<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, 1995
----------------------
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 4, 1995 is 3,165,057.
<PAGE>
FORM 10-Q
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
Consolidated Balance Sheets as of June 30, 1995 and December 31, 1994 and June
30, 1994.
Consolidated Statements of Earnings and Retained Earnings for the Three Months
Ended June 30, 1995 and 1994
Consolidated Statements of Earnings and Retained Earnings for the Six Months
Ended June 30, 1995 and 1994
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1995 and
1994
Notes to Consolidated Financial Statements.
2
<PAGE>
<TABLE>
<CAPTION>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND 1994 AND DECEMBER 31, 1994
(UNAUDITED)
(In thousands)
JUNE 30, DEC. 31, JUNE 30,
1995 1994 1994
-------- -------- --------
<S> <C> <C> <C>
ASSETS:
-------
Current Assets:
Cash and cash equivalents $ 5,799 $ 8,776 $ 14,463
Investments - 292 295
Accounts Receivable:
Trade accounts 122,354 102,255 105,637
Other 19,103 15,964 13,891
Less allowance for doubtful accounts (5,575) (5,316) (4,196)
-------- -------- --------
Accounts receivable, net 135,882 112,903 115,332
Inventories 109,061 82,432 90,810
Prepaid expenses and other current
assets 4,359 4,700 3,630
-------- -------- --------
TOTAL CURRENT ASSETS 255,101 209,103 224,530
-------- -------- --------
Property, plant and equipment, at cost:
Land, building and improvements 51,809 48,750 45,924
Manufacturing machinery and equipment 237,843 230,365 213,030
Furniture, fixtures and equipment 9,718 8,536 8,437
Construction in progress 28,178 9,505 15,782
-------- -------- --------
327,548 297,156 283,173
Less accumulated depreciation and
amortization 136,894 116,786 102,254
-------- -------- --------
Net property, plant and equipment 190,654 180,370 180,919
Goodwill, net of accumulated 14,845 13,997 14,000
amortization
Other assets 19,460 20,115 22,869
-------- -------- --------
TOTAL ASSETS $480,060 $423,585 $442,318
======== ======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
JUNE 30, 1995 AND 1994 AND DECEMBER 31, 1994
(UNAUDITED)
(In thousands)
JUNE 30, DEC. 31, JUNE 30,
1995 1994 1994
-------- -------- --------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY:
-------------------------------------
Current Liabilities:
Short term borrowings $ 44,919 $ 21,855 $ 29,634
Accounts payable - trade 74,017 60,540 58,284
Accrued liabilities:
Employee compensation and benefits 18,599 19,072 13,386
Other accrued expenses 22,318 16,143 33,286
Current installments of long term debt
and obligations under capital leases 13,993 13,043 12,808
Income taxes payable 1,860 1,160 1,167
Other current liabilities 9,411 5,942 2,160
-------- -------- --------
TOTAL CURRENT LIABILITIES 185,117 137,755 150,725
Long term debt, excluding current
installments 125,882 128,363 134,432
Obligations under capital leases,
excluding current installments 13,974 13,998 13,670
Deferred income taxes 4,240 3,747 3,011
Other 39,287 36,285 37,837
-------- -------- --------
TOTAL LIABILITIES 368,500 320,148 339,675
Minority interest 32,868 32,741 35,365
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 3,165,057
shares in 1995, 3,151,157
shares in Dec. 1994 and June 1994. 791 788 787
-------- -------- --------
791 788 787
Additional paid-in capital 43,132 42,872 42,657
Retained earnings 28,556 26,187 22,930
-------- -------- --------
72,479 69,847 66,374
Cumulative foreign currency translation 6,213 849 904
adjustment
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY 78,692 70,696 67,278
-------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $480,060 $423,585 $442,318
======== ======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
(In thousands, except per share data)
1995 1994
-------- --------
<S> <C> <C>
Sales $160,952 $135,127
Cost of sales 135,636 110,289
-------- --------
Gross profit 25,316 24,838
Selling, general and administrative
expenses 16,724 16,821
-------- --------
OPERATING INCOME 8,592 8,017
Other income (expense):
Interest expense, net (5,150) (4,446)
Foreign currency exchange gain (loss) 31 (74)
Other - net 38 (35)
-------- --------
NET OTHER EXPENSE (5,081) (4,555)
Income before provision for income taxes,
minority interest and extraordinary
item 3,511 3,462
Provision for income taxes 1,153 1,478
-------- --------
Income before minority interest and
extraordinary item 2,358 1,984
Minority interest 426 271
-------- --------
Income before extraordinary item 1,932 1,713
Extraordinary item, net - (73)
NET INCOME $ 1,932 $ 1,640
======== ========
Earnings (loss) per common share - Primary:
Before extraordinary item $ 0.58 $ 0.53
Extraordinary item - (0.02)
-------- --------
NET EARNINGS PER COMMON SHARE - PRIMARY $ 0.58 $ 0.51
======== ========
Earnings (loss) per common share - assuming
full dilution:
Before extraordinary item $ 0.58 $ 0.52
Extraordinary Item - (0.02)
NET EARNINGS PER COMMON SHARE
ASSUMING FULL DILUTION $ 0.58 $ 0.50
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
(In thousands, except per share data)
1995 1994
-------- --------
<S> <C> <C>
Sales $305,412 $250,977
Cost of sales 256,389 205,804
-------- --------
Gross profit 49,023 45,173
Selling, general and administrative 34,724 32,651
expenses
-------- --------
OPERATING INCOME 14,299 12,522
Other income (expense):
Interest expense, net (9,422) (9,054)
Foreign currency exchange loss (285) (25)
Other - net - 2
-------- --------
NET OTHER EXPENSE (9,707) (9,077)
Income before provision for income
taxes, minority interest, extraordinary
item and cumulative effect of accounting
change 4,592 3,445
Provision for income taxes 1,756 2,169
-------- --------
Income before minority interest,
extraordinary item
and cumulative effect of accounting 2,836 1,276
change
Minority interest 467 (248)
-------- --------
Income before extraordinary item and
cumulative effect of accounting change 2,369 1,524
Extraordinary item, net - (73)
Cumulative effect of accounting change, - (263)
net
-------- --------
NET INCOME $ 2,369 $ 1,188
======== ========
Earnings (loss) per common share -
primary:
Before extraordinary item and
cumulative effect of accounting change $ 0.71 $ 0.49
Extraordinary item - (0.02)
Cumulative effect of accounting - (0.08)
change, net
-------- --------
NET EARNINGS PER COMMON SHARE - PRIMARY $ 0.71 $ 0.39
======== ========
Earnings (loss) per common share -
assuming full dilution:
Before extraordinary item and
cumulative effect of accounting change $ 0.71 $ 0.46
Extraordinary item - (0.02)
Cumulative effect of accounting - (0.08)
change, net
-------- --------
NET EARNINGS PER COMMON SHARE
ASSUMING FULL DILUTION $ 0.71 $ 0.36
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
(In thousands)
1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,369 $ 1,187
Depreciation and amortization 17,451 17,445
Minority interest 467 (248)
Cumulative effect of accounting
change, net - (73)
Other adjustments (17,188) (23,053)
-------- --------
NET CASH PROVIDED BY (USED
IN) OPERATING ACTIVITIES 3,099 (4,742)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (20,075) (9,826)
Other (372) 53
-------- --------
NET CASH USED IN INVESTING
ACTIVITIES (20,447) (9,773)
Net repayments of long term debt (6,436) (5,890)
Net proceeds from short term
borrowings 20,113 21,318
Other 263 146
-------- --------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 13,940 15,574
Effect of exchange rate changes on cash 431 663
-------- --------
Increase (decrease) in cash and cash
equivalents (2,977) 1,722
Cash and cash equivalents at beginning
of period 8,776 12,741
-------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 5,799 $ 14,463
======== ========
See accompanying notes to consolidated financial statements
</TABLE>
7
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
(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 1994 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 1995 and 1994,
were 3,350,726 and 3,229,988, respectively and for the first six
months of 1995 and 1994 were 3,339,292 and 3,131,969, respectively.
For both periods of 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.
(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,
1995 1994 1994
--------- ------------- --------
<S> <C> <C> <C>
Finished goods $ 54,164 35,985 $43,155
Work in process 11,212 7,096 9,621
Raw materials & supplies 46,657 43,275 37,948
-------- ------- -------
112,033 86,356 90,724
LIFO reserve (2,972) (3,924) 86
-------- ------- -------
$109,061 $82,432 $90,810
======== ======= =======
</TABLE>
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
----------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Sales during the second quarter of 1995 increased 19% to $160,952,000, as
compared to $135,127,000 in the second quarter of 1994. Sales in the first
six months of 1995 increased 22% to $305,412,000 from $250,977,000 in the
same prior year period. Higher 1995 sales resulted from volume increases
primarily at the Company's plastic subsidiaries, the effect of foreign
currency translation rate differences which increased reported sales by the
Company's European operations by approximately $20 million in the first six
months of 1995 and $12 million in the second quarter of 1995, and resin price
increase pass-throughs which increased sales by $17 million in the first six
months of 1995 and $10 million in the second quarter of 1995, all as compared
to the same prior year periods.
Gross profit was higher in each period of 1995 than the same prior year
period although gross profit as a percentage of sales declined to 15.7% and
16.1% in the second quarter and first six months of 1995, respectively, as
compared to 18.4% and 18%, respectively, in the same periods of 1994. These
declines reflect resin increase pass-throughs at PCI which increase both sales
and costs resulting in lower percentage margins and competitive pressure at
Ferembal and, to a lesser extent, in the European flexible film business.
Selling, general and administrative expense as a percentage of sales
declined to 11.4% in the first six months of 1995 from 13% in the same prior
year period. Selling, general and administrative expense as a percentage of
sales declined to 10.4% in the second quarter of 1995 from 12.4% in the
second quarter of 1994. These declines reflect the fixed nature of many of
these expenses in relation to increased sales. Because of these various
factors, operating income amounted to $8,592,000 and $14,299,000 in the second
quarter and first six months of 1995, respectively, as compared to $8,017,000
and $12,522,000 in the respective periods of 1994.
Net interest expense increased to $5,150,000 in the second quarter of
1995 from $4,446,000 in the same period of 1994. Net interest expense
increased to $9,422,000 in the first six months of 1995 as compared to
$9,054,000 in the same period of 1994. These increases resulted from higher
interest rates at the Company's European subsidiaries in 1995 than 1994.
Provision for income taxes amounted to $1,153,000 and $1,756,000 in the
second quarter and first six months of 1995, respectively, as compared to
$1,478,000 and $2,169,000 in the second quarter and first six months of 1994,
reflecting offsetting levels of tax benefits for accounting purposes in loss
operations and 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.
Net income amounted to $1,932,000 ($0.58 per share) in the second quarter
of 1995 and $2,369,000 ($0.71 per share) in the first six months of 1995. Net
income amounted to $1,640,000 ($.50 per share)in the second quarter of 1994.
Net income in the first six months of 1994 amounted to $1,188,000 ($.36 per
share). 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.
9
<PAGE>
FINANCIAL CONDITION
-------------------
CAPITAL REQUIREMENTS
The Company acquired $10.6 million and $20.1 million of capital assets
during the second quarter and first six months of 1995, 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 1995 and total annual capital expenditures are expected to amount to
approximately $31 million.
The Company intends to actively pursue acquisition possibilities in 1995.
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 six
months of 1995. Working capital decreased to approximately $70 million, and
the current ratio amounted to 1.38 at June 30, 1995 compared to 1.52 at
December 31, 1994.
For the six months ended June 30, 1995, net cash provided by operating
activities amounted to $3.1 million. Operating activities also funded a large
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 $20.4
million during the first six months of 1995. The cash required for the
Company's investing activities for this period in excess of that provided by
operations 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, 1995, the Company had an available credit line under a
Revolving Credit Agreement of $3.3 million. In addition, the Company's
consolidated subsidiaries had available approximately $33 million in credit
lines and bank overdraft facilities at June 30, 1995. 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
1995. 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
At the annual meeting of stockholders on May 17, 1995, 2,267,408 votes were
cast in favor of the election as directors of each of Messrs. D. Bainton, K.
Bainton, DiGiovanna, Greeven, Hoenig, O'Neill, Utting, Yazgi, C. Zapata and
J.L. Zapata. Votes withheld were 10,909 for each person. Votes cast in favor
of each of Messrs. R. Bainton, Benson, Marquardt and Serrell were 2,267,208
and 11,109 votes were withheld for each person. The 1995 Restricted Stock
Compensation Plan was approved by a vote of 2,134,034 for, 127,210 against,
and 17,073 abstained.
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 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, 1995.
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
--------------
Principal Financial Officer
and on behalf of registrant
DATED: AUGUST 4, 1995
11
<TABLE> <S> <C>
<PAGE>
<CAPTION>
<ARTICLE> 5
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 5,799
<SECURITIES> 0
<RECEIVABLES> 141,457
<ALLOWANCES> 5,575
<INVENTORY> 109,061
<CURRENT-ASSETS> 255,101
<PP&E> 327,548
<DEPRECIATION> 136,894
<TOTAL-ASSETS> 480,060
<CURRENT-LIABILITIES> 185,117
<BONDS> 139,856
<COMMON> 791
0
0
<OTHER-SE> 77,901
<TOTAL-LIABILITY-AND-EQUITY> 480,060
<SALES> 305,412
<TOTAL-REVENUES> 305,412
<CGS> 256,389
<TOTAL-COSTS> 291,113
<OTHER-EXPENSES> 9,707
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,422
<INCOME-PRETAX> 4,592
<INCOME-TAX> 1,756
<INCOME-CONTINUING> 2,369
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,369
<EPS-PRIMARY> .71
<EPS-DILUTED> .71
</TABLE>
