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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10K
(Mark One)
X
---------- ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
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OR
---------- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to .
---------- ----------
Commission File Number: 1-6690
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CONTINENTAL CAN COMPANY, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-2228114
------------------------ -----------------------------------
(State of Incorporation) (I.R.S. Employer Idenification No.)
One Aerial Way, Syosset, New York 11791
---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (516) 822-4940
--------------
Securities registered pursuant to Section 12 (b) of the Act:
Common Stock ($.25 par value) New York Stock Exchange
- - ----------------------------- -------------------------------------------
(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12 (g) of the Act: None
----
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.
YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) 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 {X}.
The aggregate market value of voting stock held by non-affiliates of the
Registrant based on the closing price at which such stock was sold on the New
York Stock Exchange on March 13, 1995 was $76,696,093.
The number of shares of Common Stock outstanding on March 13, 1995 was 3,165,057
shares.
DOCUMENTS INCORPORATED BY REFERENCE
Part II (except Item No. 6 "Selected Financial Data" and Item No. 9 "Changes In
And Disagreements With Accountants On Accounting And Financial Disclosure") is
incorporated by reference to the Registrant's Annual Report to Stockholders for
the fiscal year ended December 31, 1994, and Part III (except Item 10 regarding
executive officers) is incorporated by reference to the Registrant's Proxy
Statement to be filed on or about April 3, 1995 in connection with its 1995
Annual Meeting of Stockholders to be held on May 17, 1995.
<PAGE>
ITEM 1. BUSINESS
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(a) General Development of Business
-------------------------------
Continental Can Company, Inc. (the Company) is a publicly traded company
incorporated in Delaware in 1970 under the name Viatech, Inc. The name of the
Company was changed to Continental Can Company, Inc. in October 1992. The
Company is engaged in the packaging business through a number of consolidated
operating subsidiaries. The Company's packaging business consists of (i) its
50%-owned domestic subsidiary, Plastic Containers, Inc. (PCI), which owns
Continental Plastic Containers, Inc. and Continental Caribbean Containers, Inc.
(collectively, CPC), (ii) its wholly owned German operating subsidiary, Dixie
Union Verpackungen GmbH (Dixie Union) and (iii) its majority-owned European
operating subsidiaries, Ferembal S.A. (Ferembal), which in turn owns 64% of
Obalex, A.S. (Obalex), and Onena Bolsas de Papel, S.A. (Onena). PCI is a
leading manufacturer of extrusion blow-molded containers in the United States.
Ferembal is a manufacturer of rigid packaging, primarily food cans, of which it
is the second largest supplier in France. Obalex is a manufacturer of metal
cans in the Czech Republic. Dixie Union manufactures plastic films and
packaging machines, primarily for the food and pharmaceutical industries. Onena
manufactures film, and laminates and prints plastic, paper and foil packaging
materials for the food and snack food industries in Spain. The Company also
owns Lockwood, Kessler & Bartlett, Inc. (LKB) which provides services
principally in the fields of mapping and survey, civil and structural
engineering, mechanical and electrical engineering, and construction
administration and inspection.
(b) Financial Information About Industry Segments
---------------------------------------------
The Company has one reportable industry segment - packaging, as determined
in accordance with the Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 14.
(c) Narrative Description of Business
---------------------------------
The Company manufactures packaging which accounted for 98%, 97.5% and
97.3%, of its consolidated revenues in 1994, 1993 and 1992, respectively.
CPC - The Company's 50%-owned subsidiary, PCI, acquired CPC in November
---
1991. CPC, headquartered in Norwalk, Connecticut, has fifteen manufacturing
plants in the continental United States and one in Puerto Rico. CPC is a leader
in the development, manufacture and sale of a wide range of extrusion blow-
molded plastic containers for household chemicals, food and beverages,
automotive products and motor oil, industrial and agricultural chemicals and
cosmetics and toiletries. CPC manufactures single and multi-layer containers,
primarily from high density polyethylene and polypropylene resins, ranging in
size from two ounces to five gallons. Some of these multi-layer containers
include a barrier layer of ethyl vinyl alcohol which renders the container
oxygen tight and makes it suitable for use in food products which are subject to
spoilage or deterioration if exposed to oxygen. CPC sells containers to
national consumer products companies, including Clorox Company, Coca-Cola Foods,
Colgate-Palmolive Company, Lever Brothers, Mobil Oil Corporation, Pennzoil
Products Company, Procter & Gamble Company, Quaker Oats Company and Quaker State
Oil Refining Corporation. CPC, in many cases, manufactures substantially all of
a customer's container requirements for specific product categories or for
particular container sizes. CPC has long-standing relationships with most of
its customers and has long-term contracts or agreements with customers
representing approximately 70% of its dollar sales volume.
Ferembal - The Company acquired a 68% interest in Ferembal in the fourth
--------
quarter of 1989, increased its interest to 84% in August, 1991 and at December
31, 1994 owned 85% of Ferembal. Ferembal, headquartered in Paris, has five
manufacturing plants located in each of the main agricultural regions of France.
The Roye plant, located in Picardie, was built in 1964 and expanded
substantially in 1968. Its three main divisions include coil
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cutting, printing and varnishing; the manufacture of ends and bodies; and
assembly. There are five welded lines in operation at Roye and all industrial
products are manufactured at this plant. The Moelan plant, located in Brittany,
is set up along similar lines as the Roye plant with five welded lines. The
Ludres plant, in eastern France, is Ferembal's largest facility. In addition to
twelve presses and two easy-open end manufacturing units, Ludres has nine body
assembly lines. Ferembal's research and development and technical service
departments are also located at Ludres. The Veauche plant was built in 1982 to
service southern France. Approximately 90% of the output of the two welded lines
is "passed through the wall" to a customer for the canning of pet food. The
Ville Neuve sur Lot plant was built in 1991 and went into production with a
three piece can line in early 1992. A two piece can line went into production at
this facility in mid-1992.
Ferembal is the second largest producer of food cans in France and also
produces cans for pet foods and industrial products. Ferembal's products
include three piece cans for food with over two hundred sets of specifications,
two piece cans in several different diameters, easy open ends, "hi-white enamel"
cans, and a large number of can products for industrial end uses. Ferembal's
production for the food and pet food markets accounts for approximately 85% of
its sales with remaining sales coming from cans produced for industrial
products. Ferembal's customers are primarily vegetable and prepared food
processors, pet food processors, and paint and other industrial can users.
Obalex - The Company, through Ferembal, owns 64% of the outstanding stock
------
of Obalex. Obalex is headquartered in a three building complex on a 5 acre site
in Znojmo, Czech Republic, which also serves as its sole manufacturing facility.
Obalex manufacturers both two and three piece cans for food which account for
approximately 80% of its sales and a number of can products for industrial end
users.
Dixie Union - The Company, through wholly owned subsidiaries, owns all of
-----------
the outstanding stock of Dixie Union. Dixie Union is headquartered in Kempten,
Germany and has subsidiary companies in France and the United Kingdom, which
function as a sales, distribution and customer service network. Dixie Union
manufactures three main product lines for the packaging industry: multi-layer
shrink bags, composite plastic films and packaging machines and slicers. Most
of Dixie Union's customers are in the food and pharmaceutical industries.
Onena - The Company owns 57% of the stock of Onena located in Pamplona,
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Spain. Onena manufactures plastic film and prints and laminates paper, plastic
and foil packaging material for the food and snack food industries in Spain. In
1994 the Company merged its subsidiary, Industrias Gomariz S.A. (Ingosa) with
Onena. Ingosa printed and laminated paper, plastic and foil packaging material
for the food and snack food industries in Spain and was also located in
Pamplona.
LKB - The Company owns 100% of LKB, a consulting engineering firm, located
---
in Syosset, New York. LKB provides services to clients in the fields of
transportation, site, municipal, electrical and mechanical, and environmental
engineering. Most of LKB's clients are public sector state and municipal
agencies, utilities, financial institutions and developers. Most of its
projects involve infra-structure design and rehabilitation, environmental
reports and services, and utility substation design.
Other Matters - The primary users of products manufactured by the Company
-------------
are firms in the food and snack food, pet food, household chemical, motor oil
and pharmaceutical industries.
The raw materials used in the production of plastic containers, cans and
packaging films are readily available commodity materials and chemicals produced
by a large number of manufacturers. It is the practice of the Company to obtain
these raw materials from several sources in order to ensure an economical,
adequate and timely supply.
Some of the products manufactured by the Company are manufactured pursuant
to license. With regard to composite films, a fully paid up license from the
American National Can Company is in effect. With regard to shrink
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bags and film, a license from the American National Can Company is in effect.
Present patents under this license expire at various times through 2000. The
license will expire on the date the last of the licensed patents expire. This
license is non-exclusive as to manufacture and sale of shrink bags and film in
Europe and non-exclusive as to sales to the rest of the world. Sales may not be
made in the Western Hemisphere. The Company does not believe these licenses are
material to its packaging business taken as a whole.
The Company's business is seasonal insofar as the sales of Ferembal and
Obalex to the vegetable packing industry is dependent on agricultural production
and occurs primarily in the second and third quarters. The Company's remaining
products are not seasonal.
The Company is not dependent upon a single customer or a few customers.
Sales to no single customer exceeded 10% of the Company's consolidated revenues
in 1994.
As of December 31, 1994, the Company's backlog was approximately
$29,952,000 (compared to $19,868,000, at December 31, 1993). All backlog is
expected to be filled within the current fiscal year. Ferembal, Obalex, and
Plastic Containers, Inc. produce most of their products under open orders. As a
result, none of the foregoing backlog is attributable to them.
The Company's business in total is highly competitive with a large number
of competitors. The main competitors include Owens Illinois, Inc. and Graham
Packaging with regard to plastic containers, CMB Packaging with regard to cans,
W. R. Grace & Co. with regard to barrier shrink films, and Multi-Vac with regard
to packaging machinery. The principal methods of competition are price, quality
and service.
The amount spent on research and development activities amounted to
approximately $12,461,000 in 1994, $12,862,000 in 1993 and $14,603,000 in 1992.
The number of persons employed by the Company as of December 31, 1994 and
1993 was 3,729 and 3,712, respectively.
(d) Foreign and Domestic Operations
-------------------------------
Sales to unaffiliated customers are set out below:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
(In thousands)
Europe $286,412 $255,619 $284,771
United States 247,614 221,636 218,988
Other 3,154 4,587 7,482
-------- -------- --------
Total $537,180 $481,842 $511,241
======== ======== ========
</TABLE>
Information regarding the operating profit and the identifiable assets
attributable to the Company's foreign operations is incorporated herein by
reference to Note 16 of the Consolidated Financial Statements appearing in the
Annual Report to Stockholders for the year ended December 31, 1994.
ITEM 2. PROPERTIES
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The Company believes its facilities are suitable, adequate, and properly
sized to provide the capacity necessary to meet its sales. The Company's
production facilities are utilized for the manufacture and storage of the
Company's products. The extent of utilization in each of the Company's
facilities varies based on a number of factors but primarily on sales and
inventory levels for specific products. The location of the customer also
affects
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utilization since shipment costs beyond a certain distance can make
production of some products at a remote facility uneconomic. Seasonality
affects utilization substantially at Ferembal and Obalex with very high
utilization in the pre-harvest and harvest season and substantially lower
utilization during the late fall and winter. The Company adjusts labor levels
and capital investment at each of its facilities in order to optimize their
utilization.
The Company's general corporate offices and the main production facility
for LKB are located in Syosset, New York in a 25,000 square foot building owned
by the Company. This steel and concrete block building was constructed in 1955
on a 2-1/2 acre lot.
CPC is headquartered in 19,812 square feet of leased office space in
Norwalk, Connecticut. CPC also leases its technical center in Elk Grove,
Illinois (78,840 sq. ft.), its accounting office space in Omaha, NE (5,489 sq.
ft.), and sales offices in Cincinnati, Ohio (1,266 sq. ft.) and Houston, Texas
(703 sq. ft.).
The following table sets forth the location and square footage of CPC's
production facilities which are used for both manufacture and warehousing of
finished goods:
<TABLE>
<CAPTION>
SIZE IN SIZE IN
PLANT LOCATION SQUARE FEET PLANT LOCATION SQUARE FEET
- - ----------------- ----------- ------------------- -----------
<S> <C> <C> <C>
Santa Ana, CA 102,500 Lima, OH 122,850
Fairfield, CA 66,000 Newell, WV 50,000
Houston, TX 80,000 Oil City, PA 96,000
Kansas City, KS 172,775 Baltimore, MD 150,600
Elk Grove, IL 137,800 Lakeland, FL 105,200
DuPage, IL 102,900 New Market, NJ 116,000
Cincinnati, OH 131,665 Caguas, Puerto Rico 46,800
Cleveland, OH 100,000 West Memphis, AR 32,870
</TABLE>
CPC owns the plants in Santa Ana, Fairfield, Oil City, Baltimore and Puerto
Rico; all others are leased. As of December 31, 1994, CPC had a total of 114
production lines spread throughout its manufacturing facilities. The smallest
plants have as few as two lines while the largest has eleven.
Ferembal is headquartered in 20,000 square feet of office space subject to
a capital lease in Clichy, a suburb of Paris. Ferembal operates five
manufacturing facilities in five locations in France. Ferembal owns a 384,000
square foot manufacturing facility on a 21 acre site in Roye for the production
of food and industrial cans. Ferembal owns a 42,000 square foot manufacturing
facility for the production of food cans at Veauche on a 5 acre site. The
facility at Veauche is located next to a customer's plant and food can
production is "passed through the wall" to the customer. Ferembal has a capital
lease with regard to several buildings totaling 229,000 square feet on a 23 acre
site in Ludres. In addition, Ferembal owns a 29,000 square foot building on a 3
acre site. These facilities are used for the manufacture of food cans and for
research and development activities. Ferembal has a capital lease with regard
to several buildings totaling 252,000 square feet on an 18 acre site in Moelan
which are used for the manufacture of food cans. Ferembal operates a
manufacturing facility for food cans in a 42,000 square foot building on a 4
acre site in Villeneuve sur Lot under a rental agreement. Each of the
manufacturing facilities utilizes a portion of its building space for
warehousing its finished goods.
Obalex is located in several buildings with approximately 182,000 square
feet on an 5 acre site in Znojmo, Czech Republic. This facility is the sole
manufacturing site for Obalex which also uses the complex for the storage of its
finished goods.
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Dixie Union is headquartered in a three-story, 108,000 square foot
manufacturing facility on a 5 acre site in Kempten, Germany, leased through
2004. In addition, two small facilities are leased as sales and distribution
centers in Milton Keynes, England and Redon, France.
Onena owns two buildings totaling 173,000 square feet located on a 6.6 acre
site in Pamplona, Spain, which also serve as its headquarters, manufacturing and
warehousing facility. The former Onena headquarters and manufacturing facility
consisting of 89,200 square feet on a 3.7 acre site is expected to be sold.
ITEM 3. LEGAL PROCEEDINGS
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The Company's subsidiaries are defendants in a number of actions which
arose in the normal course of business. In the opinion of management, the
eventual outcome of these actions will not have a significant effect on the
Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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No matters were submitted to a vote of security holders during the quarter
ended December 31, 1994.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
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MATTERS
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The information required by this item is incorporated herein by
reference to the section entitled "Common Stock Prices and Related Matters" of
the Annual Report to Stockholders for the year ended December 31, 1994.
5
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ITEM 6. SELECTED FINANCIAL DATA(1)
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<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Sales (2) $537,180 $481,842 $511,241 $310,654 $292,033
======== ======== ======== ======== ========
Net income (2) (3) $ 4,445 $ 988 $ 2,063 $ 7,394 $ 5,059
======== ======== ======== ======== ========
Earnings per
common share (3)
Primary $ 1.39 $ .33 $ .67 $ 2.92 $ 2.88
======== ======== ======== ======== ========
Fully Diluted $ 1.34 $ .32 $ .64 $ 2.59 $ 2.40
======== ======== ======== ======== ========
Weighted average
shares outstanding (4) 3,220 3,023 3,078 2,533 1,758
======== ======== ======== ======== ========
Total assets $423,585 $385,907 $400,010 $410,543 $202,524
======== ======== ======== ======== ========
Long term debt and capitalized
lease obligations $142,361 $153,982 $165,701 $159,567 $ 65,862
======== ======== ======== ======== ========
Total stockholders'
equity (4) $ 70,696 $ 60,855 $ 62,935 $ 61,393 $ 23,856
======== ======== ======== ======== ========
Working capital $ 71,348 $ 66,105 $ 69,158 $ 63,004 $ 48,235
======== ======== ======== ======== ========
Current ratio 1.52 1.67 1.69 1.57 1.56
======== ======== ======== ======== ========
</TABLE>
(1) In thousands, except per share amounts and current ratio.
(2) In 1993, includes sales of $10,682 and net income of $238 related to the
purchase of Obalex. In 1991, includes sales of $17,030 and a net loss of
$1,045 related to the purchase of PCI.
(3) Includes a charge for the cumulative effect of an accounting change of $262
($.08 per share both primary and fully-diluted) and an extraordinary charge
of $108 ($.03 per share both primary and fully-diluted) in 1994. Includes
income for the cumulative effect of an accounting change of $460 ($.15 per
share primary and $.14 per share fully-diluted) and an extraordinary charge
of $1,502 ($.49 per share primary and $.44 per share fully-diluted) in
1992. Includes income for an extraordinary item of $22 ($.01 per share
both primary and fully-diluted) in 1990.
(4) The 1991 weighted average shares outstanding include 1,020 shares and 255
warrants to purchase shares sold in June 1991 for net proceeds of $29,453.
The 1990 weighted average shares outstanding include 460 shares sold in
January 1990 for net proceeds of $6,756.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- - ------------------------------------------------------------------------
RESULTS OF OPERATIONS
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The information required by this item is incorporated herein by
reference to the section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Annual Report to
Stockholders for the year ended December 31, 1994.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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The information required by this item is incorporated by reference to
the Company's consolidated financial statements and related notes, together with
the independent auditors' report in the Annual Report to Stockholders for the
year ended December 31, 1994.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
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FINANCIAL DISCLOSURE
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There have been no changes in nor disagreements with the Company's
accountants on accounting and financial disclosure during the twenty-four month
period ended December 31, 1994.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
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The information required by this item, with respect to directors of the
registrant, will be included under the caption "Election of Directors" of a
definitive Proxy Statement to be dated March 28, 1994 which will be filed with
the Commission pursuant to Regulation 14A and is hereby incorporated into this
report by this reference.
Executive officers of the registrant include Messrs. Donald J. Bainton and
Abdo Yazgi who are also directors of the registrant and for whom information
required by this item is included in the Proxy Statement as previously
mentioned.
Information for other executive officers, is as follows:
<TABLE>
<CAPTION>
Term of Year First
Name and Age Position Held Office Became Officer
- - ------------------------ --------------- -------- --------------
<S> <C> <C> <C>
John H. Andreas Vice President- (1) 1992
62 Manufacturing
Marcial B. L'Hommedieu Treasurer (1) 1963
70
</TABLE>
(1) The term of office of all executive officers is indefinite, at the pleasure
of the Board of Directors.
The business experience of each executive officer is as follows:
Mr. Andreas has served as Vice President of Manufacturing since April 1992.
Prior to that time, he was an independent business consultant. Prior to his
retirement in 1988, Mr. Andreas was employed by the former Continental Can
Company, Inc. for 33 years, most recently as General Manager.
Mr. L'Hommedieu has served as Treasurer or Assistant Treasurer of the Company
and its subsidiary, Lockwood, Kessler & Bartlett, Inc., since 1963.
ITEM 11. EXECUTIVE COMPENSATION
- - --------------------------------
The information required by this item is included under the caption
"Executive Compensation" of a definitive Proxy Statement to be dated March 28,
1995 which will be filed with the Commission pursuant to Regulation 14A and is
hereby incorporated into this report by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- - -----------------------------------------------------------------------
The information required by this item is included under the caption "Stock
Ownership" of a definitive Proxy Statement to be dated March 28, 1995 which will
be filed with the Commission pursuant to Regulation 14A and is hereby
incorporated into this report by this reference.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- - -------------------------------------------------------
The information required by this item is included under the caption
"Transactions with Management" of a definitive Proxy Statement to be dated March
28, 1995 which will be filed with the Commission pursuant to Regulation 14A and
is hereby incorporated into this report by this reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- - --------------------------------------------------------------------------
(a) 1. Financial Statements:
Consolidated Balance Sheets as of December 31, 1994 and 1993
Consolidated Statements of Earnings for the years ended December 31, 1994,
1993, and 1992
Consolidated Statements of Stockholders' Equity for the years ended December
31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows for the years ended December 31, 1994,
1993 and 1992
The above financial statements are included under Item 8 or Part II of this
report.
2. Financial Statement Schedules:
III Condensed Financial Information of Registrant........ p. 11
VIII Allowance for Doubtful Accounts...................... p. 13
All other schedules are omitted because they are not applicable, not
required, or the information is given in the financial statements or the
notes thereto.
3. Exhibits Required:
<TABLE>
<C> <S> <C>
3.1 Articles of Incorporation, as amended................. (2)
3.2 By-Laws, as amended................................... (2)
4.1 Indenture, dated as of April 1, 1992, among Plastic
Containers, Inc. ("PCI"), each of Continental Plastic
Containers, Inc. ("CPC") and Continental Caribbean
Containers, Inc. ("CCC"), as guarantors and United
States Trust Company of New York, as trustee (the
"Trustee")............................................ (1)
4.2 Pledge and Security Agreement, dated as of April 9,
1992, by PCI in favor of the Trustee.................. (1)
4.3 Pledge and Security Agreement, dated as of April 9,
1992, by CPC in in favor of the Trustee............... (1)
4.4 Pledge and Security Agreement, dated as of April 9,
1992, by CCC in favor of the Trustee.................. (1)
4.5 Stock Pledge Agreement, dated as of April 9, 1992, by
PCI in favor of the Trustee........................... (1)
4.6 Patent and Trademark Security Assignment, dated April
9, 1992, by CPC to Trustee............................ (1)
4.7 Deed of Trust and Assignment of Leases and Rents,
dated April 9, 1992, by CPC relating to real property
located in Fairfield, Connecticut..................... (1)
</TABLE>
8
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<TABLE>
<C> <S> <C>
4.8 Deed of Trust and Assignment of Leases and Rents,
dated April 9, 1992, by CPC relating to real property
located in Santa Ana, California...................... (1)
4.9 Mortgage and Assignment of Leases and Rents, dated
April 9, 1992, by CPC relating to real property
located in Oil City, Pennsylvania..................... (1)
4.10 Deed of Trust and Assignment of Leases and Rents,
dated April 9, 1992, by CPC relating to real property
located in Baltimore, Maryland........................ (1)
4.11 Chattel Mortgage, dated April 7, 1992, by CCC relating
to personal property located in Puerto Rico........... (1)
4.12 Pledge Agreement, dated as of April 9, 1992 by CCC
relating to real property located in Puerto Rico...... (1)
4.13 Mortgage, dated April 8, 1992, by CCC relating to real
property located in Puerto Rico....................... (1)
10.1 Credit Agreement dated as of April 2, 1992, between
PCI and Citibank, N.A................................. (1)
10.2 1988 Restricted Stock Option Plan, as amended......... (2)*
10.3 1988 Director Stock Option Plan....................... (2)*
10.4 1990 Stock Option Plan for Non-Employee Directors..... (2)*
10.5 Shareholders' Agreement dated July 7, 1989, among
Viatech, Inc., Le Fer Blac S.A., Citicorp Capital
Investors Europe Limited and Citibank S.A............. (2)
10.6 Revolving Credit and Term Loan Agreement dated as of
December 1, 1992...................................... (2)
10.7 Stock Purchase Agreement dated November 2, 1991....... (2)
10.8 Noncompetition Agreement dated November 21, 1991...... (2)
10.9 Stockholders' Agreement dated October 19, 1991........ (2)
10.10 1992 Restricted Stock Plan for Non-Employee Directors,
as amended............................................ (2)*
10.11 Agreement Among PCI Stockholders, dated September 10,
1992.................................................. (2)
10.12 Employment Contract with Donald J. Bainton............ (2)*
10.13 1995 Restricted Stock Compensation Plan............... Attached*
10.14 Amendment No. 1 to Revolving Credit and Term Loan
Agreement............................................. Attached
13.1 Annual Report to Stockholders for 1994................ Attached
21 Subsidiaries of the Registrant........................ Attached
23.1 Independent Auditors' Report on Schedules............. Attached
23.2 Consent of Independent Auditors....................... Attached
27 Financial Data Schedule............................... Attached
28.1 Proxy Relating to PCI Stock, dated September 11,
1992.................................................. (2)
</TABLE>
* Management contract or compensatory plan or arrangement.
(1) These documents have been previously filed with the Commission as
Exhibits to 1992 Quarterly Reports on Form 10-Q for Plastic
Containers, Inc.
(2) These documents have previously been filed with the Commission as
Exhibits to 1993 Quarterly Reports on Form 10-Q for Continental Can
Company, Inc.
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 were filed during the quarter ended December 31, 1994.
9
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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.
CONTINENTAL CAN COMPANY, INC.
By: /s/ Abdo Yazgi Date: March 7, 1994
--------------- --------------
Abdo Yazgi, Executive Vice President
(Principal Financial & Accounting Officer)
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.
<TABLE>
<S> <C> <C>
/s/ Donald J. Bainton Date: March 7, 1994
- - ----------------------------------------- --------------
Donald J. Bainton, Chairman of the Board
of Directors and Chief Executive Officer
(Principal Executive Officer)
/s/ Kenneth Bainton Date: March 7, 1994
- - ----------------------------------------- --------------
Kenneth Bainton, Director
/s/ Robert L.. Bainton Date: March 7, 1994
- - ----------------------------------------- --------------
Robert L. Bainton, Director
/s/ Nils E. Benson Date: March 7, 1994
- - ----------------------------------------- --------------
Nils E. Benson, Director
/s/ Rainer N. Greeven Date: March 7, 1994
- - ----------------------------------------- --------------
Rainer N. Greeven, Director
Date:
- - ----------------------------------------- --------------
Ronald H. Hoenig, Director
/s/ Charles M. Marquardt Date: March 7, 1994
- - ----------------------------------------- --------------
Charles M. Marquardt, Director
Date:
- - ----------------------------------------- --------------
Ferdinand W. Metternich
/s/ V. Henry O'Neill Date: March 7, 1994
- - ----------------------------------------- --------------
V. Henry O'Neill, Director
/s/ John J. Serrell Date: March 7, 1994
- - ----------------------------------------- --------------
John J. Serrell, Director
/s/ Robert A. Utting Date: March 7, 1994
- - ----------------------------------------- --------------
Robert A. Utting, Director
/s/ Abdo Yazgi Date: March 7, 1994
- - ----------------------------------------- --------------
Abdo Yazgi, Director
/s/ Cayo Zapata Date: March 7, 1994
- - ----------------------------------------- --------------
Cayo Zapata, Director
/s/ Jose Luis Zapata Date: March 7, 1994
- - ----------------------------------------- --------------
Jose Luis Zapata, Director
</TABLE>
10
<PAGE>
Schedule III - Condensed Financial Information of Registrant
Continental Can Company, Inc.
Balance Sheets
Years Ended December 31, 1994 and 1993
<TABLE>
<CAPTION>
(in thousands) 1994 1993
------- -------
ASSETS:
<S> <C> <C>
Cash $ 79 $ 626
Investments in Subsidiaries at Equity 72,703 62,181
Other Assets 1,326 2,370
------- -------
Total Assets 74,108 $65,177
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities (a) 2,220 3,472
Long Term Debt (a) 1,192 850
------- -------
Total Liabilities 3,412 4,322
Stockholders' Equity 70,696 60,855
------- -------
74,108 $65,177
======= =======
</TABLE>
(a) See Note 9, Items (a) and (b) of Notes to Consolidated Financial Statements
of Continental Can Company, Inc. and Subsidiaries. At December 31, 1993,
current liabilities include $1,164 of Convertible Subordinated Debentures
due in 1994. At December 31, 1994, current liabilities include $158 of
current installments of long term debt.
Continental Can Company, Inc.
Statements of Earnings
Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
(in thousands) 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Management Fees $ 1,882 $ 2,157 $ 1,855
Selling, General and
Administrative Expenses 2,923 3,232 3,238
------- ------- -------
(1,041) (1,075) (1,383)
Equity in Net Income of
Subsidiaries (b) 5,803 2,247 3,587
------- ------- -------
4,762 1,172 2,204
Other (290) (205) (165)
------- ------- -------
4,472 967 2,039
(Provision for) Recovery of
Income Taxes (27) 21 24
------- ------- -------
Net income $ 4,445 $ 988 $ 2,063
======= ======= =======
</TABLE>
(b) Includes for 1994 an extraordinary charge of $108 relating to the
extinguishment of debt and a charge of $262 relating to the cumulative
effect of adopting SFAS No. 112. Includes for 1992 an extraordinary charge
of
11
<PAGE>
$1,502 relating to the retirement of a promissory note and a benefit of $460
relating to the cumulative effect of adopting SFAS No. 109.
Schedule III - Condensed Financial Information of
Registrant (Continued)
Continental Can Company, Inc.
Statements of Cash Flows
Years Ended December 31, 1994, 1993 and 1992
<TABLE>
(in thousands) 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income $4.445 $ 988 $ 2,063
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities:
Dividends Received From Affiliates 818 - -
Equity in Net Income of Subsidiaries (5,803) (2,247) (3,587)
Increase/Decrease in Due to Affiliates (442) 299 1,001
Other 387 288 (310)
------- ------- -------
Net Cash Provided By (Used in)
Operating Activities (595) (672) (833)
Cash Flows From Investing Activities:
Purchase of Minority Interest - (213) (120)
Redemption of investment in
Government Securities - 500 10
Increase Investment in Subsidiaries (1,225) - -
Proceeds from Sale of Capital Assets 411 527 778
Capital Expenditures - (6) (152)
------- ------- -------
Net Cash Provided By (Used in)
Investing Activities (814) 808 516
Cash Flows From Financing Activities:
Common Stock Issued Upon Conversion of
Debentures and Warrants 362 184 2,111
Proceeds from (Repayment of)
Long-Term Financing 500 203 (1,907)
------- ------- -------
Net Cash Provided by Financing
Activities 862 387 204
Net Increase (Decrease) in Cash (547) 523 (113)
Cash at Beginning of Year 626 103 216
------- ------- -------
Cash at End of Year $ 79 $ 626 $ 103
======= ======= =======
<CAPTION>
Cash paid for interest and income taxes
was as follows:
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Interest $ 210 $ 232 $ 232
Income Taxes 8 $ 22 $ 4
</TABLE>
12
<PAGE>
Continental Can Company, Inc. and Subsidiaries
Schedule VIII - Allowance for Doubtful Accounts
Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
(in thousands) Additions
Balance at charged to Balance at
beginning costs and Other Deductions end of
of period expenses additions (1) period
---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended
December 31, 1994 $3,522 $2,845 $ - $1,051 $5,316
====== ====== ==== ====== ======
Year ended
December 31, 1993 $3,622 $ 915 $418(2) $1,433 $3,522
====== ====== ==== ====== ======
Year ended
December 31, 1992 $4,626 $ 709 $ - $1,713 $3,622
====== ====== ==== ====== ======
</TABLE>
(1) Represents uncollectible accounts written-off.
(2) Represents $418 from the consolidation of acquired subsidiary in 1993.
13
<PAGE>
EXHIBITS ATTACHED:
------------------
Subsidiaries of the Registrant
Independent Auditors' Report on Schedules
Consent of Independent Auditors
Amendment No. 1 to Revolving Credit and Term
Loan Agreement
1995 Restricted Stock Compensation Plan
Financial Data Schedule
1994 Annual Report to Stockholders
1
<PAGE>
EXHIBIT 10.13
CONTINENTAL CAN COMPANY, INC.
1995 RESTRICTED STOCK COMPENSATION PLAN
PART 1. PLAN ADMINISTRATION AND ELIGIBILITY
-------------------------------------------
I. PURPOSE
The purpose of this 1995 Restricted Stock Compensation Plan (the Plan) of
Continental Can Company, Inc. (the Company) is to motivate and reward certain
key officers and employees of the Company and its subsidiaries who occupy
responsible executive or other positions with the Company and to promote the
continued long-term growth of the Company. It provides a means for such
management to receive part of their compensation in a form to encourage both
short term and long term profitable growth of the Company and share in the risk
with the Stockholders.
II. ADMINISTRATION
The Plan will be administered by the Personnel Committee of the Board of
Directors of the Company (the Committee), no member of which shall be eligible
to receive an award under the Plan. The Committee shall be composed of two or
more individuals who at the time they grant any stock awards or exercise any
other discretion in administering any aspect of the Plan are not and have not at
any time within one year prior thereto been eligible for selection as a person
to whom stock may be allocated or to whom stock may be granted pursuant to the
Plan or any other plan of the Company or any of its affiliates entitling the
participants therein to acquire stock of the Company or of its affiliates. In
addition to the powers granted the Committee with respect to the granting of
stock awards under the Plan, the Committee shall be empowered to administer and
interpret the Plan, and all determinations made by it shall be final and
conclusive.
III. PARTICIPATION IN THE PLAN
Only officers and key employees of the Company or any subsidiary of the
Company as determined by the Committee (the Recipient) shall be eligible to
participate in the Plan.
IV. STOCK SUBJECT TO THE PLAN
The maximum number of shares which may be granted under the Plan shall be
100,000 (One hundred thousand) shares of the Companys $.25 par value Common
Stock. The limitation on the number of shares which may be awarded under the
Plan shall be subject to adjustment as provided in Section X of the Plan.
1
<PAGE>
If any outstanding award under the Plan for any reason is forfeited without
having been vested in full, the shares allocable to the forfeited portion of
such award shall again become available for grant pursuant to the Plan.
Certificates representing shares of the Companys Common Stock awarded
hereunder shall be issued in the name of the respective Recipients. During the
period of time such shares are subject to the restrictions set forth in Section
5, such certificates shall be endorsed with a legend to that effect, and shall
be held by the Company. The Recipient shall, nevertheless, have all the other
rights of a stockholder, including the right to vote and the right to receive
all cash dividends paid with respect to such shares and other distributions made
with respect to such shares. Subject to the requirements of applicable law,
certificates representing such shares shall be delivered to the Recipient within
30 days after the lapse of the restrictions to which they are subject.
Upon the grant of stock, the Company may issue new shares or reissue shares
previously repurchased by or on behalf of the Company. If shares are to be
repurchased and reissued, the Company shall determine, on or before the last day
of each fiscal quarter, the amount, if any, of the Companys Common Stock to be
purchased by a broker or other independent agent designated by the Company (the
Broker) in the following quarter for delivery under the Plan. Stock so
purchased by the Broker shall be restored to the status of authorized by
unissued shares. The amounts of stock to be purchased may be all or less than
all of the projected requirements of the Plan. It is not the intent of the
Company that purchases by the Broker exceed actual Plan requirements for the
quarter. In such an event , however, excess shares should be carried over to
help plan requirements for the following quarter. To the extent that the
amounts purchased by the Broker do not need actual Plan requirements, the
Company shall issue original shares. The Broker shall be free to purchase such
stock at such times, at such prices, and in such amounts as the Broker deems
appropriate, whether through brokers or by purchase from securities dealers,
both on and off the national exchanges, or by private sale or otherwise,
provided that the Broker shall purchase the full number of shares required by
the Company to be purchased for that quarter, and that such purchases shall be
consistent with such conditions as may be prescribed from time to time by law or
by the Securities and Exchange Commission (SEC) in any rule or regulation or in
any exemptive order of no-action letter issued by the SEC to the Company or the
Broker with respect to the making of such purchases, or otherwise. As
commitments for such purchases are made by the Broker, the Company shall, upon
written consent of the Broker, deliver to the Broker the funds necessary to
consummate such purchases and pay any brokerage and related incidental charges.
All amounts transferred to the Broker by the Company shall be promptly invested
in the Companys Common Stock, in no event later than 30 days after delivery of
such funds by the Company.
2
<PAGE>
PART 2. GRANTS
---------------
V. STOCK GRANTS
The Committee in its sole discretion may grant shares of Common Stock to
Recipients in lieu of cash compensation or as additional compensation.
VI. RESTRICTIONS
At the time of the grant of shares, the Committee, in its sole discretion,
may establish for any Recipient a Restricted Period with respect to the grant,
during which Restricted Period the grant or any portion thereof shall be subject
to forfeiture; provided, however, that any shares granted pursuant to the Plan
shall become vested in full upon the retirement of the Recipient because of
total and permanent disability or upon the death of the Recipient. The
Committee may, at its option, provide at any time for the early termination of
such Restricted Period in respect of all or any portion or portions of such
grant on such terms as the Committee deems appropriate.
If a Recipient ceases to be an employee of the Company or any of its
subsidiaries during the Restricted Period for any reason other than (i) death,
or (ii) total and permanent disability, all stock granted to him which is still
subject to the foregoing restrictions shall, upon such termination of
employment, be forfeited to the Company; provided, however, that in the event
his employment is terminated at the request of the Company or by action of the
Company, the Committee may, but need not, determine that some or all of such
shares shall not be subject to forfeiture or that shares which remain restricted
shall be freed of any restriction and be fully vested. If a Recipient ceases to
be an employee of the Company or any of its subsidiaries during the Restricted
Period by reason of death or total and permanent disability, the Restricted
Period referred to above shall terminate with respect to any portion of the
grant which remains restricted. The Committee may at any time, in its sole
discretion, accelerate or waive all or any portion of the restrictions remaining
in respect of the stock grant for any or all Recipients.
In the absence of an effective registration statement covering the issuance
of such shares, each Recipient shall represent and warrant to and agree with the
Company that he takes (i) any shares awarded under the Plan for investment only
and not for purposes of sale or other disposition and will also take for
investment only and not for purposes of sale or other disposition any rights,
warrants, shares, or securities which may be issued on account of ownership of
such shares, and (ii) will not sell or transfer any shares awarded or any
rights, shares, or securities issued on account of the shares awarded or any
shares received upon exercise of any such rights or warrants except in
accordance with (A) an opinion of counsel for the Company (or of other counsel
acceptable to the Company) that such shares, rights, warrants, or other
securities may be disposed of without registration under the Securities Act of
1933, or (B) an applicable no action letter issued by the Staff of the
Commission. In addition, certificates representing such shares (in the absence
of an effective registration statement covering the issuance of such shares)
shall bear the following legend: These shares have not been registered under the
Securities Act of 1933 as amended and may not be pledged or hypothecated and
3
<PAGE>
may not be sold or transferred in the absence of an effective registration
statement for the shares under such act or an opinion of counsel addressed to
Continental Can Company, Inc. that registration is not required under such act.
PART 3. GENERAL PROVISIONS
---------------------------
VII. ASSIGNMENTS
The rights and benefits under this Plan may not be assigned except that
there shall be no such limitation on shares not subject to any restriction.
VIII. TIME FOR GRANTING AWARDS
All grants of shares subject to the Plan shall be granted, if at all, not
later than ten (10) years after the adoption of the Plan by the Companys
stockholders.
IX. LIMITATION OF RIGHTS
A. No Right to Continue as an Officer or Employee. Neither the Plan, nor
the granting of an award nor any other action taken pursuant to the Plan, shall
constitute or be evidence of any agreement or understanding, express or implied,
that the Company will retain an officer or employee for any period of time, or
at any particular rate of compensation.
B. Stockholders Rights for Recipients. A Recipient shall have all the
rights of a Stockholder with respect to the shares granted to him.
X. CHANGES IN PRESENT STOCK
If as a result of a stock dividend, stock split, recapitalization (or other
adjustment in the stated capital of the Company), or as the result of a merger,
consolidation, or other reorganization, the common shares of the Company are
increased, reduced, or otherwise changed, the number of shares available
hereunder shall be appropriately adjusted, and if by virtue thereof a Recipient
shall be entitled to new or additional or different shares, such shares to which
the Recipient shall be entitled shall be subject to the terms, conditions, and
restrictions herein contained relating to the original shares. In the event
that warrants or rights are awarded with respect to shares awarded hereunder,
and the recipient exercises such rights or warrants, the shares or securities
issuable upon such exercise shall likewise be subject to the terms, conditions,
and restrictions herein contained relating to the original shares.
XI. EFFECTIVE DATE OF THE PLAN
The Plan shall take effect on the date of adoption by the Board of
Directors of the Company subject to the approval of the Plan by the stockholders
of the Company and the listing of the shares represented thereby on the New York
Stock Exchange. Stock may be granted under the Plan at any time after such
adoption and prior to the termination of this Plan.
4
<PAGE>
XII. AMENDMENT OF THE PLAN
The Committee may suspend or discontinue the Plan or revise or amend it in
any respect whatsoever; provided, however, that without approval of the
stockholders, no revision or amendment shall change the number of shares subject
to the Plan (except as provided in Section X, or materially increase the
benefits accruing to participants under the Plan.
XIII. NOTICE
Any written notice to the Company required by any of the provisions of the
Plan shall be addressed to the Secretary of the Company and shall become
effective when it is received.
XIV. GOVERNING LAW
This Plan and all determinations made and actions taken pursuant hereto shall
be governed by the law of the State of Delaware and construed accordingly.
5
<PAGE>
EXHIBIT 10.14
AMENDMENT NO. 1 TO REVOLVING CREDIT AND TERM LOAN AGREEMENT
DATED AS OF DECEMBER 1, 1992
between
CONTINENTAL CAN COMPANY, INC. and EXTEBANK
The Revolving Credit and Term Agreement (the Agreement) is hereby amended as
follows:
1. Section 1.01 of the Agreement is hereby amended by changing the date
set forth on lines 5 and 6 thereof to May 31, 1995.
2. Section 1.05 of the Agreement is hereby amended in its entirety to read
as follows:
SECTION 1.05 Repayment of Advances. The Borrower shall repay the
---------------------
aggregate unpaid principal amount of all Advances made by the Bank and
outstanding on May 31, 1995 in sixty (60) equal monthly installments of
principal commencing on June 30, 1995 and on the last day of each
successive month thereafter through and including May 31, 2000 (the
Term Loan); provided, however, that the last such installment shall be
-------- -------
in an amount necessary to repay in full the unpaid principal amount of
the Advances, plus all interest due and owning thereon.
3. Section 2.03 of the Agreement is hereby amended by changing the date
set forth on line 3 thereof to May 31, 1995.
4. Section 2.04 of the Agreement is hereby amended by changing the
reference to the initial two (2) your term to the initial thirty (30) month
term.
5. Except as set forth herein, all of the terms and provisions of the
agreement shall remain unchanged and shall continue in full force and effect.
Dated: November 11, 1994
EXTEBANK
By: /s/ Thomas J. Crane
-------------------
Thomas J. Crane, Vice President
CONTINENTAL CAN COMPANY, INC.
By: /s/ Marcial B. L'Hommedieu
--------------------------
Marcial B. L'Hommedieu, Treasurer
ATTEST:
/s/ Abdo Yazgi
- - --------------
Abdo Yazgi, Secretary
1
<PAGE>
EXHIBIT 13.1
CONTINENTAL CAN COMPANY, INC.
1994 ANNUAL REPORT
CORPORATE PROFILE
Continental Can Company, Inc., through its subsidiaries, manufactures extrusion
blow-molded plastic containers, metal cans, plastic films and equipment for the
packaging industry, and prints and laminates flexible packaging for the food and
snack food industries. The Company also owns Lockwood, Kessler & Bartlett,
Inc., an engineering firm located in the United States.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE NUMBER
-----------
<S> <C>
Report To Shareholders...................... 26
Description Of Business..................... 28
Selected Financial Data..................... 30
Management's Discussion And Analysis
Of Financial Condition.................... 31
Consolidated Financial Statements........... 37
Notes To Consolidated Financial Statements.. 42
Independent Auditor's Report................ 65
General Information......................... 66
Directors And Officers...................... 67
Subsidiaries And Officers................... 68
</TABLE>
The Pillsbury Company received the Dupont Award For Innovation In
Packaging for their Hungry Jack syrup container. It is the first
microwave-safe syrup bottle on the market and was designed and
produced by Continental Plastic Containers, Inc.
25
<PAGE>
Dear Fellow Stockholders,
As expected, the Companys sales, profitability and cash flow (net income plus
depreciation) all increased in 1994. Sales in 1994 rose to $537.2 million, the
highest level ever achieved. In addition, income before accounting change and
extraordinary item grew nearly five-fold to $4,815,000 while earnings per share
before accounting changes and extraordinary items increased to $1.50. We
believe these excellent improvements validate our basic strategy of investing
the necessary resources for growth in our businesses coupled with the cost
reductions (including debt reductions) necessary in a competitive marketplace.
The substantial progress shown by almost all of our operations reflected, in
particular, the significant improvement in volume and operating profit at
Continental Plastic Containers, Inc. (CPC), the benefit of the beginning of an
economic recovery of Europe, and previous cost-cutting measures.
In 1994, CPC began to show the level of improvement we have expected from this
acquisition. Sales increased 12% while operating profit more than doubled to
$8,565,000. Among the years highlights at CPC were the opening of its sixteenth
plant at West Memphis, Arkansas to provide all the bottles for Coastal Unilube
(formerly a self-manufacturer), production of an innovative microwaveable syrup
bottle for Pillsbury, the execution of another contract expanding its
production for Coca-Cola Foods, and the repurchase of $5.3 million of its Senior
Secured Notes. In 1995, we expect to see a continuation of these substantial
sales increases for CPC, as well as the first reported after tax profit since
its acquisition.
In March 1995, CPC entered into an agreement to supply Mobil with most of its
plastic bottles throughout the United States for a five-year term while also
assuming additional, unusual and innovative Mobil product responsibilities for a
packager. The benefit of the Mobil contract (which takes effect in July), will
be minimal in 1995 because of expected start-up expenses but should contribute
substantially to CPCs sales and profitability in 1996 and thereafter.
In Europe in 1994, our subsidiaries benefited from the continents overall
economic improvement. However, although the beginning of an economic recovery
helped them improve volumes, operating margins remained under pressure.
Ferembal, which saw a 6% increase in sales, successfully implemented cost
reductions to maintain competitiveness in its markets, including a 10% workforce
reduction which resulted in a restructuring charge. The impact of the charge on
the Companys earnings, was almost entirely offset by a benefit from the
settlement of a tax dispute. We shall continue to emphasize least-cost
operations to ensure that in the long term Ferembal, and all of our other
subsidiaries, are able not only to compete
26
<PAGE>
but to grow and improve their competitive position. Ferembal is an excellent
food can company which was solidly profitable in 1994. We are confident that,
over time, cost reduction efforts and continuing productivity improvements will
enable it to retain its profitability at historical levels despite an
increasingly competitive market.
Dixie Union, our German-based packaging film and machine business, enjoyed a
gratifying surge in the volume and profitability of its machine business due to
economic improvement and an emphasis on the total line concept which brings
significant productivity improvement to packaged goods producers. This
improvement in machinery was partially offset by flat sales and lower margins in
Dixie Unions film business in 1994. However, backlog at Dixie Union was up
approximately $6 million at December 31, 1994 over the prior year end and the
film business is expected to increase in both volume and profitability in 1995
while the machine business continues strong.
Onena and Ingosa were merged into one modern plant location in Pamplona during
the year. We intend to sell the former plant and site for residential
development in keeping with the area in which it is located. While the
combination of our Spanish film subsidiaries has been predictably difficult and
costly in 1994, we believe that the firm footing we have established will allow
our new integrated business to grow in sales and profitability in 1995 and
future years.
Lockwood, Kessler & Bartlett, Inc., the engineering services group, suffered a
very poor first quarter last year due to the extremely severe weather in the
Northeast. However, the remaining three quarters and the year overall were
profitable and we look for a continued improvement in 1995.
In summary, we feel that all of our businesses responded well during 1994 to the
business conditions and opportunities in their particular markets and we are
optimistic about our prospects, particularly over the next several years. We
are committed to continued internal growth and profitability, and we shall
carefully pursue potential acquisitions which will enhance our present
businesses. With this prudent yet aggressive approach, we believe that we shall
significantly benefit shareholder value with our strategic long-term management
philosophy.
Donald J. Bainton
Chairman & Chief Executive Officer
March 10, 1995
27
<PAGE>
DESCRIPTION OF BUSINESS
Continental Can Company, Inc. is a holding company primarily engaged
in the packaging business through a number of consolidated operating
subsidiaries. The Company's packaging business consists of its 50%-owned
domestic subsidiary, Plastic Containers, Inc. (PCI), which owns Continental
Plastic Containers, Inc. and Continental Caribbean Containers, Inc.
(collectively, CPC), a leading manufacturer of extrusion blow-molded containers
in the United States. Its wholly-owned German operating subsidiary is Dixie
Union Verpackungen GmbH (Dixie Union) and its majority-owned European operating
subsidiaries are Ferembal S.A. (Ferembal), Obalex A.S. (Obalex) and Onena Bolsas
de Papel, S.A. (Onena). Ferembal is a manufacturer of rigid packaging,
primarily food cans, of which it is the second largest supplier in France.
Obalex also manufactures rigid packaging, primarily food cans, in the Czech
Republic. Dixie Union manufactures plastic films and packaging machines,
primarily for the food and pharmaceutical industries. Onena manufactures film,
and laminates and prints plastic, paper and foil packaging materials for the
food and snack food industries primarily in Spain. The Company also owns
Lockwood, Kessler & Bartlett, Inc. (LKB) which provides services principally in
the northeastern United States in the fields of survey, civil, environmental and
structural engineering, mechanical and electrical engineering, and construction
administration and inspection.
CPC - The Company's 50%-owned subsidiary, PCI, acquired CPC in
---
November 1991. CPC, headquartered in Norwalk, Connecticut, develops,
manufactures and sells a wide range of extrusion blow-molded plastic containers
through its national network of sixteen manufacturing plants (including one in
Puerto Rico). CPC supplies containers for food and beverages, household
chemicals, automotive products and motor oil, industrial and agricultural
chemicals and cosmetics and toiletries. CPC produces both single and multi-
layer containers, manufactured primarily from high density polyethylene and
polypropylene resins, ranging in size from two ounces to five gallons. Some of
these multi-layer containers include a barrier layer to protect food products
which are subject to spoilage or deterioration if exposed to oxygen. Besides
being fully recyclable, in many instances, these containers can be, and are,
produced using a significant amount of post-consumer recycled plastic. Its
customers include some of the largest consumer products companies in the United
States, such as Clorox Company, Coca-cola Foods, Colgate-palmolive Company,
Mobil Oil Corporation, Pennzoil Products Company, Procter & Gamble Company And
Quaker Oats Company. CPC often manufactures substantially all of a customer's
container requirements for specific product categories or for particular
container sizes. CPC has long-standing relationships with most of its customers
and has long-term contracts with customers representing approximately 70% of its
dollar sales volume.
28
<PAGE>
FEREMBAL - The Company currently owns an 85% interest in Ferembal,
--------
the second largest food can manufacturer in France and the fourth largest in
Europe. Ferembal, headquartered in Paris, has five manufacturing plants located
in each of the main agricultural regions of France.
Besides food cans for such products as vegetables, mushrooms, fruits,
prepared meals and pet foods, Ferembal also manufactures cans for industrial
products such as paint, chemical products and motor oil. Ferembal's products
include both two and three-piece cans for food, easy-open ends, hi-white enamel
cans and a large number of can products for industrial end uses, all in a number
of different diameters. Ferembal's production for the food and pet food markets
accounts for approximately 85% of its sales with remaining sales coming from
cans produced for industrial products. Ferembal's customers include many
leading French and European vegetable and prepared food processors, pet food
processors, and paint and other industrial can users.
OBALEX - The Company, through Ferembal, owns 64% of the outstanding
------
stock of Obalex. Obalex, located in the Czech Republic, manufacturers both two
and three-piece cans for food which account for approximately 80% of its sales
and a number of can products for industrial end users.
DIXIE UNION - The Company owns all of the outstanding stock of Dixie
-----------
Union. Dixie Union is headquartered in Kempten, Germany and has subsidiary
companies in France and the United Kingdom, which function as a sales,
distribution and customer service network. Dixie Union manufactures three main
product lines for the packaging industry: multi-layer shrink bags, composite
plastic films and packaging machines and slicers. Dixie Union is one of a few
companies in Europe which manufacture both packaging films and packaging
equipment.
Dixie Union's customers are primarily processors of meats, cheeses,
poultry and fish products, although Dixie Union also produces packaging and
machinery for suppliers of technical and medical products. Most of Dixie
Union's sales are generated in Europe; however, a number of Dixie Union's
packaging machines are sold in the United States through an exclusive
distributor, and through agents and distributors on a worldwide basis.
ONENA - The Company owns a 57% interest in Onena, located in
-----
Pamplona, Spain. Onena manufactures plastic film, and laminates and prints a
variety of paper, foil and plastic film products. Its major customers are
primarily in the food and snack food industries in Spain. During 1994, the
Company merged Onena with another majority owned flexible packaging subsidiary,
Industrias Gomariz S.a. (Ingosa) which it acquired in 1993 and which was also
located in Pamplona. All of the combined company's operations (also named
onena) have been moved to Ingosa's manufacturing facility, which was expanded
in 1994.
29
<PAGE>
SELECTED FINANCIAL DATA(1)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Sales (2) $537,180 $481,842 $511,241 $310,654 $292,033
======== ======== ======== ======== ========
Net income (2) (3) $ 4,445 $ 988 $ 2,063 $ 7,394 $ 5,059
======== ======== ======== ======== ========
Earnings per
common share (3)
Primary $ 1.39 $ .33 $ .67 $ 2.92 $ 2.88
======== ======== ======== ======== ========
Fully Diluted $ 1.34 $ .32 $ .64 $ 2.59 $ 2.40
======== ======== ======== ======== ========
Weighted average
shares outstanding (4) 3,220 3,023 3,078 2,533 1,758
======== ======== ======== ======== ========
Total assets $423,585 $385,907 $400,010 $410,543 $202,524
======== ======== ======== ======== ========
Long-term debt and capitalized
lease obligations $142,361 $153,982 $165,701 $159,567 $ 65,862
======== ======== ======== ======== ========
Total stockholders'
equity (4) $ 70,696 $ 60,855 $ 62,935 $ 61,393 $ 23,856
======== ======== ======== ======== ========
EBITDA (5) $ 59,365 $ 59,368 $ 64,521 $ 38,393 $ 33,590
======== ======== ======== ======== ========
Working capital $ 71,348 $ 66,105 $ 69,158 $ 63,004 $ 48,235
======== ======== ======== ======== ========
Current ratio 1.52 1.67 1.69 1.57 1.56
======== ======== ======== ======== ========
</TABLE>
(1) In thousands, except per share amounts and current ratio.
(2) In 1993, includes sales of $10,682 and net income of $238 related to the
purchase of Obalex. In 1991, includes sales of $17,030 and a net loss of
$1,045 related to the purchase of PCI.
(3) Includes a charge for the cumulative effect of an accounting change of $262
($.08 per share both primary and fully-diluted) and an extraordinary charge
of $108 ($.03 per share both primary and fully diluted) in 1994. Includes
income for the cumulative effect of accounting change of $460 ($.15 per
share primary and $.14 per share fully-diluted) and an extraordinary charge
of $1,502 ($.49 per share primary and $.44 per share fully-diluted) in
1992. Includes income for an extraordinary item of $22 ($.01 per share
both primary and fully-diluted) in 1990.
(4) The 1994 weighted average shares outstanding include 268 shares issued in
May 1994 upon the conversion of the Company 10-3/4% Convertible
Subordinated Debentures. The 1991 weighted average shares outstanding
include 1,020 shares and 255 warrants to purchase shares sold in June 1991
for net proceeds of $29,453. The 1990 weighted average shares outstanding
include 460 shares sold in January 1990 for net proceeds of $6,756.
(5) Earnings before interest, taxes, depreciation and amortization, determined
without consideration to minority interests.
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
1994 VS. 1993
In 1994, sales increased 11% to $537.2 million from $481.8 million in 1993.
This improvement resulted primarily from net volume increases and included sales
from the 1993 acquisition of Industrias Gomariz, S.A. (approximately $10
million) and foreign currency translation rate differences (approximately $5.4
million). Also included above in net volume increases is approximately $5.8
million in resin price increases which are a customer pass-through at PCI.
Management expects volume increases and the pass-through of resin price
increases at PCI to result in increased sales levels in 1995.
Backlog at December 31, 1994 amounted to $29.9 million as compared to $19.9
million at December 31, 1993. Since PCI, Ferembal, and Obalex produce most of
their products under open orders, none of this backlog is attributable to them.
The Company expects that the increased backlog at December 31, 1994 will result
in increased sales and earnings in the first six months of 1995 as compared to
the same prior year period.
Gross profit increased 8% to $94.2 million in 1994 from $87.2 million in 1993.
Gross profit margin declined to 17.5 % in 1994 from 18.1% in 1993. The increase
in gross profit resulted from higher sales volumes while the decline in gross
profit margin reflected increased competitive pressure on pricing in the can and
flexible packaging markets which more than offset improved utilization and
profitability at PCI and in the Companys packaging machine business.
Additionally, the pass-through of resin costs at PCI increases both sales and
costs equally, reducing the margin percentage.
Selling, general and administrative expense as a percentage of sales amounted to
12.8% in 1994 as compared to 12.9% in 1993. While lower on a percentage basis
because of the increased sales volume, selling, general and administrative
expense in 1994 increased $6.2 million or 10.0%. Included in 1994s expenses are
approximately $1.7 million for termination benefits caused by the restructuring
of a portion of Ferembals coating and printing lines, and $990,000 for plant
closing expense relating to a facility closed by PCI in 1991 prior to its
purchase by the Company. The charge at PCI resulted from the Companys
recognition of a loss of future rental payments from a sub-tenant which
defaulted on its sub-lease on the facility. Also, costs associated with the
merger of Onena and Ingosa added to this expense in 1994.
As a result of these various factors operating income increased to $25,648,000
in 1994 as compared to $24,871,000 in 1993 while operating margin declined to
4.8% in 1994 from 5.2% in 1993.
31
<PAGE>
Net interest expense declined substantially to $18.7 million in 1994 from $22.9
million in 1993. This decline reflected both lower interest rates in Europe,
and lower average debt balances in Europe and the United States in 1994.
The Companys consolidated effective tax rate is an amalgamation of the tax
charges and tax benefits of itself and its subsidiaries. This rate amounted to
26% in 1994 as compared to 153% in 1993 reflecting the offsetting nature of
these items in consolidation. Also, in 1994 Ferembal settled a tax dispute
which resulted in a tax benefit of approximately $900,000.
Minority interest in 1994 and 1993 reflects the interests of other shareholders
in PCI, Ferembal, Onena and Obalex.
Income before extraordinary items and the cumulative effect of an accounting
change in 1994 amounted to $4,815,000 ($1.50 per share). An extraordinary
charge in 1994, net of the portion attributable to the minority interest,
amounting to $108,000 ($.03 per share) related to costs associated with the
extinguishment of $5.3 million in Senior Secured Notes at PCI. The cumulative
effect of an accounting change in 1994 for the adoption of FASB 112 resulted in
a charge to income, net of the portion attributable to the minority interest, of
$262,000 (.08 per share).
Income before extraordinary items and the cumulative effect of an accounting
change in 1993 amounted to $988,000 ($.33 per share). There were no
extraordinary items or accounting changes in 1993.
32
<PAGE>
1993 VS. 1992
Sales declined 5.8% in 1993 to $481,842,000 as compared to $511,241,000 in 1992.
The decrease resulted primarily from changes in foreign currency translation
rates which reduced reported sales by $19.8 million as compared to the prior
year. A reduction in vegetable can sales in France as a result of inventory
reductions by Ferembal's customers (approximately $10 million) and an economic
recession in Europe accounted for the remainder of the decline. Increased sales
at PCI ($6.3 million) and sales of Obalex ($10.7 million) offset a portion of
the decline
Backlog amounted to approximately $19,868,000 at December 31, 1993 as compared
to $19,149,000 at December 31, 1992.
Gross profit declined 10% to $87,164,000 as compared to $96,872,000 in 1992.
Gross profit margin declined to 18.1% in 1993 from 18.9% in 1992. The decline
in gross profit related primarily to the Company's European operations for the
reasons noted above.
Selling, general and administrative expenses remained at approximately 13% as a
percentage of sales in both 1993 and 1992. As a result of these various
factors, operating income was $24,871,000 in 1993 and $29,600,000 in 1992 while
the operating income margin amounted to 5.2% in 1993 from 5.8% in 1992.
Net interest expense declined during 1993 to $22,942,000 from $26,023,000 in
1992 as a result of changes in foreign currency translation rates, lower average
outstanding debt balances and lower interest rates primarily in the Company's
European operations.
The Company's consolidated effective tax rate amounted to approximately 153% in
1993 compared to 87% in 1992. The higher effective tax rate reflects the low
level of tax benefits accrued at the Company's loss operations offset by the
provision for taxes applicable to the Company's profitable operations.
Minority interest in each of 1993 and 1992 reflects the interests of other
shareholders in PCI, Ferembal and Onena, and of Obalex in 1993.
Net income amounted to $988,000 ($.33 per share) in 1993 as compared to
$2,063,000 ($.67 per share) in 1992. Included in net income in 1992 was the
cumulative effect of an accounting change relating to the adoption of FASB No.
109 amounting to $460,000 ($.15 per share) and an extraordinary loss related to
the write-off of a deferred financing fee of $1,502,000 ($.49 per share).
33
<PAGE>
FINANCIAL CONDITION
Capital Resources
The packaging business utilizes relatively large amounts of specialized
machinery and equipment which are periodically upgraded or replaced.
Capital expenditures in 1994 amounted to $23,858,000 primarily for the
purchase of machinery and equipment. During 1994, major capital expenditures
included the purchase of extrusion blow-molding lines and line changes for
barrier containers for food products, an easy-open end line for cans and an
expansion of a building used by Onena. Expenditures in 1995 are expected to
amount to approximately $31,000,000 and be similar in character to those in
1994. The expected increase in 1995 compared to 1994 relates primarily to
extrusion blow molding lines and line modifications for a five year contract for
a motor oil customer which was signed in March 1995.
During 1994, Ferembal increased its ownership interest in Obalex to 64%.
See Note 2(b).
The Company merged Onena, Ingosa and Dixie Union, S.A., Dixie Unions
Spanish sales subsidiary, during 1994 and capitalized certain amounts due the
Spanish provincial government by Ingosa in exchange for 41% of the equity of the
merged entity. The merger has been reflected in the Company's financial
statements as of January 1, 1994. See Note 2(a).
The minority stockholders of Ferembal intend to sell a portion of their
shares in an initial public offering of Ferembal which the Company has agreed to
make in the fourth quarter of 1995. It is expected that the holder of a junior
subordinated convertible bond of Ferembal will convert its bond at that time to
participate in the offering. Although the Company does not currently expect to
sell any of its stock in Ferembal in the offering, if the bond is converted, the
Company ownership of Ferembal will decline from 85% to 64%. This reduction is
not expected to have any significant impact to the Companys 1995 financial
results. See Note 2(d).
The Company has actively pursued acquisition possibilities in 1994 and
intends to continue to do so in 1995 and later years. It is presently the
Company's intention to finance any acquisitions by leveraging the assets of the
company to be acquired or, possibly, through the issuance of stock. There are no
plans presently to utilize any substantial portion of the existing capital
resources of the Company in an acquisition.
The Company met its 1994 capital requirements with cash generated from
operations, from existing funds, and through
34
<PAGE>
borrowings. It is anticipated that such expenditures in 1995 will be financed in
a similar manner.
LIQUIDITY
The Company's liquidity position at December 31, 1994 declined somewhat
from the prior year end. Working capital increased to $71.5 million at December
31, 1994 from $66.1 million at December 31, 1993. The current ratio was 1.52 at
December 31, 1994 and 1.67 at December 31, 1993.
The Company's cash position decreased by approximately $4 million between
December 31, 1993 and 1994. Cash flows from operating activities provided $18.6
million for the Company in 1994 most of which related to depreciation and
amortization. In addition, approximately $14.5 million was borrowed on a short-
term basis to finance the increase in accounts receivable and inventory. These
accounts increased in 1994 primarily as a result of the substantial increase in
sales. A portion of this increase relates to an increase in accounts receivable
at Ferembal which at the prior year end had discounted accounts receivable in
the amount of $9,859,000. Most of the increase in short-term borrowings at
December 31, 1994 is expected to be repaid during the first quarter of 1995.
The Company invested $23.9 million in 1994 in property, plant and equipment.
Additionally, the Company used $12.4 million in financing for the net repayment
of long-term borrowings.
At December 31, 1994, the Company had available a credit line of $2,650,000
under a Revolving Credit Facility. The Company's packaging subsidiaries had
available various unutilized credit facilities of $43 million at December 31,
1994. However, the Company's ability to draw upon these lines for other than
certain subsidiary purposes is restricted.
The Company expects that cash from operations and its existing banking
facilities will be sufficient to meet its needs both in 1995 and on a long-term
basis.
UTILIZATION OF NET OPERATING LOSS CARRYFORWARDS
The Company and its subsidiaries account for income taxes in accordance
with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes" issued in February 1992. This statement requires, among other
things, recognition of future tax benefits, measured by enacted tax rates,
attributable to deductible temporary differences between financial statement and
income tax bases of assets and liabilities and to tax net operating loss
carryforwards, to the extent that realization of such benefits is more likely
than not.
As discussed in Note 10, PCI has tax net operating loss carryforwards (NOL's)
totaling approximately $47 million which expire between 2006 and 2009. SFAS No.
109 requires that the tax
35
<PAGE>
benefit of such NOL's be recorded as an asset to the extent that management
assesses the utilization of such NOL's to be "more likely than not". Management
has determined, based on the Continental Plastic Container Company's history of
prior operating earnings and its expectations for the future, that operating
income of PCI will more likely than not be sufficient to utilize at least $30
million of these NOL's prior to their ultimate expiration in the year 2009.
The NOL's available for future utilization were generated principally by an
operating loss caused by increased post-acquisition depreciation and
amortization charges and additional interest expense on debt incurred in
connection with the purchase. Additionally, in the year ended December 31,
1992, an extraordinary loss was incurred due to the write-off of deferred
financing costs relating to a short-term note which was refinanced. The
operations of the Continental Plastic Container Companies have historically been
profitable (excluding non-recurring items). In assessing the likelihood of
utilization of existing NOL's, management considered the historical results of
the Continental Plastic Container Companies' operations both prior to the
purchase and as subsidiaries of PCI subsequent to the purchase, and the current
operating environment.
INFLATION AND CHANGING PRICES
Costs and revenues are subject to inflation and changing prices in the
packaging business. Since all competitors are similarly affected, product
selling prices generally reflect cost increases resulting from inflation. At PCI
changes in the cost of plastic resin are passed through to customers and have
equal and offsetting effects on sales and costs of goods sold and, therefore,
have no material effect on earnings and cash flow. Such changes can have a
substantial impact on sales. Inflation has not been a material factor in the
Company's revenues and earnings in the past three-years.
36
<PAGE>
<TABLE>
<CAPTION>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
(In thousands)
1994 1993
--------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 8,776 $ 12,741
Investments 292 317
Accounts receivable:
Trade accounts 102,255 71,899
Other 15,964 8,357
Less allowance for doubtful accounts (5,316) (3,522)
--------- --------
Accounts receivable, net 112,903 76,734
Inventories 82,432 69,503
Prepaid expenses and other current assets 4,700 4,911
--------- --------
Total current assets 209,103 164,206
--------- --------
Property, plant and equipment, at cost:
Land, building and improvements 48,750 43,733
Manufacturing, machinery and equipment 230,365 206,423
Furniture, fixtures and equipment 8,536 7,379
Construction in progress 9,505 9,732
--------- --------
297,156 267,267
Less accumulated depreciation and amortization (116,786) (84,192)
--------- --------
Net property, plant and equipment 180,370 183,075
Goodwill, net of accumulated amortization of
$1,853 and $1,456, respectively 13,997 13,369
Other assets, net of accumulated amortization 20,115 25,257
--------- --------
Total assets $ 423,585 $385,907
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
37
<PAGE>
<TABLE>
<CAPTION>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
DECEMBER 31, 1994 AND 1993
<S> <C> <C>
(In thousands)
1994 1993
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short term borrowings $ 21,855 $ 6,378
Accounts payable - trade 60,540 40,828
Accrued liabilities:
Employee compensation and benefits 19,072 16,075
Other accrued expenses 16,143 15,887
Current installments of long term debt and
obligations under capital leases 13,043 13,487
Income taxes payable 1,160 635
Other current liabilities 5,942 4,811
-------- --------
Total current liabilities 137,755 98,101
Long term debt, excluding current installments 128,363 140,481
Obligations under capital leases, excluding
current installments 13,998 13,501
Deferred income taxes 3,747 2,717
Other 36,285 38,137
-------- --------
Total liabilities 320,148 292,937
Minority interest 32,741 32,115
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 and 2,879,158 shares in 1993. 788 720
-------- --------
788 720
Additional paid-in capital 42,872 41,414
Retained earnings 26,187 21,742
Cumulative foreign currency translation adjustment 849 (3,021)
-------- --------
Total stockholders' equity 70,696 60,855
-------- --------
Total liabilities and stockholders' equity $423,585 $385,907
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
38
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
(In thousands, except per share data)
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Sales $537,180 $481,842 $511,241
Cost of sales 443,023 394,678 414,369
-------- -------- --------
Gross profit 94,157 87,164 96,872
Selling, general and administrative expenses 68,509 62,293 67,272
-------- -------- --------
Operating income 25,648 24,871 29,600
Other income (expense):
Interest expense, net (18,684) (22,942) (26,023)
Foreign currency exchange loss (121) (134) (562)
Other - net (180) (55) 559
-------- -------- --------
Net other expense (18,985) (23,131) (26,026)
Income before provision for income taxes,
minority interest, extraordinary item and
cumulative effect of accounting change 6,663 1,740 3,574
Provision for income taxes 1,761 2,655 3,117
-------- -------- --------
Income (loss) before minority interest,
extraordinary item and cumulative effect of
accounting change 4,902 (915) 457
Minority interest 87 (1,903) (2,648)
-------- -------- --------
Income before extraordinary item and
cumulative effect of accounting change 4,815 988 3,105
Extraordinary item, net (108) - (1,502)
Cumulative effect of accounting change, net (262) - 460
-------- -------- --------
Net income $ 4,445 $ 988 $ 2,063
======== ======== ========
Earnings (loss) per common share - Primary:
Before extraordinary item and
cummulative effect of accounting change $ 1.50 $ 0.33 $ 1.01
Extraordinary item (0.03) - (0.49)
Cumulative effect of accounting change, net (0.08) - 0.15
-------- -------- --------
Net earnings per share - primary $ 1.39 $ 0.33 $ 0.67
======== ======== ========
Earnings (loss) per common share - assuming
full dilution:
Before extraordinary item and
cummulative effect of accounting change $ 1.45 $ 0.32 $ 0.94
Extraordinary item (0.03) - (0.44)
Cumulative effect of accounting change, net (0.08) - 0.14
-------- -------- --------
Net earnings per share - assuming
full dilution $ 1.34 $ 0.32 $ 0.64
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
39
<PAGE>
<TABLE>
<CAPTION>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
DECEMBER 31, 1994, 1993 AND 1992
(In thousands)
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 4,445 $ 988 $ 2,063
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating
Activities:
Depreciation and amortization 34,018 34,686 34,924
Extraordinary loss on write off of 108 - 1,502
capitalized finance costs, net
Minority interest 87 (1,903) (2,648)
Deferred income taxes (1,193) (1,554) (2,285)
Gain (loss) on sale of capital assets 169 363 (534)
Provision for losses on accounts receivable 2,845 915 210
Changes in Assets and Liabilities, Net of
Effects of Acquisition:
(Increase) decrease in accounts
receivable (25,528) (1,691) 7,815
(Increase) decrease in other
receivables (4,143) 3,941 198
(Increase) decrease in
inventories (6,952) 3,993 (8,260)
(Increase) decrease in prepaid
expenses and other current assets 392 146 (1,632)
(Increase) decrease in other assets 638 (481) (465)
Increase (decrease) in accounts
payable 15,901 (4,963) 441
Increase in accrued liabilities 1,884 465 1,642
Increase (decrease) in income
taxes payable 419 329 (1,403)
(Decrease) in other liabilities (4,532) (6,336) (1,234)
-------- -------- --------
Net Cash Provided by
Operating Activities 18,558 28,898 30,334
Cash Flows From Investing Activities:
Purchase of minority interests (1,970) (213) (120)
Proceeds from investments 31 534 1,349
Proceeds from sale of capital assets 985 770 1,434
Capital expenditures, net of
investment grants (23,858) (22,149) (26,393)
Purchase of equipment for customer
reimbursement (249) - (999)
Cash used to purchase Obalex, net of
cash acquired - - (1,086)
-------- -------- --------
Net Cash Used in Investing
Activities (25,061) (21,058) (25,815)
Cash Flows From Financing Activities:
Principal payments of long term debt
and obligations under
capital leases (18,125) (9,379) (135,397)
Proceeds from long term debt and
obligations under capital leases 5,727 827 135,378
Common stock issued upon conversion
of debentures and warrants 362 184 2,111
Proceeds from (repayments of) short
term borrowings 14,485 (339) (3,613)
Dividends paid by subsidiary to
minority interest (51) (344) (80)
-------- -------- --------
Net Cash Provided by (Used
in) Financing Activities 2,398 (9,051) (1,601)
Effect of exchange rate changes on cash 140 (323) (169)
-------- -------- --------
Increase (decrease) in cash and cash
equivalents (3,965) (1,534) 2,749
Cash and cash equivalents at beginning
of year 12,741 14,275 11,526
-------- -------- --------
Cash and cash equivalents at end of year $ 8,776 $ 12,741 $ 14,275
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
40
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
(In thousands)
Cumulative
Common Stock Foreign Total
----------------- Additional Currency Stock-
Number Paid-in Retained Translation holders
of Shares Amount Capital Earnings Adjustment Equity
--------- ------ ---------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1992 2,784 $696 $39,143 $18,691 $ 2,863 $61,393
Net income - - - 2,063 - 2,063
Common stock issued to employees and
upon conversion of debentures and
warrants 74 19 2,092 - - 2,111
Foreign currency translation adjustment - - - - (2,632) (2,632)
----- ---- ------- ------- ------- -------
Balances December 31, 1992 2,858 $715 $41,235 $20,754 $ 231 $62,935
Net income - - - 988 - 988
Common stock issued to employees and
upon conversion of debentures and
warrants 21 5 179 - - 184
Foreign currency translation adjustment - - - - (3,252) (3,252)
----- ---- ------- ------- ------- -------
Balances December 31, 1993 2,879 $720 $41,414 $21,742 $(3,021) $60,855
Net income - - - 4,445 - 4,445
Common stock issued to employees and
upon conversion of debentures and
warrants 272 68 1,458 - - 1,526
Foreign currency translation adjustment - - - - 3,870 3,870
----- ---- ------- ------- ------- -------
Balances December 31, 1994 3,151 $788 $42,872 $26,187 $ 849 $70,696
===== ==== ======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
41
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(1) Accounting Policies and Other Matters
(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Continental Can Company, Inc. (the Company), its majority-owned foreign and
domestic subsidiaries and its 50% interest in Plastic Containers, Inc.
(PCI). During 1992, the Company entered into an agreement which gave the
Company a proxy to vote an additional 1% of the shares of PCI (see Note
2(c)). The proxy provides the Company with effective control over PCI and,
accordingly, the Company's interest in PCI is reflected on a consolidated
basis.
At December 31, 1994, the Company owned the following packaging related
businesses: 85% of Ferembal S.A. (Ferembal) (see Note 2(d)), located in
France which in turn owns 64%of Obalex A.S. (Obalex) located in the Czech
Republic; 100% of Dixie Holding, Inc. and Dixie Union Geschaftsfurungs GmbH
which own 100% of Viatech Holding GmbH (Holding), which in turn owns all of
the outstanding shares of Dixie Union Verpackungen GmbH (Dixie Union),
located in the Federal Republic of Germany; and 57% of Onena Bolsas de
Papel, S.A. (Onena) located in Spain. As mentioned above, the Company also
owns 50% of PCI, which in turn owns 100% of Continental Plastic Containers,
Inc. and Continental Caribbean Containers, Inc. (collectively, CPC). In
addition, the Company owns 100% of an engineering firm, Lockwood, Kessler &
Bartlett, Inc.
Minority interests reflected in consolidation represent the portions of
Ferembal, Obalex, Onena, and PCI not owned by the Company.
All significant intercompany balances and transactions have been
eliminated.
(b) Inventories
Inventories consist principally of packaging materials, repair parts and
supplies. The manufacturing inventories of PCI are stated at the lower of
cost applied on the last-in, first-out (LIFO) method, which is not in
excess of market. Inventories of the Company's other subsidiaries and the
repair parts and supplies inventories of PCI are stated at the lower of
cost on a first-in, first-out (FIFO) basis or market.
(c) Depreciation and Amortization
42
<PAGE>
Depreciation and amortization of property, plant and equipment are computed
on a straight-line basis over the estimated useful lives of the assets, as
follows:
<TABLE>
<CAPTION>
Estimated
useful lives
(years)
<S> <C>
Building and building improvements 10 to 35
Manufacturing machinery and equipment 3 to 20
Furniture, fixtures and equipment 2 to 10
</TABLE>
Leasehold improvements are amortized over their estimated useful lives or
the term of the lease, whichever is less.
Provision for amortization of intangible assets is based upon the
estimated useful lives of the related assets and is computed using the
straight-line method. Intangible assets resulting from the acquisitions of
(a) PCI consist of (i) a non-compete agreement and acquisition costs
(amortized over five years), (ii) finance costs (being amortized over
periods ranging from five to nine years), and (iii) customer contracts
(amortized over ten years); and (b) Ferembal consist of patents (amortized
on a straight-line basis over their estimated useful lives) and goodwill
(amortized on a straight line basis over forty years).
(d) Income Taxes
The Company files a consolidated tax return for U.S. purposes for itself
and its domestic subsidiaries (to the extent it owns at least 80% of such
subsidiaries). Separate returns are filed for all other subsidiaries. U.S.
deferred income taxes have not been provided on the unremitted earnings of
the Company's foreign subsidiaries to the extent that such earnings have
been invested in the business, as any taxes on dividends would be
substantially offset by foreign and other tax credits.
Effective January 1, 1992, the Company implemented the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes" (see Note 10). The cumulative effect of adopting SFAS No. 109
is reflected in the consolidated statement of earnings. Under the asset and
liability method of SFAS 109, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates in effect for the year
in which those temporary differences are expected to be recovered or
settled. Under SFAS 109, the effect on deferred tax assets and liabilities
of a change in
43
<PAGE>
tax rates is recognized in income in the period that includes the
enactment date.
(e) Foreign Currency Translation
The accounts of the Companys foreign subsidiaries have been converted to
U.S. dollars utilizing SFAS No. 52, "Foreign Currency Translation", under
which assets and liabilities are translated at the exchange rate in effect
at the balance sheet date, while revenues, costs and expenses are
translated at the average exchange rate for the reporting period. Resulting
unrealized net gains or losses are recorded as a separate component of
stockholders' equity. Realized foreign exchange gains or losses are
reflected in operations.
(f) Statement of Cash Flows
The Company considers securities purchased within three months of their
maturity date to be cash equivalents. Cash equivalents consist of short-
term investments in government securities and bonds.
Cash paid for interest and income taxes was as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
(in thousands)
<S> <C> <C> <C>
Interest $18,725 $23,386 $25,535
Income taxes 4,086 4,667 6,666
</TABLE>
(g) Research and Development
Research and development costs are charged to expense as incurred. Such
costs amounted to approximately $12,461,000, $12,862,000 and $14,603,000 in
1994, 1993 and 1992, respectively.
(h) Accounting for Post-Retirement Benefits Other Than Pensions
In 1992, the Company adopted SFAS No. 106, "Employer's Accounting for Post-
Retirement Benefits Other Than Pensions", which requires a calculation of
the actuarial present value of expected benefits to be paid to or for
employees after their retirement and an allocation of the cost of those
benefits to the periods the employees render service (see Note 13).
(i) Employers Accounting for Post-Employment Benefits
In 1994, the Company adopted SFAS No. 112, Employers Accounting for Post-
Employment Benefits which requires employers to recognize the obligation to
provide postemployment benefits and an allocation of the costs of those
benefits (see Note 13).
44
<PAGE>
(j) Insurance
PCI is self-insured for coverages for the purposes of providing workers'
compensation, general liability and property and casualty insurance up to
varying deductible amounts. PCI's self-insurance reserves are included in
other liabilities in the consolidated balance sheets. Costs charged to
operations for self-insurance for the years ended December 31, 1994, 1993
and 1992 were $2,066,000, $2,268,000 and $2,078,000, respectively.
(k) Plant Rationalization and Realignment
PCI records an estimate of the liabilities associated with the closing of
specific manufacturing facilities. Costs (income) charged to operations
for these programs were $855,000, $(135,000), and $159,000 for the years
ended December 31, 1994, 1993 and 1992, respectively. Net income was
recognized in 1993 due to a sublease of the related facilities. In 1994
this sublease was defaulted upon. Included in other current liabilities at
December 31, 1994 is $549,000 ($472,000 at December 31, 1993) related to
accruals for plant rationalization and realignment.
(l) Restructuring Charge
Included in selling, general and administrative expense in 1994 is a
restructuring charge of $1,686,000 related to Ferembal. The charge
includes termination benefits for certain employees, approximately half of
whom took early retirement. During 1994, terminated employees received
$889,000. The December 31, 1994 balance sheet contains an accrued
liability of $797,000 for termination benefits for the remaining employees.
(m) Earnings Per 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 and warrants. Weighted average shares
outstanding in 1994, 1993 and 1992 were 3,220,082, 3,023,062 and 3,078,387,
respectively.
Prior to their conversion in 1994, earnings per common share, assuming full
dilution, gave effect to the conversion of the Company's outstanding
10-3/4% Convertible Subordinated Debentures as if such Debentures had been
converted, after elimination of related interest expense, net of income tax
benefit.
(n) Reclassifications
45
<PAGE>
Certain reclassifications have been made to conform prior year financial
statements to the 1994 presentation.
(2) ACQUISITIONS
(a) Ingosa
During 1993, the Company purchased substantially all of the shares of
Ingosa for nominal consideration. Ingosa, located in Pamplona, Spain, is a
flexible packaging manufacturer which laminates and prints plastic, paper
and foil materials primarily for the food industry in Spain. The
acquisition was accounted for under the purchase method. In connection with
this transaction the excess of the fair value of the net assets acquired
over the purchase price was allocated to property, plant and equipment.
Also in 1993, the Company entered into an agreement with the provincial
government of Navarra through SODENA, an economic development corporation
owned by the government. The agreement, which was legislatively ratified
in 1994, provided that (i) Onena and Dixie Union S.A. be merged into Ingosa
with the surviving company being named Onena, (ii) SODENA receive 41% of
the equity in the merged entity in exchange for the elimination of
$3,736,000 (534 million pesetas) in existing overdue local taxes owed by
Ingosa (see Note 9(f)), (iii) SODENA provide the merged entity with a
$2,163,000 (309 million pesetas) interest free loan for a period of up to 4
years secured by Onena's existing land and building (see Note 9(h)), and
(iv) the Company invest $700,000 (100 million pesetas) in the merged entity
as additional equity.
(b) Obalex
During 1992, Ferembal acquired 34% of the stock of Obalex A.S., a producer
of food cans in the Czech Republic, for approximately $3,021,000 and
simultaneously entered into two agreements to provide Obalex with training,
a technology license, and certain equipment, which approximates Ferembal's
estimated cost of providing such training, technology and equipment.
Ferembal paid approximately $1,086,000, with a balance of $1,935,000, paid
in December 1993.
In 1993, Ferembal, pursuant to a pre-emptive right, subscribed to a share
issue which gave Ferembal an additional 17% interest in the common stock of
Obalex for approximately $3,000,000. During 1994 Ferembal purchased an
additional 13% of Obalex from other investors for $730,000. These
transactions have been accounted for under the purchase method with the
purchase price allocated to the fair value of the net assets acquired.
46
<PAGE>
(c) PCI
During 1991, the Company and Merrywood, Inc. (Merrywood) each invested
$30,000,000 for respective 50% interests in PCI. On November 21, 1991, PCI
purchased all of the outstanding stock of CPC. The purchase price of
approximately $153,450,000 included $135,450,000 as the purchase price for
the stock acquired, $15,000,000 as consideration for a non-competition
agreement, and $3,000,000 as fees for providing financing. Of the total
consideration, $53,450,000 was paid in cash and $100,000,000 was
represented by a secured promissory note of PCI, guaranteed by CPC. PCI's
results are reflected in the Company's consolidated financial statements
after consideration of purchase accounting adjustments recorded by PCI.
In 1992, PCI issued $110,000,000 in senior secured notes, the proceeds of
which were used to retire the secured promissory note of PCI (see Note
9(c)). In connection with the retirement of the promissory note, PCI
incurred an extraordinary loss of $3,005,000 on the write-off of
capitalized financing costs. The Company has reflected this item in its
consolidated statement of earnings, net of the portion attributable to the
minority interest in PCI.
In addition to the foregoing amounts to purchase CPC, PCI had agreed to pay
the seller an amount equal to 30% of the amount by which CPC's sales
(adjusted to reflect resin prices in effect on August 31, 1991) for 1992
and 1993 exceeded $218,000,000 and $224,000,000, respectively. No
additional payments were required.
During 1992, the Company entered into an agreement with Merrywood pursuant
to which Merrywood granted the Company a proxy, irrevocable until August 6,
1998, to vote an additional 1% of the PCI common stock. The agreement also
provides an option which allows Merrywood either (i) to require the Company
to purchase its 50% interest in PCI for $30,000,000, plus interest at 1%
over the prime rate from November 21, 1991, or (ii) after July 1, 1994, to
exchange its 50% interest in PCI for 887,500 shares of the Company's common
stock (adjusted for any future stock split, stock combination or
reclassification) representing approximately 28% of the total number of
shares currently outstanding. In addition, pursuant to the agreement, the
Company gave Merrywood three voting and one non-voting position on the
Company's board of directors. If Merrywood has not elected to require the
Company to purchase its interests in PCI for cash by August 7, 1998, then
Merrywood's PCI shares are required to be exchanged for shares of the
Company's Common Stock.
47
<PAGE>
(d) Ferembal
During the two-year period ended December 31, 1993, the Company purchased
approximately 1% of the outstanding shares of Ferembal for $333,000. As a
result of this transaction, the Company's equity interest in Ferembal
increased to 85%. This transaction has been accounted for under the
purchase method, with the purchase price allocated to the fair value of the
net assets acquired.
As part of the 1989 purchase of Ferembal, a junior subordinated convertible
bond was issued which, if converted at December 31, 1994, would reduce the
Company's percentage ownership of Ferembal to 64% (see Note 9(d)).
Pursuant to an Agreement entered into in 1989 between the Company, the
minority shareholders and the convertible bondholder of Ferembal, the
Company agreed to take Ferembal public in order to provide liquidity for
these other investors. The agreement, as subsequently amended in 1994,
provided that, if Ferembal were not taken public by December 31, 1995, the
Company would purchase the shares of the minority shareholders at a price
to be determined through an appraisal process. Pursuant to discussions with
the minority shareholders and the convertible bondholder, they intend to
sell a portion of their shares in a public offering of Ferembal in the
fourth quarter of 1995. The Company does not presently intend to sell any
of its equity in Ferembal in the public offering. It is expected that the
convertible bondholder will convert its bond into equity immediately prior
to such offering. This conversion would reduce the Companys ownership of
Ferembal to 64%.
During the year ended December 31, 1991, Ferembal created Ferembal
Investissement S.A. (Investissement) for the purpose of holding a
subsidiary, Ferembal Sud Ouest S.A. (Sud Ouest). Investissement was
capitalized with 150,000 shares of 100 francs par value. Ferembal held
80,000 shares, and two banks, Credit du Nord and Societe Generale, held the
remaining 70,000 shares. Ferembal has purchased such shares from the banks
in 1994 for $1,817,000 which approximates fair market value.
(3) INVESTMENTS
At December 31, 1994 and 1993, all of the investments are held entirely by
PCI.
In 1994, PCI adopted SFAS No. 115, Accounting for Certain Investments in
Debt and Equity Securities. This accounting change had no effect on the
financial statements.
48
<PAGE>
Investments consist of held-to-maturity government agency securities
stated at amortized cost, which approximates market value.
(4) ACCOUNTS RECEIVABLE AND BUSINESS/CREDIT CONCENTRATIONS
Most of the Company's customers are located in the United States and
Europe. Sales to three customers in 1994, two customers in 1993 and two
customers in 1992 accounted for 21%, 15% and 15% of the Company's sales,
respectively; accounts receivable from two customers at December 31, 1994
and December 31, 1993 amounted to 22% and 19%, respectively, of the
Company's total stockholders' equity.
Included in other accounts receivable at December 31, 1994 are $4,190,000
($3,024,000 at December 31, 1993) due from customers for equipment
purchases; engineering fees billed of $3,755,000 ($2,250,000 at December
31, 1993); recoverable value added taxes of $2,477,000 ($686,000 at
December 31, 1993) related to Ferembal and Dixie Union and a receivable for
an insured loss of $3,036,000 related to Ferembal. A loan at December 31,
1993 of $34,986 to the Companys Chairman that carried a rate of interest of
prime plus 1% was repaid in 1994.
(5) INVENTORIES
Inventories consist principally of packaging materials. The components
of inventory at December 31 were as follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
(in thousands)
<S> <C> <C>
Raw materials and supplies $43,275 $31,774
Work in process 7,096 5,834
Finished goods 35,985 31,720
------- -------
86,356 69,328
LIFO reserve (3,924) 175
------- -------
$82,432 $69,503
======= =======
</TABLE>
Use of the FIFO method would have resulted in increased (reduced) cost of
goods sold of $(4,099,000), $63,000 and $112,000 in 1994, 1993 and 1992,
respectively.
(6) PREPAID EXPENSES AND OTHER CURRENT ASSETS
The components of prepaid expenses and other current assets at December
31, were as follows:
<TABLE>
<CAPTION>
1994 1993
------ ------
(In thousands)
<S> <C> <C>
Prepaid expenses $2,559 $2,367
Other 2,141 2,544
------ ------
$4,700 $4,911
====== ======
</TABLE>
49
<PAGE>
Ferembal entered into an agreement with a local municipality in
France for the sale, at cost, of land and buildings under construction at
December 31, 1991. Ferembal then agreed to lease the land and buildings
from the municipality under a 20-year operating lease. Ferembal may
terminate the lease at any time in the first six-years, without penalty,
and upon agreement thereafter. Rental payments to the municipality will be
determined on the cost of the land and buildings, less any government
subsidies received, plus interest, and will be payable over the 20-year
term. At December 31, 1992, the construction of the buildings was complete
and the cost of such land and buildings were considered to be assets held
for sale and were presented as other current assets in the amount of
$1,560,000. The sale of the land and buildings occurred on January 11,
1993 at cost, for which payment was made in 1994.
(7) OTHER ASSETS
The components of other assets at December 31 were as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
(in thousands)
<S> <C> <C>
Intangibles:
Non-compete agreements 15,000 $15,000
Financing and acquisition costs 6,316 6,469
Customer contracts 7,630 7,630
Patents 708 679
Technical licenses 840 784
Deferred tax assets 2,472 2,482
Non-current receivables,
principally VAT 1,351 1,832
Other 923 599
------ -------
35,240 35,475
Less accumulated amortization of
intangibles 15,125 10,218
------ -------
20,115 $25,257
====== =======
</TABLE>
(8) SHORT-TERM BORROWINGS
At December 31, 1994 and 1993, approximately $21,855,000 and $6,378,000,
respectively, were outstanding representing amounts drawn by (a) Ferembal
($16,858,000 at interest rates ranging from 6.0% to 10.4%), (b) Holding
($2,537,000 at an interest rate of 8.5%) and (c) Onena ($2,460,000 at
interest rates ranging from 8.25% to 8.75%).
At December 31, 1994, Ferembal had unutilized short-term unsecured
borrowing agreements of approximately $20 million. At December 31, 1994,
Holding had total lines of credit available under short-term unsecured
borrowing agreements of approximately $10,600,000.
50
<PAGE>
(9) LONG-TERM DEBT, CAPITAL LEASES AND OTHER LONG-TERM LIABILITIES
Long-term debt and capital leases at December 31, 1994 and 1993 are
summarized as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
(In thousands)
10.75% Convertible Subordinated
Debentures due 1994 (a)................. $ - $ 1,164
Revolving Credit Facility due in 1995,
with interest at 1% above the prime
rate (8.5% at December 31, 1994) (b) 1,350 850
10.75% Senior Secured Notes due 2001 (c) 104,700 110,000
Term loan payable by Ferembal between
1993 and 1997 at 10.25% (denominated
in francs: 10 million at December 31,
1994 and 14 million at December 31,
1993)................................... 1,873 2,369
Notes payable by Ferembal in
installments through 1997 at the Paris
Inter Bank Offering Rate (PIBOR)
(6.25% at December 31, 1994) plus .6%
to .75% (denominated in francs: 38
million at at December 31, 1994 and 65
million at December 31, 1993)........... 7,080 10,998
Term loans payable by Ferembal between
1993 and 2001 at weighted average
interest rates of 10% and a range of
8% to 15.5% (denominated in francs: 20
million at
December 31, 1994 and 27 million at
December 31, 1993....................... 3,761 4,535
Convertible Subordinated Bond due 2000
at PIBOR (denominated in francs: 10
million at December 31, 1994 and 1993)
(d)..................................... 1,873 1,692
Term loans payable between 1993 and
2001 at rates of 11.6% to 15.1%
(denominated in Czech crowns: 37
million at December 31, 1994 and 41
million at December 31,1993) 651 1,007
Obligations under capital leases (e).... 15,706 15,863
Notes payable by Dixie Union in 1995
and 1996 at 8.9% to 9.85% (denominated
in deutsch marks: 8 million at
December 31, 1994 and 10 million at
December 31, 1993)...................... 5,162 5,759
Notes payable by Dixie Union in
semi-annual installments through 2003
at rates of 7.3% to 7.88% (denominated
in deutsch marks : 8,285,000 at
December 31, 1994 and
7,630,000 at December 31, 1993)......... 5,346 4,394
Obligations pursuant to extension
agreement with regard to turnover tax
(f)..................................... 877 4,558
Obligations relating to settlement of
social security assessments (g)......... 3,142 3,312
Discounted secured note due 1997
(denominated in pesetas: 265 million
at December 31, 1994) (h)............... 2,017 -
</TABLE>
51
<PAGE>
<TABLE>
<S> <C> <C>
Bank borrowings at an average effective
interest rate of 10.9% in 1994, and
10.7% in 1993 (246 million and 133
million pesetas at December 31, 1994
and 1993, respectively)................. 1,866 932
Other................................... - 36
-------- ---------
155,404 167,469
Less current installments............... (13,043) (13,487)
-------- ---------
$142,361 $ 153,982
======== =========
</TABLE>
(a) In May 1987, the Company issued $1,612,875 of 10.75% Convertible
Subordinated Debentures due in 1994. Interest payments were payable
every six months. Each $15.00 face amount of Debenture, with the
payment of an additional $15.00 in cash, was convertible into four
shares of Common Stock. The Debentures were callable at the option of
the Company. All Debentures were converted in 1994 upon the issuance
of 267,799 shares of Common Stock.
(b) The Company's Revolving Credit Facility provides for borrowings of up
to $4 million. A commitment fee of .75% is payable on the unused
portion of the facility. There are provisions regarding the
maintenance of minimum net worth and demand deposits averaging at
least $400,000. The facility is secured by all of the Company's
tangible and intangible assets. Subject to certain conditions
precedent, the Revolving Credit Facility may be converted into a five-
year term note when due in May 1995.
(c) PCI is required to make four annual sinking fund payments of $22
million each, commencing April 1, 1997 and continuing through April 1,
2000. The first sinking fund payment will be reduced by any early
repurchases made before the payment date ($5.3 million at December 31,
1994). The notes are redeemable, in whole or in part, at the option
of PCI at prices decreasing from 105% of par at April 1, 1997 to par
on April 1, 2000. In the event of a change of control of PCI as
defined in the indenture, PCI is obligated to offer to purchase all
outstanding Senior Secured Notes at a redemption price of 101% of the
principal amount thereof, plus accrued interest. In addition, PCI is
obligated in certain instances to offer to purchase Senior Secured
Notes at a redemption price of 100% of the principal amount thereof,
plus accrued interest with the net cash proceeds of certain sales or
dispositions of PCI's assets. The indenture places certain
restrictions on PCI concerning payment of dividends, additional liens,
disposition of the proceeds from asset sales, sale-leaseback
transactions and additional borrowings. At December 31, 1994, PCI was
in compliance with these restrictions.
52
<PAGE>
The extraordinary loss of $108,000 in 1994, which is net of the
portion attributable to minority interest, relates to the early
extinguishment by PCI of a portion of the Senior Secured Notes.
(d) In 1989, Ferembal issued a subordinated bond convertible into 100,000
shares of capital stock at the option of the holders at any time prior
to October 28, 1999. If exercised, the Company's ownership interest
in Ferembal will decrease from the present 85% interest to a 64%
interest. If the conversion right is not exercised, the bond becomes
due in two equal annual installments beginning in 1999 (see Note
2(d)).
(e) The capital lease obligations represent lease payments due through
2005 which are capitalized.
The following is a schedule of future minimum lease payments under the
capitalized leases together with the present value of the net minimum lease
payments as of December 31, 1994:
<TABLE>
<CAPTION>
Fiscal Year (in thousands)
----------- --------------
<S> <C>
1995 $ 3,129
1996 2,964
1997 2,886
1998 2,808
1999 2,454
Later Years 8,755
-------
Total minimum lease payments $22,996
Less amount representing interest (7,290)
-------
Present value of net minimum lease
payments, including current maturities,
with interest rates ranging from
8% to 10.5% $15,706
=======
</TABLE>
(f) In June 1988, Onena settled an outstanding dispute regarding the
amount of turnover tax due to the Spanish provincial government. A
mortgage on Onena's property, plant and equipment secures the
obligation, which amounts to $887,000 (115 million pesetas) at
December 31, 1994 and is repayable in installments through May 1998.
Also included at December 31, 1993 is $3,736,000 (534 million pesetas)
which was due to the Spanish provincial government by Ingosa (see Note
2(a)).
(g) Represents $3,142,000 (414 million pesetas) at December 31, 1994 and
$3,312,000 (473 million pesetas) at December 31, 1993 due to social
security. Pursuant to an agreement, repayment by Onena is due by June
1997.
53
<PAGE>
(h) In March 1994 Onena was provided with a $2,163,000 (309 million
pesetas) interest free loan secured by its original land and building
(see Note 2(a)). The loan is due in March 1998 or upon the sale of
the land and building, whichever occurs first. The loan was
discounted at a 7% rate with the excess of $393,000 (56.8 million
pesetas) over the discounted amount of $1,770,000 (252.8 million
pesetas) being applied to reduce property, plant and equipment.
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Fiscal Year (in thousands)
----------- --------------
<S> <C>
1995 $ 11,335
1996 9,008
1997 23,120
1998 24,530
1999 25,011
Later Years 46,694
--------
$139,698
========
</TABLE>
During 1992, PCI obtained a $15 million credit facility with Citibank, N.A.
("Citibank") under which PCI is able to borrow, on a revolving basis, up to
an amount representing specified percentages of PCI's eligible accounts
receivable and eligible inventory, not to exceed $15 million outstanding at
any time. The facility will mature on its fifth anniversary. The revolving
credit loans bear interest at the rate, selected at PCI's option, of 1.5%
per annum over the fluctuating alternative base rate of Citibank or 2.75%
per annum over the London Inter Bank offering rate of Citibank. Borrowings
under the revolving credit facility are guaranteed by CPC and secured by
accounts receivable and inventories and a secondary lien on the outstanding
stock of CPC. PCI is required to pay Citibank an annual commitment fee of
1/2% of the average daily unused portion of the revolving credit facility.
Commitment fees totaled $66,000 and $72,000 for the years ended December
31, 1994 and 1993, respectively.
This revolving credit facility contains covenants covering, among other
things, leverage, current ratio and minimum interest coverage and net
worth, and restrictions on capital expenditures, additional indebtedness,
sale-leaseback transactions, dividends and other corporate transactions of
PCI and its subsidiaries. At December 31, 1994, PCI was in compliance with
the covenants, or had obtained a waiver. PCI is required to have no
outstanding borrowings under the revolving credit facility for at least 30
consecutive days during each 12-month period, other than borrowings used to
finance permitted acquisitions, dividends and letters of credit.
54
<PAGE>
The agreement provides for the issuance of letters of credit by Citibank on
PCI's behalf. At December 31, 1994, $1,889,000 of such letters of credit
had been issued, guaranteeing obligations carried in the consolidated
balance sheet. At December 31, 1994, no other funds had been drawn on the
revolving credit facility.
Other long-term liabilities at December 31, 1994 primarily include pension
and profit sharing amounts related to PCI and Ferembal of $14,304,000
($17,447,000 at December 31, 1993), insurance reserves at PCI of $8,805,000
($7,688,000 at December 31, 1993), and accrued post-retirement benefits at
PCI of $5,904,000 ($6,008,000 at December 31, 1993).
(10) Income Taxes
As discussed in note 1(d), The Company adopted SFAS No. 109 as of January
1, 1992. The cumulative effect of this change in accounting for income
taxes of $460,000, exclusive of the portion allocated to minority interest
($85,000), was determined as of January 1, 1992 and is reported separately
in the consolidated statement of earnings for the year ended December 31,
1992. As a result of applying SFAS No. 109 in 1992, pre-tax income before
minority interest, extraordinary item and cumulative effect of accounting
change for the year ended December 31, 1992 increased by $884,000.
The components of the provision for income taxes for the years ended
December 31, 1994, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Current - Federal $ 148 $ (145) $ (108)
- Foreign 812 4,209 5,452
- State 12 145 58
Deferred - Federal (1,559) (1,004) (408)
- Foreign 2,553 (60) (1,340)
- State (205) (490) (537)
------- ------- -------
Provision for income taxes $ 1,761 $ 2,655 $ 3,117
======= ======= =======
</TABLE>
The Company's total income tax provision differs from the provision
that would result from applying the U.S. Federal statutory income tax rate
to income before provision for income taxes, minority interest,
extraordinary item and cumulative effect of accounting change due to the
following:
<TABLE>
<CAPTION>
1994 1993 1992
--------------- ----------------
(in thousands, except for percentage amounts)
Amount % Amount % Amount %
<S> <C> <C> <C> <C> <C> <C>
Provision at U.S. Federal Statutory
rate $2,265 34.0% $ 592 34.0% $1,215 34.0%
Losses not providing tax benefits
(847) (12.7) - - - -
</TABLE>
55
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Change in the beginning of year
valuation allowance 696 10.4 1,671 96.0 2,409 67.4
State income taxes, net of
Federal income tax benefit (127) (1.9) (228) (13.1) (316) (8.8)
Differential in foreign tax rates
(440) (6.6) 394 22.7 (498) (13.9)
Other 214 3.2 226 13.0 307 8.5
------ ----- ------ ----- ------ -----
Provision for income taxes $1,761 26.4% $2,655 152.6% $3,117 87.2%
====== ===== ====== ===== ====== =====
</TABLE>
The significant components of deferred income tax benefit attributable to
income from continuing operations for the years ended December 31, 1994,
1993 and 1992 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- --------- --------
(in thousands)
<S> <C> <C> <C>
Deferred tax expense (exclusive of the
effects of other components listed
below) $ 520 $ 428 $ (130)
Benefit of operating loss carry forwards (1,313) (10,587) (8,535)
Book over tax bases of principally
fixed assets 886 2,497 3,971
Increase in beginning-of-the-year
balance of the valuation allowance for
deferred tax assets 696 6,108 2,409
------- -------- -------
$ 789 $ (1,554) $(2,285)
======= ======== =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1994 and 1993 are presented below:
<TABLE>
<CAPTION>
1994 1993
---- ----
Deferred tax assets: (in thousands)
<S> <C> <C>
Net operating loss carry forwards $ 21,532 $ 20,219
Alternative minimum tax credit carry forwards 145 -
Vacation pay, due to accrual for financial reporting
purposes 1,660 1,245
Plant rationalization reserves 720 733
Self-insurance reserves 3,696 3,271
Pension and post-retirement benefit reserves 5,594 5,995
Deferred income 1,537 1,623
Tax over book base of molds - 131
Stock options, due to accrual for financial reporting
purposes 301 227
Other 3,477 2,137
-------- --------
Total gross deferred tax assets 38,662 35,581
Less valuation allowance (11,424) (10,728)
-------- --------
Net deferred tax assets 27,238 24,853
-------- --------
Deferred tax liabilities:
Taxable gain on merger 3,016 3,222
Book over tax bases of principally fixed assets 21,602 20,716
Acquisition costs, book over tax bases 453 947
Other 1,300 -
-------- --------
Total gross deferred tax liabilities $ 26,371 $ 24,885
======== ========
Net Asset (liability) 867 (32)
======== ========
</TABLE>
The valuation allowance for deferred tax assets as of January 1,
1993 was $4,620,000. The net change in the total valuation allowance for
the years ended December 31, 1994 and 1993 was an increase of $696,000 and
$6,108,000, respectively.
56
<PAGE>
Due to different tax jurisdictions of the Company's subsidiaries, net
deferred tax assets (liabilities) of $867,000, ($32,000) and ($1,728,000)
at December 31, 1994, 1993 and 1992, respectively, shown above are
reflected in the consolidated balance sheets as:
<TABLE>
<CAPTION>
1994 1993
---- ----
Deferred tax assets: (in thousands)
<S> <C> <C>
Current deferred tax assets (included in
prepaid expenses and other current $2,141 $ 203
assets)
Non-current deferred tax assets
(included in other assets) 2,473 2,482
------ ------
4,614 2,685
Non-current deferred tax liabilities 3,747 2,717
------ ------
Net deferred tax asset (liabilities) $ 867 $( 32)
====== ======
</TABLE>
At December 31, 1994, PCI has operating loss carry forwards for Federal
income tax purposes of approximately $47 million which are available to
offset future Federal taxable income between 2006 and 2009.
(11) Common Stock - Stock Options and Grants
The 1988 Restricted Stock Option Plan, as amended, (the Restricted Plan)
provides for the issuance of up to 500,000 shares of Common Stock upon the
exercise of options at an exercise price determined by the Personnel
Committee of the Board of Directors (the Committee), but not less than
$1.00 per share. The Committee may determine the exercise period of the
option up to a maximum of twenty years from the date of the grant and may
determine a restricted period during which any portion of the option may
not be exercised. During 1994, employees were granted options to purchase
up to 9,500 shares of common stock at prices of $21.00 to $22.50 per share,
which prices represented fair value at the date of grant. The options vest
over a five year period and expire ten years from their grant and had not
been exercised as of December 31, 1994. As of December 31, 1994, the
Chairman and the Executive Vice President had received (i) restricted
options (granted in March 1992) to purchase 30,000 and 20,000 shares,
respectively, vesting over a five-year period, at $26.75 per share, such
price being the fair market value at date of grant; (ii) unrestricted
options to purchase 140,000 and 60,000 shares, respectively, under the
Restricted Plan at $8.625 to $17.00 per share, such prices being the fair
market value of a share of the Company's Common Stock at the date of the
grant; and (iii) restricted options (granted in April 1991) to purchase
10,000 and 6,000 shares, respectively, at an exercise price of $1.00 per
share which vest at a rate of 20% per year subject to their continued
employment. Concerning the 16,000 restricted options granted in April 1991,
compensation to be recognized
57
<PAGE>
over the five-year vesting period will aggregate $520,000, of which
$104,000 was charged to expense in each of 1994, 1993 and 1992. As of
December 31, 1994, 23,200 shares were available for future grants under the
Restricted Plan.
Pursuant to the 1988 Director Stock Option Plan (the Retainer
Plan), directors may elect to receive a stock option in lieu of cash as an
annual retainer. Each electing director will receive an option equal to
the nearest number of whole shares determined by dividing the annual
retainer by the fair market value of the stock less one dollar. The option
price is one dollar per share and an option may not be exercised prior to
the first anniversary of the date it was granted nor more than ten years
after such date. During 1994, 1993 and 1992 nine electing directors each
received an option to purchase 303, 316 and 241 shares of Common Stock,
respectively, under the Retainer Plan. In 1994, 1993 and 1992, a total of
$58,500, $58,500 and $41,250, respectively, was charged to compensation
expense with respect to the Retainer Plan.
The 1990 Stock Option Plan for Non-Employee Directors (the Director Plan)
provides for the issuance of up to 200,000 shares of Common Stock to
directors who are not employees of the Company or its subsidiaries. The
Director Plan is administered by a Board Committee. The Director Plan
provides for the grant to each non-employee director, at the commencement
of his initial term, of an option to purchase up to 10,000 shares of Common
Stock at a price equal to the fair market value of a share of Common Stock
on the date of the grant. The options become exercisable as to one-tenth of
the shares subject to option on the date of the grant and on the nine
successive anniversaries of such date. The term of the options is 10 years
provided that any option holder who ceases to be a member of the Board of
Directors forfeits any part of the option grant which has not become
exercisable as of such date. During 1990, each member of the Board of
Directors who was not an employee (10 individuals) received an option to
purchase 10,000 shares of Common Stock at prices ranging from $17.00 to
$17.50 per share, being the fair market value of a share of Common Stock on
the date of the grant. No options have been exercised pursuant to the
Director Plan. There are currently 105,000 shares available for grant under
the Director Plan.
Pursuant to the 1992 Restricted Stock Plan for Non-Employee
Directors (the "Stock Plan"), each non-employee director of the Company
receives an award of 300 shares of Company Common Stock during each year of
service beginning in 1992. Such shares are restricted from transfer while
such recipient remains a member of the Board of Directors and the shares
are subject to forfeiture under certain circumstances
58
<PAGE>
including resignation or failure to stand for reelection prior to age 70.
The Company issued 4,200 shares under the Stock Plan in 1994, and 8,400
shares under the Stock Plan in 1993 for the 1992 and 1993 plan years; the
Company has expensed $90,300 in 1994, $103,425 in 1993 and $79,500 in 1992
for shares which were issued.
A number of options have been granted which were not pursuant to
any plan. At December 31, 1994 a total of 95,000 shares were subject to
such options at exercise prices ranging from $2.94 to $25.75 per share,
which represented the fair market vaue of a share of the Companys stock on
the date each of such options were granted. These options expire between
1995 and 2002. None of these options were exercised during the three year
period ending December 31, 1994.
(12) Pension and Profit Sharing Plan
PCI provides a defined benefit pension plan for substantially all salaried
employees (which was amended in 1993) and a noncontributory defined benefit
pension plan for substantially all hourly workers who have attained 21
years of age.
The following table sets forth the plans' funded status at December 31,
1994 and 1993 based primarily on January 1, 1994 participant data and plan
assets:
<TABLE>
<CAPTION>
1994 1993
---- ----
(in thousands)
<S> <C> <C>
Actuarial present value of benefit
obligation, including vested benefits
of $25,464,000 and $14,700,000 in 1994,
and $28,369,000 and $16,884,000 in
1993 for the salaried and hourly
plans, respectively $(43,512) $(50,142)
========= =========
Projected benefit obligation (PBO) (44,557) (50,893)
Plan assets, at fair value 38,083 41,181
Unrecognized net (gain) loss 499 2,252
Adjustment to recognize minimum liability (171) (1,533)
Prior service cost not yet recognized
in net periodic pension cost (78) 31
-------- --------
Accrued pension liability
(included in other Liabilities) $ (6,224) $ (8,962)
======== =========
</TABLE>
Net pension costs under the above mentioned PCI plans included the
following components for the years ended December 31, 1994, 1993 and 1992:
59
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Service Cost $ 1,161 $ 818 $ 817
Interest Cost 3,715 3,713 3,515
Loss (return) on plan assets 1,916 (4,198) (2,730)
Net amortization and deferral (5,613) 781 (593)
Change in acturial assumptions -- 2,725 --
------- ------- -------
Net periodic pension costs 1,179 3,839 1,009
Effect of window plan -- -- 581
------- ------- -------
Total $ 1,179 $ 3,839 $ 1,590
======= ======= =======
</TABLE>
During 1992, negotiated benefit increases were made for certain hourly plan
participants and early retirement (window plan) was accepted by certain
salaried plan participants. The effects of these changes were to increase
the hourly plan's PBO by $576,000 and increase the salaried plan's PBO and
total periodic pension expense by $814,000 and $581,000, respectively.
Assumptions used in the accounting were:
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Discount rates 9.0% 7.5% 8.5%
Rates of increase in compensation levels 5.0% 5.0% 6.5%
Expected long-term rate or return on 9.5% 9.5% 9.5%
assets
</TABLE>
Ferembal provides retirement benefits pursuant to an industry-wide labor
agreement. The plan is not funded. Amounts charged to expense amounted to
$179,000, $250,000 and $94,000 in 1994, 1993 and 1992, respectively. Other
non-current liabilities at December 31, 1994 include $1,762,000,
($1,425,000 at December 31, 1993) for this plan. Ferembal also provides an
employee profit-sharing plan, the annual contributions to which are
determined by a prescribed formula. Amounts charged to expense amounted to
$673,000, $954,000 and $1,287,000 in 1994, 1993 and 1992, respectively.
Amounts are paid to employees after five years with accrued interest. Other
non-current liabilities at December 31, 1994 include $5,127,000 ($5,951,000
at December 31, 1993) for the plan.
Holding provides selected managers of a subsidiary company with pension and
disability benefits. Amounts charged to expense amounted to $175,000,
$161,000 and $154,000 in 1994, 1993 and 1992 respectively.
(13) Post-Retirement Benefits Other Than Pensions and Post-Employment Benefits
PCI provides certain health care and life insurance benefits for retired
PCI employees. Certain of PCI's hourly and salaried employees become
eligible for these benefits when they become eligible for an immediate
pension under a formal company pension plan. In 1993, the plan was amended
to
60
<PAGE>
eliminate health care benefits for employees hired after January 1,
1993. Expenses for benefits provided to retired employees were $447,000,
$710,000 and $490,000 for the years ended December 31, 1994, 1993 and 1992.
In 1992, PCI adopted SFAS No. 106, "Employers' Accounting for Post-
Retirement Benefits Other Than Pensions". There was no cumulative effect of
the change in accounting for post-retirement benefits, as the accumulated
post-retirement benefit obligation (APBO) existing at January 1, 1992
equaled the amount recorded in the prior year as part of the purchase
accounting adjustments. PCI continues to fund benefit costs on a
pay-as-you-go basis. Summary information on PCI's plan at December 31,
1994, 1993 and 1992 is as follows:
<TABLE>
<CAPTION>
Accumulated post-retirement benefit 1994 1993
obligation: ------ -------
(in thousands)
<S> <C> <C>
Retirees $3,146 $3,565
Fully eligible, active plan participants 1,097 1,121
Other fully active plan participants 1,197 1,262
------ ------
5,440 $5,948
Unrecognized net loss from experience
and changes in assumptions (99) (672)
Prior service cost in net periodic
post-retirement benefit cost 563 732
------ ------
Accrued post-retirement benefit
obligation (included in other
liabilities) 5,904 $6,008
====== ======
</TABLE>
The components of net periodic post-retirement benefit cost at December 31,
1994, 1993 and 1992 is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
(in thousands)
Service cost $ 73 $ 55 $ 33
Interest cost 431 588 457
Net amortization and deferral (57) 67 --
----- ----- -----
Net periodic post-retirement benefit
cost $ 447 $ 710 $ 490
===== ===== =====
</TABLE>
As of December 31, 1994, the discount rate used in determining the APBO was
9.0%. The assumed health care cost trend rate used in measuring the
accumulated post-retirement benefit obligation was 10.4% for 1994,
declining gradually with each succeeding year on an ultimate rate of 6.0%
beginning in calendar year 2001.
As of December 31, 1993, the discount rate used in determining the APBO was
7.5%. The assumed health care cost trend rate used in measuring the
accumulated post-retirement benefit obligation was 10.95% for 1993,
declining gradually with each succeeding year on an ultimate rate of 5.0%
beginning in calendar year 2002.
61
<PAGE>
The effect of a one percentage-point increase in the assumed health care
cost trend rates in each year would increase the accumulated post-
retirement benefit obligation as of December 31, 1994 by $778,000 and
increase the service and interest cost components of net periodic post-
retirement benefit cost for the year then ended by $68,000.
PCI provides certain post-employment benefits to former and inactive
employees, their beneficiaries and covered dependents. These benefits
include disability related benefits, continuation of health care benefits
and life insurance coverage.
In 1994, PCI adopted the provisions of SFAS No. 112, Employers Accounting
for Postemployment Benefits, which requires employers to recognize the
obligation to provide postemployment benefits and an allocation of the cost
of those benefits to the periods the employees render service. The
cumulative effect of this change in accounting principle of $262,000, which
is net of the portion attributable to minority interest, was determined as
of January 1, 1994 and is reported separately in the consolidated statement
of earnings for the year ended December 31, 1994. Additional costs charged
to operations for postemployment benefits in 1994 were $29,000.
(14) Executive Compensation
The Company entered into employment agreements with its Chairman and former
Vice-Chairman.
The contract with the former Vice-Chairman, who died in January 1989,
provided for compensation of $135,000 per annum. Also, the contract
provided that in the event of his death prior to its expiration on December
31, 1998, his spouse would receive one-half of the amounts which would
otherwise have been paid to him until her death or until December 31, 1998,
whichever occurs first. The Company has included the present value of this
obligation in accrued liabilities.
At December 31, 1994, the contract with the Chairman, as amended, provides
for base compensation of $400,000 per annum. The contract also provides
that, in the event of his death before its expiration on December 31, 1999,
his spouse will receive one-half of the amount paid to him annually as base
compensation until her death, or until ten years after the date of his
death, whichever occurs first.
62
<PAGE>
(15) Net Interest Expense
The details of net interest expense were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Interest income $ 941 $ 917 $ 939
Interest expense (19,625) (23,859) (26,962)
-------- -------- --------
Interest expense, net $(18,684) $(22,942) $(26,023)
======== ======== ========
</TABLE>
(16) Foreign and Domestic Operations
The Company performs services principally in the packaging industry.
Manufacturing operations are performed domestically through PCI, whereas
manufacturing operations are performed overseas in Europe through Ferembal,
Holding and Onena. Information about the Company's foreign and domestic
operations follows.
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
(in thousands)
Sales to unaffiliated customers:
<S> <C> <C> <C>
Foreign $289,566 $260,206 $296,910
Domestic 247,614 221,636 214,331
-------- -------- --------
Total $537,180 $481,842 $511,241
======== ======== ========
Income (loss) before provision for
income taxes, minority interest,
extraordinary item and cumulative
effect of accounting change:
Foreign $ 11,191 $ 11,045 $ 13,558
Domestic (4,528) (9,305) ( 9,984)
-------- -------- --------
Total 6,663 $ 1,740 $ 3,574
======== ======== ========
Identifiable assets:
Foreign $207,946 $173,390 $177,913
Domestic 215,639 212,517 222,097
-------- -------- --------
Total $423,585 $385,907 $400,010
======== ======== ========
</TABLE>
(17) Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, investments,
accounts receivable, other current assets, accounts payable and short-term
borrowings approximate fair value because of the short maturity of these
instruments. The fair value of the Company's long-term debt is estimated,
based on the quoted market prices for the same or similar issues, or on the
current rates offered to the Company for debt of the same remaining
maturities, and approximates the carrying amount as of December 31, 1994.
63
<PAGE>
(18) Commitments and Contingencies
The Company and its subsidiaries occupy offices and use equipment
under various lease arrangements. The rent expense under non- cancelable
long-term operating leases for the years ended December 31, 1994, 1993 and
1992 was approximately $5,418,00, $7,082,000 and $4,968,000, respectively.
Total commitments under such arrangements are payable in annual
installments of $5,080,000 in 1995, $4,981,000 in 1996, $3,870,000 in 1997,
$2,596,000 in 1998, $1,628,000 in 1999 and $5,439,000 thereafter.
The Company also rents certain equipment and facilities on a
month-to- month basis or through short-term leases. The rent expense under
such arrangements amounted to approximately $841,000 in 1994, $1,317,000 in
1993 and $969,000 in 1992.
The Company's subsidiaries are defendants in several actions
which arose in the normal course of business and, in the opinion of
management, the eventual outcome of these actions will not have a material
adverse effect on the Company's financial position.
(19) Quarterly Financial Data (Unaudited)
Summarized quarterly financial data for 1994 and 1993 (in
thousands, except per share amounts) is as follows:
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
1994 Quarter Quarter Quarter Quarter
- - ---- --------- -------- -------- ---------
<S> <C> <C> <C> <C>
Total Revenue $115,850 $135,127 $154,492 $131,711
Gross Profit 20,335 24,838 28,003 20,981
Income (loss) Before
Extraordinary Item
and Accounting Change (189) 1,713 3,102 189
Net Income (Loss) (452) 1,640 3,102 155
Earnings (Loss) Per Share Before
Extraordinary Item and Accounting
Change (.06) .53 .94 .06
Net Earnings (Loss) Per
Common Share $ (.15) $ .51 $ .94 .05
<CAPTION>
1st 2nd 3rd 4th
1993 Quarter Quarter Quarter Quarter
- - ---- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Total Revenue $110,239 $127,933 $134,325 $109,345
Gross Profit 20,119 24,074 26,150 16,821
Net Income (Loss) (824) 958 1,258 (404)
Net Earnings (Loss) Per
Common Share $ (.27) $ .32 $ .42 $ (.13)
</TABLE>
64
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
THE BOARD OF DIRECTORS AND STOCKHOLDERS
CONTINENTAL CAN COMPANY, INC.
We have audited the consolidated balance sheets of Continental Can Company, Inc.
and subsidiaries as of December 31, 1994 and 1993, and the related consolidated
statements of earnings, stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1994. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 aforementioned consolidated financial statements present
fairly, in all material respects, the financial position of Continental Can
Company, Inc. and subsidiaries as of December 31, 1994 and 1993, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1994, in conformity with generally accepted accounting
principles.
As discussed in notes 1(i) and 13 to the consolidated financial statements, the
Company adopted the provisions of Statement of Financial Accounting Standards
No. 112, Employers Accounting for Post-Employment Benefits, on a prospective
basis in 1994. Also, as discussed in notes 1 (h) and 13 and notes 1 (d) and 10
to the consolidated financial statements, the Company adopted the provisions of
Statements of Financial Accounting Standards Nos. 106, "Employer's Accounting
for Post-Retirement Benefits Other Than Pensions" and 109, "Accounting for
Income Taxes", respectively, on a prospective basis in 1992.
/s/ KPMG Peat Marwick LLP
-----------------------
Jericho, New York
March 1, 1995
65
<PAGE>
GENERAL INFORMATION
ANNUAL MEETING
May 17, 1995 at 10:00 a.m. at The Union League Club, 38 East 37th Street, New
York, New York.
AVAILABILITY OF FORM 10-K
Stockholders may receive, without charge, a copy of the Company's 1994 Annual
Report filed with the Securities and Exchange Commission on Form 10-K, including
the financial statements and schedules thereto, by directing their written
inquiries to Abdo Yazgi, Secretary, Continental Can Company, Inc., One Aerial
Way, Syosset, New York 11791.
CONTINENTAL CAN COMPANY, INC.
COMMON STOCK PRICES AND RELATED MATTERS
The common stock of Continental Can Company, Inc. is traded on the New York
Stock Exchange. The following table indicates the quarterly high and low sales
prices for Continental Can Company, Inc. (CAN) common stock for the last two
years.
<TABLE>
<CAPTION>
1994 1993
Quarter High Low High Low
- - -----------------------------------------
<S> <C> <C> <C> <C>
First 25-1/2 20-1/4 27-5/8 20-7/8
Second 24-1/8 21-1/2 27-1/2 20-1/8
Third 22 20-1/4 24-1/2 18-1/4
Fourth 24-5/8 19 22-1/8 18-3/4
</TABLE>
No dividends were paid to the holders of common stock for the years 1994, 1993
and 1992. The Company has no present intention to pay dividends on its common
stock. There were 425 stockholders of record as of March 20, 1995.
66
<PAGE>
DIRECTORS PRINCIPAL OCCUPATION
Donald J. Bainton Chairman of the Board and
Chief Executive Officer
of the Company
Kenneth Bainton Partner with the firm of Alexander Kouzmanoff,
Architects, in New York City
Robert L. Bainton Vice Chairman of the Board
Nils E. Benson Former President of Penn Elastic Co.
(Retired 1989)
Rainer N. Greeven Partner, Greeven & Ercklentz (Attorneys)
Ronald H. Hoenig President of Hoenig & Company, Inc.
Charles H. Marquardt Former Chief Operating Officer of
Plastic Containers, Inc. (Retired 1993)
V. Henry O'Neill Private investor in real estate
John J. Serrell Business Consultant
Robert A. Utting President of R.A. Utting & Associates, Inc.
Abdo Yazgi Executive Vice President, Chief Administrative
Officer, and Secretary of the Company
Cayo Zapata Director of Tapas Tapones, a division of
Taenza, S.A. DE C.V.
Jose Luis Zapata Director of Corporate Finance of Taenza, S.A.
DE C.V.
Donald F. Othmer Director Emeritus
Charles DiGiovanna Director Nominee
OFFICERS PRINCIPAL OCCUPATION
Donald J. Bainton Chairman of the Board
& Chief Executive Officer
Abdo Yazgi Executive Vice President,
Chief Administrative Officer,
and Secretary
John Andreas Vice President - Manufacturing
Marcial B. L'Hommedieu Treasurer
Linda Driscoll Assistant Secretary
67
<PAGE>
CONTINENTAL CAN COMPANY, INC.
General Offices: Syosset, New York
SUBSIDIARIES AND OFFICERS:
PLASTIC CONTAINERS, INC,
Syosset, New York
CONTINENTAL PLASTIC CONTAINERS, INC.
Norwalk, Connecticut
Charles DiGiovanna, Chief Executive Officer and President
Jay Hereford, Chief Financial Officer
Frank Kalisik, Senior Vice President - Research & Development
John E. Farrell, Vice President - Marketing
CONTINENTAL CARIBBEAN CONTAINERS, INC.
Caugus, Puerto Rico
FEREMBAL S.A.
Clichy, France
Rene Faber, Managing Director
Christian Bonnet, Financial Director
Pierre Lichtenberger, Commercial Director
Jean-Marie Desautard, Operations & Personnel Director
Pascal Vienot, Development Director
OBALEX, A.S.
Znojmo, Czech Republic
Jiri Nekvasil, Chairman
Lubomir Kadlec, Managing Director
DIXIE UNION VERPACKUNGEN GMBH
Kempten, Federal Republic of Germany
Hans H. Schwaebe, Executive Director
Peter Epp, Chief Financial Officer
ONENA BOLSAS DE PAPEL S.A.
Pamplona, Spain
Carlos Paredes, Executive Director
LOCKWOOD, KESSLER & BARTLETT, INC.
Syosset, New York
John P. Lekstutis, President
Sylvester A. Celebrini, Vice President
Ralph A. Cuomo, Vice President
George Gross, Vice President
Steven Hanuszek, Vice President
Andre Haddad, Vice President
Martin Solomon, Vice President
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company
New York, New York
AUDITORS
KPMG Peat Marwick LLP
Jericho, New York
GENERAL COUNSEL
Carter, Ledyard & Milburn
New York, New York
68
<PAGE>
EXHIBIT 21
(21) Subsidiaries of the Registrant
The following listed companies represent the significant subsidiaries of the
Company, all of which are included in the Company's consolidated financial
statements:
<TABLE>
<CAPTION>
State or Other
Name Under Which Jurisdiction Percentage Owned
Business is conducted of Incorporation by Company
- - --------------------- ---------------- ----------------
<S> <C> <C>
Ferembal S.A. France 85%(1)
Lockwood, Kessler & Bartlett, Inc. New York 100%
Dixie Union Verpackungen GmbH Germany 100%
Onena Bolsas de Papel S.A. Spain 57%
Plastic Containers, Inc. Delaware 50%*
Continental Plastic Containers, Inc. (2) Delaware 100%
Continental Caribbean Containers, Inc. (2) Delaware 100%
Obalex A.S. (3) Czech Republic 64%
</TABLE>
(1) A bond, convertible into the equity of Ferembal S.A., is currently
outstanding, which, if converted, would reduce the Companys percentage
ownership of Ferembal S.A. to 64%.
(2) Subsidiary of Plastic Containers, Inc.
(3) Subsidiary of Ferembal.
* The Company, pursuant to a proxy, has voting rights over 51% of the shares of
Plastic Containers, Inc.
1
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' REPORT ON SCHEDULES
-----------------------------------------
The Board of Directors and Stockholders
Continental Can Company, Inc.:
Under date of March 1, 1995, we reported on the consolidated balance sheets of
Continental Can Company, Inc. and subsidiaries as of December 31, 1994 and 1993,
and the related consolidated statements of earnings, stockholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1994, as contained in the 1994 Annual Report to Stockholders. In connection
with our audits of the aforementioned consolidated financial statements, we also
audited the related consolidated financial statement schedules as listed in the
accompanying index. These consolidated financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statement schedules based on our audits.
In our opinion, such schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
As discussed in notes 1(i) and 13 to the consolidated financial statements, the
Company adopted the provisions of Statement of Financial Accounting Standards
Nos. 112, Employers Accounting for Post-Employment Benefits, on a prospective
basis in 1994. Also, as discussed notes 1(h) and 13 and notes 1(d) and 10 to
the consolidated financial statements, the Company adopted the provisions of
Statements of Financial Accounting Standards Nos. 106, "Employer's Accounting
for Post-Retirements Benefits Other Than Pensions" and 109, "Accounting for
Income Taxes", respectively, on a prospective basis in 1992.
/s/ KPMG PEAT MARWICK LLP
Jericho, New York
March 1, 1995
1
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
The Board of Directors
Continental Can Company, Inc.:
We consent to incorporation by reference in the Registration Statements Nos. 33-
7783, 33-37163, 33-37164 and 33-37165 on Form S-8 of Viatech, Inc. (now known as
Continental Can Company, Inc.) of our reports dated March 1, 1995 relating to
the consolidated balance sheets of Continental Can Company, Inc. and
subsidiaries as of December 31, 1994 and 1993, and the consolidated statements
of earnings, stockholders' equity and cash flows and related schedules for each
of the years in the three year period ended December 31, 1994, which reports are
either incorporated by reference or appear in the December 31, 1994 Annual
Report on Form 10-K of Continental Can Company, Inc.
As discussed in notes 1(i) and 13 to the consolidated financial statements, the
Company adopted the provisions of Statement of Financial Accounting Standards
Nos. 112, Employers Accounting for Post-Employment Benefits, on a prospective
basis in 1994. Also, as discussed notes 1(h) and 13 and notes 1(d) and 10 to
the consolidated financial statements, the Company adopted the provisions of
Statements of Financial Accounting Standards Nos. 106, "Employer's Accounting
for Post-Retirements Benefits Other Than Pensions" and 109, "Accounting for
Income Taxes", respectively, on a prospective basis in 1992.
/s/ KPMG PEAT MARWICK LLP
Jericho, New York
March 14, 1995
1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 8,776
<SECURITIES> 292
<RECEIVABLES> 118,219
<ALLOWANCES> 5,316
<INVENTORY> 82,432
<CURRENT-ASSETS> 209,103
<PP&E> 297,156
<DEPRECIATION> 116,786
<TOTAL-ASSETS> 423,585
<CURRENT-LIABILITIES> 137,755
<BONDS> 142,361
<COMMON> 788
0
0
<OTHER-SE> 69,908
<TOTAL-LIABILITY-AND-EQUITY> 423,585
<SALES> 537,180
<TOTAL-REVENUES> 537,180
<CGS> 443,023
<TOTAL-COSTS> 511,532
<OTHER-EXPENSES> 18,985
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,684
<INCOME-PRETAX> 6,663
<INCOME-TAX> 1,761
<INCOME-CONTINUING> 4,815
<DISCONTINUED> 0
<EXTRAORDINARY> 108
<CHANGES> 262
<NET-INCOME> 4,445
<EPS-PRIMARY> 1.39
<EPS-DILUTED> 1.34
</TABLE>
