Page 1 of 12
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended March 31, 1994 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) of the Securities
Exchange Act of 1934 for the Period ____________ to ____________.
Commission file number 33-28409
SILGAN HOLDINGS INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1269834
(State of Incorporation) (I.R.S. Employer Identification Number)
4 Landmark Square
Stamford, Connecticut 06901
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (203) 975-7110
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
As of May 13, 1994, the number of shares outstanding of each of the
issuer's classes of common stock is as follows:
Classes of shares of Number of
common stock outstanding, $0.01 par value shares outstanding
Class A 417,500
Class B 667,500
Class C 50,000
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Part I. Financial Information
Item 1. Financial Statements
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, March 31, Dec. 31,
1994 1993 1993
ASSETS (unaudited)(unaudited)(audited)
Current assets:
Cash and cash equivalents $ 2,687 $ 391 $ 224
Accounts receivable, net 68,188 53,409 44,409
Inventories 124,009 85,375 108,653
Prepaid expenses and other current
assets 3,598 3,493 3,676
Total current assets 198,482 142,668 156,962
Property, plant and equipment, net 285,738 221,904 290,395
Other assets 48,885 37,304 50,276
$533,105 $401,876 $497,633
LIABILITIES & DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Working capital loans $ 5,800 $ 38,250 $ 2,200
Current portion of term loans 20,000 20,899 20,000
Trade accounts payable 48,665 32,344 31,913
Accrued payroll and related costs 25,263 22,249 20,523
Accrued interest payable 6,250 5,224 783
Accrued expenses and other current
liabilities 21,391 20,151 21,385
Total current liabilities 127,369 139,117 96,804
Term loans 120,000 21,681 120,000
Senior secured notes 50,000 50,000 50,000
11 3/4% Senior subordinated notes 135,000 135,000 135,000
13 1/4% Senior discount debentures 207,328 182,365 200,718
Deferred income taxes 7,319 6,131 6,836
Other long-term liabilities 33,300 16,600 33,242
Class A common stock subject to put option 25,050 14,613 25,050
Deficiency in stockholders' equity:
Class B & C common stock 8 5 8
Additional paid-in capital 33,606 18,609 33,606
Accumulated deficit (205,875) (182,245) (203,631)
Total deficiency in stockholders'
equity (172,261) (163,631) (170,017)
$533,105 $401,876 $497,633
See accompanying notes.
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SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands)
Three Months Ended
March 31, March 31,
1994 1993
Net sales $186,243 $148,727
Cost of goods sold 163,520 131,822
Gross profit 22,723 16,905
Selling, general and administrative expenses 8,589 8,217
Income from operations 14,134 8,688
Interest expense and other related financing costs 15,647 13,089
Other (income) expense 156 (93)
Loss before income taxes (1,669) (4,308)
Income tax provision 575 450
Loss before cumulative effect of changes
in accounting principles (2,244) (4,758)
Cumulative effect of changes in accounting
principles - (6,276)
Net loss $ (2,244) $(11,034)
See accompanying notes.
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SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
March 31, March 31,
1994 1993
Cash flows from operating activities:
Net loss $ (2,244) $(11,034)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation 9,376 7,484
Amortization 1,774 1,371
Other items 276 (46)
Accretion of discount on discount debentures 6,610 5,814
Cumulative effect of changes in accounting
principles - 6,276
Changes in assets and liabilities:
(Increase) in accounts receivable (23,878) (8,852)
(Increase) in inventories (15,356) (10,368)
Increase in trade accounts payable 16,752 4,388
Increase in accrued interest payable 5,467 4,157
Other, net 4,982 5,927
Total adjustments 6,003 16,151
Net cash provided by operating activities 3,759 5,117
Cash flows from investing activities:
Capital expenditures (4,896) (5,463)
Net cash used in investing activities (4,896) (5,463)
Cash flows from financing activities:
Borrowings under working capital loans 33,750 79,250
Repayments under working capital loans (30,150) (81,400)
Net cash provided (used) by financing
activities 3,600 (2,150)
Net increase (decrease) in cash and cash equivalents 2,463 (2,496)
Cash and cash equivalents at beginning of year 224 2,887
Cash and cash equivalents at end of period $ 2,687 $ 391
Supplementary data:
Interest paid $ 1,786 $ 1,943
Income taxes paid, net of refunds 138 (50)
See accompanying notes.
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SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 1994 and 1993 and for the
three months months then ended is unaudited)
(Dollars in thousands)
1. Basis of Presentation
The accompanying condensed unaudited consolidated financial statements of
Silgan Holdings Inc. ("Holdings" or the "Company") have been prepared in
accordance with Rule 10-01 of Regulation S-X and, therefore, do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations and cash flows in conformity
with generally accepted accounting principles. All adjustments of a
normal recurring nature have been made, including appropriate estimates
for reserves and provisions which are normally determined or settled at
year end. In the opinion of the Company, however, the accompanying
financial statements contain all adjustments (consisting solely of a
normal recurring nature) necessary to present fairly Holdings' financial
position as of March 31, 1994 and 1993 and December 31, 1993, the results
of operations for the three months ended March 31, 1994 and 1993, and the
statements of cash flows for the three months ended March 31, 1994 and
1993.
While the Company believes that the disclosures presented are adequate to
make the information not misleading, it is suggested that these financial
statements be read in conjunction with the financial statements and notes
included in Holdings' Annual Report on Form 10-K for the year ended
December 31, 1993.
In the first quarter of 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 106 "Employers' Accounting for
Postretirement Benefits Other than Pensions" and SFAS No. 109 "Accounting
for Income Taxes". In the fourth quarter of 1993, the Company adopted
SFAS No. 112 "Employers' Accounting for Postemployment Benefits" effective
as of January 1, 1993. The cumulative effect of these changes in
accounting methods aggregated $6,276. The financial statements for the
quarter ended March 31, 1993 have been restated to reflect the adoption of
SFAS No. 112. <PAGE>
Page 6 of 12
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 1994 and 1993 and for the
three months months then ended is unaudited)
(Dollars in thousands)
2. Inventories
Inventories consisted of the following:
March 31, March 31, Dec. 31,
1994 1993 1993
Raw materials and supplies $ 27,274 $ 20,181 26,458
Work-in-process 20,481 10,179 17,105
Finished goods 74,444 55,906 65,072
122,199 86,266 108,635
Adjustment to value inventory
at cost on the LIFO Method 1,810 (891) 18
$124,009 $ 85,375 $108,653
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Page 7 of 12
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended March 31, 1994 Compared with
Three Months Ended March 31, 1993.
Net sales of metal containers were $133.3 million for the three months
ended March 31, 1994 (including net sales of $50.4 million and $35.5
million to Nestle Food Company ("Nestle") and Del Monte Corporation ("Del)
Monte"), respectively, during such period), an increase of $36.0 million,
or 37.0%, over net sales of metal containers of $97.3 million for same
period in 1993 (including net sales of $57.8 million and $2.0 million to
Nestle and Del Monte, respectively, during the same period in 1993.) The
increase in net sales for the three months ended March 31, 1994 as
compared to the three months ended March 31, 1993 was primarily
attributable to increased unit sales due to the acquisitions of all of the
assets of Del Monte's container manufacturing business in the United
States ("DM Can") in December 1993 and of an additional manufacturing
facility in May 1993 and the earlier sales of containers to certain
vegetable pack customers, offset, in part, by lower unit sales to Nestle
and lower average sales prices.
Net sales of plastic containers increased $2.1 million, or 4.4%, to $50.0
million for the three months ended March 31, 1994, as compared to $47.9
million for the same period in 1993. The increase in net sales was
principally attributable to a change in mix of products sold.
Sales of other containers totaled $2.9 million for the three months ended
March 31, 1994, compared to $3.5 million for the same period in 1993.
Cost of goods sold was 87.8% of net sales ($163.5 million) for the three
months ended March 31, 1994, a decrease of 0.8 percentage points as
compared to 88.6% of net sales ($131.8 million) for the same period in
1993. The decrease in cost of goods sold as a percentage of net sales
principally resulted from improved manufacturing efficiencies as a result
of capital investments, increased margin contribution due to a change in
the mix of products sold and economic benefits resulting from the
acquisition of DM Can. Also, the purchase of an additional manufacturing
facility in May 1993 increased production capacity and eliminated the
Company's first quarter 1993 outsourcing requirement for which there was
no margin contribution.
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Page 8 of 12
RESULTS OF OPERATIONS (Continued)
Selling, general and administrative expenses as a percentage of net sales
declined 0.9 percentage points to 4.6% of net sales ($8.6 million) for the
three months ended March 31, 1994, as compared to 5.5% ($8.2 million) for
the same period in 1993. The decrease as a percentage of net sales
resulted from the Company's ability to absorb the increase in selling,
general and administrative functions associated with the acquisition of DM
Can with a modest increase in expenses, and by a decline in selling,
general and administrative expenses of the Company's other existing
business.
Income from operations as a percentage of net sales increased 1.8
percentage points to 7.6% ($14.1 million) for the three months ended
March 31, 1994, compared with 5.8% ($8.7 million) for the same period in
1993. The increase in income from operations of $5.4 million was
attributable to the aforementioned increase in gross profit margin and the
maintenance of a constant level of selling, general and administrative
expenses.
Interest expense increased by approximately $2.5 million to $15.6 million
for the three months ended March 31, 1994. The increase resulted from the
incurrance of additional bank borrowings to finance the acquisition of DM
Can, higher average interest rates, and higher accretion of interest on
the discount debentures.
The provisions for income taxes for the three months ended March 31, 1994
and 1993 were comprised of state and foreign components and recognized the
benefit of certain deductions for federal income tax purposes which are
available to Holdings.
As a result of the items discussed above, the net loss before cumulative
effect of changes in accounting principles for the three months ended
March 31, 1994 was $2.2 million, $2.6 million less than the loss for the
three months ended March 31, 1993 of $4.8 million.
Effective January 1, 1993, the Company adopted SFAS No. 106, SFAS No. 109
and SFAS No. 112. The cumulative effect of these accounting changes, for
years prior to 1993, was to decrease the net loss by $6.3 million.
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Page 9 of 12
RESULTS OF OPERATIONS (Continued)
CAPITAL RESOURCES AND LIQUIDITY
The Company's liquidity requirements arise primarily from its obligations
under the indebtedness incurred in connection with its acquisitions and
the refinancing of such indebtedness, capital investment in new and
existing equipment and the funding of the Company's seasonal working
capital needs. Historically, the Company has met these liquidity
requirements through cash flow generated from operating activities and
borrowings of working capital loans.
For the first three months of 1994, the borrowing of working capital loans
of $3.6 million along with $3.8 million of cash provided by operating
activities were used to fund net capital expenditures of $4.9 million and
increase cash balances by $2.5 million. The Company's earnings before
depreciation, interest, taxes and amortization for the three months ended
March 31, 1994 increased by $7.2 million over the same period in the prior
year to $23.9 million. However, cash provided by operations during the
first three months of 1994 declined slightly from the same period in 1993
because there was an increase in working capital needs in 1994. During
the first three months of 1994 there was an increase in accounts
receivable due to greater sales during the first quarter of 1994 and an
increase in inventories due to the projected requirements for DM Can,
offset by an increase in trade accounts payable resulting from the higher
inventory levels.
Because the Company sells metal containers used in vegetable and fruit
processing, its sales are seasonal. As a result, a significant portion of
the Company's revenues are generated in the first nine months of the year.
As is common in the packaging industry, the Company must access working
capital to build inventory and then carry accounts receivable for some
customers beyond the end of the summer and fall packing season. Seasonal
accounts are generally settled by year end. Due to the Company's seasonal
requirements, the Company expects to incur short term indebtedness to
finance its working capital requirements, and it is estimated that
approximately $50 million of the working capital revolver, including
letters of credit, will be utilized at its peak in July 1994.
As of March 31, 1994, the outstanding principal amount of working capital
loans was $5.8 million and, subject to a borrowing base limitation and
taking into account outstanding letters of credit, the unused portion of
working capital commitments at such date was $57.8 million.
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RESULTS OF OPERATIONS (Continued)
CAPITAL RESOURCES AND LIQUIDITY (Continued)
On December 21, 1993, Silgan Containers Corporation, an indirect wholly
owned subsidiary of Holdings, acquired DM Can from Del Monte. To finance
the acquisition, Silgan Corporation, a wholly owned subsidiary of Holdings
("Silgan"), and its subsidiaries entered into a credit agreement, which
credit agreement also refinanced in full Silgan's prior credit agreement.
In conjunction therewith, the banks party to the credit agreement loaned
Silgan an aggregate of $140 million of term loans and agreed to lend to
Silgan's subsidiaries up to $70 million of working capital loans. In
addition, in conjunction with the acquisition, Holdings sold 250,000
shares of its Class B Common Stock for $15 million. <PAGE>
Page 11 of 12
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
On January 5, 1994, Silgan Holdings Inc. filed a Current Report on Form 8-
K regarding the acquisition of the assets of Del Monte Corporation's metal
food and beverage container manufacturing business in the United States.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report to be signed on its
behalf by the undersigned thereunto duly authorized.
SILGAN HOLDINGS INC.
Dated: May 13, 1994 /s/Harley Rankin, Jr.
Harley Rankin, Jr.
Executive Vice President, Chief
Financial Officer and Treasurer
(Principal Financial Officer)
Dated: May 13, 1994 /s/Harold J. Rodriguez, Jr.
Harold J. Rodriguez, Jr.
Vice President and Controller
(Chief Accounting Officer)
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