<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
---------
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
-------
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended SEPTEMBER 30, 1995
-----------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
-------
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
Commission File Number: 1-6690
------
CONTINENTAL CAN COMPANY, INC.
------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 11-2228114
-------------------------- ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
One Aerial Way, Syosset, New York 11791
- --------------------------------------------------
(Address of principal executive offices) Zip Code
(516) 822-4940
----------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceeding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X YES NO
------- -------
The number of shares outstanding of the registrant's Common Stock ($.25 par
value) as of November 7, 1995 is 3,196,368.
<PAGE>
FORM 10-Q
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
Consolidated Balance Sheets as of September 30, 1995 and December 31, 1994 and
September 30, 1994.
Consolidated Statements of Earnings for the Three Months Ended September 30,
1995 and 1994
Consolidated Statements of Earnings for the Nine Months Ended September 30, 1995
and 1994
Consolidated Statements of Cash Flows for the Nine Months Ended September 30,
1995 and 1994
Notes to Consolidated Financial Statements
2
<PAGE>
<TABLE>
<CAPTION>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND 1994 AND DECEMBER 31, 1994
(UNAUDITED)
(In thousands)
<S> <C> <C> <C>
SEPTEMBER DEC. 31, SEPTEMBER 30,
30, 1995 1994 1994
---------------------------------------
ASSETS:
- -------
Current Assets:
Cash and cash equivalents $ 13,208 $ 8,776 $ 18,999
Investments - 292 294
Accounts Receivable:
Trade accounts 130,678 102,255 113,626
Other 15,258 15,964 9,637
Less allowance for doubtful accounts (5,815) (5,316) (4,552)
--------------------------------------
Accounts receivable, net 140,121 112,903 118,711
Inventories 97,865 82,432 81,085
Prepaid expenses and other current 4,615 4,700 1,558
assets
---------------------------------------
TOTAL CURRENT ASSETS 255,809 209,103 220,647
---------------------------------------
Property, plant and equipment, at cost:
Land, building and improvements 51,507 48,750 47,864
Manufacturing machinery and equipment 235,302 230,365 217,632
Furniture, fixtures and equipment 9,652 8,536 8,508
Construction in progress 37,898 9,505 17,867
---------------------------------------
334,359 297,156 291,871
Less accumulated depreciation and 141,583 116,786 110,499
amortization
---------------------------------------
Net property, plant and equipment 192,776 180,370 181,372
Goodwill, net of accumulated 14,556 13,997 14,191
amortization
Other assets 18,691 20,115 21,938
---------------------------------------
TOTAL ASSETS $481,832 $423,585 $438,148
=======================================
See accompanying notes to consolidated
financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
SEPTEMBER 30, 1995 AND 1994 AND DECEMBER 31, 1994
(UNAUDITED)
<S> <C> <C> <C>
(In thousands)
SEPTEMBER DEC. 31, SEPTEMBER 30,
30, 1995 1994 1994
---------------------------------------
LIABILITIES AND STOCKHOLDER'S EQUITY:
- ----------------------------------------
Current Liabilities:
Short term borrowings $ 41,684 $ 21,855 $ 16,204
Accounts payable - trade 83,412 60,540 60,453
Accrued liabilities:
Employee compensation and benefits 21,413 19,072 23,561
Other accrued expenses 23,567 16,143 22,150
Current installments of long term
debt and
obligations under capital leases 11,133 13,043 13,323
Income taxes payable 1,448 1,160 2,554
Other current liabilities 9,814 5,942 4,880
---------------------------------------
TOTAL CURRENT LIABILITIES 192,471 137,755 143,125
Long term debt, excluding current 122,778 128,363 133,097
installments
Obligations under capital leases,
excluding
current installments 14,012 13,998 13,729
Deferred income taxes 3,763 3,747 3,083
Other 42,756 36,285 37,497
---------------------------------------
TOTAL LIABILITIES 375,780 320,148 330,531
Minority interest 29,899 32,741 35,718
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 3,196,368
shares in 1995, 3,151,157
shares in Dec., 1994 and 3,151,157 799 788 788
shares in September, 1994.
---------------------------------------
799 788 788
Additional paid-in capital 43,867 42,872 42,872
Retained earnings 26,340 26,187 26,032
---------------------------------------
71,006 69,847 69,692
Cumulative foreign currency translation 5,147 849 2,207
adjustment
---------------------------------------
TOTAL STOCKHOLDERS' EQUITY 76,153 70,696 71,899
---------------------------------------
TOTAL LIABILITIES AND $481,832 $423,585 $438,148
STOCKHOLDERS' EQUITY
=======================================
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<S> <C> <C>
(In thousands, except per share data)
1995 1994
---------------------
Sales $171,024 $154,492
Cost of sales 143,384 126,489
---------------------
Gross profit 27,640 28,003
Restructuring charges 5,003 -
Selling, general and administrative 19,908 17,148
expenses
---------------------
OPERATING INCOME 2,729 10,855
Other income (expense):
Interest expense, net (5,435) (4,617)
Foreign currency exchange gain (loss) 109 (131)
Other - net (44) (221)
---------------------
NET OTHER EXPENSE (5,370) (4,969)
Income (loss) before provision for
income taxes
and minority interest (2,641) 5,886
Provision for income taxes 479 2,308
---------------------
Income (loss) before minority interest (3,120) 3,578
Minority interest (1,248) 476
---------------------
NET INCOME (LOSS) $ (1,872) $ 3,102
=====================
NET EARNINGS (LOSS) PER COMMON SHARE - $(0.56) $0.94
PRIMARY
=====================
NET EARNINGS (LOSS) PER COMMON SHARE
ASSUMING FULL DILUTION $(0.56) $0.94
=====================
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<S> <C> <C>
(In thousands, except per share data)
1995 1994
---------------------
Sales $476,436 $405,469
Cost of sales 399,773 332,293
---------------------
Gross profit 76,663 73,176
Restructuring charges 5,003 -
Selling, general and administrative 54,632 49,799
expenses
---------------------
OPERATING INCOME 17,028 23,377
Other income (expense):
Interest expense, net (14,857) (13,671)
Foreign currency exchange loss (176) (156)
Other - net (44) (219)
---------------------
NET OTHER EXPENSE (15,077) (14,046)
Income before provision for income
taxes,
minority interest, extraordinary
item and
cumulative effect of accounting change 1,951 9,331
Provision for income taxes 2,235 4,477
---------------------
Income (loss) before minority interest,
extraordinary item
and cumulative effect of accounting (284) 4,854
change
Minority interest (781) 228
---------------------
Income before extraordinary item and
cumulative effect of accounting change 497 4,626
Extraordinary item, net - (73)
Cumulative effect of accounting change, - (263)
net
---------------------
NET INCOME $ 497 $ 4,290
=====================
Earnings (loss) per common share -
primary:
Before extraordinary item and
cumulative effect of accounting change $ 0.15 $ 1.44
Extraordinary item - (0.02)
Cumulative effect of accounting - (0.08)
change, net
---------------------
NET EARNINGS PER COMMON SHARE - PRIMARY $ 0.15 $ 1.34
=====================
Earnings (loss) per common share -
assuming
full dilution:
Before extraordinary item and
cumulative effect of accounting change $ 0.15 $ 1.38
Extraordinary item - (0.02)
Cumulative effect of accounting - (0.08)
change, net
---------------------
NET EARNINGS PER COMMON SHARE
ASSUMING FULL DILUTION $ 0.15 $ 1.28
=====================
See accompanying notes to consolidated
financial statements.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
(In thousands)
1995 1994
-------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 497 $ 4,290
Depreciation and amortization 25,015 25,973
Minority interest (781) 228
Cumulative effect of accounting - (73)
change, net
Other adjustments 2,961 (8,955)
-------------------
NET CASH PROVIDED BY 27,692 21,463
OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (29,779) (16,996)
Other (1,017) 509
-------------------
NET CASH USED IN INVESTING (30,796) (16,487)
ACTIVITIES
CASH FLOWSFROM FINANCING ACTIVITIES:
Net repayments of long term debt (11,296) (7,967)
Net proceeds from short term 17,827 8,558
borrowings
Other 959 14
-------------------
NET CASH PROVIDED BY 7,490 605
FINANCING ACTIVITIES
Effect of exchange rate changes on cash 46 677
-------------------
Increase in cash and cash equivalents 4,432 6,258
Cash and cash equivalents at beginning 8,776 12,741
of period
-------------------
CASH AND CASH EQUIVALENTS AT END OF $ 13,208 $ 18,999
PERIOD
===================
See accompanying notes to consolidated
financial statements.
</TABLE>
7
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(1) Accounting Policies and Other Matters
(a) Basis of Presentation
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is
suggested that these consolidated financial statements be read in
conjunction with the financial statements and notes thereto included
in the Company's 1994 Annual Report to Stockholders.
(b) Adjustments
The results for the interim period reported herein have not been
audited; however, in the opinion of management, all adjustments
necessary for a fair presentation of the interim period statements
have been made.
(c) Earnings Per Common Share
Earnings per common share is based on the weighted average number of
common and common equivalent shares outstanding. Common equivalent
shares include dilutive stock options (using the treasury stock
method) exercisable under the Company's option plans. Weighted
average shares outstanding in the third quarter of 1995 and 1994,
were 3,330,653 and 3,297,685 respectively and for the first nine
months of 1995 and 1994 were 3,342,489 and 3,222,161, respectively.
For the first nine months of 1994, earnings per common share,
assuming full dilution, gives effect to the conversion of the
Company's then outstanding 10-3/4% Convertible Subordinated
Debentures (the "Debentures") due May 1, 1994 as if such Debentures
had been converted on the issue date, after elimination of related
interest expense, net of income tax effect. All Debentures were
converted during the second quarter of 1994.
(2) Inventories
Inventories consist principally of packaging materials. The components of
inventory were as follows: (000's omitted)
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1995 1994 1994
----------------------------------------------
<S> <C> <C> <C>
Finished goods $ 46,780 $35,985 $37,141
Work in process 11,109 7,096 8,781
Raw materials 43,178 43,275 35,045
-------------------------------
$101,067 $86,356 $80,967
LIFO reserve (3,202) (3,924) 118
-----------------------
$ 97,865 $82,432 $81,085
==============================================
</TABLE>
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Sales during the third quarter of 1995 increased 11% to $171,024,000 as
compared to $154,492,000 in the third quarter of 1994. Sales in the first
nine months of 1995 increased 18% to $476,436,000 from $405,469,000 in the
same prior year period. Higher sales in the third quarter of 1995 resulted
primarily from volume increases at Plastic Containers, Inc. ($4 million),
foreign currency translation rate differences ($7 million), and resin price
increase pass throughs ($6 million). Higher sales for the first nine months
of 1995 resulted from volume increases at Plastic Containers, Inc. ($20
million), foreign currency translation rate differences ($28 million), and
resin price increase pass throughs ($23 million).
Gross profit was higher in the first nine months of 1995 than the same
prior year period but slightly lower in the third quarter of 1995 than 1994.
Gross profit as a percentage of sales declined by approximately 2% in the
third quarter and in the first nine months of 1995 from the same periods of
1994. This decline primarily resulted from higher raw material prices at
Ferembal, competitive pressure in the flexible film business in Europe, and
the effect of resin price increase pass-throughs and third quarter production
start-up costs at PCI.
Results for the third quarter and first nine months of 1995 included a $5
million restructuring charge for severance and termination benefits at
Ferembal, the Company's European can manufacturing subsidiary, to help
position Ferembal as a low cost producer. The restructuring, which will
affect approximately 9% of the workforce, was prompted by the Company's
continuing efforts to reduce costs in the face of increased raw material
prices and competitive pressures in the European market.
Selling, general and administrative expense as a percentage of sales
declined by approximately 0.8% in the first nine months of 1995 versus the
same prior year period. Selling, general and administrative expense as a
percentage of sales in the third quarter of 1995 was approximately 0.6%
higher than in 1994. The reduction in selling, general and administrative
expense as a percentage of sales primarily reflects the fixed nature of many
of these expenses in relation to increased volume. Because of these various
factors, operating income amounted to $2,729,000 and $17,028,000 in the third
quarter and first nine months of 1995, respectively, as compared to
$10,855,000 and $23,337,000 in the same periods of 1994.
Net interest expense increased to $5,435,000 in the third quarter of 1995
from $4,617,000 in the third quarter of 1994. Net interest expense was
$14,857,000 in the first nine months of 1995 as compared to $13,761,000 in
the same period of 1994. These increases resulted primarily from higher
interest rates at the Company's European subsidiaries.
Provision for income taxes amounted to $479,000 and $2,235,000 in the
third quarter and first nine months of 1995, respectively, as compared to
$2,308,000 and $4,477,000 in the third quarter and first nine months of 1994,
reflecting a lower level of tax benefits for accounting purposes in loss
operations than tax expense in the Company's profitable operations. Minority
interest during each period reflects the interests of other shareholders in
some of the Company's subsidiaries.
Net loss amounted to $1,872,000 ($0.56 per share) in the third quarter of
1995. Net income amounted to $3,102,000 ($0.94 per share) in the third
quarter of 1994. Net income in the first nine months of 1995 amounted to
$497,000 ($0.15 per share). During the first nine months of 1994, the
Company recognized an extraordinary charge amounting to $73,000 ($0.02 per
share) related to the purchase and cancellation by PCI of $3 million of its
10.75% Senior Secured Notes, and a charge amounting to $263,000 ($.08 per
share) resulting from the cumulative effect of an accounting change. Net
income in the first nine months of 1994 amounted to $4,290,000 ($1.34 per
share).
9
<PAGE>
FINANCIAL CONDITION
CAPITAL REQUIREMENTS
The Company acquired $9,704,000 and $29,779,000 of capital assets during
the third quarter and first nine months of 1995, respectively, consisting
primarily of packaging equipment. These assets were acquired for cash.
Similar types of assets are expected to be acquired for the remainder of 1995
and total capital expenditures are expected to amount to approximately $33
million.
The Company intends to actively pursue acquisition possibilities in
1995. It is presently the Company's intention to finance any acquisitions by
leveraging the assets of the business to be acquired, with existing cash,
through bank borrowings or, possibly, through the issuance of stock.
LIQUIDITY
The Company's liquidity position declined slightly during the first nine
months of 1995. Working capital declined to approximately $63.3 million, and
the current ratio amounted to 1.33 at September 30, 1995 compared to 1.52 at
December 31, 1994.
For the nine months ended September 30, 1995, net cash provided by
operating activities amounted to $27,692,000. The increase in the Company's
accounts receivable and inventory in the third quarter of each year is
primarily a result of the seasonality of Ferembal's business which peaks at
this period because of the harvest of vegetable crops for canning. Net cash
used in investing activities, primarily capital expenditures, amounted to
$30,796,000 during the first nine months of 1994. In the same period, the
Company repaid approximately $11.3 million in long term debt and increased
short term borrowings by approximately $17.8 million. The Company expects
that, as Ferembal collects receivables and reduces its seasonally high
inventories relating to vegetable canning, these short term borrowings will
be repaid or refinanced.
At September 30, 1995, the Company had an available credit line under a
Revolving Credit Agreement of $2.8 million. In addition, the Company's
consolidated subsidiaries had available approximately $26 million in credit
lines and bank overdraft facilities at September 30, 1995. However, the
Company's ability to draw upon these lines for other than its subsidiaries'
needs is restricted.
The Company expects that cash from operations and its existing banking
facilities will be sufficient to meet its operating needs for the remainder
of 1995. On a long term basis the Company believes that existing funds, cash
generated by operations and its existing banking facilities will be
sufficient to meet its cash needs.
10
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------
(a) Exhibits Required
(11) Statement re computation of per share earnings
See Note 1(c) on Page 8
(27) Financial Data Schedule Page 12
All other items for which provision is made in the applicable regulations of
the Securities and Exchange Commission have been omitted as they are not
required under the related instructions or they are inapplicable.
(b) Reports on Form 8-K
A Report on Form 8-K reporting on Item 5. Other Events was filed on
September 21, 1995.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONTINENTAL CAN COMPANY, INC.
(REGISTRANT)
By: /s/ Abdo Yazgi
--------------
Abdo Yazgi
Principal Financial Officer
and on behalf of registrant
DATED: NOVEMBER 7, 1995
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 13,208
<SECURITIES> 0
<RECEIVABLES> 145,936
<ALLOWANCES> 5,815
<INVENTORY> 97,865
<CURRENT-ASSETS> 255,809
<PP&E> 334,359
<DEPRECIATION> 141,583
<TOTAL-ASSETS> 481,832
<CURRENT-LIABILITIES> 192,470
<BONDS> 136,790
<COMMON> 799
0
0
<OTHER-SE> 75,354
<TOTAL-LIABILITY-AND-EQUITY> 481,832
<SALES> 476,436
<TOTAL-REVENUES> 476,436
<CGS> 399,773
<TOTAL-COSTS> 459,408
<OTHER-EXPENSES> 15,077
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,857
<INCOME-PRETAX> 1,951
<INCOME-TAX> 2,235
<INCOME-CONTINUING> 497
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 497
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
