Continental Can Co., Inc.
Continental Can Co., Inc.
One Aerial Way
Syosset, New York 11791
Fax: (516) 931-6344
Incorporated: prior to 1913
Sales: $537.2 million (1994)
Stock Exchanges: New York
SICs: 2821 Plastic Materials, Synthetic Resins & Nonvulcanizable Elastomers; 3081 Unsupported Plastics Film & Sheet; 3083 Laminated Plastics Plate Sheet & Profile Shapes; 3411 Metal Cans; 6719 Offices of Holding Companies, Not Elsewhere Classified; 8711 Engineering Services
Once the world’s largest packaging firm, Continental Can Co., Inc. became a diversified company renamed Continental Group in the 1970s and was sold off, piece by piece, in the 1980s. A former Continental Can president bought the name and logo in 1992 and renamed his own company Continental Can. This holding company was, in 1995, producing a variety of packaging materials through several subsidiaries in the United States and Europe. Another subsidiary was providing engineering services, primarily in the northeastern United States.
Continental Can’s beginnings actually date back to the creation in 1901 of its great rival—the American Can Co.—when a few men bought the companies producing about 90 percent of the tin cans in the United States. (These cans were actually 98.5 percent steel, with an outer coating of tin plate to avoid rusting.) The canmakers who sold out had to agree not to reenter the business for 15 years. But one of these canmakers, Edward Norton of the Norton Tin Can & Plate Co., noted that the agreement did not preclude his son from going into the business. Through Norton’s son and T. G. Cranwell, who is regarded as the company’s founder and was its first president, several former canmakers who had sold out to American Can established the Continental Can Co. in 1904.
The new company, armed with $500,000 in start-up capital, purchased the patents of one of the few companies producing canmaking machinery that had not been acquired by American Can, United Machinery Co. of Rochester, New York. It opened factories in Chicago and Syracuse, New York, and began shipping cans in April 1905. A Baltimore plant was soon added. To assure a steady supply of tin, Continental Can bought the Standard Tin Plate Co. of Canonsburg, Pennsylvania, in 1909. At first production consisted of only packers’ cans for fruits and vegetables. Because this business was seasonal, with a long slack period, the company entered the general-line canning field in 1912 in Chicago.
Continental Can was incorporated in the state of New York in 1913, having by then acquired all of the interests of a New Jersey corporation of the same name, plus the Export & Domestic Can Co. and the Standard Tin Plate Co. By 1921 it operated plants in Jersey City, Syracuse, Baltimore, Chicago, and Canonsburg, Pennsylvania, and the tin-plate mill in Canonsburg. It also owned a machine shop in Syracuse for special machinery and employed more than 6,000 persons. Headquarters were in Syracuse. Net income had risen from $1,325,839 in 1915 to $2,624,963 in 1919 before falling to $1,548,620 in 1920. At that point the company was about one-fourth the size of American Can.
During the 1920s Continental Can moved its headquarters to New York City and expanded rapidly, buying almost 20 competing firms. The first West Coast plant, in Los Angeles, was acquired in 1926, and a second one opened in Seattle the following year. In 1928 Continental Can purchased the United States Can Co., the nation’s third-largest can company. O. C. Huffman, who had founded that firm in 1903 as the Virginia Can Co., became president of Continental Can, and Carle Cotter Conway, its president, moved up to chairman of the board.
By 1934 American and Continental were estimated to be making about two-thirds of the 10 million cans being produced annually in the United States. Continental at this time had 38 plants in the United States and Cuba. Although net income had fallen from a pre-Depression high of $9 million in 1929 to $4.8 million in 1932, Continental Can never had a money-losing year. Net income reached a new high of $10.7 million in 1934, when employment averaged 11,857.
By 1940 Continental Can had added plants in Canada as well. The greater part of its output consisted of cans for various food products, with the remainder for a variety of industrial uses, such as oil, paint, varnish, lard, beer, and drugs. Gross sales and operating revenue had increased to $120.7 million from $80.9 million in 1935 and had brought Continental Can up to about half the size of American Can. Net income, however, had fallen from $11.2 million to less than $9 million.
Continental Can’s extensive acquisition program continued in the 1940s as it entered the fields of paper and fiber containers, bottle caps, and synthetic resins. By 1950 the company had 65 plants, including 8 plants producing fiber and paper containers, 4 plants producing crown caps, and 1 plant producing plastics. Gross sales rose from $174.3 million in 1944 to $397.9 million in 1950, with cans accounting for 83 percent, while net income rose from $6 million to $14.9 million over the same period. In 1950 gross sales reached 71 percent of American Can’s level.
Conway, who had presided over Continental Can’s growth as its chief executive officer since 1926, retired in 1950. His hand-picked successor was General Lucius Clay, military governor of the U.S.-occupied zone of Germany in the years immediately following World War II and chief organizer of the airlift that supplied West Berlin during the Soviet land blockade. Continental Can grew even more rapidly under Clay’s direction. In 1954 gross sales reached $616 million—94 percent of American Can’s total—and net income rose to a record of almost $21 million. The number of its plants had grown to 81, of which 45 were canmaking plants.
Acquisition and diversification were largely responsible for Continental Can’s growth. In its first 50 years the company purchased and absorbed 28 independent can companies. Acquisition of concerns producing fiber drums, paper containers, and bottle tops in the 1940s broadened its range of products beyond metal containers. And the firm’s campaign to pass American Can in sales drew impetus in 1950 from a federal judge’s ruling that the practice by both companies of giving long-term discounts to quantity customers was a violation of antitrust law. This decision benefited Continental Can by allowing it to pick off some of its rival’s big clients, although it also encouraged some large packers to begin manufacturing their own cans.
In 1956 Continental Can acquired Hazel-Atlas Glass Co., third-largest U.S. manufacturer of glass containers, and thus became the first company with a full line of containers in metal, paper, and glass. It also bought Robert Gair Co., a leading producer of paperboard products. In the same year it purchased Cochrane Foil Co. to manufacture and distribute aluminum plates and rigid foil packages for the frozen-food industry and other food suppliers. These acquisitions temporarily pushed Continental Can ahead of American Can in annual sales, which passed $1 billion in 1957. The Hazel-Atlas purchase, however, was challenged in federal court by the Department of Justice as a violation of antitrust law. When the Supreme Court voided the purchase in 1964, Continental Can was already in the process of selling eight of Hazel-Atlas Glass’s ten plants to Brockway Glass Co.
Continental Can operated 155 plant facilities in 1960. In that year its net sales fell for the first time since 1942, in part due to the aftermath of a steelworkers’ strike, but the total still came to more than $1.1 billion. Net income dropped from $40 million to $27.8 million that year. During the early 1960s there was little growth in annual net sales, but net income reached a record $48.9 million in 1964 on sales of $1.2 billion. Of the sales total that year, about 55 percent came from cans.
The introduction of the easy-to-open metal can top in 1963 led to an increase in the use of metal cans rather than glass bottles for beverages. By the end of 1966 more than 45 percent of U.S. beer and more than 15 percent of U.S. soft drinks were being packaged in metal cans. In that year Continental Can announced the development of the first commercially practical welded can. T. C. Fogarty, chairman of the board, called the accomplishment “a giant step closer to freedom from dependence upon tin.”
Continental Can’s net sales passed the $2 billion market in 1970, and its net income was $76.4 million (down from a record $90.4 million in 1969). About 60 percent of its sales came from cans, 30 percent from paper products, and 10 percent from plastics, chemicals, and assorted lesser items. Aggressive expansion abroad, including the 1969 acquisition of West Germany’s Schmalbach-Lubeca-Werke A.G. (which was merged into the Europemballage Corp.), the largest packaging producer in the European community, brought international sales to 24 percent of the company total. Continental Can had 228 manufacturing plants and employed 72,000 people in 1970.
By 1973 investment analysts deemed the metal can industry to be in a state of crisis because of oversupply and tough competition. Both Continental Can and American Can were said to have made the wrong decision in the 1960s by adding capacity for both tin plate and tin-free steel production while the aluminum can was rapidly gaining ground (although Continental Can converted its four Florida plants to aluminum in 1960 for fruit juice concentrates.) Another problem was increasing public opposition to throwaway cans. Continental Can’s profits from domestic canmaking dropped from $115 million in 1969 to $52 million in 1973. Its response was to close many old-style integrated manufacturing plants in favor of large automated metal-processing centers and separate can-assembly operations situated near its customers’ plants.
For future growth Continental Can also had been looking to 1.5 million acres of timberland in the South acquired in the 1950s. In 1973 forest products contributed 30 percent of the company’s $96.8 million in net income—more than the metal (domestic container) group, even though Continental Can had definitively outstripped American Can to become the world’s biggest canmaker. All four of Continental Can’s paper mills ran at or near full capacity during the year. International operations also contributed 30 percent to company profit in 1973. The company had packaging licensees in 133 countries that year and, of its eight foreign subsidiaries, the European and Canadian ones dominated their markets. By 1975 Continental Can was making more than half of its capital expenditures overseas.
Continental Can indicated it would carry diversification even farther when it changed its name to Continental Group in 1976. The following year it acquired Richmond Corp., a life-and title-insurance holding company for cash and stock valued at $92.5 million. In 1979 the company’s new Continental Financial Services Co. subsidiary, which included Richmond, accounted for 19 percent of corporate profits. Also in 1979, the company acquired Florida Gas Co. for $350 million in cash and stock and renamed it Continental Resources Co. It contributed 6 percent of corporate profits that year. In 1980 Continental Group’s net sales and revenues came to $5.66 billion, of which the can company accounted for 46 percent (compared to 70 percent in 1969), forest industries for 19 percent, diversified businesses for 16 percent, financial services for 10 percent, and the resources company for 9 percent. Net income totaled a record $224.8 million.
Continental Group dipped farther into the energy resources field in 1981 by purchasing a half-interest in Supron Energy Corp., a natural-gas producer, for $830 million. Renamed Unicon, the acquisition proved a mistake when fuel prices began falling from record levels the following year. In 1983 Continental Group reversed direction, selling off two of its components. Its Canadian packaging subsidiary was acquired by CCL Industries, Ltd. for $130 million (in Canadian dollars), and the containerboard and brown-paper operations were sold to Stone Container Corp. for $510 million. Other divestitures brought the total inflow in assets to nearly $1 billion and made the company an attractive takeover target.
Continental Group was acquired in mid-1984 for $2.75 billion by Peter Kiewit Sons’ Inc. and financier David Murdock, with the former allotted 80 percent of the shares and the latter the remaining fifth in the newly formed Kiewit-Murdock Investment Corp. To repay $2 billion in loans from a group of 16 banks, Kiewit-Murdock began selling parts of their acquisition. By mid-1985 the new owners had sold $1.6 billion worth of insurance and paper-products businesses, gas pipelines, and oil and gas reserves. The packaging business, Continental Can Co., remained a unit of Peter Kiewit.
Between 1983 and 1986 Continental Can invested heavily in the two-piece can-manufacturing process, spending nearly $500 million to meet the growing demand for aluminum containers. With Alumax Inc., the company built an aluminum plant in Texarkana, Texas, which began recycling used cans provided by Continental Resource Recovery, a subsidiary. But Continental Can’s general-packaging division, a major producer of aerosol and metal general-line cans, was sold to United States Can Co. in 1987. Continental Can’s future became even more problematic in March 1990, when Crown Cork & Seal Co. bought two units for $336 million. One, with 1989 revenue of about $1.3 billion, made metal cans for the domestic food and beverage industry. Three months later, Ball Corp. paid $1.03 billion in cash and stock for Continental Can’s European operations, which had sales of $1.47 billion in 1989.
A white knight was coming to the rescue, however, in the form of Donald J. Bainton. Once president of Continental Can, Bainton had been fired in 1983 for disagreeing with Continental Group’s divestiture policy. Taking on a small engineering company called Viatech, Inc., Bainton turned it into a $500-million-a-year international packaging company. In 1991 he bought, with Merry wood, Inc., Continental Can’s Plastic Containers and Caribbean Containers units from Kiewit for $ 153 million. A year later he bought the Continental Can name and corporate logo from Kiewit and renamed his company Continental Can. As a sentimental touch, he also bought the original 1904 boardroom table.
Meanwhile, Kiewit had assumed a $415 million liability payment to thousands of former workers who, it was found in federal court, had been wrongfully denied Continental Group pension benefits accumulated since the 1970s. As early as 1974, an article in Barron’s had warned of the company’s unfunded pension liability of about $100 million and the prospect of another $100 million in costs as the result of a labor settlement with the United Steel Workers.
Continental Plastic Containers and Continental Caribbean Containers consisted of 15 plants in the United States and 1,400 employees. The rest of the new Continental Can included three European packaging firms: Perembal S.A., France’s second-largest manufacturer of food cans, acquired in 1989 for about $56 million; Dixie Union Verpackingen GmbH, a deficit-ridden German maker of plastic bags used to package foods, purchased in 1984 for $1.9 million; and Onena Bolsas de Papel S.A., a Spanish printer and laminator of plastic films, bought in 1989 for one peseta.
A passionate believer in keeping overhead and bureaucracy under control, Bainton was running Continental Can from its Long Island headquarters with a staff of only five in late 1992. The chief financial officer was also in charge of human resources and, according to Bainton, “any other staff function we need.” “Most large companies,” he told an Industry Week reporter, “give people responsibility, but they don’t give them authority. Everything is done by committees. … I give my managers both responsibility and authority … they can earn more than anyone else would in a similar position in the packaging industry—if they get results. If they don’t get results, they get replaced.”
Viatech/Continental Can definitely got results from 1989 through 1993. During this five-year period it was the most profitable public packaging company by return on equity, averaging 18.1 percent a year. It was the fourth fastest-growing company in the New York metropolitan area of 50 surveyed during 1991-1993, increasing 62.2 percent in revenue growth.
In early 1994 Bainton was charged in a lawsuit by the Securities and Exchange Commission (SEC) with violating insider trading laws by disclosing to a close friend in March 1992 that Viatech was about to report poor profits. Bainton denied the accusation but in December 1995 agreed in federal court to pay a $30,000 fine and consented to an order preventing him from further violating SEC laws.
At the end of 1994 Continental Can was making extrusion blow-molded plastic containers, metal cans, and plastic films for the packaging industry, and it was laminating flexible packaging for the food and snack industries. Its main U.S. holding was Plastic Containers, Inc. (PCI), a subsidiary jointly owned with Merrywood. This subsidiary owned two other subsidiaries, Continental Plastic Containers and Continental Caribbean Containers (collectively CPC). CPC’s customers included some of the largest U.S. consumer products companies, including Coca-Cola Foods, Colgate-Palmolive Co., and Procter & Gamble Co. Another subsidiary, Lockwood, Kessler & Bartlett, Inc., was providing engineering consulting services.
Continental Can wholly owned Dixie Union and owned 85 percent of Perembal, which in turn owned 64 percent of Obalex, a packaging firm in the Czech Republic. Continental Can also owned 57 percent of Onena. PCI had 16 plants in the United States (including one in Puerto Rico), of which 5 were owned by Continental Can. Continental Can headquarters were in Syosset, New York; PCI headquarters were in Norwalk, Connecticut.
Net sales fell in 1993 to $481.8 million from $511.2 million, and net income fell from $2.1 million to $988,000. In 1994, net sales rose to $537.2 million and net income rose to $4.4 million. Of the 1994 sales total, European sales accounted for 53 percent. Long-term debt was $143.4 million in March 1995. No dividends had been paid since 1960.
Continental Caribbean Containers, Inc.; Continental Plastic Containers, Inc.; Dixie Union Verpackungen GmbH (Germany); Perembal S.A. (France; 85%); Lockwood, Kessler & Bartlett, Inc.; Obalex, A.S. (Czech Republic; 64%); Onena Bolsas de Papel S.A. (Spain; 57%); Plastic Containers, Inc. (50%).
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