SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) September 15, 1995
--------------------
BALL CORPORATION
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(Exact name of registrant as specified in its charter)
Indiana
----------------------------------------------
(State or other jurisdiction of incorporation)
1-7349 35-0160610
------------------------ ---------------------------------
(Commission File Number) (IRS Employer Identification No.)
345 South High Street, Muncie, IN 47307-0407
-------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (317) 747-6100
----------------
<PAGE>
BALL CORPORATION
FORM 8-K/A - AMENDMENT NO. 1
Dated November 29, 1995
To CURRENT REPORT on FORM 8-K
Dated September 15, 1995
Registrant hereby amends its Current Report on Form 8-K dated September 15, 1995
to include the financial statements and pro forma financial information set
forth below which was omitted from the original filing pursuant to Items 7(a)(4)
and 7(b)(2).
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
(1) Audited consolidated financial statements of Ball Glass
Container Corporation and subsidiary for the years ended
December 31, 1994 and 1993
Report of Independent Accountants
Consolidated Balance Sheet at December 31, 1994 and 1993
Consolidated Statement of Income (Loss) for the years ended
December 31, 1994 and 1993
Consolidated Statement of Cash Flows for the years ended
December 31, 1994 and 1993
Consolidated Statement of Changes in Shareholder's Equity for
the years ended December 31, 1994 and 1993
Notes to Consolidated Financial Statements
(2) Unaudited condensed consolidated financial statements of Ball
Glass Container Corporation and subsidiary for the
year-to-date periods ended September 15, 1995 and October 2,
1994
Condensed Consolidated Balance Sheet at September 15, 1995 and
October 2, 1994
Condensed Consolidated Statement of Income for the year-to-date
periods ended September 15, 1995 and October 2, 1994
Condensed Consolidated Statement of Cash Flows for the
year-to-date periods ended September 15, 1995 and October 2,
1994
Notes to Unaudited Condensed Consolidated Financial Statements
(3) Audited financial statements of Foster-Forbes Glass Division
of American National Can Company for the years ended December
31, 1994 and 1993
Report of Independent Accountants
Balance Sheets at December 31, 1994 and 1993
Statements of Income - Year ended December 31, 1994 and 1993
Statements of Cash Flows - Year ended December 31, 1994 and
1993
Notes to Financial Statements
<PAGE>
BALL CORPORATION
FORM 8-K/A - AMENDMENT NO. 1
Dated November 29, 1995
To CURRENT REPORT on FORM 8-K
Dated September 15, 1995
Item 7. Financial Statements and Exhibits (continued).
(a) Financial statements of businesses acquired (continued).
(4) Unaudited financial statements of Foster-Forbes Glass Division
of American National Can Company for the year-to-date periods
ended September 15, 1995 and September 30, 1994
Balance Sheets at September 15, 1995 and September 30, 1994
Statements of Income - Year-to-date periods ended September 15,
1995 and September 30, 1994
Statements of Cash Flows - Year-to-date periods ended September
15, 1995 and September 30, 1994
Notes to Financial Statements
(b) Unaudited pro forma financial information.
Introduction
Pro Forma Condensed Consolidated Statement of Income (Loss) for the
year ended December 31, 1994
Pro Forma Condensed Consolidated Statement of Income (Loss) for the
nine month period ended October 1, 1995
Notes to Pro Forma Condensed Consolidated Statements of Income (Loss)
(c) Exhibits.
23.1 Consent of Price Waterhouse LLP, Indianapolis, Indiana (filed
herewith).
23.2 Consent of Price Waterhouse LLP, Chicago, Illinois (filed
herewith).
<PAGE>
Item 7 (a) Financial statements of businesses acquired.
(1) Audited consolidated financial statements of Ball Glass
Container Corporation and subsidiary for the years ended
December 31, 1994 and 1993
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Ball Corporation:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income (loss), of changes in shareholder's equity and
of cash flows present fairly, in all material respects, the financial position
of Ball Glass Container Corporation (a wholly owned subsidiary of Ball
Corporation) and its subsidiary at December 31, 1994 and 1993, and the results
of their operations and their cash flows for the years then ended 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 that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 1 to the consolidated financial statements, in 1993 the
company adopted the provisions of Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits other than
Pensions," Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" and Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits."
Price Waterhouse LLP
Indianapolis, Indiana
November 28, 1995
<PAGE>
<TABLE>
Ball Glass Container Corporation
Consolidated Balance Sheet
December 31, 1994 and 1993
(In thousands)
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Assets
Current assets
Cash and temporary investments $ 1,782 $ 1,645
Accounts receivable, net 55,158 50,983
Inventories, net
Raw materials and supplies 29,603 29,712
Work in process and finished goods 131,901 125,477
Deferred income taxes 11,729 26,508
Prepaid expenses 17,164 2,030
---------- ----------
Total current assets 247,337 236,355
---------- ----------
Property, plant and equipment, at cost
Land 10,564 10,564
Buildings 79,205 76,718
Machinery and equipment 381,035 370,676
---------- ----------
470,804 457,958
Accumulated depreciation (221,865) (214,402)
---------- ----------
248,939 243,556
---------- ----------
Goodwill and other intangible assets, net 29,169 31,179
---------- ----------
Other assets 17,101 16,879
---------- ----------
$ 542,546 $ 527,969
========== ==========
Liabilities and Shareholder's Equity
Current liabilities
Current portion of long term debt $ 20,000 $ 21,250
Accounts payable 42,630 41,968
Salaries, wages and accrued employee benefits 39,845 33,124
Other current liabilities 21,298 23,769
---------- ----------
Total current liabilities 123,773 120,111
---------- ----------
Noncurrent liabilities
Long-term debt 40,000 60,000
Deferred income taxes 1,823 1,875
Employee benefit obligations 23,631 21,878
Other noncurrent liabilities 22,213 18,619
---------- ----------
Total noncurrent liabilities 87,667 102,372
---------- ----------
Contingencies -- --
---------- ----------
Minority interest in consolidated subsidiary 15,823 15,165
---------- ----------
Shareholder's equity
Common stock 77,371 77,371
Additional paid in capital 69,886 69,886
Retained earnings 24,636 20,381
Investments by and advances from Ball Corporation 143,390 122,683
---------- ----------
Common shareholder's equity 315,283 290,321
---------- ----------
$ 542,546 $ 527,969
========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Ball Glass Container Corporation
Consolidated Statement of Income (Loss)
For the Years Ended December 31, 1994 and 1993
(In thousands)
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Net sales $ 750,583 $ 699,374
--------- ---------
Costs and expenses
Cost of sales 698,275 670,113
General and administrative expenses 16,892 12,693
Selling expenses 9,529 9,529
Restructuring and other -- 51,400
Interest expense 11,021 11,970
--------- ---------
735,717 755,705
--------- ---------
Income (loss) before taxes on income and minority
interest 14,866 (56,331)
Provision for income tax (expense) benefit (6,045) 22,217
Minority interest (4,566) (3,562)
Net income (loss) before cumulative effect of
changes in accounting principles 4,255 (37,676)
Cumulative effect of changes in accounting
principles, net of tax benefit -- (11,321)
--------- ---------
Net income (loss) $ 4,255 ($ 48,997)
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Ball Glass Container Corporation
Consolidated Statement of Cash Flows
For the Years Ended December 31, 1994 and 1993
(In thousands)
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities
Net income (loss) before cumulative effect of changes in
accounting principles $ 4,255 ($ 37,676)
Reconciliation of net income (loss) to net cash provided by
operating activities
Minority interest in earnings of consolidated subsidiary 4,566 3,562
Net (payment) provision for restructuring (9,843) 51,400
Depreciation and amortization 45,669 41,044
Deferred taxes on income 14,727 (20,891)
Other 3,025 884
Changes in working capital components:
Accounts receivable (4,175) 2,812
Inventories (6,315) (2,617)
Prepaid employee benefits (15,000) 7,882
Accounts payable 662 (1,673)
Salaries, wages and employee benefits 13,785 (5,743)
Other 6,464 (7,972)
--------- ---------
Net cash provided by operating activities 57,820 31,012
--------- ---------
Cash Flows from Financing Activities
Principal payments of long-term debt (21,250) (40,375)
Dividends paid to minority interest (3,908) (3,908)
Net investments by and advances from Ball Corporation 20,707 62,883
--------- ---------
Net cash (used in) provided by financing activities (4,451) 18,600
--------- ---------
Cash Flows from Investment Activities
Capital expenditures (53,232) (51,772)
--------- ---------
Net cash used in investment activities (53,232) (51,772)
--------- ---------
Net Increase (Decrease) in Cash 137 (2,160)
Cash and temporary investments at beginning of year 1,645 3,805
--------- ---------
Cash and Temporary Investments at End of Year $ 1,782 $ 1,645
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Ball Glass Container Corporation
Consolidated Statement of Changes in Shareholder's Equity
For the Years Ended December 31, 1994 and 1993
(In thousands)
<CAPTION>
Common Stock
(10,000 shares Investments by
authorized, Additional and advances
issued and Paid-in Retained from Ball
outstanding) Capital Earnings Corporation Total
------------- ---------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $ 77,371 $ 69,886 $ 69,378 $ 50,870 $ 267,505
Net transfer of cash and other from
Ball Corporation -- -- -- 71,813 71,813
Net Loss -- -- (48,997) -- (48,997)
--------- --------- --------- --------- ---------
Balance, December 31, 1993 $ 77,371 $ 69,886 $ 20,381 $ 122,683 $ 290,321
Net transfer of cash and other from
Ball Corporation -- -- -- 20,707 20,707
Net Income -- -- 4,255 -- 4,255
--------- --------- --------- --------- ---------
Balance, December 31, 1994 $ 77,371 $ 69,886 $ 24,636 $ 143,390 $ 315,283
========= ========= ========= ========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
BALL GLASS CONTAINER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
Note 1 - Significant Accounting Policies
- ----------------------------------------
Basis of Presentation
As of December 31, 1994, Ball Glass Container Corporation (the "Company") was
a wholly owned subsidiary of Ball Corporation (Ball). These consolidated
financial statements of the Company have been prepared on a separate company
basis. See Note 6, "Related Party Transactions."
Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its 51% owned subsidiary, Madera Glass Company. All significant
intercompany amounts between the Company and Madera are eliminated in
consolidation.
Temporary Investments
Temporary investments are considered cash equivalents if original maturities are
three months or less.
Revenue Recognition and Accounts Receivable
Revenue from the sales of finished goods is recognized at the time of shipment.
Accounts receivable at December 31, 1994 and 1993 are net of reserves for
uncollectible amounts of $2.28 million and $1.11 million, respectively.
In September 1993, Ball entered into an agreement to sell, on a revolving basis
without recourse, an undivided percentage ownership interest in a designated
pool of up to $75.00 million of packaging trade accounts receivable. The current
agreement expires in December 1995. At December 31, 1994 and 1993, a net amount
of approximately $16.6 million and $18.0 million of accounts receivable sold
under this program was allocated to Ball Glass Container Corporation based
accounts receivable. This reduction has not been reflected in the Company's
accounts receivable balance for the years included in these statements.
Inventories
Finished goods inventories are stated at the lower of cost or net realizable
value, cost being determined on the first-in, first-out method. All other
inventories are stated at average cost.
Depreciation and Amortization
Depreciation is provided on the straight-line method in amounts sufficient to
amortize the cost of properties over their estimated useful lives (land
improvements and buildings -- 15 to 50 years; machinery and equipment -- 2 to 20
years). Depreciation expense for the years ended December 31, 1994 and 1993 was
$43.65 million and $38.94 million, respectively.
Goodwill is amortized over the periods benefited, generally 40 years. For the
years ended December 31, 1994 and 1993, amortization expense totaled $2.01
million and $2.10 million, respectively. At December 31, 1994 and 1993,
accumulated amortization was $9.89 million and $7.88 million, respectively.
Company Owned Life Insurance
The Company has purchased insurance on the lives of certain employees. Premiums
were approximately $2.63 million and $2.66 million for the years ended December
31, 1994 and 1993, respectively. The Company borrowed $10.24 million and $7.68
million at December 31, 1994 and 1993, respectively, from the accumulated cash
value of the policies. The policies are issued by The Hartford Life Insurance
Company.
Taxes on Income
The Company is party to a tax-sharing agreement with Ball and is included in
Ball's consolidated federal tax return. Madera files a separate federal tax
return. For purposes of these consolidated financial statements, the Company
records income taxes on a separate-company basis, following the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes". SFAS No. 109 was adopted by Ball effective January 1, 1993, and
this separate-company presentation of the Company likewise reflects the adoption
effective January 1, 1993. Prior to the adoption of SFAS No. 109, Ball and the
Company accounted for income taxes under the provisions of SFAS No. 96, a
predecessor standard to SFAS No. 109. In the Company's circumstances the
accounting under SFAS No. 96 and SFAS No. 109 was similar, and as such, adoption
of SFAS No. 109 had no effect upon the 1993 provision for income tax benefit or
on the cumulative effect of changes in accounting principles.
Under SFAS No. 109, deferred income taxes reflect the future tax consequence of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each balance sheet date based upon enacted tax laws and tax
rates. Income tax expense or benefit is provided based on earnings reported in
the financial statements. The provision for income tax expense or benefit
differs from the amounts of income taxes currently payable or receivable because
certain items of income and expense included in the consolidated financial
statements are recognized in different time periods by taxing authorities.
Pension Costs
The Company's employees participate in a defined benefit pension plan sponsored
by Ball. The Company accounts for this plan as participation in a multi-employer
plan and recognizes pension expense based on amounts allocated by Ball for
continued participation in the plan. This expense allocation is based on an
actuarial estimate of the annual service and interest cost for the Company's
covered employees prepared in accordance with SFAS No. 87, "Employers'
Accounting for Pensions" and an allocation of the amortization of prior service
cost, gains or losses and the return on plan assets.
Other Postretirement and Postemployment Benefits
Effective January 1, 1993, the Company adopted the provisions of SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," and
SFAS No. 112, "Employers' Accounting for Postemployment Benefits."
Postretirement benefit costs subsequent to the change in accounting principles
are accrued on an actuarial basis over the period from the date of hire to the
date of full eligibility for employees and covered dependents who are expected
to qualify for such benefits. Postemployment benefits are accrued when it is
determined that a liability has been incurred. Previously, postretirement and
postemployment benefit costs were recognized as claims were paid or incurred.
Financial Instruments and Concentration of Credit Risk
The fair value of accounts receivable, accounts payable and other current
liabilities approximates their carrying value due to the short-term maturities
of these instruments. The fair value of long term debt was approximately $62.80
million and $91.12 million at December 31, 1994 and 1993 (carrying values of
$60.00 million and $81.25 million), respectively, and was estimated using rates
currently available to the Company for loans with similar terms and maturities.
Concentrations of credit risk with respect to accounts receivable are limited
due to the relatively large number of customers comprising the Company's
customer base. For the years ended December 31, 1994 and 1993, no customer
accounted for more than 10% of net sales.
The Company enters into derivative financial instruments with terms ranging from
three months to one year in order to hedge the commodity price risk of natural
gas and does not hold or issue financial instruments for trading purposes. The
impact of using these derivatives was not material.
Investment By and Advances from Ball Corporation
Ball maintains a centralized cash management system and substantially all cash
receipts and disbursements are recorded at the corporate level. The Company is
charged or credited for the net of cash receipts, cash disbursements, and other
corporate charges each month. Interest is charged on a portion of this balance,
and interest expense for the years ended December 31, 1994 and 1993 includes
$3.66 million and $2.09 million, respectively, of interest charged the Company
by Ball on a portion of the outstanding balances.
Note 2 - Debt and Interest Costs
- --------------------------------
Long-term debt consisted of the following at December 31, 1994 and 1993 (in
thousands):
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Serial senior notes:
9.22%, due April 30, 1995 $ --- $20,000
9.35%, due April 30, 1996 20,000 20,000
9.52%, due April 30, 1997 20,000 20,000
9.66%, due April 30, 1998 20,000 20,000
------- -------
60,000 80,000
Madera variable rate loan due January 15, 1999
(6.0% at December 31, 1993) --- 1,250
------- -------
60,000 81,250
Less current portion 20,000 21,250
------- -------
$40,000 $60,000
======= =======
</TABLE>
In 1993 the Company prepaid $20.00 million of 9.05% serial senior notes
originally due April 30, 1994. Serial senior notes in the amount of $20.00
million continue to be classified as current based upon the Company's intention
to repay that amount in each succeeding year. Additionally, in 1994 the Company
prepaid $1.25 million of the Madera variable rate term loan originally due
January 15, 1999. For the years ended December 31, 1994 and 1993, the Company
paid $6.71 million and $9.45 million, respectively, of interest to unrelated
third parties.
The serial senior notes agreement contains certain guarantees and financial
covenants, the more significant of which include current ratio, net worth and
interest coverage requirements, and limitations on other borrowings and liens,
acquisitions and the sale of assets.
Note 3 - Income Taxes
- ---------------------
The provision for income tax expense (benefit) was comprised as follows (in
thousands):
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Current
Federal $ (8,169) $ (997)
State (513) (329)
-------- --------
Total current (8,682) (1,326)
-------- --------
Deferred
Federal 12,792 (17,511)
State 1,935 (3,380)
-------- --------
Total deferred 14,727 (20,891)
-------- --------
Total provision for income tax expense (benefit) $ 6,045 $(22,217)
======== ========
</TABLE>
The reconciliation of the statutory U.S. income tax rate to the effective income
tax rate is as follows:
<TABLE>
<CAPTION>
1994 1993
----- ------
<S> <C> <C>
Statutory U.S. federal income tax rate 35.0% (35.0)%
Increase (decrease) in rate due to:
State income taxes, net of federal benefit 6.2 (4.3)
Tax effects of company owned life insurance (3.3) (.9)
Goodwill amortization 2.1 .6
Other .7 .2
----- ------
Effective income tax rate 40.7% (39.4)%
===== ======
</TABLE>
Significant components of deferred tax (assets) liabilities follow (in
thousands):
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Gross deferred tax assets:
Accrued employee benefits $(21,461) $(20,558)
Restructuring reserve (3,439) (8,141)
Inventory reserves (6,128) (5,102)
Tax credits --- (4,422)
Other (3,410) (2,846)
-------- --------
Total gross deferred tax assets (34,438) (41,069)
-------- --------
Gross deferred tax liabilities:
Depreciation 18,501 16,100
Prepaid group insurance 4,800 ---
Other 1,231 336
-------- --------
Total gross deferred tax liabilities 24,532 16,436
-------- --------
Net deferred tax assets $ (9,906) $(24,633)
======== ========
</TABLE>
All current income tax assets and liabilities are owed by/to Ball and are
included as a component of investments by and advances from Ball Corporation.
Note 4 - Other Postretirement and Postemployment Benefits
- ---------------------------------------------------------
Pension Benefits
The Company's employees participate in a defined benefit pension plan sponsored
by Ball. The Company's contributions to Ball for continued participation in this
plan were $8.97 million and $7.19 million for the years ended December 31, 1994
and 1993, respectively.
Other Postretirement and Postemployment Benefits
The Company provides retirement health care and life insurance benefits to
certain groups of employees. In addition, employees may become eligible, upon
termination of active employment prior to retirement, for long-term disability,
medical and life insurance continuation and other postemployment benefits. These
benefit obligations are unfunded and, with the exception of life insurance
benefits, are self-insured.
Effective January 1, 1993, the Company adopted two new accounting standards for
these benefit costs, SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," and SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." SFAS No. 106 requires that the Company's estimated
postretirement benefit obligations be accrued by the dates at which participants
attain eligibility for benefits. Similarly, SFAS No. 112 mandates accrual
accounting for postemployment benefits.
Postretirement Medical and Life Insurance Benefits
Postretirement health care benefits are provided to substantially all of the
Company's salaried employees and hourly employees who are members of the AFGW&U
union. Most domestic salaried employees who retired prior to 1993 are covered by
contributory medical plans with capped lifetime benefits. Employees retiring
after January 1, 1993 are provided a fixed subsidy by the Company toward each
retiree's future purchase of medical insurance. Life insurance benefits are
noncontributory. Hourly employees belonging to the AFGW&U union are covered by
noncontributory plans with capped lifetime benefits. Hourly employees belonging
to the GMP union are covered by the collective bargaining agreement, under which
the Company contributes to a multi-employer health and welfare plan. The Company
has no commitments to increase monetary benefits provided by any of the
postretirement benefit programs.
In connection with the adoption of SFAS No. 106, the Company elected immediate
recognition of the previously unrecognized transition obligation through a
pretax, noncash charge to earnings as of January 1, 1993 in the amount of $16.52
million ($9.99 million after tax). The accumulated postretirement benefit
obligation ("APBO") represents, at the date of adoption, the full liability for
postretirement benefits expected to be paid with respect to retirees and a pro
rata portion of the benefits expected to be paid with respect to active
employees.
Net periodic postretirement benefit cost for medical and life insurance benefits
for the years ended December 31, 1994 and 1993 included the following components
(in thousands):
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Service cost - benefits attributed to service during the period $ 402 $ 426
Interest cost on accumulated postretirement benefit obligation 1,204 1,430
Net amortization and deferral 17 --
------ ------
Net periodic postretirement benefit cost $1,623 $1,856
====== ======
</TABLE>
The incremental expense in 1993 resulting from the adoption of SFAS No. 106 was
approximately $1.13 million, excluding the effect of the transition obligation
which was recognized as the cumulative effect on prior years of the change in
accounting. Contributions to multi-employer plans were $3.99 million and $3.47
million for the years ended December 31, 1994 and 1993, respectively.
The status of the Company's unfunded postretirement benefit obligation at
December 31, 1994 and 1993 follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Accumulated postretirement benefit obligation (APBO):
Retirees $ 8,903 $ 10,963
Fully eligible active plan participants 2,892 3,713
Other active plan participants 3,454 5,064
--------- ---------
15,249 19,740
Prior service cost not yet recognized in net periodic
postretirement benefit cost (167) (154)
Unrecognized net gain (loss) from experience and
assumption changes 5,115 (385)
--------- ---------
Accrued postretirement benefit obligation $ 20,197 $ 19,201
========= =========
</TABLE>
The assumed discount rate used to measure the APBO was changed from 7.50% as of
December 31, 1993 to 8.75% as of December 31, 1994, resulting in the decrease in
the APBO. The health care cost trend rate used to value the APBO is assumed to
decline to 6% after the year 2001. A one percentage point increase in the health
care cost trend rate would increase the APBO as of December 31, 1994 and the sum
of the service and interest costs for the year ended December 31, 1994 by
$820,000 and $100,000, respectively.
Other Postemployment Benefits
The Company elected early adoption of SFAS No. 112 and, effective January 1,
1993, recorded a noncash, pretax charge of $2.20 million ($1.33 million after
tax) to recognize the cumulative effect on prior years. Excluding the cumulative
effect on prior years, the annual cost for SFAS No. 112 was $1.63 million and
$970,000 for the years ended December 31, 1994 and 1993, respectively. The
incremental expense in 1993 resulting from the adoption of SFAS No. 112 was
approximately $394,000, excluding the effect of the transition obligation which
was recognized as the cumulative effect on prior years of the change in
accounting.
Other Benefit Plans
Substantially all domestic salaried employees who participate in a
Ball-sponsored 401(k) salary conversion plan and meet certain eligibility
requirements automatically participate in a Ball-sponsored employee stock
ownership plan ("ESOP"). Compensation expense charged by Ball to the Company for
the Company's proportionate share of the ESOP's cost was $228,000 and $209,000
for the years ended December 31, 1994 and 1993, respectively. Interest expense
related to the ESOP was $299,000 and $304,000 for the same respective years.
Note 5 - Restructuring
- ----------------------
In late 1993 plans were developed to undertake a number of restructuring
actions, which included the elimination of excess manufacturing capacity through
plant closures and consolidations and certain administrative consolidations. In
connection therewith, pretax restructuring and other charges of $51.40 million
were recorded in the fourth quarter of 1993. A summary of these charges follows
(in thousands):
Asset write-off and write-downs to net
realizable values $22,483
Employment costs and termination benefits 23,296
Other 5,621
-------
$51,400
=======
Employment costs and termination benefits include the effects of work force
reductions and pension curtailment losses of $6.20 million. Other includes
incremental costs associated with the planned phaseout of the facilities to be
closed.
At December 31, 1994 and 1993, restructuring reserves included in the
consolidated balance sheet and the changes in those reserves were as follows (in
thousands):
<TABLE>
<CAPTION>
Current Noncurrent
Assets Liabilities Liabilities Total
------ ----------- ----------- -----
<S> <C> <C> <C> <C>
Restructuring charge to
operations in 1993 $ 22,483 $ 22,094 $ 6,823 $ 51,400
Noncash items (2,706) (6,224) -- (8,930)
-------- -------- -------- --------
Reserve at December 31, 1993 19,777 15,870 6,823 42,470
Noncash items (1,481) -- -- (1,481)
Cash payments -- (9,843) -- (9,843)
-------- -------- -------- --------
Reserve at December 31, 1994 $ 18,296 $ 6,027 $ 6,823 $ 31,146
======== ======== ======== ========
</TABLE>
Included in assets are write-offs of and write-downs of property, plant and
equipment to net realizable value and the write-off of other deferred costs. The
net book values of the property, plant and equipment related to the facilities
expected to be closed was approximately $22 million (before write-down) at
December 31, 1993, and did not change significantly at December 31, 1994. This
amount is included in the property, plant and equipment caption of the
consolidated balance sheet. Employment costs and termination benefits due to
work force reductions that are expected to be paid out within one year are
reflected in current liabilities. Liabilities resulting from pension curtailment
losses are likewise included in current liabilities and are reflected as a
noncash item in 1993 as these amounts represent an intercompany liability to
Ball, which as sponsor of the affected multi-employer plan has recorded the
additional non-current liability related to the curtailment.
Non-current liability includes the employment related costs associated with the
closure of one facility that are not expected to be paid within the next year.
Payments made in 1994 were made by Ball and reflected as increases in Ball's
investment in and advances to the Company. Of the total restructuring reserves
outstanding at December 31, 1994, $19.5 million will not impact future cash
flows, apart from related tax benefits, of either the Company or Ball.
Note 6 - Related Party Transactions
- -----------------------------------
The Company has extensive transactions and relationships with Ball. Generally,
direct transactions and allocations between the Company and Ball are recorded at
cost. During the normal course of business, Ball makes disbursements on behalf
of the Company which directly relate to the operations of the Company. The
Company also participates in Ball-sponsored programs for which it receives a
direct charge from Ball representing its proportional share of the costs
incurred. For the periods presented, operating expenses include charges for an
allocation of certain corporate expenses from Ball representing general
management and other administrative services. Management believes the foregoing
allocations were made on a reasonable basis. However, the aforementioned
transactions may not reflect the costs and revenues which would be derived from
transactions between unrelated entities. The following is a summary of the
nature and amount of expenses incurred by Ball which were charged to the Company
for the years ended December 31, 1994 and 1993 (in thousands):
<TABLE>
<CAPTION>
Nature of Expense 1994 1993
- ----------------- ------- -------
<S> <C> <C>
Management and administrative services $ 6,436 $ 7,504
Employee benefits 11,475 9,887
Information services 928 1,561
Facilities 1,170 785
------- -------
$20,009 $19,737
======= =======
</TABLE>
The Company supplied bottles to Heublein, the Madera minority shareholder, in
accordance with a renewable supply contract with an initial expiration date of
December 1, 1996. For the years ended December 31, 1994 and 1993, the Company's
sales to Heublein and its affiliates aggregated $36.83 million and $41.75
million, respectively. At December 31, 1994 and 1993, Heublein owed the Company
$2.59 million and $1.51 million, respectively.
Note 7 - Commitments and Contingencies
- --------------------------------------
Leases
Noncancellable operating leases of the Company in effect at December 31, 1994
require rental payments over the next five years approximating (in thousands):
1995 $5,600
1996 $2,400
1997 $2,100
1998 $1,700
1999 $1,400
Thereafter $3,100
The 1995 aggregate minimum lease payments have not been reduced by minimum
sublease income of $160,000. Certain of the leases contain renegotiation clauses
which provide for periodic adjustments to the payments. In 1994 Ball Glass
entered into a 10 year non-cancelable warehouse lease with monthly rental
payments of approximately $130,000, the start date of which is dependent upon
the completion of the third party warehouse, which is expected to occur in the
fourth quarter of 1995. Net lease expense for the Company was $21.74 million and
$19.62 million in 1994 and 1993, respectively.
Environmental
The U.S. Environmental Protection Agency has designated the Company as a
potentially responsible party, along with numerous other companies, for the
cleanup of certain hazardous waste sites. Information at this time does not
indicate that the disposition of these or any legal matters the Company may be
involved in will have a material, adverse effect upon financial condition,
results of operations, cash flows or competitive position of the Company.
Note 8 - Subsequent Event
- -------------------------
On September 15, 1995, Ball sold substantially all of the assets of the Company
to Ball-Foster Glass Container Corporation (Ball-Foster), a newly formed
Delaware limited liability company, for an aggregate purchase price of
approximately $323.00 million in cash, subject to adjustment in certain
circumstances. In connection with the disposition, a pretax loss of
approximately $113.33 million was recorded in 1995. In conjunction with this
sale, Ball acquired for cash a 42 percent interest in Ball-Foster, which also
acquired the glass business of Foster- Forbes Glass Division of American
National Can.
<PAGE>
Item 7 (a) Financial statements of businesses acquired (continued).
(2) Unaudited condensed consolidated financial statements of Ball
Glass Container Corporation and subsidiary for the year-to-
date periods ended September 15, 1995 and October 2, 1994
<TABLE>
Ball Glass Container Corporation and Subsidiary
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(Millions of dollars)
<CAPTION>
September 15, October 2,
1995 1994
------------ ---------
<S> <C> <C>
ASSETS
Current assets
Cash and temporary investments $ 9.1 $ 1.0
Accounts receivable, net 76.6 77.4
Inventories, net
Raw materials and supplies 31.4 28.5
Work in process and finished goods 146.0 131.0
Deferred income taxes 11.7 26.5
Prepaid expenses 2.9 1.3
------- -------
Total current assets 277.7 265.7
------- -------
Property, plant and equipment, at cost 488.5 481.9
Accumulated depreciation (247.6) (237.0)
------- -------
240.9 244.9
------- -------
Goodwill and other intangibles, net 26.9 29.1
Other assets 19.1 17.2
------- -------
$ 564.6 $ 556.9
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 20.0 $ 20.0
Accounts payable 47.1 56.3
Salaries, wages and accrued employee benefits 31.9 39.5
Other current liabilities 22.3 24.9
------- -------
Total current liabilities 121.3 140.7
------- -------
Noncurrent liabilities
Long-term debt 20.0 40.0
Deferred income taxes 1.8 1.8
Employee benefit obligations, and other
noncurrent liabilities 44.4 40.8
------- -------
Total noncurrent liabilities 66.2 82.6
------- -------
Contingencies
Minority interest in consolidated subsidiary 18.8 14.5
------- -------
Shareholder's equity 358.3 319.1
------- -------
$ 564.6 $ 556.9
======= =======
See accompanying notes to unaudited condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Ball Glass Container Corporation
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Millions of dollars)
<CAPTION>
Year-to-date Period Ended
-------------------------
September 15, October 2,
1995 1994
------------ ---------
<S> <C> <C>
Net sales $545.9 $574.2
------ ------
Costs and expenses
Cost of sales 502.8 533.9
Selling, general and administrative expenses 16.2 18.6
Interest expense 6.2 8.4
------ ------
525.2 560.9
------ ------
Income before taxes on income and minority interest 20.7 13.3
Provision for income tax expense (8.4) (5.4)
Minority interest (3.0) (3.2)
------ ------
Net income $ 9.3 $ 4.7
====== ======
See accompanying notes to unaudited condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Ball Glass Container Corporation and Subsidiary
UNAUDITED CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
(Millions of dollars)
<CAPTION>
Year-to-date Period Ended
-------------------------
September 15, October 2,
1995 1994
------------ ---------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 9.3 $ 4.7
Reconciliation of net income to net cash provided by operating
activities
Minority interest in earnings of consolidated subsidiary 3.0 3.2
Net payment for restructuring and other charges (7.2) (4.1)
Depreciation and amortization 34.7 36.5
Other, net 1.5 --
Changes in working capital components (17.8) (4.4)
----- -----
Net cash provided by operating activities 23.5 35.9
----- -----
Cash Flows from Financing Activities
Principal payments of long-term debt (20.0) (21.3)
Net investments by and advances from Ball Corporation 31.1 25.2
Dividends paid to minority interest -- (3.9)
----- -----
Net cash provided by financing activities 11.1 --
----- -----
Cash Flows from Investment Activities
Capital expenditures (27.3) (36.5)
----- -----
Net cash used in investment activities (27.3) (36.5)
----- -----
Net Increase (Decrease) in Cash 7.3 (.6)
Cash and temporary investments:
Beginning of period 1.8 1.6
----- -----
End of period $ 9.1 $ 1.0
===== =====
See accompanying notes to unaudited condensed consolidated financial statements.
</TABLE>
<PAGE>
Ball Glass Container Corporation and Subsidiary
September 15, 1995
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars unless otherwise noted)
1. General.
The accompanying unaudited condensed consolidated financial statements have been
prepared without audit. Certain information and footnote disclosures, including
significant accounting policies, normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. However, management of the Company believes that the
financial statements reflect all adjustments which are necessary for a fair
statement of the results for the interim periods. Results of operations for the
periods shown are not necessarily indicative of results for the year.
The accompanying unaudited condensed consolidated financial statements have been
prepared on a basis consistent with the audited consolidated financial
statements for the years ended December 31, 1994 and 1993. Accordingly, these
financial statements exclude the effects of the sale of substantially all of the
assets of the glass container manufacturing business of Ball Glass Container
Corporation to Ball-Foster Glass Container Corporation. Such excluded effects
are comprised of the writedown of assets to the net realized value, losses
realized and costs incurred in connection with the disposition. It is suggested
that these unaudited condensed consolidated financial statements and
accompanying notes be read in conjunction with the audited consolidated
financial statements and the notes thereto for the years ended December 31, 1994
and 1993.
<PAGE>
Item 7 (a) Financial statements of businesses acquired (continued).
(3) Audited financial statements of Foster-Forbes Glass Division
of American National Can Company for the years ended December
31, 1994 and 1993
REPORT OF INDEPENDENT ACCOUNTANTS
- ---------------------------------
October 27, 1995
To the Board of Directors of
American National Can Company
In our opinion, the accompanying balance sheets and the related statements of
income and of cash flows present fairly, in all material respects, the financial
position of the Foster-Forbes Glass Division (the "Division"), a division of
American National Can Company, at December 31, 1994 and 1993, and the results of
its operations and its cash flows for the years then ended 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 that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 2 to the financial statements, the Division changed its
method of accounting for postemployment benefits in 1994 and for postretirement
benefits in 1993. Also, as discussed in Note 2 to the financial statements, the
Division changed its method of evaluating the recoverability of goodwill in
1994.
Price Waterhouse LLP
Chicago, Illinois
<PAGE>
<TABLE>
FOSTER-FORBES GLASS DIVISION
----------------------------
BALANCE SHEETS
--------------
(Dollars in thousands)
<CAPTION>
December 31,
----------------------
1994 1993
--------- ---------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash $ 27 $ 21
Accounts receivable, less allowances of $83 in 1994 and $350 in
1993 (Note 3) 27,944 15,892
Inventories (Notes 2 and 6) 75,446 53,433
Deferred income taxes (Notes 2 and 9) 7,091 5,579
Other 2,461 1,530
--------- ---------
TOTAL CURRENT ASSETS 112,969 76,455
--------- ---------
INVESTMENTS IN UNCONSOLIDATED AFFILIATES
(Notes 2 and 4) 14,373 7,422
PROPERTY, PLANT AND EQUIPMENT, net
(Notes 2, 4 and 7) 315,948 241,097
GOODWILL, less accumulated amortization of $78,974 in 1994 and
$34,692 in 1993 (Notes 1, 2 and 5) 276,437 242,841
OTHER ASSETS (Notes 4, 11 and 15) 17,898 16,828
--------- ---------
TOTAL ASSETS $ 737,625 $ 584,643
========= =========
LIABILITIES AND EQUITY
----------------------
CURRENT LIABILITIES:
Accounts payable $ 35,226 $ 44,167
Accrued liabilities (Note 10) 41,465 28,579
--------- ---------
TOTAL CURRENT LIABILITIES 76,691 72,746
--------- ---------
LONG-TERM LIABILITIES:
Pension liabilities (Note 11) 10,450 --
Postretirement benefit obligations (Notes 2 and 12) 4,260 3,966
Deferred income taxes (Notes 2 and 9) 42,987 39,320
Other (Note 13) 24,942 22,953
--------- ---------
TOTAL LONG-TERM LIABILITIES 82,639 66,239
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 15) -- --
--------- ---------
EQUITY:
Equity adjustment for minimum pension liability (Note 11) (4,991) (371)
Investments by and advances from ANC (Note 3) 583,286 446,029
--------- ---------
TOTAL EQUITY 578,295 445,658
--------- ---------
TOTAL LIABILITIES AND EQUITY $ 737,625 $ 584,643
========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FOSTER-FORBES GLASS DIVISION
----------------------------
STATEMENTS OF INCOME
--------------------
(Dollars in thousands)
<CAPTION>
Year Ended December 31,
----------------------
1994 1993
--------- ---------
<S> <C> <C>
NET SALES (Note 16) $ 591,896 $ 528,772
OPERATING COSTS AND EXPENSES:
Cost of sales (excluding depreciation and amortization) (Note 4) 444,152 411,980
Depreciation and amortization of property, plant and equipment
(Notes 2 and 7) 35,930 31,437
Selling, general and administrative expenses (Note 3) 20,744 18,760
Net postretirement benefit expense (Note 12) 3,647 3,175
Amortization of goodwill (Notes 2 and 5) 44,282 6,938
Interest expense (Note 3) 8,072 756
Other, net (Note 14) 2,352 (2)
--------- ---------
559,179 473,044
--------- ---------
INCOME BEFORE TAXES AND CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING
PRINCIPLES 32,717 55,728
PROVISION FOR INCOME TAXES (Notes 2 and 9):
Current 23,814 21,525
Deferred 5,633 2,891
--------- ---------
29,447 24,416
--------- ---------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES 3,270 31,312
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES, net of tax (Note 2) (843) (5,167)
--------- ---------
NET INCOME $ 2,427 $ 26,145
========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FOSTER-FORBES GLASS DIVISION
----------------------------
STATEMENTS OF CASH FLOWS
------------------------
(Dollars in thousands)
<CAPTION>
Year Ended December 31,
------------------------
1994 1993
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,427 $ 26,145
Adjustments to reconcile net income to net cash provided from
operating activities:
Cumulative effect of changes in accounting principles 843 5,167
Depreciation and amortization 80,212 38,375
Provision for deferred income taxes 5,633 2,891
Other adjustments to net income 2,011 (126)
Changes in assets and liabilities, net of effects of
acquisition of business:
Increase in accounts receivable (6,314) (834)
(Increase) decrease in inventories (11,564) 1,799
(Increase) decrease in other current assets (765) 3,201
Increase in other assets (6,477) (2,447)
Increase (decrease) in accounts payable (12,573) 8,245
Increase in other liabilities 4,604 4,215
---------- ----------
NET CASH PROVIDED FROM OPERATING ACTIVITIES
58,037 86,631
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (54,795) (41,900)
Proceeds from sale of property, plant and equipment 269 4
Acquisition of business (Note 5) (138,321) --
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (192,847) (41,896)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of obligations under capital leases (14) (12)
Increase (decrease) in advances from ANC (Note 3) 134,830 (44,765)
---------- ----------
NET CASH PROVIDED FROM (USED IN) FINANCING ACTIVITIES
134,816 (44,777)
---------- ----------
NET INCREASE (DECREASE) IN CASH 6 (42)
CASH, beginning of year 21 63
---------- ----------
CASH, end of year $ 27 $ 21
========== ==========
See accompanying notes to financial statements.
</TABLE>
FOSTER-FORBES GLASS DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
Note 1 - Organization and Basis of Presentation
- -----------------------------------------------
Foster-Forbes Glass Division (the "Division") is a division of American National
Can Company ("ANC") which is an indirect majority-owned subsidiary of Pechiney
Corporation, a Delaware corporation. Pechiney Corporation is a wholly owned
subsidiary of Pechiney International S.A., which is a majority-owned subsidiary
of Pechiney S.A., a French corporation.
ANC, including the operations of the Division, was acquired by Pechiney
Corporation on December 31, 1988. As a result of the acquisition, the tangible
assets and liabilities of the Division were adjusted to their fair values as of
the date of acquisition and an allocated portion of the purchase price and
related expenses incurred by Pechiney Corporation to acquire ANC, together with
the resultant goodwill related to the Division and amortization thereof, have
been pushed down to the Division's financial statements.
The accompanying financial statements reflect the "carve-out" financial
position, results of operations and cash flows of the Division for the periods
presented. The financial information included herein does not necessarily
reflect what the financial position and results of operations of the Division
would have been had it operated as a stand alone entity during the period
covered, and may not be indicative of future operations or financial position.
Note 2 - Summary of Significant Accounting Policies
- ---------------------------------------------------
Revenue Recognition
- -------------------
Revenues are recognized when goods are shipped.
Financial Instruments
- ---------------------
The carrying value of the Division's financial instruments, primarily
receivables and payables, generally approximates fair value.
Inventories
- -----------
Inventories are stated at the lower of cost or market. The cost of 76% and 74%
of inventories at December 31, 1994 and 1993, respectively, was determined by
the last-in, first-out (LIFO) method. The cost of all other inventories was
determined by the first-in, first-out (FIFO) method.
Investments in Unconsolidated Affiliates
- ----------------------------------------
Investments in unconsolidated affiliates are accounted for using the equity
method. These investments comprise a 50% interest in Tropicana Industrial Glass
Company (the "Tropicana Joint Venture"), a joint venture with Tropicana
Products, Inc., a 50% interest in Heye America, L.P. ("Heye"), a joint venture
with Hermann Heye KG of Germany, and a 23% interest in Trona Company ("Trona"),
a joint venture with General Chemical Corporation.
Property, Plant and Equipment
- -----------------------------
Property, plant and equipment is stated at cost (as adjusted in connection with
the acquisition of ANC by Pechiney Corporation) including interest incurred on
funds borrowed during the period that major items are prepared for their
intended use. Capitalized leases are stated at the lesser of the present value
of future minimum lease payments or the fair value of the leased property.
Depreciation and amortization are computed using the straight-line method.
During 1994, the Division performed a study of the economic lives of its fixed
assets and determined that the useful lives of certain asset categories were
generally longer than the lives used for depreciation purposes. Therefore, the
Division extended the estimated depreciable lives of certain categories of
property, plant and equipment (mainly machinery and equipment used in the
production process), by a maximum of two years, effective January 1, 1994. The
effect of this change in estimate reduced 1994 depreciation expense by $3,162
and increased 1994 net income by $1,932.
Goodwill
- --------
Goodwill consists of an allocated portion of the Pechiney Corporation
acquisition costs in excess of the fair value of the net assets of the Division
(see Note 1), and the acquisition costs in excess of the fair value of the net
assets acquired from the Liberty Glass Company ("Liberty") in 1994 (see Note 5).
Goodwill is amortized on a straight-line basis over forty years.
In addition to the normal charge for the year, Pechiney Corporation and ANC, in
1994, revised their method of evaluating goodwill resulting in a writedown of
$35,944 relating to the Division. A review of the carrying value of goodwill in
light of recent profitability trends of certain assets and current market values
resulted in this additional charge.
Other Postretirement and Postemployment Benefits
- ------------------------------------------------
Effective January 1, 1993, the Division adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other than Pensions" which requires that the projected cost of all health care
and other non-pension benefits provided by the Division to its retired employees
and their dependents be accrued during an employees' period of service rather
than expensed as paid. The cumulative effect of this change in accounting for
postretirement benefits resulted in a non-cash, after-tax charge in 1993 of
$5,167 (net of $3,289 of income tax benefits). This cumulative effect represents
the actuarial present value of all future medical and life insurance benefits to
be paid to active employees and employees who retired subsequent to the date of
the acquisition by Pechiney Corporation (see Note 1) based on services rendered
to date. The amount of the cumulative effect recorded by the Division at January
1, 1993 was determined (a) for active employees on the basis of an actuarial
valuation and (b) for retired employees based on a pro rata allocation of
Division retirees to the total number of retirees of ANC covered by the plans,
after reduction for the remaining portion of the liability established at the
date of acquisition by Pechiney Corporation for employees who had already
retired as of that date.
Effective January 1, 1994, the Division adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" ("SFAS 112"). This standard requires that the projected costs of all
benefits the Division provides to former or inactive employees (and their
covered dependents) before their retirement be accrued at the time they are
terminated or become inactive. The cumulative effect of this change in
accounting for postemployment benefits resulted in a non-cash, after-tax charge
of $843 (net of $537 of income tax benefits). There was no impact on pretax
earnings in 1994 as a result of complying with SFAS 112.
Income Taxes
- ------------
The Division is included as part of ANC in the consolidated U.S. federal income
tax return of Pechiney Corporation. The provision for income taxes is computed
on the taxable income of the Division on a stand-alone basis.
The Division accounts for income taxes based on the asset and liability approach
in accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." The asset and liability approach requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the financial reporting and the
tax bases of assets and liabilities.
The liability for the current portion of the tax provision is transferred to the
Investments by and advances from ANC account at the end of each year. The net
asset or liability for deferred income taxes has been included in the
accompanying balance sheets.
Note 3 - Related Party Transactions
- -----------------------------------
ANC provides the Division certain data processing, human resources, purchasing,
credit, accounting and tax services. An allocation of the estimated costs of
these services is charged directly to the Division each month by ANC using
varying allocation bases (primarily number of transactions processed). The
allocation process is consistent with the methodology used by ANC to allocate
costs of similar services provided to its other business units. The costs for
these services are negotiated and agreed to by both the Division and ANC each
year, and in the opinion of management are reasonable. The allocated costs of
these services, which aggregated $2,787 and $2,993 in 1994 and 1993,
respectively, were reflected in selling, general and administrative expenses in
the accompanying statements of income.
ANC maintains a centralized cash management system and substantially all cash
receipts and disbursements are recorded at the corporate level. The Division is
charged or credited for the net of cash receipts and disbursements each month.
The Division incurs a monthly charge for interest expense from ANC based on a
formula which takes into consideration its percentage of certain assets and
liabilities in relation to the total for ANC of these assets and liabilities.
The Division incurred a charge for interest expense from ANC of $8,072 in 1994
and $756 in 1993.
The following table sets forth the activity in the Investments by and advances
from ANC account for the years ended December 31, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Balance, beginning of year $446,029 $464,649
Net income 2,427 26,145
Charges (advances) from ANC, net 134,830 ( 44,765)
-------- --------
Balance, end of year $583,286 $446,029
======== ========
</TABLE>
ANC maintains agreements with certain banks to sell trade accounts receivable,
with limited recourse, on a revolving basis. The agreements specify certain
eligibility criteria for receivables that are sold, including credit quality and
maturity. At December 31, 1994 and 1993, a portion of the Division's receivables
was included in the eligible pool of receivables sold by ANC. The accompanying
balance sheets reflect all Division receivables, including those in the eligible
pool.
Note 4 - Investments in Unconsolidated Affiliates
- -------------------------------------------------
Tropicana Joint Venture
- -----------------------
The Tropicana Joint Venture was formed effective January 25, 1993 for the
purpose of manufacturing glass containers. The Division's investment in the
Tropicana Joint Venture was $8,581 at December 31, 1994 and $3,276 at December
31, 1993. The Division's share of equity earnings for the years ended December
31, 1994 and 1993 of $5,305 and $3,276, respectively, was recorded as a
reduction of cost of sales in the accompanying statements of income. During 1994
and 1993, the Division purchased machinery and equipment with a cost of $13,024
and $12,471, respectively, for use by the Tropicana Joint Venture.
Heye
- ----
At December 31, 1994 and 1993, the Division's investment in Heye, a manufacturer
of glass making machinery and equipment, was $5,792 and $4,146, respectively.
The Division also holds a $3,133 non-interest bearing note receivable from Heye,
due no sooner than December 1, 2001, which is included in other assets on the
accompanying balance sheets at December 31, 1994 and 1993. During 1994 and 1993,
the Division purchased approximately $28,300 and $21,400, respectively, of
machinery and equipment, including spare parts, from Heye. The Division's share
of equity earnings of Heye for the years ended December 31, 1994 and 1993
totaled $1,882 and $1,375, respectively, of which $1,009 and $739, respectively,
was recorded as a reduction of the cost of machinery and equipment purchased by
the Division from Heye and $873 and $636, respectively, was reflected as a
reduction of cost of sales in the accompanying statements of income.
Trona
- -----
Trona was formed for the purpose of mining and distributing soda ash, a raw
material used in the glass production process. All of Trona's sales are to the
Division. The Division's share of the equity earnings of Trona for the years
ended December 31, 1994 and 1993 of $2,025 and $1,326, respectively, was
reflected as a reduction of cost of sales in the accompanying statements of
income. The Division purchased approximately $14,300 during 1994 and $13,700
during 1993 of soda ash from Trona.
Summarized financial information for all of the unconsolidated affiliates for
1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Condensed Statements of Income:
Net sales $106,300 $ 84,100
Income before taxes 23,300 15,100
Net income 23,300 15,100
Condensed Balance Sheets:
Current assets $ 40,800 $ 31,100
Noncurrent assets 4,700 5,000
-------- --------
$ 45,500 $ 36,100
======== ========
Current liabilities $ 10,600 $ 14,600
Noncurrent liabilities 6,000 6,700
Equity 28,900 14,800
-------- --------
$ 45,500 $ 36,100
======== ========
</TABLE>
Note 5 - Acquisition
- --------------------
On April 25, 1994, the Division through ANC acquired the net assets of Liberty,
a glass manufacturer with a facility in Sapulpa, Oklahoma for cash of $138,321.
This acquisition is being accounted for in accordance with the purchase method
of accounting, and accordingly the results of operations of Liberty were
included in the accompanying statements of income from the acquisition date. The
net assets of Liberty were included in the accompanying balance sheets at values
representing the allocation of the purchase cost to such net assets. The excess
of purchase cost over the valuation of the net tangible assets of $77,878 was
recorded as goodwill and is being amortized on a straight-line basis over 40
years.
The following summary presents unaudited pro forma financial information as if
the Liberty acquisition had occurred at the beginning of each year, rather than
from the date of acquisition. The pro forma financial summary is for information
purposes only, based on historical information, and does not necessarily reflect
the actual results that would have occurred nor is it necessarily indicative of
future results of operations of the combined businesses:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Net sales $614,600 $610,900
======== ========
Income before taxes and cumulative effect
of changes in accounting principles $ 33,600 $ 57,100
========= ========
Net income $ 3,000 $ 27,000
========= =========
</TABLE>
Note 6 - Inventories
- --------------------
Inventories at December 31, 1994 and 1993 consist of the following:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Raw materials $11,840 $ 9,794
Finished goods 51,002 34,136
Machine spare parts 12,604 9,503
------- --------
$75,446 $ 53,433
======= ========
</TABLE>
At December 31, 1994 and 1993, the FIFO basis of inventories (which approximates
replacement cost) exceeded the LIFO inventory carrying value by approximately
$1,477 and $2,365, respectively.
Note 7 - Property, Plant and Equipment
- --------------------------------------
Property, plant and equipment at December 31, 1994 and 1993 consists of the
following:
<TABLE>
<CAPTION>
Estimated
1994 1993 Useful Life
-------- -------- ------------
<S> <C> <C> <C>
Land $ 7,941 $ 7,171 -
Buildings & improvements 66,386 55,498 40 years
Machinery and equipment 388,553 295,786 3 to 20 years
Less: Accumulated depreciation (146,932) (117,358)
-------- --------
$315,948 $241,097
======== ========
</TABLE>
Note 8 - Operating Leases
- -------------------------
The Division leases manufacturing, warehouse and office facilities and certain
equipment. Future minimum lease payments required under operating leases having
initial or remaining noncancelable lease terms in excess of one year are set
forth below:
<TABLE>
<S> <C> <C>
1995 $ 766
1996 422
1997 274
1998 172
1999 12
Thereafter -
------
Total minimum rentals $1,646
======
</TABLE>
Rental expense under operating leases amounted to $7,908 and $7,132 for the
years ended December 31, 1994 and 1993, respectively, which included $4,898 and
$4,428, respectively, for warehouse leases with terms of less than one year.
Note 9 - Income Taxes
- ---------------------
The provision for income taxes for the years ended December 31, 1994 and 1993
was as follows:
<TABLE>
<CAPTION>
1994 1993
-------- -------
<S> <C> <C>
Current income taxes:
Federal $20,141 $18,205
State 3,673 3,320
------- -------
23,814 21,525
Deferred income taxes 5,633 2,891
------- -------
$29,447 $24,416
======= =======
</TABLE>
The provision for income taxes differed from the U.S. statutory rate for the
years ended December 31, 1994 and 1993 for the following reasons:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Statutory tax rate 35.0% 35.0%
State and local taxes,
net of federal benefit 9.1 4.4
Goodwill amortization 45.9 4.4
---- ----
90.0% 43.8%
==== ====
</TABLE>
Deferred tax assets (liabilities) were comprised of the following at December
31, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Deductible temporary differences:
Employee benefits $ 9,686 $ 8,347
Environmental reserve 3,415 3,647
Minimum pension liability adjustment 3,177 236
Workers' compensation 3,138 2,953
Inventories 608 -
Other 203 220
-------- --------
Total 20,227 15,403
-------- --------
Taxable temporary differences:
Fixed assets (54,516) (48,598)
Goodwill (1,607) -
Inventories - (546)
Total (56,123) (49,144)
Net deferred tax liability ($35,896) ($33,741)
======== ========
</TABLE>
Note 10 - Accrued Liabilities
- -----------------------------
The components of accrued liabilities at December 31, 1994 and 1993 were as
follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Accrued payroll and employee benefits $15,851 $13,478
Workers' compensation liability 9,867 7,842
Payable to fixed asset vendors 6,354 3,654
Reorganization reserves 5,138 216
Pension liabilities (Note 11) 2,536 2,088
Environmental reserve (Note 15) 462 217
Other 1,257 1,084
------- -------
$41,465 $28,579
======= =======
</TABLE>
Note 11 - Pension Liabilities
- -----------------------------
The Division sponsors defined benefit retirement plans covering substantially
all hourly employees of the Division. The Division's salaried employees are
included in ANC-sponsored defined benefit and defined contribution plans which
cover substantially all of the salaried employees of ANC. These plans provide
benefits that are based on employees' years of service and compensation during
employment with the Division. The Division through ANC makes contributions to
the defined benefit plans at least equal to the minimum funding requirements
under the Employee Retirement Income Security Act of 1974 (ERISA).
Net periodic pension cost for the Division's hourly plans for 1994 and 1993
included the following components:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Service cost - benefits earned
during the period $2,435 $2,376
Interest cost on projected
benefit obligation 4,234 3,937
Actual return on assets - (gain)loss 1,333 (7,290)
Net amortization and deferral (4,539) 4,803
------ ------
Net periodic pension cost $3,463 $3,826
====== ======
</TABLE>
The aggregate expense included in the accompanying statements of income for the
salaried defined benefit and defined contribution plans amounted to $2,717 in
1994 and $2,178 in 1993. Pension expense for salaried employees of the Division
participating in the ANC-sponsored plans was allocated based on an actuarial
valuation. Pension expense for salaried retirees of the Division participating
in the ANC-sponsored plans was determined based on a pro-rata allocation of
Division retirees to total ANC retirees.
For 1993 and 1994, the discount rate used to determine the actuarial present
value of the projected benefit obligation was 8.0%, the expected rate of return
on plan assets was 10.0%, and the discount rate used to determine the interest
cost on the projected benefit obligation was 8.0%. The expected increase in
future salaries for those plans using future compensation assumptions ranged
from 4.0% to 6.9% for 1994 and 6.0% to 8.9% for 1993.
All amortization is based upon the average remaining service period of covered
employees except for unrecognized prior service costs for benefit improvements
negotiated during the current period which are amortized over ten years (twice
the contract period).
The following table sets forth the funded status and amounts recognized for the
Division's hourly plans in the accompanying balance sheets at December 31, 1994
and 1993:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefits $ 56,604 $ 52,675
Nonvested benefits 2,114 2,134
-------- --------
Accumulated benefit obligation 58,718 54,809
Excess of projected benefit obligation
over accumulated benefit obligation -- --
-------- --------
Projected benefit obligation 58,718 54,809
Plan assets at fair value 45,732 47,703
-------- --------
Funded status (12,986) (7,106)
Unrecognized prior service cost 8,471 9,763
Unrecognized net loss 8,168 2,815
Additional minimum liability (16,639) (5,202)
-------- --------
Pension asset (liability) recognized
in the balance sheets ($12,986) $ 270
======== ========
Classified in the balance sheets as:
Other assets -- $ 2,358
Accrued liabilities (2,536) (2,088)
Long-term liabilities (10,450) --
-------- --------
($12,986) $ 270
======== ========
</TABLE>
The plans' assets are held by a master trust created for collective investment
of plans' funds. At December 31, 1994 and 1993, assets held by the master trust
consisted primarily of common and preferred stocks, corporate bonds, U.S.
government obligations, pooled funds, real estate and short-term investments.
At December 31, 1994 and 1993, equity adjustments of $4,991 and $371,
respectively, (net of taxes of $3,177 and $236, respectively), had been
recorded, which represent the excess of the additional minimum pension liability
over the related unrecognized prior service cost for the Division-sponsored
plans. Intangible assets of $8,471 and $4,596 have been recorded at December 31,
1994 and 1993, respectively, to the extent of unrecognized prior service cost
and were included in other assets in the accompanying balance sheets.
The projected benefit obligation for the Division's salaried employees and
retirees included in the ANC-sponsored plans was approximately $27,700 and
$26,600 at December 31, 1994 and 1993, respectively, calculated on the same
bases as the related pension expense. Such obligations are not included in the
accompanying balance sheets.
Note 12 - Postretirement Benefits Other than Pensions
- ----------------------------------------------------
The Division participates in a number of multi-employer plans which provide
postretirement health care benefits to substantially all hourly employees not
covered by Division-sponsored plans. The Division also sponsors health care and
life insurance benefit plans for certain hourly employees and their dependents.
Certain of the plans require retiree contributions. The Division's salaried
employees are included in an ANC-sponsored plan which covers substantially all
salaried employees of ANC.
The net postretirement benefit expense for 1994 and 1993 included the following:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Division contributions to hourly
multi-employer union plans $2,325 $1,936
Division-sponsored plans for
hourly employees:
Service cost - benefits earned during the year 63 63
Interest cost on accumulated postretirement
benefit 318 296
------ ------
381 359
------ ------
Allocated portion of service and interest cost
for the Division's salaried employees
participating in the ANC-sponsored plan 941 880
------ ------
Net postretirement benefit expense $3,647 $3,175
====== ======
</TABLE>
These benefits are funded from current Division cash flows as claims are paid.
The accumulated postretirement benefit obligation for the Division-sponsored
plans for hourly participants included in the accompanying balance sheets at
December 31, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Retirees $2,391 $2,294
Active participants 1,869 1,672
------ ------
$4,260 $3,966
====== ======
</TABLE>
Additionally, the postretirement benefit obligation for salaried employees and
salaried retirees of the Division included in the ANC-sponsored plan of $8,431
at December 31, 1994 and $7,546 at December 31, 1993, as determined by actuarial
valuation, are reflected in other long-term liabilities on the accompanying
balance sheets.
A discount rate of 8% was used for determining obligations and interest costs.
The following table shows the other assumptions used to develop the accumulated
postretirement benefit obligation and the net post-retirement benefit expense.
<TABLE>
<CAPTION>
Managed
Under Age Care Under Over Age
65 Age 65 65
--------- ---------- --------
<S> <C> <C> <C>
Current year health care trend rate 10% 8% 8%
Ultimate trend rate 6% 6% 5%
Year ultimate trend rate is achieved 2001 2001 2001
</TABLE>
A one percentage point increase in the assumed health care cost trend rates
would increase the accumulated postretirement benefit obligation, excluding the
ANC-sponsored and multi-employer plans, as of December 31, 1994 by approximately
$500, and would increase the total of the service and interest cost components
by approximately $50 for the year ended December 31, 1994.
<PAGE>
Note 13 - Other Long-Term Liabilities
- -------------------------------------
The components of other long-term liabilities at December 31, 1994 and 1993 were
as follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Environmental reserve (Note 15) $11,997 $13,262
Postretirement benefit obligation for
ANC-sponsored plans (Note 12) 8,431 7,546
Accrued employee benefits 3,691 2,140
Other 823 5
------- -------
$24,942 $22,953
======= =======
</TABLE>
Note 14 - Asset Writedowns
- --------------------------
In 1994, the Division recorded a writedown of various assets aggregating $2,381
due to the technological obsolescence of machinery and equipment used in the
production process. The writedown has been included in Other, net on the
accompanying statements of income.
Note 15 - Contingencies
- -----------------------
The Division is involved in litigation and in administrative proceedings and
investigations in various jurisdictions. A number of such matters involve the
Division, ANC and other parties related to environmental remediation costs.
It is the Division's policy to accrue environmental cleanup costs when it is
probable that a liability has been incurred and an amount is reasonably
estimable. As assessments and cleanups proceed, these liabilities are reviewed
periodically and adjusted as additional information becomes available. The
liabilities can change substantially due to such factors as additional
information on the nature or extent of contamination, methods of remediation
required, and other actions by governmental agencies or private parties. The
aggregate environmental-related accruals were $12,459 at December 31, 1994 and
$13,479 at December 31, 1993. A right of recovery exists from a third party for
certain future incurred costs at one site. This expected future recovery of
$3,681 at December 31, 1994 and $4,105 at December 31, 1993 has been recorded in
other assets in the accompanying balance sheets.
While the Division's liability, if any, with respect to all pending suits and
claims cannot be determined at this time, it is the opinion of management that
the outcome of any such matters, and all of them combined, will not have a
material adverse effect on the Division's financial position or results of
operations.
Note 16 - Major Customers
- -------------------------
The Division had net sales to one customer in 1994 and 1993 amounting to
approximately $252,000 and $229,000, respectively.
Note 17 - Subsequent Event
- --------------------------
On September 15, 1995, Foster Ball, LLC acquired from ANC substantially all of
the net operating assets of the Division, including ANC's interest in the
Tropicana Joint Venture, Heye and Trona, for cash of approximately $680,000.
Upon completion of this transaction, ANC will no longer sell products in the
glass manufacturing markets.
<PAGE>
Item 7(a) Financial statements of businesses acquired (continued).
(4) Unaudited financial statements of Foster-Forbes Glass Division
of American National Can Company for the year-to-date
periods ended September 15, 1995 and September 30, 1994
<TABLE>
FOSTER-FORBES GLASS DIVISION
----------------------------
BALANCE SHEETS
--------------
(Unaudited)
(Dollars in thousands)
<CAPTION>
September 15, September 30,
1995 1994
------------- -------------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash $ 110 $ 53
Accounts receivable, less allowances of $403 in 1995 and 42,005 27,937
$262 in 1994
Inventories 74,703 64,512
Deferred income taxes 7,445 7,427
Other 3,201 4,601
--------- ---------
TOTAL CURRENT ASSETS 127,464 104,530
INVESTMENTS IN UNCONSOLIDATED AFFILIATES 17,133 13,599
PROPERTY, PLANT AND EQUIPMENT, net 313,032 313,188
GOODWILL, less accumulated amortization of $84,764 in 1995 and 270,647 307,994
$40,945 in 1994
OTHER ASSETS 17,835 15,418
--------- ---------
TOTAL ASSETS $ 746,111 $ 754,729
========= =========
LIABILITIES AND EQUITY
----------------------
CURRENT LIABILITIES:
Accounts payable $ 29,523 $ 39,692
Accrued liabilities 25,415 30,342
--------- ---------
TOTAL CURRENT LIABILITIES 54,938 70,034
--------- ---------
LONG-TERM LIABILITIES:
Pension liabilities 7,225 7,248
Postretirement benefit obligations 3,114 4,186
Deferred income taxes 50,798 45,066
Other 24,363 24,236
--------- ---------
TOTAL LONG-TERM LIABILITIES 85,500 80,736
--------- ---------
COMMITMENTS AND CONTINGENCIES -- --
--------- ---------
EQUITY:
Equity adjustment for minimum pension liability (3,181) (3,836)
Investments by and advances from ANC 608,854 607,795
--------- ---------
TOTAL EQUITY 605,673 603,959
--------- ---------
TOTAL LIABILITIES AND EQUITY $ 746,111 $ 754,729
========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FOSTER-FORBES GLASS DIVISION
----------------------------
STATEMENTS OF INCOME
--------------------
(Unaudited)
(Dollars in thousands)
<CAPTION>
Year-to-Date Period Ended
----------------------------
September 15, September 30,
1995 1994
------------- -------------
<S> <C> <C>
NET SALES $ 459,721 $ 445,535
OPERATING COSTS AND EXPENSES:
Cost of goods sold (excluding depreciation and amortization) 367,434 337,493
Depreciation and amortization of property, plant and equipment 28,932 26,098
Selling, general and administrative expenses 17,084 15,435
Net postretirement benefit expense 2,536 2,735
Amortization of goodwill 5,790 6,078
Interest expense 12,367 4,922
Other, net (16) 2,371
--------- ---------
434,127 395,132
--------- ---------
INCOME BEFORE TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE 25,594 50,403
PROVISION FOR INCOME TAXES:
Current 5,348 14,999
Deferred 6,334 6,641
--------- ---------
11,682 21,640
--------- ---------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 13,912 28,763
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE, NET OF TAX -- (843)
--------- ---------
NET INCOME $ 13,912 $ 27,920
========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FOSTER-FORBES GLASS DIVISION
----------------------------
STATEMENTS OF CASH FLOWS
-----------------------
(Unaudited)
(Dollars in thousands)
<CAPTION>
Year-to-Date Period Ended
-----------------------------
September 15, September 30,
1995 1994
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,912 $ 27,920
Adjustments to reconcile net income to net cash provided from operating
activities:
Cumulative effect of change in accounting principle -- 843
Depreciation and amortization 34,722 32,176
Provision for deferred income taxes 6,334 6,641
Other adjustments to net income 200 2,205
Changes in assets and liabilities, net of effects of acquisition of
business:
Increase in accounts receivable (14,261) (6,541)
Decrease (increase) in inventories 743 (630)
Increase in other current assets (36) (4,424)
Increase in other assets (3,841) (6,080)
Decrease in accounts payable (4,504) (8,107)
(Decrease) increase in other liabilities (15,911) 2,458
---------- ----------
NET CASH PROVIDED FROM OPERATING ACTIVITIES 17,358 46,461
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (23,221) (40,547)
Proceeds from sale of property, plant and equipment 6 91
Acquisition of business -- (138,267)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (23,215) (178,723)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of obligations under capital leases -- (7)
Increase in advances from ANC 5,940 132,301
---------- ----------
NET CASH PROVIDED FROM FINANCING ACTIVITIES 5,940 132,294
---------- ----------
NET INCREASE IN CASH 83 32
CASH, beginning of period 27 21
---------- ----------
CASH, end of period $ 110 $ 53
========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
FOSTER-FORBES GLASS DIVISION
----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(Unaudited)
(Dollars in thousands)
A. Financial Statements
--------------------
Results of operations for any interim period are not necessarily
indicative of results of any other periods or for the year. The financial
statements as of September 15, 1995 and September 30, 1994 and for the
periods from January 1, 1995 to September 15, 1995 and January 1, 1994 to
September 30, 1994 are unaudited, but in the opinion of management
include all adjustments necessary for a fair presentation of results for
such periods. These financial statements should be read in conjunction
with the audited financial statements and related notes for the two years
ended December 31, 1994.
B. Inventories
-----------
Inventories consist of the following:
<TABLE>
<CAPTION>
September 15, 1995 September 30, 1994
------------------ ------------------
<S> <C> <C>
Raw materials $13,407 $10,984
Finished goods 49,075 41,239
Machine spare parts 12,221 12,289
------- -------
$74,703 $64,512
======= =======
</TABLE>
The FIFO basis of inventories (which approximates replacement cost)
exceeded the LIFO inventory carrying value by $4,192 at September 15,
1995 and $2,587 at September 30, 1994.
<PAGE>
Item 7 (b) Unaudited pro forma financial information.
Introduction
The following unaudited pro forma consolidated statements of income (loss) of
Ball Corporation for the year ended December 31, 1994 and for the nine months
ended October 1, 1995 give effect to the September 15, 1995 sale of Registrant's
glass food and beverage container manufacturing business, operated through its
wholly owned subsidiary, Ball Glass Container Corporation ("Ball Glass"), to
Ball-Foster Glass Container Corporation ("Ball-Foster"), a joint venture limited
liability company. On September 15, 1995, Ball-Foster also acquired
substantially all of the assets and liabilities of the Foster-Forbes Glass
Division ("Foster-Forbes") of American National Can Company, a subsidiary of
Pechiney S.A. A pro forma balance sheet presentation at October 1, 1995 is not
presented since the sale of substantially all of the assets and liabilities of
Ball Glass was reflected in Registrant's most recent balance sheet for the
quarter ended October 1, 1995 which was filed November 15, 1995 with
Registrant's Quarterly Report on Form 10-Q.
Compagnie de Saint-Gobain, a French corporation, indirectly holds 58% of the
ownership interests of Ball-Foster while the Registrant indirectly holds a 42%
ownership interest which is accounted for under the equity method. The pro forma
statements are prepared as if the aforementioned transactions had occurred on
January 1, 1994 and give effect to the deconsolidation of the Ball Glass
business and to the Registrant's 42% equity in the pro forma after tax earnings
of Ball-Foster.
The pro forma presentation does not include the net loss on Ball Glass
disposition of $113.3 million pretax ($77.8 million after tax or $2.58 per
share). Notwithstanding the potential for the combined Ball-Foster business to
achieve meaningful synergies through enhanced economies of scale and
consolidation of operations, the pro forma equity in earnings of Ball-Foster
does not include any anticipated synergies nor any nonrecurring charges which
may be required in connection with actions taken to achieve such synergies.
The unaudited pro forma consolidated statements of income (loss) are not
necessarily indicative of the results which would have been obtained had the
transactions occurred at January 1, 1994, nor are they necessarily indicative of
future results. The pro forma financial information should be read in
conjunction with: the accompanying notes to unaudited pro forma consolidated
statements of income (loss); the audited annual and unaudited interim financial
statements of Ball Glass and Foster-Forbes included elsewhere in this Form
8-K/A; the Registrant's Annual Report on Form 10-K for the year ended December
31, 1994 and Registrant's Quarterly Reports on Forms 10-Q for the three quarters
ended October 1, 1995.
<PAGE>
<TABLE>
Ball Corporation
Pro Forma Condensed Consolidated Statement of Income (Loss)
For the year ended December 31, 1994
(Unaudited)
<CAPTION>
Ball
(dollars in thousands except Corporation Less: Pro Forma Pro Forma
per share amounts) Historical Ball Glass Adjustments As Adjusted
------------ ---------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 2,594,676 $ 750,583 $ 1,844,093
Costs and Expenses:
Cost of sales 2,311,288 698,275 1,613,013
Selling, general and administrative
expenses 114,544 26,421 6,999 (c) 95,122
Restructuring and other expenses 6,772 -- 6,772
Interest expense 42,298 -- (b) (6,500)(d) 35,798
------------ ---------- ------------ ------------
Income before taxes on income,
minority interest and equity in
earnings of affiliates 119,774 25,887 (499) 93,388
Provision for income tax expense (44,706) (9,578)(e) 184 (e) (34,944)
Minority interest (4,566) (4,566)
Equity earnings in affiliates 2,454 15,668 (f) 18,122
------------ ---------- ------------ ------------
Net income 72,956 11,743 15,353 76,566
Preferred dividends, net of tax
benefit (3,133) (3,133)
------------ ---------- ------------ ------------
Net earnings attributable to common
shareholders $ 69,823 $ 11,743 $ 15,353 $ 73,433
============ ========== ============ ============
Net earnings per share of common stock $2.35 $ 2.48
============ ============
Fully diluted earnings per share
$2.20 $ 2.33
============ ============
Weighted average common shares
outstanding 29,662 29,618
============ =============
Weighted average shares outstanding -
fully diluted 32,061 31,902
============ =============
See accompanying notes to pro forma condensed consolidated statements of income (loss).
</TABLE>
<PAGE>
<TABLE>
Ball Corporation
Pro Forma Condensed Consolidated Statement of Income (Loss)
For the nine month period ended October 1, 1995
(Unaudited)
<CAPTION>
Ball
(dollars in thousands except Corporation Less: Pro Forma Pro Forma
per share amounts) Historical Ball Glass Adjustments As Adjusted
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net sales $ 2,121,567 $ 545,891 $ 1,575,676
Costs and Expenses:
Cost of sales 1,911,208 502,799 1,408,409
Selling, general and administrative
expenses 88,494 16,196 5,357 (c) 77,655
Net loss (gain) on dispositions of
businesses 109,556 113,325 (a) (3,769)
Interest expense 30,497 - (b) (6,484)(d) 24,013
------------ ------------ ----------- ------------
(Loss) income before taxes on income,
minority interests and equity in
earnings of affiliates (18,188) (86,429) 1,127 69,368
Provision for income tax benefit
(expense) 92 25,573 (e) (417)(e) (25,898)
Minority interests (4,189) (2,964) (1,225)
Equity earnings in affiliates 3,175 0 10,085 (f) 13,260
------------ ------------ ----------- -------------
Net (loss) income (19,110) (63,820) 10,795 55,505
Preferred dividends, net of tax
benefit (2,320) (2,320)
------------ ------------ ----------- ------------
Net (loss) earnings attributable to
common shareholders $ (21,430) $ (63,820) $ 10,795 $ 53,185
============ ============ =========== ============
Net (loss) earnings per share of
common stock ($0.71) $1.77
============ ============
Fully diluted (loss) earnings per
share ($0.71) $1.66
============ ============
Weighted average common shares
outstanding 30,010 30,010
============ ============
Weighted average shares outstanding -
fully diluted 32,409 32,409
============ ============
See accompanying notes to pro forma condensed consolidated statements of income
(loss).
</TABLE>
<PAGE>
Ball Corporation
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(a) To exclude the nonrecurring loss recognized upon disposition of Ball
Glass.
(b) Interest expense is not adjusted because interest-bearing indebtedness
related to Ball Glass has been retained by the Registrant.
(c) To reflect certain allocated corporate overhead costs which will not be
eliminated as a consequence of the sale of Ball Glass.
(d) Reflects the application of the $141.9 million net cash proceeds from the
sale of Ball Glass to reduce short term indebtedness and related interest
expense at weighted average actual interest rates of 4.58% and 6.45% in
1994 and 1995, respectively.
(e) To reflect the income tax effects of the pro forma adjustments at
statutory rates.
(f) Ball-Foster's acquisition of the Foster-Forbes business has been treated
as a purchase business combination with the purchase consideration
allocated to estimated fair values of assets acquired and liabilities
assumed. Such estimated values are preliminary and are subject to
adjustment due to: final purchase price negotiations, results of
appraisals and refinements to other estimates. As a consequence of
Registrant's continuing interest in the net assets of its former
glass container manufacturing business, the related depreciation
and amortization have been included in pro forma equity in
earnings of Ball-Foster at the company's basis which includes the effect
of recognizing the net value realized upon disposition.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BALL CORPORATION
(Registrant)
By: /s/ R. David Hoover
--------------------------------
R. David Hoover
Executive Vice President and
Chief Financial Officer
Date: November 29, 1995
-----------------
<PAGE>
BALL CORPORATION
FORM 8-K/A - AMENDMENT NO. 1
Dated November 29, 1995
To CURRENT REPORT on FORM 8-K
Dated September 15, 1995
EXHIBIT INDEX
Exhibit Description
EX-2.1* Asset Purchase Agreement dated June 26, 1995 among Foster Ball,
L.L.C., Ball Glass Container Corporation and Ball Corporation.
Registrant agrees to furnish supplementally a copy of any omitted
schedule to the Commission upon request.
EX-2.2* Foster Ball, L.L.C. Amended and Restated Limited Liability Company
Agreement dated June 26, 1995 among Saint-Gobain Holdings I Corp.,
BG Holdings I, Inc. and BG Holdings II, Inc. Registrant agrees to
furnish supplementally a copy of any omitted schedule to the
Commission upon request.
EX-23.1 Consent of Price Waterhouse LLP, Indianapolis, Indiana (filed
herewith).
EX-23.2 Consent of Price Waterhouse LLP, Chicago, Illinois (filed
herewith).
EX-99.1* Press Release dated September 18, 1995 issued by Ball Corporation.
*Previously filed.
<PAGE>
Exhibit 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in each Prospectus
constituting part of each Post-Effective Amendment No. 1 on Form S-3 to Form
S-16 Registration Statement (Registration Nos. 2-62247 and 2-65638) and in each
Prospectus constituting part of each Form S-3 Registration Statement or
Post-Effective Amendment (Registration Nos. 33-3027, 33-16674, 33-19035,
33-40196, and 33-58741) and in each Form S-8 Registration Statement or
Post-Effective Amendment (Registration Nos. 33-21506, 33-40199, 33-37548,
33-28064, 33-15639, 33-61986 and 33-51121) of Ball Corporation of our report
dated November 28, 1995 relating to the consolidated financial statements of
Ball Glass Container Corporation, which appears in the Current Report on Form
8-K/A of Ball Corporation dated November 29, 1995.
PRICE WATERHOUSE LLP
Indianapolis, Indiana
November 28, 1995
Exhibit 23.2
Consent of Independent Accountants
We hereby consent to the incorporation by reference in each Prospectus
constituting part of each Post-Effective Amendment No. 1 on Form S-3 to Form
S-16 Registration Statement (Registration Nos. 2-62247 and 2-65638) and in each
Prospectus constituting part of each Form S-3 Registration Statement or
Post-Effective Amendment (Registration Nos. 33-3027, 33-16674, 33-19035,
33-40196, and 33-58741) and in each Form S-8 Registration Statement or
Post-Effective Amendment (Registration Nos. 33-21506, 33-40199, 33-37548,
33-28064, 33-15639, 33-61986 and 33-51121) of Ball Corporation of our report
dated October 27, 1995 relating to the financial statements of the Foster-
Forbes Glass Division, which appears in the Current Report on Form 8-K/A
of Ball Corporation dated November 29, 1995.
PRICE WATERHOUSE LLP
Chicago, Illinois
November 27, 1995
