<PAGE>
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
_______ OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended SEPTEMBER 30, 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.)
301 Merritt 7 Corporate Park, Norwalk, CT 06856
- --------------------------------------------------------------
(Address of principal executive offices) Zip Code
(203) 750-5900
- ----------------------------------------------------
(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 November 7, 1997 is 3,217,355.
<PAGE>
<PAGE>
FORM 10-Q
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of September 30, 1997 and December 31, 1996 and
September 30, 1996
Consolidated Statements of Earnings for the Three Months Ended September 30,
1997 and 1996
Consolidated Statements of Earnings for the Nine Months Ended September 30, 1997
and 1996
Consolidated Statements of Cash Flows for the Nine Months Ended September 30,
1997 and 1996
Notes to Consolidated Financial Statements
2
<PAGE>
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND 1996 AND DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands)
SEPTEMBER 30, DEC. 31, SEPTEMBER 30,
1997 1996 1996
------------ ------------ -------------
<S> <C> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 8,667 $ 15,020 $ 2,748
Investment securities 27,799 1,210 --
Accounts Receivable:
Trade accounts 84,618 74,677 112,345
Other 7,241 7,217 11,984
Less allowance for doubtful accounts (4,459) (4,378) (5,502)
--------- --------- ---------
Accounts receivable, net 87,400 77,516 118,827
Inventories 86,476 82,911 94,761
Prepaid expenses and other current assets 6,154 5,938 5,184
--------- --------- ---------
TOTAL CURRENT ASSETS 216,496 182,595 221,520
--------- --------- ---------
Property, plant and equipment, at cost:
Land, building and improvements 46,326 49,788 51,251
Manufacturing machinery and equipment 199,419 216,760 270,742
Furniture, fixtures and equipment 8,750 9,434 9,865
Construction in progress 17,764 8,644 31,286
--------- --------- ---------
272,259 284,626 363,144
Less accumulated depreciation and amortization 131,301 132,850 167,516
--------- --------- ---------
Net property, plant and equipment 140,958 151,776 195,628
Goodwill, net of accumulated amortization 28,981 31,130 13,635
Other assets 25,808 25,531 24,603
--------- --------- ---------
TOTAL ASSETS $ 412,223 $ 391,032 $ 455,386
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
SEPTEMBER 30, 1997 AND 1996 AND DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands)
SEPTEMBER 30, DEC. 31, SEPTEMBER 30,
1997 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Short-term borrowings $ 17,757 $ 8,633 $ 53,134
Accounts payable - trade 54,721 44,169 54,171
Accrued liabilities:
Employee compensation and benefits 17,687 18,421 19,999
Other accrued expenses 19,919 13,536 25,941
Current installments of long-term debt and
obligations under capital leases 10,306 5,080 24,705
Income taxes payable 2,113 1,710 3,086
Other current liabilities 12,448 12,299 9,277
--------- --------- ---------
TOTAL CURRENT LIABILITIES 134,951 103,848 190,313
Long-term debt, excluding current installments 146,916 156,373 112,434
Obligations under capital leases, excluding
current installments 12,549 14,377 15,304
Deferred income taxes 4,260 3,641 3,657
Other liabilities 28,595 32,179 28,976
--------- --------- ---------
TOTAL LIABILITIES 327,271 310,418 350,684
Minority interest 15,896 11,990 28,488
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 3,217,355 shares in 1997,
and 3,201,035 shares in December and September
1996 804 800 800
--------- --------- ---------
804 800 800
Additional paid-in capital 44,225 43,997 43,945
Retained earnings 28,535 21,182 29,124
--------- --------- ---------
73,564 65,979 73,869
Cumulative foreign currency translation adjustment (4,508) 2,645 2,345
--------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY 69,056 68,624 76,214
--------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 412,223 $ 391,032 $ 455,386
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except per share data)
1997 1996
------------ ----------
<S> <C> <C>
Net sales $ 153,294 $ 170,882
Cost of sales 129,531 142,722
--------- ---------
Gross profit 23,763 28,160
Restructuring charges -- 400
Selling, general and administrative expenses 11,648 17,310
--------- ---------
OPERATING INCOME 12,115 10,450
Other income (expense):
Interest expense, net (4,080) (5,005)
Foreign currency exchange (loss) gain 54 (69)
Other - net (19) (123)
--------- ---------
NET OTHER EXPENSE (4,045) (5,197)
Income before provision for income taxes
and minority interest 8,070 5,253
Provision for income taxes 2,726 1,523
--------- ---------
Income before minority interest 5,344 3,730
Minority interest 1,598 1,088
--------- ---------
NET INCOME $ 3,746 $ 2,642
========= =========
NET EARNINGS PER COMMON SHARE $ 1.07 $ 0.80
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except per share data)
1997 1996
--------- ----------
<S> <C> <C>
Net sales $ 414,365 $ 443,527
Cost of sales 347,130 374,981
--------- ---------
Gross profit 67,235 68,546
Restructuring charges -- 1,500
Selling, general and administrative expenses 40,248 48,295
--------- ---------
OPERATING INCOME 26,987 18,751
Other income (expense):
Interest expense, net (12,195) (14,826)
Foreign currency exchange gain (loss) 124 153
Other - net (21) (90)
--------- ---------
NET OTHER EXPENSE (12,092) (14,763)
Income before provision for income taxes
and minority interest 14,895 3,988
PROVISION FOR INCOME TAXES 4,612 1,618
--------- ---------
Income before minority interest 10,283 2,370
Minority interest 2,930 (12)
--------- ---------
NET INCOME $ 7,353 $ 2,382
========= =========
NET EARNINGS PER COMMON SHARE $ 2.10 $ 0.72
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands)
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,353 $ 2,382
Depreciation and amortization 15,538 26,322
Minority interest 2,930 (12)
Other adjustments (4,619) (17,496)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 21,202 11,196
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (11,622) (25,815)
Other (25,999) (219)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (37,621) (26,034)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from long term debt 1,351 1,148
Net proceeds from short term borrowings 10,253 6,954
Other (123) 78
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 11,481 8,180
Effect of exchange rate changes on cash (1,415) 481
-------- --------
Decrease in cash and cash equivalents (6,353) (6,177)
Cash and cash equivalents at beginning of period 15,020 8,925
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,667 $ 2,748
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 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
and warrants. Weighted average shares outstanding in the third
quarter of 1997 and 1996 were 3,511,243 and 3,285,967,
respectively, and for the first nine months of 1997 and 1996 were
3,501,642 and 3,289,370, respectively.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS No.
128"), Earnings per Share, which supersedes APB No. 15, Earnings
per Share. The new pronouncement is effective for the December 31,
1997 financial statements and earlier adoption is not permitted.
Upon adoption, the Company will be required to change its current
method of computing earnings per share and to restate all prior
periods.
Under SFAS No. 128, primary earnings per share will be replaced
with basic earnings per share. Basic earnings per share will
exclude the dilutive effect of stock options. In addition, the new
pronouncement requires that diluted earnings per share, formerly
known as fully diluted earnings per share, be calculated using the
treasury stock method of applying the average market price for the
period rather than the higher of the average market price or the
ending market price. Under SFAS No. 128, for the three and nine
months ended September 30, 1997, the Company's basic earnings per
share would have been $1.17 and $2.29 and its diluted earnings per
share would have been $1.09 and $2.20, respectively.
8
<PAGE>
<PAGE>
(2) Inventories
Inventories consist principally of packaging materials. The components of
inventory were as follows: (000's omitted)
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1997 1996 1996
--------------- -------------- --------------
<S> <C> <C> <C>
Finished goods $ 44,610 $ 39,746 $ 44,851
Work in process 10,246 6,627 10,066
Raw materials 34,673 40,785 41,869
--------------- -------------- --------------
$ 89,529 $ 87,158 $ 96,786
LIFO reserve (3,053) (4,247) (2,025)
--------------- -------------- --------------
$ 86,476 $ 82,911 $ 94,761
=============== ============== ==============
</TABLE>
(3) Property, Plant and Equipment
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 and nine months ended September 30, 1997, the
change had the effect of decreasing depreciation expense by $1,204,000 and
$3,724,000, respectively. After adjusting for an assumed tax rate of 38%
and minority interest, this change increased net income by $530,000 ($0.15
per share) for the third quarter and $1,746,000 ($0.50 per share) for the
first nine months of 1997.
(4) Restructuring Charges
The Company's subsidiary, Plastic Containers, Inc. (PCI), recorded charges
of $1,100,000 and $400,000 in the second and third quarters of 1996,
respectively, in connection with a plan to consolidate certain
manufacturing operations, reduce operating costs and better position
itself to achieve its corporate objectives. The charges primarily
reflected severance costs from workforce reductions.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Sales during the third quarter of 1997 amounted to $153,294,000 as
compared to $170,882,000 in the third quarter of 1996. Sales in the first nine
months of 1997 decreased to $414,365,000 from $443,527,000 in the same prior
year period. The decline in sales primarily reflected foreign currency
translation rate differences amounting to $15.6 million and $28.3 million in the
third quarter and first nine months of 1997, respectively. On a consolidated
basis, resin price increase pass-throughs amounting to $3.6 million in the third
quarter of 1997 and $15.2 million in the first nine months of 1997 offset
declines resulting from the deconsolidation of Onena of $4.8 million for the
third quarter and $16 million for the first nine months of 1997.
Gross profit was lower in each period of 1997 than the same prior year
period. Gross profit as a percentage of sales decreased by approximately 1% in
the third quarter and increased by 1% in the first nine months of 1997 from the
same periods of 1996.
9
<PAGE>
<PAGE>
Results for the third quarter and first nine months of 1996 included a
$400,000 and $1.5 million restructuring charge, respectively, for plant
rationalization and realignment at PCI. These amounts reflected severance costs
for employees at two plants which will be closed. The remaining business from
those facilities, which had not previously been relocated as a result of changes
in customers' filling locations, were consolidated in PCI's other facilities.
Selling, general and administrative expenses was lower in each period of
1997 than 1996. Selling, general and administrative expenses as a percentage of
sales decreased by approximately 1.2% in the first nine months of 1997 versus
the same prior year period. Selling, general and administrative expenses as a
percentage of sales in the third quarter of 1997 was approximately 2.5% lower
than in 1996. The change in selling, general and administrative expenses as a
percentage of sales primarily reflects cost reductions. Because of these various
factors, operating income amounted to $12,115,000 and $26,987,000 in the third
quarter and first nine months of 1997, respectively, compared to $10,450,000 and
$18,751,000 in the third quarter and first nine months of 1996, respectively.
Net interest expense decreased to $4,080,000 in the third quarter of
1997 from $5,005,000 in the third quarter of 1996. Net interest expense declined
to $12,195,000 in the first nine months of 1997 versus $14,826,000 in the first
nine months of 1996. The decline in net interest expense reflects both lower net
debt levels and lower interest rates.
Provision for income taxes amounted to $2,726,000 and $4,612,000 in the
third quarter and first nine months of 1997, respectively, and provision for
income taxes amounted to $1,523,000 and $1,618,000 in the third quarter and
first nine months of 1996, respectively, reflecting offsetting amounts of tax
benefits and charges for accounting purposes in the Company's subsidiaries.
Minority interest during each period reflects the interests of other
shareholders in some of the Company's subsidiaries.
Net income amounted to $3,746,000 ($1.07 per share) in the third quarter
and $7,353,000 ($2.10 per share) in the first nine months of 1997. Net income
amounted to $2,642,000 ($.80 per share) in the third quarter and $2,382,000
($0.72 per share) in the first nine months of 1996.
FINANCIAL CONDITION
CAPITAL REQUIREMENTS
The Company acquired $5,736,000 and $11,622,000 of capital assets during
the third quarter and first nine months of 1997, respectively, consisting
primarily of packaging equipment. These assets were acquired for cash. Similar
types of assets are expected to be acquired for the remainder of the year and
total capital expenditures are expected to amount to approximately $20 million
in 1997.
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.
10
<PAGE>
<PAGE>
LIQUIDITY
The Company's liquidity position improved during the first nine months
of 1997. Working capital amounted to approximately $81.5 million, and the
current ratio amounted to 1.6 at September 30, 1997 compared to 1.76 at December
31, 1996.
For the nine months ended September 30, 1997, net cash provided by
operating activities amounted to $21,202,000 all of which is attributable to
PCI. Ferembal typically uses cash in the third quarter of each year primarily as
a result of the seasonality of its business which peaks at this period because
of the harvest of vegetable crops for canning. Net cash used in investing
activities amounted to $37,621,000 during the first nine months of 1997. Of this
amount $11.6 million related to capital expenditures with the remainder being
invested in short-term interest bearing assets. In the same period, the Company
increased short term borrowings by approximately $10 million and funded the
remainder of its needs with existing cash. The Company expects that, as Ferembal
collects receivables and reduces its seasonally high inventories relating to
vegetable canning, these short term borrowings will be repaid or refinanced.
At September 30, 1997, the Company's consolidated subsidiaries had
available approximately $65 million in credit lines and bank overdraft
facilities. 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.
11
<PAGE>
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Required
(11) Statement re computation of per share earnings
See Note 1(c) on..............................................Page 8
(27) Financial Data Schedule.......................................Page 13
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 in the quarter ended September 30,
1997.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONTINENTAL CAN COMPANY, INC.
(REGISTRANT)
By: /s/ Abdo Yazgi
_____________________________________
Abdo Yazgi
Principal Financial Officer
and on behalf of registrant
DATED: NOVEMBER 8, 1997
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 8,667
<SECURITIES> 27,779
<RECEIVABLES> 91,859
<ALLOWANCES> 4,459
<INVENTORY> 86,476
<CURRENT-ASSETS> 216,476
<PP&E> 272,259
<DEPRECIATION> 131,301
<TOTAL-ASSETS> 412,223
<CURRENT-LIABILITIES> 134,951
<BONDS> 125,000
<COMMON> 804
0
0
<OTHER-SE> 68,252
<TOTAL-LIABILITY-AND-EQUITY> 412,223
<SALES> 414,365
<TOTAL-REVENUES> 414,365
<CGS> 347,130
<TOTAL-COSTS> 387,378
<OTHER-EXPENSES> 12,092
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,195
<INCOME-PRETAX> 14,895
<INCOME-TAX> 4,612
<INCOME-CONTINUING> 7,353
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,353
<EPS-PRIMARY> 2.10
<EPS-DILUTED> 2.10
</TABLE>
