINGS PRO FORMA
ACTUAL ADJUSTMENTS(A) ADJUSTMENTS AS ADJUSTED
-------- -------------- ------------- -----------
(MILLIONS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash............................................................. $ 230.0 $ 230.0
Short-term investments........................................... 23.1 23.1
Receivables...................................................... 708.0 $ 191.1 899.1
Inventories...................................................... 618.6 178.5 797.1
Prepaid expenses................................................. 140.2 140.2
-------- -------------- -----------
Total current assets........................................... 1,719.9 369.6 2,089.5
Investments and other assets:
Investments and advances......................................... 90.9 50.6 141.5
Repair parts inventories......................................... 213.5 57.4 270.9
Prepaid pension.................................................. 659.5 14.1 673.6
Insurance for asbestos-related costs............................. 223.2 223.2
Deposits, receivables and other assets........................... 297.8 26.0 $ 53.1(b) 376.9
Excess of purchase cost over net assets acquired................. 1,269.9 1,894.2 3,164.1
-------- -------------- ------------- -----------
Total investments and other assets............................. 2,754.8 2,042.3 53.1 4,850.2
Property, plant and equipment, at cost............................. 4,175.7 947.1 5,122.8
Less accumulated depreciation...................................... 1,755.2 1,755.2
-------- -------------- -----------
Net property, plant and equipment.................................. 2,420.5 947.1 3,367.6
-------- -------------- ------------- -----------
Total assets................................................... $6,895.2 $3,359.0 $ 53.1 $10,307.3
-------- -------------- ------------- -----------
-------- -------------- ------------- -----------
LIABILITIES AND SHARE OWNERS' EQUITY
Current liabilities:
Short-term loans and long-term debt due within one year.......... $ 180.2 $ 180.2
Current portion of asbestos-related liabilities.................. 85.0 85.0
Accounts payable and other liabilities........................... 737.8 $ 154.6 892.4
-------- -------------- -----------
Total current liabilities...................................... 1,003.0 154.6 1,157.6
Long-term debt..................................................... 3,207.7 3,000.0 $(882.1)(c) 5,325.6
Deferred taxes..................................................... 249.1 154.5 (3.6)(d) 400.0
Nonpension postretirement benefits................................. 349.3 349.3
Other liabilities.................................................. 461.0 12.0 473.0
Commitments and contingencies
Minority share owners' interests................................... 239.8 37.9 277.7
Share owners' equity:
Convertible preferred stock...................................... 387.7(e) 387.7
Exchangeable preferred stock..................................... 20.1 20.1
Common stock, par value $.01 per share,
140,766,753 shares outstanding,
154,566,753 shares outstanding as adjusted(h).................. 1.4 0.1(f) 1.5
Capital in excess of par value................................... 1,568.9 556.7(f) 2,125.6
Deficit.......................................................... (9.9) (5.7)(g) (15.6)
Accumulated other comprehensive income........................... (195.2) (195.2)
-------- ------------- -----------
Total share owners' equity..................................... 1,385.3 938.8 2,324.1
-------- -------------- ------------- -----------
Total liabilities and share owners' equity................. $6,895.2 $3,359.0 $ 53.1 $10,307.3
-------- -------------- ------------- -----------
-------- -------------- ------------- -----------
</TABLE>
S-23
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(a) For purposes of the unaudited pro forma condensed consolidated balance
sheet, the assets and liabilities of BTR Packaging have been included at
their historical values at March 31, 1998. The assets and liabilities
associated with the Rockware Glass unit have been excluded. The estimated
net Acquisition consideration of $3.0 billion has been included in long term
debt. The excess of purchase cost over the historical value of the net
assets acquired is $1,894.2 million. Such excess will be allocated based
upon the fair value of the assets and liabilities of BTR Packaging, the
determination of which has not been completed. Therefore, the amounts
reflected are preliminary estimates and subject to further refinement upon
final determination of the detailed allocation of the Acquisition purchase
cost.
(b) Reflects the impact of recording additional deferred finance fees of $18.2
million and $44.2 million related to New Senior Debt Securities and the
Amended Bank Credit Agreement, respectively, and the write-off of
unamortized deferred finance fees of $9.3 million related to the repayment
of the Term Loan.
(c) Reflects the issuance of $1.1 billion aggregate principal amount of New
Senior Debt Securities and a net decrease in borrowing under the Amended
Bank Credit Agreement of $1,982.1 million.
(d) Reflects the tax benefit, at estimated statutory rates, of the write-off of
unamortized deferred finance fees.
(e) Reflects the estimated net proceeds of the Preferred Stock Offering of
$388.6 million, less estimated expenses of $0.9 million.
(f) Reflects the estimated net proceeds of the Common Stock Offering of $558.2
million, less estimated expenses of $1.4 million.
(g) Represents a charge of $9.3 million ($5.7 million after deducting estimated
tax benefits) for the write-off of unamortized deferred finance fees
associated with the Term Loan.
(h) Excludes 1,995,981 shares of Common Stock issuable pursuant to immediately
exercisable stock options at March 31, 1998.
ALTERNATIVE PRO FORMA ASSUMPTIONS
ROCKWARE SALE. For pro forma purposes, net proceeds from the Rockware Sale
have been estimated at $0.6 billion and assumed used to repay a portion of the
borrowings under the Amended Bank Credit Agreement. The actual proceeds from the
Rockware Sale will be determined at the time the Rockware Sale is completed and
may be more or less than the assumed amount. Each $25 million difference between
the actual net proceeds and the assumed amount will impact interest expense on
an annualized basis subsequent to the Rockware Sale by approximately $1.5
million, based on the pro forma rates of interest.
AMENDED BANK CREDIT AGREEMENT. For pro forma purposes, the assumed interest
rate on additional borrowings under the Amended Bank Credit Agreement were based
on the weighted average rates in effect under the Company's existing bank credit
agreement during the periods presented. Such rates were 6.39%, 5.96% and 6.11%
for the three month periods ended March 31, 1998 and 1997 and the year ended
December 31, 1997, respectively. The actual interest rate will be determined
based upon market conditions at the time such additional amounts are borrowed.
Each one-half percentage point change in the foregoing rates will impact
interest expense by $5.1 million on an annualized basis.
S-24
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for each of the
five years in the period ended December 31, 1997 have been derived from the
Company's Consolidated Financial Statements which were audited by Ernst & Young
LLP, independent auditors. The selected consolidated financial data for the
three months ended March 31, 1998 and 1997 were derived from the unaudited
consolidated financial statements of the Company, which in the opinion of
management, reflect all adjustments necessary, which consist only of normal
recurring adjustments, for a fair presentation of the interim period financial
data. The results for the three months are not necessarily indicative of the
results to be expected for the full year. The data set forth are qualified in
their entirety by, and should be read in conjunction with, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's Consolidated Financial Statements, the notes thereto and the other
financial data and statistical information included or incorporated by reference
in this Prospectus Supplement and the accompanying Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1998(A) 1997(A) 1997(A) 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
(MILLIONS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED OPERATING RESULTS:
Revenues:
Net sales................................... $ 1,098.5 $ 1,056.3 $ 4,658.5 $ 3,845.7 $ 3,763.2 $ 3,567.3 $ 3,535.0
Other (b)................................... 59.7 59.9 169.9 130.5 117.8 85.6 127.1
--------- --------- --------- --------- --------- --------- ---------
1,158.2 1,116.2 4,828.4 3,976.2 3,881.0 3,652.9 3,662.1
Costs and expenses:
Manufacturing, shipping and delivery........ 861.1 844.9 3,666.4 3,025.6 2,948.5 2,824.3 2,823.8
Research, engineering, selling,
administrative and other (c).............. 114.8 101.0 407.0 323.9 322.9 379.1 842.8
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) from continuing operations
before interest expense and items below... 182.3 170.3 755.0 626.7 609.6 449.5 (4.5)
Interest expense............................ 65.2 85.9 302.7 302.6 299.6 278.2 290.0
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) from continuing operations
before items below........................ 117.1 84.4 452.3 324.1 310.0 171.3 (294.5)
Provision (credit) for income taxes (d)..... 28.8 23.4 148.5 104.9 100.8 68.9 (113.1)
Minority share owners' interests in earnings
of subsidiaries........................... 7.9 6.4 31.4 28.1 40.1 24.1 19.4
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) from continuing operations
before extraordinary items................ 80.4 54.6 272.4 191.1 169.1 78.3 (200.8)
Net earnings of discontinued operations..... 1.4
Gain on sale of discontinued operations, net
of applicable income taxes................ 217.0
Extraordinary charges from early
extinguishment of debt, net of applicable
income taxes.............................. (104.5) (12.7)
--------- --------- --------- --------- --------- --------- ---------
Net earnings................................ $ 80.4 $ 54.6 $ 167.9 $ 191.1 $ 169.1 $ 78.3 $ 4.9
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Basic earnings (loss) per share of common
stock:
Earnings (loss) from continuing operations
before extraordinary items.............. $ 0.57 $ 0.44 $ 2.03 $ 1.58 $ 1.40 $ 0.64 $ (1.70)
Net earnings of discontinued operations... 0.01
Gain on sale of discontinued operations... 1.82
Extraordinary charges..................... (0.78) (0.10)
--------- --------- --------- --------- --------- --------- ---------
Net earnings............................ $ 0.57 $ 0.44 $ 1.25 $ 1.58 $ 1.40 $ 0.64 $ 0.03
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Diluted earnings (loss) per share of common
stock:
Earnings (loss) from continuing operations
before extraordinary items.............. $ 0.56 $ 0.44 $ 2.01 $ 1.55 $ 1.37 $ 0.64 $ (1.70)
Net earnings of discontinued operations... 0.01
Gain on sale of discontinued operations... 1.82
Extraordinary charges..................... (0.77) (0.10)
--------- --------- --------- --------- --------- --------- ---------
Net earnings............................ $ 0.56 $ 0.44 $ 1.24 $ 1.55 $ 1.37 $ 0.64 $ 0.03
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
S-25
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1998(A) 1997(A) 1997(A) 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
OTHER DATA: (MILLIONS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
EBITDA(e)................................... $ 266.4 $ 244.5 $ 1,070.8 $ 871.0 $ 813.0 $ 659.0 $ 200.7
Adjusted EBITDA (f)......................... 264.2 242.3 1,068.6 871.0 813.0 759.0 732.8
Depreciation................................ 74.9 67.7 283.5 219.8 188.3 183.3 180.0
Amortization of excess cost and
intangibles............................... 15.1 14.3 55.9 46.8 44.8 45.2 40.8
Additions to property, plant and
equipment................................. 103.6 76.6 471.3 388.4 283.6 286.0 266.2
Ratio of earnings to fixed charges.......... 2.6x 1.8x 2.4x 2.0x 1.9x 1.5x (g)
Ratio of earnings to combined fixed charges
and preferred stock dividends............. 2.6x 1.8x 2.3x 1.9x 1.9x 1.5x (g)
Ratio of Adjusted EBITDA to interest
expense................................... 4.1x 2.8x 3.5x 2.9x 2.7x 2.7x 2.5x
Weighted average shares outstanding
(in thousands)............................ 140,620 121,813 133,597 120,276 119,343 119,005 118,978
Weighted diluted average shares
(in thousands) (h)........................ 142,405 124,469 135,676 123,567 123,161 122,863
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital............................. $ 717 $ 650 $ 604 $ 380 $ 328 $ 171 $ 234
Total assets................................ 6,895 6,695 6,845 6,105 5,439 5,318 4,901
Total debt.................................. 3,388 3,570 3,324 3,395 2,833 2,690 2,487
Share owners' equity........................ 1,385 757 1,342 730 532 376 295
</TABLE>
- ------------------------
(a) Results of operations since January 1997 include the acquisition of AVIR.
Also during the period from May to October 1997, the Company completed a
refinancing plan. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(b) Other revenues include: (1) a net gain of $18.5 million ($11.4 million after
tax) related to the termination of a license agreement, including charges
for related equipment writeoffs and capacity adjustments in the three months
ended March 31, 1998; (2) a gain from a divestiture of $16.3 million ($16.3
million after tax) in the three months ended March 31, 1997 and in the year
ended December 31, 1997 and (3) a gain from a divestiture of $46.1 million
($34.6 million after tax) in the year ended December 31, 1993.
(c) In the first quarter of 1998, the Company recorded charges of $16.3 million
($10.1 million after tax) for the settlement of certain environmental
litigation and for severance costs at certain international affiliates. In
the first quarter of 1997, the Company recorded a charge of $14.1 million
($8.7 million after tax) principally for the estimated cost of guaranteed
lease obligations of a previously divested business. In the fourth quarter
of 1995, the Company recorded a charge of $40.0 million ($24.7 million after
tax) to write down the asbestos insurance asset and a net credit of $40.0
million ($24.7 million after tax) primarily from the reduction of previously
established restructuring reserves. In the fourth quarter of 1994, the
Company recorded a charge of $100.0 million ($61.7 million after tax) to
write down the asbestos insurance asset. In the fourth quarter of 1993, the
Company recorded charges totaling $578.2 million ($357.0 million after tax)
principally for estimated uninsured future asbestos-related costs and costs
associated with its restructuring program.
(d) In the first quarter of 1998, the Company recorded a tax benefit of $15.1
million to adjust net deferred income tax liabilities as a result of changes
in Italy's tax laws.
(e) EBITDA is comprised of earnings from continuing operations before interest
expense, income taxes, minority share owners interests and extraordinary
items and excludes depreciation, amortization of excess cost and intangibles
and interest income of $5.9 million and $7.8 million in the three month
periods ended March 31, 1998 and 1997, respectively, and $23.6 million,
$22.3 million, $29.7 million, $19.0 million and $15.6 million for the years
ended December 31, 1997, 1996, 1995, 1994, and 1993, respectively. EBITDA is
a measure of the Company's ability to service its debt. It is not an
alternative to net income as a measure of the Company's results of
operations (as interest income, interest expense, depreciation,
amortization, income taxes, minority share owners' interests, extraordinary
items and discontinued operations are included in the determination of net
income) or to cash flows
S-26
<PAGE>
as a measure of liquidity (as cash flows include the cash effects of all
operating, financing and investing activities). Rather, it is included
herein because EBITDA is a widely accepted financial indicator used by
certain investors and financial analysts to assess and compare companies on
the basis of operating performance. EBITDA as computed may not be comparable
to similarly-titled measures of other companies.
(f) Adjusted EBITDA excludes: (1) a net gain of $18.5 million in the three
months ended March 31, 1998; (2) a gain from a divestiture of $16.3 million
in the three months ended March 31, 1997 and in the year ended December 31,
1997 and (3) a gain from a divestiture of $46.1 million in the year ended
December 31, 1993. Adjusted EBITDA also excludes unusual charges of: (1)
$16.3 million in the three months ended March 31, 1998; (2) $14.1 million in
the three months ended March 31, 1997 and in the year ended December 31,
1997; (3) $100.0 million in the year ended December 31, 1994 and (4) $578.2
million in the year ended December 31, 1993. (See footnotes (b) and (c)
above.)
(g) Earnings of the Company were insufficient to cover fixed charges and
combined fixed charges and preferred stock dividends for the year ended
December 31, 1993 in the amount of $292.0 million and $295.0 million,
respectively, due to a $250.0 million charge in the fourth quarter of 1993
principally related to the Company's restructuring program and a $325.0
million charge in the fourth quarter of 1993 for estimated uninsured future
asbestos-related costs.
(h) Options to purchase 11,429, 146,975, 781,290, and 1,022,548 weighted average
shares of Common Stock which were outstanding during 1997, 1996, 1995 and
1994, respectively, were not included in the computation of diluted earnings
per share because the effect would be antidilutive. Diluted earnings per
share of Common Stock are equal to basic earnings per share of Common Stock
for 1993 due to the loss from continuing operations.
S-27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF FIRST QUARTER 1998 WITH FIRST QUARTER 1997
The Company recorded net earnings of $80.4 million for the first quarter of
1998 compared to $54.6 million for the first quarter of 1997. Excluding the
effects of the unusual items for both 1998 and 1997 discussed below, the
Company's first quarter 1998 net earnings of $64.0 million increased $17.0
million over first quarter 1997 net earnings of $47.0 million. Consolidated
segment operating profit, excluding the 1998 and 1997 unusual items, was $169.5
million for the first quarter of 1998 compared to $151.5 million for the first
quarter of 1997, an increase of $18.0 million, or 11.9%. The increase is
attributable to higher operating profit for the Glass Containers segment along
with lower other retained costs. Interest expense, net of interest income, for
the first quarter of 1998 decreased $18.8 million from that of the first quarter
of 1997 as a result of the refinancing initiated in the second quarter of 1997.
The Company's estimated effective tax rate for the first quarter of 1998,
excluding the effects of the adjustment to Italy's net deferred tax liabilities
discussed below, was 37.5%. This compares with 34.4% estimated in the first
quarter of 1997 and the actual rate of 34.1% for the full year 1997, excluding
the effect of the gain on the 1997 sale of the remaining 49% interest in Kimble
Glass discussed below. The increase in the 1998 estimated rate is primarily the
result of the non-recurrence of certain foreign tax credits which benefited 1997
results.
Capsule segment results (in millions of dollars) for the first quarter of
1998 and 1997 were as follows:
<TABLE>
<CAPTION>
NET SALES TO UNAFFILIATED CUSTOMERS 1998 1997
- --------------------------------------------------------- --------- ---------
<S> <C> <C>
Glass Containers......................................... $ 812.4 $ 775.6
Plastics Packaging....................................... 285.7 280.4
Other.................................................... .4 .3
--------- ---------
Consolidated total....................................... $ 1,098.5 $ 1,056.3
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
OPERATING PROFIT 1998(A) 1997(B)
- --------------------------------------------------------- --------- ---------
<S> <C> <C>
Glass Containers......................................... $ 111.5 $ 101.1
Plastics Packaging....................................... 67.3 51.7
Eliminations and other retained costs.................... (7.1) .9
--------- ---------
Consolidated total....................................... $ 171.7 $ 153.7
--------- ---------
--------- ---------
</TABLE>
- ------------------------
(a) Operating profit for 1998 includes: (1) a net gain of $18.5 million related
to the termination of a licensing agreement, including charges for related
equipment writeoffs and capacity adjustments, and (2) charges totaling $16.3
million for the settlement of certain environmental litigation and severance
costs at certain international affiliates. These items increased (decreased)
operating profit as follows: Glass Containers, $(7.8) million; Plastics
Packaging, $18.5 million; and other retained costs, $(8.5) million.
(b) Other retained costs for 1997 includes: (1) a gain of $16.3 million on the
sale of the remaining 49% interest in Kimble Glass, and (2) charges of $14.1
million principally for the estimated cost of guaranteed lease obligations
of a previously divested business.
Consolidated net sales for the first quarter of 1998 increased $42.2
million, or 4.0%, over the prior year. Net sales of the Glass Containers segment
increased $36.8 million, or 4.7%, over 1997. The combined U.S. dollar sales of
the segment's foreign affiliates increased over the prior year, reflecting the
February 1997 acquisition of AVIR, the largest manufacturer of glass containers
in Italy. Also, increased unit
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<PAGE>
shipments at several of the Company's affiliates, including those in Venezuela,
Ecuador, Finland and China more than offset lower unit shipments in Colombia.
Domestically, glass container unit shipments of containers for the beer, tea and
juice, and liquor and wine industries increased over the prior year. Net sales
of the Plastics Packaging segment increased $5.3 million, or 1.9%, over the
prior year. Higher shipments of plastic containers were partially offset by
lower shipments of prescription containers, reflecting strong unit shipments in
the first quarter of 1997 in advance of a price increase, and of child resistant
closures.
Consolidated operating profit for the first quarter of 1998, excluding the
1998 and 1997 unusual items, increased $18.0 million, or 11.9%, to $169.5
million from first quarter of 1997 operating profit of $151.5 million. The
operating profit of the Glass Containers segment, excluding the 1998 unusual
items, increased $18.2 million to $119.3 million, compared to $101.1 million in
the first quarter of 1997. The combined U.S. dollar operating profit of the
segment's foreign affiliates increased from the first quarter of 1997. The
February 1997 acquisition of AVIR and improved results at several of the
segment's affiliates, including those in Venezuela, Ecuador, Finland and China
contributed to the increase. Domestically, operating profit increased from the
first quarter of 1997 as a result of higher unit shipments for most end uses.
The operating profit of the Plastics Packaging segment, excluding the 1998
unusual items, decreased $2.9 million, or 5.6%, compared to the first quarter of
1997. Higher shipments of plastic containers were more than offset by lower
shipments of prescription containers, reflecting strong sales in the first
quarter of 1997 in advance of a price increase. Lower shipments of child
resistant closures also contributed to lower operating profit. Other retained
costs, excluding the 1998 and 1997 unusual items discussed below, were $1.4
million income for the first quarter of 1998 compared to $1.3 million expense
for the first quarter of 1997, reflecting higher net financial services income.
The first quarter 1998 results include the following unusual items: (1) a
tax benefit of $15.1 million to adjust net deferred income tax liabilities as a
result of changes in Italy's tax laws; (2) a net gain of $18.5 million ($11.4
million after tax) related to the termination of a license agreement, including
charges for related equipment writeoffs and capacity adjustments, under which
the Company had produced plastic multipack carriers for beverage cans; and (3)
charges of $16.3 million ($10.1 million after tax) for the settlement of certain
environmental litigation and for severance costs at certain international
affiliates. The first quarter 1997 results include the following unusual items:
(1) a gain of $16.3 million ($16.3 million after tax) on the sale of the
Company's remaining 49% interest in Kimble Glass, and (2) charges of $14.1
million ($8.7 million after tax) principally for guarantees of certain lease
obligations of a previously divested business.
COMPARISON OF 1997 WITH 1996
For the year ended December 31, 1997, the Company recorded earnings before
extraordinary items of $272.4 million compared to net earnings of $191.1 million
for 1996. Excluding the effects of the 1997 unusual items discussed below, the
Company's 1997 earnings before extraordinary items of $264.8 million increased
$73.7 million over 1996 net earnings of $191.1 million. The year ended 1997
includes amounts relating to: (1) the acquisition in January 1997 of AVIR, the
largest manufacturer of glass containers in Italy and (2) certain assets of
Anchor Glass Container Corporation acquired on February 5, 1997 ("Anchor
Assets"). Consolidated segment operating profit, excluding the 1997 unusual
items, was $711.3 million in 1997, an increase of $122.1 million, or 20.7%,
compared to 1996. The increase reflects higher operating profit for both the
Glass Containers segment and the Plastics Packaging segment, along with lower
retained costs. The Company's effective tax rate, excluding the effect of the
gain on the sale of the interest in Kimble Glass discussed below, increased to
34.1% for 1997 compared with 32.4% for 1996. The higher statutory tax rate in
Italy was the primary reason for the increase. Net earnings of $167.9 million
for 1997 reflect $104.5 million of extraordinary charges from the early
extinguishment of debt.
S-29
<PAGE>
Capsule segment results (in millions of dollars) for 1997 and 1996 are as
follows:
<TABLE>
<CAPTION>
NET SALES TO UNAFFILIATED CUSTOMERS 1997 1996
- --------------------------------------------------------- --------- ---------
<S> <C> <C>
Glass Containers......................................... $ 3,528.4 $ 2,783.3
Plastics Packaging....................................... 1,128.6 1,060.7
Other.................................................... 1.5 1.7
--------- ---------
Consolidated total....................................... $ 4,658.5 $ 3,845.7
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
OPERATING PROFIT 1997 1996
- --------------------------------------------------------- --------- ---------
<S> <C> <C>
Glass Containers......................................... $ 525.2 $ 424.5
Plastics Packaging....................................... 188.7 172.1
Eliminations and other retained costs(a)................. (.4) (7.4)
--------- ---------
Consolidated total....................................... $ 713.5 $ 589.2
--------- ---------
--------- ---------
</TABLE>
(a) Operating profit for 1997 includes: (1) a gain of $16.3 million on the sale
of the remaining 49% interest in Kimble Glass; and (2) charges of $14.1
million principally for the estimated cost of guaranteed lease obligations
of a previously divested business. These items were recorded in the first
quarter of 1997.
Consolidated net sales for 1997 increased $812.8 million, or 21.1%, over the
prior year. Net sales of the Glass Containers segment increased $745.1 million,
or 26.8%, over 1996. The combined U.S. dollar sales of the segment's foreign
affiliates increased over the prior year, reflecting the recent acquisition of
AVIR (which contributed approximately $524 million to 1997 U.S. dollar sales),
improved pricing in Venezuela and increased unit shipments at several other
affiliates, particularly in Colombia and the United Kingdom. Domestically, glass
container unit shipments increased over prior year, reflecting additional
business gained through the acquisition of the Anchor Assets and increased
shipments in most end uses. Net sales of the Plastics Packaging segment
increased $67.9 million, or 6.4%, over 1996. Increased shipments of plastic
containers for personal care items such as hair care, skin care, and body wash
products, along with increased demand for prescription containers, contributed
to the increase.
Consolidated operating profit for 1997, excluding the 1997 unusual items
discussed below, increased $122.1 million, or 20.7%, to $711.3 million from 1996
operating profit of $589.2 million. Consolidated operating profit, exclusive of
the 1997 unusual items, was 15.3% of net sales for both 1997 and 1996.
Consolidated operating expense (consisting of selling and administrative,
engineering, and research and development expenses) as a percentage of net sales
was 6.3% in 1997 compared to 6.4% in 1996. The operating profit of the Glass
Containers segment increased $100.7 million to $525.2 million, compared to
$424.5 million in 1996. The combined U.S. dollar operating profit of the
segment's foreign affiliates increased from 1996. AVIR contributed approximately
$71 million to 1997 U.S. dollar operating profit. Improved results at the
segment's affiliates in Venezuela, Colombia, and the United Kingdom more than
offset the effects of reduced export shipments from Hungary and soft market
conditions in Brazil. Domestically, operating profit of the Glass Containers
segment increased from 1996. Operating profit for 1997 benefited from increased
sales volume in most end uses, along with the incremental business gained
through the acquisition of the Anchor Assets. The operating profit of the
Plastics Packaging segment increased $16.6 million, or 9.6%, compared to 1996.
The increase resulted from improved manufacturing performance and increased unit
shipments in most businesses, particularly plastic containers for personal care
items. Other retained costs, excluding the 1997 unusual items discussed below,
were $2.6 million for 1997 compared to $7.4 million for 1996, reflecting higher
net financial services income.
The 1997 results include the following unusual items: (1) a gain of $16.3
million ($16.3 million after tax) on the sale of the Company's remaining 49%
interest in Kimble Glass; and (2) charges of $14.1 million
S-30
<PAGE>
($8.7 million after tax) principally for the estimated cost of guaranteed lease
obligations of a previously divested business. These items were recorded in the
first quarter of 1997.
Because of historically high rates of inflation in Brazil, the Company has
used the U.S. dollar as the functional currency for translation of its Brazilian
operations. As a result of recent reductions in the reported Brazilian inflation
rate, the applicable financial accounting standards require the Company to use
the Brazilian currency as the functional currency beginning in 1998. The Company
believes this change will not have a material effect on its consolidated
financial statements.
COMPARISON OF 1996 WITH 1995
For the year ended December 31, 1996, the Company recorded net earnings of
$191.1 million, an increase of $22.0 million, or 13.0%, over 1995 net earnings
of $169.1 million. Consolidated segment operating profit was $589.2 million in
1996 compared to $565.5 million in 1995. Excluding the effects of the 1995
unusual items described below, the increase was attributable to the Company's
domestic glass and plastics packaging operations, which more than offset lower
operating profit for the Company's international glass operations. Interest
expense, net of interest income, increased $10.4 million due in part to lower
interest income as a result of reduced levels of cash available for temporary
investment. The decrease in foreign net earnings, particularly for the Brazilian
and Venezuelan subsidiaries, also resulted in a decrease in minority share
owners' interests in earnings of subsidiaries.
Capsule segment results (in millions of dollars) for 1996 and 1995 were as
follows:
<TABLE>
<CAPTION>
NET SALES TO UNAFFILIATED CUSTOMERS 1996 1995
- ----------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Glass Containers....................................................... $ 2,783.3 $ 2,744.0
Plastics Packaging..................................................... 1,060.7 1,017.7
Other.................................................................. 1.7 1.5
--------- ---------
Consolidated total..................................................... $ 3,845.7 $ 3,763.2
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
OPERATING PROFIT 1996 1995(A)
- ----------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Glass Containers....................................................... $ 424.5 $ 482.7
Plastics Packaging..................................................... 172.1 137.4
Eliminations and other retained costs.................................. (7.4) (54.6)
--------- ---------
Consolidated total..................................................... $ 589.2 $ 565.5
--------- ---------
--------- ---------
</TABLE>
(a) Includes a charge of $40.0 million to write down the asbestos insurance
asset and a net credit of $40.0 million primarily from the reduction of
previously established restructuring reserves. These items increased
(decreased) operating profit as follows: Glass Containers, $45.1 million;
Plastics Packaging $(5.1) million; and other retained costs $(40.0) million.
Consolidated net sales for 1996 increased $82.5 million, or 2.2%, over the
prior year. Net sales of the Glass Containers segment increased $39.3 million,
or 1.4%, over 1995. The combined U.S. dollar sales of the segment's foreign
affiliates increased over the prior year, reflecting higher unit shipments by
several of the foreign affiliates. The inclusion of glass container operations
in Hungary, Finland, and Estonia, acquired in late 1995, more than offset lower
unit shipments in Brazil, Venezuela and India and the effects of devaluations of
the Venezuelan currency in late 1995 and early 1996. Domestically, glass
container unit shipments were slightly below prior year levels due in part to
the absence in 1996 of sales of soft drink bottles as a result of the conversion
from glass to plastic containers. For the Company, this conversion is completed
but has affected 1996 comparisons to prior year periods. As a result of
obtaining additional business and increased consumer demand for premium and
specialty beers, the increase in shipments to U.S. brewers more than offset the
lower shipments of food containers, including iced tea and juice bottles. In the
Plastics Packaging segment, sales increased by $43.0 million, or 4.2%, over
1995. Higher unit shipments of compression-molded and dispensing closures,
plastic containers, especially containers used
S-31
<PAGE>
for personal care and health care products, along with the reported sales of the
plastic container operations in Finland, acquired in late 1995, contributed to
the increase. Partially offsetting were the effects of lower resin prices on
pass-through arrangements with customers.
Consolidated operating profit for 1996 increased $23.7 million, or 4.2%, to
$589.2 million from 1995 operating profit of $565.5 million. Consolidated
operating profit was 15.3% of net sales in 1996 compared to 15.0% in 1995.
Consolidated operating expense as a percentage of net sales was 6.4% in both
1996 and 1995. Operating profit of the Glass Containers segment was $424.5
million, a decrease of $13.1 million, or 3.0%, from 1995, excluding the 1995
unusual item discussed below. Domestically, operating profit increased over 1995
as a result of an improved cost structure, which more than offset the effects of
inflation and slightly lower unit pricing in some product lines.
Internationally, record results were achieved in the United Kingdom and Poland,
and positive contributions were reported from the recently acquired glass
container operations in Hungary, Finland and Estonia. Despite this, however,
U.S. dollar operating profit for the international operations was lower in 1996
compared to 1995 due to soft market conditions in Brazil and Venezuela and
currency devaluations in Venezuela in late 1995 and early 1996. Operating profit
of the Plastics Packaging segment was $172.1 million, an increase of $29.6
million, or 20.8%, from 1995, excluding the 1995 unusual item discussed below.
The majority of the increase resulted from higher unit shipments in most
businesses. Additionally, improved manufacturing performance, the restructuring
of the labels and carriers business, and a consolidation of manufacturing
capacity in the specialty products business contributed to the increase. Other
retained costs were $7.4 million in 1996 compared to $14.6 million in 1995,
excluding the 1995 unusual item discussed below, reflecting higher net financial
services income.
In December 1995, the Company reached settlements involving all remaining
insurance coverage limits (81% of original limits) in the asbestos-related
litigation. As a result of the settlement agreements, the Company recorded a
charge of $40.0 million ($24.7 million after tax) in the fourth quarter of 1995
to write down the asbestos insurance asset to the approximate coverage amounts
expected to be received.
In the fourth quarter of 1995, the Company also recorded an unusual net
credit of $40.0 million ($24.7 million after tax), related primarily to the
reduction of previously established restructuring reserves. Included in the net
credit of $40.0 million is a charge of $5.1 million for the restructuring of the
Company's labels and carriers business.
CAPITAL RESOURCES AND LIQUIDITY
The Company's total debt at March 31, 1998 was $3.39 billion compared to
$3.32 billion at December 31, 1997 and $3.57 billion at March 31, 1997.
At March 31, 1998, the Company had available credit totaling $3.0 billion
under an agreement with a group of banks ("Bank Credit Agreement"), expiring in
December 2001. At March 31, 1998, the Company had unused credit available under
the Bank Credit Agreement of $679.7 million. Cash provided by operating
activities was $42.2 million for the first three months of 1998 compared to
$52.0 million for the first three months of 1997. Cash provided by operating
activities was $445.2 million in 1997 compared to $317.8 million in 1996.
During the second quarter of 1997, the Company filed a universal shelf
registration statement with the Securities and Exchange Commission (the
"Commission") for offerings of up to $2.5 billion of debt securities, common
stock, or both from time to time as market conditions permit. On May 16, 1997,
the Company completed the offerings of: (1) 14,750,000 shares of common stock at
a public offering price of $28.50 per share; (2) $300 million aggregate
principal amount of 7.85% Senior Notes due May 15, 2004; and (3) $300 million
aggregate principal amount of 8.10% Senior Notes due May 15, 2007. On May 23,
1997, the Company used the proceeds from these offerings in addition to
borrowings under the Company's Bank Credit Agreement to purchase $957.4 million
aggregate principal amount of the 11% Senior Debentures due 2003, which
represents more than 95% of the aggregate principal amount of these securities
outstanding, pursuant to a tender offer and consent solicitation for such
securities. Total
S-32
<PAGE>
consideration for each $1,000 principal amount of the 11% Senior Debentures
redeemed on May 23, 1997 was $1,115.60, which included a $20 payment for
consents to amendments to the related indenture. On June 13, 1997, the Company
issued an additional 2,186,100 shares of common stock pursuant to the partial
exercise of the underwriters' overallotment option. On June 16, 1997, the
Company redeemed all $250 million aggregate principal amount of the 10.25%
Senior Subordinated Notes due 1999, at 100% of principal amount, and all $150
million aggregate principal amount of the 10.50% Senior Subordinated Notes due
2002, at 105.25% of principal amount. The June 16, 1997, redemptions were funded
by proceeds received from the June 13, 1997, issuance of common stock and
borrowings under the Company's Bank Credit Agreement. On August 1, 1997, the
Company redeemed all $250 million aggregate principal amount of the 10% Senior
Subordinated Notes due 2002, at 105% of principal amount. On August 15, 1997,
the Company redeemed all $200 million aggregate principal amount of the 9.75%
Senior Subordinated Notes due 2004, at 104.875% of principal amount. On October
15, 1997, the Company redeemed all $100 million aggregate principal amount of
the 9.95% Senior Subordinated Notes due 2004, at 104.975% of principal amount.
These redemptions were funded by borrowings under the Company's Bank Credit
Agreement. The results of all the above refinancing actions include both a
reduction of indebtedness and lower overall interest rates. The favorable effect
on annual interest expense amounts to approximately $80 million, based upon the
1996 pro forma calculations.
In connection with the BTR Transaction, the Company entered into the Amended
Bank Credit Agreement, which provides for a $2.5 billion term loan and a $4.5
billion revolving credit facility. The Term Loan is due by October 30, 1999, and
the Revolving Credit Facility matures on December 31, 2001. The Company intends
to repay a portion of the Term Loan with the proceeds from the Offerings. The
Company anticipates that cash flow from its operations and from utilization of
credit available through December 2001 under the Amended Bank Credit Agreement
will be sufficient to fund its operating and seasonal working capital needs,
debt service and other obligations. The Company faces additional demands upon
its liquidity for asbestos-related payments. Based on the Company's expectations
regarding favorable trends which should lower its aggregate payments for
lawsuits and claims and its expectation of the collection of its insurance
coverage and reimbursement for such lawsuits and claims, and also based on the
Company's expected operating cash flow, the Company believes that the payment of
any deferred amounts of previously settled or otherwise determined lawsuits and
claims, and the resolution of presently pending and anticipated future lawsuits
and claims associated with asbestos, will not have a material adverse effect
upon the Company's liquidity on a short-term or long- term basis. See "Risk
Factors--Leverage; Restrictive Debt Covenants."
YEAR 2000
The Company uses a significant number of computer software programs and
operating systems across its entire organization, including applications used in
financial business systems, manufacturing, and various administrative functions.
To the extent that the Company's software applications contain source code that
is unable to appropriately interpret the upcoming calendar year 2000 and beyond,
modification or replacement of such applications will be necessary. The Company
has initiated a review of its computer systems and programs to identify those
that are not Year 2000 compliant. Key systems and programs, including those that
interact with customers and suppliers, are being assessed and plans are being
developed to address and implement required system and program modifications by
December 31, 1999. The Company also has begun to address whether significant
customers and suppliers may have Year 2000 compliance issues which will affect
their interaction with the Company. As part of its integration activities, the
Company will also extend its assessment of key systems and programs to those
used in BTR Packaging. The cost of implementing required system changes is not
expected to be material to the Company's consolidated financial statements. No
assurance can be given, however, that all of the Company's systems, the systems
of acquired businesses, and those of significant customers and suppliers, will
be Year 2000 compliant and that the failure to achieve Year 2000 compliance will
not have a material adverse effect on the Company's operations.
S-33
<PAGE>
BUSINESS
The Company is one of the world's leading manufacturers of packaging
products and is the largest manufacturer of glass containers in the United
States, North America, South America and India and the second largest in Europe.
With the Acquisition, the Company is also the sole manufacturer of glass
containers in Australia and New Zealand. Approximately one of every two glass
containers made worldwide is made by the Company, its affiliates or licensees.
The Company is also a market leader in the plastic containers and closures
segments of the rigid packaging market in North America. The Acquisition has
increased the range of products through which the Company provides plastics
packaging to its customers, particularly in North America. The Acquisition also
expanded the Company's international plastic operations in several parts of the
world, including the Asia-Pacific region, Latin America, Europe and the Middle
East. In 1992, the first full year following the Company's initial public
offering of its Common Stock, the Company reported earnings from continuing
operations of $78.3 million, or $0.66 per share (basic). In 1997, reported
earnings from continuing operations were $272.4 million, or $2.03 per share
(basic). Excluding the effect of certain unusual items, 1997 earnings from
continuing operations were $1.97 per share (basic).
In 1997, on a pro forma basis after giving effect to the Acquisition, the
Company's international glass container operations contributed approximately
$2.4 billion, or 41%, of net sales, and its domestic glass container operations
contributed approximately $1.8 billion, or 30% of net sales. In the United
States, the Company has an approximate 45% share of the U.S. glass container
segment of the rigid packaging market. The Company's plastics packaging
business, which consists of plastic containers, plastic closures, plastic
prescription containers, labels, and multipack plastic carriers for beverage
containers, contributed approximately $1.7 billion, or 29% of the Company's net
sales in 1997, on a pro forma basis after giving effect to the Acquisition. The
Company competes in the rigid packaging market by emphasizing total package
supply (i.e. bottle, label, and closure system), diversified market positions,
proprietary technology and products, new package development and packaging
innovation.
The Company believes it is the technological leader in the worldwide glass
and plastics packaging segments of the rigid packaging market and the low-cost
producer in most segments in which it competes. Over the past five years, the
Company has invested more than $265 million in research, development and
engineering and more than $1.5 billion in capital expenditures (excluding
acquisition expenditures) to increase capacity in key locations, commercialize
its technology into new products and improve productivity. Through its
investments in capital equipment, processes and engineering for both its glass
and plastics businesses, the Company strives to increase machine productivity,
improve process quality and control costs. By utilizing a total-system approach
to production technology and process control improvements, the Company has been
able to achieve significant annual machine and labor productivity gains. As a
result, the Company believes it is able to maintain a service-based and
cost-based competitive advantage over most of its major competitors. The
Company's technical leadership also provides significant licensing opportunities
in the growing international glass segment of the rigid packaging market.
GENERAL DEVELOPMENT OF BUSINESS
In February 1997, the Company completed the acquisition of 79% of AVIR, the
largest manufacturer of glass containers in Italy and the Czech Republic, and
the fourth largest in Spain. In addition to purchasing this controlling interest
pursuant to an acquisition agreement, the Company acquired an additional 20%
interest through public tender offers completed during the second half of 1997.
Total purchase cost for AVIR was approximately $586 million. AVIR has 15
manufacturing facilities throughout Italy and two manufacturing facilities in
each of the Czech Republic and Spain. The AVIR operations contributed over $500
million to 1997 consolidated sales.
Also in February 1997, the Company acquired certain assets of one of its
major competitors in the U.S. glass container segment of the rigid packaging
industry, Anchor Glass Container Corporation, which
S-34
<PAGE>
had filed for protection under Chapter 11 of the United States Bankruptcy Code.
The acquired assets included two glass container manufacturing facilities and
the assumption of contractual agreements with a major U.S. brewer, including a
partnership interest in a glass container manufacturing facility. The total
purchase cost was approximately $125 million plus the assumption of certain
liabilities.
During the second quarter of 1997, the Company implemented a refinancing
plan designed to reduce interest expense, reduce the amount of long-term debt,
and improve financial flexibility. The refinancing plan, which was completed on
October 15, 1997, included a $1.2 billion increase in the borrowing capacity
under the Company's Bank Credit Agreement to a total of $3.0 billion, the sale
of 16,936,100 shares of Common Stock, par value $.01 per share, for net proceeds
of $464.2 million, the issuance of $600 million of the Other Senior Notes at an
average interest rate of approximately 8%, and the retirement of approximately
$1.9 billion of higher cost debt. The sale of the shares of Common Stock and the
issuance of the Other Senior Notes were made pursuant to public offerings.
Since 1991, excluding the Acquisition, the Company has acquired 11 glass
container companies serving emerging markets and eight plastic packaging
operations. These acquisitions are consistent with the Company's strategy to
maintain leadership in glass and plastic packaging and to pursue revenue and
earnings growth opportunities around the world.
GLASS CONTAINERS INDUSTRY SEGMENT
The Company is a leading manufacturer of glass containers throughout the
world. The Company is the largest maker of glass containers in the United
States, North America, South America and India and a leading manufacturer of
glass packaging in Europe. With the Acquisition, the Company has leading market
positions in Australia and New Zealand and operations in the developing markets
of Asia, including China and Indonesia. The Company believes that its internally
developed machines are significantly more efficient and productive than those
used by its competitors, making it the low-cost manufacturer and a recognized
technological leader in the industry.
In addition to the Company's consolidated subsidiaries and BTR Packaging,
the Company has technical assistance agreements with 19 different companies in
19 countries. These agreements, which cover areas ranging from manufacturing and
engineering assistance to support in functions such as marketing, sales, and
administration, allow the Company to participate in the worldwide growth of the
glass container industry. The Company believes these associations and its
technical expertise will afford it opportunities to participate in the glass
business in regions of the world where the Company does not currently have a
presence.
PRODUCTS AND SERVICES
Glass containers are produced in a wide range of sizes, shapes and colors
for beer, food, tea, fruit juice, soft drinks, liquor, wine, wine coolers and
pharmaceuticals. The Company has been a leader in product innovation,
introducing products including long neck nonreturnable beer bottles, and in
developing containers for teas, juices, food, soft drinks and wine coolers.
The Company's product development efforts in glass containers are aimed at
providing custom designed packaging systems to customers and consumers. Product
lines designed to complement glass containers include product extensions related
to single service packages for teas, juices and soft drinks and innovative
secondary packaging systems such as closures, carriers and labeled containers.
CUSTOMERS
Beer, food (which include juices and teas), liquor (i.e. distilled spirits)
and wine producers provide the majority of industry demand for U.S. glass
containers. In addition to these producers, international glass container
customers include soft drink bottlers. In the regions where the Company has
operations, it has
S-35
<PAGE>
leading positions with major producers of these products, as well as strong
positions with producers of other products. The Company believes its position
gives it the ability to sustain market share and take advantage of new
opportunities and areas of growth within each customer group.
Most glass production is sold to customers under arrangements with terms
varying from several months to several years which specify estimated quantities
to be shipped as a percentage of the customers' total annual shipment
requirements. Containers are typically scheduled for production in response to
customers' orders for their quarterly requirements.
MARKETS AND COMPETITIVE CONDITIONS
The Company has glass container operations located in 21 countries, and the
principal markets for the Company's glass products are the United States, Latin
America, Europe and Asia-Pacific. The Company has the leading share of the glass
container segment of the United States beer and food (including juices and teas)
packaging market. Excluding E & J Gallo Winery Inc., which manufactures its own
containers, the Company believes it is the leading supplier of glass for wine
and wine coolers. Internationally, the Company is the leading producer of glass
containers in most of the geographic markets in which it is located.
The Company's glass products compete on the basis of quality, service and
price with other forms of rigid packaging, principally aluminum and steel cans,
plastic bottles and paper, as well as glass containers produced by other large,
well-established manufacturers. The principal competitors producing glass
containers within the U.S. market are Ball-Foster Glass Container Co., L.L.C., a
wholly-owned subsidiary of Paris-based Saint-Gobain ("Ball-Foster"), and Anchor
Glass Container Corporation, most of the assets of which were purchased by
Canadian-based Consumers Packaging, Inc. in early 1997. The principal competitor
producing glass containers outside the U.S. market is Saint-Gobain. The
principal competitors producing metal containers are American National Can
Company, Ball Corporation, Crown Cork & Seal Company, Inc., Reynolds Metals
Company, and Silgan Corporation. In the metal container market, no one
competitor is dominant. The principal competitors supplying plastic containers
are Continental Plastics Containers, Inc. (a subsidiary of Suiza Foods
Corporation), Graham Packaging Co., Plastipak Packaging, Inc., and Silgan
Corporation. In the plastic containers market, no one competitor is dominant.
METHODS OF DISTRIBUTION
Due to the significance of transportation costs and the importance of timely
delivery, manufacturing facilities are located close to customers. Most of the
Company's glass container products are shipped by common carrier to customers
within a 250-mile radius of a given production site.
DOMESTIC GLASS OPERATIONS
At December 31, 1997, the Company had an approximate 45% share of the glass
container category of the U.S. rigid packaging market. Domestically, the Company
operates 22 glass container manufacturing facilities, a sand plant and two
machine shops which manufacture high-productivity glass-making machines.
Marketing under the trade name Owens-Brockway, the Company believes that its
1997 U.S. glass container sales were significantly higher than the sales of its
nearest U.S. glass container competitor, Ball-Foster.
Unit shipments in the U.S. to brewers and food producers, including
producers of juices and teas, approximated 90%, 90%, and 87% of the Company's
total U.S. glass container unit shipments for 1997, 1996, and 1995,
respectively.
During 1997, total glass container industry shipments within the United
States rigid packaging market were slightly below 1996 shipment levels.
Shipments declined in 1997 as a result of lower demand for food containers,
including tea and juice bottles, partially offset by increased shipments of beer
containers. The
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Company's share of the United States glass container market increased several
percentage points during this time.
During 1997, closings of four U.S. glass container plants and one in Canada
were initiated by companies operating in the U.S. glass container industry. In
1998, the Company expects glass containers' share of the United States rigid
packaging market to remain relatively stable compared to 1997 levels and that
the Company will maintain its share of the glass container segment due in part
to the Company's ongoing improvement in operating efficiencies and its
technological leadership.
The glass container industry in the United States continues to recycle used
glass containers into new glass containers. The Company is an important part of
this effort and continues to melt substantial tonnage of recycled glass in its
glass furnaces. The infrastructure for recycling glass also supplies recycled
glass containers to producers other than those in the glass container industry
for use in the manufacture of secondary products (i.e. fiberglass and roadway
material manufacturers). Glass recycling helps relieve the burden on the
nation's landfills, while significantly reducing the need for virgin materials.
Recycling also results in energy savings and reductions in air emissions. The
Company has no technological barriers to using all of the recycled glass it can
reasonably expect to obtain from public/private collection programs as long as
such glass meets incoming material quality standards.
INTERNATIONAL GLASS OPERATIONS
The Company has added to its international operations by acquiring glass
container companies with leading positions in growing or established markets,
increasing capacity at selected foreign affiliates, and maintaining the global
network of glass container companies that license the Company's technology. With
the Acquisition, the Company has significant ownership positions in companies
located in 19 foreign countries. Most of the Company's international glass
affiliates are the leading container manufacturers in their respective
countries, producing a full line of containers for the beer, wine, liquor, food,
fruit juice, soft drink, drug and chemical industries. Some of these companies
also produce molds, mold parts, sand and feldspar, limestone, machines and
machine parts, glass insulators, rolled glass, sheet glass and glass tableware.
The Company's principal international glass affiliates are located in Latin
America, Europe and the Asia-Pacific region.
Outside of the United States, unit shipments of glass containers have grown
substantially in recent years. International glass operations are benefiting
from increased consumer spending power, increased privatization of industry, a
favorable climate for foreign investment, and global expansion programs by major
customers. The lowering of trade barriers has resulted in healthier economies,
rising standards of living, and growing demand for consumer products and quality
packaging in developing countries. The increasing demand for quality packaging
products in developing countries, where per capita glass container consumption
is low, but rising, continues to create growth opportunities. This is reinforced
by the fact that in many developing countries glass has a significant cost
advantage over plastic and metal containers. Technologies which have produced
productivity improvements in the Company's United States glass container
operations are also being applied to the operations of foreign affiliates. The
Company is continuing to pursue additional strategic alliances with
international partners whose markets are growing and whose manufacturing
operations can be enhanced by the Company's state-of-the-art technology and
equipment, which enables such operations to improve quality, increase
productivity, reduce bottle weights, and decrease energy consumption. Revenues
generated in countries where the Company does not have a direct ownership
position may also provide a benefit to the Company in the form of royalties tied
to sales volume of the Company's licensees.
PLASTICS PACKAGING INDUSTRY SEGMENT
The Company is a leading plastics packaging manufacturer in the United
States. The Company is the market leader in most plastic segments in which it
competes. Most of the operations of this segment are
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located in the United States. As a result of the Acquisition, the Company's
international operations have expanded to Australia, New Zealand, Latin America,
South America, Europe, China and Saudi Arabia. The Company's Plastics Packaging
segment is comprised of four business units.
PLASTIC CONTAINERS
This unit, with 48 factories worldwide, manufactures rigid, semi-rigid and
multi-layer plastic containers for a wide variety of uses, including food and
beverages, household products, personal care products, health care products, and
chemicals and automotive products.
CLOSURE AND SPECIALTY PRODUCTS
This unit, with 14 manufacturing facilities, develops and produces closures
and closure systems which incorporate functional features such as tamper
evidence, child resistance and dispensing. In addition, this unit's diverse
product line includes trigger sprayers, finger pumps, and lotion pumps, as well
as metal closures and finger pumps for the fragrance and cosmetic industry. In
the United States, the Company has a sole license for Alcoa's technology for
compression molded, tamper evident, thermoplastic closures. This unit also
manufactures custom injection molded products, such as deodorant canisters and
toothpaste dispensers.
PRESCRIPTION PRODUCTS
The Company's Prescription Products unit manufactures prescription
containers. These products are sold primarily to drug wholesalers, major drug
chains and the government. Containers for prescriptions include plastic and
glass ovals, vials, rounds, squares and ointment jars. The only other major
producer in the plastic containers segment of prescription drug packaging is
Kerr Group, Inc.
LABEL AND CARRIER PRODUCTS
The broad line of labels produced by this unit includes polyethylene labels
for in-mold labeling (IML) and laminated labels for beverage containers. The
proprietary Contour-Pak-Registered Trademark- plastic carrier line for bottles
is also produced by this unit. This carrier line is predominantly used as
six-pack and four-pack carriers for iced teas and other fruit drinks.
MARKETS
Major markets for these units include the food and beverage industries,
household products, personal care products and health care products.
The plastics segment of the rigid packaging market is competitive and
fragmented. A large number of competitors exist on both a national and regional
basis. The Company competes by emphasizing total package supply (i.e. bottle,
label, and closure system), diversified market positions, proprietary technology
and products, new package development and packaging innovation. The market for
closures is divided into various categories in which several suppliers compete
for business on the basis of price and product design.
The Company's strategy has been to compete in the plastics packaging market
where customers seek to use distinctive packaging to differentiate their
products among a growing array of choices offered to consumers. The Company
believes it is a leader in technology and development of custom products and has
a leading market position for such products. The Company believes its plastics
packaging business has a competitive advantage as a result of one of the
shortest new product development cycles in the industry, enabling the Company to
provide superior service in the service-sensitive custom plastic container
market. The Company's product innovations in plastics packaging include in-mold
labeling for custom-molded bottles, Contour-Pak carriers for 4, 6 and 8-pack
applications, multilayer structured bottles containing post consumer recycled
resin, Flex-Band-Registered Trademark- and PlasTop-Registered Trademark-
tamper-evident closures, Clic Loc-Registered Trademark- child-resistant
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closures and Pharmacy Mate-Registered Trademark- reversible prescription
container closures. In addition, BTR Packaging's custom PET product innovations
include the hotfill container, which maintains structural integrity at high
temperatures; the refillable container; the freestanding footed carbonated soft
drink container, which has become the industry standard; the multi-layer
container, which significantly enhances shelf life; and the "wide-mouth" PET
container, which is capable of accepting metal ends.
Recycling content legislation, which has been enacted in several states,
requires that a certain specified minimum percentage of recycled plastic be
included in new plastic products. The Company has met such legislated standards
in part due to its material and multi-layer process technology.
In addition to the Company's consolidated subsidiaries and BTR Packaging,
the Company's Plastics Packaging segment has technical assistance agreements or
cross-licenses with 12 different companies in seven countries. These agreements,
which cover areas ranging from manufacturing and engineering assistance to
support in functions such as marketing, sales, and administration, allow the
Company to participate in the worldwide growth of the plastics packaging
industry.
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BTR PACKAGING
BTR Packaging manufactures glass and plastic containers and closures
principally for the food and beverage markets. BTR Packaging's 1997 sales were
$1.2 billion and Adjusted EBITDA was $413 million, resulting in an Adjusted
EBITDA margin of 34%.
GLASS BUSINESS
BTR Packaging's glass business, headquartered in Melbourne, Australia, is
the largest manufacturer of glass containers in the Asia-Pacific region, with
nine glass plants and a combined capacity of over 1.5 billion tons per year from
22 operating furnaces. Over 900 different containers are produced to serve six
principal markets: beer, wine, food, spirits, soft drinks and fruit juice. BTR
Packaging has had access to the research and development efforts and technology
of the Company through a technology licensing agreement for more than 30 years.
In 1997, BTR Packaging's glass business had sales of $652 million and Adjusted
EBITDA of $232 million, resulting in an Adjusted EBITDA margin of 36%.
AUSTRALIA AND NEW ZEALAND
BTR Packaging began producing glass containers in 1872 in Melbourne and
currently operates five plants in Australia and one plant in New Zealand, all
located close to major urban centers. As the only major glass container producer
in Australia and New Zealand, it has the leading market position in the glass
container segment of the rigid packaging market. In Australia, other activities
include the sale of glass tableware and the mining and sale of industrial
minerals used primarily in the glass industry.
CHINA AND INDONESIA
BTR Packaging operates the two largest glass container plants in China in
Shanghai and Guangdong, through two joint ventures, both of which are majority-
owned. Historically, these two plants have been the major suppliers of glass
containers for beer in their respective regions. BTR Packaging also operates a
plant in Indonesia through a joint venture, in which it holds a majority
interest, and serves a wide-ranging domestic market including, beer, tea,
sauces, soft drinks and pharmaceuticals products. In addition to supplying the
domestic market in Indonesia, it exports approximately 20% of its total
production to Australia and New Zealand.
PRODUCTS AND CUSTOMERS
BTR Packaging produces a wide range of container shapes, sizes and colors
for beer, wine, food, spirits, soft drinks and fruit juice containers and has
been a major supplier to many high-volume customers in the regions it serves,
including Anheuser-Busch, Foster's Brewing Group, Lion Nathan, Southcorp
Holdings, Coca-Cola Amatil and Cadbury Schweppes. These relationships are
supported by leading technology, product quality, product variety and customer
service. The Company believes that the product design skills of BTR Packaging
have resulted in additional business from the launch of customers' new products
such as the new glass design recently developed in Australia for "Foster's
Extra" brand beer.
MARKETS
BTR Packaging primarily serves beverage and food customers in each of the
regions in which it operates. The Australian rigid packaging market is
characterized by the stability of its food and beverage industries. For most
products, glass containers compete with a variety of substitute packaging
products such as aluminum cans, plastic, PET bottles and paper laminate
composites. The glass container segment of the rigid packaging market in
Australia is comprised principally of beer, wine and spirits and food. The New
Zealand glass container segment has an industry structure and market dynamics
similar to those of Australia, although imported products supply a larger
portion of demand.
In China, rising standards of living and a growing demand for consumer
products create growth opportunities. The combination of strong demand for
high-quality beer containers from multinational brands, which continue to expand
in China, and the acquired glass business' technological leadership,
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positions it for growth. In Indonesia, similar trends in consumer demand and the
ongoing conversion from refillable to non-refillable containers should also
provide growth opportunities.
PLASTICS BUSINESS
BTR Packaging's plastics business is a global business with 34 factories in
eight countries and interests in four joint ventures in Brazil, Saudi Arabia and
China. It holds the leading position in the custom PET market in North America,
Australia and New Zealand and is the leading manufacturer of rigid plastic
containers, tubes and trays in Australia. In 1997, BTR Packaging's plastics
business had sales of $565 million and Adjusted EBITDA of $181 million,
resulting in an Adjusted EBITDA margin of 32%.
PRODUCTS AND CUSTOMERS
BTR Packaging focuses primarily on the custom PET container market. Custom
PET containers are produced for applications that require special processing to
ensure heat resistance and enhanced barrier protection. In the United States,
BTR Packaging serves a wide variety of the custom PET packaging end uses,
primarily in the food and beverage industries.
In Australia, BTR Packaging is also a leading producer of (i) rigid plastic
containers and laminated tubes for the packaging of motor oil, food, personal
care, laundry and industrial chemicals; (ii) extruded and thermoformed tubes and
trays for the packaging of meat, processed foods, electronics and horticultural
products; and (iii) closures for beer, food and soft drinks containers.
BTR Packaging is a major supplier to a number of international food and
beverage companies, including Coca-Cola, Heinz, Quaker Oats and Very Fine. The
broad geographic coverage of its plastics operations enables it to be close to
its customers and serve its customers globally; it produces PET bottles for
Quaker Oats in the United States, Mexico and Australia and for Coca-Cola in
Mexico, Saudi Arabia, Hungary, China, New Zealand and Brazil.
MARKETS
The United States custom PET market is comprised principally of food, juices
and isotonics (sports drinks), household and personal care products. The main
competitors in this product segment include Schwalbach-Lubeca, Crown Cork and
Seal, Plastipak and Graham Packaging.
The Company believes the plastics business of BTR Packaging will benefit in
the United States from the growth of custom PET as drink manufacturers continue
to differentiate their products through packaging. Further growth opportunities
should result from the development of markets for custom PET packaging
applications for small juice, small carbonated soft drinks and potentially, cold
filtered beers. The Company believes that BTR Packaging's proprietary technology
for barrier containers that can meet the requirements of custom PET packaging
for small juice, small carbonated soft drinks and cold filtered beers, should
give the Company a competitive advantage if commercial demand develops.
TECHNOLOGY AND PRODUCT DEVELOPMENT
BTR Packaging is the leader in the development of custom PET container
technology with over 300 patents worldwide. These technologies are a critical
component of its product portfolio. In the United States, BTR Packaging is the
largest supplier of hotfill PET containers, which maintain the structural
integrity at high temperatures, due in part to its proprietary process which
permits the production of hotfill containers at competitive prices. In addition,
BTR Packaging developed the first refillable PET container, which can be
refilled up to 30 times; the world's first freestanding footed carbonated soft
drink container, which has become the industry standard as the technology has
been licensed worldwide; the first "wide-mouth" PET container, which is capable
of accepting metal ends to create products such as the PET tennis ball
container; and the first multi-layer barrier PET container, which significantly
enhances shelf life.
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DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes (referred to
in the accompanying Prospectus as the "Debt Securities") supplements, and to the
extent inconsistent therewith, replaces the descriptions of the general terms
and provisions of the Debt Securities set forth in the accompanying Prospectus,
to which description reference is hereby made.
The Notes are to be issued under an Indenture, to be dated as of the Closing
Date (the "Indenture"), between the Company, as issuer, and The Bank of New
York, as Trustee ("the Trustee"), and will constitute a separate series of Debt
Securities described in the accompanying Prospectus. The following summary of
certain provisions of the Indenture does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all the provisions
of the Indenture, including the definitions of certain terms therein and those
terms made a part thereof by reference to the Trust Indenture Act of 1939, as
amended. As used in this "Description of the Notes," all references to the
Company shall mean Owens-Illinois, Inc., excluding, unless the context otherwise
requires or as otherwise expressly stated, its subsidiaries. Whenever this
"Description of the Notes" refers to particular defined terms of the Indenture
that are not otherwise defined herein, such defined terms are incorporated
herein by reference. For definitions of certain capitalized terms used in the
following summary, see "--Certain Definitions."
GENERAL
The Notes will be senior unsecured obligations of the Company, limited to
$350 million aggregate principal amount, and will mature on May 15, 2005.
The Notes initially will bear interest at the rate shown on the front cover
of this Prospectus Supplement from the Closing Date or from the most recent
Interest Payment Date to which interest has been paid or provided for, payable
semiannually (to Holders of record at the close of business on the May 1 or
November 1 immediately preceding the Interest Payment Date) on May 15 and
November 15 of each year, commencing November 15, 1998.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, the City of New York (which initially will
be the corporate trust office of the Trustee located in New York, New York);
PROVIDED that, at the option of the Company, payment of interest may be made by
check mailed to the address of each Holder as such address appears in the
Security Register.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 of principal amount and any integral multiple thereof.
No service charge will be made for any registration of transfer or exchange of
Notes, but the Company may require payment of a sum sufficient to cover any
transfer tax or other similar governmental charge payable in connection
therewith.
The Notes will be issued in the form of one or more Global Securities as
described under "Description of Debt Securities--Global Debt Securities" in the
accompanying Prospectus, and will be registered in the name of The Depository
Trust Company or its nominee.
OPTIONAL REDEMPTION
The Notes will not be redeemable prior to maturity.
RANKING
The Notes will be senior unsecured indebtedness of the Company, and will
rank PARI PASSU in right of payment with all existing and future senior
unsecured indebtedness of the Company, and senior in right of payment to all
subordinated indebtedness of the Company. The Notes will be effectively
subordinated to all liabilities of the Company's subsidiaries, including trade
payables. At March 31, 1998, on a pro forma
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basis, the Company (excluding its subsidiaries) would have had approximately
$5.0 billion of indebtedness outstanding, and the Company's subsidiaries would
have had approximately $2.7 billion of liabilities. See "Risk Factors--Leverage;
Restrictive Debt Covenants," "--Holding Company Structure," "--Pledge
Arrangements" and "Consolidated Capitalization."
SINKING FUND
The Notes will not be subject to the operation of any sinking fund.
COVENANTS
The Indenture will contain, among others, the following covenants:
LIMITATION ON TRANSACTIONS WITH AFFILIATES
The Indenture will provide that the Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, make any loan, advance,
guaranty or capital contribution to, or for the benefit of, or sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or for the
benefit of, or purchase or lease any property or assets from, or enter into or
amend any contract, agreement, or understanding with, or for the benefit of, any
Affiliate of the Company (each an "Affiliate Transaction"), involving aggregate
consideration in excess of $5.0 million for any one transaction, except on terms
that are no less favorable to the Company or the relevant Subsidiary, as the
case may be, than those that could have been obtained in a comparable
transaction on an arm's length basis from a person that is not such a holder or
Affiliate.
The foregoing limitation does not limit, and shall not apply to, (i)
transactions (x) in respect of which the Company or such Subsidiary delivers to
the Trustee a written opinion of a nationally recognized investment banking,
accounting, appraisal or consulting firm stating that the transaction is fair to
the Company or such Subsidiary from a financial point of view or (y) approved by
a majority of the disinterested members of the Board of Directors of the
Company, or if there are no such directors, a majority of the directors of the
Company, (ii) the payment of reasonable and customary regular fees paid to, and
indemnity provided on behalf of, officers, directors, employees and consultants
to Company or its Subsidiaries, (iii) payments or loans to officers, directors
and employees of the Company for business or personal purposes and other loans
and advances to such officers, directors and employees for travel,
entertainment, moving and other relocation expenses made in the ordinary course
of business of the Company and its Subsidiaries, (iv) the payment by the Company
or any of its Subsidiaries to KKR and its Affiliates of (1) fees for any
financial, advisory, financing, underwriting or placement services or in respect
of other investment banking activities, including without limitation, in
connection with acquisitions or divestitures, which payments are approved by a
majority of the Board of Directors of the Company and (2) annual management,
consulting and advisory fees and related expenses, (v) any agreement in effect
as of the Closing Date or any amendment thereto (so long as such amendment is
not disadvantageous to the Holders in any material respect) or any transaction
contemplated thereby, (vi) transactions with customers, clients, suppliers or
purchasers or sellers of goods or services, in each case in the ordinary course
of business which are fair to the Company or its Subsidiaries, in the reasonable
determination of the Board of Directors of the Company or the senior management
thereof and (vii) transactions between or among any of the Company and its
Subsidiaries.
LIMITATION ON LIENS
The Indenture will provide that the Company will not, and will not permit
any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien on
any of its assets or properties of any character, or any shares of Capital Stock
or Indebtedness of any of its Subsidiaries held by the Company or any of its
Subsidiaries in order to secure any Indebtedness of the Company, without making
effective provision for
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all of the Notes and all other amounts due under the Indenture relating to the
Notes to be directly secured equally and ratably with (or, if the Indebtedness
to be secured by such Lien is subordinated in right of payment to the Notes,
prior to) the Indebtedness secured by such Lien.
The foregoing limitation does not apply to: (i) Liens existing on the
Closing Date; (ii) Liens granted after the Closing Date on any assets or
properties of the Company or its Subsidiaries, or any shares of Capital Stock or
Indebtedness of any of its Subsidiaries held by the Company or any of its
Subsidiaries, securing Indebtedness of the Company created in favor of the
Holders; (iii) Liens securing Indebtedness which is incurred to refinance
Indebtedness which is secured by Liens permitted to be incurred under the
Indenture; PROVIDED that such Liens do not extend to or cover any property or
assets of the Company or any of its Subsidiaries other than the property or
assets securing the Indebtedness being refinanced; or (iv) Permitted Liens.
INVESTMENTS IN UNRESTRICTED SUBSIDIARIES
The Indenture will provide that the Company will not make, and will not
permit any of its Subsidiaries to make, any Investments in Unrestricted
Subsidiaries if, at the time thereof, the aggregate amount of such Investments
would exceed the sum of $150,000,000.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture will provide that the Company may not consolidate with or
merge with or into, or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its property or assets to any person
unless (a) the Company is the surviving corporation or the entity or the person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized and existing under
the laws of the United States, any state thereof or the District of Columbia;
(b) the entity or person formed by or surviving any such consolidation or merger
(if other than the Company) or the entity or person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of the Company under the Notes and the
Indenture; and (c) immediately prior to and after giving effect to the
transaction, no Default (as defined in the Indenture) or Event of Default shall
have occurred and be continuing. Notwithstanding the foregoing, any Subsidiary
of the Company may consolidate with, merge into or transfer all or part of its
properties and assets to the Company.
PAYMENTS FOR CONSENT
The Indenture will provide that neither the Company nor any Subsidiary of
the Company shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
the Notes for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of that Indenture or the Notes unless such consideration
is offered to be paid or agreed to be paid to all Holders of the Notes which so
consent, waive or agree to amend in the time frame set forth in solicitation
documents relating to such consent, waiver or agreement.
DEFAULTS
The following are Events of Default with respect to the Notes under the
Indenture: (a) failure to pay the principal of, or premium, if any, on such
Notes when due and payable; (b) failure to pay any interest on such Notes when
due, continued for 30 days; (c) failure to perform or observe any other
agreements of the Company in such Indenture continued for 60 days after written
notice; (d) failure to comply with the provisions of the Indenture applicable to
consolidation, merger and sale of assets of the Company; (e) acceleration of
$125,000,000 or more, individually or in the aggregate, in principal amount of
Indebtedness of the Company under the terms of the instrument under which such
indebtedness is issued
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or secured, except as a result of compliance with applicable laws, orders or
decrees, if such Indebtedness shall not have been discharged or such
acceleration is not annulled within ten days after written notice; and (f)
certain events of bankruptcy, insolvency, or reorganization.
If an Event of Default with respect to outstanding Notes (other than an
Event of Default relating to certain events of bankruptcy, insolvency or
reorganization) shall occur and be continuing, either the Trustee or the holders
of at least 50% in principal amount of the outstanding Notes by notice, as
provided in the Indenture, may declare the unpaid principal amount of, and any
accrued and unpaid interest on, all Notes to be due and payable immediately.
However, at any time after a declaration of acceleration with respect to the
Notes has been made, the holders of a majority in principal amount of the
outstanding Notes may, under certain circumstances, rescind and annul such
acceleration if the rescission would not conflict with any judgment or decree
and if all existing Events of Default have been cured or waived except
nonpayment of principal (or such lesser amount) or interest that has become due
solely because of the acceleration. For information as to waiver of defaults,
see "Description of Debt Securities--Modification and Waiver" in the
accompanying Prospectus.
The Indenture will provide that, subject to the duty of the Trustee during
an Event of Default to act with the required standard of care, the Trustee will
be under no obligation to exercise any of its rights or powers under the
applicable Indenture at the request or direction of any of the holders, unless
such holders shall have offered to the Trustee reasonable security or indemnity.
Subject to certain provisions, including those requiring security or
indemnification of the Trustee, the holders of a majority in principal amount of
the outstanding Notes will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Notes.
The Company will be required to furnish to the Trustee under the Indenture
annually a statement as to the performance by the Company of its obligations
under that Indenture and as to any default in such performance.
DEFEASANCE
The provisions described under "Description of Debt Securities--Defeasance
of Debt Securities and Certain Covenants in Certain Circumstances" in the
accompanying Prospectus are applicable to the Notes. Each of the covenants
described under "--Covenants" may be subject to covenant defeasance.
MODIFICATION AND WAIVER
The provisions described under "Description of Debt Securities--Modification
and Waiver" in the accompanying Prospectus are applicable to the Notes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indenture which will be applicable to the
Notes. Reference is made to the Indenture for the full definition of all terms
as well as any other capitalized term used herein for which no definition is
provided.
"Affiliate" means, as applied to any person, any other person directly or
indirectly controlling, controlled by, or under common control with, that
person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that person, whether through the ownership of voting securities, by
contract or otherwise.
S-45
<PAGE>
"Capitalized Lease Obligation" means, as applied to any person, any lease of
any property (whether real, personal or mixed) by that person as lessee which,
in conformity with GAAP, is required to be accounted for as a capital lease on
the balance sheet of that person.
"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock.
"Closing Date" means the date on which the Notes are originally issued under
the Indenture.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means, subject to certain provisions of the Indenture, generally
accepted accounting principles set forth in the opinions and pronouncements of
the Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as approved by
a significant segment of the accounting profession, which are applicable to the
circumstances as of the Closing Date.
"Indebtedness" of any person means, without duplication, with respect to any
person, any indebtedness, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements with respect thereto) or representing the
balance deferred and unpaid of the purchase price of any property (including
pursuant to Capitalized Lease Obligations), except any such balance that
constitutes an accrued expense or trade payable, if and to the extent any of the
foregoing indebtedness would appear as a liability upon a balance sheet of such
person prepared in accordance with GAAP (but does not include contingent
liabilities which appear only in a footnote to a balance sheet), and shall also
include, to the extent not otherwise included, the guaranty by such person of
items which would be included within this definition, obligations in respect of
Currency Agreements and Interest Rate Agreements and the maximum fixed
repurchase price of any Redeemable Stock. For purposes of the preceding
sentence, the maximum fixed repurchase price of any Redeemable Stock which does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Redeemable Stock as if such Redeemable Stock were repurchased on
any date of determination, provided that if such Redeemable Stock is not then
permitted to be repurchased, the repurchase price shall be the book value of
such Redeemable Stock.
"Interest Rate Agreements" means the obligations of any person pursuant to
any interest rate swap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to protect such person or any of its
Subsidiaries against fluctuations in interest rates.
"Investment" means any direct or indirect advance, loan (other than advances
to customers in the ordinary course of business, which are recorded as accounts
receivable on the balance sheet of any person or its Subsidiaries) or other
extension of credit or capital contribution to (by means of any transfer of cash
or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
bonds, notes, debentures or other securities issued by any other person. For the
purposes of the definition of "Unrestricted Subsidiary" and the covenant
"Investments in Unrestricted Subsidiaries" (i) the amount of any "Investment"
shall be the fair market value of the net assets of any Subsidiary of the
Company at the time that such Subsidiary is designated an Unrestricted
Subsidiary and shall exclude the fair market value of the net assets of any
Unrestricted Subsidiary that is designated a Subsidiary of the Company and (ii)
any property transferred to or from any Unrestricted Subsidiary shall be valued
at fair market value at the time of such transfer, in each case as determined by
the Board of Directors of the Company in good faith.
S-46
<PAGE>
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation, any conditional sale or other
title retention agreement or lease in the nature thereof or any agreement to
give any security interest).
"Permitted Liens" means (i) Liens (including extensions and renewals
thereof) upon real or personal (whether tangible or intangible) property
acquired after the Closing Date, PROVIDED that (a) such Lien is created solely
for the purpose of securing Indebtedness incurred, (1) to finance the cost
(including the cost of improvement or construction) of the item of property or
assets subject thereto and such Lien is created prior to, at the time of or
within 12 months after the later of the acquisition, the completion of
construction or the commencement of full operation of such property or (2) to
refinance any Indebtedness previously so secured, (b) the principal amount of
the Indebtedness secured by such Lien does not exceed 100% of such cost and (c)
any such Lien shall not extend to or cover any property or assets other than
such item of property or assets and any improvements on such item; (ii) any
interest or title of a lessor in the property subject to any Capitalized Lease
Obligation or operating lease; (iii) Liens on property of, or on shares of
Capital Stock or Indebtedness of, any person existing at the time such person
becomes, or becomes a part of, the Company or any Subsidiary of the Company;
PROVIDED that such Liens do not extend to or cover any property or assets of the
Company or any Subsidiary of the Company other than the property or assets
acquired; (iv) Liens in favor of the Company or any Subsidiary of the Company;
(v) Liens securing reimbursement obligations with respect to letters of credit
that encumber documents and other property relating to such letters of credit
and the products and proceeds thereof; (vi) Liens encumbering customary initial
deposits and margin deposits, and other Liens that are either within the general
parameters customary in the industry and incurred in the ordinary course of
business, in each case, securing Indebtedness under Interest Rate Agreements and
Currency Agreements and forward contracts, options, future contracts, futures
options or similar agreements or arrangements designed solely to protect the
Company or any of its Subsidiaries from fluctuations in interest rates,
currencies or the price of commodities; (vii) Liens arising out of conditional
sale, title retention, consignment or similar arrangements for the sale of goods
entered into by the Company or any of its Subsidiaries in the ordinary course of
business of the Company and its Subsidiaries; (viii) Liens on or sales of
receivables; (ix) Liens securing the Company's obligations in respect of
bankers' acceptances issued or created to facilitate the purchase, shipment or
storage of inventory or other goods; and (x) in addition to any other Liens
permitted to be incurred pursuant to the Indenture, Liens securing Indebtedness
in an amount not to exceed $500 million.
"Redeemable Stock" means any equity security that by its terms or otherwise
is required to be redeemed prior to the stated maturity of the Notes, or is
redeemable at the option of the holder thereof at any time prior to the stated
maturity of the Notes.
"Subsidiary" means any corporation, association or other business entity of
which more than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any person or one or more of the other
Subsidiaries of that person or a combination thereof; PROVIDED that an
Unrestricted Subsidiary shall not be deemed to be a Subsidiary of the Company
for purposes of the Indenture.
"Unrestricted Subsidiary" means (1) any Subsidiary of the Company which at
the time of determination shall be an Unrestricted Subsidiary (as designated by
the Board of Directors of the Company, as provided below) and (2) any Subsidiary
of an Unrestricted Subsidiary. The Board of Directors may designate any
Subsidiary of the Company (including any newly acquired or newly formed
subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns, or holds any Liens on, any property of, the Company
or any other Subsidiary of the Company which is not a Subsidiary of the
Subsidiary to be so designated; PROVIDED that either (x) the fair market value
of the net assets of the Subsidiary to be so designated is $1,000 or less or (y)
if the fair market value of the net assets of such Subsidiary is greater than
$1,000, the amount of the Company's Investments in Unrestricted Subsidiaries at
the time of designation is less than $150,000,000. The Board of Directors may
designate any Unrestricted
S-47
<PAGE>
Subsidiary to be a Subsidiary. Any such designation by the Board of Directors
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the resolution of the Board of Directors giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain United States federal
income tax consequences of the acquisition, ownership and disposition of Notes
by a "Non-United States Holder" and does not deal with tax consequences arising
under the laws of any foreign, state, or local jurisdiction. Except where noted,
it deals only with Notes held as capital assets by Non-United States Holders. As
used herein, a "Non-United States Holder" is a person or entity that, for United
States federal income tax purposes, is not a citizen or resident of the United
States, a corporation or partnership created or organized under the laws of the
United States or a political subdivision thereof, an estate the income of which
is subject to United States federal income tax consequences regardless of its
source, or a trust which is subject to the supervision of a court within the
United States and the control of a United States person as described in Section
7701(a)(30) of the Internal Revenue Code of 1986, as amended (the "Code"), or
that otherwise is subject to United States federal income taxation on a net
basis in respect of the Notes.
This discussion is based on provisions of the Code, existing and proposed
regulations promulgated thereunder and administrative and judicial
interpretations thereof as of the date hereof, all of which are subject to
change. This discussion does not address all aspects of United States federal
income taxes and does not deal with foreign, state or local tax consequences
that may be relevant to Non-United States Holders in light of their personal
circumstances. Prospective investors who are Non-United States Holders are urged
to consult their tax advisors regarding the United States federal tax
consequences of acquiring, holding and disposing of the Notes, as well as any
tax consequences that may arise under the laws of any foreign, state, local or
other taxing jurisdiction.
An individual may, subject to certain exceptions, be deemed to be a resident
alien (as opposed to a non-resident alien) by virtue of being present in the
United States on at least 31 days in the calendar year and for an aggregate of
at least 183 days during a three-year period ending in the current calendar
(counting for such purposes all of the days present in the current year,
one-third of the days present in the immediately preceding year, and one-sixth
of the days present in the second preceding year). Resident aliens are subject
to United States federal income tax as if they were United States citizens and
residents.
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) no withholding of United States federal income tax will be required
with respect to the payment by the Company or any paying agent of principal
or interest on a Note owned by a Non-United States Holder, provided (i) that
the beneficial owner does not actually or constructively own 10% or more of
the total combined voting power of all classes of stock of the Company
entitled to vote within the meaning of Section 871(h)(3) of the Code and the
regulations thereunder, (ii) the beneficial owner is not a controlled
foreign corporation that is related to the Company through stock ownership,
(iii) the beneficial owner is not a bank whose receipt of interest on a Note
is described in Section 881(c)(3)(A) of the Code and (iv) the beneficial
owner satisfies the statement requirement (described generally below) set
forth in Section 871(h) and Section 881(c) of the Code and the regulations
thereunder;
(b) no withholding of United States federal income tax will be required
with respect to any gain or income realized by a Non-United States Holder
upon the sale, exchange, retirement or other disposition of a Note; and
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<PAGE>
(c) a Note beneficially owned by an individual who at the time of death
is a Non-United States Holder will not be subject to United States federal
estate tax as a result of such individual's death, provided that such
individual does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Company entitled to
vote within the meaning of Section 871(h)(3) of the Code and provided that
the interest payments with respect to such Note would not have been, if
received at the time of such individual's death, effectively connected with
the conduct of a United States trade or business by such individual.
To satisfy the requirement referred to in (a)(iv) above, the beneficial
owner of such Note, or a financial institution holding the Note on behalf of
such owner, must provide, in accordance with specified procedures, a paying
agent of the Company with a statement to the effect that the beneficial owner is
not a United States person. Currently, these requirements will be met if (1) the
beneficial owner provides his name and address, and certifies, under penalties
of perjury, that he is not a United States person (which certification may be
made on an Internal Revenue Service Form ("IRS") W-8 (or successor form)) or (2)
a financial institution holding the Note on behalf of the beneficial owner
certifies, under penalties of perjury, that such statement has been received by
it and furnishes a paying agent with a copy thereof. Under recently finalized
Treasury regulations (the "Final Regulations"), the statement requirement
referred to in (a)(iv) above may also be satisfied with other documentary
evidence for interest paid after December 31, 1999 with respect to an offshore
account or through certain foreign intermediaries.
If a Non-United States Holder cannot satisfy the requirements of the
"portfolio interest" exception described in (a) above, payments of interest made
to such Non-United States Holder will be subject to a 30% withholding tax unless
the beneficial owner of the Note provides the Company or its paying agent, as
the case may be, with a properly executed (1) IRS Form 1001 (or successor form)
claiming an exemption from (or a reduction in) withholding under the benefit of
an applicable tax treaty or (2) IRS Form 4224 (or successor form) stating that
interest paid on the Note is not subject to withholding tax because it is
effectively connected with the beneficial owner's conduct of a trade or business
in the United States. Under the Final Regulations, Non-United States Holders
will generally be required to provide IRS Form W-8 in lieu of IRS Form 1001 and
IRS Form 4224, although alternative documentation may be applicable in certain
situations. Moreover, under recently finalized Regulations, the benefit of an
applicable tax treaty may, in certain circumstances, and subject to significant
limitations under the Code, be claimed by the foreign partners of a foreign
partnership that holds the Notes. Foreign partners are urged to consult their
tax advisors to determine whether they are eligible to claim such benefits.
If a Non-United States Holder is engaged in a trade or business in the
United States and interest on the Note is effectively connected with the conduct
of such trade or business, the Non-United States Holder, although exempt from
the withholding tax discussed above, will be subject to United States federal
income tax on such interest on a net income basis in the same manner as if it
were a United States holder. In addition, if such holder is a foreign
corporation, it may be subject to a branch profits tax equal to 30% (or a lower
applicable treaty rate) of its effectively connected earnings and profits for
the taxable year, subject to adjustments. For this purpose, interest on a Note
will be included in such foreign corporation's earnings and profits.
Any gain or income realized upon the sale, exchange, retirement or other
disposition of a Note generally will not be subject to United States federal
income tax unless (i) such gain or income is effectively connected with a trade
or business in the United States of the Non-United States Holder, or (ii) in the
case of a Non-United States Holder who is an individual, such individual is
present in the United States for 183 days or more in the taxable year of such
sale, exchange, retirement or other disposition, and certain other conditions
are met.
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<PAGE>
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, no information reporting or backup withholding will be required
with respect to payments made by the Company or any paying agent to Non-United
States Holders if a statement described in (a)(iv) above has been received (and
the payor does not have actual knowledge that the beneficial owner is a United
States person).
In addition, backup withholding and information reporting will not apply if
payments of the principal and interest on a Note are paid or collected by a
foreign office of a custodian, nominee or other foreign agent on behalf of the
beneficial owner of such Note, or if a foreign office of a broker (as defined in
applicable Treasury regulations) pays the proceeds of the sale of a Note to the
owner thereof. If, however, such nominee, custodian, agent or broker is, for
United States federal income tax purposes, a United States person, a controlled
foreign corporation or a foreign person that derives 50% or more of its gross
income for certain periods from the conduct of a trade or business in the United
States, or, for taxable years beginning after December 31, 1999, a foreign
partnership in which one or more United States persons, in the aggregate, own
more than 50% of the income or capital interests in the partnership or a foreign
partnership which is engaged in a trade or business in the United States, such
payments will not be subject to backup withholding but will be subject to
information reporting, unless (1) such custodian, nominee, agent or broker has
documentary evidence in its records that the beneficial owner is not a United
States person and certain other conditions are met or (2) the beneficial owner
otherwise establishes an exemption.
Payments of principal and interest on a Note paid to the beneficial owner of
a Note by a United States office of a custodian, nominee or agent, or the
payment by the United States office of a broker of the proceeds of sale of a
Note, will be subject to both backup withholding and information reporting
unless the beneficial owner provides the statement referred to in (a)(iv) above
and the payor does not have actual knowledge that the beneficial owner is a
United States person or otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.
S-50
<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions set forth in the Underwriting
Agreement dated the date hereof, the Underwriters named below have severally
agreed to purchase, and the Company has agreed to sell to them, severally, the
respective principal amount of the Notes set forth opposite their respective
names below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF 7.15% SENIOR
NOTES
UNDERWRITER DUE 2005
- ------------------------------------------------------------------------ --------------------
<S> <C>
Morgan Stanley & Co. Incorporated....................................... $ 140,000,000
Credit Suisse First Boston Corporation.................................. 30,000,000
First Chicago Capital Markets, Inc. .................................... 30,000,000
Goldman, Sachs & Co. ................................................... 30,000,000
Lehman Brothers Inc. ................................................... 30,000,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated...................... 30,000,000
Salomon Brothers Inc ................................................... 30,000,000
Scotia Capital Markets (USA) Inc. ...................................... 30,000,000
--------------------
Total............................................................... $ 350,000,000
--------------------
--------------------
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Notes are subject to receipt
of an opinion of counsel and to certain other conditions. The Underwriters are
obligated to take and pay for all the Notes if any are taken.
The Underwriters propose initially to offer part of the Notes to the public
at the public offering price set forth on the cover page hereof and in part to
certain dealers at prices that represent a concession not in excess of .50% of
the principal amount of the Notes. Any Underwriter may allow, and such dealers
may reallow, a concession not in excess of .25% of the principal amount of each
series of Notes to certain other dealers. After the initial offering of the
Notes, the offering price and other selling terms may from time to time be
varied by the Underwriters. The Underwriters have agreed to reimburse the
Company for certain expenses incurred in connection with the Debt Offerings.
The Company does not intend to apply for listing of the Notes on a national
securities exchange, but has been advised by the Underwriters that they
presently intend to make a market in the Notes, as permitted by applicable laws
and regulations. The Underwriters are not obligated, however, to make a market
in the Notes and any such market making may be discontinued at the sole
discretion of the Underwriters. Accordingly, no assurance can be given as to the
liquidity of, or trading markets for, the Notes.
In order to facilitate the offering of the Notes, the Underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price of
the Notes. Specifically, the Underwriters may over-allot in connection with the
offering of the Notes, creating short positions in the Notes for their own
account. In addition, to cover over-allotments or to stabilize the price of the
Notes, the Underwriters may bid for, and purchase, Notes in the open market.
Finally, Morgan Stanley & Co. Incorporated may reclaim selling concessions
allowed to an Underwriter or dealer for distributing Notes in this Debt
Offering, if Morgan Stanley & Co. Incorporated repurchases previously
distributed Notes in transactions that cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Notes above independent market levels. The
Underwriters are not required to engage in these activities, and may end any of
these activities at any time.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
S-51
<PAGE>
The Underwriters or their affiliates have provided and will in the future
continue to provide investment banking and other financial services, including
the provision of credit facilities, for the Company, KKR and certain of their
affiliates in the ordinary course of business for which they have received and
will receive customary compensation. In addition, Morgan Stanley & Co.
Incorporated is a managing underwriter in the Common Stock Offering. Smith
Barney Inc., an affiliate of Salomon Brothers Inc, is also the lead underwriter
in the Equity Offerings. The First National Bank of Chicago, an affiliate of
First Chicago Capital Markets, Inc., is a lender, Managing Agent and Offshore
Administrative Agent and The Bank of Nova Scotia, an affiliate of Scotia Capital
Markets (USA) Inc., is a lender, Arranger and Documentation Agent under the
Company's Amended Bank Credit Agreement. The proceeds of the Offerings will be
used to repay a portion of the Term Loan under the Amended Bank Credit
Agreement.
It is expected that delivery of the Notes will be made against payment
therefor on or about the date specified in the last paragraph of the cover page
of this Prospectus Supplement, which is the fourth business day following the
date hereof. Under Rule 15c6-1 of the Commission under the Exchange Act, trades
in the secondary market generally are required to settle in three business days,
unless the parties to any such trade expressly agree otherwise. Accordingly,
purchasers who wish to trade Notes on the date hereof will be required, by
virtue of the fact that the Notes initially will settle in T+4, to specify an
alternate settlement cycle at the time of any such trade to prevent a failed
settlement. Purchasers of Notes who wish to trade Notes on the date hereof
should consult their own advisor.
LEGAL MATTERS
Certain legal matters with respect to the Notes will be passed upon by
Latham & Watkins, San Francisco, California, as counsel for the Company, and for
the Underwriters by Simpson Thacher & Bartlett, New York, New York. Certain
partners of Latham & Watkins, members of their families, related persons and
others, have an indirect interest, through limited partnerships, in less than 1%
of the Common Stock of the Company. Such persons do not have the power to vote
or dispose of such shares of Common Stock. Simpson Thacher & Bartlett has from
time to time acted as counsel for the Company and KKR in certain matters,
including representation of the Company in connection with the BTR Transaction.
S-52
<PAGE>
OWENS-ILLINOIS, INC.
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
---------------------
[LOGO]
Owens-Illinois, Inc. (the "Company"), directly or through agents, dealers,
or underwriters designated from time to time, may offer, issue and sell, in one
or more series or issuances, up to $4,000,000,000 in the aggregate of (a)
secured or unsecured debt securities (the "Debt Securities") of the Company, in
one or more series, which may be either senior debt securities (the "Senior Debt
Securities"), senior subordinated debt securities (the "Senior Subordinated Debt
Securities") or subordinated debt securities (the "Subordinated Debt
Securities"), (b) shares of preferred stock of the Company, par value $.01 per
share (the "Preferred Stock"), in one or more series, and (c) shares of common
stock of the Company, par value $.01 per share (the "Common Stock"), or any
combination of the foregoing, either individually or as units consisting of one
or more of the foregoing, each on terms to be determined at the time of sale.
The Debt Securities may be issued as exchangeable and/or convertible Debt
Securities exchangeable for or convertible into shares of Common Stock or
Preferred Stock. The Preferred Stock may also be exchangeable for or convertible
into shares of Common Stock or another series of Preferred Stock. The Debt
Securities, the Preferred Stock and the Common Stock are collectively referred
to herein as the "Securities." The Debt Securities, the Preferred Stock and the
Common Stock may be offered separately or together in one or more separate
classes or series and in amounts, at prices and on terms to be determined at the
time of offering, and to be set forth in one or more supplements to this
Prospectus (each, a "Prospectus Supplement").
Except as described more fully herein or as set forth in the Prospectus
Supplement relating to any offered Debt Securities, the Indenture (as herein
defined) will not provide holders of Debt Securities protection in the event of
a highly-leveraged transaction, reorganization, restructuring, merger or similar
transaction involving the Company which could adversely affect holders of Debt
Securities. See "Description of Debt Securities--Consolidation, Merger and Sale
of Assets."
The Company's Common Stock is traded on The New York Stock Exchange under
the symbol OI. Any Common Stock sold pursuant to a Prospectus Supplement will be
listed on The New York Stock Exchange. On April 16, 1998, the last reported sale
price of the Common Stock on The New York Stock Exchange was $44 7/16 per share.
The Company has not yet determined whether any of the Debt Securities or
Preferred Stock offered hereby will be listed on any exchange or
over-the-counter market. If the Company decides to seek listing of any such
Securities, the Prospectus Supplement relating thereto will disclose such
exchange or market.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------------
The Securities will be sold directly, through agents, underwriters or
dealers as designated from time to time, or through a combination of such
methods. The Company reserves the sole right to accept, and together with its
agents, from time to time, to reject in whole or in part any proposed purchase
of Securities to be made directly or through agents. If agents of the Company or
any dealers or underwriters are involved in the sale of the Securities in
respect of which this Prospectus is being delivered, the names of such agents,
dealers or underwriters and any applicable commissions or discounts will be set
forth in or may be calculated from the Prospectus Supplement with respect to
such Securities. See "Plan of Distribution" for possible indemnification
arrangements with agents, dealers and underwriters.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by the applicable Prospectus Supplement.
THE DATE OF THIS PROSPECTUS IS APRIL 20, 1998.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (together with all amendments
and exhibits thereto, the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Securities offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement, part of which has been omitted in accordance with the
rules and regulations of the Commission. For further information about the
Company and the Securities offered hereby, reference is made to the Registration
Statement, including the exhibits filed as a part thereof and otherwise
incorporated therein. Statements made in this Prospectus as to the contents of
any agreement or other document referred to herein are qualified by reference to
the copy of such agreement or other document filed as an Exhibit to the
Registration Statement or such other document, each such statement being
qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files periodic reports, proxy statements and other information with
the Commission. The Registration Statement, including the exhibits thereto, as
well as such reports and other information filed by the Company with the
Commission, can be inspected, without charge, and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington D.C., 20549; 7 World Trade Center, New York, New York 10048 and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. The Commission also
maintains a site on the World Wide Web at http://www.sec.gov, that contains
reports, proxy and other information regarding registrants that file
electronically with the Commission and certain of the Company's filings are
available at such web site. Copies of such materials can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Reports and other information
concerning the Company can also be inspected at the offices of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed with the Commission pursuant to the Exchange
Act are incorporated by reference in this Prospectus:
(1) the Company's Annual Report on Form 10-K for the year ended December
31, 1997;
(2) the Company's Current Report on Form 8-K filed with the Commission
on March 2, 1998, as amended by Form 8-K/A filed with the Commission on
March 4, 1998;
(3) the Company's Current Report on Form 8-K filed with the Commission
on April 16, 1998;
(4) the description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed on December 3, 1991, as amended;
and
(5) all other documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this Prospectus and before the termination of the offering, which shall be
deemed to be a part hereof from the date of filing of such documents.
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Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated or deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
This Prospectus may not be used to consummate sales of offered securities
unless accompanied by a Prospectus Supplement. The delivery of this Prospectus
together with a Prospectus Supplement relating to particular offered Securities
in any jurisdiction shall not constitute an offer in the jurisdiction of any
other securities covered by this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon request, a copy of
any documents incorporated into this Prospectus by reference (other than
exhibits incorporated by reference into such document). Requests for documents
should be submitted to the Corporate Secretary, Owens-Illinois, Inc., One
SeaGate, Toledo, Ohio 43666, (telephone (419) 247-5000). The information
relating to the Company contained in this Prospectus does not purport to be
comprehensive and should be read together with the information contained in the
documents incorporated or deemed to be incorporated by reference herein.
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<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS, INCLUDING ANY DOCUMENTS THAT ARE INCORPORATED BY REFERENCE
AS SET FORTH IN "INFORMATION INCORPORATED BY REFERENCE," CONTAINS
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT AND SECTION 21E OF THE EXCHANGE ACT. SUCH STATEMENTS ARE INDICATED BY WORDS
OR PHRASES SUCH AS "ANTICIPATE," "ESTIMATE," "PROJECTS," "MANAGEMENT BELIEVES,"
"THE COMPANY BELIEVES," "INTENDS," "EXPECTS" AND SIMILAR WORDS OR PHRASES. SUCH
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES OR
ASSUMPTIONS. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR
SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS OF THE COMPANY MAY VARY MATERIALLY FROM ANY FUTURE RESULTS,
PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS
ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY
QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS IN THIS PARAGRAPH. THE
COMPANY DISCLAIMS ANY OBLIGATION TO PUBLICLY ANNOUNCE THE RESULTS OF ANY
REVISIONS TO ANY OF THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO REFLECT
FUTURE EVENTS OR DEVELOPMENTS.
THE COMPANY
The Company, through its subsidiaries, is the successor to a business
established in 1903. The Company is one of the world's leading manufacturers of
packaging products. Approximately one of every two glass containers made
worldwide is made by the Company, its affiliates or licensees. In addition to
being the largest manufacturer of glass containers in the United States, North
America, South America and India, and the second largest in Europe, the Company
is a leading manufacturer in the United States of plastic containers, plastic
closures, plastic prescription containers, labels, and multipack plastic
carriers for beverage containers. Since 1992, through acquisitions and
investments strategic to its core businesses, the Company has furthered its
market leadership position in the geographic areas in which it competes. During
the years 1993 through 1997, the Company has invested more than $1.5 billion in
capital expenditures alone (excluding acquisition expenditures) to improve
productivity and increase capacity in key locations.
RECENT DEVELOPMENTS
ACQUISITION. On March 1, 1998, the Company signed a definitive agreement to
acquire the worldwide glass and plastics packaging businesses of BTR plc ("BTR")
in an all cash transaction valued at approximately $3.6 billion (the
"Acquisition"). In connection with obtaining regulatory approvals for the
Acquisition, the Company believes it will be required to divest certain portions
of the acquired businesses. The Company believes, however, that any divestitures
which may be required in connection with the Acquisition will not have a
material adverse effect on the Company or its ability to integrate the acquired
businesses.
BTR's glass packaging unit is the leading glass container manufacturer in
Australia and New Zealand, a leading supplier in the United Kingdom and
participates in joint ventures in China and Indonesia. The Company has provided
technology and equipment to BTR's glass packaging unit since 1967 and to certain
BTR plastics businesses under a series of technical assistance agreements.
BTR's plastics packaging unit is a leading supplier of polyethylene
terephthalate (PET) hotfill food and drink containers, with operations in the
United States, Australia, New Zealand, the United Kingdom, the Netherlands, and
in emerging markets in such areas as Brazil, China, Hungary, Mexico and Saudi
Arabia. In addition, BTR's operations in Australia and New Zealand produce a
variety of plastic bottles and closures of high density polyethylene and
polypropylene.
The Company intends to finance the Acquisition initially with bank
borrowings. Following the closing, the Company plans to refinance a portion of
the bank borrowings with public offerings of debt and equity securities. The
Acquisition is subject to certain regulatory approvals. Although there can be no
assurance
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of these approvals, the Company believes that the approvals will be obtained and
that the Acquisition will close in the second quarter of 1998.
Since 1991, excluding the Acquisition, the Company has acquired 10 glass
container companies serving emerging markets and eight plastic packaging
operations. BTR's worldwide glass and packaging businesses had 1997 sales of
approximately $1.5 billion.
The principal offices of the Company are located at One SeaGate, Toledo,
Ohio 43666, and the telephone number is (419) 247-5000.
USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company anticipates that any net proceeds would be used for general corporate
purposes, which may include but are not limited to working capital, capital
expenditures and acquisitions or the repayment or refinancing of the Company's
indebtedness, including bank borrowings expected to be approximately $3.6
billion in connection with the Acquisition. The factors which the Company will
consider in any refinancing will include the number of shares of Common Stock,
Preferred Stock and/or the amount and characteristics of any Debt Securities
issued and may include, among others, the impact of such refinancing on the
Company's liquidity, debt-to-capital ratio and earnings per share. When a
particular series of Securities is offered, the Prospectus Supplement relating
thereto will set forth the Company's intended use for the net proceeds received
from the sale of such Securities. Pending the application of the net proceeds,
the Company expects to invest such proceeds in short-term, interest-bearing
instruments or other investment-grade securities or to reduce indebtedness under
its bank credit agreement.
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RATIOS OF EARNINGS TO FIXED CHARGES
AND EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratios of earnings to fixed charges and
earnings to combined fixed charges and preferred stock dividends of the Company
for the periods indicated.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
<S> <C> <C> <C> <C>
1997 1996 1995 1994
--------- --------- --------- ---------
Ratio of earnings to fixed charges (a)......................................... 2.4x 2.0x 1.9x 1.5x
Ratio of earnings to combined fixed charges and preferred stock dividends (a)
(b).......................................................................... 2.3x 1.9x 1.9x 1.5x
<CAPTION>
<S> <C>
1993
-----
Ratio of earnings to fixed charges (a)......................................... (c)
Ratio of earnings to combined fixed charges and preferred stock dividends (a)
(b).......................................................................... (c)
</TABLE>
- ------------------------
(a) For the purpose of calculating the ratio of earnings to fixed charges and
the ratio of earnings to fixed charges and preferred stock dividends,
earnings consist of income before income taxes and fixed charges. Fixed
charges include interest expense, capitalized interest and that portion of
rentals representative of an interest factor.
(b) At December 31, 1997, the Company had (i) 65,625 shares issued and 17,099
shares outstanding of Series A Exchangeable Preferred Stock ("Series A"),
(ii) 65,625 shares issued and 55,665 shares outstanding of Series B
Exchangeable Preferred Stock ("Series B") and (iii) 131,250 shares issued
and outstanding of Series C Exchangeable Preferred Stock ("Series C" and,
together with the Series A and the Series B, the "Exchangeable Preferred
Stock"). The holders of Exchangeable Preferred Stock are entitled to receive
cumulative dividends at the rate of $7.00 per year on each share of
Exchangeable Preferred Stock. At December 31, 1997, dividends accumulated
and unpaid were approximately $7.4 million. Shares of Exchangeable Preferred
Stock are exchangeable for a number of shares of Common Stock of the Company
determined by multiplying the total number of exchangeable shares being
exchanged by the sum of $100 plus all dividends accumulated and unpaid on
each share being exchanged and dividing such amount by the last reported
sales price of the Company's Common Stock on the New York Stock Exchange at
the close of business on the business day next preceding the day of
exchange. Holders of the Exchangeable Preferred Stock have no voting rights,
except on actions which would affect their exchange rights or on actions to
increase the authorized number of exchangeable shares.
(c) Earnings of the Company were insufficient to cover fixed charges and
combined fixed charges and preferred stock dividends for the year ended
December 31, 1993 in the amount of $292.0 million and $295.0 million,
respectively, due to a $250.0 million charge in the fourth quarter of 1993
principally related to the Company's restructuring program and a $325.0
million charge in the fourth quarter of 1993 for estimated uninsured future
asbestos-related costs.
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DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions of
the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities offered by any Prospectus Supplement,
and the extent, if any, to which such general provisions do not apply to the
Debt Securities so offered, will be described in the Prospectus Supplement
relating to such Debt Securities.
Debt Securities may be issued from time to time in series under an
indenture, and one or more indentures supplemental thereto (collectively, the
"Indenture"), between the Company and a trustee to be identified in the
applicable Prospectus Supplement (the "Trustee"). The terms of the Debt
Securities will include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (the "TIA") as in
effect on the date of the Indenture. The Debt Securities will be subject to all
such terms, and potential purchasers of the Debt Securities are referred to the
Indenture and the TIA for a statement thereof. The following summary of certain
provisions of the Indenture does not purport to be complete and is qualified in
its entirety by reference to the Indenture, including the definitions therein of
certain terms used below. A copy of the proposed form of Indenture has been
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. As used under this caption, unless the context otherwise requires,
"Offered Debt Securities" shall mean the Debt Securities offered by this
Prospectus and an accompanying Prospectus Supplement.
GENERAL
The Indenture will provide for the issuance of Debt Securities in series and
will not limit the principal amount of Debt Securities which may be issued
thereunder. In addition, except as may be provided in the Prospectus Supplement
relating to such Debt Securities, the Indenture will not limit the amount of
additional indebtedness the Company may incur.
The applicable Prospectus Supplement or Prospectus Supplements will describe
the following terms of the series of Offered Debt Securities in respect of which
this Prospectus is being delivered: (1) the title of the Offered Debt
Securities; (2) whether the Offered Debt Securities are Senior Debt Securities,
Senior Subordinated Debt Securities or Subordinated Debt Securities or any
combination thereof; (3) the price or prices (expressed as a percentage of the
aggregate principal amount thereof) at which the Offered Debt Securities will be
issued; (4) any limit upon the aggregate principal amount of the Offered Debt
Securities; (5) the date or dates on which the principal of the Offered Debt
Securities is payable; (6) the rate or rates (which may be fixed or variable) at
which the Offered Debt Securities will bear interest, if any, or the manner in
which such rate or rates are determined; (7) the date or dates from which any
such interest will accrue, the interest payment dates on which any such interest
on the Offered Debt Securities will be payable and the record dates for the
determination of holders to whom such interest is payable; (8) the place or
places where the principal of and any interest on the Offered Debt Securities
will be payable; (9) the obligation of the Company, if any, to redeem,
repurchase or repay the Offered Debt Securities in whole or in part pursuant to
any sinking fund or analogous provisions or at the option of the holders and the
price or prices at which and the period or periods within which and the terms
and conditions upon which the Offered Debt Securities shall be redeemed,
repurchased or repaid pursuant to such obligation; (10) the denominations in
which any Offered Debt Securities will be issuable, if other than denominations
of U.S. $1,000 and any integral multiple thereof; (11) if other than the
principal amount thereof, the portion of the principal amount of the Offered
Debt Securities of the series which will be payable upon declaration of the
acceleration of the maturity thereof; (12) any addition to or change in the
covenants which apply to the Offered Debt Securities; (13) any Events of Default
with respect to the Offered Debt Securities, if not otherwise set forth under
"Events of Default;" (14) whether the Offered Debt Securities will be issued in
whole or in part in global form, the terms and conditions, if any, upon which
such global Offered Debt Securities may be exchanged in whole or in part for
other individual securities, and the depositary for the Offered Debt Securities;
(15) the terms and conditions, if any, upon which the Offered Debt Securities
shall be exchanged for or converted into Common Stock or Preferred Stock; (16)
the
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nature and terms of the security for any secured Offered Debt Securities; and
(17) any other terms of the Offered Debt Securities which terms shall not be
inconsistent with the provisions of the Indenture.
Debt Securities may be issued at a discount from their principal amount
("Original Issue Discount Securities"). Federal income tax considerations and
other special considerations applicable to any such Original Issue Discount
Securities will be described in the applicable Prospectus Supplement.
Debt Securities may be issued in bearer form, with or without coupons.
Federal income tax considerations and other special considerations applicable to
bearer securities will be described in the applicable Prospectus Supplement.
STATUS OF DEBT SECURITIES
The Senior Debt Securities will rank PARI PASSU with all other unsecured and
unsubordinated indebtedness of the Company.
The obligations of the Company pursuant to Senior Subordinated Debt
Securities will be subordinate in right of payment, to the extent and in the
manner set forth in the Indenture, to all Senior Indebtedness of the Company.
With respect to any series of Senior Subordinated Debt Securities, "Senior
Indebtedness" of the Company will be defined to mean the principal of, and
premium, if any, and any interest (including interest accruing subsequent to the
commencement of any proceeding for the bankruptcy or reorganization of the
Company under any applicable bankruptcy, insolvency or similar law now or
hereafter in effect) and all other monetary obligations of every kind or nature
due on or in connection with (a) all indebtedness of the Company whether
heretofore or hereafter incurred (i) for borrowed money or (ii) in connection
with the acquisition by the Company or a subsidiary of the Company of assets
other than in the ordinary course of business, for the payment of which the
Company is liable directly or indirectly by guarantee, letter of credit,
obligation to purchase or acquire or otherwise, or the payment of which is
secured by a lien, charge or encumbrance on assets acquired by the Company, (b)
amendments, modifications, renewals, extensions and deferrals of any such
indebtedness, and (c) any indebtedness issued in exchange for any such
indebtedness (clauses (a) through (c) hereof being collectively referred to
herein as "Debt"); PROVIDED, HOWEVER, that the following will not constitute
Senior Indebtedness with respect to Senior Subordinated Debt Securities: (1) any
Debt as to which, in the instrument evidencing such Debt or pursuant to which
such Debt was issued, it is expressly provided that such Debt is subordinate in
right of payment to all Debt of the Company not expressly subordinated to such
Debt; (2) any Debt which by its terms refers explicitly to the Senior
Subordinated Debt Securities and states that such Debt shall not be senior in
right of payment; and (3) any Debt of the Company in respect of the Senior
Subordinated Debt Securities or any Subordinated Debt Securities.
The obligations of the Company pursuant to Subordinated Debt Securities will
be subordinate in right of payment to all Senior Indebtedness of the Company and
to any Senior Subordinated Debt Securities; provided, however, that the
following will not constitute Senior Indebtedness with respect to Subordinated
Debt Securities: (1) any Debt as to which, in the instrument evidencing such
Debt or pursuant to which such Debt was issued, it is expressly provided that
such Debt is subordinate in right of payment to all Debt of the Company not
expressly subordinated to such Debt; and (2) any Debt of the Company in respect
of Subordinated Debt Securities and any Debt which by its terms refers
explicitly to the Subordinated Debt Securities and states that such Debt shall
not be senior in right of payment.
No payment pursuant to the Senior Subordinated Debt Securities or the
Subordinated Debt Securities, as the case may be, may be made unless all amounts
of principal, premium, if any, and interest then due on all applicable Senior
Indebtedness of the Company shall have been paid in full or if there shall have
occurred and be continuing beyond any applicable grace period a default in any
payment with respect to any such Senior Indebtedness, or if there shall have
occurred any event of default with respect to any such Senior Indebtedness
permitting the holders thereof to accelerate the maturity thereof, or if any
judicial proceeding shall be pending with respect to any such default. However,
the Company may make payments
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<PAGE>
pursuant to the Senior Subordinated Debt Securities or the Subordinated Debt
Securities, as the case may be, if a default in payment or an event of default
with respect to the Senior Indebtedness permitting the holder thereof to
accelerate the maturity thereof has occurred and is continuing and judicial
proceedings with respect thereto have not been commenced within a certain number
of days of such default in payment or event of default. Upon any distribution of
the assets of the Company upon dissolution, winding-up, liquidation or
reorganization, the holders of Senior Indebtedness of the Company will be
entitled to receive payment in full of principal, premium, if any, and interest
(including interest accruing subsequent to the commencement of any proceeding
for the bankruptcy or reorganization of the Company under any applicable
bankruptcy, insolvency or similar law now or hereafter in effect) before any
payment is made on the Senior Subordinated Debt Securities or Subordinated Debt
Securities, as applicable. By reason of such subordination, in the event of
insolvency of the Company, holders of Senior Indebtedness of the Company may
receive more, ratably, and holders of the Senior Subordinated Debt Securities or
Subordinated Debt Securities, as applicable, having a claim pursuant to the
Senior Subordinated Debt Securities or Subordinated Debt Securities, as
applicable, may receive less, ratably, than the other creditors of the Company.
Such subordination will not prevent the occurrence of any event of default (an
"Event of Default") in respect of the Senior Subordinated Debt Securities or the
Subordinated Debt Securities.
If the Company offers Debt Securities, the applicable Prospectus Supplement
will set forth the aggregate amount of outstanding indebtedness, if any, as of
the most recent practicable date that by the terms of such Debt Securities would
be senior to such Debt Securities. The applicable Prospectus Supplement will
also set forth any limitation on the issuance by the Company of any additional
senior indebtedness.
CONVERSION RIGHTS
The terms, if any, on which Debt Securities of a series may be exchanged for
or converted into shares of Common Stock or Preferred Stock will be set forth in
the Prospectus Supplement relating thereto.
EXCHANGE, REGISTRATION, TRANSFER AND PAYMENT
Unless otherwise specified in the applicable Prospectus Supplement, payment
of principal, premium, if any, and any interest on the Debt Securities will be
payable, and the exchange of and the transfer of Debt Securities will be
registerable, at the office of the Trustee or at any other office or agency
maintained by the Company for such purpose subject to the limitations of the
Indenture. Unless otherwise indicated in the applicable Prospectus Supplement,
the Debt Securities will be issued in denominations of U.S. $1,000 or integral
multiples thereof. No service charge will be made for any registration of
transfer or exchange of the Debt Securities, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge imposed in
connection therewith.
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in the form of one or more
Global Securities (the "Global Securities") that will be deposited with a
Depositary or its nominee identified in the applicable Prospectus Supplement. In
such a case, one or more Global Securities will be issued in a denomination or
aggregate denominations equal to the portion of the aggregate principal amount
of outstanding Debt Securities of the series to be represented by such Global
Security or Securities. Each Global Security will be deposited with such
Depositary or nominee or a custodian therefor and will bear a legend regarding
the restrictions on exchanges and registration of transfer thereof referred to
below and any such other matters as may be provided for pursuant to the
applicable Indenture.
Notwithstanding any provision of the Indenture or any Debt Security
described herein, no Global Security may be transferred to, or registered or
exchanged for Debt Securities registered in the name of, any person or entity
other than the Depositary for such Global Security or any nominee of such
9
<PAGE>
Depositary, and no such transfer may be registered, unless (i) the Depositary
has notified the Company that it is unwilling or unable to continue as
Depositary for such Global Security or has ceased to be qualified to act as such
as required by the applicable Indenture, (ii) the Company executes and delivers
to the Trustee an order that such Global Security shall be so transferable,
registerable and exchangeable, and such transfers shall be registerable, or
(iii) there shall exist such circumstances, if any, as may be described in the
applicable Prospectus Supplement. All Debt Securities issued in exchange for a
Global Security or any portion thereof will be registered in such names as the
Depositary may direct.
The specific terms of the depositary arrangement with respect to any portion
of a series of Debt Securities to be represented by a Global Security will be
described in the applicable Prospectus Supplement. The Company expects that the
following provisions will apply to depositary arrangements.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities which are to be represented by a Global Security to be deposited with
or on behalf of a Depositary will be represented by a Global Security registered
in the name of such Depositary or its nominee. Upon the issuance of such Global
Security, and the deposit of such Global Security with or on behalf of the
Depositary for such Global Security, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Debt Securities represented by such Global Security to the accounts of
institutions that have accounts with such Depositary or its nominee
("participants"). The accounts to be credited will be designated by the
underwriters or agents of such Debt Securities or by the Company, if such Debt
Securities are offered and sold directly by the Company. Ownership of beneficial
interests in such Global Security will be limited to participants or persons
that may hold interests through participants. Ownership of beneficial interests
by participants in such Global Security will be shown on, and the transfer of
that ownership interest will be effected only through, records maintained by the
Depositary or its nominee for such Global Security. Ownership of beneficial
interests in such Global Security by persons that hold through participants will
be shown on, and the transfer of that ownership interest within such participant
will be effected only through, records maintained by such participant. The laws
of some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in certificate form. The foregoing
limitations and such laws may impair the ability to transfer beneficial
interests in such Global Securities.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
Indenture. Unless otherwise specified in the applicable Prospectus Supplement,
owners of beneficial interests in such Global Security will not be entitled to
have Debt Securities of the series represented by such Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of Debt Securities of such series in certified form and will not be
considered the holders thereof for any purposes under the Indenture.
Accordingly, each person owning a beneficial interest in such Global Security
must rely on the procedures of the Depositary and, if such person is not a
participant, on the procedures of the participant through which such person owns
its interest, to exercise any rights of a holder under the Indenture. If the
Company requests any action of holders or if an owner of a beneficial interest
in such Global Security desires to give any notice or take any action a holder
is entitled to give or take under the Indenture, the Depositary will authorize
the participants to give such notice or take such action, and participants would
authorize beneficial owners owning through such participants to give such notice
or take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
Notwithstanding any other provisions to the contrary in the Indenture, the
rights of the beneficial owners of the Debt Securities to receive payment of the
principal and premium, if any, of and interest on such Debt Securities, on or
after the respective due dates expressed in such Debt Securities, or to
institute suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of the
beneficial owners.
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Principal of and any interest on a Global Security will be payable in the
manner described in the applicable Prospectus Supplement.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture will provide that the Company may not consolidate with or
merge with or into, or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its property or assets to any person in
one or more related transactions unless (a) the Company is the surviving
corporation or the person formed by or surviving any such consolidation or
merger (if other than the Company) or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made is a corporation
organized and existing under the laws of the United States, any state thereof or
the District of Columbia; (b) the person formed by or surviving any such
consolidation or merger (if other than the Company) or the person to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made assumes all the obligations of the Company under the Debt Securities
and the Indenture; and (c) immediately prior to and after giving effect to the
transaction, no Default (as defined in the Indenture) or Event of Default shall
have occurred and be continuing. Notwithstanding the foregoing, any subsidiary
of the Company may consolidate with, merge into or transfer all or part of its
properties and assets to the Company.
CERTAIN OTHER COVENANTS
Unless otherwise indicated in this Prospectus or a Prospectus Supplement,
the Debt Securities will not have the benefit of any covenants that limit or
restrict the Company's business or operations, the pledging of the Company's
assets or the incurrence of indebtedness by the Company.
With respect to any series of Senior Subordinated Debt Securities, the
Company will agree not to issue Debt which is, expressly by its terms,
subordinated in right of payment to any other Debt of the Company and which is
not expressly made PARI PASSU with, or subordinate and junior in right of
payment to, the Senior Subordinated Debt Securities.
The applicable Prospectus Supplement will describe any material covenants in
respect of a series of Debt Securities. Other than the covenants of the Company
included in the Indenture as described above or as described in the applicable
Prospectus Supplement, there are no covenants or other provisions in the
Indenture providing for a put or increased interest or otherwise that would
afford holders of Debt Securities additional protection in the event of a
recapitalization transaction, a change of control of the Company or a highly
leveraged transaction.
EVENTS OF DEFAULT
Unless otherwise specified in the applicable Prospectus Supplement, the
following will constitute Events of Default under the Indenture with respect to
Debt Securities of any series: (a) failure to pay principal of any Debt Security
of that series when due and payable at maturity, upon redemption or otherwise;
(b) failure to pay any interest on any Debt Security of that series when due,
and the Default continues for 30 days; (c) the Company fails to comply with any
of its other agreements in the Debt Securities of that series or in the
Indenture with respect to that series and the Default continues for the period
and after the notice provided therein (and described below); and (d) certain
events of bankruptcy, insolvency or reorganization. A Default under clause (c)
above is not an Event of Default with respect to a particular series of Debt
Securities until the Trustee or the holders of at least 50% in principal amount
of the then outstanding Debt Securities of that series notify the Company of the
Default and the Company does not cure the Default within 30 days after receipt
of the notice. The notice must specify the Default, demand that it be remedied
and state that the notice is a "Notice of Default."
If an Event of Default with respect to outstanding Debt Securities of any
series (other than an Event of Default relating to certain events of bankruptcy,
insolvency or reorganization) shall occur and be
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continuing, either the Trustee or the holders of at least 50% in principal
amount of the outstanding Debt Securities of that series by notice, as provided
in the Indenture, may declare the unpaid principal amount (or, if the Debt
Securities of that series are Original Issue Discount Securities, such lesser
amount as may be specified in the terms of that series) of, and any accrued and
unpaid interest on, all Debt Securities of that series to be due and payable
immediately. However, at any time after a declaration of acceleration with
respect to Debt Securities of any series has been made, but before a judgment or
decree based on such acceleration has been obtained, the holders of a majority
in principal amount of the outstanding Debt Securities of that series may, under
certain circumstances, rescind and annul such acceleration. For information as
to waiver of defaults, see "Modification and Waiver" below.
The Indenture will provide that, subject to the duty of the Trustee during
an Event of Default to act with the required standard of care, the Trustee will
be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the holders, unless such holders
shall have offered to the Trustee reasonable security or indemnity. Subject to
certain provisions, including those requiring security or indemnification of the
Trustee, the holders of a majority in principal amount of the outstanding Debt
Securities of any series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the Debt
Securities of that series.
The Company will be required to furnish to the Trustee under the Indenture
annually a statement as to the performance by the Company of its obligations
under that Indenture and as to any default in such performance.
MODIFICATION AND WAIVER
Subject to certain exceptions, the Company and the Trustee may amend the
Indenture or the Debt Securities with the written consent of the holders of a
majority in principal amount of the then outstanding Debt Securities of each
series affected by the amendment with each series voting as a separate class.
The holders of a majority in principal amount of the then outstanding Debt
Securities of any series may also waive compliance in a particular instance by
the Company with any provision of the Indenture with respect to the Debt
Securities of that series; provided, however, that without the consent of each
holder of Debt Securities affected, an amendment or waiver may not (i) reduce
the percentage of the principal amount of Debt Securities whose holders must
consent to an amendment or waiver; (ii) reduce the rate or change the time for
payment of interest on any Debt Security (including default interest); (iii)
reduce the principal of, premium, if any, or change the fixed maturity of any
Debt Security, or reduce the amount of, or postpone the date fixed for,
redemption or the payment of any sinking fund or analogous obligation with
respect thereto; (iv) make any Debt Security payable in currency other than that
stated in the Debt Security; (v) make any change in the provisions concerning
waivers of Default or Events of Default by holders or the rights of holders to
recover the principal of, premium, if any, or interest on, any Debt Security;
(vi) waive a default in the payment of the principal of, or interest on, any
Debt Security, except as otherwise provided in the Indenture or (vii) reduce the
principal amount of Original Issue Discount Securities payable upon acceleration
of the maturity thereof. The Company and the Trustee may amend the Indenture or
the Debt Securities without notice to or the consent of any holder of a Debt
Security: (i) to cure any ambiguity, defect or inconsistency; (ii) to comply
with the Indenture's provisions with respect to successor corporations; (iii) to
comply with any requirements of the Commission in connection with the
qualification of the Indenture under the TIA; (iv) to provide for uncertificated
Debt Securities in addition to or in place of certificated Debt Securities; (v)
to add to, change or eliminate any of the provisions of the Indenture in respect
of one of more series of Debt Securities, provided, however, that any such
addition, change or elimination (A) shall neither (1) apply to any Debt Security
of any series created prior to the execution of such amendment and entitled to
the benefit of such provision, nor (2) modify the rights of a holder of any such
Debt Security with respect to such provision, or (B) shall become effective only
when there is no outstanding Debt Security of any series created prior to such
amendment and entitled to the benefit of
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such provision; (vi) to make any change that does not adversely affect in any
material respect the interest of any holder; or (vii) to establish additional
series of Debt Securities as permitted by the Indenture.
The holders of a majority in principal amount of the then outstanding Debt
Securities of any series, by notice to the Trustee, may waive an existing
Default or Event of Default and its consequences except a Default or Event of
Default in the payment of the principal of, or any interest on, any Debt
Security with respect to the Debt Securities of that series; provided, however,
that the holders of a majority in principal amount of the outstanding Debt
Securities of any series may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration.
DEFEASANCE OF DEBT SECURITIES AND CERTAIN COVENANTS IN CERTAIN CIRCUMSTANCES
LEGAL DEFEASANCE. Unless otherwise specified in the applicable Prospectus
Supplement, the Indenture will provide that the Company may be discharged from
any and all obligations in respect of the Debt Securities of any series (except
for certain obligations to register the transfer or exchange of Debt Securities
of such series, to replace stolen, lost or mutilated Debt Securities of such
series, and to maintain paying agencies) upon the deposit with the Trustee, in
trust, of money and/or U.S. government obligations, that, through the payment of
interest and principal in respect thereof in accordance with their terms, will
provide money in an amount sufficient in the opinion of a nationally recognized
firm of independent public accountants to pay and discharge each installment of
principal, premium, if any, and interest, if any, on and any mandatory sinking
fund payments in respect of the Debt Securities of such series on the stated
maturity of such payments in accordance with the terms of the Indenture and such
Debt Securities. Such discharge may occur only if, among other things, the
Company has received from, or there has been published by, the United States
Internal Revenue Service a ruling, or, since the date of execution of the
Indenture, there has been a change in the applicable United States federal
income tax law, in either case to the effect that holders of the Debt Securities
of such series will not recognize income, gain or loss for United States federal
income tax purposes as a result of such deposit, defeasance and discharge and
will be subject to United States federal income tax on the same amount and in
the same manner and at the same times as would have been the case if such
deposit, defeasance and discharge had not occurred.
DEFEASANCE OF CERTAIN COVENANTS. Unless otherwise specified in the
applicable Prospectus Supplement, the Indenture will provide that, upon
compliance with certain conditions, the Company may omit to comply with the
restrictive covenants contained in the Indenture, as well as any additional
covenants or Events of Default contained in a supplement to the Indenture, a
Board Resolution or an Officers' Certificate delivered pursuant thereto. The
conditions include: the deposit with the Trustee of money and/or U.S. government
obligations, that, through the payment of interest and principal in respect
thereof in accordance with their terms, will provide money in an amount
sufficient in the opinion of a nationally recognized firm of independent public
accountants to pay principal, premium, if any, and interest, if any, on and any
mandatory sinking fund payments in respect of the Debt Securities of such series
on the stated maturity of such payments in accordance with the terms of the
Indenture and such Debt Securities; and the delivery to the Trustee of an
opinion of counsel to the effect that the holders of the Debt Securities of such
series will not recognize income, gain or loss for United States federal income
tax purposes as a result of such deposit and related covenant defeasance and
will be subject to United States federal income tax in the same amount and in
the same manner and at the same times as would have been the case if such
deposit and related covenant defeasance had not occurred.
DEFEASANCE AND EVENTS OF DEFAULT. In the event the Company exercises its
option to omit compliance with certain covenants of the Indenture with respect
to any series of Debt Securities and the Debt Securities of such series are
declared due and payable because of the occurrence of any Event of Default, the
amount of money and/or U.S. government obligations on deposit with the Trustee
will be sufficient to pay amounts due on the Debt Securities of such series at
the time of their stated maturity but may not be sufficient to pay amounts due
on the Debt Securities of such series at the time of the acceleration resulting
from such Event of Default. However, the Company will remain liable for such
payments.
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REGARDING THE TRUSTEE
The Trustee with respect to any series of Debt Securities will be identified
in the Prospectus Supplement relating to such Debt Securities. The Indenture and
provisions of the TIA incorporated by reference therein contain certain
limitations on the rights of the Trustee, should it become a creditor of the
Company, to obtain payment of claims in certain cases, or to realize on certain
property received in respect of any such claim, as security or otherwise. The
Trustee and its affiliates may engage in, and will be permitted to continue to
engage in, other transactions with the Company and its affiliates; PROVIDED,
HOWEVER, that if it acquires any conflicting interest (as defined in the TIA),
it must eliminate such conflict or resign.
The holders of a majority in principal amount of the then outstanding Debt
Securities of any series will have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee. The TIA and the Indenture provide that in case an Event of Default
shall occur (and be continuing), the Trustee will be required, in the exercise
of its rights and powers, to use the degree of care and skill of a prudent
person in the conduct of such person's affairs. Subject to such provision, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request of any of the holders of the Debt Securities
issued thereunder, unless they have offered to the Trustee indemnity
satisfactory to it.
DESCRIPTION OF PREFERRED STOCK
Under the Restated Certificate of Incorporation of the Company (the
"Certificate of Incorporation"), shares of Preferred Stock may be issued from
time to time, in one or more classes or series, as authorized by the Board of
Directors, generally without the approval of the stockholders.
The Company has authorized 75,000 shares of Series A Exchangeable Preferred
Stock, 75,000 shares of Series B Exchangeable Preferred Stock and 150,000 shares
of Series C Exchangeable Preferred Stock. At December 31, 1997, the Company had
(i) 65,625 shares issued and 17,099 shares outstanding of Series A, (ii) 65,625
shares issued and 55,665 shares outstanding of Series B, and (iii) 131,250
shares issued and outstanding of Series C. The holders of Exchangeable Preferred
Stock are entitled to receive cumulative dividends at the rate of $7.00 per year
on each share of Exchangeable Preferred Stock. At December 31, 1997, dividends
accumulated and unpaid were approximately $7.4 million. Shares of Exchangeable
Preferred Stock are exchangeable for a number of shares of Common Stock of the
Company determined by multiplying the total number of exchangeable shares being
exchanged by the sum of $100 plus all dividends accumulated and unpaid on each
share being exchanged and dividing such amount by the last reported sales price
of the Company's Common Stock on the New York Stock Exchange at the close of
business on the business day next preceding the day of exchange. Holders of the
Exchangeable Preferred Stock have no voting rights, except on actions which
would affect their exchange rights or on actions to increase the authorized
number of exchangeable shares.
Prior to issuance of shares of each series, the Board of Directors is
required by the General Corporation Law of the State of Delaware (the "DGCL")
and the Certificate of Incorporation to adopt resolutions and file a Certificate
of Designation (the "Certificate of Designation") with the Secretary of State of
the State of Delaware, fixing for each such class or series the designations,
powers, preferences and rights of the shares of such class or series and the
qualifications, limitations or restrictions thereon, including, but not limited
to, dividend rights, dividend rate or rates, conversion rights, voting rights,
rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, and the liquidation preferences as are permitted by
the DGCL. The Board of Directors could authorize the issuance of shares of
Preferred Stock with terms and conditions which could have the effect of
discouraging a takeover or other transaction which holders of some, or a
majority, of such shares might believe to be in their best interests or in which
holders of some, or a majority, of such shares might receive a premium for their
shares over the then-market price of such shares.
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Subject to limitations prescribed by the DGCL, the Certificate of
Incorporation and the Amended and Restated Bylaws of the Company (the "Bylaws"),
the Board of Directors is authorized to fix the number of shares constituting
each class or series of Preferred Stock and the designations and powers,
preferences and relative, participating, optional or other special rights,
including such provisions as may be desired concerning voting, redemption,
dividends, dissolution or the distribution of assets, conversion or exchange,
and such other subjects or matters as may be fixed by resolution of the Board of
Directors or duly authorized committee thereof. The Preferred Stock offered
hereby will, when issued, be fully paid and nonassessable and will not have, or
be subject to, any preemptive or similar rights.
The applicable Prospectus Supplement or Prospectus Supplements will describe
the following terms of the class or series of Preferred Stock in respect of
which this Prospectus is being delivered: (1) the title and stated value of such
Preferred Stock; (2) the number of shares of such Preferred Stock offered, the
liquidation preference per share and the purchase price of such Preferred Stock;
(3) the dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to such Preferred Stock; (4) whether dividends
shall be cumulative or non-cumulative and, if cumulative, the date from which
dividends on such Preferred Stock shall accumulate; (5) the procedures for any
auction and remarketing, if any, for such Preferred Stock; (6) the provisions
for a sinking fund, if any, for such Preferred Stock; (7) the provisions for
redemption, if applicable, of such Preferred Stock; (8) any listing of such
Preferred Stock on any securities exchange or market; (9) the terms and
conditions, if applicable, upon which such Preferred Stock will be convertible
into Common Stock or another series of Preferred Stock of the Company, including
the conversion price (or manner of calculation thereof) and conversion period;
(10) the terms and conditions, if applicable, upon which Preferred Stock will be
exchangeable into Debt Securities of the Company, including the exchange price
(or manner of calculation thereof) and exchange period; (11) voting rights, if
any, of such Preferred Stock; (12) a discussion of any material and/or special
United States federal income tax considerations applicable to such Preferred
Stock; (13) whether interests in such Preferred Stock will be represented by
depositary shares; (14) the relative ranking and preferences of such Preferred
Stock as to dividend rights and rights upon liquidation, dissolution or winding
up of the affairs of the Company; (15) any limitations on issuance of any class
or series of Preferred Stock ranking senior to or on a parity with such series
of Preferred Stock as to dividend rights and rights upon liquidation,
dissolution or winding up of the affairs of the Company; and (16) any other
specific terms, preferences, rights, limitations or restrictions on such
Preferred Stock.
Unless otherwise specified in the Prospectus Supplement, the Preferred Stock
will, with respect to dividend rights and rights upon liquidation, dissolution
or winding-up of the Company rank: (i) senior to all classes or series of Common
Stock of the Company, and to all equity securities issued by the Company the
terms of which specifically provide that such equity securities rank junior to
such Preferred Stock with respect to dividend rights or rights upon liquidation,
dissolution or winding-up of the Company; (ii) on a parity with all equity
securities issued by the Company that do not rank senior or junior to the
Preferred Stock with respect to dividend rights or rights upon liquidation,
dissolution or winding-up of the Company; and (iii) junior to all equity
securities issued by the Company the terms of which do not specifically provide
that such equity securities rank on a parity with or junior to the Preferred
Stock with respect to dividend rights or rights upon liquidation, dissolution or
winding-up of the Company (including any entity with which the Company may be
merged or consolidated or to which all or substantially all the assets of the
Company may be transferred or which transfers all or substantially all of the
assets of the Company). As used for these purposes, the term "equity securities"
does not include convertible debt securities.
SECTION 203 OF THE DGCL
The Company is subject to the "business combination" statute of the DGCL, an
anti-takeover law enacted in 1988. In general, Section 203 of the DGCL prohibits
a publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder," for a period of three years after the date of
the transaction in which a person became an "interested stockholder," unless (i)
prior to such
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date the board of directors of the corporation approved either the "business
combination" or the transaction which resulted in the stockholder becoming an
"interested stockholder," (ii) upon consummation of the transaction which
resulted in the stockholder becoming an "interested stockholder," the
"interested stockholder" owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding those shares owned (1)
by persons who are directors and also officers and (2) employee stock plans in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer, or (iii) on or subsequent to such date the "business combination" is
approved by the board of directors and authorized at an annual or special
meeting of stockholders by the affirmative vote of a least 66% of the
outstanding voting stock which is not owned by the "interested stockholder." A
"business combination" includes mergers, stock or asset sales and other
transactions resulting in a financial benefit to the "interested stockholders."
An "interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years, did own) 15% or more of the
corporation's voting stock. Although Section 203 permits the Company to elect
not to be governed by its provisions, the Company to date has not made this
election. As a result of the application of Section 203, potential acquirors of
the Company may be discouraged from attempting to effect an acquisition
transaction with the Company, thereby possibly depriving holders of the
Company's securities of certain opportunities to sell or otherwise dispose of
such securities at above-market prices pursuant to such transactions.
PLAN OF DISTRIBUTION
The Company may sell the Securities to one or more underwriters for public
offering and sale by them and may also sell the Securities to investors directly
or through agents. Any such underwriter or agent involved in the offer and sale
of Securities will be named in the applicable Prospectus Supplement. The Company
has reserved the right to sell or exchange Securities directly to investors on
its own behalf in those jurisdictions where and in such manner as it is
authorized to do so.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices, or at negotiated prices. Sales of Common Stock offered
hereby may be effected from time to time in one or more transactions on the New
York Stock Exchange or in negotiated transactions or a combination of such
methods. The Company may also, from time to time, authorize dealers, acting as
the Company's agents, to offer and sell Securities upon the terms and conditions
as are set forth in the applicable Prospectus Supplement. In connection with the
sale of Securities, underwriters may receive compensation from the Company in
the form of underwriting discounts or commissions and may also receive
commissions from purchasers of the Securities for whom they may act as agent.
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act as
agent. Any such underwriter, dealer or agent will be identified, and any such
compensation received from the Company will be described, in the Prospectus
Supplement. Unless otherwise indicated in a Prospectus Supplement, an agent will
be acting on a best efforts basis and a dealer will purchase Securities as a
principal, and may then resell such Securities at varying prices to be
determined by the dealer.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Securities, and any discounts, concessions or
commissions allowed by underwriters to participating dealers, will be set forth
in the applicable Prospectus Supplement. Dealers and agents participating in the
distribution of Securities may be deemed to be underwriters, and any discounts
and commissions received by them and any profit realized by them on resale of
the Securities may be deemed to be underwriting discounts and commissions.
Underwriters, dealers and agents may be entitled, under agreements entered into
with the Company, to indemnification against and contribution toward certain
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civil liabilities, including liabilities under the Securities Act, and to
reimbursement by the Company for certain expenses.
To facilitate an offering of Securities, certain persons participating in
the offering may engage in transactions that stabilize, maintain, or otherwise
affect the price of the Securities. This may include over-allotments or short
sales of the Securities, which involves the sale by persons participating in the
offering of more Securities than have been sold to them by the Company. In such
circumstances, such persons would cover such over-allotments or short positions
by purchasing in the open market or by exercising the over-allotment option
granted to such persons. In addition, such persons may stabilize or maintain the
price of the Securities by bidding for or purchasing Securities in the open
market or by imposing penalty bids, whereby selling concessions allowed to
dealers participating in any such offering may be reclaimed if Securities sold
by them are repurchased in connection with stabilization transactions. The
effect of these transactions may be to stabilize or maintain the market price of
the Securities at a level above that which might otherwise prevail in the open
market. Such transactions, if commenced, may be discontinued at any time.
Certain of the underwriters, dealers or agents and their associates may
engage in transactions with and perform services for the Company in the ordinary
course of business, including refinancing of the Company's indebtedness. See
"Use of Proceeds."
LEGAL MATTERS
Certain legal matters with respect to the Securities offered hereby will be
passed upon for the Company by Latham & Watkins, San Francisco, California.
Certain legal matters will be passed upon for any agents or underwriters by
counsel for such agents or underwriters identified in the applicable Prospectus
Supplement. Certain partners of Latham & Watkins, members of their families,
related persons and others, have an indirect interest, through limited
partnerships, in less than 1% of the Common Stock. Such persons do not have the
power to vote or dispose of such shares of Common Stock.
EXPERTS
The consolidated financial statements of Owens-Illinois, Inc. appearing in
the Company's Annual Report (Form 10-K) for the year ended December 31, 1997,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The combined financial statements of BTR Packaging appearing in the Current
Report on Form 8-K of Owens-Illinois, Inc. dated April 16, 1998, have been
audited by Ernst & Young, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such combined
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
No person has been authorized to give any information or to make any
representation in connection with this offering other than those contained in
this Prospectus, and, if given or made, such information or representation must
not be relied upon as having been so authorized. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy by anyone in
any jurisdiction in which such offer to sell is not authorized, or in which the
person is not qualified to do so or to any person to whom it is unlawful to make
such offer or solicitation. Neither the delivery of this Prospectus nor any sale
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
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