Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
Form S-1
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
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AMERICAN NATIONAL CAN GROUP, INC.
(Exact name of Registrant as specified in its charter)
Delaware 3411 36-4287015
(State or Other Jurisdiction of (Primary Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
Alan H. Schumacher
American National Can Group, Inc.
8770 W. Bryn Mawr Avenue
Chicago, Illinois 60631
Telephone (773) 399-3000
(Address and telephone number of Registrant's principal executive offices)
Copies to:
Robert C. Treuhold, Esq. John D. Brinitzer, Esq.
Shearman & Sterling Cleary, Gottlieb, Steen & Hamilton
114, avenue des Champs-Elysees One Liberty Plaza
75008 Paris, France New York, New York 10006
------------------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable on or after the effective date of this
Registration Statement.
------------------------------
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, please check the following box. |_|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_| ___
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_| _____
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier registration statement for the
same offering. |_| _____
If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================
Proposed maximum Proposed maximum
Title of Each Class Amount to be offering price aggregate Amount of
of Securities to be Registered registered(1) per security offering price(2) registration fee
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common stock, nominal value $ $100,000,000 $27,800
$0.01 per share
===================================================================================================================
<FN>
(1) Includes (i) shares of common stock to cover the Underwriters' over-allotment option and (ii) shares of
common stock which are to be offered outside the United States but that may be resold from time to time in
the United States during the distribution. The shares of common stock registered hereby are not being
registered for the purpose of sales outside of the United States.
(2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457 under the
Securities Act.
</FN>
</TABLE>
------------------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THEM IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED , 1999
Shares
[logo]
AMERICAN NATIONAL CAN GROUP, INC.
Common Stock
------------------------------
This is our initial public offering. The shares of our common stock are
being sold by Pechiney, a French corporation. We will not receive any of the
proceeds from the sale of our shares of common stock by Pechiney.
The underwriters have an option to purchase additional shares from
Pechiney to cover over-allotments of shares.
Prior to this offering, there has been no public market for our common
stock. The initial public offering price of the common stock is expected to be
between $ and $ per share. We will make an application to list our common stock
on the New York Stock Exchange under the symbol "CAN."
INVESTING IN THESE SHARES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 6.
Underwriting
Price to Discounts and Proceeds to
Public Commissions Pechiney
---------------- --------------------- ---------------
Per Share............... $ $ $
Total................... $ $ $
Delivery of the shares of common stock will be made on or about ,
.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Credit Suisse First Boston
The date of this prospectus is , .
<PAGE>
TABLE OF CONTENTS
Page
Prospectus Summary.............................................................1
Risk Factors...................................................................6
Forward-looking Statements....................................................13
Reorganization of ANC.........................................................14
Relationship with Pechiney....................................................20
Use of Proceeds...............................................................21
Dividend Policy...............................................................22
Capitalization................................................................22
Selected Combined Financial Information.......................................23
Unaudited Pro Forma Financial Combined Information............................25
Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................................29
Overview of the Global Beverage Can Industry..................................43
Business of ANC...............................................................49
Management and Certain Security Holders.......................................61
Description of Capital Stock..................................................75
Shares Eligible for Future Sale...............................................77
Certain United States Tax Consequences to Non-U.S. Holders of
Common Stock............................................................ 79
Underwriting................................................................. 82
Notice to Canadian Residents..................................................84
Additional Information........................................................85
Legal Matters.................................................................85
Experts.......................................................................85
Index to Combined Financial Statements.......................................F-1
----------------------
We have compiled the market share, market size and competitive ranking
data in this prospectus using statistics and other information from several
third-party sources. The main third-party sources of information are independent
research organizations, including the Can Manufacturers' Institute (known as the
"CMI") and Beverage Can Manufacturers Europe (known as "BCME"), as well as
private consulting firms. We have also used our estimates of our market share
relative to other beverage can companies in light of our experience. While we
believe this information is reliable, we can provide no assurance as to its
accuracy. With respect to third-party information, although we have obtained
such information from sources we believe are reliable, we have not independently
verified it and can provide no assurance as to its accuracy.
Various amounts and percentages used in this prospectus have been
rounded and, accordingly, they may not total.
In this prospectus, "ANC," "we," "us" and "our" each describe
Pechiney's beverage cans activities for all periods prior to , 1999, and also
describe American National Can Group, Inc. and its consolidated subsidiaries
after that date. "The Company" describes American National Can Group, Inc.,
alone without its subsidiaries. "Pechiney" means Pechiney, a French corporation
(societe anonyme), and its consolidated subsidiaries. "Pechiney Plastics" means
Pechiney Plastic Packaging, Inc., a Delaware company. "Tons" describes metric
tons consisting of 1,000 kilograms (or approximately 2,200 lbs.). Coca-Cola and
Pepsi-Cola are trade-marks of The Coca-Cola Company and PepsiCo, Inc.,
respectively. These companies are not affiliated with ANC.
----------------------
You should rely only on the information contained in this prospectus or
to which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
Dealer Prospectus Deliver Obligation
Until (25 days after the commencement of the offering), all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the dealer's obligation to deliver a prospectus when acting as an
underwriter and with respect to unsold allotments or subscriptions.
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<PAGE>
PROSPECTUS SUMMARY
The following is a summary of this prospectus. Please do not rely on
any part of this summary without referring to the more detailed information
contained in the other sections of this prospectus.
Our Company
We believe we are the second largest producer of two-piece beverage
cans and ends in the world, based on 1998 net sales. In 1998, we sold 39 billion
cans worldwide. We are the second largest beverage can manufacturer in the
United States, with a market share of approximately 25%. In Europe, we are the
largest beverage can manufacturer, with approximately 31% of the market.
We have long-term customer relationships with global beverage
producers. The Coca-Cola Company and its affiliated bottlers make up 51% of our
global sales. We also enjoy strong relationships with major brewers in many of
the markets in which we supply cans. With 22 plants in the United States, 13
plants in Europe, and operations in Mexico, Brazil, China, Japan and South
Korea, we are well-balanced to supply our geographically diverse customers'
requirements.
We have an extensive presence in the beverage can markets in the
Americas and Europe, which accounted for 63% and 36% of our 1998 net sales,
respectively. In the Americas, our activities are carried out principally
through American National Can Company in the United States and a wholly owned
subsidiary in Brazil. We have also formed joint ventures with Coors Brewing
Company in the United States and with Mexico's largest glass container
manufacturer, Vitro S.A. In Europe, our activities are carried out through
wholly owned subsidiaries and a majority owned subsidiary in Turkey. We also
have a majority owned subsidiary in China and equity participations in Japan and
South Korea.
We are focused on reducing our cost base. We have undertaken three
specific cost reduction programs in the past five years. The goal of our first
program, called "Project Challenge," was to reduce costs by 20% (excluding metal
costs) before the end of 1999, a goal which we achieved by the end of 1998. In
1998, we introduced "Next Level," a continuous improvement process that seeks to
increase productivity and reduce costs while limiting additional capital
expenditures. This ongoing program already has produced concrete results in the
United States, including a 4% improvement in the number of cans produced per
man-hour over 1997. Our third improvement program, "ANC Production System,"
implements the principles of "Lean Manufacturing" through a comprehensive
overhaul of our production processes.
The Beverage Can Industry
In 1998, worldwide industry shipments of two-piece beverage cans
exceeded 200 billion cans. North America was the single largest market with
approximately 114 billion cans shipped in 1998, including nearly 103 billion in
the United States alone, followed by Europe with approximately 33 billion cans.
In 1998, the U.S. and European markets, with a population base of around 600
million people, consumed approximately 135 billion two-piece beverage cans,
equivalent to about 225 cans per person. Compared to the United States and
Europe, per capita consumption of beverage cans remains low in emerging
countries. Outside the United States and Europe per capita consumption is only
about 15 cans per person.
Soft drink cans and beer cans comprise substantially all of the global
beverage can markets. In 1998, soft drink cans represented approximately 68% and
beer cans 32% of the total beverage can market in the United States. In Europe,
the proportions were approximately 57% and 43%, respectively. Throughout the
world, the beverage can competes with bottles made from glass or plastic.
The global beverage can industry is characterized by a number of
factors, which we believe generally favor the beverage can:
o Per capita consumption of carbonated soft drinks increased steadily
each year in the United States and Europe between 1990 and 1998.
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o We anticipate that the market for carbonated soft drinks in Europe and
the emerging markets of Asia and Latin America, where consumption lags
significantly behind the United States, will grow substantially in the
long-term.
o We believe greater concentration among bottlers in the industry,
particularly in the carbonated soft drink markets, will provide the
beverage can with continued opportunities for growth.
o The can is firmly established in mass retail distribution channels in
the United States.
o We believe the beer markets in the United States and Europe show
favorable trends despite recent gradual decreases in consumption.
o Although the can has lost market share at the expense of the plastic
bottle in the carbonated soft drink markets in the United States and
Europe, it has continued to grow steadily in terms of units. In the
beer market, the can has declined relative to glass in the United
States but has grown in Europe.
o The can has several advantages over plastic and glass bottles that we
believe will continue to make it an attractive and competitive package
in both the carbonated soft drink and beer markets.
Our Strategy
Our strategy aims to create shareholder value through superior
profitability and cash generation. To achieve this goal, we have developed the
following key initiatives:
o We intend to capitalize on favorable conditions in the developed
beverage can markets of the United States and Europe, which represent a
strong volume base and steady growth for the beverage can.
o We will pursue profitable growth opportunities in Europe and emerging
markets, where per capita beverage consumption and beverage can
penetration are substantially lower than in the United States.
o We intend to provide superior customer service and satisfaction, and
have forged successful long-term relationships with several global
beverage can customers.
o We continuously strive to improve productivity and reduce costs.
o We intend to attract and develop the best human capital, and are
strengthening our human resources through new leadership and
performance management.
Our Formation as a Public Company
We have been making cans for over 100 years. We have been owned by
Pechiney, a global leader in the production of primary aluminum and industrial
aluminum products, since 1988. Pechiney is selling a majority ownership stake in
us through this offering. In connection with this offering, we, together with
Pechiney, took a number of actions to separate us from Pechiney. Specifically,
we now conduct all of Pechiney's former global beverage can operations and we
have transferred to Pechiney our prior non-beverage can activities.
Our principal executive offices are located at 8770 W. Bryn Mawr
Avenue, Chicago, Illinois 60631 and our telephone number is (773) 399-3000.
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SUMMARY OF THIS OFFERING
Shares offered ............. Pechiney is offering a total of shares.
Additional shares........... Pechiney, the selling stockholder, has granted the
underwriters an option to purchase additional
shares. The underwriters have 30 days from the date
of the final prospectus to exercise this option.
They may only use these additional shares to cover
sales of shares that they have over-allotted.
Price to public............. The initial public offering price of the shares is
expected to be between $ and $ per share.
Selling stockholder......... Prior to this offering, Pechiney owned 100% of our
shares. After this offering, we expect that
Pechiney will retain % of our shares. If the
underwriters exercise their over-allotment option
in full, Pechiney will retain % of our shares.
Dividends................... We intend to declare and pay quarterly cash
dividends consistent with the policies of
comparable packaging companies, depending on our
financial results and prospects. We expect the
first dividend to be payable with respect to the
quarter of 1999. With respect to dividend
payments, please consider the information under
"Risk Factors--We may not be able to pay
dividends."
Voting rights............... Each share permits the holder to cast one vote on
all matters brought before stockholders. For
further details, see "Description of Capital
Stock."
Listing of the shares....... There is currently no public market for our shares.
We intend to apply to list our shares on the New
York Stock Exchange under the symbol "CAN."
Use of proceeds............. The net proceeds from the sale of our shares will
be paid to Pechiney. We will not receive any
proceeds from this offering.
Risk factors................ Please consider carefully the risks and
uncertainties described in the "Risk Factors"
section of this prospectus before contemplating an
investment in our shares.
3
<PAGE>
SUMMARY SELECTED COMBINED FINANCIAL INFORMATION
The following table presents summary financial data for ANC. You should
also refer to the more complete information contained in our combined financial
statements and the section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in this prospectus.
The yearly information for 1996 through 1998 and the year-end
information for 1997 and 1998 has been derived from our Combined Financial
Statements, which consist of our combined statements of income, cash flows and
changes in owner's equity for the years ended December 31, 1996, 1997 and 1998,
and our combined balance sheets as of December 31, 1997 and 1998, together with
the attached notes. They have been prepared in accordance with accounting
principles generally accepted in the United States, which we refer to as "U.S.
GAAP," and have been audited by PricewaterhouseCoopers LLP. In this prospectus,
we refer to these audited financial statements as our "Combined Financial
Statements." They show the financial condition, results of operations and cash
flows of Pechiney's packaging group (from which ANC was created). The Combined
Financial Statements show our beverage can operations as continuing operations.
The plastics and other activities retained by Pechiney as part of the
reorganization are treated as discontinued operations in our Combined Financial
Statements. As such, they have been aggregated and presented as separate line
items, as discussed under "Reorganization of ANC--Accounting Treatment" in this
prospectus. The information presented below relates only to our continuing
operations. The yearly and year-end information for 1994 and 1995 and the
year-end information for 1996 has been derived from unaudited combined financial
statements relating to Pechiney's packaging group.
The pro forma financial information presented below, which is
unaudited, reflects certain adjustments based on assumptions that are intended
to show the effect of the reorganization of Pechiney's beverage cans operating
group which resulted in our formation. For an explanation of the pro forma
financial information, please see the section entitled "Unaudited Pro Forma
Combined Financial Information" in this prospectus.
<TABLE>
<CAPTION>
Pro Forma
Combined Financial Information Financial Information
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended and as of
Year Ended and as of December 31, December 31,
--------------------------------------------------------------- ---------------------
1994(1) 1995(1) 1996 1997 1998 1998(1)
----------- ----------- ----------- ----------- ----------- ---------------------
($ in millions)
Combined Statement of Income Data:
<S> <C> <C> <C> <C> <C> <C>
Net sales................................... $2,446 $2,677 $2,520 $2,465 $2,459 $2,459
Cost of goods sold (excluding depreciation). 2,164 2,281 2,190 2,069 1,985 1,985
Selling, general and administrative expense. 140 123 136 134 138 138
Research and development expense............ 25 24 22 20 15 15
Depreciation and amortization............... 68 73 74 78 82 82
Goodwill amortization (2)................... 292 41 41 41 40 40
Restructuring charge (credit) and write
down of property and equipment (3).......... 87 11 159 11 (2) (2)
Operating income (loss) from
continuing operations.................... (330) 124 (101) 112 201 201
Interest expense............................ 68 54 95 90 69 76
Interest income and other financial
income (expense), net.................... 15 13 4 27 11 8
Income tax expense (benefit) ............... (23) 51 (35) 30 26 22
Equity in net earnings (loss) of affiliates. 6 5 1 (4) 4 4
Minority interest........................... 7 8 7 5 5 5
Income (loss) from continuing
operations before cumulative effect
of accounting change...................... $ (361) $ 29 $ (163) $ 10 $ 116 $ 110
Combined Cash Flow Data:
Depreciation and amortization............... 360 114 115 119 123 123
Capital expenditures........................ 95 100 142 72 65 65
EBITDA(4)................................... 117 249 173 242 321 321
</TABLE>
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<TABLE>
<CAPTION>
Pro Forma
Combined Financial Information Financial Information
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended and as of
Year Ended and as of December 31, December 31,
--------------------------------------------------------------- ---------------------
1994(1) 1995(1) 1996 1997 1998 1998(1)
----------- ----------- ----------- ----------- ----------- ---------------------
($ in millions)
<S> <C> <C> <C> <C> <C> <C>
Combined Balance Sheet Data:
Cash and cash equivalents................... 20 49 66 106 171 69
Working capital (deficit)(5)................ (33) 108 (17) (106) (11) (57)
Property, plant and equipment, net.......... 899 934 915 846 836 836
Total assets................................ 4,643 4,121 3,910 3,891 3,927 3,216
Short-term financing and current portion
of long-term debt........................ 1,883 759 744 770 687 265
Long-term debt (less current portion)....... 485 1,006 1,072 890 551 735
Total debt.................................. 2,368 1,765 1,817 1,660 1,238 1,000
Total equity................................ 867 932 816 948 1,538 1,065
<FN>
(1) Unaudited.
(2) Substantially all of the goodwill reflected on our combined balance sheet arose from the revaluation of our tangible assets
acquired and liabilities assumed as of the date of our acquisition by Pechiney in 1988. The initial amount, which totaled
approximately $1.6 billion, is being amortized over a 40-year period in an amount of approximately $40 million per year. In
1994, goodwill amortization also included a non-recurring $257 million write down resulting from a review of the carrying value
of assets. In 1998, goodwill was reduced by $35.6 million as a result of the resolution of certain tax contingencies
originating from our acquisition by Pechiney. At December 31, 1998, $1,224 million of goodwill was recorded as an asset on our
balance sheet.
(3) The $159 million restructuring expense in 1996 is a reserve that was established in 1996 to cover the cost of plant closures,
employee termination costs and other costs associated with our restructuring plans. See Note 15 to our Combined Financial
Statements for a more complete description of this reserve.
(4) We define EBITDA as operating income (loss) from continuing operations excluding depreciation and amortization, goodwill
amortization and restructuring charge (credit) and writedown of property and equipment. EBITDA does not represent cash flow for
the periods presented and should not be considered as an alternative to net income (loss), as an indicator of our operating
performance or as an alternative to cash flows as a source of liquidity. It may not be comparable with EBITDA as defined by
other companies. We believe EBITDA is commonly used by financial analysts and others in the packaging industry.
(5) Working capital (deficit) represents total current assets, excluding cash, less total current liabilities, excluding current
portion of long-term debt and short-term financing.
</FN>
</TABLE>
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RISK FACTORS
Investing in our shares will provide you with an equity ownership
interest in ANC. As a stockholder of ANC, you may be exposed to risks inherent
in our business. The performance of your shares will reflect the performance of
our business relative to, among other things, competition, industry conditions
and general economic and market conditions. The value of your investment may
increase or decrease and could result in a loss. You should carefully consider
the following factors as well as other information contained in this prospectus
before deciding to invest in our shares.
Risk factors relating to our industry
Our principal markets are subject to overcapacity and intense price competition,
which could push prices to less profitable levels and affect our financial
results and the value of our shares.
The worldwide beverage can market has experienced limited growth in
demand in recent years. This has led to overcapacity among beverage can
producers, as capacity growth, obtained principally through productivity
improvements, outpaced the growth in demand for beverage cans. As a result, the
price of beverage cans has come under pressure. In addition, the beverage can is
a standardized product, allowing for relatively little differentiation among
competitors.
The North American beverage can market, in particular, is generally
considered to be a mature market. In this environment, a number of U.S.
producers have merged or consolidated their operations, which has resulted in a
better match between supply and demand levels. Price-driven competition has
increased as beverage can producers seek to capture more sales volumes in order
to keep their plants operating at optimal levels and reduce unit costs. With an
increasingly smaller number of major can producers in the market, this
competition has been aggressive.
Further overcapacity and increased price competition in our principal
markets could reduce selling prices and result in lower profitability, which
would adversely affect our financial results and could lead to a reduction in
any dividends and lower share value. These factors may require additional
one-time charges.
We are subject to competition from alternative products which could have an
adverse effect on our financial condition, results of operations and cash flows.
In certain markets such as the United States and the United Kingdom,
beverage can sales are subject to significant competition from substitute
products, in particular, polyethylene terephthalate bottles (known as "plastic
bottles") for soft drink containers and glass bottles in the market for single
serve beer containers (those containing less than 20 oz or 75 cl). Plastic
bottle market share in the U.S. and European soft drink container market, and
glass bottle market share in the U.S. beer container market, have both grown
substantially during the 1990s. For further information regarding the beverage
can and its competing products, see the section entitled "Overview of the Global
Beverage Can Industry" in this prospectus. Increased competition from
alternative beverage containers could have an adverse effect on our financial
results, which could lead to a reduction in any dividends and lower share value.
We have a relatively small number of customers. The loss of one or more of them
could adversely affect our revenues.
There are a small number of large independent beverage fillers in our
primary geographic markets, particularly in the soft drink industry, and the
industry may experience further consolidation. For example, the three largest
soft drink producers in the United States and Europe account for approximately
90% and 60%, respectively, of the overall soft drink market in these regions.
Suppliers of Coca-Cola and related products account for approximately 45% of the
overall soft drink market in the United States and approximately 49% in Europe.
Similarly, the three largest beer producers in the United States (Anheuser
Busch, The Miller Brewing Company and Coors Brewing Company) account for
approximately 85% of the overall U.S. beer market (excluding imports).
6
<PAGE>
Accordingly, we and the other suppliers of beverage cans rely heavily
on a small number of customers. Each customer has significant bargaining power
relative to the packaging supplier, since a small number of contracts may
account for relatively large sales volume. In addition, we compete solely in the
beverage packaging market and currently manufacture one product, the beverage
can. Five of our 10 largest customers in terms of 1998 net sales are bottlers of
Coca-Cola products: Coca-Cola Enterprises Inc.; Coca-Cola Bottling Co.
Consolidated; Coca-Cola Bottling Company of Chicago; Coca-Cola Bottlers of
Spain; and Coca-Cola Germany. Together, these customers accounted for 42% of our
1998 net sales. If we were to lose significant volume with a customer or if a
major customer were to fail to renew a major contract, and if another customer
could not be found to make up some or all of the lost sales, our financial
results could be adversely affected, which could lead to a reduction in any
dividends and lower share value.
We are dependent on a relatively small number of suppliers for some of our
principal raw materials.
Aluminum can and end sheet used in the production of beverage cans is
currently supplied by four principal suppliers in North America. There is one
dominant supplier for beverage can ink in North America and there is one
dominant worldwide supplier of beverage can end compound. If any of these
suppliers were to increase their prices significantly or were unable to meet our
requirements for raw materials, our operating results would be adversely
affected. If we were unable to obtain aluminum, ink or compound from alternative
sources, this could adversely affect our financial results, and lead to a
reduction in any dividends and lower share value. See "Business of ANC--Use and
procurement of raw materials."
Bad weather in our peak season may result in lower sales.
Sales of beverage cans are highest during the summer months. Therefore,
our sales for the second and third quarters of the year, which include the
warmer months in North America and Europe, are higher than in the first and
fourth quarters. In the past, significant changes in summer weather conditions
have caused variations in demand for beverage cans. Unseasonably cool weather
during a summer could adversely affect our financial results and lead to a
reduction in any dividends and lower share value.
RISK FACTORS RELATING TO OUR REORGANIZATION AND OUR INITIAL PUBLIC OFFERING
Following this offering, we will lose the benefit of certain services provided
by Pechiney.
In recent years, Pechiney has provided us with treasury services,
exchange rate protection services and a number of other services. After this
offering, we will be required to obtain treasury services and a number of other
services from third party sources. We may not be able to replace these services
on terms that are as favorable as those we received from Pechiney. Implementing
this change in service providers may lead us to incur additional costs after
this offering.
Under various services agreements, we will continue to obtain services
from Pechiney after this offering. These are discussed in the section entitled
"Relationship with Pechiney--Agreements with Pechiney." If these services
agreements are terminated, we will have to obtain the services on our own. These
services include, principally, various corporate services, payroll, retiree
benefits service and related information technology services. If we are unable
to replace these services in a timely manner or on terms that are as favorable
as those we received from Pechiney, this could adversely affect our financial
results and lead to a reduction in any dividends and lower share value.
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<PAGE>
We may be subject to contingent liabilities arising from the reorganization.
The non-beverage cans business transferred to Pechiney Plastics carried
certain liabilities and potential liabilities, such as unfunded post-employment
benefit obligations (other than pensions), litigation and environmental
liabilities. Pechiney Plastics and Pechiney have agreed to indemnify us for
certain matters as follows:
o Post-employment benefits. Pechiney Plastics has agreed to
assume certain obligations relating to post-employment benefits
for certain non-beverage can employees. Pechiney Plastics will
indemnify us on an after-tax basis for any losses we may incur
with respect to these liabilities. Pechiney has agreed to
guarantee this obligation of Pechiney Plastics.
o Viskase litigation. We are the defendant in patent infringement
proceedings brought by Viskase Corporation. The proceedings,
which are described under "Business of ANC--Legal Proceedings"
below, relate to the plastic packaging business that we
transferred to Pechiney Plastics in the reorganization. Pechiney
Plastics has agreed to indemnify us on an after-tax basis for any
payments we may be required to make with respect to the
proceedings. Pechiney has agreed to guarantee this obligation of
Pechiney Plastics.
o Environmental. (i) Plastics operations. Pechiney Plastics has
agreed to indemnify us on an after-tax basis against any losses
we may incur with respect to environmental liabilities relating
to past and present plastics operations and facilities. (ii)
Other non-beverage can operations. Pechiney has agreed to
indemnify us in part, on an after-tax basis, against
any losses we may incur with respect to any unidentified
environmental liabilities relating to other non-beverage can
operations and facilities (excluding the plastics operations and
facilities, which are covered only by Pechiney Plastics'
indemnity referred to in (i) above).
We may be exposed to liability, and our financial results may be adversely
affected, to the extent that:
(i) Pechiney Plastics does not fulfill its obligations under its
indemnities (and Pechiney does not fulfill its obligations under
its guarantees) with respect to the post-employment benefits or
the Viskase proceedings
(ii) Pechiney Plastics does not fulfill its obligations under its
indemnity with respect to environmental liabilities relating to
plastics operations and facilities
(iii)any unidentified environmental liabilities relating to other non-
beverage can operations and facilities exceed Pechiney's partial
indemnity, or Pechiney does not fulfill its obligations under the
partial indemnity
(iv) our identified non-beverage can environmental liabilities exceed
the amounts that we have reserved with respect to them (we
retained these reserves in our reorganization)
(v) our beverage can environmental liabilities exceed the amounts we
have reserved with respect to them
(vi) other contingent liabilities related to our reorganization arise.
For further discussion of contingent liabilities and the indemnities
provided by Pechiney Plastics and Pechiney, please refer to the sections
entitled "Reorganization of ANC" and Relationship with Pechiney."
Following this offering, we may need to find alternative sources of debt
financing.
As this offering will result in a change in control of our business, it
will cause new financial covenants to come into effect under our principal
long-term debt facility, a $500 million revolving credit facility, as well as
our $125 million receivables sales program. It will also require us to make an
offer to prepay our $228 million of privately placed notes which, if accepted,
could require the payment of a make-whole premium. We are currently engaged in
discussions with our existing lenders with respect to these matters. In
addition, we expect that our debt financing from Pechiney (aggregating $956
million outstanding as of December 31, 1998) will no longer be in place after
this offering. A significant portion of this intra-group debt will be
transferred to Pechiney Plastics.
We estimate that following this offering we will require a total of
approximately $1.2 billion of debt financing and available lines of credit
taking into account seasonality of the business and peak financial needs. We
have commenced negotiations with potential new third-party lenders to obtain
some or all of this amount when this offering is complete. It may not be
possible to obtain financing with interest rates or on terms that are as
favorable as those we currently enjoy, which may result in higher financing
cost. If we do not have sufficient funds or if we are unable to obtain financing
in the amounts desired or on acceptable terms, our results would be adversely
affected, which may lead to a reduction in any dividends and lower share value.
Our combined financial information may not be representative of our results as a
separate company.
The combined financial information we have included in this prospectus
may not reflect what our results of operations, financial position and cash
flows would have been had we been a separate, stand-alone entity during the
periods presented, or what our results of operations, financial position and
cash flows will be in the future. For more information about our financial
statements after the reorganization, see the sections entitles "Reorganization
of ANC" and "Management's Discussion and Analysis of Results of Operations and
Financial Condition."
We expect that Pechiney will be our largest shareholder and will be able to
influence the management of our business.
After this offering, we expect that Pechiney will own % of our common
stock. Under an agreement between Pechiney and us, Pechiney will have the right
to propose four of the 13 members of our board of directors
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for approval by the shareholders for as long as it owns % of our shares. As a
result, Pechiney will be able to exercise significant influence over our
policies and business.
Pechiney may sell more shares, which could depress the market price of our
shares.
Pechiney may choose to sell more of our shares in the future. We have
entered into a registration rights agreement with Pechiney which enables
Pechiney to require us to register shares of our common stock owned by Pechiney.
If Pechiney sells additional shares on the public market after this offering,
the trading prices of our shares may be adversely affected. The perception that
Pechiney may sell substantial amounts of shares may also have an adverse effect
on the trading prices of our shares. In the underwriting agreement, however,
Pechiney will agree to a "lock-up" under which it may not sell additional shares
for days following the date of the final prospectus for this offering.
The absence of an established trading market for our shares may adversely affect
their trading performance.
Before this offering, there was no public market for our shares. If no
active trading market develops or is maintained, the trading price of the shares
may fail to rise or may decline, and there may be fewer willing purchasers for
the shares. The market price of our shares after this offering may not be as
high as the public offering price.
Provisions of Delaware Law and of our corporate documents, as well as Pechiney's
voting power, could delay or prevent a change in control of our company.
We will be subject to the anti-takeover provisions of Section 203 of
the Delaware General Corporation Law, which could delay or prevent a third party
or significant stockholder from acquiring control of our company. In addition,
our charter and by-laws contain several provisions which may discourage, delay
or prevent a takeover attempt that a stockholder might consider to be in its
best interests. These provisions include the requirements that:
o the board of directors is divided into three classes with
staggered terms
o any vacancy occurring on the board of directors may be filled
only by the remaining directors
o stockholders take all action only at an annual or special
meeting, and not by written consent in lieu of a meeting
o with respect to any stockholders' meeting, stockholders must
comply with advance notice and information disclosure
requirements.
Our board of directors also has the authority to authorize the issuance
of preferred stock. The issuance of preferred stock may have the effect of
delaying, deferring or preventing a merger, tender offer or proxy contest
involving our company, and may adversely affect the market price of, and voting
rights of the holders of, our common stock.
After this offering, Pechiney will hold approximately % of our common
stock, giving it the ability to delay or prevent a change in control of our
company.
RISK FACTORS RELATING TO ANC
We may not be able to pay dividends.
We intend to declare and pay quarterly cash dividends consistent with
the policies of comparable packaging companies, depending on our financial
results and prospects. We expect the first dividend to be payable with respect
to the quarter of 1999. We will only be able to pay dividends if our financial
performance, general business conditions and our management's business plans
permit it. Because we have no history of dividend payments
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as a publicly listed company, we can give no assurance as to whether dividends
will be declared or, if dividends are declared, what amount per share will be
distributed to stockholders.
We may become exposed to mismatches between the cost of the can sheet that we
use and the selling price of beverage cans.
The principal raw material used in manufacturing beverage cans is
aluminum can sheet for aluminum cans and steel can sheet for steel cans. For
both aluminum and steel cans, can sheet represents the majority of the
manufacturing cost of the product. Unless otherwise fixed by contract, can sheet
prices vary in relation to the market prices for aluminum and steel. The market
price of aluminum has historically been volatile. Changes in the cost of can
sheet may not be offset by changes in the price of the cans that we sell. We
seek to protect ourselves from this risk by endeavoring to match the terms of
our raw material supply contracts with the terms of our sales contracts with
customers. To the extent there is a mismatch, it may cause our operating
expenses to increase relative to sales, which would adversely affect our
financial results and lead to a reduction in any dividends and lower share
value.
Our financial results are affected by currency fluctuations.
A major component of the worldwide market price for aluminum can sheet
is U.S. dollar-based. Large portions of our sales and expenses are in European
currencies, most significantly the Euro and the British pound, and we also have
revenues in other currencies.
Our currency of accounting is the U.S. dollar. Revenues denominated in
other currencies, particularly Euros and British pounds, are translated into
U.S. dollars in preparing our Combined Financial Statements. Changes in the
value of these currencies relative to the U.S. dollar will affect our levels of
net sales reported in future financial results. Similarly, exchange rate
fluctuations will affect dollar values of assets and liabilities denominated in
these currencies.
Portions of our sales are also denominated in currencies that have
experienced significant devaluation relative to the U.S. dollar, including the
Brazilian real, the Turkish lira, the Korean won and the Mexican peso.
These currencies have historically been volatile and may devalue further.
As a result of these factors, currency fluctuations may lead to
decreases in our operating results. We have taken various measures to seek to
protect ourselves against these risks. In particular, a portion of our invoicing
in Brazil and Turkey is indexed to U.S. dollar prices. To the extent these
measures are insufficient, our results of operations and financial condition
could be adversely affected and lead to a reduction in any dividends and lower
share value. For further discussion of these matters and the measures we have
taken to seek to protect our business against these exchange rate risks, see the
section entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Quantitative and Qualitative Disclosures about Market
Risk--Foreign Exchange Rates."
We are exposed to risks in emerging markets which could affect the value of our
assets there.
We have a number of operations or investments in emerging markets. Our
operations in Brazil, China and Turkey represented approximately 9% of our 1998
net sales. We also have equity interests in operations in Mexico and South
Korea. As compared to our North American and European markets, emerging markets
are more likely to suffer from social, political and economic risks, such as
inflation, restrictions on currency movements, difficulties in operations
including importing raw materials, risks of default by partners and
counterparties, and uncertainty stemming from local corporate, tax and labor
laws. These developments may adversely impact our business and financial results
and lead to a reduction in any dividends and lower share value. In particular,
the recent economic crisis in Brazil (including the significant devaluation of
the Brazilian real) has caused a drop in local demand, resulting in lower net
sales and lower profitability for our Brazilian operations.
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We are subject to costs and liabilities related to stringent environmental and
health and safety standards.
We are subject to a broad range of environmental health and safety laws
and regulations in each of the jurisdictions in which we operate. These laws and
regulations impose increasingly stringent environmental, health and safety
protection standards on us. They relate to, among other things, air emissions
from solvents used in coatings, inks and compounds, waste water discharges from
the can washing process, the use and handling of hazardous materials, waste
disposal practices, and clean-up of existing environmental contamination. These
laws and regulations expose us to the risk of substantial costs and liabilities,
including liabilities associated with assets that have been sold and activities
that have been discontinued.
Currently, we are involved in a number of compliance and remediation
efforts and legal proceedings concerning environmental matters. Based on
information presently available, we have budgeted capital expenditures for
environmental improvement projects and, in accordance with U.S. GAAP, have
established reserves for known environmental remediation liabilities that are
probable and reasonably capable of estimation. However, environmental matters
cannot be predicted with certainty, and these amounts may not be adequate for
all purposes. In addition, the development or discovery of new facts, events,
circumstances or conditions, and other developments such as changes in law,
could result in increased costs and liabilities that could adversely affect our
business, results of operations or financial condition and lead to a reduction
in any dividends and lower share value. Although we have received certain
indemnities from Pechiney Plastics and Pechiney, any environmental liabilities
relating to our past and present beverage can operations, as well as
environmental liabilities relating to past non-beverage can operations (other
than plastics) in excess of our reserves or Pechiney's partial indemnity will be
our responsibility, as discussed in the section entitled "Reorganization of
ANC--Indemnities and Guarantees from Pechiney Plastics and Pechiney" in this
prospectus. Although we believe our accounting reserves with respect to
environmental liabilities to be appropriate, there can be no assurance that they
will be sufficient to cover the liabilities for which we are not indemnified.
Such liabilities could be material and have a material adverse effect on our
business and financial results and lead to a reduction in any dividends and
lower share value. For further discussion of environmental and health and safety
costs and liabilities, please refer to the section entitled "Business of
ANC--Environmental and Health and Safety Matters."
The European Packaging and Packaging Waste Directive sets targets for
the use of refillable containers in European Union member states, although the
current regulation allows the member states significant flexibility in setting
and applying quotas. The Directive has required a significant increase in the
use of refillable containers in certain member states. A continuation of this
trend could limit potential growth opportunities for the beverage can in Europe,
which could have an adverse effect on our financial results and lead to a
reduction in any dividends and lower share value.
Year 2000
Our business could be adversely affected by information technology
issues related to the transition to the Year 2000. For a discussion of this risk
and our Year 2000 compliance efforts, please refer to the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000."
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FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based
these forward-looking statements on our current expectations and projections
about future events. Our actual results could differ materially from those
anticipated in the forward-looking statements. The forward-looking statements
are affected by risks, uncertainties and assumptions about ANC, including, among
other things:
o our customers' financial condition
o our customers' can requirements
o the number of cans we will supply and the locations of our customers
o our ability to control costs
o the terms upon which we will acquire aluminum
o our debt levels and our ability to obtain financing and service debt
o competitive pressures in the beverage can business
o the successful implementation of our strategy
o prevailing interest rates and currency exchange rates
o legal proceedings and regulatory matters
o general economic conditions and the strength of certain economies in
which we have operations
o the other risks described above in "Risk Factors."
We undertake no obligation to update publicly or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this prospectus might not occur.
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REORGANIZATION OF ANC
Summary of the Reorganization.
Prior to this offering, we have been operated by Pechiney as part of
its U.S. packaging group. This operating group consisted of several direct and
indirect subsidiaries of Pechiney, as shown on Chart 1 below. The operating
group also conducted various other businesses, principally plastic packaging
operations in the United States. Pechiney will retain these businesses following
this offering. In a reorganization to be carried out prior to this offering,
Pechiney will transfer all of the beverage can operations to us, and will cause
the non-beverage can operations to be transferred to a newly created separate
company called Pechiney Plastic Packaging, Inc. (called "Pechiney Plastics" in
this prospectus).
The reorganization will be effected through a series of transactions in
a number of countries, all of which will become effective on or before the
closing of this offering. Accordingly, for presentation purposes, this
section of the prospectus assumes the reorganization has been completed.
Chart 1: The Operating Group Prior to the Reorganization
[GRAPHIC OMITTED. The graphic shows that, prior to the reorganization, Pechiney
owns 100% of Pechiney North America, which in turn owns 90% of the United States
operating company. Pechiney owns the remaining 10% of the United States
operating company. The United States operating company is responsible for
beverage can operations in North America, beverage can operations in Japan and
China, and plastic packaging operations in North America. The graphic shows
further that, prior to the reorganization, Pechiney owns 44% of the European
operating companies, which are responsible for beverage can operations in
Europe. The United States operating company, prior to the reorganization, owns
56% of the European operating companies. The graphic also shows that Pechiney's
other interests, prior to the reorganization, include 100% ownership of an end
plant in France, 100% ownership of beverage can operations in Brazil, 65%
ownership of beverage can operations in Turkey, 50% ownership of beverage can
operations in Mexico, and 40% ownership of beverage can operations in Korea.]
The principal steps comprising the reorganization were as follows:
Step 1: The U.S. non-beverage can activities were separated from the U.S.
beverage can operations
(a) The U.S. operating company was originally 10% held by Pechiney
directly and 90% held by Pechiney North America, Inc., itself
a wholly owned subsidiary of Pechiney.
(b) The U.S. operating company transferred its non-beverage can
activities to Pechiney Plastics, a newly formed corporation,
in return for all of Pechiney Plastics' share capital.
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(c) The U.S. operating company transferred Pechiney Plastics to
Pechiney in exchange for Pechiney's 10% direct stake in the
U.S. operating company.
(d) At the end of Step 1, Pechiney directly owned Pechiney
Plastics, which held all of the non-beverage can activities,
and indirectly owned 100% of the U.S. operating company
through Pechiney North America.
Step 2: Pechiney transferred all of its beverage cans operations to ANC
(a) Pechiney formed our new Company and transferred the following
to it:
o Pechiney North America (and thus indirectly the U.S.
operating company and its beverage can operations)
o Pechiney's interests in the European operating
companies and their beverage cans operations
o The can end operations in France, the Brazilian
beverage cans operating company, together with
Pechiney's interests in the joint venture companies
in Turkey, Mexico and South Korea.
(b) At the end of Step 2, ANC held all of Pechiney's beverage cans
operations, as indicated in Chart 2.
Chart 2: Following the Reorganization and Prior to the Offering
[GRAPHIC OMITTED. The graphic shows that following the reorganization and prior
to the offering, Pechiney will own 100% of ANC and 100% of Pechiney Plastics.
Pechiney Plastics will be responsible for plastics packaging operations in North
America. The graphic also shows that ANC will own 100% of Pechiney North
America, which in turn will own 100% of the United States operating company,
responsible for beverage can operations in North America and for beverage can
operations in Japan and China. Following the reorganization and prior to the
offering, ANC will also own 44% of the European operating companies, which will
be responsible for beverage can operations in Europe. The graphic shows that the
United States operating company will own 56% of the European operating companies
following the reorganization and prior to the offering. The graphic further
shows ANC's other interests following the reorganization and prior to the
offering, including 100% ownership of an end plant in France, 100% ownership of
beverage can operations in Brazil, 65% ownership in beverage can operations in
Turkey, 50% ownership of beverage can operations in Mexico, and 40% ownership of
beverage can operations in South Korea.]
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Accounting Treatment
The non-beverage can activities have been treated as discontinued
operations in our Combined Financial Statements. As such, they have not been
included in the line items shown in the combined statements of income, balance
sheets and statements of cash flow. Net income (loss) from discontinued
operations is shown as a separate line item on the combined statement of income.
On our combined balance sheet, the net current and non-current assets of the
discontinued operations are each presented as single line items. The combined
statement of cash flows sets forth separately the cash flows of discontinued
operations as single line items within each major category of cash flows.
Pensions and Other Post-Employment Benefits
Prior to the reorganization, the U.S. operating company carried the
assets and liabilities for pension plans covering its employees. These plans can
be divided into three groups:
o plans relating to beverage cans employees only
o plans relating to plastics employees only
o co-mingled plans covering employees from both businesses as well as
employees of certain other operations.
As part of the reorganization, we transferred the pension plans
relating to plastics employees only to Pechiney Plastics (which assumed full
contractual responsibility as primary obligor for the obligations thereunder)
and retained the other plans. At the same time, the benefits for service accrued
by plastics employees in the co-mingled plans before the reorganization were
frozen (subject to increases for certain future service and pay), and Pechiney
Plastics set up equivalent plans covering those employees' future benefits. We
retain the co-mingled plans and their related assets, and will be responsible
for the payment of benefits to all non-beverage can employees that accrued prior
to the reorganization. The Pension Benefit Guaranty Corporation has requested
certain information from us with respect to the reorganization and its potential
effect on the funding of our pension plans.
After the reorganization, we will continue to contribute to three
multiemployer pension plans sponsored by unions representing certain of our
employees. If, in the future, we were to discontinue contributions to one of
these plans (for example, as a result of the closing of a plant whose employees
are covered by one of these plans), we could incur a withdrawal liability. The
amount of this liability, if any, would depend upon a variety of factors
including the funding status of the plan at that time.
Prior to the reorganization, the U.S. operating company also carried
unfunded obligations for other post-employment benefits totaling $695 million
(based on actuarial assumptions and as recorded in our Combined Financial
Statements), which related to both beverage can and non-beverage can employees.
The benefits consist mainly of health and medical coverage. As part of the
reorganization, we entered into a Delegation and Assumption Agreement with
Pechiney Plastics. Under that agreement, we assigned the benefit obligations
relating to plastic packaging and certain other non-beverage can employees to
Pechiney Plastics, which assumed liability for those obligations. The amount
(based on actuarial assumptions and as recorded in our Combined Financial
Statements) of obligations assigned was $361 million. As a result, we retain
$334 million of obligations. Because we could be subject to contingent
liabilities with respect to the obligations assigned to Pechiney Plastics,
Pechiney Plastics has also agreed to indemnify us on an after-tax basis against
any losses we may incur if it fails to satisfy its obligations under the
Delegation and Assumption Agreement. Pechiney has guaranteed the performance by
Pechiney Plastics of its obligation under this indemnity.
Change of Control Matters
As the offering will result in a change in control of our business, it
will cause new financial covenants to come into effect under our principal
long-term debt facility, a $500 million revolving credit facility, as well as
our $125 million receivables sales program. It will also require us to make an
offer to prepay our $228 million of privately placed notes which, if accepted,
could require the payment of a make-whole premium to be calculated on the
prepayment date. We are currently engaged in discussions with our existing
lenders with respect to these matters. In addition, we expect that our debt
financing from Pechiney (aggregating $956 million at December 31, 1998) will no
longer be in place after this offering. A substantial portion of this
intra-group debt will be transferred to Pechiney Plastics. We have therefore
commenced negotiations with potential new third-party lenders to obtain some or
all of our total funding requirements when the offering is complete. Please
refer to the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources--Cash
Flows" for further discussion of these matters.
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We have substantial net operating losses. This offering will result in
a change in control as defined under Internal Revenue Code Section 382. As a
result, the utilization of our net operating losses will be subject to certain
annual limitations. Please refer to the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources--Cash Flows" for further discussion
of our net operating losses.
The change of control will also allow our joint venture partners in
Mexico and Korea to exercise certain rights under the relevant joint venture
agreements. The transfer of Pechiney's shares in the Mexican joint venture to us
will enable Vitro, the other shareholder, to terminate the joint venture
arrangements by purchasing our interest in the joint venture at fair market
value. However, Vitro has granted us a waiver of its right for this transfer.
In the case of Hanil Can Co., the Korean food and beverage can joint venture,
the other shareholders may exercise a right of preemption on the proposed
transfer of Pechiney's shares to us. They have agreed in principle not to
exercise this right and we and Pechiney are working with them to formalize the
agreement in principle.
Finally, the change in control will give two of our customers the legal
right to terminate contracts.
o Under our Master Manufacturer's Authorization Agreement with the
Coca-Cola Company relating to the reproduction of the Coca-Cola
trade-mark and label designs, Coca-Cola (registered) is entitled to
terminate the agreement upon a change in control after giving 90 days'
prior notice. We have notified Coca-Cola of the expected change in
control. We have discussed the matter with them and do not expect them
to terminate the agreement.
o Our Master Supply Agreement with Anheuser Busch also allows the
customer to terminate the agreement upon a change in control. We have
notified the customer of the expected change in control and do not
expect them to terminate the agreement.
Indemnities and Guarantees from Pechiney Plastics and Pechiney
Pechiney Plastics and Pechiney have agreed to indemnify us in respect
of the following matters:
o Post-employment benefits. Pechiney Plastics has agreed to assume
certain obligations relating to post-employment benefits (other than
pensions) for certain non-beverage can employees. Pechiney Plastics
will indemnify us on an after-tax basis for any losses we may incur
with respect to these liabilities. Pechiney has agreed to guarantee
this obligation of Pechiney Plastics.
o Viskase litigation. We are the defendant in patent infringement
proceedings brought by Viskase Corporation. The proceedings, which are
described under "Business of ANC--Legal Proceedings" below, relates to
the plastic packaging business that we transferred to Pechiney Plastics
in the reorganization. Pechiney Plastics has agreed to indemnify us on
an after-tax basis for any payments we may be required to make with
respect to the proceedings. Pechiney has agreed to guarantee this
obligation of Pechiney Plastics.
o Environmental. Under U.S. environmental laws and regulations, we are
exposed to the risk of substantial costs and liabilities, including the
cost of remediating pollution damage related to our current or past
operations. These potential costs and liabilities extend to assets that
have been sold and activities that have been discontinued.
- Plastics operations. Pechiney Plastics has agreed to indemnify us
on an after-tax basis against any losses we may incur with respect
to environmental liabilities relating to past and present plastics
operations and facilities. This indemnity extends to assets that
have been sold and activities that have been discontinued. It
covers both identified and unidentified liabilities. If Pechiney
Plastics fails to satisfy its indemnity obligation in full, we may
be exposed to contingent liability. Pechiney has not guaranteed
and is not legally required to support this obligation. We have no
knowledge of Pechiney Plastics' future financial condition.
- Other non-beverage can operations. To the extent that we have
indentified environmental liabilities for other non-beverage can
operations and facilities that are probable and reasonably capable
of estimation, we have established accounting reserves
that we retained in the reorganization that we believe are
consistent with U.S. GAAP. These identified liabilities will be
for our own account. For any unidentified liabilities, Pechiney
has agreed to indemnify us in part, on an after-tax basis, against
any losses we may incur. This partial indemnity will be limited to
80% of any direct loss we suffer and will be valid for ten years.
Each claim will be subject to a deductible amount, and the
indemnity will be limited to a maximum overall dollar amount.
Pechiney's indemnity relates only to other non-beverage can
operations that we have transferred, sold or shut down in the
` past. It does not include the plastics operations, which are
covered by Pechiney Plastics' indemnity only. We may be
exposed to contingent liability to the extent that (i) the
identified liabilities exceed our reserved amounts, or (ii) any
unidentified liabilities exceed the partial indemnity from
Pechiney.
- Beverage can operations. Any environmental liabilities relating to
our past and present beverage can activities will be for our own
account. To the extent that these liabilities have been
identified and are probable and reasonably capable of estimation,
we have established accounting reserves that we believe are
consistent with U.S. GAAP.
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RELATIONSHIP WITH PECHINEY
We have been operated as a subsidiary of Pechiney since 1988. In recent
years, Pechiney provided us with treasury services, exchange rate protection
services, metal price hedging services and a number of other services. We have
also purchased a portion of our aluminum supply from Rhenalu, a subsidiary of
Pechiney. For purposes of governing certain ongoing relationships between us and
Pechiney, we will enter into (or continue in effect) various agreements and
relationships, including those described below.
Some of the agreements summarized below are included as exhibits to the
registration statement of which this prospectus is a part. The following
summaries are qualified completely by reference to such exhibits, which are
incorporated in this prospectus by reference.
Relationship with Pechiney as a Principal Shareholder
Following the offering, we expect that Pechiney will retain % of our
shares and will have the right to elect four of the 13 members of our board of
directors. As a result, Pechiney will be able to exercise significant influence
over our policies and business.
Agreements with Pechiney
We have entered into (or will enter into) various agreements with
Pechiney governing the relationships between us and Pechiney after this
offering, and providing for the allocation of various liabilities and
obligations relating to periods prior to and after this offering.
Aluminum Purchase Agreements. Prior to this offering we purchased a
portion (approximately 14 percent in 1998) of our aluminum supplies from
Rhenalu, a subsidiary of Pechiney, on an arms'-length basis and under normal
market terms and conditions. We expect to continue to purchase aluminum from
Rhenalu on similar terms following this offering.
We also have an agreement with Pechiney World Trade under which
Pechiney World Trade, a subsidiary of Pechiney, procures used aluminum beverage
cans on the open market to satisfy a portion of our aluminum can sheet supply.
This is an arms'-length agreement.
Currency Protection Agreements. We have entered into a number of
currency protection agreements with Pechiney under which Pechiney agrees to
purchase foreign currencies from us, or sell foreign currencies to us, at
specified rates in order to reduce our exposure to exchange rate fluctuations.
For further discussion of the measures we have taken to seek to protect
ourselves against exchange rate fluctuations, see the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Quantitative and Qualitative Disclosures about Market Risk--Foreign
Exchange Rates." Following this offering, existing currency protection
agreements with Pechiney will remain in place until they mature, but we will
hedge new foreign currency exposures with third parties rather than with
Pechiney.
Agreement Regarding Plastic Beer Bottles. Both we and Pechiney will
remain free to enter this market either alone or with other partners. We have
entered into an agreement with Pechiney, however, that may give us access to
Pechiney's multi-layer plastic beer bottle technology if we choose to enter the
market. Under the agreement, Pechiney may request us to form a joint venture
with them for multi-layer plastic beer bottles. If the parties cannot agree on
the terms of the joint venture, the agreement requires Pechiney to license its
multi-layer plastic beer bottle technology to us on market terms.
Technology Agreement. We have also agreed to license certain of our
technology that may be useful for non-beverage can operations, such as drawn and
well-ironed aluminum can forming technology, to Pechiney on market terms if
requested.
Registration Rights. We have entered into a registration rights
agreement with Pechiney under which we have agreed to register Pechiney's
remaining shares if Pechiney wishes to sell its shares in the future. We have
agreed to cooperate fully in connection with any such registration and with any
related offering. Under its "lock-up," however, Pechiney may not sell additional
shares for days following the date of the final prospectus for this offering.
Reorganization Agreements. The reorganization of Pechiney's U.S.
packaging group that led to our formation was effected by a number of
agreements. These agreements provided for the contribution of the non-beverage
can activities to Pechiney Plastics and the transfer of Pechiney Plastics to
Pechiney. These
17
<PAGE>
agreements also set out the various indemnities from Pechiney Plastics and
Pechiney that are described in the section entitled "Reorganization of
ANC--Indemnities from Pechiney and Pechiney Plastics" above.
The reorganization agreements also included a tax separation agreement
which we entered into with Pechiney that reflects each party's rights and
obligations with respect to payments and refunds of taxes attributable to
periods beginning prior to and including this offering, and taxes resulting from
transactions effected in connection with this offering.
Pechiney Nominee Directors. We have entered into an agreement with
Pechiney under which Pechiney will have the right to propose four of the 13
members of our board of directors for approval by the shareholders for as long
as it holds % of our shares.
Services Agreements. Prior to the reorganization, Pechiney provided us
with a number of services, and we shared a number of other services with the
non-beverage can activities in Pechiney's U.S. packaging group. In connection
with this offering, we have entered into various agreements regarding these
services:
o For most of the corporate services that we shared Pechiney's U.S.
plastic packaging operations, the relevant service departments have
been divided between Pechiney Plastics and us. The payroll, retiree
benefit services and related information technology service departments
will be transferred to Pechiney Metals Corporation, a subsidiary of
Pechiney. Pechiney Metals Corporation will provide these services to
both Pechiney Plastics and ourselves under a shared services agreement.
The agreement specifies that the services will be provided on an
arm's-length basis.
o We have also entered into a services agreement with Pechiney Plastics
under which we and Pechiney Plastics provide each other with certain
other corporate services.
o Pechiney will continue to provide certain other services to us on a
transitional basis following this offering, and we have entered into a
transitional services agreement with Pechiney to this effect. The
transitional services will include corporate and employee
communications and certain legal services relating to employee
relations. We will reimburse Pechiney for the cost of those services
and will have the right to terminate the transitional services
agreement in part or in full with six months' notice.
Delegation and Assumption Agreement. We have entered into a delegation
and assumption agreement with Pechiney Plastics providing for the assignment to
Pechiney Plastics of the post-employment benefit obligations relating to
plastics employees and certain other non-beverage can employees. Under the
agreement, Pechiney Plastics agrees to assume these obligations and to indemnify
us against any losses that we may incur with respect to them. Pechiney has
agreed to guarantee this obligation of Pechiney Plastics.
USE OF PROCEEDS
The net proceeds from the sale of our shares will be paid to Pechiney,
the selling stockholder. We will not receive any proceeds from this offering.
DIVIDEND POLICY
We intend to declare and pay quarterly cash dividends consistent with
the policies of comparable packaging companies, depending on our financial
results and prospects. We expect the first dividend to be payable with respect
to the quarter of 1999. We are a newly formed company and as such have never
declared or paid any cash dividends on our capital stock.
18
<PAGE>
CAPITALIZATION
The following table shows our capitalization as at December 31, 1998,
stated (a) on an actual basis and (b) as adjusted to reflect our reorganization.
The adjustments, which are the same as the adjustments effected in preparing our
Pro Forma Combined Financial Information in this prospectus, consist of the
following:
o the reorganization of ANC
o the agreement by Pechiney Plastics to reimburse us on an
after-tax basis for any payments we make with respect to the
Viskase proceedings, together with Pechiney's guarantee of
this obligation
o the payment of a $137 million dividend to Pechiney by certain
of its beverage can subsidiaries prior to this offering
o the transfer to Pechiney Plastics of $275 million of
short-term and long-term debt owed to Pechiney,
o the conversion of $681 million of short-term and of long-term
debt owed to Pechiney to third-party debt.
For further discussion of our financial condition, you should refer to
the more complete information contained in the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" as
well as the Pro Forma Combined Financial Information and the Combined Financial
Statements.
<TABLE>
<CAPTION>
As at December 31, 1998
----------------------------
Actual Pro Forma
-------------- -------------
($ in millions)
<S> <C> <C>
Short-term financing............................................. 680 263
Current portion of long-term debt................................ 7 2
Long-term debt (excluding current portion)....................... 551 735
----- -----
Total debt..................................................... 1,238 1,000
Owner's equity................................................... 1,603 --
Common stock ( shares authorized, shares issued and
outstanding)................................................... -- 10
Additional paid in capital....................................... -- 1,182
Receivable from Pechiney Plastic Packaging, Inc.................. -- (62)
Accumulated other comprehensive loss............................. (65) (65)
----- -----
Total equity................................................... 1,538 1,065
Total capitalization............................................ 2,776 2,065
===== =====
Debt to capital ratio........................................... 44.6% 48.4%
</TABLE>
19
<PAGE>
SELECTED COMBINED FINANCIAL INFORMATION
The following table presents summary financial data for ANC. You should
also refer to the more complete information contained in our combined financial
statements and the section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in this prospectus.
The yearly information for 1996 through 1998 and the year-end
information for 1997 and 1998 has been derived from our Combined Financial
Statements, which consist of our combined statements of income, cash flows and
changes in owner's equity for the years ended December 31, 1996, 1997 and 1998,
and our combined balance sheets as of December 31, 1997 and 1998, together with
the attached notes. They have been prepared in accordance with accounting
principles generally accepted in the United States, which we refer to as "U.S.
GAAP," and have been audited by PricewaterhouseCoopers LLP. In this prospectus,
we refer to these audited financial statements as our "Combined Financial
Statements." They show the financial condition, results of operations and cash
flows of Pechiney's packaging group (from which ANC was created). The Combined
Financial Statements show our beverage can operations as continuing operations.
The plastics and other activities retained by Pechiney as part of the
reorganization are treated as discontinued operations in our Combined Financial
Statements. As such, they have been aggregated and presented as separate line
items, as discussed under "Reorganization of ANC--Accounting Treatment" in this
prospectus. The information presented below relates only to our continuing
operations. The yearly and year-end information for 1994 and 1995 and the
year-end information for 1996 has been derived from unaudited combined financial
statements relating to Pechiney's packaging group.
The pro forma financial information presented below, which is
unaudited, reflects certain adjustments based on assumptions that are intended
to show the effect of the reorganization of Pechiney's beverage cans operating
group which resulted in our formation. For an explanation of the pro forma
financial information, please see the section entitled "Unaudited Pro Forma
Combined Financial Information" in this prospectus.
<TABLE>
<CAPTION>
Pro Forma
Combined Financial Information Financial Information
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended and as of
Year Ended and as of December 31, December 31,
--------------------------------------------------------------- ---------------------
1994(1) 1995(1) 1996 1997 1998 1998(1)
----------- ----------- ----------- ----------- ----------- ---------------------
($ in millions)
Combined Statement of Income Data:
<S> <C> <C> <C> <C> <C> <C>
Net sales................................... $2,446 $2,677 $2,520 $2,465 $2,459 $2,459
Cost of goods sold (excluding depreciation). 2,164 2,281 2,190 2,069 1,985 1,985
Selling, general and administrative expense. 140 123 136 134 138 138
Research and development expense............ 25 24 22 20 15 15
Depreciation and amortization............... 68 73 74 78 82 82
Goodwill amortization (2)................... 292 41 41 41 40 40
Restructuring charge (credit) and write
down of property and equipment (3).......... 87 11 159 11 (2) (2)
Operating income (loss) from
continuing operations.................... (330) 124 (101) 112 201 201
Interest expense............................ 68 54 95 90 69 76
Interest income and other financial
income (expense), net.................... 15 13 4 27 11 8
Income tax expense (benefit) ............... (23) 51 (35) 30 26 22
Equity in net earnings (loss) of affiliates. 6 5 1 (4) 4 4
Minority interest........................... 7 8 7 5 5 5
Income (loss) from continuing operations
before cumulative effect accounting
change.................................... $ (361) $ 29 $ (163) $ 10 $ 116 $ 110
Combined Cash Flow Data:
Depreciation and amortization............... 360 114 115 119 123 123
Capital expenditures........................ 95 100 142 72 65 65
EBITDA(4)................................... 117 249 173 242 321 321
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Pro Forma
Combined Financial Information Financial Information
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended and as of
Year Ended and as of December 31, December 31,
--------------------------------------------------------------- ---------------------
1994(1) 1995(1) 1996 1997 1998 1998(1)
----------- ----------- ----------- ----------- ----------- ---------------------
($ in millions)
<S> <C> <C> <C> <C> <C> <C>
Combined Balance Sheet Data:
Cash and cash equivalents................... 20 49 66 106 171 69
Working capital (deficit)(5)................ (33) 108 (17) (106) (11) (57)
Property, plant and equipment, net.......... (899) 934 915 846 836 836
Total assets................................ 4,643 4,121 3,910 3,891 3,927 3,216
Short-term financing and current portion
of long-term debt........................ 1,883 759 744 770 687 265
Long-term debt (less current portion)....... 485 1,006 1,072 890 551 735
Total debt.................................. 2,368 1,765 1,817 1,660 1,238 1,000
Total equity................................ 867 932 816 948 1,538 1,065
<FN>
(1) Unaudited.
(2) Substantially all of the goodwill reflected on our combined balance sheet arose from the revaluation of our tangible assets
acquired and liabilities assumed as of the date of our acquisition by Pechiney in 1988. The initial amount, which totaled
approximately $1.6 billion, is being amortized over a 40-year period in an amount of approximately $40 million per year. In
1994, goodwill amortization also included a non-recurring $257 million write down resulting from a review of the carrying value
of assets. In 1998, goodwill was reduced by $35.6 million as a result of the resolution of certain tax contingencies
originating from our acquisition by Pechiney. At December 31, 1998, $1,224 million of goodwill was recorded as an asset on our
balance sheet.
(3) The $159 million restructuring expense in 1996 is a reserve that was established in 1996 to cover the cost of plant closures,
employee termination costs and other costs associated with our restructuring plans. See Note 15 to our Combined Financial
Statements for a more complete description of this reserve.
(4) We define EBITDA as operating income (loss) from continuing operations, excluding depreciation and amortization, goodwill
amortization and restructuring charge (credit) and writedown of property and equipment. EBITDA does not represent cash flow for
the periods presented and should not be considered as an alternative to net income (loss), as an indicator of our operating
performance or as an alternative to cash flows as a source of liquidity. It may not be comparable with EBITDA as defined by
other companies. We believe EBITDA is commonly used by financial analysts and others in the packaging industry.
(5) Working capital (deficit) represents total current assets, excluding cash, less total current liabilities, excluding current
portion of long-term debt and short-term financing.
</FN>
</TABLE>
21
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Our Pro Forma Combined Financial Information as of and for the year
ended December 31, 1998, which is unaudited, has been prepared from the Combined
Financial Statements which we present elsewhere in this prospectus. This
information reflects adjustments for the following transactions:
o the reorganization of ANC
o the agreement by Pechiney Plastics to reimburse us on an after-tax
basis for any payments we make with respect to the Viskase litigation,
together with Pechiney's guarantee of this obligation
o the payment of a $137 million dividend to Pechiney by certain of its
beverage can subsidiaries prior to this offering
o the transfer to Pechiney Plastics of $275 million of short-term and
long-term debt owed to Pechiney
o the conversion of $681 million of short-term and long-term debt owed
to Pechiney to third party debt.
These adjustments are more fully described in the notes to the Pro Forma
Combined Financial Information below.
For purposes of the Pro Forma Combined Statement of Income, these
transactions are assumed to have occurred on January 1, 1998. For purposes of
the Pro Forma Combined Balance Sheet, they are assumed to have occurred on
December 31, 1998.
Our management believes that the assumptions used to prepare the Pro Forma
Combined Financial Information are reasonable under the circumstances. The Pro
Forma Combined Financial Information does not necessarily reflect what our
results of operations or financial position would have been if the transactions
had been completed as of the dates indicated, nor does it give effect to any
events other than those discussed in the notes to the Pro Forma Combined
Financial Information below. The Pro Forma Combined Financial Information may
not be indicative of our future operating results or financial position.
The Pro Forma Combined Financial Information should be read in conjunction
with our Combined Financial Statements and the sections entitled "Reorganization
of ANC" and "Management's Discussion and Analysis of Results of Operations and
Financial Condition" included elsewhere in this prospectus.
22
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, 1998
-----------------------------------------------------
Reorganization Pro Forma
Pro Forma Combined Statement of Income Actual and Financing As Adjusted
-------------- ---------------------- ---------------
($ in millions)
<S> <C> <C> <C>
Net sales..................................................... $2,459 - $2,459
Costs of goods sold (excluding depreciation).................. 1,985 - 1,985
Selling, general and administrative expense................... 138 - 138
Research and development expense.............................. 15 - 15
Depreciation and amortization................................. 82 - 82
Goodwill amortization......................................... 40 - 40
Restructuring charge (credit) and writedown of property
and equipment.............................................. (2) - (2)
------ ------ ------
Operating income (loss) from continuing operations............ 201 - 201
Interest expense.............................................. 69 $ 7 (1) 76
Interest income and other financial income
(expense), net............................................. 11 (3)(2) 8
------ ------ ------
Income (loss) from continuing operations before income
taxes, equity in earnings of affiliates, minority interest
and cumulative effect of accounting change................. 143 (10) 133
Income tax expense (benefit).................................. 26 (4)(3) 22
------ ------ ------
Income (loss) from continuing operations
before equity in earnings of affiliates, minority interest
and cumulative effect of accounting change................. 117 (6) 111
Equity in net earnings (loss) of affiliates................... 4 - 4
Minority interest............................................. (5) - (5)
------ - ------
Income (loss) from continuing operations before
cumulative effect of accounting change..................... $ 116 $ (6) $110
====== ====== ======
Pro forma basic and diluted net income per share..............
Pro forma weighted average shares outstanding.................
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
As of December 31, 1998
-------------------------------------------------------------------------------------
Pro Forma
Actual Reorganization Financing Offering As Adjusted
------ -------------- --------- -------- -----------
Pro Forma Combined Balance Sheet ($ in millions)
Assets:
Current assets
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents.............. 171 (100)(4) (2)(8) - 69
Accounts receivable.................... 138 - - - 138
Other receivables and prepaid expenses. 42 - - - 42
Inventories............................ 236 - - - 236
Net assets of discontinued operations.. 47 (47)(5) - - -
Deferred income taxes.................. 110 - - - 110
------- ------- ------- ------- -------
Total current assets.............. 744 (147) (2) - 595
Property, plant and equipment net........... 836 - - - 836
Goodwill.................................... 1,224 - - - 1,224
Investments in equity affiliates............ 113 - - - 113
Pension asset............................... 212 - - - 212
Net assets of discounted operations......... 536 (536)(5) - - -
Deferred income taxes....................... 193 (28)(6) - - 165
Other long-term assets...................... 69 - 2 (9) - 71
------- ------- ------- ------- -------
Total assets...................... 3,927 (711) - - 3,216
======= ======= ======= ======= =======
Liabilities and Owner's Equity:
Current liabilities.........................
Accounts payable - trade............... 241 - - - 241
Other payables and accrued liabilities. 342 - - - 342
Current portion of long-term debt...... 7 - (5)(9) - 2
Short-term financing:
Related party.......................... 660 (275)(5) (385)(9) - -
External............................... 20 - 243 (9) - 263
------- ------- ------- ------- -------
Total current liabilities......... 1,270 (275) (147) - 848
Deferred income taxes....................... 60 - - - 60
Postretirement benefit obligations.......... 309 - - - 309
Other long-term liabilities................. 170 - - - 170
Long-term debt:
Related party.......................... 291 (291)(9) - -
External............................... 260 37 (4) 438 (9) - 735
------- ------- ------- ------- -------
Total liabilities................. 2,360 (238) - - 2,122
Minority interests.......................... 29 - - - 29
Preferred Stock............................. - - - - -
Common stock................................ - - 10 (10) 10
Additional paid-in capital.................. 62 (7) - 1,120 (10) 1,182
------- ------- ------- -------
Less: Receivable
from Pechiney Plastic Packaging, Inc. (62)(7) - - (62)
Owner's equity.............................. 1,603 (473)(4)(5)(6) - (1,130)(10)
(7)(8)
Accumulated other comprehensive loss........ (65) (65)
------- ------- ------- ------- -------
Total equity 1,538 (473) 1,065
------- ------- ------- ------- -------
Total liabilities and equity 3,927 (711) - 3,216
======= ======= ======= ======= =======
</TABLE>
24
<PAGE>
Notes to the Pro Forma Combined Financial Information
(1) Reflects the increase in interest expense based on (i) the transfer by
ANC to Pechiney Plastics of $275 million of intercompany debt payable
to Pechiney, (ii) the assumed additional borrowings of $518 million
under the existing credit facilities, (iii) the proceeds from a new
$200 million five-year revolving credit facility at an assumed interest
rate of 6.5% and (iv) repayment of $681 million of related party debt.
The average borrowing for the year ended December 31, 1998 is assumed
to be $1,150 million. The increase in interest expense consists of the
following:
($ in millions)
Assumed interest expense on average borrowings................ $75
Amortization of deferred financing costs...................... 1
----
76
Interest expense on historical debt........................... (69)
----
Increase in interest expense.................................. $ 7
====
(2) Reflects the decrease in interest income due to the use of $100 million
of cash at an assumed average interest rate of 3% for the payment of
dividends to Pechiney by certain of Pechiney's European beverage can
subsidiaries.
(3) Reflects the estimated tax impact of pro forma adjustments using an
effective tax rate of 39.6%.
(4) Reflects the payment of dividends aggregating $137 million to Pechiney
by certain of Pechiney's European beverage can subsidiaries,
consisting of an assumed $100 million of existing cash and the
borrowing of $37 million of long-term external debt.
(5) Reflects (i) the contribution by ANC of its plastic packaging
activities and other operations to Pechiney Plastics in
return for common stock constituting 100% of the share capital of
Pechiney Plastics; (ii) the transfer by ANC to Pechiney
Plastics of $275 million of short-term financing with
Pechiney; and (iii) the transfer by ANC of its shares of Pechiney
Plastics to Pechiney in exchange for shares of ANC held
directly by Pechiney.
(6) Reflects the use of net operating loss carryforwards related to the
taxable gain on the sale to another subsidiary of Pechiney of
plastic packaging technology with a currently estimated value of $70
million, using an effective tax rate of 39.6%.
(7) Reflects the agreement by Pechiney Plastics to reimburse
ANC on an after-tax basis for any payments it makes with respect to the
Viskase proceedings, together with Pechiney's guarantee of this
obligation.
(8) Reflects $2 million of debt issuance costs related to the new revolving
credit facility.
(9) Reflects the repayment of intercompany debt with Pechiney of $681
million, the increase in short-term debt with others of $243 million
and the increase in long-term debt with others of $438 million.
(10) Reflects the formation of our company and the issuance of million of
our shares of common stock, including million shares which we expect
to sell in this offering.
The interest rate used to calculate pro forma interest expense on the new
and existing revolving credit facilities is 6.5%. The rate on the revolving
credit facilities is based on our estimates, considering market conditions for
similar facilities. A 0.5% change in the interest rate on the revolving credit
facilities would result in a $3.5 million increase (or decrease) in the pro
forma interest expense for the year ended December 31, 1998.
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
We manufacture beverage cans and beverage can ends and have an
extensive presence in the worldwide beverage can markets. Our activities are
conducted in several geographic areas, principally North America, South America,
Europe and the Far East. In 1998, our businesses in the Americas (the United
States and Brazil) accounted for 63% of our net sales, while Europe, including
Turkey, accounted for 36%. In the Far East, we have a manufacturing subsidiary
in China and equity positions in Japan and South Korea.
Our Financial Statements. This discussion is based on our Combined
Financial Statements, to which you should also refer. Our Combined Financial
Statements show our financial condition, results of operations and cash flows.
Our Combined Financial Statements may not reflect what our results of
operations, financial position and cash flows would have been had we been
operating as a separate, stand-alone entity during the periods presented or what
our results of operations, financial position and cash flows will be in the
future. This is because we were not operated as a single stand-alone business
for the periods presented.
Non-beverage can activities that were transferred to Pechiney as part
of the reorganization of Pechiney's U.S. packaging operations which resulted in
our formation have been treated as discontinued operations in our Combined
Financial Statements. As such, they have not been included in the specific line
items shown in the combined statements of income, balance sheets and statements
of cash flows. Net income (or loss) from discontinued operations is shown as a
separate line item on the combined statement of income. On the combined balance
sheet, the net current and non-current assets of the discontinued operations are
aggregated and presented as single line items. The combined statement of cash
flows sets forth separately the cash flows of discontinued operations as single
line items within each major category of cash flows. In this section, we analyze
only the results of operations and financial condition of our continuing
operations.
You should also refer to our Pro Forma Combined Financial Information,
which is intended to present certain financial information as if the
reorganization of Pechiney's U.S. packaging operations which resulted in our
formation had taken place.
Net Sales. Our net sales figures reflect the volume of cans and can
ends that we sell. In certain cases, we sell can ends separately. Net sales also
reflect the relative mix of different sized cans. A higher proportion of
higher-priced cans (such as larger cans or cans with special features) can lead
to higher net sales figures even if overall volumes remain stable.
Sales of beverage cans are highest during the summer months. Therefore,
our sales for the second and third quarters of the year, which include the
warmer months in North America and Europe, are higher than in the first and
fourth quarters. In the past, significant changes in summer weather conditions
have caused variations in demand for beverage cans and therefore in our net
sales.
Some of our long-term sales contracts with customers contain formulas
that link the can price to our raw material cost, generally on the basis of
prevailing aluminum prices several months prior to the sale. These formulas can
lead to variations in net sales levels which, because they are generally offset
by corresponding variations in the cost of goods sold, do not necessarily affect
our operating income levels.
Significant portions of our sales are in European currencies,
especially currencies that now comprise the Euro, as well as the British pound.
Revenues denominated in foreign currencies are translated into U.S. dollars in
preparing our financial statements. Therefore, when these currencies fluctuate
in value relative to the U.S. dollar, our net sales figures may fluctuate
accordingly.
Cost of Goods Sold (Excluding Depreciation). Our cost of goods sold
consists of raw materials costs, as well as other operating expenses and freight
charges. It does not include depreciation and amortization charges.
26
<PAGE>
o The principal raw material used in manufacturing beverage cans is
aluminum can sheet for aluminum cans and ends, and steel can sheet for
steel cans. Metal generally represents between 60% and 70% of the
manufacturing cost of the beverage can, depending on the can size and
the type of metal used. We purchase most of our aluminum can stock
requirements from major aluminum can sheet producers in North America
and Europe and we purchase steel from major European producers. In
particular, we have long-term aluminum purchase contracts with:
o Alcan Rolled Products Company, which supplied approximately 47%
of our worldwide aluminum tonnage in 1998.
o Aluminum Company of America (known as "Alcoa"), which supplied
approximately 29% of our worldwide aluminum tonnage in 1998.
o Pechiney, which supplied approximately 14% of our worldwide
aluminum tonnage in 1998.
All of our purchase contracts are entered into on an arms'-length basis
on prevailing market terms. Unless otherwise fixed by contract, can and
end sheet prices vary in relation to the market prices for aluminum and
steel. Aluminum prices have historically fluctuated while steel prices
have been stable.
In addition to metals, we use other raw materials, principally
compound, inks, varnishes and coating materials.
o Other operating expenses include all other fixed and variable expenses
required to run our can and end plants, principally labor costs,
utilities and repair materials.
o Freight charges represent the cost of transporting cans from our
facilities to our customers' facilities, as well as all other
logistical costs.
Selling, General and Administrative Expense. This item consists of
selling and administration compensation costs, together with all other
administration costs such as our headquarters costs, management information
systems and certain consulting and other fees. It does not include depreciation
and amortization charges.
Research and Development Expense. This item includes our product
engineering costs in the United States, including our Beverage Technical Center
located near Chicago, as well as the cost of research services which we have
historically purchased from Pechiney's facility in Voreppe, France.
EBITDA. We believe EBITDA is an appropriate financial measure of our
operating performance, given our significant non-cash depreciation and
amortization charges and our significant goodwill amortization charges. We
define EBITDA as operating income (loss) from continuing operations, excluding
depreciation and amortization, goodwill amortization and restructuring charge
(credit) and writedown of property and equipment. Our discretionary use of funds
depicted by EBITDA may be limited by working capital, debt service, tax payment
and capital expenditure requirements, and by restrictions related to legal
requirements, commitments and uncertainties. You should refer to the section
entitled "Selected Combined Financial Information" for a further discussion of
EBITDA.
Depreciation and Amortization. This item consists of depreciation of
our productive and administrative capital assets, and amortization of purchased
software and other intangibles. It does not include goodwill amortization.
Goodwill Amortization. This item relates principally to the revaluation
of our tangible assets and liabilities as of the date of our acquisition by
Pechiney in 1988. The initial amount, which totaled approximately $1.6 billion,
is being amortized over a 40-year period, which results in an annual charge of
approximately $40 million. At December 31, 1998, our balance sheet reflected
approximately $1.2 billion of goodwill remaining to be amortized.
Restructuring Charge (Credit) and Writedown of Property and Equipment.
This item consists principally of restructuring charges (related to plant
closures and other modernization programs) as well as gains and losses on fixed
asset sales, and asset impairment charges.
27
<PAGE>
Accounting Change. Effective January 1, 1998, we adopted AICPA
Statement of Position 98-5, "Reporting of the Costs of Start-Up Activities," and
wrote off previously capitalized start-up expenses of $3 million, net of taxes
of $1 million.
Acquisitions and New Operations.
o In February 1996, we acquired Sitac S.r.l. (subsequently renamed
Nacanco Italia S.r.l.), an Italian beverage can end manufacturer, for a
purchase price of $12 million, excluding cash acquired. We recorded
goodwill of $1.6 million in connection with the transaction.
o In late 1996, our Brazilian subsidiary commenced operations. Pechiney
contributed $66 million in cash and equipment to finance the
construction of the Brazilian facility, and this contribution is
reflected in cash flows from financing activities in 1996. The facility
had minimal impact on 1996 sales, operated at partial capacity during
its start-up year 1997, and came fully on-stream in 1998.
Results of Operations in 1996, 1997 and 1998
The following table shows our EBITDA, our operating income (loss) from
continuing operations and various expense items as a percentage of our net sales
for 1996, 1997 and 1998.
<TABLE>
<CAPTION>
Year Ended
December 31,
----------------------------------------------
1996 1997 1998
----------------------------------------------
(Percentages of net sales)
<S> <C> <C> <C>
Net sales............................................... 100.0% 100.0% 100.0%
Cost of goods sold (excluding depreciation)........ 86.9% 83.9% 80.7%
Selling, general and administrative expense........ 5.4% 5.4% 5.6%
Research and development expense................... 0.9% 0.8% 0.6%
---- ---- ----
EBITDA.................................................. 6.8% 9.8% 13.1%
Depreciation and amortization...................... 2.9% 3.2% 3.3%
Goodwill amortization.............................. 1.6% 1.7% 1.6%
Restructuring charge (credit) and writedown of
property and equipment............................. 6.3% 0.4% (0.1)%
---- ---- ----
Operating income (loss) from continuing operations...... (4.0)% 4.5% 8.2%
====== ==== ====
</TABLE>
Net Sales
Our net sales totaled $2,459 million in 1998, compared with $2,465
million in 1997 and $2,520 million in 1996. The 0.3% decline overall in 1998
reflected mixed results in key market areas. Net sales in the Americas in 1998
were stable at $1,560 million compared to $1,554 million in 1997. In the United
States, although our product mix improved, this was offset by lower volumes in
both soft drink cans and beer cans. The lower volumes in soft drink cans
resulted from a loss of market share, while the decrease in beer can volume was
due to an overall decline in the market. Brazil reported good gains due to
increased market demand and the plant being on-line for the full year. Net sales
in Europe and Asia declined slightly by 1.1%, to $901 million in 1998. Strong
market growth in Southern Europe partially offset the negative impact of a less
favorable product mix and poor weather conditions in Northern Europe.
In 1997, the 2.2% decrease in net sales reflected a decline in our
overall selling prices, partly offset by total volume gains. In the Americas,
net sales decreased by 1.7% to $1,554 million in 1997 from $1,581 million in
1996. This decrease reflected an increase in unit volumes, more than offset by a
decrease in selling prices. The lower selling prices reflected the low market
price of aluminum in late 1996 and early 1997 which was largely passed on to
customers through contract pricing formulas. The increase in unit volumes was
driven by soft drink can sales, which benefited from sustained demand throughout
most of the year. Beer can sales declined, however, continuing the trend toward
premium and microbrew beers (generally sold in glass) and away from budget
priced beer
28
<PAGE>
(generally sold in cans). Unit volumes were also spurred by increased can end
sales and the commercial start-up of the Brazilian facility.
In Europe and Asia, net sales decreased by 3.7% to $911 million in 1997
from $946 million in 1996, largely due to the depreciation in selling currencies
(notably the Spanish peseta, German mark and Italian lira) against the U.S.
dollar. This factor was partially offset by a slight increase in unit volumes,
driven by strong demand in Southern Europe.
Operating Expenses
o Cost of goods sold amounted to $1,984 million in 1998, compared with
$2,069 million in 1997 and $2,190 million in 1996. These figures
represent consistent reductions in cost of goods sold as a percentage
of net sales, which equaled 80.7% in 1998, 83.9% in 1997 and 86.9% in
1996.
We undertook two specific cost reduction programs during the period:
Project Challenge and Next Level. Pechiney introduced Project Challenge
in 1996 as a business-wide cost reduction program. The program's
objective was to reduce the 1995 cost base, excluding metals, by 20% by
the end of 1999, an outcome we achieved by year-end 1998. Following
completion of Project Challenge in 1998, we introduced Next Level, a
continuous improvement process that seeks to increase productivity and
reduce costs, while limiting additional capital expenditures. This
ongoing program has already produced concrete results in the United
States, including a 4% improvement in cans per man-hour over 1997.
o Selling, general and administrative expenses amounted to $138 million
in 1998, compared with $134 million in 1997 and $136 million in 1996.
The slight increase in 1998 primarily reflected an increase in bad debt
expense of $7 million, together with increased consulting expenses
relating to Project Challenge. Excluding these factors, SG&A expenses
decreased by 4.5% in 1998, reflecting our ongoing cost reduction
efforts.
o Research and development expense amounted to $15 million in 1998,
compared with $20 million in 1997 and $22 million in 1996. In 1998, we
used fewer services from Pechiney's research center and were allocated
a lower portion of costs relating to this center. The lower charges in
1998 and 1997 also reflected our ongoing effort to share a larger
portion of development expenses with customers and suppliers.
EBITDA
Our EBITDA totaled $321 million in 1998, compared with $242 million in
1997 and $173 million in 1996. These figures reflect increases of 32.6% in 1998
and 39.9% in 1997.
Operating Income (Loss) from Continuing Operations.
Our operating income from continuing operations totaled $201 million in
1998, compared with $112 million in 1997 and a loss of $101 million in 1996.
o Depreciation and amortization amounted to $82 million in 1998, compared
with $78 million in 1997 and $74 million in 1996. The $4 million
increases in each of 1998 and 1997 reflected capital expenditure
levels, including the Brazilian expansion and Project Challenge.
o Restructuring and writedown of property and equipment posted a credit
of $2 million in 1998, compared with charges of $11 million in 1997
and $159 million in 1996. In 1998, we took no charges, but we restored
to income $2 million of the reserves that we had previously taken as
part of Project Challenge, due to a revision in its scope. The
1997 charge includes a $10 million impairment writedown for our
investment in China in light of economic conditions there.
In the fourth quarter of 1996, we recorded a charge of $159 million for
restructuring and impairment of property and equipment related to
actions taken under Project Challenge. After years of strong growth,
the beverage can market in the United States and Canada had reached
maturity. In 1996, the market had increased only slightly over the
prior year resulting in an industry supply/demand imbalance, which led
to our decision to reduce annual capacity by in excess of three billion
cans.
The restructuring charge related primarily to the planned shutdown of
five can manufacturing facilities to eliminate production overcapacity.
One of these facilities (Jacksonville, Florida) was shutdown in
December 1996. The remaining reduction of capacity was planned to be
accomplished by the shutdown of three plants in 1997 and one in 1998.
In addition to the cost of the five plant shutdowns, the restructuring
charge covered the reorganization of operations at certain other
existing plants which would continue operations and the elimination of
certain executive and administrative functions at our headquarters and
other plants.
In May 1997, the San Juan, Puerto Rico facility was shutdown. In the
fourth quarter of 1997, we decided to defer to 2000 the shutdown
of the remaining two plants originally scheduled for shutdown in 1997.
These two plants primarily produce special-sized cans under contracts
that are scheduled to expire in 2000. Our shutdown plan for one of the
two plants originally contemplated certain capital investments to be
made to expand another plant to allow for the transfer of production of
the special-sized cans. A decision was made in 1997 not to make the
necessary capital investment and to continue to operate the plant. Our
plan for the second plant was to negotiate an early termination of the
contract or to make alternative supply arrangements. In 1997, we made a
decision to continue to operate the plants at approximately 50% of
capacity, incurring cash losses, which are recorded as incurred.
In 1998, based on a large customer's decision to reduce its purchases
in various geographic markets and on studies by outside consultants of
market demographics, our management decided not to close a plant
provided for in 1996 which at that time was expected to be closed in
1998, but rather to temporarily curtail production at several lines in
our facilities. As a result, the reserve of $17 million previously
established for employee termination and severance programs, lease
termination costs, facility costs and other exit costs related to this
plant was restored to income. A further restoration of $29 million
related to adjustments to the restructuring reserve for changes in
estimates of the number of employees to be terminated at plants
shutdown or to be shutdown, and higher-than-expected proceeds on the
sale of several plant sites.
In connection with the 1998 decision not to close the previously
identified plant and in response to the continuing oversupply of can
production capacity, in 1998 our management decided to close a
different plant in late 1999. Accordingly, a charge of $25 million was
recorded in 1998 to cover the costs of the new plant closure.
For further discussion of these items, please refer to Note 15 to our
Combined Financial Statements.
29
<PAGE>
Income (Loss) from Continuing Operations and Cumulative Effect of Accounting
Change
o Interest expense totaled $69 million in 1998, compared with $90 million
in 1997 and $95 million in 1996. These decreases reflect the continued
reductions in our debt levels. The $21 million decline in 1998 also
reflects the repayment of $473 million of intra-group debt as part of
a capital reorganization of ANC. You should refer to Note 1 to our
Continued Financial Statements for a discussion of this capital
reorganization. Our interest expense levels in 1999 and future years
may be significantly different from these historical figures because
of the change in our capital structure after this offering. In
particular, we expect that our financing will be entirely provided by
third-party lenders rather than Pechiney, which has provided a
significant proportion of our financing in recent years. You should
also refer to the discussion of our historical and prospective
financing sources and requirements in the "--Liquidity and Capital
Resources" discussion below.
o Interest income and other financial income (expense), net amounted to
$11 million in 1998, compared with $27 million in 1997 and $4 million
in 1996. Within this item, interest income totaled $14 million in 1998,
compared with $8 million in 1997 and $9 million in 1996. Interest
income in each year was partly offset by expenses related to the sale
of accounts receivable under our receivables sales agreement. The 1997
income amount also included a $21 million nonrecurring gain relating to
foreign currency forward contracts.
Effective March 31, 1999, we sold our 50% interest in the Container
Recycling Alliance partnership, a joint venture with Waste Management,
Inc. for the recycling of glass, at a gain of approximately $5 million.
The selling price was $9 million in cash, plus future payments to us
based on the partnership's operating results for the two years ending
December 31, 2000. The agreement specifies that such future payments
will not be less than $750,000 in the aggregate.
o Income tax expense amounted to $27 million in 1998, compared with $30
million in 1997 and an income tax benefit of $35 million in 1996. In
1998, we received a favorable tax settlement from the Internal Revenue
Service pertaining to federal income tax returns for the years 1985
through 1995. This settlement enabled us to write back $32 million of
our reserves for income taxes, which was offset against our income tax
expenses in 1998. Excluding this effect, our 1998 income tax expense
would have been $59 million. The income tax benefit in 1996 reflects
the losses we incurred in that year, due principally to our
restructuring charge.
Our effective tax rate was 18.6% in 1998, compared with 61.4% in 1997
and negative 18.3% in 1996. Our effective tax rate differs from the
statutory rate because our goodwill amortization (a relatively stable
amount in each period) is not deductible for tax purposes. This results
in a higher effective tax rate, particularly in years where profits are
lower. The rate also fluctuates as a function of varying profit levels
in foreign countries, where the tax rates differ. In 1998, excluding
the favorable tax settlement and the goodwill amortization effect, our
effective tax rate would have been 31.3%. In 1997, excluding the
goodwill amortization effect, the rate would have been 32.1%
o Equity in net earnings (loss) of affiliates (Korea, Mexico and Japan)
totaled $4 million in 1998, compared with losses of $3 million in 1997
and earnings of $1 million in 1996. In 1998, operations improved in
Mexico and Korea, compared with weak performance in 1997 which related
particularly to the devaluation of the Korean won at the end of 1997.
o Minority interest (relating to operations in Turkey and China)
remained relatively stable at $5 million in 1998 and 1997, compared
with $7 million in 1996.
30
<PAGE>
Income (loss) from continuing operations before the cumulative effect
of the accounting change totaled $116 million in 1998, compared with $10 million
in 1997 and a loss of $163 million in 1996. The cumulative effect of the
accounting change resulted in a $3 million charge in 1998, net of tax of $1
million.
Liquidity and Capital Resources
Liquidity and Capital Resources Prior to this Offering
In recent years, our primary sources of cash have been cash flow from
operations, advances and other intra-group borrowings from Pechiney, and the
following third-party financing transactions:
o We have a $500 million revolving credit facility with a syndicate of
commercial banks led by The First National Bank of Chicago. The
available lines of credit are due to expire on various dates from 2001
through 2003. At December 31, 1998, we had drawn $20 million under this
facility. Drawings bear interest based on a spread over Libor plus
certain other fees, as discussed in Note 7 to our Combined Financial
Statements. Currently, the only financial covenant in this facility is
a minimum net worth requirement.
o We have $228 million of privately placed notes outstanding, which are
due to be repaid on various dates from 2000 through 2008 (including
$110 million to be repaid in December 2003). Interest rates under the
notes are fixed and vary from 5.69% to 6.64% according to the note
series.
o We have a receivables sale facility under which we can sell up to $125
million of trade receivables to Windmill Funding Corporation and ABN
AMRO Bank N.V. At December 31, 1998, we had sold $38 million under this
facility. Currently, the only financial covenant in this facility is a
minimum net worth requirement.
o Vitro-American National Can, S.A. de C.V. has credit facilities
totaling $35 million from commercial banks that are partially
guaranteed by Pechiney.
The advances and other intra-group borrowings from Pechiney amounted to
$956 million at December 31, 1998.
In 1998, our debt to equity ratio was reduced to 0.80 compared to 1.75
in 1997 and 2.23 in 1996. The improvement in the ratio in 1998 reflects improved
earnings and cash flows as well as the impact of the capital reorganization of
ANC which reduced debt and increased equity by $473 million. You should refer to
Note 1 to our Combined Financial Statements for a discussion of the capital
reorganization. In 1997, the reduction in the ratio was the result of
forgiveness of $152 million of debt by Pechiney.
Liquidity and Capital Resources Following this Offering
As this offering will result in a change of control of our business, it
will affect our existing debt financing in the following ways:
o We will become subject to new financial covenants under the $500
million revolving credit facility and under the receivables sale
agreement (the same new covenants under both agreements).
o We will be required to make an offer to prepay the $228 million of
privately placed notes, which if accepted would also require us to pay
a make-whole premium to be calculated on the basis of prevailing
interest rates.
o The lenders under Vitro-American National Can's credit facilities will
be entitled to terminate the credit facilities when the offering is
completed.
o Pechiney has indicated that our intra-group advances and borrowings
will terminate or be transferred to Pechiney Plastics when the offering
is completed.
We are currently in discussions with our third-party lenders with
respect to these matters.
31
<PAGE>
As a separate entity, we will have a capital structure and financial
policies that are reflective of an independent company, allowing us to make
better capital allocation and investment decisions. We estimate that following
this offering we will require a total of approximately $1.2 billion of debt
financing and available lines of credit. We have commenced negotiations with
potential new third-party lenders to obtain some or all of this amount when the
offering is complete. In the future, our debt requirements may change depending
on our liquidity needs, our capital expenditure requirements, and our cash flow
from operations.
Capital Expenditures
Our business requires ongoing capital investments to maintain our
existing level of operations and implement productivity improvements. These
investments totaled $65 million in 1998, $72 million in 1997 and $142 million in
1996. The higher levels of spending in 1996 included investments for
construction and start-up of our Brazilian plant. Excluding the Brazilian
investment, our 1996 capital expenditures would have been $85 million. The
reductions in spending over the three-year period (excluding Brazil) reflect our
drive for further efficiency and productivity through lean manufacturing rather
than high levels of capital spending. Capital expenditures in 1998 focused on
achieving manufacturing improvements by installing equipment to improve quality
and reduce labor cost.
Cash Flows
The following table shows selected cash flow data for our continuing
operations in 1998, 1997 and 1996.
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------
1996 1997 1998
------------- ----------- -----------
($ in millions)
<S> <C> <C> <C>>
Net cash provided by operating activities of continuing
operations ................................................ 4 65 150
Net cash used in investing activities of continuing
operations ................................................ (119) (57) (58)
Net cash provided by (used in) financing activities of
continuing operations...................................... 99 (3) 26
Cash and cash equivalents at end of year...................... 66 106 171
</TABLE>
In 1998, net cash provided by operating activities of continuing
operations totaled $150 million, driven by $116 million of income from
continuing operations and depreciation and amortization of $123 million,
together with a $31 million provision for deferred income taxes. In 1998, we
reduced our net trade working capital (defined as inventories, accounts
receivable and accounts payable) by an aggregate of $9 million compared with
1997. This was achieved principally through a decrease in inventory balances in
the United States as a result of the Project Challenge cost reduction program.
Offsetting these cash flows were $35 million of noncash pension income and $32
million related to our favorable tax settlement from the Internal Revenue
Service, which was recorded as income but did not generate a cash benefit.
In 1997, net cash provided by operating activities of continuing
operations totaled $65 million, driven by income from continuing operations of
$10 million and depreciation and amortization of $119 million. Pension funding
of $55 million reduced the cash provided by operating activities. Although our
trade working capital remained relatively stable on a net basis, both
receivables and payables increased during the year as a result of the start-up
in Brazil. Increased inventories in Brazil were more than offset by inventory
reductions achieved in the United States, which accounted for our overall $6
million reduction in inventories during the year.
In 1996, net cash provided by operating activities of continuing
operations totaled $4 million. The loss from continuing operations of $163
million was partly offset by the $159 million restructuring provision and
depreciation and amortization of $115 million. We reduced our net trade working
capital by $39 million. The cash generated by these items was principally used
to fund pension plan contributions of $119 million and $23 million of
restructuring expenditures. The fluctuations in trade working capital items
during the year were principally due to the decline in metals prices, which
affect our inventory carrying value and selling prices. The $81 million
inventory reduction reflected theses lower metals prices as well as a decline in
quantities. The $53 million decrease in accounts receivable was due principally
to lower selling prices (due to lower metals prices), as well as reduced payment
periods, while accounts payable declined by $95 million due also to lower metals
prices.
32
<PAGE>
Net cash used in investing activities of continuing operations remained
relatively stable at $58 million in 1998 and $57 million in 1997. This item
includes our capital expenditures net of the proceeds of sales of assets. The
increased levels of capital expenditures in 1996 related to investments for
construction of our Brazilian plant.
Net cash provided by financing activities of continuing operations in
1998 totaled $26 million, reflecting the reorganization of our capital structure
in Europe. In that reorganization, we exchanged stock interests in certain
European subsidiaries for the sum of $883 million. This funded a dividend to
Pechiney of $410 million (which is included in the $425 million of dividends
paid in that year) and a $473 million repayment of long-term debt owed to
Pechiney (which is included in the $596 million of payments of long-term debt in
that year).
In 1997, net cash used in financing activities of continuing operations
totaled $3 million. This amount included $28 million in payments on long-term
debt and $8 million in dividends paid. In 1996, net cash provided by financing
activities of continuing operations totaled $99 million, which included net new
long-term debt of $88 million (offset by a $37 million decrease in short-term
debt) as well as a $66 million capital contribution from Pechiney related to the
new investment in Brazil.
At December 31, 1998, we had a total of $148 million of net operating
losses recorded on our balance sheet as deferred income taxes. In conjunction
with the reorganization of Pechiney's packaging operations which resulted in our
formation, we expect that plastic packaging technology with a currently
estimated value of $70 million will be sold to another subsidiary of Pechiney.
This sale should give rise to a tax charge of $28 million which we will offset
against a portion of our net operating losses. Following the reorganization, on
a pro forma basis, we have a total of $120 million of available U.S. net
operating losses.
U.S. tax rules impose an annual limit on the amount of net operating
loss and tax credit carryforwards that may be used by a company following a
change in its ownership of more than 50%. These rules apply because Pechiney is
selling more than 50% of our shares. The annual limitation on tax benefits from
these carryforwards is equal to the product of (i) the federal income tax rate
multiplied by (ii) an amount equal to the product of (x) the federal long-term
tax exempt rate multiplied by (y) the fair market value of the company on the
date of the ownership change. We do not expect this limiation to have a material
impact on our ability to utilize our net operating losses and tax credit
carryforwards.
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to various market risks, including fluctuations in
metals prices, foreign exchange rates and interest rates on our debt. Prior to
this offering, these risks were managed principally through Pechiney's risk
management system. We are implementing a worldwide ANC risk management program
to assess our exposure to market risk and implement protection policies.
Metals Prices
The principal raw material used in manufacturing beverage cans is
aluminum can sheet and steel can sheet. Unless otherwise fixed by contract, can
sheet prices vary in relation to the market prices for aluminum and steel. The
market price of aluminum has historically been volatile, while the market price
of steel has been more stable.
We generally do not use commodity derivative instruments. We generally
limit our exposure to aluminum price fluctuations by matching the terms of our
aluminum purchase contracts with the terms of our customer sales contracts. In
the United States, several major suppliers of aluminum can stock offer pricing
systems which provide a "band" pricing formula. Under these contracts, the price
of aluminum can stock varies with aluminum quotations, but only within a band
(i.e., an upper limit and lower limit) for a period of up to five years. Other
suppliers offer to supply aluminum can stock on the basis of a capped ingot
price, but without a lower limit price. In the United States, we have entered
into long-term sales contracts with many of our customers, in which the selling
price for beverage cans is based on similar pricing formulas. These sales
contracts cover over 90% of our net sales in North America.
In Europe, over 60% of our net sales are made under long-term contracts
of varying lengths. Pricing on most of these contracts is determined on an
annual basis. We manage our exposure to aluminum price volatility in Europe by
matching aluminum purchases to sales agreements for similar periods. Steel
prices have historically been stable and we expect our existing long-term
contracts to give us continued price stability for steel.
33
<PAGE>
Foreign Exchange Rates
We are exposed to two types of risks related to currency exchange
rates: transaction risk and translation risk.
Transaction Risk. Transaction risk occurs when one of our operating
units enters into a foreign currency denominated transaction, with the result
that its expenses are denominated in a different currency from its revenues.
This risk is not significant in our United States operations, since we both
purchase raw materials and sell cans in transactions denominated in U.S.
dollars. The introduction of the Euro on January 1, 1999 eliminated transaction
risk between the 11 European countries participating in the European Monetary
Union (known as the "Euro zone"). Therefore, in our business, this risk arises
principally in the United Kingdom.
Within the United Kingdom, where our functional currency is the British
pound, we purchase can sheet in Euros from suppliers in Euro zone countries. If
the Euro exchange rate rises against the British pound, the relative cost (in
British pounds) of the can sheet rises. To protect against this risk, when we
enter into a long-term agreement to purchase can sheet, we hedge the risk by
entering into a forward purchase of Euros. This effectively fixes the rate at
which we will be able to obtain the Euros we will require to make payments under
the contract, thereby eliminating the transaction risk.
Similarly, we sell a portion of our U.K. can production to customers in
Euro zone countries. These sales are denominated in Euros. If the Euro declines
in value against the British pound, the amount of revenues (in British pounds)
declines. When we enter into a long-term sales agreement, we hedge this risk
through a forward sale of Euros. This effectively fixes the rate at which we
will be able to sell the Euros we expect to receive in the future.
Our policy is to use currency exchange instruments only to hedge
against firm commitments under foreign currency denominated contracts to
purchase raw materials or sell beverage cans. Our policy is not to engage in
speculative foreign exchange transactions.
Translation Risk. Translation risk occurs when the functional currency
of a foreign business' financial statements is converted into our reporting
currency, the U.S. dollar. For example, the assets, liabilities, revenues and
expenses of our European operations must be translated into U.S. dollars for
inclusion in our combined financial statements. To the extent that the exchange
rates of the British pound and Euro relative to the U.S. dollar vary, the
reported values of European assets and liabilities and the amount of their
recorded earnings will change. We do not hedge against this particular
translation risk.
In Brazil and Turkey, which experience significant currency volatility,
and where our functional currency is the U.S. dollar, we attempt to balance
local currency denominated monetary assets and liabilities to manage translation
risk. When this is not possible, we hedge translation risks that could have a
negative impact on the cash flows of the business. For example, in Brazil, can
sales are invoiced in Brazilian reals, whereas metal and certain other purchases
are U.S. dollar denominated. We therefore enter into forward sales of Brazilian
reals in order to fix the rate at which our Brazilian real receivable
collections can be converted into the U.S. dollars required for metal purchases.
Our Currency Instruments. Approximately 90% of our currency hedging
instruments by nominal value have Pechiney as the counterparty. Following the
offering, the existing instruments with Pechiney (which are forward purchase
contracts and forward sale contracts) will remain in place until they mature. At
December 31, 1998, we held forward contracts to purchase $321 million of foreign
currency and to sell $90 million of foreign currency. These commitments extend
through July 2003. The carrying value of these instruments in our accounts is
approximately equal to their fair value, as illustrated by the tables below.
34
<PAGE>
<TABLE>
<CAPTION>
As of December 31, 1998
----------------------------------------------------------
Maturing Within Maturing Between
Total 1 Year 1-5 Years
------------- -------------------- -------------------
($ in millions)
<S> <C> <C> <C>
Nominal Value:
Forward purchases
Euros(1)...................... 315 230 85
British pounds................ 1 1 -
Other......................... 5 5 -
--------- ------- -------
Total....................... 321 236 85
========= ======= =======
Forward sales
Euros(1)...................... 24 24 -
British pounds................ 22 22 -
Brazilian reals............... 42 42 -
Other......................... 2 2 -
--------- ------- -------
Total....................... 90 90 -
========= ======= =======
Fair Value:
Forward purchases
Euros(1)...................... (2) 5 (7)
British Pounds................ - - -
Other......................... - - -
--------- ------- -------
Total...................... (2) 5 (7)
========= ======= =======
Forward Sales
Euros(1)...................... - - -
British Pounds................ - - -
Brazilian reals............... - - -
Other......................... - - -
--------- ------- -------
Total...................... - - -
========= ======= =======
- -----------------------------
<FN>
(1) This item consists of contracts originally denominated in French francs, German marks, Dutch
guilders, Belgian francs and Spanish pesetas, which are now denominations of the Euro.
</FN>
</TABLE>
Fair value amounts represent the sum that we would receive (or pay) if
the instrument were to be unwound as of December 31, 1998. Since these
instruments relate to firm commitments, any gain or loss arising from the
mark-to-market would be offset by a gain or loss on the foreign currency
exposures they hedge.
Interest Rate Risks
Currently, approximately 80% of our debt is at variable interest rates,
which results in exposure to increases in interest rates. We hedge a small
portion of our current exposure using an interest rate cap instrument
denominated in French francs, as illustrated by the table below.
35
<PAGE>
<TABLE>
<CAPTION>
As of December 31, 1998
----------------------------------------------------------
Maturing Within Maturing Between
Total 1 Year 1-5 Years
------------- -------------------- -------------------
($ in millions)
<S> <C> <C> <C>
Nominal Value:
Purchase of caps............... 9 - 9
------ ----- -----
Total......................... 9 - 9
====== ===== =====
Fair Value:
Purchase of caps............... 0 - 0
----- ----- -----
Total......................... 0 - 0
===== ===== =====
</TABLE>
Since our intra-group debt provided by Pechiney will be terminated or
transferred to Pechiney Plastics on completion of the offering, and we are
currently in negotiations with potential new third-party lenders, our proportion
of fixed and variable rate debt, and our exposure to increases in interest
rates, may be significantly different following this offering.
Year 2000
Many computerized systems and microprocessors that are embedded in a
variety of products that we use may experience operational problems if they
cannot handle the transition to the Year 2000. We are currently completing a
program designed to ensure that our internal software systems and installed
electronics will function properly with respect to dates in the Year 2000 and
afterwards, and that our suppliers will be Year 2000 compliant. This program has
consisted of identifying potential risks and carrying out appropriate corrective
action.
Risk Analysis. The process of identifying risks covered all of our
information processing and automated industrial control systems, computer-based
management systems, communications networks and security and access control
systems. In 1996, we identified all systems at risk and planned appropriate
corrective action.
Corrective Action. Our corrective action program has covered internal
systems, installed electronic components and supplier compliance.
o We purchased new computer systems to replace our old mainframe systems
that were not compliant and which could not be upgraded practicably.
In 1998, we purchased and installed a new SAP R/3 financial software
package in the United States. Currently, we are installing a new SAP
purchasing package in the United States and new SAP financial software
across Europe (except for England and Spain). We expect to have
completed installation of these packages by the end of the second
quarter of 1999. Our operations in the United Kingdom and Spain are
upgrading their Oracle financial software to a compliant version, and
we expect to complete the upgrade in July 1999. Finally, we are
installing Paradigm ERP software to replace our production, customer
services, distribution and sales invoicing systems worldwide. We
expect to complete installation of this software by the end of October
1999.
o We conducted an inventory of all ANC locations worldwide to identify
all items that contained electronic components. We then contacted the
manufacturers of those components and sought written assurances of Year
2000 compliance. Where items were identified as non-compliant, or where
we received no response, we are implementing corrective action
consisting of reprogramming, removing or replacing the item. We expect
to have completed this action by the end of the second quarter of 1999.
o We have surveyed our major suppliers (including both hardware and
software suppliers) and have sought assurances that their systems will
be compliant. From the answers given, we believe that our major
suppliers will generally be in compliance. In a minority of cases, we
are continuing the audit or repeating our request for assurances. In
particular, we believe that the level of compliance in emerging markets
such as Brazil, Turkey and China is not as high as in North America
and Europe.
36
<PAGE>
Contingency Plans. We are currently drawing up contingency plans that
specify back-up procedures in the event that internal or external processes,
systems or services fail. We expect to complete these plans by the end of the
second quarter of 1999.
Expenditures. On the basis of currently available information, our
budgeted spending on Year 2000 issues will amount to approximately $3 million
when all action is completed. Of this amount, we estimate that we had spent
almost $1.5 million as of March 31, 1999. These figures refer only to external
costs related directly to Year 2000 compliance issues, consisting of the cost of
purchasing hardware, software and outside consultant support for installation.
They do not include the cost of upgrading or replacing software and equipment,
which were commissioned independently, such as SAP and Paradigm. We estimate
that these separately commissioned costs will total approximately $18 million,
of which we spent approximately $10 million as of March 31, 1999.
Likely Effect on Our Business. In light of the foregoing, we do not
currently anticipate that we will experience a significant disruption to our
business as a result of the Year 2000 issue. Our most likely risk is a temporary
inability of suppliers to provide supplies of raw materials or of customers to
pay on a timely basis, particularly in emerging markets. We believe that we have
dedicated sufficient resources to deal with the Year 2000 issue in a timely
manner. However, our efforts are ongoing and will continue to evolve as new
information becomes available. There is still uncertainty about the broader
scope of the Year 2000 issue as it may affect us and third parties, including
our suppliers and customers. For example, lack of readiness by electrical and
water utilities and other providers of general infrastructure could, in some
geographic areas (particularly emerging markets), pose significant impediments
to our ability to carry on normal operations in those areas, including temporary
plant closures or delays in receiving supplies or shipping beverage cans.
Accordingly, while we believe our actions should significantly lessen Year 2000
risks, we are unable to eliminate these risks or to estimate their ultimate
effect on our operating results.
Introduction of the Euro
On January 1, 1999, 11 member states of the European Union adopted a
common currency known as the Euro. Their previous national currencies became
denominations of the Euro for a transitional period expected to end in 2002, and
the exchange rates between these currencies and the Euro were fixed.
We conduct business in the majority of the countries concerned. We
believe that the introduction of the Euro will simplify the management of cash
flows among the ANC entities operating in the Euro zone. The Euro has become the
prime currency for metal purchasing in the Euro zone, and we have adopted it as
the currency for all our intra-group billing in the Euro zone. The absence of
exchange rate fluctuations between these currencies has eliminated the need for
a large amount of currency hedging in our European operations. However, Britain
is not a part of the Euro zone and currency fluctuation risk between the British
pound and the Euro remains.
The introduction of the Euro is thought to have increased price
transparency between countries in the Euro zone, particularly for consumer
goods. We do not believe this will have a significant negative impact on our
results, since we sell beverage cans to large international buyers in a market
that is relatively insensitive to this increased price transparency.
Significant Recently-Issued Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement requires that all
derivatives be recognized as assets and liabilities and measured at fair value.
Changes in the fair value of derivatives not qualifying as hedges are required
to be reported in earnings. We will be required to adopt this standard in our
financial statements for the year ending December 31, 2000. Our management is in
the process of evaluating the standard and has not yet determined the future
impact on our financial statements.
37
<PAGE>
OVERVIEW OF THE GLOBAL BEVERAGE CAN INDUSTRY
Overview
In 1998, worldwide industry shipments of two-piece beverage cans
exceeded 200 billion cans. North America was the single largest market with
approximately 114 billion cans shipped in 1998, including nearly 103 billion in
the United States alone, followed by Europe with approximately 33 billion cans.
The U.S. and European markets, with a population base of approximately 600
million people, or approximately 20% of the world population, accounted for
approximately 68% of worldwide industry shipments in 1998. The remaining market
was split among Asia-Pacific (approximately 40 billion), South America
(approximately 14 billion) and Africa and the Middle East (approximately 7
billion).
Soft drinks and beer comprise substantially all of the global beverage
can markets. In 1998, soft drink cans represented approximately 68% and beer
cans 32% of the total beverage can market in the United States. In Europe, the
proportions were approximately 57% and 43%, respectively. Throughout the world,
the beverage can competes with bottles made from glass and plastic. For a
discussion of competing products, see "Business of ANC--Competition" and "Risk
Factors--We are subject to competition from alternative products which could
have an adverse effect on our financial condition, results of operations and
cash flows."
Significant industry conditions
The global beverage can industry is characterized by a number of
factors, which we believe generally favor the beverage can:
o Strong and increasing carbonated soft drink consumption. Carbonated
soft drink consumption volumes and per capita consumption have
increased steadily each year in both the United States and Europe
between 1990 and 1998. In addition to retail prices and weather
conditions, advertising and promotion by major soft drink producers
have largely contributed to these increases. These factors have
continued to drive volume growth in can shipments in both of our
primary markets.
o Significant carbonated soft drink demand potential. In Europe, per
capita carbonated soft drink consumption is less than one-third that of
the United States. We believe the European market has strong growth
potential. In Eastern Europe and the emerging markets of Asia and Latin
America, consumption lags significantly behind the United States, and
the package mix is dominated by glass. We believe that in the long term
many of these markets will grow substantially, and that the appeal of
the can will offer long-term growth potential as economic and
demographic growth occurs over time.
o Continuing industry concentration and alignment. The carbonated soft
drink market is highly concentrated with Coca-Cola and Pepsi-Cola being
the principal owners of carbonated soft drink brands. The market
leader, Coca-Cola, had a global market share of 51% in 1998. Beverage
can bottlers, our customers, are also highly concentrated and many are
affiliates of Coca-Cola or Pepsi-Cola. We believe increased
concentration among major carbonated soft drink and beer bottlers will
provide the beverage can with continued opportunities for growth. In
addition, the industry has experienced greater concentration and
alignment between major carbonated soft drink bottlers and beverage can
producers, and we believe this trend will continue. The beer market,
which in Europe has traditionally been more fragmented than the
carbonated soft drink market, is experiencing similar trends.
o Established distribution channels. The can is firmly established in
mass retail distribution channels in the United States. In addition,
the can benefits from a large installed base of filling equipment at
beverage
38
<PAGE>
producers' plants. There is also a significant number of existing can
vending machines in the United States and, to a lesser extent, in
Europe.
o Favorable trends in beer markets. In Europe, despite a gradual decline
in consumption, the shift to take-home beer consumption has benefited
the can, spurring growth in both can shipment volumes and market share
between 1990 and 1998. In the United States, beer consumption decreased
slightly between 1990 and 1998, but we believe the beer market will
increase as the children of baby boomers reach the legal drinking age
of 21 beginning in the year 2000.
o Changing product mix. In the carbonated soft drink markets of the
United States and Europe, plastic has gained market share in the recent
past. Although the can has continued to experience steady growth in
terms of units, it has lost market share in these markets. Plastic
bottles have attributes that make them competitive against the can, in
particular in the single-serve beverage market, including
resealability, clarity and shapability. In addition, plastic is less
expensive than the can for larger-size containers on a per ounce basis.
In the U.S. beer market, the can has declined at the expense of glass.
On the contrary, the can is stable in the European beer market.
o Enhanced Customer value. Notwithstanding the continued growth of
plastic market share, the can maintains several competitive advantages
over plastic and glass. The can is generally less expensive than
plastic and glass bottles on a per package basis, and is generally
priced competitively in retail outlets, particularly for soft drink
multi-packs. The can demonstrates superior economics in shipping,
handling and stacking. Other advantages include: higher filling speeds
compared to narrow-necked glass and plastic bottles; lighter weight;
resistance to breakage; superior shelf life and product freshness
compared to plastic; large promotional space; and a high rate of
recycling (63% in the United States in 1998 and over 80% in certain
European countries). Both carbonated soft drink and beer producers
create significant advertising awareness for the beverage can by using
it as a vehicle for promotional activities. We believe that these
attributes continue to make the can an attractive and competitive
package in both the carbonated soft drink and beer markets.
The U.S. and European beverage can markets
The table below shows the volume of two-piece beverage can shipments
for carbonated soft drinks and beer in the United States and in Europe for the
1990-1998 period.
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994(1) 1995 1996 1997 1998
---- ---- ---- ---- ------- ---- ---- ---- ----
Cans (billions of units)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States
Soft drinks................... 53.3 55.8 57.5 60.1 66.3 62.6 64.5 66.5 69.5
Beer.......................... 39.2 38.8 38.2 37.5 36.8 35.5 34.6 34.2 33.4
---- ---- ---- ---- ---- ---- ---- ---- -----
Total......................... 92.5 94.6 95.7 97.6 103.1 98.1 99.1 100.7 102.9
==== ==== ==== ==== ===== ==== ==== ===== ======
Europe
Soft drinks................... 12.3 14.2 14.6 14.9 16.9 18.6 17.9 19.0 19.0
Beer and other alcoholic drinks 8.6 9.8 10.2 10.6 12.2 13.8 14.1 14.1 14.1
----- ----- ---- ---- ---- ---- ---- ---- -----
Total......................... 20.9 24.0 24.7 25.4 29.1 32.3 32.0 33.1 33.1
==== ==== ==== ==== ==== ==== ==== ==== ====
Source: Can Manufacturers' Institute and Beverage Can Manufacturers Europe
<FN>
(1) In 1994, 2.8 billion units were purchased in advance in anticipation of a metal price increase.
</FN>
</TABLE>
In the United States, the market for beverage cans grew from 92.5
billion cans in 1990 to nearly 103 billion cans in 1998. This growth reflected
increased consumption of carbonated soft drinks and the growth of cans in mass
merchandise channels, particularly in supermarkets and warehouse clubs, where
multi-pack pricing is competitive. Beverage can shipments for soft drinks grew
at a 3% compound annual rate from 1990 to 1998, while beer can shipments
experienced gradual volume loss of approximately 2% annually. Limited market
growth (particularly since 1993), overcapacity and price competition in the
United States have created a more challenging marketplace.
In Europe, the market for beverage cans grew from approximately 21
billion cans in 1990 to more than 33 billion cans in 1998. Total beverage can
shipments increased at a compound annual rate of approximately 6% from 1990 to
1998, driven by an increase in per capita consumption of carbonated soft drinks
reflecting changes in customer lifestyle, increased use of the can in the beer
market compared to other packaging products, and the opening up of Eastern
European economies. Europe consists of many beverage can markets with varying
characteristics and factors impacting growth. Northern Europe (consisting of the
U.K., France, Germany and
39
<PAGE>
Holland) has represented the largest market for beverage cans in Europe since
1990. Beverage can penetration is lower in Southern Europe (consisting of Italy,
Spain and Portugal), representing a potential growth opportunity for the
industry.
The carbonated soft drink market
The table below shows, for the 1990-1998 period, total volumes and per
capita consumption of carbonated soft drink in the United States and Europe.
Volume is expressed in U.S. gallons and includes sales at soda fountains.
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States
Volume (billions of U.S. gallons) 12.0 12.2 12.4 12.7 13.3 13.8 14.2 14.7 15.2
Per capita (U.S. gallons)..... 48.0 48.4 48.8 49.7 51.5 52.2 53.4 54.6 56.1
Europe
Volume (billions of U.S. gallons) 6.1 6.2 6.5 6.4 6.8 7.1 7.1 7.5 7.7
Per capita (U.S. gallons)..... 14.2 14.3 14.8 14.7 15.4 16 15.9 16.7 17.0
Source: Beverage Marketing Corporation and Canadian
</TABLE>
Total carbonated soft drink volume (or "gallonage") has increased at a
compound annual rate of approximately 3% in the United States since 1990. Per
capita consumption of carbonated soft drinks has grown at a compound annual rate
of approximately 2% from 1990 through 1998, reaching 56.1 U.S. gallons (212
liters) per person in 1998. Changes in customer lifestyle and the increased
number of younger consumers in the United States fueled total volume growth and
per capita consumption of carbonated soft drinks during that period. On a
year-on-year basis, the principal factors driving changes in carbonated soft
drink consumption in the United States are retail price and weather conditions.
Another contributing factor is advertising and promotion by major soft drink
producers. In Europe, total carbonated soft drink volume has increased at a
compound annual rate of approximately 3% since 1990 and per capita consumption
of carbonated soft drinks has grown at a compound annual rate of approximately
2% during the same period, reaching 17 U.S. gallons (64 liters) per person in
1998. This increase is largely due to changes in customer lifestyle, promotional
activities of major carbonated soft drink producers and weather conditions.
Despite faster growth than in the United States, per capita consumption in
Europe in 1998 was less than one-third that of the United States.
The table below shows, for the 1990-1998 period, the carbonated soft
drink package mix in the United States and Europe.
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ----
(percentages of total gallonage)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States
Cans............................... 54 54 53 53 53 51 50 49 48
Glass (single-serve)............... 12 10 9 8 5 3 1 1 1
Plastic (non-returnable single serve) 3 4 5 6 8 11 13 16 18
Plastic (non-returnable multiple serve) 31 32 33 34 34 36 36 34 33
---- ---- ---- ---- ---- ---- ---- ---- ----
Total.............................. 100 100 100 100 100 100 100 100 100
=== === === === === === === === ===
Europe
Cans............................... 18 19 19 19 19 20 19 19 19
Glass (single serve)............... 21 16 14 14 13 12 11 11 10
Glass (multiple serve)............. 30 28 25 21 18 14 12 11 10
Plastic (single serve)............. 0 1 1 1 2 3 3 4 4
Plastic (multiple serve)........... 31 36 40 45 48 51 55 56 57
---- ---- ---- ---- ---- ---- ---- ---- ---
Total.............................. 100 100 100 100 100 100 100 100 100
=== === === === === === === === ===
Sources: Our estimates based on the following external sources: Beverage World, Beverage Marketing Corporation , Container
Consulting, CMI, Canadian and customer interviews.
</TABLE>
40
<PAGE>
In the United States, the can remains the dominant package in the
single serve category, but faces strong competition. While increasing on a unit
basis, the can lost more than 6% in market share between 1990 and 1998 to
plastic containers, particularly in the single-serve 20-oz size. The recloseable
feature of the plastic container has contributed to its growth in refrigerated
distribution channels for immediate consumption, particularly in convenience
stores. The 20-oz plastic container is also being established in the vending
machine distribution channel. In 1990, glass still held more than 10% of the
U.S. carbonated soft drink market, but it has since been virtually replaced by
plastic.
The can is firmly established in mass retail distribution channels,
mostly supermarkets and warehouse clubs, principally due to competitive
multi-pack pricing. More than 40% of the packaged carbonated soft drink volume
in the U.S. is distributed in supermarkets. Within this distribution channel,
the can has a 55% share. In 1996, 50cl and 24-oz plastic multipacks were
introduced in supermarket distribution channels and priced directly against the
twelve-can multipack. However, the can has held its position in the mass retail
distribution channel. The market share of two-liter and three-liter multiple
serve plastic packages increased until 1995, but has recently declined.
In Europe, growth in the volume of can shipments since 1990 has
reflected volume growth of carbonated soft drink consumption, as the can has
maintained a steady market share of approximately 19% of the package mix.
Refillable and non-refillable plastic packaging, which accounted for
approximately 61% of the total soft drink package mix in 1998, has captured
market share from refillable glass since 1990. However, as multi-packing of cans
is being introduced gradually to continental Europe, we believe this packaging
format, combined with heightened customer marketing and the potential for
increased per capita consumption, creates potential opportunities for can growth
in Europe. In particular, the distribution and retail systems in Southern Europe
require longer shelf life and therefore favor the beverage can, with its
superior shelf life and product freshness, over plastic bottles.
The beer market
The table below shows, for the 1990-1998 period, total volume and per
capita beer consumption in the United States and in Europe.
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States
Volume (billions of U.S. gallons) 6.0 5.9 5.8 5.8 5.9 5.8 5.9 5.9 6.0
Per capita (U.S. gallons)........ 24.0 23.2 23.0 22.6 22.5 21.9 22.0 22.0 23.0
Europe
Volume (billions of U.S. gallons) 8.6 8.4 8.5 8.3 8.4 8.4 8.2 8.3 8.2
Per capita (U.S. gallons)........ 19.9 19.4 19.5 18.8 19.0 18.8 18.3 18.4 18.2
Source: Beverage Marketing Corporation and Canadian
</TABLE>
The total U.S. beer market remained relatively flat from 1990 to 1998.
Although consumption of imported beer continued to grow, domestic beers
(including both premium brands and budget brands) have suffered in recent years
as U.S. consumers have favored more sophisticated, higher priced brands over
low-cost, mass-produced brews. The specialty segment, which includes microbrews,
has grown significantly. The light beer segment, with low-calorie versions of
many premium brands, has also been attracting a significant number of consumers.
In Europe, the overall market for beer has experienced a gradual
decline in consumption since 1990. However, the market has been characterized by
a shift from on-premise consumption in bars, cafes, restaurants and hotels to
take-home consumption, which has benefited the can.
41
<PAGE>
The table below shows, for the 1990-1998 period, the beer package mix
in the United States and in Europe.
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ----
(percentages of total gallonage)
United States
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cans.......................... 70 70 69 67 64 61 62 61 59
Glass (single serve).......... 30 30 31 33 36 39 38 39 41
---- ---- ---- ---- ---- ---- ---- ---- ---
Total......................... 100 100 100 100 100 100 100 100 100
=== === === === === === === === ===
Europe
Cans.......................... 17 18 18 20 22 24 25 25 25
Glass (single serve).......... 77 76 75 74 72 70 69 69 69
Glass (multiple serve)........ 7 6 6 6 6 6 6 5 5
----- ----- ----- ---- ---- ----- ----- ---- -----
Total......................... 100 100 100 100 100 100 100 100 100
=== === === === === === === === ===
Sources: Our estimates based on the following external sources: Beverage World, Beverage Marketing Corporation , Container
Consulting, CMI, Canadian and customer interviews.
</TABLE>
In the United States, changes in the beer package mix have reflected
consumption trends. In the present strong economy, consumers have traded up to
premium and specialty brands and the introduction of new brands by major brewers
has benefited glass packaging. The can, the major container in the budget
segment, is experiencing volume losses as that category declines. The erosion of
the can's market share and volume slowed, however, between 1995 and 1998.
Packaged beer continues to take market share from draught beer in most
European countries. The take-home consumption trend has benefited the can. The
can has increased its share of the beer package mix from 17% in 1990 to 25% in
1998.
Other beverage can markets
In 1998, the U.S. and European markets, with a population base of
around 600 million people, consumed approximately 135 billion two-piece beverage
cans, equivalent to about 225 cans per person. Compared to the United States and
Europe, per capita consumption of beverage cans remains low in emerging
countries. Based on a global market of 200 billion two-piece beverage cans,
outside the United States and Europe annual per capita consumption is only about
15 cans per person. In these markets, glass dominates the package mix,
reflecting the traditional preference for less expensive multiple serve
returnable containers over the can, which is still perceived and marketed as a
premium product. However, we believe, over time, as Asian and Latin American
economies recover from their present economic difficulties, demographic growth
and the appeal of the can as a product representing a higher standard of living
(particularly in Latin America) offer substantial long-term growth potential for
the beverage can.
42
<PAGE>
BUSINESS OF ANC
Our key business strengths
o ANC is a global leader. We believe we are the second largest producer
of two-piece beverage cans and ends in the world, based on 1998 net
sales. We are the second largest beverage can manufacturer in the
United States with a market share of approximately 25%. In Europe, we
are the largest beverage can manufacturer, with approximately 31% of
the market.
o ANC has excellent customer alliances. We have long-term customer
relationships with global beverage producers. The Coca-Cola Company and
its affiliated bottlers make up 51% of our global portfolio. We also
enjoy strong relationships with major brewers in many of the markets in
which we supply cans.
o ANC has strategically located facilities. With 22 plants in the United
States, 13 plants in Europe, and operations in Mexico, Brazil, China,
Japan and South Korea, we are well-balanced to supply our
geographically diverse customers' requirements.
o ANC is a leader in product innovation and differentiation. As a part of
our customer-focused approach, we have sought to provide our customers
with the means to differentiate themselves through product innovation.
We were the first can manufacturer to introduce commercial shaped and
embossed cans to the marketplace. We are on the leading edge of
promotional concepts such as tab incising, colored tabs and ends, and
new ink technologies.
o ANC's management is focused on the beverage can. Our exclusive business
is the production and sale of beverage cans and ends. Our management is
dedicated to making the best strategic decisions for the supply of
quality beverage cans and ends to our customers.
Our strategy
Our strategy aims to create shareholder value through superior
profitability and cash generation. To achieve this goal, we have developed
several key strategic initiatives.
Capitalize on favorable conditions in developed markets
We are a leader in the developed beverage can markets of the United
States and Northern Europe. These markets represent a strong volume base and
steady growth for the beverage can. We intend to continue to focus on
maintaining our strategically located facilities in these markets. We believe
our network of plants is poised to benefit from the steady growth of these
stable markets with limited additional capital expenditure.
Pursue profitable growth opportunities in Europe and emerging markets
We believe Southern Europe and emerging markets in Asia and Latin
America, where per capita beverage consumption and beverage can penetration are
lower than in the United States, represent attractive opportunities for
profitable growth. We are the largest player in the growing market of Southern
Europe. We intend to add incremental capacity to our existing facilities to
supply these markets with only limited increases in our capital expenditures. We
also continue to monitor a number of emerging markets looking for attractive
strategic acquisitions or investments. We currently have strategic market
positions in emerging markets such as Mexico, Brazil and China. As our global
customers expand in these markets, we will be well-positioned to serve them and
participate in their growth.
Provide superior customer service and satisfaction
We have forged successful long-term relationships with several global
beverage producers. Our long-term customer relationships and outstanding service
capabilities make us a key player in our principal markets. We believe
outstanding customer service has been key to maintaining our close customer
relationships and represents a competitive strength. We have developed
value-added, innovative services for our customers, including a technical
43
<PAGE>
team that leverages our manufacturing experience by providing them on-site
production assistance. We intend to enhance this strength by continuing to focus
on greater product quality, customer support, and product innovation to add
value to our customers' operations and enhance customer satisfaction.
Continuously improve productivity and reduce costs
We have undertaken three specific cost reduction programs in the past
five years: Project Challenge, Next Level, and our total quality production
system program, which we refer to as "ANC Production System". Project Challenge
was introduced in 1996 as a business-wide cost reduction program. The program's
objective was to reduce the 1995 cost base (excluding metal costs) by 20% before
the end of 1999, an outcome we achieved by year-end 1998. Building on the
success of Project Challenge, in 1998 we introduced "Next Level," a continuous
improvement process that seeks to increase productivity and reduce costs while
limiting additional capital expenditures. This ongoing program has already
produced concrete results in the United States, including a 4% improvement in
the number of cans produced per man-hour in 1998 over 1997. Our third
improvement program, ANC Production System, implements the principles of "Lean
Manufacturing" through a comprehensive overhaul of our production processes.
Lean Manufacturing is the systematic identification and elimination of waste,
where waste is defined as anything that does not add value to the product. We
believe the cost reductions we anticipate through ANC Production System will be
a significant competitive advantage for us.
Attract and develop the best human capital
We recognize that achieving our objectives will depend in large part
upon maintaining the highest quality management team. To this end, we are
strengthening our human resources through new leadership and improved
performance management. We are changing our culture by blending the best of our
existing internal resources with externally recruited proven talent with new
ideas from benchmark companies. We are also committed to ongoing training for
our employees to improve their skills and create a results-oriented environment
in an effort to better meet the needs of our customers.
Products
The beverage can is a standardized two-piece container produced by a
combination of drawing and ironing aluminum or steel can stock, and an end
closure which is seamed on to the can by the customer after filling. In the
United States, the beverage cans we produce are made exclusively from aluminum.
Our principal product in the United States is the two-piece, 12-oz aluminum
beverage can and end. We also produce an extensive range of other sizes (from
5.5- to 24-oz aluminum cans). In Europe, we produce beverage cans in both
aluminum and steel, in a range of seven different sizes but principally in 33cl
and 50cl sizes, as well as aluminum ends. In Europe, aluminum has gained market
share against steel in 1998 and accounted for approximately 51% of the cans
shipped in 1998.
Metal used in the production of beverage cans accounts for between 60%
and 70% of the manufacturing cost of the beverage can, depending on can size,
end diameter and type of metal. To reduce our metal costs, we reduced raw
material usage and spoilage in our manufacturing processes as a part of Project
Challenge. These measures included "lightweighting," which consists of reducing
the thickness of the can sheet and the diameter of the can top. In the United
States and Europe, we were the first beverage can manufacturer to reduce the can
neck to 2 2/16 inches (known as the "202-diameter" neck), which has become the
industry standard in the U.S. soft drink market. Conversion to this new can
format began in 1993 and is virtually completed. The U.S. beer market generally
utilizes a 2 4/16 inch (or "204-diameter") can neck. In Europe, we have been
converting can and end production capacity to 202-diameter necks since 1994,
although the U.K. and Turkey beer markets continue to use 2 6/16 inch
("206-diameter") ends.
Markets
We believe that, on the basis of 1998 net sales, we are the second
largest producer of two-piece beverage cans and ends in the world, the second
largest producer of beverage cans and ends in North America with a U.S. market
share of approximately 25%, and the largest producer of beverage cans and ends
in Europe with
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approximately 31% of the European market. The following table sets forth
selected data for our business overall and by geographic region, for 1996, 1997
and 1998:
<TABLE>
<CAPTION>
Year Ended At December 31,
--------------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Total:
Net sales ($ in millions)(1)....................... 2,520 2,465 2,459
Total cans shipped................................. 38.5 39.1 38.7
Number of employees................................ 5,230 4,956 4,735
The Americas:
Net sales ($ in millions)(1)....................... 1,574 1,554 1,558
Total cans shipped (billions of cans)(2)........... 28.2 28.8 28.0
Europe and Asia:
Net sales ($ in millions)(1)....................... 946 911 901
Total cans shipped (billions of cans).............. 10.3 10.3 10.7
- -------------------------
<FN>
(1) After elimination of intracompany sales.
(2) Includes cans shipped through joint ventures with Coors Brewing Company (Valley Metal Container
Partnership) and with Vitro S.A. (Vitro-American National Can, S.A. de C.V.) which are accounted
for under the equity method and as such are not included in net sales.
</FN>
</TABLE>
We have an extensive presence in the beverage can markets in the
Americas and Europe, which accounted for 63% and 36% of our 1998 net sales,
respectively. In the Americas, our activities are carried out principally
through American National Can Company in the United States and a wholly-owned
subsidiary in Brazil. We have also formed joint ventures with Coors Brewing
Company in the United States and with Mexico's largest glass container
manufacturer, Vitro S.A. In Europe, our activities are carried out through
wholly owned subsidiaries and a majority owned subsidiary in Turkey. We also
have a majority owned subsidiary in China and equity participations in Japan and
South Korea.
In 1998, we held 25% of the U.S. beverage can market. We believe our
strong customer relationships, our optimally located facilities and our
technical support services make us a strong player in this market. Since 1994,
we have operated the Valley Metal Container Partnership, a joint venture
producing beverage cans and ends near the Coors Brewery Company in Golden,
Colorado. This joint venture provides Coors Brewing Company with the benefits of
our technological expertise and a dedicated can and end supply, while allowing
both parties to benefit from the savings that our can and end making technology
generates.
Our market share in Europe was 31% in 1998. We believe three principal
factors position us to serve the European market: a geographically dispersed
network of manufacturing facilities located close to major bottlers; a strong
manufacturing presence in the higher-growth Southern European market; and a
relatively high market share among leading soft drink producers.
We are streamlining our business in mature markets while pursuing
development in markets which we believe have greater potential for growth,
particularly in Eastern Europe, Latin America and Asia. We commenced operations
in Mexico in 1995 through Vitro-American National Can, S.A. de C.V., a joint
venture with Vitro S.A., Mexico's largest glass container manufacturer. The
facility, located in Queretaro, at December 31, 1998, represented gross
investments in property, plant and equipment of $49.7 million and has the
capacity to produce approximately one billion cans per year. Prior to 1998,
operating performance was hampered by the weak Mexican economy and the resulting
overcapacity in the marketplace. In 1998, operations benefited from
organizational changes, productivity improvement programs and aggressive cost
cutting, along with renewed beverage promotional activity and increased demand
in Mexico. As a result, sales and earnings increased significantly over 1997.
Vitro-American National Can's share of the Mexican beverage can market was
approximately 14% in 1998.
Construction of a plant in Brazil commenced in the first quarter of
1996 and initial commercial production started in December 1996. At December 31,
1998, the facility represented gross investments in property, plant and
equipment of $73 million. The facility, located in Extrema, Minas Gerais, 60
miles northeast of Sao Paulo, has the capacity to produce 1.5 billion units per
year. While competitive production capacity increased significantly and created
margin pressure in 1997, high demand levels led to significantly improved
results in 1998. This trend is not expected to continue in 1999 due to
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<PAGE>
the recent economic difficulties in Brazil. Our share of the Brazilian beverage
can market was approximately 17% in 1998.
Our operations in Asia consist of two joint ventures operating in Japan
and South Korea and one subsidiary in China. The Chinese subsidiary, which is
40% owned by Guangdong City Blue Ribbon Group and 60%-owned by us, operates a
plant that produces 12-oz aluminum beverage cans for beer and carbonated soft
drinks. The Chinese market continues to grow (approximately 7% in 1998) but
overcapacity remains a factor, prompting increased pressure on prices. The
Chinese subsidiary's share of the Chinese beverage can market was
approximately 5% in 1998.
The 24.5% and 40% interests, respectively, in our Japanese and South
Korean joint ventures, operated with local majority partners, are accounted for
under the equity method. Since 1997, activity in Asia has slowed considerably
due to the economic crisis, poor weather conditions and overcapacity. Each joint
venture has reacted to adverse conditions with restructuring and cost-cutting
programs, initiated in 1997, and expected to continue throughout 1999. Our
Japanese joint venture, a majority of which is owned by Asahi Brewers, continues
to expand its facilities to meet anticipated future increases in demand from
Asahi.
Customers
Our facilities are generally located in proximity to our major
customers, and ship cans directly to beverage fillers and producers under a
variety of multi-year supply contracts. In the carbonated soft drink market, the
owners of beverage brands generally own both the beverage trademark and the
secret formulas to concentrates. Owners of beverage brands either manufacture
and sell products themselves or rely on a network of bottlers (often their
affiliates) to sell, distribute and sometimes manufacture these products under
licenses.
Consolidation trends among beverage can fillers have led to a highly
concentrated customer base. Our top ten global customers represented
approximately 74% of our 1998 net sales. Among these customers are five
Coca-Cola affiliated bottlers. The volume of our sales to Coca-Cola and its
affiliated bottlers represented 51% of our 1998 net sales, with Coca-Cola
Enterprises Inc. alone representing 28% of 1998 net sales. In addition, we
supply 100% of Coors Brewing Company's can needs through our joint venture,
Valley Metal Container Partnership. Our other significant customers in 1998
included Anheuser Busch, Beverage Associates Cooperative, Inc., The Pepsi
Bottling Group, Inc., and The Stroh Brewing Company.
We have a strong supply relationship with The Coca-Cola Company and its
affiliated bottlers. Coca-Cola has numerous brands, including: Coca-Cola
Classic, Diet Coke, Sprite, Diet Sprite, Barq's, Mr. Pibb, and Fanta. We believe
we are currently the largest supplier to the Coca-Cola system. We have been the
largest supplier of cans to Coca-Cola Enterprises Inc. for the past ten years.
We believe this relationship has and will create long-term benefit to us on a
global basis.
The market environments in which we operate are highly competitive. The
ability of can manufacturers to differentiate their products is limited. As a
result, we are focused on the differentiation of our services. We believe our
technical support provided within our customers' plants has aided us in building
solid customer relationships. We are also highly responsive to our customers'
quality, innovation and promotional needs, which helps to make us a preferred
supplier. We believe these strengths have been validated by our long-term
contracts with major customers.
Cost improvement programs
In response to slowing growth rates, overcapacity and price competition
in our major markets, we have devoted substantial attention to ongoing
productivity improvement and cost reduction efforts across our global network of
facilities. These initiatives involved three distinct programs.
Project Challenge
The objective of Project Challenge was to reduce the 1995 cost base
(excluding metal costs) by 20% before the end of 1999. The program focused on
reduction of operating costs, working capital requirements and selling, general
and administrative expenditures. To achieve this objective, we implemented a
number of measures, including "best practice transfers"
46
<PAGE>
(the identification and generalization across all facilities of optimal
manufacturing processes), "benchmarking" (an internal and external comparative
analysis of manufacturing processes designed to identify cost reduction
targets), headcount reductions, "lightweighting" (a reduction in use of metal
per container), and a decrease in logistical costs. Project Challenge also honed
our ability to track our business through better quality measurements, spoilage
reduction, and improved inventory management. As part of this effort, we
eliminated some of our higher-cost production capacity through the closure of
two manufacturing facilities and the curtailment of several additional can
making lines in the past three years. By the end of 1998, we had met all of our
Project Challenge objectives.
Next Level
In 1998, building on the success of Project Challenge, we introduced
"Next Level," a continuous improvement process through which we seek to increase
productivity and reduce costs while limiting additional capital expenditures.
Next Level represents a more focused, analytical approach than its predecessor
cost reduction effort. An internal task force comprised of engineers,
manufacturing experts and plant staff spends several months in each of our
facilities to study and adopt best practices, optimize performance for each
piece of equipment, improve manufacturing techniques, and introduce superior
maintenance programs to reduce machine downtime. A by-product of these efforts
is the development and enhancement of new analytical and problem solving skills
at the plant level. The Next Level program also encompasses a number of measures
designed to enhance employee productivity through training, organizational
development and employee incentives, including newly adopted systems more
closely linking performance to reward. The objective of the Next Level program
is to institute a cost-focused culture within our organization.
The table below illustrates the productivity gains (expressed in
percentage change in cans produced per man hour) achieved through the Challenge
and Next Level programs.
Change 1996/95 1997/96 1998/97
U.S. cans per man hour +0.1% +10.4% +3.9%
European cans per man hour -2.7% +2.3% +3.3%
ANC Production System
In addition to the Next Level program, we are beginning to implement
the principles of "Lean Manufacturing" through a comprehensive overhaul of our
production processes. The essence of Lean Manufacturing is the systematic
identification and elimination of waste, where waste is defined as anything that
does not add value to the product. The aim of Lean Manufacturing is to reduce
costs by applying the specific tools of the Toyota Production System to identify
and eliminate waste on the factory floor and in the global production system.
ANC Production System targets waste not only at the plant level, but in
every part of our organization. From redundant e-mails to unnecessary meetings
to waiting for parts, we are focused on removing waste from our practices. In
our plants, our efforts focus on reducing spoilage and equipment downtime, both
sources of waste. Every ANC employee will attend a three-day training seminar
over the next 24 months to learn the skills of Lean Management and its
application to various tasks. We are learning from the experience of other
benchmark companies that have successfully implemented Lean Manufacturing
techniques and we have hired experts in lean production from outside the can
industry to bring new perspectives on waste reduction.
Research and development
Consistent with our emphasis on customer satisfaction and in order to
permit customers to increase market differentiation of their products, we
continuously pursue the development of innovations for beverage cans.
Our principal innovations include:
o shaped cans
o fluted cans
o registered embossing development
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<PAGE>
o large opening ends
o colored ends and tabs
o promotional "under-the-tab" printing
o aluminum beer widgets, a technology which replicates the
foaming of draught beer (developed jointly with a major U.K.
brewer).
We believe our product performance and cost-effectiveness benefit from
our significant commitment to research and development, often conducted in
collaboration with our customers. At our Beverage Technical Center in Elk Grove
Village, Illinois, we design, develop and test new and improved beverage can and
can end products and processes, and qualify materials for customers around the
world. Our technical center operates a complete, bi-metal pilot can-making line
for comprehensive and efficient trials, as well as an advanced laboratory. We
also contract for the services of various research facilities, including
Pechiney's laboratory in Voreppe, France.
In 1997, with the introduction of the Coca-Cola contour can, inspired
by Coca-Cola's contour bottle, we became the first manufacturer to commercially
produce shaped two-piece beverage cans. The shaped can represents a
technological breakthrough in two-piece beverage can making, retaining
structural stability and superior graphics without significantly affecting
production and filling speeds. We developed the can shaping technology with
Oberburg Engineering of Switzerland. Today, we have the exclusive rights to use
the shaping technology through the beginning of 2000, and we may extend these
rights to the beginning of 2002. Once we no longer have these exclusive rights,
Oberburg can sell the technology to other can manufacturers by paying us a
royalty. Coca-Cola has test-marketed the shaped can on a limited basis in the
United States. The shaped can remains a developmental project that continues to
attract customer interest.
Also in 1997, we commenced production of registered embossed beverage
cans for Coca-Cola. Registered embossing aligns indentation with the can's
graphics, providing texture and differentiation to the package and allowing
brewers and soft drink companies to enhance the image of their brand. The
process was developed by Alcoa Packaging Machinery, a licensee under our can
sidewall reshaping technology.
Colored ends, which we introduced in 1997, allow customers to extend
brand image to the total package. Colored and printed tabs provide further
promotional opportunities such as proof of purchase and instant win games. In
1997, we also introduced a 568 ml can (one U.K. pint) as part of a joint
development project with one of our key beer customers. This new size has since
been adopted by a major cider customer.
In 1998, we produced the first commercial embossed two-piece beverage
cans in the United Kingdom for Whitbread Beer Company's Stella Artois premium
lager and were awarded the "Best in Metal" prize by the Metal Packaging
Manufacturers Association. The embossed can continues to attract customer
interest worldwide.
Production facilities
The competitiveness of can production depends in large part on the
control of transportation costs. We have built up a network of geographically
dispersed low cost facilities that allows us to minimize transportation costs by
producing can bodies in relative proximity to our customers in our principal
markets.
The following maps illustrate our 22 facilities in the Americas and 13
facilities in Europe, including location and product details for each facility:
[Maps of facilities]
As part of our quality management system and efforts to continuously
improve products and processes, we have sought quality certification from the
Geneva-based International Organization for Standardization. By the end of 1997,
all European facilities had obtained ISO 9002 certification. Currently, 19 of
our 37 facilities have obtained ISO 9002 certification, confirming that our
quality controls and manufacturing processes meet recognized international
standards.
We own all of our manufacturing facilities (except for four facilities
in the U.S. which we operate under lease) and substantially all of the land on
which such facilities are located. We lease our corporate
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<PAGE>
headquarters in Chicago, Illinois. We believe our properties are in good
condition and are adequate to serve our current needs and expected near-term
growth.
Our ongoing productivity improvement and cost reduction efforts in
recent years have focused on improved raw material cost management, upgrading
and modernizing certain facilities to improve costs, efficiency and
productivity, and phasing out non-competitive facilities. As part of Project
Challenge and in light of excess supply in the North American market, we reduced
our annual beverage can production capacity by approximately 3 billion cans in
1996 and 1997 by closing our Jacksonville, Florida and San Juan, Puerto Rico can
manufacturing facilities and by permanently curtailing production on several
lines at selected plant sites.
Use and procurement of raw materials
To reduce costs and optimize resources, we purchase our principal raw
materials on a centralized, global basis. We purchase several categories of raw
materials including inks, varnishes, coatings, compounds and, most
significantly, metal.
The principal raw material used in manufacturing beverage cans is
aluminum can sheet for aluminum cans and steel can sheet for steel cans. Our
aluminum beverage can production activities in the United States and Europe
consumed approximately 581,200 metric tons of aluminum can sheet in 1998 and
587,000 metric tons in 1997, while steel beverage can production activities
consumed approximately 138,700 metric tons of steel in 1998 compared with
149,000 metric tons in 1997. Part of the reduction in metal consumption can be
attributed to the lightweighting of cans. In the United States, we purchase the
majority of our aluminum can stock requirements from the major North American
aluminum can sheet producers. In Europe, we purchase aluminum can stock from
European producers (including approximately 50% of our European supply from an
affiliate of Pechiney on arm's-length terms), and we purchase steel can sheet
from major European steel producers pursuant to annual or long-term contracts at
prevailing market prices and on standard market terms. For further details of
our future relationship with Pechiney, including expected future purchasing of
aluminum, see the section entitled "Relationship with Pechiney."
Unless otherwise fixed by contract, aluminum can sheet prices will vary
in relation to the London Metal Exchange prices for primary aluminum. Steel can
sheet costs have historically been more stable and are not subject to the same
volatility as aluminum. Our results could be adversely affected by increases in
the cost of aluminum can sheet which temporarily are not reflected in
corresponding increases in the price of the cans that we sell. For further
details of this risk, see the section entitled "Risk Factors--We may become
exposed to mismatches between the cost of the can sheet that we use and the
selling price of beverage cans."
Competition
The market for beverage cans is highly competitive. Competition is
based principally on price, product quality and service. The beverage can also
competes with bottles made from glass and plastic. See the sections entitled
"Overview of the global beverage can industry--Significant industry
conditions--Customer value" and "--Changing product mix."
In 1998, the beverage can accounted for a significant majority of the
North American single-serve beer and soft drink market, followed by glass, while
plastic single-serve sizes continued to gain market share for soft drinks.
Plastic bottles constitute the vast majority of larger-size containers, which
compete with cans sold in multi-pack configurations. In Europe, we believe the
can, as part of the packaging mix, maintained its overall market share in the
packaged beer and carbonated soft drink market in 1998. In the European soft
drink market, plastic bottle growth is estimated to have slightly outperformed
market growth at the expense of glass. However, certain markets, notably the
United Kingdom, have experienced a more rapid gain in single-serve plastic
bottles.
The production of beverage cans in the United States and Europe is
highly concentrated, with six leading producers of beverage cans, including us,
comprising virtually the entire market. Our principal U.S. competitors are Ball
Corporation (which recently purchased the North American beverage can operations
of Reynolds Metals Company) and Crown Cork and Seal Company, Inc. and Metal
Container Corporation (a subsidiary of the Anheuser Busch Company). In Europe,
our principal competitors are Carnaud Metalbox (acquired by Crown Cork
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<PAGE>
and Seal in 1996), Schmalbach-Lubeca Continental Can Europe (VIAG AG) and PLM
AB (recently acquired by Rexam Plc). Altogether, including us, these four
largest producers accounted for nearly all sales in Europe in 1998.
Environmental and health and safety matters
Our operations are subject to numerous federal, state, local and
foreign environmental health and safety laws and regulations, including those
pertaining to the handling and disposal of hazardous and toxic materials,
practices and procedures applicable to the construction and operation of our
facilities and standards relating to the discharge of pollutants to the air,
soil and water. In addition, our operations are subject to environmental
remediation laws such as the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (known as "CERCLA"), and similar state
laws that can impose liability upon certain statutorily defined categories of
parties for the entire cost of the cleanup of a contaminated site without regard
to fault or the lawfulness of the original activity resulting in contamination.
Pursuant to CERCLA and similar state laws, we are currently undertaking or
participating in remediation of contamination at certain of our present and
former operations and at several third party waste disposal sites. We are also
subject to liability for certain environmental obligations in connection with
previously divested businesses.
Based on information currently available, the sites at which we have,
relative to other sites, the largest potential liability for remediation of
contamination are third party disposal sites known as the Operating Industries,
Inc. Landfill Site in California, the Midco I and II/Midwest Solvents Recovery
Site, the Ninth Avenue Dump Landfill Site and the Fisher-Calo Site each of which
is in Indiana, and the Ellisville Site in Missouri. Based on information
currently available regarding these sites and other sites at which we are
subject to known remediation liability, we do not expect that such liability
will have a material adverse effect on our business, financial condition or
results of operations. In addition, under U.S. GAAP, we have established
reserves for known environmental remediation liabilities that are probable and
reasonably capable of estimation. Nonetheless, there can be no assurance that
the development or discovery of facts, events, circumstances or conditions will
not result in a significant increase in such liability that would have such a
material adverse effect.
As for environmental, health and safety laws and regulations applicable
to our ongoing operations and construction activities, while we believe that our
operations are in substantial compliance with such laws and regulations as
currently in effect, we are currently faced with certain instances of
noncompliance at our U.S. and non-U.S. facilities for which expenditures will be
required, and violations of such laws or regulations may occur in the future.
Violations of environmental, health and safety laws can lead to substantial
fines or penalties. Other developments, such as the promulgation of more
stringent requirements of environmental, health and safety laws and regulations
and increasingly strict enforcement thereof by governmental authorities, could
substantially impact our operations.
We are currently handling the defense of a claim filed by governmental
authorities alleging improper handling and disposal of asbestos at our former
Englewood plant in Chicago, Illinois. The government initially sought a penalty
of approximately $1.5 million. While we intend to continue to vigorously defend
this claim, the claim is in a preliminary stage and we cannot predict its
outcome with certainty. We also have recently received a notification from the
Brazilian authorities that the wastewater effluent chemical oxygen demand at our
Extrema plant is above the limit incorporated in the plant's environmental
operating permit. We intend to implement additional wastewater treatment at an
estimated capital cost of $200,000 in order to correct this reported deficiency.
In addition, we are in the process of addressing noncompliance with occupational
safety and health laws, particularly as related to noise, electrical upgrade and
ventilation, at several of our facilities in Europe. We have budgeted capital
expenditures of approximately $25 million over the next five years for this
work.
Current or forthcoming U.S. regulations also may require action to
address air emissions of ethylene glycol monobutyl ether (known as "EGBE") and
formaldehyde from our 2-piece can making facilities. Under its current draft
schedule, in November 2001 the U.S. Environmental Protection Agency (known as
"EPA") will adopt new standards under the Federal Clean Air Act to require
2-piece can makers to implement maximum achievable control technology (known as
"MACT") for designated hazardous air pollutants, particularly EGBE and
formaldehyde. Under EPA's current draft schedule, we would have to comply with
these standards by November 2004. If these regulations are promulgated, we may
have to spend up to an estimated $70 million to purchase and install control
equipment (thermal oxidizers) between November 2001 and November 2004 to
implement MACT for EGBE and
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formaldehyde at certain of our facilities. Regardless of the adoption of the
MACT standards, under current state laws establishing formaldehyde emission
limits, we may be subject to fines, penalties or other actions requiring
emission reductions. Pursuant to such laws, we may have to spend up to $40
million to control formaldehyde emissions beginning as early as 1999.
We and others in the industry are engaged in actions seeking to
mitigate these costs and liabilities. On November 12, 1996, a petition was filed
with the EPA requesting that the 2-piece can coating subcategory, or its EGBE
emissions, be removed from the list of regulated pollutants on the basis that,
as used in this process, it is non-hazardous. EPA has not yet begun formal
evaluation of the petition, but it is expected to issue its decision in 2000.
Regarding formaldehyde, a 45% emissions reduction has already been accomplished
by modifying the inside spray material, and work is underway to reduce emissions
from the use of varnish and ink. Further, EPA currently is reviewing new
scientific data showing formaldehyde to be significantly less hazardous than
would be predicted based on earlier data and is expected to announce a decision
by the end of 1999. If EPA accepts these new data and the states adjust their
regulations accordingly, we do not expect to incur significant additional costs
to reduce formaldehyde emissions. However, there can be no assurance that the
regulatory relief being sought will be granted, and it is possible that the
costs and liabilities associated with EGBE and formaldehyde emissions will be
higher than the current estimates.
New ambient air quality standards for particulate and ground
level ozone were adopted in 1997. These new standards would require our U.S.
facilities to install additional pollution control equipment. Important aspects
of the standards, including the deadlines to conform, have not yet been stated.
At this stage, the eventual financial implications for us cannot be estimated.
While these matters and other developments, such as claims for damages
to property or injury to persons resulting from the environmental, health or
safety impacts of our operations or past contamination, could have a material
adverse effect on our business, financial condition or results of operations,
based on information presently available, management does not anticipate such an
effect.
One of our principal environmental goals is to progress beyond mere
compliance with applicable regulations and to establish procedures to
continuously improve our impact on the environment. We favor an approach that
would use market mechanisms, such as voluntary commitments and negotiable
permits. Accordingly, we have implemented an environmental management system at
our facilities, which fosters and monitors continuous improvement.
Insurance
To date, we have been able to obtain adequate insurance coverage for
our operations worldwide at levels which we consider to be prudent. We maintain
insurance covering various types of risk in respect of our operations. The
insurance coverage we maintain includes public and products liability,
transportation, material damage, business interruption and all-risks insurance,
as well as employer's liability insurance where required. We do not anticipate
any difficulty in obtaining adequate levels of insurance in the future.
Intellectual property
Our intellectual property, including patents, designs, know-how and
trademarks, are important to our business. We have implemented vigorous policies
to protect our patent rights and intellectual property. We have long had
worldwide patent committees to coordinate intellectual property management with
our management, research and development, sales and marketing and legal
functions. In 1997, we began to coordinate the efforts more closely at the
senior management levels. The principal purpose of these committees is to
protect and capitalize on our intellectual property.
At December 31, 1998, we had a portfolio of approximately 250 patents
and 100 patent applications in total. We have filed approximately 20 new patent
applications in 1998. The patent coverage on our most important technologies
will not expire within the next 10 years.
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We are currently a party to a patent infringement action brought
against us by Viskase Corporation. See the section entitled "- Legal
proceedings" below.
Employees
At December 31, 1998 we employed approximately 4,735 people. The table
below shows the number of our employees by geographic location at December 31,
1996, 1997 and 1998.
Year Ended At December 31,
1996 1997 1998
---------------- -------------- --------------
The Americas..................... 3,100 2,843 2,614
Europe........................... 1,903 1,898 1,915
Asia............................. 227 215 206
------ ------ ------
Total...................... 5,230 4,956 4,735
===== ===== =====
A significant number of our employees in the United States are members
of labor unions, primarily the United Steel Workers' Association and the
International Association of Machinists, and we have entered into various
collective bargaining agreements. In Europe, membership of our employees in
labor unions varies from country to country and we have also entered into
various collective bargaining agreements. We are not aware of any material
arrangements whose expiry is pending and which is not expected to be
satisfactorily renewed or replaced in a timely manner. The labor relations
environment has been stable, no significant work stoppage has occurred since
1996, and we believe relations with our employees are good.
Legal proceedings
In December 1993, Viskase Corporation, a subsidiary of Envirodyne
Industries, Inc., brought a patent infringement action against American National
Can Company in the U.S. District Court for the Northern District of Illinois.
Viskase alleged that we infringed certain of Viskase's patents relating to the
manufacture of heat shrinkable bags for meat and poultry.
In November 1996, following a trial, the jury awarded Viskase $102
million in damages and found willful infringement on our part. At December 31,
1996, we recorded a provision in the amount of the jury's award plus estimated
costs, in addition to a $3 million reserve previously recorded. Under applicable
law, the jury's damage award may be reduced if the court finds the amount
excessive, or increased by up to a multiple of three, depending on the court's
assessment of the willful nature of the infringement. The parties filed various
post-trial motions and, among them, Viskase filed motions seeking prejudgment
interest and attorneys' fees.
On September 29, 1997, the judge ordered a new trial as to the alleged
infringement by our Affinity(TM)-containing products and on the amount of
damages. Viskase then filed a motion for summary judgment concerning the
Affinity(TM)-containing products. In August 1998, the court granted summary
judgment to Viskase on the Affinity(TM)-containing products. Viskase then filed
a motion for reinstatement of the $102 million damage award. We have opposed
that motion and continue to seek a new trial on the issue of damages. The court
has not ruled at the present time.
In addition, we have requested the U.S. Patent and Trademark Office
(known as the "PTO") to re-examine the claims of two of the patents that Viskase
alleged ANC infringed. In March 1999, a PTO Examiner issued an Office Action
that re-examined and rejected claims of one of the two patents, but the Office
Action is not final. Concerning the second patent, the PTO has also issued an
Office Action rejecting the Viskase claims, but the PTO recently granted
Viskase's petition to change the inventorship of the patent. Additional
proceedings are ongoing.
Because these legal proceedings relate to plastic packaging operations
that have been transferred to Pechiney Plastics as part of the reorganization,
Pechiney Plastics has agreed to reimburse us on an after-tax basis for any
payments we may make with respect to this litigation. Pechiney has agreed to
guarantee this obligation of Pechiney Plastics. In any event, on the basis of
the current facts and circumstances, we do not believe that the provisions we
made in 1996 based on the jury's damages award require amendment.
Pechiney has received a notice of patent infringement (which may cover
its subsidiaries, including ANC) for a number of patents owned by the Lemelson
Medical, Education & Research Foundation, Limited Partnership. These Lemelson
patents are alleged to cover machine vision and automatic identification
techniques commonly used in producing containers, including glass bottles, metal
cans and plastic containers, among other things. The merits of such claims are
currently being investigated.
We are involved on a regular basis in various claims and lawsuits
incidental to the ordinary course of our business. Except for the Viskase
proceedings, we are not involved in any legal or arbitration proceedings,
including
52
<PAGE>
environmental proceedings, which we expect could have a material adverse effect
on our business, financial condition or results of operations, either
individually or in the aggregate.
53
<PAGE>
MANAGEMENT AND CERTAIN SECURITY HOLDERS
Directors and Executive Officers
The table below shows, as of June , 1999, the names and ages of the
members of our board of directors and executive officers, and their current
positions with ANC.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Directors and Executive Officers:
Jean-Pierre Rodier......................... 52 Chairman of the Board and Chief Executive Officer
Edward A. Lapekas.......................... 56 President, Chief Operating Officer and Director
Christel Bories............................ 35 Director
Frank W. Considine......................... 77 Director
Ronald J. Gidwitz.......................... 54 Director
George D. Kennedy.......................... 73 Director
Homer J. Livingston, Jr.................... 63 Director
Roland H. Meyer, Jr........................ 71 Director
James J. O'Connor.......................... 62 Director
Alain Pasquier............................. 50 Director
Jean-Dominique Senard...................... 45 Director
James R. Thompson.......................... 63 Director
Jack H. Turner............................. 64 Director
Curtis J. Clawson.......................... 39 Executive Vice President and President -- Beverage Cans
Americas
Michael D. Herdman......................... 49 Executive Vice President and President -- Beverage Cans
Europe and Asia
Alan H. Schumacher......................... 52 Senior Vice President and Chief Financial Officer
Dennis R. Bankowski........................ 52 Senior Vice President -- Administration and Chief Human
Resource Officer
Allan J. Bohner............................ 46 Senior Vice President -- Engineering and Beverage Cans
Americas Manufacturing
</TABLE>
Directors of ANC
The following individuals have agreed to serve as directors of our
Company. They were elected on April 14, 1999 and will hold office until the
annual meeting of our stockholders in the year 2000, 2001, or 2002, depending
upon the director class in which they serve following the offering.
Jean-Pierre Rodier will serve as Chairman of the Board and Chief
Executive Officer until the completion of the offering, at which time he will
resign from these positions and be replaced by Mr. Edward Lapekas. Since 1994,
Mr. Rodier has served as Chairman and Chief Executive Officer of Pechiney,
formerly our parent company. Prior to this offering, he served as Chairman of
the Board and Chief Executive Officer of American National Can Company. Before
joining Pechiney in 1994, Mr. Rodier served as Chairman and Chief Executive
Officer of Penarroya and Managing Director of Penarroya's parent company,
Imetal. He has also held the positions of Chairman of the Executive Board for
Metaleurop France and head of Union Miniere, the Belgian affiliate of Groupe
Suez.
Edward A. Lapekas is President and Chief Operating Officer and has
served as Senior Executive Vice President and Chief Operating Officer--Beverage
Cans Worldwide of American National Can Company since November 1996. He joined
American National Can Company in June 1996 as Senior Vice President--Beverage
Cans Americas. Prior to joining American National Can Company, Mr. Lapekas
served as Vice Chairman of Schmalbach-Lubeca A.G. and Continental Can Europe,
both majority-owned subsidiaries of VIAG A.G., a diversified manufacturer of
metal and plastic packaging.
54
<PAGE>
Christel Bories has been Senior Executive Vice President, Chief
Operating Officer, Plastic Packaging of Pechiney since January 1999 and also
served in a similar position at American National Can Company. From April 1995
through December 1998, she was Senior Executive Vice President, Strategy
and Control of Pechiney.
Frank W. Considine was Chairman of the Board of American National Can
Company from 1983 to 1990, Honorary Chairman and Chairman of the Executive
Committee from 1990 to present, President from 1969 to 1988, and Chief Executive
Officer from 1973 to 1988. Mr. Considine is also a director of SEI Information
Technology and Scotsman Industries, Inc. and Chairman of the Board of Trustees
of Loyola University, Chicago, Vice President of the Lyric Opera of Chicago, and
a member of the Executive Committee of the Museum of Sciences and Industry,
Chicago, and the Board of Trustees of the Field Museum of Natural History,
Chicago.
Ronald J. Gidwitz is a partner in GCG Partners, a private investment
firm, a position he has held since 1998. He previously served as President and
Chief Executive Officer of Helene Curtis Industries, Inc. from 1979 to 1998. He
is also a director of Continental Materials Corporation, Prairie Packaging
Corporation and SEI Consulting. Mr. Gidwitz is also a member of the Board of
Governors of Boys and Girls Clubs of America, the board of directors of Lyric
Opera of Chicago, the Field Museum of Natural History, the Museum of Sciences
and Industry, and the Board of Trustees of Rush-Presbyterian Medical Center.
George D. Kennedy was Chairman and a director of Mallinckrodt Group
Inc., a producer of medical products and chemicals, from 1991 until his
retirement in October, 1994. He was Chairman and Chief Executive Officer of
Mallinckrodt Group Inc. from 1986 to 1991. Mr. Kennedy is also a director of the
Kemper National Insurance Companies and Scotsman Industries, Inc.
Homer J. Livingston, Jr. served as President and Chief Executive
Officer of the Chicago Stock Exchange in Chicago, Illinois until his retirement
in May 1995. From 1988 through 1992, Mr. Livingston was Chairman of the Board
and Chief Executive Officer of Livingston Financial Group. He has also held the
positions of Executive Vice President of First National Bank of Chicago, Partner
at Lehman Bros., Partner at William Blair & Co., President and Chief Executive
Officer of LaSalle National Bank and Trustee of Southern Pacific Railroad. Mr.
Livingston is also a director of EVEREN Capital Corporation and Peoples Energy
Corporation.
Roland H. Meyer, Jr. served as President and Chief Operating Officer of
American National Can Company from 1989, and Chief Operating Officer from 1988,
until his retirement in 1992. Mr. Meyer joined American National Can Company in
1972 and from that time held various management positions in the Metal
Container Division including Manager--Manufacturing, Vice President--Operations,
and Vice Chairman--Operations. Mr. Meyer is also a director of Uniroyal
Technology Corporation and Vice Chairman of First Commercial Bank of Tampa.
James J. O'Connor is the retired Chairman and Chief Executive Officer
of Commonwealth Edison Company and Unicom Corporation, a holding company, where
he served from June 1994 until March 1998, and of Edison Company, an electric
utility, where he served from 1980 to March 1998. He is also a Director of
Corning Incorporated, EVEREN Capital Corporation, Scotsman Industries Inc.,
Smurfit-Stone Container Corporation, Tribune Company and UAL Corporation.
Alain Pasquier has held various senior corporate management positions
within Pechiney's finance department since 1993. He currently serves as Senior
Vice President--Corporate Finance of Pechiney, a position he has held since
1997. He is also a director of Impress Metal Packaging Holdings B.V. and Paribas
Capital Markets Ltd.
Jean-Dominique Senard is Senior Executive Vice President and Chief
Financial Officer, and member of the Executive Committee of Pechiney. Prior to
joining Pechiney in 1996, Mr. Senard held various posts at the French company
Saint-Gobain, including Group Director of Treasury and Financing, Financial
Director of Saint-Gobain's General Delegation for Germany and Central Europe and
member of the Management Committee of Vegla GmbH. He commenced his career at
Total where he served as financial controller and later financial risk manager
within the treasury group.
55
<PAGE>
James R. Thompson was Governor of Illinois during the period 1977
through 1991. Since January 1991, Mr. Thompson has been a partner in, and
Chairman of the Executive Committee of, Winston & Strawn, a Chicago, Illinois
law firm, and since January 1993, he has been Chairman of the firm. Mr. Thompson
is also a director of FMC Corporation, Prime Retail, Inc., Hollinger
International, Inc., Jefferson Smurfit Group, Metzler Group, Prime Group Realty
Trust and Union Pacific Resources. He also serves as a Public Governor of the
Chicago Board of Trade and is the Chairman of the Public Review Board of the
Hotel and Restaurant Employees International Union. He is Chairman of the Board
of Trustees of the Illinois Mathematics and Science Academy Foundation, and
serves as a trustee of the Chicago Historical Society, Lyric Opera of Chicago,
Museum of Contemporary Art, the Art Institute of Chicago and the Economic Club
of Chicago.
Jack H. Turner served as President of American National Can Company and
Chief Operating Officer from 1992 through 1995. Mr. Turner joined American
National Can Company in February 1969 as the Assistant Corporate Controller and
held the positions of Controller, Vice President and General
Manager--International Division, Senior Vice President--International Division,
Executive Vice President--Worldwide Beverage Metal Containers, Executive Vice
President and Chief Operating Officer--Beverage Worldwide.
Executive Officers of ANC
In addition to Mr. Rodier and Mr. Lapekas, who are also Directors, the
following persons are executive officers of ANC.
The executive officers were
appointed on April 14, 1999 and will hold office until the first annual meeting
of our stockholders following the offering, which is expected to be held in ,
2000.
Curtis J. Clawson is Executive Vice President and President--Beverage
Cans Americas. He joined American National Can Company in June 1998 as Senior
Vice President--Beverage Cans Americas. Prior to joining American National Can
Company he was employed at Allied Signal, Inc. from 1995 through 1997 as
President of two separate business units. Prior to his experience with Allied
Signal, Inc. he held increasingly responsible senior level international
positions at Arvin Industries, Inc.
Michael D. Herdman is Executive Vice President and President--Beverage
Cans Europe and Asia. Since 1991, Mr. Herdman has held the position of Senior
Vice President--Beverage Cans Europe of American National Can Company. In
January 1997, he also assumed responsibility for the beverage can business in
Asia. Since joining American National Can Company in 1972, Mr. Herdman's prior
positions have included Managing Director of Nacanco Ltd, Vice President of
Business Development, Vice President and General Manager--Plastics, Managing
Director--Iberica, and other sales and manufacturing management positions.
Alan H. Schumacher is Senior Vice President and Chief Financial
Officer. He has held this position in American National Can Company since July
1997. After joining American National Can Company in April 1977, Mr. Schumacher
held a variety of positions in the management of finance and accounting,
including Vice President, Controller and Chief Accounting Officer, Assistant
Corporate Controller, and Manager--Corporate Accounting. Prior to joining
American National Company, Mr. Schumacher was employed in the audit function of
Price Waterhouse and Co.
Dennis R. Bankowski is Senior Vice President--Administration and Chief
Human Resources Officer. He joined American National Can Company in 1991 as
Senior Vice President--Human Resources. In January 1997, he was named Senior
Vice President--Corporate Services. Before joining American National Can
Company, Mr. Bankowski was employed by BP America, a subsidiary of British
Petroleum, from 1981 through 1990 where he served in the positions of Director
of Compensation, Director of Organizational Development and Vice President of
Human Resources.
Allan J. Bohner serves as Senior Vice President--Beverage Cans
Engineering and Beverage Cans Americas Manufacturing. He has held these
positions with American National Can Company since January 1998. Mr. Bohner
joined American National Can Company in 1975 and has held numerous positions in
engineering and management. Prior to assuming his present position he held
positions including Senior Vice President--Engineering and Development for
Beverage Cans Worldwide, Vice President--Engineering Food Metal and Specialties,
Vice President--Manufacturing, Director--Engineering and several engineering
manager positions.
56
<PAGE>
Board of Directors, Directors' Compensation and Committees of the Board
The Company's board of directors consists of 13 members. Directors are
elected to serve until the expiration date of their terms as determined by their
respective class, and until their successors are elected and qualified. Officers
of the Company are elected or appointed by, and serve at the discretion of, the
Board of Directors.
As of the date of this offering, the board of directors of ANC is
divided into three staggered classes. The initial board will consist of four
Class I directors (Madame Bories and Messrs. Meyer, Pasquier and Turner), four
Class II directors (Messrs. Considine, Kennedy, Livingston and Senard) and five
Class III directors (Messrs. Gidwitz, Lapekas, O'Connor, Rodier and Thompson).
At each annual meeting of stockholders, a class of directors will be elected for
a three-year term to succeed the directors of the same class whose terms are
then expiring. The terms of the Class I directors, Class II directors and Class
III directors will expire upon the election and qualification of successor
directors at the Annual Meeting of Stockholders to be held during calendar years
2000, 2001 and 2002, respectively.
Each officer serves at the discretion of the board of directors and
holds office until his or her successor is elected and qualified or until his or
her earlier resignation or removal. There are no family relationships among any
of the directors or executive officers of ANC.
Compensation of Directors
Directors who are officers or employees of the Company do not receive
compensation other than reimbursement for out-of-pocket expenses incurred by
them in connection with their travel to and attendance at meetings of the board
of directors or committees thereof.
The Company will compensate its current directors based on the
directors' plans established under American National Can Company. A new
compensation plan for directors will be designed and presented for approval
prior to the expiration of the Class I directors' terms in 2000.
In addition to the reimbursement of reasonable expenses, directors of
the Company who are not also officers or employees of the Company receive an
annual fee of $22,000 and meeting fees of $1,000. In addition, non-employee
directors who chair any committee of the board receive an additional fee of
$3,000 per year for each such committee chaired. Directors can elect to defer
their annual retainers and meeting fees to receive deferred amounts after
retirement from the Board either in a lump sum or in up to five annual
installments. Any such deferred amount will earn interest at the prime rate. The
Company provides each non-employee director with $250,000 of accidental death
and dismemberment insurance coverage on a 24-hour basis for any period a
non-employee director is traveling on company business.
Committees of the Board of Directors
The board of directors has established an audit committee, a
compensation committee and an executive committee. The functions of each of
these committees are described below.
The audit committee is responsible for reviewing the propriety and
accuracy of ANC's consolidated financial statements. The audit committee (a)
reviews the internal accounting controls and annual consolidated financial
statements, (b) reviews with the independent certified public accountants the
scope of their audit, their report and their recommendations, (c) considers the
possible effect on the independence of such accountants in approving non-audit
services requested of them and (d) recommends the action to be taken with
respect to the appointment of the independent certified public accountants.
The compensation committee is responsible for (a) approving the
compensation of all elected officers, (b) reviewing, advising and making
recommendations with respect to elected officer compensation plans, their
benefits and standards and taking all related actions that are not reserved for
the board, and (c) administering the Company's annual incentive plan and such
other salary, compensation or benefit plans as it is designated to administer.
57
<PAGE>
During intervals between meetings of the board, the executive committee
has and exercises all the powers and authority of the board in the management of
our business and affairs, except as specifically limited in our By-laws.
Executive Compensation
Prior to the offering, all compensation paid to our executive officers
was paid by American National Can Company, ANC's U.S. beverage cans operating
company. The following table shows information concerning the compensation paid
for services rendered in all capacities to American National Can Company and its
subsidiaries for the fiscal year ended December 31, 1998, for the individual who
will serve as Chief Executive Officer of ANC and the other five most highly
compensated executive officers, based on their employment by American National
Can Company or an affiliate of American National Can Company at December 31,
1998 (the "named executive officers"). The compensation described in this table
was paid by American National Can Company, or an affiliate of American National
Can Company.
References to "stock options" relate to awards of Pechiney Options
under the Pechiney 1998 Stock Option Plan. This plan grants options to purchase
Pechiney stock on the Paris stock exchange. References to "stock appreciation
rights" ("SARs") relate to awards of Pechiney Stock Appreciation Rights under
the American National Can Company 1998 Long-Term Incentive Plan. SARs reflect
the appreciation of Pechiney American Depositary Shares as traded on the New
York Stock Exchange. The American Depositary Shares trade at a ratio of 2:1 to
the Pechiney French shares.
<TABLE>
<CAPTION>
Summary Compensation Table(1)
- --------------------------------------------------------------------------------------------------------------------------------
Annual Compensation 1998 Long- Term Compensation Payouts
- ---------------------------------------------------------------------------- --------------------------------------------------
Stock Long-Term
Salary(3) Other Annual Options / SARs Incentive All Other
Name and Principal Position (2) ($) Bonus ($) Compensation ($) (#) (4) Plan Payouts ($) Compensation
- -------------------------------- -------- ---------- ---------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Jean-Pierre Rodier............. $ $ $0 0 / 0 $ $0
Chairman and Chief Executive Officer
Edward A. Lapekas.............. $ $ $0 0 / 0 $0 $8,075.53 (5)
President and Chief Operating
Officer
Michael D. Herdman............. $ $ $0 0 / 0 $0 $8,075.53 (5)
Executive Vice President and
President -- Beverage Cans Europe
and Asia
Alan H. Schumacher ............ $ $ $0 0 / 0 $0 $8,075.53 (5)
Senior Vice President and Chief
Financial Officer
Dennis R. Bankowski ........... $ $ $0 0 / 0 $0 $8,075.53 (5)
Senior Vice President -- Administration
and Chief Human Resources Officer
Allan J. Bohner ............... $ $ $0 3,000 / $0 $8,075.53 (5)
Senior Vice President -- Beverage 25,000
Engineering and
Beverage Cans Americas Manufacturing
</TABLE>
(1) In accordance with the executive compensation disclosure rules adopted
by the SEC, the compensation of the named executive officers is not
shown for fiscal 1996 and 1997 because the Company was not a reporting
company under the Securities Exchange Act of 1934 for such years and
the compensation information has not been provided in a prior filing
with the Securities and Exchange Commission.
(2) The positions reflected in the table are the positions to be held by
the named executive officers with the Company following the offering
and were not the positions held by the named executive officers with
American National Can Company during 1998, the period covered by the
table. Compensation reflected in the table for 1998 was paid by
American National Can Company to the named executive officers in the
following capacities: Mr. Lapekas, Senior Executive Vice President and
Chief Operating Officer -- Beverage Cans Worldwide, Mr. Herdman,
Senior Vice President -- Beverage Cans Europe and Asia, Mr.
Schumacher, Senior Vice President and Chief Financial Officer, Mr.
Bankowski, Senior Vice President Corporate Services, Mr. Bohner,
Senior Vice President -- Beverage Worldwide Engineering and
Beverage Cans Americas Manufacturing. Mr. Curtis J. Clawson, who is
not listed here, joined American National Can
58
<PAGE>
Company in June 1998. The pro-rata salary paid to Mr. Clawson for his
seven months of employment in 1998 was $ . A bonus of $
was paid reflecting 1998 financial and individual performance. If Mr.
Clawson had been employed for the full fiscal year his level of
compensation would qualify him as a named executive officer.
(3) The amount of prerequisite and other personal benefits did not
exceed the lesser of $50,000 or 10% of the total of annual salary plus
bonus.
(4) All such options and stock appreciation rights will be converted to
the Company's restricted stock at the date of the offering. The method
used to convert the options or stock appreciation rights is described
in the section entitled "--Stock Compensation Conversion Plan" below.
(5) Amounts contributed or accrued for fiscal year 1998 for the named
executive officers under the American National Can Company Capital
Accumulation Plan for Salaried Employees.
Effective June 1999, the annual salaries of Messrs. Lapekas,
Herdman, Schumacher, Bankowski and Bohner are expected to be $ , $ , $ ,
$ , and $ , respectively.
Option Grants
The table below shows information concerning grants of stock options
made to the named executive officers during the fiscal year ended December 31,
1998. Awards of "stock options" in 1998 relate to awards of Pechiney Options
under the Pechiney 1998 Stock Option Plan. This plan grants options to purchase
Pechiney stock on the Paris stock exchange. Awards of "stock appreciation
rights" ("SARs") in 1998 relate to awards of Pechiney Stock Appreciation Rights
under the American National Can Company 1998 Long-Term Incentive Plan. SARs
reflect the appreciation of Pechiney American Depositary Shares as traded on the
New York Stock Exchange. The American Depositary Shares trade at a ratio of 2:1
to the Pechiney French shares.
<TABLE>
<CAPTION>
Pechiney Option and Stock Appreciation Rights Grants in Last Fiscal Year
------------------------------------------------------------------------
Individual Grants
-------------------------------------------------------------------------------
Name Number of % of Total Exercise or Market Price Expiration Potential Realizable
Securities Options/SARs Base Price at Grant Date Value at Assumed
Underlying Granted to (FF or $/Share) Annual Rates of Stock
Options/SARs Employees in Price Appreciation for
Granted Fiscal Year (2) Option/SAR Term
(#) (1) (FF or $) (3)
<S> <C> <C> <C> <C> <C> <C> <C>
Jean-Pierre Rodier ...
Edward A. Lapekas ....
Michael D. Herdman....
Alan H. Schumacher....
Dennis Bankowski .....
Allan J. Bohner ...... 3,000 / 0.85% / FF 179.56 / FF 187.25 11/25/08 / FF 353,282/ FF 895,285 /
25,000 3.0% $16.16 $16.16 11/25/02 $87,065 $187,496
<FN>
(1) All options granted to the named executive officers in 1998 were granted on November 25, 1998 and all become exercisable
on November 25, 2003. All SARs granted to the named executive officers in 1998 were granted on November 25, 1998 and
become exercisable over two years.
(2) 352,500 options were granted to Pechiney employees worldwide in 1998. 844,700 SARs were granted to American National Can
Company employees in 1998.
(3) The 5% and 10% rates of appreciation were set by the Securities and Exchange Commission and are not intended to forecast
future appreciation, if any, of Pechiney capital stock. If Pechiney's capital stock does not increase in value, then the
option and SAR grants described in this table will be valueless.
</FN>
</TABLE>
59
<PAGE>
As set forth in the Stock Compensation Conversion Plan, any Pechiney
Option granted since June 26, 1996, or SAR granted since September 16, 1997, and
held by an employee of ANC at the time of the offering, will be converted into
restricted shares of the Company. The terms, vesting schedules, and method of
conversion are described in the section entitled, "--Stock Compensation
Conversion Plan" below.
1999 Extraordinary SAR Grant
On February 10, 1999 a grant of SARs was approved for selected
executives of American National Can Company. The grant, which was not made under
the annual long-term incentive plan, was named the Extraordinary Grant.
This grant was intended to increase the competitiveness of the
long-term incentive plan and was recommended after a review by an independent
consulting firm of the nature and competitiveness of long-term incentives in the
United States. American National Can Company recognized that the long-term
incentive targets for its executives had been set conservatively in recent
years, while competitive U.S. long-term incentive targets had increased rapidly
during that same time period. It also recognized that the opportunity for share
price appreciation with respect to SARs previously granted was limited since the
SARs granted under its plans had a shorter term (three to four years) than
traditional stock options, which often have ten-year terms.
The Extraordinary Grant allowed executives to exchange some or all of
their outstanding SARs from the June 26, 1996 grant for Extraordinary SARs with
a new vesting and exercise schedule, a new grant price and a new four-year term.
As a result of this program, of the outstanding 1996 SARs have
been exchanged. Some executives who have outstanding 1996 SARs were not selected
to participate in the Extraordinary Grant. These executives can retain their
1996 SARs and may exercise them until they expire on June 26, 1999.
The Extraordinary SARs outstanding on the date of the offering will be
converted to restricted shares in the Company in accordance with the Stock
Compensation Conversion Plan described below.
Stock Compensation Conversion Plan
Prior to the offering, the executives of American National Can
Company participated annually in a long-term incentive plan. The plan granted
them either options to purchase Pechiney capital stock traded on the Paris stock
exchange or SARs which provided them with the opportunity to receive cash awards
equal to the appreciation in Pechiney American Depositary Shares traded on the
New York Stock Exchange, or both. At the time of the offering, ANC will convert
the outstanding Pechiney options granted since June 26, 1996 and the outstanding
SARs granted since September 16, 1997 to restricted shares in ANC.
Additional outstanding SARs granted as part of the long-term
incentive plan on June 26, 1996 that were not exchanged in connection with the
Extraordinary Grant will not be converted under the Stock Compensation
Conversion Plan and, if unexercised, will expire on June 26, 1999.
The options and SARs were valued when originally granted using the
Black-Scholes methodology, a calculation that computes the present value of
stock options and SARs. Each executive with outstanding options or SARs will
receive a grant of restricted shares with an approximate Black-Scholes value
equal to the Black-Scholes value of their outstanding options and SARs. (Due to
the lack of historical information about the trading and performance of the
Company's stock, a true Black-Scholes value is impossible to determine at the
time of the offering.)
The vesting and exercises of the restricted shares will approximate
the vesting schedules of the original grants.
Following the grant of restricted shares in the Company, all Pechiney
stock options granted since June 26, 1996 and all SARs granted since September
16, 1997 to employees of the Company will be canceled.
60
<PAGE>
Option/SAR Exercises in Last Fiscal Year and Fiscal Year End Option Values
The following table sets forth information concerning option and SAR
exercises with respect to Pechiney capital stock by the named executive officers
during the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
Aggregated Pechiney Option Number of Securities Underlying Value of Unexercised In-
and Stock Appreciation Right Unexercised Option/SARs at Fiscal the-Money Option/SARs at
Exercises in Last Fiscal Year Year End (1) Fiscal Year-End (2)
--------------------------------- --------------------------------- ------------------------
Shares Acquired
on Exercise
Name (#) Value Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Jean-Pierre Rodier(1)... 0 FF 0 / 0 / 0 / FF 0 / FF 0 /
$ 0 0 0 $0 $0
Edward A. Lapekas....... 0 FF 0 / 0 / 8,500 / FF 0 / FF 0 /
$ 0 49,250 24,250 $0 $0
Michael D. Herdman...... 0 FF 0 / 0 / 7,500 / FF 0 / FF 0 /
$ 0 12,450 8,250 $0 $0
Alan H. Schumacher...... 0 FF 0 / 0 / 4,000 / FF 0 / FF 0 /
$ 0 13,900 10,500 $0 $0
Dennis R. Bankowski..... 0 FF 0 / 0 / 5,000 / FF 0 / FF 0 /
$ 0 31,050 13,050 $0 $0
Allan J. Bohner......... 0 / FF 0 / 0 / 6,500 / FF 0 / FF 8820 /
6,000 $26,250 16,750 35,750 $0 $0
- --------------------
<FN>
(1) Mr. Rodier has not been awarded any stock options or stock appreciation rights in respect of services performed
as an executive officer of ANC.
</FN>
</TABLE>
If the offering is completed all of these options and SARs will be
canceled and the holders will be granted restricted shares of the Company in
accordance with the provisions of the Stock Compensation Conversion Plan
described above.
The closing price of Pechiney capital stock on December 30, 1998, the
last trading day for such capital stock prior to Pechiney's fiscal year end, was
FF 182.50 per share on the Paris stock exchange. The closing price of American
Depositary Shares on December 31, 1998, the last trading day for such Shares
prior to Pechiney's fiscal year end, was $16.125 per American Depositary Share
on the New York Stock Exchange.
Retirement Benefits
Many of ANC's salaried employees have been participants in the
American National Can Company Pension Plan for Salaried Employees. At or prior
to the consummation of the offering, we intend to adopt an ANC Salaried
Employees Pension Plan and an ANC Pension Equalization Plan on terms
substantially similar to the comparable American National Can Company plans.
Under the ANC plan, when an executive retires at the normal
retirement age of 65, the approximate annual benefits payable for the following
earnings classifications and years of service are included in the table below.
Such benefits reflect a reduction to recognize, in part, the cost of Social
Security benefits related to service for American National Can Company and ANC.
The plans also provide for the payment of benefits to an employee's surviving
spouse.
Remuneration Years of Service
------------ -------------------------------------------------------
10 Years 20 Years 30 Years 40 Years
-------- -------- -------- --------
$250,000 $35,029 $70,057 $107,495 $138,745
500,000 72,529 145,057 219,995 282,495
750,000 110,029 220,057 332,495 426,245
1,000,000 147,529 295,057 444,995 569,995
1,250,000 185,029 370,057 557,495 713,745
1,500,000 222,529 445,057 669,995 857,495
1,750,000 260,029 520,057 782,495 1,001,245
2,000,000 297,529 595,057 894,995 1,144,995
Covered compensation includes salary and annual bonus. The
calculation of retirement benefits under the plans generally is based upon
average earnings for the highest five consecutive years of service. The years of
61
<PAGE>
credited service as of January 1, 1999 for the named executive officers are as
follows: 2 years for Mr. Lapekas, 26 years for Mr. Herdman, 21 years for Mr.
Schumacher, 8 years for Mr. Bankowski, and 23 years for Mr. Bohner.
Sections 401(a)(17) and 415 of the Code limit the annual benefits
which may be paid from a tax-qualified retirement plan. As permitted by the
Employee Retirement Income Security Act of 1974, American National Can Company
had established and the Company will establish supplemental plans which
authorize the payment out of their respective general funds of any benefits
calculated under provisions of the applicable retirement plan which may be above
the limits under these sections.
New Stock-Based and Incentive Plans of ANC.
The Long-Term Incentive Plan
Generally. The ANC Long-Term Incentive Plan ("LTIP") has been approved
by the board of directors. The ANC LTIP provides for the grant of various types
of long-term incentive awards to key employees. These awards may include
non-qualified options to purchase shares of our common stock, performance units,
incentive stock options, stock appreciation rights and restricted stock grants.
The term of the ANC LTIP is five years. The LTIP will also be submitted to the
Company's stockholders for approval at the annual meeting of stockholders in
2000. Such stockholder approval is required for purposes of Section 162(m) of
the Code in order to ensure favorable tax treatment of amounts paid under the
LTIP after the first regularly scheduled meeting of the shareholders of the
Company that occurs more than twelve months after the date of the offering. The
LTIP is designed to align the interests of executives with those of the
stockholders through the use of stock based compensation. The LTIP presents
executives and key employees a significant long-term interest in the Company's
success and is designed to assist in the retention of these key employees.
Administration. The ANC LTIP vests broad powers in the Compensation
Committee of the board of directors to administer and interpret the ANC LTIP.
The Committee's powers include authority to select persons to be granted awards,
to determine terms and conditions of awards, including the type, size and term
of awards, to determine the time when awards will be granted and any conditions
for receiving awards, to establish objectives and conditions for earning awards,
and to determine whether such conditions have been met. The Committee also has
authority to determine whether payment of an award will be made at the end of an
award period, or at the time of exercise, or deferred, and to determine whether
payment of an award should be reduced or eliminated. The ANC LTIP grants powers
to the Compensation Committee to amend and terminate the ANC LTIP.
In order to meet the requirements of Section 162(m) of the Code and the
rules under Section 16 of the Exchange Act, all grants under the LTIP will be
made by a Grant Committee consisting of those members of the Compensation
Committee who are both "outside directors" as defined for purposes of Section
162(m) of the Code and regulations thereunder and "non employee directors" as
defined for purposes of Section 16 of the Securities Exchange Act of 1934.
Participation. The persons to whom grants are made under the LTIP
("LTIP Participants") will be selected from time to time by the Grant Committee,
based on recommendations by the President and Chief Executive Officer, from
among corporate officers and other key employees of the Company and its
subsidiaries and affiliates. The Grant Committee may also grant awards to
employees of a joint venture or other business in which we have a substantial
investment, and may make awards to non-executive employees who are in a position
to contribute to the Company's success.
Shares Subject to LTIP. The LTIP authorizes the issuance or transfer of
an aggregate of 7 million shares of our common stock, provided that the total
number of shares as to which grants may be made under the LTIP in any one fiscal
year beginning after June 1999 may not exceed 2.0% of the total outstanding and
treasury shares of the Company.
Stock Option Grants as of the Offering
As of the offering, the Compensation Committee of the board of
directors intends to make the following stock option grants to the named
executive officers. This initial grant will replace future stock option grants
scheduled to be made under the ANC LTIP in fiscal years 1999, 2000 and 2001.
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<TABLE>
<CAPTION>
Individual Grants Potential Realizable
------------------------------------------------------------------- Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Option Term
Name Number of % of Total Exercise or Expiration 5% (2) 10% (2)
Securities Options Base Price Date
Underlying Granted to ($/Share)
Options Employees in
Granted Fiscal Year
(#) (1)
<S> <C> <C> <C> <C> <C>
Jean-Pierre
Rodier .............. TBD TBD (1) $ $
Edward A. TBD TBD (1)
Lapekas .............
Michael D. TBD TBD (1)
Herdman..............
Alan H. TBD TBD (1)
Schumacher...........
Dennis R. TBD TBD (1)
Bankowski ...........
Allan J. Bohner...... TBD TBD (1)
<FN>
(1) These options will be granted as of the date the offering is completed and consist of non-qualified stock
options. These options will become exercisable over a five-year period at a rate of 20% per year. All of
these options expire ten years after the offering date.
(2) The 5% and 10% rates of appreciation were set by the Securities and Exchange Commission and are not
intended to forecast future appreciation, if any, of our common stock. If our common stock does not
increase in value, then the option grants described in the table will be valueless.
</FN>
</TABLE>
ANC Incentive Compensation Plan
Generally. The ANC Incentive Compensation Plan (the "ICP") has been
adopted by the Company's board of directors. The ICP will also be submitted to
the Company's stockholders for approval at the annual meeting of stockholders in
2000. This stockholder approval is necessary for purposes of Section 162(m) of
the Code in order to ensure favorable tax treatment of amounts paid under the
ICP of the first regularly scheduled meeting of the shareholders of the Company
that occurs more than twelve months after the date of this offering. The
purposes of the ICP are to provide a reward and an incentive to employees in
managerial, staff or technical capacities who have contributed in the
then-current fiscal year and, in the future, are likely to contribute to the
success of the Company. It also serves to enhance the Company's ability to
attract and retain outstanding employees to serve in such capacities. The ICP
measures the achievement of specific financial operating goals and demanding
personal objectives in the determination of awards for participants. The goals
are established from the strategic and operating plans of the Company. Awards
exceed competitive levels when performance exceeds the targets established. When
performance does not reach the levels targeted under the plan, the awards paid
to participants can range from below competitive levels to zero.
Administration. The ICP vests broad powers in the Compensation
Committee to administer and interpret the ANC ICP. The Compensation Committee's
powers include authority to select the persons to be granted awards, to
determine the time when awards will be granted, and to determine and certify
whether objectives and conditions for earning awards have been met. The
Compensation Committee also has authority to determine whether payment of an
award will be made at the end of an award period or deferred, and to determine
whether an award or payment of an award should be reduced or eliminated. The ANC
ICP grants broad powers to the Compensation Committee to amend and terminate the
Plan.
In order to meet the requirements of Section 162(m) of the Code and
the rules under Section 16 of the Exchange Act, all grants under the ICP will be
made by a Grant Committee consisting of those members of the
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Compensation Committee who are both "outside directors" as defined for purposes
of Section 162(m) of the Code and regulations thereunder and "non employee
directors" as defined for purposes of Section 16 of the Securities Exchange Act
of 1934.
Eligibility. Any person in the salaried employ of the Company during
some part of the fiscal year for which awards are made may be selected for an
award by the Compensation Committee. Unless also an employee of the Company, no
member of the Company's board of directors will be eligible to participate in
the ICP.
Other Stock Ownership Programs
Ownership Guidelines. In order to align closely the financial interests
of the Company's key executives with those of the Company's stockholders, it is
expected that immediately after the offering date the Compensation Committee
will adopt the following minimum ownership guidelines requiring ownership of
shares of common stock with a market value equal to the multiple of base
salary indicated:
Multiple of Base Salary
------------------------------
President and Chief Executive Officer............ 3
Subsidiary Presidents, Executive Vice
Presidents and Senior Vice Presidents............ 2
Vice Presidents.................................. 1
Only shares owned directly (including restricted shares) or through the
Company's savings plan, but not shares subject to unexercised stock options,
will be considered for determining whether an executive meets such ownership
guidelines. The approximately executives who will be subject to the guidelines
immediately following the offering will have a transition period of 5 years
beginning on the offering date within which to meet the guidelines. Other
executives who become subject to the guidelines after the offering date will
also have a transition period of 5 years within which to meet the guidelines.
Executives who fail to meet the minimum ownership requirements will be
ineligible to participate in future long-term incentive stock option or
restricted share grants.
Founders Grant. The Compensation Committee intends to make a one-time
grant to every full-time employee, below the Director level, of options to
purchase 100 shares of ANC common stock. These options will have an exercise
price equal to ; and will vest 30 percent two years following the
grant date, 30 percent three years following the grant date, and 40 percent four
years following the grant date. The options will be exercisable ten years after
the date of the grant.
Employment Contracts, Termination Agreements and Change in Control Arrangements
In 1996, American National Can Company entered into individual
agreements with all of its named executive officers (and we intend to enter into
similar agreements). Each agreement is effective for an indefinite term. If the
Company terminates an executive for any reason other than for cause (defined as
serious misconduct, gross negligence, willful disobedience or commission of a
crime involving fraud or moral turpitude) or if the executive voluntarily
terminates for any of the reasons indicated below prior to age 60, the
agreements provide for continuation of pay and certain benefits for a period of
time following termination.
Each executive may voluntarily resign for the following reasons and
receive the continued pay and benefits provided for in their agreement: material
reduction in status, duties or responsibilities; reduction in base salary or a
material reduction in annual incentive compensation opportunity; termination of
participation in any long-term incentive plan; or relocation to a location more
than 50 miles from their current offices without their prior consent.
The length of the period during which the executives will continue to
receive their salary is equal to the earlier of 24 months or the executive's
60th birthday. The length of the continuation period for an executive's
inclusion in medical, dental and life insurance benefit programs is until age
55. However, the coverage provided by the American National Can Company will be
secondary to coverage provided for by a subsequent employer.
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<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the number of shares of our common stock
expected to be beneficially owned following the offering, directly or
indirectly, by each director, each named executive officer and such persons and
other executive officers, as a group, based upon the beneficial ownership of
such persons, including shares as to which a right to acquire ownership exists
(for example, through the exercise of stock options, conversions of securities
or through various trust arrangements) within the meaning of Rule 13d-3(d)(1)
under the Exchange Act.
<TABLE>
<CAPTION>
Common Stock
--------------------------------------------------------
Name(1) Shares Percent of Class (2)
<S> <C> <C>
Pechiney
7, Place du Chancelier Adenauer
75218 Paris Cedex 16, France.................
Jean-Pierre Rodier.............................
Christel Bories................................
Frank W. Considine.............................
Ronald J. Gidwitz..............................
George D. Kennedy..............................
Homer J. Livingston, Jr........................
Roland H. Meyer, Jr............................
James J. O'Connor..............................
Alain Pasquier.................................
Jean-Dominique Senard..........................
James R. Thompson..............................
Jack H. Turner.................................
Curtis J. Clawson..............................
Edward A. Lapekas..............................
Michael D. Herdman.............................
Alan H. Schumacher.............................
Dennis R. Bankowski............................
Allan J. Bohner................................
All of the above and other executive
officers as a group (45 persons)...............
<FN>
(1) Each person has sole voting and investment power with respect to the shares listed unless
otherwise indicated.
(2) The shares owned by each person, and by the group, and the shares included in the number of
shares outstanding have been adjusted, and the percentage of shares owned (where such percentage
exceeds 0.1%) has been computed, in accordance with Rule 13d-3(d)(1) under the Exchange Act.
</FN>
</TABLE>
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
As of the date of this offering, the authorized capital stock of the
Company consists of 1,000,000,000 shares of common stock, $0.01 par value per
share, and 25,000,000 shares of preferred stock, $0.01 par value per share. As
at , 1999, there were outstanding shares of common stock and options to
purchase an aggregate of shares of common stock.
The following summary of certain provisions of our capital stock,
certificate of incorporation and by-laws is not intended to be complete and is
qualified by reference to the provisions of applicable law and to our
certificate of incorporation and by-laws included as exhibits to the
registration statement of which this prospectus is a part. See "Additional
Information."
Common Stock
Holders of common stock are entitled to one vote for each share held on
all matters submitted to a vote of stockholders and do not have cumulative
voting rights. Accordingly, holders of a majority of the common stock entitled
to vote in any election of directors may elect all of the directors standing for
election. Holders of common stock are entitled to receive proportionately any
dividends declared by the board of directors, subject to any preferential
dividend rights of outstanding preferred stock, if any. In the event of
liquidation, dissolution or winding up, the holders of common stock are entitled
to receive ratably our net assets available after the payment of all debts and
other liabilities and subject to the prior rights of any outstanding preferred
stock, if any. Holders of common stock have no preemptive, subscription,
redemption or conversion rights. Our outstanding shares of common stock are, and
the shares offered by us in this offering will be, when issued and paid for,
fully paid and non-assessable. The rights, preferences and privileges of holders
of common stock are subject to the rights of the holders of shares of any series
of preferred stock which we may designate and issue in the future.
Preferred Stock
Under the terms of the certificate of incorporation, the board of
directors is authorized to issue shares of preferred stock in one or more series
without stockholder approval. The board has discretion to determine the number
of shares; rights, preferences, privileges and restrictions, including voting
rights, dividend rights, conversion rights, redemption privileges and
liquidation preferences of each series of shares of preferred stock.
The purpose of authorizing the board of directors to issue stock and
determine its rights and preferences is to eliminate delays associated with a
stockholder vote on specific issuances. The issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could make it more difficult for a third party to
acquire, or could discourage a third party from acquiring, a majority of our
outstanding voting stock. We do not presently have plans to issue any shares of
preferred stock.
Delaware Law and Certain Charter and By-Law Provisions
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Section 203 prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the person becomes an interested stockholder, unless
the business combination is approved in a prescribed manner. A "business
combination" includes mergers, asset sales and other transactions resulting in a
financial benefit to the interested stockholder. Subject to certain exceptions,
an "interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of the
corporation's voting stock.
The by-laws divide the board of directors into three classes with
staggered three-year terms. See "Management and Certain Security Holders." The
directors are removable only for cause upon the affirmative vote of the holders
of at least a majority of the voting power of all outstanding shares then
entitled to vote at an election of directors. Under the by-laws, any vacancy on
the board of directors, including a vacancy resulting from an enlargement of the
board of directors, may only be filled by vote of a majority of the directors
then in office.
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<PAGE>
These provisions could make it more difficult for a third party to
acquire, or discourage a third party from making a tender offer for our common
stock or otherwise seeking to acquire, control of our company.
The certificate of incorporation and by-laws also provide that
stockholders may take action only at an annual meeting or special meeting, and
not by written action in lieu of a meeting. The by-laws further provide that
only the Chairman of the Board, the President or the board of directors may call
a special meeting of the stockholders.
A stockholder must comply with advance notice and information
disclosure requirements in order for any matter to be considered "properly
brought" before a meeting. The stockholder must deliver written notice to us
between 60 and 90 days prior to the meeting. If we give less than 70 days'
notice or prior public disclosure of the meeting date, the stockholder must
deliver written notice to us within 10 days following the date on which the
notice of the meeting was mailed or such public disclosure was made, whichever
occurs first. If the matter relates to the election of our directors, the notice
must set forth specific information regarding each nominee and the nominating
shareholder. For any other matter, the notice must set forth a brief description
of the proposed and certain information regarding the proponent stockholder.
These provisions could delay until the next stockholders meeting stockholder
actions which are favored by the holders of a majority of our outstanding voting
securities. These provisions could also discourage a third party from making a
tender offer for our common stock, because even if it acquired a majority of our
outstanding voting securities, the third party would be able to take action as a
stockholder only at a duly called stockholders' meeting and not by written
consent.
The certificate of incorporation contains certain provisions permitted
under the Delaware General Corporation Law relating to the liability of
directors. The provisions permit us to limit or eliminate a director's liability
for monetary damages for a breach of fiduciary duty as a director, except in
certain circumstances involving wrongful acts, such as the breach of a
director's duty of loyalty or acts or omissions which involve intentional
misconduct or a knowing violation of law. Further, the certificate of
incorporation and the by-laws contain provisions to indemnify our directors and
officers to the fullest extent permitted by the Delaware General Corporation
Law. We believe these provisions will assist in attracting and retaining
qualified individuals to serve as directors.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is .
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no public market for our shares.
After completion of this offering we will have shares of our common stock
outstanding. If the underwriters exercise their overallotment option in full, we
will have a total of shares of common stock outstanding. Of these shares, the
shares sold in this offering will be freely tradable without restriction or
further registration under the Securities Act of 1933, as amended (the
"Securities Act"). However, any shares held by our "affiliates," as that term is
defined in Rule 144 under the Securities Act, may generally only be sold in
compliance with the limitations of Rule 144, unless those shares have been
registered for sale under the Securities Act.
Sales of shares
All of our shares offered by this prospectus will be freely tradable in
the open market. The remaining shares of common stock owned by Pechiney that
will be outstanding after this offering will be subject to the resale
limitations of Rule 144 under the Securities Act, since Pechiney is an
affiliate. Rule 144 defines an affiliate as a person that directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, the issuer. As such, Pechiney's ability to sell
its shares is limited unless we register them for sale under the Securities Act.
Under the registration rights agreement with Pechiney, we have agreed to
register Pechiney's remaining shares for sale under the Securities Act if
Pechiney wishes to sell its shares in the future. See "Relationship with
Pechiney - Agreements with Pechiney." Pechiney is not under any contractual
obligation to retain our common stock, except during the -day "lock-up" period
described in the section entitled "Underwriting" of this prospectus.
If Pechiney does not request us to register shares held by it as an
affiliate it may only sell shares pursuant to Rule 144, subject to the
limitations described below, or pursuant to another exemption from registration.
In general, a stockholder subject to Rule 144 who has owned common
stock of an issuer for at least one year may, within any three-month period, and
subject to certain manner of sale and notice requirements, sell up to the
greater of:
o 1% of the total number of shares of common stock then
outstanding; and
o the average weekly trading volume of the common stock during the
four weeks preceding the stockholder's required notice of sale.
Rule 144 requires stockholders to aggregate their sales with other
affiliated stockholders for purposes of complying with this volume limitation. A
stockholder who has owned common stock for at least two years, and who has not
been an affiliate of the issuer for at least three months, may sell common stock
free from the volume limitation, manner of sale and notice requirements of Rule
144.
We cannot estimate the number of shares of common stock that Pechiney
or other third parties may sell in the future because such sales will depend on
market prices, the circumstances of sellers and other factors.
Options
After this offering, an aggregate of shares of our common stock
may be issued under our Long-Term Incentive Plan and our Stock Option Plan. We
may choose to file Form S-8 registration statements, under which the shares
issued upon the exercise of stock options or under the plan will be eligible for
resale in the public market without restriction, subject to Rule 144 limitations
for affiliates if applicable.
Effect of sales of shares
Prior to this offering, there has been no public market for our common
stock. We cannot predict the effect, if any, that future sales of shares of our
common stock or the availability of shares for sale would have on the prevailing
market price of our common stock. Nevertheless, future sales by us or by
Pechiney of substantial amounts of our common stock, or the perception that such
sales may occur, could adversely affect the prevailing market price of our
common stock.
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<PAGE>
CERTAIN UNITED STATES TAX CONSEQUENCES TO
NON-U.S. HOLDERS OF COMMON STOCK
General
The following is a general discussion of U.S. Federal income and estate
tax consequences of the ownership and disposition of common stock that may be
relevant to you if you are a "non-U.S. Holder." For purposes of this summary, a
non-U.S. holder is a beneficial owner of common stock that is, for U.S. Federal
income tax purposes, (1) a nonresident alien individual, (2) a foreign
corporation, (3) a nonresident alien fiduciary of a foreign estate or trust, or
(4) a foreign partnership one or more of the members of which is, for U.S.
Federal income tax purposes, a nonresident alien individual, a foreign
corporation or a nonresident alien fiduciary of a foreign estate or trust.
This discussion does not address all aspects of U.S. Federal income and
estate taxation that may be relevant to you in light of your particular
circumstances, and does not address any foreign, state or local tax
consequences. Furthermore, this discussion is based on provisions of the
Internal Revenue Code, Treasury regulations and administrative and judicial
interpretations as of the date hereof. All of these are subject to change,
possibly with retroactive effect, or different interpretations. If you are
considering buying common stock you should consult your own tax advisor about
current and possible future tax consequences of holding and disposing of common
stock in your particular situation.
Distributions
If distributions are paid on the shares of our common stock, these
distributions generally will constitute dividends for U.S. Federal income tax
purposes to the extent paid from our current or accumulated earnings and
profits, as determined under U.S. Federal income tax principles, and then will
constitute a return of capital that is applied against your basis in the common
stock to the extent these distributions exceed such earnings and profits.
Dividends paid to a non-U.S. holder that are not effectively connected with a
U.S. trade or business of the non-U.S. holder will be subject to United States
withholding tax at a 30% rate or, if a tax treaty applies, a lower rate
specified by the treaty. To receive a reduced treaty rate, a non-U.S. holder
must furnish to us or our paying agent a duly completed Form 1001 or Form W-8BEN
(or substitute form) certifying to its qualification for such rate.
Currently, withholding is generally imposed on the gross amount of a
distribution, regardless of whether we have sufficient earnings and profits to
cause the distribution to be a dividend for U.S. Federal income tax purposes.
However, withholding on distributions made after December 31, 1999 may be on a
less than the gross amount of the distribution if the distribution exceeds a
reasonable estimate made by us of our accumulated and current earnings and
profits.
Dividends that are effectively connected with the conduct of a trade or
business within the U.S. and, if a tax treaty applies, are attributable to a
U.S. permanent establishment of the non-U.S. holder, are exempt from U.S.
Federal withholding tax, provided that the non-U.S. holder furnishes to us or
our paying agent a duly completed Form 4224 or Form W-8ECI (or substitute form)
certifying the exemption. However, dividends exempt from U.S. withholding
because they are effectively connected or they are attributable to a U.S.
permanent establishment are subject to U.S. Federal income tax on a net income
basis at the regular graduated U.S. Federal income tax rates. Any such
effectively connected dividends received by a foreign corporation may, under
certain circumstances, be subject to an additional "branch profits tax" at a 30%
rate or a lower rate specified by an applicable income tax treaty.
Under current U.S. Treasury regulations, dividends paid before January
1, 2000 to an address outside the United States are presumed to be paid to a
resident of the country of address for purposes of the withholding discussed
above and for purposes of determining and applicability of a tax treaty rate.
However, U.S. Treasury regulations applicable to dividends paid after December
31, 1999 eliminate this presumption, subject to certain transition rules.
For dividends paid after December 31, 1999, a non-U.S. holder generally
will be subject to U.S. backup withholding tax at a 31% rate under the backup
withholding rules described below, rather than at a 30% rate or a reduced rate
under an income tax treaty, as described above, unless the non-U.S. holder
complies with certain Internal Revenue Service certification procedures or, in
the case of payments made outside the U.S. with respect to
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<PAGE>
an offshore account, certain IRS documentary evidence procedures. Further, to
claim the benefit of a reduced rate of withholding under a tax treaty for
dividends paid after December 31, 1999, a non-U.S. holder must comply with
certain modified IRS certification requirements. Special rules also apply to
dividend payments made after December 31, 1999 to foreign intermediaries, U.S.
or foreign wholly owned entities that are disregarded for U.S. Federal income
tax purposes and entities that are treated as fiscally transparent in the U.S.,
the applicable income tax treaty jurisdiction, or both. You should consult your
own tax advisor concerning the effect, if any, of the rules affecting
post-December 31, 1999 dividends on your possible investment in common stock.
A non-U.S. holder may obtain a refund of any excess amounts withheld by
filing an appropriate claim for refund along with the required information with
the IRS.
Gain on Disposition of Common Stock
A non-U.S. holder will generally not be subject to U.S. Federal income
tax with respect to gain recognized on a sale or other disposition of our common
stock unless one of the following apply:
o If the gain is effectively connected with a trade or business of
the non-U.S. holder in the United States and, if a tax treaty
applies, the gain is attributable to a U.S. permanent
establishment maintained by the non-U.S. holder. The non-U.S.
holder will, unless an applicable treaty provides otherwise, be
taxed on its net gain derived from the sale under regular
graduated U.S. Federal income tax rates. If the non-U.S. holder
is a foreign corporation, it may be subject to an additional
branch profits tax equal to 30% of its effectively connected
earnings and profits within the meaning of the Internal Revenue
Code for the taxable year, as adjusted for certain items, unless
it qualifies for a lower rate under an applicable income tax
treaty and duly demonstrates such qualification.
o If a non-U.S. holder who is an individual and holds our common
stock as a capital asset is present in the United States for 183
or more days in the taxable year of the disposition and certain
other conditions are met, the non-U.S. holder will be subject to
a flat 30% tax on the gain derived from the sale, which may be
offset by certain U.S. capital losses.
o If we are or have been a "U.S. real property holding corporation"
for U.S. Federal Income tax purposes at any time during the
shorter of the five-year period ending on the date of the
disposition or the period during which the non-U.S. holder held
the common stock. We believe that we never have been and are not
currently a U.S. real property holding corporation for U.S.
Federal income tax purposes. Although we consider it unlikely
based on our current business plans and operations, we may or may
not become a U.S. real property holding corporation in the
future. Even if we were to become a U.S. real property holding
corporation, any gain recognized by a non-U.S. holder still would
not be subject to U.S. tax if the shares were considered to be
"regularly traded on an established securities market" and the
non-U.S. holder did not own, actually or constructively, at any
time during the shorter of the periods described above, more than
five percent of a class of our common stock.
Federal Estate Tax
Common stock held by an individual non-U.S. holder at the time of death
will be included in such holder's gross estate for U.S. Federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.
Information Reporting and Backup Withholding Tax
Under U.S. Treasury regulations, we must report annually to the IRS and
to each non-U.S. holder the amount of dividends paid to such holder and the tax
withheld with respect to such dividends. These information reporting
requirements apply even if withholding was not required because the dividends
were effectively connected dividends or withholding was reduced or eliminated by
an applicable income tax treaty. Pursuant to an applicable tax treaty, that
information may also be made available to the tax authorities in the country in
which the non-U.S. holder resides.
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United States Federal backup withholding generally is a withholding tax
imposed at the rate of 31% on certain payments to persons that fail to furnish
certain required information. Backup withholding generally will not apply to
dividends paid before January 1, 2000 to non-U.S. holders. See the discussion
under "Distributions" above for rules regarding reporting requirements to avoid
backup withholding on dividends paid after December 31, 1999.
As a general matter, information reporting and backup withholding will
not apply to a payment by or through a foreign office of a foreign broker of the
proceeds of a sale of our common stock effected outside the U.S. However,
information reporting requirements, but not backup withholding, will apply to a
payment by or through a foreign office of a broker of the proceeds of a sale of
our common stock effected outside the U.S. if that broker:
o is a U.S. person;
o is a foreign person that derives 50% or more of its gross income
for certain periods from the conduct of a trade or business in
the U.S.;
o is a "controlled foreign corporation" as defined in the Internal
Revenue Code; or
o is a foreign partnership with certain U.S. connections (for
payments made after December 31, 1999).
Information reporting requirements will not apply in the above cases if
the broker has documentary evidence in its records that the holder is a non-U.S.
holder and certain conditions are met or the holder otherwise establishes an
exemption.
Payment by or through a U.S. office of a broker of the proceeds of a
sale of our common stock is subject to both backup withholding and information
reporting unless the holder certifies to the payor in the manner required as to
its non-U.S. status under penalties of perjury or otherwise establishes an
exemption.
Amounts withheld under the backup withholding rules do not constitute a
separate U.S. Federal income tax. Rather, any amounts withheld under the backup
withholding rules will be refunded or allowed as a credit against the holder's
U.S. Federal income tax liability, if any, provided the required information or
appropriate claim for refund is filed with the IRS.
The foregoing discussion is a summary of certain U.S. Federal income
and estate tax consequences of the ownership, sale or other disposition of our
common stock by non-U.S. holders. You are urged to consult your own tax advisor
with respect to the particular tax consequences to you of ownership and
disposition of our common stock, including the effect of any state, local,
foreign or other tax laws.
71
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an
underwriting agreement dated , 1999, the selling stockholder has agreed to
sell to the underwriters named below, for whom Credit Suisse First Boston
Corporation, and are acting as representatives, the following
respective numbers of ANC's shares:
Number
Underwriters of Shares
------------ ---------
Credit Suisse First Boston Corporation....................
-------------
Total............................................
-------------
The underwriting agreement provides that the underwriters are obligated
to purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
The selling stockholder has granted to the underwriters a 30-day option
to purchase on a pro rata basis up to additional outstanding shares from the
selling stockholder at the initial public offering price, less the underwriting
discounts and commissions. The option may be exercised only to cover any
over-allotments of common stock.
The underwriters propose to offer our shares initially at the
public offering price on the cover page of this prospectus and to selling group
members at that price less a concession of $ per share. The underwriters and
selling group members may allow a discount of $ per share on sales to other
broker/dealers. After the initial public offering, the public offering price and
concession and discount to dealers may be changed by the representatives.
The following table summarizes the compensation and estimated expenses
we and the selling stockholder will pay.
Without With
Over-allotment Over-allotment
-------------- --------------
Expenses payable by us........................... $ $
Underwriting discounts and commissions paid
by selling stockholder...................... $ $
Expenses payable by the selling stockholder...... $ $
72
<PAGE>
Each of the underwriters severally represents and agrees that: (i) it
has not offered or sold and prior to the date six months after the date of issue
of the common stock will not offer or sell any common stock to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995; (ii) it
has complied and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the common
stock in, from or otherwise involving the United Kingdom; and (iii) it has only
issued or passed on and will only issue or pass on in the United Kingdom any
document received by it in connection with the issue of the common stock to a
person who is of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom
such document may otherwise lawfully be issued or passed on.
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We and the selling stockholder have agreed, subject to certain
exceptions, that we and it will not offer, sell, contract to sell, announce an
intention to sell, pledge or otherwise dispose of, directly or indirectly, or
file with the Securities and Exchange Commission a registration statement under
the Securities Act of 1933 (the "Securities Act") relating to, any additional
shares of our common stock or securities convertible into or exchangeable or
exercisable for any of our common stock without the prior written consent of
Credit Suisse First Boston Corporation for a period of days after the date of
this prospectus.
We and the selling stockholder have agreed to indemnify the
underwriters against liabilities under the Securities Act, or contribute to
payments which the underwriters may be required to make in that respect.
We will make an application to list the shares of common stock on the
New York Stock Exchange under the symbol "CAN."
In connection with the listing of the common stock on the New York
Stock Exchange, the underwriters will undertake to sell round lots of 100 shares
or more to a minimum of 2,000 beneficial owners.
Certain of the U.S. and international underwriters have from time to
time performed, and continue to perform, financial advisory, investment banking
and commercial banking services for us, Pechiney and our respective
subsidiaries, for which customary compensation has been received. A member of
the Board of Directors of Credit Suisse, an affiliate of Credit Suisse First
Boston Corporation, is also a member of the Board of Directors of Pechiney.
The price to the public will be determined by Pechiney and ANC in
consultation with the representatives. Among the factors expected to be
considered in determining the price to the public, in addition to prevailing
market conditions, particularly market conditions for initial public offerings
and for securities of companies in the metal packaging industry, include the
history of and prospects for ANC's business and for the metal packaging industry
in general, the past and present operations of ANC, the past and present
earnings and current financial position of ANC, an assessment of ANC's
management and other relevant factors.
Credit Suisse First Boston Corporation, on behalf of the underwriters,
may engage in over-allotment, stabilizing transactions, syndicate covering
transactions and penalty bids in accordance with Regulation M under the
Securities Exchange Act of 1934 (the "Exchange Act"). Over-allotment involves
syndicate sales in excess of the offering size, which creates a syndicate short
position. Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specified maximum
price. Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the representatives to reclaim a
selling concession from a syndicate member when the common stock originally sold
by such syndicate member is purchased in a syndicate covering transaction to
cover syndicate short positions. These stabilizing transactions, syndicate
covering transactions and penalty bids may cause the price of the common stock
to be higher than it would otherwise be in the absence of these transactions.
These transactions may be effected on the New York Stock Exchange or otherwise
and, if commenced, may be discontinued at any time.
73
<PAGE>
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the shares in Canada is being made only on a
private placement basis exempt from the requirement that ANC and Pechiney
prepare and file a prospectus with the securities regulatory authorities in each
province where trades of shares are effected. Accordingly, any resale of the
shares in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or pursuant
to a discretionary exemption granted by the applicable Canadian securities
regulatory authority. Purchasers are advised to seek legal advice prior to any
resale of shares.
Representations of Purchasers
Each purchaser of shares in Canada who receives a purchase confirmation
will be deemed to represent to ANC and Pechiney and the dealer from whom such
purchase confirmation is received that (a) such purchaser is entitled under
applicable provincial securities laws to purchase such shares without the
benefit of a prospectus qualified under such securities laws, (b) where required
by law, such purchaser is purchasing as principal and not as an agent, and (c)
such purchaser has reviewed the text above under "Resale Restrictions."
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by the
Ontario Securities Laws. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
Enforcement of Legal Rights
All of ANC's directors and officers as well as the experts named herein
and Pechiney may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada upon
the issuer or such persons. All or a substantial portion of the assets of ANC,
Pechiney and such persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against ANC, Pechiney or such persons
in Canada or to enforce a judgment obtained in Canadian courts against ANC,
Pechiney or such persons outside of Canada.
Notice to British Columbia Residents
A purchaser of shares to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
shares acquired by such purchaser pursuant to this offering. Such report must be
in the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from ANC. Only one such report must be
filed in respect of shares acquired on the same date and under the same
prospectus exemption.
Taxation and Eligibility for Investment
Canadian purchasers of shares should consult their own legal and tax
advisers with respect to the tax consequences of an investment in the shares in
their particular circumstances and with respect to the eligibility of the shares
for investment by the purchaser under relevant Canadian legislation.
74
<PAGE>
ADDITIONAL INFORMATION
We have filed a registration statement on Form S-1 with the Securities
and Exchange Commission (known as the "SEC"). This prospectus, which is a part
of the registration statement, does not contain all of the information included
in the registration statement. Certain information is omitted and you should
refer to the registration statement and its exhibits. You may review a copy of
the registration statement, including exhibits, at the SEC's public reference
room at Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549 or Seven
World Trade Center, 13th Floor, New York, New York 10048 or Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms.
As a result of the offering of shares in the United States, we will
become subject to the reporting requirement of the Securities Exchange Act of
1934, and therefore, we will also file annual, quarterly and current reports,
proxy statements and other information with the SEC. You may read and copy any
reports, statements or other information on file at the public reference rooms.
You can also request copies of these documents, for a copying fee, by writing to
the SEC.
Our SEC filings and the registration statement can also be
reviewed by accessing the SEC's Internet site at http:/www.sec.gov, which
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC.
The shares will be traded on the New York Stock Exchange and reports
and other information concerning our Company will be available for inspection at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
LEGAL MATTERS
The validity of our shares offered hereby will be passed upon for us
and the selling stockholder by Shearman & Sterling, Paris, France and for the
underwriters by Cleary, Gottlieb, Steen & Hamilton, New York, New York.
EXPERTS
The Combined Financial Statements as of December 31, 1997 and 1998 and
for each of the three years in the period ended December 31, 1998 included in
this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
75
<PAGE>
INDEX TO COMBINED FINANCIAL STATEMENTS
Page
Report of Independent Accountants............................................F-2
Combined Statements of Income for the years ended
December 31, 1998, 1997 and 1996........................................F-3
Combined Balance Sheets at December 31, 1998 and 1997........................F-4
Combined Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996........................................F-5
Combined Statements of Changes in equity for the years ended
December 31, 1998, 1997 and 1996........................................F-7
Notes to Combined Financial Statements.......................................F-8
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of American National Can Group, Inc.
In our opinion, the combined financial statements listed in the Index to
Combined Financial Statements appearing on Page F-1 of this prospectus present
fairly, in all material respects, the financial position of American National
Can Holdings, Inc. and combined companies ("ANC") at December 31, 1997 and 1998,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of ANC's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audits 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 1, effective January 1, 1998, ANC adopted AICPA
Statement of Position 98-5, "Reporting on the Costs of Start-up Activities."
PricewaterhouseCoopers LLP
Chicago, Illinois
April 19, 1999
F - 2
<PAGE>
American National Can Group, Inc.
Combined Statement of Income
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended
December 31,
------------------------------------------------
Notes 1996 1997 1998
----- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 2,520,290 $2,465,018 $2,458,849
Cost of goods sold (excluding depreciation) 2,189,605 2,069,206 1,984,369
Selling, general and administrative expense 136,427 134,221 138,257
Research and development expense 21,652 19,514 15,224
Depreciation and amortization 73,958 77,656 82,057
Goodwill amortization 41,033 41,035 40,474
Restructuring charge (credit) and writedown
of property and equipment 5,15 158,706 10,924 (2,437)
---------- ---------- ----------
Operating income (loss) from continuing operations (101,091) 112,462 200,905
Interest expense 10 95,324 90,433 68,773
Interest income and other financial income
(expense), net 11 4,321 26,880 10,634
---------- ---------- ----------
Income (loss) from continuing operations
before income taxes, equity earnings, minority
interest, and cumulative effect of
accounting change (192,094) 48,909 142,766
Income tax expense (benefit) 9 (35,191) 30,027 26,546
---------- ---------- ----------
Income (loss) from continuing operations before
equity earnings, minority interest and cumulative
effect of accounting change (156,903) 18,882 116,220
Equity in net earnings (loss) of affiliates 6 993 (3,475) 4,465
Minority interest (7,209) (5,352) (4,997)
---------- ---------- ----------
Income (loss) from continuing operations before
cumulative effect of accounting change (163,119) 10,055 115,688
Income (loss) from discontinued operations,
net of tax expense (benefit) of ($32,454), $8,715
and $13,599 2 (60,803) 2,392 527
Cumulative effect of accounting change, net of
tax of $1,381 1 (2,566)
---------- ---------- ----------
Net income (loss) $ (223,922) $ 12,447 $ 113,649
========== ========== ==========
</TABLE>
See notes to the Combined Financial Statements.
F - 3
<PAGE>
American National Can Group, Inc.
Combined Balance Sheet
(In thousands of U.S. dollars)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
--------------------------------------
Notes 1997 1998
----- ---- ----
<S> <C> <C> <C>
ASSETS:
Current assets
Cash and cash equivalents $ 105,835 $ 170,549
Accounts receivable 3 135,549 138,312
Other receivables and prepaid expenses 36,537 42,232
Inventories 4 256,354 236,340
Net current assets of discontinued operations 2 13,670 46,454
Deferred income taxes 9 119,116 109,713
---------- -----------
Total current assets 667,061 743,600
Property, plant and equipment, net 5,15 845,849 836,064
Goodwill, net 1 1,300,471 1,224,348
Investments in equity affiliates 6 98,153 112,541
Pension asset 12 194,356 212,531
Net noncurrent assets of discontinued operations 2 511,787 536,397
Deferred income taxes 9 202,057 193,168
Other long-term assets 71,685 68,568
---------- -----------
Total assets $3,891,419 $ 3,927,217
========== ===========
LIABILITIES AND OWNER'S EQUITY:
Current Liabilities
Accounts payable--trade 250,733 241,215
Other payables and accrued liabilities 13 416,830 342,509
Current portion of long-term debt 7,8 7,403 6,704
Short-term financing: 7
External 24,435 20,258
Related party 738,563 659,783
---------- -----------
Total current liabilities 1,437,964 1,270,469
Deferred income taxes 9 53,089 59,900
Postretirement benefit obligations 12 308,847 309,004
Other long-term liabilities 14 225,020 169,828
Long-term debt: 7,8
External 318,198 259,921
Related party 571,591 291,277
---------- -----------
Total liabilities 2,914,709 2,360,399
Minority interests 29,042 28,530
Commitments and contingencies 18
Owner's equity 1,031,646 1,603,367
Accumulated other comprehensive loss (83,978) (65,079)
---------- -----------
Total equity 947,668 1,538,288
---------- -----------
Total liabilities and equity $3,891,419 $ 3,927,217
========== ===========
See notes to the Combined Financial Statements.
</TABLE>
F - 4
<PAGE>
American National Can Group, Inc.
Combined Statement of Cash Flows
(In thousands of U.S. dollars)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years ended
December 31,
--------------------------------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations before cumulative effect of
accounting change $(163,119) $ 10,055 $ 115,688
Minority interests 7,209 5,352 4,997
Equity in net (earnings) loss of affiliates (993) 3,475 (4,465)
Depreciation and amortization 114,991 118,691 122,531
Pension expense (income) 2,963 (14,640) (34,844)
Restructuring charge (credit) and write down
of property, plant and equipment 158,706 10,924 (2,437)
Provision (benefit) for deferred income taxes (38,076) (7,310) 30,691
Reduction in income tax reserve -- -- (32,206)
Other non-cash (income) expense, net (15,056) (8,180) 9,541
Changes in assets and liabilities exclusive of
effects from acquisitions, divestitures and
translation adjustments:
Decrease (increase) in inventories 81,443 6,434 23,243
Decrease (increase) in accounts receivable 52,756 (45,696) (3,140)
(Decrease) increase in accounts payable (95,104) 39,386 (10,958)
Other changes in assets and liabilities 4,577 10,666 (49,934)
Restructuring expenditures (23,303) (22,553) (12,059)
Pension funding (119,408) (54,865) (14,610)
Dividends received from unconsolidated affiliates 6,203 13,493 8,243
--------- --------- ---------
Net cash provided by operating activities of continuing operations 3,901 65,232 150,281
Net cash provided by operating activities of discontinued operations 8,451 96,704 35,198
--------- --------- ---------
Net cash provided by operating activities 13,352 161,936 185,479
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (142,387) (71,861) (65,196)
Proceeds from sales of property, plant and equipment 27,842 8,538 6,998
Acquisition of businesses (12,012) -- --
Other 7,218 6,320 --
--------- --------- ---------
Net cash used in investing activities of continuing operations (119,339) (57,003) (58,198)
Net cash provided by (used in) investing activities of discontinued operations 40,812 (55,062) (84,758)
--------- --------- ---------
Net cash used in investing activities (78,527) (112,065) (142,956)
See notes to the Combined Financial Statements.
</TABLE>
F - 5
<PAGE>
American National Can Group, Inc.
Combined Statement of Cash Flows
(In thousands of U.S. dollars)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term debt 120,000 1,037 265,295
Payments on long-term debt (32,052) (27,732) (595,951)
Net increase (decrease) in short-term financing (36,941) 34,284 (95,644)
Proceeds from issuance of common and preferred stock
by subsidiary companies to Pechiney -- -- 883,100
Capital contributions from Pechiney 66,000 602
Dividends paid:
To parent company (12,442) (7,658) (425,028)
To minority interests in subsidiaries (5,680) (4,016) (5,503)
--------- --------- ---------
Net cash provided by (used in) financing activities of continuing
operations 98,885 (8,483) 26,269
Net cash provided by (used in) financing activities of discontinued
operations (15,172) (3,282) (5,079)
--------- --------- ---------
Net cash provided by (used in) financing activities 83,718 (6,768) 21,190
Net effect of foreign currency translation on cash (63) (4,133) 1,161
--------- --------- ---------
Net increase in cash and cash equivalents 17,475 38,973 64,874
Change in cash and cash equivalents of discontinued operations (88) 454 (160)
--------- --------- ---------
Net increase in cash and cash equivalents of continuing operations 17,387 39,427 64,714
Cash and cash equivalents at beginning of year 49,021 66,408 105,835
--------- --------- ---------
Cash and cash equivalents at end of year $ 66,408 $ 105,835 $ 170,549
========= ========= =========
SUPPLEMENTAL DISCLOSURES
Cash payments during the year for:
Interest $ 95,380 $ 89,646 $ 67,545
Income taxes 31,883 25,054 41,141
Non-cash transactions:
Forgiveness of debt by Pechiney 152,000
Contribution by Pechiney of its minority interest in 883,100
European subsidiaries
See notes to the Combined Financial Statements.
</TABLE>
F - 6
<PAGE>
American National Can Group, Inc.
Combined Statement of Changes in Equity
(In thousands of U.S. dollars)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
Other
Owner's Comprehensive Comprehensive
Equity Income Income Total
----------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Balance at January 1, 1996 $ 1,044,619 $ (112,247) $ 932,372
Net loss (223,922) $ (223,922) (223,922)
Changes in accumulated other comprehensive income:
Foreign currency translation adjustment,
net of tax of $1,686 (4,006) (4,006) (4,006)
Minimum pension liability adjustments,
net of tax of $36,706 57,655 57,655 57,655
-----------
Comprehensive income (loss) $ (170,273)
===========
Capital contribution from Pechiney relating to
Brazilian subsidiary 66,000 66,000
Dividends paid to Pechiney (12,442) (12,442)
----------- ----------- -----------
Balance at December 31, 1996 874,255 (58,598) 815,657
Net income 12,447 12,447 12,447
Changes in accumulated other comprehensive income:
Foreign currency translation adjustment,
net of tax of ($7,496) (56,353) (56,353) (56,353)
Minimum pension liability adjustment,
net of tax of $18,690 29,552 29,552 29,552
-----------
$ (14,354)
Comprehensive income (loss)
Capital contribution from Pechiney relating to
forgiveness of debt ($152,000) and Brazilian
subsidiary ($602) 152,602 152,602
Dividends paid to Pechiney (7,658) (7,658)
Impact of divestiture 1,421 1,421
----------- ----------- -----------
Balance at December 31, 1997 1,031,646 (83,978) 947,668
Net income 113,649 $ 113,649 113,649
Changes in accumulated other comprehensive income:
Foreign currency translation adjustment,
net of tax of $4,263 29,892 29,892 29,892
Minimum pension liability adjustment,
net of tax of ($7,207) (10,993) (10,993) (10,993)
-----------
Comprehensive income $ 132,548
===========
Contribution by Pechiney of minority interest in
European subsidiaries 883,100 883,100
Dividends paid to Pechiney (425,028) (425,028)
----------- ----------- -----------
Balance at December 31, 1998 $1,603,367 $ (65,079) $ 1,538,288
=========== =========== ===========
Accumulated other comprehensive income items comprise cumulative translation adjustments of $18,409, $22,415, $77,347 and $47,455
and minimum pension liability adjustments of $93,838, $36,183, $6,631 and $17,624 at January 1, 1996 and December 31, 1996, 1997,
and 1998, respectively. Such amounts are net of tax aggregating $71,029, $32,637, $21,443 and $24,387 at those dates,
respectively. The net amounts for minimum pension liability adjustments referred to above include $2,935, $2,673, $3,469 and
$4,265 applicable to the discontinued Plastics business.
See notes to the Combined Financial Statements.
</TABLE>
F - 7
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
NOTE 1 - BASIS OF PRESENTATION
REPORTING STRUCTURE AND NATURE OF BUSINESS
American National Can Group, Inc. (the "Company"), a newly formed Delaware
company, will become the holding company for the worldwide beverage can business
of Pechiney, a French company, through a series of transactions in a number of
countries (the "Reorganization") to be completed immediately prior to the
initial public offering (the "Offering") by Pechiney of a majority ownership in
the Company. The beverage can business consists of the manufacture and sale of
aluminum and steel beverage cans for the soft drink, beer, fruit drink and tea
markets. Operations of this business have been conducted by (a) Pechiney North
America, Inc. ("PNA") (a wholly owned subsidiary of Pechiney) through its 90%
owned subsidiary (Pechiney owns directly the remaining 10%), American National
Can Company ("ANCC") and ANCC's various European (in which Pechiney has a
minority interest) and Asian subsidiaries and (b) Pechiney through its
subsidiaries in Turkey (65% owned), France (100% owned) and Brazil (100% owned)
and its joint ventures in Mexico (50% interest) and Korea (40% interest).
ANCC also operates a plastics packaging business which consists of the
manufacture and sale of flexible plastics (flexible packaging for the food,
meat, dairy and healthcare markets), plastic bottles (plastic barrier bottles
for food companies) and tubes (plastic and laminated tubes for the
pharmaceutical, cosmetics and toiletries markets).
The Reorganization consists of:
- Transfer by Pechiney of (a) PNA, (b) its minority interests in the
ANCC European subsidiaries and (c) its aforementioned
subsidiaries and investments in joint ventures to ANC, Inc.
- Transfer by ANCC of the Plastics business along with approximately
$275,000 of related party debt to a newly created wholly owned
subsidiary of ANCC (Pechiney Plastic Packaging, Inc.) and transfer of
the stock in the newly created subsidiary to Pechiney in exchange for
Pechiney's 10% ownership interest in ANCC. No gain/loss related to the
transfer of the Plastics operations will be recognized for financial
reporting purposes. The transfer of the Plastics operations would
result in a reduction of owner's equity of approximately $336,000. No
gain for income tax purposes is expected to result from the transfer.
However, in conjunction with the Reorganization, Pechiney Plastic
Packaging, Inc. intends to sell technology to another subsidiary of
Pechiney, resulting in a taxable gain currently estimated to be
$70,000. Such gain would result in no cash outlay, but would reduce
the deferred tax asset for net operating loss carryforwards by
$28,000.
Accordingly, the accompanying combined financial statements include the accounts
of PNA, ANCC and the entities to be transfered by Pechiney for the periods
presented. The combined entity is referred to hereinafter as the "ANC." The
Plastics operations have been presented as discontinued operations in the
accompanying combined financial statements as they represent a separate segment.
As a consequence, in the combined balance sheets at December 31, 1997 and 1998,
the amounts of the net current and net non-current assets and liabilities of
the Plastics operations have been aggregated and presented as single-line items.
In the combined statement of income for all periods presented, the operating
results of the Plastics business have been presented separately as single-line
items. The combined statement of cash flows sets forth separately the cash flows
of the continuing and discontinued operations for all periods presented.
F - 8
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- -------------------------------------------------------------------------------
In February 1998, Pechiney reorganized the ownership of its beverage can
European subsidiaries. As a result of that reorganization, newly created foreign
subsidiaries of ANC, which own all the stock of the European subsidiaries,
issued common and preferred stock to Pechiney for $883,100, representing a 44%
ownership interest in the subsidiaries. The proceeds were lent by ANC to PNA.
PNA utilized the proceeds to repay debt owing to Pechiney ($473,100) and for
payment of a dividend to Pechiney ($410,000). As referred to above, Pechiney
will transfer its minority interest in the European subsidiaries to the Company
and, accordingly, $883,100 was recorded in the combined financial statements as
a contribution to capital.
In February 1996, an Italian subsidiary of ANC acquired the capital stock of
SITAC, an Italian company engaged in the manufacture of beverage can ends. The
purchase price, exclusive of cash acquired, was $12,012. Goodwill of $1,600 was
recorded in connection with the transaction.
ACCOUNTING PRINCIPLES
The combined financial statements of ANC are prepared in accordance with
accounting principles generally accepted in the United States of America ("U.S.
GAAP").
Newly issued accounting principles
o In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued its Statement of Position 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use". The statement
requires capitalization of external direct costs of materials and services
consumed in the development or obtainment of internal use computer
software, payroll and payroll-related costs for employees who are directly
associated with and who devote time to the internal-use computer software
project and interest costs incurred during the development of the computer
software for internal use. Adoption of this statement will be required in
ANC's financial statements for the year ending December 31, 1999
and is not expected to have a significant effect.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement requires that all
derivatives be recognized as assets and liabilities and measured at fair
value. Changes in the fair value of derivatives not qualifying as hedges
are required to be reported in earnings. Adoption of the standard will be
required in ANC's financial statements for the year ending December
31, 2000. Management is in the process of evaluating this standard and has
not yet determined the future impact on ANC's combined financial
statements.
In April 1998, the AICPA issued its Statement of Position 98-5, "Reporting
on the Costs of Start-up Activities". This statement requires the cost of
start-up activities and organization costs to be expensed as incurred. ANC
adopted this statement effective January 1, 1998 and unamortized
costs that were previously capitalized through that date were written off
as a cumulative effect of an accounting change. This resulted in a charge
of $2,566 (net of taxes of $1,381) to continuing operations and $1,481 (net
of taxes of $971) to discontinued operations.
F - 9
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- -------------------------------------------------------------------------------
Significant accounting policies
Principles of Combination
The combined financial statements include the accounts of the entities referred
to above under Reporting Structure and Nature of Business. The equity method of
accounting is used for unconsolidated companies in which ANC exercises
significant influence. All significant intercompany transactions and profits
have been eliminated.
Revenue Recognition
Revenues are recognized when goods are shipped.
Translation
Asset and liability accounts denominated in non-U.S. currencies are translated
into U.S. dollars at year-end exchange rates, while revenues and costs are
translated at average rates of exchange in effect during the period. The net
effect of translating non-U.S. currencies is recorded as a cumulative adjustment
within accumulated other comprehensive income, net of applicable income taxes.
For non-U.S. subsidiaries and equity investments with financial activities which
are considered to be an extension of ANC's U.S. activities or which operate in a
highly inflationary economy, non-monetary items and related income statement
amounts are remeasured into the reporting currency at historical rates and
monetary items are remeasured at current exchange rates. Remeasurement
differences and exchange differences arising from non-U.S. currency transactions
for these entities are reflected in the combined statement of income.
Property, Plant and Equipment
Property, plant and equipment is stated at cost including interest incurred on
funds borrowed during the period that major items are constructed for their
intended use. Capitalized leases are stated at the present value of future
minimum lease payments. Depreciation and amortization are computed using the
straight-line method over the estimated useful lives of the assets (buildings -
40 years and machinery and equipment - 4 to 25 years).
Whenever events or changes in circumstances indicate that the carrying amount of
long-lived assets may not be recoverable, this carrying amount is compared with
the future cash flows (undiscounted and without interest charges) expected to
result from the use of the assets and their eventual disposition. If the sum of
expected future cash flows is less than the carrying amount of the assets, an
impairment loss is recognized based on the fair value of the assets; when a
market value is not available, the fair value is generally estimated as the
present value of expected future cash flows.
F - 10
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- -------------------------------------------------------------------------------
Inventories
Inventories are stated at the lower of cost or market. The cost of substantially
all U.S. inventories, other than spare parts, is determined by the last-in,
first-out (LIFO) method. The cost of substantially all other inventories is
determined by the first-in, first-out (FIFO) method. At December 31, 1997 and
1998, inventories stated at LIFO comprised approximately 30% and 36%,
respectively, of combined inventories.
Goodwill
The difference between the purchase price and the book value of net assets
acquired is allocated to tangible and intangible assets and to assumed
liabilities for which a fair value can be specifically determined. The excess of
the purchase price over the fair value of net assets acquired is allocated to
goodwill. Goodwill is amortized on a straight-line basis over a period not
exceeding 40 years.
Substantially all of the goodwill reflected on the combined balance sheet arose
from the revaluation of the tangible assets and assumed liabilities of ANC as
of the date of its acquisition by Pechiney in 1988. At December 31, 1997 and
1998, accumulated amortization of goodwill aggregated $430,290 and $470,764,
respectively.
The carrying value of goodwill is reviewed regularly to reflect changes which
may have permanently impaired the profitability and the value of the related
assets:
- - the carrying value of goodwill is compared with the fair value of the
corresponding entities, estimated on the basis of market value of these
entities or comparable entities, when available, or using other
techniques such as the discounted cash flow method;
- - in addition, goodwill associated with property, plant and equipment is
reviewed for impairment jointly with the property, plant and equipment
with which it is associated.
No writedowns were required in the periods presented as a result of the
evaluations performed under these two methodologies.
During 1998, certain income tax uncertainties related to the 1988 acquisition of
ANC by Pechiney were resolved and the related liabilities established at the
acquisition date were reversed resulting in a net $46,122 reduction in goodwill,
of which $35,649 pertained to continuing operations (Note 9).
Research and Development Costs
Research and development costs are expensed as incurred.
F - 11
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- -------------------------------------------------------------------------------
Deferred Income Taxes
Deferred income taxes are accounted for using the liability method on temporary
differences between the financial statement and tax bases. These deferred taxes
are measured by applying currently enacted tax laws. Valuation allowances are
established on deferred tax assets when management estimates that it is more
likely than not that the related benefit will not be realized.
Financial Instruments
ANC's financial instruments include cash, current accounts and notes
receivable, noncurrent receivables, accounts payable, short-term and long-term
debt, and foreign currency exchange contracts. The market value of cash and
current receivables and payables are considered to be identical to the book
value due to the short-term nature of those instruments. The market value for
noncurrent receivables and short-term and long-term debt, based on current
interest rates available to ANC for similar instruments, approximated
their carrying value at December 31, 1998.
ANC enters into foreign currency exchange contracts, primarily with
Pechiney, as a hedge against firm currency commitments which are primarily for
the purchase of raw materials and the sale of finished goods. ANC's
foreign currency exchange contracts do not subject ANC to significant
risk due to exchange rate movements because gains and losses on these contracts
are deferred and offset against gains and losses on the transactions being
hedged. At December 31, 1998, ANC had forward exchange contracts, with
maturity dates through July 2003, to purchase $321,000 and to sell $90,000 of
various foreign currencies. The carrying value of ANC's foreign currency
exchange contracts approximate their fair value.
Prepaid Customer Incentives
Included in prepaid expenses and other long-term assets are prepaid customer
incentives, representing payments to certain customers in exchange for entering
into long-term sales contracts requiring purchases of guaranteed minimum
quantities. These incentive payments are capitalized upon payment and amortized
over the length of the underlying contract.
Uncertainties Resulting from the Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates and assumptions.
Estimates and assumptions are particularly significant with respect to
estimating liabilities such as provisions and accruals for litigation or
environmental reserves. They are also significant with respect to assessing the
recoverability of the carrying value of property, plant and equipment,
intangible assets and deferred tax assets, which, to a large extent, is based on
estimates of expected future net income or cash flows. Actual future net income
and cash flows could vary significantly from the estimates.
Cash and Cash Equivalents
F - 12
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- -------------------------------------------------------------------------------
For purposes of the statement of cash flows, cash and cash equivalents include
all financial instruments with an initial maturity of 90 days or less.
Earnings Per Share
Because of the multiple capital structures of the entities included in these
combined financial statements, earnings per share amounts are not considered
meaningful and have not been presented.
F - 13
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- -------------------------------------------------------------------------------
NOTE 2 - DISCONTINUED OPERATIONS
The Plastics business of ANC will be transferred to Pechiney (Note 1). These
operations have been reflected as discontinued operations for all periods
presented in the combined financial statements. The net assets of the
discontinued business at December 31, 1997 and 1998 comprise:
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C>
Net current assets
Cash $ 1,349 $ 1,509
Accounts receivable, net 14,273 12,623
Inventories:
Raw materials 26,203 38,054
Spare parts 6,410 7,326
Work-in-process 27,612 25,950
Finished goods 65,132 64,801
----------- --------
Total inventories 125,357 136,131
Other receivables and prepaid expenses 12,383 20,261
Deferred income taxes 10,005 7,682
Accounts payable-trade (60,651) (48,692)
Postretirement benefit obligations (29,000) (29,000)
Other payables and accrued liabilities (51,614) (46,320)
Current portion of long-term debt (4,096) (4,388)
Short-term financing - External (4,336) (3,352)
----------- --------
Net current assets $ 13,670 $ 46,454
=========== ========
Net noncurrent assets
Property, plant and equipment $ 408,481 $449,264
Goodwill 349,542 327,060
Deferred income taxes 114,028 118,952
Pension asset 631 177
Other long-term assets 55,180 43,781
Post retirement benefit obligations (335,031) (331,797)
Other long-term liabilities (13,182) (7,565)
Long-term debt - Related party (67,862) (63,475)
----------- --------
Net noncurrent assets $ 511,787 $536,397
=========== ========
</TABLE>
F - 14
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- -------------------------------------------------------------------------------
In December 1995, ANC entered into an agreement with PMC Lease Co., a related
party, for the sale and leaseback of certain Plastics business machinery and
equipment. Based on an independent valuation, the final selling price of these
assets was $79,260, which approximated their book value. PMC Lease Co. paid ANC
$14,631 in 1995 and issued a note receivable for the balance. The note is
repayable in annual installments over 10 years, with the final installment due
in December 2005, and bears interest at 6.1%. The lease has been recorded as a
capital lease. The recorded assets and liabilities related to this agreement
have been included in the net assets of discontinued operations in the combined
balance sheet at December 31, 1997 and 1998.
In December 1996, PNA sold the capital stock of Intsel Southwest, a 100% owned
subsidiary engaged in the metal distributions business, for $61,396 of cash. The
gain on sale of this business, together with its net income from 1996
operations, has been presented as a discontinued operation in the combined
statement of income for 1996. Net sales of Intsel Southwest for 1996 were
$99,015.
Cash flows from investing activities of discontinued operations for 1996 include
proceeds from sales of businesses of $97,462, comprising $61,396 pertaining to
the sale of Intsel Southwest by PNA and $35,526 in final settlement of ANC's
selling price of its Food Metal & Specialty business unit and its Glass business
unit. These ANC business units have been accounted for as discontinued
operations since June 30, 1995.
In December 1996, Pechiney authorized the sale of ANC's 51% interest in an
Italian subsidiary engaged in the manufacture of food cans and a provision for
loss of $6,300 million related to income taxes was recorded. The sale was
completed in 1997 and proceeds were $3,239, net of $13,000 of subsidiary cash.
An additional loss of $100 million was recorded in 1997.
In December 1996, the plastics business recorded a restructuring charge of
$32,412. The 1996 charge resulted from Project Challenge initiatives and
comprised the cost to close the Mt. Vernon, OH plant, sever an additional 89
employees primarily in plants other than Mt. Vernon, and to writedown equipment
in other plants to net realizable value. The plant was closed during the fourth
quarter of 1998. Remaining restructuring reserves included in the liabilities of
the discontinued business were $12,163 and $6,800 at December 31, 1997 and 1998,
respectively. Management believes that the remaining reserve at December 31,
1998 will be substantially utilized in 1999.
F - 15
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- -------------------------------------------------------------------------------
Income (loss) from discontinued operations as presented in the combined
statement of income comprises:
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------------------------
1996 1997 1998
--------------------- -------------------- ------------
<S> <C> <C> <C>
Plastics business
Income (loss) before income taxes $ (130,003) $ 11,107 $ 16,578
(Provision) benefit for income taxes 45,315 (8,715) (14,570)
------------ ------------ ------------
Income (loss) before cumulative effect of
accounting change (84,688) 2,392 2,008
Cumulative effect of accounting
change, net of tax of $971 (Note 1) (1,481)
------------ ------------ ------------
Income (loss) (84,688) 2,392 527
Intsel Southwest
Income before income taxes 13,480
Provision for income taxes 4,718
------------
Income 8,762
------------
Gain on sale 23,266
Provision for income taxes 8,143
------------
Net gain 15,123
------------
23,885
------------ ------------ ------------
Income (loss) from discontinued operations $ (60,803) $ 2,392 $ 527
============ ============ ============
</TABLE>
Net sales for the Plastics business were $878,080, $846,409 and $827,233 for the
years ended December 31, 1996, 1997 and 1998 respectively.
The loss before income taxes of the Plastics business for 1996 includes a
provision for loss of $103,768 pertaining to the Viskase litigation (Note 18).
NOTE 3 - ACCOUNTS RECEIVABLE
In June 1997, ANC began selling all of its U.S. receivables (including those
related to its Plastics business) to American National Can Receivables
Corporation ("ANCRC"), a wholly-owned nonconsolidated subsidiary of ANC. ANCRC
entered into a Receivables Sale Agreement with a financial institution under
which it is able to sell through October 1999, with limited recourse, an
undivided interest of up to $125,000 in the receivables that it purchases from
ANC. At December 31, 1997 and 1998, ANCRC had sold to the financial
institution, undivided interests of $45,096 and $37,768, respectively, in the
receivables that it purchased from ANC. At December 31, 1997 and 1998,
accounts receivable as shown in the combined balance sheet included $50,266 and
$67,704, respectively, due from ANCRC. ANC has retained the collection
responsibility with respect to the receivables sold to ANCRC.
Before June 1997, ANC had an agreement with a financial institution to sell
U.S. trade accounts receivable, with limited recourse, on a revolving basis.
Under the agreement, the maximum amount of receivables that could be sold at any
point in time was $175,000.
An analysis of the allowances for doubtful current and noncurrent receivables
follows:
F - 16
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------------
1996 1997 1998
------------------ -------------------- -----------
<S> <C> <C> <C>
Balance at beginning of year $ 9,059 $ 22,486 $ 24,840
Provision charged to income 12,418 2,774 10,049
Writeoff of uncollectible receivables, net of
recoveries 507 (249) (2,032)
Other 502 (171) 52
----------- ------------ -----------
Balance at end of year $ 22,486 $ 24,840 $ 32,909
=========== ============ ============
</TABLE>
The allowance for doubtful receivables has been determined recognizing that
ANC has retained substantially the same risk of credit loss as if the U.S.
receivables had not been sold.
F - 17
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- -------------------------------------------------------------------------------
NOTE 4 - INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1997 1998
------------------- ------------
<S> <C> <C>
Raw materials $ 52,408 $ 36,244
Spare parts 51,208 40,065
Work-in-progress 4,729 1,974
Finished goods 148,009 158,057
------------ ------------
$ 256,354 $ 236,340
============= ============
The LIFO inventory carrying value exceeded its FIFO basis by approximately
$3,506 and $6,366 at December 31, 1997 and 1998, respectively.
NOTE 5 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
</TABLE>
<TABLE>
<CAPTION>
December 31,
---------------------------------
1997 1998
------------------- ------------
<S> <C> <C>
Land $ 41,161 $ 40,473
Buildings 242,510 249,396
Machinery and equipment 1,031,878 1,110,795
Construction in progress 55,347 42,965
Less accumulated depreciation (533,361) (614,058)
------------ ------------
837,535 829,571
------------ ------------
Assets under capital leases 22,053 20,471
Less: accumulated amortization (13,739) (13,978)
------------ ------------
8,314 6,493
------------ ------------
$ 845,849 $ 836,064
============ ============
</TABLE>
Assets under capital leases primarily represent buildings, machinery and
equipment.
F - 18
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- -------------------------------------------------------------------------------
NOTE 6 - INVESTMENTS IN EQUITY AFFILIATES
Investments in equity affiliates and ANC's percentage of ownership were
as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
% Owned 1997 1998
------- --------- ----------
<S> <C> <C> <C>
Hanil Can Company, Ltd. (Korea) 40.0 $ 22,128 $ 33,712
Valley Metal Container Partnership (Coors) 50.0 24,296 24,867
Nippon National Seikan Co., Ltd. (Japan) 24.5 25,222 26,957
ANC Receivables Corporation (Note 3) 100.0 14,096 14,289
Vitro-American National Can (Mexico) 50.0 8,953 8,394
Container Recycling Alliance L.P. 50.0 3,458 4,322
-------- ---------
$ 98,153 $ 112,541
======== =========
</TABLE>
As a result of applying the purchase method of accounting, the carrying value of
these investments exceeded the company's proportionate share of underlying
equity at December 31, 1998 by an aggregate of $17,656, which is being amortized
over a forty-year period.
Equity in net earnings of affiliates included in the combined statement of
income aggregated $12,774, $9,569 and $10,950 in the years ended December 31,
1996, 1997 and 1998, respectively. These amounts included earnings from
partnerships which produce and sell packaging products of $11,781, $13,044 and
$6,485 in the years ended December 31, 1996, 1997 and 1998, respectively, which
were recorded as a reduction of cost of goods sold.
Dividends received from equity affiliates aggregated $6,203, $13,493 and $8,243
for the years ended December 31, 1996, 1997 and 1998, respectively.
Effective March 31, 1999, ANC sold its 50% interest in the Container Recycling
Alliance partnership at a gain of approximately $4,800. The selling price was
$9,000 in cash, plus future payments to ANC based on the partnership's
operating results for the two years ended December 31, 2000. The agreement
specifies that such future payments will not be less than $750 in the aggregate.
F - 19
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- -------------------------------------------------------------------------------
The following table includes financial information relating to ANC's
unconsolidated equity affiliates as of December 31, 1997 and 1998 and for each
of the three years in the period ended December 31, 1998.
F - 20
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1996 1997 1998
--------- -------- --------
<S> <C> <C> <C>
Balance Sheet:
Current assets $288,860 $303,294
Noncurrent assets 216,964 264,958
Current liabilities 257,581 259,419
Noncurrent liabilities 76,225 80,309
Statement of Income:
Net revenues $689,489 $674,090 $602,708
Net income 32,847 23,915 34,313
</TABLE>
NOTE 7 - LONG-TERM DEBT
A summary of long-term debt outstanding was as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1997 1998
----------------- -----------------
<S> <C> <C>
External:
Note Purchase Agreements of ANC with various insurance
companies:
5.69% Senior Notes due December 2000 $ 38,000 $ 38,000
6.33% Senior Notes due December 2003 110,200 110,200
6.46% Senior Notes due December 2005 41,800 41,800
6.64% Senior Notes due December 2008 38,000 38,000
Revolving bank borrowings of ANC, bearing interest based
on spreads over LIBOR, under a credit agreement expiring
in June 2003 85,000 20,000
Bank borrowings of Brazilian subsidiary due January 2001
at 0.75% over LIBOR -- 9,996
Capital leases 2,984 2,294
Other 5,034 1,752
---------- --------
321,018 262,042
Less: amounts due within one year (2,820) (2,121)
---------- --------
$ 318,198 $ 259,921
========== ============
</TABLE>
F - 21
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Related Party:
<S> <C> <C>
Revolving borrowings from Pechiney, bearing $ 500,000 $ --
interest based on .675 over Libor under a credit
agreement expiring December 2000
Revolving borrowings from Pechiney, bearing -- 200,000
interest based on .125 over Libor under a credit
agreement expiring January 2001
Subordinated notes with Pechiney, bearing interest 50,663 46,079
based on .625 over Libor, due in annual payments through
October 2002
Other borrowings from Pechiney, bearing interest at a rate of 10.5%
expiring December 2004 20,000 20,000
Deutschmark denominated note with Pechiney bearing -- 23,911
interest based on Fibor plus 0.3%, expiring February 2003
Other 5,511 5,870
--------- ---------
576,174 295,860
Less: amounts due within one year (4,583) (4,583)
--------- ---------
$ 571,591 $ 291,277
========= =========
</TABLE>
At December 31, 1998 the maturities of long-term debt during the next five
years, excluding obligations under capital leases, were as follows:
1999 $ 6,078
2000 42,829
2001 15,225
2002 52,570
2003 134,315
During the year ended December 31, 1997, long-term debt owing to Pechiney of
$152,000 was forgiven and recorded as a capital contribution.
The Note Purchase Agreements with various insurance companies, the credit
agreement with banks and the Receivables Sales Agreement (Note 3) contain
various restrictions, among others, on the (a) sale of ANC assets, including
specific restrictions on the amount of receivables to be sold in relation to net
sales, (b) issuance of guarantees and (c) the maintenance of ANC consolidated
net worth.
F - 22
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
External lines of credit available to ANC under borrowing arrangements
and the usage thereof at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Total
Available Used Unused
--------- ---- ------
<S> <C> <C> <C>
U.S. - long-term $ 500,000 $ 20,000 $ 480,000
U.S. - short-term 89,000 15,525 73,475
International - short-term 160,112 4,733 155,379
</TABLE>
The U.S. long-term line is available under the credit agreement expiring in June
2003. At December 31, 1998, borrowings under this agreement are at an interest
rate of Libor plus .17%. The agreement requires payment of a facility fee of
.08% per annum of the commitment amount (whether used or unused) and a
utilization fee of .05% per annum of average borrowings if such borrowings
exceed 60% of the commitment. ANC maintains lines of credit in the United States
and in a number of foreign countries. Foreign borrowings are generally overdraft
facilities at rates competitive in the countries in which ANC operates.
Generally, each foreign line is available only for borrowings related to
operations of a specific country. U.S. lines are overnight facilities at market
rate. The weighted average interest rate on short-term borrowings outstanding as
of December 31, 1997 and 1998 was approximately 5.9% and 5.6%, respectively.
As the Offering will result in a change in control of ANC, it will give rise to
new financial covenants under the $500 million revolving credit facility. These
covenants will require ANC to maintain a specified EBITDA interest coverage
ratio and a specified debt to equity ratio. The change of control will also
require ANC to make an offer to prepay the $228 million of notes with insurance
companies. ANC is currently negotiating with its existing lenders with respect
to these matters. In addition, Pechiney has indicated that all the debt
financing it provides on an intra-group basis will terminate when the Offering
is complete. Accordingly, the Company has commenced negotiations with potential
new third-party lenders to obtain some or all of the total funding requirements
when the Offering is complete.
F - 23
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
NOTE 8 - LEASES
ANC leases manufacturing, warehouse and office facilities, and equipment. Future
minimum lease payments required under capital leases and operating leases having
initial or remaining noncancelable lease terms in excess of one year are set
forth below. Such future minimum lease payments have not been reduced by
sublease rentals to be received subsequent to December 31, 1998 of $26,275 for
operating leases.
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------ ------
<S> <C> <C>
1999 $ 826 $ 32,031
2000 253 29,772
2001 243 27,283
2002 242 29,367
2003 203 28,428
2004 and beyond 2,637 114,310
-------------- --------------
Total minimum rentals 4,404 $ 261,191
==============
Less: amount representing interest (2,110)
--------------
Present value of future minimum payments (Note 7) 2,294
Less: current portion (626)
--------------
Long-term obligations under capital leases $ 1,668
==============
</TABLE>
Rental expense under operating leases was as follows:
<TABLE>
<CAPTION>
Years ended
December 31,
-------------------------------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Gross rental expense $ 39,443 $ 40,240 $ 34,676
Less: sublease rental income (3,031) (3,138) (3,443)
-------------- -------------- -------------
$ 36,412 $ 37,102 $ 31,233
============== ============== =============
</TABLE>
Rental expense under operating leases included in the results of discontinued
operations was $8,027, $6,899 and $7,363 for the years ended December 31, 1996,
1997 and 1998, respectively.
F - 24
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
NOTE 9 - INCOME TAXES
The provision (benefit) for taxes on income (loss) from continuing operations
was as follows:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Current income taxes:
United States:
Federal $ (19,573) $ 2,674 $ (40,650)
State (408) 358 (144)
Other 22,866 34,305 36,649
------------- ------------- -------------
2,885 37,337 (4,145)
------------- ------------- -------------
Deferred income taxes:
United States (41,025) (11,027) 23,401
Other 2,949 3,717 7,290
------------- ------------- -------------
(38,076) (7,310) 30,691
------------- ------------- -------------
$ (35,191) $ 30,027 $ 26,546
============= ============= =============
</TABLE>
The provision (benefit) for taxes on income (loss) from continuing operations
differs from the U.S. statutory rate for the following reasons:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Statutory tax rate (35.0%) 35.0% 35.0%
State taxes, net of federal tax effect (3.0) 6.0 1.8
Goodwill amortization 7.5 29.3 9.9
Foreign tax rate differential 3.6 (15.4) (4.2)
Adjustment of prior year taxes -- -- (22.6)
Other 8.6 6.5 (1.3)
----------- ----------- -----------
Effective tax rate (18.3%) 61.4% 18.6%
=========== =========== ===========
</TABLE>
U.S. Federal income taxes which may be incurred upon remittance of approximately
$92,000 of accumulated earnings of ANC's foreign subsidiaries have not been
provided at December 31, 1998 because such earnings are considered to be
permanently invested.
F - 25
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
Deferred tax assets (liabilities) consisted of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1997 1998
--------------------- --------------
<S> <C> <C>
Deferred tax assets
Deductible temporary differences:
Employee benefits $ 152,454 $ 149,503
Restructuring reserves 36,405 29,383
Other 139,612 134,657
Tax loss and credit carryforwards:
U.S. Federal net operating losses 135,262 148,227
U.S. Federal alternative minimum tax credits 6,838 7,587
U.S. federal general business credits 5,738 5,738
U.S. state net operating losses 7,901 7,901
Valuation allowances (18,455) (18,455)
--------------- ---------------
Total 465,755 464,541
--------------- ---------------
Deferred tax liabilities
Taxable temporary differences:
Fixed assets (86,829) (100,674)
Inventories (15,632) (14,065)
Employee benefits (61,327) (76,682)
Other (33,883) (30,139)
--------------- ---------------
Total (197,671) (221,560)
--------------- ---------------
Net deferred tax asset $ 268,084 $ 242,981
=============== ===============
</TABLE>
The U.S. federal net operating loss carryforwards expire as follows:
2003 $28,871
2009 109,909
2011 201,626
2012 47,311
2018 35,789
The U. S. federal alternative minimum tax credit carryforwards of $7,587 have an
unlimited carryover period.
The general business credits of $5,738 expire 1999 through 2007, including
$2,970 and $1,789 in 2000 and 2001, respectively.
F - 26
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
As a result of the Offering, U.S. tax regulations will limit the amount of net
operating loss and tax credit carryforwards available to ANC going
forward on an annual basis.
At December 31, 1998, valuation allowances have been provided for the tax assets
attributed to (a) the U.S. federal net operating loss carryforwards expiring in
2003, which can be utilized solely against the taxable income of a component
member of the consolidated taxpayer group ($10,105), (b) the general business
credits, substantially all of which also can be used solely against the taxes
payable by a component member of the taxpayer group ($5,738), and (c) certain
U.S. state income tax net operating loss carryforwards ($2,612). No other
valuation allowances were deemed necessary as management believes that it is
more likely than not that, based upon prior earnings history, future taxable
income will be more than sufficient to utilize the tax loss carryforwards and
the deductible temporary differences not offset by future reversals of taxable
temporary differences.
As a result of the receipt in August 1998 of Joint Committee approval for the
settlement of various issues pertaining to federal income tax returns for the
years 1985 through 1995, income tax liabilities were reduced by $78,328. Of this
amount, $46,122 pertained to issues for which tax reserves had been established
in the purchase accounting for the acquisition of ANC by Pechiney in 1988,
which was recorded as a reduction of goodwill during 1998 ($35,649 pertained to
continuing operations - Note 1). The $32,206 remainder of the tax reserve
reduction pertained to expense provisions recorded in prior years and was
recorded as a reduction of the provision for income taxes in the combined
statement of income for the year ended December 31, 1998.
Included in income (loss) from continuing operations before income taxes, equity
earnings, minority interest and commutative effect of accounting change in 1996,
1997 and 1998, was $42,963, $75,572 and $119,497, respectively, of income from
foreign sources, none of which was remitted to ANC.
NOTE 10 - INTEREST EXPENSE
Interest expense consisted of the following:
<TABLE>
<CAPTION>
Years ended
December 31,
-------------------------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Interest cost incurred
External $ 26,599 $ 23,011 $ 19,710
Related party 68,258 67,053 48,720
Interest imputed on obligations under
capital leases 321 268 241
Deferred financing cost amortization 146 101 102
--------- ----------- ---------
Total interest expense $ 95,324 $ 90,433 $ 68,773
========= =========== =========
</TABLE>
Discontinued operations reflect interest expense of $28,477, $25,219 and
$18,930 for the years ended December 31, 1996, 1997 and 1998, respectively.
Such amounts give recognition to the debt of the Plastics operations, as well as
an allocation of combined entity interest based primarily on the net assets of
the component entities.
F - 27
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
NOTE 11 - INTEREST INCOME AND OTHER FINANCIAL INCOME (EXPENSE), NET
Interest income and other financial income (expense), net, consisted of the
following:
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Interest income:
External $ 7,253 $ 6,555 $ 8,641
Related party 1,309 1,515 5,056
Expense related to the sale of accounts
receivable (3,966) (3,038) (2,513)
Foreign currency exchange gains (losses) (1,811) 21,332 515
Other 1,536 516 (1,065)
-------- -------- --------
$ 4,321 $ 26,880 $ 10,634
======== ======== ========
</TABLE>
Foreign currency exchange gains (losses) for the year ended December 31, 1997
includes a $21,020 non-recurring gain relating to foreign currency forward
contracts.
NOTE 12 - PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
ANC has defined benefit and defined contribution retirement plans covering
substantially all current and retired U.S. employees and certain U.S. employees
of businesses that have been sold. The plans provide benefits that are based on
the employee's years of service and compensation during employment with ANC. ANC
makes contributions to the defined benefit plans at least equal to the minimum
funding requirements under the Employee Retirement Income Security Act of 1974.
Costs for government-sponsored pension plans of ANC's international operations
are expensed on a current basis. ANC's Plastics business sponsors defined
benefit retirement plans covering certain hourly employees of that business. The
remaining hourly employees of that business are included in ANC-sponsored
defined benefit plans or multi-employer union plans. The salaried employees of
the Plastics business are included in defined benefit and defined contribution
plans which cover substantially all of the salaried employees of ANC.
Obligations of the plans sponsored by the Plastics business, as well as
obligations under multi-employer plans, will remain with that business and be
included in the operations being transferred to Pechiney (Note 1). These
liabilities aggregated $4,154 at December 31, 1998 and are included in the net
assets of discontinued operations in the combined balance sheet at that date.
Benefits of Plastics business participants included in the ANC-sponsored plans
will be frozen as of the Plastics business transfer with respect to service
accrued before that date (subject to adjustments for certain future service and
pay) and new mirror offset plans will be created by the Plastics business for
those employees.
F - 28
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
ANC provides certain healthcare and life insurance benefits for substantially
all retired U.S. employees and their dependents, including those of the Plastics
business, under various postretirement benefit plans based on age and length of
service. Certain of the plans require retiree contributions. Benefits for
employees in non-U.S. countries are generally limited due to coverage which is
already provided by national health programs. The liability for benefits for
active and retired employees of the Plastics business, aggregating $83,561 at
December 31, 1998 will be included in the liabilities transferred to Pechiney
Plastic Packaging, Inc. Further, liability for benefits for certain additional
retired employees relating primarily to closed plants aggregating $277,236 at
December 31, 1998 will also be transferred to and be assumed by Pechiney
Packaging, Inc. These liabilities aggregating $360,797 have been included in the
net assets of the discontinued operations (Note 2). Pechiney has agreed to
guarantee this obligation of Pechiney Plastic Packaging, Inc.
Net pension expense (income) for benefit pension plans and net postretirement
benefit expense for the years ended December 31, 1996, 1997 and 1998 consisted
of the following:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
---------------- --------------
1996 1997 1998 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 23,991 $ 25,811 $ 23,334 $ 2,800 $ 2,759 $ 2,549
Interest cost 128,001 133,154 132,523 24,276 24,146 21,364
Expected return on plan assets (157,571) (180,474) (193,680) -- -- --
Amortization of:
Unrecognized transition obligation (867) (867) (819) -- -- --
Unrecognized prior service cost (benefit) 1,950 2,366 3,248 (196) (936)
Unrecognized net loss 4,961 5,946 (226) (199)
--------- --------- --------- --------- --------- ---------
Net periodic benefit (income) expense 465 (14,064) (35,620) $ 26,880 $ 26,706 $ 22,977
========= ========= =========
Net curtailment loss (3,934) (1,837)
--------- --------- ---------
465 (17,998) (37,457)
Defined contribution and multi-employer
plans 2,498 3,358 2,613
--------- --------- ---------
Total benefit expense (income) $ 2,963 $ (14,640) $ (34,844)
========= ========= =========
</TABLE>
Total benefit expense (income) above excludes amounts attributed to discontinued
operations comprising pension expense of the Plastics business sponsored plans
and multi-employer union plans and Plastics business employees who are active
participants in the ANC sponsored plans. Other benefits expense attributed to
discontinued operations comprises the expense related to active and retired
employees of the Plastics business as well as for the additional retired
employees of closed plants referred to above.
F - 29
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
The following table sets forth the funded status of ANC's defined
benefit pension plans and postretirement benefit obligation and the amounts
recognized in the combined balance sheet at December 31, 1997 and 1998.
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
---------------- --------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Change in benefit obligation
- ----------------------------
Benefit obligation at January 1 $ 1,802,925 $ 1,970,724 $ 337,166 $ 352,735
Service cost 25,811 23,334 2,759 2,549
Interest cost 133,154 132,522 24,146 21,364
Plan participants' contributions -- -- 1,549 1,568
Plan amendments 3,085 7,506 -- (7,263)
Actuarial loss 150,410 114,663 12,529 (13,655)
Benefits paid (144,661) (152,518) (25,414) (24,388)
----------- ----------- ----------- -----------
Benefit obligation at December 31, 1,970,724 2,096,231 352,735 332,910
----------- ----------- ----------- -----------
Change in plan assets
- ---------------------
Fair value of plan assets at January 1, 1,775,606 2,045,173 -- --
Actual return on plan assets 359,363 180,709 -- --
Employer contribution 54,865 14,610 23,865 22,820
Plan participants' contributions -- -- 1,549 1,568
Benefits paid (144,661) (152,518) (25,414) (24,388)
----------- ----------- ----------- -----------
Fair value of plan assets at December 31, 2,045,173 2,087,974 -- --
----------- ----------- ----------- -----------
Funded status 74,449 (8,257) (352,735) (332,910)
Unrecognized actuarial loss 81,132 202,431 18,807 5,178
Unrecognized prior service cost (benefit) 9,462 13,669 (2,119) (8,472)
Unrecognized transition asset (10,934) (12,772) -- --
----------- ----------- ----------- -----------
Net asset (liability) recognized $ 154,109 $ 195,071 $ (336,047) $ (336,204)
=========== =========== =========== ===========
Amounts recognized in the statement of
financial position consist of:
Prepaid benefit cost $ 194,356 $ 212,531 $ -- $ --
Accrued benefit liability (50,518) (43,710) (336,047) (336,204)
Intangible asset 4,968 4,133 -- --
Accumulated other comprehensive
income 5,303 22,117 -- --
----------- ----------- ----------- -----------
Net amount recognized $ 154,109 $ 195,071 $ (336,047) $ (336,204)
=========== =========== =========== ===========
Weighted-average assumptions as of December 31:
Discount rate 7.0% 6.5% 7.0% 6.5%
Expected return on plan assets 10.0% 10.0%
Expected increase in future salaries 5.0% 5.0%
</TABLE>
F - 30
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for the pension plans with accumulated benefit obligations in
excess of plan assets were $239,859, $232,716 and $195,964 respectively, as of
December 31, 1997 and $79,068, $69,682 and $34,705, respectively, as of December
31, 1998.
The following table shows the other major assumptions used to develop the
accumulated postretirement benefit obligation and the net postretirement benefit
expense in 1998 and 1997.
<TABLE>
<CAPTION>
Managed
Under age Care Under Over age
65 Age 65 65
------------------ ------------------ ------------------
<S> <C> <C> <C>
Current year health care trend rate - 1998 7.71% 6.86% 6.29%
Current year health care trend rate - 1997 8.29% 7.14% 6.71%
Ultimate trend rate 6.00% 6.00% 5.00%
Year ultimate trend rate is achieved 2001 2001 2001
</TABLE>
Assumed health care trend rates have a significant effect on the amounts
reported for the health care plan. A one-percentage-point change in assumed
health care cost trend rate would have the following effects:
<TABLE>
<CAPTION>
1-Percentage- 1-Percentage-
Point Increase Point Decrease
-------------- --------------
<S> <C> <C>
Effect on total of service and interest cost components $ 2,227 ($2,057)
Effect on postretirement benefit obligation 25,948 (23,991)
</TABLE>
NOTE 13 - OTHER PAYABLES AND ACCRUED LIABILITIES
Other payables and accrued liabilities consisted of the following:
December 31,
------------
1997 1998
---- ----
Accrued payroll and employee benefits $ 78,255 $ 65,187
Postretirement benefit obligation (Note 12) 27,200 27,200
Pension liabilities (Note 12) 37,596 6,555
Restructuring reserves (Note 15) 22,043 28,913
Litigation reserves (Note 18) 104,249 102,013
Income taxes 59,322 27,742
Accrued rent 18,646 14,254
Accrued taxes other than income 11,295 10,430
Other 58,224 60,215
-------- --------
$416,830 $342,509
======== ========
F - 31
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
NOTE 14 - OTHER LONG-TERM LIABILITIES
Other long-term liabilities consisted of the following:
December 31,
------------
1997 1998
---- ----
Restructuring reserves (Note 15) $ 69,888 $ 45,286
Environmental reserves 54,748 50,057
Income taxes 45,446 --
Pension liabilities (Note 12) 12,922 37,155
Other long-term employee costs 13,803 13,598
Other 28,213 23,732
-------- --------
$225,020 $169,828
======== ========
Laws and regulations expose ANC to the risk of substantial environmental costs
and liabilities, including liabilities associated with past activities. ANC is
involved in judicial and administrative proceedings concerning environmental
compliance and the remediation of contamination at ANC properties and other
sites. The related charges are reserved when known to the extent they can be
reasonably estimated. The types of costs accrued are expenditures for clean up
of environmental contamination and other remediation activities. The estimated
reserves are based on current environmental laws and regulatory requirements and
currently available technology. The accrued costs do not include potential
recoveries from insurers and have not been discounted to their present values.
The precision and reliability of the loss estimates varies from site to site,
depending on such factors as the quantity of data concerning contamination at
the site, the extent to which remedial requirements have been identified or
agreed upon with regulatory authorities and the availability and likelihood of
contribution from other responsible parties. ANC believes, however, that the
amount it has reserved will enable it to satisfy its known and anticipated
environmental liabilities to the extent they can be estimated. Because
environmental matters cannot be predicted with certainty, there can be no
assurance that these amounts will be adequate for all purposes. In addition, the
discovery of new sites or future developments at known sites, such as changes in
law or environmental conditions, could result in increased environmental costs
and liabilities in excess of accrued environmental reserves that could have a
material effect on ANC's results of operations in any given year or its combined
financial position, although the amount of such increases cannot be estimated.
NOTE 15 - RESTRUCTURING
In the fourth quarter of 1996, ANC recorded a charge of $158,706 for
restructuring and impairment of property and equipment related to actions taken
under Pechiney's Challenge program. The Challenge program was announced in 1996
and was designed to eliminate production overcapacity, reduce costs and improve
productivity and utilization of assets. After years of strong growth, the
beverage can market in the United States and Canada had reached maturity. In
1996, the market increased only slightly over the prior year resulting in an
industry supply/demand imbalance, which led to the decision by ANC to reduce
annual capacity by in excess of three billion cans. Other costs of the
restructuring plan, which include relocation of personnel and equipment,
training, process reengineering, consulting costs, and capital expenditures are
being recognized as incurred.
F - 32
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
The activity in the restructuring reserve for continuing operations including
prior year activity as described below for the year ended December 31, 1996 was
as follows:
<TABLE>
<CAPTION>
Utilized
---------------------------
Net
Beginning Charge to Credit to Charge Cash Ending
Balance Income Income (Credit) Payments Non-cash Balance
------------- ------------- ------------ ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Employee termination
and severance programs $ 32,454 $ 58,895 -- $ 58,895 $ (13,129) $ (13,173) $ 65,047
Lease termination costs 762 14,563 -- 14,563 -- -- 15,325
Environmental testing
and remediation 2,000 3,000 -- 3,000 -- -- 5,000
Facility costs 13,099 19,340 -- 19,340 (8,410) -- 24,029
Equipment dismantle
and disposal costs 3,793 5,750 -- 5,750 (1,764) -- 7,779
Other exit costs 1,246 -- -- -- -- -- 1,246
Non-cash asset
write-downs -- 57,158 -- 57,158 -- (57,158) --
--------- --------- --------- --------- --------- --------- ---------
$ 53,354 $ 158,706 $ -- $ 158,706 $ (23,303) $ (70,331) $ 118,426
========= ========= ========= ========= ========= ========= =========
</TABLE>
The restructuring charge related primarily to the planned shutdown of five can
manufacturing facilities to eliminate production overcapacity. One of these
facilities (Jacksonville, FL) was shutdown in December 1996. The remaining
reduction of capacity was planned to be accomplished by the shutdown of three
plants in 1997 and one in 1998. In addition to the cost of the five plant
shutdowns, the restructuring charge covered the reorganization of operations at
certain other existing plants which would continue operations and the
elimination of certain executive and administrative functions at ANC's
headquarters and other plants as a result of cost reduction initiatives.
The severance and other employee related costs (primarily enhanced pension and
postretirement benefits) provided for a reduction of 540 employees at the five
plants, 120 people at plants that will remain open and 130 employees at ANC's
administrative offices. Severance costs for employees covered by collective
bargaining agreements were determined based on the terms of the agreements.
Severance costs for salaried and hourly employees not covered by a collective
bargaining agreement were determined by the existing ANC severance plan.
The impairment charge for property and equipment represents the writedown to
fair value of property and equipment to be disposed of or scrapped and the
recognition of impairment losses for assets to be used up to the plant closing
date for plants to be closed. The fair value of such depreciable assets that
remain in use are depreciated over the assets' remaining useful life.
Cash payments during 1996 related primarily to benefits paid to terminated
employees of the closed Danbury, CT, Gateway and St. Louis, MO, plants that had
been provided for in 1994. Payments also included amounts for corporate employee
severance and rental charges for vacated space. Non-cash transfers related
primarily to (a) the transfer of enhanced pension benefit amounts based upon
final actuarial determinations to the separately classified pension liability
account and (b) the writedown of plant and equipment to fair value.
F - 33
<PAGE>
American National Can Group, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
The activity in the restructuring reserve for the year ended December 31, 1997
was as follows:
<TABLE>
<CAPTION>
Utilized
---------------------------
Net
Beginning Charge to Credit to Charge Cash Ending
Balance Income Income (Credit) Payments Non-cash Balance
----------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Employee termination
and severance programs $ 65,047 $ -- $ -- $ -- $(15,616) $ (3,942) $ 45,489
Lease termination costs 15,325 -- -- -- -- -- 15,325
Environmental testing
and remediation 5,000 -- -- -- -- -- 5,000
Facility costs 24,029 -- -- -- (5,704) -- 18,325
Equipment dismantle and
disposal costs 7,779 -- -- -- (1,233) -- 6,546
Other exit costs 1,246 -- -- -- -- -- 1,246
Non-cash asset
write-downs -- 10,924 -- 10,924 -- (10,924) --
-------- -------- -------- -------- -------- -------- --------
$118,426 $ 10,924 $ -- $ 10,924 $(22,553) $(14,866) $ 91,931
======== ======== ======== ======== ======== ======== ========
</TABLE>
In 1997, the charge of $10,924 for restructuring and writedown of property and
equipment included a $10,000 impairment loss related to ANC's operations in
China.
Cash payments for 1997 relate to the shutdown of the San Juan, Puerto Rico plant
effective May , 1997 and continuing payments related to previously closed
plants. The non-cash impairment relates to the aforementioned writedown of
property, plant and equipment.
In May 1997, the San Juan, Puerto Rico facility was shutdown. In the fourth
quarter of 1997, ANC made a decision to defer to 2000 the shutdown of the
remaining two plants originally scheduled for shutdown in 1997. These two plants
primarily produce special-sized cans under contracts that are scheduled to
expire in 2000. ANC's shutdown plan for one of the two plants originally
contemplated certain capital investments to be made to expand another plant to
allow for the transfer of production of the special-sized cans. A decision was
made in 1997 to not make the necessary capital investment and to continue to
operate the plant. The Company's plan for the second plant was to negotiate an
early termination of the contract or to make alternative supply arrangements. In
1997, ANC made a decision to continue to operate the plants at approximately 50%
of capacity incurring cash losses which are recorded as incurred.
F - 34
<PAGE>
American National Can Holdings, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
The activity in the restructuring reserve for the year ended December 31, 1998
was as follows:
<TABLE>
<CAPTION>
Utilized
--------------------------
Net
Beginning Charge to Credit to Charge Cash Ending
Balance Income Income (Credit) Payments Non-cash Balance
------------- ------------- ------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Employee termination
and severance programs $ 45,489 $ 22,610 $(18,496) $ 4,114 $ (9,556) $ (4,610) $ 35,437
Lease termination costs 15,325 5,606 (7,293) (1,687) (289) -- 13,349
Environmental testing
and remediation 5,000 200 -- 200 -- -- 5,200
Facility costs 18,325 3,184 (2,852) 332 (1,793) -- 16,864
Equipment dismantle
and disposal costs 6,546 965 (4,950) (3,985) (421) -- 2,140
Other exit costs 1,246 -- (37) (37) -- -- 1,209
Non-cash asset
write-downs -- 10,781 (12,155) (1,374) -- 1,374 --
-------- -------- -------- -------- -------- -------- --------
$ 91,931 $ 43,346 $(45,783) $ (2,437) $(12,059) $ (3,236) $ 74,199
======== ======== ======== ======== ======== ======== ========
</TABLE>
In 1998, management, based on a large customer's decision to reduce its
purchases in various geographic markets and on studies by outside consultants of
market demographics, decided not to close a plant provided for in 1996 which at
that time was expected to be closed in 1998, but rather to temporarily curtail
several lines in our facilities. As a result, the revenue of $17,118 previously
established for employee termination and severance programs, leave terminated
costs, facility costs and other exit costs related to this plant was restored to
income. A further restoration of $28,665 related to adjustments to the
restructuring reserve for changes in estimates of the number of employees to be
terminated at plants shutdown or to be shutdown, and higher-than-expected
proceeds on the sale of several plant sites.
In connection with the 1998 decision to not close the previously identified
plant and in response to the continuing oversupply of can production capacity,
in 1998 management decided to close a different plant in late 1999. Accordingly,
a charge of $24,846 was recorded in 1998 to cover the costs of the new plant
closure. The plant closure costs cover severance and other employee related
costs to provide for the reduction of 115 employees and to writedown property
and equipment to fair value. In addition, a charge of $14,100 was recorded in
1998 for severance costs for approximately 150 plant, sales and administrative
employees and an impairment charge of $4,400 was recorded relating to lease
termination costs and equipment write offs for permanently idle equipment.
Expected cash payments for restructuring costs in future periods, exclusive of
pension liabilities, are as follows:
1999 $23,640
2000 12,783
2001 11,891
2002 5,989
2003 1,100
2004 and beyond 14,978
F - 35
<PAGE>
American National Can Holdings, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
NOTE 16 - SEGMENT AND RELATED INFORMATION
In 1998, ANC adopted SFAS No. 131 - "Disclosures about Segments of an Enterprise
and Related Information" (Note 1) and reflected its provisions retroactively in
these combined financial statements. SFAS No. 131 establishes standards for
reporting information about operating segments. It also establishes standards
for related disclosures about products and services, geographic areas and major
customers. ANC's continuing operations, consisting of its worldwide beverage can
business, comprise one reportable segment.
Following are net sales and long-lived asset information by geographic area.
Year ended December 31
----------------------
1996 1997 1998
---- ---- ----
Net sales
United States $1,573,882 $1,504,427 $1,453,992
United Kingdom 383,810 374,654 369,316
Others 562,598 585,937 635,541
---------- ---------- ----------
$2,520,290 $2,465,018 $2,458,849
========== ---------- ----------
Long-lived assets
Continuing operations
United States $1,074,947 $1,054,393 $ 999,151
Others 1,153,122 1,091,927 1,061,261
Discontinued operations 776,320 758,023 776,324
---------- ---------- ----------
$3,004,389 $2,904,343 $2,836,736
========== ---------- ----------
Net sales are based on the country in which the legal subsidiary is domiciled.
NOTE 17 - CONCENTRATIONS OF RISK
One of the principal raw materials used in ANC's production process is aluminum.
Currently, we generally limit our exposure to the fluctuations in the market
price of aluminum by matching its contracts to supply cans to its customers with
aluminum forward purchase supply contracts with similar terms.
ANC had sales in excess of 10% of net sales from continuing operations to one
customer amounting to approximately $1,010,614, $1,048,168 and $1,253,200 for
the years ended December 31, 1996, 1997 and 1998, respectively.
NOTE 18 - COMMITMENTS AND CONTINGENCIES
In 1993, Viskase Corporation ("Viskase") brought a patent infringement lawsuit
against ANCC alleging infringements related to patents held by Viskase, a unit
of Envirodyne Industries, Inc., for heat shrinkable meat bags utilized in the
Plastics business. In November 1996, a federal court jury in Chicago, Illinois
awarded Viskase $102,385 in damages and found willful infringement. Based on the
facts and circumstances, ANCC
F - 36
<PAGE>
American National Can Holdings, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
recorded a charge to expense of $103,768 in 1996 which represented the amount of
the damages awarded as well as certain out-of-pocket costs. This was recorded in
discontinued operations in the accompanying combined statement of income and in
other payables and accrued liabilities of the continuing business in the
combined balance sheet. Pechiney Plastics has agreed to indemnify ANC on a net
of tax basis for any payments we may be required to make with respect to these
proceedings. Pechiney has agreed to guarantee this obligation of Pechiney
Plastics.
In September 1997, the court granted ANCC's motion for a new trial on liability
as to part of the case and ordered a new trial on damages. In August 1998, the
trial judge granted Viskase's motion for summary judgment on the doctrine of
equivalents. Viskase has moved for the damage award to be reinstated, and ANCC
has opposed that motion. No ruling has been made. In addition, ANCC has
requested the U.S. Patent and Trademark Office (known as the "PTO") to
re-examine the claims of two of the patents that Viskase alleged ANCC infringed.
In March 1999, a PTO Examiner issued an Office Action that re-examined and
rejected claims of one of the two patents, but the Office Action is not final.
Concerning the second patent, the PTO has also issued an Office Action rejecting
the Viskase claims, but the PTO recently granted Viskase's petition to change
the inventorship of the patent. Additional proceedings are ongoing. In view of
the uncertainties related to this matter, no adjustments have been made to the
reserve in 1998 and 1997, other than payments for certain out-of-pocket costs.
In addition to the above matter, the Company and its subsidiaries are involved
in various other legal and administrative proceedings which have arisen in the
ordinary course of business. While any litigation contains an element of
uncertainty, ANC believes that the outcome of such proceedings will not
have a material adverse effect on ANC's combined financial position.
ANC has two agreements to purchase certain information technology services
through September 2002. Total commitments under the agreements approximated
$31,200 as of December 31, 1998.
ANC is contingently liable with respect to guarantees of indebtedness of
other companies in the amount of $26,555 at December 31, 1998.
F - 37
<PAGE>
American National Can Holdings, Inc.
Notes to Combined Financial Statements
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
NOTE 19 - RELATED PARTY TRANSACTIONS
Significant transactions and balances with Pechiney and its affiliates, other
than those presented on the face of the combined balance sheets or described
elsewhere in the notes to the combined financial statements, included the
following:
Year ended December 31
----------------------
1996 1997 1998
---- ---- ----
Sales $ 7,651 $ 804 $ 5,474
Purchases 249,535 151,420 165,794
Selling, general and administrative expenses 856 2,128 577
Charges from Pechiney for research and
development expenses 5,178 5,283 4,039
December 31,
-------------------
1997 1998
--------- -------
Receivables 10,626 7,447
Noncurrent assets 3,000 187
Accounts payable 23,915 18,985
Other payables and accrued expenses 6,406 7,535
F - 38
<PAGE>
[Logo]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
An itemized statement of the estimated amount of all expenses in
connection with the distribution of the Securities registered hereby is as
follows:
Securities and Exchange Commission Registration Fee................ $ *
New York Stock Exchange Listing Fee................................ *
National Association of Securities Dealers, Inc. Filing Fee........ *
Transfer Agent and Registration Fee................................ *
Printing Expenses.................................................. *
Legal Fees and Expenses............................................ *
Accounting Fees and Expenses....................................... *
Miscellaneous...................................................... *
----
Total.............................................................. *
====
- ---------------------
* To be supplied by amendment.
Item 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law ("DGCL") provides
that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. Section 145 further provides that a corporation
similarly may indemnify any such person serving in any such capacity who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgement in its favor, against expenses (including attorneys' fees) actually
and reasonably incurred in connection with the defense or settlement of such
action or suit if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Delaware Court
of Chancery or such other court in which such action or suit was brought shall
determine upon
II-1
<PAGE>
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 102(b)(7) of the DGCL permits a corporation to include in its
certificate of incorporation a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such provision
shall not eliminate or limit the liability of a director (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omission not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL (relating to
liability for unlawful payment of dividends and unlawful stock purchase and
redemption) or (iv) for any transaction from which the director derived an
improper personal benefit.
The Company's Certificate of Incorporation provides that the Company's
directors shall not be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director to the fullest extent
permitted by the DGCL as it existed on the date of, or is or has been amended
from time to time after, the filing of the Certificate of Incorporation. The
Certificate of Incorporation and the Company's By-Laws further provide that the
Company shall indemnify its directors and officers to the fullest extent
permitted by the DGCL.
Item 15. Recent Sales of Unregistered Securities.
In connection with the formation of the Company and the reorganization
of Pechiney's packaging operations, American National Can Group, Inc., will
issue shares to Pechiney. The consideration for this issuance will be the
transfer to the Company by Pechiney of all its beverage can operations.
In the foregoing transaction, the securities were offered and sold
pursuant to section 4(2) of the Securities Act of 1933, as amended. No
underwriting discounts or commissions will be paid in connection with such
transaction.
Item 16. Exhibits and Financial Data Schedule.
(a) Exhibits
1 Form of Underwriting Agreement.*
3.1 Certificate of Incorporation of the Registrant.
3.2 By-Laws of the Registrant.
4. Specimen of stock certificate for the common stock of the Company.*
5.1 Opinion of Shearman & Sterling as to the legality of the securities
being offered.
8.1 Opinion of Shearman & Sterling with respect to certain U.S. Federal
income tax matters.*
10.1 Aluminum Purchase/Sales Supply Agreement between American National Can
Company and Alcan Rolled Products Company (confidential treatment of
certain portions requested).
10.2 Aluminum Purchase Agreement between American National Can Company and
Aluminum Company of America (confidential treatment of certain portions
requested).
10.3 Can Supply Agreement between American National Can Company and
Coca-Cola Enterprises Inc. (confidential treatment of certain portions
requested).
10.4 Form of Shared Services Agreement between the Registrant, Pechiney
Metals Co. and Pechiney Plastic Packaging, Inc.*
10.5 Form of Services Agreement with Pechiney Plastic Packaging, Inc.*
II-2
<PAGE>
10.6 Form of Transitional Services Agreement with Pechiney.*
10.7 Form of Foreign Currency Forward Sale Agreements and Foreign Currency
Forward Purchase Agreements with Pechiney.*
10.8 American National Can Company Long-Term Incentive Plan.*
10.9 American National Can Group Incentive Compensation Plan.*
10.10 American National Can Group Directors Stock Option Plan.*
10.11 American National Can Company Stock Compensation Conversion Plan.*
10.12 Employment Agreement dated between American National Can
Company and Jean-Pierre Rodier.*
10.13 Employment Agreement dated between American National Can
Company and Edward A. Lapekas.*
10.14 Employment Agreement dated between American National Can
Company and Michael D. Herdman.*
10.15 Employment Agreement dated between American National Can
Company and Alan H. Schumacher.*
10.16 Employment Agreement dated between American National Can
Company and Dennis R. Bankowski.*
10.17 Employment Agreement dated between American National Can
Company and Allan J. Bohner.*
10.18 Pechiney 1998 Stock Option Plan.*
21 Subsidiaries of the Registrant.*
23.1 Consent of Shearman & Sterling (included in Exhibits 5.1 and 8.1).
23.2 Consent of PricewaterhouseCoopers LLP.
24 Powers of Attorney with respect to amendments to this Registration
Statement are included on the signature page.
27 Financial Data Schedule
- --------------------
* To be filed by amendment
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under "Item 14,
Indemnification of Directors and Officers" above, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Chicago, Illinois on
April 21, 1999.
American National Can Group, Inc.
By: /s/ Jean-Pierre Rodier
--------------------------------
Jean-Pierre Rodier
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated on April 21, 1999. In addition, each of the undersigned
hereby constitutes and appoints Jean-Pierre Rodier, Edward A. Lapekas and
Jean-Dominique Senard, jointly and severally, his attorneys-in-fact, each with
power of substitution, in his name and in the capacity indicated below, to sign
any and all further amendments (including post-effective amendments) to the
registration statement, and any registration statement filed under Rule 462(b)
with respect to this registration statement, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Signature Title
- --------- -----
/s/ Jean-Pierre Rodier
- -------------------------- Chairman of the Board and Chief Executive
Jean-Pierre Rodier Officer
/s/ Edward A. Lapekas
- -------------------------- President and Chief Operating Officer
Edward A. Lapekas
/s/ Alan H. Schumacher
- -------------------------- Senior Vice President and Chief Financial
Alan H. Schumacher Officer
/s/ John. G. LaBahn
- -------------------------- Vice President, Controller and Chief
John G. LaBahn Accounting Officer
/s/ Christel Bories
- -------------------------- Director
Christel Bories
/s/ Frank W. Considine
- -------------------------- Director
Frank W. Considine
<PAGE>
/s/ Ronald J. Gidwitz
- -------------------------- Director
Ronald J. Gidwitz
/s/ George D. Kennedy
- -------------------------- Director
George D. Kennedy
/s/ Homer J. Livingston, Jr.
- -------------------------- Director
Homer J. Livingston, Jr.
/s/ Roland H. Meyer, Jr.
- -------------------------- Director
Roland H. Meyer, Jr.
- -------------------------- Director
James J. O'Connor
- -------------------------- Director
Alain Pasquier
/s/ Jean-Dominique Senard
- -------------------------- Director
Jean-Dominique Senard
/s/ James R. Thompson
- -------------------------- Director
James R. Thompson
/s/ Jack H. Turner
- -------------------------- Director
Jack H. Turner
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
EXHIBITS
FILED WITH
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
American National Can Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction
of incorporation or organization)
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequential
Exhibits Page Number
- -------- -------------
<S> <C> <C>
1 Form of Underwriting Agreement*..................................................
3.1 Certificate of Incorporation of the Registrant ..................................
3.2 By-Laws of the Registrant........................................................
4 Specimen of stock certificate for the common stock of the Company*...............
5.1 Opinion of Shearman & Sterling as to the legality of the securities being
offered..........................................................................
8.1 Opinion of Shearman & Sterling with respect to certain U.S. federal
income tax matters*..............................................................
10.1 Aluminum Purchase/Sales Supply Agreement between American National Can
Company and Alcan Rolled Products Company (confidential treatment of certain
portions requested)..............................................................
10.2 Aluminum Purchase Agreement between American National Can Company and
Aluminum Company of America (confidential treatment of certain portions
requested).......................................................................
10.3 Can Supply Agreement between American National Can Company and
Coca-Cola Enterprises Inc. (confidential treatment of certain portions requested)
10.4 Form of Shared Services Agreement between the Registrant, Pechiney Metals
Co. and Pechiney Plastic Packaging, Inc.*........................................
10.5 Form of Services Agreement with Pechiney Plastic Packaging, Inc.*................
10.6 Form of Transitional Services Agreement with Pechiney.*
10.7 Form of Foreign Currency Forward Sale Agreements and Foreign Currency
Forward Purchase Agreements with Pechiney.*......................................
10.8 American National Can Company Long-Term Incentive Plan*..........................
10.9 American National Can Group Incentive Compensation Plan*.........................
10.10 American National Can Group Directors Stock Option Plan*.........................
10.11 American National Can Company Stock Compensation Conversion Plan*................
10.12 Employment Agreement dated between American National Can
Company and Jean-Pierre Rodier*..................................................
10.13 Employment Agreement dated between American National Can
Company and Edward A. Lapekas*...................................................
10.14 Employment Agreement dated between American National Can
Company and Michael D. Herdman*..................................................
10.15 Employment Agreement dated between American National Can
Company and Alan H. Schumacher*..................................................
10.16 Employment Agreement dated between American National Can
Company and Dennis R. Bankowski*.................................................
10.17 Employment Agreement dated between American National Can
Company and Allan J. Bohner*.....................................................
10.18 Pechiney 1998 Stock Option Plan*
21 Subsidiaries of the Registrant*..................................................
23.1 Consent of Shearman & Sterling (included in Exhibits 5.1 and 8.1)................
23.2 Consent of PricewaterhouseCoopers LLP............................................
24 Powers of Attorney with respect to amendments to this Registration Statement
are included on the signature page
27 Financial Data Schedule
- --------------------
* To be filed by amendment.
</TABLE>
CERTIFICATE OF INCORPORATION
OF
AMERICAN NATIONAL CAN HOLDINGS, INC.
ARTICLE I
Name
The name of the corporation is American National Can Holdings,
Inc. (the "Corporation").
ARTICLE II
Registered Office and Registered Agent
The address of the registered office of the Corporation in the
State of Delaware is c/o The Corporation Trust Company, Corporation Trust
Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The
name of the registered agent of the Corporation at such address is The
Corporation Trust Company.
ARTICLE III
Corporate Purpose
The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware (the "General Corporation Law").
ARTICLE IV
Authorized Capital Stock
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 1,025,000,000 shares, consisting of
(i) 1,000,000,000 shares of Common Stock, $0.01 par value per share ("Common
Stock"), and (ii) 25,000,000 shares of Preferred
<PAGE>
2
Stock, $0.01 par value per share ("Preferred Stock"). Except as may otherwise be
provided in any resolution adopted by the Board of Directors establishing the
terms of any series of Preferred Stock pursuant to the authority granted below
in this Article IV, the authorized number of shares of the Common Stock and the
Preferred Stock may be increased or decreased by the affirmative vote of a
majority of the outstanding shares entitled to vote thereon, without the
necessity for a separate class vote of the holders of the Common Stock or the
Preferred Stock, as applicable.
A. Common Stock. The powers, preferences and rights, and the
qualifications, limitations and restrictions, of the Common Stock are as
follows:
(1) Voting. Except as otherwise expressly required by law or
provided in this Certificate of Incorporation, and subject to any
voting rights provided to holders of Preferred Stock at any time
outstanding, (a) the holders of any outstanding shares of Common Stock
shall vote together as a single class on all matters with respect to
which stockholders are entitled to vote under applicable law, this
Certificate of Incorporation or the By-Laws of the Corporation, or upon
which a vote of stockholders is otherwise duly called for by the
Corporation, and (b) at each annual or special meeting of stockholders,
each holder of record of shares of Common Stock on the relevant record
date shall be entitled to cast one (1) vote in person or by proxy for
each one (1) share of the Common Stock standing in such holder's name
on the Corporation's stock transfer records.
(2) Dividends. Subject to the rights of the holders of
Preferred Stock, and subject to any other provisions of this
Certificate of Incorporation, as it may be amended from time to time,
holders of shares of Common Stock shall be entitled to receive such
dividends and other distributions in cash, stock or property of the
Corporation when, as and if declared thereon by the Board of Directors
from time to time out of assets or funds of the Corporation legally
available therefor.
(3) Liquidation or Dissolution. In the event of any
liquidation, dissolution or winding up (either voluntary or
involuntary) of the Corporation, subject to the rights of the holders
of Preferred Stock, the holders of shares of Common Stock shall be
entitled to receive the assets and funds of the Corporation available
for distribution after payments to creditors in proportion to the
number of shares held by them, respectively, without regard to class.
B. Preferred Stock. The Board of Directors is authorized to
provide for the issuance of shares of Preferred Stock from time to time in one
or more series, and to establish by resolution the designations, powers,
preferences, rights, qualifications, limitations and restrictions applicable to
the shares of each series. The authority of the Board of Directors with respect
to each series shall include, but not be limited to, determination of the
following:
<PAGE>
3
(1) Number of Shares. The number of shares constituting that
series and the distinctive designation of that series.
(2) Voting. Whether the shares of that series shall have
voting rights in addition to any voting rights provided by law, and, if
so, the terms of such voting rights.
(3) Dividends. The dividends payable on shares of that series,
if any, whether dividends shall be cumulative, and, if so, from which
date or dates, and the relative rights of priority, if any, of payment
of dividends on shares of that series.
(4) Conversion Privileges. Whether that series shall have
conversion privileges, and, if so, the terms and conditions of such
conversion, including provision for adjustment of the conversion rate
in such events as the Board of Directors shall determine.
(5) Redemption. Whether or not the shares of that series shall
be redeemable, and, if so, the terms and conditions of such redemption,
including the date or date upon or after which they shall be
redeemable, and the amount per share payable in case of redemption,
which amount may vary under different conditions and at different
redemption dates.
(6) Sinking Fund. Whether that series shall have a sinking
fund for the redemption or purchase of shares of that series, and, if
so, the terms and amount of such sinking fund.
(7) Liquidation. The rights of the shares of that series in
the event of voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, and the relative rights of priority, if
any, of payment of shares of that series.
(8) Other. Any other rights, preferences and limitations of
that series.
ARTICLE V
Directors
(1) Elections of directors of the Corporation need not be by
written ballot, except and to the extent provided in the By-laws of the
Corporation.
(2) To the fullest extent permitted by the General Corporation
Law as it now exists and as it may hereafter be amended, no director of the
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as
<PAGE>
4
a director, notwithstanding any provision of law imposing such liability. Any
amendment to or repeal of this provision shall not adversely affect any right or
protection of any director of the Corporation for or with respect to any acts or
omissions of such director that occurred prior to such amendment.
(3) The Board of Directors shall be and is divided into three
classes: Class I, Class II and Class III. No one class shall have more than one
director more than another class. Allocations of directors among each of the
three classes shall be made in accordance with the Bylaws of the Corporation.
(4) Each director shall serve for a term ending on the date of
the third annual meeting following the annual meeting at which such director was
elected; provided, that each initial director in Class I shall serve for a term
ending on the date of the annual meeting of stockholders in 2000; each initial
director in Class II shall serve for a term ending on the date of the annual
meeting of stockholders in 2001; and each initial director in Class III shall
serve for a term ending on the date of the annual meeting of stockholders in
2002; provided further, that any director elected to fill a vacancy shall be
elected to hold office until the next election of the class for which such
director shall have been chosen; and provided further, that the term of each
director shall be subject to the election and qualification of his successor and
to his earlier death, resignation or removal.
ARTICLE VI
Indemnification of Directors, Officers and Others
(1) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in, or not opposed to, the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
such person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person seeking indemnification did not act in good faith and in a manner
which such person reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with
<PAGE>
5
respect to any criminal action or proceeding, had reasonable cause to believe
that such person's conduct was unlawful.
(2) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery of the
State of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(3) To the extent that a present or former director or officer
of the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Sections (1) and (2) of this
Article VI, or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
(4) Any indemnification under Sections (1) and (2) of this
Article VI (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director or officer is proper in the circumstances because such person has met
the applicable standard of conduct set forth in such Sections (1) and (2). Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (a) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (b) by a committee of such directors designated by
majority vote of such directors, even though less than a quorum, or (c) if there
are no such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (d) by the stockholders of the Corporation.
(5) Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not entitled to
be indemnified by the Corporation authorized in this Article VI. Such expenses
(including attorneys' fees) incurred by
<PAGE>
6
former directors and officers or other employees and agents may be so paid upon
such terms and conditions, if any, as the Corporation deems appropriate.
(6) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other sections of this Article VI shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any law, by-law, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office.
(7) The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power to
indemnify such person against such liability under the provisions of Section 145
of the General Corporation Law.
(8) For purposes of this Article VI, references to "the
Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Article VI with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued.
(9) For purposes of this Article VI, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves service by, such director,
officer, employee or agent with respect to any employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner such person reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article VI.
(10) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article VI shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
<PAGE>
7
ARTICLE VII
By-Laws
The directors of the Corporation shall have the power to
adopt, amend or repeal by-laws.
ARTICLE VIII
Reorganization
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
ARTICLE IX
Amendment
The Corporation reserves the right to amend, alter, change or
repeal any provision of this Certificate of Incorporation, in the manner now or
hereafter prescribed by law, and all rights conferred on stockholders in this
Certificate of Incorporation are subject to this reservation.
<PAGE>
8
ARTICLE X
Incorporator
The name and mailing address of the sole incorporator is as
follows:
Name Mailing Address
---- ---------------
William A. Francois American National Can Company
8770 West Bryn Mawr Avenue
Chicago, Illinois 60631-3504
ARTICLE XI
Meetings and Action of Stockholders
(1) Stockholders of the Corporation may not take any action by
written consent in lieu of a meeting.
(2) Special meetings of stockholders may be called at any time
by only the Chairman of the Board of Directors, the President of the Corporation
or the Board of Directors. Business conducted at any special meeting of
stockholders shall be limited to matters relating to the purpose or purposes
stated in the notice of meeting.
* * * * *
I, THE UNDERSIGNED, being the sole incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the General
Corporation Law of the State of Delaware, do make this Certificate of
Incorporation, hereby declaring and certifying that this is my act and deed and
the facts herein stated are true, and accordingly have hereunto set my hand this
12th day of April, 1999.
/S/ William A. Francois
---------------------------
William A. Francois
<PAGE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
* * * * *
AMERICAN NATIONAL CAN HOLDINGS, INC., a corporation organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, at a meeting
duly held, adopted a resolution proposing and declaring advisable the following
amendment to the Certificate of Incorporation of said corporation:
RESOLVED, that the Certificate of Incorporation of American National
Can Holdings, Inc. be amended by changing Article I thereof so that, as
amended, said Article shall be and read as follows:
ARTICLE I
Name
The name of the corporation is American National Can Group, Inc.
(the "Corporation").
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given unanimous written consent to said amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 242 and 228 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, this certificate of amendment has been signed by a
duly authorized officer of American National Can Holdings, Inc. on this 19th day
of April, 1999.
AMERICAN NATIONAL CAN HOLDINGS, INC.
By: /s/ William A. Francois
---------------------------------
Name: William A. Francois
Title: Vice President and Secretary
EXHIBIT 3.2
====================================
BY-LAWS
OF
AMERICAN NATIONAL CAN HOLDINGS, INC.
====================================
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE I
OFFICES
1.01. Registered Office..............................................1
1.02. Other Offices..................................................1
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.01. Annual Meetings................................................1
2.02. Special Meetings...............................................1
2.03. Notice of Meetings.............................................2
2.04. Waiver of Notice...............................................2
2.05. Adjournments...................................................2
2.06. Quorum.........................................................2
2.07. Voting.........................................................3
2.08. Proxies........................................................3
2.09. Nomination of Directors........................................3
2.10. Notice of Business at Annual Meetings..........................4
2.11. Stockholders' Consent in Lieu of Meeting.......................5
ARTICLE III
BOARD OF DIRECTORS
3.01. General Powers.................................................5
3.02. Number, Qualification and Election.............................5
3.03. Classes of Directors...........................................5
3.04. Terms of Office................................................5
3.05. Allocation Among Classes Due to Changes in the
Number of Directors........................................5
3.06. Resignation....................................................6
3.07. Vacancies......................................................6
3.08. Meetings.......................................................6
(i)
<PAGE>
Section Page
3.09. Committees of the Board........................................7
3.10. Directors' Consent in Lieu of Meeting..........................8
3.11. Action by Means of Telephone or Similar
Communications Equipment...................................8
3.12. Compensation...................................................8
ARTICLE IV
OFFICERS
4.01. Officers.......................................................9
4.02. Authority and Duties...........................................9
4.03. Term of Office, Resignation and Removal........................9
4.04. Vacancies......................................................9
4.05. The Chairman...................................................9
4.06. The President.................................................10
4.07. Vice Presidents...............................................10
4.08. The Secretary.................................................10
4.09. Assistant Secretaries.........................................10
4.10. The Treasurer.................................................10
4.11. Assistant Treasurers..........................................11
ARTICLE V
CHECKS, DRAFTS, NOTES, AND PROXIES
5.01. Checks, Drafts and Notes......................................11
5.02. Execution of Proxies..........................................11
ARTICLE VI
SHARES AND TRANSFERS OF SHARES
6.01. Certificates Evidencing Shares................................11
6.02. Stock Ledger..................................................12
6.03. Transfers of Shares...........................................12
6.04. Addresses of Stockholders.....................................12
6.05. Lost, Destroyed and Mutilated Certificates....................12
6.06. Regulations...................................................12
6.07. Fixing Date for Determination of Stockholders of Record.......12
(ii)
<PAGE>
Section Page
ARTICLE VII
SEAL
7.01. Seal..........................................................13
ARTICLE VIII
FISCAL YEAR
8.01. Fiscal Year...................................................13
ARTICLE IX
INDEMNIFICATION AND INSURANCE
9.01. Indemnification................................................13
9.02. Insurance for Indemnification..................................15
ARTICLE X
AMENDMENTS
10.01. Amendments...................................................16
(iii)
<PAGE>
BY-LAWS
OF
AMERICAN NATIONAL CAN HOLDINGS, INC.
ARTICLE I
OFFICES
SECTION 1.01. Registered Office. The registered office of
American National Can Holdings, Inc. (the "Corporation") in the State of
Delaware shall be at the principal office of The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801, and the registered agent in charge thereof shall be The
Corporation Trust Company.
SECTION 1.02. Other Offices. The Corporation may also have an
office or offices at any other place or places within or without the State of
Delaware as the Board of Directors of the Corporation (the "Board") may from
time to time determine or the business of the Corporation may from time to time
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.01. Annual Meetings. The annual meeting of
Stockholders of the Corporation for the election of Directors of the Corporation
("Directors"), and for the transaction of such other business as may properly
come before such meeting, shall be held at such place, date and time as shall be
fixed by the Board and designated in the notice or waiver of notice of such
annual meeting. If no annual meeting of Stockholders is held in accordance with
the foregoing provisions, the Board shall cause the meeting to be held as soon
thereafter as is convenient. If no annual meeting is held in accordance with the
foregoing provisions, a special meeting may be held in lieu of the annual
meeting, and any action taken at that special meeting shall have the same effect
as if it had been taken at the annual meeting, and in such case all references
in these By-laws to the annual meeting of the Stockholders shall be deemed to
refer to such special meeting.
SECTION 2.02. Special Meetings. Special meetings of
Stockholders may be called at any time only by the Chairman of the Board, the
President of the Corporation or the
<PAGE>
2
Board of Directors. Business transacted at any special meeting of Stockholders
shall be limited to matters relating to the purpose or purposes stated in the
notice of meeting.
SECTION 2.03. Notice of Meetings. Except as otherwise provided
by the General Corporation Law of the State of Delaware (the "General
Corporation Law"), written notice of each annual or special meeting of
Stockholders stating the place, date and time of such meeting and, in the case
of a special meeting, the purpose or purposes for which such meeting is to be
held, shall be given personally or by first-class mail (airmail in the case of
international communications) to each recordholder of shares of capital stock of
the Corporation (a "Stockholder") entitled to vote thereat, not less than 10 nor
more than 60 days before the date of such meeting. If mailed, such notice shall
be deemed to be given when deposited in the United States mail, postage prepaid,
directed to the Stockholder at such Stockholder's address as it appears on the
records of the Corporation. If, prior to the time of mailing, the Secretary of
the Corporation (the "Secretary") shall have received from any Stockholder a
written request that notices intended for such Stockholder are to be mailed to
some address other than the address that appears on the records of the
Corporation, notices intended for such Stockholder shall be mailed to the
address designated in such request.
SECTION 2.04. Waiver of Notice. Notice of any annual or
special meeting of Stockholders need not be given to any Stockholder who files a
written waiver of notice with the Secretary, signed by the person entitled to
notice, whether before or after such meeting. Neither the business to be
transacted at, nor the purpose of, any meeting of Stockholders need be specified
in any written waiver of notice thereof. Attendance of a Stockholder at a
meeting, in person or by proxy, shall constitute a waiver of notice of such
meeting, except when such Stockholder attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business on the grounds that the notice of such meeting was inadequate or
improperly given.
SECTION 2.05. Adjournments. Whenever a meeting of
Stockholders, annual or special, is adjourned to another date, time or place,
notice need not be given of the adjourned meeting if the date, time and place
thereof are announced at the meeting at which the adjournment is taken. If the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each Stockholder entitled to vote thereat. At the adjourned meeting,
any business may be transacted which might have been transacted at the original
meeting.
SECTION 2.06. Quorum. Except as otherwise provided by law or
the Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation"), the recordholders of a majority of the shares of capital stock
of the Corporation ("Shares") entitled to vote thereat, present in person or by
proxy, shall constitute a quorum for the transaction of business at all meetings
of Stockholders, whether annual or special. If, however, such quorum shall not
be present in person or by proxy at any meeting of Stockholders, the
Stockholders entitled to vote
<PAGE>
3
thereat may adjourn the meeting from time to time in accordance with Section
2.05 hereof until a quorum shall be present in person or by proxy.
SECTION 2.07. Voting. Each Stockholder shall be entitled to
one vote for each Share held of record by such Stockholder. Except as otherwise
provided by law or the Certificate of Incorporation, when a quorum is present at
any meeting of Stockholders, the vote of the recordholders of a majority of the
Shares constituting such quorum shall decide any question brought before such
meeting.
SECTION 2.08. Proxies. Each Stockholder entitled to vote at a
meeting of Stockholders or to express, in writing, consent to or dissent from
any action of Stockholders without a meeting may authorize another person or
persons to act for such Stockholder by proxy. Such proxy shall be filed with the
Secretary before such meeting of Stockholders or such action of Stockholders
without a meeting, at such time as the Board may require. No proxy shall be
voted or acted upon more than three years from its date, unless the proxy
provides for a longer period.
SECTION 2.09. Nomination of Directors. Only persons who are
nominated in accordance with the following procedures shall be eligible for
election as Directors. Nomination for election to the Board at a meeting of
Stockholders may be made by the Board or by any Stockholder entitled to vote for
the election of Directors at such meeting who complies with the notice
procedures set forth in this Section 2.09. Such nominations, other than those
made by or on behalf of the Board, shall be made by notice in writing delivered
or mailed by first class United States mail, postage prepaid, to the Secretary,
and received not less than 60 days nor more than 90 days prior to such meeting;
provided, however, that if less than 70 days' notice or prior public disclosure
of the date of the meeting is given to Stockholders, such nomination shall have
been mailed or delivered to the Secretary not later than the close of business
on the 10th day following the date on which the notice of the meeting was mailed
or such public disclosure was made, whichever occurs first. Such notice shall
set forth (a) as to each proposed nominee (i) the name, age, business address
and, if known, residence address of each such nominee, (ii) the principal
occupation or employment of each such nominee, (iii) the number of Shares which
are beneficially owned by each such nominee, and (iv) any other information
concerning the nominee that must be disclosed as to nominees in proxy
solicitations pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (including such person's written consent to be named as a
nominee and to serve as a Director if elected); and (b) as to the Stockholder
giving the notice (i) the name and address, as they appear on the Corporation's
books, of such Stockholder and (ii) the class and number of Shares which are
beneficially owned by such Stockholder. The Corporation may require any proposed
nominee to furnish such other information as may reasonably be required by the
Corporation to determine the eligibility of such proposed nominee to serve as a
Director of the Corporation.
<PAGE>
4
The chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so determine, he shall
so declare to the meeting and the defective nomination shall be disregarded.
SECTION 2.10. Notice of Business at Annual Meetings. At an
annual meeting of the Stockholders, only such business shall be conducted as
shall have been properly brought before the meeting. To be properly brought
before an annual meeting, business must be (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board,
(b) otherwise properly brought before the meeting by or at the direction of the
Board, or (c) otherwise properly brought before an annual meeting by a
Stockholder. For business to be properly brought before an annual meeting by a
Stockholder, if such business relates to the election of Directors of the
Corporation, the procedures in Section 2.09 of this Article II must be complied
with. If such business relates to any other matter, the Stockholder must have
given timely notice thereof in writing to the Secretary. To be timely, a
Stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 60 days nor more
than 90 days prior to the meeting; provided, however, that in the event that
less than 70 days' notice or prior public disclosure of the date of the meeting
is given or made to Stockholders, notice by the Stockholder to be timely must be
so received not later than the close of business on the 10th day following the
date on which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever occurs first. A Stockholder's notice to the
Secretary shall set forth as to each matter the Stockholder proposes to bring
before the annual meeting (a) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (b) the name and address, as they appear on the
Corporation's books, of the Stockholder proposing such business, (c) the class
and number of Shares which are beneficially owned by the Stockholder, and (d)
any material interest of the Stockholder in such business. Notwithstanding
anything in these By-Laws to the contrary, no business shall be conducted at any
annual meeting except in accordance with the procedures set forth in this
Section 2.10, except that any Stockholder proposal which complies with Rule
14a-8 of the proxy rules (or any successor provision) promulgated under the
Securities Exchange Act of 1934, as amended, and is to be included in the
Corporation's proxy statement for an annual meeting of Stockholders shall be
deemed to comply with the requirements of this Section 2.10.
The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 2.10, and
if he should so determine, the chairman shall so declare to the meeting that any
such business not properly brought before the meeting shall not be transacted.
<PAGE>
5
SECTION 2.11. Stockholders' Consent in Lieu of Meeting.
Stockholders may not take any action by written consent in lieu of a meeting.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01. General Powers. The business and affairs of the
Corporation shall be managed by the Board, which may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by law, the
Certificate of Incorporation or these By-laws directed or required to be
exercised or done by Stockholders.
SECTION 3.02. Number, Qualification and Election. The number
of Directors shall be three or such other greater number as shall be fixed from
time to time by the Board. Directors need not be Stockholders of the
Corporation. Directors shall be elected at the annual meeting of Stockholders by
such Stockholders entitled to vote on such election and shall hold office until
his successor is elected and qualified, or until his earlier death or
resignation or removal in the manner hereinafter provided.
SECTION 3.03. Classes of Directors. The Board shall be and is
divided into three classes: Class I, Class II and Class III. No one class shall
have more than one Director more than another class. If a fraction is contained
in the quotient arrived at by dividing the designated number of Directors by
three, then, if such fraction is one-third, the extra Director shall be a member
of Class I, and if such fraction is two-thirds, one of the extra Directors shall
be a member of Class I and one of the extra Directors shall be a member of Class
II, unless otherwise provided from time to time by resolution adopted by the
Board.
SECTION 3.04. Terms of Office. Each Director shall serve for a
term ending on the date of the third annual meeting following the annual meeting
at which such Director was elected; provided, that each initial Director in
Class I shall serve for a term ending on the date of the annual meeting of
Stockholders in 2000; each initial Director in Class II shall serve for a term
ending on the date of the annual meeting of Stockholders in 2001; and each
initial Director in Class III shall serve for a term ending on the date of the
annual meeting of Stockholders in 2002; provided further, that any Director
elected to fill a vacancy shall be elected to hold office until the next
election of the class for which such Director shall have been chosen; and
provided further, that the term of each Director shall be subject to the
election and qualification of his successor and to his earlier death,
resignation or removal in the manner hereinafter provided.
SECTION 3.05. Allocation Among Classes Due to Changes in the
Number of Directors. In the event of any increase or decrease in the authorized
number of Directors, (i) each Director then serving as such shall nevertheless
continue to serve as a Director of the class
<PAGE>
6
of which he is a member and (ii) the newly created or eliminated directorships
resulting from such increase or decrease shall be apportioned by the Board among
the three classes of Directors so as to ensure that no one class has more than
one Director more than any other class. To the extent possible, consistent with
the foregoing rule, any newly created directorships shall be added to those
classes whose terms of office are to expire at the latest date following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of office are to expire at the earliest dates
following such allocation, unless otherwise provided from time to time by
resolution adopted by the Board.
SECTION 3.06. Resignation. Any Director may resign at any time
by giving written notice to the Board, the Chairman of the Board of the
Corporation (the "Chairman") or the Secretary. Such resignation shall take
effect at the time specified in such notice or, if the time be not specified,
upon receipt thereof by the Board, the Chairman or the Secretary, as the case
may be. Unless otherwise specified therein, acceptance of such resignation shall
not be necessary to make it effective.
SECTION 3.07. Vacancies. Any vacancy on the Board, however
occurring, including, without limitation, a vacancy occurring as a result of the
creation of new directorships that increase the number of Directors, may be
filled by such vote or written consent or by vote of the Board or by written
consent of the Directors pursuant to Section 3.10 hereof. If the number of
Directors then in office is less than a quorum, such other vacancies may be
filled by vote of a majority of the Directors then in office or by written
consent of all such Directors pursuant to Section 3.10 hereof. Each Director
chosen in accordance with this Section 3.07 shall hold office until the next
annual election of the class for which such Directors shall have been chosen,
subject to the election and qualification of his successor and his earlier
death, resignation or removal.
SECTION 3.08. Meetings. (a) Annual Meetings. As soon as
practicable after each annual election of Directors by the Stockholders, the
Board shall meet for the purpose of organization and the transaction of other
business, unless it shall have transacted all such business by written consent
pursuant to Section 3.10 hereof.
(b) Other Meetings. Other meetings of the Board shall be held
at such times as the Chairman, the President of the Corporation (the
"President"), the Secretary or a majority of the Board shall from time to time
determine.
(c) Notice of Meetings. The Secretary shall give written
notice to each Director of each meeting of the Board, which notice shall state
the place, date, time and purpose of such meeting. Notice of each such meeting
shall be given to each Director, if by mail, addressed to him at his residence
or usual place of business, at least two days before the day on which such
meeting is to be held, or shall be sent to him at such place by telecopy,
telegraph, cable, or other form of recorded communication, or be delivered
personally or by telephone not
<PAGE>
7
later than the day before the day on which such meeting is to be held. A written
waiver of notice, signed by the Director entitled to notice, whether before or
after the time of the meeting referred to in such waiver, shall be deemed
equivalent to notice. Neither the business to be transacted at, nor the purpose
of any meeting of the Board need be specified in any written waiver of notice
thereof. Attendance of a Director at a meeting of the Board shall constitute a
waiver of notice of such meeting, except as provided by law.
(d) Place of Meetings. The Board may hold its meetings at such
place or places within or without the State of Delaware as the Board or the
Chairman may from time to time determine, or as shall be designated in the
respective notices or waivers of notice of such meetings.
(e) Quorum and Manner of Acting. A number of Directors
constituting a majority of the total number of Directors then in office shall be
present in person at any meeting of the Board in order to constitute a quorum
for the transaction of business at such meeting, and the vote of a majority of
those Directors present at any such meeting at which a quorum is present shall
be necessary for the passage of any resolution or act of the Board, except as
otherwise expressly required by law, the Certificate of Incorporation or these
By-laws. In the absence of a quorum for any such meeting, a majority of the
Directors present thereat may adjourn such meeting from time to time until a
quorum shall be present.
(f) Organization. At each meeting of the Board, one of the
following shall act as chairman of the meeting and preside, in the following
order of precedence:
(i) the Chairman;
(ii) the President;
(iii) any Director chosen by a majority of the
Directors present.
The Secretary or, in the case of his absence, any person (who shall be an
Assistant Secretary, if an Assistant Secretary is present) whom the chairman of
the meeting shall appoint shall act as secretary of such meeting and keep the
minutes thereof.
SECTION 3.09. Committees of the Board. The Board may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of one or more Directors. The Board may
designate one or more Directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of such committee. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another Director
to act at the meeting in the place of any such absent or disqualified member.
Any committee of the Board, to the extent
<PAGE>
8
provided in the resolution of the Board designating such committee, shall have
and may exercise all the powers and authority of the Board in the management of
the business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; provided, however,
that no such committee shall have such power or authority in reference to
amending the Certificate of Incorporation (except that such a committee may, to
the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the Board as provided in Section 151(a)
of the General Corporation Law, fix the designations and any of the preferences
or rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes of stock of
the Corporation or fix the number of shares of any series of stock or authorize
the increase or decrease of the shares of any series), adopting an agreement of
merger or consolidation under Section 251 or 252 of the General Corporation Law,
recommending to the Stockholders the sale, lease or exchange of all or
substantially all the Corporation's property and assets, recommending to the
Stockholders a dissolution of the Corporation or the revocation of a
dissolution, or amending these By-laws; provided further, however, that, unless
expressly so provided in the resolution of the Board designating such committee,
no such committee shall have the power or authority to declare a dividend, to
authorize the issuance of stock, or to adopt a certificate of ownership and
merger pursuant to Section 253 of the General Corporation Law. Each committee of
the Board shall keep regular minutes of its proceedings and report the same to
the Board when so requested by the Board.
SECTION 3.10. Directors' Consent in Lieu of Meeting. Any
action required or permitted to be taken at any meeting of the Board or of any
committee thereof may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by all the members of the Board or such committee and such
consent is filed with the minutes of the proceedings of the Board or such
committee.
SECTION 3.11. Action by Means of Telephone or Similar
Communications Equipment. Any one or more members of the Board, or of any
committee thereof, may participate in a meeting of the Board or such committee
by means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting by such means shall constitute presence in person at
such meeting.
SECTION 3.12. Compensation. Unless otherwise restricted by the
Certificate of Incorporation, the Board may determine the compensation of
Directors. In addition, as determined by the Board, Directors may be reimbursed
by the Corporation for their expenses, if any, in the performance of their
duties as Directors. No such compensation or reimbursement shall preclude any
Director from serving the Corporation in any other capacity and receiving
compensation therefor.
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ARTICLE IV
OFFICERS
SECTION 4.01. Officers. The officers of the Corporation shall
be the Chairman, the President, the Secretary and a Treasurer and may include
one or more Vice Presidents and one or more Assistant Secretaries and one or
more Assistant Treasurers. Any two or more offices may be held by the same
person.
SECTION 4.02. Authority and Duties. All officers shall have
such authority and perform such duties in the management of the Corporation as
may be provided in these By-laws or, to the extent not so provided, by
resolution of the Board.
SECTION 4.03. Term of Office, Resignation and Removal. (a)
Each officer shall be appointed by the Board and shall hold office for such term
as may be determined by the Board. Each officer shall hold office until his
successor has been appointed and qualified or his earlier death or resignation
or removal in the manner hereinafter provided. The Board may require any officer
to give security for the faithful performance of his duties.
(b) Any officer may resign at any time by giving written
notice to the Board, the Chairman, the President or the Secretary. Such
resignation shall take effect at the time specified in such notice or, if the
time be not specified, upon receipt thereof by the Board, the Chairman, the
President or the Secretary, as the case may be. Unless otherwise specified
therein, acceptance of such resignation shall not be necessary to make it
effective.
(c) All officers and agents appointed by the Board shall be
subject to removal, with or without cause, at any time by the Board or by the
action of the recordholders of a majority of the Shares entitled to vote
thereon.
SECTION 4.04. Vacancies. Any vacancy occurring in any office
of the Corporation, for any reason, shall be filled by action of the Board.
Unless earlier removed pursuant to Section 4.03 hereof, any officer appointed by
the Board to fill any such vacancy shall serve only until such time as the
unexpired term of his predecessor expires unless reappointed by the Board.
SECTION 4.05. The Chairman. The Chairman shall have the power
to call special meetings of Stockholders, to call special meetings of the Board
and, if present, to preside at all meetings of Stockholders and all meetings of
the Board. The Chairman shall perform all duties incident to the office of
Chairman of the Board and all such other duties as may from time to time be
assigned to him by the Board or these By-laws.
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10
SECTION 4.06. The President. The President shall be the chief
executive officer of the Corporation and shall have general and active
management and control of the business and affairs of the Corporation, subject
to the control of the Board, and shall see that all orders and resolutions of
the Board are carried into effect. The President shall perform all duties
incident to the office of President and all such other duties as may from time
to time be assigned to him by the Board or these By-laws.
SECTION 4.07. Vice Presidents. Vice Presidents, if any, in
order of their seniority or in any other order determined by the Board, shall
generally assist the President and perform such other duties as the Board or the
President shall prescribe, and in the absence or disability of the President,
shall perform the duties and exercise the powers of the President.
SECTION 4.08. The Secretary. The Secretary shall, to the
extent practicable, attend all meetings of the Board and all meetings of
Stockholders and shall record all votes and the minutes of all proceedings in a
book to be kept for that purpose, and shall perform the same duties for any
committee of the Board when so requested by such committee. He shall give or
cause to be given notice of all meetings of Stockholders and of the Board, shall
perform such other duties as may be prescribed by the Board, the Chairman or the
President and shall act under the supervision of the Chairman. He shall keep in
safe custody the seal of the Corporation and affix the same to any instrument
that requires that the seal be affixed to it and which shall have been duly
authorized for signature in the name of the Corporation and, when so affixed,
the seal shall be attested by his signature or by the signature of the Treasurer
of the Corporation (the "Treasurer") or an Assistant Secretary or Assistant
Treasurer of the Corporation. He shall keep in safe custody the certificate
books and Stockholder records and such other books and records of the
Corporation as the Board, the Chairman or the President may direct and shall
perform all other duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the Board, the Chairman or
the President.
SECTION 4.09. Assistant Secretaries. Assistant Secretaries of
the Corporation ("Assistant Secretaries"), if any, in order of their seniority
or in any other order determined by the Board, shall generally assist the
Secretary and perform such other duties as the Board or the Secretary shall
prescribe, and, in the absence or disability of the Secretary, shall perform the
duties and exercise the powers of the Secretary.
SECTION 4.10. The Treasurer. The Treasurer shall have the care
and custody of all the funds of the Corporation and shall deposit such funds in
such banks or other depositories as the Board, or any officer or officers, or
any officer and agent jointly, duly authorized by the Board, shall, from time to
time, direct or approve. He shall disburse the funds of the Corporation under
the direction of the Board and the President. He shall keep a full and accurate
account of all moneys received and paid on account of the Corporation and shall
render a statement of his accounts whenever the Board, the Chairman or the
President shall so request. He shall perform all other necessary actions and
duties in connection with the administration of the financial
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11
affairs of the Corporation and shall generally perform all the duties usually
appertaining to the office of treasurer of a Corporation. When required by the
Board, he shall give bonds for the faithful discharge of his duties in such sums
and with such sureties as the Board shall approve.
SECTION 4.11. Assistant Treasurers. Assistant Treasurers of
the Corporation ("Assistant Treasurers"), if any, in order of their seniority or
in any other order determined by the Board, shall generally assist the Treasurer
and perform such other duties as the Board or the Treasurer shall prescribe,
and, in the absence or disability of the Treasurer, shall perform the duties and
exercise the powers of the Treasurer.
ARTICLE V
CHECKS, DRAFTS, NOTES, AND PROXIES
SECTION 5.01. Checks, Drafts and Notes. All checks, drafts and
other orders for the payment of money, notes and other evidences of indebtedness
issued in the name of the Corporation shall be signed by such officer or
officers, agent or agents of the Corporation and in such manner as shall be
determined, from time to time, by resolution of the Board.
SECTION 5.02. Execution of Proxies. The Chairman or the
President, or, in the absence or disability of both of them, any Vice President,
may authorize, from time to time, the execution and issuance of proxies to vote
shares of stock or other securities of other Corporations held of record by the
Corporation and the execution of consents to action taken or to be taken by any
such Corporation. All such proxies and consents, unless otherwise authorized by
the Board, shall be signed in the name of the Corporation by the Chairman, the
President or any Vice President.
ARTICLE VI
SHARES AND TRANSFERS OF SHARES
SECTION 6.01. Certificates Evidencing Shares. Shares shall be
evidenced by certificates in such form or forms as shall be approved by the
Board. Certificates shall be issued in consecutive order and shall be numbered
in the order of their issue, and shall be signed by the Chairman, the President
or any Vice President and by the Secretary, any Assistant Secretary, the
Treasurer or any Assistant Treasurer. In the event any such officer who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to hold such office or to be employed by the Corporation before such
certificate is issued, such certificate may be issued by the Corporation with
the same effect as if such officer had held such office on the date of issue.
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12
SECTION 6.02. Stock Ledger. A stock ledger in one or more
counterparts shall be kept by the Secretary, in which shall be recorded the name
and address of each person, firm or Corporation owning the Shares evidenced by
each certificate evidencing Shares issued by the Corporation, the number of
Shares evidenced by each such certificate, the date of issuance thereof and, in
the case of cancellation, the date of cancellation. Except as otherwise
expressly required by law, the person in whose name Shares stand on the stock
ledger of the Corporation shall be deemed the owner and recordholder thereof for
all purposes.
SECTION 6.03. Transfers of Shares. Registration of transfers
of Shares shall be made only in the stock ledger of the Corporation upon request
of the registered holder of such shares, or of such person's attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary, and
upon the surrender of the certificate or certificates evidencing such Shares
properly endorsed or accompanied by a stock power duly executed, together with
such proof of the authenticity of signatures as the Corporation may reasonably
require.
SECTION 6.04. Addresses of Stockholders. Each Stockholder
shall designate to the Secretary an address at which notices of meetings and all
other corporate notices may be served or mailed to such Stockholder, and, if any
Stockholder shall fail to so designate such an address, corporate notices may be
served upon such Stockholder by mail directed to the mailing address, if any, as
the same appears in the stock ledger of the Corporation or at the last known
mailing address of such Stockholder.
SECTION 6.05. Lost, Destroyed and Mutilated Certificates. Each
recordholder of Shares shall promptly notify the Corporation of any loss,
destruction or mutilation of any certificate or certificates evidencing any
Share or Shares of which such person is the recordholder. The Board may, in its
discretion, cause the Corporation to issue a new certificate in place of any
certificate theretofore issued by it and alleged to have been mutilated, lost,
stolen or destroyed, upon the surrender of the mutilated certificate or, in the
case of loss, theft or destruction of the certificate, upon satisfactory proof
of such loss, theft or destruction, and the Board may, in its discretion,
require the recordholder of the Shares evidenced by the lost, stolen or
destroyed certificate or such person's legal representative to give the
Corporation a bond sufficient to indemnify the Corporation against any claim
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
SECTION 6.06. Regulations. The Board may make such other rules
and regulations as it may deem expedient, not inconsistent with these By-laws,
concerning the issue, transfer and registration of certificates evidencing
Shares.
SECTION 6.07. Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the Stockholders entitled to
notice of or to vote at any meeting of Stockholders or any adjournment thereof,
or to express consent to, or to dissent from, corporate action in writing
without a meeting, or entitled to receive payment of any dividend or
<PAGE>
13
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board may fix, in advance, a record
date, which shall not be more than 60 nor less than 10 days before the date of
such meeting, nor more than 60 days prior to any other such action. A
determination of the Stockholders entitled to notice of or to vote at a meeting
of Stockholders shall apply to any adjournment of such meeting; provided,
however, that the Board may fix a new record date for the adjourned meeting.
ARTICLE VII
SEAL
SECTION 7.01. Seal. The Board may approve and adopt a
corporate seal, which shall be in the form of a circle and shall bear the full
name of the Corporation, the year of its Incorporation and the words "Corporate
Seal Delaware".
ARTICLE VIII
FISCAL YEAR
SECTION 8.01. Fiscal Year. The fiscal year of the Corporation
shall end on the thirty-first day of December of each year unless changed by
resolution of the Board.
ARTICLE IX
INDEMNIFICATION AND INSURANCE
SECTION 9.01. Indemnification. (a) The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another Corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if such person acted in good faith and in a manner
such person reasonably believed to be in, or not opposed to, the best interests
of the Corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe such person's conduct was unlawful. The
termination of any action, suit or proceeding
<PAGE>
14
by judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which such person reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that such
person's conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another Corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if such
person acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a present or former director or officer
of the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Section 9.01(a) and (b) of these
By-laws, or in defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under Section 9.01(a) and (b) of these
By-laws (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director or officer is proper in the circumstances because such person has met
the applicable standard of conduct set forth in Section 9.01(a) and (b) of these
By-laws. Such determination shall be made, with respect to a person who is a
director or officer at the time of such determination, (i) by a majority vote of
the directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (ii) by a committee of such directors designated
by majority vote of such directors, even though less than a quorum, or (iii) if
there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion, or (iv) by the Stockholders of the
Corporation.
(e) Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding
<PAGE>
15
upon receipt of an undertaking by or on behalf of such director or officer to
repay such amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the Corporation pursuant to this Article IX. Such
expenses (including attorneys' fees) incurred by other employees and agents may
be so paid upon such terms and conditions, if any, as the Corporation deems
appropriate.
(f) The indemnification and advancement of expenses provided
by, or granted pursuant to, other Sections of this Article IX shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any law, by-law, agreement, vote
of Stockholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office.
(g) For purposes of this Article IX, references to "the
Corporation" shall include, in addition to the resulting Corporation, any
constituent Corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents so that any person who is or was a director, officer, employee or agent
of such constituent Corporation, or is or was serving at the request of such
constituent Corporation as a director, officer, employee or agent of another
Corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Article IX with respect to the
resulting or surviving Corporation as such person would have with respect to
such constituent Corporation if its separate existence had continued.
(h) For purposes of this Article IX, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves service by, such director,
officer, employee or agent with respect to any employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner such person reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article IX.
(i) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article IX shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
SECTION 9.02. Insurance for Indemnification. The Corporation
may purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another Corporation, partnership, joint venture, trust or other
<PAGE>
16
enterprise, against any liability asserted against him and incurred by him in
any such capacity, or arising out of such person's status as such, whether or
not the Corporation would have the power to indemnify him against such liability
under the provisions of Section 145 of the General Corporation Law.
ARTICLE X
AMENDMENTS
SECTION 10.01. Amendments. Any By-law (including these
By-laws) may be adopted, amended or repealed only by (i) the vote of the
recordholders of a majority of the Shares then entitled to vote at an election
of Directors, provided notice of such adoption, amendment or repeal shall have
been stated in the notice of such regular or special meeting, (ii) by vote of
the Board or (iii) by a written consent of Directors pursuant to Section 3.10
hereof.
Exhibit 5.1
April 21, 1999
To the Board of Directors
of American National Can Group, Inc.
Ladies and Gentlemen:
We are acting as counsel for American National Can Group, Inc.
(the "Company") in connection with the Registration Statement on Form S-1 (the
"Registration Statement") being filed with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended,
relating to the offering by the selling stockholder of the Company listed in the
Registration Statement (the "Selling Stockholder") of the Company's common
stock, nominal value $0.01 per share (the "Common Stock").
We are familiar with the corporate proceedings of the Company
to date with respect to the proposed issuance and sale of the Common Stock,
including resolutions of the Board of Directors of the Company (the
"Resolutions") authorizing the issuance, offering and sale of the Common Stock,
and we have examined such corporate records of the Company and such other
documents and certificates as we have deemed necessary as a basis for the
opinions hereinafter expressed.
Based on the foregoing, and having regard for such legal
considerations as we have deemed relevant, we are of the opinion that:
1. The Common Stock has been duly authorized and, when the
final terms thereof have been duly established and approved and when duly
executed by the Company pursuant to the authority granted in the Resolutions and
delivered by the Selling Stockholder to and paid for by the purchasers thereof,
will constitute valid and legally binding obligations of the Company and will be
legally issued, fully paid and nonassessable.
<PAGE>
2
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the use of our name under the heading
"Legal Matters" in the prospectus contained therein.
Very truly yours,
/s/ Shearman & Sterling
RCT/RE/DB/EAB/JTC
CONFIDENTIAL
TREATMENT
REQUEST
Exhibit 10.1
ALUMINUM PURCHASE/SUPPLY AGREEMENT
This Agreement is made this 5th day of July, 1995 between American
National Can Company (ANC) and Alcan Rolled Products Company (ALCAN).
Whereas, ANC and ALCAN entered into a Memorandum of Agreement dated
December 21, 1992 (the "framework agreement") providing for ALCAN's supply of
aluminum can stock to ANC on a worldwide basis over a three year term expiring
at the end of 1995; and
Whereas, the parties are desirous of entering into a new long-term
Supply Agreement (the "LTSA") covering ANC's North American requirements to take
affect upon the expiration of the framework agreement; and
Whereas, the parties are desirous of establishing in the LTSA pricing
within a cost-based "band" which the parties expect will, over time, (a) provide
a reasonable return to ALCAN for metal over the business cycle, while also
eliminating extreme market volatility, and (b) when combined with market-based
fabrication conversion charges, will allow ANC to negotiate can pricing with its
customers within specified predictable parameters.
Now, therefore, in consideration of the mutual covenants set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
STRICTLY CONFIDENTIAL
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1. General Provisions
1.1 Definitions: Aluminum can-stock means aluminum beverage can body-stock and
aluminum beverage can end-stock that comply with ANC's standards and
specifications applied in a consistent manner to all its aluminum can-stock
suppliers.
1.2 Term and Termination: This LTSA will be effective with shipments
beginning January 1, 1996, will run through December 31, 2000 (five years) and
will be subject to successive three-year extensions, provided that both parties
agree on terms and conditions to be applicable during such extension periods at
least twelve (12) months prior to the termination of the initial five-year term
or any extension period, and provided further that if, during at least 3/4 of
the period of six months preceding the time limit for agreement at the end of
the initial term (i.e., between July 1, 1999 and December 31, 1999), the Midwest
delivered metal price is out of the "band" defined in Article 3.4, Sub-section
c, or, if during the initial term of this Agreement, ALCAN should request a
fabrication increase substantially beyond the initial 32(cent) and 70(cent)
fabrication components including adjustments for the applicable cost increases
and PPI increases which were previously incorporated as described in Section
3.4d of this Agreement, then the Agreement will automatically be extended for
one additional year beyond the initial five-year term. In addition, ANC shall
have the right to extend, at its sole option, this Agreement for a period of one
additional year following the automatic extension year, provided that they
exercise this additional option year no later than October 1 of the automatic
extension year and also that the band prices in existence in the year 2000
average at least [*] on the metal component floor plus applicable cost and PPI
increases covered in Section 3.4c and that the fabrication component on CBS is
at least 32(cent)/lb. and CES is at least 72(cent)/lb. plus applicable
STRICTLY CONFIDENTIAL
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3
cost and PPI increases covered in Section 3.4d and, further, that all of these
specific terms and conditions have been and continue to be adhered to by ANC.
Should ANC invoke this additional unilateral extension year, it shall be limited
to a maximum of one-third (1/3) of the annual volume of the 50% share of ANC's
business sourced with ALCAN in the prior contract year. The terms and conditions
of the remaining two-thirds (2/3) of the volume would be decided upon by
negotiations between the parties. The intent of this extension is to preclude a
major "run up" in the price of aluminum can sheet at the end of the Agreement
without providing ANC and their customers with time to elect other options or
alternative materials.
1.3 Global Supply: The intent of this Agreement is for ALCAN to supply a minimum
of 50% of ANC's can-stock purchases in North America (United States, Canada and
Mexico). In addition, ALCAN shall have a right of first refusal for up to 50% of
the can stock requirements of ANC, its subsidiaries and affiliates in Central
and South America. Conditions of eventual supply in Central and South America
will be discussed on a case-by-case basis, and the parties shall be free to
reach an agreement on competitive terms and conditions as to such other
locations which may be different than the agreements set forth herein.
1.4 Cost Initiatives: ALCAN and ANC will work aggressively (and cooperatively,
where appropriate) to lower system costs wherever possible without injury or
hardship to each other.
1.5 Force Majeure: The obligations of each party hereunder shall be excused in
the event that party's performance is prevented or impeded by strikes, work
stoppages and slowdowns, war, insurrection, government action (including levies,
etc.), casualty (including, without limitation, fire,
STRICTLY CONFIDENTIAL
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4
flood, accident and explosion), acts of God and any other similar or different
circumstance beyond the reasonable control of such party (any of the foregoing
events being referred to as an event of "force majeure"). The party affected by
an event of force majeure shall promptly notify the other party, identifying the
event and estimated duration.
2. Quality
2.1 ALCAN warrants that all can-stock delivered under the LTSA will meet or
exceed ANC standards, which standards are being reasonably applied in a
consistent manner to all of its can-stock suppliers.
2.2 ALCAN and ANC commit to work together to continually improve system quality
and service.
2.3 In the event that ALCAN is disqualified at any plant, ANC commits to work
with due diligence with ALCAN to requalify. If the parties are not successful in
achieving requalification in a reasonable time and the supply pattern cannot be
altered to other plants, ANC's volume and commitments hereunder for the period
when ALCAN was disqualified may be, at ANC's option, reduced accordingly until
ALCAN is able to requalify its material.
3. Purchase and Sale of Can-Stock
3.1 Quantities: ANC will purchase from ALCAN, and ALCAN will supply to ANC,
annually, a minimum of 50% of ANC's North American (United States, Canada, and
Mexico) aluminum can-stock requirements designated for processing in ANC's
facilities for that year. It is the intent of the parties to include in such
requirements the needs of all of ANC's aluminum beverage-can facilities in North
America. However, ALCAN recognizes that specific circumstances (joint
STRICTLY CONFIDENTIAL
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5
ventures, acquisitions subject to previous supply commitments, new facilities
outside the continental United States, etc.) may prevent ANC, during a period of
time, from including certain facilities in the requirements covered by the 50%.
It is the intent of the parties to include the volumes corresponding to such
specific circumstances into the requirements covered by the 50% as soon as
practically possible. The parties agree that, in the event that ANC's overall
volume is reduced (for whatever reason), the initial ten percentage points of
lost volume will not affect ALCAN's volume. Thereafter, should additional volume
be lost, ANC will reduce supplier share on whatever basis it feels is
appropriate, provided that ALCAN will not be cut more than 50% of any additional
lost volume.
3.2 Scheduling: ANC will advise ALCAN no later than November 15 of
the preceding year of its estimated aluminum can-stock requirements for the
following year, by type, based on the 50% supply commitment. Should ANC require
additional volumes substantially above the 50% supply commitment, a request for
such additional volumes shall be transmitted to ALCAN prior to November 15 of
the preceding year (but as soon as possible), in order for ALCAN to attempt to
accommodate it. The parties agree that, as far as practically possible, they
will dedicate specific entire lines (ANC) to specific mills (ALCAN), and
specific mills (ALCAN) to specific entire lines (ANC). Each calendar month (M),
ANC will provide ALCAN with an estimate of its requirements by type of can-stock
and by delivery location for months M + 2 and M + 3.
3.3 Tolling:
a. To lessen the amount of metal which is required to be hedged, ANC agrees that
a minimum of [*] of ALCAN's annual North American aluminum can-sheet shipments
to ANC will be provided
STRICTLY CONFIDENTIAL
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6
by toll conversion of Class I and Class III process scrap supplied by ANC. The
parties agree that some portion of Class II and Class IV scrap may be utilized
to fulfill such [*] requirement. If ALCAN is not in a position to toll Class II
and Class IV directly, it shall offer to toll it in slab form. If process
recovery at ANC's facility improves, the parties will meet to decrease the [*]
figure accordingly. Scrap will be returned to ALCAN and tolled in proportion to
its generation by ANC facilities (i.e., [*] Class I, [*] Class II, [*] Class III
and Class IV).
b. Due to the nature of the pricing conditions below, the only other tolling
options available to ANC are limited to UBC and ingot, as indicated in paragraph
3.4 or 3.5 below (ingot toll would apply on the non-banded portion of ANC's
business unless mutually agreed upon). ANC must advise ALCAN, no later than
November 15 of the preceding year, of the amount of UBC and/or ingot tolling (if
any) ANC elects to undertake during the subsequent year. Once a toll option is
selected by ANC, the volume of the toll and the toll price become firm and are
part of the annual supply agreement and not subject to change during the
corresponding year.
c. Toll conversion into aluminum can-stock shall be made on a pound-for-pound
basis with all in-bound freight paid by ANC.
3.4 Prices:
a. Prices for non toll-converted can-stock hereunder shall consist of a metal
component plus a fabrication conversion component.
b. The metal component price for that portion of the volume to be purchased
under the "band" concept described in Sub-paragraph (c) below will be derived
from the average of the daily Platt's
STRICTLY CONFIDENTIAL
<PAGE>
7
Metals Week transaction prices (the average official LME cash settlement price
and the midwest premium) for a six-month period. This average price shall be
established twice each year during the term of this Agreement as follows: (i)
during the period January 1 to April 1 of the initial contract year (1996), the
metal component price will be the average of the transaction settlement prices
for the period June 1 to November 30, 1995; (ii) during the period April 1 to
September 30, the metal component price will be the average of the daily Platt's
Metals Week transaction prices for the September 1 to February 28 of the
preceding period immediately prior to the April 1 date; and (iii) during the
period October 1 to March 31, the metal component price will be the average of
the daily Platt's Metals Week transaction prices for the March 1 to August 31
period immediately preceding the October 1 date. Once established, volume and
price for the relevant six-month period shall become firm for both parties,
provided that ANC's actual releases and corresponding receipts during the period
may vary between 95% (minimum) and 100% (maximum) of the committed "band"
volume. The parties recognize that significant volume shifts from one six-month
period to another would be costly and disruptive and, to avoid this, the parties
agree that ALCAN will not be required to provide ANC more than 55% of ANC's
annual volume in either of the six-month periods.
c. Notwithstanding Sub-paragraph (b) above, the metal component price (as
defined above) will be "banded" within the range of not less than [*] and not
more than [*] during the initial five-year period of this contract, except as
outlined below. As the parties have discussed, this is strategic to both parties
and constitutes a critical component of this LTSA. Specifically, it is
understood that ALCAN will forego metal increases beyond the top of the "band"
throughout the contract duration, and ANC will forego metal decreases below the
bottom of the "band" throughout the contract
STRICTLY CONFIDENTIAL
<PAGE>
8
duration. It is specifically understood that the terms and conditions of the
"band" are binding on both parties, regardless of the approach taken by other
aluminum can-stock suppliers or can makers regarding "band" pricing. Prior to
August 31, 1995, should Alcoa (and this applies only to Alcoa) establish a metal
band which is different from the [*] metal component, which ALCAN and ANC have
adopted, then the parties will meet to discuss the Alcoa band vs. the ALCAN
band. It is understood that neither ALCAN nor ANC would be obligated to adopt
the Alcoa band. Further, ANC will discuss with and obtain from its customers an
agreement of support for the terms and conditions of this band concept. The form
and substance of the agreement of support must be acceptable to both ALCAN and
ANC. On or before August 31, 1995, ANC will advise ALCAN of the percentage of
business to be purchased under the "band" concept based on the commitments that
it has received up to that date from its beverage can customers for the
five-year period of this Agreement. ANC will only purchase under the "band"
concept the volumes of metal necessary to fulfill these customer commitments.
Any and all other volumes of metal not covered by the "band" will be purchased
by ANC to fulfill its 50% purchase commitment to ALCAN either (i) from ALCAN at
the prevailing first-tier market prices and terms and pricing methodologies
existing during the term of this Agreement, subject to the provisions hereof; or
(ii) from other metal sources (such as UBC, process scrap, ingot, etc.) and then
provided to ALCAN for tolling subject to the tolling terms and conditions of
this Agreement.
For each successive year following the initial year, the upper and
lower levels of the "band" (i.e., initially [*] and [*]) will be subject to an
inflation adjustment to cover substantial non-controllable cost increases. The
parties agree that one-half (1/2) of the year-over-year changes in the
STRICTLY CONFIDENTIAL
<PAGE>
9
Producer Price Index for Intermediate Materials (PPI) will be added to both the
upper and lower limits of the "band" each year, beginning on January 1, 1997 and
continuing thereafter on January 1 of 1998, 1999 and 2000.
d. The price for the conversion component for body stock for the year 1996 will
be 32(cent)/lb. based on 0.0114" gauge; different gauged body stock will be
priced based on ALCAN's current published conversion price list at the date of
the execution hereof. The 32(cent)/lb. fabrication conversion charge will be
adjusted after 1996 based on one-half of the previous year's changes in the PPI
(i.e., 1997 adjustment will be based on one-half of the 1996 over 1995 PPI
changes). (In the event of significant increases in cost items which were not
included in, or a component of, the change in the PPI, the parties agree to make
appropriate adjustments for these items in the conversion component.)
Notwithstanding the foregoing, the conversion component shall in no event be
higher than the price charged for conversion of similar products from other
first-tier aluminum suppliers to ANC on a weighted average basis. First-tier
suppliers shall mean, for the purposes of this agreement, ALCOA, REYNOLDS and
KAISER ALUMINUM (DC cast and rolled material) and shall only apply while they
are pricing under a multi-year band pricing concept containing metal plus
fabrication pricing.
The price for the conversion component for end stock for the year 1996
will be our current 70(cent)/lb. based on 0.0110 gauge, clear soft drink
beverage; different gauged end stock or beer end stock will be priced based on
ALCAN's current published conversion price list at the date of the execution
hereof. However, both parties agreed that fabrication conversion charges for
1996 are anticipated to increase to 72(cent) per pound based on coating cost
increases to be made effective
STRICTLY CONFIDENTIAL
<PAGE>
10
January 1, 1996 or on January 1, 1996, should coating costs increase prior to
that date. Should such coating increases occur, the conversion component will
reflect them on their effective date. Adjustments to this price after 1996 will
be handled in the same manner as adjustments to body stock described above.
Notwithstanding the foregoing, the conversion component shall in no event be
higher than the price charged for conversion of similar products from other
first-tier aluminum suppliers to ANC on a weighted average basis. First-tier
suppliers shall mean, for the purposes of this agreement, ALCOA, REYNOLDS and
KAISER ALUMINUM (DC cast and rolled material) and shall only apply while they
are pricing under a long-term band price of metal plus fabrication.
e. Tolling prices into can body-stock (gauge 0.0114") (and in the case of Class
II below can end stock toll at 0.0110" gauge clear soft drink) for the year 1996
are as follows:
Toll and Metal Component
Metal Component: [*] [*] [*]
Class I Scrap [*] [*] [*]
Class III Scrap [*] [*] [*]
UBC [*] [*] [*]
Class 11 Scrap [*] [*] [*]
CBS Sheet Ingot [*] [*] [*]
Metal component shall be calculated based on the average of the daily
Platt's Metals Week transaction prices for the month of product shipment.
STRICTLY CONFIDENTIAL
<PAGE>
11
Tolling prices into can end stock (gauge 0.0110" clear soft drink
beverage) for the year 1996 are as follows:
P1020* [*]**
CES Sheet Ingot [*]**
* P1020, for the purpose of this Agreement, shall be defined as good western
production in T or sow form (1,500 pounds).
** Tolling prices into can end stock for 1996 are anticipated to increase to
72(cent)/lb. and 64(cent)/lb. respectively based on coating cost increases to be
made effective January 1, 1996.
Metal units for tolling are to be delivered to Midwest locations
agreed upon by ALCAN and ANC, freight prepaid by ANC. Exact tolling prices will
be based on the specification ordered with differentials based on ALCAN's
published fabrication conversion price list. In the event that ANC desires to
toll end stock with ALCAN from sheet ingot and ALCAN is short of sheet ingot in
its system and desires to toll the sheet ingot, then ANC and ALCAN will meet to
agree upon the appropriate market spread to be charged by ALCAN.
The toll conversion prices listed above will be adjusted after 1996
based on one-half of the previous year's changes in the PPI for intermediate
materials (i.e., 1997 adjustment will be based on one-half of the 1996 over 1995
PPI changes). In the event of significant increases in cost items which were not
included in, or a component of, the change in the PPI, the parties agree to make
appropriate adjustments for these items in the toll conversion component.
Notwithstanding the foregoing, the toll conversion price shall in no event be
higher than the price charged for toll conversion of similar products from other
first-tier aluminum suppliers to ANC on a weighted
STRICTLY CONFIDENTIAL
<PAGE>
12
average basis. First-tier suppliers shall mean, for the purposes of this
agreement, ALCOA, REYNOLDS and KAISER ALUMINUM (DC cast and rolled material) and
shall only apply while they are pricing under a long-term band price of metal
plus fabrication.
f. ALCAN agrees to provide ANC with conversion and tolling
prices equal to or less than any such prices provided by ALCAN to any other can
stock customer for delivery in North America. ALCAN will certify to ANC at the
beginning of each year, by letter from ALCAN Rolled Products' Chief Financial
Officer, that this provision has been met during the preceding year. This
certification will be applicable to the conversion/tolling component only and
will exclude any investment-oriented discounts. Should ALCAN's total can sheet
sales to its North American can stock customers be greater than 90% under "band"
pricing, and should ALCAN quote any incremental business opportunities at a
price which is lower than ANC is paying hereunder, then ALCAN agrees to offer
such lower prices to ANC. Incremental business opportunities shall mean any
sales to North American can sheet users for North American consumption other
than "annual" volume contracts.
g. Payment Terms: ANC's payment terms are net 30 days with payment as follows:
Invoices shall be grouped from the 10th of the month to the 9th of the following
month and paid by wire transfer on the first working day of the month next
following.
3.5 UBC Acquisition: ANC will provide ALCAN with UBCs equal to [*] of its can
body sheet (CBS) purchases from ALCAN each year (i.e., CBS sales of [*] of UBC).
The parties agree that the price will be the market price; however, the price on
UBCs equal to [*] of the CBS will be capped
STRICTLY CONFIDENTIAL
<PAGE>
13
at [*] delivered during the term of the contract (i.e., CBS sales of 400 MM lbs.
@ [*] of UBCs price capped). The remaining UBCs shall be purchased at market
price; however, ALCAN shall have the right, at its sole option, to refuse to buy
UBCs above the cap price. It is agreed that ANC shall not be obligated, in any
month, to provide ALCAN with UBCs, at a capped price of [*] delivered, any more
than 1/12th of ANC's annual obligation stated above.
Should ANC wish to toll UBC volume, subject to the conditions listed
in paragraph 3.3b., the toll pounds would first displace the ANC capped UBCs.
UBC volumes, if a toll option has been selected, must be reasonably
level on a monthly basis throughout the period. If the UBC toll option is
selected, both the toll volume and toll price shall become firm for the
following year.
Each year, the parties will review the situation of the spread between
UBC and ingot. If the evolution of the spread during a calendar year has changed
substantially enough to create an economic problem to one of the parties, the
parties will meet to find a way to reduce the magnitude of the problem,
including but not limited to reducing the quantity of UBCs to be processed by
ALCAN under this Article 3.5. If this is not practical, the parties will meet to
decide how to reasonably share in the temporary burden created by the spread
situation. If sharing is required, it is the intent of the parties that they
share on a 50-50 basis.
STRICTLY CONFIDENTIAL
<PAGE>
14
BENCHMARK
Metal [*] [*] [*] [*]
Spread Required* [*] [*] [*] [*]
* Delivered price would include freight and administration fee.
4. Succession Clause: All of the covenants, obligations, terms, provisions and
conditions of this Agreement shall apply to, bind, and inure to the benefit of
any successor, assign, or ultimate transferee through the transfer (by sale,
merger, consolidation, conveyance or otherwise) of all or substantially all of
the assets of ANC for which aluminum can stock is used in production ("the
Assets") or the transfer of securities of ANC, and ANC shall transfer this
Agreement and all of the covenants, obligations, terms, provisions and
conditions of this Agreement as a part of any agreement providing for any
transfer of all or substantially all of the Assets or securities of ANC. In
connection therewith, ANC shall obtain the written assumption by the ultimate
transferee of all of the obligations of ANC under this Agreement, provided that
ANC shall not be relieved from those obligations should such transferee not
perform.
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio, USA without giving effect to the
principles of conflict of laws thereof.
5. Confidentiality: Except to the extent that disclosures to other persons of
confidential information relating to this Agreement may be required by law or
such confidential information becomes public, ANC and ALCAN agree to keep
strictly secret and confidential and not to disclose to any person,
STRICTLY CONFIDENTIAL
<PAGE>
15
any or all pricing and cost information or other confidential or proprietary
information provided pursuant to this Agreement.
6. Notices: All legal notices and other legal communications provided for
hereunder shall be in writing and given by registered or certified mail, or
responsible overnight courier, addressed as provided below, with acknowledgment
of receipt requested, or by telex, telegram, cable or facsimile, sent or
delivered to the addressee below, or, as to each party, at such addresses as
shall be designated by such party hereafter in a written notice to the other.
All such legal notices and legal communications shall be effective when hand
delivered or, in the case of notice by facsimile, on the day of receipt if
received prior to 5:00 p.m. EST on a working day or on the next working day if
received after 5:00 p.m. EST on a working day, provided that the sender's copy
includes the appropriate acknowledgment of receipt by the receiver's facsimile
machine.
If to ALCAN: IF to ANC:
- ----------- ---------
Alcan Rolled Products Company American National Can Company
100 Erieview Plaza 8770 West Bryn Mawr
Cleveland, OH 44114 Chicago, Illinois 60631
Attn: Vice President and Attn: Corporate Secretary
General Manager - Sheet Products
7. Audits: ANC shall be entitled to make physical inventory audits of its metal
units in ALCAN's possession for toll conversion at any time, upon reasonable
notice, during ALCAN's normal business hours. ALCAN manages its scrap/metal
units on a fully integrated, system-wide (multi-plant) basis. As a result, this
inventory is in no way segregated, once it enters the system. Therefore, the
metal units delivered by ANC must be viewed as fungible, from an
access-at-a-later-date perspective. Due
STRICTLY CONFIDENTIAL
<PAGE>
16
to the multi-location ALCAN system and fungible inventory, ALCAN could provide
access to ANC at a location other than where the physical metal was originally
delivered.
In addition, ANC may perform reasonable quality audits of ALCAN's
systems, procedures, and processes to assure than can stock produced hereunder
meets the specifications and other requirements contained in this Agreement.
The foregoing Memorandum of Agreement has been accepted and agreed to
by the parties as of this 5th day of July, 1995.
Alcan Aluminum Limited American Nation Can Company
By: /s/ Jacques Bougie By: /s/ Jean-Pierre Rodier
--------------------------- ---------------------------
Jacques Bougie Jean-Pierre Rodier
President and CEO Chairman and CEO
Alcan Aluminum Limited American National Can Company
Alcan Rolled Products Company
By: /s/ Robert L. Ball By: /s/ Gerard Hause
--------------------------- ---------------------------
Robert L. Ball Gerard Hauser
Executive VP, Alcan Aluminum Ltd. COO, Beverage Sector
President, Alcan Aluminum Corporation American National Can Company
President, Alcan Rolled Products
By: /s/ Brian W. Sturgell By: /s/ Richard M. Deneau
--------------------------- ---------------------------
Brian W. Sturgell Richard M. Deneau
Vice President and General Manager Senior Vice President
Alcan Rolled Products Beverage Cans Americas
American National Can Company
STRICTLY CONFIDENTIAL
<PAGE>
(AMERICAN NATIONAL CAN LETTERHEAD)
Bert F. Larsson
Vice President, Purchasing
Beverage Cans Americas
January 29, 1996
Mr. Brian Sturgell
ALCAN ROLLED PRODUCTS COMPANY
6060 Parkland Blvd.
Mayfield Heights, OH 44124-4185
Dear Brian:
Subject: 1998 - 2000 BAND VOLUME OFFER
Now that we have finalized our sales commitments under the band concept, we need
to insure that the offered can sheet volume flexibility for the years 1998
through 2000 remains in place.
Please confirm by signing below that Alcan has an ongoing offer to supply to
ANC, additional can sheet under the band program based on the following
commitment timeframes: If up to
a) 200 - 250mm pounds required per year, ANC must declare by April 1, 1997, and
b) 150 - 200mm pounds declare by July 1, 1997, and
c) 100 - 150mm pounds declare by October 1, 1997.
This additional volume is understood by both parties to be above and beyond the
percentage of band volume currently contracted for the 5 year period beginning
January 1, 1996 and the band requirements and provisions would be the same.
Very truly yours,
Bert F. Larsson
BFL/kmm
BFL722.doc
cc: Mr. E. Daugherty - Alcan Rolled Products Company
Mr. R. Nunn - American National Can
- --------------------------------
Brian W. Sturgell
<PAGE>
ADDENDUM TO ALUMINUM PURCHASE/SUPPLY AGREEMENT
DATED JULY 5,1995
WHEREAS, Coca-Cola Enterprises ("CCE") and The Coca-Cola Company
("TCCC") have requested that the current five year can supply agreement (the
"can supply agreement") between ANC and CCE be modified for the years 1998
through 2000 to provide for the awarding by CCE/TCCC to ANC of can volumes
(incremental volumes) in excess of the 7 billion cans (the base volume) which
CCE is required to purchase annually under the can supply agreement. CCE/TCCC
has requested that the can sheet required for any such incremental volume be
awarded in its entirety to Alcan Rolled Products ("Alcan") under the same terms
and conditions as the base volume. Since the purchase of the can sheet for this
incremental volume is being directed by and credited to CCE/TCCC, the purchase
of this volume will be, in essence, a soft toll, which is to say that it will be
purchased by ANC, but negotiated by and credited to CCE/TCCC; and
WHEREAS, ANC is willing to modify its can supply agreement with
CCE effective January 1, 1998 for the remaining term of such supply agreement
(i.e., through December 31, 2000) based on ANC's knowledge and belief that the
arrangements relating to the purchase of such incremental can sheet and the
modifications to ANC's agreement with CCE have been reviewed with and approved
by Alcan. However, ANC believes that the purchase by ANC from Alcan of 100% of
such incremental volume in the years 1998 through 2000 would result in ANC's
breach of its agreements with its other can sheet suppliers; and
WHEREAS, ANC does not intend to break its other can sheet supply
agreements for the 1998 through 2000 period, but nonetheless wishes to satisfy
the CCE/TCCC requests delineated above; and
WHEREAS, Alcan is willing to accommodate ANC's concerns by entering
into the agreements set forth below.
NOW, THEREFORE, in consideration of the mutual promises set forth
hereinbelow and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Alcan and ANC agree to the
following addendum to the Aluminum Purchase/Supply Agreement dated July 5, 1995:
1. ANC agrees to award to Alcan 50% of any incremental volume in excess
of 7 billion cans which may be awarded to ANC by CCE/TCCC in the years 1998
through 2000. The remaining 50% of such incremental can sheet volume will be
accrued and awarded to Alcan in the first quarter of the calendar year 2001
prior to any other volume commitments made by ANC in that year. It is understood
that such accrued volume will be incremental to whatever volume commitment is
negotiated between ANC and Alcan for the year 2001. Tolling and pricing terms
and conditions for such accrued volume will be those in effect at the time of
shipment with the metal component to be equal to that charged for aluminum ingot
in the fourth quarter of the year 2000. If the parties mutually agree to spread
the volume accrued over the first half of the year 2001, metal pricing during
<PAGE>
the second quarter of 2001 would be based on the average of the daily Platt's
Metals Week U.S. transaction prices for the period September 1, 2000 through
February 28, 2001. Any investment related discount to ANC for the accrued volume
would only be rebated to ANC if there is an agreement in place between ANC and
Alcan regarding such a discount during the year 2001.
2. Providing that ANC does receive incremental volume during the period
January 1, 1998 through December 31, 2000, Alcan agrees to (a) provide to ANC
50% of such incremental volume in each year that such incremental volume is
awarded by CCE/TCCC; (b) accrue the remaining 50% until the year 2001 as
provided above; and (c) credit CCE/TCCC annually for 100% of the incremental
(i.e., soft toll) volume awarded to ANC. ANC will advise Alcan by November 15 of
each year beginning in 1997 of the forecasted incremental can volume awarded to
ANC by CCE/TCCC for the following year and the corresponding can sheet tonnages
involved. ANC will then advise Alcan by January 15 of each year beginning in
1999 of the actual incremental can volume shipped to CCE/TCCC in excess of 7
billion cans during the previous year and the corresponding can sheet volume.
3. Alcan and ANC hereby confirm to one another that the conditions spelled
out in this Agreement are to be kept confidential and not shared with anyone
outside either the Alcan or ANC organizations unless specifically approved in
advance by both parties hereto.
4. Except as expressly stated above, and except as previously amended, all
other terms and conditions in the Aluminum Purchase/Supply Agreement dated July
5, 1995 remain unchanged and in full force and effect.
EXECUTED and ACKNOWLEDGED this 9th day of July, 1997.
AMERICAN NATIONAL CAN COMPANY ALCAN ROLLED PRODUCTS
By: /s/ Edward A. Lapekas By: /s/ R.E. Daugherty
--------------------------- ---------------------------
Title: Senior Executive Vice Title: Vice President -
--------------------------- ---------------------------
President and Chief Worldwide Can
Operating Officer Sales
Beverage Worldwide
<PAGE>
(AMERICAN NATIONAL CAN LETTERHEAD)
May 6,1997
Mr. R. Edward Daugherty
Vice-President, Sales
Alcan Rolled Products Company
6060 Parkland Boulevard
Cleveland, OH 44124-4185
Dear Ed:
With the transfer of the UBC acquisition activity from American National Can
Company ("ANC") to Pechiney World Trade ("PWT") now complete, we want to
reconfirm the required changes to the can sheet supply contract dated July 5,
1995 related to this transfer, now that PWT will act as ANC's agent in securing
and supplying the UBC metal units. The contract should be amended as follows:
3.3 Tolling: The original contract provided that ANC would supply annually a
minimum of [*] of the total Aluminum can-stock purchased (body, end and tab) as
class scrap metal units (combination of CL1, CL2 and CL3) and another [*] of the
total Aluminum can-stock as UBC metal units. We have mutually agreed to revise
this as follows:
The total metal unit minimum requirement of [*] annually of the
total Aluminum can-stock purchased will be a combination of:
o UBC's of [*] regardless of total Aluminum can-stock purchases.
o Class Scrap of [*]. Percentage is fixed regardless of UBC's returned.
o ANC may supply a greater percentage of combined metal units by
increasing the amount of Class Scrap to be tolled by mutual agreement
with Alcan.
3.5 UBC Acquisition: The original agreement under which ANC would supply band
priced UBC for [*] of the total Aluminum can-stock purchased needs to be amended
as follows:
ANC will, through PWT, supply ALCAN with UBC's under band
pricing equal to [*] per year [*] per month).
ALCAN will retain the option to purchase from PWT additional
non-banded UBC's up to [*] of ANC's annual total Aluminum
can-stock purchases.
Pricing of UBC: The intent of our original agreement regarding pricing of the
banded UBC's had four components:
> formula pricing with a ceiling provided for in Section 3.5,
<PAGE>
- 2 -
> floor price per the 9/18/95 amendment,
> a sharing review in each year if the pricing created an economic
problem for one party per Section 3.5,
> formula sharing beyond the one penny in actual gains or losses per
S. Fehling's 1/11/96 fax and the minutes of our 1/24/96 joint meeting.
Although PWT has expressed concern regarding the formula used, the
ceiling and floor concept will be retained as well as the annual review
of each others economic problems. However, since PWT will be hedging
this activity both in their premium book and in their LME book, the
computation of gains or losses will ultimately require some
modifications. Alcan and PWT, as ANC's UBC agent, will discuss and
attempt to agree upon a modification to this computation and will
provide a further written amendment to the can sheet supply agreement
once this modification has been agreed upon.
[*]
If you are in agreement with the above delineated changes to our can sheet
supply contract, please so indicate by signing the copy of this letter in the
space provided below, and return to ANC Purchasing.
Yours truly,
/s/ Bert F. Larsson
Bert F. Larsson
DAUGHERTY/SL
Enclosure
cc: R. Nunn -08Z
J. Sasso -08Z
S. Fehling-Alcan/Cleveland
J-P. Lacor-PWT
ACCEPTED AND AGREED TO:
ALCAN ROLLED PRODUCTS COMPANY AMERICAN NATIONAL CAN COMPANY
By: /s/ Brian Sturgell By: /s/ Edward A. Lapekas
--------------------------- ---------------------------
Brian Sturgell Edward A. Lapekas
<PAGE>
(AMERICAN NATIONAL CAN LETTERHEAD)
July 25, 1995
Mr. Brian W. Sturgell
ALCAN ROLLED PRODUCTS COMPANY
100 Erieview Plaza
P.O. Box 6977
Cleveland, OH 44114
Subject: AMERICAN NATIONAL CAN GLOBAL SOURCING STRATEGY
Dear Brian:
This is to confirm that it is the intent of American National Can Company (ANC)
to source approximately 40% of its worldwide can sheet requirements from Alcan
Rolled Products Company (Alcan).
With the signing of the North American Supply Agreement, ANC and Alcan have
shown their willingness to enter into a mutually beneficial multi-year
commitment. It is the intent of ANC to enter into a similar kind of an agreement
with your Alcan Deutschland group covering our European can sheet requirements.
The realization of such an agreement for our European operations will be
predicated on the mutual acceptability of the terms and conditions required in
that market.
ANC also intends to offer Alcan an opportunity to supply up to 40% of its can
sheet requirements in South and Central America, as that market develops, under
conditions and terms which are competitive in those specific markets.
Sincerely,
/s/ Gerard Hauser
Gerard Hauser
C.O.O. Beverage Sector
American National Can Company
GH/kmm
GH002.DOC
cc: Mr. R. Ball - Alcan
Mr. R. Deneau - American National Can
Mr. M. Herdman - American National Can
Mr. B. Larsson - American National Can
<PAGE>
(ALCAN ROLLED PRODUCTS COMPANY'S LETTERHEAD)
December 12, 1995
Mr. Richard M. Deneau
Senior Vice President
Beverage Cans, North America
American National Can
8770 West Bryn Mawr
Chicago, IL 60631
Dear Rick:
This is to confirm that, for purposes of the multi-year can sheet supply
contract with Alcan, American National Can has elected to take advantage of the
"band" concept, as outlined in Paragraph C of the pricing provisions of that
contract, with respect to a volume equivalent to 50% of their annual usage of
can sheet. American National Can understands that, based on its decision to take
advantage of the "band" concept for this volume, Alcan will be taking steps to
secure metal positions or otherwise will be acting in reliance on that decision.
While American National Can's contracting decisions with its customers are
matters that have been negotiated solely between American National Can and its
customers, American National Can nonetheless confirms that it is contractually
committed to one or more of its customers in ways that provide American National
Can the comfort to make the foregoing commitment to Alcan. In that regard,
American National Can is ordering under the band concept only the metal that is
supported by such customer contracts.
I would appreciate your confirming this commitment by countersigning the
enclosed extra copy of this letter and returning it to me. By doing so, American
National Can reaffirms its commitment to the multi-year can sheet supply
contract, including the pricing provisions of that contract.
Sincerely,
/s/ Brian W. Sturgell /s/ Richard M. Deneau
- --------------------------- ---------------------------
Brian W. Sturgell Richard M. Deneau
Vice President and General Manager Senior Vice President
Sheet Products Beverage Cans, North America
American National Can
<PAGE>
(ALCAN ROLLED PRODUCTS COMPANY LETTERHEAD)
CONFIDENTIAL
------------
August 7, 1995
Mr. Bert F. Larsson
American National Can
8770 West Bryn Mawr
Chicago, IL 60631
RE: Aluminum RCS Support
Dear Bert:
This letter is to confirm our agreement that Alcan Rolled Products will support
American National Can's plans to grow the use of aluminum cans in North, Central
and South America by expanding the current market and developing new markets.
Specifically, Alcan agrees to provide financial support to ANC, to partially
offset the ANC costs associated with growing and developing the aluminum can,
during the five-year agreement between the parties, while Alcan holds a 50% can
sheet supply position with ANC in the North American region.
In order to continue to grow and develop the aluminum can business, Alcan will
provide financial support [*] per pound on all can sheet pounds sold to ANC in
North America. This support shall be payable to ANC at the end of the first year
of the agreement and at the end of each year of the initial contract duration
thereafter, provided that:
o ANC has invested in the growth and development of the aluminum can
during the year in question such that the volume of ANC's business to
Alcan [*] will be increased as a direct result of the investment
during that year from what it otherwise would have been had the
investment by ANC not been made during that year (i.e., tooling for
new can sizes, expansion of a can plant to meet demand, new can
designs for marketing purposes, etc.).
o ANC continues to give Alcan a minimum of [*] of their can sheet (body
and end) business in North, Central and South America, unless Alcan
elects not to participate in any particular piece of business, which
would then reduce accordingly the [*] share in that region.
o The fabrication component being charged by Alcan to ANC is at market
or at 32(cent)/lb. on body sheet and 72(cent)/lb. on coated beverage
end sheet throughout the year in question, adjusted by cost increases
or by PPI, as described in Section 3.4d of the agreement.
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o The metal price component being charged to ANC is 70(cent)/lb. or
greater throughout the year.
o It is understood that this support would not apply to expenditures by
ANC which involve cost reduction, rationalization, etc., but would
apply to expenditures to grow and develop the can market in North,
Central and South America.
These conditions having been met, Alcan will support ANC's growth plans with
financial support [*] per pound on all can sheet sales in North America sold to
ANC by Alcan.
An example would be that on a [*] market share of [*] million pounds sold by
Alcan to ANC in North America ([*] billion ANC total volume x [*] to Alcan),
Alcan would pay, subject to the above conditions, [*] with proper documentation
to verify the Alcan market share as well as the amount and nature of the
investment support. It is understood between the parties that if any one of the
above conditions is not satisfied throughout the calendar year in question,
Alcan will not be required to pay the support during that year of the contract.
This agreement is to be held in strict confidence between the parties.
Sincerely,
/s/ R. Edward Daugherty
R. Edward Daugherty
Vice President - Sales
RED/kjd
CONFIDENTIAL
TREATMENT
REQUEST
Exhibit 10.2
ALUMINUM PURCHASE AGREEMENT
THIS AGREEMENT (the "Agreement") is made as of the 10th day of January, 1995, by
and between AMERICAN NATIONAL CAN CORPORATION, a Delaware corporation
(hereinafter referred to as "ANC") and ALUMINUM COMPANY OF AMERICA, a
Pennsylvania corporation (hereinafter referred to as "ALCOA").
W I T N E S S E T H:
WHEREAS, ANC is a world leader in the sale and manufacturing of aluminum
beverage cans;
WHEREAS, ALCOA is a world leader in the sale and manufacturing of
(aluminum can-stock) used in the manufacturing of beverage cans; and
WHEREAS, ANC and ALCOA desire to enter into an agreement for the long-term
supply of (aluminum can-stock) for use in the manufacturing of aluminum beverage
cans;
NOW, THEREFORE, in consideration of the mutual promises of each of the parties
set forth below and for other valuable considerations, which both ANC and ALCOA
acknowledge receiving from one another, the parties agree as follows:
ARTICLE 1: Definitions
1.1/Aluminum can-stock. Aluminum can-stock (hereinafter referred to as
"can-stock") shall mean body-stock, end-stock and tab-stock, collectively, that
comply with ANC's standards and specifications set forth in Exhibits A-1, A-2
and A-3.
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) 1/27
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1.2/Aluminum can body-stock. Aluminum can body-stock (hereinafter referred to as
"body-stock') shall mean coiled aluminum sheet stock for aluminum beverage can
bodies, conforming to ANC's standards and specifications attached hereto as
Exhibit A-1.
1.3/Aluminum can end-stock. Aluminum can end-stock (hereinafter referred to as
"end-stock") shall mean coiled aluminum sheet stock for aluminum beverage can
ends which has either been treated by ALCOA with a coating (hereinafter referred
to as "coated end-stock"), or has not been so treated by ALCOA (hereinafter
referred to as "bare end-stock"), and conforming to ANC's standards and
specifications attached hereto as Exhibit A-2.
1.4/Aluminum can tab stock. Aluminum can tab stock (hereinafter referred to as
"tab-stock") shall mean coiled aluminum sheet stock for aluminum beverage can
end tabs, conforming to ANC's standards and specifications attached hereto as
Exhibit A-3.
ANC may change its aluminum can-stock standards and specifications from time to
time, as set forth in Article 7, Section 7.1.
ARTICLE II: Term and termination
2.1/Term. This Agreement shall take effect as of March 1, 1995, and shall
continue in full force and effect through December 31, 1997.
2.2/Termination. This Agreement shall extend automatically from year to year
after expiration of the initial term, unless and until terminated by one of the
parties by giving notice to the other party at least twelve months prior to the
expiration of the initial term or any extended term.
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) 2/27
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ARTICLE III: Quantities
3.1/Quantity for year 1995. For the calendar year 1995, ANC agrees to purchase
and ALCOA agrees to supply a quantity of 140 million pounds, consisting of 75
million pounds of body-stock and 65 million pounds of end-stock.
3.2/Quantity for years 1996 and 1997. For calendar year 1996, ANC agrees to
purchase, and ALCOA agrees to supply, 25% of ANC's on-going total requirements
of aluminum can-stock in North America. For calendar year 1997, ANC agrees to
purchase, and ALCOA agrees to supply, 30% of ANC's on-going total requirements
of aluminum can-stock in North America. A letter from ANC to ALCOA, attached to
this contract as Exhibit F, will give indications about the potential order of
magnitude of the corresponding quantities.
3.3/On-going requirements. ANC's on-going total requirements of aluminum
can-stock in North America shall mean the aluminum can-stock requirements of the
current (as of January 1, 1994) beverage can manufacturing facilities of ANC in
the United States, Canada and Mexico, and the requirements of any new plant,
line or product to be eventually added by ANC to its manufacturing capacity by
any means (acquisition, construction, or other), provided that: (I) new plant
volume already covered by aluminum can-stock purchase commitments at the time of
the addition to ANC's facilities will be included only upon the earliest date
when such contracts expire or are terminated by ANC; (II) if another supplier
makes an offer to support new plant volume in consideration of an aluminum
purchase commitment from that new plant that would prevent ANC from acquiring
the above-referenced shares (25% in 1996 and 30% in 1997) of its additional
aluminum can-stock requirements from ALCOA, and ALCOA elects not to make a
comparable offer to ANC, then this new plant volume covered by the commitment
shall be included as part of ANC's total requirements under this section only
upon the earliest date when such commitment expires or is terminated by ANC. A
list of ANC's current beverage can manufacturing facilities in North America as
of January 1, 1994, is attached to this Agreement as Exhibit D.
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) 3/27
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3.4/Mix allocation. For years 1996 and 1997, the specific mix allocation between
body-stock, end-stock and tab-stock for each year will be as agreed upon by the
parties. A letter from ANC to ALCOA, attached to this contract as Exhibit F,
will give indications about the potential order of magnitude of the
corresponding quantities.
3.5/Additional quantities.
a/Nothing in this Agreement shall prevent, or be construed to prevent, ANC's
right to bid in the marketplace, for years 1996 and 1997, part or all of the
portion of ANC's on-going total requirements of aluminum can-stock in North
America, in excess of the commitments to ALCOA defined in article 3, paragraph
3.2 above. Nothing in this Agreement shall prevent, or be construed to prevent,
ALCOA from offering to supply those additional quantities.
b/If another supplier
of can-stock to ANC fails or is unable to supply ANC the quantities agreed to by
that supplier for a reason other than an ANC default, at ANC's request, ALCOA
will use its best commercial efforts to supply the other supplier's deficiency
on terms and conditions to be agreed upon. ANC shall give ALCOA as much advance
notice of such a circumstance as possible.
c/Until incorporated into the annual
contract volume by an amendment to this contract, the "additional quantities"
described in Article 5, Section 3.5-a and 3.5-b above shall be referred to as
Incremental Contract Volume.
ARTICLE IV: Tolling
4.1/General limitation of tolling. Any can-stock quantity already priced for
delivery during the next year with a ceiling metal component, a minimum-maximum
metal component, or a fixed price metal component established prior to November
1st cannot be tolled under the provisions of Article 4, Section 4.2 and 4.3
below.
4.2/Tolling of scrap. At its sole option, during the entire duration of this
agreement, ANC shall have the right to ask ALCOA to deliver the quantities set
forth in article 3 above, under a straight sale
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) 4/27
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arrangement, or a combination of both a straight sale and a scrap tolling
arrangements, with the quantity limitations set forth below. With the exception
of year 1995, ANC must notify ALCOA of its election before November 1st of the
preceding calendar year. Such election shall be made for an entire calendar
year, and cannot then be changed, unless an agreement to the contrary is reached
between the parties. For year 1995, ALCOA shall be given notice within ten (10)
days after execution of this Agreement.
ALCOA will accept shipments from ANC of Class I and Class III aluminum can-stock
scrap from ANC's North American facilities. Deliveries shall be made at ANC's
expense to Midwest locations designated by ALCOA and shall conform to ALCOA's
specifications. The specific volumes for each form are:
- -Class I scrap: up to 20% of ALCOA's body-stock shipments to ANC North American
facilities.
- -Class III scrap: up to 4% of ALCOA's body-stock shipments to ANC's North
American facilities.
4.3/Tolling of ingot. Provided that, at the date that the election is made, the
LME aluminum ingot future average price for the period of election is equal to
or greater than 80 ct./lb., at ANC's sole option, starting with year 1996, and
in addition to the tolling of scrap covered by Article 4, Section 4.1 above, ANC
shall have the right to ask ALCOA to deliver the quantities set forth in article
3 above, under a straight sale arrangement, or a combination of both a straight
sale and an ingot (P1020) tolling arrangement, with the quantity limitations set
forth below. ANC must notify ALCOA of its election before November 1st of the
preceding calendar year. Such election shall be made for an entire calendar
year, and cannot then be changed, unless an agreement to the contrary is reached
between the parties.
Deliveries of ingot (P1020) shall be made at ANC's expense to Midwest locations
designated by ALCOA and shall conform to ALCOA's specifications.
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The specific volumes of acceptable tolling under this Article 4, Section 4.2,
for each form of can-stock, are:
- -up to 30% of ALCOA's body-stock shipments to ANC North American facilities.
- -up to 75% of ALCOA's end-stock and tab-stock shipments to ANC's North American
facilities.
4.4/Delivery of metal units for tolling. [*] ALCOA shall deliver to ANC by the
end of each calendar month during the term a quantity of can-stock equal to, and
in return for, the quantity of metal units delivered to ALCOA for tolling at
least 30 days prior to the requested delivery date of the corresponding
can-stock. ALCOA shall weigh the railcars and/or trailers containing the metal
units received from ANC. The weight recorded by ALCOA shall be the weight
delivered to ALCOA unless a discrepancy occurs between ALCOA's and ANC's
recorded weights. Should such a discrepancy occur, the parties shall meet and
negotiate an agreeable resolution of the discrepancy. The scales used by ALCOA
shall be inspected and certified in accordance with applicable state law. Scale
tickets shall be kept by ALCOA and made available to ANC upon request. ALCOA
shall supply to ANC a monthly status report (format to be defined by ANC)
showing, by product class, the weight of metal units received by ALCOA from ANC
and of can-stock shipped to ANC by ALCOA. If ALCOA's receipt of metal units from
ANC exceeds the current month's receipt of can-stock by ANC, the balance of the
metal units must be tolled by ALCOA in the following month.
4.5/Bailment. Toll transactions contemplated by Article 4 shall be considered as
bailments involving the manipulation of the goods. ANC shall retain title to,
and risk of loss for, the metal units delivered to ALCOA for conversion into
can-stock pursuant to this Agreement. ALCOA shall exercise such care in regard
to the metal units as a reasonable careful person would exercise under like
circumstances and ALCOA shall insure such metal while it is in ALCOA's care,
custody and control. ALCOA shall assume liability for loss or damage of metal
units caused by its failure to exercise such care.
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) 6/27
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4.6/Commingling. ALCOA reserves the right to commingle metal units delivered by
ANC with any other metal units in ALCOA's possession, and, if so commingled, ANC
shall have an undivided interest therein. ALCOA further reserves the right to
substitute metal units in ALCOA's possession for those metal units delivered by
ANC, provided that the toll converted can-stock delivered by ALCOA to ANC is in
conformity with the appropriate specifications set forth in Exhibits A-1, A-2,
and A-3.
ARTICLE V: Pricing
5.1/Pricing conditions. Provisions of this article shall apply to both tolling
and straight sales.
Deliveries of can-stock by ALCOA shall be made F.O.B. destination within the
continental United States, as designated by ANC. Additional transportation cost
outside the continental United States shall be paid for by ANC. Title to and
risk of loss for can-stock shall pass to ANC upon delivery to ANC's plant. In
the case of tolling, ANC shall be responsible for the cost of transportation of
metal units to the designated ALCOA facility.
ANC shall pay for can-stock supplied and delivered under this Agreement by wire
transfer, [*]. Actual payments shall be disbursed by ANC on or before the
expiration of the payment periods for each type of can-stock determined in
accordance with the applicable provisions of this Agreement. Payment shall be
made to the address supplied to ANC by written notice from ALCOA.
All prices and fees covered in this Agreement will be for the reference
specifications set forth below:
body-stock 3xxx-H19 0.0114" x base width
coated end-stock (clear beverage) 5182-H19 0.0108" x base width
bare tab-stock 5042-H19 0.0110" x base width
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) 7/27
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5.2/Straight sale pricing mechanisms. At ANC's option, ANC may place all or any
portion of its annual contract straight sale priced contract volume using one or
more of the following four pricing mechanisms defined and delineated below:
-ceiling pricing,
-minimum-maximum pricing,
-fixed pricing,
-spot pricing.
For fixed pricing, ceiling and minimum-maximum pricing, prices for the metal
component, as well as any applicable risk premiums, shall be fixed for periods
of one (1) month increments, but in no event shorter than one month for any one
period. The distribution among the pricing mechanisms, and the choice of the
pricing period shall be entirely at ANC's option. Any annual contract volume not
priced by either a fixed, ceiling or minimum-maximum price by the last day of
the month two months prior to the scheduled month of delivery shall be priced by
the spot pricing mechanism. At ANC's option, ANC may at anytime, but effective
only starting after the current month, and for a maximum of twenty-four (24)
months after the current month, move from spot pricing to fixed, ceiling or
minimum-maximum pricing. However, once a fixed, ceiling or minimum-maximum price
is established, period, volume and price are firm, and ANC cannot switch between
these mechanisms, or to a spot price, or to tolling, for the corresponding
volumes.
5.3/Ceiling pricing. The ceiling price is the sum of a ceiling price risk
premium, a metal component and a conversion component. Payment of a ceiling
price risk premium entitles ANC to a price no greater than a maximum for the
specific volume of can-stock priced at a ceiling price.
a/Ceiling price risk premium. The ceiling price risk premium reflects the cost
of securing an option to purchase metal at a maximum future price for a
specified delivery period. The ceiling price risk premium is established at the
same time as the ceiling metal component.
b/Ceiling metal component, The ceiling metal component is the sum of
the LME's London Clearing House (LCH) aluminum high-grade futures contracts
price corresponding to the above mentioned option for the agreed future delivery
period, plus the applicable Midwest market delivered premium
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) 8/27
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at the time of order acceptance. The notification day and placement period are
as defined below in Article 5, Section 5.3-e.
c/Actual metal component price. The metal component price payable by ANC shall
be the lower of the ceiling metal component and the average Midwest spot price
for aluminum high-grade ingot for the month prior to delivery.
d/Conversion component. For each product (body-stock, end-stock, tab-stock), and
specification, the conversion component of the ceiling price shall be the lower
of (I) ALCOA's published conversion price at the time of shipment, or (II) the
competitive market conversion price. The competitive market conversion price
shall be the lower of (I) for delivery within the continental United States,
ALCOA's lowest weighted average conversion price charged to another customer of
ALCOA for delivery within continental United States, for the same specification
during the same period, and for delivery in Mexico or Canada, ALCOA's lowest
weighted average conversion price charged to another customer of ALCOA for
delivery respectively into Mexico or Canada, for the same specification during
the same period or: (II) the lowest weighted average conversion price for the
same specification during the same period, available to ANC from KAISER and/or
ALCAN, if those competitors are committed to, or are offering to supply,
individually at least 15% of ANC's North American requirements for the relevant
type of can stock.
e/Procedure for establishing a ceiling price. ANC shall advise ALCOA in writing
of the volume and delivery period for which the ceiling price will be
established [Example: on the first Tuesday of the second month of the second
quarter of year Y, at 4:00 p.m. EST, ANC advises ALCOA of their intention to
purchase 105 million pounds of body-stock using the ceiling price mechanism].
ALCOA will confirm in writing to ANC the details of the intended metal coverage
program, provided that the quantity to be hedged on any one day shall not exceed
40 million pounds in the aggregate for all pricing mechanisms, unless
specifically agreed upon by the parties. The notification day ends at 5:00pm
East Standard Time (EST) on the day ANC instructs ALCOA to fix the ceiling of
the metal component for the requested delivery period. In the event that ANC
places more than forty (40) million pounds of volume on any one day, in order to
establish the ceiling of the metal component price, ALCOA will use the weighted
average of the closing prices for the next "X" LME working
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) 9/27
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days (the placement period), plus the contangoes or backwardations applicable to
the future delivery period, where "X" is the total volume placed divided by
forty (40) million pounds, and rounded up to the whole number of days [Example:
ALCOA will indicate the ceiling premium expected for Wednesday (40 million
pounds), Thursday (40 million pounds), Friday (25 million pounds), immediately
following the notification Tuesday]. ANC will immediately instruct ALCOA whether
or not to implement the program. After completion, ALCOA will notify ANC as to
the actual metal component ceiling price, and the corresponding option premiums.
Option premiums will be invoiced immediately by ALCOA, and paid by ANC net 30
days.
5.4/Minimum-maximum pricing. The minimum-maximum price is the sum of a minimum-
maximum price risk premium, a metal component and a conversion component.
Payment of a minimum-maximum price risk premium entitles ANC to a price no
greater than a maximum and no lower than a minimum for the specific volume of
can-stock priced at a minimum-maximum price.
a/Minimum-maximum price risk premium. The minimum-maximum price risk premium
reflects the cost of securing an option to purchase metal at a maximum future
price for the agreed future delivery period, less the revenue of selling an
option to sell metal at a minimum future price for the agreed future delivery
period. The minimum-maximum price risk premium is established at the same time
as the minimum-maximum metal components.
b/Minimum-maximum metal components. The minimum-maximum metal components are the
LME's London Clearing House (LCH) aluminum high-grade futures contracts prices
corresponding to the above mentioned options for the agreed future delivery
period, plus the applicable Midwest market delivered premium at the time of
order acceptance. The notification day and placement period are as defined below
in Article 5, Section 5.4-e.
c/Actual metal component. The metal component price payable by ANC shall be the
average Midwest spot price for aluminum high-grade ingot for the month prior to
delivery, provided that if this average is greater than the maximum metal
component, the actual metal component shall be equal to this maximum metal
component, and provided that if this average is lower than the minimum metal
component, the actual metal component shall be equal to this minimum metal
component.
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d/Conversion component. For each product (body-stock, end-stock, tab-stock), and
specification, the conversion component of the minimum-maximum price shall be
the lower of (I) ALCOA's published conversion price at the time of shipment, or
(II) the competitive market conversion price. The competitive market conversion
price shall be the lower of (I) for delivery within the continental United
States, ALCOA's lowest weighted average conversion price charged to another
customer of ALCOA for delivery within continental United States, for the same
specification during the same period, and for delivery in Mexico or Canada,
ALCOA's lowest weighted average conversion price charged to another customer of
ALCOA for delivery respectively into Mexico or Canada, for the same
specification during the same period or: (II) the lowest weighted average
conversion price for the same specification during the same period, available to
ANC from KAISER and/or ALCAN, if those competitors are committed to, or are
offering to supply, individually at least 15% of ANC's North American
requirements for the relevant type of can stock.
e/Procedure for establishing a minimum-maximum price. ANC shall advise ALCOA in
writing of the volume and delivery period for which the minimum-maximum price
will be established [Example: on the first Tuesday of the second month of the
second quarter of year Y, at 4:00 p.m. EST, ANC advises ALCOA of their intention
to purchase 105 million pounds of body-stock using the minimum-maximum price
mechanism]. ALCOA will confirm in writing to ANC the details of the intended
metal coverage program, provided that the quantity to be hedged on any one day
shall not exceed 40 million pounds, in the aggregate for all pricing mechanisms,
unless specifically agreed upon by the parties. The notification day ends at
5:00pm East Standard Time (EST) on the day ANC instructs ALCOA to fix the
minimum and maximum of the metal component for the requested delivery period. In
the event that ANC places more than forty (40) million pounds of volume on any
one day, in order to establish the ceiling of the metal component price, ALCOA
will use the weighted average of the closing prices for the next "X" LME working
days (the placement period), plus the contangoes or backwardations applicable to
the future delivery periods, where "X" is the total volume placed divided by
forty (40) million pounds, and rounded up to the whole number of days [Example:
ALCOA will indicate the minimum/maximum premium expected for Wednesday (40
million pounds), Thursday (40 million pounds), Friday (25 million pounds),
immediately following the notification Tuesday]. ANC
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will immediately instruct ALCOA whether or not to implement the program. After
completion, ALCOA will notify ANC as to the actual metal component
minimum-maximum price, and the corresponding option premiums. Option premiums
will be invoiced immediately by ALCOA, and paid by ANC net 30 days.
5.5/Fixed pricing. The fixed price is the sum of a metal component fixed price
and a conversion component.
a/Metal component fixed price. The metal component fixed price is the LME's
London Clearing House (LCH) aluminum high-grade futures contracts closing price
for the agreed future delivery period, plus the applicable Midwest market
delivered premium at the time of order acceptance. The notification day and
placement period are as defined below in Article 5, Section 5.5-d.
b/Actual metal component price. The metal component price payable by ANC is
equal to the metal component fixed price.
c/Conversion component. For each product (body-stock, end-stock, tab-stock), and
specification, the conversion component of the fixed price shall be the lower of
(I) ALCOA's published conversion price at the time of shipment, or (II) the
competitive market conversion price. The competitive market conversion price
shall be the lower of (I) for delivery within the continental United States,
ALCOA's lowest weighted average conversion price charged to another customer of
ALCOA for delivery within continental United States, for the same specification
during the same period, and for delivery in Mexico or Canada, ALCOA's lowest
weighted average conversion price charged to another customer of ALCOA for
delivery respectively into Mexico or Canada, for the same specification during
the same period or: (II) the lowest weighted average conversion price for the
same specification during the same period, available to ANC from KAISER and/or
ALCAN, if those competitors are committed to, or are offering to supply,
individually at least 15% of ANC's North American requirements for the relevant
type of can stock.
d/Procedure for establishing a fixed price. ANC shall advise ALCOA in writing of
the volume and delivery period for which the fixed price will be established.
ALCOA will confirm in writing to ANC the details of the intended metal coverage
program, provided that the quantity to be fixed on any one day shall not exceed
40 million pounds, in aggregate for all pricing mechanisms, unless specifically
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agreed upon by the parties. The notification day ends at 5:00pm East Standard
Time on the day ANC instructs ALCOA to fix the price of the metal component for
the requested delivery period. In the event that ANC places more than forty (40)
million pounds of volume on any one day, in order to establish the metal
component price, ALCOA will use the average of the LME cash settlement prices
for the next "X" LME working days (the placement period), plus the contangoes or
backwardations applicable to the future delivery periods, where "X" is the total
volume placed divided by forty (40) million pounds, and rounded up to the whole
number of days. ANC will immediately instruct ALCOA whether or not to implement
the program. After completion, ALCOA will notify ANC as to the actual metal
component fixed price.
5.6/Spot pricing. The spot price is the sum of the metal component price and the
conversion price.
a/Metal component. The spot price metal component is the average of the LME's
London Clearing House (LCH) aluminum high-grade contracts closing prices for the
month prior to delivery, plus the average applicable Midwest market delivered
premium for the same month.
b/Conversion component.
For each product (body-stock, end-stock, tab-stock), and specification, the
conversion component of the spot price shall be the lower of (I) ALCOA's
published conversion price at the time of shipment, or (II) the competitive
market conversion price. The competitive market conversion price shall be the
lower of (I) for delivery within the continental United States, ALCOA's lowest
weighted average conversion price charged to another customer of ALCOA for
delivery within continental United States, for the same specification during the
same period, and for delivery in Mexico or Canada, ALCOA's lowest weighted
average conversion price charged to another customer of ALCOA for delivery
respectively into Mexico or Canada, for the same specification during the same
period or: (II) the lowest weighted average conversion price for the same
specification during the same period, available to ANC from KAISER and/or ALCAN,
if those competitors are committed to, or are offering to supply, individually
at least 15% of ANC's North American requirements for the relevant type of can
stock.
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5.7/Conversion component of tolling prices.
The tolling fee for Class I scrap is established for year 1995 at [*] above the
body-stock conversion price defined in Article 5, Section 5.3-d above. The
tolling fee for Class III scrap is established for year 1995 at [*] above the
body-stock conversion price defined in Article 5, Section 5.3-d above. Both
tolling fees are subject to yearly adjustment by multiplication by the ratio of
the Producer Price Index of September of the preceding year by the Producer
Price Index of September 1994 [Example: if the PPI index of September 1994 is
324, and the PPI index of September 1995 is 337, and provided that the
body-stock conversion fee is [*], the maximum tolling fee for Class I scrap for
year 1996 shall be [*] x (337/324) = [*], but may not be higher than the
competitive tolling market fee. The competitive tolling market fee shall be the
lower of (I) for delivery within the continental United States, ALCOA's lowest
weighted average tolling fee charged by ALCOA to another customer for delivery
within the continental United States, for the same specifications during the
same period, and for delivery in Mexico or Canada, ALCOA's lowest weighted
average tolling fee charged by ALCOA to another customer for delivery
respectively within Mexico or Canada, or: (II) the weighted average tolling fee
for the same specifications during the same period, available to ANC from KAISER
and/or ALCAN if those competitors are committed to, or are offering to supply,
individually, at least 15% of ANC's North American requirements for the relevant
product.
5.8/Adjustment of the conversion component to meet competition.
a/Should ANC at any time provide ALCOA with evidence that ANC has a bona fide
offer from KAISER and/or ALCAN with a conversion price and/or tolling fees more
favorable than those ANC gets from ALCOA, ALCOA will adjust its relevant
conversion prices and/or tolling fees to the level of the competitive offer at
the effective date of such offer, subject to the provisions of Article 5,
Sections 5.8-c and 5.8-d.
b/Once the price for can-stock has been established, this price shall be
adjusted only for changes in conversion prices or tolling fees pursuant to
Article 5, Section 5.8-a above, or to reflect the difference in specification of
an order to the base specification. The price shall not be adjusted for any
changes
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) 14/27
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in metal, contango, backwardation, ceiling risk premium, minimum-maximum
risk premium or delivery premiums during the period.
c/Should ANC at any time provide ALCOA with evidence that ANC has a bona fide
offer from KAISER and/or ALCAN to sell can-stock in the United States, Mexico or
Canada on a straight sale pricing more favorable than the pricing being charged
by ALCOA hereunder, and the conversion price is not explicitly stated, then the
competitive conversion price for that country will be derived by subtracting the
Midwest price for the metal for the relevant period of the offer on the date of
the competitive offer from the competitor's straight sale price. If ALCOA elects
to meet this competitive situation, at ALCOA's option, ALCOA may meet either the
outright sales price, or the derived matched conversion price.
Because of the volatility of the metal market, both parties agree to act on a
timely basis to ensure that all competitive price comparisons are
contemporaneous. ALCOA will advise ANC within thirty (30) working days of the
terms of any sale made by ALCOA to any customer for delivery in continental
United States, Mexico and Canada, as appropriate, that reflects a conversion
price lower than the last price offer made by ALCOA to ANC, and will adjust
ANC's price to the date of the relevant sale. ANC will advise ALCOA within five
(5) working days that ANC has a bona fide offer from ALCAN or KAISER
individually to sell at least 15% of ANC's relevant can-stock product
requirements on either a total pricing or a conversion price basis more
favorable than the price charged by ALCOA, and ANC will give ALCOA ten (10)
working days to match, at ALCOA's option, either the conversion price or the
total straight sale price. If ANC doesn't receive ALCOA's agreement to match the
competitive offer within the ten (10) working days period, then ANC shall be
entitled, without any liability beyond the metal component price liability
described in Article 5, Section 5.10 below, to purchase the quantity of
can-stock offered by the other supplier with a corresponding reduction in ANC's
committed volume to ALCOA.
d/For competitive straight sale and/or conversion price offers which ALCOA is
required to meet, or bring to ANC, any of the following price arrangements shall
be excluded from consideration in determining the value of the offer:
- -unique systems savings programs,
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) 15/27
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- -specific promotional prices or promotional tolling fees,
- -spot pricing or toll fees for incremental business,
- -annual or multi-year pricing based on or tolling fees derived from forward
metal prices or hedges,
- -multi-year pricing or tolling fees arrangements made prior to the execution of
this contract
- -any special discounts to ANC off "the best or lowest market price", including
any discount offered off the ALCOA price list by any reliable supplier to ANC
for a fixed long-term volume. In the event ANC's competitive price offer is
below ALCOA's price by more than $0.005 per pound, at ALCOA's request, ANC will
confirm that the offer does not contain any of the excluded arrangements set
forth above in this Article 5, Section 5.8-d.
5.9/Liquidation of metal positions. After ANC and ALCOA have agreed upon a
contract volume for a period, and if for any reason, permitted by this Agreement
or by ALCOA, any amount of that commitment is not purchased by ANC, ALCOA shall,
with the agreement of both parties, either liquidate any metal future position
relating to this volume at ANC's sole expense, or apply such metal position
against the next available scheduled shipment volume until all such metal is
consumed. In the event ALCOA liquidates any futures or option positions, ANC
shall forfeit any prepaid fees and shall be obligated to pay any reasonable
expenses incurred in the liquidation.
5.10/Change in market conditions. If, during the life of this Agreement, the
contractual price mechanisms described hereinabove no longer reflect the
announced ALCOA price mechanisms, the price mechanism available to ANC from
ALCAN or KAISER, or the price mechanism currently being offered to other ALCOA's
customers by ALCOA, ANC and ALCOA agree to meet and discuss these changes and
their impact on this Agreement, with the goal not to disadvantage either party.
5.11/lnvoicing and credit procedures. For all pricing mechanisms, the invoice
price is the sum of the actual metal component defined in Article 5, Sections
5.3-c, 5.4-c, 5.5-c, and 5.6-c, plus the published ALCOA conversion revenue. In
the event that during any shipment month, an agreed upon conversion price
competitive situation exists, then ALCOA will issue to ANC a credit for the
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) 16/27
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difference between the published conversion price, and the competitive
conversion price during the month following shipment. If appropriate, the
parties may agree on more specific procedures for a defined period of time.
ARTICLE VI: Scheduling.
6.1/One line-one mill. The parties agree that, as far as practically possible,
they will dedicate specific entire lines (ANC) to specific mills (ALCOA), and
specific mills (ALCOA) to specific entire lines (ANC). The list of lines to be
serviced by ALCOA under this Article 6, Section 6.1, in 1995, is set forth in
Exhibit B. The list of lines to be serviced by ALCOA under this Article 6,
Section 6.1, for subsequent years, will be agreed upon each year by the parties.
6.2/Annual forecasts. As soon as practicable and for the first time within two
(2) weeks after the effective date of this Agreement, and thereafter by November
1 of each subsequent year, ANC shall provide ALCOA with a schedule showing ANC's
annual estimates for purchase of each type of can-stock for the following year
of the Agreement.
6.3/Monthly commitments. ANC will use its best commercial efforts to schedule
and release in equal monthly shipments, with seasonality not to exceed plus or
minus 5%. Each calendar month (M), ANC will provide ALCOA with an estimate of
its requirements by type of can-stock and by delivery location for months M+2
and M+3. The estimate for month M+2 shall be considered as a firm commitment for
ALCOA to ship and for ANC to take delivery that can be modified only by
agreement between the parties. [Example: by the end of June, ANO shall give
ALCOA an estimate of can-stock delivery for the months of August (M+2) and
September (M+3). August volume will be firm delivery schedule, while September
shall still be considered an estimate.]
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) 17/27
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ARTICLE VII: Quality
7.1/Specifications. Specifications for can-stock to be delivered to ANC are set
forth in Exhibits A- 1, A-2, and A-3. ANC may at any time change its
specifications for any type of can-stock provided ALCOA does not object in
writing to ANC, with a detailed explanation of the reasons for the objection,
within thirty (30) days of ANC's notification to ALCOA of the requested new
specifications. ALCOA may not object if ANC's specifications are within
specifications generally available to other aluminum container manufacturers
from ALCOA at the time of the change. A specification change shall be effective
for orders to be delivered sixty (60) days after the date of such change.
Can-stock covered by this Agreement shall meet ANC's specifications and
standards set forth in Exhibits A-1, A-2, and A-3, as modified from time to time
hereafter in accordance with this Article 7, Section 7.1.
7.2/Rejections. Aluminum can-stock shall be subject to rejection by ANC if: (1)
it fails to meet ANC's specifications and standards, or (2) it fails to run in
comparably equipped ANC's plants in accordance with the standards typically
applied by ANC to its other can-stock suppliers at that or other plants, as more
generally described in Exhibit E. ALCOA and ANC shall work together in good
faith to determine whether the rejection was the fault of ALCOA or ANC, and, if
determined to be the fault of ALCOA, to agree upon the appropriate disposition
of the rejected material. In resolving the issues of responsibility and
disposition, the parties shall utilize the customs and procedures currently
utilized between them. Should ANC reject aluminum can-stock supplied by ALCOA
because of ALCOA's failure as described above, ANC shall, as agreed to by the
parties, either receive replacement aluminum can-stock of an equivalent type and
for the same amount of metal units, or a cash refund (or credit) in the full
amount of the purchase price or toll fee of the rejected can-stock. If ANC
receives a refund or a credit, the volume of rejected can-stock, whether
purchased on a straight sale or tolling basis, shall be at ANC's sole option
credited against ANC's
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) 18/27
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volume commitment hereunder. At ALCOA's option, ANC will either return such
rejected aluminum can-stock to ALCOA, or ALCOA shall deduct the scrap value of
such can-stock received by ANC. If rejected can-stock was acquired on a toll
basis, and ANC receives a refund or credit, the parties shall also agree upon an
appropriate adjustment to such refund or credit to reflect the value of the
original scrap. ALCOA shall, on a case by case basis, give consideration to
reimbursing ANC for (1) ANC's reasonable direct cost associated with the
processing by ANC of defective material in accordance with practices and
procedures currently in place between the parties, (2) if relevant, ANC's
replacement of defective and/or rejected material with comparable substitute
material from another qualified supplier.
Attached hereto as Exhibit E is the procedure under which ALCOA may be
disqualified as a supplier of aluminum to ANC as a result of ALCOA's supply of
material which does not meet ANC's specifications and standards. Should ALCOA be
disqualified at any plant location pursuant to the attached procedure, ALCOA
will, within a three-month period after such disqualification, be given the
opportunity to re-qualify through ANC's normal re-qualification procedure
provided that ALCOA has given reasonable assurances to ANC that the quality
problem that gave rise to ALCOA's disqualification has been resolved. In such
event, ANC will be relieved from the obligation to purchase the quantity of
metal that would normally have been purchased from ALCOA during the period of
disqualification (such quantity of metal being defined as the percentage of the
annual volume for that year that the period of disqualification bears to one
year).
ARTICLE VIII: Warranty
8.1/Warranty. ALCOA warrants that the can-stock supplied hereunder will conform
to ANC's standards and specifications set forth in Exhibits A-1, A-2, and A-3,
as modified from time to time hereafter as provided in Article 7, Section 7.1,
that it will convey good title thereto, and that such can-stock will be
delivered from any lawful security interest or any other lien or encumbrance.
ALCOA makes no warranty that the can-stock shall be merchantable or fit for any
particular purpose.
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ALCOA makes no warranty, express or implied, except such as is expressly set
forth herein. ALCOA shall not be liable to ANC for any incidental or
consequential damage from any breach of this Agreement.
ARTICLE IX: Force Majeure. If the full or partial performance of this Agreement
by either party hereto (other than the payment of money due hereunder) is
delayed, interrupted, or prevented by reason of any strike, labor difficulty,
lockout, fire, explosion, fight, mobilization, war (declared or undeclared),
hostilities, riots, rebellion, revolution, blockade, act of any government or
agency or subdivision thereof, acts of public enemies, or other acts of God or
any other cause, whether or not of the nature or character specifically
enumerated above, which is beyond the reasonable control of such party, then:
(a) such party shall give notice to the other of the existence of the Force
Majeure event and the impact of the event on its North American facilities;
(b) such party shall be excused from the performance of this Agreement (other
than the payment of monies due hereunder) while and to the extent that such
party is delayed, interrupted or prevented from so performing by one or more of
such causes; and
(c) the performance of this Agreement shall be resumed as soon as practicable
after such disability is removed.
If a party is only partially disabled by an event of force Majeure, the disabled
party's obligations shall be partially reduced by the amount of the
proportionate effect of the disabling event on all of that party's North
American facilities.
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) 20/27
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ARTICLE X: Default
10.1/Unexcused failure to supply. Unless otherwise excused due to Force Majeure,
if ALCOA fails to supply can-stock to ANC in accordance with the terms of an
acknowledged order, and, as a result of this failure, ALCOA either misses a
delivery or delivers non-conforming can-stock to ANC, ANC shall notify ALCOA
within ten (10) business days of this failure. Upon receipt of this notice,
ALCOA and ANC shall meet and discuss the prompt replacement shipment of
can-stock meeting the specification from ALCOA's facilities. In the event that
the parties cannot work out satisfactory arrangements for replacement can-stock,
the parties shall discuss arrangements for substitute can-stock from third
parties if necessary to avoid production interruptions of ANC's facilities. The
replacement of can-stock by ALCOA or substitute of can-stock from third parties
shall constitute ANC's exclusive remedy for ALCOA's un-excused failure to supply
can-stock pursuant to the terms of an acknowledged order. The non-conforming
can-stock shall then be returned to ALCOA at ALCOA's cost and expense.
10.2/Other default. Any other material failure of either party to perform or
observe its obligations under this Agreement shall be a default of this
Agreement. Unless this default is excused by Force Majeure or diligent action is
taken to remedy this failure within thirty (30) days after notice by the
non-defaulting party to the defaulting party specifying the default, then the
non-defaulting party shall have such remedy or remedies as are provided by
statute, or by law, equity or in bankruptcy or insolvency proceedings.
10.3/Effect on parties. Subject to and without limitation of paragraph 10.4
below, in the event of such a termination:
(a) ALCOA shall return to ANC any property belonging to ANC at ALCOA's
manufacturing facilities; the cost of such return shall be the responsibility of
ALCOA in the event of an ALCOA default and ANC in the event of an ANC default;
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) 21/27
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(b) The parties shall pay one another any amounts that may be due and unpaid
within thirty (30) days after any such termination.
10.4/No prejudice. Except as otherwise provided in this Article 10, termination
of this Agreement under the preceding paragraphs shall be without prejudice to
any right or remedy available to either party under the provisions of this
Agreement, or any law, statute or regulation. Upon termination of this Agreement
by either of the parties, any payment to be made under this Agreement shall
become due immediately.
ARTICLE XI: Miscellaneous
11.1/Integration and Modification. This Agreement forms the entire agreement
between the parties as to the subject matter of this Agreement, and all prior
agreements (including without limitation the Supply Agreement dated June 1,
1990), commitments, representations, writings, and discussions are merged into
and superseded by this Agreement. This Agreement may not be released,
discharged, changed, or modified in any manner except by an instrument in
writing signed by a duly authorized officer or representative of each of the
parties.
11.2/Purchase and sales forms. No printed terms or conditions appearing on any
sales acknowledgment of ALCOA or shipment release or purchase order forms of ANC
shall govern the purchase hereunder, and the terms and conditions of this
Agreement shall be controlling.
11.3/Waivers. The failure of either party hereto to enforce at any time any of
the provisions of this Agreement shall in no way be construed to be a waiver of
such provisions nor in any way to affect the validity of this Agreement or any
part thereof, nor the right of any party thereafter to enforce each and every
such provision. No waiver of any breach of this Agreement shall be held to be a
waiver of any other or subsequent breach.
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) 22/27
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11.4/Assignment and delegation. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and assigns.
Neither party may assign this Agreement or any right arising hereunder, nor
delegate any duty or obligation arising hereunder, without the prior written
consent of the other party.
11.5/Notices. All notices and other communications provided for hereunder shall
be in writing and given by registered or certified mail, or responsible
overnight courier, addressed as provided below, with acknowledgment of receipt
requested, or by telex, telegram, cable or facsimile, sent or delivered to the
addressee below, or, as to each party, at such addresses as shall be designated
by such party hereafter in a written notice to the other. All such notices and
communications shall be effective when hand delivered or, in the case of notice
by facsimile, on the day of receipt if received prior to 5:00p.m. EST on a
working day or on the next working day if received after 5:00p.m. EST on a
working day, provided that the sender's copy includes the appropriate
acknowledgment of receipt by the receiver's facsimile machine.
If to ALCOA: Aluminum Company of America If to ANC: American National Can Co.
Rigid Packaging Division 8770 West Bryn Mawr
1100 Riverview Tower Chicago, Illinois 60631
900 South Gay Street Attention: Corporate
KNOXVILLE, TN 37902 Secretary
Attention: President
11.6/Audits. ANC shall be entitled to make physical inventory audits of its
property in ALCOA's possession at any time, upon reasonable notice, during
ALCOA's normal business hours. In addition, ANC may perform reasonable quality
audits of ALCOA's systems, procedures and processes to assure that can-stock
produced hereunder meets the specifications and other requirements contained in
this Agreement.
11.7/Confidentiality. ALCOA shall hold in confidence during and for a period of
10 years after the term of this Agreement, shall not disclose to anyone other
than employees of ALCOA who have a need to know, and shall use only for ANC's
benefit, any confidential technical information (including,
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) 23/27
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without limitation, specifications, drawings, designs, samples and models)
furnished by ANC in connection with this Agreement; provided that no document
furnished to ALCOA by ANC shall be deemed to be confidential unless it is marked
"CONFIDENTIAL" or the equivalent when furnished.
ANC shall hold in confidence during and for a period of 10 years after the term
of this Agreement, shall not disclose to anyone other than employees of ANC who
have a need to know, and shall use only for ALCOA's benefit, any confidential
technical information (including, without limitation, specifications, drawings,
designs, samples and models) furnished by ALCOA in connection with this
Agreement; provided that no document furnished to ANC by ALCOA shall be deemed
to be confidential unless it is marked "CONFIDENTIAL", "STRICTLY PRIVATE", or
the equivalent when furnished.
Neither party shall have liability for disclosures of information otherwise
prohibited under this Section if the information:
(a) was already in the public domain when disclosed; or
(b) was obtained lawfully from a third party not under a confidentiality
obligation to either ANC or ALCOA; or
(c) was disclosed in accordance with requirements imposed by any applicable law,
rule or regulation or by any court or regulatory agency with jurisdiction over
the disclosing party, provided that the disclosing party reasonably assisted and
cooperated with the other party in attempting to preserve the confidentiality of
the information involved, including without limitation
(I) immediately notifying the other party upon learning of any such
disclosure requirement and
(II) not disclosing the information earlier than required.
For purposes of this Agreement, subject to the exceptions set forth in the
preceding sentence, information regarding a party's pricing, production, raw
materials, labor and other costs, suppliers, customers and technology, whether
or not labeled or described by such party as "confidential," shall
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) 24/27
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be considered confidential information and subject to this Section in addition
to any other information identified from time to time by such party as
"confidential."
(d) is independently developed by the recipient.
11.8/Headings. The captions, titles and headings described in this Agreement
have been inserted as a matter of convenience and reference only and do not
limit or describe the scope of this Agreement or otherwise control or affect the
interpretation of this Agreement.
11.9/Applicable Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Illinois.
11.10/Severability. In the event any provision of this Agreement (whether a
paragraph, sentence or a portion thereof) is determined by a court of competent
jurisdiction to be null and void or unenforceable, such provision shall be
deemed to be severed, and the remaining provisions of this Agreement shall
remain in full force and effect.
11.11/Independence of Parties, further assurances and certain representations.
(a) The parties acknowledge that the contractual relationship established
hereunder shall be one of independent contractors. ANC and ALCOA shall not, by
execution of this Agreement, be deemed partners, joint venturers or agents for
one another for any purpose whatsoever.
(b) Each party warrants to the other that:
(I) it has the corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby, and
(II) this Agreement has been duly executed and delivered on its behalf.
(c) Each of the parties agrees to furnish to the other such additional documents
and instruments as shall be reasonably requested to effectuate the purposes of
this Agreement.
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11.12/Legislative Increases. During the term of this Agreement, federal, state
or local legislative changes could have a material impact on ALCOA's costs of
supplying can-stock to ANC. All prices and fees are subject to increase by ALCOA
to reflect these cost increases, provided and only to the extent that these
costs increases are also reflected in the prices of can-stock available in the
market, and subject to the provisions of Article 5, Sections 5.3-d, 5.4-d,
5.5-d, 5.6-d, 5.7 and 5.8 above. The parties shall meet and discuss the impact
of such changes and the actions to be taken to minimize the cost of compliance.
11.13/Hardship. If at any time or from time to time during the term of this
Agreement, without default of the party concerned, an intervening event or
change of circumstances occurs which is beyond the said party's control, when
acting reasonably and prudently, such that the consequences and effects of which
create a set of circumstances which are fundamentally different from what was
contemplated by the parties at the time of entering into this Agreement. Upon
the occurrence of such an event, the party claiming that it is placed in such a
position may, by notice, request the other to meet to determine if said
occurrence has happened and, if so, agree upon what, if any, adjustment in the
price then in force under this Agreement and/or other terms and conditions
hereof is justified under the circumstances, in fairness to the parties, to
alleviate the consequences and effects of said occurrence.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first written above.
WITNESS ALUMINUM COMPANY OF AMERICA
/s/ Illegible By: /s/George Bergerson
WITNESS AMERICAN NATIONAL CAN COMPANY
/s/Illegible By: /s/Edward Lapekas
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) 26/27
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List of exhibits identified in this Agreement
Exhibit A-1 - ANC standards and specifications for body-stock.
Exhibit A-2 - ANC standards and specifications for end-stock.
Exhibit A-3 - ANC standards and specifications for tab-stock.
Exhibit B - Ship to locations for year 1995.
Exhibit C - ALCOA's specifications for each type of metal unit used for toll
conversion into can-stock.
Exhibit D - List of ANC's current beverage can manufacturing facilities in North
America as of January 1st, 1994.
Exhibit E - Disqualification procedure.
Exhibit F - Letter from ANC to ALCOA giving certain indications in relationship
with potential volumes and mix allocation for years 1996 and 1997.
<PAGE>
Exhibits A-1, A-2, and A-3: ANC standards and specifications
Exhibit A-1 - ANC standards and specifications for body-stock (attached).
Exhibit A-2 - ANC standards and specifications for end-stock (attached).
Exhibit A-3 - ANC standards and specifications for tab-stock (attached).
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
Exhibit A-1
ANC standards and specifications for body-stock
Exhibit A-1-a: 3004 Alloy H19 Temper (1 page, attached)
Exhibit A-1-b: 3104 Alloy Hl9 Temper (1 page, attached)
Exhibit A-1-c: 3204 Alloy Hl9 Temper (1 page, attached)
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
NUMBER: RD/S-88-005A Page 1 of 1
DATE: 09/23/88
REVISED: 12/07/93
EXHIBIT A-1-a
AMERICAN NATIONAL CAN
CORPORATE R&D
MATERIALS SPECIFICATION SHEET
Final After Signature Approvals
================================================================================
Material Identification (Name, Code, Mfgr. Etc.)
Aluminum: 3004 Alloy H19 Temper. Application: Drawn and Ironed Beverage
Can Bodies.
================================================================================
Primary (Fixed) Specifications:
1. Tolerances:
a) Gauge: +/-0.0002"
b) Coil Width: -0.000", +0.125"
d) Camber: 0.015" maximum in 30", 1/4" maximum
in 10 ft.
2. Mechanical Properties:
a) Yield Strength: 42.5 ksi maximum as received and 36.0
ksi minimum after 400o F
bake for 10 minutes.
b) Elongation in 2": 3% minimum as received
3. Earing: 2.5% maximum at a 42% draw
reduction using a controlled gap hold
down to minimize pinching of ears.
4. Surface Roughness: 15-25 microinches (AA).
5. Chemical Composition (% maximum unless shown otherwise): 0.30 Si, 0.70 Fe,
0.25 Cu, 1.0-1.5 Mn, 0.8- 1.3 Mg, 0.25 Zn, 0.0001 Be, others 0.05 each and
0.15 total, balance A1.
================================================================================
Secondary (Variable) Specifications:
1. Coils are to be relubed with DTI 5600 PL at 25+/-10 mg/ft.2/side. Forest
Park requires Nalco 6468AB at 25+/-10 mg/ft2/side. Other relubes may only
be supplied when approved by Development and/or Materials Process
Engineering.
================================================================================
Remarks:
1. Presence of oxides, inclusions, laminations, slivers, rolled-over
scratches, rolled-in dirt, abrasions, pinholes, water stain corrosion and
stains may be cause for rejection.
2. Material with inadequate formability for drawing and ironing is subject to
rejection.
3. Flatness/shape inadequate to permit feeding in the cupper press is subject
to rejection.
4. ASTM B557 and E8 apply.
================================================================================
Approvals (As Applicable)
================================================================================
Development CREG MFOP MTMG
================================================================================
By /s/Illegible By /s/Illegible By /s/Illegible By /s/Illegible
Date 12/14/93 Date 2/9/94 Date 1/7/94 Date 12/14/93
================================================================================
================================================================================
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
NUMBER: RD/S-88-005A Page 1 of 1
DATE: 09/23/88
REVISED: 12/07/93
EXHIBIT A-1-b
AMERICAN NATIONAL CAN
CORPORATE R&D
MATERIALS SPECIFICATION SHEET
Final After Signature Approvals
================================================================================
Material Identification (Name, Code, Mfgr. Etc.)
Aluminum: 3004 Alloy H19 Temper. Application: Drawn and Ironed Beverage
Can Bodies.
================================================================================
Primary (Fixed) Specifications:
1. Tolerances:
a) Gauge: +/-0.0002"
b) Coil Width: -0.000", +0.125"
d) Camber: 0.015" maximum in 30", 1/4" maximum
in 10 ft.
2. Mechanical Properties:
a) Yield Strength: 42.5 ksi maximum as received and 36.0
ksi minimum after 400o F
bake for 10 minutes.
b) Elongation in 2": 3% minimum as received
3. Earing: 2.5% maximum at a 42% draw
reduction using a controlled gap hold
down to minimize pinching of ears.
4. Surface Roughness: 15-25 microinches (AA).
5. Chemical Composition (% maximum unless shown otherwise): 0.60 Si, 0.80 Fe,
0.05-0.25 Cu, 0.8-1.4 Mn, 1.3-1.5 Mg, 0.25 Zn, 0.10 Ti, 0.0001 Be, others
0.05 each and 0.15 total, balance A1.
================================================================================
Secondary (Variable) Specifications:
1. Coils are to be relubed with DTI 5600 PL at 25+/-10 mg/ft.2/side. Forest
Park requires Nalco 6468AB at 25+/-10 mg/ft2/side. Other relubes may only
be supplied when approved by Development and/or Materials Process
Engineering.
================================================================================
Remarks:
1. Presence of oxides, inclusions, laminations, slivers, rolled-over
scratches, rolled-in dirt, abrasions, pinholes, water stain corrosion and
stains may be cause for rejection.
2. Material with inadequate formability for drawing and ironing is subject to
rejection.
3. Flatness/shape inadequate to permit feeding in the cupper press is subject
to rejection.
4. ASTM B557 and E8 apply.
================================================================================
Approvals (As Applicable)
================================================================================
Development CREG MFOP MTMG
================================================================================
By /s/Illegible By /s/Illegible By /s/Illegible By /s/Illegible
Date 12/14/93 Date 2/9/94 Date 1/7/94 Date 12/14/93
================================================================================
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
NUMBER: RD/S-88-005A Page 1 of 1
DATE: 01/02/93
REVISED: 12/07/93
EXHIBIT A-1-c
AMERICAN NATIONAL CAN
CORPORATE R&D
MATERIALS SPECIFICATION SHEET
Final After Signature Approvals
================================================================================
Material Identification (Name, Code, Mfgr. Etc.)
Aluminum: 3004 Alloy H19 Temper. Application: Drawn and Ironed Beverage
Can Bodies.
================================================================================
Primary (Fixed) Specifications:
1. Tolerances:
a) Gauge: +/-0.0002"
b) Coil Width: -0.000", +0.125"
d) Camber: 0.015" maximum in 30", 1/4" maximum
in 10 ft.
2. Mechanical Properties:
a) Yield Strength: 44.0 ksi maximum as received and 37.5
ksi minimum after 400o F
bake for 10 minutes.
b) Elongation in 2": 3% minimum as received
3. Earing: 2.5% maximum at a 42% draw
reduction using a controlled gap hold
down to minimize pinching of ears.
4. Surface Roughness: 15-25 microinches (AA).
5. Chemical Composition (% maximum unless shown otherwise): 0.60 Si, 0.80 Fe,
0.05-0.25 Cu, 0.8-1.4 Mn, 1.3-1.5 Mg, 0.25 Zn, 0.10 Ti, 0.0001 Be, others
0.05 each and 0.15 total, balance A1.
================================================================================
Secondary (Variable) Specifications:
1. Coils are to be relubed with DTI 5600 PL at 25+/-10 mg/ft.2/side. Forest
Park requires Nalco 6468AB at 25+/-10 mg/ft2/side. Other relubes may only
be supplied when approved by Development and/or Materials Process
Engineering.
================================================================================
Remarks:
1. Presence of oxides, inclusions, laminations, slivers, rolled-over
scratches, rolled-in dirt, abrasions, pinholes, water stain corrosion and
stains may be cause for rejection.
2. Material with inadequate formability for drawing and ironing is subject to
rejection.
3. Flatness/shape inadequate to permit feeding in the cupper press is subject
to rejection.
4. ASTM B557 and E8 apply.
================================================================================
Approvals (As Applicable)
================================================================================
Development CREG MFOP MTMG
================================================================================
By /s/Illegible By /s/Illegible By /s/Illegible By /s/Illegible
Date 12/14/93 Date 2/9/94 Date 1/10/93 Date 12/14/93
================================================================================
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
Exhibit A-2
ANC standards and specifications for end-stock
Exhibit A-2-a: 5182 Alloy H19 Temper Coated (2 pages, attached)
Exhibit A-2-b: 5182 Alloy H19 Temper Bare (1 page, attached)
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
NUMBER: RD/S-88-013A Page 1 of 2
DATE: 09/23/88
REVISED: 01/02/93
EXHIBIT A-2-a
AMERICAN NATIONAL CAN
CORPORATE R&D
MATERIALS SPECIFICATION SHEET
Final After Signature Approvals
================================================================================
Material Identification (Name, Code, Mfgr. Etc.)
Aluminum: 5182 Alloy H19 Temper and Coil Coated.
Application: Coil Coated Beer/Beverage End Stock for Wide Shell Press.
================================================================================
Primary (Fixed) Specifications:
1. Tolerances:
a) Gauge: +/-0.0002"
b) Coil Width: -0", +1/8"
c) Edge Burr: 0.002" maximum
d) Camber: 0.015" maximum in 30", 0.250" maximum in 10 ft.
e) Flatness: 1/8" maximum height for cycles up to 18" long.
f) Edge Wave: Any cycle less than 5" is unacceptable.
g) Crossbow: A rise exceeding 0.125" is unacceptable.
2. Mechanical Properties (After Coil Coating):
a) Yield Strength: 47-52 ksi*
b) Elongation in 2": 6% minimum
*Yield strength when measured at 45(degree) to rolling direction.
3. Chemical Composition (% maximum unless shown otherwise):
0.20 Si, 0.35 Fe, 0.15 Cu, 0.20-0.50 Mn, 4.00-5.00 Mg, 0.10 Cr, 0.25 Zn,
0.10 Ti, 0.0001 Be, others 0.05 each and 0.15 total, balance A1.
================================================================================
Secondary (Variable) Specifications:
1. Coil coated aluminum beer/beverage end stock is supplied, cleaned and
chemically treated with chromate- phosphate treatment at a weight of 4-9
mg/ft.2/side or titanium based treatment prior to coil coating.
2. Organic coatings should be as follows (including qualified equivalents
with same dried film):
<TABLE>
<CAPTION>
<S> <C> <C>
Application/Color Exterior Coat (mg/4 in.2) Interior Coat (mg/4 in.2)
Beverage Clear V S9835-007 @ 8, -2, +4 V S9835-007 @ 32, -3, +6
V S6839-020 @ 8, -2, +4 D 8800-A04M @ 32, -3, +6
Coke Gold V 90X043 @ 8, -2, +4 V S9835-007 @ 32, -3, +6
V S6839-535 @ 8, -2, +4 D 8800-A04M @ 32, -3, +6
Pepsi Gold V S9835-512 @ 8, -2, +4 V S9835-007 @ 32, -3, +6
V S9829-521 @ 8, -2, +4 D 8800-A04M @ 32, -3, +6
7-Up Gold V 85X005 @ 8, -2, +4 D 8800-A04M @ 32, -3, +6
</TABLE>
================================================================================
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
NUMBER: RD/S-88-013A Page 2 of 2
DATE: 09/23/88
REVISED: 01/02/93
EXHIBIT A-2-a
AMERICAN NATIONAL CAN
CORPORATE R&D
MATERIALS SPECIFICATION SHEET
Final After Signature Approvals
================================================================================
Secondary (Variable) Specifications: (Continued)
<TABLE>
<CAPTION>
<S> <C> <C>
Application/Color Exterior Coat (mg/4 in.2) Interior Coat (mg/4 in.2)
Beer Clear V S9835-007 @ 8, -2, +4 V S9835-007 @ 8, -2, +4
V S6839-020 @ 8, -2, +4 V S6839-020 @ 8, -2, +4
P (E) Coat @ 8, -2, +4 P (E) Coat @ 8, -2, +4
Heileman Gold V 90X044 @ 8, -2, +4 V S9835-007 @ 8, -2, +4
V 85X005 @ 8, -2, +4 V S6839-020 @ 8, -2, +4
Miller Gold V S9835-512 @ 8, -2, +4 V S9835-007 @ 8, -2, +4
V S9429-521 @ 8, -2, +4 V S6839-020 @ 8, -2, +4
Pabst Gold V S9835-512 @ 8, -2, +4 V S9835-007 @ 8, -2, +4
V S9429-521 @ 8, -2, +4 V S6839-020 @ 8, -2, +4
Genesee Gold V S9835-512 @ 10, -2, +4 V S9835-007 @ 8, -2, +4
V S9429-521 @ 10, -2, +4 V S6839-020 @ 8, -2, +4
AB Gold P (E) Coat @ 8, -2, +4 P (E) Coat @ 8, -2, +4
Note: V = Valspar; D = Dexter; P = PPG
</TABLE>
3. Exterior Lubricant:
Petrolatum at 10 +/- 5 mg/ft.2/side for pigmented gold
coatings only. Petrolatum at 6 +/- 3 mg/ft.2/side for all
others.
================================================================================
================================================================================
Remarks:
1. Presence of oxides, inclusions, large carbides, laminations, slivers,
rolled-over scratches or gouges, rolled- in defects, abrasions, pinholes
and stains, etc., may be cause for rejection.
2. Material must be able to be fed into shell press, formed into basic ends
and converted into finished ends without fracturing.
3. ASTM B557 and E8 apply.
================================================================================
================================================================================
Approvals (As Applicable)
================================================================================
READ CREG MFOP MTMG
================================================================================
By /s/Illegible By /s/Illegible By /s/Illegible By /s/Illegible
Date 12/21/92 Date 1/4/93 Date 12/19/92 Date 1/6/93
================================================================================
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
NUMBER: RD/S-88-012A Page 1 of 1
DATE: 09/23/88
REVISED: 01/02/93
EXHIBIT A-2-b
AMERICAN NATIONAL CAN
CORPORATE R&D
MATERIALS SPECIFICATION SHEET
Final After Signature Approvals
================================================================================
Material Identification (Name, Code, Mfgr. Etc.)
Aluminum: 5182 Alloy H19 Temper. Application: Plain Beer/Beverage End
Stock for Coil or Sheet
Coating.
================================================================================
Primary (Fixed) Specifications:
1. Tolerances:
a) Gauge: +/-0.0002"
b) Coil Width: -0.000", +0.125"
c) Edge Burr: 0.002" maximum
d) Camber: 0.015" maximum in 30", 0.250" maximum in 10 ft.
e) Flatness: 1/8" maximum height for cycles up to 18" long.
f) Edge Wave: Any cycle less than 5" is unacceptable.
g) Crossbow: A rise exceeding 1/8" is unacceptable.
2. Mechanical Properties (After 10 Minutes at 360(degree)F):):
a) Yield Strength: 47-52 ksi*
b) Elongation in 2": 6% minimum
*Yield strength when measured at 45(degree) to rolling direction.
3. Chemical Composition (% maximum unless shown otherwise):
0.20 Si, 0.35 Fe, 0.15 Cu, 0.20-0.50 Mn, 4.0-5.00 Mg, 0.10 Cr, 0.25 Zn,
0.10 Ti, 0.0001 Be, others 0.05 each and 0.15 total, balance A1.
================================================================================
Secondary (Variable) Specifications:
Plain aluminum beverage end stock is supplied, cleaned, chemically treated with
A272A or equivalent chromate- phosphate treatment at a weight of 3-9
mg/ft.2/side and is DOS reoiled at 0.9+/-0.3 mg/ft.2/side.
Remarks:
1. Presence of oxides, inclusions, slivers, rolled-over scratches, rolled-in
dirt, abrasions, pinholes and stains may be cause for rejection.
2. Material must be able to be formed into basic ends and converted into
finished ends without fracturing, otherwise it will be subject to
rejection.
3. ASTM B557 and E8 apply.
================================================================================
Approvals (As Applicable)
================================================================================
READ CREG MFOP MTMG
================================================================================
By /s/Illegible By /s/Illegible By /s/Illegible By /s/Illegible
Date 12/21/92 Date 1/4/93 Date 12/17/92 Date 1/4/93
================================================================================
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
Exhibit A-3
ANC standards and specifications for tab-stock
Exhibit A-3-a: 5042 Alloy H19 Temper (1 page, attached)
Exhibit A-3-b: 5082 Alloy H19 and H251 Temper (1 page, attached)
Exhibit A-3-c: 5182 Alloy H19 Temper (2 pages, attached)
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
NUMBER: RD/S-88-001A Page 1 of 1
DATE: 09/23/88
REVISED: 01/02/93
EXHIBIT A-3-a
AMERICAN NATIONAL CAN
CORPORATE R&D
MATERIALS SPECIFICATION SHEET
Final After Signature Approvals
================================================================================
Material Identification (Name, Code, Mfgr, Etc.)
Aluminum: 5042 Alloy H19 Temper.
Application: Plain Tab Stock for Beverage Ends.
================================================================================
Primary (Fixed) Specifications:
1. Tolerances:
a) Gauge: +/-0.0003 for 0.0140" and lower gauges
-0.0003", +0.0004" for gauges over 0.0140"
b) Coil Width: +/-0.007"
c) Edge Burr: 0.002" maximum
d) Camber: 0.050" maximum in 30", 0.250" maximum in 10 ft.
2. Mechanical Properties (As-Received) H19 Temper:
Yield Strength: 44-52 ksi
Tensile Strength: 48-58 ksi
Elongation in 2": 2% minimum
3. Chemical Composition (% maximum unless shown otherwise):
0.20 Si, 0.35 Fe, 0.15 Cu, 0.20-0.50 Mn, 3.0-4.0 Mg, 0.10 Cr, 0.25 Zn,
0.10 Ti, 0.0001 Be, others 0.05 each and 0.15 total, balance A1.
================================================================================
Secondary (Variable) Specifications:
1. Plain aluminum tab stock is supplied cleaned of residual rolling oils and
other soils and is DOS reoiled at 0.8 +/- 0.4 mg/ft.2/side.
================================================================================
Remarks:
1. Presence of oxides, inclusions, laminations, slivers, rolled-over
scratches, rolled-in dirt, abrasions, pinholes and stains may be cause for
rejection.
2. ASTM B557 and E8 apply.
================================================================================
Approvals (As Applicable)
================================================================================
READ CREG MFOP MTMG
================================================================================
By /s/Illegible By /s/Illegible By /s/Illegible By /s/Illegible
Date 12/21/92 Date 1/4/93 Date 12/17/92 Date 1/4/93
================================================================================
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
NUMBER: RD/S-88-002A Page 1 of 1
DATE: 09/23/88
REVISED: 01/02/93
EXHIBIT A-3-b
AMERICAN NATIONAL CAN
CORPORATE R&D
MATERIALS SPECIFICATION SHEET
Final After Signature Approvals
================================================================================
Material Identification (Name, Code, Mfgr, Etc.)
Aluminum: 5082 Alloy H19 Temper and H251 Temper.
Application: Plain Tab Stock for Beverage Ends.
================================================================================
Primary (Fixed) Specifications:
1. Tolerances:
a) Gauge: +/-0.0003" for 0.0140" and lower gauges
-0.0003", +0.0004" for gauges over 0.0140"
b) Coil Width: +/-0.007"
c) Edge Burr: 0.002" maximum
d) Camber: 0.050" maximum in 30", 0.250" maximum in 10 ft.
2. Mechanical Properties (As-Received) H19 Temper: H251 Temper
----------- -----------
a) Yield Strength: 48-58 ksi 29-37 ksi
b) Tensile Strength: 52-62 ksi 42-50 ksi
c) Elongation in 2": 2% minimum 10% minimum
3. Chemical Composition (% maximum unless shown otherwise):
0.20 Si, 0.35 Fe, 0.15 Cu, 0.15 Mn, 4.0-5.0 Mg, 0.15 Cr, 0.25 Zn, 0.10 Ti,
0.0001 Be, others 0.05 each and 0.15 total, balance A1.
================================================================================
Secondary (Variable) Specifications:
1. Plain aluminum tab stock is supplied cleaned of residual rolling oils and
other soils and is DOS reoiled at 0.8 +/- 0.4 mg/ft.2/side.
================================================================================
Remarks:
1. Presence of oxides, inclusions, laminations, slivers, rolled-over
scratches, rolled-in dirt, abrasions, pinholes and stains may be cause for
rejection.
2. ASTM B557 and E8 apply.
================================================================================
Approvals (As Applicable)
================================================================================
READ CREG MFOP MTMG
================================================================================
By /s/Illegible By /s/Illegible By /s/Illegible By /s/Illegible
Date 12/21/92 Date 1/4/93 Date 12/17/92 Date 1/3/93
================================================================================
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
NUMBER: RD/S-93-015A (Page 1 of 2)
DATE: 06/14/93
REVISED:
EXHIBIT A-3-c
AMERICAN NATIONAL CAN
MATERIAL SPECIFICATION SHEET
Final After Signature Approvals
================================================================================
Material Identification (Name, Code, Mfgr, Etc.)
Aluminum: 5182 Alloy H19 Temper. USA
Application: CAT99 Tab Stock for Beverage and Beer Ends.
================================================================================
Primary (Fixed) Specifications:
1. Tolerances (inch):
a) Gauge: +/-0.0003
b) Coil Width: +/-0.007"
c) Edge Burr: 0.002 maximum
d) Camber: 0.050 maximum in 30"
0.250 maximum in 10 ft.
2. Mechanical Properties (As-Received):
H19 Temper: Yield Strength: 49-55.5 ksi
Tensile Strength: 55-62 ksi
Elongation in 2": 5% minimum
3. Chemical Composition (% maximum unless shown otherwise):
0.20 Si, 0.35 Fe, 0.15 Cu, 0.20-0.50 Mn, 4.0-5.0 Mg, 0.10 Cr, 0.25 Zn,
0.10 Ti, 0.0001 Be, others 0.05 each and 0.15 total, balance A1.
================================================================================
Secondary (Variable) Specifications:
1. Plain aluminum tab stock is supplied cleaned of residual rolling oils and
other soils and is DOS reoiled at 0.8+/-0.4 mg/ft.2/side.
================================================================================
Amendments:
Alcoa C232-H3E30 is an acceptable replacement for 5182-H19 (in the H3E30 temper
only).
================================================================================
Remarks:
1. Presence of oxides, inclusions, laminations, slivers, rolled-over
scratches, rolled-in dirt, abrasions, pinholes and stains may be cause for
rejection.
2. ASTM B557 and E8 apply.
================================================================================
Approvals (As Applicable)
================================================================================
BTEC CREG MFOP MTMG
================================================================================
/s/Illegible /s/Illegible /s/Illegible /s/Illegible
Signature Signature Signature Signature
Date 7/1/93 Date 9/1/93 Date 8/12/93 Date 7/1/93
================================================================================
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
Exhibit B: list of 1995 ANC's ship-to locations
CHICAGO, IL
MEMPHIS, TE
McINTYRE, CO
BIRMINGHAM, AL
St. LOUIS, MO
VALPARAISO, IN
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
Exhibit C: ALCOA's specifications for each type of metal unit
used for toll conversion into can-stock
INGOT (P1020A)
Chemical composition:
element element
Al less than 99.7% Ga less than 0.04%
Si less than 0.10% As less than 0.0050%
Fe less than 0.20% Na less than 0.004%
Be less than 0.0001% Va less than 0.03%
Zn less than 0.010% Li less than 0.0001%
Pb less than 0.0015%
Cd less than 0.0003% others (each) less than or equal to 0.03%
Hg less than 0.0001% others (total) less than or equal to 0.10%
Aspect ratio:
P1020A ingot in sow or tee form shall have an aspect ratio (ratio of second
smallest dimension divided by smallest dimension) of not less than 3.
SCRAP
Attached (7 pages)
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
Aluminum Company of America EFFECTIVE 1993-01-01
Rigid Container Sheet Scrap SUPERSEDES PREVIOUS PAGE DATED 1986-01-01
SELF-GENERATED SCRAP - SECTION RPD941C
TABLE OF CONTENTS
Page
SCRAP - SELF GENERATED
General Information......................................................3
Packing...............................................................3, 4
Loading - Rail...........................................................5
Loading - Truck..........................................................6
Shipment Notice, Manifest and Bill of Lading..........................7, 8
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
Aluminum Company of America EFFECTIVE 1993-01-01
Rigid Container Sheet Scrap SUPERSEDES PREVIOUS PAGE DATED 1986-01-01
SELF-GENERATED SCRAP - SECTION RPD941C
SELF-GENERATED SCRAP
GENERAL
The customer must contact the ALCOA Knoxville Office (615) 594-4859 to
obtain approval to return scrap. Scrap must be commercially free of dirt, iron,
and other contaminants. Material should be stored indoors and free of moisture.
Lead levels in excess of .0100 as an alloy constituent are not acceptable.
Freight charges and all other charges regarding rejected scrap will be for the
account of the customer.
SCRAP LOADING AND PACKING
METHOD OF PREPARATION
Acceptable methods of preparation are:
Class I (3000)............Briquetted Only
Class II (5000)...........Briquetted or Baled
Class III (3000)..........Briquetted or Baled
Class IV (5000)...........Gaylord boxes or loose
Max. of up to 20% when
mixed with Class II
Sheet Scrap...............Strapped to skids
No fibre cartons, fibre or metal drums or metal or wood boxes are to be
used as packages. Under no circumstances should surplus skids be returned in any
load. 5000 series alloys may be mixed in a given package. Class 2 & 4 may be
shipped in the same railcar/trailer providing classes are segregated. All other
classes must be segregated and returned separately.
BALES
Bales must separate into sections when banding or wire is cut. Material
must be banded with 6 minimum to 10 maximum 3/4 in. x .030 in.
(5056-H36) aluminum or 5/8 in. x .020 in. steel or 6 minimum to 10
maximum 10-gauge (5056-0) aluminum or 13-gauge steel. Bands or wires of
other material are not acceptable. Use of support sheets of any
material is not acceptable. Skids should not be used. Bales uniform in
size are preferred. Composite bales of two or more individual bales
banded together to meet size specifications are not acceptable (see
Figure 1).
Class 2 (5000 Series): The density of bales should not exceed 40 pounds
per cubic foot. Minimum bale size is 30 cubic feet. Acceptable range
dimensions are 24 to 36 in. x 30 to 48 in. x 40 to 72 in.
Class 3 (3000 Series): The density of bales should not exceed 40 pounds
per cubic foot. Minimum bale size is 30 cubic feet. Acceptable range
dimensions are 24 to 40 in. x 30 to 52 in. x 40 to 72 in.
BRIQUETTES
The density of hydraulic briquettes should be a minimum of 50 pounds
per cubic foot. Briquettes uniform in size are preferred. Optimum
dimensions are 12 in. x 12 in. x 12 in. A minimum of two steel straps
parallel to runners and under deckboards, two steel straps
perpendicular to runners and under deckboards and one horizontal strap
per layer must be used. All steel straps must be a minimum of 5/8 in. x
.020 in. or aluminum straps 3/4 in. x .030 in. (5052-H36). Bands of
other materials are not acceptable. The maximum metal stack height is
48 in., and the briquettes must not overhang the pallet. Briquettes
should not have aluminum flat sheet or any other support material
between briquette layers or between bottom layer of briquettes and skid
(see Figure 2).
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
Aluminum Company of America EFFECTIVE 1993-01-01
Rigid Container Sheet Scrap SUPERSEDES PREVIOUS PAGE DATED 1986-01-01
SELF-GENERATED SCRAP - SECTION RPD941C
Self-Generated Scrap
SCRAP LOADING AND PACKING DATA
METHOD OF PREPARATION
SHEET SCRAP
Material should be packed on skids. Minimum weight per skid is 1,500
pounds and maximum weight per skid is 6,000 pounds. Sheet scrap should
be secured with not less than 3/4 in. x .025 in. steel straps or 4 3/4
in. x .030 in. aluminum straps (see Figures 3 and 4). (Extra straps may
be required to prevent metal stacks from shifting during transit).
LOOSE
Only spoiled compound ends (Class 4) and tab skeletons and particles
(Class 2) should be loaded loose or in Gaylord boxes. A maximum of up
to 20% loose scrap may be returned with briquettes or bales.
[PICTURE] [PICTURE]
Figure 1, Bale Figure 2, Skid of
Briquettes
[PICTURE] [PICTURE]
Figure 3, Skid of Coiled Figure 4, Skid of Flat Sheet
Sheet Scrap Scrap
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
Aluminum Company of America EFFECTIVE 1993-01-01
Rigid Container Sheet Scrap SUPERSEDES PREVIOUS PAGE DATED 1986-01-01
SELF-GENERATED SCRAP - SECTION RPD941C
Self-Generated Scrap
SCRAP LOADING AND PACKING DATA
LOADING PROCEDURES - RAIL
Scrap is to be loaded to at least 60,000 pounds minimum per car. Cars
assigned or stenciled for return to a specific ALCOA plant should not be used.
All scrap returned by rail must be loaded in railcars having minimum 10 foot
wide doors and minimum height of 9 foot 6 inches. Railcars with double doors are
preferred. Interior equipment, such as gates or other bracing components, if not
being used to restrain the lading, must be stored in the ends of the car.
Nothing should be piled against the doors which inhibits door opening.
Facilities do not permit prior selection of the side to be unloaded; therefore,
the railcar lading must be easily accessible from either side. Shipper should
assure that any railcar being loaded is clean, in good shape, and free of holes
in the floor which could jeopardize unloading operations.
BALES
Loading throughout the car must be such that the long horizontal
dimension is presented to unloading equipment, i.e., long dimension
must be perpendicular to the forks of an approaching truck. Material
should be loaded to prevent shifting in transit. To facilitate
unloading, bales should not be jammed against the roof, sides or doors.
There should be a minimum clearance of 1 foot (see Figure 5).
BRIQUETTES
Skids in the ends of the car are loaded with runners parallel to the
sides of the car. Skids loaded in the doorway are loaded with runners
perpendicular to the sides of the car. Two-high stacking of briquettes
is acceptable if the pallets are uniform in size (consistent height and
width dimensions) and loaded solid from end to end with fixed bracing
to fill any center void. Stacking three skids or more is not
acceptable. All loads must be sufficiently braced for delivery of
entire pallets. Do not load loose or partial unrestrained pallets (see
Figure 6).
LOOSE SCRAP
If necessary to load 60,000 pounds in a car, loose scrap is permitted
in the doorway providing the car contains only loose scrap. Both
doorways must be protected with grain doors. Compounded ends are to be
segregated and loaded in one end of the car. Cars containing loose
scrap are preferred with the doorway area free of scrap (see Figure 7).
MIXED LOADS
Cars that are loaded with more than one class of baled and briquetted
scrap are subject to ALCOA approval. Contact the ALCOA Knoxville Office
for instructions. Loose scrap is to be loaded in either end or both
ends of the car and bales, or palletized briquettes are to be used to
hold loose scrap in place. Loads must be braced so as to prevent
package from being broken apart and to keep loose scrap from the
doorway area (see Figure 8).
[PICTURE] [PICTURE]
Figure 5, Bales Figure 6, Briquetted
Loaded Solid for Length of Car Skidded
[PICTURE] [PICTURE]
Figure 7, Loose Scrap Figure 8, Mixed Car of Baled
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
Aluminum Company of America EFFECTIVE 1993-01-01
Rigid Container Sheet Scrap SUPERSEDES PREVIOUS PAGE DATED 1986-01-01
SELF-GENERATED SCRAP - SECTION RPD941C
Self-Generated Scrap
SCRAP LOADING AND PACKING DATA
LOADING PROCEDURES - TRUCK
All scrap shipments by truck must meet the same size, quality, density,
and contaminant standards as rail shipments. Minimum shipments of Class 1, 2, or
3 via truck is 40,000 pounds. All trailers used for scrap returns must have
sliding tandems, swing out doors (no roll up doors) and be of van type (no drop
deck or moving van trailers) or flatbed side-loaded. Trailers should be loaded
to allow at least 4 inches of clearance between the bales and the sides of the
trailer and 12 inches of clearance between the bales and rear door and roof.
Nothing should be piled against the doors which prohibits the opening of them.
ALCOA reserves the right to refuse shipments which are not loaded properly or do
not meet specifications. Shipper should assure that any truck being loaded is
clean, in good shape, and free of holes in the floor which could jeopardize
unloading operations.
BALES
Stack bales placing bales one atop the other so that the maximum amount
(100% if possible) rests on their largest face. Do not load bales on
end or on edge. A bale resting on its largest face is in a position of
maximum stability. Material should be loaded to prevent shifting in
transit (see Figure 9).
BRIQUETTES
Skids are to be loaded with the runners parallel to the side of the
trailers. Briquettes should not be double stacked. Briquettes should be
loaded either single or double wide from nose of trailer to end of
trailer. All loads must be sufficiently braced. Do not load loose,
partial, or unrestrained pallets. If the shipment is loaded down the
middle of the trailer, the pallets must be blocked and/or braced to
avoid shifting while in transit (see Figure 10).
[PICTURE] [PICTURE]
Figure 9, Bale Truckloaded Figure 10, Briquettes Truckloaded
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
Aluminum Company of America EFFECTIVE 1993-01-01
Rigid Container Sheet Scrap SUPERSEDES PREVIOUS PAGE DATED 1986-01-01
SELF-GENERATED SCRAP - SECTION RPD941C
Self-Generated Scrap
SCRAP LOADING AND PACKING DATA
RAIL/TRUCK
SHIPMENT NOTICE, MANIFEST AND BILL OF LADING
SHIPMENT NOTICE
At the time of shipment, the customer is to phone (615) 594-4859 or fax
(615) 594-4655 "ship to" location and furnish the following information
to ALCOA Knoxville Office:
A. Railcar/trailer number E. Seal number used on railcar/trailer
B. Date shipped F. Estimated aluminum weight
C. Type of scrap G. Weight of dunnage
D. Number of bales/briquettes H. Shipping location
NOTE: Seals will be inspected at the ALCOA locations or
designated ALCOA agent locations and will be placed
on a "hold" status in the result of a discrepancy or
broken seal. The shipment will remain on "hold" until
approval is obtained from customer to unload.
MANIFEST
The information shown above for the shipment notice is to be shown on a
shipment manifest which should be taped to the inside of the door. In
addition, the manifest should include ALCOA SPT number.
BILL OF LADING
The bill of lading for shipment is to be completed as shown in Figure 11
and Figure 12 (See attached). Note that:
A. The ALCOA SPT number is to be included on the "consigned to" line.
B. The "Description of Articles" is to indicate "Scrap Aluminum,
for Remelting Purposes Only."
C. Indicate actual scale weight or an estimated weight, which must be
marked "Estimated."
D. Duplicate bill of lading is required at receiving location.
CERTIFICATION
The following "certification" is to be applied to the bill of lading
and MUST BE SIGNED BY THE CONSIGNOR OR HIS AGENT:
"This shipment is being transported for the purposes of RECYCLING as
defined in applicable tariffs containing such provisions."
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
Aluminum Company of America EFFECTIVE 1993-01-01
Rigid Container Sheet Scrap SUPERSEDES PREVIOUS PAGE DATED 1986-01-01
SELF-GENERATED SCRAP - SECTION RPD941C
Self-Generated Scrap
SCRAP LOADING AND PACKING DATA
[PICTURE]
SAMPLE BILL OF LADING - RAIL
Figure 11
[PICTURE]
SAMPLE BILL OF LADING - TRUCK
Figure 12
Shipper will be given specific routing information by Scrap Central and must
adhere to those instructions.
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
Exhibit D: List of ANC's current beverage can manufacturing
facilities in North America as of January 1st, 1994
can plants number of lines can sizes
Bishopville, SC 3 12oz.
Brunswick, NJ 2 12oz.
Chatsworth, CA 3 12oz.
Chicago, IL 2 12oz.
Danbury, CT 1 12oz.
Fairfield, CA 2 12oz.
Forest Park, GA 2 12oz.
Fremont, OH 3 12oz.
Gateway, MO 4 12oz., 16oz.
Houston, TX 2 10oz., 12oz., 16oz.
Jacksonville, FL 3 12oz.
Kent, WA 4 12oz.
Longview, TX 4 10oz., 12oz.
Memphis, TE 3 12oz.
Oklahoma City, OK 2 12oz.
Phoenix, AZ 3 12oz.
Piscataway, NJ 3 12oz.
Puerto Rico 1 10oz., 12oz.
St. Paul, MN 3 12oz.
Whitehouse, OH 3 12oz., 24oz.
Winston-Salem, NC 6 12oz., 14oz., 16oz.
end plants modules sizes
Birmingham, AL 4 o202, o204, o206, o209
St. Louis, MO 2 o206
San Leandro, CA 1 o202, o206
Valparaiso, IN 4 o206
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
Exhibit E: Disqualification procedure
Procedure for disqualification of an aluminum supplier ("Supplier")
Disqualification by ANC of a supplier at any ANC location may occur under the
following circumstances:
1/Criteria:
1.1/As a result of mutually agreed metal defects, for a 5 day period, can
structure and appearance (i.e., split flanges, pin holes, low buckles, loopers,
streakers, etc ... ) directly attributed to metal defects exceed current ANC
qualifications limits, as set forth in table below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Cupper performance cupperjam less than l per coil acceptable
(confirmed coil related) >1 per coil unacceptable
Bodymaker performance tearoffs less than l per 300,000 cans acceptable
(confirmed coil related) >1 per 300,000 cans unacceptable
Can integrity cracked flanges (confirmed coil less than l per 300,000 cans acceptable
related) >1 per 300,000 cans unacceptable
Pinholes basecoated cans less than l per 1,000,000 cans acceptable
(confirmed coil related) >1 per 1,000,000 cans unacceptable
non basecoated cans less than l per 300,000 cans acceptable
>1 per 300,000 cans unacceptable
Buckle strength minimum 90 lb.
Dome growth at 90 PSIG maximum 0.064 inches
Column strength minimum 250 lb.
Can appearance looper lines, scratches, draw marks, and any other surface defect attributable
to metal can be cause for rejection
</TABLE>
Measurements and evaluations will be performed by qualified ANC personnel, in
accordance with ANC qualification trial procedures.
1.2/As a result of mutually agreed metal defects, for a 30-day period,
production efficiency is less than 98% of the previous 30-day average of the
efficiency obtained with metal from the same or another supplier.
1.3/Total spoilage, directly attributable to metal, for a 30-day period, exceeds
the previous 30-day average by 1 percent or more.
1.4/Metal related HFI (hold for inspection), for a 30-day period, exceed the
metal total monthly usage (number of coils) by 3 percent or more.
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
1.5/Tooling usage, directly attributable to metal, for a 30-day period, exceeds
the previous 30-day history by 5 percent or more.
1.6/A disruption in the plant operations occurs, which is directly attributable
to defective metal deliveries or service.
2/Procedure: if a supplier's metal performance violates any four of the above
six criteria, the plant to which the metal is being supplied may request of ANC
management that a disqualification proceeding be initiated by ANC.
If ANC decides to proceed with such a disqualification proceeding, the supplier
will then be advised of its poor performance and an immediate corrective action
will be requested. This corrective action plan will be promptly forwarded by the
supplier to ANC. It will then be implemented promptly by the supplier, who must
then demonstrate improvement within a 45-day period.
At the end of the 45-day period, if little or no improvement has been observed,
ANC may decide to disqualify the supplier at the plant in question.
In the event of a catastrophic problem, ANC shall have the right to immediately
suspend the supplier, as an aluminum can-stock supplier at that plant. If it is
determined that the supplier metal was the cause of the catastrophic problem,
the supplier may be disqualified at that location.
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
Exhibit F: Letter from ANC to ALCOA giving certain
indications in relationship with potential volumes
and mix allocation for years 1996 and 1997.
Attached (1 page)
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
American National Can Pechiney Group
- --------------------------------------------------------------------------------
CHICAGO, December 13, 1994
Guy Chardon
Sr. Vice President - Purchasing
Mr. Robert F.DAVIS
ALUMINUM COMPANY of AMERICA
Rigid Packaging Division
1100 Riverview Tower
900 South Gay Street
KNOXVILLE, TE 37902
Dear Bob,
This letter is intended to clarify certain points discussed during our 12/13/94
meeting in CHICAGO in relationship with the ANC - ALCOA multi-year agreement.
Estimated volume for year 1996 should be 300 million pounds, and estimated
volume for year 1997 should be 350 million pounds. Those volume are indicative,
and for production capacity reservation only. The actual volumes will be derived
from ANC's contractual commitment of 25% of ANC's on-going total requirements of
aluminum can-stock in North America for year 1996, and 30% of ANC's on-going
total requirements of aluminum can-stock in North America for year 1997,
on-going total requirements being defined in the agreement. However, should the
actual volume exceed 330 million pounds in 1996, or 385 million pounds in 1997,
ANC agrees to meet with ALCOA as soon as this situation is known, in order to
find an acceptable solution for both parties.
As mentioned in the agreement, mix allocation for year 1995 is 75 million pounds
of body-stock and 65 million pounds of coated end-stock. As an indication,
requirements of coated end-stock for year 1996 and 1997 should range between 65
and 90 million pounds.
Best regards,
Guy CHARDON
ALUMINUM PURCHASE AGREEMENT (ANC-ALCOA) Exhibit
STRICTLY PRIVATE
<PAGE>
Mr. Bert Larsson
08 January 1997
Page 2
Aluminum Company of America ALCOA
- --------------------------------------------------------------------------------
08 January 1997
Mr. Bert Larsson
Vice President, Purchasing
American National Can Corporation
8770 West Bryn Mawr, M/S 8Z
Chicago, Illinois 60631
Dear Bert,
In light of the flurry of recent discussions, it seems advisable to confirm our
agreements on ANC's 1997 Class I scrap toll requirements under the Aluminum
Purchase Agreement between Aluminum Company of America ("Alcoa") and American
National Can Company ("ANC") dated January 10, 1995, as amended by our letter
agreement dated February 1, 1996 (as amended, the "Agreement"), (unless
otherwise indicated, capitalized terms used in this letter have the meanings
specified in the Agreement) and other matters. They are:
1. Alcoa agrees to waive ANC's Class I scrap toll obligation for the
first quarter of 1997 of 11 million pounds.
2. ANC agrees to toll [*] million pounds of P1020 with Alcoa during the
first quarter of 1997 for tolling fee of [*] (.0112" gauge).
3. ANC agrees to toll [*] million pounds of Class I Scrap with Alcoa
spread over the second, third, and fourth quarters of 1997 (level loaded) for a
tolling fee of [*] above published conversion prices (ANC pays transportation
fees).
4. ANC agrees to purchase from Alcoa [*] million pounds of tab-stock
during 1997 at published book pricing (Alcoa Price Data, September 15, 1995) and
the metal component per the Agreement. This quantity of tab-stock is part of
Alcoa's [*] share of ANC's total 1997 purchases, estimated to be [*] million
pounds, i.e. is not incremental business in 1997.
5. [*] or the termination of the time period for doing so, whichever
first occurs, ANC will provide Alcoa with notice of all the terms of the most
favorable offer for this volume, and Alcoa, within 20 working days, will then
notify ANC of its decision to match or to decline to match such offer.
Except as modified by this letter agreement, the terms and conditions of the
Agreement shall continue in full force and effect.
<PAGE>
Mr. Bert Larsson
08 January 1997
Page 2
Please confirm ANC's agreement to the above by executing where indicated below
and returning one fully executed copy of this letter to me.
Sincerely,
ALUMINUM COMPANY OF AMERICA, AMERICAN NATIONAL CAN
Rigid Packaging Division COMPANY
By: /s/George Bergerson By: /s/Edward Lapekas
---------------------------- ----------------------------------------
President Senior Executive Vice President
Chief Operating Officer, Beverage Cans
Worldwide
<PAGE>
Aluminum Company of America ALCOA
- --------------------------------------------------------------------------------
6 January 1997
Mr. Edward A. Lapekas
Chief Operating Officer
American National Can Company
8770 West Bryn Mawr
Chicago, Illinois 60631
Dear Ed:
In connection with the Aluminum Purchase Agreement between Aluminum Company of
America ("Alcoa") and American National Can Company ("ANC") dated January 10,
1995, as amended by our letter agreement dated February 1, 1996 (as amended, the
"Agreement"), (unless otherwise indicated, capitalized terms used in this letter
have the meanings specified in the Agreement), ANC has recently triggered
Alcoa's right of refusal with regard to the supply of a percentage of ANC's
on-going total annual can-stock purchases in North America during each of
calendar years 1998, 1999, and 2000.
ANC has been advised by Pepsi Cola Company ("COBO") not to make can-stock
purchase commitments in connection with its purchases from ANC. If COBO
hereafter decides to have ANC purchase the can-stock requirements for its
purchases from ANC, these requirements shall be subject to Alcoa's first right
of refusal under the Agreement, and ANC and Alcoa shall promptly meet thereon.
Alcoa's share of the COBO can-stock requirements is approximately 40 million
pounds. ANC further advises Alcoa that it is currently unaware of any other ANC
customer volume that is subject to be purchased directly by any of ANC's
customers during the period in question, i.e., calendar years 1998, 1999, and
2000.
Alcoa will be supplying, in the aggregate, thirty percent (30%) of ANC's
presently available on-going can-stock purchase requirements for North America,
during calendar years 1998, 1999 and 2000. Alcoa is willing to commit to supply
an amount of can-stock (the "Ceiling Volume") during calendar years 1998, 1999,
2000 on the terms set forth in the Attachment hereto (the "Attachment"). The
Ceiling Volume will be calculated as follows:
Ceiling Volume equals the difference between (i) thirty percent (30%)
of [ANC's total on-going can-stock purchase requirements for North
America for the year in question less the COBO volume as discussed
above] and (ii) 100 million pounds (firm volume commitment) which will
be supplied to ANC under the terms of the Agreement and the Letter
Agreement between ANC and Alcoa dated September 5, 1996.
<PAGE>
Mr. Edward A. Lapekas
6 January, 1997
Page 2
example:
Ceiling Volume = [0.30 x (ANC Total Purchases - COBO Volume)] - 100 MM lb.
ANC shall specify the Ceiling Volume (in millions of pounds) by January 10, 1997
for deliveries in each of 1998, 1999 and 2000, which Alcoa will then use to
determine appropriate metal hedging positions. If ANC's can-stock purchases
during any of the calendar years 1998, 1999, or 2000 are not equal to or greater
than 90% of this specified volume, ANC will pay Alcoa's associated costs for
option premiums on any shortage below 90% volume. Any reduction in ANC's
purchases from Alcoa during 1998, 1999, or 2000 shall be consistent in term and
proportion with reductions of ANC's purchases from it's other can-stock
suppliers. Further, if ANC purchases from Alcoa during any of the calendar years
1998, 1999, or 2000 exceed the 110% volume, the metal component price for that
incremental volume will be based on current market conditions at the time a firm
commitment for volume is made.
If the above reflects our agreement on the matters covered, please execute where
indicated below, and return one fully executed copy to me.
Sincerely,
ALUMINUM COMPANY OF AMERICA,
Rigid Packaging Division
By: /s/George E. Bergerson
--------------------------
George E. Bergerson
President
READ AND AGREED TO THIS 10TH DAY OF JANUARY, 1997
AMERICAN NATIONAL CAN COMPANY
By: /s/Edward A. Lapekas
-------------------------------------
Edward A. Lapekas, Senior Executive
Vice President and Chief Operating
Officer, Beverage Cans Worldwide
<PAGE>
ALCOA/ANC
1998, 1999, 2000 CEILING PRICING
o Base Midwest Metal Ceiling (No Floor) at no cost to ANC
1998, 1999, 2000 Ceiling @ [*]
o Actual invoiced metal is the ceiling price, or when metal is below the
ceiling will be at the reference price for that period. The pricing periods
will be identical to those currently in force under the provisions of the
Alcoa/ANC amendment dated February 1, 1996 (i.e., September 1st to February
28th, for can sheet shipments April 1st to September 30th, and March 1st to
August 31st, for shipments October 1st to March 31st.). When at or above
the ceiling, actual invoiced metal will be at [*]
o Book Conversion pricing for ceiling priced material
.0114" Body Stock $.32/lb.
.0110" Soft Drink End Stock $.73/lb.
- Adjusted annually for 1/2 PPI starting, with 1998, based on 1997 vs.
1996 full year averages.
- Price for changes from reference specifications based on Alcoa's
published schedules dated 15 September 1995.
o This ceiling price offer is for the Ceiling Volume, which is the difference
between (i) thirty percent (30%) of [ANC's total on-going can-stock
purchase requirements for North America for the year in question less the
120 million pound COBO volume as discussed above] and (ii) 100 million
pounds (firm volume commitment) which will be supplied to ANC under the
terms of the Agreement and the Letter Agreement between ANC and Alcoa dated
September 5, 1996.
o ANC to specify the Ceiling Volume (in millions of pounds) by January 10,
1997 for deliveries in each of 1998, 1999, and 2000, which Alcoa will then
use to secure metal hedging positions. If ANC's can stock purchases during
any of the calendar years 1998, 1999, or 2000 are not equal to or greater
than ninety percent (90%) of this specified volume, ANC will pay Alcoa's
associated costs for option premiums on any shortage below the 90% volume.
If ANC's purchases from Alcoa during any of the calendar years 1998, 1999,
or 2000 exceed the one hundred ten percent (110%) volume, the metal
component price for that incremental volume will be based on current market
conditions at the time a firm commitment for volume is made.
o Mutually agreed upon ship-to locations.
o [*]
o Except as otherwise provided in this Attachment and the letter to which it
is attached, the terms and conditions of the Agreement shall apply.
<PAGE>
SCRAP PURCHASE AGREEMENT
THIS SCRAP PURCHASE AGREEMENT is entered into as of the 10th day of
January, 1997 by and between AMERICAN NATIONAL CAN COMPANY, a Delaware
corporation ("ANC") and Rigid Packaging Division of ALUMINUM COMPANY OF AMERICA,
a Pennsylvania corporation ("Alcoa").
In consideration of mutual undertakings the parties agree as follows:
1. Quantity. ANC agrees to sell and Alcoa agrees to buy an amount of
"3004 can manufacturing plant generated scrap," commonly designated as Class I
scrap ("Class Scrap") equal to three and two tenths percent (3.2%) of ANC's
total annual can-stock purchases for use in North America during each calendar
year of the term of this Agreement; provided, however, that any amount of such
ANC purchases for Pepsi Cola Corporation which is not purchased from Alcoa, and
the quantity of can-stock supplied by Alcoa pursuant to the September 5, 1996
letter agreement between the parties, shall both be excluded from "ANC's total
annual can-stock purchases for use in North America" for purposes of this
Section 1.
2. Term. This Agreement shall become effective on January 1, 1998 and
shall remain in effect until December 31, 2000.
3. Price. The FOB customer can plant price per pound of Class Scrap
shall be[*]. The deductor shall be adjusted by one half (1/2) of the annual
change in the Producer Price Index beginning on January 1, 1998 as follows:
PURCHASE PERIOD: REFERENCE PERIOD:
Ql, 1998 March 1997 - August 1997
Q2/Q3, 1998 September 1997 - February 1998
Q4,1998 / Q1, 1999 March 1998 - August 1998
Q2/Q3, 1999 September 1998 - February 1999
Q4, 1999/Q1, 2000 March 1999 - August 1999
Q2/Q3,2000 September 1999 - February 2000
Q4, 2000 March 2000 - August 2000
<PAGE>
2
4. Payment Terms. Payments shall be due net 30 days from receipt of
Class Scrap and shall be made on the first business day of each month.
5. Shipments. The projected annual quantity of Class Scrap to be
purchased hereunder shall be shipped in approximately equal monthly shipments.
6. Specifications. Class Scrap to be purchased hereunder shall conform
to Alcoa's Class I Specifications in effect at the time of shipment. In the
event that nonconforming Class Scrap is shipped by ANC, the parties shall seek
to agree to a revision of the purchase price, failing which ANC will, at its
sole expense, replace the nonconforming Class Scrap with conforming Class Scrap
at the Alcoa designated destination.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
ALUMINUM COMPANY OF AMERICA, AMERICAN NATIONAL CAN
Rigid Packaging Division COMPANY
By: /s/George Bergerson By: /s/Edward Lapekas
----------------------------- -----------------------------------------
Title: President Title: Senior Executive Vice President
and Chief Operating Officer,
Beverage Cans Worldwide
<PAGE>
Aluminum Company of America ALCOA
- --------------------------------------------------------------------------------
1996 September 5
Mr. Edward A. Lapekas
Senior Vice President
Beverage Cans Americas
American National Can Corporation
8770 W. Bryn Mawr
Chicago IL 60631
Dear Edward:
In connection with the Aluminum Purchase Agreement between Aluminum Company of
America ("Alcoa") and American National Can Corporation ("ANC") dated January
10, 1995, as amended by our letter agreement dated February 1, 1996 (as amended,
the "Agreement"), ANC has recently triggered Alcoa's right of refusal with
regard to the supply of 100 million pounds of can-stock during each of calendar
years 1998, 1999 and 2000. ANC has asked Alcoa to agree to supply or to decline
to supply this quantity on the banded price basis set forth in the Attachment
hereto (the "Attachment"). (Unless otherwise indicated, capitalized terms used
in this letter have the meanings specified in the Agreement.)
Alcoa is willing to commit to supply 100 million pounds of can-stock to ANC in
each of calendar years 1998, 1999 and 2000 as part of its contract share of
ANC's on-going annual requirements on the banded price basis and other terms set
forth in the Attachment. ANC and its customer for which ANC is securing the
above quantity specifically understand that the metal price component of the
price for this quantity will be no less than the agreed minimum price set forth
on the Attachment of [*] per pound as adjusted per the Attachment regardless of
the market price of aluminum at the time of delivery or at any other time and/or
any other competitive conditions. Alcoa specifically understands that the metal
price component of the price for this same quantity will be no more than the
agreed maximum price of [*] per pound as set forth and adjusted per the
attachment regardless of the market price of aluminum at the time of delivery or
any other competitive conditions.
If you are willing to proceed on this basis, please execute where indicated
below. Ask your customer to execute the attached letter, and return one fully
executed copy of both to me.
Sincerely,
ALUMINUM COMPANY OF AMERICA,
Rigid Packaging Division
By: /s/George E. Bergerson
----------------------------------
George E. Bergerson
President
READ AND AGREED TO THIS 9TH DAY OF SEPTEMBER, 1996
AMERICAN NATIONAL CAN CORPORATION
By: /s/Edward Lapekas
----------------------------------
Edward Lapekas
Title: Senior Vice President
<PAGE>
Mr. Edward A. Lapekas
1996 September 5
Page 2
Aluminum Company of America
Rigid Packaging Division
1100 Riverview Tower
900 South Gay Street
Knoxville, TN 37902
Attention: George E. Bergerson,
President
Gentlemen:
The undersigned entity hereby acknowledges and agrees to the conditions of the
Attachment and specifically understands that the metal price component for the
100 million pounds of aluminum can-stock which American National Can Corporation
("ANC") has contracted for with Aluminum Company of America ("Alcoa") for each
of calendar years 1998, 1999 and 2000 in connection with our purchase obligation
with ANC for those years shall not be less than [*] per pound as set forth and
adjusted per the Attachment agreed to by ANC and Alcoa, regardless of the market
price of aluminum at the time of delivery or at any other time or any other
competitive conditions. Alcoa specifically understands that the metal price
component of the price for this same quantity will be no more than the agreed
maximum price of [*] per pound as set forth and adjusted per the attachment
regardless of the market price of aluminum at the time of delivery or any other
competitive conditions.
- --------------------------------
By:
--------------------------
Title:
--------------------------
Date:
--------------------------
- --------------------------------
By: George E. Bergerson
--------------------------
Title: President
--------------------------
Date:
--------------------------
<PAGE>
Alcoa / ANC
1998, 1999, 2000 Banded Price
o Base Midwest Metal Band at no cost to ANC
1996 max [*]
min [*]
The band will be adjusted annually based on 1/2 the change in PPI over
the prior 12 months, i.e., January 1 through December 31, and
implemented on April 1st of the following year. (Index is the PPI for
intermediate materials as reported by the US Department of Labor -
March 1996 base is 124.9.)
o Actual invoiced metal is the maximum, the minimum or when metal is
within the band, at the referenced price for that pricing period. The
pricing period will be September 1st to February 28th, for can sheet
shipments April 1st to September 30th and March 1st to August 31st, for
can sheet shipments October 1st to March 31st.
o Conversion price for banded material
.0114" Bare $.32
.0110" Soft Drink End $.73
.0110" Tab (H19) $.633
- Price for changes from reference specifications based on Alcoa's
published schedules dated 15 September 1995
- Adjusted annually on April 1st based on 1/2 of the PPI average
12-month period from January 1 through December 1 of the prior year.
o Annual quantity-100 million pounds, fixed volume commitment
Volume is specifically dedicated to BACI (Beverage Associates
Cooperative, Inc.)
o Alcoa agreed upon ship-to locations
o [*]
o Other conditions per our Supply Agreement dated 10 January 1995.
<PAGE>
American National Can PECHINEY GROUP
- --------------------------------------------------------------------------------
February 1, 1996
Via Federal Express
Mr. George E. Bergerson
President
Aluminum Company of America
Rigid Packaging Division
1100 Riverview Tower
900 South Gay Street
Knoxville, Tennessee 37902
Dear George:
As a result of discussions we have had over the last four months, Aluminum
Company of America ("Alcoa") and American National Can Company ("ANC") have
agreed to clarify and amend the Aluminum Purchase Agreement between them dated
January 10, 1995 (the "Agreement") as set forth below. Unless otherwise defined,
terms defined in the Agreement shall have the same meanings herein.
1. ANC agrees to purchase and Alcoa agrees to supply (i) twenty-five
percent (25%) of ANC's on-going total purchases of aluminum can-stock in North
America during 1996, which are currently estimated to be approximately two
hundred fifty (250) million pounds; and (ii) thirty percent (30%) of ANC's
on-going total purchases of aluminum can-stock in North America during 1997,
which are currently estimated to be approximately two hundred ninety (290)
million pounds. The foregoing purchase commitments are exclusive of ANC's can
volume for Coors Brewing Company, ANC's currently existing plants in Mexico, and
twenty-four (24) ounce cans, all of which are subject to preexisting agreements
as of the date hereof. Any addition to ANC's on-going requirements or extensions
to these two purchase commitments will be treated per Section 3.3 of the
Agreement.
2. ANC accepts Alcoa's Two Year Ceiling Price Contract Pricing
Alternative Offer dated September 15, 1995 (the "Offer"), a copy of which is
attached hereto, for one hundred fifty (150) million pounds of aluminum
can-stock in 1996 and one hundred seventy (170) million pounds of aluminum
can-stock in 1997.
3. The quantities of aluminum can-stock to be purchased by ANC in 1996
and 1997 pursuant to the Offer shall be priced on the following basis
(quantities are in millions of pounds):
<PAGE>
Mr. George E. Bergerson
February 1, 1996
Page 2
<TABLE>
<CAPTION>
TIER 1:
1996 1997
---- ----
<S> <C> <C> <C>
150 170 Total volume included in Tier 1
9 12 Volume of Class I scrap to be tolled at the
conversion component contained in the Offer
141 158 Volume to be ceiling priced by Alcoa per the
Offer
TIER 2:
1996 1997
---- ----
100 120 Total volume included in Tier 2
12 32 Volume of Class I scrap to be tolled at the
conversion component contained in the Offer
88 88 Volume priced by Alcoa using the conversion
component and the Midwest spot average price
for metal for the pricing periods, both as outlined
in the Offer.
</TABLE>
<TABLE>
<CAPTION>
TIER 3:
1996 and 1997 Volumes Pricing
--------------------- -------
<S> <C>
Remaining volume based on share and any Per existing Agreement pricing mechanisms
incremental contract volume above share. and contract provisions.
</TABLE>
For 1996 and 1997, Tier 1 and Tier 2 volumes will be allocated proportionally on
a monthly basis.
4. ANC represents and warrants that it has or will secure metal hedging
positions of high grade aluminum in 1996 and 1997 to cover their Tier 2
positions. ANC has or will take such positions in its own name and as a
principal, not as an agent for any other party. Alcoa has no direct or indirect
interest in or liability with respect to such positions, and ANC shall make no
claims or demands, and shall indemnify and hold Alcoa harmless against any
claims or demands, arising from or in connection with such positions.
5. If ANC purchases less than one hundred fifty (150) million pounds
and/or less than one hundred seventy (170) million pounds of can-stock under
Tier 1 in 1996 and/or 1997,
<PAGE>
Mr. George E. Bergerson
February 1, 1996
Page 3
respectively, under the Agreement as amended hereby (the "Amended Agreement")
due to a decline in the beverage can market, ANC will pay Alcoa's actual hedging
costs, if any, associated with the shortage. For the purpose of calculating
ANC's maximum liability under this section only, these costs will not exceed
$0.05 per pound for either 1996 or 1997; provided, however, that ANC shall be
entitled to any Alcoa profit resulting under these circumstances from any actual
Alcoa hedge positions taken in the financial markets in connection with the
Offer during 1996 and/or 1997, as the case may be. Any reduction in ANC
purchases covered by this paragraph shall be consistent in term and proportion
with reductions of ANC's purchases from its other can stock suppliers, except
for one preexisting contract as of the date hereof , where ANC has committed to
purchase a specific volume from a particular supplier which represents less than
20 percent of ANC's total volume.
6. ANC will give due consideration to Alcoa's request to provide one
hundred percent (100%) of ANC/Coors E-Coat(R) end-stock requirements for use by
the Coors Brewing Company, which requirements currently approximate twenty-five
(25) million pounds annually. In consideration of such purchases, Alcoa shall
waive its [*] per pound slitting charge on shipments of E-Coat(R) beer end-stock
for use at Coors' Golden plant until its narrow presses are replaced with wide
presses tooled to run the maximum width of E-Coat(R) end-stock produced at
Alcoa's Warrick, Indiana facility. Once such narrow presses are replaced with
wide width capabilities, ANC shall continue to purchase its Coors E-Coat(R) end
stock volume from Alcoa for so long as Alcoa keeps ANC competitive with respect
to the direct cost inefficiencies resulting from ANC's use of E-Coat(R) material
which is "one-out" narrower than the press and tools are capable of running.
7. ANC will give due consideration to Alcoa's request to supply to
preferred ship-to locations and not to be disadvantaged as compared to other
suppliers of can-stock in this regard.
8. ANC grants to Alcoa a first right of refusal on thirty percent (30%)
of its total purchases of aluminum can-stock in North America for each of
calendar years 1998, 1999 and 2000 in accordance with the terms of the Offer.
This first right of refusal is exclusive of ANC's can volume purchases for Coors
Brewing Company, ANC's currently existing plants in Mexico, and twenty-four (24)
ounce cans if these preexisting agreements are still in effect at that time. Any
addition to ANC's on-going requirements will be treated per Section 3.3 of the
Agreement. ANC shall provide Alcoa with prompt notice of all of the material
terms of the most favorable offers (including without limitation, any band
pricing offers) it receives after the date this letter amendment is fully
executed from a supplier of can-stock to supply at least fifteen percent (15%)
of its total requirements of aluminum can-stock in North America over one or
more years during 1998, 1999 and/or 2000. Alcoa shall have fifteen (15) working
days to notify ANC of its decision to match or to decline to match such offer
and, for any offer extending beyond 2000, but
<PAGE>
Mr. George E. Bergerson
February 1, 1996
Page 4
including 1998, 1999 or 2000, its decision to match or decline to match such
offer during those years. If Alcoa declines to match such offer or makes an
alternative offer unacceptable to ANC and ANC accepts the other supplier's
offer, ANC shall be entitled to reduce Alcoa's right of refusal quantity for the
year or years in question commensurately.
9. For contracts or commitments of supply covering the period of the
Offer, if Alcoa agrees or has agreed, on or after January 10, 1995: (i) to sell
to any can sheet purchaser for delivery in North America (whether to meet a
competitive offer or otherwise) under a "metal plus conversion" based agreement
or under any other pricing formula that includes "below market" support on the
risk premium that results in economic value in excess of the risk premium
support that Alcoa previously provided to ANC or (ii) to provide to any can
sheet purchaser in North America for use in North America, any incentive
program, subsidy or the like, which constitutes either a discount or below
market support on the metal components or the conversion component and/or any
other type of financial support on one or more RCS products of the type supplied
by Alcoa to ANC for use in North America, then Alcoa will offer the equivalent
incremental economic value of this support to ANC. This "below market" support
could be in the form of a risk premium discount, or a discount to the London
Metal Exchange metal component, the contango component, the Midwest Premium
component, the conversion component, or any other terms or conditions designed
to deliver economic value. Alcoa shall adjust the price for Tier 1 and priced
Tier 2 volume by the amount of the support or discount, as the case may be, and
shall offer to supply any unpriced Tier 3 volume on such terms; provided,
however, that such adjustment or offer, as the case may be, shall only apply to
ANC deliveries made while Alcoa is supplying can stock to such other purchaser
on those terms. ANC shall notify Alcoa within fifteen days of its acceptance or
rejection of such offer, failing which such offer shall be deemed to have been
rejected. Alcoa will make adjustments to meet the terms of any such offer, but
shall in no event be obligated to make adjustments for any changes in the London
Metal Exchange component, the contango component, the Midwest premium component
or the risk premium component resulting from the market changes. By the end of
January 1997 and January 1998, the Chief Financial Officer of Alcoa will confirm
in writing to the Chief Financial Officer of American National Can that Alcoa is
in compliance with the pricing provisions of this paragraph.
10. Except as expressly modified by this letter amendment, the terms
and conditions of the Agreement shall continue in full force and effect.
11. For purposes of calculating the Midwest Spot price for the
reference periods captured in the Offer, Alcoa will use the average monthly U.S.
transaction prices as quoted in Platt's Metals Week.
<PAGE>
Mr. George E. Bergerson
February 1, 1996
Page 5
If the foregoing reflects your understanding of our agreement, please execute
this letter where indicated below and return one fully executed copy of the
letter to me for our files.
Sincerely,
AMERICAN NATIONAL CAN COMPANY
By: /s/Gerard Hauser
-------------------------------------------
Gerard Hauser
Senior Executive Vice President
Chief Operating Officer - Beverage Sector
READ AND AGREED TO THIS 6TH DAY OF FEBRUARY, 1996.
ALUMINUM COMPANY OF AMERICA,
Rigid Packaging Division
By: /s/George Bergerson
-------------------------------------------
George Bergerson
Title: President
<PAGE>
ALCOA 2 YEAR CEILING PRICE
CONTRACT PRICING ALTERNATIVE OFFER
o Base ceiling prices for RCS reference specifications for 1996 and 1997 are
Reference Spec* Ceiling Price
--------------- -------------
Body .0114" $1.220
Soft drink end .0110" $1.630
Bare tab .0110" $1.533
*Prices for changes to reference specifications are adjusted
according to ALCOA's published price schedules dated September 15, 1995
o Cost to customer is $.02 per pound per year for volume placed using this
price mechanism, paid net 30 days after ceiling price volume commitment
o Ceiling price will be adjusted downward to reflect actual average midwest
spot (MWS) if MWS is less than $0.90 per pound as follows:
Price Period Reference Period for MWS
------------ ------------------------
Jan 1, 1996 - Mar 31, 1996 June 1, 1995 - Nov 30, 1995
Apr 1, 1996 - Sept 30, 1996 Sep 1, 1995 - Feb 29, 1996
Oct 1, 1996 - Mar 31, 1997 Mar 1, 1996 - Aug 31, 1997
Apr 1, 1997 - Sep 30, 1997 Sep 1, 1996 - Feb 28, 1997
Oct 1, 1997 - Dec 31, 1997 Mar 1, 1996 - Aug 31, 1997
o Conversion fee for ceiling price material
.0114 body $.32
.0110 soft drink end $.73
.0110 tab (HI9) $.663
o 1/2 of PPI adjustment on total ceiling price effective 1/l/97, based on PPI
12 month period Oct 95 - Sept 96.
o Fixed minimum volumes for 1996 & 1997
-- can place 0 - 100% of fixed volume with ceiling price
-- once volume is fixed, must take during annual period
-- no meet competition provisions on the ceiling price material during
1996 and 1997
-- any volume in excess of the fixed volume commitment and any volume
not placed with this proposed mechanism can be placed with existing
price mechanisms with existing meet competition requirements for
conversion fees
-- the ALCAN banded price offer and other competitive responses to the
ALCAN offer are excluded from meet competition requirements
o Class I toll
-- 15% of body stock shipments at 11(cent)over body stock conversion
price
o Shipments to US & Canada only
<PAGE>
o ALCOA agreed upon ship-to locations and product mix
o ALCOA has right of refusal on fixed share/volume for 1998, 1999, 2000
-- No obligation to meet competitive offers/contracts in existence
prior to January 10, 1995
o Deadline to accept this proposal is 9/22/95 and to the volumes at ceiling
price is NLT 9/29/95
o Offer is valid during offer period only if LME is less than $1850/tonne
during offer period
CONFIDENTIAL
TREATMENT
REQUEST
EXHIBIT 10.3
CAN SUPPLY AGREEMENT
--------------------
This Agreement is made this 20th day of November, 1995 between AMERICAN
NATIONAL CAN COMPANY, a Delaware corporation, with its principal offices at 8770
W. Bryn Mawr Avenue, Chicago, Illinois 60631 ("ANC"), and COCA-COLA ENTERPRISES
INC., with its principal offices at P.O. Box 723040, Atlanta, GA 31139-0040
("Buyer"), and covers the manufacture and supply by ANC to Buyer and the
purchase by Buyer of two-piece aluminum beverage can bodies and ends (herein
collectively referred to as "cans" or "containers") of the specifications and
quantities referred to hereinbelow.
WHEREAS, the parties are desirous of entering into a long-term supply
agreement covering certain of Buyers requirements of Containers; and
WHEREAS, the parties are desirous of establishing pricing for the
containers to be purchased and sold hereunder, with a floor and ceiling cost for
aluminum ingot ("Ingot Band") which will, over the term of this Agreement, limit
the extreme volatility which both parties have experienced in the recent past
with respect to can pricing and particularly with respect to aluminum costs; and
WHEREAS, in order to accomplish this goal of predictability of pricing,
the parties are willing to commit themselves to purchase and sell, as the case
may be, the quantity of containers stated herein utilizing aluminum covered by
an Ingot Band, and the parties recognize that each of them has the ability to
protect itself against the fluctuation in the cost of aluminum above or below
the Ingot Band by purchasing the appropriate downside or upside protection,
which is available in the marketplace.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. Description of Products. This Agreement relates to containers of the
specifications set forth on Exhibit A attached hereto, required by Buyer at its
can filling location(s) set forth on Exhibit B (and at any additional or
substitute facilities designated by Buyer where Buyer may fill cans).
<PAGE>
2
2. Term. The initial term of this Agreement shall be five (5) years
commencing January 1, 1996 and terminating December 31, 2000. This Agreement
shall be automatically extended for one additional year beyond the initial term
(i.e., until December 31, 2001) if, during the period July 1, 1999 through
December 31, 1999, the daily London Metal Exchange cash settlement price for
aluminum ingot plus the Midwest premium for that ingot (the "Midwest Ingot
Price") is outside of the Ingot Band (i.e., above the ceiling cost or below the
floor cost) referenced on Exhibit C attached hereto, on more than 75% of the
dates when the market is open.
3. Volume.
(a) Buyer agrees to buy and ANC agrees to sell, in each calendar year
during the term of this Agreement, 7 billion cans. Can bodies and ends shall be
purchased by Buyer and supplied by ANC in substantially equal volumes.
(b) The foregoing annual volume of containers to be purchased hereunder
may not be changed by Buyer during the terms of this Agreement without the
written consent of ANC although ANC will use its commercially reasonable best
efforts to accommodate year over year changes hereafter requested by Buyer in
its annual volume.
(c) ANC will not be required to provide more than 57% of Buyers annual
band-priced volume hereunder in either of the following six month periods
throughout the term hereof: (i) April 1 through September 30; (ii) October 1
through March 31.
(d) Buyers annual forecasts of volume, provided for under paragraph 6
below, shall each contain a breakdown of forecasted volumes for each location
set forth on Exhibit B (and any additional or substitute Buyer filling
locations), which forecasts shall remain in effect until adjusted by Buyer upon
reasonable advance notice to ANC; provided, however, that such adjustments shall
not affect Buyers purchase commitment set forth in Paragraph 3(a) above.
4. Pricing.
(a) Prices under this Agreement shall be established and adjusted in
accordance with the terms, conditions and limitations set forth on Exhibit C
attached hereto. In addition to the price adjustment mechanisms set forth on
Exhibit C, any changes in the specifications of containers supplied hereunder
may result in an upward or downward price adjustment.
(b) ANC will in no event be required to meet competitive band formulas
or other competitive offers driven by lower metal costs; however, and
notwithstanding the foregoing, ANC intends to be competitive with specific
offers not driven by lower metal costs.
(c) Buyer and ANC recognize and agree that fluctuations in the price of
aluminum may drive the spot price of aluminum above the ceiling price or below
the floor price of the Ingot
<PAGE>
3
Band, as such ceiling and floor prices may be adjusted from time to time in
accordance with Exhibit C. However, Buyer and ANC agree to purchase and sell the
quantities agreed to hereunder with aluminum ingot costs no higher than such
ceiling prices nor lower than such floor prices notwithstanding any such
fluctuations. The parties recognize that protection against any such market
fluctuation is available to be purchased in the marketplace.
(d) Buyer and ANC agree to share equally in any savings resulting from
reductions in the amount of metal used to make cans. Buyers' share of such
savings will be passed along to Buyer only after ANC has recovered the cost of
any expenditures made by it in connection with the implementation of such metal
reductions.
5. Payment Terms. Payment terms shall be: 1% 10, net 30 days. Interest
shall be assessed on all past-due amounts at the annual rate of two (2%) percent
above the prime rate of interest at the First National Bank of Chicago, Chicago,
Illinois.
6. Delivery. Buyer shall advise ANC, prior to October 31, of its annual
requirements of containers under this Agreement for the upcoming calendar year
(the "Forecasted Volume"). ANC shall not be required under any circumstances to
sell band priced containers to Buyer in excess of such Forecasted volume. If the
Forecasted Volume is in excess of or less than the volume referred to in
subparagraph 3(a) above, ANC shall only be required to use its commercially
reasonable best efforts to provide such excess to Buyer or accommodate such
shortfall. In the event that the Forecasted Volume is in excess of the volume
referenced in subparagraph 3(a), ANC shall first attempt to secure metal within
the then current band pricing range. If ANC is unsuccessful in securing band
pricing for such excess, then ANC shall so advise Buyer and Buyer shall notify
ANC whether ANC should purchase metal to satisfy such excess requirements. If
Buyer requests ANC to purchase such metal, the metal price shall be based on the
Midwest Ingot Price on the date ANC purchases the metal.
7. Effect of Termination. Upon termination of this Agreement, for any
reason, Buyer shall accept all completed, specially fabricated or lithographed
containers and related items previously ordered, acquired or committed for by
ANC in reasonable quantities in anticipation of Buyer's normal can requirements.
8. Warranties, Claims and Limitation of Liability.
(a) ANC hereby warrants to Buyer that the containers to be manufactured
and sold to Buyer hereunder shall be free from defects in workmanship and
materials, and shall conform to the specifications set forth in Exhibit A
attached hereto. EXCEPT AS EXPRESSLY STATED ABOVE, THERE ARE NO OTHER WARRANTIES
OF ANY KIND, EXPRESS OR IMPLIED INCLUDING, BUT NOT LIMITED TO, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
<PAGE>
4
(b) ANC shall not be liable to Buyer or to any other person where the
claimed damages result from: (1) Buyers faulty assembly or closure of the can
body and loose end; (2) rust or outside corrosion on containers occurring after
Buyers receipt, except when caused by ANC's faulty workmanship or imperfect
materials; (3) the failure of Buyer (or any other party excluding ANC from time
to time having custody or control of allegedly defective goods) to exercise
reasonable care in conveying, warehousing, using, packing, handling,
distributing or storing filled or unfilled containers; or (4) the failure of
empty or filled containers exported or used in foreign countries unless a
special warranty has been specifically approved by ANC to cover such exported
containers.
(c) Seller shall give immediate consideration to settlement of Buyer's
claims, but in no event shall Seller be liable on any claim unless notice
thereof is received by ANC promptly following Buyer's discovery of an alleged
defect in a container.
(d) ANC's liability to Buyer hereunder shall be limited to Buyer's cost
of the defective containers, cost of the contents of the containers lost as a
direct result of the defect, and the reasonable cost of recovery and disposition
of defective containers (but as to the latter, only to the extent reasonably
required). ANC shall also be responsible for claims by third parties (including
governmental entities) to the extent arising out of a container defect provided
that ANC is given adequate notice of such claim and the opportunity to defend
such claim by counsel of its own choosing.
9. Force Majeure. Except for the payment of money due hereunder, ANC
and Buyer shall be excused for failure to perform under this Agreement where
such failure results from circumstances beyond the affected parties reasonable
control including, without limitation, such circumstances as fire, storm, flood,
earthquake, strikes, work stoppages or slowdowns, delay or failure of
transportation or suppliers, acts of the public enemy, acts of God or acts,
regulations, priorities or actions of the United States, a state or any local
government or agents or instrumentalities thereof.
10. Notices. All notices, requests or other communications shall be in
writing, and shall be deemed given when delivered personally or deposited in the
United States mail, postage prepaid, or to a courier service and properly
addressed to Buyer at: P.O. Box 723040, Atlanta, GA 31139-0040, Attention
Raymond J. Malone, Director of Purchasing and Lowry F. Kline, General Counsel,
and to ANC at: 8770 W. Bryn Mawr Ave., Chicago, IL 60631, Attention: Sales
Department, or to such other address as either party may, from time to time,
designate to the other in writing.
11. Assignability. This Agreement shall be binding upon and inure to
the benefit of the successors and assigns of the parties hereto including,
without limitation, a subsidiary, a purchaser, transferee or successor by merger
of substantially all of the business or assets of either Buyer or ANC. Buyer
hereby agrees to require the purchaser or transferee of all or any portion of
<PAGE>
5
its can filling operations to assume that portion of this requirements contract
that relates to the portion of its operations being sold or transferred.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
AMERICAN NATIONAL CAN COMPANY COCA-COLA ENTERPRISES INC.
By: /s/ James R. Turner By: /s/ Henry A. Schimberg
--------------------------- ---------------------------
James R. Turner Henry A. Schimberg
Title: Senior Vice President, Sales Title: President and Chief
Operating Officer
<PAGE>
EXHIBIT A
12 Ounce Aluminum Can Body
- 4 prints on metal
202 Diameter Aluminum Stay-On-Tab Ends
Cans must meet or exceed specifications, performance and quality criteria as
mandated by The Coca-Cola Company as they may change from time to time.
<PAGE>
EXHIBIT B
Buyer's Filling Location(s)
---------------------------
1. Downey, CA
2. College Park, GA
3. Houston, TX
4. Eagan, MN
5. Baltimore, MD
6. San Leandro, CA
7. Orlando, FL
8. Cincinnati, OH
9. Lenexa, KS
10. Twinsburg, OH
11. Ft. Worth, TX
12. Phoenix, AZ
13. Hollywood, FL
14. West Memphis, AR
15. Bellevue, WA
16. Needham Heights, MA
17. Dallas, TX
18. Cleveland, TN
19. Jacksonville, FL
20. Detroit, MI
21. Sandston, VA
22. Denver, CO
23. Mattoon, IL
24. Gretna, LA
25. Wilsonville, OR
26. Maryland Heights, MO
27. San Diego, CA
28. Grand Rapids, MI
29. Austin, TX
30. Little Rock, AR
31. Flint, MI
32. Honolulu, HI
33. Wichita, KS
34. McAllen, TX
<PAGE>
EXHIBIT C
MECHANISMS FOR ADMINISTRATION OF PRICING OF CONTAINERS
------------------------------------------------------
1. Can Price Components. Prices of cans to be purchased and sold hereunder
will be determined by reference to changes in the following 3 cost components:
(a) Cost of aluminum ingot ("ingot cost");
(b) Cost of conversion of ingot into can, end or tab sheet
("ingot conversion cost"); and
(c) Cost of conversion of can, end and tab sheet into finished
containers ("can sheet conversion cost").
2. Initial Can Price. Effective January 1, 1996, the base price for cans to be
supplied to you under this agreement will be * per thousand 12 ounce cans and
202 ends. This price is based upon an ingot cost of * per pound, an ingot
conversion cost of * per pound for * gauge body stock, * per pound for * gauge
clear soft drink end stock and * per pound for tab stock. This base price will
be adjusted as of January 1, 1996 to reflect any changes in the above ingot cost
and ingot conversion cost assumptions as follows: the ingot cost will be
determined based upon the average of the daily Platt's Metals Week transaction
prices (i.e., the straight arithmetic average official London Metal Exchange
(LME) cash settlement prices plus the Midwest Premium on such prices) during the
period June 1, 1995 through November 30, 1995. The ingot conversion cost is not
yet set but is expected to change by about * per pound to cover increases in the
cost of coating materials on ends and tabs only. Changes by Buyer to the
specifications set forth in Exhibit A prior to January 1, 1996 may also result
in an adjustment to the base price.
An example of the January 1, 1996 base price calculation is set forth in
Attachment 1.
3. Adjustments to Can And End Pricing Within The Band. Prices for all
Containers (cans and ends) covered by this Agreement will be adjusted every six
months on April 1 and October 1, with the first such adjustment taking place on
April 1, 1996. These price adjustments will be driven by changes in the cost of
the three components described in paragraph 1 above as follows:
(a) Price adjustments reflecting changes in ingot cost will be determined
by reference to the average of the daily Platt's Metals Week transaction prices
(i.e., the straight arithmetic average official London Metal Exchange cash
settlement prices plus the Midwest Premium on such prices) during a six-month
period prior to the particular adjustment date (the Average Ingot Price). For
the April 1 adjustment date, the six-month averaging period will be between
September 1 and February 28 immediately preceding such April 1 date. For the
October 1 adjustment date, the averaging period will be from March 1 to August
31 immediately preceding such October 1 date (i.e., for the April 1, 1996
adjustment date, the relevant averaging period will be September 1, 1995 to
February 28, 1996 and for the October 1, 1996 adjustment date, the
<PAGE>
2
relevant averaging period will be from March 1, 1996 to August 31, 1996). An
example of the impact of an ingot cost change on the can price is shown in
Attachment 2.
Notwithstanding the foregoing and subject to the adjustments described
below, ingot cost, inclusive of the Midwest Premium for such ingot, will never
be higher than a ceiling cost of * per pound or lower than a floor cost of * per
pound (the "ingot band"). Such ingot band will remain fixed until April 1, 1997,
at which time such band will be adjusted in the amount of * of the percentage
change in the monthly average Producer Price Index for Intermediate Materials,
Supplies and Components as reported in Table 1 of the monthly "Summary Data From
the Producer Price Index News Release" (hereafter called the Producer Price
Index) for the period January 1, 1996 through December 31, 1996 over the average
for the January 1, 1995 through December 31, 1995 period. The ingot band will be
similarly adjusted on April 1 of 1998, 1999, 2000 and 2001 if this Agreement is
extended in accordance with the term of this Agreement. All adjustments will be
based on the changes in the Producer Price Index for the calendar year
immediately preceding the adjustment date. An example of a calculation of the
ingot band adjustment is set forth below:
<TABLE>
<CAPTION>
Example of Calculation of Index Change:
<S> <C> <C>
Index Average for the period January 1, 1995 to December 31, 1995 102.0 (Straight average of each monthly index for
period January 1, 1995 to December 31, 1995)
Index Average for the period January 1, 1996 to December 31, 1996 104.0 (Straight average of each monthly index for
period January 1, 1996 to December 31, 1996)
Percentage Change 1.96%
Half of Percentage Change 0.98%
</TABLE>
Effect of Above Index Change on Floor and Ceiling Ingot Costs:
Ingot Cost per Pound Prior Effective April 1, 1997
- -------------------- ----- -----------------------
Floor Price * x 1.0098 = *
Ceiling Price * x 1.0098 = *
(b) Price adjustments reflecting changes in both the ingot conversion
cost and the can sheet conversion cost will not be implemented until April 1,
1997. At that time, increases in such conversion costs will be no more than * of
the year over year Producer Price Index increase described in paragraph 3(a)
above with reference to adjustments to the ingot band. This adjustment procedure
will be repeated on April 1 of 1998, 1999, 2000, and 2001 if this contract is
extended for an additional year. An example of the impact of conversion cost
changes on the can price is set forth in Attachment 3.
(c) The parties agree that in the event of significant chances in the
cost of items which are not reflected in the Producer Price Index, the parties
will meet to discuss making appropriate adjustments for these items.
(d) All price adjustments reflecting changes in costs shall be supported
by detailed documentation reasonably acceptable to Buyer.
<PAGE>
BAND PRICE FORMULA
ATTACHMENT 1
AMERICAN NATIONAL CAN CO.
ASSUMPTIONS FOR JANUARY 1, 1996:
AVERAGE MIDWEST INGOT JUNE 1 TO NOVEMBER 30, 1995 IS $.83 PER POUND
COST TO CONVERT END AND TAB INGOT INCREASES $.02 PER POUND
<TABLE>
<CAPTION>
EXAMPLE ONLY
BASE PRICE FOR 1996 CARBONATED SOFT DRINK
<S> <C> <C>
12 OZ ALUMINUM CAN AND 202 END $71.82
------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FORMULA FOR CHANGES
<TABLE>
<CAPTION>
1) CHANGE IN ALUMINUM INGOT PRICE (LME PLUS MIDWEST PREMIUM)
---------------------------------------------------------
PRIOR NEW CHANGE
----- --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
* * * PER POUND X 25 PER M CANS ($0.50)
* * * PER POUND X 6 PER M ENDS ($0.12)
</TABLE>
<TABLE>
<CAPTION>
2) CHANGE IN PRICE TO CONVERT INGOT TO COILED SHEET
------------------------------------------------
PRIOR NEW CHANGE
----- --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
* * * PER POUND X 31 PER M CANS 0.0112 $0.00
* * * PER POUND X 6 PER M ENDS 0.0086 $0.12
* * * PER POUND X 1 PER M TABS 0.0100 $0.02
</TABLE>
<TABLE>
<CAPTION>
3) CHANGE IN ANC'S PRICE TO MANUFACTURE AND DELIVER FINISHED PRODUCT
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
PRIOR NEW CHANGE
----- --- ------
* * * PER THOUSAND (* OF PPI INDEX CHANGE AS DEFINED) $0.00
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
NEW CONTAINER PRICE $71.34
------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
BAND PRICE FORMULA
ATTACHMENT 2
AMERICAN NATIONAL CAN CO.
ASSUMPTIONS FOR APRIL 1, 1996:
AVERAGE MIDWEST INGOT SEPTEMBER 1, 1995 TO FEBRUARY 28, 1996 IS $.82 PER POUND
<TABLE>
<CAPTION>
EXAMPLE ONLY
JANUARY 1, 1996 PRICE CARBONATED SOFT DRINK (SEE ATTACHMENT 1)
<S> <C> <C>
12 OZ ALUMINUM CAN AND 202 END $71.34
-----
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FORMULA FOR CHANGES
<TABLE>
<CAPTION>
1) CHANGE IN ALUMINUM INGOT PRICE (LME PLUS MIDWEST PREMIUM)
---------------------------------------------------------
PRIOR NEW CHANGE
----- --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
* * * PER POUND X 25 PER M CANS ($0.25)
* * * PER POUND X 6 PER M ENDS ($0.06)
</TABLE>
<TABLE>
<CAPTION>
2) CHANGE IN PRICE TO CONVERT INGOT TO COILED SHEET
------------------------------------------------
PRIOR % NEW CHANGE
----- --- --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
* * * * PER POUND X 31 PER M CANS 0.0112 $0.00
* * * * PER POUND X 6 PER M ENDS 0.0086 $0.00
* * * * PER POUND X 1 PER M TABS 0.0100 $0.00
</TABLE>
<TABLE>
<CAPTION>
3) CHANGE IN ANC'S PRICE TO MANUFACTURE AND DELIVER FINISHED PRODUCT
-----------------------------------------------------------------
PRIOR % NEW CHANGE
----- --- --- ------
<S> <C> <C> <C> <C> <C>
* * * * PER THOUSAND (* OF PPI INDEX CHANGE AS DEFINED) $0.00
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
NEW CONTAINER PRICE $71.03
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
BAND PRICE FORMULA
ATTACHMENT 3
AMERICAN NATIONAL CAN CO.
ASSUMPTIONS FOR APRIL 1, 1997:
AVERAGE MIDWEST INGOT SEPTEMBER 1, 1995 TO FEBRUARY 28, 1996 IS $.80 PER POUND
PPI INDEX INCREASES 2%, THEREFORE FORMULA FACTOR CHANGES BY 1%
<TABLE>
<CAPTION>
EXAMPLE ONLY
APRIL 1, 1996 PRICE CARBONATED SOFT DRINK (SEE ATTACHMENT 1)
<S> <C> <C>
12 OZ ALUMINUM CAN AND 202 END $71.03
------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FORMULA FOR CHANGES
<TABLE>
<CAPTION>
1) CHANGE IN ALUMINUM INGOT PRICE (LME PLUS MIDWEST PREMIUM)
--------------------------------------------------------
PRIOR NEW CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
* * * PER POUND X 25 PER M CANS ($0.50)
* * * PER POUND X 6 PER M ENDS ($0.12)
</TABLE>
<TABLE>
<CAPTION>
2) CHANGE IN PRICE TO CONVERT INGOT TO COILED SHEET
------------------------------------------------
PRIOR % NEW CHANGE
----- --- --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
* * * * PER POUND X 31 PER M CANS 0.0112 $0.10
* * * * PER POUND X 6 PER M ENDS 0.0086 $0.05
* * * * PER POUND X 1 PER M TABS 0.0100 $0.01
</TABLE>
<TABLE>
<CAPTION>
3) CHANGE IN ANC'S PRICE TO MANUFACTURE AND DELIVER FINISHED PRODUCT
PRIOR % NEW CHANGE
----- --- --- ------
<S> <C> <C> <C> <C> <C> <C> <C>
* * * * PER THOUSAND (* OF PPI INDEX CHANGE AS DEFINED) $0.28
</TABLE>
<TABLE>
<S> <C>
NEW CONTAINER PRICE $70.85
------
</TABLE>
<PAGE>
[ANC Letterhead]
January 4, 1996
Mr. Ray Malone
Coca-Cola Enterprises, Inc.
P.O. Box 723040
Atlanta, Georgia 31139-0040
Dear Ray:
This letter will serve as an addendum to Exhibit C of the can supply agreement
sent to you on October 6, 1995.
1. Your invoice price effective January 1, 1996 will be * per
thousand based on * per pound aluminum as defined in the
agreement. This will not change during 1996.
2. Notwithstanding paragraph 1 above, your price will be adjusted,
effective January 1, 1996, to * per thousand based on * as
outlined above. Price adjustments due to changes in the metal cost
from the * per pound base will be handled on a credit- memo basis
consistent with the other credits referred to in this memo.
3. Your payment terms are *.
4. Beginning on January 1, 1996, * will be credited based upon all
purchases made by you from us under the agreement or otherwise.
5. Beginning on January 1, 1998, * purchased by you from us will be
credited based upon all purchases by you under the agreement or
otherwise (so that the total rebate due you for cans and ends
purchased on and after January 1, 1998 pursuant to items 4 and 5
will be *).
<PAGE>
ADDENDUM TO EXHIBIT C OF THE CAN SUPPLY AGREEMENT OF 10/06/95
Page 2
6. During the term of our band agreement, if the Floor Ingot Cost as
defined in such agreement is in effect, we will rebate to you *.
All of the above rebates will be remitted to you through the issuance of
quarterly credit memos. Should you have any questions, please feel free to call
me.
Very truly yours,
/s/ James R. Turner
James R. Turner
Senior Vice President, Sales
Beverage Cans Americas
American National Can Company
JRT249-2/bb
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated April 19, 1999, relating
to the combined financial statements of American National Can Group, Inc., which
appears in the Prospectus. We also consent to the references to us under the
headings "Experts", "Summary Combined Financial Information" and "Selected
Combined Financial Information" in such Prospectus. However, it should be noted
that PricewaterhouseCoopers LLP has not prepared or certified such "Summary
Selected Combined Financial Information" or "Selected Combined Financial
Information."
PricewaterhouseCoopers LLP
Chicago, Illinois
April 21, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
AMERICAN NATIONAL CAN GROUP, INC.'S COMBINED FINANCIAL STATEMENTS AND IS
QUALIFED IN ITS ENTIRETY BY REFERENCE TO SUCH COMBINED FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001084304
<NAME> American National Can Group, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 171
<SECURITIES> 0
<RECEIVABLES> 171
<ALLOWANCES> 33
<INVENTORY> 236
<CURRENT-ASSETS> 744
<PP&E> 1,464
<DEPRECIATION> 628
<TOTAL-ASSETS> 3,927
<CURRENT-LIABILITIES> 1,270
<BONDS> 0
0
0
<COMMON> 2,957
<OTHER-SE> (1,419)
<TOTAL-LIABILITY-AND-EQUITY> 3,927
<SALES> 2,459
<TOTAL-REVENUES> 2,459
<CGS> 1,984
<TOTAL-COSTS> 128
<OTHER-EXPENSES> 135
<LOSS-PROVISION> 10
<INTEREST-EXPENSE> 69
<INCOME-PRETAX> 143
<INCOME-TAX> 27
<INCOME-CONTINUING> 116
<DISCONTINUED> 1
<EXTRAORDINARY> 0
<CHANGES> (3)
<NET-INCOME> 114
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
