US CAN CORP - 10-K Annual Report

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UNITED STATES
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, 2002

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 March 26, 2003, 53,333.333 shares of Common Stock were outstanding.

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TABLE OF CONTENTS

Page
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PART I

Item 1. Business.................................................................................... 2
Item 2. Properties.................................................................................. 10
Item 3. Legal Proceedings........................................................................... 11
Item 4. Submission of Matters to a Vote of Security Holder.......................................... 12

PART II

Item 5. Market for Common Equity and Related Stockholder Matters.................................... 13
Item 6. Selected Financial Data..................................................................... 14
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................................................... 15
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.................................. 23
Item 8. Financial Statements and Supplementary Data................................................. 25
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.................................................................. 65

PART III

Item 10. Directors and Executive Officers of the Registrant.......................................... 65
Item 11. Executive Compensation...................................................................... 68
Item 12. Security Ownership of Certain Beneficial Owners and Management.............................. 73
Item 13. Certain Relationships and Related Transactions.............................................. 74

PART IV

Item 14. Controls and Procedures..................................................................... 77
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................ 77

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 sufficient cash flows to service our debt; the timing
and cost of plant closures; the level of cost reduction achieved through restructuring and capital expenditure programs;
the success of new technology; changes in market conditions or product demand; loss of important customers or volume;
downward selling price movements; changes in raw material costs; and currency and interest rate 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, incorporated in Delaware in 1983, 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 Reckitt Benckiser, Sherwin Williams,
S.C. Johnson, Gillette and Unilever. 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 United States Can's subsidiaries (the "Subsidiaries"). The consolidated group is
referred to herein as "the Company".

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 (16) to the Consolidated Financial Statements.

Business Segments

We have four major business segments: Aerosol Products; International Operations; Paint, Plastic & General
Line Products; and Custom & 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 manufactured in the U.S. represent our largest segment, accounting for approximately
45.7%, 43.3% and 44.2% of our total net sales in 2002, 2001 and 2000, respectively. In 2002, we manufactured
approximately 55% 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. The Company beneficially owns 36.5%
of Formametal S.A. Our subsidiary, May Verpackungen GmbH & Co., KG ("May"), a German manufacturer of steel food
packaging and aerosol cans provides us with diversification across our product lines and customer base.

International Operations represents our second largest segment, accounting for approximately 30.3%, 29.7%
and 29.6% of our total net sales in 2002, 2001 and 2000, respectively. In 2002, we were the second largest producer of
steel aerosol cans in Europe and manufactured over 30% of the steel aerosol cans produced. May is a leading European
food can producer with more than 30% of the German food can market, by sales volume.

Paint, Plastic & General Line Products

Our primary Paint, Plastic & General Line products include steel paint and coating containers, oblong cans
and plastic pails and drums. 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. Paint, Plastic & General Line products accounted for
approximately 15.1%, 16.9% and 16.8% of our total net sales in 2002, 2001 and 2000, respectively.

Custom & Specialty Products

We also have a significant presence in the Custom & Specialty market, offering a wide range of decorative
and specialty steel products. Our primary products include functional and decorative containers and tins, and collectible
items, such as decorative metal signs. These products are generally custom designed and decorated and are typically
produced in smaller quantities than our other products. On February 20, 2001, we acquired certain assets of Olive Can
Company, a Custom & Specialty manufacturer. The Olive acquisition is not material to the Company's operations or
financial position.

Custom & Specialty products accounted for approximately 8.9%, 10.0% and 9.4% of our total net sales in
2002, 2001 and 2000, respectively.

Customers and Sales Force

As of December 31, 2002, we had approximately 4,800 customers, with our largest customer accounting for
8.6% of our total net sales in 2002. 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, 2002, we had 68 sales representatives in the United States
and 19 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.

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. Our largest domestic
steel suppliers are U.S. Steel, Weirton Steel and Wheeling-Pitt, while Corus, Arcelor and Rasselstein supply the largest
volume in Europe.

The President of the United States has imposed 30% ad valorem tariffs under Section 201 of the Trade Act
of 1974 on tin mill imports from most foreign producers effective March 20, 2002. These tariffs are scheduled to remain
in effect for three years, declining to 24% in the second year and 18% in the third year. Tin mill imports from Canada,
Mexico and certain developing countries are excluded from the tariffs. The Company purchases the vast majority of its
domestic steel from domestic sources but since the tariff curtails foreign competition, the Company is being negatively
impacted as the competitive ability to purchase foreign steel at lower prices has been effectively restricted by the
tariff.

In response to the U.S. tariffs imposed under Section 201 of the Trade Act of 1974, in March of 2002
European Union Trade Commission established a steel safeguard initiative whereby imports of steel into Europe from
designated countries are assessed a duty of 17% versus the previous duty of 1%. The new duty on some European imports
remains in effect for the duration of the U.S. imposed tariffs under Section 201. Due to the fact that the Company's
European operations do not import steel from any of the countries affected by the new European duty, in 2002 the
Company's international operations were not affected by the new duty. Likewise, the Company does not anticipate the new
duty to affect its operations in 2003 as the Company has no plans to begin purchasing steel from these countries.

Our domestic and European operations purchase approximately 400,000 tons of tin-plate annually. The
Company believes that adequate quantities of tin-plate will continue to be available from steel manufacturers, however,
potential seasonal shortages may occur from domestic suppliers as foreign sourcing is effectively no longer available due
to the tariffs.

Tin-plate prices have increased slightly over the last five years. While there is some long-term
variability, tin-plate prices have generally been stable and price increases have historically been announced several
months before implementation. This stability has enhanced 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. The tariffs implemented in 2002 did not have a material effect on the Company's
costs for the year but the Company expects the increase in steel costs in 2003 to be above historical increases due to
the tariffs. We cannot assess the impact of the tariffs on its steel prices in 2004 or later years. We have not always
been able to immediately offset increases in tin-plate prices with price increases on our products. Further, the tariffs
could jeopardize this pricing stability, and could negatively impact our gross margins as we may not have the ability to
immediately or fully pass through tinplate price increases to all of our customers. The Company is unable to determine
the long term effects the tariffs will have on steel prices or resource availability. However, the Company will continue
to explore other sourcing alternatives to limit any potential negative impact of the tariffs.

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 & 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.

Special Charges

The Company initiated several restructuring programs in 2001, consisting of a voluntary termination
program offered to corporate office salaried employees, the closure of six manufacturing facilities and the opening of a
new plastics plant in Atlanta, Georgia.

During 2001, the Company closed a paint can manufacturing facility and a warehouse in Baltimore, Maryland
and ceased operations in Dallas, Texas. Also in connection with the restructuring programs established in 2001, during
2002 the Company closed a Custom & Specialty plant located in the Baltimore, Maryland area, closed the Southall, England
manufacturing facility and closed the Burns Harbor, Indiana lithography facility. The Company has also closed two
plastics facilities in Georgia and transferred production to a new facility in Atlanta, Georgia. The closure of the
Burns Harbor, Indiana lithography facility, in the fourth quarter of 2002 completed the restructuring program established
in 2001, as originally planned.
While the majority of the restructuring initiatives have been completed in 2002, certain portions of the
programs will not be completed until 2003, and the Company does not expect to realize the full earnings benefits until
2004. Certain long-term liabilities (approximately $3.7 million as of December 31, 2002), consisting primarily of
employee termination costs and future ongoing facility carrying costs will be paid over many years.

During 2002, the Company recorded a net charge of $8.7 million related to its restructuring programs.
The 2002 net charge included a reassessment of the restructuring reserves established in 2001, the costs associated with
an executive level position elimination and the loss on the sale of the Daegeling, Germany facility. The increased 2001
reserves are primarily due to additional required contractual payments to terminated employees and a reassessment of
future carrying costs for closed facilities. The increased employee separation costs are primarily due to larger
payments made to employees of the Southall, England plant as a result of the extension of the closure period and
additional employee terminations in connection with the 2001 program. Facility closing costs were reassessed and
increased as a result of landlord negotiations. The increased costs were offset by reduced employee separation and
facility closing costs of our Burns Harbor facility shutdown. The individual components of the restructuring programs
are discussed in Note (4) to the consolidated financial statements.

Labor

As of December 31, 2002, we employed approximately 2,400 employees in the United States. Of our total U.S.
workforce, approximately 1,600 employees, or 67%, 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 approximately 400 employees were successfully negotiated in 2002. As of December 31, 2002, our
European subsidiaries employed approximately 1,350 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. 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.

As discussed previously, the restructuring programs initiated in 2001 have resulted in a reduction of the
salaried and hourly work force. The Company has worked closely with the various labor unions and their collective
bargaining units to ensure provisions for termination, severance and pension eligibility were in accordance with the
respective collective bargaining agreements. Except as referenced in "Legal Proceedings - Litigation", the Company's
relationship with represented employees is good and there have been no labor strikes, slow-downs, work stoppages or other
material labor disputes threatened or pending against the Company for at least the past 10 years.

Competition

Quality, service and price are the principal methods of competition in the rigid metal and plastic
container industry. Geographic presence is also an important competitive factor given the cost of shipping empty cans
long distances and accordingly, the Company maintains East Coast, Midwest, Southern and West Coast manufacturing
facilities. In addition, price 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 and BWAY. Because steel
aerosol cans are pressurized and are used for personal care, household and other consumer 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 other smaller regional producers. Crown Cork &
Seal and Impress are 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 & Specialty line competes with a large number of container manufacturers, but we do not compete
across the entire product spectrum with any single company. Competition in this segment 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 and flexible pouches.

Strategic Transactions

In February 2001, we acquired certain assets of Olive Can Company, a Custom & Specialty manufacturer. The
acquisition, which is not material to the Company's operations or financial position, was accounted for as a purchase.

The Company continually evaluates all areas of its operations for ways to improve profitability and
overall Company performance. In connection with these evaluations, management considers numerous alternatives to enhance
the Company's existing business including, but not limited to acquisitions, divestitures, capacity realignments and
alternative capital structures.

The Company's Senior Secured Credit Facility prohibits the redemption of the subordinated debt. The
Company may consider making such repurchases upon the expiration or amendment of the Facility.

Refer to Note (5) to the Consolidated Financial Statements for further discussion of the Olive acquisition.

Risk Factors

We have substantial debt that could negatively impact our business by, among other things, increasing our vulnerability
to general adverse economic and industrial conditions and preventing us from fulfilling our obligations under our Senior
Secured Credit Agreement and our Subordinated Debt obligations. As of December 31, 2002, total consolidated debt
outstanding was $549.7 million. We had $30.1 million of unused commitment under our revolving credit facility and cash
of $11.8 million. Our high level of debt could:

o limit our financial flexibility in planning for and reacting to industry changes;
o place us at a competitive disadvantage as compared to less leveraged companies;
o increase our vulnerability to general adverse economic and industry conditions, including changes in
interest rates;
o require us to dedicate a substantial portion of our cash flow to payments on our debt, reducing the
availability of our cash flow for other purposes;
o make it difficult for us to satisfy our obligations, including making interest payments under our debt
obligations; and
o limit our ability to obtain additional financing to operate our business.

The terms of our debt may severely limit our ability to plan for or respond to changes in our business.

Our senior secured credit facility restricts, among other things, our ability to take specific actions,
even if these actions may be in our best interest. These restrictions limit our ability to:

o incur liens or make negative pledges on our assets;
o merge, consolidate or sell our assets;
o issue additional debt;
o pay dividends or redeem capital stock and prepay other debt;
o make investments and acquisitions;
o make capital expenditures;
o materially change our business;
o amend our debt and other material agreements;
o issue and sell capital stock;
o allow distributions from our subsidiaries; or
o prepay specified indebtedness.

Our debt requires us to maintain specified financial ratios and meet specific financial tests. Our failure
to comply with these covenants could result in an event of default that, if not cured or waived, could result in us being
required to repay these borrowings before their due date. If we were unable to make this repayment or otherwise refinance
these borrowings, our lenders could foreclose on our assets. If we were unable to refinance these borrowings on favorable
terms, our business could be adversely impacted.

Our senior debt bears interest at a floating rate, and if interest rates rise, our payments will increase and we may
incur losses.

Outstanding amounts under our senior secured credit facility bear interest at a floating rate. If interest
rates rise, our senior debt interest payments also will increase, which could make it more difficult for us to satisfy
our debt obligations and further reduce availability of our cash flow for operations and other purposes.

This risk has been partially mitigated by interest rate swap and collar agreements that we have entered
into. (See "Quantitative and Qualitative Disclosure About Market Risk - Foreign Currency and Interest Rate Risk -
Interest Rate Risk"). However, the interest rate swaps and collars were entered into in 2000, when interest rates were
higher than current rates. Accordingly, these contracts are "out of the money" and may require future payments if market
interest rates do not return to historical levels. Further, these contracts expire in October 2003. Management has not
determined whether new contracts will be entered into at that time.

Berkshire Partners owns a controlling interest in our voting securities.

Berkshire Partners and its affiliates own approximately 77.3% of the total common equity of U.S. Can
Corporation. Subject to specified limitations contained in our stockholders agreement, Berkshire Partners controls the
Company. Accordingly, Berkshire and its affiliates will control the power to elect directors and to approve many actions
requiring the approval of our stockholders, such as adopting most amendments to our certificate of incorporation and
approving mergers, sales of all or substantially all of our assets and other corporate transactions that could result in
a change of control of our company.

We face competitive risks from many sources that may negatively impact our profitability.

The can and container industry is highly competitive with some of our competitors having greater financial
resources than we do. Quality, service and price are the principal methods of competition in our industry. Because our
customers have the ability to buy similar products from our competitors, we are limited in our ability to increase
prices. Our capital investments have improved our operating efficiencies, and consequently, improved profitability, but
we cannot assure you that we will continue to improve profit margins in this manner. In addition, our profit margins
could decrease if we are unable to meet our customers' quality and service demands.

We also face competitive risks from substitute products, such as aluminum, glass and plastic containers.
Our business also is affected by changes in consumer demand for our customers' products. A decrease in the costs of
substitute products or a decline in consumer demand for our customers' products, particularly their aerosol-based
products, could reduce our customers' orders and adversely affect our business, including our profitability.

The loss of a key customer could have a significant impact on our sales.

We make a significant percentage of our sales to a limited number of customers. Our largest customer
accounted for approximately 8.6% of our sales in 2002. The loss of key customers could adversely affect our sales,
necessitating quick operating cost reductions to offset the resulting sales decrease.

In addition, several of our manufacturing plants are dependent on high volume orders from customers. The
loss of any of these customers or a decrease in demand for their products, which are packaged in our containers, could
adversely affect our business and force us to close manufacturing plants. Product quality is a key element in customer
retention in the packaging industry.

Increases in tin-plated steel prices could cause our production costs to increase, which could reduce our ability to
compete effectively.

Tin-plated steel is the most significant raw material used to make our products. Negotiations with our
domestic and European tin-plated steel suppliers generally occur once per year. Failure to negotiate favorable tin-plated
steel prices in the future could result in an increase in production costs and a negative impact on our results of
operations.

The President of the United States has imposed 30% ad valorem tariffs under Section 201 if the Trade Act
of 1974 on tin mill imports from most foreign producers effective March 30, 2002. These tariffs are scheduled to remain
in effect for three years, declining to 24% in 2003 and 18% in 2004. Tin mill imports from Canada, Mexico and certain
developing counties are excluded from these tariffs. The Company purchases the vast majority of its domestic steel from
domestic sources. Since the tariff curtails foreign competition, a negative impact to the Company is expected since the
Company is unable to purchase foreign steel at lower prices.

Some customer contracts allow us to pass tin-plated steel price increases through to our customers.
However, these contracts generally limit pass-throughs and also may require us to match other competitive bids. If we
cannot pass through all future tin-plated steel price increases to our customers or match other packaging suppliers'
bids, our financial condition may be adversely affected.

We face risks associated with our international operations.

We operate facilities and sell products in several countries outside the United States. We have
significant foreign operations, including plants and sales offices in Denmark, France, Germany, Italy, Spain and the
United Kingdom. In addition, we currently own 36.5% of an aerosol can manufacturer located in Argentina. Our
international operations subject us to risks associated with selling and operating in foreign countries. In Europe,
these risks include:

o fluctuations in currency exchange rates;
o restrictions on dividend payments and other payments by our foreign subsidiaries;
o withholding and other taxes on dividend payments and other payments by our foreign subsidiaries; and
o investment regulation and other restrictions by foreign governments.

In Argentina, these risks include:

o limitations on conversion of foreign currencies into United States dollars;
o hyperinflation; and
o political instability.

Our business is subject to substantial environmental remediation and compliance costs.

Our operations are subject to federal, state, local and foreign laws and regulations relating to
pollution, the protection of the environment, the management and disposal of hazardous substances and wastes and the
cleanup of contaminated sites. In particular, our lithography operations' air emissions are strictly regulated. We spend
significant funds each year to upgrade emissions control equipment to comply with changes in environmental regulations
and increase the efficiencies of our manufacturing operations. Changes in applicable environmental regulations could
increase the capital expenditures necessary to bring manufacturing facilities into compliance with changing environmental
laws. We also could incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, as a result
of violations of, or liabilities under, environmental laws or non-compliance with environmental permits required for our
production facilities. Occasionally, contaminants from current or historical operations have been detected at some of our
present and former sites. Although we are not currently aware of any material claims or obligations with respect to these
sites, the detection of additional contaminants or the imposition of cleanup obligations at existing or unknown sites of
contamination could result in significant liability.

We cannot predict the amount or timing of costs imposed under environmental laws. Liability under certain
environmental laws relating to contaminated sites can be imposed retroactively and on a joint and several basis (i.e.,
one liable party could be held liable for all costs at a site). We have been named as a potentially responsible party for
costs incurred in the clean up of a regional groundwater plume partially extending underneath property located in San
Leandro, California, formerly a site of one of our can assembly plants. We have agreed to indemnify the owner of this
property against this matter. We do not believe the past operations of our can assembly plant caused or contributed to
this groundwater plume. However, any liability in connection with this or other environmental matters could result in
substantial costs.

A significant portion of our workforce is unionized and labor disruptions could decrease our productivity.

As of December 31, 2002, we had approximately 3,800 employees. Nearly 1,600 of our United States employees
are subject to collective bargaining agreements. In keeping with common practice, virtually all manufacturing employees
at our European plants are unionized. Although we consider our current relations with our employees to be good, except as
referenced in "Legal Proceedings - Litigation", if we do not maintain these good relations, or if major work disruptions
were to occur, our production costs could increase.

ITEM 2. PROPERTIES

We have 13 operations 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 March 15, 2003.

Location Size (in sq. Status Segment
- -------- ------------- ------ -------
ft.)
----

United States
Elgin, IL (1)............................ 481,346 Owned Aerosol
Tallapoosa, GA (1)....................... 249,480 Owned Aerosol
Baltimore, MD ........................... 232,172 Leased Custom & Specialty
Commerce, CA............................. 215,860 Leased Paint, Plastic & General Line
Newnan, GA............................... 185,122 Leased Paint, Plastic & General Line
Hubbard, OH (1).......................... 174,970 Owned Paint, Plastic & General Line
Elgin, IL................................ 144,578 Leased Custom & Specialty
Baltimore, MD (1)........................ 137,000 Owned Custom & Specialty
Horsham, PA (1).......................... 132,000 Owned Aerosol
Weirton, WV.............................. 108,000 Leased Aerosol
Danville, IL (1)......................... 100,000 Owned Aerosol
Alliance, OH............................. 52,000 Leased Paint, Plastic & General Line
New Castle, PA (1)....................... 22,750 Owned Custom & Specialty
Europe
Erftstadt, Germany....................... 369,000 Leased International
Merthyr Tydfil, United Kingdom (2)....... 320,000 Leased International
Laon, France............................. 220,000 Owned International
Reus, Spain.............................. 182,250 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) U.S. owned plants are subject to a lien in favor of Bank of America, N.A. as collateral agent for the
lenders under the credit agreement.

(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.

In connection with our restructuring initiatives, we have closed several manufacturing facilities, some
which have been subleased. The Company has reserved for on-going costs associated with these closed facilities and they
are not included in the above listing.

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, relating to pollution,
the protection of the environment, the management and disposal of hazardous substances and wastes and the cleanup of
contaminated sites. 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, some of 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.

Occasionally, contaminants from current or historical operations have been detected at some of our present
and former sites. Although we are not currently aware of any material claims or obligations with respect to these sites,
the detection of additional contamination or the imposition of cleanup obligations at existing or unknown sites could
result in significant liability.

We have been designated as a potentially responsible party under superfund laws at various sites in the
United States, including a former can plant 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 the sites designated under U.S. Superfund law was, in most cases, minimal. With respect to San Leandro, we believe the
principal source of contamination is unrelated to our past operations.

Through corporate due diligence and the Company's compliance management system, we 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. In February 2001,
the Company 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. The
Company undertook a full review, revised its emissions calculations based on its review and determined that it had not
exceeded its emissions cap for any reporting year. In September 2001, the Company reported to PDEP and EPA certain
deviations from the requirements of its Title V permit related to the use of non-compliant coatings and corresponding
recordkeeping and reporting obligations, and certain recordkeeping deviations stemming from the malfunction of the
temperature recorder for an oxidizer. The Company met with PDEP officials in October 2001, and provided some supplemental
information requested by PDEP in November 2001. On May 21, 2002, the Company met with PDEP officials and reached an
agreement to resolve the past reported deviations by entering into a Consent Assessment of Civil Penalty for $30,000.
The Company and PDEP signed a definitive agreement in October 2002 and the Company paid the first installment. The
second installment is due in April 2003.

Based upon currently available information, the Company does not expect the effects of environmental
matters to be material to its financial position.

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 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. On June 19, 2001, the Court of Appeals issued a
written decision. While the Court enforced the award of backpay, with interest, it agreed with the Company's position
that the NLRB should permit the Company to present actuarial calculations of any credit due it because of overpayments or
early payments of supplemental unemployment benefits or pension. On March 1, 2002, the Company settled this case. Under
the settlement agreement, the Company paid approximately $1.8 million in backpay and interest, as well as certain pension
adjustments that are not expected to have a material effect on the Company. The National Labor Relations Board approved
the settlement on May 30, 2002. The Company made substantially all payments due under the settlement in July 2002. In
October 2002, the NLRB entered an Order officially closing this matter.

Walter Schmidt, former finance director at May Verpackungen GmbH ("May") sued for unfair dismissal
following termination of his employment contract. The contract had a five-year term and Schmidt remains in pay status
through its notice period, ending January 31, 2005. Mr. Schmidt claims that he also is due a severance settlement of
five years' salary at the end of the notice period. In July 2002, the labor courts of first instance ruled that Mr.
Schmidt's notice date and termination should be effective December 31, 2005, and that the severance settlement is due at
that time. On January 7, 2003, May appealed this ruling. In its appeal, May contends that the labor courts' ruling is
erroneous on four bases. The appeals court will review the ruling of the labor courts of first instance de novo, meaning
that it is not bound by the prior ruling and may render an independent decision. Since the appeals court's review is not
complete, the Company is unable, at this time, to determine the appeals court's position or the effect on the Company of
the initial decision.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

In December 2002, U.S. Can Corporation sought the consent of its common and preferred shareholders to
amend its certificate of incorporation to effect (i) a reverse stock split which, upon obtaining the necessary consents
and filing with the Secretary of State of the State of Delaware, reclassified and converted each preexisting share of
common stock and Series A preferred stock into 1/1000th of a share of common and preferred stock, respectively, and (ii)
a corresponding reduction in the number of its authorized shares of common stock from 100,000,000 shares to 100,000
shares and in the number of its authorized shares of preferred stock from 200,000,000 shares to 200,000 shares.

The following tables set forth the number of shares consenting, not consenting, abstaining, or not
obtained (numbers shown are prior to the reverse stock split):

Common Stock
------------

Shares Outstanding........................................... 53,333,333
Shares Consenting................................. 48,620,761
Shares Not Consenting........................... ---
Shares Abstaining................................. ---
Shares Consent Not Obtained.................... 4,712,572

Preferred Stock
---------------

Shares Outstanding........................................... 106,666,667
Shares Consenting................................. 105,979,382
Shares Not Consenting........................... ---
Shares Abstaining................................. ---
Shares Consent Not Obtained.................... 687,285

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

U.S. Can has approximately 20 common stockholders. Its common stock has not been registered and there is
no trading market for its common stock. 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") and the Senior Subordinated Notes
("the Notes") on United States Can's ability to fund or pay cash dividends to U.S. Can Corporation.

In 2000, U.S. Can Corporation issued shares of preferred stock having a face value of $106.7 million.
Dividends accrue on the preferred stock at an annual rate of 10%, are cumulative from the date of issuance and are
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 such payment
would not violate the terms of the Facility and the Notes. As of December 31, 2002, dividends of approximately $26.5
million have been accrued. As United States Can is U.S. Can Corporation's only source of cash and payments by United
States Can are restricted by the terms of the Facility and the Notes, U.S. Can Corporation does not anticipate paying
cash dividends on the preferred stock in the foreseeable future. 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 (after giving effect to the reverse stock split), 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.

On December 20, 2002, U.S. Can Corporation amended its certificate of incorporation to effect (i) a
reverse stock split which, upon filing with the Secretary of State of the State of Delaware, reclassified and converted
each preexisting share of common stock and Series A preferred stock into 1/1000th of a share of common and preferred
stock, respectively, and (ii) a corresponding reduction in the number of its authorized shares of common stock from
100,000,000 shares to 100,000 shares and in the number of its authorized shares of preferred stock from 200,000,000
shares to 200,000 shares. The reverse stock split did not affect the relative percentages of ownership for any
shareholders. The reverse stock split did not affect the annual rate at which dividends on preferred stock accrue, their
cumulation or quarterly compounding. Dividends remain 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 such payment would not violate the terms of the
Facility and the Notes.

ITEM 6. SELECTED FINANCIAL DATA

The following consolidated financial data as of and for each of the fiscal years in the five years ended
December 31, 2002 were derived from our audited financial statements. You should read all of this information in
conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our
financial statements for the year ended December 31, 2002 and accompanying notes beginning on page 25.

U.S. CAN CORPORATION AND SUBSIDIARIES
(000's omitted)
For the Year Ended December 31,
-------------------------------
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
OPERATING DATA:
Net sales........................................ $ 796,500 $ 772,188 $ 809,497 $ 732,897 $ 730,951
Special charges (a).............................. 8,705 36,239 3,413 -- 35,869
Recapitalization charge (b)...................... -- -- 18,886 -- --
Operating income (loss).......................... 39,547 (6,146) 48,153 66,975 21,748
Income (loss) from continuing operations
before discontinued operations, extraordinary item,
and cumulative effect of accounting change.... (53,474) (40,416) 3,341 22,452 (7,525)
Discontinued operations, net of income taxes (c)
Net loss on sale of business.................. -- -- -- -- (8,528)
Extraordinary item, net of income taxes - loss from
early extinguishment of debt (d).............. -- -- (14,863) (1,296) --
Cumulative effect of accounting change, net of
income taxes (e).............................. (18,302) -- -- -- --
Net income (loss) before preferred stock dividends (71,776) (40,416) (11,522) 21,156
(16,053)
Preferred stock dividend requirements............ (12,521) (11,345) (2,601) -- --
Net income (loss) attributable to
common stockholders........................... $ (84,297) $ (51,761) $ (14,123) $ 21,156 $ (16,053)
BALANCE SHEET DATA:
Total assets..................................... $ 578,826 $ 634,350 $ 637,864 $ 663,570 $ 555,571
Total debt....................................... 549,682 536,776 495,045 359,317 316,673
Redeemable preferred stock....................... 133,133 120,613 109,268 -- --
Stockholders' equity (f)......................... (343,846) (247,124) (174,323) 68,556 50,177

(a) See Note (4) of the "Notes to Consolidated Financial Statements" for a description of the 2002, 2001 and 2000
Special Charges. In 1998, the Company established a restructuring provision for closure of the Green Bay,
Wisconsin aerosol assembly plant, the Alsip, Illinois general line plant, and the Columbiana, Ohio specialty
plant; a write-down to estimated proceeds for the sale of the metal closure business located in Glen Dale, West
Virginia; and selected closures and realignment of facilities servicing the lithography needs of the Company's
core businesses.

(b) See Note (3) of the "Notes to Consolidated Financial Statements."

(c) On November 9, 1998, the Company sold its commercial metal services business ("Metal Services"). Metal Services
included one plant in each of Chicago, Illinois; Trenton, New Jersey; Brookfield, Ohio, and Alsip, Illinois.

(d) In April of 2002, the FASB issued Statement of Financial Accounting Standard No. 145 related to gains and
losses on extinguishment of debt. See "New Accounting Pronouncements". In accordance with the pronouncement,
the Company will adopt the standard for the year ended December 31, 2003 and is in the process of reviewing the
criteria in Accounting Principles Board Opinion 30 as it relates to the Company's early extinguishment of debt
in 2000 and 1999. See Note (6) of the "Notes to Consolidated Financial Statements" for further details relating
to the early extinguishment of debt.

(e) See Note (15) of the "Notes to Consolidated Financial Statements."

(f) 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, 2002. This discussion
should be read in conjunction with the consolidated financial statements and notes to the consolidated financial
statements.

Critical Accounting Policies; Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Estimates are used for, but not limited to: allowance for doubtful
accounts; inventory valuation; purchase accounting allocations; restructuring amounts; asset impairments; depreciable
lives of assets; goodwill impairments; pension assumptions and tax valuation allowances. Future events and their effects
cannot be perceived with certainty. Accordingly, our accounting estimates require the exercise of management's current
best reasonable judgment based on facts available. The accounting estimates used in the preparation of the consolidated
financial statements will change as new events occur, as more experience is acquired, as more information is obtained and
as the Company's operating environments change. Significant business or customer conditions could cause material changes
to the amounts reflected in our financial statements. Accounting policies requiring significant management judgments
include those related to revenue recognition, inventory valuation, accounts receivable allowances, goodwill impairment,
restructuring reserves, tax valuation allowances, pension benefit obligations and interest rate exposure.

The Company's critical accounting policies are described in Note (2) to the Consolidated Financial
Statements. Significant business or customer conditions could cause material changes to the amounts reflected in our
financial statements. For example, the Company enters into contractual agreements with certain of its customers for
rebates, generally based on annual sales volumes. Should the Company's estimates of the customers' annual sales volumes
vary materially from the sales volumes actually realized, revenue may be materially impacted. Similarly, a large portion
of the Company's inventory is manufactured to customer specifications. Other inventory is generally less specific and
saleable to multiple customers. However, losses may result should the Company manufacture customized products which it is
unable to sell. Management also estimates allowances for collectibility related to its accounts receivable. These
allowances are based on the customer relationships, the aging and turns of accounts receivable, credit worthiness of
customers, credit concentrations and payment history. Despite our best efforts, the inability of a particular customer to
pay its debts could impact collectibility of receivables and could have an impact on future revenues if the customer is
unable to arrange other financing.

The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142 "Goodwill and Other
Intangible Assets" on January 1, 2002. Under this standard, goodwill and "indefinite-lived" intangibles are no longer
amortized, but are tested at least annually for impairment. The Company identifies potential impairments of goodwill by
comparing an estimated fair value for each applicable business unit to its respective carrying value. Although the
values were assessed using a variety of internal and external sources, future events may cause reassessments of these
values and related goodwill impairments.

During the first six months of 2002, the Company completed the initial transitional goodwill impairment
test as of January 1, 2002 required under SFAS No. 142, and reported that a non-cash impairment charge was required in
the Custom & Specialty and International segments. During the fourth quarter of 2002, the Company determined the amount
of the goodwill impairment and recorded a pre-tax goodwill impairment charge of $39.1 million ($18.3 million, net of tax)
relating to the Custom & Specialty and International segments. The charge has been presented as a cumulative effect of a
change in accounting principle effective as of January 1, 2002 and is primarily due to competitive pressures in the
Custom & Specialty and International segment marketplaces. To determine the amount of goodwill impairment, the Company
measured the impairment loss as the excess of the carrying amount of goodwill over the implied fair value of goodwill.
The impairment charge has no impact on covenant compliance under the Senior Secured Credit Agreement. As of December 31,
2002, the Company had $27.4 million of goodwill remaining on its balance sheet.

SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," was issued in August
2001. SFAS No. 144, which addresses financial accounting and reporting for the impairment of long-lived assets and for
long-lived assets to be disposed of, supercedes SFAS No. 121 and is effective for fiscal years beginning after December
15, 2001. The Company adopted this pronouncement on January 1, 2002. In accordance with SFAS 144, we continually review
whether events and circumstances subsequent to the acquisition of any long-lived assets have occurred that indicate the
remaining estimated useful lives of those assets may warrant revision or that the remaining balance of those assets may
not be recoverable. If events and circumstances indicate that the long-lived assets should be reviewed for possible
impairment, we use projections to assess whether future cash flows or operating income (before amortization) on an
undiscounted basis related to the tested assets is likely to exceed the recorded carrying amount of those assets, to
determine if a write-down is appropriate. Should an impairment be identified, a loss would be reported to the extent that
the carrying value of the impaired assets exceeds their fair values as determined by valuation techniques appropriate in
the circumstances that could include the use of similar projections on a discounted basis.

As more fully described in Note (4) to the Consolidated Financial Statements, several restructuring
programs were implemented in order to streamline operations and reduce costs. The Company has established reserves and
recorded charges against such reserves, to cover the costs to implement the programs. The estimated costs were
determined based on contractual arrangements, quotes from contractors, similar historical activities and other judgmental
determinations. Actual costs may differ from those estimated and, in 2002, an additional net charge of $8.7 million was
recorded related to the reassessment of the 2001 restructuring programs, 2002 employee terminations, and the sale of the
Daegeling, Germany facility. See Note (4) to the Consolidated Financial Statements for a description of the additional
net charge. SFAS No. 146 "Accounting for Costs Associated With Exit or Disposal Activities" was issued in July 2002.
SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the
liability is incurred. SFAS No. 146 supercedes the guidance of Emerging Issues Task Force ("EITF") Issue No. 94-3
"Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity", which required that
liabilities for exit costs be recognized at the date of an entity's commitment to an exit plan. SFAS No. 146 is
effective for exit or disposal activities that are initiated after December 31, 2002. The Company will adopt SFAS No.
146 for any exit disposal activities initiated after such date.

The Company accounts for income taxes using the asset and liability method under which deferred income tax
assets and liabilities are recognized for the tax consequences of "temporary differences" between the financial statement
carrying amounts and the tax bases of existing assets and liabilities and operating losses and tax credit carry
forwards. On an ongoing basis, the Company evaluates its deferred tax assets to determine whether it is more likely
than not that such assets will be realized in the future and records valuation allowances against the deferred tax assets
for amounts which are not considered more likely than not to be realized. The estimate of the amount that is more likely
than not to be realized requires the use of assumptions concerning the amounts and timing of the Company's future income
by taxing jurisdiction. Actual results may differ from those estimates.

Due to a history of operating losses in certain countries coupled with the deferred tax assets that arose
in connection with the restructuring programs and goodwill impairment charges, the Company has determined that it cannot
conclude that it is "more likely than not" that all of the deferred tax assets of certain of its foreign operations will
be realized in the foreseeable future. Accordingly, during the fourth quarter of 2002, the Company established a
valuation allowance of $44.7 million to provide for the estimated unrealizable amount of its net deferred tax assets as
of December 31, 2002. The Company will continue to assess the valuation allowance and, to the extent it is determined
that such allowance is no longer required, these deferred tax assets will be recognized in the future.

The Company relies upon actuarial models to calculate its pension benefit obligations and the related
effects on operations. Accounting for pensions and postretirement benefit plans using actuarial models requires the use
of estimates and assumptions regarding numerous factors, including discount rate, the long-term rate of return on plan
assets, health care cost increases, retirement ages, mortality and employee turnover. On an annual basis, the Company
evaluates these critical assumptions and makes changes to them as necessary to reflect the Company's experience. In any
given year, actual results could differ from actuarial assumptions made due to economic and other factors which could
impact the amount of expense or liability for pensions or postretirement benefits the Company reports.

Two of the critical assumptions in determining the Company's reported expense or liability for pensions or
postretirement benefits are the discount rate and the long-term expected rate of return on plan assets. The use of a
lower discount rate and a lower long-term expected rate of return on plan assets would increase the present value of
benefit obligations and increase pension expense and postretirement benefit expense. In 2002, the Company reduced its
U.S. and foreign discount rates to reflect market interest rate conditions.

To manage interest rate exposure, the Company enters into interest rate agreements. The net interest paid
or received on these agreements is recognized as interest income or expense. Our interest rate agreements are reported in
the Consolidated Financial Statements at fair value using a mark-to-market valuation. Changes in the fair value of the
contracts are recorded each period as a component of other comprehensive income. Gains or losses on our interest rate
agreements are reclassified as earnings or losses in the period in which earnings are affected by the underlying hedged
item. This may result in additional volatility in reported earnings, other comprehensive income and accumulated other
comprehensive income. Our interest rate swaps and collars were entered into in 2000, when interest rates were higher
than current rates. Accordingly, these contracts are "out of the money" and may require future payments if market
interest rates do not return to historical levels. In addition, if rates do increase above historical levels and the
counterparties to the agreements default on their obligations under the agreements, our interest expense would increase.
The Company does not use financial instruments for trading or speculative purposes.

Year Ended December 31, 2002 Compared To Year Ended December 31, 2001

Consolidated net sales for the year ended December 31, 2002 were $796.5 million as compared to $772.2
million in 2001, an increase of 3.1%. Along business segment lines, Aerosol net sales in 2002 increased to $364.1 million
from $334.7 million in 2001, an increase of 8.8%, due principally to increased unit volume ($37.4 million) partially
offset by the pricing impacts resulting from a change in customer mix and the 2002 effect of pricing concessions granted
in 2001 ($8.0 million). International net sales increased to $241.2 million in 2002 from $229.5 million in 2001, an
increase of $11.7 million or 5.1% primarily due to the positive impact of the translation of sales made in foreign
currencies based upon using the same average U.S. dollar exchange rates in effect during the year ended December 31,
2001. The Paint, Plastic & General Line segment net sales decreased 8.0%, from $130.4 million in 2001 to $120.0 million
in 2002. This decrease was due to changes in product and customer mix along with falling resin prices in our plastics
business that are contractually passed on to customers ($11.3 million) and decreased paint volume ($2.2 million) offset
by increased volume in plastics ($3.1 million). In 2002, the Company reduced manufacturing capacity in its paint
business as part of the Company's restructuring programs. In the Custom & Specialty segment, sales decreased 8.2% from
$77.6 million in 2001 to $71.2 million in 2002 driven primarily by a change in product mix ($7.6 million) partially
offset by an increase in volume ($1.2 million).

Consolidated cost of goods sold increased $14.9 million to $710.4 million for 2002. The principal reasons
for the increase were increased volume experienced in our domestic Aerosol business ($32.1 million), operating
inefficiencies in the U.K. and Germany ($3.2 million) and the foreign currency translation impact on costs ($11.9
million) based upon using the same average U.S dollar exchange rates in effect during the year ended December 31, 2001.
These increases were partially offset by cost containment programs and changes in product mix in U.S. production
facilities ($30.6 million) and the decline in resin prices ($2.0 million). As anticipated, the tariffs imposed in 2001
on imported steel did not have a material impact on the Company's cost of goods sold in 2002. The impact of higher steel
prices due to the tariffs will increase the Company's costs of goods sold in 2003, however the Company cannot determine
the effect on steel purchase prices for 2004 and later years. For further discussion on the tariffs see "Business - Raw
Materials". Gross profit margin of 10.8% in 2002 increased 0.9 percentage points from 2001. The increase in the gross
margin rate is due to the $9.6 million of benefits achieved from the restructuring programs (1.2 percentage points),
volume related efficiencies (0.4 percentage points) partially offset by operating costs and inefficiencies in the U.K.
and Germany (0.7 percentage points).

Selling, general and administrative costs decreased from $46.6 million in 2001 to $37.9 million in 2002
due to the lack of goodwill amortization during the year and positive results from management's focus on Company-wide
cost saving programs initiated in 2001. As previously discussed, the Company has ceased the amortization of goodwill.
Goodwill amortization for the year ended December 31, 2001 was $2.8 million.

During 2002, the Company substantially completed the restructuring programs initiated in 2001. The
Company offered voluntary termination programs to corporate office salaried employees, opened a new plastics plant in
Atlanta, Georgia and closed six planned manufacturing facilities. The Burns Harbor, Indiana lithography facility was
closed in the fourth quarter, completing the facility closure program. In addition, during the fourth quarter of 2002,
the Company sold its Daegeling, Germany facility.

During 2002, the Company recorded a net charge of $8.7 million related to restructuring. The net charge
of $8.7 million consists of new restructuring reserves of $11.9 million less reversals of $3.2 million due to the
reassessment of restructuring reserves established in 2001. Included in the 2002 net restructuring charge are executive
position elimination costs and the loss on the sale of the Daegeling, Germany facility. While the majority of the
restructuring initiatives have been completed in 2002, certain portions of the programs will not be completed until 2003,
and the Company does not expect to realize the full earnings benefits until 2004. Certain long-term liabilities
(approximately $3.7 million as of December 31, 2002), consisting primarily of employee termination costs and future
ongoing facility carrying costs will be paid over many years. The Company initiated the restructuring programs in 2001
and recorded a net restructuring charge of $36.2 million for the year.

The table below presents the reserve categories and related activity as of December 31, 2002:

January 1, 2002 Net December 31, 2002
(in millions) Balance Additions(d) Deductions(c) Other (b) Balance
----------------- --------------- ---------------- ------------- --------------------
----------------- --------------- ---------------- ------------- --------------------
Employee Separation $21.2 $4.9 ($17.6) $0.7 $9.2

Facility Closing Costs 10.7 3.8 (9.6) 1.6 6.5
----------------- --------------- ---------------- ------------- --------------------
----------------- --------------- ---------------- ------------- --------------------
Total $31.9 $8.7 ($27.2) $2.3 $15.7
(a)
================= =============== ================ ============= ====================
================= =============== ================ ============= ====================

(a) Includes $3.7 million classified as other long-term liabilities as of December 31, 2002.
(b) Non-cash foreign currency translation impact and the reversal of $1.5 million of asset write-offs
previously expensed in 2001.
(c) Includes cash payments of $20.8 million. The remaining non-cash deductions represent increased pension
and post-retiree benefits transferred to Other Long-Term Liabilities and the non-cash loss recorded on the sale of
the Daegeling facility.
(d) Includes reversals of $3.2 million due to the re-assessment of reserves

Interest expense in 2002 decreased 3.4%, or $1.9 million, versus 2001 due to lower interest rates ($3.4
million) partially offset by the interest expense impact of higher average borrowings ($1.5 million). See Note (6) to the
Consolidated Financial Statements for a further discussion of the Company's debt position.

Payment in kind dividends of $12.5 million and $11.3 million on the redeemable preferred stock issued in
connection with the recapitalization were recorded in 2002 and 2001, respectively. See Note (12) to the Consolidated
Financial Statements.

Year Ended December 31, 2001 Compared To Year Ended December 31, 2000

Consolidated net sales for the year ended December 31, 2001 were $772.2 million as compared to $809.5
million in 2000, a decrease of 4.6%. Along business segment lines, Aerosol net sales in 2001 decreased to $334.7 million
from $357.7 million in 2000, a 6.4% decline, due principally to decreased unit volume ($13.6 million), a change in the
mix of sales volume towards lower selling value products ($4.0 million) and pricing concessions granted in the first half
of 2001 ($5.3 million). The pricing concessions granted in the first part of the year will continue to negatively impact
the first half of 2002, both in sales and gross profit. International net sales decreased to $229.5 million in 2001 from
$239.6 million in 2000, a decrease of $10.1 million or 4.2%. There was a $9.7 million negative impact in 2001 due to
U.S. dollar translation on sales made in foreign currencies. The Paint, Plastic & General Line segment net sales
decreased 4.1%, from $136.1 million in 2000 to $130.4 million in 2001 due primarily to decreased unit volume of paint and
general line. In the Custom & Specialty segment, sales increased 2.0% from $76.1 million in 2000 to $77.6 million in
2001, due to additional sales as the result of the acquisition of Olive Can ($12.1 million see Note (5) to the
Consolidated Financial Statements) offset by the sale of the Wheeling metal closure and Warren lithography businesses
($3.4 million) and an overall decline in volume ($6.5 million).

Consolidated cost of goods sold increased $2.3 million to $695.5 million for 2001. The principal reasons
for the increase included additional volume as a result of the Olive Can acquisition ($11.8 million) and a one-time
inventory write-off relating to discontinued Custom & Specialty products ($3.2 million) offset by decreased costs caused
by volume and mix ($12.7 million). Gross profit margin of 9.9% in 2001 decreased 4.5 percentage points from 2000. The
primary reasons for the decline in gross margin rate include the impact of volume declines (0.5 percentage points),
selling price and product mix (2.0 percentage points) and manufacturing inefficiencies resulting from volume softness
(0.9 percentage points) and the delay in the sale of the Southall, U.K facility (0.4 percentage points).

Selling, general and administrative costs increased from $45.9 million in 2000 to $46.6 million in 2001.
The Company expects a reduction to selling, general and administration costs as a result of the Company offering a
voluntary termination program in connection with the restructuring initiatives discussed in Note (4) to the Consolidated
Financial Statements.

During 2001, the Company initiated several restructuring programs. These programs will result in (a) the
closure of five manufacturing facilities, (b) the additional consolidation of two facilities into one new facility, (c)
the reversal of a previous decision to close a Custom & Specialty lithography facility due to changing business needs and
(d) the elimination of approximately 600 jobs. The restructuring programs, which are more fully described in Note (4) to
the Consolidated Financial Statements, resulted in a net charge of $36.2 million in 2001. The programs are expected to
result in improved operating income in 2002 and future years as a result of reduced payroll costs and the elimination of
fixed overhead costs. A pre-tax charge of $3.4 million for severance and other termination-related costs was recorded in
the third quarter of 2000. 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.

The tables below present the reserve categories and related activity as of December 31, 2001 respectively:

January 1, 2001 December 31, 2001
(in millions) Balance Additions(a) Deductions(c) Balance
-------------------- ------------------ ------------------ --------------------
Employee Separation $19.8 ($4.7) $21.2
$6.1
Facility Closing Costs 9.3 11.2 (9.8) 10.7
Other Asset Write-Offs -- 5.2 (5.2)(d) --
--------------------
------------------ ------------------ --------------------
Total $15.4 $36.2 ($19.7) $31.9(b)
==================== ================== ================== ====================
------------------ ------------------ --------------------

(a) Includes a re-assessment of prior programs of $7.2 million
(b) Includes $6.0 million of other long-term liabilities as of December 31, 2001
(c) Includes cash payments of $ 8.3 million
(d) Net of proceeds from sale of Southall facility of $11.7 million

Interest expense in 2001 increased 41.6%, or $16.8 million, versus 2000 due to borrowings made in
connection with the recapitalization transactions that occurred in October 2000. The recapitalization resulted in
increased borrowings for all 2001 versus the fourth quarter of 2000. See "Liquidity and Capital Resources" and Notes
(3), (5) and (6) to the Consolidated Financial Statements for a further discussion of the recapitalization and the
Company's debt position.

Payment in kind dividends of $11.3 million and $2.6 million on the redeemable preferred stock issued in
connection with the recapitalization were recorded in 2001 and 2000, respectively. See Note (12) to the Consolidated
Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

During 2002, liquidity needs were met through internally generated cash flow and borrowings made under
lines of credit. Principal liquidity needs included operating costs, working capital, including restructuring costs and
capital expenditures. Cash flow provided by operations was $6.2 million for the year ended December 31, 2002, compared
to cash used of $7.0 million for the year ended December 31, 2001. The decreased use of cash is primarily due to the
decrease in the net loss before income taxes (as discussed earlier).

Net cash used in investing activities was $21.7 million in 2002, as compared to $24.4 million in 2001.
Investing activities for 2002 relate primarily to capital spending of $27.2 million, including $11.5 million in
conjunction with the Company's restructuring programs, offset by the proceeds received from the sale of property of $5.7
million, including the final payment received for the sale of our Southall facility of $4.8 million. Total capital
expenditures in 2001 were $19.5 million. Base capital expenditures are expected to range from $20.0 million to $24.0
million each year during the five years commencing 2003. 2003 capital expenditures include approximately $3.0 million to
complete the Company's 2001 restructuring programs. Capital expenditures are expected to be funded from cash on hand,
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.

Net cash provided from financing activities in 2002 was $12.0 million versus $35.1 million in 2001. The
primary 2002 financing sources were borrowings under the revolving credit portion of the Senior Secured Credit Facility
("the Facility") and unsecured revolving lines of credit granted by various banks to fund the seasonal working capital
requirements of May Verpackungen. The Senior Secured Credit Facility and the Notes contain a number of financial and
restrictive covenants. The Company was in compliance with all of the required financial ratios and other covenants as of
December 31, 2002. The unsecured revolving lines granted to May Verpackungen may be terminated by the offering banks
upon given notice periods. As agreed, May repaid(euro)2.0 million during 2002 and(euro)0.7 million in January 2003. No further
repayments have been committed. See Note (6) to the Consolidated Financial Statements for further discussion on the
Company's debt obligations.

Primary sources of liquidity are cash flow from operations and borrowings under revolving credit
facilities. United States Can Company, as Borrower, is a party to 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"). As amended, the Senior Secured Credit Facility provides for aggregate borrowings of $395.0 million
consisting of: (i) $80.0 million Tranche A loan; (ii) $180.0 million Tranche B loan; (iii) $25.0 million Tranche C
facility and (iv) $110.0 million under a revolving credit facility. All of the Tranche A and Tranche B debt and
approximately $20.5 million under the revolving credit facility were used to finance the recapitalization. The borrowings
under the revolving credit portion of the facility are available to fund working capital requirements, capital
expenditures and other general corporate purposes. The revolving loan facility also includes a subfacility for the
issuance of Letters of Credit. The Tranche C borrowings in December 2001 provided additional liquidity.

Principal repayments required under the Senior Secured Credit Facility are $10.0 million in 2003
increasing to $218.8 million at the maturity date in 2006. Also due in 2006 are any amounts outstanding at that time
under the Company's revolving line of credit. Additionally, the Facility requires a prepayment in the event that excess
cash flow (as defined) exists and following certain other events, including certain asset sales and issuances of debt and
equity.

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 were increased in
connection with the 2001 amendments and 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.

Borrowings under the Tranche A term loan are due and payable in quarterly installments, which are $2.0
million for each of the first three quarters in 2003 and $3.0 million for the fourth quarter of 2003 and increase over
time to $8.0 million per quarter, until the final balance is due. Borrowings under the Tranche B term loan are due and
payable in quarterly installments of nominal amounts until the final payment is due on January 4, 2006. No payments are
due on borrowings under the Tranche C term loan prior to its final maturity. The revolving credit facility is available
until January 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.

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.

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 under both facilities, as amended, at December 31, 2002 and anticipates being in
compliance in 2003. However, the minimum EBITDA covenant increases significantly in each of the first three quarters of
2003. Although management believes that it will be in compliance with these and other covenants under the Senior Secured
Credit Facility, factors beyond our control, such as sudden downturns in the demand for our products or significant cost
increases that we cannot quickly pass through to customers or offset through cost reductions, may cause our earnings
levels to not achieve those forecasted. If we believe that we would be unable to achieve our minimum EBITDA or other
financial covenants, we would expect to negotiate with the lenders an amendment to our Senior Secured Credit Facility.
We cannot be assured however, that the lenders would agree to an amendment if one were required. Without such an
amendment or a waiver, we would be in default on almost all of our borrowings, which would have severe consequences to
the Company regarding its sources of liquidity and its ability to continue operations.

At December 31, 2002, $69.7 million was outstanding under the $110.0 million revolving loan portion of the
Senior Secured Credit Facility. Letters of Credit of $10.2 million were outstanding securing the Company's obligations
under various insurance programs and other contractual agreements. Additionally, unsecured revolving lines of credit
granted by various banks of approximately $25.0 million are available to fund the seasonal working capital requirements
of our international operations. Borrowings outstanding under these facilities at December 31, 2002 were $13.4 million.
The lines may be terminated by the offering banks upon given notice periods.

As more fully described in Note (4) to the Consolidated Financial Statements, the Company has implemented
several restructuring programs. Future cash requirements to complete these programs are estimated to be approximately
$12.0 million in 2003 and $3.7 million in 2004 and beyond. The Company expects to fund these cash requirements from cash
on hand, operations and borrowings under the revolving credit facility. Upon completion, the programs are expected to
yield annual improvements in operating income exceeding $17.0 million, primarily through the reduction of payroll and
fixed overhead expenses.

The Company has a number of contractual commitments to make future cash payments. Under existing
agreements, contractual obligations as of December 31, 2002 are as follows (000's omitted):

Payments due by period
Contractual Obligations 1st year 2-3 years 4-5 years After 5 years
-------------------------------------
----------------------------------------------------------
Long Term Debt $25,074 $52,601 $ 291,140 $ 179,000
Capital lease obligations 1,079 788 - -
Operating leases 4,997 8,209 5,952 3,628
----------------------------------------------------------
Total Contractual Commitments $ 31,150 $61,598 $ 297,092 $ 182,628

See Note (6) to the Consolidated Financial Statements for further information on obligations under the
Senior Secured Credit Facility and 12 3/8% Senior Subordinated Notes due October 1, 2010 ("Notes") and Note (10) for
further information on capital and operating leases.

At existing levels of operations, cash generated from operations together with amounts to be drawn from
the revolving credit facility, are expected to be adequate to meet anticipated debt service requirements, restructure
costs, capital expenditures and working capital needs. Future operating performance, including the impact, if any, of
the tariff described under "Raw Materials", 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.

The Company's Senior Secured Credit Facility prohibits the redemption of the subordinated debt. The
Company may consider making such repurchases upon the expiration or amendment of the Facility.

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 customer price
increases. The Company's capital spending programs and manufacturing process upgrades are designed to increase operating
efficiencies and mitigate the impact of inflation on the Company's cost structure.

Effective March 20, 2002, the President of the United States imposed 30% ad valorem tariffs under Section
201 of the Trade Act of 1974 on tin mill imports from most foreign producers. The tariffs are scheduled to remain in
effect for three years, declining to 24% in the second year and 18% in the third year. Tin mill imports from Canada,
Mexico and certain developing countries are excluded from the tariffs. The tariffs did not materially effect the
Company's costs for 2002. However, the Company does purchase the vast majority of its domestic steel from domestic
sources and since the tariff curtails foreign competition, a negative impact to the Company could arise from price
increases from domestic suppliers.

In response to the U.S. tariffs imposed under Section 201of the Trade Act of 1974, in March of 2002 Europe
established a steel safeguard initiative whereby imports of steel into Europe from designated countries are assessed a
duty of 17% versus the previous duty of 1%. The new duty on some European imports remains in effect for the duration of
the U.S. imposed tariffs under Section 201. Due to the fact that the Company's European operations do not import steel
from any of the countries affected by the new European duty, in 2002 the Company's international operations were not
affected by the new duty. Likewise, the Company does not anticipate the new duty to affect its operations in 2003 as the
Company has no plans to begin purchasing steel from these countries.

NEW ACCOUNTING PRONOUNCEMENTS

During July 2001, the Financial Accounting Standards Board (FASB) issued and the Company adopted Statement
of Financial Accounting Standards (SFAS) No. 141, Business Combinations. SFAS No. 141 modifies the method of accounting
for business combinations entered into after June 30, 2001 and addresses the accounting for acquired intangible assets.
All business combinations entered into after June 30, 2001, are accounted for using the purchase method.

The Company adopted SFAS No. 142 "Goodwill and Other Intangible Assets" on January 1, 2002. This standard
provides accounting and disclosure guidance for acquired intangibles. Under this standard, goodwill and
"indefinite-lived" intangibles are no longer amortized, but are tested at least annually for impairment. Effective
January 1, 2002, the Company ceased amortization of its goodwill. The Company recorded goodwill amortization of $2.8
million and $2.9 million for the years ended December 31, 2001 and 2000. SFAS No. 142 required the Company to make an
initial assessment of goodwill impairment within six months after the adoption date. The initial step was designed to
identify potential goodwill impairment by comparing an estimated fair value for each applicable reporting unit to its
respective carrying value. For the reporting units where the carrying value exceeds fair value, a second step was
performed by to measure the amount of the goodwill impairment.

During the first six months of 2002, the Company completed the initial transitional goodwill impairment
test as of January 1, 2002, and reported that a non-cash impairment charge was required in the Custom & Specialty and
International segments. During the fourth quarter of 2002, the Company determined the amount of the goodwill impairment
and recorded a pre-tax goodwill impairment charge of $39.1 million relating to the Custom & Specialty and International
segments. The charge has been presented as a cumulative effect of a change in accounting principle effective as of
January 1, 2002 and is primarily due to competitive pressures in the Custom & Specialty and International segment
marketplaces. To determine the amount of goodwill impairment, the Company measured the impairment loss as the excess of
the carrying amount of goodwill over the implied fair value of goodwill. The impairment charge has no impact on covenant
compliance under the Senior Secured Credit Agreement. For further discussion of the goodwill impairment charge see Note
(15) to the Consolidated Financial Statements.

SFAS No. 145 "Recission of FASB Statements No. 4, 44, and 46, Amendment of FASB Statement No. 13, and
Technical Corrections" was issued in April 2002 and is effective for fiscal years beginning after May 15, 2002. This
statement eliminates the current requirement that gains and losses on extinguishment of debt be classified as
extraordinary items in the statement of operations. Instead, the statement requires that gains and losses on
extinguishment of debt be evaluated against the criteria in APB Opinion 30 to determine whether or not such gains or
losses should be classified as an extraordinary item. The statement also contains other corrections to authoritative
accounting literature in SFAS 4, 44 and 46. In accordance with the pronouncement, the Company will adopt the standard
for the year ended December 31, 2003 and is in the process of reviewing the criteria in Opinion 30 as it relates to the
Company's early extinguishment of debt in 2000.

The FASB issued SFAS No. 146 "Accounting for Costs Associated With Exit or Disposal Activities", in July
2002. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when
the liability is incurred. SFAS No. 146 supercedes the guidance of Emerging Issues Task Force ("EITF") Issue No. 94-3
"Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity", which required that
liabilities for exit costs be recognized at the date of an entity's commitment to an exit plan. SFAS No. 146 is
effective for exit or disposal activities that are initiated after December 31, 2002. The Company will adopt SFAS No.
146 for any exit disposal activities initiated after such date.

In December of 2002, the FASB issued SFAS No. 148 "Accounting for Stock-Based Compensation - Transition
and Disclosure". SFAS No. 148 amends FASB Statement No. 123 "Accounting for Stock-Based Compensation" to provide
alternative methods of transition for companies who voluntarily change to the fair value based method of accounting for
stock-based employee compensation. The statement also increases stock-based compensation quarterly and annual disclosure
requirements for all companies and is effective for financial statements of companies with fiscal years ending after
December 15, 2002. The Company adopted this statement in December of 2002 and there was no impact to the financial
position and results of operations of the Company as a result of the adoption. See Note (11) to the Consolidated
Financial Statements for the additional disclosures required by this pronouncement.

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 were entered into to mitigate the foreign currency risks associated with the financing of a
production facility in the United Kingdom. Pursuant to the agreement under which the contracts had been issued, the
counterparty elected to terminate the contracts in January 2003. In connection with the termination, the Company paid
$1.0 million to the counterparty which will be reflected in 2003 interest expense in accordance with the original
contract terms.

The Company bears foreign exchange risk because much of the financing is currently obtained in United
States dollars, but a portion of the Company's revenues and expenses are earned in the various currencies of our foreign
subsidiaries' operations. The revolving credit facility allows certain foreign subsidiaries to borrow up to $75 million
in British Pounds Sterling, and Euros. The Company has not made borrowings in any of these currencies.

Interest Rate Risk

Interest rate risk exposure results from our floating rate borrowings. A portion of the interest rate
risks have been hedged by entering into 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.

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.

2003 2004 2005 2006 2007 Thereafter Fair Value
----------- ------------ ----------- ------------ ------------ ----------- -------------
Debt Obligations (dollars in millions)
- --------------------------
Fixed rate $16.2 $17.8 $0.6 $1.4 $1.3 $175.0 $115.7
Average interest rate 8.35% 8.58% 6.10% 12.38%
8.14% 6.12%
Variable rate $10.0 $14.0 $21.0 $288.5 $ -- $ 4.0 $337.5
Average interest rate 5.42% 5.64% 1.40%
5.43% 5.41% 0.00%

Interest Rate Swaps-
Variable to Fixed
- --------------------------
Notional Amount $83.3 $ -- $ -- $ -- $ -- $ -- $(3.4)
Pay / receive rate 6.63% -- -- -- -- --

Interest Rate Collars
- --------------------------
Notional Amount $41.7 -- -- -- -- -- $(1.5)
Cap Rate 7.25% -- -- -- -- --
Floor Rate 6.10% -- -- -- -- --

The interest rate swaps and collars were entered into in 2000, when interest rates were higher than
current rates. Accordingly, these contracts are "out-of-the-money" and may require future payments if market interest
rates do not return to historical levels. In addition, if rates do increase above historical levels and the
counterparties to the agreements default on their obligations under the agreements, our interest expense would increase.
The Company does not use financial instruments for trading or speculative purposes. No quoted market value is available
(except on the 12 3/8% Senior Subordinated Notes). Fair value 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
----

Independent Auditors' Report for 2002...................................................................... 26

Report of Independent Accountants for 2001 and 2000........................................................ 27

Consolidated Statements of Operations for the Years Ended December 31, 2002, 2001 and 2000................. 28

Consolidated Balance Sheets as of December 31, 2002 and 2001............................................... 29

Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2002, 2001 and 2000....... 30

Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2001 and 2000................. 31

Notes to Consolidated Financial Statements................................................................. 32

INDEPENDENT AUDITORS' REPORT

To U.S. Can Corporation:
Lombard, Illinois

We have audited the accompanying consolidated balance sheet of U.S. Can Corporation and Subsidiaries ("the Company")
as of December 31, 2002, and the related consolidated statements of operations, stockholders' equity, and cash flows
for the year then ended. 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 audit. The consolidated financial
statements of the Company as of December 31, 2001 and 2000 and for each of the two years then ended, before the
inclusion of the disclosures discussed in Note 15 to the financial statements, were audited by other auditors, who
have ceased operations. Those auditors expressed an unqualified opinion on those financial statements in their
report dated March 6, 2002.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America.
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 audit provides a reasonable basis for our opinion.

In our opinion, such 2002 consolidated financial statements present fairly, in all material respects, the financial
position of U.S. Can Corporation and Subsidiaries as of December 31, 2002, and the consolidated results of their
operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted
in the United States.

As discussed in Note 2, in 2002 the Company changed its method of accounting for goodwill as required by Statement of
Financial Accounting Standards (Statement) No. 142, "Goodwill and Other Intangible Assets."

As discussed above, the financial statements of U.S. Can Corporation as of December 31, 2001 and 2000, and for the
years then ended were audited by other auditors who have ceased operations. As described in Note 15, these financial
statements have been revised to include the transitional disclosures required by Statement No. 142, which was adopted
by the Company as of January 1, 2002. Our audit procedures with respect to the disclosures in Note 15 with respect
to 2001 and 2000 included (i) agreeing the previously reported net income to the previously issued financial
statements and the adjustments to reported net income representing amortization expense (including any related tax
effects) recognized in those periods related to goodwill, to the Company's underlying records obtained from
management, and (ii) testing the mathematical accuracy of the reconciliation of adjusted net income to reported net
income. In our opinion, the disclosures for 2001 and 2000 in Note 15 are appropriate. However, we were not engaged
to audit, review, or apply any procedures to the 2001 or 2000 financial statements of the Company other than with
respect to such disclosures and, accordingly, we do not express an opinion or any other form of assurance on the 2001
or 2000 financial statements taken as a whole.

Deloitte & Touche LLP
Chicago, Illinois
February 21, 2003

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

The following report is a copy of a report previously issued by Arthur Andersen LLP and has not been reissued by
Arthur Andersen LLP. In fiscal 2002, the Company adopted the provisions of Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS No. 142). As discussed in Note 15 to the
consolidated financial statements, the Company has presented the transitional disclosures for 2001 and 2000 required
by SFAS No. 142. The Arthur Andersen LLP report does not extend to these transitional disclosures. These
disclosures are reported on by Deloitte & Touche LLP as stated in their report appearing herein.

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, 2001 and 2000, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December 31, 2001*. 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, 2001 and 2000, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States.

ARTHUR ANDERSEN LLP
Chicago, Illinois
March 6, 2002

* The 1999 consolidated financial statements are not required to be presented in the 2002 annual report.

U.S. CAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(000's omitted)

For the Year Ended
-------------------------------------------------------
December 31, December 31, December 31,
2002 2001 2000
----------------- ----------------- -----------------

Net Sales................................................. $796,500 $772,188 $809,497

Cost of Sales............................................. 710,395 695,514 693,158
----------------- ----------------- -----------------

Gross Income......................................... 86,105 76,674 116,339

Selling, General and Administrative Expenses.............. 37,853 46,581 45,887

Special Charges........................................... 8,705 36,239 3,413

Recapitalization Charges.................................. - - 18,886
----------------- ----------------- -----------------

Operating Income (Loss).............................. 39,547 (6,146) 48,153

Interest Expense.......................................... 55,384 57,304 40,468
----------------- ----------------- -----------------

Income (Loss) Before Income Taxes.................... (15,837) (63,450) 7,685

Provision (Benefit) for Income Taxes...................... 37,637 (23,034) 4,344
----------------- ----------------- -----------------

Income (Loss) from Operations Before Extraordinary
Item and Cumulative Effect of Accounting Change...... (53,474) (40,416) 3,341

Extraordinary Item, net of income taxes

Net Loss from Early Extinguishment of Debt........... - - (14,863)

Cumulative Effect of Accounting Change, net of income taxes (18,302) - -
----------------- ----------------- -----------------

Net Loss Before Preferred Stock Dividends............ (71,776) (40,416) (11,522)

Preferred Stock Dividend Requirement...................... (12,521) (11,345) (2,601)
----------------- ----------------- -----------------

Net Loss Attributable to Common Stockholders......... $(84,297) $(51,761) $(14,123)
================= ================= =================

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 2002 2001
--------------------- ---------------------
CURRENT ASSETS:
Cash and cash equivalents............................................ $11,790 $14,743
Accounts receivable, net of allowances............................... 89,986 95,274
Inventories, net..................................................... 105,635 100,676
Deferred income taxes................................................ 7,730 21,977
Other current assets................................................. 14,466 15,732
--------------------- ---------------------
Total current assets............................................ 229,607 248,402

PROPERTY, PLANT AND EQUIPMENT, less accumulated
depreciation and amortization........................................ 241,674 23