-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WTeq8RuqV6D9Z4yLH4H5hvjCikRxkbJAMu8smZAlffR32hYAY96ZaFGLN25vuIOG v6UseTP8wBIRvEPSwRlf4g== 0000950130-96-001089.txt : 19960402 0000950130-96-001089.hdr.sgml : 19960402 ACCESSION NUMBER: 0000950130-96-001089 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960401 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONTINENTAL CAN CO INC /DE/ CENTRAL INDEX KEY: 0000103392 STANDARD INDUSTRIAL CLASSIFICATION: METAL CANS [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: 96542170 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-K 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, 1995 ------------------------------------------- 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 25, 1996 was $42,401,660. The number of shares of Common Stock outstanding on March 25, 1996 was 3,199,668 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, 1995, 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 8, 1996 in connection with its 1996 Annual Meeting of Stockholders to be held on May 15, 1996. 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 GmbH & Company KG (Dixie Union) and (iii) its majority-owned European operating subsidiaries, Ferembal S.A. (Ferembal), which in turn owns 86% 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 98.4%, 98% and 97.5% of its consolidated revenues in 1995, 1994 and 1993, 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, 1995 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 2 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's subsidiary, Ferembal, owns 86% 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 3 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 one customer exceeded 10% of the Company's consolidated revenues in 1995. As of December 31, 1995, the Company's backlog was approximately $22,550,000 (compared to $29,952,000, at December 31, 1994). 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 $12,187,000 in 1995, $12,461,000 in 1994 and $12,862,000 in 1993. The number of persons employed by the Company as of December 31, 1995 and 1994 was 3,796 and 3,729, respectively. (d) Foreign and Domestic Operations ------------------------------- Sales to unaffiliated customers are set out below: 1995 1994 1993 -------- -------- -------- (In thousands) Europe $312,137 $286,412 $255,619 United States 295,470 247,614 221,636 Other 6,780 3,154 4,587 -------- -------- -------- Total $614,387 $537,180 $481,842 ======== ======== ======== Information regarding the operating profit and the identifiable assets attributable to the Company's foreign operations is incorporated herein by reference to Note 15 of the Consolidated Financial Statements appearing in the Annual Report to Stockholders for the year ended December 31, 1995. 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 4 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, 1995, CPC had a total of 124 production lines spread throughout its manufacturing facilities. The smallest plants have as few as two lines while the largest has thirteen. 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. 5 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, 1995. 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, 1995. 6 ITEM 6. SELECTED FINANCIAL DATA(1) -----------------------------------
1995 1994 1993 1992 1991 -------- -------- -------- -------- -------- Net Sales (2) $614,387 $537,180 $481,842 $511,241 $310,654 ======== ======== ======== ======== ======== Net income (2) (3) $ 555 $ 4,445 $ 988 $ 2,063 $ 7,394 ======== ======== ======== ======== ======== Earnings per common share (3) Primary $ .17 $ 1.39 $ .33 $ .67 $ 2.92 ======== ======== ======== ======== ======== Fully Diluted $ .17 $ 1.34 $ .32 $ .64 $ 2.59 ======== ======== ======== ======== ======== Weighted average shares outstanding (4) 3,339 3,220 3,023 3,078 2,533 ======== ======== ======== ======== ======== Total assets $445,411 $423,585 $385,907 $400,010 $410,543 ======== ======== ======== ======== ======== Long term debt and capitalized lease obligations $143,138 $142,361 $153,982 $165,701 $159,567 ======== ======== ======== ======== ======== Total stockholders' equity (4) $ 76,298 $ 70,696 $ 60,855 $ 62,935 $ 61,393 ======== ======== ======== ======== ======== Working capital $ 46,195 $ 71,348 $ 66,105 $ 69,158 $ 63,004 ======== ======== ======== ======== ======== Current ratio 1.29 1.52 1.67 1.69 1.57 ======== ======== ======== ======== ========
(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 an extraordinary charge of $115 ($.03 per share both primary and fully-diluted) in 1995. 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. (4) The 1994 weighted average shares outstanding include 268 shares issued in May 1994 upon the conversion of the Company's 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. 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, 1995. 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, 1995. 7 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, 1995. 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, 1996 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 63 Manufacturing Marcial B. L'Hommedieu Treasurer (1) 1963 71
(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, 1996 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, 1996 which will be filed with the Commission pursuant to Regulation 14A and is hereby incorporated into this report by this reference. 8 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, 1996 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, 1995 and 1994 Consolidated Statements of Earnings for the years ended December 31, 1995, 1994, and 1993 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1995, 1994 and 1993 Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993 Notes to Consolidated Financial Statements for the years ended December 31, 1995, 1994, and 1993 Independent Auditors' Report The above financial statements are included under Item 8 of Part II of this report. 2. Financial Statement Schedules: II Valuation & Qualifying Accounts.......................p. 12 III Condensed Financial Information of Registrant.........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) 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) 9 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 October 31, 1995 between PCI and CIT.................................. (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, as amended..............................................p. 16* 10.13 1995 Restricted Stock Compensation Plan................... (2)* 10.14 Amendment No. 1 to Revolving Credit and Term Loan Agreement....................................... (2) 10.15 Amendment No. 2 to Revolving Credit and Term Loan Agreement.....................................p. 17 13.1 Annual Report to Stockholders for 1995..................p. 20 21 Subsidiaries of the Registrant..........................p. 51 23.1 Independent Auditors' Report on Schedules...............p. 52 23.2 Consent of Independent Auditors.........................p. 53 27 Financial Data Schedule.................................p. 54 99 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 by Plastic Containers, Inc. (2) These documents have previously been filed with the Commission. 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, 1995. 10 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 25,1996 --------------------------------------------- --------------- 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 25,1996 - ------------------------------------------- ------------- Donald J. Bainton, Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer) /s/ Kenneth Bainton Date: March 25,1996 - ------------------------------------------- ------------- Kenneth Bainton, Director /s/ Robert L.. Bainton Date: March 25,1996 - ------------------------------------------- ------------- Robert L. Bainton, Director /s/ Nils E. Benson Date: March 25,1996 - ------------------------------------------- ------------- Nils E. Benson, Director /s/ Charles DiGiovanna Date: March 25,1996 - ------------------------------------------- ------------- Charles DiGiovanna, Director /s/ Rainer N. Greeven Date: March 25,1996 - ------------------------------------------- ------------- Rainer N. Greeven, Director /s/ Charles H. Marquardt Date: March 25,1996 - ------------------------------------------- ------------- Charles M. Marquardt, Director Date: - ------------------------------------------- ------------- V. Henry O'Neill, Director /s/ John J. Serrell Date: March 25,1996 - ------------------------------------------- ------------- John J. Serrell, Director Date: - ------------------------------------------- ------------- Robert A. Utting, Director /s/ Abdo Yazgi Date: March 25,1996 - ------------------------------------------- ------------- Abdo Yazgi, Director /s/ Cayo Zapata Date: March 25,1996 - ------------------------------------------- ------------- Cayo Zapata, Director /s/ Jose Luis Zapata Date: March 25,1996 - ------------------------------------------- ------------- Jose Luis Zapata, Director 11 Schedule II - Valuation and Qualifying Accounts Continental Can Company, Inc. and Subsidiaries Years Ended December 31, 1995, 1994 and 1993 (in thousands) Additions ------------------- Balance at Charged to Balance at beginning costs and Deductions end of of period expenses Other (1) period ---------- ---------- ----- ------ ---------- Year ended December 31, 1995 $5,316 $1,909 $ - $1,081 $6,144 ====== ====== ===== ====== ====== 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 ====== ====== ===== ====== ====== (1) Represents uncollectible accounts written-off. (2) Represents $418 from the consolidation of acquired subsidiary in 1993. 12 Schedule III - Condensed Financial Information of Registrant Continental Can Company, Inc. Balance Sheets Years Ended December 31, 1995 and 1994 (in thousands) 1995 1994 -------- ------- ASSETS: Cash $ (10) $ 79 Investments in Subsidiaries at Equity 77,520 72,703 Other Assets 1,692 1,326 ------- ------- Total Assets $79,202 $74,108 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY: Current Liabilities (a) $ 2,479 $ 2,220 Long Term Debt (a) 425 1,192 ------- ------- Total Liabilities $ 2,904 $ 3,412 Stockholders' Equity 76,298 70,696 ------- ------- $79,202 $74,108 ======= ======= (a) See Note 8, Items (a) and (b) of Notes to Consolidated Financial Statements of Continental Can Company, Inc. and Subsidiaries. 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, 1995, 1994 and 1993 (in thousands) 1995 1994 1993 -------- -------- -------- Management Fees $ 2,247 $ 1,882 $ 2,157 Selling, General and Administrative Expenses 3,817 2,923 3,232 ------- ------- ------- (1,570) (1,041) (1,075) Equity in Net Income of Subsidiaries (b) 2,402 5,803 2,247 ------- ------- ------- 832 4,762 1,172 Other (277) (290) (205) ------- ------- ------- 555 4,472 967 (Provision for) Recovery of Income Taxes - (27) 21 ------- ------- ------- Net Income $ 555 $ 4,445 $ 988 ======= ======= ======= (b) Includes for 1995 and 1994 extraordinary charges of $115 and $108, respectively, relating to the extinguishment of debt and in 1994 a charge of $262 relating to the cumulative effect of adopting SFAS No. 112. 13 Schedule III - Condensed Financial Information of Registrant (Continued) Continental Can Company, Inc. Statements of Cash Flows Years Ended December 31, 1995, 1994 and 1993 (in thousands) 1995 1994 1993 -------- -------- -------- Cash Flows from Operating Activities: Net Income $ 555 $ 4,445 $ 988 Adjustments to Reconcile Net Income to Net Cash Used in Operating Activities: Dividends Received From Affiliates 344 818 - Equity in Net Income of Subsidiaries (2,402) (5,803) (2,247) Increase/Decrease in Due to Affiliates 1,281 (442) 299 Other 51 387 288 ------- ------- ------- Net Cash Used in Operating Activities (171) (595) (672) Cash Flows From Investing Activities: Purchase of Minority Interest - - (213) Redemption of investment in - - 500 Government Securities Increase Investment in Subsidiaries - (1,225) - Proceeds from Sale of Capital Assets - 411 527 Capital Expenditures - - (6) ------- ------- ------- Net Cash Provided By (Used in) - (814) 808 Investing Activities Cash Flows From Financing Activities: Common Stock Issued Upon Conversion of Debentures and Warrants 849 362 184 Proceeds from (Repayment of) Long-Term Financing (767) 500 203 ------- ------- ------- Net Cash Provided by Financing 82 862 387 Activities Net Increase (Decrease) in Cash (89) (547) 523 Cash at Beginning of Year 79 626 103 ------- ------- ------- Cash at End of Year (10) $ 79 $ 626 ======= ======= ======= Cash paid for interest and income taxes was as follows: 1995 1994 1993 ------- ------- ------- Interest $ 76 $ 210 $ 232 Income Taxes $ 105 $ 8 $ 22 14 EXHIBITS ATTACHED: ------------------ 10.12 Employment Contract with Donald J. Bainton, as amended Page 16 10.15 Amendment No. 2 to Revolving Credit and Term Loan Agreement Page 17 13.1 1995 Annual Report to Stockholders Page 20 21 Subsidiaries of the Registrant Page 51 23.1 Independent Auditors' Report on Schedules Page 52 23.2 Consent of Independent Auditors Page 53 27 Financial Data Schedule Page 54 15 EX-10.12 2 EMPLOYMENT CONTRACT EXHIBIT 10.12 March 23, 1989 Mr. Donald J. Bainton 39 Westbrother Drive Greenwich, CT 06830 Dear Don: Pursuant to the action of the Board of Directors, the following amended employment agreement has been approved. 1. Your salary shall be $180,000/(1)/ per year, effective March 27, 1989, or such other amount as the Board of directors shall, in the future, determine. 2. The expiration date of the non-qualified stock option to purchase 40,000 shares of the Company's Common Stock, which was awarded to you in 1983, will be extended until November 15, 1998. 3. This agreement will terminate December 31, 1999. 4. All shares of stock previously issued to you in lieu of cash compensation (except those shares which had previously been released from forfeiture) shall remain subject to forfeiture until December 31, 1999 or such earlier date as the Board of Directors shall, in the future, determine. 5. In the event of your death prior to December 31, 1999, providing that you are at that time an employee of the Company, your wife shall be paid one-half of the amounts that would otherwise have been paid to you as salary until her death./(2)/ Such amounts shall be paid bi-weekly. If you find this agreement acceptable, please so signify by signing and returning the enclosed copy of this letter to me. Sincerely, VIATECH, INC. /s/ Abdo Yazgi ----------------- Abdo Yazgi Secretary ACCEPTED: By: /s/Donald J. Bainton ----------------------- DATED: March 24, 1989 -------------- (1) $420,000 effective March 18, 1995 as amended March 6, 1995 by Personnel Committee of Board. (2) As amended August 8, 1995 by Personnel Committee of Board. 16 EX-10.15 3 AMENDMENT NO. 2 TO REVOLVING CREDIT EXHIBIT 10.15 AMENDMENT NO. 2 TO REVOLVING CREDIT AND TERM LOAN AGREEMENT DATED AS OF DECEMBER 1, 1992 between CONTINENTAL CAN COMPANY, INC. (The "Borrower") and EXTEBANK (the "Bank") The Revolving Credit and Term Agreement (the "Agreement") is hereby amended as follows: 1. Section 1.01 of the Agreement is hereby amended by (i) changing the date set forth on lines 5 and 6 thereof to "September 30, 1997" and (ii) changing the amount set forth on line 9 thereof to $3,000,000.00." 2. Section 1.02 of the Agreement is hereby amended by changing the amount set forth in line 3 thereof to "$3,000,000.00." 3. 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 September 30, 1997 in sixty (60) equal monthly installments of principal commencing on October 31, 1997 and on the last day of each successive month thereafter through and including September 30, 2002 (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. 4. Section 2.02(b) of the Agreement is hereby amended by changing the amount in line 4 thereof to "$300,000.00." 5. Section 2.03 of the Agreement is hereby amended by (i) deleting the words "initial two (2) year" in line 3 thereof and (ii) changing the date set forth in line 3 thereof to "September 30, 1997." 6. Section 2.04 of the Agreement is hereby amended in its entirety to read as follows: 17 SECTION 2.04. Commitment Fee. During the period through and -------------- including September 30, 1997, the Borrower agrees to pay to the Bank a commitment fee equal to one-half of one (1/2%) percent of the unused portion of the $3,000,000.00 Revolving Credit Facility, which commitment fee shall be paid to the Bank on a monthly basis. 7. An amended and restated promissory note substantially in the form of Exhibit A hereto (the "Restated Note") shall be issued simultaneously with the execution and delivery of this Amendment No. 2, which Restated Note amends and restates in its entirety the Restated Promissory Note currently held by the Bank. Accordingly, Exhibit A to the Agreement is hereby deleted in its entirety and Exhibit A to this amendment No. 2 is substituted therefor, and from and after the date hereof, all references in the Agreement and the other Loan Documents (as hereinafter defined) to the Note shall be deemed to refer to the Restated Note provided for herein. 8. The term "Agreement" as used in the Agreement and in the documents, instruments and agreements executed and delivered in connection therewith (the "Loan documents") shall hereafter mean the Agreement as amended hereby. Except as herein specifically agreed, the Agreement and the Loan Documents are hereby ratified and confirmed and shall remain in full force and effect according to their respective terms. 9. The borrower represents and warrants to the Lender as follows: a. It has taken all necessary action to authorize the execution, delivery and performance of this Amendment No. 2 and the Restated Note. b. Each of this Amendment No. 2 and the Restated Note has been duly executed and delivered and constitutes the valid and legally binding obligation of the Borrower, enforceable in 18 accordance with its respective terms, subject to applicable bankruptcy, reorganization, insolvency, moratorium and similar laws affecting creditors' rights generally. c. No consent or approval of any person, firm, corporation or entity (including, without limitation, any shareholder of the Borrower), and no consent, license, approval or authorization of any governmental authority is or will be required in connection with the execution, delivery performance, validity or enforcement of this amendment No. 2 or the Restated Note. d. It is, as of the date hereof, in full compliance with all of the various covenants and agreements set forth in each of the Loan Documents. e. No event has occurred and is continuing which constitutes or would constitute, with the giving of notice or lapse of time or both, and Event of Default (as such term is defined in the Agreement). f. All representations and warranties contained in the Agreement and each of the other Loan Documents are true and correct as of the date hereof as though made on and as of the date hereof. 10. This Amendment has been executed and delivered in the State of New York and shall be governed by and construed in accordance with the laws of the State of New York. Dated: October 26, 1995 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 19 EX-13.1 4 1995 ANNUAL REPORT TO STOCKHOLDERS EXHIBIT 13.1 CONTINENTAL CAN COMPANY, INC. 1995 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 ---- REPORT TO STOCKHOLDERS............................. 2 DESCRIPTION OF BUSINESS............................ 4 SELECTED FINANCIAL DATA............................ 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.. 7 CONSOLIDATED FINANCIAL STATEMENTS.................. 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS......... 15 INDEPENDENT AUDITOR'S REPORT....................... 26 DIRECTORS AND OFFICERS............................. 27 CORPORATE INFORMATION.............................. 28 REPORT TO STOCKHOLDERS ---------------------- Dear Fellow Stockholders, Though 1995 was a very challenging year for the packaging industry, our Company achieved a number of important objectives which will position us positively for the future. Sales increased 14% to $614.4 million in 1995 compared to $537.2 million in 1994. Cash flow from operations increased by 35% to $25 million and our Company's book value improved to $23.87 per share at December 31, 1995 compared to $22.43 on December 31, 1994. Due to pricing pressure in Europe and operating difficulties in the U.S., income before extraordinary items was $.20 per share. However, we also restructured our manning in Europe in response to tighter margins which resulted in an $.83 per share charge. Without this charge earnings before extraordinary items would have been $1.03 per share for the year. This restructuring will place us in a good competitive position in future years when the personnel reductions are completed. Our U.S. plastic container subsidiary, Continental Plastic Containers, Inc. (CPC) increased volumes in a flat marketplace. Their vendor management agreement with the Mobil Oil Corporation was successfully implemented in 1995. CPC also entered into new multi-year contracts with Procter and Gamble for redesigned containers for health and beauty aid products and for concentrated dishwashing liquids. At CPC, the increase in sales and redesigned containers required a substantial amount of capital expenditures for new and modified line installations. In addition, the overlapping of installation schedules resulted in added installation cost. Also, in order to meet the higher customer demand, a significant amount of overtime, freight and production on newly installed lines caused additional excess expense. By the end of the fourth quarter, the majority of these problems had been satisfactorily resolved. At Ferembal, our French can manufacturing subsidiary, operating margins declined in the face of lower selling prices for its products coupled with increased raw material prices. In 1995, we began an aggressive program to control raw material prices by expanding the number and location of our sources of supply. This program is continuing on an expanded basis in 1996. We also have taken a restructuring charge amounting to $5 million with regard to termination benefits for personnel in France. This charge, as stated previously, reduced our earnings in 1995 by $.83 per share and is part of our continuing program to reduce our costs in this market. While we cannot dictate prices for our products, we are committed to reducing our costs to the lowest level possible, consistent with maintaining product quality and customer service. The European flexible packaging business in which Dixie Union and Onena operate had significant resin price increases in 1995. While operating margins in flexible packaging were negatively impacted by these 20 factors, our machine and shrink bag businesses at Dixie Union continued to have strong volumes and margins. In the shrink bag area, we are adding capacity and expect continued growth in sales and profitability in the future. With the difficult economic conditions in our markets continuing in early 1996, we expect sales and profitability to be lower in the first half with a rebound in sales and profitability later in the year. Due to our cost reduction programs we are optimistic about our future growth and business prospects. We also will continue to strengthen our businesses with the capital necessary to enhance their productivity, respond to the competitive environment and to grow market share. We will address the opportunities each of our businesses face in order to insure their success and long-term health, and will continue to look for attractive acquisitions and joint ventures to ensure long-term value for our shareholders. Donald J. Bainton Chairman & Chief Executive Officer March 8, 1996 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 GmbH & Company KG (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. 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. 21 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's subsidiary, Ferembal, owns 86% 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. SELECTED FINANCIAL DATA(1) 1995 1994 1993 1992 1991 -------- -------- -------- -------- -------- Net sales (2) $614,387 $537,180 $481,842 $511,241 $310,654 ======== ======== ======== ======== ======== Net income (2) (3) $ 555 $ 4,445 $ 988 $ 2,063 $ 7,394 ======== ======== ======== ======== ======== Earnings per common share (3) Primary $ .17 $ 1.39 $ .33 $ .67 $ 2.92 ======== ======== ======== ======== ======== Fully diluted $ .17 $ 1.34 $ .32 $ .64 $ 2.59 ======== ======== ======== ======== ======== Weighted average shares outstanding (4) 3,339 3,220 3,023 3,078 2,533 ======== ======== ======== ======== ======== Total assets $445,411 $423,585 $385,907 $400,010 $410,543 ======== ======== ======== ======== ======== Long-term debt and capitalized lease obligations $143,138 $142,361 $153,982 $165,701 $159,567 ======== ======== ======== ======== ======== Total stockholders' equity (4) $ 76,298 $ 70,696 $ 60,855 $ 62,935 $ 61,393 ======== ======== ======== ======== ======== EBITDA (5) $ 54,361 $ 59,365 $ 59,368 $ 64,521 $ 38,393 ======== ======== ======== ======== ======== 22 (1) In thousands, except per share amounts. (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 an extraordinary charge of $115 ($.03 per share both primary and fully diluted) in 1995. 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. (4) The 1994 weighted average shares outstanding include 268 shares issued in May 1994 upon the conversion of the Company's 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. (5) Earnings before interest, taxes, depreciation and amortization, determined without consideration to minority interests. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 1995 VS. 1994 In 1995 sales increased 14% to $614.4 million from $537.2 million in 1994. This improvement resulted from net volume increases, foreign currency translation rate differences (approximately $34 million) and resin price increases which are a customer pass-through at PCI (approximately $23 million). Backlog at December 31, 1995 amounted to $22.6 million as compared to $29.9 million at December 31, 1994. 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 decrease in backlog at December 31, 1995 will result in lower sales and earnings in the first quarter of 1996, as compared to the same period in the prior year. Gross profit increased 3.4% to $97.4 million in 1995 from $94.2 million in 1994. Gross profit margin declined to 15.8% in 1995 from 17.5% in 1994. The increase in gross profit resulted from higher sales volumes, while the declining gross profit margin reflected continued competitive pressure on pricing in the can and flexible packaging markets. Additionally, the pass- through of resin costs at PCI increases both sales and costs equally, reducing the margin percentage. Restructuring charges amounting to $5,003,000 in 1995 and $1,686,000 in 1994 related to Ferembal. The charges relate to termination benefits for certain employees of Ferembal and reflect a response to continuing competitive pressure in Ferembal's marketplace. Selling, general and administrative expense as a percentage of net sales amounted to 12.5% in 1995 as compared to 12.8% in 1994. This reflects the fixed nature of many of these expenses in relation to increased volume. As a result of these various factors, operating income decreased to $20,598,000 in 1995 from $25,648,000 in 1994, while operating margin declined to 3.4% in 1995 from 4.8% in 1994. Net interest expense increased slightly to $19.9 million in 1995 from $18.7 million in 1994. This increase primarily reflected higher average short- term debt balances in Europe and the United States in 1995. The Company's consolidated effective tax rate is an amalgamation of the tax charges and tax benefits of itself and its subsidiaries. This rate reflects the offsetting nature of these items in consolidation. PCI 23 utilized tax benefits of $2,505,000 and $1,631,000 in 1995 and 1994, respectively. Also in 1994, Ferembal settled a tax dispute which resulted in a tax benefit of approximately $900,000. Minority interest in 1995 and 1994 reflects the interest of other shareholders in Plastic Containers, Inc., Ferembal, Onena and Obalex. Income before extraordinary item in 1995 amounted to $670,000 ($.20 per share). An extraordinary charge in 1995, net of the portion attributable to the minority interest, amounting to $115,000 ($.03 per share) related to costs associated with the cancellation of a revolving credit agreement at PCI. Net income amounted to $555,000 ($.17 per share) in 1995 and $4,445,000 ($1.34 per share) in 1994. 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. 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. 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 Company's 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 declined to 12.8% in 1994 as compared to 12.9% in 1993. Selling, general and administrative expense in 1994 increased $6.2 million or 10.0%. Included in 1994's expenses are approximately $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 Company's 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. 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 Company's 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 Statement of Financial Accounting Standards (SFAS) No.112 resulted in a charge to income, net of the portion attributable to the minority interest, of $262,000 ($.08 per share). 24 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. 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 1995 amounted to $42,482,000 primarily for the purchase of machinery and equipment. During 1995, major capital expenditures included the purchase of extrusion blow-molding lines and line changes, an easy-open end line for cans and additional capacity for shrink bags at Dixie Union. Expenditures in 1996 are expected to amount to approximately $29 million and be similar in character to those in 1995. During 1995, Ferembal increased its ownership interest in Obalex to 86%. See Note 2(b). The minority stockholders of Ferembal have the right to sell a portion of their shares in an initial public offering of Ferembal which the Company has agreed to make at their request. It is expected that the holder of a junior subordinated convertible bond of Ferembal will convert its bond at such time to participate in any such offering. Although the Company does not currently expect to sell any of its stock in Ferembal in any such offering, if the bond is converted, the Company ownership of Ferembal will decline from 85% to 64%. See Note 2(d). The Company has actively pursued acquisition possibilities in 1995 and intends to continue to do so in 1996 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 1995 capital requirements with cash generated from operations, from existing funds and through borrowings. It is anticipated that such expenditures in 1996 will be financed in a similar manner. LIQUIDITY The Company's liquidity position at December 31, 1995 declined somewhat from the prior year end. Working capital decreased to $46.2 million at December 31, 1995 from $71.3 million at December 31, 1994. The current ratio was 1.29 at December 31, 1995 and 1.52 at December 31, 1994. The Company's cash position remained approximately equal between December 31, 1995 and 1994. Cash flows from operating activities provided $25 million for the Company in 1995 most of which related to depreciation and amortization. Included in the reduction of accounts receivable is $17 million, which represents discounting of certain trade accounts receivable by Ferembal. Approximately $10 million of the $22.2 million increase in short-term borrowings was used to fund a contribution to the pension plan at PCI. The remainder of such borrowings and cash from operations were used for capital expenditures and repayment of long-term debt. The Company invested approximately $42.5 million in 1995 in property, plant and equipment. Additionally, the Company used $5.6 million in financing for the net repayment of long-term borrowings. Most of the increase in short- term borrowings at December 31, 1995 is expected to be repaid during 1996. At December 31, 1995, the Company had available a credit line of $2,575,000 under a Revolving Credit Facility. The Company's packaging subsidiaries had available various unutilized credit facilities of approximately $90 million at December 31, 1995. 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 1996 and on a long- term basis. UTILIZATION OF NET OPERATING LOSS CARRYFORWARDS The Company and its subsidiaries account for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes," issued in February 1992. This statement requires, among other things, 25 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 9, PCI has tax net operating loss carryforwards (NOL's) totaling approximately $61 million which expire between 2006 and 2010. SFAS No. 109 requires that the tax 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." Based upon the scheduled reverses of deferred tax liabilities, projected future taxable income and tax planning strategies, management believes it is more likely then not the Company will realize the benefits of these deductible differences net of the existing valuation allowances at December 31, 1995. The NOL's available for future utilization were generated principally by operating losses 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. NEW ACCOUNTING STANDARDS FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," must be adopted by the Company in 1996. Statement No. 121 requires, among other things, that long-lived assets held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Management does not believe that the implementation of Statement No. 121 will have a material impact on the Company's financial position or results of operations. In October of 1995, the Financial Accounting Standards Board (FASB) issued Statement No. 123. "Accounting for Stock-Based Compensation," which must be adopted by the Company in 1996. The Company has elected not to implement the fair value based accounting method for employee stock options, but has elected to disclose, commencing in 1996, the pro forma net income and earnings per share as if such method had been used to account for stock based compensation cost as described in Statement No. 123. 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. 26
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND 1994 (In thousands, except share data) 1995 1994 ----------- ------------ ASSETS Current Assets: Cash and cash equivalents $ 8,925 $ 8,776 Investments 285 292 Accounts Receivable: Trade 94,461 102,255 Other 13,215 15,964 Less allowance for doubtful accounts (6,144) (5,316) ----------- ------------ Accounts receivable, net 101,532 112,903 Inventories 91,636 82,432 Prepaid expenses and other current assets 5,275 4,700 ----------- ------------ Total current assets 207,653 209,103 ----------- ------------ Property, plant and equipment, at cost: Land, building and improvements 52,090 48,750 Manufacturing machinery and equipment 263,331 230,365 Furniture, fixtures and equipment 9,591 8,536 Construction in progress 22,476 9,505 ----------- ------------ 347,488 297,156 Less accumulated depreciation and amortization (148,874) (116,786) ----------- ------------ Net property, plant and equipment 198,614 180,370 Goodwill, net of accumulated amortization of $2,277 and $1,853 in 1995 and 1994, respectively 14,486 13,997 Other assets, net of accumulated amortization 24,658 20,115 ----------- ------------ Total assets $ 445,411 $ 423,585 =========== ============
See accompanying notes to consolidated financial statements. 27 CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED) DECEMBER 31, 1995 AND 1994
(In thousands, except share data) 1995 1994 ----------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-term borrowings $ 47,945 $ 21,855 Accounts payable - trade 56,830 60,540 Accrued liabilities: Employee compensation and benefits 18,238 19,072 Other accrued expenses 17,417 16,143 Current installments of long-term debt and obligations under capital leases 10,665 13,043 Income taxes payable 1,610 1,160 Other current liabilities 8,753 5,942 ----------- ------------ Total current liabilities 161,458 137,755 Long-term debt, excluding current 130,023 128,363 installments Obligations under capital leases, excluding current installments 13,115 13,998 Deferred income taxes 3,872 3,747 Other liabilities 30,365 36,285 ----------- ------------ Total liabilities 338,833 320,148 Minority interest 30,280 32,741 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 3,196,368 shares in 1995 and 3,151,157 shares in 1994. 799 788 ----------- ------------ 799 788 Additional paid-in capital 43,868 42,872 Retained earnings 26,742 26,187 Cumulative foreign currency translation adjustment 4,889 849 ----------- ------------ Total stockholders' equity 76,298 70,696 Commitments and contingencies - - ----------- ------------ Total liabilities and stockholders' equity $ 445,411 $ 423,585 =========== ============
See accompanying notes to consolidated financial statements. 28 CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(In thousands, except per share data) 1995 1994 1993 ----------- ----------- ------------ Net sales $614,387 $ 537,180 $ 481,842 Cost of sales 517,010 443,023 394,678 ----------- ----------- ------------ Gross profit 97,377 94,157 87,164 Selling, general and administrative 71,776 66,823 62,293 expenses Restructuring charges 5,003 1,686 - ----------- ----------- ------------ Operating income 20,598 25,648 24,871 Other expense: Interest expense, net (19,917) (18,684) (22,942) Foreign currency exchange loss (299) (121) (134) Other - net (291) (180) (55) ----------- ----------- ------------ Net other expense (20,507) (18,985) (23,131) Income before (recovery) provision for income taxes, minority interest, extraordinary item and cumulative effect of accounting 91 6,663 1,740 change (Recovery) provision for income taxes (503) 1,761 2,655 ----------- ----------- ------------ Income (loss) before minority interest, extraordinary item and cumulative effect of 594 4,902 (915) accounting change Minority interest (76) 87 (1,903) ----------- ----------- ------------ Income before extraordinary item and cumulative effect of accounting 670 4,815 988 change Extraordinary item, net (115) (108) - Cumulative effect of accounting change, - (262) - net ----------- ----------- ------------ Net income $ 555 $ 4,445 $ 988 =========== =========== ============ Earnings (loss) per common share - primary: Before extraordinary item and cumulative effect of accounting $0.20 $1.50 $0.33 change Extraordinary item (0.03) (0.03) - Cumulative effect of accounting - (0.08) - change, net ----------- ----------- ------------ Net earnings per share - primary $0.17 $1.39 $0.33 =========== =========== ============ Earnings (loss) per common share - assuming full dilution: Before extraordinary item and cummulative effect of accounting $0.20 $1.45 $0.32 change Extraordinary item (0.03) (0.03) - Cumulative effect of accounting - (0.08) - change, net ----------- ----------- ------------ Net earnings per share - assuming full dilution $0.17 $1.34 $0.32 =========== =========== ============
See accompanying notes to consolidated financial statements. 29 CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(In thousands) 1995 1994 1993 ----------- ----------- ------------ Cash Flows From Operating Activities: Net income $ 555 $ 4,445 $ 988 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and amortization 34,353 34,018 34,686 Extraordinary loss on write off of capitalized finance costs, net 115 108 - Minority interest (76) 87 (1,903) Deferred income taxes (2,805) 789 (1,554) Gain on sale of capital assets 68 169 363 Provision for doubtful accounts receivable 1,656 2,845 915 Changes in Assets and Liabilities, Net of Effects of Acquisition: Decrease (increase) in accounts receivable 14,534 (25,528) (1,691) Decrease (increase) in other receivables 697 (4,143) 3,941 (Increase) decrease in inventories (4,215) (6,952) 3,993 Decrease (increase) in prepaid expenses and other current assets Increase in other assets 245 (678) 146 Increase in pension (1,338) (274) (481) asset/liability (11,377) (2,740) (1,778) (Decrease) increase in accounts payable (9,144) 15,901 (4,963) (Decrease) increase in accrued liabilities (1,021) 1,884 465 Increase in income taxes payable 362 419 329 Increase (decrease) in other liabilities 2,462 (1,792) (4,558) ----------- ----------- ------------ Net Cash Provided by Operating Activities 25,071 18,558 28,898 Cash Flows From Investing Activities: Purchase of minority interests (1,448) (1,970) (213) Proceeds from investments 2 31 534 Proceeds from sale of capital assets 986 985 770 Capital expenditures, net of investment grants (42,482) (23,858) (22,149) Purchase of equipment for customer reimbursement - (249) - ----------- ----------- ------------ Net Cash Used in Investing Activities (42,942) (25,061) (21,058) Cash Flows From Financing Activities: Principal payments of long-term debt and obligations under capital leases (14,742) (18,125) (9,379) Proceeds from long-term debt and obligations under capital leases 9,164 5,727 827 Common stock issued to employees and upon conversion of debentures, warrants and options 1,007 362 184 Proceeds from (repayments of) short-term borrowings 22,211 14,485 (339) Dividends paid by subsidiary to minority interest (49) (51) (344) ----------- ----------- ------------ Net Cash Provided by (Used in) Financing 17,591 2,398 (9,051) Activities Effect of exchange rate changes on cash 429 140 (323) ----------- ----------- ------------ Increase (decrease) in cash and cash equivalents 149 (3,965) (1,534) Cash and cash equivalents at beginning of year 8,776 12,741 14,275 ----------- ----------- ------------ Cash and cash equivalents at end of year $ 8,925 $ 8,776 $ 12,741 =========== =========== ============
See accompanying notes to consolidated financial statements. 30 CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(In thousands) Cumulative Foreign Total Common Stock Additional Currency Stock- ------------ Number Paid-in Retained Translation holders' of Shares Amount Capital Earnings Adjustment Equity ---------------------------------------------------------------------- Balances, January 1, 1993 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 Net income - - - 555 - 555 Common stock issued to employees and upon exercise of options 45 11 996 - - 1,007 Foreign currency translation adjustment - - - - 4,040 4,040 ----------- -------- ------- --------- ------- --------- Balances December 31, 1995 3,196 $ 799 $43,868 $ 26,742 $ 4,889 $ 76,298 =========== ======== ======= ========= ======= =========
See accompanying notes to consolidated financial statements 31 CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS (a) Principles of Consolidation Continental Can Company, Inc. (the Company) 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 accompanying consolidated financial statements include the accounts of the Company, its majority-owned foreign and domestic subsidiaries and its 50% interest in Plastic Containers, Inc. (PCI) (see Note 2(c)). At December 31, 1995, 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 86% of Obalex A.S. (Obalex) located in the Czech Republic; 100% of Dixie Holding, Inc. and Dixie Union Geschaftsfurungs GmbH which own 100% of Dixie Union GmbH & Company KG (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 in consolidation. (b) Investments Investments are accounted for under SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Investments consist of held- to-maturity government agency securities stated at amortized cost, which approximates market value. At December 31, 1995 and 1994, all of the investments were held entirely by PCI. (c) 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. (d) Depreciation and Amortization 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 improvements 10 to 35 Manufacturing machinery and equipment 3 to 20 Furniture, fixtures and equipment 3 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). (e) Goodwill 32 Goodwill, which represents the excess of purchase price over fair value of net assets acquired, is amortized on a straight-line basis over the expected periods to be benefited, generally 40 years. The Company assesses the recoverability of this intangible asset by determining whether the amortization of the goodwill balance over its remaining life can be recovered through undiscounted future operating cash flows of the acquired operation. The amount of goodwill impairment, if any, is measured based on projected undiscounted future operating cash flows using a discount rate reflecting the Company's average cost of funds. The assessment of the recoverability of goodwill will be impacted if estimated future operating cash flows are not achieved. (f) 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. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (g) Foreign Currency Translation The accounts of the Company's 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. (h) Statement of Cash Flows Cash equivalents consist of short-term investments in government securities and bonds. The Company considers securities purchased within three months of their maturity date to be cash equivalents. Cash paid for interest and income taxes was as follows: 1995 1994 1993 ------- ------- ------- (in thousands) Interest $19,657 $18,725 $23,386 Income taxes $ 2,630 $ 4,086 $ 4,667 (i) Research, Development and Engineering Expenditures for research, development and engineering are expensed as incurred. Research, development and engineering costs amounted to $12,187,000, $12,461,000 and, $12,862,000 in 1995, 1994 and 1993, respectively. (j) Employers' Accounting for Postemployment Benefits In 1994, the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits," which requires employers to recognize the obligation to provide postemployment benefits and an allocation of the costs of those benefits (see Note 12). (k) Insurance PCI purchases commercial insurance policies, but remains self-insured in certain states for the purposes of providing workers' compensation, general liability and property and casualty insurance coverage up to varying deductible amounts. PCI's self-insurance reserves are included in other liabilities on the consolidated balance sheets. Costs charged to operations for self-insurance for the years ended December 31, 1995, 1994 and 1993 were $2,200,000, $2,066,000 and $2,268,000, respectively. (l) Plant Rationalization and Realignment 33 PCI records an estimate of the liabilities associated with the closing of specific manufacturing facilities. Costs charged (income credited) to operations for these programs were $98,000, $855,000 and $(135,000) for the years ended December 31, 1995, 1994 and 1993, 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, 1995 is $500,000 ($549,000 at December 31, 1994) related to accruals for plant rationalization and realignment. (m) Restructuring Charges Included in expenses in 1995 and 1994 are restructuring charges of $5,003,000 and $1,686,000, respectively, related to Ferembal. The charges include termination benefits for certain employees, approximately half of whom accepted early retirement. Terminated employees received $1,882,000 in 1995 and $889,000 in 1994. Included in other current liabilities in 1995 and 1994 is $3,539,000 and $797,000, respectively, for termination benefits for the remaining employees. (n) Use of Estimates Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. (o) 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. Weighted average shares outstanding in 1995, 1994 and 1993 were 3,338,737, 3,220,082 and 3,023,062, 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. (p) Reclassifications Certain reclassifications have been made to conform prior year financial statements to the 1995 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 8(e)), (iii) SODENA provide the merged entity with a $2,163,000 (309 million pesetas) interest free loan for a period of up to four years secured by Onena's existing land and building (see Note 8(g)), and (iv) the Company invest $700,000 (100 million pesetas) in the merged entity as additional equity. (b) Obalex During 1993, Ferembal, pursuant to a pre-emptive right, subscribed to a share issue which gave Ferembal an additional 17% interest to its existing 34% 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. During 1995, Ferembal purchased an additional 22% of Obalex from other investors for $1,448,000. As a result of these transactions, Ferembal's equity interest in Obalex increased to 86%. These 34 transactions have been accounted for under the purchase method with the purchase price allocated to the fair value of the net assets acquired. (c) PCI The Company and Merrywood, Inc. (Merrywood) each own 50% interests in PCI. 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). 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 6, 1998, then Merrywood's PCI shares are required to be exchanged for shares of the Company's Common Stock. (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, 1995, would reduce the Company's percentage ownership of Ferembal to 64% (see Note 8(c)). 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 (unless this resulted from the actions of the minority shareholders), the Company would purchase the shares of the minority shareholders at a price to be determined through an appraisal process. The minority shareholders and the convertible bondholder, declined to sell a portion of their shares in a public offering of Ferembal which had been planned for the fourth quarter of 1995. Pursuant to the agreement the Company's obligation to purchase the shares through an appraisal process terminated. The Company remains committed to taking Ferembal public at a time determined by the minority shareholders. It is expected that the convertible bondholder will convert its bond into equity immediately prior to any such offering. This conversion would reduce the Company's 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 purchased such shares from the banks in 1994 for $1,817,000 which approximates fair market value. (3) 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 1995, three customers in 1994 and two customers in 1993 accounted for 23%, 21% and 15% of the Company's sales, respectively; accounts receivable from five customers at December 31, 1995 and two customers at December 31, 1994 amounted to 46% and 22%, respectively, of the Company's total stockholders' equity. During 1995, 1994 and 1993, Ferembal discounted with banks approximately $79,353,000, $79,260,000 and $92,859,000, respectively, of trade accounts receivable with full recourse. Of these amounts, approximately $17,401,000 remains outstanding on December 31, 1995. None were outstanding at December 31, 1994. 35 The components of other accounts receivable at December 31 were as follows: 1995 1994 ------------ -------- (in thousands) Recoverable value added taxes $ 2,680 $ 2,477 related to Ferembal Engineering fees billed 2,309 3,755 Cost of molds not yet billed 1,734 - Other taxes 1,154 240 Due from customer for equipment 419 4,190 purchases Receivable for insured loss - 3,036 Other 4,919 2,266 ------- ------- $13,215 $15,964 ======= ======= (4) INVENTORIES Inventories consist principally of packaging materials. The components of inventory at December 31 were as follows: 1995 1994 ------- ------- (in thousands) Raw materials and supplies $43,625 $43,275 Work in process 7,795 7,096 Finished goods 42,241 35,985 ------- ------- 93,661 86,356 LIFO reserve (2,025) (3,924) ------- ------- $91,636 $82,432 ======= ======= During 1995, LIFO inventory layers were reduced. This reduction resulted in charging lower inventory costs prevailing in previous years to cost-of-goods sold in 1995, thus reducing cost-of-goods sold by approximately $700,000 below the amount that would have resulted from liquidating inventory recorded at December 31, 1995 prices. (5) DERIVATIVE FINANCIAL INSTRUMENTS The Company has only limited involvement with derivative financial instruments and does not use them for trading purposes. They are used to manage well-defined interest rate and currency price risks. At December 31, 1995, Ferembal had bought $10.2 million under forward contracts through September 1996 at an average exchange rate of 4.93 FF per U.S. dollar. The amount of the forward contracts approximates the amount of Ferembal's expected 1996 U.S. dollar-denominated purchase obligations. These forward contracts could not be tied to a specific dollar- denominated transaction at December 31, 1995 and were marked to market at that date resulting in a charge to earnings of $99,000. At December 31, 1995, Ferembal had entered into several short-term interest rate hedge agreements in which it has exchanged an obligation to pay variable interest rates based on the three month Paris Inter-Bank Offering Rate (PIBOR) for fixed rates ranging from 5.49% to 6.0%. These agreements cover the period between March and December 1996 for principal amounts between $10.2 million and $20.4 million. Ferembal had also entered into an interest rate collar agreement. To the extent the three month PIBOR rate is above 8% for the three months prior to March 19, 1996, Ferembal would receive the difference based on a principal amount of $10.2 million for three months; if below 8%, Ferembal would pay the actual rate but not less than 6.1%. At December 31, 1995, three month PIBOR was 5%. The fair value of these agreements at December 31, 1995 was an unrecognized loss of $118,000. This negative fair value reflects the difference between the interest rates in effect for such agreements and the rates that could have been obtained on December 31, 1995 based on the principal amounts over the period covered. (6) OTHER ASSETS The components of other assets at December 31 were as follows: 36 1995 1994 ------ ------- (in thousands) Intangibles: Non-compete agreements $15,000 $15,000 Financing and acquisition costs 6,058 6,316 Customer contracts 7,630 7,630 Prefunded pension 5,153 - Deferred tax assets 5,099 2,472 Non-current receivables, principally VAT 1,248 1,351 Other 4,100 2,471 ------- ------- 44,288 35,240 Less accumulated amortization of 19,630 15,125 intangibles ------- ------- $24,658 $20,115 ======= ======= (7) SHORT-TERM BORROWINGS At December 31, 1995 and 1994, approximately $47,945,000 and $21,855,000, respectively, were outstanding representing at December 31, 1995 amounts drawn by (a) Ferembal, including Obalex, ($24,208,000 at interest rates ranging from 5.46% to 11.5%), (b) PCI ($17,018,000 at interest rates ranging from 7.37% to 8.75%) (c) Onena ($4,597,000 at interest rates ranging form 8.5% to 9.5%) and (d) Dixie Union ($2,122,000 at interest rates ranging from 6.75% to 7.0%). At December 31, 1995, Ferembal had unutilized short-term unsecured borrowing agreements of approximately $45 million. At December 31, 1995, Dixie Union had total lines of credit available under short-term unsecured borrowing agreements of approximately $13.5 million. On October 30, 1995, PCI entered into a $50 million revolving credit facility with a commercial bank, which replaced an existing $15 million revolving credit facility. The new revolving credit facility is for a term of seven years with interest on individual borrowings based on the bank's prime rate or LIBOR, at PCI's option. Borrowings are secured by accounts receivable and inventories. At December 31, 1995, borrowings of $17,018,000 were outstanding at interest rates of 7.37 % and 8.75%. PCI is required to pay an annual commitment fee of 0.25% on the unused facility up to $25 million and 0.5% on the unused amount in excess of $25 million. Commitment fees for the year ended December 31, 1995 were $23,000. The facility contains certain restrictive covenants, including the maintenance of minimum levels of net worth, fixed charge coverage and interest coverage, limitations on capital expenditures and additional indebtedness and restrictions on the payment of dividends. At December 31, 1995, PCI was in compliance with these covenants or had obtained waivers. The facility also provides for the issuance of letters of credit by the bank on PCI's behalf. At December 31, 1995, letters of credit amounting to $3,131,000 had been issued to guarantee obligations carried on the consolidated balance sheet. The extraordinary loss of $115,000 in 1995, which is net of the portion attributable to minority interest, relates to the write-off of unamortized fees for the prior revolving credit agreement. (8) LONG-TERM DEBT, CAPITAL LEASES AND OTHER LONG-TERM LIABILITIES Long-term debt and capital leases at December 31, 1995 and 1994 are summarized as follows: 1995 1994 --------- --------- (in thousands) Revolving Credit Facility with interest at 1% above the prime rate (9.5% at December 31, 1995) (a) $ 425 $ 1,350 10.75% Senior Secured Notes due 2001 (b) 104,700 104,700 Term loan payable by Ferembal through 1997 at 10.25% (denominated in francs: 6 million at December 31, 1995 and 10 million at December 31, 1994).... 1,223 1,873 Notes payable by Ferembal in installments through 1997 at PIBOR (5% at December 31, 1995) plus 0.6% to 0.75% (denominated in francs: 21 million and 38 million at December 31, 1995 and 1994, respectively).......................... 4,282 7,080 37 Term loans payable by Ferembal through 2001 at weighted average interest rates of 10% and a range of 8.5% to 15.5% (denominated in francs: 14.8 million at December 31, 1995 and 20 million at December 31, 1994).... 3,024 3,761 Convertible Subordinated Bond due 2000 at PIBOR (denominated in francs: 10 million at December 31, 1995 and 1994) (c)..................... 2,040 1,873 Term loans payable through 1999 at a rate of 13% (denominated in Czech crowns: 13 million at December 31, 1995 and 37 million at December 31,1994)...................... 245 651 Obligations under capital leases (d).... 15,148 15,706 Notes payable by Dixie Union at 5.7% to 9.25% (denominated in deutsch marks: 13 million and 8 million at December 31, 1995 and 1994, respectively).......................... 9,049 5,162 Notes payable by Dixie Union in semi-annual installments through 2003 at rates of 7.3% to 7.8% (denominated in deutsch marks: 6,105,000 and 8,285,000 at December 31, 1995 and 1994, respectively)................. 4,250 5,346 Obligations pursuant to extension agreement with regard to turnover tax (e)........................ 948 877 Obligations relating to settlement of social security assessments (f)........ 3,097 3,142 Discounted secured note due 1997 (denominated in pesetas: 284 million and 265 million at December 31, 1995 and 1994, respectively) (g)....................... 2,333 2,017 Bank borrowings at an average effective interest rate of 10.25% in 1995, and 10.9% in 1994 (370 million and 246 million pesetas at December 31, 1995 and 1994, respectively).......................... 3,039 1,866 -------- -------- 153,803 155,404 Less current installments............... (10,665) (13,043) -------- -------- $143,138 $142,361 ======== ======== (a) The Company's Revolving Credit Facility provides for borrowings of up to $3 million. A commitment fee of 0.5% 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 $300,000. 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 October 1997. (b) 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, 1995). 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, 1995, PCI was in compliance with these restrictions. 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. 38 (c) 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)). (d) The capital lease obligations represent lease payments due through 2004 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, 1995: Fiscal Year (in thousands) ---------------------------------------- -------------- 1996 $ 3,201 1997 3,117 1998 3,032 1999 2,646 2000 2,056 Later Years 7,445 ------- Total minimum lease payments 21,497 Less amount representing interest (6,349) ------- Present value of net minimum lease payments, including current maturities, with interest rates ranging from 7% to 10.6% $15,148 ======= (e) 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 115 million pesetas at December 31, 1995 and 1994 and is repayable in installments through May 1998. (See Note 2(a)). (f) Represents 377 million pesetas and 414 million pesetas at December 31, 1995 and 1994, respectively due to social security. Pursuant to an agreement, repayment of principal and interest by Onena is due up to October 2000. (g) 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: Year Ending December 31 (in thousands) -------------------------- ----------------- 1996 $ 8,632 1997 20,941 1998 30,894 1999 30,228 2000 25,003 Later Years 22,957 -------- $138,655 ======== Other long-term liabilities at December 31, 1995 primarily include pension and profit sharing amounts related to PCI and Ferembal of $7,859,000 ($14,304,000 at December 31, 1994), insurance reserves at PCI of $8,956,000 ($8,805,000 at December 31, 1994), and accrued postretirement benefits at PCI of $5,972,000 ($5,904,000 at December 31, 1994). (9) INCOME TAXES 39 The components of the (benefit) provision for income taxes for the years ended December 31, 1995, 1994 and 1993 are as follows: 1995 1994 1993 -------- -------- -------- (in thousands) Current - Federal $ 145 $ 148 $ (145) - Foreign 2,075 812 4,209 - State 82 12 145 Deferred - Federal (2,569) (1,559) (1,004) - Foreign (73) 2,553 (60) - State (163) (205) (490) ------- ------- ------- (Benefit) provision for income taxes $ ( 503) $ 1,761 $ 2,655 ======= ======= ======= The Company's total income tax (benefit) provision differs from the provision that would result from applying the U.S. Federal statutory income tax rate to income before (benefit) provision for income taxes, minority interest, extraordinary item and cumulative effect of accounting change due to the following:
1995 1994 1993 ----------------- --------------- --------------- (in thousands, except for percentage amounts) Amount % Amount % Amount % ------ -------- ------- ------ ------- ------ Provision at U.S. federal statutory rate $ 31 34.0 $2,265 34.0 $ 592 34.0 Losses not providing tax benefits - - (847) (12.7) - - Change in valuation allowance (383) (420.9) 696 10.4 1,671 96.0 State income taxes, net of federal income tax benefit (53) (58.2) (127) (1.9) (228) (13.1) Differential in foreign tax rates (247) (271.4) (440) (6.6) 394 22.7 Other 149 163.8 214 3.2 226 13.0 ----- ------ ------ ----- ------ ----- (Recovery) provision for income taxes $(503) (552.7) $1,761 26.4 $2,655 152.6 ===== ====== ====== ===== ====== =====
The significant components of deferred income tax (benefit) expense attributable to income from continuing operations for the years ended December 31, 1995, 1994 and 1993 are as follows: 1995 1994 1993 -------- -------- --------- (in thousands) Deferred tax (benefit) expense (exclusive of the effects of $ (844) $ 119 $ (737) other components below) Benefit of operating loss carryforwards (5,922) (1,313) (10,587) Book over tax bases of principally 109 886 2,497 fixed assets Pension and postretirement 2,277 401 1,165 benefits reserves Prefunded pension 1,958 - - (Decrease) increase in valuation (383) 696 6,108 allowance for deferred tax assets ------- ------- -------- $(2,805) $ 789 $ (1,554) ======= ======= ======== The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1995 and 1994 are presented below: 1995 1994 ---- ---- Deferred tax assets: (in thousands) Net operating loss carryforwards $ 27,454 $ 21,532 Vacation pay, due to accrual for 1,120 1,660 financial reporting purposes Self-insurance reserves 3,753 3,696 Pension and postretirement benefit 3,317 5,594 reserves Stock options, due to accrual for 340 301 financial reporting purposes Other 6,493 5,879 -------- -------- Total gross deferred tax assets 42,477 38,662 40 Less valuation allowance (11,041) (11,424) -------- -------- Net deferred tax assets 31,436 27,238 Deferred tax liabilities: Taxable gain on merger 2,953 3,016 Book over tax bases of principally 21,711 21,602 fixed assets Acquisition costs, book over tax 237 453 bases Prefunded pension 1,958 - Other 608 1,300 -------- -------- Total gross deferred tax liabilities 27,467 26,371 ======== ======== Net Asset $ 3,969 $ 867 ======== ======== The valuation allowance for deferred tax assets as of January 1, 1994 was $10,728,000. The net change in the total valuation allowance for the years ended December 31, 1995 and 1994 was a decrease of $383,000 and an increase of $696,000, respectively. Due to different tax jurisdictions of the Company's subsidiaries, net deferred tax assets of $3,969,000 and $867,000 at December 31, 1995 and 1994, respectively, shown above are reflected in the consolidated balance sheets as: 1995 1994 ------ ------ (in thousands) Current deferred tax assets (included in prepaid expenses and other current $2,742 $2,141 assets) Non-current deferred tax assets (included in other assets) 5,099 2,473 ------ ------ 7,841 4,614 Non-current deferred tax liabilities 3,872 3,747 ------ ------ Net deferred tax asset $3,969 $ 867 ====== ====== At December 31, 1995, PCI has operating loss carryforwards for federal income tax purposes of approximately $61 million which are available to offset future federal taxable income and which expire between 2006 and 2010. Based upon the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies, management believes it is more likely than not that PCI will realize the benefits of these deductible differences, net of the existing valuation allowances at December 31, 1995. (10) 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 1995, employees were granted options to purchase up to 25,000 shares of Common Stock at a price of $24.50 per share, which 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, 1995. As of December 31, 1995, 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. 41 Concerning the 16,000 restricted options granted in April 1991, compensation expense to be recognized over the five-year vesting period will aggregate $520,000, of which $104,000 was charged to expense in each of 1995, 1994 and 1993. As of December 31, 1995, 60,700 shares were available for future grants under the Restricted Plan. Pursuant to the 1988 Director Stock Option Plan, as amended, (the Retainer Plan), directors may elect to receive a stock option in lieu of cash as an annual retainer and for attendance fees. Each electing director will receive an option equal to the nearest number of whole shares determined by dividing the annual retainer plus attendance fees 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 and 1993, nine electing directors received options to purchase a total of 2,727 and 2,844 shares of Common Stock, respectively, under the Retainer Plan. In 1995, seven electing directors received options to purchase a total of 2,791 shares of Common Stock under the Retainer Plan. In 1995, 1994 and 1993, a total of $65,500, $58,500 and $58,500, 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 ten 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 (ten 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 119,000 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 including resignation or failure to stand for re-election prior to age 70. The Company issued 3,900, 4,200 and 4,200 shares under the Stock Plan for the 1995, 1994 and 1993 plan years, respectively. The Company has expensed $93,113 in 1995, $90,300 in 1994 and $103,425 in 1993 for shares which were issued. The 1995 Restricted Stock Compensation Plan (the "1995 Plan") provides for the issuance of restricted shares to key employees of the Company. During 1995, the Chairman was granted 8,163 shares under the 1995 Plan in lieu of a cash bonus of $200,000. Such amount was charged to compensation expense in 1994. Also in 1995, the Chairman and five other employees received a total of 21,740 shares under the 1995 Plan. The amount charged to compensation expense for these shares was $88,772 in 1995. All such shares vest five years after the date of the grant subject to the continued employment of the recipients by the Company or its subsidiaries. A number of options have been granted which were not pursuant to any plan. At December 31, 1995 a total of 85,000 shares were subject to such options at exercise prices ranging from $2.94 to $25.75 per share, which represented the fair market value of a share of the Company's stock on the date each of such options was granted. These options expire between 1998 and 2002. Options to purchase 10,000 shares at $17.00 per share were exercised during the three year period ending December 31, 1995. (11) PENSION, PROFIT SHARING AND OTHER PLANS 42 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. Subject to the limitation on deductibility imposed by federal income tax laws, PCI's policy has been to contribute funds to the plans annually in amounts required to maintain sufficient plan assets to provide for accrued benefits. Plan assets are held in a master trust and are comprised primarily of common stock, corporate bonds and U.S. Government and government agency obligations. The following table sets forth the plans' funded status at December 31, 1995 and 1994 based primarily on January 1, 1995 participant data and plan assets: 1995 1994 ---------- ---- (in thousands) ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATION, INCLUDING VESTED BENEFITS OF $29,078 AND $18,644 IN ($52,798) ($43,512) 1995 AND $25,464 AND ========= ======== $14,700 IN 1994 FOR THE SALARIED AND HOURLY PLANS, RESPECTIVELY PROJECTED BENEFIT OBLIGATION (PBO) (54,987) (44,557) PLAN ASSETS, AT FAIR VALUE 53,150 38,083 UNRECOGNIZED NET LOSS 7,132 499 ADJUSTMENT TO RECOGNIZE MINIMUM - (171) LIABILITY PRIOR SERVICE COST NOT YET RECOGNIZED (142) (78) IN NET PERIODIC PENSION COST --------- --------- PREFUNDED PENSION ASSET (ACCRUED PENSION LIABILITY) $ 5,153 $ (6,224) ========= ========= Net periodic pension costs under the above mentioned PCI plans included the following components for the years ended December 31, 1995, 1994 and 1993: 1995 1994 1993 -------- -------- ---- (in thousands) SERVICE COST $ 992 $ 1,161 $ 818 INTEREST COST 4,002 3,715 3,713 (RETURN) LOSS ON PLAN ASSETS (6,292) 1,916 (4,198) NET AMORTIZATION AND DEFERRAL 2,922 (5,613) 781 EFFECT OF WINDOW PLAN - - 2,725 ------- ------- ------- NET PERIODIC PENSION COSTS $ 1.624 $ 1,179 $ 3,839 ======= ======= ======= PCI contributions to the plans for the years ended December 31, 1995, 1994 and 1993 were $12,800,000, $2,585,000 and $2,075,000, respectively. 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 total periodic pension expense by $2,725,000 in 1993. Assumptions used in the accounting were: 1995 1994 1993 ----- ----- ----- Discount rates 7.5% 9.0% 7.5% Rates of increase in compensation 5.0% 5.0% 5.0% levels Expected long-term rate on return 9.5% 9.5% 9.5% on assets PCI contributes to various union pension plans pursuant to its labor agreements. Union benefit plan expense was $1,080,000, $896,000 and $783,000 for the years ended December 31, 1995, 1994 and 1993, respectively. Ferembal provides retirement benefits pursuant to an industry-wide labor agreement. The plan is not funded. (Income credited) costs charged to operations amounted to $(213,000), $179,000 and $250,000 in 1995, 1994 and 1993, respectively. Other non-current liabilities at December 31, 1995 include $1,682,000 43 ($1,762,000 at December 31, 1994) 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 $86,000, $673,000 and $954,000 in 1995, 1994 and 1993, respectively. Amounts are paid to employees after five years with accrued interest. Other non-current liabilities at December 31, 1995 include $4,701,000 ($5,127,000 at December 31, 1994) for the plan. Dixie Union provides selected managers with pension and disability benefits. Amounts charged to expense amounted to $192,000, $175,000 and $161,000 in 1995, 1994 and 1993, respectively. PCI maintains a defined contribution plan which covers substantially all hourly employees who meet eligibility requirements. Provisions regarding employee and employer contributions and the benefits provided under the plan vary between PCI's manufacturing facilities. PCI's defined contribution plan's expense was $292,000, $272,000 and $232,000 for the years ended December 31, 1995, 1994 and 1993, respectively. PCI maintains a contributory defined contribution 401(k) savings plan which covers substantially all non-organized salaried employees. Employees may contribute up to twelve and eight percent of pay on a pre-tax and after-tax basis, respectively. However, the total employee contribution rate may not exceed fifteen percent of pay. PCI matches up to three percent of employees' pre-tax contributions. Employees vest in PCI's contributions at twenty-five percent per year, becoming fully vested after four years of employment. Employees may make withdrawals from the plan prior to attaining age 59-1/2, subject to certain penalties. PCI's savings plan expense was $518,000, $450,000 and $445,000 for the years ended December 31, 1995, 1994 and 1993, respectively. (12) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS AND POSTEMPLOYMENT 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 eliminate health care benefits for employees hired after January 1, 1993. PCI's policy is to fund the cost of medical benefits in amounts determined at the discretion of management. Summary information on PCI's plan at December 31, 1995 and 1994 is as follows: Accumulated postretirement benefit obligation: 1995 1994 ---- ---- (in thousands) ------------- Retirees $3,449 $3,146 Fully eligible, active plan participants 1,219 1,097 Other active plan participants 1,486 1,197 ------ ------ $6,154 $5,440 Unrecognized net loss from experience and (614) (99) changes in assumptions Prior service cost in net periodic 432 563 postretirement benefit cost ------ ------ Accrued postretirement benefit obligation $5,972 $5,904 ====== ====== (included in other liabilities) The components of net periodic postretirement benefit cost at December 31, 1995, 1994 and 1993 is as follows: 1995 1994 1993 ----- ------ ------ (in thousands) ------ Service cost $ 52 $ 73 $ 55 Interest cost 480 431 588 Net amortization and deferral (34) (57) 67 ----- ------ ------ Net periodic postretirement benefit cost $ 498 $ 447 $ 710 ===== ====== ====== As of December 31, 1995, the discount rate used in determining the APBO was 7.5%. The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 9.7% for 1995, declining gradually with each succeeding year to an ultimate rate of 5.0% beginning in calendar year 2001. 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 postretirement benefit obligation was 10.4% 44 for 1994, declining gradually with each succeeding year to an ultimate rate of 6.0% beginning in calendar year 2001. The effect of a one percentage-point increase in the assumed health care cost trend rates in each year would increase the accumulated postretirement benefit obligation as of December 31, 1995 by $720,000 and increase the service and interest cost components of net periodic postretirement benefit cost for the year then ended by $61,000. PCI provides certain postemployment 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 1995 and 1994 were $24,000 and $29,000, respectively. (13) 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 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. This obligation which amounted to $244,000 and $267,000 at December 31, 1995 and 1994, respectively, is included in accrued liabilities. At December 31, 1995, the contract with the Chairman, as amended, provides for base compensation of $420,000 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. (14) NET INTEREST EXPENSE The details of net interest expense were as follows: 1995 1994 1993 --------- ---------- --------- (in thousands) Interest income $ 759 $ 941 $ 917 Interest expense (20,676) (19,625) (23,859) -------- -------- -------- Interest expense, net $(19,917) $(18,684) $(22,942) ======== ======== ======== (15) 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, Obalex, Dixie Union and Onena. Information about the Company's foreign and domestic operations follows. 1995 1994 1993 --------- --------- --------- (in thousands) ------------------------------- Sales to unaffiliated customers: Foreign $318,917 $289,566 $260,206 Domestic 295,470 247,614 221,636 -------- -------- -------- Total $614,387 $537,180 $481,842 ======== ======== ======== Income before (recovery) provision for income taxes, minority interest, extraordinary item and cumulative effect of accounting change: Foreign $ 3,937 $ 11,191 $ 11,045 Domestic (3,846) (4,528) (9,305) -------- -------- -------- Total $ 91 $ 6,663 $ 1,740 ======== ======== ======== Identifiable assets: Foreign $220,740 $207,946 $173,390 Domestic 224,671 215,639 212,517 -------- -------- -------- Total $445,411 $423,585 $385,907 ======== ======== ======== 45 The above income includes restructuring charges related to Ferembal of $5,003,000 and $1,686,000 in 1995 and 1994, respectively. (16) 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. (17) 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, 1995, 1994 and 1993 was approximately $7,131,000, $5,418,000 and $7,082,000, respectively. Total commitments under such arrangements are payable in annual installments of $8,067,000 in 1996, $7,082,000 in 1997, $4,805,000 in 1998, $3,894,000 in 1999, $3,202,000 in 2000 and $5,528,000 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 $1,277,000 in 1995, $841,000 in 1994 and $1,317,000 in 1993. 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. (18) QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial data for 1995 and 1994 (in thousands, except per share amounts) is as follows:
1st 2nd 3rd 4th 1995 Quarter Quarter Quarter Quarter - ---------------------------------------- --------- -------- --------- -------- Net Sales $144,460 $160,952 $171,024 $137,951 Gross Profit 23,707 25,316 27,640 20,714 Income (Loss) Before Extraordinary Item 437 1,932 (1,872) 173 Net Income (Loss) 437 1,932 (1,872) 58 Earnings (Loss) Per Share Before Extraordinary Item .13 .58 (.56) .05 Net Earnings (Loss) Per Common Share $ .13 $ .58 $ (.56) $ .02 1st 2nd 3rd 4th 1994 Quarter Quarter Quarter Quarter - ---------------------------------------- -------- -------- -------- -------- Net Sales $115,850 $135,127 $154,492 $131,711 Gross Profit 20,335 24,838 28,003 20,981 (Loss) Income Before Extraordinary Item and Accounting Change (189) 1,713 3,102 189 Net (Loss) Income (452) 1,640 3,102 155 (Loss) Earnings Per Share Before Extraordinary Item and Accounting Change (.06) .53 .94 .06 Net (Loss) Earnings Per Common Share (.15) .51 .94 .05 (Loss) Earnings Per Share Before Extraordinary Item and Accounting Change - Assuming Full Dilution (.05) .52 .94 .06 Net (Loss) Earnings Per Common Share - Assuming Full Dilution $ (.13) $ .50 $ .94 $ .05
46 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, 1995 and 1994, 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, 1995. 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, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. As discussed in notes 1(j) and 12 to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," on a prospective basis in 1994. /s/ KPMG Peat Marwick LLP Jericho, New York March 1, 1996 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 47 Nils E. Benson Former President of Penn Elastic Co. Charles DiGiovanna President, Continental Plastic Containers, Inc. Rainer N. Greeven Partner, Greeven & Ercklentz (Attorneys) Charles H. Marquardt Former Chief Operating Officer of Plastic Containers, Inc. (Retired 1993) V. Henry O'Neill Private Investor 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. Edward Clark Director Emeritus 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 CONTINENTAL CAN COMPANY, INC. General Offices: Syosset, New York SUBSIDIARIES AND OFFICERS: PLASTIC CONTAINERS, INC. Syosset, New York Jose Luis Zapata, President CONTINENTAL PLASTIC CONTAINERS, INC. Norwalk, Connecticut Charles DiGiovanna, Chief Executive Officer and President Jay Hereford, Chief Financial Officer John E. Farrell, Senior Vice President - Marketing Maarten Van Buren, Senior Vice President Samuel A. Nutile, Vice President - Manufacturing John S. Roesch, Vice President - Sales CONTINENTAL CARIBBEAN CONTAINERS, INC. Caugus, Puerto Rico FEREMBAL S.A. Clichy, France William Peters, Managing Director Christian Bonnet, Financial Director Pierre Lichtenberger, Commercial Director Jean-Marie Desautard, Operations & Personnel Director OBALEX, A.S. Znojmo, Czech Republic 48 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 Juan Ballaz, Executive Director Carlos Aizpun, Chief Financial Officer 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 GENERAL INFORMATION: ANNUAL MEETING May 15, 1996 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 1995 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. 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. 1995 1994 Quarter High Low High Low - ----------------------------------------- [S] [C] [C] [C] [C] First 29-1/8 21-1/4 25-1/2 20-1/4 Second 27-3/4 23-3/8 24-1/8 21-1/2 Third 24-3/4 19 22 20-1/4 Fourth 19-3/4 14-5/8 24-5/8 19 49 No dividends were paid to the holders of common stock for the years 1995, 1994 and 1993. The Company has no present intention to pay dividends on its common stock. There were 353 stockholders of record as of March 12, 1996. 50 EX-21 5 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 (22) 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: Name Under Which State or Other Percentage Owned - --------------------------- Jurisdiction -------------------- ------------------------- Business is Conducted of Incorporation by Company - --------------------------- ------------------------- -------------------- [S] [C] [C] Ferembal S.A. France 85%(1) Lockwood, Kessler & New York 100% Bartlett, Inc. Dixie Union Verpackungen Germany 100% GmbH Onena Bolsas de Papel S.A. Spain 57% Plastic Containers, Inc. Delaware 50%* Continental Plastic Delaware 100% Containers, Inc. (2) Continental Caribbean Delaware 100% Containers, Inc. (2) Obalex A.S. (3) Czech Republic 86% (1) A bond, convertible into the equity of Ferembal S.A., is currently outstanding, which, if converted, would reduce the Company's 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. 51 EX-23.1 6 INDEPENDENT AUDITORS' REPORT ON SCHEDULES EXHIBIT 23.1 INDEPENDENT AUDITORS' REPORT ON SCHEDULES ----------------------------------------- The Board of Directors and Stockholders Continental Can Company, Inc.: Under date of March 1, 1996, we reported on the consolidated balance sheets of Continental Can Company, Inc. and subsidiaries as of December 31, 1995 and 1994, 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, 1995, as contained in the 1995 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(j) and 12 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. /s/ KPMG Peat Marwick LLP Jericho, New York March 1, 1996 52 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, 1996 relating to the consolidated balance sheets of Continental Can Company, Inc. and subsidiaries as of December 31, 1995 and 1994, 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, 1995, which reports are either incorporated by reference or appear in the December 31, 1995 Annual Report on Form 10-K of Continental Can Company, Inc. As discussed in notes 1(j) and 12 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. /s/ KPMG Peat Marwick LLP Jericho, New York March 22, 1996 53 EX-27 8 FINANCIAL DATA SCHEDULE
5 1,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 8,925 285 107,676 6,144 91,636 207,653 347,488 148,874 445,411 161,458 143,138 799 0 0 75,499 445,411 614,387 614,387 517,010 593,789 20,507 0 19,917 91 (503) 670 0 115 0 555 .17 .17
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