-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IC5XiCl17xt7WDfDK5aIno4bvMo3JWS3+46JnKvj9iVX+CVJHWNdQ9hqePfKBo3K va6HtrE2ZXHKJ+9aANXAqg== 0000912057-01-008489.txt : 20010328 0000912057-01-008489.hdr.sgml : 20010328 ACCESSION NUMBER: 0000912057-01-008489 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20001230 FILED AS OF DATE: 20010327 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LIQUI BOX CORP CENTRAL INDEX KEY: 0000216430 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 310628033 STATE OF INCORPORATION: OH FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-08514 FILM NUMBER: 1580464 BUSINESS ADDRESS: STREET 1: 6950 WORTHINGTON GALENA RD CITY: WORTHINGTON STATE: OH ZIP: 43085 BUSINESS PHONE: 6148889280 MAIL ADDRESS: STREET 1: 6950 WORTHINGTON GALENA ROAD CITY: WORTHINGTON STATE: OH ZIP: 43085 10-K 1 a2042557z10-k.htm 10-K Prepared by MERRILL CORPORATION www.edgaradvantage.com
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year (fifty-two weeks) ended December 30, 2000

or

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to                

Commission File Number 0-8514

LIQUI-BOX CORPORATION
(Exact name of registrant as specified in its charter)

OHIO
(State or other jurisdiction of incorporation)		   31-0628033
(I.R.S. Employer Identification No.)
6950 Worthington-Galena Road, Worthington, Ohio
(Address of principal executive offices)		   43085
(Zip Code)

Registrant's telephone number, including area code (614) 888-9280

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:

Common Shares, No Par Value

(Title of Class)

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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / /

Based upon the closing price reported on The NASDAQ National Market on February 23, 2001, the aggregate market value of the voting stock held by non-affiliates of the Registrant was $102,978,000. The number of common shares outstanding at February 23, 2001 was 4,390,754.

Documents Incorporated by Reference:

        (1) Portions of the Registrant's Annual Report to Shareholders for the fiscal year ended December 30, 2000 are incorporated by reference into Parts I and II of this Annual Report on Form 10-K.

        (2) Portions of the Registrant's Definitive Proxy Statement for its Annual Meeting of Shareholders to be held on April 19, 2001 are incorporated by reference into Part III of this Annual Report on Form 10-K.


PART I

Item 1. Business.

    General Development of Business—Liqui-Box Corporation, including its subsidiaries ("Liqui-Box" or the "Company"), is one of the largest companies in the world specializing in the research, development and manufacture of bag-in-box flexible liquid packaging systems. The Company was incorporated in January, 1962 in the State of Ohio. Its principal offices are located at 6950 Worthington-Galena Road, Worthington, Ohio.

    Liqui-Box is a major producer of bag-in-box flexible packaging and related filling equipment systems for the beverage, processed foods, dairy, wine and other specialty products industries. The Company is also the leading supplier of containers and dispensing systems to the bottled water industry.

    The Company and its subsidiaries operate 12 manufacturing plants in the United States, Europe and India. Through licensees, a direct sales force and independent agents, Liqui-Box serves markets in many countries worldwide.

    Description of Principal Products—The principal product of the Company is plastic packaging. Such packaging includes specialty plastic bags and plastic blow molded containers; injection molded plastic products used in liquid packaging and a variety of industrial and commercial plastic packaging films. In addition, the Company manufactures equipment for filling such packaging products (approximately 4% of total net sales). These products are marketed nationwide primarily to the edible products industries principally through a direct sales force. These products are also marketed internationally through a direct sales force, licensees, independent agents and the Company's own export operations. In 2000, the Company maintained its position in its principal markets of beverage, processed foods and specialty industrial products.

    Competition—The plastic packaging market is large and highly fragmented. There are numerous competitors and the major market in which the Company sells its products is very competitive. These products are in competition with similar products produced by other manufacturers, and in some instances, with products produced by other industries from other raw materials.

    The plastic packaging industry is, therefore, highly price competitive. A substantial number of manufacturers compete in the national and international markets. None are considered to be dominant. According to information in the public domain, Liqui-Box supplies less than one percent of the total plastic packaging market in the United States.

    While Liqui-Box's product and customer mix is generally diverse, The Perrier Group of America ("Perrier") constitutes a buying group of customers that is a material part of the Company's business to the extent that loss of this buying group, with which the Company has a good relationship, would have a material adverse effect on the Company's business. The risk associated with such a potential loss is partially mitigated by a 3-year supply agreement between the Company and Perrier for an amount which would approximate 70% of the Company's sales to Perrier in the year 2000. This agreement, which was negotiated in 2000, expires on December 31, 2003. Sales to this customer constituted 21%, 22% and 20% of total sales in 2000, 1999 and 1998, respectively. However, due to the lower margins on this segment, the percent that this represents of the total margin of the Company was noticeably less than the percentage of sales.

    Research and Development—Liqui-Box emphasizes applied research and development as a vital aspect of meeting the needs of its customers for plastic packaging. Thus, the Company's research activities focus on the development of new plastic packaging products and packaging systems to increase quality, improve production efficiency and/or reduce costs to its customers and to the ultimate consumer. The Company also devotes significant efforts to the research, development and improvement

2

of plastic packaging machinery and equipment for use by its customers and in its own production operations.

    Research and development expenditures in 2000, 1999 and 1998 were $1,559,000, $1,436,000 and $1,221,000, respectively. All such activities were entirely Company-funded from operations. It should also be noted that the funding levels only represent costs directly charged to research and development. The amounts do not represent the commitment and work of all employees of Liqui-Box to improving existing products and processes and to developing new products and processes. Many employees who are not part of the research and development organization of the Company spend part of their efforts on developing new products and processes.

    Information on research and development can also be found on Pages 2 and 3 [Management's Discussion and Analysis] and on Page 16 [Note 1, Accounting Policies, of the Notes to Consolidated Financial Statements] of the 2000 Annual Report to shareholders and such information is incorporated herein by reference.

    Patents and Licenses—Liqui-Box holds and maintains patents for packaging design, fitments and packaging equipment which are used by the Company in its production and which are also licensed to other manufacturers. Revenues from royalties from these patent licenses are not material to the total revenues of the Company.

    Environment—Consumer recognition of environmental friendliness of liquid plastic packaging systems is growing. Compared to a conventional 5-gallon plastic pail, the 5-gallon plastic bag-in-box reduces total plastic use by 90 percent. An empty, collapsed 5-gallon bag requires a small fraction of the disposal space required by a comparable number of No. 10 cans, five wide-mouth one gallon jars or one 5-gallon pail. The corrugated box used to transport and store packaged liquids is completely recyclable. Liqui-Box utilizes proper recycling codes on all of its products for quick identification in community recycling programs.

    The bag-in-box design is increasingly seen as a major part of the solution to the problem of environmental waste, storage and disposal. In addition, Liqui-Box has asked its suppliers to experiment in the use of reprocessed material in the products furnished to the Company and several promising applications are being actively explored. The Company also has committed to zero scrap in the waste stream of its plant operations through sorting and recycling for use in shipping bags and other non-food applications. This commitment represents the elimination of more than one million pounds of waste annually.

    As a major player in the solution to societal environmental problems, the Company supports such conscientiousness and is not aware of any federal, state or local statutory or regulatory provisions concerning environmental protection or the discharge of materials into the environment that will have any material adverse effect on the capital expenditures, sales, earnings or competitive position of the Company in the future.

    Raw Materials—The primary raw material essential to the Company's business is plastic resin. There are a number of suppliers for this material and the market is highly competitive. The Company is confident that its sources of supply of resin are adequate for its needs in the foreseeable future.

    Seasonality of Business—The demand for some applications of plastic packaging products is seasonal in nature. A mild summer, for example, can reduce the Company's sales to the beverage industry. However, experience over the years has shown that these variations generally offset each other and tend to level the total demand for the Company's products throughout the year. As a result, the Company usually experiences only minor variations in sales volume attributable to seasonal demands.

3

    Backlog of Orders—Sales of the Company's packaging products generally are closely coordinated with the product production of its customers. Typically, orders are filled within 30 days. Therefore, the backlog of orders is not significant.

    Employees—Liqui-Box employed 753 individuals in its operations throughout the United States, Europe and India as of December 30, 2000. Approximately 2% of these employees are members of collective bargaining units. The Company considers itself an industry leader in participative management of its human resources, placing a premium value on innovation, creativity and attentiveness to solving customers' problems in packaging. Accordingly, the Company believes its relations with its employees to be an asset.

    Foreign Operations and Sales—The Company's foreign operations constituted 13% of consolidated net sales, less than 1% of consolidated income before taxes and 14% of consolidated identifiable assets as of and for the year ended December 30, 2000. European operations constituted 13% of consolidated net sales, less than 6% of consolidated income before taxes and 24% of consolidated identifiable assets as of and for the year ended January 1, 2000. Further information regarding the Company's foreign operations can be found on page 23 [Note 9 of the Notes to Consolidated Financial Statements] of the 2000 Annual Report to Sharerholders, which information is incorporated herein by reference.

Item 2. Properties.

    At December 30, 2000, the Company owned or leased property at sixteen (16) locations for manufacturing and offices with a total of approximately 636,000 square feet of floor space. The following table summarizes the properties owned or leased by the Company:

Use and Location:
   Approximate Floor Space (Sq. Ft.)
   Owned or Leased
   Expiration Date of Lease
Executive offices, research and manufacturing:            
  Worthington, Ohio   63,000   Owned   N/A
Manufacturing:            
  Ashland, Ohio   43,000   Owned   N/A
  Ashland, Ohio   22,000   Owned   N/A
  Houston, Texas   33,000   Leased   2005
  Elkton, Maryland   58,000   Leased   2015
  Auburn, Massachusetts   30,000   Owned   N/A
  Ontario, California   61,000   Leased   2003
  Upper Sandusky, Ohio   76,000   Owned   N/A
  Lake Wales, Florida   8,000   Owned   N/A
  Lake Wales, Florida   12,000   Owned   N/A
  Sacramento, California   74,000   Leased   2002
  Sacramento, California   24,000   Leased   Month to Month
  Allentown, Pennsylvania   40,000   Leased   2006
  Romiley, England   53,000   Leased   2006
  Romiley, England   12,000   Leased   2006
  Pune-Maharashtra, India   27,000   Leased   2003

    The Company believes that its properties, plant and equipment are all in good operating condition and are adequate for its expected needs. Certain of the leases contain renewal options which the Company expects to exercise to maintain its operations at the facilities.

4

Item 3. Legal Proceedings.

    See the discussion of litigation matters on page 19 [Note 3 of the Notes to Consolidated Financial Statements] of the 2000 Annual Report to shareholders which is incorporated herein by reference.

Item 4. Submission of Matters to a Vote of Security Holders.

    Not applicable.

    Executive Officers of the Registrant.

    The names, ages and positions of all of the executive officers of Liqui-Box, as of March 19, 2001, are listed below along with their business experience during the past five years. Generally, executive officers are appointed annually by the Board of Directors at the annual meeting of directors immediately following the annual meeting of shareholders or the Executive Committee of the Board of Directors. There are no arrangements or understandings between any executive officer and any other person pursuant to which the executive officer was selected.

Name
   Age
   Title
Samuel B. Davis(1)   59   Chairman of the Board, Chief Executive Officer, Treasurer and Director
Samuel N. Davis(2)   36   Vice Chairman of the Board, Secretary and Director
Stewart M. Graves(3)   50   Chief Operating Officer and President
(1)
Samuel B. Davis has been Chairman of the Board, Chief Executive Officer and Treasurer since August, 1982. Mr. Davis was President of the Company from September, 1991 to December, 1997.

(2)
Samuel N. Davis became Vice Chairman and Secretary of Liqui-Box in October of 2000. He was Vice President, Development and an executive officer of the Company from April, 1996 to October, 2000. From September, 1995 until April, 1996, Mr. Davis held the position of Special Projects Coordinator for the Company.

(3)
Stewart M. Graves became President and Chief Operating Officer of Liqui-Box in October, 2000. He was Vice President, International of the Company from August, 1996 until October, 2000. From January, 1994 until August, 1996, Mr. Graves held the position of Managing Director of LB Europe Limited, a subsidiary of the Company.


PART II

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

    The Company, in the normal course of business, is exposed to market risks associated with foreign currency exchange rates, fluctuations in the market value of equity securities available for sale, and changes in interest rates. The Company is also exposed to changes in the price of commodities used in its manufacturing operations. However, commodity price risk is not material as price changes are customarily passed along to the customer.

Foreign Currency Exchange Risk

    In 2000 and 1999, foreign operations accounted for approximately 13% of the Company's consolidated net sales. As a result, there is exposure to foreign currency exchange risk on transactions that are denominated in a currency other than the business unit's functional currency. The Company maintains assets and liabilities with financial institutions in various foreign currencies to hedge transactions that are to be settled in the business unit's functional currency. Reference is made to Note 1—Foreign Currency Translation in the Notes to the Company's Consolidated Financial

5

Statements for further information with respect to foreign currency exchanges. The Company's hedging activities provide only limited protection against currency exchange risks, however, a hypothetical 10% foreign exchange fluctuation would not materially impact the Company's operating results or cash flow.

Marketable Securities Risk

    The Company maintains a portfolio of marketable equity securities available for sale. The fair market value of these securities at December 30, 2000 was approximately $1,190,000 with the corresponding unrealized gain included as a component of stockholders' equity. A hypothetical 10% decrease in the quoted market price of marketable securities would not materially impact operating results or cash flow.

Interest Rate Risk

    The interest payable for the Company's credit facilities is affected by changes in market interest rates. At December 30, 2000, the Company's credit facilities bear interest rates ranging from 5.75% to 7.5% and, therefore, a hypothetical 10% fluctuation would not materially impact the Company's operating results or cash flow

    The following items are incorporated herein by reference from the indicated pages of the Liqui-Box 2000 Annual Report to Shareholders:

 
    
   Pages

Item 5.
 
Market for Registrant's Common Equity and Related Stockholder Matters
 
1

Item 6.
 
Selected Financial Data
 
1

Item 7.
 
Management's Discussion and Analysis of Financial Condition and Results of Operation
 
2-7

Item 8.
 
Financial Statements and Supplementary Data
 
8-24

Item 9.
 
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
 
None


PART III

    The following items are incorporated herein by reference from the indicated pages of the Registrant's definitive Proxy Statement for its 2001 annual meeting of shareholders filed pursuant to Regulation 14A of the Securities Exchange Act of 1934.

 
    
   Pages
Item 10.   Directors and Executive Officers of the Registrant
In addition, certain information concerning the executive officers of the Registrant called for in this Item 10 is set forth in the portion of Part I of this Annual Report on Form 10-K entitled "Executive Officers of the Registrant".		   4-6 and 12

Item 11.
 
Executive Compensation
Neither the Report of the Board of Directors on Executive Compensation, nor the performance graph included in the Registrant's definitive Proxy Statement for its 2001 annual meeting of shareholders are incorporated herein by reference.
 
9-10
Item 12.   Security Ownership of Certain Beneficial Owners and Management   3-4
Item 13.   Certain Relationships and Related Transactions   5-6 and 11

6


PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

    (a)(1) The following consolidated financial statements of Liqui-Box Corporation and Subsidiaries are included in the Registrant's 2000 Annual Report to Shareholders. The page numbers indicate the location of the consolidated financial statements in the Registrant's 2000 Annual Report to Shareholders.

 
    
   Pages
    Consolidated Balance Sheets
—December 30, 2000 and January 1, 2000		   8-9
    Consolidated Statements of Income
—Fifty-two weeks ended December 30, 2000, Fifty-two weeks ended January 1, 2000 and Fifty-two weeks ended January 2,1999		   10
    Consolidated Statements of Cash Flows
—Fifty-two weeks ended December 30, 2000, Fifty-two weeks ended January 1, 2000 and Fifty-two weeks ended January 2,1999		   11
    Consolidated Statements of Stockholders' Equity
—Fifty-two weeks ended December 30, 2000, Fifty-two weeks ended January 1, 2000 and Fifty-two weeks ended January 2,1999		   12-13
    Notes to Consolidated Financial Statements   14-23
    Report of Independent Auditors   24
    Report of Independent Auditors on Financial Statement Schedules.   (Filed in this Report)

    (a)(2) The following consolidated financial statement schedule of Liqui-Box Corporation and Subsidiaries is included herein pursuant to Item 14(d) of this Report.

      II Valuation and Qualifying Accounts.

      Schedules other than those listed above are omitted because they are not required or are not applicable.

    (a)(3) Listing of Exhibits—The following exhibits are included herein pursuant to Item 14(c):

Exhibit No.
   Description
   Pages
3A   Amended Articles of Incorporation of the Registrant as filed with the Ohio Secretary of State on December 14, 1995 are incorporated herein by reference to the Registrant's Form 10-K for the fiscal year ended December 30, 1995 filed with the Securities and Exchange Commission (Exhibit 3A)   N/A
3B   Code of Regulations, as amended, of the Registrant are incorporated herein by reference to the Registrant's Form 10-Q for the fiscal quarter ended July 1, 1995 filed with the Securities and Exchange Commission (Exhibit 3B)   N/A
3C   Amendment to Code of Regulations, as amended, approved by Shareholders on April 20, 2000.   Filed herein
9   Voting Trust and Right of First Refusal Agreement, effective as of September 29, 1993, by and among Mary Ann Davis, Samuel B. Davis, as Voting Trustee, and Samuel B. Davis, individually, is incorporated herein by reference to Amendment No. 6 to Schedule 13D of Samuel B. Davis filed on March 6, 1995 (Exhibit 1).   N/A

7

10A*   1990 Liqui-Box Stock Option Plan is incorporated herein by reference to the Registrant's Form 10-Q for the fiscal quarter ended June 30, 1990 filed with the Securities and Exchange Commission (Exhibit 19(a)) (File number 0-8514).   N/A
10AA*   2000 Amendment to 1990 Liqui-Box Stock Option Plan dated September 26, 2000.   Filed herein
10B*   Summary of Profit Participation Program is incorporated herein by reference to the Registrant's Form 10-K for the fiscal year ended January 2, 1993 filed with the Securities and Exchange Commission (Exhibit  10E) (File number 0-8514).   N/A
10C*   Executive Deferred Compensation Plan is incorporated herein by reference to the Registrant's Form 10-K for the fiscal year ended January 1, 2000 filed with the Securities and Exchange Commission (Exhibit  10C)   N/A
10D*   LB Shares Stock Option Plan, as amended.   Filed herein
13   Annual Report to Shareholders for the fiscal year ended December 30, 2000   Filed herein
21   Subsidiaries of the Registrant   Filed herein
23   Independent Auditors' Consent and Report on Schedule (Deloitte & Touche LLP)   Filed herein
24   Powers of Attorney   Filed herein
*
Indicates executive compensation plan or arrangement.

    (b) Reports on Form 8-K. During the last quarter of the period covered by this Report, the Company filed a Report on Form 8-K dated September 14, 2000 to report a change in the Company's transfer agent. The Company also filed a Report on Form 8-K dated October 24, 2000 to report changes in executive officers of the Company.

    (c) Exhibits filed with this Annual Report on Form 10-K are attached hereto. See Index to Exhibits at page 12.

    (d) Financial Statement Schedules—See Item 14(a)(2)

8


SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
(amounts rounded to the nearest thousand dollars)

LIQUI-BOX CORPORATION AND SUBSIDIARIES

Column A
   Column B
   Column C
   Column D
   Column E
 
    
   Additions
    
    
Description
   Balance at Beginning of Period
   Charged to Costs and Expenses
   Charged to Other Accounts
   Deductions (1)
   Balance at End of Period
Reserves deducted from assets:                            
 
Fifty-two weeks ended December 30, 2000:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Allowance for doubtful accounts   $ 730,000   $ 393,000       $ (367,000 ) $ 756,000
 
Fifty-two weeks ended January 1, 2000:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Allowance for doubtful accounts   $ 946,000   $ 209,000       $ (425,000 ) $ 730,000
 
Fifty-two weeks ended January 2, 1999:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Allowance for doubtful accounts   $ 933,000   $ 384,000       $ (371,000 ) $ 946,000
(1)
Uncollectible accounts written off, net of recoveries and other adjustments.


SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) 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.

    LIQUI-BOX CORPORATION

Date: March 22, 2001
 
By:
/s/ *SAMUEL B. DAVIS   
Samuel B. Davis
 Chairman of the Board, Chief Executive Officer, and Treasurer

    Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Date: March 22, 2001   By: /s/ *SAMUEL B. DAVIS   
Samuel B. Davis
 Chairman of the Board, Chief Executive Officer, Treasurer and Director (Principal Executive and Financial Officer)

Date: March 22, 2001
 
By:
/s/ *SAMUEL N. DAVIS   
Samuel N. Davis
 Director

Date: March 22, 2001
 
By:
/s/ *CHARLES R. COATE   
Charles R. Coate
 Director

Date: March 22, 2001
 
By:
/s/ *CARL J. ASCHINGER, JR.   
Carl J. Aschinger, Jr.
 Director

Date: March 22, 2001
 
By:
/s/ *RUSSELL M. GERTMENIAN   
Russell M. Gertmenian
 Director

Date: March 22, 2001
 
By:
/s/ *JOHN TROSTHEIM   
John Trostheim
 Director

Date: March 22, 2001
 
By:
/s/ *ROBERT L. ZIEG   
Robert L. Zieg
 Director

10


Date: March 22, 2001
 
By:
/s/ PETER J. LINN   
Peter J. Linn
 Director of Finance
(Principal Accounting Officer)

Date: March 22, 2001
 
By:
/s/ PETER J. LINN   
Peter J. Linn
 Attorney in Fact

11


Index to Exhibits

    Listing of Exhibits—The following exhibits are included pursuant to Item 14(c). The page number indicates the location of the exhibit in this Form 10-K.

Exhibit No.
   Description
   Pages
3A   Amended Articles of Incorporation of the Registrant as filed with the Ohio Secretary of State on December 14, 1995 are incorporated herein by reference to the Registrant's Form 10-K for the fiscal year ended December 30, 1995 filed with the Securities and Exchange Commission (Exhibit 3A)   N/A
3B   Code of Regulations, as amended, of the Registrant are incorporated herein by reference to the Registrant's Form 10-Q for the fiscal quarter ended July 1, 1995 filed with the Securities and Exchange Commission (Exhibit 3B)   N/A
3C   Amendment to Code of Regulations, as amended, approved by Shareholders on April 20, 2000   Filed herein
9   Voting Trust and Right of First Refusal Agreement, effective as of September 29, 1993, by and among Mary Ann Davis, Samuel B. Davis, as Voting Trustee, and Samuel B. Davis, individually, is incorporated herein by reference to Amendment No. 6 To Schedule 13D of Samuel B. Davis filed on March 6, 1995 (Exhibit 1)   N/A
10A   1990 Liqui-Box Stock Option Plan is incorporated herein by reference to the Registrant's Form 10-Q for the fiscal quarter ended June 30, 1990 filed with the Securities and Exchange Commission (Exhibit 19(a)   N/A
10AA   2000 Amendment to 1990 Liqui-Box Stock Option Plan dated September 26, 2000 Filed herein 10B Summary of Profit Participation Program is incorporated herein by reference to the Registrant's Form 10-K for the fiscal year ended January 2, 1993 filed with the Securities and Exchange Commission (Exhibit 10E) (File number 0-8514)   N/A
10C   Executive Deferred Compensation Plan is incorporated herein by reference to the Registrant's Form 10-K for the fiscal year ended January 1, 2000 filed with the Securities and Exchange Commission (Exhibit  10C)   N/A
10D   LB Shares Stock Option Plan, as amended   Filed herein
13   Annual Report to Shareholders for the fiscal year ended December 30, 2000   Filed herein
21   Subsidiaries of the Registrant   Filed herein
23   Independent Auditors' Consent and Report on Schedule (Deloitte & Touche LLP)   Filed herein
24   Powers of Attorney   Filed herein


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PART I
PART II
PART III
PART IV
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS (amounts rounded to the nearest thousand dollars) LIQUI-BOX CORPORATION AND SUBSIDIARIES
SIGNATURES
Index to Exhibits
 EX-3.C 2 a2042557zex-3_c.txt AMENDMENT TO CODE OF REGULATIONS EXHIBIT 3C AMENDMENT TO LIQUI-BOX CORPORATION CODE OF REGULATIONS, AS AMENDED (AS ADOPTED BY SHAREHOLDERS ON APRIL 20, 2000) SECTION 8. PROXIES. At meetings of the shareholders, any shareholder of record entitled to vote thereat, or to execute consents, waivers, or releases, may be represented and may vote at such meetings, execute consents, waivers, and releases, and exercise any of his other rights as a shareholder, by proxy or proxies appointed by an instrument in writing signed by such shareholder or appointed in any other manner permitted by Ohio law. Any such instrument in writing or record of any such appointment shall be filed with or received by the secretary of the meeting before the person(s) holding such proxy or proxies shall be allowed to vote thereunder. No appointment of a proxy or proxies is valid after the expiration of eleven months after it is made unless the writing or other communication which appoints such proxy or proxies specifies the date on which it is to expire or the length of time it is to continue in force. 13 EX-10.AA 3 a2042557zex-10_aa.txt 2000 AMENDMENT TO 1990 STOCK OPTION PLAN EXHIBIT 10AA 2000 AMENDMENT TO 1990 LIQUI-BOX STOCK OPTION PLAN WHEREAS, Liqui-Box Corporation ("Corporation") adopted the 1990 Liqui-Box Stock Option Plan ("1990 Stock Option Plan"); WHEREAS, as required by the terms of the 1990 Stock Option Plan, no options have been issued after February 9, 2000, although options issued before that date remain outstanding; WHEREAS, effective December 1, 1999, the Corporation adopted the Liqui-Box Corporation Executive Deferred Compensation Plan ("Deferred Compensation Plan"); WHEREAS, participants in the Deferred Compensation Plan may elect to defer any taxable income on the exercise of nonqualified stock options granted under the 1990 Stock Option Plan by completing the appropriate section of the "Deferral Notice" made available under the terms of the Deferred Compensation Plan; WHEREAS, subject to certain restrictions described in Section 14 of the 1990 Stock Option Plan, the Board retained the power to amend the 1990 Stock Option Plan; NOW, THEREFORE, effective on the date approved by the Corporation's Board of Directors, Section 8 of the 1990 Stock Option Plan is amended by the addition of the following new paragraph: Each Participant who also is a participant in the Liqui-Box Corporation Executive Deferred Compensation Plan ("Deferred Compensation Plan") may elect to defer recognition of any gain on the exercise of any Non-Qualified Stock Option by (i) completing the appropriate section of the Deferral Notice made available under the Deferred Compensation Plan and (ii) otherwise complying with the rules and requirements imposed by the Deferred Compensation Plan. If this election is made, any Common Shares acquired through the exercise of a Non-Qualified Stock Option subject to this deferral will be distributed from the trust associated with the Deferred Compensation Plan under the distribution provisions established as part of the Deferred Compensation Plan, including the requirement that the affected Common Shares be held and distributed in that form. IN WITNESS WHEREOF, the undersigned officer of the Corporation has executed this amendment to be effective as of September 26, 2000. LIQUI-BOX CORPORATION By: /s/ C. William McBee ----------------------------------------- Print Name: C. William McBee --------------------------------- Title: President & COO -------------------------------------- 14 EX-10.D 4 a2042557zex-10_d.txt LB SHARES STOCK OPTION PLAN EXHIBIT 10D LIQUI-BOX CORPORATION LB SHARES STOCK OPTION PLAN Section 1. PURPOSE. This LB Shares Stock Option Plan (hereinafter referred to as the "Plan") is intended as a means whereby full-time employees (hereinafter referred to as "Employee" or "Employees" and "Optionee" or "Optionees") of Liqui-Box Corporation (hereinafter referred to as the "Company") or any subsidiary of the Company designated by the Executive Committee of the Board of Directors of the Company (hereinafter individually referred to a "Subsidiary" and collectively as the "Subsidiaries") can each enlarge his or her proprietary interest in the Company, thereby encouraging the judgment, initiative and efforts of the Employees for the successful conduct of the Company's business. The Plan is also intended to create common interests between the Employees and the other shareholders of the Company, and to assist the Company in attracting, retaining and motivating Employees. Section 2. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Executive Committee of the Board of Directors (hereinafter referred to as the "Committee"). The Committee shall construe and interpret the Plan, establish such operating guidelines and rules as it deems necessary for the proper administration of the Plan and make such determinations and take such other action in connection with the Plan as it deems necessary and advisable. It shall designate the Subsidiaries whose employees may participate in the Plan and determine the individuals to whom and the time or times at which Options (as hereinafter defined) shall be granted, the number of shares to be subject to each Option, the Option Price (as hereinafter defined) and the duration of leaves of absence which may be granted to participants without constituting a termination of their employment for purposes of the Plan. Any such construction, interpretation, rule determination or other action taken by the Committee pursuant to the Plan shall be final, binding and conclusive on all interested parties, including the Company and all former, present and future Employees of the Company. Actions by a majority of the Committee at a meeting at which a quorum is present, or actions approved in writing by all of the members of the Committee, shall be the valid acts of the Committee. No member of the Board of Directors or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Option granted under it. Section 3. MAXIMUM NUMBER OF SHARES SUBJECT TO PLAN. Subject to any adjustment as provided in the Plan, the shares to be offered under the Plan may be, in whole or in part, authorized but unissued Common Shares of the Company, or issued Common Shares which shall have been reacquired by the Company and held by it as treasury shares. The aggregate number of Common Shares to be delivered upon exercise of all Options granted under the Plan shall not exceed 500,000 shares plus the amount of any additional Common Shares which may result from any share distributions effected after the approval of this Plan by the Board of Directors of the Company. If any Option granted hereunder shall expire or terminate for any reason without having been exercised in full, the unpurchased shares with respect thereto shall again be available for other Options to be granted under the Plan unless the Plan shall have been terminated. Section 4. SELECTION OF OPTIONEES. All those Employees of the Company or its Subsidiaries as shall be determined from time to time by the Committee shall be eligible to participate in the Plan, provided, however, that no Employee may be granted Options in the aggregate which would result in that Employee receiving more than ten percent of the maximum number of shares available for issuance under the Plan. Any Employee who has been granted an Option under another stock option plan of the Company may be granted an additional Option or Options under the Plan if the Committee shall so determine. Section 5. OPTION PRICE. The Option Price for the shares covered by each option granted shall be the fair market value of the Common Shares on the Grant Date (as hereinafter defined) of the Option. Such fair market value shall be equal to the mean of the high and low prices of the Common Shares of the Company as reported on the NASDAQ National Market System on such date. 15 Section 6. OPTION REQUIREMENTS. The Options granted pursuant to the Plan shall be authorized by the Committee and shall be evidenced in writing in a form approved by the Committee and shall include the following terms and conditions: (a) OPTIONEE. Each Option shall state the name off the Optionee. (b) NUMBER OF SHARES. Each Option shall state the number of shares to which that Option pertains. (c) OPTION PRICE. Each Option shall state the Option Price, which shall be not less than one hundred percent (100%) of the fair market value of the shares covered by such Option on the Grant Date of such Option. See Section 5 hereof. (d) PAYMENT. The Option Price for the Options being exercised must be paid in full at the time of exercise in a manner acceptable to the Committee. In addition, in order to enable the Company to meet any applicable foreign, federal (including FICA), state and local withholding tax requirements, an Optionee shall also be required to pay the amount of tax to be withheld at the time of exercise. No Common Shares will be delivered to any Optionee until all such amounts have been paid. (e) LENGTH OF OPTION. Each Option shall be granted for a period to be determined by the Committee but in no event to exceed more than ten (10) years. However, subject to Sections 9 and 10, each Option shall be exercisable only during such portion of its term as the Committee shall determine, and only if the Optionee is employed by the Company or a Subsidiary of the Company at the time of such exercise. (f) EXERCISE OF OPTION. With respect to Options offered pursuant to the Plan to an Employee who is subject to Section 16 of the Securities Exchange Act of 1934 ("Section 16 of the Exchange Act"), if any, no option can be exercised for at least six (6) months after the Grant Date except in the case of death or Disability (as hereinafter defined) as set forth in Section 10 where the Option is otherwise exercisable. Otherwise, each Optionee shall have the right to exercise his or her Option in the manner specified in this Plan or in the agreement evidencing the granting of such Option. Section 7. METHOD OF EXERCISE OF OPTIONS. Each Option shall be exercised pursuant to the terms of such Option and pursuant to the terms of this Plan by giving written notice to the Company at its principal place of business or other address designated by the Company, accompanied by cash, check, shares, or other property acceptable to the Committee, in payment of the Option Price for the number of whole shares specified and paid for and the amount of tax to be withheld as aforesaid. From time to time the Committee may establish procedures relating to effecting such exercises. No fractional shares shall be issued as a result of exercising an Option. The Company shall make delivery of such shares as soon as possible; provided, however, that if any law or regulation requires the Company to take action with respect to the shares specified in such notice before issuance thereof, the date of delivery of such shares shall then be extended for the period necessary to take such action. Section 8. NON-TRANSFERABILITY OF OPTIONS. Except as set forth in Section 10, an Option is exercisable during an Optionee's lifetime only by the optionee. The Options shall not be transferable except by will or the laws of descent and distribution, and shall terminate as provided in this Plan. Section 9. EARLIER TERMINATION OF OPTIONS. Upon the termination of the Optionee's employment for any reason whatsoever, including retirement, the Options will terminate as to all shares covered by Options which have not been exercised as of the date of such termination. Notwithstanding the preceding sentence, however, Options shall be exercisable following the death or Disability of the Optionee as set forth in Section 10. Section 10. EXERCISE UPON DEATH OR DISABILITY. In the event an Optionee dies while employed by the Company or a Subsidiary, the estate of the deceased Optionee shall have the right to exercise any rights the Optionee would otherwise have under this Plan for a period of six (6) months after the date of the Optionee's death, with exercise to be made as set forth in Section 7. 16 In the event an Optionee becomes Disabled while employed by the Company or a Subsidiary, the Optionee (or, in the event the Optionee is incapacitated and unable to exercise Options, the Optionee's legal guardian or legal representative whom the committee deems appropriate based on applicable facts and circumstances) shall have the right to exercise any rights the Optionee would otherwise have under this Plan for a period of six (6) months after the date the Optionee becomes Disabled, with exercise to be made as sat forth in Section 7. Section 11. LIMITATION ON SALE OF COMMON SHARES OFFERED PURSUANT TO PLAN. With respect to the Common Shares offered pursuant to the Plan to an Employee who is subject to Section 16 of the Exchange Act, if any, such Common Shares cannot be sold for a least six (6) months after acquisition, except in the case of death or Disability. Section 12. NON-QUALIFIED STOCK OPTIONS. The Options granted under the Plan shall be non-qualified stock options. Section 13. EFFECT OF CHANGE IN COMMON SHARES SUBJECT TO THE PLAN. In the event any dividend upon the Common Shares payable in shares is declared by the Company, or in case of any subdivision or combination of the outstanding Common Shares the aggregate number of Common Shares to be delivered upon exercise of all Options granted under the Plan shall be increased or decreased proportionately so that there will be no change in the aggregate purchase price payable upon the exercise of the Option. In the event of any other recapitalization or any reorganization, merger, consolidation or any change in the corporate structure or stock of the Company, the Committee shall make such adjustment, if any, as it may deem appropriate to reflect accurately the terms of the option as to the number and kind of shares deliverable upon subsequent exercising of the Option and in the Option prices under the Option. Section 14. LISTING AND REGISTRATION OF COMMON SHARES. If at any time the Committee shall determine that listing, registration or qualification of the Common Shares covered by the Option upon any securities exchange or under any state or federal law or the consent or the approval of any governmental regulatory body is necessary or desirable as a condition of or in connection with the purchase of Common Shares under the Option, the Option may not be exercised in whole or in part unless and until such listing, registration, qualification, consent or approval shall have been of effected or obtained free of any conditions not acceptable to the Committee. Any person exercising an Option shall make such representations and agreements and furnish such information as the Committee may request to assure compliance with the foregoing or any other applicable legal requirements. Section 15. NO OBLIGATION TO EXERCISE OPTION. The granting of an Option shall impose no obligation upon the Optionee to exercise such Option. Section 16. MISCONDUCT. In the event that an Optionee has (i) used for profit or disclosed to unauthorized persons, confidential information or trade secrets of the Company or its Subsidiaries, or (ii) breached any contract with or violated any fiduciary obligation to the Company or its Subsidiaries, or (iii) engaged in unlawful trading in the securities of the Company or its Subsidiaries or of another company based on information gained as a result of the Optionee's employment with the Company or its Subsidiaries, then that Optionee shall forfeit all rights to any Unexercised Options granted under the Plan and all of the Optionee's outstanding Options shall automatically terminate and lapse, unless the Committee shall determine otherwise. Section 17. FOREIGN EMPLOYEES. Without amending the Plan, the Committee may grant Options to eligible Employees who are foreign nationals on such terms and conditions different from those specified in this Plan as may in the judgment of the Committee be necessary or desirable to foster and promote achievement of the purposes of the Plan, and, in furtherance of such purposes, the committee nay make such modifications, amendments, procedures, and the like as may be necessary or advisable to comply with provisions of laws of other countries in which the company or its Subsidiaries operate or have employees. Section 18. BUY OUT OF OPTION GAINS. At any time after any Option becomes exercisable, the Committee shall have the right to elect, in its sole discretion and without the consent of the 17 holder thereof, to cancel such Option and pay to the Optionee the excess of the fair market value of the Common Shares covered by such Option over the Option Price of such Option at the date the Committee provides written notice (the "Buy Out Notice") of the intention to exercise such right. Buy outs pursuant to this provision shall be effected by the Company as promptly as possible after the date of the Buy Out Notice. Payments of buy out amounts may be made in cash, in Common Shares, or partly in cash and partly in Common Shares, as the Committee deems advisable. To the extent payment is made in Common Shares, the number of shares shall be determined by dividing the amount of the payment to be made by the fair market value of a Common Share at the date of the Buy Out Notice. In no event shall the Company be required to deliver a fractional Common Share in satisfaction of this buy out provision. Payments of any such buy out amounts shall be made net of any applicable foreign, federal (including FICA), state and local withholding taxes. For the purposes of this Section 18, fair market value shall be equal to the mean of the high and low prices of the Common Shares of the Company as reported on the NASDAQ National Market System on the relevant date. Section 19. NO RIGHTS TO OPTIONS OR EMPLOYMENT. No Employee or other person shall have any claim or right to be granted an Option under the Plan. Having received an Option under the Plan shall not give an Employee any right to receive any other grant under the Plan. An Optionee shall have no rights to or interest in any Option except as set forth herein. Neither the Plan nor any action taken herein shall be construed as giving any Employee any right to be retained in the employ of the Company or its Subsidiaries. Section 20. MERGER, CONSOLIDATION, ETC. In the event that the Company is a party to a plan or agreement for merger or consolidation or reclassification of its securities or the exchange of its securities for the securities of another person which has acquired the Company's assets or which is in control (as defined in Section 368(c) of the Internal Revenue Code of 1986, as amended) of a person which has acquired the Company's assets, where the terms of such plan or agreement are binding upon all shareholders of the Company, except to the extent that dissenting shareholders may be entitled to relief under Section 1701.85 of the Ohio Revised Code, then Options granted and outstanding pursuant to the Plan for more than six (6) months, notwithstanding the date of exercise fixed in the grant of such Options, shall become immediately exercisable and each Optionee shall be entitled to receive, upon payment of the amount required for exercise of each Option, securities or cash consideration, or both, equal to those the Optionee would have entitled to receive under such plan or agreement if the Optionee had already exercised such option. Section 21. AMENDMENT OR TERMINATION. The Board of Directors may amend or terminate the Plan at any time, provided that the Board of Directors shall not (except as provided in Sections 9, 10 and 13 hereof ) make any change in the Options which will impair the rights of the Optionee Therein, without the consent or the Optionee. No option shall be granted herein after September 1, 2001. Section 22. OTHER ACTIONS. This Plan shall not restrict the authority of the Committee, the Board of Directors or of the Company or its Subsidiaries for proper corporate purposes to grant or assume stock options, other than under the Plan, to or with respect to any Employee or other person. Section 23. COSTS AND EXPENSES. Except as provided in Section 6(d) hereof with respect to taxes, the costs and expenses of administering the Plan shall be borne by the Company, and shall not be charged to any grant nor to any Employee receiving a grant. Section 24. PLAN UNFUNDED. The Plan shall be unfunded. Except for reserving a Sufficient number of authorized shares to the extent required by law to meet the requirements of the Plan, the Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure payment of any grant under the Plan. Section 25. LAWS GOVERNING PLAN. This Plan shall be construed under and governed by the laws off the State of Ohio. Section 26. CAPTIONS. The captions to the several sections hereof are not a part of this Plan, but are merely guides or labels to assist in locating and reading the several sections hereof. 18 Section 27. EFFECTIVE DATE. The Plan shall become effective on the date it is approved by the Board of Directors of the Company. Section 28. DEFINITIONS. Unless the context clearly indicates otherwise, the following terms, when used in this Plan, shall have the meaning set forth below: (a) The "Grant Date" of an option shall be the date on which an Option is granted under the Plan. (b) "Option" means the right granted under the Plan to an Optionee to purchase a Common Share of the Company at a fixed price for a specified period of time. (c) "Option Price" means the price at which a Common Share covered by an option granted hereunder may be purchased. See Section 5 and Section 6(o) hereof. (d) With regard to any particular Employee, "Disabled" shall have the meaning set forth in the Company's long term disability program applicable to such Employee. 19 2000 AMENDMENT TO LB SHARES STOCK OPTION PLAN WHEREAS, Liqui-Box Corporation ("Corporation") adopted the Liqui-Box Corporation LB Shares Stock Option Plan ("LB Share Stock Option Plan"); WHEREAS, as required by the terms of the LB Shares Stock Option Plan, no options may be issued after September 1, 2001, although options issued before that date may remain outstanding after that date; WHEREAS, effective December 1, 1999, the Corporation adopted the Liqui-Box Corporation Executive Deferred Compensation Plan ("Deferred Compensation Plan"); WHEREAS, participants in the Deferred Compensation Plan may elect to defer any taxable income on the exercise of Options granted under the LB Shares Stock Option Plan by completing the appropriate section of the "Deferral Notice" made available under the terms of the Deferred Compensation Plan; WHEREAS, subject to certain restrictions described in Section 21 of the LB Shares Stock Option Plan, the Board retained the power to amend the LB Shares Stock Option Plan; NOW, THEREFORE, effective on the date approved by the Corporation's Board of Directors, Section 7 of the LB Shares Stock Option Plan is amended by the addition of the following new paragraph: Each Participant who also is a participant in the Liqui-Box Corporation Executive Deferred Compensation Plan ("Deferred Compensation Plan") may elect to defer recognition of any gain on the exercise of any Option by (i) completing the appropriate section of the Deferral Notice made available under the Deferred Compensation Plan and (ii) otherwise complying with the rules and requirements imposed by the Deferred Compensation Plan. If this election is made, any Common Shares acquired through the exercise of an Option subject to this deferral will be distributed from the trust associated with the Deferred Compensation Plan under the distribution provisions established as part of the Deferred Compensation Plan, including the requirement that the affected Common Shares be held and distributed in that form. IN WITNESS WHEREOF, the undersigned officer of the Corporation has executed this amendment to be effective as of September 26, 2000. LIQUI-BOX CORPORATION By: /s/ C. William McBee ------------------------------------- Print Name: C. William McBee ----------------------------- Title: President & COO ---------------------------------- 20 EX-13 5 a2042557zex-13.txt ANNUAL REPORT TO SHAREHOLDERS FOR 2000 LIQUI-BOX CORPORATION 2000 ANNUAL REPORT [LIQUI-BOX LOGO] "PACKAGING VALUE" Letter to the Shareholders Dear Shareholder: The latter part of 2000 ushered in a general economic slowdown in manufacturing, and we were not exempt from that trend. Our sales volume dropped as our customers experienced similar drops in demand for their products. At the same time, margins were squeezed further as everyone tried to react to the change in the general economy. In reaction to the changing climate, we analyzed the day-to-day operation of our business again and found many things we thought could be improved. As a result, changes were made in both the management and in the general organization of the company. A new President and Chief Operating Officer was promoted to take a more hands-on approach and to prioritize tasks in light of the changing circumstances. We also adopted a tougher stance on individual performance. We believe these changes will produce positive results and we hope to return to the record profit levels Liqui-Box has enjoyed in the past by the end of 2001. In 2000, we implemented a team of industry managers that were located in other geographic regions, and while this was intended to focus more on specific segments, it proved to be an unworkable arrangement. We could not communicate as effectively with key managers away from headquarters, and this caused some loss of momentum in the process. We have also changed that part of our structure, and it is already improved the speed with which we make decisions. In addition to these changes, we had already implemented an expansion in the Far East during the year. The costs associated with that will continue to be with us for a while longer before they begin to show offsetting results. Our facility in the United Kingdom is concentrating on efficiencies in the operation to help offset the strength of the pound. We have always been an innovation driven company geared to produce the best product for the money in the industries we serve. This has allowed us to earn a higher return on sales than many companies in the packaging sector. This only happens when you are constantly testing, redesigning and reinforcing this message. Over the past few years, we got away from stressing that as a core value. While we continued to have the best products, we failed to capitalize on that effectively in our sales efforts. As a result, we have implemented on-going competitive testing so that we can present test results to the sales force for use with prospects and customers. I am pleased to say that so far, it appears we are continuing to do the best job of anyone we are competing against. What we are beginning to do again is make sure our customers are aware of it. Our product development team is now talking directly to customers and prospects. This has shortened the time from concept to market dramatically. They are listening to the customers' direct market feedback and making immediate changes to products and processes. In addition, they are concentrating on the products that can generate the most immediate returns and put on the back burner any that are peripheral to our core business. We expect that both the Clear Handi-Tap and the QC/D 3000 beverage system will begin to bring new revenue to the top line before the year is out. We have a smaller, closer-knit team at present. We have fewer layers between top management and the customer, and the core management is now located right here in Worthington. As a result, things are moving along much more quickly than they have in the past few years. The new operational management is tougher, more disciplined, and quicker to respond to the needs of the marketplace. At the same time, we are staying with core values: innovative proprietary products geared to offer our customers the best value for their money. Most importantly, we are all reading from the same page as to how things should be run. As we move forward with these changes, we would like to thank you, our shareholders, for your continued support over the years. We will continue to work diligently to merit your confidence in our future. [PHOTO OF SAMUEL B. DAVIS] /s/ SB Davis FINANCIAL HIGHLIGHTS For the Five Fiscal Years Ended December 30, 2000 (In thousands of dollars, except for per share data)
SELECTED INCOME STATEMENT DATA 2000 1999 1998 1997(1) 1996 Net Sales $155,200 $165,227 $154,656 $154,145 $152,368 Income Before Taxes $27,153 $31,649 $28,838 $26,115 $24,109 Net Income $16,427 $19,134 $17,043 $15,646 $14,519 Net Income as a % of Net Sales 10.6% 11.6% 11.0% 10.2% 9.5% Return on Stockholders' Equity 21.5% 27.5% 24.7% 19.9% 17.7% Earnings Per Share Basic $3.71 $4.20 $3.62 $2.77 $2.44 Diluted $3.55 $4.00 $3.45 $2.72 $2.41 SELECTED BALANCE SHEET DATA Total Assets $96,174 $94,890 $92,074 $97,442 $100,016 Long-term Obligations - - - - - Cash Dividends Per Share $0.80 $0.76 $0.66 $0.52 $0.48 Book Value Per Share $18.13 $16.30 $14.14 $14.06 $14.47 Market Price at Fiscal Year-end $37.25 $49.50 $52.00 $39.06 $32.75
(1) Includes 53 weeks DATA PER COMMON SHARE The reported low and high closing prices on the NASDAQ National Market as reported by the National Quotation Bureau, Inc. and cash dividends per share were as follows:
2000 1999 Cash Cash Dividends Dividends Low High Per Share Low High Per Share First Quarter $44.13 $52.50 $0.20 $48.25 $55.00 $0.18 Second Quarter $44.00 $51.50 $0.20 $47.25 $54.44 $0.18 Third Quarter $31.63 $53.00 $0.20 $51.25 $55.00 $0.20 Fourth Quarter $32.38 $40.13 $0.20 $49.50 $55.50 $0.20
As of December 30, 2000, there were 615 holders of record of common shares. Credit facility covenants restrict cash dividends to 50% of net income. SHARE REPURCHASE PROGRAM Liqui-Box is committed to increasing the market value of each share of its common stock outstanding. As part of this commitment, the Company closely monitors the current market price on a daily basis. During 2000, 1999 and 1998, the Company felt that the market undervalued its common stock and as a result, the Company began an aggressive campaign to repurchase its common shares outstanding. During 2000 and 1999, Liqui-Box repurchased 169,962 common shares at an aggregate cost of $7,816,000 and 172,168 common shares at an aggregate cost of $8,773,000, respectively. The Company purchased an additional 48,117 common shares from January 1, 2001 through March 7, 2001 at an aggregate cost of $1,998,000. The grand total of the above purchases was $18,587,000 at an average cost of $47.63. These would have had a total market value of $15,563,000 based on a closing price of $39.88 on March 7, 2001. 1 Mangement's Discussion and Analysis RESULTS OF OPERATIONS 2000 COMPARED TO 1999 During 2000, Liqui-Box Corporation (the "Company") experienced a 6% decrease in net sales dollars on a 5% decrease in unit sales compared to 1999. The decrease in sales dollars and units is attributed to a generally down year in certain customer segments of the bottled water market. Gross margin, as a percentage of net sales, was 34.8% in 2000 and 37.2% in 1999. The decrease in gross margin is attributable to increased raw material prices that have not been passed on to our customers. Selling, administrative and development expenses in 2000 were $27,074,000 compared to $29,908,000 in 1999, a decrease of $2,834,000. The decrease is primarily due to a favorable settlement of certain contingencies and a reduction in Profit Participation Plan cost partly offset by an increase in research and development costs. Research and development costs were $1,559,000 in 2000 and $1,436,000 in 1999, an increase of $123,000. The 2000 costs included significant costs associated with improvements of existing products, as well as the development of new generation products. These amounts include direct costs associated with research and development only. Many of the company's employees are involved in the process of developing new products and processes along with other duties and these costs are not included in the above figures. Net income decreased by 14% to $16,427,000 compared to $19,134,000 in 1999. The provision for income taxes was 39.5% of before tax income in both 2000 and 1999. [The 2 1/2 gallon P.E.T. "clear" Handi-Tap.] 2 At the end of 2000 and 1999, Liqui-Box had no significant backlog of orders which is industry typical. 1999 COMPARED TO 1998 During 1999, the Company experienced a 7% increase in net sales dollars on a 6% increase in unit sales compared to 1998. The increase in net sales dollars can be primarily attributed to comparable increases in unit sales. Selling prices on most products generally increased as did the cost of the Company's prime raw material, plastic resin. Gross margin, as a percentage of net sales, was 37.2% in 1999 and 35.4% in 1998. This increase is primarily the result of improvements in plant efficiencies and mix of product sales. Selling, administrative and development expenses in 1999 were $29,908,000 compared to $25,589,000 in 1998, an increase of $4,319,000. This increase is primarily due to an increase in compensation-related costs, depreciation and maintenance costs, and an increase in data processing expenses. The increase in compensation-related costs in 1999 is the result of the Company's compensation program, which bases a significant portion of employees' total compensation on Company profitability. The increase in depreciation and maintenance results from the Company's commitment to ensure its facilities and production equipment operate efficiently. The increase in data processing expenses is the result of continued updating of the Company's computer systems. Research and development costs were $1,436,000 in 1999 and $1,221,000 in 1998, an increase of $215,000. The 1999 costs included significant costs associated with improvements of existing products, as well as the development of new generation products. These amounts include direct costs associated with research and development. The Company and all of its employees share a commitment to continually improve existing products and processes, as well as developing new products. Net income increased by 12% to $19,134,000 compared to $17,043,000 in 1998. This increase is a result of the increase in gross margin, which was partially offset by the increase in selling, administrative and development expenses and income taxes. The provision for income taxes was 39.5% and 40.9% of before tax income in 1999 and 1998, respectively. [The Award Winning Liqui-Box Trade Show Exhibit. "SHOWING THE WORLD HOW GREAT WE REALLY ARE."] 3 Mangement's Discussion and Analysis RESULTS OF OPERATIONS The decrease in the effective tax rate resulted primarily from state and local tax refunds from the prior year. At the end of 1999 and 1998, Liqui-Box had no significant backlog of orders which is industry typical. LIQUIDITY AND CAPITAL RESOURCES Total working capital at year-end was $29,767,000, $29,242,000 and $16,247,000 in 2000, 1999 and 1998, respectively. The ratio of current assets to current liabilities was 2.8 to 1 in 2000, 2.5 to 1 in 1999 and 1.6 to 1 in 1998. The 2000 increase is primarily the result of a decrease in accounts payable. Net cash provided from operations was $23,725,000 for 2000 compared to $26,254,000 in 1999 and $23,957,000 in 1998. The decrease in cash provided in 2000 was the result of the decrease in net income, which was offset by changes in operating assets and liabilities. Net cash used in investing activities was $12,916,000 for 2000 compared to $4,547,000 in 1999 and $9,591,000 in 1998. The cash used in investing activities was primarily for purchases of new plant equipment and improvements to existing property and plant equipment. Cash used in financing activities was $8,327,000 for 2000 compared to $18,542,000 in 1999 and $23,124,000 in 1998. The cash used in financing activities was primarily for the acquisition of treasury stock, the payment of cash dividends and repayment of the Company's revolving line of credit. Liqui-Box's major commitments for capital expenditures as of December 30, 2000, were, as they have been in the past, primarily for increasing capacity at existing [Launch of the new Q-3000 "Universal" fitment.] 4 locations, building filling machines for lease and tooling for new products. Funds required to fulfill these commitments are expected to be provided by operations. There have been no significant changes in the Company's capitalization during the past three years except for the repurchase of and the issuance of treasury shares. The common shares have been purchased at prices considered fair by management and there has been cash available for the purchases. The Company feels the purchases represent a good investment and secure common shares for issuance under the Company's employee benefit plans. Financing arrangements with The Huntington National Bank ("Bank") provide various credit facilities with a total commitment of $30,000,000. There was nothing outstanding under these commitments as of December 30, 2000. A portion of these credit facilities ($20,000,000) expires on April 30, 2001; however, management has a commitment from the Bank to renew these facilities on terms comparable to the existing facility. The remaining portion of these facilities expires on April 30, 2004. The Company's foreign subsidiaries in the United Kingdom and India have secured credit facilities that expire in October 2001. The total amount outstanding under these facilities was $4,577,000 at December 30, 2000. Longer-term cash requirements, other than those related to normal operations, relate to financing anticipated growth; increasing capacity at existing plants; developing new products and enhancing of existing products; dividend payments; and possibly continuing repurchases of the Company's common shares. The Company believes that its existing cash and cash equivalents, available credit facilities and anticipated cash generated from operations will be sufficient to satisfy its currently anticipated cash requirements for the 2001 fiscal year. During 2000, the Company experienced general increases in the costs of plastic resin, but the Company was able to obtain an adequate supply for its needs. In 2001, it is uncertain what will happen to plastic resin prices. The Company anticipates that during 2001 there will be an adequate supply of the major types of plastic resin it purchases. Management feels that inflation did not have a material effect on the Company during 2000, 1999 or 1998. The Company has the ability to adjust prices as the cost of resin changes; however, there is generally a time lag between when the Company incurs a change in resin cost and when that change is passed on to a customer. [Liqui-Box QC/D] [Coke Style Connector] [Rapak Connector] [Pepsi Connector] [Q-3000 "Universal" fitment can be connected to any existing dispensing system.] 5 Mangement's Discussion and Analysis EFFECT OF NEW EUROPEAN CURRENCY The implementation of the Euro currency in certain European countries in 2002 could adversely impact the Company. In January 1999, the "Euro" was introduced in certain Economic and Monetary Union ("EMU") countries. During 2002, all EMU countries are expected to be operating with the Euro as their single currency. Uncertainty exists as to the effect the Euro currency will have on the marketplace. Additionally, all of the final rules and regulations have not yet been defined and finalized by the European Commission with regard to the Euro currency. The Company is still assessing the impact the EMU formation and Euro implementation will have on internal systems and the sale of its products. The Company expects to take appropriate actions based on the results of such assessment. As of March 7, 2001, the Company has not become aware of any negative impact on the Company resulting from the EMU formation and Euro implementation. The Company has not yet determined the cost, if any, related to addressing this issue and there can be no assurance that this issue and its related costs will not have a material adverse effect on the Company's business, operating results and financial condition. NEW ACCOUNTING STANDARD Statement of Financial Accounting Standards (SFAS) No.133, Accounting for Derivative Instruments and Hedging Activities, is effective for all fiscal years beginning after June 15, 2000. SFAS 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. Under SFAS 133, certain contracts that were not formerly considered derivatives may now meet the definition of a derivative. The Company will adopt SFAS 133 effective December 31, 2000 (fiscal year 2001). [Water-In-Bag System (WIBS)] 6 Management does not expect the adoption of SFAS 133 to have a significant impact on the financial position, results of operations, or cash flows of the Company. FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 provides a safe-harbor for forward-looking statements made by or on behalf of the Company. The Company and its representatives may from time to time make written or verbal forward-looking statements, including statements contained in the Company's filings with the Securities and Exchange Commission and in its reports to shareholders. All statements which are not historical fact are forward-looking statements based upon the Company's current plans and strategies and reflect the Company's current assessment of the risks and uncertainties related to its business, including such things as product demand and market acceptance; the economic and business environment and the impact of governmental regulations, both in the United States and abroad; the effects of competitive products and pricing pressures; the impact of fluctuations in foreign currency exchange rates and the implementation of the Euro; capacity; efficiency and supply constraints; weather conditions; and other risks detailed in the Company's press releases, shareholder communications and Securities and Exchange Commission filings. It is not possible to identify or foresee all such risks and uncertainties, and the foregoing should not be considered an exhaustive statement of all risks or uncertainties relating to such forward-looking statements. Actual events affecting the Company and the impact of such events on the Company's operations may vary from those currently anticipated. The Company is not obligated to update or revise these forward-looking statements to reflect new events or circumstances. [Laboratory tests show the Liqui-Box Unglass Bottle outperforms the closest competitor 4 to 1.] 7 CONSOLIDATED BALANCE SHEETS
ASSETS DECEMBER 30, 2000 JANUARY 1, 2000 - -------------------------------------------------------------------------------------------------------------------------- CURRENT ASSETS - -------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents $13,274,000 $11,635,000 Accounts receivable: Trade, net of allowance for doubtful accounts of $756,000 and $730,000, respectively 13,800,000 19,579,000 Other 682,000 446,000 ----------- ----------- Total receivables 14,482,000 20,025,000 Inventories: Raw materials and supplies 9,173,000 8,256,000 Work in process 2,421,000 2,460,000 Finished goods 4,355,000 3,334,000 ----------- ----------- Total Inventories 15,949,000 14,050,000 Deferred tax assets 1,668,000 2,602,000 Other current assets 724,000 808,000 ----------- ----------- TOTAL CURRENT ASSETS 46,097,000 49,120,000 - -------------------------------------------------------------------------------------------------------------------------- PROPERTY, PLANT AND EQUIPMENT - -------------------------------------------------------------------------------------------------------------------------- Land, buildings and leasehold improvements 18,066,000 15,158,000 Equipment and vehicles 82,602,000 77,122,000 Equipment leased to customers 16,266,000 16,691,000 Construction in process 6,432,000 2,706,000 ----------- ----------- TOTAL 123,366,000 111,677,000 Less accumulated depreciation and amortization (84,718,000) (78,448,000) ----------- ----------- Property, plant and equipment, net 38,648,000 33,229,000 - ------------------------------------------------------------------------------------------------------------------------------------ OTHER ASSETS - ------------------------------------------------------------------------------------------------------------------------------------ Goodwill, net of amortization 7,065,000 7,855,000 Deferred charges and other assets, net 4,364,000 4,686,000 ----------- ----------- Total other assets 11,429,000 12,541,000 TOTAL ASSETS $96,174,000 $94,890,000 =========== =========== See notes to consolidated financial statements.
8 CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY DECEMBER 30, 2000 JANUARY 1, 2000 - --------------------------------------------------------------------------------------------------------------------------- CURRENT LIABILITIES - --------------------------------------------------------------------------------------------------------------------------- Accounts payable $4,901,000 $10,955,000 Short-term borrowings 4,577,000 3,283,000 Dividends payable 878,000 903,000 Salaries, wages and related liabilities 2,114,000 1,971,000 Federal, state and local taxes 351,000 - Deposits 1,166,000 1,270,000 Other accrued liabilities 2,343,000 1,496,000 ----------- ----------- TOTAL CURRENT LIABILITIES 16,330,000 19,878,000 - --------------------------------------------------------------------------------------------------------------------------- OTHER NONCURRENT LIABILITIES - --------------------------------------------------------------------------------------------------------------------------- Deferred income taxes 228,000 1,468,000 Commitments and Contingencies - - - --------------------------------------------------------------------------------------------------------------------------- STOCKHOLDERS' EQUITY - --------------------------------------------------------------------------------------------------------------------------- Preferred stock, without par value, 2,000,000 shares authorized; none issued - - Common stock, $.1667 stated value, 20,000,000 shares authorized, 7,262,598 shares issued 1,210,000 1,210,000 Additional paid-in capital 10,593,000 9,505,000 Accumulated other comprehensive income 649,000 1,596,000 Retained earnings 164,499,000 151,608,000 Less: Treasury stock, at cost - 2,871,061 and 2,751,439 shares, respectively (97,335,000) (90,375,000) - --------------------------------------------------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY 79,616,000 73,544,000 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $96,174,000 $94,890,000 =========== ===========
See notes to consolidated financial statements. 9 CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Fifty-two Fifty-two Fifty-two Weeks Ended Weeks Ended Weeks Ended December 30, January 1, January 2, 2000 2000 1999 NET SALES $155,200,000 $165,227,000 $154,656,000 Cost of Sales 101,209,000 103,693,000 99,849,000 ------------ ------------ ------------ Gross Margin 53,991,000 61,534,000 54,807,000 Selling, administrative and development expenses 27,074,000 29,908,000 25,589,000 ------------ ------------ ------------ Operating Income 26,917,000 31,626,000 29,218,000 OTHER INCOME (EXPENSE): Interest and dividend income 610,000 381,000 331,000 Interest expense (145,000) (315,000) (536,000) Other, net (229,000) (43,000) (175,000) ------------ ------------ ------------ INCOME BEFORE INCOME TAXES 27,153,000 31,649,000 28,838,000 TAXES ON INCOME 10,726,000 12,515,000 11,795,000 ------------ ------------ ------------ NET INCOME 16,427,000 19,134,000 17,043,000 OTHER COMPREHENSIVE INCOME (EXPENSE), NET OF TAX: Foreign currency translation adjustments (910,000) (213,000) 8,000 Unrealized gain (loss) on marketable securities (37,000) (376,000) 63,000 ------------ ------------ ------------ Other comprehensive income (expense) (947,000) (589,000) 71,000 ------------ ------------ ------------ COMPREHENSIVE INCOME $15,480,000 $18,545,000 $17,114,000 ============ ============ ============ - ------------------------------------------------------------------------------------------------------------------------- EARNINGS PER SHARE - ------------------------------------------------------------------------------------------------------------------------- Basic $3.71 $4.20 $3.62 Diluted $3.55 $4.00 $3.45 Cash dividends per common share $0.80 $0.76 $0.66 - ------------------------------------------------------------------------------------------------------------------------- WEIGHTED AVERAGE NUMBER OF SHARES USED IN COMPUTING EARNINGS PER SHARE: - ------------------------------------------------------------------------------------------------------------------------- Basic 4,431,017 4,561,383 4,703,198 Diluted 4,626,813 4,785,556 4,944,183
See notes to consolidated financial statements. 10 CONSOLIDATED STATEMENTS OF CASH FLOWS
Fifty-two Fifty-two Fifty-two Weeks Ended Weeks Ended Weeks Ended December 30, January 1, January 2, 2000 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $16,427,000 $19,134,000 $17,043,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,642,000 8,258,000 7,991,000 Provision for loss on accounts receivable 26,000 186,000 370,000 Amortization of other noncurrent assets 843,000 883,000 959,000 Loss (gain) on disposal of property, plant and equipment 66,000 57,000 (33,000) Deferred compensation 188,000 324,000 275,000 Changes in deferred income tax accounts (306,000) 159,000 (1,439,000) Changes in operating assets and liabilities: Accounts receivable 5,418,000 (5,165,000) (592,000) Inventories (1,897,000) 269,000 (563,000) Other current assets 96,000 (128,000) (218,000) Accounts payable (5,999,000) 3,230,000 758,000 Salaries, wages and related liabilities 142,000 79,000 (79,000) Other accrued liabilities 1,079,000 (1,032,000) (515,000) ----------- ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 23,725,000 26,254,000 23,957,000 - -------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: - -------------------------------------------------------------------------------------------------------------------------- Purchase of property, plant and equipment (15,520,000) (6,528,000) (9,050,000) Proceeds from sale of property, plant and equipment 2,372,000 1,586,000 2,042,000 Purchase of patents and other intangibles - - (2,500,000) Purchase of investments - (261,000) - Other changes, net 232,000 656,000 (83,000) ----------- ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (12,916,000) (4,547,000) (9,591,000) - --------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: - --------------------------------------------------------------------------------------------------------------------------- Acquisition of treasury shares (7,816,000) (8,773,000) (23,902,000) Sale of treasury shares 530,000 20,000 255,000 Exercise of stock options 1,226,000 1,117,000 2,603,000 Cash dividends (3,561,000) (3,389,000) (2,880,000) Proceeds from short-term borrowings 2,557,000 13,620,000 6,300,000 Repayment of short-term borrowings (1,263,000) (21,137,000) (5,500,000) ----------- ----------- ----------- NET CASH USED IN FINANCING ACTIVITIES (8,327,000) (18,542,000) (23,124,000) - --------------------------------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (843,000) (215,000) 18,000 - --------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,639,000 2,950,000 (8,740,000) CASH AND CASH EQUIVALENTS, Beginning of year 11,635,000 8,685,000 17,425,000 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS, End of year $13,274,000 $11,635,000 $8,685,000 ----------- ----------- -----------
See notes to consolidated financial statements. 11 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
ADDITIONAL SHARES COMMON PAID-IN OUTSTANDING STOCK CAPITAL ----------- ---------- ---------- BALANCE AT JANUARY 3, 1998 5,157,045 $1,210,000 $7,234,000 Net income Cash dividends Purchase of treasury stock (605,863) Proceeds from exercise of stock options 93,937 698,000 Sale of treasury stock 6,362 147,000 Tax benefit on stock options exercised 234,000 Deferred compensation 275,000 Translation gain Unrealized gain on marketable securities BALANCE AT JANUARY 2, 1999 4,651,481 1,210,000 8,588,000 Net income Cash dividends Purchase of treasury stock (172,168) Proceeds from exercise of stock options 31,454 411,000 Sale of treasury stock 392 13,000 Tax benefit on stock options exercised 169,000 Deferred compensation 324,000 Translation gain Unrealized gain on marketable securities BALANCE AT JANUARY 1, 2000 4,511,159 1,210,000 9,505,000 Net income Cash dividends Purchase of treasury stock (169,962) Proceeds from exercise of stock options 38,991 450,000 Sale of treasury stock 11,349 337,000 Tax benefit on stock options exercised 113,000 Deferred compensation 188,000 Translation gain Unrealized gain on marketable securities BALANCE AT DECEMBER 30, 2000 4,391,537 $1,210,000 $10,593,000 ========== =========== =========== See notes to consolidated financial statements. 12 OTHER COMPREHENSIVE TREASURY RETAINED INCOME STOCK EARNINGS ------------- ------------ ------------ BALANCE AT JANUARY 3, 1998 $2,114,000 $(60,023,000) $121,979,000 Net income 17,043,000 Cash dividends (3,093,000) Purchase of treasury stock (23,902,000) Proceeds from exercise of stock options 1,671,000 Sale of treasury stock 108,000 Tax benefit on stock options exercised Deferred compensation Translation gain 8,000 Unrealized gain on marketable securities 63,000 BALANCE AT JANUARY 2, 1999 2,185,000 (82,146,000) 135,929,000 Net income 19,134,000 Cash dividends (3,455,000) Purchase of treasury stock (8,773,000) Proceeds from exercise of stock options 537,000 Sale of treasury stock 7,000 Tax benefit on stock options exercised Deferred compensation Translation gain (213,000) Unrealized gain on marketable securities (376,000) BALANCE AT JANUARY 1, 2000 1,596,000 (90,375,000) 151,608,000 Net income 16,427,000 Cash dividends (3,536,000) Purchase of treasury stock (7,816,000) Proceeds from exercise of stock options 663,000 Sale of treasury stock 193,000 Tax benefit on stock options exercised Deferred compensation Translation gain (910,000) Unrealized gain on marketable securities (37,000) BALANCE AT DECEMBER 30, 2000 $649,000 $(97,335,000) $164,499,000 ========== ============ ============
13 Notes to Consolidated Financial Statements NOTE 1 ACCOUNTING POLICIES Liqui-Box Corporation and its subsidiaries (the "Company") are manufacturers of bag-in-box flexible packaging, blow-molded containers, filling equipment and bulk liquid dispensing systems for the beverage, processed foods, dairy, detergent, wine and other specialty products industries. The Company operates twelve manufacturing plants in the United States, Europe and India in primarily the plastic packaging industry. Significant accounting policies of the Company are as follows: CONSOLIDATION - The consolidated financial statements include the accounts of Liqui-Box Corporation and its subsidiaries, all of which are wholly-owned. The Company eliminates all significant intercompany balances and transactions in the consolidated financial statements. BASIS OF ACCOUNTING - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH EQUIVALENTS - The Company considers money market funds and all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents are on deposit primarily with three financial institutions. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMER - The Company's exposure to credit risk is impacted by the economic climate affecting its diverse customer base and wide geographic dispersion. The Company manages this risk by performing ongoing credit evaluations of its customers. Reserves for credit losses are maintained by the Company. [The newly designed ORBITER 6000-ESL Rotary Filler.] 14 Approximately 21%, 22% and 20% of the Company's revenues in 2000, 1999 and 1998, respectively, were derived from sales to one major customer. Trade receivables due from this customer were $1,870,000 and $3,908,000 at December 30, 2000 and January 1, 2000, respectively. This decrease from one year to the next was primarily due to heavy buying demand during the last quarter of 1999 in answer to the Y2K event. INVENTORY VALUATION - Inventories are stated at the lower of cost or market. Substantially all of the Company's domestic product inventories are valued on the last-in, first-out (LIFO) method. If current cost had been used, inventories would have increased approximately $1,958,000 and $1,976,000 at December 30, 2000 and January 1, 2000, respectively. The Company's inventory of machine parts and inventories of certain foreign subsidiaries are valued on the first-in, first-out (FIFO) method. These inventories approximated $9,222,000 and $7,817,000 at December 30, 2000 and January 1, 2000, respectively. PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment is stated at cost. Depreciation is computed using the straight-line method (accelerated methods are generally used for tax purposes) in amounts adequate to amortize the cost over the estimated useful lives of the assets as follows: buildings and improvements -- 5 to 30 years and equipment -- 3 to 7 years. GOODWILL AND OTHER INTANGIBLES - Goodwill represents the excess purchase price over net assets acquired and is being amortized using the straight-line method over 15 to 24 years. Other intangibles resulting from business acquisitions, comprised mainly of costs related to sales agreements, patents and non-compete agreements, are being amortized using the straight-line method over 15 to 17 years. Accumulated amortization of goodwill and other intangibles as of December 30, 2000 and January 1, 2000 approximated $7,334,000 and $6,501,000, respectively. At each balance sheet date, a determination is made by the Company as to whether any intangible assets have been impaired based on several criteria including, but not limited to, sales trends, operating factors and undiscounted cash flows. [The newest prototype dispensing valves for Handi-Tap and Bag-In-Box.] 15 Notes to Consolidated Financial Statements MARKETABLE SECURITIES - Marketable securities consist primarily of common stocks and are included in other noncurrent assets. The Company classifies its securities as available for sale and accordingly, carries such at fair market value based on quoted market prices with unrealized gains and losses reported as other comprehensive income. The fair market value, cost and cumulative unrealized gains, net of tax, were $1,190,000, $321,000 and $522,000, respectively, at December 30, 2000 and $1,252,000, $321,000 and $559,000, respectively, at January 1, 2000. The unrealized gain, net of tax, is a supplemental non-cash transaction for the statement of cash flows. TREASURY STOCK - During 2000 and 1999, Liqui-Box repurchased 169,962 common shares at an aggregate cost of $7,816,000 and 172,168 common shares at an aggregate cost of $8,773,000, respectively. Subsequent to December 30, 2000, the Company repurchased 10,667 Liqui-Box common shares at $46.875 per share, which was above the fair market on the date of purchase and 37,450 Liqui-Box common shares at $40 per share, which was the fair market value per share on the date of purchase from officers who resigned or retired at that time. REVENUE RECOGNITION - Revenue from product sales is recognized at the time products are shipped and title transfers to customers. Revenues for estimated returns, allowances and customer rebates are established when revenues are recognized. RESEARCH AND DEVELOPMENT - All research and development costs are expensed as incurred. Such costs amounted to $1,559,000, $1,436,000 and $1,221,000 in 2000, 1999 and 1998, respectively. ADVERTISING COSTS - Advertising costs primarily relate to trade shows, product catalogs and product literature. Such costs are expensed as incurred. Total advertising expenses were $912,000, $830,000 and $769,000 in 2000, 1999 and 1998, respectively. EARNINGS PER SHARE - Basic income per share amounts are based on the weighted average number of shares of common stock outstanding during the years presented. Diluted income per share amounts [Our "bulk bag" aseptic filling systems are placed in over 200 locations worldwide.] 16 are based on the weighted average number of shares of common stock and stock options outstanding during the years presented. FOREIGN CURRENCY TRANSLATION - All assets and liabilities of wholly-owned foreign subsidiaries have been translated using the current exchange rate in effect at the balance sheet dates. Revenue and expense accounts of such subsidiaries have been translated using the average exchange rate prevailing during the year and capital accounts have been translated using historic rates. Gains and losses resulting from the elimination of long-term intercompany receivable balances and the translation of the foreign financial statements into U.S. dollars are reflected as translation adjustments in comprehensive income. The foreign currency cumulative translation adjustment was $128,000, $1,038,000 and $1,250,000 at fiscal year ended 2000, 1999 and 1998, respectively. The related deferred income tax expense (benefit) was $(364,000), $(85,000) and $3,000 in fiscal years 2000, 1999 and 1998, respectively. Foreign currency exchange gains (losses) arise primarily from transactions denominated in foreign currencies and are included in other income (expense) in the amount of approximately $37,000, $5,000 and $(10,000) in 2000, 1999 and 1998, respectively. DISCLOSURES CONCERNING FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying value of cash and cash equivalents; trade and other receivables; accounts payable; fair value of guaranteed debt obligations to certain officers and employees; short-term borrowings and other current liabilities are estimated to approximate fair value because of the short-term maturity of these items. NEW ACCOUNTING STANDARD - Statement of Financial Accounting Standards (SFAS) No.133, Accounting for Derivative Instruments and Hedging Activities, is effective for all fiscal years beginning after June 15, 2000. SFAS 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. Under SFAS 133, certain contracts that were not formerly considered derivatives may now meet the definition of a derivative. The Company will adopt SFAS 133 effective December 31, 2000 (fiscal year 2001). Management does not expect the adoption of SFAS 133 to have a significant impact on the financial position, results of operations, or cash flows of the Company. RECLASSIFICATION -Certain reclassifications have been made to the 1999 financial statements to conform to the 2000 presentation. [Descrition of graphic to come] 17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 TAXES ON INCOME Deferred income taxes are provided for the temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes by applying enacted statutory tax rates applicable to future years to the basis differences. The effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Significant components of the Company's deferred tax liabilities and assets are as follows:
AS OF FISCAL YEAR END DECEMBER 30, 2000 JANUARY 1, 2000 Current deferred tax assets: Accounts receivable $251,000 $209,000 Reserves, accruals and other 1,417,000 2,393,000 ---------- ----------- Net current deferred tax assets $1,668,000 $2,602,000 ========== =========== Long-term deferred tax liabilities: Property, plant and equipment $1,180,000 $1,800,000 Marketable securities and other 453,000 756,000 ---------- ----------- Total long-term deferred tax liabilities 1,633,000 2,556,000 ---------- ----------- Long-term deferred tax assets: Intangibles 400,000 436,000 Deferred compensation and other 1,005,000 652,000 ---------- ----------- Total long-term deferred tax assets 1,405,000 1,088,000 ---------- ----------- Net long-term deferred tax liabilities $228,000 $1,468,000 ========== ===========
Significant components of the provision for income taxes are as follows:
2000 1999 1998 Current: Federal $8,590,000 $10,169,000 $10,762,000 Foreign 399,000 483,000 107,000 State 1,456,000 1,704,000 2,365,000 ----------- ------------ ------------- Total current taxes 10,445,000 12,356,000 13,234,000 ----------- ------------ ------------- Deferred: Federal and State (credit) 281,000 159,000 (1,439,000) ----------- ------------ ------------- Total taxes $10,726,000 $12,515,000 $11,795,000 =========== ============ =============
18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes the difference between income taxes computed at the expected Federal statutory rate and actual amounts:
2000 1999 1998 Expense at Federal statutory rates $9,504,000 $11,077,000 $10,093,000 Foreign income taxes 399,000 321,000 107,000 State income taxes, net of Federal tax benefit 967,000 1,108,000 1,425,000 Other, net (144,000) 9,000 170,000 ----------- ----------- ----------- Total $10,726,000 $12,515,000 $11,795,000 =========== =========== =========== Effective income tax rate 39.5 % 39.5 % 40.9 %
The Company made income tax payments, net of refunds, of approximately $10,094,000, $13,865,000, and $12,746,000 in 2000, 1999 and 1998, respectively. - ------------------------------------------------------------------------------- NOTE 3 COMMITMENTS AND CONTINGENCIES The Company leases property and equipment pursuant to various non-cancelable operating lease agreements. Certain leases contain renewal options and generally provide that the Company shall pay for insurance, taxes and maintenance. Future minimum payments on non-cancelable operating leases with initial or remaining terms in excess of one year for the five fiscal years subsequent to December 30, 2000 are: $1,393,000, $1,266,000, $1,030,000, $984,000 and $489,000. Lease payments under non-cancelable operating leases subsequent to the year 2005 aggregate $1,836,000. Total rent expense including other cancelable and short-term leases was $2,046,000, $1,885,000 and $1,895,000 in 2000, 1999 and 1998, respectively. The case styled Great Pines Water Company, Inc. v. Liqui-Box Corporation, in the United States District Court in Texas reported previously under Item 3 of the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 2000, as filed with the Securities and Exchange Commission, has been settled and was dismissed in July 2000. Terms of the settlement are confidential and have been sealed by the court, however; settlement of this case did not have a material impact on the 2000 results of operations. The Company is also involved in various other litigation arising in the ordinary course of business. The Company believes that the reserves recorded in the Company's consolidated financial statements are adequate to satisfy the outcome of litigation. However, because of the risks associated with any litigation, the ultimate outcome may differ. The Company has guaranteed debt obligations of certain officers and employees totaling $2,427,000 as of December 30, 2000. Subsequent to December 30, 2000, the guaranteed obligations were reduced to $1,187,000. - ------------------------------------------------------------------------------- NOTE 4 STOCK OPTIONS As of December 30, 2000, the Company has stock-based compensation programs which are described below. The Company applies APB Opinion 25 and related interpretations in accounting for its plans. Accordingly, the only compensation expense charged against income is related to deferred compensation for options issued at a discount from market value at the measurement date of the grant. Compensation expense recorded in 2000, 1999 and 1998 was $188,000, $324,000 and $275,000, respectively. 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Had the compensation costs for the Company's stock-based compensation plans been determined using the fair value at the grant dates for awards under those plans consistent with the method of FASB Statement No. 123, the Company's net income and earnings per share would have been as indicated in the pro forma amounts below: - -------------------------------------------------------------------------------
2000 1999 1998 ------- ------- ------- Net income As Reported $16,427 $19,134 $17,043 Pro forma $15,933 $18,920 $16,797 Basic earnings per share As Reported $3.71 $4.20 $3.62 Pro forma $3.60 $4.15 $3.57 Diluted earnings per share As Reported $3.55 $4.00 $3.45 Pro forma $3.44 $3.95 $3.40
- ------------------------------------------------------------------------------- The pro forma amounts are not representative of the effects on reported net income for future years. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2000: dividend yield of 1.6%; expected volatility of 25%; risk-free interest rates of 6.00%; and expected lives of 7 years. The assumption for 1999 grants assumed a dividend yield of 1.5%; expected volatility of 21%; risk-free interest rates of 6.00%; and expected lives of 7 years. The assumption for 1998 grants assumed a dividend yield of 1.7%; expected volatility of 23%; risk-free interest rates of 5.25%; and expected lives of 7 years. Under the 1990 Liqui-Box Stock Option Plan (the "1990 Plan"), the Company has granted incentive, non-qualified and deferred compensation stock options awards. The terms and issuance prices of such awards have been determined by the Board of Directors as limited by Internal Revenue Service rules where applicable. Options granted under the 1990 Plan are exercisable according to the terms of each option. However, in the event of a change in control as defined in the 1990 Plan, options become immediately exercisable, except those awarded within the last six months. Options granted under the 1990 Plan include incentive options, supplemental retirement options and other options. The Company has granted supplemental retirement options under the 1990 Plan to certain Company executives. These options were granted at an exercise price of 50% of the fair market value on the date of grant. Six months after the date of grant, each option vests with respect to 75% of the shares covered by the option if the grantee has signed a non-compete agreement; if a non-compete agreement has not been signed by the grantee, the option vests with respect to 50% of the shares covered by the option. In either case, the option vests based on age with respect to the remaining shares covered by the option. Supplemental retirement options are exercisable only upon termination of employment for other than cause. Other options outstanding under the 1990 Plan include non-qualified options and incentive options for the purchase of common shares. The exercise price per share for the incentive options is not less than the fair market value per share of Company common shares on the date of grant and, for non-qualified options, is at or below fair market value per share on the date of grant. The incentive and a portion of the non-qualified options become exercisable in 25% increments on each anniversary of the grant date. The remaining non-qualified options generally become exercisable in 10% increments on each anniversary of the grant date. The 1990 Plan terminated by its terms on February 9, 2000, except with respect to options then outstanding which had been previously issued under the Plan. Under its LBShares Stock Option Plan, the Company may grant options annually to a majority of its employees based on their individual prior year's wages. Options are granted at exercise prices that equal the fair market value on the date of grant. Options become exercisable in 25% increments on each anniversary of the grant date and are forfeited upon termination of employment for reasons other than death or disability. Options expire 10 years after the grant date. 20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A summary of the status of the Company's stock option plan as of December 30, 2000 and for the three years then ended is presented below:
2000 1999 1998 ------------------------- -------------------------- --------------------------- Shares Weighted-Average Shares Weighted-Average Shares Weighted-Average (000) Exercise Price (000) Exercise Price (000) Exercise Price ----- -------------- ----- -------------- ----- -------------- Outstanding at beginning of year 639 $27 671 $26 721 $25 Granted 200 $32 42 $53 60 $41 Exercised (39) $29 (31) $30 (94) $25 Forfeited (20) $40 (43) $36 (16) $31 ---- --- --- Outstanding at end of year 780 $27 639 $27 671 $26 ==== === === Options Exercisable at year-end 381 $28 387 $28 333 $28
2000 1999 1998 ---- ---- ---- Weighted-average fair value of options granted during the year where market price at date of grant is at exercise price $11 $17 $12
The following table summarizes information about stock options outstanding at December 30, 2000:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------------------------------------------------------------------------------------- Number Weighted-Average Number Range of Outstanding Remaining Weighted-Average Outstanding Weighted-Average Exercise Prices (000) Contractual Life Exercise Price (000) Exercise Price - --------------- ----- ---------------- -------------- ----- -------------- $12.50 to $18.50 202 4.6 $14 55 $14 $22.50 to $24.625 20 1.3 $24 20 $24 $27.25 to $30.75 217 4.1 $28 217 $28 $31.50 to $37.00 268 8.4 $35 61 $35 $38.25 to $53.3125 73 7.7 $47 28 $45 ------------------------------------------------------ ----------------------------------- 780 6.0 $27 381 $28 ====================================================== ===================================
The Company receives tax deductions for the difference between fair market value and the exercise price of common shares at the time non-incentive options are exercised. In addition, common shares obtained through the exercise of stock options which are sold by the optionee within two years of grant or one year of exercise result in a tax deduction for the Company equivalent to the taxable gain recognized by the optionee. The tax benefit of this deduction is reflected in additional paid-in capital and totaled $113,000, $169,000 and $234,000 in 2000, 1999 and 1998, respectively. - ------------------------------------------------------------------------------ NOTE 5 EQUIPMENT LEASED TO CUSTOMERS The Company leases various types of filling machinery and equipment to its customers to support its packaging products. The leases are classified as operating leases and are generally cancelable at the option of the Company. Assets available for lease and assets under current lease contracts are included in the balance sheets as equipment leased to customers. Accumulated depreciation on these assets at December 30, 2000 and January 1, 2000 approximated $12,236,000 and $12,380,000, respectively. Total lease income, including other cancelable and short-term leases was $751,000, $725,000 and $753,000 in 2000, 1999 and 1998, respectively. The future minimum rental income on non-cancelable operating leases for the five fiscal years subsequent to December 30, 2000 and thereafter are: $562,000, $473,000, $315,000, $200,000 and $101,000. 21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 6 CREDIT FACILITIES The Company maintains unsecured credit facilities that aggregate $30,000,000 and include $10,000,000 for a revolving term loan, the availability of which terminates on April 30, 2004, when, at the option of the Company, outstanding amounts can be converted to a term note under the terms of the agreement as defined. No amounts were outstanding under these credit facilities as of December 30, 2000. The remaining portion of the credit facilities of $20,000,000 is a line of credit that expires April 30, 2001; however, the Company has a commitment from the Bank to renew this facility on terms comparable to the existing facility. No amounts were outstanding under this facility as of December 30, 2000. At the Company's option, the credit facilities bear interest at either the prime rate, the London Interbank Offered Rate plus 0.50%, or a negotiated rate, as defined (7.06% at December 30, 2000). The facilities require the maintenance of certain financial ratios and restrict future common cash dividends to 50% of consolidated net income. Additionally, the Company's Europe and India subsidiaries maintain secured credit facilities (subject to certain limitations) that expire in October 2001. The amount outstanding under these facilities was $4,577,000 at December 30, 2000. The credit facilities bear interest at varying rates, based upon the currency borrowed (ranging from 5.75% to 7.5% as of December 30, 2000). The facilities are collateralized by a $1,493,000 guarantee by the Company and the cash balances and accounts receivable of the subsidiaries which total approximately $7,739,000 at December 30, 2000. Total interest paid under all facilities in 2000, 1999 and 1998 was $145,000, $315,000 and $518,000 respectively. - ------------------------------------------------------------------------------ NOTE 7 EMPLOYEE BENEFIT PLANS The Company has a deferred profit sharing plan covering the majority of its employees not covered by a collective bargaining agreement. The Company's contributions to this plan, which are at the discretion of the Board of Directors, were $556,000, $599,000 and $652,000 in 2000, 1999 and 1998, respectively. The Company also has an Employee Stock Ownership Plan ("ESOP") for the majority of employees who are not covered by a collective bargaining agreement. Eligible employees may elect to contribute not less than 2%, nor more than 6% of their annual compensation to the ESOP. For each participating employee, the Company contributes an amount equal to 50% of the employee's contribution. The Company applies SOP 76-3 and related Interpretations in accounting for its ESOP plan. In addition, all shares of common stock of the Company held by the ESOP are treated as outstanding shares in the determination of earnings per share. Dividends paid on all shares held by the ESOP are charged to retained earnings. Total ESOP expenses were $69,000, $82,000 and $73,000 in 2000, 1999 and 1998, respectively. ESOP allocated and unallocated shares were 194,000 and 5,000 at December 30, 2000 and 187,000 and 5,000 at January 1, 2000, respectively. In 1999, the Company adopted an Executive Deferred Compensation Plan. Under the plan, eligible participants can defer up to 100% of their cash compensation as well as realized gains from the exercise of non-qualified stock options. There was no related deferred compensation expense in 2000 and 1999. - ------------------------------------------------------------------------------ NOTE 8 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) ($ in thousands, except per share data)
EARNINGS PER SHARE NET GROSS NET -------------------- 2000 SALES MARGIN INCOME BASIC DILUTED First quarter $36,554 $14,108 $4,567 $1.02 $0.98 Second quarter 43,183 15,545 4,923 1.11 1.06 Third quarter 43,440 14,349 4,449 1.01 0.97 Fourth quarter 32,023 9,989 2,488 0.57 0.54 -------- ------- ------- ----- ----- Total $155,200 $53,991 $16,427 $3.71 $3.55 ======== ======= ======= ===== ===== EARNINGS PER SHARE NET GROSS NET -------------------- 1999 SALES MARGIN INCOME BASIC DILUTED First quarter $36,666 $14,944 $4,424 $0.95 $0.91 Second quarter 44,141 17,849 5,951 1.30 1.24 Third quarter 44,327 16,126 5,811 1.29 1.23 Fourth quarter 40,093 12,615 2,948 0.66 0.62 -------- ------- ------- ----- ----- Total $165,227 $61,534 $19,134 $4.20 $4.00 ======== ======= ======= ===== =====
22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 9 SEGMENT INFORMATION Financial information by segment for each of the three years in the period ended December 30, 2000, is summarized as follows:
UNITED STATES FOREIGN TOTAL ------------- ----------- ------------ 2000 Net sales $135,697,000 $19,503,000 $155,200,000 ------------ ----------- ------------ Operating income $25,677,000 $1,240,000 $26,917,000 ------------ ----------- ------------ Depreciation and amortization $6,863,000 $1,622,000 $8,485,000 ------------ ----------- ------------ Capital expenditures $12,302,000 $3,218,000 $15,520,000 ------------ ----------- ------------ Interest income (expense), net $494,000 $(29,000) $465,000 ------------ ----------- ------------ Income tax expense $10,327,000 $399,000 $10,726,000 ------------ ----------- ------------ Net income (loss) $16,633,000 $(206,000) $16,427,000 ------------ ----------- ------------ Identifiable assets $82,786,000 $13,388,000 $96,174,000 ------------ ----------- ------------ 1999 Net sales $143,740,000 $21,487,000 $165,227,000 ------------ ----------- ------------ Operating income $29,804,000 $1,822,000 $31,626,000 ------------ ----------- ------------ Depreciation and amortization $7,542,000 $1,599,000 $9,141,000 ------------ ----------- ------------ Capital expenditures $5,523,000 $1,005,000 $6,528,000 ------------ ----------- ------------ Interest income (expense), net $148,000 $(82,000) $66,000 ------------ ----------- ------------ Income tax expense $12,032,000 $483,000 $12,515,000 ------------ ----------- ------------ Net income $18,698,000 $436,000 $19,134,000 ------------ ----------- ------------ Identifiable assets $72,233,000 $22,657,000 $94,890,000 ------------ ----------- ------------ 1998 Net sales $134,762,000 $19,894,000 $154,656,000 ------------ ----------- ------------ Operating income $28,216,000 $1,002,000 $29,218,000 ------------ ----------- ------------ Depreciation and amortization $7,627,000 $1,323,000 $8,950,000 ------------ ----------- ------------ Capital expenditures $7,016,000 $2,034,000 $9,050,000 ------------ ----------- ------------ Interest income (expense), net $(205,000) - $(205,000) ------------ ----------- ------------ Income tax expense $11,688,000 $107,000 $11,795,000 ------------ ----------- ------------ Net income $16,851,000 $192,000 $17,043,000 ------------ ----------- ------------ Identifiable assets $72,661,000 $19,413,000 $92,074,000 ------------ ----------- ------------
The Company is managed in two geographic operating segments: United States and Foreign. Foreign operations are in the United Kingdom and India. Inter-segment transactions are accounted for on the same basis as sales to unaffiliated parties. Identifiable assets are those assets associated with a specific segment. There were no significant inter-segment sales. Substantially all sales were derived from plastic packaging products in 2000, 1999 and 1998. 23 INDEPENDENT AUDITORS' REPORT TO THE STOCKHOLDERS AND DIRECTORS OF LIQUI-BOX CORPORATION We have audited the accompanying consolidated balance sheets of Liqui-Box Corporation and subsidiaries as of December 30, 2000 and January 1, 2000, and the related consolidated statements of income and comprehensive income, stockholders' equity and cash flows for each of the three fiscal years in the period ended December 30, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with 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, such consolidated financial statements present fairly, in all material respects, the financial position of Liqui-Box Corporation and subsidiaries at December 30, 2000 and January 1, 2000, and the results of their operations and their cash flows for each of the three fiscal years in the period ended December 30, 2000 in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP Columbus, Ohio March 7, 2001 24 OFFICERS AND DIRECTORS EXECUTIVE OFFICERS SAMUEL B. DAVIS Chairman, Chief Executive Officer and Treasurer SAMUEL N. DAVIS Vice Chairman, Secretary STEWART M. GRAVES President, Chief Operating Officer DIRECTORS CARL J. ASCHINGER, JR. Chairman and Chief Executive Officer, The Columbus Showcase Company Retail and Bakery Deli Showcase Manufacturer CHARLES R. COATE Vice President, Wheeling National Bank SAMUEL B. DAVIS Chairman, Chief Executive Officer and Treasurer, Liqui-Box Corporation SAMUEL N. DAVIS Vice Chairman, Secretary, Liqui-Box Corporation RUSSELL M. GERTMENIAN, ESQ. Partner, Vorys, Sater, Seymour and Pease JOHN TROSTHEIM President, ABB Industrial Systems Inc. ROBERT L. ZEIG Assistant General Counsel, Battelle Memorial Institute LIQUI-BOX LOCATIONS WORLD HEADQUARTERS Worthington, Ohio MANUFACTURING FACILITIES Allentown, Pennsylvania Ashland, Ohio Auburn, Massachusetts Elkton, Maryland Houston, Texas Lake Wales, Florida Ontario, California Sacramento, California Upper Sandusky, Ohio Worthington, Ohio Romiley, England Pune-Maharashtra, India CORPORATE INFORMATION AUDITORS Deloitte & Touche LLP, Columbus, Ohio TRANSFER AGENT Computershare Investor Services, Cleveland, Ohio FORM 10-K The Annual Report to the Securities and Exchange Commission on Form 10-K is available to shareholders upon written request to the Chairman of the Corporation. ANNUAL MEETING The Annual Meeting of Shareholders will be at the Hilton Columbus (Easton), 3900 Chagrin Drive, Columbus, Ohio on April 19, 2001 at 9:00 a.m. STOCK TRADING Liqui-Box is traded on the NASDAQ national market under the symbol LIQB. "Liqui-Box", "Handi-Tap", "QC/D", "Alaskan Falls", "Inpaco" and "Pacesetter" are registered trademarks of Liqui-Box Corporation [LIQUI-BOX CORPORATION LOGO] [LIQUI-BOX LOGO] Liqui-Box Corporation 6950 Worthington-Galena Road Worthington, Ohio 43085 http://www.liquibox.com EX-21 6 a2042557zex-21.txt SUBSIDIARIES OF THE REGISTRANT Exhibit (21) SUBSIDIARIES OF THE REGISTRANT LIQUI-BOX CORPORATION AND SUBSIDIARIES FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 30, 2000
Percentage of Voting Securities Jurisdiction of Owned by Subsidiaries Incorporation the Registrant - --------------------------------- ---------------------- ------------------ Commander Systems, Inc. Ohio 100% Liqui-Box Packaging, Inc.. Ohio 100% Liqui-Box India Ltd. India 100% LB Communications, Inc. Ohio 100% LB Development Corp. Ohio 100% LB Investments, Inc. Delaware 100% LB Europe Limited England 100% Inpaco Corporation Ohio 100% Liqui-Box International, Inc. Ohio 100% Liqui-Box International, Corp. Barbados 100% Liqui-Box of Canada, Ltd. Canada 100% Liqui-Box Asia Ltd. Hong Kong 100%
22 EX-23 7 a2042557zex-23.txt INDEPENDENT AUDITOR'S REPORT Exhibit (23) INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE We consent to the incorporation by reference in Registration Statements No. 33-35815, No. 33-35816, No. 33-35817, and No. 33-42452 of Liqui-Box Corporation on Form S-8 of our report dated March 7, 2001 incorporated by reference in this Annual Report on Form 10-K of Liqui-Box Corporation for the year ended December 30, 2000. Our audits of the consolidated financial statements referred to in our aforementioned report also included the consolidated financial statement schedule of Liqui-Box Corporation, listed in Item 14(a). This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Columbus, Ohio March 22, 2001 23 EX-24 8 a2042557zex-24.txt POWER OF ATTORNEYS POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of LIQUI-BOX CORPORATION, an Ohio corporation, which is about to file with the Securities and Exchange Commission, Washington, D. C., under the provisions of the Securities Exchange Act of 1934, as amended, an ANNUAL REPORT ON FORM 10-K, hereby constitutes and appoints SAMUEL N. DAVIS and PETER J. LINN his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him/her and in his/her name, place and stead, in any and all capacities, to sign such Report and any or all amendments or documents related thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and substitute or substitutes, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes and he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his/her substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his/her hand and seal as of this 16th day of March, 2001. /s/ Samuel B. Davis --------------------------------------- Samuel B. Davis Chairman of the Board, Chief Executive Officer Treasurer and Director 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of LIQUI-BOX CORPORATION, an Ohio corporation, which is about to file with the Securities and Exchange Commission, Washington, D. C., under the provisions of the Securities Exchange Act of 1934, as amended, an ANNUAL REPORT ON FORM 10-K, hereby constitutes and appoints SAMUEL B. DAVIS, and PETER J. LINN his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him/her and in his/her name, place and stead, in any and all capacities, to sign such Report and any or all amendments or documents related thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and substitute or substitutes, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes and he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his/her substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his/her hand and seal as of this 19th day of March, 2001. /s/ Samuel N. Davis --------------------------------------------- Samuel N. Davis Director 25 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of LIQUI-BOX CORPORATION, an Ohio corporation, which is about to file with the Securities and Exchange Commission, Washington, D. C., under the provisions of the Securities Exchange Act of 1934, as amended, an ANNUAL REPORT ON FORM 10-K, hereby constitutes and appoints SAMUEL B. DAVIS, SAMUEL N. DAVIS and PETER J. LINN his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him/her and in his/her name, place and stead, in any and all capacities, to sign such Report and any or all amendments or documents related thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and substitute or substitutes, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes and he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his/her substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his/her hand and seal as of this 20th day of March, 2001. /s/ John Trostheim --------------------------------------------- John Trostheim Director 26 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of LIQUI-BOX CORPORATION, an Ohio corporation, which is about to file with the Securities and Exchange Commission, Washington, D. C., under the provisions of the Securities Exchange Act of 1934, as amended, an ANNUAL REPORT ON FORM 10-K, hereby constitutes and appoints SAMUEL B. DAVIS, SAMUEL N. DAVIS and PETER J. LINN his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him/her and in his/her name, place and stead, in any and all capacities, to sign such Report and any or all amendments or documents related thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and substitute or substitutes, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes and he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his/her substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his/her hand and seal as of this 22nd day of March, 2001. /s/ Charles R. Coate ---------------------------------------------- Charles R. Coate Director 27 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of LIQUI-BOX CORPORATION, an Ohio corporation, which is about to file with the Securities and Exchange Commission, Washington, D. C., under the provisions of the Securities Exchange Act of 1934, as amended, an ANNUAL REPORT ON FORM 10-K, hereby constitutes and appoints SAMUEL B. DAVIS, SAMUEL N. DAVIS and PETER J. LINN his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him/her and in his/her name, place and stead, in any and all capacities, to sign such Report and any or all amendments or documents related thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and substitute or substitutes, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes and he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his/her substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his/her hand and seal as of this 23rd day of March, 2001. /s/ Robert L. Zieg -------------------------------------------- Robert L. Zieg Director 28 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of LIQUI-BOX CORPORATION, an Ohio corporation, which is about to file with the Securities and Exchange Commission, Washington, D. C., under the provisions of the Securities Exchange Act of 1934, as amended, an ANNUAL REPORT ON FORM 10-K, hereby constitutes and appoints SAMUEL B. DAVIS, SAMUEL N. DAVIS and PETER J. LINN his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him/her and in his/her name, place and stead, in any and all capacities, to sign such Report and any or all amendments or documents related thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and substitute or substitutes, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes and he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his/her substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his/her hand and seal as of this 20th day of March, 2001. /s/ Carl J. Aschinger, Jr. -------------------------------------------- Carl J. Aschinger, Jr. Director 29 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of LIQUI-BOX CORPORATION, an Ohio corporation, which is about to file with the Securities and Exchange Commission, Washington, D. C., under the provisions of the Securities Exchange Act of 1934, as amended, an ANNUAL REPORT ON FORM 10-K, hereby constitutes and appoints SAMUEL B. DAVIS, SAMUEL N. DAVIS and PETER J. LINN his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him/her and in his/her name, place and stead, in any and all capacities, to sign such Report and any or all amendments or documents related thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and substitute or substitutes, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes and he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his/her substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his/her hand and seal as of this 21st day of March, 2001. /s/ Russell M. Gertmenian ---------------------------------------------- Russell M. Gertmenian Director 30 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of LIQUI-BOX CORPORATION, an Ohio corporation, which is about to file with the Securities and Exchange Commission, Washington, D. C., under the provisions of the Securities Exchange Act of 1934, as amended, an ANNUAL REPORT ON FORM 10-K, hereby constitutes and appoints SAMUEL B. DAVIS, SAMUEL N. DAVIS and PETER J. LINN his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him/her and in his/her name, place and stead, in any and all capacities, to sign such Report and any or all amendments or documents related thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and substitute or substitutes, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes and he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his/her substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his/her hand and seal as of this 15th day of March, 2001. /s/ Peter J. Linn --------------------------------------------- Peter J. Linn Director of Finance 31 -----END PRIVACY-ENHANCED MESSAGE-----