U.S. Can Appoints George V. Bayly to Board of Directors; Reports Second Quarter Results
LOMBARD, Ill., Aug. 1, 2003 -- U.S. Can Corporation announced the appointment of George V. Bayly to its Board of Directors. Mr. Bayly is currently a principal of Whitehall Investors, LLC, a consulting and venture capital firm located in Lake Forest, Illinois. From 1991 through 2002, he was Chairman, President & Chief Executive Officer of Ivex Packaging Corporation in Lincolnshire, Illinois. Mr. Bayly has held management, sales and marketing roles in the packaging industry since 1969. Carl Ferenbach, Chairman of U.S. Can's board commented, "George's 30-plus years of experience in the packaging industry will bring a tremendous knowledge base to U.S. Can's board. We look forward to his active participation in setting U.S. Can's future course." Mr. Bayly is a member of the Boards of Directors of General Binding Corporation, Packaging Dynamics Inc. and Huhtamaki, among other corporate and charitable boards.
U.S. Can reported net sales of $210.3 million for its second quarter ended June 29, 2003 compared to $203.6 million for the corresponding period of 2002, a 3.3% increase. The increase is primarily attributable to a positive foreign currency impact on sales made in Europe and changes in product mix and pricing in the Company's U.S. segments, partially offset by lower volume. For the first six months of 2003, net sales increased to $409.2 million from $389.7 million for the same period in 2002 primarily due to a positive foreign currency impact on sales made in Europe, partially offset by decreased International volume and sales of metal paint products.
For the second quarter, U.S. Can reported gross income of $24.7 million (11.7% to sales), compared to $22.9 million (11.2% to sales) in 2002. For the six months ended June 29, 2003 gross income increased to $46.1 million (11.3% to sales) from $41.9 million (10.7% to sales) for the first six months of 2002. Gross profit margin was positively impacted by operating efficiencies realized from restructuring programs partially offset by the negative impact of production inefficiencies in our International operations.
Selling, general and administrative expenses were $1.2 million lower than the same quarter last year and $0.9 million lower for the year-to-date period primarily due to positive results from Company-wide cost savings programs.
During the first half of 2003, the Company recorded special charges of $1.6 million. The Company recorded a special charge of $0.6 million in the second quarter of 2003 related to potential additional severance costs in its May Verpackungen operation. A $1.0 million charge was recorded in the first quarter of 2003 related to position elimination costs in the U.S. and Europe.
Income tax expense was $2.3 million for the second quarter of 2003 versus an income tax benefit of $0.2 million for the second quarter of 2002. For the first half of 2003, income tax expense was $2.9 million versus an income tax benefit of $1.9 million for the first half of 2002. During the fourth quarter of 2002, the Company recorded a valuation allowance as it could not 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, in 2003 the Company did not record an income tax benefit related to losses of those operations.
The net loss before preferred stock dividends was $1.0 million for the quarter ended June 29, 2003 compared to a net loss of $0.9 million for the quarter ended June 30, 2002. The net loss before preferred stock dividends on a year-to-date basis for 2003 was $5.0 million compared to $21.6 million for the same period of 2002. The year-to-date 2002 net loss includes the Company's non-cash goodwill impairment charge of $18.3 million recorded in the fourth quarter of 2002, retroactive to the first quarter of 2002.
Earnings before interest, taxes, depreciation, amortization, special charges relating to our restructurings and certain other charges and expenses, as defined under the terms of our Senior Secured Credit Facility ("Credit Facility EBITDA") was $24.0 million for the second quarter of 2003, an improvement of $2.5 million versus the second quarter of 2002. Year-to-date Credit Facility EBITDA was $44.1 million for 2003, an increase of $4.6 million versus the same period of 2002. The Company considers Credit Facility EBITDA to be a useful measure of its current financial performance and its ability to incur and service debt. In addition, Credit Facility EBITDA is a measure used to determine the Company's compliance with its Senior Secured Credit Facility. The most directly comparable GAAP financial measure to Credit Facility EBITDA is net loss from operations before cumulative effect of accounting change. Below is a quantitative reconciliation of the loss from operations before cumulative effect of accounting change to Credit Facility EBITDA.
2nd Quarter YTD
2003 2002 2003 2002
(in millions)
Net Loss Before
Cumulative Effect of
Accounting Change $(1.0) $(0.9) $(5.0) $(3.3)
Plus: Income Tax
Provision 2.3 (0.2) 2.9 (1.9)
Plus: Interest Expense 14.2 14.1 28.3 27.8
Plus: Depreciation
and Amortization 8.2 7.8 16.3 15.6
Plus: Special Charges 0.6 - 1.6 -
Plus: Other Add-backs
as Specified in
Lending Agreement (0.3) 0.7 - 1.3
Credit Facility EBITDA $24.0 $21.5 $44.1 $39.5
At June 29, 2003, $90.0 million had been borrowed under the $110.0 million revolving loan portion of the Senior Secured Credit Facility. Letters of Credit of $11.7 million were also outstanding securing the Company's obligations under various insurance programs and other contractual agreements. In addition, the Company had $19.0 million of cash and cash equivalents at quarter end. The Company is in the process of renegotiating certain credit facilities of May Verpackungen.
On July 22, 2003, the Company completed an offering of $125 million of 10-7/8% Senior Secured Notes due 2010. The Notes are secured, on a second priority basis, by substantially all of the collateral that currently secures the Company's Senior Secured Credit Facility. The Company used the $125 million in proceeds generated from the offering to prepay $23.3 million of its Tranche A term loan, $46.7 million of its Tranche B term loan and to reduce its borrowings under its revolving credit facility by $55.0 million. The repayments under the revolving credit facility did not reduce the $110.0 million amount available for borrowings under the facility. The Company incurred approximately $7.6 million of fees and expenses related to the offering and senior secured credit facility amendment.
U.S. Can Corporation is a leading manufacturer of steel containers for personal care, household, automotive, paint and industrial products in the United States and Europe, as well as plastic containers in the United States and food cans in Europe.
Certain statements in this release 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 future results, performance or achievements expressed or implied in this release. 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 flow to service this debt; the timing and cost of plant closures; the level of cost reduction achieved through restructuring; the success of new technology; the timing of, and synergies achieved through, integration of acquisitions; changes in market conditions or product demand; loss of important customers 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 release should not be regarded as a representation by the Company that any future results, performance or achievements will be attained.
U.S. CAN CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
(Dollars in Thousands)
For the Three For the Six
Months Ended Months Ended
June 29, June 30, June 29, June 30,
2003 2002 2003 2002
Net Sales $210,312 $203,624 $409,202 $389,662
Cost of Goods Sold 185,602 180,731 363,148 347,801
Gross Income 24,710 22,893 46,054 41,861
Selling, General and
Administrative Expenses 8,661 9,867 18,337 19,198
Special Charges 591 - 1,621 -
Operating Income 15,458 13,026 26,096 22,663
Interest Expense 14,159 14,100 28,261 27,843
Income (Loss) From Operations
Before Income Taxes 1,299 (1,074) (2,165) (5,180)
Provision (Benefit) for Income
Taxes 2,301 (198) 2,874 (1,922)
Net Loss Before Cumulative Effect
of Accounting Change (1,002) (876) (5,039) (3,258)
Cumulative Effect of Accounting
Change, net of tax - - - (18,302)
Net Loss Before Preferred Stock
Dividends (1,002) (876) (5,039) (21,560)
Preferred Stock Dividends (3,400) (3,081) (6,646) (6,055)
Net Loss $(4,402) $(3,957) $(11,685) $(27,615)
U.S. CAN CORPORATION
BALANCE SHEET
AS OF JUNE 29, 2003 AND DECEMBER 31, 2002
(Dollars in Thousands)
June 29, December 31,
2003 2002
ASSETS
Current Assets $262,691 $229,607
Property, Plant and Equipment 238,743 241,674
Noncurrent Assets 106,617 107,545
Total Assets $608,051 $578,826
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities $209,343 $185,084
Long-Term Debt 522,142 523,529
Long-Term Liabilities 82,265 80,926
Preferred Stock 139,780 133,133
Stockholders' Equity (345,479) (343,846)
Total Liabilities and Stockholders'
Equity $608,051 $578,826