<PAGE>1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1994
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 1-2227
CROWN CORK & SEAL COMPANY, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1526444
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization) No.)
9300 Ashton Road, Philadelphia, PA 19136
(Address of principal executive offices) (Zip Code)
215-698-5100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
There were 89,118,641 shares of Common Stock outstanding as of July 31, 1994.
This Form 10-Q consists of a total of 13 pages.
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CROWN CORK & SEAL COMPANY, INC.
PART 1 - FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (In millions except share data)
Three months ended June 30, 1994 1993
NET SALES $1,134.5 $1,168.6
COSTS, EXPENSES & OTHER INCOME
Cost of products sold, excluding depreciation
and amortization 932.7 976.5
Depreciation and amortization 54.7 46.5
Selling and administrative expense 33.2 32.8
Interest expense 22.1 24.8
Interest income ( 1.6) ( 2.4)
Translation and exchange adjustments 2.6 2.2
1,043.7 1,080.4
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGES 90.8 88.2
Provision for income taxes 30.0 31.4
Equity earnings, net of minority interests 4.0 ( .2)
NET INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES 64.8 56.6
CUMULATIVE EFFECT OF ACCOUNTING CHANGES FOR:
Income taxes
Postemployment benefits
(Net of income tax benefit)
Postretirement benefits other than pensions
(Net of income tax benefit)
NET INCOME $ 64.8 $ 56.6
PER AVERAGE COMMON SHARE DATA:
EARNINGS BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES $ .73 $ .65
CUMULATIVE EFFECT OF ACCOUNTING CHANGES FOR:
Income taxes
Postemployment benefits
Postretirement benefits other than pensions
EARNINGS PER AVERAGE COMMON SHARE $ .73 $ .65
DIVIDENDS PER SHARE - - - - - -
AVERAGE COMMON SHARES OUTSTANDING 89,094,150 87,286,858
[FN]
The financial statements for 1994 include the operations of the Van Dorn
Company and Wellstar B.V. acquired in the second quarter of 1993.
The accompanying notes are an integral part of these financial statements
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<PAGE>3
CROWN CORK & SEAL COMPANY, INC.
PART 1 - FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (In millions except share data)
Six months ended June 30, 1994 1993
NET SALES $2,077.5 $2,081.7
COSTS, EXPENSES & OTHER INCOME
Cost of products sold, excluding depreciation
and amortization 1,712.6 1,747.5
Depreciation and amortization 107.2 89.4
Selling and administrative expense 66.3 64.7
Interest expense 43.7 44.9
Interest income ( 3.0) ( 5.0)
Translation and exchange adjustments 6.1 4.8
1,932.9 1,946.3
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGES 144.6 135.4
Provision for income taxes 50.5 49.1
Equity earnings, net of minority interests 4.3 ( .3)
NET INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES 98.4 86.0
CUMULATIVE EFFECT OF ACCOUNTING CHANGES FOR:
Income taxes 23.5
Postemployment benefits
(Net of income tax benefit) ( 16.1)
Postretirement benefits other than pensions
(Net of income tax benefit) ( 89.2)
NET INCOME $ 98.4 $ 4.2
PER AVERAGE COMMON SHARE DATA:
EARNINGS BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES $ 1.11 $ 1.00
CUMULATIVE EFFECT OF ACCOUNTING CHANGES FOR:
Income taxes .28
Postemployment benefits ( .20)
Postretirement benefits other than pensions ( 1.04)
EARNINGS PER AVERAGE COMMON SHARE $ 1.11 $ .04
DIVIDENDS PER SHARE - -
AVERAGE COMMON SHARES OUTSTANDING 88,983,915 85,654,213
[FN]
The financial statements for 1994 include the operations the Van Dorn Company
and Wellstar B.V. acquired in the second quarter of 1993.
Results for 1993 have been restated to reflect the adoption, effective
January 1, 1993, of SFAS No. 112.
The accompanying notes are an integral part of these financial statements.
</PAGE>
<PAGE>4
CROWN CORK & SEAL COMPANY, INC.
CONSOLIDATED BALANCE SHEETS (Condensed)
(In millions except book value)
(Unaudited)
June 30, December 31,
1994 1993
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 43.2 $ 54.2
Receivables 703.1 532.9
Inventories 732.9 699.7
Prepaid expenses and other current assets 65.3 37.7
Total Current Assets 1,544.5 1,324.5
Long-term notes and receivables 80.0 67.9
Investments 44.9 42.6
Goodwill, net of amortization 1,129.9 1,119.1
Property, plant and equipment, net 1,742.3 1,593.5
Other non-current assets 100.7 69.3
TOTAL $4,642.3 $4,216.9
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $ 723.4 $ 372.9
Current portion of long-term debt 98.6 101.9
Accounts payable and accrued liabilities 692.0 795.3
United States and foreign income taxes 22.2 10.6
Total Current Liabilities 1,536.2 1,280.7
Long-term debt, excluding current maturities 940.0 891.5
Postretirement and pension liabilities 627.4 623.0
Other non-current liabilities 116.9 116.2
Minority interests 69.8 53.7
Shareholders' equity 1,352.0 1,251.8
TOTAL $4,642.3 $4,216.9
BOOK VALUE PER COMMON SHARE $ 15.18 $ 14.09
[FN]
Certain prior year balance sheet items have been reclassified to improve
comparability.
The accompanying notes are an integral part of these financial statements.
</PAGE>
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CROWN CORK & SEAL COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Condensed)
(In millions)
(Unaudited)
Six months ended June 30, 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 98.4 $ 4.2
Depreciation and amortization 107.2 89.4
Accounting changes 81.8
Equity in earnings of joint ventures,
net of dividends received ( 7.7) 1.9
Minority interest in earnings of subsidiaries 5.7 2.6
Change in assets and liabilities, other than debt ( 342.8) ( 153.6)
NET CASH PROVIDED (USED) IN OPERATING ACTIVITIES ( 139.2) 26.3
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ( 223.9) ( 122.6)
Acquisition of businesses, net of cash acquired ( 65.4) ( 60.1)
Proceeds from sale of property, plant and equipment .9 5.3
Proceeds from sale of businesses 83.6
Other, Net ( 1.5) ( .3)
NET CASH USED IN INVESTING ACTIVITIES ( 289.9) ( 94.1)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 113.0 504.8
Payments of long-term debt ( 91.2) ( 705.0)
Net change in short-term debt 379.1 380.7
Common stock:
Repurchase for treasury ( 8.5) ( 86.3)
Issued under various employee benefit plans 8.0 12.5
Minority contributions, net of dividends paid 11.4 8.5
NET CASH PROVIDED BY FINANCING ACTIVITIES 411.8 115.2
Effect of exchange rate changes on cash and
cash equivalents 6.3 ( 2.5)
NET CHANGE IN CASH AND CASH EQUIVALENTS ( 11.0) 44.9
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 54.2 26.9
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 43.2 $ 71.8
[FN]
The 1993 cashflow excludes the non-cash transaction for the acquisition of the
Van Dorn Company. Along with cash, 3,631,624 shares of the Company's common
stock valued at $140 million, was issued in that acquisition.
1993 has been restated to reflect the adoption, effective January 1, 1993,
of SFAS No. 112.
Certain prior year balances have been reclassified to improve comparability.
The accompanying notes are an integral part of these financial statements.
</PAGE>
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Crown Cork & Seal Company, Inc.
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In millions)
(Unaudited)
<CAPTION>
Minimum Cumulative
Common Paid-In Retained Pension Translation Treasury
Stock Capital Earnings Liability Adjustment Shares Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993 $592.5 $167.4 $843.1 ($ 46.3) ($156.5) ($148.4) $1,251.8
Net earnings 98.4 98.4
Treasury stock purchased ( 7.3) ( 1.2) ( 8.5)
Stock issued under employee
benefit plans 5.6 2.4 8.0
Stock issued in business
combination
Translation adjustments 2.3 2.3
BALANCE AT JUNE 30, 1994 $592.5 $165.7 $941.5 ($ 46.3) ($154.2) ($147.2) $1,352.0
Minimum Cumulative
Common Paid-In Retained Pension Translation Treasury
Stock Capital Earnings Liability Adjustment Shares Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992 $592.5 $ 95.0 $744.0 ($127.2) ($160.7) $1,143.6
Net earnings 4.2 4.2
Treasury stock purchased ( 73.4) ( 12.9) ( 86.3)
Stock issued under employee
benefit plans 9.1 3.4 12.5
Stock issued in business
combination 122.4 18.2 140.6
Translation adjustments ( 20.4) ( 20.4)
BALANCE AT JUNE 30, 1993 $592.5 $153.1 $748.2 ($147.6) ($152.0) $1,194.2
</TABLE>
[FN]
1993 net earnings has been restated to reflect the adoption, effective
January 1, 1993, of SFAS No. 112.
The accompanying notes are an integral part of these financial statements.
</PAGE>
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Crown Cork & Seal Company, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
A.Statement of Information Furnished
The accompanying unaudited interim consolidated and condensed financial
statements have been prepared by the Company in accordance with Form 10-Q
instructions. In the opinion of management, these consolidated financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position of Crown
Cork & Seal Company, Inc. as of June 30, 1994 and the results of operations
and cash flows for the periods ended June 30, 1994 and 1993, respectively.
These results have been determined on the basis of generally accepted
accounting principles and practices applied consistently.
Certain information and footnote disclosures, normally included in financial
statements presented in accordance with generally accepted accounting
principles, have been condensed or omitted. The accompanying Consolidated
Financial Statements should be read in conjunction with the financial
statements and notes thereto incorporated by reference in the Company's
1993 Form 10-K Annual Report as well as its first quarter 1994 Form 10-Q.
B.Supplemental Cash Flow Information
Cash payments for interest, net of amounts capitalized, were $39.4 million
during the first six months of both 1994 and 1993, respectively. Cash
payments for income taxes amounted to $41.4 million and $11.5 million
during the first six months of 1994 and 1993, respectively. The increase
in 1994 payments is due primarily to a first quarter 1993 tax refund
and minimal payments.
C.Inventories
(in millions)
June 30, December 31,
1994 1993
Finished goods and work in process $400.6 $329.7
Raw materials and supplies 332.3 370.0
Total inventories $732.9 $699.7
D.Accounting Changes
The 1993 results for the six months ended June 30 and the financial position
at June 30, 1993 have been restated to account for the adoption, in the
fourth quarter of 1993, effective January 1, 1993, of Statement of Financial
Accounting Standards (SFAS) No. 112 "Employers' Accounting for Postemployment
Benefits". The restatement resulted in a reduction of $16.1 million to
earnings and $.20 per share to the reported earnings per share for the six
months ended June 30, 1993. The restatement does not have a material effect
on the remaining 1993 quarters.
</PAGE>
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Crown Cork & Seal Company, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
E.Long-term Debt
On June 9, 1994, the Company sold $100 million of public debt securities
through Salomon Brothers, Inc. and The First Boston Corporation. This
transaction represents the final tranche of a shelf registration statement
filed with the Securities and Exchange Commission in January 1993. The
tranche includes $100 million of 7% notes due 1999, priced at 99.71% to yield
7.02%. Net proceeds from the issue were used to refinance outstanding
short-term indebtedness.
</PAGE>
<PAGE>9
Crown Cork & Seal Company, Inc.
Part I - Financial Information
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Net Income in the second quarter was $64.8 million or $.73 per share,
an increase of 14.5% and 12.3%, respectively, over the prior year's
earnings of $56.6 million or $.65 per share. For the six months, net
income was $98.4 million or $1.11 per share, an increase of 14.4%
and 11.0%, respectively over the prior year's earnings, before
cumulative effect of accounting changes, of $86.0 million or $1.00
per share.
The pricing pressure in beverage cans, along with an ongoing 202 diameter
conversion program resulted in lower operating income for this product
in North America. The beverage can business outside of North Amercia,
however, continues to be an important area of growth for the Company.
Income derived from our joint venture operations, particulary in the Far
East and Middle East, was up sharply and was reflected in higher equity
earnings for the period.
Net sales for the quarter at $1,134.5 million were 2.9% lower than prior
year sales of $1,168.6 million. North American Division net sales
declined 7.1% offset by gains in International of 4.9% and Plastics of
9.1%. In North America, sales were affected by continued pricing
pressures in beverage cans. Additionally, comparative net sales for the
Company's non-U.S. affiliates were down $16 million due to the strength
of the U.S. dollar in 1994. Net sales for the six months were relatively
unchanged from 1993 amounting to $2,077.5 million as compared
to $2,081.7 million in 1993, a decrease of .2%. In general, volumes in
most product lines are up over 1993 with both beverage can and plastic
container volumes experiencing strong customer demand. Year-to-date net
sales of the Company's non-U.S. affiliates were lower by $31 million
due to the strength of the U.S. dollar during the period.
Cost of products sold, excluding depreciation and amortization, for the
second quarter 1994 was $932.7 million, a 4.5% decline from 1993.
The reduction is due primarily to lower raw material costs in North
America as well as the impact of productivity improvements, research
and development and continuing programs to contain and reduce costs. For
the six months, cost of products sold was $1,712.6 million or 82.4% of
net sales, a reduction of 2% from the 1993 level of $1,747.5 million.
The market for certain of our basic materials is tightening, as
economies around the world improve and with it pressure on costs is
anticipated. The Company's ability to source such materials with
increasing effectiveness is an ongoing objective. For the six months
depreciation and amortization was 5.2% of net sales in 1994 as compared
to 4.3% in 1993. This increase primarily reflects the Company's
increased level of capital investment to improve productivity
and efficiencies as well as to meet customer demand for new products.
Selling and administrative expenses for the second quarter were $33.2
million, an increase of 1.2% over 1993. These expenses have increased
primarily due to the 1993 acquisitions of Van Dorn and Wellstar B.V.
and the start-up of the operations in the United Arab Emirates and in
Argentina. As a percentage of net sales these expenses were 2.9% in 1994
as compared to 2.8% in 1993. For the six months, selling and
administrative expenses were $66.3 million or 3.2% of net sales as
compared to $64.7 million or 3.1% of net sales in 1993.
</PAGE>
<PAGE>10
Crown Cork & Seal Company, Inc.
Item 2 - Management's Discussion and Analysis (Continued)
Net interest expense was $20.5 million for 1994, a decrease of 8.5% from
the 1993 amount of $22.4 million. This improvement is due primarily to
the paydowns in March of $36 million in long-term Canadian private
placement debt which carried an interest rate of 11.75% and of $50
million in long-term U.S. private placement debt which carried an
interest rate of 8.49%. For the six months, net interest expense
increased $.8 million or 2.0% over the prior year. This increase is
due to (1) the refinancing of the bridge loan which was used to
acquire CONSTAR International, (2) the borrowings necessary to fund
the continued expansion of the Plastics Division, (3) the 1993
acquisition of Wellstar B.V. and (4) the funding of new operations in
the United Arab Emirates and Argentina, offset by the above noted debt
paydowns.
In the quarter the effective tax rate improved to 33.0% from 35.6% .
This improvement is, to some extent, the result of continued tax
planning efforts instituted on a worldwide basis and from increased
pre-tax profits for affiliates operating in environments hav low tax
rates.
Liquidity and Capital Resources
Cash flow from operations declined from 1993 by $165.5 million due
primarily to the increased working capital requirements of acquired
businesses as well as from the growth and continuing investments in
the Plastics Division which is being funded on a short-term basis
through issuances of commercial paper.
Capital expenditures of $223.9 million represent an increase of 82.6%
over 1993. Spending in the North American Division totaled $79.3
million. Major spending was for the new technical center and aerosol
plant in Alsip, Illinois, for two-piece steel food can lines in
Owatonna, Minnesota and for the conversion of beverage can and end
lines to a 202 diameter at various plants. Spending in the Plastics
Division totaled $113.2 million as compared to $37.6 million in 1993.
The growth in 1994 spending is evidence of the Company's continuing
commitment to invest so as to meet customer demand for products,
particularly beverage packaging products both metal and plastic.
Cash used in the acquisition of businesses relates primarily to the
acquisition of Tri Valley Growers' container manufacturing plants in
California.
Total debt, net of cash and cash equivalents, at June 30, 1994 was
$1,718.8 million and represented an increase of 31.0% over the
December 31, 1993 level of $1,312.1 million. Total debt, net of cash
and cash equivalents, as a percentage of total capitalization was 54.7%
at June 30, 1994 as compared to 50.1% at December 31, 1993. The
increase in total debt to total capitalization is primarily due to the
acquisition of Tri Valley on June 27th, seasonal build- up of
inventories and receivables as well as capital investment programs to
meet customer demand.
</PAGE>
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Crown Cork & Seal Company, Inc.
Part II - Other Information
Item 5. Other Information
On June 27, 1994, the Company announced that it had completed the
acquisition of Tri Valley Growers' container manufacturing
facilities in Fremont, Modesto and Merced, California. Tri Valley
Growers is an agriculture marketing cooperative which processes and
markets fruits and vegetables. The Company and Tri Valley Growers
entered into a long-term supply contract.
On July 8, 1994, the Company announced that it had formed a new joint
venture company near Hanoi, Vietnam for the manufacture of two-piece
aluminum beverage cans. Construction is expected to commence in the
fourth quarter of 1994. The facility will be capable of producing
approximately 400 million cans per year and will serve the northern
Vietnam soft drink and beer markets, as well as, regional export markets.
On June 29, 1994 the Company announced that it would rebuild its
aluminum beverage can plant in Van Nuys, California that was idled
in January 1994 due to earthquake damage.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.1 Form of the Company's 7% Notes due 1999 (incorporated by
reference to Exhibit 99.1 of Registrant's Current
Report on Form 8-K dated June 16, 1994 (File No. 1-2227)).
4.2 Officers' Certificate of the Company dated June 16, 1994
(incorporated by reference to Exhibit 99.2 of Registrant's
Current Report on Form 8-K dated June 16, 1994 (File No.
1-2227)).
4.3 Terms Agreement dated June 16, 1994 (incorporated by
reference to Exhibit 99.3 of the Registrant's Current Report
on Form 8-K dated June 16, 1994 (File No. 1-2227)).
12 Statement of computation of ratio of earnings to fixed
charges (incorporated by reference to Exhibit 12 of the
Registrant's Current Report on Form 8-K dated June 15, 1994
(File No. 1-2227)).
</PAGE>
<PAGE>12
Crown Cork & Seal Company, Inc.
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K (cont'd)
(b) Reports on Form 8-K
During the second quarter of 1994, the Registrant filed Current Reports on
Form 8-K for the following event:
(1) June 15, 1994
Item 6. Exhibits - provided the computation of the ratio of earnings
to fixed charges for the five years 1989 through 1993 as well as that
for the three months ended March 31, 1994 as provided in the
Prospectus Supplement, dated June 6, 1994, covering the 7%
Notes due 1999.
(2) June 16, 1994
Item 5. Other Events - reported the issuance of $100 million of
public debt securities as the final tranche of the shelf registration
filed with the Securities and Exchange Commission on January 15, 1993.
</PAGE>
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Crown Cork & Seal Company, Inc.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Crown Cork & Seal Company, Inc.
Registrant
Dated: August 15, 1994
Timothy J. Donahue
Financial Controller
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