<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark one) FORM 10-Q
(x) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended March 31, 2000
or
( ) Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Owens-Illinois, Inc.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-9576 22-2781933
- ---------------- ----------- -------------------
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification No.)
incorporation or
organization)
One SeaGate, Toledo, Ohio 43666
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
419-247-5000
- ------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Owens-Illinois, Inc. $.01 par value common stock - 146,556,413
shares at April 30, 2000.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The Condensed Consolidated Financial Statements presented herein are unaudited
but, in the opinion of management, reflect all adjustments necessary to
present fairly such information for the periods and at the dates indicated.
Since the following unaudited condensed consolidated financial statements have
been prepared in accordance with Article 10 of Regulation S-X, they do not
contain all information and footnotes normally contained in annual
consolidated financial statements; accordingly, they should be read in
conjunction with the Consolidated Financial Statements and notes thereto
appearing in the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1999.
2
<PAGE>
OWENS-ILLINOIS, INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
Three months ended March 31, 2000 and 1999
(Millions of dollars, except share and per share amounts)
2000 1999
-------- --------
Revenues:
Net sales $1,345.6 $1,307.0
Royalties and net technical assistance 7.2 7.0
Equity earnings 3.3 4.5
Interest 6.8 5.8
Other 47.2 29.0
-------- --------
1,410.1 1,353.3
Costs and expenses:
Manufacturing, shipping, and delivery 1,045.9 999.8
Research and development 10.5 9.6
Engineering 11.8 9.4
Selling and administrative 75.3 66.6
Interest 115.2 105.2
Other 50.1 43.5
-------- --------
1,308.8 1,234.1
-------- --------
Earnings before items below 101.3 119.2
Provision for income taxes 40.5 46.2
Minority share owners' interests in earnings
of subsidiaries 2.1 3.7
-------- --------
Net earnings $ 58.7 $ 69.3
======== ========
Basic net earnings per share of common stock $ 0.36 $ 0.41
======== ========
Weighted average shares outstanding (thousands) 146,585 155,611
======= =======
Diluted net earnings per share of common stock $ 0.36 $ 0.41
======== ========
Weighted diluted average shares (thousands) 147,184 157,110
======= =======
See accompanying notes.
3
<PAGE>
OWENS-ILLINOIS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2000, December 31, 1999, and March 31, 1999
(Millions of dollars)
March 31, Dec. 31, March 31,
2000 1999 1999
--------- --------- ---------
Assets
Current assets:
Cash, including time deposits $ 182.3 $ 257.1 $ 240.1
Short-term investments, at cost which
approximates market 39.7 32.1 30.2
Receivables, less allowances for losses
and discounts ($61.9 at March 31, 2000,
$56.9 at December 31, 1999, and $50.5 at
March 31, 1999) 880.3 856.4 854.7
Inventories 873.2 826.6 858.4
Prepaid expenses 140.2 137.6 168.5
--------- --------- ---------
Total current assets 2,115.7 2,109.8 2,151.9
Other assets:
Equity investments 190.5 195.2 186.8
Repair parts inventories 249.5 234.1 250.3
Prepaid pension 770.1 745.6 704.7
Insurance receivable for
asbestos-related costs 205.3 205.3 212.8
Deposits, receivables, and other assets 521.5 527.8 401.5
Net assets held for sale 397.5
Excess of purchase cost over net assets
acquired, net of accumulated
amortization ($527.5 at March 31,
2000, $502.8 at December 31, 1999,
and $429.3 at March 31, 1999) 3,236.0 3,294.4 3,294.0
--------- --------- ---------
Total other assets 5,172.9 5,202.4 5,447.6
Property, plant, and equipment, at cost 5,732.2 5,590.8 5,273.7
Less accumulated depreciation 2,229.8 2,146.7 1,969.9
--------- --------- ---------
Net property, plant, and equipment 3,502.4 3,444.1 3,303.8
--------- --------- ---------
Total assets $10,791.0 $10,756.3 $10,903.3
========= ========= =========
4
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS -- continued
March 31, Dec. 31, March 31,
2000 1999 1999
--------- --------- ---------
Liabilities and Share Owners' Equity
Current liabilities:
Short-term loans and long-term debt
due within one year $ 220.8 $ 205.7 $ 284.2
Current portion of asbestos-related
liabilities 85.0 85.0 85.0
Accounts payable and other liabilities 941.2 982.4 957.3
--------- --------- ---------
Total current liabilities 1,247.0 1,273.1 1,326.5
Long-term debt 5,782.3 5,733.1 5,667.2
Deferred taxes 426.2 407.4 336.0
Nonpension postretirement benefits 308.7 314.9 332.8
Other liabilities 477.5 483.0 618.7
Commitments and contingencies
Minority share owners' interests 184.4 194.9 211.8
Share owners' equity:
Convertible preferred stock, par value
$.01 per share, liquidation preference
$50 per share, 9,050,000 shares
authorized, issued and outstanding 452.5 452.5 452.5
Exchangeable preferred stock 3.4 4.0 12.9
Common stock, par value $.01 per share,
250,000,000 shares authorized,
156,957,243 shares issued and outstanding,
less 10,000,000 treasury shares at
March 31, 2000 (156,851,337 issued and
outstanding, less 10,000,000 treasury
shares at December 31, 1999; and
155,813,289 issued and outstanding
at March 31, 1999) 1.6 1.6 1.5
Capital in excess of par value 2,203.8 2,201.9 2,190.0
Treasury stock, at cost (225.6) (225.6)
Retained earnings 337.4 284.1 71.2
Accumulated other comprehensive income (408.2) (368.6) (317.8)
--------- --------- ---------
Total share owners' equity 2,364.9 2,349.9 2,410.3
--------- --------- ---------
Total liabilities and share owners' equity $10,791.0 $10,756.3 $10,903.3
========= ========= =========
See accompanying notes.
5
<PAGE>
OWENS-ILLINOIS, INC.
CONDENSED CONSOLIDATED CASH FLOWS
Three months ended March 31, 2000 and 1999
(Millions of dollars)
2000 1999
-------- --------
Cash flows from operating activities:
Net earnings $ 58.7 $ 69.3
Non-cash charges (credits):
Depreciation 104.3 102.4
Amortization of deferred costs 36.3 34.3
Other (33.7) (13.3)
Change in non-current operating assets (.7) (14.6)
Asbestos-related payments (26.9) (35.0)
Reduction of non-current liabilities (10.8) (2.3)
Change in components of working capital (115.4) (129.1)
-------- --------
Cash provided by operating activities 11.8 11.7
Cash flows from investing activities:
Additions to property, plant, and equipment (134.8) (101.8)
Acquisitions, net of cash acquired (47.4) (18.1)
Net cash proceeds from divestitures 16.6 1.2
-------- --------
Cash utilized in investing activities (165.6) (118.7)
Cash flows from financing activities:
Additions to long-term debt 304.4 138.5
Repayments of long-term debt (241.1) (87.1)
Increase in short-term loans 24.3 41.1
Payment of convertible preferred stock dividends (5.4) (5.4)
Issuance of common stock and other .5 .2
-------- --------
Cash provided by financing activities 82.7 87.3
Effect of exchange rate fluctuations on cash (3.7) (11.6)
-------- --------
Decrease in cash (74.8) (31.3)
Cash at beginning of period 257.1 271.4
-------- --------
Cash at end of period $ 182.3 $ 240.1
======== ========
See accompanying notes.
6
<PAGE>
OWENS-ILLINOIS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Tabular data in millions of dollars,
except share and per share amounts
1. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings
per share:
- -----------------------------------------------------------------------------
Three months ended
March 31,
----------------------------
2000 1999
Numerator: ----------- -----------
Net earnings $58.7 $69.3
Preferred stock dividends:
Convertible (5.4) (5.4)
Exchangeable (.1) (.2)
- -----------------------------------------------------------------------------
Numerator for basic earnings per
share - income available to common
share owners 53.2 63.7
Effect of dilutive securities -
exchangeable preferred stock dividends .1 .2
- -----------------------------------------------------------------------------
Numerator for diluted earnings per
share - income available to common
share owners after assumed
exchanges of preferred stock
for common stock $53.3 $63.9
=============================================================================
Denominator:
Denominator for basic earnings per
share - weighted average
shares outstanding 146,584,972 155,610,547
Effect of dilutive securities:
Stock options 306,897 642,055
Exchangeable preferred stock 291,804 857,145
- -----------------------------------------------------------------------------
Dilutive potential common shares 598,701 1,499,200
- -----------------------------------------------------------------------------
Denominator for diluted earnings
per share - adjusted weighted
average shares and assumed
exchanges of preferred stock for
common stock 147,183,673 157,109,747
=============================================================================
Basic earnings per share $0.36 $0.41
=============================================================================
Diluted earnings per share $0.36 $0.41
=============================================================================
7
<PAGE>
The Convertible preferred stock was not included in the computation of March
31, 2000 and March 31, 1999 diluted earnings per share since the result would
have been antidilutive. Options to purchase 4,621,348 and 2,933,347 weighted
average shares of common stock which were outstanding during the three months
ended March 31, 2000 and 1999, respectively, were not included in the
computation of diluted earnings per share because the options' exercise price
was greater than the average market price of the common shares.
2. Inventories
Major classes of inventory are as follows:
March 31, Dec. 31, March 31,
2000 1999 1999
--------- -------- ---------
Finished goods $619.7 $580.0 $643.7
Work in process 36.0 36.3 35.3
Raw materials 131.0 131.3 115.6
Operating supplies 86.5 79.0 63.8
------ ------ ------
$873.2 $826.6 $858.4
====== ====== ======
8
<PAGE>
3. Long-Term Debt
The following table summarizes the long-term debt of the Company:
- -----------------------------------------------------------------------------
March 31, Dec. 31, March 31,
2000 1999 1999
Bank Credit Agreement: --------- -------- ---------
Revolving Credit Facility:
Revolving Loans $2,795.0 $2,559.4 $2,235.0
Offshore Loans:
1.39 billion (1.42 billion at
December 31, 1999; 1.30 billion at
March 31, 1999) Australian
dollars 855.4 904.4 804.4
135.0 million (230.0 million at
December 31, 1999; 333.0 million
at March 31, 1999) British pounds 213.3 369.5 534.1
95.0 billion (100.0 billion at
December 31, 1999; 118.0 billion at
March 31, 1999) Italian lira 47.4 52.0 67.1
Bid Rate Loans 75.0
Senior Notes:
7.85%, due 2004 300.0 300.0 300.0
7.15%, due 2005 350.0 350.0 350.0
8.10%, due 2007 300.0 300.0 300.0
7.35%, due 2008 250.0 250.0 250.0
Senior Debentures:
7.50%, due 2010 250.0 250.0 250.0
7.80%, due 2018 250.0 250.0 250.0
Other 222.7 224.6 341.7
- -----------------------------------------------------------------------------
5,833.8 5,809.9 5,757.3
Less amounts due within one year 51.5 76.8 90.1
- -----------------------------------------------------------------------------
Long-term debt $5,782.3 $5,733.1 $5,667.2
=============================================================================
In April 1998, the Company entered into the Second Amended and Restated Credit
Agreement (the "Bank Credit Agreement" or "Agreement") with a group of banks
which expires on December 31, 2001. The Agreement provides for a $4.5 billion
revolving credit facility (the "Revolving Credit Facility"), which includes a
$1.75 billion fronted offshore loan revolving facility (the "Offshore
Facility") denominated in certain foreign currencies, subject to certain
sublimits, available to certain of the Company's foreign subsidiaries. The
Agreement includes an Overdraft Account facility providing for aggregate
borrowings up to $100 million which reduce the amount available for borrowing
under the Revolving Credit Facility. In addition, the terms of the Bank
Credit Agreement permit the Company to request Bid Rate Loans from banks
participating in the Agreement. Borrowings outstanding under Bid Rate Loans
are limited to $750 million and reduce the amount available for borrowing
under the Revolving Credit Facility. The Agreement also provides for the
issuance of letters of credit totaling up to $500 million, which also reduce
the amount available for borrowing under the Revolving Credit Facility. At
9
<PAGE>
March 31, 2000, the Company had unused credit of $534.2 million available
under the Bank Credit Agreement.
Borrowings under the Revolving Loans commitment bear interest, at the
Company's option, at the prime rate or a reserve adjusted Eurodollar rate.
Loans under the Offshore Facility bear interest, at the applicable borrower's
option, at the applicable Offshore Base Rate or the Adjusted Offshore Periodic
Rate (as those terms are defined in the Bank Credit Agreement). Borrowings
under the Revolving Credit Facility also bear a margin linked to the Company's
Consolidated Leverage Ratio, as defined in the Agreement. The margin is
currently .750% and is limited to a range of .275% to 1.000%. Overdraft
Account loans bear interest at the prime rate minus the facility fee
percentage, defined below. The weighted average interest rate on borrowings
outstanding under the Revolving Loans commitment at March 31, 2000, was 6.79%.
The weighted average interest rate on borrowings outstanding under the
Offshore Facility at March 31, 2000, was 6.27%. While no compensating
balances are required by the Agreement, the Company must pay a facility fee on
the Revolving Credit Facility commitments. The facility fee, currently .375%,
is limited to a range of .125% and .500%, based on the Company's Consolidated
Leverage Ratio.
Borrowings outstanding under the Bank Credit Agreement are unsecured. All of
the obligations of the Company's foreign subsidiaries under the Offshore
Facility are guaranteed by the Company. The Company's Senior Notes and Senior
Debentures rank pari passu with the obligations of the Company under the Bank
Credit Agreement. The Bank Credit Agreement, Senior Notes, and Senior
Debentures are senior in right of payment to all existing and future
subordinated debt of the Company.
Under the terms of the Bank Credit Agreement, dividend payments with respect
to the Company's Preferred or Common Stock and payments for redemption of
shares of its Common Stock are subject to certain limitations. The Agreement
also requires, among other things, the maintenance of certain financial
ratios, and restricts the creation of liens and certain types of business
activities and investments.
4. Cash Flow Information
Interest paid in cash aggregated $68.2 million for the first quarter of 2000
and $54.4 million for the first quarter of 1999. Income taxes paid in cash
totaled $8.7 million for the first quarter of 2000 and $11.6 million for the
first quarter of 1999.
5. Comprehensive Income
The Company's components of comprehensive income are net earnings and foreign
currency translation adjustments. Total comprehensive income (loss) for the
three month periods ended March 31, 2000 and 1999 amounted to $19.1 million
and $(57.8) million, respectively.
10
<PAGE>
6. Net Assets Held for Sale
In connection with the April 1998 acquisition of the worldwide glass and
plastics packaging businesses of BTR plc, the Company committed to sell BTR's
United Kingdom glass container manufacturer ("Rockware") obtained in the
transaction. Early in the second quarter of 1999, the Company completed the
sale of Rockware to a subsidiary of Ardagh plc, an Irish glass container
manufacturer based in Dublin, Ireland, for total consideration of 249 million
pounds sterling (approximately $405 million). The accompanying Condensed
Consolidated Results of Operations for the three months ended March 31, 1999,
exclude Rockware and related financing costs. The carrying value of Rockware
at March 31, 1999 was based upon estimated future cash flows associated with
the assets. In connection with the sale of Rockware, the Company received
notes of approximately $135 million. Cash proceeds from the Rockware sale
were used for the reduction of debt and for general corporate purposes.
7. Contingencies
The Company is one of a number of defendants (typically 10 to 20) in a
substantial number of lawsuits filed in numerous state and federal courts by
persons alleging bodily injury (including death) as a result of exposure to
dust from asbestos fibers. From 1948 to 1958, one of the Company's former
business units commercially produced and sold approximately $40 million of a
high-temperature, clay-based insulating material containing asbestos. The
Company exited the insulation business in April 1958. The traditional
asbestos personal injury lawsuits and claims relating to such production and
sale of asbestos material typically allege various theories of liability,
including negligence, gross negligence and strict liability and seek
compensatory and punitive damages in various amounts (herein referred to as
"asbestos claims"). As of March 31, 2000, the Company estimates that it is a
named defendant in asbestos claims involving approximately 17,000 plaintiffs
and claimants.
The Company is also a defendant in other asbestos-related lawsuits or claims
involving maritime workers, medical monitoring claimants, co-defendants and
property damage claimants. Based on its past experience, the Company believes
that the foregoing categories of claims will not involve any material
liability and they are not included in the above description of pending
claims.
In 1984, the Company initiated litigation in New Jersey against the Company's
insurers, including its wholly-owned captive insurer Owens Insurance Limited
("OIL"), and certain other parties for the years 1977 through 1985 in which
the Company sought damages and a declaration of coverage for both asbestos
bodily injury and property damage claims under insurance policies in effect
during those years (Owens-Illinois, Inc. v. United Insurance Co., et al,
Superior Court of New Jersey, Middlesex County, November 30, 1984). Beginning
in December 1994 and continuing intermittently for approximately one year
thereafter, the Company entered into settlements for approximately $240
million of its coverage claim against OIL to the extent of reinsurance
provided to OIL by the settling reinsurance companies. Following such
11
<PAGE>
settlements, a settlement agreement (the "OIL Settlement") was reached with
OIL. The OIL Settlement called for the payment of remaining non-settled
reinsurance at 78.5% of applicable reinsurance limits, increasing to 81% on
approximately March 1, 1996 and accruing interest thereafter at 10% per annum.
In December 1995, the presiding judge in the United Insurance case entered a
Consent Judgment approving the OIL Settlement, and specifically finding that
it was a good faith settlement which was fair and reasonable as to OIL and all
of OIL's non-settling reinsurers.
In November 1995, a reinsurer of OIL during the years affected by the United
Insurance case brought a separate suit against OIL seeking a declaratory
judgment that it had no reinsurance obligation to OIL (Employer's Mutual v.
Owens-Insurance Limited, Superior Court of New Jersey, Morris County, December
1995). The Company was not a named party to this cause of action but was
subsequently joined in it as a necessary party defendant.
Subsequent to the entry of the Consent Judgment Order in the United Insurance
case described above, OIL gave notice of the OIL Settlement to all non-
settling reinsurers affected by the United Insurance case, informing all such
reinsurers of the terms of the OIL Settlement and demanding timely payment
from such reinsurers pursuant to such terms. Since the date of the OIL
Settlement, 28 previously non-settling reinsurers have made the payments
called for under the OIL Settlement or otherwise settled their obligations
thereunder. Other non-settling solvent reinsurers, all of which are parties
to the Employers Mutual case described above, have not, however, made the
payments called for under the OIL Settlement.
As a result of payments and commitments that have been made by reinsurers
pursuant to the OIL Settlement and the earlier settlement agreements described
above in the United Insurance case and certain other available insurance, the
Company has to date confirmed coverage for its asbestos-related costs of
approximately $317.5 million. Of the total amount confirmed to date, $304.7
million had been received through March 31, 2000; and the balance of
approximately $12.8 million will be received throughout 2000 and the next
several years. The remainder of the insurance asset of approximately $192.5
million relates principally to the reinsurers who have not yet paid, and
continue to contest, their reinsurance obligations under the OIL Settlement.
The Company believes, based on the rulings of the trial court, the Appellate
Division and the New Jersey Supreme Court in the United Insurance case, as
well as its understanding of the facts and legal precedents and based on
advice of counsel, McCarter & English L.L.P., that it is probable substantial
additional payments will be received to cover the Company's asbestos-related
claim losses.
The Company believes that its ultimate asbestos-related contingent liability
(i.e., its indemnity or other claim disposition costs plus related litigation
expenses) is difficult to estimate with certainty. However, in 1993, the
Company established a liability of $975 million to cover what it then
estimated would be the total indemnity payments and legal fees associated with
the resolution of then outstanding and all expected future asbestos lawsuits
and claims. In 1998, an additional liability of $250 million was established
12
<PAGE>
to cover what the Company estimated to be the total indemnity payments and
legal fees associated with the resolution of outstanding asbestos personal
injury lawsuits and claims and asbestos personal injury lawsuits and claims
filed during the succeeding five years, after which any remaining liability
was not expected to be material in relation to the Company's Consolidated
Financial Statements.
Since establishing the additional liability in 1998, the Company has continued
to monitor the trends of matters which may affect its ultimate liability and
has continued to analyze the trends, developments and variables affecting or
likely to affect the resolution of pending and future asbestos claims against
the Company. The number of asbestos lawsuits and claims pending and filed
against the Company since 1998 has exceeded the number estimated at that time.
The trend of costs to resolve lawsuits and claims since 1998 has also been
unfavorable compared to expectations. As a result, the asbestos liability may
not be sufficient for the five year period originally anticipated in 1998.
As part of its continual monitoring of asbestos-related matters, during 2000
the Company intends to conduct a comprehensive review to determine if further
adjustments of asbestos-related assets or liabilities are appropriate. The
Company cannot presently predict the outcome of the review.
Subject to completion of the comprehensive review in 2000 noted above, based
on all the factors and matters relating to the Company's asbestos-related
litigation and claims, the Company presently believes that its asbestos-
related costs and liabilities will not exceed by a material amount the sum of
the available insurance reimbursement the Company believes it has and will
have principally as a result of the United Insurance case, and the OIL
Settlement, as described above, and the amount of the charges for asbestos-
related costs previously recorded.
Other litigation is pending against the Company, in many cases involving
ordinary and routine claims incidental to the business of the Company and in
others presenting allegations that are nonroutine and involve compensatory,
punitive or treble damage claims as well as other types of relief. The
ultimate legal and financial liability of the Company in respect to the
lawsuits and proceedings referred to above, in addition to other pending
litigation, cannot be estimated with certainty. However, the Company
believes, based on its examination and review of such matters and experience
to date, that such ultimate liability will not be material in relation to the
Company's Consolidated Financial Statements.
8. Segment Information
The Company operates in the rigid packaging industry. The Company has two
reportable product segments within the rigid packaging industry: (1) Glass
Containers and (2) Plastics Packaging. The Plastics Packaging segment
consists of three business units -- plastic containers, closure and specialty
products, and prescription products. The Other segment consists primarily of
the Company's labels and carriers products business unit.
13
<PAGE>
The Company evaluates performance and allocates resources based on earnings
before interest income, interest expense, provision for income taxes, minority
share owners' interests in earnings of subsidiaries, and extraordinary
charges, (collectively "EBIT") excluding unusual items. EBIT for product
segments includes an allocation of corporate expenses based on both a
percentage of sales and direct billings based on the costs of specific
services provided.
Financial information for the three month periods ended March 31, 2000 and
1999 regarding the Company's product segments is as follows:
- -----------------------------------------------------------------------------
Elimina-
tions
Total and Consoli-
Glass Plastics Product Other dated
Containers Packaging Other Segments Retained Totals
- -----------------------------------------------------------------------------
Net sales:
March 31, 2000 $883.9 $443.2 $18.5 $1,345.6 $1,345.6
March 31, 1999 873.1 415.3 18.6 1,307.0 1,307.0
=============================================================================
EBIT:
March 31, 2000 $135.0 $ 71.5 $ (.1) $ 206.4 $ 3.3 $ 209.7
March 31, 1999 140.3 79.7 1.7 221.7 (3.1) 218.6
=============================================================================
The reconciliation of EBIT to consolidated totals for the three month periods
ended March 31, 2000 and 1999 is as follows:
- -----------------------------------------------------------------------------
March 31, 2000 March 31, 1999
- -----------------------------------------------------------------------------
Earnings before income taxes and minority
share owners' interests in earnings of
subsidiaries:
EBIT for reportable segments $206.4 $221.7
Eliminations and other retained 3.3 (3.1)
Net interest expense (108.4) (99.4)
- -----------------------------------------------------------------------------
Total $101.3 $119.2
=============================================================================
14
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations - First Quarter 2000 compared with First Quarter 1999
The Company recorded net earnings of $58.7 million for the first quarter of
2000 compared to $69.3 million for the first quarter of 1999. Consolidated
EBIT for the first quarter of 2000 was $209.7 million, a decrease of $8.9
million, or 4.1%, compared to the first quarter of 1999 EBIT of $218.6
million. The decrease is attributable to lower EBIT for both the Glass
Containers and the Plastics Packaging segments as discussed below. Interest
expense, net of interest income, increased $9.0 million from the 1999 period
due principally to higher interest rates. The Company's estimated effective
tax rate for the first quarter of 2000 was 40.0%. This compares with an
estimated rate of 38.8% for the first quarter of 1999 and the actual rate of
36.9% for the full year of 1999, excluding unusual items. The increase in the
2000 estimated rate is primarily the result of the non-recurrence of certain
foreign tax credits which benefited 1999 results.
Capsule segment results (in millions of dollars) for the first quarter of 2000
and 1999 were as follows:
- ----------------------------------------------------------------------------
Net sales
(Unaffiliated customers) EBIT (a)
- ----------------------------------------------------------------------------
2000 1999 2000 1999
-------- -------- -------- --------
Glass Containers $ 883.9 $ 873.1 $ 135.0 $ 140.3
Plastics Packaging 443.2 415.3 71.5 79.7
Other 18.5 18.6 (.1) 1.7
- ----------------------------------------------------------------------------
Segment totals 1,345.6 1,307.0 206.4 221.7
Eliminations and other
retained costs 3.3 (3.1)
- ----------------------------------------------------------------------------
Consolidated totals $1,345.6 $1,307.0 $ 209.7 $ 218.6
============================================================================
(a) EBIT consists of consolidated earnings before interest income, interest
expense, provision for income taxes, and minority share owners' interests in
earnings of subsidiaries.
Consolidated net sales for the first quarter of 2000 increased $38.6 million,
or 3.0%, over the prior year. Net sales of the Glass Containers segment
increased $10.8 million, or 1.2%, from 1999. In the United States, shipments
were approximately equal to the prior year. The combined U.S. dollar sales of
the segment's foreign affiliates increased over the prior year. Increased
shipments from the Company's operations in Italy, Poland, Colombia, Brazil,
and China were partially offset by continued weak economic and market
conditions in markets served by the Company's operations in Venezuela,
Ecuador, and Europe. The effect of changing foreign currency exchange rates
reduced 2000 U.S. dollar sales of the segment's foreign affiliates by
15
<PAGE>
approximately $35 million. Net sales of the Plastics Packaging segment
increased $27.9 million, or 6.7%, over 1999, reflecting increased shipments of
plastic containers for juices and closures for food and beverages, partially
offset by lower shipments of prescription packaging.
Segment EBIT for the first three months of 2000 decreased $15.3 million, or
6.9%, to $206.4 million from 1999 segment EBIT of $221.7 million. EBIT of the
Glass Containers segment decreased $5.3 million to $135.0 million, compared to
$140.3 million in 1999. The combined U.S. dollar EBIT of the segment's
foreign affiliates decreased from prior year. Increased shipments from the
Company's operations in Italy, Poland, Colombia, Brazil, and China, and a gain
from the restructuring of the ownership in two small joint ventures in South
America were more than offset by soft market conditions for most of the
affiliates located in Europe and South America, expenses associated with the
scheduled rebuild of a glass melting furnace in Australia, and higher energy
costs worldwide. In the United States, Glass Container EBIT increased from
1999 as a result of further improvements in cost structure. The EBIT of the
Plastics Packaging segment decreased $8.2 million to $71.5 million, compared
to $79.7 million in 1999. Increased shipments of plastic containers for
juices and closures for food and beverages were more than offset by costs
incurred in connection with the start-up of a new plastic bottle plant and a
decrease in shipments of prescription packaging. Eliminations and other
retained costs improved $6.4 million from 1999 reflecting principally higher
net financial services income.
Capital Resources and Liquidity
The Company's total debt at March 31, 2000 was $6.00 billion, compared to
$5.94 billion at December 31, 1999 and $5.95 billion at March 31, 1999.
At March 31, 2000, the Company had available credit totaling $4.5 billion
under its agreement with a group of banks ("Bank Credit Agreement") expiring
in December 2001, of which $534.2 million had not been utilized. At December
31, 1999, the Company had $565.3 million of credit which had not been utilized
under the Bank Credit Agreement. Cash provided by operating activities was
$11.8 million for the first three months of 2000 compared to $11.7 million for
the first three months of 1999.
The Company anticipates that cash flow from its operations and from utiliza-
tion of credit available through December 2001 under the 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 expecta-
tions regarding future 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.
16
<PAGE>
The Company's Board of Directors has authorized the management of the Company
to repurchase up to 20 million shares of the Company's common stock. Since
July 1999, the Company has repurchased 10,000,000 shares for $225.6 million.
No shares were repurchased during the first quarter of 2000. The Company
intends to purchase its common stock from time to time on the open market
depending on market conditions and other factors. The Company believes that
cash flows from its operations and from utilization of credit available under
the Bank Credit Agreement will be sufficient to fund such repurchases in
addition to the obligations mentioned in the previous paragraph.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
The Bank Credit Agreement provides, among other things, a $1.75 billion
offshore revolving loan facility which is available to certain of the
Company's foreign subsidiaries and denominated in certain foreign currencies.
For further information about the facility and related foreign currency loan
amounts outstanding, see Note 3 to the financial statements.
Forward Looking Statements
This document may contain "forward looking" statements as defined in the
Private Securities Litigation Reform Act of 1995. Forward looking statements
reflect the Company's best assessment at the time, and thus involve
uncertainty and risk. It is possible the Company's future financial
performance may differ from expectations due to a variety of factors
including, but not limited to the following: (1) foreign currency
fluctuations relative to the U.S. dollar, (2) change in capital availability
or cost, including interest rate fluctuations, (3) the general political,
economic and competitive conditions in markets and countries where the Company
has operations, including competitive pricing pressures, inflation or
deflation, and changes in tax rates, (4) consumer preferences for alternative
forms of packaging, (5) fluctuations in raw material and labor costs,
(6) availability of raw materials, (7) costs and availability of energy,
(8) transportation costs, (9) consolidation among competitors and customers,
(10) the ability of the Company to integrate operations of acquired
businesses, (11) the performance by customers of their obligations under
purchase agreements, and (12) the timing and occurrence of events which are
beyond the control of the Company. It is not possible to foresee or identify
all such factors. Any forward looking statements in this document are based
on certain assumptions and analyses made by the Company in light of its
experience and perception of historical trends, current conditions, expected
future developments, and other factors it believes are appropriate in the
circumstances. Forward looking statements are not a guarantee of future
performance and actual results or developments may differ materially from
expectations. While the Company continually reviews trends and uncertainties
affecting the Company's results of operations and financial condition, the
Company does not intend to update any particular forward looking statements
contained in this document.
17
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
(a) Contingencies. Note 7 to the Condensed Consolidated Financial
Statements, "Contingencies," that is included in Part I of this Report, is
incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit 10.1 Owens-Illinois, Inc. Executive Life Insurance
Plan.
Exhibit 10.2 Owens-Illinois, Inc. Death Benefit Only
Agreement.
Exhibit 12 Computation of Ratio of Earnings to Fixed Charges
and Earnings to Combined Fixed Charges and
Preferred Stock Dividends.
Exhibit 23 Consent of McCarter & English, LLP.
Exhibit 27 Financial Data Schedule.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant
during the first quarter of 2000.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OWENS-ILLINOIS, INC.
Date May 15, 2000 By /s/ David G. Van Hooser
------------ ----------------------------------------------
David G. Van Hooser, Senior Vice President and
Chief Financial Officer (Principal Financial
Officer)
19
<PAGE>
INDEX TO EXHIBITS
Exhibits
- --------
10.1 Owens-Illinois, Inc. Executive Life Insurance Plan
10.2 Owens-Illinois, Inc. Death Benefit Only Agreement
12 Computation of Ratio of Earnings to Fixed Charges and Earnings to
Combined Fixed Charges and Preferred Stock Dividends
23 Consent of McCarter & English, LLP
27 Financial Data Schedule
20
<PAGE>
Exhibit 10.1
Owens-Illinois
Executive Life Insurance Plan
Effective April 1, 2000
<PAGE>
Owens-Illinois
Executive Life Insurance Plan
Owens-Illinois, Inc., a corporation duly organized and existing under
the laws of the state of Delaware and having its corporate headquarters in the
state of Ohio (hereinafter, together with its successors and assigns, called
the "Company"), hereby establishes and will be the sponsor of this Owens-
Illinois Executive Life Insurance Plan (the "Plan"), effective as of April 1,
2000. The Plan is established and will be maintained by the Company on behalf
of each corporation (or other business entity) 50 percent or more of the
voting stock (or other ownership interest) of which is owned, directly or
indirectly, by the Company and which employs any person or persons who are
eligible to participate in this Plan. Each such corporation (or other business
entity), together with its successors and assigns, is hereinafter referred to
as an "Employer".
W I T N E S S E T H:
The primary purpose of this Plan is to support the Employers in
attracting and retaining qualified executive personnel, by providing for pre-
retirement and post-retirement death benefits in an amount equal to three
times annual base salary, determined as hereinafter provided and subject to
certain limits hereinafter stated. The Company has determined that the
foregoing can best be provided under split dollar life insurance arrangements,
and an insurance policy has been or will be applied for on the life of each of
the Participants. By execution of this Plan and the Agreement (as defined
below), the Company and the Participants agree to make said insurance policies
subject to the Plan.
Article I - Definitions
1.1 Administrator. The Plan administrator serving pursuant to Article XIII
of this Plan. The Company shall be the Administrator unless and until
the Company appoints one or more officers or employees of the Company
to serve as the Administrator.
1.2 Agreement. A Participation Agreement, in the form attached hereto as
Exhibit A, entered into between a Participant and the Company pursuant
to which the individual agrees to participate in the Plan.
1.3 Anniversary Date. The first day of each Plan Year.
1.4 Beneficiary. The beneficiary or beneficiaries of the Owner's portion
of the death benefit payable under each Policy, as designated in
accordance with paragraph 8.1 and such Policy.
1.5 Collateral Assignment. A contractual assignment, in the form attached
hereto as Exhibit B, entered into between the Owner of a Policy and the
Company pursuant to which the Owner assigns to the Company certain
rights in such Policy.
1
<PAGE>
1.6 Disability. An Employee's inability, solely because of disease or
injury for which the Employee is under the care of a qualified
physician, to work within his or her own occupation, as determined for
purposes of the Owens-Illinois Long-Term Disability Plan (a component
of the Owens-Illinois, Inc. Salary Employees Welfare Benefit Plan).
1.7 Effective Date. April 1, 2000.
1.8 Employee. An individual performing services for an Employer for which
Form W-2 compensation is paid.
1.9 Insurance Company. Nationwide Life Insurance Company, or any other
insurance company or companies authorized to do business in the state
of Ohio selected by the Company for the issuance of a Policy pursuant
to the Plan.
1.10 Insurance Limit. The maximum amount of Owner's death benefit for which
a Policy may be issued at standard rates and on a guaranteed-issue
basis, as established by the Insurance Company, unless the Insurance
Company and the Company mutually consent to a different amount as the
Insurance Limit on coverage for an individual Participant. On the
Effective Date, the Insurance Limit on the original issuance of a
Policy is $1,500,000, subject to adjustment based on subsequent
increases in the Participant's annual base salary in accordance with
the Insurance Company's schedule therefor to a maximum of $3,000,000
on the Participant's Termination Date. The Insurance Limit is subject
to modification by the Insurance Company from time to time after the
Effective Date.
1.11 Owner. The Participant, or a life insurance trust created by the
Participant, or another person or entity designated by the Participant
with the written consent of the Company, who is or will be defined in a
Policy as Owner and, as such, possesses or will possess all incidents
of ownership in such Policy. It is the intention of the Plan that, with
respect to a Policy the Owner of which is not the Participant insured
by such Policy, such Participant will not possess any incidents of
ownership in such Policy.
1.12 Participant. Any Employee who is eligible to participate in the Plan
and has enrolled in the Plan in accordance with Article II, including a
former Employee who became a Participant before his or her Termination
Date and whose Agreement remains in effect.
1.13 Plan. This Owens-Illinois Executive Life Insurance Plan.
2
<PAGE>
1.14 Plan Documents. This document and all documents incorporated into the
Plan under this document, including the Agreements, the Collateral
Assignments, the Policies, and any other documents specifically
referenced herein or therein.
1.15 Plan Year. Each 12 consecutive month period beginning on April 1 and
ending on the following March 31. The first Plan Year begins April 1,
2000 and ends March 31, 2001.
1.16 Policy. The life insurance policy on the life of a Participant,
together with any supplemental contracts issued by the Insurance Company
in conjunction therewith, purchased pursuant to the terms of the
Agreement to which such Participant is a party and the Plan.
1.17 Premium Payment Period. The period of time beginning on the issuance of
a Policy and ending on the Policy anniversary coinciding with or next
following the insured Participant's 65th birthday or, if later, on the
eighth Policy anniversary, throughout which period it is anticipated
that the insured Participant's Employer will pay all premiums into the
Policy. If the Agreement applicable to a Policy terminates during the
Premium Payment Period for such Policy, such Premium Payment Period
shall end concurrently.
1.18 Retirement. Retirement from employment with an Employer at a time and
under circumstances whereby the Participant would be eligible for an
immediately payable early or normal retirement benefit under the Owens-
Illinois Salary Retirement Plan, as from time to time in effect.
1.19 Term Cost. The annual cost, during each calendar year, of one-year term
life insurance in an amount equal to the Owner's portion of the death
benefit under the applicable Policy, determined by reference to the then
current published premium rates charged by the Insurance Company for
individual one-year term life insurance available to all standard risks
and otherwise in accordance with Revenue Ruling 64-328, 1964-2 C. B. 11,
and Revenue Ruling 66-110, 1966-1 C. B. 12, and/or any other applicable
rulings or interpretations by the Internal Revenue Service.
1.20 Termination Date. The date of termination of the Participant's
employment with the Employer(s) for any reason, including voluntary and
involuntary termination, as well as termination of employment due to
Disability or Retirement.
Article II - Eligibility
2.1 An Employee shall be eligible to participate in the Plan if his or her
job with an Employer is at or above the level of divisional vice
president (or equivalent, as determined by the Company) and the Employee
is designated as eligible by the Chief Executive Officer of the Company.
3
<PAGE>
2.2 An Employee who is eligible to participate in the Plan on the Effective
Date, and who enrolls in the Plan by executing an Agreement, shall
become a Participant on or as of the Effective Date. An Employee who
becomes eligible to participate in the Plan after the Effective Date,
and who thereafter enrolls in the Plan by executing an Agreement, shall
become a Participant on the first Anniversary Date thereafter.
2.3 An Agreement shall go into effect on or as of the effective date
specified in the Agreement and shall remain in effect until the
Participant's death, unless terminated earlier as provided in Article
IX. Each Agreement shall, however, remain in effect notwithstanding the
termination of the Plan, the Company's discontinuance of the payment of
premiums under the Plan, or the cancellation, lapse, or surrender of the
Policy for any reason, so long as the Participant remains an Employee of
any Employer or has, prior to any such event, terminated such employment
by reason of Retirement or Disability.
Article III - Application for Insurance
3.1 On or before the Effective Date or Anniversary Date on which an eligible
Employee becomes a Participant, the Owner of the Policy to be issued on
the life of such Participant shall apply to the Insurance Company for
the issuance of a Policy insuring the Participant's life in such amount
as is determined by the Company, which amount shall include the amount
of the Owner's interest in the death benefit of the Policy, in
accordance with subparagraph 6.2(b), plus such additional amount as the
Company determines, in its sole and absolute discretion, to be
sufficient to allow the Company to recover, from its share of the
Policy's death benefit, the cumulative premiums paid into the Policy by
the Employer(s) plus interest thereon at a rate acceptable to the
Company. The Owner of the Policy shall be subject to the provisions of
the Plan, including the Agreement and the Collateral Assignment.
However, and notwithstanding anything herein to the contrary, neither an
Employee's eligibility to participate in the Plan, nor any of the
Company's and Employers' obligations to provide a death benefit in the
amount specified in subparagraph 6.2(b) with respect to any Participant,
are conditioned on the issuance of a Policy on the life of such
Participant, but the rights and interests of the Company, the Employers,
the Participant, and the Owner in and to any other feature of a Policy
are expressly conditioned upon the issuance of such Policy on such
underwriting classification and premium amounts as are acceptable to the
Company in the exercise of its sole and absolute discretion.
3.2 It is the intention of the Plan, as a matter of reasonable expectation
based on each Policy's death benefit amount, investment options,
schedule of premiums, and other relevant Policy features, and on the age
and other relevant characteristics of the insured Participant, but not
as a matter guaranteed by the Company, any Employer, the Insurance
Company, or otherwise, that:
4
<PAGE>
(a) At any time after the end of each Policy's Premium Payment
Period, such Policy can be maintained in force for the
remaining life of the insured Participant without the
payment of additional premiums into the Policy, by utilizing
the Policy's cash surrender value; provided, however, that
if additional premiums are nevertheless required to be paid
into the Policy after the end of the Policy's Premium
Payment Period but while the Agreement remains in effect
with respect to such Policy, the Employer(s) shall pay such
premiums; and
(b) At any time after the end of each Policy's Premium Payment
Period, the Company's portion of the cash surrender value of
such Policy will equal no less than the cumulative amount of
premiums paid into the Policy by the insured Participant's
Employer(s), plus interest thereon from each premium payment
date to the date of reimbursement compounded annually at a
rate acceptable to the Company; provided, however, that any
shortfall in the value of the Company's portion of the cash
surrender value of a Policy may only be recovered from the
Company's portion of the Policy's death benefit as specified
in subparagraph 6.1(b) and shall not impair the amount of
the Owner's portion of such death benefit as specified in
subparagraph 6.2(b).
Article IV - Payment of Premiums
4.1 On or before the due date of each periodic Policy premium payable during
the Premium Payment Period, or within any grace period after such due
date permitted by the Policy, the Employer of the Participant insured by
such Policy shall pay the full amount of such premium to the Insurance
Company. The amount of the premium which the Employer shall pay each
year, and the period of years over which such premium is expected to be
paid, shall be detailed with respect to each Participant in a schedule
of premiums furnished by the Insurance Company to the Company at the
time of issuance of the Policy on the life of such Participant.
4.2 To the extent that an Employer pays the premium amounts for life
insurance benefits under a Policy, the Participant insured by such
Policy shall incur a taxable economic benefit each year equal in amount
to the Policy's Term Cost for such year, and the Employer will gross up
the amount thereof to cover the applicable federal, state, and local
income taxes thereon. The amount to be reported as income each year
shall include the amount of such economic benefit plus the additional
amount attributable to the Employer's grossing up such amount to cover
such taxes. The Employer will furnish the Participant with statements of
the amount of such income reportable by the Participant for federal,
state, and local income tax purposes.
5
<PAGE>
4.3 Notwithstanding the schedule of premiums referred to in paragraph 4.1,
if any additional premiums should be required to be paid into a Policy
while the Plan and the Agreement applicable to such Policy remain in
effect, the insured Participant's Employer (or former Employer) shall
pay such premiums, but no additional premium payments shall be required
to be paid by an Employer on any Policy issued under the Plan after the
death of the insured Participant.
Article V - Collateral Assignment
5.1 To secure the repayment of the amount of the premiums paid by an
Employer hereunder, the Owner of each Policy shall, simultaneous with
the issuance of the Policy, execute a Collateral Assignment and deliver
it to the Company. Such Collateral Assignment shall grant to the Company
the interests in the Policy ascribed to the Company in Article VI. All
rights in and to the Policy not granted to the Company by the Collateral
Assignment or the Agreement shall be retained by the Owner of the
Policy, subject to applicable provisions of this Plan. Such Collateral
Assignment shall not be canceled, altered, or amended except as
expressly provided by the provisions of the Collateral Assignment and
permitted by the Plan.
Article VI - Policy Interests
6.1 At any time while the Agreement applicable to a Policy remains in
effect, the Company's ownership of such Policy is as follows:
(a) Cash Surrender Value. The Company shall own a portion of
the cash surrender value of each Policy equal to the
cumulative premiums paid into the Policy by the Employer(s),
plus interest thereon from each premium payment date
compounded annually at the rate available under the Policy,
as determined by the Administrator, taking into account the
length of time the Policy has been in effect, the investment
return of the Policy, and any other relevant factors as
determined by the Administrator.
(b) Death Benefit. The Company shall own a portion of the death
benefit of each Policy equal to the amount, if any, by which
the entire death benefit of the Policy exceeds that portion
owned by the Owner of the Policy, as set forth in
subparagraph 6.2(b).
6.2 Subject to paragraph 7.1, at any time while the Agreement applicable to
a Policy remains in effect, the Owner's ownership of such Policy is as
follows:
(a) Cash Surrender Value. The Owner shall own a portion of the
cash surrender value of such Policy equal to the amount, if
any, by which the entire cash surrender value of the Policy
exceeds that portion owned by the Company, as set forth in
subparagraph 6.1(a).
(b) Death Benefit. Prior to the insured Participant's
Termination Date, the Owner shall own a portion of the death
6
<PAGE>
benefit of such Policy equal in amount to three times the
Participant's annual base salary as of the most recent
Anniversary Date or, if less, the Insurance Limit. On or
after the insured Participant's Termination Date, the Owner
shall own a portion of the death benefit of such Policy
equal in amount to three times the Participant's annual base
salary as of the last Anniversary Date preceding his or her
Termination Date or, if less, the Insurance Limit.
Notwithstanding the foregoing, the Owner's portion of the
death benefit of the Policy on any Anniversary Date shall
not be reduced by reason of any subsequent decrease in the
insured Participant's annual base salary.
6.3 The Company shall have the exclusive right to direct the allocation of
all amounts paid into each Policy, and the entire value of the Policy,
among any investment options available under the Policy, in accordance
with applicable provisions of the Policy, so long as the Agreement
applicable to such Policy remains in effect.
6.4 Neither the Company nor the Owner of the Policy shall have or exercise
any right in and to the portion of the cash surrender value or death
benefit of the Policy which is owned by or is payable to the other
party, including any right to borrow against or from the other
party's portion of the cash surrender value of the Policy, to collect
the proceeds of the other party's portion of the death benefits of
the Policy, or to take any action which would reduce the other
party's interest in the Policy, except as expressly provided in the
Plan.
6.5 If the Participant is the Owner upon issuance of the Policy insuring his
or her life, he or she shall have the right to transfer his or her
interest in the Policy to another person or entity meeting the
definition of Owner in paragraph 1.11, but (i) only to the extent
permitted by the terms of the Policy and in accordance with procedures
established by the Insurance Company and (ii) only upon the transferee's
execution and delivery of a written agreement with the Company to be
fully bound by the provisions of this Plan and of the Agreement and
Collateral Assignment. Subject to the foregoing, and except for the
Collateral Assignment, the Owner shall not have or exercise any
otherwise available right to sell, assign, pledge as collateral, or
otherwise transfer or encumber the Owner's interest in the Policy at any
time while the Agreement remains in effect, and any attempt to do so
shall be void.
6.6 The Company shall have the right (i) to assign its portion of each
Policy as security for the repayment of any loans from the Insurance
Company or any other creditors, and (ii) to assign its portion of each
Policy which represents any accrued but unpaid interest with respect to
such loans to the Insurance Company or other creditors.
7
<PAGE>
6.7 The Company shall maintain possession of the Policy. The Company shall
make the Policy available to the Insurance Company to the extent
necessary for the purpose of endorsements or filing any change of
Beneficiary in accordance with the provision of this Plan. The Policy
shall be returned promptly to the Employer after any such action shall
have been accomplished.
Article VII - Policy Rights
7.1 The cash surrender value of each Policy shall be used to support the
life insurance benefits payable to the Beneficiary of such Policy and
to the Company under the terms of the Plan. Prior to the payment of
such benefits, the Owner and the Company shall be entitled to
exercise their rights of ownership of their individual portions of
the Policy in accordance with the provisions of this Article VII. The
rights of ownership which shall be exercisable by the Owner of the
Policy shall include all of the rights of the "owner" which are
specified in the Policy, subject to the following limitations:
(a) The Owner shall not be permitted to exercise any otherwise
available right to surrender or take withdrawals from the
Policy, in whole or in part, so long as the Agreement remains
in effect, without the written consent of the Administrator.
(b) The Owner shall not be permitted to exercise any otherwise
available right to take policy loans from his portion of the cash
surrender value of the Policy during the Premium Payment Period.
(c) The Owner shall not be permitted to exercise any otherwise
available right to direct the allocation of amounts paid into the
Policy, or any of the value of the Policy among any investment
options available under the Policy so long as the Agreement
remains in effect.
7.2 So long as the Agreement remains in effect, the Owner of each Policy
shall cooperate with the Company to effectuate any withdrawals and/or
policy loans by the Company from the Company's portion of the cash
surrender value of the Policy. The Owner shall complete all necessary
forms prescribed by the Insurance Company in order to allow the Company
to receive or begin receiving such withdrawals and/or policy loans.
7.3 Policy loans shall be subject to the following guidelines:
(a) The interest rate charged on amounts which are borrowed from the
Policy shall be that rate which is specified in the Policy or
declared by the Insurance Company. In the event that the borrowed
amount is not repaid as of the Anniversary Date immediately
following the date on which the
8
<PAGE>
amount is borrowed, the borrower's benefits under the Policy
shall be offset to reflect the annual interest which has been
charged on the borrowed amounts by the Insurance Company. All
interest charges shall be incurred by the borrowing party.
(b) Amounts which have been borrowed against the cash surrender value
of the Policy shall be remitted to the Insurance Company
according to the terms for repayment established by the Insurance
Company. Such remittance shall be accompanied by such forms
and shall be in accordance with such other procedures as the
Insurance Company and the Administrator shall prescribe from
time to time.
(c) If indebtedness exists with respect to a Policy as of the date of
death of the Participant, such indebtedness, together with
accumulated interest which has been charged by the Insurance
Company, shall be deducted from the borrower's portion of the
death benefit of the Policy.
Article VIII - Death Benefits
8.1 The Owner of each Policy shall have the right to designate a Beneficiary
for the payment of the Owner's portion of the death benefit of the
Policy. The Beneficiary shall be designated, and may be changed from
time to time, in accordance with procedures specified in the Policy or
otherwise prescribed by the Insurance Company.
8.2 Upon the death of the Participant, the Company, the Owner (if other than
the Participant), and the Beneficiary shall take appropriate action
promptly to obtain the death benefits under the Policy to be paid in
accordance with the Policy and the Plan. When the Policy matures as a
death claim, the Company shall be entitled to claim from the proceeds
payable thereunder its portion of the death benefit payable under the
Policy. The balance of such proceeds shall be paid to the Beneficiary in
accordance with paragraph 8.3 below and the Beneficiary provisions of
the Policy.
8.3 Upon the death of the Participant, the Beneficiary shall receive the
Owner's portion of the death benefit of the Policy in a single sum,
minus any outstanding indebtedness, if any. Such amount shall be paid to
the Beneficiary in accordance with the terms of the Policy.
Article IX - Retirement or Other Termination of Employment
9.1 If a Participant's Termination Date occurs by reason of the
Participant's Retirement or Disability, the occurrence of such
Termination Date shall have no effect.
9
<PAGE>
9.2 If a Participant's Termination Date occurs for any reason other than the
Participant's Retirement, Disability, or death, the Owner may elect, by
written notice to the Administrator given no later than 30 days after
such Termination Date:
(a) to acquire the Company's interest in the Policy, without
reducing the Policy's cash surrender value or death
benefits, by reimbursing the Company in full for the
Company's portion of the Policy's cash surrender value as
then determined under subparagraph 6.1(a) and assuming full
responsibility for the payment of all future premiums; or
(b) to acquire the Company's interest in the Policy, after the
Company has withdrawn the Company's portion of the Policy's
cash surrender value as then determined under subparagraph
6.1(a) and the amount of the Policy's death benefit has been
reduced by a corresponding amount, by assuming full
responsibility for the payment of all future premiums,
whereupon, under either (a) or (b), the Agreement applicable to such
Policy shall terminate, effective as of the Participant's Termination
Date, and the Company shall release the Collateral Assignment of such
Policy.
9.3 In the circumstances described in paragraph 9.2, above, but in the
absence of a timely election by the Owner under either (a) or (b)
thereunder, the entire ownership of the Policy shall revert to the
Company, whereupon the Agreement applicable to such Policy shall
terminate, effective as of the Participant's Termination Date, and
thereafter no Employer shall be under any further obligation to make
premium payments or to take any other action to maintain the Policy in
force or to preserve the Policy's value in any manner. Upon request by
the Company, the Owner shall execute any and all documents and take any
and all other actions reasonably necessary or appropriate to perfect the
Company's ownership of the entire interest in the Policy.
Article X - Plan Termination
10.1 The Company reserves the right to unilaterally discontinue or suspend
the Employers' payment of premiums under the Plan at any time or to
terminate the Plan at any time. The Plan shall terminate upon the total
cessation of the business of the Company or upon the bankruptcy,
receivership or dissolution of the Company.
10.2 Upon termination of the Plan or the complete discontinuance of the
payment of premiums under the Plan, the provisions of paragraph 9.3
shall be applied to govern the disposition of each Policy as if the
effective date of such Plan termination or discontinuance of premiums
were the Termination Date of each Participant. However, the Agreement
with each Participant who then remains in employment with an Employer or
whose Termination Date has theretofore occurred by reason of Retirement
or Disability, and the obligation of the Company and/or the Employer(s)
to provide a death benefit on behalf of each such Participant in the
10
<PAGE>
amount specified as the amount of the Owner's death benefit in
subparagraph 6.2(b), shall survive such Plan termination or
discontinuance of premiums.
Article XI - Plan Amendments
11.1 The Company reserves the right to amend the Plan in any respect and at
any time and from time to time. However, the Company shall not amend the
Plan in any manner, or take or omit any other action, that has the
effect of (i) reducing the amount of an Owner's portion of the death
benefit of a Policy as specified in subparagraph 6.2(b) without the
Owner's consent; (ii) of retroactively changing, or depriving any Owner
of, rights retained by or conferred on the Owner with respect to a
Policy attributable to premiums theretofore paid into the Policy,
without the Owner's consent; or (iii) amending in any respect or
revoking a Participant's Agreement without the consent of the
Participant.
Article XII - Insurance Company
12.1 The Insurance Company will be fully discharged from its obligations
under the Policy by its payment of the Policy death benefit to the
beneficiary(ies) designated in the Policy, subject to the terms of the
Policy. The Insurance Company will not, in any event, be considered a
party to this Plan or to any Agreement, or to any modification or
amendment of the Plan or any Agreement.
Article XIII - Administration and Claims
13.1 The Plan is an employee welfare benefit plan under Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
The following provisions of this paragraph 13.1 are intended to meet
applicable ERISA requirements:
(a) The Plan shall be administered by the Administrator, and the
Administrator shall have full discretionary authority and
responsibility for the operation and management of the Plan.
(b) The named fiduciary or fiduciaries are the Company and/or
one or more officers or employees of the Company duly
appointed to exercise fiduciary authority and responsibility
with respect to the Plan.
(c) The funding policy under this Plan anticipates that all
premiums on each Policy shall be remitted by the Employer(s)
to the Insurance Company when due, and all benefits under
the Plan shall be provided pursuant to a contract or
contracts with any insurance company or companies authorized
to do business in the state of Ohio, as selected by the
Company.
(d) Direct payment by the Insurance Company is the basis of
payment of benefits under this Plan, with those benefits in
turn being based on the payment of premiums as provided in
the Plan.
11
<PAGE>
(e) The claims procedure of the Plan shall be as follows:
(i) The Owner of a Policy, a Beneficiary, or a duly
authorized representative thereof may make a
claim for benefits by filing a claim with the
Administrator on a form made available for that
purpose. The Administrator shall make the
initial determination as to the treatment of the
claim and give the claimant notice thereof
within 90 days after receipt of the claim. If
for any reason a claim for benefits under this
Plan is denied by the Administrator, it shall
deliver to the claimant a written explanation
setting forth the specific reason for the
denial, pertinent references to the Plan
provision on which the denial is based, such
other data as may be pertinent and information
on the procedures to be followed by the claimant
in obtaining a review of the claim, all written
in a manner calculated to be understood by the
claimant. For this purpose:
(A) The claimant's claim shall be deemed
filed when presented in writing to
the Administrator.
(B) The Administrator's determination
and explanation shall be in writing
delivered to the claimant within 90
days of the date the claim is filed.
(ii) The claimant shall have 60 days following his
receipt of the denial of the claim to file with
the Company a written request for review of the
denial. For such review, the claimant or a
representative thereof may submit pertinent
documents and written issues and comments.
(iii) The Company shall decide the issue on review and
furnish the claimant with a copy of its
determination within 60 days of receipt of the
claimant's request for review of the claim. The
decision shall be in writing and shall include
specific reasons for the decision written in a
manner calculated to be understood by the
claimant, as well as specific reference to the
pertinent Plan provisions on which the decision
is based. If a copy of the decision is not
furnished to the claimant within such 60-day
period, the claim shall be deemed denied on
review.
12
<PAGE>
Article XIV - Miscellaneous
14.1 The Plan Documents shall constitute the entire documentation of the
Plan. No representations, warranties, covenants, understandings or
agreements, oral or otherwise, in relation to the subject matter hereof,
other than those set forth in the Plan Documents, shall be valid.
14.2 The Plan and the Policy shall not constitute an inducement or
consideration for the employment of any Employee or Participant and
shall not give any Employee or Participant any right to be retained in
the employ of any Employer, and each Employer hereby retains the right
to discharge any Employee or Participant at any time, in accordance with
the personnel policies of the Employer, or as provided in any employment
agreement between the Employer and the Employee or Participant.
14.3 This Plan shall be binding upon and inure to the benefit of each
Participant and each Owner of a Policy, and their respective heirs,
successors, assigns, and personal representatives, and the Company and
each Employer, and their respective successors and assigns.
14.4 In the event that any part of this Plan shall be deemed invalid for any
reason, such invalidity shall not affect the remainder of this Plan,
which shall remain valid and binding upon all interested parties and
enforceable in accordance with its terms.
14.5 Except where otherwise indicated by the context, any use of the
masculine gender herein shall also refer to the feminine and vice versa,
and the use of any term herein in the singular shall also, where
appropriate, include the plural and vice versa.
14.6 Except as otherwise required by the laws of the United States of
America, the Plan Documents shall be construed in accordance with and
governed by the laws of the state of Ohio.
13
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Plan to be duly executed
by its duly authorized officer(s) on this 10th day of March, 2000.
OWENS-ILLINOIS, INC.
By: /s/ Thomas L. Young
------------------------
Thomas L. Young
Executive Vice President
Attest:
/s/ James W. Baehren
--------------------
James W. Baehren
Secretary
14
<PAGE>
Owens-Illinois Executive Life Insurance Plan
Participation Agreement
(Exhibit A to the Owens-Illinois Executive Life Insurance Plan)
This Participation Agreement (the "Agreement") is made by and between
Owens-Illinois, Inc. (the "Company") and______________________________________
(the "Participant"), pursuant to the Owens-Illinois Executive Life Insurance
Plan (the "Plan").
IT IS AGREED:
A. Capitalized terms defined in the Plan and not otherwise defined in this
Agreement shall have the meaning assigned in the Plan.
B. All of the terms, provisions, and conditions of the Plan are hereby
incorporated into this Agreement.
C. Commencing on April 1, 20__ (the effective date of this Agreement), the
Participant agrees to participate in the Plan and become subject to its
terms, and the Company agrees that the Participant's Employer(s) will
contribute premiums in accordance with the Plan for the period of time
and in the amounts determined thereunder. Both parties to this Agreement
understand that benefits under the Plan shall be provided by Policy
Number _______________ issued or to be issued by the Insurance Company.
D. Notwithstanding the foregoing provisions of this Agreement or any
contrary provisions of the Plan, the Company agrees that:
1. At any time while this Agreement remains in effect before
the Participant's Termination Date, the death benefit
payable to the Beneficiary shall equal three times the
Participant's annual base salary as of the most recent
Anniversary Date or, if less, the Insurance Limit;
2. At any time while this Agreement remains in effect on or
after the Participant's Termination Date, if such
Termination Date occurred by reason of the Participant's
Retirement or Disability, the death benefit payable to the
Beneficiary shall equal three times the Participant's annual
base salary as of the last Anniversary Date preceding his or
her Termination Date or, if less, the Insurance Limit; and
3. Notwithstanding 1 and 2, above, the amount of the death
benefit in effect as payable to the Beneficiary on any
Anniversary Date so long as the Participant remains an
Employee of any Employer or has, prior to such Anniversary
Date, terminated such employment by reason of Retirement or
Disability, shall not be reduced by reason of any subsequent
decrease in the Participant's annual base salary.
1
<PAGE>
E. This Agreement may be amended only by the mutual written consent of the
Company and the Participant.
F. This Agreement shall remain in effect from its effective date until the
death of the Participant, unless terminated earlier, in connection with
the Participant's termination of employment for any reason other than
Retirement or Disability, as provided in the Plan. This Agreement shall,
however, remain in effect notwithstanding the termination of the Plan,
the Company's discontinuance of the payment of premiums under the Plan,
or the cancellation, lapse, or surrender of the Policy for any reason,
so long as the Participant remains an Employee of any Employer or has,
prior to any such event, terminated such employment by reason of
Retirement or Disability.
Dated as of the day of , 20 .
----------- --------------------------------- ------
Participant: Owens-Illinois, Inc.
By:
- ------------------------------------------------- --------------------
2
<PAGE>
Owens-Illinois Executive Life Insurance Plan
Collateral Assignment
(Exhibit B to the Owens-Illinois Executive Life Insurance Plan)
1. The subject of this Collateral Assignment ("Assignment") is life
insurance Policy No. ___________________ (the "Policy") issued or to be
issued by Nationwide Life Insurance Company on the life of
____________________________________________ (the "Participant") and any
supplemental policy or contract issued in connection therewith or with
the Plan described below.
2. This Assignment is made pursuant to the Owens-Illinois Executive Life
Insurance Plan (the "Plan"), effective April 1, 20__. Capitalized terms
defined in the Plan and not otherwise defined in this Assignment shall
have the meaning assigned in the Plan.
3. The Owner of the Policy is (check one, as applicable):
____ the Participant
____ the trustee of an irrevocable life insurance trust
previously created by the Participant.
____ other third party (subject to the Company's consent,
which is hereby given upon the Company's execution
hereof).
Furnish name, address, and Social Security number (or taxpayer
identification number) of Owner, if other than the Participant:
________________________________________________________________________
________________________________________________________________________
4. All of the terms, provisions, and conditions of the Plan are hereby
incorporated herein by reference.
5. This Assignment is made by the Owner to the Company, its successors and
assigns, in consideration of amounts paid by the Employer(s) under the
Plan and in recognition of the Company's rights and interests in the
Policy created pursuant to the Plan.
6. The Owner of the Policy hereby assigns, transfers, and sets over to the
Company, as collateral security for the repayment of the amounts paid or
to be paid by the Participant's Employer(s) to or for the benefit of the
Owner under the terms of the Plan, all of the rights and interests in
the Policy, in its cash surrender value, and in its death benefit, as
are described in the Plan as belonging to the Company or the
Employer(s), including without limitation the following:
1
<PAGE>
(a) A portion of the cash surrender value of the Policy equal to
the cumulative premiums paid into the Policy by the
Employer(s), plus interest thereon from each premium payment
date compounded annually at the rate available under the
Policy, as determined by the Administrator of the Plan,
taking into account the length of time the Policy has been
in effect, the investment return of the Policy, and any
other relevant factors as determined by the Administrator.
(b) Any right to withdraw from or borrow all or any part of the
portion of the Policy's cash surrender value hereby assigned
to the Company.
(c) A portion of the death benefit of the Policy equal to the
amount, if any, by which the entire death benefit of the
Policy exceeds that portion owned by the Owner of the
Policy, as set forth in paragraph 8, below.
(d) Any right to direct the allocation of all amounts paid into
the Policy, and the entire value of the Policy, among any
investment options available under the Policy.
(e) The exclusive right to possession of the Policy, pursuant to
which the Insurance Company shall deliver the Policy
directly to the Company upon issuance.
7. The rights and interests hereby assigned to the Company shall remain
exclusively the Company's unless and until this Assignment is released
by the Company. The Company shall only be obligated to release this
Assignment pursuant to the terms of the Plan and the Agreement.
8. The Owner of the Policy, pursuant to the terms of the Plan and the
Agreement, shall only retain and possess a right to designate and change
the Beneficiary for the portion of the Policy death benefit equal in
amount to three times the Participant's annual base salary as of the
most recent Anniversary Date preceding his or her Termination Date or,
if less, the Insurance Limit as defined in the Plan. Notwithstanding the
foregoing, the Owner's portion of the Policy death benefit on any
Anniversary Date shall not be reduced by reason of any subsequent
decrease in the insured Participant's annual base salary.
9. The Insurance Company shall have no duty or obligation to inquire into
or investigate the reason or validity of a request from either the
Company or the Owner to exercise any of their rights hereunder, or
whether the other party has notice of it. The Insurance Company may
treat any such request as an affirmation that the request conforms to
this Assignment and the Plan, and is thereby authorized to act upon such
requests without further investigation.
10. The Insurance Company is not a party to this Collateral Assignment or
to the Plan, but has executed this Assignment below solely for the
purpose of acknowledging the existence of this Collateral Assignment.
2
<PAGE>
IN WITNESS WHEREOF, this Assignment is hereby executed as of the day
of , 20 . --------
--------- ------
Owner of Policy: Owens-Illinois, Inc.
By:
- --------------------------- --------------------
Acknowledgment by Insurance Company:
Nationwide Life Insurance Company
By:
-----------------------------------------------------------
Title:
------------------------------------
Date:
-------------------------------------
3
<PAGE>
Exhibit 10.2
DEATH BENEFIT ONLY AGREEMENT
Effective April 1, 2000
<PAGE>
DEATH BENEFIT ONLY AGREEMENT
THIS DEATH BENEFIT ONLY AGREEMENT (the "Agreement"), made and entered into
effective on or as of the 1st day of April, 2000, by and between Owens-Illinois,
Inc., a corporation duly organized and existing under the laws of the State of
Delaware, U.S.A., and having its corporate headquarters in the State of Ohio,
U.S.A. (hereinafter, together with its successors and assigns, referred to as
"Owens-Illinois"), acting on behalf of itself and any other corporation (or
other business entity) 50 percent or more of the voting stock (or other
ownership interest) of which is owned, directly or indirectly, by Owens-Illinois
and which now or hereafter employs the person identified below as the Executive
(hereinafter, together with its successors and assigns, referred to as the
"Employer"), and
Name:
-------------------------------------------------------
(hereinafter referred to as the "Executive").
WHEREAS, the Employer desires to provide a death benefit on behalf of
certain of its non-U.S. employees whose jobs are at or above the level of
divisional vice president (or equivalent, as determined by Owens-Illinois) and
who are designated as eligible by the Chief Executive Officer of Owens-Illinois;
WHEREAS, the Executive has been in the employ of the Employer and has now
and in the past faithfully served the Employer and has been designated as
eligible for a death benefit to be provided by the Employer; and
WHEREAS, it is the desire of the Employer to make this death benefit
payable, in the event of the Executive's death while this Agreement is in
effect,to the person or persons or entity or entities (the "Beneficiary")
designated by the Executive on the Beneficiary Designation Form (in
substantially the form attached as Schedule A hereto) in effect at the date of
the Executive's death.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I - BENEFITS
The benefits provided by the Employer to the Executive under this Agreement
are in the nature of a fringe benefit and shall in no event be construed to
affect or limit the Executive's current or prospective salary increases, cash
bonuses, or other benefits, as applicable. The taxable nature of the benefits
shall be the responsibility of the Executive's Beneficiary.
1
<PAGE>
Should the Executive die while this Agreement is in effect, the Executive's
Employer shall pay the Executive's Beneficiary the sum of US$200,000. Such
benefit shall be paid in a single lump sum as soon as practicable after Owens-
Illinois receives written notice, in a form and manner acceptable to Owens-
Illinois, of the Executive's death. In the event the Executive has not
designated a Beneficiary, or if the Executive's designated Beneficiary shall
have predeceased the Executive, the benefit under this Agreement shall be paid
to the Executive's estate. The Beneficiary shall be designated on a Beneficiary
Designation Form in substantially the form of Schedule A to this Agreement. The
Executive may at any time and from time to time while this Agreement is in
effect change his or her Beneficiary by executing and delivering to Owens-
Illinois a new Beneficiary Designation Form.
If the Executive's Employer on the date of the Executive's death fails to
pay the full amount of such benefit to the Executive's Beneficiary when due,
Owens-Illinois shall pay the unpaid amount thereof to such Beneficiary as soon
as practicable after receiving written notice, in a form and manner acceptable
to Owens-Illinois, of such failure. Except to the extent otherwise provided in
the immediately preceding sentence, neither Owens-Illinois nor any corporation
(or other business entity) controlling, controlled by, or under common control
with Owens-Illinois (other than the Executive's Employer on the date of the
Executive's death) promises or guarantees the performance of the Executive's
Employer under this Agreement.
ARTICLE II - FUNDING RESTRICTIONS
The Executive, his Beneficiary, and any successor in interest to them,
shall be and remain, with respect to the obligations under this Agreement, a
general creditor of the Employer in the same manner as any other general
creditor of the Employer. Owens-Illinois, on behalf of itself and each Employer,
reserves the absolute right, in its sole discretion, through the purchase of
life insurance on the life of the Executive or otherwise, to secure to the
Employer a source for the payment of the Employer's obligations hereunder and to
determine the extent, nature, and method thereof from time to time, including
the right to discontinue the same at any time. Should Owens-Illinois elect to do
so, in whole or in part, through the purchase of life insurance or any other
funding medium, only Owens-Illinois and/or the Employer shall have any right or
interest in any such life insurance or other funding medium, and neither the
Executive nor his or her Beneficiary shall have any right or interest therein or
recourse thereto.
ARTICLE III - TERM OF AGREEMENT
This Agreement shall, upon its execution by the parties, become effective
as of April 1, 2000, and shall remain in effect for so long as the Executive
remains in the employ of the Employer. This Agreement shall continue in effect
after the Executive's termination of employment with the Employer only if such
termination occurs by reason of the Executive's total and permanent disability
or retirement, as determined by Owens-Illinois with reference to any disability
benefit plan, retirement plan, and/or law applicable to the Executive in his or
her country of residence and/or employment.
2
<PAGE>
ARTICLE IV - ERISA PROVISIONS
To the extent this Agreement is deemed to constitute or comprise a part of
an "employee welfare benefit plan" within the meaning of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), the provisions of this
Article IV shall apply.
A. Named Fiduciary and Administrator. The named fiduciary and
administrator of such plan shall be Owens-Illinois. As named fiduciary and
administrator, Owens-Illinois shall be responsible for the management, control
and administration of the plan in accordance with the provisions of this
Agreement. Owens-Illinois may delegate to others certain responsibilities
hereunder, including the employment of advisors and the delegation of
ministerial duties to qualified individuals.
B. Claims Procedure.
If benefits under this Agreement are not paid to the Executive's
Beneficiary and such claimants feel they are entitled to receive such benefits,
then a written claim must be made to the administrator named above within 60
days from the date payment is refused. The administrator shall review the
written claim and if the claim is denied, in whole or in part, shall provide in
writing within 90 days of receipt of such claim the specific reasons for such
denial, reference to the provisions of this Agreement upon which the denial is
based, and any additional material or information necessary to perfect the
claim. Such written notice shall further indicate the additional steps to be
taken by claimants if a further review of the claim denial is desired. A claim
shall be deemed denied if the administrator fails to take any action within the
aforesaid 90 day period.
If the claimants desire a second review, they shall notify the named
fiduciary in writing within 60 days of the first claim denial. Claimants may
review the Agreement or any documents relating thereto and submit any written
issues and comments they may feel appropriate. In its sole discretion, the named
fiduciary shall then review the second claim and provide a written decision
within 60 days of receipt of such claim. This decision shall likewise state the
specific reasons for the decision and shall include reference to specific
provisions of the Agreement upon which the decision is based.
The parties hereto agree that they and their heirs, personal
representatives, successors, and assigns shall be bound by the decision of the
named fiduciary with respect to any claim properly submitted to it for
determination.
ARTICLE V - MISCELLANEOUS
A. Alienability and Assignment Prohibition. Neither the Executive, his
spouse, nor any other Beneficiary hereunder shall have any power or right to
transfer assign, anticipate, hypothecate, mortgage, commute, modify, or
otherwise encumber in advance any of the benefits payable hereunder, nor shall
any of said benefits be subject to seizure for the payment of any debts,
judgments, alimony, or separate maintenance owed by the Executive or his or her
3
<PAGE>
Beneficiary, nor be transferable by operation of law in the event of bankruptcy
or insolvency or otherwise. In the event the Executive or any Beneficiary
attempts assignment, commutation, hypothecation, transfer, or disposal of the
benefits hereunder, the Employer's liabilities hereunder shall forthwith cease
and terminate.
B. Gender and Headings. Whenever in this Agreement words are used in the
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine, or neuter gender, whenever they should so apply. Headings
and subheadings in this Agreement are inserted for reference and convenience
only and shall not be deemed a part of the Agreement.
C. Effect on Other Employer Benefit Agreements. Nothing contained in this
Agreement shall affect the right of the Executive to participate in or be
covered under any qualified or non-qualified pension, profit sharing, group life
insurance, bonus, or other supplemental compensation or fringe benefit plan or
arrangement constituting a part of the Employer's existing or future
compensation and benefits structure.
D. Amendment and Termination. This Agreement may be amended or terminated
at any time or times, in whole or in part, by the mutual written consent of the
Executive and the Employer. Owens-Illinois may amend this Agreement unilaterally
at any time or times, so long as no such unilateral amendment has the effect of
revoking or decreasing the amount of the death benefit payable hereunder.
E. Applicable Law. The validity and interpretation of this Agreement
shall be governed by the laws of the State of Ohio, U.S.A..
IN WITNESS WHEREOF, the Executive and the Employer, by their signatures
below, hereby acknowledge their agreement to the terms and provisions contained
herein, and that, upon execution, each has received a signed copy.
EXECUTIVE OWENS-ILLINOIS, INC.
By: /s/ Thomas L. Young
- ------------------------------ --------------------------
Thomas L. Young
Executive Vice President
Date: Date: March 16, 2000
------------------------ -----------------
4
<PAGE>
Exhibit 12
OWENS-ILLINOIS, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Millions of dollars, except ratios)
Three Months ended March 31,
2000 1999
-------- --------
Earnings before income taxes, and minority
share owners' interests $ 101.3 $ 119.2
Less: Equity earnings (3.3) (4.5)
Add: Total fixed charges deducted
from earnings . . . . . . . 122.1 112.1
Proportional share of pre-tax
earnings of 50% owned
associates. . . . . . . . . . 2.4 1.2
-------- --------
Earnings available for payment
of fixed charges. . . . . . $ 222.5 $ 228.0
======== ========
Fixed charges (including the Company's
proportional share of 50% owned
associates):
Interest expense. . . . . . . $ 112.7 $ 103.1
Portion of operating lease rental
deemed to be interest . . . 6.9 6.9
Amortization of deferred
financing costs and debt
discount expense. . . . . . 2.5 2.1
-------- --------
Total fixed charges deducted from
earnings and fixed charges. $ 122.1 $ 112.1
Preferred stock dividends (increased to
assumed pre-tax amount). . . . . . 8.9 9.1
-------- ---------
Combined fixed charges and preferred
stock dividends. . . . . . . . . . $ 130.7 $ 121.2
======== ========
Ratio of earnings to fixed charges . 1.8 2.0
Ratio of earnings to combined fixed
charges and preferred stock
dividends. . . . . . . . . . . . . 1.7 1.9
<PAGE>
EXHIBIT 23
CONSENT OF MCCARTER & ENGLISH, LLP
May 12, 2000
Ladies and Gentlemen:
We consent to the incorporation by reference in this Quarterly Report on
Form 10-Q of Owens-Illinois, Inc. for the quarter ended March 31, 2000, of the
reference to our firm under the caption "Legal Proceedings."
Very truly yours,
/s/McCarter & English, LLP
--------------------------
McCarter & English, LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
March 31, 2000 condensed consolidated balance sheet, and the condensed
consolidated results of operations for the three-month period then ended
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 222,000,000
<SECURITIES> 0
<RECEIVABLES> 880,300,000
<ALLOWANCES> 61,900,000
<INVENTORY> 873,200,000
<CURRENT-ASSETS> 2,115,700,000
<PP&E> 5,732,200,000
<DEPRECIATION> 2,229,800,000
<TOTAL-ASSETS> 10,791,000,000
<CURRENT-LIABILITIES> 1,247,000,000
<BONDS> 5,833,800,000
0
455,900,000
<COMMON> 1,600,000
<OTHER-SE> 1,907,400,000
<TOTAL-LIABILITY-AND-EQUITY> 10,791,000,000
<SALES> 1,345,600,000
<TOTAL-REVENUES> 1,410,100,000
<CGS> 1,045,900,000
<TOTAL-COSTS> 1,045,900,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 115,200,000
<INCOME-PRETAX> 101,300,000
<INCOME-TAX> 40,500,000
<INCOME-CONTINUING> 58,700,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,700,000
<EPS-BASIC> 0.36
<EPS-DILUTED> 0.36
</TABLE>
