<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM 10-Q
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the quarterly period ended March 31, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the transition period from _________ to
_________
-----------------------------
COMMISSION FILE NUMBER 1-15163
AMERICAN NATIONAL CAN GROUP, INC.
(Exact name of Registrant as specified in its charter)
Delaware 36-4287015
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) No.)
8770 W. Bryn Mawr Avenue, Chicago, Illinois 60631
(Address of principal executive offices)
Registrant's telephone number, including area code: (773) 399-3000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] - No [ ]
The number of shares outstanding of the registrant's common stock as of April
24, 2000 was 55,000,000
================================================================================
<PAGE> 2
AMERICAN NATIONAL CAN GROUP, INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I: FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Statements of Income (unaudited) for the three months
ended March 31, 2000 and 1999 .................................................... 3
Consolidated Balance Sheets at March 31, 2000 (unaudited)
and at December 31, 1999 ......................................................... 4
Condensed Consolidated Statements of Cash Flows (unaudited) for the three months
ended March 31, 2000 and 1999 .................................................... 5
Consolidated Statement of Changes in Equity (unaudited) for the three months
ended March 31, 2000 ............................................................. 6
Notes to Consolidated Financial Statements (unaudited) ........................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ............................................................ 12
Item 3. Quantitative and Qualitative Disclosure of Market Risk ........................... 14
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ................................................. 15
Signatures ................................................................................ 16
</TABLE>
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
AMERICAN NATIONAL CAN GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
MARCH 31,
----------------------
2000 1999
--------- ---------
<S> <C> <C>
Net sales ............................................... $ 521,105 $ 530,642
Cost of goods sold (excluding depreciation) ............. 420,003 432,268
Selling, general and administrative expense ............. 29,744 31,207
Research and development expense ........................ 3,384 3,563
Depreciation and amortization ........................... 18,045 20,986
Goodwill amortization ................................... 10,441 10,201
Goodwill impairment writedown ........................... 127,000 --
Restructuring charge (credit) and writedown of
property and equipment .............................. 398 --
--------- ---------
OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS ...... (87,910) 32,417
Interest expense ........................................ 21,474 15,318
Interest income and other financial income (expense), net 1,061 8,156
--------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES, EQUITY EARNINGS AND MINORITY INTEREST ........ (108,323) 25,255
Income tax expense ...................................... 7,988 10,774
--------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE EQUITY
EARNINGS AND MINORITY INTEREST ...................... (116,311) 14,481
Equity in net earnings of affiliates .................... 342 1,976
Minority interest ....................................... (5) (470)
--------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS ................ (115,974) 15,987
Income from discontinued operations, net of tax
expense of $1,309 ................................... -- 1,098
--------- ---------
NET INCOME (LOSS) ....................................... $(115,974) $ 17,085
========= =========
EARNINGS (LOSS) PER SHARE - BASIC AND ASSUMING DILUTION
Income (loss) from continuing operations ........... $ (2.11) $ 0.29
Income from discontinued operations ................ -- 0.02
--------- ---------
NET INCOME (LOSS) .................................. $ (2.11) $ 0.31
========= =========
Weighted average shares outstanding (in thousands)
Basic .............................................. 55,000 55,000
Assuming dilution .................................. 55,000 55,000
</TABLE>
See notes to Consolidated Financial Statements.
<PAGE> 4
AMERICAN NATIONAL CAN GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars, except share amounts)
<TABLE>
<CAPTION>
MARCH 31,2000 DECEMBER 31, 1999
------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS:
CURRENT ASSETS
Cash and cash equivalents ...................... $ 35,817 $ 53,155
Accounts receivable ............................ 165,188 143,486
Other receivables and prepaid expenses ......... 65,688 71,409
Inventories .................................... 258,452 222,707
Deferred income taxes .......................... 88,864 86,339
----------- -----------
TOTAL CURRENT ASSETS ........................... 614,009 577,096
Property and equipment, net .................... 780,730 790,199
Goodwill, net .................................. 1,084,077 1,221,565
Investments in equity affiliates ............... 104,897 102,410
Pension asset .................................. 290,773 277,450
Deferred income taxes .......................... 157,758 156,883
Other long-term assets ......................... 124,129 101,215
----------- -----------
TOTAL ASSETS ................................... $ 3,156,373 $ 3,226,818
=========== ===========
LIABILITIES AND EQUITY:
CURRENT LIABILITIES
Accounts payable - trade ....................... $ 257,531 $ 247,020
Other payables and accrued liabilities ......... 327,745 372,119
Current portion of long-term debt .............. 301 245
Short-term financing ........................... 93,597 64,350
----------- -----------
TOTAL CURRENT LIABILITIES ...................... 679,174 683,734
Deferred income taxes .......................... 53,448 53,826
Postretirement benefit obligations ............. 302,058 302,860
Other long-term liabilities .................... 143,318 145,973
Long-term debt ................................. 1,034,252 972,732
----------- -----------
TOTAL LIABILITIES .............................. 2,212,250 2,159,125
----------- -----------
Commitments and contingencies .................. -- --
Minority interests ............................. 7,005 7,002
EQUITY
Preferred stock (25,000,000 shares authorized,
none issued and outstanding) ............... -- --
Common stock ($0.01 par value, 1,000,000,000
shares authorized, 55,000,000 shares issued
and outstanding) ........................... 550 550
Additional paid in capital ..................... 1,198,205 1,198,205
Receivable from Pechiney Plastic Packaging, Inc. (61,825) (61,825)
Retained earnings (deficit) .................... (107,363) 8,611
Accumulated other comprehensive loss ........... (92,449) (84,850)
----------- -----------
TOTAL EQUITY ................................... 937,118 1,060,691
----------- -----------
TOTAL LIABILITIES AND EQUITY ................... $ 3,156,373 $ 3,226,818
=========== ===========
</TABLE>
See notes to Consolidated Financial Statements.
<PAGE> 5
AMERICAN NATIONAL CAN GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations ............................... $(115,974) $ 15,987
Minority interests ..................................................... 5 470
Equity in net earnings of affiliates ................................... (342) (1,976)
Depreciation, amortization and goodwill impairment writedown ........... 155,486 31,187
Restructuring charge (credit) and write down of property and equipment.. 398 --
Provision for deferred income taxes .................................... 2,660 1,492
Other non-cash (income) expense, net ................................... (8,792) (6,032)
Changes in assets and liabilities exclusive of effects from divestitures
and translation adjustments ....................................... (118,008) (74,716)
--------- ---------
Net cash used in operating activities of continuing operations ............ (84,567) (33,588)
Net cash used in operating activities of discontinued operations .......... -- (1,635)
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES ..................................... (84,567) (35,223)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment ............................. (18,230) (14,540)
Proceeds from sales of property, plant and equipment ................... -- 29
--------- ---------
Net cash used in investing activities of continuing operations ............ (18,230) (14,511)
Net cash used in investing activities of discontinued operations .......... -- (10,878)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES ..................................... (18,230) (25,389)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term debt ............................................ 70,460 --
Payments on long-term debt ............................................. (8,053) (25,115)
Net increase in short-term financing ................................... 31,305 87,589
Dividends paid:
To shareholders .................................................... (7,700) --
To Pechiney ........................................................ -- (10,192)
To minority interests in subsidiaries .............................. -- (4,776)
--------- ---------
Net cash provided by financing activities of continuing operations ........ 86,012 47,506
Net cash used in financing activities of discontinued operations .......... -- (2,061)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES ................................. 86,012 45,445
NET EFFECT OF FOREIGN CURRENCY TRANSLATION ON CASH ........................ (553) 1,495
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS ................................. (17,338) (13,672)
Increase in cash and cash equivalents of discontinued operations .......... -- (896)
--------- ---------
Net decrease in cash and cash equivalents of continuing operations ........ (17,338) (14,568)
Cash and cash equivalents at beginning of period .......................... 53,155 170,549
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................................ $ 35,817 $ 155,981
========= =========
</TABLE>
See notes to Consolidated Financial Statements.
5
<PAGE> 6
AMERICAN NATIONAL CAN GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(In thousands of U.S. dollars)
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Additional Receivable Retained Other
Common Paid in from Earnings Comprehensive
Stock Capital PPPI (Deficit) (Loss) Total
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 ... $ 550 $ 1,198,205 $ (61,825) $ 8,611 $ (84,850) $ 1,060,691
Net loss ....................... (115,974) (115,974)
Changes in accumulated other
comprehensive loss:
Foreign currency translation
adjustment, net of tax
benefit of $858 .......... (7,599) (7,599)
----------- ----------- ----------- ----------- ----------- -----------
Balance at March 31, 2000 ...... $ 550 $ 1,198,205 $ (61,825) $ (107,363) $ (92,449) $ 937,118
=========== =========== =========== =========== =========== ===========
</TABLE>
Accumulated other comprehensive loss represents cumulative translation
adjustments at December 31, 1999 and March 31, 2000. Such amounts are net of tax
aggregating $21,305 and $22,163 at those dates, respectively.
See notes to Consolidated Financial Statements.
6
<PAGE> 7
AMERICAN NATIONAL CAN GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share amounts)
(Unaudited)
NOTE 1: COMPANY FORMATION AND BASIS OF PRESENTATION
COMPANY FORMATION
American National Can Group, Inc. (the "Company" or "ANC"), a Delaware
company, consists of the former worldwide beverage can business of Pechiney, a
French company. The Company was incorporated with the issuance of 55,000,000
shares of ANC common stock and was formed through a series of transactions (the
"Reorganization") completed immediately prior to the initial public offering
(the "Offering" or the "IPO") by Pechiney of a 54.5% ownership interest in the
Company. Operations of the Company prior to the Reorganization were conducted by
(a) Pechiney North America, Inc. ("PNA"), a wholly owned subsidiary of Pechiney,
through its 90% owned subsidiary (Pechiney owned directly the remaining 10%),
American National Can Company ("ANCC"), and ANCC's various European (in which
Pechiney held a minority interest) and Asian subsidiaries, and (b) Pechiney
through its subsidiaries in Turkey (65% owned), France (100% owned) and Brazil
(100% owned) and joint ventures in Mexico and Korea. ANCC also owned and
operated a plastics packaging business.
The Reorganization consisted of:
The payment of dividends to Pechiney aggregating $100,242 by certain
of Pechiney's European beverage can subsidiaries prior to completion
of the Offering. Such dividends were in addition to $21,280 of
dividends paid to Pechiney prior to the Reorganization.
The transfer by Pechiney of (a) PNA, (b) its minority interests in the
ANCC European subsidiaries and (c) its subsidiaries in Turkey, France
and Brazil and investment in joint ventures to the Company.
The transfer by ANCC of its plastics packaging business along with
$260,000 of related party debt to Pechiney Plastic Packaging, Inc.
("PPPI") and transfer of the stock of PPPI to Pechiney in exchange for
Pechiney's 10% interest in ANCC.
On July 28, 1999, the Company acquired the remaining 35% minority interest
in its Turkish subsidiary for $53,000 in cash and is including 100% of the
Turkish subsidiary's operating results in the consolidated financial statements
thereafter.
On August 2, 1999, Pechiney completed the IPO by selling 30,000,000 shares
of ANC common stock for $17.00 per share less underwriting discounts and
commissions. ANC did not receive any proceeds from the IPO. Pechiney continues
to hold 25,000,000 shares of ANC common stock.
BASIS OF PRESENTATION
The accompanying financial statements include the combined accounts of PNA,
ANCC and the entities transferred by Pechiney to the Company for the three
months ended March 31, 1999 and the consolidated accounts of the Company as of
December 31, 1999 and March 31, 2000 and for the three months ended March 31,
2000. The former plastics operations of ANCC have been presented as discontinued
operations in the accompanying financial statements. In the consolidated
statements of income and cash flows for the three months ended March 31, 1999,
the operating results and cash flows of the plastics business have been
presented separately as single-line items.
7
<PAGE> 8
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of the Company as of March 31, 2000 and the results of its
operations for the three month periods ended March 31, 2000 and 1999 and cash
flows for the three months ended March 31, 2000 and 1999. All adjustments
reflected in the accompanying unaudited consolidated financial statements are of
a normal recurring nature. Results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year. Certain
information and footnote disclosures, normally included in financial statements
prepared in accordance with generally accepted accounting principles, have been
condensed or omitted. The unaudited consolidated financial statements should be
read in conjunction with the combined financial statements and the related notes
included in the Company's Form 10-K for the year ended December 31, 1999.
NOTE 2: MERGER AGREEMENT
On March 31, 2000, the Company and Rexam PLC ("Rexam") entered into a
definitive agreement under which Rexam will acquire all outstanding shares of
the Company for $18.00 per share payable in cash. Rexam has commenced the
transaction with a cash tender offer. The Boards of Directors of both companies
have unanimously approved the merger agreement. The transaction will be
conditioned on regulatory approvals, including expiration of applicable waiting
periods and other customary conditions. In addition, Pechiney, the Company's
largest shareholder with approximately 45% of the Company's stock, has entered
into an agreement pursuant to which it has irrevocably agreed to tender all of
its shares into the Rexam tender offer.
NOTE 3: GOODWILL IMPAIRMENT WRITEDOWN
Substantially all of the goodwill reflected on the consolidated 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. In 1999 ANC
recorded goodwill of $38,603 related to the acquisition of the remaining 35%
minority interest in its Turkish subsidiary.
The carrying value of goodwill is reviewed regularly in accordance with
Accounting Principles Board Opinion No. 17, "Intangible Assets", ("APB 17") and
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of", to
reflect changes which may have permanently impaired the profitability and the
value of the related assets. For purposes of APB 17, the Company evaluates
goodwill impairment on a fair value basis.
During the first quarter of 2000, ANC received several offers from third
parties to purchase all of the outstanding shares of ANC common stock. ANC
retained Deutsche Bank Securities, Inc. ("Deutsche Bank") as financial advisor
to evaluate these offers and other potential alternatives. On March 31, 2000,
Deutsche Bank issued a Fairness Opinion and advised the ANC Board of Directors
that the Rexam offer of $18.00 per share was fair from a financial point of view
to ANC shareholders. The ANC Board of Directors agreed with the Deutsche Bank
Opinion and on March 31, 2000 approved a definitive merger agreement under which
Rexam would acquire all outstanding shares of the Company for $18.00 per share
(Note 2).
Based on Deutsche Bank's and the ANC Board of Director's recommendations
that $18.00 per share represented a fair value of the Company, ANC determined
that a goodwill impairment existed at March 31, 2000 and accordingly recorded a
goodwill writedown of $127,000 with no tax benefit.
NOTE 4: DISCONTINUED OPERATIONS
Net sales for the plastics business were $209,876 for the three months
ended March 31, 1999. Net income from discontinued operations for the three
months ended March 31, 1999 includes $1,098 of income, net of income tax expense
of $1,309, from the results of the plastics operations. Intercompany borrowings
of the plastics operations from ANCC are included in financing activities from
continuing operations in the statements of cash flows for the three months ended
March 31, 1999.
8
<PAGE> 9
NOTE 5: COMPREHENSIVE LOSS
Comprehensive loss for the three months ended March 31, 2000 and 1999
consisted of the following:
<TABLE>
<CAPTION>
Three months ended March 31,
2000 1999
--------- ---------
<S> <C> <C>
Net income (loss) ..................................... $(115,974) $ 17,085
Other comprehensive loss:
Foreign currency translation adjustment ........... (8,457) (33,918)
Foreign currency translation adjustment tax effect 858 8,743
--------- ---------
Foreign currency translation adjustment, net of tax (7,599) (25,175)
--------- ---------
Comprehensive loss .................................... $(123,573) $ (8,090)
========= =========
</TABLE>
NOTE 6: EARNINGS (LOSS) PER SHARE
The following is a reconciliation of the numerators and denominators of the
basic and assuming dilution earnings (loss) per share from continuing operations
computations (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three months ended March 31,
2000 1999
---- ----
<S> <C> <C>
INCOME (LOSS) (NUMERATOR):
Income (loss) from continuing operations ............... $(115,974) $ 15,987
SHARES (DENOMINATOR):
Weighted average number of shares outstanding during the
period .............................................. 55,000 55,000
Incremental common shares attributable to
dilutive stock awards ............................... -- --
--------- ---------
Diluted number of shares outstanding
during the period ................................... 55,000 55,000
========= =========
Basic earnings (loss) per common share ................. $ (2.11) $ 0.29
Earnings (loss) per common share assuming dilution ..... $ (2.11) $ 0.29
</TABLE>
If the Company had net income from continuing operations for the three
months ended March 31, 2000 instead of a loss, the incremental common shares
attributable to dilutive stock awards would have been 290 shares.
No dilutive securities were outstanding prior to the IPO.
9
<PAGE> 10
NOTE 7: INVENTORIES
Inventories consisted of the following:
March 31, 2000 December 31, 1999
-------------- -----------------
Raw materials $ 48,401 $ 55,785
Spare parts 35,582 37,138
Work-in-process 448 807
Finished goods 174,021 128,977
-------- --------
$258,452 $222,707
======== ========
NOTE 8: RESTRUCTURING CHARGE (CREDIT) AND WRITEDOWN OF PROPERTY
AND EQUIPMENT
The $398 restructuring charge (credit) and writedown of property and
equipment for continuing operations for the three months ended March 31, 2000
included a restructuring charge of $303 and a loss on the sale of property and
equipment of $95.
The activity in the restructuring reserve for continuing operations for the
three months ended March 31, 2000 was as follows:
<TABLE>
<CAPTION>
Employee Equipment
termination dismantle
and Lease and Non-cash
severance termination Facility disposal asset
programs cost costs costs writedowns Total
-------- -------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 $ 31,863 $ 8,023 $ 6,447 $ 879 $ -- $ 47,212
Charge to income 14 -- 287 2 -- 303
Cash payments (3,415) -- (482) (2) -- (3,899)
Non-cash utilized or reclassified (233) -- -- -- -- (233)
-------- -------- -------- -------- --------- --------
Balance at March 31, 2000 $ 28,229 $ 8,023 $ 6,252 $ 879 $ -- $ 43,383
======== ======== ======== ======== ========= ========
</TABLE>
ANC has segregated the restructuring activities into three separate
programs; (1) pre-1996 program, (2) Challenge program and (3) Next Level and
Lean Manufacturing program.
A summary of the activity in the reserve relating to the pre-1996 program is
as follows:
<TABLE>
<CAPTION>
Employee Equipment
termination dismantle
and Lease and Non-cash
severance termination Facility disposal asset
programs cost costs costs writedowns Total
----------- ----------- -------- -------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 $ -- $ -- $ -- $ -- $ -- $ --
Charge to income -- -- 189 2 -- 191
Cash payments -- -- (189) (2) -- (191)
----------- ----------- ----- ----- ----------- -----
Balance at March 31, 2000 $ -- $ -- $ -- $ -- $ -- $ --
=========== =========== ===== ===== =========== =====
</TABLE>
At December 31, 1999 the reserve balance related to the pre-1996 program was
zero. The charge to income and the cash payments in the first quarter of 2000
are related to costs incurred to maintain two facilities previously closed.
These costs, which are not expected to be material, will continue until the
expiration of a lease at one facility in 2001 and until the property at the
other facility is ultimately sold.
10
<PAGE> 11
A summary of the activity in the reserve relating to the Challenge program
is as follows:
<TABLE>
<CAPTION>
Employee Equipment
termination dismantle
and Lease and Non-cash
severance termination Facility disposal asset
programs cost costs costs writedowns Total
-------- -------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 $ 8,490 $ 5,123 $ 6,447 $ 879 $ -- $ 20,939
Charge to income 14 -- 98 -- -- 112
Cash payments (775) -- (293) -- -- (1,068)
-------- -------- -------- -------- ----------- --------
Balance at March 31, 2000 $ 7,729 $ 5,123 $ 6,252 $ 879 $ -- $ 19,983
======== ======== ======== ======== =========== ========
</TABLE>
The charge to income of $112 in the first quarter of 2000 is related to cash
payments for employee severance costs and facility costs at the Jacksonville, FL
facility shut down in December 1996 which exceeded the remaining reserve balance
at December 31, 1999.
Cash payments for employee termination and severance were primarily for the
Piscataway, NJ plant, but also included severance payments to employees
terminated at Jacksonville, FL and the ANC headquarters in Chicago, IL. Cash
payments for facility costs included rent costs related to the administrative
offices in Chicago, IL and facility costs at the Jacksonville, FL plant.
A summary of the activity in the reserve relating to the Next Level and Lean
Manufacturing program is as follows:
<TABLE>
<CAPTION>
Employee Equipment
termination dismantle
and Lease and Non-cash
severance termination Facility disposal asset
programs cost costs costs writedowns Total
-------- -------- --------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 $ 23,373 $ 2,900 $ -- $ -- $ -- $ 26,273
Cash payments (2,640) -- -- -- -- (2,640)
Non-cash utilized or reclassified (233) -- -- -- -- (233)
-------- -------- --------- ----------- ----------- --------
Balance at March 31, 2000 $ 20,500 $ 2,900 $ -- $ -- $ -- $ 23,400
======== ======== ========= =========== =========== ========
</TABLE>
The cash payments of $2,640 were for employee termination and severance
related to the Next Level and Lean Manufacturing program in both the United
States and Europe.
A non-cash adjustment of $233 was made to the restructuring reserve in the
first quarter of 2000 as a result of currency fluctuations in the euro and
British pound.
11
<PAGE> 12
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
FORWARD-LOOKING STATEMENTS
This discussion and the information contained in the preceding notes to the
financial statements include forward-looking statements based on current
expectations about future events. 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's
business, including, among other things:
- - our customers' financial condition
- - the number of cans we will supply and the locations of our customers
- - our ability to control costs
- - the terms upon which we will acquire aluminum and our ability to reflect
those terms in can sales
- - our reliance on third-party vendors for various services
- - our debt levels and our ability to obtain and retain financing and service
debt
- - competitive pressures in the beverage can business
- - the successful implementation of our strategy to create shareholder value
through superior profitability and cash generation
- - prevailing interest rates and currency exchange rates
- - payment of dividends
- - the effect of any acquisitions, investments and divestitures on our results
of operations and financial condition
- - legal proceedings and regulatory matters
- - the outcome of the proposed merger agreement with Rexam
- - general economic conditions, particularly the strength of the economies in
which we have operations.
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 herein might not occur.
RESULTS OF OPERATIONS
Sales of beverage cans are highest during the summer months. Therefore,
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.
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Net sales decreased by 1.8% to $521 million in the first quarter of 2000,
compared with $530 million in the first quarter of 1999. A $16 million adverse
impact of foreign currency exchange rates, predominately in Europe, was
primarily responsible for the decline. Total unit sales increased in the first
quarter by 0.2% compared with the 1999 first quarter. Increases in U. S. and
Brazil soft drink can sales volumes were partially offset by volume declines in
U. S. beer can sales and unit sales in Europe and Asia.
Cost of goods sold of $420 million in the first quarter of 2000 was down
$12 million, or 2.8%, compared with cost of goods sold of $432 million for the
first quarter of 1999 due primarily to manufacturing improvements. Cost of goods
sold as a percentage of net sales declined to 80.6% for the first quarter of
2000 compared with 81.5% for the first quarter of 1999. Gross margins improved
to $101 million in the first quarter of 2000 compared to $98 million a year ago.
12
<PAGE> 13
An operating loss from continuing operations of $88 million, which included
a goodwill impairment writedown of $127 million, was recorded in the first
quarter of 2000. Operating income from continuing operations excluding the $127
million writedown for goodwill impairment increased by $7 million, or 20.6%, to
$39 million in the first quarter of 2000, compared with $32 million in the first
quarter of 1999 primarily as a result of the improved manufacturing performance.
Selling, general and administrative expenses declined by $1 million, or 4.7%
quarter on quarter. Total depreciation and amortization, including goodwill
amortization, but excluding the goodwill impairment writedown, decreased by $3
million, or 8.7%, to $31 million in the first quarter of 2000 compared with $28
million in the first quarter of 1999 as a result of lower depreciation expense.
Exchange rate fluctuations adversely impacted operating income by $3 million
compared with the first quarter of 1999.
Income from continuing operations, excluding the goodwill impairment
writedown, decreased to $11 million in the first quarter of 2000, compared with
$16 million in the first quarter last year. Interest expense increased by $6
million, or 40.2%, from $15 million in the first quarter of 1999 to $21 million
in the first quarter of 2000. Average borrowing rates, which increased to 7.6%
in the first quarter of 2000 versus 6.3% in the first quarter of 1999, added
over $3 million in interest expense to the first quarter 2000 results. Average
borrowing levels and the impact of the IPO and Reorganization also resulted in
additional interest expense quarter on quarter. Interest income and other
financial income decreased to $1 million in the first quarter of 2000 from $8
million in the same period in 1999. The 1999 first quarter included a $5 million
gain on the sale of the Company's 50% interest in a recycling joint venture.
Income tax expense was $8 million in the first quarter of 2000 compared to $11
million in the first quarter of 1999. The worldwide effective tax rate,
excluding the goodwill impairment writedown, increased slightly to 42.8% in the
first quarter of 2000 compared with 42.7% in the first quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $36 million at March 31, 2000, a decrease
of $17 million compared with $53 million at December 31, 1999.
Total debt of $1,128 million at March 31, 2000 increased by $91 million
compared with total debt of $1,037 million at December 31, 1999. A $47 million
increase in trade working capital requirements and a $44 million reduction in
other payable and accrued liabilities contributed to the increased debt
requirements from year-end.
Total equity decreased by $124 million from $1,061 million as of December
31, 1999 to $937 million at March 31, 2000 due to the net loss for the first
three months of 2000 of $116 million and an $8 million increase in accumulated
other comprehensive loss. As a result of the pending transaction with Rexam, the
Company has not declared any dividends during the first quarter of 2000.
The Company's total debt to equity ratio increased to 1.20 at March 31,
2000 compared with 0.98 at December 31, 1999 as a result of the net loss and
increased borrowing requirements in the first quarter of 2000.
Net cash used in operating activities was $85 million for the three months
ended March 31, 2000. The loss from continuing operations of $116 million and
$155 million of depreciation and amortization, including the $127 million
goodwill impairment writedown, resulted in operating income of $39 million,
which was offset by non-cash income of $9 million and a $118 million usage for
the change in other assets and liabilities, of which $61 million represented
additional working capital requirements.
Net cash used in investing activities of $18 million for the first quarter
of 2000 represents capital expenditures.
13
<PAGE> 14
Net cash provided by financing activities amounted to $86 million for the
first three months of 2000. The proceeds from new long-term debt of $71 million
and an increase in short-term financing of $31 million were partially offset by
dividend payments of $8 million and long-term debt repayments of $8 million.
YEAR 2000
Our efforts in this area resulted in normal continuation of our operations
and systems, without any disruptions.
OTHER MATTERS
On April 3, 2000, the Company announced that Rexam and ANC had entered into
a definitive agreement under which Rexam will acquire all outstanding shares of
the Company for $18.00 per share payable in cash. Rexam has commenced the
transaction with a cash tender offer. The Boards of Directors of both companies
have unanimously approved the merger agreement. The transaction will be
conditioned on regulatory approvals, including expiration of applicable waiting
periods and other customary conditions. In addition, Pechiney, the Company's
largest shareholder with approximately 45% of the Company's stock, has entered
into an agreement pursuant to which it has irrevocably agreed to tender all of
its shares into the Rexam tender offer.
ITEM 3. Quantitative and Qualitative Disclosure of Market Risk
The Company is exposed to various market risks, including fluctuations in
metal prices, foreign exchange rates and interest rates on our debt. There has
been no material change in the Company's market risks that would significantly
affect the disclosures made in the Form 10-K for the year ended December 31,
1999.
14
<PAGE> 15
PART II: OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(A) Exhibits
27 Financial Data Schedule (filed only electronically with the SEC)
(B) Reports on Form 8-K
No reports on Form 8-K were filed for the quarter ended March 31, 2000.
On April 11, 2000 the Company filed a report on Form 8-K related to an
Agreement and Plan of Merger ANC entered into with Rexam PLC.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
American National Can Group, Inc.
By /s/ John G. LaBahn
----------------------
John G. LaBahn
Vice President, Controller and Chief Accounting Officer *
Date: April 26, 2000
* The Chief Accounting Officer is also duly authorized to sign on behalf of
the registrant and has signed in the dual responsibilities.
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