<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
---------
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
------- OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended MARCH 31, 1997
------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
- -------- OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
------- --------
Commission File Number: 1-6690
------
CONTINENTAL CAN COMPANY, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 11-2228114
-------------------------- ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
One Aerial Way, Syosset, New York 11791
- --------------------------------------------------
(Address of principal executive offices) Zip Code
(516) 822-4940
- ----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X YES NO
------- ----- -------
The number of shares outstanding of the registrant's Common Stock ($.25 par
value) as of May 9, 1997 is 3,205,835.
<PAGE>
FORM 10-Q
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
Consolidated Balance Sheets as of March 31, 1997 and 1996 and December 31, 1996
Consolidated Statements of Operations for the Three Months Ended March 31, 1997
and 1996
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1997
and 1996
Notes to Consolidated Financial Statements
2
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND 1996 AND DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands)
MARCH 31, DEC. 31, MARCH 31,
1997 1996 1996
-------- -------- --------
<S> <C> <C> <C>
ASSETS:
- ------
Current Assets:
Cash and cash equivalents $ 22,705 $ 15,020 $ 2,587
Investments 15,274 1,210 283
Accounts Receivable:
Trade accounts 63,700 74,677 101,430
Other 8,201 7,217 13,573
Less allowance for doubtful accounts (4,430) (4,378) (5,995)
-------- -------- --------
Accounts receivable, net 67,471 77,516 109,008
Inventories 89,679 82,911 102,169
Prepaid expenses and other current
assets 6,247 5,938 5,949
-------- -------- --------
TOTAL CURRENT ASSETS 201,376 182,595 219,996
-------- -------- --------
Property, plant and equipment, at cost:
Land, building and improvements 47,748 49,788 51,408
Manufacturing machinery and equipment 208,795 216,760 267,986
Furniture, fixtures and equipment 8,757 9,434 9,618
Construction in progress 10,907 8,644 23,929
-------- -------- --------
276,207 284,626 352,941
Less accumulated depreciation and
amortization 130,947 132,850 154,275
-------- -------- --------
Net property, plant and equipment 145,260 151,776 198,666
Goodwill, net of accumulated
amortization 29,588 31,130 14,100
Other assets 24,589 25,531 24,293
-------- -------- --------
TOTAL ASSETS $400,813 $391,032 $457,055
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
MARCH 31, 1997 AND 1996 AND DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands)
March 31, Dec. 31 MARCH 31,
1997 1996 1996
-------- -------- --------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY:
- ------------------------------------
Current Liabilities:
Short term borrowings $ 14,289 $ 8,633 $ 50,846
Accounts payable - trade 47,221 44,169 66,706
Accrued liabilities:
Employee compensation and benefits 18,961 18,421 19,421
Other accrued expenses 15,983 13,536 19,817
Current installments of long term
debt and obligations under capital
leases 11,111 5,080 11,406
Income taxes payable 1,298 1,710 1,572
Other current liabilities 14,624 12,299 11,777
-------- -------- --------
TOTAL CURRENT LIABILITIES 123,487 103,848 181,545
Long term debt, excluding current
installments 151,513 156,373 126,753
Obligations under capital leases,
excluding current installments 14,082 14,377 12,217
Deferred income taxes 3,603 3,641 3,763
Other 30,667 32,179 29,830
-------- -------- --------
TOTAL LIABILITIES 323,352 310,418 354,108
Minority interest 12,093 11,990 28,431
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 3,205,835 shares in
1997, 3,201,035 shares in Dec.,
1996 and 3,199,668 shares in
March, 1996. 801 800 800
-------- -------- --------
801 800 800
Additional paid-in capital 44,060 43,997 43,919
Retained earnings 22,262 21,182 26,301
-------- -------- --------
67,123 65,979 71,020
Cumulative foreign currency translation
adjustment (1,755) 2,645 3,496
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY 65,368 68,624 74,516
-------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $400,813 $391,032 $457,055
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except per share data)
1997 1996
-------- --------
<S> <C> <C>
SALES $122,610 $131,382
Cost of sales 102,762 112,521
-------- --------
Gross profit 19,848 18,861
Selling, general and administrative
expenses 14,076 15,622
-------- --------
OPERATING INCOME 5,772 3,239
Other income (expense):
Interest expense, net (4,015) (4,677)
Foreign currency exchange gain (loss) 28 67
Other - net 34 14
-------- --------
Net other expense (3,953) (4,596)
Income (loss) before provision for
income taxes and minority interest 1,819 (1,357)
Provision (recovery) for income taxes 473 (137)
-------- --------
Income (loss) before minority interest 1,346 (1,220)
Minority interest 266 (779)
-------- --------
NET INCOME (LOSS) $ 1,080 $ (441)
======== ========
NET EARNINGS (LOSS) PER COMMON SHARE $0.33 $(0.13)
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands)
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,080 $ (441)
Depreciation and amortization 5,142 8,434
Minority interest 266 (779)
Other adjustments 7,197 (2,977)
-------- --------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 13,685 4,237
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,326) (11,263)
Other (13,989) (675)
-------- --------
NET CASH USED IN INVESTING
ACTIVITIES (17,315) (11,938)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments of long term debt 5,615 (2,961)
Net proceeds from short term
borrowings 5,903 4,422
Other 64 52
-------- --------
NET CASH PROVIDED BY 11,582 1,513
FINANCING ACTIVITIES
Effect of exchange rate changes on cash (267) (149)
-------- --------
Increase (decrease) in cash and cash
equivalents 7,685 (6,337)
Cash and cash equivalents at beginning
of period 15,020 8,925
-------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 22,705 $ 2,588
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(1) Accounting Policies and Other Matters
(a) Basis of Presentation
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these consolidated financial statements be read in conjunction
with the financial statements and notes thereto included in the
Company's 1996 Annual Report to Stockholders.
(b) Adjustments
The results for the interim period reported herein have not been
audited, however, in the opinion of management, all adjustments
necessary for a fair presentation of the interim period statements have
been made.
(c) Earnings Per Common Share
Earnings per common share is based on the weighted average number of
common and common equivalent shares outstanding. Common equivalent
shares include dilutive stock options (using the treasury stock method)
exercisable under the Company's option plans. Weighted average shares
outstanding in the first quarter of 1997 and 1996 were 3,298,053 and
3,288,437, respectively.
(2) Reclassifications
Certain 1996 balances have been reclassified to conform to the 1997
presentation.
(3) Inventories
Inventories consist principally of packaging materials. The components of
inventory were as follows: (000's omitted)
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1997 1996 1996
----------- ----------- ----------
<S> <C> <C> <C>
(in thousands)
Finished goods $46,336 $ 50,162 $39,746
Work in process 10,665 12,014 6,627
Raw materials and supplies 35,731 44,745 40,785
------- -------- -------
92,732 106,921 87,158
LIFO reserve (3,053) (3,792) (4,247)
------- -------- -------
$89,679 $103,129 $82,911
======= ======== =======
</TABLE>
(4) Property, Plant and Equipment
7
<PAGE>
Effective January 1, 1997, the Company revised its estimates of the useful
lives of certain machinery and equipment. These changes were made to
better reflect the estimated periods during which these assets will remain
in service. For the quarter ended March 31, 1997, the change had the
effect of decreasing depreciation expense by $1,274,000 and (after
adjusting for an assumed tax rate of 35% and minority interest) increasing
net income by $701,000 ($0.21 per share).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ----------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Sales during the first quarter of 1997 decreased 7% to $122,610,000 as
compared to $131,382,000 in the first quarter of 1996. Decreased sales in 1997
reflected foreign currency translation rate differences ($6.5 million), the
deconsolidation of Onena in 1996 ($5.5 million) and lower volumes in the
Company's European packaging operations ($2 million). Offsetting the decrease
were resin price increases passed-through to customers at Plastic Containers,
Inc. (PCI) (approximately $5 million).
Gross profit increased 5% in the first quarter of 1997, as compared to the
prior year period. Gross profit as a percentage of sales increased to 16.2% in
the first quarter of 1997 as compared to 14.4% in the same period of 1996. This
improvement, despite lower sales, primarily reflects cost reduction efforts at
PCI and Ferembal, S.A. (Ferembal). In addition, in January 1997, the Company
revised its estimates of the useful lives of certain machinery and equipment to
better reflect the estimated periods during which these assets will be in
service. The change had the effect of reducing depreciation expense by
$1,274,000.
Selling, general and administrative expense was reduced to $14.1 million in
1997 compared to $15.6 million in the first quarter of 1996; as a percentage of
sales such expense also decreased to 11.5% in 1997 as compared to 11.9% in 1996,
despite the lower sales volume. As a result, operating income amounted to
$5,772,000 in the first quarter of 1997 as compared to $3,239,000 in the first
quarter of 1996. Operating profit as a percentage of sales increased over the
same periods to 4.7% from 2.5%.
Net interest expense decreased to $4,015,000 in the first quarter of 1997
as compared to $4,677,000 in the same period of 1996. This decrease resulted
primarily from lower net debt levels in 1997 than 1996.
Provision for taxes amounted to $473,000 in the first quarter of 1997.
Recovery of income taxes amounted to $137,000 in the first quarter of 1996 and
reflected a higher level of tax benefits for accounting purposes in loss
operations than tax expense in the Company's profitable operations. Minority
interest during each period reflects the interests of other shareholders in some
of the Company's subsidiaries.
Net income amounted to $1,080,000 ($.33 per share) in the first quarter of
1997. Net loss in the first quarter of 1996 amounted to $441,000 ($.13 per
share).
8
<PAGE>
FINANCIAL CONDITION
- -------------------
CAPITAL REQUIREMENTS
The Company acquired $3.3 million of capital assets during the first
quarter of 1997 consisting primarily of packaging equipment. These assets were
acquired for cash. Similar types of assets are expected to be acquired for the
remainder of 1997. Total capital spending in 1997 is expected to amount to
approximately $23 million.
As expected, in April 1997 the holder of $1.8 million principal amount of
convertible bonds in Ferembal converted such bonds into stock representing 25%
of the equity of Ferembal. As a result of the conversion the Company's
ownership interest in Ferembal was reduced to 64%.
The Company intends to actively pursue acquisition possibilities in 1997.
It is presently the Company's intention to finance any acquisitions by
leveraging the assets of the business to be acquired, with existing cash,
through bank borrowings or, possibly, through the issuance of stock.
LIQUIDITY
The Company's liquidity position declined slightly during the first quarter
of 1997. Working capital decreased to approximately $75 million, and the
current ratio amounted to 1.62 at March 31, 1997 compared to 1.76 at December
31, 1996.
During the first quarter of 1997, the Company's operating activities
generated $13.7 million of cash most of which was generated by PCI. The Company
used $3.3 million for the purchase of packaging equipment and invested $14.1 in
short-term financial assets. The Company's financing activities generated $11.5
million in cash, most of which were borrowings by its European subsidiaries.
Cash increased by $7.6 million in the first quarter.
At March 31, 1997, the Company had an available credit line under a
Revolving Credit Agreement of $1.2 million. In addition, the Company's
consolidated subsidiaries had available approximately $93 million in short term
credit lines and bank overdraft facilities at March 31, 1997. However, the
Company's ability to draw upon these lines for other than its subsidiaries'
needs is restricted.
The Company expects that cash from operations and its existing banking
facilities will be sufficient to meet its operating needs for the remainder of
1997.
9
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits Required
(11) Statement re computation of per share earnings
See Note 1(c) on Page 7
(27) Financial data schedule Page 11
All other items for which provision is made in the applicable regulations
of the Securities and Exchange Commission have been omitted as they are
not required under the related instructions or they are inapplicable.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed since December 31, 1996.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONTINENTAL CAN COMPANY, INC.
(REGISTRANT)
By: /s/ Abdo Yazgi
---------------------------
Principal Financial Officer
and on behalf of registrant
DATED: MAY 9, 1997
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 22,705
<SECURITIES> 15,274
<RECEIVABLES> 71,901
<ALLOWANCES> 4,430
<INVENTORY> 89,679
<CURRENT-ASSETS> 201,376
<PP&E> 276,207
<DEPRECIATION> 130,947
<TOTAL-ASSETS> 400,813
<CURRENT-LIABILITIES> 123,487
<BONDS> 165,595
0
0
<COMMON> 801
<OTHER-SE> 64,567
<TOTAL-LIABILITY-AND-EQUITY> 400,813
<SALES> 122,610
<TOTAL-REVENUES> 122,610
<CGS> 102,762
<TOTAL-COSTS> 116,836
<OTHER-EXPENSES> 3,953
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,015
<INCOME-PRETAX> 1,819
<INCOME-TAX> 473
<INCOME-CONTINUING> 1,080
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,080
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
