Page 1 of 15
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 September 30, 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 November 9, 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<PAGE>
Page 2 of 15
Part I. Financial Information
Item 1. Financial Statements
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
Sept. 30, Sept. 30, Dec. 31,
1994 1993 1993
ASSETS (unaudited)(unaudited)(audited)
Current assets:
Cash and cash equivalents $ 2,472 $ 435 $ 224
Accounts receivable, net 108,612 77,864 44,409
Inventories 100,993 88,107 108,653
Prepaid expenses and other current
assets 4,191 3,709 3,676
Total current assets 216,268 170,115 156,962
Property, plant and equipment, net 279,523 233,612 290,395
Other assets 50,226 35,662 50,276
$546,017 $439,389 $497,633
LIABILITIES & DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Working capital loans $ 850 $ 72,850 $ 2,200
Current portion of term loans 20,000 20,899 20,000
Trade accounts payable 50,536 31,969 31,913
Accrued payroll and related costs 25,382 19,047 20,523
Accrued interest payable 5,325 5,186 783
Accrued expenses and other current
liabilities 19,203 22,005 21,385
Total current liabilities 121,296 171,956 96,804
Term loans 115,000 20,553 120,000
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 221,064 194,446 200,718
Deferred income taxes 7,362 7,011 6,836
Other long-term liabilities 33,053 15,501 33,242
Deficiency in stockholders' equity:
Class A, B & C common stock 12 9 12
Additional paid-in capital 58,652 33,218 58,652
Accumulated deficit (195,422) (188,305) (203,631)
Total deficiency in stockholders'
equity (136,758) (155,078) (144,967)
$546,017 $439,389 $497,633
See accompanying notes.<PAGE>
Page 3 of 15
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands)
Three Months Ended
Sept. 30, Sept. 30,
1994 1993
Net sales $286,037 $181,092
Cost of goods sold 249,198 161,768
Gross profit 36,839 19,324
Selling, general and administrative expenses 9,605 7,395
Income from operations 27,234 11,929
Interest expense and other related financing costs 16,763 13,875
Other expense 38 1,047
Income (loss) before income taxes 10,433 (2,993)
Income tax provision 1,475 500
Net income (loss) $ 8,958 $ (3,493)
See accompanying notes.<PAGE>
Page 4 of 15
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands)
Nine Months Ended
Sept. 30, Sept. 30,
1994 1993
Net sales $673,240 $478,342
Cost of goods sold 584,693 421,497
Gross profit 88,547 56,845
Selling, general and administrative expenses 28,266 24,278
Income from operations 60,281 32,567
Interest expense and other related financing costs 48,693 40,192
Other expense 454 1,693
Income (loss) before income taxes 11,134 (9,318)
Income tax provision 2,925 1,500
Income (loss) before cumulative effect of
changes in accounting principles 8,209 (10,818)
Cumulative effect of changes in accounting
principles - (6,276)
Net income (loss) $ 8,209 $(17,094)
See accompanying notes.<PAGE>
Page 5 of 15
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended
Sept. 30, Sept. 30,
1994 1993
Cash flows from operating activities:
Net income (loss) $ 8,209 $(17,094)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 27,027 21,418
Amortization 5,043 4,112
Loss on equipment disposal 442 1,612
Other items 629 (164)
Accretion of discount on discount debentures 20,346 17,895
Provision for postretirement health care
benefits 419 261
Cumulative effect of changes in accounting
principles - 6,276
Changes in assets and liabilities:
(Increase) in accounts receivable (64,766) (32,937)
(Increase) decrease in inventories 7,660 (11,470)
Increase in trade accounts payable 18,623 4,013
Other, net 1,981 6,811
Total adjustments 17,404 17,827
Net cash provided by operating activities 25,613 733
Cash flows from investing activities:
Capital expenditures (17,015) (34,738)
Proceeds from sale of assets - 231
Net cash used in investing activities (17,015) (34,507)
Cash flows from financing activities:
Borrowings under working capital loans 281,100 232,400
Repayments under working capital loans (282,450) (199,950)
Repayments of term loans (5,000) (1,128)
Net cash provided (used) by financing activities (6,350) 31,322
Net increase (decrease) in cash and cash equivalents 2,248 (2,452)
Cash and cash equivalents at beginning of year 224 2,887
Cash and cash equivalents at end of period $ 2,472 $ 435
Supplementary data:
Interest paid $ 18,938 14,702
Income taxes paid, net of refunds 2,283 50
See accompanying notes.<PAGE>
Page 6 of 15
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 1994 and 1993 and for the
three months and nine 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 September 30, 1994 and 1993 and December 31, 1993, the
results of operations for the three months and nine months ended September
30, 1994 and 1993, and the statements of cash flows for the nine months
ended September 30, 1994 and 1993. Certain reclassifications have been
made to conform prior years' data to the current presentation.
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
period ended September 30, 1993 have been restated to reflect the adoption
of SFAS No. 112.<PAGE>
Page 7 of 15
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 1994 and 1993 and for the
three months and nine months then ended is unaudited)
(Dollars in thousands)
2. Inventories
Inventories consisted of the following:
Sept. 30, Sept. 30, Dec. 31,
1994 1993 1993
Raw materials and supplies $ 27,973 $ 21,265 26,458
Work-in-process 15,907 10,204 17,105
Finished goods 56,133 57,748 65,072
100,013 89,217 108,635
Adjustment to value inventory
at cost on the LIFO Method 980 (1,110) 18
$100,993 $ 88,107 $108,653
3. Stockholders' Equity
At June 30, 1994, the put option for the Class A common stock had expired
and the fair market value that had been assigned to the put option
liability has been reclassified to stockholders' equity for each of the
periods presented.<PAGE>
Page 8 of 15
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended September 30, 1994 Compared with
Three Months Ended September 30, 1993
Net sales of metal containers were $231.2 million for the three months
ended September 30, 1994 (including net sales of $65.7 million and $81.4
million to Nestle Food Company ("Nestle") and Del Monte Corporation ("Del
Monte"), respectively, during such period), an increase of $98.8 million,
or 74.6%, over net sales of metal containers of $132.4 million for the
same period in 1993 (including net sales of $57.6 million and $3.1 million
to Nestle and Del Monte, respectively, during the same period in 1993.)
The increase in net sales for the three months ended September 30, 1994 as
compared to the three months ended September 30, 1993 was primarily
attributable to increased unit sales due to the acquisition of all of the
assets of Del Monte's container manufacturing business in the United
States ("DM Can") in December 1993, increased unit sales of containers to
Nestle and existing vegetable pack customers, offset, in part, by modestly
lower average sales prices.
Net sales of plastic containers increased $7.0 million, or 15.3%, to $52.8
million for the three months ended September 30, 1994, as compared to
$45.8 million for the same period in 1993. The increase in net sales was
principally attributable to increased unit sales to new and existing
customers.
Sales of other containers totaled $2.0 million for the three months ended
September 30, 1994, compared to $2.9 million for the same period in 1993.
Cost of goods sold was 87.1% of net sales ($249.2 million) for the three
months ended September 30, 1994, a decrease of 2.2 percentage points as
compared to 89.3% of net sales ($161.8 million) for the same period in
1993. The decrease in cost of goods sold as a percentage of net sales
principally resulted from lower per unit manufacturing costs due to higher
production volumes, improved manufacturing efficiencies resulting from
greater capital investment in 1993 and synergistic benefits resulting from
the acquisition of DM Can.<PAGE>
Page 9 of 15
RESULTS OF OPERATIONS (Continued)
Selling, general and administrative expenses as a percentage of net sales
declined 0.7 percentage points to 3.4% of net sales ($9.6 million) for the
three months ended September 30, 1994, as compared to 4.1% ($7.4 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.
Income from operations as a percentage of net sales increased
2.9 percentage points to 9.5% ($27.2 million) for the three months ended
September 30, 1994, compared with 6.6% ($11.9 million) for the same period
in 1993. The increase in income from operations of $15.3 million was
principally attributable to the aforementioned increase in gross profit.
Interest expense increased by approximately $2.9 million to $16.8 million
for the three months ended September 30, 1994. The increase resulted from
the incurrance of additional bank borrowings to finance the acquisition of
DM Can, higher average bank borrowing rates and higher accretion of
interest on the Company's discount debentures.
The provision for income taxes for the three months ended September 30,
1994 and September 30, 1993 were comprised of state and foreign components
and recognize the benefit of certain deductions for federal income tax
purposes which are available to Holdings.
As a result of the items discussed above, net income for the three months
ended September 30, 1994 was $9.0 million, $12.5 million greater than the
net loss for the three months ended September 30, 1993 of $3.5 million.<PAGE>
Page 10 of 15
RESULTS OF OPERATIONS (Continued)
Nine Months Ended September 30, 1994 Compared with
Nine Months Ended September 30, 1993
Net sales of metal containers were $514.9 million for the nine months
ended September 30, 1994 (including net sales of $167.6 million and $158.0
million to Nestle and Del Monte, respectively, during such period), an
increase of $187.2 million, or 57.1%, over net sales of metal containers
of $327.7 million for the same period in 1993 (including net sales of
$163.9 million and $7.6 million to Nestle and Del Monte, respectively,
during the same period in 1993.) The increase in net sales for the nine
months ended September 30, 1994 as compared to the nine months ended
September 30, 1993 was primarily attributable to increased unit sales due
to the acquisition of DM Can in December 1993 and increased unit sales of
containers to existing customers, including vegetable pack customers,
offset, in part, by modestly lower average sales prices.
Net sales of plastic containers increased $10.2 million, or 7.2%, to
$150.9 million for the nine months ended September 30, 1994, as compared
to $140.7 million for the same period in 1993. The increase in net sales
was attributable to increased unit sales to new and existing customers
and, to a lesser extent, higher average sales prices due to the pass
through of higher resin costs.
Sales of other containers totaled $7.4 million for the nine months ended
September 30, 1994, compared to $9.9 million for the same period in 1993.
Cost of goods sold was 86.8% of net sales ($584.7 million) for the nine
months ended September 30, 1994, a decrease of 1.3 percentage points as
compared to 88.1% of net sales ($421.5 million) for the same period in
1993. The decrease in cost of goods sold as a percentage of net sales
principally resulted from lower per unit manufacturing costs due to higher
production volumes, improved manufacturing efficiencies resulting from
greater capital investment in 1993 and synergistic benefits resulting from
the acquisition of DM Can. Also, the purchase of an additional
manufacturing facility in May 1993 increased production capacity and
offset the first half 1993 outsourcing requirement for which there was no
margin contribution.<PAGE>
Page 11 of 15
RESULTS OF OPERATIONS (Continued)
Selling, general and administrative expenses as a percentage of net sales
declined 0.9 percentage points to 4.2% of net sales ($28.3 million) for
the nine months ended September 30, 1994, as compared to 5.1% ($24.3
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.
Income from operations as a percentage of net sales increased
2.2 percentage points to 9.0% ($60.3 million) for the nine months ended
September 30, 1994, compared with 6.8% ($32.6 million) for the same period
in 1993. The increase in income from operations of $27.7 million was
principally attributable to the aforementioned increase in gross profit.
Interest expense increased by approximately $8.5 million to $48.7 million
for the nine months ended September 30, 1994. The increase resulted
primarily from the incurrance of additional bank borrowings to finance the
acquisition of DM Can, higher average bank borrowing rates and higher
accretion of interest on the Company's discount debentures.
The provision for income taxes for the nine months ended September 30,
1994 and September 30, 1993 were comprised of state and foreign components
and recognize the benefit of certain deductions for federal income tax
purposes which are available to Holdings.
As a result of the items discussed above, net income for the nine months
ended September 30, 1994 was $8.2 million, $19.0 million greater than the
loss before cumulative effect of changes in accounting principles for the
nine months ended September 30, 1993 of $10.8 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 net income by $6.3 million.<PAGE>
Page 12 of 15
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 nine months of 1994, cash generated from operations of $25.6
million was used to fund capital expenditures of $17.0 million, repay $5.0
million of term loan borrowings and $1.4 million of working capital
borrowings and increase cash balances by $2.2 million. Cash provided from
operations during the nine months ended September 30, 1994 was $24.9
million greater than cash provided from operations during the same period
in the prior year. This increase was attributable to an increase in
earnings before depreciation, interest, taxes and amortization ($88.8
million for the nine months ended September 30, 1994 versus $55.8 million
for the same period in the prior year) principally due to higher earnings
realized on increased sales volume. Net working capital at September 30,
1994, as compared to September 30, 1993, increased due to the acquisition
of DM Can on December 21, 1993.
Because the Company sells metal containers used in vegetable and fruit
processing, its sales are seasonal. 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
incurred short term indebtedness to finance its working capital
requirements, and approximately $50.0 million of the working capital
revolver, including letters of credit, were utilized at its peak in July
1994.
As of September 30, 1994, the outstanding principal amount of working
capital loans was $0.9 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 $63.9 million. On October
14, 1994, the Company voluntarily prepaid $15.0 million of term loan
borrowings under its credit agreement in satisfaction of the mandatory
payment due December 31, 1994.<PAGE>
Page 13 of 15
RESULTS OF OPERATIONS (Continued)
CAPITAL RESOURCES AND LIQUIDITY (Continued)
In May 1994, Silgan Containers Corporation, an indirect wholly owned
subsidiary of Holdings ("Containers"), extended the term of three of its
supply agreements with Nestle (representing approximately 65% of the
Company's unit sales to Nestle) through December 31, 2001.
On December 21, 1993, Containers 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 $140.0 million of term loans and
agreed to lend to Silgan's subsidiaries up to $70.0 million of working
capital loans. In addition, in conjunction with the acquisition, Holdings
sold 250,000 shares of its Class B Common Stock for $15.0 million.<PAGE>
Page 14 of 15
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number Description
27 Financial Data Schedule.
(b) Reports on Form 8-K
None.<PAGE>
Page 15 of 15
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: November 10, 1994 /s/Harley Rankin, Jr.
Harley Rankin, Jr.
Executive Vice President, Chief
Financial Officer and Treasurer
(Principal Financial Officer)
Dated: November 10, 1994 /s/Harold J. Rodriguez, Jr.
Harold J. Rodriguez, Jr.
Vice President and Controller
(Chief Accounting Officer)
10QH394<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SILGAN
HOLDINGS' FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1994 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 2,472
<SECURITIES> 0
<RECEIVABLES> 108,612
<ALLOWANCES> 0
<INVENTORY> 100,993
<CURRENT-ASSETS> 216,268
<PP&E> 447,402
<DEPRECIATION> 167,879
<TOTAL-ASSETS> 546,017
<CURRENT-LIABILITIES> 121,296
<BONDS> 521,064
<COMMON> 12
0
0
<OTHER-SE> (136,770)
<TOTAL-LIABILITY-AND-EQUITY> 546,017
<SALES> 673,240
<TOTAL-REVENUES> 673,240
<CGS> 584,693
<TOTAL-COSTS> 584,693
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,693
<INCOME-PRETAX> 11,134
<INCOME-TAX> 2,925
<INCOME-CONTINUING> 8,209
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,209
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
