FIRST AND FINAL ADD TO MANVILLE REPORTS IMPROVED FIRST QUARTER RESULTS; COMPLETES RECEIVABLES SALE FACILITY.
/FIRST AND FINAL ADD -- DV001 -- MANVILLE RESULTS/ MANVILLE CORPORATION CONSOLIDATED BUSINESS SEGMENTS (Thousands of dollars) (unaudited) Three Months Ended March 31, PAPERBOARD AND PACKAGING PRODUCTS 1992 1991 Net Sales $249,265 $231,642 Costs and Expenses 213,963 207,586 Other (Loss) Income, net (1,541) 1,002 Income from Operations $ 33,761 $ 25,058 ENGINEERED PRODUCTS Net Sales $127,107 $120,232 Costs and Expenses 114,198 109,642 Other Income, net 3,299 4,924 Income from Operations $ 16,208 $ 15,514 BUILDING PRODUCTS Net Sales $126,630 $122,477 Costs and Expenses 122,093 131,613 Other Income, net 333 12,147 Income from Operations $ 4,870 $ 3,011 CORPORATE AND ELIMINATIONS Net Sales $ (6,065) $ (6,380) Costs and Expenses (1,204) (1,537) Other (Loss) Income, net (1,285) 19 (Loss) from Operations $ (6,146) $ (4,824) CONSOLIDATED TOTAL COMPANY Net Sales $496,937 $467,971 Costs and Expenses 449,050 447,304 Other Income, net 806 18,092 Income from Operations $ 48,693 $ 38,759 MANVILLE CORPORATION CONSOLIDATED STATEMENT OF INCOME (Thousands of dollars) (unaudited) Three Months Ended March 31, INCOME 1992 1991 Net Sales $496,937 $ 467,971 Cost of Sales 385,627 382,049 Selling, General and Administrative 55,169 55,532 Research, Development and Engineering 8,254 9,723 Other Income, net 806 18,092 Income from Operations 48,693 38,759 Interest Income 2,087 29,436 Interest Expense 27,732 27,167 Profit Sharing Expense 2,330 14,658 Income from Continuing Operations Before Income Taxes 20,718 26,370 Income Taxes 11,453 14,221 Income from Continuing Operations 9,265 12,149 Income from Discontinued Operations, net of tax --- 1,481 Income Before Cumulative Effect of Accounting Changes 9,265 13,630 Cumulative Effect of a Change in Accounting for Postretirement Benefits Other Than Pensions, net of tax --- (173,398) Cumulative Effect of a Change in Accounting for Income Taxes --- 220,795 Net Income 9,265 61,027 Preference Stock Accretion (4,741) (3,974) Net Income Applicable to Common Stock $ 4,524 $ 57,053 MANVILLE CORPORATION CONSOLIDATED STATEMENT OF INCOME (Cont'd) (unaudited) Three Months Ended March 31, EARNINGS (LOSS) PER COMMON SHARE 1992 1991 Primary: Income from Continuing Operations $.04 $ .07 Income from Discontinued Operations, net of tax --- .01 Income Before Cumulative Effect of Accounting Change .04 .08 Cumulative Effect of a Change in Accounting for Postretirement Benefits Other Than Pensions, net of tax --- (1.44) Cumulative Effect of a Change in Accounting for Income Taxes --- 1.83 Net Income $.04 $ .47 Fully Diluted: Income from Continuing Operations $.04 $ .07 Income from Discontinued Operations, net of tax --- .01 Income Before Cumulative Effect of Accounting Change .04 .08 Cumulative Effect of a Change in Accounting for Postretirement Benefits Other Than Pensions, net of tax --- (1.44) Cumulative Effect of a Change in Accounting for Income Taxes --- 1.83 Net Income $.04 $ .47 MANVILLE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 1 - In 1982, the Company and its principal U.S. and Canadian subsidiaries filed petitions for reorganization under Chapter 11 of the federal Bankruptcy Code. The filings were precipitated by actual and contingent tort liabilities resulting from litigation arising out of the Company's previous asbestos-related business operations. In December 1986, the Plan of Reorganization (the "plan") was confirmed by the United States Bankruptcy Court for the Southern District of New York. The Order consummating the plan became final on November 28, 1988. The plan relieves the Company of the burden of defending thousands of asbestos lawsuits. This is accomplished through the creation of two independent trusts that were established to assume, administer, settle and pay claims. In lieu of bringing actions against the Company, asbestos claimants must assert their claims against the Manville Personal Injury Settlement Trust (the "personal injury trust") or the Manville Property Damage Settlement Trust (the "property damage trust"), which have been and will continue to be funded by the Company pursuant to the plan. The plan, a court order (the "Injunction") and the federal Bankruptcy Code together operate to prohibit all persons from taking any actions against the Company with respect to any past, present or future asbestos-related liabilities. The Injunction and the plan further prohibit the assertion of punitive damage claims by asbestos claimants against the Company or the personal injury trust or the property damage trust. The Injunction is a unique feature of the Company's Chapter 11 proceedings and could be challenged in future legal proceedings. The Injunction is essential to the Company's ability to continue to operate its businesses and to make required payments to the personal injury trust or the property damage trust. The Company also believes that any attempt to vacate or modify the Injunction will be unsuccessful. Note 2 - Beginning in 1992 (based on the prior year's net earnings), the Company is obligated to pay to the personal injury trust, 20 percent of net earnings (adjusted as specified in the definition of "Profits" in the glossary to the plan of reorganization). Thereafter, similar payments to the personal injury trust are due each year based on the prior year's net earnings. The profit sharing right of the personal injury trust is a right to annual payments if and when the Company has income and it is not a right or lien against the assets of the Company. The amount of the profit sharing becomes probable and reasonably estimable only when the Company has earnings. The profit sharing obligation is a period cost based on actual results of the year in which earned. The profit sharing obligation will exist for as long as the personal injury trust is in existence and any asbestos personal injury claims filed against the personal injury trust remain unpaid. After termination of the personal injury trust, the profit sharing obligation will be transferred to the property damage trust. Based upon a review of the existing and potential claims facing the two trusts, the Company believes that the profit sharing, for all practical purposes, will be payable in perpetuity unless the Company and the trusts agree to a restructuring or modification of the profit sharing obligation at some future date. In the first quarter of 1992, the Company recorded $2.3 million of profit sharing expense to be paid in 1993 as required in the plan of reorganization. Net after-tax adjustments to consolidated net income in arriving at profits, as defined, include (a) adding losses/subtracting gains on the sale, disposition or write-down of assets not in the ordinary course of business; (b) adding goodwill amortization; and (c) adding the accrual or interest accretion related to the 9 percent interest deferred sinking fund debentures. The Company will recognize a tax benefit for financial reporting purposes on the amount of profit sharing accrued. Income tax impacts of the profit sharing charge on the Company's effective tax rate are not considered in arriving at profits as defined in the plan. In 1990, a class action lawsuit was filed by certain plaintiffs against the personal injury trust seeking to restructure the methods by which the personal injury trust's liabilities are paid. The Company is not a party to this court proceeding. Note 3 below describes the class action lawsuit and restructuring of the personal injury trust's distribution process. Note 3 - The possibility of liquidity shortfalls on the part of the personal injury trust had been anticipated during the course of the bankruptcy proceedings. A series of negotiations between the Company and the personal injury trust ensued during 1989 on alternative methods of solving the trust's liquidity problems. On November 19, 1990, the Company and the personal injury trust entered into formal agreements with respect to an arrangement (the "Arrangement") for restructuring the timing of funding to the personal injury trust. The Arrangement is subject to numerous approvals and conditions, including, among other things, the definitive resolution of the limited fund class action lawsuit brought by a group of claimants against the personal injury trust to restructure the methods by which it resolves and pays claims, final orders reaffirming the Injunction separating the Company from asbestos claims, certain other legal matters and the receipt of consents from certain other persons. In 1990, a class action lawsuit was filed by certain plaintiffs against the personal injury trust to restructure the methods by which it resolves and pays claims. On May 16, 1991, U. S. District Judge Jack B. Weinstein and Chief Bankruptcy Judge Burton J. Lifland (the "Courts") issued a joint memorandum, order and final judgement (the "Memorandum") which includes an order reaffirming the Injunction (the "Reaffirmation Order") and approved the restructuring of the personal injury trust in accordance with new distribution process guidelines. The Memorandum was modified in non-substantive respects on June 27, 1991. Thirteen appeals of the Memorandum as revised have been filed, none of which challenges the Reaffirmation Order. Oral arguments of these appeals were heard by the United States Court of Appeals for the second circuit on February 24, 1992. The Company expects the appeals process to continue at least into the fourth quarter of 1992. The Company is not a party to these court proceedings. As part of the plaintiffs' class action lawsuit against the personal injury trust, the Courts have determined the personal injury trust to be a limited fund whose projected obligations significantly exceed its assets. The new claims settlement procedures contemplate that the personal injury trust will sell its assets (which include its stock and debt ownership in the Company) during the foreseeable future in order to fund the trust's obligations because of the significant liquidity needs of the personal injury trust. Under the new personal injury trust distribution process, claimants with settled claims will receive a share of the annual funds available to the personal injury trust. These funds are to be paid pursuant to the new distribution process guidelines. Final resolution of appeals to the class action lawsuit is necessary before the Arrangement becomes effective. If the aforementioned conditions are satisfied, the Arrangement provides, among other things, that: Conversion of Preferred Stock The Series A Convertible Preferred Stock, par value $1.00 per share, of the Company, all of which is owned by the personal injury trust, would be converted by its terms into 72,000,000 shares of Common Stock, par value $.01 per share, of the Company. Dividends The Company would pay pro rata dividends to all holders of Common Stock according to the following schedule and subject to the described conditions: 1) $1.04 per share payable no later than 90 days after the finality of various court orders entered approving the settlement of both the class action involving the personal injury trust and reaffirming the Injunction separating the Company from asbestos claims; 2) $1.04 per share payable one year after the first dividend; 3) $.42 per share payable in each of the second and third years after the first dividend; and 4) In the third through sixth years after the first dividend, depending on the Company's annual performance, the Company would declare and pay additional annual dividends with a cumulative cap of $300 million. All of the dividends would be subject, among other things, to the Company's ability under applicable law to declare and pay dividends. The Company expects to have sufficient cash on hand to pay the first common dividend without incurring additional borrowings for this purpose. All dividends after the initial dividend are subject to the Company being able to arrange financing on terms not substantially more onerous than those available to corporations with BB rated unsecured debt for substantially similar financing. To the extent that each of the financings required to make scheduled dividends has not been obtained, the second through the eighth dividends, or any portions thereof, would be deferred until such financing is obtained. Dividends will be cumulative and will not bear interest. The dividends have been accrued using the criteria for recording loss contingencies as prescribed in Statement of Financial Accounting Standards No. 5, "Accounting for Contingencies". Consequently, an accrual for the first four dividends was recorded at the time of receipt of United States District Court orders approving new distribution process procedures for the personal injury trust and reaffirming the Injunction, because, in the Company's opinion, it is probable that all significant contingencies relating to these dividends have been resolved. No accrual will be made for the fifth through eighth dividends until such time as the amounts are estimable. Therefore, the March 31, 1992 balance sheet reflects a common dividend accrual of $358.6 million representing the first four common dividend payments under the Arrangement. Dividends on the Company's Cumulative Preference Stock, Series B, may be paid beginning in 1994 at an annual rate of $2.70 per share, payable quarterly, but only at the discretion of the Company's Board of Directors after other funding requirements under the plan of reorganization have been met. Payment of the dividends to common shareholders under the Arrangement entitles the holders of the Cumulative Preference Stock, Series B, to cash dividends beginning in 1994 at an annual rate of $2.70 per share in any year in which a common dividend is declared relating to 1994 and subsequent years. The Company currently anticipates that the first common dividend payment under the Arrangement will occur in late 1992 or early 1993. Accordingly, based on the above, an accrual of $37.6 million, which represents the pro rata discounted value of the 1994 and 1995 dividends to Series B cumulative preference stockholders, was reclassified from equity to non-current liabilities through March 31, 1992. Although accrued for financial reporting purposes, neither the common nor the Series B preference dividends have been declared by the Company's Board of Directors. The Company will receive a tax benefit for both financial reporting and tax purposes in the year in which the common dividends are paid. Restructure Bonds The two bonds of the Company currently held by the personal injury trust (the "Bonds") would be exchanged for a new bond (the "New Bond"), which may be further exchanged into marketable bonds, pursuant to a Bond Exchange Agreement (the "Bond Agreement") in order to enhance the ability of the personal injury trust to sell all or portions of the bonds, while not materially changing the present value of the Company's payment obligations. This would be accomplished by permitting the personal injury trust, as part of a sale to a third party, to exchange all or a portion of the New Bond for marketable bonds with a maturity shorter than those now held by the personal injury trust and by modifying the covenants applicable to the marketable bonds to approximate those currently contained in comparable public debt securities. At the time the Bonds are exchanged for the New Bond, the Bond Agreement will limit the Company's ability to declare and pay dividends on its capital stock, except dividends paid pursuant to the Arrangement. The restrictions on dividends under the Bond Agreement pertain primarily to the Company meeting financial tests regarding net income. Modify Covenants Certain of the restrictive covenants contained in contracts between the Company and the personal injury trust would be modified to permit greater flexibility to the Company in the issuance of equity and debt securities, in the payment of further common dividends and in making certain types of investments. Note 4 - In July 1989, a lawsuit filed by the Company against Guardian Industries Corporation of Northville, Michigan culminated in the Company being awarded approximately $15 million in a patent infringement judgement. In January 1991, a U.S. appeals court upheld the judgement. The award proceeds, approximately $40 million including accrued interest, were received in February, 1991. The original $15 million judgement, net of approximately $2 million of deferred litigation costs, was reflected in other income in the Company's first quarter 1991 financial statements. Approximately $25 million of the proceeds was reflected in interest income. Note 5 - The Company's 1992 effective tax rate on income from continuing operations of 55 percent is comparable to the 1991 rate of 54 percent. These rates are higher than U.S. federal statutory tax rates principally due to high foreign effective income tax rates. Note 6 - In June 1991, the Board of Directors adopted a formal plan to dispose of a significant portion of the Company's Mining and Minerals business segment. The Company sold its worldwide filtration and industrial minerals business known as Celite Corporation for cash and the assumption of certain liabilities in the third quarter of 1991. Accordingly, the operating results of the discontinued operations were excluded from the determination of 1991 income from continuing operations. Net sales applicable to the discontinued operations amounted to $27,746,000 for the first quarter of 1991. The operating results of the discontinued operations for the first quarter of 1991 were presented net of taxes of $718,000. Note 7 - Effective January 1, 1991 the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" ("SFAS No. 106") for its U.S. and Canadian postretirement medical and life insurance benefit plans. In accordance with the provisions of that statement, postretirement benefit information for prior years has not been restated. The Company elected to immediately recognize the accumulated postretirement benefit obligation of $173.4 million, net of tax of $91.4 million, upon adoption of SFAS No. 106. Previously, retiree medical and life insurance coverage benefits were expensed as incurred. The effect of adopting SFAS No. 106 on 1991 income before cumulative effects of accounting changes is not significantly different from the amount the Company would have recognized on the expense-as-incurred method. Also, in 1991, the Company recorded a $220.8 million credit to net income to reflect the cumulative effect on prior years of a change in method of accounting for income taxes. The credit resulted from the adoption of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", effective January 1, 1991. Note 8 - The Company's Series A Convertible Preferred Stock is convertible, under certain circumstances, into an additional 72 million shares of Common Stock. Based on the probability of conversion, all earnings (loss) per common share computations assume that the preferred stock has been converted into Common Stock and has been outstanding as of the beginning of the earliest period presented. During 1989 and 1990, the Company issued stock options and stock appreciation rights. In addition, warrants issued upon consummation of the plan of reorganization became exercisable during 1989. These common stock equivalents were considered in determining earnings (loss) per common share amounts. Additionally, if the warrants are exercised before the Series A Convertible Preferred Stock is converted, the Company will be required to issue up to 10.5 miation. This provision is also considered in determining earnings (loss) per common share amounts. The issuance of additional common shares under this provision will not be required if the personal injury trust refinancing Arrangement becomes effective (see Note 3). Primary earnings (loss) per common share amounts are based on the weighted average number of common and common equivalent shares outstanding during the period. The fully diluted earnings (loss) per common share computation further assumes that the common stock equivalents were outstanding at the beginning of the period. For the first quarter of 1992, primary and fully diluted earnings (loss) per common share amounts are based on 123,039,000 and 123,113,000 common equivalent shares, respectively. Primary and fully diluted earnings per common share amounts for the first quarter of 1991 are based on 120,479,000 common equivalent shares. Earnings (loss) per share amounts were calculated after the deduction for preference stock accretion. Note 9 - The Company reports the results of the Paperboard and Packaging Products segment (formerly the Forest Products segment), the Engineered Products segment and the Building Products segment. The Company's paper products, packaging machinery, wood products and energy businesses are included in the Paper and Packaging segment. The Engineered Products segment includes the industrial fiber glass insulations and the mats, fiber and reinforcements businesses. Included as part of the Building Products segment are the Company's building insulations, roofing and mechanical insulations businesses. The Company has reclassified the presentation of prior year and quarter business segment information to conform with the current presentation format. Net sales included in Corporate and Eliminations relate principally to the elimination of intersegment sales (at prices approximating market). Intersegment sales principally relate to sales from the Engineered Products segment to the Building Products segment. The Company's equity investment in the Stillwater platinum and palladium mining operations is the only significant asset of the former Mining and Minerals business segment that was not included in the sale. Financial results for Stillwater are now included under Corporate and Eliminations for business segment reporting purposes. -0- 4/23/92 AA DV001 /END OF FIRST AND FINAL ADD/ (MVL) CO: Manville Corporation; Riverwood International Corporation; Schuller International Inc. ST: Colorado IN: PAP SU: ERN
BB -- DV001A -- 1633 04/23/92 08:06 EDT
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|Date:||Apr 23, 1992|
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