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alltrista annual report 2001

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  • 1. alltrista report 2001 annual

2. corporate profile: Alltrista is a leading provider of niche consumer products used in home food preservation. Alltristas current consumer products business sells home canning and related products, primarily under the Ball, Kerr and Bernardin brands. With the pending addition of the Foodsaver line, the Company will be the market leader in home vacuum packaging systems and accessories. The Company also operates a materials based group, which is the largest producer of zinc strip in the U.S. and manufactures injection molded and industrial plastics.corporate strategy: It is the Companys strategy to increase stockholder value by building a leading consumer products business focused on home food preservation, branded domestic consumables and related items. In pursuing this objective, the Company will seek to leverage its high market shares of niche markets to introduce new products to its customers. contentsfinancial highlights inside front coverchairmans letter2consumer products group4materials based group7financial statements9company information and operating locations inside back cover 3. financial highlights historical:20012000 1999 (in millions, except per share data)Net sales$305.0$357.4 $358.0 EBITDA*32.7 40.7 58.5 Net income (loss)$ (85.4)$4.9 $ 29.2 Diluted earnings (loss) per share$(13.43)$.77 $ 4.28 Diluted weighted average shares outstanding6.46.46.8 *EBITDA is calculated as income (loss) before interest, taxes and minority interest plus (i) depreciation and amortization, (ii) special charges (credits) and reorganization expenses and (iii) loss (gain) on divestiture of assets and product lines. pro forma:20012000 1999 (in millions, except per share data)Net sales$425.5$390.2 $ 355.0 EBITDA*70.3 62.3 64.2 Net income $ 20.3$ 19.4 $ 19.8 Diluted earnings per share $ 3.18$ 3.04 $ 2.92 Diluted weighted average shares outstanding6.46.46.8 The unaudited pro forma financial information presented gives effect to the planned acquisition of Tilia and the related financing. In addition, it gives effect to the significant dispositions of businesses in 2001 and 1999 and the related federal tax refunds received in 2002.*EBITDA is calculated as income (loss) before interest, taxes and minority interest plus (i) depreciation and amortization, (ii) special charges (credits) and reorganization expenses and (iii) loss (gain) on divestiture of assets and product lines. 4. Dear Fellow Shareholders Many of you will be familiar with the saying,2002. First and foremost, the sale Our future is where our past is. As a historyof the thermoformed plasticsbusinesses of Triangle, TriEnda and buff I believe this old adage is equally applicableSynergy World ended a misguidedand very costly diversification from to businesses and their progression.the core strengths of Alltrista. Thesale, which created a loss of $121.1 Since the management changes at your company million, removed a significant distraction and finan- in September 2001, we have pushed hard to return cial burden on the company. At the same time, the Alltrista to the fundamental tenets that historically sale produced a tax loss carry back in excess of gave it solid and consistent financial performance. $100.0 million that has enabled Alltrista to recover The DNA of Alltrista has been to excel as a marketat least a portion of its lost capital through tax leader in multiple niche markets that are relativelysavings and refunds. mature, thereby producing attractive margins and Simultaneously with the divestiture, we took steps to strong cash flow. By far the largest component improve the efficiency of our headquarters structure, of the continuing company has been Consumer closing our Indianapolis office and moving these Products, which manufactures branded consumables functions to our Rye, New York and Muncie, Indiana used for food preservation. The fundamental shift in2locations. These actions have netted approximately focus and direction that has taken place in your $3 million in cost savings. Alltrista company during 2001 is the renewed emphasis on the consumer products business that has consistently delivered steady returns for shareholders.In order to achieve this renewed focus, sincehome September 2001 the company has executed its statedcanning objectives to produce a clear platform for growth infoodpreservationDuring 2001, Alltrista repositioned its branded kitchenconsumables growth strategy to focus on consumer products.This pyramid depicts the long term consumerconsumer productsproducts strategy. 5. Chairmans LetterMartin E. FranklinChairman andChief Executive Officer In a further step to solidify the platform of Alltrista for the future, in December 2001 we sought and received overwhelming shareholder support for a number of corporate initiatives designed to enhance our ability to present a more attractive company to investors. These initiatives included moving the companys state of incorporation from Indiana to Delaware, increasing the authorized share capital and creating and amending stock option plans to attract and motivate your management team.I am pleased to report that despite all of the distractions and strategic initiatives during 2001, Looking forward into 2002, we were delighted the core remaining businesses of Alltrista turned into announce the proposed acquisition of Tilia solid financial results. All of these businesses were International, Inc. This acquisition, if completed, will profitable with healthy operating margins, a fact not only bring us leadership in home vacuum pack- that is a testament to the resilience of our businesses aging systems, but will bring our consumer products in tough economic environments. concentration to over 72% of sales. We will greatly 3 benefit from the strong leadership at Tilia and they As you will see in this 2001 Annual Report, theAlltrista will be a welcome complement to our team. renewed focus on Consumer Products will serve as the foundation for future growth. That is not toI look forward to providing a more detailed descrip- imply that our Materials Based Group will not tion of the enlarged group when reporting on our continue to receive attention and be an integral part progress for 2002. of the company over the long term, but merely will not be where we will seek external growth.Yours sincerely,Your management and employees are delighted to be past the turmoil of 2001. Morale in the company is high, enhanced by the renewed support and approval from Wall Street and our Martin E. Franklin larger shareholders. Chairman and Chief Executive Officer 6. consumer products grouplltrista is a leading provider of niche consumerA products used in home food preservation. With the planned acquisition of Tilia, the Consumer Products Group will consist of Alltrista Consumer Products, the leading provider of home canning and related products in North America and Tilia, the lead- ing provider of home vacuum packaging systems for household use in the United States. Alltrista consumer products currentlytin-plated steel sheet. Sales have been aided inmanufactures, markets and distributesrecent years by trends such as increased healtha broad line of home food preserva-consciousness and organic eating habits. In addition, tion and preparation products thatthe industry is characterized by a stable demandinclude Ball, Kerr and Bernardin home can- pattern and historically has not been negatively ning jars as well as jar closures and related impacted by underlying macroeconomic conditions. food products (including fruit pectin, Fruit-Fresh We market our products through approximately brand fruit protector, pickle mixes and tomato1,800 grocery, mass merchant, hardware, and special-4mixes). We believe that over half of all U.S. house-ty retail customers. Some of our large customers holds use our canning supplies. We purchase glass include Albertsons, Kroger, SuperValu, True-Serve Alltristajars under a long-term supply agreement and manu- and Wal-Mart Stores. facture our own jar closures principally from decoratedTapper Jars and Natural FruitPectin Products 7. Alltristas success results in part from our strong consumer products brands that are respected for quality and longevity in the marketplace.Jack MetzPresident, Alltrista Consumer Products 8. consumer products group(continued)ilia is the leading provider of vacuum packagingTsystems for household use under the FoodSaver brand. Vacuum packaging is the process of removing air from a container to create a vacuum and then sealing the container so that air cannot re-enter. The patented FoodSaver longer than traditional storage systems and reducesvacuum packaging system isexpenditures to replace spoiled food. Tilia introducedsuperior to more conventional its original FoodSaver product through infomercials means of food packaging, including freezer and and has since expanded its distribution methods to storage bags and plastic containers, in preventing include primarily retail customers such as Costco dehydration, rancidity, mold, freezer burn and Wholesale Corp., Kohls Corporation, Sears, Roebuck hardening of food. The FoodSaver allows consumersand Co., Target Corporation and Wal-Mart Stores, Inc.to extend the shelf-life of food three to five times6 Alltrista FoodSaver Professional II The FoodSaver Jar Sealer fits FoodSaver Canisters, Bags,regular Ball, Kerr, or BernardinBottle Stoppers and Universal Lidsmason jars. 9. materials based group ur objective for the Materials Based Group is Oto grow organically while maintaining the strongcash flow characteristics of the three businesses: zinc strip, Unimark injection molded plastics, and industrial plastics.Alltrista Zinc Products is the largest zinc castingIndustrial Plastics manufactures thermoformed and rolling facility in the United States. We are thewhite goods in our Fort Smith, Arkansas facility sole source supplier of copper plated zinc penny primarily for Whirlpool Corporation, with whom we blanks to both the United States Mint and the Royalenjoy a business relationship spanning over 25 years. Canadian Mint and are currently exploring opportu- We also extrude sheet (the formation of plastic sheet nities with several other countries. In addition, we from resin granules) for our internal products and manufacture a line of industrial zinc items used inother manufacturers. In addition, we produce plastic the plumbing, automotive, electrical component and tables for original equipment manufacturers and have European architectural markets, and the Lifejacketa proprietary line of tables selling under the Vision anti-corrosion system. brand that are primarily sold to hospitality andinstitutional markets. Unimark Plastics is a plastic injection molding operation which manufactures precision custom injection molded components in three plants for7 major companies in the healthcare and consumer Alltrista products industries including CIBA Vision Corporation, Johnson & Johnson, Meridian Diagnostics, Inc., Scotts Company and Winchester. We also own Yorker Closures, a proprietary product line of plastic closures. Products for the healthcare industry include such items as intravenous harness components and surgical devices. Products for manufacturers of consumer goods primarily include packaging and sport shooting ammunition components.Injection moldedhealthcare poducts-Unimark 10. materials based group(continued)Zinc strip raw material Injection molded consumer Thermoformed inner door linerproductsfor Whirlpool refrigeratorUnimark Industrial PlasticsZinc Our materials based group enjoys long- standing relationships with its customers predicated on innovative technology, low- cost high quality production and consistent customer service. 11. alltrista corporationReport of Independent AuditorsBoard of Directors and Stockholders Alltrista Corporation and Subsidiaries We have audited the accompanying consolidated balance sheets of Alltrista Corporation and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, comprehensive income, stockholders equity, and cash ows for each of the three years in the period ended December 31, 2001. These nancial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these nancial statements based on our audits.We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the nancial statements. An audit also includes assessing the accounting principles used and signicant estimates made by management, as well as evaluating the overall nancial statement presentation. We believe that our audits provide a reasonable basis for our opinion.In our opinion, the nancial statements referred to above present fairly, in all material respects, the consolidated nancial position of Alltrista Corporation and subsidiaries at December 31, 2001 and 2000, and the consolidated results of their operations and their cash ows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States. Indianapolis, Indiana January 23, 2002, Except for Note 19, as to which the date is March 27, 2002 9 Alltrista 12. alltrista corporationConsolidated Statements of Operations (in thousands, except per share amounts) Year ended December 31,2001 2000 1999 Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 304,978$357,356 $358,031 Costs and expensesCost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233,676 275,571257,308Selling, general and administrative expenses . . . . . . . . . . . . . . 52,21256,019 55,322Goodwill amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,153 6,4044,605Special charges (credits) and reorganization expenses . . . . . . 4,978 3802,314Loss (gain) on divestitures of assets and product lines . . . . . . 122,887 (19,678) Income (loss) before interest, taxes and minority interest . . . . .(113,928)18,98258,160 Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(11,791) (11,917) (8,395) Income (loss) from continuing operations before taxes and minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (125,719) 7,065 49,765 Income tax (provision) benet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,443 (2,402) (19,458) Minority interest in loss (gain) of consolidated subsidiary . . . .153 (259) Income (loss) from continuing operations. . . . . . . . . . . . . . . . . . .(85,429) 4,92230,307 Discontinued operations: Loss on disposal of discontinued operations, net of income tax benet of $54 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (87) Extraordinary loss from early extinguishment of debt, net of income tax benet of $635 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,028) Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ (85,429) $ 4,922$ 29,192 Basic earnings (loss) per share: Income (loss) from continuing operations. . . . . . . . . . . . . . . . .$(13.43) $0.78$4.50 Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$(13.43) $0.78$4.34Diluted earnings (loss) per share: Income (loss) from continuing operations. . . . . . . . . . . . . . . . .$(13.43) $0.77$4.44 Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$(13.43) $0.77$4.28 10 Weighted average shares outstanding: AlltristaBasic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,3636,338 6,734Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6,3636,383 6,819 The accompanying notes are an integral part of the consolidated nancial statements. 13. alltrista corporation Consolidated Balance Sheets (in thousands, except per share amounts)December 31, 20012000 Assets Current assets Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$6,376 $3,303 Accounts receivable, net of reserve for doubtful accounts of $778 and $1,517 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13,986 32,250 Income taxes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,252 Inventories, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,994 52,548 Deferred taxes on income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,8324,621 Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,1341,658 Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,574 94,380 Property, plant and equipment, at cost Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7821,998 Buildings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24,356 35,059 Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .106,106149,405131,244186,462Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(87,701) (97,410) 43,543 89,052 Goodwill, net of accumulated amortization of $6,628 and $16,192.15,487114,138 Deferred taxes on income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25,417 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,282 11,169 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$161,303 $308,739 Liabilities and stockholders equity Current liabilities Short-term debt and current portion of long-term debt. . . . . . . . . .$ 28,500 $ 41,995 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14,197 17,842 Accrued salaries, wages and employee benets . . . . . . . . . . . . . . . . . 9,2528,344 Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11,5903,224 Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,539 71,405 Noncurrent liabilities Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56,375 95,065 Deferred taxes on income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13,06811 Other noncurrent liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6,2609,957Alltrista Total noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62,635118,090 Minority interest in subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,023 Commitments and contingencies (Notes 11 & 12) . . . . . . . . . . . . . . . . Stockholders equity: Common stock ($.01 par value), 50,000 shares authorized, 7,963 and 7,963 shares issued and 6,398 and 6,341 shares outstanding in 2001 and 2000, respectively . . . . . . . . . . . . . . . . . .64 40,017 Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41,789 Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32,724118,153 Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . .(1,862)(978) Less: treasury stock (1,565 and 1,622 shares, at cost) . . . . . . . . . . . . (37,586) (38,971) Total stockholders equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35,129118,221 Total liabilities and stockholders equity . . . . . . . . . . . . . . . . . . . . . . . . .$161,303 $308,739The accompanying notes are an integral part of the consolidated nancial statements. 14. alltrista corporationConsolidated Statements of Cash Flows(in thousands) Year ended December 31, 2001 20001999 Cash ows from operating activities Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (85,429) $ 4,922 $ 29,192 Reconciliation of net income (loss) to net cash provided by operating activities: Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,427 14,53312,030 Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,3706,778 5,667 Loss (gain) on divestitures of assets and product lines . . . .122,887 (19,678) Loss on disposal of xed assets . . . . . . . . . . . . . . . . . . . . . . . . .402338 152 Special charges (credits) and reorganization expenses . . . .680 (1,600)2,314 Write-off of debt issuance and amendment costs. . . . . . . . .1,507 Deferred taxes on income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(27,804) 3,892(4,215) Deferred employee benets . . . . . . . . . . . . . . . . . . . . . . . . . . . .378(40)1,297 Minority interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 (259) Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 310450(459) Changes in working capital components, net of effects from acquisitions and divestitures: Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4,3516,678 1,760 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,2195,952(7,023) Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 794(12,613) (1,086) Accrued salaries, wages and employee benets. . . . . . . . . . .2,212 (2,589)510 Other current assets and liabilities . . . . . . . . . . . . . . . . . . . . . . (10,600)(7,298)1,863 Net cash provided by operating activities . . . . . . . . . . . . . 39,857 19,14422,324 Cash ows from nancing activities Proceeds from revolving credit borrowings . . . . . . . . . . . . . . . . 41,050 57,332 37,260 Payments on revolving credit borrowings . . . . . . . . . . . . . . . . .(47,650) (41,940) (36,652) Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . 150,995 Payments on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (45,585) (19,094) (37,076) Debt issue cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,262) Debt modication cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (867) Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . 8151,2191,672 Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,485)(3,146) Net cash provided (used) by nancing activities . . . . . . . . .(52,237) (12,968) 110,791 Cash ows from investing activities 12 Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(9,707) (13,637) (16,628) Alltrista Insurance proceeds from property casualty . . . . . . . . . . . . . . . .1,535 Proceeds from sale of property, plant and equipment. . . . . . .701051,658 Acquisitions of businesses, net of cash acquired. . . . . . . . . . . . (6,930)(151,278) Proceeds from divestitures of assets and product lines . . . . . .21,001220 29,305 Proceeds from the surrender of insurance contracts . . . . . . . . 6,706 Proceeds from insurance contracts loaned to former ofcers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,059) Investments in insurance contracts . . . . . . . . . . . . . . . . . . . . . . . (274) Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (93) (25) 42 Net cash provided (used) by investing activities. . . . . . . . . .15,453 (20,267) (137,175) Net increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . . . . . .3,073(14,091) (4,060) Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . 3,303 17,39421,454 Cash and cash equivalents, end of year . . . . . . . . . . . . . . . .$ 6,376 $ 3,303 $ 17,394 The accompanying notes are an integral part of the consolidated nancial statements. 15. alltrista corporationConsolidated Statements of Changes in Stockholders Equity(in thousands)Accumulated Other Comprehensive LossCommon Stock Treasury Stock AdditionalCumulativeInterest Minimum Paid-in Retained Translation RatePensionShares Amount Shares Amount Capital EarningsAdjustment SwapLiabilityBalance, December 31, 1998 . . . 7,967 $ 40,494 (1,203)$(29,021) $ $ 84,039$(619)$ $ Net income . . . . . . . . . . . . . .. 29,192 Stock options exercised and stock plan purchases . . . . . ..1392,497 Shares reissued from treasury.. (141)(3,039) 141 3,039 Shares tendered for stock options and taxes . . . . . . ... (23)(611) Cumulative translation adjustment . . . . . . . . . . . . .. 200 Purchase of common stock . . .. (144) (3,146) Balance, December 31, 1999 . . . 7,96539,952 (1,229) (29,739) 113,231 (419) Net income . . . . . . . . . . . . . .. 4,922 Stock options exercised and stock plan purchases . . . . . .. 631,449 Shares reissued from treasury..(65)(1,384)65 1,384 Shares tendered for stock options and taxes . . . . . . ... (6)(131) Cumulative translation adjustment . . . . . . . . . . . . .. (559) Purchase of common stock . . .. (452) (10,485) Balance, December 31, 2000 . . . 7,96340,017 (1,622) (38,971) 118,153 (978) Net loss . . . . . . . . . . . . . . . . . . (85,429) Stock options exercised and stock plan purchases . . . . . . .67929 Shares reissued from treasury .. (67)(1,515)67 1,515 Shares tendered for stock options and taxes . . . . . . . .. (10)(130) Stock option compensation. . . .2,422 Restatement of par value of common stock associated with reincorporation in Delaware. . . . . . . . . . . . . . .. (41,789) 41,789 Cumulative translation adjustment . . . . . . . . . . . . . . (424)13 Translation adjustment recorded to net income due Alltrista to liquidation of investment in foreign subsidiary . . . . . .. 461 Interest rate swap unrealized loss . . . . . . . . . . . . . . . . . . . . (524) Minimum pension liability . . .. (397) Balance, December 31, 2001 . . . 7,963 $64 (1,565)$(37,586) $41,789 $ 32,724$(941)$(524) $(397)The accompanying notes are an integral part of the consolidated nancial statements. 16. alltrista corporationConsolidated Statements of Comprehensive Income (in thousands)Year ended December 31, 2001 2000 1999 Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(85,429) $4,922$29,192 Foreign currency translation: Translation adjustment during period. . . . . . . . . . . . . . . . . . . . . (424) (559) 200 Translation adjustment recorded to net income due to liquidation of investment in foreign subsidiary . . . . . . . . . . 461 Interest rate swap unrealized gain (loss): Transition adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Change during period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(569) Minimum pension liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (397) Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(86,313) $4,363$29,392 14 AlltristaThe accompanying notes are an integral part of the consolidated nancial statements. 17. Notes to Consolidated FinancialStatements 1. Signicant Accounting PoliciesCash and Cash Equivalents Cash equivalents include nancial invest- Basis of Presentationments with a maturity of three months or lesswhen purchased.These consolidated nancial statements have been prepared in accordance with gener-Inventories ally accepted accounting principles. The con-Inventories are stated at the lower of cost, solidated nancial statements include the ac-determined on the rst-in, rst-out method, or counts of Alltrista Corporation and itsmarket. subsidiaries (the Company). All signicant intercompany transactions and balances haveProperty, Plant and Equipment been eliminated upon consolidation. Certain reclassications have been made in the Com- Property, plant and equipment are recorded panys nancial statements of prior years to at cost. Maintenance and repair costs are conform to the current year presentation. Thesecharged to expense as incurred, and expendi- reclassications have no impact on previouslytures that extend the useful lives of the assets reported net income. are capitalized. The Company reviews prop-erty, plant and equipment for impairment The businesses comprising the Companywhenever events or circumstances indicate that have interests in consumer and materials basedcarrying amounts may not be recoverable products. See Business Segment Informationthrough future undiscounted cash ows, ex- (Note 4).cluding interest cost. Use of Estimates DepreciationPreparation of the consolidated nancial Depreciation is provided on the straight- statements requires estimates and assumptionsline method in amounts sufcient to amortize that affect amounts reported and disclosed inthe cost of the assets over their estimated useful the nancial statements and related notes. Ac- lives (buildings 30 to 50 years; machinery and tual results could differ from those estimates.equipment 5 to 15 years). Goodwill Revenue Recognition Goodwill represents the excess of the pur-Revenue from the sale of products is prima-chase prices of acquired businesses over the rily recognized at the time product is shippedestimated fair values of the net assets acquired.15 to customers. The Company allows customersGoodwill is amortized on a straight-line basis to return defective or damaged products as well Alltristaover periods not to exceed 20 years. The Com- as certain other products for credit, replace-pany evaluates these assets for impairment ment, or exchange. Revenue is recognized aswhenever events or circumstances indicate that the net amount to be received after deductingcarrying amounts may not be recoverable estimated amounts for product returns, dis-through future undiscounted cash ows, ex- counts, and allowances. The Company pro-cluding interest costs. If facts and circum- vides credit, in the normal course of business,stances suggest that a subsidiarys net assets are to its customers. The Company also maintainsimpaired, the Company assesses the fair value an allowance for doubtful customer accountsof the underlying business and reduces good- and charges actual losses when incurred to thiswill to an amount that results in the book value allowance.of the operation approximating fair value.Freight CostsTaxes on IncomeFreight costs on goods shipped to custom- Deferred taxes are provided for differences ers are included in Cost of Sales. between the nancial statement and tax bases 18. of assets and liabilities using enacted tax rates. Option Plan, however, the Company did recog- The Company established a valuation allow- nize a one-time charge of compensation cost ance against a portion of the net tax benet because of stockholder approval of the plan associated with all carryforwards and tempo- subsequent to the grant date (see Note 10). rary differences at December 31, 2001, as it is2. Acquisitions and Divestitures more likely than not that these will not be fully utilized in the available carryforward period. Effective November 26, 2001, the Com-pany sold the assets of its Triangle, TriEnda andFair Value and Credit Risk ofSynergy World plastic thermoforming opera- Financial Instrumentstions to Wilbert, Inc. for $21.0 million in cash,a $1.85 million noninterest-bearing one-yearThe carrying values of cash and cashnote as well as the assumption of certain iden- equivalents, accounts receivable, notes pay-tied liabilities. The Company recorded a pre- able, accounts payable and accrued liabilitiestax loss of $121.1 million in 2001 related to the approximate their fair market value due to thesale. The amount of goodwill included in the short-term maturities of these instruments. Theloss on the sale was $82.0 million. The proceeds fair market value of long-term debt was esti-from the sale were used to pay down the Com- mated using rates currently available to thepanys term debt. Company for debt with similar terms and ma- turities.As a result of the sale, the Company alsorecovered in January 2002 approximately The Company enters into interest rate$15.7 million of federal income taxes paid in swaps to manage interest rate exposures. The1999 and 2000 by utilizing the carryback of a Company designates the interest rate swaps astax net operating loss generated in 2001. hedges of underlying debt. Interest expense is$15.0 million of the proceeds related to this adjusted to include the payment made or re-recovery of income taxes was also used to pay ceived under the swap agreements. The fairdown the Companys term debt. The tax net market value of the swap agreements was esti-operating loss not utilized during the allowable mated based on the current market value ofcarryback period will be available to offset tax- similar instruments.able income in future periods. (See Note 19.)Financial instruments that potentially sub-The combined net sales of the thermo- ject the Company to credit risk consist prima-formed business sold included in the Compa- rily of trade receivables and interest-bearingnys historical results were $63.8 million in investments. Trade receivable credit risk is lim-2001 (through the date of sale), $100.3 million ited due to the diversity of the Companysin 2000 and $70.7 million in 1999. Operating customers and the Companys ongoing creditearnings (losses) associated with this business review procedures. Collateral for trade receiv-were $(12.0) million in 2001, $(8.4) million in ables is generally not required. The Company 16 2000 and $2.8 million in 1999. places its interest-bearing cash equivalents with major nancial institutions and limits the AlltristaEffective November 1, 2001, the Company amount of credit exposure to any one nancialsold its majority interest in Microlin, LLC for institution.$1,000 in cash plus contingent considerationbased upon future performance through De- Stock Optionscember 31, 2012 and the cancellation of futurefunding requirements. The Company recordedThe Company accounts for the issuance ofa pre-tax loss of $1.4 million in 2001 related to stock options under the provisions of Account-the sale. ing Principles Board Opinion No. 25, Account- ing for Stock Issued to Employees. Generally for On June 1, 2000, the Company acquired the Companys stock option plans, no compen- the net assets of Synergy World, a St. Louis, sation cost is recognized in the consolidatedMissouri-based designer and marketer of por- statement of operations because the exercise table restrooms sold to equipment rental com- price of the Companys stock options equalspanies, waste services companies and diversi- the market price of the underlying stock on theed sanitation rms, for $6.9 million in cash date of grant. Under the Companys 2001 Stockplus acquisition costs. The transaction was ac- 19. counted for as a purchase with the purchase income taxes were received at the beginning of price allocated to the assets purchased and li- each period, and assumes a 35.0% effective abilities assumed based on their estimated fair income tax rate for all periods. values as of the date of acquisition. These assets (in thousands, except per were sold effective November 26, 2001.share amounts)20012000On December 21, 1999, the Company ac-Net sales . . . . . . . . . . . . . . . . . . $241,679 $257,995 quired a 51 percent equity interest in Microlin,Earnings before interest, LLC (Microlin), a developer of proprietarytaxes and minority battery technology. The initial cash outlay for interest . . . . . . . . . . . . . . . . .20,530 26,676 this investment was $1.5 million, with an agree-Net income . . . . . . . . . . . . . . . 7,260 11,251 ment to fund working capital needs over the Diluted earnings per share . . $1.14 $ 1.76 next several years. This investment was sold effective November 1, 2001. The Companys pro forma net income ad- justed to reect the elimination of all specialEffective May 24, 1999, the Company sold charges (credits) and reorganization expenses, its plastic packaging product line, which pro- all losses on divestitures of assets, and the write- duced coextruded high-barrier plastic sheet and off of debt issuance and amendment costs containers for the food processing industry, for would have been $12.0 million, or $1.88 per $28.7 million in cash. This transaction resulted share, for 2001 and $11.4 million, or $1.78 per in a gain of $19.7 million. Proceeds from the share, for 2000. sale were used for debt repayment. The Com- panys sales from this product line were $13.0 million in 1999. 4. Business Segment InformationEffective April 25, 1999, the Company ac-Following the sale of the Triangle, TriEnda quired the net assets of Triangle Plastics, Inc. and Synergy World plastic thermoforming as- and its TriEnda subsidiary (Triangle Plastics), sets and the third quarter 2001 appointment of a manufacturer of heavy gauge industrial ther- new executive management, the Company re- moformed parts for original equipment manu- organized its business segments to reect the facturers in the heavy trucking, agricultural, new business and management strategy. Prior portable toilet, recreational and construction periods have been reclassied to conform to markets, and producer of plastic thermoformed the current segment denitions. products for material handling applications,The Company is now organized into two for $148.0 million in cash plus acquisition costs. distinct segments: Consumer Products and Ma- The transaction was accounted for as a pur- terials Based Group. The Companys operating chase with the purchase price allocated to the segments are managed by the Companys Chief assets purchased and liabilities assumed based Executive Ofcer and, with respect to the Con- on their estimated fair values as of the date of 17 sumer Products segment, the division presi- acquisition. These assets were sold effective No- dent for consumer products as well. They are vember 26, 2001.Alltrista responsible for the segments performance and are also part of the Companys operating 3. Pro Forma Financial Information decision-making group. The following unaudited pro forma nan-The Consumer Products segment markets cial information presents a summary of consoli- a line of home food preservation products un- dated results of the Company as if the sale of der Ball , Kerr and Bernardin brands. Prod- the assets of the Triangle, TriEnda and Synergy ucts include home canning jars which are World plastic thermoforming operations (as de- sourced from major commercial glass container scribed in Note 2 above) had occurred at the manufacturers, home canning metal closures, beginning of each period presented. The pro and related food products, which are distrib- forma nancial information also reects the uted through a wide variety of retail outlets. sale of the Companys interest in Microlin that became effective November 1, 2001. The pro The Materials Based Group provides cast forma information assumes the proceeds from zinc strip and fabricated zinc products prima- the sale of thermoformed assets and recovery of rily for zinc coinage and industrial applica- 20. (in thousands)200120001999 tions, produces injection molded plastic prod- ucts used in medical, pharmaceutical and Depreciation andamortization: consumer products, and manufactures indus- Consumer products . . . $ 3,202 $ 3,264 $ 2,505 trial thermoformed plastic parts for appliances. Materials based group .15,39517,81314,372 This segment also included through Novem- Corporate . . . . . . . . . . 200 234 820 ber 26, 2001, the plastic thermoforming opera- Total depreciation tions of Triangle, TriEnda and Synergy World and amortization. . $18,797 $21,311 $17,697 (see Note 2) which produced industrial thermo- formed plastic parts for manufactured housing,(1) Effective November 26, 2001, the Company sold the recreational vehicles, heavy trucking, agricul-assets of its Triangle, TriEnda and Synergy World plas- ture equipment, portable restrooms, recre- tic thermoforming operations. ational and construction products. (2) Corporate assets primarily include cash and cashequivalents, amounts relating to benet plans, de- Net sales, operating earnings, assets em-ferred tax assets and corporate facilities and equip- ployed in operations, capital expenditures, andment. depreciation and amortization by segment are (3) Includes the net sales of Triangle Plastics effectiveApril 25, 1999. summarized as follows:(4) Effective May 24, 1999, the Company sold its plasticpackaging product line. (in thousands) 20012000 1999 The Companys major customers are lo- Net sales:cated within the United States and Canada. NetConsumer products . . . $ 120,644 $120,381 $133,074sales of the Companys products in Canada,Materials based group(1)(3)(4). . . . . . 185,437 238,047 225,584including home food preservation products,Intercompany . . . . . . .(1,103) (1,072) (627)coinage and thermoformed plastic parts wereTotal net sales. . . . . . $ 304,978 $357,356 $358,031$26.8 million, $35.3 million and $35.7 millionin 2001, 2000 and 1999, respectively. Long- Operating earnings (loss):lived assets located outside the United StatesConsumer products . . . $ 13,291 $ 10,362 $ 17,091and net sales outside of the United States andMaterials based group .1,801 9,92821,467Canada are not material.Intercompany . . . . . . .1339 (69)Unallocated corporateexpenses . . . . . . . . .(6,146) (1,347) (7)5.InventoriesGain (loss) ondivestitures of assetsInventories were comprised of the follow-and productlines(1)(4) . . . . . . . . (122,887) 19,678ing at December 31: Earnings (loss) beforeinterest, taxes and (in thousands) 2001 2000minority interest . .(113,928) 18,982 58,160Raw materials and supplies. . . . $ 5,563 $14,311 Interest expense, net . . . .(11,791)(11,917)(8,395)Work in process . . . . . . . . . . . . . . 4,746 10,253 Income (loss) before taxes and minority Finished goods . . . . . . . . . . . . . . . 16,685 27,98418 interest. . . . . . . . . . . . . . $(125,719) $ 7,065 $ 49,765Total inventories . . . . . . . . . $26,994 $52,548 Alltrista Assets employed in operations: Consumer products . . . $ 51,301 $ 60,713 $ 71,625 6.Debt and Interest Materials based group(1). . . . . . . . . . 55,152 231,956 232,619In November 2001, the Company enteredinto an agreement with its lenders to amendTotal assetsemployed incertain provisions of its term loan and revolv-operations. . . . . . . 106,453 292,669304,244ing credit facilities. The amendment reduced Corporate(2) . . . . . . . .54,85016,070 34,507the revolving credit facility from $50 million toTotal assets . . . . . . . . $ 161,303 $308,739 $338,751$40 million, shortened the facility terminationdate by one year, accelerated the required prin- Capital expenditures:Consumer products . . . $ 633 $ 1,314 $ 5,477 cipal payments to conform with the shortenedMaterials based group . 9,06712,03610,893 term of the facility, modied certain nancialCorporate . . . . . . . . . . 7 287 258 covenants, and required that the proceeds fromthe sale of the thermoforming assets andTotal capitalexpenditures . . . . . $9,707 $ 13,637 $ 16,628$15 million from the recovery of income taxes 21. associated with the net operating loss carry- The Company nanced the 1999 acquisi- back be used to prepay term debt. tion of Triangle Plastics with a $250.0 million credit facility consisting of a six-year $150.0 mil- In December 2001, the Company applied lion term loan and a $100.0 million revolving the $21.0 million of proceeds from the sale of credit facility with all borrowings scheduled to the thermoformed assets to the outstanding mature on March 31, 2005. The agreement term loan balance. In January 2002, the Com- contains certain guarantees and nancial cov- pany applied $15.0 million of proceeds from enants including minimum net worth require- the income tax refund related to the thermo- ments, minimum xed charge coverage ratios formed sale to further pay down the term loan. and maximum nancial leverage ratios.The term loan, as amended and reecting As part of the nancing in 1999, the Com- the payments mentioned above, requires quar- terly payments of principal of $3.1 million pany paid off $25.7 million of existing debt. through the rst quarter of 2003, with quar-The Company incurred a $1.7 million pretax terly payments of $11.2 million for the remain- ($1.0 million after-tax) prepayment charge in der of the term (through March 31, 2004). connection with the payoff. The charge is re- Interest on the term loan is based upon xedported as an extraordinary loss on the Consoli- increments over the adjusted London Inter-dated Statements of Operations. bank Offered Rate or the agent banks alternateIn May 1999, the Company entered into a borrowing rate as dened in the agreement. three-year interest rate swap with an initial The Companys weighted average interest rate notional value of $90.0 million. The swap ef- on the term loan outstanding borrowings at fectively xed the interest rate on approxi- December 31, 2001 was 4.3%, exclusive of the mately 60% of the Companys term debt at a effects of the interest rate swap (see below). As maximum rate of 7.98% for the three-year pe- of December 31, 2001 and 2000, the outstand- ing balances of the term loan were $75.5 mil- riod. Adjusted for the application of proceeds lion and $120.0 million, respectively.from the sale of thermoformed assets and from the related income tax refund, the swap now Because the interest rates applicable to the covers 100% of the Companys term debt. The term loan are based on oating rates identied fair market value of the swap as of Decem- by reference to market rates, the fair market ber 31, 2001 and 2000 was approximately value of the long-term debt as of December 31, $(524,000) and $45,000, respectively. 2001 and 2000 approximates its carrying value.As of December 31, 2001, maturities on Interest on borrowings under the revolv- long-term debt over the next ve years, were ing credit facility are based upon xed incre- $19.1 million in 2002, $43.5 million in 2003, ments over the adjusted London Interbank Of- $12.9 million in 2004, and none for 2005 and fered Rate or the agent banks alternate 2006. Maturities on long-term debt over the borrowing rate as dened in the agreement. 19 The agreement also requires the payment ofnext ve years, as adjusted to reect the appli-Alltrista commitment fees on the unused balance. As ofcation of the $15 million of proceeds from the December 31, 2001, $9.4 million of borrowings income tax refund as mentioned above, are were outstanding under this agreement with a$27.4 million in 2002, $36.8 million in 2003, weighted average interest rate of 4.7%. As of $11.2 million in 2004, and none for 2005 and December 31, 2000, $16.0 million of borrow- 2006. ings were outstanding with a weighted averageInterest paid on the Companys borrow- interest rate of 8.1%. ings during the years ended December 31, 2001,In February 2001, the Company entered2000 and 1999 was $9.5 million, $11.4 million into an agreement with its lenders to amend and $8.3 million, respectively. certain provisions of its term loan and revolv- ing credit facilities. The amendment reduced7. Special Charges (Credits) and the revolving credit facility to $50.0 million, Reorganization Expenses provided for the Companys accounts receiv- The Company incurred net special charges able and inventory to be pledged as collateral, (credits) and reorganization expenses of and modied certain nancial covenants. 22. $5.0 million, $0.4 million and $2.3 million forDuring September 2001, options were 2001, 2000 and 1999, respectively. Thesegranted to participants under the Companys amounts are comprised of the following (in2001 Stock Option Plan. Because the options millions):granted under this new plan were still subject to stockholder approval at the time of grant,2001 2000 1999 the options resulted in a one-time charge of Costs to evaluate strategic $2.4 million which was recorded in the fourthoptions . . . . . . . . . . . . . . . . . $ 1.4 $ 0.6 $ quarter of 2001 (see Note 10) following stock- Discharge of deferred holder approval of the 2001 Stock Option Plancompensation on December 18, 2001.obligations . . . . . . . . . . . . . . (4.1) Separation costs for former During the fourth quarter of 2001, theofcers. . . . . . . . . . . . . . . . . .2.6 Company incurred corporate restructuring Stock option compensation. 2.4 costs in the amount of $2.3 million. These Corporate restructuring include costs related to the transitioning of thecosts . . . . . . . . . . . . . . . . . . . . 2.3 corporate ofce function from Indianapolis, Costs to exit facilities . . . . . . 0.8 2.3 Indiana to Rye, New York and Muncie, Indiana, Reduction of long-term costs to reincorporate in Delaware and to holdperformance-based a special meeting of stockholders, and othercompensation . . . . . . . . . . . (1.6) costs including professional fees. Of this Litigation charges . . . . . . . . . .1.4 amount, $1.8 million remained unpaid as of Items related to divested December 31, 2001.thermoformingoperations . . . . . . . . . . . . . . (0.4) In August 2001, the Company announced that it would be consolidating its home can-$ 5.0 $ 0.4 $2.3 ning metal closure production from its Bernar- din Ltd. Toronto, Ontario facility into its Mun- During 2001, certain participants in thecie, Indiana manufacturing operation. The total Companys deferred compensation plans cost to exit the Toronto facility was $0.8 mil- agreed to forego balances in those plans in lion and includes a $0.3 million loss on the sale exchange for loans from the Company in the and disposal of equipment, and $0.5 million of same amounts. The loans, which were com- employee severance costs. Of the $0.5 million pleted during 2001, bear interest at the appli- accrued liability established for severance costs, cable federal rate and require the individuals to approximately $0.4 million had been expended secure a life insurance policy having the death through December 31, 2001. The Company benet equivalent to the amount of the loan will continue to distribute its products in payable to the Company. All accrued interest Canada through Bernardin, Ltd. and principal on the loans are payable uponDuring 2001, items recognized related to the death of the participant and their spouse.20 the divested thermoforming operations in- The Company recognized $4.1 million of pre- Alltrista cluded a pre-tax gain of $1.0 million in connec- tax income during 2001 related to the dis- tion with an insurance recovery associated with charge of the deferred compensation obliga- a property casualty. Also in August 2001, the tions. Company announced that it had vacated itsOn September 25, 2001, the Company an- former Triangle Plastics facility in Indepen- nounced the departure from the Company of dence, Iowa and integrated personnel and ca- Thomas B. Clark, Chairman, President and pabilities into its other operating and distribu- Chief Executive Ofcer, and Kevin D. Bower, tion facilities in the area. The total cost to exit Senior Vice President and Chief Financial Of- this Iowa facility was $0.6 million and includes cer. The Board announced the appointment $0.4 million in future lease obligations and an of Martin E. Franklin as Chairman and Chief additional $0.2 million of costs related to the Executive Ofcer and Ian G.H. Ashken as Vice leased facility. Chairman, Chief Financial Ofcer and Secre- During 2000, the Company recorded a pre- tary. Separation costs associated with this man- tax gain of $1.6 million related to a reduction agement reorganization were approximately in long-term performance-based compensa- $2.6 million. 23. tion. Also during 2000, the Company reachedApproximately $103 million of net operat- settlements in legal disputes incurring $1.4 mil- ing loss carryforwards remain at December 31, lion in net settlement and legal expenses.2001. Their use is limited to future taxable income of the Company. The carryforwardsDuring 1999, the Company incurred expire in 2021. The Company established a $2.3 million in costs associated with the exit of valuation allowance against a portion of the a plastic thermoforming facility. net tax benet associated with all carryfor- wards and temporary differences at Decem- 8. Taxes on Incomeber 31, 2001, as it is more likely than not that these will not be fully utilized in the available The components of the provision for in- carryforward period. (See Note 19.) come taxes attributable to continuing opera- tions were as follows for the years endedThe difference between the federal statu- December 31: tory income tax rate and the Companys effec- tive income tax rate as a percentage of income (thousands of dollars) 2001 2000 1999 from continuing operations is reconciled as Current income tax expense(benet):follows:U.S. federal. . . . . . . . . . . . $(13,978) $ (166) $19,233Foreign . . . . . . . . . . . . . .1,163 462960200120001999State and local . . . . . . . . . (500)(59) 2,880 Federal statutory tax rate . . .35.0% 35.0% 35.0%Total . . . . . . . . . . . . . . . (13,315) 23723,073 Increase (decrease) in rates Deferred income taxexpense (benet):resulting from:U.S. federal. . . . . . . . . . . . (33,707)1,135 (3,635) State and local taxes, net . 3.3 1.0 3.0State and local . . . . . . . . .(4,962)187 (580) Foreign . . . . . . . . . . . . . . . . (0.9) (2.2)1.2Total . . . . . . . . . . . . . . . (38,669)1,322 (4,215) Valuation allowance . . . . . (4.3) Income tax benet applied to goodwill. . . . . . . . . . . . 11,541 843600Other . . . . . . . . . . . . . . . . . (0.9)0.2(0.1) Total income tax provision Effective income tax rate . . . 32.2% 34.0% 39.1% (benet) . . . . . . . . . . . . . . $(40,443) $2,402 $19,458 Foreign pre-tax income was $0.9 million, In 1999, the income tax expense or benet $2.5 million and $1.0 million in 2001, 2000 from discontinued operations differed from an and 1999, respectively. expense or benet calculated using the federal statutory tax rate primarily due to state incomeDeferred tax liabilities (assets) are com- prised of the following at December 31: taxes and the amortization of intangible assets.Total income tax payments made by the (thousands of dollars)2001 2000 Company during the years ended December 31, Property, equipment and 21 2001, 2000 and 1999 were $1.0 million, intangibles . . . . . . . . . . . . . . $ 9,430 $17,559 Alltrista $1.7 million and $23.2 million, respectively. Other . . . . . . . . . . . . . . . . . . . . . 2,314 346Gross deferred tax 9. Retirement and Other Employeeliabilities . . . . . . . . . . . . . .11,744 17,905 Benet Plans Net operating loss. . . . . . . . . . (39,909) The Company has multiple dened contri- Accounts receivable bution retirement plans that qualify under sec- allowances . . . . . . . . . . . . . .(388)(580) tion 401(k) of the Internal Revenue Code. The Inventory valuation. . . . . . . .(1,730)(1,312) Companys contributions to these retirement Compensation and benets. (4,010)(5,352) plans were $1.5 million, $1.5 million and Other . . . . . . . . . . . . . . . . . . . . . (1,351)(2,214) $1.9 million, respectively, in the years endedGross deferred tax assets . .(47,388) (9,458)December 31, 2001, 2000 and 1999. Valuation allowance . . . . . . . 5,395 The Company also maintains a dened Net deferred tax liability benet pension plan for certain of its hourly(asset). . . . . . . . . . . . . . . . . . . $(30,249) $ 8,447 employees. The components of net periodic 24. pension expense for the years ended Decem- 2000 include a discount rate of 7.5% and an ber 31, 2001, 2000 and 1999 are as follows:expected long-term rate of return on assets of9.0%. (thousands of dollars)2001 2000 1999 In accordance with the provisions of SFAS Service cost of87, Employers Accounting for Pensions, the benets earnedCompany recorded an additional minimum during the period . $ 273 $ 280 $ 291liability of $1.3 million at December 31, 2001, Interest cost onrepresenting the excess of the unfunded accu- projected benetmulated benet obligation over the accrued obligation. . . . . . . .907853 807pension cost. The additional minimum liabil- Investment lossity has been offset by an intangible asset to the (gain) on planextent of previously unrecognized prior service assets . . . . . . . . . . . . 1,793 (1,648) (1,670)cost, with the remainder of $0.4 million re- Net amortizationcorded as a component of accumulated other and deferral . . . . . . (2,942)630 802comprehensive loss. Net periodicpension expense. . $ 31 $115 $ 230The Company also provides certain postre-tirement medical and life insurance benets for The following table is a reconciliation of a portion of its non-union employees. the benet obligation and the fair value of plan The components of net periodic postretire- assets as of December 31, 2001 and 2000:ment benet expense for the years ended De-cember 31, 2001, 2000 and 1999 are as follows: (thousands of dollars)2001 2000 Change in benetobligation: (thousands of dollars) 200120001999Benet obligation atService cost of benetsbeginning of year . . . . . . $12,304 $11,541 earned. . . . . . . . . . . . . . . . $ 62 $ 60 $ 67Service cost. . . . . . . . . . . . . . 273280Interest cost on liability . . 112 105 105Interest cost . . . . . . . . . . . . . 907853Net amortization andAmendments . . . . . . . . . . . .232 deferral . . . . . . . . . . . . . . . (15) (14) 2Actuarial gain . . . . . . . . . . . (113) (58) Net postretirementBenets paid . . . . . . . . . . . . (386)(312)benet cost . . . . . . . . . $159 $151 $174Benet obligation at endof year . . . . . . . . . . . . . . . . 13,217 12,304 The status of the Companys unfunded pos- Change in plan assets:tretirement benet obligation at December 31,Fair value of plan assets at2001 and 2000 are as follows:beginning of year . . . . . . 13,320 12,087Actual return on plan22(thousands of dollars)2001 2000assets . . . . . . . . . . . . . . . . . (1,793) 1,648 AlltristaBenets paid . . . . . . . . . . . . (445)(415) Change in benet obligation:Fair value of plan assets atend of year . . . . . . . . . . . . 11,082 13,320Benet obligation at beginning of year . . . . . . $1,553 $1,446Funded status . . . . . . . . . . . (2,135) 1,016 Service cost. . . . . . . . . . . . . . 62 60Unrecognized nettransitional asset. . . . . . .(1)Interest cost . . . . . . . . . . . . .112105Unrecognized prior Actuarial loss (gain) . . . . . .109 (9)service cost . . . . . . . . . . . .882745 Benets paid . . . . . . . . . . . . (61) (49)Unrecognized net loss Benet obligation at end(gain) . . . . . . . . . . . . . . . . .884 (2,098)Additional minimum of year . . . . . . . . . . . . . . . .1,7751,553liability . . . . . . . . . . . . . . . (1,279) Unrecognized priorAccrued benet cost. . . . . . $ (1,648) $ (338) service cost . . . . . . . . . . . . (46)(49) Unrecognized net gain . . .339 443 The actuarial assumptions used to com- Accrued benet cost. . . . . .$2,068 $1,947 pute the funded status of the plan for 2001 and 25. tions. These amounts are included in SpecialThe assumed discount rate used to measureCharges (Credits) and Reorganization Expenses the benet obligation was 7.0% and 7.5% as ofon the Consolidated Statements of Operations. December 31, 2001 and 2000, respectively. In- creases in health care costs would not materi- ally impact the benet obligation or the annual10. Stock Plans service and interest costs recognized as benets The Company maintains the 1998 Long- under the medical plan consist of a denedTerm Equity Incentive Plan that allows for dollar monthly subsidy toward the retirees pur-grants of stock options, restricted stock, stock chase of medical insurance for the majority ofequivalent units, stock appreciation rights and employees covered.other stock-related forms of incentive compen-Through December 31, 2001, the Com- sation. As of December 31, 2001, there were pany had a deferred compensation plan that383,490 shares available for grant under this permitted eligible employees to defer a speci-long-term equity incentive plan. ed portion of their compensation. The de- ferred compensation earned rates of return as Effective September 24, 2001, the Com- specied in the plan. As of December 31, 2001pany established the 2001 Stock Option Plan and 2000, the Company had accrued $2.2 mil-for the purpose of granting options for the lion and $6.4 million, respectively, for its obli- purchase of common shares to the Companys gations under this plan. Interest expense on executive ofcers and independent directors. this obligation was $0.2 million, $0.3 million Options vest to, and are exercisable by, partici- and $0.7 million in 2001, 2000 and 1999, re- pants on the earlier of 1) the date the Compa- spectively. Effective January 1, 2002 the de-nys closing stock price equals or exceeds $17 ferred compensation plan has been terminated.per share or 2) the seventh anniversary of the Participants may elect to keep their existinggrant date. During September, 570,000 options balances in the plan, and if so those balanceswere granted to participants under this new will earn a rate of return equal to the federalplan. Because the options granted under this funds overnight repurchase rate.new plan were still subject to stockholder ap- To effectively fund the deferred compensa- proval at the time of grant, the options resulted tion obligation, the Company had purchased in a one-time charge of $2.4 million which was variable rate life insurance contracts. These in-recorded in the fourth quarter of 2001. The surance contracts were surrendered incharge represents the difference between the June 2001 and therefore the obligation at De-exercise price of the options of $10.95 (the fair cember 31, 2001 is unfunded. The cash surren-value at the date of grant) and the fair value of der value of the contracts included in Other the Companys stock at the time of stockholder Assets at December 31, 2000 was $6.6 million.approval on December 18, 2001 which was$15.20. This charge is included in Special During 2001, certain participants in the23Charges (Credits) and Reorganization Expenses Companys deferred compensation planson the Consolidated Statements of Operations. Alltrista agreed to forego balances in those plans inAs of December 31, 2001, there were 80,000 exchange for loans from the Company in theshares available for grant under the 2001 Stock same amounts. The loans, which were com-Option Plan. pleted during 2001, bear interest at the appli- cable federal rate and require the individuals toThe Company also maintains the 1993 secure a life insurance policy having the deathStock Option Plan and the 1993 and 1996 Stock benet equivalent to the amount of the loanOption Plans for Nonemployee Directors payable to the Company. All accrued interest whereby stock options are granted to key em- and principal on the loans are payable uponployees and non-employee directors. As of De- the death of the participant and their spouse. cember 31, 2001, there were 222,042 shares The Company recognized $4.1 million of pre-available for grant under these stock option tax income during 2001 related to the dis- plans. New stock option issuances are generally charge of the deferred compensation obliga-made under the 1998 and 2001 plans. 26. (in thousands, except perA summary of stock option activity for theshare amounts)2001 20001999 years ended December 31, 2001 and 2000 is asNet income (loss) follows:As reported . . . . . . . . $(85,429) $4,922 $29,192Pro forma . . . . . . . . . (85,724) 4,624 28,8992001Basic earnings (loss) WeightedAvg.per share Shares Option Price Price RangeAs reported . . . . . . . . $ (13.43) $ 0.78 $ 4.34 Outstanding at beginning of year . . . . 306,170$18.27$10.89-$27.94Pro forma . . . . . . . . . (13.47) 0.734.29 New options granted . . . 666,000 11.0610.95-15.09Diluted earnings (loss) Exercised . . . . . . . . . . . (15,355)10.8910.89-10.89 Canceled . . . . . . . .. . . (33,843)19.6213.00-27.94per share Outstanding at end ofAs reported . . . . . . . . $ (13.43) $ 0.77 $ 4.28 year. . . . . . . . . . . . . 922,972 13.1410.95-27.94 Exercisable at end ofPro forma . . . . . . . . . (13.47) 0.724.24 year. . . . . . . . . . . . . 242,543$18.37$12.50-$27.942000 The fair value of each option granted is WeightedAvg.estimated on the date of grant using the Black- Shares Option Price Price RangeScholes option-pricing model with the follow- Outstanding ating weighted-average assumptions used for beginning of year . . . . 276,110$18.81$10.89-$27.94 New options granted . . . 80,75016.5412.50-23.75grants in 2001, 2000 and 1999, respectively: no Exercised . . . . . . . . . . . (20,890)12.3810.89-19.63 Canceled . . . . . . . .. . . (29,800)23.5319.63-27.94 dividend yield for all years, expected volatility Outstanding at end ofof 37, 36 and 25 percent, risk-free interest rates year. . . . . . . . . . . . . 306,170 18.2710.89-27.94of 4.8, 5.1 and 5.4 percent and expected lives of Exercisable at end of year. . . . . . . . . . . . . 213,650$18.70$10.89-$27.947.5 years for all periods. The average fair valueof each option granted in 2001, 2000 and 1999 Signicant option groups outstanding atwas $5.77, $8.26 and $8.62, respectively. December 31, 2001 and related weighted aver- age price and life information follows:The Company also grants restricted stockto key employees. The company granted 500,Exercise Price$22.75 $18.75 $10.953,250 and 6,950 shares in 2001, 2000 and 1999,$27.94 $21.50$15.09respectively. Options outstanding . . .. 52,576108,894 761,502 Weighted averageThe Company also maintains an employeeexercise price . . . . . . .. $ 23.95 $ 20.89 $ 11.29 Options exercisable . . . .. 43,893 106,148 92,502 stock purchase plan whereby the Company Weighted averagematches 20% of each participating employeesexercise price . . . . . . .. $ 23.70 $20.92 $ 12.91monthly payroll deduction, up to $500. The Weighted averageremaining life (years) ..4.363.65 8.69Company thereby contributed $59,000,$144,000 and $166,000 to the plan in 2001, Had compensation cost for the Companys2000 and 1999, respectively. stock option plans been determined based on the fair value at the grant dates for awards2411. Lease Commitments under those plans, the Companys net income Alltrista and earnings per share would have been re-The Company has commitments under op- duced to the pro forma amounts indicated.erating leases, certain of which extend through 27. 2008. These commitments total $2.7 million in ness Combinations, and No. 142, Goodwill and Other Intangible Assets, effective for scal years 2002, $2.6 million in 2003, $2.3 million in beginning after December 15, 2001. Under the 2004, $1.6 million in 2005, $0.6 million in new rules, goodwill (and intangible assets 2006 and $0.4 million in total for all later years. deemed to have indenite lives) will no longer Total lease expense was $4.8 million in 2001, be amortized but will be subject to annual $4.1 million in 2000 and $3.5 million in 1999. impairment tests in accordance with the State- ments. Other intangible assets will continue to 12. Contingencies be amortized over their useful lives. The Com- pany will apply the new rules on accounting The Company is involved in various legal for goodwill and other intangible assets begin- disputes in the ordinary course of business. In ning in the rst quarter of 2002. During 2002, addition, the Environmental Protection Agency the Company will perform the rst of the re- has designated the Company as a potentially quired impairment tests of goodwill and inde- responsible party, along with numerous other nite lived intangible assets, but does not antici- companies, for the clean up of several hazard- pate a material impact on its results of ous waste sites. Based on currently available operations or nancial position. information, the Company does not believe that the disposition of any of the legal or envi-In June 2001, the FASB issued Statement of ronmental disputes the Company is currently Financial Accounting Standard No. 143 (SFAS involved in will have a material adverse effect 143), Accounting for Asset Retirement Obliga- upon the nancial condition, results of opera-tions, effective for scal years beginning after tions, cash ows or competitive position of the June 15, 2002. This standard requires entities to Company. It is possible, that as additional in- record the fair value of a liability for an asset formation becomes available, the impact onretirement obligation in the period in which it the Company of an adverse determination is incurred. SFAS 143 is effective for the Com- could have a different effect.pany beginning with the rst quarter of 2003, and its adoption is not expected to have a material impact on the Companys results of 13. New Accounting Pronouncements operations or nancial position.The Company adopted Statement of Finan-In August 2001, the FASB issued Statement cial Accounting Standard No. 133 (SFAS 133), of Financial Accounting Standard No. 144 Accounting for Derivative Instruments and Hedg- (SFAS 144), Accounting for the Impairment or ing Activities, on January 1, 2001. The statement Disposal of Long-Lived Assets, effective for scal requires the Company to recognize all deriva- years beginning after December 15, 2001. This tives on the balance sheet at fair value. Deriva- standard supercedes SFAS 121, Accounting for tives that are not hedges must be adjusted to the Impairment of Long-Lived Assets and for Long- fair value through income. If the derivative is a Lived Assets to Be Disposed Of, and provides a hedge, depending on the nature of the hedge, 25 single accounting model for long-lived assets to changes in the fair value of derivatives will be disposed of. The new standard also super- Alltrista either be offset against the change in fair value sedes the provisions of APB Opinion No. 30 of the hedged assets, liabilities, or rm commit- with regard to reporting the effects of a disposal ments through earnings or recognized in other of a segment of a business and requires ex- comprehensive income until the hedged item pected future operating losses from discontin- is recognized in earnings. Hedge ineffective- ued operations to be displayed in discontinued ness, the amount by which the change in the operations in the period(s) in which the losses value of a hedge does not exactly offset the are incurred. SFAS 144 is effective for the Com- change in the value of the hedged item, will be pany beginning with the rst quarter of 2002, immediately recognized in earnings. The adop- and its adoption is not expected to have a tion of SFAS 133 on January 1, 2001 did not material impact on the Companys results of have a material impact on the Companys re- operations or nancial position. sults of operations or nancial position. 14. Derivative Financial Instruments In July 2001, the Financial Accounting Standards Board (FASB) issued Statements ofThe Companys derivative activities are ini- Financial Accounting Standards No. 141, Busi- tiated within the guidelines of documented 28. corporate risk-management policies and do notnumber of common shares outstanding for the create additional risk because gains and lossesperiod. Diluted earnings per share are calcu- on derivative contracts offset losses and gainslated based on the weighted average number of on the assets, liabilities and transactions beingoutstanding common shares plus the dilutive hedged. As derivative contracts are initiated, effect of stock options as if they were exercised. the Company designates the instruments indi- Due to the net loss for 2001, the effect of the vidually as either a fair value hedge or a cashpotential exercise of stock options was not con- ow hedge. Management reviews the correla-sidered in the diluted earnings per share calcu- tion and effectiveness of its derivatives on alation for that year since it would be antidilu- periodic basis.tive.The Company uses interest rate swaps to A computation of earnings per share is as manage a portion of its exposure to short-termfollows for the years ended December 31: interest rate variations with respect to the Lon- don Interbank Offered Rate on its term debt(in thousands, except per share obligations. The Company has designated theamounts)2001 20001999 interest rate swaps as cash ow hedges. GainsIncome (loss) from and losses related to the effective portion of the continuing operations. . . . $(85,429) $4,922 $30,307 interest rate swaps are reported as a componentDiscontinued operations . . .(87) of other comprehensive income and reclassi-Extraordinary loss from ed into earnings in the same period the hedgedearly extinguishment of transaction affects earnings. Because the termsdebt . . . . . . . . . . . . . . . . . . . . (1,028) of the swaps exactly match the terms of theNet income (loss) . . . . . . . . . . $(85,429) $4,922 $29,192 underlying debt, the swaps are perfectly effec- tive. The interest rate swap agreements expire Weighted average shares in March 2002. outstanding . . . . . . . . . . . . . 6,3636,338 6,734Additional shares assuming 15. Related Party Transactionsconversion of stockOn May 7, 2001, the Company entered options . . . . . . . . . . . . . . . . . 45 85 into a letter of intent (the Letter) with Marlin Weighted average shares Partners II, LP (Marlin), Catterton Partners,outstanding assuming L.P. and Alpha Private Equity Group (collec- conversion . . . . . . . . . . . . . .6,3636,383 6,819 tively, the Other Investors) for the acquisi-Basic earnings (loss) per tion by Marlin and the Other Investors of all ofshare: the issued and outstanding common stock ofIncome (loss) from the Company. At the time, Marlin was a relatedcontinuing operations. . . . $ (13.43) $ 0.78 $ 4.50 party due to its ownership of approximately 10Discontinued operations . . .(0.01) percent of the issued and outstanding commonExtraordinary loss from26 stock of the Company. Mr. Martin Franklin andearly extinguishment of Mr. Ian Ashken, the Companys current Chair- Alltristadebt . . . . . . . . . . . . . . . . . . . . (0.15) man and CEO, and Vice Chairman and CFO,Net income (loss) . . . . . . . . . . $ (13.43) $ 0.78 $ 4.34 respectively, were the managing partners of Marlin. According to the terms of the Letter,Diluted earnings (loss) per Marlin was reimbursed approximately $480,000 share assuming of expenses related to the contemplated trans- conversion: action. On June 24, 2001, Messrs. Franklin and Income (loss) from Ashken became Directors of the Company and continuing operations. . . . $ (13.43) $ 0.77 $ 4.44 on September 24, 2001, Messrs. Franklin andDiscontinued operations . . .(0.01) Ashken became executive ofcers of the Com-Extraordinary loss from pany.early extinguishment ofdebt . . . . . . . . . . . . . . . . . . . . (0.15) 16. Earnings Per ShareNet income (loss) . . . . . . . . . . $ (13.43) $ 0.77 $ 4.28 Basic earnings per share are computed by dividing net income by the weighted average 29. (in thousands, 17. Quarterly Stock Prices except per share FirstSecond ThirdFourth (Unaudited)amounts)Quarter Quarter Quarter Quarter TotalDiluted earnings(loss) per share: Quarterly sales prices for the Companys Income (loss) common stock, as reported on the composite fromcontinuing tape, were as follows: operations . .$0.07 $ 0.98 $0.26 $ (0.53) $ 0.77Net income FirstSecond ThirdFourth (loss) . . . . . . $0.07 $ 0.98 $0.26 $ (0.53) $ 0.77Quarter Quarter Quarter Quarter1999 2001Net sales . . . . . . $53,411 $113,653 $112,768$78,199$358,031 High . . . . . .$15.13 $16.15$13.03 $16.05Gross prot . . . .12,318 33,67833,81720,910 100,723 Low. . . . . . .$12.30 $11.64$10.70 $11.30Net income from 2000 continuingoperations. . . . 1,963 20,364(h)7,813 167(i) 30,307 High . . . . . .$25.00 $25.50$23.50 $20.94Net income (loss) . 2,099 19,336 7,813(56)29,192 Low. . . . . . .$21.00 $20.00$20.75 $10.00Basic earnings(loss) per share: 18. Quarterly Results of OperationsIncome from (Unaudited)continuingoperations . .$0.29 $ 3.03 $1.16 $ 0.02 $ 4.50Net income Summarized quarterly results of (loss) . . . . . . $0.31 $ 2.88 $1.16 $ (0.01) $ 4.34 operations for 2001, 2000 and 1999 wereDiluted earnings(loss) per share: as follows:Income fromcontinuing (in thousands,operations . .$0.29 $ 2.99 $1.14 $ 0.02 $ 4.44 except per shareFirstSecond ThirdFourth amounts) Quarter Quarter Quarter Quarter Total Net income (loss) . . . . . . $0.31 $ 2.84 $1.14 $ (0.01) $ 4.28 2001 Net sales . . . . . .$69,027 $ 90,598 $ 90,477$54,876$304,978 Gross prot . . . . 14,935 24,67722,178 9,51271,302 (a) Includes $1.3 million of income (net of tax) related to the discharge of deferred compensation obligations. Net income (loss) from (b) Includes $1.5 million of income (net of tax) related to the continuing operations. . . .(238)(a) 5,111(b) (83,032)(c) (7,270)(d) (85,429)discharge of deferred compensation obligations, a $0.7 mil- lion gain (net of tax) related to an insurance recovery Net income (loss) .(238)5,111(83,032)(7,270) (85,429) associated with a property casualty and $0.9 million of costs Basic earnings (net of tax) associated with the Companys evaluation of its (loss) per share: strategic options. Income (loss) from(c) Includes an $81.2 million loss (net of tax) related to the sale continuing operations . . $ (.04) $ 0.80 $ (13.04) $ (1.14) $ (13.43) of thermoforming assets, $1.8 million of separation costs(net of tax) related to the management reorganization and Net income(loss) . . . . . .$ (.04) $ 0.80 $ (13.04) $ (1.14) $ (13.43) $0.9 million of costs (net of tax) associated with the exit offacilities. Diluted earnings (loss) per share:(d) Includes $1.5 million of costs (net of tax) associated with Income (loss)27corporate restructuring, a $1.6 million charge (net of tax) for from continuing stock option compensation, $1.0 million of costs (net of tax) operations . . $ (.04) $ 0.80 $(13.04) $ (1.14) $ (13.43) Alltristaassociated with the write-off of debt issuance and amend- Net incomement costs, an additional $0.9 million loss (net of tax)(loss) . . . . . .$ (.04) $ 0.80 $(13.04) $ (1.14) $ (13.43)related to the sale of thermoforming assets and a $0.9 2000million loss (net of tax) related to the sale of the Companys Net sales . . . . . .$84,455 $114,998 $97,096 $60,807 $357,356 interest in Microlin, LLC. Gross prot . . . . 18,808 30,82423,123 9,030 81,785(e) Includes $1.1 million of income (net of tax) associated with Net income (loss)the reduction in long-term performance-based compensa- fromtion. continuing operations. . . .4446,210(e)1,641(f) (3,373)(g) 4,922(f) Includes $1.5 million of costs (net of tax) related to litiga- Net income (loss) .4446,210 1,641(3,373) 4,922 tion. Basic earnings(g) Includes $0.6 million of income (net of tax) related to (loss) per share: litigation. Income (loss) from(h) Includes a $12.2 million gain (net of tax) on the sale of the continuing Companys plastic packaging product line. operations . . $ 0.07$ 0.99 $ 0.26$ (0.53) $0.78 Net income(i) Includes $1.4 million of costs (net of tax) associated with the(loss) . . . . . .$ 0.07$ 0.99 $ 0.26$ (0.53) $0.78exit of a plastics thermoforming facility. 30. Note: Earnings per share calculations for each$1.6 million, respectively. The purpose of these loans, which are due on January 23, 2007, is to quarter are based on the weighted average num- exercise non-qualied stock options granted ber of shares outstanding for each period, and under the Companys 2001 Stock Option Plan. the sum of the quarterly amounts may not necessarily equal the annual earnings per shareOn March 27, 2002, the Company entered amounts.into a denitive asset purchase agreement to acquire the business of Tilia International, Inc., a developer and distributor of home food pres- Note 19. Subsequent Events ervation products, for $145.0 million cash andOn March 9, 2002, the Job Creation and $15.0 million in seller debt nancing. In addi- Workers Assistance Act of 2002 was enacted tion, the agreement includes an earn-out pro- which provides, in part, for the carryback of vision with a total potential payment in cash or 2001 net operating losses for ve years instead Alltrista common stock of up to $25.0 million of the previous two year period. As a result, the payable in three years, provided that certain company led for an additional refund of $22.8earnings performance targets are met. The ac- million, of which $22.2 million was receivedquisition, which is expected to more than on March 22, 2002. At December 31, 2001, thedouble the Companys consumer products rev- federal net operating losses were recorded as a enue, is consistent with the Companys strate- deferred tax asset with a valuation allowance ofgic focus on food preservation products and $5.4 million. This valuation allowance will beniche branded kitchen consumables. reversed during 2002 resulting in a deferred taxThe purchase price allocation has not been benet. completed, but it is anticipated that goodwillOn January 24, 2002, Martin E. Franklin, in the amount of approximately $100.9 mil- Chairman and Chief Executive Ofcer, and Ianlion will be recorded which will not be subject G.H. Ashken, Vice Chairman, Chief Financial to amortization. It is also anticipated that am- Ofcer and Secretary, received loans from the ortizable intangible assets amounting to ap- Company in the amounts of $3.3 million andproximately $5.0 million will be recorded.28 Alltrista 31. alltrista corporationSelected Financial Data Year ended December 31,2001 20001999 1998 1997 (in thousands, except per share amounts) Statement of Operations Data: Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 304,978 $ 357,356 $ 358,031 $ 258,489 $ 249,604 Costs and expenses Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..233,676275,571257,308 188,174 183,371 Selling, general and administrative expenses . . . . . . . . . . 52,212 56,019 55,32237,45234,868 Goodwill amortization . . . . . . . . . . . . . . . . . . . . . . . . ..5,1536,4044,605 1,399 1,265 Special charges (credits) and reorganization expenses (a) ..4,9783802,314 1,260 Loss (gain) on divestiture of assets and product lines. . . ..122,887 (19,678) Income (loss) before interest, taxes and minority interest . . . (113,928)18,982 58,16030,20430,100 Interest expense, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,791 11,9178,395 1,822 2,256 Income tax provision (benet) . . . . . . . . . . . . . . . . . . . . ..(40,443) 2,402 19,45810,78510,603 Minority interest in loss (gain) of consolidated subsidiary ..153 (259) Income (loss) from continuing operations . . . . . . . . . . . . . .(85,429) 4,922 30,30717,59717,241 Loss from discontinued operations . . . . . . . . . . . . . . . . . .. (87) (1,870) (2,404) Extraordinary loss from early extinguishment of debt (net of income taxes). . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,028) Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. $ (85,429) $4,922 $ 29,192 $15,727 $14,837 Basic earnings (loss) per share: Income (loss) from continuing operations . . . . . . . . . . . . $ (13.43) $ 0.78 $4.50 $2.48 $2.33 Loss from discontinued operations. . . . . . . . . . . . . . . . . . (0.01)(0.26)(0.33) Extraordinary loss from early extinguishment of debt (net of income taxes) . . . . . . . . . . . . . . . . . . . . . . . . . . (0.15) $(13.43) $ 0.78 $4.34 $2.22 $ 2.00 Diluted earnings (loss) per share: Income (loss) from continuing operations . . . . . . . . . . . . $ (13.43) $ 0.77 $4.44 $2.45 $2.28 Loss from discontinued operations. . . . . . . . . . . . . . . . . . (0.01)(0.26)(0.32) Extraordinary loss from early extinguishment of debt (net of income taxes). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.15) $(13.43) $ 0.77 $4.28 $2.19 $ 1.96 Other Data: EBITDA (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,734 $40,673 $58,493 $42,012 $40,485 Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . .18,79721,31117,69710,54810,385 Capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,70713,63716,62811,909 7,897Balance Sheet Data (at end of period): Cash and cash equivalents . . . . . . . . . . . . .. . . . . . . . . . . .$ 6,376 $ 3,303 $ 17,394 $ 21,454 $ 26,641 Working capital . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . .8,03522,975 54,611 46,923 53,759 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .161,303 308,739338,751165,831166,577 Total debt. . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 84,875 137,060140,761 25,715 30,000 Total stockholders equity . . . . . . . . . . . . . . . . . . . . . . . . . . 35,129 118,221123,025 94,893 97,309(a) Special charges (credits) and reorganization expenses were comprised of the following (in millions): 2001 20001999 1998 Costs to evaluate strategic options . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . $ 1.4 $ 0.6 $$ 29 Discharge of deferred compensation obligations. . . . . . . .. . . . . . . . . . . .(4.1) Alltrista Separation costs for former ofcers . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 2.6 Stock option compensation . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 2.4 Corporate restructuring costs . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 2.3 Costs to exit facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.8 2.3 Reduction of long-term performance-based compensation. . . . . . . . . . . . (1.6) Litigation charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.4 Items related to divested operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(0.4) 1.3$ 5.0 $ 0.4 $2.3$1.3 (b) EBITDA is calculated as income (loss) before interest, taxes and minority interest plus (i) depreciation and amortization, (ii) special charges (credits) and reorganization expenses and (iii) loss (gain) on divestiture of assets and product lines. EBITDA is not intended to represent cash ow from operations as dened by accounting principles generally accepted in the United States and should not be used as an alternative to net income as an indicator of operating performance or to cash ow as a measure of liquidity. EBITDA is included in this offering memorandum because it is a basis upon which our management assesses nancial performance. While EBITDA is frequently used as a measure of operations and the ability to meet debt service requirements, it is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation. 32. [This Page Intentionally Left Blank] 33. [This Page Intentionally Left Blank] 34. [This Page Intentionally Left Blank] 35. company informationboard of directors:corporate counsel: Martin E. Franklin Kane Kessler, PC Chairman and Chief Executive Officer New York, New YorkIan G.H. AshkenWillkie Farr & Gallagher Vice Chairman and Chief Financial OfficerNew York, New YorkDouglas W. Huemmetransfer agent: DirectorNational City Bank Richard L. Molen Cleveland, Ohio Director 800-622-6757 Lynda W. Popwellcorporate headquarters: Director555 Theodore Fremd Avenue, Suite B-302 Patrick W. RooneyRye, New York 10580 Director 914-967-9400 phone914-967-9405 fax David L. [email protected] Directorwww.alltrista.com Robert L. Woodsecurities listings: DirectorAlltristas common stock is traded independent auditors:on the New York Stock Exchange.Symbol: ALC Ernst & Young New York, New Yorkinvestor relations:Morgen Walke Associates, Inc.New York, New York212-850-5600 alltrista operating locations:Industrial PlasticsUnimark Plastics Consumer Products Zinc Products Tilia8307 Ball Road1303 Batesville RoadPO Box 1890303 Second Street 345 S. High StreetFort Smith, AR 72903Greeneville, TN 37744 Greer, SC 29650North Tower, 5th Floor Muncie, IN 47305501-646-8296864-879-8100423-639-8111 San Francisco, CA 94107 765-281-5000 415-371-7200www.etrista.comwww.unimarkplastics.comwww.allzinc.com www.homecanning.comPresident: Kyle DeJaegerPresident: Curt WatkinsPresident: Al Giles President: Jack Metzwww.tilia.com President: Linda Graebner