<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 MARCH 31, 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 preceding 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 May 10, 1995 is 3,165,057.
<PAGE>
FORM 10-Q
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
Consolidated Balance Sheets as of March 31, 1994 and 1995 and December 31, 1994
Consolidated Statements of Earnings and Retained Earnings for the Three Months
Ended March 31, 1995 and 1994
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1995
and 1994
Notes to Consolidated Financial Statements
2
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 AND 1994 AND DECEMBER 31, 1994
(UNAUDITED)
(In thousands)
MARCH 31, DEC. 31, MARCH 31,
1995 1994 1994
--------- --------- ---------
ASSETS:
- -------
Current Assets:
Cash and cash equivalents $ 13,248 $ 8,776 $ 16,563
Investments 290 292 297
Accounts Receivable:
Trade accounts 109,895 102,255 89,944
Other 18,959 15,964 10,676
Less allowance for doubtful accounts (5,388) (5,316) (3,671)
--------- --------- --------
Accounts receivable, net 123,466 112,903 96,949
Inventories 103,129 82,432 83,255
Prepaid expenses and other current 4,383 4,700 4,161
assets
--------- --------- --------
TOTAL CURRENT ASSETS 244,516 209,103 201,225
--------- --------- --------
Property, plant and equipment, at cost:
Land, building and improvements 51,861 48,750 43,559
Manufacturing machinery and equipment 237,857 230,365 208,651
Furniture, fixtures and equipment 9,659 8,536 7,624
Construction in progress 18,269 9,505 16,297
--------- --------- --------
317,646 297,156 276,131
Less accumulated depreciation and (129,591) (116,786) (93,122)
amortization
--------- --------- --------
Net property, plant and equipment 188,055 180,370 183,009
Goodwill, net of accumulated 15,040 13,997 13,610
amortization
Other assets 20,391 20,115 23,641
--------- --------- --------
TOTAL ASSETS $ 468,002 $ 423,585 $421,485
========= ========= ========
See accompanying notes to consolidated financial statements.
3
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
MARCH 31, 1995 AND 1994 AND DECEMBER 31, 1994
(UNAUDITED)
(In thousands)
MARCH 31, DEC. 31, MARCH 31,
1995 1994 1994
--------- --------- ---------
LIABILITIES AND STOCKHOLDER'S EQUITY:
- -------------------------------------
Current Liabilities:
Short term borrowings $ 33,932 $ 21,855 $ 13,735
Accounts payable - trade 74,172 60,540 57,464
Accrued liabilities:
Employee compensation and benefits 21,316 19,072 13,270
Other accrued expenses 18,789 16,143 30,531
Current installments of long term
debt and
obligations under capital leases 14,295 13,043 15,463
Income taxes payable 1,512 1,160 929
Other current liabilities 9,533 5,942 1,467
-------- -------- --------
TOTAL CURRENT LIABILITIES 173,549 137,755 132,859
Long term debt, excluding current 128,334 128,363 134,653
installments
Obligations under capital leases,
excluding
current installments 15,056 13,998 13,668
Deferred income taxes 4,188 3,747 2,943
Other 37,087 36,285 40,463
-------- -------- --------
TOTAL LIABILITIES 358,214 320,148 324,586
Minority interest 32,803 32,741 34,544
STOCKHOLDERS' EQUITY:
- ---------------------
Capital stock:
First preferred stock, cumulative $25
par value.
Authorized 250,000 shares; no - - -
shares issued.
Second preferred stock, 4%
non-cumulative,
$100 par value. Authorized 1,535
shares;
no shares issued. - - -
Common stock, $.25 par value.
Authorized 20,000,000
shares; Outstanding 3,165,057
shares in 1995, 3,151,157
shares in Dec. 1994 and 2,879,158 791 788 720
shares in March 1994. -------- -------- --------
791 788 720
Additional paid-in capital 43,132 42,872 41,414
Retained earnings 26,624 26,187 21,290
-------- -------- --------
70,547 69,847 63,424
Cumulative foreign currency translation 6,438 849 (1,069)
adjustment -------- -------- --------
TOTAL STOCKHOLDERS' EQUITY 76,985 70,696 62,355
-------- -------- --------
TOTAL LIABILITIES AND $468,002 $423,585 $421,485
STOCKHOLDERS' EQUITY ======== ======== ========
See accompanying notes to consolidated financial statements.
4
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
(In thousands, except per share data)
1995 1994
-------- --------
Sales $144,460 $115,850
Cost of sales 120,753 95,515
-------- --------
Gross profit 23,707 20,335
Selling, general and administrative 18,000 15,830
expenses
-------- --------
OPERATING INCOME 5,707 4,505
Other income (expense):
Interest expense, net (4,272) (4,608)
Foreign currency exchange gain (loss) (316) 49
Other - net (38) 36
-------- --------
NET OTHER EXPENSE (4,626) (4,523)
Income (loss) before provision for
income taxes,
minority interest and cumulative
effect of
accounting change 1,081 (18)
Provision for income taxes 603 691
-------- --------
Income (loss) before minority interest
and cumulative
effect of accounting change 478 (709)
Minority Interest 41 (520)
-------- --------
Income (loss) before cumulative effect
of
accounting change 437 (189)
Cumulative effect of accounting change, - (263)
net -------- --------
NET INCOME (LOSS) $ 437 $ (452)
======== ========
Earnings (loss) per common share -
primary:
Before cumulative effect of accounting $ 0.13 $ (0.06)
change
Cumulative effect of accounting - (0.09)
change, net -------- --------
NET EARNINGS (LOSS) PER COMMON SHARE - $ 0.13 $ (0.15)
PRIMARY ======== ========
Earnings (loss) per common share -
assuming
full dilution:
Before cumulative effect of accounting $ 0.13 $ (0.05)
change
Cumulative effect of accounting - (0.08)
change, net -------- --------
NET EARNINGS (LOSS) PER COMMON SHARE
ASSUMING FULL DILUTION $ 0.13 $ (0.13)
======== ========
RETAINED EARNINGS:
- ------------------
Balance at beginning of period $ 26,187 $ 21,742
Net income (loss) 437 (452)
-------- --------
BALANCE AT END OF PERIOD $ 26,624 $ 21,290
======== ========
See accompanying notes to consolidated financial statements.
5
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
(In thousands)
1995 1994
-------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 437 $ (452)
Depreciation and Amortization 8,577 8,718
Minority interest 41 (520)
Cumulative Effect of Accounting - (263)
Change, Net
Other Adjustments (2,376) (1,372)
-------- -------
NET CASH PROVIDED BY 6,679 6,111
OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (9,518) (6,794)
Other (513) 86
-------- -------
NET CASH USED IN INVESTING (10,031) (6,708)
ACTIVITIES
NET CASH PROVIDED BY 7,207 4,177
FINANCING ACTIVITIES
Effect of exchange rate changes on cash 617 242
-------- -------
Increase in cash and cash equivalents 4,472 3,822
Cash and cash equivalents at beginning 8,776 12,741
of period -------- -------
CASH AND CASH EQUIVALENTS AT END OF $ 13,248 $16,563
PERIOD ======== =======
See accompanying notes to consolidated financial statements.
6
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 first quarter of
1995 and 1994 were 3,410,079, and 3,039,938, respectively.
Prior to their conversion in May 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 effect.
(2) Acquisitions
During the first quarter of 1995, Ferembal increased its interest in
Obalex to 74% by purchasing 10 % of the equity of Obalex from outside
investors for $586,000 which approximated book value.
(3) Inventories
Inventories consist principally of packaging materials. The components of
inventory were as follows: (000's omitted)
March 31, December 31, March 31,
1995 1994 1994
-------- ------- -------
(in thousands)
Finished goods $ 50,162 $43,275 $41,187
Work in process 12,014 7,096 8,779
Raw materials and supplies 44,745 35,985 33,179
-------- ------- -------
106,921 86,356 83,145
LIFO reserve (3,792) (3,924) 110
-------- ------- -------
$103,129 $82,432 $83,255
======== ======= =======
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ----------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Sales during the first quarter of 1995 increased 25% to $144,460,000 as
compared to $115,850,000 in the first quarter of 1994. Increased sales in 1995
reflected higher volumes primarily at Plastic Containers, Inc. (PCI) but also at
the Company's flexible packaging operations. Contributing to the increase were
currency translation rate differences (approximately $9 million) and resin price
pass-throughs to customers (approximately $7 million).
Gross profit increased 17% in the first quarter of 1995, as compared to the
prior year period. Gross profit as a percentage of sales declined slightly in
the first quarter of 1995 as compared to the same period of 1994. The decline
primarily reflects resin price pass-throughs to customers at PCI which increase
both sales and costs resulting in a lower margin percentage.
Selling, general and administrative expense as a percentage of sales
declined to 12.5% in 1995 as compared to 13.7% 1994, primarily as a result of
the higher sales volume. Because of these various factors, operating income
amounted to $5,707,000 in the first quarter of 1995 as compared to $4,505,000 in
the first quarter of 1994. Operating profit as a percentage of sales improved
over the same periods to 4.0% from 3.9%.
Net interest expense declined to $4,272,000 in the first quarter of 1995 as
compared to $4,608,000 in the same period of 1994. This decline resulted
primarily from lower debt levels in 1995 than 1994. Foreign exchange losses
amounted to $316,000 in the first quarter of 1995, reflecting the strength of
the deutsch mark against other European currencies. Foreign exchange gains
amounted to $49,000 in the first quarter of 1994.
Provision for income taxes amounted to $603,000 in the first quarter of
1995 and reflected 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 income in the first quarter of 1995 amounted to $437,000 ($.13 per
share). Loss before cumulative effect of an accounting change amounted to
$189,000 ($.06 per share) in the first quarter of 1994. A charge amounting to
$263,000 ($.09 per share) resulted from the cumulative effect of an accounting
change in the first quarter of 1994. Net loss in the first quarter of 1994
amounted to $452,000 ($.15).
FINANCIAL CONDITION
- -------------------
CAPITAL REQUIREMENTS
The Company acquired $9.5 million of capital assets during the first
quarter of 1995 consisting primarily of packaging equipment. These assets were
acquired for cash. Similar types of
8
<PAGE>
assets are expected to be acquired for the remainder of 1995. Total capital
spending in 1995 is expected to amount to approximately $31 million.
The Company intends to actively pursue acquisition possibilities in 1995.
It is presently the Company's intention to finance any acquisitions by
leveraging the assets of the business to be acquired, with existing cash,
through bank borrowings or, possibly, through the issuance of stock.
LIQUIDITY
The Company's liquidity position declined slightly during the first quarter
of 1995. Working capital increased slightly to approximately $71 million, and
the current ratio amounted to 1.41 at March 31, 1995 compared to 1.51 at
December 31, 1994.
During the first quarter of 1995, the Company's operating activities
generated $6.7 million of cash primarily as a result of depreciation charges.
The Company used $10 million in investing activities primarily for the purchase
of packaging equipment. The small shortfall was covered by cash from financing
activities primarily short term borrowings of $9.6 million, which was also used
to repay long term debt with the remainder being added to the Company's cash
reserves.
At March 31, 1995, the Company had an available credit line under a
Revolving Credit Agreement of $2.9 million. In addition, the Company's
consolidated subsidiaries had available approximately $39 million in short term
credit lines and bank overdraft facilities at March 31, 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.
9
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits Required
(10) Amendment No. 1 to the 1988 Director Stock Option Plan Page 11
(11) Statement re computation of per share earnings
See Note 1(c) on Page 7
(27) Financial data schedule Page 12
All other items for which provision is made in the applicable
regulations of the Securities and Exchange Commission have been omitted
as they are not required under the related instructions or they are
inapplicable.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed since December 31, 1994.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONTINENTAL CAN COMPANY, INC.
(REGISTRANT)
By: /s/ Abdo Yazgi
--------------------------------
Principal Financial Officer
and on behalf of registrant
DATED: MAY 10, 1995
10
<PAGE>
AMENDMENT NO. 1 TO THE
1988 DIRECTOR STOCK OPTION PLAN
-------------------------------
The 1988 Director Stock Option Plan is hereby amended as follows:
1. By replacing the words retainer fees in Paragraph VI, Subparagraph A, with
the words total fees.
2. By replacing the words Annual Retainer in Paragraph VI, Subparagraph B, with
the words Total Fees and by striking the word not in the eighth line of such
subpararaph.
3. This amendment shall be effective as of March 6, 1995.
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 13,248
<SECURITIES> 290
<RECEIVABLES> 128,854
<ALLOWANCES> 5,388
<INVENTORY> 103,129
<CURRENT-ASSETS> 244,516
<PP&E> 317,646
<DEPRECIATION> 129,591
<TOTAL-ASSETS> 468,002
<CURRENT-LIABILITIES> 173,549
<BONDS> 143,390
<COMMON> 791
0
0
<OTHER-SE> 76,194
<TOTAL-LIABILITY-AND-EQUITY> 468,002
<SALES> 144,460
<TOTAL-REVENUES> 144,460
<CGS> 120,753
<TOTAL-COSTS> 138,753
<OTHER-EXPENSES> 4,626
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,272
<INCOME-PRETAX> 1,081
<INCOME-TAX> 603
<INCOME-CONTINUING> 437
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 437
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
