<PAGE>1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 MARCH 31, 1995
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 (I.R.S. Employer Identification No.)
incorporation or organization)
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 90,166,553 shares of Common Stock outstanding as of April 28, 1995.
This Form 10-Q consists of a total of 16 pages.
</page>
<PAGE>2
PART 1 - FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF INCOME
(In millions except share data)
(Unaudited)
Three months ended March 31, 1995 1994
Net sales $ 1,126.7 $ 943.0
Cost, expenses & other income
Cost of products sold, excluding
depreciation and amortization 932.0 779.9
Depreciation and amortization 64.2 52.5
Selling and administrative expense 35.8 33.1
Interest expense 35.5 21.6
Interest income ( 2.8) ( 1.4)
Translation and exchange adjustments 1.6 3.5
1,066.3 889.2
Income before income taxes 60.4 53.8
Provision for income taxes 19.7 20.5
Equity earnings, net of
minority interests ( 4.2) .3
Net income $ 36.5 $ 33.6
Earnings per average common share $ .41 $ .38
Dividends per share
Average common shares outstanding 89,640,314 88,872,455
The financial statements for 1995 include the container manufacturing
operations of Tri-Valley Growers, acquired on June 27, 1994.
The accompanying notes are an integral part of these financial statements.
</page>
<PAGE>3
CONSOLIDATED BALANCE SHEETS (Condensed)
(In millions except book value)
(Unaudited)
March 31, December 31,
1995 1994
Assets
Current assets
Cash and cash equivalents $ 44.5 $ 43.5
Receivables 827.8 738.0
Inventories 950.7 767.5
Prepaid expenses and other current assets 54.7 56.6
Total current assets 1,877.7 1,605.6
Long-term notes and receivables 65.3 70.4
Investments 45.8 47.7
Goodwill, net of amortization 1,119.0 1,122.4
Property, plant and equipment 1,877.0 1,816.5
Other non-current assets 112.5 118.7
Total $5,097.3 $4,781.3
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt $ 855.7 $ 604.5
Current portion of long-term debt 63.3 131.3
Accounts payable and accrued liabilities 743.3 737.1
United States and foreign income taxes 23.4 10.1
Total current liabilities 1,685.7 1,483.0
Long-term debt, excluding
current maturities 1,163.7 1,089.5
Postretirement and pension liabilities 634.4 639.4
Other non-current liabilities 127.8 128.8
Minority interests 79.8 75.4
Shareholders' equity 1,405.9 1,365.2
Total $5,097.3 $4,781.3
Book value per common share $15.61 $15.28
[FN]
The accompanying notes are a integral part of these financial statements.
</FN?
</page>
<PAGE>4
CONSOLIDATED STATEMENTS OF CASH FLOW (Condensed)
(In millions)
(Unaudited)
Three months ended March 31, 1995 1994
Cash flows from operating activities
Net income $ 36.5 $ 33.6
Depreciation and amortization 64.2 52.5
Equity in earnings of joint ventures,
net of dividends received .7
Minority interest in earnings
of subsidiaries 3.8 2.0
Change in assets and liabilities,
other than debt ( 258.3) ( 235.8)
Net cash used in operating activities ( 153.1) ( 147.7)
Cash flows from investing activities
Capital expenditures ( 94.4) ( 85.3)
Proceeds from sale of property,
plant and equipment 1.1
Other, net ( 1.7) ( 4.8)
Net cash used for investing activities ( 95.0) ( 90.1)
Cash flows from financing activities
Proceeds from long-term debt 303.8 5.5
Payments of long-term debt ( 186.3) ( 93.6)
Net change in short-term debt 117.7 314.7
Common Stock:
Repurchased for treasury ( 2.5)
Issued under various
employee benefit plans 9.7 5.3
Minority contributions,
net of dividends paid ( .1)
Net cash provided
by financing activities 244.8 229.4
Effect of exchange rate changes
on cash and cash equivalents 4.3 2.8
Net change in cash and cash equivalents 1.0 ( 5.6)
Cash and cash equivalents
at beginning of period 43.5 54.2
Cash and cash equivalents at end of period $ 44.5 $ 48.6
Certain prior year balances have been reclassified to improve comparability.
The accompanying notes are an integral part of these financial statements.
</page>
<PAGE>5
Crown Cork & Seal Company, Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In millions)
(Unaudited)
<TABLE>
Minimum Cumulative
<CAPTION> Common Paid-In Retained Pension Translation Treasury
Stock Capital Earnings Liability Adjustments Stock Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $592.5 $168.4 $974.1 ($48.1) ($175.9) ($145.8) $1,365.2
Net earnings 36.5 36.5
Treasury stock purchased
Stock issued under employee
benefit plans 6.1 3.6 9.7
Translation adjustments ( 5.5) ( 5.5)
Balance at March 31, 1995 $592.5 $174.5 $1,010.6 ($48.1) ($181.4) ($142.2) $1,405.9
Minimum Cumulative
Common Paid-In Retained Pension Translation Treasury
Stock Capital Earnings Liability Adjustments Stock Total
<S> <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 33.6 33.6
Treasury stock purchased ( 2.2) ( .3) ( 2.5)
Stock issued under employee
benefit plans 3.8 1.5 5.3
Translation adjustments ( 6.6) ( 6.6)
Balance at March 31, 1994 $592.5 $169.0 $876.7 ($46.3) ($163.1) ($147.2) $1,281.6
</TABLE>
The accompanying notes are an integral part of these financial statements
</Page>
<PAGE>6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share data)
(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 for Crown
Cork & Seal Company, Inc., as of March 31, 1995 and the results of
operations and cash flows for the periods ended March 31, 1995 and 1994,
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 1994
Form 10-K Annual Report.
B. Restructuring
On September 14, 1994 the Company announced its plans to restructure
thirteen metal packaging facilities. The balance of these reserves
(excluding the writedown of assets which are reflected as a reduction
of the related asset accounts) are included within accounts payable and
accrued liabilities as well as other non-current liabilities. The
restructuring balances are as follows:
December 31, 1995 March 31,
1994 Activity 1995
Employee costs $16.6 ($ .8) $15.8
Lease termination and
property holding costs 5.9 ( .6) 5.3
Anticipated gain from sale
of properties (11.1) (11.1)
Incremental operating losses 5.4 ( 1.1) 4.3
$16.8 ($2.5) $14.3
Where applicable, the Company has also established reserves to restructure
acquired companies. These purchase accounting adjustments related
primarily to employee separation costs to be incurred upon plant
closures, such as severance and additional pension and retiree medical
liabilities. As of March 31, 1995, remaining balances from 1994 and 1993
acquisitions were $22.2 million.
The Company, as appropriate, periodically charges current operations when
non-recurring severance plans are announced. As of March 31, 1995, the
balance for such expenses, classified as restructuring in the balance
sheet, were $3.9 million.
</page>
<PAGE>7
C. Inventories March 31, December 31,
1995 1994
Finished goods and work in process $603.4 $391.3
Raw material and supplies 347.3 376.2
Total inventories $950.7 $767.5
D. Supplemental Cash Flow Information
Cash payments for interest, net of amounts capitalized, were $18.1 million
and $16.0 million during the first three months of 1995 and 1994,
respectively. Cash payments for income taxes amounted to $4.7 million and
$5.0 million during the first three months of 1995, and 1994, respectively.
</page>
<PAGE>8
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Net Income and Earnings Per Share
Net Income for the first quarter ended March 31, 1995 was $36.5 million or
$.41 per share, an increase of 8.6% and 7.9%, respectively, over
the prior year's income of $33.6 million or $.38 per share. While such
an increase is respectable, the Company's overall performance was
hampered by intensive competitive pressures in selected areas.
Net Sales
Net sales for the quarter increased 19.5% from $ 943.0 million in 1994 to
$1,126.7 million in 1995. Sales from domestic operations increased
17.9% and those in foreign markets increased 22.7%. Domestic sales
accounted for 66.1% of consolidated sales in 1995 as compared to
67.0% in 1994. An analysis of net sales by operating division follows:
Net Sales
First Quarter Increase
Division 1995 1994 $ %
North America $ 610.3 $554.5 $ 55.8 10.1
International 227.3 179.7 47.6 26.5
Plastics 260.2 189.4 70.8 37.4
Other 28.9 19.4 9.5 49.0
$1,126.7 $943.0 $183.7 19.5
The first quarter 1995 increase in North American Division net sales was
primarily the result of the pass-through of substantially higher raw
material costs partially offset by reduced beverage can unit sales
volumes and the impact of continued strengthening of the U.S. dollar against
the Canadian dollar and Mexico peso. Also contributing to the growth
were slightly higher food can volumes aided by the contribution of the
new Owatonna 2-piece food can plant and the container operations acquired
from Tri-Valley Growers on June 27, 1994. The decline in beverage can
volumes was due primarily to unusually large customer purchases prior to the
January 1995 price increases. Without the impact of foreign exchange
translation on Canadian and Mexican sales, North American divisional sales
would have been $22.8 million higher.
</page>
<PAGE>9
Item 2. Management's Discussion and Analysis (Continued)
Within the International Division, sales in the quarter increased due
primarily to cost-driven price increases as well as increased sales unit
volumes in Latin America and China and the continued weakening of the
U.S. dollar against most European currencies. Increased sales in Latin
America resulted from the attainment of full production at the Company's
beverage can plant in Buenos Aires, Argentina whereas in the first
quarter of 1994 the operations were in start-up. Also contributing to
growth in Latin America was the realization of the benefits from
the Brazilian government's "Real Plan". This economy has shown continued
stability; and, continued growth is anticipated. As announced on
January 18, 1995 the Company's new joint venture in Shanghai, China
commenced production of 2-piece aluminum beverage cans. In line with the
Company's expectations for the Brazilian markets, the Company announced on
February 17, 1995 that it had agreed to form a joint venture in Brazil
with Petropar S.A. of Porto Alegre, Brazil for the production of beverage
cans and ends, PET plastic bottles and plastic closures. Production
capacity of 1.6 billion cans per year is expected to become available in the
third quarter of 1996.
The increase in Plastics Division sales resulted from increased demand for
plastic packaging, accommodated through continued investment for expansion
of unit capacity, and increased raw material prices passed through to
customers.
Cost of Products Sold
Cost of products sold, excluding depreciation and amortization for the
first quarter ended March 31, 1995 was $932.0 million, a 19.5% increase from
$779.9 million in 1994. The increase is due primarily to higher
net raw material costs partially offset by company-wide cost containment
programs, including the effects of the 1994 restructuring program, as well
as increased focus on production planning and inventory management.
As a percentage of net sales, cost of products sold was equal to prior year
at 82.7%.
Selling and Administrative
Selling and administrative expenses for the first quarter were $35.8
million, an increase of 8.2% over 1994. As a percentage of net sales,
these expenses have improved to 3.2% in 1995 from 3.5% in 1994.
</page>
<PAGE>10
Item 2. Management's Discussion and Analysis (Continued)
Operating Income
The Company views operating income as the principal measure of performance
before interest costs and other non-operating expenses. Operating
income for the first quarter ended March 31, 1995 was $94.7 million or
22.2% higher than in 1994. Operating income as a percentage of net
sales was 8.4% for 1995 as compared to 8.2% in 1994. An analysis of
operating income by operating division follows:
Operating Income
First Quarter Increase
Division 1995 1994 $ %
North America $55.8 $ 49.3 $ 6.5 13.2
International 24.4 19.0 5.4 28.4
Plastics 10.1 6.8 3.3 48.5
Other 4.4 2.4 2.0 83.3
$94.7 $77.5 $17.2 22.2
Operating income in the North American Division was 9.1% of net sales in
1995 as compared to 8.9% in 1994. This increase reflects initial effects
of the announced September 1994 restructuring program as well as the
Company's efforts to improve productivity and contain costs. Also
contributing to the increase were improved efficiencies in Canada and
Mexico.
The Company's suppliers of aluminum can and end sheet implemented a new
pricing structure for 1995 which, by formula, is directly tied to the
price of ingot on the London Metal Exchange (LME). The formula takes
the LME spot price of aluminum ingot and adds other costs to convert
and transport aluminum, thereby effectively transferring the volatility in
the commodity markets to the Company. While the Company has announced
price increases to its customers based on LME quotes, the Company may not
always be able to fully recover movements in commodity pricing. With
already depressed margins in the domestic beverage can business and
the possibility of continuing higher aluminum costs, the Company is
cautious about earnings for the remainder of 1995. The longer-term
consequences of higher aluminum costs will likely include less
investment in North American beverage can capacity. The Company plans to
maintain its competitive position by completing its 202 diameter aluminum
end conversion program by year-end and through line speed enhancements.
The International Division operating income was 10.7% of net sales as
compared to 10.6% in 1994. The increased operating income primarily
reflects improved 2-piece beverage can margins due to the start-up
of the plant in Shanghai, China as well as the realization of full
production in Argentina and the United Arab Emirates.
Increased sales volumes resulting from recent production capacity growth
through the Company's capital investment programs was the primary reason for
the increased operating income in the Plastics Division. As a percentage of
net sales, operating income was 3.9% in 1995 as compared to 3.6% in 1994.
</page>
<PAGE>11
Item 2. Management's Discussion and Analysis (Continued)
Net Interest Expense/Income
Net interest expense was $32.7 million in the first quarter or an increase
of $12.5 million when compared to 1994 net interest of $20.2 million.
The increase in net interest expense is due primarily to (a) higher
interest rates, (b) the Company's increased working capital requirements
due to sales growth and higher raw material costs and (c) the capital
investment program maintained by the Company in its efforts to expand
production worldwide and improve production efficiencies.
Taxes on Income
The effective tax rate in the first quarter was 32.6% as compared to 38.1%
in 1994. The lower effective tax rate is primarily due to increased
pre-tax income from non-U.S. operations with lower statutory rates, such as,
those in China and the United Arab Emirates.
Liquidity and Capital Resources
Net cash used in operations during the three months ended March 31, 1995
increased from $147.7 in 1994 to $153.1 million in 1995 or 3.7%.
While net cash used in operations has increased in the first quarter 1995,
the increase was limited as strong fourth quarter 1994 sales resulted
in higher year-end 1994 receivables being collected in the first
quarter 1995 as compared to collections in the first quarter 1994.
The Company will continue to manage its inventory levels in response to
the volatility of raw material prices and increased customer demand for
its products.
Capital expenditures of $94.4 million represent an increase of 10.7%
over 1994. Spending in the North American Division totaled $32.9
million. Major spending was for ongoing projects related to the
conversion of aluminum beverage can and end lines to 202 diameter at various
plants. Spending in the International Division totaled $11.2 million,
representing an increase of 41.9% over 1994. Major spending for this
division has been concentrated in the Company's joint ventures as
well as further expansion of existing plastic cap production in Europe.
In the Plastics Division expenditures for 1995 totaled $45.2 million,
an increase of 13.2% above 1994. Major spending included continued
expansion of existing products, specifically single-serve PET preform
and bottle lines.
Cash provided from financing activities increased in line with the increased
use of cash in operating and investing activities as the Company
continues to fund its working capital requirements on a short-term basis
primarily through issuances of commercial paper. On January 15, 1995,
the Company sold $300.0 million of public debt securities and used the net
proceeds to pay down short-term indebtedness.
</page>
<PAGE>12
Item 2. Management's Discussion and Analysis (Continued)
Total debt, net of cash and cash equivalents, at March 31, 1995
was $2,038.2 million and represented an increase of 14.4% above the
December 31, 1994 level of $1,781.8 million. Total debt, net of cash
and cash equivalents, as a percentage of total capitalization was 57.8% at
March 31, 1995 as compared to 55.3% at December 31, 1994. The increase in
total debt to total capitalization is primarily due to the seasonal
build-up of receivables and inventories. The Company is actively
trying to reduce the amount of working capital which it must employ to
support its business activities worldwide.
In February 1995, the Company formalized a $1 billion multi-currency credit
facility which bears interest at variable market rates and matures in
February 2000. This facility replaces existing lines of credit and is not
restricted.
</page>
<PAGE>13
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on April 27, 1995.
The matters voted upon and the results of the votes are as follows:
- - - - V O T E S - - - -
(1) Election of the Board of Directors:
FOR AGAINST WITHHELD
William J. Avery 79,193,126 107,979 459,644
Henry E. Butwel 79,232,180 68,925 459,644
Charles F. Casey 79,247,352 53,753 459,644
Francis X. Dalton 79,238,084 63,021 459,644
Francis J. Dunleavy 79,226,067 75,038 459,644
Chester C. Hilinski 79,255,192 45,913 459,644
Richard J. Krzyzanowski 79,257,369 43,736 459,644
Josephine C. Mandeville 79,248,094 53,011 459,644
Michael J. Mc Kenna 79,244,874 56,231 459,644
Alan W. Rutherford 79,253,935 47,170 459,644
J. Douglass Scott 79,235,579 65,526 459,644
Robert J. Siebert 79,274,644 26,461 459,644
Harold A. Sorgenti 79,287,328 13,777 459,644
Edward P. Stuart 79,231,715 69,390 459,644
FOR AGAINST ABSTAINING
(2) The resolution for the adoption of 68,560,447 10,601,526 598,776
The 1994 Crown Cork & Seal Company,
Inc. Stock-Based Incentive
Compensation Plan
</page>
<PAGE>14
Item 5. Other Information
In February 1995, the Company formalized a $1 billion multi-currency
credit facility bearing interest at variable market rates and maturing
in February 2000. The Company's use of this facility is not restricted and
replaced existing revolving bank credit agreements.
On January 25, 1995 the Company issued $300.0 million, 8.38% notes
due 2005 with the proceeds used to pay down short-term indebtedness.
These notes were part of a $500.0 million shelf registration filed on
December 20, 1994.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
4.a Form of the Company's 8 % Notes due 2005 (incorporated by reference to
Exhibit 99a of the Registrant's Current Report on Form 8-K dated
January 25, 1995 (File No 1-2227)).
4.b Officers' Certificate of the Company dated January 25, 1995
(incorporated by reference to Exhibit 99b of the Registrant's
Current Report on Form 8-K dated January 25, 1995 (File No. 1-2227)).
4.c Indenture dated as of January 15, 1995 between the Company and Chemical
Bank, as Trustee (incorporated by reference to Exhibit 4 of the
Registrant's Current Report on Form 8-K dated January 25, 1995
(File No. 1-2227)).
4.d Terms Agreement dated January 18, 1995 (incorporated by reference to
Exhibit 99c of the Registrant's Current Report on Form 8-K
dated January 25, 1995 (File No. 1-2227)).
4.e Revolving Credit and Competitive Advance Facility Agreement dated as of
February 10, 1995 among the Registrant, the Subsidiary Borrowers
referred to therein, the Lenders referred to therein and Chemical
Bank, as Administrative Agent (incorporated by reference to Exhibit 4.n
of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994 (File No. 1-2227)).
10. 1994 Stock - Based Incentive Compensation Plan (incorporated by
reference to Exhibit 10.g of the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994 (File No. 1-2227)).
</page>
<PAGE>15
(b) Reports on Form 8-K
On January 25, 1995, the Registrant filed a Current Report on Form 8-K for
the following event:
The Company reported under Item 5 - Other Events the issuance of $300
million of public debt securities consisting of $300 million aggregate
principal amount of 8 % Notes due 2005. The Notes were sold on
January 18, 1995 pursuant to a shelf registration statement previously
filed with the Securities and Exchange Commission. The Company appended as
exhibits thereto the form of the Company's 8 % Notes due 2005, the
Officers' Certificate of the Company dated January 25, 1995, the Indenture
dated as of January 15, 1995 between the Company and the Trustee and the
Terms Agreement dated January 18, 1995.
</page>
<PAGE>16
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
Date: May 10, 1995
By: /s/ Timothy J. Donahue
Timothy J. Donahue
Financial Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 44
<SECURITIES> 0
<RECEIVABLES> 750
<ALLOWANCES> 11
<INVENTORY> 951
<CURRENT-ASSETS> 1878
<PP&E> 3005
<DEPRECIATION> 1131
<TOTAL-ASSETS> 5097
<CURRENT-LIABILITIES> 1686
<BONDS> 1164
<COMMON> 592
0
0
<OTHER-SE> 814
<TOTAL-LIABILITY-AND-EQUITY> 5097
<SALES> 1127
<TOTAL-REVENUES> 1127
<CGS> 996
<TOTAL-COSTS> 996
<OTHER-EXPENSES> 2
<LOSS-PROVISION> 2
<INTEREST-EXPENSE> 36
<INCOME-PRETAX> 60
<INCOME-TAX> 20
<INCOME-CONTINUING> 37
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
</TABLE>
