UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
------- OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended MARCH 31, 1996
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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: 1-6690
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CONTINENTAL CAN COMPANY, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 11-2228114
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(State of Incorporation) (I.R.S. Employer Identification No.)
One Aerial Way, Syosset, New York 11791
- ---------------------------------------- --------
(Address of principal executive offices) Zip Code
(516) 822-4940
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(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.
X YES NO
------- -------
The number of shares outstanding of the registrant's Common Stock ($.25 par
value) as of May 6, 1996 is 3,199,668.
FORM 10-Q
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
Consolidated Balance Sheets as of March 31, 1996 and 1995 and December 31, 1995
Consolidated Statements of Earnings and Retained Earnings for the Three Months
Ended March 31, 1996 and 1995
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1996
and 1995
Notes to Consolidated Financial Statements
2
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND 1995 AND DECEMBER 31, 1995
(UNAUDITED)
(In thousands)
MARCH 31, DEC. 31, MARCH 31,
1996 1995 1995
--------- -------- ---------
ASSETS:
- ------
Current Assets:
Cash and cash equivalents $ 2,587 $ 8,925 $ 13,248
Investments 283 285 290
Accounts Receivable:
Trade accounts 101,430 94,461 109,895
Other 13,573 13,215 18,959
Less allowance for doubtful accounts (5,995) (6,144) (5,388)
--------- --------- ---------
Accounts receivable, net 109,008 101,532 123,466
Inventories 102,169 91,636 103,129
Prepaid expenses and other current
assets 5,949 5,275 4,383
--------- --------- ---------
TOTAL CURRENT ASSETS 219,996 207,653 244,516
--------- --------- ---------
Property, plant and equipment, at cost:
Land, building and improvements 51,408 52,090 51,861
Manufacturing machinery and equipment 267,986 263,331 237,857
Furniture, fixtures and equipment 9,618 9,591 9,659
Construction in progress 23,929 22,476 18,269
--------- --------- ---------
352,941 347,488 317,646
Less accumulated depreciation and
amortization 154,275 148,874 129,591
--------- --------- ---------
Net property, plant and equipment 198,666 198,614 188,055
Goodwill, net of accumulated 14,100 14,486 15,040
amortization
Other assets 24,293 24,658 20,391
--------- --------- ---------
TOTAL ASSETS $ 457,055 $ 445,411 $ 468,002
========= ========= =========
See accompanying notes to consolidated financial statements.
3
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
MARCH 31, 1996 AND 1995 AND DECEMBER 31, 1995
(UNAUDITED)
(In thousands)
MARCH 31, DEC. 31, MARCH 31,
1996 1995 1995
--------- -------- ---------
LIABILITIES AND STOCKHOLDER'S EQUITY:
- -------------------------------------
Current Liabilities:
Short term borrowings $ 50,846 $ 47,945 $ 33,932
Accounts payable - trade 66,706 56,830 74,172
Accrued liabilities:
Employee compensation and benefits 19,421 18,238 21,316
Other accrued expenses 19,817 17,417 18,789
Current installments of long term
debt and obligations under capital
leases 11,406 10,665 14,295
Income taxes payable 1,572 1,610 1,512
Other current liabilities 11,777 8,753 9,533
-------- -------- --------
TOTAL CURRENT LIABILITIES 181,545 161,458 173,549
Long term debt, excluding current
installments 126,753 130,023 128,334
Obligations under capital leases,
excluding current installments 12,217 13,115 15,056
Deferred income taxes 3,763 3,872 4,188
Other 29,830 30,365 37,087
-------- -------- --------
TOTAL LIABILITIES 354,108 338,833 358,214
Minority interest 28,431 30,280 32,803
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 3,199,668
shares in 1996, 3,196,368
shares in Dec., 1995 and 3,165,057
shares in March, 1995. 800 799 791
-------- -------- --------
800 799 791
Additional paid-in capital 43,919 43,868 43,132
Retained earnings 26,301 26,742 26,624
-------- -------- --------
71,020 71,409 70,547
Cumulative foreign currency translation
adjustment 3,496 4,889 6,438
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY 74,516 76,298 76,985
-------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $457,055 $445,411 $468,002
======== ======== ========
See accompanying notes to consolidated financial statements.
4
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
(In thousands, except per share data)
1996 1995
---- ----
Sales $131,382 $144,460
Cost of sales 111,439 120,503
-------- --------
Gross profit 19,943 23,957
Selling, general and administrative
expenses 16,704 18,250
-------- --------
OPERATING INCOME 3,239 5,707
Other income (expense):
Interest expense, net (4,677) (4,272)
Foreign currency exchange gain (loss) 67 (316)
Other - net 14 (38)
-------- --------
NET OTHER EXPENSE (4,596) (4,626)
Income (loss) before provision for
income taxes
and minority interest (1,357) 1,081
Provision (recovery) for income taxes (137) 603
-------- --------
Income (loss) before minority interest (1,220) 478
Minority interest (779) 41
-------- --------
NET INCOME (LOSS) $ (441) $ 437
======== ========
NET EARNINGS (LOSS) PER COMMON SHARE $(0.13) $0.13
======== ========
See accompanying notes to consolidated financial statements.
5
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
(In thousands)
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (441) $ 437
Depreciation and amortization 8,434 8,577
Minority interest (779) 41
Other adjustments (2,977) (2,376)
-------- --------
NET CASH PROVIDED BY 4,237 6,679
OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (11,263) (9,518)
Other (675) (513)
-------- --------
NET CASH USED IN INVESTING (11,938) (10,031)
ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments of long term debt (2,961) (2,628)
Net proceeds from short term 4,422 9,572
borrowings
Other 52 263
-------- --------
NET CASH PROVIDED BY 1,513 7,207
FINANCING ACTIVITIES
Effect of exchange rate changes on cash (149) 617
-------- --------
Increase (decrease) in cash and cash
equivalents (6,337) 4,472
Cash and cash equivalents at beginning
of period 8,925 8,776
-------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 2,588 $ 13,248
======== ========
See accompanying notes to consolidated financial statements.
6
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(1) Accounting Policies and Other Matters
(a) Basis of Presentation
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is
suggested that these consolidated financial statements be read in
conjunction with the financial statements and notes thereto included
in the Company's 1995 Annual Report to Stockholders.
(b) Adjustments
The results for the interim period reported herein have not been
audited, however, in the opinion of management, all adjustments
necessary for a fair presentation of the interim period statements
have been made.
(c) Earnings Per Common 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 the first quarter of 1995 and 1994 were
3,288,437 and 3,410,079, respectively.
(2) Reclassifications
Certain 1995 balances have been reclassified to conform to the 1996
presentation.
(3) Acquisitions
During the first quarter of 1996, Ferembal increased its interest in
Obalex to 96% by purchasing approximately 10% of the equity of Obalex
from outside investors for $788,000 which approximated book value.
(4) Inventories
Inventories consist principally of packaging materials. The
components of inventory were as follows: (000's omitted)
March 31, March 31, December 31,
1996 1995 1995
--------- --------- ------------
(in thousands)
Finished goods $ 50,690 $ 50,162 $42,241
Work in process 11,743 12,014 7,795
Raw materials and supplies 41,761 44,745 43,625
-------- -------- -------
104,194 106,921 93,661
LIFO reserve (2,025) (3,792) (2,025)
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$102,169 $103,129 $91,636
======== ======== =======
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
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CONDITION AND RESULTS OF OPERATIONS
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Sales during the first quarter of 1996 decreased 9% to $131,382,000 as
compared to $144,460,000 in the first quarter of 1995. Decreased sales in
1996 reflected lower volumes primarily at Plastic Containers, Inc. (PCI) but
also at the Company's European packaging operations. Contributing to the
decrease were resin price reductions passed-through to customers
(approximately $5 million).
Gross profit decreased 17% in the first quarter of 1996, as compared to
the prior year period. Gross profit as a percentage of sales declined to
15.2% in the first quarter of 1996 as compared to 16.6% in the same period of
1995. The decline primarily reflects the lower volumes discussed above.
Selling, general and administrative expense was reduced to $16.7 million
in 1996 compared to $18.3 million in the first quarter of 1995; however, as a
percentage of sales such expense increased to 12.7% in 1996 as compared to
12.6% in 1995, because of the lower sales volume. As a result, operating
income amounted to $3,239,000 in the first quarter of 1996 as compared to
$5,707,000 in the first quarter of 1995. Operating profit as a percentage of
sales declined over the same periods to 2.5% from 4.0%.
Net interest expense increased to $4,677,000 in the first quarter of 1996
as compared to $4,272,000 in the same period of 1995. This increase resulted
primarily from higher debt levels in 1996 than 1995. Foreign exchange gains
amounteed to $67,000 in the first quarter of 1996, reflecting changes among
European currencies. Foreign exchange losses amounted to $316,000 in the
first quarter of 1995.
Recovery of income taxes amounted to $137,000 in the first quarter of
1996 and reflected a higher level of tax benefits for accounting purposes in
loss operations than tax expense in the Company's profitable operations.
Minority interest during each period reflects the interests of other
shareholders in some of the Company's subsidiaries.
Net loss in the first quarter of 1996 amounted to $441,000 ($.13 per
share). Net income in the first quarter of 1995 amounted to $437,000 ($.13
per share).
FINANCIAL CONDITION
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CAPITAL REQUIREMENTS
The Company acquired $11.3 million of capital assets during the first
quarter of 1996 consisting primarily of packaging equipment. These assets
were acquired for cash. Similar types of assets are expected to be acquired
for the remainder of 1996. Total capital spending in 1996 is expected to
amount to approximately $29 million.
8
The Company intends to actively pursue acquisition possibilities in 1996.
It is presently the Company's intention to finance any acquisitions by
leveraging the assets of the business to be acquired, with existing cash,
through bank borrowings or, possibly, through the issuance of stock.
LIQUIDITY
The Company's liquidity position declined during the first quarter of
1995. Working capital decreased to approximately $38 million, and the current
ratio amounted to 1.21 at March 31, 1996 compared to 1.29 at December 31,
1995.
During the first quarter of 1996, the Company's operating activities
generated $4.2 million of cash primarily as a result of depreciation charges.
The Company used $11.9 million in investing activities primarily for the
purchase of packaging equipment. The shortfall was covered by cash from
financing activities primarily short term borrowings of $4.4 million and by
cash on hand which was also used to repay long term debt.
At March 31, 1996, the Company had an available credit line under a
Revolving Credit Agreement of $1.9 million. In addition, the Company's
consolidated subsidiaries had available approximately $85 million in short
term credit lines and bank overdraft facilities at March 31, 1996. However,
the Company's ability to draw upon these lines for other than its
subsidiaries' needs is restricted.
The Company expects that cash from operations and its existing banking
facilities will be sufficient to meet its operating needs for the remainder of
1996.
9
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits Required
(11) Statement re computation of per share earnings
See Note 1(c) on Page 7
(27) Financial data schedule Page 11
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 have been filed since December 31, 1995.
SIGNATURE
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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.
CONTINENTAL CAN COMPANY, INC.
(REGISTRANT)
By: /s/ Abdo Yazgi
----------------
Principal Financial Officer
and on behalf of registrant
DATED: MAY 7, 1996
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