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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2002
Commission File Number 0-21314
U.S. CAN CORPORATION
(Exact Name of Registrant as Specified in its Charter)
06-1094196
(I.R.S. Employer Identification No.)
DELAWARE
(State or Other Jurisdiction of
Incorporation or Organization)
700 EAST BUTTERFIELD ROAD
SUITE 250
LOMBARD, ILLINOIS 60148
(Address of Principal Executive Offices, Including Zip Code)
(630) 678-8000
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 (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 |_|
As of July 31, 2002, 53,333,333 shares of Common Stock were outstanding.
=======================================================================================================================================
U.S. CAN CORPORATION AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
TABLE OF CONTENTS
Page
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements - Unaudited
Consolidated Statements of Operations for the Three and Six Months Ended
June 30, 2002 and July 1, 2001................................................................... 3
Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001............................ 4
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2002 and July 1, 2001................................................................... 5
Notes to Consolidated Financial Statements....................................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................................................ 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk....................................... 19
PART II OTHER INFORMATION
Item 1. Legal Proceedings................................................................................ 20
Item 6. Exhibits and Reports on Form 8-K................................................................. 20
Forward Looking Statements
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; the success of new technology; changes in market conditions or product demand; loss of important customers or
volume; downward product price movements; changes in raw material costs; and currency fluctuations. In light of these and other risks
and uncertainties, the inclusion of a forward-looking statement in this report should not be regarded as a representation by the
Company that any future results, performance or achievements will be attained.
21
U.S. CAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(000's omitted)
For The For The
Three Months Ended Six Months Ended
--------------------------------- --------------------------------
June 30, 2002 July 1, 2001 June 30, 2002 July 1, 2001
---------------- --------------- --------------- ---------------
(unaudited)
Net Sales $ 203,624 $ 193,329 $ 389,662 $ 384,497
Cost of Sales 180,731 166,968 347,801 333,685
----------- ----------- ----------- -----------
Gross Income 22,893 26,361 41,861 50,812
Selling, General and Administrative Expenses 9,867 11,193 19,198 23,035
----------- ----------- ----------- -----------
Operating Income 13,026 15,168 22,663 27,777
Interest Expense 14,100 14,407 27,843 29,211
----------- ----------- ----------- -----------
Income (Loss) Before Income Taxes (1,074) 761 (5,180) (1,434)
Provision (Benefit) for Income Taxes (198) 338 (1,922) (529)
------------ ----------- ----------- -----------
Net Income (Loss) Before Preferred Stock Dividends (876) 423 (3,258) (905)
Preferred Stock Dividend Requirement (3,081) (2,792) (6,055) (5,517)
----------- ----------- ----------- -----------
Net Loss Available for Common Stockholders $ (3,957) $ (2,369) $ (9,313) $ (6,422)
=========== =========== =========== ===========
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 share data)
June 30, December 31,
ASSETS 2002 2001
----------------- ------------------
CURRENT ASSETS: (Unaudited)
Cash and cash equivalents $ 16,513 $ 14,743
Accounts receivable, net of allowances 108,752 95,274
Inventories 111,829 100,676
Deferred income taxes 22,067 21,977
Other current assets 21,476 15,732
----------------- ------------------
Total current assets 280,637 248,402
PROPERTY, PLANT AND EQUIPMENT, less accumulated
depreciation and amortization 243,300 239,234
GOODWILL, less accumulated amortization 69,157 66,437
OTHER NON-CURRENT ASSETS 68,007 80,277
----------------- ------------------
Total assets $ 661,101 $ 634,350
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt and capital lease obligations $ 27,264 $ 14,983
Accounts payable 111,551 96,685
Accrued expenses 46,196 45,437
Restructuring reserves 21,832 25,945
Income taxes payable 757 1,055
----------------- ------------------
Total current liabilities 207,600 184,105
LONG-TERM DEBT 527,555 521,793
DEFERRED INCOME TAXES PAYABLE 660 1,162
OTHER LONG-TERM LIABILITIES 53,886 53,801
----------------- ------------------
Total liabilities 789,701 760,861
REDEEMABLE PREFERRED STOCK 126,668 120,613
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value 533 533
Additional paid in capital 52,800 52,800
Accumulated other comprehensive loss (37,482) (38,651)
Accumulated deficit (271,119) (261,806)
----------------- ------------------
Total stockholders' equity / (deficit) (255,268) (247,124)
----------------- ------------------
Total liabilities and stockholders' equity $ 661,101 $ 634,350
================= ==================
The accompanying Notes to Consolidated Financial Statements are
an integral part of these balance sheets.
U.S. CAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's omitted)
For the Six Months Ended
June 30, 2002 July 1, 2001
------------------ -------------------
CASH FLOWS FROM OPERATING ACTIVITIES: (Unaudited)
Net loss before preferred stock dividend requirements $ (3,258) $ (905)
Adjustments to reconcile net loss to net cash used in
operating activities -
Depreciation and amortization 17,663 18,405
Deferred income taxes (1,922) (529)
Change in operating assets and liabilities, net of effect of acquired
businesses:
Accounts receivable (9,180) (24,818)
Inventories (5,662) (3,417)
Accounts payable 10,278 11,010
Accrued expenses (6,472) 40
Other, net (5,608) (10,445)
----------- -----------
Net cash used in operating activities (4,161) (10,659)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures including restructuring capital (11,036) (6,748)
Acquisition of business, net of cash acquired - (4,570)
Proceeds from sale of property 591 -
Investment in Formametal S.A. (133) (6,051)
------------ -----------
Net cash used in investing activities (10,578) (17,369)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under the revolving line of credit 8,900 29,500
Borrowings of other debt 13,750 -
Payments of other debt, including capital lease obligations (5,689) (6,382)
------------ ------------
Net cash provided by financing activities 16,961 23,118
------------ -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (452) 392
------------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,770 (4,518)
CASH AND CASH EQUIVALENTS, beginning of year 14,743 10,784
------------ -----------
CASH AND CASH EQUIVALENTS, end of period $ 16,513 $ 6,266
============ ===========
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002
(Unaudited)
(1) PRINCIPLES OF REPORTING
The consolidated financial statements include the accounts of U.S. Can Corporation (the "Corporation"), its wholly owned
subsidiary, United States Can Company ("U.S. Can"), and U.S. Can's subsidiaries (collectively, the "Company"). All significant
intercompany balances and transactions have been eliminated. These financial statements, in the opinion of management, include all
normal recurring adjustments necessary for a fair presentation. Operating results for any interim period are not necessarily
indicative of results that may be expected for the full year. These financial statements should be read in conjunction with the
previously filed financial statements and footnotes included in the Corporation's Annual Report on Form 10-K for the year ended
December 31, 2001. Certain prior year amounts have been reclassified to conform with the 2002 presentation.
NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted Statement of Financial Accounting Standards (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 has ceased amortization of goodwill. The Company recorded goodwill amortization of $0.8 million for the second
quarter of 2001 and $1.5 million for the first half of 2001. SFAS No. 142 requires the Company to make an initial assessment of
goodwill impairment within six months after the adoption date. The initial step is designed to identify potential goodwill
impairment by comparing an estimated fair value for each applicable business unit to its respective carrying value. For the business
units where the carrying value exceeds fair value, a second step must be performed by year-end 2002 to measure the amount of the
goodwill impairment.
The Company has completed the initial impairment test and has determined that a non-cash impairment charge is required in
the Custom & Specialty and International segments. The Company is currently quantifying the amount of the impairment charge. Upon
completion of the analysis, the Company will report the charge, retroactive to the first quarter of 2002, as a cumulative effect of a
change in accounting. The impairment charge will have no impact on compliance with covenants under its lending agreements.
Pursuant to SFAS No. 142, the results for 2001 have not been restated. A reconciliation of net income as if SFAS 142 had
been adopted is presented below for the three months and six months ended July 1, 2001.
Three Months Ended Six Months Ended
July 1, 2001 July 1, 2001
------------------------------ ----------------------------
(in thousands) (in thousands)
Reported Net Loss Available for Common Stockholders $ (2,369) $ (6,422)
Add back: Goodwill amortization (net of tax) 499 981
--------------- ------------
Adjusted Net Loss Available for Common Stockholders $ (1,870) $ (5,441)
============== ==============
On January 1, 2002, the Company also adopted 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 FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," 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. There was no impact to the financial position and results of operations of the Company as a result
of the adoption.
The FASB issued SFAS No. 146 "Accounting for Costs Associated With Exit or Disposal Activities", in July 2002. The Company
will adopt SFAS No. 146 for any exit or disposal activities initiated after December 31, 2002.
(2) SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid interest of approximately $29.0 million and $27.2 million during the six months ended June 30, 2002 and
July 1, 2001, respectively. The Company paid $1.2 million in income taxes during the six months ended June 30, 2002 and no income
taxes were paid during the six months ended July 1, 2001.
(3) SPECIAL CHARGES
The Company initiated several restructuring programs in 2001, consisting of a voluntary termination program offered to all
corporate office salaried employees, the closure of five manufacturing facilities and the consolidation of two Georgia plastics
facilities into a new facility.
During 2001, the Company closed a paint can manufacturing facility and a warehouse in Baltimore, Maryland and ceased
operations in Dallas, Texas. During the first quarter of 2002, the Company closed two existing plastic facilities in Morrow, Georgia
and Newnan, Georgia and transferred production to a new facility in Atlanta, Georgia. The remaining programs to be completed in 2002
include the closing of the Burns Harbor, Indiana lithography facility, the Columbia Specialty facility located in Maryland and the
Southall, England manufacturing facility. The Company anticipates completing the closures by December 31, 2002, as originally
planned. .
Total cash restructuring costs in the first six months of 2002 were $6.2 million (primarily severance and facility shut down
costs) and the Company anticipates spending another $27.8 million of such costs. The remainder of the charge consists primarily of
employee termination benefits paid over time for approximately 68 salaried and 192 hourly employees (approximately 600 positions were
originally identified for elimination), future cash payments for employee benefits as required under union contracts, lease
termination and other facility exit costs.
The tables below present the reserve categories and related activity as of June 30, 2002 respectively:
January 1, 2002 June 30, 2002
Balance Payments Other (b) Balance
-------------------- -------------- -------------- -----------------
--------------
Employee Separation $21.2 ($4.3) $0.4 $16.9
Facility Closing Costs 10.7 (1.9) 1.7 8.8
--------------------------------------------------------------------
Total $31.9 ($6.2) $2.1 $27.8 (a)
==================== ============== ============== =================
(a) Includes $6.0 million of other long-term liabilities as of June 30, 2002
(b) Non-cash foreign currency translation impact and facility cost write-off
reclassifications
(4) INVENTORIES
All domestic inventories are stated at cost determined by the last-in, first-out ("LIFO") cost method, not in excess of
market. Inventories of approximately $58.2 million at June 30, 2002 and $48.1 million at December 31, 2001, at the European
subsidiaries are stated at cost determined by the first-in, first-out ("FIFO") cost method, not in excess of market. FIFO cost of
LIFO inventories approximated their LIFO value at June 30, 2002 and at December 31, 2001.
Inventories reported in the accompanying balance sheets were classified as follows (000's omitted):
June 30, December 31,
2002 2001
---- ----
Raw materials........................................................ $ 27,916 $ 27,216
Work in process...................................................... 42,814 40,046
Finished goods....................................................... 41,098 33,414
----------------- ---------------
$ 111,828 $ 100,676
================= ===============
(5) BUSINESS SEGMENTS
Management monitors and evaluates business performance, customer base and market share for four business segments. The
segments have separate management teams and distinct product lines. The Aerosol segment primarily produces steel aerosol containers
for personal care, household, automotive, paint and industrial products. The International segment produces aerosol cans in Europe
and Latin America (through Formametal S.A., a joint venture in Argentina) as well as steel food packaging in Europe. The Paint,
Plastic & General Line segment produces round cans for paint and coatings, oblong cans for such items as lighter fluid and turpentine
as well as plastic containers for paint and industrial and consumer products. The Custom & Specialty segment produces a wide array of
functional and decorative tins, containers and other products. In 2002, the Company realigned certain plants from the Paint, Plastic
& General Line segment to the Custom & Specialty segment. The amounts for 2001 have been reclassified to reflect the 2002 segment
realignment.
The following is a summary of revenues from external customers and income (loss) from operations for the quarterly periods
ended June 30, 2002 and July 1, 2001, respectively (000's omitted):
Three Months Ended Six Months Ended
------------------------------- -------------------------
June 30, July 1, June 30, July 1,
2002 2001 2002 2001
-------------- -------------------------------- ------------
REVENUES FROM EXTERNAL CUSTOMERS:
Aerosol $96,900 $82,424 $183,364 $166,729
International 57,447 55,960 111,951 111,984
Paint, Plastic & General Line 32,677 35,417 61,588 69,519
Custom & Specialty 16,600 19,528 32,759 36,265
------- ------- ------- ------
Total revenues $203,624 $193,329 $389,662 $384,497
========= ========= ========= ========
INCOME (LOSS) FROM OPERATIONS:
Aerosol $15,848 $14,173 $28,535 $27,462
International 325 3,992 109 6,508
Paint, Plastic & General Line 3,350 3,536 5,626 7,299
Custom & Specialty (355) 1,186 274 1,935
------ ------ ---- -----
Total Segment Income From Operations 19,168 22,887 34,544 43,204
Corporate Expenses (6,142) (7,719) (11,881) (15,427)
Interest Expense (14,100) (14,407) (27,843) (29,211)
--------- --------- --------- --------
Income (Loss) Before Income Taxes $(1,074) $761 $(5,180) $(1,434)
========= ===== ========= ========
(6) COMPREHENSIVE INCOME (LOSS)
The components of accumulated other comprehensive loss are as follows (000's omitted):
June 30 December 31,
2002 2001
---- ----
Foreign Currency Translation Adjustment ............................................ $(33,298) (a) $(34,501)
Minimum Pension Liability Adjustment................................................ (288) (288)
Unrealized Loss on Cash Flow Hedges................................................. (3,896) (3,862)
------------- ---------------
Total Accumulated Other Comprehensive Loss.......................................... $(37,482) $(38,651)
============== ===============
(a) Includes an $18.1 million devaluation impact related to the investment in Formametal, which will not be settled in the
foreseeable future. The Company used the exchange rate of 3.85 pesos per U.S. dollar to calculate the translation
adjustment.
The components of comprehensive income (loss) for the quarterly periods ended June 30, 2002 and July 1, 2001 are as follows
(000's omitted):
Three Months Ended Six Months Ended
------------------------------- -------------------------
June 30, July 1, June 30, July 1,
2002 2001 2002 2001
-------------- ---------------- ---------------- ----------
Net Income (Loss) $ (876) $ 423 $ (3,258) $ (905)
Unrealized Income (Loss) on Cash Flow Hedges (a) (2,745) 150 (2,880) (558)
Foreign Currency Translation Adjustment 14,127 (3,330) 1,203 (14,239)
-------- --------- -------- ---------
Comprehensive Income (Loss) $ 10,506 $ (2,757) $ (4,935) $(15,702)
======== ========= ========= =========
(a) Net of reclassification of losses included in interest expense of $1.4 million and $2.8 million for the three months and
six months ended June 30, 2002.
(7) SUBSIDIARY GUARANTOR INFORMATION
The following presents the condensed consolidating financial data for U.S. Can Corporation (the "Parent Guarantor"), United
States Can Company (the "Issuer"), USC May Verpackungen Holding Inc. (the "Subsidiary Guarantor"), and the Issuer's European
subsidiaries, including May Verpackungen GmbH & Co., KG (the "Non-Guarantor Subsidiaries"), as of June 30, 2002 and December 31, 2001
and for the six-month periods ended June 30, 2002 and July 1, 2001. Investments in subsidiaries are accounted for by the Parent
Guarantor, the Issuer and the Subsidiary Guarantor under the equity method for purposes of the supplemental consolidating
presentation. Earnings of subsidiaries are, therefore, reflected in their parent's investment accounts and earnings. This
consolidating information reflects the guarantors and non-guarantors of the Issuer's 12 3/8% senior subordinated notes due 2010.
The 12 3/8% senior subordinated notes are guaranteed on a full, unconditional, unsecured, senior subordinated, joint and
several basis by the Parent Guarantor, the Subsidiary Guarantor and any other domestic restricted subsidiary of the Issuer. USC May
Verpackungen Holding Inc., which is wholly owned by the Issuer, currently is the only Subsidiary Guarantor. The Parent Guarantor has
no assets or operations separate from its investment in the Issuer.
Separate financial statements of the Issuer or the Subsidiary Guarantors have not been presented as management has
determined that such information is not material to the holders of the 12 3/8% senior subordinated notes.
U.S.CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the SIX MONTHS ENDED JUNE 30, 2002
(unaudited)
(000's omitted)
USC May USC Europe/ May
United Verpackungen Verpackungen GmbH
U.S. Can States Can Holding & Co., KG U.S. Can
Corporation Company (Guarantor (Non-Guarantor Corporation
(Parent) (Issuer) Subsidiary) Subsidiaries) Eliminations Consolidated
------------- ------------- ----------------- -------------------- ------------- -------------
NET SALES $ - $ 277,711 $ - $ 111,951 $ - $ 389,662
COST OF SALES - 243,280 - 104,521 - 347,801
-------- ---------- --------- ---------- ------- ---------
Gross income - 34,431 - 7,430 - 41,861
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES - 11,877 - 7,321 - 19,198
-------- ---------- --------- ---------- ------- ---------
Operating income - 22,554 - 109 - 22,663
INTEREST EXPENSE - 23,394 3,268 1,181 - 27,843
EQUITY IN EARNINGS (LOSS)
OF SUBSIDIARIES (3,258) (2,742) (1,182) - 7,182 -
-------- --------- ----------- --------- -------- --------
Loss before income taxes (3,258) (3,582) (4,450) (1,072) 7,182 (5,180)
PROVISION (BENEFIT) FOR
INCOME TAXES - (324) (1,992) 394 - (1,922)
-------- --------- --------- --------- ------- ---------
NET LOSS BEFORE
PREFERRED STOCK DIVIDENDS (3,258) (3,258) (2,458) (1,466) 7,182 (3,258)
PREFERRED STOCK DIVIDEND
REQUIREMENT (6,055) - - - - (6,055)
-------- --------- --------- --------- ------- ---------
NET LOSS AVAILABLE
FOR COMMON STOCKHOLDERS $ (9,313) $ (3,258) $ (2,458) $ (1,466) $ 7,182 $ (9,313)
======== ========= ========= ========== ======== =========
U.S.CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the SIX MONTHS ENDED JULY 1, 2001
(unaudited)
(000's omitted)
USC May USC Europe/ May
United Verpackungen Verpackungen GmbH
U.S. Can States Can Holding & Co., KG U.S. Can
Corporation Company (Guarantor (Non-Guarantor Corporation
(Parent) (Issuer) Subsidiary) Subsidiaries) Eliminations Consolidated
------------- ------------- ----------------- -------------------- ------------- -------------
NET SALES $ - $ 272,513 $ - $ 111,984 $ - $ 384,497
COST OF SALES - 235,819 - 97,866 - 333,685
---------- ----------- ----------- ------------ ---------- ----------
Gross income - 36,694 - 14,118 - 50,812
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES - 14,629 796 7,610 - 23,035
---------- ----------- ------------ ------------ ---------- ----------
Operating income - 22,065 (796) 6,508 - 27,777
INTEREST EXPENSE - 24,560 3,268 1,383 - 29,211
EQUITY IN EARNINGS (LOSS)
OF SUBSIDIARIES (905) 625 1,581 - (1,301) -
---------- ----------- ------------ ----------- ---------- ----------
Income (loss) before income
taxes (905) (1,870) (2,483) 5,125 (1,301) (1,434)
PROVISION (BENEFIT) FOR
INCOME TAXES - (965) (946) 1,382 - (529)
---------- ---------- ----------- ------------ ---------- ----------
NET INCOME (LOSS) BEFORE
PREFERRED STOCK DIVIDENDS (905) (905) (1,537) 3,743 (1,301) (905)
PREFERRED STOCK DIVIDEND
REQUIREMENT (5,517) - - - - (5,517)
---------- ---------- ----------- ----------- ---------- ----------
NET INCOME (LOSS) AVAILABLE
FOR COMMON STOCKHOLDERS $ (6,422) $ (905) $ (1,537) $ 3,743 $ (1,301) $ (6,422)
========== ========== =========== ============ ========== ==========
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
CONDENSED CONSOLIDATING BALANCE SHEET
As of JUNE 30, 2002
(unaudited)
(000s omitted)
USC May USC Europe/ May
United Verpackungen Verpackungen GmbH
U.S. Can States Can Holding & Co., KG U.S. Can
Corporation Company (Guarantor (Non-Guarantor Corporation
(Parent) (Issuer) Subsidiary) Subsidiaries) Eliminations Consolidated
------------- -------------- ------------------ ------------------- ------------- -------------
CURRENT ASSETS:
Cash and cash equivalents $ - $ 11,906 $ - $ 4,607 $ - $ 16,513
Accounts receivable...... - 60,873 - 47,879 - 108,752
Inventories.............. - 53,600 (600) 58,829 - 111,829
Deferred income taxes and
other
assets................. - 28,506 463 14,574 - 43,543
--------- --------- --------- ----------- --------- -----------
Total current assets - 154,885 (137) 125,889 - 280,637
PROPERTY, PLANT AND
EQUIPMENT, NET.............. - 149,734 - 93,566 - 243,300
GOODWILL...................... - 40,610 1,544 27,003 - 69,157
OTHER NON-CURRENT ASSETS...... - 51,797 4,461 11,749 - 68,007
INTERCOMPANY
ADVANCES.................... - 242,895 - - (242,895) -
INVESTMENT IN
SUBSIDIARIES................ - 18,517 71,700 - (90,217) -
--------- --------- --------- ---------- --------- -----------
Total assets........ $ - $ 658,438 $ 77,568 $ 258,207 $(333,112) $ 661,101
========= ========== ========= =========== ========= ===========
CURRENT LIABILITIES:
Current maturities of
long-term debt and
capital lease
obligations................... $ - $ 10,709 $ - $ 16,555 $ - $ 27,264
Accounts payable......... - 62,097 - 49,454 - 111,551
Other current liabilities - 48,719 578 19,488 - 68,785
--------- --------- --------- ----------- --------- -----------
Total current
liabilities................... - 121,525 578 85,497 - 207,600
TOTAL LONG-TERM DEBT.......... 854 505,988 - 20,713 - 527,555
OTHER LONG-TERM
LIABILITIES................. - 46,615 1,079 6,852 - 54,546
REDEEMABLE PREFERRED
STOCK...................... 126,668 - - - - 126,668
INTERCOMPANY LOANS............ 112,056 - 89,024 41,815 (242,895) -
INVESTMENT IN
SUBSIDIARIES................ 15,690 - - - (15,690) -
STOCKHOLDERS' EQUITY / (DEFICIT) (255,268) (15,690) (13,113) 103,330 (74,527) (255,268)
--------- ---------- -------- ----------- ---------- -----------
Total liabilities and
stockholders' equity $ - $ 658,438 $ 77,568 $ 258,207 $(333,112) $ 661,101
========= ========= ========= =========== ========= ===========
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued)
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2001
(000s omitted)
USC May USC Europe/ May
Verpackugen Verpackugen
U.S. Can United States Holding GmbH U.S. Can
Corporation Can Company (Guarantor (Non-Guarantor Corporation
(Parent) (Issuer) Subsidiary) Subsidiaries) Eliminations Consolidated
-------------- --------------- ------------------ ----------------- -------------- ------------------
CURRENT ASSETS:
Cash and cash equivalents $ - $ 8,249 $ - $ 6,494 $ - $ 14,743
Accounts receivable...... - 51,806 - 43,468 - 95,274
Inventories.............. - 52,625 (600) 48,651 - 100,676
Deferred income taxes and
other
assets................. - 26,518 1,049 10,142 - 37,709
-------------- --------------- ------------------ ----------------- -------------- ------------------
Total current assets - 139,198 449 108,755 - 248,402
PROPERTY, PLANT AND
EQUIPMENT, NET.............. - 152,779 - 86,455 - 239,234
GOODWILL...................... - 40,611 1,544 24,282 - 66,437
OTHER NON-CURRENT ASSETS...... - 62,561 - 17,716 - 80,277
INTERCOMPANY
ADVANCES.................... - 239,414 - - (239,414) -
INVESTMENT IN
SUBSIDIARIES................ - 11,044 65,779 - (76,823) -
-------------- --------------- ------------------ ----------------- -------------- ------------------
-------------- --------------- ------------------ ----------------- -------------- ------------------
Total assets........ $ - $ 645,607 $ 67,772 $ 237,208 $ (316,237) $ 634,350
============== =============== ================== ================= ============== ==================
CURRENT LIABILITIES:
Current maturities of
long-term debt and
capital lease
obligations................... $ - $ 12,801 $ - $ 2,182 $ - $ 14,983
Accounts payable......... - 47,995 - 48,690 - 96,685
Other current liabilities - 51,834 (1,759) 22,362 - 72,437
-------------- --------------- ------------------ ----------------- -------------- ------------------
Total current - 112,630 (1,759) 73,234 - 184,105
liabilities...................
TOTAL LONG-TERM DEBT.......... 854 499,339 - 21,600 - 521,793
OTHER LONG-TERM
LIABILITIES................. - 47,239 514 7,210 - 54,963
REDEEMABLE PREFERRED
STOCK....................... 120,613 - - - - 120,613
INTERCOMPANY LOANS............ 112,056 - 86,775 40,583 (239,414) -
INVESTMENT IN
SUBSIDIARIES................ 13,601 - - - (13,601) -
STOCKHOLDERS' EQUITY /
(DEFICIT)..................... (247,124) (13,601) (17,758) 94,581 (63,222) (247,124)
-------------- --------------- ------------------ ----------------- -------------- ------------------
-------------- --------------- ------------------ ----------------- -------------- ------------------
Total liabilities $ - $ 645,607 $ 67,772 $ 237,208 $ (316,237) $ 634,350
and
stockholders'
equity........................
============== =============== ================== ================= ============== ==================
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2002
(unaudited)
(000s omitted)
U.S. Can United USC May USC Europe / May U.S. Can
Verpackungen
States Can Holding Verpackungen
Corporation Company (Guarantor (Non-Guarantor Corporation
(Parent) (Issuer) Subsidiary) Subsidiaries) Consolidated
-------------- ------------- ------------------ -------------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES $ - $ 9,699 $ (4,524) $ (9,336) $ (4,161)
-------- -------- --------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - (6,765) - (4,271) (11,036)
Proceeds from the sale of property - 475 - 116 591
Advances to Formametal S.A. - (133) - - (133)
-------- --------- --------- -------- ----------
Net cash used in investing activities - (6,423) - (4,155) (10,578)
-------- -------- --------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in intercompany advances - (4,179) 4,524 (345) -
Net borrowings under revolving line of
credit - 8,900 - - 8,900
Payments of other long-term debt - (4,340) - (1,349) (5,689)
Borrowings of other long-term debt - - - 13,750 13,750
------------ ------------ -------------- --------------- ---------
Net cash provided by financing
activities - 381 4,524 12,056 16,961
-------- -------- ---------- -------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH - - - (452) (452)
-------- -------- --------- --------- ----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS - 3,657 - (1,887) 1,770
CASH AND CASH EQUIVALENTS, beginning
of period - 8,249 - 6,494 14,743
-------- --------- --------- -------- ---------
CASH AND CASH EQUIVALENTS, end of period $ - $ 11,906 $ - $ 4,607 $ 16,513
======== ========= ========= ======== =========
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JULY 1, 2001
(unaudited)
(000s omitted)
USC May
United Verpackungen USC Europe / May
U.S. Can States Can Holding Verpackungen U.S. Can
Corporation Company (Guarantor (Non-Guarantor Corporation
(Parent) (Issuer) Subsidiary) Subsidiaries) Consolidated
-------------- ------------- ------------------ -------------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES $ - $ (3,179) $ (3,268) $ (4,212) $(10,659)
-------- -------- --------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - (5,621) - (1,127) (6,748)
Acquisition of business - (4,570) - - (4,570)
Advances to Formametal S.A. - (6,051) - - (6,051)
-------- -------- --------- -------- --------
Net cash used in investing activities - (16,242) - (1,127) (17,369)
-------- -------- --------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in intercompany advances - (5,540) 3,268 2,272 -
Net borrowings under revolving line of
credit - 29,500 - - 29,500
Payments of long-term debt, including
capital lease
obligations - (3,660) - (2,722) (6,382)
-------- -------- --------- -------- --------
Net cash (used in) provided by
financing
activities - 20,300 3,268 (450) 23,118
-------- --------- ---------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH - - - 392 392
-------- -------- --------- --------- --------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS - 879 - (5,397) (4,518)
CASH AND CASH EQUIVALENTS, beginning
of period - 2,275 - 8,509 10,784
-------- --------- --------- --------- --------
CASH AND CASH EQUIVALENTS, end of period $ - $ 3,154 $ - $ 3,112 $ 6,266
======== ========= ========= ========= ========
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following narrative discusses the results of operations, liquidity and capital resources for the Company on a
consolidated basis. This section should be read in conjunction with the Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001 (see "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained
therein).
Use of Estimates; Critical Accounting Policies
The preparation of financial statements in conformity with generally accepted accounting principles 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 and
interest rate exposure.
Revenue is recognized when goods are shipped to the customer. Provisions for discounts, returns, allowances, customer
rebates and other adjustments are provided for in the same period as the related revenues are recorded. 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.
Inventories are stated at the lower of cost or market and include material, labor and factory overhead. Costs for United
States inventory have been determined using the last-in, first-out ("LIFO") method and costs for Subsidiaries' inventory have been
determined by the first-in, first-out ("FIFO") method. The Company estimates reserves for inventory obsolescence and shrinkage based
on its judgment of future realization. A large portion of the Company's inventory is manufactured to customer specifications. Losses
may result to the extent the Company manufactures customized products that it is unable to sell.
Management estimates allowances for collectibility related to its accounts receivable 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. The Company has engaged an independent appraisal firm to determine the
fair market value of each business. The independent appraisal firm used discussions with management and business unit financial
projections as well as external data in developing these fair market values. 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.
The appraisal firm has completed the initial impairment test and has determined that a non-cash impairment charge is
required for the Custom & Specialty and International segments. The Company is currently measuring the amount of the impairment
charge and will report the charge, retroactive to the first quarter of 2002, upon completion of the assessment. The impairment
charge will have no impact on compliance with covenants under its lending agreements.
Several restructuring programs are underway 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. The FASB issued SFAS No. 146 "Accounting for Costs Associated With
Exit or Disposal Activities", in July 2002. The Company will adopt SFAS No. 146 for any exit or disposal activities initiated after
December 31, 2002.
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.
Results of Operations
Three month period ended June 30, 2002, as compared to the three month period ended July 1, 2001
Consolidated net sales for the three months ended June 30, 2002 were $203.6 million as compared to $193.3 million in 2001,
an increase of 5.3%. Along business segment lines, Aerosol net sales for second quarter of 2002 increased to $96.9 million from $82.4
million for the same period in 2001, a 17.6% increase, due principally to increased unit volume ($19.5 million), offset partially by
a change in customer mix and the 2002 effect of pricing concessions granted in 2001 ($5.0 million). International net sales
increased to $57.4 million for the second quarter of 2002 from $56.0 million for the second quarter of 2001, an increase of $1.4
million or 2.7%. International net sales were positively impacted by the translation of sales made in foreign currencies ($3.3
million) based upon using the same average U.S dollar exchange rates in effect during the second quarter of 2001, the positive impact
of increased May Verpackungen unit volumes ($1.7 million), partially offset by a decline in European aerosol unit volumes ($2.8
million) and changes in customer mix ($0.8 million). Paint, Plastic & General Line net sales decreased $2.7 million, from $35.4
million for the second quarter of 2001 to $32.7 million for the second quarter of 2002. This decrease was due primarily to lower
volume caused by the closing of our Dallas plant and changes in customer mix in our Paint, Plastic & General line business ($0.9
million) coupled with falling resin prices in our plastics business which are contractually passed on to customers ($1.8 million). In
the Custom & Specialty segment, sales decreased 15.0% from $19.5 million for the second quarter of 2001 to $16.6 million for the
second quarter of 2002, driven primarily by a decline in volume.
Consolidated cost of goods sold increased $13.8 million to $180.7 million for the three months ended June 30, 2002 from the
same quarter in 2001. The principal reasons for the increase included additional volume in U.S. aerosol ($16.1 million) and at May
Verpackungen ($1.4 million), combined with production inefficiencies at one May Verpackungen facility ($1.3 million), operating
inefficiencies in the U.K. due to costs of our Southall facility, which is to be closed in the third quarter, ($1.5 million) and the
foreign currency translation impact on costs ($3.0 million) based upon using the same average U.S dollar exchange rates in effect
during the second quarter of 2001. The increase was partially offset by decreased costs resulting from a decline in resin prices
($2.3 million), a change in U.S. production mix and efficiencies ($4.8 million) and European aerosol volume declines ($2.4 million).
Gross profit margin of 11.2% in the second quarter of 2002 decreased 2.4 percentage points from the second quarter of 2001. Factors
contributing to the decline include a change in customer mix and pricing concessions granted in 2001 in U.S. aerosol (2.6 percentage
points), the aforementioned inefficiencies in the U.K. (0.9 percentage points), and manufacturing inefficiencies in the Company's
food can operations (0.9 percentage points) offset by U.S. volume related efficiencies (1.8 percentage points). The Company expects
to improve gross margins upon completion of its restructuring programs as 2002 progresses. These include the closure of the Southall
U.K. integrated plant, the Burns Harbor lithography facility, and one Custom and Specialty plant.
Selling, general and administrative costs decreased from $11.2 million for the second quarter of 2001 to $9.9 million in the
second quarter of 2002 primarily due to the lack of goodwill amortization in the second quarter of 2002 and positive results from
Company-wide cost saving programs initiated in 2001. In connection with the adoption of SFAS 142 Goodwill and Other Intangible
Assets, the Company has ceased the amortization of goodwill. Second quarter 2001 selling, general and administrative expense included
$0.8 million of goodwill amortization.
...................
Interest expense in the second quarter of 2002 decreased 2.1%, or $0.3 million, versus the same period of 2001 due to lower
interest rates ($0.8 million) partially offset by higher average borrowings ($0.5 million).
Payment in kind dividends of $3.1 million and $2.8 million on the redeemable preferred stock were recorded for the second
quarters of 2002 and 2001, respectively.
Six month period ended June 30, 2002, as compared to the six month period ended July 1, 2001
Net sales for the six-month period ended June 30, 2002, totaled $389.7 million, a 1.3% increase versus the corresponding
period in 2001. Along business segment lines, Aerosol net sales in the first half of 2002 were $183.4 million, a 10.0% increase
versus the same period last year. The increase is primarily due to an increase in U.S. volumes ($24.0 million) partially offset by
the pricing impacts resulting from a change in customer mix and the 2002 effect of pricing concessions granted in 2001 ($7.3
million). International sales were flat at $112.0 million for the first half of 2002 and 2001. Paint, Plastic & General Line
segment sales decreased 11.4% to $61.6 million. This decrease was due primarily to lower volume caused by the closing of our Dallas
plant ($3.1 million) and changes in customer mix in our paint and general line business ($1.3 million) coupled with falling resin
prices in our plastics business that are contractually passed on to customers ($3.5 million). Custom & Specialty sales of $32.8
million decreased from the $36.3 million for the first half of 2001, driven primarily by a decline in volume.
Consolidated cost of goods sold of $347.8 million for the first half of 2002 increased $14.1 million, or 4.2%, from the same
period in 2001. The principal reasons for the increase were the volume increases experienced in domestic aerosol sales ($20.0
million) and at May Verpackungen ($1.0 million), supply chain and manufacturing inefficiencies experienced at May ($4.7 million) and
operating inefficiencies in the U.K. ($2.4 million) partially offset by a change in domestic volume/manufacturing mix ($8.5 million),
the positive impact received from a decline in resin prices ($3.6 million) and European aerosol volume declines ($1.9 million).
Gross income of $41.9 million for the six-month period ended June 30, 2002 decreased $9.0 million, or 17.6%, versus the corresponding
period of 2001. Gross profit margin of 10.7% for the first six months of 2002 decreased 2.5% from the same period in 2001. Factors
contributing to the decline in margin percentage included a change in customer mix and pricing concessions granted in 2001 (1.9
percentage points), operating costs and inefficiencies in the U.K (0.8 percentage points), and production inefficiencies at one May
manufacturing facility (1.0 percentage points) offset by U.S. aerosol volume related efficiencies (1.2 percentage points). As
discussed previously, the Company expects to improve gross margins upon completion of its restructuring programs as 2002 progresses.
The consolidation of two plastic facilities into a new manufacturing facility, which began in 2001, was completed in the first
quarter of 2002.
Selling, general, and administrative expenses were $19.2 million in the first half of 2002, a $3.8 million decrease in
comparison to the same period of 2001 due to the lack of goodwill amortization in the first half of 2002 and positive results from
Company-wide cost saving programs initiated in 2001. As previously discussed, the Company has ceased the amortization of goodwill.
The goodwill amortization for the first six months of 2001 was $1.5 million.
Interest expense decreased $1.4 million from $29.2 million for the first six months of 2001 versus $27.8 million for the
same period in 2002 due to lower interest rates ($2.3 million) partially offset by higher average borrowings ($0.9 million).
Payment in kind dividends of $6.1 million and $5.5 million on the redeemable preferred stock were recorded in the first
half of 2002 and 2001, respectively.
Liquidity and Capital Resources
During the first half of 2002, liquidity needs were met through internally generated cash flow and borrowings made under
credit lines. Principal liquidity needs included operating costs, working capital and capital expenditures. Cash flow used by
operations was $4.2 million for the six months ended June 30, 2002, compared to cash used of $10.7 million for the six months ended
July 1, 2001. The decreased use of cash by operations is due primarily to improved collections of customer receivable balances.
The Company initiated several restructuring programs in 2001, consisting of closing five manufacturing facilities,
consolidating two Georgia plastics facilities into a new facility in Georgia and offered a voluntary termination program to all
corporate office salaried employees. In the first quarter of 2002, the Company consolidated the two facilities into one new
facility. Three of the five facilities identified for closure have ceased operations as of the end of the second quarter and the
remaining two are expected to be closed by the end of the year. Total cash restructuring costs in the first six months of 2002 were
$6.2 million (primarily severance and facility shut down costs) and the Company anticipates spending another $27.8 million of such
costs. The Company does not expect to realize a full year of earnings benefit until 2003. Cash restructuring expenditures are
classified as cash used for operations.
Net cash used in investing activities was $10.6 million (primarily capital spending, including $4.1 million of capital
expenditures in connection with the Company's restructuring programs) for the first half of 2002, as compared to $17.4 million for
the first half of 2001. First half 2001 investing activities included capital spending, the acquisition of certain assets of Olive
Can Company and advances to Formametal S.A. ("Formametal") to finance Formametal's debt repayment and working capital needs.
Net cash provided by financing activities in the first six months of 2002 was $17.0 million, versus $23.1 million for the
same period in 2001. The primary financing sources were borrowings under the revolving credit portion of the Senior Secured Credit
Facility and unsecured revolving lines of credit granted by various banks to fund the seasonal working capital requirements of May
Verpackungen. The unsecured revolving lines granted to May Verpackungen may be terminated by the offering banks upon given notice
periods. In August 2002, May Verpackungen agreed to repay $4.5 million euros in the fourth quarter of 2002 from May Verpackungen's
operating cash flow. 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 June 30, 2002.
At June 30, 2002, $65.0 million had been borrowed under the $110.0 million revolving loan portion of the Senior Secured
Credit Facility. Letters of Credit of $10.4 million were also outstanding securing the Company's obligations under various insurance
programs and other contractual agreements.
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, restructuring costs, capital expenditures and
working capital needs. Future operating performance and the ability to service or refinance the notes, to service, extend or
refinance the Senior Secured Credit Facility and to redeem or refinance our preferred stock will be subject to future economic
conditions and to financial, business and other factors, many of which are beyond management's control.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Management does not believe the Company's exposure to market risk has significantly changed since year-end 2001.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
New Castle, PA Self-Discovery
In May 2002, the Company met with Pennsylvania Department of Environmental Protection (PDEP) officials and reached an agreement in
principle to resolve this matter by entering into a Consent Assessment of Civil Penalty for a de minimis amount. The Company and
PDEP currently are negotiating a definitive agreement memorializing their agreement in principle.
National Labor Relations Board/IPJO Case
The Company has agreed with the United Steelworkers of America to settle this inter-plant job opportunity case. On May 30, 2002,
the National Labor Relations Board approved the settlement. Under the settlement, the Company will pay $1.8 million in backpay and
interest, as well as make certain pension adjustments that are not expected to have a material effect on the Company. The Company
made payments in July 2002.
Item 6. Exhibits and Reports On Form 8-K
(a) Exhibits
Exhibit
Number .........Exhibit Description
- ---------------------------------------------------------------------------------------------------------------------------
99.1 Certification Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, As Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
U.S. CAN CORPORATION
Date: August 13, 2002 By: /s/ John L. Workman
-----------------------
John L. Workman
Executive Vice President and
Chief Financial Officer