<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 APRIL 2, 2000
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 April 30, 2000, 13,441,999 shares of U.S. Can Corporation's common
stock were outstanding.
<PAGE> 2
U.S. CAN CORPORATION AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED APRIL 2, 2000
TABLE OF CONTENTS
PAGE
----
PART I FINANCIAL INFORMATION 3
Item 1. Financial Statements (Unaudited) 3
U.S. Can Corporation and Subsidiaries Consolidated
Statements of Operations for the Quarterly Periods Ended
April 2, 2000 and April 4, 1999 3
U.S. Can Corporation and Subsidiaries Consolidated
Balance Sheets as of April 2, 2000 and December 31, 1999 4
U.S. Can Corporation and Subsidiaries Consolidated
Statements of Cash Flows for the Quarterly Periods Ended
April 2, 2000 and April 4, 1999 5
Notes to 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 17
PART II OTHER INFORMATION 18
Item 6. Exhibits and Reports on Form 8-K 18
2
<PAGE> 3
U.S. CAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(000's omitted, except per share data)
<TABLE>
<CAPTION>
FOR THE QUARTERLY PERIOD ENDED
------------------------------
April 2, 2000 April 4, 1999
------------- -------------
<S> <C> <C>
NET SALES $207,674 $184,916
COST OF SALES 178,211 159,039
-------- --------
Gross income 29,463 25,877
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 11,277 8,257
-------- --------
Operating income 18,186 17,620
INTEREST EXPENSE ON BORROWINGS 8,001 7,636
AMORTIZATION OF DEFERRED FINANCING COSTS 393 320
OTHER EXPENSES 664 432
-------- --------
Income before income taxes 9,128 9,232
PROVISION FOR INCOME TAXES 3,491 3,681
-------- --------
NET INCOME $ 5,637 $ 5,551
======== ========
PER SHARE DATA:
Basic:
Net income $ 0.42 $ 0.42
======== ========
Weighted average shares outstanding (000's) 13,564 13,326
Diluted:
Net income $ 0.41 $ 0.41
======== ========
Weighted average and equivalent shares outstanding (000's) 13,621 13,412
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are
an integral part of these statements.
3
<PAGE> 4
U.S. CAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(000'S omitted, except per share data)
<TABLE>
<CAPTION>
APRIL 2, DECEMBER 31,
ASSETS 2000 1999
--------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 12,224 $ 15,697
Accounts receivables, less allowances of $12,225 and $13,367 as of April 2, 2000 and
December 31, 1999, respectively 103,824 91,864
Inventories 115,335 115,979
Prepaid expenses and other current assets 20,788 19,677
Prepaid income taxes 16,114 16,114
--------- ---------
Total current assets 268,285 259,331
--------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Land 6,051 14,541
Buildings 67,935 83,106
Machinery, equipment and construction in process 448,617 463,400
--------- ---------
522,603 561,047
Less -- Accumulated depreciation and amortization (227,304) (228,543)
--------- ---------
Total property, plant and equipment 295,299 332,504
--------- ---------
INTANGIBLE ASSETS, less amortization of $11,796 and $12,211 as of April 2, 2000 and
December 31, 1999, respectively 72,715 50,478
OTHER ASSETS 20,888 21,257
--------- ---------
Total assets $ 657,187 $ 663,570
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 49,936 $ 38,824
Accounts payable 100,926 104,189
Accrued payroll, benefits and insurance 25,454 29,500
Restructuring reserves 13,391 25,016
Other current liabilities 31,065 24,068
--------- ---------
Total current liabilities 220,772 221,597
--------- ---------
SENIOR DEBT 75,546 83,864
SUBORDINATED DEBT 236,629 236,629
--------- ---------
Total long-term debt 312,175 320,493
--------- ---------
OTHER LONG-TERM LIABILITIES
Deferred income taxes 12,330 10,670
Other long-term liabilities 41,641 42,254
--------- ---------
Total other long-term liabilities 53,971 52,924
--------- ---------
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, 13,444,121 and
13,446,933 shares issued as of April 2, 2000 and December 31, 1999, respectively 136 135
Paid-in-capital 112,991 112,840
Unearned restricted stock (521) (629)
Treasury common stock, at cost; 101,536 and 83,024 shares at April 2, 2000 and
December 31, 1999, respectively (1,658) (1,380)
Currency translation adjustment (11,677) (7,771)
Accumulated deficit (29,002) (34,639)
--------- ---------
Total stockholders' equity 70,269 68,556
--------- ---------
Total liabilities and stockholders' equity $ 657,187 $ 663,570
========= =========
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are
an integral part of these balance sheets
4
<PAGE> 5
U.S. CAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000S OMITTED)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTERLY PERIOD ENDED
APRIL 2, 2000 APRIL 4, 1999
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,637 $ 5,551
Adjustments to reconcile net income to net cash provided by
operating activities --
Depreciation and amortization 9,411 8,817
Deferred income taxes 611 799
Change in operating assets and liabilities, net of effect of acquired and
disposed of businesses:
Accounts receivable (25,344) (22,170)
Inventories (6,480) 5,057
Accounts payable (2,992) 4,870
Accrued payroll, benefits and insurance 7,557 (1,839)
Other, net 2,942 11,361
-------- --------
Net cash (used for) provided by operating activities (8,658) 12,446
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (8,876) (4,727)
Proceeds from sale of businesses 12,088 4,500
Proceeds from sale of property 13 553
Investment in Formametal S.A. - (1,194)
-------- --------
Net cash provided by (used in) investing activities 3,225 (868)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock and exercise of stock options 150 420
Net borrowings (payments) under the revolving line of credit and changes in
cash overdrafts 10,692 3,655
Repurchase of 10 1/8% notes - (3,811)
Borrowings of other long-term debt, including capital lease
obligations 1,462 -
Payments of other long-term debt, including capital lease
obligations (9,702) (5,387)
Purchase of treasury stock (278) (298)
-------- --------
Net cash provided by (used in) financing activities 2,324 (5,421)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (364) (258)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,473) 5,899
CASH AND CASH EQUIVALENTS, beginning of year 15,697 18,072
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 12,224 $ 23,971
======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
5
<PAGE> 6
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 2, 2000
(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 (collectively, the
"Company. All significant intercompany balances and transactions have been
eliminated. 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. These financial statements are to 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, 1999.
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
Cash costs for restructuring activities in the first quarter of 2000
were $1.2 million. The Company anticipates spending another $9.5 million of such
costs in 2000 and $3.5 million in cash costs in 2001 and beyond. The remainder
of the restructuring provision primarily consists of non-cash items associated
with the write-off of assets.
On March 10, 2000, the Company sold its Wheeling metal closures plant
and the Warren lithography facility for $12.1 million in cash. The Company
established a disposition provision for the anticipated loss on the sale of the
metal closures business in connection with the special charge taken in 1998.
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
On December 30, 1999, the Company acquired all of the partnership
interest of May Verpackungen GmbH & Co., KG ("May"), a German limited liability
company. The acquisition was financed using the borrowings made by U.S. Can
under the Credit Agreement (see Note 5) for an aggregate amount of $64.6
million.
The following is a summary of the preliminary allocation of the
aggregate purchase price for May (000's omitted):
Current Assets $53,744
Property, Plant and Equipment 53,037
Goodwill 21,880
Other Assets 3,708
Current Portion of Long Term Debt (17,023)
Current Liabilities (38,722)
Long-Term Debt (6,552)
Other Liabilities (5,484)
-------
Total Purchase Price $64,588
=======
The acquisition was accounted for as a purchase for financial
reporting purposes; therefore 1999 results do not include operations related to
the acquired business. Certain assets and liabilities of May were revalued to
estimated fair values as of the acquisition date. The final amounts recorded may
differ based on results of further evaluations of the fair value of the acquired
assets and liabilities.
6
<PAGE> 7
The following represents the Company's unaudited pro forma results of
operations for the first quarter of 1999 as if the May acquisition had occurred
on January 1, 1999 (000's omitted, except per share data):
1999
----
Net Sales 218,678
Net Income 6,096
Diluted Per Share Data:
Net Income 0.45
May's pre-acquisition results have been adjusted to reflect
amortization of goodwill, the depreciation expense impact of the increased fair
market value of property, plant and equipment, interest expense on acquisition
borrowings, changes in contractual agreements and the effect of income taxes on
the pro forma adjustments. The pro forma information given above does not
purport to be indicative of the results that would have been obtained if the
operations were combined during the periods presented and is not intended to be
a projection of future results or trends.
(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 $58.2 million at April 2, 2000 and $49.6
million at December 31, 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 April 2, 2000 and at December 31, 1999.
Inventories reported in the accompanying balance sheets were
classified as follows (000's omitted):
April 2, DECEMBER 31,
2000 1999
-------- ------------
Raw materials $ 26,585 $ 30,821
Work in process 52,862 49,884
Finished goods 35,888 35,274
-------- --------
$115,335 $115,979
======== ========
(5) DEBT OBLIGATIONS
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
certain collateral, certain covenants in the Credit Agreement 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
certain investments or engage in certain mergers and acquisition or affiliated
transactions. The Company was in compliance with all financial ratios and
covenants as of April 2, 2000.
(6) SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid interest on borrowings of approximately $0.1 million
and $0.2 million for the quarterly periods ended April 2, 2000 and April 4,
1999, respectively.
The Company paid approximately $0.1 million of income taxes for the
quarterly period ended April 2, 2000 and no income taxes were paid during the
quarter ended April 4, 1999.
During the quarterly period ended April 4, 1999, the Company issued
stock valued at approximately $0.9 million into certain of its employee benefit
plans.
(7) BUSINESS SEGMENTS
The Company has established three segments by which management
monitors and evaluates business performance,
7
<PAGE> 8
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 produces steel aerosol containers for personal
care, household, automotive, paint and industrial products and has two units:
United States and International. The Paint, Plastic & General Line segment
produces round metal cans for paint and coatings, oblong cans for items such as
lighter fluid and turpentine, and plastic containers for industrial and consumer
products. Custom & Specialty produces a wide array of functional and decorative
tins and other containers, and beginning in the first quarter of 2000, the pet
food and specialty food containers of May. The May acquisition was accounted for
as a purchase for financial reporting purposes; therefore previously reported
1999 results did not include May's operations. For the year ended December 31,
1999, identifiable assets of May were reported as part of the Aerosol segment.
The following is a summary of revenues from external customers and
income (loss) from operation for the periods ended April 2,2000 and April 4,
1999, respectively (000's omitted):
APRIL 2, APRIL 4,
2000 1999
--------- ---------
REVENUES FROM EXTERNAL CUSTOMERS:
Aerosol $ 126,502 $ 125,920
Paint, Plastic, & General Line 38,552 41,903
Custom & Specialty 42,620 16,307
Other -- 786
--------- ---------
Total revenues $ 207,674 $ 184,916
========= =========
INCOME (LOSS) FROM OPERATIONS:
Aerosol $ 20,777 $ 19,870
Paint, Plastic, & General Line 2,949 4,272
Custom & Specialty 5,740 1,735
Corporate and eliminations (11,280) (8,257)
--------- ---------
Total income from operations $ 18,186 $ 17,620
========= =========
(8) COMPREHENSIVE NET INCOME
The components of comprehensive income for the three months ended
April 2, 2000 and April 4, 1999 are as follows (000's omitted):
THREE MONTHS ENDED
APRIL 2, APRIL 4,
2000 1999
---- ----
Net Income $ 5,637 $ 5,551
Foreign Currency Translation Adjustment (3,906) (3,995)
------- -------
Comprehensive Income $ 1,731 $ 1,556
======= =======
(9) NEW ACCOUNTING PRONOUNCEMENTS
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued in June 1998(amended by SFAS No. 137 to delay
implementation) and will be adopted by the Company in 2001. 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. The Company is evaluating
SFAS No. 133, but does not believe this pronouncement will have a material
impact on the Company's financial position or results of operations.
(10) RECENT DEVELOPMENTS
On March 22, 2000, a group led by Paul W. Jones, Chairman and Chief
Executive Officer of the Company and Berkshire Partners, a private equity firm,
made a proposal to the Company's board of directors calling for the
recapitalization of the Company in which public shareholders of the Company
would receive $21.00 in cash per outstanding share of common stock. The
Company's board of directors has formed a special committee to evaluate the
proposal. The special committee has retained legal and financial advisors to
assist in the evaluation. Any transaction would be subject to approvals by the
special committee and the board of directors, shareholder approval, confirmatory
due diligence to be performed by the financial institutions that are expected to
provide the
8
<PAGE> 9
financing for the proposed transaction, the negotiation of mutually satisfactory
definitive agreements and other customary conditions. There can be no assurance
that any agreements relating to the proposal will be reached or that any
transaction will be consummated.
(11) 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 April 2, 2000, United States Can
Company and USC May Verpackungen Holding Inc. ("May Holding"), both wholly owned
(directly or indirectly) by the Corporation, were the only Subsidiary
Guarantors. The Corporation has no assets or operations other than its
investment in United States Can Company, and May Holding has no assets or
operations other than its investment in May. May Holding acquired May on
December 30, 1999. This acquisition was accounted for using the purchase method
of accounting and, therefore, the Company's 1999 results of operations did not
include May's results. Separate financial statements of United States Can
Company or May Holding 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"), consolidated United States Can
Company/May Holding (the "Subsidiary Guarantors"), and the other foreign
subsidiaries (the "Non-Guarantor Subsidiaries"), as of April 2, 2000 and
December 31, 1999, and for the quarterly periods ended April 2, 2000 and April
4, 1999. Investments in subsidiaries are accounted for by the Parent and the
Subsidiary Guarantors 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.
9
<PAGE> 10
U.S.CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarterly Period Ended April 2, 2000
(000's omitted)
(UNAUDITED)
<TABLE>
<CAPTION>
U.S. CAN U.S. CAN
Corporation Subsidiary Non-Guarantor Corporation
(Parent) Guarantors Subsidiaries Eliminations Consolidated
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES $ -- $175,450 $ 32,224 $ -- $207,674
COST OF SALES -- 150,643 27,568 -- 178,211
-------- -------- -------- -------- --------
Gross income -- 24,807 4,656 -- 29,463
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES -- 9,408 1,869 -- 11,277
-------- -------- -------- -------- --------
Operating income -- 15,399 2,787 -- 18,186
INTEREST EXPENSE ON BORROWINGS -- 7,550 451 -- 8,001
AMORTIZATION OF DEFERRED FINANCING COSTS -- 393 -- -- 393
OTHER EXPENSES -- 664 -- -- 664
EQUITY EARNINGS (LOSS) FROM SUBSIDIARY 5,637 1,467 -- (7,104) --
PROVISION FOR INCOME TAXES -- 2,622 869 -- 3,491
-------- -------- -------- -------- --------
NET INCOME $ 5,637 $ 5,637 $ 1,467 $ (7,104) $ 5,637
======== ======== ======== ======== ========
</TABLE>
10
<PAGE> 11
U.S.CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarterly Period Ended April 4, 1999
(000's omitted)
(UNAUDITED)
<TABLE>
<CAPTION>
U.S. CAN U.S. CAN
Corporation Subsidiary Non-Guarantor Corporation
(Parent) Guarantors Subsidiaries Eliminations Consolidated
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES $ -- $152,258 $ 32,658 $ -- $184,916
COST OF SALES -- 130,045 28,994 -- 159,039
-------- -------- -------- -------- --------
Gross income -- 22,213 3,664 -- 25,877
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES -- 6,488 1,769 -- 8,257
-------- -------- -------- -------- --------
Operating income -- 15,725 1,895 -- 17,620
INTEREST EXPENSE ON BORROWINGS -- 6,956 680 -- 7,636
AMORTIZATION OF DEFERRED FINANCING COSTS -- 320 -- -- 320
OTHER EXPENSES -- 432 -- -- 432
EQUITY EARNINGS (LOSS) FROM SUBSIDIARY 5,551 862 -- (6,413) --
PROVISION FOR INCOME TAXES -- 3,328 353 -- 3,681
-------- -------- -------- -------- --------
NET INCOME $ 5,551 $ 5,551 $ 862 $ (6,413) $ 5,551
======== ======== ======== ======== ========
</TABLE>
11
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U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
CONDENSED CONSOLIDATING BALANCE SHEET
As of April 2, 2000
(000s omitted)
(UNAUDITED)
<TABLE>
<CAPTION>
U.S. Can U.S. Can
Corporation Subsidiary Non-Guarantor Corporation
(Parent) Guarantors Subsidiaries Eliminations Consolidated
----------- ------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ -- $ 7,116 $ 5,108 $ -- $ 12,224
Accounts receivable -- 73,402 30,422 -- 103,824
Inventories -- 95,699 19,636 -- 115,335
Prepaid expenses and other assets -- 31,340 5,562 -- 36,902
--------- --------- --------- --------- ---------
Total current assets -- 207,557 60,728 -- 268,285
NET PROPERTY, PLANT AND EQUIPMENT -- 230,730 64,569 -- 295,299
INTANGIBLE ASSETS -- 72,715 -- -- 72,715
OTHER ASSETS 236,629 13,504 7,384 (236,629) 20,888
INVESTMENT IN SUBSIDIARIES 113,513 126,369 -- (239,882) --
--------- --------- --------- --------- ---------
Total assets $ 350,142 $ 650,875 $ 132,681 $(476,511) $ 657,187
========= ========= ========= ========= =========
CURRENT LIABILITIES
Current maturities of long-term debt $ -- $ 47,708 $ 2,228 $ -- $ 49,936
Accounts payable -- 80,245 20,681 -- 100,926
Other current liabilities -- 61,421 8,489 -- 69,910
--------- --------- --------- --------- ---------
Total current liabilities -- 189,374 31,398 -- 220,772
SENIOR DEBT -- 52,645 22,901 -- 75,546
SUBORDINATED DEBT 236,629 236,629 -- (236,629) 236,629
OTHER LONG-TERM LIABILITIES -- 49,271 4,700 -- 53,971
INTERCOMPANY ADVANCES 43,244 9,443 (52,687) -- --
STOCKHOLDERS' EQUITY 70,269 113,513 126,369 (239,882) 70,269
--------- --------- --------- --------- ---------
Total liabilities and stockholders' equity $ 350,142 $ 650,875 $ 132,681 $(476,511) $ 657,187
========= ========= ========= ========= =========
</TABLE>
12
<PAGE> 13
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued)
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 1999
(000s omitted)
(UNAUDITED)
<TABLE>
<CAPTION>
U.S. Can U.S. Can
Corporation Subsidiary Non-Guarantor Corporation
(Parent) Guarantors Subsidiaries Eliminations Consolidated
------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ -- $ 2,101 $ 13,596 $ -- $ 15,697
Accounts receivable -- 66,509 25,355 -- 91,864
Inventories -- 98,040 17,939 -- 115,979
Prepaid expenses and other assets -- 31,133 4,658 -- 35,791
--------- --------- --------- --------- ---------
Total current assets -- 197,783 61,548 -- 259,331
NET PROPERTY, PLANT AND EQUIPMENT -- 266,636 65,868 -- 332,504
INTANGIBLE ASSETS -- 50,478 -- -- 50,478
OTHER ASSETS 236,629 14,799 6,458 (236,629) 21,257
INVESTMENT IN SUBSIDIARIES 46,827 (3,565) -- (43,262) --
--------- --------- --------- --------- ---------
Total assets $ 283,456 $ 526,131 $ 133,874 $(279,891) $ 663,570
========= ========= ========= ========= =========
CURRENT LIABILITIES
Current maturities of long-term debt $ -- $ 36,585 $ 2,239 $ -- $ 38,824
Accounts payable -- 83,374 20,815 -- 104,189
Other current liabilities -- 68,733 9,851 -- 78,584
--------- --------- --------- --------- ---------
Total current liabilities -- 188,692 32,905 -- 221,597
SENIOR DEBT -- 61,088 22,776 -- 83,864
SUBORDINATED DEBT 236,629 236,629 -- (236,629) 236,629
OTHER LONG-TERM LIABILITIES -- 48,802 4,122 -- 52,924
INTERCOMPANY ADVANCES (21,729) (55,907) 77,636 -- --
STOCKHOLDERS' EQUITY 68,556 46,827 (3,565) (43,262) 68,556
--------- --------- --------- --------- ---------
Total liabilities and stockholders' equity $ 283,456 $ 526,131 $ 133,874 $(279,891) $ 663,570
========= ========= ========= ========= =========
</TABLE>
13
<PAGE> 14
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE QUARTERLY PERIOD ENDED APRIL 2, 2000
(000s omitted)
(UNAUDITED)
<TABLE>
<CAPTION>
U.S. Can U.S. Can
Corporation Subsidiary Non-Guarantor Corporation
(Parent) Guarantors Subsidiaries Consolidated
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ -- $ 1,995 $(10,653) $ (8,658)
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (6,847) (2,029) (8,876)
Proceeds on the sale of business -- 12,088 -- 12,088
Proceeds on the sale of property -- 13 -- 13
-------- -------- -------- --------
Net cash provided by (used in) investing activities -- 5,254 (2,029) 3,225
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in intercompany advances 128 (4,581) 4,453 --
Issuance of common stock and exercise of stock options 150 -- -- 150
Net borrowings under the revolving line of credit and changes
in cash overdrafts -- 10,692 -- 10,692
Borrowings of other long-term debt, including capital lease
obligations -- -- 1,462 1,462
Payments of other long-term debt, including capital lease
obligations -- (8,295) (1,407) (9,702)
Purchase of treasury stock (278) -- -- (278)
-------- -------- -------- --------
Net cash provided by (used in) provided by financing activities -- (2,184) 4,508 (2,324)
-------- -------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH -- (50) (314) (364)
-------- -------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS -- 5,015 (8,488) (3,473)
CASH AND CASH EQUIVALENTS, beginning of year -- 2,101 13,596 15,697
-------- -------- -------- --------
CASH AND CASH EQUIVALENTS, end of period $ -- $ 7,116 $ 5,108 $ 12,224
======== ======== ======== ========
</TABLE>
14
<PAGE> 15
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE QUARTERLY PERIOD ENDED APRIL 4, 1999
(000s omitted)
(UNAUDITED)
<TABLE>
<CAPTION>
U.S. Can U.S. Can
Corporation Subsidiary Non-Guarantor Corporation
(Parent) Guarantors Subsidiaries Consolidated
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ -- $ 15,321 $ (2,875) $ 12,446
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (4,074) (653) (4,727)
Proceeds on the sale of business -- 4,500 -- 4,500
Proceeds on the sale of property -- 553 -- 553
Investment in Formametal S.A. -- -- (1,194) (1,194)
-------- -------- -------- --------
Net cash used in investing activities -- 979 (1,847) (868)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in intercompany advances (122) (3,321) 3,443 --
Issuance of common stock and exercise of stock options 420 -- -- 420
Net borrowings under the revolving line of credit and
changes in cash overdrafts -- 3,655 -- 3,655
Repurchase of 10 1/8% notes -- (3,811) -- (3,811)
Net payments of other long-term debt, including capital
lease obligations -- (3,097) (2,290) (5,387)
Purchase of treasury stock (298) -- -- (298)
-------- -------- -------- --------
Net cash (used in) provided by financing activities -- (6,574) 1,153 (5,421)
-------- -------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH -- -- (258) (258)
-------- -------- -------- --------
INCREASE IN CASH AND CASH EQUIVALENTS -- 9,726 (3,827) 5,899
CASH AND CASH EQUIVALENTS, beginning of year -- 9,408 8,664 18,072
-------- -------- -------- --------
CASH AND CASH EQUIVALENTS, end of period $ -- $ 19,134 $ 4,837 $ 23,971
======== ======== ======== ========
</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, 1999. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained therein.
RESULTS OF OPERATIONS
Net sales for the quarter ended April 2, 2000, totaled $207.7
million, a 12.3% increase versus the corresponding period in 1999. This was
principally due to the acquisition of May Verpackungen in December 1999. Along
business segment lines, Aerosol net sales in the first quarter of 2000 were
$126.5 million, an increase of 0.5% versus the first quarter of 1999,
principally due to increased sales in Europe. The Paint, Plastic and General
Line segment had an 8.0% decrease in net sales. The decline in this segment
relates to the loss of a Plastite customer in the third quarter of 1999. In the
Custom & Specialty segment, sales of $42.6 million were up $26.3 million versus
the first quarter of 1999 due to the May acquisition. First quarter 2000 sales
for May were $27.9 million. Excluding May, the Custom & Specialty segment had a
9.5% decline in net sales largely due to the sale of Wheeling metal closure and
the Warren lithography businesses. (See Note (2) to the Consolidated Financial
Statements). The Custom & Specialty segment continues to focus on product
development and enhancements to expand its customer base.
Gross income of $29.5 million for the first quarter of 2000 was up
$3.6 million, or 13.9%, versus the first quarter of 1999. Gross margin of 14.2%
improved slightly versus the 14.0% gross margin in the first quarter of 1999. In
the Aerosol segment, gross income increased 4.6% primarily due to increased
productivity in Europe. As anticipated, within the domestic Aerosol segment,
gross and operating margins were impacted by the start up activities associated
with the installation of two state-of-the-art lithography presses late in 1999.
The Company expects the presses to be at full operating capacity in the third
quarter. Paint, Plastic and General Line first quarter gross income decreased
31.0% due largely to the loss of a Plastite customer in the third quarter of
1999. Custom & Specialty gross income was $5.7 million, an increase of $4.0
million versus the first quarter of 1999 due primarily to the May acquisition.
Excluding May, the Custom and Specialty segment gross income remained relatively
flat at $1.7 million for the first quarters of 2000 and 1999. Certain expenses
are not allocated to specific business segments.
Operating income in the first quarter of 2000 was $18.2 million
versus $17.6 million in the first quarter of 1999. Selling, general, and
administrative expenses were $11.3 million, a $3.0 million increase over the
first quarter of 1999. Current year selling, general and administrative expenses
include the expenses of May Verpackungen. Interest expense in the first quarter
of 2000 increased 4.8%, or $0.4 million, versus the first quarter of 1999. The
increase was due to interest incurred in connection with the May acquisition
offset by the interest expense reduction due to the redemption of $27.7 million
the 10 1/8% Senior Subordinated notes in the first three quarters of 1999.
On March 10, 2000, U.S. Can sold substantially all of the assets of
its Wheeling, West Virginia metal closure business and Warren, Ohio lithography
facility. Revenues from this operation were $3.3 million through March 10, 2000
and $4.4 million in the first quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 2000, the Company met its liquidity needs
through internally generated cash flow, the sale of the metal closures and
Warren lithography businesses and borrowings made under its credit lines.
Principal liquidity needs included operations, debt amortization and capital
expenditures. Cash flow used for operations was $4.3 million in the first
quarter of 2000, compared to cash provided of $12.5 million inflow in the first
quarter of 1999. Cash outflows in the first quarter of 2000 include $1.2 million
of payments related to restructuring costs, and inventory and accounts
receivable increases due primarily to the seasonality of the May food can
business. The Company anticipates spending an additional $9.5 million of such
costs during the remainder of 2000.
As of April 2, 2000, U.S. Can had $67.6 million outstanding under the
Credit Agreement, $8.9 million in letters of credit had been issued pursuant
thereto, and $43.5 million of unused credit remained available thereunder. As of
April 2, 2000, U.S. Can was in compliance with the covenants under the Credit
Agreement and its other long-term debt agreements.
The Company expects total capital expenditures in 2000 to be
approximately $35 million, of which $8.9 million was spent in the first 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.
16
<PAGE> 17
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. 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 cash, stock and debt financing as
appropriate under the conditions in effect at the time of the acquisition.
RECENT DEVELOPMENTS
On March 22, 2000, a group led by Paul W. Jones, Chairman and Chief
Executive Officer of the Company and Berkshire Partners, a private equity firm,
made a proposal to the Company's board of directors calling for the
recapitalization of the Company in which public shareholders of the Company
would receive $21.00 in cash per outstanding share of common stock. The
Company's board of directors has formed a special committee to evaluate the
proposal. The special committee has retained legal and financial advisors to
assist in the evaluation. Any transaction would be subject to approvals by the
special committee and the board of directors, shareholder approval, confirmatory
due diligence to be performed by the financial institutions that are expected to
provide the financing for the proposed transaction, the negotiation of mutually
satisfactory definitive agreements and other customary conditions. There can be
no assurance that any agreements relating to the proposal will be reached or
that any transaction will be consummated.
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
uncertainties include 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 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 1999.
17
<PAGE> 18
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
INCORPORATION
EXHIBIT BY REFERENCE
NUMBER DESCRIPTION OF DOCUMENT (IF APPLICABLE)
------- ----------------------- ---------------
<S> <C> <C>
27.1 Financial Data Schedule (EDGAR version only)
(b) Reports on Form 8-K
Form 8-K dated January 13, 2000 reporting the
acquisition of May Verpackungen GmbH & Co., KG.
Form 8-K/ A-1 dated March 2, 2000 relating to the
acquisition of May Verpackungen GmbH & Co. KG
</TABLE>
18
<PAGE> 19
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: May 17, 2000 By: /s/ John L. Workman
-------------------
John L. Workman
Executive Vice President and
Chief Financial Officer
19
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> APR-02-2000
<EXCHANGE-RATE> 1
<CASH> 12,224
<SECURITIES> 0
<RECEIVABLES> 103,824
<ALLOWANCES> 12,225
<INVENTORY> 115,335
<CURRENT-ASSETS> 268,285
<PP&E> 522,603
<DEPRECIATION> (227,304)
<TOTAL-ASSETS> 657,187
<CURRENT-LIABILITIES> 220,772
<BONDS> 0
0
0
<COMMON> 136
<OTHER-SE> 70,133
<TOTAL-LIABILITY-AND-EQUITY> 657,187
<SALES> 207,674
<TOTAL-REVENUES> 207,674
<CGS> 178,211
<TOTAL-COSTS> 178,211
<OTHER-EXPENSES> 1,057
<LOSS-PROVISION> 191
<INTEREST-EXPENSE> 8,001
<INCOME-PRETAX> 9,128
<INCOME-TAX> 3,491
<INCOME-CONTINUING> 5,637
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,637
<EPS-BASIC> 0.42
<EPS-DILUTED> 0.41
</TABLE>
