1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-2227
CROWN CORK & SEAL COMPANY, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1526444
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9300 Ashton Road, Philadelphia, PA 19136
(Address of principal executive offices) (Zip Code)
215-698-5100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
There were 90,387,106 shares of Common Stock outstanding as of July 31, 1995.
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Crown Cork & Seal Company, Inc.
PART 1 - FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF INCOME
(In millions except share data)
(Unaudited)
Three months ended June 30, 1995 1994
Net sales $ 1,385.8 $ 1,134.5
Costs, expenses & other income
Cost of products sold, excluding
depreciation and amortization 1,153.8 932.7
Depreciation and amortization 65.0 54.7
Selling and administrative expense 36.0 33.2
Provision for restructuring 20.2
Interest expense 38.0 22.1
Interest income ( 2.7) ( 1.6)
Translation and exchange adjustments ( 1.1) 2.6
1,309.2 1,043.7
Income before income taxes 76.6 90.8
Provision for income taxes 21.6 30.0
Equity earnings, net of minority interests ( 2.8) 4.0
Net income $ 52.2 $ 64.8
Earnings per average common share $ .58 $ .73
Dividends per share
Average common shares outstanding 90,197,100 89,094,150
The financial statements for 1995 include the container manufacturing operations
of Tri-Valley Growers, acquired on June 27, 1994.
The accompanying notes are an integral part of these financial statements.
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Crown Cork & Seal Company, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(In millions except share data)
(Unaudited)
Six months ended June 30, 1995 1994
Net sales $ 2,512.5 $ 2,077.5
Costs, expenses & other income
Cost of products sold, excluding
depreciation and amortization 2,085.8 1,712.6
Depreciation and amortization 129.2 107.2
Selling and administrative expense 71.8 66.3
Provision for restructuring 20.2
Interest expense 73.5 43.7
Interest income ( 5.5) ( 3.0)
Translation and exchange adjustments .5 6.1
2,375.5 1,932.9
Income before income taxes 137.0 144.6
Provision for income taxes 41.3 50.5
Equity earnings, net of minority interests ( 7.0) 4.3
Net income $ 88.7 $ 98.4
Earnings per average common share $ .99 $ 1.11
Dividends per share
Average common shares outstanding 89,920,245 88,983,915
The financial statements for 1995 include the container manufacturing operations
of Tri-Valley Growers, acquired on June 27, 1994.
The accompanying notes are an integral part of these financial statements.
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Crown Cork & Seal Company, Inc.
CONSOLIDATED BALANCE SHEETS (Condensed)
(In millions except book value per share)
(Unaudited)
June 30, December 31,
1995 1994
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 68.9 $ 43.5
Receivables 910.9 738.0
Inventories 944.6 767.5
Prepaid expenses and other current assets 72.8 56.6
Total Current Assets 1,997.2 1,605.6
Long-term notes and receivables 65.9 70.4
Investments 56.9 47.7
Goodwill, net of amortization 1,112.1 1,122.4
Property, plant and equipment 1,937.3 1,816.5
Other non-current assets 108.6 118.7
TOTAL $5,278.0 $4,781.3
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $1,023.1 $ 604.5
Current portion of long-term debt 63.5 131.3
Accounts payable and accrued liabilities 700.5 737.1
United States and foreign income taxes 13.0 10.1
Total Current Liabilities 1,800.1 1,483.0
Long-term debt, excluding current maturities 1,152.3 1,089.5
Postretirement and pension liabilities 627.1 639.4
Other non-current liabilities 126.5 128.8
Minority interests 101.7 75.4
Shareholders' equity 1,470.3 1,365.2
TOTAL $5,278.0 $4,781.3
BOOK VALUE PER COMMON SHARE $16.28 $15.28
The accompanying notes are an integral part of these financial statements.
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Crown Cork & Seal Company, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Condensed)
(In millions)
(Unaudited)
Six months ended June 30, 1995 1994
Cash flows from operating activities
Net income $ 88.7 $ 98.4
Depreciation and amortization 129.2 107.2
Provision for restructuring 12.8
Equity in earnings of joint ventures, net
of dividends received ( 2.7) ( 7.7)
Minority interest in earnings of subsidiaries 9.9 5.7
Change in assets and liabilities, other than debt ( 436.2) ( 342.8)
Net cash used in operating activities ( 198.3) ( 139.2)
Cash flows from investing activities
Capital expenditures ( 206.5) ( 223.9)
Acquisition of businesses, net of cash acquired ( 64.0)
Proceeds from sale of property, plant and equipment 12.8 .9
Other, net ( 6.9) ( 2.9)
Net cash used in investing activities ( 200.6) ( 289.9)
Cash flows from financing activities
Proceeds from long-term debt 310.5 113.0
Payments of long-term debt ( 203.7) ( 91.2)
Net change in short-term debt 283.7 379.1
Common stock:
Repurchase for treasury ( .3) ( 8.5)
Issued under various employee benefit plans 14.5 8.0
Minority contributions, net of dividends paid 9.7 11.4
Net cash provided by financing activities 414.4 411.8
Effect of exchange rate changes
on cash and cash equivalents 9.9 6.3
Net change in cash and cash equivalents 25.4 ( 11.0)
Cash and cash equivalents at beginning of period 43.5 54.2
Cash and cash equivalents at end of period $ 68.9 $ 43.2
Schedule of non-cash Investing Activities 1995 1994
Acquisition of business:
Fair value of assets acquired $89.1
Liabilities assumed ( 25.1)
Cash paid $64.0
Certain prior year balances have been reclassified to improve comparability.
The accompanying notes are an integral part of these financial statements.
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Crown Cork & Seal Company, Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In millions)
(Unaudited)
Minimum Cumulative
Common Paid-In Retained Pension Translation Treasury
Stock Capital Earnings Liability Adjustment Shares Total
Balance at December 31, 1994 $592.5 $168.4 $ 974.1 ($48.1) ($175.9) ($145.8) $1,365.2
Net income 88.7 88.7
Treasury stock purchased ( .3) ( .3)
Stock issued under employee
benefit plans 9.6 4.9 14.5
Translation adjustments 2.2 2.2
Balance at June 30, 1995 $592.5 $177.7 $1,062.8 ($48.1) ($173.7) ($140.9) $1,470.3
Minimum Cumulative
Common Paid-In Retained Pension Translation Treasury
Stock Capital Earnings Liability Adjustment Shares Total
Balance at December 31, 1993 $592.5 $167.4 $ 843.1 ($46.3) ($156.5) ($148.4) $1,251.8
Net income 98.4 98.4
Treasury stock purchased ( 7.3) ( 1.2) ( 8.5)
Stock issued under employee
benefit plans 5.6 2.4 8.0
Translation adjustments 2.3 2.3
Balance at June 30, 1994 $592.5 $165.7 $ 941.5 ($46.3) ($154.2) ($147.2) $1,352.0
The accompanying notes are an integral part of these financial statements.
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Crown Cork & Seal Company, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
A. Statement of Information Furnished
The accompanying unaudited interim consolidated and condensed financial
statements have been prepared by the Company in accordance with Form
10-Q instructions. In the opinion of management, these consolidated
financial statements contain all adjustments necessary to present fairly
the financial position of Crown Cork & Seal Company, Inc., as of June
30, 1995 and the results of operations and cash flows for the periods ended
June 30, 1995 and 1994, respectively. These results have been
determined on the basis of generally accepted accounting principles
and practices applied consistently.
Certain information and footnote disclosures, normally included in
financial statements presented in accordance with generally accepted
accounting principles, have been condensed or omitted. The accompanying
Consolidated Financial Statements should be read in conjunction
with the financial statements and notes thereto incorporated by
reference in the Company's 1994 Annual Report on Form 10-K as well as its
first quarter 1995 Interim Report on Form 10-Q.
B. Restructuring
The Company recorded a pre-tax restructuring expense of $114.6 million in
the third quarter of 1994 ($73.2 million after-tax) related to a
program announced on September 14, 1994. The program was implemented
in the fourth quarter of 1994 with seven of the announced thirteen
plants being closed as of December 31, 1994. The program is ongoing
in 1995 with three of the previously announced plants scheduled to close by
the end of the third quarter of 1995.
Currently, the estimates related to the seven plants closed in 1994 and the
three plants to be closed by the end of the third quarter 1995 have
remained unchanged. However, management has reevaluated the effect
of closing two aerosol plants and an art and plate operation and has
decided to keep these operations open. The financial impact
of this decision is a net pre-tax charge to income of $.1 million.
During the third quarter the Company also finalized plans to close a
three-piece food can plant and has also decided to not re-open the
Van Nuys beverage can plant. The estimated cost associated with these two
plant closures is $20.1 million pre-tax.
The total adjustment to operating income for the above changes is a pre-tax
charge of $20.2 million, or $12.8 million after-tax. The program is
expected to be completed before the end of the third quarter of 1995.
The Company estimates that the decision to keep open the two aerosol
plants and the art and plate operation and to close the three piece food
can plant and beverage can plant will result in additional annual savings
to net income of approximately $3.1 million and reduced capital
requirements by approximately $20.0 million.
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Crown Cork & Seal Company, Inc.
The balance of the reserves for restructuring as described above is $32.6
million as of June 30, 1995 (excluding the writedown of assets which is
reflected as a reduction of the related asset accounts) and is included
in accounts payable and accrued liabilities as well as other non-current
liabilities. The restructuring balances are as follows:
Adjustments
December 31, to 1995 June 30
1994 Reserves Activity 1995
Employee costs $16.6 $ 6.4 ($2.0) $21.0
Writedown of assets ( .8) .8
Lease termination and
property holding costs 5.9 5.4 ( .4) 10.9
Anticipated gain from sale
of properties ( 11.1) 10.9 ( .2)
Incremental operating losses 5.4 ( 1.7) ( 2.8) .9
$16.8 $20.2 ($4.4) $32.6
Where applicable, the Company has also established reserves to restructure
acquired companies. These purchase accounting adjustments related
primarily to employee separation costs to be incurred upon plant
closures, such as severance and additional pension and retiree medical
liabilities. As of June 30, 1995 the remaining balance from 1994 and 1993
acquisitions was $21.2 million.
C. Inventories
June 30, December 31,
1995 1994
Finished goods and work in process $582.2 $391.3
Raw materials and supplies 362.4 376.2
Total inventories $944.6 $767.5
D. Supplemental Cash Flow Information
Cash payments for interest, including capitalized interest of $3.0 million
and $3.2 million, were $62.9 million and $39.4 million during the
six months ended June 30, 1995 and 1994, respectively. Cash payments for
income taxes amounted to $14.1 million and $41.4 million during
the six months ended June 30, 1995 and 1994, respectively. The 1995 tax
payments are net of a second quarter refund of $15.0 million.
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Crown Cork & Seal Company, Inc.
PART I - FINANCIAL INFORMATION
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Net Income and Earnings Per Share
Net income for the second quarter and for the six months ended June 30,
1995 was $52.2 million and $88.7 million,respectively, as compared to
$64.8 million and $98.4 million for the same periods in 1994.
Earnings per share for the second quarter and for the six months ended
June 30, 1995 was $.58 and $.99, respectively, as compared to $.73 and
$1.11 for the same periods in 1994. Net income, before the provision
for restructuring, in the quarter was $65.0 million or $.72 per share as
compared to $64.8 million or $.73 per share in 1994. For the six
months ended June 30, 1995, net income, before the restructuring charge,
increased 3.2% to $101.5 million and earnings per share increased 2.1% to
$1.13.
In the second quarter, the Company, reevaluated the effect of closing two
aerosol plants and an art and plate operation which had been included
in the announced September 1994 restructuring plan and has decided
to keep these operations open. The financial impact of this decision
is a net pre-tax charge of $.1 million. The Company has also
decided to close a three-piece food can plant and to not re-open the
Van Nuys beverage can plant which had been damaged by an earthquake in
1994. The impact on pre-tax earnings from this decision is a charge of
$20.1 million. These actions are expected to be completed by the end
of the third quarter of 1995 and are expected to contribute additional
annual savings of approximately $3.1 million.
The Company estimates that of the total net pre-tax restructuring charge of
$20.2 million, $9.2 million will be non-cash charges primarily to
reflect the writedown of assets. Cash charges primarily relate
to future pension plan contributions and retiree medical benefits
to be paid for terminated employees.
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Crown Cork & Seal Company, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Net Sales
Net sales for the quarter increased 22.2% from $1,134.5 million in 1994 to
$1,385.8 million in 1995. Sales from domestic operations increased
21.2% and those in foreign markets increased 24.0%. Domestic sales
accounted for 66.4% of consolidated sales in 1995 as compared to 66.9% in
1994. Net sales for the six months ended June 30, 1995 at $2,512.5 million
increased 20.9% from the year earlier level of $2,077.5 million.
An analysis of net sales by operating division follows:
Net Sales Percentage
Second Quarter Six Months Ended Change
1995 1994 1995 1994 Second Six
Quarter Months
North American $ 792.0 $675.7 $1,402.3 $1,230.2 17.2 14.0
International 251.0 208.1 478.3 387.8 20.6 23.3
Plastics 325.4 227.6 585.7 416.9 43.0 40.5
Other 17.4 23.1 46.2 42.6 (24.7) 8.5
$1,385.8 $1,134.5 $ 2,512.5 $2,077.5 22.2 20.9
North American Division net sales increased in the quarter and year-to-date
over the respective prior year periods due primarily to the pass-through of
substantially higher raw material costs. This pass-through did not
fully recover the cost increases experienced for aluminum can sheet.
It will continue to be difficult to increase selling prices during the
remainder of 1995 to fully recover such cost increases. Year-to-date
sales growth was partially offset by lower unit sales for beverage cans as
well as the impact of the devaluation of the Mexican peso against
the U.S. dollar. The decline in beverage can volumes was due primarily
to unusually large customer purchases prior to the January 1995 selling
price increases. In the second quarter these volumes were relatively
unchanged from a year earlier. The Canadian dollar has strengthened
against the U.S. dollar in the second quarter with unit sales for beverage
cans increasing. Without the impact of a significantly lower
Mexican peso, North American Division sales would have been higher
by $34.5 million year-to-date and $17.2 million in the quarter from a year
earlier.
Increased sales in the International Division were due primarily to
increased unit sales in China, the Middle East and Latin America as well
as the continued weakening of the U.S. dollar against most European
currencies. In China, the commencement of production of two-piece
aluminum beverage cans and beverage ends in Shanghai, and Foshan were the
primary factors for growth. Full production was also attained in the
Company's operations in Dubai and Argentina resulting in substantial unit
growth.
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Crown Cork & Seal Company, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Significant sales increases have been recognized within the Plastics
Division both for the quarter and year-to-date over the prior year
periods. More than 60% of this growth has been derived in domestic markets
due primarily to increased unit sales of approximately 35% over
1994 and to a lesser extent from the pass-through of substantially
higher polyethylene terephthalate ("PET") resin costs. Increased unit
capacity at most U.S. plants as a result of the 1994 capital investment
programs in response to customer requirements was the primary factor
for volume growth. In Europe, the Company's plastic operations have
experienced sales gains due to increased volumes, pass-through of higher
raw material costs and, to a lesser degree, customer concerns about
future resin shortages. The Company believes that its supplier base will
provide satisfactory means for it to obtain raw materials in
sufficient quantities to meet the future needs of its customers.
Cost of Products Sold
Cost of products sold, excluding depreciation and amortization, for the
second quarter ended June 30, 1995 was $1,153.8 million, a 23.7%
increase from $932.7 million in 1994. For the six months ended, cost of
products sold increased 21.8% to $2,085.8 million from $1,712.6
million in 1994. These increases are due primarily to higher net raw
material costs as well as overall increased unit sales. These increased
raw material costs, both in aluminum can and end sheet and plastic
resins, have not been fully passed through to customers and have
resulted in lower margins. Management is concerned that these cost
increases will not be fully recovered from customers during the remainder
of 1995. Cost of products sold as a percentage of net sales are
approximately 1% higher than in 1994 both within the quarter and
year-to-date. The markets for certain of the Company's basic raw materials
continue to tighten but it is the Company's ongoing objective to maintain
its ability to effectively source such materials. Continued emphasis on
research and development as well as capital programs which improve
plant efficiencies support the Company's efforts to contain costs.
Selling and Administrative
Selling and administrative expenses for the second quarter were $36.0
million, and as a percentage of net sales were 2.6%. Expenses
increased by 8.4% over 1994 but improved as a percentage of net sales
from 2.9% a year earlier. For the six months ended June 30, 1995,
selling and administrative expenses increased 8.3% from a year earlier but
improved as a percentage of net sales from 3.2% to 2.9% in 1995.
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Crown Cork & Seal Company, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Operating Income
The Company views operating income before interest costs and other
non-operating expenses as the principal measure of performance.
Operating income, before restructuring charges of $20.2 million,
was $225.7 million or 9.0% of net sales for the six months ended
June 30, 1995 and $131.0 million or 9.5% of net sales in the
quarter. Increases over the same period a year earlier were 17.9% and
15.0%, respectively. An analysis of operating income, before
restructuring, by operating division follows:
Operating Expense Percentage
Second Quarter Six Months Ended Change
1995 1994 1995 1994 Second Six
Quarter Months
North American $73.3 $62.5 $129.1 $111.8 17.3 15.5
International 23.4 26.9 47.8 45.9 (13.0) 4.1
Plastics 32.1 23.8 42.2 30.6 34.9 37.9
Other 2.2 .7 6.6 3.1 214.3 112.9
$131.0 $113.9 $225.7 $191.4 15.0 17.9
Within the North American Division, operating income increased over a year
earlier by 17.3% in the quarter and 15.5% year-to-date. As a
percentage of net sales, operating margin was up year-to-date from 9.1%
in 1994 to 9.2% in 1995 and unchanged at 9.3% within the quarter from
a year earlier. Increased operating profits year-to-date reflect
the initial effects of the September 1994 restructuring program, higher
aluminum scrap prices, improved conditions in Mexico and Canada and
benefits derived from the Company's continuing investment programs,
primarily for beverage cans and ends.
Within the second quarter, the increase in operating profits was partially
offset by the continued increases in raw material costs particularly
in aluminum can sheet. It will continue to be difficult to fully
recover raw material cost increases during the second half of 1995.
Also within the quarter, the Company's Mexican operations showed
continued improvement from a year earlier as the devaluation of the
Mexican peso slowed and unit sales increased.
The implementation of a new pricing structure in 1995 by the Company's
suppliers of aluminum can and end sheet directly ties the
price for can and end sheet to the price of ingot on the London Metal
Exchange (LME). This has resulted in the volatility in commodity markets
being effectively transferred to the Company. While the Company has
announced selling price increases to its customers based on LME
quotes, the Company has not and may not always be able to fully recover
movements in commodity pricing. With already depressed margins in the
domestic beverage can business and the possibility of higher aluminum
costs, the Company remains cautious about earnings for the second half of
1995. The longer term consequences of higher aluminum costs will likely
include reduced investment in North American beverage can capacity.
The Company plans to maintain its competitive position by completing
its 202 diameter aluminum end conversion program by the end of 1995
and by enhancing line speeds.
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Crown Cork & Seal Company, Inc.
Item 2. Management's Discussion and Analysis (Continued)
The International Division operating income was 10.0% of net sales
year-to-date and 9.3% of net sales in the quarter as compared to
11.8% and 12.9% in 1994, respectively. The lower margins are directly
related to competitive pressures on selling prices and changes
in product mix. Although unit and dollar sales are up in most markets,
the pressure on margins from higher costs remains significant.
Operating income for the Plastics Division increased 34.9% in the quarter
and 37.9% year-to-date over a year earlier. As a percentage
of net sales, operating income was 9.9% in the quarter and 7.2%
year-to-date as compared to 10.5% and 7.3% in 1994,
respectively. The increased operating profits resulted from increased
unit sales, improved manufacturing efficiencies in Europe due
to the increased production and, to a lesser extent, favorable product
mix. Operating margins in the domestic operations have declined within
the quarter and year-to-date from a year earlier due primarily to the
difficulty experienced in recovering the steady increases in PET
resin prices since October 1994 and, to a lesser extent, inefficiencies
caused by the continuing capital investment programs to increase unit
volume capacity at various plants. PET resin prices have increased 24%
since January 1, 1995. The Company has to some extent increased selling
prices to its customers to offset such raw material increases. During 1995
it has been increasingly difficult to fully recover resin increases, which
has led to margin erosion. With excess capacity in the U.S. PET bottle
market and eroding margins due to the difficult PET price structure,
the Company expects that margins may erode further in 1995.
Net Interest Expense/Income
Net interest expense was $35.3 million in the quarter and $68.0 million
year-to-date and represents increases over 1994 of 72.2% and
67.1%, respectively. The increase in net interest expense is due
primarily to (a) generally higher interest rates, (b) increased working
capital requirements resulting from the impact on inventories of
higher raw material costs and (c) continued capital spending programs to
expand production worldwide and to improve production efficiencies.
Taxes on Income
The effective tax rate was 28.2% in the second quarter and 30.1%
year-to-date. In 1994, the effective tax rates were 33.0%
and 34.9%, respectively. The lower effective tax rate is primarily
due to increased pre-tax income from non-U.S. operations with lower
statutory rates, such as, those in China and the United Arab Emirates.
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Crown Cork & Seal Company, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Liquidity and Capital Resources
Net cash used in operations of $198.3 million increased by $59.1 million
for the six months ended June 30, 1995 over 1994 cash used in operations
of $139.2 million. These increases were due primarily to higher receivable
and inventory balances as raw material costs have increased up to
50% compared to 1994. The Company will continue to manage its inventory
levels in response to the volatility of raw material prices and increased
customer demand for its products.
Capital expenditures of $206.5 million represent a decrease of 7.8% from
the year earlier level of $223.9 million. The reduction in overall
spending from a year earlier represents the Company's continuing efforts
to reduce interest costs by lowering debt levels. Spending in the North
American Division was $78.3 million, down from $79.3 million in 1994.
Included in spending for this division were the conversion of
aluminum beverage can and end lines to 202 diameter at various plants,
down payments on two new high-speed beverage can lines and
modernization of a plant in Texas to meet customer needs. Spending
in the International Division totaled $32.2 million, an increase over
the 1994 level of $30.2 million. Major spending for the International
Division has been concentrated in the Company's joint ventures as well as
further expansion of existing plastic cap production in European
metal facilities. Spending for the Plastics Division declined from $113.2
million in 1994 to $87.6 million in 1995. Major spending included
continued expansion of existing products to meet customer requirements,
specifically single-serve PET preform and bottle lines.
Cash provided from financing activities increased marginally as higher
uses of cash in operations was offset by reduced spending in investing
activities. The cash provided from long-term debt was generated by the
Company's sale of $300.0 million of public debt securities in January 1995.
These funds were used to pay down short-term indebtedness. Working capital
of $197.1 million represented an increase of $74.5 million and $188.8
million, respectively, over December 31, 1994 working capital of $122.6
million and June 30, 1994 working capital of $8.3 million.
Total debt, net of cash and cash equivalents, at June 30, 1995 was
$2,170.0 million and represented an increase of 21.8% against the December
1994 level of $1,781.8 million and 26.3% against the June 30, 1994 level
of $1,718.8 million. Total debt, net of cash and cash
equivalents, as a percentage of total capitalization was 58.0% at
June 30, 1995 as compared to 55.3% at December 31, 1994 and 54.7% at
June 30, 1994. The increase in total debt to total capitalization
is primarily due to the seasonal build-up of receivables and inventories
and the increases in raw material costs as compared to 1994. The
Company continues to fund its working capital requirements on a short-term
basis primarily through the issuance of commercial paper. The
Company is actively pursuing a reduction in the amount of working
capital which it must employ to support its business activities worldwide.
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Crown Cork & Seal Company, Inc.
Item 2. Management's Discussion and Analysis (Continued)
As described in the Company's Current Report on Form 8-K dated
May 22, 1995, the Company entered into an Exchange Offer Agreement,
dated as of May 22, 1995 (the "Agreement"), with Compagnie Generale
d' Industrie et de Participations, a French societe anonyme ("CGIP").
Pursuant to the Agreement and subject to the terms and conditions thereof,
the Company has agreed to make (or cause a wholly-owned subsidiary of the
Company to make) a public exchange offer (the "Offer") for all the
outstanding shares of common stock, (the "CMB Common Stock"), of
CarnaudMetalbox, a French societe anonyme ("CMB"), and CGIP has agreed to
tender all shares of CMB Common Stock beneficially owned by CGIP pursuant
to the Offer and to elect irrevocably to receive only Units
(consisting of a combination of Company common stock and 4.5% cumulative
convertible preferred stock) in consideration for such shares.
The Company intends to obtain the funds necessary to finance the cash
portion of the Offer pursuant to an acquisition facility. The Company
anticipates that the indebtedness incurred under such a facility will
be repaid from funds generated internally by the Company and its
subsidiaries, through additional borrowings, proceeds
from asset dispositions, possible equity offerings or a combination of
two or more such sources.
The foregoing description of the Agreement is qualified in its entirety
by reference to the Company's Current Report on Form 8-K dated
May 22, 1995, and the Agreement (including the Annexes thereto), which
has been filed as Exhibit 2.1 to the Form 8-K.
16
Crown Cork & Seal Company, Inc.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
The Company's Annual Meeting of Shareholders was held on April 27,
1995. The matters voted upon and the results of such votes are set
forth in Part II, Item 4 of the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1995 and such Item 4
is incorporated herein by reference.
Item 5. Other Information
The Company's Board of Directors has declared a dividend distribution
of one common stock purchase right (the "Rights") for each
outstanding share of the Company's common stock, to shareholders
of record at the close of business on August 10, 1995. Each Right
entitles the registered holder to purchase from the Company under
certain specified circumstances one share of common stock (or in
certain circumstances, cash, property or other securities of the
Company) at a purchase price of $200, subject to adjustment. The
description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") between the Company and First
Chicago Trust Company of New York, the Rights Agent. The Rights
Agreement, as well as certain other documents related to the Rights,
are filed as exhibits to the Company's registration statement
on Form 8-A filed with the Securities and Exchange Commission
on August 10,1995 (the "Form 8-A"). The foregoing description
of the Rights and the Rights Agreement is qualified in its entirety
by reference to the Form 8-A and the Rights Agreement filed
as Exhibits 1 and 2 to the Form 8-A.
17
Crown Cork & Seal Company, Inc.
Item 6. Exhibits and Reports on Form 8-K
(a.) Exhibits
2.a Exchange Offer Agreement, dated as of May 22, 1995, between Crown
Cork & Seal Company, Inc., and Compagnie Generale d' Industrie
et de Participations (incorporated by reference to Exhibit 2.1 of
the Registrant's Current Report on Form 8-K dated May 22, 1995
(File No. 1-2227)).
3. By-laws of the Registrant as amended by the Company's Board of
Directors on July 27, 1995.
4. Rights Agreement dated as of August 7, 1995 between Crown Cork & Seal
Company, Inc., and First Chicago Trust Company of New York
(incorporated by reference to Exhibit 1 of Registrant's Form 8-A
dated August 10, 1995 (File No. 1-2227)).
10.a 1994 Stock - Based Incentive Compensation Plan (incorporated by
reference to Exhibit 10.g of Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994 (File No. 1-2227)).
10.b Crown Cork & Seal Company, Inc. Deferred Compensation Plan for
Directors, dated as of October 27, 1994.
10.c Crown Cork & Seal Company, Inc. Pension Plan for Outside Directors,
dated as of October 27, 1994.
11. Statement re: Computation of per share earnings
27. Financial Data Schedule
18
Crown Cork & Seal Company, Inc.
(b) Reports on Form 8-K
On May 22, 1995, the Registrant filed a Current Report on Form 8-K for
the following event:
The Company reported under Item 5 - Other Events that it had entered
into the Agreement with CGIP with respect to the Offer for all of
the outstanding CMB Common Stock.
19
Crown Cork & Seal Company, Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Crown Cork & Seal Company, Inc.
Registrant
By: /s/ Timothy J. Donahue
Timothy J. Donahue
Vice President and Controller
Date: August 11, 1995