<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 SEPTEMBER 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 November 7, 1994 is 3,151,157.
<PAGE>
FORM 10-Q
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
Consolidated Balance Sheets as of September 30, 1994 and December 31, 1993 and
September 30, 1993.
Consolidated Statements of Earnings and Retained Earnings for the Three Months
Ended September 30, 1994 and 1993
Consolidated Statements of Earnings and Retained Earnings for the Nine Months
Ended September 30, 1994 and 1993
Consolidated Statements of Cash Flows for the Nine Months Ended September 30,
1994 and 1993
Notes to Consolidated Financial Statements
2
<PAGE>
CONTINENTAL CAN COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1994 AND 1993 AND DECEMBER 31, 1993
<TABLE>
<CAPTION>
( In thousands )
September 30, December 31, September 30,
1994 1993 1993
--------------------------------------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 18,999 $ 12,741 $ 12,545
Investments 294 317 319
Accounts receivable:
Trade accounts 113,626 71,899 112,532
Other 9,637 8,357 7,890
Less allowance for doubtful accounts (4,552) (3,522) (4,043)
-------------------------------------------
Accounts receivable, net 118,711 76,734 116,379
Inventories 81,085 69,503 73,006
Prepaid expenses and other current assets 1,558 4,911 3,461
-------------------------------------------
Total current assets 220,647 164,206 205,710
Property, plant and equipment, at cost:
Land, building and building improvements 47,864 43,733 45,292
Manufacturing machinery and equipment 217,632 206,423 192,378
Furniture, fixtures and equipment 8,508 7,379 7,760
Construction in progress 17,867 9,732 20,663
-------------------------------------------
291,871 267,267 266,093
Less accumulated depreciation and amortization 110,499 84,192 81,539
-------------------------------------------
Net property, plant and equipment 181,372 183,075 184,554
Goodwill, net of accumulated amortization 14,191 13,369 13,821
Investments - non-current 50 96 100
Other assets 21,888 25,161 25,125
-------------------------------------------
Total assets $438,148 $385,907 $429,310
===========================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
CONTINENTAL CAN COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1994 AND 1993 AND DECEMBER 31, 1993
<TABLE>
<CAPTION>
( In thousands )
September 30, December 31, September 30,
1994 1993 1993
-------------------------------------------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities :
Short term borrowings $ 16,204 $ 6,378 $ 18,883
Accounts payable - trade 60,453 40,828 55,956
Accrued liabilities:
Employee compensation and benefits 23,561 16,075 20,282
Other accrued expenses 22,150 15,887 19,810
Current installments of long term debt and
obligations under capital leases 13,323 13,487 10,048
Income taxes payable 2,554 635 1,160
Other liabilities 4,880 4,811 8,677
------------------------------------------
Total current liabilities 143,125 98,101 134,816
Long term debt, excluding current installments 133,097 140,481 141,710
Obligations under capital leases, excluding
current installments 13,729 13,501 14,413
Deferred income taxes 3,083 2,717 3,568
Other 37,497 38,137 38,843
------------------------------------------
Total liabilities 330,531 292,937 333,350
Minority interest 35,718 32,115 33,377
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 Sep. 1993. 788 720 718
------------------------------------------
788 720 718
Additional paid-in capital 42,872 41,414 41,370
Retained earnings 26,032 21,742 22,095
------------------------------------------
69,692 63,876 64,183
Cumulative foreign currency translation adjustment 2,207 (3,021) (1,600)
------------------------------------------
Total stockholders' equity 71,899 60,855 62,583
------------------------------------------
$438,148 $385,907 $429,310
==========================================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
CONTINENTAL CAN COMPANY, INC.
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
THREE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
<TABLE>
<CAPTION>
(In thousands, except per share data)
1994 1993
---------- ----------
<S> <C> <C>
Sales $154,492 $134,213
Cost of goods sold 126,489 107,982
---------- ----------
Gross profit 28,003 26,231
Selling, general and administrative expenses 17,148 17,457
---------- ----------
Operating income 10,855 8,774
Other income (expense):
Interest expense , net (4,617) (6,273)
Foreign currency exchange loss (131) (189)
Other - net (221) 10
---------- ----------
Net other expense (4,969) (6,452)
---------- ----------
Income before provision for income taxes ,
minority interest and extraordinary item 5,886 2,322
Provision for income taxes 2,308 1,884
---------- ----------
Income before minority interest and
extraordinary item 3,578 438
Minority interest 476 (821)
---------- ----------
Net income $3,102 $1,259
========== ==========
Net earnings per common share - Primary $0.94 $0.42
========== ==========
Net earnings (loss) per common share
assuming full dilution $0.94 $0.38
========== ==========
RETAINED EARNINGS
Balance at beginning of period $22,930 $20,836
Net income 3,102 1,259
---------- ----------
Balance at end of period $26,032 $22,095
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
CONTINENTAL CAN COMPANY, INC.
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
<TABLE>
<CAPTION>
(In thousands except per share data)
1994 1993
----------- -----------
<S> <C> <C>
Sales $405,469 $372,445
Cost of goods sold 332,293 301,735
----------- -----------
Gross profit 73,176 70,710
Selling, general and administrative expenses 49,799 48,783
----------- -----------
Operating income 23,377 21,927
Other income (expense):
Interest expense , net (13,671) (17,862)
Foreign currency exchange loss (156) (239)
Other - net (219) 109
----------- -----------
Net other expense (14,046) (17,992)
----------- -----------
Income before provision for income taxes ,
minority interest, extraordinary item and
cumulative effect of accounting change 9,331 3,935
Provision for income taxes 4,477 3,944
----------- -----------
Income (loss) before minority interest, extraordinary
item and cumulative effect of accounting change 4,854 (9)
Minority interest 228 (1,402)
----------- -----------
Income before extraordinary item and
cumulative effect of accounting change 4,626 1,393
Extraordinary Item (73) -
Cumulative effect of accounting change, net (263) -
----------- -----------
Net income $4,290 $1,393
=========== ===========
Earnings (loss) per common share - Primary:
Before cumulative effect of accounting change $1.44 $0.46
Extraordinary Item (0.02)
Cumulative effect of accounting change (0.08) -
----------- -----------
Net earnings per common share $1.34 $0.46
=========== ===========
Earnings (loss) per common share, assuming
full dilution:
Before cumulative effect of accounting change $1.38 $0.44
Extraordinary Item (0.02)
Cumulative effect of accounting change (0.08) -
----------- -----------
Net earnings per common share ,
assuming full dilution $1.28 $0.44
=========== ===========
RETAINED EARNINGS
Balance at beginning of period $21,742 $20,754
Net income 4,290 1,393
----------- -----------
26,032 22,147
Dividends Declared - 52
----------- -----------
Balance at end of period $26,032 $22,095
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
CONTINENTAL CAN COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
<TABLE>
<CAPTION>
(In thousands)
1994 1993
------------ ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $4,290 $1,392
Depreciation and Amortization 25,973 26,674
Minority Interest 228 (1,402)
Cumulative Effect of Accounting Change, Net (73) -
Other Adjustments (8,955) (19,193)
------------ ------------
Net Cash Provided by Operating Activities 21,463 7,471
Net Cash Provided by (Used in) Investing Activities:
Capital Expenditures (16,996) (16,223)
Other 509 673
------------ ------------
Net Cash Used in Investing Activities (16,487) (15,550)
Net Cash Provided by Financing Activities 605 6,449
Effect of Exchange Rate Changes on Cash 677 (100)
------------ ------------
Net Increase (Decrease) in Cash 6,258 (1,730)
Cash at Beginning of Period 12,741 14,275
------------ ------------
Cash at End of Period $18,999 $12,545
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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 third quarter of
1994 and 1993, were 3,297,685 and 3,019,946 respectively and for
the first nine months of 1994 and 1993 were 3,222,161, and
3,030,607, respectively.
For the first nine months of 1993 and 1994 and for the third
quarter of 1993, earnings per common share, assuming full
dilution, gives effect to the conversion of the Company's then
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:
<TABLE>
<CAPTION>
(000's omitted)
September 30, December 31, September 30,
1994 1993 1993
-------- -------- --------
<S> <C> <C> <C>
Finished goods $37,141 $31,720 $34,672
Work in process 8,781 5,834 7,506
Raw materials & supplies 33,045 31,774 30,716
------- ------- -------
80,967 69,328 72,894
LIFO reserve 118 175 112
------- ------- -------
$81,085 $69,503 $73,006
======= ======= =======
</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
equity 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
8
<PAGE>
of $2,272,000 (309 million pesetas) on an interest-free basis for three years.
These transactions have been 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 current installments 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 third quarter of 1994 increased 15% to $154,492,000, as
compared to $132,213,000 in the third quarter of 1993. Sales in the first nine
months of 1994 increased 7% to $405,469,000 from $372,445,000 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. Sales were effected by foreign currency translation rate differences
which improved reported sales by the Company's European operations by
approximately $7.7 million in the third quarter of 1994 but reduced sales by
approximately $1 million in the first nine months 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
1.4% in the third quarter and 0.9% in the first nine months of 1994 from the
same periods of 1993. This decline primarily resulted from higher raw material
prices at Ferembal and competitive pressure in the European flexible film
business in Europe, which more than offset the percentage margin improvement at
PCI.
Selling, general and administrative expense as a percentage of sales
declined approximately 0.8% in the first nine months of 1994 versus the same
prior year period. Selling, general and administrative expense as a percentage
of sales in the third quarter of 1994 was approximately 2% lower than in 1993.
The reduction in selling, general and administrative expense as a percentage of
sales primarily reflects the fixed nature of many of these expenses in relation
to increased volume. Because of these various factors, operating income amounted
to $10,855,000 and $23,377,000 in the third quarter and first nine months of
1994, respectively, as compared to $8,774,000 and $21,927,000 in the same
periods of 1993.
Net interest expense declined to $4,617,000 in the third quarter of 1994
from $6,273,000 in the third quarter of 1993. Net interest expense declined to
$13,761,000 in the first nine months of 1994 as compared to $17,862,000 in the
same period of 1993. This decline resulted from lower consolidated debt levels,
and lower interest rates at the Company's European subsidiaries.
Provision for income taxes amounted to $2,308,000 and $4,477,000 in the
third quarter and first nine months of 1994, respectively, as compared to
$1,884,000 and $3,944,000 in the third quarter and first nine months of 1993,
reflecting a lower level of tax benefits for accounting purposes in loss
operations than tax
9
<PAGE>
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.
Net income before extraordinary items amounted to $3,102,000 ($0.94 per
share) in the third quarter of 1994 as compared to $1,259,000 ($.42 per share)
in the third quarter of 1993. During the first nine 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, and a charge amounting to $263,000 ($.08 per share)
resulting from the cumulative effect of an accounting change. Net income in the
first nine months of 1994 amounted to $4,290,000 ($1.34 per share) as compared
to net income of $1,393,000 ($0.46 per share) in 1993.
FINANCIAL CONDITION
CAPITAL REQUIREMENTS
The Company acquired $7,170,000 and $16,996,000 of capital assets during
the third quarter and first nine 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 $23 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 first nine
months of 1994. Working capital increased to approximately $77.5 million, and
the current ratio amounted to 1.54 at September 30, 1994 compared to 1.67 at
December 31, 1993.
For the nine months ended September 30, 1994, net cash provided by
operating activities amounted to $21,463,000. The increase in the Company's
working capital requirements in the third quarter of each year is primarily a
result of the seasonality of Ferembal's business which peaks at this period
because of the harvest of vegetable crops for canning. Net cash used in
investing activities, primarily capital expenditures, amounted to $16,996,000
during the first nine months of 1994. In the same period, the Company repaid
approximately $8 million in long term debt and increased short term borrowings
by approximately $8.5 million. 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 September 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 $28 million in credit
lines and bank overdraft facilities at September 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.
(27)Financial Data Schedule Page 12.
All other items for which provision is made in the applicable regulations of
the Securities and Exchange Commission 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 June 30, 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: NOVEMBER 7, 1994
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 18,999
<SECURITIES> 294
<RECEIVABLES> 123,263
<ALLOWANCES> 4,552
<INVENTORY> 81,085
<CURRENT-ASSETS> 220,647
<PP&E> 291,871
<DEPRECIATION> 110,499
<TOTAL-ASSETS> 438,148
<CURRENT-LIABILITIES> 143,125
<BONDS> 146,826
<COMMON> 788
0
0
<OTHER-SE> 71,111
<TOTAL-LIABILITY-AND-EQUITY> 438,148
<SALES> 405,469
<TOTAL-REVENUES> 405,469
<CGS> 332,293
<TOTAL-COSTS> 382,092
<OTHER-EXPENSES> 375
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,671
<INCOME-PRETAX> 9,331
<INCOME-TAX> 4,477
<INCOME-CONTINUING> 4,626
<DISCONTINUED> 0
<EXTRAORDINARY> 73
<CHANGES> 263
<NET-INCOME> 4,290
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 1.28
</TABLE>
