<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A-1
Amendment No. 1 to Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported):
August 2, 1996; September 11, 1996
U.S. CAN CORPORATION UNITED STATES CAN COMPANY
(Exact name of registrant as (Exact named of registrant
specified in its charter) as specified in its charter)
DELAWARE DELAWARE
(State or other jurisdiction (State or other jurisdiction
of incorporation) or incorporation)
0-21314 33-43734
(Commission File Number) (Commission File Number)
06-1094196 06-1145011
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
900 Commerce Drive 900 Commerce Drive
Oak Brook, Illinois 60521 Oak Brook, Illinois 60521
(Address of principal (Address of principal
executive offices) executive offices)
(630) 571-2500 (630) 571-2500
(Registrant's telephone number, (Registrant's telephone number,
including area code) including area code)
Not Applicable Not Applicable
(Former name or former address, (Former name or former address,
if changed since last report.) if changed since last report.)
(Explanatory Note: United States Can Company is not required by Section 13 or
15(d) of the Exchange Act to file reports thereunder, but has agreed, pursuant
to the Indenture under which its 13 1/2% Senior Subordinated Notes Due 2002
were issued, to file all reports required by Section 13 or 15(d) whether or not
required by law.
Explanatory Note 2: This Form 8-K/A-1 amends each of the two Form 8-K's
filed jointly by U.S. Can Corporation and United States Can Company dated
August 2, 1996 and September 11, 1996 regarding the acquisitions of the CPI
Group (as defined herein) and USC Europe (as defined herein), respectively.)
<PAGE> 2
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Reports on Form 8-K dated August
2, 1996 and September 11, 1996, respectively, as set forth in the pages attached
hereto.
Item 7. Financial Statements and Exhibits. The financial statements are
amended by filing the following financial statements and pro forma financial
information:
<TABLE>
<CAPTION>
ACQUIRED BUSINESSES FINANCIAL STATEMENTS
<S> <C>
CPI GROUP:
Combined Financial Statements:
Independent Auditor's Report...................................................... F-1
Combined Balance Sheets as of December 31, 1994 and 1995.......................... F-2
Combined Statements of Income for the Years Ended December 31, 1993, 1994 and
1995............................................................................. F-3
Combined Statements of Stockholders' Equity for the Years Ended December 31, 1993,
1994 and 1995.................................................................... F-4
Combined Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and
1995............................................................................. F-5
Notes to the Combined Financial Statements........................................ F-6
Unaudited Combined Interim Financial Statements:
Combined Interim Balance Sheets as of June 30, 1995 and June 30, 1996............. F-13
Combined Interim Statements of Income for the Six Months Ended June 30, 1995 and
1996............................................................................. F-14
Combined Interim Statements of Stockholders' Equity for the Six Months Ended June
30, 1995 and 1996................................................................ F-15
Combined Interim Statements of Cash Flows for the Six Months Ended June 30, 1995
and 1996......................................................................... F-16
Notes to Combined Interim Financial Statements.................................... F-17
USC EUROPE (AEROSOLS DIVESTITURE PACKAGE):
Combined Financial Statements:
Report of Independent Accountants................................................. F-23
Combined Statements of Financial Position as of December 31, 1994 and 1995........ F-24
Combined Statements of Operations for the Years Ended December 31, 1993, 1994 and
1995............................................................................. F-25
Notes to the Combined Financial Statements........................................ F-26
Unaudited Combined Interim Financial Statements:
Combined Interim Statement of Financial Position as of June 30, 1996.............. F-34
Combined Interim Statements of Operations for the Six Months Ended June 30, 1995
and 1996......................................................................... F-35
Notes to the Combined Interim Financial Information............................... F-36
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
U.S. CAN CORPORATION AND SUBSIDIARIES:
Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 1996............. F-43
Unaudited Pro Forma Condensed Combined Statement of Operations for the Year Ended
December 31, 1995.................................................................. F-44
Unaudited Pro Forma Condensed Combined Statement of Operations for the Six Months Ended
July 2, 1995....................................................................... F-45
Unaudited Pro Forma Condensed Combined Statement of Operations for the Six Months Ended
June 30, 1996...................................................................... F-46
Notes to Unaudited Pro Forma Condensed Combined Financial Statements................. F-47
</TABLE>
In connection with the USC Europe Acquisition consummated September 11,
1996, Crown (as defined herein) provided to the Company audited balance sheets
and income statements for USC Europe for the years 1993 through 1995. However,
the various entities which constitute USC Europe historically have been
organized in a manner that does not permit consolidation or combining of
individual capital accounts, and the financing and cash management for the
various entities were centralized in a manner that did not permit
identification of cash flows at the USC Europe level prior to the USC Europe
Acquisition. Consequently, the Company is unable to provide historical
statements of cash flows and historical statements of changes in stockholder's
equity for USC Europe for the periods prior to the USC Europe Acquisition, and
therefore the Company cannot meet the requirements of Rules 3-02 and 3-04 of
Regulation S-X to file statements of cash flows and statements of changes in
stockholder's equity for USC Europe. The staff of the Commission, in a letter
dated September 19, 1996, has indicated that so long as the Company presents
financial information concerning USC Europe consisting of combined statements
of financial position and combined statements of operations prepared in
conformity with United States Generally Accepted Accounting Principles ("GAAP")
for all periods specified by Rules 3-02 and 3-05 of Regulation S-X, the staff
of the Commission will not object to the Company's presentation of financial
data regarding USC Europe. However, the Commission staff has stated that, in
light of the significance of USC Europe to the Company, narrative discussion of
the operating cash flow characteristics of USC Europe, quantified to the extent
practicable, should be provided. The Commission staff also stated that
historical investing and financing transactions that would be material to a
shareholder's understanding of the operations of USC Europe should also be
disclosed and that the Company should also disclose the reasonably likely
effects of the acquisition of USC Europe on the Company's cash flows,
liquidity, capital resources and results of operations.
The financial statements for USC Europe supplied by Crown and included
herein have been prepared in accordance with international accounting
principles issued by the International Accounting Standards Committee. These
principles, as applied to the USC Europe combined financial statements included
herein, do not differ materially from GAAP with the exception of certain
disclosure requirements. Such combined financial statements are not intended to
be a complete presentation of USC Europe's financial position or cash flows.
USC Europe's liquidity needs since January 1995 have principally been
met through internally generated cash flows or advances from its previous
owners. Working capital increased to $25.1 million as of June 30, 1996 from
$24.4 million and $15.0 million as of December 31, 1995 and 1994, respectively.
Net income plus non-cash depreciation and amortization charges and less the
change in working capital amounted to $4.5 million and ($0.5 million) for the
six months ended June 30, 1996 and the year ended December 31, 1995,
respectively. Based on information provided to the Company by Crown, capital
expenditures for USC Europe were approximately $4.6 million, $8.5 million and
$4.8 million for the six months ended June 30, 1996 and the years ended December
31, 1995 and 1994, respectively. Indebtedness of USC Europe decreased from
$12.6 million as of December 31, 1994 to $10.8 million as of December 31, 1995
and $8.9 million as of June 30, 1996. Changes to Crown's net investment in USC
Europe, excluding the effect of net income on such investment, was an increase
of $11.2 million during the year ended December 31, 1995 and a decrease of $2.2
million during the six months ended June 30, 1996. Based on USC Europe's
performance in the six months ended June 30, 1996, the Company expects that USC
Europe will increase the Company's consolidated cash flows, enhance its
liquidity and improve consolidated results of operations.
INCLUSION OF FORWARD-LOOKING INFORMATION
Certain of the foregoing statements constitute "forward-looking
statements" within the meaning of Section 21E of the Exchange Act. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements
of the Company to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Such
factors include, among other things, the following: general economic and
business and market conditions, changes in product demand, changes in
competition, the ability of the Company to integrate acquisitions or complete
future acquisitions, interest rate fluctuations, currency fluctuations,
dependence on raw material producers, dependence on and availability of
qualified personnel, changes in or failure to comply with governmental
regulations including environmental laws, ability to obtain adequate financing
in the future and other factors indicated in the Company's other filings with
the Commission. These important factors may also cause the forward-looking
statements made by the Company in this report to be materially different from
actual results achieved by the Company. In light of these and other
uncertainties, the inclusion of a forward-looking statement herein should not
be regarded as a representation by the Company that the Company's plans and
objectives will be achieved.
EXHIBITS
Consent of Independent Accountants: Plante & Moran LLP Exhibit 23.1
Consent of Independent Accountants: Befec-Price Waterhouse Exhibit 23.2
<PAGE> 3
INDEPENDENT AUDITOR'S REPORT
To the Directors and Stockholders
CPI Plastics, Inc., CP Illinois, Inc.
and CP Ohio, Inc.
We have audited the accompanying combined balance sheet of CPI Plastics,
Inc., CP Illinois, Inc. and CP Ohio, Inc. as of December 31, 1994 and 1995 and
the related combined statements of income, stockholders' equity and cash flows
for each year in the three-year period ended December 31, 1995. These combined
financial statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of CPI
Plastics, Inc., CP Illinois, Inc. and CP Ohio, Inc. at December 31, 1994 and
1995 and the combined results of their operations and their cash flows for each
year in the three-year period ended December 31, 1995, in conformity with
generally accepted accounting principles.
PLANTE & MORAN, LLP
Southfield, Michigan
February 2, 1996
F-1
<PAGE> 4
CPI PLASTICS, INC. ET AL. (NOTE 1)
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1994 1995
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash............................................................ $ 53,751 $ 9,749
Accounts receivable:
Trade -- Less allowance for doubtful accounts of $35,000 in
1994 and $70,000 in 1995.................................... 2,647,937 2,795,737
Officer...................................................... -- 68,554
Notes receivable -- Stockholders (Note 2)....................... 995,000 995,000
Inventories (Note 3)............................................ 2,041,758 2,377,137
Prepaid expenses and other...................................... 121,898 236,281
----------- -----------
Total current assets......................................... 5,860,344 6,482,458
PROPERTY AND EQUIPMENT (Note 4)................................... 8,637,134 8,439,678
OTHER ASSETS (Note 5)............................................. 69,044 47,106
----------- -----------
Total assets................................................. $14,566,522 $14,969,242
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable (Note 6):
Bank......................................................... $ 2,427,763 $ 1,781,373
Stockholders................................................. 1,560,000 1,560,000
Current portion of long-term debt (Note 7)...................... 1,439,664 1,475,014
Accounts payable -- Trade....................................... 2,819,235 2,622,470
Accrued payroll and related liabilities......................... 321,503 362,652
Other accrued liabilities (Note 4).............................. 419,345 492,575
----------- -----------
Total current liabilities.................................... 8,987,510 8,294,084
LONG-TERM LIABILITIES
Debt (Note 7)................................................... 1,491,008 895,994
Other (Note 4).................................................. 647,646 416,470
STOCKHOLDERS' EQUITY (Note 8)
Common stock.................................................... 300,000 300,000
Paid-in capital................................................. 400,000 400,000
Retained earnings............................................... 2,740,358 4,662,694
----------- -----------
Total stockholders' equity................................... 3,440,358 5,362,694
----------- -----------
Total liabilities and stockholders' equity................... $14,566,522 $14,969,242
=========== ===========
</TABLE>
See Notes to Combined Financial Statements.
F-2
<PAGE> 5
CPI PLASTICS, INC. ET AL. (NOTE 1)
COMBINED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES.......................................... $22,263,167 $25,946,351 $29,350,842
COST OF SALES...................................... 19,262,875 22,361,752 24,906,390
----------- ----------- -----------
GROSS PROFIT....................................... 3,000,292 3,584,599 4,444,452
SELLING AND ADMINISTRATIVE EXPENSES................ 1,813,659 2,005,680 1,861,804
----------- ----------- -----------
OPERATING INCOME................................... 1,186,633 1,578,919 2,582,648
INTEREST EXPENSE................................... 649,327 637,943 660,312
----------- ----------- -----------
NET INCOME......................................... $ 537,306 $ 940,976 $ 1,922,336
=========== =========== ===========
</TABLE>
See Notes to Combined Financial Statements.
F-3
<PAGE> 6
CPI PLASTICS, INC. ET AL. (NOTE 1)
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
-------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
BALANCE -- January 1, 1993................... $300,000 $ 400,000 $1,306,076 $ 2,006,076
Net income................................... -- -- 537,306 537,306
Cash dividends............................... -- -- (44,000) (44,000)
-------- -------- ---------- ----------
BALANCE -- January 1, 1994................... 300,000 400,000 1,799,382 2,499,382
Net income................................... -- -- 940,976 940,976
-------- -------- ---------- ----------
BALANCE -- January 1, 1995................... 300,000 400,000 2,740,358 3,440,358
Net income................................... -- -- 1,922,336 1,922,336
-------- -------- ---------- ----------
BALANCE -- December 31, 1995................. $300,000 $ 400,000 $4,662,694 $ 5,362,694
======== ======== ========== ==========
</TABLE>
See Notes to Combined Financial Statements.
F-4
<PAGE> 7
CPI PLASTICS, INC. ET AL. (NOTE 1)
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income....................................... $ 537,306 $ 940,976 $ 1,922,336
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization................. 1,171,063 1,240,301 1,268,332
Bad debt expense.............................. 29,605 722 35,000
Loss on disposal.............................. -- -- 2,745
Changes in assets and liabilities:
Increase in accounts receivable............. (462,253) (423,471) (251,354)
(Increase) decrease in inventories.......... (203,839) 129,124 (335,379)
(Increase) decrease in prepaid expenses..... 164,324 (99,471) (114,382)
(Increase) decrease in other assets......... (49) 14,636 --
Increase (decrease) in accounts payable..... (178,801) 814,223 (196,765)
Increase in accrued payroll and other
accrued liabilities...................... 101,631 24,063 185,822
----------- ----------- -----------
Net cash provided by operating
activities............................. 1,158,987 2,641,103 2,516,355
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment..... 9,070 -- 5,500
Purchase of property and equipment............... (361,618) (1,000,115) (1,359,803)
Issuance of note receivable...................... (80,000) -- --
Collections on note receivable................... 32,751 -- --
----------- ----------- -----------
Net cash used in investing activities.... (399,797) (1,000,115) (1,354,303)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (repayments) on short-term debt --
Net........................................... 480,266 (66,503) (646,390)
Principal payments on long-term debt............. (1,813,840) (1,499,636) (1,439,664)
Proceeds (repayments) from issuance of long-term
debt.......................................... -- (37,658) 880,000
Proceeds from issuance of notes to
stockholders.................................. 580,000 -- --
Dividends paid................................... (6,342) -- --
----------- ----------- -----------
Net cash used in financing activities.... (759,916) (1,603,797) (1,206,054)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH.................... (726) 37,191 (44,002)
CASH -- Beginning of year.......................... 17,286 16,560 53,751
----------- ----------- -----------
CASH -- End of year................................ $ 16,560 $ 53,751 $ 9,749
=========== =========== ===========
</TABLE>
See Notes to Combined Financial Statements.
F-5
<PAGE> 8
CPI PLASTICS, INC. ET AL. (NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995
NOTE 1 NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
The Companies operate plants in Georgia, Illinois and Ohio and are engaged
in manufacturing plastic shipping containers. The Companies' customers are
located throughout the United States and are engaged in the chemical, petroleum,
paint and food industries.
Principles of Combination -- The combined financial statements include the
following companies that are related by common ownership:
CPI Plastics, Inc.
CP Illinois, Inc.
CP Ohio, Inc.
All material intercompany accounts and transactions have been eliminated in
the accompanying combined financial statements.
Inventories -- Inventories are stated at the lower of cost, determined by
the last-in, first-out (LIFO) method, or market.
Property and Equipment -- Property and equipment are recorded at cost.
Depreciation is computed principally on the straight-line basis over the
estimated useful lives of the assets. Costs of maintenance and repairs are
charged to expense when incurred.
Intangible Assets -- Patents are being amortized on the straight-line basis
over their remaining lives. Goodwill is being amortized on the straight-line
basis over ten years. Organization costs are recorded at cost and are being
amortized on the straight-line basis over five to ten years.
Major Customers -- One major customer accounted for approximately 31, 32
and 36 percent of sales for the years ended December 31, 1993, 1994 and 1995,
respectively. Accounts receivable from this customer was $724,013, $869,390 and
$801,423 as of December 31, 1993, 1994 and 1995, respectively.
Income Taxes -- The Companies have elected to be treated as S Corporations
for income tax purposes. Under this election, the stockholders report the
taxable income (or loss) and pay any income tax (or receive any tax benefit)
personally.
Pension Plans -- CPI Plastics, Inc. maintains a defined contribution plan
for its union employees. Contributions in 1993 and 1994 were based on a
percentage of employee compensation. Contributions for 1995 are based upon $.30
for each hour worked. Contributions were paid not less than annually based on
the provisions set forth by each plan.
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 revenue and expenses during
the reporting period. Actual results could differ from those estimates.
NOTE 2 NOTES RECEIVABLE -- STOCKHOLDERS
Notes receivable -- stockholders represent unsecured demand loans to
stockholders. The loans bear interest at 8 percent to 10 percent per annum.
Interest income earned relating to these notes amounted to $73,200, $81,400 and
$81,400 for the years ended December 31, 1993, 1994 and 1995, respectively.
F-6
<PAGE> 9
CPI PLASTICS, INC. ET AL. (NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993, 1994 AND 1995
NOTE 3 INVENTORIES
Inventories at December 31 are comprised of the following:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Current cost:
Raw materials:
Resin.......................................... $1,061,857 $ 869,723
Other.......................................... 435,117 655,448
Finished goods.................................... 1,152,154 1,325,979
---------- ----------
Total current cost........................... 2,649,128 2,851,150
Excess of current cost over LIFO.................... 607,370 474,013
---------- ----------
LIFO cost.................................... $2,041,758 $2,377,137
========== ==========
</TABLE>
NOTE 4 PROPERTY AND EQUIPMENT
Cost of property and equipment is summarized as follows:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Land.............................................. $ 90,000 $ 90,000
Land improvements................................. 1,479,085 1,475,442
Building and improvements......................... 1,264,019 1,330,591
Machinery and equipment........................... 7,886,027 8,299,224
Molds............................................. 3,631,129 4,175,350
Furniture and fixtures............................ 156,030 180,800
----------- -----------
Total cost................................... 14,506,290 15,551,407
Less accumulated depreciation..................... 5,869,156 7,111,729
----------- -----------
Net carrying amount.......................... $ 8,637,134 $ 8,439,678
=========== ===========
</TABLE>
Depreciation expense totaled $1,090,093, $1,173,919 and $1,246,394 during
the years ended December 31, 1993, 1994 and 1995, respectively.
During 1994, the Companies identified an environmental problem on one of
their real properties. In connection with remediation of the problem, the
Companies have capitalized the estimated total corrective cost of approximately
$1,415,000 as land improvements. Approximately $563,000 and $303,000 was paid in
1994 and 1995, respectively, and the remainder has been classified in the
accompanying balance sheet based on the expected payment period.
F-7
<PAGE> 10
CPI PLASTICS, INC. ET AL. (NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993, 1994 AND 1995
NOTE 5 OTHER ASSETS
Intangible assets included in other assets consist of the following:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Patents........................................... $ 400,000 $ 400,000
Goodwill.......................................... 80,000 80,000
Organization costs................................ 149,791 149,791
-------- --------
Total cost................................... 629,791 629,791
Less accumulated amortization..................... 582,665 604,603
-------- --------
Net carrying amount.......................... $ 47,126 $ 25,188
======== ========
</TABLE>
Total amortization expense charged to operations during the years ended
December 31, 1993, 1994 and 1995 was $80,970, $66,382 and $21,938, respectively.
Other assets also includes a deposit with an insurance carrier in the
amount of $21,918 at December 31, 1994 and 1995.
NOTE 6 NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Line of credit with a bank with a ceiling of
$4,000,000, requiring monthly payment of interest
at one-half of 1% above the prime rate, (8.5
percent at December 31, 1994 and 1995)
collateralized by property and equipment, accounts
receivable and inventories of the Companies (also
see Note 7)....................................... $2,427,763 $1,781,373
========== ==========
Unsecured demand notes payable to stockholders,
bearing interest at rates ranging from 8% to 10%
per annum......................................... $1,560,000 $1,560,000
========== ==========
</TABLE>
F-8
<PAGE> 11
CPI PLASTICS, INC. ET AL. (NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993, 1994 AND 1995
NOTE 7 LONG-TERM DEBT
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Term loan payable to bank in monthly installments of
$119,972 plus interest at 1% over the prime rate,
(8.5 percent at December 31, 1994 and 1995)
maturing January 1997, collateralized by
substantially all assets of the Company. During
1995, the note was amended and increased by
$700,000.......................................... $2,930,672 $2,191,008
Equipment note payable, bearing interest at 8.25%,
payable in monthly installments of $4,415
beginning February 1996, including interest,
collateralized by specific items of equipment..... -- 180,000
---------- ----------
Total........................................ 2,930,672 2,371,008
Less current portion......................... 1,439,664 1,475,014
---------- ----------
Long-term portion............................ $1,491,008 $ 895,994
========== ==========
</TABLE>
In connection with the line of credit and term loan, the Companies have
agreed to, among other things, covenants that require maintenance of certain
working capital and fixed charge ratios, prohibit payments for dividends or
stock redemptions and place restrictions on repayment of subordinated
stockholder notes.
Minimum principal payments on long-term debt to maturity as of December 31,
1995 are as follows:
<TABLE>
<S> <C>
1996................................ $1,475,014
1997................................ 793,985
1998................................ 46,295
1999................................ 50,262
2000................................ 5,452
----------
Total............................. $2,371,008
==========
</TABLE>
Total interest expense incurred during the years ended December 31, 1993,
1994 and 1995 was $649,327, $637,943 and $660,312, respectively, including
approximately $139,000, $124,000 and $152,400 to notes payable to stockholders
in 1993, 1994 and 1995, respectively.
F-9
<PAGE> 12
CPI PLASTICS, INC. ET AL. (NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993, 1994 AND 1995
NOTE 8 STOCKHOLDERS' EQUITY
Stockholders' equity consists of the following as of December 31, 1994 and
1995:
<TABLE>
<CAPTION>
CPI PLASTICS, CP ILLINOIS, CP OHIO,
INC. INC. INC. TOTAL
------------- ------------ --------- ----------
<S> <C> <C> <C> <C>
1994
Common stock -- $100 par value, 1,000 shares
authorized and issued for each Company.... $ 100,000 $ 100,000 $ 100,000 $ 300,000
Additional paid-in capital.................. 400,000 -- -- 400,000
Retained earnings
(accumulated deficit)..................... 3,579,440 130,296 (969,378) 2,740,358
---------- -------- --------- ----------
Total stockholders' equity (deficit)...... $ 4,079,440 $ 230,296 $(869,378) $3,440,358
========== ======== ========= ==========
1995
Common stock -- $100 par value, 1,000 shares
authorized and issued for each Company.... $ 100,000 $ 100,000 $ 100,000 $ 300,000
Additional paid-in capital.................. 400,000 -- -- 400,000
Retained earnings
(accumulated deficit)..................... 5,185,340 395,414 (918,060) 4,662,694
---------- -------- --------- ----------
Total stockholders' equity (deficit)...... $ 5,685,340 $ 495,414 $(818,060) $5,362,694
========== ======== ========= ==========
</TABLE>
NOTE 9 LEASE COMMITMENTS
CP Ohio, Inc. leases its facility from an affiliate. The lease is
renegotiated quarterly and currently provides for quarterly payments of $16,200.
Additionally, the Companies lease transportation equipment and machinery
under agreements expiring from 1995 to 2000. The following is a schedule of
future minimum rental payments under the lease agreements:
<TABLE>
<S> <C>
1996.................................. $121,304
1997.................................. 20,709
1998.................................. 13,323
1999.................................. 8,489
2000.................................. 4,953
--------
Total............................... $168,778
========
</TABLE>
Rent expense for 1993, 1994 and 1995 amounted to $227,983, $251,010 and
$241,278, respectively, including $64,800 to affiliates in each year.
NOTE 10 MANAGEMENT SERVICE FEES
The Companies purchased certain sales, marketing and administrative
services from an affiliate through February 1994. Expenses of the Companies
approximated $656,000 in 1993 and $86,000 in 1994 related to such services.
NOTE 11 EMPLOYEE BENEFIT PLANS
The total expense for the Companies' defined contribution pension plans
amounted to $125,605, $35,847 and $38,540 for the years ended December 31, 1993,
1994 and 1995, respectively.
F-10
<PAGE> 13
CPI PLASTICS, INC. ET AL. (NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993, 1994 AND 1995
The Companies have a partially self-insured medical and dental plan for the
benefit of substantially all employees. Under the plan, the Companies are liable
for claims up to a maximum annual amount of $100,000 per employee and
approximately $750,000 in the aggregate. Expenses incurred under the plan,
including administrative charges, approximated $606,000, $631,000 and $592,000
in 1993, 1994 and 1995, respectively.
During 1995, CPI Plastics, Inc. and CP Illinois, Inc. were partially
uninsured for workers' compensation claims. The Companies have insurance
coverage that limits the workers' compensation loss. Under the plan, the maximum
loss is limited to $500,000 with a $2,500 deductible per occurrence.
CP Ohio, Inc. maintains workers' compensation insurance with the State of
Ohio.
Total workers' compensation expense for 1993, 1994 and 1995 under the above
plans amounted to approximately $500,000, $490,000 and $349,000, respectively.
NOTE 12 SUPPLEMENTAL INCOME INFORMATION
As disclosed in the combined financial statements, the Companies use the
last-in, first-out (LIFO) method of costing inventories. Following is summarized
financial data showing what the results would have been if the first-in,
first-out (FIFO) method had been used:
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Inventories at lower of cost, (first
in, first-out) or market.......... $ 2,426,043 $ 2,649,128 $ 2,851,150
=========== =========== ===========
Net sales........................... $22,263,167 $25,946,351 $29,350,842
Cost of sales....................... 19,238,569 22,009,543 25,039,747
----------- ----------- -----------
Gross profit........................ $ 3,024,598 $ 3,936,808 $ 4,311,095
=========== =========== ===========
Net income.......................... $ 561,612 $ 1,293,185 $ 1,788,979
=========== =========== ===========
</TABLE>
NOTE 13 CASH FLOWS
During 1993, a significant noncash financing activity consisted of the
declaration of a cash dividend of $44,000, of which $37,658 was not paid.
Cash paid for interest during the years ended December 31, 1993, 1994 and
1995 was $679,592, $628,360 and $661,312, respectively.
NOTE 14 DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
Cash, Trade Accounts Receivable and Payable, Accrued Receivables and
Accrued Liabilities -- The fair value approximates the carrying amount because
of the short maturity of these instruments.
Long-term Debt -- The carrying amount of the Companies' long-term debt,
$2,371,008 at December 31, 1995, approximates the fair value and is estimated
based on rates currently available to the Company; however, it may not be
possible to settle the liability at the reported value.
Notes Receivable from Stockholders -- The estimated fair value of these
instruments, which approximates the carrying amount, has been determined by
discounting the future cash flows using the interest rate at which the Companies
would currently make similar loans to stockholders.
F-11
<PAGE> 14
CPI PLASTICS, INC. ET AL. (NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993, 1994 AND 1995
Notes Payable to Bank and Stockholders -- The carrying amount of notes
payable to bank and stockholders of $1,781,373 and $1,560,000, respectively, at
December 31, 1995 approximates the fair value because of the short maturity of
those instruments.
F-12
<PAGE> 15
CPI PLASTICS, INC. ET AL. (NOTE 1)
COMBINED INTERIM BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30
--------------------------
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents....................................... $ 726,642 $ 16,117
Accounts receivable:
Trade -- Less allowance for doubtful accounts of $50,000 in
1995 and $35,000 in 1996.................................... 3,295,943 3,595,724
Notes receivable -- Stockholders (Note 2)....................... 995,000 995,000
Inventories (Note 3)............................................ 1,816,072 1,986,793
Prepaid expenses and other...................................... 124,718 216,800
----------- -----------
Total current assets......................................... 6,958,375 6,810,434
PROPERTY AND EQUIPMENT (Note 4)................................... 8,483,322 8,273,141
OTHER ASSETS (Note 5)............................................. 57,280 72,363
----------- -----------
Total assets................................................. $15,498,977 $15,155,938
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable (Note 6):
Bank......................................................... $ 3,513,000 $ 2,971,373
Stockholders................................................. 1,560,000 995,000
Current portion of long-term debt (Note 7)...................... 1,439,664 1,512,097
Accounts payable -- Trade....................................... 2,085,311 2,657,637
Accrued payroll and related liabilities......................... 236,263 214,404
Other accrued liabilities (Note 4).............................. 273,977 487,292
----------- -----------
Total current liabilities.................................... 9,108,215 8,837,803
LONG-TERM LIABILITIES
Debt (Note 7)................................................... 1,471,176 123,769
Other (Note 4).................................................. 638,409 412,422
STOCKHOLDERS' EQUITY
Common stock, $100 par value, 1,000 shares authorized and issued
for each Company............................................. 300,000 300,000
Paid-in capital................................................. 400,000 400,000
Retained earnings............................................... 3,581,177 5,081,944
----------- -----------
Total stockholders' equity................................... 4,281,177 5,781,944
----------- -----------
Total liabilities and stockholders' equity................... $15,498,977 $15,155,938
=========== ===========
</TABLE>
See Notes to Combined Interim Financial Statements.
F-13
<PAGE> 16
CPI PLASTICS, INC. ET AL. (NOTE 1)
COMBINED INTERIM STATEMENT OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
--------------------------
1995 1996
----------- -----------
<S> <C> <C>
NET SALES....................................................... $15,853,099 $15,739,682
COST OF SALES................................................... 13,727,307 12,378,353
----------- -----------
GROSS PROFIT.................................................... 2,125,792 3,361,329
SELLING AND ADMINISTRATIVE EXPENSES............................. 942,971 1,173,154
----------- -----------
OPERATING INCOME................................................ 1,182,821 2,188,175
INTEREST EXPENSE................................................ 342,002 266,259
----------- -----------
NET INCOME...................................................... $ 840,819 $ 1,921,916
=========== ===========
</TABLE>
See Notes to Combined Interim Financial Statements.
F-14
<PAGE> 17
CPI PLASTICS, INC. ET AL. (NOTE 1)
COMBINED INTERIM STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------ PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE -- January 1, 1995......... 3,000 $300,000 $ 400,000 $ 2,740,358 $ 3,440,358
Net income -- Six months ended June
30, 1995......................... -- -- -- 840,819 840,819
----- -------- -------- ----------- -----------
BALANCE -- June 30, 1995........... 3,000 $300,000 $ 400,000 $ 3,581,177 $ 4,281,177
===== ======== ======== =========== ===========
BALANCE -- January 1, 1996......... 3,000 $300,000 $ 400,000 $ 4,662,694 $ 5,362,694
Net income -- Six months ended June
30, 1996......................... -- -- -- 1,921,916 1,921,916
Cash distributions................. -- -- -- (1,502,666) (1,502,666)
----- -------- -------- ----------- -----------
BALANCE -- June 30, 1996........... 3,000 $300,000 $ 400,000 $ 5,081,944 $ 5,781,944
===== ======== ======== =========== ===========
</TABLE>
See Notes to Combined Interim Financial Statements.
F-15
<PAGE> 18
CPI PLASTICS, INC. ET AL. (NOTE 1)
COMBINED INTERIM STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD ENDED JUNE 30
-------------------------
1995 1996
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income...................................................... $ 840,819 $ 1,921,916
Adjustments to reconcile net income to net cash from operating
activities:
Depreciation and amortization................................ 628,106 680,551
Bad debt expense............................................. 8,080 16,000
Changes in assets and liabilities:
Increase in accounts receivable............................ (656,086) (747,433)
Decrease in inventories.................................... 225,686 390,344
Decrease (increase) in prepaid expenses.................... (2,820) 19,481
Increase in other assets................................... -- (33,000)
Increase (decrease) in accounts payable.................... (733,924) 35,167
Decrease in accrued payroll and other accrued
liabilities............................................... (239,845) (157,579)
----------- ----------
Net cash provided by operating activities............... 70,016 2,125,447
CASH FLOWS FROM INVESTING ACTIVITIES -- Purchase of property and
equipment....................................................... (462,530) (506,271)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on short-term debt, net.............................. 1,085,237 1,190,000
Repayment on stockholders' debt................................. -- (565,000)
Principal payments on long-term debt............................ (719,832) (915,142)
Proceeds from issuance of long-term debt........................ 700,000 180,000
Dividends paid.................................................. -- (1,502,666)
----------- ----------
Net cash (used in) provided by financing activities..... 1,065,405 (1,612,808)
----------- ----------
NET INCREASE IN CASH.............................................. 672,891 6,368
CASH AND CASH EQUIVALENTS -- Beginning of period.................. 53,751 9,749
----------- ----------
CASH AND CASH EQUIVALENTS -- End of period........................ $ 726,642 $ 16,117
=========== ==========
</TABLE>
See Notes to Combined Interim Financial Statements.
F-16
<PAGE> 19
CPI PLASTICS, INC. ET AL. (NOTE 1)
NOTES TO COMBINED INTERIM FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1996
NOTE 1 NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
The Companies operate plants in Georgia, Illinois and Ohio and are engaged
in manufacturing plastic shipping containers. The Companies' customers are
located throughout the United States and are engaged in the chemical, petroleum,
paint and food industries.
Principles of Combination -- The combined financial statements include the
following companies that are related by common ownership:
CPI Plastics, Inc.
CP Illinois, Inc.
CP Ohio, Inc.
All material intercompany accounts and transactions have been eliminated in
the accompanying combined interim financial statements.
Cash Equivalents -- The Companies consider all highly liquid investments
purchased with a maturity of three months or less to be cash equivalents.
Inventories -- Inventories are stated at the lower of cost, determined by
the last-in, first-out (LIFO) method, or market.
Property and Equipment -- Property and equipment are recorded at cost.
Depreciation is computed principally on the straight-line basis over the
estimated useful lives of the assets. Cost of maintenance and repairs are
charged to expense when incurred.
Intangible Assets -- Patents are being amortized on the straight-line basis
over their remaining lives. Goodwill is being amortized on the straight-line
basis over ten years. Organization costs are recorded at cost and are being
amortized on the straight-line basis over five to ten years.
Major Customers -- Three customers accounted for approximately 45 percent
of sales for each of the six months ended June 30, 1995 and 1996. Accounts
receivable from these customers approximated $1,200,000 as of June 30, 1995 and
1996.
Income Taxes -- The Companies have elected to be treated as S Corporations
for income tax purposes. Under this election, the stockholders report the
taxable income (or loss) and pay any income tax (or receive any tax benefit)
personally.
Pension Plans -- CPI Plastics, Inc. maintains a defined contribution plan
for its union employees. Contributions are based upon $.30 for each hour worked.
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 revenue and expenses during
the reporting period. Actual results could differ from those estimates.
NOTE 2 NOTES RECEIVABLE -- STOCKHOLDERS
Notes receivable -- stockholders represent unsecured demand loans to
stockholders. The loans bear interest at 10 percent per annum.
F-17
<PAGE> 20
CPI PLASTICS, INC. ET AL. (NOTE 1)
NOTES TO COMBINED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1995 AND 1996
NOTE 3 INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Current cost:
Raw materials:
Resin.......................................... $ 826,531 $ 655,934
Other.......................................... 545,822 657,767
Finished goods.................................... 1,152,099 1,175,195
---------- ----------
Total current cost........................... 2,524,452 2,488,896
Excess of current cost over LIFO.................... 708,380 502,103
---------- ----------
LIFO cost.................................... $1,816,072 $1,986,793
========== ==========
</TABLE>
NOTE 4 PROPERTY AND EQUIPMENT
Cost of property and equipment is summarized as follows:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Land.............................................. $ 90,000 $ 90,000
Land improvements................................. 1,465,599 1,507,522
Building and improvements......................... 1,322,755 1,330,591
Machinery and equipment........................... 8,011,380 8,402,205
Molds............................................. 3,917,570 4,546,560
Furniture and fixtures............................ 161,516 180,800
----------- -----------
Total cost................................... 14,968,820 16,057,678
Less accumulated depreciation..................... (6,485,498) (7,784,537)
----------- -----------
Net carrying amount.......................... $ 8,483,322 $ 8,273,141
=========== ===========
</TABLE>
Depreciation expense totaled $616,342 for the six-month period ended June
30, 1995 and $672,808 for the six-month period ended June 30, 1996.
During 1994, the Companies identified an environmental problem on one of
their real properties. In connection with remediation of the problem, the
Companies have capitalized the estimated total corrective cost of approximately
$1,448,000 as land improvements. Approximately $158,000 and $82,000 was paid
during the six-month periods ended June 30, 1995 and 1996, respectively, and the
remainder has been classified in the accompanying balance sheet based on the
expected payment period.
F-18
<PAGE> 21
CPI PLASTICS, INC. ET AL. (NOTE 1)
NOTES TO COMBINED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1995 AND 1996
NOTE 5 OTHER ASSETS
Intangible assets included in other assets consist of the following:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Patents........................................... $ 400,000 $ 400,000
Goodwill.......................................... 80,000 80,000
Organization costs................................ 149,791 149,791
--------- ---------
Total cost................................... 629,791 629,791
Less accumulated amortization..................... (594,429) (612,346)
--------- ---------
Net carrying amount.......................... $ 35,362 $ 17,445
========= =========
</TABLE>
Total amortization expense charged to operations during the six-month
periods ended June 30, 1995 and 1996 was $11,764 and $7,743, respectively.
Other assets also include deposits with insurance carriers in the amount of
$21,918 and $54,918 at June 30, 1995 and 1996, respectively.
NOTE 6 NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Line of credit with a bank with a ceiling of
$4,000,000, requiring monthly payment of interest
at .50% above the prime rate, (9% and 7% at June
30, 1995 and 1996, respectively) collateralized by
property and equipment, accounts receivable and
inventories of the Companies (also see Note 7).... $3,513,000 $2,971,373
========== ==========
Unsecured demand notes payable to stockholders,
bearing interest at rates ranging from 8% to 10%
per annum......................................... $1,560,000 $ 995,000
========== ==========
</TABLE>
F-19
<PAGE> 22
CPI PLASTICS, INC. ET AL. (NOTE 1)
NOTES TO COMBINED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1995 AND 1996
NOTE 7 LONG-TERM DEBT
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Term loan payable to bank in monthly installments of
$119,972 plus interest at 1% over the prime rate,
(9% and 7% at June 30, 1995 and 1996,
respectively) maturing January 1997,
collateralized by substantially all assets of the
Company. During the six-month period ended June
30, 1995, the note was amended and increased by
$700,000.......................................... $2,910,840 $1,471,176
Equipment note payable, bearing interest at 8.25%,
payable in monthly installments of $4,415
beginning February 1996, including interest,
collateralized by specific items of equipment..... -- 164,690
---------- ----------
Total........................................ 2,910,840 1,635,866
Less current portion......................... 1,439,664 1,512,097
---------- ----------
Long-term portion............................ $1,471,176 $ 123,769
========== ==========
</TABLE>
In connection with the line of credit and term loan, the Companies have
agreed to, among other things, covenants requiring maintenance of certain
working capital and fixed charge ratios, prohibit payments for dividends or
stock redemptions and place restrictions on repayment of subordinated
stockholder notes.
Minimum principal payments on the long-term debt to maturity as of June 30,
1996 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30 AMOUNT
------------------------------------- ----------
<S> <C>
1997.............................. $1,512,097
1998.............................. 44,432
1999.............................. 48,056
2000.............................. 31,281
----------
Total......................... $1,635,866
==========
</TABLE>
Total interest expense incurred during the six-month periods ended June 30,
1995 and 1996 was $342,002 and $266,259, respectively, including approximately
$36,000 to related parties for both six-month periods ended June 30, 1995 and
1996.
F-20
<PAGE> 23
CPI PLASTICS, INC. ET AL. (NOTE 1)
NOTES TO COMBINED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1995 AND 1996
NOTE 8 LEASE COMMITMENTS
CP Ohio, Inc. leases its facility from an affiliate. The lease is
renegotiated quarterly and currently provides for quarterly payments of $16,200.
Additionally, the Companies lease transportation and phone equipment and
machinery under agreements expiring from 1996 to 2005. The following is a
schedule of future minimum rental payments under the lease agreements:
<TABLE>
<S> <C>
1997.............................. $ 56,445
1998.............................. 23,001
1999.............................. 11,836
2000.............................. 8,688
2001 and after.................... 45,609
--------
Total......................... $145,579
========
</TABLE>
Rent expense for the six-month periods ended June 30, 1995 and 1996
amounted to $128,602 and $84,687, respectively, including $32,400 to affiliates
in both 1995 and 1996.
NOTE 9 EMPLOYEE BENEFIT PLANS
The total expense for the Companies' defined contribution pension plans
amounted to $20,130 for the six-month period ended June 30, 1995 and $19,476 for
the six-month period ended June 30, 1996.
The Companies have a partially self-insured medical and dental plan for the
benefit of substantially all employees. Under the plan, the Companies are liable
for claims up to a maximum annual amount of $100,000 per employee and
approximately $750,000 in the aggregate. Expenses incurred under the plan,
including administrative charges, approximated $341,915 in 1995 and $368,195 in
1996.
NOTE 10 WORKERS' COMPENSATION
Through April 1996, CPI Plastics, Inc. and CP Illinois, Inc. were partially
uninsured for workers' compensation claims. The Companies have insurance
coverage that limits the workers' compensation loss. Under the plan, the maximum
loss is limited to $500,000 with a $2,500 deductible per occurrence.
CP Ohio, Inc. maintains workers' compensation insurance with the State of
Ohio.
Total workers' compensation expense for the six-month periods ended June
30, 1995 and 1996 under the above plans amounted to approximately $178,000 and
$116,000, respectively.
F-21
<PAGE> 24
CPI PLASTICS, INC. ET AL. (NOTE 1)
NOTES TO COMBINED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1995 AND 1996
NOTE 11 SUPPLEMENTAL INCOME INFORMATION
As disclosed in the combined interim financial statements, the Companies
use the last-in, first-out (LIFO) method of costing inventories. Following is
summarized financial data showing what the results would have been if the
first-in, first-out (FIFO) method had been used:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Inventories at lower of cost (first-in, first-out)
or market....................................... $ 2,524,452 $ 2,488,896
=========== ===========
Net sales......................................... $15,853,099 $15,739,682
Cost of sales..................................... 13,626,297 12,350,263
----------- -----------
Gross profit...................................... $ 2,226,802 $ 3,389,419
=========== ===========
Net income........................................ $ 941,829 $ 1,950,006
=========== ===========
Total stockholders' equity........................ $ 4,989,557 $ 6,284,047
=========== ===========
</TABLE>
NOTE 12 CASH FLOWS
Cash paid for interest during the six-month periods ended June 30, 1995 and
1996 was $342,241 and $271,593, respectively.
NOTE 13 DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
Cash, Trade Accounts Receivable and Payable, Accrued Receivables and
Accrued Liabilities -- The carrying amount approximates fair value because of
the short maturity of those instruments.
Long-term Debt -- The fair value of the Companies' long-term debt,
$1,635,866 at June 30, 1996, approximates its carrying amount and is estimated
based on rates currently available to the Companies.
Notes Receivable From Stockholders -- The estimated fair value of these
instruments has been determined by discounting the future cash flows using the
interest rate at which the Companies would currently make similar loans to
stockholders.
Notes Payable to Bank and Stockholders -- The carrying amount of notes
payable to bank and stockholders of $2,971,373 and $995,000, respectively, at
June 30, 1996 approximates fair value because of the short maturity of those
instruments.
NOTE 14 SUBSEQUENT EVENT
On July 29, 1996, the Companies' common stock was acquired by United States
Can Company. A portion of the proceeds was used by the stockholders as a capital
contribution to pay, in full, the line of credit and term loans payable to bank
as described in Notes 6 and 7. Additionally, during July 1996, in conjunction
with the transaction, all real property and improvements were sold to a related
entity and the notes receivable distributed resulting in a net decrease to
retained earnings of approximately $2,070,000.
F-22
<PAGE> 25
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
CROWN CORK & SEAL COMPANY, INC.
We have audited the accompanying combined statements of financial position
of the Aerosols Divestiture Package (the "DP"), (a combination of several
operations of Crown Cork & Seal Company, Inc. and CarnaudMetalbox, collectively
the "Company"), at December 31, 1995 and 1994, and the combined statements of
operations of the DP for the years ended December 31, 1995, 1994 and 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying combined financial statements were prepared in accordance
with International Accounting Standards and on the basis of accounting described
in Note A and are not intended to be a complete presentation of the DP's
financial position or cash flows.
In our opinion, based on our audits, the combined financial statements
present fairly, in all material respects, the financial position of the DP at
December 31, 1995 and 1994 and the results of its operations for the three years
ended December 31, 1995, 1994 and 1993 in conformity with International
Accounting Standards.
Paris, March 1, 1996
Befec-Price Waterhouse
Jean-Pierre Caroff
F-23
<PAGE> 26
AEROSOLS DIVESTITURE PACKAGE
COMBINED STATEMENTS OF FINANCIAL POSITION (SEE NOTE A)
(US DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1994 1995
------- -------
<S> <C> <C>
ASSETS
Current assets
Accounts receivable -- trade...................................... $21,668 $25,904
Accounts receivable -- related parties............................ 1,216 1,395
Inventories....................................................... 19,294 22,255
Prepaid expenses and other current assets......................... 2,407 1,900
------- -------
Total current assets...................................... 44,585 51,454
------- -------
Property, plant and equipment, net................................ 40,957 45,804
Other non-current assets.......................................... 269 259
------- -------
Total..................................................... $85,811 $97,517
======= =======
LIABILITIES & OWNER'S NET INVESTMENT
Current liabilities
Short-term debt................................................... $ 4,424 $ 2,948
Accounts payable -- trade......................................... 16,071 15,048
Accounts payable -- related parties............................... 2,697 4,728
Accrued liabilities............................................... 6,377 4,288
------- -------
Total current liabilities................................. 29,569 27,012
------- -------
Long-term debt.................................................... 8,159 7,897
Other non-current liabilities..................................... 2,976 3,509
Owner's net investment............................................ 45,107 59,099
------- -------
Total..................................................... $85,811 $97,517
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE> 27
AEROSOLS DIVESTITURE PACKAGE
COMBINED STATEMENTS OF OPERATIONS (SEE NOTE A)
(US DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Sales
Trade.............................................. $ 88,884 $ 95,501 $ 109,471
Group.............................................. 4,807 7,666 9,635
--------- --------- ---------
$ 93,691 $ 103,167 $ 119,106
========= ========= =========
Costs and expenses
Cost of products sold (excluding depreciation and
amortization)................................... 81,380 86,150 99,156
Depreciation and amortization...................... 4,730 5,074 6,137
Selling and administrative expenses................ 5,208 4,610 5,700
Other (income)/expense -- net...................... (50) (274) 29
Management fees -- Group........................... 1,295 1,734 1,900
Provision for restructuring........................ 1,000 1,877 20
Interest expense................................... 2,035 1,541 1,445
--------- --------- ---------
95,598 100,712 114,387
--------- --------- ---------
Income/(loss) before taxes........................... (1,907) 2,455 4,719
Provision for income taxes........................... 614 1,312 1,915
--------- --------- ---------
Net income/(loss).................................... $ (2,521) $ 1,143 $ 2,804
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE> 28
AEROSOLS DIVESTITURE PACKAGE
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(US DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
A. BASIS OF PRESENTATION
In January 1996 Crown Cork & Seal Company, Inc. ("Crown") offered to
purchase all outstanding shares of CarnaudMetalbox SA for either cash or
Crown shares. The transaction was initiated by an announcement on May 22,
1995 that Crown and Compagnie Generale d'Industrie et de Participations
("CGIP"), the principal shareholder of CarnaudMetalbox, had signed an
agreement under which CGIP irrevocably committed (subject to certain
conditions which were subsequently met) to sell its shares to Crown. The
proposed transaction was reviewed by the European Commission and approved
by the Commission on November 15, 1995. The offer closed on February 1,
1996 resulting in 98.7% of outstanding shares being tendered. The European
Commission's approval was conditional on the divestiture of five aerosol
businesses within the aerosols' operations, hereafter referred to as the
Divestiture Package ("DP"). The group of companies constituting Crown and
CarnaudMetalbox, excluding operations comprising the DP, is hereafter
referred to as the "Group".
The DP includes the following aerosol can making operations:
<TABLE>
<CAPTION>
COUNTRY LOCATION
------------------------------------------ ------------------------------------------
<S> <C>
France.................................... Laon
Germany................................... Schwedt
Italy..................................... Voghera
Spain..................................... Reus
United Kingdom ("UK")..................... Southall/Tredegar
</TABLE>
The accompanying Combined (combined is used instead of consolidated due to
the two different parent companies) Financial Statements have been prepared
in connection with the sale of the DP and are in accordance with
international accounting principles issued by the International Accounting
Standards Committee. These principles, as applied to the Combined Financial
Statements, do not differ materially from accounting principles generally
accepted in the United States of America with the exception of certain
disclosure requirements. Further these financial statements are not
intended to be a complete presentation of the DP's financial position or
cash flows.
Throughout the period covered by the Combined Financial Statements, the
DP's UK and Italian operations were conducted and accounted for as product
lines of subsidiaries of Crown and as such were not legal entities. The
DP's French, German and Spanish operations were operating subsidiaries of
CarnaudMetalbox.
Accordingly, financial statements were not previously prepared for the DP.
These Combined Financial Statements have been derived from the historical
accounting records of Crown and CarnaudMetalbox subsidiaries, and present
the financial position and results of operations as if the DP was a
separate operating entity. The Combined Financial Statements have been
prepared as if the operations of the DP in each country had been conducted
exclusively within a wholly-owned subsidiary in that country. In that
context, there is no direct ownership among the various units comprising
the DP. Accordingly, Crown's net investment in the DP (Owner's Net
Investment) is shown in lieu of Stockholders' Equity in the Combined
Financial Statements.
Under Crown and CarnaudMetalbox's cash management systems, cash
requirements and cash generated were generally centralized under cash
pooling agreements. In addition, Crown operations'
F-26
<PAGE> 29
AEROSOLS DIVESTITURE PACKAGE
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(US DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
systems were not designed to track liabilities and payments or receivables
and receipts on a business specific basis. Given these constraints,
statements of cash flows are not presented. Intercompany loans and debt in
connection with the Group, net of cash, are included in Owner's Net
Investment.
Two Group manufacturing operations share sites with operations of the DP.
Assets and liabilities which relate to non-DP operations, specifically at
Southall and Voghera, are not included in the Combined Statement of
Financial Position while assets not owned by two of the DP operations,
specifically Reus and Laon, but included in the assets to be sold, have
been reflected in the combined financial statements.
The building in Laon (France) is leased by a CarnaudMetalbox group company
under a finance-type lease. This finance lease has been recognized in the
Combined Financial Statements as an asset and a liability in accordance
with International Accounting Standards.
The building in Reus (Spain) is currently owned by a CarnaudMetalbox group
company and is intended to be sold to the DP. This building has been
accounted for in the Combined Financial Statements at historical cost.
The depreciation and interest expenses in respect of the buildings in Laon
and Reus are included in these Combined Financial Statements.
The Combined Statements of Operations include revenues and costs directly
attributable to the DP including a) facility costs, b) interest on third
party debt and c) management charges. Excluded from the Statements of
Operations are intercompany interest charges (all intercompany debt has
been reflected as Owners's Net Investment).
All the allocations and estimates in the Combined Financial Statements are
based on assumptions that Group management believes are reasonable under
the circumstances. These allocations and estimates are not, however,
necessarily indicative of the costs that would have resulted if the DP had
been operated as a separate entity.
Transactions between the DP and Group entities have been identified in the
Combined Financial Statements among related parties.
B. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
BASIS OF COMBINATION
The Combined Financial Statements include the accounts of the various
businesses comprising the DP. All material transactions and accounts
between DP operations have been eliminated in combination.
USE OF ESTIMATES AND ASSUMPTIONS
The Combined Financial Statements have been prepared on the basis of
presentation disclosed in Note A. They reflect management estimates and
assumptions. Actual results could differ from these estimates, impacting
reported results of operations and financial position.
F-27
<PAGE> 30
AEROSOLS DIVESTITURE PACKAGE
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(US DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
CASH
The DP participates in Group cash pooling systems and, as such, its cash
funding requirements are met by and cash generated is transferred to the
Group. All cash balances are offset against Owner's Net Investment in the
Combined Statements of Financial Position.
INVENTORIES
Inventories are stated principally at the lower of cost or estimated net
realizable value. Cost is determined on a first in, first out basis. The
cost of work in progress and finished goods comprises material, labor and
attributable manufacturing overheads.
PROPERTY, PLANT AND EQUIPMENT (PP&E)
PP&E is shown at historical cost. Depreciation is provided, except on
freehold land, on a straight-line basis over the estimated useful lives of
the assets, as follows (in years):
<TABLE>
<S> <C>
Buildings and improvements.................... 10 to 40 years
Plant and machinery........................... 5 to 12 years
Other assets.................................. 5 to 10 years
</TABLE>
PENSIONS AND RETIREMENT BENEFITS
French legislation requires the company to provide for employees' lump sum
termination benefits depending upon the length of employee service in its
consolidated financial statements. The employer is required to meet the
full cost of retirement benefits, and provision is made in the DP Combined
Statements of Financial Position under other non-current liabilities in
respect of those liabilities. Regular actuarial valuations are carried out
in order to determine the Group's obligation in respect of those retirement
benefits. Retirement benefit obligations are valued using the accumulated
benefit valuation method. The accumulated benefit obligation at December
31, 1994 and 1995, is the present value of benefits (whether vested or non
vested) based on employee service and compensation prior to December 31,
1994 and 1995 respectively.
The employees of the DP's UK operations participate in a Crown sponsored
pension plan. The plan is currently funded. The benefits under the plan are
based primarily on years of service and the employees remuneration. Pension
expense allocated to the Combined Financial Statements, of $188, $364 and
$325 for the years ended December 31, 1993, 1994 and 1995, respectively was
determined under statutory accounting principles which are not considered
materially different from International Accounting Principles.
In other countries amounts are set aside in accordance with local
legislation to provide fully for termination and retirement benefit
obligations relating to employees.
FOREIGN CURRENCY TRANSLATION
The US dollar has been used as the reporting currency of the DP's combined
financial statements. Foreign currency asset and liability amounts are
translated into U.S. dollars at end-of-period exchange rates. Income and
expenses are translated at average rates in effect during each year.
F-28
<PAGE> 31
AEROSOLS DIVESTITURE PACKAGE
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(US DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
The following rates (1 $ =) have been used:
-- to translate assets and liabilities at
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
------- -------
<S> <C> <C>
French Franc......................................................... 5.35 4.90
UK Pound............................................................. 0.641 0.645
German DM............................................................ 1.551 1.433
Spanish Pesetas...................................................... 131.77 121.28
Italian Lira (100)................................................... 16.2622 15.8583
</TABLE>
-- to translate income and expenses for the year ended
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
French Franc................................................ 5.66 5.55 4.99
UK Pound.................................................... 0.666 0.653 0.633
German DM................................................... 1.655 1.623 1.434
Spanish Pesetas............................................. 126.62 134.05 124.75
Italian Lira (100).......................................... 15.7227 16.3238 16.0965
</TABLE>
REVENUE RECOGNITION
Sales and related cost of goods sold are included in income when goods are
shipped to the customer.
RESEARCH AND DEVELOPMENT EXPENSES
Expenditures for research and development at the operations level are
charged to operations as incurred and are included in selling and
administrative expenses. Research and development costs incurred at
CarnaudMetalbox group level are charged to subsidiaries through management
fees (0.2% of revenues).
INCOME TAXES
The taxable income of the various operations comprising the DP is included
in the consolidated tax returns of the Group company of which it is a part.
As such, separate income tax returns are not prepared or filed by the DP.
Income tax expense has been measured as if each member of the DP were a
separate taxpayer using the local statutory rate for each period presented.
Income taxes currently payable are deemed remitted by the DP to the Group
in the period in which the liability arose. No tax benefit has been
recorded for any member of the DP whose operations resulted in a loss
during any year in the period covered. No deferred taxes have been recorded
in the Combined Financial Statements.
C. RELATED PARTY TRANSACTIONS
The Combined Financial Statements include transactions with other Group
organisations involving sales of goods, purchase of materials and
components and functions and services (such as cash
F-29
<PAGE> 32
AEROSOLS DIVESTITURE PACKAGE
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(US DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
management, tax administration, legal, research and development and data
processing) that were provided to the DP.
MANAGEMENT FEES
The costs of some group functions and services have been charged and/or
allocated to the DP. Such intercompany charges and allocations are not
necessarily indicative of the costs that would be incurred directly if the
DP had been operated as a separate entity.
SALES AND PURCHASES
Sales by the DP to other operations of the Group were approximately $4,807,
$7,666 and $9,635 for the years ended December 31, 1993, December 31, 1994
and December 31, 1995 respectively.
Purchases by the DP from other operations of the Group, were approximately
$18,640, $20,180, and $28,286 for the years ended December 31, 1993,
December 31, 1994 and December 31, 1995 respectively and approximate fair
market value. Such purchases relate mainly to the purchase of metal by the
UK DP operations from the Group which amounted to approximately $13,285,
$13,560 and $17,579 in 1993, 1994 and 1995 respectively. Although sourced
locally, these transactions reflect the centralised purchasing and billing
arrangements within Crown.
BORROWINGS
As stated in Note A, intercompany borrowings are included in Owner's Net
Investment. No interest expense related to intercompany borrowings is
reflected in the Combined Financial Statements.
D. RECEIVABLES
Accounts receivable are presented in the Combined Statements of Financial
Position net of allowances of $1,086 and $1,080 at December 31, 1994 and
December 31, 1995, respectively.
E. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1994 1995
-------- --------
<S> <C> <C>
Raw materials and consumables.................................... $ 6,173 $ 7,259
Work in progress................................................. 6,523 8,599
Finished goods................................................... 4,638 4,486
Spare parts and supplies......................................... 1,960 1,911
-------- --------
$ 19,294 $ 22,255
======== ========
</TABLE>
F-30
<PAGE> 33
AEROSOLS DIVESTITURE PACKAGE
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(US DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
F. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
-------- --------
<S> <C> <C>
Land & Buildings................................................. $ 11,727 $ 12,885
Plant & Machinery................................................ 54,829 64,075
Other tangible assets............................................ 1,829 2,151
Construction in progress......................................... 4,524 5,765
-------- --------
72,909 84,876
Less: Accumulated depreciation and amortization.................. (31,952) (39,072)
-------- --------
$ 40,957 $ 45,804
======== ========
</TABLE>
As stated in Note A, the historical cost of two buildings (including land)
to be comprised in the divestiture, specifically in France and in Spain, is
included above. Depreciation expense has been adjusted to reflect the
capitalisation of these two buildings. Gross book value for the buildings
in France and Spain amount to $7,298 and $1,015, respectively for the year
ended December 31, 1994 and $7,968 and $1,202, respectively, for the year
ended December 31, 1995. Accumulated depreciation for the buildings in
France and Spain amount to $730 and $85, respectively, for the year ended
December 31, 1994 and $1,062 and $122 respectively for the year ended
December 31, 1995.
Coating and printing lines used by the Italian aerosol operations are
shared with other product lines and are owned by a Crown subsidiary not
part of the DP. However, Crown has committed to provide, subject to the
requirements of a prospective buyer, coating and printing facilities
similar to the existing lines. Therefore, the annual depreciation charge of
the coating and printing lines has been maintained in the Combined
Statements of Operations for the years ended December 31, 1993, 1994 and
1995 for $64, $70 and $84 respectively.
G. CAPITAL LEASE
The building in Laon, dedicated to operating activities, was financed in
1993 under a 15 years lease contract (see Note A and F),
Minimum commitments are $1,097 per annum and can be detailed as follows:
<TABLE>
<CAPTION>
INTEREST CAPITAL
-------- -------
<S> <C> <C>
1996................................................................ $ 757 $ 340
1997................................................................ 717 380
1998................................................................ 673 424
1999................................................................ 624 473
2000................................................................ 569 528
Over five years..................................................... 1,840 4,914
</TABLE>
F-31
<PAGE> 34
AEROSOLS DIVESTITURE PACKAGE
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(US DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
H. ACCRUED LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1994 1995
------ ------
<S> <C> <C>
Accrued employee related charges....................................... $3,938 $3,517
Other.................................................................. 2,439 771
------ ------
$6,377 $4,288
====== ======
</TABLE>
I. SHORT TERM AND LONG TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1994 1995
------ ------
<S> <C> <C>
Short term debt
Overdraft............................................................ $1,245 $ 153
Bank loans (fixed rate 6.25% -- 11.75%).............................. 577 627
Discounted Notes..................................................... 2,309 1,809
Capital lease and other.............................................. 293 359
------ ------
Total short term debt.................................................. $4,424 $2,948
====== ======
Long term debt
Bank loans -- due 1996............................................... $ 335 $ --
6.25% bank loan -- due 2001.......................................... 1,353 1,178
Capital lease (see notes A and F).................................... 6,471 6,719
------ ------
Total long term debt................................................... $8,159 $7,897
====== ======
</TABLE>
J. OTHER NON-CURRENT LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
1994 1995
------ ------
<S> <C> <C>
Pensions............................................................... $1,208 $1,474
Grants................................................................. 966 1,195
Other.................................................................. 802 840
------ ------
$2,976 $3,509
====== ======
</TABLE>
K. PROVISION FOR RESTRUCTURING
As part of the Group's continuing program of reorganisation and
rationalization, certain members of the DP incurred costs principally in
connection with labor force reductions. In 1993 the French and Spanish
operations were restructured. In 1994 the French operation again incurred
significant restructuring costs and additionally a charge was incurred by
the UK.
L. OTHER INCOME/EXPENSE
Other income/expense mainly represents the gain/loss on disposal of assets
and other miscellaneous income/expense.
F-32
<PAGE> 35
AEROSOLS DIVESTITURE PACKAGE
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(US DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
M. COMMITMENTS AND CONTINGENCIES
Aerosol products have historically been subject to certain criticism on
environmental grounds. The future development of unfavorable legislation or
regulations may have a negative effect on the aerosols markets, and
accordingly could potentially adversely affect the DP operations.
To comply with local environmental regulations the UK operations will be
required to upgrade its production equipment, in particular involving the
installation of incinerators in the lithographic department, by 1997.
The German operations received local government grants from 1990 to 1995
corresponding to around 23% of capital expenditures in return for employing
a specified number of workers. The operation has not fully met its
obligations in this respect, specifically, it has employed fifty five
instead of sixty workers as stipulated by the local government at the end
of 1995. The operation may therefore be required to reimburse part of these
grants, estimated by management not to exceed the pro-rata terms of
non-compliance with the conditions of these grants.
The German operations are committed to pay termination indemnities to a
sale agent of approximately $400 in the event of termination of its
contract.
The French DP operations are subject to two potential material claims. This
entity was sued in the United States by an individual consumer, who alleges
she suffered burns while using aerosol hairspray. The complaint includes
counts for breach of warranty of merchantability, unsuitability for use and
lack of appropriate warnings. This entity is also subject to a claim by
Matrix Essentials Inc. for defective aerosol cans caused by flaking side
strips on cans supplied to it.
The DP's basic raw material is tinplate which is purchased from multiple
sources. The DP is subject to material fluctuations in the cost of raw
materials and adjusts its selling prices to reflect these movements. There
can be no assurance, however, that the DP will be able to recover fully any
increase in raw material costs from its customers.
The DP is subject to various other claims and litigations and
administrative proceedings. While the impact on future financial results is
not subject to reasonable estimation because considerable uncertainty
exists, management is of the opinion that their outcome will not have a
material effect on the DP's financial position or results of operations.
N. SUBSEQUENT EVENTS -- UNAUDITED
On September 11, 1996, the operations comprising the DP were sold to U.S.
Can Corporation by means of the sale and purchase of the entire issued
share capital of the former CarnaudMetalbox French. German and Spanish DP
entities and of the Crown UK and Italian DP businesses and related
undertakings. The consideration for the transaction amounts to $58.6
million subject to adjustments based on working capital and net financial
indebtedness as defined in the sale agreement.
F-33
<PAGE> 36
AEROSOLS DIVESTITURE PACKAGE
COMBINED INTERIM STATEMENT OF FINANCIAL POSITION (SEE NOTE A)
(US DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30,
1996
-----------
<S> <C>
ASSETS
Current assets
Accounts receivable -- trade................................................ $ 29,635
Accounts receivable -- related parties...................................... 1,947
Inventories................................................................. 19,660
Prepaid expenses and other current assets................................... 945
-----------
Total current assets..................................................... 52,187
-----------
Property, plant and equipment, net.......................................... 43,462
Other non-current assets.................................................... 224
-----------
Total.................................................................... $ 95,873
=========
LIABILITIES & OWNER'S NET INVESTMENT
Current liabilities
Short-term debt............................................................. $ 2,663
Accounts payable -- trade................................................... 14,985
Accounts payable -- related parties......................................... 4,434
Accrued liabilities......................................................... 4,983
-----------
Total current liabilities................................................ 27,065
-----------
Long-term debt.............................................................. 6,214
Other non-current liabilities............................................... 3,404
Owner's net investment...................................................... 59,190
-----------
Total.................................................................... $ 95,873
=========
</TABLE>
The accompanying notes are an integral part of this financial information.
F-34
<PAGE> 37
AEROSOLS DIVESTITURE PACKAGE
COMBINED INTERIM STATEMENTS OF OPERATIONS (SEE NOTE A)
(US DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30,
---------------------
1995 1996
-------- --------
<S> <C> <C>
Sales
Trade.............................................................. $ 57,529 $ 59,868
Group.............................................................. 4,410 3,145
-------- --------
61,939 63,013
Costs and expenses
Cost of products sold (excluding depreciation and amortization).... 51,456 51,868
Depreciation and amortization...................................... 3,037 2,891
Selling and administrative expenses................................ 2,736 2,903
Other (income)/expense -- net...................................... 50 (8)
Management fees -- Group........................................... 997 952
Provision for restructuring........................................ 21 62
Interest expense................................................... 777 561
-------- --------
59,074 59,229
Income before taxes.................................................. 2,865 3,784
Provision for income taxes........................................... 1,124 1,511
-------- --------
Net income........................................................... $ 1,741 $ 2,273
======== ========
</TABLE>
The accompanying notes are an integral part of this financial information.
F-35
<PAGE> 38
AEROSOLS DIVESTITURE PACKAGE
NOTES TO THE COMBINED INTERIM FINANCIAL INFORMATION
JUNE 30, 1996
(U.S. DOLLARS IN THOUSANDS)
(UNAUDITED)
A. BASIS OF PRESENTATION
In January 1996 Crown Cork & Seal Company, Inc. ("Crown") offered to
purchase all outstanding shares of CarnaudMetalbox, for either cash or
Crown shares. The transaction was initiated by an announcement on May 22,
1995 that Crown and Compagnie Generale d'Industrie et de Participations
("CGIP"), the principal shareholder of CarnaudMetalbox, had signed an
agreement under which CGIP irrevocably committed (subject to certain
conditions which were subsequently met) to sell its shares to Crown. The
proposed transaction was reviewed by the European Commission and approved
by the Commission on November 15, 1995. The offer closed on February 1,
1996 resulting in 98.7% of outstanding shares being tendered. The European
Commission's approval was conditional on the divestiture of five aerosol
businesses within the aerosols' operations, hereafter referred to as the
Divestiture Package ("DP"). The group of companies constituting Crown and
CarnaudMetalbox, excluding operations comprising the DP, is hereafter
referred to as the "Group".
The DP includes the following aerosol can making operations:
<TABLE>
<CAPTION>
Country Location
------------------------------------------- ------------------
<S> <C>
France..................................... Laon
Germany.................................... Schwedt
Italy...................................... Voghera
Spain...................................... Reus
United Kingdom ("UK")...................... Southall/Tredegar
</TABLE>
The accompanying unaudited Combined Interim Financial Information has been
prepared in connection with the sale of the DP. In the opinion of
management it contains all material adjustments necessary to present the
interim financial position of the DP as of June 30, 1996 and the interim
results of its operations for the periods ended June 30, 1995 and June 30,
1996, respectively. These results have been determined on the basis of
international accounting principles and practices applied consistently and
are not necessarily indicative of the results that may be expected for the
year ended December 31, 1996. These principles, as applied to the unaudited
Combined Interim Financial Information do not differ materially from
accounting principles generally accepted in the United States of America.
This unaudited Combined Interim Financial Information is not intended to be
a complete presentation of the DP's financial position or cash flows.
Throughout the period covered by the Combined Interim Financial
Information, the DP's UK and Italian operations were conducted and
accounted for as product lines of subsidiaries of Crown and as such were
not legal entities. The DP's French, German and Spanish operations were
operating subsidiaries of CarnaudMetalbox.
Accordingly, financial statements were not previously prepared for the DP.
This Combined Interim Financial Information has been derived from the
historical accounting records of Crown and CarnaudMetalbox subsidiaries,
and presents the interim financial position and results of operations as if
the DP was a separate operating entity. The Combined Interim Financial
Information has been prepared as if the operations of the DP in each
country had been conducted exclusively within a wholly-owned subsidiary in
that country. In that context, there is no direct ownership among the
various units comprising the DP. Accordingly, Crown's net investment in the
DP (Owner's Net Investment) is shown in lieu of Stockholders' Equity in the
Combined Interim Financial Information.
F-36
<PAGE> 39
AEROSOLS DIVESTITURE PACKAGE
NOTES TO THE COMBINED INTERIM FINANCIAL INFORMATION
JUNE 30, 1996
(U.S. DOLLARS IN THOUSANDS)
(UNAUDITED)
Under Crown and CarnaudMetalbox's cash management systems, cash
requirements and cash generated were generally centralized under cash
pooling agreements. In addition, Crown operations' systems were not
designed to track liabilities and payments or receivables and receipts on a
business specific basis. Given these constraints, statements of cash flows
are not presented. Intercompany loans and debt in connection with the
Group, net of cash, are included in Owner's Net Investment.
Two Group manufacturing operations share sites with operations of the DP.
Assets and liabilities which relate to non-DP operations, specifically at
Southall and Voghera, are not included in the Combined Interim Statement of
Financial Position while assets not owned by the Laon DP operations, but
included in the assets to be sold, have been reflected in the Combined
Interim Financial Information.
The building in Laon (France) is leased by a CarnaudMetalbox group company
under a finance-type lease. This lease has been transferred to the DP in
July 1996. This finance lease has been recognized in the Combined Interim
Financial Information as an asset and a liability in accordance with
International Accounting Standards.
The building in Reus, Spain was owned by a Group company throughout the
period covered by the Combined Interim Financial Information, until May
1996 when it was sold to the DP. This building has been accounted for at
historical cost in the Combined Interim Financial Information (See Note F).
The depreciation and interest expenses in respect of the buildings in Laon
and Reus are included in this Combined Interim Financial Information.
The Combined Interim Statements of Operations include revenues and costs
directly attributable to the DP including a) facility costs, b) interest on
third party debt and c) management charges. Excluded from the Interim
Statements of Operations are intercompany interest charges (all
intercompany debt has been reflected as Owner's Net Investment).
All the allocations and estimates in the Combined Interim Financial
Information are based on assumptions that Group management believes are
reasonable under the circumstances. These allocations and estimates are
not, however, necessarily indicative of the costs that would have resulted
in the DP had been operated as a separate entity.
Transactions between the DP and Group entities have been identified in the
Combined Interim Financial information among related parties.
Certain information and footnote disclosures, normally included in
financial statements in accordance with generally accepted accounting
principles, have been condensed or omitted. The accompanying Combined
Interim Financial Information should be read in conjunction with the
Combined Financial Statements for the year ended December 31, 1995.
B. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
BASIS OF COMBINATION
The Combined Interim Financial Information includes the accounts of the
various businesses comprising the DP. All material transactions and
accounts between DP operations have been eliminated in combination.
F-37
<PAGE> 40
AEROSOLS DIVESTITURE PACKAGE
NOTES TO THE COMBINED INTERIM FINANCIAL INFORMATION
JUNE 30, 1996
(U.S. DOLLARS IN THOUSANDS)
(UNAUDITED)
USE OF ESTIMATES AND ASSUMPTIONS
The Combined Interim Financial Information has been prepared on the basis
of presentation disclosed in Note A. It reflects management estimates and
assumptions. Actual results could differ from these estimates, impacting
results of operations and financial position.
CASH
The DP participates in Group cash pooling systems and, as such, its cash
funding requirements are met by and cash generated is transferred to the
Group. All cash balances are offset against Owner's Net Investment in the
Combined Interim Statements of Financial Position.
INVENTORIES
Inventories are stated principally at the lower of cost or estimated net
realizable value. Cost is determined on a first in, first out basis. The
cost of work in progress and finished goods comprises material, labor and
attributable manufacturing overheads.
PROPERTY, PLANT AND EQUIPMENT (PP&E)
PP&E is shown at historical cost. Depreciation is provided, except on
freehold land, on a straight-line basis over the estimated useful lives of
the assets, as follows (in years):
<TABLE>
<S> <C>
Buildings and improvements.................... 10 to 40 years
Plant and machinery........................... 5 to 12 years
Other assets.................................. 5 to 10 years
</TABLE>
PENSIONS AND RETIREMENT BENEFITS
French legislation requires the company to provide for employees' lump sum
termination benefits depending upon the length of employee service in its
consolidated financial statements. The employer is required to meet the
full cost of retirement benefits, and provision is made in the DP Combined
Interim Statement of Financial Position under other non-current liabilities
in respect of those liabilities. Regular actuarial valuations are carried
out in order to determine the Group's obligation in respect of those
retirement benefits. Retirement benefit obligations are valued using the
accumulated benefit valuation method. The accumulated benefit obligation at
June 30, 1996, is the present value of benefits (whether vested or
non-vested) based on employees services and compensation prior to June 30,
1996.
The employees of the DP's UK operations participate in a Crown-sponsored
pension plan. This plan is currently funded. The benefits under the plan
are based primarily on years of service and the employees remuneration.
Pension expense allocated to the Combined Interim Financial Information of
$216 for the six-month period ended June 30, 1996 was determined under
statutory accounting principles which are not considered materially
different from International Accounting Principles.
In other countries amounts are set aside in accordance with local
legislation to provide fully for termination and retirement benefit
obligations relating to employees.
F-38
<PAGE> 41
AEROSOLS DIVESTITURE PACKAGE
NOTES TO THE COMBINED INTERIM FINANCIAL INFORMATION
JUNE 30, 1996
(U.S. DOLLARS IN THOUSANDS)
(UNAUDITED)
FOREIGN CURRENCY TRANSLATION
The US dollar has been used as the reporting currency of the DP's Combined
Interim Financial Information. Foreign currency asset and liability amounts
are translated into U.S. dollars at end-of-period exchange rates. Income
and expenses are translated at average exchange rates in effect during each
period.
The following rates (1 $ =) have been used:
-- to translate assets and liabilities at June 30, 1996
<TABLE>
<S> <C>
French Franc................................................. 5.15
UK Pound..................................................... 0.646
German DM.................................................... 1.523
Spanish Pesetas.............................................. 128.25
Italian Lira (100)........................................... 15.3424
</TABLE>
-- to translate income and expenses for the six-month period ended.
<TABLE>
<CAPTION>
JUNE 30,
-----------------
1995 1996
------- -------
<S> <C> <C>
French Franc.......................................... 4.98 5.12
UK Pound.............................................. 0.625 0.655
German DM............................................. 1.418 1.504
Spanish Pesetas....................................... 125.28 126.31
Italian Lira (100).................................... 16.5059 15.6127
</TABLE>
REVENUE RECOGNITION
Sales and related cost of goods sold are included in income when goods are
shipped to the customer.
RESEARCH AND DEVELOPMENT EXPENSES
Expenditures for research and development at the operations level are
charged to operations as incurred and are included in selling and
administrative expenses. Research and development costs incurred at
CarnaudMetalbox group level are charged to subsidiaries through management
fees (0.2% of revenues).
INCOME TAXES
The taxable income of the various operations comprising the DP is included
in the consolidated tax returns of the Group company of which it is a part.
As such, separate income tax returns are not prepared or filed by the DP.
Income tax expense has been measured as if each member of the DP were a
separate taxpayer using the local statutory rate for each period presented.
Income taxes currently payable are deemed remitted by the DP to the Group
in the period in which the liability arose. No tax benefit has been
recorded for any member of the DP whose operations resulted in a loss
during any of the periods covered. No deferred taxes have been recorded in
the Combined Interim Financial Information.
F-39
<PAGE> 42
AEROSOLS DIVESTITURE PACKAGE
NOTES TO THE COMBINED INTERIM FINANCIAL INFORMATION
JUNE 30, 1996
(U.S. DOLLARS IN THOUSANDS)
(UNAUDITED)
C. RELATED PARTY TRANSACTIONS
The Combined Interim Financial Information includes transactions with other
Group organizations involving sales of goods, purchase of materials and
components and functions and services (such as cash management, tax
administration, legal, research and development and data processing) that
were provided to the DP.
MANAGEMENT FEES
The costs of some group functions and services have been charged and/or
allocated to the DP. Such intercompany charges and allocations are not
necessarily indicative of the costs that would be incurred directly if the
DP had been operated as a separate entity.
SALES AND PURCHASES
Sales by the DP to other operations of the Group were approximately $4,410
and $3,145 for the periods ended June 30, 1995 and June 30, 1996
respectively.
Purchases by the DP from other operations of the Group were $9,756 and
$10,700 for the periods ended June 30, 1995 and June 30, 1996 respectively
and approximate fair market value. Such purchases relate mainly to the
purchase of metal by the UK DP operations from the Group which amounted to
approximately $6,970 and $6,088 for the six-month periods ended June 30,
1995 and June 30, 1996, respectively. Although sourced locally, these
transactions reflect the centralized purchasing and billing arrangements
within Crown.
BORROWINGS
As stated in Note A, intercompany borrowings are included in Owner's Net
Investment. No interest expense related to intercompany borrowings is
reflected in the Combined Interim Financial Information.
D. RECEIVABLES
Accounts receivable are presented in the Combined Interim Statement of
Financial Position net of allowances of $1,037 at June 30, 1996.
E. INVENTORIES
<TABLE>
<CAPTION>
JUNE 30,
1996
--------
<S> <C>
Raw materials and consumables............................. $ 6,347
Work in progress.......................................... 7,831
Finished goods............................................ 3,564
Spare parts and supplies.................................. 1,918
--------
$ 19,660
========
</TABLE>
F-40
<PAGE> 43
AEROSOLS DIVESTITURE PACKAGE
NOTES TO THE COMBINED INTERIM FINANCIAL INFORMATION
JUNE 30, 1996
(U.S. DOLLARS IN THOUSANDS)
(UNAUDITED)
F. PROPERTY, PLANT AND EQUIPMENT
The building in Laon (France) is leased by a CarnaudMetalbox group company
under a finance-type lease. This lease has been transferred to the DP in
July 1996. This finance lease has been recognized in the Combined Interim
Financial Information at June 30, 1996 as an asset and a liability in
accordance with International Accounting Standards. The net book value for
this building amounts to $6,441 at June 30, 1996.
The building in Reus (Spain) was bought from a Crown Cork & Seal group
company during the first half of 1996 for $2,401. As of June 1996, this
building has been accounted for in the Combined Interim Financial
Information at historical cost. The net book value for this building
amounts to $1,006 at June 30, 1996.
G. COMMITMENTS AND CONTINGENCIES
Aerosol products have historically been subject to certain criticism on
environmental grounds. The future development of unfavorable legislation or
regulations may have a negative effect on the aerosols markets, and
accordingly could potentially adversely affect the DP operations.
The German operations received local government grants from 1990 to 1995
amounting to $1,520 and corresponding to around 23% of capital expenditures
in return for employing a specified number of workers. The operation has
not fully met its obligations in this respect, specifically, it has
employed fifty-five instead of sixty workers as stipulated by the local
government at the end of 1995. The operation may therefore be required to
reimburse part of these grants, estimated by management not to exceed the
pro-rata terms of non-compliance with the conditions of these grants.
The German operations are committed to pay termination indemnities to a
sale agent of approximately $400 in the event of termination of its
contract.
The French DP operations are subject to two potentially material claims.
This entity was sued in the United States by an individual consumer, who
alleges she suffered burns while using aerosol hairspray. The complaint
includes counts for breach of warranty of merchantibility, unsuitability
for use and lack of appropriate warnings. This entity is also subject to a
claim by Matrix Essentials, Inc.
To comply with local environmental regulations the UK operations will be
required to upgrade its production equipment, in particular involving the
installation of incinerators in the lithographic department, by 1997.
The DP's basic raw material is tinplate which is purchased from multiple
sources. The DP is subject to material fluctuations in the cost of raw
materials and adjusts its selling prices to reflect these movements. There
can be no assurance, however, that the DP will be able to recover fully any
increase in raw material costs from its customers.
The DP is subject to various other claims and litigations and
administrative proceedings. While the impact on future financial results is
not subject to reasonable estimation because considerable uncertainty
exists, management is of the opinion that their outcome will not have a
material effect on the DP's financial position or results of operations.
F-41
<PAGE> 44
AEROSOLS DIVESTITURE PACKAGE
NOTES TO THE COMBINED INTERIM FINANCIAL INFORMATION
JUNE 30, 1996
(U.S. DOLLARS IN THOUSANDS)
(UNAUDITED)
H. SUBSEQUENT EVENTS
On September 11, 1996, the operations comprising the DP were sold to U.S.
Can Corporation by means of the sale and purchase of the entire issued
share capital of the former CarnaudMetalbox French, German and Spanish DP
entities and of the Crown UK and Italian DP businesses and related
undertakings. The consideration for the transaction amounts to $58.6
million subject to adjustments based on working capital and net financial
indebtedness as defined in the sale agreement.
F-42
<PAGE> 45
U.S. CAN CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR ACQUIRED
U.S. CAN CPI USC BUSINESSES PRO FORMA
CORPORATION GROUP EUROPE (NOTE 2) COMBINED
----------- ------- ------- ------------ ---------
(000'S OMITTED)
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents... $ 740 $ 16 $ -- $ 3,077 $ 3,833
Accounts receivable......... 74,976 4,591 31,582 (995) 110,154
Inventories................. 86,864 1,987 19,660 507 109,018
Prepaid expenses and other
assets.................... 10,975 217 945 -- 12,137
Prepaid income taxes........ 5,027 -- -- 197 5,224
--------- -------- ------- -------- ---------
Total current assets...... 178,582 6,811 52,187 2,786 240,366
--------- -------- ------- -------- ---------
NET PROPERTY, PLANT AND
EQUIPMENT................... 243,789 8,273 43,462 (783) 294,741
--------- -------- ------- -------- ---------
INTANGIBLE ASSETS............. 66,353 17 -- 2,608 68,978
OTHER ASSETS.................. 15,803 55 224 -- 16,082
--------- -------- ------- -------- ---------
Total assets.............. $ 504,527 $15,156 $95,873 $ 4,611 $620,167
========= ======== ======= ======== =========
CURRENT LIABILITIES:
Current maturities of
long-term debt............ $ 17,484 $ 1,512 $ 2,663 $ (1,482) $ 20,177
Notes payable............... -- 3,966 -- (3,966) --
Accounts payable............ 41,347 2,658 19,419 -- 63,424
Other current liabilities... 47,930 702 4,983 5,750 59,365
--------- -------- ------- -------- ---------
Total current
liabilities............. 106,761 8,838 27,065 302 142,966
--------- -------- ------- -------- ---------
SENIOR DEBT................... 158,041 124 6,214 67,807 232,186
SUBORDINATED DEBT............. 100,000 -- -- -- 100,000
--------- -------- ------- -------- ---------
Total long-term debt, less
current maturities...... 258,041 124 6,214 67,807 332,186
--------- -------- ------- -------- ---------
OTHER LONG-TERM
LIABILITIES................. 47,917 412 3,404 1,474 53,207
--------- -------- ------- -------- ---------
STOCKHOLDERS' EQUITY.......... 91,808 5,782 59,190 (64,972) 91,808
--------- -------- ------- -------- ---------
Total liabilities and
stockholders' equity.... $ 504,527 $15,156 $95,873 $ 4,611 $620,167
========= ======== ======= ======== =========
</TABLE>
The accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
are an integral part of this balance sheet.
F-43
<PAGE> 46
U.S. CAN CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR
ACQUIRED
U.S. CAN CPI USC BUSINESSES PRO FORMA
CORPORATION GROUP EUROPE (NOTE 3) COMBINED
----------- ------- -------- ----------- ---------
(000'S OMITTED, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
NET SALES................ $ 626,485 $29,351 $119,106 $ -- $ 774,942
COST OF SALES............ 555,478 24,906 105,293 (53) 685,624
-------- ------- -------- ------- --------
Gross income........... 71,007 4,445 13,813 53 89,318
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES............... 27,369 1,862 7,620 -- 36,851
OVERHEAD REDUCTION
PROVISION.............. 8,000 -- -- -- 8,000
-------- ------- -------- ------- --------
Operating income....... 35,638 2,583 6,193 53 44,467
INTEREST EXPENSE ON
BORROWINGS............. 24,513 660 1,445 4,328 30,946
AMORTIZATION OF DEFERRED
FINANCING COSTS........ 1,543 -- -- -- 1,543
OTHER EXPENSE............ 2,035 -- 29 55 2,119
-------- ------- -------- ------- --------
Income before income
taxes and
extraordinary item... 7,547 1,923 4,719 (4,330) 9,859
PROVISION FOR INCOME
TAXES.................. 3,608 -- 1,915 (941) 4,582
-------- ------- -------- ------- --------
INCOME BEFORE
EXTRAORDINARY ITEM..... $ 3,939 $ 1,923 $ 2,804 $(3,389) $ 5,277
======== ======= ======== ======= ========
PER SHARE DATA:
Income before
extraordinary item..... $ 0.31 $ 0.41
======== ========
Weighted average shares
and equivalent shares
outstanding............ 12,839 12,839
======== ========
</TABLE>
The accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
are an integral part of this statement.
F-44
<PAGE> 47
U.S. CAN CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 2, 1995
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR ACQUIRED
U.S. CAN CPI USC BUSINESSES PRO FORMA
CORPORATION GROUP EUROPE (NOTE 3) COMBINED
----------- ------- ------- ------------ ---------
(000'S OMITTED, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
NET SALES................. $ 320,042 $15,853 $61,939 $ -- $ 397,834
COST OF SALES............. 276,969 13,727 54,493 (26) 345,163
--------- ------- ------- ------- ---------
Gross income............ 43,073 2,126 7,446 26 52,671
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES................ 13,692 943 3,754 -- 18,389
--------- ------- ------- ------- ---------
Operating income........ 29,381 1,183 3,692 26 34,282
INTEREST EXPENSE ON
BORROWINGS.............. 12,147 342 777 2,152 15,418
AMORTIZATION OF DEFERRED
FINANCING COSTS......... 739 -- -- -- 739
OTHER EXPENSE............. 881 -- 50 27 958
--------- ------- ------- ------- ---------
Income before income
taxes and
extraordinary item.... 15,614 841 2,865 (2,153) 17,167
PROVISION FOR INCOME
TAXES................... 6,532 -- 1,124 (515) 7,141
--------- ------- ------- ------- ---------
INCOME BEFORE
EXTRAORDINARY ITEM...... $ 9,082 $ 841 $ 1,741 $ (1,638) $ 10,026
========= ======= ======= ======= =========
PER SHARE DATA:
Income before
extraordinary item.... $ 0.71 $ 0.78
========= =========
Weighted average shares
and equivalent shares
outstanding........... 12,860 12,860
========= =========
</TABLE>
The accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements are an integral part of this statement.
F-45
<PAGE> 48
U.S. CAN CORPORATION AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR ACQUIRED
U.S. CAN CPI USC BUSINESSES PRO FORMA
CORPORATION GROUP EUROPE (NOTE 3) COMBINED
----------- ------- ------- ------------ ---------
(000'S OMITTED, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
NET SALES.................... $ 344,207 $15,739 $63,013 $ -- $422,959
COST OF SALES................ 299,595 12,378 54,759 (26) 366,706
--------- ------- ------- -------- --------
Gross income............... 44,612 3,361 8,254 26 56,253
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES................... 13,930 1,173 3,917 -- 19,020
--------- ------- ------- -------- --------
Operating income........... 30,682 2,188 4,337 26 37,233
INTEREST EXPENSE ON
BORROWINGS................. 12,520 266 561 2,236 15,583
AMORTIZATION OF DEFERRED
FINANCING COSTS............ 802 -- -- -- 802
OTHER (INCOME) EXPENSE....... 1,003 -- (8) 27 1,022
--------- ------- ------- -------- --------
Income before income taxes
and extraordinary item... 16,357 1,922 3,784 (2,237) 19,826
PROVISION FOR INCOME TAXES... 6,950 -- 1,511 (116) 8,345
--------- ------- ------- -------- --------
INCOME BEFORE EXTRAORDINARY
ITEM....................... $ 9,407 $ 1,922 $ 2,273 $ (2,121) $ 11,481
========= ======= ======= ======== ========
PER SHARE DATA:
Income before extraordinary
item..................... $ 0.72 $ 0.88
========= =========
Weighted average shares and
equivalent shares
outstanding.............. 13,042 13,042
========= =========
</TABLE>
The accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements are an integral part of this statement.
F-46
<PAGE> 49
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
(000'S OMITTED)
NOTE 1 -- DESCRIPTION OF PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
United States Can Company acquired all of the stock of three related
companies, CPI Plastics, Inc., CP Ohio, Inc. and CP Illinois, Inc.
(collectively, "CPI Group") on August 2, 1996, at a purchase price of $15
million, subject to adjustment for the change in net working capital (as
defined in the acquisition agreement) from December 31, 1995 through the
closing date, plus potential contingent payments (in an amount not to exceed $1
million) based upon CPI Group's financial performance for the years 1996 and
1997. This acquisition was financed with borrowings under the Company's primary
credit facilities which include a $95 million revolving line of credit (the
"Revolving Credit Facility") and a supplemental $97 million credit facility to
fund certain acquisitions (the "Acquisition Facility"), including the
acquisitions of the CPI Group and USC Europe. U.S. Can Corporation (together
with its subsidiaries, the "Company") completed the acquisition of certain
aerosol can businesses owned by Crown Cork & Seal Company, Inc. ("Crown") in
the United Kingdom and Italy as well as the aerosol can businesses owned by the
Crown affiliate, CarnaudMetalbox S.A. in France, Spain and Germany
(collectively, "USC Europe") on September 11, 1996 at a purchase price of $52.8
million, subject to a post-closing adjustment for changes in working capital
from April 30, 1996 through the closing date. This acquisition was also funded
with borrowings under the Acquisition Facility. The pro forma adjustments
included herein do not consider the effect of any post-closing adjustment or
contingent payments related to the purchase prices as such effect is not
expected to be material.
The unaudited pro forma condensed combined balance sheet of the Company
gives effect to the acquisitions as if such acquisitions had occurred on June
30, 1996. The unaudited pro forma condensed combined statements of operations
of the Company give effect to the acquisitions as if such acquisitions had
occurred on January 1, 1995.
For purposes of the accompanying pro forma combined financial statements,
acquisition-related adjustments, all made pursuant to the purchase method of
accounting have been reflected on an estimated basis using the most recent
information available. Pending finalization of property appraisals, plant
consolidation requirements and other studies, no assurances can be given that
the final determination of the fair value of assets acquired and liabilities
assumed by the Company in the acquisitions will not differ from the adjustments
presented herein. Such determinations will be made within one year of the
related acquisitions and are not expected to be materially different from the
estimates used herein.
The unaudited pro forma combined financial statements should be read in
conjunction with the separate historical financial statements and related notes
thereto of the Company, the CPI Group and USC Europe. The pro forma condensed
combined financial statements do not purport to be indicative of the results
that actually would have been obtained had all the transactions been completed
as of the assumed dates and for the periods presented and are not intended to be
a projection of future results or trends. Operating results for any interim
period are not necessarily indicative of results that may be expected for the
full year.
On July 16, 1996, the Company's Board of Directors authorized the
issuance of $225.0 million of senior subordinated notes (the "Notes") in a
private placement. The Noteholders will have registration rights with respect
to the Notes. Net proceeds from the issuance of the Notes are expected to be
approximately $218.6 million and to be used to retire or pay down outstanding
indebtedness. The effect of this potential refinancing is not reflected in the
accompanying pro forma combined financial statements.
F-47
<PAGE> 50
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
(000'S OMITTED)
NOTE 2 -- PRO FORMA ADJUSTMENTS FOR ACQUIRED BUSINESSES TO THE JUNE 30, 1996
CONDENSED COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR ACQUIRED
BUSINESSES
------------
<S> <C>
Cash and cash equivalents --
Record cash received to offset debt assumed................................... $ 3,077
=======
Accounts receivable --
Eliminate officer and shareholder receivables not retained by the Company..... $ (995)
=======
Inventories --
Revalue inventories to estimated fair market value............................ $ 507
-------
Prepaid income taxes --
Record prepaid income taxes related to historical and revalued net assets $ 197
=======
Net property, plant and equipment --
Revalue CPI Group's property, plant and equipment to estimated fair market
value...................................................................... $ 3,684
Apply excess of estimated fair value of net assets acquired over purchase
price to USC Europe's long-lived assets.................................... (4,467)
-------
$ (783)
=======
Intangible assets --
Record excess purchase price over estimated fair value of USC Group's net
assets acquired............................................................ $ 2,608
=======
Current maturities of long-term debt --
Eliminate existing debt not assumed by the Company............................ $ (1,482)
=======
Notes payable --
Eliminate existing notes payable not assumed by the Company................... $ (3,966)
=======
Other current liabilities --
Revalue certain liabilities, including plant consolidation reserves, to
estimated fair market value................................................ $ 3,750
Accrue acquisition costs...................................................... 2,000
-------
$ 5,750
=======
Senior debt --
Record borrowings under the Acquisition Facility to fund the acquisitions..... 67,307
Record borrowings under the Revolving Credit Facility to fund the
acquisitions............................................................... 500
-------
$ 67,807
=======
Other long-term liabilities --
Record long-term deferred income taxes related to revalued property........... $ 1,474
=======
Stockholder's equity --
Eliminate equity of acquired businesses....................................... $(64,972)
=======
</TABLE>
F-48
<PAGE> 51
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
(000'S OMITTED)
NOTE 3 -- PRO FORMA ADJUSTMENTS FOR ACQUIRED BUSINESSES TO THE STATEMENTS OF
OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED
FOR THE YEAR ENDED --------------------
DECEMBER 31, JULY 2, JUNE 30,
1995 1995 1996
------------------ -------- --------
<S> <C> <C> <C>
Cost of sales --
Record additional depreciation expense on revalued
property, plant and equipment -- CPI Group........... 245 123 123
Reduce depreciation expenses on revalued property,
plant and equipment -- USC Europe.................... $ (298) $ (149) $ (149)
------------- -------- --------
$ (53) $ (26) $ (26)
============= ======== ========
Interest expense on borrowings --
Eliminate debt not assumed by the Company -- CPI
Group................................................ $ (649) $ (337) $ (253)
Record interest expense on borrowings used to fund the
acquisitions (7.13% annually)........................ 4,977 2,489 2,489
------------- -------- --------
$ 4,328 $ 2,152 $ 2,236
============= ======== ========
Other expense --
Amortize goodwill related to the CPI Group
acquisition.......................................... $ 55 $ 27 $ 27
============= ======== ========
Provision for income taxes --
Income tax effect of CPI Group's historical pretax
income and of the pro forma adjustments at the
Company's effective tax rate (40%)(a)................ $ (941) $ (515) $ (116)
============= ======== ========
</TABLE>
- ---------------
(a) The CPI Group had been treated as an S Corporation. As such, no income taxes
were reflected in its historical statements of income.
F-49
<PAGE> 52
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 hereunto duly authorized.
U.S. CAN CORPORATION
Date: October 2, 1996 By /s/ John R. McGowan
----------------------------------
John R. McGowan
Vice President and Controller
<PAGE> 53
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 hereunto duly authorized.
UNITED STATES CAN COMPANY
Date: October 2, 1996 By /s/ John R. McGowan
----------------------------------
John R. McGowan
Vice President and Controller
<PAGE> 54
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------- ----------------------
23.1 Consent of Independent Accountants: Plante
& Moran LLP
23.2 Consent of Independent Accountants: Befec-
Price Waterhouse
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation of our report dated February 2, 1996 on
the combined financial statements of CPI Plastics, Inc., CP Illinois, Inc., and
CP Ohio, Inc. as of December 31, 1995 and 1994 and for the three year period
ended December 31, 1995, included in this Form 8-K/A-1 and into U.S. Can
Corporation's previously filed Registration Statement Files Nos. 33-76742,
333-04202, 33-91820 and 33-61888 on Form S-8, and 33-79556 on Form S-3.
PLANTE & MORAN, LLP
Southfield, Michigan
October 2, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 33-79556) and
in the Registration Statements on Form S-8 (Nos. 33-61888, 33-76742, 33-91820
and 333-04202) of U.S. Can Corporation, of our report dated March 1, 1996
relating to the combined financial statements of the Aerosols Divestiture
Package, which appears in the Current Report on Form 8-K/A-1 of U.S. Can
Corporation dated October 2, 1996.
Paris, October 2, 1996
Befec-Price Waterhouse
Jean-Pierre Caroff
