<PAGE>
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, 1995
-------------------------------------------
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
------
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 25, 1996 was $42,401,660.
The number of shares of Common Stock outstanding on March 25, 1996 was 3,199,668
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, 1995, 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 8, 1996 in connection with its 1996
Annual Meeting of Stockholders to be held on May 15, 1996.
<PAGE>
ITEM 1. BUSINESS
-----------------
(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 GmbH & Company KG (Dixie Union) and (iii) its majority-owned
European operating subsidiaries, Ferembal S.A. (Ferembal), which in turn owns
86% 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 98.4%, 98% and
97.5% of its consolidated revenues in 1995, 1994 and 1993, 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, 1995 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
2
<PAGE>
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's subsidiary, Ferembal, owns 86% 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,
-----
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
3
<PAGE>
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 one customer exceeded 10% of the Company's consolidated revenues in
1995.
As of December 31, 1995, the Company's backlog was approximately
$22,550,000 (compared to $29,952,000, at December 31, 1994). 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 $12,187,000 in 1995, $12,461,000 in 1994 and $12,862,000 in
1993.
The number of persons employed by the Company as of December 31, 1995 and
1994 was 3,796 and 3,729, respectively.
(d) Foreign and Domestic Operations
-------------------------------
Sales to unaffiliated customers are set out below:
1995 1994 1993
-------- -------- --------
(In thousands)
Europe $312,137 $286,412 $255,619
United States 295,470 247,614 221,636
Other 6,780 3,154 4,587
-------- -------- --------
Total $614,387 $537,180 $481,842
======== ======== ========
Information regarding the operating profit and the identifiable assets
attributable to the Company's foreign operations is incorporated herein by
reference to Note 15 of the Consolidated Financial Statements appearing in the
Annual Report to Stockholders for the year ended December 31, 1995.
ITEM 2. PROPERTIES
-------------------
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
4
<PAGE>
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, 1995, CPC had a total
of 124 production lines spread throughout its manufacturing facilities. The
smallest plants have as few as two lines while the largest has thirteen.
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.
5
<PAGE>
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
--------------------------
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
------------------------------------------------------------
No matters were submitted to a vote of security holders during the
quarter ended December 31, 1995.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
--------------------------------------------------------------------------
MATTERS
-------
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, 1995.
6
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA(1)
-----------------------------------
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Sales (2) $614,387 $537,180 $481,842 $511,241 $310,654
======== ======== ======== ======== ========
Net income (2) (3) $ 555 $ 4,445 $ 988 $ 2,063 $ 7,394
======== ======== ======== ======== ========
Earnings per
common share (3)
Primary $ .17 $ 1.39 $ .33 $ .67 $ 2.92
======== ======== ======== ======== ========
Fully Diluted $ .17 $ 1.34 $ .32 $ .64 $ 2.59
======== ======== ======== ======== ========
Weighted average
shares outstanding (4) 3,339 3,220 3,023 3,078 2,533
======== ======== ======== ======== ========
Total assets $445,411 $423,585 $385,907 $400,010 $410,543
======== ======== ======== ======== ========
Long term debt and capitalized
lease obligations $143,138 $142,361 $153,982 $165,701 $159,567
======== ======== ======== ======== ========
Total stockholders'
equity (4) $ 76,298 $ 70,696 $ 60,855 $ 62,935 $ 61,393
======== ======== ======== ======== ========
Working capital $ 46,195 $ 71,348 $ 66,105 $ 69,158 $ 63,004
======== ======== ======== ======== ========
Current ratio 1.29 1.52 1.67 1.69 1.57
======== ======== ======== ======== ========
</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 an extraordinary charge of $115 ($.03 per share both primary and
fully-diluted) in 1995. 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.
(4) The 1994 weighted average shares outstanding include 268 shares issued in
May 1994 upon the conversion of the Company's 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.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
--------------------------------------------------------------------- ---
RESULTS OF OPERATIONS
---------------------
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, 1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------
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, 1995.
7
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
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, 1995.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------
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, 1996 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
63 Manufacturing
Marcial B. L'Hommedieu Treasurer (1) 1963
71
</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,
1996 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, 1996 which
will be filed with the Commission pursuant to Regulation 14A and is hereby
incorporated into this report by this reference.
8
<PAGE>
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, 1996 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, 1995 and 1994
Consolidated Statements of Earnings for the years ended December 31,
1995, 1994, and 1993
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1994 and 1993
Notes to Consolidated Financial Statements for the years ended December
31, 1995, 1994, and 1993
Independent Auditors' Report
The above financial statements are included under Item 8 of Part II of
this report.
2. Financial Statement Schedules:
II Valuation & Qualifying Accounts.......................p. 12
III Condensed Financial Information of Registrant.........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:
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)
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)
9
<PAGE>
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 October 31,
1995 between PCI and CIT.................................. (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,
as amended..............................................p. 16*
10.13 1995 Restricted Stock Compensation Plan................... (2)*
10.14 Amendment No. 1 to Revolving Credit and
Term Loan Agreement....................................... (2)
10.15 Amendment No. 2 to Revolving Credit and
Term Loan Agreement.....................................p. 17
13.1 Annual Report to Stockholders for 1995..................p. 20
21 Subsidiaries of the Registrant..........................p. 51
23.1 Independent Auditors' Report on Schedules...............p. 52
23.2 Consent of Independent Auditors.........................p. 53
27 Financial Data Schedule.................................p. 54
99 Proxy Relating to PCI Stock, dated
September 11, 1992........................................ (2)
* Management contract or compensatory plan or arrangement.
(1) These documents have been previously filed with the Commission by
Plastic Containers, Inc.
(2) These documents have previously been filed with the Commission.
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,
1995.
10
<PAGE>
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 25,1996
--------------------------------------------- ---------------
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.
/s/ Donald J. Bainton Date: March 25,1996
- ------------------------------------------- -------------
Donald J. Bainton, Chairman of the Board
of Directors and Chief Executive Officer
(Principal Executive Officer)
/s/ Kenneth Bainton Date: March 25,1996
- ------------------------------------------- -------------
Kenneth Bainton, Director
/s/ Robert L.. Bainton Date: March 25,1996
- ------------------------------------------- -------------
Robert L. Bainton, Director
/s/ Nils E. Benson Date: March 25,1996
- ------------------------------------------- -------------
Nils E. Benson, Director
/s/ Charles DiGiovanna Date: March 25,1996
- ------------------------------------------- -------------
Charles DiGiovanna, Director
/s/ Rainer N. Greeven Date: March 25,1996
- ------------------------------------------- -------------
Rainer N. Greeven, Director
/s/ Charles H. Marquardt Date: March 25,1996
- ------------------------------------------- -------------
Charles M. Marquardt, Director
Date:
- ------------------------------------------- -------------
V. Henry O'Neill, Director
/s/ John J. Serrell Date: March 25,1996
- ------------------------------------------- -------------
John J. Serrell, Director
Date:
- ------------------------------------------- -------------
Robert A. Utting, Director
/s/ Abdo Yazgi Date: March 25,1996
- ------------------------------------------- -------------
Abdo Yazgi, Director
/s/ Cayo Zapata Date: March 25,1996
- ------------------------------------------- -------------
Cayo Zapata, Director
/s/ Jose Luis Zapata Date: March 25,1996
- ------------------------------------------- -------------
Jose Luis Zapata, Director
11
<PAGE>
Schedule II - Valuation and Qualifying Accounts
Continental Can Company, Inc. and Subsidiaries
Years Ended December 31, 1995, 1994 and 1993
(in thousands)
Additions
-------------------
Balance at Charged to Balance at
beginning costs and Deductions end of
of period expenses Other (1) period
---------- ---------- ----- ------ ----------
Year ended
December 31, 1995 $5,316 $1,909 $ - $1,081 $6,144
====== ====== ===== ====== ======
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
====== ====== ===== ====== ======
(1) Represents uncollectible accounts written-off.
(2) Represents $418 from the consolidation of acquired subsidiary in 1993.
12
<PAGE>
Schedule III - Condensed Financial Information of Registrant
Continental Can Company, Inc.
Balance Sheets
Years Ended December 31, 1995 and 1994
(in thousands) 1995 1994
-------- -------
ASSETS:
Cash $ (10) $ 79
Investments in Subsidiaries at Equity 77,520 72,703
Other Assets 1,692 1,326
------- -------
Total Assets $79,202 $74,108
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities (a) $ 2,479 $ 2,220
Long Term Debt (a) 425 1,192
------- -------
Total Liabilities $ 2,904 $ 3,412
Stockholders' Equity 76,298 70,696
------- -------
$79,202 $74,108
======= =======
(a) See Note 8, Items (a) and (b) of Notes to Consolidated Financial
Statements of Continental Can Company, Inc. and Subsidiaries. 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, 1995, 1994 and 1993
(in thousands) 1995 1994 1993
-------- -------- --------
Management Fees $ 2,247 $ 1,882 $ 2,157
Selling, General and
Administrative Expenses 3,817 2,923 3,232
------- ------- -------
(1,570) (1,041) (1,075)
Equity in Net Income of
Subsidiaries (b) 2,402 5,803 2,247
------- ------- -------
832 4,762 1,172
Other (277) (290) (205)
------- ------- -------
555 4,472 967
(Provision for) Recovery of
Income Taxes - (27) 21
------- ------- -------
Net Income $ 555 $ 4,445 $ 988
======= ======= =======
(b) Includes for 1995 and 1994 extraordinary charges of $115 and $108,
respectively, relating to the extinguishment of debt and in 1994 a
charge of $262 relating to the cumulative effect of adopting SFAS
No. 112.
13
<PAGE>
Schedule III - Condensed Financial Information of Registrant (Continued)
Continental Can Company, Inc.
Statements of Cash Flows
Years Ended December 31, 1995, 1994 and 1993
(in thousands) 1995 1994 1993
-------- -------- --------
Cash Flows from Operating Activities:
Net Income $ 555 $ 4,445 $ 988
Adjustments to Reconcile Net Income
to Net Cash Used in Operating
Activities:
Dividends Received From Affiliates 344 818 -
Equity in Net Income of Subsidiaries (2,402) (5,803) (2,247)
Increase/Decrease in Due to Affiliates 1,281 (442) 299
Other 51 387 288
------- ------- -------
Net Cash Used in Operating Activities (171) (595) (672)
Cash Flows From Investing Activities:
Purchase of Minority Interest - - (213)
Redemption of investment in - - 500
Government Securities
Increase Investment in Subsidiaries - (1,225) -
Proceeds from Sale of Capital Assets - 411 527
Capital Expenditures - - (6)
------- ------- -------
Net Cash Provided By (Used in) - (814) 808
Investing Activities
Cash Flows From Financing Activities:
Common Stock Issued Upon Conversion of
Debentures and Warrants 849 362 184
Proceeds from (Repayment of)
Long-Term Financing (767) 500 203
------- ------- -------
Net Cash Provided by Financing 82 862 387
Activities
Net Increase (Decrease) in Cash (89) (547) 523
Cash at Beginning of Year 79 626 103
------- ------- -------
Cash at End of Year (10) $ 79 $ 626
======= ======= =======
Cash paid for interest and income
taxes was as follows:
1995 1994 1993
------- ------- -------
Interest $ 76 $ 210 $ 232
Income Taxes $ 105 $ 8 $ 22
14
<PAGE>
EXHIBITS ATTACHED:
------------------
10.12 Employment Contract with Donald J. Bainton, as amended Page 16
10.15 Amendment No. 2 to Revolving Credit and Term Loan Agreement Page 17
13.1 1995 Annual Report to Stockholders Page 20
21 Subsidiaries of the Registrant Page 51
23.1 Independent Auditors' Report on Schedules Page 52
23.2 Consent of Independent Auditors Page 53
27 Financial Data Schedule Page 54
15
<PAGE>
EXHIBIT 10.12
March 23, 1989
Mr. Donald J. Bainton
39 Westbrother Drive
Greenwich, CT 06830
Dear Don:
Pursuant to the action of the Board of Directors, the following amended
employment agreement has been approved.
1. Your salary shall be $180,000/(1)/ per year, effective March 27, 1989,
or such other amount as the Board of directors shall, in the future,
determine.
2. The expiration date of the non-qualified stock option to purchase
40,000 shares of the Company's Common Stock, which was awarded to you
in 1983, will be extended until November 15, 1998.
3. This agreement will terminate December 31, 1999.
4. All shares of stock previously issued to you in lieu of cash
compensation (except those shares which had previously been
released from forfeiture) shall remain subject to forfeiture until
December 31, 1999 or such earlier date as the Board of Directors shall,
in the future, determine.
5. In the event of your death prior to December 31, 1999, providing that
you are at that time an employee of the Company, your wife shall be
paid one-half of the amounts that would otherwise have been paid to you
as salary until her death./(2)/ Such amounts shall be paid bi-weekly.
If you find this agreement acceptable, please so signify by signing and
returning the enclosed copy of this letter to me.
Sincerely,
VIATECH, INC.
/s/ Abdo Yazgi
-----------------
Abdo Yazgi
Secretary
ACCEPTED:
By: /s/Donald J. Bainton
-----------------------
DATED: March 24, 1989
--------------
(1) $420,000 effective March 18, 1995 as amended March 6, 1995 by Personnel
Committee of Board.
(2) As amended August 8, 1995 by Personnel Committee of Board.
16
<PAGE>
EXHIBIT 10.15
AMENDMENT NO. 2 TO REVOLVING CREDIT
AND TERM LOAN AGREEMENT
DATED AS OF DECEMBER 1, 1992 between
CONTINENTAL CAN COMPANY, INC. (The "Borrower")
and EXTEBANK (the "Bank")
The Revolving Credit and Term Agreement (the "Agreement") is hereby
amended as follows:
1. Section 1.01 of the Agreement is hereby amended by (i) changing the
date set forth on lines 5 and 6 thereof to "September 30, 1997" and (ii)
changing the amount set forth on line 9 thereof to $3,000,000.00."
2. Section 1.02 of the Agreement is hereby amended by changing the
amount set forth in line 3 thereof to "$3,000,000.00."
3. 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 September 30, 1997 in sixty (60) equal monthly
installments of principal commencing on October 31, 1997 and on the
last day of each successive month thereafter through and including
September 30, 2002 (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.
4. Section 2.02(b) of the Agreement is hereby amended by changing the
amount in line 4 thereof to "$300,000.00."
5. Section 2.03 of the Agreement is hereby amended by (i) deleting the
words "initial two (2) year" in line 3 thereof and (ii) changing the date
set forth in line 3 thereof to "September 30, 1997."
6. Section 2.04 of the Agreement is hereby amended in its entirety to
read as follows:
17
<PAGE>
SECTION 2.04. Commitment Fee. During the period through and
--------------
including September 30, 1997, the Borrower agrees to pay to the Bank
a commitment fee equal to one-half of one (1/2%) percent of the
unused portion of the $3,000,000.00 Revolving Credit Facility, which
commitment fee shall be paid to the Bank on a monthly basis.
7. An amended and restated promissory note substantially in the form of
Exhibit A hereto (the "Restated Note") shall be issued simultaneously with
the execution and delivery of this Amendment No. 2, which Restated Note
amends and restates in its entirety the Restated Promissory Note currently
held by the Bank. Accordingly, Exhibit A to the Agreement is hereby
deleted in its entirety and Exhibit A to this amendment No. 2 is
substituted therefor, and from and after the date hereof, all references in
the Agreement and the other Loan Documents (as hereinafter defined) to the
Note shall be deemed to refer to the Restated Note provided for herein.
8. The term "Agreement" as used in the Agreement and in the documents,
instruments and agreements executed and delivered in connection therewith
(the "Loan documents") shall hereafter mean the Agreement as amended
hereby. Except as herein specifically agreed, the Agreement and the Loan
Documents are hereby ratified and confirmed and shall remain in full force
and effect according to their respective terms.
9. The borrower represents and warrants to the Lender as follows:
a. It has taken all necessary action to authorize the execution,
delivery and performance of this Amendment No. 2 and the Restated Note.
b. Each of this Amendment No. 2 and the Restated Note has been duly
executed and delivered and constitutes the valid and legally binding
obligation of the Borrower, enforceable in
18
<PAGE>
accordance with its respective terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting
creditors' rights generally.
c. No consent or approval of any person, firm, corporation or entity
(including, without limitation, any shareholder of the Borrower), and no
consent, license, approval or authorization of any governmental authority
is or will be required in connection with the execution, delivery
performance, validity or enforcement of this amendment No. 2 or the
Restated Note.
d. It is, as of the date hereof, in full compliance with all of the
various covenants and agreements set forth in each of the Loan Documents.
e. No event has occurred and is continuing which constitutes or
would constitute, with the giving of notice or lapse of time or both, and
Event of Default (as such term is defined in the Agreement).
f. All representations and warranties contained in the Agreement and
each of the other Loan Documents are true and correct as of the date hereof
as though made on and as of the date hereof.
10. This Amendment has been executed and delivered in the State of New
York and shall be governed by and construed in accordance with the laws of
the State of New York.
Dated: October 26, 1995
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
19
<PAGE>
EXHIBIT 13.1
CONTINENTAL CAN COMPANY, INC.
1995 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 OF CONTENTS
Page
----
REPORT TO STOCKHOLDERS............................. 2
DESCRIPTION OF BUSINESS............................ 4
SELECTED FINANCIAL DATA............................ 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.. 7
CONSOLIDATED FINANCIAL STATEMENTS.................. 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS......... 15
INDEPENDENT AUDITOR'S REPORT....................... 26
DIRECTORS AND OFFICERS............................. 27
CORPORATE INFORMATION.............................. 28
REPORT TO STOCKHOLDERS
----------------------
Dear Fellow Stockholders,
Though 1995 was a very challenging year for the packaging industry, our
Company achieved a number of important objectives which will position us
positively for the future. Sales increased 14% to $614.4 million in 1995
compared to $537.2 million in 1994. Cash flow from operations increased by
35% to $25 million and our Company's book value improved to $23.87 per
share at December 31, 1995 compared to $22.43 on December 31, 1994. Due to
pricing pressure in Europe and operating difficulties in the U.S., income
before extraordinary items was $.20 per share. However, we also
restructured our manning in Europe in response to tighter margins which
resulted in an $.83 per share charge. Without this charge earnings before
extraordinary items would have been $1.03 per share for the year. This
restructuring will place us in a good competitive position in future years
when the personnel reductions are completed.
Our U.S. plastic container subsidiary, Continental Plastic Containers, Inc.
(CPC) increased volumes in a flat marketplace. Their vendor management
agreement with the Mobil Oil Corporation was successfully implemented in
1995. CPC also entered into new multi-year contracts with Procter and
Gamble for redesigned containers for health and beauty aid products and for
concentrated dishwashing liquids. At CPC, the increase in sales and
redesigned containers required a substantial amount of capital expenditures
for new and modified line installations. In addition, the overlapping of
installation schedules resulted in added installation cost. Also, in order
to meet the higher customer demand, a significant amount of overtime,
freight and production on newly installed lines caused additional excess
expense. By the end of the fourth quarter, the majority of these problems
had been satisfactorily resolved.
At Ferembal, our French can manufacturing subsidiary, operating margins
declined in the face of lower selling prices for its products coupled with
increased raw material prices. In 1995, we began an aggressive program to
control raw material prices by expanding the number and location of our
sources of supply. This program is continuing on an expanded basis in
1996. We also have taken a restructuring charge amounting to $5 million
with regard to termination benefits for personnel in France. This charge,
as stated previously, reduced our earnings in 1995 by $.83 per share and is
part of our continuing program to reduce our costs in this market. While
we cannot dictate prices for our products, we are committed to reducing our
costs to the lowest level possible, consistent with maintaining product
quality and customer service.
The European flexible packaging business in which Dixie Union and Onena
operate had significant resin price increases in 1995. While operating
margins in flexible packaging were negatively impacted by these
20
<PAGE>
factors, our machine and shrink bag businesses at Dixie Union continued to
have strong volumes and margins. In the shrink bag area, we are adding
capacity and expect continued growth in sales and profitability in the
future.
With the difficult economic conditions in our markets continuing in early
1996, we expect sales and profitability to be lower in the first half with
a rebound in sales and profitability later in the year. Due to our cost
reduction programs we are optimistic about our future growth and business
prospects. We also will continue to strengthen our businesses with the
capital necessary to enhance their productivity, respond to the competitive
environment and to grow market share. We will address the opportunities
each of our businesses face in order to insure their success and long-term
health, and will continue to look for attractive acquisitions and joint
ventures to ensure long-term value for our shareholders.
Donald J. Bainton
Chairman & Chief Executive Officer
March 8, 1996
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 GmbH & Company KG (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.
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.
21
<PAGE>
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's subsidiary, Ferembal, owns 86% 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.
SELECTED FINANCIAL DATA(1)
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
Net sales (2) $614,387 $537,180 $481,842 $511,241 $310,654
======== ======== ======== ======== ========
Net income (2) (3) $ 555 $ 4,445 $ 988 $ 2,063 $ 7,394
======== ======== ======== ======== ========
Earnings per
common share (3)
Primary $ .17 $ 1.39 $ .33 $ .67 $ 2.92
======== ======== ======== ======== ========
Fully diluted $ .17 $ 1.34 $ .32 $ .64 $ 2.59
======== ======== ======== ======== ========
Weighted average
shares outstanding (4) 3,339 3,220 3,023 3,078 2,533
======== ======== ======== ======== ========
Total assets $445,411 $423,585 $385,907 $400,010 $410,543
======== ======== ======== ======== ========
Long-term debt and capitalized
lease obligations $143,138 $142,361 $153,982 $165,701 $159,567
======== ======== ======== ======== ========
Total stockholders'
equity (4) $ 76,298 $ 70,696 $ 60,855 $ 62,935 $ 61,393
======== ======== ======== ======== ========
EBITDA (5) $ 54,361 $ 59,365 $ 59,368 $ 64,521 $ 38,393
======== ======== ======== ======== ========
22
<PAGE>
(1) In thousands, except per share amounts.
(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 an extraordinary charge of $115 ($.03 per share both primary
and fully diluted) in 1995. 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.
(4) The 1994 weighted average shares outstanding include 268 shares issued
in May 1994 upon the conversion of the Company's 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.
(5) Earnings before interest, taxes, depreciation and amortization,
determined without consideration to minority interests.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
1995 VS. 1994
In 1995 sales increased 14% to $614.4 million from $537.2 million in 1994.
This improvement resulted from net volume increases, foreign currency
translation rate differences (approximately $34 million) and resin price
increases which are a customer pass-through at PCI (approximately $23
million).
Backlog at December 31, 1995 amounted to $22.6 million as compared to $29.9
million at December 31, 1994. 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 decrease in backlog at December 31,
1995 will result in lower sales and earnings in the first quarter of 1996,
as compared to the same period in the prior year.
Gross profit increased 3.4% to $97.4 million in 1995 from $94.2 million in
1994. Gross profit margin declined to 15.8% in 1995 from 17.5% in 1994.
The increase in gross profit resulted from higher sales volumes, while the
declining gross profit margin reflected continued competitive pressure on
pricing in the can and flexible packaging markets. Additionally, the pass-
through of resin costs at PCI increases both sales and costs equally,
reducing the margin percentage.
Restructuring charges amounting to $5,003,000 in 1995 and $1,686,000 in
1994 related to Ferembal. The charges relate to termination benefits for
certain employees of Ferembal and reflect a response to continuing
competitive pressure in Ferembal's marketplace. Selling, general and
administrative expense as a percentage of net sales amounted to 12.5% in
1995 as compared to 12.8% in 1994. This reflects the fixed nature of many
of these expenses in relation to increased volume.
As a result of these various factors, operating income decreased to
$20,598,000 in 1995 from $25,648,000 in 1994, while operating margin
declined to 3.4% in 1995 from 4.8% in 1994.
Net interest expense increased slightly to $19.9 million in 1995 from $18.7
million in 1994. This increase primarily reflected higher average short-
term debt balances in Europe and the United States in 1995.
The Company's consolidated effective tax rate is an amalgamation of the tax
charges and tax benefits of itself and its subsidiaries. This rate
reflects the offsetting nature of these items in consolidation. PCI
23
<PAGE>
utilized tax benefits of $2,505,000 and $1,631,000 in 1995 and 1994,
respectively. Also in 1994, Ferembal settled a tax dispute which resulted
in a tax benefit of approximately $900,000.
Minority interest in 1995 and 1994 reflects the interest of other
shareholders in Plastic Containers, Inc., Ferembal, Onena and Obalex.
Income before extraordinary item in 1995 amounted to $670,000 ($.20 per
share). An extraordinary charge in 1995, net of the portion attributable
to the minority interest, amounting to $115,000 ($.03 per share) related to
costs associated with the cancellation of a revolving credit agreement at
PCI.
Net income amounted to $555,000 ($.17 per share) in 1995 and $4,445,000
($1.34 per share) in 1994.
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.
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.
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 Company's
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
declined to 12.8% in 1994 as compared to 12.9% in 1993. Selling, general
and administrative expense in 1994 increased $6.2 million or 10.0%.
Included in 1994's expenses are approximately $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 Company's 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.
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 Company's 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 Statement of Financial Accounting Standards (SFAS) No.112
resulted in a charge to income, net of the portion attributable to the
minority interest, of $262,000 ($.08 per share).
24
<PAGE>
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.
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 1995 amounted to $42,482,000 primarily for the
purchase of machinery and equipment. During 1995, major capital
expenditures included the purchase of extrusion blow-molding lines and line
changes, an easy-open end line for cans and additional capacity for shrink
bags at Dixie Union. Expenditures in 1996 are expected to amount to
approximately $29 million and be similar in character to those in 1995.
During 1995, Ferembal increased its ownership interest in Obalex to
86%. See Note 2(b).
The minority stockholders of Ferembal have the right to sell a portion
of their shares in an initial public offering of Ferembal which the Company
has agreed to make at their request. It is expected that the holder of a
junior subordinated convertible bond of Ferembal will convert its bond at
such time to participate in any such offering. Although the Company does
not currently expect to sell any of its stock in Ferembal in any such
offering, if the bond is converted, the Company ownership of Ferembal will
decline from 85% to 64%. See Note 2(d).
The Company has actively pursued acquisition possibilities in 1995 and
intends to continue to do so in 1996 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 1995 capital requirements with cash generated from
operations, from existing funds and through borrowings. It is anticipated
that such expenditures in 1996 will be financed in a similar manner.
LIQUIDITY
The Company's liquidity position at December 31, 1995 declined
somewhat from the prior year end. Working capital decreased to $46.2
million at December 31, 1995 from $71.3 million at December 31, 1994. The
current ratio was 1.29 at December 31, 1995 and 1.52 at December 31, 1994.
The Company's cash position remained approximately equal between
December 31, 1995 and 1994. Cash flows from operating activities provided
$25 million for the Company in 1995 most of which related to depreciation
and amortization. Included in the reduction of accounts receivable is $17
million, which represents discounting of certain trade accounts receivable
by Ferembal. Approximately $10 million of the $22.2 million increase in
short-term borrowings was used to fund a contribution to the pension plan
at PCI. The remainder of such borrowings and cash from operations were
used for capital expenditures and repayment of long-term debt. The Company
invested approximately $42.5 million in 1995 in property, plant and
equipment. Additionally, the Company used $5.6 million in financing for
the net repayment of long-term borrowings. Most of the increase in short-
term borrowings at December 31, 1995 is expected to be repaid during 1996.
At December 31, 1995, the Company had available a credit line of
$2,575,000 under a Revolving Credit Facility. The Company's packaging
subsidiaries had available various unutilized credit facilities of
approximately $90 million at December 31, 1995. 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 1996 and on a long-
term basis.
UTILIZATION OF NET OPERATING LOSS CARRYFORWARDS
The Company and its subsidiaries account for income taxes in
accordance with SFAS No. 109, "Accounting for Income Taxes," issued in
February 1992. This statement requires, among other things,
25
<PAGE>
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 9, PCI has tax net operating loss carryforwards
(NOL's) totaling approximately $61 million which expire between 2006 and
2010. SFAS No. 109 requires that the tax 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." Based upon the scheduled reverses of
deferred tax liabilities, projected future taxable income and tax planning
strategies, management believes it is more likely then not the Company will
realize the benefits of these deductible differences net of the existing
valuation allowances at December 31, 1995.
The NOL's available for future utilization were generated principally by
operating losses 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.
NEW ACCOUNTING STANDARDS
FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of," must be adopted by the
Company in 1996. Statement No. 121 requires, among other things, that
long-lived assets held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Management does not believe
that the implementation of Statement No. 121 will have a material impact on
the Company's financial position or results of operations.
In October of 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 123. "Accounting for Stock-Based Compensation," which must be
adopted by the Company in 1996. The Company has elected not to implement
the fair value based accounting method for employee stock options, but has
elected to disclose, commencing in 1996, the pro forma net income and
earnings per share as if such method had been used to account for stock
based compensation cost as described in Statement No. 123.
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.
26
<PAGE>
<TABLE>
<CAPTION>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(In thousands, except share data)
1995 1994
----------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 8,925 $ 8,776
Investments 285 292
Accounts Receivable:
Trade 94,461 102,255
Other 13,215 15,964
Less allowance for doubtful accounts (6,144) (5,316)
----------- ------------
Accounts receivable, net 101,532 112,903
Inventories 91,636 82,432
Prepaid expenses and other current assets 5,275 4,700
----------- ------------
Total current assets 207,653 209,103
----------- ------------
Property, plant and equipment, at cost:
Land, building and improvements 52,090 48,750
Manufacturing machinery and equipment 263,331 230,365
Furniture, fixtures and equipment 9,591 8,536
Construction in progress 22,476 9,505
----------- ------------
347,488 297,156
Less accumulated depreciation and amortization (148,874) (116,786)
----------- ------------
Net property, plant and equipment 198,614 180,370
Goodwill, net of accumulated amortization of $2,277
and $1,853 in 1995 and 1994, respectively 14,486 13,997
Other assets, net of accumulated amortization 24,658 20,115
----------- ------------
Total assets $ 445,411 $ 423,585
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
(In thousands, except share data)
1995 1994
----------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings $ 47,945 $ 21,855
Accounts payable - trade 56,830 60,540
Accrued liabilities:
Employee compensation and benefits 18,238 19,072
Other accrued expenses 17,417 16,143
Current installments of long-term debt and
obligations under capital leases 10,665 13,043
Income taxes payable 1,610 1,160
Other current liabilities 8,753 5,942
----------- ------------
Total current liabilities 161,458 137,755
Long-term debt, excluding current 130,023 128,363
installments
Obligations under capital leases,
excluding
current installments 13,115 13,998
Deferred income taxes 3,872 3,747
Other liabilities 30,365 36,285
----------- ------------
Total liabilities 338,833 320,148
Minority interest 30,280 32,741
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 and 3,151,157 shares in 1994. 799 788
----------- ------------
799 788
Additional paid-in capital 43,868 42,872
Retained earnings 26,742 26,187
Cumulative foreign currency translation adjustment 4,889 849
----------- ------------
Total stockholders' equity 76,298 70,696
Commitments and contingencies - -
----------- ------------
Total liabilities and stockholders' equity $ 445,411 $ 423,585
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
(In thousands, except per share data)
1995 1994 1993
----------- ----------- ------------
<S> <C> <C> <C>
Net sales $614,387 $ 537,180 $ 481,842
Cost of sales 517,010 443,023 394,678
----------- ----------- ------------
Gross profit 97,377 94,157 87,164
Selling, general and administrative 71,776 66,823 62,293
expenses
Restructuring charges 5,003 1,686 -
----------- ----------- ------------
Operating income 20,598 25,648 24,871
Other expense:
Interest expense, net (19,917) (18,684) (22,942)
Foreign currency exchange loss (299) (121) (134)
Other - net (291) (180) (55)
----------- ----------- ------------
Net other expense (20,507) (18,985) (23,131)
Income before (recovery) provision for
income taxes,
minority interest, extraordinary
item and
cumulative effect of accounting 91 6,663 1,740
change
(Recovery) provision for income taxes (503) 1,761 2,655
----------- ----------- ------------
Income (loss) before minority interest,
extraordinary
item and cumulative effect of 594 4,902 (915)
accounting change
Minority interest (76) 87 (1,903)
----------- ----------- ------------
Income before extraordinary item and
cumulative effect of accounting 670 4,815 988
change
Extraordinary item, net (115) (108) -
Cumulative effect of accounting change, - (262) -
net
----------- ----------- ------------
Net income $ 555 $ 4,445 $ 988
=========== =========== ============
Earnings (loss) per common share -
primary:
Before extraordinary item and
cumulative effect of accounting $0.20 $1.50 $0.33
change
Extraordinary item (0.03) (0.03) -
Cumulative effect of accounting - (0.08) -
change, net
----------- ----------- ------------
Net earnings per share - primary $0.17 $1.39 $0.33
=========== =========== ============
Earnings (loss) per common share -
assuming
full dilution:
Before extraordinary item and
cummulative effect of accounting $0.20 $1.45 $0.32
change
Extraordinary item (0.03) (0.03) -
Cumulative effect of accounting - (0.08) -
change, net
----------- ----------- ------------
Net earnings per share - assuming
full dilution $0.17 $1.34 $0.32
=========== =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
(In thousands)
1995 1994 1993
----------- ----------- ------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 555 $ 4,445 $ 988
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating
Activities:
Depreciation and amortization 34,353 34,018 34,686
Extraordinary loss on write off
of capitalized
finance costs, net 115 108 -
Minority interest (76) 87 (1,903)
Deferred income taxes (2,805) 789 (1,554)
Gain on sale of capital assets 68 169 363
Provision for doubtful accounts
receivable 1,656 2,845 915
Changes in Assets and
Liabilities, Net of
Effects of Acquisition:
Decrease (increase) in
accounts receivable 14,534 (25,528) (1,691)
Decrease (increase) in
other receivables 697 (4,143) 3,941
(Increase) decrease in
inventories (4,215) (6,952) 3,993
Decrease (increase) in
prepaid expenses and
other current assets
Increase in other assets 245 (678) 146
Increase in pension (1,338) (274) (481)
asset/liability (11,377) (2,740) (1,778)
(Decrease) increase in
accounts payable (9,144) 15,901 (4,963)
(Decrease) increase in
accrued liabilities (1,021) 1,884 465
Increase in income taxes
payable 362 419 329
Increase (decrease) in
other liabilities 2,462 (1,792) (4,558)
----------- ----------- ------------
Net Cash Provided by
Operating Activities 25,071 18,558 28,898
Cash Flows From Investing Activities:
Purchase of minority interests (1,448) (1,970) (213)
Proceeds from investments 2 31 534
Proceeds from sale of capital assets 986 985 770
Capital expenditures, net of
investment grants (42,482) (23,858) (22,149)
Purchase of equipment for customer
reimbursement - (249) -
----------- ----------- ------------
Net Cash Used in Investing
Activities (42,942) (25,061) (21,058)
Cash Flows From Financing Activities:
Principal payments of long-term debt and
obligations under capital leases (14,742) (18,125) (9,379)
Proceeds from long-term debt and obligations
under capital leases 9,164 5,727 827
Common stock issued to employees
and upon conversion of debentures,
warrants and options 1,007 362 184
Proceeds from (repayments of) short-term
borrowings 22,211 14,485 (339)
Dividends paid by subsidiary to
minority interest (49) (51) (344)
----------- ----------- ------------
Net Cash Provided by (Used in) Financing 17,591 2,398 (9,051)
Activities
Effect of exchange rate changes on cash 429 140 (323)
----------- ----------- ------------
Increase (decrease) in cash and cash
equivalents 149 (3,965) (1,534)
Cash and cash equivalents at beginning
of year 8,776 12,741 14,275
----------- ----------- ------------
Cash and cash equivalents at end of year $ 8,925 $ 8,776 $ 12,741
=========== =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
(In thousands)
Cumulative
Foreign Total
Common Stock 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, 1993 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
Net income - - - 555 - 555
Common stock issued to employees and
upon exercise of options 45 11 996 - - 1,007
Foreign currency translation
adjustment - - - - 4,040 4,040
----------- -------- ------- --------- ------- ---------
Balances December 31, 1995 3,196 $ 799 $43,868 $ 26,742 $ 4,889 $ 76,298
=========== ======== ======= ========= ======= =========
</TABLE>
See accompanying notes to consolidated financial statements
31
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS
(a) Principles of Consolidation
Continental Can Company, Inc. (the Company) 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
accompanying consolidated financial statements include the accounts of
the Company, its majority-owned foreign and domestic subsidiaries and its
50% interest in Plastic Containers, Inc. (PCI) (see Note 2(c)).
At December 31, 1995, 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 86% of Obalex A.S. (Obalex) located in the
Czech Republic; 100% of Dixie Holding, Inc. and Dixie Union
Geschaftsfurungs GmbH which own 100% of Dixie Union GmbH & Company KG
(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 in consolidation.
(b) Investments
Investments are accounted for under SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Investments consist of held-
to-maturity government agency securities stated at amortized cost, which
approximates market value. At December 31, 1995 and 1994, all of the
investments were held entirely by PCI.
(c) 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.
(d) Depreciation and Amortization
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:
Estimated
useful lives
(years)
------------
Building and improvements 10 to 35
Manufacturing machinery and equipment 3 to 20
Furniture, fixtures and equipment 3 to 10
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).
(e) Goodwill
32
<PAGE>
Goodwill, which represents the excess of purchase price over fair value
of net assets acquired, is amortized on a straight-line basis over the
expected periods to be benefited, generally 40 years. The Company
assesses the recoverability of this intangible asset by determining
whether the amortization of the goodwill balance over its remaining life
can be recovered through undiscounted future operating cash flows of the
acquired operation. The amount of goodwill impairment, if any, is
measured based on projected undiscounted future operating cash flows
using a discount rate reflecting the Company's average cost of funds.
The assessment of the recoverability of goodwill will be impacted if
estimated future operating cash flows are not achieved.
(f) 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.
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
(g) Foreign Currency Translation
The accounts of the Company's 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.
(h) Statement of Cash Flows
Cash equivalents consist of short-term investments in government
securities and bonds. The Company considers securities purchased within
three months of their maturity date to be cash equivalents.
Cash paid for interest and income taxes was as follows:
1995 1994 1993
------- ------- -------
(in thousands)
Interest $19,657 $18,725 $23,386
Income taxes $ 2,630 $ 4,086 $ 4,667
(i) Research, Development and Engineering
Expenditures for research, development and engineering are expensed as
incurred. Research, development and engineering costs amounted to
$12,187,000, $12,461,000 and, $12,862,000 in 1995, 1994 and 1993,
respectively.
(j) Employers' Accounting for Postemployment Benefits
In 1994, the Company adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," which requires employers to recognize the
obligation to provide postemployment benefits and an allocation of the
costs of those benefits (see Note 12).
(k) Insurance
PCI purchases commercial insurance policies, but remains self-insured in
certain states for the purposes of providing workers' compensation,
general liability and property and casualty insurance coverage up to
varying deductible amounts. PCI's self-insurance reserves are included
in other liabilities on the consolidated balance sheets. Costs charged
to operations for self-insurance for the years ended December 31, 1995,
1994 and 1993 were $2,200,000, $2,066,000 and $2,268,000, respectively.
(l) Plant Rationalization and Realignment
33
<PAGE>
PCI records an estimate of the liabilities associated with the closing
of specific manufacturing facilities. Costs charged (income credited) to
operations for these programs were $98,000, $855,000 and $(135,000) for
the years ended December 31, 1995, 1994 and 1993, 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, 1995 is $500,000 ($549,000 at
December 31, 1994) related to accruals for plant rationalization and
realignment.
(m) Restructuring Charges
Included in expenses in 1995 and 1994 are restructuring charges of
$5,003,000 and $1,686,000, respectively, related to Ferembal. The
charges include termination benefits for certain employees, approximately
half of whom accepted early retirement. Terminated employees received
$1,882,000 in 1995 and $889,000 in 1994. Included in other current
liabilities in 1995 and 1994 is $3,539,000 and $797,000, respectively,
for termination benefits for the remaining employees.
(n) Use of Estimates
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(o) 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. Weighted average shares
outstanding in 1995, 1994 and 1993 were 3,338,737, 3,220,082 and
3,023,062, 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.
(p) Reclassifications
Certain reclassifications have been made to conform prior year financial
statements to the 1995 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 8(e)), (iii) SODENA provide the merged entity with a
$2,163,000 (309 million pesetas) interest free loan for a period of up to
four years secured by Onena's existing land and building (see Note 8(g)),
and (iv) the Company invest $700,000 (100 million pesetas) in the merged
entity as additional equity.
(b) Obalex
During 1993, Ferembal, pursuant to a pre-emptive right, subscribed to a
share issue which gave Ferembal an additional 17% interest to its
existing 34% 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. During 1995, Ferembal purchased an
additional 22% of Obalex from other investors for $1,448,000. As a
result of these transactions, Ferembal's equity interest in Obalex
increased to 86%. These
34
<PAGE>
transactions have been accounted for under the purchase method with the
purchase price allocated to the fair value of the net assets acquired.
(c) PCI
The Company and Merrywood, Inc. (Merrywood) each own 50% interests in
PCI. 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). 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 6, 1998, then Merrywood's PCI shares
are required to be exchanged for shares of the Company's Common Stock.
(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, 1995,
would reduce the Company's percentage ownership of Ferembal to 64% (see
Note 8(c)).
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
(unless this resulted from the actions of the minority shareholders), the
Company would purchase the shares of the minority shareholders at a price
to be determined through an appraisal process. The minority shareholders
and the convertible bondholder, declined to sell a portion of their
shares in a public offering of Ferembal which had been planned for the
fourth quarter of 1995. Pursuant to the agreement the Company's
obligation to purchase the shares through an appraisal process
terminated. The Company remains committed to taking Ferembal public at a
time determined by the minority shareholders. It is expected that the
convertible bondholder will convert its bond into equity immediately
prior to any such offering. This conversion would reduce the Company's
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 purchased such shares from the
banks in 1994 for $1,817,000 which approximates fair market value.
(3) 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 1995, three customers in 1994 and
two customers in 1993 accounted for 23%, 21% and 15% of the Company's
sales, respectively; accounts receivable from five customers at December
31, 1995 and two customers at December 31, 1994 amounted to 46% and 22%,
respectively, of the Company's total stockholders' equity.
During 1995, 1994 and 1993, Ferembal discounted with banks approximately
$79,353,000, $79,260,000 and $92,859,000, respectively, of trade accounts
receivable with full recourse. Of these amounts, approximately
$17,401,000 remains outstanding on December 31, 1995. None were
outstanding at December 31, 1994.
35
<PAGE>
The components of other accounts receivable at December 31 were as
follows:
1995 1994
------------ --------
(in thousands)
Recoverable value added taxes $ 2,680 $ 2,477
related to Ferembal
Engineering fees billed 2,309 3,755
Cost of molds not yet billed 1,734 -
Other taxes 1,154 240
Due from customer for equipment 419 4,190
purchases
Receivable for insured loss - 3,036
Other 4,919 2,266
------- -------
$13,215 $15,964
======= =======
(4) INVENTORIES
Inventories consist principally of packaging materials. The components of
inventory at December 31 were as follows:
1995 1994
------- -------
(in thousands)
Raw materials and supplies $43,625 $43,275
Work in process 7,795 7,096
Finished goods 42,241 35,985
------- -------
93,661 86,356
LIFO reserve (2,025) (3,924)
------- -------
$91,636 $82,432
======= =======
During 1995, LIFO inventory layers were reduced. This reduction
resulted in charging lower inventory costs prevailing in previous years
to cost-of-goods sold in 1995, thus reducing cost-of-goods sold by
approximately $700,000 below the amount that would have resulted from
liquidating inventory recorded at December 31, 1995 prices.
(5) DERIVATIVE FINANCIAL INSTRUMENTS
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. They are used to
manage well-defined interest rate and currency price risks. At December
31, 1995, Ferembal had bought $10.2 million under forward contracts
through September 1996 at an average exchange rate of 4.93 FF per U.S.
dollar. The amount of the forward contracts approximates the amount of
Ferembal's expected 1996 U.S. dollar-denominated purchase obligations.
These forward contracts could not be tied to a specific dollar-
denominated transaction at December 31, 1995 and were marked to market at
that date resulting in a charge to earnings of $99,000.
At December 31, 1995, Ferembal had entered into several short-term
interest rate hedge agreements in which it has exchanged an obligation to
pay variable interest rates based on the three month Paris Inter-Bank
Offering Rate (PIBOR) for fixed rates ranging from 5.49% to 6.0%. These
agreements cover the period between March and December 1996 for principal
amounts between $10.2 million and $20.4 million. Ferembal had also
entered into an interest rate collar agreement. To the extent the three
month PIBOR rate is above 8% for the three months prior to March 19,
1996, Ferembal would receive the difference based on a principal amount
of $10.2 million for three months; if below 8%, Ferembal would pay the
actual rate but not less than 6.1%. At December 31, 1995, three month
PIBOR was 5%.
The fair value of these agreements at December 31, 1995 was an
unrecognized loss of $118,000. This negative fair value reflects the
difference between the interest rates in effect for such agreements and
the rates that could have been obtained on December 31, 1995 based on
the principal amounts over the period covered.
(6) OTHER ASSETS
The components of other assets at December 31 were as follows:
36
<PAGE>
1995 1994
------ -------
(in thousands)
Intangibles:
Non-compete agreements $15,000 $15,000
Financing and acquisition costs 6,058 6,316
Customer contracts 7,630 7,630
Prefunded pension 5,153 -
Deferred tax assets 5,099 2,472
Non-current receivables, principally VAT 1,248 1,351
Other 4,100 2,471
------- -------
44,288 35,240
Less accumulated amortization of 19,630 15,125
intangibles ------- -------
$24,658 $20,115
======= =======
(7) SHORT-TERM BORROWINGS
At December 31, 1995 and 1994, approximately $47,945,000 and $21,855,000,
respectively, were outstanding representing at December 31, 1995 amounts
drawn by (a) Ferembal, including Obalex, ($24,208,000 at interest rates
ranging from 5.46% to 11.5%), (b) PCI ($17,018,000 at interest rates
ranging from 7.37% to 8.75%) (c) Onena ($4,597,000 at interest rates
ranging form 8.5% to 9.5%) and (d) Dixie Union ($2,122,000 at interest
rates ranging from 6.75% to 7.0%).
At December 31, 1995, Ferembal had unutilized short-term unsecured
borrowing agreements of approximately $45 million. At December 31, 1995,
Dixie Union had total lines of credit available under short-term
unsecured borrowing agreements of approximately $13.5 million.
On October 30, 1995, PCI entered into a $50 million revolving credit
facility with a commercial bank, which replaced an existing $15 million
revolving credit facility. The new revolving credit facility is for a
term of seven years with interest on individual borrowings based on the
bank's prime rate or LIBOR, at PCI's option. Borrowings are secured by
accounts receivable and inventories. At December 31, 1995, borrowings of
$17,018,000 were outstanding at interest rates of 7.37 % and 8.75%. PCI
is required to pay an annual commitment fee of 0.25% on the unused
facility up to $25 million and 0.5% on the unused amount in excess of $25
million. Commitment fees for the year ended December 31, 1995 were
$23,000. The facility contains certain restrictive covenants, including
the maintenance of minimum levels of net worth, fixed charge coverage and
interest coverage, limitations on capital expenditures and additional
indebtedness and restrictions on the payment of dividends. At December
31, 1995, PCI was in compliance with these covenants or had obtained
waivers. The facility also provides for the issuance of letters of
credit by the bank on PCI's behalf. At December 31, 1995, letters of
credit amounting to $3,131,000 had been issued to guarantee obligations
carried on the consolidated balance sheet.
The extraordinary loss of $115,000 in 1995, which is net of the portion
attributable to minority interest, relates to the write-off of
unamortized fees for the prior revolving credit agreement.
(8) LONG-TERM DEBT, CAPITAL LEASES AND OTHER LONG-TERM LIABILITIES
Long-term debt and capital leases at December 31, 1995 and 1994 are
summarized as follows:
1995 1994
--------- ---------
(in thousands)
Revolving Credit Facility with interest
at 1% above the
prime rate (9.5% at December 31, 1995) (a) $ 425 $ 1,350
10.75% Senior Secured Notes due 2001 (b) 104,700 104,700
Term loan payable by Ferembal through
1997 at 10.25% (denominated in francs:
6 million at December 31, 1995
and 10 million at December 31, 1994).... 1,223 1,873
Notes payable by Ferembal in installments
through 1997 at PIBOR
(5% at December 31, 1995) plus 0.6% to
0.75%
(denominated in francs: 21 million and
38 million at
December 31, 1995 and 1994,
respectively).......................... 4,282 7,080
37
<PAGE>
Term loans payable by Ferembal through
2001 at weighted
average interest rates of 10% and a
range of 8.5% to 15.5%
(denominated in francs: 14.8 million at
December 31, 1995
and 20 million at December 31, 1994).... 3,024 3,761
Convertible Subordinated Bond due 2000
at PIBOR (denominated
in francs: 10 million at December 31,
1995 and 1994) (c)..................... 2,040 1,873
Term loans payable through 1999 at a
rate of 13%
(denominated in Czech crowns: 13 million at
December 31, 1995 and 37 million at
December 31,1994)...................... 245 651
Obligations under capital leases (d).... 15,148 15,706
Notes payable by Dixie Union at 5.7% to
9.25% (denominated in
deutsch marks: 13 million and 8 million
at December 31, 1995 and 1994,
respectively).......................... 9,049 5,162
Notes payable by Dixie Union in
semi-annual installments
through 2003 at rates of 7.3% to 7.8%
(denominated in deutsch marks: 6,105,000
and 8,285,000 at December 31, 1995
and 1994, respectively)................. 4,250 5,346
Obligations pursuant to extension
agreement with regard to
turnover tax (e)........................ 948 877
Obligations relating to settlement of
social security assessments (f)........ 3,097 3,142
Discounted secured note due 1997
(denominated in pesetas:
284 million and 265 million at December
31, 1995 and 1994,
respectively) (g)....................... 2,333 2,017
Bank borrowings at an average effective
interest rate of 10.25%
in 1995, and 10.9% in 1994 (370 million
and 246 million pesetas
at December 31, 1995 and 1994,
respectively).......................... 3,039 1,866
-------- --------
153,803 155,404
Less current installments............... (10,665) (13,043)
-------- --------
$143,138 $142,361
======== ========
(a) The Company's Revolving Credit Facility provides for borrowings of up to $3
million. A commitment fee of 0.5% 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 $300,000. 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 October 1997.
(b) 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, 1995). 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, 1995, PCI was in compliance with these
restrictions.
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.
38
<PAGE>
(c) 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)).
(d) The capital lease obligations represent lease payments due through
2004 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, 1995:
Fiscal Year (in thousands)
---------------------------------------- --------------
1996 $ 3,201
1997 3,117
1998 3,032
1999 2,646
2000 2,056
Later Years 7,445
-------
Total minimum lease payments 21,497
Less amount representing interest (6,349)
-------
Present value of net minimum lease
payments, including current maturities,
with interest rates ranging from
7% to 10.6% $15,148
=======
(e) 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 115 million pesetas at December 31, 1995 and 1994 and is repayable in
installments through May 1998. (See Note 2(a)).
(f) Represents 377 million pesetas and 414 million pesetas at December 31, 1995
and 1994, respectively due to social security. Pursuant to an agreement,
repayment of principal and interest by Onena is due up to October 2000.
(g) 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:
Year Ending December 31 (in thousands)
-------------------------- -----------------
1996 $ 8,632
1997 20,941
1998 30,894
1999 30,228
2000 25,003
Later Years 22,957
--------
$138,655
========
Other long-term liabilities at December 31, 1995 primarily include pension
and profit sharing amounts related to PCI and Ferembal of $7,859,000
($14,304,000 at December 31, 1994), insurance reserves at PCI of $8,956,000
($8,805,000 at December 31, 1994), and accrued postretirement benefits at
PCI of $5,972,000 ($5,904,000 at December 31, 1994).
(9) INCOME TAXES
39
<PAGE>
The components of the (benefit) provision for income taxes for the years
ended December 31, 1995, 1994 and 1993 are as follows:
1995 1994 1993
-------- -------- --------
(in thousands)
Current - Federal $ 145 $ 148 $ (145)
- Foreign 2,075 812 4,209
- State 82 12 145
Deferred - Federal (2,569) (1,559) (1,004)
- Foreign (73) 2,553 (60)
- State (163) (205) (490)
------- ------- -------
(Benefit) provision for income taxes $ ( 503) $ 1,761 $ 2,655
======= ======= =======
The Company's total income tax (benefit) provision differs from the
provision that would result from applying the U.S. Federal statutory income
tax rate to income before (benefit) provision for income taxes, minority
interest, extraordinary item and cumulative effect of accounting change due
to the following:
<TABLE>
<CAPTION>
1995 1994 1993
----------------- --------------- ---------------
(in thousands, except for percentage amounts)
Amount % Amount % Amount %
------ -------- ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Provision at U.S. federal statutory rate $ 31 34.0 $2,265 34.0 $ 592 34.0
Losses not providing tax benefits - - (847) (12.7) - -
Change in valuation allowance (383) (420.9) 696 10.4 1,671 96.0
State income taxes, net of
federal income tax benefit (53) (58.2) (127) (1.9) (228) (13.1)
Differential in foreign tax rates (247) (271.4) (440) (6.6) 394 22.7
Other 149 163.8 214 3.2 226 13.0
----- ------ ------ ----- ------ -----
(Recovery) provision for income taxes $(503) (552.7) $1,761 26.4 $2,655 152.6
===== ====== ====== ===== ====== =====
</TABLE>
The significant components of deferred income tax (benefit) expense
attributable to income from continuing operations for the years ended
December 31, 1995, 1994 and 1993 are as follows:
1995 1994 1993
-------- -------- ---------
(in thousands)
Deferred tax (benefit) expense
(exclusive of the effects of $ (844) $ 119 $ (737)
other components below)
Benefit of operating loss carryforwards (5,922) (1,313) (10,587)
Book over tax bases of principally 109 886 2,497
fixed assets
Pension and postretirement 2,277 401 1,165
benefits reserves
Prefunded pension 1,958 - -
(Decrease) increase in valuation (383) 696 6,108
allowance for deferred tax assets ------- ------- --------
$(2,805) $ 789 $ (1,554)
======= ======= ========
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1995 and 1994 are presented below:
1995 1994
---- ----
Deferred tax assets: (in thousands)
Net operating loss carryforwards $ 27,454 $ 21,532
Vacation pay, due to accrual for 1,120 1,660
financial reporting purposes
Self-insurance reserves 3,753 3,696
Pension and postretirement benefit 3,317 5,594
reserves
Stock options, due to accrual for 340 301
financial reporting purposes
Other 6,493 5,879
-------- --------
Total gross deferred tax assets 42,477 38,662
40
<PAGE>
Less valuation allowance (11,041) (11,424)
-------- --------
Net deferred tax assets 31,436 27,238
Deferred tax liabilities:
Taxable gain on merger 2,953 3,016
Book over tax bases of principally 21,711 21,602
fixed assets
Acquisition costs, book over tax 237 453
bases
Prefunded pension 1,958 -
Other 608 1,300
-------- --------
Total gross deferred tax liabilities 27,467 26,371
======== ========
Net Asset $ 3,969 $ 867
======== ========
The valuation allowance for deferred tax assets as of January 1, 1994 was
$10,728,000. The net change in the total valuation allowance for the years
ended December 31, 1995 and 1994 was a decrease of $383,000 and an increase
of $696,000, respectively.
Due to different tax jurisdictions of the Company's subsidiaries, net
deferred tax assets of $3,969,000 and $867,000 at December 31, 1995 and
1994, respectively, shown above are reflected in the consolidated balance
sheets as:
1995 1994
------ ------
(in thousands)
Current deferred tax assets (included in
prepaid expenses and other current $2,742 $2,141
assets)
Non-current deferred tax assets
(included in
other assets) 5,099 2,473
------ ------
7,841 4,614
Non-current deferred tax liabilities 3,872 3,747
------ ------
Net deferred tax asset $3,969 $ 867
====== ======
At December 31, 1995, PCI has operating loss carryforwards for federal
income tax purposes of approximately $61 million which are available to
offset future federal taxable income and which expire between 2006 and
2010. Based upon the scheduled reversals of deferred tax liabilities,
projected future taxable income and tax planning strategies, management
believes it is more likely than not that PCI will realize the benefits of
these deductible differences, net of the existing valuation allowances at
December 31, 1995.
(10) 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 1995, employees were granted options to purchase up to
25,000 shares of Common Stock at a price of $24.50 per share, which
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, 1995. As of December 31, 1995, 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.
41
<PAGE>
Concerning the 16,000 restricted options granted in April 1991,
compensation expense to be recognized over the five-year vesting period
will aggregate $520,000, of which $104,000 was charged to expense in each
of 1995, 1994 and 1993. As of December 31, 1995, 60,700 shares were
available for future grants under the Restricted Plan.
Pursuant to the 1988 Director Stock Option Plan, as amended, (the Retainer
Plan), directors may elect to receive a stock option in lieu of cash as an
annual retainer and for attendance fees. Each electing director will
receive an option equal to the nearest number of whole shares determined by
dividing the annual retainer plus attendance fees 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 and
1993, nine electing directors received options to purchase a total of 2,727
and 2,844 shares of Common Stock, respectively, under the Retainer Plan. In
1995, seven electing directors received options to purchase a total of
2,791 shares of Common Stock under the Retainer Plan. In 1995, 1994 and
1993, a total of $65,500, $58,500 and $58,500, 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 ten 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 (ten 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 119,000 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 including resignation or failure to
stand for re-election prior to age 70. The Company issued 3,900, 4,200 and
4,200 shares under the Stock Plan for the 1995, 1994 and 1993 plan years,
respectively. The Company has expensed $93,113 in 1995, $90,300 in 1994 and
$103,425 in 1993 for shares which were issued.
The 1995 Restricted Stock Compensation Plan (the "1995 Plan") provides for
the issuance of restricted shares to key employees of the Company. During
1995, the Chairman was granted 8,163 shares under the 1995 Plan in lieu of
a cash bonus of $200,000. Such amount was charged to compensation expense
in 1994. Also in 1995, the Chairman and five other employees received a
total of 21,740 shares under the 1995 Plan. The amount charged to
compensation expense for these shares was $88,772 in 1995. All such shares
vest five years after the date of the grant subject to the continued
employment of the recipients by the Company or its subsidiaries.
A number of options have been granted which were not pursuant to any plan.
At December 31, 1995 a total of 85,000 shares were subject to such options
at exercise prices ranging from $2.94 to $25.75 per share, which
represented the fair market value of a share of the Company's stock on the
date each of such options was granted. These options expire between 1998
and 2002. Options to purchase 10,000 shares at $17.00 per share were
exercised during the three year period ending December 31, 1995.
(11) PENSION, PROFIT SHARING AND OTHER PLANS
42
<PAGE>
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.
Subject to the limitation on deductibility imposed by federal income tax
laws, PCI's policy has been to contribute funds to the plans annually in
amounts required to maintain sufficient plan assets to provide for accrued
benefits. Plan assets are held in a master trust and are comprised
primarily of common stock, corporate bonds and U.S. Government and
government agency obligations.
The following table sets forth the plans' funded status at December 31,
1995 and 1994 based primarily on January 1, 1995 participant data and plan
assets:
1995 1994
---------- ----
(in thousands)
ACTUARIAL PRESENT VALUE OF
BENEFIT OBLIGATION,
INCLUDING VESTED BENEFITS
OF $29,078 AND $18,644 IN ($52,798) ($43,512)
1995 AND $25,464 AND ========= ========
$14,700 IN 1994 FOR THE
SALARIED AND HOURLY
PLANS, RESPECTIVELY
PROJECTED BENEFIT OBLIGATION (PBO) (54,987) (44,557)
PLAN ASSETS, AT FAIR VALUE 53,150 38,083
UNRECOGNIZED NET LOSS 7,132 499
ADJUSTMENT TO RECOGNIZE MINIMUM - (171)
LIABILITY
PRIOR SERVICE COST NOT YET RECOGNIZED (142) (78)
IN NET PERIODIC PENSION COST --------- ---------
PREFUNDED PENSION ASSET
(ACCRUED PENSION LIABILITY) $ 5,153 $ (6,224)
========= =========
Net periodic pension costs under the above mentioned PCI plans included the
following components for the years ended December 31, 1995, 1994 and 1993:
1995 1994 1993
-------- -------- ----
(in thousands)
SERVICE COST $ 992 $ 1,161 $ 818
INTEREST COST 4,002 3,715 3,713
(RETURN) LOSS ON PLAN ASSETS (6,292) 1,916 (4,198)
NET AMORTIZATION AND DEFERRAL 2,922 (5,613) 781
EFFECT OF WINDOW PLAN - - 2,725
------- ------- -------
NET PERIODIC PENSION COSTS $ 1.624 $ 1,179 $ 3,839
======= ======= =======
PCI contributions to the plans for the years ended December 31, 1995, 1994
and 1993 were $12,800,000, $2,585,000 and $2,075,000, respectively. 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
total periodic pension expense by $2,725,000 in 1993.
Assumptions used in the accounting were:
1995 1994 1993
----- ----- -----
Discount rates 7.5% 9.0% 7.5%
Rates of increase in compensation 5.0% 5.0% 5.0%
levels
Expected long-term rate on return 9.5% 9.5% 9.5%
on assets
PCI contributes to various union pension plans pursuant to its labor
agreements. Union benefit plan expense was $1,080,000, $896,000 and
$783,000 for the years ended December 31, 1995, 1994 and 1993,
respectively.
Ferembal provides retirement benefits pursuant to an industry-wide labor
agreement. The plan is not funded. (Income credited) costs charged to
operations amounted to $(213,000), $179,000 and $250,000 in 1995, 1994 and
1993, respectively. Other non-current liabilities at December 31, 1995
include $1,682,000
43
<PAGE>
($1,762,000 at December 31, 1994) 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
$86,000, $673,000 and $954,000 in 1995, 1994 and 1993, respectively.
Amounts are paid to employees after five years with accrued interest. Other
non-current liabilities at December 31, 1995 include $4,701,000 ($5,127,000
at December 31, 1994) for the plan.
Dixie Union provides selected managers with pension and disability
benefits. Amounts charged to expense amounted to $192,000, $175,000 and
$161,000 in 1995, 1994 and 1993, respectively.
PCI maintains a defined contribution plan which covers substantially all
hourly employees who meet eligibility requirements. Provisions regarding
employee and employer contributions and the benefits provided under the
plan vary between PCI's manufacturing facilities. PCI's defined
contribution plan's expense was $292,000, $272,000 and $232,000 for the
years ended December 31, 1995, 1994 and 1993, respectively.
PCI maintains a contributory defined contribution 401(k) savings plan which
covers substantially all non-organized salaried employees.
Employees may contribute up to twelve and eight percent of pay on a pre-tax
and after-tax basis, respectively. However, the total employee contribution
rate may not exceed fifteen percent of pay. PCI matches up to three percent
of employees' pre-tax contributions. Employees vest in PCI's contributions
at twenty-five percent per year, becoming fully vested after four years of
employment. Employees may make withdrawals from the plan prior to attaining
age 59-1/2, subject to certain penalties. PCI's savings plan expense was
$518,000, $450,000 and $445,000 for the years ended December 31, 1995, 1994
and 1993, respectively.
(12) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS AND POSTEMPLOYMENT 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 eliminate
health care benefits for employees hired after January 1, 1993.
PCI's policy is to fund the cost of medical benefits in amounts determined
at the discretion of management. Summary information on PCI's plan at
December 31, 1995 and 1994 is as follows:
Accumulated postretirement benefit obligation: 1995 1994
---- ----
(in thousands)
-------------
Retirees $3,449 $3,146
Fully eligible, active plan participants 1,219 1,097
Other active plan participants 1,486 1,197
------ ------
$6,154 $5,440
Unrecognized net loss from experience and (614) (99)
changes in assumptions
Prior service cost in net periodic 432 563
postretirement benefit cost ------ ------
Accrued postretirement benefit obligation $5,972 $5,904
====== ======
(included in other liabilities)
The components of net periodic postretirement benefit cost at December 31, 1995,
1994 and 1993 is as follows:
1995 1994 1993
----- ------ ------
(in thousands)
------
Service cost $ 52 $ 73 $ 55
Interest cost 480 431 588
Net amortization and deferral (34) (57) 67
----- ------ ------
Net periodic postretirement benefit cost $ 498 $ 447 $ 710
===== ====== ======
As of December 31, 1995, the discount rate used in determining the APBO was
7.5%. The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 9.7% for 1995, declining gradually with
each succeeding year to an ultimate rate of 5.0% beginning in calendar year
2001.
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
postretirement benefit obligation was 10.4%
44
<PAGE>
for 1994, declining gradually with each succeeding year to an ultimate rate
of 6.0% beginning in calendar year 2001.
The effect of a one percentage-point increase in the assumed health care
cost trend rates in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1995 by $720,000 and
increase the service and interest cost components of net periodic
postretirement benefit cost for the year then ended by $61,000.
PCI provides certain postemployment 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 1995 and 1994 were $24,000 and $29,000,
respectively.
(13) 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 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. This obligation which amounted to
$244,000 and $267,000 at December 31, 1995 and 1994, respectively, is
included in accrued liabilities.
At December 31, 1995, the contract with the Chairman, as amended,
provides for base compensation of $420,000 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.
(14) NET INTEREST EXPENSE
The details of net interest expense were as follows:
1995 1994 1993
--------- ---------- ---------
(in thousands)
Interest income $ 759 $ 941 $ 917
Interest expense (20,676) (19,625) (23,859)
-------- -------- --------
Interest expense, net $(19,917) $(18,684) $(22,942)
======== ======== ========
(15) 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, Obalex, Dixie Union and Onena. Information about the Company's
foreign and domestic operations follows.
1995 1994 1993
--------- --------- ---------
(in thousands)
-------------------------------
Sales to unaffiliated customers:
Foreign $318,917 $289,566 $260,206
Domestic 295,470 247,614 221,636
-------- -------- --------
Total $614,387 $537,180 $481,842
======== ======== ========
Income before (recovery) provision for
income taxes, minority interest,
extraordinary item and cumulative
effect of accounting change:
Foreign $ 3,937 $ 11,191 $ 11,045
Domestic (3,846) (4,528) (9,305)
-------- -------- --------
Total $ 91 $ 6,663 $ 1,740
======== ======== ========
Identifiable assets:
Foreign $220,740 $207,946 $173,390
Domestic 224,671 215,639 212,517
-------- -------- --------
Total $445,411 $423,585 $385,907
======== ======== ========
45
<PAGE>
The above income includes restructuring charges related to Ferembal of
$5,003,000 and $1,686,000 in 1995 and 1994, respectively.
(16) 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.
(17) 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, 1995, 1994 and
1993 was approximately $7,131,000, $5,418,000 and $7,082,000,
respectively. Total commitments under such arrangements are payable in
annual installments of $8,067,000 in 1996, $7,082,000 in 1997, $4,805,000
in 1998, $3,894,000 in 1999, $3,202,000 in 2000 and $5,528,000
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 $1,277,000 in 1995, $841,000 in
1994 and $1,317,000 in 1993.
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.
(18) QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1995 and 1994 (in thousands,
except per share amounts) is as follows:
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
1995 Quarter Quarter Quarter Quarter
- ---------------------------------------- --------- -------- --------- --------
<S> <C> <C> <C> <C>
Net Sales $144,460 $160,952 $171,024 $137,951
Gross Profit 23,707 25,316 27,640 20,714
Income (Loss) Before
Extraordinary Item 437 1,932 (1,872) 173
Net Income (Loss) 437 1,932 (1,872) 58
Earnings (Loss) Per Share Before
Extraordinary Item .13 .58 (.56) .05
Net Earnings (Loss) Per
Common Share $ .13 $ .58 $ (.56) $ .02
1st 2nd 3rd 4th
1994 Quarter Quarter Quarter Quarter
- ---------------------------------------- -------- -------- -------- --------
Net Sales $115,850 $135,127 $154,492 $131,711
Gross Profit 20,335 24,838 28,003 20,981
(Loss) Income Before
Extraordinary Item
and Accounting Change (189) 1,713 3,102 189
Net (Loss) Income (452) 1,640 3,102 155
(Loss) Earnings Per Share Before
Extraordinary Item and Accounting
Change (.06) .53 .94 .06
Net (Loss) Earnings Per
Common Share (.15) .51 .94 .05
(Loss) Earnings Per Share Before
Extraordinary Item and Accounting
Change -
Assuming Full Dilution (.05) .52 .94 .06
Net (Loss) Earnings Per Common Share -
Assuming Full Dilution $ (.13) $ .50 $ .94 $ .05
</TABLE>
46
<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, 1995 and 1994, 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, 1995. 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, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles.
As discussed in notes 1(j) and 12 to the consolidated financial statements,
the Company adopted the provisions of Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits," on a
prospective basis in 1994.
/s/ KPMG Peat Marwick LLP
Jericho, New York
March 1, 1996
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
47
<PAGE>
Nils E. Benson Former President of Penn Elastic Co.
Charles DiGiovanna President, Continental Plastic Containers, Inc.
Rainer N. Greeven Partner, Greeven & Ercklentz (Attorneys)
Charles H. Marquardt Former Chief Operating Officer of
Plastic Containers, Inc. (Retired 1993)
V. Henry O'Neill Private Investor
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.
Edward Clark Director Emeritus
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
CONTINENTAL CAN COMPANY, INC.
General Offices: Syosset, New York
SUBSIDIARIES AND OFFICERS:
PLASTIC CONTAINERS, INC.
Syosset, New York
Jose Luis Zapata, President
CONTINENTAL PLASTIC CONTAINERS, INC.
Norwalk, Connecticut
Charles DiGiovanna, Chief Executive Officer and President
Jay Hereford, Chief Financial Officer
John E. Farrell, Senior Vice President - Marketing
Maarten Van Buren, Senior Vice President
Samuel A. Nutile, Vice President - Manufacturing
John S. Roesch, Vice President - Sales
CONTINENTAL CARIBBEAN CONTAINERS, INC.
Caugus, Puerto Rico
FEREMBAL S.A.
Clichy, France
William Peters, Managing Director
Christian Bonnet, Financial Director
Pierre Lichtenberger, Commercial Director
Jean-Marie Desautard, Operations & Personnel Director
OBALEX, A.S.
Znojmo, Czech Republic
48
<PAGE>
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
Juan Ballaz, Executive Director
Carlos Aizpun, Chief Financial Officer
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
GENERAL INFORMATION:
ANNUAL MEETING
May 15, 1996 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 1995 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.
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.
1995 1994
Quarter High Low High Low
- -----------------------------------------
[S] [C] [C] [C] [C]
First 29-1/8 21-1/4 25-1/2 20-1/4
Second 27-3/4 23-3/8 24-1/8 21-1/2
Third 24-3/4 19 22 20-1/4
Fourth 19-3/4 14-5/8 24-5/8 19
49
<PAGE>
No dividends were paid to the holders of common stock for the years 1995, 1994
and 1993. The Company has no present intention to pay dividends on its common
stock. There were 353 stockholders of record as of March 12, 1996.
50
<PAGE>
EXHIBIT 21
(22) 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:
Name Under Which State or Other Percentage Owned
- --------------------------- Jurisdiction --------------------
-------------------------
Business is Conducted of Incorporation by Company
- --------------------------- ------------------------- --------------------
[S] [C] [C]
Ferembal S.A. France 85%(1)
Lockwood, Kessler & New York 100%
Bartlett, Inc.
Dixie Union Verpackungen Germany 100%
GmbH
Onena Bolsas de Papel S.A. Spain 57%
Plastic Containers, Inc. Delaware 50%*
Continental Plastic Delaware 100%
Containers, Inc. (2)
Continental Caribbean Delaware 100%
Containers, Inc. (2)
Obalex A.S. (3) Czech Republic 86%
(1) A bond, convertible into the equity of Ferembal S.A., is currently
outstanding, which, if converted, would reduce the Company's 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.
51
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' REPORT ON SCHEDULES
-----------------------------------------
The Board of Directors and Stockholders
Continental Can Company, Inc.:
Under date of March 1, 1996, we reported on the consolidated balance sheets
of Continental Can Company, Inc. and subsidiaries as of December 31, 1995
and 1994, 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, 1995, as contained in the 1995 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(j) and 12 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.
/s/ KPMG Peat Marwick LLP
Jericho, New York
March 1, 1996
52
<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,
1996 relating to the consolidated balance sheets of Continental Can
Company, Inc. and subsidiaries as of December 31, 1995 and 1994, 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, 1995, which reports are either incorporated by reference or
appear in the December 31, 1995 Annual Report on Form 10-K of Continental
Can Company, Inc.
As discussed in notes 1(j) and 12 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.
/s/ KPMG Peat Marwick LLP
Jericho, New York
March 22, 1996
53
<TABLE> <S> <C>
<PAGE>
<CAPTION>
<ARTICLE> 5
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 8,925
<SECURITIES> 285
<RECEIVABLES> 107,676
<ALLOWANCES> 6,144
<INVENTORY> 91,636
<CURRENT-ASSETS> 207,653
<PP&E> 347,488
<DEPRECIATION> 148,874
<TOTAL-ASSETS> 445,411
<CURRENT-LIABILITIES> 161,458
<BONDS> 143,138
<COMMON> 799
0
0
<OTHER-SE> 75,499
<TOTAL-LIABILITY-AND-EQUITY> 445,411
<SALES> 614,387
<TOTAL-REVENUES> 614,387
<CGS> 517,010
<TOTAL-COSTS> 593,789
<OTHER-EXPENSES> 20,507
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,917
<INCOME-PRETAX> 91
<INCOME-TAX> (503)
<INCOME-CONTINUING> 670
<DISCONTINUED> 0
<EXTRAORDINARY> 115
<CHANGES> 0
<NET-INCOME> 555
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
