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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended December 31, 2000
Commission File Number 333-53276
U.S. Can Corporation
(Exact Name Of Registrant As Specified In Its Charter)
Delaware 06-1094196
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
700 East Butterfield Road, Suite 250, Lombard, Illinois 60148
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (630) 678-8000
Securities registered pursuant to Section 12(b) of the Act: None
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 (the"Exchange Act") during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. Yes |X| No |_|
As of February 28, 2001, 53,333,333 shares of Common Stock were outstanding.
TABLE OF CONTENTS
Page
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PART I
Item 1. Business.................................................................................... 3
Item 2. Properties.................................................................................. 7
Item 3. Legal Proceedings........................................................................... 8
Item 4. Submission of Matters to a Vote of Security Holder.......................................... 9
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.................................... 9
Item 6. Selected Financial Data..................................................................... 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................................................... 11
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.................................. 15
Item 8. Financial Statements and Supplementary Data................................................. 17
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.................................................................. 50
PART III
Item 10. Directors and Executive Officers of the Registrant.......................................... 50
Item 11. Executive Compensation...................................................................... 53
Item 12. Security Ownership of Certain Beneficial Owners and Management.............................. 60
Item 13. Certain Relationships and Related Transactions.............................................. 61
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................ 65
INCLUSION OF FORWARD-LOOKING INFORMATION
Certain statements in this report constitute "forward-looking statements" within the meaning of the federal
securities laws. Such statements involve known and unknown risks and uncertainties which may cause the Company's actual
results, performance or achievements to be materially different than any future results, performance or achievements
expressed or implied in this report. By way of example and not limitation and in no particular order, known risks and
uncertainties include our substantial debt and ability to generate positive cash flows; the timing and cost of plant
closures; the level of cost reduction achieved through restructuring; the success of new technology; the timing of, and
synergies achieved through, integration of acquisitions; changes in market conditions or product demand; loss of
important customers; changes in raw material costs; and currency fluctuations. In light of these and other risks and
uncertainties, the inclusion of a forward-looking statement in this report should not be regarded as a representation by
the Company that any future results, performance or achievements will be attained.
PART I
ITEM 1. BUSINESS
General
U.S. Can Corporation (a Delaware corporation), through its wholly owned subsidiary, United States Can
Company, is a leading manufacturer, by sales volume, of steel containers for personal care, household, automotive, paint,
industrial and specialty products in the United States and Europe. We also are a manufacturer of plastic containers in
the United States and food cans in Europe. We have long-standing relationships with many well-known consumer products and
paint manufacturers in the United States and Europe, including Gillette, Reckitt Benckiser and Sherwin Williams. We also
produce seasonal holiday tins sold by mass merchandisers. References in this report include U.S. Can Corporation (the
"Corporation" or "U.S. Can"), its wholly owned subsidiary, United States Can Company ("United States Can"), and U.S.
Can's subsidiaries (the "Subsidiaries").
We hold the number one market position in steel aerosol cans, based on sales volume, in the United States
and the number two market position in Europe. In addition, we hold the number two market position in paint cans in the
United States, by unit volume. We attribute our market leadership to our ability to consistently provide high-quality
products and service at competitive prices, while continually improving our product-related technologies. The references
in this Report to market positions or market share are based on information derived from annual reports, trade
publications and management estimates which the Company believes to be reliable. For financial information about business
segments and geographic areas, refer to Note (13) to the Consolidated Financial Statements.
The Recapitalization
On October 4, 2000, Pac Packaging Acquisition Corporation and U.S. Can Corporation merged in a
recapitalization transaction, with U.S. Can Corporation being the surviving corporation. As a result of the
recapitalization, U.S. Can Corporation, which was previously a publicly traded company, became a private company and its
common stock was delisted from the New York Stock Exchange. See further discussion on the recapitalization in
Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources
and Note (3) to the Consolidated Financial Statements.
Business Segments
We have four major business segments: Aerosol Products; International Operations; Paint, Plastic and General Line
Products; and Custom and Specialty Products.
Aerosol Products
As the largest producer of steel aerosol cans in the United States by sales volume, we have a leading
position in all of the major aerosol consumer product lines, including personal care, household, automotive and spray
paint cans. We offer a wide range of aerosol containers to meet our customer requirements including stylized necked-in
cans and barrier pack cans used for products that cannot be mixed with a propellant, such as shaving gel. Most of the
aerosol cans that we produce employ a lithography process that consists of printing our customers' designs and logos on
flat sheets of tinplate, prior to formation into cans.
Steel aerosol cans represent our largest segment, accounting for approximately 44.2%, 49.8% and 48.9% of
our total net sales in 2000, 1999 and 1998, respectively. In 2000, we manufactured over 50% of the steel aerosol cans
produced in the United States.
International Operations
We produce steel aerosol cans and steel food cans in Europe. We also supply steel aerosol cans to
customers in Latin America through Formametal S.A., our joint venture in Argentina. On December 30, 1999, we acquired
May Verpackungen GmbH & Co., KG ("May"), a German manufacturer of steel food packaging and aerosol cans. May also has
provided us with diversification across our product lines and customer base.
International Operations represents our second largest segment, accounting for approximately 29.6%, 17.7%
and 16.4% of our total net sales in 2000, 1999 and 1998, respectively. In 2000, we were the second largest producer of
steel aerosol cans in Europe and manufactured over 25% of the steel aerosol cans produced. May is a leading European food
can producer with more than 20% of the German food can market, by sales volume.
Paint, Plastic & General Line Products
Our primary paint, plastic and general line products include steel paint and coating containers, oblong
steel cans for products such as turpentine and charcoal lighter fluid, plastic pails and other containers for industrial
products, such as spackle and dry wall compounds, and consumer products, such as swimming pool chemicals and paint.
Management estimates that U.S. Can is second in market share in the United States, on a unit volume basis, in steel round
and general line containers. Among our largest customers for these products are Sherwin Williams and ICI Industries.
Paint, plastic and general line products accounted for approximately 19.8%, 22.9% and 23.5% of our total
net sales in 2000, 1999 and 1998, respectively.
Custom & Specialty Products
We also have a significant presence in the custom and specialty products market, offering a wide range of
decorative and specialty products. Our primary products include a wide array of functional and decorative containers and
tins, fitments and stampings, and collectible items, such as decorative metal signs and canister sets. These products are
generally custom designed and decorated and are typically produced in smaller quantities than our other products. Our
customers in this segment include Wyeth Nutritionals, Keebler Company and Liz Claiborne Cosmetics.
Custom and specialty products accounted for approximately 6.4%, 9.5% and 10.4% of our total net sales in
2000, 1999 and 1998, respectively.
Customers and Sales Force
As of December 31, 2000, in the United States, we had approximately 7,000 customers, with our largest
customer accounting for 7.6% of our total net sales in 2000. To the extent possible, we enter into one-year or multi-year
supply agreements with our major customers. Some of these agreements specify the number of containers a customer will
purchase (or the mechanism for determining this number), pricing, volume discounts (if any) and, in the case of many of
our domestic and some of our international multi-year supply agreements, a provision permitting us to pass through price
increases in specified raw material and other costs.
We market our products primarily through a sales force comprised of inside and outside sales
representatives dedicated to each segment. As of December 31, 2000, we had 87 sales representatives in the United States
and 39 sales representatives in Europe. Each sales representative is responsible for growing sales in a specific
geographic region and is compensated by a salary and a bonus based on sales volume targets.
Over the past several years, we have focused on providing value added services to our customers. Beginning
in 1999 and continuing through 2000, we established a new marketing organization, and are in the process of implementing
a strategic marketing plan. We have conducted customer interviews to determine our performance against customer service
expectations. A key element to our strategic marketing plan is changing the selling process from being product-driven to
being solution-driven with the ultimate objective of becoming an informed business partner with our customers rather than
merely a product supplier. A number of strategic supplier alliances have been formed to support customers with global
manufacturing needs such as Gillette and Reckitt Benckiser.
Raw Materials
Our principal raw materials are tin-plated steel, referred to as tin-plate, and coatings and inks used to
print our customers' designs and logos onto tin-plate. Tin-plate represents our largest raw material cost. Our domestic
operations purchase tin-plate principally from domestic steel manufacturers, with a smaller portion purchased from
foreign suppliers. Our European operations purchase tin-plate principally from European suppliers.
We believe that adequate quantities of tin-plate will continue to be available from steel manufacturers.
Our largest domestic steel suppliers are U.S. Steel, Weirton Steel and LTV, while Corus, Usinor and Aceralia supply the
largest volume in Europe. We have not historically entered into written supply contracts with steel makers and believe
that other container manufacturers follow the same practice.
Our domestic and European operations purchase approximately 500,000 tons of tin-plate annually. Tin-plate
prices have increased slightly over the last five years. Historically, we have been able to negotiate lower price
increases than those announced by our major suppliers.
While there is some long-term variability, tin-plate prices are fairly stable and price increases are
announced several months before implementation. This stability enhances our ability to communicate and negotiate required
selling price increases with our customers and minimizes fluctuations of our gross margins. Many of our domestic and some
of our international multi-year supply agreements with our customers permit us to pass through tin-plate price increases
and, in some cases, other raw material costs. However, we have not always been able to immediately offset increases in
tin-plate prices with price increases on our products.
Coatings and inks, which are used to coat tin-plate and print designs and logos, represent our second
largest raw material expense. We purchase coatings and inks from regional suppliers in the United States and Europe.
These products historically have been readily available, and we expect to be able to meet our needs for coatings and inks
in the foreseeable future.
Our plastic products are produced from two main types of resins, which are petroleum- or natural gas-based
products. High-density polyethylene resin is used to make pails, drums and agricultural products. We use 100%
post-industrial and post-consumer use, recycled polypropylene resin in the production of the Plastite(R)line of paint
cans. The price of resin fluctuates significantly, and we believe that it is standard industry practice, as well as a
provision of many of our customer contracts, to pass on increases and decreases in resin prices to our customers.
Seasonality
The Company's business as a whole has minor seasonal variations. Quarterly sales and earnings tend to be
slightly stronger starting in early spring (second quarter) through late summer (third quarter). Aerosol sales have minor
increases in the spring and summer related to increased sales of containers for household products and insect repellents.
Paint container sales tend to be stronger in spring and early summer due to the favorable weather conditions. Portions of
the Custom and Specialty products line tend to vary seasonally, because of holiday sales late in the year. May's food
can sales generally peak in the third and fourth quarters.
Labor
As of February 1, 2001, we employed approximately 2,700 salaried and hourly employees in the United
States. Of our total U.S. workforce, approximately 1,700 employees, or 63%, were members of various labor unions,
including the United Steelworkers of America, the International Association of Machinists and the Graphic Communications
International Union. Labor agreements covering 630 employees were successfully negotiated in 2000. As of February 1,
2001, our European subsidiaries employed approximately 1,400 people. In line with common European practices, all plants
are unionized.
We have followed a labor strategy designed to enhance our flexibility and productivity through
constructive relations with our employees and collective bargaining units. Our practice is to deal directly with local
labor unions on employment contract issues and other employee concerns. We believe that we and our employees have
benefited from this approach, and we intend to continue this practice in the future. This practice also has the effect of
staggering renewal negotiations with the various bargaining units. We believe that our relations with our employees and
their collective bargaining units are generally good.
Competition
Quality, service and price are the principal methods of competition in the rigid metal and plastic
container industry. To compete effectively, we must strategically locate supply facilities to reduce the added cost of
shipping cans long distances. In addition, competition in our industry limits our ability to raise prices for many of our
top products.
In the U.S. steel aerosol can market, we compete primarily with Crown Cork & Seal. Because steel aerosol
cans are pressurized and are used for personal care, household and other packaged products, they are more sensitive to
quality, can decoration and other consumer-oriented features than some of our other products.
Our European subsidiaries compete with Crown Cork & Seal, Impress Metal Packaging and a group of other
smaller regional producers. Crown Cork & Seal is larger and may have greater financial resources than we do.
In metal paint and general line products, we compete primarily with BWAY Corporation and one smaller,
regional manufacturer. Our plastic products line competes with many regional companies.
Our custom and specialty products compete with a large number of container manufacturers, but we do not
compete across the entire product spectrum with any single company. Competition is based principally on quality, service,
price, geographical proximity to customers and production capability, with varying degrees of intensity according to the
specific product category.
Our products also face competition from aluminum, glass and plastic containers.
Acquisitions
On December 30, 1999, the Company acquired all of the partnership interests of May Verpackungen GmbH &
Co., KG ("May"), a German limited liability company, in a transaction accounted for using the purchase method. May,
headquartered in Erftstadt, Germany, is a manufacturer of pet food and specialty food packaging, as well as aerosol cans.
Historically, the Company has not had a significant presence in the food can market.
On February 20, 2001, we acquired certain assets of Olive Can Company, a Custom and Specialty
manufacturer. The acquisition, which is not material to the Company's operations or financial position, will be
accounted for as a purchase.
The Company believes that strategic acquisition opportunities are important to its growth. The Company
will continue to evaluate and selectively pursue acquisitions which adhere to U.S. Can's stated strategy of seeking rigid
packaging companies that will complement and grow the Company's existing product base. If acquisitions are made, the
Company would expect to finance them through cash and debt financing as appropriate under the conditions in effect at the
time of the acquisition.
Refer to the caption "Acquisitions" in Management's Discussion and Analysis of Financial Condition and
Results of Operations and Note (5) to the Consolidated Financial Statements for further discussion of these matters.
ITEM 2. PROPERTIES
We have 16 plants located in the United States, many of which are strategically positioned near principal
customers and suppliers. Through our European subsidiaries, we also have production locations in the largest regional
markets in Europe, including Denmark, France, Germany, Italy, Spain and the United Kingdom. The following table sets
forth certain information with respect to our principal plants as of December 31, 2000.
Location Size (in sq. Status Segment
- -------- ------------- ------ -------
ft.)
----
United States
Elgin, IL................................ 481,346 Owned Aerosol
Tallapoosa, GA........................... 249,480 Owned Aerosol
Commerce, CA............................. 215,860 Leased Paint, Plastic and General Line
Burns Harbor, IN......................... 190,000 Leased Aerosol
Hubbard, OH.............................. 174,970 Owned Paint, Plastic and General Line
Elkridge, MD............................. 150,000 Leased Custom and Specialty
Baltimore, MD............................ 137,000 Owned Custom and Specialty
Horsham, PA.............................. 132,000 Owned Aerosol
Morrow, GA............................... 110,160 Leased Paint, Plastic and General Line
Weirton, WV.............................. 108,000 Leased Aerosol
Danville, IL............................. 100,000 Owned Aerosol
Newnan, GA............................... 95,000 Leased Paint, Plastic and General Line
Dallas, TX............................... 87,000 Owned Paint, Plastic and General Line
Baltimore, MD............................ 55,000 Leased Custom and Specialty
Alliance, OH............................. 52,000 Leased Paint, Plastic and General Line
New Castle, PA........................... 22,750 Owned Custom and Specialty
Europe
Erftstadt, Germany....................... 369,000 Leased International
Merthyr Tydfil, United Kingdom (2)....... 320,000 Leased International
Southall, United Kingdom................. 253,000 Owned International
Laon, France (1)......................... 220,000 Owned International
Reus, Spain.............................. 182,250 Owned International
Dageling, Germany........................ 172,224 Owned International
Itzehoe, Germany......................... 80,730 Owned International
Esbjerg, Denmark......................... 66,209 Owned International
Voghera, Italy........................... 45,200 Leased International
Schwedt, Germany......................... 35,500 Leased International
(1) Subject to a mortgage in favor of Societe Generale.
(2) The property at Merthyr Tydfil is subject to a 999-year lease with a pre-paid option to buy that becomes
exercisable in January 2007. Up to that time, the landowner may require us to purchase the property for a payment
of one Pound Sterling. Currently, the leasehold interest in, and personal property located at, Merthyr Tydfil is
subject to a pledge to secure amounts outstanding under a credit agreement with General Electric Capital
Corporation.
We believe our facilities are adequate for our present needs and that our properties are generally in good
condition, well-maintained and suitable for their intended use. We continuously evaluate the composition of our various
manufacturing facilities in light of current and expected market conditions and demand, and may further consolidate our
plant operations in the future.
ITEM 3. LEGAL PROCEEDINGS
Environmental Matters
Our operations are subject to environmental laws in the United States and abroad, including those
described below. Our capital and operating budgets include costs and expenses associated with complying with these laws,
including the acquisition, maintenance and repair of pollution control equipment, and routine measures to prevent,
contain and clean up spills of materials that occur in the ordinary course of our business. In addition, our production
facilities require environmental permits that are subject to revocation, modification and renewal. We believe that we are
in substantial compliance with environmental laws and our environmental permit requirements, and that the costs and
expenses associated with this compliance are not material to our business. However, additional operating costs and
capital expenditures could be incurred if, among other developments, additional or more stringent requirements relevant
to our operations are promulgated.
From time to time, contaminants from current or historical operations have been detected at some of our
present and former sites, principally in connection with the removal or closure of underground storage tanks. We are not
currently aware that any of our facility locations have material outstanding claims or obligations relating to
contamination issues.
We have been designated as a potentially responsible party at various superfund sites in the United
States, including a former site located in San Leandro, California. As a potentially responsible party, we are or may be
legally responsible, jointly and severally with other members of the potentially responsible party group, for the cost of
environmental remediation at these sites. Based on currently available data, we believe our contribution to these sites
was, in most cases, minimal.
Through corporate due diligence and the Company's compliance management system, we recently identified
potential noncompliance with the environmental laws at our New Castle, Pennsylvania facility related to the possible use
of a coating or coatings inconsistent with the conditions in the facility's Clean Air Act Title V permit. Upon
identification, the Company immediately began a full review of the plant's Title V and related records. On February 5,
2001, the Company also voluntarily self-reported the potential noncompliance to the Pennsylvania Department of
Environmental Protection (PDEP) and the Environmental Protection Agency (EPA) in accordance with PDEP's and EPA's
policies. Both PDEP and EPA have indicated that they will address the Company's self-disclosure through the annual
compliance certification process under the Title V program. Because the Company's review is in its initial phase, the
Company is unable, at this time, to determine the nature, extent and/or effect of any possible noncompliance.
Litigation
We are involved in litigation from time to time in the ordinary course of our business. In our opinion,
the litigation is not material to our financial condition or results of operations.
In May 1998, the National Labor Relations Board issued a decision ordering us to pay $1.5 million in back
pay, plus interest, for a violation of certain sections of the National Labor Relations Act. The violation was a result
of our closure of several facilities in 1991 and our failure to offer inter-plant job opportunities to 25 affected
employees. We have appealed this decision on the grounds, among others, that we are entitled to a credit against this
award for certain supplemental unemployment benefits and pension payments. We presented oral arguments in late
September 2000, and are awaiting the decision of the court. We believe this appeal will be successful.
On September 20, 2000, a class action lawsuit was filed against U.S. Can Corporation, Pac Packaging
Acquisition Corporation, the directors of U.S. Can Corporation prior to the recapitalization and Carl Ferenbach. The
complaint challenges the recapitalization and alleges inadequate disclosure with respect to U.S. Can Corporation's
filings with the Securities and Exchange Commission and violations of Delaware law. The complaint seeks to rescind the
recapitalization and requests that the defendants pay unspecified monetary damages, costs and attorney's fees. U.S. Can
has held discussions and based on those discussions believes it is likely that this matter will be settled, by requiring
us to pay $0.20 per share to the former stockholders of U.S. Can Corporation as of October 4, 2000, less a fee award to
the plaintiffs' counsel. The settlement agreement remains subject to final approval by the parties involved, the
preparation of definitive settlement documents, delivery of notice to the relevant U.S. Can Corporation stockholders and
approval by the Delaware Court of Chancery following a hearing. We cannot assure you that the settlement agreement will
be approved by the required parties.
For further discussion on legal and environmental matters refer to Note (10) to the Consolidated Financial
Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
U.S. Can has approximately 20 common stockholders. It has not paid, and has no present intention to pay,
cash dividends. As U.S. Can Corporation has no operations, its only source of cash for dividends or distributions is
United States Can Company. There are stringent limitations in the Senior Secured Credit Facility ("the Facility") on
United States Can's ability to fund or pay cash dividends to U.S. Can Corporation.
On October 4, 2000, U.S. Can Corporation sold (i) $106.7 million of preferred stock to Berkshire Partners,
its co-investors and certain other then existing stockholders and (ii) $53.3 million of common stock to Berkshire
Partners, its co-investors, several other then existing stockholders and management. No general form of advertising or
solicitation was used in connection with such sales and all the purchasers were accredited investors within the meaning
of Section 501(a) of Regulation D under the Securities Act of 1933, as amended (the "Securities Act"). Such sales were
exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof. No underwriters were
used, and no discounts or commissions were paid, in respect of such sales. See Item 13 - Certain Relationships and
Related Transactions - Stockholders' Agreement and - Preferred Stock.
On October 4, 2000, United States Can Company issued $175.0 million aggregate principal amount of its 12
3/8% senior subordinated notes due 2010 to a number of "qualified institutional investors" who purchased pursuant to Rule
144A under the Securities Act and to a number of non-U.S. persons pursuant to Regulation S under the Securities Act.
Salomon Smith Barney Inc. and Banc of America Securities LLC acted as initial purchasers in connection with the initial
resale of such securities and received gross commissions and discounts equal to $4.6 million.
The net proceeds from the sale of these securities were used to fund the payments required to effect the
recapitalization discussed above, to tender for all of our 10 1/8% Senior Subordinated Notes (including paying accrued
interest and the bond tender premium) and refinance a majority of our existing senior debt; and to pay related fees and
expenses. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."
ITEM 6. SELECTED FINANCIAL DATA
U.S. CAN CORPORATION AND SUBSIDIARIES
(000's omitted)
For the Year Ended December 31,
-------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Operating Data:
Net sales........................................ $ 809,497 $ 732,897 $ 730,951 $ 777,140 $ 678,359
Special charges (a).............................. 3,413 -- 35,869 62,980 --
Recapitalization charge (b)...................... 18,886 -- -- -- --
Operating income (loss).......................... 48,153 66,975 21,748 (8,093) 58,727
Income (loss) from continuing operations
before discontinued operations
and extraordinary item........................ 3,341 22,452 (7,525) (29,906) 16,555
Discontinued operations, net of income taxes ( a )
Net income (loss) from discontinued operations -- -- -- 1,078 446
Net loss on sale of business.................. -- -- (8,528) (3,204) --
Extraordinary item - loss from early
extinguishment of debt, net of income taxes (c) (14,863) (1,296) -- --
(5,250)
Net income (loss) before preferred stock dividends (11,522) 21,156 (16,053) (32,032) 11,751
Preferred stock dividend requirements (d)..... (2,601) -- -- -- --
Net income (loss) available for
common shareholders........................... $ (14,123) $ 21,156 $ (16,053) $ (32,032) $ 11,751
BALANCE SHEET DATA:
Total assets..................................... $ 637,864 $ 663,570 $ 555,571 $ 633,704 $ 643,616
Total working capital............................ 74,244 37,734 76,112 80,771 105,630
Total debt....................................... 495,045 359,317 316,673 376,141 375,810
Total redeemable preferred stock................. 109,268 -- -- -- --
Total stockholders' equity (e)................... (174,323) 68,556 50,177 62,313 96,785
(a) See Note 4 of the "Notes to Consolidated Financial Statements."
(b) See Note 3 of the "Notes to Consolidated Financial Statements."
(c) See Note 6 of the "Notes to Consolidated Financial Statements."
(d) See Note 12 of the "Notes to Consolidated Financial Statements."
(e) Negative stockholders' equity in 2000 was caused by the recapitalization. See Note 3 of the "Notes to
Consolidated Financial Statements."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion summarizes the significant factors affecting the consolidated operating results
and financial condition of the Company and subsidiaries for the three years ended December 31, 2000. This discussion
should be read in conjunction with the consolidated financial statements and notes to the consolidated financial
statements.
Year Ended December 31, 2000 Compared To Year Ended December 31, 1999
Consolidated net sales for the year ended December 31, 2000 were $809.5 million as compared to $732.9
million in 1999, an increase of 10.5%. The increase was principally due to the acquisition of May Verpackungen in
December 1999. Along business segment lines, Aerosol net sales in 2000 decreased to $357.7 million from $365.3 million in
1999, a 2.1% decline, due principally to decreased unit volume. International net sales increased to $239.6 million in
2000 from $129.6 million in 1999, an increase of $110.0 million or 84.9%, due to the May acquisition. Net sales for 2000
for May were $118.2 million. There was a $9.4 million negative impact in 2000 due to U.S. dollar translation on sales
made in foreign currencies. The Paint, Plastic and General Line segment had a 4.2% decrease in net sales, from $167.6
million in 1999 to $160.5 million in 2000. This decrease is due to the loss of a Plastite customer in 1999 coupled with
an overall decrease in product demand. In the Custom & Specialty segment, sales were down 25.9% from $69.8 million in
1999 to $51.7 million in 2000, primarily due to the sale of the Wheeling metal closure and Warren lithography businesses
(see Note (4) to the Consolidated Financial Statements). Excluding Wheeling and Warren, net sales were down 7.3% from
$52.1 million in 1999 to $48.3 million in 2000.
Consolidated cost of goods sold of $693.2 million for 2000 was up $62.8 million, a 10.0% increase from
1999. The principal reason for the increase was the May acquisition ($105.0 million in 2000) offset by the sale of the
Wheeling metal closure and the Warren lithography businesses ($11.4 million), $8.0 million negative impact in 2000 due to
U.S. dollar translation on sales made in foreign currencies, and decreased volume combined with operating efficiencies of
$22.8 million. Gross profit margin of 14.4% in 2000 increased 0.4% from 1999. Throughout the Company, there is a
continuing focus on cost savings and expense reduction opportunities.
Selling, general and administrative costs increased from $35.5 million to $45.9 million between 1999 and
2000. The increase is primarily due to the acquisition of May Verpackungen in December 1999 which accounted for $7.8
million of the increase. The remainder of the increase is due to higher marketing expenses being invested to improve
customer service. As a percent of sales, selling, general and administrative costs increased from 4.9% in 1999 to 5.7% in
2000.
On July 7, 2000, a reduction in force program was announced , under which 81 salaried and 39 hourly
positions have been eliminated. A one-time pre-tax charge of $3.4 million for severance and other termination related
costs was recorded in the third quarter of 2000. Annual savings of $5.0 million are expected to be realized from this
program. There also was an $18.9 million charge in the fourth quarter of 2000 related to the recapitalization. See Notes
(3) and (4) to the Consolidated Financial Statements for further discussion on the recapitalization and the special
charge, respectively.
Interest expense in 2000 increased 35.3%, or $10.6 million, versus 1999. Increased interest expense can be
attributed to borrowings made in connection to the May acquisition (which occurred on December 30, 1999) and with the
recapitalization transaction. See caption "Liquidity and Capital Resources" and Notes (3), (5) and (6) to the
Consolidated Financial Statements for further discussion on the recapitalization transaction, the May acquisition and the
Company's debt position.
In connection with the recapitalization, substantially all of the Company's 10 1/8% subordinated notes
were redeemed and an extraordinary charge for the redemption premium and the write-off of related deferred financing
costs of $14.9 million (net of related income taxes) was recorded. In addition, a payment in kind dividend of $2.6
million on the redeemable preferred stock issued in connection with the recapitalization was recorded in 2000. See Note
(12) to the Consolidated Financial Statements.
Year Ended December 31, 1999 Compared To Year Ended December 31, 1998
Consolidated net sales for the year ended December 31, 1999 were $732.9 million, an increase of 0.3%
versus $731.0 million in 1998. Along business segment lines, Aerosol net sales increased 2.1% from $357.8 million in 1998
to $365.3 million in 1999, primarily due to increased U.S. demand. International operations experienced an 8.1% increase
in net sales, from the $119.9 million reported in 1998 to $129.6 million in 1999. Increased efficiencies and production
at the Wales facility is the primary contributor to the growth internationally. Consistent with expectations, the Paint,
Plastic and General Line segment had a 2.3% decrease in net sales from $171.6 million in 1998 to $167.6 million in 1999,
due to reduced customer requirements during the year. In the Custom and Specialty segment, sales decreased 8.4% from
$76.2 million in 1998 to $69.8 million in 1999, due principally to significant liquidation of excess holiday products in
early 1998 and softer markets in 1999. Key management changes were made in mid-1999 to address Custom and Specialty sales
and operational issues.
Consolidated cost of goods sold of $630.4 million for 1999 decreased $8.5 million, an 1.3% decrease,
versus $638.9 million in 1998 due to consolidation of operations and an increased focus on cost saving opportunities.
Gross margin of 14.0% compares favorably to the 12.6% reported in 1998 due to benefits derived from restructuring
programs, productivity improvements as a result of line speed-ups and cost reduction programs instituted in the plants,
as well as the ramp-up of the Wales facility.
Selling, general and administrative costs increased 2.9% from $34.5 million to $35.5 million between 1998
and 1999. As a percent of sales, selling, general and administrative costs remained flat at 4.8%.
In the third quarter of 1998, a pre-tax special charge of $35.9 million was established. The provision was
for the closure of several facilities and write-downs of non-core businesses. Costs related to closing and realigning
selected lithography facilities servicing the core business was also included in the provision as part of our national
lithography strategy. The 1998 special charge included charges for non-cash items of $27.7 million.
Interest expense in 1999 was $29.9 million, a decrease of 14.4%, or $5.0 million, versus $34.9 million in
1998. Prior to the May acquisition in late December, long-term debt had been reduced by $48.0 million as excess cash was
used to redeem some of the 10 1/8% notes due 2006. Including the May acquisition, long-term debt increased 3.4% or
$10.6 million in 1999 as compared to 1998. In 1999, there were 10 months in which no borrowings were made under the credit
agreement.
In 1999, a $1.3 million extraordinary charge (net of related income taxes of $0.8 million) was recorded
for the early redemption premium on $27.7 million of the 10 1/8% notes and the write-off of related deferred financing
costs.
LIQUIDITY AND CAPITAL RESOURCES
During 2000, liquidity needs were met through internally generated cash flow, the sale of the Wheeling
metal closures and Warren lithography businesses, borrowings made under lines of credit and a sale/leaseback transaction
of certain manufacturing assets. Principal liquidity needs included working capital (primarily inventory and accrued
expenses), the recapitalization, debt and interest payments and capital expenditures. Cash flow provided by operations
was $28.7 million for the year ended December 31, 2000, compared to cash provided of $62.5 million for the year ended
December 31, 1999. The decrease was primarily due to the aforementioned working capital needs.
Net cash used in investing activities was $8.6 million in 2000, as compared to $91.5 million in 1999. Cash
was provided in 2000 by the sale of the Wheeling metal closure and Warren lithography businesses for $12.1 million, and
the sale/leaseback transaction of certain manufacturing assets. Cash used for investing activities for 1999 included
$63.8 million paid to acquire May. Total capital expenditures in 2000 were $24.5 million versus $31.0 million in 1999
(which included the installation of two new state-of-the-art lithography presses). Capital expenditures are expected to
be approximately $150.0 to $200.0 million during the five years commencing 2001, in roughly equal amounts of
$30.0 million to $40.0 million a year. They are expected to be funded from operations and borrowings under the revolving
credit facility. Capital investments have historically yielded reduced operating costs and improved profit margins, and
management believes that the strategic deployment of capital will enable overall profitability to improve by leveraging
the economies of scale inherent in the manufacturing of containers
Concurrent with the recapitalization, $175.0 million Senior Subordinated Notes ("the Notes") were issued
and the Senior Secured Credit Facility ("the Facility") was placed. The Notes will mature on October 4, 2010 and will
bear interest at a rate of 12 3/8% per annum until maturity. The Company will pay interest semiannually on April 1 and
October 1 of each year, beginning April 1, 2001. The Facility provides for two tranches of term loans in the aggregate
principal amount of $260.0 million. In addition, the Facility provides for a revolving credit facility that will provide
revolving loans in an aggregate amount up to $140.0 million. Upon closing of the recapitalization, the full amount
available under the term loan facilities was borrowed and approximately $20.5 million under the revolving credit
facility. The borrowings under the revolving credit facility are available to fund working capital requirements, capital
expenditures and other general corporate purposes. The tranche A term loan facility of $80.0 million matures in quarterly
installments from December 31, 2000 through October 4, 2006. The tranche B term loan facility of $180.0 million matures
in quarterly installments from December 31, 2000 through October 4, 2008. Principal repayments required under the term
loan facilities are $6.0 million in 2001increasing to $65 million in 2008. Additionally, the Facility requires a
prepayment in the event that excess cash flow (as defined) exists and following certain other events, including asset
sales and issuances of debt and equity. The Facility has a number of financial covenants and restrictive covenants. See
Note (6) to the Consolidated Financial Statements.
During the first quarter of 2001, we experienced a decline in order volumes consistent with the steel
aerosol can market generally. Management believes these lower volumes are mainly created by inventory reductions in the
consumer products market in both the U.S. and Europe. In addition, May Verpackungen experienced difficulties with a
major customer in the second half of 2000 resulting in reduced production for a portion of 2000. As a result, May was
required to re-qualify its production process with this customer before returning to prior production levels, which will
negatively impact the first half of 2001. Because we have a fixed cost base, our earnings levels and cash flow are
sensitive to unit volumes levels.
Under our senior secured credit facilities, there are several financial covenants tied to specific
earnings and debt levels, as well as interest and fixed charge coverage ratios. As a result of the volume shortfalls,
there is uncertainty as to whether we will be in compliance under our covenants at the end of the first quarter of 2001.
We are not required to report the results of our first quarter operations to the lenders until May 1, 2001, and we do not
expect to know our definitive results of operations for this period until April 26, 2001. In the event we are not in
compliance with our covenants, we expect to negotiate with the lenders and obtain a waiver. We cannot be assured,
however, that the lenders will agree to grant us a waiver. As of March 23, 2001 the total amount outstanding under our
senior credit facility was $306 million. A default under our credit facility which is not waived could allow the lenders
to accelerate the outstanding indebtedness. Accelerated indebtedness that is unpaid for a period of ten days would also
trigger a default of our $175,000,000 principal amount 12-3/8% Senior Subordinated Notes due 2010.
In addition, we issued $106.7 million in preferred stock and $53.3 million in common stock was issued
concurrent with the recapitalization. The preferred stock has a liquidation preference equal to the purchase price per
share, plus all accrued and unpaid dividends. The preferred stock ranks senior to all classes of U.S. Can Corporation
common stock and is not convertible into common stock. Dividends accrue on the preferred stock at an annual rate of 10%,
are cumulative from the date of issuance and compounded quarterly, on March 31, June 30, September 30 and December 31 of
each year and are payable in cash when and as declared by the Board of Directors, so long as sufficient cash is available
to make the dividend payment and has been obtained in a manner permitted under the terms of the new senior secured credit
facility and the indenture.
Funds generated from the recapitalization were used to retire all of the borrowings outstanding under the
Company's former credit agreement, to repay the principal, accrued interest and tender premium applicable to U.S. Can's
10 1/8% Notes due 2006, to pay fees and expenses associated with the transaction and to make payments to U.S. Can's
existing stockholders and optionholders as previously described.
The following table sets forth the sources and uses of funds in connection with the recapitalization as of
October 4, 2000:
Amount
(Dollars in Millions)
---------------------
Sources of Funds:
New Senior Secured Credit Facility:
Revolving Credit Facility.................................. $20.5
Term Loans................................................. 260.0
12 3/8% Senior Subordinated Notes due October 1, 2010......... 175.0
Preferred Stock............................................... 106.7
Common Stock.................................................. 53.3
-------------
Total Sources.................................................... $615.5
Uses of Funds:
Purchase Capital Stock........................................ $277.5
Refinance Existing Debt....................................... 309.0
Payment of Fees and Expenses (a).............................. 29.0
-------------
Total Uses....................................................... $615.5
(a) We paid $4.6 million in additional expenses related to the recapitalization after October 4, 2000.
See Note (3) to the Consolidated Financial Statements for further discussion on the recapitalization transaction.
Primary sources of liquidity are cash flow from operations and borrowings under the new revolving credit
facility. Management expects that ongoing requirements for debt service, working capital and capital expenditures will be
funded from these sources. Based upon the current level of operations and anticipated growth, cash generated from
operations together with amounts available under the revolving credit facility are expected to be adequate to meet
anticipated debt service requirements, capital expenditures and working capital needs for the next several years. Future
operating performance and the ability to service or refinance the notes, to service, extend or refinance the senior
secured credit facility and to redeem or refinance our preferred stock will be subject to future economic conditions and
to financial, business and other factors, many of which are beyond management's control.
INFLATION
Tin-plated steel represents the primary component of the Company's raw materials requirement.
Historically, the Company has not always been able to immediately offset increases in tinplate prices with price
increases on the Company's products. However, in most years, a combination of factors has permitted the Company to
maintain its profitability notwithstanding these conditions. The Company's capital spending programs and manufacturing
process upgrades have increased operating efficiencies and thereby mitigated the impact of inflation on the Company's
cost structure.
ACQUISITIONS
The Company believes that strategic acquisition opportunities are important to its growth. In
December 1999, U.S. Can acquired all of the partnership interests of May for an aggregate amount of $64.6 million. The
acquisition was financed using borrowings made by U.S. Can under the Credit Agreement. On February 20, 2001, certain
assets of Olive Can Company, a Custom and Specialty manufacturer were acquired.
The Company will continue to evaluate and selectively pursue acquisitions which adhere to U.S. Can's
stated strategy of seeking rigid packaging companies that will complement and grow the Company's existing product base
and create value for shareholders. If acquisitions are made, the Company would expect to finance them through cash and
debt financing as appropriate under the conditions in effect at the time of the acquisition.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities", which establishes new
accounting and reporting standards for derivative instruments. In June 1999, the FASB issued SFAS No. 137, "Accounting
for Certain Derivatives and Certain Hedging Activities - A Deferral of the Effective Date of FASB Statement No. 133", and
in June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities
- - An Amendment of FASB Statement No. 133."
These rules require that all derivative instruments be reported in the consolidated financial statements
at fair value. Changes in the fair value of derivatives are to be recorded each period as a component of earnings or
other comprehensive income, depending on whether the derivative is designated and is effective as part of a hedged
transaction, and on the type of hedge transaction. Gains or losses on derivative instruments reported in other
comprehensive income must be reclassified as earnings in the period in which earnings are affected by the underlying
hedged item, and the ineffective portion of all hedges must be recognized in earnings in the current portion. These new
standards may result in additional volatility in reported earnings, other comprehensive income and accumulated other
comprehensive income. These rules become effective for us on January 1, 2001. We will record the effect of the
transition to these new accounting requirements in the first quarter of 2001. The effect of this change will decrease
stockholders' equity (other comprehensive loss) by approximately $2.5 million.
The Emerging Issues Task Force released Issue No. 00-10 (EITF 00-10), "Accounting for Shipping and
Handling Revenues and Costs" in July of 2000. EITF 00-10 requires that amounts billed, if any, for shipping and handling
be included in revenue and costs incurred for shipping and handling are required to be recorded in cost of goods sold.
The impact of implementing EITF 00-10 was to increase each of net sales and cost of goods sold by approximately $22.9
million, $18.8 million and $20.7 million in 2000, 1999 and 1998 respectively. There was no net impact on results of
operations nor financial position caused by the implementation of EITF 00-10.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Foreign Currency and Interest Rate Risk
Foreign Currency Risk
The Company has engaged in transactions that carry some degree of foreign currency risk. As such, a series
of forward hedge contracts have been entered into to mitigate the foreign currency risks associated with the financing of
one production facility in the United Kingdom as follows:
2001 2002 2003 2004 2005 Thereafter
-------------------------------------------------------------------------------------
Forward Exchange Contracts (in millions)
(Receive $US / Pay GBP)
Contract amount ................ $3.00 $2.90 $2.80 $15.60 - -
Average Contractual
Exchange Rate .................. 1.54 1.52 1.50 1.49 - -
................Foreign exchange risk is also borne because much of the financing is currently obtained in United States
dollars, but a portion of the Company's revenues and expenses occur in the various currencies of our foreign
subsidiaries' operations. The new revolving credit facility allows certain foreign subsidiaries to borrow up to
$75 million in British Pounds Sterling, German Deutsche Marks and Euros. The Company has not made borrowings in any of
these currencies.
Interest Rate Risk
................Interest rate risk exposure is primarily the result of floating rate borrowings. A portion of the interest
rate risks have been hedged by entering into a swap and collar agreements. Since the counterparties to the agreements are
also lenders under the senior secured credit facility, obligations under these agreements are subject to the security
interest under the terms of the senior secured credit facility. See "Other Indebtedness."
................The table below provides information about the Company's derivative financial instruments and other
financial instruments that are sensitive to changes in interest rates, including interest rate swaps and debt
obligations. For debt obligations, the table presents principal cash flows and related weighted average interest rates
by expected maturity dates. For interest rate swaps and collars, the table presents notional amounts and weighted
average interest rates by expected (contractual) maturity dates. Notional amounts are used to calculate the contractual
payments to be exchanged under the contract.
2001 2002 2003 2004 2005 Thereafter
--------------------------------------------------------------------------------------
Debt Obligations (in millions)
- ----------------
Fixed rate..................... $6.0 $7.0 $19.2 $0.7 $0.5 $176.7
Average interest rate.......... 6.93% 6.99% 8.39% 6.33% 6.13% 12.34%
Variable rate.................. $9.7 $9.0 $10.0 $14.0 $21.0 $221.3
Average interest rate.......... 10.04% 11.78% 11.78% 11.77% 11.76% 11.8%
Interest Rate Swaps
- -------------------
Variable to Fixed.............. $83.3 $83.3 $83.3 $ -- $ -- $ --
Pay / receive rate............. 6.625% 6.625% 6.625% -- -- --
Interest Rate Collars
- ---------------------
Contract Amount................ $41.7 $41.7 $41.7 -- -- --
Cap Rate....................... 7.25% 7.25% 7.25% -- -- --
Floor Rate..................... 6.10% 6.10% 6.10% -- -- --
The Company does not utilize derivative financial instruments for trading or other speculative purposes.
Based upon borrowing rates currently available to the Company for borrowings with similar terms and
maturities, the fair value of the Company's total debt was approximately $495.3 million as of December 31, 2000. No
quoted market value is available (except on the 12 3/8% Senior Subordinated Notes). These amounts, because they do not
include certain costs such as prepayment penalties, do not represent the amount the Company would have to pay to
reacquire and retire all of its outstanding debt in a current transaction.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
----
Report of Independent Public Accountants................................................................... 18
Consolidated Statements of Operations for the Years Ended December 31, 2000, 1999 and 1998................. 19
Consolidated Balance Sheets as of December 31, 2000 and 1999............................................... 20
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2000, 1999 and 1998....... 21
Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1999................. 23
Notes to Consolidated Financial Statements................................................................. 24
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO U.S. CAN CORPORATION:
We have audited the accompanying consolidated balance sheets of U.S. CAN CORPORATION (a Delaware corporation) AND
SUBSIDIARIES as of December 31, 2000 and 1999, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December 31, 2000. These financial statements
are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 financial statements referred to above present fairly, in all material respects, the consolidated
financial position of U.S. Can Corporation and Subsidiaries as of December 31, 2000 and 1999, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 6, 2001
U.S. CAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(000's omitted)
For the Year Ended
-------------------------------------------------------
December 31, December 31, December 31,
2000 1999 1998
----------------- ----------------- -----------------
Net Sales................................................. $809,497 $732,897 $730,951
Cost of Sales............................................. 693,158 630,411 638,861
----------------- ----------------- -----------------
Gross income......................................... 116,339 102,486 92,090
Selling, General and Administrative Expenses.............. 45,887 35,511 34,473
Special Charges........................................... 3,413 - 35,869
Recapitalization Charges.................................. 18,886 - -
----------------- ----------------- -----------------
Operating income..................................... 48,153 66,975 21,748
Interest Expense.......................................... 40,468 29,901 34,935
----------------- ----------------- -----------------
Income (loss) before income taxes.................... 7,685 37,074 (13,187)
Provision (benefit) for income taxes...................... 4,344 14,622 (5,662)
----------------- ----------------- -----------------
Income (loss) from operations before discontinued 3,341 22,452 (7,525)
operations and extraordinary item..................
Net loss on sale of discontinued businesses, net of
income taxes............................................ - - (8,528)
Extraordinary Item, net of income taxes
Net loss from early extinguishment of debt................ (14,863) (1,296) -
----------------- ----------------- -----------------
Net Income (Loss) Before Preferred Stock Dividends........ (11,522) 21,156 (16,053)
Preferred Stock Dividend Requirement...................... (2,601) - -
----------------- ----------------- -----------------
Net Income (Loss) Available for Common Stockholders....... $(14,123) $21,156 $(16,053)
================= ================= =================
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
U.S. CAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(000's omitted, except per share data)
December 31, December 31,
ASSETS 2000 1999
--------------------- ---------------------
CURRENT ASSETS:
Cash and cash equivalents............................................ $10,784 $15,697
Accounts receivables, net of allowances.............................. 90,763 91,864
Inventories, net..................................................... 113,902 115,979
Deferred income taxes................................................ 12,538 16,114
Other current assets................................................. 23,300 19,677
--------------------- ---------------------
Total current assets............................................ 251,287 259,331
PROPERTY, PLANT AND EQUIPMENT, less accumulated
depreciation and amortization........................................... 272,220 332,504
GOODWILL, less amortization............................................... 70,712 50,478
OTHER NON-CURRENT ASSETS.................................................. 43,645 21,257
--------------------- ---------------------
Total assets.................................................... $637,864 $663,570
===================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt and capital lease obligations... $14,671 $38,824
Accounts payable..................................................... 102,274 104,189
Accrued expenses..................................................... 46,479 50,711
Restructuring reserves............................................... 11,915 25,016
Income taxes payable................................................. 1,704 2,857
--------------------- ---------------------
Total current liabilities....................................... 177,043 221,597
LONG TERM DEBT............................................................ 480,374 320,493
DEFERRED INCOME TAXES PAYABLE............................................. 3,083 10,670
OTHER LONG-TERM LIABILITIES............................................... 42,419 42,254
--------------------- ---------------------
Total liabilities............................................... 702,919 595,014
PREFERRED STOCK........................................................... 109,268 -
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value........................................ 533 135
Additional Paid -in-capital.......................................... 52,800 112,840
Unearned restricted stock............................................ - (629)
Treasury common stock at cost........................................ - (1,380)
Currency translation adjustment...................................... (19,674) (7,771)
Accumulated deficit.................................................. (207,982) (34,639)
--------------------- ---------------------
Total stockholders' equity...................................... (174,323) 68,556
--------------------- ---------------------
Total liabilities and stockholders' equity................. $637,864 $663,570
===================== =====================
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
U.S. CAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(000's omitted)
Accumulated Other
Comprehensive Loss
--------------------------
Common Paid-in-CapitUnearned Treasury Cumulative Minimum Accumulated Comprehensive
Pension
Restricted Common Translation Liability
Stock Stock Stock Adjustment Adjustment Deficit Income (Loss)
------------------------------------------------------------------------------------------------------
BALANCE AT $ 131 $108,003 $ (2,558) $ (714) $ (2,193) $ (614) $(39,742)
DECEMBER 31, 1997.......
Net loss................... - - - - - - (16,053) $ (16,053)
Issuance of stock under
employee benefit plans.. - - - 716 - - - -
Purchase of treasury stock. - - - (1,730) - - - -
Exercise of stock options.. 2 1,656 - - - - - -
Issuance of restricted stock - 180 (180) - - - - -
Amortization of unearned
restricted stock......... - - 1,909 - - - - -
Equity adjustment to
reflect
minimum pension liability - - - - - 614 - 614
Cumulative translation
adjustment.............. - - - - 750 - - 750
----------------
Comprehensive loss......... $ (14,689)
--------------------------------------------------------------------------------------================
BALANCE AT 133 109,839 (829) (1,728) (1,443) - (55,795)
DECEMBER 31, 1998.......
Net income................. - - - - - - 21,156 $ 21,156
Issuance of stock under
employee benefit plans.. - - - 850 - - - -
Purchase of treasury stock. - - - (502) - - - -
Exercise of stock options.. 2 2,818 - - - - - -
Issuance of restricted stock - 183 (183) - - - - -
Amortization of unearned
restricted stock........ - - 383 - - - - -
Cumulative translation
adjustment.............. - - - - (6,328) - - (6,328)
----------------
Comprehensive income....... $ 14,828
================
--------------------------------------------------------------------------------------
BALANCE AT $ 135 $112,840 $ (629) $(1,380) $ (7,771) $ - $(34,639)
DECEMBER 31, 1999.......
======================================================================================
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements
U.S. CAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY-- (Continued)
(000's omitted)
Accumulated Other
Comprehensive Loss
--------------------------
Common Paid-in-CapitUnearned Treasury Cumulative Minimum Accumulated Comprehensive
Pension
Restricted Common Translation Liability
Stock Stock Stock Adjustment Adjustment Deficit Income (Loss)
------------------------------------------------------------------------------------------------------
BALANCE AT $ 135 $112,840 $ (629) $(1,380) $ (7,771) $ - $(34,639)
DECEMBER 31, 1999.......
Net loss before preferred
stock dividends......... - - - - - - (11,522) $ (11,522)
Redemption of common stock
and exercise of stock
options in connection
with
the recpaitalization.... (134) (110,973) 305 - - - (159,220) -
Purchase of treasury stock. - - - (488) - - - -
Retirement of treasury stock (1) (1,867) - 1,868 - - - -
Issuance of common stock in
recapitalized company... 533 52,800 - - - - - -
Preferred stock dividends.. - - - - - - (2,601) -
Amortization of unearned
restricted stock........ - - 324 - - - - -
Cumulative translation
adjustment.............. - - - - (11,903) - - (11,903)
----------------
Comprehensive loss......... $ (23,425)
------------- ================
--------------------------------------------------------------------------------------
BALANCE AT $ 533 $ 52,800 $ - $ - $ (19,674) $ - $(207,982)
DECEMBER 31, 2000.......
======================================================================================
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements
U.S. CAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's omitted)
For the Year Ended December 31,
------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 2000 1999 1998
--------------- --------------- ---------------
Net income (loss) before preferred stock dividends requirements....... $(11,522) $21,156 $(16,053)
Adjustments to reconcile net income to net cash provided by...........
operating activities -
Depreciation and amortization...................................... 33,670 31,863 35,439
Special Charge..................................................... 3,413 - 35,869
Recapitalization Charge............................................ 18,886 - -
Loss on Sale of Business........................................... - - 8,528
Extraordinary loss on extinguishment of debt....................... 14,863 1,296 -
Deferred income taxes.............................................. (4,344) 11,124 (6,916)
Change in operating assets and liabilities, net of effect of
acquired and disposed of businesses:
Accounts receivable................................................ (11,869) (14,464) 10,275
Inventories........................................................ (3,587) 4,211 15,324
Accounts payable................................................... 10,733 14,805 (667)
Accrued expenses................................................... (7,363) (8,563) (8,228)
Other, net......................................................... (14,148) 1,024 (8,608)
---------------
--------------- --------------- ---------------
Net cash provided by operating activities....................... 28,732 62,452 64,963
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................................. (24,504) (30,982) (22,828)
Acquisition of businesses, net of cash acquired....................... - (63,847) -
Proceeds from sale of business........................................ 12,088 4,500 28,296
Proceeds from sale of property........................................ 8,755 448 6,601
Investment in Formametal S.A.......................................... (4,914) (1,600) (3,000)
--------------- --------------- ---------------
Net cash provided by (used in) investing activities............ (8,575) (91,481) 9,069
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock ............................................. 53,333 - -
Issuance of preferred stock .......................................... 106,667 - -
Retirement of common stock and exercise of stock options.............. (270,022) 2,820 1,658
Purchase of treasury stock............................................ (488) (502) (1,730)
Issuance of 12 3/8% notes............................................. 175,000 - -
Repurchase of 10 1/8% notes........................................... (254,658) (27,696) (10,675)
Net borrowings (payments) under the old revolving line of credit and
changes
in cash overdrafts................................................. (56,100) 23,553 (36,770)
Borrowing of Tranche A loan........................................... 80,000 - -
Borrowing of Tranche B loan........................................... 180,000 - -
Borrowing of other long-term debt, including capital lease obligations 19,286 38,598 -
Payments of long-term debt, including capital lease obligations....... (22,528) (9,449) (15,618)
Payment of debt financing costs....................................... (16,137) - -
Payment of recapitalization costs..................................... (18,886) - -
--------------- --------------- ---------------
--------------- --------------- ---------------
Net cash provided by (used in) financing activities............ (24,533) 27,324 (63,135)
--------------- --------------- ---------------
--------------- --------------- ---------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH................................. (537) (670) 402
--------------- --------------- ---------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........................ (4,913) (2,375) 11,299
CASH AND CASH EQUIVALENTS, beginning of year............................ 15,697 18,072 6,773
---------------
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS, end of year.................................. $10,784 $15,697 $18,072
=============== =============== ===============
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000, 1999 AND 1998
(1) Basis of Presentation and Operations
The consolidated financial statements include the accounts of U.S. Can Corporation (the "Corporation" or
"U.S. Can"), its wholly owned subsidiary, United States Can Company ("United States Can"), and U.S. Can's subsidiaries
(the "Subsidiaries"). All significant intercompany balances and transactions have been eliminated. The consolidated group
is referred to herein as the Company. Certain prior year amounts have been reclassified to conform with the 2000
presentation.
The Company is a supplier of steel and plastic containers for personal care, household, food, automotive,
paint and industrial supplies, and other specialty products. The Company owns or leases 16 plants in the United States
and 10 plants located in Europe.
(2) Summary of Significant Accounting Policies
(a) Cash and Cash Equivalents - The Company considers all liquid interest-bearing instruments purchased
with an original maturity of three months or less to be cash equivalents.
(b) Accounts Receivable Allowances - Activity in the accounts receivable allowances accounts was as
follows (000's omitted):
2000 1999 1998
---- ---- ----
Balance at beginning of year........................................... $ 13,367 $ 17,063 $ 15,134
Provision for doubtful accounts..................................... 516 997 881
Change in discounts, allowances and rebates,
net of recoveries................................................ (2,449) (3,914) 2,525
Net write-offs of doubtful accounts................................. (463) (779) (1,477)
------------- ----------- -----------
Balance at end of year................................................. $ 10,971 $ 13,367 $ 17,063
============= =========== ===========
(c) Inventories--Inventories are stated at the lower of cost or market and include material, labor and
factory overhead. Costs for United States inventory have been determined using the last-in, first-out ("LIFO") method.
Had the inventories been valued using the first-in, first-out ("FIFO") method, the amount would not have differed
materially from the amounts as determined using the LIFO method. Costs for Subsidiaries' inventory of approximately $44.2
million at December 31, 2000 and $49.6 million as of December 31, 1999 have been determined by the FIFO method.
Inventories reported in the accompanying balance sheets were classified as follows (000's omitted):
2000 1999
---- ----
Raw materials....................................................................... $ 28,540 $ 30,821
Work in progress.................................................................... 49,728 49,884
Finished goods...................................................................... 35,634 35,274
Total Inventory..................................................................... $ 113,902 $ 115,979
============== ===========
(d) Property, Plant and Equipment--Property, plant and equipment is recorded at cost. Major renewals and
betterments which extend the useful life of an asset are capitalized; routine maintenance and repairs are expensed as
incurred. Maintenance and repairs charged against earnings were approximately $27.5 million, $29.4 million and
$29.9 million in 2000, 1999 and 1998, respectively. Upon sale or retirement of these assets, the asset cost and related
accumulated depreciation are removed from the accounts and any related gain or loss is reflected in income.
Depreciation for financial reporting purposes is principally provided using the straight-line method over
the estimated useful lives of the assets, as follows: buildings-25 to 40 years; machinery and equipment--5 to 20 years.
Equipment under capital leases are amortized over the life of the lease. Depreciation expense was $28.7 million, $28.8
million and $30.5 million for 2000, 1999 and 1998, respectively.
Property reported in the accompanying balance sheets were classified as follows (000's omitted):
2000 1999
---- ----
Land ............................................................................... $ 6,543 $ 14,541
Buildings........................................................................... 65,158 83,106
Machinery and equipment............................................................. 402,822 407,043
Capital leases...................................................................... 13,137 23,484
Construction in process............................................................. 22,266 32,873
509,926 561,047
Accumulated depreciation and amortization........................................... (237,706) (228,543)
Total Property...................................................................... $ 272,220 $ 332,504
============== ============
The Company acquired May Verpackungen on December 30, 1999 (see Note (5)). During 2000, the Company
finalized the amounts assigned to the net assets acquired. The final amount assigned to property, plant and equipment
was approximately $28.0 million less than the amount reflected in the December 31, 1999 balance sheet, and goodwill was
increased accordingly.
(e) Goodwill - The excess purchase price over the fair value of the net assets of businesses acquired
("goodwill"), is amortized on a straight-line basis over the periods of expected benefit, ranging from 20 to 40 years.
The related amortization expense was $2.9 million, $1.7 million and $1.8 million for the years ended December 31, 2000,
1999 and 1998, respectively. The Company continually reviews whether subsequent events and circumstances have occurred
that indicate the remaining estimated useful life of goodwill may warrant revision or its recoverable value requires
adjustment. In assessing and measuring recoverability, the Company uses projections to determine whether future operating
income (net of tax) exceeds the goodwill amortization. In addition to the amount discussed in (d) Property, Plant and
Equipment, there were further goodwill adjustments of $3.9 million relating to finalization of the fair value of the
assets acquired in the May acquisition.
(f) Deferred Financing Costs - Costs related to the issuance of new debt are included in other
non-current assets and are deferred and amortized over the terms of the related debt agreements. Financing costs
expensed in 2000, 1999, and 1998 were $1.7 million, $1.2 million and $1.8 million, respectively and are included in
interest expense.
(g) Revenue - Revenue is recognized when goods are shipped to the customer. Estimated sales returns and
allowances are recognized as an offset against revenue in the period in which the related revenue is recognized.
(h) Foreign Currency Translation - The functional currency for substantially all the Company's
Subsidiaries is the applicable local currency. The translation from the applicable foreign currencies to U.S. dollars is
performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and
expense accounts using an average exchange rate prevailing during the period. The gains or losses resulting from such
translation are included in stockholders' equity. Gains or losses resulting from foreign currency transactions are
included in operating income and were not material in 2000, 1999 or 1998.
(i) New Accounting Pronouncements - In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities", which establishes new accounting and reporting standards for derivative instruments. In June 1999, the FASB
issued SFAS No. 137, "Accounting for Certain Derivatives and Certain Hedging Activities - A Deferral of the Effective
Date of FASB Statement No. 133", and in June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities - An Amendment of FASB Statement No. 133."
These rules require that all derivative instruments be reported in the consolidated financial statements
at fair value. Changes in the fair value of derivatives are to be recorded each period as a component of earnings or
other comprehensive income, depending on whether the derivative is designated and is effective as part of a hedged
transaction, and on the type of hedge transaction. Gains or losses on derivative instruments reported in other
comprehensive income must be reclassified as earnings in the period in which earnings are affected by the underlying
hedged item, and the ineffective portion of all hedges must be recognized in earnings in the current portion. These new
standards may result in additional volatility in reported earnings, other comprehensive income and accumulated other
comprehensive income. These rules become effective for us on January 1, 2001. We will record the effect of the
transition to these new accounting requirements in the first quarter of 2001. The effect of this change will decrease
stockholders' equity (other comprehensive loss) by approximately $2.5 million.
The Emerging Issues Task Force released Issue No. 00-10 (EITF 00-10), "Accounting for Shipping and
Handling Revenues and Costs" in July of 2000. EITF 00-10 requires that amounts billed, if any, for shipping and handling
be included in revenue and costs incurred for shipping and handling are required to be recorded in cost of goods sold.
The impact of implementing EITF 00-10 was to increase each of net sales and cost of goods sold by approximately $22.9
million, $18.8 million and $20.7 million in 2000, 1999 and 1998 respectively. There was no net impact on results of
operations nor financial position caused by the implementation of EITF 00-10.
(j) Use of estimates - The preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(3) Recapitalization
On October 4, 2000, U.S. Can Corporation and Berkshire Partners LLC completed a recapitalization of the
Company through a merger. As a result of the recapitalization, all of U.S. Can's common stock, other than certain shares
held by designated continuing shareholders (the rollover shareholders), was converted into the right to receive $20.00 in
cash per share and options to purchase approximately 1.6 million shares of U.S. Can's common stock were retired in
exchange for a cash payment of $20.00 per underlying share, less the applicable option price. Certain shares held by the
rollover shareholders were converted into the right to receive $20.00 in cash per share and certain shares held by the
rollover shareholders were converted into the right to receive shares of capital stock of the surviving corporation in
the merger.
The recapitalization was financed by:
- a $106.7 million preferred stock investment by Berkshire Partners, its co-investors and certain of the
rollover stockholders;
- a $53.3 million common stock investment by Berkshire Partners, its co-investors, certain of the rollover
stockholders and management;
- $260.0 million in term loans under a new senior bank credit facility;
- $20.5 million in borrowings under a new revolving credit facility; and
- $175.0 million from the sale of 12 3/8% Senior Subordinated Notes due 2010.
Funds generated from the recapitalization were used to retire all of the borrowings outstanding under the
Company's former credit agreement, to repay the majority of the principal, accrued interest and tender premium applicable
to U.S. Can's 10 1/8% Notes due 2006, to pay fees and expenses associated with the transaction and to make payments to
U.S. Can's existing stockholders and optionholders as previously described. The Company recorded a charge of $18.9
million related to the recapitalization in the fourth quarter of 2000. In addition, see Note (6) regarding the
extraordinary charge relating to the early redemption of the Company's 10 1/8% Notes due in 2006.
(4) Special Charges and Discontinued Operations
2000
On July 7, 2000, the Company announced a reduction in force program, under which 81 salaried and 39 hourly
positions have been eliminated. A one-time pre-tax charge of $3.4 million for severance and other termination related
costs was recorded in the third quarter of 2000. The Company expects to realize annual savings of $5.0 million from this
program.
1998
In the third quarter of 1998, the Company established a pre-tax special charge of $35.9 million. The
provision was for the closure of several facilities and write-downs of non-core businesses. Costs related to closing and
realigning selected lithography facilities servicing our core business were also included in the provision as part of our
national lithography strategy. The 1998 special charge included charges for non-cash items of $27.7 million.
On November 9, 1998, the Company sold its commercial metal services business ("Metal Services") for net
cash proceeds of approximately $28 million. Metal Services included one plant in each of Chicago, Illinois; Trenton, New
Jersey; and Brookfield, Ohio, and the closed Midwest Litho plant in Alsip, Illinois. Based on the proceeds received, the
Company recorded an incremental $8.5 million after-tax charge for the loss on the sale of Metal Services in 1998.
Revenues to third parties from these operations were $94.3 million in the period ended November 8, 1998
(excluding intra-company sales continued by the buyer and ongoing third-party sales from the closed Midwest Litho
facility, which were transferred to other Metal Services facilities).
As of December 31, 2000, the remaining balances in the 2000 and 1998 restructuring reserves include $7.3
million for severance and related termination benefits paid over a period of time for approximately 22 salaried and 133
hourly employees; $4.4 million for non-cash write-off of assets related to facilities being closed or consolidated; and
$3.7 million for other costs associated with the restructuring actions (primarily on-going carrying costs for facilities
already closed).
Cash expended for restructuring activities in 2000 was $5.1 million and the Company anticipates spending
another $11.0 million of such costs in 2001 and beyond. The remainder of the restructuring reserves primarily consists of
non-cash items associated with the write-off of assets. The details of the changes in accrued restructuring reserves are
as follows (000's omitted):
2000 1999
---- ----
Balance at beginning of the year............................................... $ 28,514 $ 43,387
Special charge.............................................................. 3,413 --
Payments against reserve.................................................... (5,142) (6,856)
Non-cash charges against reserve............................................ (11,394) (8,017)
----------- ------------
Balance at end of the year..................................................... $ 15,391(a) $ 28,514(a)
========== ============
(a) Includes $3.5 million and $3.5 million classified as other long-term liabilities as of December 31, 2000 and
1999, respectively.
(5) Acquisitions
On December 30, 1999, the Company acquired all of the partnership interests of May Verpackungen GmbH &
Co., KG ("May"), a German limited liability company. The acquisition was accounted for as a purchase for financial
reporting purposes; therefore 1999 results do not include operations related to the acquired business. The acquisition
was financed using the borrowings made by U.S. Can under the former credit agreement for an aggregate amount of $64.6
million. During 2000, the Company finalized its allocation of the purchase price to the net assets acquired.
The following is a summary of the final allocation of the aggregate purchase price for May (000's omitted):
Current Assets........................................................................... $ 50,685
Property, Plant and Equipment............................................................ 46,604
Goodwill................................................................................. 32,206
Other Assets............................................................................. 5,896
Current Portion of Long Term Debt........................................................ (16,118)
Current Liabilities...................................................................... (35,405)
Long-Term Debt........................................................................... (6,552)
Other Liabilities........................................................................ (12,728)
--------------
Total Purchase Price..................................................................... $ 64,588
==============
The following represents the Company's unaudited pro forma results of operations for 1999 as if the May
acquisition had occurred on January 1, 1999 (000's omitted):
1999
----
Net Sales........................................................................................... $ 860,837
Income Before Discontinued Operations and Extraordinary Item........................................ 23,337
Net Income.......................................................................................... 22,041
May's pre-acquisition results have been adjusted to reflect amortization of goodwill, the depreciation
expense impact of the increased fair market value of property, plant and equipment, interest expense on acquisition
borrowings, changes in contractual agreements and the effect of income taxes on the pro forma adjustments. The pro forma
information given above does not purport to be indicative of the results that would have been obtained if the operations
were combined during the periods presented and is not intended to be a projection of future results or trends.
On February 20, 2001, certain assets were acquired of Olive Can Company, a Custom and Specialty
manufacturer. The acquisition, which is not material to the Company's operations, will be accounted for as a purchase.
In March 1998, a European Subsidiary acquired a 36.5% equity interest in Formametal S.A. ("Formametal"),
an aerosol can manufacturer located in Argentina, for $4.6 million. In connection with this investment, the Company has
provided a guaranty in an amount not to exceed $5.8 million, to secure the repayments of certain indebtedness of
Formametal. In 1999, the Company loaned Formametal $1.0 million for capital expenditures with all principal and interest
payable in January 2004. In addition, the Company received a three-year option to convert this loan into additional
shares of Formametal, which, if exercised, would take the Company's interest in Formametal up to 39.8%. This investment
has been accounted for using the equity method.
(6) Debt Obligations
Long-term debt obligations of the Company at December 31, 2000 and 1999 consisted of the following (000's
omitted):
2000 1999
---- ----
Senior debt -
New revolving line of credit at adjustable interest rate, based on market rates,
due October 4, 2006............................................................ $ 18,500 $ --
Revolving credit facility at adjustable interest rate, based on market rates,
(repaid in connection with the recapitalization)............................... -- 56,100
Tranche A term loan at adjustable interest rate, based on market rates,
due October 4, 2006............................................................ 80,000 --
Tranche B term loan at adjustable interest rate, based on market rates,
due October 4, 2008............................................................ 180,000 --
Secured term loan at 8.5% interest rate, due serially to October 2003............ 19,911 21,156
Industrial revenue bonds at adjustable interest rate, based on market rates,
due February 1, 2015........................................................... 4,000 7,500
Capital lease obligations........................................................ 6,609 10,869
Other............................................................................ 10,171 27,063
Senior Subordinated Series B Notes at 12 3/8% interest rate, due October 1, 2010....... 175,000 --
Senior Subordinated Series B Notes at 10 1/8% interest rate, due October 15, 2006...... 854 236,629
------------- -------------
Total Debt 495,045 359,317
Less--Current maturities......................................................... (14,671) (38,824)
-------------- -------------
Total long-term debt.......................................................... $ 480,374 $ 320,493
============= =============
In connection with the recapitalization, United States Can Company, as Borrower, entered into a Credit
Agreement among United States Can, U.S. Can Corporation and Domestic Subsidiaries of U.S. Can Corporation as Domestic
Guarantors, and certain lenders including Bank of America, N.A., Citicorp North America, Inc., and Bank One NA as of
October 4, 2000 (the "Senior Secured Credit Facility"). The Senior Secured Credit Facility provides for aggregate
borrowings of $400.0 million consisting of: (i) $80.0 million tranche A loan; (ii) $180.0 million tranche B loan; and
(iii) $140.0 million under a revolving credit facility. All of the term debt and approximately $20.5 million under the
revolving credit facility were used to finance the recapitalization.
Amounts outstanding under the Senior Secured Credit Facility bear interest at a rate per annum equal to
either: (1) the base rate (as defined in the Senior Secured Credit Facility) or (2) the LIBOR rate (as defined in the
Senior Secured Credit Facility), in each case, plus an applicable margin. The applicable margins are subject to future
reductions based on the achievement of certain leverage ratio targets and on the credit rating of the Senior Secured
Credit Facility. The applicable margins are not subject to reduction until after March 2001.
Borrowings under the tranche A term loan are due and payable in quarterly installments, which are
initially $1.0 million and increase over time to $8.0 million, until the final balance is due on October 4, 2006.
Borrowings under the tranche B term loan are due and payable in quarterly installments (the quarterly payments due before
December 31, 2006 being in nominal amounts), with the final balance due on October 4, 2008. The revolving credit facility
is available until October 4, 2006. In addition, the Company is required to prepay a portion of the facilities under the
Senior Secured Credit Facility upon the occurrence of certain specified events.
The Senior Secured Credit Facility is secured by a first priority security interest in all existing and
after-acquired assets of the Company and its direct and indirect domestic subsidiaries' existing and after-acquired
assets, including, without limitation, real property and all of the capital stock owned of our direct and indirect
domestic subsidiaries (including certain capital stock of their direct foreign subsidiaries only to the extent permitted
by applicable law). In addition, if loans are made to foreign subsidiaries, they will be secured by the existing and
after-acquired assets of certain of our foreign subsidiaries.
United States Can also issued $175.0 million aggregate principal amount of 12 3/8% Senior Subordinated
Notes due October 1, 2010 (" Notes"). The Notes are unsecured obligations of United States Can and are subordinated in
right of payment to all of United States Can's senior indebtedness. The Notes are guaranteed by U.S. Can and all of
United States Can's domestic restricted subsidiaries.
Both the Senior Secured Credit Facility and the Notes contain a number of financial and restrictive
covenants. Under our senior secured credit facility, the Company is required to meet certain financial tests, including
achievement of a minimum EBITDA level, a minimum interest coverage ratio, a minimum fixed charge coverage ratio and a
maximum leverage ratio. The restrictive covenants limit the Company's ability to incur debt, pay dividends or make
distributions, sell assets or consolidate or merge with other companies. The Company was in compliance with all of the
required financial ratios and other covenants at December 31, 2000.
During the first quarter of 2001, the Company experienced a decline in order volumes generally consistent
with the steel aerosol can market. In addition, May Verpackungen experienced difficulties with a major customer in the
second half of 2000 resulting in (i) reduced production for a portion of 2000, and (ii) requiring May Verpackungen to
re-qualify its production process with the customer before returning to prior production levels. This will negatively
impact May Verpackungen's first half 2001 revenues. As the Company has a significant fixed cost base, earnings levels
and cash flow are sensitive to unit volumes. As a result of the volume shortfalls, there is uncertainty as to whether
the Company will be in compliance with the covenants at the end of the first quarter 2001. In the event of noncompliance
with our covenants, the lenders would have the ability to terminate their commitments to advance us additional funds and
to accelerate any outstanding indebtedness. If the lenders accelerate the outstanding indebtedness and the Company
remains in default under the senior secured credit facility for a period of ten days, then the Company would also be in
default under the indenture governing the Notes. In the event the Company is not in compliance with the covenants, the
Company expects to negotiate with the lenders to obtain a waiver. The Company cannot be assured, however, that the
lenders will agree to grant the Company a waiver.
In connection with the recapitalization, the Corporation completed a tender offer and consent solicitation
for all of its outstanding 10 1/8% notes due 2006, plus accrued interest and a bond tender premium. $235.7 million of the
$236.6 million principal amount of bonds outstanding were purchased by the Corporation in the tender offer. An
extraordinary charge of $14.9 million ($24.2 million pre-tax) was taken in the fourth quarter of 2000, related to the
tender premium and the write-off of related deferred financing charges.
Under existing agreements, contractual maturities of long-term debt as of December 31, 2000 (including
capital lease obligations), are as follows (000's omitted):
2001............................................................................................ $ 14,671
2002............................................................................................ 15,988
2003............................................................................................ 29,416
2004............................................................................................ 14,999
2005............................................................................................ 21,503
Thereafter...................................................................................... 398,468
-------------
$ 495,045
=============
See Note (10) for further information on obligations under capital leases. Other debt, consisting of
various governmental loans, real estate mortgages and secured equipment notes bearing interest at rates between 4.2% and
8.5%, matures at various times through 2015, and was used to finance the expansion of several manufacturing facilities.
In an effort to limit foreign exchange risks, the Company has entered into several forward hedge
contracts. The Merthyr Tydfil facility was financed by a series of British Pound/Dollar forward hedge contracts, which
will not exceed $24.4 million in notional amount or a term of not more than five years.
Based upon borrowing rates currently available to the Company for borrowings with similar terms and
maturities, the fair value of the Company's total debt was approximately $495.3 million and $366 million as of
December 31, 2000 and 1999, respectively. No quoted market value is available (except on the 12 3/8% and the 10 1/8%
Notes). These amounts, because they do not include certain costs such as prepayment penalties, do not represent the
amount the Company would have to pay to reacquire and retire all of its outstanding debt in a current transaction.
The Company paid interest on borrowings of $27.5 million, $26.5 million and $ 33.2 million in 2000, 1999
and 1998, respectively. Accrued interest payable of $13.4 million and $5.1 million as of December 31, 2000 and 1999
respectively, is included in accrued expenses on the consolidated balance sheet.
(7) Income Taxes
The provision (benefit) for income taxes before discontinued operations and extraordinary item consisted
of the following (000's omitted):
2000 1999 1998
---- ---- ----
Current......................................................... $ -- $ 1,304 $ --
Deferred........................................................ 2,301 11,124 (6,916)
Foreign......................................................... 2,043 2,194 1,254
------------ ----------- -------------
Total....................................................... $ 4,344 $ 14,622 $ (5,662)
============ =========== ==============
The Company received a refund of $2.2 million and paid $1.1 million for income taxes (net of refunds) in
2000 and 1999, respectively. No income taxes were paid in 1998.
A reconciliation of the difference between taxes on pre-tax income from continuing operations before
discontinued operations and extraordinary item computed at the Federal statutory rate and the actual provision
(benefit) for such income taxes for the years presented were as follows (000's omitted):
2000 1999 1998
---- ---- ----
Tax provision (benefit) computed at the statutory rates............ $ 2,613 $ 12,605 $ (4,483)
Nondeductible recapitalization costs and amortization of
intangible assets............................................... 1,658 253 238
State taxes, net of Federal tax effect............................. 113 1,483 (659)
Other, net......................................................... (40) 281 (758)
------------- ----------- -------------
Provision (benefit) for income taxes............................ $ 4,344 $ 14,622 $ (5,662)
============ =========== =============
Deferred income taxes are determined based on the estimated future tax effects of differences between the
financial statement and tax bases of assets and liabilities given the provisions of the enacted tax laws. Significant
temporary differences representing deferred income tax benefits and obligations consisted of the following (000's
omitted):
December 31, 2000 December 31, 1999
----------------- -----------------
Benefits Obligations Benefits Obligations
-------- ----------- -------- -----------
Restructuring reserves.................................. $ 9,943 -- $ 13,527 --
Retirement and postemployment benefits.................. 13,877 -- 13,916 --
Accrued liabilities..................................... 7,355 -- 6,143 --
Tax credit carry-forwards............................... 6,899 -- 5,891 --
Capitalized leases...................................... 374 -- 1,904 --
Property and equipment.................................. -- (33,516) 2,316 (32,545)
Inventory valuation reserves............................ -- (5,900) -- (6,246)
Net operating losses.................................... 11,840 -- 949 --
Other................................................... 6,514 (4,414) 4,572 (4,983)
------------- ------------- ----------- --------------
Total deferred income tax benefits
(obligations)................................ $ 56,802 $ (43,830) $ 49,218 $ (43,774)
============= ============= =========== ==============
The substantial majority of the net operating losses expire in 2020.
The Company does not provide for U. S. income taxes which would be payable if undistributed earnings of
the European Subsidiaries were remitted to the U.S. because the Company either considers these earnings to be invested
for an indefinite period or anticipates that if such earnings were distributed, the U.S. income taxes payable would be
substantially offset by foreign tax credits. Such unremitted earnings were $11.8 million and $8.3 million as of
December 31, 2000 and 1999, respectively.
(8) Employee Benefit Plans
The Company maintains separate noncontributory defined benefit and defined contribution pension plans
covering most domestic hourly employees and all domestic salaried personnel, respectively. It is the Company's policy to
fund accrued pension and defined contribution plan costs in compliance with ERISA requirements.
The following presents the changes in the projected benefit obligations for the plan years ended
December 31, 2000 and 1999 (000's omitted):
2000 1999
---- ----
Projected benefit obligation at the beginning of the year............................ $ 28,682 $ 31,129
Net increase (decrease) during the year attributed to:
Service cost...................................................................... 782 854
Interest cost..................................................................... 2,296 2,185
Actuarial gains................................................................... 2,909 (3,449)
Benefits paid..................................................................... (2,020) (2,037)
Plan amendments................................................................... 861 --
------------- -------------
Net increase (decrease) during the year.............................................. 4,828 (2,447)
------------- -------------
Projected benefit obligation at the end of the year.................................. $ 33,510 $ 28,682
============= =============
The following table presents the changes in the fair value of net assets available for plan benefits for
the plan years ended December 31, 2000 and 1999 (000's omitted):
2000 1999
---- ----
Fair value of plan assets at the beginning of the year.................................. $ 35,274 $ 30,448
Increase (decrease) during the year:
Return on plan assets................................................................ 1,942 5,367
Sponsor contributions................................................................ 2,103 1,496
Benefits paid........................................................................ (2,020) (2,037)
------------- ------------
Net increase during the year............................................................ 2,025 4,826
------------ -----------
Fair value of plan assets at the end of the year........................................ $ 37,299 $ 35,274
============ ===========
The following table sets forth the funded status of the Company's domestic defined benefit pension plans,
at December 31, 2000 and 1999 (000's omitted):
2000 1999
---- ----
Actuarial present value of benefit obligation --
Vested benefits................................................................... $ (31,424) $ (26,680)
Nonvested benefits................................................................ (2,086) ( 2,002)
------------- -----------
Accumulated benefit obligation....................................................... (33,510) (28,682)
Fair value of plan assets............................................................ 37,299 35,274
------------ -----------
Fair value of plan assets in excess of accumulated benefit obligation................ 3,789 6,593
Unrecognized transition obligation................................................... 2 3
Unrecognized net loss................................................................ (4,280) (8,538)
Unrecognized prior-service costs..................................................... 2,203 1,588
------------ -----------
Net amount recognized................................................................ $ 1,714 $ (354)
============ ===========
Amounts recognized in the consolidated balance sheet consist of:
Prepaid pension costs................................................................ $ 1,714 $ --
Accrued benefit liability............................................................ -- (354)
------------ -----------
Net amount recognized................................................................ $ 1,714 $ (354)
============ ===========
The projected benefit obligation as of December 31, 2000, 1999 and 1998 was determined using an assumed
discount rate of 7.5%, 7.8% and 7.0%, respectively. The expected long-term rate of return on plan assets used in
determining net periodic pension cost was 8.5% in 2000, 1999, and 1998. The plan has a non-pay related dollar multiplier
benefit formula; accordingly, the effect of projected future compensation levels is zero. The plan's assets consist
primarily of shares of equity and bond funds, corporate bonds and investment contracts with insurance companies.
The United States net periodic pension cost was as follows (000's omitted):
2000 1999 1998
---- ---- ----
Service costs...................................................... $ 782 $ 854 $ 912
Interest costs..................................................... 2,296 2,185 2,028
Return on assets................................................... (2,454) (3,215) (2,501)
Amortization of unrecognized transition obligation................. 1 2 2
Recognized (gains) / loss.......................................... (318) -- --
Prior service cost recognized...................................... 246 977 666
------------- -------------- -----------
Net periodic pension cost.......................................... $ 553 $ 803 $ 1,107
============= ============== ===========
In addition, hourly employees at eight plants are covered by union-sponsored collectively bargained,
multi-employer pension plans. The Company contributed to these plans and charged to expense approximately $1.2 million,
$1.4 million and $1.3 million in 2000, 1999 and 1998, respectively. The contributions are generally determined in
accordance with the provisions of the negotiated labor contracts and are generally based on a per employee, per week
amount.
The Company provides a 401(k) defined contribution plan to eligible employees. Company matching contributions for
employees and related administration costs associated with the plan were $2.3 million, $3.5 million and $3.0 million for
2000, 1999 and 1998, respectively.
In March 1999 and 1998, the Corporation contributed shares of Common Stock, valued at $0.9 million and
$0.7 million, respectively, to U.S. Can's Salaried Employees Savings and Retirement Accumulation Plan. In 2000, the
Company changed the contribution elements of the plan and no longer contributes shares of Common Stock.
The Company maintains defined benefit plans for certain of its employees in the United Kingdom, Germany
and France. The plan benefits are based primarily on years of service, employee compensation or a combination thereof. As
of December 31, 2000, 1999 and 1998, the preliminary actuarially-determined accumulated benefit obligations were
$50.9 million, $35.3 million and $30.8 million, respectively, of which $53.7 million was funded. The aggregate net pension
expense in 2000 for these plans was approximately $1.1 million.
(9) Postretirement Benefit Plans
The Company provides health and life insurance benefits for certain domestic retired employees in
connection with certain collective bargaining agreements.
The following presents the changes in the accumulated postretirement benefit obligations for the plan
years ended December 31, 2000 and 1999 (000's omitted):
2000 1999
---- ----
Accumulated postretirement benefit obligations at the beginning
of the year............................................................................ $ 26,808 $ 29,128
Net decrease during the year attributable to:
Service cost........................................................................... 243 373
Interest cost.......................................................................... 1,764 1,929
Actuarial gains........................................................................ (2,036) (3,306)
Benefits paid.......................................................................... (1,428) (1,316)
------------- -----------
Net decrease for the year.................................................................. (1,457) (2,320)
------------- ------------
Accumulated postretirement benefit obligations at the end of the year...................... $ 25,351 $ 26,808
============ ===========
The Company's postretirement benefit plans are not funded. The status of the plans at December 31, 2000
and 1999, is as follows (000's omitted):
2000 1999
---- ----
Accumulated postretirement benefit obligations:
Active employees....................................................................... $ 6,505 $ 7,586
Retirees............................................................................... 18,846 19,222
------------ -----------
Total accumulated postretirement benefit obligations....................................... 25,351 26,808
Unrecognized net gain...................................................................... 2,604 721
------------ -----------
Net liability recognized................................................................... $ 27,955 $ 27,529
============ ===========
Net periodic postretirement benefit costs for the Company's domestic postretirement benefit plans for the
years ended December 31, 2000, 1999 and 1998, included the following components (000's omitted):
2000 1999 1998
---- ---- ----
Service cost........................................................... $ 243 $ 373 $ 424
Interest cost.......................................................... 1,764 1,929 1,907
Recognized gain........................................................ (152) -- --
------------ ---------- ----------
Net periodic postretirement benefit cost............................... $ 1,855 $ 2,302 $ 2,331
============ ========== ==========
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit
obligation was 7% in 2000 and 1999 and 8% in 1998. A one percentage point increase in the assumed health care cost trend
rate for each year would increase the accumulated postretirement benefit obligation as of December 31, 2000 and 1999, by
approximately $2.9 million and $2.8 million, respectively, and the total of the service and interest cost components of
net postretirement benefit cost for each year then ended by approximately $0.2 million in 2000 and $0.3 million in both
1999 and 1998. A one percentage point decrease in the assumed health care cost trend rate for each year would decrease
the accumulated postretirement benefit obligation as of December 31, 2000 and 1999, by approximately $2.6 million in both
years, and the total of the service and interest cost components of net postretirement benefit cost for each year then
ended by approximately $0.2 million in 2000 and $0.3 million in both 1999 and 1998. The assumed discount rate used in
determining the accumulated postretirement benefit obligation was 7.5%, 7.8% and 7.0%, in 2000, 1999 and 1998,
respectively.
As of December 31, 2000, 1999 and 1998, the Company had recorded a liability of $3.2 million, $3.3 million
and $3.4 million, respectively, for benefit obligations for which a former executive was fully eligible to receive on a
periodic payment basis beginning August 1, 1998. The principal source of funding for this obligation is an insurance
policy on the executive's life.
(10) Commitments and Contingencies
Environmental
United States Can has been named as a potentially responsible party for costs incurred in the clean-up of
a groundwater plume partially extending underneath a former site of one of the Company's can assembly plants. We are a
party to an indemnity agreement related to this matter with the owner of the property. Extensive soil and groundwater
investigative work has been performed at this site in a coordinated sampling event in 1999. The results of the sampling
were inconclusive as to the source of the contamination. While the State of California has not yet commented on the
sampling results, we believe that the source of contamination is unrelated to our past operations.
The Company recently identified through corporate due diligence and the Company's compliance management
system potential noncompliance with the environmental laws at its New Castle, Pennsylvania facility arising from the
possible use of a coating or coatings that was inconsistent with the conditions for use that are contained in the
facility's Clean Air Act Title V permit. The Company also identified possible incorrect reporting of emission estimates
to state and federal agencies in connection with the potential noncompliant use of coatings. Upon identification, the
Company immediately began a full review of the plant's Title V and related records. On February 5, 2001, the Company
also voluntarily self-reported the potential noncompliance to the Pennsylvania Department of Environmental Protection
(PDEP) and the Environmental Protection Agency (EPA) in accordance with PDEP's and EPA's policies. Both PDEP and EPA have
indicated that they will address the Company's self-disclosure through the annual compliance certification process under
the Title V program. Because the Company's review is in its initial phase, the Company is unable, at this time, to
determine the nature, extent and/or effect of any possible noncompliance.
Legal
The National Labor Relations Board ("NLRB") issued a decision ordering the Company to pay $1.5 million in
back pay, plus interest, for a violation of certain sections of the National Labor Relations Act as a result of the
Company's closure of certain facilities in 1991 and the failure to offer inter-plant job opportunities to 25 affected
employees. The decision of the NLRB is on appeal to the Court of Appeals for the Seventh Circuit. The Company argued
that the Company is entitled to a credit against this award for certain supplemental unemployment benefits and pension
payments it paid to the affected employees. On September 20, 2000, the Court heard the arguments of the parties and will
issue a written ruling in the future.
In September, 2000, a purported class action lawsuit challenging U.S. Can Corporation's recapitalization
was filed in the Delaware Court of Chancery by a stockholder against U.S. Can, Pac Packaging Acquisition Corporation, all
of the directors of U.S. Can, and a principal in Berkshire Partners LLC who formerly served as a director of U.S. Can.
The complaint challenges the recapitalization and alleges breach of fiduciary duty and failure to disclose claims. The
complaint seeks unspecified monetary damages, costs and attorney's fees and rescission of the recapitalization. U.S.
Can's shareholders approved the recapitalization on September 29, 2000 and the Company closed the recapitalization
transaction on October 4, 2000. The Company has held discussions and based on those discussions believes it is likely
that this matter will be settled as to a class including shareholders of record from September 6, 2000 thru October 4,
2000 who exchanged their shares pursuant to the recapitalization for a settlement amount of $0.20/share or in the
aggregate approximately $2.0 million. The company will record the $2.0 million charge to retained earnings in 2001 if the
settlement is accepted. If settlement for the class described above is not concluded, the Company will contest this
matter vigorously.
Leases
The Company has entered into agreements to lease certain property under terms which qualify as capital
leases. Capital leases consist primarily of data processing equipment and various production machinery and equipment.
Most capital leases contain renewal options and some contain purchase options. As of December 31, 2000 and 1999, capital
lease assets were $4.0 million and $6.9 million, net of accumulated amortization of $9.1 million and $16.6 million,
respectively.
The Company also maintains operating leases on various plant and office facilities, vehicles and office
equipment. Rent expense under operating leases for the years ended December 31, 2000, 1999 and 1998, was $7.2 million,
$7.1 million and $6.8 million, respectively.
At December 31, 2000, minimum payments due under these leases were as follows (000's omitted):
Capital Operating
Leases Leases
------ ------
2001 .............................................................................. $ 2,713 $ 7,461
2002 .............................................................................. 3,985 6,531
2003 .............................................................................. 250 5,061
2004 .............................................................................. 243 3,953
2005 .............................................................................. 20 3,682
Thereafter.......................................................................... -- 10,537
------------- ------------
Total minimum lease payments.................................................. 7,211 $ 37,225
============
Amount representing interest........................................................ (602)
-------------
Present value of net minimum capital lease payments................................. $ 6,609
=============
(11) Equity Incentive Plans
In connection with the recapitalization, the Board of Directors and stockholders of U.S. Can Corporation
approved the U.S. Can 2000 Equity Incentive Plan. The Board of Directors administers the plan and may, from time to time,
grant option awards to directors of U.S. Can Corporation, including directors who are not employees of U.S. Can
Corporation, all executive officers of U.S. Can Corporation and its subsidiaries, and other employees, consultants, and
advisers who, in the opinion of the Board, are in a position to make a significant contribution to the success of U.S.
Can and its subsidiaries. The Board of Directors may grant options that are time-vested and options that vest based on
the attainment of performance goals specified by the Board of Directors. All previous plans were terminated in
connection with the recapitalization.
In prior years, the Company made grants of restricted shares which were charged to stockholders' equity at
their fair value and amortized as expense on a straight-line basis over the period earned. Shares awarded were 10,582
shares or $0.2 million in 1999 and 17,140 shares or $0.3 million in 1998. Amortization charges were $0.2 million and
$1.7 million during 1999 and 1998, respectively. In 2000, all unvested outstanding restricted stock was accelerated and
issued in connection with the recapitalization.
A summary of the status of the Company's stock option plans at December 31, 2000, 1999 and 1998, and
changes during the years then ended, are presented in the tables below:
Options Outstanding Exercisable Options
------------------- -------------------
Wtd. Avg. Wtd. Avg.
Exercise Exercise
Shares Price Shares Price
------ ----- ------ -----
December 31, 1997.............................. 876,500 $ 14.63 867,250 $ 14.59
Granted..................................... 916,750 16.91
Exercised................................... (112,222) 12.01
Canceled.................................... (79,726) 17.38
-------------- ----------
December 31, 1998.............................. 1,601,302 $ 15.93 820,280 $ 15.03
Granted..................................... 154,300 21.95
Exercised................................... (225,280) 13.41
Canceled.................................... (92,172) 16.88
-------------- ----------
December 31, 1999.............................. 1,438,150 $ 16.82 801,212 $ 15.90
Granted..................................... 433,500 14.19
Exercised................................... (1,855,859) 16.29
Canceled.................................... (15,791) 6.20
--------------- ----------
October 4, 2000................................
Granted..................................... 2,476,542 1.00 -- $ --
Exercised................................... -- --
Canceled.................................... -- --
-------------- ----------
December 31, 2000.............................. 2,476,542 $ 1.00 -- $ --
============== ==========
Remaining Wtd.
Contractual Avg.
Options Outstanding Life Exercise
at December 31, 2000 Shares (Years) Price
- -------------------- ------ ------- -----
$1.00.......................... 2,476,542 10 $ 1.00
---------------
No options were exercisable as of December 31, 2000.
The Company accounts for the plan under APB Opinion No. 25; therefore, no compensation costs have been
recognized for options granted. Had compensation costs been determined on the fair value-based accounting method for
options granted in 2000, 1999 and 1998, pro forma net income (loss) would have been $(15.8) million, $20.1 million and
($19.5) million for 2000, 1999 and 1998, respectively.
The weighted-average estimated fair value of options granted during 2000 after and before the
recapitalization, 1999 and 1998 was $0.44, $13.52, $12.92 and $8.80, respectively. The fair value of each option grant is
determined on the date of grant using the Black-Scholes option pricing model with the following weighted-average
assumptions for options granted in 2000 after and before the recapitalization, 1999 and 1998, respectively: risk-free
interest rate of 6.0%, 6.0%, 5.8% and 5.2%; expected lives of 10.0 years, 10.0 years, 10.0 years and 8.9 years; expected
volatility of 0%, 35.2%, 35.2% and 33.1%; and no dividends for any year.
(12) Preferred Stock
As part of the recapitalization, U.S. Can Corporation issued shares of preferred stock having an aggregate
value of $106.7 million to Berkshire Partners and its affiliates and the rollover stockholders. Dividends accrue on the
preferred stock at an annual rate of 10%, are cumulative from the date of issuance and compounded quarterly, on March 31,
June 30, September 30 and December 31 of each year and are payable in cash when and as declared by our Board of
Directors, so long as sufficient cash is available to make the dividend payment and has been obtained in a manner
permitted under the terms of our new senior secured credit facility and the indenture. As of December 31, 2000, dividends
of approximately $2.6 million have been accrued. Holders of the preferred stock have no voting rights, except as
otherwise required by law. The preferred stock has a liquidation preference equal to the purchase price per share, plus
all accrued and unpaid dividends. The preferred stock ranks senior to all classes of U.S. Can Corporation common stock
and is not convertible into common stock.
(13) Business Segments
The Company has established four segments by which management monitors and evaluates business performance,
customer base and market share. The Company has realigned its reportable segments in connection with the May
acquisition. International operations are now reflected as a separate segment. Accordingly, the segment information for
prior years has been restated to conform with the current reporting structure.
The segments have separate management teams and distinct product lines. The aerosol segment primarily
produces steel aerosol containers for personal care, household, automotive, paint and industrial products. The
International segment produces aerosol cans in the Europe and Latin America (through Formametal S.A., a joint venture in
Argentina) as well as steel food packaging in Europe. The Paint, Plastic & General Line segment produces round cans for
paint and coatings, oblong cans for such items as lighter fluid and turpentine as well as plastic containers for paint
and industrial and consumer products. The Custom & Specialty segment produces a wide array of functional and decorative
tins, containers and other products.
The accounting policies of the segments are the same as those described in Note (2) to the Consolidated
Financial Statements. No single customer accounted for more than 10% of the Company's total net sales during 2000, 1999
or 1998.
Financial information relating to the Company's operations by geographic area was as follows (000's
omitted):
United
States Europe Consolidated
------ ------ ------------
2000
Net sales......................................... $569,870 $ 239,627 $ 809,497
Identifiable assets............................. 388,918 248,946 637,864
1999
Net sales....................................... $603,282 $ 129,615 $ 732,897
Identifiable assets............................. 397,326 266,244 663,570
1998
Net sales....................................... $611,035 $ 119,916 $ 730,951
Identifiable assets............................. 424,404 131,167 555,571
The following is a summary of revenues from external customers, income (loss) from operations, capital
spending, depreciation and amortization and identifiable assets for each segment as of December 31, 2000, 1999 and 1998
(000's omitted):
2000 1999 1998
---- ---- ----
Revenues from external customers:
Aerosol....................................................... $ 357,688 $ 365,306 $ 357,754
International................................................. 239,627 129,615 119,916
Paint, Plastic, & General Line................................ 160,460 167,561 171,644
Custom & Specialty............................................ 51,722 69,826 76,228
Other ........................................................ -- 589 5,409
------- --------- -----------
Total revenues.......................................... $ 809,497 $ 732,897 $ 730,951
============= ============ =============
Income (loss) from operations:
Aerosol....................................................... $ 66,395 $ 64,034 $ 68,628
International................................................. 12,802 8,751 5,903
Paint, Plastic, & General Line................................ 15,383 13,817 15,645
Custom & Specialty............................................ 6,524 8,882 10,970
Corporate and eliminations (a) (b)............................ (52,951) (28,509) (79,398)
-------------- ------------ -------------
Total income (loss) from operations..................... $ 48,153 $ 66,975 $ 21,748
============= ============ =============
Capital spending:
Aerosol....................................................... $ 6,499 $ 15,804 $ 11,142
International................................................. 8,063 6,073 5,562
Paint, Plastic, & General Line................................ 3,651 5,866 1,360
Custom & Specialty............................................ 608 956 547
Corporate..................................................... 5,683 2,283 4,217
------------- ------------ -------------
Total capital spending.................................. $ 24,504 $ 30,982 $ 22,828
============= ============ =============
2000 1999 1998
---- ---- ----
Depreciation and amortization:
Aerosol....................................................... $ 10,842 $ 12,446 $ 14,040
International................................................. 9,288 6,108 6,721
Paint, Plastic, & General Line................................ 5,472 5,680 5,649
Custom & Specialty............................................ 1,735 2,476 2,457
Corporate..................................................... 6,333 5,153 6,572
------------- ------------ -------------
Total depreciation and amortization..................... $ 33,670 $ 31,863 $ 35,439
============= ============ =============
Identifiable assets:
Aerosol....................................................... $ 183,150 $ 174,884 $ 177,777
International................................................. 248,946 266,244 131,167
Paint, Plastic, & General Line................................ 96,123 92,471 92,629
Custom & Specialty............................................ 45,103 71,625 73,019
Corporate..................................................... 64,542 58,346 80,979
------------- ------------ -------------
Total identifiable assets............................... $ 637,864 $ 663,570 $ 555,571
============= ============ =============
(a) Includes special charges and recapitalization costs. Management does not evaluate segment performance including
such charges.
(b) Selling, general and administrative costs are only allocated to the international segement.
(14) Subsidiary Guarantor Information
The following presents the condensed consolidating financial data for U.S. Can Corporation (the "Parent
Guarantor"), United States Can Company (the "Issuer"), USC May Verpackungen Holding Inc. (the "Subsidiary Guarantor"),
and the Parent Guarantor's European subsidiaries, including May Verpackungen GmbH & Co., KG (the "Non-Guarantor
Subsidiaries"), as of December 31, 2000 and 1999 and for the years ended December 31, 2000, 1999 and 1998. The Subsidiary
Guarantor was formed by the Issuer in December 1999. Investments in subsidiaries are accounted for by the Parent
Guarantor, the Issuer and the Subsidiary Guarantor under the equity method for purposes of the supplemental consolidating
presentation. Earnings of subsidiaries are, therefore, reflected in their parent's investment accounts and earnings. This
consolidating information reflects the guarantors and non-guarantors of the new 12 3/8% senior subordinated notes due
2010.
The 12 3/8% senior subordinated notes due 2010 are guaranteed on a full, unconditional, unsecured, senior
subordinated, joint and several basis by the Parent Guarantor, the Subsidiary Guarantor and any other domestic restricted
subsidiary of the Issuer. USC May Verpackungen Holding Inc., which is wholly owned by the Issuer, currently is the only
Subsidiary Guarantor. The Parent Guarantor has no assets or operations separate from its investment in the Issuer.
Separate financial statements of the Issuer or the Subsidiary Guarantors have not been presented as
management has determined that such information is not material to the holders of the 12 3/8% senior subordinated notes
due 2010.
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(000's omitted)
U.S. Can United USC May USC Europe/ Eliminations U.S. Can
May
Verpackugen Verpackugen
States Can Holding GmbH
Corporation Company (Subsidiary (Non-Guarantor Corporation
(Parent) (Issuer) Guarantor) Subsidiaries) Consolidated
-------------- ------------- --------------- ---------------- --------------- --------------
NET SALES.................................. $ - $ 569,870 $ - $ 239,627 $ - $ 809,497
COST OF SALES.............................. - 481,217 - 211,941 - 693,158
-------------- ------------- --------------- ---------------- --------------- --------------
Gross income.......................... - 88,653 - 27,686 - 116,339
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - 29,525 1,478 14,884 - 45,887
SPECIAL CHARGES............................ - 3,413 - - - 3,413
Recapitalization Charges................... 18,886 - - - - 18,886
-------------- ------------- --------------- ---------------- --------------- --------------
Operating income...................... (18,886) 55,715 (1,478) 12,802 - 48,153
INTEREST AND DEFERRED FINANCING
EXPENSE.................................. - 31,261 6,220 2,987 - 40,468
EQUITY EARNINGS (LOSS) FROM
SUBSIDIARY............................... 55 (135) 4,476 - (4,396) -
-------------- ------------- --------------- ---------------- --------------- --------------
Income before income taxes............. (18,831) 24,319 (3,222) 9,815 (4,396) 7,685
PROVISION FOR INCOME TAXES................. (7,309) 9,401 (178) 2,430 - 4,344
-------------- ------------- --------------- ---------------- --------------- --------------
Income from operations before (11,522) 14,918 (3,044) 7,385 (4,396) 3,341
extraordinary item...................
NET LOSS FROM EARLY
EXTINGUISHMENT OF DEBT................... - (14,863) - - - (14,863)
-------------- ------------- --------------- ---------------- --------------- --------------
NET INCOME (LOSS) BEFORE (11,522) 55 (3,044) 7,385 (4,396) (11,522)
PREFERRED STOCK DIVIDENDS................
PREFERRED STOCK DIVIDENDS.................. (2,601) - - - - (2,601)
-------------- ------------- --------------- ---------------- --------------- --------------
-------------- ------------- --------------- ---------------- --------------- --------------
NET INCOME (LOSS) AVAIABLE FOR $ (14,123) $ 55 $ (3,044) $ 7,385 $ (4,396) $ (14,123)
COMMON STOCKHOLDERS......................
============== ============= =============== ================ =============== ==============
U.S.CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(000's omitted)
U.S. Can United U.S. Can Eliminations U.S. Can
Europe/ May
Verpackugen
States Can GmbH
Corporation Company (Non-Guarantor Corporation
(Parent) (Issuer) Subsidiaries) Consolidated
-------------- ------------- ---------------- ------------- ---------------
NET SALES....................................... $ - $ 603,282 $ 129,615 $ - $ 732,897
COST OF SALES................................... - 516,703 113,708 - 630,411
-------------- ------------- ---------------- ------------- ---------------
Gross income............................... - 86,579 15,907 - 102,486
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES...................................... - 28,355 7,156 - 35,511
-------------- ------------- ---------------- ------------- ---------------
Operating income........................... - 58,224 8,751 - 66,975
INTEREST AND DEFERRED FINANCING
EXPENSE....................................... - 27,447 2,454 - 29,901
EQUITY IN EARNINGS OF SUBSIDIARIES.............. 21,156 4,103 - (25,259) -
-------------- ------------- ---------------- ------------- ---------------
Income before income taxes.................. 21,156 34,880 6,297 (25,259) 37,074
PROVISION FOR INCOME TAXES...................... - 12,428 2,194 - 14,622
-------------- ------------- ---------------- ------------- ---------------
Income from operations before extraordinary 21,156 22,452 4,103 (25,259) 22,452
item......................................
NET LOSS FROM EARLY EXTINGUISHMENT
OF DEBT....................................... - (1,296) - - (1,296)
-------------- ------------- ---------------- ------------- ---------------
-------------- ------------- ---------------- ------------- ---------------
NET INCOME (LOSS) AVAILABLE FOR $ 21,156 $ 21,156 $ 4,103 $ (25,259) $ 21,156
COMMON STOCKHOLDERS...........................
============== ============= ================ ============= ===============
U.S.CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(000's omitted)
U.S. Can United States USC Europe/ Eliminations U.S. Can
May
Verpackugen
GmbH
Corporation Can Company (Non-Guarantor Corporation
(Parent) (Issuer) Subsidiaries) Consolidated
------------- --------------- ---------------- ------------- ----------------
NET SALES....................................... $ - $ 611,035 $ 119,916 $ - $ 730,951
COST OF SALES................................... - 531,315 $107,546 - 638,861
------------- --------------- ---------------- ------------- ----------------
Gross income............................... - 79,720 12,370 - 92,090
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES...................................... - 28,005 6,468 - 34,473
SPECIAL CHARGE.................................. - 35,869 - - 35,869
------------- --------------- ---------------- ------------- ----------------
Operating income........................... - 15,846 5,902 - 21,748
INTEREST AND DEFERRED FINANCING
EXPENSE....................................... - 32,335 2,600 - 34,935
EQUITY IN EARNINGS (LOSS) OF
SUBSIDIARIES.................................. (16,053) 2,048 - 14,005 -
------------- --------------- ---------------- ------------- ----------------
Income before income taxes.................. (16,053) (14,441) 3,302 14,005 (13,187)
PROVISION FOR INCOME TAXES...................... - (6,916) 1,254 - (5,662)
------------- --------------- ---------------- ------------- ----------------
Income from operations before discontinued (16,053) (7,525) 2,048 14,005 (7,525)
operations................................
NET LOSS FROM DISCONTINUED
OPERATIONS.................................... - (8,528) - - (8,528)
------------- --------------- ---------------- ------------- ----------------
------------- --------------- ---------------- ------------- ----------------
NET INCOME (LOSS) AVAILABLE FOR $ (16,053) $ (16,053) $ 2,048 $ 14,005 $ (16,053)
COMMON STOCKHOLDERS...........................
============= =============== ================ ============= ================
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued)
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2000
(000s omitted)
U.S. Can United States USC May USC Europe/ May Eliminations U.S. Can
Verpackugen Verpackugen
Holding GmbH
Corporation Can Company (Subsidiary (Non-Guarantor Corporation
(Parent) (Issuer) Guarantor) Subsidiaries) Consolidated
-------------- --------------- ------------------ ----------------- -------------- ------------------
CURRENT ASSETS:
Cash and cash equivalents $ - $ 2,276 $ - $ 8,508 $ - $ 10,784
Accounts receivable...... - 47,952 - 42,811 - 90,763
Inventories.............. - 69,709 (600) 44,793 - 113,902
Prepaid expenses and
other
assets................. - 27,878 608 7,352 - 35,838
-------------- --------------- ------------------ ----------------- -------------- ------------------
Total current assets - 147,815 8 103,464 - 251,287
NET PROPERTY, PLANT AND
EQUIPMENT................... - 169,525 - 102,695 - 272,220
INTANGIBLE ASSETS............. - 41,974 1,630 27,108 - 70,712
OTHER ASSETS.................. - 29,606 439 13,600 - 43,645
INTERCOMPANY
ADVANCES.................... - 224,260 - - (224,260) -
INVESTMENT IN
SUBSIDIARIES................ 45,790 38,881 63,317 - (147,988) -
-------------- --------------- ------------------ ----------------- -------------- ------------------
-------------- --------------- ------------------ ----------------- -------------- ------------------
Total assets........ $ 45,790 $ 652,061 $ 65,394 $ 246,867 $ (372,248) $ 637,864
============== =============== ================== ================= ============== ==================
CURRENT LIABILITIES
Current maturities of
long-term debt......... $ - $ 9,569 $ - $ 5,102 $ - $ 14,671
Accounts payable......... - 56,208 - 46,066 - 102,274
Other current liabilities - 50,255 650 9,193 - 60,098
-------------- --------------- ------------------ ----------------- -------------- ------------------
Total current - 116,032 650 60,361 - 177,043
liabilities...................
TOTAL LONG TERM DEBT.......... 854 454,539 - 24,981 - 480,374
OTHER LONG-TERM
LIABILITIES................. - 35,700 879 8,923 - 45,502
PREFERRED STOCK............... 109,268 - - - - 109,268
INTERCOMPANY LOANS............ 109,991 - 72,656 41,613 (224,260) -
STOCKHOLDERS' EQUITY.......... (174,323) 45,790 (8,791) 110,989 (147,988) (174,323)
-------------- --------------- ------------------ ----------------- -------------- ------------------
-------------- --------------- ------------------ ----------------- -------------- ------------------
Total liabilities $ 45,790 $ 652,061 $ 65,394 $ 246,867 $ (372,248) $ 637,864
and
stockholders'
equity........................
============== =============== ================== ================= ============== ==================
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued)
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 1999
(000s omitted)
U.S. Can United States USC May USC Europe/ Eliminations U.S. Can
May
Verpackugen Verpackugen
Holding GmbH
Corporation Can Company (Subsidiary (Non-Guarantor Corporation
(Parent) (Issuer) Guarantor) Subsidiaries) Consolidated
------------- --------------- ---------------- ---------------- -------------- ---------------
CURRENT ASSETS:
Cash and cash equivalents... $ - $ 2,095 $ - $ 13,602 $ - $ 15,697
Accounts receivable......... - 45,205 - 46,659 - 91,864
Inventories................. - 66,360 - 49,619 - 115,979
Prepaid expenses and
other assets.............. - 30,377 - 5,414 - 35,791
------------- --------------- ---------------- ---------------- -------------- ---------------
Total current assets... - 144,037 - 115,294 - 259,331
NET PROPERTY, PLANT AND
EQUIPMENT...................... - 191,997 - 140,507 - 332,504
INTANGIBLE ASSETS................ - 50,200 - 278 - 50,478
OTHER ASSETS..................... 4,891 6,202 - 10,164 - 21,257
INTERCOMPANY ADVANCES............ 242,654 - - - (242,654) -
INVESTMENT IN
SUBSIDIARIES................... 57,640 50,919 63,847 - (172,406) -
------------- --------------- ---------------- -------------- ---------------
------------- --------------- ---------------- ---------------- -------------- ---------------
Total assets........... $ 305,185 $ 443,355 $ 63,847 $ 266,243 $ (415,060) $ 663,570
============= =============== ================ ================ ============== ===============
CURRENT LIABILITIES
Current maturities of
long-term debt............ $ - $ 19,562 $ - $ 19,262 $ - $ 38,824
Accounts payable............ - 50,083 - 54,106 - 104,189
Other current liabilities... - 62,594 - 15,990 - 78,584
------------- --------------- ---------------- ---------------- -------------- ---------------
Total current - 132,239 - 89,358 - 221,597
liabilities......................
TOTAL LONG TERM DEBT............. 236,629 54,536 - 29,328 - 320,493
OTHER LONG-TERM
LIABILITIES.................... - 43,317 - 9,607 - 52,924
INTERCOMPANY LOANS............... - 155,623 63,847 23,184 (242,654) -
STOCKHOLDERS' EQUITY............. 68,556 57,640 - 114,766 (172,406) 68,556
------------- --------------- ---------------- -------------- ---------------
------------- --------------- ---------------- ---------------- -------------- ---------------
Total liabilities and $ 305,185 $ 443,355 $ 63,847 $ 266,243 $ (415,060) $ 663,570
stockholders' equity.
============= =============== ================ ================ ============== ===============
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2000
(000s omitted)
U.S. Can United USC May USC Europe / U.S. Can
Verpackungen May
States Can Holding Verpackungen
Corporation Company (Subsidary (Non-Guarantor Corporation
(Parent) (Issuer) Guarantor) Subsidaries) Condsolidated
--------------- -------------- ---------------- ----------------- -----------------
CASH FLOWS FROM OPERATING
ACTIVITIES..................................... $ 18,886 $ 14,231 $ (8,809) $ 4,424 $ 28,732
--------------- -------------- ---------------- ----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures........................... - (16,371) - (8,133) (24,504)
Proceeds on sale of business................... - 12,088 - - 12,088
Proceeds on the sale of property............... - 8,755 - - 8,755
Investment in Formametal S.A................... - - - (4,914) (4,914)
--------------- -------------- ---------------- ----------------- -----------------
Net cash used in investing activities...... - 4,472 - (13,047) (8,575)
--------------- -------------- ---------------- ----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in intercompany advances............... 365,168 (392,408) 8,809 18,431 -
Issuance of common stock....................... 53,333 - - - 53,333
Issuance of preferred stock.................... 106,667 - - - 106,667
Retirement of common stock and exercise
of stock options............................. (270,022) - - - (270,022)
Purchase of treasury stock..................... (488) - - - (488)
Issuance of 12 3/8% notes...................... - 175,000 - - 175,000
Repurchase of 10 1/8% notes.................... (254,658) - - - (254,658)
Net borrowings (payments) under the old
revolving
line of credit and changes in cash overdrafts - (56,100) - - (56,100)
Borrowing of Tranche A loan.................... - 80,000 - - 80,000
Borrowing of Tranche B loan.................... - 180,000 - - 180,000
Borrowing of other long-term debt, including
capital lease obligations.................... - 18,500 - 786 19,286
Payments of long-term debt, including
capital lease obligations.................... - (7,377) - (15,151) (22,528)
Payment of debt financing costs................ - (16,137) - - (16,137)
Payment of recapitalization costs.............. (18,886) - - - (18,886)
--------------- -------------- ---------------- ----------------- -----------------
Net cash (used in) provided by
financing activities..................... (18,886) (18,522) 8,809 4,066 (24,533)
--------------- -------------- ---------------- ----------------- -----------------
--------------- -------------- ---------------- ----------------- -----------------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH........................................ - - - (537) (537)
--------------- -------------- ---------------- ----------------- -----------------
INCREASE (DECREASE) IN CASH AND CASH - 181 - (5,094) (4,913)
EQUIVALENTS....................................
CASH AND CASH EQUIVALENTS, beginning
of year........................................ - 2,095 - 13,602 15,697
--------------- -------------- ---------------- -----------------
----------------- -----------------
CASH AND CASH EQUIVALENTS, $ - $ 2,276 $ - $ 8,508 $ 10,784
end of period..................................
=============== ============== ================ ================= =================
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
(000s omitted)
U.S. Can United USC May USC Europe / U.S. Can
Verpackungen May
States Can Holding Verpackungen
Corporation Company (Subsidary (Non-Guarantor Corporation
(Parent) (Issuer) Guarantor) Subsidaries) Condsolidated
-------------- ------------- ----------------- ----------------- -----------------
CASH FLOWS FROM OPERATING
ACTIVITIES...................................... $ - $ 51,865 $ - $ 10,587 $ 62,452
-------------- ------------- ----------------- ----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................ - (24,909) - (6,073) (30,982)
Acquisition of businesses, net of cash acquired. - - (63,847) - (63,847)
Proceeds on sale of business.................... - 4,500 - - 4,500
Proceeds on the sale of property................ - 448 - - 448
Investment in Formametal S.A.................... - - - (1,600) (1,600)
-------------- ------------- ----------------- ----------------- -----------------
Net cash used in investing activities....... - (19,961) (63,847) (7,673) (91,481)
-------------- ------------- ----------------- ----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in intercompany advances................ 25,378 (95,917) 63,847 6,692 -
Retirement of common stock and exercise of
stock options................................. 2,820 - - - 2,820
Purchase of treasury stock...................... (502) - - - (502)
Repurchase of 10 1/8% notes..................... (27,696) - - - (27,696)
Borrowings of long-term debt.................... - 38,598 - - 38,598
Net borrowings (payments) under the revolving
line of credit and changes in cash overdrafts. - 23,159 - 394 23,553
Payments of long-term debt, including capital
lease obligations............................. - (5,057) - (4,392) (9,449)
-------------- ------------- ----------------- ----------------- -----------------
Net cash (used in) provided by
financing activities...................... - (39,217) 63,847 2,694 27,324
-------------- ------------- ----------------- ----------------- -----------------
-------------- ------------- ----------------- ----------------- -----------------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH......................................... - - - (670) (670)
-------------- ------------- ----------------- ----------------- -----------------
INCREASE (DECREASE) IN CASH AND - (7,313) - 4,938 (2,375)
CASH EQUIVALENTS................................
CASH AND CASH EQUIVALENTS,
beginning of year............................... - 9,408 - 8,664 18,072
-------------- ------------- ----------------- -----------------
----------------- -----------------
CASH AND CASH EQUIVALENTS, $ - $ 2,095 $ - $ 13,602 $ 15,697
end of period...................................
============== ============= ================= ================= =================
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
(000s omitted)
U.S. Can United USC Europe / U.S. Can
May
States Can Verpackungen
Corporation Company (Non-Guarantor Corporation
(Parent) (Issuer) Subsidaries) Condsolidated
-------------- ------------- ---------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES......................... $ - $ 54,913 $ 10,050 $ 64,963
-------------- ------------- ---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures....................................... - (17,266) (5,562) (22,828)
Proceeds on sale of business............................... - 28,296 - 28,296
Proceeds on the sale of property........................... - 6,578 23 6,601
Investment in Formametal S.A............................... - - (3,000) (3,000)
-------------- ------------- ---------------- -----------------
Net cash used in investing activities.................. - 17,608 (8,539) 9,069
-------------- ------------- ---------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in intercompany advances........................... 10,747 (13,747) 3,000 -
Retirement of common stock and exercise of stock options... 1,658 - - 1,658
Purchase of treasury stock................................. (1,730) - - (1,730)
Repurchase of 10 1/8% notes................................ (10,675) - - (10,675)
Net borrowings (payments) under the revolving line
of credit and changes in cash overdrafts................. - (36,770) - (36,770)
Payments of long-term debt, including capital lease
obligations.................................................. - (13,011) (2,607) (15,618)
-------------- ------------- ---------------- -----------------
Net cash (used in) provided by financing activities.... - (63,528) 393 (63,135)
-------------- ------------- ---------------- -----------------
-------------- ------------- ---------------- -----------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH...................... - - 402 402
-------------- ------------- ---------------- -----------------
INCREASE (DECREASE) IN CASH AND - 8,993 2,306 11,299
CASH EQUIVALENTS...........................................
CASH AND CASH EQUIVALENTS, beginning of year................. - 415 6,358 6,773
-------------- ------------- -----------------
---------------- -----------------
CASH AND CASH EQUIVALENTS, end of period..................... $ - $ 9,408 $ 8,664 $ 18,072
============== ============= ================ =================
(15) Quarterly Financial Data (Unaudited)
The following is a summary of the unaudited interim results of operations for each of the quarters in 2000
and 1999 (000's omitted).
First Quarter Second Quarter Third Quarter Fourth Qtr
----------------- ------------------ ------------------ ----------------
2000 1999 2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ---- ---- ----
Net Sales........... $ 213,761 $ 189,775 $ 210,518 $ 191,623 $ 200,022 $ 182,750 $ 185,196 $ 168,749
Special Charges(a).. -- -- -- -- 3,413 -- -- --
Recapitalization
Charge(b) ....... -- -- -- -- -- -- 18,886 --
Income (loss) from
Operations Before
Extraordinary Item 5,637 5,551 6,121 7,138 4,376 6,006 (12,793)
3,757
Net Income (Loss)
Available for Common
Shareholders.... $ 5,637 $ 5,551 $ 6,121 $ 6,330 $ 4,376 $ 5,518 $ (30,257) $ 3,757
========== ========== ========== ========== ========== =========== =========== ===========
(a) See Note 4 of the "Notes to Consolidated Financial Statements."
(b) See Note 3 of the "Notes to Consolidated Financial Statements."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the name, age as of March 15, 2001 and position of each of our directors,
executive officers and other key employees. Each of our directors will hold office until the next annual meeting of
shareholders or until his successor has been elected and qualified. Our officers are elected by our Board of Directors
and serve at the discretion of the Board of Directors.
Name Age Position
---- --- --------
Paul W. Jones............................. 52 Chairman of the Board, President and Chief Executive Officer
John L. Workman........................... 49 Director, Executive Vice President and Chief Financial
Officer
J. Michael Kirk........................... 43 Executive Vice President, Corporate Marketing and Aerosol
Sales
Gillian V. N. Derbyshire.................. 47 Senior Vice President and General Manager, Paint, Plastic,
Custom and General Line Operations
Roger B. Farley........................... 57 Senior Vice President, Human Resources
David R. Ford............................. 54 Senior Vice President, International, and President,
European Operations
Thomas A. Scrimo.......................... 52 Senior Vice President and General Manager, Aerosol
Operations and Business Support
John R. McGowan........................... 59 Vice President and Controller
Larry S. Morrison......................... 47 Vice President, Operational Excellence
Emil P. Obradovich........................ 54 Vice President and Chief Technical Officer
Steven K. Sims............................ 36 Vice President, General Counsel and Secretary
Sandra K. Vollman......................... 43 Vice President, Finance
Carl Ferenbach............................ 58 Director
Richard K. Lubin.......................... 54 Director
Ricardo Poma.............................. 54 Director
Francisco A. Soler........................ 55 Director
Louis B. Susman........................... 63 Director
Paul W. Jones. Mr. Jones has been our President and Chief Executive Officer since April 1998, and our Chairman of the
Board since July 1998. From 1989 to 1998, Mr. Jones was the President of Greenfield Industries, Inc., an international
tool manufacturer. Prior to joining Greenfield Industries, Inc., Mr. Jones held various positions with General Electric
for 19 years, including serving as General Manager--Manufacturing for General Electric Transportation Systems from 1988 to
1989. Mr. Jones is a member of the Board of Directors of Federal Signal Corporation and Regal-Beloit Corporation.
John L. Workman. Mr. Workman has been our Executive Vice President and Chief Financial Officer since his appointment in
August 1998. Prior to his appointment, Mr. Workman served as Executive Vice President and Chief Restructuring Officer at
Montgomery Ward Holding Corporation. Montgomery Ward was one of the nation's largest privately-held retailers.
Mr. Workman joined Montgomery Ward in 1984 as a general auditor and held a variety of financial positions with Montgomery
Ward, including Vice President--Controller, Vice President--Finance and Chief Financial Officer. Mr. Workman was an
executive officer of Montgomery Ward in July 1997 when it filed for reorganization under Chapter 11 of the Federal
bankruptcy laws.
J. Michael Kirk. Mr. Kirk has served as our Executive Vice President, Marketing since August 1999. In February 2000,
Aerosol sales were also added to his duties. Prior to joining us, he served as General Manager of Blank Fed Packaging
Systems for Tetra Pak, Inc., a manufacturer of beverage packaging products. He joined Tetra Pak in 1986 as a sales
manager and held a number of sales and marketing positions. At Tetra Pak, he became General Manager of the nine state
Southern Region of Tetra Pak and in 1996 was named General Manager of Tetra Pak's 33-state Central Region.
Gillian V. N. Derbyshire. Ms. Derbyshire has served as our Senior Vice President, Paint, Plastic and General Line since
September 1999. In February 2000, Custom and Specialty operations were added to Ms. Derbyshire's responsibilities. Prior
to joining us, she served as Vice President and General Manager of American National Can's Worldwide Plastic Bottle
Group, a position held from June 1997 to September 1999. Prior to joining American National Can, Ms. Derbyshire was Vice
President and General Manager of Tenneco Packaging's EZ Foil(R)Products Group (from June 1995 to June 1997). Prior to
that, Ms. Derbyshire was Vice President and General Manager, Marketing of the Tenneco Packaging Specialty Packaging
Group.
Roger B. Farley. Mr. Farley has served as our Senior Vice President, Human Resources since August 1998. Prior to joining
us, Mr. Farley was Senior Vice President, Human Resources from July 1997 to July 1998 and Vice President, Human Resources
from June 1994 to June 1997 of Greenfield Industries, Inc., an international tool manufacturer.
David R. Ford. Mr. Ford has served as our Senior Vice President, International and President, European Operations since
November 1997. From 1987 until 1997, Mr. Ford held a number of senior management positions with CMB Packaging Group, a
division of CarnaudMetalbox (a Crown Cork & Seal company), including Vice President, Eastern Europe; Vice President,
European Food Can business; Regional Vice President, Northern Europe; and Managing Director, CMB Food Can UK. Crown
Cork & Seal is a global metal and plastic packaging company.
Thomas A. Scrimo. Mr. Scrimo has served as our Senior Vice President and General Manager, Aerosol Operations and
Business Support since February 2000. From August 1998 to February 2000, Mr. Scrimo served as our Vice President,
Business Support Operations. Prior to joining us, he served as Vice President of Operations for Greenfield
Industries, Inc., an international tool manufacturer, from January 1997 to August 1998. From July 1992 to January 1997, he
served as Vice President of Manufacturing of Commercial Cam Co., Wheeling, Illinois, a division of Emerson Electric Co.,
a manufacturer of precision material handling equipment.
John R. McGowan. Mr. McGowan has served as our Vice President and Controller since August 1989. Mr. McGowan joined us in
May 1987 and served as Vice President, Planning from September 1987 to July 1989.
Larry S. Morrison. Mr. Morrison has served as our Vice President, Operational Excellence since February 2000. From 1998
to February 2000, Mr. Morrison served as our Vice President and General Manager, Custom and Specialty Products. From
July 1995 to 1998, Mr. Morrison served as our Vice President of Manufacturing of Custom and Specialty Products.
Emil P. Obradovich. Mr. Obradovich has served as our Vice President and Chief Technical Officer since February 2000.
From 1996 to February 2000, Mr. Obradovich served as our Managing Director of Technical Service.
Steven K. Sims. Mr. Sims has served as our Vice President, General Counsel and Secretary since June 1998. From
April 1995 to May 1998, Mr. Sims served as our Assistant General Counsel. From September 1989 to March 1995, Mr. Sims was
engaged in private practice at the Chicago-based law firm of Ross & Hardies.
Sandra K. Vollman. Ms. Vollman has served as our Vice President--Finance since July 2000. From July 1999 to July 2000,
Ms. Vollman served as our Vice President--Business Development. From 1997 to 1999, Ms. Vollman was Vice President and
Corporate Controller for Montgomery Ward and Co. Prior to 1997, Ms. Vollman held a variety of financial and information
systems positions at Montgomery Ward and was vice president and controller of Signature Financial/Marketing, Inc.,
Montgomery Ward's direct marketing subsidiary.
Carl Ferenbach. Mr. Ferenbach, who was one of our founding directors in 1983 and served as a member of our Board of
Directors until February 2000, was elected as a Director at the time of the recapitalization. Mr. Ferenbach is also a
Managing Director of Berkshire Partners, which he co-founded in 1986. He has been a director of many of Berkshire
Partners' manufacturing, transportation and telecommunications investments, including, among others, Crown Castle
International Corporation, Wisconsin Central Transportation Corporation, Tranz Rail Limited and Trico Marine
Services, Inc.
Richard K. Lubin. Mr. Lubin has served as a Director since the recapitalization. Mr. Lubin is a Managing Director of
Berkshire Partners, which he co-founded in 1986. He has been a director of many of Berkshire Partners' manufacturing,
retailing and transportation investments, including, among others, The Holmes Group, Inc., InteSys Technologies, Inc. and
Wisconsin Central Transportation Corporation.
Ricardo Poma. Mr. Poma has served as a Director since 1983. Since 1979, Mr. Poma has served as the Managing Partner and
Chief Executive Officer of Group Poma, a family holding company involved in automobile distribution, hotels, real estate
development and manufacturing. Mr. Poma is also Vice Chairman of International Bancorp of Miami, Inc.; a member of the
Advisory Board of Bain Capital, an investment fund; and President of the School for Economics and Business, a private
university in El Salvador.
Francisco A. Soler. Mr. Soler has served as a Director since 1983. Since 1985, Mr. Soler has served as the Chairman of
International Bancorp of Miami, Inc., the holding company for The International Bank of Miami, N.A. Mr. Soler is also
President of Harbour Club Milano Spa and a director of various industrial and commercial companies in the United Kingdom
and El Salvador.
Louis B. Susman. Mr. Susman has served as a Director since 1998. Mr. Susman is a Vice Chairman of the Citigroup Global
Corporate Investment Bank, Chairman of the Citigroup North American Customer Committee, and a Vice Chairman of Investment
Banking and Managing Director of Salomon Smith Barney Inc. Prior to joining Salomon Brothers Inc (one of the predecessors
of Salomon Smith Barney) in June 1989, Mr. Susman was a senior partner at the St. Louis-based law firm of Thompson &
Mitchell. Mr. Susman is a Director of Drury Inns and has previously served on the boards of the St. Louis National
Baseball Club, Inc., Silver Eagle, Inc., Hasco International, PennCorp Financial, Avery, Inc. and other publicly-held
corporations.
In addition to the directors listed above, we expect to expand our board to include up to four additional
independent directors as a result of the recapitalization.
ITEM 11. EXECUTIVE COMPENSATION
The following tables set forth information concerning compensation paid to our Chief Executive Officer and
our other four most highly compensated executive officers during fiscal years 2000, 1999 and 1998.
Summary Compensation Table
Long Term Compensation
----------------------
Annual Compensation Awards Payout
------------------- ------ ------
Securities
Underlying
Other Annual Options/SARs (#)(c) All Other
-------------------
Name and Principal Position Year Salary Bonus(a) Compensation Compensation
---- ------ -------- ------------ ------------
Paul W. Jones(b) 2000 $614,473 $122,000 $7,521 212,202 $2,351,037(d)
President and Chief Executive 1999 $572,800 $830,200 $7,500 none $96,300(e)
Officer 1998 $384,900 $618,750 $5,500 450,000 $68,100
David R. Ford(f) 2000 $395,000 $39,500 none 141,468 $ 771,266(d)
Senior Vice President, International 1999 $383,000 $251,300 none none $ 239,116(d)
and President, European Operations 1998 $365,100 $143,100 none 28,000 $ 116,600
John L. Workman(b) 2000 $398,088 $39,000 $7,521 353,669 $1,055,782(d)
Executive Vice President and Chief 1999 $378,600 $270,700 $7,500 none $ 54,100(e)
Financial Officer 1998 $119,600 $165,000 $2,900 117,500 $ 2,200
Gillian V.N. Derbyshire(b) 2000 $277,069 $26,000 $7,521 212,202 $ 344,568(d)
Senior Vice President and General 1999 $62,138 $102,500 $2,025 50,000 $ 1,080(e)
Manager, Paint, Plastic, Custom and
General Line Operations
J. Michael Kirk(b) 2000 $243,088 $23,500 $7,521 212,202 $ 351,282(d)
Senior Vice President, Corporate 1999 $79,892 $77,500 $2,603 50,000 $ 3,691(e)
Marketing and Aerosol Sales
- -----------
(a) The 1998 amounts for Messrs. Jones and Workman and the 1999 amounts for Ms. Derbyshire and Mr. Kirk consist of a
signing or make-whole bonus (based on foregone bonus from their previous employers) and a guaranteed partial year
incentive payout. For 1998 and 1999, the amounts shown for all officers include the dollar value of additional
deferred stock units provided by us to the named executive officers in connection with their deferral of a
portion of their 1998 and 1999 bonuses into deferred stock units under our Executive Deferred Compensation Plan.
Under this plan, eligible executives were able to defer up to 25% of their annual incentive compensation into
deferred United States Can Company stock units, which were settled in cash at the reorganization date. We
contributed one additional deferred stock unit for each five deferred stock units elected by the executive.
(b) Mr. Jones, Mr. Workman, Ms. Derbyshire and Mr. Kirk joined our company in April 1998, August 1998, September 1999
and August 1999, respectively.
(c) Options granted in 1999 and 1998 were granted under various option or equity incentive plans that were terminated
as of the October 4, 2000 recapitalization date and reflect shares prior to the recapitalization. Options granted
in 2000 exclude options for 50,000, 25,000, 30,000, 35,000 and 37,000 shares issued to Messrs. Jones, Ford and
Workman, Ms. Derbyshire and Mr. Kirk, respectively, under the plans in effect prior to the recapitalization. All
of the foregoing options were cancelled at the time of the recapitalization, and each holder received a cash
payment equal to the product of (i) the $20.00 price per share paid to shareholders in connection with the
recapitalization less the exercise price of the option and (ii) the number of shares of common stock subject to
the option. Options reflected in this table for 2000 were granted on October 4, 2000 under the U.S. Can
Corporation 2000 Equity Incentive Plan in connection with the recapitalization.
(d) The 2000 amounts include one-time bonuses in connection with the recapitalization of $697,500, $156,600,
$309,000, $90,700 and $99,400 for Messrs. Jones, Ford and Workman, Ms. Derbyshire and Mr. Kirk, respectively,
cash proceeds from the cancellation of employee stock options in the recapitalization of $1,291,312, $252,250,
$624,713, $220,000 and $220,288 for Messrs. Jones, Ford and Workman, Ms. Derbyshire and Mr. Kirk, respectively,
distribution of cash from U.S. Can Corporation's executive deferred compensation program to the extent not
reported as 1999 or 1998 bonuses, of $124,384, $39,399, $38,852, $6,053 and $6,053 for Messrs. Jones, Ford and
Workman, Ms. Derbyshire and Mr. Kirk, respectively, contributions or payments for their benefit to U.S. Can
Corporation's Salaried Employee Savings and Retirement Accumulation Plan ("SRAP") of $10,200 for each named
executive officer other than Mr. Ford and $214,538, $68,614, $16,535 and $12,772 for Messrs. Jones and Workman,
Ms. Derbyshire and Mr. Kirk, respectively, pursuant to nonqualified retirement plans. The 2000 amounts shown for
Mr. Jones, Ms. Derbyshire and Mr. Kirk include the cost of life insurance in excess of our standard benefit
($5,803, $1,080 and $1,369, respectively) and the imputed value of Mr. Workman's company-provided life insurance
benefit of $810. The 2000 amounts shown for Messrs. Jones, Workman and Kirk include payments for personal
financial planning of $7,300, $3,593 and $1,200, respectively. The 2000 and 1999 amounts for Mr. Ford include
contributions to an executive retirement plan and an overseas employee benefit trust, of which Mr. Ford is the
beneficiary, designed to provide contractual retirement benefits ($227,011 and $229,424 for 2000 and 1999,
respectively) and the cost of life insurance ($8,958 and $9,692 for 2000 and 1999, respectively). The 2000 amount
for Mr. Ford also includes reimbursement for relocation expenses as provided under his Service Agreement of
$87,048.
(e) The 1999 amounts shown for Mr. Jones, Ms. Derbyshire and Mr. Kirk include the cost of life insurance in excess of
our standard benefit ($5,803, $1,080 and $1,175, respectively). The 1999 amounts shown for Messrs. Jones, Workman
and Kirk include contributions or payments for their benefit to U.S. Can Corporation's Salaried Employee Savings
and Retirement Accumulation Plan ("SRAP") and pursuant to nonqualified retirement plans ($90,500, $54,100 and
$2,515, respectively).
(f) Mr. Ford is compensated in British Pounds. Certain amounts shown for Mr. Ford have been converted to U.S. dollars
at the exchange rate ($1.4931) in effect as of the calendar year-end for the year in which payment was made.
Option Grants in 2000
% of Total Potential Realizable Value
Number of Options at Assumed
Securities Granted to Annual Rates of Stock Price
Underlying Employees Exercise Appreciation for
Options in or Option Term
-----------
Granted (#)(a) Fiscal Year Base Price Expiration Date 5%($) 10%($)
-------------- ----------- ---------- --------------- ----- ------
Name
Paul W. Jones........... 70,734(b) 2.17% $1.00 October 4, 2010 $44,484 $112,729
141,468(c) 8.93% $1.00 October 4, 2010 $88,969 $225,458
David R. Ford........... 141,468(b) 4.35% $1.00 October 4, 2010 $88,969 $225,458
John L. Workman......... 70,734(b) 2.17% $1.00 October 4, 2010 $44,484 $112,729
282,935(c) 17.86% $1.00 October 4, 2010 $177,938 $450,914
Gillian V.N. Derbyshire. 84,881(b) 2.61% $1.00 October 4, 2010 $53,382 $135,275
127,321(c) 8.04% $1.00 October 4, 2010 $80,072 $202,911
J. Michael Kirk......... 84,881(b) 2.61% $1.00 October 4, 2010 $53,382 $135,275
127,321(c) 8.04% $1.00 October 4, 2010 $80,072 $202,911
- -----------
(a) Options granted in 2000 exclude options for 50,000, 25,000, 30,000, 35,000 and 37,000 shares issued to
Messrs. Jones, Ford and Workman, Ms. Derbyshire and Mr. Kirk, respectively, under the plans in effect prior to
the recapitalization, which were cancelled at the time of the recapitalization. See note (c) to the Summary
Compensation Table.
(b) Represents time-vested options to purchase shares of common stock. These options vest in equal installments of
20% on October 4 of each of 2001, 2002, 2003, 2004 and 2005, subject to accelerated vesting upon a change of
control of U.S. Can Corporation.
(c) Represents performance-based options to purchase shares of common stock. These options are exercisable only as to
the total number of shares that are both vested and earned. These options vest in equal installments of 20% on
October 4 of each of 2001, 2002, 2003, 2004 and 2005. These options are earned at the time of an initial public
offering or if Berkshire Fund V Investment Corp. and its affiliates receive a specified return on their
investment in U.S. Can Corporation under specific, enumerated circumstances.
Aggregated Options/SAR Exercises in 2000 and 2000-End Options/SAR Valued
No shares were acquired as a result of option exercises by the named executive officers during 2000. See
note (d) to the Summary Compensation Table for a description of the cash proceeds from the cancellation of employee stock
options in the recapitalization. We have not awarded any stock appreciation rights ("SARs").
Exercisable/Unexercisable
Number of Securities Exercisable/Unexercisable
Underlying Value of Unexercised
Unexercised Options In-The-Money Options
Name at 2000-Year End (#) at 2000-Year End ($)(a)
---- -------------------- -----------------------
Paul W. Jones............................................ 0/212,202 $0/$0
David R. Ford............................................ 0/141,468 $0/$0
John L. Workman.......................................... 0/353,669 $0/$0
Gillian V.N. Derbyshire.................................. 0/212,202 $0/$0
J. Michael Kirk.......................................... 0/212,202 $0/$0
- -----------
(a) Because there was no established trading market for U.S. Can Corporation's common stock as of December 31, 2000,
management has determined that the fair market value of the common stock underlying these options did not exceed
$1.00 (the exercise price of these options) and, accordingly, none of these options were in-the-money.
Compensation of Directors
Directors Fees
Each outside Director of U.S. Can receives an annual retainer of $30,000 and full Board meeting fees of
$1,500 for meetings attended in person and $500 for telephonic meetings. Directors are also reimbursed for reasonable
expenses incurred in the course of their service. There are five regularly scheduled full Board meetings each year,
typically held in February, April, July, October and December.
Committee Fees
The Board has standing Audit, Compensation and Nominating Committees. Each outside Director serving on a
Committee receives meeting fees of $1,000 for meetings attended in person and $500 for telephonic meetings. Committee
members are also reimbursed for reasonable expenses incurred in the course of their service.
Transactions with Management
Executive Deferred Compensation Plan
The executive deferred compensation plan permits eligible executives to reduce the amount of their current
taxable income by deferring payment of up to 25% of their annual cash bonus under our management incentive plan. The
vested amount in participants' accounts are invested in various mutual funds.
Executive Severance Plan
Several of our executive officers are eligible to participate in our executive severance plan. The
executive severance plan provides an executive with a severance payment equal to 12 months (18 months for certain
executives) of the executive's base salary in the event the executive is terminated without cause or leaves for good
reason. In the cases of Ms. Derbyshire and Messrs. Farley, Kirk, Morrison, Scrimo, Sims and Workman, the executive
severance plan will not provide a severance benefit if these executives are entitled to receive a severance benefit under
their change in control agreements (described below).
U.S. Can Corporation 2000 Equity Incentive Plan
In connection with the recapitalization, the Board of Directors and stockholders of U.S. Can Corporation
approved the U.S. Can Corporation 2000 Equity Incentive Plan. The Board of Directors administers the plan and may, from
time to time, grant option awards to directors of U.S. Can Corporation, including directors who are not employees of U.S.
Can Corporation, all executive officers of U.S. Can Corporation and its subsidiaries, and other employees, consultants,
and advisers who, in the opinion of the Board, are in a position to make a significant contribution to the success of
U.S. Can and its subsidiaries. The Board of Directors may grant options that are time-vested and options that vest based
on the attainment of performance goals specified by the Board of Directors.
Change in Control Agreements
Certain executive officers are a party to a change in control agreement. The recapitalization constituted
a change in control under each agreement, which generally requires the Company to provide severance benefits to the
executive officer upon his or her termination of employment during the agreement term.
The agreements with Messrs. Morrison and Sims provide that, until the end of the 24th month following
October 2000, the executive will be entitled to the following benefits during the term of the executive's agreement while
employed by us:
o a salary which is not less than his or her highest annual base salary rate during the one-year period
before the change in control;
o continued participation in our management incentive plan or any replacement bonus plan providing an
opportunity for an incentive payment equal to at least the greatest incentive compensation opportunity
provided to him or her during the one-year period prior to the change in control;
o life insurance coverage providing an amount in death benefits that is not less than two times the
executive's base salary and disability income replacement coverage; and
o participation in health, welfare, retirement and other fringe benefit programs on substantially the same
terms as those benefits that are provided to other senior management employees.
If the executive is terminated without cause at any time prior to the end of the 24th month following
October 2000, or if the executive leaves employment as a result of a constructive termination, the executive is entitled
to a lump sum severance payment. This payment will equal 18 months of base salary for Mr. Morrison and 12 months of base
salary for Mr. Sims. In addition, the executives will be entitled to pro rata payments of bonus awards under the
management incentive plan.
The agreements with Messrs. Ford, McGowan and Obradovich provide that upon termination by us or
constructive termination by the executive within two years of a change in control, the executive will be entitled to:
o a severance payment equal to two times the greater of his current annual base salary or the annual base
salary immediately before the change in control in the cases of Messrs. Ford and McGowan and equal to
one times this amount in the case of Mr. Obradovich;
o a pro-rated bonus based on the executive's target bonus;
o accelerated vesting of all restricted stock grants awarded to Mr. McGowan; and
o continuation of health and welfare benefits for two years following termination in the cases of
Messrs. Ford and McGowan and for one year in the case of Mr. Obradovich.
Employment Agreement with Mr. Jones
As of the recapitalization, Mr. Jones terminated his then existing change of control agreement and entered
into a new two-year employment agreement with us. Under the terms of Mr. Jones' employment agreement, he will be paid an
annual base salary of at least $610,000. His base salary and other compensation will be reviewed annually by the
Compensation Committee of the Board of Directors. Mr. Jones participates in the management incentive plan with an
opportunity to receive a bonus payment equal to 100% of his base salary. We have also agreed to provide Mr. Jones with
term life insurance coverage with death benefits at least equal to twice his base salary, an automobile allowance and
employee benefits comparable to those provided to our other senior executives.
In the event of the termination of Mr. Jones' employment with us due to his death or permanent disability,
we will pay him or his estate:
(1) an amount equal to one year's base salary reduced by any amounts received from any life or disability
insurance provided by us; and
(2) if Mr. Jones is entitled to receive a bonus payment under the management incentive plan, a bonus payment
prorated to reflect any partial year of employment.
In the event Mr. Jones terminates his employment for good reason or we terminate his employment without
cause, we will pay him:
(1) his base salary and benefits for the earliest to occur of 18 months, his death or the date that he
breaches the provisions of his employee agreement (relating to non-competition, confidentiality and
inventions); and
(2) if Mr. Jones is entitled to receive a bonus payment under the management incentive plan, a bonus payment
prorated to reflect any partial year of employment.
If Mr. Jones' employment is terminated for cause or by voluntary resignation, he will receive no further
compensation.
Employment Agreements with Ms. Derbyshire and Messrs. Farley, Kirk, Scrimo and Workman
As of the recapitalization, Ms. Derbyshire and Messrs. Farley, Kirk, Scrimo and Workman, referred to as
the executives, terminated their then existing change of control agreements and entered into new employment agreements
with the Company. Two-year employment agreements were entered into with each of the executives on October 4, 2000. Under
the terms of these employment agreements, Ms. Derbyshire and each of Messrs. Farley, Kirk, Scrimo and Workman will be
paid an annual base salary of at least $260,000, $226,000, $235,000, $220,000 and $390,000, respectively. Each
executive's base salary and other compensation will be reviewed annually by that executive's supervisor. Each executive
also participates in our management incentive plan with an opportunity to receive a bonus payment equal to 50% of his or
her base salary. The Company also agreed to provide each executive with term life insurance coverage with death benefits
at lease equal to twice his or her base salary, an automobile allowance and employee benefits comparable to those
provided to our other senior executives.
In the event of the termination of an executive's employment with us due to his or her death or permanent
disability, we will pay him or her or his or her estate:
(1) an amount equal to one year's base salary reduced by any amounts received from any life or disability
insurance provided by us; and
(2) if the executive is entitled to receive a bonus payment under the management incentive plan, a bonus
payment prorated to reflect any partial year of employment.
In the event an executive terminates his or her employment for good reason or we terminate his or her
employment without cause, we will pay him or her:
(1) his or her base salary and benefits for the earliest to occur of 18 months, his or her death or the date
that he or she breaches the provisions of his or her employee agreement (relating to non-competition,
confidentiality and inventions); and
(2) if the executive is entitled to receive a bonus payment under the management incentive plan, a bonus
payment prorated to reflect any partial year of employment.
If an executive's employment is terminated for cause or by voluntary resignation, he or she will receive
no further compensation.
Service Agreement with Mr. Ford
The Company has entered into a service agreement with Mr. Ford through our wholly owned subsidiary, USC
Holding UK Limited. The service agreement will continue in effect until it is terminated by us or Mr. Ford, but not
beyond Mr. Ford's attainment of USC Holding UK Limited's retirement age (currently 65). The Company has agreed to pay
Mr. Ford a base salary of(pound)232,000 per year during the term of his agreement and to provide him with an automobile and
retirement benefits no less beneficial than those provided by his previous employer. The Company has agreed to provide a
target bonus for Mr. Ford of 50% of his base salary with the actual amount based upon the attainment of pre-established
performance goals.
Mr. Ford may terminate his employment by providing 12 months notice Mr. Ford's employment may be
terminated by giving him 24 months notice, except Mr. Ford's employment can be terminated for cause without prior notice.
After termination notice is given and prior to expiration of the notice period, the Company is required to continue to
pay Mr. Ford's salary and provide other contractual benefits. If Mr. Ford's employment is terminated by reason of
redundancy, he will receive an additional payment to Mr. Ford equal to two times his entitlement to statutory redundancy
pay (to include the statutory entitlement).
Additionally, the service agreement requires Mr. Ford to refrain from disclosing confidential information
acquired in connection with his employment with the Company and also requires Mr. Ford to refrain from working for any
other firm during the term of the agreement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Following the consummation of the transactions on October 4, 2000, we had one class of issued and
outstanding common stock, and U.S. Can Corporation owned all of it.
The following table sets forth certain information with respect to the ownership of U.S. Can Corporation's
common stock as of March 15, 2001. As of March 15, 2001, U.S. Can Corporation had 53,333,333 shares of issued and
outstanding common stock.
U.S. Can Corporation's preferred stock, which has no voting rights other than those provided by Delaware
law, is owned by Berkshire Partners and its co-investors, Salomon Smith Barney, Carl Ferenbach and affiliates of Ricardo
Poma, Francisco Soler. See " Certain Relationships and Related Party Transactions--Preferred Stock."
Notwithstanding the beneficial ownership of common stock presented below, the stockholders agreement
entered into upon consummation of the transactions governs the stockholders' exercise of their voting rights with respect
to the election of directors and other material events. The parties to the stockholders agreement have agreed to vote
their shares to elect the Board of Directors as set forth therein. See "Certain Relationships and Related Party
Transactions - Stockholders Agreement."
The following table describes the beneficial ownership of each class of issued and outstanding common
stock of U.S. Can Corporation by each of our directors and executive officers, our directors and executive officers as a
group and each person who beneficially owns more than 5% of the outstanding shares of common stock of U.S. Can
Corporation as of March 15, 2001. As used in the table, beneficial ownership has the meaning set forth in
Rule 13d-3(d)(1) of the Exchange Act.
Beneficial Owner Number of Shares Percent Ownership
---------------- ---------------- -----------------
Berkshire Partners LLC(1)............................................. 41,229,278 77.30%
Salomon Smith Barney Inc.(2).......................................... 2,613,332 4.90
Paul W. Jones......................................................... 1,933,334 3.63
John L. Workman....................................................... 1,000,000 1.88
J. Michael Kirk....................................................... 333,333 *
Gillian V. N. Derbyshire.............................................. 333,333 *
Roger B. Farley....................................................... 533,333 1.00
David R. Ford......................................................... 453,333 *
Thomas A. Scrimo...................................................... 213,334 *
Carl Ferenbach(3)..................................................... 41,229,278 77.30
Richard K. Lubin(4)................................................... 41,229,278 77.30
Ricardo Poma(5)....................................................... 2,202,344 4.13
Francisco A. Soler(6)................................................. 951,485 1.79
Louis B. Susman(7).................................................... 2,613,332 4.90
All officers and directors as a group (12 persons).................... 51,769,758 97.07
- -----------
* Less than 1%
(1) Includes 25,847,737 shares of common stock held by Berkshire Fund V Investment Corp.; 2,584,771 shares of common
stock held by Berkshire Investors LLC; and 12,796,770 shares of common stock held by Berkshire Fund V
Coinvestment Corp. The address of Berkshire Partners LLC is One Boston Place, Suite 3300, Boston, Massachusetts
02108.
(2) The address of Salomon Smith Barney Inc. is 8700 Sears Tower, Chicago, Illinois 60606.
(3) Mr. Ferenbach is a Managing Director of Berkshire Partners LLC.
(4) Mr. Lubin is a Managing Director of Berkshire Partners LLC.
(5) Mr. Poma beneficially owns 2,202,344 shares of U.S. Can Corporation common stock as a result of his relationship
to (i) Salcorp Ltd., a company of which Mr. Poma is the sole stockholder, director and executive officer, and
which is the record holder of 924,804 shares, (ii) Scarsdale Company N.V., Inc., a company of which Mr. Poma is a
director and executive officer and which is the record holder of 26,681 shares, and (iii) Barcel Corporation,
which is the record holder of 1,250,859 shares and is wholly owned by United Capital Corporation, which is wholly
owned by Inversal Trust, a family trust of which Mr. Poma is the trustee.
(6) Mr. Soler beneficially owns 951,485 shares of U.S. Can Corporation common stock as a result of his relationship
to (i) Windsor International Corporation, a company of which Mr. Soler is a director and executive officer and
which is the record holder of 424,460 shares, (ii) Atlas World Carriers S.A., a company of which Mr. Soler is a
director and executive officer and which is the record holder of 250,172 shares, (iii) The World Financial
Corporation S.A., a company of which Mr. Soler is a director and executive officer and which is the record holder
of 250,172 shares, and (iv) Scarsdale Company N.V., Inc., a company of which Mr. Soler is an executive officer
and which is the record holder of 26,681 shares.
(7) Mr. Susman is the Vice Chairman of Investment Banking and Managing Director of Salomon Smith Barney Inc. Salomon
Smith Barney owns 2,613,332 shares of common stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Relationship with Berkshire Partners
Berkshire Partners has been actively involved in our company through Carl Ferenbach, a founding partner of
Berkshire Partners. Mr. Ferenbach was one of the Company's founding directors in 1983 and served as a member of our Board
of Directors until February 2000. Upon the completion of the recapitalization, Berkshire Partners received a fee of
$2.0 million. In addition, Berkshire Partners will receive a management fee of $750,000 per year.
Relationship with Salomon Smith Barney
Salomon Smith Barney currently beneficially owns 4.62% of the Company's common stock and provides
investment banking and financial advisory services. Between 1997 and 1998, Salomon Brothers Inc, one of Salomon Smith
Barney's predecessors, was paid approximately $800,000 in fees in connection with the sale of our commercial metal
services business. Salomon Smith Barney was paid $2.0 million in fees for financial advisory services provided in
connection with the recapitalization. In addition, Salomon Smith Barney received customary fees for serving as sole book
running manager for the original offering, as dealer manager in U.S. Can Corporation's tender offer for all of its
outstanding 101/8% notes due 2006 and as joint arranger under the new senior secured credit facility.
Stockholders Agreement
In connection with the recapitalization, the Company entered into a stockholders agreement with
stockholders which provides for, among other things, certain restrictions and rights related to the transfer, sale or
purchase of common stock and preferred stock. The stockholders agreement has the following provisions:
o Prior to the third anniversary of the closing of the recapitalization, no stockholder may transfer
shares of U.S. Can Corporation capital stock (other than limited exceptions including permitted
transfers to an affiliate or in connection with estate planning).
o After the third anniversary of the closing of the recapitalization, a stockholder may only transfer
shares of U.S. Can Corporation capital stock (other than limited exceptions including permitted
transfers to an affiliate or in connection with estate planning) after the transferring stockholder
first gives U.S. Can Corporation, and then the other stockholders on a pro rata basis, a right of first
refusal to purchase all or a portion of the shares at the same price.
o U.S. Can Corporation has the right to purchase U.S. Can Corporation equity securities held by a
management stockholder (as defined) in the event the management stockholder's employment with U.S. Can
Corporation is terminated for any reason.
o If a management stockholder's employment with U.S. Can Corporation is terminated by virtue of death,
disability or retirement in accordance with U.S. Can Corporation policy, the management stockholder will
have the right to require U.S. Can Corporation to purchase his or her equity securities of U.S. Can
Corporation.
o If, at any time, specified stockholders holding 75% of the outstanding common stock equivalents (as
defined) (i.e., Berkshire Partners, its affiliates and another stockholder) elect to consummate the sale
of 50% or more of the common stock of U.S. Can Corporation to an unaffiliated third party, the remaining
stockholders will be obligated to consent to and take all actions necessary to complete the proposed
sale of the same proportion of their stock on the same terms.
o After the third anniversary of the closing of the recapitalization, a stockholder (or a group of
stockholders together) owning more than 4% of the outstanding shares of U.S. Can Corporation capital
stock may only (other than in connection with estate planning transfers) transfer the shares to an
unaffiliated third party, so long as other stockholders are given the option to participate in the
proposed transfer on the same terms and conditions on a pro rata basis (except in connection with
transfers permitted by the stockholders agreement).
o The stockholders have agreed to elect directors of U.S. Can Corporation such that the Board of Directors
will consist of two designees of Berkshire and its affiliates so long as the Berkshire stockholders
maintain ownership of at least 25% of the U.S. Can Corporation common stock, two designees of management
stockholders, Louis Susman, Ricardo Poma, Francisco Soler (or other designees of the Scarsdale Group if
Francisco Soler and Ricardo Poma both no longer serve on the Board of Directors so long as the Scarsdale
Group owns at least 5% of the U.S. Can Corporation common stock) and two other independent directors
acceptable to the other directors.
o Following an initial public offering of U.S. Can Corporation common stock, specified stockholders will
have either one or two demand registration rights. The stockholders will be entitled to "piggy-back"
registration rights on all registrations of U.S. Can Corporation common stock by U.S. Can Corporation or
any other stockholder, subject to customary underwriter cutback.
o So long as U.S. Can Corporation is not paying default interest under any of its financing arrangements,
an 80% vote of the common stockholders will be required to approve and adopt mergers, acquisitions,
charter or bylaw amendments, extraordinary borrowings, dividends, stock issuances and other specified
matters. An 80% vote will be required at all times for a financial restructuring that treats the
management stockholders differently and adversely from the rest of the common stockholders.
o Stockholders have pre-emptive rights to subscribe for newly issued shares on a pro rata basis, subject
to certain exclusions.
o Most of the restrictions contained in the stockholders agreements terminate upon consummation of a
qualified initial public offering of common stock by U.S. Can Corporation or specified changes in
control of U.S. Can Corporation.
Preferred Stock
As part of the transactions, U.S. Can Corporation issued and sold in a private placement shares of
preferred stock having an aggregate value of $106.7 million to Berkshire Partners and its affiliates and the rollover
stockholders. The principal terms of the preferred stock are summarized below. This summary, however, is not complete and
is qualified in its entirety by reference to the provisions of U.S. Can Corporation's certificate of incorporation, as in
effect at the time of the closing of the transactions.
Dividends. Dividends accrue on the preferred stock at an annual rate of 10%, are cumulative from the date
of issuance and compounded quarterly, on March 31, June 30, September 30 and December 31 of each year and are payable in
cash when and as declared by our Board of Directors, so long as sufficient cash is available to make the dividend payment
and has been obtained in a manner permitted under the terms of our new senior secured credit facility and the indenture.
Voting Rights. Holders of the preferred stock have no voting rights, except as otherwise required by law.
Ranking. The preferred stock has a liquidation preference equal to the purchase price per share, plus all
accrued and unpaid dividends. The preferred stock ranks senior to all classes of U.S. Can Corporation common stock and is
not convertible into common stock.
Redemption. U.S. Can Corporation is required to redeem the preferred stock, at the option of the holders,
at a price equal to its liquidation preference, plus accrued and unpaid dividends, upon the occurrence of any of the
following events and so long as sufficient cash is available at U.S. Can or available from dividend payments permitted
under the terms of the indenture:
o the bankruptcy of either U.S. Can Corporation or United States Can Company;
o the acceleration of debt under any major loan agreement to which U.S. Can Corporation or any of its
subsidiaries is a party; or
o public offerings of shares of capital stock of U.S. Can Corporation.
No holder of preferred stock, however, may require U.S. Can Corporation to redeem the preferred stock if
doing so would cause the bankruptcy of U.S. Can Corporation or United States Can Company or a breach of the indenture. In
addition, if proceeds from public offerings of U.S. Can Corporation's stock are insufficient to redeem all of the shares
of the preferred stock that the holders wish to be redeemed, U.S. Can Corporation is required to redeem the remaining
shares at a price equal to its liquidation preference, 366 days after the tenth anniversary of the closing of the
transactions or the payment in full of the notes and the debt outstanding under the new senior secured credit facility,
whichever is earlier.
U.S. Can Corporation's certificate of incorporation expressly states that any redemption rights of holders
of preferred stock shall be subordinate or otherwise subject to prior rights of the lenders under our new senior secured
credit facility and the holders of the exchange notes.
Upon a change of control of U.S. Can Corporation (as defined in the indenture), the shares of preferred
stock may be redeemed at the option of either the holders or U.S. Can Corporation, subject to the terms of our new senior
secured credit facility and after the holders of the notes have been made and completed the requisite offer to repurchase
following a change of control under the indenture.
The new senior secured credit facility prohibits our ability to redeem the preferred stock, and the
indenture restricts U.S. Can Corporation's ability to obtain funds that may be necessary to redeem the preferred stock.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements commence on p.17.
(2) Financial Statement Schedules
All schedules are omitted as they are inapplicable or not required, or the required information
is included in the financial statements or in the notes thereto.
(3) Exhibits: A list of Exhibits is included in the Exhibit Index, which appears following the
signature pages and incorporated by reference herein.
The Company agrees that, upon request, it will furnish a copy of any instrument with respect to long-term
debt less than or equal to 10 percent of its total consolidated assets.
(b) Reports on Form 8-K
On October 18, 2000, the registrant filed a Form 8-K reporting
the completion of its leveraged buyout under Items 1, 5 and 7.
On October 26, 2000, the registrant filed a Form 8-K reporting
its third quarter results under Items 7 and 9.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March
30, 2001.
U.S. CAN CORPORATION
By: /s/ John L. Workman
-------------------------------------------------
John L. Workman
Executive Vice President and Chief Financial Officer
Each of the undersigned officers and directors of U.S. Can Corporation hereby severally constitutes and
appoints and each of them singly, his or her true and lawful attorneys with full power to them, and each of them singly,
to execute on behalf of the undersigned in the capacities indicated below any and all amendments to this Report on Form
10-K.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report and power of attorney
have been signed below by the following persons in the capacities and on the date indicated.
Signature Title
- --------- -----
/s/ Paul W. Jones Chairman of the Board, President and Chief
- -----------------------------------------------------
Paul W. Jones Executive Officer
/s/ John L. Workman Director, Executive Vice President and Chief Financial Officer
- -----------------------------------------------------
John L. Workman
/s/ John R. McGowan Vice President and Controller
- -----------------------------------------------------
John R. McGowan
/s/ Carl Ferenbach Director
- -----------------------------------------------------
Carl Ferenbach
/s/ Richard K. Lubin Director
- -----------------------------------------------------
Richard K. Lubin
/s/ Ricardo Poma Director
- -----------------------------------------------------
Ricardo Poma
/s/ Francisco A. Soler Director
- -----------------------------------------------------
Francisco A. Soler
/s/ Louis B. Susman Director
- -----------------------------------------------------
Louis B. Susman
Item 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following exhibits are either filed with this registration statement or incorporated by reference:
Exhibit
Number Exhibit Description
2.1 Agreement and Plan of Merger (the "Merger Agreement ") dated as of June 1, 2000 between U.S. Can Corporation and
Pac Packaging Acquisition Corporation (Exhibit 2 to the current report on Form 8-K, filed on June 15, 2000).(1)
2.2 First Amendment to Merger Agreement dated as of June 28, 2000 (Exhibit 2.2 to the current report on Form 8-K,
filed on June 30, 2000).(1)
2.3 Second Amendment to Merger Agreement dated as of August 22, 2000 (Exhibit 2.3 to the current report on Form 8-K,
filed on August 31, 2000).(1)
3.1 Restated Certificate of Incorporation of U.S. Can Corporation (Exhibit 3.1 to the registration statement on Form
(No. 333-53276), declared effective on March 5, 2001).(1)
3.2 Amended and Restated By-laws of U.S. Can Corporation (Exhibit 3.2 to the registration statement on Form (No.
333-53276), declared effective on March 5, 2001).(1)
3.3 Restated Certificate of Incorporation of United States Can Company (Exhibit 3.3 to the registration statement on
Form (No. 333-53276), declared effective on March 5, 2001).(1)
3.4 Amended and Restated By-laws of United States Can Company (Exhibit 3.4 to the registration statement on Form (No.
333-53276), declared effective on March 5, 2001).(1)
3.5 Certificate of Incorporation of USC May Verpackungen Holding Inc (Exhibit 3.5 to the registration statement on
Form (No. 333-53276), declared effective on March 5, 2001).(1)
3.6 By-Laws of USC May Verpackungen Holding Inc (Exhibit 3.6 to the registration statement on Form (No. 333-53276),
declared effective on March 5, 2001).(1)
4.1 Indenture dated as of October 4, 2000 between the Company and Bank One Trust Company, N.A., as Trustee (Exhibit
4.1 to the current report on Form 8-K, filed on October 18, 2000).(1)
10.1 Credit Agreement dated as of October 4, 2000, among United States Can Company, the guarantors and Bank of
America, N.A. and the other financial institutions listed therein, as Lenders (Exhibit 10.1 to the current report
on Form 8-K, filed on October 18, 2000).(1)
10.2 Pledge Agreement dated as of October 4, 2000 among U.S. Can Corporation, United States Can Company, each of the
domestic subsidiaries of United States Can Company and Bank of America, N.A (Exhibit 10.2 to the registration
statement on Form (No. 333-53276), declared effective on March 5, 2001).(1)
10.3 Security Agreement dated as of October 4, 2000 among U.S. Can Corporation, United States Can Company, each of the
domestic subsidiaries of United States Can Company and Bank of America, N.A (Exhibit 10.3 to the registration
statement on Form (No. 333-53276), declared effective on March 5, 2001).(1)
10.4 Sublease Agreement, dated 2/10/89, relating to the Commerce, CA property (Exhibit 10.10 to the quarterly report
on Form 10-Q for the quarter ended April 6, 1997, filed on May 20, 1997).(1)
10.5 Lease Agreement, dated 1/1/76, as amended, relating to the Weirton, WV property (Exhibit 10.11 to the quarterly
report on Form 10-Q, for the quarter ended April 6, 1997, filed on May 20, 1997).(1)
10.6 Frank J. Galvin Separation Agreement, dated 2/1/2000 (Exhibit 10.7 to the annual report on Form 10-K for the
fiscal year ended December 31, 1999, filed on March 30, 2000).(1)
10.7 Amendment No. 4 to the Lease Agreement, dated 1/1/76, as amended, relating to the Weirton, WV property (Exhibit
10.7 to the registration statement on Form (No. 333-53276), declared effective on March 5, 2001).(1)
10.8 Lease relating to Dragon Parc Industrial Estate, Merthyr Tydfil, Wales, dated November 27, 1996 (Exhibit 10.24 to
the annual report on Form 10-K for the fiscal year ended December 31, 1996, filed on March 26, 1997).(1)
10.9 Nonqualified Supplemental 401(k) Plan (Exhibit 10.33 to the annual report on Form 10-K for the fiscal year ended
December 31, 1995, filed on March 26, 1996).(1)
10.10 Nonqualified Benefit Replacement Plan (Exhibit 10.34 to the annual report on Form 10-K for the fiscal year ended
December 31, 1995, filed on March 26, 1996).(1)
Exhibit
Number Exhibit Description
10.11 Lease Agreement between May Grundbesitz GmbH & Co. KG and May Verpackungen GmbH & Co. KG (Exhibit 10.1 to the
quarterly report on Form 10-Q for the quarter ended July 2, 2000, filed on August 15, 2000).(1)
10.12 Amendment No. 3 to the Lease Agreement, dated 1/1/76, as amended, relating to the Weirton, WV property (Exhibit
10.55 to the annual report on Form 10-K for the fiscal year ended December 31, 1995, filed on March 26, 1996).(1)
10.13 Employment Agreement dated October 4, 2000 by and among Paul W. Jones, United States Can Company and U.S. Can
Corporation (Exhibit 10.13 to the registration statement on Form (No. 333-53276), declared effective on March 5,
2001).(1)
10.14 Employment Agreement dated October 4, 2000 by and among John L. Workman, United States Can Company and U.S. Can
Corporation (Exhibit 10.14 to the registration statement on Form (No. 333-53276), declared effective on March 5,
2001).(1)
10.15 Employment Agreement dated October 4, 2000 by and among Gillian V. Derbyshire, United States Can Company and U.S.
Can Corporation (Exhibit 10.15 to the registration statement on Form (No. 333-53276), declared effective on March
5, 2001).(1)
10.16 Employment Agreement dated October 4, 2000 by and among Roger B. Farley, United States Can Company and U.S. Can
Corporation (Exhibit 10.16 to the registration statement on Form (No. 333-53276), declared effective on March 5,
2001).(1)
10.17 Employment Agreement dated October 4, 2000 by and among J. Michael Kirk, United States Can Company and U.S. Can
Corporation (Exhibit 10.17 to the registration statement on Form (No. 333-53276), declared effective on March 5,
2001).(1)
10.18 Employment Agreement dated October 4, 2000 by and among Thomas A. Scrimo, United States Can Company and U.S. Can
Corporation (Exhibit 10.18 to the registration statement on Form (No. 333-53276), declared effective on March 5,
2001).(1)
10.19 Service Agreement with David R. Ford dated November 24, 1997 (Exhibit 10.34 to the annual report on Form 10-K for
the fiscal year ended December 31, 1998, filed on March 31, 1999).(1)
10.20 Employee Agreement dated October 4, 2000 by and among David R. Ford, United States Can Company and U.S. Can
Corporation (Exhibit10.20 to the registration statement on Form (No. 333-53276), declared effective on March 5,
2001).(1)
10.21 Change-in-Control Agreement dated February 4, 1998 by and among David R. Ford, U.S. Can Corporation and United
States Can Company (Exhibit 10.51 to the annual report on Form 10-K for the fiscal year ended December 31, 1997,
filed on March 26, 1998).(1)
10.22 U.S. Can Corporation Executive Deferred Compensation Plan (Exhibit 10.30 to the annual report on Form 10-K for
the fiscal year ended December 31, 1998, filed on March 31, 1999).(1)
10.23 Amendment No. 1 to the U.S. Can Corporation Executive Deferred Compensation Plan, dated as of October 4, 2000
(Exhibit 10.23 to the registration statement on Form (No. 333-53276), declared effective on March 5, 2001).(1)
10.24 U.S. Can Corporation 2000 Equity Incentive Plan (Exhibit 10.24 to the registration statement on Form (No.
333-53276), declared effective on March 5, 2001).(1)
10.25 United States Can Company Executive Severance Plan, dated as of October 13, 1999 (Exhibit 10.34 to the annual
report on Form 10-K for the fiscal year ended December 31, 1999, filed on March 30, 2000).(1)
10.26 U.S. Can Corporation Stockholders Agreement, dated as of October 4, 2000 (Exhibit 10.26 to the registration
statement on Form (No. 333-53276), declared effective on March 5, 2001).(1)
21 Subsidiaries of the Registrants.(1)
23. Consent of Auditors.
24 Power of Attorney (included as part of the Signature Pages).
(1) Incorporated by reference.
(b) Other financial statement schedules are omitted because the information called for is not required or is shown either
in the financial statements or the accompanying notes.