SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 16, 1996
Owens-Illinois, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-9576 22-2781933
--------------- ----------- -------------------
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification No.)
incorporation)
Owens-Illinois Group, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-13061 34-1559348
--------------- ----------- -------------------
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification No.)
incorporation)
One SeaGate, Toledo, Ohio 43666
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrants' telephone number,
including area code: 419-247-5000
Exhibit Index -- Page 4
Page 1 of 4 pages
The Registrants hereby amend its Current Report on Form 8-K dated December 16,
1996 to include the information required under Items 7(a), 7(b) and 7(c).
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
(1) Audited consolidated finanical statements of Avir Finanziaria S.p.A.
and subsidiaries for the year ended December 31, 1995 (with
comparative information as of and for the year ended
December 31, 1994).
- Independent Auditors' Report
- Consolidated Balance Sheets
- Consolidated Profit and Loss Accounts
- Consolidated Statements of Changes in Net Equity
- Consolidated Cash Flow Statements
- Notes to Consolidated Financial Statements
(2) Unaudited condensed consolidated finanical statements of Avir
Finanziaria S.p.A. and subsidiaries for the six months ended
June 30, 1996 and 1995.
- Condensed Consolidated Balance Sheets
- Condensed Consolidated Profit and Loss Accounts
- Condensed Consolidated Cash Flow Statements
- Notes to Condensed Consolidated Financial Statements
(b) Unaudited pro forma financial information.
- Pro Forma Condensed Consolidated Balance Sheet at June 30, 1996
- Pro Forma Condensed Consolidated Income Statement for the six
months ended June 30, 1996
- Pro Forma Condensed Consolidated Income Statement for the year
ended December 31, 1995
- Notes to Pro Forma Condensed Consolidated Financial Statements
(c) Exhibits.
2.1 Acquisition Agreement dated December 16, 1996
23.1 Consent of KPMG S.p.A., Rome, Italy
Page 2 of 4 pages
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
OWENS-ILLINOIS, INC.
OWENS-ILLINOIS GROUP, INC.
By /s/ Lee A. Wesselmann
--------------------------
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Dated: March 3, 1997
Page 3 of 4 pages
EXHIBIT INDEX
Exhibit
Number Exhibit
2.1 Acqusition Agreement dated December 16, 1996
23.1 Consent of KPMG S.p.A., Rome, Italy
Page 4 of 4 pages
Independent Auditors' Report
----------------------------
The Shareholders
Avir Finanziaria S.p.A.
We have audited the accompanying consolidated balance sheet of Avir
Finanziaria S.p.A. and subsidiaries as of December 31, 1995 and the related
consolidated profit and loss account, statement of changes in net equity and
cash flow statement for the year then ended. These consolidated financial
statements are the responsibility of Avir Finanziaria S.p.A.'s management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits. We did not audit the consolidated financial
statements of Vidrieria Rovira S.A., a subsidiary (62% ownership), which
statements reflect total assets constituting 8% and total revenues
constituting 9% of the related consolidated totals. Those statements were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the amounts included for Vidrieria Rovira
S.A., is based solely on the report of the other auditors.
We conducted our audits in accordance with auditing standards generally
accepted in the Republic of Italy, which standards are substantially
equivalent to auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, based on our audit and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Avir Finanziaria S.p.A. and
subsidiaries as of December 31, 1995, and the results of their operations and
their cash flows for the year then ended, in conformity with generally
accepted accounting principles in the Republic of Italy.
Accounting principles generally accepted in the Republic of Italy vary in
certain significant respects from accounting principles generally accepted in
the United States of America. Application of accounting principles generally
accepted in the United States of America would have affected net profit for
the year ended December 31, 1995 and net equity as of December 31, 1995, to
the extent summarized in Note 20 to the consolidated financial statements.
KPMG S.p.A.
Naples, Italy
May 13, 1996, except as to Note 21,
which is as of March 3, 1997
1
CONSOLIDATED BALANCE SHEETS Avir Finanziaria S.p.A.
Millions of Lire
December 31, 1995 1994
- -----------------------------------------------------------------------------
Assets
A) Receivables from shareholders for
unpaid capital - -
B) Fixed Assets
I) Intangible assets:
1) Start-up and improvement costs 323 414
2) Costs of research, development and
publicity 38 128
3) Patents and rights to use third-party
patents 1,053 1,342
4) Concessions, licenses, brands and
similar rights 9 13
5) Differences on consolidation 1,933 3,227
6) Assets in progress and advances 50 14
7) Other 1,563 2,130
- -----------------------------------------------------------------------------
Total 4,969 7,268
II) Tangible assets:
1) Land and buildings 107,009 111,451
2) Plant and machinery 188,364 187,636
3) Industrial and commercial equipment 20,754 21,366
4) Other assets 1,089 1,177
5) Assets under construction and advances 47,310 12,109
- -----------------------------------------------------------------------------
Total 364,526 333,739
III) Financial assets:
1) Investment in:
b) associated companies 24,147 19,247
d) other companies 1,621 755
2) Loans receivable:
d) from third-parties
due within one year 257 139
due after one year 8,838 1,141
3) other securities 860 860
- -----------------------------------------------------------------------------
Total 35,723 22,142
=============================================================================
Total fixed assets (B) 405,218 363,149
=============================================================================
2
CONSOLIDATED BALANCE SHEETS Avir Finanziaria S.p.A. (continued)
Millions of Lire
December 31, 1995 1994
- -----------------------------------------------------------------------------
C) Current assets
I) Inventories
1) raw materials and supplies 45,303 39,591
2) work-in-progress and semi-finished
products 5,563 1,699
4) finished products and goods for resale 85,071 92,315
5) advances 26 33
- -----------------------------------------------------------------------------
Total 135,963 133,638
II) Receivables:
1) from customers
due within one year 250,366 242,205
due after one year 8,907 6,480
3) due within one year 293 6,577
5) from third parties
due within one year 25,076 9,262
due after one year 26,523 22,381
- -----------------------------------------------------------------------------
Total 311,165 286,905
III) Financial assets:
4) other investments 6,569 -
6) loans receivable:
-- from third parties
due within one year 178,231 71,036
- -----------------------------------------------------------------------------
Total 184,800 71,036
IV) Cash on hand and at bank
1) bank and postal accounts 84,313 108,338
3) cash on hand 198 301
- -----------------------------------------------------------------------------
Total 84,511 108,639
- -----------------------------------------------------------------------------
Total current assets 716,439 600,218
D) Prepaid assets and accrued income 8,796 3,894
- -----------------------------------------------------------------------------
Total Assets 1,130,453 967,261
=============================================================================
Liabilities and Net Equity
A) Net equity
I) Share capital 22,092 22,092
II) Share premium reserve - -
III) Revaluation reserve 4,224 4,224
IV) Legal reserve 4,418 4,418
V) Treasury stock - -
3
CONSOLIDATED BALANCE SHEETS Avir Finanziaria S.p.A. (continued)
Millions of Lire
December 31, 1995 1994
- -----------------------------------------------------------------------------
VI) Statutory reserves - -
VII) Other reserves
-- extraordinary reserve 78,584 74,610
-- taxed reserves 202 202
-- reserve for CASMEZ grants 99 99
-- reserve on gains re. Law 170 1,767 1,767
-- consolidation reserve 257,642 214,526
-- foreign exchange translation reserve 1,771 976
VIII) Retained earnings - -
IX) Net profit for the year attributable to the
Group 102,153 61,877
- -----------------------------------------------------------------------------
Total net equity attributable to the Group 472,952 384,791
Share capital and reserves attributable to
minorities 72,454 69,261
Net profit for the year attributable to
minorities 11,599 5,492
- -----------------------------------------------------------------------------
Total net equity attributable to minorities 84,053 74,753
- -----------------------------------------------------------------------------
Total Consolidated Net Equity 557,005 459,544
B) Risk and other provisions
1) Deferred compensation 308 204
2) Income taxes 34,281 33,460
3) Other 19,724 21,280
- -----------------------------------------------------------------------------
Total 54,313 54,944
C) Employees' termination indemnity 57,385 54,651
D) Payables
3) Banks overdrafts:
due within one year 46,265 66,442
due after one year 63,109 50,893
4) Due to other financial institutions:
due within one year 1,101 13,604
due after one year 30,296 17,094
5) Advances
due within one year 385 -
6) Trade payables
due within one year 182,416 145,733
7) Notes payable
due within one year 703 703
due after one year 40 743
9) Due to associated companies
due within one year 25 203
4
CONSOLIDATED BALANCE SHEETS Avir Finanziaria S.p.A. (continued)
Millions of Lire
December 31, 1995 1994
- -----------------------------------------------------------------------------
11) Due to fiscal authorities
due within one year 97,315 68,311
12) Due to social security
due within one year 13,167 10,835
due after one year 44 115
13) Other payables
due within one year 16,068 11,759
due after one year 537 443
- -----------------------------------------------------------------------------
Total 451,471 386,878
E) Accrued expenses and deferred income 10,279 11,244
- -----------------------------------------------------------------------------
Total net equity and liabilities 1,130,453 967,261
=============================================================================
Memorandum Accounts
Liens on real estate on the Group's liabilities:
-- mortgages and privileges 83,787 78,070
-- reservation of property 743 1,446
- -----------------------------------------------------------------------------
Total guarantees 84,530 79,516
Other memorandum, commitments and contingency
accounts 3,901 3,895
- -----------------------------------------------------------------------------
Total Memorandum Accounts 88,431 83,411
5
CONSOLIDATED PROFIT AND LOSS ACCOUNTS Avir Finanziaria S.p.A.
Millions of Lire
Years ended December 31, 1995 1994
- -----------------------------------------------------------------------------
A) Value of production
1) Revenues from sales 1,150,874 991,134
2) Variation in inventories of work-in-
progress, semi-finished and finished
products (3,615) 11,342
4) Capitalized labor 7,382 5,481
5) Other
-- contribution on operating expenses
revenues 144 702
-- other 8,452 9,534
- -----------------------------------------------------------------------------
Total 1,163,237 1,018,193
B) Cost of production
6) Raw materials, supplies and goods for
resale (397,644) (323,523)
7) Services received (284,966) (252,658)
8) Rentals and leasing charges (3,091) (3,535)
9) Personnel:
a) wages and salaries (132,094) (129,938)
b) social security contributions (48,441) (47,584)
c) employees' severance indemnities (9,713) (9,189)
d) deferred compensation (77) (1)
e) other (2,519) (3,297)
10) Depreciation and write-downs:
a) amortization of intangible assets (2,682) (3,731)
b) depreciation of tangible assets (69,734) (65,060)
c) other write-downs to fixed assets (132) (700)
d) provision for doubtful accounts risks (3,249) (5,477)
11) Variation in inventories of raw materials,
supplies and goods for resale 6,111 (595)
12) Provisions for risks (6,580) (1,215)
13) Other provisions (677) (303)
14) Other operating costs (20,118) (17,643)
- -----------------------------------------------------------------------------
Total (975,606) (864,449)
- -----------------------------------------------------------------------------
Difference between value and cost of production 187,631 153,744
C) Financial income and expense
15) Income from investments:
-- dividends 115 -
16) Other financial income
a) on long-term loans granted:
-- to third parties - 18
b) on investment securities 116 65
d) other 26,043 11,435
6
CONSOLIDATED PROFIT AND LOSS ACCOUNTS Avir Finanziaria S.p.A. (continued)
Millions of Lire
Years ended December 31, 1995 1994
- -----------------------------------------------------------------------------
17) Interest and other financial charges
-- third-parties (22,534) (21,659)
- -----------------------------------------------------------------------------
Total 3,740 (10,141)
D) Adjustment to the value of financial assets
18) Revaluations
a) investments 8,645 3,551
19) Write-downs
a) investments (961) (15)
- -----------------------------------------------------------------------------
Total 7,684 3,536*
E) Extraordinary income and expense
20) Extraordinary income
-- gains on disposals 1,361 657
-- other 13,601 6,987
21) Extraordinary expense
-- losses on disposals (1,647) (726)
-- prior year income taxes (1,123) (1,164)
-- other (4,012) (7,230)
- -----------------------------------------------------------------------------
Total 8,180 (1,476)
- -----------------------------------------------------------------------------
Profit before income taxes 207,235 145,663
22) Income taxes (93,483) (78,294)
- -----------------------------------------------------------------------------
23) Net profit for the year 113,752 67,369
of which:
-- attributable to the Group 102,153 61,877
-- attributable to minorities 11,599 5,492
* In the 1994 financial statements the amount was included in "Other
revenues".
7
CONSOLIDATED STATEMENTS OF CHANGES IN NET EQUITY Avir Finanziaria S.p.A.
Millions of Lire
Years ended December 31, 1995 and 1994
- ----------------------------------------------------------------------------
Attributable to the Group
Total
Net net
profit equity
Share Own Consolidation for the of the
capital reserves reserves Total year Group
- ----------------------------------------------------------------------------
Balance at
December 31,
1994 22,092 85,320 215,502 322,914 61,877 384,791
Dividends
distributed - - (13,255) (13,255) - (13,255)
Appropriation of
net profit to
reserves - 3,974 57,903 61,877 (61,877) -
Variations in
reserves - - (737) (737) - (737)
Net profits for
the year - - - - 102,153 102,153
- ----------------------------------------------------------------------------
Balance at
December 31,
1995 22,092 89,294 259,413 370,799 102,153 472,952
============================================================================
- ----------------------------------------------------------------------------
Attributable
to the Attributable to minorities
Group Share Net
Total net capital profit
equity of and for the Consolidated
the Group reserves year Total net equity
- ----------------------------------------------------------------------------
Balance at
December 31, 1994 384,791 69,261 5,492 74,753 459,544
Dividends distributed (13,255) (3,106) - (3,106) (16,361)
Appropriation of net
profit to reserves - 5,492 (5,492) - -
Variations in reserves (737) 807 - 807 70
Net profit for the
year 102,153 - 11,599 11,599 113,752
- ----------------------------------------------------------------------------
Balance at
December 31, 1995 472,952 72,454 11,599 84,053 557,005
============================================================================
8
CONSOLIDATED CASH FLOW STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire
Years ended December 31, 1995 1994
- ---------------------------------------------------------------------------
Net Cash - beginning 137,537 15,182
Cash flows from operating activities
Net income - Group 102,153 61,877
Net income - External 11,599 5,492
Depreciation 72,416 68,791
Reversal of Group shares of the net result of
companies valued at net equity (8,626) (3,536)
(Gain)/Loss from disposal of assets 1,656 (1,899)
(Revaluation)/Devaluation of assets 131 700
Movement in working capital 39,393 39,338
Net movement in severance indemnity 2,734 (1,311)
Net movement in allowance for risks and charges (631) 3,682
- ---------------------------------------------------------------------------
220,825 173,134
Cash flows from investing activities
Investments in assets:
-- intangible (493) (861)
-- fixed (108,793) (64,503)
-- financial (9,680) (2,100)
Sales proceeds on disposal of fixed assets 12,304 25,196
- ---------------------------------------------------------------------------
(106,662) (42,268)
Cash flows from financing activities
-- Additional borrowings 31,310 35,992
-- Capital contributions 383 6,015
-- Loan repayments (24,278) (47,328)
- ---------------------------------------------------------------------------
7,415 (5,321)
Dividends paid (13,255) (6,627)
Other movements that do not form part of cash flows
from financing activities
Consolidation movements - -
Movements in reserves 2,546 6,428
Movements in shares of net equity of third parties (3,106) (2,991)
Conversion differences (3,833) -
- ---------------------------------------------------------------------------
(4,393) 3,437
Cash flows for the period 103,930 122,355
- ---------------------------------------------------------------------------
Net Cash - final 241,467 137,537
===========================================================================
9
CONSOLIDATED CASH FLOW STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire
Years ended December 31, 1995 1994
- ---------------------------------------------------------------------------
Net cash, at year end, is as follows:
- -- Bank deposits and liquid funds 84,511 108,639
- -- Current financial debtors 184,800 71,036
- -- Current financial creditors (27,844) (42,138)
- ---------------------------------------------------------------------------
241,467 137,537
===========================================================================
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
The consolidated financial statements, consisting of the consolidated balance
sheets, consolidated profit and loss accounts, consolidated cash flow
statements and notes thereto, have been drawn up in accordance with the
requirements of Legislative Decree no. 127 of April 9, 1991 enacted as a
result of the VIIth EEC Directive.
1. Consolidation Group
The consolidation group includes the Italian and foreign companies in which
Avir Finanziaria S.p.A. (the "Company" and together with its subsidiaries, the
"Group") holds the majority of the voting rights and over which it exercises
significant control.
Compared to the consolidated financial statements at December 31, 1994, the
consolidation group shows only one change, due to the acquisition of the
entire share capital of Sonator Investments B.V. located in Amsterdam
(Holland).
During December 1995, the Company, as subscription of an increase in share
capital, transferred to Sonator Investments B.V. its controlling interest in
Vidrieria Rovira S.A., represented by 2,285,559 shares equal to 62.415% of the
share capital.
2. Changes in Unconsolidated Investments
Non-consolidated investments, over which the Group exercises significant
influence and normally represented by shareholdings of between 20% and 50%,
are valued using the equity method.
In accordance with the equity method, the consolidated financial statements do
not include the assets, liabilities, costs and revenues of the relevant
companies, but the Group's share of their equity, including the result for the
year, which is proportionately credited to the profit and loss under the item
"Adjustment to the value of financial assets".
The changes from the prior year are as follows:
- -- inclusion of Attivita' Industriali Friuli S.r.l., San Vito al Tagliamento
(PN) - 49%
- -- exclusion of Vetrerie Venete S.r.l., Verona; following the disposal of
735,000 shares, the shareholding reduced from 30% to 15.3%
Minority investments in other companies are valued at cost. Changes from the
prior year were:
- -- inclusion of Acque e Terme di Bognanco S.p.A. for the purchase of 800,000
shares with a nominal value of five hundred lire each
11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
- -- inclusion of Vetrerie Venete S.r.l., following the decrease of the
investment from 30% to 15.3%
- -- elimination of the investments in Hotel Prince de Ligne S.r.o., Sediver
International S.A. and Sklo Export a.s., following their disposal
3. Basis of Consolidation
Financial statements used for the consolidation
- -----------------------------------------------
The financial statements used for the consolidation are those approved by the
shareholders' meetings of each consolidated company except for the financial
statements of one company valued under the equity method for which the
financial statements presented by the Board of Directors for the shareholders'
approval were used.
These financial statements have been adjusted, where necessary, to eliminate
items recorded exclusively to obtain fiscal benefits and to ensure they comply
with the accounting principles adopted by the Company.
The financial statements of foreign subsidiaries were reclassified to bring
them into line with Italian presentation requirements and were converted,
until December 31, 1994, into Italian lire using the year-end exchange (both
for balance sheet and profit and loss items). Beginning in 1995, financial
statements denominated in foreign currency are converted into Italian lire as
follows: profit and loss items at the average rate for the year and balance
sheet items at year-end exchange rates, except for the result for the year
which was converted with the same rates as the profit and loss account. The
difference arising on the result for the year between the application of
average rates and year-end rates is recorded in the "Foreign exchange
translation reserve" in net equity. The effects on net equity due to the
fluctuation of exchange rates between the end of 1995 and the end of 1994 are
also recorded in this account.
The exchange rates applied for the conversion are as follows:
- -----------------------------------------------------------------------------
1995 December 31, December 31,
Average 1995 1994
- -----------------------------------------------------------------------------
Czech crown 61.57 59.42 58.23
Dutch guilder 1,015.89 987.73 -
Pound sterling 2,556.27 2,458.22 2,533.43
Spanish peseta 13.08 13.05 12.33
- -----------------------------------------------------------------------------
12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Principles of consolidation
- ---------------------------
All the consolidated companies have been included through the full
consolidation method, the main characteristics of which are as follows:
- -- assets, liabilities, costs and revenues are included at their full amount;
- -- equity and result for the year attributable to minority shareholders are
shown separately in specific items of the financial statements;
- -- the book value of the investments is eliminated against the corresponding
value of their equity;
- -- balances and transactions between the Group companies are eliminated;
- -- if significant, profits arising from transactions between Group companies
with respect to inventories held at year end by the acquiring company are
eliminated;
- -- if significant, gains and losses resulting from the transfer of fixed
assets between Group companies are eliminated;
- -- intercompany dividends and write-downs in the value of investments in
consolidated companies are eliminated;
- -- conversion differences in respect of financial statements expressed in
foreign currencies are recorded under a specific reserve in net equity;
- -- items recorded exclusively to obtain fiscal benefits are eliminated.
Any differences between acquisition cost and the proportional value of net
equity at the date of acquisition, in respect of consolidated subsidiaries and
investments valued under the equity method, have been treated as follows:
- -- negative differences are credited to the consolidation reserve;
- -- positive differences, if they do not relate to specific assets, are
recorded as difference in consolidation under intangible assets.
4. Accounting principles and valuation criteria
The accounting principles adopted in the preparation of the consolidated
financial statements are those recommended by the Consigli Nazionali dei
Dottori Commercialisti e dei Ragionieri and, where non existent, those
recommended by CONSOB and IASC - International Accounting Standards Committee.
Intangible assets
- -----------------
Start-up and improvement costs, relating primarily to incorporation and share
capital increase fees, and research, development and publicity costs are
amortized over a period not exceeding 5 years.
Patents and rights to use patents of third-parties, relating principally to
trademarks and software programs are amortized over their duration and 5
years, respectively.
Brands are written-off over 10 years.
13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
The difference on consolidation relates to the goodwill paid on acquisition of
investments and is amortized over a maximum of 5 years.
Other intangibles include the earning rights (usufruct) on Avirunion a.s.
shares, costs related to loan agreements and improvements made to third-party
assets and are written-off on the basis of the duration of the underlying
contracts.
Tangible assets
- ---------------
Tangible assets are recorded at acquisition cost or manufacturing cost,
including directly attributable ancillary costs and increased by monetary
revaluations carried out by Italian subsidiaries in accordance with specific
legislation, and are shown net of accumulated depreciation.
Depreciation is calculated using the straight-line method, based on the useful
lives of the assets as well as on their effective utilization. In the year of
acquisition the rates used are decreased by half.
Assets under construction and advances are recorded on the basis of actual
costs incurred.
Ordinary maintenance and repairs are expensed as incurred.
Investments
- -----------
Investments in non-consolidated companies, in which the Group holds an
interest of at least 20%, are valued using the equity method.
Other investments relating to ownership of less than 20% are valued at cost,
eventually reduced to take into consideration any permanent diminutions in
value.
Fixed-interest securities
- -------------------------
Long-term securities are recorded at acquisition cost, which is equivalent to
nominal value since they are not marketable.
Securities purchased under resale agreements are recorded under financial
assets in current assets at their acquisition cost; the difference between the
sale and acquisition value is recorded as interest over the term of the
agreement.
Inventories
- -----------
Inventories are recorded at the lower of cost (purchase or internal
production) or market value. Cost is determined using the LIFO method with
annual layers.
14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Receivables and payables
- ------------------------
Receivables (both current and long-term) and payables are recorded at their
nominal value.
The value of receivables is adjusted to correspond to their net realizable
value.
Receivables and payables denominated in foreign currencies have been converted
into Italian lire using the exchange rates on the transaction date; losses on
exchange are covered by a specific provision recorded under "Risk and other
provisions", calculated as the negative difference between the balances
converted at the year-end exchange rates and the original transaction exchange
rates.
Accruals and prepayments
- ------------------------
They consist of income and expense items relating to more than one financial
year and are recorded under the accrual method of accounting.
Provision for income taxes
- --------------------------
The provision includes deferred taxes recorded by Italian subsidiaries on
realized gains on disposal of fixed assets and on prior year income, whose
taxation effects are spread over the year of realization and a number of
subsequent years, as well as those with respect to the elimination of
accelerated depreciation.
The provision also includes the amounts provided for by each consolidated
company with respect to expected fiscal charges on outstanding positions or
amounts under dispute.
Employees' severance indemnities
- --------------------------------
The provision is calculated in accordance with the relevant legislation and
labor contracts and reflects amounts accruing to each individual employee of
the consolidated companies at year-end.
Costs and revenues
- ------------------
They are recorded on the basis of prudent criteria using the accrual method of
accounting.
Income taxes
- ------------
Income taxes are calculated by each consolidated company based on a realistic
estimate of taxes payable in accordance with local current relevant
legislation.
15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
5. Fixed Assets
Intangible assets
- -----------------
Intangible assets and related accumulated amortization consist of the
following:
1995 1994
------------------------------ -----
Accumulated
Gross amortization Net Net
- ----------------------------------------------------------------------------
Start-up and improvement costs 1,750 1,427 323 414
Cost of research, development and
publicity 571 533 38 128
Patents and rights to use third-
party patents 2,238 1,185 1,053 1,342
Concessions, licenses, brands and
similar rights 22 13 9 13
Difference on consolidation 6,473 4,540 1,933 3,227
Assets in progress and advances 50 - 50 14
Other 3,819 2,256 1,563 2,130
- ----------------------------------------------------------------------------
14,923 9,954 4,969 7,268
============================================================================
The schedule below outlines the movements for the year in intangible assets
and accumulated amortization:
Accumulated
Gross amortization
- ----------------------------------------------------------------------------
Balance at December 31, 1994 20,210 (12,942)
Increases 493 -
Decreases (5,908) 5,777
Amortization - (2,682)
Exchange differences 128 (107)
- ----------------------------------------------------------------------------
Balance at December 31, 1995 14,923 (9,954)
The difference on consolidation of 1,933 relates to the positive differences
between the acquisition cost of investments and the corresponding share of net
equity, as explained in the accounting principles.
16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Movements during the year were as follows:
Balance at December 31, 1994 3,227
Amortization (1,294)
- -----------------------------------------------------------------------------
Balance at December 31, 1995 1,933
=============================================================================
Other intangible assets of 1,563 includes 1,098 with respect to earning
rights on Avirunion a.s. shares.
Tangible assets
- ---------------
1995 1994
---------------------------------- -------
Accumulated
Gross depreciation Net Net
- ----------------------------------------------------------------------------
Land and buildings 199,224 92,215 107,009 111,451
Plant and machinery 635,751 447,387 188,364 187,636
Industrial and commercial
equipment 83,204 62,450 20,754 21,366
Other assets 2,186 1,097 1,089 1,177
Assets under construction
and advances 47,310 - 47,310 12,109
- ----------------------------------------------------------------------------
967,675 603,149 364,526 333,739
============================================================================
The schedule below outlines the movements for the year in tangible assets and
accumulated depreciation:
Accumulated
Gross depreciation
- ----------------------------------------------------------------------------
Balance at December 31, 1994 915,885 (582,146)
Increases (decreases) for the year:
- -- acquisitions 108,793 -
- -- disposals (63,864) 51,780
- -- depreciation - (69,734)
- -- exchange differences 6,861 (3,049)
- ----------------------------------------------------------------------------
Balance at December 31, 1995 967,675 (603,149)
============================================================================
Medium and long-term loans are collateralized by mortgages (land and
buildings) and privileges (on plant and machinery) on tangible fixed assets.
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
In addition, machinery of 624, purchased in accordance with Law 1329/65 (so-
called Sabatini law), is held under capital leases.
As required by Art. 2427, paragraph 1, of the Italian Civil Code, the
following schedule details the various revaluations carried out on fixed
assets held by the Group at December 31, 1995:
Industrial
and
Land and Plant and Commercial Other
buildings machinery equipment assets (*) Total
- ----------------------------------------------------------------------------
Voluntary
revaluation 1968 827 107 - - 934
Voluntary
revaluation 1978 630 - - - 630
Law no. 576 of
2.12.75 3,491 2,896 247 - 6,634
Law no. 72 of
18.3.83 18,202 18,622 655 - 37,479
Law no. 413 of
30.12.91 35,193 - - 512 35,705
- ----------------------------------------------------------------------------
58,343 21,625 902 512 81,382
============================================================================
(*) Industrial building concessions.
Financial assets
- ----------------
In associated companies
- -----------------------
The balance consist of the following:
1995 1994
- ----------------------------------------------------------------------------
Attivita' Industriali Friuli S.r.l. 5,412 -
Avir Serapo S.r.l. 228 247
Nord Vetri S.p.A. 7,274 6,143
Sicilvetro S.p.A. 11,233 10,915
Vetrerie Venete S.p.A. - 1,942
- ----------------------------------------------------------------------------
24,147 19,247
============================================================================
The change is due to the effect of the results of companies valued under the
equity method, to the acquisition of the investment in Attivita' Industriali
Friuli S.r.l. and the reclassification of the investment in Vetrerie Venete
S.p.A. following the disposal of 735,000 shares.
18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Other companies
- ---------------
The balance consist of the following:
1995 1994
- ----------------------------------------------------------------------------
Acque e Terme di Bognanco S.p.A. 800 -
CESI S.p.A. 16 16
Confidi Soc. Coop. a r.l. 5 5
Consorzio nazionale obbligatorio per il riciclaggio dei
contenitori per liquidi in vetro (compulsory national
consortium for the recycling of glass bottles) 35 36
Hotel Prince de Ligne s.r.o. - 212
Sediver International S.A. - 5
Skloexport a.s. - 481
Vetrerie Venete S.p.A. 765 -
- ----------------------------------------------------------------------------
1,621 755
============================================================================
The changes relate to the acquisition of the investment in Acque e Terme di
Bognanco S.p.A., to the reclassification of Vetrerie Venete S.p.A. as already
mentioned above and to the disposal of minority investments in Hotel Prince de
Ligne, Sediver International and Skloexport.
Loans receivable from third-parties
- -----------------------------------
1995 1994
- ----------------------------------------------------------------------------
Due within one year 257 139
Due after one year 8,838 1,141
- ----------------------------------------------------------------------------
9,095 1,280
============================================================================
Receivables due after one year consist of the following:
Guarantee deposits on utilities' contracts 1,386
Term deposit due on March 31, 1998 7,452
-----
8,838
=====
The term deposit relates to the Company and is related to the guarantee
(principal and interest) provided by a primary Italian bank in favor of
Mediocredito Centrale for a loan; according to the contract, the deposit will
bear interest to the Company at the best market conditions and eventually
through other forms of investment designed to maximize earnings.
The year-end balance of 7,452 was used to purchase treasury certificates under
agreements to resell expiring on April 1996.
19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Other securities
- ----------------
1995 1994
- -----------------------------------------------------------------------------
These are as follows:
Treasury certificates, issue date January 1, 1994,
expiring January 1998, interest 12.5% p.a. 260 260
Vetrerie Veneta S.p.A. debentures, expiring July 1,
1999, variable interest rate credited every six
months on January 1 and July 1 600 600
- -----------------------------------------------------------------------------
860 860
=============================================================================
6. Current assets
Inventories
- -----------
1995 1994
- -----------------------------------------------------------------------------
Raw materials and supplies 45,303 39,591
Work-in-progress and semi-finished products 5,563 1,699
Finished products and goods for resale 85,071 92,315
Advances 26 33
- -----------------------------------------------------------------------------
135,963 133,638
=============================================================================
Inventories are valued using the LIFO method. If they had been valued at
current costs their value in the consolidated financial statements would have
been higher by approximately 24,000. At December 31, 1994, the difference
would have amounted to 25,000.
Receivables from customers
- --------------------------
1995 1994
- -----------------------------------------------------------------------------
Due within one year 265,475 249,240
Provision for doubtful accounts (15,109) (7,035)
- -----------------------------------------------------------------------------
250,366 242,205
Due after one year 12,888 11,344
Provision for doubtful accounts (3,981) (4,864)
- -----------------------------------------------------------------------------
8,907 6,480*
- -----------------------------------------------------------------------------
Total 259,273 248,685
=============================================================================
*of the total, this amount is due after 5 years
20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Receivables from third-parties
- ------------------------------
1995 1994
- -----------------------------------------------------------------------------
Due within one year
- -- State and public offices 11,129 3,738
- -- Personnel 364 479
- -- Debit balances with suppliers 10,671 1,692
- -- Other 2,912 3,353
- -----------------------------------------------------------------------------
25,076 9,262
Due after one year:
- -- State and public offices 23,314 20,912
- -- Personnel 22 6
- -- Other 3,187 1,463
- -----------------------------------------------------------------------------
26,523 22,381
- -----------------------------------------------------------------------------
Total 51,599 31,643
=============================================================================
Financial assets
- ----------------
1995 1994
- -----------------------------------------------------------------------------
Other investments 6,569 -
=============================================================================
The item relates to shares of Italian public companies purchased during the
year and valued at the lower of cost or average market prices for the month of
December 1995.
Loans receivable from third parties
- -----------------------------------
1995 1994
- -----------------------------------------------------------------------------
Due within one year 178,231 71,036
=============================================================================
They mainly relate to swap contracts on fixed-interest Italian and foreign
securities.
Cash on hand and at bank
- ------------------------
1995 1994
- -----------------------------------------------------------------------------
Bank and postal accounts 84,313 108,338
Cash on hand 198 301
- -----------------------------------------------------------------------------
84,511 108,639
=============================================================================
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
7. Prepaid expenses and accrued income
1995 1994
- -----------------------------------------------------------------------------
Prepaid expenses
Interest income 7,922 2,502
Other 117 486
- -----------------------------------------------------------------------------
8,039 2,988
Accrued income
Interest expense and commissions 97 190
Rental, hiring and maintenance charges 60 47
Insurance premiums 130 74
Other items 470 595
- -----------------------------------------------------------------------------
757 906
- -----------------------------------------------------------------------------
Total 8,796 3,894
=============================================================================
8. Net equity
1995 1994
- -----------------------------------------------------------------------------
Attributable to the Company
Share capital 22,092 22,092
Reserves 348,707 300,822
Net profit for the year 102,153 61,877
- -----------------------------------------------------------------------------
472,952 384,791
Attributable to minorities
Share capital and reserves 72,454 69,261
Net profit for the year 11,599 5,492
- -----------------------------------------------------------------------------
84,053 74,753
- -----------------------------------------------------------------------------
Total net equity 557,005 459,544
=============================================================================
The share capital of the Company, issued and fully paid, amounts to 22,092 and
is made up of 44,183,295 shares with a nominal value of five-hundred lire
each.
The reserves of the Company and Italian consolidated companies include the
following at December 31, 1995 with respect to which no deferred income taxes
have been provided for since their distribution is not expected:
- -- revaluation reserve of 58,801, net of 30,388 utilized for share capital
increases in prior years;
- -- investment grants of 71,018.
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
In addition, the following are included:
- -- investment grants of 1,891 subjected to income taxes at 56.25%;
- -- other reserves of 22,474 which, in the event of distribution, would be
taxed at an additional rate of 15% and 2,488 at an additional rate of
56.25%.
The reconciliation between the financial statements of the Company and the
consolidated financial statements with respect to net equity and profit for
the year follows:
Capital
and
Net profit reserves
for the of the Consolidation Net
year Group reserve equity
- ----------------------------------------------------------------------------
Financial statements of
the Company at
December 31, 1995 31,644 111,386 - 143,030
Net profit of other
consolidated companies,
net of minorities 113,281 - - 113,281
Consolidation adjustments:
- -- dividends recorded by
Group (51,503) - 51,503 -
- -- valuation of equity
investments 8,626 - 8,653 17,279
- -- difference between net
equity of consolidated
companies and relevant
net equity, net of
minorities - - 170,721 170,721
Other consolidation
adjustments 105 - 28,536 28,641
- ----------------------------------------------------------------------------
Consolidated financial
statements of the Company
at December 31, 1995 102,153 111,386 259,413 472,952
============================================================================
9. Risk and other provisions
1995 1994
- ----------------------------------------------------------------------------
Deferred compensation 308 204
Income taxes 34,281 33,460
Other 19,724 21,280
- ----------------------------------------------------------------------------
54,313 54,944
============================================================================
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
The provision for deferred compensation includes 177 with respect to agents'
leaving indemnities.
Income taxes relates primarily to deferred taxes provided with respect to the
elimination of accelerated depreciation. The provision also includes deferred
taxes on gains on disposals of fixed assets and on prior year income which
will be subject to taxation in future years as well as the presumed tax
charges on outstanding positions and items under litigation.
Other provisions reflect principally the provision for foreign exchange
fluctuations which is calculated in accordance with the net difference on
receivables and payables denominated in foreign currencies valued at year-end
exchange rates as well as provisions for reorganization costs and incentivated
resignations from employees.
10. Employees' termination indemnity
- ----------------------------------------------------------------------------
Balance at December 31, 1994 54,651
Charge for the year 9,713
Utilisation for indemnities paid (6,979)
- ----------------------------------------------------------------------------
Balance at December 31, 1995 57,385
============================================================================
The closing balance represents the amounts due to employees in accordance with
relevant legislation and labor contracts.
11. Payables
Bank overdrafts
- ---------------
Bank overdrafts are made up as follows:
1995 1994
- ----------------------------------------------------------------------------
Short-term 27,844 42,138
Long-term:
due within one year 18,421 24,304
due after one year 63,109 50,893
- ----------------------------------------------------------------------------
109,374 117,335
============================================================================
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Long-term loans relate to mortgage and other loans, whose changes during the
year were as follows:
- ----------------------------------------------------------------------------
Balance at December 31, 1994 75,197
New loans 30,611
Installments paid (24,278)
- ----------------------------------------------------------------------------
Balance at December 31, 1995 81,530
============================================================================
Detail of the long-term loans is as follows:
- ----------------------------------------------------------------------------
Maturity
- ----------------------------------------------------------------------------
Between
Within 1 and 5 After 5
1 year years years Total
- ----------------------------------------------------------------------------
BIMER-BANCA S.p.A. - 4,000 - 4,000
B.N.L. - Sezione di Credito
Industriale 666 766 - 1,432
Cassa di Risparmio delle Provincie
Lombarde 1 4 - 5
Centrobanca 500 - - 500
Credito Industriale Sardo 358 1,759 567 2,684
Istituto Mobiliare Italiano 9,592 24,777 6,662 41,031
Mediocredito Centrale 1,648 14,836 - 16,484
Mediocredito della Puglia 3,484 8,717 - 12,201
Mediocredito Toscano 1,639 - - 1,639
Mediocredito Trentino Alto Adige 264 657 81 1,002
SFIRS 269 283 - 552
- ----------------------------------------------------------------------------
18,421 55,799 7,310 81,530
============================================================================
Interest rates vary between 2.65% and 14.55%.
Mortgage loans are collateralized by mortgages on land and buildings,
privileges on plant and machinery and suretyships and endorsements given by
the company and other consolidated companies, while the loan of 16,484 from
Mediocredito Centrale of the Company is collateralized by a bank guarantee.
Due to other financial institutions
- -----------------------------------
1995 1994
- ----------------------------------------------------------------------------
Due within one year 1,101 13,604
Due after one year 30,296 17,094
- ----------------------------------------------------------------------------
31,397 30,698
============================================================================
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Amounts due after one year include a loan to the subsidiary Avirunion a.s.
(25,319) and are repayable within 5 years.
Advances
- --------
1995 1994
- ----------------------------------------------------------------------------
Due within one year 385 -
============================================================================
Advances related to deposits paid on preliminary contracts for the sale of
building premises.
Trade payables
- --------------
1995 1994
- ----------------------------------------------------------------------------
Due within one year 182,416 145,733
============================================================================
Notes payable
- -------------
1995 1994
- ----------------------------------------------------------------------------
Due within one year 703 703
Due after one year 40 743
- ----------------------------------------------------------------------------
743 1,446
============================================================================
Notes payable relate to principal and interest amounts in respect of loans
granted for the purchase of machinery in accordance with Law 170 of November
28, 1965; the amounts due are collateralized by the machinery acquired.
Notes due after one year fall due in 1997.
Due to associated companies
- ---------------------------
1995 1994
- ----------------------------------------------------------------------------
Nord Vetri S.p.A. - 186
Sicilvetro S.p.A. 25 17
- ----------------------------------------------------------------------------
25 203
============================================================================
They relate to commercial transactions due within one year.
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Due to fiscal authorities
- -------------------------
1995 1994
- ----------------------------------------------------------------------------
Income taxes 76,839 54,535
Tax on net equity 2,646 2,342
Withholding taxes 6,416 4,445
Value-added taxes 2,560 2,561
Other 8,854 4,428
- ----------------------------------------------------------------------------
97,315 68,311
============================================================================
Due to social security
- ----------------------
1995 1994
- ----------------------------------------------------------------------------
Due within one year 13,167 10,835
Due after one year 44 115
- ----------------------------------------------------------------------------
13,211 10,950
============================================================================
Amounts mainly relate to contributions matured at the end of the year and
payable to the relevant authorities within the following year.
Other payables
- --------------
1995 1994
- ----------------------------------------------------------------------------
Personnel 12,915 9,290
Directors and statutory auditors 631 580
Credit balances with customers 1,217 880
Other 1,305 1,009
- ----------------------------------------------------------------------------
16,068 11,759
============================================================================
Other payables due after one year, amounting to 537 at December 31, 1995
(1994: 443) relate mainly to guarantee deposits of tenants and interest
matured thereon.
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
12. Accrued expenses and deferred income
1995 1994
- ----------------------------------------------------------------------------
Accrued expenses
- -- holiday leave due to employees 3,411 3,291
- -- interest on loans 671 611
- -- insurance premiums 23 205
- -- other 624 1,274
- ----------------------------------------------------------------------------
4,729 5,381
Deferred income
- -- interest grants 52 106
- -- investment grants 5,157 5,413
- -- rental charges 12 22
- -- other 329 322
- ----------------------------------------------------------------------------
5,550 5,863
- ----------------------------------------------------------------------------
10,279 11,244
============================================================================
In accordance with art. 55 of Presidential Decree 917/86 investment grants
amounting to 5,157 will be credited in the profit and loss accounts over the
next 9 years, the first 8 of which are for an amount of 640 and the 9th for
37; deferred taxes at December 31, 1995 on these grants amount go 2,744.
13. Memorandum accounts
Guarantees given
- ----------------
1995 1994
- ----------------------------------------------------------------------------
Mortgages and privileges on fixed assets of
consolidated companies 83,787 78,070
Reservation of property, as per Law 1329/65
(Sabatini) on machinery of consolidated companies 743 1,446
- ----------------------------------------------------------------------------
84,530 79,516
============================================================================
The amount of the guarantees corresponds to the amounts due on secured loans
still outstanding at year-end. For amounts in foreign currency the adjustment
to year end rates has been taken into consideration.
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Other memorandum, commitments and contingency accounts
- ------------------------------------------------------
1995 1994
- ----------------------------------------------------------------------------
Leasing installments 101 95
Commitments 3,800 3,800
- ----------------------------------------------------------------------------
3,901 3,895
============================================================================
Commitments are with respect of the obligation of the Company to repurchase,
on July 30, 1998, 4,552 shares of Avirunion a.s. (representing 7% of the share
capital) at the agreed-upon base price of 3,800; the commitment is secured by
a bank guarantee.
14. Profit and loss account
1995 1994
- ----------------------------------------------------------------------------
Value of production 1,163,237 1,018,193
============================================================================
The following schedule shows the detail of revenues divided by category and
geographical area:
1995
Geographical Area
------------------------------- 1994
Italy Abroad Total Total
- ----------------------------------------------------------------------------
Revenues from sales:
- -- glass containers 671,097 264,910 936,007 827,037
- -- glass household products 14,516 27,395 41,911 32,926
- -- glass insulators 9,232 16,407 25,639 16,844
- -- molds 613 - 613 467
- -- raw materials and supplies 122,687 14,905 137,592 106,696
- ----------------------------------------------------------------------------
818,145 323,617 1,141,762 983,970
Services rendered 4,135 4,977 9,112 7,164
- ----------------------------------------------------------------------------
822,280 328,594 1,150,874 991,134
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Other revenues are made up as follows:
1995 1994
- ----------------------------------------------------------------------------
Revenues from properties 1,252 1,218
Gains on disposal of fixed assets 888 2,683
Indemnities received on damaged goods 209 189
Expenses recovered 4,705 1,172
Other 1,398 4,272*
- ----------------------------------------------------------------------------
8,452 9,534
Contributions on operating expenses 144 702
- ----------------------------------------------------------------------------
8,596 10,236
============================================================================
*The amount includes 3,536 of valuation adjustments to financial assets.
1995 1994
- ----------------------------------------------------------------------------
Cost of production 975,606 864,449
============================================================================
Costs for the purchase of raw materials, supplies and goods for resale are as
follows:
1995 1994
- ----------------------------------------------------------------------------
Raw materials 181,490 156,372
Suppliers 214,373 160,717
Goods for resale 1,781 6,434
- ----------------------------------------------------------------------------
397,644 323,523
============================================================================
Costs for services received are as follows:
1995 1994
- ----------------------------------------------------------------------------
Purchased services 32,666 33,778
Energy 136,059 119,445
Other manufacturing services 31,964 27,024
Commercial services 75,751 63,945
Administrative services 8,526 8,466
- ----------------------------------------------------------------------------
284,966 252,658
============================================================================
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Rental and leasing charges comprise:
1995 1994
- ----------------------------------------------------------------------------
Rentals 3,037 2,979
Leasing installments 54 556
- ----------------------------------------------------------------------------
3,091 3,535
============================================================================
Personnel costs are as follows:
1995 1994
- ----------------------------------------------------------------------------
Salaries and benefits 192,844 190,009
============================================================================
The amount includes wages and salaries, the year's charge with respect to
employees termination indemnities, accrued holiday leave, social security
contributions arising from the application of labor contracts and current
legislation as well as other costs relating to canteen services and public
utility charges.
The average number of employees, divided by category, of the Company and the
consolidated companies is as follows:
1995 1994
- ----------------------------------------------------------------------------
Managers 48 49
White collar employees 757 774
Intermediates 277 281
Blue collar workers 2,883 2,966
- ----------------------------------------------------------------------------
3,965 4,070
of which on temporary lay-off schemes 63 109
============================================================================
Depreciation and write-downs are as follows:
1995 1994
- ----------------------------------------------------------------------------
Amortization of intangible assets 2,682 3,731
Depreciation of tangible assets 69,734 65,060
Other write-downs of intangible assets 132 -
Other write-downs of tangible assets - 700
Charge to the provision for doubtful accounts 3,249 5,477
- ----------------------------------------------------------------------------
75,797 74,968
============================================================================
The charge to the provision for doubtful accounts was calculated to adjust the
nominal value of receivables to their net realizable value.
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
1995 1994
- ----------------------------------------------------------------------------
Provision for risks 6,580 1,215
============================================================================
The charge relates mainly to the provision for exchange fluctuations (in both
years) and in 1995 it also includes reorganization costs.
1995 1994
- ----------------------------------------------------------------------------
Other provisions 677 303
============================================================================
The charge includes 630 for inventory obsolescence and 47 for agents'
termination indemnities.
Other operating costs are as follows:
1995 1994
- ----------------------------------------------------------------------------
Tax on net equity 2,383 2,342
Municipal tax on building premises 1,100 1,222
Indirect duties and taxes 2,253 1,858
Membership fees 1,432 1,243
Emoluments to Directors and Statutory Auditors 3,335 3,280
Losses on disposal of fixed assets 2,258 715
Other 7,357 6,983
- ----------------------------------------------------------------------------
20,118 17,643
============================================================================
15. Financial income and expense
Financial income and expense is composed of the following:
1995 1994
- ----------------------------------------------------------------------------
Income from investments 116 -
Other financial income 26,158 11,518
Interest and other financial expense (22,534) (21,659)
- ----------------------------------------------------------------------------
3,740 (10,141)
============================================================================
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
They are made up as follows:
1995 1994
- ----------------------------------------------------------------------------
Income from investments
-- dividends from other companies 115 -
(They relate to dividends received from Italian
public companies.)
============================================================================
Other financial income
-- interest on fixed-interest securities and
resale agreements (long-term) 116 65
-- interest on fixed-interest securities and
resale agreements (short-term) 11,986 2,426
-- interest on commercial paper transactions 870 -
-- interest grants 462 410
-- other interest income 7,351 4,793
-- exchange gains 5,373 3,824
- ----------------------------------------------------------------------------
26,158 11,518
============================================================================
1995 1994
- ----------------------------------------------------------------------------
Interest and other financial expense
-- interest on mortgage loans 6,690 6,111
-- interest on amount due to banks 527 5,616
-- other interest expense 4,298 2,017
-- discounts and other financial expense 6,394 4,254
-- exchange losses 4,625 3,661
- ----------------------------------------------------------------------------
22,534 21,659
============================================================================
No interest charges were capitalized during the year.
16. Adjustment to the value of financial assets
1995 1994
- ----------------------------------------------------------------------------
Revaluation of investments 8,645 3,551
Write-down of investments (961) (15)
- ----------------------------------------------------------------------------
7,684 3,536*
============================================================================
*In the 1994 financial statements, the amount was included in other income.
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
The balance includes the Group's share of the year's results of companies
valued under the equity method; for 1995, it also includes a write-down of 941
on listed investments included in current assets on the basis of the average
prices for the month of December 1995.
17. Extraordinary income and expense
They are as follows:
1995 1994
- ----------------------------------------------------------------------------
Extraordinary income 14,962 7,644
Extraordinary expense (6,782) (9,120)
- ----------------------------------------------------------------------------
8,180 (1,476)
============================================================================
Extraordinary income for 1995 consists of:
1995
- ----------------------------------------------------------------------------
Gains on disposals of fixed assets 1,361
Utilization of charges recorded in prior years 1,130
1/10th of investment grants 639
Other extraordinary income and prior year income:
-- indemnities received from suppliers of
machinery 5,306
-- indemnities received for flood damages in
November 94 2,100
-- other 4,426 11,832
- ----------------------------------------------------------------------------
14,962
============================================================================
Extraordinary expense for 1995 is comprised of:
1995
- ----------------------------------------------------------------------------
Losses on disposals of fixed assets 1,647
Prior year income taxes 1,123
Incentives paid to leaving employees and related contributions 62
Other extraordinary expenses and prior year expenses 3,950
- ----------------------------------------------------------------------------
6,782
============================================================================
18. Income taxes
1995 1994
- ----------------------------------------------------------------------------
Current and deferred taxes 93,483 78,294
============================================================================
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
They relate to the income taxes of each consolidated company, mainly deferred
taxes related to the elimination of accelerated depreciation.
19. Emoluments to directors and statutory auditors
Emoluments due to Directors and Statutory Auditors of the Company in respect
of similar functions carried out in other consolidated companies are as
follows:
-- 1,901 for directors
-- 46 for statutory auditors
20. Differences between Italian GAAP and U.S. GAAP
The Group's accounting policies differ from accounting principles generally
accepted in the United States (hereafter "U.S. GAAP"). Differences which have
an effect on net profit and net equity are described below:
A. Revaluations of property -- Certain buildings were revalued to amounts in
excess of historical cost. These revaluations, which were either
authorized or required by Italian law, are permissible under Italian
accounting principles.
The total increase in tangible assets resulting from these revaluations
was credited to net equity. At December 31, 1995 net equities of the
consolidated companies included approximately 85,800 resulting from these
revaluations. Deferred tax liabilities on the taxable portion of such
revaluation reserve have not been provided. The amount of such
liabilities, not required to be accounted for according to SFAS 109 as
they relate to years prior to 1992, is approximately 43,000. Assets
revalued under Italian accounting principles are depreciated over their
remaining useful lives based on their revalued basis. U.S. GAAP does not
permit the revaluation of such assets. Accordingly, the increase in net
equity and the related increase in depreciation expense occurring as a
result of such revaluations have been reversed for U.S. GAAP purposes.
B. Depreciation on land -- Included in this adjustment is the reversal of
depreciation on land which is not permitted under U.S. GAAP.
C. Accounting for intangible assets and deferred charges -- The Group has
capitalized and deferred various costs which should be expensed under U.S.
GAAP. At December 31, 1995 these costs include research and development,
advertising expenses and certain other deferred charges.
D. Accounting for balances in foreign currencies -- The Group has certain
receivables and payables denominated in foreign currencies which are
recorded in the financial statements at the exchange rate prevailing at
the date of the transaction. Under U.S. GAAP, these balances are adjusted
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
at each balance sheet date using rates prevailing on the respective date
and both unrealized gains and losses are recognized. At each of the
balance sheet dates, the Group has recorded an adjustment only if an
unrealized loss resulted. Accordingly, the accompanying reconciliation
includes adjustments to recognise the unrealized gains.
E. Accounting for Government Grants -- The Group has received a number of
government grants for primarily investments in tangible assets. The Group
has accounted for these grants as either a direct credit to net equity or
as deferred revenue recognised over five to ten years based on the
prevailing Italian regulations and accounting principles at the time of
the grant. Under U.S. GAAP, all such grants would be deferred and
recognized through income over the estimated useful life of the related
assets.
F. Investments in Equity Securities -- During 1995, the Group invested in the
equity securities of several Italian publicly traded companies. At
December 31, 1995, the Group has adjusted the carrying value of these
investments to the current market value with the resulting charge or
credit being recorded in the income statement. Under SFAS 115, these
investments would be considered available-for-sale securities and the
unrealized gains and losses would be recorded as a separate component of
net equity, net of the related deferred taxes.
G. Accounting for income taxes -- The Group has recorded deferred taxes
following the accounting principles in those countries in which it
operates. The deferred taxes recorded substantially all relate to
differences in the basis of tangible assets for income tax and financial
reporting purposes. The accompanying reconciliations include the effect
of establishing deferred tax assets and liabilities in accordance with
SFAS 109 and the related change in the provision for income taxes. These
changes relate primarily to: (1) establishing deferred tax assets for
provisions for inventory, accounts receivable and plant shutdowns which
are not yet deductible for tax purposes; (2) establishing deferred tax
liabilities for government grants received after 1992 and undistributed
earnings of domestic subsidiaries after 1992 which are not taxable until
distributed; and (3) establishing deferred tax assets and liabilities on
the U.S. GAAP adjustments.
H. Cash Flow Statement -- The cash flow statement presented by the Group
differs from that of a statement of cash flows under U.S. GAAP primarily
in the definition of cash, classification of cash flows and gross versus
net reporting. Italian GAAP considers current financial debtors and
current financial creditors as a component of cash, while U.S. GAAP
classifies these items as operating activities. In addition, Italian GAAP
presents dividends paid and other movements as a separate cash flows,
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
while U.S. GAAP provides for dividends paid to be presented as financing
activities and other movements as either operating, investing or
financing, depending on the type of cash flow.
The following table reconciles net equity of December 31, 1995 between Italian
GAAP and U.S. GAAP:
Net equity as reported in the Italian consolidated financial
statements 472,952
A. Elimination of revaluation of property, net of related
accumulated depreciation (31,441)
B. Reversal of accumulated depreciation on land 2,846
C. Write-off of certain intangible assets and deferred charges,
net of accumulated amortisation (341)
D. Unrealized foreign exchange gains 1,737
E. Deferral of the recognition of government grants
(unamortized portion) (6,554)
F. Recognition of deferred taxes under FAS 109
-- net deferred income taxes on provisions (for inventory,
accounts receivable, plant shutdowns, etc.) which
are not yet deductible for tax purposes 7,258
-- deferred tax liabilities on the undistributed earnings of
domestic subsidiaries and Government grants received
after 1992 (4,791)
-- net deferred income taxes on U.S. GAAP adjustments 17,957
-------
Net equity in accordance with U.S. GAAP 459,623
=======
The following table reconciles net profit for the year ended December 31, 1995
between Italian GAAP and U.S. GAAP.
Net income as reported in the Italian consolidated
financial statements 102,153
A. Reversal of depreciation related to revaluation of property 2,302
B. Reversal of depreciation of land 566
C. Write-off of certain intangible assets and deferred charges,
net of amortisation expense 180
D. Unrealized foreign exchange gains 363
E. Recognition of government grants 3,023
F. Reversal of amounts recognised for the change in fair market
value of investments in equity securities 941
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
G. Recognition of deferred taxes under FAS 109:
-- net deferred income taxes on provision (for inventory,
accounts receivable, plant shutdowns, etc.) which are not
yet deductible for tax purposes 342
-- deferred tax liabilities on undistributed earnings of
domestic subsidiaries and government grants received
after 1992 (118)
-- net deferred income taxes on U.S. GAAP adjustments (3,923)
-------
Net profit in accordance with U.S. GAAP 105,829
=======
21. Subsequent events
At the beginning of April 1996, the Board of Directors approved the merger in
the Company of the controlled entities Adige Vetro S.r.l., Avir Commerciale
S.r.l., Aziende Ventrarie Italiane Ricciardi - A.V.I.R. S.p.A., Beninvest
S.r.l., Borma S.p.A., Compagnia Gestione Vetrerie - Co. Ge. Ve. S.p.A., I.A.G.
- - Holding S.r.l., Immobiliare Agricola Industriale S.r.l., Sicra S.r.l.,
Vetroceramica Turritana S.p.A., Vetropiave S.p.A., Vetrosilex S.p.A., and
Vetro Umbria S.r.l. A similar decision was reached by the Administrative
Bodies of the incorporated companies. This operation aims at simplifying the
Group company structure. The merger, that will take effect, for fiscal
purposes, from January 1, 1996, will result in an increase in capital to the
Company, as, to date, all the companies to be incorporated are 100% owned
either directly or indirectly.
At the end of April 1996, the controlled entity Borma S.p.A. disposed of land
and factories of the ex industrial establishment of Livorno, realizing a
capital gain of approximately 8,000.
In April 1996, the "Autorita Garante della Concorrensa e del Mercato" (Anti-
trust Commission) began an investigation on the principal producers of glass,
to establish whether an agreement had been reached to uniform prices to
customers prohibited by Art. 2 of Law 287/90, at the time of renewing supply
contracts during 1996, for the supply and repurchase of packaging (pallets and
buffers). In relation to the above, Avir Commerciale S.r.l. that operates as
a sales agent for the glass industry companies of the Group, was advised of
the opening of an investigation under Art. 14 of the cited Law 287/90. Based
on information that became available during 1996, and in light of the wider
inquiries which ensued, the Company as of March 3, 1997 understands that a
range of exposure of between 1% and 10% of one year's sales revenues could be
assessed under pertinent law. Based on the fact that such assessments have
been rare and that none have exceeded 4,200, the Company has decided to
provide 6,500 (1% of 1996 revenues) for this exposure as of December 31, 1996.
While management believes that no assessment is appropriate, the ultimate
resolution of this matter is not expected to exceed the amount provided.
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
22. Expected management results
During the first few months of 1996, the Italian industrial companies of the
Group have recorded a drop in sales of containers compared to the same period
in 1995. In relation to the internal market, this is due to a decrease in
consumption and also the fact that large stocks have been accumulated by
clients due to previous promotions. The reduction may be due to the
appreciation in the lira with respect to prior year. Considering the
uncertain situation ahead, it is not possible to formulate a reliable forecast
that sales will reach the level of the prior year. Also the reduction could
be partly due to increases in sales prices. As a result of the planned
merger, the income components of the entities will flow into the economic
management of the Company and given the dividends earned in the first semester
of 1996, it is expected that the year will close with a positive result.
39
CONDENSED CONSOLIDATED BALANCE SHEETS Avir Finanziaria S.p.A.
(unaudited)
Millions of Lira June 30, December 31, June 30,
1996 1995 1995
- ----------------------------------------------------------------------------
Assets
Fixed Assets
Intangible assets 4,123 4,969 6,378
Tangible assets 373,838 364,526 358,069
Financial assets 35,871 35,723 30,115
- ----------------------------------------------------------------------------
Total fixed assets 412,832 405,218 394,562
Current assets
Inventories 172,735 135,963 138,145
Receivables:
from customers 286,674 259,566 306,735
from third parties 52,122 60,395 47,358
- ----------------------------------------------------------------------------
Total receivables 338,796 319,961 354,093
Loans receivable and other
investments 68,278 184,800 121,268
Cash on hand and at bank 102,753 84,511 71,500
- ----------------------------------------------------------------------------
Total current assets 682,562 725,235 685,006
- ----------------------------------------------------------------------------
Total assets 1,095,394 1,130,453 1,079,568
============================================================================
Liabilities and Net Equity
Net equity
Net equity attributable to the
Group 502,378 472,952 421,637
Net equity attributable to
minorities 80,594 84,053 82,025
- ----------------------------------------------------------------------------
Total Consolidated Net Equity 582,972 557,005 503,662
Risk and other provisions 64,270 54,313 59,409
Employees' termination indemnity 58,617 57,385 54,210
Payables
Bank overdrafts 92,047 109,374 126,865
Due to other financial institutions 36,622 31,397 27,608
Trade payables 184,493 183,569 190,136
Other liabilities 76,373 137,410 117,678
- ----------------------------------------------------------------------------
Total current liabilities 512,422 573,448 575,906
- ----------------------------------------------------------------------------
Total net equity and liabilities 1,095,394 1,130,453 1,079,568
============================================================================
1
CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNTS Avir Finanziaria S.p.A.
(unaudited)
Millions of Lire
Six months ended June 30, 1996 1995
- -----------------------------------------------------------------------------
Value of production
Revenues from sales 531,464 577,064
Variation in inventories of work-in-
progress, semi-finished and finished
products 27,492 (3,926)
Capitalized labor 5,323 3,735
Contribution on operating expenses
revenues 69 9
- -----------------------------------------------------------------------------
Total 564,348 576,882
Cost of production
Raw materials, supplies and services (328,918) (333,779)
Personnel (98,622) (96,162)
Depreciation and amortization (36,979) (35,675)
Other write-downs and provisions (6,904) (6,573)
Other - net (5,447) (6,577)
- -----------------------------------------------------------------------------
Total (476,870) (478,766)
- -----------------------------------------------------------------------------
Difference between value and cost of production 87,478 98,116
Financial income and expense - net 3,653 696
Adjustment to the value of financial assets 3,479 2,936
Extraordinary income and expense - net 10,953 2,633
- -----------------------------------------------------------------------------
Profit before income taxes 105,563 104,381
Income taxes (48,665) (50,218)
- -----------------------------------------------------------------------------
Net profit for the year 56,898 54,163
of which:
-- attributable to the Group 49,342 47,227
-- attributable to minorities 7,556 6,936
2
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS Avir Finanziaria S.p.A.
(unaudited)
Millions of Lire
Six Months ended June 30, 1996 1995
- ---------------------------------------------------------------------------
Net Cash - beginning 241,467 137,537
Cash flows from operating activities
Net income - Group 49,342 47,227
Net income - External 7,556 6,936
Depreciation 36,979 35,675
Reversal of Group shares of the net result of
companies valued at net equity (3,788) (3,184)
(Gain)/Loss from disposal of assets (9,888) 93
(Revaluation)/Devaluation of assets (400) -
Movement in working capital (115,720) (10,076)
Net movement in severance indemnity 1,232 (441)
Net movement in allowance for risks and charges 9,957 4,465
- ---------------------------------------------------------------------------
(24,730) 80,695
Cash flows from investing activities
Investments in assets:
-- intangible (467) (329)
-- fixed (58,745) (58,663)
-- financial - (8,637)
Sales proceeds on disposal of fixed assets 16,717 9,666
- ---------------------------------------------------------------------------
(42,495) (57,963)
Cash flows from financing activities
-- Additional borrowings 12,450 30,610
-- Capital contributions 1,553 -
-- Loan repayments (9,209) (16,957)
- ---------------------------------------------------------------------------
4,794 13,653
Dividends paid (17,673) (13,255)
Other movements that do not form part of cash flows
from financing activities
Movements in reserves (5,419) 9,500
Movements in shares of net equity of third parties (6,071) (3,106)
Conversion differences 8,657 (9,218)
- ---------------------------------------------------------------------------
(2,833) (2,824)
- ---------------------------------------------------------------------------
Cash flows for the period (82,937) 20,306
- ---------------------------------------------------------------------------
Net Cash - final 158,530 157,843
===========================================================================
3
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS Avir Finanziaria S.p.A.
(unaudited)
Millions of Lire
Six Months ended June 30, 1996 1995
- ---------------------------------------------------------------------------
Net cash, at end of period, is as follows:
- -- Bank deposits and liquid funds 102,753 71,500
- -- Current financial debtors 68,278 121,268
- -- Current financial creditors (12,501) (34,925)
- ---------------------------------------------------------------------------
158,530 157,843
===========================================================================
4
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
June 30, 1996 and 1995
- ------------------------------------------------------------------------------
Note 1 - Basis of Presentation
The Condensed Consolidated Financial Statements presented herein are unaudited
but, in the opinion of management, reflect all adjustments necessary to
present fairly such information for the periods and at the dates indicated.
The following condensed unaudited financial statements do not contain all
information and footnotes normally contained in annual consolidated financial
statements; accordingly, they should be read in conjunction with the
Consolidated Financial Statements and notes thereto included elsewhere herein.
Note 2 -- Differences between Italian GAAP and U.S. GAAP
The Group's accounting policies differ from accounting principles generally
accepted in the United States (hereafter "U.S. GAAP"). Differences which have
an effect on net profit and net equity are described below:
A. Revaluations of property -- Certain buildings were revalued to amounts in
excess of historical cost. These revaluations, which were either
authorized or required by Italian law, are permissible under Italian
accounting principles.
The total increase in tangible assets resulting from these revaluations
was credited to net equity. At June 30, 1996 net equities of the
consolidated companies included approximately 85,800 resulting from these
revaluations. Deferred tax liabilities on the taxable portion of such
revaluation reserve have not been provided. The amount of such
liabilities, not required to be accounted for according to SFAS 109 as
they relate to years prior to 1992, is approximately 43,000. Assets
revalued under Italian accounting principles are depreciated over their
remaining useful lives based on their revalued basis. U.S. GAAP does not
permit the revaluation of such assets. Accordingly, the increase in net
equity and the related increase in depreciation expense occurring as a
result of such revaluations have been reversed for U.S. GAAP purposes.
B. Depreciation on land -- Included in this adjustment is the reversal of
depreciation on land which is not permitted under U.S. GAAP.
C. Accounting for intangible assets and deferred charges -- The Group has
capitalized and deferred various costs which should be expensed under U.S.
GAAP. At June 30, 1996 these costs include research and development,
advertising expenses and certain other deferred charges.
D. Accounting for balances in foreign currencies -- The Group has certain
receivables and payables denominated in foreign currencies which are
recorded in the financial statements at the exchange rate prevailing at
the date of the transaction. Under U.S. GAAP, these balances are adjusted
at each balance sheet date using rates prevailing on the respective date
and both unrealized gains and losses are recognized. At each of the
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
June 30, 1996 and 1995
- -----------------------------------------------------------------------------
balance sheet dates, the Group has recorded an adjustment only if an
unrealized loss resulted. Accordingly, the accompanying reconciliation
includes adjustments to recognise the unrealized gains.
E. Accounting for Government Grants -- The Group has received a number of
government grants for primarily investments in tangible assets. The Group
has accounted for these grants as either a direct credit to net equity or
as deferred revenue recognised over five to ten years based on the
prevailing Italian regulations and accounting principles at the time of
the grant. Under U.S. GAAP, all such grants would be deferred and
recognized through income over the estimated useful life of the related
assets.
F. Investments in Equity Securities -- During 1995, the Group invested in the
equity securities of several Italian publicly traded companies. At June
30, 1996, the Group has adjusted the carrying value of these investments
to the current market value with the resulting charge or credit being
recorded in the income statement. Under SFAS 115, these investments would
be considered available-for-sale securities and the unrealized gains and
losses would be recorded as a separate component of net equity, net of the
related deferred taxes.
G. Accounting for income taxes -- The Group has recorded deferred taxes
following the accounting principles in those countries in which it
operates. The deferred taxes recorded substantially all relate to
differences in the basis of tangible assets for income tax and financial
reporting purposes. The accompanying reconciliations include the effect
of establishing deferred tax assets and liabilities in accordance with
SFAS 109 and the related change in the provision for income taxes. These
changes relate primarily to: (1) establishing deferred tax assets for
provisions for inventory, accounts receivable and plant shutdowns which
are not yet deductible for tax purposes; (2) establishing deferred tax
liabilities for government grants received after 1992 and undistributed
earnings of domestic subsidiaries after 1992 which are not taxable until
distributed; and (3) establishing deferred tax assets and liabilities on
the U.S. GAAP adjustments.
H. Cash Flow Statement -- The cash flow statement presented by the Group
differs from that of a statement of cash flows under U.S. GAAP primarily
in the definition of cash, classification of cash flows and gross versus
net reporting. Italian GAAP considers current financial debtors and
current financial creditors as a component of cash, while U.S. GAAP
classifies these items as operating activities. In addition, Italian GAAP
presents dividends paid and other movements as a separate cash flows,
while U.S. GAAP provides for dividends paid to be presented as financing
activities and other movements as either operating, investing or
financing, depending on the type of cash flow.
6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
June 30, 1996 and 1995
- -----------------------------------------------------------------------------
The following table reconciles net equity of June 30, 1996 between Italian
GAAP and U.S. GAAP:
Net equity as reported in the Italian consolidated financial
statements 502,378
A. Elimination of revaluation of property, net of related
accumulated depreciation (29,984)
B. Reversal of accumulated depreciation on land 2,960
C. Write-off of certain intangible assets and deferred charges,
net of accumulated amortisation (251)
D. Unrealized foreign exchange gains 2,730
E. Deferral of the recognition of government grants
(unamortized portion) (3,971)
F. Recognition of deferred taxes under FAS 109
-- net deferred income taxes on provisions (for inventory,
accounts receivable, plant shutdowns, etc.) which
are not yet deductible for tax purposes 7,216
-- deferred tax liabilities on the undistributed earnings of
domestic subsidiaries and Government grants received
after 1992 (5,516)
-- net deferred income taxes on U.S. GAAP adjustments 15,171
-------
Net equity in accordance with U.S. GAAP 490,733
=======
The following table reconciles net profit for the six months ended June 30,
1996 between Italian GAAP and U.S. GAAP.
Net income as reported in the Italian consolidated
financial statements 49,342
A. Reversal of depreciation related to revaluation of property 1,457
B. Reversal of depreciation of land 114
C. Write-off of certain intangible assets and deferred charges,
net of amortisation expense 90
D. Unrealized foreign exchange gains 993
E. Recognition of government grants 2,583
F. Reversal of amounts recognised for the change in fair market
value of investments in equity securities (94)
7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
June 30, 1996 and 1995
- -----------------------------------------------------------------------------
G. Recognition of deferred taxes under FAS 109:
-- net deferred income taxes on provision (for inventory,
accounts receivable, plant shutdowns, etc.) which are not
yet deductible for tax purposes (42)
-- deferred tax liabilities on undistributed earnings of
domestic subsidiaries and government grants received
after 1992 (726)
-- net deferred income taxes on U.S. GAAP adjustments (2,736)
------
Net profit in accordance with U.S. GAAP 50,981
======
8
Item 7(b) PRO FORMA FINANCIAL STATEMENTS
The following pro forma condensed consolidated balance sheet and pro forma
condensed consolidated statements of operations depict the effects of the
acquisition of 100% of Avir Finanziaria S.p.A. ("AVIR") and the related
financing. For purposes of the pro forma condensed consolidated balance
sheet, the transaction is assumed to have occurred on June 30, 1996, whereas
for purposes of the pro forma condensed statements of operations, the transac-
tion is assumed to have occurred on January 1, 1995.
The pro forma financial statements do not purport to represent what Owens-
Illinois, Inc.'s ("Company") financial position or results of operations would
actually have been if all of the above transactions had actually occurred on
the dates indicated, or to project the Company's financial position or results
of operations for any future period or date.
Acquisition of AVIR
- -------------------
On December 16, 1996, the Company announced that it completed a definitive
agreement to purchase a controlling interest of approximately 76% in AVIR, the
largest manufacturer of glass containers in Italy. AVIR is based in Milan,
Italy and its shares are traded on the Milan Stock Exchange. Approximately
21% of the shares are publicly held, with the remaining shares controlled by
Dr. Natale Maderna, AVIR chairman, and members of the Maderna and Ricciardi
families. On February 3, 1997, the Company completed the acquisition of a 79%
controlling interest. In addition to acquiring this controlling interest, the
Company will also initiate a tender offer for the 21% of the shares of AVIR
that are publicly held. Total consideration for 100% of the AVIR shares is
expected to be approximately $580 million.
The acquisition is being accounted for under the purchase method of account-
ing. The total purchase cost of approximately $580 million will be allocated
to the tangible and identifiable intangible assets and liabilities of AVIR
based upon their respective fair values. Such allocations will be based upon
valuation and studies that have not been finalized. Accordingly, the alloca-
tion of the purchase cost included in the accompanying pro forma condensed
consolidated balance sheet is preliminary and, among other things, no alloca-
tion has been made to property, plant, and equipment. The unallocated excess
of purchase cost over net assets acquired is being amortized over 20 years in
the pro forma condensed consolidated statements of operations. Such period is
an estimate of the average life of the tangible and intangible assets to which
the excess purchase cost will be assigned.
1
Owens-Illinois, Inc.
Pro Forma Condensed Consolidated Balance Sheet
As of June 30, 1996
(Millions of Dollars)
AVIR
Consolidation Purchase
of AVIR Accounting Adjusted
Historical and Financing Company
Historical Amounts (1) Adjustments (2) Pro Forma
---------- ------------- --------------- ---------
Assets
Current assets:
Cash and short
term investments $ 120.4 $111.4 $ 231.8
Receivables, net 469.1 180.8 649.9
Inventories 489.3 112.6 $ 15.6 617.5
Prepaid expenses 87.0 16.3 103.3
-------- ------ ------- --------
Total current
assets 1,165.8 421.1 15.6 1,602.5
Investments and other
assets 798.3 48.1 846.4
Prepaid pension 638.8 638.8
Excess of purchase cost
over net assets
acquired 1,003.3 1.0 247.9 1,252.2
Property, plant, and
equipment, net 1,868.3 225.2 2,093.5
-------- ------ ------- --------
Total assets $5,474.5 $695.4 $ 263.5 $6,433.4
======== ====== ======= ========
Liabilities and
Share owners' Equity
Current liabilities:
Short-term loans and
long-term debt due
within one year $ 103.4 $ 21.8 $ 125.2
Accounts payable
and other
liabilities 746.3 179.9 926.2
-------- ------ --------
Total current
liabilities 849.7 201.7 1,051.4
Long-term debt 2,792.4 62.1 $ 576.4 3,430.9
Deferred taxes and
other liabilities 1,017.3 61.0 7.0 1,085.3
Minority share owners'
interests 183.4 50.7 234.1
Share owners' equity 631.7 319.9 (319.9) 631.7
-------- ------ ------- --------
Total liabilities
and share owners'
equity $5,474.5 $695.4 $ 263.5 $6,433.4
======== ====== ======= ========
See accompanying Notes to Pro Forma Condensed Consolidated Balance Sheet.
2
NOTES TO PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET
(1) AVIR Historical Amounts -- Represents the historical carrying value of
AVIR's assets and liabilities prior to purchase accounting adjustments.
The translation into U. S. dollars has been made using the June 30, 1996
rate of 1,534.25 Italian Lire per U. S. dollar.
(2) Acquisition and Financing Adjustments -- Includes adjustments of the
carrying values of AVIR's assets and liabilities to eliminate historical
share owners' equity and revalue inventories accounted for on the LIFO
method. Additionally, the column reflects the incremental debt assumed
incurred to finance the acquisition.
3
Owens-Illinois, Inc.
Pro Forma Condensed Consolidated Statement of Operations
Six Months Ended June 30, 1996
(Millions of Dollars, except per share amounts)
AVIR
AVIR Purchase
Historical Accounting Adjusted
Results of and Financing Company
Historical Operations (1) Adjustments (2) Pro Forma
---------- -------------- --------------- ---------
Revenues:
Net Sales $1,869.5 $299.4 $2,168.9
Other 63.0 25.4 88.4
-------- ------ --------
1,932.5 324.8 2,257.3
Costs and expenses:
Manufacturing,
shipping, and
delivery 1,446.4 196.6 1,643.0
Research, engineering,
selling, and
administrative 120.3 49.4 169.7
Interest 148.3 5.7 $ 18.2 172.2
Other 30.2 1.8 6.2 38.2
-------- ------ ------ --------
1,745.2 253.5 24.4 2,023.1
-------- ------ ------ --------
Earnings (loss) before
income taxes and
minority share owners'
interests 187.3 71.3 (24.4) 234.2
Provision (credit) for
income taxes 65.2 33.6 (7.0) 91.8
Minority share owners'
interests 15.9 5.0 20.9
-------- ------ ------ --------
Net earnings (loss) $ 106.2 $ 32.7 $(17.4) $ 121.5
======== ====== ====== ========
Net earnings per share
of common stock $ 0.88 $ 1.01
======== ========
Average shares
outstanding
(thousands) 120,172 120,172
======= =======
See accompanying Notes to Pro Forma
Condensed Consolidated Statement of Operations.
4
Owens-Illinois, Inc.
Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 1995
(Millions of Dollars, except per share amounts)
AVIR
AVIR Purchase
Historical Accounting Adjusted
Results of and Financing Company
Historical Operations (1) Adjustments (2) Pro Forma
---------- -------------- --------------- ---------
Revenues:
Net Sales $3,763.2 $622.6 $4,385.8
Other 117.8 36.2 154.0
-------- ------ --------
3,881.0 658.8 4,539.8
Costs and expenses:
Manufacturing,
shipping, and
delivery 2,948.5 411.1 3,359.6
Research, engineering,
selling, and
administrative 242.6 96.7 339.3
Interest 299.6 13.8 $ 39.3 352.7
Other 80.3 4.9 12.4 97.6
-------- ------ ------ --------
3,571.0 526.5 51.7 4,149.2
-------- ------ ------ --------
Earnings (loss) before
income taxes and
minority share owners'
interests 310.0 132.3 (51.7) 390.6
Provision (credit) for
income taxes 100.8 60.1 (15.1) 145.8
Minority share owners'
interests 40.1 7.2 47.3
-------- ------ ------ --------
Net earnings (loss) $ 169.1 $ 65.0 $(36.6) $ 197.5
======== ====== ====== ========
Net earnings per share
of common stock $ 1.40 $ 1.64
======== ========
Average shares
outstanding
(thousands) 119,348 119,348
======= =======
See accompanying Notes to Pro Forma
Condensed Consolidated Statement of Operations.
5
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(1) Consolidation of AVIR Historical Results -- Reflects the actual results
of operations for AVIR based on historical costs for the six months
ended June 30, 1996, and year ended December 31, 1995 prior to purchase
accounting adjustments and the effects of the related financing. The
translation into U. S. dollars has been made using the average rate for
the six months ended June 30, 1996 and the year ended December 31, 1995
of 1,557.51 and 1,627.41 Italian Lire, respectively, per U. S. dollar.
Financing for the acquisition has been assumed to be provided by
additional borrowings under the Company's Bank Credit Agreement which
was amended in November 1996. Interest is based on average rates in
effect under the Company's Bank Credit Agreement during the periods. In
the event any portion of the acquisition is financed or refinanced with
borrowings from sources other than under the Company's Bank Credit
Agreement, the incremental interest cost may be higher than that shown
in the pro forma condensed consolidated statements of operations.
(2) AVIR Purchase Accounting and Financing Adjustments -- Includes the
following increases (decreases) in earnings:
Six Months Year
ended ended
June 30, December 31,
1996 1995
---------- ------------
(Millions of Dollars)
Incremental interest cost assuming the
financing related to the acquisition
occurred on January 1, 1995 $(18.2) $(39.3)
Amortization of the unallocated excess
of purchase cost over net assets
acquired over 20 years (6.2) (12.4)
------ ------
(24.4) (51.7)
Tax benefits related to the incremental
interest cost, at incremental U. S.
statutory rates 7.0 15.1
------ ------
$(17.4) $(36.6)
====== ======
6