<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
COMMISSION FILE NUMBER 1-13678
U.S. CAN CORPORATION
(Exact Name Of Registrant As Specified In Its Charter)
06-1094196
(I.R.S. Employer Identification No.)
DELAWARE
(State Or Other Jurisdiction Of Incorporation Or Organization)
900 COMMERCE DRIVE
Oak Brook, Illinois 60523
(Address Of Principal Executive Offices, Including Zip Code)
(630) 571-2500
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- --------------------------------- ------------------------------------------
Common Stock, par value $0.01 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ ]
As of February 28, 1999, the aggregate market value of the voting stock held by
non-affiliates of U.S. Can Corporation was approximately $210,489,399.
As of February 28, 1999, 13,207,178 shares of Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of U.S. Can Corporation's 1999 Proxy Statement are incorporated
in Part III hereof by reference.
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U.S. CAN CORPORATION AND SUBSIDIARIES
FORM 10-K
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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PART I
<S> <C> <C>
Item 1. Business 1
Item 2. Properties 4
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 5
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters 6
Item 6. Selected Financial Data 6
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 12
Item 8. Financial Statements and Supplementary Data 13
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure 39
PART III
Item 10. Directors and Executive Officers of the Registrant 39
Item 11. Executive Compensation 39
Item 12. Security Ownership of Certain Beneficial Owners and Management 39
Item 13. Certain Relationships and Related Transactions 39
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 39
</TABLE>
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INCLUSION OF FORWARD-LOOKING INFORMATION
CERTAIN STATEMENTS IN THIS REPORT CONSTITUTE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE FEDERAL SECURITIES LAWS. SUCH STATEMENTS
INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES WHICH MAY CAUSE THE COMPANY'S
ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT THAN ANY
FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED IN THIS REPORT.
BY WAY OF EXAMPLE AND NOT LIMITATION, KNOWN RISKS AND UNCERTAINTIES INCLUDE
TIMING OF, AND NET PROCEEDS REALIZED FROM, DIVESTITURES; THE TIMING AND COST OF
PLANT CLOSURES; THE LEVEL OF COST REDUCTION ACHIEVED THROUGH RESTRUCTURING; THE
SUCCESS OF NEW TECHNOLOGY; CHANGES IN MARKET CONDITIONS OR PRODUCT DEMAND; LOSS
OF IMPORTANT CUSTOMERS; COMPETITION AND CURRENCEY FLUCTUATIONs. IN LIGHT OF
THESE AND OTHER RISKS AND UNCERTAINTIES, THE INCLUSION OF A FORWARD-LOOKING
STATEMENT IN THIS REPORT SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE
COMPANY THAT ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS WILL BE ATTAINED.
<PAGE> 4
U.S. CAN CORPORATION AND SUBSIDIARIES
FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
PART I
ITEM 1. BUSINESS
GENERAL
References in this Report to the "Company" mean U.S. Can Corporation
and its subsidiaries, collectively, unless the context otherwise requires; and
references to "U.S. Can" mean solely United States Can Company and, unless the
context otherwise requires, does not include U.S. Can's foreign subsidiaries
(collectively referred to as "USC Europe"). U.S. Can Corporation is a Delaware
corporation, which owns all of U.S. Can's outstanding capital stock. The
references in this Report to market positions or market share are based on
information derived from annual reports, trade publications and management
estimates which the Company believes to be reliable.
The Company is a leading manufacturer of steel and plastic containers
for personal care products and household, automotive, paint and industrial
supplies and other specialty products in the United States and Europe. The
Company conducts its principal business operations in the general packaging
(non-food and non-beverage) sector of the metal container industry. The
Company's sales are generated by three major segments: (i) Aerosol Products:
U.S. and International; (ii) Paint, Plastic & General Line Products; and (iii)
Custom & Specialty Products. For financial information about segments and
geographic areas, refer to Note (12) to the Consolidated Financial Statements.
The Company as a whole has minor seasonal variation, whereby quarterly
sales and earnings tend to be slightly stronger starting early spring (second
quarter) and extending through late summer (third quarter). For more information
on seasonality refer to the corresponding caption in Management's Discussion and
Analysis of Financial Conditions and Results of Operations.
AEROSOL
The Company is the leader in sales of aerosol cans in the United
States, accounting for more than 50% of all steel aerosol containers used in
1998. USC Europe is the second largest manufacturer of steel aerosol cans in
Europe. Aerosol containers represent the Company's largest segment, accounting
for approximately 66.3% of the Company's total net sales in 1998, and are used
to package personal care, household, automotive, paint and various other
products. The Company offers a wide range of aerosol containers in order to meet
its customers' requirements, including stylized necked-in cans and barrier-pack
cans used for products such as shaving gel.
In March 1998, the Company acquired a 36.5% equity interest in
Formametal S.A. ("Formametal"), an aerosol can manufacturing company located in
the Province of Buenos Aires, Argentina. The Company is providing manufacturing
equipment, funding and certain technical assistance to Formametal, in order to
modernize and expand Formametal's manufacturing operations. For further
information on the Formametal investment see Note (4) to the Consolidated
Financial Statements.
PAINT, PLASTIC & GENERAL LINE
Paint, Plastic & General Line, the Company's second largest segment,
accounted for approximately 23.1% of the Company's total net sales in 1998. This
product group includes round cans for paint and coatings, oblong cans for
products such as turpentine and charcoal lighter, and plastic pails and other
containers for industrial and consumer products. Management estimates that U.S.
Can is second in market share in the United States, on a unit volume basis, in
steel round and general line containers.
CUSTOM & SPECIALTY PRODUCTS
The Company has a significant presence in the custom and specialty
products market. Its product lines include a wide array of functional and
decorative
1
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containers and tins, caps and closures, fitments and stampings, and collectible
items such as metal trading cards and signs. Custom & Specialty products
contributed net sales of approximately $75 million or 10.6% of the Company's
total net sales in 1998.
RESTRUCTURING PROGRAM
During the third quarter of 1998, the Company announced a restructuring
program which included the adoption of a new national lithography strategy, the
intention to divest additional non-strategic businesses and additional plant
closings to further consolidate operations. During the fourth quarter of 1998,
the Company divested its commercial metal services business for $31 million,
subject to working capital and other adjustments. See Management's Discussion
and Analysis of Financial Conditions and Results of Operations and Note (3) to
the Consolidated Financial Statements for further details.
CUSTOMERS
As of December 31, 1998, in the United States, the Company had
approximately 7,000 customers for its products, as compared to approximately
7,500 and 9,000 customers as of December 31, 1997 and 1996, respectively. The
decrease in customers is related to businesses disposed of or exited. No single
customer accounted for more than 10% of the Company's total net sales during any
of these years.
To the extent possible, the Company enters into one-year or multi-year
supply agreements with its major customers. These agreements specify the number
of containers a customer will purchase (or the mechanism for determining such
number), pricing, volume discounts (if any) and, in the case of many of the
Company's multi-year supply agreements, a provision permitting the Company to
pass through price increases in certain raw material costs.
U.S. Can and USC Europe markets their products primarily through a
sales force comprised of inside and outside sales representatives dedicated to
each segment.
RAW MATERIALS
The Company's principal raw materials are tin-plated steel
("tin-plate") and coatings and inks used to print its customers' designs and
logos onto the tin-plate. U.S. Can purchases tin-plate principally from domestic
steel manufacturers, with a smaller portion purchased from foreign suppliers.
Many of U.S. Can's and some of USC Europe's multi-year supply agreements with
its customers permit them to pass through tin plate price increases and, in some
cases, other raw material costs. However, U.S. Can and USC Europe have not
always been able to immediately offset increases in tin-plate prices with price
increases on their products.
The Company believes that adequate quantities of tin-plate will
continue to be available from steel manufacturers. The individual suppliers of
raw materials accounting for more than 10% of the total steel used by U.S. Can
in 1998 were USX's U.S. Steel group, Weirton Steel Corporation and LTV
Corporation. The Company has not historically entered into written supply
contracts with steel makers and believes that other can manufacturers follow the
same practice.
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The Company's second largest raw material expense is for coatings and
inks, which are used to print designs and logos onto the tin plate prior to
assembly. Coatings and inks are purchased from indigenous suppliers. Based on
the ready availability of these materials in the past and the number of
manufacturers which continue to make these products, management does not
anticipate any lack of availability of coatings and inks in the foreseeable
future.
LABOR
As of February 1, 1999, in the U.S., the Company employed approximately
3,195 salaried and hourly employees. At that date, there were a total of 1,936
employees, or 61% of the Company's total U.S. workforce, who were members of
various labor unions, including the United Steelworkers of America ("USWA"), the
International Association of Machinists ("IAM") and Graphic Communications
International Union ("GCIU"). Labor agreements covering 632 employees were
successfully negotiated in 1998. In 1999, labor agreements covering 453
employees will need to be negotiated between the Company and the respective
unions. USC Europe employed approximately 765 people at the end of 1998. In line
with common European practices, all plants are unionized.
The Company has followed a labor strategy designed to enhance its
flexibility and productivity through constructive relations with its employees
and collective bargaining units. Management believes the Company and its
employees have benefited from dealing directly with local unions in order to
tailor their contracts to local employee issues and plans to continue this
practice in the future. This practice also has the effect of staggering renewal
negotiations with the various bargaining units. Management believes the
Company's relations with its employees and their collective bargaining units are
generally good.
COMPETITION
The principal methods of competition in the general packaging industry
are price, quality and service. Because shipping costs associated with the
delivery of cans from outside major geographical markets would add a significant
additional component of cost, the industry has historically had relatively
little competition from manufacturers outside these markets. Management believes
that this condition is unlikely to change in the foreseeable future. Price
competition exists in the industry and limits the Company's ability to increase
prices.
Management believes that the following factors benefit the Company from
a competitive standpoint: (i) reputation for quality and service; (ii)
strategically located manufacturing facilities and a strong sales force; (iii)
substantial capital investment in new technology such as necked-in and barrier
package designs, high-speed presses and assembly equipment, and
computer-controlled lithography; (iv) quality control systems, including
statistical process control and electronic "vision" error detection; (v) breadth
of product line; (vi) in-house decorating and lithography capability; and (vii)
a successful labor strategy.
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In steel aerosol containers, U.S. Can competes primarily with Crown,
Cork & Seal ("Crown") and BWAY Corporation. USC Europe competes in the steel
aerosol market with Crown, Impress, Staehle, and a group of other smaller
regional producers. Crown is larger and has greater financial resources than the
Company. Because aerosol cans are used for personal care, household and other
packaged products, and because they are pressurized, aerosol cans are more
sensitive to quality, can decoration and other consumer-oriented features than
paint and general line containers.
In paint, plastic and general line, the Company competes primarily with
BWAY Corporation and one smaller, private firm. The Company's products also face
competition from aluminum, glass and plastic containers.
Custom and specialty products compete with a large number of container
manufacturers and closure suppliers; they do not compete across their entire
product spectrum with any single company. Competition is based principally on
price, quality and service, geographical proximity to customers and production
capability, with varying degrees of intensity according to the specific product
catagory.
The Company believes it has the ability to compete favorably in each
aspect of its businesses as market conditions may require.
ITEM 2. PROPERTIES
The Company has 28 manufacturing facilities located in 10 states in the
U.S., many of which are strategically positioned near principal customers and
suppliers. Through USC Europe, it also has production locations in the five
largest regional markets abroad, including the United Kingdom, France, Spain,
Italy and Germany. The following table sets forth certain information with
respect to the Company's principal plants as of February 28, 1999.
<TABLE>
<CAPTION>
LOCATION SIZE STATUS SEGMENT
-------- ---- ------ -------
<S> <C> <C> <C>
UNITED STATES
Elgin, IL 481,346 sq. ft. Owned Aerosol
Tallapoosa, GA 228,080 sq. ft. Owned Aerosol
21,400 sq. ft. Owned Aerosol
Commerce, CA 215,860 sq. ft. Leased Paint, Plastic
& General Line
Glen Dale, WV 210,000 sq. ft. Owned Custom & Specialty
Burns Harbor, IN 190,000 sq. ft. Leased Aerosol
Hubbard, OH 174,970 sq. ft. Owned Paint, Plastic
& General Line
Baltimore, MD 150,000 sq. ft. Leased Custom & Specialty
Horsham, PA 132,000 sq. ft. Owned Aerosol
Green Bay, WI* 127,000 sq. ft. Leased Aerosol
Baltimore, MD 123,000 sq. ft. Owned Custom & Specialty
Columbiana, OH* 121,000 sq. ft. Leased Custom & Specialty
Morrow, GA 110,160 sq. ft. Leased Paint, Plastic
& General Line
Weirton, WV 108,000 sq. ft. Leased Aerosol
Danville, IL 100,000 sq. ft. Owned Aerosol
Newnan, GA 95,000 sq. ft. Leased Paint, Plastic
& General Line
Dallas, TX 87,000 sq. ft. Owned Paint, Plastic
& General Line
Alsip, IL* 64,349 sq. ft. Leased Paint, Plastic
& General Line
</TABLE>
4
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Warren, OH 58,000 sq. ft. Leased Custom & Specialty
Alliance, OH 52,000 sq. ft. Leased Paint, Plastic
& General Line
Baltimore, MD 45,000 sq. ft. Leased Paint, Plastic
& General Line
New Castle, PA 22,750 sq. ft. Owned Custom & Specialty
EUROPE
Merthyr Tydfil, UK 320,000 sq. ft. Leased(1) Aerosol
Southall, UK 253,000 sq. ft. Owned Aerosol
Laon, France 220,000 sq. ft. Owned(2) Aerosol
Reus, Spain 182,250 sq. ft. Owned Aerosol
Voghera, Italy 45,200 sq. ft. Leased Aerosol
Schwedt, Germany 35,500 sq. ft. Leased Aerosol
- ----------
* These facilities are in the process of being closed due to the
Company's restructuring activities and are expected to be sold or
sublet.
(1) The property at Merthyr Tydfil is subject to a 999-year lease with a
pre-paid option to buy which becomes exercisable in January 2007. Up to
that time, the landowner may require the Company to purchase the
property for a payment of (pound)1 Sterling. Currently, the Company's
facility at Merthyr Tydfil is subject to a pledge of the leasehold
interests and personal property located thereon to secure amounts
outstanding under a credit agreement entered into with General Electric
Capital Corporation.
(2) Subject to a mortgage in favor of Societe Generale.
Management believes the Company's facilities are adequate for its
present needs and that its properties are generally in good condition,
well-maintained and suitable for their intended use. The Company continuously
evaluates the composition of its various manufacturing facilities in light of
current and expected market conditions and demand. Further consolidation of
plant operations may be implemented in the future.
ITEM 3. LEGAL PROCEEDINGS
The Company has been named as a potentially responsible party ("PRP")
for costs incurred in the clean-up of property located in San Leandro,
California, formerly a site of one of the Company's can assembly plants. The
Company has indemnified the owner of the property against this matter. Extensive
soil and groundwater investigative work has been performed at this site. The
Company does not believe there is any on-site source of groundwater
contamination. Nevertheless, the Company has agreed to participate in a
coordinated sampling event in 1999 with other PRPs. To date, there is no
resolution of this matter.
As a PRP at various superfund sites in the U.S., the Company is or may
be legally responsible, jointly and severally with other members of the PRP
group, for the cost of remediation of these sites. Based on currently available
data, the Company believes its contribution, and/or the contribution of its
predecessors, to these sites was, in most cases, minimal.
For further discussion on legal and environmental matters refer to
Management's Discussion and Analysis and Note (9) to the Consolidated Financial
Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of 1998.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET PRICE AND DIVIDEND POLICY
U.S. Can Corporation's common stock, par value $0.01 per share (the
"Common Stock"), is listed on the New York Stock Exchange, trading under the
symbol "USC." The table below sets forth the high and low sales price for the
Common Stock for each quarter of 1997 and 1998, as reported in the consolidated
transaction reporting system.
<TABLE>
<CAPTION>
QUARTER HIGH LOW
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<S> <C> <C>
First quarter, 1997 $17.750 $14.500
Second quarter, 1997 17.250 14.000
Third quarter, 1997 17.375 12.875
Fourth quarter, 1997 18.750 15.750
First quarter, 1998 18.250 14.875
Second quarter, 1998 18.250 13.875
Third quarter, 1998 17.000 12.813
Fourth quarter, 1998 18.000 13.250
</TABLE>
As of February 28, 1999, there were 592 record holders of the Common
Stock. No cash dividends were declared on the Common Stock by U.S. Can
Corporation during 1997 or 1998, and U.S. Can Corporation has no intention to
pay cash dividends in the foreseeable future. There are restrictions on the
ability of U.S. Can to transfer funds to U.S. Can Corporation in the form of
cash dividends, loans or advances, and on U.S. Can Corporation's ability to
declare cash dividends, under the Company's credit agreement and indenture,
respectively. See Note (5) to the Consolidated Financial Statements for
additional details on these restrictions.
SALES OF UNREGISTERED SECURITIES
In April 1998, 10,140 shares of restricted Common Stock were awarded to
outside directors of the Company, in payment of their annual retainer. Each of
these awards was exempt pursuant to Section 4(2) of the Securities Act of 1933,
as amended.
ITEM 6. SELECTED FINANCIAL DATA
U.S. CAN CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(000'S OMITTED EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------------------------------------
1994 1995 1996 1997 1998
-------------------------------------------------------------
OPERATING DATA:
<S> <C> <C> <C> <C> <C>
Net sales $ 532,652 $ 562,728 $ 660,623 $ 755,675 $ 710,246
Special charges (a) -- 8,000 -- 62,980 35,869
Operating income (loss) 56,881 37,097 60,515 (6,107) 23,570
Income (loss) from continuing operations before
discontinued operations and extraordinary item 18,690 4,949 16,555 (29,906) (7,525)
-------------------------------------------------------------
Discontinued operations, net of income taxes (a)
Net income (loss) from discontinued operations (120) (1,010) 446 1,078 --
Net income (loss) on sale of business -- -- -- (3,204) (8,528)
Extraordinary item - loss from early
extinguishment of debt, net of income taxes (b) -- -- (5,250) -- --
-------------------------------------------------------------
Net income (loss) $ 18,570 $ 3,939 $ 11,751 $ (32,032) $ (16,053)
-------------------------------------------------------------
Diluted earning (loss) per share $ 1.73 $ 0.31 $ 0.90 $ (2.45) $ (1.21)
-------------------------------------------------------------
Weighted average shares outstanding (000's) 10,714 12,839 13,090 13,048 13,264
-------------------------------------------------------------
BALANCE SHEET DATA:
Total assets $ 400,724 $ 455,436 $ 643,616 $ 633,704 $ 555,571
Total debt (including current maturities) 200,646 244,576 375,810 376,141 316,673
</TABLE>
(a) See Note 3 to the Consolidated Financial Statements.
(b) See Note 5 to the Consolidated Financial Statements.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF YEAR ENDED DECEMBER 31, 1998, AS COMPARED TO YEAR ENDED
DECEMBER 31, 1997
NET SALES
Consolidated net sales for the year ended December 31, 1998 were $710.2
million, a decrease of 6.0% versus 1997. This decrease reflects the sale of the
Company's Metal Pail business in late 1997, and the loss of a major Aerosol
customer, also in late 1997.
Along business segment lines, Aerosol net sales in 1998 of $471.3
million declined 2.7% versus the prior year, reflecting the loss of a major
customer in late 1997. European net sales, included within the Aerosol business
segment, increased 11.1% from prior year as the Wales facility achieved
qualification with its primary customer in 1998. Paint, Plastic & General Line
net sales of $164.1 million are down 12.0% from last year due to the sale of the
Metal Pail business in November 1997. Custom & Specialty 1998 net sales of $74.9
million are 11.7% lower than 1997. The decline in this business segment is
largely a function of product mix and management's decision to not pursue
unprofitable popcorn tin business with a certain customer it serviced in 1997.
GROSS INCOME
Consolidated gross income improved 2.4% to a level of $92.1 million for
the year ended December 31, 1998 as compared to 1997. Gross margin of 13.0% for
the full-year 1998 compares favorably to the 11.9% reported in 1997. Margin rate
increases were primarily in the Paint, Plastic & General Line and the Custom &
Specialty business segments and reflect improved productivity as a result of
line speed-ups and cost reduction programs instituted in the plants, the sale of
the unprofitable Metal Pail business and the shedding of the popcorn tin
business. The Wales facility impacted Aerosol operations gross margins
favorably.
Aerosol gross income of $79.3 million declined 1.7% versus prior year
on a lower volume base. Gross margins in this sector remained relatively flat
year-to-year at 16.8%, despite the lower sales volume base. Paint, Plastic &
General Line gross income improved 26.1% to $15.6 million. Custom & Specialty
gross income improved 60.8% versus last year to a level of $11.0 million.
Certain corporate level expenses are not allocated to specific business
segments. These charges include corporate engineering costs and other
miscellaneous charges associated with corporate level activity.
OPERATING INCOME
Consolidated operating income of $23.6 million for the year ended
December 31, 1998 compares to an operating loss of $6.1 million for the same
period in 1997. Excluding special charges recorded in both years, 1998 operating
income of $59.4 million improved 4.4% versus a level of $56.9 million in 1997.
Operating margins, before special charges, of 8.4% in 1998, compares favorably
to the 7.5% reported for the year in 1997. Improvements versus prior year
reflect stronger gross margins coupled with the benefits realized late in 1998
from the restructuring programs initiated in 1997.
INTEREST EXPENSE
Interest expense for the full-year 1998 of $33.2 million declined 10.0%
versus 1997. The Company's focus on cash flow, working capital improvements and
controlled capital programs resulted in a year-to-year debt reduction of $59.5
million.
NET INCOME (LOSS)
Net loss from continuing operations in 1998 was ($7.5) million, or
($0.57) per share, verses a net loss of ($29.9) million, or ($2.29) per share in
1997. Special charges recorded in 1998 had a negative after-tax effect of
($21.4) million, or ($1.62) per share. Special charges recorded in 1997 had an
after-tax effect of ($37.8) million, or ($2.90) per share.
Net loss for 1998 was ($16.1) million, or ($1.21) per share, (including
($8.5) million, or ($0.64) per share loss on the sale of the discontinued Metal
Service business) verses 1997 net loss of ($32.0) million, or ($2.45) per share.
1997 net loss includes a ($2.1) million, or ($0.16) per share loss on the
discontinued Metal Service business.
1998 SPECIAL CHARGES
In the third quarter of 1998, the Company established a pre-tax special
charge of $35.9 million. The provision is for closure of certain facilities and
write-downs of non-core businesses. Closing and realignment of selected
lithography facilities servicing the Company's core business were also included
in the provision as part of the Company's national lithography strategy.
Working capital improvements are expected to partially offset new
capital costs associated with the 1998 restructuring program and the acquisition
of new lithography technology. The restructuring program and related capital
investment in new technology are expected to generate after-tax savings of $10
million annually at maturity.
See Note (3) to the Consolidated Financial Statements for further
information on the 1998 special charges.
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<PAGE> 11
RESULTS OF YEAR ENDED DECEMBER 31, 1997, AS COMPARED TO YEAR ENDED DECEMBER 31,
1996
NET SALES
Consolidated net sales for the year ended December 31, 1997 were $755.7
million, an increase of 14% over 1996. Sales gains were the result of the
Company's acquisition of USC Europe in September 1996 and modest growth in
domestic steel paint and oblong unit volumes. The USC Europe acquisition
accounted for nearly 71% of the total year-to-year increase.
Aerosol net sales grew 13.7% year-to-year to $484.3 million, due to the
USC Europe acquisition. Paint, Plastic & General Line sales of $186.5 million
increased 13.4% versus prior year. The increase was due largely to a full year
of sales activity in plastic products that were acquired from CPI in the second
quarter of 1996. Some modest growth in metal paint and oblong containers also
bolstered year-to-year comparisons in this segment. Custom & Specialty net sales
of $84.8 million were 20.6% stronger than 1996. However, most of this sales
growth was attributable to increased popcorn tin volume, which turned out to be
unprofitable.
GROSS INCOME
Consolidated gross income of $89.9 million was up $1.0 million or 1%
from 1996. Gross margin declined to 11.9% in 1997 versus 13.5% in 1996.
Competitive pricing pressure and increased steel costs compressed margins.
Aerosol gross income declined 8.5% to $80.6 million versus the prior
year. 1997 included a full year of European operations partially offset by a
loss in the Wales facility due to start-up costs. Competitive pricing pressure
in the domestic Aerosol market eroded gross margins, as the Company had little
success in passing through steel cost increases to its customers. Paint, Plastic
& General Line gross income of $12.4 million was 3.8% better than 1996 due to a
full year of plastic sales volume. Competitive pricing pressure on metal paint
cans also compressed margins in this segment. Custom & Specialty gross income of
$6.8 million in 1997 fell 19.9%, largely due to unprofitable popcorn tin
business.
OPERATING INCOME
Consolidated operating income in 1997 before the special charges was
$56.9 million versus $60.5 million in 1996. Lower gross margins adversely
impacted 1997 operating income. Selling, general, and administrative expenses
rose slightly from 4.3% of net sales in 1996, to 4.4% of net sales in 1997.
Including the impact of the $63.0 million special charges, the Company
reported an operating loss of $6.1 million for 1997. Due to the timing of the
plant closings and other cost reduction actions included in the special charges,
no material benefit was realized in the 1997 results.
INTEREST EXPENSE
Interest expense on borrowings increased $8.5 million in 1997 as
compared to 1996, due to increased borrowing, primarily to finance the Company's
acquisition of USC Europe, and the exchange of shorter-term, floating-rate bank
debt for the 10 1/8% Notes issued in October 1996.
NET INCOME (LOSS)
Net loss from continuing operations in 1997 was ($29.9) million or
($2.29) per share, versus net income of $16.6 million or $1.28 per share in
1996. The special charge recorded in 1997 had a negative after-tax effect of
($37.8) million or ($2.90) per share.
Net loss for 1997 was ($32.0) million or ($2.45) per share, [including
($2.1) million or ($0.16) per share loss on the discontinued metal service
business] versus 1996 net income of $11.8 million or $0.91 per share [including
discontinued operations loss of ($0.4) million and extraordinary loss on debt
extinguishment of ($5.2) million after-tax].
1997 SPECIAL CHARGES
In the third quarter of 1997, the Company established a pre-tax special
charge of $35 million primarily for plant closings and overhead cost reductions.
These actions were due to the loss of a major aerosol customer (the customer
represented approximately $35 million of annual sales) and to enhance
efficiencies at certain other locations. In addition, the Company established a
disposition provision for the anticipated loss on the closure of its Metal Pail
operation in North Brunswick, New Jersey.
Also in the fourth quarter of 1997, the Company, at the direction of
its Board of Directors, employed the assistance of external business consultants
to review operations and explore other avenues for enhancing shareholder value.
As a result of this review, a provision was established primarily to include
further personnel reductions and the reduction of asset value associated with
equipment used in the businesses the Company had exited or was in the process of
exiting.
See Note (3) to the Consolidated Financial Statements for further
information on the 1997 special charges.
8
<PAGE> 12
ENVIRONMENTAL MATTERS
The processes involved in the lithography and certain aspects of the
manufacture of steel containers have historically involved the use and handling
of materials now classified as hazardous substances under various laws. These
activities may expose owners and operators of the facilities involved to
potential liability for the cost to clean up or remedy any environmental
contamination resulting from such substances. It is possible that the Company's
insurance coverage may extend to certain environmental liabilities, but the
Company has not been able to estimate such coverage due to the complexity and
uncertainty inherent in such an estimate. The Company has not considered
insurance coverage in assessing its potential liabilities. In addition, the
Company has obtained indemnities against certain liabilities in connection with
its recent acquisitions. Management does not believe that remediation costs, if
any, in excess of the reserve established, will have a material adverse affect
on the Company's results of operations or financial condition.
A variety of propellants are used in the Company's principal product,
aerosol cans. These propellants include hydrocarbons, compressed gases (for
example, carbon dioxide and nitrous oxide), and volatile organic compounds such
as propane, butane and isobutane (collectively "VOCs"). Some United States and
European regulations concerning VOCs have caused consumer product manufacturers
(the Company's customers) to reformulate either their products, the propellants
used therein or both. To date, most of the Company's customers have been
successful in reformulating both their products and propellants. However, there
can be no assurance that all customers will be able to effect such
reformulations or future reformulations, if any, in either products or
propellants with satisfactory results. If customers are unable to do so, this
could have an adverse effect on the market for aerosol cans.
As a potentially responsible party ("PRP") at various Superfund sites
in the U.S., the Company is or may be legally responsible, jointly and severally
with the other members of the PRP group, for the cost of remediation of these
sites. Based on currently available data (including EPA data, internal records
and other sources believed to be reliable), the Company believes its
contribution, and/or the contribution of its predecessors, to these sites was in
most cases de minimis. Based on the information available as of the date of this
report, management does not believe that its aggregate remediation costs or
potential liabilities in connection with these sites will have a material
adverse effect on the Company's financial condition or results of operations.
However, there can be no assurance that the other PRP's will pay their
proportionate share of the remediation costs at these sites and, as a result,
future costs or liabilities incurred by the Company could be significantly
increased.
See Note (9) to the Consolidated Financial Statements for further
information.
INFLATION
Tin-plated steel represents the primary component of the Company's raw
materials requirement. Historically, the Company has not always been able to
immediately offset increases in tin-plate prices with price increases on the
Company's products. However, in most years, a combination of factors has
permitted the Company to maintain its profitability notwithstanding these
conditions. The Company's capital spending programs and manufacturing process
upgrades have increased operating efficiencies and thereby mitigated the impact
of inflation on the Company's cost structure.
CUSTOMER RELATIONSHIPS/AEROSOL
CONTAINERS
Aerosol containers accounted for 66.3% of the Company's total net sales
for the year ended December 31, 1998. A significant reduction in the number of
aerosol containers used by the Company's customers could have a material adverse
effect on the Company and, in particular, its European operations which are
comprised solely of Aerosol manufacturing facilities.
In October 1996, U.S. Can received written confirmation of a major
customer's intention to purchase certain annual unit volumes of aerosol cans
from U.S. Can, including USC Europe operations. The Company's manufacturing
facility in Merthyr Tydfil, in which the Company has invested approximately $30
million, was opened in large part due to the major customer's decision. The loss
of this customer or a material reduction in the benefits to the Company expected
under this arrangement, would have an adverse impact on the profitability of
that facility and the Company's ability to recoup its investment in Merthyr
Tydfil. It is not U.S. Can's policy to have any plant devoted exclusively to one
customer and the plant has begun to service other customers in 1998.
The Company's relationships with its customers are critical to its
business. A significant portion of the Company's annual net sales is
attributable to repeat customers. The loss of a significant number of such
customers could have a material effect on the Company.
YEAR 2000
The year 2000 issue is the result of certain computer programs using a
two-digit format, as opposed to four digits, to indicate the year. Such computer
programs will be unable
9
<PAGE> 13
to interpret dates beyond the year 1999, which could cause a system failure or
other computer errors, leading to disruptions in operations. The Year 2000 issue
presents several risks to the Company, such as (i) the Company's internal
systems may not function properly, (ii) suppliers' or customers' computer and
operational systems may not function properly, causing delays in delivery of
materials and supplies, and delays in orders and payments to the Company for
delivered product, and (iii) the Company's banks' computer systems could
malfunction, disrupting orderly deposits, fund transfers, and payments.
The Company is a manufacturer of consumer, commercial and specialty
packaging products. The products produced and sold by the Company are unaffected
by Year 2000 issues since they contain no microprocessors or similar electronic
components.
The Company has been in the process of evaluating its internal
computing infrastructure, business applications and manufacturing systems for
Year 2000 compliance. The Company's main operating systems' hardware and
operational software, including all hardware and software associated with its
internal network, is already Year 2000 compliant. All facilities (with the
exception of those announced to be sold in 1999) are currently using a system
for their order entry, accounts receivable, customer invoicing, and various
other critical business functions, for which a compliant system is available
from the system vendor. The compliant version will be rolled out in the first
quarter of 1999. A compliant version of the general ledger is installed and
conversion and related testing are expected in the second quarter of 1999. The
Company is working with its current payroll service provider to convert its
existing payroll and human resource systems to a Year 2000 compliant integrated
solution. This conversion and related testing will be completed in the third
quarter of 1999. All personal computers are in the process of converting to a
Year 2000 compliant operating system. Shop floor data collection and inventory
management systems are being upgraded for Year 2000 compliance. In addition to
these activities, the Company has inventoried its manufacturing facilities to
further identify any systems or equipment that might have compliance issues, and
is working to make the systems compliant.
Key vendors have been contacted by the Company to ensure uninterrupted
supply of materials and services critical to core operations. None of the
suppliers contacted have indicated any compliance issues to date. Their efforts
in regards to Year 2000 compliance will be followed closely by the Company
throughout 1999.
As part of its normal course of business, the Company has evaluated and
invested in its internal computer systems as a means to streamline processes and
better manage its operations. Many system conversions were already in process
yielding Year 2000 compliance as a side benefit. As such, it is difficult to
separate the cost of Year 2000 compliance from ongoing information system costs
already recorded in the financial results of the Company as part of its normal
operations. However, the Company estimates that Year 2000 compliance costs have
been less than $1 million in total to date. All such costs and any future costs
(estimated at less than $1 million) have been or will be funded through cash
generated from operations.
The Company will identify and evaluate potential business disruption
scenarios surrounding the Year 2000 issue. Such plans may include securing
alternative sources of supply, increasing safety stock of materials, adjusting
facility shutdown and start-up schedules and other appropriate measures. These
plans and related cost estimates will be refined as additional information
becomes available. Management believes that the Year 2000 issue will not pose
significant operational problems for the Company. However, if all Year 2000
issues are not identified, or assessment, remediation and testing are not
effected in a timely manner, there can be no assurance that the Year 2000 issue
will not materially and adversely impact the Company's results of operations.
Nor can there be assurances that there will be no adverse impact on its
relationships with customers, vendors, or others. Any failure to become Year
2000 compliant by banks, vendors, customers, and governmental agencies may have
an impact on the results of the Company to the extent they relate to the
Company's ongoing operations and business requirements.
10
<PAGE> 14
OTHER ITEMS
ACQUISITIONS
Acquisitions have been a key part of the Company's growth strategy. For
further details on past acquisitions, see Note (4) to the Consolidated Financial
Statements.
SEASONALITY
The Company's business as a whole has minor seasonal variations,
whereby quarterly sales and earnings tend to be slightly stronger starting in
early spring (second quarter) and extending through late summer (third quarter).
Aerosol sales do not tend to fluctuate during the year, with only relatively
minor spring and summer increases related to household products and insect
repellents. Paint container sales tend to be stronger in spring and early summer
due to the favorable weather conditions. Portions of the Custom and Specialty
products line tend to vary seasonally, because of holiday sales late in the
year.
LEGAL
The Company is involved in various legal proceedings including a labor
matter involving a closed facility. The Company believes it is adequately
reserved for these matters. See Note (9) to the Consolidated Financial
Statements for further information.
FOREIGN CURRENCY RISK
To the extent that the Company obtains financing in United States
dollars and receives revenues and incurs expenses in the development,
construction and operation of USC Europe in its local currencies, the Company
will encounter currency exchange rate risks.
LIQUIDITY AND CAPITAL RESOURCES
During the last three fiscal years, the Company has met its liquidity
needs primarily through internally generated cash flows, borrowings under its
credit lines and proceeds of securities offerings. Principal liquidity needs
have included normal operations, restructuring related expenditures, debt
amortization, capital spending and acquisitions. Cash flow from operations has
increased from $30.3 million in 1996 and $64.1 million in 1997, to $65.0 million
in 1998. Improved earnings and better working capital management were the
primary factors contributing to improved cash from operations in 1998. Cash
costs for restructuring activities in 1998 were $8.3 million, including costs
related to its discontinued operations. The Company anticipates spending another
$ 7.5 million of such costs in 1999 and $7.8 million in cash costs in year 2000
and beyond. The remainder of the special charges primarily consists of non-cash
items associated with the write down of assets.
As of December 31, 1998, the Company's total debt was approximately
$316.7 million. The Company had no borrowings outstanding under the Credit
Agreement, $12.3 million in letters of credit had been issued pursuant thereto
and $67.7 million of unused credit remained available. The Company issued $275
million 10 1/8% Senior Subordinated Notes in 1996, which have no scheduled
maturity until 2006 but requires annual interest payments of approximately $28
million.
For a full discussion on the Company's debt obligations, refer to Note
(5) to the Consolidated Financial Statements.
On November 9, 1998, U.S. Can sold to BMAT, Inc. substantially all of
the assets of its commercial Metal Services business, including operating
facilities located in Chicago, Illinois; Trenton, New Jersey; and Brookfield,
Ohio, and a closed plant located in Alsip, Illinois, for a sale price of
approximately $31 million in cash subject to final working capital adjustments.
Approximately $23.1 million of the proceeds were used to repay outstanding
indebtedness under U.S. Can's revolving bank credit facility. The Company
intends to use the remaining proceeds from the sale for general corporate
purposes.
Due to the special charge in the third quarter of 1998, it was
necessary for the Company to request a waiver under its Credit Agreement
relative to its financial covenants dealing with total leverage, domestic
leverage and interest coverage. The Company's banks approved the waiver and
amended the Credit Agreement to take the Company's third quarter 1998 special
charge into account when calculating EBITDA to avoid violation of future
financial covenants. As of December 31, 1998, the Company was in compliance with
all of its debt covenants.
The Company's capital expenditures totaled $22.8 million in 1998, $54.0
million in 1997 and $48.6 million in 1996. Of the total capital expenditures in
1997 and 1996, approximately $30 million relates to the start-up of the Merthyr
Tydfil, UK plant. In each year, these capital expenditures also included
investments in new can production lines, improvements to existing can lines,
advanced lithography technology and computer integrated manufacturing, to
increase manufacturing capacity, reduce changeover times and improve
productivity. The Company has also invested capital in plant expansions and the
installation of state-of-the-art end-making presses and automated packaging
equipment. An additional $12.4 million and $80.9 million was spent in 1997 and
1996, respectively, for business acquisitions described in Note (4) to the
Consolidated Financial Statements.
11
<PAGE> 15
The Company expects to spend approximately $130.0 to $175.0 million on
capital expenditures during the five years commencing in 1999, in an amount of
approximately $30.0 to $35.0 million in 1999 and in roughly equal amounts of
approximately $25.0 to $35.0 million in each year thereafter. The Company's
capital investments are expected to yield reduced operating costs, thereby
improving profit margins. Capital investments are evaluated under a shareholder
value added ("SVA") approach. This approach seeks incremental net operating
profit after tax which covers the weighted average cost of capital (estimated at
10%) of the investment.
Management believes that cash flow from operations and amounts
available under its credit facilities should provide sufficient funds for the
Company's short-term and long-term capital expenditure and debt amortization
requirements, and other cash needs in the ordinary course of business. If future
strategic acquisition opportunities arise, the Company would expect to finance
them though some combination of cash, stock and/or debt financing.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Management does not believe that interest rate fluctuations have a
material effect on the Company's results of operations and financial condition.
As of December 31, 1998, none of the Company's borrowings were floating rate
obligations. Currently, the Company holds no interest rate swaps. However, in an
effort to limit foreign exchange risk related to the financing of the Merthyr
Tydfil facility, the Company entered into a series of British Pound/Dollar
forward hedge contracts in 1997 that will not exceed $37 million in notional
amount or a term of more than seven years.
As parts of its national lithography strategy, the Company is investing
in certain lithography process equipment with a foreign vendor. In an effort to
limit foreign exchange risk related to this purchase commitment, the Company
entered into a series of German Deutsch Mark/Dollar forward hedge contracts that
will not exceed $17 million, payable in varying amounts throughout 1999 with a
final payment in February 2000.
12
<PAGE> 16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants 14
U.S. Can Corporation and Subsidiaries Consolidated Statements of
Operations and Comprehensive Income for the Years Ended
December 31, 1996, 1997 and 1998 15
U.S. Can Corporation and Subsidiaries Consolidated Balance Sheets as of
December 31, 1998 and 1997 16
U.S. Can Corporation and Subsidiaries Consolidated Statements of
Stockholders' Equity for the Years Ended December 31, 1996, 1997 and 1998 17
U.S. Can Corporation and Subsidiaries Consolidated Statements of Cash
Flows for the Years Ended December 31, 1996, 1997 and 1998 18
U.S. Can Corporation and Subsidiaries Notes to Consolidated Financial
Statements 19
</TABLE>
13
<PAGE> 17
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To U.S. Can Corporation:
We have audited the accompanying consolidated balance sheets of U.S. CAN
CORPORATION (a Delaware corporation) AND SUBSIDIARIES as of December 31, 1997
and 1998, and the related consolidated statements of operations and
comprehensive income, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1998. 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 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of U.S. Can
Corporation and Subsidiaries as of December 31, 1997 and 1998, and their results
of operations and cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
February 17, 1999
14
<PAGE> 18
U.S. CAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(000'S OMITTED, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------
1996 1997 1998
------------------------------------------
<S> <C> <C> <C>
NET SALES $ 660,623 $ 755,675 $ 710,246
COST OF SALES 571,667 665,755 618,156
------------------------------------------
Gross income 88,956 89,920 92,090
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 28,441 33,047 32,651
SPECIAL CHARGES -- 62,980 35,869
------------------------------------------
Operating income (loss) 60,515 (6,107) 23,570
INTEREST EXPENSE ON BORROWINGS 28,387 36,867 33,182
AMORTIZATION OF DEFERRED FINANCING COSTS 1,518 1,738 1,753
OTHER EXPENSES 1,788 1,986 1,822
------------------------------------------
Income (loss) before income taxes 28,822 (46,698) (13,187)
PROVISION (BENEFIT) FOR INCOME TAXES 12,267 (16,792) (5,662)
------------------------------------------
Income (loss) from continuing operations before extraordinary item 16,555 (29,906) (7,525)
DISCONTINUED OPERATIONS, net of income taxes
Net income from discontinued operations 446 1,078 --
Net loss on sale of discontinued business -- (3,204) (8,528)
EXTRAORDINARY ITEM, net of income taxes (5,250) -- --
------------------------------------------
NET INCOME (LOSS) 11,751 (32,032) (16,053)
OTHER COMPONENTS OF COMPREHENSIVE INCOME (LOSS) 2,003 (4,427) 1,364
------------------------------------------
Comprehensive income (loss) $ 13,754 $ (36,459) $ (14,689)
==========================================
PER SHARE DATA:
Basic:
Income (loss) from continuing operations before extraordinary item $ 1.28 $ (2.29) $ (0.57)
Discontinued operations 0.04 (0.16) (0.64)
Extraordinary item (0.41) -- --
------------------------------------------
Net income (loss) $ 0.91 $ (2.45) $ (1.21)
==========================================
Weighted average shares outstanding (000's) 12,929 13,048 13,264
Diluted:
Income (loss) from continuing operations before extraordinary item $ 1.26 $ (2.29) $ (0.57)
Discontinued operations 0.04 (0.16) (0.64)
Extraordinary item (0.40) -- --
------------------------------------------
Net income (loss) $ 0.90 $ (2.45) $ (1.21)
==========================================
Weighted average shares and equivalent shares outstanding (000's) 13,090 13,048 13,264
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
15
<PAGE> 19
U.S. CAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(000'S OMITTED, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
December 31, December 31,
------------------------------
1997 1998
------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,773 $ 18,072
Accounts receivables, less allowances of $15,134 and $17,063 in
1997 and 1998, respectively 74,137 63,742
Inventories 109,458 94,887
Prepaid expenses and other current assets 17,503 16,011
Deferred taxes 22,748 22,934
------------------------------
Total current assets 230,619 215,646
------------------------------
PROPERTY, PLANT AND EQUIPMENT:
Land 5,485 5,862
Building 73,277 63,026
Machinery, equipment and construction in process 427,404 416,940
------------------------------
506,166 485,828
Less: Accumulated depreciation and amortization (181,869) (217,826)
------------------------------
Total property, plant and equipment 324,297 268,002
------------------------------
INTANGIBLE ASSETS, less accumulated amortization of $10,526 and
$11,853 in 1997 and 1998, respectively 59,578 51,928
OTHER ASSETS 19,210 19,995
------------------------------
Total assets $ 633,704 $ 555,571
==============================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long term debt $ 9,635 $ 6,731
Accounts payable 58,486 52,317
Accrued payroll, benefits and insurance 30,965 31,282
Restructuring reserves 31,645 25,674
Other current liabilities 19,117 23,530
------------------------------
Total current liabilities 149,848 139,534
------------------------------
SENIOR DEBT 91,506 45,617
SUBORDINATED DEBT 275,000 264,325
------------------------------
Total long-term debt 366,506 309,942
------------------------------
OTHER LONG-TERM LIABILITIES
Deferred income taxes 17,973 5,595
Other long-term liabilities 37,064 50,323
------------------------------
Total other long-term liabilities 55,037 55,918
------------------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value; 10,000,000 shares authorized,
none issued or outstanding -- --
Common stock, $0.01 par value; 50,000,000 shares authorized,
13,097,855 and 13,278,223 shares issued in 1997 and 1998, respectively 131 133
Paid-in-capital 108,003 109,839
Unearned restricted stock (2,558) (829)
Treasury common stock, at cost; 44,159 and 90,011 shares in
1997 and 1998, respectively (714) (1,728)
Currency translation adjustment (2,193) (1,443)
Minimum pension liability adjustment (614) --
Accumulated deficit (39,742) (55,795)
------------------------------
Total stockholders' equity 62,313 50,177
------------------------------
Total liabilities and stockholders' equity $ 633,704 $ 555,571
==============================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these balance sheets.
16
<PAGE> 20
U.S. CAN CORPORATION AND SUBSIDIARIES
CONSOLIDATION STATEMENTS OF STOCKHOLDER'S EQUITY
(000'S OMITTED)
<TABLE>
<CAPTION>
Accumulated Other
Comprehensive Income
--------------------
Unearned Treasury Cumulative Pension
Common Paid-in Restricted Common Translation Liability Accumulated
Stock Capital Stock Stock Adjustment Adjustment Deficit
--------- ------- ---------- --------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 $ 129 $103,913 $ (2,052) $ (319) $ -- $ (383) $(19,461)
Net income -- -- -- -- -- -- 11,751
Issuance of stock under employee
benefit plans -- 516 -- -- -- -- --
Purchase of treasury stock -- -- -- (233) -- -- --
Issuance of treasury stock -- 129 -- 296 -- -- --
Exercise of stock options -- 18 -- -- -- -- --
Issuance of restricted stock 1 1,006 (1,007) -- -- -- --
Amortization of unearned
restricted stock -- -- 478 -- -- -- --
Equity adjustment to reflect minimum
pension liability -- -- -- -- -- 381 --
Cumulative translation adjustment -- -- -- -- 1,622 -- --
-------- -------- -------- -------- -------- -------- --------
BALANCE AT DECEMBER 31, 1996 130 105,582 (2,581) (256) 1,622 (2) (7,710)
Net income (loss) -- -- -- -- -- -- (32,032)
Issuance of stock under employee
benefit plans -- 778 -- 721 -- -- --
Purchase of treasury stock -- -- -- (1,179) -- -- --
Exercise of stock options -- 152 -- -- -- -- --
Issuance of restricted stock 1 1,491 (1,492) -- -- -- --
Amortization of unearned
restricted stock -- -- 1,515 -- -- -- --
Equity adjustment to reflect minimum
pension liability -- -- -- -- -- (612) --
Cumulative translation adjustment -- -- -- -- (3,815) -- --
-------- -------- -------- -------- -------- -------- --------
BALANCE AT DECEMBER 31, 1997 131 108,003 (2,558) (714) (2,193) (614) (39,742)
Net income (loss) -- -- -- -- -- -- (16,053)
Issuance of stock under employee
benefit plans -- -- -- 716 -- -- --
Purchase of treasury stock -- -- -- (1,730) -- -- --
Exercise of stock options 2 1,656 -- -- -- -- --
Issuance of restricted stock -- 180 (180) -- -- -- --
Amortization of unearned
restricted stock -- -- 1,909 -- -- -- --
Equity adjustment to reflect minimum
pension liability -- -- -- -- -- 614 --
Cumulative translation adjustment -- -- -- -- 750 -- --
-------- -------- -------- -------- -------- -------- --------
BALANCE AT DECEMBER 31, 1998 $ 133 $109,839 $ (829) $ (1,728) $ (1,443) $ -- $(55,795)
======== ======== ======== ======== ======== ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
17
<PAGE> 21
U.S. CAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000'S OMITTED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 11,751 $(32,032) $(16,053)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities -
Depreciation and amortization 33,977 42,434 35,439
Special charges -- 62,980 35,869
Loss on sale of business -- 12,413 8,528
Extraordinary loss on extinguishment of debt 5,250 -- --
Deferred income taxes 4,124 (17,788) (6,916)
Change in operating assets and liabilities, net of effect of acquired
and disposed businesses -
Accounts receivable (7,948) 12,059 10,275
Inventories (15,942) 3,785 15,324
Accounts payable 6,077 (5,193) (667)
Accrued payrolls, benefits, insurance and special charge cash costs (5,644) (20,172) (8,228)
Other, net (1,385) 5,576 (8,608)
--------- --------- ---------
Net cash provided by operating activities 30,260 64,062 64,963
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (48,630) (54,030) (22,828)
Acquisition of businesses, net of cash acquired (80,894) (12,398) --
Proceeds on sale of businesses -- 1,000 28,296
Change in restricted cash 1,455 -- --
Proceeds from sale of property 1,515 630 6,601
Investments in Formametal S.A -- -- (3,000)
--------- --------- ---------
Net cash used in investing activities (126,554) (64,798) 9,069
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock and exercise of stock options 18 152 1,658
Net borrowings (payments) under the revolving line of credit and
changes in cash overdrafts (25,052) 1,931 (36,770)
Issuance of 10 1/8% notes 275,000 -- --
Repurchase of 10 1/8% notes -- -- (10,675)
Borrowings of other long-term debt, including
capital lease obligations 14,247 24,935 --
Payments of other long-term debt, including
capital lease obligations (151,152) (22,352) (15,618)
Payments of debt refinancing costs (9,259) (1,574) --
Purchase of Treasury stock (233) (1,179) (1,730)
--------- --------- ---------
Net cash provided by financing activities 103,569 1,913 (63,135)
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 555 (2,370) 402
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 7,830 (1,193) 11,299
CASH AND CASH EQUIVALENTS, beginning of year 136 7,966 6,773
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of year $ 7,966 $ 6,773 $ 18,072
========= ========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
18
<PAGE> 22
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS DECEMBER 31, 1996, 1997 AND 1998
(1) BASIS OF PRESENTATION AND OPERATIONS
The consolidated financial statements include the accounts of U.S. Can
Corporation (the "Corporation"), its wholly owned subsidiary, United States Can
Company ("U.S. Can"), and U.S. Can's subsidiaries, most of which are foreign
companies formed or acquired during 1996 (the "European Subsidiaries"). All
significant intercompany balances and transactions have been eliminated. The
consolidated group is referred to herein as the Company. These financial
statements are prepared in accordance with generally accepted accounting
principles.
The Company is a packaging supplier of steel and plastic containers for
personal care products and household, automotive, paint and industrial supplies,
and other specialty products. The Company owns or leases 22 plants in the United
States and 6 plants located in Europe. Certain operations and plants are being
discontinued or closed as further described in Note 3.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Cash and Cash Equivalents - The Company considers all liquid
interest-bearing instruments purchased with an original maturity of three months
or less to be cash equivalents.
(b) Accounts Receivable Allowances - Activity in the accounts receivable
allowances accounts was as follows (000's omitted):
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of year $ 5,451 $ 10,895 $ 15,134
Additions for doubtful accounts 3,095 1,065 881
Change in discounts,
allowances and rebates,
net of recoveries 2,895 3,734 2,525
Net write-offs of doubtful accounts (546) (560) (1,477)
-------- -------- --------
Balance at end of year $ 10,895 $ 15,134 $ 17,063
======== ======== ========
</TABLE>
(c) Inventories - All United States inventories, except machine parts, are
stated at cost determined by the last-in, first-out ("LIFO") method, not in
excess of market. Inventories of approximately $16.4 million at December 31,
1997 and $19.9 million as of December 31, 1998 at the European Subsidiaries and
machine shop inventory are stated at cost determined by the first-in, first-out
("FIFO") method, not in excess of market. Inventory costs include material,
labor and factory overhead.
Inventories reported in the accompanying balance sheets were classified as
follows (000's omitted):
<TABLE>
<CAPTION>
December 31,
1997 1998
-------- ---------
<S> <C> <C>
Raw materials $ 33,746 $ 21,171
Work in progress 42,763 42,146
Finished goods 28,037 26,848
Machine shop inventory 4,912 4,722
-------- ---------
$109,458 $ 94,887
======== =========
</TABLE>
(d) Property, Plant and Equipment - Property, plant and equipment is
recorded at cost. Major renewals and betterments which extend the useful life of
an asset are capitalized; routine maintenance and repairs are expensed as
incurred. Total maintenance and repairs expense charged against earnings was
approximately $25.2 million, $30.9 million and $29.9 million in 1996, 1997 and
1998, respectively. Upon sale or retirement of these assets, the asset cost and
related accumulated depreciation are removed from the accounts and any related
gain or loss is reflected in income.
Depreciation for financial reporting purposes is principally provided using
the straight-line method over the estimated useful lives of the assets, as
follows: buildings-25 to 40 years; machinery and equipment - 5 to 20 years.
Property, plant and equipment under capital leases are amortized over the
shorter of the estimated useful life of the asset or the term of the lease.
Accelerated methods are used for income tax purposes, where permitted.
(e) Intangibles - Intangible assets consist principally of the excess
purchase price over the fair value of the net assets of businesses acquired
("goodwill"), which is principally amortized over a 40 year life. The related
amortization expense was $1.5 million, $1.8 million and $1.8 million for the
years ended December 31, 1996, 1997 and 1998, respectively. The Company
continually reviews whether subsequent events and circumstances have occurred
that indicate the remaining estimated useful life of goodwill may warrant
revision or its recoverable value requires adjustment. In assessing and
measuring recoverability, the Company uses projections to determine whether
future operating income (net of tax) exceeds the goodwill amortization.
(f) Environmental Liabilities - The Company's operations and products are
subject to Federal, state, local and foreign regulatory requirements relating to
environmental protection. The Company has a policy to comply with applicable
legal requirements. The Company may be subject to liabilities for previously
owned or operated sites or sites where the Company or its predecessors shipped
waste.
19
<PAGE> 23
The Company accrues for the estimated cost of environmental matters, on a
non-discounted basis. Such provisions and accruals exclude claims for recoveries
from insurance carriers or other third parties.
Statement of Position ("SOP") 96-1,"Environmental Remediation Liabilities"
was issued in October 1996 and adopted by the Company in 1997. The impact of
adopting this SOP did not have a material effect on the Company's financial
position or results of operations.
(g) Revenue - Revenue is recognized when goods are shipped to the customer.
Estimated sales returns and allowances are recognized as an offset against
revenue in the period in which the related revenue is recognized.
(h) Foreign Currency Translation - The functional currency for substantially
all the Company's European Subsidiaries is the applicable local currency. The
translation from the applicable foreign currencies to U.S. dollars is performed
for balance sheet accounts using current exchange rates in effect at the balance
sheet date and for revenue and expense accounts using an average exchange rate
prevailing during the period. The gains or losses resulting from such
translation are included in stockholders' equity. Gains or losses resulting from
foreign currency transactions are included in other income and were not material
in 1996, 1997 or 1998.
(i) New Accounting Pronouncements - Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share" was issued in February 1997 and
adopted by the Company as of December 31, 1997. Previously reported earnings per
share for such periods were not materially different than currently reported
diluted earnings per share. Diluted earnings per share for the Company includes
the impact of assumed exercise of diluted stock options.
SFAS No. 130, "Reporting Comprehensive Income" was issued in July 1997 and
was adopted by the Company in 1998. This new pronouncement establishes standards
for the reporting and display of comprehensive income and its components which,
for the Company, include cumulative translation and minimum pension adjustments.
SFAS No. 131, "Disclosures about Segments of an Enter- prise and Related
Information" was issued in July 1997 and adopted by the Company in 1998. The
Company determines its reportable segments based on "the management approach."
This method mirrors the segmentation utilized by the chief operating decision
maker for internal performance assessment and operating decisions. For further
discussion refer to Note (12) to the Consolidated Financial Statements.
SFAS No. 132, "Employers' Disclosures about Pensions and Other
Post-retirement Benefits" was issued in February 1998 and adopted by the Company
in 1998. This statement revises the Company's disclosures about pension and
other post-retirement benefit plans.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"
was issued in June 1998 and will be adopted by the Company in 1999. This new
pronouncement establishes accounting and reporting standards for derivative
instruments and hedging activities. It requires that the Company recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Management of the Company
does not believe this pronouncement will have a material impact upon current
reporting or results.
(j) Use of estimates - The preparation of financial statements requires
management to make estimates and assumptions that affect the report of assets
and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
(3) SPECIAL CHARGES AND DISCONTINUED OPERATIONS
1997 Special Charges
In the third quarter of 1997, the Company established a pre-tax special
charge of $35 million, primarily for plant closings and overhead cost reductions
associated with the loss of a major aerosol customer who awarded its global
aerosol business to a U.S. Can competitor. In addition, the Company established
a pre-tax disposition provision of $17.2 million for the anticipated loss on the
closure of its Metal Pail operation in North Brunswick, New Jersey. In November
1997, the Company sold this business for $1.4 million which resulted in a net
pre-tax loss of only $13.3 million and the Company appropriately adjusted the
provision.
Also, in the fourth quarter of 1997, the Company, at the direction of its
Board of Directors, employed the assistance of external business consultants to
review operations and explore other avenues for enhancing shareholder value. As
a result of this review, the Company established an additional pre-tax special
charge of $14.7 million, primarily to include personnel reductions and the
reduction of asset value associated with equipment used in the businesses the
Company has exited or was in the process of exiting.
The key elements of the third and fourth quarter restructuring included
closure in 1998 of the Racine, Wisconsin aerosol assembly plant, the Midwest
litho center in Alsip, Illinois, the Sparrows Point litho center in Baltimore,
Maryland, and the California Specialty plant in Vernalis, California; a
write-down to estimated proceeds for the sale of the Orlando, Florida machine
engineering center ("OMEC") and the Baltimore, Maryland specialty and paint can
distribution business; and organizational changes designed to reduce general
overhead. On January 29, 1999, the Company completed the sale of OMEC for $4.5
million in cash.
20
<PAGE> 24
The third and fourth quarter special charge included $41.7 million for the
non-cash write-off of assets related to the facilities to be closed or sold,
(includes fixed assets of $34.1 million and unamortized goodwill of $7.6
million), $13.2 million for severance and related termination benefits for
approximately 115 salaried and 370 hourly employees, and $8.1 million for other
related closure costs.
Discontinued Operations
On November 9, 1998, the Company sold its commercial Metal Services business
(for approximately $31 million of net cash proceeds subject to final working
capital adjustments). Based on the proceeds received, the Company recorded an
incremental $8.5 million after-tax charge for the loss on the sale of this
business in 1998. (In the fourth quarter of 1997, the Company had provided $3.2
million after income taxes for the loss on the sale of this business, primarily
representing the excess of recorded carrying value over the estimated aggregate
net proceeds, expected at that time, for the net assets to be sold).
Metal Services included one plant in each of Chicago, Illinois; Trenton, New
Jersey; and Brookfield, Ohio, and the closed Midwest Litho plant in Alsip,
Illinois. The Company's historical financial statements have been restated to
reflect this business as a discontinued operation.
Revenues to third parties from these operations were $115.7 million and
$94.3 million in the periods ending December 31, 1997 and November 8, 1998,
respectively (excluding intra-company sales which are expected to be continued
by the buyer and excluding ongoing third-party sales from the closed Midwest
Litho facility, which have been transferred to other Metal Services facilities).
1998 Special Charges
In 1998, the Company established a pre-tax restructuring provision of $35.9
million for additional plant closings, implementation of a national lithography
strategy, an incremental provision for the anticipated loss on the sale of OMEC
mentioned previously and a reassessment of 1997 special charges.
The key elements of the 1998 restructuring provision include the closure of the
Green Bay, Wisconsin aerosol assembly plant, the Alsip, Illinois general line
plant, and the Columbiana, Ohio specialty plant expected to occur in 1999; a
write-down to estimated proceeds for the sale of the metal closure business
located in Glen Dale, West Virginia; and selected closures and realignment of
facilities servicing the lithography needs of the Company's core business.
The restructuring provision includes $5.2 million for severance and related
termination benefits for approximately 45 salaried and 250 production employees;
$24.4 million for the non-cash write off of assets related to the facilities
being closed or consolidated (includes fixed assets of $9.3 million and
unamortized goodwill of $15.1 million); $3.3 million for the estimated net loss
(book value in excess of proceeds) on the sale of the closure business and OMEC;
$4.2 million for other related closure costs and ($1.2) million adjustment for
1997 items. The adjustment for 1997 items included subletting a facility sooner
than expected, continuing a facility which had been scheduled to be sold and
receiving less than expected proceeds on certain sold facilities.
Cash costs for restructuring activities in 1998 were $8.3 million, including
costs related to its discontinued operations. The Company anticipates spending
another $7.5 million of such costs in 1999 and $7.8 million in cash costs in the
year 2000 and beyond. The remainder of the restructuring provision primarily
consists of non-cash items associated with the write-off of assets.
The Company continuously evaluates the composition of its various
manufacturing facilities in light of current and expected market conditions and
demand. While no formal plans currently exist to further consolidate plant
operations, such actions may be deemed appropriate in the future.
<TABLE>
<CAPTION>
Restructuring Provision Rollforward
(000's omitted)
<S> <C>
Balance December 31, 1996 --
Special charge $ 62,980
Discontinued operations charge 5,358
Payments against reserve (2,801)
Non-cash charges against reserve (30,456)
--------
Balance December 31, 1997 35,081(a)
Special charge 35,869
Discontinued operations charge 14,261
Payments against reserve (8,251)
Non-cash charges against reserve (33,573)
========
BALANCE DECEMBER 31, 1998 $ 43,387(a)
========
</TABLE>
(a) Includes $3.4 million and $17.7 million of long-term liabilities as of
December 31, 1997 and 1998, respectively.
(4) ACQUISITIONS
In Spring 1996, the Company acquired from Alltrista Corporation
("Alltrista") for approximately $14.4 million and the assumption of a $0.5
million liability substantially all of the assets of Alltrista Metal Services
("AMS"), a division of Alltrista. In July of 1996, the Company discontinued
operations at two of the former AMS plants.
In August 1996, the Company completed the acquisition of all of the
outstanding stock of three related companies, CPI Plastics, Inc., CP Ohio, Inc.
and CP Illinois, Inc. (collectively, the "CPI Group"), engaged in manufacturing
molded plastic drums and pails and poultry products. The Company paid
approximately $15.1 million in cash to the stockholders of the CPI Group at
closing. In addition, U.S. Can has made contingent payments, based upon the CPI
Group's financial performance during 1996 and 1997, aggregating $1.0 million.
In September 1996, the Company completed the acquisition of a portion of
Crown Cork & Seal Company, Inc.'s ("Crown's") European aerosol can businesses
("USC Europe") for $51.8 million, in addition to the assumption of debt of $5.8
million. This acquisition included manu- facturing operations in the United
Kingdom, France, Spain and Germany, and the aerosol can manufacturing equipment
and assets from a Crown facility in Italy. The companies acquired and
established in connection with the USC Europe acquisition comprise the majority
of the European Subsidiaries.
21
<PAGE> 25
In January 1997, the Company acquired certain assets from Owens-Illinois
Closure Inc. ("O-I") for cash consideration of $11 million.
Each of the foregoing business acquisitions was accounted for as a purchase
for financial reporting purposes. Accordingly, assets and liabilities of the
acquired companies were revalued to estimated fair values as of the acquisition
date. The operating results of each acquired business are included in the
consolidated statement of operations from the date of acquisition.
In March 1998, a European Subsidiary acquired a 36.5% equity interest in
Formametal S.A., an aerosol can manufacture located in Argentina, for $4.6
million, payable over a 15-month period. In connection with this investment,
Formametal has agreed to purchase approximately $2.6 million to $3.0 million of
manufacturing equipment from the Company, and the Company has agreed to provide
certain technical and engineering assistance to Formametal. The Company has also
provided a guaranty in an amount not to exceed $2.0 million, to secure the
repayments of certain indebtedness of Formametal. This investment is being
accounted for on the equity method. December 31, 1998 results include a
after-tax loss of $0.1 million as a result of the Company's investment in
Formametal.
(5) DEBT OBLIGATIONS
The primary long-term debt obligations of the Company at December 31, 1997
and 1998, consisted of the following (000's omitted):
<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Senior debt -
Revolving line of credit $ 32,600 $ --
Secured equipment notes 4,825 --
Capital lease obligations 28,210 15,511
Secured term loan 26,680 25,128
Industrial revenue bonds 7,500 7,500
Mortgages and other 1,326 4,209
--------- ---------
101,141 52,348
Less - Current maturities (9,635) (6,731)
--------- ---------
Total senior debt 91,506 45,617
Senior Subordinated 10 1/8% Notes 275,000 264,325
--------- ---------
Total long-term debt $ 366,506 $ 309,942
========= =========
</TABLE>
In April 1997, U.S. Can entered into an Amended and Restated Credit
Agreement with a group of banks (the "Credit Agreement"), providing a $110
million revolving credit facility, which was reduced to $80 million in 1998
because of the Company's reduced needs. Obligations under the Credit Agreement
are secured by U.S. Can's domestic accounts receivable and inventories. Funds
available under the Credit Agreement may be used for general corporate purposes
(including working capital needs and permitted acquisitions).
The loans under the Credit Agreement bear interest at a floating rate equal
to, at the election of U.S. Can, one of the following: (i) the Base Rate (as
defined in the Credit Agreement) per annum, or (ii) based on the current pricing
ratio, a reserve-adjusted Eurodollar rate plus the then applicable margin, for
specified interest periods of one, two, three, or six months. The weighted
average interest rate of the loans outstanding under the Credit Agreement was
6.7% at December 31, 1997. U.S. Can is required to pay letter of credit fees
based on the outstanding face amount on each letter of credit and a commitment
fee based on the average daily unused portion of each lender's commitment under
the Credit Agreement.
As of December 31, 1998, U.S. Can had no borrowings outstanding under the
Credit Agreement, $12.3 million in letters of credit issued pursuant thereto,
and $67.7 million of unused credit remained available.
Capital lease obligations mature in varying amounts from 1999 to 2005 and
bear interest at various rates between 3.7% and 9.8%. Other debt, consisting of
various governmental loans, real estate mortgages and secured equipment notes
bearing interest at rates between 5.6% and 8.8%, matures at various times
through 2015, and was used to finance the expansion of several manufacturing
facilities.
On December 20, 1996, U.K. Can, Ltd., one of the European Subsidiaries,
entered into (and U.S. Can guaranteed) a $28 million secured term loan with
General Electric Capital Corporation, to finance the acquisition of land,
building and equipment comprising the Merthyr Tydfil, Wales production facility.
This credit facility is secured by the real and personal property of U.S. Can's
Merthyr Tydfil operation. The loan is denominated in U.S. Dollars. During 1997,
in connection with the transaction, the Corporation entered into foreign
currency contracts which allow the Company to exchange a fixed amount of U.K.
Pounds for U.S. Dollars at certain dates which coincide with the repayment of
principal and interest on the loan. The forward contracts are intended to hedge
against fluctuations in currency rates.
On October 17, 1996, the Corporation issued $275 million principal amount of
10 1/8% Senior Subordinated Notes due 2006 in a private placement. These notes
were exchanged in March 1997 for similar notes which are publicly registered.
These exchange notes (the "10 1/8% Notes") are unsecured and are subordinated to
all other senior debt of the Corporation and its subsidiaries. The 10 1/8% Notes
are fully and unconditionally guaranteed on an unsecured senior subordinated
basis by U.S. Can. On or after October 15, 2001, the Corporation may, at its
option, redeem all or some of the 10 1/8% Notes at declining redemption premiums
which begin at approximately 105.1% in 2001. Upon a change of control of the
Corporation, as defined, the Noteholders could require that the Corporation
repurchase all or some of the 10 1/8% Notes at a 101% premium.
22
<PAGE> 26
Net proceeds from the issuance of the 10 1/8% Notes were $268.1 million. The
Company paid off its 13 1/2% Senior Subordinated Notes as of October 17, 1996
which resulted in an extraordinary charge in the fourth quarter of 1996 of $5.2
million (net of income taxes of $3.5 million) primarily representing the write
off of related unamortized deferred financing costs.
As part of the Company's focus on debt reduction, it repurchased through the
open market and subsequently retired, $10.7 million of the outstanding 10 1/8%
Notes in 1998. Under existing loan agreements the Company can elect to
repurchase up to $40.0 million of the outstanding 10 1/8% Notes.
Based upon borrowing rates currently available to the Company for borrowings
with similar terms and maturities, the fair value of the Company's total debt
was approximately $350 million and $324 million as of December 31, 1997 and
1998, respectively. No quoted market value is available, (except on the 10 1/8%
Notes). These amounts, because they do not include certain costs such as
prepayment penalties, do not represent the amount the Company would have to pay
to reacquire and retire all of its outstanding debt in a current transaction.
Financing costs related to the issuance of new debt are deferred and
amortized over the terms of the related debt agreements. Net deferred financing
costs are recorded as other assets in the accompanying balance sheets.
The Company paid interest on borrowings of $25.7 million, $35.2 million and
$ 33.2 million in 1996, 1997 and 1998, respectively.
The Credit Agreement and certain of the Company's other debt agreements
contain various financial and other restrictive covenants, as well as
cross-default provisions. The financial covenants include, but are not limited
to, limitations on annual capital expenditures and certain ratios of borrowings
to earnings before interest, taxes, depreciation and amortization ("EBITDA"),
senior debt to EBITDA and interest coverage. The covenants also restrict the
Company's and U.S. Can's ability to distribute dividends, to incur additional
indebtedness, to dispose of assets and to make investments, acquisitions,
mergers and transactions with affiliates. Due to the 1998 third quarter
restructuring, the Company needed and obtained a waiver on certain financial
covenants. The Credit Agreement was amended so that the restructuring charges
are excluded in the covenant calculations. The Company did comply with all
financial ratios and covenants at year end 1998.
Under existing agreements, contractual maturities of long-term debt as of
December 31, 1998 (including capital lease obligations), are as follows (000's
omitted):
1999 $6,731
2000 5,183
2001 6,878
2002 6,547
2003 2,155
Thereafter 289,179
-----------
$ 316,673
===========
(6) INCOME TAXES
The Company does not provide for U. S. income taxes which would be payable
if undistributed earnings of the European Subsidiaries were remitted to the U.S.
because the Company either considers these earnings to be invested for an
indefinite period or anticipates that if such earnings were distributed, the
U.S. income taxes payable would be substantially offset by foreign tax credits.
Such unremitted earnings were $1.8 million and $4.0 million as of December 31,
1997 and 1998, respectively.
The provision (benefit) for income taxes before discontinued operations and
extraordinary item consisted of the following (000's omitted):
<TABLE>
<CAPTION>
1996 1997 1998
------- -------- -------
<S> <C> <C> <C>
Current $ 7,844 $ -- $ --
Deferred 4,124 (17,788) (6,916)
Foreign 299 996 1,254
------- -------- -------
Total $12,267 $(16,792) $(5,662)
======= ======== =======
</TABLE>
Income taxes, net of refunds, of $2.9 million and $0.5 million were paid in
1996 and 1997, respectively, and none were paid in 1998.
The principal items comprising the difference between taxes on pre-tax
income from continuing operations before extraordinary item computed at the
Federal statutory rate and the actual provision (benefit) for such income taxes
for the years presented were as follows (000's omitted):
<TABLE>
<CAPTION>
1996 1997 1998
------- -------- -------
<S> <C> <C> <C>
Tax provision (benefit) computed
at the statutory rates $10,088 $(16,344) $(4,483)
Nondeductible amortization
of intangible assets 370 396 238
State taxes, net of Federal effect 1,299 (801) (659)
Other, net 510 (43) (758)
------- -------- -------
Provision (benefit) for
income taxes $12,267 $(16,792) $(5,662)
======= ======== =======
</TABLE>
23
<PAGE> 27
Deferred income taxes are determined based on the estimated future tax
effects of differences between the financial statement and tax bases of assets
and liabilities given the provisions of the enacted tax laws. Significant
temporary differences representing deferred income tax benefits and obligations
consisted of the following (000's omitted):
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998
----------------- -----------------
BENEFITS OBLIGATIONS BENEFITS OBLIGATIONS
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Vacation accrual $ 3,421 $ -- $ 3,475 $ --
Post-retirement benefits 11,069 -- 12,694 --
Workers' compensation accrual 898 -- 1,529 --
Pension accrual 2,303 -- 3,221 --
Inventory valuation reserves -- (7,214) -- (6,888)
Depreciation -- (37,707) -- (32,914)
Alternative minimum tax credit
carry-forwards 4,470 -- 4,310 --
Restructuring and overhead
reduction reserves 19,208 -- 19,544 --
Net operating loss 5,909 -- 6,168 --
Other 6,766 (4,348) 9,945 (3,745)
------- -------- ------- --------
Total deferred income tax
benefits (obligations) $54,044 $(49,269) $60,886 $(43,547)
======= ======== ======= ========
</TABLE>
(7) EMPLOYEE BENEFIT PLANS
The Company maintains separate noncontributory pension and defined
contribution plans covering most domestic hourly employees and all domestic
salaried personnel, respectively. It is the Company's policy to fund accrued
pension and defined contribution plan costs in compliance with ERISA
requirements. The total cost of these plans charged against earnings was
approximately $6.1 million, $6.5 million and $5.2 million for 1996, 1997 and
1998, respectively.
The following presents the changes in the projected obligations for the plan
years ended December 31, 1997 and 1998 (000's omitted):
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Projected benefit obligation at
the beginning of the year $ 16,343 $ 28,685
Net increase (decrease) during
the year attributed to:
Service cost 871 912
Interest cost 1,679 1,887
Actuarial (gain)/loss 3,255 (1,104)
Benefits paid (1,285) (1,547)
Plan amendments 1,219 376
Business combinations, divestitures,
curtailments or settlements 4,143 --
Special termination benefits 2,460 --
-------- --------
Net increase for the year 12,342 524
-------- --------
Projected benefit obligation
at the end of the year $ 28,685 $ 29,209
======== ========
</TABLE>
The following table presents the change in the fair value of net assets
available for plan benefits for the plan years ended December 31, 1997 and 1998
(000's omitted):
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Fair value of net assets available
at the beginning of the year $ 12,963 $ 22,825
Increase (decrease) during the year:
Return on plan assets 2,935 3,870
Sponsor contributions 2,405 2,780
Benefits paid (1,285) (1,547)
Business combinations, divestitures,
curtailments or settlements 5,807 --
-------- --------
Net increase for the year 9,862 5,103
-------- --------
Fair value of net assets available
at the end of the year $ 22,825 $ 27,928
======== ========
</TABLE>
The following table sets forth the funded status of the Company's domestic
defined benefit pension plans, at December 31, 1997 and 1998 (000's omitted):
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligation -
Vested benefits $(25,619) $(26,608)
Nonvested benefits (3,066) (2,601)
-------- --------
Accumulated benefit obligation (28,685) (29,209)
Fair value of plan assets 22,825 27,928
-------- --------
Projected benefit obligation in
excess of plan assets (5,860) (1,281)
Unrecognized transition obligation 67 50
Unrecognized net gain (loss) 1,003 (1,873)
Unrecognized prior-service costs 1,956 1,903
-------- --------
Net amount recognized $ (2,834) $ (1,201)
======== ========
Amounts recognized in the consolidated
balance sheet consist of:
Accrued benefit liability $ (5,860) $ (1,281)
Intangible asset 2,022 80
Accumulated other comprehensive income 1,004 --
-------- --------
Net amount recognized $ (2,834) $ (1,201)
======== ========
</TABLE>
The projected benefit obligation as of December 31, 1996, 1997 and 1998 was
determined using an assumed discount rate of 7.5%, 7.0% and 7.0%, respectively.
The expected long-term rate of return on plan assets used in determining net
periodic pension cost was 8.0%, 8.5% and 8.5% in 1996, 1997, and 1998,
respectively. The plan has a flat benefit formula; accordingly, the effect of
projected future compensation levels is zero. The plan's assets consist
primarily of shares of the Corporation's common stock, equity and bond funds,
corporate bonds and investment contracts with insurance companies.
The United States net periodic pension cost was as follows (000's omitted):
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Service costs $ 690 $ 871 $ 912
Interest costs 1,133 1,679 1,887
Return on assets (929) (4,213) (1,983)
Amortization of unrecognized
transition obligation 66 3 17
Prior service cost recognized 204 297 313
Curtailment loss on severed employees -- 2,595 --
------- ------- -------
Net periodic pension cost $ 1,164 $ 1,232 $ 1,146
======= ======= =======
</TABLE>
24
<PAGE> 28
In addition, hourly employees at eight plants are covered by union-sponsored
collectively bargained, multi-employer pension plans. The Company contributed to
these plans and charged to expense approximately $1.5 million, $1.4 million and
$1.3 million in 1996, 1997 and 1998, respectively. The contributions are
generally determined in accordance with the provisions of the negotiated labor
contracts and are generally based on a per employee per week amount.
In March 1996, 1997 and 1998, the Corporation contributed shares of Common
Stock, valued at $0.4 million, $0.9 million and $0.7 million, respectively, to
U.S. Can's Salaried Employees Savings and Retirement Accumulation Plan.
The Company maintains two defined benefit plans for certain of its employees
in the United Kingdom and in France. The United Kingdom plan benefits are based
primarily on years of service and employee compensation. As of December 31,
1996, 1997 and 1998, the preliminary actuarially-determined accumulated benefit
obligation was $28.8 million, $29.1 million and $28.8 million, respectively,
with such amount being fully funded. The French plan benefits are based
primarily on length of employee service. As of December 31, 1996, 1997 and 1998,
the actuarially-determined accumulated benefit obligation was approximately $1.4
million, $1.8 million and $2.0 million, respectively, all of which was
non-vested. This plan is not funded. The aggregate net pension expense in 1996,
from the date of the USC Europe acquisition and full year 1997 and 1998, for
these two plans was approximately $0.2 million, $0.8 million and $1.3 million,
respectively.
(8) POST-RETIREMENT BENEFIT PLANS
The Company provides health and life insurance benefits for certain domestic
retired employees in connection with certain collective bargaining agreements.
The following presents the changes in the accumulated post-retirement
benefit obligations for the plan years ended December 31, 1997 and 1998 (000's
omitted):
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Accumulated post-retirement benefit
obligations at the beginning of the year $ 26,069 $ 29,533
Net increase (decrease) during the year
attributable to:
Service cost 406 424
Interest cost 1,994 1,907
Actuarial (gains)/losses 2,626 (1,731)
Benefits paid (1,562) (1,005)
-------- --------
Net increase (decrease) for the year 3,464 (405)
-------- --------
Accumulated post-retirement benefit
obligations at the end of the year $ 29,533 $ 29,128
======== ========
</TABLE>
The Company's post-retirement benefit plans currently are not funded. The
status of the plans at December 31, 1997 and 1998, is as follows (000's
omitted):
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Accumulated post-retirement benefit obligations:
Active employees $(11,793) $(11,477)
Retirees (17,740) (17,651)
-------- --------
Total accumulated post-retirement
benefit obligations (29,533) (29,128)
Unrecognized net loss 4,317 2,586
-------- --------
Net amount recognized $(25,216) $(26,542)
======== ========
</TABLE>
Net periodic post-retirement benefit costs for the Company's domestic
post-retirement benefit plans for the years ended December 31, 1996, 1997 and
1998, included the following components (000's omitted):
<TABLE>
<CAPTION>
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Service cost $ 388 $ 406 $ 424
Interest cost 1,851 1,994 1,907
Amortization of net loss -- 10 --
------ ------ ------
Net periodic post-retirement
benefit cost $2,239 $2,410 $2,331
====== ====== ======
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
post-retirement benefit obligation was 10% in 1996, 9% in 1997 and 8% in 1998,
declining to 7% by the year 1999 and remaining at that level thereafter. A one
percentage point increase in the assumed health care cost trend rate for each
year would increase the accumulated post-retirement benefit obligation as of
December 31, 1998 and 1997, by approximately $3.1 million and $3.0 million,
respectively, and the total of the service and interest cost components of net
post-retirement benefit cost for both of the years then ended by approximately
$0.3 million. A one percentage point decrease in the assumed health care cost
trend rate for each year would decrease the accumulated post-retirement benefit
obligation as of December 31, 1998 and 1997, by approximately $2.8 million and
$2.7 million, respectively, and the total of the service and interest cost
components of net post-retirement benefit cost for both of the years then ended
by approximately $0.3 million. The assumed discount rate used in determining the
accumulated post-retirement benefit obligation was 7.5%, 7.0% and 7.0%, in 1996,
1997 and 1998, respectively.
As of December 31, 1997 and 1998, the Company had recorded a liability of
$3.3 million and $3.4 million, respectively, for benefit obligations for which a
former executive was fully eligible to receive on a periodic payment basis
beginning August 1, 1998. The principal source of funding for this obligation is
an insurance policy on the executive's life for which the Company is currently
paying the premium.
25
<PAGE> 29
(9) COMMITMENTS AND CONTINGENCIES
Environmental
The processes involved in the lithography and certain aspects of the
manufacture of steel containers have historically involved the use and handling
of materials now classified as hazardous substances under various laws.
The Company has been named as a potentially responsible party ("PRP") for
costs incurred in the clean-up of a property located in San Leandro, California,
formerly a site of one of the Company's can assembly plants. The Company has
indemnified the owner of the property against this matter. Extensive soil and
groundwater investigative work has been preformed at this site. The Company does
not believe there is any on-site source of groundwater contamination.
Nevertheless, the Company has agreed to participate in a coordinated sampling
event in 1999 with other PRP's. To date, there is no resolution of this matter.
The Company acquired five aerosol can-making operations in Europe in 1996.
The Company conducted an audit (with assistance of an outside consultant) of the
sites but did no subsurface sampling. Certain of these operations are in
historically industrialized areas. Warranties were provided by the seller but
there can be no assurance that there are not unknown environmental liabilities.
As a PRP at various superfund sites in the U.S., the Company is or may be
legally responsible, jointly and severally with other members of the PRP group,
for the cost of remediation of these sites. Based on currently available data,
the Company believes its contribution, and/or the contribution of its
predecessors, to these sites was in most cases, de minimis.
The Company has established reserves in accordance with the policy described
in Note (2) to the Consolidated Financial Statements of $0.5 million for future
ascertainable costs of environmental remediation. Management does not believe
that such costs, if any, in excess of the reserve will have a material adverse
effect on the Company's results of operations or financial condition. In making
this assessment, the Company considered all information available to it
including its and other companies' reported prior experience in dealing with
such matters, data released by the EPA and reports by independent environmental
consultants regarding certain matters. The Company has made, and expects to
continue to make, significant capital expenditures to upgrade its facilities in
accordance with current and pending environmental regulations and administrative
proceedings.
Legal
An Administrative Law Judge of the National Labor Relations Board ("NLRB")
has issued a decision ordering the Company to pay $1.5 million in back pay, plus
interest, for a violation of certain sections of the National Labor Relations
Act as a result of the Company's closure of certain facilities in 1991 and
failure to offer inter-plant job opportunities to affected employees. The
Company has appealed this decision on the grounds, among others, that the
Company is entitled to a credit against this award for certain pension payments.
The Company believes its appeal will be successful and the claim will not exceed
the liability recorded.
The Company, including the European Subsidiaries, is involved in various
legal actions and administrative proceedings. Management is of the opinion that
their outcome will not have a material effect on the Company's financial
position or results of operations.
Purchase Commitments
As parts of its national lithography strategy, the Company is investing in
certain lithography process equipment with a foreign vendor. In an effort to
limit foreign exchange risk related to this purchase commitment, the Company
entered into a series of German Deutsch Mark/Dollar forward hedge contracts that
will not exceed $17 million payable in varying amounts throughout 1999 with a
final payment in February 2000.
Leases
The Company has entered into agreements to lease certain property under
terms which qualify as capital leases. Capital leases consist primarily of data
processing equipment and various production machinery and equipment. Most
capital leases contain renewal options and some contain purchase options. The
December 31, 1997 and 1998 capital lease asset balances were $37.8 million and
$31.7 million, net of accumulated amortization of $18.8 million and $20.4
million, respectively.
The Company also maintains operating leases on various plant and office
facilities, vehicles and office equipment. Rent expense under operating leases
for the years ended December 31, 1996, 1997 and 1998, was $9.2 million, $6.8
million and $6.8 million, respectively.
26
<PAGE> 30
At December 31, 1998, minimum payments due under these leases were as
follows (000's omitted):
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------ ------
<C> <C> <C>
1999 $ 5,077 $ 5,340
2000 3,032 4,377
2001 4,608 3,630
2002 4,245 2,927
2003 512 1,501
Thereafter 772 5,611
-------- --------
Total minimum lease payments 18,246 $ 23,386
========
Amount representing interest (2,735)
Present value of net minimum capital --------
lease payments $ 15,511
========
</TABLE>
(10) EQUITY INCENTIVE PLANS
The Company has various programs to provide incentives for management so as
to align management's interest with those of the Company's shareholders. These
plans are described in the following table:
<TABLE>
<CAPTION>
EXERCISE
NO. OF PRICE MAXIMUM
PLAN SHARES (PER SHARE) TERM
---- ------ ----------- ----
<S> <C> <C> <C>
1984 Incentive 240,000 Market 10 years
Stock Option Plan Price
1993/1994 Option 550,000 Market 10 years (4 year
Plans Price vesting)
Annual Stock (A) Market Price 1 year (Being
Purchase Plans less 15% eliminated after
discount 1999 plan year)
Equity Incentive 650,000 Market 10 years
Plan (Options, SAR's Price
Restricted Stock) (B)
1997 Equity 400,000 Market 7-10 years
Incentive Plan Price
1998 Equity 600,000 Market 10 years
Incentive Plan Price
</TABLE>
(A) Limited to 7.5% of each participating employee's salary. During 1996,
1997, and 1998, the Corporation issued common stock valued at $0.5 million, $0.7
million and $0.7 million, respectively, related to the Stock Purchase Plan.
(B) Incentive Stock Options ("ISOs") granted under the plan ranged in price
from $16.50 to $20.88 per share. Non-qualified stock options ("NSOs") were
issued at $18.75 per share.
No stock appreciation rights ("SARS") have been issued.
Restricted shares are dependent on continued employment and transferability
is limited, unless waived by the Board of Directors upon termination of
employment.
Restricted shares are charged to stockholders equity at their fair value
and amortized as expense on a straight line basis over the restriction period.
Shares awarded were: 1996: 67,000 shares or $1.1 million; 1997: 95,630 shares or
$1.4 million; 1998: 17,140 shares or $0.3 million. Amortization charges were
$0.5 million, $2.4 million and $1.7 million during 1996, 1997 and 1998,
respectively.
A summary of the status of the Company's stock option plans at December 31,
1996, 1997 and 1998, and changes during the years then ended, is presented in
the tables below:
<TABLE>
<CAPTION>
Options Outstanding Exercisable Options
Wtd. Avg. Wtd. Avg.
Exercise Exercise
Shares Price Shares Price
------ ----- ------ -----
<S> <C> <C> <C> <C>
January 1, 1996 956,792 $ 14.00 403,469 $ 11.48
Granted 83,897 14.56
Exercised (28,350) 16.94
Canceled (94,567) 17.21
--------- ---------
December 31, 1996 917,772 $ 13.63 744,499 $ 13.15
Granted 100,000 19.03
Exercised (12,000) 12.00
Canceled (129,272) 3.63
--------- ---------
December 31, 1997 876,500 $ 14.63 867,250 $ 14.59
Granted 916,750 16.91
Exercised (112,222) 12.01
Canceled (79,726) 17.38
--------- ---------
December 31, 1998 1,601,302 $ 15.93 820,280 $ 15.03
========= =========
</TABLE>
<TABLE>
<CAPTION>
Options Outstanding Exercisable Options
at December 31, 1998 at December 31, 1998
-------------------- --------------------
Wtd. Avg.
Remaining Wtd. Avg. Wtd. Avg.
Range of Contractual Exercise Exercise
Exercise Prices Shares Life (Years) Price Shares Price
- --------------- ------ ------------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
$ 8.00 to $15.75 363,500 3.0 $ 11.67 348,500 $ 11.57
$16.00 to $21.50 1,237,802 8.4 17.18 471,780 17.58
--------- ------- ---------
1,601,302 7.2 $ 15.93 820,280 $ 15.03
========= ======= =========
</TABLE>
Had compensation costs been determined on the fair value-based accounting
method for options granted in 1996, 1997 and 1998, pro forma net income (loss)
and diluted earnings (loss) per share would have been $11.0 million and $0.84,
respectively, for 1996, ($32.4) million and ($2.49), respectively, for 1997 and
($19.5) million and ($1.47), respectively, for 1998. As compensation costs for
options granted prior to January 1, 1996, were not remeasured for purposes of
this pro forma disclosure, such disclosure may not be representative of such
future pro forma disclosures.
The weighted-average estimated fair value of options granted during 1996,
1997 and 1998 was $2.42, $6.80 and $8.80, respectively. The fair value of each
option grant is determined on the date of grant using the Black-Scholes option
pricing model with the following weighted-aver-age assumptions for options
granted in 1996, 1997 and 1998, respectively; risk-free interest rate of 5.8%,
6.2% and 5.2%; expected lives of 6.3 years, 7.0 years and 8.9 years; expected
volatility of 35.4%, 28.3% and 33.1%; and no dividends for any year.
27
<PAGE> 31
(11) SHAREHOLDER RIGHTS PLAN / CHANGE OF CONTROL
On October 19, 1995, the Corporation's Board of Directors adopted a
Shareholder Rights Plan. The Board declared a distribution of one right (a
"Right") for each share of Common Stock, which was outstanding on October 19,
1995 (the "Record Date"). Each share of Common Stock issued after the Record
Date will be issued with an attached Right. The Rights will not immediately be
exercisable or detachable from the Common Stock. Rights will become exercisable
and detachable only following the acquisition by a person or a group of 15
percent or more of the outstanding Common Stock of U.S. Can Corporation or
following the announcement of a tender or exchange offer for 15 percent or more
of the outstanding Common Stock.
The Rights will, if they become exercisable, permit the holders of the
Rights to purchase a certain amount of preferred stock of the Corporation at a
50 percent discount, or to exchange the Rights for Common Stock, if the Board
permits. Where an acquiring company effects a merger or other control
transaction with the Corporation, the Rights may also entitle the holder to
acquire stock of the acquiring company at a 50 percent discount. If a person or
group acquires 15 percent or more of the Common Stock (or announces a tender or
exchange offer for 15 percent or more of the Common Stock), the acquiring
person's or group's Rights become void. In certain circumstances, the Rights may
be redeemed by the Company at an initial redemption price of $.01 per Right. If
not redeemed, the Rights will expire ten years after the Record Date.
In addition, the Company has adopted certain change of control protection
that, under certain circumstances, would increase compensation and benefits of
certain executive officers and other key managers.
(12) SEGMENTATION
The Company has established three segments by which management monitors and
evaluates business performance, customer base and market share. These segments
(Aerosol; Paint, Plastic & General Line and Custom & Specialty) have separate
management teams and distinct product lines.
The aerosol segment has two units: United States and International. The
segment produces steel aerosol containers for personal care, household,
automotive, paint and industrial products. The Paint, Plastic & General Line
segment produces round cans for paint and coatings, oblong cans for such items
as lighter fluid and turpentine as well as plastic containers for industrial and
consumer products. Custom & Specialty produces a wide array of functional and
decorative tins, containers and other products.
The accounting policies of the segments are the same as those described in
Note (1) to the Consolidated Financial Statements. No single customer accounted
for more than 10% of the Company's total net sales during 1996, 1997 or 1998.
Financial information relating to the Company's operations by geographic
area was as follows (000's omitted):
<TABLE>
<CAPTION>
UNITED
STATES EUROPE CONSOLIDATED
------------ ------------ ------------
<S> <C> <C> <C>
1996
- ----
Net sales $627,860 $ 32,763 $660,623
Identifiable assets 538,389 105,227 643,616
1997
- ----
Net sales $650,643 $105,032 $755,675
Identifiable assets 517,283 116,421 633,704
1998
- ----
Net sales $593,606 $116,640 $710,246
Identifiable assets 424,404 131,167 555,571
</TABLE>
The following is a summary of revenues from external customers, income
(loss) from operations, depreciation and amortization of capital leases and
identifiable assets for the years ended December 31, 1996, 1997 and 1998 (000's
omitted):
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
REVENUES FROM EXTERNAL CUSTOMERS:
Aerosol $ 425,881 $ 484,337 $ 471,323
Paint, Plastic, & General Line 164,453 186,509 164,050
Custom & Specialty 70,289 84,829 74,873
--------- --------- ---------
Total revenues $ 660,623 $ 755,675 $ 710,246
========= ========= =========
INCOME (LOSS) FROM OPERATIONS:
Aerosol $ 88,094 $ 80,647 $ 79,271
Paint, Plastic, & General Line 11,936 12,394 15,640
Custom & Specialty 8,523 6,823 10,972
Corporate and eliminations (a) (48,038) (105,971) (82,313)
--------- --------- ---------
Total income (loss)
from operations $ 60,515 $ (6,107) $ 23,570
========= ========= =========
CAPITAL SPENDING:
Aerosol $ 26,615 $ 34,150 $ 16,830
Paint, Plastic, & General Line 6,717 8,560 1,360
Custom & Specialty 6,127 7,270 547
Corporate 9,171 4,050 4,091
--------- --------- ---------
Total income
from operations $ 48,630 $ 54,030 $ 22,828
========= ========= =========
DEPRECIATION AND AMORTIZATION
OF CAPITAL LEASES:
Aerosol $ 17,722 $ 22,481 $ 21,126
Paint, Plastic, & General Line 4,474 6,051 5,649
Custom & Specialty 1,866 2,577 2,457
Corporate 3,730 3,611 1,053
--------- --------- ---------
Total depreciation and
amortization $ 27,792 $ 34,720 $ 30,285
========= ========= =========
IDENTIFIABLE ASSETS:
Aerosol $ 307,012 $ 317,555 $ 317,908
Paint, Plastic, & General Line 106,423 100,600 92,629
Custom & Specialty 84,002 93,972 73,019
Corporate 146,179 121,577 72,015
--------- --------- ---------
Total identifiable assets $ 643,616 $ 633,704 $ 555,571
========= ========= =========
</TABLE>
(a) Special charges are included in Corporate costs. Management does not
evaluate segment performance including such charges.
28
<PAGE> 32
(13) QUARTERLY FINANCIAL INFORMATION
The following is a summary of the unaudited interim results of operations for
each of the quarters in 1997 and 1998.
<TABLE>
<CAPTION>
FIRST QTR SECOND QTR THIRD QTR FOURTH QTR
1997 1998 1997 1998 1997 1998 1997 1998
--------------------- --------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET SALES $ 204,175 $ 192,363 $ 196,088 $ 183,473 $ 195,021 $ 177,920 $ 160,391 $ 156,490
SPECIAL CHARGES (a) -- -- -- -- 52,159 35,869 10,821 --
OPERATING INCOME (LOSS) 16,576 14,955 14,019 15,190 (37,393) (20,099) 691 13,524
INCOME (LOSS) FROM CONTINUING
OPERATIONS 3,854 3,082 2,366 3,805 (30,298) (17,358) (5,828) 2,946
NET INCOME (LOSS) $ 4,338 $ 3,082 $ 2,771 $ 3,805 $ (29,807) $ (25,886) $ (9,334) $ 2,946
===================== ===================== ==================== ====================
DILUTED EARNINGS (LOSS) PER SHARE $ 0.33 $ 0.23 $ 0.21 $ 0.28 $ (2.28) $ (1.94) $ (0.71) $ 0.22
===================== ===================== ==================== ====================
Weighted average shares and equivalent
shares outstanding (000's) 13,155 13,257 13,163 13,401 13,092 13,325 13,129 13,443
</TABLE>
(a) See Note 3 to the Consolidated Financial Statements.
29
<PAGE> 33
(14) SUBSIDIARY GUARANTOR INFORMATION
The 10 1/8% Notes are guranteed on a full, unconditional,
unsecured, senior subordianted, joint and several basis by each of the
Corporation's Subsidiary Guarantors. As of and through December 31, 1998, U.S.
Can, wholly owned by the corporation, was the only Subsidiary Guarantor. The
Corporation had no assets or operations separate from its investment in U.S.
Can, and there were no Non-Guarantor Subsidiaries until the acquisition by U.S.
Can of USC Europe on September 11, 1996. Separate financial statements of U.S.
Can are not presented because management of the Company has determined that they
are not material to investors.
The following condensed consolidating financial data illustrates the
composition of the Corporation (the "Parent"), U.S. Can (the "Subsidiary
Guarantor"), and the European Subsidiaries (the "Non-Guarantor Subsidiaries"),
as of and for the years ended December 31, 1996, 1997, and 1998. Investments in
subsidiaries are accounted for by the Parent and the Subsidiary Guarantor under
the equity method for purposes of the supplemental consolidating presentation.
Earnings of subsidiaries are, therefore, reflected in their parent's investment
accounts and earnings.
30
<PAGE> 34
US CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
(000's omitted)
<TABLE>
<CAPTION>
UNITED STATES CAN
U.S. CAN COMPANY USC EUROPE(NON U.S. CAN
CORPORATION (SUBSIDIARY GUARANTOR CORPORATION
(PARENT) GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES $ -- $ 593,606 $ 116,640 $ -- $ 710,246
COST OF SALES -- 513,886 104,270 -- 618,156
---------- ---------- --------- --------- ----------
Gross income -- 79,720 12,370 -- 92,090
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES -- 26,183 6,468 -- 32,651
SPECIAL CHARGES -- 35,869 -- -- 35,869
---------- ---------- --------- --------- ----------
Operating income -- 17,668 5,902 -- 23,570
INTEREST EXPENSE ON BORROWINGS -- 30,582 2,600 -- 33,182
AMORTIZATION OF DEFERRED FINANCING COSTS -- 1,753 -- 1,753
OTHER EXPENSES -- 1,822 -- -- 1,822
EQUITY EARNINGS (LOSS) SUBSIDIARY (16,053) 2,048 -- 14,005 --
PROVISION (BENEFIT) FOR INCOME TAXES -- (6,916) 1,254 -- (5,662)
NET LOSS FROM DISCONTINUED OPERATIONS -- (8,528) -- -- (8,528)
---------- ---------- --------- --------- ----------
NET INCOME (LOSS) $ (16,053) $ (16,053) $ 2,048 $ 14,005 $ (16,053)
========== ========== ========= ========= ==========
</TABLE>
31
<PAGE> 35
U.S.CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(000'S OMITTED)
<TABLE>
<CAPTION>
UNITED STATES CAN
U.S. CAN COMPANY USC EUROPE(NON U.S. CAN
CORPORATION (SUBSIDIARY GUARANTOR CORPORATION
(PARENT) GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES $ -- $ 650,643 $ 105,032 $ -- $ 755,675
COST OF SALES -- 569,292 96,463 -- 665,755
---------- ---------- --------- --------- ----------
Gross income -- 81,351 8,569 -- 89,920
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES -- 28,784 4,263 -- 33,047
SPECIAL CHARGES -- 62,980 -- -- 62,980
---------- ---------- --------- --------- ----------
Operating income (loss) -- (10,413) 4,306 -- (6,107)
INTEREST EXPENSE ON BORROWINGS -- 34,869 1,998 -- 36,867
AMORTIZATION OF DEFERRED FINANCING COSTS -- 1,738 -- 1,738
OTHER EXPENSES -- 1,986 -- -- 1,986
EQUITY EARNINGS (LOSS) SUBSIDIARY (32,032) 1,312 -- 30,720 --
PROVISION (BENEFIT) FOR INCOME TAXES -- (17,788) 996 -- (16,792)
NET LOSS FROM DISCONTINUED OPERATIONS -- 1,078 -- -- 1,078
NET INCOME FROM DISCONTINUATION OF BUSINESS -- (3,204) -- -- (3,204)
---------- ---------- --------- --------- ---------
NET INCOME (LOSS) $ (32,032) $ (32,032) $ 1,312 $ 30,720 $ (32,032)
========== ========== ========= ========= =========
</TABLE>
32
<PAGE> 36
U.S.CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(000'S OMITTED)
<TABLE>
<CAPTION>
UNITED STATES CAN
U.S. CAN COMPANY USC EUROPE(NON U.S. CAN
CORPORATION (SUBSIDIARY GUARANTOR CORPORATION
(PARENT) GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES $ -- $ 627,860 $ 32,763 $ -- $ 660,623
COST OF SALES -- 541,167 30,500 -- 571,667
--------- --------- --------- --------- ---------
Gross income -- 86,693 2,263 -- 88,956
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES -- 27,153 1,288 -- 28,441
SPECIAL CHARGES -- -- -- -- --
--------- --------- --------- --------- ---------
Operating income (loss) -- 59,540 975 -- 60,515
INTEREST EXPENSE ON BORROWINGS -- 28,159 228 -- 28,387
AMORTIZATION OF DEFERRED FINANCING COSTS -- 1,518 -- -- 1,518
OTHER EXPENSES -- 1,851 (63) -- 1,788
EQUITY EARNINGS (LOSS) SUBSIDIARY 11,751 511 -- (12,262) --
PROVISION (BENEFIT) FOR INCOME TAXES -- 11,968 299 -- 12,267
NET LOSS FROM DISCONTINUED OPERATIONS -- 446 -- -- 446
NET INCOME FROM DISCONTINUATION OF BUSINESS -- (5,250) -- -- (5,250)
--------- --------- --------- --------- ---------
NET INCOME (LOSS) $ 11,751 $ 11,751 $ 511 $ (12,262) $ 11,751
========= ========= ========= ========= =========
</TABLE>
33
<PAGE> 37
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
FOR THE YEAR ENDED DECEMBER 31, 1998
(000's OMITTED)
<TABLE>
<CAPTION>
UNITED STATES
U.S. CAN CAN COMPANY USC EUROPE U.S. CAN
CORPORATION (SUBSIDIARY) (NON-GUARANTOR CORPORATION
(PARENT) GUARANTOR SUBSIDIARIES) ELIMINATIONS CONSOLIDATED
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ - $ 9,408 $ 8,664 $ - $ 18,072
Accounts receivable - 41,461 22,281 - 63,742
Inventories - 74,965 19,922 - 94,887
Prepaid expenses and other assets - 35,856 3,089 - 38,945
--------- ---------- -------- ---------- --------
Total current assets - 161,690 53,956 - 215,646
NET PROPERTY, PLANT AND EQUIPMENT - 197,677 70,325 - 268,002
INTANGIBLE ASSETS - 51,928 - - 51,928
OTHER ASSETS 270,587 6,847 6,886 (264,325) 19,995
INVESTMENT IN SUBSIDIARIES 40,383 53,144 - (93,527) -
--------- ---------- -------- ---------- --------
Total assets $310,970 $ 471,286 $131,167 $(357,852) $555,571
========= ========== ======== ========== ========
CURRENT LIABILITIES
Current maturities of long-term debt $ - $ 3,922 $ 2,809 $ - $ 6,731
Accounts payable - 37,089 15,228 - 52,317
Other current liabilities - 67,735 12,751 - 80,486
--------- ---------- -------- ---------- --------
Total current liabilities - 108,746 30,788 - 139,534
SENIOR DEBT 19,134 26,483 - 45,617
SUBORDINATED DEBT 264,325 264,325 - (264,325) 264,325
OTHER LONG-TERM LIABILITIES - 51,656 4,262 - 55,918
INTERCOMPANY ADVANCES (3,532) (12,958) 16,490 - -
STOCKHOLDERS' EQUITY 50,177 40,383 53,144 (93,527) 50,177
--------- ---------- -------- ---------- --------
Total liabilities and stockholders' equity $310,970 $ 471,286 $131,167 $(357,852) $555,571
========= ========== ======== ========== ========
</TABLE>
34
<PAGE> 38
US CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
FOR THE YEAR ENDED DECEMBER 31, 1997
(000s OMITTED)
<TABLE>
<CAPTION>
UNITED STATES
U.S. CAN CAN COMPANY USC EUROPE U.S. CAN
CORPORATION (SUBSIDIARY) (NON-GUARANTOR CORPORATION
(PARENT) GUARANTOR SUBSIDIARIES) ELIMINATIONS CONSOLIDATED
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ - $ 415 $ 6,358 $ - $ 6,773
Accounts receivable - 53,559 20,578 - 74,137
Inventories - 93,028 16,430 - 109,458
Prepaid expenses and other assets - 36,652 3,599 - 40,251
-------- -------- -------- ---------- --------
Total current assets - 183,654 46,965 - 230,619
NET PROPERTY, PLANT AND EQUIPMENT - 256,464 67,833 - 324,297
INTANGIBLE ASSETS - 59,578 - - 59,578
OTHER ASSETS 282,347 10,240 1,623 (275,000) 19,210
INVESTMENT IN SUBSIDIARIES 60,962 48,646 - (109,608) -
-------- -------- -------- ---------- --------
Total assets $343,309 $558,582 $116,421 $(384,608) $633,704
======== ======== ======== ========== ========
CURRENT LIABILITIES
Current maturities of long-term debt $ - $ 6,817 $ 2,818 $ - $ 9,635
Accounts payable - 42,155 16,331 - 58,486
Other current liabilities - 73,480 8,247 - 81,727
-------- -------- -------- ---------- --------
Total current liabilities - 122,452 27,396 - 149,848
SENIOR DEBT - 61,850 29,656 - 91,506
SUBORDINATED DEBT 275,000 275,000 - (275,000) 275,000
OTHER LONG-TERM LIABILITIES - 52,031 3,006 - 55,037
INTERCOMPANY ADVANCES 5,996 (13,713) 7,717 - -
STOCKHOLDERS' EQUITY 62,313 60,962 48,646 (109,608) 62,313
-------- -------- -------- ---------- --------
Total liabilities and stockholders' equity $343,309 $558,582 $116,421 $(384,608) $633,704
======== ======== ======== ========== ========
</TABLE>
35
<PAGE> 39
'
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31,1998
(000s omitted)
<TABLE>
<CAPTION>
UNITED STATES
US CAN CAN COMPANY USC EUROPE US CAN
CORPORATION (SUBSIDIARY) (NON-GUARANTOR CORPORATION
(PARENT) GUARANTOR SUBSIDIARIES) ELIMINATIONS CONSOLIDATED
------------ ------------ -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ -- $ 54,913 $ 10,050 $ -- $ 64,963
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (17,266) (5,562) -- (22,828)
Acquisition of businesses, net of cash acquired -- -- -- -- --
Proceeds on sale of businesses -- 28,296 -- -- 28,296
Proceeds from sale of property -- 6,578 23 -- 6,601
Investment in Formametal S.A -- -- (3,000) -- (3,000)
-------- -------- -------- -------- --------
Net cash used in investing activities -- 17,608 (8,539) -- 9,069
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock and exercise of stock options 1,658 (3,000) 3,000 -- 1,658
Changes in intercompany advances 10,747 (10,747) -- -- --
Borrowings (payments) under the revolving line of
credit and changes in cash overdrafts -- (36,770) -- -- (36,770)
Repurchase of 10 1/8% Notes (10,675) -- -- -- (10,675)
Borrowings of other long-term debt, including
capital lease obligations -- -- -- -- --
Payments of other long-term debt, including
capital lease obligations (13,011) (2,607) (15,618)
Purchase of treasury stock, net (1,730) -- -- -- (1,730)
-------- -------- -------- -------- --------
Net cash provided by financing activities -- (63,528) 393 -- (63,135)
-------- -------- -------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH -- -- 402 -- 402
-------- -------- -------- -------- --------
INCREASE IN CASH AND CASH EQUIVALENTS -- 8,993 2,306 -- 11,299
CASH AND CASH EQUIVALENTS, beginning of year -- 415 6,358 -- 6,773
-------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS, end of year $ -- $ 9,408 $ 8,664 $ -- $ 18,072
======== ======== ======== ======== ========
</TABLE>
36
<PAGE> 40
US CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
(000s omitted)
<TABLE>
<CAPTION>
UNITED STATES
US CAN CAN COMPANY USC EUROPE US CAN
CORPORATION (SUBSIDIARY) (NON-GUARANTOR CORPORATION
(PARENT) GUARANTOR SUBSIDIARIES) ELIMINATIONS CONSOLIDATED
------------ ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ -- $ 65,035 $ (973) $-- $ 64,062
-------- -------- -------- ---- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (36,122) (17,908) -- (54,030)
Acquisition of businesses, net of
cash acquired -- (12,398) -- -- (12,398)
Proceeds on sale of business -- 1,000 -- -- 1,000
Proceeds from sale of property -- -- 630 -- 630
-------- -------- -------- ---- --------
Net cash used in investing
activities -- (47,520) (17,278) -- (64,798)
-------- -------- -------- ---- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock and
exercise of stock options 152 -- -- -- 152
Changes in intercompany advances 1,027 4,629 (5,656) -- --
Net borrowings under the revolving
line of credit and changes in cash
overdrafts -- 1,931 -- -- 1,931
Borrowings of other long-term debt,
including capital lease obligations -- (1,086) 26,021 -- 24,935
Payments of other long-term debt,
including capital lease obligations -- (21,628) (724) -- (22,352)
Payments of debt refinancing costs -- (1,574) -- -- (1,574)
Purchase of treasury stock, net (1,179) -- -- -- (1,179)
-------- -------- -------- ---- --------
Net cash provided by financing
activities -- (17,728) 19,641 -- 1,913
-------- -------- -------- ---- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH -- -- (2,370) -- (2,370)
-------- -------- -------- ---- --------
INCREASE IN CASH AND CASH EQUIVALENTS -- (213) (980) -- (1,193)
CASH AND CASH EQUIVALENTS, beginning of year -- 628 7,338 -- 7,966
-------- -------- -------- ---- --------
CASH AND CASH EQUIVALENTS, end of year $ -- $ 415 $ 6,358 $-- $ 6,773
======== ======== ======== ==== ========
</TABLE>
37
<PAGE> 41
US CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
(000's omitted)
<TABLE>
<CAPTION>
UNITED STATES
US CAN CAN COMPANY USC EUROPE US CAN
CORPORATION (SUBSIDIARY) (NON-GUARANTOR CORPORATION
(PARENT) GUARANTOR SUBSIDIARIES) ELIMINATIONS CONSOLIDATED
----------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ -- $ 26,274 $ 3,986 $-- $ 30,260
--------- --------- --------- --- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (38,294) (10,336) -- (48,630)
Acquisition of businesses, net of cash acquired -- (29,655) (51,239) -- (80,894)
Proceeds on sale of business -- 1,455 -- -- 1,455
Proceeds from sale of property -- 1,515 -- -- 1,515
--------- --------- --------- --- ---------
Net cash used in investing activities -- (64,979) (61,575) -- (126,554)
--------- --------- --------- --- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock and exercise of
stock options 18 (51,100) 51,100 -- 18
Changes in intercompany advances (274,785) 261,412 13,373 -- --
Net borrowings under the revolving line of credit
and changes in cash overdrafts -- (25,052) -- -- (25,052)
Issuance of 10 1/8% Notes 275,000 -- -- -- 275,000
Borrowings of other long-term debt, including
capital lease obligations -- 14,247 -- -- 14,247
Payments of other long-term debt, including
capital lease obligations -- (151,051) (101) -- (151,152)
Payments of debt refinancing costs -- (9,259) -- -- (9,259)
Purchase of treasury stock, net (233) -- -- -- (233)
--------- --------- --------- --- ---------
Net cash provided by financing activities -- 39,197 64,372 -- 103,569
--------- --------- --------- --- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH -- -- 555 -- 555
--------- --------- --------- --- ---------
INCREASE IN CASH AND CASH EQUIVALENTS -- 492 7,338 -- 7,830
CASH AND CASH EQUIVALENTS, beginning of year -- 136 -- -- 136
--------- --------- --------- --- ---------
CASH AND CASH EQUIVALENTS, end of year $ -- $ 628 $ 7,338 $-- $ 7,966
========= ========= ========= === =========
</TABLE>
38
<PAGE> 42
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference to "Election of Directors," "Executive
Officers and Directors" and "Section 16 (a) Beneficial Ownership Reporting
Compliance" in the Corporation's 1999 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to "Executive Officers and Directors -
Compensation of Directors," "Executive Compensation" and "Compensation Committee
Interlocks and Insider Participation" in the Corporation's 1999 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to "Principal Stockholders" in the
Corporation's 1999 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements commence on p.15.
(2) Financial Statement Schedules
All schedules are omitted as they are inapplicable or not
required, or the required information is included in the
financial statements or in the notes thereto.
(3) Exhibits:A list of Exhibits is included in the Exhibit Index,
which appears following the signature pages and incorporated
by reference herein.
The Company agrees that, upon request, it will furnish a copy of any
instrument with respect to long-term debt less than or equal to 10 percent of
its total consolidated assets.
(b) No reports on Form 8-K were filed by the Corporation during the
fourth quarter of 1998.
39
<PAGE> 43
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on March 30, 1999.
U.S. CAN CORPORATION
By: /s/ Paul W. Jones
----------------------------------
Paul W. Jones
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities indicated
on March 30, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Paul W. Jones Chairman of the Board, President and Chief Executive
- ----------------------------------------- Officer
Paul W. Jones
/s/ John L. Workman Executive Vice President and Chief Financial
- ----------------------------------------- Officer
John L. Workman
/s/ John R. McGowan Vice President and Controller
- -----------------------------------------
John R. McGowan
/s/ Calvin W. Aurand, Jr. Director
- -----------------------------------------
Calvin W. Aurand, Jr.
/s/ Benjamin F. Bailar Director
- -----------------------------------------
Benjamin F. Bailar
/s/ Carl Ferenbach Director
- -----------------------------------------
Carl Ferenbach
/s/ Ricardo Poma Director
- -----------------------------------------
Ricardo Poma
/s/ Francisco A. Soler Director
- -----------------------------------------
Francisco A. Soler
/s/ Louis B. Susman Director
- -----------------------------------------
Louis B. Susman
</TABLE>
40
<PAGE> 44
EXHIBIT INDEX
Incorporation by Reference
to the Exhibit Number
Listed Below in the
Exhibit Description Filing Reference Below
- ------- ----------- --------------------------
3.1 Restated Certificate of (a)4.3
Incorporation
3.2 By-Laws (b)4.1
4.1 Indenture for 10-1/8 Notes (c)4.2
4.2 Amended and Restated Credit (d)4.1
Agreement
4.3 Amendment No. 1 to Credit Agreement (e)10.3
4.4 Amendment No. 2 to Credit Agreement (f)4.4
4.5 Amendment No. 3 to Credit Agreement (g)10.1
4.6 Amendment No. 4 to Credit Agreement (g)10.5
4.7 Shareholder Rights Agreement (h)4.1
10.1 Commerce, CA Sublease Agreement, (i)10.10
dated 2/10/89
10.2 Weirton, WV Lease, dated 1/1/76, as (i)10.11
amended
10.3 Burns Harbor, IN Lease, dated (j)10.12
12/5/87
10.4 Voghera, Italy lease (English (k)10.6
translation)
10.5 Baltimore, MD (paint can plant) (j)10.23
Lease, dated 10/24/91
10.6 William J. Smith Nonqualified (l)10.31
Supplemental Benefit Plan*
10.7 Stockholders Agreement (m)10.25
<PAGE> 45
Incorporation by Reference
to the Exhibit Number
Listed Below in the
Exhibit Description Filing Reference Below
- ------- ----------- --------------------------
10.8 Frank J. Galvin Employment (m)10.29
Agreement, dated 3/26/93*
10.9 Amendment No. 4 to Weirton, WV Lease (n)10.30
10.10 Amendment, dated 9/1/94, to Burns (n)10.31
Harbor Lease
10.11 Merthyr Tydfil, Wales Lease (k)10.24
10.12 Nonqualified Supplemental 401(k) (o)10.33
Plan*
10.13 Nonqualified Benefit Replacement (o)10.34
Plan*
10.14 Frank J. Galvin Amended and (g)10.2
Restated Change-in-Control
Agreement*
10.15 Amendment No. 1 to Frank J. Galvin (o)10.44
Employment Agreement*
10.16 Amendment No. 1 to Burns Harbor, IN (o)10.48
Lease
10.17 Amendment No. 3 to Burns Harbor, IN (o)10.49
Lease
10.18 Amendment No. 1 to Baltimore, MD (o)10.51
(paint can plant) Lease
10.19 Baltimore, MD (Columbia Specialty (o)10.52
plant) Lease Agreement, dated 5/6/94
10.20 Amendment No. 3 to Weirton, WV (o)10.55
Lease Agreement
10.21 Newnan, GA Lease (c)10.3
10.22 Alliance, OH Lease (c)10.4
<PAGE> 46
Incorporation by Reference
to the Exhibit Number
Listed Below in the
Exhibit Description Filing Reference Below
- ------- ----------- --------------------------
10.23 Salomon Smith Barney Engagement (f)10.49
Letter, dated 1/30/98
10.24 David R. Ford Change-in-Control (f)10.51
Agreement*
10.25 Salomon Brothers Inc (a predecessor (j)10.1
to Salomon Smith Barney)
indemnification agreement, dated
7/9/97
10.26 Lawrence T. Messina Employment (f)10.59
Agreement, dated 5/1/97*
10.27 Amendment, dated 11/17/97, to Frank (f)10.61
J. Galvin Employment Agreement*
10.28 Paul W. Jones Employment Agreement, (p)10.1
dated 4/1/98*
10.29 William J. Smith Resignation (g)10.3
Agreement, dated 7/2/98
10.30 Executive Deferred Compensation
Plan*
10.31 Lawrence T. Messina
Change-in-Control Agreement*
10.32 Amendment, dated 8/31/98, to
Lawrence T. Messina
Change-in-Control Agreement*
10.33 John L. Workman offer letter, dated
7/798*
10.34 David R. Ford Service Agreement,
dated as of 11/24/97*
<PAGE> 47
<TABLE>
<CAPTION>
Exhibit Description Incorporation by Reference
- ------- ----------- --------------------------
<S> <C> <C>
10.35 1998 Equity Incentive Plan*
10.36 1995 Equity Incentive Plan* (r)Exhibit A
10.37 1997 Equity Incentive Plan* (f)10.50
10.38 1993 Stock Option Plan* (q)10.28
10.39 1984 Incentive Stock Option Plan* (i)10.20
21.1 Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule (EDGAR
version only)
</TABLE>
* Management contract or compensatory plan or arrangement.
a. Previously filed on June 1, 1994, with Form S-3 Registration Statement
of the Company (No. 33-79556).
b. Previously filed on March 23, 1994, with Form S-8 Registration
Statement of the Company (No. 33-76742).
c. Previously filed with Form 10-Q for the quarter ended
September 29, 1996.
d. Previously filed with Form 10-Q for the quarter ended March 31, 1996.
e. Previously filed with Form 10-Q for the quarter ended July 2, 1995.
f. Previously filed with Form 10-K for the year ended December 31, 1997.
g. Previously filed with Form 10-Q for the quarter ended October 4, 1998.
h. Previously filed with Form 10-Q for the quarter ended October 1, 1995.
i. Previously filed with Form 10-Q for the quarter ended April 6, 1997.
j. Previously filed with Form 10-Q for the quarter ended October 5, 1997.
<PAGE> 48
k. Previously filed with Form 10-K for the year ended December 31, 1996.
l. Previously filed on January 6, 1993, with Form S-1 Registration
Statement of the Company (No. 33-56804).
m. Previously filed with U.S. Can Form 10-K for the year ended
December 31, 1992.
n. Previously filed with Form 10-K for the year ended December 31, 1994.
o. Previously filed with Form 10-K for the year ended December 31, 1995.
p. Previously filed with Form 10-Q for the quarter ended April 5, 1998.
q. Previously filed on August 9, 1996, with Form 8-K.
r. Previously filed with the 1995 Proxy Statement.
<PAGE> 1
EXHIBIT 10.30
U. S. CAN CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C> <C> <C>
SECTION 1
General................................................................................................ -1-
1.1. Purpose......................................................................... -1-
1.2. Effective Date.................................................................. -1-
1.3. Related Companies and Employers................................................. -1-
1.4. Administration.................................................................. -1-
1.5. Plan Year....................................................................... -1-
1.6. Applicable Laws................................................................. -1-
1.7. Gender and Number............................................................... -2-
1.8. Notices......................................................................... -2-
1.9. Form and Time of Elections...................................................... -2-
1.10. Evidence........................................................................ -2-
1.11. Action by Employers............................................................. -2-
SECTION 2
Participation.......................................................................................... -2-
2.1. Participant..................................................................... -2-
2.2. Deferral Election............................................................... -2-
2.3. Plan Not Contract of Employment................................................. -3-
SECTION 3
Plan Accounting........................................................................................ -4-
3.1. Accounts........................................................................ -4-
3.2. Adjustment of Accounts.......................................................... -4-
3.3. Crediting of Stock Units Under Deferral Elections............................... -4-
3.4. Crediting of Matching Stock Units............................................... -5-
3.5. Crediting of Dividends.......................................................... -5-
3.6. Statement of Accounts........................................................... -5-
SECTION 4
Distributions ......................................................................................... -5-
4.1. General......................................................................... -5-
4.2. Distribution Election........................................................... -6-
4.4. Designation of Beneficiary...................................................... -6-
4.5. Distributions to Disabled Persons............................................... -6-
4.6. Benefits May Not be Assigned.................................................... -7-
</TABLE>
-ii-
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
4.7. No Rights as Shareholder........................................................ -7-
4.8. Offset.......................................................................... -7-
SECTION 5
Change in Control...................................................................................... -7-
5.1. Distribution on Change in Control............................................... -7-
5.2. Change in Control Definition.................................................... -7-
SECTION 6
Source of Benefit Payments ............................................................................ -7-
6.1. Liability for Benefit Payments.................................................. -7-
6.2. No Guarantee.................................................................... -8-
SECTION 7
Committee.............................................................................................. -8-
7.1. Powers of Committee............................................................. -8-
7.2. Delegation by Committee......................................................... -8-
7.3. Information to be Furnished to Committee........................................ -8-
7.4. Liability and Indemnification................................................... -8-
SECTION 8
Amendment and Termination.............................................................................. -9-
</TABLE>
-iii-
<PAGE> 4
U. S. CAN CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
SECTION 1
General
1.1. Purpose. The U. S. Can Corporation Executive Deferred Compensation
Plan (the "Plan") has been established by U. S. Can Corporation (the "Company")
so that it, and each of the Related Companies which, with the consent of the
Company, adopts the Plan may provide tax planning benefits for eligible
executives by permitting the executives to reduce the amount of their current
taxable income and defer the income inclusion event until a specified future
date. The Plan also allows the participating executives to obtain additional
equity interests in the Company. The Plan represents an unsecured, unfunded
promise by the Company and the Related Companies to pay certain benefits to
participating executives, and is maintained solely for the benefit of a select
group of management and highly compensated employees within the meaning of
sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
1.2. Effective Date. The "Effective Date" of the Plan is January 1,
1998.
1.3. Related Companies and Employers. The term "Related Company" means
any company during any period in which it owns at least fifty percent of the
voting power of all classes of stock of the Company entitled to vote, and any
company during any period in which at least fifty percent of the voting power of
all classes entitled to vote is owned, directly or indirectly, by the Company or
by any other company that is a Related Company by reason of its ownership of
stock of the Company. The Company and each Related Company which, with the
consent of the Company, adopts the Plan for the benefit of its eligible
employees are referred to below collectively as the "Employers" and individually
as an "Employer".
1.4. Administration. The authority to control and manage the operation
and administration of the Plan shall be vested in the Compensation and
Management Development Committee (the "Committee") of the Board of Directors of
the Company. In controlling and managing the operation and administration of the
Plan, the Committee shall have the rights, powers and duties set forth in
Section 7. Responsibility for the day-to-day administration of the Plan shall be
vested in one or more officers of the Company designated by the Committee as the
"Plan Administrator" for the Plan.
1.5. Plan Year. The term "Plan Year" means the calendar year.
<PAGE> 5
1.6. Applicable Laws. The Plan shall be construed and administered in
accordance with the laws of the State of Illinois to the extent that such laws
are not preempted by the laws of the United States of America.
1.7. Gender and Number. Where the context admits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
1.8. Notices. Any notice or document required to be filed with the Plan
Administrator or the Committee under the Plan will be properly filed if
delivered or mailed by registered mail, postage prepaid, to the Plan
Administrator, in care of the Company, at its principal executive offices. The
Plan Administrator may, by advance written notice to affected persons, revise
such notice procedure from time to time. Any notice required under the Plan may
be waived by the person entitled to notice.
1.9. Form and Time of Elections. Unless otherwise specified herein,
each election required or permitted to be made by any Participant or other
person entitled to benefits under the Plan, and any permitted modification or
revocation thereof, shall be in writing filed with the Plan Administrator at
such times, in such form, and subject to such restrictions and limitations as
the Plan Administrator shall require.
1.10. Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
1.11. Action by Employers. Any action required or permitted to be taken
by any Employer shall be by resolution of its Board of Directors, or by a duly
authorized officer of the Employer.
SECTION 2
Participation
2.1. Participant. Any employee of an Employer who is designated by the
Committee, in its sole discretion, as an "Eligible Executive" may elect to
become a "Participant" in the plan, subject to the terms of the Plan. The
Committee shall designate as Eligible Executives only those employees of an
Employer who are members of a select group of management and highly compensated
employees for purposes of sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.
2.2. Deferral Election. An Eligible Executive shall participate in the
Plan by electing to defer payment of up to 25% of his annual cash bonus (if any)
under the U.S. Can
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<PAGE> 6
Management Incentive Plan (the "MIP") pursuant to the terms of a "Deferral
Election". An individual's Deferral Election shall be subject to the following:
(a) An individual who, prior to the beginning of any Plan Year,
has been designated an Eligible Executive for the Plan Year
shall be eligible to file a Deferral Election with respect
to his annual MIP bonus for that Plan Year. Such Deferral
Election shall be filed prior to June 30 of the taxable year
for which the annual MIP bonus is payable, in such form as
the Plan Administrator prescribes.
(b) An individual who, prior to the beginning of any Plan Year,
has not satisfied the requirements of an Eligible Executive
for the Plan Year, but who becomes an Eligible Executive
during the Plan Year, shall be eligible to file a Deferral
Election with respect to his annual MIP bonus for that Plan
Year. Such Deferral Election shall be filed within thirty
days (or such shorter period as may be specified by the Plan
Administrator) after he first becomes an Eligible Executive
for the year, but in all cases, prior to the tax year in
which such bonus is paid.
(c) If the Plan first becomes effective with respect to the
employees of any Employer during any Plan Year, and an
employee of that Employer becomes an Eligible Executive on
the date the Plan becomes effective, such employee shall be
eligible to file a Deferral Election with respect to his
annual MIP bonus for that Plan Year. Such Deferral Election
shall be filed within thirty days (or such shorter period as
may be specified by the Plan Administrator) after the date
the Plan becomes effective, but in all cases, prior to the
tax year in which such bonus is paid.
(d) Notwithstanding the foregoing, for the 1998 MIP bonus (if
any) to be paid in 1999, an Eligible Executive shall be
eligible to file a Deferral Election with respect to his
annual MIP bonus for 1998, provided that the Deferral
Election shall be filed prior to December 22, 1998.
(e) The terms of a Deferral Election shall be subject to any
conditions and limitations that may be imposed by the Plan
Administrator. Except as otherwise provided in this
subsection 2.2, a Deferral Election shall be irrevocable for
the Plan Year to which it applies.
(f) The Committee may revoke an individual's Deferral Election
as of the date on which the individual ceases to meet the
criteria of subsection 2.1.
(g) Each Deferral Election shall be automatically revoked as of
the date on which a Change in Control (as defined in
subsection 5.2) occurs, and no new Deferral Election shall
be accepted for any date after the date of a Change in
Control.
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<PAGE> 7
(h) Subject to the terms of the Plan, the Participant shall
specify, as part of his Deferral Election, and in accordance
with subsection 4.2, the time and form of distribution of
the amounts deferred pursuant to such election.
2.3. Plan Not Contract of Employment. The Plan does not constitute a
contract of employment, and participation in the Plan will not give any employee
the right to be retained in the employ of any Employer nor any right or claim to
any benefit under the Plan, unless such right or claim has specifically accrued
under the terms of the Plan.
SECTION 3
Plan Accounting
3.1. Accounts. The Plan Administrator shall establish one or more
Accounts for each Participant who has filed a Deferral Election for purposes of
recording the amount of the Participant's bonus deferrals and the Stock Units
credited to him on account of such bonus deferrals. For purposes of the Plan,
"Stock Units" shall mean an unfunded obligation on the part of the Company to
pay to the Participant, at the time specified in the Deferral Election and in
this plan document, a number of shares of Company common stock equal to the
number of Stock Units credited to the Participant's Account. If a Participant is
employed by more than one Employer in any Plan Year, and his annual MIP bonus
otherwise payable from such Employers is reduced pursuant to the Plan, a
separate Account shall be established for the Participant with respect to the
bonus deferrals for the Plan Year from each such Employer.
3.2. Adjustment of Accounts. Each Account shall be adjusted in
accordance with this Section 3 in a uniform, non-discriminatory manner, as of
such periodic "Accounting Dates" as may be determined by the Plan Administrator
from time to time (which Accounting Dates shall be not less frequent than
quarterly). As of each Accounting Date, the balance of each Account shall be
adjusted as follows:
(a) first, charge to the Account balance the number of Stock
Units used for any distributions under the Plan with respect
to that Account that have not previously been charged;
(b) then, credit to the Account balance the number of Stock
Units attributable to bonus deferrals to be credited to that
Account in accordance with subsection 3.3 that have not
previously been credited;
(c) then, credit to the Account balance the number of Matching
Stock Units (defined in subsection 3.4) to be credited to
that Account in accordance with subsection 3.4 that have not
previously been credited;
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<PAGE> 8
(d) then, credit to the Account balance the number of Stock
Units to be credited due to dividend payments in accordance
with subsection 3.5 that have not previously been credited.
3.3. Crediting of Stock Units Under Deferral Elections. A Participant's
Account for any Plan Year shall be credited with Stock Units in an amount equal
to the amount by which his annual MIP bonus for the year is reduced pursuant to
a Deferral Election, in the manner described in the next sentence. The number of
Stock Units credited to the Participant's Account shall be equal to the MIP
bonus amount which has been deferred for that year divided by the closing market
price per share for Company common stock on the date the bonus would otherwise
have been paid. Such crediting shall occur as of the date on which the bonus
would otherwise have been paid to the Participant by the Employer were it not
for the reduction made pursuant to the Deferral Election or, if such date is not
an Accounting Date, as of the first Accounting Date occurring thereafter. The
Participant shall be 100% vested at all times in all Stock Units credited to his
Accounts under this paragraph.
3.4. Crediting of Matching Stock Units. For any Plan Year in which a
Participant defers the receipt of a part of his annual MIP bonus for that Plan
Year, the Participant's Account shall be credited, in addition to, and on the
same date as, the Stock Units credited for such year under subsection 3.3, with
additional Stock Units known as "Matching Stock Units". The number of Matching
Stock Units credited is 20% of the number of Stock Units credited in accordance
with the provisions of subsection 3.3. The Participant shall not be vested in
the Matching Stock Units until the fifth anniversary of the date of that they
are credited to the Participant's Account, and as of that date, the Participant
shall be 100% vested in such Matching Stock Units. If prior to becoming fully
vested in all Matching Stock Units, the Participant's Date of Termination occurs
by reason of retirement, death, disability, or termination by his employer
without cause, all Matching Stock Units shall immediately become 100% vested. If
prior to becoming fully vested in all Matching Stock Units, the Participant's
Date of Termination occurs for any other reason, the unvested Units shall be
forfeited upon the Date of Termination. The Participant's Date of Termination
shall be the date on which his employment with the Company and Related Companies
terminates for any reason.
3.5. Crediting of Dividends. Each Plan Year a Participant's Accounts
shall be credited with additional Stock Units to the extent dividends are paid
on actual shares of Company common stock. The number of additional Stock Units
to be credited to a Participant's Accounts by reason of dividend payments shall
equal the per-share dividend amount for that Plan Year multiplied by the number
of Stock Units in the Account, divided by the closing market price per share of
Company common stock on the date the dividends are paid. The Stock Units
credited by this paragraph shall vest simultaneously with the Stock Units from
which they are based.
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<PAGE> 9
3.6. Statement of Accounts. As soon as practicable after the end of
each Plan Year, the Company shall provide each Participant with a statement of
the transactions in his Account during that year and his Account balances as of
the end of the year.
SECTION 4
Distributions
4.1. General. Subject to this Section 4 and Section 5, the Stock Units
credited to a Participant's Account with respect to any year shall be
distributed in the form of an equivalent numbers of shares of common stock of
the Company at the time specified in the Participant's Deferral Election,
provided however, that the Committee, in its sole discretion, may distribute an
equivalent amount of cash, or a combination of cash and stock, in fulfillment of
any obligation hereunder. In no event shall the amount distributed with respect
to any Participant's Account as of any date exceed the amount of the Account
balance as of that date.
4.2. Distribution Election. A Participant's Deferral Election for any
year shall specify the time and method of distribution in which the Account
attributable to such election shall be distributed, subject to such restrictions
and limitations as may be imposed by the Committee. In no event shall
distribution of a Participant's Accounts commence later than 60 days after the
date of the Participant's Date of Termination. Distributions attributable to the
Account balances for any Plan Year shall be made in one lump sum payment or, if
so elected by the Participant in his Deferral Election, in equal annual
installments over a period not exceeding 5 years.
4.3. Unforeseeable Emergency. Prior to the date otherwise scheduled for
distribution of his benefits under the Plan, upon a showing of an unforeseeable
emergency, a Participant may request accelerated payment of an amount not
exceeding the lesser of (a) the amount necessary to meet the emergency or (b)
the sum of his vested Account balance(s) under the Plan. For purposes of the
Plan, the term "unforeseeable emergency" shall mean an unanticipated emergency
that is caused by an event beyond the control of the Participant (or the control
of the beneficiary, if the amount is payable to a beneficiary) and that would
result in severe financial hardship to the individual if early withdrawal were
not permitted. The determination of "unforeseeable emergency" shall be made by
the Committee, based on such information as the Committee shall deem to be
necessary.
4.4. Designation of Beneficiary. Each Participant from time to time, by
signing a form furnished by the Plan Administrator, may designate any legal or
natural person or persons (who may be designated contingently or successively)
to whom his benefits under the Plan are to be paid if he dies before he receives
all of his benefits. A beneficiary designation form will be effective only when
the signed form is filed with the Plan Administrator while the Participant is
alive and will cancel all beneficiary designation forms filed earlier. Except as
otherwise specifically provided in this subsection 4.3, if a deceased
Participant failed to designate a
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<PAGE> 10
beneficiary as provided above, or if the designated beneficiary of a deceased
Participant dies before him or before complete payment of the Participant's
benefits, his benefits shall be paid to the legal representative or
representatives of the estate of the last to die of the Participant and his
designated beneficiary.
4.5. Distributions to Disabled Persons. Notwithstanding the provisions
of this Section 4, if, in the Plan Administrator's opinion, a Participant or
beneficiary is under a legal disability or is in any way incapacitated so as to
be unable to manage his financial affairs, the Plan Administrator may direct
that payment be made to a relative or friend of such person for his benefit
until claim is made by a conservator or other person legally charged with the
care of his person or his estate, and such payment shall be in lieu of any such
payment to such Participant or beneficiary. Thereafter, any benefits under the
Plan to which such Participant or beneficiary is entitled shall be paid to such
conservator or other person legally charged with the care of his person or his
estate.
4.6. Benefits May Not be Assigned. Neither the Participant nor any
other person shall have any voluntary or involuntary right to commute, sell,
assign, pledge, anticipate, mortgage or otherwise encumber, transfer,
hypothecate or convey in advance of actual receipt the amounts, if any, payable
hereunder, or any part hereof, which are expressly declared to be unassignable
and non-transferable. No part of the amounts payable shall be, prior to actual
payment, subject to seizure or sequestration for payment of any debts,
judgements, alimony or separate maintenance owed by the Participant or any other
person, or be transferred by operation of law in the event of the Participant's
or any other person's bankruptcy or insolvency.
4.7. No Rights as Shareholder. Until such time that actual shares of
the Company's common stock are distributed under this section, if any, the
Participant will not have any rights as a shareholder under this Plan, and as
such, will have no voting rights or rights to any dividends with respect to his
allocable Units under this Plan.
4.8. Offset. Notwithstanding the provisions of subsection 4.6, if, at
the time payments are to be made under the Plan, the Participant or beneficiary
or both are indebted or obligated to any Employer or Related Company, then the
payments remaining to be made to the Participant or the beneficiary or both may,
at the discretion of the Committee, be reduced by the amount of such
indebtedness, or obligation, provided, however, that an election by the
Committee not to reduce any such payment shall not constitute a waiver of the
claim for such indebtedness or obligation.
SECTION 5
Change in Control
5.1. Distribution on Change in Control. In the event of a Change in
Control, the Participant shall become immediately vested in any unvested
Matching Stock Units, and the
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<PAGE> 11
Participant shall receive a lump sum distribution equal to the closing market
value per share of Company common stock as of the date of the Change in Control
multiplied by the number of Stock Units in his Account. Such distributions shall
be made to the Participant regardless of any elections that may otherwise be
applicable under the Plan, and shall be made as soon as practicable after the
date of such Change in Control, but in no event later than 15 days after the
occurrence of such Change in Control.
5.2. Change in Control Definition. For purposes of the Plan, a "Change
in Control" shall mean any one or more of the following: the acquisition by any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
fifteen percent (15%) or more of the shares of the then outstanding common stock
of the Company, a merger or consolidation of the Company in which the Company
does not survive as an independent public company, a sale of all or
substantially all of the assets of the Company or a liquidation or dissolution
of the Company; provided, however, that the following acquisitions shall not
constitute a Change of Control for the purposes of this Agreement: (i) any
acquisition directly from the Company or (ii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company.
SECTION 6
Source of Benefit Payments
6.1. Liability for Benefit Payments. Subject to the provisions of this
Section 6, an Employer shall be liable for payment of benefits under the Plan
with respect to any Participant to the extent that such benefits are
attributable to the deferral of the annual MIP bonus otherwise payable by that
Employer to the Participant. Any disputes relating to liability of Employers for
benefit payments shall be resolved by the Committee.
6.2. No Guarantee. Neither a Participant nor any other person shall, by
reason of the Plan, acquire any right in or title to any assets, funds or
property of the Employers whatsoever, including, without limitation, any
specific funds, assets, or other property which the Employers, in their sole
discretion, may set aside in anticipation of a liability under the Plan. A
Participant shall have only a contractual right to the amounts, if any, payable
under the Plan, unsecured by any assets of the Employers. Nothing contained in
the Plan shall constitute a guarantee by any of the Employers that the assets of
the Employers shall be sufficient to pay any benefits to any person.
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<PAGE> 12
SECTION 7
Committee
7.1. Powers of Committee. The authority to control and manage all
aspects of the operation and administration of the Plan shall also be vested in
the Committee. The Committee is authorized to interpret the Plan, to establish,
amend, and rescind any rules and regulations relating to the Plan, and to
determine the terms and provisions of any agreements made pursuant to the Plan,
and to make all other determinations that may be necessary or advisable for the
administration of the Plan. Except as otherwise specifically provided by the
Plan, any determinations to be made by the Committee under the Plan shall be
decided by the Committee in its sole discretion. Any interpretation of the Plan
by the Committee and any decision made by it under the Plan is final and binding
on all persons.
7.2. Delegation by Committee. The Committee may allocate all or any
portion of its responsibilities and powers to any one or more of its members and
may delegate all or any part of its responsibilities and powers to the Plan
Administrator or any other person or persons selected by it. Any such allocation
or delegation may be revoked at any time.
7.3. Information to be Furnished to Committee. The Employers and
Related Companies shall furnish the Committee with such data and information as
may be required for it to discharge its duties. The records of the Employers and
Related Companies as to an employee's or Participant's employment, termination
of employment, leave of absence, reemployment and Compensation shall be
conclusive on all persons unless determined to be incorrect. Participants and
other persons entitled to benefits under the Plan must furnish the Committee
such evidence, data or information as the Committee considers desirable to carry
out the Plan.
7.4. Liability and Indemnification. Neither the Plan Administrator or
any member or authorized delegate of the Committee shall be liable to any person
for any action taken or omitted in connection with the administration of the
Plan unless attributable to his own fraud or willful misconduct; nor shall the
Employers be liable to any person for any such action unless attributable to
fraud or willful misconduct on the part of a director or employee of the
Employers. The Plan Administrator, the Committee, the individual members
thereof, and persons acting as the authorized delegates of the Committee under
the Plan, shall be indemnified by the Employers against any and all liabilities,
losses, costs and expenses (including legal fees and expenses) of whatsoever
kind and nature which may be imposed on, incurred by or asserted against the
Committee or its members or authorized delegates by reason of the performance of
a Committee function if the Committee or its members or authorized delegates did
not act dishonestly or in willful violation of the law or regulation under which
such liability, loss, cost or expense arises. This indemnification shall not
duplicate but may supplement any coverage available under any applicable
insurance.
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<PAGE> 13
SECTION 8
Amendment and Termination
The Committee may, at any time, amend or terminate the Plan, subject to
the following:
(a) Subject to the following provisions of this Section 8, no
amendment or termination may materially adversely affect the
rights of any Participant or beneficiary under the Plan.
(b) The Committee may revoke any Participant's right to defer an
annual MIP bonus under the Plan; provided, however, that no
such revocation shall apply to the annual MIP bonus of any
Participant to the extent that the revocation is adopted by
the Committee after the date the annual MIP bonus is
otherwise required to be credited to the Participant's
Account under the Plan.
(c) The Plan may not be amended to delay the date on which
benefits are otherwise payable under the Plan without the
consent of each affected Participant. The Committee may
amend the Plan to accelerate the date on which Plan benefits
are otherwise payable under the Plan.
(d) Notwithstanding any other provision of the Plan to the
contrary, the Committee may not delegate its rights and
responsibilities under this Section 8; provided, however,
that, the Board of Directors of the Company may, from time
to time, substitute itself, or another committee of the
Board of Directors of the Company, for the Committee under
this Section 8.
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<PAGE> 1
EXHIBIT 10.31
CHANGE IN CONTROL AGREEMENT BETWEEN
LAWRENCE T. MESSINA AND
UNITED STATES CAN COMPANY
THIS CHANGE IN CONTROL AGREEMENT, dated as of September 20, 1995 (the
"Agreement"), is by and between U. S. Can Corporation, a Delaware corporation
having its principal offices at 900 Commerce Drive, Oak Brook, Illinois 60521
("USC"), United States Can Company, a Delaware corporation having its principal
offices at 900 Commerce Drive, Oak Brook, Illinois 60521 (the "Subsidiary",
with USC and the Subsidiary collectively referred to herein as "US Can" or the
"Company"), and Lawrence T. Messina, an employee of US Can (the "Employee").
WHEREAS, the Employee is presently serving as Vice President -- Western
and Machine Center Operations and an employee of US Can; and
WHEREAS, US Can desires to retain the Employee's services and the
Employee is willing to enter into and continue his employment as an employee of
US Can on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and conditions contained herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. CERTAIN DEFINED TERMS. (a) "Change of Control" - As used herein, shall
mean any one or more of the following: the acquisition by any individual, entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of Twenty
Percent (20%) or more of the shares of the then outstanding common stock of the
Company (the "Outstanding Common Stock"), a merger or consolidation of the
Company in which the Company does not survive as an independent public company,
a sale of all or substantially all of the assets of the Company, or a
liquidation or dissolution of the Company; provided, however, that the following
acquisitions shall not constitute a Change of Control for the purposes of this
subsection (a): (i) any acquisition directly from the Company, or (ii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company.
(b) "Constructive Termination", as used herein, shall mean any one or more
of the following occurrences within two (2) years following the Effective Date
of a Change of Control: (i) the assignment to the Employee of any duties
inconsistent in any
<PAGE> 2
material respect with the Employee's position, authority, duties or
responsibilities immediately prior to the Effective Date of the Change of
Control referred to above, or any other action by the Company which results in a
diminution in any material respect of the Employee's position, authority, duties
or responsibilities as the same existed immediately prior to the Effective Date
of the Change of Control referred to above.
(c) "Effective Date", as used herein, shall mean the first date during
which a Change of Control (as defined in Section 1(a)) occurs.
2. TERMINATION. If the Employee is terminated, or is subject to a
Constructive Termination, within two (2) years following the Effective Date of a
Change of Control, the Employee will be entitled to receive the benefits set
forth below.
(a) SEVERANCE PAYMENT. If termination or Constructive Termination of
the Employee occurs within two (2) years following the Effective Date of a
Change of Control, the Employee shall receive a severance payment equal to the
higher of the Employee's then current annual base salary, or the Employee's
annual base salary on the date immediately prior to the Effective Date of a
Change of Control.
(b) BONUS PAYMENT. If termination or Constructive Termination of the
Employee occurs within two (2) years following the Effective Date of a Change of
Control, the Employee shall be awarded a prorated bonus based on Employee's
target bonus (as then established by the Board of Directors of the Company or
the Employee's manager, as set forth by the Company in any the effective bonus
plan, as set forth in any employment agreement or as set forth in any
combination of the above) for the fiscal year in which the employment services
are Terminated or Constructively Terminated. The bonus amount received shall be
prorated for the actual number of days which have elapsed in the fiscal year of
Termination or Constructive Termination over the total number of days in that
fiscal year.
(c) RESTRICTED STOCK. If termination or Constructive Termination of
the Employee occurs within two (2) years following the Effective Date of a
Change of Control, the vesting of all restricted stock grants shall he
accelerated to the date on which the Employee is terminated or is subject to a
Constructive Termination.
(d) HEALTH BENEFITS. If termination or Constructive Termination of the
Employee occurs within two (2) years following
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<PAGE> 3
the Effective Date of a Change of Control, the Employee shall continue to
receive the same health and welfare benefits (in effect at any time 120 days
prior to the Effective Date of a Change of Control) for a period of one year
following the date of Termination or Constructive Termination.
3. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois applicable to agreements made
and to be performed in Illinois, without giving effect to conflicts of law
principles.
4. HEADINGS. The section headings of this Agreement are for reference only
and are to be given no effect in the construction or interpretation of this
Agreement.
5. SEVERABILITY. If any part or provision of this Agreement shall be
declared invalid or unenforceable by a court of competent jurisdiction, said
provision or part shall be ineffective to the extent of such invalidity or
unenforceability only, without in any way affecting the remaining parts or
provisions of this Agreement.
6. WAIVER. Any party may waive compliance by another party with any of the
provisions of this Agreement. No waiver of any provision shall be construed as a
waiver of any other provision. Any waiver must be in writing.
7. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding on and inure
to the benefit of the parties and their respective successors and permitted
assigns. Nothing in this Agreement shall create or be deemed to create any third
party beneficiary rights in any person or entity (including any employee or
person engaged by the Company in any capacity) not a party to this Agreement.
The Company will require any successor (whether direct or indirect, by merger,
purchase, consolidation or otherwise) of the Company to make an express
assumption of the obligations hereunder and cause any successor (whether direct
or indirect, by merger, purchase, consolidation or otherwise) of the Company to
agree to perform all parts and provisions under this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place.
8. COUNTERPARTS. This Agreement may be signed in any number of counterparts
and all such counterparts shall be read together and construed as but one and
the same document.
9. NOTICES. All notices and other communications under this Agreement shall
be in writing and shall be deemed given when delivered personally, one day after
sent by recognized overnight courier, or five (5) days after deposit in the
United States mail, postage prepaid, registered or certified mail, return
receipt
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<PAGE> 4
requested, to the parties at the following addresses (or to such other address
as a party may have specified by notice duly given to the other party in
accordance with this provision):
If to the Employee:
At the Employee's then current business or residence address as shown
on the records of US Can, with a copy to such other person as the
Employee may have specified by notice duly given to US Can in
accordance with this provision.
If to US Can:
United States Can Company
900 Commerce Drive
Oak Brook, Illinois 60521
Attention: President
With a copy to:
Ross & Hardies
150 N. Michigan Avenue
Chicago, Illinois 60601-7567
Attention: Lawrence R. Samuels
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<PAGE> 5
IN WITNESS WHEREOF the parties have executed this Agreement, in
triplicate, on the date first written above.
Employee
/s/ LAWRENCE T. MESSINA
---------------------------------------
Lawrence T. Messina
United States Can Company
/s/ WILLIAM J. SMITH
--------------------------------------
William J. Smith
President and Chief Executive Officer
U. S. Can Corporation
/s/ WILLIAM J. SMITH
--------------------------------------
William J. Smith
President and Chief Executive Officer
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<PAGE> 1
EXHIBIT 10.32
CHANGE-IN-CONTROL
AMENDMENT
THIS CHANGE-IN-CONTROL AMENDMENT (this "Amendment") is entered into as
of this 31st day of August, 1998, by and among U.S. Can Corporation, a Delaware
corporation (the "Corporation"), United States Can Company, a Delaware
corporation and wholly owned subsidiary of the Corporation ("U.S. Can"), and
Lawrence T. Messina (the "Employee"), an officer or employee of the Corporation,
U.S. Can or one of U.S. Can's subsidiaries.
WHEREAS, the parties hereto previously entered into a Change-in-Control
Agreement dated September 20, 1995 (the "Agreement"); and
WHEREAS, the parties hereto are mutually desirous of amending the
Agreement to modify a provision of the Agreement whereby the trigger for a stock
acquisition constituting a change-in-control event is incorrectly stated to be
20%;
NOW, THEREFORE, the Agreement is hereby amended by substituting fifteen
percent (15%) for twenty percent (20%) in the fifth line of Section 1(a) of the
Agreement.
All other terms and conditions of the Agreement are hereby ratified and
confirmed in all respects.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.
U.S. CAN CORPORATION UNITED STATES CAN COMPANY
By /s/ Paul W. Jones By /s/ Paul W. Jones
---------------------------- ---------------------------
Paul W. Jones Paul W. Jones
Chairman, President and Chairman, President and
Chief Executive Officer Chief Executive Officer
EMPLOYEE SIGNATURE
/s/ Lawrence T. Messina
------------------------------
Lawrence T. Messina
2
<PAGE> 1
EXHIBIT 10.33
[US CAN LETTERHEAD]
United States Can Company
July 7, 1998
Mr. John Workman
870 Maryknoll Circle
Glen Ellyn, IL 60137
Dear John,
It is my pleasure to confirm our offer, and your acceptance, to join U.S. Can
as Executive Vice President and Chief Financial Officer. Following are the
details of the offer:
BASE SALARY: $300,000.00 Reviewed annually
SIGNING BONUS: $ 60,000.00 Payable upon your joining the company.
BONUS ON 1/99: $100,000.00 Payable 1/99
Future bonuses to be determined by revised compensation program, but will have a
target of 50% of base.
CAR ALLOWANCE: $900.00 net per month
INITIAL STOCK OPTION AWARD: 75,000 options with the maximum number being
incentive stock options that vest over three years -- one-third each year.
INCENTIVE TO PURCHASE STOCK: For every share of U.S. Can stock you purchase on
your own, up to $100,000.00, you will receive three stock option shares with a
strike price equal to the price you paid. These options vest immediately.
SEVERANCE OR CHANGE OF CONTROL: There will be a separate agreement with you that
will provide eighteen months of salary continuance in the event of severance
without cause or a change in control that results in severance, reductions in
salary or benefits, reduced responsibility, etc.
OTHER: You will receive all other benefits customary for company executive
officers.
<PAGE> 2
-2-
John, it's exciting having someone of your talents and drive joining us at
U.S. Can. We're going to have a lot of fun.
Sincerely,
UNITED STATES CAN COMPANY
/s/ Paul W. Jones
-----------------------------------
Paul W. Jones, Chairman,
President & Chief Executive Officer
PWJ:sh
<PAGE> 1
EXHIBIT 10.34
DATED 1998
USC HOLDING UK LIMITED
- and -
MR DAVID FORD
SERVICE AGREEMENT
BERWIN LEIGHTON
Adelaide House London Bridge London EC4R 9HA
Telephone 0171 623 3144 Fax 0171 623 4416
<PAGE> 2
<TABLE>
<CAPTION>
DATED
PARTIES
<S> <C> <C>
1 Company USC HOLDING UK LIMITED (company
no 3209772) whose registered office is
at Apexes Works, Scotts Road, Southall,
Middlesex UB2 5DM
2 Executive DAVID FORD of Kilreague, Tivoli Road,
Cheltenham, Glos GL50 2TD
</TABLE>
<TABLE>
<CAPTION>
OPERATIVE PROVISIONS
<S> <C> <C> <C>
1 DEFINITIONS AND INTERPRETATION
1.1 Unless the contrary intention appears, the following definitions apply:
associated company (a) a company whose equity share
capital (as defined by section 744
of the Companies Act 1985) is, as to
20% or more but less than 50%,
beneficially owned by one or more
Group Company; and
(b) a subsidiary of a company within
(a) above;
Bonus the Executive's bonus arrangements as set
out in clause 3.2;
Commencement Date 24 November 1997;
(a) trade secrets, customer lists,
Confidential Information trading details or other
information of a confidential
nature relating to a Group
</TABLE>
1
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
Company (including without limitation
details of activities, businesses
or finances of a Group Company);
(b) any other information designated
by any Group Company as
confidential; and
(c) any information in relation to which
any Group Company owes a duty of
confidentiality to any third party;
Group the Company, any holding company of the
Company and subsidiaries of the Company or
of any such holding company and an
associated company of any of them;
Group Company a member of the Group;
holding company and subsidiary the same meanings as in section 736
Companies Act 1985;
Intellectual Property includes letters patent, trade marks,
service marks, designs, utility models,
copyrights, design rights, applications for
registration of any of the foregoing and
the right to apply for them in any part of
the world, moral rights, inventions,
confidential information, know-how, and
rights of a similar nature arising or
subsisting anywhere in the world in
relation to all of the foregoing, whether
registered or
</TABLE>
2
<PAGE> 4
<TABLE>
<S> <C>
unregistered;
President the President and Chief Executive Officer
of United States Can Company, from time to
time;
Recognised Investment Exchange the same meaning as in section 207 of the
Financial Services Act 1986;
Review Date each anniversary of the Commencement Date;
Salary the salary referred to at clause 3.1 as
varied from time to time: and
</TABLE>
1.2 No period of employment with a previous employer shall count towards
the Executive's period of continuous employment which, for the
purposes of the Employment Protection Rights Act 1996 shall begin on
the Commencement Date.
1.3 The headings in this agreement are for convenience only and do not
affect its construction or interpretation.
1.4 References to an enactment are construed as extending to an amendment
or re-enactment and to any previous enactment which is consolidated
in the enactment (as amended or re-enacted) and to any regulation or
order made under any of them.
1.5 Words denoting the singular include the plural and vice versa; and
words denoting any gender include all genders.
2 JOB TITLE AND DUTIES
2.1 The Company shall employ the Executive and the Executive shall serve
as Senior Vice President International of the United States Can
Company and President of its European Operations. The Executive will
report directly to the President. The Executive will serve on the
Executive Committee of the United States Can Company.
2.2 The Executive shall during his employment under this agreement:
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<PAGE> 5
2.2.1 perform such duties and exercise such powers as the President may
from time to time reasonably assign to him and such duties and powers
may relate or concern the business of any Group Company including
serving on the board of directors or other executive body or
committee or board of trustees of or relating to such Group Company
as may be required from time to time by the President;
2.2.2 well and faithfully serve the Group Companies and use his utmost
endeavours to promote their interests;
2.2.3 give to the President such information regarding the affairs of Group
Companies as it requires; and
2.2.4 at all times conform to the reasonable directions of the President.
2.3 The Executive shall during his employment under this agreement devote
himself exclusively to the performance of his duties during normal
working hours at his place of employment and at all other times
necessary for the proper performance of his duties, unless prevented
by ill health from doing so.
2.4 The Executive shall not directly or indirectly enter into, or be
concerned or interested in, any trade, business or occupation other
than the business of the Group except:
2.4.1 with the prior written consent of the President, but consent may be
given subject to any terms or conditions which the President
requires, a breach of which shall be deemed to be a breach of the
terms of this agreement; or
2.4.2 as a holder of not more than 3% of any class of shares, debentures or
other securities in a company which is listed or dealt in on a
Recognised Investment Exchange.
2.5 The Executive's place of employment shall be at Southall. The
Executive may be required, on not less than 3 months' notice, to be
permanently employed at any other place within the United Kingdom. In
the event that the Company exercises its right to require the
Executive to be permanently employed at another place, the relocation
arrangements under clause 3.7 will apply. The Executive may be
required to travel on the business of a Group Company.
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<PAGE> 6
2.6 The Company may suspend the Executive for not more than 30 days on
full pay for the purpose of investigating the substance of any
disciplinary matter involving the Executive and holding a
disciplinary hearing.
3 REMUNERATION
3.1 SALARY
3.1.1 The Executive's Salary shall be (pound)220,000 per annum which shall
accrue from day to day and be payable in arrears by equal monthly
instalments not later than the last day of every month. The Salary
shall be inclusive of any director's fees payable to him under the
articles of association of a Group Company.
3.1.2 The Executive's Salary shall be reviewed by the Compensation
Committee of the Board of Directors United States Can Company on the
Review Date and may be increased at its discretion.
3.1.3 The Company may both during this agreement and on termination deduct
from the Salary any sum due from the Executive to the Company
including but not limited to any outstanding loans, advances, excess
holiday, over payments and any amount stated to be payable by the
Executive to the Company in any court or tribunal judgment or award.
3.2 BONUS
The Executive shall be eligible to participate in such annual
incentive scheme as shall be implemented in relation to employees of
the Executive's status from year to year under which he shall be
entitled to receive a bonus of up to 50% of Salary.
3.3 PENSION SCHEME
3.3.1 The Company shall procure that pension arrangements are put into
place as soon as reasonably practicable but in any event no later
than 5 April 1998, under which the Executive shall have an
entitlement which is no less beneficial to the Executive than the
entitlement he received from his previous membership of the Carnaud
Metal Box Senior Executive Pension Plan.
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<PAGE> 7
3.3.2 The Company shall instruct professional advisers to provide advice to
the Executive concerning the implementation of these pension
arrangements and the Company shall be responsible for the
professional adviser's fees in relation to the provision of such
advice.
3.4 INSURANCE BENEFITS
The Executive shall be entitled to participate at the Company's
expense in the Company's life assurance scheme (to provide a payment
in the event of the Executive's death of four times Salary), the
United States Can Company's Long Term Disability Insurance Benefit
Plan (in relation to which the minimum service requirement shall be
waived) and for himself, his spouse and his children under 21 years
in the Company's private medical insurance scheme.
3.5 COMPANY CAR
3.5.1 The Company shall supply the Executive with a BMW 535 car (or
equivalent car) for his use in the performance of his duties. The
Company shall pay all running costs of the car including insurance
and maintenance including petrol consumed in private use.
3.5.2 The Executive shall take good care of the company car and ensure that
the provisions and conditions of any insurance policy relating to it
are observed and shall comply with all other requirements of the
Company's policy from time to time for the provision of cars to
employees.
3.6 MOBILE PHONE
The Company shall supply the Executive with a mobile phone and the
Company shall pay for costs incurred in the Executive's use of the
phone.
3.7 RELOCATION
3.7.1 For as long as the Executive continues to own the property at
Kilreague, Tivoli Road, Cheltenham, Glos and the Executive shall have
not have relocated to an address nearer to his place of work, the
Company will meet the cost of renting a
6
<PAGE> 8
furnished apartment that the Company shall reasonably deem to be
suitable for the Executive's purposes.
3.7.2 In the event that the Executive shall purchase a property nearer to
his place of work then the Company shall reimburse the Executive the
reasonable solicitor's fees, surveyor's fees, land registry fees,
stamp duty and removal costs involved in relocating to the new
property and a disturbance allowance of 16 2/3 per cent of the
Salary. Further, the Executive's entitlement to the cost of the
rented apartment under clause 3.7.1 shall cease.
3.8 EXPENSES
The Company shall by way of reimbursement pay or procure to be paid
to the Executive all reasonable expenses wholly, exclusively and
necessarily incurred by him in the performance of his duties under
this agreement on production of appropriate vouchers or receipts.
3.9 OTHER BENEFITS
Any benefits provided by the Company to the Executive or his family
which are not expressly referred to in this agreement shall be
regarded as ex-gratia and at the entire discretion of the Company and
shall not form part of the Executive's contract of employment.
4 TERM OF EMPLOYMENT
4.1 The Company shall employ the Executive and the Executive shall serve
the Company as from the Commencement Date until expiration of not
less than 24 months prior notice given by the Company to the
Executive or not less than 12 months prior notice given by the
Executive to the Company.
4.2 The Executive's employment under this agreement shall terminate
automatically on the last day of the month in which the Executive
shall attain the Company's retirement age from time to time. This is
currently 65 years.
4.3 If this agreement is terminated on notice the Company may require the
Executive to cease to perform his duties under this agreement and not
to attend at the
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<PAGE> 9
Company's premises during the notice period or any part of the notice
period as the Company determines. During this period the Company
shall continue to pay the Executive the Salary and other benefits to
which he has an entitlement under this agreement and the Executive,
who shall remain in employment, shall continue to be bound by all
obligations owed to the Company under this agreement.
4.4 In the event that the Company shall wrongfully dismiss the Executive
the Company agrees to transfer to the Executive the ownership of the
Company car that the Executive shall at that time have the benefit of
pursuant to clause 3.5 of this agreement. The Executive agrees to
accept such transfer in full and final settlement of any claim that
he may have against the Company in relation to the loss of the use of
the car.
4.5 The Company agrees that in the event the Executive's employment under
this agreement is terminated by reason of redundancy the Company
shall make a payment to the Executive, in addition to any other
payment under this agreement, equal to two times the Executive's
entitlement to statutory redundancy pay (to include the Executive's
entitlement to statutory redundancy pay).
5 HOLIDAYS
The Executive shall (in addition to the usual public and bank
holidays) be entitled to 25 working days' holiday in each calendar
year to be taken at times convenient to the Company. During the first
and last calendar years of the Executive's employment the Executive
shall be entitled to a pro rata proportion of his annual holiday
entitlement. The Executive may not carry over accrued holiday
entitlement from one calendar year to the next without the written
consent of the President. On termination of this agreement (except
under clause 7 below) the Company shall make a payment in lieu of any
holiday entitlement not taken and may deduct from the final payment
of Salary for holiday taken in excess of the Executive's entitlement.
6 INCAPACITY
6.1 The Executive shall be entitled to statutory sick pay in relation to
periods of absence due to illness, accident or other incapacity. The
Executive shall, solely in
8
<PAGE> 10
the President's discretion, during any such period of absence,
continue to receive any remuneration in excess of statutory sick pay.
6.2 If the Executive is at any time prevented by illness, accident or
other incapacity from performing his duties for a period of 30
consecutive working days, the Company may appoint a temporary
replacement to undertake all or some of his duties during any further
period in which he is prevented from performing his duties.
6.3 For the purposes of this clause 6 a working day shall be Monday to
Friday inclusive.
6.4 If required by the President the Executive shall, at the expense of
the Company, undergo a medical examination by such medical
practitioner as the President nominates. The Executive shall
authorise the medical practitioner to disclose to and discuss with
the President the results of the examination.
7 SUMMARY TERMINATION OF EMPLOYMENT
7.1 The employment of the Executive may be terminated by the Company
without notice or payment in lieu of notice if the Executive:
7.1.1 commits an act of gross misconduct or of gross neglect or a material
or repeated breach of an obligation in this agreement, or is guilty
of conduct tending to bring himself or any Group Company into
disrepute; or
7.1.2 has an interim receiving order made against him, becomes bankrupt or
makes a composition or enters into any deed of arrangement with his
creditors; or
7.1.3 is convicted of an arrestable criminal offence (other than an offence
under road traffic legislation for which a fine or non-custodial
penalty is imposed); or
7.1.4 is convicted of an offence under the Part V of the Criminal Justice
Act 1993 or under any other statutory enactment or regulations
relating to insider dealing; or
7.1.5 resigns as a director of any Group Company otherwise than at the
request of the President; or
9
<PAGE> 11
7.1.6 is disqualified from being a director of a company by reason of an
order made by a competent court.
7.2 The termination by the Company of the appointment shall be without
prejudice to any claim which the Company may have for damages arising
from breach of this agreement by the Executive.
8 EXECUTIVE'S OBLIGATIONS ON TERMINATION
Upon the termination of this agreement or in the event of the
Executive serving on the Company notice to terminate his employment
or in the event of the Company requesting the Executive to cease
performing or exercising any or all of his duties pursuant to clause
4.3:
8.1 the Executive shall at the request of the President immediately
resign all his directorships in the Group without claim for
compensation and in the event of his failure to do so any director or
the secretary of the Company may, in his name and on his behalf, sign
and deliver the resignations to the appropriate Group Company;
8.2 the Executive shall immediately deliver to the Company all records,
documents, accounts, letters and papers within his possession or
under his control relating to the affairs and business of any Group
Company and any other property belonging to a Group Company.
9 INVENTIONS
9.1 In accordance with the provisions of the Patents Act 1977, the
Registered Designs Act 1949 and the Copyright, Designs and Patents
Act 1988, if in the course of his employment under this agreement the
Executive makes or discovers, or participates in the making or
discovery of, Intellectual Property relating to or capable of being
used in the business carried on by a Group Company, full details of
the Intellectual Property shall immediately be communicated by him to
the Company and shall be the absolute property of the Company. At the
request and expense of the Company the Executive shall give and
supply all such information, data, drawings and assistance as is
requisite to enable the Company to exploit the Intellectual Property
to the best advantage. If so requested, the Executive shall, at the
Company's
10
<PAGE> 12
expense but without receiving payment, execute all documents and do
all things necessary to vest the title to the invention, design or
discovery in the Company. The Executive irrevocably appoints the
Company to be his attorney and in his name and on his behalf to
execute any documents and generally to act and to use his name for
the purpose of giving to the Company (or its nominee) the full
benefit this clause. A certificate in writing signed by a director or
the secretary of the Company that an instrument or act falls within
the authority conferred by this clause shall be conclusive evidence
in favour of a third party that it is the case.
9.2 If the Executive makes or discovers or participates in the making or
discovery of any Property during his employment under this agreement
but which is not the property of the Company under clause 9.1, the
Company shall, subject only to the provisions of the Patents Act
1977, have the right to acquire for itself or its nominee the
Executive's rights in the Intellectual Property within 3 months after
disclosure under clause 9.1 on fair and reasonable terms to be agreed
or settled by a single arbitrator.
9.3 The Executive waives all of his moral rights as defined in the
Copyright, Designs and Patents Act 1988 in relation to the
Intellectual Property which is the property of the Company by virtue
of clause 9.1.
9.4 Rights and obligations under this clause shall continue in force
after termination of this agreement in respect of Intellectual
Property made or discovered during the Executive's employment under
this agreement and shall be binding upon his representatives.
10 CONFIDENTIALITY
10.1 The Executive shall not (except in the proper course of his duties)
during the period of employment under this agreement or subsequently,
without the prior consent in writing of the President, divulge to any
person or otherwise make use of Confidential Information and shall,
during the period of this agreement, use his best endeavours to
prevent the publication or disclosure of any Confidential
Information.
11
<PAGE> 13
10.2 Confidential Information which is made or received by the Executive
during this agreement shall be the property of the Company and all
such property and copies thereof and any other property of the Group
shall be surrendered by the Executive to the Company at the
termination of this agreement (howsoever occasioned) or at the
request of the President at any time during the course of his
employment.
11 DISCIPLINE AND GRIEVANCES
11.1 The Company's discipline and grievance procedures as set out below do
not form part of the Executive's terms and conditions of employment
and afford him no legal rights.
11.2 The Executive shall promptly comply with all reasonable orders and
directions given to him by the President and with any orders or
regulations in force at his place of employment.
11.3 If the Executive is dissatisfied with any disciplinary decision
relating to him, or has any other grievance about his employment, he
should apply in writing to the President whose decision shall be
final.
12 NOTICES
All communications between the parties with respect to any of the
provisions of this agreement shall be sent to the addresses set out
in this agreement, or to such other addresses as may be notified by
the parties for the purpose of this clause, by pre-paid registered or
recorded delivery post or by facsimile transmission or other
electronic means of written communication with confirmation by letter
given by the close of business on the next following business day.
Any communication to the Company must be marked "For the attention of
the Company Secretary".
12.1 Communications which are sent or despatched as set out below shall be
deemed to have been received by the addressee as follows:
12.1.1 by post - 2 business days after despatch;
12.1.2 by facsimile transmission or other electronic means of written
communication - on the business day next following the day on which
the communication was sent.
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12.2 In proving service by post it shall be necessary only to prove that
the communication was contained in an envelope which was duly
addressed, stamped and posted by registered or recorded delivery
post. In proving service by facsimile transmission or other
electronic means of written communication, proof of service will be
accepted on proof of posting of the confirmatory letter.
12.3 For the purpose this clause a "business day" means a day on which the
clearing banks in the City of London are open for business and "close
of business" means 18.00 hours.
13 GENERAL
13.1 This agreement shall take effect as from the Commencement Date, from
which date all other agreements or arrangements, whether written or
oral, express or implied, between the Executive and any member of the
Group relating to the services or employment of the Executive shall
be deemed to have been cancelled.
13.2 The expiration or determination of this agreement shall not affect
those terms which are expressed to operate or have effect after its
termination and shall be without prejudice to any right of action
already accrued to either party in respect of a breach of this
agreement by the other party.
14 LAWS
The construction, validity and performance of this agreement shall be
governed by the laws of England.
Delivered as deed on the date of this agreement
EXECUTED by USC HOLDING UK LIMITED ) /S/ WILLIAM J. SMITH
as a deed )
[SIG]
Director
Director/Secretary
[SIG]
SIGNED by DAVID FORD ) /S/ DAVID FORD
as a deed in the presence of: )
/s/ DAVID FORD
13
<PAGE> 1
EXHIBIT 10.35
U.S. CAN CORPORATION
1998 EQUITY INCENTIVE PLAN
<PAGE> 2
U.S. CAN CORPORATION
1998 EQUITY INCENTIVE PLAN
SECTION I
GENERAL
1.1. PURPOSE. The U.S. Can Corporation 1998 Equity Incentive Plan (the
"Plan") has been established by U.S. Can Corporation (the "Company") to (i)
attract and retain persons eligible to participate in the Plan; (ii) motivate
Participants, by means of appropriate incentives, to achieve long-range goals;
(iii) provide incentive compensation opportunities that are competitive with
those of other similar companies; and (iv) further identify Participants'
interests with those of the Company's other shareholders through compensation
that is based on the Company's common stock; and thereby promote the long-term
financial interest of the Company and the Subsidiaries, including the growth in
value of the Company's equity and enhancement of long-term shareholder return.
1.2. PARTICIPATION. Subject to the terms and conditions of the Plan,
the Committee shall determine and designate, from time to time, from among the
Eligible Individuals (including transferees of Eligible Individuals to the
extent the transfer is permitted by the Plan and the applicable Award
Agreement), those persons who will be granted one or more Awards under the Plan,
and thereby become "Participants" in the Plan. In the discretion of the
Committee, a Participant may be granted any Award permitted under the provisions
of the Plan, and more than one Award may be granted to a Participant. Awards may
be granted as alternatives to or replacement of awards granted or outstanding
under the Plan, or any other plan or arrangement of the Company or a Subsidiary
(including a plan or arrangement of a business or entity, all or a portion of
which is acquired by the Company or a Subsidiary).
1.3. OPERATION ADMINISTRATION, AND DEFINITIONS. The operation and
administration of the Plan, including the Awards made under the Plan, shall be
subject to the provisions of Section 3 (relating to operation and
administration). Capitalized terms in the Plan shall be defined as set forth in
the Plan (including the definition provisions of Section 6 of the Plan).
<PAGE> 3
SECTION 2
OPTIONS AND SARS
2. 1 DEFINITIONS.
(a) The grant of an "Option" entitles the Participant to purchase shares of
Stock at an Exercise Price established by the Committee. Options
granted under this Section 2 are not intended to be an "incentive stock
options" as that term is described in section 422(b) of the Code.
(b) A stock appreciation right (an "SAR") entitles the Participant to
receive, in cash or Stock (as determined in accordance with subsection
2.5), value equal to (or otherwise based on) the excess of: (a) the
Fair Market Value of a specified number of shares of Stock at the time
of exercise; over (b) an Exercise Price established by the Committee.
2.2. EXERCISE PRICE. The "Exercise Price" of each Option and SAR
granted under this Section 2 shall be established by the Committee or shall be
determined by a method established by the Committee at the time the Option or
SAR is granted; except that the Exercise Price shall not be less than 100% of
the Fair Market Value of a share of Stock on the date of grant (or, if greater,
the par value of a share of Stock).
2.3. EXERCISE. An Option and an SAR shall be exercisable in accordance
with such terms and conditions and during such periods as may be established by
the Committee.
2.4 PAYMENT OF OPTION EXERCISE PRICE. The payment of the Exercise Price
of an Option granted under this Section 2 shall be subject to the following:
(a) Subject to the following provisions of this subsection 2.4, the full
Exercise Price for shares of Stock purchased upon the exercise of any
Option shall be paid at the time of such exercise (except that, in the
case of an exercise arrangement approved by the Committee and described
in paragraph 2.4(c), payment may be made as soon as practicable after
the exercise).
(b) The Exercise Price shall be payable in cash or by tendering, by either
actual delivery of shares or by attestation, shares of Stock acceptable
to the Committee,
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and valued at Fair Market Value as of the day of exercise, or in any combination
thereof, as determined by the Committee.
(c) The Committee may permit a Participant to elect to pay the Exercise
Price upon the exercise of an Option by irrevocably authorizing a third party to
sell shares of Stock (or a sufficient portion of the shares) acquired upon
exercise of the Option and remit to the Company a sufficient portion of the sale
proceeds to pay the entire Exercise Price and any tax withholding resulting from
such exercise.
2.5. SETTLEMENT OF AWARD. Shares of Stock delivered pursuant to the
exercise of an option or SAR shall be subject to such conditions, restrictions
and contingencies as the Committee may establish in the applicable Award
Agreement. Settlement of SARs may be made in shares of Stock (valued at their
Fair Market Value at the time of exercise), in cash, or in a combination
thereof, as determined in the discretion of the Committee. The Committee, in its
discretion, may impose such conditions, restrictions and contingencies with
respect to shares of Stock acquired pursuant to the exercise of an Option or an
SAR as the Committee determines to be desirable.
SECTION 3
OPERATION AND ADMINISTRATION
3.1. EFFECTIVE DATE. The Plan shall be effective as of February 24,
1998 (the "Effective Date"). The Plan shall be unlimited in duration and, in the
event of Plan termination, shall remain in effect as long as any Awards under it
are outstanding; provided, however, that no Awards may be granted under the Plan
after the ten-year anniversary of the Effective Date (except for Awards granted
pursuant to commitments entered into prior to such ten-year anniversary).
3.2. SHARES SUBJECT TO PLAN. The shares of Stock for which Awards may
be granted under the Plan shall be subject to the following:
(a) The shares of Stock with respect to which Awards may be made under the
Plan shall be shares currently held or subsequently acquired by the
Company as treasury shares, including shares purchased in the open
market or in private transactions, or authorized but unissued shares,
with respect to Participants that are new hires of the Company, and
shares currently held or subsequently acquired by the Company as
treasury shares, including shares purchased in the open market or in
private transactions, with respect to all other Participants.
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(b) Subject to the following provisions of this subsection 3.2, the maximum
number of shares of Stock that may be delivered to Participants and
their beneficiaries under the Plan shall be equal to 600,000 shares of
Stock.
(c) To the extent any shares of Stock covered by an Award are not delivered
to a Participant or beneficiary because the Award is forfeited or
canceled, or the shares of Stock are not delivered because the Award is
settled in cash, such shares shall not be deemed to have been delivered
for purposes of determining the maximum number of shares of Stock
available for delivery under the Plan.
(d) If the exercise price of any stock option granted under the Plan is
satisfied by tendering shares of Stock to the Company (by either actual
delivery or by attestation), only the number of shares of Stock issued
net of the shares of Stock tendered shall be deemed delivered for
purposes of determining the maximum number of shares of Stock available
for delivery under the Plan.
(e) In the event of a corporate transaction involving the Company
(including, without limitation, any stock dividend, stock split,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination or exchange of shares),
the Committee may adjust Awards to preserve the benefits or potential
benefits of the Awards. Action by the Committee may include: (i)
adjustment of the number and kind of shares which may be delivered
under the Plan; (ii) adjustment of the number and kind of shares
subject to outstanding Awards; (iii) adjustment of the Exercise Price
of outstanding Options and SARs; and (iv) any other adjustments that
the Committee determines to be equitable.
3.3. GENERAL RESTRICTIONS. Delivery of shares of Stock or other amounts
under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the Company shall
have no liability to deliver any shares of Stock under the Plan or make
any other distribution of benefits under the Plan unless such delivery
or distribution would comply with all applicable laws (including,
without limitation, the requirements of the Securities Act of 1933),
and the applicable requirements of any securities exchange or similar
entity.
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<PAGE> 6
(b) To the extent that the Plan provides for issuance of stock certificates
to reflect the issuance of shares of Stock, the issuance may be
effected on a non-certificated basis, to the extent not prohibited by
applicable law or the applicable rules of any stock exchange.
3.4. TAX WITHHOLDING. All distributions under the Plan are subject to
withholding of all applicable taxes, and the Committee may condition the
delivery of any shares or other benefits under the Plan on satisfaction of the
applicable withholding obligations. The Committee, in its discretion, and
subject to such requirements as the Committee may impose prior to the occurrence
of such withholding, may permit such withholding obligations to be satisfied
through cash payment by the Participant, through the surrender of shares of
Stock which the Participant already owns, or through the surrender of shares of
Stock to which the Participant is otherwise entitled under the plan.
3.5. USE OF SHARES. Subject to the overall limitation on the number of
shares of Stock that may be delivered under the Plan, the Committee may use
available shares of Stock as the form of payment for compensation, grants or
rights earned or due under any other compensation plans or arrangements of the
Company or a Subsidiary, including the plans and arrangements of the Company or
a Subsidiary assumed in business combinations.
3.6. DIVIDENDS AND DIVIDEND EQUIVALENTS. An Award may provide the
Participant with the right to receive dividend payments or dividend equivalent
payments with respect to Stock subject to the Award (both before and after the
Stock subject to the Award is earned, vested, or acquired), which payments May
be either made currently or credited to an account for the Participant, and may
be settled in cash or Stock as determined by the Committee. Any such
settlements, and any such crediting of dividends or dividend equivalents or
reinvestment in shares of Stock, may be subject to such conditions, restrictions
and contingencies as the Committee shall establish, including the reinvestment
of such credited amounts in Stock equivalents.
3.7. PAYMENTS. Awards may be settled through cash payments, the
delivery of shares of Stock, the granting of replacement Awards, or combination
thereof as the Committee shall determine. Any Award settlement, including
payment deferrals, may be subject to such conditions, restrictions and
contingencies as the Committee shall determine. The Committee may permit or
require the deferral of any Award payment, subject to such rules and procedures
as it may establish, which may include provisions for the payment or crediting
of interest, or dividend equivalents, including converting
5
<PAGE> 7
such credits into deferred Stock equivalents. Each Subsidiary shall be liable
for payment of cash due under the Plan with respect to any Participant to the
extent that such benefits are attributable to the services rendered for that
Subsidiary by the Participant. Any disputes relating to liability of a
Subsidiary for cash payments shall be resolved by the Committee.
3.8. TRANSFERABILITY. Except as otherwise provided by the Committee,
Awards under the Plan are not transferable except as designated by the
Participant by will or by the laws of descent and distribution.
3.9. FORM AND TIME OF ELECTIONS. Unless otherwise specified herein,
each election required or permitted to be made by any Participant or other
person entitled to benefits under the Plan, and any permitted modification, or
revocation thereof, shall be in writing filed with the Committee at such times,
in such form, and subject to such restrictions and limitations, not inconsistent
with the terms of the Plan, as the Committee shall require.
3.10. AGREEMENT WITH COMPANY. An Award under the Plan shall be subject
to such terms and conditions, not inconsistent with the Plan, as the Committee
shall, in its sole discretion, prescribe. The terms and conditions of any Award
to any Participant shall be reflected in such form of written document as is
determined by the Committee. A copy of such document shall be provided to the
Participant, and the Committee may, but need not require that the Participant
sign a copy of such document. Such document is referred to in the Plan as an
"Award Agreement" regardless of whether any Participant signature is required.
3.11. ACTION BY COMPANY OR SUBSIDIARY. Any action required or
permitted to be taken by the Company or any Subsidiary shall be by resolution of
its board of directors, or by action of one or more members of the board
(including a committee of the board) who are duly authorized to act for the
board, or (except to the extent prohibited by applicable law or applicable rules
of any stock exchange) by a duly authorized officer of such company.
3.12. GENDER AND NUMBER. Where the context admits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
3.13. LIMITATION OF IMPLIED RIGHTS.
6
<PAGE> 8
(a) Neither a Participant nor any other person shall, by reason of
participation in the Plan, acquire any right in or title to any assets,
funds or property of the Company or any Subsidiary whatsoever,
including, without limitation, any specific funds, assets, or other
property which the Company or any Subsidiary, in their sole discretion,
may set aside in anticipation of a liability under the Plan. A
Participant shall have only a contractual right to the Stock or
amounts, if any, payable under the Plan, unsecured by any assets of the
Company or any Subsidiary, and nothing contained in the Plan shall
constitute a guarantee that the assets of the Company or any Subsidiary
shall be sufficient to pay any benefits to any person.
(b) The Plan does not constitute a contract of employment, and selection as
a Participant will not give any participating employee or director the
right to be retained in the employ of the Company or any Subsidiary, or
the right to remain a member of the board of directors, nor any right
or claim to any benefit under the Plan, unless such right or claim has
specifically accrued under the terms of the Plan. Except as otherwise
provided in the Plan, no Award under the Plan shall confer upon the
holder thereof any rights as a shareholder of the Company prior to the
date on which the individual fulfills all conditions for receipt of
such rights.
3.14. EVIDENCE. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
SECTION 4
COMMITTEE
4.1. ADMINISTRATION. The authority to control and manage the operation
and administration of the Plan shall be vested in a committee (the "Committee")
in accordance with this Section 4. The Committee shall be selected by the Board.
If the Committee does not exist, or for any other reason determined by the
Board, the Board may take any action under the Plan that would otherwise be the
responsibility of the Committee.
4.2. POWERS OF COMMITTEE. The Committee's administration of the Plan
shall be subject to the following:
7
<PAGE> 9
(a) Subject to the provisions of the Plan, the Committee will have the
authority and discretion to select from among the Eligible Individuals
those persons who shall receive Awards, to determine the time or times
of receipt, to determine the types of Awards and the number of shares
covered by the Awards, to establish the terms, conditions, performance
criteria, restrictions, and other provisions of such Awards, and
(subject to the restrictions imposed by Section 5) to cancel or suspend
Awards.
(b) To the extent that the Committee determines that the restrictions
imposed by the Plan preclude the achievement of the material purposes
of the Awards in jurisdictions outside of the United States, the
Committee will have the authority and discretion to modify those
restrictions as the Committee determines to be necessary or appropriate
to conform to applicable requirements or practices of jurisdictions
outside of the United States.
(c) The Committee will have the authority and discretion to interpret the
Plan, to establish, amend, and rescind any rules and regulations
relating to the Plan, to determine the terms and provisions of any
Award Agreement made pursuant to the Plan, and to make all other
determinations that may be necessary or advisable for the
administration of the Plan.
(d) Any interpretation of the Plan by the Committee and any decision made
by it under the Plan is final and binding on all persons.
(e) In controlling and managing the operation and administration of the
Plan, the Committee shall take action in a manner that conforms to the
articles and bylaws of the Company, and applicable state corporate law.
4.3. DELEGATION BY COMMITTEE. Except to the extent prohibited by
applicable law or the applicable rules of a stock exchange, the Committee may
allocate all or any portion of its responsibilities and powers to any one or
more of its members and may delegate all or any part of its responsibilities and
powers to any person or persons selected by it. Any such allocation or
delegation may be revoked by the Committee at any time.
4.4. INFORMATION TO BE FURNISHED TO COMMITTEE. The Company and
Subsidiaries shall furnish the Committee with such data and information as it
determines may be required for it to discharge its duties. The records of the
Company and Subsidiaries as to an employee's or Participant's employment (or
other period of service), termination
8
<PAGE> 10
of employment (or cessation of services), leave of absence, reemployment and
compensation shall be conclusive on all persons unless determined to be
incorrect. Participants and other persons entitled to benefits under the Plan
must furnish the Committee such evidence, data or information as the Committee
considers desirable to carry out the terms of the Plan.
SECTION 5
AMENDMENT AND TERMINATION
The Board may, at any time, amend or terminate the Plan; provided that
no amendment or termination may, in the absence of written consent to the change
by the affected Participant (or, if the Participant is not then living, the
affected beneficiary), adversely affect the rights of any Participant or
beneficiary under any Award granted under the Plan prior to the date such
amendment is adopted by the Board, except that adjustments pursuant to paragraph
3.2(e) shall not be subject to the foregoing limitations of this Section 5.
SECTION 6
DEFINED TERMS
In addition to the other definitions contained herein, the following
definitions shall apply:
(a) AWARD. The term "Award" shall mean any award or benefit granted under
the Plan, including, without limitation, the grant of Options and SARs.
(b) BOARD. The term "Board" shall mean the Board of Directors of the
Company.
(c) CODE. The term "Code" means the Internal Revenue Code of 1986, as
amended. A reference to any provision of the Code shall include
reference to any successor provision of the Code.
(d) ELIGIBLE INDIVIDUAL. The term "Eligible Individual" shall mean any
employee of the Company or a Subsidiary, and any member of the board of
directors of the Company or a Subsidiary. An Award may be granted to an
employee or director, in connection with hiring, retention or
otherwise, prior to the date the employee or director first performs
services for the Company or the
9
<PAGE> 11
Subsidiaries, provided that such Awards shall not become vested prior
to the date the employee or director first performs such services.
(e) FAIR MARKET VALUE. For purposes of determining the "Fair Market Value"
of a share of Stock as of any date, the following rules shall apply:
(i) If the principal market for the Stock is a national securities exchange
or the Nasdaq stock market, then the "Fair Market Value" as of that
date shall be the mean between the lowest and highest reported sale
prices of the Stock on that date on the principal exchange on which the
Stock is then listed or admitted to trading.
(ii) If sale prices are not available or if the principal market for
the Stock is not a national securities exchange and the Stock is not
quoted on the Nasdaq stock market, the average between the highest bid
and lowest asked prices for the Stock on such day as reported on the
Nasdaq OTC Bulletin Board Service or by the National Quotation Bureau,
Incorporated or a comparable service.
(iii) If the day is not a business day, and as a result, paragraphs (i)
and (ii) next above are inapplicable, the Fair Market Value of the
Stock shall be determined as of the last preceding business day. If
paragraphs (i) and (ii) next above are otherwise inapplicable, then the
Fair Market Value of the Stock shall be determined in good faith by the
Committee.
(f) SUBSIDIARY. The term "Subsidiary" means any company during any period
in which it is a "subsidiary corporation" (as that term is defined in
Code section 424(f)) with respect to the Company.
(g) STOCK. The term "Stock" shall mean shares of common stock of the
Company.
10
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF U.S. CAN CORPORATION
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Name Place Of Organization Trade Name
- -------------------------------------------------------------------------------------
<S> <C> <C>
United States Can Company State Of Delaware, U.S.A. U.S. Can
- -------------------------------------------------------------------------------------
U.S.C. Europe N.V. Netherlands Antilles N/A
- -------------------------------------------------------------------------------------
U.S.C. Europe Netherlands B.V. Netherlands N/A
- -------------------------------------------------------------------------------------
</TABLE>
NOTE: U.S.C. Europe Netherlands B.V. has nine foreign subsidiaries engaged in
metal can manufacturing in Europe, and also owns 36.5% of Formametal S.A., an
Argentine metal can manufacturer.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this form 10-K into the Company's previously filed
Registration Statements File Nos. 33-76742, 333-23647 and 333-51063 on Form S-8,
and 33-79556 on Form S-3.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 18,072
<SECURITIES> 0
<RECEIVABLES> 63,742
<ALLOWANCES> 17,063
<INVENTORY> 94,887
<CURRENT-ASSETS> 215,646
<PP&E> 485,828
<DEPRECIATION> 217,826
<TOTAL-ASSETS> 555,571
<CURRENT-LIABILITIES> 139,534
<BONDS> 0
0
0
<COMMON> 133
<OTHER-SE> 50,044
<TOTAL-LIABILITY-AND-EQUITY> 555,571
<SALES> 710,246
<TOTAL-REVENUES> 710,246
<CGS> 618,156
<TOTAL-COSTS> 618,156
<OTHER-EXPENSES> 3,575
<LOSS-PROVISION> 805
<INTEREST-EXPENSE> 33,182
<INCOME-PRETAX> (13,187)
<INCOME-TAX> (5,662)
<INCOME-CONTINUING> (7,525)
<DISCONTINUED> (8,528)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,053)
<EPS-PRIMARY> (1.21)
<EPS-DILUTED> (1.21)
</TABLE>
