UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Alltrista Corporation
Indiana 0-21052 35-1828377
State of Incorporation Commission File Number IRS Identification Number
5875 Castle Creek Parkway, North Drive, Suite 440
Indianapolis, Indiana 46250-4330
Registrant's telephone number, including area code: (317) 577-5000
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------------------- -----------------------------------------
Common Stock, without par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of voting stock held by non-affiliates of the
registrant was $141.3 million based upon the closing market price on March 19,
1999
Number of shares outstanding as of the latest practicable date.
Class Outstanding at March 19, 1999
- -------------------------------------- -----------------------------
Common Stock, without par value 6,768,680
DOCUMENTS INCORPORATED BY REFERENCE
1. Annual Report to Shareholders for the year ended December 31, 1998 to the
extent indicated in Parts I, II, and IV. Except as to information
specifically incorporated, the 1998 Annual Report to Shareholders is not to
be deemed filed as part of this Form 10-K report.
2. Proxy statement filed with the Commission dated March 31, 1999 to the
extent indicated in Part III.
<PAGE>
ALLTRISTA CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-K
Part I PAGE
Item 1. Business 3
Item 2. Properties 8
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Part II
Item 5. Market for Registrant's Common Stock and
Related Shareholder Matters 8
Item 6. Selected Financial Data 8
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 8. Financial Statements and Supplementary Data 9
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 9
Part III
Item 10. Directors and Executive Officers of the Registrant 10
Item 11. Executive Compensation 10
Item 12. Security Ownership of Certain Beneficial Owners and Management 11
Item 13. Certain Relationships and Related Transactions 11
Part IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 11
Signatures 12
Index to Financial Statement Schedules 13
Index to Exhibits 16
<PAGE>
PART I
Item 1. Business
On April 2, 1993 (the Distribution Date) Alltrista Corporation (the
Company) became an independent company as a result of the distribution of
7,291,208 shares of its common stock (no par value) in the form of a dividend to
the shareholders of Ball Corporation (Ball) on the basis of one share of the
Company's common stock for every four shares of Ball common stock held by Ball
shareholders (the Distribution). Prior to the Distribution Date, Ball
transferred to the Company, a wholly owned subsidiary of Ball, the net assets of
its Consumer Products, Zinc Products, Metal Services (previously Metal
Decorating and Service) and LumenX (previously Industrial Systems) Divisions and
its plastic products business (comprised of its Unimark Plastics and Industrial
Plastics Divisions and Plastic Packaging (previously Plastic Packaging Products
Co.)).
In April 1996, the Company sold its Metal Services plants, real estate,
equipment and certain inventory. On September 30, 1997, the Company sold the
machine vision inspection equipment product line of LumenX. The sale consisted
primarily of inventory, fixed assets and intangibles. Effective September 28,
1998, the Company sold the x-ray inspection equipment product line of LumenX
ending the Company's involvement in the capital goods market.
Effective January 1, 1997, the Company organized all of its operating
divisions into newly formed, separate legal entities. Consequently, the majority
of the assets and liabilities associated with these operating divisions were
transferred to the new entities.
The businesses comprising the Company have interests in metal and plastics
products.
On March 12, 1999, the Company entered into a definitive agreement to
acquire the net assets of Triangle Plastics, Inc. and its subsidiaries
("Triangle Plastics"). Triangle Plastics manufactures heavy gauge industrial
thermoformed parts for original equipment manufacturers in a variety of
industries, including the heavy trucking, agricultural, portable toilet,
recreational and construction markets. Through its TriEnda division, Triangle
Plastics produces plastic thermoformed products for material handling
applications. Triangle Plastics employs approximately 1,100 people and has a
technical center and five production facilities located in Florida, Iowa,
Tennessee and Wisconsin. Triangle Plastics had net sales of $114.1 million in
1998.
The following sections of the 1998 Annual Report to Shareholders contain
financial and other information concerning company operations and are
incorporated herein by reference: the financial statement notes "Significant
Accounting Policies" and "Business Segment Information" on pages 18 through 20;
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 10 through 13.
Metal Products Segment
The Company's metal products segment includes consumer and zinc products.
Consumer Products
The Company markets a line of home food preservation products which
includes Ball(TM), Kerr(R), Bernardin and Golden Harvest(TM) brand home canning
jars and jar closures and related food products (including fruit pectin, fruit
protector, pickle mixes and tomato mixes) for home food preservation and
preparation. Jar closures are manufactured by the Company principally from
tin-plated steel sheet. Food products purchased from others for resale are
manufactured and packaged to the division's specifications. Beginning in 1999,
the Company will market a line of housewares including tumblers, beverage
tappers and other glassware.
At the end of the third quarter of 1994, the Company acquired the
Fruit-Fresh(R) brand of fruit protector from Joh. A. Benckiser GmbH. The
transaction resulted in the acquisition of inventory and the Fruit-Fresh(R)
brand name. Bernardin Ltd. was purchased from American National Can during the
fourth quarter of 1994. Bernardin Ltd. markets home canning products and
produces metal closures for home canning in Canada. At the end of the first
quarter of 1996, the Company acquired certain assets from Kerr Group, Inc.
related to their home food preservation products. The Company purchased the
equipment, raw materials inventory and a license to use the Kerr(R) trade name.
In October 1997, the Company entered into an agreement to market and distribute
the Golden Harvest(TM) line of home canning products, which includes jars and
lids.
The demand for home canning supplies is seasonal. Sales generally reflect
the pattern of the growing season. Although home canning jars are reusable, the
jar closures are replaced after use. Accordingly, a large portion of the
Company's sales is represented by sales of new closures and related food
products for use with home canning jars.
<PAGE>
The home canning market has declined over the past decade. Management
believes the decline has moderated based on its view that the home canning
market has already adjusted for the lifestyle changes that occurred in the 1980s
(i.e., two wage-earning families and trends toward fast food and convenience
foods) and that a core base in this market will be maintained. The demand for
home canning supplies has historically been contra-cyclical relative to the
macro-economy. The Company's line of home canning mixes simplify food
preservation consistent with consumer preferences for convenience. Growth
opportunities exist through new products and product line extensions as well as
acquisitions. The Company is also exploring marketing home canning products
outside of the United States and Canada.
Sales are made through well-established distribution channels to
approximately 1,750 wholesale and retail customers (principally food, hardware
and mass merchants) in the United States and Canada. Sales to one large retail
customer exceeded 10% of the Company's 1998 consumer product sales.
The Company continues to be a market leader in the sale of home canning
supplies in the United States. The Company's acquisition in 1994 of Bernardin
Ltd. provides a leadership position in the Canadian market. The Company competes
with companies who specialize in other food preservation mediums such as
freezing and dehydration. The food product portion of its business is much more
segmented, with competitors ranging in size from very small to very large.
Zinc Products
Ball began the manufacture of closures for its home canning jars in 1885
using zinc as the primary material and expanded the zinc product line to include
other products through internal development. The current manufacturing facility
for zinc products was constructed in Greeneville, Tennessee, in 1970.
The Company produces copper plated zinc penny blanks for the U.S. Mint and
Royal Canadian Mint, cans for use in zinc/carbon batteries, zinc strip and a
line of industrial zinc products, including various products used in the
plumbing, automotive, electrical component markets and European architectural
markets.
The Company's largest customer is the U.S. Mint who comprised approximately
43% of the Company's zinc product net sales and approximately 9% of the
Company's consolidated net sales. The Company is affected by fluctuations in
penny blank requirements of the United States Department of the Treasury and the
Federal Reserve System. Although the future use of the penny as legal tender has
been debated in recent years, the zinc penny is still considered a cost
effective currency unit by the U.S. Mint. The Company supplied approximately 80%
of the U.S. Mint's total requirements in 1998, with one competitor producing the
remainder. In September 1996, the U.S. Mint awarded the Company a five-year
contract. In November 1998 this contract was extended two years, awarding the
Company all the U.S. Mint requirements. The U.S. Mint supplies the zinc and
copper used to produce the penny blanks under this contract. The Company won a
multi-year contract in 1996 to produce copper plated zinc penny blanks for the
Royal Canadian Mint and currently supplies all of this mint's requirements. The
Company is currently pursuing other coinage opportunities in the United States
and abroad.
Until recently, a significant portion of the Company's zinc product sales
were battery cans sold to two manufacturers, which together account for a large
percentage of the United States zinc/carbon battery production. During the last
two years, the two battery manufacturers whose business represented 11.3% and
28.5% of the Company's 1998 and 1997 zinc product sales, respectively, notified
the Company they were moving production of their zinc/carbon batteries to
foreign countries. One of the two manufacturers ceased to purchase cans from the
Company in 1998. The other manufacturer has significantly reduced the volume of
cans purchased, eliminating three can sizes leaving only one can size for future
Company sales. The domestic market for zinc/carbon batteries has declined in
recent years and will continue to decline as U.S. manufacturers shift their
emphasis toward the alkaline battery market.
In general, zinc offers superior performance and cost advantages relative
to competing materials in the specific product applications in which the Company
competes. Producers of other metals have not viewed zinc as a major competitor.
Therefore, the Company has been able to target niche markets where a zinc-based
product offers cost savings with little competitive reaction. Several new areas
with potential high volume usage are being investigated as a result of product
development programs and include counterpoise grounding of electrical
transmission towers, electromagnetic interference shielding for electronic
components and cathodic protection systems for bridges and other structures in
coastal areas.
The Company is the largest United States zinc strip producer. There are
only two other zinc strip producers in North America, neither of which has the
physical facilities to compete for high volume customer requirements in close
tolerance, high quality and specialty rolled products.
Raw Materials
Raw materials used by the Company's metal products segment include glass
canning jars which are supplied under an agreement with Anchor Glass Container
Corporation, tin-plate used to manufacture jar closures which is supplied under
various supply agreements and zinc ingot which is readily available from a
variety of sources. The Company's metal products segment is not experiencing any
shortage of raw materials.
<PAGE>
Plastic Products Segment
The plastic product segment includes thermoformed industrial parts and
propriety products, injection molded products and plastic packaging, each of
which is discussed briefly below.
Thermoformed Industrial Parts and Propriety Products
The Company manufactures primarily thermoformed plastic door liners and
evaporator trays for refrigerators in its Fort Smith, Arkansas, facility. Ball
built this facility in 1974 as an expansion of Ball's plastics business started
in 1952. Approximately 52% of the Company's 1998 thermoformed product sales were
to one customer. The Company is well established in serving this account based
on its focus to provide a high level of customer service, such as product
tooling design, high quality standards, proximity and just-in-time delivery.
Therefore, it enjoys a sole source position with this customer. Effective
January 1, 1999, the Company entered into a new three-year supply agreement with
this customer. In addition, sales of the Company's plastic tables continue to
grow and other products are being developed to reduce dependency on a single
customer.
On May 19, 1997, the Company purchased certain net assets of Viking
Industries who manufactures thermoformed plastic tubs, shower stalls and other
bath products sold to the manufactured housing, recreational vehicle, home, and
marine industries under the "Capri bath products" name. The Company produces
bath products at two facilities, one in El Dorado, Arkansas and the other in
South Whitely, Indiana. These products are sold primarily through distributors
to manufactured housing and recreational vehicle manufacturers. Historically, a
large portion of the Company's bath products sales were to one distributor.
During 1998, the Company redirected the distribution of its bath products from
this distributor to various regional distributors and a direct sales strategy.
The Company supplements the bath product sheet requirements with sheet produced
by the Fort Smith facility.
Injection Molded Products
In 1978, Ball acquired Unimark Plastics, Inc., a plastic injection molding
operation located in Reedsville, Pennsylvania. The Company's injection molding
operations expanded in 1984 with a manufacturing facility in Greenville, South
Carolina. Yorker(R) Closures, a proprietary product line of plastic closures,
was acquired in 1988. In 1989, the Company began operations in Arecibo, Puerto
Rico following major customers who established operations in Puerto Rico. Due to
the limited growth potential, the Company ceased operations in this plant in
January 1999. The Company completed construction of a new manufacturing facility
during 1995, and began production early in 1996 in Springfield, Missouri. A
major part of this facility is devoted to fulfilling supply agreements to
produce internal components for shot gun shells for two major U.S. producers.
The Company manufactures precision custom injection molded components for
major companies in the health care, consumer products and packaging markets.
Products for the health care industry, which includes such items as
intravenous harness components and surgical devices, comprised approximately 54%
of the Company's 1998 injection molded product sales. Consumer products include
components for retail items and accounted for approximately 34% of the Company's
1998 injection molded product sales. The remaining sales were primarily
closures. Sales to each of three major customers were greater than 10% and in
the aggregate 54% of the Company's total 1998 injection molded product sales.
The market for injection molded plastics is highly competitive. The Company
concentrates its marketing efforts in those markets that require high levels of
precision, quality and cleanliness. There is potential for continued growth in
all product lines, especially in the health care market, where the Company's
quality, service and "clean room" molding operations are critical competitive
factors. The Company believes that the quality and cleanliness of these
facilities provide a competitive advantage with respect to this market. Except
for Yorker(R) Closures, molds used by the Company to manufacture its products
are owned by its customers.
<PAGE>
Plastic Packaging
In 1978, Ball began the development of high-barrier coextruded plastic
packaging and, in 1984, built a manufacturing facility in Muncie, Indiana, which
was expanded in 1990. In 1991, Ball formed Plastic Packaging Products Co., a
partnership with Continental Plastics Ventures, Inc. ("CPV"). The partnership
was formed from the assets of Ball's high-barrier coextruded plastic packaging
business in Muncie, Indiana and CPV's plastic business located in West Chicago,
Illinois. In July 1992, Ball purchased CPV's interest in the partnership and
concurrently announced the closure of the West Chicago facility and consolidated
the plastic packaging business in Muncie, Indiana.
The Company produces high-barrier multilayer and monolayer plastic
products, including sheet (sold directly to processed food manufacturers who
"form, fill and seal" their own packages), formed containers (printed and
unprinted) and retort containers (reheatable and microwaveable).
The Company's customers include major companies in the food and pet
food businesses. Sales to each of two customers exceeded 10% and in the
aggregate 87% of the Company's 1998 plastic packaging sales. Industry purchasing
practices normally involve 1 to 3 year supply contracts, which are placed for
competitive bid. The contracts provide for periodic price adjustment as a result
of changes in the price of plastic resin, the most significant cost component.
Long development, testing and introduction periods are common in order to
qualify new food packaging products for acceptance by customers. Accordingly,
the loss of one or more key customers would have a negative impact on the
Company's gross margins in the short-term until new business is developed. The
Company is well established in serving these accounts based on its focus to
provide quality products with a high level of customer service and technical
support at competitive prices. The Company has ongoing development projects for
new product and market applications. The Company enjoys good relationships with
customers and equipment manufacturers as a preferred source for plastic
packaging materials.
Initially, the coextruded plastic business experienced competition as
several manufacturers attempted to enter this emerging market, leading to excess
capacity and thereby strengthening the substantial negotiating leverage of major
customers. While the number of competitors has declined, the remaining industry
capacity exceeds current demand with resulting competitive pressure, which is
likely to continue. Management believes that continued growth in this business
depends upon a number of factors, including recyclability of barrier plastics,
competition with other packaging media, the desire by consumers for convenience
packaging and the ability to develop and successfully market innovative forms of
plastic packaging.
Raw Materials
Raw materials used in the Company's plastic products segment consist
primarily of plastic resins, most of which are available from a variety of
sources at competitive prices. Currently, the plastic products segment is not
experiencing any shortage of raw materials.
Capital Expenditures
The Company's businesses generally are not significantly affected by rapid
technological change. Consequently, capital spending derives from the need to
replace existing assets, expand capacity, manufacture new products, improve
quality and efficiency, facilitate cost reduction and meet regulatory
requirements.
Patents and Trademarks
The Company believes that none of its active patents or trademarks is
essential to the successful operation of its business as a whole. However, one
or more patents or trademarks may be material in relation to individual products
or product lines such as property rights to use the Kerr brand, Ball brand, and
Fruit-Fresh(R) brand names, and the Bernardin trade name in connection with
certain goods to be sold, including home horticultural and food preservation
supplies, kitchen housewares and packaged foods for human consumption. In the
event of a change of control of the Company which has not received the approval
of a majority of the board of directors of the Company, Ball and Kerr have the
option to require the re-transfer of the right to use the Ball(TM) and Kerr(R)
brand names, respectively.
Government Contracts
The Company enters into contracts with the United States Government which
contain termination provisions customary for government contracts. See "__ Metal
Products Segment __ Zinc Products." The United States Government retains the
right to terminate such contracts at its convenience. However, if the contract
is terminated, the Company is entitled to be reimbursed for allowable costs and
profits to the date of termination relating to authorized work performed to such
date. The United States Government contracts are also subject to reduction or
modification in the event of changes in government requirements or budgetary
constraints. None of the United States Government contracts with the Company
have been terminated since the inception of the penny blank supply arrangement
in 1981.
<PAGE>
Backlog
The Company sells under supply contracts for minimum (generally exceeded)
or indeterminate quantities and, accordingly, is unable to furnish backlog
information.
Research and Development
Research and development costs are expensed as incurred in connection with
the Company's internal programs for the development of products and processes
and have not been significant in recent years.
Environmental Matters
Compliance with federal, state and local provisions, which have been
enacted or adopted relating to protection of the environment, has not had a
material adverse effect on the Company.
In 1990, Congress passed amendments to the Clean Air Act, which imposed
more stringent standards on air emissions. The Clean Air Act amendments will
primarily affect the operation of one of the Company's manufacturing facilities.
Although many of the specific standards to be promulgated as a result of the
Clean Air Act amendments are still unknown, environmental control systems and
capture systems in place currently meet the new standards.
Non-recyclable packaging components, such as multilayer plastic, may become
targets for legislation which would prohibit, tax or restrict the sale or use of
certain types of packaging materials. The Company believes that if such
legislation were passed it would be on a state by state basis and it would not
have an immediate material adverse effect on the Company. There can be no
assurance, however, that such restrictive legislation would not be enacted at a
national level.
Currently, neither the federal government nor 48 states call wastes
"hazardous" on the basis of zinc content. California and Michigan do label
wastes as "hazardous" because of zinc content, however, regulators in both
states have indicated movement away from this classification. The Company
believes there is adequate regulation under existing clean water and air
statutes to control the disposal of zinc and that more restrictive regulation is
unnecessary. There can be no assurance, however, that additional restrictive
legislation will not become law. Such legislation could reduce the demand for
the Company's products and increase its operating costs.
The EPA has designated Ball a potentially responsible party, along with
numerous other companies, for the cleanup of hazardous waste sites with which
the Company may have been associated. Pursuant to the terms of the Distribution
Agreement with Ball, the Company assumed responsibility for any potential costs
or liabilities arising from existing or future environmental claims relating to
the businesses comprising the Company or prior facilities. However, the
Company's information at this time does not indicate these matters will have a
material adverse effect upon financial condition, results of operations, capital
expenditures or competitive position of the Company.
Employees
As of December 1998, the Company employed approximately 1,100 people.
Approximately 260 union workers are covered by two collective bargaining
agreements at the Company's zinc products and consumer products closure
manufacturing facilities. These agreements expire at the consumer products
facility (Muncie, Indiana) on October 14, 2001, and at the zinc products
facility (Greeneville, Tennessee) on October 4, 2003. The Company has not
experienced a work stoppage during the past three years. Management believes
that its relationships with the Company's collective bargaining units are good.
<PAGE>
Item 2. Properties
The Company's properties are well maintained, considered adequate and being
utilized for their intended purposes. The Company's corporate headquarters is
located in Indianapolis, Indiana and is occupied under a lease agreement.
Information regarding the approximate size of significant manufacturing and
warehousing facilities is provided below. All major manufacturing facilities are
owned or leased by the Company.
<TABLE>
<CAPTION>
Approximate
Floor Space
Plant Location Business Segment/ Product Line in Square Feet
- ------------------------------- ---------------------------------------------- --------------
<S> <C> <C>
Greeneville, Tennessee Metal Products/Zinc Products 320,000
Fort Smith, Arkansas Plastic Products/Industrial Thermoformed Parts 140,000
El Dorado, Arkansas (leased) Plastic Products/Industrial Thermoformed Parts 94,000
South Whitely, Indiana (leased) Plastic Products/Industrial Thermoformed Parts 67,000
Reedsville, Pennsylvania Plastic Products/Injection Molded Products 73,000
Greenville, South Carolina Plastic Products/Injection Molded Products 48,000
Springfield, Missouri Plastic Products/Injection Molded Products 43,000
Muncie, Indiana Plastic Products/Plastic Packaging 162,000
Muncie, Indiana Metal Products/Consumer Products 173,000
Toronto, Canada (leased) Metal Products/Consumer Products 30,000
</TABLE>
The Company has initiated a plan to close its injection molding facility located
in Arecibo, Puerto Rico. The facility lease expires on March 31, 1999.
Item 3. Legal Proceedings
In the ordinary course of business, the Company has been and is involved in
various legal disputes, including disputes related to allegations of
noncompliance with environmental and employment laws and regulations. Pursuant
to the terms of the Distribution Agreement with Ball, the Company assumed
liability, if any, for certain claims arising from the Company's businesses and
certain predecessor businesses. Management does not presently expect any
potential loss or settlement in connection with such disputes to have a material
adverse effect on the Company.
Item 4. Submission of Matters to Vote of Security Holders
There were no matters submitted to the security holders during the fourth
quarter of 1998.
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
Alltrista Corporation common stock is traded on the New York Stock Exchange
under the symbol "ALC". There were 4,335 common shareholders of record on March
19, 1999. The Company currently does not and does not intend to pay cash
dividends on its common stock in the foreseeable future. Cash generated from
operations will be invested to support competitiveness and growth. In addition,
the Company will purchase its own common stock into treasury to offset the
dilutive effect of shares issued under employee benefit plans. The Company will
also periodically repurchase additional shares as a flexible and tax efficient
means of distributing excess cash to shareholders.
Other information required by Item 5 appears under the caption "Quarterly
Stock Prices" on page 25 of the 1998 Annual Report to Shareholders and is
incorporated herein by reference.
Item 6. Selected Financial Data
The information required by Item 6 appears in the section titled "Six Year
Review of Selected Financial Data" on page 27 of the 1998 Annual Report to
shareholders and is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Management's Discussion and Analysis of Financial Condition and Results of
Operations, on pages 10 through 13 of the 1998 Annual Report to Shareholders is
incorporated herein by reference.
<PAGE>
Market Risk Information
In general, business enterprises can be exposed to market risks including
fluctuations in commodity prices, foreign currency values, and interest rates
that can affect the cost of operating, investing, and financing. The Company's
exposures to these risks are minimal. Over 90% of the Company's zinc business is
conducted on a tolling basis whereby customers supply zinc to the Company for
processing or supply contracts provide for fluctuations in the price of zinc to
be passed on to the customer.
The Company invests in short-term financial instruments with original
maturities usually less than thirty days. The Company's borrowings under the
long-term financing agreement carry a fixed interest rate. As a result, the
Company's exposure to interest rate fluctuations is insignificant.
The Company does not invest in any derivative financial or commodity
instruments nor does it invest in any foreign financial instruments.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements and notes thereto, appearing on pages
14 through 27 of the 1998 Annual Report to Shareholders, together with the
report thereon of Ernst & Young LLP dated February 1, 1999 appearing on page 27
of the 1998 Annual Report to Shareholders, are incorporated herein by reference.
The report of Price Waterhouse LLP, the Company's independent accountants
during the financial statement periods covering the two years ended December 31,
1997 follows:
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Alltrista Corporation
In our opinion, the consolidated balance sheet and the related consolidated
statements of income, of comprehensive income, of changes in shareholders'
equity and of cash flows, prior to restatement (not presented separately
herein), present fairly, in all material respects, the financial position,
results of operations and cash flows of Alltrista Corporation and its
subsidiaries as of and for each of the two years in the period ended December
31, 1997, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe our audits provide a reasonable basis for the opinion expressed above.
We have not audited the consolidated financial statements of Alltrista
Corporation and its subsidiaries for any period subsequent to December 31, 1997
nor have we examined any adjustments applied to the financial statements as of
and for each of the two years in the period ended December 31, 1997.
/s/ Price Waterhouse LLP
Indianapolis, Indiana
January 30, 1998
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
A change in the Company's certifying accountant was disclosed in a Form 8-K
(Commission File Number 0-21052) dated March 18, 1998.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The executive officers of the company are as follows:
Thomas B. Clark, age 53, is president and chief executive officer of the
Company. Mr. Clark has been president since March 1994 and became chief
executive officer on January 1, 1995. From April 1993 to March 1994, Mr. Clark
served as senior vice president and chief financial officer. Mr. Clark served as
vice president of Ball from August 1992 until April 1993. Mr. Clark joined Ball
in August 1976 as director of planning, was elected vice president, planning and
development in April 1985 and served as vice president, communications, planning
and development from May 1989 until August 1992. Mr. Clark also serves as a
director of First Merchants Corporation, Muncie, Indiana.
Kevin D. Bower, age 40, is senior vice president and chief financial officer of
the Company. From March 1994 to April 1997 Mr. Bower served as vice president of
finance and controller of the Company. From April 1993 to March 1994 Mr. Bower
served as vice president and controller of the Company. Mr. Bower joined Ball in
November 1992. Prior to that time, he served as a senior manager with the public
accounting firm of Price Waterhouse.
Jerry T. McDowell, age 57, is group vice president, metal products, of the
Company. From December 1994 to March 1998 Mr. McDowell served as senior vice
president and chief operating officer of the Company. Mr. McDowell served as
president of Zinc Products Company from April 1993 to December 1994. Since
joining Ball in 1970, Mr. McDowell served in various operating positions within
the Company's Zinc Products division. From July 1979 to April 1993, Mr. McDowell
served as president of Ball's Zinc Products division.
John F. Zappala, age 54, joined the Company in October 1998 as group vice
president, plastic products. From 1992 until 1998 he served as vice president
and general manager of the Royalite Division of Uniroyal Technology Corporation.
From 1987 to 1992 Mr. Zappala was with Sprague Electric, his last position with
that company being vice president and director of sales operations. From 1980 to
1987 Mr. Zappala was with General Electric, his last position there being
manager, field market development of specialty plastics.
Angela K. Knowlton, age 36, is vice president and treasurer of the Company. From
August 1994 to April 1997 Ms. Knowlton served as director, taxation. From August
1993 to August 1994 Ms. Knowlton served as manager, taxation. Prior to joining
the Company in August 1993, Ms. Knowlton served as a manager with the public
accounting firm of Price Waterhouse.
Larry D. Miller, age 64, is vice president, communications and investor
relations of the Company. Prior to joining Alltrista when the Company began
operations on April 2, 1993, Mr. Miller served as director of corporate
communications for Ball. He joined Ball in November 1979.
J. David Tolbert, age 38, is vice president, human resources and administration
of the Company. From April 1997 to October 1998 Mr. Tolbert served as vice
president, human resources and corporate risk of the Company. From October 1993
to April 1997 Mr. Tolbert served as director of human resources of the Company.
Since joining Ball in 1987, Mr. Tolbert served in various human resource and
operating positions of Ball's and the Company's Plastic Packaging division.
Other information required by Item 10 appearing under the caption "Director
Nominees and Continuing Directors" on pages 4 and 5 of the Company's proxy
statement filed pursuant to Regulation 14A, dated March 31, 1999, is
incorporated herein by reference. The proxy statement will be filed with the
Commission no later than March 31, 1999.
Item 11. Executive Compensation
The information required by Item 11 appearing under the caption "Executive
Compensation" on pages 9 through 14 of the Company's proxy statement filed
pursuant to Regulation 14A dated March 31, 1999 is incorporated herein by
reference. The proxy statement will be filed with the Commission no later than
March 31, 1999.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by Item 12 appearing under the caption "Voting
Securities and Principal Shareholders" on page 6 of the Company's proxy
statement filed pursuant to Regulation 14A dated March 31, 1999, is incorporated
herein by reference. The proxy statement will be filed with the Commission no
later than March 31, 1999.
Item 13. Certain Relationships and Related Transactions
No disclosure required under Item 13.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) List of documents filed as part of this report.
(1) Financial Statements
The following documents are filed as part of this report and
incorporated herein by reference from the indicated pages of the
Company's 1998 Annual Report to Shareholders.
Page(s) in
Annual Report
--------------
Consolidated statements of income -
Years ended December 31, 1998, 1997 and 1996 14
Consolidated balance sheets - December 31, 1998 and 1997 15
Consolidated statements of cash flows -
Years ended December 31, 1998, 1997 and 1996 16
Consolidated statements of changes in shareholders' equity -
Years ended December 31, 1998, 1997 and 1996 17
Consolidated statements of comprehensive income -
Years ended December 31, 1998, 1997 and 1996 17
Notes to consolidated financial statements 18 to 27
Report of independent accountants 27
(2) Financial Statement Schedule:
See the Index to the Financial Statement Schedule on page 13 of this
Form 10-K, which is incorporated by reference herein.
(3) Exhibits:
See the Index to Exhibits on pages 16 and 17 of this Form 10-K, which
is incorporated by reference herein.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fourth quarter of
the year ended December 31, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ALLTRISTA CORPORATION
(Registrant)
By: /s/ Thomas B. Clark
-------------------------------------
Thomas B. Clark
President and Chief Executive Officer
March 29, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated below.
(1) Principal Executive Officer:
/s/ Thomas B. Clark President and Chief Executive Officer
---------------------------------
Thomas B. Clark March 29, 1999
(2) Principal Financial Accounting Officer:
Senior Vice President
/s/ Kevin D. Bower and Chief Financial Officer
---------------------------------
Kevin D. Bower March 29, 1999
(3) Board of Directors:
/s/ William L. Peterson Chairman and Director
---------------------------------
William L. Peterson March 29, 1999
President, Chief Executive Officer
/s/ Thomas B. Clark and Director
---------------------------------
Thomas B. Clark March 29, 1999
/s/ William A. Foley Director
---------------------------------
William A. Foley March 29, 1999
/s/ Richard L. Molen Director
---------------------------------
Richard L. Molen March 29, 1999
/s/ Lynda Watkins Popwell Director
---------------------------------
Lynda Watkins Popwell March 29, 1999
/s/ Patrick W. Rooney Director
---------------------------------
Patrick W. Rooney March 29, 1999
/s/ David L. Swift Director
---------------------------------
David L. Swift March 29, 1999
<PAGE>
ALLTRISTA CORPORATION AND SUBSIDIARIES
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1998
Index to the Financial Statement Schedule
Form 10-K
Page
-------------
Reports of Independent Accountants on the
Financial Statement Schedule 14*
Schedule II Valuation and Qualifying Accounts and Reserves 15
The financial statement schedule should be read in conjunction with the
consolidated financial statements in the 1998 Annual Report to Shareholders.
Schedules not included in this additional financial data have been omitted
because they are not applicable or the required information is shown in the
consolidated financial statements or notes thereto.
* The report of Ernst & Young LLP on the financial statement schedule is filed
as Exhibit 23.1 with this Annual Report on Form 10-K.
<PAGE>
Report of Independent Accountants on the
Financial Statement Schedule
To the Board of Directors of
Alltrista Corporation
Our audits of the consolidated financial statements referred to in our report of
January 30, 1998 included in this Annual Report on Form 10-K also included an
audit of the Financial Statement Schedule listed in Item 14(a)(2) of this Form
10-K. In our opinion, this Financial Statement Schedule presents fairly, in all
material respects, the information set forth therein, as of and for the two
years ended December 31, 1997, when read in conjunction with the related
consolidated financial statements.
/s/ Price Waterhouse LLP
Indianapolis, Indiana
January 30, 1998
<PAGE>
Schedule II
<TABLE>
<CAPTION>
ALLTRISTA CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(thousands of dollars)
Balance at Charges to Balance at
beginning costs and Deductions end of
of period expense from reserves period
-------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C>
Reserves against accounts receivable:
1998 $ (1,023) $ (400) $ 342 $(1,081)
1997 $ (1,129) $ (542) $ 648 $(1,023)
1996 $ (1,377) $ (1,589) $ 1,837 $(1,129)
</TABLE>
<PAGE>
ALLTRISTA CORPORATION AND SUBSIDIARIES
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1998
Index to Exhibits
Exhibit
Number Description of Exhibit
- ----- ----------------------------------------------------------------------
3.1 Form of Amended Articles of Incorporation (filed as Exhibit 3.1 to the
Company's Registration Statement on Form 10, Filing No. 0-21052, and
incorporated herein by reference), filed October 20, 1992
3.2 Form of Bylaws of Alltrista Corporation (filed as Exhibit 3.2 to the
Company's Annual Report on Form 10-K, Filing No. 0-21052, and
incorporated herein by reference), filed March 31, 1996
4.1 Form of Common Stock Certificate of Alltrista Corporation (filed as
Exhibit 4.1 to the Company's Registration Statement on Form 10, Filing
No. 0-21052, and incorporated herein by reference), filed March 17,
1993
4.2 Form of Rights Agreement (filed as Exhibit 4.2 to the Company's
Registration Statement on Form 10, Filing No. 0-21052, and
incorporated herein by reference), filed October 20, 1992
10.1 Form of Alltrista Corporation 1993 Economic Value Added Incentive
Compensation Plan for Key Members of Management (filed as Exhibit 10.1
to the Company's Annual Report on Form 10-K, Filing No. 0-21052, and
incorporated herein by reference), filed March 31, 1996
10.2 Form of Alltrista Corporation 1993 Stock Option Plan for Nonemployee
Directors (filed as Exhibit 10.2 to the Company's Registration
Statement on Form 10, Filing No. 0-21052, and incorporated herein by
reference), filed March 17, 1993
10.3 Form of Alltrista Corporation 1993 Stock Option Plan (filed as Exhibit
10.3 to the Company's Registration Statement on Form 10, Filing No.
0-21052, and incorporated herein by reference), filed March 17, 1993
10.4 Form of Alltrista Corporation 1996 Stock Option Plan for Nonemployee
Directors (filed as Exhibit 10.4 to the Company's Annual Report on
Form 10-K, Filing No. 0-21052, and incorporated herein by reference),
filed March 27, 1997
10.5 Form of Alltrista Corporation 1993 Restricted Stock Plan (filed as
Exhibit 10.4 to the Company's Registration Statement on Form 10,
Filing No. 0-21052, and incorporated herein by reference), filed March
17, 1993
10.6 Form of Change of Control Agreement
10.7 List of Alltrista Corporation employees party to Exhibit 10.6
10.8 Form of Distribution Agreement between Ball Corporation and Alltrista
Corporation (filed as Exhibit 10.7 to the Company's Registration
Statement on Form 10, Filing No. 0-21052, and incorporated herein by
reference), filed March 17, 1993
10.9 Form of Tax Sharing and Indemnification Agreement between Ball
Corporation and Alltrista Corporation (filed as Exhibit 10.10 to the
Company's Registration Statement on Form 10, Filing No. 0-21052, and
incorporated herein by reference), filed March 17, 1993
<PAGE>
Exhibit
Number Description of Exhibit
- ----- -------------------------------------------------------------------------
10.10 Form of Indemnification Agreement (filed as Exhibit 10.13 to the
Company's Registration Statement on Form 10, Filing No. 0-21052, and
incorporated herein by reference), filed March 17, 1993
10.11 List of Directors and Executive Officers party to Exhibit 10.10 (filed
as Exhibit 10.10 to the Company's Annual Report on Form 10-K, Filing
No. 0-21052, and incorporated herein by reference), filed March 31,
1996
10.12 Form of Alltrista Corporation 1993 Deferred Compensation Plan for
Selected Key Employees (filed as Exhibit 10.11 to the Company's Annual
Report on Form 10-K, Filing No. 0-21052, and incorporated herein by
reference), filed March 31, 1996
10.13 Form of Alltrista Corporation 1993 Deferred Compensation Plan as
amended (filed as Exhibit 10.13 to the Company's Annual Report on Form
10-K, Filing No. 0-21052, and incorporated herein by reference), filed
March 27, 1997
10.14 Alltrista Corporation 1997 Deferred Compensation Plan for Directors
(filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K,
Filing No. 0-21052, and incorporated herein by reference), filed March
30, 1998
10.15 Alltrista Corporation Excess Savings and Retirement Plan (filed as
Exhibit 10.15 to the Company's Annual Report on Form 10-K, Filing No.
0-21052, and incorporated herein by reference), filed March 30, 1998
10.16 Alltrista Corporation 1998 Long Term Equity Incentive Plan (filed as
Appendix A to the Company's Proxy Statement dated April 8, 1998,
Filing No. 0-21052, and incorporated herein by reference), filed April
6, 1998
13.1 Alltrista Corporation 1998 Annual Report to Shareholders (The Annual
Report to Shareholders, except for those portions thereof incorporated
by reference, is furnished for the information of the Commission and
is not to be deemed filed as part of this Form 10-K).
21.1 Subsidiaries of Alltrista Corporation
23.1 Consent of Independent Accountants
23.2 Consent of Independent Accountants
27.1 Financial Data Schedule (electronic copy only)
27.2 Financial Data Schedule (electronic copy only) - Restated Interim 1998
Results for Discontinued Operations
27.3 Financial Data Schedule (electronic copy only) - Restated 1997 Results
for Discontinued Operations
27.4 Financial Data Schedule (electronic copy only) - Restated 1996 Results
for Discontinued Operations
Copies of exhibits incorporated by reference can be obtained from the SEC and
are located in SEC File No. 0-21052.
Exhibit 10.6
FORM OF CHANGE OF CONTROL AGREEMENT
PERSONAL AND CONFIDENTIAL
[Date]
[Name of Individual]
[Title]
Alltrista Corporation
5875 Castle Creek Parkway, North Drive, Suite 440
Indianapolis, IN 46250
Dear [Name]:
Alltrista Corporation (the "Corporation") considers it essential to the best
interests of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the
Corporation (the "Board") recognizes that the possibility of a change in control
of the Corporation exists and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Corporation and its
stockholders.
The Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Corporation's
management, including yourself, to their assigned duties without distraction in
the face of potentially disturbing circumstances arising from the possibility of
a change in control of the Corporation.
In order to induce you to remain in the employ of the Corporation, the
Corporation agrees that you shall receive the severance benefits set forth in
this letter agreement (the "Agreement"), which amends and restates the agreement
between you and the Corporation dated as of May 10, 1993, in the event your
employment with the Corporation is terminated under the circumstances described
below subsequent to a "Change in Control of the Corporation" (as defined in
Section 2).
1. Term of Agreement. The Agreement shall continue in effect through
December 31, 1997; provided, however, that commencing on December 31, 1997, and
each December 31 thereafter, the term of this Agreement shall automatically be
extended for one additional year unless, not later than October 31 immediately
preceding such December 31, and every October 31, thereafter, the Corporation
shall have given notice that it does not wish to extend this Agreement; and
provided, further, that if a Change in Control of the Corporation as defined in
Section 2, shall have occurred during the original or extended term of this
Agreement, this Agreement shall continue in effect for a period of not less than
twenty-four (24) months beyond the month in which such Change in Control
occurred.
2. Change in Control. No benefits shall be payable hereunder unless
there shall have been a Change in Control of the Corporation, as set forth
below. For purposes of this Agreement, a "Change in Control of the Corporation"
shall be deemed to have occurred upon the first to occur of the following
events:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (other than the Corporation, any trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation or
any subsidiary of the Corporation, or any corporation owned, directly
or indirectly, by the stockholders of the Corporation in substantially
the same proportions as their ownership of stock of the Corporation),
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the
Corporation representing 30 percent or more of the combined voting
power of the Corporation's then outstanding securities;
(ii) at any time during any period of two consecutive years,
individuals, who at the beginning of such period constitute the Board,
and any new director (other than a director designated by a person who
has entered into an agreement with the Corporation to effect a
transaction described in Subsection (i), (iii) or (iv) of this Section)
whose election by the Board or nomination for election by the
Corporation's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors at the beginning of the period or
whose election or nomination for election was previously so approved
cease for any reason to constitute at least a majority thereof;
(iii) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other than
(1) a merger or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than 50
percent of the combined voting power of the voting securities of the
Corporation or such surviving entity outstanding immediately after such
merger or consolidation or (2) a merger or consolidation effected to
implement a recapitalization of the Corporation (or similar
transaction) in which no person acquires 50 percent or more of the
combined voting power of the Corporation's then outstanding securities;
or
(iv) the stockholders of the Corporation approve a plan of
complete liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all of the
Corporation's assets.
3. Takeover Threat. For purposes of this Agreement, a "Takeover Threat"
shall be deemed to have occurred if (i) the Corporation enters into an
agreement, the consummation of which would result in the occurrence of a Change
in Control of the Corporation; (ii) any person (including the Corporation)
publicly announces an intention to take or to consider taking actions which, if
consummated, would constitute a Change in Control of the Corporation; (iii) any
"person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act
(other than the Corporation, any trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation, or any subsidiary of the
Corporation, or any corporation owned, directly or indirectly, by the
stockholders of the Corporation in substantially the same proportions as their
ownership of stock of the Corporation), who is or has become the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly
of securities of the Corporation representing 10 percent or more of the combined
voting power of the Corporation's then outstanding securities increases such
ownership by 5 percentage points or more of such voting power over a period of
less than twenty-four (24) months; or (iv) the Board adopts a resolution to the
effect that a Takeover Threat for purposes of this Agreement has occurred.
Solely for purposes of determining your entitlement to payment of severance
benefits pursuant to this Agreement, you agree that, subject to the terms and
conditions of the Agreement, in the event of a Takeover Threat, you will remain
in the employ of the Corporation for a period of one (1) year from the
occurrence of such Takeover Threat, or until an actual Change in Control of the
Corporation, whichever occurs earlier.
4. Termination Following Change in Control.
(i) General. If any of the events described in Section 2
constituting a Change in Control of the Corporation shall have
occurred, you shall be entitled to the benefits provided in Section
5(iii) upon the subsequent termination of your employment during the
term of this Agreement unless such termination is (a) because of your
death or Disability, (b) by the Corporation for Cause, or (c) by you
other than on account of Constructive Termination. In the event your
employment with the Corporation is terminated for any reason at any
time prior to the occurrence of a Change in Control of the Corporation
and subsequently a Change in Control of the Corporation shall have
occurred, you shall not be entitled to any benefits hereunder.
(ii) Disability. If, as a result of your incapacity due to
physical or mental illness, you shall have been absent from the
full-time performance of your duties with the Corporation for six (6)
consecutive months, and within thirty (30) days after written notice of
termination is given you shall not have returned to the full-time
performance of your duties, your employment may be terminated for
"Disability."
(iii) Cause. Termination by the Corporation of your employment
for "Cause" shall mean termination (a) upon your conviction of a felony
in conjunction with your services to the Corporation, including the
entry of a guilty or nolo contendere plea, or (b) your engaging in
conduct that constitutes willful gross neglect or willful gross
misconduct in carrying out your duties, resulting, in either case, in
material harm to the Corporation, monetarily or otherwise, unless you
reasonably believed in good faith that such act or non-act was in (or
not opposed to) the best interests of the Corporation. For purposes of
this Subsection, no act, or failure to act, on your part shall be
deemed "willful" unless done, or omitted to be done, by you not in good
faith and without reasonable belief that your action or omission was in
the best interest of the Corporation. Notwithstanding the foregoing,
you shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters
(3/4) of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the
Board), finding that in the good faith opinion of the Board you were
guilty of conduct set forth above in this Subsection and specifying the
particulars thereof in detail.
(iv) Constructive Termination. You shall be entitled to
terminate your employment upon the occurrence of Constructive
Termination. For purposes of this Agreement, "Constructive Termination"
shall mean, without your expressed written consent, the occurrence
after a Change in Control of the Corporation of any of the following
circumstances unless, in the case of paragraphs (a), (e), (f), (g) or
(h), such circumstances are fully corrected prior to the Date of
Termination (as defined in Subsection (vi) hereof) specified in the
Notice of Termination (as defined in Subsection (v) hereof) given in
respect thereof:
(a) the assignment to you of any duties inconsistent (unless
in the nature of a promotion) with the position in the Corporation that
you held immediately prior to the Change in Control of the Corporation,
or a significant adverse reduction or alteration in the nature or
status of your position, duties or responsibilities or the conditions
of your employment from those in effect immediately prior to such
Change in Control;
(b) a reduction by the Corporation in your annual base salary
as in effect immediately prior to the Change in Control of the
Corporation or as the same may be increased from time to time, except
for across-the-board salary reductions similarly affecting all
management personnel of the Corporation and all management personnel of
any person in control of the Corporation;
(c) the Corporation's requiring that your principal place of
business be at an office located more than twenty (20) miles from the
location where your principal place of business is located immediately
prior to the Change in Control of the Corporation, except for required
travel on the Corporation's business to an extent substantially
consistent with your present business travel obligations;
(d) the failure by the Corporation to pay to you any portion
of your current compensation except pursuant to an across-the-board
compensation deferral similarly affecting all management personnel of
the Corporation and all management personnel of any person in control
of the Corporation or to pay to you any portion of an installment of
deferred compensation under any deferred compensation program of the
Corporation within seven (7) days of the date such compensation is due;
(e) the failure by the Corporation to continue in effect any
compensation or benefit plan in which you participate immediately prior
to the Change in Control of the Corporation that is material to your
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to
such plan, or the failure by the Corporation to continue your
participation therein (or in such substitute or alternative plan) on a
basis not materially less favorable, both in terms of the amount of
benefits provided and the level of your participation relative to other
participants, as existed at the time of the Change in Control of the
Corporation;
(f) the failure by the Corporation to continue to provide you
with benefits substantially similar to those enjoyed by you under any
of the Corporation's life insurance, medical, health and accident, or
disability plans in which you were participating at the time of the
Change in Control of the Corporation, the taking of any action by the
Corporation which would directly or indirectly materially reduce any of
such benefits or deprive you of any material fringe benefit enjoyed by
you at the time of the Change in Control of the Corporation, or the
failure by the Corporation to provide you with the number of paid
vacation days to which you are entitled on the basis of years of
service with the Corporation in accordance with the Corporation's
normal vacation policy in effect at the time of the Change in Control
of the Corporation;
(g) the failure of the Corporation to continue this Agreement
in effect, or to obtain a satisfactory agreement from any successor to
assume and agree to perform this Agreement, as contemplated in Section
6 hereof, or
(h) any purported termination of your employment that is not
effected strictly in accordance with the terms of this Agreement and
pursuant to a Notice of Termination satisfying the requirements of
Subsection (v) hereof (and, if applicable, the requirements of
Subsection (iii) hereof), which purported termination shall not be
effective for purposes of this Agreement.
Your right to terminate your employment pursuant to this Subsection shall not be
affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Constructive Termination hereunder.
(v) Notice of Termination. Any purported termination of your
employment by the Corporation or by you shall be communicated by
written Notice of Termination to the other party hereto in accordance
with Section 7. "Notice of Termination" shall mean a notice that shall
indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your
employment under the provision so indicated.
(vi) Date of Termination. "Date of Termination" shall mean (a)
if your employment is terminated for Disability, thirty (30) days after
Notice of Termination is given (provided that you shall not have
returned to the full-time performance of your duties during such thirty
(30-day period), and (b) if your employment is terminated pursuant to
Subsection (iii) or (iv) hereof or for any other reason (other than
Disability), the date specified in the Notice of Termination (which, in
the case of a termination for Cause shall not be less than thirty (30)
days from the date such Notice of Termination is given, and in the case
of a termination on account of Constructive Termination shall not be
less than fifteen (15) nor more than sixty (60) days from the date such
Notice of Termination is given); provided, however, that if within
fifteen (15) days after any Notice of Termination is given, or, if
later, prior to the Date of Termination (as determined without regard
to this proviso), the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the
termination, then the Date of Termination shall be the date on which
the dispute is finally determined, either by mutual written agreement
of the parties, or by a binding arbitration award; and provided,
further, that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving
such notice pursues the resolution of such dispute with reasonable
diligence. Notwithstanding the pendency of any such dispute, the
Corporation will continue to pay you your full compensation in effect
when the notice giving rise to the dispute was given (including, but
not limited to, base salary), and continue you as a participant in all
compensation, benefit and insurance plans in which you were
participating when the notice giving rise to the dispute was given,
until the dispute is finally resolved in accordance with this
Subsection. Amounts paid under this Subsection, in addition to all
other amounts due under this Agreement, shall not be offset against or
reduce any other amounts due under this Agreement and shall not be
reduced by any compensation earned by you as the result of employment
by another employer.
5. Compensation Upon Termination or During Disability. Following a
Change in Control of the Corporation, you shall be entitled to the following
benefits during a period of disability, or upon termination of your employment,
as the case may be, provided that such period or termination occurs during the
term of this Agreement or, if earlier, within one year following such Change in
Control of the Corporation:
(i) During any period that you fail to perform your full-time
duties with the Corporation as a result of incapacity due to physical
or mental illness, you shall continue to receive your base salary at
the rate in effect at the commencement of any such period, reduced to
the extent disability benefits are actually received by you during this
period, until this Agreement is terminated pursuant to Section 4(ii)
hereof. Thereafter, or in the event your employment shall be terminated
by reason of your death, your benefits shall be determined under the
Corporation's retirement, insurance, disability and other compensation
programs then in effect in accordance with the terms of such programs.
(ii) If your employment shall be terminated by the Corporation
for Cause or by you other than on account of Constructive Termination,
the Corporation shall pay you your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is
given, plus all other amounts to which you are entitled under any
compensation or benefit plan of the Corporation at the time such
payments are due, and the Corporation shall have no further obligations
to you under this Agreement.
(iii) If your employment by the Corporation shall be
terminated by you on account of Constructive Termination or by the
Corporation other than for Cause or Disability, then you shall be
entitled to the benefits provided below:
(a) no later than the fifth day following the Date of
Termination, the Corporation shall pay to you your full base
salary through the Date of Termination at the rate in effect
at the time Notice of Termination is given, plus all other
amounts to which you are entitled under any incentive, bonus
or other compensation plan of the Corporation, at the time
such payments are due;
(b) in lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the Corporation
shall pay as severance pay to you, at the time specified in
Subsection (iv) hereof, a lump sum severance payment (together
with the payments provided in paragraph (c), below, the
"Severance Payments") equal to three (3) times the sum of (1)
your annual salary rate (including for this purpose any
deferred salary) as in effect as of the Date of Termination,
immediately prior to the Change in Control of the Corporation
or immediately prior to the first occurrence of an event or
circumstance constituting Constructive Termination, whichever
is greatest, and (2) your annual target bonus under the
applicable bonus or incentive compensation plans in respect of
the calendar year preceding that in which occurs the Date of
Termination, the Change in Control or the first occurrence of
an event or circumstance constituting Constructive
Termination, whichever date yields the greatest annual target
bonus;
(c) notwithstanding any provision of any annual or
long-term incentive plan to the contrary, in lieu of any
payments under any bonus or incentive compensation plan in
effect for the year in which your Date of Termination occurs,
the Corporation shall pay you in a lump sum, in cash, at the
time specified in Subsection (iv) hereof, (1) a pro rata
portion (based on the number of whole months, with a partial
month treated as a whole month, elapsed since the first day of
the calendar year in which the Date of Termination occurs) of
the target amount of all contingent awards granted under such
plans for all uncompleted periods, plus (2) the value
(assuming such value is a positive number) of any
undistributed bonus bank balance (or other amount or amounts
that have accumulated on your behalf), whether or not you
would then have been entitled to a distribution thereof, under
the Alltrista Corporation 1993 Economic Value Added Incentive
Compensation Plan for Key Members of Management, or any
successor thereto;
(d) in lieu of shares of common stock of the
Corporation ("Corporation Shares") issuable upon the exercise
of outstanding options ("Options"), if any, granted to you
under any Corporation stock option plan (which Options shall
be cancelled upon the making of the payment referred to
below), you shall receive within the time provided for in
Subsection (iv) hereof an amount in cash equal to the product
of (A) the excess of the higher of the closing price of
Corporation Shares as reported on the NASDAQ National Market
System, the American Stock Exchange or The New York Stock
Exchange, wherever listed, on or nearest the Date of
Termination or the highest per share price for Corporation
Shares actually paid in connection with any Change in Control
of the Corporation, over the per share exercise price of each
Option held by you (whether or not then fully exercisable),
times (B) the number of Corporation Shares covered by each
such Option;
(e) In addition to the benefits to which you are
entitled under the defined contribution plan or plans of the
Corporation, including the Corporation's [Savings and
Retirement Plan] or any successor plan thereto (the "Defined
Contribution Plans") (without regard to any amendment to the
Defined Contribution Plans made subsequent to a Change in
Control of the Corporation and on or prior to the Date of
Termination, which amendment adversely affects in any manner
the computation of benefits under such plans), the Corporation
shall pay to you in a lump sum, in cash, at the time specified
in Subsection (iv) hereof, an amount equal to three (3) times
the value of the matching or other employer contributions that
the Corporation would have made to each such plan during the
plan year immediately preceding the Date of Termination, the
Change in Control, or the first occurrence of an event or
circumstance constituting Constructive Termination, whichever
date yields the highest value, at your rate of salary in
effect on the Date of Termination, immediately prior to the
Change in Control of the Corporation or immediately prior to
the first occurrence of an event or circumstance constituting
Constructive Termination, whichever is greatest, determined as
if you had contributed the maximum amount permitted pursuant
to applicable law and the terms of such plan during any such
year and accumulated thereunder three (3) additional years of
service for purposes of eligibility and vesting (after the
Date of Termination);
(f) for the thirty-six (36) month period beginning
with your termination of employment, the Corporation shall
arrange to provide you and your dependents with life,
disability, accident and health insurance benefits
substantially similar to those that you were receiving
immediately prior to the Notice of Termination, or if more
favorable to you, the first occurrence of an event or
circumstance constituting Constructive Termination. Benefits
otherwise receivable by you pursuant to this paragraph (f)
shall be reduced to the extent comparable benefits are
actually received by you from any and all successor employers
during the thirty-six (36) month period following the Date of
Termination, and any such benefits actually received by you
shall be reported to the Corporation; provided, however, that,
unless you consent to a different method (after taking into
account the effect of such method on the calculation of
"parachute payments" pursuant to Subsection (vi) hereof), such
health insurance benefits shall be provided through a
third-party insurer; and provided further, however, that the
Corporation shall reimburse you for the excess, if any, of the
cost of such benefits to you over such cost immediately prior
to the Date of Termination or, if more favorable to you, the
cost of such benefits to you as of the first occurrence of an
event or circumstance constituting Constructive Termination;
(g) the Corporation shall pay to you all reasonable
legal fees and expenses incurred by you as a result of such
termination (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by
this Agreement) unless the decision-maker in any proceeding,
contest or dispute arising hereunder makes a formal finding
that you did not have a reasonable basis for instituting such
proceeding, contest or dispute;
(h) the Corporation shall provide you with individual
outplacement services in accordance with the general custom
and practice generally accorded to an executive of your
position.
(iv) Except as provided in Subsection (vi) hereof, the
payments provided for in Subsections (iii) (b), (c), (d) and (e) above,
shall be made not later than the fifth day following the Date of
Termination; provided, however, that if the amounts of such payments
cannot be finally determined on or before such day, the Corporation
shall pay to you on such day an estimate, as determined in good faith
by the Corporation, of the minimum amount of such payments and shall
pay the remainder of such payments (together with interest at the rate
provided in section 1274(b)(2)(B) of the Internal Revenue Code of 1986,
as amended (the "Code")) as soon as the amount thereof can be
determined but in no event later than the thirtieth day after the Date
of Termination. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Corporation to you, payable on
the fifth day after demand by the Corporation (together with interest
at the rate provided in section 1274(b)(2)(B) of the Code).
(v) Except as provided in Subsection (iii)(f) hereof, you
shall not be required to mitigate the amount of any payment provided
for in this Section 5 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in this Section
5 be reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed to you to the Corporation, or
otherwise.
Whether or not you become entitled to the Severance
Payments, if any of the payments or benefits received or to be received
by you in connection with a Change in Control of the Corporation or
your termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the
Corporation, any person whose actions result in a Change in Control of
the Corporation or any person affiliated with the Corporation or such
person) (such payments or benefits, excluding the "Gross-Up Payment"
(as defined below) being hereinafter referred to as the "Total
Payments") will be subject to any excise tax imposed under section 4999
of the Code (the "Excise Tax"), the Corporation shall pay to you an
additional amount (the "Gross-Up Payment") such that the net amount
retained by you, after deduction of any Excise Tax on the Total
Payments and any federal, state and local income and employment taxes
and Excise Tax upon the Gross-Up Payment, shall be equal to the Total
Payments.
For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) all of the Total Payments shall be treated as
"parachute payments" (within the meaning of section 280G(b)(2) of the
Code) unless, in the opinion of tax counsel ("Tax Counsel") reasonably
acceptable to you and selected by the accounting firm which was,
immediately prior to the Change in Control of the Corporation, the
Corporation's independent auditor (the "Auditor"), such payments or
benefits (in whole or in part) do not constitute parachute payments,
including by reason of section 280G(b)(4)(A) of the Code, (ii) all
"excess parachute payments" within the meaning of section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax unless, in the
opinion of Tax Counsel, such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually rendered
(within the meaning of section 280G(b)(4)(B) of the Code) in excess of
the "base amount" (as defined in section 280G(b)(3) of the Code)
allocable to such reasonable compensation, or are otherwise not subject
to the Excise Tax, and (iii) the value of any noncash benefits or any
deferred payment or benefit shall be determined by the Auditor in
accordance with the principles of sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up Payment,
you shall be deemed to pay federal income tax at the highest marginal
rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of your
residence on the Date of Termination (or if there is no Date of
Termination, then the date on which the Gross-Up Payment is calculated
for purposes of this Subsection vi), net of the maximum applicable
reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.
In the event that the Excise Tax is finally determined to
be less than the amount taken into account hereunder in calculating the
Gross-Up Payment, you shall repay to the Corporation, within five (5)
business days following the time that the amount of such reduction in
the Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the
Gross-Up Payment attributable to the Excise Tax and federal, state and
local income and employment taxes imposed on the Gross-Up Payment being
repaid by you, to the extent that such repayment results in a reduction
in the Excise Tax and a dollar-for-dollar reduction in your taxable
income and wages for purposes of federal, state and local income and
employment taxes, plus interest on the amount of such repayment at 120%
of the rate provided in section 1274(b)(2)(B) of the Code. In the event
that the Excise Tax is determined to exceed the amount taken into
account hereunder in calculating the Gross-Up Payment (including by
reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Corporation shall
make an additional Gross-Up Payment in respect of such excess (plus any
interest, penalties or additions payable by you with respect to such
excess) within five (5) business days following the time that the
amount of such excess is finally determined. You and the Corporation
shall each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or
amount of liability for Excise Tax with respect to the Total Payments.
(vi) As soon as practicable, following a Takeover Threat, or
in any event, within twenty (20) business days thereafter, the
Corporation agrees it will establish and fund an irrevocable grantor
trust in an amount sufficient to provide for all cash payments of
benefits specified in Section 5, assuming that you were entitled to
such benefits, plus an additional $50,000 to cover the legal fees
referred to in Section 5(iii)(g).
6. Successors-, Binding Agreement.
(i) The Corporation will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation to
expressly assume and agree to perform this Agreement in the same manner
and to the same extent that the Corporation would be required to
perform it if no such succession had taken place. Failure of the
Corporation to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle you to compensation from the Corporation in
the same amount and on the same terms to which you would be entitled
hereunder if you terminate your employment on account of Constructive
Termination following a Change in Control of the Corporation, except
that for the purposes of implementing the foregoing, the date on which
any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Corporation" shall mean the
Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by you and your personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisee and
legatees. If you should die while any amount would still be payable to
you hereunder had you continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms
of this Agreement to your devisee, legatee or other designee or, if
there is no such designee, to your estate.
7. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by the United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notice to the Corporation shall be directed to the
attention of the Board with a copy to the Secretary of the Corporation, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
8. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you and such officer as may be specifically designated
by the Board. No waiver by either party hereto at that time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Indiana without regard to its conflicts of law
principles. All references to section of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state or local law. The obligations of the corporation under
Section 5 shall survive the expiration of the term of this Agreement.
9. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
10. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
11. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators in Muncie, Indiana in accordance
with the rules of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court having jurisdiction;
provided, however, that you shall be entitled to seek specific performance of
your right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
12. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agreement
of the parties hereto in respect of the subject matter contained herein is
hereby terminated and cancelled.
<PAGE>
If this letter sets forth our agreement on the subject matter
hereof, kindly sign both copies and return one, in the enclosed envelope, to the
Corporation, which will then constitute our agreement on this subject.
Sincerely.
ALLTRISTA CORPORATION
By: ____________________________
Thomas B. Clark
President and CEO
Agreed to this ______ day of [Date].
- -----------------------------------
[Name]
Exhibit 10.7
LIST OF ALLTRISTA CORPORATION
EMPLOYEES WHO ARE EXPECTED TO EXECUTE
CHANGE OF CONTROL AGREEMENTS
Elected Corporate Officers
Thomas B. Clark President and Chief Executive Officer
Jerry T. McDowell Group Vice President, Metal Products
John F. Zappala Group Vice President, Plastic Products
Kevin D. Bower Senior Vice President and Chief Financial Officer
Larry D. Miller Vice President, Communications and Investor Relations
Garnet E. King Corporate Secretary and Director, Executive Services
Angela K. Knowlton Vice President and Treasurer
J. David Tolbert Vice President, Human Resources and Administration
Appointed Officers
Kyle L. DeJaeger President - Industrial Plastics Company
Albert H. Giles President - Zinc Products Company
Charles W. Orth President - Unimark Plastics Company
John A. Metz President - Consumer Products Company
Timothy D. Sigley President - Plastic Packaging Company
[GRAPHIC OMITTED]
Committed to Growth
ALLTRISTA CORPORATION
1998 ANNUAL REPORT
<PAGE>
COMPANY PROFILE
Alltrista Corporation manufactures metal and plastic products. The company has
10 manufacturing facilities located in the eastern third of the United States,
plus Canada. Alltrista stock is traded on the New York Stock Exchange under the
symbol ALC.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(thousands of dollars and shares, except per share amounts)
Percentage
Increase
1998 1997 (Decrease)
---------- --------- -----------
<S> <C> <C> <C>
For the year
Net sales $ 244,046 $ 239,646 1.8
Net income 15,727 14,837 6.0
Diluted earnings per share
Income from continuing operations 2.45 2.28 7.5
Discontinued operation (.26) (.32) (18.8)
Net income $ 2.19 $ 1.96 11.7
Diluted weighted average
common shares outstanding 7,195 7,558 (4.8)
Free cash flow 15,479 27,933 (44.6)
Interest expense, net 1,822 2,256 (19.2)
Depreciation and amortization 10,548 10,385 1.6
Property, plant and equipment additions 11,909 7,897 (50.8)
Acquisition of businesses 1,000 8,379 -
Purchase of treasury stock 19,321 4,230 -
After-tax return on year-end invested capital* 18.67% 17.87% -
After-tax return on year-end common equity 16.57% 15.25% -
At year-end
Working capital, excluding cash and debt $ 29,755 $ 31,404 (5.3)
Total assets 165,831 166,577 (.4)
Common shareholders' equity 94,893 97,309 (2.5)
Market price per common share 24.00 28.375 (15.4)
Common shareholders of record 4,092 4,323 (5.3)
Number of employees 1,080 1,097 (1.5)
</TABLE>
[BAR GRAPH]
Net Sales
(millions of dollars)
1993 175.4
1994 187.5
1995 201.7
1996 208.5
1997 239.6
1998 244.0
[BAR GRAPH]
Net Income
(miillions of dollars)
1993 12.7
1994 16.1
1995 11.5
1996 14.5
1997 14.8
1998 15.7
[BAR GRAPH]
Diluted Earnings Per Share
(dollars)
1993 1.69
1994 2.07
1995 1.44
1996 1.84
1997 1.96
1998 2.19
*reflecting continuing operations before unusual items
<PAGE>
We're pleased with our performance in 1998. We hope you are, too.
Diluted earnings per share of $2.19 was a record. More importantly for
investors, we anticipate continued growth in both sales and earnings for 1999.
On March 12 of this year we signed a definitive agreement to acquire the assets
of Triangle Plastics, Inc. With sales of $114 million in 1998, Triangle
represents an excellent strategic fit with our existing industrial and
proprietary thermoforming business, as well as a significant growth opportunity
in the material handling market, where plastics are displacing traditional
materials at a rapid rate.
The Triangle organization and manufacturing operations will add to the
strength of our plastic products group. We believe the acquisition will lead to
numerous additional growth opportunities for Alltrista.
During 1998 the unprofitable inspection equipment business was divested
and arrangements made to close a plastics plant in Puerto Rico in early 1999
that had little growth potential. In addition, operations were restructured into
two groups, metal products and plastic products, and in anticipation of growth,
group vice presidents were placed in charge of each.
As you know, we manage the company and measure value creation using
Economic Value Added, or EVA(R). EVA is net operating profits after tax, less a
charge for the use of capital employed in the business. All our investment
decisions, as well as a large portion of our compensation, are based on this
principle. EVA rose nearly 18 percent during 1998 to $8 million.
While EVA is the best way to measure financial performance, earnings
remain the most frequently referenced measure. Our growth goals, as outlined to
you a year ago, are focused on this measurement--to achieve at least $500
million in sales and $50 million in operating earnings by the end of the year
2002. In 1998, we laid the ground work for progress toward these goals, and the
Triangle acquisition is a significant first step.
Most important for all of us as shareholders is that we expect a
continuation of growth in earnings in 1999 from current businesses, and we will
continue our search for additional strategic acquisition opportunities.
For the year, sales were up two percent to $244 million. Net income was
$15.7 million or $2.19 a diluted share, including a loss on discontinued
operations of 26 cents a share and charges to exit the Puerto Rico plastic
[GRAPHIC OMITTED] Thomas B. Clark, President and Chief Executive Officer
[GRAPHIC OMITTED] William L. Peterson, Chairman of the Board
<PAGE>
plant of 11 cents a share. Net income was up 6 percent, while the per share gain
was 12 percent versus a year ago. We ended the year on a strong note when fourth
quarter net income advanced 20 percent and diluted earnings per share rose 32
percent over the same period in 1997.
Segment reporting has been realigned to reflect how we manage
operations. The metal products segment includes home canning and other consumer
products, as well as zinc products, and the plastic products segment
incorporates all activities in injection molding, extrusion and thermoforming
for numerous markets.
It was an excellent year for the company's oldest product line, home
canning and other consumer items. Demand was softened in the southern United
States due to poor growing conditions, but this was more than compensated for by
strong demand in the northern U.S. and Canadian markets.
New products were successfully introduced, including the Collection
Elite(TM) home canning jars and closures in Canada, and the Heritage Canister
products in the U.S. Sales of these new products exceeded expectations.
Collection Elite, which features colorful, high-quality decoration on the metal
closures, is being introduced in the U.S. during 1999. Also new for Alltrista
this year is the Golden Harvest(R) housewares line, including tumblers, beverage
tappers and other glassware. This product line will add considerably to 1999
sales and will serve as an entree into the housewares category. Finally, in 1999
we are testing the Eastern European market for home canning products. Initially
a full-scale test market will be implemented in Hungary. If successful, sales
will be expanded to other countries in the region over the next several years.
Alltrista's second oldest business, zinc strip and fabricated zinc
products, continues to perform more with the enthusiasm of a Generation X
youngster than the octogenarian it is.
Despite losing considerable battery can business to lower-cost Mexican
production and imports from the Pacific Rim, the zinc operation contributed to
improved earnings in 1998 and expects continued gains in the new year. The
production and shipment of coin blanks to both the United States and Royal
Canadian Mints grew during 1998, as did our share of market in the U.S. We are
now developing international coinage opportunities. A successful example of this
effort is a contract with the Birmingham Mint in England to supply one and
five-cent Eurocoin blanks.
The cathodic protection product line grew in 1998. Current year
projections call for continued growth. The product is undergoing trials at
several locations, including LaGuardia Airport in New York. New,
higher-value-added applications for zinc strip are being developed as a result
of adding strip plating capacity; here, the electronics market is a key target.
Moving to the plastic products segment, the company's
<PAGE>
thermoforming product line had an excellent 1998, producing a record number of
inner door liners for its refrigerator/freezer customer, Whirlpool Corporation.
Sales of proprietary light-weight plastic tables grew during the year, and we
envision additional marketing initiatives for that product line during coming
months. Integration of a 1997 acquisition in the thermoforming area has been
slower than expected; however, plans have been put in place to improve
efficiencies, reduce expenses and realize the full potential of this business.
The plastic packaging market remains quite competitive and we
anticipate 1999 will be challenging; however, this product line has been and
should remain profitable.
Significant growth was achieved in the sales of injection molded
plastic products last year. Key markets include healthcare, consumer products
and ammunition. The Springfield, Missouri facility, which serves shotgun shell
manufacturers, is operating at capacity. We expect even better performance in
injection molding as we bring on a number of new customer programs. Results in
1999 will also benefit from the closing of the underperforming Puerto Rico
facility.
During the year, Alltrista Corporation repurchased 767,000 shares of
its stock for $19.3 million. The 1998 program was the second major repurchase
program completed. Since becoming a public company, 1.6 million shares have been
repurchased at a cost of $36.5 million. We will continue to repurchase shares
from time to time.
Our tax rate averaged 38% during 1998, down marginally. In addition,
interest expense for the year was down 19 percent, reflecting our strong cash
flow.
As mentioned earlier, EVA for the year showed an excellent gain;
unfortunately, this was not reflected in the corporation's stock price, which at
year-end was $24 a share, down 15 percent from the close in 1997. We believe the
stock is significantly undervalued given actual results and the outlook for the
company.
In closing, we express appreciation to our shareholders, employees,
customers, suppliers and the communities in which we operate. Alltrista is a
strong, growing organization with enthusiastic employees. We look forward to
achieving the growth to which all of us are committed.
/s/ Thomas B. Clark
President and Chief Executive Officer
/s/ William L. Peterson
Chairman of the Board
February 24, 1999
<PAGE>
[GRAPHICS OMITTED]
Alltrista's vision is a growing, diversified company with businesses that
command a leading market position or possess other differentiating
characteristics that consistently create value for shareholders, employees and
customers. All resource allocation decisions are focused on this vision.
<PAGE>
[GRAPHIC OMITTED]
Ball(R) and Kerr(R) brands are market leaders in the United States home
canning market.
Bernardin(R) in Canada is the leading home canning brand in that
market.
Alltrista is the leading supplier of one-cent blanks to both the United States
Mint and the Royal Canadian Mint.
Alltrista is the sole supplier of innerdoor liners for Whirlpool side-by-side
refrigerator/freezers.
Alltrista is the leading supplier of shotgun shell components for the ammunition
market in the United States.
Alltrista's Fruit-Fresh(R) fruit protector, which stops browning and protects
flavor, is the leader in its market.
Alltrista is a significant supplier of proprietary bath products to the
manufactured housing industry under the Capri(TM)brand.
<PAGE>
[GRAPHICS OMITTED]
Alltrista Corporation's financial strength is evidenced by low debt and
excellent cash flow. Our financial strength will fuel significant growth, coming
from product and market development in existing operations, as well as
acquisitions which have potential for value creation.
[BAR GRAPH]
After-Tax Return on Average Invested Capital*
1994 14.92%
1995 14.23%
1996 14.99%
1997 17.35%
1998 18.68%
*reflecting continuing operations before unusual items
<PAGE>
[GRAPHICS OMITTED]
[BAR GRAPH]
Economic Value Added*
(in millions)
1994 $4,096
1995 $3,666
1996 $4,515
1997 $6,823
1998 $8,023
Debt has been reduced from a high of $75 million in 1993 to $25.7 million at the
end of 1998. The company is essentially debt-free, with cash approximating
long-term debt.
Shareholders' equity has grown from $45.1 million in 1993 to $94.9 million at
1998's year-end, even after over $36 million in share repurchases.
Economic Value Added, our primary performance measure, has risen from $4.1
million in 1993 to $8 million in 1998, an average compound growth rate of 18%
per year. This reflects continuing operations before unusual items.
Alltrista's after-tax return on invested capital has increased from 14.9% in
1993 to 18.7% in 1998.
Our products also provide strength: cathodic protection systems lengthen the
life of bridge columns at a fraction of the replacement cost.
<PAGE>
[GRAPHICS OMITTED]
Alltrista is committed to growth--in sales and earnings. Growth is what our
vision and strategy are all about. Our goal is $500 million in sales and $50
million in operating earnings by the end of the year 2002. This growth has and
will continue to come from both internal expansion as well as acquisition.
<PAGE>
[GRAPHICS OMITTED]
Each Alltrista business has been charged with establishing and achieving growth
programs. New products figure in these goals, as evidenced by the Collection
Elite(TM) line of home canning products introduced in Canada last year and in
the United States in 1999.
Alltrista has taken a giant step (5,000 miles, to be exact) in test marketing
home canning products in the Eastern European market. Jars and closures are
being test marketed during 1999 in Hungary, and if successful the territory will
be expanded to other countries in that region.
Zinc strip is a growing product line for Alltrista, as precision slitting,
plating and roll-bonding enhance value added and allow penetration of new
markets.
A 1997 acquisition provided the company with an entry to the manufactured
housing and recreational vehicle markets, both of which utilize our expertise in
plastics extrusion and thermoforming. One-piece camper tops are lighter,
stronger and more resistant to leakage than the materials we replace, all with
enhanced noise and thermal insulation.
The company's plastic packaging business, while a challenging one in 1998 and
1999, anticipates growth in the food processing industry, and is investigating
other markets, as well.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
During the first quarter of 1998, the Company, as part of its vision and
strategy, redefined its businesses into two new distinct segments: plastic
products and metal products. The plastic products segment includes operations in
packaging (coextruded sheet and formed containers for processed human and pet
food), injection molding, including products for the medical, consumer and
packaging markets, and heavy gauge sheet extrusion and thermoformed parts for
appliance, furniture, manufactured housing and recreational vehicle markets. The
metal products segment includes home canning supplies and related consumer
products and zinc strip and products fabricated from that strip. Previously
reported segment information was reclassified to correspond with the current
presentation. Due to the sale of the LumenX vision and x-ray inspection systems
product lines during 1998 and 1997, this business is classified as a
discontinued operation for all periods presented.
Results of Operations -- Comparing 1998 to 1997
The Company reported net sales of $244.0 million in 1998, an increase of 1.8%
from sales of $239.6 million in 1997. Excluding a one-time charge of $1.3
million to exit the Company's plastics plant in Arecibo, Puerto Rico, 1998
operating earnings of $31.5 million increased 4.5% from $30.1 million in 1997.
The increase in sales was primarily due to new consumer product offerings that
the Company began marketing during the year, a full year of sales resulting from
the May 1997 acquisition of Viking Plastics and new health care applications in
plastics. The impact of these increases was offset to a lesser extent by reduced
plastic packaging and zinc battery can sales. Although profits were not
impacted, reported sales were also $3.8 million lower as a result of lower 1998
zinc ingot prices.
Overall, gross margin percentages increased from 27.5% in 1997 to 28.6% in
1998. The increase was primarily due to increases in injection molding plant
capacity utilization and coinage volume as well as the impact of lower reported
sales from the decrease in zinc raw material prices and an increase in coinage
volume. This increase was offset in part by the industrywide margin erosion in
plastic packaging and a less favorable consumer product mix.
Selling, general and administrative expenses increased 6.6% or $2.3 million
to $38.2 million in 1998 from $35.9 million in 1997. The increase was primarily
due to increased warehousing cost for new home canning and other consumer
products, new zinc product and business development costs and a full year of
expenses due to the Viking Plastics acquisition. These items were offset in part
by a reduction in consumer product selling and marketing costs.
In July 1998, as part of the Company's commitment to exit operations that do
not produce positive Economic Value Added within an acceptable period of time,
the Company initiated a plan to close its plastics plant in Arecibo, Puerto
Rico. Operations ceased in this plant in January 1999. As a result, the Company
recorded a one-time charge of $1.3 million, which includes a $0.7 million
non-cash loss on the sale and disposal of equipment and $0.6 million in other
costs, including employee severance and costs to return the leased facility to
its original condition.
Interest expense, net in 1998 was $1.8 million compared to $2.3 million in
1997. Other than seasonal working capital borrowings in Canada, the Company did
not borrow during 1998. Interest costs were also offset by $1.1 million and $0.5
million of interest earned on short-term investments in 1998 and 1997,
respectively.
Income from continuing operations of $17.6 million in 1998 increased 2.1%
from $17.2 million in 1997 and diluted earnings per share from continuing
operations was $2.45, an increase of 7.5% over the $2.28 reported for 1997.
Excluding the after-tax charge to exit the Arecibo, Puerto Rico facility,
diluted earnings per share from continuing operations was $2.56, an increase of
12.3% over the 1997 reported amount. During 1998, the Company purchased 767,000
shares of its common stock in the open market which resulted in a $.11 favorable
impact on diluted earnings per share.
Metal Products Segment
In the metal products segment, 1998 sales and earnings increased 1.1% and
9.2%, respectively, compared to 1997. Sales of consumer products increased 12.7%
in 1998 compared to 1997. The increase in sales was primarily due to marketing
and distributing the Golden Harvest(TM) line of home canning products, good home
garden growing conditions, especially in the northern two thirds of the United
States and Canada, and the increased usage of palletized home canning product
displays in mass merchandiser stores. Although the volume of zinc products sold
increased in 1998, reported sales decreased 14.3% compared to 1997. Penny blank
shipments increased 33% in 1998 compared to 1997 reflecting strong demand from
both the U.S. Mint and the Royal Canadian Mint. Offsetting the coinage volume
increase was a decline in battery cans sold. The decision of two customers to
move production of their zinc/carbon batteries to foreign countries
significantly reduced the number of battery cans purchased from the Company.
Though sales to the U.S. Mint excludes the cost of zinc ingot, a 21% decrease in
the average price of zinc in 1998 reduced reported sales of other zinc products
by $3.8 million.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The increase in coinage demand and consumer product sales were significant
factors in increasing operating earnings. Items offsetting profits from these
advances were higher warehousing costs for new consumer products and new zinc
product and business development costs.
The additions of a new consumer housewares product line, including tumblers,
beverage tappers and other glassware, are expected to have a favorable impact on
sales and earnings in 1999. Collection Elite(TM) (colorful, high-quality
decorative metal closures) will be introduced in the U.S. market following a
successful 1998 introduction in the Canadian market. In 1999, the Company will
test market home canning products in Hungary. If the Hungarian test market is
successful, the Company would anticipate expanding into other Eastern European
countries. Zinc product sales should also increase primarily due to an increase
in coinage volume. The Company has been engaged to supply one and five cent
Eurocoin blanks to the Birmingham Mint in England. Battery can sales will likely
continue to decline as customers move battery production to foreign
manufacturers.
Plastic Products Segment
Sales increased 3.0% in the plastic products segment and earnings, before the
charge to exit the facility in Arecibo, Puerto Rico, decreased 10.5%. Sales of
thermoformed plastic parts and products increased 41.3% primarily due to the May
1997 acquisition of Viking Plastics and increased sales of appliance components.
Sales of injection molded products increased 18.6% as a result of new business,
including the transfer of a customer's in-house production to the Company's
Springfield, Missouri facility. These achievements were offset in part by a
decrease in sales of plastic packaging to the human and pet food markets where
the Company has encountered intense competition and lower customer demand. The
decline in gross margins for plastic packaging more than offset the gains
accomplished within the balance of the segment.
The Company anticipates an increase in both sales and operating earnings for
the plastic products segment in 1999. Sales growth is anticipated for
thermoformed bath and recreational vehicle products and plastic furniture.
Injection molded product line sales should increase with the addition of new
customers and increased sales with existing customers. Along with the
anticipated increases in sales, earnings should benefit from the closing of the
Arecibo, Puerto Rico facility and a plan to improve efficiencies in the plants
which produce large thermoformed plastic parts for the manufactured housing and
recreational vehicle industries. It is anticipated the market for plastic
packaging will remain quite competitive.
Results of Operations -- Comparing 1997 to 1996
The Company reported net sales of $239.6 million for 1997, which represents a
14.9% increase over 1996 sales of $208.5 million. Operating earnings of $30.1
million for 1997 were 8.3% higher than 1996 operating earnings of $27.8 million.
Sales increases were reported in both the metal and plastic products segments,
while operating earnings were up in the metal products segment and lower in the
plastic products segment. The March 1996 acquisition of the Kerr(R) brand of
home canning products and a good growing season for home gardening and fresh
produce were the primary drivers of the sales and earnings increase in the metal
products segment. Reduced coinage shipments to the U.S. Mint tempered the
results in this segment. The May 1997 acquisition of Viking Plastics was the
primary driver of the plastic products sales increase. Reduced customer
requirements for injection molded products drove the reduction in operating
earnings while cost reductions in the plastic packaging operations helped offset
this decline.
Overall, gross margin percentages declined in 1997. Margins within the metal
products segment declined due to a 45% reduction in coinage sales volume to the
U.S Mint. This decline was offset in part by a full year of Kerr home canning
product sales and economies resulting from consolidating the related operations.
The plastic products segment had lower margins due to lower injection molding
capacity utilization and lower than normal margins during the integration of
Viking Plastics.
Selling, general and administrative expenses increased 11.3% or $3.6 million
to $35.9 million in 1997 from $32.3 million in 1996. The increase was almost
entirely a function of the increased home canning products business level and
the Viking Plastics acquisition. Selling, general and administrative expenses as
a percentage of net sales were 15.0% for 1997 compared to 15.5% for 1996. The
improvement is largely due to efficiencies resulting from consolidating the
operations of the Ball and Kerr brands.
Net interest expense for 1997 was $2.3 million compared to $2.6 million for
the same period last year. Lower 1997 daily average borrowings and higher
interest income from short-term cash investments were offset in part by slightly
higher interest rates on borrowings.
Income from continuing operations of $17.2 million increased 11.9% from $15.4
million and diluted earnings per share from continuing operations was $2.28, an
increase of 16.9% over the $1.95 reported for 1996.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Metal Products Segment
Sales and operating earnings within the metal products segment increased
$25.3 million and $3.4 million, respectively, in 1997 compared to 1996. These
increases were primarily the result of the March 1996 acquisition of the Kerr(R)
brand of home canning products and a good growing season for home gardening and
fresh produce in the United States as well as in Canada. During 1996, the
Company, under the terms of a non-exclusive Sales Agent Agreement, sold certain
pre-closing inventory retained by Kerr(R). These sales and any resulting profits
are not reflected in the Company's 1996 results of operations. Since the Company
fulfilled the agreement at the end of 1996, 1997 sales and profits from all
Kerr(R) products are reflected in the Company's results.
Zinc product sales increased $2.8 million despite a 45% decrease in U.S. Mint
coinage shipments. The decline in coinage volume was offset by a 27% increase in
average zinc ingot prices, an increase in European industrial sales volume and
an increase in sales to the Royal Canadian Mint for the Canadian one cent coin.
The aforementioned decline in sales volume to the U.S. Mint had an adverse
effect on the segment's operating earnings.
Plastic Products Segment
Sales within the plastic products segment increased 6.3% in 1997 compared to
1996 whereas operating earnings decreased 6.7%. The Company reported a $10.4
million increase in thermoformed plastic product sales as a result of the May
1997 acquisition of Viking Plastics ($9.7 million in sales). Plastic packaging
sales decreased 4.3% due to lower customer requirements and a more intense
competitive environment. Injection molded product sales declined 8.1% as a
result of reduced customer requirements, including several customers with
in-house molding facilities moving production back into their own locations
during periods of reduced demand.
Operating earnings within the plastic products segment decreased by 6.7%
primarily due to the aforementioned decline in demand for injection molded
products. In addition, Viking Plastics integration costs were higher than
normal. A reduction in selling, general and administrative salaries and benefit
costs within the plastic packaging operations helped limit the decline in
operating earnings.
Financial Condition, Liquidity and Capital Resources
Working capital (excluding the current portion of long-term debt) decreased
$6.8 million to $51.2 million from the 1997 year-end level of $58.0 million.
During 1998, the Company purchased $19.3 million (767,000 shares) of its common
stock. In September of 1998, the Company completed the purchase of shares under
a 600,000-share repurchase program announced in May 1997. It is also the
Company's policy to annually repurchase shares to offset the dilutive effect of
shares issued under employee benefit plans. Other significant changes in working
capital include increases in inventory and accounts payable due to the
introduction of new consumer product lines. The Company has $25.7 million
outstanding under a long-term financing agreement with a fixed interest rate of
7.8%. Maturities, which began in December 1998, are $4.3 million per year for
seven years. The Company has a revolving credit agreement with a group of banks
whereby the Company can borrow up to $50 million through March 31, 2000 when all
borrowings mature. There were no borrowings outstanding under this agreement at
December 31, 1998 or 1997. After reducing debt by the cash balance, the Company
was essentially debt free at the end of both 1998 and 1997. Consequently,
changes in interest rates would not have a material impact on the financial
condition or liquidity of the Company.
Capital expenditures were $11.9 million in 1998 compared to $7.9 million in
1997 and are largely related to maintaining facilities and improving
manufacturing efficiencies. The increase in 1998 is primarily due to investments
in new injection molding machines and a new integrated information system and
other capital improvements within the plastics group. Within the metal products
segment, expenditures were incurred for upgrading an existing plating line,
investing in a new high precision industrial slitting line, and construction of
a railcar unloading station for chlorine supply. Overall, capital expenditures
are expected to be at higher levels in 1999 compared to 1998. The Company
believes that existing funds, cash generated from operations and existing
sources of debt financing are adequate to satisfy its working capital and
capital expenditure requirements for the foreseeable future. However, the
Company may raise additional capital from time to time to take advantage of
favorable conditions in the capital markets or in connection with the Company's
corporate development activities.
Effective September 28, 1998, the Company sold the assets of its x-ray
inspection equipment operation and ended the Company's participation in the
capital goods market. Taking into account the cash proceeds from the sale, tax
benefits and expenses paid, the Company expects the transaction to provide
approximately $3.4 million in cash.
In July 1998, management initiated a plan to exit the Company's plastics
plant in Arecibo, Puerto Rico.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Operations in this facility ceased in January 1999. Taking into account the cash
proceeds from the sale of certain equipment, tax benefits and costs paid, the
Company expects the transaction to provide approximately $1.3 million in cash.
The Company is subject to and involved in claims arising out of the conduct
of its business including those relating to product liability, environmental and
safety and health matters. The Company's information at this time does not
indicate that the resolution of these claims will have a material adverse effect
upon financial condition, results of operations, capital expenditures or
competitive position of the Company.
Recent Development
On March 12, 1999, the Company entered into a definitive agreement to acquire
the net assets of Triangle Plastics, Inc. and its subsidiaries ("Triangle
Plastics") for $148.0 million in cash plus acquisition costs. The transaction,
which is expected to close at the end of March or early April, will be accounted
for as a purchase. The Company will finance the transaction with a new $250
million credit facility which will replace the Company's other existing credit
facilities. Triangle Plastics manufactures heavy gauge industrial thermoformed
parts for original equipment manufacturers in a variety of industries, including
the heavy trucking, agricultural, portable toilet, recreational and construction
markets. Triangle Plastics, through its TriEnda division, produces plastic
thermoformed products for material handling applications. Triangle Plastics
employs approximately 1,100 people and has a technical center and five
production facilities located in Florida, Iowa, Tennessee and Wisconsin.
Triangle Plastics had net sales of $114.1 million in 1998.
Year 2000 Readiness
The Company continues to assess its exposure to potential Year 2000 issues
within its businesses. The assessment includes information technology (IT),
non-information technology (non-IT), and customer and vendor readiness. Non-IT
systems include computer-controlled devices with embedded technology such as
microcontrollers. Phases within the process include assessment, remediation,
testing and implementation. With respect to each of the divisions, the Company's
percentage of completion for the assessment phase for both IT and non-IT ranges
from 65% to 100% and 80% to 100% complete, respectively. The Company anticipates
all divisions will have the assessment phase complete by May 1999. Through the
assessment process, the Company has identified certain financial and
manufacturing systems that are not Year 2000 ready. The Company has plans to
replace or upgrade these systems with remediation, testing and implementation to
be completed no later than October 1999. The largest undertaking is an
enterprise-wide system implementation in the Company's consumer products
operation. Certain contingency plans are in place and others will be developed
if remediation, testing or implementation is delayed or otherwise required
following the identification of any material Year 2000 risks or uncertainties.
If this implementation is delayed contingency plans include the modification of
existing code. The failure of the Company to properly assess and remediate Year
2000 problems and test or implement solutions could result in disruptions of
normal business operations. Such failures could have a material adverse effect
upon the financial condition, results of operations, cash flows or competitive
position of the Company.
The Company has incurred less than $300,000 in costs to date directly
associated with the remediation of its own systems. Management believes future
Year 2000 assessment and remediation costs will be less than $500,000. The
Company intends to fund any necessary Year 2000 assessment and remediation costs
from internal financial resources. These costs do not include the cost of
upgrading or replacing systems for other business reasons. Such measures usually
provide the additional benefit of making the systems Year 2000 compliant.
The assessment of customers and suppliers for Year 2000 readiness ranges from
initial stages to 100% complete across the Company's businesses as of January
1999. The assessment of third parties is scheduled to be complete no later than
April 1999. The assessments include third party electronic interfaces. The
Company currently is not aware of any significant customer or supplier with a
Year 2000 issue that would materially impact the Company's financial condition,
results of operations, cash flows or competitive position. However, the Company
has no means of ensuring that customers or suppliers will be Year 2000 ready.
The inability of other entities to be prepared could have a material adverse
effect on the Company.
While the Company has not fully completed its assessment process, it is not
expected that Year 2000 issues will have a material adverse effect on the
Company. However, it is possible that, for example, disruptions in the economy
generally or interruptions in the Company's manufacturing processes because of
Year 2000 problems could adversely affect the Company's results of operations,
liquidity and financial condition.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Income
Alltrista Corporation and Subsidiaries
(thousands, except per share amounts) Year ended December 31,
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Net sales ...................................................... $ 244,046 $ 239,646 $ 208,498
Costs and expenses
Cost of sales ................................................. 174,333 173,651 148,437
Selling, general and administrative expenses .................. 38,249 35,895 32,258
Costs to exit facility ........................................ 1,260 - -
--------- -------- ---------
Operating earnings .............................................. 30,204 30,100 27,803
Interest expense, net ........................................... (1,822) (2,256) (2,571)
--------- -------- ---------
Income from continuing operations before taxes .................. 28,382 27,844 25,232
Provision for income taxes ...................................... (10,785) (10,603) (9,828)
--------- -------- ---------
Income from continuing operations ............................... 17,597 17,241 15,404
Discontinued operations:
Loss from discontinued operations, net of income tax benefit
(expense) of $557, $2,423 and ($151), respectively ............ (908) (2,404) (183)
Net loss on disposal of discontinued operations, net
of income tax benefit of $589 and $468, respectively .......... (962) - (711)
--------- --------- ---------
Net income ...................................................... $ 15,727 $ 14,837 $ 14,510
========= ========= =========
Basic earnings per share:
Income from continuing operations ............................. $ 2.48 $ 2.33 $ 1.99
Discontinued operations ....................................... (.26) (.33) (.11)
--------- --------- ---------
Net income .................................................... $ 2.22 $ 2.00 $ 1.88
========= ========= =========
Diluted earnings per share:
Income from continuing operations ............................. $ 2.45 $ 2.28 $ 1.95
Discontinued operations ....................................... (.26) (.32) (.11)
--------- --------- ---------
Net income .................................................... $ 2.19 $ 1.96 $ 1.84
========= ========= =========
Weighted average shares outstanding:
Basic ......................................................... 7,079 7,413 7,737
Diluted ....................................................... 7,195 7,558 7,906
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
Alltrista Corporation and Subsidiaries
(thousands of dollars) December 31,
1998 1997
--------- ---------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents .................................................... $ 21,454 $ 26,641
Accounts receivable, net of reserve for doubtful accounts of $1,081 and $1,023 20,907 23,646
Inventories .................................................................. 38,281 33,183
Prepaid expenses ............................................................. 1,414 1,511
Deferred taxes on income ..................................................... 4,512 4,243
--------- ---------
Total current assets ....................................................... 86,568 89,224
--------- ---------
Property, plant and equipment, at cost
Land ......................................................................... 782 782
Buildings .................................................................... 30,075 30,500
Machinery and equipment ...................................................... 121,849 118,622
--------- ---------
152,706 149,904
Accumulated depreciation ..................................................... (105,850) (104,894)
--------- ---------
46,856 45,010
--------- ---------
Goodwill, net of accumulated amortization of $3,746 and $2,347 ................. 24,548 24,947
Deferred taxes on income ....................................................... - 200
Other assets ................................................................... 7,859 7,196
--------- ---------
Total assets ................................................................... $ 165,831 $ 166,577
========= =========
Liabilities and shareholders' equity
Current liabilities
Current portion of long-term debt ............................................ $ 4,286 $ 4,286
Accounts payable ............................................................. 20,579 18,424
Accrued salaries, wages and employee benefits ................................ 8,428 7,139
Other current liabilities .................................................... 6,352 5,616
--------- ---------
Total current liabilities .................................................. 39,645 35,465
--------- ---------
Noncurrent liabilities
Long-term debt ............................................................... 21,429 25,714
Deferred taxes on income ..................................................... 282 -
Other noncurrent liabilities ................................................. 9,582 8,089
--------- ---------
Total noncurrent liabilities ............................................... 31,293 33,803
--------- ---------
Contingencies
Shareholders' equity
Common stock, 25,000,000 shares authorized, 7,966,971 and 7,976,747 shares issued
and 6,764,254 and 7,461,765 shares outstanding in 1998 and 1997, respectively 40,494 40,779
Retained earnings 84,039 68,312
Accumulated other comprehensive income--cumulative translation adjustment .... (619) (303)
--------- ---------
123,914 108,788
Less: treasury stock (1,202,717 and 514,982 shares, at cost).................. (29,021) (11,479)
--------- ---------
Total shareholders' equity ................................................. 94,893 97,309
--------- ---------
Total liabilities and shareholders' equity ..................................... $ 165,831 $ 166,577
========= =========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Alltrista Corporation and Subsidiaries
(thousands of dollars) Year ended December 31,
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities
Net income ................................................................... $ 15,727 $ 14,837 $ 14,510
Reconciliation of net income to net cash provided by operating activities:
Depreciation ............................................................... 8,884 8,880 9,444
Amortization ............................................................... 1,664 1,505 1,125
Deferred taxes on income ................................................... 214 (1,391) (1,134)
Loss on sale of assets ..................................................... 71 267 550
Loss on disposal of discontinued operations ................................ 2,451 3,612 1,179
Deferred employee benefits ................................................. 1,024 1,071 1,008
Other ...................................................................... (874) (105) 63
Cost to exit plant ......................................................... 1,260 - -
Changes in working capital components excluding acquisitions
and divestitures:
Accounts receivable ........................................................ (1,818) 5,567 7,803
Inventories ................................................................ (6,970) 6,724 12,041
Accounts payable ........................................................... 2,559 (683) (6,195)
Accrued salaries, wages and employee benefits .............................. 1,506 (734) (3,241)
Other current assets and liabilities ....................................... 1,690 (3,720) (2,334)
-------- -------- --------
Net cash provided by operating activities ................................ 27,388 35,830 34,819
-------- -------- --------
Cash flows from financing activities
Proceeds from revolving credit borrowings and notes payable .................. 4,431 15,967 20,695
Principal payments on revolving credit borrowings and notes payable .......... (8,717) (15,967) (24,195)
Proceeds from issuance of common stock ....................................... 1,283 2,653 3,091
Purchase of treasury stock ................................................... (19,321) (4,230) (13,980)
-------- -------- --------
Net cash used in financing activities .................................... (22,324) (1,577) (14,389)
-------- -------- --------
Cash flows from investing activities
Proceeds from sales of property, plant and equipment ......................... 33 229 950
Additions to property, plant and equipment ................................... (11,909) (7,897) (10,699)
Acquisitions of businesses, net of cash acquired ............................. (1,000) (8,379) (14,633)
Proceeds from divestitures of businesses and product lines ................... 3,463 1,000 14,384
Investment in life insurance contracts ....................................... (685) - (4,308)
Other, net ................................................................... (153) (176) (846)
-------- -------- --------
Net cash used in investing activities .................................... (10,251) (15,223) (15,152)
-------- -------- --------
Net (decrease) increase in cash ................................................ (5,187) 19,030 5,278
Cash and cash equivalents, beginning of year ................................... 26,641 7,611 2,333
-------- -------- --------
Cash and cash equivalents, end of year ......................................... $ 21,454 $ 26,641 $ 7,611
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Changes in Shareholders' Equity
Alltrista Corporation and Subsidiaries
Accumulated Other
Comprehensive Income
--------------------
(thousands of dollars and shares) Minimum Cumulative
Common Stock Treasury Stock Retained Pension Translation
Shares Amount Shares Amount Earnings Liability Adjustment
------ -------- ------ ------ -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 .......... 7,884 $40,679 - $ - $38,965 $(367) $(26)
Net income .......................... - - - - 14,510 - -
Minimum pension liability ........... - - - - - 114 -
Stock options exercised and
stock plan purchases ............... 212 3,584 - - - - -
Shares reissued from treasury ....... (127) (2,806) 127 2,806 - - -
Cumulative translation adjustment ... - - - - - - (12)
Purchase of common stock ............ - - (631) (13,980) - - -
------ -------- ------ ------ -------- --------- -----------
Balance, December 31, 1996 .......... 7,969 41,457 (504) (11,174) 53,475 (253) (38)
Net income .......................... - - - - 14,837 - -
Minimum pension liability ........... - - - - - 253 -
Stock options exercised .............
and stock plan purchases ........... 183 3,247 - - - - -
Shares reissued from treasury ....... (175) (3,925) 175 3,925 - - -
Cumulative translation adjustment ... - - - - - - (265)
Purchase of common stock ............ - - (186) (4,230) - - -
------ -------- ------ ------ -------- --------- -----------
Balance, December 31, 1997 .......... 7,977 40,779 (515) (11,479) 68,312 - (303)
Net income .......................... - - - - 15,727 - -
Stock options exercised .............
and stock plan purchases ........... 69 1,494 - - - - -
Shares reissued from treasury ....... (79) (1,779) 79 1,779 - - -
Cumulative translation adjustment ... - - - - - - (316)
Purchase of common stock ............ - - (767) (19,321) - - -
------ -------- ------ ------- -------- --------- -----------
Balance, December 31, 1998 .......... 7,967 $40,494 (1,203) $(29,021) $84,039 $ - $(619)
====== ======== ====== ======= ======== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statements of Comprehensive Income
Alltrista Corporation and Subsidiaries
Year ended December 31,
(thousands of dollars) 1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Net income ................................................. $15,727 $14,837 $14,510
Foreign currency translation ............................... (316) (265) (12)
Minimum pension liability .................................. - 253 114
------- ------- -------
Comprehensive income ....................................... $15,411 $14,825 $14,612
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
Notes to Consolidated Financial Statements
Alltrista Corporation and Subsidiaries
SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These consolidated financial statements have been prepared in accordance with
generally accepted accounting principles. The consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries. All
significant intercompany transactions and balances have been eliminated upon
consolidation. Certain prior year amounts have been reclassified to conform to
the current year presentation including the 1998 presentation of discontinued
operations.
The businesses comprising the Company have interests in metal and plastics
products. See Business Segment Information note.
USE OF ESTIMATES
Preparation of the consolidated financial statements requires estimates and
assumptions that affect amounts reported and disclosed in the financial
statements and related notes. Actual results could differ from those estimates.
REVENUE RECOGNITION
Sales are recognized upon shipment of products to customers.
CASH AND CASH EQUIVALENTS
Cash equivalents include financial investments with a maturity of three months
or less when purchased.
INVENTORIES
Inventories are stated at the lower of cost, determined on the first-in,
first-out method, or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Maintenance and repair costs
are charged to expense as incurred, and expenditures that extend the useful
lives of the assets are capitalized. The Company reviews property, plant and
equipment for impairment whenever events or circumstances indicate that carrying
amounts may not be recoverable through future undiscounted cash flows, excluding
interest cost.
DEPRECIATION
Depreciation is provided on the straight-line method in amounts sufficient to
amortize the cost of the properties over their estimated useful lives.
GOODWILL
Goodwill represents the excess of the purchase prices of acquired businesses
over the estimated fair values of the net assets acquired. Goodwill is being
amortized on a straight-line basis over periods not to exceed 20 years. The
Company evaluates these assets for impairment whenever events or circumstances
indicate that carrying amounts may not be recoverable through future
undiscounted cash flows, excluding interest costs.
TAXES ON INCOME
Deferred taxes are provided for differences between the financial statement and
tax bases of assets and liabilities using enacted tax rates in effect for the
year in which the differences are expected to reverse.
FAIR VALUE AND CREDIT RISK OF FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, accounts receivable, accounts
payable, and accrued liabilities approximate their fair market values due to the
short-term maturities of these instruments. Investments in life insurance
contracts are carried at surrender value, which approximates fair market value.
The fair market value of long-term debt was estimated using rates currently
available to the Company for debt with similar terms and maturities.
Financial instruments that potentially subject the Company to credit risk
consist primarily of trade receivables and interest-bearing investments. Trade
receivable credit risk is limited due to the diversity of the Company's
customers and the Company's ongoing credit review procedures. The Company places
its interest-bearing cash equivalents with major financial institutions and
limits the amount of credit exposure to any one institution.
STOCK OPTIONS
The Company accounts for the issuance of stock options under the provisions of
Accounting Principles Board No. 25, "Accounting for Stock Issued to Employees."
Accordingly, for the Company's stock option plans, no compensation cost is
recognized in the consolidated statement of income because the exercise price of
the Company's stock options equals the market price of the underlying stock on
the date of grant. Had compensation cost for the Company's stock option plans
been determined based on the fair value at the grant dates for awards under
those plans, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
(thousands of dollars
except per share amounts)
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Net income
As reported ............ $15,727 $14,837 $14,510
Pro forma .............. 15,464 14,612 14,349
Basic earnings per share
As reported ............ $ 2.22 $ 2.00 $ 1.88
Pro forma .............. 2.18 1.97 1.85
Diluted earnings per share
As reported ............ $ 2.19 $ 1.96 $ 1.84
Pro forma .............. 2.15 1.93 1.81
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
Alltrista Corporation and Subsidiaries
The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1998, 1997 and 1996, respectively: no dividend
yield for all years, expected volatility of 23, 23 and 21 percent, risk-free
interest rates of 4.7, 6.2 and 6.3 percent and expected lives of 7.5 years for
all periods. The fair value of each option granted in 1998, 1997 and 1996 was
$10.96, $9.42 and $9.13, respectively.
EARNINGS PER SHARE
Basic earnings per share are computed by dividing net income by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share are calculated based on the weighted average number of outstanding common
shares plus the dilutive effect of stock options as if they were exercised.
A computation of earnings per share is as follows (in thousands except per
share data) for the year ended December 31:
<TABLE>
<CAPTION>
(thousands of dollars, except per share amounts) 1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Basic earnings per share
Income from continuing operations ............... $17,597 $17,241 $15,404
Discontinued operations:
Loss from discontinued operations ............ (908) (2,404) (183)
Net loss on disposal of discontinued
operations ............................... (962) - (711)
-------- -------- --------
Net income ...................................... $15,727 $14,837 $14,510
======== ======== ========
Weighted average number of common
shares outstanding .......................... 7,079 7,413 7,737
======== ======== ========
Basic earnings per share:
Income from continuing operations ............ $ 2.48 $ 2.33 $ 1.99
Discontinued operations ...................... (.26) (.33) (.11)
-------- -------- --------
Net income ................................... $ 2.22 $ 2.00 $ 1.88
======== ======== ========
Diluted earnings per share
Income from continuing operations ............... $17,597 $17,241 $15,404
Discontinued operations:
Loss from discontinued operations ............ (908) (2,404) (183)
Net loss on disposal of discontinued
operations ............................... (962) - (711)
-------- -------- --------
Net income ...................................... $15,727 $14,837 $14,510
======== ======== ========
Weighted average number of common
shares outstanding ........................... 7,079 7,413 7,737
Additional shares assuming
conversion of stock options .................. 116 145 169
Weighted average number of common -------- -------- --------
and equivalent shares ........................ 7,195 7,558 7,906
Diluted earnings per share: ======== ======== ========
Income from continuing operations ............ $ 2.45 $ 2.28 $ 1.95
Discontinued operations ...................... (.26) (.32) (.11)
-------- -------- --------
Net Income ................................... $ 2.19 $ 1.96 $ 1.84
======== ======== ========
</TABLE>
BUSINESS SEGMENT INFORMATION
The Company adopted Statement of Financial Accounting Standards ("SFAS")No. 131,
"Disclosures about Segments of an Enterprise and Related Information"during the
fourth quarter of 1998. SFASNo. 131 requires, among other things, segments to be
reported in a way management analyzes them for making operating decisions and
assessing performance. Prior year's disclosures have been restated to conform to
the current year presentation. The accounting policies of the operating segments
are the same as those described in the summary of significant accounting
policies.
The Company is organized into two distinct segments: metal and plastic
products. The Company's chief operating decision making group includes the
president and the Group Vice Presidents. The operating segments are managed by
the two Group Vice Presidents who are responsible for the segments' performance.
The metal products segment includes sales of zinc and consumer products. This
segment provides cast zinc strip and fabricated zinc products, primarily zinc
battery cans and coinage. The U.S. Mint is the primary purchaser of coinage and,
on the basis of net sales, is the largest customer of the Company. This segment
also markets a line of home food preservation products, including Ball(R),
Kerr(R), Bernardin(R) and Golden HarvestTM brand home canning jars, home canning
jar closures, and related food products, which are distributed through a wide
variety of retail outlets.
The plastic products segment produces injection molded plastic products used
in medical, pharmaceutical and consumer products, industrial thermoformed
plastic parts for appliances, manufactured housing and recreational vehicles and
multi-layer plastic sheet and formed containers used in food packaging. The
majority of the industrial thermoformed plastic parts and multi-layer plastic
sheet and formed container sales were to two customers.
Net sales, operating earnings, assets employed in operations, capital
expenditures, and depreciation and amortization by segment are summarized as
follows:
<PAGE>
Notes to Consolidated Financial Statements
Alltrista Corporation and Subsidiaries
<TABLE>
<CAPTION>
(thousands of dollars) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Net sales:
Metal products:
Consumer products ...................................................... $ 89,710 $ 79,573 $ 57,096
Zinc products .......................................................... 51,679 60,291 57,501
-------- -------- --------
Total metal products ................................................ 141,389 139,864 114,597
Plastic products: -------- -------- --------
Industrial thermoformed parts .......................................... 38,559 27,297 16,850
Injection molded products .............................................. 36,100 30,434 33,105
Plastic packaging ...................................................... 28,100 42,051 43,946
-------- -------- --------
Total plastic products .............................................. $102,759 $ 99,782 $ 93,901
Intercompany sales ............................................................. (102) - -
-------- -------- --------
Total net sales ..................................................... $244,046 $239,646 $208,498
======== ======== ========
Operating earnings:
Metal products ............................................................. $ 23,037 $ 21,101 $ 17,743
Plastic products(1) ........................................................ 8,338 10,728 11,501
Unallocated corporate expenses ............................................. (1,171) (1,729) (1,441)
-------- -------- --------
Total operating earnings ............................................ $ 30,204 $ 30,100 $ 27,803
Interest expense, net ...................................................... (1,822) (2,256) (2,571)
-------- -------- --------
Income from continuing operations before taxes ...................... $ 28,382 $ 27,844 $ 25,232
======== ======== ========
Assets employed in operations:
Metal products ............................................................. $ 76,249 $ 66,274 $ 72,499
Plastic products ........................................................... 55,171 53,364 46,737
-------- -------- --------
Total assets employed in operations ................................. 131,420 119,638 119,236
Discontinued operations .................................................... - 7,842 17,538
Corporate(2) ............................................................... 34,411 39,097 17,305
-------- -------- --------
Total assets ........................................................ $165,831 $166,577 $154,079
======== ======== ========
Capital expenditures:
Metal products(3) .......................................................... $ 5,974 $ 3,297 $ 17,333
Plastic products(4) ........................................................ 6,674 12,362 7,081
Discontinued operations .................................................... - 518 546
Corporate .................................................................. 261 99 372
-------- -------- --------
Total capital expenditures .......................................... $ 12,909 $ 16,276 $ 25,332
======== ======== ========
Depreciation and amortization:
Metal products ............................................................. $ 3,439 $ 3,580 $ 3,003
Plastic products ........................................................... 6,540 6,089 5,962
Discontinued operations .................................................... 283 523 1,390
Corporate .................................................................. 286 193 214
-------- -------- --------
Total depreciation and amortization ................................. $ 10,548 $ 10,385 $ 10,569
======== ======== ========
<FN>
(1) Operating earnings for 1998 include a pre-tax charge of $1.3 million to exit
a plant.
(2) Corporate assets include cash and cash equivalents, amounts related to
employee benefit plans, deferred tax assets and corporate facilities and
equipment.
(3) Capital expenditures for 1996 include the purchase of the Kerr(R)
brand home food preservation product line. (4) Capital expenditures for 1997
include the purchase of certain net assets of Viking Plastics.
</FN>
</TABLE>
The Company's major customers are located within the United States and
Canada. Net sales of the Company's metal products to Canada, including home food
preservation products and coinage, were $20.1 million, $16.5 million and $11.8
million in 1998, 1997 and 1996, respectively. Long-lived assets located outside
the United States and net sales outside of the United States and Canada are not
material.
<PAGE>
Notes to Consolidated Financial Statements
Alltrista Corporation and Subsidiaries
INVENTORIES
Inventories were comprised of the following at December 31:
<TABLE>
<CAPTION>
(thousands of dollars) 1998 1997
------- -------
<S> <C> <C>
Raw materials and supplies............. $ 8,589 $ 9,410
Work in process and finished goods..... 29,692 23,773
------- -------
Total inventories $38,281 $33,183
======= =======
</TABLE>
DEBT AND INTEREST
The Company had $25.7 million and $30.0 million outstanding at year-end 1998 and
1997, respectively, under a private placement long-term financing agreement with
a fixed interest rate of 7.8%. Maturities are $4.3 million per year for seven
years beginning December 1998. Concurrent with this borrowing, the Company
entered into a three-year interest rate swap agreement with two counterparties
which effectively converted the debt to London Interbank Offered Rate ("LIBOR")
based floating rate debt, with the interest rate reset every six months. In May
1995, the Company terminated the swap agreement. This transaction resulted in a
gain of $.5 million which was amortized over the original term of the swap and
effectively fixed the Company's interest rate on the long-term debt through
December 1998 at 7.19%. The fair market value of the Company's long-term debt at
December 31, 1998 and 1997 is estimated to be $27.1 million and $31.5 million,
respectively.
The Company has a revolving credit agreement with a group of banks whereby
the Company can borrow up to $50 million through March 31, 2000, when all
borrowings mature. The agreement may be terminated by the Company with three
days notice. Interest on the borrowings is based upon fixed increments over
adjusted LIBOR or the agent bank's alternate borrowing rate as defined in the
agreement. The agreement also requires the payment of commitment fees on the
unused balance. At December 31, 1998 and 1997, no borrowings were outstanding
under this agreement.
The Company's debt agreements contain certain guarantees and financial
covenants including current ratio requirements, interest coverage, minimum
equity and maximum financial leverage requirements.
Interest paid on the Company's borrowings during the years ended December 31,
1998, 1997, and 1996 was $2.4, $2.5 and $2.9 million, respectively.
COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted SFASNo. 130, "Reporting
Comprehensive Income". Under provisions of this statement, the Company has
included a financial statement presentation of comprehensive income to conform
to these new requirements. Statement 130 requires the Company's minimum pension
liability and foreign currency translation adjustments, which, prior to adoption
of the statement, were reported separately in shareholders' equity, to be
included in other comprehensive income. As a consequence of this change, certain
balance sheet reclassifications were necessary for previously reported amounts
to achieve the required presentation of comprehensive income.
ACQUISITIONS
On May 19, 1997, the Company purchased certain assets and assumed certain
liabilities of Viking Industries ("Viking Plastics") an Arkansas-based producer
of large thermoformed plastic products sold to the manufactured housing and
recreational vehicle industries. The acquisition was accounted for as a
purchase. To date, the Company has paid $9.4 million and may pay an additional
$4.0 million based upon incremental sales over the next two years. The purchase
price was allocated to the assets purchased and liabilities assumed based on
their estimated fair values as of the date of acquisition. The purchase price in
excess of the fair value of assets purchased and liabilities assumed of $6.2
million is being amortized over a 20-year period. Any contingency payments made
by the Company will be added to goodwill. The impact of including the financial
results of Viking Plastics on a pro forma presentation would not have been
material.
On March 15, 1996, the Company acquired certain assets related to the home
food preservation product line of Kerr Group, Inc. ("Kerr") for approximately
$14.6 million and accounted for the acquisition as a purchase. The purchase
price was allocated to the equipment, raw materials inventory and a perpetual
license to use the Kerr(R) trade name, based on their estimated fair values. The
license to use the Kerr(R) trade name is being amortized over 20 years. In
addition, the Company assumed the operating lease at Kerr's Jackson, Tennessee,
manufacturing facility. During the third quarter of 1996, the Company announced
its intention to close the Jackson facility and consolidate operations in its
Muncie, Indiana, facility. As a result of this decision, acquisition costs of
$2.6 million were recorded in "Other Current Liabilities" for severance and the
estimated net costs to close the Jackson facility, resulting in additional
goodwill. The Jackson facility closure was completed in December 1997 as
planned.
<PAGE>
Notes to Consolidated Financial Statements
Alltrista Corporation and Subsidiaries
DISCONTINUED OPERATIONS
Effective September 28, 1998, the Company sold the assets of LumenX, its x-ray
inspection equipment business, for $3.2 million. As a result of the sale, the
Company's consolidated financial statements and the notes thereto report this
business as a discontinued operation. Prior-period financial statements have
been restated accordingly. LumenX had net sales of $7.2 million, $15.5 million,
and $21.8 million in 1998, 1997, and 1996, respectively.
On September 30, 1997, the Company completed the sale of the machine vision
inspection equipment product line of LumenX to Pressco Technology Inc.
("Pressco"). The sale, which consisted primarily of inventory, fixed assets and
intangibles, was for $1.0 million in cash and future consideration based upon
Pressco's future sales of vision inspection equipment to the container industry.
Effective April 26, 1996, the Company sold its Metal Services company plants,
real estate, equipment and coatings and inks inventory to U.S. Can Corporation
for approximately $14.4 million after certain transaction costs. Proceeds from
the sale were used to reduce outstanding borrowings. In addition to the $14.4
million sale proceeds, the Company received approximately $13 million during
1996 from the sale of certain inventory and the collection of accounts
receivable less amounts required to settle the accounts payable and other
liabilities of the Metal Services business.
The disposal of the Metal Services Company assets has been accounted for as a
discontinued operation in the accompanying statements of income. The 1996 loss
from this disposal was $.7 million, net of tax. Sales from this operation were
$18.0 million in 1996.
COSTS TO EXIT FACILITY
In July 1998, management initiated a plan to exit the Company's plastic
injection molding facility in Arecibo, Puerto Rico. Operations in this facility
ended in January 1999. Certain equipment was sold in February 1999. In
accordance with SFAS121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of", the Company determined that a charge
to write down the equipment to fair value was necessary in the third quarter of
1998. Fair value was based upon the selling price of the assets. The total cost
to exit the facility is estimated to be $1.3 million which includes the $.7
million write down of the equipment and $.6 million in other costs consisting
primarily of employee severance and costs to return the leased facility to its
original condition. The Company expects this action to generate approximately
$1.3 million of cash.
TAXES ON INCOME
The components of the provision for income taxes attributable to continuing
operations were as follows for the years ended December 31:
<TABLE>
<CAPTION>
(thousands of dollars) 1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Current income tax expense:
U.S. federal ............. $ 8,562 $ 9,769 $ 8,652
Foreign .................. 1,137 806 449
State and local .......... 1,287 1,382 2,022
------- ------- -------
Total ................ 10,986 11,957 11,123
------- ------- -------
Deferred income tax benefit:
U.S. federal ............ (148) (1,162) (1,062)
State, local and other .. (53) (192) (233)
------- ------- -------
Total ............... (201) (1,354) (1,295)
------- ------- -------
Total provision for
income taxes ........ $10,785 $10,603 $ 9,828
======= ======= =======
</TABLE>
Foreign pre-tax income was $2.8 million, $2.1 million and $1.1 million in
1998, 1997 and 1996, respectively.
Deferred tax liabilities (assets) are comprised of the following at December
31:
<TABLE>
<CAPTION>
(thousands of dollars) 1998 1997
------- -------
<S> <C> <C>
Property, equipment and intangibles.... $ 3,880 $ 2,287
Other.................................. 483 711
------- -------
Gross deferred tax liabilities..... 4,363 2,998
------- -------
Accounts receivable allowances......... (413) (388)
Inventory valuation.................... (1,294) (1,143)
Compensation and benefits.............. (5,036) (4,234)
Other.................................. (1,850) (1,676)
------- -------
Gross deferred tax assets.......... (8,593) (7,441)
------- -------
Net deferred tax asset................. $(4,230) $(4,443)
======= =======
</TABLE>
At December 31, 1998 and 1997, there were no valuation allowances for
deferred tax assets as management believes it is more likely than not that they
will be realized through future taxable earnings or alternative tax strategies.
<PAGE>
Notes to Consolidated Financial Statements
Alltrista Corporation and Subsidiaries
The difference between the federal statutory income tax rate and the
Company's effective income tax rate as a percentage of income from continuing
operations is reconciled as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Federal statutory tax rate......... 35.0% 35.0% 35.0%
Increase (decrease) in rates
resulting from:
State and local taxes, net. 2.9 2.9 4.6
Other...................... .1 .2 (.6)
----- ----- -----
Effective income tax rate.......... 38.0% 38.1% 39.0%
===== ===== =====
</TABLE>
The income tax expense or benefit from discontinued operations differs from
an expense or benefit calculated using the federal statutory tax rate primarily
due to state income taxes and the amortization of intangible assets.
Total income tax payments made by the Company during the years ended December
31, 1998, 1997 and 1996 were $8.2 million, $9.8 million, and $10.1 million,
respectively.
RETIREMENT AND OTHER EMPLOYEE BENEFIT PLANS
Effective January 1, 1998, the Company adopted SFAS No. 132, "Employer's
Disclosures about Pensions and Other Post Retirement Benefits". SFAS132 revises
the disclosure requirements for these benefits.
All active employees other than those represented by bargaining units
participate in a defined contribution plan ("Retirement Plan"). The Company
makes contributions to the Retirement Plan based on an employee's age and length
of service. In addition, the Company matches 100% of employee contributions of
up to 2% of base compensation and 50% of additional employee contributions up to
a maximum Company match of 4%, subject to statutory limitations. The Company's
contributions to the Retirement Plan were $1.8 million, $1.8 million and $1.7
million respectively, in the years ended December 31, 1998, 1997 and 1996.
For all active hourly employees at locations represented by bargaining units
and the former hourly employees of the Metal Services division, the Company
maintains a defined benefit pension plan. Plan benefits are based upon fixed
rates for each year of service. Plan assets consist primarily of fixed income
securities and common stocks. The Company's funding policy is to contribute at
least the statutorily required amount.
The components of net periodic pension expense for the years ended December
31, 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
(thousands of dollars) 1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Service cost of benefits
earned during the period...... $ 253 $ 254 $ 313
Interest cost on projected
benefit obligation............. 727 685 630
Investment gain on plan assets..... (1,192) (1,649) (835)
Net amortization and deferral...... 368 959 421
----- ----- -----
Net periodic pension expense....... $ 156 $ 249 $ 529
===== ====== ======
</TABLE>
The following table is a reconciliation of the benefit obligation and the
fair value of plan assets as of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
(thousands of dollars) 1998 1997
------ ------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year. $10,130 $9,183
Service cost............................ 253 254
Interest cost........................... 727 685
Amendments.............................. 484 -
Actuarial gain.......................... 706 109
Benefits paid........................... (200) (101)
------ ------
Benefit obligation at end of year....... 12,100 10,130
------ ------
Change in plan assets:
Fair value of plan assets at
beginning of year................... 9,799 7,989
Actual return on plan assets............ 1,192 1,649
Company contributions................... - 391
Benefits paid........................... (252) (230)
------ ------
Fair value of plan assets at
end of year........................ 10,739 9,799
------ ------
Funded status........................... (1,361) (331)
Unrecognized net transitional asset..... (18) (27)
Unrecognized prior service cost......... 934 508
Unrecognized net loss................... 452 14
------ ------
Prepaid benefit cost.................... $ 7 $ 164
======= ======
</TABLE>
In accordance with the provisions of SFAS 87, "Employer's Accounting for
Pensions," the Company recorded an additional minimum liability of $.9 and $.3
million at December 31, 1998 and 1997, representing the excess of the unfunded
accumulated benefit obligation over the accrued pension cost. The additional
liability has been offset by intangible assets to the extent of previously
unrecognized prior service cost.
<PAGE>
Notes to Consolidated Financial Statements
Alltrista Corporation and Subsidiaries
The actuarial assumptions used to compute the funded status of the plan
include a discount rate of 6.75% and 7.25% in 1998 and 1997, respectively, and
an expected long-term rate of return on assets of 9.0% in both 1998 and 1997.
The change in assumption had an immaterial effect of the funded status of the
plan.
The Company also provides certain postretirement medical and life insurance
benefits for substantially all of its non-union employees. Most employees not
covered by the plan are covered by collective bargaining agreements, under which
the Company contributes to multi-employer health and welfare plans.
The components of net periodic postretirement benefit expense for the years
ended December 31, 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
(thousands of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost of benefit earned....... $ 74 $ 73 $ 72
Interest cost on liability........... 111 102 118
Net amortization and deferral........ (4) (7) 4
---- ----- ----
Net postretirement benefit cost. $181 $168 $194
==== ===== ====
</TABLE>
The status of the Company's unfunded postretirement benefit obligation at
December 31, 1998 and 1997 follows:
<TABLE>
<CAPTION>
(thousands of dollars) 1998 1997
------- --------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at
beginning of year............... $1,579 $1,408
Service cost......................... 74 73
Interest cost........................ 111 102
Actuarial gain....................... 88 41
Benefits paid........................ (47) (45)
------- -------
Benefit obligation at end of year.... 1,805 1,579
Unrecognized prior service cost...... (56) (60)
Unrecognized net loss................ 188 278
------- -------
Accrued benefit cost................. $1,937 $1,797
======= =======
</TABLE>
The assumed discount rate used to measure the benefit obligation was changed
from 7.25% as of December 31, 1997 to 6.75% as of December 31, 1998. This change
in assumption resulted in an immaterial increase in the benefit obligation.
Increases in health care costs would not impact the benefit obligation or the
annual service and interest costs recognized, except for one of the Company's
facilities, as benefits under the medical plan consist of a defined dollar
monthly subsidy toward the retiree's purchase of medical insurance. Due to the
small number of employees not receiving a defined dollar monthly subsidy, the
effect of a one-percent increase in the health care cost trend rate on the
obligation and the annual service and interest costs is immaterial.
The Company has a deferred compensation plan that permits eligible employees
to defer a specified portion of their compensation. The deferred compensation
earns rates of return as specified in the plan. As of year end 1998 and 1997,
the Company had accrued $6.0 million and $5.3 million, respectively, for its
obligations under this plan. Interest expense on this obligation was $.5 million
in 1998 and $.4 million in 1997. To effectively fund this obligation, in
December 1996 the Company purchased variable rate life insurance contracts.
Proceeds from the insurance contracts are payable to the Company upon the death
of the participants. The cash surrender value of these contracts included in
Other Assets was $5.8 and $4.6 million as of the years ended 1998 and 1997,
respectively.
STOCK PLANS
The Company maintains a stock option plan for key employees, for which it has
reserved 1,200,000 shares of the Company's common stock. It also maintains a
stock option plan, for which it has reserved 10,000 shares of the Company's
common stock, for the issuance of stock options to non-employee directors of the
Company. The stock option price under both plans will not be less than the fair
market value of the Company's common stock on the date of grant. Payment must be
made at the time of exercise in cash or with shares of stock owned by the option
holder (which are valued at fair market value on the exercise date). Options
under the employee plan terminate ten years from date of grant and are
exercisable in four equal installments commencing one year from grant. Options
under the non-employee director's plan terminate ten years from date of grant
and are exercisable one year from the grant date.
<PAGE>
Notes to Consolidated Financial Statements
Alltrista Corporation and Subsidiaries
<TABLE>
<CAPTION>
A summary of stock option activity for the years ended December 31, 1998 and 1997 is as follows:
1998 1997
--------------------------------------- --------------------------------------
Weighted Avg. Weighted Avg.
Shares Option Price Price Range Shares Option Price Price Range
------- ------------ -------------- ------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year........ 374,061 $16.55 $10.70 -$24.125 473,074 $15.05 $10.70-$24.125
New options granted..................... 27,800 27.74 27.00 - 27.938 55,175 21.50 21.50
Exercised............................... (25,936) 12.27 10.70 - 22.25 (133,521) 12.79 10.70- 22.25
Canceled................................ (17,085) 22.59 19.625- 27.938 (20,667) 19.64 10.89- 24.125
------- -------
Outstanding at end of year.............. 358,840 17.44 10.70 - 27.938 374,061 16.55 10.70- 24.125
Exercisable at end of year.............. 270,887 15.55 10.70 - 24.125 249,263 14.12 10.70- 24.125
Reserved for future grants.............. 140,982 -- -- 151,697 -- --
</TABLE>
Significant option groups outstanding at December 31, 1998 and related weighted
average price and life information follows:
<TABLE>
<CAPTION>
Options Weighted average Options Weighted average Weighted average
Exercise Price outstanding exercise price exercisable exercise price remaining life (years)
---------------- ----------- -------------- ----------- ---------------- ----------------------
<S> <C> <C> <C> <C> <C>
$22.25- $27.94 66,388 $24.35 32,154 $22.38 7.4
18.75- 21.50 125,105 20.91 71,386 20.55 7.1
10.70- 13.25 167,347 12.11 167,347 12.11 2.7
</TABLE>
The Company also maintains a restricted stock plan for key employees, for
which it has reserved 50,000 shares of the Company's common stock. Restrictions
under the plan lapse at a rate of 20% per year commencing one year from grant.
Restricted stock totaling 8,224 shares was available for grant at December 31,
1998.
In 1993, the Company established an employee stock purchase plan, whereby the
Company contributes 20% of up to $500 of each participating employee's monthly
payroll deduction. The Company contributed $156,000, $164,000, and $206,000 to
the plan in 1998, 1997 and 1996, respectively.
CONTINGENCIES
The Company is involved in various legal disputes in the ordinary course of
business. In addition, the Environmental Protection Agency has designated the
Company as a potentially responsible party, along with numerous other companies,
for the clean up of several hazardous waste sites. Information at this time does
not indicate that disposition of any of the legal or environmental disputes the
Company is currently involved in will have a material, adverse effect upon the
financial condition, results of operations, cash flows or competitive position
of the Company.
SUBSEQUENT EVENTS (UNAUDITED)
On March 12, 1999, the Company entered into a definitive agreement to acquire
the net assets of Triangle Plastics, Inc. and its subsidiaries ("Triangle
Plastics")for $148.0 million plus acquisition costs. The transaction will be
accounted for as a purchase. Triangle Plastics manufactures heavy gauge
industrial thermoformed parts for original equipment manufacturers in a variety
of industries, including the heavy trucking, agricultural, portable toilet,
recreational and construction markets. Through its TriEnda division, Triangle
Plastics produces plastic thermoformed products for material handling
applications. Triangle Plastics employs approximately 1,100 people and has a
technical center and five production facilities located in Florida, Iowa,
Tennessee and Wisconsin. Triangle Plastics had net sales of $114.1 million in
1998.
QUARTERLY STOCK PRICES (UNAUDITED)
Quarterly sales prices for the Company's common stock, as reported on the
composite tape, were as follows:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
1998
High................ 29 1/4 28 3/4 27 5/8 25
Low................. 26 7/8 24 1/4 19 3/4 19
1997
High................ 25 27 3/8 27 3/4 29 3/4
Low................. 20 5/8 20 1/2 24 1/2 26 5/8
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
Alltrista Corporation and Subsidiaries
<TABLE>
<CAPTION>
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
First Second Third Fourth
(thousands of dollars except per share amounts) Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
1998
Net sales.............................................. $43,126 $82,068 $72,646 $46,206 $244,046
------- ------- ------- ------- --------
Gross profit........................................... 10,153 25,084 23,182 11,294 69,713
------- ------- ------- ------- --------
Net income from continuing operations.................. 1,587 6,844 7,177 1,989 17,597
------- ------- ------- ------- --------
Net income............................................. 1,656 6,581 5,501 1,989 15,727
------- ------- ------- ------- --------
Basic net income per share:
Income from continuing operations................... $ .22 $ .94 $ 1.03 $ .30 $ 2.48
------- ------- ------- ------- --------
Net income.......................................... $ .23 $ .90 $ .79 $ .30 $ 2.22
------- ------- ------- ------- --------
Diluted net income per share:
Income from continuing operations................... $ .21 $ .93 $ 1.01 $ .29 $ 2.45
------- ------- ------- ------- --------
Net income.......................................... $ .22 $ .89 $ .78 $ .29 $ 2.19
------- ------- ------- ------- --------
1997
Net sales.............................................. $41,363 $74,120 $75,656 $48,507 $239,646
------- ------- ------- ------- --------
Gross profit........................................... 9,387 22,898 23,809 9,901 65,995
------- ------- ------- ------- --------
Net income from continuing operations.................. 1,509 6,836 7,045 1,851 17,241
------- ------- ------- ------- --------
Net income............................................. 1,433 6,812 4,939 1,653 14,837
------- ------- ------- ------- --------
Basic earnings per share:
Income from continuing operations.................. $ .20 $ .93 $ .95 $ .25 $ 2.33
------- ------- ------- ------- --------
Net income......................................... $ .19 $ .93 $ .67 $ .22 $ 2.00
------- ------- ------- ------- --------
Diluted earnings per share:
Income from continuing operations.................. $ .20 $ .91 $ .94 $ .25 $ 2.28
------- ------- ------- ------- --------
Net income......................................... $ .19 $ .91 $ .66 $ .22 $ 1.96
------- ------- ------- ------- --------
1996
Net sales.............................................. $45,682 $64,863 $59,641 $38,312 $208,498
------- ------- ------- ------- --------
Gross profit........................................... 11,887 21,432 18,418 8,324 60,061
------- ------- ------- ------- --------
Net income from continuing operations.................. 3,170 6,010 4,271 1,953 15,404
------- ------- ------- ------- --------
Net income............................................. 3,357 5,637 4,176 1,340 14,510
------- ------- ------- ------- --------
Basic earnings per share:
Income from continuing operations.................. $ .40 $ .77 $ .55 $ .26 $ 1.99
------- ------- ------- ------- --------
Net income......................................... $ .43 $ .72 $ .54 $ .18 $ 1.88
------- ------- ------- ------- --------
Diluted earnings per share:
Income from continuing operations.................. $ .40 $ .75 $ .54 $ .26 $ 1.95
------- ------- ------- ------- --------
Net income......................................... $ .42 $ .70 $ .53 $ .18 $ 1.84
------- ------- ------- ------- --------
</TABLE>
Earnings per share calculations for each quarter are based on the weighted
average number of shares outstanding for each period, and the sum of the
quarterly amounts may not necessarily equal the annual earnings per share
amounts. In addition, the effect of outstanding dilutive stock options has been
included in diluted earnings per share in each year.
<PAGE>
Notes to Consolidated Financial Statements
Alltrista Corporation and Subsidiaries
<TABLE>
<CAPTION>
SIX-YEAR REVIEW OF SELECTED FINANCIAL DATA
1998 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Statement of Income Data
Net sales..................................... $244,046 $239,646 $208,498 $201,658 $187,525 $175,350
Earnings before interest and taxes(a)(b)...... 30,204 30,100 27,803 24,018 24,904 25,388
Income from continuing operations............. 17,597 17,241 15,404 12,623 13,952 13,065
Gain (loss) from discontinued operations...... (1,870) (2,404) (894) (1,124) 2,176 379
Effect of accounting change
(net of income taxes)...................... -- -- -- -- -- (714)
-------- -------- -------- -------- -------- --------
Net income (a) (b)............................ $ 15,727 $ 14,837 $ 14,510 $ 11,499 $ 16,128 $ 12,730
======== ======== ======== ======== ======== ========
Basic earnings per share:
Income from continuing operations........... $ 2.48 $ 2.33 $ 1.99 $ 1.62 $ 1.84 $ 1.78
Gain (loss) from discontinued operations.... (.26) (.33) (.11) (.15) .29 .05
Effect of accounting change
(net of income taxes)................... -- -- -- -- -- (.10)
-------- -------- -------- -------- -------- --------
$ 2.22 $ 2.00 $ 1.88 $ 1.47 $ 2.13 $ 1.73
======== ======== ======== ======== ======== ========
Diluted earnings per share:
Income from continuing operations........... $ 2.45 $ 2.28 $ 1.95 $ 1.58 $ 1.79 $ 1.73
Gain (loss) from discontinued operations.... (.26) (.32) (.11) (.14) .28 .05
Effect of accounting change
(net of income taxes)................... -- -- -- -- -- (.09)
-------- -------- -------- -------- -------- --------
$ 2.19 $ 1.96 $ 1.84 $ 1.44 $ 2.07 $ 1.69
======== ======== ======== ======== ======== ========
Balance Sheet Data (at end of year)
Total assets.................................. $165,831 $166,577 $154,079 $162,650 $156,725 $143,107
Property, plant and equipment, net............ 46,856 45,010 45,660 56,083 59,040 58,693
Goodwill, net................................. 24,548 24,947 20,549 7,534 8,219 819
Long-term debt................................ 21,429 25,714 30,000 30,000 30,000 35,000
<FN>
(a) The year ended December 31, 1998 includes a $1.3 million pretax charge to
exit a plastic injection molding facility in Arecibo, Puerto Rico.
(b) The year ended December 31, 1995 includes a $2.4 million pretax charge to
write-off assets related to a discontinued zinc product development project.
</FN>
</TABLE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Alltrista Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheet of Alltrista
Corporation and subsidiaries as of December 31, 1998, and the related
consolidated statement of income, comprehensive income, shareholders equity, and
cash flows for the year ended December 31, 1998. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit. The financial
statements of Alltrista Corporation for the years ended December 31, 1997 and
1996, prior to the modifications described below, were audited by other auditors
whose report dated January 30, 1998 expressed an unqualified opinion on those
statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1998 financial statements referred to above present
fairly, in all material respects the consolidated financial position of
Alltrista Corporation and subsidiaries at December 31, 1998, and the
consolidated results of their operations and their cash flows for the year ended
December 31, 1998, in conformity with generally accepted accounting principles.
We also audited the adjustments described in the Discontinued Operations
footnote that were made to recast the 1997 and 1996 financial statements. In our
opinion, such adjustments were appropriate and have been properly applied.
Further, we have audited the Business Segment Information footnote for 1997 and
1996. In our opinion, the segment information has been presented in accordance
with Statement of Financial Accounting Standard Number 131, Disclosures about
Segments of an Enterprise and Related Information.
/s/ Ernst & Young LLP
Indianapolis, Indiana
February 1, 1999
<PAGE>
DIRECTORS AND CORPORATE OFFICERS
ALLTRISTA CORPORATION
DIRECTORS
Thomas B. Clark (3) (4)
President &
Chief Executive Officer
Alltrista Corporation
Indianapolis, Indiana
William A. Foley (2) (3) (4)
Chairman, President &
Chief Executive Officer
LESCO, Inc.
Rocky River, Ohio
Richard L. Molen (2) (3) (4)
Retired Chairman, President &
Chief Executive Officer
Huffy Corporation
Miamisburg, Ohio
William L. Peterson (1) (2)
Chairman of the Board
Retired President &
Chief Executive Officer
Muncie, Indiana
Lynda Watkins Popwell (1)
President
Carolina Eastman Division
Eastman Chemical Company
Columbia, South Carolina
Patrick W. Rooney (1) (3)
Chairman & Chief Executive Officer
Cooper Tire & Rubber Company
Findlay, Ohio
David L. Swift (1) (2) (4)
Former Chairman, President &
Chief Executive Officer
Acme-Cleveland Corporation
Cleveland, Ohio
(1) Audit Committee
(2) Executive Compensation Committee
(3) Nominating Committee
(4) Strategy Committee
CORPORATE OFFICERS
Thomas B. Clark (22)
President &
Chief Executive Officer
Kevin D. Bower (6)
Senior Vice President &
Chief Financial Officer
Jerry T. McDowell (28)
Group Vice President, Metal Products
John F. Zappala*
Group Vice President, Plastic Products
Angela K. Knowlton (5)
Vice President & Treasurer
Larry D. Miller (19)
Vice President,
Communications & Investor Relations
J. David Tolbert (11)
Vice President,
Human Resources & Administration
Garnet E. King (17)
Corporate Secretary
(Years of service)
* Joined company in November 1998
<PAGE>
CORPORATE INFORMATION
ALLTRISTA CORPORATION
CORPORATE HEADQUARTERS
Alltrista Corporation
Suite 440
5875 Castle Creek Parkway, North Drive
Indianapolis, IN 46250-4330
Telephone: 317.577.5000 Fax: 317.577.5001
STOCK TRANSFER AGENT
General Shareholder Correspondence: First Chicago Trust Company, a division of
EquiServe, P.O. Box 2500, Jersey City, NJ 07303-2500. Transfer of stock
ownership: First Chicago Trust Company, a division of EquiServe, P.O. Box 2506,
Jersey City, NJ 07303-2506. Operators are available Monday-Friday, 8:30 a.m. to
7 p.m. EST. An interactive automated phone system is available 24 hours a day.
Inside the U.S.,1.800.446.2617; outside the U.S., 1.201.324.0498; TDD/TTY for
the hearing impaired, 1.201.222.4955. E-mail is [email protected]. Internet site
is http://www.equiserv.com.
DUPLICATE COPIES
If you receive duplicate copies of annual or quarterly reports, extras may be
eliminated by requesting only one copy be sent. Send labels or information
indicating which name you wish to keep on the list and which names should be
deleted to the stock transfer agent.
ANNUAL MEETING
Alltrista Corporation's 1999 annual meeting will, like prior years, be held
solely to report the results of voting on those matters listed in the proxy
statement sent to all shareholders. There will be no other business transacted,
and it is not anticipated that any directors or senior executives will be in
attendance. The meeting to count votes will be at 8 a.m. (EST) on May 12, 1999,
at the corporate headquarters. A written report of the vote will be mailed to
shareholders immediately following the meeting.
FORM 10-K
A copy of the company's Form 10-K (annual report filed with the Securities and
Exchange Commission) will be sent to any stockholder upon request in writing to
Garnet E. King, Corporate Secretary.
COMPANY CONTACTS
For shareholder records questions write Garnet E. King, Corporate Secretary.
Call her at 1.800.696.8451 or contact her by e-mail at [email protected].
For information or assistance about stock holdings, transfer requirements and
address changes, or duplicate mailings, contact the stock transfer agent at the
addresses listed under stock transfer agent.
For any other information about the company, contact Larry D. Miller, Vice
President, Communications and Investor Relations, at 1.800.696.8451 or contact
him by e-mail at [email protected]. For information on the Internet about
the company and its operating business units, as well as news releases and other
financial information, see http://www.alltrista.com. Click on news releases,
then Reuters Financials.
EQUAL OPPORTUNITY
Alltrista Corporation is an equal opportunity employer.
TRADEMARKS
Ball(R) is a registered trademark of Ball Corporation under
limited license to Alltrista Corporation. Kerr(R) is a registered trademark of
Kerr Group, Inc., under limited license to Alltrista Corporation. EVA(R) is a
registered trademark of Stern Stewart & Co. Golden Harvest(R) is a registered
trademark under license to Hearthmark, Inc., a wholly owned subsidiary of
Alltrista Corporation. Collection Elite(TM) is a trademark of Alltrista
Corporation.
FORWARD-LOOKING STATEMENTS
Under the safe harbor provisions of the Private Securities Litigation Reform Act
of 1995, the company cautions investors that any forward looking statement of
projections made by the company, including the letter to shareholders and the
management's discussion and analysis portion of this annual report to
shareholders, are subject to risks and uncertainties that may cause actual
results to differ materially from those projected. The company's operations may
be influenced by weather effects of home canning; U.S. Mint/Federal Reserve
requirements for the U.S. penny; competition and/or substitute products;
economic factors, such as changes in inflation and interest rates; and legal
factors, including environmental and product liability matters.
[GRAPHIC OMITTED]
Exhibit 21.1
ALLTRISTA CORPORATION AND SUBSIDIARIES
SUBSIDIARIES OF ALLTRISTA CORPORATION
State of
Company Shareholder Incorporation/
Organization
- ------------------------------ -------------------------- --------------
Alltrista Unimark, Inc. Alltrista Corporation Indiana
Bernardin Ltd. Alltrista Limited Canada
Alltrista Limited Alltrista Corporation Canada
Alltrista Newco Corporation Alltrista Corporation Indiana
Quoin Corporation Alltrista Corporation Delaware
Hearthmark, Inc.* Quoin Corporation Indiana
Alltista Plastics Corporation** Quoin Corporation Indiana
Alltrista Zinc Products, L.P.*** Quoin Corporation (LP 99%) Indiana
Alltrista Newco Corporation (GP 1%)
* (DBA) Alltrista Consumer Products Company
** (DBA) Alltrista Plastic Packaging Company
Alltrista Industrial Plastics Company
Alltrista Unimark Plastics Company
*** (DBA) Alltrista Zinc Products Company
Exhibit 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in each Registration
Statement on Form S-8 (Registration Statement Nos. 33-60622, 33-60730,
333-27459, 333-27461, 333-67033) of Alltrista Corporation of our report dated
January 30, 1998 appearing in this Annual Report on Form 10-K. We also consent
to the incorporation by reference of our report on the Financial Statement
Schedule, which appears in this Form 10-K.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Indianapolis, Indiana
March 26, 1999
Exhibit 23.2
Consent of Independent Accountants
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Alltrista Corporation of our report dated February 1, 1999, included in the
1998 Annual Report to Shareholders of Alltrista Corporation.
Our audit also included the 1998 financial statement schedule of Alltrista
Corporation listed in Item 14(a). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audit. In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in Registration Statement
Number 33-60622 on Form S-8 dated March 31, 1993, Registration Statement Number
33-60730 on Form S-8 dated March 31, 1993, Registration Statement Number
333-27459 on Form S-8 dated May 20, 1997, Registration Statement Number
333-27461 on Form S-8 dated May 20, 1997, and in Registration Statement Number
333-67033 on Form S-8 dated November 10, 1998 of our report dated February 1,
1999, with respect to the consolidated financial statements of Alltrista
Corporation incorporated by reference in the 1998 Annual Report (Form 10-K) for
the year then ended December 31, 1998.
/s/ ERNST & YOUNG LLP
Indianapolis, Indiana
March 26, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME FOUND IN THE
COMPANY'S FORM 10-K FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
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<ALLOWANCES> 0
<INVENTORY> 38281
<CURRENT-ASSETS> 86568
<PP&E> 152706
<DEPRECIATION> 105850
<TOTAL-ASSETS> 165831
<CURRENT-LIABILITIES> 39645
<BONDS> 21429
0
0
<COMMON> 40494
<OTHER-SE> 54399
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME FOUND IN THE
COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C> <C>
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0 0
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
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COMPANY'S FORM 10-K AND FORM 10-Q FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS
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</LEGEND>
<RESTATED>
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<INCOME-TAX> 910 5029 9404 10603
<INCOME-CONTINUING> 1509 8345 15390 17241
<DISCONTINUED> (76) (100) (2206) (2404)
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
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COMPANY'S FORM 10-K FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
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<CGS> 148437
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</TABLE>
