SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 8-K/A-2
AMENDMENT TO CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): August 1, 1995
SILGAN CORPORATION
------------------
(Exact name of registrant as specified in its charter)
Delaware 1-11200 06-1207662
-------- ------- ----------
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
4 Landmark Square, Stamford, Connecticut 06901
---------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 975-7110
<PAGE>
The purpose of this filing is to amend the Current Report on Form 8-K originally
filed on August 14, 1995, and amended on October 16, 1995 (the "Report") of
Silgan Corporation (the "Company"), to reclassify a distribution by the Company
of $75.0 million to Silgan Holdings Inc., the parent holding company of the
Company ("Holdings" or "Parent"), included in the Company's pro forma financial
statements and originally characterized as an advance to Parent, to a dividend
to Parent. To reflect this reclassification, adjustments have been made to the
pro forma financial information included in Appendix C of the Report to amend
the pro forma unaudited condensed balance sheet at June 30, 1995 and Notes (c)
and (g) thereto, which describe the distribution to Holdings. Furthermore, Note
(g) to the pro forma condensed statement of operations included in Appendix C of
the Report has been amended to characterize the distribution to the Parent as a
dividend. Other than the adjustments and amendments described above, this filing
is identical in all respects to the original Report.
2
<PAGE>
The undersigned registrant hereby amends the following items of its
Current Report on Form 8-K filed August 14, 1995, as set forth in the pages
attached hereto:
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) and (b) Financial Statements of Business Acquired and Pro Forma Financial
Information
In accordance with Item 7 of the registrant's Current Report on Form
8-K filed August 14, 1995, the registrant appends to the Form 8-K the following
financial statements and pro forma information:
A. For American National Can Company's Food Metal & Specialty Division:
Financial Statements of Business Acquired
The following report and audited financial statements of American
National Can Company's Food Metal & Specialty Division ("ANC Food Metal
& Specialty Business") are attached hereto as Appendix A:
1. (a) Report of independent public accountants dated September 14, 1995;
(b) Balance Sheets at December 31, 1994 and 1993 prepared in
accordance with SEC Regulation S-X, Rule 3-05;
(c) Statements of Operations for the years ended December 31, 1994, 1993
and 1992, prepared in accordance with SEC Regulation S-X, Rule 3-05;
(d) Statements of Cash Flows for the years ended December 31, 1994, 1993
and 1992 prepared in accordance with SEC Regulation S-X, Rule 3-05;
(e) Notes to Financial Statements.
The following unaudited financial statements of ANC Food Metal &
Specialty Business are attached hereto as Appendix B:
2. (a) Unaudited Balance Sheets at June 30, 1995 and 1994 prepared in
accordance with SEC Regulation S-X, Rule 3-05;
(b) Unaudited Statements of Operations for the six months ended June 30,
1995 and 1994, prepared in accordance with SEC Regulation S-X,
Rule 3-05;
(c) Unaudited Statements of Cash Flows for the six months ended June 30,
1995 and 1994 prepared in accordance with SEC Regulation S-X,
Rule 3-05;
(d) Notes to unaudited Financial Statements.
3
<PAGE>
B. For Silgan Corporation:
Pro Forma Financial Information
The following unaudited pro forma financial information of Silgan
Corporation are attached hereto as Appendix C:
1. (a) Unaudited pro forma balance sheet at June 30, 1995 prepared in
accordance with SEC Regulation S-X, Article 11;
(b) Unaudited pro forma statements of operations for the year ended
December 31, 1994 and for the six months ended June 30, 1995
prepared in accordance with SEC Regulation S-X, Article 11.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
SILGAN CORPORATION
Date: November 19, 1996 /s/Harley Rankin, Jr.
- ------------------------ ---------------------
Harley Rankin, Jr.
Executive Vice President,
Chief Financial Officer
and Treasurer
(Principal Financial Officer)
Date: November 19, 1996 /s/Harold J. Rodriguez, Jr.
- ------------------------ ---------------------------
Harold J. Rodriguez, Jr.
Vice President & Controller
(Chief Accounting Officer)
4
<PAGE>
APPENDIX A
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
American National Can Company
In our opinion, the accompanying balance sheets and the related statements of
operations and of cash flows present fairly, in all material respects, the
financial position of the Food Metal & Specialty Division (the "Division"), a
division of American National Can Company, at December 31, 1994 and 1993, and
the results of its operations and its cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Note 2 to the financial statements, the Division changed its
method of accounting for postemployment benefits in 1994 and postretirement
benefits in 1993. Also, as discussed in Note 2 to the financial statements, the
Division changed its method of evaluating the recoverability of goodwill in
1994.
Price Waterhouse LLP
Chicago, Illinois
September 14, 1995
5
<PAGE>
FOOD METAL & SPECIALTY DIVISION
BALANCE SHEETS
(Dollars in thousands)
December 31,
1994 1993
---- ----
ASSETS
CURRENT ASSETS:
Cash ............................................. $ 7 $ 8
Accounts receivable, less allowances of
$732 in 1994 and $92 in 1993 (Note 3) .......... 45,578 38,597
Inventories (Notes 2 and 4) ...................... 120,963 96,713
Deferred income taxes (Notes 2 and 7) ............ 19,287 26,400
Other ............................................ 7,747 1,123
-------- --------
TOTAL CURRENT ASSETS ........................... 193,582 162,841
PROPERTY, PLANT AND EQUIPMENT, net
(Notes 2 and 5) .................................. 208,157 247,137
GOODWILL, less accumulated amortization
of $56,704 in 1994 and $25,045 in 1993
(Notes 1 and 2) .................................. 146,363 178,022
OTHER ASSETS ...................................... 2,140 7,624
-------- --------
TOTAL ASSETS ................................... $550,242 $595,624
======== ========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable ................................. $ 93,058 $ 82,040
Accrued liabilities (Notes 9 and 13) ............. 55,819 79,333
Long-term obligations under capital leases
to be paid within one year (Note 6) ............ 50 87
-------- --------
TOTAL CURRENT LIABILITIES ...................... 148,927 161,460
LONG-TERM LIABILITIES:
Long-term obligations under capital
leases (Note 6) ................................ 1,113 1,163
Deferred income taxes (Notes 2 and 7) ............ 19,684 29,897
Other (Notes 12 and 13) .......................... 61,026 73,052
-------- --------
TOTAL LONG-TERM LIABILITIES .................... 81,823 104,112
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 15) ............ -- --
EQUITY:
Equity adjustment for minimum pension
liability (Note 10) ............................ ( 500) ( 246)
Investments by and advances from ANC
(Note 3) ........................................ 319,992 330,298
-------- --------
TOTAL EQUITY ................................... 319,492 330,052
-------- --------
TOTAL LIABILITIES AND EQUITY ................... $550,242 $595,624
======== ========
See accompanying notes to financial statements.
6
<PAGE>
FOOD METAL & SPECIALTY DIVISION
STATEMENTS OF OPERATIONS
(Dollars in thousands)
Year Ended December 31,
-----------------------
1994 1993 1992
---- ---- ----
NET SALES (Note 16) .................... $ 596,594 $ 578,081 $ 698,699
OPERATING COSTS AND EXPENSES:
Cost of goods sold (excluding
depreciation and amortization) ..... 516,286 508,434 630,764
Depreciation and amortization of
property, plant and equipment
(Note 2) ............................ 17,073 23,692 27,965
Selling, general and administrative
expenses (Note 3) .................. 26,446 31,304 39,826
Research and development expenses .... 5,594 4,779 8,302
Net postretirement benefit expense
(Note 11) .......................... 37,030 37,356 16,312
Restructuring expenses (Note 13) ..... 10,100 4,588
Amortization of goodwill (Note 2) .... 31,659 5,009 5,009
Financial expense, net (Notes 3 and 8) 2,255 2,565 9,883
Other, net (Note 14) ................. 7,112 3,827 786
------- ------- -------
653,555 616,966 743,435
------- ------- -------
LOSS BEFORE TAXES AND CUMULATIVE
EFFECT OF CHANGES IN ACCOUNTING
PRINCIPLES ........................... ( 56,961) ( 38,885) ( 44,736)
BENEFIT (PROVISION) FOR INCOME TAXES
(Notes 2 and 7):
Current ............................ 7,448 40,646 19,980
Deferred ........................... 2,356 ( 27,507) ( 4,565)
------- ------- -------
9,804 13,139 15,415
------- ------- -------
LOSS BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES ..... ( 47,157) ( 25,746) ( 29,321)
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES, net of tax
(Note 2) ............................. ( 914) ( 139,983) --
-------- -------- --------
NET LOSS ............................... ($ 48,071) ($165,729) ($ 29,321)
======== ======== ========
See accompanying notes to financial statements.
7
<PAGE>
FOOD METAL & SPECIALTY DIVISION
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Year Ended December 31,
-----------------------
1994 1993 1992
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................ ($48,071) ($165,729) ($29,321)
Adjustments to reconcile net loss
to net cash provided from (used
in) operating activities:
Cumulative effect of changes in
accounting principles ............. 914 139,983
Depreciation and amortization ....... 48,732 28,701 32,974
Provision for restructuring ......... 10,100 4,588
Provision for asset writedowns ...... 7,110
Provision (benefit) for deferred
income taxes ...................... (2,356) 27,507 4,565
Other adjustments to net loss ....... 281 3,907 1,250
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable ..................... ( 7,273) 14,572 (227)
(Increase) decrease in inventories ( 24,891) 19,817 33,762
(Increase) decrease in other
current assets ................. (6,624) 173 319
Decrease in other assets .......... 6,989 448 4,804
Decrease in accounts payable
and other liabilities .......... ( 35,595) ( 33,779) ( 50,350)
-------- --------- --------
NET CASH PROVIDED FROM (USED IN)
OPERATING ACTIVITIES ........... ( 50,684) 35,600 2,364
-------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................. ( 10,153) ( 17,723) (9,594)
Proceeds from sale of property, plant
and equipment ...................... 10,557 2,921 25,659
Transfer of property, plant and
equipment to (from) other ANC
business units ..................... 12,601 715 (223)
-------- --------- --------
NET CASH PROVIDED FROM (USED IN)
INVESTING ACTIVITIES ........... 13,005 ( 14,087) 15,842
-------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of obligations under capital
leases ............................. ( 87) ( 116) ( 147)
Increase (decrease) in advances from
ANC (Note 3) ....................... 37,765 ( 21,398) ( 18,534)
-------- --------- --------
NET CASH PROVIDED FROM (USED IN)
FINANCING ACTIVITIES ........... 37,678 ( 21,514) ( 18,681)
-------- --------- --------
NET DECREASE IN CASH ................... ( 1) ( 1) ( 475)
CASH, beginning of year ................... 8 9 484
-------- --------- --------
CASH, end of year ......................... $ 7 $ 8 $ 9
======== ========= ========
See accompanying notes to financial statements.
8
<PAGE>
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
Note 1 - Organization and Basis of Presentation
- -----------------------------------------------
Food Metal & Specialty Division (the "Division") is a division of American
National Can Company ("ANC") which is an indirect majority-owned subsidiary of
Pechiney Corporation, a Delaware corporation. Pechiney Corporation is a
wholly-owned subsidiary of Pechiney International S.A., which is a
majority-owned subsidiary of Pechiney S.A., a French corporation.
ANC, including the operations of the Division, was acquired by Pechiney
Corporation on December 31, 1988. As a result of the acquisition, the tangible
assets and liabilities of the Division were adjusted to their fair values as of
the date of acquisition and an allocated portion of the purchase price and
related expenses incurred by Pechiney Corporation to acquire ANC, together with
the resultant goodwill related to the Division and amortization thereof, have
been pushed down to the Division's financial statements.
The accompanying financial statements reflect the "carve-out" financial
position, results of operations and cash flows of the Division for the periods
presented. The financial information included herein does not necessarily
reflect what the financial position and results of operations of the Division
would have been had it operated as a stand alone entity during the periods
covered, and may not be indicative of future operations or financial position.
Note 2 - Summary of Significant Accounting Policies
- ---------------------------------------------------
Revenue Recognition
- -------------------
Revenues are recognized when goods are shipped.
Financial Instruments
- ---------------------
The carrying value of the Division's financial instruments, primarily
receivables and payables, generally approximates fair value.
Inventories
- -----------
Inventories are stated at the lower of cost or market. The costs of inventories
other than spare parts were determined by the first-in, first-out (FIFO) method.
Costs of spare parts inventories were determined by the weighted average method.
9
<PAGE>
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
Property, Plant and Equipment
- -----------------------------
Property, plant and equipment is stated at cost (as adjusted in connection with
the acquisition of ANC by Pechiney Corporation) including interest incurred on
funds borrowed during the period that major items are prepared for their
intended use. Capitalized leases are stated at the lesser of the present value
of future minimum lease payments or the fair value of the leased property.
Depreciation and amortization are computed using the straight-line method.
During 1994, the Division performed a study of the economic lives of its fixed
assets and determined that the useful lives of certain asset categories were
generally longer than the lives used for depreciation purposes. Therefore, the
Division extended the estimated depreciable lives of certain categories of
property, plant and equipment (mainly machinery and equipment used in the
production process), by a maximum of two years, effective January 1, 1994. The
effect of this change in estimate reduced 1994 depreciation expense and net loss
by $3,203 and $1,957, respectively.
Goodwill
- --------
Goodwill consists of an allocated portion of the Pechiney Corporation
acquisition costs in excess of the fair value of the net assets of the Division
(see Note 1). Goodwill is amortized on a straight-line method over forty years.
In addition to the normal charge for the year, Pechiney Corporation and ANC, in
1994, revised their method of evaluating goodwill resulting in a writedown of
$26,650 relating to the Division. A review of the carrying value of goodwill in
the light of recent profitability trends of certain assets and current market
values resulted in this additional charge.
Other Postretirement and Postemployment Benefits
- ------------------------------------------------
Effective January 1, 1993, the Division adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other than Pensions" ("SFAS 106") which requires that the projected cost of all
healthcare and other nonpension benefits provided by the Division to its retired
employees and their dependents be accrued during an employees' period of service
rather than expensed as paid. The cumulative effect of this change in accounting
for postretirement benefits resulted in a non-cash, after-tax charge in 1993 of
$139,983 (net of $89,122 of income tax benefits). This cumulative effect
represents the actuarial present value of all future medical and life insurance
benefits to be paid to active employees and employees who retired subsequent to
the date of the acquisition by Pechiney Corporation (see Note 1) based on
services rendered to date. The amount of the cumulative effect recorded by the
Division at January 1, 1993 was determined (a) for active employees on the basis
of an actuarial valuation and (b) for retired employees by applying the pro rata
allocation relationship for determining postretirement benefit expense for
retired employees as described in Note 11, to the total accumulated
postretirement benefit obligation for retired employees of ANC after reduction
for the remaining portion of the liability established at the date of
acquisition by Pechiney Corporation for employees who had retired at that date.
Additional expense for 1993 due to the adoption of SFAS 106 exclusive of the
cumulative effect was $20,873.
Prior to 1993, the Division accounted for health care and other non-pension
benefits for retired employees on the cash basis except for benefits of
employees who were retired as of the date of the acquisition by Pechiney
Corporation (see Note 11).
10
<PAGE>
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
Effective January 1, 1994, the Division adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" ("SFAS 112"). This standard requires that the projected costs of all
benefits the Division provides to former or inactive employees (and their
covered dependents) before their retirement be accrued at the time they are
terminated or become inactive. The cumulative effect of this change in
accounting for postemployment benefits resulted in a non-cash, after-tax charge
in 1994 of $914 (net of $582 of income tax benefits). There was no impact on
pre-tax earnings in 1994 as a result of complying with SFAS 112.
Income Taxes
- ------------
The Division is included as part of ANC in the consolidated U.S. federal income
tax return of Pechiney Corporation. The provision for income taxes is computed
on the taxable income or loss of the Division on a stand-alone basis. For
financial reporting purposes, income tax benefits are recognized based upon
amounts currently recognized by ANC which credits the Division for the tax
benefits resulting from the inclusion of the Division's losses in the
consolidated return.
The Division accounts for income taxes based on the asset and liability approach
in accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes". The asset and liability approach requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the financial reporting and the
tax bases of assets and liabilities.
The liability for the current portion of the tax provision is transferred to the
Investments by and advances from ANC account at the end of each year. The
deferred income tax assets and liabilities have been included in the
accompanying balance sheets.
Note 3 - Related Party Transactions
- -----------------------------------
ANC provides the Division certain data processing, human resources, purchasing,
credit, accounting and tax services. An allocation of the estimated costs of
these services is charged directly to the Division each month by ANC using
varying allocation bases (primarily number of transactions processed). The
allocation process is consistent with the methodology used by ANC to allocate
costs of similar services provided to its other business units. The costs for
these services are negotiated and agreed to by both the Division and ANC each
year, and in the opinion of management are reasonable. The allocated costs of
these services, which aggregated $7,110 in 1994, $9,241 in 1993 and $16,153 in
1992, were reflected in selling, general and administrative expenses in the
accompanying statements of operations.
ANC maintains a centralized cash management system and substantially all cash
receipts and disbursements are recorded at the corporate level. The Division is
charged or credited for the net of cash receipts and disbursements each month.
11
<PAGE>
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
The Division incurs a monthly charge for interest expense from ANC based on a
formula which takes into consideration its percentage of certain assets and
liabilities in relation to the total for ANC of these assets and liabilities
(see Note 8).
The following table sets forth the activity in the Investments by and advances
from ANC account for the years ended December 31, 1994, 1993 and 1992:
1994 1993 1992
---- ---- ----
Balance, beginning of year ................. $330,298 $377,442 $ 425,297
Net loss ................................... ( 48,071) (165,729) ( 29,321)
Charges/advances from ANC, net, including
in 1993, $139,983 relating to a cumulative
effect of a change in accounting principle 37,765 118,585 ( 18,534)
-------- ------- ---------
Balance, end of year ....................... $319,992 $330,298 $ 377,442
======== ======== =========
ANC maintains agreements with certain banks to sell trade accounts receivable,
with limited recourse, on a revolving basis. The agreements specify certain
eligibility criteria for receivables that are sold, including credit quality and
maturity. At December 31, 1994 and 1993, a portion of the Division's receivables
were included in the eligible pool of receivables sold by ANC. The balance
sheets reflect all Division receivables, including those in the eligible pool.
Note 4 - Inventories
- --------------------
Inventories at December 31, 1994 and 1993 consist of the following:
1994 1993
---- ----
Raw materials ..... $ 43,466 $13,968
Work-in-process ... 6,143 6,147
Finished goods .... 60,515 64,952
Machine spare parts 10,839 11,646
-------- -------
$120,963 $96,713
======== =======
Note 5 - Property, Plant and Equipment
- --------------------------------------
Property, plant and equipment at December 31, 1994 and 1993 consists of the
following:
Estimated
1994 1993 Useful Life
---- ---- -----------
Land ......................... $ 25,680 $ 31,260 --
Buildings and improvements ... 59,876 60,912 40 years
Machinery and equipment ...... 229,333 256,286 3 to 20 years
Less: Accumulated depreciation (106,732) (101,321)
-------- --------
$208,157 $247,137
======== ========
12
<PAGE>
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
Property, plant and equipment includes assets held for sale with a net book
value of $39,439 and $35,539 at December 31, 1994 and 1993, respectively. At
December 31, 1994 and 1993, the Division has available restructuring reserves of
$12,423 and $7,829, respectively, to cover the estimated losses to be incurred
on the disposal of these assets (see Note 13).
Note 6 - Leases
- ---------------
The Division leases manufacturing, warehouse and office facilities and certain
equipment. Future minimum lease payments required under capital leases and
operating leases having initial or remaining noncancelable lease terms in excess
of one year are set forth below. Such future minimum lease payments have not
been reduced by sublease rentals to be received subsequent to December 31, 1994
of $4,385 for operating leases:
Capital Operating
Leases Leases
------ ------
1995 $ 154 $ 4,116
1996 154 3,603
1997 154 3,366
1998 154 2,769
1999 153 2,226
Thereafter ............................... 1,529 5,736
------- -------
Total minimum rentals .................... 2,298 $21,816
=======
Less amount representing interest ........ ( 1,135)
-------
Present value of future minimum payments . 1,163
Less current portion ..................... ( 50)
-------
Long-term obligations under capital leases $ 1,113
=======
Rental expense under operating leases for the years ended December 31, 1994,
1993 and 1992 was as follows:
1994 1993 1992
---- ---- ----
Gross rental expense ...... $5,568 $6,418 $4,597
Less sublease rental income 652 865 419
------ ------ ------
$4,916 $5,553 $4,178
====== ====== ======
13
<PAGE>
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
Note 7 - Income Taxes
- ---------------------
The income tax benefit (provision) for the years ended December 31, 1994, 1993
and 1992 was as follows:
1994 1993 1992
---- ---- ----
Current income taxes:
Federal .......... $6,299 $34,376 $16,898
State ............ 1,149 6,270 3,082
------ ------- -------
7,448 40,646 19,980
Deferred income taxes 2,356 (27,507) ( 4,565)
------ ------- -------
$9,804 $13,139 $15,415
====== ======= =======
The provision for taxes on income differed from the U.S. statutory rate for the
years ended December 31, 1994, 1993 and 1992 for the following reasons:
1994 1993 1992
---- ---- ----
Statutory tax rate ....... 35.0% 35.0% 35.0%
State and local taxes, net
of federal benefit .... 1.7 3.3 3.4
Goodwill amortization .... (19.5) (4.5) (3.9)
---- ---- ----
17.2% 33.8% 34.5%
==== ==== ====
Deferred tax assets (liabilities) were comprised of the following at December
31, 1994 and 1993:
1994 1993
---- ----
Deductible temporary differences:
Restructuring reserve ........ $ 20,043 $ 32,034
Environmental reserve ........ 9,229 9,393
Employee benefits ............ 6,191 7,589
Workers' compensation ........ 5,031 4,533
Inventories .................. 3,122 2,750
Other ........................ 1,073 1,370
-------- --------
Total ........................ 44,689 57,669
Taxable temporary differences:
Property, plant and equipment (45,086) (61,166)
-------- --------
Net deferred tax liability ...... ($ 397) ($ 3,497)
======== ========
14
<PAGE>
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
Note 8 - Financial Expenses, net
- --------------------------------
Financial expenses for the years ended December 31, 1994, 1993 and 1992 consist
of the following:
1994 1993 1992
---- ---- ----
Interest expense:
Allocated from ANC (Note 3) ... $2,986 $3,099 $10,698
Interest imputed on obligations
under capital leases ....... 75 123 135
Capitalized interest .......... ( 582) ( 211) ( 732)
------ ------ -------
Total interest expense ........... 2,479 3,011 10,101
Interest income .................. ( 224) ( 446) ( 218)
------ ------ -------
Financial expenses, net .......... $2,255 $2,565 $ 9,883
====== ====== =======
Note 9 - Accrued Liabilities
- ----------------------------
The components of accrued liabilities at December 31, 1994 and 1993 were as
follows:
1994 1993
---- ----
Restructuring reserve (Note 13) ..... $20,000 $37,000
Accrued payroll and employee benefits 18,219 22,278
Workers' compensation liability ..... 12,932 11,652
Accrued taxes other than payroll .... 2,155 2,926
Payable to fixed asset vendors ...... 1,903 2,692
Accrued quality claims .............. -- 1,900
Pension liabilities (Note 10) ....... 542 668
Other ............................... 68 217
------- -------
$55,819 $79,333
======= =======
Note 10 - Pension Liabilities
- -----------------------------
The Division sponsors defined benefit retirement plans covering certain hourly
employees of the Division. The Division's remaining hourly employees are
included in ANC-sponsored defined benefit plans or multi-employer union plans.
The Division's salaried employees are included in defined benefit and defined
contribution plans which cover substantially all of the salaried employees of
ANC. The ANC-sponsored plans for salaried employees provide benefits that are
based on employees' years of service and compensation during employment with the
Division. The Division through ANC makes contributions to the defined benefit
plans at least equal to the minimum funding requirements under the Employee
Retirement Income Security Act of 1974 (ERISA).
15
<PAGE>
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
Net periodic cost (income) for defined benefit and defined contribution plans
for the years ended December 31, 1994, 1993 and 1992 was as follows:
1994 1993 1992
---- ---- ----
Division-sponsored hourly plans ($ 340) $ 184 $ 370
ANC-sponsored plans:
Active hourly employees .... 4,558 7,279 8,222
Active salaried employees .. 2,865 3,267 2,894
Retired hourly employees ... 2,075 7,635 7,191
Retired salaried employees . (995) (419) (542)
Multi-employer union plans .... 148 169 200
------ ------- -------
$8,311 $18,115 $18,335
====== ======= =======
Net periodic pension cost (income) for the Division-sponsored hourly plans for
1994, 1993 and 1992 included the following components:
Service cost - benefits
earned during the period . $ 286 $ 350 $ 429
Interest cost on projected
benefit obligation ....... 722 835 886
Actual return on assets -
loss (gain) ............... 272 ( 1,795) ( 544)
Net amortization and deferral ( 1,620) 794 ( 401)
------- ------- ------
Net periodic pension
cost (income) ............. ($ 340) $ 184 $ 370
======= ======= ======
Pension expense for active employees of the Division participating in the
ANC-sponsored plans was allocated based on an actuarial valuation. Pension
expense (income) for the Division's retirees participating in ANC-sponsored
plans was based on a pro-rata allocation of active Division participants to
total actives in each ANC-sponsored plan.
For the years 1992 through 1994, the discount rate used to determine the
actuarial present value of the projected benefit obligation was 8.0%, the
expected rate of return on plan assets was 10.0%, and the discount rate used to
determine the interest cost on the projected benefit obligation was 8.0%. The
expected increase in future salaries for those plans using future compensation
assumptions ranged from 4.0% to 6.9% for 1994 and 6.0% to 8.9% for 1993 and
1992.
All amortization is based upon the average remaining service period of covered
employees except for unrecognized prior service costs for benefit improvements
negotiated during the current period which are amortized over six or ten years
(twice the contract period).
16
<PAGE>
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
The following table sets forth the funded status and amounts recognized for the
Division-sponsored hourly plans in the balance sheets at December 31, 1994 and
1993:
1 9 9 4 1 9 9 3
------------------- -------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
Actuarial present value of
benefit obligations:
Vested benefits ............... $4,985 $3,434 $ 5,449 $2,576
Nonvested benefits ............ 818 -- 927 --
------ ------ ------- ------
Accumulated benefit obligation .... 5,803 3,434 6,376 2,576
Excess of projected benefit
obligation over accumulated
benefit obligation ............. 427 -- 2,324 --
------ ------- ------- -------
Projected benefit obligation ...... 6,230 3,434 8,700 2,576
Plan assets at fair value ......... 8,724 2,369 10,118 1,674
------ ------- ------- -------
Funded status ..................... 2,494 ( 1,065) 1,418 ( 902)
Unrecognized prior service cost ... 3 -- 5 --
Unrecognized net (gain) loss ...... (1,319) 708 ( 643) 189
Additional minimum liability ...... -- ( 818) -- ( 403)
------ ------- ------- -------
Accrued pension asset (liability)
recognized in the balance sheets . $1,178 ($1,175) $ 780 ($1,116)
====== ======= ======= =======
The plans' assets are held by several master trusts created for collective
investment of plans' funds. At December 31, 1994 and 1993, assets held by the
master trusts consisted primarily of common and preferred stocks, corporate
bonds, U.S. government obligations, pooled funds, real estate and short-term
investments.
At December 31, 1994 and 1993, equity adjustments of $500 and $246,
respectively, (net of taxes of $318 and $157, respectively) had been recorded,
representing the excess of the additional minimum pension liability over the
related unrecognized prior service cost for the Division-sponsored plans.
The projected benefit obligation for the Division's active hourly and salaried
employees included in the ANC-sponsored defined benefit plans, based on
actuarial valuations, was approximately $102,000 at December 31, 1994 and
$130,000 at December 31, 1993. Such obligations are not included in the
accompanying balance sheets.
17
<PAGE>
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
Note 11 - Postretirement Benefits Other than Pensions
- -----------------------------------------------------
ANC sponsors healthcare and life insurance benefit plans for substantially all
of the Division's hourly and salaried employees and their dependents. Certain of
the plans require retiree contributions. The Division also participates in
several multi-employer union plans which provide postretirement health care
benefits to certain hourly employees.
The net postretirement benefit expense for active employees is based on an
actuarial valuation. For purposes of these financial statements, the net
postretirement benefit expense for retired employees of the Division
participating in the ANC-sponsored plans was computed based on a pro-rata
allocation of the number of Division employees that retired between 1989 and
1994 compared to the total number of employees covered by the plans who retired
during the same time period. This allocation method assumes that the percentage
of Division employees who retired prior to 1989, compared to all employees who
retired prior to 1989, approximates the percentage calculated above. Management
believes that this method of allocation is reasonable. Total postretirement
benefit expense for retired employees of ANC participating in the ANC-sponsored
plans was determined by actuarial valuation.
The net postretirement benefit expense for 1994, 1993 and 1992 included the
following:
1994 1993 1992
---- ---- ----
In accordance with SFAS 106:
Allocated portion of service and
interest cost for the Division's
active employees participating in
ANC-sponsored plans:
Active hourly employees ............ $ 2,885 $ 2,642
Active salaried employees .......... 990 895
Allocated portion of interest cost
for the Division's retired employees
participating in ANC- sponsored plans:
Retired hourly employees ........... 28,034 28,553
Retired salaried employees ......... 4,830 5,026
------- -------
36,739 37,116
Prior to adoption of SFAS 106:
Payments for employees retired
subsequent to the acquisition
by Pechiney Corporation ............. $15,956
Division contributions to hourly
multi-employer union plans .......... 291 240 356
------- ------- -------
Net postretirement benefit expense .... $37,030 $37,356 $16,312
======= ======= =======
These benefits are funded from current Division cash flows as claims are paid.
18
<PAGE>
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
The postretirement benefit obligation for active employees of the Division
included in ANC-sponsored plans, which was approximately $28,000 and $25,500 for
hourly employees and $8,900 and $8,000 for salaried employees at December 31,
1994 and 1993, respectively, as determined by actuarial valuation, is not
reflected in the accompanying balance sheets. The postretirement benefit
obligation for retired hourly and salaried employees of the Division are also
not included in the accompanying balance sheets.
A discount rate of 8% was used for determining obligations and interest costs.
The following table shows the other assumptions used to develop the accumulated
postretirement benefit obligation and the net post-retirement benefit expense in
1994 and 1993.
Managed
Under Age Care Under Over Age
65 Age 65 65
--------- ---------- --------
Current year health care trend rate 10% 8% 8%
Ultimate trend rate ................ 6% 6% 5%
Year ultimate trend rate is achieved 2001 2001 2001
A one percentage point increase in the assumed health care cost trend rates
would increase the postretirement benefit expense for the Division's active and
retired employees participating in the ANC-sponsored plans by approximately
$2,600 for the year ended December 31, 1994.
Note 12 - Other Long-Term Liabilities
- -------------------------------------
The components of other long-term liabilities at December 31, 1994 and 1993 were
as follows:
1994 1993
---- ----
Restructuring reserve (Note 13) $32,725 $45,351
Environmental reserve (Note 15) 23,726 24,147
Accrued employee benefits ..... 3,813 2,808
Deferred incentive compensation 762 746
------- -------
$61,026 $73,052
======= =======
Note 13 - Restructuring
- -----------------------
The Division has implemented a restructuring program to close certain plants,
modify plant operations and consolidate and transfer production processes
between locations. As a result of the restructuring program, nine plants have
been closed or reorganized since 1991 resulting in the reduction of
approximately 1,100 employees through December 31, 1994. The Division recorded a
restructuring provision in June, 1992 of $4,588 which represented the loss
incurred on the sale of property of a closed facility. In December, 1994, the
Division recorded an additional provision of $10,100 for two plants still in the
process of being closed or reorganized which will result in the elimination of
approximately 70 additional positions by the end of 1995.
19
<PAGE>
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
The following table sets forth the activity in the restructuring reserve for
1994 and 1993 and the reserve balances at December 31, 1994 and 1993 which are
included in accrued liabilities and other long-term liabilities in the
accompanying balance sheets.
Equipment
Standby Writedown
Employee and Project of Sales
Costs Costs Assets Proceeds Total
----- ----- ------ -------- -----
Balance at 12/31/92 $87,514 $31,101 $38,264 ($29,685) $127,194
1993 Activity ..... (31,780) (12,313) (2,725) 1,975 (44,843)
------- ------- ------- -------- --------
Balance at 12/31/93 55,734 18,788 35,539 (27,710) 82,351
1994 Provision .... 4,310 150 13,550 (7,910) 10,100
1994 Activity ..... (31,183) (7,497) (9,650) 8,604 (39,726)
------- ------- ------- -------- --------
Balance at 12/31/94 $28,861 $ 1,441 $39,439 ($27,016) $ 52,725
======= ======= ======= ======== ========
Employee costs primarily include employee separation costs to be incurred upon
plant closures, such as severance and unemployment benefits to be paid to
terminated employees and pension and retiree medical benefits based on actuarial
valuation.
Equipment standby and project costs include costs associated with the
modification of certain facilities, transferring equipment between locations and
the ongoing costs of maintaining certain plants and equipment from the expected
closing date to the estimated sale date.
As a result of closing certain facilities, the restructuring reserve includes a
provision to record any excess assets at their estimated realizable values.
Anticipated proceeds from the sales of certain facilities and excess machinery
and equipment have been used to offset the total costs associated with the
restructuring program.
Substantially all of these costs will be incurred over the next three years.
Note 14 - Asset Writedowns
- --------------------------
In 1994, the Division recorded a write down of various assets aggregating $7,110
due to the technological obsolescence of machinery and equipment used in the
production process and machinery and equipment which was purchased for the
manufacture of a new product which was unsuccessful. The writedown has been
included in Other, net in the accompanying statements of operations.
20
<PAGE>
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
Note 15 - Contingencies
- -----------------------
The Division is involved in litigation and in administrative proceedings and
investigations in various jurisdictions. A number of such matters involve the
Division, ANC and other parties related to environmental remediation costs.
It is the Division's policy to accrue environmental cleanup costs when it is
probable that a liability has been incurred and an amount is reasonably
estimable. As assessments and cleanups proceed, these liabilities are reviewed
periodically and adjusted as additional information becomes available. The
liabilities can change substantially due to such factors as additional
information on the nature or extent of contamination, methods of remediation
required, and other actions by governmental agencies or private parties.
At December 31, 1994, the Division has recorded an environmental reserve of
$23,726 which includes $737 for plant locations that are currently in operation.
The remaining reserve of $22,989 includes plant locations which have been closed
and environmental sites that are located somewhere other than a plant location
(landfills, solvent recovery sites, dump sites, etc.). The majority of these
costs are expected to be paid out within the next 10 years, however, certain
costs could be incurred for up to 30 years.
While the Division's liability, if any, with respect to all pending suits and
claims cannot be determined at this time, it is the opinion of management that
the outcome of any such matters, and all of them combined, will not have a
material adverse effect on the Division's financial position or results of
operations.
Note 16 - Major Customers
- -------------------------
The Division had gross sales in excess of 10% to one customer in 1994 and 1993
amounting to approximately $63,900 and $62,000, respectively.
Note 17 - Subsequent Event
- --------------------------
On August 1, 1995, Silgan Containers Corporation ("Silgan") acquired from ANC
substantially all of the net operating assets of the Division for cash of
approximately $336,300. The purchase agreement specifies that certain additional
assets will be sold to Silgan upon completion of a restructuring project at one
of the operating plants, but no later than December 31, 1996. Upon completion of
this transaction, ANC will no longer actively sell products in the food metal
& specialty markets.
21
<PAGE>
APPENDIX B
FOOD METAL & SPECIALTY DIVISION
BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
June 30, 1995 June 30, 1994
-------------- -------------
ASSETS
CURRENT ASSETS:
Cash ............................................... $ 6 $ 7
Accounts receivable, less allowances
of $465 in 1995 and $380 in 1994 ................. 74,681 73,445
Inventories ........................................ 160,574 141,836
Deferred income taxes .............................. 18,928 23,197
Other .............................................. 3,331 4,791
-------- --------
TOTAL CURRENT ASSETS ............................. 257,520 243,276
PROPERTY, PLANT AND EQUIPMENT, net ................... 191,060 218,770
GOODWILL, less accumulated amortization
of $58,856 in 1995 and $27,550 in 1994 ............. 144,211 175,517
OTHER ASSETS ......................................... 2,145 4,559
-------- --------
TOTAL ASSETS ..................................... $594,936 $642,122
======== ========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable ................................... $ 71,223 $ 77,385
Accrued liabilities ................................ 46,769 62,689
Long-term obligations under capital
leases to be paid within one year ................ 53 53
-------- --------
TOTAL CURRENT LIABILITIES ....................... 118,045 140,127
-------- --------
LONG-TERM LIABILITIES:
Long-term obligations under capital leases ......... 1,086 1,138
Deferred income taxes .............................. 17,061 18,773
Other .............................................. 61,030 73,389
-------- --------
TOTAL LONG-TERM LIABILITIES ...................... 79,177 93,300
-------- --------
COMMITMENTS AND CONTINGENCIES ........................ -- --
-------- --------
EQUITY:
Equity adjustment for minimum pension liability .... ( 500) ( 246)
Investments by and advances from ANC ............... 398,214 408,941
-------- --------
TOTAL EQUITY ..................................... 397,714 408,695
-------- --------
TOTAL LIABILITIES AND EQUITY ..................... $594,936 $642,122
======== ========
See accompanying notes to financial statements.
22
<PAGE>
FOOD METAL & SPECIALTY DIVISION
STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands)
Six Months Ended June 30,
-------------------------
1995 1994
---- ----
NET SALES ...................................... $245,052 $256,343
OPERATING COSTS AND EXPENSES:
Cost of goods sold (excluding
depreciation and amortization) ............. 205,307 220,556
Depreciation and amortization of
property, plant and equipment .............. 8,473 10,526
Selling, general and administrative
expenses ................................... 13,314 14,331
Research and development expenses ............ 1,979 2,184
Net postretirement benefit expense ........... 17,974 18,484
Amortization of goodwill ..................... 2,152 2,505
Financial expense, net ....................... 6,258 1,116
Other, net ................................... 142 96
-------- --------
255,599 269,798
-------- --------
LOSS BEFORE TAXES AND CUMULATIVE
EFFECT OF CHANGES IN ACCOUNTING
PRINCIPLES ................................... ( 10,547) ( 13,455)
BENEFIT (PROVISION) FOR INCOME TAXES:
Current ...................................... 991 ( 3,090)
Deferred ..................................... 2,265 7,340
-------- --------
3,256 4,250
-------- --------
LOSS BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES ............. ( 7,291) (9,205)
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES ........................ ( 914)
-------- --------
NET LOSS ....................................... ($ 7,291) ($10,119)
======== ========
See accompanying notes to financial statements.
23
<PAGE>
FOOD METAL & SPECIALTY DIVISION
STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Six Months Ended June 30,
-------------------------
1995 1994
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ........................................ ($ 7,291) ($ 10,119)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Cumulative effect of changes in
accounting principles ..................... 914
Depreciation and amortization ............... 10,625 13,031
Benefit for deferred income taxes ........... (2,265) (7,340)
Other adjustments to net loss ............... 39 343
Changes in assets and liabilities:
Increase in accounts receivable ........... (29,044) ( 32,465)
Increase in inventories ................... (39,626) ( 41,076)
Decrease (increase) in other
current assets .......................... 5,631 ( 8,130)
Decrease in other assets .................. 268 6,760
Decrease in accounts payable
and other liabilities ................... (31,852) (22,559)
------- --------
NET CASH USED IN OPERATING
ACTIVITIES .................................. (93,515) (100,641)
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................ ( 2,993) ( 4,238)
Proceeds from sale of property, plant
and equipment ................................. 1,176 9,033
Transfer of property, plant and
equipment to other ANC business units ......... 9,846 9,856
-------- --------
NET CASH PROVIDED FROM INVESTING
ACTIVITIES .................................. 8,029 14,651
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of obligations under capital leases .... ( 24) ( 59)
Increase in advances from ANC ................... 85,509 86,048
-------- --------
NET CASH PROVIDED FROM FINANCING
ACTIVITIES .................................. 85,485 85,989
-------- --------
NET DECREASE IN CASH .............................. ( 1) ( 1)
CASH, beginning of period.......................... 7 8
-------- --------
CASH, end of period................................ $ 6 $ 7
======== ========
See accompanying notes to financial statements.
24
<PAGE>
FOOD METAL & SPECIALTY DIVISION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Financial Statements
- -----------------------------
Results of operations for any interim period are not necessarily indicative of
results of any other periods or for the year. The financial statements as of
June 30, 1995 and 1994 and for the six month periods then ended are unaudited,
but in the opinion of management include all adjustments necessary for a fair
presentation of results for such periods. These financial statements should be
read in conjunction with the audited financial statements and related notes for
the three years ended December 31, 1994.
Note 2 - Inventories
- --------------------
Inventories at June 30, 1995 and 1994 consist of the following:
1995 1994
---- ----
Raw materials ..... $ 25,180 $ 25,469
Work-in-process ... 774 813
Finished goods .... 124,466 104,771
Machine spare parts 10,154 10,783
-------- --------
$160,574 $141,836
======== ========
Note 3 - Subsequent Event
- -------------------------
On August 1, 1995, Silgan Containers Corporation ("Silgan") acquired from ANC
substantially all of the net operating assets of the Division for cash of
approximately $336,300. The purchase agreement specifies that certain additional
assets will be sold to Silgan upon completion of a restructuring project at one
of the operating plants, but no later than December 31, 1996. Upon completion of
this transaction, ANC will no longer actively sell products in the food metal
and specialty markets.
25
<PAGE>
APPENDIX C
SILGAN CORPORATION
UNAUDITED PRO FORMA FINANCIAL STATEMENTS AND NARRATIVE DISCLOSURE
(REFLECTING THE ACQUISITION OF AMERICAN NATIONAL CAN COMPANY'S
FOOD METAL & SPECIALTY DIVISION)
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Introductory Note
The following unaudited pro forma consolidated financial statements reflect the
acquisition of the ANC Food Metal & Specialty Business by Silgan Containers
Corporation ("Containers"), a wholly-owned subsidiary of Silgan Corporation
("Silgan" or the "Company"), which occurred on August 1, 1995. The acquisition
will be accounted for using the purchase method of accounting and the total
purchase cost will be allocated first to the tangible and identifiable
intangible assets and liabilities of ANC Food Metal & Specialty Business
acquired and assumed based upon their respective fair values as determined from
preliminary appraisals and valuations, and the remainder, if any, will be
allocated to the excess of cost over fair value of assets acquired. The
aggregate purchase cost and its preliminary allocation to the assets and
liabilities are as follows:
(Dollars in
thousands)
----------
Preliminary allocation of purchase cost:
Net assets of ANC Food Metal & Specialty Business
at historical amounts at June 30, 1995 ............. $397,714
Current assets not acquired ............................ (43,175)
Other assets not acquired .............................. (146,236)
Other assets acquired .................................. 8,290
Other liabilities not assumed .......................... 96,224
Other liabilities assumed .............................. (37,200)
--------
(122,097)
Adjustments to historical balance of property, plant
and equipment acquired to reflect current fair value 49,019
Cost in excess of fair value of net assets acquired .... 15,039
Increase in net working capital during the period from
June 30, 1995 through August 1, 1995 ............... 24,295
--------
363,970
Estimated fees and expenses related to financing
the transaction .................................... 21,000
--------
Total purchase cost .............................. $384,970
========
26
<PAGE>
SILGAN CORPORATION
UNAUDITED PRO FORMA FINANCIAL STATEMENTS AND NARRATIVE DISCLOSURE
(REFLECTING THE ACQUISITION OF AMERICAN NATIONAL CAN COMPANY'S
FOOD METAL & SPECIALTY DIVISION)
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Introductory Note
(continued)
The pro forma adjustments are based upon available information and upon certain
assumptions that Silgan believes are reasonable. The final purchase price
allocation may differ from that shown above, although it is not expected to
differ materially.
The pro forma financial data do not purport to be indicative of Silgan's
financial position or results that would actually have been obtained had such
transactions been completed as of the date or for the periods presented, or to
project Silgan's financial position or results of operations at any future date
or for any future period.
The unaudited pro forma statements of operations include adjustments for
depreciation, goodwill amortization and interest expense (including debt
amortization) based upon the allocated cost of the acquisition and its related
financing. In addition, estimated pro forma adjustments have been made to
reflect manufacturing cost savings which management believes will be realized
upon the combination of Silgan's can manufacturing operations and that of ANC
Food Metal & Specialty Business, as well as reduced SG&A expenditures which will
be realized from the planned integration of sales, administrative and research
functions. The pro forma statement of operations for the year ended December 31,
1994 includes a restructuring provision of $10.1 million. This charge
represented a provision for shut down costs incurred by ANC Food Metal &
Specialty Business during the final phase of its four-year rationalization
program in which assets of its business were realigned to match more closely the
existing customer base. The 1994 pro forma statement of operations also includes
one-time charges of $16.7 million and $7.1 million incurred by Silgan and the
ANC Food Metal & Specialty Business, respectively, to adjust the carrying value
of certain technologically obsolete and inoperable equipment and of $26.7
million incurred by ANC Food Metal & Specialty Business for the write-down of
goodwill. The pro forma statements of operations reflect non-cash charges for
depreciation and goodwill amortization of $27.4 million for the six months ended
June 30, 1995 and $58.5 million for the year ended December 31, 1994.
During the last five months of 1995, the Company will be incurring redundant and
one-time costs as it integrates the selling, administrative and research
functions of its business to accomplish the savings set forth in the pro forma
statements of operations. Under current accounting pronouncements, these costs
will be charged against operating income. Accordingly, earnings for the year
ended December 31, 1995 will not reflect the full benefits estimated from the
integration of the businesses as presented in the accompanying pro forma
statements of operations.
27
<PAGE>
SILGAN CORPORATION
UNAUDITED PRO FORMA FINANCIAL STATEMENTS AND NARRATIVE DISCLOSURE
(REFLECTING THE ACQUISITION OF AMERICAN NATIONAL CAN COMPANY'S
FOOD METAL & SPECIALTY DIVISION)
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Introductory Note
(continued)
As required, the Company has also not given pro forma effect to the anticipated
benefits it may realize as a result of the planned rationalization of plant
operations.
The acquisition of the ANC Food Metal & Specialty Business occurred as of August
1, 1995. As part of the acquisition, Containers intends to acquire the
operations of the St. Louis, MO facility of the ANC Food Metal & Specialty
Business upon completion by American National Can Company of a rationalization
project at that facility. The Company anticipates that the St. Louis operations
will be acquired by mid-1996. The estimated purchase price of approximately
$15.2 million and related assumption of certain post retirement benefit
obligations for active employees related to future service has been included in
the pro forma presentation on the assumption that its purchase was coincident
with the acquisition of the remainder of the ANC Food Metal & Specialty
Business.
On August 1, 1995, the Company entered into a $675.0 million credit facility,
the proceeds of which were used to finance the acquisition, refinance in full
the Company's outstanding secured debt obligations, and to fund the repurchase
of up to $75.0 million of discount debentures of Silgan Holdings Inc., the
parent company of Silgan ("Holdings"). On the date the facility was entered
into, the Company borrowed $512.8 million to fund the acquisition and to repay
the Company's existing bank debt. On August 31, 1995, as part of the $675.0
million credit facility, the banks lent $50 million of A term loans to fund in
full the prepayment of Silgan's senior secured notes.
The credit facility permits Holdings at any time prior to June 30, 1996 to
repurchase up to $75.0 million of its 13 1/4% Discount Debentures through
borrowings of working capital loans. The commitment under the credit facility
for working capital loans was initially $150.0 million, increasing at the time
and by the amount of such repurchases by Holdings of its discount debentures (up
to a maximum commitment of $225.0 million). During August and September,
Holdings repurchased $57.6 million of its outstanding 13 1/4% Discount
Debentures, and presently the commitment under the credit facility for working
capital loans is $207.6 million. The Company intends to make additional
borrowings of working capital loans of up to $17.4 million for the repurchase of
Holdings' discount debentures and up to $15.2 million to fund the acquisition of
the St. Louis operations.
28
<PAGE>
SILGAN CORPORATION
UNAUDITED PRO FORMA FINANCIAL STATEMENTS AND NARRATIVE DISCLOSURE
(REFLECTING THE ACQUISITION OF AMERICAN NATIONAL CAN COMPANY'S
FOOD METAL & SPECIALTY DIVISION)
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Introductory Note
(continued)
The pro forma unaudited balance sheet reflects the acquisition (including the
purchase of the St. Louis operations), the financing of such acquisition, the
refinancing of all of the Company's secured debt obligations and the repurchase
of $75.0 million of Holdings' discount debentures, as if all of these events
occurred as of June 30, 1995. For illustration purposes, presented below is a
table reflecting the sources and uses of funds, hypothetically, for the
acquisition, refinancings and repurchases described above (assuming that all
these events occurred as of June 30, 1995). The drawdown of the bank revolver
presented in the table below is greater than the amount of revolver borrowings
which will actually be outstanding because the table does not reflect cash
generated from operations during the period from the acquisition date until the
acquisition of the St. Louis facility and/or the final repurchase of discount
debentures. The hypothetical sources and uses of the fundings are as follows:
Borrowings at
Acquisition Additional
Date Borrowings Total
---- ---------- -----
Source (In millions)
Proceeds from A Term Loan ............... $175.0 $ 50.0 $225.0
Proceeds from B Term Loan ............... 225.0 -- 225.0
Drawdown of Bank Revolver ............... 112.8 100.4 213.2 (1)
------ ------ ------
$512.8 $150.4 $663.2
====== ====== ======
Uses
Acquisition of ANC Food Metal &
Specialty Business ..... $336.3 $ -- $336.3
ANC purchase price adjustment ........... -- 10.2 10.2
Acquisition of St. Louis facility ...... -- 15.2 15.2
Repay outstanding bank debt ............. 155.5 -- 155.5
Repay Senior Secured Notes .............. -- 50.0 50.0
Repurchase Discount Debentures .......... -- 75.0 75.0
Transaction fees ........................ 21.0 -- 21.0
------ ------ ------
$512.8 $150.4 $663.2
====== ====== ======
(1) Hypothetical amount due to the timing of certain uses
29
<PAGE>
SILGAN CORPORATION
UNAUDITED PRO FORMA FINANCIAL STATEMENTS AND NARRATIVE DISCLOSURE
(REFLECTING THE ACQUISITION OF AMERICAN NATIONAL CAN COMPANY'S
FOOD METAL & SPECIALTY DIVISION)
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Introductory Note
(continued)
Because the Company sells metal containers used in vegetable and fruit
processing, its sales are seasonal. As is common in the packaging industry,
Silgan must build inventory prior to the pack season and carry accounts
receivable beyond the end of the season. Seasonal accounts are generally settled
by year end. The acquisition of the ANC Food Metal & Specialty Business
increased the Company's seasonal metal containers business and, as a result, the
Company increased the amount of working capital loans available to it under its
credit facility to $225.0 million ($150.0 million initially, increasing to a
maximum of $225.0 million as discussed above). Because the Company's acquisition
of the ANC Food Metal & Specialty Business occurred near its seasonal peak, the
purchase price included $162.9 million for the net working capital of the
business. If the acquisition had occurred at December 31, 1994, the working
capital component of the purchase price would have been $56.9 million, or $106.0
million less than the net working capital at the time of acquisition. The
Company believes that its seasonal peak occurred in late September 1995, when
approximately $191.0 million of the working capital revolver, including letters
of credit, was utilized.
30
<PAGE>
SILGAN CORPORATION
PRO FORMA UNAUDITED CONDENSED BALANCE SHEET
JUNE 30, 1995
(Dollars in thousands)
ANC Food
Metal &
Specialty Pro Forma
Historical Business Adjustments Pro Forma
---------- -------- ----------- ---------
(Restated) (Restated)
ASSETS
Current assets:
Cash and cash equivalents ......$ 836 $ 6 $ -- $ 842
Accounts receivable, net ....... 74,926 74,681 (9,500)(a) 140,107
Inventories .................... 164,138 160,574 (11,610)(a) 313,102
Prepaid expenses and other
current assets ............... 6,123 22,259 (22,065)(a) 6,317
-------- -------- --------- ----------
Total current assets ... 246,023 257,520 (43,175) 460,368
Property, plant & equipment, net 255,453 191,060 49,019 (b) 495,532
Goodwill, net ................... 29,389 144,211 (129,172)(d) 44,428
Other assets .................... 18,070 2,145 22,489 (a)(e) 42,704
-------- -------- --------- ----------
$548,935 $594,936 $(100,839) $1,043,032
======== ======== ========= ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Trade accounts payable .........$ 44,826 $ 71,223 $ -- $ 116,049
Accrued payroll & related costs 25,307 10,656 (651)(a) 35,312
Accrued interest payable ....... 1,735 -- -- 1,735
Accrued expenses & other
current liabilities .......... 17,394 36,166 (31,828)(a) 21,732
Amount due ANC ................. -- -- 15,200 (f) 15,200
Bank working capital loans ..... 39,750 -- 135,308 (g) 175,058
Current portion of long-term
debt ......................... 19,514 -- (13,014)(g) 6,500
-------- ------- -------- ----------
Total current liabilities ... 148,526 118,045 105,015 371,586
Long-term debt .................. 282,568 -- 295,932 (g) 578,500
Deferred income taxes ........... 13,017 17,061 (17,061)(a) 13,017
Other long-term liabilities ..... 25,239 62,116 (7,235)(a)(h) 80,120
Common stockholder's equity:
Investment by and advances
from ANC ..................... -- 398,214 (398,214)(i) --
Equity adjustment for
minimum pension .............. -- (500) 500 (a) --
Additional paid-in capital ..... 72,635 -- -- 72,635
Retained earnings .............. 6,950 -- (4,776)(j) (72,826)
(75,000)(c)
-------- ------- -------- ----------
Total common stockholder's
equity ..................... 79,585 397,714 (477,490) (191)
-------- -------- --------- ----------
$548,935 $594,936 $(100,839) $1,043,032
======== ======== ========= ==========
31
<PAGE>
SILGAN CORPORATION
NOTES TO PRO FORMA UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 1995
(a) Elimination of assets not acquired and liabilities not assumed pursuant
to the Asset Purchase Agreement net of adjustments to restate assets
acquired and liabilities assumed to fair value.
(b) Adjustment of property, plant and equipment to estimated fair market
value based upon preliminary appraisals and evaluations.
(c) Dividend to Parent to fund repurchase of Parent's discount debentures.
(d) Adjustment to eliminate historical goodwill and record excess cost over
estimated fair market value of net assets acquired.
(e) Adjustment to eliminate deferred debt financing costs related to
retired debt facilities and record deferred financing costs for new
Credit Agreement. Additional adjustment to record deferred tax asset of
$10 million.
(f) Estimated amount due American National Can Company related to the
purchase of additional can manufacturing assets (and the related
assumption of certain limited liabilities) at its St. Louis plant which
will be sold to Silgan Containers Corporation, no later than December
31, 1996, upon the completion of a restructuring at that facility.
(g) Borrowings under the Credit Agreement which were used to finance the
acquisition of ANC Food Metal & Specialty Business (net of an
adjustment for the increase in seasonal working capital during the
period from June 30, 1995 to August 1, 1995, the closing date), repay
amounts outstanding under Silgan's old credit agreement and amounts
owed under Silgan's Secured Notes, pay a dividend to Parent of $75
million for the repurchase of Parent's discount debentures and pay
fees and expenses associated with Silgan's new credit facility.
(h) Adjustment to record (i) assumption of post-retirement medical benefit
obligation for active employees, including the amount related to the
St. Louis operations ($19.7 million), (ii) assumption of contracted
future liabilities relating to employee pension benefit plans ($5.2
million), and (iii) employee termination costs associated with plant
rationalizations and administrative workforce reductions, other plant
exit costs and employee relocation costs ($30.0 million).
(i) Elimination of investment by ANC.
(j) Reflects charge to equity for unamortized deferred financing costs
related to the repayment of amounts outstanding under Silgan's credit
agreement and Silgan's Secured Notes.
32
<PAGE>
SILGAN CORPORATION
PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995
(Dollars in thousands)
ANC Food
Metal &
Specialty Pro Forma Pro
Historical Business Adjustments Forma
---------- -------- ----------- -----
(a)
Net sales ......................... $404,990 $245,052 $ -- $650,042
1,835 (b)
(1,963)(c)
(17,047)(d)
Cost of goods sold ................ 346,144 232,461 (4,000)(e) 557,430
-------- -------- --------- --------
Gross profit .................... 58,846 12,591 21,175 92,612
134 (b)
Selling, general and .............. (1,244)(d)
administrative expenses .......... 17,315 16,880 (6,500)(f) 26,585
-------- --------- ------- --------
Income (loss) from operations ... 41,531 (4,289) 28,785 66,027
Interest expense and other ........ 8,302 (g)
related financing costs .......... 19,091 6,258 (68)(h) 33,583
-------- -------- ------ --------
Income (loss) before income taxes 22,440 (10,547) 20,551 32,444
Income tax provision (benefit) .... 9,300 (3,256) 7,258(i) 13,302
-------- -------- ------ --------
Income before
extraordinary item (j) ........ $ 13,140 $ (7,291) $13,293 $ 19,142
======== ======== ======= ========
33
<PAGE>
SILGAN CORPORATION
PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
(Dollars in thousands)
ANC Food
Metal &
Specialty Pro Forma Pro
Historical Business Adjustments Forma
---------- -------- ----------- -----
(a)
Net sales ........................ $861,374 $596,594 $ - $1,457,968
3,560 (b)
(4,633)(c)
35,176)(d)
Cost of goods sold ............... 747,457 572,508 (8,000)(e) 1,275,716
-------- -------- ------- ----------
Gross profit ................... 113,917 24,086 44,249 182,252
252 (b)
Selling, general and (2,486)(d)
admisistrative expenses ......... 37,993 34,930 13,000)(f) 57,689
Restructuring expense ............ - 10,100 - 10,100
Reduction in carrying
value of assets ................. 16,729 33,762 - 50,491
-------- -------- ------- ----------
Income (loss) from operations .. 59,195 (54,706) 59,483 63,972
Interest expense and other 29,290 (g)
related financing costs ......... 36,142 2,255 (135)(h) 67,552
-------- -------- ------- ----------
Income (loss) before
income taxes .................. 23,053 (56,961) 30,328 (3,580)
Income tax provision (benefit) ... 11,000 (9,804) (2,663)(i) (1,467)
-------- -------- ------- ----------
Income (loss) before
extraordinary item (j) ........ $ 12,053 $(47,157) $ 32,991 $ (2,113)
======== ======== ======== =========
34
<PAGE>
SILGAN CORPORATION
NOTES TO PRO FORMA UNAUDITED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1995
AND YEAR ENDED DECEMBER 31, 1994
(a) Restated ANC Food Metal & Specialty Business financial information
to conform to Silgan presentation.
(b) Increased depreciation charge from historical amount based upon the
estimated fair values of property, plant and equipment acquired with
estimated useful life of 25 years for buildings and improvements and
5-11 years for machinery and equipment.
(c) Decreased charge for amortization of goodwill from historical amount to
reflect amortization of estimated excess fair value over net book value
of assets acquired over 40-year period.
(d) Elimination of pension and post-retirement medical expense for retired
employees because related obligations were not assumed by Silgan.
(e) Decreased cost of goods sold for benefits expected from the integration
of ANC Food Metal & Specialty Business with Silgan's existing can
manufacturing operation.
(f) Decrease in the cost of administrative support services which will be
realized as a result of the integration of the ANC Food Metal &
Specialty Business and Silgan's sales, administrative and research
functions.
(g) Estimated increase in interest expense due to additional bank
borrowings of approximately $420 million at rates ranging from 8.38% to
8.63% (Silgan's current bank borrowing rates) to finance the
acquisition of ANC Food Metal & Specialty Business assets and to fund
Silgan's average working capital requirements plus the dividend to
Parent of $75 million for the repurchase of Parent's discount debentures.
(h) Amortization of deferred financing fees of $19.3 million on new debt
over six-year term less elimination of amortization of debt costs on
retired debt.
(i) Adjustment for estimated effective income tax rate as calculated in
accordance with SFAS 109 applied to pro forma income before income
taxes.
(j) The pro forma statement of operations does not reflect the
extraordinary charge resulting from the write-off of unamortized
deferred financing costs.
35
<PAGE>
