Page 1 of 14
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 June 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 August 5, 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 14
Part I. Financial Information
Item 1. Financial Statements
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, June 30, Dec. 31,
1994 1993 1993
ASSETS (unaudited)(unaudited)(audited)
Current assets:
Cash and cash equivalents $ 6,675 $ 316 $ 224
Accounts receivable, net 77,216 49,435 44,409
Inventories 142,560 108,403 108,653
Prepaid expenses and other current
assets 3,925 3,790 3,676
Total current assets 230,376 161,944 156,962
Property, plant and equipment, net 281,580 233,416 290,395
Other assets 51,874 36,675 50,276
$563,830 $432,035 $497,633
LIABILITIES & DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Working capital loans $ 34,950 $ 65,750 $ 2,200
Current portion of term loans 20,000 20,899 20,000
Trade accounts payable 49,814 38,076 31,913
Accrued payroll and related costs 24,530 20,070 20,523
Accrued interest payable 1,746 1,056 783
Accrued expenses and other current
liabilities 19,203 20,907 21,385
Total current liabilities 150,243 166,758 96,804
Term loans 120,000 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 214,016 188,247 200,718
Deferred income taxes 6,776 6,536 6,836
Other long-term liabilities 33,510 16,526 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 (204,379) (184,812) (203,631)
Total deficiency in stockholders'
equity (145,715) (151,585) (144,967)
$563,830 $432,035 $497,633
See accompanying notes.<PAGE>
Page 3 of 14
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands)
Three Months Ended
June 30, June 30,
1994 1993
Net sales $200,959 $148,522
Cost of goods sold 172,228 128,583
Gross profit 28,731 19,939
Selling, general and administrative expenses 10,072 8,666
Income from operations 18,659 11,273
Interest expense and other related financing costs 16,284 13,228
Other expense 5 62
Income (loss) before income taxes 2,370 (2,017)
Income tax provision 875 550
Net income (loss) $ 1,495 $ (2,567)
See accompanying notes.<PAGE>
Page 4 of 14
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands)
Six Months Ended
June 30, June 30,
1994 1993
Net sales $387,203 $297,250
Cost of goods sold 335,748 260,405
Gross profit 51,455 36,845
Selling, general and administrative expenses 18,662 16,882
Income from operations 32,793 19,963
Interest expense and other related financing costs 31,930 26,318
Other (income) expense 161 (30)
Income (loss) before income taxes 702 (6,325)
Income tax provision 1,450 1,000
Loss before cumulative effect of changes
in accounting principles (748) (7,325)
Cumulative effect of changes in accounting
principles - (6,276)
Net loss $ (748) $(13,601)
See accompanying notes.<PAGE>
Page 5 of 14
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
June 30, June 30,
1994 1993
Cash flows from operating activities:
Net loss $ (748) $(13,601)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 18,280 14,782
Amortization 3,309 2,741
Other items 551 (539)
Accretion of discount on discount debentures 13,298 11,696
Reserve for postretirement health care
benefits 254 200
Cumulative effect of changes in accounting
principles - 6,276
Changes in assets and liabilities:
(Increase) in accounts receivable (33,182) (4,302)
(Increase) in inventories (33,907) (31,806)
Increase in trade accounts payable 17,901 10,120
Other, net (2,414) 3,494
Total adjustments (15,910) 12,662
Net cash used by operating activities (16,658) (939)
Cash flows from investing activities:
Capital expenditures (9,641) (26,070)
Proceeds from sale of assets - 216
Net cash used in investing activities (9,641) (25,854)
Cash flows from financing activities:
Borrowings under working capital loans 183,500 157,200
Repayments under working capital loans (150,750) (131,850)
Repayments of term loans - (1,128)
Net cash provided by financing activities 32,750 24,222
Net increase (decrease) in cash and cash equivalents 6,451 (2,571)
Cash and cash equivalents at beginning of year 224 2,887
Cash and cash equivalents at end of period $ 6,675 $ 316
Supplementary data:
Interest paid $ 14,071 2,275
Income taxes paid, net of refunds 1,389 (110)
See accompanying notes.<PAGE>
Page 6 of 14
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 1994 and 1993 and for the
three months and six 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 June 30, 1994 and 1993 and December 31, 1993, the results
of operations for the three months and six months ended June 30, 1994 and
1993, and the statements of cash flows for the six months ended June 30,
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
period ended June 30, 1993 have been restated to reflect the adoption of
SFAS No. 112.<PAGE>
Page 7 of 14
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 1994 and 1993 and for the
three months and six months then ended is unaudited)
(Dollars in thousands)
2. Inventories
Inventories consisted of the following:
June 30, June 30, Dec. 31,
1994 1993 1993
Raw materials and supplies $ 28,127 $ 22,869 26,458
Work-in-process 19,221 10,491 17,105
Finished goods 93,835 75,939 65,072
141,183 109,299 108,635
Adjustment to value inventory
at cost on the LIFO Method 1,377 (896) 18
$142,560 $108,403 $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 14
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended June 30, 1994 Compared with
Three Months Ended June 30, 1993
Net sales of metal containers were $150.4 million for the three months
ended June 30, 1994 (including net sales of $51.5 million and $41.0
million to Nestle Food Company ("Nestle") and Del Monte Corporation ("Del
Monte"), respectively, during such period), an increase of $52.4 million,
or 53.5%, over net sales of metal containers of $98.0 million for the same
period in 1993 (including net sales of $48.5 million and $2.4 million to
Nestle and Del Monte, respectively, during the same period in 1993.) The
increase in net sales for the three months ended June 30, 1994 as compared
to the three months ended June 30, 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,
increased sales of containers to existing customers, including vegetable
pack customers, and an increase in unit sales to Nestle, offset, in part,
by modestly lower average sales prices.
Net sales of plastic containers increased $1.1 million to $48.1 million
for the three months ended June 30, 1994, as compared to $47.0 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 $2.5 million for the three months ended
June 30, 1994, compared to $3.5 million for the same period in 1993.
Cost of goods sold was 85.7% of net sales ($172.2 million) for the three
months ended June 30, 1994, a decrease of 0.9 percentage points as
compared to 86.6% of net sales ($128.6 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 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 9 of 14
RESULTS OF OPERATIONS (Continued)
Selling, general and administrative expenses as a percentage of net sales
declined 0.8 percentage points to 5.0% of net sales ($10.1 million) for
the three months ended June 30, 1994, as compared to 5.8% ($8.7 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 9.3% ($18.7 million) for the three months ended June
30, 1994, compared with 7.6% ($11.3 million) for the same period in 1993.
The increase in income from operations of $7.4 million was attributable to
the margin realized on the increased sales volume, offset, in part, by
slightly higher selling, general and administrative expenses on the
increased sales base.
Interest expense increased by approximately $3.1 million to $16.3 million
for the three months ended June 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 June 30, 1994
and June 30, 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, net income for the three months
ended June 30, 1994 was $1.5 million, $4.1 million greater than the net
loss for the three months ended June 30, 1993 of $2.6 million.<PAGE>
Page 10 of 14
RESULTS OF OPERATIONS (Continued)
Six Months Ended June 30, 1994 Compared with
Six Months Ended June 30, 1993
Net sales of metal containers were $283.7 million for the six months ended
June 30, 1994 (including net sales of $101.9 million and $76.5 million to
Nestle and Del Monte, respectively, during such period), an increase of
$88.4 million, or 45.3%, over net sales of metal containers of $195.3
million for the same period in 1993 (including net sales of $106.3 million
and $4.4 million to Nestle and Del Monte, respectively, during the same
period in 1993.) The increase in net sales for the six months ended June
30, 1994 as compared to the six months ended June 30, 1993 was primarily
attributable to increased unit sales due to the acquisitions of DM Can in
December 1993 and of an additional manufacturing facility in May 1993 and
increased sales of containers to existing customers, including vegetable
pack customers, offset, in part, by lower unit sales to Nestle and
modestly lower average sales prices.
Net sales of plastic containers increased $3.2 million, or 3.4%, to $98.1
million for the six months ended June 30, 1994, as compared to $94.9
million for the same period in 1993. The increase in net sales was
attributable to increased unit sales to new and existing customers and
higher average sales prices due to a change in product mix.
Sales of other containers totaled $5.4 million for the six months ended
June 30, 1994, compared to $7.1 million for the same period in 1993.
Cost of goods sold was 86.7% of net sales ($335.7 million) for the six
months ended June 30, 1994, a decrease of 0.9 percentage points as
compared to 87.6% of net sales ($260.4 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 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 14
RESULTS OF OPERATIONS (Continued)
Selling, general and administrative expenses as a percentage of net sales
declined 0.9 percentage points to 4.8% of net sales ($18.7 million) for
the six months ended June 30, 1994, as compared to 5.7% ($16.9 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 1.8
percentage points to 8.5% ($32.8 million) for the six months ended June
30, 1994, compared with 6.7% ($20.0 million) for the same period in 1993.
The increase in income from operations of $12.8 million was attributable
to the margin realized on the increased sales volume, offset, in part, by
slightly higher selling, general and administrative expenses on the
increased sales base.
Interest expense increased by approximately $5.6 million to $31.9 million
for the six months ended June 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 six months ended June 30, 1994 and
June 30, 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 loss before cumulative
effect of changes in accounting principles for the six months ended
June 30, 1994 was $0.7 million, $6.6 million less than the loss for the
six months ended June 30, 1993 of $7.3 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 14
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 six months of 1994, the borrowing of working capital loans
of $32.8 million was used to fund operating activities of $16.7 million
and capital expenditures of $9.6 million and increase cash balances by
$6.5 million. The Company's earnings before depreciation, interest, taxes
and amortization for the six months ended June 30, 1994 increased by
$15.8 million over the same period in the prior year to $51.8 million
because of higher earnings realized on increased sales volume. However,
cash used by operations during the first six months of 1994 increased by
$15.7 million over the same period in 1993 because of an increase in
working capital needs in 1994. During the first six months of 1994, there
was an increase in accounts receivable due to greater sales during the
first half of 1994 and an increase in inventories due to the projected
requirements for DM Can and other vegetable pack customers, offset, in
part, 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 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 million of the working capital
revolver, including letters of credit, were utilized at its peak in July
1994.
As of June 30, 1994, the outstanding principal amount of working capital
loans was $35.0 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 $28.3 million.<PAGE>
Page 13 of 14
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 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 14 of 14
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: August 11, 1994 /s/Harley Rankin, Jr.
Harley Rankin, Jr.
Executive Vice President, Chief
Financial Officer and Treasurer
(Principal Financial Officer)
Dated: August 11, 1994 /s/Harold J. Rodriguez, Jr.
Harold J. Rodriguez, Jr.
Vice President and Controller
(Chief Accounting Officer)<PAGE>
