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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 2001
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
ALLTRISTA CORPORATION
Indiana 0-21052 35-1828377
State of Incorporation Commission File Number IRS Identification Number
5875 Castle Creek Parkway, North Drive, Suite 440
Indianapolis, Indiana 46250-4330
Registrant's telephone number, including area code: (317) 577-5000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Outstanding at
Class April 29, 2001
----- ----------------
Common Stock, without par value.......................... 6,366,781 shares
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ALLTRISTA CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
For the period ended April 1, 2001
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Unaudited Condensed Consolidated Statements of Income for
the three month periods ended April 1, 2001 and April 2,
2000....................................................... 3
Unaudited Statements of Comprehensive Income for the three
month periods ended
April 1, 2001 and April 2, 2000............................ 4
Unaudited Condensed Consolidated Balance Sheets at April 1,
2001 and
December 31, 2000.......................................... 5
Unaudited Condensed Consolidated Statements of Cash Flows
for the three month periods ended April 1, 2001 and April
2, 2000.................................................... 6
Notes to Unaudited Condensed Consolidated Financial
Statements.................................................. 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk.. 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................ 14
2
ALLTRISTA CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(thousands except per share amounts)
Three month
period ended
------------------
April 1, April 2,
2001 2000
-------- --------
Net sales................................................... $69,027 $83,325
Costs and expenses
Cost of sales............................................. 54,092 64,630
Selling, general and administrative expenses.............. 12,627 13,398
Goodwill amortization..................................... 1,625 1,551
Discharge of deferred compensation obligations............ (1,903) --
------- -------
Operating earnings.......................................... 2,586 3,746
Interest expense, net....................................... (3,124) (3,071)
------- -------
Income (loss) before taxes and minority interest............ (538) 675
Provision for income taxes.................................. 205 (263)
Minority interest in loss of consolidated subsidiary........ 95 32
------- -------
Net income (loss)........................................... $ (238) $ 444
======= =======
Basic earnings per share.................................... $ (.04) $.07
Diluted earnings per share.................................. $ (.04) $.07
Weighted average shares outstanding:........................
Basic..................................................... 6,337 6,421
Diluted................................................... 6,337 6,474
See accompanying notes to unaudited condensed consolidated financial
statements.
3
ALLTRISTA CORPORATION AND SUBSIDIARIES
UNAUDITED STATEMENTS OF COMPREHENSIVE INCOME
(thousands of dollars)
Three month
period ended
------------------
April 1, April 2,
2001 2000
-------- --------
Net income (loss)............................................ $ (238) $ 444
Foreign currency translation................................. (342) (206)
Interest rate swap unrealized gain (loss):
Transition adjustment...................................... 45 --
Change during period....................................... (668) --
------- -----
Comprehensive income (loss).................................. $(1,203) $ 238
======= =====
See accompanying notes to unaudited condensed consolidated financial
statements.
4
ALLTRISTA CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(thousands of dollars)
April 1, December 31,
2001 2000
--------- ------------
ASSETS
Current assets
Cash and cash equivalents............................ $ 5,564 $ 3,303
Accounts receivable, net............................. 38,397 32,806
Inventories:
Raw materials and supplies......................... 12,351 14,311
Work in process.................................... 12,256 10,253
Finished goods..................................... 31,107 27,984
Deferred taxes on income............................... 4,622 4,621
Prepaid expenses....................................... 1,948 1,102
--------- --------
Total current assets............................. 106,245 94,380
--------- --------
Property, plant and equipment, at cost................. 188,802 186,462
Accumulated depreciation............................... (100,774) (97,410)
--------- --------
88,028 89,052
Goodwill, net.......................................... 112,296 114,138
Other assets........................................... 9,611 11,169
--------- --------
Total assets..................................... $ 316,180 $308,739
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt.................... $ 27,870 $ 25,995
Notes payable........................................ 16,500 16,000
Accounts payable..................................... 30,944 17,842
Accrued salaries, wages and employee benefits........ 7,947 8,344
Other current liabilities............................ 5,799 3,224
--------- --------
Total current liabilities........................ 89,060 71,405
--------- --------
Noncurrent liabilities
Long-term debt....................................... 88,099 95,065
Deferred taxes on income............................. 13,068 13,068
Other noncurrent liabilities......................... 7,881 9,957
--------- --------
Total noncurrent liabilities..................... 109,048 118,090
--------- --------
Minority interest in subsidiary........................ 870 1,023
--------- --------
Contingencies.......................................... -- --
Shareholders' equity:
Common stock (7,963,351 common shares issued and
6,354,417 shares outstanding at April 1, 2001)...... 39,920 40,017
Retained earnings.................................... 117,915 118,153
Accumulated other comprehensive loss:
Cumulative translation adjustment.................. (1,320) (978)
Interest rate swap................................. (623) --
--------- --------
155,892 157,192
Less: treasury stock (1,608,934 shares at cost at April
1, 2001).............................................. (38,690) (38,971)
--------- --------
Total shareholders' equity....................... 117,202 118,221
--------- --------
Total liabilities and shareholders' equity....... $ 316,180 $308,739
========= ========
See accompanying notes to unaudited condensed consolidated financial
statements.
5
ALLTRISTA CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands of dollars)
Three month
period ended
------------------
April 1, April 2,
2001 2000
-------- --------
Cash flows from operating activities
Net income (loss)........................................ $ (238) $ 444
Reconciliation of net income (loss) to net cash provided
by operating activities:
Depreciation........................................... 3,695 3,527
Amortization........................................... 1,688 1,652
Discharge of deferred compensation obligations......... (1,903) --
Deferred employee benefits............................. 89 399
Minority interest...................................... (95) (32)
Other, net............................................. 21 326
Changes in working capital components.................... 5,403 (20,893)
-------- --------
Net cash provided by (used in) operating activities.. 8,660 (14,577)
-------- --------
Cash flows from financing activities
Proceeds from revolving credit borrowings................ 11,450 20,082
Payments on revolving credit borrowings.................. (10,950) (3,164)
Payments on long-term debt............................... (5,091) (3,823)
Debt modification cost................................... (629) --
Proceeds from issuance of common stock................... 167 458
Purchase of treasury stock............................... -- (10,485)
-------- --------
Net cash provided by (used in) financing activities.. (5,053) 3,068
-------- --------
Cash flows from investing activities
Additions to property, plant and equipment............... (2,822) (4,076)
Proceeds from the surrender of insurance contracts....... 1,461 --
Other, net............................................... 15 46
-------- --------
Net cash used in investing activities................ (1,346) (4,030)
-------- --------
Net increase (decrease) in cash............................ 2,261 (15,539)
Cash and cash equivalents, beginning of period............. 3,303 17,394
-------- --------
Cash and cash equivalents, end of period................... $ 5,564 $ 1,855
======== ========
See accompanying notes to unaudited condensed consolidated financial
statements.
6
ALLTRISTA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Presentation of Condensed Consolidated Financial Statements
Certain information and footnote disclosures, including significant
accounting policies normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been condensed
or omitted. In the opinion of management, the accompanying condensed
consolidated financial statements include all adjustments necessary for a fair
presentation of the results for the interim period presented. Results of
operations for the periods shown are not necessarily indicative of results for
the year, particularly in view of the seasonality for home food preservation
products. The accompanying unaudited condensed financial statements should be
read in conjunction with the Consolidated Financial Statements and Notes to
Consolidated Financial Statements of Alltrista Corporation and Subsidiaries
included in the Company's latest annual report.
2. Earnings Per Share Calculation
Basic earnings per share are computed by dividing net income by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share are calculated based on the weighted average number of
outstanding common shares plus the dilutive effect of stock options as if they
were exercised. Due to the net loss for the three month period ended April 1,
2001, the effect of the potential exercise of stock options was not considered
in the diluted earnings per share calculation for that period since it would
be antidilutive.
A computation of earnings per share is as follows (in thousands except per
share data):
Three month
period ended
----------------
April
1, April 2,
2001 2000
------ --------
Net income (loss)....... $ (238) $ 444
------ ------
Weighted average shares
outstanding............ 6,337 6,421
Additional shares
assuming conversion of
stock options.......... -- 53
------ ------
Weighted average shares
outstanding assuming
conversion............. 6,337 6,474
------ ------
Basic earnings per
share.................. $ (.04) $ .07
Diluted earnings per
share--assuming
conversion............. $ (.04) $ .07
3. Segment Information
The Company is organized into two distinct segments: metal products and
plastic products. The metal products segment includes sales of zinc and
consumer products. This segment provides cast zinc strip and fabricated zinc
products primarily for zinc coinage and industrial applications. It also
markets a line of home food preservation products including home canning jars,
home canning metal closures and related food products, which are distributed
through a wide variety of retail outlets. The plastic products segment
produces injection molded plastic products used in medical, pharmaceutical and
consumer products and industrial thermoformed plastic parts for appliances,
manufactured housing, recreational vehicles, heavy trucking, agriculture
equipment, portable restrooms, recreational and construction products.
7
ALLTRISTA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Net sales, operating earnings and assets employed in operations by segment
are summarized as follows (thousands of dollars):
Three month
period ended
----------------------
April 1, April 2,
2001 2000
-------- ------------
Net Sales:
Metal products
Consumer products.................................... $ 19,366 $ 18,940
Zinc products........................................ 13,636 16,375
Other................................................ 128 63
-------- --------
Total metal products............................... 33,130 35,378
-------- --------
Plastic products:
Industrial thermoformed parts........................ 26,242 36,690
Injection molded products............................ 10,044 11,888
-------- --------
Total plastic products............................. 36,286 48,578
-------- --------
Intercompany........................................... (389) (631)
-------- --------
Total net sales.................................... $ 69,027 $ 83,325
======== ========
Operating earnings:
Metal products......................................... $ 2,601 $ 1,843
Plastic products....................................... (1,203) 2,112
Intercompany........................................... -- (18)
Unallocated corporate expenses......................... (715) (191)
Discharge of deferred compensation obligations......... 1,903 --
-------- --------
Total operating earnings........................... 2,586 3,746
Interest expense, net.................................... (3,124) (3,071)
-------- --------
Income (loss) before taxes and minority interest......... $ (538) $ 675
======== ========
April 1, December 31,
2001 2000
-------- ------------
Assets employed in operations:
Metal products......................................... $ 89,291 $ 84,755
Plastic products....................................... 209,012 207,914
-------- --------
Total assets employed in operations................ 298,303 292,669
Corporate (1).......................................... 17,877 16,070
-------- --------
Total assets....................................... $316,180 $308,739
======== ========
- --------
(1) Corporate assets primarily include cash and cash equivalents, amounts
relating to benefit plans, deferred tax assets and corporate facilities
and equipment.
8
ALLTRISTA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Costs to Exit Facility
In October 1999, management initiated a plan to exit the Company's plastic
thermoforming facility in El Dorado, Arkansas. Operations in this facility
ceased in January 2000 and were moved to the Company's Auburndale, Florida
facility. The total cost to exit the facility was $2.3 million and includes a
$0.8 million loss on the sale and disposal of equipment, $0.6 million in
future lease obligations, net of assumed sublease revenue and $0.9 million in
other costs consisting primarily of employee severance, consulting and
employment obligations and other related fees. Of this $2.3 million charge,
which was recorded in the fourth quarter of 1999, $1.9 million has been
expended through April 1, 2001.
5. Contingencies
The Company is involved in various legal disputes in the ordinary course of
business. In addition, the Environmental Protection Agency has designated the
Company as a potentially responsible party, along with numerous other
companies, for the clean up of several hazardous waste sites. Information at
this time does not indicate that disposition of any of the legal or
environmental disputes the Company is currently involved in will have a
material, adverse effect upon the financial condition, results of operations,
cash flows or competitive position of the Company.
6. Discharge of Deferred Compensation Obligations and Related Loan Commitments
During the first quarter of 2001, certain participants in the Company's
deferred compensation plans agreed to forego balances in those plans in
exchange for loans from the Company in the same amounts. The loans, which will
bear interest at the applicable federal rate, will be fully secured by life
insurance policies in favor of the Company on the lives of those participants
and their spouses. All accrued interest and principal on the loans will be
payable upon the death of the participant and their spouse. The Company
recognized $1.9 million of pre-tax income during the first quarter of 2001
related to the discharge of the deferred compensation obligations. The loans
to the respective participants in this arrangement are expected to be
completed during the second quarter.
Also during the first quarter of 2001, the Company liquidated certain
investments in variable rate life insurance contracts in the amount of $1.5
million. The contracts had effectively been used to fund the deferred
compensation obligations that were foregone. This amount was included in Cash
and cash equivalents on the Company's Consolidated Balance Sheet at April 1,
2001.
7. New Accounting Pronouncement
The Company adopted Statement of Financial Accounting Standard 133 (SFAS
133), Accounting for Derivative Instruments and Hedging Activities, on January
1, 2001. The statement requires the Company to recognize all derivatives on
the balance sheet at fair value. Derivatives that are not hedges must be
adjusted to fair value through income. If the derivative is a hedge, depending
on the nature of the hedge, changes in the fair value of derivatives will
either be offset against the change in fair value of the hedged assets,
liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. Hedge
ineffectiveness, the amount by which the change in the value of a hedge does
not exactly offset the change in the value of the hedged item, will be
immediately recognized in earnings. The adoption of SFAS 133 on January 1,
2001 did not have a material impact on the Company's results of operations or
financial position.
8. Derivative Financial Instruments
The Company's derivative activities are initiated within the guidelines of
documented corporate risk-management policies and do not create additional
risk because gains and losses on derivative contracts offset
9
ALLTRISTA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
losses and gains on the assets, liabilities and transactions being hedged. As
derivative contracts are initiated, the Company designates the instruments
individually as either a fair value hedge or a cash flow hedge. Management
reviews the correlation and effectiveness of its derivatives on a periodic
basis.
The Company uses interest rate swaps to manage a portion of its exposure to
short-term interest rate variations with respect to the London Interbank
Offered Rate on its term debt obligations. The Company has designated the
interest rate swaps as cash flow hedges. The effective portion of gains and
losses on the interest rate swaps are reported as a component of other
comprehensive income and reclassified into earnings in the same period the
hedged transaction affects earnings. Because the terms of the swaps exactly
match the terms of the underlying debt, the swaps are perfectly effective.
10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations--Comparing First Quarter 2001 to First Quarter 2000
The Company reported net sales of $69.0 million for the first quarter of
2001, a 17.2% decrease from net sales of $83.3 million in the first quarter of
2000. First quarter operating earnings of $2.6 million decreased 31.0% from
first quarter 2000 operating earnings of $3.7 million. The metal products
segment reported lower sales and higher operating earnings, while the plastic
products segment reported lower sales and lower operating earnings.
Net sales within the metal products segment decreased from $35.4 million in
the first quarter of 2000 to $33.1 million for the first quarter of 2001.
Sales of zinc products decreased $2.7 million, due primarily to reduced demand
for products to the automotive market and a customer's decision to self-
manufacture zinc carbon batteries in Mexico. The decline was offset in part by
an increase in coinage sales volumes. The average price of zinc ingot
decreased 5.0% in the first quarter of 2001 compared to the same period one
year ago resulting in lower sales of approximately $0.6 million. The Company
passes on fluctuations in zinc ingot prices to those customers who do not
purchase their own zinc ingot. Sales of consumer products increased $0.4
million due primarily to price increases on home canning and housewares
products.
Net sales within the plastic products segment decreased from $48.6 million
in the first quarter of 2000 to $36.3 million for the first quarter of 2001.
Sales of industrial thermoformed parts decreased $10.4 million or 28.5%. The
severe downturn in the heavy truck market resulted in a decline in sales to
this market of approximately 60% or $6.0 million, compared to the first
quarter of 2000. Sales of material handling products, primarily to the
automotive industry, were off 35% or approximately $4.0 million. Bath product
sales also decreased $1.3 million as the manufactured housing market remains
depressed. Synergy World (acquired on June 1, 2000) added $0.5 million of
incremental sales related to portable restrooms after accounting for the
elimination of intercompany transactions. Sales of injection molded products
decreased by $1.8 million due to continued softness in the healthcare and
precision consumer products markets, as well as a work stoppage at a key
customer that has since ended.
Gross margin percentages decreased from 22.4% in the first quarter of 2000
to 21.6% in the first quarter of 2001. Gross margin percentages on plastic
products decreased from 19.3% in the first quarter of 2000 to 14.0% in the
first quarter of 2001. Margins for industrial thermoformed parts decreased due
primarily to lower sales volumes associated with the decreased demand in the
heavy truck, material handling and manufactured housing markets. Smaller
orders have reduced the length of production runs and, thus, diminished
operating efficiencies. Margins on injection molded products have decreased
due to lower sales volumes of healthcare and precision consumer products
coupled with a delay in production start-up for a new customer. Gross margin
percentages on metal products increased from 26.3% in the first quarter of
2000 to 29.6% in the first quarter of 2001. Consumer products margins
increased due to price increases implemented for its home canning and
housewares products. Margins for zinc products increased due in part to lower
manufacturing costs, offset somewhat by lower overall sales volumes.
Selling, general and administrative expenses decreased from $13.4 million
in the first quarter of 2000 to $12.6 million in the first quarter of 2001.
Expenses within the metal products segment decreased primarily due to lower
costs in connection with sales and marketing, warehousing and shipping.
Expenses within the plastic products segment decreased primarily as a result
of cost savings related to the realignment and consolidation of the Company's
thermoforming operations, which occurred during the latter half of 2000. This
decrease was offset somewhat by the inclusion of the expenses of Synergy World
(acquired June 1, 2000) in the current quarter. The Company also incurred
approximately $0.3 million of costs during the first quarter of 2001 related
to its review of strategic options. Selling, general and administrative
expenses as a percentage of net sales increased from 16.1% in the first
quarter of 2000 to 18.3% for the first quarter of 2001. The increase in the
percentage resulted primarily from lower sales, offset partially by the cost
savings realized due to the realignment and consolidation of the thermoforming
operations.
11
Goodwill amortization increased slightly for the first quarter of 2001
compared to the same period last year due to the June 2000 acquisition of
Synergy World.
During the first quarter of 2001, certain participants in the Company's
deferred compensation plans agreed to forego balances in those plans in
exchange for loans from the Company in the same amount. The loans will bear
interest at the applicable federal rate and will be fully secured by life
insurance policies in favor of the Company on the lives of those participants
and their spouses. The Company recognized $1.9 million of pre-tax income
during the first quarter of 2001 related to the discharge of the deferred
compensation obligations.
Net interest expense increased slightly for the first quarter of 2001
compared to the same period last year due primarily to the expensing of
certain debt issuance costs associated with the amendment of the Company's
debt agreement. This increase was offset somewhat by the effect of lower
average borrowings outstanding in the first quarter of 2001 compared to those
outstanding during the same period one year ago. The Company's effective tax
rate decreased from 39.0% in the first quarter of 2000 to 38.1% in the first
quarter of 2001 due to foreign operating losses for which a tax benefit was
not recorded in the prior year.
Excluding the $1.2 million after-tax income from the discharge of deferred
compensation obligations, the net loss for the first quarter of 2001 was $1.4
million compared to net income of $0.4 million for the first quarter of 2000.
Diluted earnings per share, as adjusted, was a loss of $0.22 per share for the
first quarter of 2001 compared to income of $0.07 per share for the same
period in 2000. Due to the seasonality of home food preservation product
sales, the Company's first quarter results of operations have proportionately
less of an impact on full year results.
Financial Condition, Liquidity and Capital Resources
In February 2001, the Company entered into an agreement with its lenders to
amend certain provisions of its term loan and revolving credit facility and
waive violations of its minimum fixed charge ratio and maximum leverage ratio
at December 31, 2000. The amendment reduces the revolving credit facility from
$100 million to $50 million, provides for the Company's accounts receivable
and inventory to be pledged as collateral, and modifies certain financial
covenants.
Working capital (excluding the current portion of long-term debt and notes
payable) decreased $3.4 million from $65.0 million at December 31, 2000 to
$61.6 million at April 1, 2001. Accounts payable and inventories increased
$13.1 million and $3.2 million, respectively, due primarily to the customary
build-up in anticipation of seasonal home canning activity. Accounts
receivable increased $5.6 million on increased sales across most product lines
from the fourth quarter of 2000. Cash and cash equivalents increased $2.3
million, while short-term borrowings increased $0.5 million.
Capital expenditures were $2.8 million in the first quarter of 2001
compared to $4.1 million for the same period in 2000 and are largely related
to maintaining facilities and improving manufacturing efficiencies. Capital
expenditures during the first quarter of 2001 related to, among other items,
injection molding machines and a co-extrusion line for the production of
plastic sheet used in thermoforming operations.
The Company believes that existing funds, cash generated from operations
and its debt facility are adequate to satisfy its working capital and capital
expenditure requirements for the foreseeable future. However, the Company may
raise additional capital from time to time to take advantage of favorable
conditions in the capital markets or in connection with the Company's
corporate development activities.
Contingencies
The Company is involved in various legal disputes in the ordinary course of
business. In addition, the Environmental Protection Agency has designated the
Company as a potentially responsible party, along with numerous other
companies, for the clean up of several hazardous waste sites. Information at
this time does not
12
indicate that disposition of any of the legal or environmental disputes the
Company is currently involved in will have a material, adverse effect upon the
financial condition, results of operations, cash flows or competitive position
of the Company.
Forward-Looking Information
This Quarterly Report on Form 10-Q includes certain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934. Those statements
include, but may not be limited to, discussions regarding expectations of
future sales and profitability, anticipated demand for the Company's products
and expectations regarding operating and other expenses. Reliance on forward-
looking statements involves risks and uncertainties. Although the Company
believes that the forward-looking statements contained herein are based on
reasonable assumptions, any of those assumptions could prove to be inaccurate.
As a result, the forward-looking statements based on those assumptions could
also be incorrect. Please see the Company's Annual Report on Form 10-K for
2000 for a list of factors, which could cause the Company's actual results to
differ materially from those projected in the Company's forward-looking
statements.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
In general, business enterprises can be exposed to market risks including
fluctuations in commodity prices, foreign currency values, and interest rates
that can affect the cost of operating, investing, and financing. The Company's
exposures to these risks are low. Over 90% of the Company's zinc business is
conducted on a tolling basis whereby customers supply zinc to the Company for
processing, or supply contracts provide for fluctuations in the price of zinc
to be passed on to the customer.
The Company from time to time invests in short-term financial instruments
with original maturities usually less than thirty days. The Company is exposed
to short-term interest rate variations with respect to London Interbank
Offered Rate ("LIBOR") on its term and revolving debt obligations. A portion
of this risk has been managed through the use of interest rate swaps,
completed in 1999, whereby the Company effectively pays a maximum interest
rate of 7.98% on 60% of the outstanding term debt balance for a period of
three years.
Changes in LIBOR interest rates would affect the earnings of the Company
either positively or negatively depending on the changes in short-term
interest rates. Assuming that LIBOR rates increased 100 basis points over
period end rates on the outstanding term and revolver debt, the Company's
interest expense, after considering the effects of its interest rate swap,
would have increased by approximately $160,000 and $150,000 for the three
month periods ended April 1, 2001 and April 2, 2000, respectively. The amount
was determined by considering the impact of the hypothetical interest rates on
the Company's borrowing cost, short-term investment rates, interest rate swap
and estimated cash flow. Actual changes in rates may differ from the
assumptions used in computing this exposure.
The Company does not invest or trade in any derivative financial or
commodity instruments, nor does it invest in any foreign financial
instruments.
13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
10.1 Agreement to Forego Compensation between Thomas B. Clark and Alltrista
Corporation, effective March 31, 2001.
10.2 Agreement to Forego Compensation between Kevin D. Bower and Alltrista
Corporation, effective March 31, 2001.
b. Reports on Form 8-K
In a Form 8-K (Commission File Number 0-21052) dated May 11, 2001, the
Company filed a press release announcing that it has signed a letter of
intent to accept the $18 per share proposal tendered by Marlin Partners II,
L.P. and has committed to a related exclusive negotiation period through
June 29, 2001. The Company also announced that its shareholder meeting,
previously scheduled for June 1, 2001, would be postponed to a later date.
14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Alltrista Corporation
(Registrant)
/s/ Kevin D. Bower
By: _________________________________
Kevin D. Bower
Senior Vice President and
Chief Financial Officer
Date: May 11, 2001
15