<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 4, 1999
COMMISSION FILE NUMBER 0-21314
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)
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
As of July 31, 1999, 13,386,784 shares of U.S. Can Corporation's common
stock were outstanding.
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U.S. CAN CORPORATION AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JULY 4, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
U.S. Can Corporation and Subsidiaries Condensed Consolidated
Statements of Operations for the Quarterly and Six-Month Periods Ended
July 5, 1998 and July 4, 1999 3
U.S. Can Corporation and Subsidiaries Condensed Consolidated
Balance Sheets as of December 31, 1998 and July 4, 1999 4
U.S. Can Corporation and Subsidiaries Condensed Consolidated
Statements of Cash Flows for the Six-Months Ended
July 5, 1998 and July 4, 1999 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
PART II OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 6. Exhibits and Reports on Form 8-K 19
</TABLE>
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U.S. CAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(000's omitted, except per share data)
<TABLE>
<CAPTION>
For the Quarterly Period Ended For the Six Months Ended
July 5, 1998 July 4, 1999 July 5, 1998 July 4, 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
NET SALES $ 183,473 $ 186,773 $ 375,836 $ 371,689
COST OF SALES 160,009 158,335 329,202 317,374
--------- --------- --------- ---------
Gross income 23,464 28,438 46,634 54,315
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 8,274 8,611 16,489 16,868
--------- --------- --------- ---------
Operating income 15,190 19,827 30,145 37,447
INTEREST EXPENSE ON BORROWINGS 8,404 7,281 17,140 14,917
AMORTIZATION OF DEFERRED FINANCING COSTS 384 300 764 620
OTHER EXPENSES 428 432 867 864
--------- --------- --------- ---------
Income before income taxes 5,974 11,814 11,374 21,046
PROVISION FOR INCOME TAXES 2,169 4,676 4,487 8,357
--------- --------- --------- ---------
Income from continuing operations before extraordinary item 3,805 7,138 6,887 12,689
EXTRAORDINARY ITEM, net of income taxes
Net loss from early extinguishment of debt -- (808) -- (808)
--------- --------- --------- ---------
NET INCOME $ 3,805 $ 6,330 $ 6,887 $ 11,881
========= ========= ========= =========
PER SHARE DATA:
Basic:
Income from continuing operations before
extraordinary item $ 0.29 $ 0.53 $ 0.52 $ 0.95
Extraordinary item -- (0.06) -- (0.06)
--------- --------- --------- ---------
Net income $ 0.29 $ 0.47 $ 0.52 $ 0.89
========= ========= ========= =========
Weighted average shares outstanding (000's) 13,262 13,373 13,212 13,352
Diluted:
Income from continuing operations before extraordinary item $ 0.28 $ 0.53 $ 0.52 $ 0.94
Extraordinary item -- (0.06) -- (0.06)
--------- --------- --------- ---------
Net income $ 0.28 $ 0.47 $ 0.52 $ 0.88
========= ========= ========= =========
Weighted average shares outstanding (000's) 13,401 13,529 13,324 13,462
</TABLE>
The accompanying Notes to the Condensed Consolidated Financial Statements
are an integral part of these statements.
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<PAGE> 4
U.S. CAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(000'S omitted, except per share data)
<TABLE>
<CAPTION>
December 31, July 4,
ASSETS 1998 1999
----------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 18,072 $ 15,315
Accounts receivables, less allowances of $17,063 and
$16,331 as of December 31, 1998, respectively 63,742 82,827
Inventories 94,887 83,858
Prepaid expenses and other current assets 16,011 16,156
Deferred income taxes 22,934 22,935
--------- ---------
Total current assets 215,646 221,091
--------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Land 5,862 5,632
Buildings 63,026 62,017
Machinery, equipment and construction in process 416,940 410,204
--------- ---------
485,828 477,853
Less -- Accumulated depreciation and amortization (217,826) (220,835)
--------- ---------
Total property, plant and equipment 268,002 257,018
--------- ---------
INTANGIBLE ASSETS, less amortization of $11,853 and
$11,347 as of December 31, 1998 and July 4, 1999, respectively 51,928 51,064
OTHER ASSETS 19,995 19,159
--------- ---------
Total assets $ 555,571 $ 548,332
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 6,731 $ 6,042
Accounts payable 52,317 72,452
Accrued payroll, benefits and insurance 31,282 31,737
Restructuring reserves 25,674 21,325
Other current liabilities 23,530 24,798
--------- ---------
Total current liabilities 139,534 156,354
--------- ---------
SENIOR DEBT 45,617 38,999
SUBORDINATED DEBT 264,325 240,539
--------- ---------
Total long-term debt 309,942 279,538
--------- ---------
OTHER LONG-TERM LIABILITIES
Deferred income taxes 5,595 7,976
Other long-term liabilities 50,323 46,804
--------- ---------
Total other long-term liabilities 55,918 54,780
--------- ---------
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, 13,278,223 and 13,358,707 shares issued as
of December 31, 1998 and July 4, 1999, respectively 133 134
Paid-in-capital 109,839 111,328
Unearned restricted stock (829) (529)
Treasury common stock, at cost; 90,011 and 154,252
shares at December 31, 1998 and July 4, 1999, respectively (1,728) (1,383)
Currency translation adjustment (1,443) (7,976)
Accumulated deficit (55,795) (43,914)
--------- ---------
Total stockholders' equity 50,177 57,660
--------- ---------
Total liabilities and stockholders' equity $ 555,571 $ 548,332
========= =========
</TABLE>
The accompanying Notes to the Condensed Consolidated Financial Statements
are an integral part of these balance sheets
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U.S. CAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(000s omitted)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
CASH FLOWS FROM OPERATING ACTIVITIES: JULY 5, 1998 JULY 4, 1999
------------ --------------
<S> <C> <C>
Net income $ 6,887 $ 11,881
Adjustments to reconcile net income to net cash provided by
operating activities --
Depreciation and amortization 19,742 17,386
Extraordinary loss on extinguishment of debt -- 808
Deferred income taxes 1,719 1,575
Change in operating assets and liabilities --
Accounts receivable (18,503) (24,862)
Inventories (802) 4,552
Accounts payable 5,623 18,580
Accrued payrolls and benefits, insurance and other 6,654 2,566
Postretirement benefits 832 624
Other, net 6,867 (1,359)
-------- --------
Net cash provided by operating activities 29,019 31,751
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (8,379) (13,311)
Proceeds on sale of business -- 4,500
Change in restricted cash 29 --
Proceeds from sale of property -- 1,057
Investment in Formametal S.A -- (1,394)
-------- --------
Net cash used in investing activities (8,350) (9,148)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock and exercise of stock options 724 640
Net borrowings under the revolving line of credit and changes in
cash overdrafts (12,276) 5,285
Repurchase of 10 1/8% notes -- (23,786)
Payments of other long-term debt, including capital lease
obligations (9,312) (7,296)
Payments of debt refinancing costs (98) --
Purchase of treasury stock, net (1,125) 345
-------- --------
Net cash used in financing activities (22,087) (24,812)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (624) (548)
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (2,042) (2,757)
CASH AND CASH EQUIVALENTS, beginning of year 6,773 18,072
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 4,731 $ 15,315
======== ========
</TABLE>
The accompanying Notes to the Condensed Consolidated Financial Statements
are an integral part of these statements.
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U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 4, 1999
(UNAUDITED)
(1) PRINCIPLES OF REPORTING
The condensed 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, all of which are
foreign companies. All significant intercompany balances and transactions have
been eliminated. The consolidated group including the Corporation is hereinafter
referred to as the Company. These financial statements have been prepared in
accordance with generally accepted accounting principles for interim reporting.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
These financial statements, in the opinion of management, include normal
recurring adjustments necessary for a fair presentation. Operating results for
any interim period are not necessarily indicative of results that may be
expected for the full year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission; however, management believes that the
disclosures contained herein are adequate to make the information presented not
misleading. It is suggested that these financial statements be read in
conjunction with the previously filed financial statements and footnotes
included in the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1998.
Generally, quarterly accounting periods are based upon two four-week
periods and one five-week period. Management believes that this technique
provides a more consistent view of accounting data resulting in greater
comparability than the calendar month basis would provide.
(2) SPECIAL CHARGES AND DISCONTINUED OPERATIONS
1997 SPECIAL CHARGES
In 1998, the Company closed its Racine, Wisconsin aerosol assembly
plant, the Sparrows Point litho center in Baltimore, Maryland, and the
California Specialty plant in Vernalis, California. Costs associated with these
actions were recorded and provided for as part of 1997 restructuring charges. In
addition, the 1997 restructuring provision included a write-down to estimated
proceeds for the sale of the Orlando, Florida machine engineering center
("OMEC"). The sale of OMEC was completed on January 29, 1999 for $4.5 million in
cash.
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. Revenues from sales to third parties from these
operations were $94.3 million in the period ending November 8, 1998 (excluding
intra-company sales and ongoing third-party sales from the closed Midwest Litho
facility, which were transferred to other Metal Services facilities).
1998 SPECIAL CHARGES
In the third quarter of 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. There have been no significant changes to the estimated
costs or timing of the Company's restructuring estimates.
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<PAGE> 7
Cash costs for restructuring activities in the first six months of
1999 were $4.3 million. The Company anticipates spending another $0.2 million of
such costs in 1999 and $7.6 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.
(3) ACQUISITIONS
In March 1998, the Company acquired a 36.5% interest in Formametal
S.A. ("Formametal"), an aerosol can manufacturer in Argentina, for $4.6 million,
payable over a 15-month period. In connection with this investment, the Company
provided a guaranty, in an amount not to exceed $2.0 million, to secure the
repayment of certain indebtedness of Formametal. In January 1999, the Company
loaned Formametal $1.0 million for capital expenditures, with all principal and
interest payable in January 2004. In addition, the Company received a three-year
option to convert this loan into additional shares of Formametal, which, if
exercised, would take the Company's interest in Formametal up to 39.8%.
(4) INVENTORIES
All domestic inventories, except machine parts, are stated at cost
determined by the last-in, first-out ("LIFO") cost method, not in excess of
market. Inventories of approximately $19.9 million at December 31, 1998, and
$19.0 million at July 4, 1999, at the European subsidiaries and machine shop
inventory are stated at cost determined by the first-in, first-out ("FIFO") cost
method, not in excess of market. FIFO cost of LIFO inventories approximated
their LIFO value at December 31, 1998 and at July 4, 1999.
Inventories reported in the accompanying balance sheets were
classified as follows (000's omitted):
<TABLE>
<CAPTION>
DECEMBER 31, JULY 4,
1998 1999
------------ -------
<S> <C> <C>
Raw materials $ 21,171 $ 17,824
Work in process 42,146 40,526
Finished goods 26,848 25,508
Machine shop inventory 4,722 --
-------- --------
$ 94,887 $ 83,858
======== ========
</TABLE>
(5) DEBT OBLIGATIONS
The primary debt obligations of the Company at December 31, 1998 and July
4, 1999 consisted of the following (000's omitted):
<TABLE>
<CAPTION>
DECEMBER 31, JULY 4,
1998 1999
----------- ---------
<S> <C> <C>
Senior Debt
Capital lease obligations $ 15,511 $ 11,700
Secured term loan 25,128 23,646
Industrial revenue bonds 7,500 7,500
Mortgages and other 4,209 2,195
--------- ---------
52,348 45,041
Less--Current maturities (6,731) (6,042)
--------- ---------
Total senior debt 45,617 38,999
Senior subordinated 10 1/8% notes 264,325 240,539
--------- ---------
Total long-term debt $ 309,942 $ 279,538
========= =========
</TABLE>
In 1997, U.S. Can entered into an Amended and Restated Credit
Agreement with a group of banks (the "Credit Agreement"), originally providing a
$110 million revolving credit facility, which was reduced to $80 million in 1998
and to $50 million on April 13, 1999 because of the Company's reduced needs.
Obligations under the Credit Agreement were secured by U.S. Can's domestic
accounts receivable and inventories, however, this collateral was released in
May, 1999 because of the improved credit profile of the Company. Funds available
under the Credit Agreement may be used for general corporate purposes (including
working capital needs and permitted acquisitions).
7
<PAGE> 8
As of December 31, 1998 and July 4, 1999, U.S. Can had no borrowings
outstanding under the Credit Agreement, $12.3 million and $12.8 million,
respectively, in letters of credit had been issued pursuant thereto, and $67.7
million and $37.2 million, respectively, of unused credit remained available.
The weighted average interest rate of the loans outstanding was 9.90% and
9.83%, respectively.
In October, 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. As part of the Company's focus on debt reduction, it repurchased
through the open market and subsequently retired, $10.7 million and an
additional $23.8 million of the outstanding 10 1/8% Notes through December 31,
1998 and July 4, 1999, respectively. As a result of the early redemption, there
was an extraordinary charge in the second quarter of 1999 of $0.8 million, net
of taxes of $0.5 million, which represents the redemption premiums related to
the retirement of the 10 1/8% Notes. Under existing loan agreements the Company
can elect to repurchase up to $40.0 million of the outstanding 10 1/8% Notes. As
of July 1999, the Company has purchased the maximum amount of bonds allowed
under the existing loan agreement.
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. In conjunction with the release of
the collateral, certain covenants were tightened moderately. The covenants also
restrict the Company's ability to distribute dividends, to incur additional
indebtedness, to dispose of assets and to make investments, acquisitions,
mergers and transactions with affiliates. The Company was in compliance with all
financial ratios and covenants as of July 4, 1999.
(6) SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid interest on borrowings of approximately $18.0
million and $14.3 million for the six-month periods ended July 5, 1998 and July
4, 1999, respectively.
The Company paid approximately $1.0 million of income taxes for the
six-month period ended July 5, 1998 and no income taxes were paid during the
six-month period ended July 4, 1999.
During the six-month periods ended July 5, 1998 and July 4, 1999, the
Company issued stock valued at approximately $0.7 million and $0.9 million,
respectively, into certain of its employee benefit plans.
(7) NEW ACCOUNTING PRONOUNCEMENTS
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued in June 1998 and will be adopted by the Company in 2000.
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.
(8) 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 items such
as lighter fluid and turpentine, and plastic containers for industrial and
consumer
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products. Custom & Specialty produces a wide array of functional and decorative
tins, containers and other products.
The following is a summary of revenues from external customers and
income (loss) from operations for the periods ended July 5, 1998 and July 4,
1999, respectively (000's omitted):
<TABLE>
<CAPTION>
Three months ended Six months ended
July 5, July 4, July 5, July 4,
1998 1999 1998 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES FROM EXTERNAL CUSTOMERS:
Aerosol $ 119,999 $ 126,249 $ 247,379 $ 252,955
Paint, Plastic, & General Line 46,217 44,171 90,899 86,074
Custom & Specialty 17,257 16,353 37,558 32,660
--------- --------- --------- ---------
Total revenues $ 183,473 $ 186,773 $ 375,836 $ 371,689
========= ========= ========= =========
INCOME (LOSS) FROM OPERATIONS:
Aerosol $ 16,731 $ 21,690 $ 35,379 $ 41,560
Paint, Plastic, & General Line 4,388 3,706 7,901 7,978
Custom & Specialty 1,390 1,651 4,121 3,386
Corporate and eliminations (7,319) (7,220) (17,256) (15,477)
--------- --------- --------- ---------
Total income from operations $ 15,190 $ 19,827 $ 30,145 $ 37,447
========= ========= ========= =========
</TABLE>
(9) COMPREHENSIVE NET INCOME
The components of comprehensive income for the three-months and six
months ended July 5, 1998 and July 4, 1999 are as follows (000's omitted):
<TABLE>
<CAPTION>
Three months ended Six months ended
July 5, July 4, July 5, July 4,
1998 1999 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Income $ 3,805 $ 6,330 $ 6,887 $ 11,881
Foreign Currency Translation Adjustment 316 (2,538) (349) (6,533)
-------- -------- -------- --------
Comprehensive Income $ 4,121 $ 3,792 $ 6,538 $ 5,348
======== ======== ======== ========
</TABLE>
(10) SUBSIDIARY GUARANTOR INFORMATION
The 10 1/8% Notes are guaranteed on a full, unconditional, unsecured,
senior subordinated, joint and several basis by each of the Corporation's
Subsidiary Guarantors. As of and through July 4, 1999, U.S. Can, wholly owned by
the Corporation, was the only Subsidiary Guarantor. 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 other subsidiaries (the "Non-Guarantor Subsidiaries"), as
of December 31, 1998 and July 4, 1999, and for the six-month periods ended July
5, 1998 and July 4, 1999. 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.
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U.S. CAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED
July 4, 1999
(Unaudited)
(000's omitted)
<TABLE>
<CAPTION>
United States USC Europe
U.S. Can Can Company (Non- U.S. Can
Corporation (Subsidiary Guarantor Corporation
(Parent) Guarantor) Subsidiaries) Eliminations Consolidated
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES $ -- $ 307,016 $ 64,673 $ -- $ 371,689
COST OF SALES -- 261,236 56,138 -- 317,374
--------- --------- --------- --------- ---------
Gross income -- 45,780 8,535 -- 54,315
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES -- 13,371 3,497 -- 16,868
--------- --------- --------- --------- ---------
Operating income -- 32,409 5,038 -- 37,447
INTEREST EXPENSE ON BORROWINGS -- 13,623 1,294 -- 14,917
AMORTIZATION OF DEFERRED FINANCING COSTS -- 620 -- -- 620
OTHER EXPENSES -- 864 -- -- 864
EQUITY EARNINGS (LOSS) FROM SUBSIDIARY 11,881 2,482 -- (14,363) --
PROVISION FOR INCOME TAXES -- 7,095 1,262 -- 8,357
EXTRAORDINARY ITEM - LOSS ON THE EARLY
EXTINGUISHMENT OF DEBT, net of income tax -- (808) -- -- 808
========= ========= ========= ========= =========
NET INCOME $ 11,881 $ 11,881 $ 2,482 $ (14,363) $ 11,881
========= ========= ========= ========= =========
</TABLE>
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U.S. CAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JULY 5, 1998
(Unaudited)
(000's OMITTED)
<TABLE>
<CAPTION>
United States USC Europe
U.S. Can Can Company (Non- U.S. Can
Corporation (Subsidiary Guarantor Corporation
(Parent) Guarantor) Subsidiaries) Eliminations Consolidated
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES $ -- $315,305 $ 60,531 $ -- $375,836
COST OF SALES -- 275,121 54,081 -- 329,202
-------- -------- -------- -------- --------
Gross income -- 40,184 6,450 -- 46,634
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES -- 14,197 2,292 -- 16,489
-------- -------- -------- -------- --------
Operating income -- 25,987 4,158 -- 30,145
INTEREST EXPENSE ON BORROWINGS -- 15,833 1,307 -- 17,140
AMORTIZATION OF DEFERRED FINANCING COSTS -- 764 -- -- 764
OTHER EXPENSES -- 867 -- -- 867
EQUITY EARNINGS (LOSS) FROM SUBSIDIARY 6,887 2,007 -- (8,894) --
PROVISION FOR INCOME TAXES -- 3,643 844 -- 4,487
======== ======== ======== ======== ========
NET INCOME (LOSS) $ 6,887 $ 6,887 $ 2,007 $ (8,894) $ 6,887
======== ======== ======== ======== ========
</TABLE>
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U.S. CAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
As of July 4, 1999
(Unaudited)
(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 $ -- $ 6,872 $ 8,443 $ -- $ 15,315
Accounts receivable -- 55,257 27,570 -- 82,827
Inventories -- 64,873 18,985 -- 83,858
Prepaid expenses and other assets 34,246 4,845 -- 39,091
--------- --------- --------- --------- ---------
Total current assets -- 161,248 59,843 -- 221,091
NET PROPERTY, PLANT AND EQUIPMENT -- 193,835 63,183 -- 257,018
INTANGIBLE ASSETS -- 51,064 -- -- 51,064
OTHER ASSETS 240,539 12,419 6,740 (240,539) 19,159
INVESTMENT IN SUBSIDIARIES 66,942 50,718 -- (117,660) --
--------- --------- --------- --------- ---------
Total assets $ 307,481 $ 469,284 $ 129,766 $(358,199) $ 548,332
========= ========= ========= ========= =========
CURRENT LIABILITIES
Current maturities of long-term debt $ -- $ 3,431 $ 2,611 $ -- $ 6,042
Accounts payable -- 53,701 18,751 -- 72,452
Other current liabilities -- 67,035 10,825 -- 77,860
--------- --------- --------- --------- ---------
Total current liabilities -- 124,167 32,187 -- 156,354
SENIOR DEBT -- 15,798 23,201 -- 38,999
SUBORDINATED DEBT 240,539 240,539 -- (240,539) 240,539
OTHER LONG-TERM LIABILITIES -- 50,464 4,316 -- 54,780
INTERCOMPANY ADVANCES 9,282 (28,626) 19,344 -- --
STOCKHOLDERS' EQUITY 57,660 66,942 50,718 (117,660) 57,660
--------- --------- --------- --------- ---------
Total liabilities and stockholders' $ 307,481 $ 469,284 $ 129,766 $(358,199) $ 548,332
========= ========= ========= ========= =========
</TABLE>
12
<PAGE> 13
U.S. CAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 1998
(Unaudited)
(000s omitted)
<TABLE>
<CAPTION>
United States USC Europe
U.S. Can Can Company (Non- U.S. Can
Corporation (Subsidiary 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' $ 310,970 $ 471,286 $ 131,167 $(357,852) $ 555,571
========= ========= ========= ========= =========
</TABLE>
13
<PAGE> 14
US CAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JULY 4, 1999
(Unaudited)
(000s omitted)
<TABLE>
<CAPTION>
U.S. Can
U.S. Can Company USC Europe U.S. Can
Corporation (Subsidiary (Non-Guarantor Corporation
(Parent) Guarantor) Subsidiaries) Eliminations Consolidated
----------- --------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ -- $ 29,824 $ 1,927 $ -- $ 31,751
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (11,804) (1,507) -- (13,311)
Proceeds on the sale of business -- 4,500 -- -- 4,500
Proceeds on the sale of property -- 1,057 -- -- 1,057
Investment in Formametal S.A -- -- (1,394) -- (1,394)
-------- -------- -------- -------- --------
Net cash used in investing activities -- (6,247) (2,901) -- (9,148)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in intercompany advances (985) (3,494) 4,479 -- --
Issuance of common stock and exercise of stock options 640 -- -- -- 640
Net borrowings under the revolving line of credit and changes in
cash overdrafts -- 4,994 291 -- 5,285
Repurchase of 10 1/8% notes -- (23,786) -- -- (23,786)
Payments of other long-term debt, including capital lease
obligations -- (3,827) (3,469) -- (7,296)
Purchase of treasury stock, net 345 -- -- -- 345
-------- -------- -------- -------- --------
Net cash (used in) provided by financing activities -- (26,113) 1,301 -- (24,812)
-------- -------- -------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH -- -- (548) -- (548)
-------- -------- -------- -------- --------
DECREASE IN CASH AND CASH EQUIVALENTS -- (2,536) (221) -- (2,757)
CASH AND CASH EQUIVALENTS, beginning of year -- 9,408 8,664 -- 18,072
-------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS, end of period $ -- $ 6,872 $ 8,443 $ -- $ 15,315
======== ======== ======== ======== ========
</TABLE>
14
<PAGE> 15
US CAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JULY 5, 1998
(Unaudited)
(000s omitted)
<TABLE>
<CAPTION>
U.S. Can
U.S. Can Company USC Europe U.S. Can
Corporation (Subsidiary (Non-Guarantor Corporation
(Parent) Guarantor) Subsidiaries) Eliminations Consolidated
----------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ -- $ 26,692 $ 2,327 $-- $ 29,019
-------- -------- -------- --- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (5,811) (2,568) -- (8,379)
Changes in restricted cash -- 29 -- -- 29
-------- -------- -------- --- --------
Net cash used in investing activities -- (5,782) (2,568) -- (8,350)
-------- -------- -------- --- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in intercompany advances 401 (3,638) 3,237 -- --
Issuance of common stock and exercise of stock options 724 -- -- -- 724
Net borrowings under the revolving line of credit --
and changes in cash overdrafts -- (12,146) (130) -- (12,276)
Borrowings of other long-term debt, including capital lease --
obligations -- -- -- -- --
Payments of other long-term debt, including capital lease --
obligations -- (5,314) (3,998) -- (9,312)
Payments of debt refinancing costs -- (98) -- -- (98)
Purchase of treasury stock, net (1,125) -- -- -- (1,125)
-------- -------- -------- --- --------
Net cash (used in) provided by financing activities -- (21,196) (891) -- (22,087)
-------- -------- -------- --- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH -- -- (624) -- (624)
-------- -------- -------- --- --------
DECREASE IN CASH AND CASH EQUIVALENTS -- (286) (1,756) -- (2,042)
CASH AND CASH EQUIVALENTS, beginning of year -- 415 6,358 -- 6,773
-------- -------- -------- --- --------
CASH AND CASH EQUIVALENTS, end of period $ -- $ 129 $ 4,602 $-- $ 4,731
======== ======== ======== === ========
</TABLE>
15
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following narrative discusses the results of operations, liquidity
and capital resources for the Company on a consolidated basis. This section
should be read in conjunction with the Corporation's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained therein.
RESULTS OF OPERATIONS
On November 9, 1998, U.S. Can sold substantially all of the assets of
its commercial Metal Services business and, accordingly, the Metal Services
business was shown as a discontinued operation. 1998 revenues of the Metal
Services business up to the point of the sale were $94.3 million. The Company
also sold its machine engineering center in Orlando, Florida ("OMEC") on January
29, 1999. Revenues from this location were $8.2 million in 1998. In addition, as
of August 1999, the Company continues to actively work towards the sale of its
Metal Closure business which operates out of the Glendale, West Virginia
facility. 1998 revenues from this operation were $18.1 million and comparable
revenues from this facility in the second quarter of 1999 and for the six-month
period ended July 4, 1999 were $4.3 million and $ 8.4 million, respectively.
QUARTER ENDED JULY 4, 1999, AS COMPARED TO QUARTER ENDED JULY 5, 1998
Net Sales
Net sales for the quarter ended July 4, 1999, totaled $186.8 million, a
1.8% increase versus the corresponding period in 1998. Stronger aerosol unit
volumes, both in the U.S. and Europe, contributed to the sales increase.
Along business segment lines, Aerosol net sales in the second quarter of
1999 were $126.3 million. This represented a 5.2% increase primarily due to the
ramp-up of the Wales facility and strong U.S. demand. AS anticipated by the
Company, the Paint, Plastic and General Line segment had a 4.4% decrease in net
sales due to reduced customer requirements during the current period. In the
Custom & Specialty segment, sales of $16.4 million were down 5.2% versus the
second quarter of 1998.
Gross Income
Gross income of $28.4 million for the second quarter of 1999 was up $5.0
million, or 21.2%, versus the second quarter of 1998. Gross margin increased to
15.2% of net sales for the period from 12.8% in the comparable period last year.
The primary factors influencing the increase were the operating benefits being
realized from the 1997 and the 1998 restructuring programs, solid productivity
improvements, and the Wales operation ramping up its activity.
Aerosol gross income increased 29.6%, aided by higher sales volume, the
Welsh operation improvement, and the effects of consolidating manufacturing
operations. Paint, Plastic and General Line gross income declined 15.5% versus
the second quarter of 1998 as a result of lower sales and operating
inefficiencies in a plastic container manufacturing facility. Organizational
changes were initiated in May 1999 to address operational issues at this
facility. Custom & Specialty gross income increased 18.8% for the second quarter
of 1999, due principally to actions taken as part of the restructuring programs.
Certain expenses are not allocated to specific business segments. These charges
include corporate engineering costs and other miscellaneous charges.
Operating Income
Operating income in the second quarter of 1999 was $19.8 million versus
$15.2 million in the second quarter of 1998. Operating margin increased to 10.6%
of net sales for the period from 8.3% in the comparable period last year. Higher
gross margins in 1999 favorably impacted operating income. Selling, general, and
administrative expenses as a percentage of net sales were flat compared to the
same period a year ago.
Interest and Other Expenses
Interest expense in the second quarter of 1999 was down 13.4%, or $1.1
million, versus the second quarter of 1998. Tighter controls on working capital
and capital expenditures, coupled with strong operating cash flows, have
resulted in long-term debt reductions of $71.2 million since the second quarter
of last year and $31.1 million since year-end 1998.
16
<PAGE> 17
Income from Continuing Operations
Second quarter income from continuing operations before extraordinary
item of $7.1 million and net income of $6.3 million were up 87.6% and 66.4%,
respectively, versus the same period last year. Positive gross margin impact and
a decrease in interest expense are the primary drivers of this growth.
Extraordinary Item
In 1999, the Company recorded a $0.8 million extraordinary charge (net
of related income taxes of $0.5 million) relating to the early redemption
premium on $23.8 million of its 10 1/8% subordinated notes.
SIX-MONTH PERIOD ENDED JULY 4, 1999, AS COMPARED TO SIX-MONTH PERIOD ENDED
JULY 5, 1998
Net Sales
Net sales for the six-month period ended July 4, 1999, totaled $371.7
million, a 1.1% decrease versus the corresponding period in 1998.
Along business segment lines, Aerosol net sales in the first half of
1999 were $253.0 million, 2.3% ahead of the same period last year. Stronger
second quarter U.S. volumes and increased production in Wales enhanced
year-to-date sales comparisons. Consistent with expectations, the Paint, Plastic
and General Line segment had a 5.3% decrease in net sales due to reduced
customer requirements during the current period. In the Custom & Specialty
segment, sales were down 13.0% due principally to significant liquidation of
excess holiday products in early 1998.
Gross Income
Gross income of $54.3 million for the six-month period in 1999 was up
$7.7 million, or 16.5%, versus the corresponding period of 1998. Gross margin of
14.6% for the first half of 1999 compares favorably to the 12.4% reported in the
first half of 1998. Improved margins reflect productivity improvements and
benefits derived from restructuring programs.
Aerosol gross income increased 17.5%, which is due to higher sales
volume, the Welsh operation ramp-up, and the effects of consolidating
manufacturing operations (as part of the restructuring plans). Paint, Plastic
and General Line gross income increased 1.0% versus the first half of 1998.
Gross margins in this segment improved largely due to enhanced productivity.
Custom & Specialty gross income declined 17.8% for the six-month period of 1999,
due largely to lower sales levels. Certain expenses are not allocated to
specific business segments. These charges include corporate engineering costs
and other miscellaneous charges.
Operating Income
Operating income reported for the first six-months of 1999 was $37.4
million versus $30.1 million in the first half of 1998. Operating margin
increased to 10.1% of net sales for the period from 8.0% in the comparable
period last year. Higher gross margins in 1999 favorably impacted operating
income. Selling, general, and administrative expenses as a percentage of net
sales were relatively unchanged compared to the same period one year ago.
Interest and Other Expenses
Interest expense in the first half of 1999 was down 13.0%, or $2.2
million, versus the first half of 1998, as a result of long-term debt reduction.
Tighter controls on working capital and capital expenditures, coupled with
strong operating cash flows, provided the sources for debt repayment.
Income from Continuing Operations
Income from continuing operations before extraordinary item for the
first six-months of 1999 of $12.7 million and net income of $11.9 million were
up 84.2% and 72.5%, respectively, versus the same period last year. Positive
gross margin impact and a decrease in interest expense are the two primary
components of the growth.
17
<PAGE> 18
Extraordinary Item
In 1999, the Company recorded a $0.8 million extraordinary charge (net
of related income taxes of $0.5 million) relating to the early redemption
premium on $23.8 million of its 10 1/8% subordinated notes.
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of 1999, the Company met its liquidity needs
through internally generated cash flow. Principal liquidity needs included
operations, debt amortization, capital expenditures and the Company's minority
investment in Formametal (see Note (3) to the Condensed Consolidated Financial
Statements). Cash flow from operations was $31.8 million in the first six months
of 1999, compared to $29.0 million in the first six months of 1998. Cash
outflows in the first six months of 1999 included $4.3 million of payments
related to restructuring costs. The Company anticipates spending another $0.2
million of such costs during the remainder of 1999.
As of July 4, 1999, U.S. Can had no borrowings outstanding under the
Credit Agreement, $12.8 million in letters of credit had been issued pursuant
thereto, and $37.2 million of unused credit remained available thereunder. On
April 13, 1999, the revolver was reduced from $80 million to $50 million due to
the Company's reduced borrowing needs. As of July 4, 1999, U.S. Can was in
compliance with the Credit Agreement and its other long-term debt agreements.
(See Note (5) to the Condensed Consolidated Financial Statements for a
description of the Credit Agreement.)
The Company expects total capital expenditures in 1999 to be
approximately $30 to $33 million and has spent $13.3 million in the first six
months of the year. The 1999 expenditures include plans to install two new
lithography presses in the fourth quarter. The Company's capital investments
have historically yielded reduced operating costs and improved the Company's
profit margins, and management believes that the strategic deployment of capital
will enable the Company to improve its overall profitability by leveraging the
economies of scale inherent in the manufacture of containers.
Management believes that cash flow from operations, amounts available
under its credit facilities and proceeds from sales of assets 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. The Company believes it will be able to refinance the Revolving
Credit Facility on or prior to maturity. The Company believes future strategic
acquisition opportunities are important to its growth and should they arise, the
Company would expect to finance them though some combination of cash, stock
and/or debt financing.
YEAR 2000
Management has reviewed, evaluated and assessed the implication of the
Year 2000 issue and believes that it will not pose significant operational
problems for the Company. The Company divided its Year 2000 issues into four
major categories, namely, Corporate information technology, embedded technology
in its manufacturing operations, supporting customers and suppliers
capabilities. The Company's corporate information systems are near completion
relative to the Year 2000 compliance issues and the Company does not expect any
disruption in its activities. The majority of embedded technology in the
manufacturing operations have been made Year 2000 compliant as of the end of the
second quarter. Those systems that are not yet corrected have been identified
and are in the process being resolved and contingency plans are being finalized.
The Company has met with numerous customers and has satisfied their concerns
relative to Year 2000 readiness of the Company. Many key suppliers have been
visited or surveyed for which there seems to be a general state of readiness.
Appropriate contingency plans are being made if the Company believes there may
be a Year 2000 risk at a specific supplier
If Year 2000 issues are not identified, or assessment, remediation and
testing are not effected in a timely manner, it is possible that the Year 2000
issue will materially and adversely impact the Company's results of operations.
It is also possible that there will be an 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 also have an impact on
the results of the Company to the extent they relate to the Company's ongoing
operations and business requirements.
18
<PAGE> 19
FORWARD LOOKING STATEMENT
Certain statements in this filing constitute "forward-looking
statements" within the meaning of the Federal securities laws. Such statements
involve known or unknown risks and uncertainties which may cause the Company's
actual results, performance or achievements to be materially different than
future results, performance or achievements expressed or implied in this filing.
By way of example and not limitation and in no particular order, known risks and
uncertainty include the 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; changes in raw
material costs; the effect Year 2000 may have on computer systems; and currency
fluctuation. In light of these and other risks and uncertainties, the inclusion
of a forward-looking statement in this filing should not be regarded as a
representation by the Company that any future results, performance or
achievement will be attained.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Management does not believe the Company's exposure to market risk has
significantly changed since year-end 1998 and believes that such risks are
immaterial.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDING
In April 1999, the National Labor Relations Board ("NRLB") upheld
substantially all of the Administrative Law Judge's decision concerning the
Company's compliance with certain interplant job opportunity provisions of a
collective bargaining agreement. The Company has appealed to the NLRB's decision
to the Court of Appeals for the Seventh Circuit. Reference is made to Note (9)
of the Company's Consolidated Financial Statements contained in the Company's
Form 10-K for the year ended December 31, 1998, for a description of this
proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The registrant's Annual Meeting of Stockholders was held on April 22,
1999. The following persons were nominated and elected to serve as Directors of
the registrant for a term of three years or until their successors have been
duly elected and qualified:
Nominee For Withheld
- -----------------------------------------------------------------------
Charles W. Gaillard 11,173,683 38,638
Ricardo Poma 11,172,459 39,862
Louis B. Susman 11,172,945 39,376
In addition, the proposal to adopt the 1999 Equity Incentive Plan was
approved in accordance with the following vote:
For Against Withheld Broker Non-Votes
- ----------------------------------------------------------------------------
6,710,001 1,146,734 3,402 3,352,184
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
INCORPORATION
EXHIBIT BY REFERENCE
NUMBER DESCRIPTION OF DOCUMENT (IF APPLICABLE)
- ------- ----------------------- ---------------
10.1 Amendment No. 5 to Credit Agreement
27.1 Financial Data Schedule (EDGAR version only)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
19
<PAGE> 20
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.
U.S. CAN CORPORATION
Date: August 16, 1999 By: /s/ John L. Workman
-----------------------------
John L. Workman
Executive Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the undersigned, in his capacity as the principal
financial officer of the registrant.
Date: August 16, 1999 By: /s/ John L. Workman
-----------------------------
John L. Workman
Executive Vice President and Chief Financial
Officer
20
<PAGE> 1
EXECUTION COPY
AMENDMENT NO. 5
TO
AMENDED AND RESTATED CREDIT AGREEMENT
AND
SECURITY INTEREST RELEASE
THIS AMENDMENT NO. 5 TO AMENDED AND RESTATED CREDIT AGREEMENT AND
SECURITY INTEREST RELEASE ("Agreement") is being executed and delivered as of
April 30, 1999, by and among United States Can Company, a Delaware corporation
(the "Borrower"), the financial institutions from time to time party to the
Amended and Restated Credit Agreement referred to below (collectively, the
"Lenders", and each individually, a "Lender"), and Bank of America National
Trust and Savings Association (as successor to Bank of America Illinois), as the
"Agent" for the Lenders (the "Agent"). Undefined capitalized terms which are
used herein shall have the meanings ascribed to such terms in the Credit
Agreement.
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders and the Agent are parties to that
certain Amended and Restated Credit Agreement dated as of April 25, 1997 (as
heretofore amended and modified by that certain Amendment No. 1 and Waiver No. 1
thereto dated as of November 12, 1997, that certain Amendment No. 2 and Waiver
No. 2 dated as of February 19, 1998, that certain Amendment No. 3 dated as of
September 11, 1998, and that certain Amendment No. 4 and Waiver No. 3 dated as
of October 15, 1998, in each case among such parties, the "Credit Agreement"),
pursuant to which the Lenders have agreed to provide, subject to the terms and
conditions contained therein, certain loans and other financial accommodations
to the Borrower;
WHEREAS, the Borrower has requested, and subject to the terms and
conditions of this Agreement the Lenders and the Agent have agreed, (i) to
release the Agent's Liens on the Collateral securing the Obligations and (ii) to
reduce the Commitment Amount from $80,000,000 to $50,000,000;
WHEREAS, as a condition, among others, to the Lenders' and the
Agent's willingness to agree to such requested release of Liens, the Lenders and
the Agent require that the financial covenants set forth in Sections 6.3(b), (c)
and (d) be modified in the manner set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises, the
terms and conditions stated herein and other valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by the Borrower, the Lenders
and the Agent, such parties hereby agree as follows:
<PAGE> 2
1. Amendment No. 5 to Credit Agreement. Subject to Paragraph 3 of
this Agreement, and effective as of the date of this Agreement, the Credit
Agreement is hereby amended as follows (section and schedule references herein
refer to those of the Credit Agreement):
(a) Each of Sections 1.5, 2.1.2, 2.1.3, 2.2.2, 2.8.1(e), 2.20,
4.1(h), 4.1(i), 4.1(k), 5.1(v), 6.1(n), 6.2(h)(i) and 8.10 are hereby deleted in
their entirety and replaced with the following reference:
[intentionally omitted].
(b) Section 2.21 is amended to delete the second sentence thereof in
its entirety and to replace such sentence with the following sentence:
Notwithstanding anything contained herein to the contrary, the Borrower
shall not apply the proceeds of any Borrowing or utilize any Letter of
Credit to directly or indirectly provide funds to or for the benefit of
any Subsidiary for acquisitions permitted by Section 6.2(a), unless, in
the case of any acquisition resulting in the Borrower directly or
indirectly having a new Domestic Subsidiary or in the case of any
acquisition of assets by any existing or newly created Domestic
Subsidiary of the Borrower (including, without limitation, an
acquisition by merger), (a) the Borrower shall have caused such Domestic
Subsidiary to have executed and delivered in favor of the Agent, for the
benefit of the Lenders, an unconditional guaranty of the Obligations
pursuant to a guaranty substantively similar to the guaranties
previously executed by former Subsidiaries of the Borrower in connection
with the Existing Agreement (in each case, in form, scope and substance
reasonably acceptable to the Agent, collectively, the "Subsidiary
Guaranties") and (b) the Borrower shall have delivered or cause to be
delivered such other agreements, instruments, documents, including,
without limitation, subordination agreements, intercreditor agreements,
secretary's certificates, legal opinions, certified resolutions,
incumbency certificates, certificates of incorporation, by-laws, good
standing certificates and lien search reports, as the Agent may
reasonably request with respect to such Subsidiary Guaranties; provided,
however, that such Subsidiary Guaranties and other documentation shall
only be required with respect to Domestic Subsidiaries which have not
been merged with and into the Borrower, or with and into another
Domestic Subsidiary with respect to which a Subsidiary Guaranty was
previously executed and delivered to the Agent, within sixty (60) days
of such acquisition or creation of such Domestic Subsidiary or such
acquisition of assets.
(c) Section 5.1(c) is amended to delete in its entirety the
parenthetical at the end of such section.
(d) Section 5.1(d) is amended to delete, in its entirety, all
language in such section which immediately follows the reference therein to the
term "Loan Documents".
-2-
<PAGE> 3
(e) Section 5.1(q) is amended to delete, in its entirety, all
language in such section which immediately follows the phrase "in all material
respects" set forth therein.
(f) Section 5.1(r) is amended to delete in its entirety the
parenthetical at the end of the third sentence of such section.
(g) Section 6.1(m) is amended to delete in its entirety the
parenthetical contained within the first sentence of such section.
(h) Section 6.2(a)(iii) is amended to delete, in its entirety, all
language in subclause (a) of such section which immediately follows the
reference therein to the term "Loan Documents".
(i) Section 6.2(b)(iii) is amended to delete, in its entirety, the
phrase "which does not constitute Collateral" as set forth therein.
(j) Section 6.2(p) is deleted in its entirety and replaced with the
following provision:
(p) Change of Location. The Borrower shall not, nor shall it
permit any of its Domestic Subsidiaries to, change the location of its
principal place of business, chief executive office, chief place of
business or its records concerning its business and financial affairs
from the contiguous continental United States of America to any place
outside the contiguous continental United States of America.
(k) Section 6.3(b) is amended to delete, in its entirety, the
schedule of periods and ratios set forth therein and to replace such schedule
with the following schedule:
Period Ratio
------ -----
Closing Date through and
including March 31, 1999 4.00 to 1.00
April 1, 1999 through and
including March 31, 2000 3.85 to 1.00
April 1, 2000 through and
including March 31, 2001 3.75 to 1.00
April 1, 2001 and
thereafter 3.50 to 1.00.
(l) Section 6.3(c) is amended to delete, in its entirety, the
schedule of periods and ratios set forth therein and to replace such schedule
with the following schedule:
-3-
<PAGE> 4
Period Ratio
------ -----
Closing Date through and
including March 31, 1999 6.00 to 1.00
April 1, 1999 through and
including March 31, 2001 5.75 to 1.00
April 1, 2001 and
thereafter 5.50 to 1.00.
(m) Section 6.3(d) is amended to delete, in its entirety, the
schedule of periods and ratios set forth therein and to replace such schedule
with the following schedule:
Period Ratio
------ -----
Closing Date through and
including March 31, 1999 2.50 to 1.00
April 1, 1999 and
thereafter 2.00 to 1.00.
(n) Section 7.1(j) is deleted in its entirety and replaced
with the following provision:
(j) Termination of Documents. Any of the Loan
Documents shall cease for any reason to be in full force and effect
(other than in accordance with the terms hereof or thereof), or the
Borrower, any of its Subsidiaries or any guarantor of the Obligations
shall disavow its obligations under, or shall contest the validity or
enforceability of, any of the Loan Documents or the Obligations, or the
Parent Indenture or the subordination provisions of any of the
documents and instruments evidencing any Subordinated Debt shall at any
time cease to be in full force and effect, or the Borrower, the Parent
or any of their Subsidiaries shall institute any action seeking a
determination of any of the foregoing.
(o) Section 8.3 is amended to make lower case the first letter
in the word "Collateral" set forth therein.
(p) Section 8.9 is amended to delete the reference therein to
the term "Collateral Documents" and replace such reference with reference to the
term "Loan Documents".
(q) Schedule I is amended to delete, in their entirety, each
of the definitions of "Collateral", "Collateral Documents", "Metal Services
Assets", "Metal Services Gross Proceeds",
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<PAGE> 5
"Metal Services Reduction Increment", "Metal Services Reduction Date" and "Metal
Services Sale Date".
(r) Schedule I is further amended to delete, in its entirety,
the definition of "Commitment Amount" and to replace such definition with the
following definition:
"Commitment Amount" means $50,000,000 at all times,
subject to reduction pursuant to Section 2.2.
(s) Schedule I is further amended to delete, in its entirety,
clause (iv) of the definition of "EBITDA" and to replace such clause with the
following clause:
(iv) for purposes of computing the Borrower's and its consolidated
Subsidiaries' EBITDA for any four (4) fiscal quarter period, the amount
of EBITDA otherwise calculated pursuant to this definition shall be
increased by the aggregate amount of that portion of any unusual
charges incurred by the Borrower and its Subsidiaries during such
period which will not result in the outlay of cash during such
computation period and is deducted in otherwise computing EBITDA for
such period, but only to the extent such amount does not exceed
$15,000,000 during such period,
(t) Schedule I is further amended to delete the reference to
"Collateral Documents" in the definition of "Loan Documents" and to replace such
reference with a reference to "Subsidiary Guaranties".
(u) Schedule I is further amended to delete, in its entirety,
clause (a) of the definition of "Material Adverse Effect" and to replace such
clause with the following reference:
[intentionally omitted]
(v) Schedule I is further amended to delete, in its entirety,
clause (b) of the definition of "Permitted Disposition" and to replace such
clause with the following clause:
(b) any other asset or assets the disposition of which is for a fair
market price and results in cash and noncash proceeds in an aggregate
amount for all such dispositions made by the Borrower and its Domestic
Subsidiaries in any fiscal year of the Borrower and its Subsidiaries,
not exceeding 5% of the consolidated total assets of the Borrower for
the then immediately preceding fiscal year of the Borrower;
(w) Schedule I is further amended to delete, in its entirety,
clause (iv) of the definition of "Pricing EBITDA" and to replace such clause
with the following clause:
(iv) for purposes of computing the Borrower's and its consolidated
Subsidiaries' Pricing EBITDA for any four (4) fiscal quarter period,
the amount of Pricing EBITDA otherwise calculated pursuant to this
definition shall be increased by the aggregate amount of that
-5-
<PAGE> 6
portion of any unusual charges incurred by the Borrower and its
Subsidiaries during such period which will not result in the outlay of
cash (whether during such computation period or any subsequent period)
and is deducted in otherwise computing Pricing EBITDA for such period,
but only to the extent such amount does not exceed $15,000,000 during
such period,
(x) Schedule I is further amended to delete, in its entirety, the
definition of "Subsidiary Documents" and to replace such definition with the
following definition:
"Subsidiary Guaranties" has the meaning specified in Section 2.21.
(y) Schedule II is deleted in its entirety and replaced with the
schedule attached hereto as Exhibit A.
2. Release of Security Interests; Termination of Security Agreement.
Subject to Paragraph 3 of this Agreement, and effective as of the date of this
Agreement, the Agent hereby (a) releases, and each of the Lenders hereby
authorizes the Agent to release, each of the security interests heretofore
granted in favor of the Agent and securing the Obligations pursuant to the
Security Agreement, (b) agrees (and, upon the effectiveness of this paragraph,
the Borrower hereby also agrees) that the provisions of the Security Agreement,
other than those set forth in Section 20 thereof (which shall continue in full
force and effect), are hereby terminated and (c) agrees to execute and deliver
to the Borrower, as soon as practicable following the effectiveness of this
Agreement, UCC Termination Statements in recordable form with respect to each
UCC Financing Statement heretofore recorded by or on behalf of the Agent with
respect to such security interests, it being understood and agreed that the
recordation of such UCC Termination Statements shall be the sole responsibility
of the Borrower and all costs and expenses incurred by the Agent in connection
with the preparation and recordation of such statements shall be for the sole
account of the Borrower.
3. Effectiveness of this Agreement; Conditions Precedent. The
provisions of Paragraphs 1 and 2 shall be deemed to have become effective as of
the date of this Agreement, but such effectiveness shall be expressly
conditioned upon the Agent's receipt of an originally- executed counterpart (or
facsimile thereof) of this Agreement executed by a duly authorized officer of
the Borrower and by duly authorized officers of the Majority Lenders.
4. Representations, Warranties and Covenants. (a) The Borrower
hereby represents and warrants that this Agreement constitutes the legal, valid
and binding obligation of the Borrower enforceable against the Borrower in
accordance with its terms.
(b) The Borrower hereby represents and warrants that its execution
and delivery of this Agreement, and its performance hereafter of the Credit
Agreement as modified by this Agreement, have been duly authorized by all
necessary corporate action, do not violate any provision of its certificate of
incorporation, bylaws or other charter documents, will not violate any law,
regulation, court order or writ applicable to it, will not require the approval
or consent of
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<PAGE> 7
any governmental agency, and do not require the approval or consent of any third
party under the terms of any contract or agreement to which the Borrower, Parent
or any Subsidiary of the Borrower or Parent is bound (including, without
limitation, the Parent Indenture).
(c) The Borrower hereby represents and warrants that, after giving
effect to all of the provisions of this Agreement, (i) no Default or Event of
Default has occurred and is continuing or will have occurred and be continuing
and (ii) all of the representations and warranties of the Borrower contained in
the Credit Agreement (other than representations and warranties which, in
accordance with their express terms, are made only as of a specified date) are,
and will be, true and correct as of the date of the Borrower's execution hereof
in all material respects as though made on and as of such date.
5. Reference to and Effect on Credit Agreement. The Credit Agreement
shall remain in full force and effect and is hereby ratified and confirmed.
Except as expressly provided in Paragraph 2 hereof, neither the execution,
delivery nor effectiveness of this Agreement shall operate as a waiver of any
right, power or remedy of the Agent or any Lender of any Default or Event of
Default under the Credit Agreement, all of which the Agent and the Lenders
hereby expressly reserve. Nothing contained herein shall require the Agent or
the Lender to hereafter waive any Default or Event of Default, or to further
amend any provisions of any Loan Document, whether or not similar to the waivers
or amendments effected by this Agreement. The Borrower, the Lenders and the
Agent agree and acknowledge that this Agreement constitutes a "Loan Document"
under and as defined in the Credit Agreement.
6. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws and decisions of the State of Illinois.
7. Agent's Expenses. The Borrower hereby agrees to promptly
reimburse the Agent for all of the reasonable out-of-pocket expenses, including,
without limitation, attorneys' and paralegals' fees, it has heretofore or
hereafter incurred or incurs in connection with the preparation, negotiation and
execution of this Agreement and the UCC Termination Statement referred to in
Paragraph 2 above.
8. Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original and all of which together shall constitute
one and the same agreement among the parties.
* * * *
-7-
<PAGE> 8
IN WITNESS WHEREOF, this Agreement has been duly executed as
of the day and year first above written.
UNITED STATES CAN COMPANY
By: ____________________________
Name: Peter J. Andres
Title: Vice President - Treasurer
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By: _____________________________
Name: ______________________
Title: ______________________
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION, as the Primary
Issuing Lender, a Lender
and individually
By: ______________________________
Name: _____________________
Title: ______________________
HARRIS TRUST AND SAVINGS BANK,
as an Issuing Lender and a Lender
By: ______________________________
Name: _____________________
Title: ______________________
-8-
<PAGE> 9
THE NORTHERN TRUST COMPANY,
as a Lender
By: ______________________________
Name: ____________________
Title: _____________________
SOCIETE GENERALE, CHICAGO,
BRANCH, as a Lender
By: ______________________________
Name: ____________________
Title: _____________________
-9-
<PAGE> 10
EXHIBIT A
TO
AMENDMENT NO. 5
TO
AMENDED AND RESTATED CREDIT AGREEMENT
AND
SECURITY INTEREST RELEASE
Revised Schedule II
-------------------
Attached.
-10-
<PAGE> 11
SCHEDULE II
LIST OF PERCENTAGES AND APPLICABLE LENDING OFFICES
<TABLE>
<S> <C> <C>
NAME OF BANK DOMESTIC LENDING OFFICE EURODOLLAR OFFICE
Bank of America 231 South LaSalle Street 231 South LaSalle Street
NT & SA Chicago, Illinois 60697 Chicago, Illinois 60697
Attn: John F. Collopy Attn: John F. Collopy
Commitment $20,454,550
Percentage 40.9091%
Harris Trust and Savings 111 West Monroe Street 111 West Monroe Street
Bank Chicago, IL 60690 Chicago, IL 60690
Attn: Scott F. Geik Attn: Scott F. Geik
Commitment $11,363,650
Percentage 22.7273%
The Northern Trust 50 South LaSalle Street 50 South LaSalle Street
Company Chicago, IL 60675 Chicago, IL 60675
Attn: Daniel A. Toll Attn: Daniel A. Toll
Commitment $9,090,900
Percentage 18.1818%
Societe Generale, 181 West Madison 181 West Madison
Chicago Branch Chicago, IL 60602 Chicago, IL 60602
Attn: Michael O. Lincoln Attn: Michael O. Lincoln
Commitment $9,090,900
Percentage 18.1818%
</TABLE>
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUL-04-1999
<CASH> 15,315
<SECURITIES> 0
<RECEIVABLES> 82,827
<ALLOWANCES> 16,331
<INVENTORY> 83,858
<CURRENT-ASSETS> 221,091
<PP&E> 477,853
<DEPRECIATION> 220,835
<TOTAL-ASSETS> 548,332
<CURRENT-LIABILITIES> 156,354
<BONDS> 0
0
0
<COMMON> 134
<OTHER-SE> 57,526
<TOTAL-LIABILITY-AND-EQUITY> 548,332
<SALES> 371,689
<TOTAL-REVENUES> 371,689
<CGS> 317,374
<TOTAL-COSTS> 317,374
<OTHER-EXPENSES> 1,484
<LOSS-PROVISION> 220
<INTEREST-EXPENSE> 14,917
<INCOME-PRETAX> 21,046
<INCOME-TAX> 8,357
<INCOME-CONTINUING> 12,689
<DISCONTINUED> 0
<EXTRAORDINARY> (808)
<CHANGES> 0
<NET-INCOME> 11,881
<EPS-BASIC> $0.89
<EPS-DILUTED> $0.88
</TABLE>
