<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
---------
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
-------
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended JUNE 30, 1994
----------------------
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: 1-6690
------
CONTINENTAL CAN COMPANY, INC.
------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 11-2228114
-------------------------- ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
One Aerial Way, Syosset, New York 11791
- ---------------------------------------- --------
(Address of principal executive offices) Zip Code
(516) 822-4940
- ----------------------------------------------------
(Registrant's telephone number, including area code)
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 preceeding 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.
X YES NO
------- -------
The number of shares outstanding of the registrant's Common Stock ($.25 par
value) as of August 11, 1994 is 3,151,157.
<PAGE>
FORM 10-Q
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
Consolidated Balance Sheets as of June 30, 1994 and December 31, 1993 and June
30, 1993.
Consolidated Statements of Earnings and Retained Earnings for the Three Months
Ended June 30, 1994 and 1993
Consolidated Statements of Earnings and Retained Earnings for the Six Months
Ended June 30, 1994 and 1993
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1994 and
1993
Notes to Consolidated Financial Statements
2
<PAGE>
<TABLE>
<CAPTION>
CONTINENTAL CAN COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1994 AND 1993 AND DECEMBER 31, 1993
(In thousands)
June 30, December 31, June 30,
1994 1993 1993
----------------------------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 14,463 $ 12,741 $ 15,496
Investments 295 317 823
Accounts receivable:
Trade accounts 105,637 71,899 90,201
Other 13,891 8,357 5,770
Less allowance for doubtful
accounts (4,196) (3,522) (3,514)
----------------------------------
Accounts receivable, net 115,332 76,734 92,457
Inventories 90,810 69,503 82,000
Prepaid expenses and other current
assets 3,630 4,911 3,683
----------------------------------
Total current assets 224,530 164,206 194,459
Property, plant and equipment, at cost:
Land, building and building
improvements 45,924 43,733 44,877
Manufacturing machinery and equipment 213,030 206,423 188,907
Furniture, fixtures and equipment 8,437 7,379 7,497
Construction in progress 15,782 9,732 17,095
----------------------------------
283,173 267,267 258,376
Less accumulated depreciation and
amortization 102,254 84,192 72,682
----------------------------------
Net property, plant and
equipment 180,919 183,075 185,694
Goodwill, net of accumulated
amortization 14,000 13,369 13,818
Investments - non-current 50 96 101
Other assets 22,819 25,161 24,359
----------------------------------
Total assets $442,318 $385,907 $418,431
==================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
CONTINENTAL CAN COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1994 AND 1993 AND DECEMBER 31, 1993
(In thousands)
June 30, December 31, June 30,
1994 1993 1993
---------------------------------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short term borrowings $ 29,634 $ 6,378 $ 16,553
Accounts payable - trade 58,284 40,828 47,345
Accrued liabilities:
Employee compensation and benefits 13,386 16,075 19,695
Other accrued expenses 33,286 15,887 19,863
Current installments of long term debt
and obligations under capital leases 12,808 13,487 8,863
Income taxes payable 1,167 635 649
Other liabilities 2,160 4,811 7,483
---------------------------------
Total current liabilities 150,725 98,101 120,451
Long term debt, excluding current
installments 134,432 140,481 144,831
Obligations under capital leases,
excluding current installments 13,670 13,501 14,429
Deferred income taxes 3,011 2,717 3,267
Other 37,837 38,137 40,886
---------------------------------
Total liabilities 339,675 292,937 323,864
Minority interest 35,365 32,115 33,748
Stockholders' equity:
Capital stock:
First preferred stock,
cumulative $25 par value.
Authorized 250,000
shares; no shares issued. - - -
Second preferred stock, 4%
non-cumulative, $100 par
value. Authorized 1,535
shares; no shares issued. - - -
Common stock, $.25 par value.
Authorized 20,000,000 shares;
Outstanding 3,151,157
shares in 1994, 2,858,026
shares in Dec. 1993 and
2,873,078 shares in Jun. 1993. 787 720 718
----------------------------------
787 720 718
Additional paid-in capital 42,657 41,414 41,370
Retained earnings 22,930 21,742 20,836
----------------------------------
66,374 63,876 62,924
Cumulative foreign currency translation
adjustment 904 (3,021) (2,105)
----------------------------------
Total stockholders' equity 67,278 60,855 60,819
----------------------------------
$442,318 $385,907 $418,431
==================================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
CONTINENTAL CAN COMPANY, INC.
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
THREE MONTHS ENDED JUNE 30, 1994 AND 1993
(In thousands, except per share data)
1994 1993
-------- --------
<S> <C> <C>
Sales $135,127 $127,460
Cost of goods sold 110,289 103,087
-------- --------
Gross profit 24,838 24,373
Selling, general and administrative
expenses 16,821 15,997
-------- --------
Operating income 8,017 8,376
Other income (expense):
Interest expense, net (4,446) (5,864)
Foreign currency exchange gain (loss) (74) 35
Other - net (35) 63
-------- --------
Net other expense (4,555) (5,766)
-------- --------
Income before provision for income
taxes, minority interest and
extraordinary item 3,462 2,610
Provision for income taxes 1,478 1,677
-------- --------
Income before minority interest and
extraordinary item 1,984 933
Minority interest 271 (25)
-------- --------
1,713 958
Extraordinary Item (73) -
-------- --------
Net income $ 1,640 $ 958
======== ========
Net earnings (loss) per common share -
Primary:
Before extraordinary item $ 0.53 $ 0.32
Extraordinary item (0.02) -
-------- --------
Net earnings per common share $ 0.51 $ 0.32
======== ========
Earnings (loss) per common share,
assuming
full dilution:
Before extraordinary item $ 0.52 $ 0.29
Extraordinary item (0.02) -
-------- --------
Net earnings (loss) per common share
assuming full dilution $ 0.50 $ 0.29
======== ========
RETAINED EARNINGS
Balance at beginning of period $ 21,290 $ 19,930
Net income 1,640 958
-------- --------
22,930 20,888
Dividends declared - 52
-------- --------
Balance at end of period $ 22,930 $ 20,836
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
CONTINENTAL CAN COMPANY, INC.
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
SIX MONTHS ENDED JUNE 30, 1994 AND 1993
(In thousands except per share data)
1994 1993
-------- --------
<S> <C> <C>
Sales $250,977 $238,232
Cost of goods sold 205,804 193,753
-------- --------
Gross profit 45,173 44,479
Selling, general and administrative
expenses 32,651 31,327
-------- --------
Operating income 12,522 13,152
Other income (expense):
Interest expense, net (9,054) (11,589)
Foreign currency exchange loss (25) (50)
Other - net 2 100
-------- --------
Net other expense (9,077) (11,539)
-------- --------
Income before provision for income
taxes,minority interest,
extraordinary item and cumulative
effect of accounting change 3,445 1,613
Provision for income taxes 2,169 2,060
-------- --------
Income (loss) before minority interest,
extraordinary item and cumulative
effect of accounting change 1,276 (447)
Minority interest (248) (581)
-------- --------
Income before extraordinary item and
cumulative effect of accounting change 1,524 134
Extraordinary Item (73) -
Cumulative effect of accounting
change, net (263) -
-------- ---------
Net income $ 1,188 $ 134
======== ========
Earnings (loss) per common share -
Primary:
Before cumulative effect of
accounting change $ 0.49 $ 0.04
Extraordinary Item (0.02) -
Cumulative effect of accounting change (0.08) -
-------- --------
Net earnings per common share $ 0.39 $ 0.04
======== ========
Earnings (loss) per common share,
assuming full dilution:
Before cumulative effect of
accounting change $ 0.46 $ 0.05
Extraordinary Item (0.02) -
Cumulative effect of accounting change (0.08) -
-------- --------
Net earnings per common share,
assuming full dilution $ 0.36 $ 0.05
======== ========
RETAINED EARNINGS
Balance at beginning of period $ 21,742 $ 20,754
Net income 1,188 134
-------- --------
22,930 20,888
Dividends Declared - 52
-------- --------
Balance at end of period $ 22,930 $ 20,836
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
CONTINENTAL CAN COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1994 AND 1993
(In thousands)
1994 1993
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 1,187 $ 134
Depreciation and Amortization 17,445 16,880
Minority Interest (248) (581)
Cumulative Effect of Accounting (73) -
Change, Net
Other Adjustments (23,053) (12,885)
-------- --------
Net Cash Provided by (Used in)
Operating Activities (4,742) 3,548
Net Cash Provided by (Used in)
Investing Activities:
Capital Expenditures (9,826) (9,306)
Other 53 104
-------- --------
Net Cash Used in Investing Activities (9,773) (9,202)
Net Cash Provided by Financing
Activities 15,574 7,009
Effect of Exchange Rate Changes on Cash 663 (134)
-------- --------
Net Increase in Cash 1,722 1,221
Cash at Beginning of Period 12,741 14,275
-------- --------
Cash at End of Period $ 14,463 $ 15,496
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1994
(1) Accounting Policies and Other Matters
(a) Basis of Presentation
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is
suggested that these consolidated financial statements be read in
conjunction with the financial statements and notes thereto included
in the Company's 1993 Annual Report to Stockholders.
(b) Adjustments
The results for the interim period reported herein have not been
audited; however, in the opinion of management, all adjustments
necessary for a fair presentation of the interim period statements
have been made.
(c) Earnings Per Common Share
Earnings per common share is based on the weighted average number of
common and common equivalent shares outstanding. Common equivalent
shares include dilutive stock options (using the treasury stock
method) exercisable under the Company's option plans. Weighted
average shares outstanding in the second quarter of 1994 and 1993,
were 3,229,988 and 3,031,979, respectively and for the first six
months of 1994 and 1993 were 3,131,969, and 3,033,119, respectively.
For both periods of 1993 and 1994, earnings per common share,
assuming full dilution, gives effect to the conversion of the
Company's outstanding 10-3/4% Convertible Subordinated Debentures
(the "Debentures") due May 1, 1994 as if such Debentures had been
converted on the issue date, after elimination of related interest
expense, net of income tax effect. All Debentures were converted
during the second quarter of 1994. See Note 4.
(2) Inventories
Inventories consist principally of packaging materials. The components of
inventory were as follows: (000's omitted)
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1994 1993 1993
-------- ------------ --------
<S> <C> <C> <C>
Finished goods $43,155 $31,720 $39,632
Work in process 9,621 5,834 8,761
Raw materials & supplies 37,948 31,774 33,495
------- ------- -------
90,724 69,328 81,888
LIFO reserve 86 175 112
------- ------- -------
$90,810 $69,503 $82,000
======= ======= =======
</TABLE>
(3) Merger of Subsidiaries
During the second quarter of 1994, the Company's subsidiaries Onena Bolsas
de Papel S.A. (Onena), Industrias Gomariz S.A. (Ingosa) and Dixie Union S.A.
legally merged with effect from January 1, 1994. The provincial government
through SODENA, an economic development corporation, was issued 41% of the
merged entity, Onena Bolsas de Papel S.A., in exchange for the elimination of
$3,905,000 (534 million pesetas) in overdue local taxes owed by Ingosa. In
addition, SODENA provided a loan in the amount of $2,272,000 (309 million
pesetas) on an interest-free basis for three years. These transactions have
been
8
<PAGE>
accounted for under the purchase method with the excess over the negotiated
value of SODENA's equity interest ($1,097,000;150 million pesetas) and the
excess over the loan amount discounted at a 7% annual rate ($439,000;57
million pesetas), being allocated to property, plant and equipment.
(4) Common Stock
During the second quarter of 1994, the Company's Debentures, totaling
$1,164,187 in principal amount, matured. All of the Debentures were
surrendered for conversion and 267,799 shares of common stock were issued.
Holders of the Debentures had two options with regard to the conversion, one
of which required the payment of additional cash. Pursuant to this option
$146,152 was received, $146,152 principal amount of Debentures were
surrendered, and 38,974 shares of Common Stock were issued. The remaining
$1,018,035 principal amount of Debentures were surrendered for 228,825 shares
of Common Stock.
The elimination of the Debentures and the additional cash received resulted
in the reduction of Long Term Debt by $1,164,187, an increase in the Common
Stock account of $66,950 and an increase in the Paid-in Capital account of
$1,243,389.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
----------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Sales during the second quarter of 1994 increased 6% to $135,127,000,
as compared to $127,460,000 in the second quarter of 1993. Sales in the first
six months of 1994 increased 5% to $250,977,000 from $238,232,000 in the same
prior year period. Higher 1994 sales resulted from volume increases in each
of the Company's packaging subsidiaries, as well as from the acquisition of
Ingosa in late 1993. Reducing the amount of the sales improvement was the
effect of foreign currency translation rate differences which lowered reported
sales by the Company's European operations by approximately 5% ($4.7 million)
in the first six months of 1994 and 3% ($2.3 million) in the second quarter of
1994, as compared to the same prior year periods.
Gross profit was higher in each period of 1994 than the same prior year
period although gross profit as a percentage of sales declined approximately
0.7% in the second quarter and first six months of 1994 from the same periods
of 1993. This decline primarily resulted from a higher mix of lower margin
business at Ferembal and competitive pressure in the European flexible film
business in Europe, which more than offset margin improvement at PCI.
Selling, general and administrative expense as a percentage of sales
declined approximately 0.4% in the first six months of 1994 versus the same
prior year period. Selling, general and administrative expense as a
percentage of sales in the second quarter of 1994 and 1993 was approximately
equal over both periods. Selling, general and administrative expense was
negatively impacted during both periods of 1994 by expenses relating to the
merger of Ingosa and Onena. See Note 3. Because of these various factors,
operating income amounted to $8,017,000 and $12,522,000 in the second quarter
and first six months of 1994, respectively, as compared to $8,376,000 and
$13,152,000 in the same periods of 1993.
Net interest expense declined to $4,446,000 in the second quarter of 1994
from $5,864,000 in the same period of 1993. Net interest expense declined to
$9,054,000 in the first six months of 1994 as compared to $11,589,000 in the
same period of 1993. This decline resulted from lower consolidated debt
levels, and lower interest rates principally at the Company's European
subsidiaries.
Provision for income taxes amounted to $1,478,000 and $2,169,000 in the
second quarter and first six months of 1994, respectively, as compared to
$1,677,000 and $2,060,000 in the second quarter and first six months of 1993,
reflecting a lower level of tax benefits for accounting purposes in loss
operations than tax expense in the Company's profitable operations. Minority
interest during each period reflects the interests of other shareholders in
some of the Company's subsidiaries.
9
<PAGE>
Net income before extraordinary items amounted to $1,713,000 ($.53 per
share)in the second quarter of 1994 as compared to $958,000 ($.32 per share)
in the second quarter of 1993. During the second quarter and first six months
of 1994, the Company recognized an extraordinary charge amounting to $73,000
($0.02 per share) related to the purchase and cancellation by PCI of $3
million of its 10.75% Senior Secured Notes. During the first six months of
1994, the Company recorded a charge amounting to $263,000 ($.08 per share)
resulting from the cumulative effect of an accounting change. Net income in
the first six months of 1994 amounted to $1,187,000 ($.39 per share) as
compared to net income of $134,000 ($.04 per share) in 1993.
FINANCIAL CONDITION
-------------------
CAPITAL REQUIREMENTS
--------------------
The Company acquired $3,032,000 and $9,826,000 of capital assets during
the second quarter and first six months of 1994, respectively, consisting
primarily of packaging equipment. These assets were acquired for cash.
Similar types of assets are expected to be acquired for the remainder of 1994
and total capital expenditures are expected to amount to approximately $24
million.
The Company intends to actively pursue acquisition possibilities in 1994.
It is presently the Company's intention to finance any acquisitions by
leveraging the assets of the business to be acquired, with existing cash,
through bank borrowings or, possibly, through the issuance of stock.
LIQUIDITY
The Company's liquidity position declined slightly during the second
quarter of 1994. Working capital decreased to approximately $73.8 million,
and the current ratio amounted to 1.49 at June 30, 1994 compared to 1.67 at
December 31, 1993.
For the six months ended June 30, 1994, net cash used by operating
activities amounted to $4,742,000 and was to fund an increase in working
capital. The increase in the Company's working capital requirements in the
second and third quarters of each year is primarily a result of the
seasonality of Ferembal's business which peaks at these periods because of the
harvest of vegetable crops for canning. Net cash used in investing
activities, primarily capital expenditures, amounted to $9,773,000 during the
first six months of 1994. The cash required for the Company's operating and
investing activities for this period in excess of that provided by net income
and depreciation was financed with short term borrowings which were also used
to make payments of long term debt. The Company expects that, as Ferembal
collects receivables and reduces its seasonally high inventories relating to
vegetable canning, these short term borrowings will be repaid.
At June 30, 1994, the Company had an available credit line under a
Revolving Credit Agreement of $2.1 million. In addition, the Company's
consolidated subsidiaries had available approximately $26 million in credit
lines and bank overdraft facilities at June 30, 1994. However, the Company's
ability to draw upon these lines for other than its subsidiaries' needs is
restricted.
The Company expects that cash from operations and its existing banking
facilities will be sufficient to meet its operating needs for the remainder of
1994. On a long term basis the Company believes that existing funds, cash
generated by operations and its existing banking facilities will be sufficient
to meet its cash needs.
10
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------
(a) Exhibits Required
(11) Statement re computation of per share earnings
See Note 1(c) on Page 8.
All other items for which provision is made in the applicable
regulations of the Securities and Exchange ommission have been omitted
as they are not required under the related instructions or they are
inapplicable.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed since
March 31, 1994.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONTINENTAL CAN COMPANY, INC.
(REGISTRANT)
By: /s/ Abdo Yazgi
---------------------------
Abdo Yazgi
Principal Financial Officer
and on behalf of registrant
DATED: AUGUST 11, 1994
11
