<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 28, 1998
Filed pursuant to Rule 424(b)(3)
Registration No. 333-47519
P R O S P E C T U S S U P P L E M E N T
(To Prospectus Dated April 20, 1998)
12,600,000 Shares
[LOGO]
Owens-Illinois, Inc.
Common Stock
($.01 PAR VALUE)
--------------
All of the shares of common stock (the "Common Stock") offered hereby (the
"Common Stock Offering") are being sold by Owens-Illinois, Inc. (the "Company").
Concurrently with the Common Stock Offering, the Company is offering 7,000,000
shares of Preferred Stock (the "Preferred Stock Offering" and together with the
Common Stock Offering, the "Equity Offerings"), $250 million aggregate principal
amount of Senior Notes due 2005, $300 million aggregate principal amount of
Senior Notes due 2008, $300 million aggregate principal amount of Senior
Debentures due 2010, and $250 million aggregate principal amount of Senior
Debentures due 2018 (collectively, the "Debt Offerings" and, together with the
Equity Offerings, the "Offerings"). The securities offered in the Debt Offerings
are referred to herein as the "New Senior Debt Securities." The proceeds from
the Offerings will be used to repay anticipated borrowings under the Amended
Bank Credit Agreement (as defined herein). The Company expects to borrow funds
under the Amended Bank Credit Agreement to finance the acquisition of the
worldwide glass and plastics packaging businesses of BTR plc. Consummation of
the Debt Offerings is conditioned upon the consummation of the Equity Offerings.
Consummation of the Equity Offerings is not subject to consummation of the Debt
Offerings.
The Common Stock is listed on The New York Stock Exchange (the "NYSE") under
the symbol "OI." On April 27, 1998, the last reported sale price of the Common
Stock on the NYSE was $40 5/8 per share.
--------------
SEE "RISK FACTORS" BEGINNING ON PAGE S-11 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY POTENTIAL 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.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share $ $ $
Total (3) $ $ $
</TABLE>
(1) For information regarding indemnification of the Underwriters, see
"Underwriting".
(2) Before deducting offering expenses payable by the Company estimated at
$1.4 million.
(3) The Company has granted to the Underwriters a 30-day option to purchase
up to 1,890,000 additional shares of Common Stock solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to
Company will be $ , $ and $ , respectively. See
"Underwriting".
------------------
The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale when, as and if accepted by them and subject
to certain conditions. It is expected that delivery of the shares of Common
Stock offered hereby will be made at the office of Smith Barney Inc., 333 West
34th Street, New York, New York 10001, or through the facilities of The
Depository Trust Company, on or about , 1998.
--------------
Salomon Smith Barney
BT Alex. Brown
Credit Suisse First Boston
Goldman, Sachs & Co.
Lehman Brothers
Merrill Lynch & Co.
Morgan Stanley Dean Witter
<PAGE>
THIS PROSPECTUS SUPPLEMENT RELATES TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, AND IS SUBJECT TO COMPLETION OR AMENDMENT. THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR
SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH JURISDICTION.
, 1998
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING, PURCHASING COMMON STOCK TO COVER SYNDICATE
SHORT POSITIONS AND IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
<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.
Upon completion of the acquisition of the worldwide glass and plastics packaging
businesses of BTR plc ("BTR"), which is expected to close on or about April 30,
1998, the Company will be 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) will
increase the range of products through which the Company provides plastic
packaging to its customers, particularly in North America. The Acquisition also
will expand 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 would have contributed
approximately $2.4 billion, or 41%, of net sales, and its domestic glass
container operations would have 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, would have 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
S-3
<PAGE>
its major competitors. The Company's technical leadership also provides
significant licensing opportunities in the growing international glass segment
of the rigid packaging market.
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,
the Company has agreed to acquire the worldwide glass and plastics packaging
businesses of BTR plc (the "BTR Transaction"). In the BTR Transaction, the
Company will acquire 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 timing of
the closing of the BTR Transaction is subject to a number of conditions,
including receipt of approval from Australian regulatory authorities. There can
be no assurance that this approval will be received, or that any other condition
to which the BTR Transaction is subject will be satisfied, in order to close the
BTR Transaction on or about April 30, 1998.
The Acquisition will significantly expand the Company's glass packaging
business internationally and will position 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 will significantly expand the Company's customer base and
enhance 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 will 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 will 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. Upon completion of the Acquisition, the
Company will have significant ownership positions in companies located in 19
foreign countries. On a pro forma basis giving effect to the Acquisition,
international glass net sales in 1997 would have been larger than domestic glass
net sales for the first time in the Company's history, having grown from $640
million in 1992 to approximately $2.4 billion in 1997. 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 will position 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
will enhance its position as a leading producer of plastic containers and will
give 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. Upon completion of the Acquisition,
the Company also will have 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 will expand 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.
S-5
<PAGE>
The Company believes it is a leader in 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.
RECENT OPERATING RESULTS
On April 23, 1998, the Company reported first quarter net earnings of $80.4
million or $0.56 per share (diluted). The net earnings include a one-time
benefit of $0.10 per share (diluted) related to a tax rate reduction in Italy.
In the first quarter of 1997, the Company reported net earnings of $54.6
million, or $0.44 per share (diluted). Excluding the effect of certain unusual
items, 1997 first quarter earnings were $0.38 per share (diluted).
Net sales rose to $1.099 billion in the first quarter of 1998, up from
$1.056 billion in the first quarter of 1997.
AMENDED BANK CREDIT AGREEMENT; REPAYMENT OF TERM LOAN
The Company expects to finance 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 is expected to close immediately prior to, or concurrently with, the
closing of the BTR Transaction. The Amended Bank Credit Agreement will provide
up to $7.0 billion in credit facilities and consist of (i) a $2.5 billion term
loan to the Company (the "Term Loan") due 18 months following completion of the
BTR Transaction 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, will terminate on December 31, 2001.
All of the obligations of the Company's foreign subsidiaries under the Offshore
Facility will be 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 will 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") will bear interest, at the
applicable
S-6
<PAGE>
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 will pay 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 will
pay certain underwriting and other fees to the lenders and agents upon the
closing of the Amended Bank Credit Agreement.
The Credit Facilities will be unsecured. However, in the event the Company's
leverage ratio exceeds a specified level as of the end of the first fiscal
quarter ending after the date that is twelve months after the closing of the BTR
Transaction, the Company will be 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 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 will contain, 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 will be required to maintain compliance with certain covenants relating
to interest coverage and leverage. The Amended Bank Credit Agreement also will
contain 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>
<S> <C>
Common Stock Offering................. 12,600,000 shares
Common Stock outstanding after the
Common Stock Offering(1)............ 153,380,903 shares
NYSE Symbol........................... "OI"
Use of Proceeds....................... The net proceeds from the Common Stock Offering,
together with the net proceeds from the Preferred
Stock Offering and the Debt Offerings, will be used
to repay a portion of the Term Loan. See "Use of
Proceeds."
Common Stock Dividend Policy.......... No dividends have been declared or paid since the
Company's initial public offering in December 1991,
and the Company does not anticipate that it will pay
any cash dividends in the near future. See "Price
Range of Common Stock and Dividend Policy."
Risk Factors.......................... Prospective investors should carefully consider all
the information set forth and incorporated by
reference herein and, in particular, should evaluate
the specific factors set forth under "Risk Factors"
before purchasing any of the shares of Common Stock
offered hereby.
</TABLE>
- ------------------------
(1) Based on 140,780,903 shares of Common Stock outstanding as of April 24,
1998. Excludes, at April 24, 1998, 1,981,831 shares of Common Stock issuable
pursuant to immediately exercisable stock options and approximately 58,072
and 178,254 shares of Common Stock issuable in exchange for the Company's
Series A Exchangeable Preferred Stock and Series B Exchangeable Preferred
Stock, respectively. Also excludes shares of Common Stock issuable upon
conversion of the preferred stock (the "Convertible Preferred Stock") to be
issued pursuant to the Preferred Stock Offering.
S-8
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The actual historical consolidated financial data presented below relate to
each of the three years in the period ended December 31, 1997. Such data 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, notes thereto
and other financial and statistical information included or incorporated by
reference in this Prospectus Supplement and the accompanying Prospectus.
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." See
"Selected Consolidated Financial Data."
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
PRO FORMA ACTUAL
--------- -------------------------------
1997 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................................................... 464.6 302.7 302.6 299.6
--------- --------- --------- ---------
Earnings before income taxes, minority share owners' interests and
extraordinary items.............................................. 502.0 452.3 324.1 310.0
Provision for income taxes......................................... 168.9 148.5 104.9 100.8
Minority share owners' interests in earnings of subsidiaries....... 24.4 31.4 28.1 40.1
--------- --------- --------- ---------
Earnings before extraordinary items................................ $ 308.7 $ 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.......................................................... 1.96 2.01 1.55 1.37
OTHER DATA:
EBITDA(d).......................................................... $ 1,464.4 $ 1,070.8 $ 871.0 $ 813.0
Adjusted EBITDA(e)................................................. 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............................. 3.8x 3.1x 3.9x 3.5x
Weighted average shares outstanding (000's)........................ 146,197 133,597 120,276 119,343
Weighted diluted average shares (000's)(f)......................... 148,276 135,696 123,567 123,161
</TABLE>
S-9
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
PRO FORMA ACTUAL
--------- -------------------------------
1997 1997(A) 1996 1995
--------- --------- --------- ---------
(MILLIONS OF DOLLARS, EXCEPT
RATIOS, SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital.................................................... $ 829 $ 604 $ 380 $ 328
Total assets....................................................... 10,239 6,845 6,105 5,439
Total debt......................................................... 5,561 3,324 3,395 2,833
Share owners' equity............................................... 2,159 1,342 730 532
</TABLE>
- ------------------------
(a) Results of operations since January 1997 include the acquisition of AVIR
S.p.A. ("AVIR"). Also during 1997, the Company completed a refinancing plan.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
(b) Other revenues includes a gain from a divestiture of $16.3 million ($16.3
million after tax) in the year ended December 31, 1997.
(c) 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. During 1997, BTR Packaging recorded
charges of $19.1 million ($12.2 million after tax) for capacity curtailment
and restructuring.
(d) 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 $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.
(e) Adjusted EBITDA excludes a gain from a divestiture of $16.3 million for the
year ended December 31, 1997, and unusual charges of $14.1 million for the
year ended December 31, 1997 ($33.2 million on a pro forma basis) (see
footnotes (b) and (c) above).
(f) Shares of Common Stock issuable upon conversion of the Convertible Preferred
Stock and stock options to purchase 11,429, 146,975 and 781,290, weighted
average shares of Common Stock which were outstanding during 1997, 1996 and
1995, respectively, were not included in the computation of diluted earnings
per share because the effect would be antidilutive.
S-10
<PAGE>
RISK FACTORS
PURCHASERS OF THE COMMON STOCK 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, UNCERTAINTIES OR
OTHER FACTORS 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 December 31, 1997, the Company had $3.3 billion of outstanding
indebtedness. At December 31, 1997, 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 $5.6 billion. The Company has
indebtedness that is substantial in relation to its share owners' equity. At
December 31, 1997, 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 2.6 to 1.0. See "Consolidated
Capitalization" and "Unaudited Pro Forma Condensed Consolidated Financial
Information."
The Company's Amended Bank Credit Agreement will contain, 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 at maturity, which will be 18 months from the
closing of the BTR Transaction. The restrictions that will be 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 to
be contained in the Amended Bank Credit Agreement or any of the indentures
relating to its outstanding debt could result in a default thereunder, which in
turn could cause such indebtedness (and by reason of cross-default provisions,
S-11
<PAGE>
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.
PLEDGE ARRANGEMENTS
The Credit Facilities will be unsecured. However, in the event the Company's
leverage ratio exceeds a specified level as of the end of the first fiscal
quarter ending after the date that is twelve months after the closing of the BTR
Transaction, the Company will be 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") will 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 will have the right to
release the Pledged Collateral. If these arrangements are 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 will have
the ability to direct the Collateral Agent with respect to the exercise of
remedies with respect to, and releases of, the Pledged Collateral. 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 will be subject to various risks and uncertainties, including the
inability to assimilate effectively the operations, products, technologies and
personnel of 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
Upon completion of the Acquisition, the Company will operate 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 would have 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;
S-12
<PAGE>
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 April 24, 1998, approximately 23.5% 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.
SHARES ELIGIBLE FOR FUTURE SALE
After giving effect to the Common Stock Offering, and based on the number of
shares of Common Stock outstanding as of April 24, 1998, the Company will have
approximately 153,380,903 shares of Common Stock outstanding. The 36,000,000
shares held by the KKR Partnerships will continue to be "restricted shares" as
defined in Rule 144 under the Securities Act. Such shares may be resold only if
they are registered under the Securities Act or if an exemption from
registration is available, including the exemption provided by Rule 144 under
the Securities Act. The shares held by the KKR Partnerships are subject to
demand and piggyback registration rights pursuant to the terms of a Registration
Rights Agreement by and among the Company, the KKR Partnerships and KKR
Associates. All of the remaining shares of Common Stock outstanding after the
consummation of the Common Stock Offering, including 14,589,124 shares
collectively held by the Trust for Owens-Illinois Hourly Retirement Plan and the
Trust for Owens-Illinois Salary Retirement Plan, are freely tradeable without
restriction under the Securities Act by persons other than "affiliates" of the
Company. No prediction can be made as to the effect, if any, that future sales
of shares, or the availability of shares for future sale, will have on the
market price of the Common Stock prevailing from time to time. Sales of
substantial amounts of Common Stock (including shares issued upon the exercise
of stock options), or the perception that such sales could occur, could
adversely affect prevailing market prices for the Common Stock. If such sales
reduce the market price of the Common Stock, the Company's ability to raise
additional capital in the equity markets could be adversely affected. Each of
the Company, its directors, the KKR Partnerships, and certain of the Company's
executive officers has agreed that, without the written consent of Smith Barney
Inc., on behalf of the Underwriters, it will not offer, sell, contract to sell
or otherwise dispose of any Common Stock, or any securities convertible into, or
exercisable or exchangeable for, Common Stock for a period of 90 days after the
date of this Prospectus Supplement.
S-13
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offerings are estimated to be
$1,906.5 million after deducting underwriting discounts and estimated offering
expenses ($2,030.3 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 to be incurred in
connection with the BTR Transaction. Borrowings under the Term Loan mature 18
months following completion of the BTR Transaction 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............................................................. $ 500.9
Preferred Stock Offering.......................................................... 350.0
$250 million aggregate principal amount of Senior Notes due 2005.................. 250.0
$300 million aggregate principal amount of Senior Notes due 2008.................. 300.0
$300 million aggregate principal amount of Senior Debentures due 2010............. 300.0
$250 million aggregate principal amount of Senior Debentures due 2018............. 250.0
Borrowings under the Revolving Credit Facility.................................... 37.8
---------
Total sources of funds........................................................ $ 1,988.7
---------
---------
USES OF FUNDS
Repayment of Term Loan............................................................ $ 1,900.0
Estimated Fees and Expenses (including underwriters' discounts)................... 88.7
---------
Total uses of funds........................................................... $ 1,988.7
---------
---------
</TABLE>
S-14
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is traded on The New York Stock Exchange under the symbol
"OI." The following table sets forth, for each of the quarterly periods
indicated, the high and low sale prices of the Common Stock as reported on The
New York Stock Exchange.
<TABLE>
<CAPTION>
YEAR HIGH LOW
- ----------------------------------------------------------------------------- ----- ---
<S> <C> <C>
1996
First Quarter.............................................................. $ 17 1/8 $ 13 5/8
Second Quarter............................................................. 16 3/4 15 1/8
Third Quarter.............................................................. 17 1/2 15 1/4
Fourth Quarter............................................................. 22 3/4 15 1/4
1997
First Quarter.............................................................. $ 27 1/8 $ 21 1/2
Second Quarter............................................................. 34 23 3/8
Third Quarter.............................................................. 37 1/8 29 5/8
Fourth Quarter............................................................. 38 3/8 29 3/4
1998
First Quarter.............................................................. $ 46 3/16 $ 33 3/4
Second Quarter (through April 27, 1998).................................... 44 1/2 39
</TABLE>
No dividends have been declared or paid since the Company's initial public
offering in December 1991 and the Company does not anticipate that it will pay
any cash dividends on the Common Stock in the near future. The payment of any
future dividends on the Common Stock will be determined by the Company's Board
of Directors in light of conditions then existing, including the Company's
earnings, financial condition, capital requirements, restrictions in financing
arrangements, business conditions and other factors. The Company's Amended Bank
Credit Agreement will limit the Company's ability to declare and pay dividends.
Future indentures and loan facilities, if any, obtained by the Company may
prohibit or restrict the ability of the Company to pay dividends and make
distributions to its stockholders. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Capital Resources and Liquidity."
S-15
<PAGE>
CONSOLIDATED CAPITALIZATION
The following table sets forth as of December 31, 1997 (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 contained elsewhere 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 DECEMBER 31, 1997
----------------------
<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....................................................................... $ 106.8 $ 106.8
Long-term debt due within one year..................................................... 70.1 70.1
--------- -----------
Total current debt................................................................. $ 176.9 $ 176.9
--------- -----------
--------- -----------
Long-term debt:
Bank credit agreements................................................................. 2,175.0 3,312.8(a)
Senior Debentures due 1999 to 2003..................................................... 42.6 42.6
Senior Notes due 2004.................................................................. 300.0 300.0
Senior Notes due 2005.................................................................. 250.0
Senior Notes due 2007.................................................................. 300.0 300.0
Senior Notes due 2008.................................................................. 300.0
Senior Debentures due 2010............................................................. 300.0
Senior Debentures due 2018............................................................. 250.0
--------- -----------
Total notes and debentures......................................................... 642.6 1,742.6
Other.................................................................................. 329.1 329.1
--------- -----------
Total long-term debt............................................................... 3,146.7 5,384.5
Share owners' equity:
Convertible preferred stock............................................................ 339.5
Exchangeable preferred stock........................................................... 20.4 20.4
Common stock, par value $.01 per share, 140,526,195 shares outstanding, 153,126,195
shares outstanding as adjusted(b).................................................... 1.4 1.5
Capital in excess of par value......................................................... 1,558.4 2,041.5
Deficit................................................................................ (90.3) (96.0)(c)
Cumulative foreign currency translation adjustment..................................... (148.0) (148.0)
--------- -----------
Total share owners' equity......................................................... 1,341.9 2,158.9
--------- -----------
Total capitalization..................................................................... $ 4,488.6 $ 7,543.4
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(a) Includes $3.0 billion additional borrowings under the Amended Bank Credit
Agreement in connection with the Acquisition and $1,862.2 million repayment
of such borrowings in connection with the Offerings (repayment of $1.9
billion under the Term Loan, offset by $37.8 million of borrowings under the
Revolving Credit Facility).
(b) Excludes 2,202,125 shares of Common Stock issuable pursuant to immediately
exercisable stock options outstanding as of December 31, 1997.
(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-16
<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 12,600,000 shares of Common Stock in the Common Stock Offering at an offering
price of $39.75 per share; (iii) the sale and issuance of 7,000,000 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 December 31, 1997.
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-17
<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
AMOUNTS)
<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
shareowners' interests and extraordinary items................ 755.0 211.6 966.6
Interest expense................................................ 302.7 183.3 $(21.4)(b) 464.6
-------- --------- ------- ------------
Earnings before income taxes, minority shareowners' interests
and extraordinary items....................................... 452.3 28.3 21.4 502.0
Provision for income taxes...................................... 148.5 12.2 8.2(c) 168.9
Minority share owners' interests in earnings (losses) of
subsidiaries.................................................. 31.4 (7.0) 24.4
-------- --------- ------- ------------
Earnings before extraordinary items............................. 272.4 $ 23.1 $ 13.2 308.7
--------- -------
--------- -------
Exchangeable Preferred Stock dividends.......................... 1.5 1.5
Convertible Preferred Stock dividends........................... 17.5(e)
-------- ------------
Earnings available to common share owners....................... $ 270.9 $ 289.7
-------- ------------
-------- ------------
Earnings before extraordinary items per share of common stock:
Basic....................................................... $ 2.03 $ 1.98
-------- ------------
-------- ------------
Diluted..................................................... $ 2.01 $ 1.96
-------- ------------
-------- ------------
Weighted average shares outstanding (000's)..................... 133,597 146,197
Weighted diluted average shares (000's)......................... 135,676 148,276(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-18
<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 1997. 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 an
average exchange rate for 1997 of .74 U.S. dollars per Australian dollar. The
Company believes that a portion of the $1,901.3 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 $9.1 million. Amortization over 40 years
would increase net earnings by $6.8 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 $1,906.5 million from the
Offerings will be used to repay $1,862.2 million expected to be 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 for the year ended December 31, 1997, consist of
the following (in millions of dollars):
<TABLE>
<S> <C>
(1) Elimination of interest related to repayments of borrowings
under the Amended Bank Credit Agreement........................ $ (113.8)
(2) Interest on the New Senior Debt Securities:
Senior Notes due 2005 (using an assumed rate of 7.12%)......... 17.8
Senior Notes due 2008 (using an assumed rate of 7.27%)......... 21.8
Senior Debentures due 2010 (using an assumed rate of 7.42%).... 22.3
Senior Debentures due 2018 (using an assumed rate of 7.70%).... 19.3
(3) Amortization of estimated deferred finance fees related to:
Amended Bank Credit Agreement.................................. 9.8
New Senior Debt Securities..................................... 1.4
---------
$ (21.4)
---------
---------
</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 statement of results of
operations does 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 an assumed
rate of 5%.
(f) The additional 7,044,025 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-19
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT DECEMBER 31, 1997
<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............................................................. $ 218.2 $ 218.2
Short-term investments........................................... 16.1 16.1
Receivables...................................................... 681.6 $ 202.3 883.9
Inventories...................................................... 592.4 182.1 774.5
Prepaid expenses................................................. 140.0 140.0
-------- -------------- -----------
Total current assets........................................... 1,648.3 384.4 2,032.7
Investments and other assets:
Investments and advances......................................... 87.7 48.8 136.5
Repair parts inventories......................................... 227.2 56.3 283.5
Prepaid pension.................................................. 635.3 12.6 647.9
Insurance for asbestos-related costs............................. 239.3 239.3
Deposits, receivables and other assets........................... 307.0 25.0 $ 51.2(b) 383.2
Excess of purchase cost over net assets acquired................. 1,294.9 1,901.3 3,196.2
-------- -------------- ------------- -----------
Total investments and other assets............................. 2,791.4 2,044.0 4,886.6
Property, plant and equipment, at cost............................. 4,105.1 913.9 5,019.0
Less accumulated depreciation...................................... 1,699.7 1,699.7
-------- -------------- -----------
Net property, plant and equipment.................................. 2,405.4 913.9 3,319.3
-------- -------------- ------------- -----------
Total assets................................................... $6,845.1 $3,342.3 $ 51.2 $10,238.6
-------- -------------- ------------- -----------
-------- -------------- ------------- -----------
LIABILITIES AND SHARE OWNERS' EQUITY
Current liabilities:
Short-term loans and long-term debt due within one year.......... $ 176.9 $ 176.9
Current portion of asbestos-related liabilities.................. 85.0 85.0
Accounts payable and other liabilities........................... 781.9 $ 160.2 942.1
-------- -------------- -----------
Total current liabilities...................................... 1,043.8 160.2 1,204.0
Long-term debt..................................................... 3,146.7 3,000.0 $(762.2)(c) 5,384.5
Deferred taxes..................................................... 229.2 135.9 (3.6)(d) 361.5
Nonpension postretirement benefits................................. 354.8 354.8
Other liabilities.................................................. 482.2 8.8 491.0
Commitments and contingencies
Minority share owners' interests................................... 246.5 37.4 283.9
Share owners' equity:
Convertible preferred stock...................................... 339.5(e) 339.5
Exchangeable preferred stock..................................... 20.4 20.4
Common stock, par value $.01 per share,
140,526,195 shares outstanding,
153,126,195 shares outstanding as adjusted(h).................. 1.4 0.1(f) 1.5
Capital in excess of par value................................... 1,558.4 483.1(f) 2,041.5
Deficit.......................................................... (90.3) (5.7)(g) (96.0)
Cumulative foreign currency translation adjustment............... (148.0) (148.0)
-------- ------------- -----------
Total share owners' equity..................................... 1,341.9 817.0 2,158.9
-------- -------------- ------------- -----------
Total liabilities and share owners' equity................. $6,845.1 $3,342.3 $ 51.2 $10,238.6
-------- -------------- ------------- -----------
-------- -------------- ------------- -----------
</TABLE>
S-20
<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 December 31, 1997. 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 $1,901.3 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 $16.2
million and $44.3 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 $1,862.2 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
$340.4 million, less estimated expenses of $0.9 million.
(f) Reflects the estimated net proceeds of the Common Stock Offering of $484.6
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 2,202,125 shares of Common Stock issuable pursuant to immediately
exercisable stock options at December 31, 1997.
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
subsequent to the Rockware Sale by approximately $1.5 million, based on the pro
forma rate of interest.
AMENDED BANK CREDIT AGREEMENT. For pro forma purposes, the assumed interest
rate on additional borrowings under the Amended Bank Credit Agreement is 6.11%,
based on the weighted average rates in effect under the Company's existing bank
credit agreement during 1997. 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 rate will impact interest expense by
$5.7 million on an annualized basis.
NEW SENIOR DEBT SECURITIES. For pro forma purposes, the assumed interest
rates are 7.12% (U.S. Treasury issue of like maturity plus 1.40%) on the Senior
Notes due 2005, 7.27% (U.S. Treasury issue of like maturity plus 1.60%) on the
Senior Notes due 2008, 7.42% (U.S. Treasury issue of like maturity plus 1.75%)
on the Senior Debentures due 2010 and 7.70% (U.S. Treasury issue of like
maturity plus 1.75%) on the Senior Debentures due 2018. The actual interest rate
will be determined based upon market conditions at the time of pricing the Debt
Offerings. Each one-half percentage point change in the rate applied to the $1.1
billion aggregate principal amount of the New Senior Debt Securities will impact
interest expense by $5.5 million on an annualized basis.
S-21
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below relate to each of
the five years in the period ended December 31, 1997. Such data 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 contained elsewhere or incorporated by reference in this
Prospectus Supplement and the accompanying Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997(A) 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<CAPTION>
(MILLIONS OF DOLLARS, EXCEPT RATIOS, SHARES AND PER
SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED OPERATING RESULTS:
Revenues:
Net sales............................................... $ 4,658.5 $ 3,845.7 $ 3,763.2 $ 3,567.3 $ 3,535.0
Other (b)............................................... 169.9 130.5 117.8 85.6 127.1
--------- --------- --------- --------- ---------
4,828.4 3,976.2 3,881.0 3,652.9 3,662.1
Costs and expenses:
Manufacturing, shipping and delivery.................... 3,666.4 3,025.6 2,948.5 2,824.3 2,823.8
Research, engineering, selling, administrative and other
(c)................................................... 407.0 323.9 322.9 379.1 842.8
--------- --------- --------- --------- ---------
Earnings (loss) from continuing operations before
interest expense and items below...................... 755.0 626.7 609.6 449.5 (4.5)
Interest expense........................................ 302.7 302.6 299.6 278.2 290.0
--------- --------- --------- --------- ---------
Earnings (loss) from continuing operations before items
below................................................. 452.3 324.1 310.0 171.3 (294.5)
Provision (credit) for income taxes..................... 148.5 104.9 100.8 68.9 (113.1)
Minority share owners' interests in earnings of
subsidiaries.......................................... 31.4 28.1 40.1 24.1 19.4
--------- --------- --------- --------- ---------
Earnings (loss) from continuing operations before
extraordinary items................................... 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............................................ $ 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................................. $ 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........................................ $ 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................................. $ 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........................................ $ 1.24 $ 1.55 $ 1.37 $ 0.64 $ 0.03
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
S-22
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1997(A) 1996 1995 1994 1993
--------- --------- --------- --------- ---------
(MILLIONS OF DOLLARS, EXCEPT RATIOS, SHARES AND PER
SHARE DATA)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA(d)............................................... $ 1,070.8 $ 871.0 $ 813.0 $ 659.0 $ 200.7
Adjusted EBITDA (e)..................................... 1,068.6 871.0 813.0 759.0 732.8
Depreciation............................................ 283.5 219.8 188.3 183.3 180.0
Amortization of excess cost and intangibles............. 55.9 46.8 44.8 45.2 40.8
Additions to property, plant and equipment.............. 471.3 388.4 283.6 286.0 266.2
Ratio of earnings to fixed charges...................... 2.4x 2.0x 1.9x 1.5x (f)
Ratio of earnings to combined fixed charges and
preferred stock dividends............................. 2.3x 1.9x 1.9x 1.5x (f)
Ratio of Adjusted EBITDA to interest expense............ 3.5x 2.9x 2.7x 2.7x 2.5x
Ratio of total debt to Adjusted EBITDA.................. 3.1x 3.9x 3.5x 3.5x 3.4x
Weighted average shares outstanding
(in thousands)........................................ 133,597 120,276 119,343 119,005 118,978
Weighted diluted average shares
(in thousands) (g).................................... 135,676 123,567 123,161 122,863
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital......................................... $ 604 $ 380 $ 328 $ 171 $ 234
Total assets............................................ 6,845 6,105 5,439 5,318 4,901
Total debt.............................................. 3,324 3,395 2,833 2,690 2,487
Share owners' equity.................................... 1,342 730 532 376 295
</TABLE>
- ------------------------
(a) Results of operations since January 1997 include the acquisition of AVIR.
Also in May 1997, the Company completed a refinancing plan. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(b) Other revenues include gains from divestitures of $16.3 million ($16.3
million after tax) in the year ended December 31, 1997, and $46.1 million
($34.6 million after tax) in the year ended December 31, 1993.
(c) 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) 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 $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 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
S-23
<PAGE>
measures of other companies.
(e) Adjusted EBITDA excludes gains from divestitures of $16.3 million and $46.1
million for the years ended December 31, 1997 and 1993, respectively, and
unusual charges of $14.1 million, $100.0 million and $578.2 million for the
years ended December 31, 1997, 1994 and 1993, respectively, (see footnotes
(b) and (c) above).
(f) 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.
(g) Shares of Common Stock issuable upon conversion of the Convertible Preferred
Stock and 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-24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
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 Group 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.
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 Group........................................... 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 Group........................................... 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 Group 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.
S-25
<PAGE>
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 Group 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 ($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 group 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.
S-26
<PAGE>
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 Group......................................................... 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 Group......................................................... 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 Group $(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 Group 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 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 Group 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
S-27
<PAGE>
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 December 31, 1997 was $3.32 billion compared to
$3.39 billion at December 31, 1996.
At December 31, 1997, the Company had available credit totaling $3 billion
under an agreement with a group of banks ("Bank Credit Agreement"), expiring in
December 2001. At December 31, 1997, the Company had unused credit available
under the Bank Credit Agreement of $741.0 million. At December 31, 1996, total
commitments under the Company's previous credit facility were $1.8 billion of
which $628.7 million of credit had not been utilized. The increased utilization
of the Bank Credit Agreement resulted in large part from implementation of the
refinancing plan, as discussed in the following paragraph, and expenditures
related to the acquisition of the Anchor Assets. Utilization was also higher as
a result of borrowings for capital expenditures, partially offset by proceeds
received from the sale of the Company's remaining 49% interest in Kimble Glass
and cash provided by operations. Cash provided by operating activities was
$445.2 million in 1997 compared to $317.8 million in 1996. Capital expenditures
for property, plant and equipment were $471.3 million in 1997 and $388.4 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 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,
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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 will enter into the
Amended Bank Credit Agreement, which will provide for a $2.5 billion term loan
and a $4.5 billion revolving credit facility. The Term Loan will be due 18
months following the completion of the BTR Transaction, and the Revolving Credit
Facility will mature 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. In addition, following closing of the BTR
Transaction, as part of its integration activities the Company will 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.
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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.
Upon completion of the BTR Transaction, which is expected to close on or about
April 30, 1998, the Company will be 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 will increase the range
of products through which the Company provides plastics packaging to its
customers, particularly in North America. The Acquisition also will expand 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 would have contributed
approximately $2.4 billion, or 41%, of net sales, and its domestic glass
container operations would have 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, would have 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.
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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 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 will have 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.
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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 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
Upon completion of the Acquisition, the Company will have glass container
operations located in 21 countries, and the principal markets for the Company's
glass products will be 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.
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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 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. Upon
completion of the Acquisition, the Company will have 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, with the Acquisition, 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
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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 located in the United
States. As a result of the Acquisition, the Company's international operations
will expand 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 following the Acquisition,
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 following the Acquisition,
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
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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 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 different 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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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS FOR
NON-UNITED STATES HOLDERS
GENERAL
The following is a general discussion of certain United States federal
income and estate tax consequences of the acquisition, ownership and disposition
of Common Stock by a "Non-United States Holder" and does not deal with tax
consequences arising under the laws of any foreign, state, or local
jurisdiction. 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 Common Stock.
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 and estate 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 Common Stock, 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 year
(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.
DIVIDENDS
Generally, any dividend paid to a Non-United States Holder of Common Stock
will, except as described below, be subject to withholding of United States
federal income tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty, unless the dividend is effectively connected with
the conduct of a trade or business of the Non-United States Holder within the
United States and, where a tax treaty applies, is attributable to a United
States permanent establishment maintained by the Non-United States Holder. If
the dividend is so effectively connected with the conduct of a trade or business
of the Non-United States Holder within the United States, the dividend would be
subject to United States federal income tax on a net income basis at applicable
graduated individual or corporate rates and would be exempt from the 30%
withholding tax described above. A Non-United States Holder may claim exemption
from withholding under the effectively connected income exception by filing Form
4224 (Statement Claiming Exemption from Withholding of Tax on Income Effectively
Connected with the Conduct of Business in the United States) with the Company or
its paying agent. Under the recently finalized Treasury regulations (the "Final
Regulations"), Non-United States Holders will generally be required to provide
Form W-8 in lieu of Form 4224, although alternative documentation may be
applicable in certain situations.
In addition to the graduated rate described above, dividends received by a
corporate Non-United States Holder that are effectively connected with a United
States trade or business may, under certain
S-38
<PAGE>
circumstances, be subject to an additional "branch profits tax" at a 30% rate or
such lower rate as may be specified by an applicable income tax treaty.
Under current United States Treasury regulations, dividends paid to an
address outside the United States are presumed to be paid to a resident of such
country (unless the payor has knowledge to the contrary) for purposes of the
withholding discussed above, and, under the current interpretation of United
States Treasury regulations, for purposes of determining the applicability of a
tax treaty rate. Under the Final Regulations, however, a Non-United States
Holder of Common Stock who wishes to claim the benefit or an applicable treaty
rate (and to avoid backup withholding as discussed below) for dividends paid
after December 31, 1999, will be required to satisfy applicable certification
and other requirements.
A Non-United States Holder of Common Stock that is eligible for a reduced
rate of United States withholding tax pursuant to a tax treaty may obtain a
refund of any excess amounts currently withheld by filing an appropriate claim
for refund with the United States Internal Revenue Service.
DISPOSITION OF COMMON STOCK
A Non-United States Holder generally will not be subject to United States
federal income tax on any gain recognized upon the sale or other disposition of
Common Stock unless (i) such gain is effectively connected with a United States
trade or business of the Non-United States Holder and, if a tax treaty applies,
attributable to a United States permanent establishment maintained by the
Non-United States Holder, (ii) the Non-United States Holder is an individual who
is a former citizen of the United States who lost such citizenship within the
preceding ten-year period (or former long-term resident of the United States who
relinquished United States residency on or after February 6, 1995) whose loss of
citizenship or permanent residency had as one of its principal purposes the
avoidance of United States tax, (iii) in the case of certain Non-United States
Holders who are non-resident alien individuals and hold the Common Stock as a
capital asset, such individuals are present in the United States for 183 days or
more days in the taxable year of disposition and either (a) the individual has a
"tax home" in the United States for United States federal income tax purposes or
(b) the gain is attributable to an office or other fixed place of business
maintained by the individual in the United States or (iv) the Company is or has
been a "United States real property holding corporation" ("USRPHC") for federal
income tax purposes at any time within the shorter of the five-year period
preceding such disposition or such Non-United States Holder's holding period
(the "Required Holding Period"), and, provided that the Common Stock is
"regularly traded on an established securities market" for tax purposes, the
Non-United States Holder held, directly or indirectly, Common Stock with a fair
market value in excess of 5% of the fair market value of all the Company Common
Stock outstanding at any time during Required Holding Period.
If an individual Non-United States Holder falls under clauses (i) or (ii)
above, the holder will be taxed on the net gain derived from the sale under
regular United States federal income tax rates. If an individual Non-United
States Holder falls under clauses (iii) above, the holder generally will be
subject to a flat 30% tax on the gain derived from the sale which may be offset
by United States capital losses (notwithstanding the fact that the holder is not
considered a resident of the United States). If a Non-United States Holder that
is a foreign corporation falls under clause (iii) above, it will be taxed on its
gain under regular graduated United States federal income tax rates and, in
addition, will under certain circumstances be subject to the branch profits tax
equal to 30% of its "effectively connected earnings and profits" within the
meaning of the Code for the taxable year, as adjusted for certain items, unless
it qualifies for a lower rate under an applicable income tax treaty.
The Company has determined that it is not and does not believe that it will
become a USRPHC for federal income tax purposes. Although the Company believes
that the Common Stock will be treated as "regularly traded on an established
securities market," if the Common Stock were not so treated, on a sale or other
disposition of such stock, the transferee of such stock would be required to
withhold 10% of the
S-39
<PAGE>
proceeds of such disposition, unless the Company were to provide a certification
that it is not (and has not been during a specific period) a USRPHC or another
exemption applied.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company must report annually to the Internal Revenue Service and to each
Non-United States Holder the amount of dividends paid to such holder and the
amount of any tax withheld. These information reporting requirements apply
regardless of whether withholding is required. Copies of the information returns
reporting such dividends and withholding may also be made available to the tax
authorities in the country in which the Non-United States Holder resides under
the provisions of an applicable income tax treaty.
Under current law, backup withholding at the rate of 31% generally will not
apply to dividends paid to a Non-United States Holder at an address outside the
United States (unless the payor has knowledge that the payee is a United States
person). Under the Final Regulations, however, a Non-United States Holder will
be subject to backup withholding unless applicable certification requirements
are met.
Payment of the proceeds of a sale of Common Stock by or through a United
States office of a broker is subject to both backup withholding and information
reporting unless the beneficial owner certifies under penalties of perjury that
it is a Non-United States Holder or otherwise establishes an exemption. In
general, backup withholding and information reporting will not apply to a
payment of the proceeds of a sale of Common Stock by or through a foreign office
of a broker. If, however, such 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 a certain period 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 if the partnership is engaged in a trade
or business in the United States, such payments will be subject to information
reporting, but not backup withholding, unless (1) such broker has documentary
evidence in its records that the beneficial owner is a Non-United States Holder
and certain other conditions are met, or (2) the beneficial owner otherwise
establishes an exemption.
Any amounts withheld under the backup withholding rules may 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 Internal Revenue
Service.
FEDERAL ESTATE TAXES
Common Stock held (or treated as owned) by an individual Non-United States
Holder at the time of death will be included in such holder's gross estate for
United States federal estate tax purposes and may be subject to United States
federal estate tax, unless an applicable estate tax treaty provides otherwise.
S-40
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement"), the Company has agreed to sell to each of the
underwriters named below (the "Underwriters"), and each of the Underwriters, for
whom Smith Barney Inc. is acting as representative (the "Representative"), has
severally agreed to purchase from the Company, the number of shares of Common
Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- --------------------------------------------------------------------------- -------------
<S> <C>
Smith Barney Inc...........................................................
BT Alex. Brown Incorporated................................................
Credit Suisse First Boston Corporation.....................................
Goldman, Sachs & Co........................................................
Lehman Brothers Inc........................................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated.........................
Morgan Stanley & Co. Incorporated..........................................
-------------
Total.................................................................. 12,600,000
-------------
-------------
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed, subject
to the terms and conditions set forth therein, to purchase all the shares of
Common Stock offered in the Common Stock Offering if any such shares are
purchased. In the event of a default by any Underwriter, the Underwriting
Agreement provides that, in certain circumstances, purchase commitments of the
non-defaulting Underwriters may be increased or the Underwriting Agreement may
be terminated. The Underwriters have agreed to purchase such shares of Common
Stock from the Company at the public offering price set forth on the cover page
of this Prospectus Supplement and the Company has agreed to pay the Underwriters
the underwriting discount set forth on the cover page of this Prospectus
Supplement for each share of Common Stock so purchased. The Company has been
advised by the Representative that the several Underwriters propose initially to
offer such shares of Common Stock to the public at the public offering price set
forth on the cover page of this Prospectus Supplement, and to certain dealers at
such price, less a concession not in excess of $ per share. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share to other dealers. After the Common Stock Offering, the
public offering price and such concessions may be changed.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus Supplement, to purchase up
to an aggregate of 1,890,000 additional shares of Common Stock at the same
public offering price per share as set forth on the cover page of this
Prospectus Supplement to cover over-allotments, if any. The Company has agreed
to pay the Underwriters the underwriting discount set forth on the cover page of
this Prospectus Supplement for each additional share of Common Stock so
purchased. To the extent that the Underwriters exercise such option, each
Underwriter will have a firm commitment, subject to certain conditions, to
purchase the same proportion of such shares as the number of shares to be
purchased and offered by such Underwriter in the above table bears to the total
number of shares initially offered by the Underwriters.
If the overallotment option is exercised, 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 acquired in 1991.
Each of the Company, its directors, the KKR Partnerships and certain
executive officers has agreed that none of them will, directly or indirectly,
offer, sell, announce its intention to sell, contract to sell, pledge,
hypothecate, grant any option to purchase or otherwise dispose of, any shares of
Common Stock or securities convertible or exchangeable into or exercisable for
any shares of Common Stock without the
S-41
<PAGE>
prior written consent of Smith Barney Inc. for a period of 90 days after the
date of this Prospectus Supplement, subject to certain exceptions.
Until the distribution of the Common Stock is completed, rules of the
Commission may limit the ability of the Underwriters to bid for and purchase the
Common Stock. As an exception to these rules, the Representative is permitted to
engage in certain transactions that stabilize the price of the Common Stock.
Such transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Common Stock.
If the Underwriters create short positions in the Common Stock in connection
with the Common Stock Offering by selling more shares of Common Stock than are
set forth on the cover page of this Prospectus Supplement, the Representative
may reduce that short position by purchasing Common Stock in the open market.
The Representative may also elect to reduce any short position by exercising all
or part of the over-allotment option described above.
The Representative may also impose a penalty bid on certain Underwriters.
This means that if the Representative purchases shares of Common Stock in the
open market to reduce the Underwriters' short position or to stabilize the price
of shares of Common Stock, it may reclaim the amount of selling concession from
the Underwriters who sold those shares as part of the Common Stock Offering. In
general, purchases of a security for the purpose of stabilization or to reduce a
short position could cause the price of the security to be higher than it might
be in the absence of such purchases. The imposition of a penalty bid might also
have an effect on the price of a security to the extent that it were to
discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of shares of Common Stock. In addition,
neither the Company nor any of the Underwriters makes any representation that
the Representative will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act, or contribute to payments the Underwriters may be required
to make in respect thereof.
The Underwriters and 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, Smith Barney Inc. is the lead
underwriter in the Preferred Stock Offering and Salomon Brothers Inc, an
affiliate of Smith Barney Inc., is a managing underwriter in the Debt Offerings.
Morgan Stanley & Co. Incorporated is the lead underwriter in the Debt Offerings.
BT Alex. Brown Incorporated will be an Arranger of, and Bankers Trust Company,
an affiliate of BT Alex. Brown Incorporated, will be the Administrative Agent
and a lender 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.
LEGAL MATTERS
Certain legal matters with respect to the Common Stock 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-42
<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.
2
<PAGE>
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.
3
<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
4
<PAGE>
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.
5
<PAGE>
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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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
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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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NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS.
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OF ANY
SECURITIES OTHER THAN THOSE TO WHICH THEY RELATE OR AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH THEY RELATE IN ANY STATE TO ANY
PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH STATE. THE DELIVERY
OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DOES NOT IMPLY THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary........... S-3
Risk Factors............................ S-11
Use of Proceeds......................... S-14
Price Range of Common Stock and Dividend
Policy................................ S-15
Consolidated Capitalization............. S-16
Unaudited Pro Forma Condensed
Consolidated Financial Information.... S-17
Selected Consolidated Financial Data.... S-22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ S-25
Business................................ S-30
BTR Packaging........................... S-36
Certain United States Federal Tax
Considerations for Non-United
States Holders........................ S-38
Underwriting............................ S-41
Legal Matters........................... S-42
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
Earning 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>
12,600,000 Shares
Owens-Illinois, Inc.
Common Stock
[LOGO]
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P R O S P E C T U S S U P P L E M E N T
(TO PROSPECTUS DATED APRIL 20, 1998)
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Salomon Smith Barney
BT Alex. Brown
Credit Suisse First Boston
Goldman, Sachs & Co.
Lehman Brothers
Merrill Lynch & Co.
Morgan Stanley Dean Witter
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