Common use of Report of Independent Auditors Clause in Contracts

Report of Independent Auditors. We have audited the accompanying consolidated balance sheets of AMETEK, Inc. as of December 31, 1994 and 1993, and the related consolidated statements of income, cash flows and stockholders' equity for each of the three years in the period ended December 31, 1994. 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 generally accepted auditing standards. 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, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of AMETEK, Inc. at December 31, 1994 and 1993, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. As discussed in Note 4 to the consolidated financial statements, the Company changed its method of accounting for marketable securities. Philadelphia, PA January 31, 1995 AMETEK, INC. CONSOLIDATED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, ---------------------------------- 1994 ---------- 1993 ---------- 1992 ---------- Net sales.................................. $ 807,964 ---------- $ 732,195 ---------- $ 769,550 ---------- Expenses: Cost of sales, excluding depreciation.... 619,389 582,001 583,357 Selling, general and administrative...... 79,248 76,759 77,690 Depreciation............................. 29,986 28,277 29,360

Report of Independent Auditors. The Board of Directors and Share Owner ▇▇▇▇▇-▇▇▇▇▇▇▇▇ Glass Container Inc. We have audited the accompanying consolidated balance sheets of AMETEK, ▇▇▇▇▇-▇▇▇▇▇▇▇▇ Glass Container Inc. as of December 31, 1994 2001 and 19932000, and the related consolidated statements of incomeresults of operations, net Parent investment, and cash flows and stockholders' equity for each of the three years in the period ended December 31, 19942001. 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 auditing standardsin the United States. 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, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of AMETEK, ▇▇▇▇▇-▇▇▇▇▇▇▇▇ Glass Container Inc. at December 31, 1994 2001 and 19932000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 19942001, in conformity with accounting principles generally accepted accounting principlesin the United States. As discussed Toledo, Ohio January 24, 2002 ▇▇▇▇▇-▇▇▇▇▇▇▇▇ GLASS CONTAINER INC. CONSOLIDATED RESULTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2001 2000 1999 Revenues: Costs and expenses: Earnings before items below................................. 176.3 64.6 299.6 Provision for income taxes.................................. 87.3 24.0 108.7 Minority share owners' interests in Note 4 earnings of Net earnings................................................ $ 69.4 $ 20.0 $ 179.7 ======== ======== ======== ------------------- CURRENT ASSETS: 2001 -------- 2000 -------- Short-term investments.................................... Receivables including amount from related parties of $1.6 ($1.1 in 2000), less allowances of $32.2 ($40.6 in 2000) for losses and discounts................................ 575.3 3.7 568.0 Prepaid expenses.......................................... Total current assets.................................... 23.9 -------- 1,334.9 57.0 -------- 1,409.7 OTHER ASSETS: Equity investments........................................ 153.9 164.4 Repair parts inventories.................................. 173.5 201.6 Prepaid pension........................................... 49.8 41.2 Deposits, receivables, and other assets................... 421.4 337.4 Excess of purchase cost over net assets acquired, net of accumulated amortization of $531.0 ($417.2 in 2000)..... 1,556.2 1,602.3 -------- -------- Total other assets...................................... 2,354.8 2,346.9 PROPERTY, PLANT, AND EQUIPMENT: Land, at cost............................................. 135.1 130.9 Buildings and equipment, at cost: Buildings and building equipment........................ 526.7 540.7 Factory machinery and equipment......................... 2,828.9 2,809.3 Transportation, office, and miscellaneous equipment..... 79.3 77.5 Construction in progress................................ 196.8 111.3 -------- -------- -------- -------- Net property, plant, and equipment...................... 2,103.3 2,122.9 -------- -------- ------------------- 2001 2000 -------- -------- CURRENT LIABILITIES: Accounts payable including amount to related parties of $30.1 ($9.9 in 2000).................................... 337.0 313.9 EXTERNAL LONG-TERM DEBT..................................... 2,778.5 1,165.5 DEFERRED TAXES.............................................. 161.9 149.1 OTHER LIABILITIES........................................... 275.7 218.4 MINORITY SHARE OWNERS' INTERESTS............................ 159.7 165.1 NET PARENT INVESTMENT: Accumulated other comprehensive loss...................... (547.9) -------- (479.4) -------- Total liabilities and net Parent investment................. $5,793.0 ======== $5,879.5 ======== See accompanying Statement of Significant Accounting Policies and Financial Review. ▇▇▇▇▇-▇▇▇▇▇▇▇▇ GLASS CONTAINER INC. CONSOLIDATED NET PARENT INVESTMENT YEARS ENDED DECEMBER 31, 2001 2000 1999 INVESTMENT BY AND ADVANCES TO PARENT Balance at beginning of year.............................. $ 3,900.3 $3,730.4 $3,701.8 Net intercompany transactions............................. (1,693.6) 174.9 (151.1) Net earnings.............................................. 69.4 20.0 179.7 Net loss for the month ended December 31, 2000 for the change in the fiscal year end of certain international affiliates.............................................. (25.0) Balance at end of year.................................. 2,276.1 ========= 3,900.3======== 3,730.4======== ACCUMULATED OTHER COMPREHENSIVE LOSS Total net Parent investment................................. $ 1,728.2========= $3,420.9======== $3,386.9======== TOTAL COMPREHENSIVE INCOME (LOSS) Net earnings.............................................. $ 69.4 $ 20.0 $ 179.7 Change in certain derivative instruments.................. (2.5) Total................................................... $ 0.9========= $ (115.9)======== $ 16.1======== YEARS ENDED DECEMBER 31, 2001 2000 1999 OPERATING ACTIVITIES: Net earnings.............................................. $ 69.4 $ 20.0 $179.7 Non-cash charges (credits): Depreciation............................................ 286.4 298.3 299.0 Amortization of deferred costs.......................... 72.3 62.2 66.1 Deferred tax provision (credit)......................... 72.5 (64.2) 45.2 Restructuring costs and writeoffs of certain assets..... 65.2 186.0 20.8 (Gains) losses on asset sales........................... 20.7 (40.8) Change in non-current operating assets.................... 18.9 (16.8) (7.8) Change in non-current liabilities......................... (22.1) (0.1) 1.4 Cash provided by operating activities................... 490.6 325.4 398.0 INVESTING ACTIVITIES: Additions to property, plant and equipment................ (364.8) (301.6) (441.9) Acquisitions, net of cash acquired........................ (169.0) (77.2) (34.2) Net cash proceeds from divestitures and other............. 80.0 31.7 327.6 Cash utilized in investing activities................... (453.8) (347.1) (148.5) FINANCING ACTIVITIES: Additions to long-term debt............................... 2,593.0 172.3 222.6 Repayments of long-term debt.............................. (918.5) (357.0) (475.8) Decrease in short-term loans.............................. (35.7) (40.4) (14.9) Net change in intercompany debt........................... (1,643.0) 200.7 8.1 Collateral deposits for certain derivative instruments.... (26.1) Payment of finance fees................................... (45.3) Cash utilized in financing activities................... (75.6) (24.4) (260.0) Effect of exchange rate fluctuations on cash.............. (6.1) 16.1 (17.9) Effect of change in fiscal year end for certain international affiliates................................ 31.9 Increase (decrease) in cash................................. (44.9) 1.9 (28.4) Cash at beginning of year................................... 169.6 167.7 196.1 Cash at end of year......................................... $ 124.7======== $169.6====== $167.7====== STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF CONSOLIDATED STATEMENTS The consolidated financial statements of ▇▇▇▇▇-▇▇▇▇▇▇▇▇ Glass Container, Inc. ("Company") include the accounts of its subsidiaries. Newly acquired subsidiaries have been included in the consolidated financial statementsstatements from dates of acquisition. Prior to December 2000, substantially all of the Company's consolidated foreign subsidiaries reported their results of operations on a one-month lag, which allowed additional time to compile the results. Beginning in December 2000, the one-month lag was eliminated. As a result, the December 2000 results of operations for these subsidiaries, which amounted to a net loss of $25.0 million, was recorded directly to retained earnings in December 2000. The Company changed its uses the equity method of accounting for marketable securitiesinvestments in which it has a significant ownership interest, generally 20% to 50%. PhiladelphiaOther investments are accounted for at cost. RELATIONSHIP WITH ▇▇▇▇▇-▇▇▇▇▇▇▇▇ PACKAGING, PA January 31INC., 1995 AMETEK▇▇▇▇▇-ILLINOIS GROUP, INC. CONSOLIDATED STATEMENT AND ▇▇▇▇▇-ILLINOIS, INC. The Company is a wholly-owned subsidiary of ▇▇▇▇▇-▇▇▇▇▇▇▇▇ Packaging, Inc. ("OB Packaging), and an indirect subsidiary of ▇▇▇▇▇-Illinois Group, Inc. ("OI Group") and ▇▇▇▇▇-Illinois, Inc. ("OI Inc."). Although OI Inc. does not conduct any operations, it has substantial obligations related to outstanding indebtedness, dividends for preferred stock and asbestos-related payments. OI Inc. relies primarily on distributions from its direct and indirect subsidiaries to meet these obligations. For federal and certain state income tax purposes, the taxable income of the Company is included in the consolidated tax returns of OI Inc. and income taxes are allocated to the Company on a basis consistent with separate returns. NATURE OF INCOME YEAR ENDED DECEMBER OPERATIONS The Company is a leading manufacturer of glass container products. The Company's principal product lines in the Glass Containers product segment are glass containers for the food and beverage industries. The Company has glass container operations located in 19 countries. The principal markets and operations for the Company's glass products are in North America, Europe, South America, and Australia. One customer accounted for 11.5%, 10.9%, and 10.3% of the Company's sales in 2001, 2000, and 1999, respectively. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management of the Company to make estimates and assumptions that affect certain amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates, at which time the Company would revise its estimates accordingly. CASH The Company defines "cash" as cash and time deposits with maturities of three months or less when purchased. FAIR VALUES OF FINANCIAL INSTRUMENTS The carrying amounts reported for cash, short-term investments and short-term loans approximate fair value. In addition, carrying amounts approximate fair value for certain long-term debt obligations subject to frequently redetermined interest rates. Derivative financial instruments are included on the balance sheet at fair value. INVENTORY VALUATION The Company values most U.S. inventories at the lower of last-in, first-out (LIFO) cost or market. Other inventories are valued at the lower of standard costs (which approximate average costs) or market. EXCESS OF PURCHASE COST OVER NET ASSETS ACQUIRED Through December 31, ---------------------------------- 1994 ---------- 1993 ---------- 1992 ---------- Net sales.................................. $ 807,964 ---------- $ 732,195 ---------- $ 769,550 ---------- Expenses: Cost 2001, the excess of purchase cost over net assets acquired was being amortized over 40 years. The Company evaluated the recoverability of long-lived assets based on undiscounted projected cash flows, excluding interest and taxes, when factors indicate that an impairment may exist. (See "New Accounting Standards). PROPERTY, PLANT, AND EQUIPMENT In general, depreciation is computed using the straight-line method. Renewals and improvements are capitalized. Maintenance and repairs are expensed as incurred. REVENUE RECOGNITION The Company recognizes sales, excluding depreciation.... 619,389 582,001 583,357 Sellingnet of estimated discounts and allowances, general when title to products is transferred to customers. Shipping and administrative...... 79,248 76,759 77,690 Depreciation............................. 29,986 28,277 29,360handling costs are included with manufacturing, shipping, and delivery costs.