-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, YdGWlNkDc0YQgaP2NmPhqWr6/+FctxPN9A4EphgRvBf26udo9Iy0XUYeTZMK2Roi TsTQMHPlALN9a91AwcpKLA== 0000950130-95-000496.txt : 19950616 0000950130-95-000496.hdr.sgml : 19950616 ACCESSION NUMBER: 0000950130-95-000496 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950316 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONTINENTAL CAN CO INC /DE/ CENTRAL INDEX KEY: 0000103392 STANDARD INDUSTRIAL CLASSIFICATION: 3411 IRS NUMBER: 112228114 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-06690 FILM NUMBER: 95521163 BUSINESS ADDRESS: STREET 1: ONE AERIAL WAY CITY: SYOSSET STATE: NY ZIP: 11791 BUSINESS PHONE: 5168224940 MAIL ADDRESS: STREET 1: ONE AERIAL WAY CITY: SYOSSET STATE: NY ZIP: 11791 FORMER COMPANY: FORMER CONFORMED NAME: LOCKWOOD KESSLER & BARTLETT INC DATE OF NAME CHANGE: 19710815 10-K405 1 FORM 10-K405 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10K (Mark One) X ---------- ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 ------------------------------------------- OR ---------- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to . ---------- ---------- Commission File Number: 1-6690 ------ CONTINENTAL CAN COMPANY, INC. ----------------------------- (Exact name of registrant as specified in its charter) Delaware 11-2228114 ------------------------ ----------------------------------- (State of Incorporation) (I.R.S. Employer Idenification No.) One Aerial Way, Syosset, New York 11791 ---------------------------------------- ---------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (516) 822-4940 -------------- Securities registered pursuant to Section 12 (b) of the Act: Common Stock ($.25 par value) New York Stock Exchange - - ----------------------------- ------------------------------------------- (Title of each class) (Name of each exchange on which registered) Securities registered pursuant to Section 12 (g) of the Act: None ---- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceeding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K {X}. The aggregate market value of voting stock held by non-affiliates of the Registrant based on the closing price at which such stock was sold on the New York Stock Exchange on March 13, 1995 was $76,696,093. The number of shares of Common Stock outstanding on March 13, 1995 was 3,165,057 shares. DOCUMENTS INCORPORATED BY REFERENCE Part II (except Item No. 6 "Selected Financial Data" and Item No. 9 "Changes In And Disagreements With Accountants On Accounting And Financial Disclosure") is incorporated by reference to the Registrant's Annual Report to Stockholders for the fiscal year ended December 31, 1994, and Part III (except Item 10 regarding executive officers) is incorporated by reference to the Registrant's Proxy Statement to be filed on or about April 3, 1995 in connection with its 1995 Annual Meeting of Stockholders to be held on May 17, 1995. ITEM 1. BUSINESS - - ----------------- (a) General Development of Business ------------------------------- Continental Can Company, Inc. (the Company) is a publicly traded company incorporated in Delaware in 1970 under the name Viatech, Inc. The name of the Company was changed to Continental Can Company, Inc. in October 1992. The Company is engaged in the packaging business through a number of consolidated operating subsidiaries. The Company's packaging business consists of (i) its 50%-owned domestic subsidiary, Plastic Containers, Inc. (PCI), which owns Continental Plastic Containers, Inc. and Continental Caribbean Containers, Inc. (collectively, CPC), (ii) its wholly owned German operating subsidiary, Dixie Union Verpackungen GmbH (Dixie Union) and (iii) its majority-owned European operating subsidiaries, Ferembal S.A. (Ferembal), which in turn owns 64% of Obalex, A.S. (Obalex), and Onena Bolsas de Papel, S.A. (Onena). PCI is a leading manufacturer of extrusion blow-molded containers in the United States. Ferembal is a manufacturer of rigid packaging, primarily food cans, of which it is the second largest supplier in France. Obalex is a manufacturer of metal cans in the Czech Republic. Dixie Union manufactures plastic films and packaging machines, primarily for the food and pharmaceutical industries. Onena manufactures film, and laminates and prints plastic, paper and foil packaging materials for the food and snack food industries in Spain. The Company also owns Lockwood, Kessler & Bartlett, Inc. (LKB) which provides services principally in the fields of mapping and survey, civil and structural engineering, mechanical and electrical engineering, and construction administration and inspection. (b) Financial Information About Industry Segments --------------------------------------------- The Company has one reportable industry segment - packaging, as determined in accordance with the Financial Accounting Standards Board Statement of Financial Accounting Standards No. 14. (c) Narrative Description of Business --------------------------------- The Company manufactures packaging which accounted for 98%, 97.5% and 97.3%, of its consolidated revenues in 1994, 1993 and 1992, respectively. CPC - The Company's 50%-owned subsidiary, PCI, acquired CPC in November --- 1991. CPC, headquartered in Norwalk, Connecticut, has fifteen manufacturing plants in the continental United States and one in Puerto Rico. CPC is a leader in the development, manufacture and sale of a wide range of extrusion blow- molded plastic containers for household chemicals, food and beverages, automotive products and motor oil, industrial and agricultural chemicals and cosmetics and toiletries. CPC manufactures single and multi-layer containers, primarily from high density polyethylene and polypropylene resins, ranging in size from two ounces to five gallons. Some of these multi-layer containers include a barrier layer of ethyl vinyl alcohol which renders the container oxygen tight and makes it suitable for use in food products which are subject to spoilage or deterioration if exposed to oxygen. CPC sells containers to national consumer products companies, including Clorox Company, Coca-Cola Foods, Colgate-Palmolive Company, Lever Brothers, Mobil Oil Corporation, Pennzoil Products Company, Procter & Gamble Company, Quaker Oats Company and Quaker State Oil Refining Corporation. CPC, in many cases, manufactures substantially all of a customer's container requirements for specific product categories or for particular container sizes. CPC has long-standing relationships with most of its customers and has long-term contracts or agreements with customers representing approximately 70% of its dollar sales volume. Ferembal - The Company acquired a 68% interest in Ferembal in the fourth -------- quarter of 1989, increased its interest to 84% in August, 1991 and at December 31, 1994 owned 85% of Ferembal. Ferembal, headquartered in Paris, has five manufacturing plants located in each of the main agricultural regions of France. The Roye plant, located in Picardie, was built in 1964 and expanded substantially in 1968. Its three main divisions include coil 1 cutting, printing and varnishing; the manufacture of ends and bodies; and assembly. There are five welded lines in operation at Roye and all industrial products are manufactured at this plant. The Moelan plant, located in Brittany, is set up along similar lines as the Roye plant with five welded lines. The Ludres plant, in eastern France, is Ferembal's largest facility. In addition to twelve presses and two easy-open end manufacturing units, Ludres has nine body assembly lines. Ferembal's research and development and technical service departments are also located at Ludres. The Veauche plant was built in 1982 to service southern France. Approximately 90% of the output of the two welded lines is "passed through the wall" to a customer for the canning of pet food. The Ville Neuve sur Lot plant was built in 1991 and went into production with a three piece can line in early 1992. A two piece can line went into production at this facility in mid-1992. Ferembal is the second largest producer of food cans in France and also produces cans for pet foods and industrial products. Ferembal's products include three piece cans for food with over two hundred sets of specifications, two piece cans in several different diameters, easy open ends, "hi-white enamel" cans, and a large number of can products for industrial end uses. Ferembal's production for the food and pet food markets accounts for approximately 85% of its sales with remaining sales coming from cans produced for industrial products. Ferembal's customers are primarily vegetable and prepared food processors, pet food processors, and paint and other industrial can users. Obalex - The Company, through Ferembal, owns 64% of the outstanding stock ------ of Obalex. Obalex is headquartered in a three building complex on a 5 acre site in Znojmo, Czech Republic, which also serves as its sole manufacturing facility. Obalex manufacturers both two and three piece cans for food which account for approximately 80% of its sales and a number of can products for industrial end users. Dixie Union - The Company, through wholly owned subsidiaries, owns all of ----------- the outstanding stock of Dixie Union. Dixie Union is headquartered in Kempten, Germany and has subsidiary companies in France and the United Kingdom, which function as a sales, distribution and customer service network. Dixie Union manufactures three main product lines for the packaging industry: multi-layer shrink bags, composite plastic films and packaging machines and slicers. Most of Dixie Union's customers are in the food and pharmaceutical industries. Onena - The Company owns 57% of the stock of Onena located in Pamplona, ----- Spain. Onena manufactures plastic film and prints and laminates paper, plastic and foil packaging material for the food and snack food industries in Spain. In 1994 the Company merged its subsidiary, Industrias Gomariz S.A. (Ingosa) with Onena. Ingosa printed and laminated paper, plastic and foil packaging material for the food and snack food industries in Spain and was also located in Pamplona. LKB - The Company owns 100% of LKB, a consulting engineering firm, located --- in Syosset, New York. LKB provides services to clients in the fields of transportation, site, municipal, electrical and mechanical, and environmental engineering. Most of LKB's clients are public sector state and municipal agencies, utilities, financial institutions and developers. Most of its projects involve infra-structure design and rehabilitation, environmental reports and services, and utility substation design. Other Matters - The primary users of products manufactured by the Company ------------- are firms in the food and snack food, pet food, household chemical, motor oil and pharmaceutical industries. The raw materials used in the production of plastic containers, cans and packaging films are readily available commodity materials and chemicals produced by a large number of manufacturers. It is the practice of the Company to obtain these raw materials from several sources in order to ensure an economical, adequate and timely supply. Some of the products manufactured by the Company are manufactured pursuant to license. With regard to composite films, a fully paid up license from the American National Can Company is in effect. With regard to shrink 2 bags and film, a license from the American National Can Company is in effect. Present patents under this license expire at various times through 2000. The license will expire on the date the last of the licensed patents expire. This license is non-exclusive as to manufacture and sale of shrink bags and film in Europe and non-exclusive as to sales to the rest of the world. Sales may not be made in the Western Hemisphere. The Company does not believe these licenses are material to its packaging business taken as a whole. The Company's business is seasonal insofar as the sales of Ferembal and Obalex to the vegetable packing industry is dependent on agricultural production and occurs primarily in the second and third quarters. The Company's remaining products are not seasonal. The Company is not dependent upon a single customer or a few customers. Sales to no single customer exceeded 10% of the Company's consolidated revenues in 1994. As of December 31, 1994, the Company's backlog was approximately $29,952,000 (compared to $19,868,000, at December 31, 1993). All backlog is expected to be filled within the current fiscal year. Ferembal, Obalex, and Plastic Containers, Inc. produce most of their products under open orders. As a result, none of the foregoing backlog is attributable to them. The Company's business in total is highly competitive with a large number of competitors. The main competitors include Owens Illinois, Inc. and Graham Packaging with regard to plastic containers, CMB Packaging with regard to cans, W. R. Grace & Co. with regard to barrier shrink films, and Multi-Vac with regard to packaging machinery. The principal methods of competition are price, quality and service. The amount spent on research and development activities amounted to approximately $12,461,000 in 1994, $12,862,000 in 1993 and $14,603,000 in 1992. The number of persons employed by the Company as of December 31, 1994 and 1993 was 3,729 and 3,712, respectively. (d) Foreign and Domestic Operations ------------------------------- Sales to unaffiliated customers are set out below:
1994 1993 1992 -------- -------- -------- (In thousands) Europe $286,412 $255,619 $284,771 United States 247,614 221,636 218,988 Other 3,154 4,587 7,482 -------- -------- -------- Total $537,180 $481,842 $511,241 ======== ======== ========
Information regarding the operating profit and the identifiable assets attributable to the Company's foreign operations is incorporated herein by reference to Note 16 of the Consolidated Financial Statements appearing in the Annual Report to Stockholders for the year ended December 31, 1994. ITEM 2. PROPERTIES - - ------------------- The Company believes its facilities are suitable, adequate, and properly sized to provide the capacity necessary to meet its sales. The Company's production facilities are utilized for the manufacture and storage of the Company's products. The extent of utilization in each of the Company's facilities varies based on a number of factors but primarily on sales and inventory levels for specific products. The location of the customer also affects 3 utilization since shipment costs beyond a certain distance can make production of some products at a remote facility uneconomic. Seasonality affects utilization substantially at Ferembal and Obalex with very high utilization in the pre-harvest and harvest season and substantially lower utilization during the late fall and winter. The Company adjusts labor levels and capital investment at each of its facilities in order to optimize their utilization. The Company's general corporate offices and the main production facility for LKB are located in Syosset, New York in a 25,000 square foot building owned by the Company. This steel and concrete block building was constructed in 1955 on a 2-1/2 acre lot. CPC is headquartered in 19,812 square feet of leased office space in Norwalk, Connecticut. CPC also leases its technical center in Elk Grove, Illinois (78,840 sq. ft.), its accounting office space in Omaha, NE (5,489 sq. ft.), and sales offices in Cincinnati, Ohio (1,266 sq. ft.) and Houston, Texas (703 sq. ft.). The following table sets forth the location and square footage of CPC's production facilities which are used for both manufacture and warehousing of finished goods:
SIZE IN SIZE IN PLANT LOCATION SQUARE FEET PLANT LOCATION SQUARE FEET - - ----------------- ----------- ------------------- ----------- Santa Ana, CA 102,500 Lima, OH 122,850 Fairfield, CA 66,000 Newell, WV 50,000 Houston, TX 80,000 Oil City, PA 96,000 Kansas City, KS 172,775 Baltimore, MD 150,600 Elk Grove, IL 137,800 Lakeland, FL 105,200 DuPage, IL 102,900 New Market, NJ 116,000 Cincinnati, OH 131,665 Caguas, Puerto Rico 46,800 Cleveland, OH 100,000 West Memphis, AR 32,870
CPC owns the plants in Santa Ana, Fairfield, Oil City, Baltimore and Puerto Rico; all others are leased. As of December 31, 1994, CPC had a total of 114 production lines spread throughout its manufacturing facilities. The smallest plants have as few as two lines while the largest has eleven. Ferembal is headquartered in 20,000 square feet of office space subject to a capital lease in Clichy, a suburb of Paris. Ferembal operates five manufacturing facilities in five locations in France. Ferembal owns a 384,000 square foot manufacturing facility on a 21 acre site in Roye for the production of food and industrial cans. Ferembal owns a 42,000 square foot manufacturing facility for the production of food cans at Veauche on a 5 acre site. The facility at Veauche is located next to a customer's plant and food can production is "passed through the wall" to the customer. Ferembal has a capital lease with regard to several buildings totaling 229,000 square feet on a 23 acre site in Ludres. In addition, Ferembal owns a 29,000 square foot building on a 3 acre site. These facilities are used for the manufacture of food cans and for research and development activities. Ferembal has a capital lease with regard to several buildings totaling 252,000 square feet on an 18 acre site in Moelan which are used for the manufacture of food cans. Ferembal operates a manufacturing facility for food cans in a 42,000 square foot building on a 4 acre site in Villeneuve sur Lot under a rental agreement. Each of the manufacturing facilities utilizes a portion of its building space for warehousing its finished goods. Obalex is located in several buildings with approximately 182,000 square feet on an 5 acre site in Znojmo, Czech Republic. This facility is the sole manufacturing site for Obalex which also uses the complex for the storage of its finished goods. 4 Dixie Union is headquartered in a three-story, 108,000 square foot manufacturing facility on a 5 acre site in Kempten, Germany, leased through 2004. In addition, two small facilities are leased as sales and distribution centers in Milton Keynes, England and Redon, France. Onena owns two buildings totaling 173,000 square feet located on a 6.6 acre site in Pamplona, Spain, which also serve as its headquarters, manufacturing and warehousing facility. The former Onena headquarters and manufacturing facility consisting of 89,200 square feet on a 3.7 acre site is expected to be sold. ITEM 3. LEGAL PROCEEDINGS - - -------------------------- The Company's subsidiaries are defendants in a number of actions which arose in the normal course of business. In the opinion of management, the eventual outcome of these actions will not have a significant effect on the Company's financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - - ------------------------------------------------------------ No matters were submitted to a vote of security holders during the quarter ended December 31, 1994. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER - - -------------------------------------------------------------------------- MATTERS - - ------- The information required by this item is incorporated herein by reference to the section entitled "Common Stock Prices and Related Matters" of the Annual Report to Stockholders for the year ended December 31, 1994. 5 ITEM 6. SELECTED FINANCIAL DATA(1) - - -----------------------------------
1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- Sales (2) $537,180 $481,842 $511,241 $310,654 $292,033 ======== ======== ======== ======== ======== Net income (2) (3) $ 4,445 $ 988 $ 2,063 $ 7,394 $ 5,059 ======== ======== ======== ======== ======== Earnings per common share (3) Primary $ 1.39 $ .33 $ .67 $ 2.92 $ 2.88 ======== ======== ======== ======== ======== Fully Diluted $ 1.34 $ .32 $ .64 $ 2.59 $ 2.40 ======== ======== ======== ======== ======== Weighted average shares outstanding (4) 3,220 3,023 3,078 2,533 1,758 ======== ======== ======== ======== ======== Total assets $423,585 $385,907 $400,010 $410,543 $202,524 ======== ======== ======== ======== ======== Long term debt and capitalized lease obligations $142,361 $153,982 $165,701 $159,567 $ 65,862 ======== ======== ======== ======== ======== Total stockholders' equity (4) $ 70,696 $ 60,855 $ 62,935 $ 61,393 $ 23,856 ======== ======== ======== ======== ======== Working capital $ 71,348 $ 66,105 $ 69,158 $ 63,004 $ 48,235 ======== ======== ======== ======== ======== Current ratio 1.52 1.67 1.69 1.57 1.56 ======== ======== ======== ======== ========
(1) In thousands, except per share amounts and current ratio. (2) In 1993, includes sales of $10,682 and net income of $238 related to the purchase of Obalex. In 1991, includes sales of $17,030 and a net loss of $1,045 related to the purchase of PCI. (3) Includes a charge for the cumulative effect of an accounting change of $262 ($.08 per share both primary and fully-diluted) and an extraordinary charge of $108 ($.03 per share both primary and fully-diluted) in 1994. Includes income for the cumulative effect of an accounting change of $460 ($.15 per share primary and $.14 per share fully-diluted) and an extraordinary charge of $1,502 ($.49 per share primary and $.44 per share fully-diluted) in 1992. Includes income for an extraordinary item of $22 ($.01 per share both primary and fully-diluted) in 1990. (4) The 1991 weighted average shares outstanding include 1,020 shares and 255 warrants to purchase shares sold in June 1991 for net proceeds of $29,453. The 1990 weighted average shares outstanding include 460 shares sold in January 1990 for net proceeds of $6,756. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - - ------------------------------------------------------------------------ RESULTS OF OPERATIONS - - --------------------- The information required by this item is incorporated herein by reference to the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Annual Report to Stockholders for the year ended December 31, 1994. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - - ---------------------------------------------------- The information required by this item is incorporated by reference to the Company's consolidated financial statements and related notes, together with the independent auditors' report in the Annual Report to Stockholders for the year ended December 31, 1994. 6 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND - - ------------------------------------------------------------------------ FINANCIAL DISCLOSURE - - -------------------- There have been no changes in nor disagreements with the Company's accountants on accounting and financial disclosure during the twenty-four month period ended December 31, 1994. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - - ------------------------------------------------------------ The information required by this item, with respect to directors of the registrant, will be included under the caption "Election of Directors" of a definitive Proxy Statement to be dated March 28, 1994 which will be filed with the Commission pursuant to Regulation 14A and is hereby incorporated into this report by this reference. Executive officers of the registrant include Messrs. Donald J. Bainton and Abdo Yazgi who are also directors of the registrant and for whom information required by this item is included in the Proxy Statement as previously mentioned. Information for other executive officers, is as follows:
Term of Year First Name and Age Position Held Office Became Officer - - ------------------------ --------------- -------- -------------- John H. Andreas Vice President- (1) 1992 62 Manufacturing Marcial B. L'Hommedieu Treasurer (1) 1963 70
(1) The term of office of all executive officers is indefinite, at the pleasure of the Board of Directors. The business experience of each executive officer is as follows: Mr. Andreas has served as Vice President of Manufacturing since April 1992. Prior to that time, he was an independent business consultant. Prior to his retirement in 1988, Mr. Andreas was employed by the former Continental Can Company, Inc. for 33 years, most recently as General Manager. Mr. L'Hommedieu has served as Treasurer or Assistant Treasurer of the Company and its subsidiary, Lockwood, Kessler & Bartlett, Inc., since 1963. ITEM 11. EXECUTIVE COMPENSATION - - -------------------------------- The information required by this item is included under the caption "Executive Compensation" of a definitive Proxy Statement to be dated March 28, 1995 which will be filed with the Commission pursuant to Regulation 14A and is hereby incorporated into this report by this reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - - ----------------------------------------------------------------------- The information required by this item is included under the caption "Stock Ownership" of a definitive Proxy Statement to be dated March 28, 1995 which will be filed with the Commission pursuant to Regulation 14A and is hereby incorporated into this report by this reference. 7 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - - ------------------------------------------------------- The information required by this item is included under the caption "Transactions with Management" of a definitive Proxy Statement to be dated March 28, 1995 which will be filed with the Commission pursuant to Regulation 14A and is hereby incorporated into this report by this reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K - - -------------------------------------------------------------------------- (a) 1. Financial Statements: Consolidated Balance Sheets as of December 31, 1994 and 1993 Consolidated Statements of Earnings for the years ended December 31, 1994, 1993, and 1992 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1994, 1993 and 1992 Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992 The above financial statements are included under Item 8 or Part II of this report. 2. Financial Statement Schedules: III Condensed Financial Information of Registrant........ p. 11 VIII Allowance for Doubtful Accounts...................... p. 13 All other schedules are omitted because they are not applicable, not required, or the information is given in the financial statements or the notes thereto. 3. Exhibits Required: 3.1 Articles of Incorporation, as amended................. (2) 3.2 By-Laws, as amended................................... (2) 4.1 Indenture, dated as of April 1, 1992, among Plastic Containers, Inc. ("PCI"), each of Continental Plastic Containers, Inc. ("CPC") and Continental Caribbean Containers, Inc. ("CCC"), as guarantors and United States Trust Company of New York, as trustee (the "Trustee")............................................ (1) 4.2 Pledge and Security Agreement, dated as of April 9, 1992, by PCI in favor of the Trustee.................. (1) 4.3 Pledge and Security Agreement, dated as of April 9, 1992, by CPC in in favor of the Trustee............... (1) 4.4 Pledge and Security Agreement, dated as of April 9, 1992, by CCC in favor of the Trustee.................. (1) 4.5 Stock Pledge Agreement, dated as of April 9, 1992, by PCI in favor of the Trustee........................... (1) 4.6 Patent and Trademark Security Assignment, dated April 9, 1992, by CPC to Trustee............................ (1) 4.7 Deed of Trust and Assignment of Leases and Rents, dated April 9, 1992, by CPC relating to real property located in Fairfield, Connecticut..................... (1)
8 4.8 Deed of Trust and Assignment of Leases and Rents, dated April 9, 1992, by CPC relating to real property located in Santa Ana, California...................... (1) 4.9 Mortgage and Assignment of Leases and Rents, dated April 9, 1992, by CPC relating to real property located in Oil City, Pennsylvania..................... (1) 4.10 Deed of Trust and Assignment of Leases and Rents, dated April 9, 1992, by CPC relating to real property located in Baltimore, Maryland........................ (1) 4.11 Chattel Mortgage, dated April 7, 1992, by CCC relating to personal property located in Puerto Rico........... (1) 4.12 Pledge Agreement, dated as of April 9, 1992 by CCC relating to real property located in Puerto Rico...... (1) 4.13 Mortgage, dated April 8, 1992, by CCC relating to real property located in Puerto Rico....................... (1) 10.1 Credit Agreement dated as of April 2, 1992, between PCI and Citibank, N.A................................. (1) 10.2 1988 Restricted Stock Option Plan, as amended......... (2)* 10.3 1988 Director Stock Option Plan....................... (2)* 10.4 1990 Stock Option Plan for Non-Employee Directors..... (2)* 10.5 Shareholders' Agreement dated July 7, 1989, among Viatech, Inc., Le Fer Blac S.A., Citicorp Capital Investors Europe Limited and Citibank S.A............. (2) 10.6 Revolving Credit and Term Loan Agreement dated as of December 1, 1992...................................... (2) 10.7 Stock Purchase Agreement dated November 2, 1991....... (2) 10.8 Noncompetition Agreement dated November 21, 1991...... (2) 10.9 Stockholders' Agreement dated October 19, 1991........ (2) 10.10 1992 Restricted Stock Plan for Non-Employee Directors, as amended............................................ (2)* 10.11 Agreement Among PCI Stockholders, dated September 10, 1992.................................................. (2) 10.12 Employment Contract with Donald J. Bainton............ (2)* 10.13 1995 Restricted Stock Compensation Plan............... Attached* 10.14 Amendment No. 1 to Revolving Credit and Term Loan Agreement............................................. Attached 13.1 Annual Report to Stockholders for 1994................ Attached 21 Subsidiaries of the Registrant........................ Attached 23.1 Independent Auditors' Report on Schedules............. Attached 23.2 Consent of Independent Auditors....................... Attached 27 Financial Data Schedule............................... Attached 28.1 Proxy Relating to PCI Stock, dated September 11, 1992.................................................. (2)
* Management contract or compensatory plan or arrangement. (1) These documents have been previously filed with the Commission as Exhibits to 1992 Quarterly Reports on Form 10-Q for Plastic Containers, Inc. (2) These documents have previously been filed with the Commission as Exhibits to 1993 Quarterly Reports on Form 10-Q for Continental Can Company, Inc. All other items for which provision is made in the applicable regulations of the Securities and Exchange Commission have been omitted as they are not required under the related instructions or they are inapplicable. (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended December 31, 1994. 9 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. CONTINENTAL CAN COMPANY, INC. By: /s/ Abdo Yazgi Date: March 7, 1994 --------------- -------------- Abdo Yazgi, Executive Vice President (Principal Financial & Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Donald J. Bainton Date: March 7, 1994 - - ----------------------------------------- -------------- Donald J. Bainton, Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer) /s/ Kenneth Bainton Date: March 7, 1994 - - ----------------------------------------- -------------- Kenneth Bainton, Director /s/ Robert L.. Bainton Date: March 7, 1994 - - ----------------------------------------- -------------- Robert L. Bainton, Director /s/ Nils E. Benson Date: March 7, 1994 - - ----------------------------------------- -------------- Nils E. Benson, Director /s/ Rainer N. Greeven Date: March 7, 1994 - - ----------------------------------------- -------------- Rainer N. Greeven, Director Date: - - ----------------------------------------- -------------- Ronald H. Hoenig, Director /s/ Charles M. Marquardt Date: March 7, 1994 - - ----------------------------------------- -------------- Charles M. Marquardt, Director Date: - - ----------------------------------------- -------------- Ferdinand W. Metternich /s/ V. Henry O'Neill Date: March 7, 1994 - - ----------------------------------------- -------------- V. Henry O'Neill, Director /s/ John J. Serrell Date: March 7, 1994 - - ----------------------------------------- -------------- John J. Serrell, Director /s/ Robert A. Utting Date: March 7, 1994 - - ----------------------------------------- -------------- Robert A. Utting, Director /s/ Abdo Yazgi Date: March 7, 1994 - - ----------------------------------------- -------------- Abdo Yazgi, Director /s/ Cayo Zapata Date: March 7, 1994 - - ----------------------------------------- -------------- Cayo Zapata, Director /s/ Jose Luis Zapata Date: March 7, 1994 - - ----------------------------------------- -------------- Jose Luis Zapata, Director
10 Schedule III - Condensed Financial Information of Registrant Continental Can Company, Inc. Balance Sheets Years Ended December 31, 1994 and 1993
(in thousands) 1994 1993 ------- ------- ASSETS: Cash $ 79 $ 626 Investments in Subsidiaries at Equity 72,703 62,181 Other Assets 1,326 2,370 ------- ------- Total Assets 74,108 $65,177 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY: Current Liabilities (a) 2,220 3,472 Long Term Debt (a) 1,192 850 ------- ------- Total Liabilities 3,412 4,322 Stockholders' Equity 70,696 60,855 ------- ------- 74,108 $65,177 ======= =======
(a) See Note 9, Items (a) and (b) of Notes to Consolidated Financial Statements of Continental Can Company, Inc. and Subsidiaries. At December 31, 1993, current liabilities include $1,164 of Convertible Subordinated Debentures due in 1994. At December 31, 1994, current liabilities include $158 of current installments of long term debt. Continental Can Company, Inc. Statements of Earnings Years Ended December 31, 1994, 1993 and 1992
(in thousands) 1994 1993 1992 ------- ------- ------- Management Fees $ 1,882 $ 2,157 $ 1,855 Selling, General and Administrative Expenses 2,923 3,232 3,238 ------- ------- ------- (1,041) (1,075) (1,383) Equity in Net Income of Subsidiaries (b) 5,803 2,247 3,587 ------- ------- ------- 4,762 1,172 2,204 Other (290) (205) (165) ------- ------- ------- 4,472 967 2,039 (Provision for) Recovery of Income Taxes (27) 21 24 ------- ------- ------- Net income $ 4,445 $ 988 $ 2,063 ======= ======= =======
(b) Includes for 1994 an extraordinary charge of $108 relating to the extinguishment of debt and a charge of $262 relating to the cumulative effect of adopting SFAS No. 112. Includes for 1992 an extraordinary charge of 11 $1,502 relating to the retirement of a promissory note and a benefit of $460 relating to the cumulative effect of adopting SFAS No. 109. Schedule III - Condensed Financial Information of Registrant (Continued) Continental Can Company, Inc. Statements of Cash Flows Years Ended December 31, 1994, 1993 and 1992 (in thousands) 1994 1993 1992 ------- ------- ------- Cash Flows from Operating Activities: Net Income $4.445 $ 988 $ 2,063 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Dividends Received From Affiliates 818 - - Equity in Net Income of Subsidiaries (5,803) (2,247) (3,587) Increase/Decrease in Due to Affiliates (442) 299 1,001 Other 387 288 (310) ------- ------- ------- Net Cash Provided By (Used in) Operating Activities (595) (672) (833) Cash Flows From Investing Activities: Purchase of Minority Interest - (213) (120) Redemption of investment in Government Securities - 500 10 Increase Investment in Subsidiaries (1,225) - - Proceeds from Sale of Capital Assets 411 527 778 Capital Expenditures - (6) (152) ------- ------- ------- Net Cash Provided By (Used in) Investing Activities (814) 808 516 Cash Flows From Financing Activities: Common Stock Issued Upon Conversion of Debentures and Warrants 362 184 2,111 Proceeds from (Repayment of) Long-Term Financing 500 203 (1,907) ------- ------- ------- Net Cash Provided by Financing Activities 862 387 204 Net Increase (Decrease) in Cash (547) 523 (113) Cash at Beginning of Year 626 103 216 ------- ------- ------- Cash at End of Year $ 79 $ 626 $ 103 ======= ======= =======
Cash paid for interest and income taxes was as follows: 1994 1993 1992 ------- ------- ------- Interest $ 210 $ 232 $ 232 Income Taxes 8 $ 22 $ 4
12 Continental Can Company, Inc. and Subsidiaries Schedule VIII - Allowance for Doubtful Accounts Years Ended December 31, 1994, 1993 and 1992
(in thousands) Additions Balance at charged to Balance at beginning costs and Other Deductions end of of period expenses additions (1) period ---------- ---------- --------- ---------- ---------- Year ended December 31, 1994 $3,522 $2,845 $ - $1,051 $5,316 ====== ====== ==== ====== ====== Year ended December 31, 1993 $3,622 $ 915 $418(2) $1,433 $3,522 ====== ====== ==== ====== ====== Year ended December 31, 1992 $4,626 $ 709 $ - $1,713 $3,622 ====== ====== ==== ====== ======
(1) Represents uncollectible accounts written-off. (2) Represents $418 from the consolidation of acquired subsidiary in 1993. 13 EXHIBITS ATTACHED: ------------------ Subsidiaries of the Registrant Independent Auditors' Report on Schedules Consent of Independent Auditors Amendment No. 1 to Revolving Credit and Term Loan Agreement 1995 Restricted Stock Compensation Plan Financial Data Schedule 1994 Annual Report to Stockholders 1 EX-10.13 2 1995 RESTRICTED STOCK COMPENSATION PLAN EXHIBIT 10.13 CONTINENTAL CAN COMPANY, INC. 1995 RESTRICTED STOCK COMPENSATION PLAN PART 1. PLAN ADMINISTRATION AND ELIGIBILITY ------------------------------------------- I. PURPOSE The purpose of this 1995 Restricted Stock Compensation Plan (the Plan) of Continental Can Company, Inc. (the Company) is to motivate and reward certain key officers and employees of the Company and its subsidiaries who occupy responsible executive or other positions with the Company and to promote the continued long-term growth of the Company. It provides a means for such management to receive part of their compensation in a form to encourage both short term and long term profitable growth of the Company and share in the risk with the Stockholders. II. ADMINISTRATION The Plan will be administered by the Personnel Committee of the Board of Directors of the Company (the Committee), no member of which shall be eligible to receive an award under the Plan. The Committee shall be composed of two or more individuals who at the time they grant any stock awards or exercise any other discretion in administering any aspect of the Plan are not and have not at any time within one year prior thereto been eligible for selection as a person to whom stock may be allocated or to whom stock may be granted pursuant to the Plan or any other plan of the Company or any of its affiliates entitling the participants therein to acquire stock of the Company or of its affiliates. In addition to the powers granted the Committee with respect to the granting of stock awards under the Plan, the Committee shall be empowered to administer and interpret the Plan, and all determinations made by it shall be final and conclusive. III. PARTICIPATION IN THE PLAN Only officers and key employees of the Company or any subsidiary of the Company as determined by the Committee (the Recipient) shall be eligible to participate in the Plan. IV. STOCK SUBJECT TO THE PLAN The maximum number of shares which may be granted under the Plan shall be 100,000 (One hundred thousand) shares of the Companys $.25 par value Common Stock. The limitation on the number of shares which may be awarded under the Plan shall be subject to adjustment as provided in Section X of the Plan. 1 If any outstanding award under the Plan for any reason is forfeited without having been vested in full, the shares allocable to the forfeited portion of such award shall again become available for grant pursuant to the Plan. Certificates representing shares of the Companys Common Stock awarded hereunder shall be issued in the name of the respective Recipients. During the period of time such shares are subject to the restrictions set forth in Section 5, such certificates shall be endorsed with a legend to that effect, and shall be held by the Company. The Recipient shall, nevertheless, have all the other rights of a stockholder, including the right to vote and the right to receive all cash dividends paid with respect to such shares and other distributions made with respect to such shares. Subject to the requirements of applicable law, certificates representing such shares shall be delivered to the Recipient within 30 days after the lapse of the restrictions to which they are subject. Upon the grant of stock, the Company may issue new shares or reissue shares previously repurchased by or on behalf of the Company. If shares are to be repurchased and reissued, the Company shall determine, on or before the last day of each fiscal quarter, the amount, if any, of the Companys Common Stock to be purchased by a broker or other independent agent designated by the Company (the Broker) in the following quarter for delivery under the Plan. Stock so purchased by the Broker shall be restored to the status of authorized by unissued shares. The amounts of stock to be purchased may be all or less than all of the projected requirements of the Plan. It is not the intent of the Company that purchases by the Broker exceed actual Plan requirements for the quarter. In such an event , however, excess shares should be carried over to help plan requirements for the following quarter. To the extent that the amounts purchased by the Broker do not need actual Plan requirements, the Company shall issue original shares. The Broker shall be free to purchase such stock at such times, at such prices, and in such amounts as the Broker deems appropriate, whether through brokers or by purchase from securities dealers, both on and off the national exchanges, or by private sale or otherwise, provided that the Broker shall purchase the full number of shares required by the Company to be purchased for that quarter, and that such purchases shall be consistent with such conditions as may be prescribed from time to time by law or by the Securities and Exchange Commission (SEC) in any rule or regulation or in any exemptive order of no-action letter issued by the SEC to the Company or the Broker with respect to the making of such purchases, or otherwise. As commitments for such purchases are made by the Broker, the Company shall, upon written consent of the Broker, deliver to the Broker the funds necessary to consummate such purchases and pay any brokerage and related incidental charges. All amounts transferred to the Broker by the Company shall be promptly invested in the Companys Common Stock, in no event later than 30 days after delivery of such funds by the Company. 2 PART 2. GRANTS --------------- V. STOCK GRANTS The Committee in its sole discretion may grant shares of Common Stock to Recipients in lieu of cash compensation or as additional compensation. VI. RESTRICTIONS At the time of the grant of shares, the Committee, in its sole discretion, may establish for any Recipient a Restricted Period with respect to the grant, during which Restricted Period the grant or any portion thereof shall be subject to forfeiture; provided, however, that any shares granted pursuant to the Plan shall become vested in full upon the retirement of the Recipient because of total and permanent disability or upon the death of the Recipient. The Committee may, at its option, provide at any time for the early termination of such Restricted Period in respect of all or any portion or portions of such grant on such terms as the Committee deems appropriate. If a Recipient ceases to be an employee of the Company or any of its subsidiaries during the Restricted Period for any reason other than (i) death, or (ii) total and permanent disability, all stock granted to him which is still subject to the foregoing restrictions shall, upon such termination of employment, be forfeited to the Company; provided, however, that in the event his employment is terminated at the request of the Company or by action of the Company, the Committee may, but need not, determine that some or all of such shares shall not be subject to forfeiture or that shares which remain restricted shall be freed of any restriction and be fully vested. If a Recipient ceases to be an employee of the Company or any of its subsidiaries during the Restricted Period by reason of death or total and permanent disability, the Restricted Period referred to above shall terminate with respect to any portion of the grant which remains restricted. The Committee may at any time, in its sole discretion, accelerate or waive all or any portion of the restrictions remaining in respect of the stock grant for any or all Recipients. In the absence of an effective registration statement covering the issuance of such shares, each Recipient shall represent and warrant to and agree with the Company that he takes (i) any shares awarded under the Plan for investment only and not for purposes of sale or other disposition and will also take for investment only and not for purposes of sale or other disposition any rights, warrants, shares, or securities which may be issued on account of ownership of such shares, and (ii) will not sell or transfer any shares awarded or any rights, shares, or securities issued on account of the shares awarded or any shares received upon exercise of any such rights or warrants except in accordance with (A) an opinion of counsel for the Company (or of other counsel acceptable to the Company) that such shares, rights, warrants, or other securities may be disposed of without registration under the Securities Act of 1933, or (B) an applicable no action letter issued by the Staff of the Commission. In addition, certificates representing such shares (in the absence of an effective registration statement covering the issuance of such shares) shall bear the following legend: These shares have not been registered under the Securities Act of 1933 as amended and may not be pledged or hypothecated and 3 may not be sold or transferred in the absence of an effective registration statement for the shares under such act or an opinion of counsel addressed to Continental Can Company, Inc. that registration is not required under such act. PART 3. GENERAL PROVISIONS --------------------------- VII. ASSIGNMENTS The rights and benefits under this Plan may not be assigned except that there shall be no such limitation on shares not subject to any restriction. VIII. TIME FOR GRANTING AWARDS All grants of shares subject to the Plan shall be granted, if at all, not later than ten (10) years after the adoption of the Plan by the Companys stockholders. IX. LIMITATION OF RIGHTS A. No Right to Continue as an Officer or Employee. Neither the Plan, nor the granting of an award nor any other action taken pursuant to the Plan, shall constitute or be evidence of any agreement or understanding, express or implied, that the Company will retain an officer or employee for any period of time, or at any particular rate of compensation. B. Stockholders Rights for Recipients. A Recipient shall have all the rights of a Stockholder with respect to the shares granted to him. X. CHANGES IN PRESENT STOCK If as a result of a stock dividend, stock split, recapitalization (or other adjustment in the stated capital of the Company), or as the result of a merger, consolidation, or other reorganization, the common shares of the Company are increased, reduced, or otherwise changed, the number of shares available hereunder shall be appropriately adjusted, and if by virtue thereof a Recipient shall be entitled to new or additional or different shares, such shares to which the Recipient shall be entitled shall be subject to the terms, conditions, and restrictions herein contained relating to the original shares. In the event that warrants or rights are awarded with respect to shares awarded hereunder, and the recipient exercises such rights or warrants, the shares or securities issuable upon such exercise shall likewise be subject to the terms, conditions, and restrictions herein contained relating to the original shares. XI. EFFECTIVE DATE OF THE PLAN The Plan shall take effect on the date of adoption by the Board of Directors of the Company subject to the approval of the Plan by the stockholders of the Company and the listing of the shares represented thereby on the New York Stock Exchange. Stock may be granted under the Plan at any time after such adoption and prior to the termination of this Plan. 4 XII. AMENDMENT OF THE PLAN The Committee may suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided, however, that without approval of the stockholders, no revision or amendment shall change the number of shares subject to the Plan (except as provided in Section X, or materially increase the benefits accruing to participants under the Plan. XIII. NOTICE Any written notice to the Company required by any of the provisions of the Plan shall be addressed to the Secretary of the Company and shall become effective when it is received. XIV. GOVERNING LAW This Plan and all determinations made and actions taken pursuant hereto shall be governed by the law of the State of Delaware and construed accordingly. 5 EX-10.14 3 AMENDMENT NO. 1 TO REVOLVING CREDIT & TERM LOAN AGREEMENT EXHIBIT 10.14 AMENDMENT NO. 1 TO REVOLVING CREDIT AND TERM LOAN AGREEMENT DATED AS OF DECEMBER 1, 1992 between CONTINENTAL CAN COMPANY, INC. and EXTEBANK The Revolving Credit and Term Agreement (the Agreement) is hereby amended as follows: 1. Section 1.01 of the Agreement is hereby amended by changing the date set forth on lines 5 and 6 thereof to May 31, 1995. 2. Section 1.05 of the Agreement is hereby amended in its entirety to read as follows: SECTION 1.05 Repayment of Advances. The Borrower shall repay the --------------------- aggregate unpaid principal amount of all Advances made by the Bank and outstanding on May 31, 1995 in sixty (60) equal monthly installments of principal commencing on June 30, 1995 and on the last day of each successive month thereafter through and including May 31, 2000 (the Term Loan); provided, however, that the last such installment shall be -------- ------- in an amount necessary to repay in full the unpaid principal amount of the Advances, plus all interest due and owning thereon. 3. Section 2.03 of the Agreement is hereby amended by changing the date set forth on line 3 thereof to May 31, 1995. 4. Section 2.04 of the Agreement is hereby amended by changing the reference to the initial two (2) your term to the initial thirty (30) month term. 5. Except as set forth herein, all of the terms and provisions of the agreement shall remain unchanged and shall continue in full force and effect. Dated: November 11, 1994 EXTEBANK By: /s/ Thomas J. Crane ------------------- Thomas J. Crane, Vice President CONTINENTAL CAN COMPANY, INC. By: /s/ Marcial B. L'Hommedieu -------------------------- Marcial B. L'Hommedieu, Treasurer ATTEST: /s/ Abdo Yazgi - - -------------- Abdo Yazgi, Secretary 1 EX-13.1 4 1994 ANNUAL REPORT EXHIBIT 13.1 CONTINENTAL CAN COMPANY, INC. 1994 ANNUAL REPORT CORPORATE PROFILE Continental Can Company, Inc., through its subsidiaries, manufactures extrusion blow-molded plastic containers, metal cans, plastic films and equipment for the packaging industry, and prints and laminates flexible packaging for the food and snack food industries. The Company also owns Lockwood, Kessler & Bartlett, Inc., an engineering firm located in the United States.
TABLE OF CONTENTS PAGE NUMBER ----------- Report To Shareholders...................... 26 Description Of Business..................... 28 Selected Financial Data..................... 30 Management's Discussion And Analysis Of Financial Condition.................... 31 Consolidated Financial Statements........... 37 Notes To Consolidated Financial Statements.. 42 Independent Auditor's Report................ 65 General Information......................... 66 Directors And Officers...................... 67 Subsidiaries And Officers................... 68
The Pillsbury Company received the Dupont Award For Innovation In Packaging for their Hungry Jack syrup container. It is the first microwave-safe syrup bottle on the market and was designed and produced by Continental Plastic Containers, Inc. 25 Dear Fellow Stockholders, As expected, the Companys sales, profitability and cash flow (net income plus depreciation) all increased in 1994. Sales in 1994 rose to $537.2 million, the highest level ever achieved. In addition, income before accounting change and extraordinary item grew nearly five-fold to $4,815,000 while earnings per share before accounting changes and extraordinary items increased to $1.50. We believe these excellent improvements validate our basic strategy of investing the necessary resources for growth in our businesses coupled with the cost reductions (including debt reductions) necessary in a competitive marketplace. The substantial progress shown by almost all of our operations reflected, in particular, the significant improvement in volume and operating profit at Continental Plastic Containers, Inc. (CPC), the benefit of the beginning of an economic recovery of Europe, and previous cost-cutting measures. In 1994, CPC began to show the level of improvement we have expected from this acquisition. Sales increased 12% while operating profit more than doubled to $8,565,000. Among the years highlights at CPC were the opening of its sixteenth plant at West Memphis, Arkansas to provide all the bottles for Coastal Unilube (formerly a self-manufacturer), production of an innovative microwaveable syrup bottle for Pillsbury, the execution of another contract expanding its production for Coca-Cola Foods, and the repurchase of $5.3 million of its Senior Secured Notes. In 1995, we expect to see a continuation of these substantial sales increases for CPC, as well as the first reported after tax profit since its acquisition. In March 1995, CPC entered into an agreement to supply Mobil with most of its plastic bottles throughout the United States for a five-year term while also assuming additional, unusual and innovative Mobil product responsibilities for a packager. The benefit of the Mobil contract (which takes effect in July), will be minimal in 1995 because of expected start-up expenses but should contribute substantially to CPCs sales and profitability in 1996 and thereafter. In Europe in 1994, our subsidiaries benefited from the continents overall economic improvement. However, although the beginning of an economic recovery helped them improve volumes, operating margins remained under pressure. Ferembal, which saw a 6% increase in sales, successfully implemented cost reductions to maintain competitiveness in its markets, including a 10% workforce reduction which resulted in a restructuring charge. The impact of the charge on the Companys earnings, was almost entirely offset by a benefit from the settlement of a tax dispute. We shall continue to emphasize least-cost operations to ensure that in the long term Ferembal, and all of our other subsidiaries, are able not only to compete 26 but to grow and improve their competitive position. Ferembal is an excellent food can company which was solidly profitable in 1994. We are confident that, over time, cost reduction efforts and continuing productivity improvements will enable it to retain its profitability at historical levels despite an increasingly competitive market. Dixie Union, our German-based packaging film and machine business, enjoyed a gratifying surge in the volume and profitability of its machine business due to economic improvement and an emphasis on the total line concept which brings significant productivity improvement to packaged goods producers. This improvement in machinery was partially offset by flat sales and lower margins in Dixie Unions film business in 1994. However, backlog at Dixie Union was up approximately $6 million at December 31, 1994 over the prior year end and the film business is expected to increase in both volume and profitability in 1995 while the machine business continues strong. Onena and Ingosa were merged into one modern plant location in Pamplona during the year. We intend to sell the former plant and site for residential development in keeping with the area in which it is located. While the combination of our Spanish film subsidiaries has been predictably difficult and costly in 1994, we believe that the firm footing we have established will allow our new integrated business to grow in sales and profitability in 1995 and future years. Lockwood, Kessler & Bartlett, Inc., the engineering services group, suffered a very poor first quarter last year due to the extremely severe weather in the Northeast. However, the remaining three quarters and the year overall were profitable and we look for a continued improvement in 1995. In summary, we feel that all of our businesses responded well during 1994 to the business conditions and opportunities in their particular markets and we are optimistic about our prospects, particularly over the next several years. We are committed to continued internal growth and profitability, and we shall carefully pursue potential acquisitions which will enhance our present businesses. With this prudent yet aggressive approach, we believe that we shall significantly benefit shareholder value with our strategic long-term management philosophy. Donald J. Bainton Chairman & Chief Executive Officer March 10, 1995 27 DESCRIPTION OF BUSINESS Continental Can Company, Inc. is a holding company primarily engaged in the packaging business through a number of consolidated operating subsidiaries. The Company's packaging business consists of its 50%-owned domestic subsidiary, Plastic Containers, Inc. (PCI), which owns Continental Plastic Containers, Inc. and Continental Caribbean Containers, Inc. (collectively, CPC), a leading manufacturer of extrusion blow-molded containers in the United States. Its wholly-owned German operating subsidiary is Dixie Union Verpackungen GmbH (Dixie Union) and its majority-owned European operating subsidiaries are Ferembal S.A. (Ferembal), Obalex A.S. (Obalex) and Onena Bolsas de Papel, S.A. (Onena). Ferembal is a manufacturer of rigid packaging, primarily food cans, of which it is the second largest supplier in France. Obalex also manufactures rigid packaging, primarily food cans, in the Czech Republic. Dixie Union manufactures plastic films and packaging machines, primarily for the food and pharmaceutical industries. Onena manufactures film, and laminates and prints plastic, paper and foil packaging materials for the food and snack food industries primarily in Spain. The Company also owns Lockwood, Kessler & Bartlett, Inc. (LKB) which provides services principally in the northeastern United States in the fields of survey, civil, environmental and structural engineering, mechanical and electrical engineering, and construction administration and inspection. CPC - The Company's 50%-owned subsidiary, PCI, acquired CPC in --- November 1991. CPC, headquartered in Norwalk, Connecticut, develops, manufactures and sells a wide range of extrusion blow-molded plastic containers through its national network of sixteen manufacturing plants (including one in Puerto Rico). CPC supplies containers for food and beverages, household chemicals, automotive products and motor oil, industrial and agricultural chemicals and cosmetics and toiletries. CPC produces both single and multi- layer containers, manufactured primarily from high density polyethylene and polypropylene resins, ranging in size from two ounces to five gallons. Some of these multi-layer containers include a barrier layer to protect food products which are subject to spoilage or deterioration if exposed to oxygen. Besides being fully recyclable, in many instances, these containers can be, and are, produced using a significant amount of post-consumer recycled plastic. Its customers include some of the largest consumer products companies in the United States, such as Clorox Company, Coca-cola Foods, Colgate-palmolive Company, Mobil Oil Corporation, Pennzoil Products Company, Procter & Gamble Company And Quaker Oats Company. CPC often manufactures substantially all of a customer's container requirements for specific product categories or for particular container sizes. CPC has long-standing relationships with most of its customers and has long-term contracts with customers representing approximately 70% of its dollar sales volume. 28 FEREMBAL - The Company currently owns an 85% interest in Ferembal, -------- the second largest food can manufacturer in France and the fourth largest in Europe. Ferembal, headquartered in Paris, has five manufacturing plants located in each of the main agricultural regions of France. Besides food cans for such products as vegetables, mushrooms, fruits, prepared meals and pet foods, Ferembal also manufactures cans for industrial products such as paint, chemical products and motor oil. Ferembal's products include both two and three-piece cans for food, easy-open ends, hi-white enamel cans and a large number of can products for industrial end uses, all in a number of different diameters. Ferembal's production for the food and pet food markets accounts for approximately 85% of its sales with remaining sales coming from cans produced for industrial products. Ferembal's customers include many leading French and European vegetable and prepared food processors, pet food processors, and paint and other industrial can users. OBALEX - The Company, through Ferembal, owns 64% of the outstanding ------ stock of Obalex. Obalex, located in the Czech Republic, manufacturers both two and three-piece cans for food which account for approximately 80% of its sales and a number of can products for industrial end users. DIXIE UNION - The Company owns all of the outstanding stock of Dixie ----------- Union. Dixie Union is headquartered in Kempten, Germany and has subsidiary companies in France and the United Kingdom, which function as a sales, distribution and customer service network. Dixie Union manufactures three main product lines for the packaging industry: multi-layer shrink bags, composite plastic films and packaging machines and slicers. Dixie Union is one of a few companies in Europe which manufacture both packaging films and packaging equipment. Dixie Union's customers are primarily processors of meats, cheeses, poultry and fish products, although Dixie Union also produces packaging and machinery for suppliers of technical and medical products. Most of Dixie Union's sales are generated in Europe; however, a number of Dixie Union's packaging machines are sold in the United States through an exclusive distributor, and through agents and distributors on a worldwide basis. ONENA - The Company owns a 57% interest in Onena, located in ----- Pamplona, Spain. Onena manufactures plastic film, and laminates and prints a variety of paper, foil and plastic film products. Its major customers are primarily in the food and snack food industries in Spain. During 1994, the Company merged Onena with another majority owned flexible packaging subsidiary, Industrias Gomariz S.a. (Ingosa) which it acquired in 1993 and which was also located in Pamplona. All of the combined company's operations (also named onena) have been moved to Ingosa's manufacturing facility, which was expanded in 1994. 29 SELECTED FINANCIAL DATA(1)
1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- Sales (2) $537,180 $481,842 $511,241 $310,654 $292,033 ======== ======== ======== ======== ======== Net income (2) (3) $ 4,445 $ 988 $ 2,063 $ 7,394 $ 5,059 ======== ======== ======== ======== ======== Earnings per common share (3) Primary $ 1.39 $ .33 $ .67 $ 2.92 $ 2.88 ======== ======== ======== ======== ======== Fully Diluted $ 1.34 $ .32 $ .64 $ 2.59 $ 2.40 ======== ======== ======== ======== ======== Weighted average shares outstanding (4) 3,220 3,023 3,078 2,533 1,758 ======== ======== ======== ======== ======== Total assets $423,585 $385,907 $400,010 $410,543 $202,524 ======== ======== ======== ======== ======== Long-term debt and capitalized lease obligations $142,361 $153,982 $165,701 $159,567 $ 65,862 ======== ======== ======== ======== ======== Total stockholders' equity (4) $ 70,696 $ 60,855 $ 62,935 $ 61,393 $ 23,856 ======== ======== ======== ======== ======== EBITDA (5) $ 59,365 $ 59,368 $ 64,521 $ 38,393 $ 33,590 ======== ======== ======== ======== ======== Working capital $ 71,348 $ 66,105 $ 69,158 $ 63,004 $ 48,235 ======== ======== ======== ======== ======== Current ratio 1.52 1.67 1.69 1.57 1.56 ======== ======== ======== ======== ========
(1) In thousands, except per share amounts and current ratio. (2) In 1993, includes sales of $10,682 and net income of $238 related to the purchase of Obalex. In 1991, includes sales of $17,030 and a net loss of $1,045 related to the purchase of PCI. (3) Includes a charge for the cumulative effect of an accounting change of $262 ($.08 per share both primary and fully-diluted) and an extraordinary charge of $108 ($.03 per share both primary and fully diluted) in 1994. Includes income for the cumulative effect of accounting change of $460 ($.15 per share primary and $.14 per share fully-diluted) and an extraordinary charge of $1,502 ($.49 per share primary and $.44 per share fully-diluted) in 1992. Includes income for an extraordinary item of $22 ($.01 per share both primary and fully-diluted) in 1990. (4) The 1994 weighted average shares outstanding include 268 shares issued in May 1994 upon the conversion of the Company 10-3/4% Convertible Subordinated Debentures. The 1991 weighted average shares outstanding include 1,020 shares and 255 warrants to purchase shares sold in June 1991 for net proceeds of $29,453. The 1990 weighted average shares outstanding include 460 shares sold in January 1990 for net proceeds of $6,756. (5) Earnings before interest, taxes, depreciation and amortization, determined without consideration to minority interests. 30 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 1994 VS. 1993 In 1994, sales increased 11% to $537.2 million from $481.8 million in 1993. This improvement resulted primarily from net volume increases and included sales from the 1993 acquisition of Industrias Gomariz, S.A. (approximately $10 million) and foreign currency translation rate differences (approximately $5.4 million). Also included above in net volume increases is approximately $5.8 million in resin price increases which are a customer pass-through at PCI. Management expects volume increases and the pass-through of resin price increases at PCI to result in increased sales levels in 1995. Backlog at December 31, 1994 amounted to $29.9 million as compared to $19.9 million at December 31, 1993. Since PCI, Ferembal, and Obalex produce most of their products under open orders, none of this backlog is attributable to them. The Company expects that the increased backlog at December 31, 1994 will result in increased sales and earnings in the first six months of 1995 as compared to the same prior year period. Gross profit increased 8% to $94.2 million in 1994 from $87.2 million in 1993. Gross profit margin declined to 17.5 % in 1994 from 18.1% in 1993. The increase in gross profit resulted from higher sales volumes while the decline in gross profit margin reflected increased competitive pressure on pricing in the can and flexible packaging markets which more than offset improved utilization and profitability at PCI and in the Companys packaging machine business. Additionally, the pass-through of resin costs at PCI increases both sales and costs equally, reducing the margin percentage. Selling, general and administrative expense as a percentage of sales amounted to 12.8% in 1994 as compared to 12.9% in 1993. While lower on a percentage basis because of the increased sales volume, selling, general and administrative expense in 1994 increased $6.2 million or 10.0%. Included in 1994s expenses are approximately $1.7 million for termination benefits caused by the restructuring of a portion of Ferembals coating and printing lines, and $990,000 for plant closing expense relating to a facility closed by PCI in 1991 prior to its purchase by the Company. The charge at PCI resulted from the Companys recognition of a loss of future rental payments from a sub-tenant which defaulted on its sub-lease on the facility. Also, costs associated with the merger of Onena and Ingosa added to this expense in 1994. As a result of these various factors operating income increased to $25,648,000 in 1994 as compared to $24,871,000 in 1993 while operating margin declined to 4.8% in 1994 from 5.2% in 1993. 31 Net interest expense declined substantially to $18.7 million in 1994 from $22.9 million in 1993. This decline reflected both lower interest rates in Europe, and lower average debt balances in Europe and the United States in 1994. The Companys consolidated effective tax rate is an amalgamation of the tax charges and tax benefits of itself and its subsidiaries. This rate amounted to 26% in 1994 as compared to 153% in 1993 reflecting the offsetting nature of these items in consolidation. Also, in 1994 Ferembal settled a tax dispute which resulted in a tax benefit of approximately $900,000. Minority interest in 1994 and 1993 reflects the interests of other shareholders in PCI, Ferembal, Onena and Obalex. Income before extraordinary items and the cumulative effect of an accounting change in 1994 amounted to $4,815,000 ($1.50 per share). An extraordinary charge in 1994, net of the portion attributable to the minority interest, amounting to $108,000 ($.03 per share) related to costs associated with the extinguishment of $5.3 million in Senior Secured Notes at PCI. The cumulative effect of an accounting change in 1994 for the adoption of FASB 112 resulted in a charge to income, net of the portion attributable to the minority interest, of $262,000 (.08 per share). Income before extraordinary items and the cumulative effect of an accounting change in 1993 amounted to $988,000 ($.33 per share). There were no extraordinary items or accounting changes in 1993. 32 1993 VS. 1992 Sales declined 5.8% in 1993 to $481,842,000 as compared to $511,241,000 in 1992. The decrease resulted primarily from changes in foreign currency translation rates which reduced reported sales by $19.8 million as compared to the prior year. A reduction in vegetable can sales in France as a result of inventory reductions by Ferembal's customers (approximately $10 million) and an economic recession in Europe accounted for the remainder of the decline. Increased sales at PCI ($6.3 million) and sales of Obalex ($10.7 million) offset a portion of the decline Backlog amounted to approximately $19,868,000 at December 31, 1993 as compared to $19,149,000 at December 31, 1992. Gross profit declined 10% to $87,164,000 as compared to $96,872,000 in 1992. Gross profit margin declined to 18.1% in 1993 from 18.9% in 1992. The decline in gross profit related primarily to the Company's European operations for the reasons noted above. Selling, general and administrative expenses remained at approximately 13% as a percentage of sales in both 1993 and 1992. As a result of these various factors, operating income was $24,871,000 in 1993 and $29,600,000 in 1992 while the operating income margin amounted to 5.2% in 1993 from 5.8% in 1992. Net interest expense declined during 1993 to $22,942,000 from $26,023,000 in 1992 as a result of changes in foreign currency translation rates, lower average outstanding debt balances and lower interest rates primarily in the Company's European operations. The Company's consolidated effective tax rate amounted to approximately 153% in 1993 compared to 87% in 1992. The higher effective tax rate reflects the low level of tax benefits accrued at the Company's loss operations offset by the provision for taxes applicable to the Company's profitable operations. Minority interest in each of 1993 and 1992 reflects the interests of other shareholders in PCI, Ferembal and Onena, and of Obalex in 1993. Net income amounted to $988,000 ($.33 per share) in 1993 as compared to $2,063,000 ($.67 per share) in 1992. Included in net income in 1992 was the cumulative effect of an accounting change relating to the adoption of FASB No. 109 amounting to $460,000 ($.15 per share) and an extraordinary loss related to the write-off of a deferred financing fee of $1,502,000 ($.49 per share). 33 FINANCIAL CONDITION Capital Resources The packaging business utilizes relatively large amounts of specialized machinery and equipment which are periodically upgraded or replaced. Capital expenditures in 1994 amounted to $23,858,000 primarily for the purchase of machinery and equipment. During 1994, major capital expenditures included the purchase of extrusion blow-molding lines and line changes for barrier containers for food products, an easy-open end line for cans and an expansion of a building used by Onena. Expenditures in 1995 are expected to amount to approximately $31,000,000 and be similar in character to those in 1994. The expected increase in 1995 compared to 1994 relates primarily to extrusion blow molding lines and line modifications for a five year contract for a motor oil customer which was signed in March 1995. During 1994, Ferembal increased its ownership interest in Obalex to 64%. See Note 2(b). The Company merged Onena, Ingosa and Dixie Union, S.A., Dixie Unions Spanish sales subsidiary, during 1994 and capitalized certain amounts due the Spanish provincial government by Ingosa in exchange for 41% of the equity of the merged entity. The merger has been reflected in the Company's financial statements as of January 1, 1994. See Note 2(a). The minority stockholders of Ferembal intend to sell a portion of their shares in an initial public offering of Ferembal which the Company has agreed to make in the fourth quarter of 1995. It is expected that the holder of a junior subordinated convertible bond of Ferembal will convert its bond at that time to participate in the offering. Although the Company does not currently expect to sell any of its stock in Ferembal in the offering, if the bond is converted, the Company ownership of Ferembal will decline from 85% to 64%. This reduction is not expected to have any significant impact to the Companys 1995 financial results. See Note 2(d). The Company has actively pursued acquisition possibilities in 1994 and intends to continue to do so in 1995 and later years. It is presently the Company's intention to finance any acquisitions by leveraging the assets of the company to be acquired or, possibly, through the issuance of stock. There are no plans presently to utilize any substantial portion of the existing capital resources of the Company in an acquisition. The Company met its 1994 capital requirements with cash generated from operations, from existing funds, and through 34 borrowings. It is anticipated that such expenditures in 1995 will be financed in a similar manner. LIQUIDITY The Company's liquidity position at December 31, 1994 declined somewhat from the prior year end. Working capital increased to $71.5 million at December 31, 1994 from $66.1 million at December 31, 1993. The current ratio was 1.52 at December 31, 1994 and 1.67 at December 31, 1993. The Company's cash position decreased by approximately $4 million between December 31, 1993 and 1994. Cash flows from operating activities provided $18.6 million for the Company in 1994 most of which related to depreciation and amortization. In addition, approximately $14.5 million was borrowed on a short- term basis to finance the increase in accounts receivable and inventory. These accounts increased in 1994 primarily as a result of the substantial increase in sales. A portion of this increase relates to an increase in accounts receivable at Ferembal which at the prior year end had discounted accounts receivable in the amount of $9,859,000. Most of the increase in short-term borrowings at December 31, 1994 is expected to be repaid during the first quarter of 1995. The Company invested $23.9 million in 1994 in property, plant and equipment. Additionally, the Company used $12.4 million in financing for the net repayment of long-term borrowings. At December 31, 1994, the Company had available a credit line of $2,650,000 under a Revolving Credit Facility. The Company's packaging subsidiaries had available various unutilized credit facilities of $43 million at December 31, 1994. However, the Company's ability to draw upon these lines for other than certain subsidiary purposes is restricted. The Company expects that cash from operations and its existing banking facilities will be sufficient to meet its needs both in 1995 and on a long-term basis. UTILIZATION OF NET OPERATING LOSS CARRYFORWARDS The Company and its subsidiaries account for income taxes in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes" issued in February 1992. This statement requires, among other things, recognition of future tax benefits, measured by enacted tax rates, attributable to deductible temporary differences between financial statement and income tax bases of assets and liabilities and to tax net operating loss carryforwards, to the extent that realization of such benefits is more likely than not. As discussed in Note 10, PCI has tax net operating loss carryforwards (NOL's) totaling approximately $47 million which expire between 2006 and 2009. SFAS No. 109 requires that the tax 35 benefit of such NOL's be recorded as an asset to the extent that management assesses the utilization of such NOL's to be "more likely than not". Management has determined, based on the Continental Plastic Container Company's history of prior operating earnings and its expectations for the future, that operating income of PCI will more likely than not be sufficient to utilize at least $30 million of these NOL's prior to their ultimate expiration in the year 2009. The NOL's available for future utilization were generated principally by an operating loss caused by increased post-acquisition depreciation and amortization charges and additional interest expense on debt incurred in connection with the purchase. Additionally, in the year ended December 31, 1992, an extraordinary loss was incurred due to the write-off of deferred financing costs relating to a short-term note which was refinanced. The operations of the Continental Plastic Container Companies have historically been profitable (excluding non-recurring items). In assessing the likelihood of utilization of existing NOL's, management considered the historical results of the Continental Plastic Container Companies' operations both prior to the purchase and as subsidiaries of PCI subsequent to the purchase, and the current operating environment. INFLATION AND CHANGING PRICES Costs and revenues are subject to inflation and changing prices in the packaging business. Since all competitors are similarly affected, product selling prices generally reflect cost increases resulting from inflation. At PCI changes in the cost of plastic resin are passed through to customers and have equal and offsetting effects on sales and costs of goods sold and, therefore, have no material effect on earnings and cash flow. Such changes can have a substantial impact on sales. Inflation has not been a material factor in the Company's revenues and earnings in the past three-years. 36
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1994 AND 1993 (In thousands) 1994 1993 --------- -------- ASSETS Current Assets: Cash and cash equivalents $ 8,776 $ 12,741 Investments 292 317 Accounts receivable: Trade accounts 102,255 71,899 Other 15,964 8,357 Less allowance for doubtful accounts (5,316) (3,522) --------- -------- Accounts receivable, net 112,903 76,734 Inventories 82,432 69,503 Prepaid expenses and other current assets 4,700 4,911 --------- -------- Total current assets 209,103 164,206 --------- -------- Property, plant and equipment, at cost: Land, building and improvements 48,750 43,733 Manufacturing, machinery and equipment 230,365 206,423 Furniture, fixtures and equipment 8,536 7,379 Construction in progress 9,505 9,732 --------- -------- 297,156 267,267 Less accumulated depreciation and amortization (116,786) (84,192) --------- -------- Net property, plant and equipment 180,370 183,075 Goodwill, net of accumulated amortization of $1,853 and $1,456, respectively 13,997 13,369 Other assets, net of accumulated amortization 20,115 25,257 --------- -------- Total assets $ 423,585 $385,907 ========= ========
See accompanying notes to consolidated financial statements. 37
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED) DECEMBER 31, 1994 AND 1993 (In thousands) 1994 1993 -------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short term borrowings $ 21,855 $ 6,378 Accounts payable - trade 60,540 40,828 Accrued liabilities: Employee compensation and benefits 19,072 16,075 Other accrued expenses 16,143 15,887 Current installments of long term debt and obligations under capital leases 13,043 13,487 Income taxes payable 1,160 635 Other current liabilities 5,942 4,811 -------- -------- Total current liabilities 137,755 98,101 Long term debt, excluding current installments 128,363 140,481 Obligations under capital leases, excluding current installments 13,998 13,501 Deferred income taxes 3,747 2,717 Other 36,285 38,137 -------- -------- Total liabilities 320,148 292,937 Minority interest 32,741 32,115 Stockholders' Equity: Capital stock: First preferred stock, cumulative $25 par value. Authorized 250,000 shares; no shares issued. - - Second preferred stock, 4% non-cumulative, $100 par value. Authorized 1,535 shares; no shares issued. - - Common stock, $.25 par value. Authorized 20,000,000 shares; outstanding 3,151,157 shares in 1994 and 2,879,158 shares in 1993. 788 720 -------- -------- 788 720 Additional paid-in capital 42,872 41,414 Retained earnings 26,187 21,742 Cumulative foreign currency translation adjustment 849 (3,021) -------- -------- Total stockholders' equity 70,696 60,855 -------- -------- Total liabilities and stockholders' equity $423,585 $385,907 ======== ========
See accompanying notes to consolidated financial statements. 38 CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(In thousands, except per share data) 1994 1993 1992 -------- -------- -------- Sales $537,180 $481,842 $511,241 Cost of sales 443,023 394,678 414,369 -------- -------- -------- Gross profit 94,157 87,164 96,872 Selling, general and administrative expenses 68,509 62,293 67,272 -------- -------- -------- Operating income 25,648 24,871 29,600 Other income (expense): Interest expense, net (18,684) (22,942) (26,023) Foreign currency exchange loss (121) (134) (562) Other - net (180) (55) 559 -------- -------- -------- Net other expense (18,985) (23,131) (26,026) Income before provision for income taxes, minority interest, extraordinary item and cumulative effect of accounting change 6,663 1,740 3,574 Provision for income taxes 1,761 2,655 3,117 -------- -------- -------- Income (loss) before minority interest, extraordinary item and cumulative effect of accounting change 4,902 (915) 457 Minority interest 87 (1,903) (2,648) -------- -------- -------- Income before extraordinary item and cumulative effect of accounting change 4,815 988 3,105 Extraordinary item, net (108) - (1,502) Cumulative effect of accounting change, net (262) - 460 -------- -------- -------- Net income $ 4,445 $ 988 $ 2,063 ======== ======== ======== Earnings (loss) per common share - Primary: Before extraordinary item and cummulative effect of accounting change $ 1.50 $ 0.33 $ 1.01 Extraordinary item (0.03) - (0.49) Cumulative effect of accounting change, net (0.08) - 0.15 -------- -------- -------- Net earnings per share - primary $ 1.39 $ 0.33 $ 0.67 ======== ======== ======== Earnings (loss) per common share - assuming full dilution: Before extraordinary item and cummulative effect of accounting change $ 1.45 $ 0.32 $ 0.94 Extraordinary item (0.03) - (0.44) Cumulative effect of accounting change, net (0.08) - 0.14 -------- -------- -------- Net earnings per share - assuming full dilution $ 1.34 $ 0.32 $ 0.64 ======== ======== ========
See accompanying notes to consolidated financial statements. 39
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS DECEMBER 31, 1994, 1993 AND 1992 (In thousands) 1994 1993 1992 -------- -------- -------- Cash Flows From Operating Activities: Net income $ 4,445 $ 988 $ 2,063 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and amortization 34,018 34,686 34,924 Extraordinary loss on write off of 108 - 1,502 capitalized finance costs, net Minority interest 87 (1,903) (2,648) Deferred income taxes (1,193) (1,554) (2,285) Gain (loss) on sale of capital assets 169 363 (534) Provision for losses on accounts receivable 2,845 915 210 Changes in Assets and Liabilities, Net of Effects of Acquisition: (Increase) decrease in accounts receivable (25,528) (1,691) 7,815 (Increase) decrease in other receivables (4,143) 3,941 198 (Increase) decrease in inventories (6,952) 3,993 (8,260) (Increase) decrease in prepaid expenses and other current assets 392 146 (1,632) (Increase) decrease in other assets 638 (481) (465) Increase (decrease) in accounts payable 15,901 (4,963) 441 Increase in accrued liabilities 1,884 465 1,642 Increase (decrease) in income taxes payable 419 329 (1,403) (Decrease) in other liabilities (4,532) (6,336) (1,234) -------- -------- -------- Net Cash Provided by Operating Activities 18,558 28,898 30,334 Cash Flows From Investing Activities: Purchase of minority interests (1,970) (213) (120) Proceeds from investments 31 534 1,349 Proceeds from sale of capital assets 985 770 1,434 Capital expenditures, net of investment grants (23,858) (22,149) (26,393) Purchase of equipment for customer reimbursement (249) - (999) Cash used to purchase Obalex, net of cash acquired - - (1,086) -------- -------- -------- Net Cash Used in Investing Activities (25,061) (21,058) (25,815) Cash Flows From Financing Activities: Principal payments of long term debt and obligations under capital leases (18,125) (9,379) (135,397) Proceeds from long term debt and obligations under capital leases 5,727 827 135,378 Common stock issued upon conversion of debentures and warrants 362 184 2,111 Proceeds from (repayments of) short term borrowings 14,485 (339) (3,613) Dividends paid by subsidiary to minority interest (51) (344) (80) -------- -------- -------- Net Cash Provided by (Used in) Financing Activities 2,398 (9,051) (1,601) Effect of exchange rate changes on cash 140 (323) (169) -------- -------- -------- Increase (decrease) in cash and cash equivalents (3,965) (1,534) 2,749 Cash and cash equivalents at beginning of year 12,741 14,275 11,526 -------- -------- -------- Cash and cash equivalents at end of year $ 8,776 $ 12,741 $ 14,275 ======== ======== ========
See accompanying notes to consolidated financial statements. 40 CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(In thousands) Cumulative Common Stock Foreign Total ----------------- Additional Currency Stock- Number Paid-in Retained Translation holders of Shares Amount Capital Earnings Adjustment Equity --------- ------ ---------- -------- ----------- -------- Balances, January 1, 1992 2,784 $696 $39,143 $18,691 $ 2,863 $61,393 Net income - - - 2,063 - 2,063 Common stock issued to employees and upon conversion of debentures and warrants 74 19 2,092 - - 2,111 Foreign currency translation adjustment - - - - (2,632) (2,632) ----- ---- ------- ------- ------- ------- Balances December 31, 1992 2,858 $715 $41,235 $20,754 $ 231 $62,935 Net income - - - 988 - 988 Common stock issued to employees and upon conversion of debentures and warrants 21 5 179 - - 184 Foreign currency translation adjustment - - - - (3,252) (3,252) ----- ---- ------- ------- ------- ------- Balances December 31, 1993 2,879 $720 $41,414 $21,742 $(3,021) $60,855 Net income - - - 4,445 - 4,445 Common stock issued to employees and upon conversion of debentures and warrants 272 68 1,458 - - 1,526 Foreign currency translation adjustment - - - - 3,870 3,870 ----- ---- ------- ------- ------- ------- Balances December 31, 1994 3,151 $788 $42,872 $26,187 $ 849 $70,696 ===== ==== ======= ======= ======= =======
See accompanying notes to consolidated financial statements. 41 CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (1) Accounting Policies and Other Matters (a) Principles of Consolidation The accompanying consolidated financial statements include the accounts of Continental Can Company, Inc. (the Company), its majority-owned foreign and domestic subsidiaries and its 50% interest in Plastic Containers, Inc. (PCI). During 1992, the Company entered into an agreement which gave the Company a proxy to vote an additional 1% of the shares of PCI (see Note 2(c)). The proxy provides the Company with effective control over PCI and, accordingly, the Company's interest in PCI is reflected on a consolidated basis. At December 31, 1994, the Company owned the following packaging related businesses: 85% of Ferembal S.A. (Ferembal) (see Note 2(d)), located in France which in turn owns 64%of Obalex A.S. (Obalex) located in the Czech Republic; 100% of Dixie Holding, Inc. and Dixie Union Geschaftsfurungs GmbH which own 100% of Viatech Holding GmbH (Holding), which in turn owns all of the outstanding shares of Dixie Union Verpackungen GmbH (Dixie Union), located in the Federal Republic of Germany; and 57% of Onena Bolsas de Papel, S.A. (Onena) located in Spain. As mentioned above, the Company also owns 50% of PCI, which in turn owns 100% of Continental Plastic Containers, Inc. and Continental Caribbean Containers, Inc. (collectively, CPC). In addition, the Company owns 100% of an engineering firm, Lockwood, Kessler & Bartlett, Inc. Minority interests reflected in consolidation represent the portions of Ferembal, Obalex, Onena, and PCI not owned by the Company. All significant intercompany balances and transactions have been eliminated. (b) Inventories Inventories consist principally of packaging materials, repair parts and supplies. The manufacturing inventories of PCI are stated at the lower of cost applied on the last-in, first-out (LIFO) method, which is not in excess of market. Inventories of the Company's other subsidiaries and the repair parts and supplies inventories of PCI are stated at the lower of cost on a first-in, first-out (FIFO) basis or market. (c) Depreciation and Amortization 42 Depreciation and amortization of property, plant and equipment are computed on a straight-line basis over the estimated useful lives of the assets, as follows:
Estimated useful lives (years) Building and building improvements 10 to 35 Manufacturing machinery and equipment 3 to 20 Furniture, fixtures and equipment 2 to 10
Leasehold improvements are amortized over their estimated useful lives or the term of the lease, whichever is less. Provision for amortization of intangible assets is based upon the estimated useful lives of the related assets and is computed using the straight-line method. Intangible assets resulting from the acquisitions of (a) PCI consist of (i) a non-compete agreement and acquisition costs (amortized over five years), (ii) finance costs (being amortized over periods ranging from five to nine years), and (iii) customer contracts (amortized over ten years); and (b) Ferembal consist of patents (amortized on a straight-line basis over their estimated useful lives) and goodwill (amortized on a straight line basis over forty years). (d) Income Taxes The Company files a consolidated tax return for U.S. purposes for itself and its domestic subsidiaries (to the extent it owns at least 80% of such subsidiaries). Separate returns are filed for all other subsidiaries. U.S. deferred income taxes have not been provided on the unremitted earnings of the Company's foreign subsidiaries to the extent that such earnings have been invested in the business, as any taxes on dividends would be substantially offset by foreign and other tax credits. Effective January 1, 1992, the Company implemented the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes" (see Note 10). The cumulative effect of adopting SFAS No. 109 is reflected in the consolidated statement of earnings. Under the asset and liability method of SFAS 109, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a change in 43 tax rates is recognized in income in the period that includes the enactment date. (e) Foreign Currency Translation The accounts of the Companys foreign subsidiaries have been converted to U.S. dollars utilizing SFAS No. 52, "Foreign Currency Translation", under which assets and liabilities are translated at the exchange rate in effect at the balance sheet date, while revenues, costs and expenses are translated at the average exchange rate for the reporting period. Resulting unrealized net gains or losses are recorded as a separate component of stockholders' equity. Realized foreign exchange gains or losses are reflected in operations. (f) Statement of Cash Flows The Company considers securities purchased within three months of their maturity date to be cash equivalents. Cash equivalents consist of short- term investments in government securities and bonds. Cash paid for interest and income taxes was as follows:
1994 1993 1992 ------- ------- ------- (in thousands) Interest $18,725 $23,386 $25,535 Income taxes 4,086 4,667 6,666
(g) Research and Development Research and development costs are charged to expense as incurred. Such costs amounted to approximately $12,461,000, $12,862,000 and $14,603,000 in 1994, 1993 and 1992, respectively. (h) Accounting for Post-Retirement Benefits Other Than Pensions In 1992, the Company adopted SFAS No. 106, "Employer's Accounting for Post- Retirement Benefits Other Than Pensions", which requires a calculation of the actuarial present value of expected benefits to be paid to or for employees after their retirement and an allocation of the cost of those benefits to the periods the employees render service (see Note 13). (i) Employers Accounting for Post-Employment Benefits In 1994, the Company adopted SFAS No. 112, Employers Accounting for Post- Employment Benefits which requires employers to recognize the obligation to provide postemployment benefits and an allocation of the costs of those benefits (see Note 13). 44 (j) Insurance PCI is self-insured for coverages for the purposes of providing workers' compensation, general liability and property and casualty insurance up to varying deductible amounts. PCI's self-insurance reserves are included in other liabilities in the consolidated balance sheets. Costs charged to operations for self-insurance for the years ended December 31, 1994, 1993 and 1992 were $2,066,000, $2,268,000 and $2,078,000, respectively. (k) Plant Rationalization and Realignment PCI records an estimate of the liabilities associated with the closing of specific manufacturing facilities. Costs (income) charged to operations for these programs were $855,000, $(135,000), and $159,000 for the years ended December 31, 1994, 1993 and 1992, respectively. Net income was recognized in 1993 due to a sublease of the related facilities. In 1994 this sublease was defaulted upon. Included in other current liabilities at December 31, 1994 is $549,000 ($472,000 at December 31, 1993) related to accruals for plant rationalization and realignment. (l) Restructuring Charge Included in selling, general and administrative expense in 1994 is a restructuring charge of $1,686,000 related to Ferembal. The charge includes termination benefits for certain employees, approximately half of whom took early retirement. During 1994, terminated employees received $889,000. The December 31, 1994 balance sheet contains an accrued liability of $797,000 for termination benefits for the remaining employees. (m) Earnings Per Share Earnings per common share is based on the weighted average number of common and common equivalent shares outstanding. Common equivalent shares include dilutive stock options (using the treasury stock method) exercisable under the Company's option plans and warrants. Weighted average shares outstanding in 1994, 1993 and 1992 were 3,220,082, 3,023,062 and 3,078,387, respectively. Prior to their conversion in 1994, earnings per common share, assuming full dilution, gave effect to the conversion of the Company's outstanding 10-3/4% Convertible Subordinated Debentures as if such Debentures had been converted, after elimination of related interest expense, net of income tax benefit. (n) Reclassifications 45 Certain reclassifications have been made to conform prior year financial statements to the 1994 presentation. (2) ACQUISITIONS (a) Ingosa During 1993, the Company purchased substantially all of the shares of Ingosa for nominal consideration. Ingosa, located in Pamplona, Spain, is a flexible packaging manufacturer which laminates and prints plastic, paper and foil materials primarily for the food industry in Spain. The acquisition was accounted for under the purchase method. In connection with this transaction the excess of the fair value of the net assets acquired over the purchase price was allocated to property, plant and equipment. Also in 1993, the Company entered into an agreement with the provincial government of Navarra through SODENA, an economic development corporation owned by the government. The agreement, which was legislatively ratified in 1994, provided that (i) Onena and Dixie Union S.A. be merged into Ingosa with the surviving company being named Onena, (ii) SODENA receive 41% of the equity in the merged entity in exchange for the elimination of $3,736,000 (534 million pesetas) in existing overdue local taxes owed by Ingosa (see Note 9(f)), (iii) SODENA provide the merged entity with a $2,163,000 (309 million pesetas) interest free loan for a period of up to 4 years secured by Onena's existing land and building (see Note 9(h)), and (iv) the Company invest $700,000 (100 million pesetas) in the merged entity as additional equity. (b) Obalex During 1992, Ferembal acquired 34% of the stock of Obalex A.S., a producer of food cans in the Czech Republic, for approximately $3,021,000 and simultaneously entered into two agreements to provide Obalex with training, a technology license, and certain equipment, which approximates Ferembal's estimated cost of providing such training, technology and equipment. Ferembal paid approximately $1,086,000, with a balance of $1,935,000, paid in December 1993. In 1993, Ferembal, pursuant to a pre-emptive right, subscribed to a share issue which gave Ferembal an additional 17% interest in the common stock of Obalex for approximately $3,000,000. During 1994 Ferembal purchased an additional 13% of Obalex from other investors for $730,000. These transactions have been accounted for under the purchase method with the purchase price allocated to the fair value of the net assets acquired. 46 (c) PCI During 1991, the Company and Merrywood, Inc. (Merrywood) each invested $30,000,000 for respective 50% interests in PCI. On November 21, 1991, PCI purchased all of the outstanding stock of CPC. The purchase price of approximately $153,450,000 included $135,450,000 as the purchase price for the stock acquired, $15,000,000 as consideration for a non-competition agreement, and $3,000,000 as fees for providing financing. Of the total consideration, $53,450,000 was paid in cash and $100,000,000 was represented by a secured promissory note of PCI, guaranteed by CPC. PCI's results are reflected in the Company's consolidated financial statements after consideration of purchase accounting adjustments recorded by PCI. In 1992, PCI issued $110,000,000 in senior secured notes, the proceeds of which were used to retire the secured promissory note of PCI (see Note 9(c)). In connection with the retirement of the promissory note, PCI incurred an extraordinary loss of $3,005,000 on the write-off of capitalized financing costs. The Company has reflected this item in its consolidated statement of earnings, net of the portion attributable to the minority interest in PCI. In addition to the foregoing amounts to purchase CPC, PCI had agreed to pay the seller an amount equal to 30% of the amount by which CPC's sales (adjusted to reflect resin prices in effect on August 31, 1991) for 1992 and 1993 exceeded $218,000,000 and $224,000,000, respectively. No additional payments were required. During 1992, the Company entered into an agreement with Merrywood pursuant to which Merrywood granted the Company a proxy, irrevocable until August 6, 1998, to vote an additional 1% of the PCI common stock. The agreement also provides an option which allows Merrywood either (i) to require the Company to purchase its 50% interest in PCI for $30,000,000, plus interest at 1% over the prime rate from November 21, 1991, or (ii) after July 1, 1994, to exchange its 50% interest in PCI for 887,500 shares of the Company's common stock (adjusted for any future stock split, stock combination or reclassification) representing approximately 28% of the total number of shares currently outstanding. In addition, pursuant to the agreement, the Company gave Merrywood three voting and one non-voting position on the Company's board of directors. If Merrywood has not elected to require the Company to purchase its interests in PCI for cash by August 7, 1998, then Merrywood's PCI shares are required to be exchanged for shares of the Company's Common Stock. 47 (d) Ferembal During the two-year period ended December 31, 1993, the Company purchased approximately 1% of the outstanding shares of Ferembal for $333,000. As a result of this transaction, the Company's equity interest in Ferembal increased to 85%. This transaction has been accounted for under the purchase method, with the purchase price allocated to the fair value of the net assets acquired. As part of the 1989 purchase of Ferembal, a junior subordinated convertible bond was issued which, if converted at December 31, 1994, would reduce the Company's percentage ownership of Ferembal to 64% (see Note 9(d)). Pursuant to an Agreement entered into in 1989 between the Company, the minority shareholders and the convertible bondholder of Ferembal, the Company agreed to take Ferembal public in order to provide liquidity for these other investors. The agreement, as subsequently amended in 1994, provided that, if Ferembal were not taken public by December 31, 1995, the Company would purchase the shares of the minority shareholders at a price to be determined through an appraisal process. Pursuant to discussions with the minority shareholders and the convertible bondholder, they intend to sell a portion of their shares in a public offering of Ferembal in the fourth quarter of 1995. The Company does not presently intend to sell any of its equity in Ferembal in the public offering. It is expected that the convertible bondholder will convert its bond into equity immediately prior to such offering. This conversion would reduce the Companys ownership of Ferembal to 64%. During the year ended December 31, 1991, Ferembal created Ferembal Investissement S.A. (Investissement) for the purpose of holding a subsidiary, Ferembal Sud Ouest S.A. (Sud Ouest). Investissement was capitalized with 150,000 shares of 100 francs par value. Ferembal held 80,000 shares, and two banks, Credit du Nord and Societe Generale, held the remaining 70,000 shares. Ferembal has purchased such shares from the banks in 1994 for $1,817,000 which approximates fair market value. (3) INVESTMENTS At December 31, 1994 and 1993, all of the investments are held entirely by PCI. In 1994, PCI adopted SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. This accounting change had no effect on the financial statements. 48 Investments consist of held-to-maturity government agency securities stated at amortized cost, which approximates market value. (4) ACCOUNTS RECEIVABLE AND BUSINESS/CREDIT CONCENTRATIONS Most of the Company's customers are located in the United States and Europe. Sales to three customers in 1994, two customers in 1993 and two customers in 1992 accounted for 21%, 15% and 15% of the Company's sales, respectively; accounts receivable from two customers at December 31, 1994 and December 31, 1993 amounted to 22% and 19%, respectively, of the Company's total stockholders' equity. Included in other accounts receivable at December 31, 1994 are $4,190,000 ($3,024,000 at December 31, 1993) due from customers for equipment purchases; engineering fees billed of $3,755,000 ($2,250,000 at December 31, 1993); recoverable value added taxes of $2,477,000 ($686,000 at December 31, 1993) related to Ferembal and Dixie Union and a receivable for an insured loss of $3,036,000 related to Ferembal. A loan at December 31, 1993 of $34,986 to the Companys Chairman that carried a rate of interest of prime plus 1% was repaid in 1994. (5) INVENTORIES Inventories consist principally of packaging materials. The components of inventory at December 31 were as follows:
1994 1993 ------- ------- (in thousands) Raw materials and supplies $43,275 $31,774 Work in process 7,096 5,834 Finished goods 35,985 31,720 ------- ------- 86,356 69,328 LIFO reserve (3,924) 175 ------- ------- $82,432 $69,503 ======= =======
Use of the FIFO method would have resulted in increased (reduced) cost of goods sold of $(4,099,000), $63,000 and $112,000 in 1994, 1993 and 1992, respectively. (6) PREPAID EXPENSES AND OTHER CURRENT ASSETS The components of prepaid expenses and other current assets at December 31, were as follows:
1994 1993 ------ ------ (In thousands) Prepaid expenses $2,559 $2,367 Other 2,141 2,544 ------ ------ $4,700 $4,911 ====== ======
49 Ferembal entered into an agreement with a local municipality in France for the sale, at cost, of land and buildings under construction at December 31, 1991. Ferembal then agreed to lease the land and buildings from the municipality under a 20-year operating lease. Ferembal may terminate the lease at any time in the first six-years, without penalty, and upon agreement thereafter. Rental payments to the municipality will be determined on the cost of the land and buildings, less any government subsidies received, plus interest, and will be payable over the 20-year term. At December 31, 1992, the construction of the buildings was complete and the cost of such land and buildings were considered to be assets held for sale and were presented as other current assets in the amount of $1,560,000. The sale of the land and buildings occurred on January 11, 1993 at cost, for which payment was made in 1994. (7) OTHER ASSETS The components of other assets at December 31 were as follows:
1994 1993 ---- ---- (in thousands) Intangibles: Non-compete agreements 15,000 $15,000 Financing and acquisition costs 6,316 6,469 Customer contracts 7,630 7,630 Patents 708 679 Technical licenses 840 784 Deferred tax assets 2,472 2,482 Non-current receivables, principally VAT 1,351 1,832 Other 923 599 ------ ------- 35,240 35,475 Less accumulated amortization of intangibles 15,125 10,218 ------ ------- 20,115 $25,257 ====== =======
(8) SHORT-TERM BORROWINGS At December 31, 1994 and 1993, approximately $21,855,000 and $6,378,000, respectively, were outstanding representing amounts drawn by (a) Ferembal ($16,858,000 at interest rates ranging from 6.0% to 10.4%), (b) Holding ($2,537,000 at an interest rate of 8.5%) and (c) Onena ($2,460,000 at interest rates ranging from 8.25% to 8.75%). At December 31, 1994, Ferembal had unutilized short-term unsecured borrowing agreements of approximately $20 million. At December 31, 1994, Holding had total lines of credit available under short-term unsecured borrowing agreements of approximately $10,600,000. 50 (9) LONG-TERM DEBT, CAPITAL LEASES AND OTHER LONG-TERM LIABILITIES Long-term debt and capital leases at December 31, 1994 and 1993 are summarized as follows:
1994 1993 ---- ---- (In thousands) 10.75% Convertible Subordinated Debentures due 1994 (a)................. $ - $ 1,164 Revolving Credit Facility due in 1995, with interest at 1% above the prime rate (8.5% at December 31, 1994) (b) 1,350 850 10.75% Senior Secured Notes due 2001 (c) 104,700 110,000 Term loan payable by Ferembal between 1993 and 1997 at 10.25% (denominated in francs: 10 million at December 31, 1994 and 14 million at December 31, 1993)................................... 1,873 2,369 Notes payable by Ferembal in installments through 1997 at the Paris Inter Bank Offering Rate (PIBOR) (6.25% at December 31, 1994) plus .6% to .75% (denominated in francs: 38 million at at December 31, 1994 and 65 million at December 31, 1993)........... 7,080 10,998 Term loans payable by Ferembal between 1993 and 2001 at weighted average interest rates of 10% and a range of 8% to 15.5% (denominated in francs: 20 million at December 31, 1994 and 27 million at December 31, 1993....................... 3,761 4,535 Convertible Subordinated Bond due 2000 at PIBOR (denominated in francs: 10 million at December 31, 1994 and 1993) (d)..................................... 1,873 1,692 Term loans payable between 1993 and 2001 at rates of 11.6% to 15.1% (denominated in Czech crowns: 37 million at December 31, 1994 and 41 million at December 31,1993) 651 1,007 Obligations under capital leases (e).... 15,706 15,863 Notes payable by Dixie Union in 1995 and 1996 at 8.9% to 9.85% (denominated in deutsch marks: 8 million at December 31, 1994 and 10 million at December 31, 1993)...................... 5,162 5,759 Notes payable by Dixie Union in semi-annual installments through 2003 at rates of 7.3% to 7.88% (denominated in deutsch marks : 8,285,000 at December 31, 1994 and 7,630,000 at December 31, 1993)......... 5,346 4,394 Obligations pursuant to extension agreement with regard to turnover tax (f)..................................... 877 4,558 Obligations relating to settlement of social security assessments (g)......... 3,142 3,312 Discounted secured note due 1997 (denominated in pesetas: 265 million at December 31, 1994) (h)............... 2,017 -
51 Bank borrowings at an average effective interest rate of 10.9% in 1994, and 10.7% in 1993 (246 million and 133 million pesetas at December 31, 1994 and 1993, respectively)................. 1,866 932 Other................................... - 36 -------- --------- 155,404 167,469 Less current installments............... (13,043) (13,487) -------- --------- $142,361 $ 153,982 ======== =========
(a) In May 1987, the Company issued $1,612,875 of 10.75% Convertible Subordinated Debentures due in 1994. Interest payments were payable every six months. Each $15.00 face amount of Debenture, with the payment of an additional $15.00 in cash, was convertible into four shares of Common Stock. The Debentures were callable at the option of the Company. All Debentures were converted in 1994 upon the issuance of 267,799 shares of Common Stock. (b) The Company's Revolving Credit Facility provides for borrowings of up to $4 million. A commitment fee of .75% is payable on the unused portion of the facility. There are provisions regarding the maintenance of minimum net worth and demand deposits averaging at least $400,000. The facility is secured by all of the Company's tangible and intangible assets. Subject to certain conditions precedent, the Revolving Credit Facility may be converted into a five- year term note when due in May 1995. (c) PCI is required to make four annual sinking fund payments of $22 million each, commencing April 1, 1997 and continuing through April 1, 2000. The first sinking fund payment will be reduced by any early repurchases made before the payment date ($5.3 million at December 31, 1994). The notes are redeemable, in whole or in part, at the option of PCI at prices decreasing from 105% of par at April 1, 1997 to par on April 1, 2000. In the event of a change of control of PCI as defined in the indenture, PCI is obligated to offer to purchase all outstanding Senior Secured Notes at a redemption price of 101% of the principal amount thereof, plus accrued interest. In addition, PCI is obligated in certain instances to offer to purchase Senior Secured Notes at a redemption price of 100% of the principal amount thereof, plus accrued interest with the net cash proceeds of certain sales or dispositions of PCI's assets. The indenture places certain restrictions on PCI concerning payment of dividends, additional liens, disposition of the proceeds from asset sales, sale-leaseback transactions and additional borrowings. At December 31, 1994, PCI was in compliance with these restrictions. 52 The extraordinary loss of $108,000 in 1994, which is net of the portion attributable to minority interest, relates to the early extinguishment by PCI of a portion of the Senior Secured Notes. (d) In 1989, Ferembal issued a subordinated bond convertible into 100,000 shares of capital stock at the option of the holders at any time prior to October 28, 1999. If exercised, the Company's ownership interest in Ferembal will decrease from the present 85% interest to a 64% interest. If the conversion right is not exercised, the bond becomes due in two equal annual installments beginning in 1999 (see Note 2(d)). (e) The capital lease obligations represent lease payments due through 2005 which are capitalized. The following is a schedule of future minimum lease payments under the capitalized leases together with the present value of the net minimum lease payments as of December 31, 1994:
Fiscal Year (in thousands) ----------- -------------- 1995 $ 3,129 1996 2,964 1997 2,886 1998 2,808 1999 2,454 Later Years 8,755 ------- Total minimum lease payments $22,996 Less amount representing interest (7,290) ------- Present value of net minimum lease payments, including current maturities, with interest rates ranging from 8% to 10.5% $15,706 =======
(f) In June 1988, Onena settled an outstanding dispute regarding the amount of turnover tax due to the Spanish provincial government. A mortgage on Onena's property, plant and equipment secures the obligation, which amounts to $887,000 (115 million pesetas) at December 31, 1994 and is repayable in installments through May 1998. Also included at December 31, 1993 is $3,736,000 (534 million pesetas) which was due to the Spanish provincial government by Ingosa (see Note 2(a)). (g) Represents $3,142,000 (414 million pesetas) at December 31, 1994 and $3,312,000 (473 million pesetas) at December 31, 1993 due to social security. Pursuant to an agreement, repayment by Onena is due by June 1997. 53 (h) In March 1994 Onena was provided with a $2,163,000 (309 million pesetas) interest free loan secured by its original land and building (see Note 2(a)). The loan is due in March 1998 or upon the sale of the land and building, whichever occurs first. The loan was discounted at a 7% rate with the excess of $393,000 (56.8 million pesetas) over the discounted amount of $1,770,000 (252.8 million pesetas) being applied to reduce property, plant and equipment. Maturities of long-term debt are as follows:
Fiscal Year (in thousands) ----------- -------------- 1995 $ 11,335 1996 9,008 1997 23,120 1998 24,530 1999 25,011 Later Years 46,694 -------- $139,698 ========
During 1992, PCI obtained a $15 million credit facility with Citibank, N.A. ("Citibank") under which PCI is able to borrow, on a revolving basis, up to an amount representing specified percentages of PCI's eligible accounts receivable and eligible inventory, not to exceed $15 million outstanding at any time. The facility will mature on its fifth anniversary. The revolving credit loans bear interest at the rate, selected at PCI's option, of 1.5% per annum over the fluctuating alternative base rate of Citibank or 2.75% per annum over the London Inter Bank offering rate of Citibank. Borrowings under the revolving credit facility are guaranteed by CPC and secured by accounts receivable and inventories and a secondary lien on the outstanding stock of CPC. PCI is required to pay Citibank an annual commitment fee of 1/2% of the average daily unused portion of the revolving credit facility. Commitment fees totaled $66,000 and $72,000 for the years ended December 31, 1994 and 1993, respectively. This revolving credit facility contains covenants covering, among other things, leverage, current ratio and minimum interest coverage and net worth, and restrictions on capital expenditures, additional indebtedness, sale-leaseback transactions, dividends and other corporate transactions of PCI and its subsidiaries. At December 31, 1994, PCI was in compliance with the covenants, or had obtained a waiver. PCI is required to have no outstanding borrowings under the revolving credit facility for at least 30 consecutive days during each 12-month period, other than borrowings used to finance permitted acquisitions, dividends and letters of credit. 54 The agreement provides for the issuance of letters of credit by Citibank on PCI's behalf. At December 31, 1994, $1,889,000 of such letters of credit had been issued, guaranteeing obligations carried in the consolidated balance sheet. At December 31, 1994, no other funds had been drawn on the revolving credit facility. Other long-term liabilities at December 31, 1994 primarily include pension and profit sharing amounts related to PCI and Ferembal of $14,304,000 ($17,447,000 at December 31, 1993), insurance reserves at PCI of $8,805,000 ($7,688,000 at December 31, 1993), and accrued post-retirement benefits at PCI of $5,904,000 ($6,008,000 at December 31, 1993). (10) Income Taxes As discussed in note 1(d), The Company adopted SFAS No. 109 as of January 1, 1992. The cumulative effect of this change in accounting for income taxes of $460,000, exclusive of the portion allocated to minority interest ($85,000), was determined as of January 1, 1992 and is reported separately in the consolidated statement of earnings for the year ended December 31, 1992. As a result of applying SFAS No. 109 in 1992, pre-tax income before minority interest, extraordinary item and cumulative effect of accounting change for the year ended December 31, 1992 increased by $884,000. The components of the provision for income taxes for the years ended December 31, 1994, 1993 and 1992 are as follows:
1994 1993 1992 -------- -------- -------- (in thousands) Current - Federal $ 148 $ (145) $ (108) - Foreign 812 4,209 5,452 - State 12 145 58 Deferred - Federal (1,559) (1,004) (408) - Foreign 2,553 (60) (1,340) - State (205) (490) (537) ------- ------- ------- Provision for income taxes $ 1,761 $ 2,655 $ 3,117 ======= ======= =======
The Company's total income tax provision differs from the provision that would result from applying the U.S. Federal statutory income tax rate to income before provision for income taxes, minority interest, extraordinary item and cumulative effect of accounting change due to the following:
1994 1993 1992 --------------- ---------------- (in thousands, except for percentage amounts) Amount % Amount % Amount % Provision at U.S. Federal Statutory rate $2,265 34.0% $ 592 34.0% $1,215 34.0% Losses not providing tax benefits (847) (12.7) - - - -
55 Change in the beginning of year valuation allowance 696 10.4 1,671 96.0 2,409 67.4 State income taxes, net of Federal income tax benefit (127) (1.9) (228) (13.1) (316) (8.8) Differential in foreign tax rates (440) (6.6) 394 22.7 (498) (13.9) Other 214 3.2 226 13.0 307 8.5 ------ ----- ------ ----- ------ ----- Provision for income taxes $1,761 26.4% $2,655 152.6% $3,117 87.2% ====== ===== ====== ===== ====== =====
The significant components of deferred income tax benefit attributable to income from continuing operations for the years ended December 31, 1994, 1993 and 1992 are as follows:
1994 1993 1992 -------- --------- -------- (in thousands) Deferred tax expense (exclusive of the effects of other components listed below) $ 520 $ 428 $ (130) Benefit of operating loss carry forwards (1,313) (10,587) (8,535) Book over tax bases of principally fixed assets 886 2,497 3,971 Increase in beginning-of-the-year balance of the valuation allowance for deferred tax assets 696 6,108 2,409 ------- -------- ------- $ 789 $ (1,554) $(2,285) ======= ======== =======
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1994 and 1993 are presented below:
1994 1993 ---- ---- Deferred tax assets: (in thousands) Net operating loss carry forwards $ 21,532 $ 20,219 Alternative minimum tax credit carry forwards 145 - Vacation pay, due to accrual for financial reporting purposes 1,660 1,245 Plant rationalization reserves 720 733 Self-insurance reserves 3,696 3,271 Pension and post-retirement benefit reserves 5,594 5,995 Deferred income 1,537 1,623 Tax over book base of molds - 131 Stock options, due to accrual for financial reporting purposes 301 227 Other 3,477 2,137 -------- -------- Total gross deferred tax assets 38,662 35,581 Less valuation allowance (11,424) (10,728) -------- -------- Net deferred tax assets 27,238 24,853 -------- -------- Deferred tax liabilities: Taxable gain on merger 3,016 3,222 Book over tax bases of principally fixed assets 21,602 20,716 Acquisition costs, book over tax bases 453 947 Other 1,300 - -------- -------- Total gross deferred tax liabilities $ 26,371 $ 24,885 ======== ======== Net Asset (liability) 867 (32) ======== ========
The valuation allowance for deferred tax assets as of January 1, 1993 was $4,620,000. The net change in the total valuation allowance for the years ended December 31, 1994 and 1993 was an increase of $696,000 and $6,108,000, respectively. 56 Due to different tax jurisdictions of the Company's subsidiaries, net deferred tax assets (liabilities) of $867,000, ($32,000) and ($1,728,000) at December 31, 1994, 1993 and 1992, respectively, shown above are reflected in the consolidated balance sheets as:
1994 1993 ---- ---- Deferred tax assets: (in thousands) Current deferred tax assets (included in prepaid expenses and other current $2,141 $ 203 assets) Non-current deferred tax assets (included in other assets) 2,473 2,482 ------ ------ 4,614 2,685 Non-current deferred tax liabilities 3,747 2,717 ------ ------ Net deferred tax asset (liabilities) $ 867 $( 32) ====== ======
At December 31, 1994, PCI has operating loss carry forwards for Federal income tax purposes of approximately $47 million which are available to offset future Federal taxable income between 2006 and 2009. (11) Common Stock - Stock Options and Grants The 1988 Restricted Stock Option Plan, as amended, (the Restricted Plan) provides for the issuance of up to 500,000 shares of Common Stock upon the exercise of options at an exercise price determined by the Personnel Committee of the Board of Directors (the Committee), but not less than $1.00 per share. The Committee may determine the exercise period of the option up to a maximum of twenty years from the date of the grant and may determine a restricted period during which any portion of the option may not be exercised. During 1994, employees were granted options to purchase up to 9,500 shares of common stock at prices of $21.00 to $22.50 per share, which prices represented fair value at the date of grant. The options vest over a five year period and expire ten years from their grant and had not been exercised as of December 31, 1994. As of December 31, 1994, the Chairman and the Executive Vice President had received (i) restricted options (granted in March 1992) to purchase 30,000 and 20,000 shares, respectively, vesting over a five-year period, at $26.75 per share, such price being the fair market value at date of grant; (ii) unrestricted options to purchase 140,000 and 60,000 shares, respectively, under the Restricted Plan at $8.625 to $17.00 per share, such prices being the fair market value of a share of the Company's Common Stock at the date of the grant; and (iii) restricted options (granted in April 1991) to purchase 10,000 and 6,000 shares, respectively, at an exercise price of $1.00 per share which vest at a rate of 20% per year subject to their continued employment. Concerning the 16,000 restricted options granted in April 1991, compensation to be recognized 57 over the five-year vesting period will aggregate $520,000, of which $104,000 was charged to expense in each of 1994, 1993 and 1992. As of December 31, 1994, 23,200 shares were available for future grants under the Restricted Plan. Pursuant to the 1988 Director Stock Option Plan (the Retainer Plan), directors may elect to receive a stock option in lieu of cash as an annual retainer. Each electing director will receive an option equal to the nearest number of whole shares determined by dividing the annual retainer by the fair market value of the stock less one dollar. The option price is one dollar per share and an option may not be exercised prior to the first anniversary of the date it was granted nor more than ten years after such date. During 1994, 1993 and 1992 nine electing directors each received an option to purchase 303, 316 and 241 shares of Common Stock, respectively, under the Retainer Plan. In 1994, 1993 and 1992, a total of $58,500, $58,500 and $41,250, respectively, was charged to compensation expense with respect to the Retainer Plan. The 1990 Stock Option Plan for Non-Employee Directors (the Director Plan) provides for the issuance of up to 200,000 shares of Common Stock to directors who are not employees of the Company or its subsidiaries. The Director Plan is administered by a Board Committee. The Director Plan provides for the grant to each non-employee director, at the commencement of his initial term, of an option to purchase up to 10,000 shares of Common Stock at a price equal to the fair market value of a share of Common Stock on the date of the grant. The options become exercisable as to one-tenth of the shares subject to option on the date of the grant and on the nine successive anniversaries of such date. The term of the options is 10 years provided that any option holder who ceases to be a member of the Board of Directors forfeits any part of the option grant which has not become exercisable as of such date. During 1990, each member of the Board of Directors who was not an employee (10 individuals) received an option to purchase 10,000 shares of Common Stock at prices ranging from $17.00 to $17.50 per share, being the fair market value of a share of Common Stock on the date of the grant. No options have been exercised pursuant to the Director Plan. There are currently 105,000 shares available for grant under the Director Plan. Pursuant to the 1992 Restricted Stock Plan for Non-Employee Directors (the "Stock Plan"), each non-employee director of the Company receives an award of 300 shares of Company Common Stock during each year of service beginning in 1992. Such shares are restricted from transfer while such recipient remains a member of the Board of Directors and the shares are subject to forfeiture under certain circumstances 58 including resignation or failure to stand for reelection prior to age 70. The Company issued 4,200 shares under the Stock Plan in 1994, and 8,400 shares under the Stock Plan in 1993 for the 1992 and 1993 plan years; the Company has expensed $90,300 in 1994, $103,425 in 1993 and $79,500 in 1992 for shares which were issued. A number of options have been granted which were not pursuant to any plan. At December 31, 1994 a total of 95,000 shares were subject to such options at exercise prices ranging from $2.94 to $25.75 per share, which represented the fair market vaue of a share of the Companys stock on the date each of such options were granted. These options expire between 1995 and 2002. None of these options were exercised during the three year period ending December 31, 1994. (12) Pension and Profit Sharing Plan PCI provides a defined benefit pension plan for substantially all salaried employees (which was amended in 1993) and a noncontributory defined benefit pension plan for substantially all hourly workers who have attained 21 years of age. The following table sets forth the plans' funded status at December 31, 1994 and 1993 based primarily on January 1, 1994 participant data and plan assets:
1994 1993 ---- ---- (in thousands) Actuarial present value of benefit obligation, including vested benefits of $25,464,000 and $14,700,000 in 1994, and $28,369,000 and $16,884,000 in 1993 for the salaried and hourly plans, respectively $(43,512) $(50,142) ========= ========= Projected benefit obligation (PBO) (44,557) (50,893) Plan assets, at fair value 38,083 41,181 Unrecognized net (gain) loss 499 2,252 Adjustment to recognize minimum liability (171) (1,533) Prior service cost not yet recognized in net periodic pension cost (78) 31 -------- -------- Accrued pension liability (included in other Liabilities) $ (6,224) $ (8,962) ======== =========
Net pension costs under the above mentioned PCI plans included the following components for the years ended December 31, 1994, 1993 and 1992: 59
1994 1993 1992 ---- ---- ---- (in thousands) Service Cost $ 1,161 $ 818 $ 817 Interest Cost 3,715 3,713 3,515 Loss (return) on plan assets 1,916 (4,198) (2,730) Net amortization and deferral (5,613) 781 (593) Change in acturial assumptions -- 2,725 -- ------- ------- ------- Net periodic pension costs 1,179 3,839 1,009 Effect of window plan -- -- 581 ------- ------- ------- Total $ 1,179 $ 3,839 $ 1,590 ======= ======= =======
During 1992, negotiated benefit increases were made for certain hourly plan participants and early retirement (window plan) was accepted by certain salaried plan participants. The effects of these changes were to increase the hourly plan's PBO by $576,000 and increase the salaried plan's PBO and total periodic pension expense by $814,000 and $581,000, respectively. Assumptions used in the accounting were:
1994 1993 1992 ----- ----- ----- Discount rates 9.0% 7.5% 8.5% Rates of increase in compensation levels 5.0% 5.0% 6.5% Expected long-term rate or return on 9.5% 9.5% 9.5% assets
Ferembal provides retirement benefits pursuant to an industry-wide labor agreement. The plan is not funded. Amounts charged to expense amounted to $179,000, $250,000 and $94,000 in 1994, 1993 and 1992, respectively. Other non-current liabilities at December 31, 1994 include $1,762,000, ($1,425,000 at December 31, 1993) for this plan. Ferembal also provides an employee profit-sharing plan, the annual contributions to which are determined by a prescribed formula. Amounts charged to expense amounted to $673,000, $954,000 and $1,287,000 in 1994, 1993 and 1992, respectively. Amounts are paid to employees after five years with accrued interest. Other non-current liabilities at December 31, 1994 include $5,127,000 ($5,951,000 at December 31, 1993) for the plan. Holding provides selected managers of a subsidiary company with pension and disability benefits. Amounts charged to expense amounted to $175,000, $161,000 and $154,000 in 1994, 1993 and 1992 respectively. (13) Post-Retirement Benefits Other Than Pensions and Post-Employment Benefits PCI provides certain health care and life insurance benefits for retired PCI employees. Certain of PCI's hourly and salaried employees become eligible for these benefits when they become eligible for an immediate pension under a formal company pension plan. In 1993, the plan was amended to 60 eliminate health care benefits for employees hired after January 1, 1993. Expenses for benefits provided to retired employees were $447,000, $710,000 and $490,000 for the years ended December 31, 1994, 1993 and 1992. In 1992, PCI adopted SFAS No. 106, "Employers' Accounting for Post- Retirement Benefits Other Than Pensions". There was no cumulative effect of the change in accounting for post-retirement benefits, as the accumulated post-retirement benefit obligation (APBO) existing at January 1, 1992 equaled the amount recorded in the prior year as part of the purchase accounting adjustments. PCI continues to fund benefit costs on a pay-as-you-go basis. Summary information on PCI's plan at December 31, 1994, 1993 and 1992 is as follows:
Accumulated post-retirement benefit 1994 1993 obligation: ------ ------- (in thousands) Retirees $3,146 $3,565 Fully eligible, active plan participants 1,097 1,121 Other fully active plan participants 1,197 1,262 ------ ------ 5,440 $5,948 Unrecognized net loss from experience and changes in assumptions (99) (672) Prior service cost in net periodic post-retirement benefit cost 563 732 ------ ------ Accrued post-retirement benefit obligation (included in other liabilities) 5,904 $6,008 ====== ======
The components of net periodic post-retirement benefit cost at December 31, 1994, 1993 and 1992 is as follows:
1994 1993 1992 ----- ----- ----- (in thousands) Service cost $ 73 $ 55 $ 33 Interest cost 431 588 457 Net amortization and deferral (57) 67 -- ----- ----- ----- Net periodic post-retirement benefit cost $ 447 $ 710 $ 490 ===== ===== =====
As of December 31, 1994, the discount rate used in determining the APBO was 9.0%. The assumed health care cost trend rate used in measuring the accumulated post-retirement benefit obligation was 10.4% for 1994, declining gradually with each succeeding year on an ultimate rate of 6.0% beginning in calendar year 2001. As of December 31, 1993, the discount rate used in determining the APBO was 7.5%. The assumed health care cost trend rate used in measuring the accumulated post-retirement benefit obligation was 10.95% for 1993, declining gradually with each succeeding year on an ultimate rate of 5.0% beginning in calendar year 2002. 61 The effect of a one percentage-point increase in the assumed health care cost trend rates in each year would increase the accumulated post- retirement benefit obligation as of December 31, 1994 by $778,000 and increase the service and interest cost components of net periodic post- retirement benefit cost for the year then ended by $68,000. PCI provides certain post-employment benefits to former and inactive employees, their beneficiaries and covered dependents. These benefits include disability related benefits, continuation of health care benefits and life insurance coverage. In 1994, PCI adopted the provisions of SFAS No. 112, Employers Accounting for Postemployment Benefits, which requires employers to recognize the obligation to provide postemployment benefits and an allocation of the cost of those benefits to the periods the employees render service. The cumulative effect of this change in accounting principle of $262,000, which is net of the portion attributable to minority interest, was determined as of January 1, 1994 and is reported separately in the consolidated statement of earnings for the year ended December 31, 1994. Additional costs charged to operations for postemployment benefits in 1994 were $29,000. (14) Executive Compensation The Company entered into employment agreements with its Chairman and former Vice-Chairman. The contract with the former Vice-Chairman, who died in January 1989, provided for compensation of $135,000 per annum. Also, the contract provided that in the event of his death prior to its expiration on December 31, 1998, his spouse would receive one-half of the amounts which would otherwise have been paid to him until her death or until December 31, 1998, whichever occurs first. The Company has included the present value of this obligation in accrued liabilities. At December 31, 1994, the contract with the Chairman, as amended, provides for base compensation of $400,000 per annum. The contract also provides that, in the event of his death before its expiration on December 31, 1999, his spouse will receive one-half of the amount paid to him annually as base compensation until her death, or until ten years after the date of his death, whichever occurs first. 62 (15) Net Interest Expense The details of net interest expense were as follows:
1994 1993 1992 --------- ---------- ---------- (in thousands) Interest income $ 941 $ 917 $ 939 Interest expense (19,625) (23,859) (26,962) -------- -------- -------- Interest expense, net $(18,684) $(22,942) $(26,023) ======== ======== ========
(16) Foreign and Domestic Operations The Company performs services principally in the packaging industry. Manufacturing operations are performed domestically through PCI, whereas manufacturing operations are performed overseas in Europe through Ferembal, Holding and Onena. Information about the Company's foreign and domestic operations follows.
1994 1993 1992 --------- --------- --------- (in thousands) Sales to unaffiliated customers: Foreign $289,566 $260,206 $296,910 Domestic 247,614 221,636 214,331 -------- -------- -------- Total $537,180 $481,842 $511,241 ======== ======== ======== Income (loss) before provision for income taxes, minority interest, extraordinary item and cumulative effect of accounting change: Foreign $ 11,191 $ 11,045 $ 13,558 Domestic (4,528) (9,305) ( 9,984) -------- -------- -------- Total 6,663 $ 1,740 $ 3,574 ======== ======== ======== Identifiable assets: Foreign $207,946 $173,390 $177,913 Domestic 215,639 212,517 222,097 -------- -------- -------- Total $423,585 $385,907 $400,010 ======== ======== ========
(17) Fair Value of Financial Instruments The carrying amounts of cash and cash equivalents, investments, accounts receivable, other current assets, accounts payable and short-term borrowings approximate fair value because of the short maturity of these instruments. The fair value of the Company's long-term debt is estimated, based on the quoted market prices for the same or similar issues, or on the current rates offered to the Company for debt of the same remaining maturities, and approximates the carrying amount as of December 31, 1994. 63 (18) Commitments and Contingencies The Company and its subsidiaries occupy offices and use equipment under various lease arrangements. The rent expense under non- cancelable long-term operating leases for the years ended December 31, 1994, 1993 and 1992 was approximately $5,418,00, $7,082,000 and $4,968,000, respectively. Total commitments under such arrangements are payable in annual installments of $5,080,000 in 1995, $4,981,000 in 1996, $3,870,000 in 1997, $2,596,000 in 1998, $1,628,000 in 1999 and $5,439,000 thereafter. The Company also rents certain equipment and facilities on a month-to- month basis or through short-term leases. The rent expense under such arrangements amounted to approximately $841,000 in 1994, $1,317,000 in 1993 and $969,000 in 1992. The Company's subsidiaries are defendants in several actions which arose in the normal course of business and, in the opinion of management, the eventual outcome of these actions will not have a material adverse effect on the Company's financial position. (19) Quarterly Financial Data (Unaudited) Summarized quarterly financial data for 1994 and 1993 (in thousands, except per share amounts) is as follows:
1st 2nd 3rd 4th 1994 Quarter Quarter Quarter Quarter - - ---- --------- -------- -------- --------- Total Revenue $115,850 $135,127 $154,492 $131,711 Gross Profit 20,335 24,838 28,003 20,981 Income (loss) Before Extraordinary Item and Accounting Change (189) 1,713 3,102 189 Net Income (Loss) (452) 1,640 3,102 155 Earnings (Loss) Per Share Before Extraordinary Item and Accounting Change (.06) .53 .94 .06 Net Earnings (Loss) Per Common Share $ (.15) $ .51 $ .94 .05 1st 2nd 3rd 4th 1993 Quarter Quarter Quarter Quarter - - ---- -------- -------- -------- -------- Total Revenue $110,239 $127,933 $134,325 $109,345 Gross Profit 20,119 24,074 26,150 16,821 Net Income (Loss) (824) 958 1,258 (404) Net Earnings (Loss) Per Common Share $ (.27) $ .32 $ .42 $ (.13)
64 INDEPENDENT AUDITORS' REPORT ---------------------------- THE BOARD OF DIRECTORS AND STOCKHOLDERS CONTINENTAL CAN COMPANY, INC. We have audited the consolidated balance sheets of Continental Can Company, Inc. and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1994. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the aforementioned consolidated financial statements present fairly, in all material respects, the financial position of Continental Can Company, Inc. and subsidiaries as of December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1994, in conformity with generally accepted accounting principles. As discussed in notes 1(i) and 13 to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards No. 112, Employers Accounting for Post-Employment Benefits, on a prospective basis in 1994. Also, as discussed in notes 1 (h) and 13 and notes 1 (d) and 10 to the consolidated financial statements, the Company adopted the provisions of Statements of Financial Accounting Standards Nos. 106, "Employer's Accounting for Post-Retirement Benefits Other Than Pensions" and 109, "Accounting for Income Taxes", respectively, on a prospective basis in 1992. /s/ KPMG Peat Marwick LLP ----------------------- Jericho, New York March 1, 1995 65 GENERAL INFORMATION ANNUAL MEETING May 17, 1995 at 10:00 a.m. at The Union League Club, 38 East 37th Street, New York, New York. AVAILABILITY OF FORM 10-K Stockholders may receive, without charge, a copy of the Company's 1994 Annual Report filed with the Securities and Exchange Commission on Form 10-K, including the financial statements and schedules thereto, by directing their written inquiries to Abdo Yazgi, Secretary, Continental Can Company, Inc., One Aerial Way, Syosset, New York 11791. CONTINENTAL CAN COMPANY, INC. COMMON STOCK PRICES AND RELATED MATTERS The common stock of Continental Can Company, Inc. is traded on the New York Stock Exchange. The following table indicates the quarterly high and low sales prices for Continental Can Company, Inc. (CAN) common stock for the last two years.
1994 1993 Quarter High Low High Low - - ----------------------------------------- First 25-1/2 20-1/4 27-5/8 20-7/8 Second 24-1/8 21-1/2 27-1/2 20-1/8 Third 22 20-1/4 24-1/2 18-1/4 Fourth 24-5/8 19 22-1/8 18-3/4
No dividends were paid to the holders of common stock for the years 1994, 1993 and 1992. The Company has no present intention to pay dividends on its common stock. There were 425 stockholders of record as of March 20, 1995. 66 DIRECTORS PRINCIPAL OCCUPATION Donald J. Bainton Chairman of the Board and Chief Executive Officer of the Company Kenneth Bainton Partner with the firm of Alexander Kouzmanoff, Architects, in New York City Robert L. Bainton Vice Chairman of the Board Nils E. Benson Former President of Penn Elastic Co. (Retired 1989) Rainer N. Greeven Partner, Greeven & Ercklentz (Attorneys) Ronald H. Hoenig President of Hoenig & Company, Inc. Charles H. Marquardt Former Chief Operating Officer of Plastic Containers, Inc. (Retired 1993) V. Henry O'Neill Private investor in real estate John J. Serrell Business Consultant Robert A. Utting President of R.A. Utting & Associates, Inc. Abdo Yazgi Executive Vice President, Chief Administrative Officer, and Secretary of the Company Cayo Zapata Director of Tapas Tapones, a division of Taenza, S.A. DE C.V. Jose Luis Zapata Director of Corporate Finance of Taenza, S.A. DE C.V. Donald F. Othmer Director Emeritus Charles DiGiovanna Director Nominee OFFICERS PRINCIPAL OCCUPATION Donald J. Bainton Chairman of the Board & Chief Executive Officer Abdo Yazgi Executive Vice President, Chief Administrative Officer, and Secretary John Andreas Vice President - Manufacturing Marcial B. L'Hommedieu Treasurer Linda Driscoll Assistant Secretary 67 CONTINENTAL CAN COMPANY, INC. General Offices: Syosset, New York SUBSIDIARIES AND OFFICERS: PLASTIC CONTAINERS, INC, Syosset, New York CONTINENTAL PLASTIC CONTAINERS, INC. Norwalk, Connecticut Charles DiGiovanna, Chief Executive Officer and President Jay Hereford, Chief Financial Officer Frank Kalisik, Senior Vice President - Research & Development John E. Farrell, Vice President - Marketing CONTINENTAL CARIBBEAN CONTAINERS, INC. Caugus, Puerto Rico FEREMBAL S.A. Clichy, France Rene Faber, Managing Director Christian Bonnet, Financial Director Pierre Lichtenberger, Commercial Director Jean-Marie Desautard, Operations & Personnel Director Pascal Vienot, Development Director OBALEX, A.S. Znojmo, Czech Republic Jiri Nekvasil, Chairman Lubomir Kadlec, Managing Director DIXIE UNION VERPACKUNGEN GMBH Kempten, Federal Republic of Germany Hans H. Schwaebe, Executive Director Peter Epp, Chief Financial Officer ONENA BOLSAS DE PAPEL S.A. Pamplona, Spain Carlos Paredes, Executive Director LOCKWOOD, KESSLER & BARTLETT, INC. Syosset, New York John P. Lekstutis, President Sylvester A. Celebrini, Vice President Ralph A. Cuomo, Vice President George Gross, Vice President Steven Hanuszek, Vice President Andre Haddad, Vice President Martin Solomon, Vice President TRANSFER AGENT AND REGISTRAR American Stock Transfer & Trust Company New York, New York AUDITORS KPMG Peat Marwick LLP Jericho, New York GENERAL COUNSEL Carter, Ledyard & Milburn New York, New York 68 EX-21 5 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 (21) Subsidiaries of the Registrant The following listed companies represent the significant subsidiaries of the Company, all of which are included in the Company's consolidated financial statements:
State or Other Name Under Which Jurisdiction Percentage Owned Business is conducted of Incorporation by Company - - --------------------- ---------------- ---------------- Ferembal S.A. France 85%(1) Lockwood, Kessler & Bartlett, Inc. New York 100% Dixie Union Verpackungen GmbH Germany 100% Onena Bolsas de Papel S.A. Spain 57% Plastic Containers, Inc. Delaware 50%* Continental Plastic Containers, Inc. (2) Delaware 100% Continental Caribbean Containers, Inc. (2) Delaware 100% Obalex A.S. (3) Czech Republic 64%
(1) A bond, convertible into the equity of Ferembal S.A., is currently outstanding, which, if converted, would reduce the Companys percentage ownership of Ferembal S.A. to 64%. (2) Subsidiary of Plastic Containers, Inc. (3) Subsidiary of Ferembal. * The Company, pursuant to a proxy, has voting rights over 51% of the shares of Plastic Containers, Inc. 1 EX-23.1 6 INDEPENDENT AUDITORS' REPORT EXHIBIT 23.1 INDEPENDENT AUDITORS' REPORT ON SCHEDULES ----------------------------------------- The Board of Directors and Stockholders Continental Can Company, Inc.: Under date of March 1, 1995, we reported on the consolidated balance sheets of Continental Can Company, Inc. and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1994, as contained in the 1994 Annual Report to Stockholders. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedules as listed in the accompanying index. These consolidated financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statement schedules based on our audits. In our opinion, such schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. As discussed in notes 1(i) and 13 to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards Nos. 112, Employers Accounting for Post-Employment Benefits, on a prospective basis in 1994. Also, as discussed notes 1(h) and 13 and notes 1(d) and 10 to the consolidated financial statements, the Company adopted the provisions of Statements of Financial Accounting Standards Nos. 106, "Employer's Accounting for Post-Retirements Benefits Other Than Pensions" and 109, "Accounting for Income Taxes", respectively, on a prospective basis in 1992. /s/ KPMG PEAT MARWICK LLP Jericho, New York March 1, 1995 1 EX-23.2 7 CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS ------------------------------- The Board of Directors Continental Can Company, Inc.: We consent to incorporation by reference in the Registration Statements Nos. 33- 7783, 33-37163, 33-37164 and 33-37165 on Form S-8 of Viatech, Inc. (now known as Continental Can Company, Inc.) of our reports dated March 1, 1995 relating to the consolidated balance sheets of Continental Can Company, Inc. and subsidiaries as of December 31, 1994 and 1993, and the consolidated statements of earnings, stockholders' equity and cash flows and related schedules for each of the years in the three year period ended December 31, 1994, which reports are either incorporated by reference or appear in the December 31, 1994 Annual Report on Form 10-K of Continental Can Company, Inc. As discussed in notes 1(i) and 13 to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards Nos. 112, Employers Accounting for Post-Employment Benefits, on a prospective basis in 1994. Also, as discussed notes 1(h) and 13 and notes 1(d) and 10 to the consolidated financial statements, the Company adopted the provisions of Statements of Financial Accounting Standards Nos. 106, "Employer's Accounting for Post-Retirements Benefits Other Than Pensions" and 109, "Accounting for Income Taxes", respectively, on a prospective basis in 1992. /s/ KPMG PEAT MARWICK LLP Jericho, New York March 14, 1995 1 EX-27 8 FINANCIAL DATA SCHEDULES
5 1,000 YEAR DEC-31-1994 JAN-01-1994 DEC-31-1994 8,776 292 118,219 5,316 82,432 209,103 297,156 116,786 423,585 137,755 142,361 788 0 0 69,908 423,585 537,180 537,180 443,023 511,532 18,985 0 18,684 6,663 1,761 4,815 0 108 262 4,445 1.39 1.34
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