U.S. Can Corporation

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U.S. Can Corporation

900 Commerce Drive
Oak Brook, Illinois 60523
(630) 571-2500
Fax: (630) 573-0715
Web site: http://www.uscanco.com

Public Company
Incorporated: 1983
Employees: 3,200
Sales: $710.24 million (1998)
Stock Exchanges: New York
Ticker Symbol: USC
NAIC: 332431 Metal Can Manufacturing

U.S. Can Corporation is one of the leading world manufacturers of steel and plastic containers for automotive products, personal care and household items, paint, plastic and industrial supplies, and custom and specialty products in both the United States and in Europe. The company is the leading supplier of aerosol cans throughout the United States, with a 50 percent share of the market. In Europe, U.S. Can is the second largest manufacturer of aerosol cans. The company is also proud of the fact that it supplies approximately one-half of all the one-gallon paint cans sold across the United States. During the past five years, U.S. Can Corporation has focused on developing an international network of sales offices and manufacturing facilities, and has opened new company locations in the United Kingdom, France, Spain, Italy, and Germany.

Early History

U.S. Can Corporation was the dream of William J. Smith, its founder and longtime chairman, president, and chief executive officer. After graduating from Syracuse University, Smith began his lengthy career in the packaging business by joining American Can Company, one of the three dominant firms in the industry which included American Can, Crown, Cork & Seal, and Ball Corporation. After working a number of years in a variety of both employee and managerial positions at several manufacturing facilities within the company, Smith had worked his way up to assume the title general manager of general packaging. Within two short years, Smith had been promoted to senior vice-president of technology at American Can. This position brought with it diverse and far-reaching responsibilities, including the departments of research and development, engineering, manufacturing technology, and productivity. Experience gained from supervising and managing these departments provided Smith with a comprehensive knowledge of the packaging industry. By the time he was promoted to executive vice-president in 1981, Smith was more than able and willing to manage the companys paper sector, which at that time increased its sales to approximately $1.3 billion. At the same time, Smith was appointed chairman of American Cans operating committee, a position that propelled him into the airy, upper echelons of high management, and placed upon him responsibilities and duties much the same as a chief operating officer.

Upon reaching the near top of American Can Company management, there was not a great deal of corporate ladder left to climb. After having surveyed his status within the company, Smith decided to retire in 1983. Yet the experienced and talented manager was unable to remain away from the business world for long. In the same year, Smith made the major commitment to establish his own company. Drawing from his years of experience in the packaging business, and a host of contacts on which to gather a management team around him, Smith arranged to purchase the paint and manufacturing operation of The Sherwin-Williams Company. Sherwin-Williams had a long history in the packaging business, specifically in manufacturing and supplying one-gallon containers for the paint market. Smiths idea was to acquire this operation and use it as a cornerstone to establish a packaging business to supply containers for a wide array of industries, including personal care, household, and automotive markets. Smith named his company U.S. Can Corporation, hoping to capitalize on the familiarity of American Can throughout the packaging industry.

From its inception, U.S. Can concentrated on aspects of the packaging business that Smith knew best, namely, manufacturing the containers used for house paints. The paint industry amounted to sales in the billions of dollars, and the largest segment of that comprised the millions of gallons of house paint. Within the first few years of its existence, U.S. Can was manufacturing nearly one out of every five paint containers, in sizes that ranged from pints to gallons. At approximately the same time, Smith and his management team decided to manufacture aerosol containers for the household and consumer products markets. Aerosol containers were used for an ever growing number of products, including shaving gels, hair care products, cleaning fluids and sprays, and food products such as whipped cream. By the time the company reached the end of the 1980s, sales figures had increased to well over the $100 million mark, and the road ahead was laden with more and more opportunity.

Growth and Expansion: Early 1990s

By 1992, the company had reached over $400 million in sales. Much of this dramatic increase in sales was due to the burgeoning demands for aerosol containers. The company was manufacturing aerosol containers for a broad customer base and, due to the promising projections within the market, expanded its manufacturing capacity for both consumer product aerosol containers, and household and automotive aerosol product containers. A new manufacturing facility was built in Horsham, Pennsylvania, with a large-diameter production line in order to accommodate the needs of consumers who purchased large-size containers of household and automotive products, mostly sold in mass-market discount stores where economy packaging provided the public with more produce for their money. Simultaneously, another facility was built in Green Bay, Wisconsin, this time with a small, 45mm diameter production line in order to meet the growing needs of consumers who purchased small, more compact personal care packaging that reflected the needs of a more mobile society and general public. Both of these facilities were operational by the end of fiscal 1996. In addition, U.S. Can made a commitment to the growing demand for barrier packaging with the aerosol industry, where the product was separated from its propellant within the container. Many personal care product firms were moving in this direction, especially in the shave gels, hair care, saline solutions, and food products markets. Responding to this need, U.S. Can revamped its manufacturing line in Racine, Wisconsin, and began to capture a large part of the market for this specific type of container.

In 1994 U.S. Can created its Custom and Specialty Group so that it could manufacture an almost endless variety of metal container products as the need presented itself. Within two years, this Group had five plants manufacturing a wide range of metal containers, including such items as embossed containers for Liz Claiborne Cosmetics, a rather uniquely designed tin container for Fossil, Inc. watches, newly designed canisters for collectible plates by Lenox Corporation, and innovative Flex-Seal canisters for Republic of Tea, Inc.

In addition to the companys expansion of manufacturing facilities, Smith and his management team were convinced that a strategic acquisitions program would enable U.S. Can to capture ever greater shares of targeted markets. With this strategy in mind, the company acquired Alltrista Corporations metal services division to enhance the companys metal processing operation. The new acquisition complemented U.S. Cans facility in Brookfield, Ohio, that was quickly developing into one of the leading cutters and graders of metal for products that ranged from oil filters to pictures frames, as well as becoming a leader in precision coating and lithography. In 1996, the company acquired CPI Plastic, Inc., one of the leading suppliers of resealable injection-molded pails and drums. This acquisition was made to strengthen the operations and expand the scope of the Paint, Plastics, and General Line division of U.S. Can.

The single most important development during this period of time, however, was the companys expansion into the international market. U.S. Can reached a multi-year contract with The Gillette Company to manufacture barrier aerosol containers to a facility in Reading, England, operated by Gillette. Shortly afterward, U.S. Can built its own fully integrated aerosol container manufacturing facility in Merthyr Tyfil, south Wales. With a sure foothold in the European container market, the company entered and won a bid ordered by the European Union for the aerosol container operations that was available and due to be divested because of the CMB/Crown, Cork & Seal merger. In one swoop, U.S. Can completed the purchase from Crown, Cork & Seal of five aerosol manufacturing facilities across Europe, including locations in the United Kingdom, France, Germany, Spain, and Italy. As a result, the company catapulted to the rank of number two in the aerosol container market in Europe, and was well positioned to capitalize on a fast-growing market. Approximately half of the European aerosol market was in personal care products dominated by the U.S. firms of Gillette, Procter & Gamble, and S.C. Johnson, all of whom U.S. Can was already supplying with aerosol containers.

Company Perspectives:

Our mission at U.S. Can is to consistently increase shareholder value by being the leading supplier of the highest quality packaging products at a reasonable price by focusing on our customers needs and expectation, by attracting and retaining an empowered workforce and by continually improving our products and processes.

Transition and Change: Late 1990s

Unfortunately, the heady period of unlimited expansion and growth came to an abrupt end in 1997. U.S. Can lost its single largest and most important customer, S.C. Johnson & Sons, Inc., a personal and household products company based in Racine, Wisconsin, to its strongest competitor, Crown, Cork & Seal. To make matters worse, S.C. Johnson and Crown, Cork & Seal reached a five-year supply contract, which essentially eliminated U.S. Can from winning any short-term bids. Debt began to mount as a result, and the company soon found itself overwhelmed with debt equal to approximately 85 percent of its capital. Managements first reaction was to close as many manufacturing facilities as possible, dramatically par down its workforce, and begin a strategy of selling off divisions or businesses which were not bringing in enough revenue. By the end of 1997, the company reported a loss of $32 million on sales of just over $738 million.

Recognizing the need for a new management team, founder and longtime President and CEO William Smith decided to retire at the age of 71. Smith remained on the board and assisted in the search for a talented leader that could improve the waning fortunes of the company. The board of directors acted quickly and decided to hire Paul W. Jones. Jones had a long history of management experience, including a lengthy stay at General Electric Corporation where he held many different managerial and executive positions. In 1989, he was hired by Greenfield, Inc., a well-known manufacturer of industrial cutting tools based in Augusta, Georgia, to return the company to profitability and financial security. The company was laden with debt, and unable to turn a profit when Jones arrived on the scene. Jones immediately implemented a comprehensive and far-reaching reorganization strategy, including paying down the companys debt, selling off non-strategic divisions, and initiating an acquisitions plan. Within nine years, Jones had almost rid Greenfield of all its debt, acquired over two dozen companies, and took the company public with a highly successful IPO. To top it off, Jones then arranged for Greenfield to be sold for over $1 billion to Kennametal, Inc., one of the most respected and successful firms within the field of industrial manufacturing.

When Jones arrived at U.S. Can, he immediately set about to work in the same fashion as he had at Greenfield. Non-core businesses were sold off, including the companys metal pail business, the metal services division, and its standalone machine shop. Management at U.S. Can was also restructured, and new high-level executives where brought in to help Jones turn the company around. The continuing restructuring plan reduced costs and also enhanced manufacturing capabilities in strategic areas, such as aerosol containers. Three major facilities were closed in 1998, including an assembly plant in Green Bay, Wisconsin, a manufacturing facility in Alsip, Illinois, and a custom and specialty manufacturing plant in Columbiana, Ohio, while other facilities in Illinois, Georgia, Ohio, and Maryland increased their manufacturing capacities to offset the closings. The most significant change, however, occurred when the new management announced a revised plan to forge a stronger presence in the European and South American aerosol markets. Not only did U.S. Can improve its management and enlarge the manufacturing capacities of all its European operations, but the company also purchased an interest in Formametal, S.A., one of the largest aerosol can manufacturing firms in Argentina. Double-digit growth rates were predicted for the aerosol markets in both Europe and South America over the next ten years, and Jones had been astute enough to place U.S. Can in a position to take advantage of this development.

Joness presence at U.S. Can, along with his reputation as a turnaround specialist, calmed fears that the company would continue its downward spiral. Nonetheless, the challenges before Jones and his management team would be difficult to overcome, especially within the predominantly slow growth market that U.S. Can now found itself.

Further Reading

Aerosol Services, Chemical Market Reporter, January 18, 1999, p. 24.

Demetrakakes, Pam, Proactive Packaging: New Technologies Allow Packaging to Be More Than Just a Barrier, Food Processing, February 1999, p. 90.

Food Industry Pushes Hygienic Standard, Paperboard Packaging, May 1999, p. 20.

Interview with Paul W. Jones, Wall Street Reporter Magazine, June 1998, p. 38.

Murphy, H. Lee, U.S. Can CEO Must Prove Mettle in Firms Turnaround, Grains Chicago Business, May 4, 1998, p. 10.

Neff, Jack, All Dressed Up, No Place to Go, Food Processing, May 1999, p. 120.

Steel Containers Provide Lasting Durability, Modern Materials Handling, April 30, 1999, p. 117.

Thomas Derdak

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U.S. Can Corporation