SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________________ to ____________________
Commission file number 33-28409
SILGAN HOLDINGS INC.
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(Exact name of registrant as specified in its charter)
Delaware 06-1269834
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(State of incorporation) (I.R.S. Employer Identification No.)
4 Landmark Square, Stamford, Connecticut 06901
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 975-7110
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
None of the registrant's voting stock was held by non-affiliates as of March 15,
1995.
As of March 15, 1995, the number of shares outstanding of each of the
registrant's classes of common stock is as follows:
Classes of shares of common stock Number of shares
outstanding, $0.01 par value outstanding
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Class A 417,500
Class B 667,500
Class C 50,000
Documents Incorporated by Reference: None
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TABLE OF CONTENTS
Page
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PART I .................................................................. 1
Item 1. Business.............................................. 1
Item 2. Properties........................................... 10
Item 3. Legal Proceedings.................................... 12
Item 4. Submission of Matters to a Vote of
Security Holders..................................... 13
PART II ................................................................. 14
Item 5. Market for Registrant's Common Stock and
Related Stockholder Matters.......................... 14
Item 6. Selected Financial Data.............................. 14
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations........ 17
Item 8. Financial Statements and Supplementary Data.......... 25
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure............... 25
PART III ................................................................. 26
Item 10. Directors and Executive Officers of
the Registrant....................................... 26
Item 11. Executive Compensation............................... 30
Item 12. Security Ownership of Certain Beneficial
Owners and Management................................ 35
Item 13. Certain Relationships and Related Transactions....... 42
PART IV ................................................................. 45
Item 14. Exhibits, Financial Statements, Schedules,
and Reports on Form 8-K.............................. 45
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PART I
Item 1. Business
General
Silgan Holdings Inc. ("Holdings," and, together with its subsidiaries,
the "Company") is a Delaware corporation organized in April 1989, that, in June
1989, through certain mergers acquired all of the outstanding common stock of
Silgan Corporation ("Silgan"). Holdings' principal asset is all of the
outstanding capital stock of Silgan. Prior to June 30, 1989, Holdings did not
engage in any business. Silgan is a Delaware corporation formed in August 1987
as a holding company to acquire interests in various packaging manufacturers.
See "Company History" below.
The Company is a major manufacturer of a broad range of steel and
aluminum containers for human and pet food. The Company also manufactures custom
designed plastic containers for health, personal care, food, beverage,
pharmaceutical and household chemical products in North America. In 1994, the
Company had net sales of $861.4 million.
Management believes that the Company is the sixth largest can producer
and one of the largest food can producers in North America, as well as one of
the largest producers in North America of custom designed plastic containers for
health and personal care products. Silgan has grown rapidly since its inception
in 1987 primarily as a result of acquisitions, but also through internally
generated growth. In December 1993, Silgan's wholly owned subsidiary, Silgan
Containers Corporation ("Containers"), acquired the U.S. metal container
business of Del Monte Corporation ("Del Monte"). See "Company History" below.
The Company's strategy is to continue to increase its share of the North
American packaging market through acquisitions, as well as investment in
internally generated opportunities. The Company intends to focus particular
attention on those rigid metal and plastic container segments where operating
and market synergies are likely.
The Company is also engaged in the manufacture and sales of paper
containers primarily used by processors and packagers in the food industry.
Metal Container Business
Management estimates that Containers is currently the sixth largest can
producer and one of the largest manufacturers of metal food containers in North
America. In 1994 Containers sold approximately 21% of all metal food containers
used in North America. Although the food can industry in North America is
relatively mature in terms of unit sales growth, Containers has realized
compound annual unit sales growth in excess of 12% since 1987. Types of
containers manufactured include those for vegetables, fruit, pet food, tomato
based products, evaporated milk and infant formula. Containers has agreements
with Nestle Food Company ("Nestle") pursuant to which Containers supplies
substantially all of its metal container requirements, and an agreement with Del
Monte pursuant to which Containers supplies substantially all of its metal
container requirements. In addition to Nestle and Del Monte, Containers has
multi-year supply arrangements with other customers. The Company estimates that
in excess of 80% of Containers' sales in 1995 will be pursuant to such supply
arrangements. See "Sales and Marketing" below.
Containers has focused on growth through acquisition followed by
investment in the acquired assets to achieve a low cost position in the food can
segment. Since its acquisition in 1987 of the metal container manufacturing
division of Nestle ("Nestle Can"), Containers has invested approximately $99
million in its
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acquired manufacturing facilities and has spent approximately $67 million for
the acquisition of additional can manufacturing assets. As a result of these
efforts and management's focus on quality and service, Containers has more than
doubled its overall share of the food can segment in terms of unit sales, from a
share of approximately 10% in 1987 to a share of approximately 21% in 1994.
Plastic Container Business
Management believes that Silgan's wholly owned subsidiary, Silgan
Plastics Corporation ("Plastics"), is one of the leading manufacturers of custom
designed, high density polyethylene ("HDPE") and polyethylene terephthalate
("PET") containers sold in North America for health and personal care products.
HDPE containers manufactured by Plastics include personal care containers for
shampoos, conditioners, hand creams, lotions and cosmetics, household chemical
containers for scouring cleaners, specialty cleaning agents and lawn and garden
chemicals and pharmaceutical containers for tablets, laxatives and eye cleaning
solutions. Plastics manufactures PET custom medicinal and health care product
containers (such as mouthwash and cough syrup bottles), custom food product
containers (such as salad dressing and instant coffee bottles), and custom
non-carbonated soft drink beverage product containers (such as juice bottles) as
well as water and liquor bottles. See "Products" below.
Plastics has grown primarily by strategic acquisition. From a sales base
of $89 million in 1987, Plastics' sales have grown at a compound rate of 13% to
$204 million in 1994. Plastics emphasizes value-added design, fabrication and
decoration of custom containers. Plastics is aggressively pursuing opportunities
in custom designed PET and HDPE containers for which the market has been growing
principally due to consumer preferences for plastic containers. The Company
believes it has equipment and technical expertise to take advantage of these
growth segments.
Products
Metal Container Business
The Company is engaged in the manufacture and sale of steel and aluminum
containers that are used primarily by processors and packagers for human and pet
food. Types of containers manufactured include those for vegetables, fruit, pet
food, tomato based products, evaporated milk and infant formula. The Company
does not produce cans for use in the beer or soft drink industries. Cans are
produced in a variety of sizes, ranging in diameter from 2-1/8 inches to 6-3/16
inches and in height from 1-7/16 inches to 7 inches.
Plastic Container Business
The Company is also engaged in the manufacture and sale of plastic
containers primarily used for health, personal care, food, beverage (other than
carbonated soft drinks), pharmaceutical and household chemical products. Plastic
containers are produced by converting thermoplastic materials into containers
ranging in size from 1/2 to 96 ounces. Emphasis is on value-added design,
fabrication and decoration of the containers. The Company designs and
manufactures a wide range of containers for health and personal care products
such as shampoos, hand creams, lotions and mouthwash. Because these products are
characterized by short product life and a demand for creative packaging, the
containers manufactured for these products generally have more sophisticated
designs and decorations. Food and beverage containers are designed and
manufactured (generally to unique specifications for a specific customer) to
contain products such as salad dressing, coffee, juice, water and liquor.
Household chemical containers are designed and manufactured to contain polishes,
specialty cleaning agents, lawn and garden chemicals and liquid household
products. Pharmaceutical containers are designed and manufactured (either in a
generic or in a custom-made form) to contain tablets, solutions and similar
products for the ethical and over-the-counter markets.
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Manufacturing and Production
As is the practice in the industry, most of the Company's can and
plastic container customers provide it with annual estimates of products and
quantities pursuant to which periodic commitments are given. Such estimates
enable the Company to effectively manage production and control working capital
requirements. At December 31, 1994, Containers had in excess of 80% of its
projected 1995 sales under multi-year contracts. Plastics has written purchase
orders or contracts for containers with the majority of its customers. In
general, these purchase orders and contracts are for containers made from
proprietary molds and are for a duration of 2 to 5 years. Both Containers and
Plastics schedule their production to meet their customers' requirements.
Because the production time for the Company's products is short, the backlog of
customer orders in relation to sales is not significant.
Metal Container Business
The Company uses three basic processes to produce cans. The traditional
three-piece method requires three pieces of flat metal to form a cylindrical
body with a welded side seam, a bottom and a top. The Company uses a welding
process for the side seam of three-piece cans to achieve a superior seal. High
integrity of the side seam is further assured by the use of sophisticated
electronic weld monitors and organic coatings that are thermally cured by
induction and convection processes. The other two methods of producing cans
start by forming a shallow cup that is then formed into the desired height using
either the draw and iron process or the draw and redraw process. Using the draw
and redraw process, the Company manufactures steel and aluminum two-piece cans,
the height of which does not exceed the diameter. For cans the height of which
is greater than the diameter, the Company manufactures steel two-piece cans by
using a drawing and ironing process. Quality and stackability of such cans are
comparable to that of the shallow two-piece cans described above. Can bodies and
ends are manufactured from thin, high-strength aluminum alloys and steels by
utilizing proprietary tool and die designs and selected can making equipment.
The Company's manufacturing operations include cutting, coating, lithographing,
fabricating, assembling and packaging finished cans.
Plastic Container Business
The Company utilizes two basic processes to produce plastic bottles. In
the blow extrusion molding process, pellets of plastic resin are heated and
extruded into a tube of plastic. A two-piece metal mold is then closed around
the plastic tube and high pressure air is blown into it causing a bottle to form
in the mold's shape. In the injection blow molding process, pellets of plastic
resin are heated and injected into a mold, forming a plastic preform. The
plastic preform is then blown into a bottle-shaped metal mold, creating a
plastic bottle.
The Company believes that its proprietary equipment for the production
of HDPE containers is particularly well-suited for the use of PCR resins because
of the relatively low capital costs required to convert its equipment from the
use of virgin resins.
The Company's decorating methods for its plastic products include (i)
silk screen decoration, which enables the application of images in multiple
colors to the bottle, (ii) post-molded decoration, which uses paper labels
applied to the bottles with glue, (iii) pressure-sensitive decoration, which
applies a plastic film label to a post-molded bottle by pressing against the
bottle and (iv) in-mold labeling, which applies a plastic film label to the
bottle during the blowing process. The Company has state-of-the-art decorating
equipment, including, management believes, one of the largest sophisticated
decorating facilities in the Midwest, which allows the Company to custom-design
new products with short lead times.
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Raw Materials
The Company does not believe that it is materially dependent upon any
single supplier for any of its raw materials and, based upon the existing
arrangements with suppliers discussed above, its current and anticipated
requirements and market conditions, the Company believes that it has made
adequate provisions for acquiring raw materials. Although increases in the
prices of raw materials have generally been passed along to the Company's
customers, the inability to do so in the future could have a significant impact
on the Company's operating margins.
Metal Container Business
The Company uses tin plated and chromium plated steel, aluminum, copper
wire, organic coatings, lining compound and inks in the manufacture and
decoration of its metal can products. The Company's steel and other material
requirements are supplied through purchase orders with suppliers with whom the
Company, through its predecessors, has long-term relationships. If its suppliers
fail to deliver under their arrangements, the Company would be forced to
purchase raw materials on the open market, and no assurances can be given that
it would be able to make such purchases at prices which would allow it to remain
competitive. The Company has a contract to obtain the majority of its
requirements for aluminum from a supplier at prices that are subject to
adjustment based on formulas and market conditions. Such contract expires in
1996. The Company believes that it would be able to satisfy its requirements for
aluminum from other suppliers in the event of the loss of its current supplier.
The Company believes that it will be able to purchase sufficient quantities of
steel and aluminum can sheet for the foreseeable future.
Plastic Container Business
The raw materials used by the Company for the manufacture of plastic
containers are primarily resins in pellet form such as HDPE-PCR and virgin HDPE
and PET and, to a lesser extent, low density polyethylene, extrudable polyester
terephthalate, polyethylene terephthalate glycol, polypropylene, polyvinyl
chloride and medium density polyethylene. The Company's resin requirements are
acquired through multi-year arrangements for specific quantities of resins with
several major suppliers of resins. The price the Company pays for resin raw
materials is not fixed and is subject to market pricing. Currently, demand for
PET exceeds supplies of PET. However, the Company has long-term arrangements for
PET with a number of producers and, as a result, believes that it has adequate
supply commitments for PET to satisfy its current business and obligations to
customers. The Company anticipates that there will be new capacity for PET
beginning in mid-to-late 1995 and into 1996. The Company believes that the
successful start-up of such announced new capacity will bring supply of and
demand for PET into better balance in 1996. However, delays in the availability
of such new capacity could have an adverse impact on the Company's plans for
growth in its plastic containers business in 1996. The Company believes that it
will be able to purchase sufficient quantities of other resins (including HDPE)
for the foreseeable future.
Sales and Marketing
The Company markets its products in most areas of North America
primarily by a direct sales force and through a large network of distributors.
Because of the high cost of transporting empty containers, the Company generally
sells to customers within a 300 mile radius of its manufacturing plants. See
also "Competition" below.
In 1994, 1993 and 1992, the Company's metal container business accounted
for approximately 76%, 71% and 69%, respectively, of the Company's total sales,
and the Company's plastic container business accounted for approximately 24%,
29% and 31%, respectively, of the Company's total sales. In 1994, 1993
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and 1992, approximately 26%, 34% and 37%, respectively, of the Company's sales
were to Nestle and in 1994 approximately 21% of the Company's sales were to Del
Monte. No other customer accounted for more than 10% of the Company's total
sales during such years.
Metal Container Business
Management believes that the Company is currently the sixth largest can
producer and one of the largest food can producers in North America. In 1994,
Containers sold approximately 21% of all metal food containers in North America.
Containers has entered into multi-year supply arrangements with many of its
customers, including Nestle and Del Monte. The Company estimates that in excess
of 80% of its metal container sales in 1995 will be pursuant to such
arrangements.
In 1987, the Company, through Containers, and Nestle entered into supply
agreements (the "Nestle Supply Agreements") pursuant to which Containers has
agreed to supply Nestle with, and Nestle has agreed to purchase from Containers,
substantially all of the can requirements of the former Carnation operations of
Nestle for a period of ten years, subject to certain conditions. In 1994, the
term of three of the Nestle Supply Agreements (representing approximately 70% of
the Company's 1994 unit sales to Nestle) was extended through 2001.
The Nestle Supply Agreements provide for certain prices and specify that
such prices will be increased or decreased based upon cost change formulas set
forth therein. The Nestle Supply Agreements contain provisions that require
Containers to maintain certain levels of product quality, service and delivery
in order to retain the Nestle business. In the event of a breach of a particular
Nestle Supply Agreement, Nestle may terminate such Nestle Supply Agreement but
the other Nestle Supply Agreements would remain in effect.
Under the three Nestle Supply Agreements which were recently extended
through 2001, Nestle has the right to receive competitive bids under narrowly
limited circumstances, and Containers has the right to match any such bids.
Under the other six Nestle Supply Agreements, if Nestle receives a competitive
bid for any product supplied thereunder, Containers has the right to match such
bid with respect to the type and volume of cans over the period of the
competitive bid. In either case, in the event that Containers chooses not to
match a competitive bid, Nestle may purchase cans from the competitive bidder at
the competitive bid price for the term of the bid. Since 1990, under the
original Nestle Supply Agreements Nestle has requested that Containers match
certain bids received from other potential suppliers. Containers agreed to match
such bids (which resulted in minor margin impact) and continues to supply
substantially all of the can requirements of the former Carnation operations of
Nestle. In the future, there can be no assurance that Containers will choose to
match any such bids or that, even if matched, such bids will be at a level
sufficient to allow Containers to maintain margins currently received. Until any
such bids are received by Nestle and submitted to the Company, the Company
cannot predict the effect, if any, of such bids upon its financial condition or
results of operations. Significant reductions of margins or the loss of
significant unit volume under the Nestle Supply Agreements could, however, have
a material adverse effect on the Company.
On December 21, 1993, Containers and Del Monte entered into a supply
agreement (the "DM Supply Agreement"). Under the DM Supply Agreement, Del Monte
has agreed to purchase from Containers, and Containers has agreed to sell to Del
Monte, 100% of Del Monte's annual requirements for metal containers to be used
for the packaging of food and beverages in the United States and not less than
65% of Del Monte's annual requirements of metal containers for the packaging of
food and beverages at Del Monte's Irapuato, Mexico facility, subject to certain
limited exceptions.
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The DM Supply Agreement provides for certain prices for all metal
containers supplied by Containers to Del Monte thereunder and specifies that
such prices will be increased or decreased based upon specified cost change
formulas.
Under the DM Supply Agreement, after five years, Del Monte may, under
certain circumstances, receive proposals with terms more favorable than those
under the DM Supply Agreement from independent commercial can manufacturers for
the supply of containers of a type and quality similar to the metal containers
that Containers furnishes to Del Monte, which proposals shall be for the
remainder of the term of the DM Supply Agreement and for 100% of the annual
volume of containers at one or more of Del Monte's canneries. Containers has the
right to retain the business subject to the terms and conditions of such
competitive proposal.
The sale of metal containers to vegetable pack customers is seasonal and
monthly revenues increase during the months of June through October. As is
common in the packaging industry, the Company must build inventory and then
carry accounts receivable for some seasonal vegetable pack customers beyond the
end of the harvest season. Consistent with industry practice, such customers may
return unused containers. Historically, such returns have been minimal.
Plastic Container Business
The Company is one of the leading manufacturers of custom designed HDPE
and PET containers sold in North America. The Company markets its plastic
containers in most areas of North America through a direct sales force and
through a large network of distributors. More than 70% of the Company's plastic
containers are sold for health and personal care products, such as hair care,
oral care, pharmaceutical and other health care applications. The Company's
customers in these product segments include Helene Curtis Inc., Procter & Gamble
Co., Avon Products, Inc., Jergens Inc., Warner-Lambert Company and Pfizer Inc.
The Company also manufactures plastic containers for food and beverage products,
such as salad dressings, mustard, mayonnaise, coffee and premium bottled water.
Customers in these product segments include Procter & Gamble Co., Kraft General
Foods Inc. and General Mills, Inc.
As part of its marketing strategy, the Company has arrangements to sell
some of its plastic products to distributors, which in turn sell such products
primarily to small-size regional customers. Plastic containers sold to
distributors are manufactured by using generic molds with decoration, color and
neck finishes added to meet the distributors' individual requirements. The
distributors' warehouses and their sales personnel enable the Company to market
and inventory a wide range of such products to a variety of customers.
Plastics has written purchase orders or contracts for containers with
the majority of its customers. In general, these purchase orders and contracts
are for containers made from proprietary molds and are for a duration of 2 to 5
years.
Competition
The packaging industry is highly competitive. The Company competes in
this industry with other packaging manufacturers as well as fillers, food
processors and packers who manufacture containers for their own use and for sale
to others. The Company attempts to compete effectively through the quality of
its products, pricing and its ability to meet customer requirements for
delivery, performance and technical assistance. The Company also pursues market
niches such as the manufacture of easy-open ends and special feature cans, which
may differentiate the Company's products from its competitors' products.
Because of the high cost of transporting empty containers, the Company
generally sells to customers within a 300 mile radius of its manufacturing
plants. Strategically located existing plants give the Company
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an advantage over competitors from other areas, and the Company would be
disadvantaged by the loss or relocation of a major customer. As of February 28,
1995, the Company operated 34 manufacturing facilities, geographically dispersed
throughout the United States and Canada, that serve the distribution needs of
its customers.
Metal Container Business
Management believes that the metal food containers segment is mature.
Some self-manufacturers have sold or closed can manufacturing operations and
entered into long-term supply agreements with the new owners or with commercial
can manufacturers. Of the commercial metal can manufacturers, American National
Can Company, Crown Cork and Seal Company, Inc. and Ball Corporation are the
Company's most significant competitors.
Although metal containers face continued competition from plastic, paper
and composite containers, management believes that metal containers are superior
to plastic and paper containers in applications where the contents are processed
at high temperatures, where the contents are packaged in large or institutional
quantities (14 to 64 oz.) or where long-term storage of the product is
desirable. Such applications include canned vegetables, fruits, meats and pet
foods. These sectors are the principal areas for which the Company manufactures
its products.
Plastic Container Business
Plastics competes with a number of large national producers of health,
personal care, food, beverage, pharmaceutical and household chemical plastic
container products, including Owens-Brockway Plastics Products, a division of
Owens-Illinois, Inc., Constar Plastics Inc., a subsidiary of Crown Cork and Seal
Company, Inc., Johnson Controls Inc., Continental Plastics Inc. and Plastipak
Packaging Inc. In order to compete effectively in the constantly changing market
for plastic bottles, the Company must remain current with, and to some extent
anticipate innovations in, resin composition and applications and changes in the
manufacturing of plastic bottles.
Employees
As of December 31, 1994, the Company employed approximately 670 salaried
and 3,330 hourly employees on a full time basis. Approximately 63% of the
Company's hourly plant employees are represented by one of the following unions:
(i) Sheet Metal Workers International Association, (ii) International
Association of Machinists and Aerospace Workers, (iii) The International
Brotherhood of Teamsters, (iv) The United Steel Workers of America, (v)
Industrial, Technical & Professional Employees Union, (vi) The Glass, Molders,
Pottery, Plastics and Allied Workers International Union, (vii) The United
Rubber, Cork and Plastic Workers of America and (viii) Oil, Chemical & Atomic
Workers International Union.
The Company's labor contracts expire at various times between 1995 and
1999. Contracts covering approximately 22% of the Company's hourly employees
presently expire during 1995. The Company expects no significant changes in its
relations with these unions. Management believes that its relationship with its
employees is good.
Regulation
The Company is subject to federal, state and local environmental laws
and regulations. In general, these laws and regulations limit the discharge of
pollutants into the air and water and establish standards for the treatment,
storage, and disposal of solid and hazardous waste. The Company believes that
all of its facilities
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are either in compliance in all material respects with all presently applicable
environmental laws and regulations or are operating in accordance with
appropriate variances, delayed compliance orders or similar arrangements.
In addition to costs associated with regulatory compliance, the Company
may be held liable for alleged environmental damage associated with the past
disposal of hazardous substances. Generators of hazardous substances disposed of
at sites at which environmental problems are alleged to exist, as well as the
owners of those sites and certain other classes of persons, are subject to
claims under the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 ("CERCLA") regardless of fault or the legality of the
original disposal. Liability under CERCLA and under many similar state statutes
is joint and several, and, therefore, any responsible party may be held liable
for the entire cleanup cost at a particular site. Other state statutes may
impose proportionate rather than joint and several liability. The federal
Environmental Protection Agency or a state agency may also issue orders
requiring responsible parties to undertake removal or remedial actions at
certain sites. Pursuant to the agreement relating to the acquisition in 1987 of
Nestle Can, the Company has assumed liability for the past waste disposal
practices of Nestle Can. The Company has received notice that it is one of many
potentially responsible parties (or similarly designated parties) for cleanup of
hazardous waste at a site to which it (or its predecessor Nestle Can) is alleged
to have shipped such waste and at which the Company's share of cleanup costs
could exceed $100,000. See "Legal Proceedings."
Pursuant to the agreement relating to the acquisition in 1987 from
Monsanto Company ("Monsanto") of substantially all of the business and related
fixed assets and inventory of Monsanto's plastic containers business ("Monsanto
Plastic Containers"), Monsanto has agreed to indemnify the Company for
substantially all of the costs attributable to the past waste disposal practices
of Monsanto Plastic Containers. In connection with the acquisition from Del
Monte of substantially all of the fixed assets and working capital of its
container manufacturing business in the United States ("DM Can"), Del Monte has
agreed to indemnify the Company for a period of three years for substantially
all of the costs attributable to any noncompliance by DM Can with any
environmental law prior to the closing, including all of the costs attributable
to the past waste disposal practices of DM Can.
The Company is subject to the Occupational Safety and Health Act and
other laws regulating noise exposure levels in the production areas of its
plants.
Management does not believe that any of the matters described above
individually or in the aggregate will have a material effect on the Company's
capital expenditures, earnings, financial position or competitive position.
Research and Technology
Metal Container Business
The Company's research, product development and product engineering
efforts relating to its metal containers are conducted at its research center at
Oconomowoc, Wisconsin and at other plant locations.
Plastic Container Business
The Company's research, product development and product engineering
efforts with respect to its plastic containers are currently performed by its
manufacturing and engineering personnel located at its Norcross, Georgia
facility. In addition to its own research and development staff, the Company
participates in arrangements with four non-U.S. plastic container manufacturers
that call for an exchange of technology among these manufacturers. Pursuant to
these arrangements, the Company licenses its blow molding technology to such
manufacturers.
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Company History
Silgan was organized in August 1987 as a holding company to acquire
interests in various packaging manufacturers. On August 31, 1987, Silgan,
through Containers, purchased from Nestle the business and related assets and
working capital of Nestle Can for approximately $151 million in cash and the
assumption of substantially all of the liabilities of Nestle Can. Also on August
31, 1987, Silgan, through Plastics, purchased from Monsanto substantially all
the business and related fixed assets and inventory of Monsanto Plastic
Containers for approximately $43 million in cash and the assumption of certain
liabilities of Monsanto Plastic Containers. To finance these acquisitions and to
pay related fees and expenses, Silgan issued common stock, preferred stock and
senior subordinated notes and borrowed amounts under its credit agreement.
During 1988, Containers acquired from The Dial Corporation its metal
container manufacturing division known as the Fort Madison Can Company ("Fort
Madison"), and from Nestle its carton manufacturing division known as the
Seaboard Carton Division ("Seaboard").
During 1989, Plastics acquired Aim Packaging, Inc. ("Aim") and Fortune
Plastics, Inc. ("Fortune") in the United States, and Express Plastic Containers
Limited ("Express") in Canada, to improve its competitive position in the HDPE
container segment.
Holdings was organized in April 1989 as a holding company to acquire all
of the outstanding common stock of Silgan. On June 30, 1989, Silgan Acquisition,
Inc. ("Acquisition"), a wholly owned subsidiary of Holdings, merged with and
into Silgan, and Silgan became a wholly owned subsidiary of Holdings (the "1989
Mergers").
In 1989, the Company acquired the business and related assets of Amoco
Container Company ("Amoco Container"). In November 1991, Plastics sold its
nonstrategic PET carbonated beverage bottle business (the "PET Beverage Sale"),
exiting that commodity business.
In 1992, Holdings and Silgan refinanced a substantial portion of their
indebtedness (the "Refinancing") pursuant to a plan to improve their financial
flexibility. The Refinancing included the following: (i) the public offering in
June 1992 by Silgan of $135 million principal amount of its 11-3/4% Senior
Subordinated Notes due 2002 (the "11-3/4% Notes"); (ii) the private placement in
June 1992 by Silgan of $50 million principal amount of its Senior Secured
Floating Rate Notes due 1997 (the "Secured Notes") with certain institutional
investors; (iii) the public offering in June 1992 by Holdings of its 13-1/4%
Senior Discount Debentures due 2002 (the "Discount Debentures") for an aggregate
amount of proceeds of $165.4 million; (iv) the amendment of the Amended and
Restated Credit Agreement, dated as of August 31, 1987, as amended (the "Amended
and Restated Credit Agreement") among Silgan and certain of its subsidiaries,
the lenders named therein and Bankers Trust Company ("Bankers Trust"), as agent,
followed by the prepayment in June 1992 by Silgan of $30 million of term loans
and the borrowing by Silgan of approximately $17 million of working capital
loans under the Amended and Restated Credit Agreement; (v) the redemption (the
"14% Notes Redemption") in August 1992 of all of the outstanding 14% Senior
Subordinated Notes due 1997 of Silgan; (vi) the redemption (the "Preferred Stock
Redemption") in August 1992 of all of the outstanding 15% Cumulative
Exchangeable Redeemable Preferred Stock of Silgan; (vii) the repayment by Silgan
of a $25.2 million advance from Holdings and the payment to Holdings of a $15.7
million dividend; (viii) the payment by Holdings in cash of $15.3 million of
interest payable on July 1, 1992 on its Senior Reset Debentures due 2004 (the
"Holdings Reset Debentures"); (ix) the redemption by Holdings in July 1992 of
all of the outstanding Holdings Reset Debentures (the "Holdings Reset Debentures
Redemption;" together with the "14% Notes Redemption" and the "Preferred Stock
Redemption" being sometimes herein referred to as the "Redemptions"); and (x)
the payment of transaction fees and expenses relating to the Refinancing.
Additionally, in June 1992 Aim, Fortune and certain other subsidiaries of
Plastics were merged into Plastics.
-9-
<PAGE>
On December 21, 1993, Containers acquired from Del Monte substantially
all of the fixed assets and certain working capital of Del Monte's container
manufacturing business in the United States for a purchase price of
approximately $73 million and the assumption of certain limited liabilities. To
finance the acquisition, (i) Silgan, Containers and Plastics (collectively, the
"Borrowers") entered into a credit agreement, dated as of December 21, 1993 (the
"Credit Agreement") with the lenders from time to time party thereto (the
"Banks"), Bank of America National Trust and Savings Association ("Bank of
America"), as Co-Agent, and Bankers Trust, as Agent, and (ii) Holdings issued
and sold to Mellon Bank, N.A., as trustee for First Plaza Group Trust, a group
trust established under the laws of the State of New York ("First Plaza"),
250,000 shares of its Class B Common Stock, par value $.01 per share (the
"Holdings Stock"), for a purchase price of $60.00 per share and an aggregate
purchase price of $15 million. Additionally, Silgan, Containers and Plastics
borrowed term and working capital loans under the Credit Agreement to refinance
and repay in full all amounts owing under the Amended and Restated Credit
Agreement.
Item 2. Properties
Holdings' and Silgan's principal executive offices are located at 4
Landmark Square, Stamford, Connecticut 06901. The administrative headquarters
and principal places of business for Containers and Plastics are located at
21800 Oxnard Street, Woodland Hills, California 91367 and 14515 N. Outer Forty,
Chesterfield, Missouri 63017, respectively. All of these offices are leased by
the Company.
The Company owns and leases properties for use in the ordinary course of
business. Such properties consist primarily of 21 metal container manufacturing
facilities, 12 plastic container manufacturing facilities and one paper
container manufacturing facility. Seventeen of these facilities are owned and 17
are leased by the Company. The leases expire at various times through 2020. Some
of these leases provide renewal options.
-10-
<PAGE>
Below is a list of the Company's operating facilities, including
attached warehouses, as of February 28, 1995 for its metal container business:
Approximate
Location (square feet) Building Area
-------- -------------
Kingsburgh, CA 37,783 (leased)
Modesto, CA 35,585 (leased)
Oakland, CA 173,780 (leased)
Riverbank, CA 167,000
Stockton, CA 243,500
Stockton, CA 71,785 (leased)
Broadview, IL 85,000
Rochelle, IL 175,000
Ft. Dodge, IA 49,500 (leased)
Fort Madison, IA 66,000
Mt. Vernon, MO 100,000
St. Joseph, MO 173,725
Hillsboro, OR 47,000
Cambridge Springs, PA 55,000
Crystal City, TX 26,045 (leased)
Smithfield, UT 105,000
Toppenish, WA 98,000
Menomonee Falls, WI 116,000
Menomonie, WI 60,000 (leased)
Oconomowoc, WI 105,200
Plover, WI 44,495 (leased)
Waupun, WI 212,000
Below is a list of the Company's operating facilities, including
attached warehouses, as of February 28, 1995 for its plastic container business:
Approximate
Building Area
Location (square feet)
-------- -------------
Anaheim, CA 127,000 (leased)
Deep River, CT 140,000
Monroe, GA 117,000
Norcross, GA 59,000 (leased)
Ligonier, IN 388,000 (leased)
Seymour, IN 406,000
Franklin, KY 122,000 (leased)
Louisville, KY 30,000 (leased)
Port Clinton, OH 336,000 (leased)
Langhorne, PA 156,000 (leased)
Mississauga, Ontario 80,000 (leased)
Mississauga, Ontario 60,000 (leased)
The Company owns and leases certain other warehouse facilities that are
detached from its manufacturing facilities. In addition, the Company owns two
other properties that it is not currently using and intends to sell. All of the
Company's facilities are subject to liens in favor of the Banks.
-11-
<PAGE>
The Company believes that its plants, warehouses and other facilities
are in good operating condition, adequately maintained, and suitable to meet its
present needs and future plans. The Company believes that it has sufficient
capacity to satisfy the demand for its products in the foreseeable future. To
the extent that the Company needs additional capacity, management believes that
the Company can convert certain facilities to continuous operation or make the
appropriate capital expenditures to increase capacity.
Item 3. Legal Proceedings
Complaints and Appraisal Petition Arising Out of the 1989 Mergers.
Contemporaneous with the merger of Silgan into a subsidiary of Holdings in June
1989, certain holders of 1,050,000 shares of Silgan Class B common stock filed
two actions in the Court of Chancery of the State of Delaware (the "Chancery
Court") alleging that Silgan and certain affiliates, officers and directors
breached fiduciary duties in implementing the 1989 Mergers. One of the actions
was voluntarily dismissed without prejudice of the right to reinstate the action
upon the conclusion of the appraisal proceeding described below. The second
action was dismissed following settlement.
In 1989, the same Silgan stockholders also sought appraisal of the value
of their shares of Class B common stock pursuant to Section 262 of the Delaware
General Corporation Law. Following discovery, and settlement with the holders of
650,000 shares of Class B common stock, trial of the appraisal with respect to
the remaining 400,000 shares of Class B common stock was conducted during the
week of November 28, 1994. Post-trial briefing is scheduled to be completed on
April 17, 1995.
Management believes that the consideration offered in the 1989 Mergers
fully reflected the value of Silgan's Class B common stock and that the ultimate
resolution of the appraisal proceeding will not have a material effect on the
financial condition or results of operations of the Company.
Katell/Desert Complaint. On November 6, 1991, Gerald L. Katell
("Katell") and Desert Equities, Inc. ("Desert"), who are limited partners of The
Morgan Stanley Leveraged Equity Fund, L.P. ("MSLEF"), filed a consolidated
complaint in the Chancery Court (the "Katell/Desert Complaint") against a number
of defendants, including Holdings and Silgan. (The plaintiffs previously had
filed similar complaints in the New York Supreme Court, but the complaints were
dismissed on the grounds that, in the interests of substantial justice, the
actions should be heard in the courts of Delaware.) The plaintiffs allege, among
other things, that the general partners of MSLEF breached duties owed to the
limited partners by selling MSLEF's investment in Silgan at a grossly inadequate
price. Holdings and Silgan are named as defendants in Court III of such amended
complaint, which charges them with aiding and abetting breaches of fiduciary
duty by MSLEF and the general partners. The plaintiffs claim damages in the
amount of $4.67 million.
After full briefing and oral argument on a motion by defendants to
dismiss the amended complaint filed by plaintiffs, the court dismissed all
claims against Holdings and Silgan by memorandum opinion and order dated January
14, 1993. The court denied plaintiffs' motion to reargue the dismissal by order
dated March 29, 1993. Because the Katell/Desert Complaint continues against
certain other defendants, the plaintiffs' right to appeal the dismissal of the
claims against Holdings and Silgan has not yet expired.
Management believes that there is no factual basis for the allegations
and claims contained in the Katell/Desert Complaint. Management also believes
that the lawsuit is without merit and intends to defend the lawsuit vigorously.
In addition, management believes that the ultimate resolution of these matters
and the appraisal proceedings will not have a material effect on the financial
condition or results of operations of the Company.
-12-
<PAGE>
Summer del Caribe. On October 17, 1989, the State of California, on
behalf of the California Department of Health Services, filed a suit in the
United States District Court for the Northern District of California against the
owners and operators of a recycling facility operated by Summer del Caribe,
Inc., Dale Summer and Lynn Rodich. The complaint also named 16 can manufacturing
companies, including Silgan, that had sent small amounts of solder dross to the
facility for recycling as "Responsible Parties" under the California Superfund
statute. The Company is one of 16 defendant can companies participating in a
steering committee. The steering committee has actively undertaken a feasibility
study which was approved by the California Department of Toxic Substances in
June 1994. The Company has agreed with the other can company defendants that its
apportioned share of cleanup costs would be 6.72% of the total cost of cleanup.
On March 14, 1995, the court approved the Consent Order settling the case and
reaffirming the Company's 6.72% apportioned share of the cleanup costs. Although
the total cost of cleanup has not yet been determined, the Company understands
that the State of California's current worst case estimate of total cleanup
costs for all parties is $5.5 million. The steering committee believes that the
cost to remediate will be less than one-half the government's estimate.
Accordingly, the Company believes its maximum exposure is not greater than 6.72%
of $3 million, or approximately $202,000.
Other. Other than the actions mentioned above, there are no other
pending legal proceedings, other than ordinary routine litigation incidental to
the business of the Company, to which the Company is a party or to which any of
its properties are subject.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
-13-
<PAGE>
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.
Holdings has three classes of Common Stock, its Class A Common Stock,
par value $.01 per share (the "Holdings Class A Stock"), its Class B Common
Stock, par value $.01 per share (the "Holdings Class B Stock"), and its Class C
Common Stock, par value $.01 per share (the "Holdings Class C Stock," together
with the Holdings Class A Stock and the Holdings Class B Stock being herein
referred to as the "Holdings Common Stock"). The Holdings Common Stock is not
publicly traded on any market or exchange. There are two holders of record of
the Holdings Class A Stock, two holders of record of the Holdings Class B Stock
and one holder of record of the Holdings Class C Stock. See "Security Ownership
of Certain Beneficial Owners and Management." Holdings has not paid any
dividends on the Holdings Common Stock. Pursuant to the Amended and Restated
Holdings Guaranty, dated as of December 21, 1993 made by Holdings in favor of
the banks under the Credit Agreement, Bank of America, as Co-Agent and Bankers
Trust, as Agent, and, unless certain financial tests are met, the indenture in
respect of the Discount Debentures, Holdings is prohibited from paying any such
dividends, and it does not intend to pay any such dividends in the foreseeable
future.
Item 6. Selected Financial Data.
Set forth below are selected historical consolidated financial data of
Holdings at December 31, 1994, 1993, 1992, 1991 and 1990 and for the periods
then ended.
The selected historical consolidated financial data of Holdings at
December 31, 1994 and 1993 and for each of the three years in the period ended
December 31, 1994 (with the exception of employee data) were derived from the
historical consolidated financial statements that were audited by Ernst & Young,
independent auditors, whose report appears elsewhere in this Annual Report on
Form 10-K. The selected historical consolidated financial data of Holdings at
December 31, 1992, 1991 and 1990 and for the years ended December 31, 1991 and
1990 were derived from the historical audited consolidated financial statements
for such periods.
The selected historical consolidated financial data should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations and the audited financial statements and accompanying
notes thereto included elsewhere in this Annual Report on Form 10-K.
-14-
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
Year Ended December 31,
-----------------------------------------------------------
1994<Fa> 1993<Fa> 1992 1991<Fb> 1990
------- ------- ------- ------- -------
(Dollars in thousands)
Operating Data:
<S> <C> <C> <C> <C> <C>
Net sales................................. $861,374 $645,468 $630,039 $678,211 $657,537
Cost of goods sold........................ 747,457 571,174 554,972 605,185 582,991
------- ------- ------- ------- -------
Gross profit.............................. 113,917 74,294 75,067 73,026 74,546
Selling, general and administrative
expenses............................ 38,830 32,495 32,809 33,733 36,962
Reduction in carrying value of assets..... 16,729 -- -- -- --
------- ------- ------- ------- -------
Income from operations.................... 58,358 41,799 42,258 39,293 37,584
Interest expense and other related
financing costs..................... 65,789 54,265 57,091 55,996 55,115
Minority interest expense................. -- -- 2,745 3,889 3,356
------- ------- ------- ------- -------
Loss before income taxes.................. (7,431) (12,466) (17,578) (20,592) (20,887)
Income tax provision (benefit)............ 5,600 1,900 2,200 -- (2,495)
------- ------- ------- ------- -------
Loss before extraordinary
charges and cumulative effect of
changes in accounting principles.... (13,031) (14,366) (19,778) (20,592) (18,392)
Extraordinary charges relating to
early extinguishment of debt........ -- (1,341) (23,597) -- --
Cumulative effect of changes in
accounting principles <Fc>.......... -- (6,276) -- -- --
------- -------- ------- ------- -------
Net loss................................. $(13,031) $(21,983) $(43,375) $(20,592) $(18,392)
======= ======== ======= ======= =======
Balance Sheet Data (at end of period):
Fixed assets.............................. $251,810 $290,395 $223,879 $230,501 $244,672
Total assets.............................. 504,821 497,633 389,035 390,693 443,889
Total long-term debt...................... 510,763 505,718 383,232 315,461 337,821
Redeemable preferred stock of Silgan
(minority interest of Holdings)..... -- -- -- 27,878 24,061
Deficiency in stockholders' equity <Fd>... (157,998) (144,967) (137,984) (94,609) (74,017)
Other Data:
EBDITA (e)................................ $114,489 $ 76,095 $ 74,012 $ 72,141 $ 69,053
EBDITA as a percentage of net sales....... 13.3% 11.8% 11.7% 10.6% 10.5%
Capital expenditures...................... $ 29,184 $ 42,480 $ 23,447 $ 21,834 $ 22,908
Depreciation and amortization<Ff>......... $ 37,187 $ 33,818 $ 31,754 $ 32,848 $ 29,496
Number of employees (at end of
period)<Fg>......................... 4,000 3,330 3,340 3,560 4,330
(footnotes follow)
-15-
<PAGE>
Notes to Selected Financial Data
<FN>
<Fa> On December 21, 1993, the Company acquired from Del Monte substantially
all of the fixed assets and certain working capital of its container
manufacturing business. The acquisition was accounted for as a purchase
transaction and the results of operations have been included with the
Company's historical results from the acquisition date. See Note 3 to the
Consolidated Financial Statements included elsewhere in this Annual Report
on Form 10-K.
<Fb> On November 15, 1991, the Company completed the PET Beverage Sale. For
1991, sales from the PET carbonated beverage business were $33.4 million.
<Fc> During 1993, the Company adopted SFAS No. 106, "Employers Accounting for
Postretirement Benefits Other than Pensions," SFAS No. 109, "Accounting
for Income Taxes" and SFAS No. 112, "Employers Accounting for
Postemployment Benefits." The Company has elected not to restate prior
year's financial statements for any of these pronouncements.
<Fd> Effective June 30, 1994, the put option for Holdings Class A Stock
expired. The fair market value that had been assigned to the liability
associated with such put option has been reclassified as stockholders'
equity for each period presented. See Note 9 to the Consolidated Financial
Statements included elsewhere in this Annual Report on Form 10-K.
<Fe> "EBDITA" means consolidated net income before extraordinary charges,
cumulative effect of changes in accounting principles and preferred stock
dividends plus, to the extent reflected in the income statement for the
period for which consolidated net income is to be determined, without
duplication, (i) consolidated interest expense (including minority
interest expense), (ii) income tax expense, (iii) depreciation expense,
(iv) amortization expense, (v) expenses relating to postretirement health
care costs which amounted to $0.715 million in 1994 and $0.478 million in
1993, (vi) charges relating to the vesting of benefits under SARs of
$1.5 million and $1.973 million in 1994 and 1990, respectively, and (vii)
the reduction in carrying value of assets of $16.7 million in 1994.
EBDITA is being presented by the Company as a supplement to the discussion
of the Company's operating income and cash flow from operations analysis
because the Company believes that certain persons may find it to be useful
in measuring the Company's performance and ability to service its debt.
EBDITA is not a substitute for GAAP operating and cash flow data.
<Ff> Depreciation and amortization excludes amortization of debt financing
costs.
<Fg> The number of employees at December 31, 1993 excludes 650 employees who
joined the Company on December 21, 1993 as a result of the acquisition by
Containers of DM Can.
</FN>
</TABLE>
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<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The Company has focused on growth through acquisitions followed by
investment in the acquired assets to gain production efficiencies and provide
internal growth. Since Silgan's inception in 1987, the metal food can business,
which had sales of $647 million in 1994, has realized compound growth of 12%
through both internal growth and acquisitions of food can businesses, including
the acquisition of Del Monte's captive can manufacturing operations in December
1993. The Company believes that its investments have enabled it to achieve a low
cost position in the food can segment. To contain costs, the Company closed two
smaller, higher cost metal container facilities in 1992 and another smaller
facility in early 1995. The Company believes that the addition of the Del Monte
facilities has created further cost reduction opportunities through plant
rationalization as well as line reconfiguration and production scheduling. The
Company expects that these cost reduction opportunities, which began to be
implemented in late 1994, will be fully realized by 1997. To enhance its
competitive position, the Company has maintained a stable customer base by
entering into multi-year supply arrangements with a majority of its metal food
can customers. Such arrangements generally provide for pricing changes in
accordance with cost change formulas, thereby reducing the Company's exposure to
the volatility of raw material prices but also limiting the Company's ability to
increase prices. The arrangement to supply substantially all of Del Monte's
metal container requirements in the United States under the DM Supply Agreement
extends to 2002 and the arrangement to supply a majority of Nestle's domestic
metal container requirements under the Nestle Supply Agreements extends through
2001. The Company estimates that in excess of 80% of its 1995 metal container
sales will be subject to long term contracts.
The plastic container business has grown from a sales base of $89
million in 1987 to $204 million in 1994. In 1989, the Company made four
acquisitions of plastic container manufacturers to improve its competitive
position in the plastic container segment. As a result of these acquisitions,
the Company implemented an aggressive consolidation and rationalization program
during the period from 1991 through 1993, closing three manufacturing facilities
and consolidating the technical and administrative functions of its plastic
container business. The full benefit of the consolidation and rationalization
program was not realized until 1994. The Company is aggressively pursuing
opportunities in custom designed PET and HDPE containers for which the market
has been growing principally due to consumer preferences for plastic containers.
The Company believes it has equipment and technical expertise to take advantage
of these growth segments.
Summary results for the Company's two business segments, metal and
plastic containers, for the calendar years 1994, 1993 and 1992 are provided
below. See Note 13 of the Notes to Consolidated Financial Statements which are
included elsewhere in this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
(Dollars in millions)
Net sales:
<S> <C> <C> <C>
Metal containers and other $657.1 $459.2 $437.4
Plastic containers 204.3 186.3 192.6
----- ----- -----
Consolidated $861.4 $645.5 $630.0
===== ===== =====
Operating profit:
Metal containers and other $67.0 $42.3 $40.7
Plastic containers 9.4 0.6 2.3
Reduction in asset value<F1> (16.7) -- --
Corporate expense (1.3) (1.1) (0.7)
---- ----- -----
Consolidated $58.4 $41.8 $42.3
==== ==== ====
-----------------------------
<FN>
<F1> $7.2 million of this charge is allocable to the metal container business
and $9.5 million is allocable to the plastic container business.
</FN>
</TABLE>
-17-
<PAGE>
This discussion should be read in conjunction with the selected
financial data, the historical statements of operations and the notes thereto
included elsewhere in this Annual Report on Form 10-K.
Results of Operations
Year Ended December 31, 1994 Compared with Year Ended December 31, 1993.
Consolidated net sales increased $215.9 million, or 33.4%, to $861.4
million for the year ended December 31, 1994, as compared to $645.5 million for
the same period in 1993. Approximately 81% of this increase related to sales to
Del Monte pursuant to the DM Supply Agreement entered into by the Company on
December 21, 1993 to supply substantially all of Del Monte's metal container
requirements for a period of ten years. The remainder of this increase resulted
principally from greater unit sales in both the metal container and plastic
container businesses.
Net sales for the metal container business (including paper containers)
were $657.1 million for the year ended December 31, 1994, an increase of $197.9
million (43.1%) over net sales for the metal container business of $459.2
million for the same period in 1993. Sales of metal containers increased $201.6
million primarily as a result of the DM Supply Agreement, which represented
$174.7 million of this increase, an increase of $20.1 million (9.1%) in sales to
all other customers and an increase of $6.8 million (3.2%) in sales to Nestle.
Sales of metal containers increased principally from higher unit volume and
reflected continued growth in sales of pet food containers, as well as greater
sales to vegetable pack customers due to a larger than normal pack in 1994.
Sales of paper containers included in the metal container segment declined $3.7
million to $9.6 million during 1994.
Net sales for the plastic container business of $204.3 million during
the year ended December 31, 1994 increased $18.0 million, or 9.7%, over net
sales of plastic containers of $186.3 million for the same period in 1993. The
increase in net sales of plastic containers was attributable to increased unit
sales to new and existing customers, particularly PET customers, and to a lesser
extent, higher average sales prices due to the pass through of increased resin
costs.
Cost of goods sold was 86.8% of consolidated net sales ($747.5 million)
for the year ended December 31, 1994, a decrease of 1.7 percentage points as
compared to 88.5% of consolidated net sales ($571.2 million) for the same period
in 1993. The decrease in cost of goods sold as a percentage of consolidated net
sales principally resulted from synergistic benefits resulting from the
acquisition of DM Can, lower per unit manufacturing costs realized on higher
sales and production volumes and improved manufacturing efficiencies in the
plastic container business resulting from larger cost reduction and productivity
investments in 1993.
Selling, general and administrative expenses as a percentage of
consolidated net sales declined 0.5 percentage points to 4.5% of consolidated
net sales ($38.8 million) for the year ended December 31, 1994, as compared to
5.0% ($32.5 million) for the same period in 1993. The decrease as a percentage
of consolidated net sales resulted principally from a modest increase in
selling, general and administrative functions relative to the increased sales
associated with the acquisition of DM Can, offset in part by an increase of $1.3
million in benefits accrued under stock appreciation rights agreements.
Income from operations as a percentage of consolidated net sales
increased 0.3 percentage points to 6.8% ($58.4 million) for the year ended
December 31, 1994, compared with 6.5% ($41.8 million) for the same period in
1993. During 1994 the Company incurred a charge of $16.7 million to write-down
certain properties held for sale to their net realizable value and to reduce the
carrying value of certain technologically obsolete and inoperable equipment.
Without giving effect to this nonrecurring charge, income from operations in
1994
-18-
<PAGE>
would have been 8.7% ($75.1 million), an increase of 2.2 percentage points as
compared to 1993, and was principally attributable to the aforementioned
improvement in gross margin.
Income from operations as a percentage of net sales for the metal
container business (without giving effect to the $7.2 million charge to
write-down the carrying value of certain assets) increased 1.0% to 10.2% ($67.0
million) during 1994 as compared to 1993, principally due to operating synergies
realized from the acquisition of DM Can and lower per unit manufacturing costs
incurred as a result of higher production volumes in 1994. Income from
operations as a percentage of net sales attributable to the plastic container
business (without giving effect to the $9.5 million charge to write-down the
carrying value of certain assets) in 1994 was 4.6% ($9.4 million), as compared
to 0.3% ($0.6 million) in 1993. The improved operating performance of the
plastic container business resulted from production efficiencies realized as a
result of rationalizations and capital investment made in prior periods, and
lower unit manufacturing costs.
Interest expense, including amortization of debt financing costs,
increased by approximately $11.5 million to $65.8 million for the year ended
December 31, 1994. This increase resulted from the incurrance of additional bank
borrowings to finance the acquisition of DM Can, higher average bank borrowing
rates, higher accretion of interest on the Discount Debentures and increased
charges for the amortization of debt financing costs.
The provisions for income taxes for the years ended December 31, 1994
and 1993 were comprised of federal, state and foreign income taxes currently
payable. The increase in the provision for income taxes in 1994 reflects an
increase in federal income taxes currently payable. During 1994, the Company
fully utilized its alternative minimum tax net operating loss carryovers and,
therefore, was subject to tax at the rate of 20% on its alternative minimum
taxable income. Without the benefit of its alternative minimum tax net operating
loss carryovers, the Company expects that its provision for federal income taxes
payable in 1995 will approximate $10 million and increase annually thereafter.
As a result of the items discussed above, the net loss for the year
ended December 31, 1994 was $13.0 million, $1.4 million less than the loss
before extraordinary charges and cumulative effect of changes in accounting
principles for the year ended December 31, 1993 of $14.4 million.
In conjunction with the acquisition of DM Can in 1993, the Company
incurred an extraordinary charge of $1.3 million for the early extinguishment of
debt. Also, during 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. As a result of these charges,
the net loss for 1993 was $22.0 million.
Year Ended December 31, 1993 Compared with Year Ended December 31, 1992.
Consolidated net sales increased $15.5 million, or 2.5%, to $645.5
million for the year ended December 31, 1993, as compared to $630.0 million for
the same period in 1992. This increase resulted from greater unit sales by the
metal container business offset by a decline in sales volume of the plastic
container business.
Net sales for the metal container business (including paper containers)
were $459.2 million for the year ended December 31, 1993, an increase of $21.8
million (5.0%) over net sales for the metal container business of $437.4 million
for the same period in 1992. Sales of metal containers increased 4.7% in 1993,
primarily as a result of higher unit sales to non-vegetable pack customers and
to a lesser extent the purchase of an additional manufacturing facility in May
1993, offset in part, by a decline in sales to Nestle due to reduced demand and
lower unit sales to vegetable pack customers due to the extremely wet weather in
the summer of
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<PAGE>
1993. Sales of paper containers included in the metal container segment
increased $1.7 million to $13.3 million during 1993.
Net sales for the plastic container business of $186.3 million during
the year ended December 31, 1993 were $6.3 million lower than net sales of
plastic containers of $192.6 million for the same period in 1992. The decrease
in net sales of plastic containers was primarily attributable to lower unit
sales to existing customers due to soft market conditions.
Cost of goods sold was 88.5% of consolidated net sales ($571.2 million)
for the year ended December 31, 1993, as compared to 88.1% of consolidated net
sales ($555.0 million) for the same period in 1992. The increase in cost of
goods sold as a percentage of consolidated net sales principally resulted from
higher per unit manufacturing costs incurred as a result of higher depreciation
expense, lost margin on outsourced cans due to capacity constraints in early
1993, offset in part by improved manufacturing efficiency.
Selling, general and administrative expenses as a percentage of net
sales declined 0.2 percentage points to 5.0% of consolidated net sales ($32.5
million) for the year ended December 31, 1993, as compared to 5.2% ($32.8
million) for the same period in 1992. The decrease in selling, general and
administrative expenses as a percentage of consolidated net sales was
principally attributable to the maintenance of a constant level of expenditures
on a greater sales base.
Income from operations as a percentage of consolidated net sales was
6.5% ($41.8 million) for the year ended December 31, 1993, as compared to 6.7%
($42.3 million) for the same period in 1992. The decrease was principally
attributable to the aforementioned decline in gross margin.
Income from operations as a percentage of net sales for the metal
container business was 9.2% ($42.3 million) during 1993, as compared to 9.3%
($40.7 million) in 1992. Income from operations as a percentage of net sales
attributable to the plastic container business was 0.3% ($0.6 million) during
1993, as compared to 1.2% ($2.3 million) in 1992. The decline in operating
performance of the plastic container business resulted from production
inefficiencies incurred as a result of plant consolidations and higher per unit
manufacturing costs realized from reduced unit volume.
Interest expense decreased by approximately $5.5 million to $54.3
million for the year ended December 31, 1993 compared with $59.8 million
(including minority interest expense of $2.7 million) for the same period in
1992. The decrease principally reflected the benefit of the refinancing in June
1992 of the Company's and Silgan's debt and Silgan's preferred stock at lower
average interest rates.
The provisions for income taxes for 1993 and 1992 were comprised of
state and foreign components and recognized the benefit of certain deductions
for federal income tax which were available to Holdings. Effective January 1,
1993, the Company adopted SFAS No. 109. The application of the new standard did
not have an effect on the Company's provision for income taxes for 1993.
The loss before extraordinary charges and cumulative effect of changes
in accounting principles for the year ended December 31, 1993 was $14.4 million,
as compared to $19.8 million for the year ended December 31, 1992. The decrease
in the loss before extraordinary charges and cumulative effect of changes in
accounting principles was principally the result of the decrease in interest
expense in 1993.
As a result of the refinancing of the Amended and Restated Credit
Agreement in conjunction with the acquisition of DM Can and the refinancing in
June 1992 of Silgan's debt and preferred stock and Holdings' debt, the Company
incurred extraordinary charges of $1.3 million and $23.6 million for the early
extinguishment of debt in 1993 and 1992, respectively.
-20-
<PAGE>
During 1993 the Company adopted SFAS No. 106 and SFAS No. 112. The
cumulative effect of these accounting changes was to decrease net income by $5.0
million and $1.3 million, respectively.
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 working capital borrowings. As described
below, beginning in December 1996 the Company's liquidity requirements may also
be affected by the interest associated with Holdings' indebtedness.
During 1994, cash generated from operations of $47.3 million along with
working capital borrowings of $10.4 million were used to fund capital
expenditures of $27.9 million (net of proceeds of $1.3 million), make mandatory
debt repayments of $20.5 million, pay $6.9 million to former shareholders of
Silgan in partial settlement of outstanding litigation and increase cash
balances by $2.4 million. In late 1994, the Company entered into a program to
accelerate the purchase of certain raw materials prior to anticipated 1995 price
increases. As a result, at December 31, 1994 inventories were approximately $14
million higher than the prior year. There was not a corresponding increase in
trade payables, however, because the advance purchase of raw materials was paid
for prior to year-end through additional working capital borrowings. The trade
receivable balance increased at December 31, 1994 as compared to the prior
year-end principally as a result of the DM Supply Agreement, which became
effective on December 21, 1993.
On December 21, 1993 Silgan, Containers and Plastics entered into the
Credit Agreement to finance the acquisition of DM Can and to refinance and repay
in full all amounts owing under the Amended and Restated Credit Agreement. In
conjunction therewith the Banks loaned the Company $60.0 million of A Term
Loans, $80.0 million of B Term Loans and $29.8 million of working capital loans.
In addition, Holdings issued and sold 250,000 shares of its Class B Common Stock
for $15.0 million. With these proceeds, the Company (i) repaid $41.5 million of
term loans and $60.8 million of working capital loans under the Amended and
Restated Credit Agreement; (ii) acquired from Del Monte substantially all the
fixed assets and certain working capital of Del Monte's container manufacturing
business for approximately $73 million; and (iii) paid fees and expenses of $8.9
million.
For 1993, the Company used cash generated from operations of $48.1
million and available cash balances of $2.7 million to fund capital expenditures
of $42.5 million, repay working capital loans of $7.2 million (in addition to
working capital loans which were repaid with proceeds from the Credit
Agreement), and pay $1.1 million of term loans. During the year, the Company
increased its annual amount of capital spending in order to reduce costs and to
add incremental production capacity. The increase in inventory at December 31,
1993 as compared to the prior year principally resulted from the inventory
acquired as part of the acquisition of DM Can.
To improve their financial flexibility, Holdings and Silgan completed
the Refinancing in 1992. The Refinancing (i) lowered Holdings' consolidated
average cost of indebtedness by retiring the 14% Notes and the Holdings Reset
Debentures with new indebtedness bearing lower interest rates, (ii) improved
Silgan's liquidity and ability to further repay its indebtedness by eliminating
Silgan's obligation to pay cash dividends on the Preferred Stock through the
Preferred Stock Redemption and by deferring for an additional two years (until
December 1996) and reducing the cash interest requirements on Holdings'
indebtedness, (iii) provided Holdings with additional financial flexibility by
eliminating restrictions in the indenture relating to the 14% Notes on Silgan's
ability to pay dividends to Holdings in order to fund interest payments on
Holdings' indebtedness through the 14% Notes Redemption and (iv) extended the
average length of maturity of Silgan's indebtedness
-21-
<PAGE>
by issuing the 11-3/4% Notes and the Secured Notes to refinance $30 million of
bank term loans and the 14% Notes.
In connection with the Refinancing, Holdings and Silgan received $333.1
million in proceeds from the issuance of the Secured Notes, the 11-3/4% Notes,
and the Discount Debentures net of debt issuance costs of $17.3 million. On June
29, 1992, Silgan repaid $30 million of term loans under its credit agreement. On
July 29, 1992, Holdings paid $181.6 million to redeem the Holdings Reset
Debentures. On August 16, 1992, Silgan paid $31.5 million to redeem the
Preferred Stock. On August 28, 1992, Silgan paid $89.3 million to redeem the 14%
Notes.
The Company borrowed working capital loans of $19.2 million during the
year ended December 31, 1992 which, along with cash provided by operations
during 1992 of $15.4 million (which included payment of $17.7 million in cash
interest on the Holdings Reset Debentures) were used principally to fund capital
expenditures of $23 million, to make term loan repayments of $10.2 million (in
addition to the term loan repayment made in connection with the Refinancing), to
pay cash dividends of $1.1 million on the Preferred Stock and to increase
outstanding cash balances by $1.1 million.
Since a portion of the proceeds realized from the Credit Agreement on
December 21, 1993 were used to repay working capital loans under the Amended and
Restated Credit Agreement, the Company was able to reduce the amount of its
commitment for working capital loans. Under the Credit Agreement, the commitment
for working capital loans was reduced by $41 million to $70 million. As of
December 31, 1994, the outstanding principal amount of working capital loans was
$12.6 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 $51.9 million.
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 $40 million of the working
capital revolver, including letters of credit, will be utilized at its peak in
July 1995.
In addition to its operating cash needs, the Company's cash requirements
over the next several years are anticipated to consist primarily of (i) annual
capital expenditures of $35 million to $40 million (approximately $15 million of
which is nondiscretionary in each year), (ii) principal amortization payments of
A Term Loans under the Credit Agreement of approximately $20 million in each of
1995 and 1996, (iii) expenditures of approximately $7 million associated with
the rationalization of facilities related to the acquisition of DM Can, (iv) the
scheduled maturity on September 15, 1996 of the working capital loans and $80
million of B Term Loans under the Credit Agreement, (v) the scheduled maturity
of the $50 million principal amount of the Secured Notes in 1997, (vi) the
Company's interest requirements, including interest on working capital loans,
the principal amount of which will vary depending upon seasonal requirements,
the Secured Notes and bank term loans, all of which bear fluctuating rates of
interest, and the 11-3/4% Notes and semi-annual cash interest payments of $18.2
million on the Discount Debentures commencing in December 1996, and (vii)
payments of approximately $14 million for federal and state tax liabilities
beginning in 1995 (assuming the redemption of the Discount Debentures at
maturity) and increasing annually thereafter by approximately $2 million.
-22-
<PAGE>
Interest on the Discount Debentures is payable at a rate of 13-1/4% per
annum from and after June 15, 1996, and commencing on December 15, 1996
semi-annual interest payments of $18.2 million will be required to be made
thereon. Since Holdings' only asset is its investment in Silgan, its ability to
pay interest on the Discount Debentures on and after December 15, 1996 (the date
on which interest is first payable on the Discount Debentures) may depend upon
its receipt of funds paid by dividend or otherwise loaned, advanced or
transferred by Silgan to Holdings. While Silgan has no legal obligation to make
such funds available, it is expected that Silgan will do so if it is permitted
under the agreements to which it shall then be a party and if it then has
sufficient funds available for such purpose. If sufficient funds to pay such
interest are not generated by the operations of Silgan's subsidiaries, Silgan or
Holdings may seek to borrow or otherwise finance the amount of such payments or
refinance the Discount Debentures. Neither the Indenture for the 11-3/4% Notes
nor the Secured Notes limits the ability of Silgan to pay cash dividends to
Holdings in order to enable Holdings to pay interest on the Discount Debentures.
The Credit Agreement presently prohibits Silgan from paying dividends or
otherwise transferring funds to Holdings in order to service Holdings'
indebtedness; however, the Credit Agreement matures on September 15, 1996, prior
to the date on which interest or principal is payable on the Discount
Debentures. Silgan expects to enter into a new credit facility to replace the
Credit Agreement on or before September 15, 1996 on terms which would not limit
the ability of Silgan to transfer funds to Holdings in order to enable Holdings
to pay interest on the Discount Debentures. However, there can be no assurance
that Silgan will be able to enter into a new credit facility on such terms. In
such event, Silgan and Holdings would consider pursuing alternative
arrangements, including possible equity and/or debt financings, to enable
Holdings to meet its obligations. There can be no assurance that any such
alternative, if pursued, would be accomplished or would enable Holdings to make
timely payments of its obligations under the Discount Debentures. The funding
requirements of Holdings to service its indebtedness (beginning in December
1996) will be met by Silgan through cash generated by operations or borrowings
or by Holdings through refinancings of its existing indebtedness or additional
debt or equity financings.
In addition to any financing effected as described above, the Company
may consider refinancing all or any part of its indebtedness through other debt
financings and/or equity financings, including a public offering of equity. Any
such financings would depend upon the market conditions existing at the time and
would have to be effected in compliance with the Company's agreements in respect
of its indebtedness.
The Discount Debentures represent "applicable high yield discount
obligations" ("AHYDOs") within the meaning of Section 163(i) of the Internal
Revenue Code of 1986, as amended (the "Code"). Accordingly, the tax deduction
which would otherwise be available to Holdings in respect of the accretion of
interest on the Discount Debentures during their noncash interest period ending
June 15, 1996 ($109.6 million) has been and will continue to be deferred, which,
in turn, will increase the taxable income of Holdings and reduce the after-tax
cash flows of Holdings. However, as a result of Holdings' utilization of its net
operating loss carryforward, which, as of December 31, 1994, amounts to
approximately $75 million for regular federal income tax purposes, the effect of
such deferral on the regular federal income taxes of Holdings has been and will
continue to be mitigated until such net operating loss carryforward is fully
utilized.
In 1993, Holdings became subject to alternative minimum tax ("AMT") and,
due to the utilization of its AMT net operating loss carryforwards, incurred an
AMT liability at a rate of 2%. In 1994, Holdings fully utilized its AMT loss
carryforward. Accordingly, in 1995 and thereafter, Holdings will incur an AMT
liability at a rate of 20% (or the applicable rate then in effect). The AMT paid
is allowed (subject to certain limitations) as an indefinite credit carryover
against Holdings' regular tax liability in the future when and if Holdings'
regular tax liability exceeds the AMT liability.
The deferred accreted interest will not be deductible until the
redemption, retirement or other repayment of the Discount Debentures (other than
with stock or debt of Holdings or a related party). Until the deferred accreted
interest is deductible, except to the extent the net operating loss carryforward
is available, Holdings
-23-
<PAGE>
will realize taxable income sooner and in a greater amount than if the deferred
accreted interest on the Discount Debentures were deductible as it accretes.
Depending upon its tax position and financial condition and the benefit which
may be available through the deduction of the deferred accreted interest,
Holdings could decide in the future to refinance the Discount Debentures or a
portion thereof prior to their stated maturity date. In such event, the full
amount of the deferred accreted interest (applicable to the Discount Debentures
retired) should be deductible under the carryback and carryforward rules under
the Code unless the holders of the Discount Debentures receive stock or debt of
Holdings or a related party in exchange for the Discount Debentures. No
assurance can be given that Holdings will be able to refinance the Discount
Debentures at such time; however, management believes that application of the
AHYDO rules will not have a material adverse effect on Holdings' financial
condition or ability to repay the Discount Debentures. In addition, the IRS has
broad authority to issue regulations under the AHYDO rules with retroactive
effect to prevent the avoidance of the purposes of those rules through
agreements to borrow amounts due under a debt instrument or other arrangements,
and thus these regulations, when issued, may affect the timing or availability
of the tax deductions for original issue discount on the Discount Debentures.
Management believes that cash generated by operations and funds from
working capital borrowings under the Credit Agreement will be sufficient to meet
the Company's expected operating needs, planned capital expenditures and debt
service requirements until the maturity of the working capital facility under
the Credit Agreement on September 15, 1996. Management also believes that it
will be able to replace the working capital facility under the Credit Agreement
with another facility on or prior to September 15, 1996 on terms which will be
acceptable to the Company. However, there can be no assurance that the Company
will be able to replace its working capital facility. In such event, the Company
could be required to consider alternative equity or debt financings in order to
meet its cash needs. The ability of the Company to effect any such financing and
the extent to which the Company may seek or be required to obtain additional
financing will depend upon a variety of factors, including the future
performance of the Company and its subsidiaries, which will be subject to
prevailing economic conditions and to financial, business and other factors
(including the state of the economy and the financial markets, demand for the
products of the Company and its subsidiaries, costs of raw materials,
legislative and regulatory changes and other factors beyond the control of the
Company and its subsidiaries) affecting the business and operations of the
Company and its subsidiaries as well as prevailing interest rates, actual
amounts expended for capital expenditures and other corporate purposes and the
timing and amount of debt prepayments or redemptions.
The Credit Agreement, the Secured Notes and the indentures relating to
the 11-3/4% Notes and the Discount Debentures each contain restrictive covenants
that, among other things, limit the Company's ability to incur debt, sell assets
and engage in certain transactions. Management does not expect these limitations
to have a material effect on the Company's business or results of operations.
The Company is in compliance with all financial and operating covenants
contained in such financing agreements and believes that it will continue to be
in compliance during 1995 with all such covenants.
Effect of Interest Rate Fluctuations and Inflation
Because the Company has indebtedness which bears interest at floating
rates, the Company's financial results will be sensitive to changes in
prevailing interest rates. To mitigate the effect of significant changes in
interest rates, the Company may enter into interest rate hedge agreements (with
counterparties that, in the Company's judgment, have sufficient
creditworthiness) with respect to a portion of its floating rate indebtedness.
At December 31, 1994, the Company was not a party to any interest rate hedge
agreement.
Historically, inflation has not had a material effect on the Company,
other than to increase its cost of borrowing. In general, the Company has been
able to increase the sales prices of its products to reflect any increases in
the prices of raw materials.
-24-
<PAGE>
Item 8. Financial Statements and Supplementary Data.
See Item 14 below for a listing of financial statements and schedules
included therein.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
-25-
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
Directors and Executive Officers of Holdings
The current directors and executive officers of Holdings and their
respective ages, positions and principal occupations, five-year employment
history and other directorships held are furnished below:
Age at Five-Year Employment
March 15, History and Other Directorships
Name and Position 1995 Held
----------------- -------- -------------------------------
R. Philip Silver 52 Prior to forming S&H, Inc.
Chairman of the Board and ("S&H") in 1987, President of
Co-Chief Executive Officer Continental Can Company from
of Holdings and Silgan since June 1983 to August 1986;
March 1994; formerly consultant to packaging
President of Holdings and industry from August 1986 to
Silgan; Director of Holdings August 1987; Vice Chairman of
since April 1989 and of the Board and Director of
Silgan since August 1987; Sweetheart Holdings Inc. and
Chairman of the Board of Sweetheart Cup Company, Inc.
Plastics since March 1994; from September 1989 to January
Director of Containers and 1991; Chairman of the Board and
Plastics since August 1987. Director of Sweetheart Holdings
Inc. and Sweetheart Cup
Company, Inc. from January 1991
through August 1993; Director,
Johnstown America Corporation.
D. Greg Horrigan 51 Prior to forming S&H in 1987,
President and Co-Chief Executive Vice President and
Executive Officer of Operating Officer of
Holdings and Silgan since Continental Can Company from
March 1994; formerly 1984 to 1987; Chairman of the
Chairman of the Board of Board and Director of
Holdings and Silgan; Sweetheart Holdings Inc. and
Director of Holdings since Sweetheart Cup Company, Inc.
April 1989 and of Silgan from September 1989 to January
since August 1987; Chairman 1991; Vice Chairman of the
of the Board of Containers Board and Director of
since August 1987; Director Sweetheart Holdings Inc. and
of Containers and Plastics Sweetheart Cup Company, Inc.
since August 1987. from January 1991 through
August 1993.
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<PAGE>
Age at Five-Year Employment
March 15, History and Other Directorships
Name and Position 1995 Held
----------------- -------- -------------------------------
James S. Hoch 34 Executive Director of Morgan
Director, Vice President and Stanley & Co., Ltd. since 1994;
Assistant Secretary of Principal of Morgan Stanley &
Holdings since January 1991; Co. Incorporated since 1993;
Director of Silgan since Vice President of Morgan
January 1991; Vice President Stanley & Co. Incorporated from
and Assistant Secretary of 1991 to 1993. Director of
Silgan since 1987; Director, Sullivan Communications, Inc.,
Vice President and Assistant Sullivan Graphics, Inc. and
Secretary of Containers Nokia Aluminium Ox.
since January 1991;
Director, Vice President and
Assistant Secretary of
Plastics since January 1991.
Robert H. Niehaus 39 Managing Director of Morgan
Vice President, Assistant Stanley & Co. Incorporated
Secretary and Director of since January 1, 1990;
Holdings since April 1989; Principal of Morgan Stanley &
Vice President, Assistant Co. Incorporated from 1988 to
Secretary and Director of 1989. Vice President and
Silgan since August 1987; Director of MSLEF II, Inc.
Vice President, Assistant since January 1990; Vice
Secretary and Director of Chairman of MSCP III since
Containers and Plastics January 1994. Director of
since August 1987. American Italian Pasta Company,
Fort Howard Corporation, PSF
Finance Holdings, Inc.,
Randall's Food Markets, Inc.,
Waterford Crystal Ltd. and
Waterford Wedgewood UK plc.
Harley Rankin, Jr. 55 Prior to joining the Company,
Executive Vice President and Senior Vice President and Chief
Chief Financial Officer of Financial Officer of Armtek
Holdings since April 1989; Corporation; prior to Armtek
Treasurer of Holdings since Corporation, Vice President and
January 1992; Executive Vice Chief Financial Officer of
President and Chief Continental Can Company from
Financial Officer of Silgan November 1984 to August 1986.
since January 1989; Vice President, Chief Financial
Treasurer of Silgan since Officer and Treasurer of
January 1992; Vice President Sweetheart Holdings Inc. and
of Containers and Plastics Vice President of Sweetheart
since January 1989; Cup Company, Inc. from
Treasurer of Plastics since September 1989 to August 1993.
January 1994.
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<PAGE>
Age at Five-Year Employment
March 15, History and Other Directorships
Name and Position 1995 Held
----------------- -------- -------------------------------
Harold J. Rodriguez, Jr. 39 Employed by Ernst & Young from
Vice President of Holdings 1978 to 1987, last serving as
and Silgan since March 1994; Senior Manager specializing in
Vice President of Containers taxation. Controller,
and Plastics since March Assistant Secretary and
1994; Controller and Assistant Treasurer of
Assistant Treasurer of Sweetheart Holdings Inc. and
Holdings and Silgan since Assistant Secretary and
March 1990; Assistant Assistant Treasurer of
Controller and Assistant Sweetheart Cup Company, Inc.
Treasurer of Holdings from from September 1989 to August
April 1989 to March 1990; 1993.
Assistant Controller and
Assistant Treasurer of
Silgan from October 1987 to
March 1990.
Management of Metal Container Business
In addition to the persons listed under "--Directors and
Executive Officers of Holdings" above, the following are the principal
executive officers of Containers:
Age at Five-Year Employment
March 15, History and Other Directorships
Name and Position 1995 Held
----------------- --------- -------------------------------
James D. Beam 52 Vice President - Marketing &
President and a non-voting Sales of Containers from
Director of Containers September 1987 to July 1990;
since July 1990. Vice President and General
Manager of Continental Can
Company, Western Food Can
Division, from March 1986 to
September 1987.
Gerald T. Wojdon 59 General Manager of
Vice President - Manufacturing of the Can
Operations and Assistant Division of The Carnation
Secretary of Containers Company from August 1982 to
since September 1987. August 1987.
Gary M. Hughes 52 Vice President, Sales and
Vice President - Sales & Marketing of the Beverage
Marketing of Containers Division of Continental Can
since July 1990. Company from February 1988 to
July 1990; prior to February
1988, was employed by
Continental Can in various
regional sales positions.
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<PAGE>
Age at Five-Year Employment
March 15, History and Other Directorships
Name and Position 1995 Held
----------------- -------- -------------------------------
Dennis Nerstad 57 Vice President of Containers
Vice President - from December 1993 to June
Production Services of 1994. Vice President -
Containers since July Distribution and Container
1994. Manufacturing of Del Monte from
August 1989 to December 1993;
Director of Container
Manufacturing of Del Monte from
November 1983 to July 1989;
prior to 1983, employed by Del
Monte in various regional and
plant positions.
Management of Plastic Container Business
In addition to the persons listed under "--Directors and
Executive Officers of Holdings" above, the following are the principal
executive officers of Plastics:
Age at
March 15, Five-Year Employment
Name and Position 1995 History and Positions
----------------- -------- ---------------------
Russell F. Gervais 51 President and Chief Executive
President and non-voting Officer of Aim Packaging, Inc.
Director of Plastics since from March 1984 to September
December 1992; Vice 1989.
President - Sales &
Marketing of Plastics from
September 1989 until
December 1992.
Howard H. Cole 49 Manager of Personnel of Monsanto
Vice President and Engineered Products Division of
Assistant Secretary of the Monsanto Company from April
Plastics since September 1986 to September 1987.
1987.
Charles Minarik 57 President of Wheaton Industries
Vice President - Operations Plastics Group from February 1991
and Commercial Development to August 1992; Vice President -
of Plastics since May 1993. Marketing of Constar
International, Inc. from March
1983 to February 1991.
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<PAGE>
Age at
March 15, Five-Year Employment
Name and Position 1995 History and Positions
----------------- -------- ---------------------
Alan H. Koblin 43 Vice President of Churchill
Vice President - Sales & Industries from 1990 to 1992.
Marketing of Plastics since
1994, Director of Sales &
Marketing of Plastics from
1992 to 1994.
Colleen J. Jones 35 Audit Manager, Arthur Young &
Vice President - Finance Company from July 1982 to July
and Chief Financial Officer 1989.
of Plastics since January
1995, Assistant Secretary
of Plastics since November
1993, Corporate Controller
of Plastics from October
1993 to January 1995,
Manager - Finance of
Plastics from July 1989 to
October 1993.
Item 11. Executive Compensation.
The following table sets forth information concerning the annual and
long term compensation for services rendered in all capacities to the Company
during the fiscal years ended December 31, 1994, 1993 and 1992 of those persons
who at December 31, 1994 were (i) the Chief Executive Officer of Holdings and
(ii) the other four most highly compensated executive officers of Holdings and
its subsidiaries. No director of Holdings or its subsidiaries receives any
compensation for serving as a director of Holdings or its subsidiaries.
See "Certain Transactions - Management Agreements."
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<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Annual Compensation Compensation
----------------------------------------------- ------------
Awards
------
Other Securities
Annual Underlying Stock All Other
Name and Principal Position Year Salary<Fa><Fb> Bonus<Fa><Fc> Compensation Options/SARs<Fd> Compensation<Fe>
--------------------------- ---- -------------- ------------- ------------ ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
R. Philip Silver 1994 $ 1,684,135 - - - -
(Chairman of the Board and 1993 1,608,799 - - - -
Co-Chief Executive Officer of 1992 1,528,844 - - - -
Holdings and Silgan and Chairman
of the Board of Plastics)
D. Greg Horrigan 1994 1,684,135 - - - -
(President and Co-Chief 1993 1,608,799 - - - -
Executive Officer of Holdings and 1992 1,528,844 - - - -
Silgan and Chairman of the
Board of Containers)
Harley Rankin, Jr. 1994 384,930 - - 6,000 -
(Executive Vice President, 1993 347,598 - - - -
Chief Financial Officer and 1992 324,407 - - - -
Treasurer of Holdings and
Silgan and Vice President of
Containers and Plastics)
James D. Beam 1994 354,375 $169,092 - - $32,491
(President of Containers) 1993 239,949 65,277 - - 24,883
1992 231,949 65,497 - - 24,215
Russell F. Gervais 1994 218,553 83,300 - 600 -
(President of Plastics) 1993 210,000 - - - -
1992 165,585 - - - -
-------------------
<FN>
<Fa> The compensation of Messrs. Horrigan, Silver, Rankin and Rodriguez
reflects amounts as earned and was paid by S&H. Such persons received no
direct compensation from Holdings, Silgan or their respective
subsidiaries. See "Certain Transactions -- Management Agreements."
<Fb> The salaries of Messrs. Beam and Gervais were paid by Containers and
Plastics, respectively.
<Fc> Bonuses of Messrs. Beam and Gervais were earned by them in such year and
paid in the following year, pursuant to the Silgan Containers
Corporation Performance Incentive Plan and the Silgan Plastics
Corporation Incentive Plan, respectively. Under such plans, executive
officers and other key employees of Containers and Plastics may be
awarded cash bonuses provided that such company achieves certain
assigned financial targets.
<Fd> Reflects options to purchase, and tandem SARs relating to, shares of
Holdings Class C Stock granted under the Silgan Holdings Inc. Second
Amended and Restated 1989 Stock Option Plan (the "Holdings Plan") in the
case of Mr. Rankin, and Plastics' common stock granted under the Silgan
Plastics Corporation 1994 Stock Option Plan (the "Plastics Plan") in the
case of Mr. Gervais. Such options and tandem SARs become exercisable
ratably over a five-year period beginning on January 1, 1995.
<Fe> Reflects amounts contributed by Containers under the Silgan Containers
Corporation Deferred Incentive Savings Plan (the "Savings Plan").
Containers contributes to the Savings Plan an amount each year based on
its profits for such year, as determined by Containers' board of
directors. Such contribution is allocated proportionately to
participants in accordance with their compensation. A participant's
allocable share of such contribution becomes fully vested after five
years of service or, if earlier, upon reaching age 55, death, total and
permanent disability or termination on account of the sale or closure of
a work facility.
</FN>
</TABLE>
-31-
<PAGE>
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation For Option Term <Fc>
----------------- ---------------------------------------
Number of Percent of Total
Securities Options/SARs
Underlying Granted to Exercise or
Option/SARs Employees in Base Price
Name Granted (#) Fiscal Year ($/Sh) Expiration Date 5% ($) 10% ($)
---- ----------- ------------ ---------- --------------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
R. Philip Silver......... -- -- -- -- -- --
D. Greg Horrigan......... -- -- -- -- -- --
Harley Rankin, Jr.<Fa>... 6,000 66.67% $60.71 December 31, 2003 $229,080 $580,060
James D. Beam............ -- -- -- -- -- --
Russell F. Gervais<Fb>... 600 66.67% $126.00 December 31, 2003 $47,544 $120,486
-------------------
<FN>
<Fa> Reflects options to purchase, and tandem SARs relating to, shares of
Holdings Class C Stock granted under the Holdings Plan.
<Fb> Reflects options to purchase, and tandem SARs relating to, shares of
Plastics' common stock granted under the Plastics Plan. In the event of
a public offering by Holdings or a change of control of Holdings, such
options and tandem SARs would be converted into options and tandem SARs
under the Holdings Plan as provided in the Plastics Plan.
<Fc> The 5% and 10% assumed annual rates of appreciation were set by the
Securities and Exchange Commission and are not intended to forecast
future appreciation, if any, of the stock underlying such options. If
such stock does not increase in value, then these option and tandem SAR
grants will be valueless.
</FN>
</TABLE>
<TABLE>
<CAPTION>
OPTION/SAR VALUES AT DECEMBER 31, 1994
Value of Unexercised
Number of Unexercised in-the-Money
Options/SARs at Options/SARs at
December 31, 1994 December 31, 1994
----------------- -----------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
R. Philip Silver..................... -- -- -- --
D. Greg Horrigan..................... -- -- -- --
Harley Rankin, Jr.<Fa>............... 11,200 4,800 -- --
James D. Beam<Fb><Fc>................ 432 48 $1,109,854 $59,209
Russell F. Gervais<Fd>............... 120 480 -- --
-------------------
<FN>
<Fa> Options are for, and tandem SARs relate to, shares of Holdings Class C
Stock. Value is determined based upon the excess of the book value of
Holdings Class C Stock from the date of grant over the exercise price.
In the event of a public offering by Holdings or a change of control of
Holdings, value would be based on fair market value as provided in the
Holdings Plan.
<Fb> Options are for, and tandem SARs relate to, shares of Containers' common
stock. As of December 31, 1994, 13,754 shares of Containers' common
stock are issued and outstanding and an additional 1,200 shares of
Containers' common stock are authorized for issuance under the Silgan
Containers Corporation Second Amended and Restated 1989 Stock Option
Plan (the "Containers Plan"). Value is determined based upon the excess
of the book value of Containers' common stock from the date of grant,
less the portion of parent debt allocable to Containers, over the
exercise price. In the event of a public offering by Holdings or a
change of control of Holdings, such options and tandem SARs would be
converted into options and tandem SARs
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<PAGE>
under the Holdings Plan as provided in the Containers Plan, and value
would be based on fair market value as determined under the Holdings
Plan.
<Fc> 240 options and tandem SARs were granted in June 1989 under the
Containers Plan and an additional 240 options and tandem SARs were
granted in July 1990 under the Containers Plan. The book value, as
computed under the Containers Plan, for the shares underlying the
options and tandem SARs exceeds the exercise price therefor.
<Fd> Options are for, and tandem SARs relate to, shares of Plastics' common
stock. As of December 31, 1994, 13,800 shares of Plastics' common stock
are issued and outstanding and an additional 1,200 shares of Plastics'
common stock are authorized for issuance under the Plastics Plan. The
options and related SARs are not exercisable until a public offering by
Holdings or a change of control of Holdings shall have occurred. At the
time of such public offering or change of control, such options and
tandem SARs would be converted into options and tandem SARs under the
Holdings Plan as provided in the Plastics Plan, and value would be based
upon the fair market value of such options and tandem SARs as determined
under the Holdings Plan.
</FN>
</TABLE>
Pension Plans
The Company has established pension plans (the "Pension Plans") covering
substantially all of the salaried employees of Containers and Plastics,
respectively, including the executive officers (the "Containers Pension Plan"
and the "Plastics Pension Plan," respectively). The Pension Plans are defined
benefit plans intended to be qualified pension plans under Section 401(a) of the
Code, under which pension costs are determined annually on an actuarial basis
with contributions made accordingly.
Certain salaried employees of Containers, including Containers'
executive officers, were covered by the Carnation Employees Plan Number Two for
United States Employees (the "Carnation Pension Plan") immediately prior to the
acquisition of Nestle Can. The Containers Pension Plan recognizes prior service
under the Carnation Pension Plan for purposes of eligibility, vesting and
benefit accrual. The benefits payable at retirement under, or upon vested
termination from, the Containers Pension Plan are based on the benefit formula
and all other factors then in effect under the Containers Pension Plan applied
to all combined pension service. Such benefit shall be offset by the accrued
benefit, if any, such employee is entitled to receive under the Carnation
Pension Plan as of August 31, 1987. In connection with the acquisition of DM
Can, employees of Del Monte that were employed by Containers are also covered by
the Containers Pension Plan. Generally, the Containers Pension Plan credits such
employees with their prior service with Del Monte for purposes of eligibility,
vesting and benefit accrual.
The Containers Pension Plan was amended effective July 1, 1994 to
eliminate mandatory employee contributions, and to substantially revise the
benefit formula. The new formula is based on a percentage of the participant's
average base pay over the final three years of employment, multiplied by the
participant's years of service (not to exceed 35). The particular percentage
applied in the formula depends on when the participant's services were performed
and on whether the participant's average base salary exceeds "covered
compensation" (the average of Social Security wage bases for the 35 years
preceding retirement). For service performed through June 30, 1994, the
percentage is 1.3% up to covered compensation, and 1.75% above covered
compensation. For service performed after June 30, 1994, the percentage is .75%
up to covered compensation, and 1.2% above covered compensation. In no event
will a participant's benefit be less than the benefit accrued as of June 30,
1994 under the prior benefit formula. Average base pay used in the benefit
formula consists of a participant's base salary exclusive of any bonus, overtime
or other extra compensation. A participant becomes fully vested after five years
of service or upon reaching age 55, if earlier.
The following table illustrates the estimated annual normal retirement
benefits that are payable under the Containers Pension Plan based upon the final
pay formula. Such benefit levels assume retirement at age 65, the years of
service shown, continued existence of the Containers Pension Plan without
substantial change and payment in the form of a single life annuity and includes
benefits, if any, payable under the Carnation Pension Plan which will be paid by
that plan.
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<PAGE>
<TABLE>
<CAPTION>
Containers Pension Plan Table
-----------------------------
Years of Service
Final Average ---------------------------------------------------------------------------
Earnings 10 15 20 25 30 35
------------- -------- -------- -------- -------- --------- ---------
<C> <C> <C> <C> <C> <C> <C>
$ 50,000 $ 7,130 $ 10,640 $ 14,260 $ 17,830 $ 21,390 $ 24,960
75,000 11,510 17,260 23,010 28,760 34,520 40,270
100,000 15,880 23,820 31,760 39,700 47,640 55,580
125,000 20,260 30,380 40,510 50,640 60,770 70,890
150,000 24,630 36,950 49,260 61,580 73,890 86,210
175,000 29,010 43,510 58,010 72,510 87,020 101,520
200,000 33,380 50,070 66,760 83,450 100,140 116,830
225,000 37,760 56,630 75,510 94,390 113,270 132,140
</TABLE>
Pursuant to Section 401(a)(17) of the Code, there is a limit on the
amount of annual compensation which can be taken into account under the
Containers Pension Plan. The dollar limit on compensation for 1993 was $235,840.
The dollar limit on compensation for 1994 is $150,000. The dollar limit, where
applicable, will reduce the amount of benefits payable to highly compensated
participants in the Containers Pension Plan.
As of December 31, 1994, the years of credited service under the
Containers Pension Plan for the eligible executive officer named in the Summary
Compensation Table is as follows: James D. Beam, 7.
Certain salaried employees of Plastics, including Plastics' executive
officers, were covered by the Monsanto Company Salaried Employees' Pension Plan
(the "Monsanto Pension Plan") immediately prior to the acquisition of Monsanto
Plastic Containers. The Plastics Pension Plan recognizes prior service under the
Monsanto Pension Plan for purposes of eligibility, vesting and benefit accrual.
The benefits payable at retirement under, or upon vested termination from, the
Plastics Pension Plan are based on the benefit formula and all other factors
then in effect under the Plastics Pension Plan applied to all combined pension
service. Such benefit is offset by the accrued benefit, if any, such employee is
entitled to receive under the Monsanto Pension Plan as of August 31, 1987.
Under the Plastics Pension Plan, pensions are based on the greatest of
(i) years of benefit service multiplied by 1.4% of Average Earnings, which is
defined as the greater of (a) average compensation received during the final 36
months of employment or (b) average compensation received during the highest
three of the final five calendar years of employment; (ii) years of benefit
service multiplied by 1.5% of Average Earnings less a 50% social security
offset; or (iii) years of benefit service multiplied by $30.00. For employees
hired between April 1, 1986 and September 1, 1987, the formula is the greater of
(i) years of benefit service multiplied by 1.2% of Average Earnings; or (ii)
years of benefit service multiplied by 1.5% of Average Earnings less a 50%
social security offset. For employees hired after September 1, 1987, the formula
is years of benefit service multiplied by 1.1% of Average Earnings. Average
Earnings under the Plastics Pension Plan is a participant's total cash income
before deduction for contributions, if any, to a plan pursuant to Section 401(k)
of the Code or Section 125 of the Code less any moving expense allowance but, in
no event, shall Average Earnings exceed 125% of base pay of the participant. A
participant becomes fully vested after five years of service or attainment of
Normal Retirement Age (as defined under the Plastics Pension Plan), if earlier.
The following table illustrates the estimated annual normal retirement
benefits that are payable under the Plastics Pension Plan based upon the greater
of 1.4% of Average Earnings, without reduction for social security or other
offset amounts, or 1.5% of Average Earnings less a 50% social security offset.
Such benefit levels assume retirement age at 65, the years of service shown,
continued existence of the Plastics Pension Plan without substantial change and
payment in the form of a single life annuity and includes benefits, if any,
payable under the Monsanto Pension Plan which will be paid by that plan.
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<PAGE>
<TABLE>
<CAPTION>
Plastics Pension Plan Table
---------------------------
Years of Service
Final Average --------------------------------------------------------------------------
Earnings 10 15 20 25 30 35
------------- -------- -------- -------- -------- -------- ---------
<C> <C> <C> <C> <C> <C> <C>
$ 50,000 $ 7,000 $ 10,550 $ 14,000 $ 17,500 $ 21,000 $ 24,500
75,000 10,500 15,750 21,000 26,250 31,500 36,750
100,000 14,000 21,000 28,000 35,000 42,000 49,000
125,000 17,500 26,250 35,000 43,750 52,500 61,250
150,000 21,000 31,500 42,000 52,500 63,000 73,950
175,000 24,500 36,750 49,000 61,250 73,950 87,075
200,000 28,000 42,000 56,000 70,200 85,200 100,200
225,000 31,500 47,250 63,000 79,575 96,450 113,325
</TABLE>
Pursuant to Section 401(a)(17) of the Code, there is a limit on the
amount of annual compensation which can be taken into account under the Plastics
Pension Plan. The dollar limit on compensation for 1993 was $235,840. The dollar
limit on compensation for 1994 is $150,000. The dollar limit, where applicable,
will reduce the amount of benefits payable to highly compensated participants in
the Plastics Pension Plan.
As of December 31, 1994, the years of credited service under the
Plastics Pension Plan for the eligible executive officer named in the Summary
Compensation Table is as follows: Russell F. Gervais, 5.
Certain Employment Agreements
Certain executive officers and other key employees of Containers and
Plastics (including Messrs. Beam and Gervais) have executed employment
agreements. The initial term of each such employment agreement is generally
three years from its effective date and is automatically extended for successive
one year periods unless terminated pursuant to the terms of such agreement. Each
such employment agreement provides for, among other things, a minimum severance
benefit equal to base salary and benefits for, in most cases, a period of one
year (or the remainder of the term of the agreement, if longer) (i) if the
employee is terminated by his employer for any reason other than disability or
for cause as specified in the agreement or (ii) if the employee voluntarily
terminates employment due to a demotion and, in some cases, significant
relocation, all as specified in the agreement.
The foregoing summaries of the various benefit plans and agreements of
the Company are qualified by reference to such plans and agreements, copies of
certain of which have been filed as exhibits to this Annual Report on Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Certain Beneficial Owners of Holdings' Capital Stock
The following table sets forth, as of March 15, 1995, certain
information with respect to the beneficial ownership by certain persons and
entities of outstanding shares of capital stock of Holdings:
-35-
<PAGE>
<TABLE>
<CAPTION>
Number of Shares of Each Class of Percentage Ownership of
Holdings Common Stock Owned Holdings Common Stock
----------------------------------- --------------------------------------------------
Class A Class B Class C Class A Class B Class C Consolidated<F1>
------- ------- ------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
R. Philip Silver<F2>.................208,750 -- -- 50% -- -- 19.24%
D. Greg Horrigan<F2>.................208,750 -- -- 50% -- -- 19.24%
James S. Hoch<F3>.................... -- -- -- -- -- -- --
Robert H. Niehaus<F3>................ -- -- -- -- -- -- --
Harley Rankin, Jr.<F4> .............. -- -- 11,200<F5> -- -- 16.77% --
James D. Beam<F6>.................... -- -- -- -- -- -- --
Russell F. Gervais<F7>............... -- -- -- -- -- -- --
The Morgan Stanley Leveraged
Equity Fund II, L.P.<F8>)........... -- 417,500 -- -- 62.55% -- 38.48%
Mellon Bank, N.A., as trustee for
First Plaza Group Trust<F9>......... -- 250,000 -- -- 37.45% -- 23.04%
All officers and directors as a
group...............................417,500 -- 16,800<F5> 100% -- 25.15%<F10> 38.48%
-------------------
<FN>
<F1> This column reflects the percentage ownership of voting common stock
that would exist if Holdings Class A Stock and Holdings Class B Stock
were treated as a single class. Holdings Class C Stock generally does
not have voting rights and is not included in the percentage ownership
reflected in this column. See "Description of Holdings Common Stock"
below.
<F2> Director of Holdings and Silgan. Messrs. Silver and Horrigan are parties
to a voting agreement pursuant to which they have agreed to use their
best efforts to vote their shares as a block. The address for such
person is 4 Landmark Square, Stamford, CT 06901.
<F3> Director of HOldings and Silgan. The address for such person is c/o
Morgan Stanley & Co. Incorporated, 1221 Avenue of the Agericas, New
York, NY 10020.
<F4> The address for such person is 4 Landmark Square, Stamford, CT 06901.
<F5> Reflects shares that may be acquired through the exercise of vested
stock options granted pursuant to Silgan Holdings Inc. Second Amended
and Restated 1989 Stock Option Plan.
<F6> Options to purchase shares of common stock of Containers and tandem SARs
have been granted to such person pursuant to the Containers Plan.
Pursuant to the Containers Plan, such options may be converted into
stock options of Holdings (and the Containers' common stock issuable
upon exercise of such options may be converted into common stock of
Holdings) in the event of a public offering of any of Holdings' common
stock or a change of control of Holdings. The address for such person is
21800 Oxnard Street, Woodland Hills, CA 91367.
<F7> Options to purchase shares of common stock of Plastics and tandem SARs
have been granted to such person pursuant to the Plastics Plan. Pursuant
to the Plastics Plan, such options may be converted into stock options
of Holdings in the event of a public offering of any of Holdings' common
stock or a change of control of Holdings. The address for such person is
14515 N. Outer Forty, Chesterfield, MO 63017.
<F8> The address for The Morgan Stanley Leveraged Equity Fund II, L.P., is
1221 Avenue of the Americas, New York, NY 10020.
<F9> The address for First Plaza Group Trust is c/o General Motors Investment
Management Corporation, 767 Fifth Avenue, New York, NY 10153. Mellon
Bank, N.A., acts as the trustee (the "Trustee") for First Plaza, a trust
under and for the benefit of certain employee benefit plans of General
Motors Corporation ("GM") and its subsidiaries. These shares may be
deemed to be owned beneficially by General Motors Investment Management
Corporation
-36-
<PAGE>
("GMIMCo"), a wholly owned subsidiary of GM. GMIMCo is serving as First
Plaza's investment manager with respect to these shares and in that
capacity it has the sole power to direct the Trustee as to the voting
and disposition of these shares. Because of the Trustee's limited role,
beneficial ownership of the shares by the Trustee is disclaimed.
<F10> Bankers Trust New York Corporation beneficially owns 50,000 shares of
Holdings Class C Stock.
See "Description of Holdings Common Stock" and "Description of the
Holdings Organization Agreement" for additional information about the common
stock of Holdings, the holders thereof and certain arrangements among them.
Description of Holdings Common Stock
Certain of the statements contained herein are summaries of the detailed
provisions of the Restated Certificate of Incorporation of Holdings (the
"Certificate of Incorporation") and are qualified in their entirety by reference
to the Certificate of Incorporation, a copy of which is filed herewith.
Under the Certificate of Incorporation, Holdings has authority to issue
500,000 shares of Class A Common Stock, par value $.01 per share (the "Holdings
Class A Stock"), 667,500 shares of Class B Common Stock, par value $.01 per
share (the "Holdings Class B Stock"), and 1,000,000 shares of Class C Common
Stock, par value $.01 per share (the "Holdings Class C Stock" and, together with
the Holdings Class A Stock and Holdings Class B Stock, the "Holdings Common
Stock"). Holdings has an aggregate of 1,135,000 shares of Holdings Common Stock
outstanding as follows: (i) 417,500 shares of Holdings Class A Stock; (ii)
667,500 shares of Holdings Class B Stock; and (iii) 50,000 shares of Holdings
Class C Stock. Except as described below, the rights, privileges and powers of
Holdings Class A Stock and Holdings Class B Stock are identical, with each share
of each class being entitled to one vote on all matters to come before the
stockholders of Holdings.
Until the occurrence of a Change of Control (as defined in the
Certificate of Incorporation and as described below), the affirmative vote of
the holders of not less than a majority of the outstanding shares of Holdings
Class A Stock and Holdings Class B Stock, voting as separate classes, shall be
required for the approval of any matter to come before the stockholders of
Holdings, except that (i) the holders of a majority of the outstanding shares of
Holdings Class A Stock, voting as a separate class, have the sole right to vote
for the election and removal of three directors (the directors elected by the
holders of Holdings Class A Stock being referred to herein as "Class A
Directors"); (ii) the holders of a majority of the outstanding shares of
Holdings Class B Stock, voting as a separate class, have the sole right to vote
for the election and removal of all directors other than the Class A Directors
(the directors elected by the holders of Holdings Class B Stock being referred
to herein as "Class B Directors"); and (iii) the vote of not less than a
majority of the outstanding shares of Holdings Class B Stock shall be required
in certain circumstances set forth in the Certificate of Incorporation. The
holders of Holdings Class C Stock have no voting rights except as provided by
applicable law and except that such holders are entitled to vote as a separate
class on certain amendments to the Certificate of Incorporation as provided
therein. In the event Holdings sells shares of any class of its common stock to
the public, the distinctions between Holdings Class A Stock and Holdings Class B
Stock terminate, the powers, including voting powers, of Holdings Class A Stock
and Holdings Class B Stock shall be identical upon compliance with certain
provisions contained in the Certificate of Incorporation, and any Regulated
Stockholder (generally defined to mean banks) will be entitled to convert all
shares of Holdings Class C Stock held by such stockholder into the same number
of shares of Holdings Class B Stock (or Holdings Class A Stock to the extent
such Holdings Class C Stock was issued upon conversion of Holdings Class A
Stock).
After a Change of Control, the affirmative vote of the holders of not
less than a majority of the outstanding shares of Holdings Class A Stock and
Holdings Class B Stock, voting together as a single class, will be required for
the approval of any matter to come before the stockholders of Holdings, except
that the
-37-
<PAGE>
provisions described in clauses (i) and (ii) in the preceding paragraph shall
continue to apply from and after a Change of Control, and except as otherwise
provided in the Certificate of Incorporation with respect to its amendment.
Also, after a Change of Control, the number of Class B Directors will be
increased to five.
In the event that a vacancy among the Class A Directors or the Class B
Directors occurs at any time prior to the election of directors at the next
scheduled annual meeting of stockholders, the vacancy shall be filled, in the
case of the Class A Directors, by either (i) the vote of the holders of a
majority of the outstanding shares of Holdings Class A Stock, at a special
meeting of stockholders, or (ii) by written consent of the holders of a majority
of the outstanding shares of Holdings Class A Stock, and, in the case of the
Class B Directors, by either (i) the vote of the holders of a majority of the
outstanding shares of Holdings Class B Stock at a special meeting or
stockholders, or (ii) by written consent of the holders of a majority of the
outstanding shares of the Holdings Class B Stock.
A "Change of Control" is defined in the Certificate of Incorporation to
include the occurrence of any of the following events: (i) Messrs. Silver and
Horrigan shall collectively own, directly or indirectly, less than one-half of
the aggregate number of outstanding shares of Holdings Class A Stock owned by
them directly or indirectly on June 30, 1989 on a common stock equivalent basis,
or (ii) the acceleration of the indebtedness under the Credit Agreement or the
Discount Debentures, as a result of the occurrence of an event of default
thereunder relating to a payment default or a financial covenant event of
default.
Description of the Holdings Organization Agreement
Concurrently with the issuance and sale to First Plaza of the Holdings
Stock, Holdings, The Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF II"),
Bankers Trust New York Corporation ("BTNY"), First Plaza and Messrs. R. Philip
Silver and D. Greg Horrigan entered into the Amended and Restated Organization
Agreement dated as of December 21, 1993 (the "Holdings Organization Agreement")
that provides for the termination of the Organization Agreement dated as of June
30, 1989 by and among Holdings, MSLEF II, BTNY and Messrs. Silver and Horrigan
(except for the indemnification provisions thereof, which provisions survive)
and for the investment by First Plaza in Holdings and the relationships among
the stockholders and between the stockholders and Holdings. Certain of the
statements contained herein are summaries of the detailed provisions of the
Holdings Organization Agreement and are qualified in their entirety by reference
to the Holdings Organization Agreement.
The Holdings Organization Agreement prohibits the disposition of
Holdings' common stock without the prior written consent of Messrs. Silver and
Horrigan and MSLEF II, except for (i) dispositions to affiliates (which, in the
case of First Plaza, includes any successor or underlying trust, and which, in
the case of MSLEF II, does not include any person which is not an Investment
Entity (as defined below)), (ii) dispositions to certain family members of
Messrs. Silver and Horrigan or trusts for the benefit of those family members,
(iii) dispositions to certain parties at any time on or after June 30, 1994,
subject to certain other rights of first refusal discussed below, (iv) the sale
by First Plaza to Holdings of all of the Holdings Stock acquired by First Plaza
on December 21, 1993, upon the exercise of Holdings' call option as described
below, and (v) dispositions in connection with an initial public offering of the
common stock of Holdings, as described below. Any transfer of Holdings' common
stock (other than transfers described in clauses (iv) and (v) of the preceding
sentence) will be void unless the transferee agrees in writing prior to the
proposed transfer to be bound by the terms of the Holdings Organization
Agreement.
Under the Holdings Organization Agreement, MSLEF II may effect a sale of
stock to an Investment Entity (generally defined as any person who (i) is
primarily engaged in the business of investing in securities of other companies
and not taking an active role in the management or operations of such companies
and (ii) does not permit the participation or involvement in any way in the
business or affairs of Holdings of a person
-38-
<PAGE>
who is engaged in a business not described in clause (i)) or, in the event of
certain defaults under the amended and restated management services agreement by
and between S&H, a company wholly owned by Messrs. Silver and Horrigan, and
Holdings (described below under "Description of Management Agreements"), to a
third party, in each case, if it first offers such stock to: (a) Holdings, (b)
the Group (defined generally to mean, collectively, Messrs. Silver and Horrigan
and their respective affiliates and certain related family transferees and
estates, with Mr. Silver and his affiliates and certain related family
transferees and estates being deemed to be collectively one member of the Group,
and Mr. Horrigan and his affiliates and certain related family transferees and
estates being deemed to be collectively one member of the Group) and (c) BTNY,
in each case on the same terms and conditions as the proposed sale to an
Investment Entity or the proposed third party sale. In addition, in any such
sale by MSLEF II, BTNY and First Plaza must be given the opportunity to sell the
same percentage of its stock to such Investment Entity or third party. Each
member of the Group may transfer shares of stock to a third party if such holder
first offers such shares to: (a) the other member of the Group, (b) Holdings,
(c) MSLEF II and (d) BTNY, in each case on the same terms and conditions as the
proposed third party sale. BTNY may effect a sale of stock to a third party if
it first offers such shares to: (a) Holdings, (b) MSLEF II and (c) the Group, in
each case on the same terms and conditions as the proposed third party sale.
Under the Holdings Organization Agreement, either MSLEF II or the Group
has the right to require a recapitalization transaction. A recapitalization
transaction is defined as any transaction (such as a merger, consolidation,
exchange of securities or liquidation) involving Holdings pursuant to which
MSLEF II and the Group retain their proportionate ownership interest in the
surviving entity if the following conditions are met: (i) the value of any
securities of the surviving entity acquired or retained by the party not
initiating the recapitalization transaction does not exceed 67% of the
difference between (x) the value of such securities and any cash received by
such party and (y) all taxes payable as a result of the transaction, (ii) if
MSLEF II initiates the recapitalization transaction and will not own all the
voting equity securities of the surviving entity not owned by the Group, the
Group shall have the right to purchase such securities, (iii) if the Group
initiates the recapitalization transaction and will not own all of the voting
equity securities of the surviving entity, MSLEF II shall have the right to
purchase such securities, and (iv) the majority in principal amount of the
indebtedness incurred in connection with such transaction shall be held for at
least one year by persons not affiliated with either MSLEF II or any member of
the Group.
At any time prior to December 21, 1998, Holdings has the right and
option to purchase from First Plaza, and First Plaza shall have the obligation
to sell to Holdings, all (but not less than all) of the Holdings Stock for a
price per share equal to the greater of (i) $120 per share and (ii) the purchase
price necessary to yield on an annual basis a compound return on investment of
forty percent (40%). The number of shares subject to such call and the call
purchase price shall be proportionately adjusted to take into account any stock
dividend, stock split, combination of shares, subdivision or other
recapitalization of the capital stock of Holdings.
The Holdings Organization Agreement provides that at any time after June
15, 1996, the holders of a majority of the issued and outstanding shares of
Holdings Class A Stock and Holdings Class B Stock (considered together as a
class) may by written notice to Holdings require Holdings to pursue the first
public offering of Holdings' common stock pursuant to an effective registration
statement (an "IPO") on the terms and conditions provided in the Holdings
Organization Agreement. In addition to the portion of the IPO which shall
consist of shares of Holdings' common stock to be sold by Holdings, the IPO may
also include a secondary tranche consisting of shares of Holdings' common stock
to be sold by stockholders of Holdings.
Pursuant to the provisions of the Holdings Organization Agreement, each
of MSLEF II, BTNY, First Plaza and Messrs. Silver and Horrigan has agreed to
take all action (including voting its shares of Holdings' common stock) to
approve the adoption of the Restated Certificate of Incorporation of Holdings,
as amended,
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the Amended and Restated By-laws of Holdings, and the Amended and Restated
Management Services Agreement (the "Post-IPO Management Services Contract"), in
each case substantially in the form agreed to pursuant to the Holdings
Organization Agreement and in each case to become effective at the time an IPO
is completed. The Post-IPO Management Services Contract provides, among other
things, for the payment to S&H of management fees of $2.0 million annually plus
reimbursement of expenses. See "Certain Relationships and Related Transactions
-- Management Agreements" below.
Pursuant to the provisions of the Holdings Organization Agreement, MSLEF
II has agreed that it will not vote its shares of Holdings Class B Stock in
favor of any changes in the Certificate of Incorporation or By-laws of Holdings
which would adversely affect the rights of First Plaza, unless First Plaza has
consented in writing to such change. In addition, so long as First Plaza shall
hold not less than 18.73% of the issued and outstanding shares of Holdings Class
B Stock, First Plaza shall have the right to nominate one of the Class B
Directors to be elected at each annual meeting of stockholders in accordance
with the provisions of the Certificate of Incorporation, and the holders of
Holdings Class B Stock parties to the Holdings Organization Agreement have
agreed to vote their shares of Holdings Class B Stock in favor of such nominee.
In addition, in the event that First Plaza, MSLEF II or BTNY shall
purchase any shares of Holdings Class A Stock, such purchaser has agreed that it
will vote such shares in accordance with the directions of the "holders of a
majority of the shares of Class A Stock held by the Group" (defined generally to
mean the holders of a majority of the aggregate of 417,500 shares of Holdings
Class A Stock held by Messrs. Silver and Horrigan at December 21, 1993, which at
the time of any such determination have been continuously and are held by the
Group) until such time as a Change of Control has occurred. In the event that
Messrs. Silver or Horrigan shall purchase any shares of Holdings Class B Stock,
such purchaser agrees that it will vote such shares in accordance with the
directions of MSLEF II, unless MSLEF II and First Plaza (together with their
respective affiliates) shall hold directly or indirectly less than one-half of
the aggregate number of shares of Holdings Class B Stock held by MSLEF II and
First Plaza immediately following the issuance and sale of the Holdings Stock to
First Plaza on December 21, 1993.
Pursuant to the terms of the Holdings Organization Agreement, Holdings
entered into an amended and restated management services agreement with S&H, a
corporation wholly owned by Messrs. Silver and Horrigan. See "Description of
Management Agreements" below.
The Holdings Organization Agreement terminates upon the earlier of (i)
the mutual agreement of the parties, (ii) such time as it becomes unlawful,
(iii) the completion of an IPO, and (iv) June 30, 1999. The parties may agree to
extend the term of the Holdings Organization Agreement.
Description of the Holdings Stockholders Agreement
Concurrently with the issuance and sale to First Plaza of the Holdings
Stock, Holdings, MSLEF II, BTNY, First Plaza and Messrs. Silver and Horrigan
entered into a Stockholders Agreement dated as of December 21, 1993 (the
"Stockholders Agreement") that provides for certain prospective rights and
obligations among the stockholders and between the stockholders and Holdings.
The operative provisions of the Stockholders Agreement do not take effect until
after the occurrence of an IPO, at which time the Holdings Organization
Agreement will have terminated in accordance with its terms as described above
under "Description of the Holdings Organization Agreement." Certain of the
statements contained herein are summaries of the detailed provisions of the
Stockholders Agreement and are qualified in their entirety by reference to the
Stockholders Agreement.
The Stockholders Agreement provides that for a period of eight years
after the IPO, each of MSLEF II and First Plaza shall have the right to demand
two separate registrations of its shares of Holdings' common
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stock (equalling a total of four separate demand registrations); provided,
however, that such demand right will terminate as to MSLEF II or First Plaza, as
the case may be, at such time as MSLEF II or First Plaza, as the case may be,
together with its affiliates, owns less than five percent of the issued and
outstanding shares of Holdings' common stock at any time. If, at any time or
from time to time for a period of eight years after the IPO, Holdings shall
determine to register Holdings' common stock (other than in connection with
certain non-underwritten offerings), Holdings will offer each of MSLEF II, BTNY,
First Plaza and Messrs. Silver and Horrigan the opportunity to register shares
of Holdings' common stock it holds in a "piggyback registration."
The Stockholders Agreement prohibits the transfer prior to June 30, 1999
(or, in the case of any restriction applicable to First Plaza, December 21,
1998) by MSLEF II, First Plaza or Messrs. Silver or Horrigan of Holdings' common
stock without the prior written consent of Messrs. Silver and Horrigan and MSLEF
II, except for (i) transfers made in connection with a public offering or a Rule
144 Open Market Transaction (as defined in the Stockholders Agreement), (ii)
transfers made to an affiliate, which, in the case of a transfer by First Plaza
or MSLEF II to an affiliate, must be an Investment Entity (defined generally to
be any person who is primarily engaged in the business of investing in
securities of other companies and not taking an active role in the management or
operations of such companies), (iii) transfers made to certain family members of
Messrs. Silver and Horrigan or trusts for the benefit of those family members,
(iv) certain transfers by First Plaza to a third party that comply with certain
rights of first refusal of the Group and MSLEF II set forth in the Stockholders
Agreement, (v) certain transfers by MSLEF II to an Investment Entity or, in the
event of certain defaults under the amended and restated management services
agreement between S&H and Holdings, to a third party, that comply with certain
rights of first refusal of the Group set forth in the Stockholders Agreement,
(vi) certain transfers by either member of the Group to a third party that
comply with certain rights of first refusal of the other member of the Group and
MSLEF II set forth in the Stockholders Agreement, and (vii) in the case of MSLEF
II, a distribution of all or substantially all of the shares of Holdings' common
stock then owned by MSLEF II to the partners of MSLEF II (a "MSLEF
Distribution"). Notwithstanding the foregoing, MSLEF II may pledge its shares of
Holdings' common stock to a lender or lenders reasonably acceptable to Holdings
to secure a loan or loans to MSLEF II. In the event of any proposed foreclosure
of such pledge, such shares will be subject to certain rights of first refusal
of the Group set forth in the Stockholders Agreement.
The Stockholders Agreement provides that until December 21, 1998, for so
long as MSLEF II and its affiliates (excluding the limited partners of MSLEF II
who may acquire shares of Holdings' common stock from MSLEF II in a MSLEF
Distribution) shall hold at least one-half of the number of shares of Holdings'
common stock held by MSLEF II on December 21, 1993 (as adjusted, if necessary,
to take into account any stock dividend, stock split, combination of shares,
subdivision or recapitalization of the capital stock of Holdings), the parties
and their Restricted Voting Transferees (as defined in the Stockholders
Agreement) shall use their best efforts (including to vote any shares of
Holdings' common stock owned or controlled by such person or otherwise) to cause
the nomination and election of two (2) members of the Board of Directors of
Holdings to be chosen by MSLEF II; provided, however, that each such nominee
shall be (i) either an employee of Morgan Stanley whose primary responsibility
is managing investments for MSLEF II (or a successor or related partnership) or
(ii) a person reasonably acceptable to the Group not engaged in (as a director,
officer, employee, agent or consultant or as a holder of more than five percent
of the equity securities of) a business competitive with that of Holdings.
In addition, until December 21, 1998, for so long as the Group shall
hold at least one-half of the number of shares of Holdings' common stock held by
it in the aggregate on December 21, 1993 (as adjusted, if necessary, to take
into account any stock dividend, stock split, combination of shares, subdivision
or recapitalization of the capital stock of Holdings), the parties and their
Restricted Voting Transferees shall use their best efforts (including to vote
any shares of Holdings' common stock owned or controlled by such person or
otherwise) to cause the nomination and election of two (2) individuals nominated
by the "holders of a
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majority of the shares of [c]ommon [s]tock held by the Group" (as such phrase is
defined in the Stockholders Agreement) as members of the Board of Directors of
Holdings; provided, however, that at least one (1) of such nominees shall be Mr.
Silver or Mr. Horrigan and the other person, if not Mr. Silver or Mr. Horrigan,
shall be a person reasonably acceptable to MSLEF II, so long as MSLEF II and its
affiliates (other than any affiliate which is not an Investment Entity and
excluding the limited partners of MSLEF II who may acquire shares of Holdings'
common stock from MSLEF II in a MSLEF distribution) shall hold at least one-half
of the number of shares of Holdings' common stock held by MSLEF II at the
Closing Date (as adjusted, if necessary, to take into account any stock
dividend, stock split, combination of shares, subdivision or recapitalization of
the capital stock of Holdings).
Subject to the terms of the preceding two paragraphs, for so long as the
Group shall hold at least one-half of the number of shares of Holdings' common
stock held by it in the aggregate at the Closing Date (as adjusted, if
necessary, to take into account any stock dividend, stock split, combination of
shares, subdivision or recapitalization of the capital stock of Holdings), First
Plaza and its Restricted Voting Transferees shall vote all shares of Holdings'
common stock held by them in favor of any other directors standing for election
to Holdings' Board of Directors for whom the holders of a majority of the shares
of Holdings' common stock held by the Group shall direct First Plaza to vote.
The Stockholders Agreement further provides that until December 21,
1998, MSLEF II and its Restricted Voting Transferees shall vote all shares of
Holdings' common stock held by them against any unsolicited merger, or sale of
Holdings' business or its assets, if such transaction is opposed by the holders
of a majority of the shares of common stock held by the Group, unless as of the
applicable record date for such vote, the Group holds less than ninety percent
(90%) of the number of shares of Holdings' common stock held by it in the
aggregate at the Closing Date (as adjusted, if necessary, to take into account
any stock dividend, stock split, combination of shares, subdivision or
recapitalization of the capital stock of Holdings). Until December 21, 1998,
First Plaza and its Restricted Voting Transferees shall vote all shares of
common stock held by them against any unsolicited merger, or sale of Holdings'
business or its assets, if such transaction is opposed by the holders of a
majority of the shares of common stock held by the Group; provided, however,
that First Plaza and its Restricted Voting Transferees shall not be required to
vote their shares of Holdings' common stock in accordance with the foregoing if
(i) in connection with such merger or sale, (x) First Plaza and its Restricted
Voting Transferees propose to sell or otherwise transfer all of their shares of
Holdings' common stock to a third party for aggregate cash consideration of less
than $10 million and (y) the Group and/or MSLEF II has not exercised their right
of first refusal in respect of such sale or transfer by First Plaza or such
right of first refusal in respect of the shares of Holdings' common stock held
by First Plaza shall have terminated, or (ii) as of the applicable record date
for such vote, the Group holds less than ninety percent (90%) of the number of
shares of Holdings' common stock held by it in the aggregate at December 21,
1993 (as adjusted, if necessary, to take into account any stock dividend, stock
split, combination of shares, subdivision or recapitalization of the capital
stock of Holdings).
Item 13. Certain Relationships and Related Transactions.
Management Agreements
Holdings, Silgan, Containers and Plastics each entered into an amended
and restated management services agreement dated as of December 21, 1993
(collectively, the "Management Agreements") with S&H to replace in its entirety
its existing management services agreement, as amended, with S&H. Pursuant to
the Management Agreements, S&H provides Holdings, Silgan, Containers and
Plastics and their respective subsidiaries with general management and
administrative services (the "Services"). The Management Agreements provide for
payments to S&H (i) on a monthly basis, of $5,000 plus an amount equal to 2.475%
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of consolidated earnings before depreciation, interest and taxes of Holdings and
its subsidiaries ("Holdings EBDIT"), for such calendar month until Holdings
EBDIT for the calendar year shall have reached an amount set forth in the
Management Agreements for such calendar year (the "Scheduled Amount") and 1.65%
of Holdings EBDIT for such calendar month to the extent that Holdings EBDIT for
the calendar year shall have exceeded the Scheduled Amount but shall not have
been greater than an amount (the "Maximum Amount") set forth in the Management
Agreements (the "Monthly Management Fee") and (ii) on a quarterly basis, of an
amount equal to 2.475% of Holdings EBDIT for such calendar quarter until
Holdings EBDIT for the calendar year shall have reached the Scheduled Amount and
1.65% of Holdings EBDIT for such calendar quarter to the extent that Holdings
EBDIT for the calendar year shall have exceeded the Scheduled Amount but shall
not have been greater than the Maximum Amount (the "Quarterly Management Fee").
The Scheduled Amount was $71.5 million for the calendar year 1994 and increases
by $6.0 million for each year thereafter. The Maximum Amount is $90.197 million
for the calendar year 1994, $95.758 million for the calendar year 1995, $98.101
million for the calendar year 1996, $100.504 million for the calendar year 1997,
$102.964 million for the calendar year 1998 and $105.488 million for the
calendar year 1999. The Management Agreements provide that upon receipt by
Silgan of a notice from Bankers Trust that certain events of default under the
Credit Agreement have occurred, the Quarterly Management Fee shall continue to
accrue, but shall not be paid to S&H until the fulfillment of certain
conditions, as set forth in the Management Agreements.
The Management Agreements continue in effect until the earliest of: (i)
the completion of an IPO; (ii) June 30, 1999; (iii) at the option of each of the
respective companies, the failure or refusal of S&H to perform its obligations
under the Management Agreements, if such failure continues unremedied for more
than 60 days after written notice of its existence shall have been given; (iv)
at the option of MSLEF II (a) if S&H or Holdings is declared insolvent or
bankrupt or a voluntary bankruptcy petition is filed by either of them, (b) upon
the occurrence of any of the following events with respect to S&H or Holdings if
not cured, dismissed or stayed within 45 days: the filing of an involuntary
petition in bankruptcy, the appointment of a trustee or receiver or the
institution of a proceeding seeking a reorganization, arrangement, liquidation
or dissolution, (c) if S&H or Holdings voluntarily seeks a reorganization or
arrangement or makes an assignment for the benefit of creditors or (d) upon the
death or permanent disability of both of Messrs. Silver and Horrigan; and (v)
the occurrence of a Change of Control (as defined in the Restated Certificate of
Incorporation of Holdings and as described under "Description of Holdings Common
Stock" above).
In addition to the management fees described above, the Management
Agreements provide for the payment to S&H on the closing date of the IPO of an
amount, if any (the "Additional Amount") equal to the sum of the present values,
calculated for each year or portion thereof, of (i) the amount of the annual
management fee for such year or portion thereof that otherwise would have been
payable to S&H for each such year or portion thereof for the period beginning as
of the time of the IPO and ending on June 30, 1999 (the "Remaining Term")
pursuant to the provisions described in the preceding paragraph but for the
occurrence of the IPO, minus (ii) the amount payable to S&H for the Remaining
Term at the rate of $2.0 million per year. The Management Agreements further
provide that the amounts described in clause (i) of the first sentence of this
paragraph will be calculated based upon S&H's good faith projections of Holdings
EBDIT for each such year (or portion thereof) during the Remaining Term (the
"Estimated Fees"), which projections shall be made on a basis consistent with
S&H's past projections. The difference between the amount of Estimated Fees for
any particular year and $2 million shall be discounted to present value at the
time of the IPO using a discount rate of eight percent (8%) per annum,
compounded annually.
Additionally, the Management Agreements provide that Holdings, Silgan,
Containers, Plastics and their respective subsidiaries shall reimburse S&H, on a
monthly basis, for all out-of-pocket expenses paid by S&H in providing the
Services, including fees and expenses to consultants, subcontractors and other
third parties, in connection with such Services. All fees and expenses paid to
S&H under each of the Management Agreements are credited against amounts paid to
S&H under the other Management Agreements. Under the
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terms of the Management Agreements, Holdings, Silgan, Containers and Plastics
have agreed, subject to certain exceptions, to indemnify S&H and its affiliates,
officers, directors, employees, subcontractors, consultants or controlling
persons against any losses, damages, costs and expenses they may sustain arising
in connection with the Management Agreements.
The Management Agreements also provide that S&H may select a consultant,
subcontractor or agent to provide the Services. S&H has retained Morgan Stanley
to render financial advisory services to S&H. In connection with such retention,
S&H has agreed to pay Morgan Stanley a fee equal to 9.1% of the fees paid to S&H
under the Management Agreements.
The Credit Agreement does not permit the payment of fees under the
Management Agreements above amounts provided for therein.
For the years ended December 31, 1994, 1993 and 1992, pursuant to the
arrangements described above, S&H earned aggregate fees, including reimbursable
expenses and fees payable to Morgan Stanley, of $5.0 million, $4.4 million and
$4.2 million, respectively, from Holdings, Silgan, Containers and Plastics, and
during 1994, 1993 and 1992 Morgan Stanley earned fees of $383,000, $337,000 and
$324,000, respectively.
Other
In connection with the 1989 Mergers, subject to the provisions of
Delaware law, Silgan agreed to indemnify each director, officer, employee,
fiduciary and agent of Silgan, Containers, Plastics and its subsidiaries and
their respective affiliates against costs, expenses, judgments, fines, losses,
claims, damages and settlements (except for any settlement effected without
Silgan's written consent) in connection with any claims, actions, suits,
proceedings or investigations arising out of or related to the 1989 Mergers or
their financing, including certain liabilities arising under the federal
securities laws.
Simultaneously with the consummation of the 1989 Mergers, a tax
allocation agreement was entered into by Holdings, Silgan, Plastics and
Containers that permits Silgan and its subsidiaries to use the tax benefits
provided by the debt of Holdings and permits funds to be provided to Holdings
from Silgan and its subsidiaries in an amount equal to the federal and state tax
liabilities of Holdings, as the parent of the consolidated group consisting of
Holdings, Silgan and its Subsidiaries. Such tax allocation agreement has been
amended and restated from time to time to include new members of the
consolidated group.
In connection with the Amended and Restated Credit Agreement under the
Refinancing, the lenders thereunder (including Bankers Trust) received certain
fees amounting to $1.4 million. In connection with the Refinancing, Morgan
Stanley received as compensation for its services as underwriter for the Notes
Offering and Holdings Debentures Offering and as initial purchaser of the
Secured Notes an aggregate of $11.5 million. In connection with the Credit
Agreement entered into in December 1993, the Banks (including Bankers Trust)
received certain fees amounting to $8.1 million.
G. William Sisley, Secretary of the Holdings and Silgan, is a partner in
the law firm of Winthrop, Stimson, Putnam & Roberts. Winthrop, Stimson, Putnam &
Roberts provides legal services to Holdings, Silgan and their subsidiaries.
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PART IV
Item 14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K.
(a)
Financial Statements:
SILGAN HOLDINGS INC.:
Report of Independent Auditors............................................ F-1
Consolidated Balance Sheets at December 31, 1994 and 1993................. F-2
Consolidated Statements of Operations for the years ended
December 31, 1994, 1993 and 1992........................................ F-3
Consolidated Statements of Deficiency in Stockholders' Equity for the
years ended December 31, 1994, 1993 and 1992............................ F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992........................................ F-5
Notes to Consolidated Financial Statements................................ F-7
SILGAN CORPORATION:
Report of Independent Auditors........................................... F-31
Consolidated Balance Sheets at December 31, 1994 and 1993.................F-32
Consolidated Statements of Operations for the years ended
December 31, 1994, 1993 and 1992........................................F-33
Consolidated Statements of Common Stockholder's Equity for the
years ended December 31, 1994, 1993 and 1992............................F-34
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992......................................F-35
Notes to Consolidated Financial Statements................................F-37
Schedules:
SILGAN HOLDINGS INC.:
I. Condensed Financial Information of Silgan Holdings Inc.:
Condensed Balance Sheets at December 31, 1994 and 1993........... F-60
Condensed Statements of Operations for the years ended
December 31, 1994, 1993 and 1992.............................. F-61
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Condensed Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992...............................F-62
SILGAN CORPORATION:
I. Condensed Financial Information of Silgan Corporation:
Condensed Balance Sheets at December 31, 1994 and 1993............F-63
Condensed Statements of Operations for the years ended
December 31, 1994, 1993 and 1992...............................F-64
Condensed Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992...............................F-65
II. Schedules of Valuation and Qualifying Accounts for the
years ended December 31, 1994, 1993 and 1992...................F-66
All other financial statements and schedules not listed have been omitted
because they are not applicable, or not required, or because the required
information is included in the consolidated financial statements or notes
thereto.
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Exhibits:
Exhibit
Number Description
------- -----------
3.1 Restated Certificate of Incorporation of Silgan, as amended
(incorporated by reference to Exhibit 3.1 filed with Silgan's Annual
Report on Form 10-K for the year ended December 31, 1993, Commission
File No. 1-11200).
3.2 By-laws of Silgan (incorporated by reference to Exhibit 3(ii) filed
with Silgan's Registration Statement on Form S-1, dated January 11,
1988, Registration Statement No. 33-18719).
3.3 Restated Certificate of Incorporation of Holdings (incorporated by
reference to Exhibit 1 filed with Holdings' Current Report on Form
8-K, dated March 25, 1994, Commission File No. 33-28409).
3.4 By-laws of Holdings (incorporated by reference to Exhibit 3.4 filed
with Silgan's Registration Statement on Form S-1, dated May 1, 1989,
Registration Statement No. 33-28409).
4.1 Indenture, dated as of June 29, 1992, between Holdings and The
Connecticut National Bank, as trustee, with respect to the Discount
Debentures (incorporated by reference to Exhibit 1 filed with
Holdings' Current Report on Form 8-K dated July 15, 1992, Commission
File No. 33-47632).
4.2 Indenture dated as of June 29, 1992, between Silgan and Shawmut Bank,
N.A., as Trustee, with respect to the Notes (incorporated by reference
to Exhibit 1 filed with Silgan's Current Report on Form 8-K dated July
15, 1992, Commission File No. 33-46499).
4.3 Secured Notes Purchase Agreement dated as of June 29, 1992, between
Silgan and Morgan Stanley (incorporated by reference to Exhibit 2
filed with Silgan's Current Report on form 8-K dated July 15, 1992,
Commission File No. 33-46499).
4.4 Form of Holdings' 13-1/4% Senior Discount Debentures Due 2002
(incorporated by reference to Exhibit 4.4 filed with Holdings' Annual
Report on Form 10-K for the year ended December 31, 1992, Commission
File No. 33-28409).
4.5 Form of Silgan's 11-3/4% Senior Subordinated Notes due 2002
(incorporated by reference to Exhibit 4.5 filed with Holdings' Annual
Report on Form 10-K for the year ended December 31, 1992, Commission
File No. 33-28409).
10.1 Agreement for Purchase and Sale of Assets, dated as of June 18, 1987,
between Carnation Company and Canaco Corporation (Containers)
(incorporated by reference to Exhibit 2(i) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719).
10.2 First Amendment to Agreement for Purchase and Sale of Assets, dated as
of July 15, 1987, between Carnation Company and Canaco Corporation
(Containers) (incorporated by reference to Exhibit 2(ii) filed with
Silgan's Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719).
10.3 Second Amendment to Agreement for Purchase and Sale of Assets, dated
as of August 31, 1987, between Carnation Company and Canaco
Corporation (Containers) (incorporated by reference to
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Exhibit
Number Description
------- -----------
Exhibit 2(iii) filed with Silgan's Registration Statement on Form S-1,
dated January 11, 1988, Registration Statement No. 33-18719).
10.4 Asset Purchase Agreement, dated as of July 29, 1987, between Plastics
Corporation (Plastics) and Monsanto Company (incorporated by reference
to Exhibit 2(iv) filed with Silgan's Registration Statement on Form
S-1, dated January 11, 1988, Registration Statement No. 33-18719).
10.5 First Amendment to the Asset Purchase Agreement, dated as of July 29,
1987, between Plastics Corporation (Plastics) and Monsanto Company
(incorporated by reference to Exhibit 2(v) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33- 18719).
10.6 Agreement for Purchase and Sale of Assets, dated as of September 27,
1988, between Carnation Company and Containers (incorporated by
reference to Exhibit 1 filed with Silgan's Current Report on Form 8-K,
dated October 17, 1988).
10.7 Agreement for Purchase and Sale of Cartons, effective October 1, 1988,
between Containers and Carnation Company (incorporated by reference to
Exhibit 2 filed with Silgan's Current Report on Form 8-K, dated
October 17, 1988).
10.8 Agreement for Sale and Purchase of Containers, dated as of December 3,
1988, between Containers and Dial (incorporated by reference to
Exhibit 2 filed with Silgan's Current Report on Form 8-K, dated
December 19, 1988).
10.9 Asset Purchase Agreement, dated as of November 7, 1988, between
Containers and Dial (incorporated by reference to Exhibit 1 filed with
Silgan's Current Report on Form 8-K, dated December 19, 1988).
10.10 Amended and Restated Stock Purchase Agreement, dated as of January 1,
1989, among Aim, certain shareholders of Aim, and Silgan (incorporated
by reference to Exhibit 1 filed with Silgan's Current Report on Form
8-K, dated March 15, 1989).
10.11 Assignment and Assumption, dated as of March 1, 1989, between Silgan
and InnoPak Plastics Corporation (Plastics) (incorporated by reference
to Exhibit 2 filed with Silgan's Current Report on Form 8-K, dated
March 15, 1989).
10.12 Agreement for Purchase and Sale of Assets between Fortune and InnoPak
Plastics Corporation (Plastics) dated as of March 1, 1989
(incorporated by reference to Exhibit 1 filed with Silgan's Current
Report on Form 8-K, dated April 14, 1989).
10.13 Amendment to Agreement for Purchase and Sale of Assets, dated as of
March 30, 1989, between Fortune and InnoPak Plastics Corporation
(Plastics) (incorporated by reference to Exhibit 2 to Silgan's Current
Report on Form 8-K, dated April 14, 1989).
10.14 Assignment and Assumption Agreement, dated as of March 31, 1989,
between InnoPak Plastics Corporation (Plastics) and Fortune
Acquisition Corporation (incorporated by reference to Exhibit 3 to
Silgan's Current Report on Form 8-K, dated April 14, 1989).
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Exhibit
Number Description
------- -----------
10.15 Agreement for Purchase and Sale of Shares between and among InnoPak
Plastics Corporation (Plastics), Gordon Malloch and Jurgen Arnemann
and Express, dated as of March 1, 1989 (incorporated by reference to
Exhibit 5 to Silgan's Current Report on Form 8-K, dated April 14,
1989).
10.16 Amendment to Agreement for Purchase and Sale of Shares, dated as of
March 31, 1989, among InnoPak Plastics Corporation (Plastics),
Express, Gordon Malloch and Jurgen Arnemann (incorporated by reference
to Exhibit 6 to Silgan's Current Report on Form 8-K, dated April 14,
1989).
10.17 Assignment and Assumption Agreement dated as of March 31, 1989,
between InnoPak Plastics Corporation (Plastics) and 827598 Ontario
Inc. (incorporated by reference to Exhibit 7 to Silgan's Current
Report on Form 8-K, dated April 14, 1989).
10.18 Employment Agreement, dated as of September 14, 1987, between James
Beam and Canaco Corporation (Containers) (incorporated by reference to
Exhibit 10(vi) filed with Silgan's Registration Statement on Form S-1,
dated January 11, 1988, Registration Statement No. 33-18719).
10.19 Amended and Restated Employment Agreement, dated as of June 18, 1987,
between Gerald Wojdon and Canaco Corporation (Containers)
(incorporated by reference to Exhibit 10(vii) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719).
10.20 Employment Agreement, dated as of September 1, 1989, between Silgan,
InnoPak Plastics Corporation (Plastics), Russell F. Gervais and Aim
(incorporated by reference to Exhibit 5 filed with Silgan's Report on
Form 8-K, dated March 15, 1989).
10.21 Supply Agreement for Gridley, California effective August 31, 1987
(incorporated by reference to Exhibit 10(ix) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.22 Amendment to Supply Agreement for Gridley, California, dated July 1,
1990 (incorporated by reference to Exhibit 10.27 filed with Silgan's
Registration Statement on Form S-1, dated March 18, 1992, Registration
Statement No. 33-46499) (Portions of this Exhibit are subject to
confidential treatment pursuant to order of the Commission).
10.23 Supply Agreement for Gustine, California effective August 31, 1987
(incorporated by reference to Exhibit 10(x) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.24 Amendment to Supply Agreement for Gustine, California, dated March 1,
1990 (incorporated by reference to Exhibit 10.29 filed with Silgan's
Registration Statement on Form S-1, dated March 18, 1992, Registration
Statement No. 33-46499) (Portions of this Exhibit are subject to
confidential treatment pursuant to order of the Commission).
-49-
<PAGE>
Exhibit
Number Description
------- -----------
10.25 Supply Agreement for Hanford, California effective August 31, 1987
(incorporated by reference to Exhibit 10(xi) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.26 Amendment to Supply Agreement for Hanford, California, dated July 1,
1990 (incorporated by reference to Exhibit 10.31 filed with Silgan's
Registration Statement on Form S-1, dated March 18, 1992, Registration
Statement No. 33-46499) (Portions of this Exhibit are subject to
confidential treatment pursuant to order of the Commission).
10.27 Supply Agreement for Riverbank, California effective August 31, 1987
(incorporated by reference to Exhibit 10(xii) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.28 Supply Agreement for Woodland, California effective August 31, 1987
(incorporated by reference to Exhibit 10(xiii) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.29 Amendment to Supply Agreement for Woodland, California, dated July 1,
1990 (incorporated by reference to Exhibit 10.34 filed with Silgan's
Registration Statement on Form S-1, dated March 18, 1992, Registration
Statement No. 33-46499) (Portions of this Exhibit are subject to
confidential treatment pursuant to order of the Commission).
10.30 Supply Agreement for Morton, Illinois, effective August 31, 1987
(incorporated by reference to Exhibit 10(vii) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.31 Amendment to Supply Agreement for Morton, Illinois, dated July 1, 1990
(incorporated by reference to Exhibit 10.36 filed with Silgan's
Registration Statement on Form S-1, dated March 18, 1992, Registration
Statement No. 33-46499) (Portions of this Exhibit are subject to
confidential treatment pursuant to order of the Commission).
10.32 Supply Agreement for Ft. Dodge, Iowa, effective August 31, 1987
(incorporated by reference to Exhibit 10(xiv) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.33 Amendment to Supply Agreement for Ft. Dodge, Iowa, dated March 1, 1990
(incorporated by reference to Exhibit 10.38 filed with Silgan's
Registration statement on Form S-1, dated March 18, 1992, Registration
Statement No. 33-46499) (Portions of this Exhibit are subject to
confidential treatment pursuant to order of the Commission).
-50-
<PAGE>
Ehibit
Number Description
------ -----------
10.34 Supply Agreement for Maysville, Kentucky, effective August 31, 1987
(incorporated by reference to Exhibit 10(xvi) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.35 Amendment to Supply Agreement for Maysville, Kentucky, dated March 1,
1990 (incorporated by reference to Exhibit 10.40 filed with Silgan's
Registration Statement on Form S-1, dated March 18, 1992, Registration
Statement No. 33-46499) (Portions of this Exhibit are subject to
confidential treatment pursuant to order of the Commission).
10.36 Supply Agreement for St. Joseph, Missouri, effective August 31, 1987
(incorporated by reference to Exhibit 10(xvii) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.37 Amendment to Supply Agreement for St. Joseph, Missouri, dated March 1,
1990 (incorporated by reference to Exhibit 10.42 filed with Silgan's
Registration Statement on Form S-1, dated March 18, 1992, Registration
Statement No. 33-46499) (Portions of this Exhibit are subject to
confidential treatment pursuant to order of the Commission).
10.38 Supply Agreement for Trenton, Missouri, effective August 31, 1987
(incorporated by reference to Exhibit 10(xviii) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.39 Amendment to Supply Agreement for Trenton, Missouri, dated March 1,
1990 (incorporated by reference to Exhibit 10.44 filed with Silgan's
Registration Statement on Form S-1, dated March 18, 1992, Registration
Statement No. 33-46499) (Portions of this Exhibit are subject to
confidential treatment pursuant to order of the Commission).
10.40 Supply Agreement for South Dayton, New York, effective August 31, 1987
(incorporated by reference to Exhibit 10(xix) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.41 Amendment to Supply Agreement for South Dayton, New York, dated March
1, 1990 (incorporated by reference to Exhibit 10.46 filed with
Silgan's Registration Statement on Form S-1, dated March 18, 1992,
Registration Statement No. 33-46499) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.42 Supply Agreement for Statesville, North Carolina, effective August 31,
1987 (incorporated by reference to Exhibit 10(xx) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
-51-
<PAGE>
Exhibit
Number Description
------- -----------
10.43 Supply Agreement for Hillsboro, Oregon, effective August 31, 1987
(incorporated by reference to Exhibit 10(xxi) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.44 Amendment to Supply Agreement for Hillsboro, Oregon, dated March 1,
1990 (incorporated by reference to Exhibit 10.49 filed with Silgan's
Registration Statement on Form S-1, dated March 18, 1992, Registration
Statement No. 33-46499) (Portions of this Exhibit are subject to
confidential treatment pursuant to order of the Commission).
10.45 Supply Agreement for Moses Lake, Washington, effective August 31, 1987
(incorporated by reference to Exhibit 10(xxii) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.46 Amendment to Supply Agreement for Moses Lake, Washington, dated March
1, 1990 (incorporated by reference to Exhibit 10.51 filed with
Silgan's Registration Statement on Form S-1, dated March 18, 1992,
Registration Statement No. 33-46499) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.47 Supply Agreement for Jefferson, Wisconsin, effective August 31, 1987
(incorporated by reference to Exhibit 10(xxiii) filed with Silgan's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.48 Amendment to Supply Agreement for Jefferson, Wisconsin, dated March 1,
1990 (incorporated by reference to Exhibit 10.53 filed with Silgan's
Registration Statement on Form S-1, dated March 18, 1992, Registration
Statement No. 33-46499) (Portions of this Exhibit are subject to
confidential treatment pursuant to order of the Commission).
10.49 Supply Agreement for Seaboard, effective October 1, 1988 (incorporated
by reference to Exhibit 2 filed with Silgan's Current Report on Form
8-K, dated October 17, 1988).
10.50 Supply Agreement for Fort Madison, dated as of December 3, 1988
(incorporated by reference to Exhibit 2 filed with Silgan's Current
Report on Form 8-K, dated December 19, 1988).
10.51 Amendment to Supply Agreements dated November 17, 1989 for Ft. Dodge,
Iowa; Hillsboro, Oregon; Jefferson, Wisconsin; St. Joseph, Missouri;
and Trenton, Missouri (incorporated by reference to Exhibit 10.49
filed with Silgan's Annual Report on Form 10-K for the year ended
December 31, 1989, Commission File No. 33-18719) (Portions of this
Exhibit are subject to confidential treatment pursuant to order of the
Commission).
10.52 Raw Materials Agreement, dated as of November 12, 1986, by and between
Carnation and Alcoa (incorporated by reference to Exhibit 10(xxxix)
filed with Silgan's Registration Statement on Form S-1, dated
September 14, 1988, Registration Statement No. 33-18719).
-52-
<PAGE>
Exhibit
Number Description
------- -----------
10.53 Assignment of Raw Materials Agreement, dated as of August 31, 1987, by
and between Carnation and Alcoa (incorporated by reference to Exhibit
10(xl) filed with Silgan's Post-Effective Amendment No. 4 to its
Registration Statement on Form S-1, dated September 14, 1988,
Registration No. 33-18719).
10.54 Amendment to Raw Materials Agreement, dated February 21, 1990, by and
between Containers and Alcoa (incorporated by reference to Exhibit
10.52 filed with Silgan's Annual Report on Form 10-K for the year
ended December 31, 1989, Commission File No. 33-18719) (Portions of
this Exhibit are subject to confidential treatment pursuant to order
of the Commission).
10.55 InnoPak Plastics Corporation (Plastics) Pension Plan for Salaried
Employees (incorporated by reference to Exhibit 10.32 filed with
Silgan's Annual Report on Form 10-K for the year ended December 31,
1988, Commission File No. 33-18719).
10.56 Containers Pension Plan for Salaried Employees (incorporated by
reference to Exhibit 10.34 filed with Silgan's Annual Report on Form
10-K for the year ended December 31, 1988, Commission File No.
33-18719).
10.57 Non-Competition Agreement, dated as of January 1, 1989, among Silgan,
Aim, and certain shareholders of Aim (incorporated by reference to
Exhibit 4 filed with Silgan's Current Report on Form 8-K, dated March
15, 1989).
10.58 Lease, dated as of August 31, 1987, between Monsanto and InnoPak
Plastics Corporation (Plastics), concerning the land and plant in
Anaheim, California (incorporated by reference to Exhibit 10(xxxi)
filed with Silgan's Post-Effective Amendment No. 4 to its Registration
Statement on Form S-1, dated September 14, 1988, Registration No.
33-18719).
10.59 Express Guaranty dated as of March 31, 1989 (incorporated by reference
to Exhibit 10.66 to Holdings' Registration Statement on Form S-1,
dated May 1, 1989, Registration No. 33-28409).
10.60 Express Security Agreement dated as of March 31, 1989 (incorporated by
reference to Exhibit 10.67 to Holdings' Registration Statement on Form
S-1, dated May 1, 1989, Registration No. 33-28409).
10.61 Canadian Holdco Guaranty dated as of March 31, 1989 (incorporated by
reference to Exhibit 10.68 to Holdings' Registration Statement on Form
S-1, dated May 1, 1989, Registration No. 33-28409).
10.62 Canadian Holdco Pledge Agreement dated as of March 31, 1989
(incorporated by reference to Exhibit 10.69 to Holdings' Registration
Statement on Form S-1, dated May 1, 1989, Registration No. 33- 28409).
10.63 Canadian Acquisition Co. Guaranty dated as of March 31, 1989
(incorporated by reference to Exhibit 10.70 to Holdings' Registration
Statement on Form S-1, dated May 1, 1989, Registration No. 33-28409).
10.64 Canadian Acquisition Co. Pledge Agreement dated as of March 31, 1989
(incorporated by reference to Exhibit 10.71 to Holdings' Registration
Statement on Form S-1, dated May 1, 1989, Registration No. 33-28409).
-53-
<PAGE>
Exhibit
Number Description
------- -----------
10.65 Agreement and Plan of Merger, dated as of April 28, 1989, among
Holdings, Acquisition and Silgan (incorporated by reference to Exhibit
2.6 to Holdings' Registration Statement on Form S-1, dated May 1,
1989, Registration No. 33-28409).
10.66 Lease between Containers and Riverbank Venture dated May 1, 1990
(incorporated by reference to Exhibit 10.99 filed with Silgan's Annual
Report on Form 10-K for the year ended December 31, 1989, Commission
File No. 33-18719).
10.67 Loan Agreement between The Iowa Department of Economic Development,
City of Iowa City and Iowa City Can Manufacturing Company, dated
November 17, 1988 (incorporated by reference to Exhibit 10.100 filed
with Silgan's Annual Report on Form 10-K for the year ended December
31,1989, Commission File No. 33-18719).
10.68 Promissory Note and Promissory Note Agreement dated November 17, 1988
from Iowa City Can Manufacturing Company to the City of Iowa City
(incorporated by reference to Exhibit 10.101 filed with Silgan's
Annual Report on Form 10-K for the year ended December 31, 1989,
Commission File No. 33-18719).
10.69 Mortgage between City of Iowa City, Iowa City Can Manufacturing
Company and Michael Development dated January 5, 1990 (incorporated by
reference to Exhibit 10.102 filed with Silgan's Annual Report on Form
10-K for the year ended December 31, 1989, Commission File No. 33-
18719).
10.70 Containers Master Equipment Lease with Decimus Corporation, dated as
of October 11, 1989 (incorporated by reference to Exhibit 10.103 filed
with Silgan's Annual Report on Form 10-K for the year ended December
31, 1989, Commission File No. 33-18719).
10.71 Underwriting Agreement dated June 22, 1989 between Holdings and Morgan
Stanley (incorporated by reference to Exhibit 1 filed with Amendment
No. 4 to Holdings' Registration Statement on Form S-1, dated June 23,
1989, Registration Statement No. 33-28409).
10.72 Amended and Restated Tax Allocation Agreement by and among Holdings,
Silgan, Containers, InnoPak Plastics Corporation (Plastics), Aim,
Fortune, SPHI and Silgan PET dated as of July 13, 1990 (incorporated
by reference to Exhibit 10.107 filed with Post-Effective Amendment No.
6 to Silgan's Registration Statement on Form S-1, dated August 20,
1990, Registration Statement No. 33-18719).
10.73 Sublease Agreement between Amoco and PET Acquisition Corp. (Silgan
PET) dated July 24, 1989 (incorporated by reference to Exhibit 10.111
filed with Post-Effective Amendment No. 6 to Silgan's Registration
Statement on Form S-1, dated August 20, 1990, Registration Statement
No. 33-18719).
10.74 Lease Agreement between the Trustees of Cabot 95 Trust and Amoco
Plastic Products Company dated August 16, 1978 (incorporated by
reference to Exhibit 10.112 filed with Post-Effective Amendment No. 6
to Silgan's Registration Statement on Form S-1, dated August 20, 1990,
Registration Statement No. 33-18719).
-54-
<PAGE>
Exhibit
Number Description
------- -----------
10.75 Contribution Agreement by and among Messrs. Silver, Horrigan, Rankin
and Rodriguez, MSLEF II and BTNY dated as of July 13, 1990
(incorporated by reference to Exhibit 2 filed with Silgan's Current
Report on Form 8-K, dated July 1990).
10.76 Asset Purchase Agreement, dated as of November 1, 1991 by and among
Silgan PET, Holdings and Sewell Plastics Inc. (incorporated by
reference to Exhibit 1 filed with Silgan's Current Report on Form 8-K,
dated December 2, 1991).
10.77 Inventory and Equipment Purchase Agreement, dated as of November 1,
1991 by and among Silgan PET, Holdings and Sewell Plastics, Inc.
(incorporated by reference to Exhibit 2 filed with Silgan's Current
Report on Form 8-K, dated December 2, 1991).
10.78 Letter Agreement, dated November 15, 1991, amending the Asset Purchase
Agreement dated as of November 1, 1991 by and among Silgan PET,
Holdings and Sewell Plastics, Inc. (incorporated by reference to
Exhibit 3 to Silgan's Current Report on Form 8-K, dated December 2,
1991).
10.79 Letter Agreement, dated November 15, 1991, amending the Inventory and
Equipment Purchase Agreement dated as of November 1, 1991 by and among
Silgan PET, Holdings and Sewell Plastics, Inc. (incorporated by
reference to Exhibit 4 filed with Silgan's Current Report on Form 8-K,
dated December 2, 1991).
10.80 Letter Agreement, dated November 31, 1991, amending the Inventory and
Equipment Purchase Agreement dated as of November 1, 1991 by and among
Silgan PET, Holdings and Sewell Plastics, Inc. (incorporated by
reference to Exhibit 5 filed with Silgan's Current Report on Form 8-K,
dated December 2, 1991).
10.81 Containers Deferred Incentive Savings Plan (incorporated by reference
to Exhibit 10.144 filed with Silgan's Registration Statement on Form
S-1, dated March 18, 1992, Registration Statement No. 33-46499).
10.82 Amended and Restated Pledge Agreement dated as of June 18, 1992, made
by Silgan (incorporated by reference to Exhibit 5 filed with Silgan's
Current Report on Form 8-K dated July 15, 1992, Commission File No.
33-46499).
10.83 Amended and Restated Pledge Agreement dated as of June 18, 1992, made
by Containers and Plastics (incorporated by reference to Exhibit 6
filed with Silgan's Current Report on Form 8-K dated July 15, 1992,
Commission File No. 33-46499).
10.84 Amended and Restated Pledge Agreement dated as of June 18, 1992, made
by Holdings (incorporated by reference to Exhibit 7 filed with
Silgan's Current Report on Form 8-K dated July 15, 1992, Commission
File No. 33-46499).
10.85 Amended and Restated Security Agreement dated as of June 18, 1992,
among Plastics, Containers and Bankers Trust (incorporated by
reference to Exhibit 8 filed with Silgan's Current Report on Form 8-K
dated July 15, 1992, Commission File No. 33-46499).
-55-
<PAGE>
Exhibit
Number Description
------- -----------
10.86 Subsidiaries Guarantee, dated as of June 29, 1992, of Containers and
Plastics (incorporated by reference to Exhibit 11 filed with Silgan's
Current Report on Form 8-K dated July 15, 1992, Commission File No.
33-46499).
10.87 Underwriting Agreement, dated June 22, 1992, between Holdings and
Morgan Stanley with respect to the Discount Debentures (incorporated
by reference to Exhibit 2 filed with Holdings' Current Report on Form
8-K dated July 15, 1992, Commission File No. 33-47632).
10.88 Underwriting Agreement, dated June 22, 1992, between Silgan and Morgan
Stanley with respect to the 11-3/4% Notes (incorporated by reference
to Exhibit 3 filed with Silgan's Current Report on Form 8-K dated July
15, 1992, Commission File No. 33-46499).
10.89 Silgan Containers Corporation Second Amended and Restated 1989 Stock
Option Plan (incorporated by reference to Exhibit 10.100 filed with
Post-Effective Amendment No. 2 to the Company's Registration Statement
on Form S-1, dated May 11, 1994, Commission File No. 33-46499).
10.90 Form of Containers Nonstatutory Restricted Stock Option and Stock
Appreciation Right Agreement (incorporated by reference to Exhibit
10.120 filed with Holdings' Annual Report on Form 10-K for the year
ended December 31, 1992, Commission File No. 33-28409).
10.91 Silgan Plastics Corporation 1994 Stock Option Plan (incorporated by
reference to Exhibit 10.102 filed with Post-Effective Amendment No. 2
to the Company's Registration Statement on Form S-1, dated May 11,
1994, Commission File No. 33-46499).
10.92 Form of Plastics Nonstatutory Restricted Stock Option and Stock
Appreciation Right Agreement (incorporated by reference to Exhibit
10.103 filed with Post-Effective Amendment No. 2 to the Company's
Registration Statement on Form S-1, dated May 11, 1994, Commission
File No. 33-46499).
10.93 Silgan Holdings Inc. Second Amended and Restated 1989 Stock Option
Plan (incorporated by reference to Exhibit 10.104 filed with
Post-Effective Amendment No. 2 to the Company's Registration Statement
on Form S-1, dated May 11, 1994, Commission File No. 33-46499).
10.94 Form of Holdings Nonstatutory Restricted Stock Option and Stock
Appreciation Right Agreement (incorporated by reference to Exhibit
10.124 filed with Holdings' Annual Report on Form 10-K for the year
ended December 31, 1992, Commission File No. 33-28409).
10.95 Purchase Agreement, dated as of September 3, 1993, between Containers
and Del Monte (incorporated by reference to Exhibit 1 filed with
Holdings' Current Report on Form 8-K, dated January 5, 1994,
Commission File No. 33-28409).
10.96 Amendment to Purchase Agreement, dated as of December 10, 1993,
between Containers and Del Monte (incorporated by reference to Exhibit
2 filed with Holdings' Current Report on Form 8-K, dated January 5,
1994, Commission File No. 33-28409).
-56-
<PAGE>
Exhibit
Number Description
------- -----------
10.97 Amended and Restated Organization Agreement, dated as of December 21,
1993, among R. Philip Silver, D. Greg Horrigan, MSLEF II, BTNY, First
Plaza and Holdings (incorporated by reference to Exhibit 2 filed with
Holdings' Current Report on Form 8-K, dated March 25, 1994, Commission
File No. 33-28409).
10.98 Stockholders Agreement, dated as of December 21, 1993, among R. Philip
Silver, D. Greg Horrigan, MSLEF II, BTNY, First Plaza and Holdings
(incorporated by reference to Exhibit 3 filed with Holdings' Current
Report on Form 8-K, dated March 25, 1994, Commission File No.
33-28409).
10.99 Amended and Restated Management Services Agreement, dated as of
December 21, 1993, between S&H and Holdings (incorporated by reference
to Exhibit 4 filed with Holdings' Current Report on Form 8-K, dated
March 25, 1994, Commission File No. 33-28409).
10.100 Amended and Restated Management Services Agreement, dated as of
December 21, 1993, between S&H and Silgan (incorporated by reference
to Exhibit 5 filed with Holdings' Current Report on Form 8-K, dated
March 25, 1994, Commission File No. 33-28409).
10.101 Amended and Restated Management Services Agreement, dated as of
December 21, 1993, between S&H and Containers (incorporated by
reference to Exhibit 6 filed with Holdings' Current Report on Form
8-K, dated March 25, 1994, Commission File No. 33-28409).
10.102 Amended and Restated Management Services Agreement, dated as of
December 21, 1993, between S&H and Plastics (incorporated by reference
to Exhibit 7 filed with Holdings' Current Report on Form 8-K, dated
March 25, 1994, Commission File No. 33-28409).
10.103 Stock Purchase Agreement, dated as of December 21, 1993, between
Holdings and First Plaza (incorporated by reference to Exhibit 8 filed
with Holdings' Current Report on Form 8-K, dated March 25, 1994,
Commission File No. 33-28409).
10.104 Credit Agreement, dated as of December 21, 1993, among Silgan,
Containers, Plastics, the lenders from time to time party thereto,
Bank of America, as co-agent, and Bankers Trust, as agent
(incorporated by reference to Exhibit 9 filed with Holdings' Current
Report on Form 8-K, dated March 25, 1994, Commission File No.
33-28409).
10.105 Amended and Restated Holdings Guaranty, dated as of December 21, 1993,
made by Holdings (incorporated by reference to Exhibit 10 filed with
Holdings' Current Report on Form 8-K, dated March 25, 1994, Commission
File No. 33-28409).
10.106 Amended and Restated Borrowers Guaranty, dated as of December 21,
1993, made by Silgan, Containers, Plastics and California-Washington
Can Corporation (incorporated by reference to Exhibit 11 filed with
Holdings' Current Report on Form 8-K, dated March 25, 1994, Commission
File No. 33-28409).
10.107 Supply Agreement, dated as of September 3, 1993, between Containers
and Del Monte (incorporated by reference to Exhibit 10.118 filed with
Silgan's Annual Report on Form 10-K for the year ended
-57-
<PAGE>
December 31, 1993, Commission File No. 1-11200). (Portions of this
Exhibit are subject to an application for confidential treatment filed
with the Commission.)
10.108 Amendment to Supply Agreement, dated as of December 21, 1993, between
Containers and Del Monte (incorporated by reference to Exhibit 10.119
filed with Silgan's Annual Report on Form 10-K for the year ended
December 31, 1993, Commission File No. 1-11200). (Portions of this
Exhibit are subject to an application for confidential treatment filed
with the Commission.)
21 Subsidiaries of the Registrant (incorporated by reference to Exhibit
22 filed with Holdings' Annual Report on Form 10-K for the year ended
December 31, 1993, Commission File No. 1-11200).
*27 Financial Data Schedule.
(b) Reports on Form 8-K:
None.
--------------------
*Filed herewith
-58-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
SILGAN HOLDINGS INC.
Date: March 30, 1995 By /s/ R. Philip Silver
---------------------
R. Philip Silver
Chairman of the Board and
Co-Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
Chairman of the Board and
Co-Chief Executive Officer
/s/ R. Philip Silver (Principal Executive Officer) March 30, 1995
-------------------------
(R. Philip Silver)
/s/ D. Greg Horrigan President, Co-Chief Executive March 30, 1995
------------------------- Officer and Director
(D. Greg Horrigan)
-59-
<PAGE>
Signature Title Date
--------- ----- ----
Vice President, Assistant
/s/ James S. Hoch Secretary and Director March 30, 1995
------------------------
(James S. Hoch)
Vice President, Assistant
/s/ Robert H. Niehaus Secretary and Director March 30, 1995
------------------------
(Robert H. Niehaus)
Executive Vice President, Chief
Financial Officer and Treasurer
/s/ Harley Rankin, Jr. (Principal Financial Officer) March 30, 1995
------------------------
(Harley Rankin, Jr.)
Vice President, Controller and
Assistant Treasurer
/s/ Harold J. Rodriguez, Jr. (Principal Accounting Officer) March 30, 1995
----------------------------
(Harold J. Rodriguez, Jr.)
-60-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Silgan Holdings Inc.
We have audited the accompanying consolidated balance sheets of Silgan
Holdings Inc. as of December 31, 1994 and 1993, and the related
consolidated statements of operations, deficiency in stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1994. Our audits also included the financial statement schedules listed in
the index at Item 14(a). These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Silgan Holdings Inc. at December 31, 1994 and 1993, and the
consolidated 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. Also, in our opinion, the
related financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
As discussed in Notes 2 and 6 to the consolidated financial statements,
in 1993 the Company changed its method of accounting for income taxes,
postemployment benefits and postretirement benefits other than pensions.
Ernst & Young LLP
Stamford, CT
March 17, 1995
F-1<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
(Dollars in thousands)
ASSETS 1994 1993
Current assets:
Cash and cash equivalents $ 2,682 $ 224
Accounts receivable, less allowances for
doubtful accounts of $1,557 and $1,084 for
1994 and 1993, respectively 65,229 44,409
Inventories 122,429 108,653
Prepaid expenses and other current assets 8,044 3,676
Total current assets 198,384 156,962
Property, plant and equipment, at cost:
Land 3,707 4,469
Buildings and improvements 51,665 56,087
Machinery and equipment 346,061 352,409
Construction in progress 18,124 19,894
419,557 432,859
Less accumulated depreciation and amortization (167,747) (142,464)
Net property, plant and equipment 251,810 290,395
Goodwill, net of amortization 30,009 24,175
Other assets 24,618 26,101
$504,821 $497,633
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 36,845 $ 31,913
Accrued payroll and related costs 26,019 20,523
Accrued interest payable 1,713 783
Accrued expenses and other current liabilities 22,505 21,385
Bank working capital loans 12,600 2,200
Current portion of long-term debt 21,968 20,000
Total current liabilities 121,650 96,804
Long-term debt 510,763 505,718
Deferred income taxes 6,836 6,836
Other long-term liabilities 23,570 33,242
Deficiency in stockholders' equity:
Common stock ($0.01 par value per share;
2,167,500 shares authorized, 1,135,000
shares issued and outstanding) 12 12
Additional paid-in capital 33,606 33,606
Accumulated deficit (191,616) (178,585)
Total deficiency in stockholders' equity (157,998) (144,967)
$504,821 $497,633
See accompanying notes.
F-2<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
1994 1993 1992
Net sales $861,374 $645,468 $630,039
Cost of goods sold 747,457 571,174 554,972
Gross profit 113,917 74,294 75,067
Selling, general and
administrative expenses 38,830 32,495 32,809
Reduction in carrying value of assets 16,729 - -
Income from operations 58,358 41,799 42,258
Interest expense and other
related financing costs 65,789 54,265 57,091
Minority interest expense - - 2,745
Loss before income taxes (7,431) (12,466) (17,578)
Income tax provision 5,600 1,900 2,200
Loss before extraordinary
charges and cumulative effects of
changes in accounting principles (13,031) (14,366) (19,778)
Extraordinary charges relating to early
extinguishment of debt - (1,341) (23,597)
Cumulative effect of changes in accounting
principles - (6,276) -
Net loss $(13,031) $(21,983) $(43,375)
See accompanying notes.
F-3<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
Total
Additional deficiency in
Common paid-in Accumulated stockholders'
stock capital deficit equity
Balance at December 31, 1991 $ 9 $18,609 $(113,227) $ (94,609)
Net loss - - (43,375) (43,375)
Balance at December 31, 1992 9 18,609 (156,602) (137,984)
Issuance of 250,000 shares of
Class B Common Stock 3 14,997 - 15,000
Net loss - - (21,983) (21,983)
Balance at December 31, 1993 12 33,606 (178,585) (144,967)
Net loss - - (13,031) (13,031)
Balance at December 31, 1994 $ 12 $33,606 $(191,616) $(157,998)
See accompanying notes.
F-4<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
1994 1993 1992
Cash flows from operating activities:
Net loss $(13,031)$ (21,983) $(43,375)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation 35,392 31,607 29,538
Amortization 7,075 5,488 5,097
Accretion of discount on discount
debentures 27,477 24,167 11,116
Minority interest expense - - 2,745
Reduction in carrying value of assets 16,729 - -
Other items 792 342 1,215
Extraordinary charges relating
to early extinguishment of debt - 1,341 23,597
Cumulative effect of changes in
accounting principles - 6,276 -
Changes in assets and liabilities,
net of effect of acquisitions:
(Increase) decrease in accounts
receivable (21,293) 707 (8,705)
(Increase) decrease in inventories (16,741) (4,316) 5,541
Increase (decrease) in trade
accounts payable 4,478 3,757 (4,330)
Other, net 6,455 749 (6,999)
Total adjustments 60,364 70,118 58,815
Net cash provided by operating
activities 47,333 48,135 15,440
Cash flows from investing activities:
Acquisition of Del Monte Can
Manufacturing Assets 519 (73,865) -
Capital expenditures (29,184) (42,480) (23,447)
Proceeds from sale of assets 765 262 429
Net cash used in investing activities (27,900) (116,083) (23,018)
Continued on following page.
F-5<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
1994 1993 1992
Cash flows from financing activities:
Borrowings under working capital loans $393,250 $328,050 $316,050
Repayments under working capital loans (382,850) (366,250) (296,850)
Proceeds from issuance of long-term debt - 140,000 350,435
Proceeds from issuance of common stock - 15,000 -
Reduction of long-term debt (20,464) (42,580) (300,365)
Premium paid on early retirement of debt - - (10,678)
Redemption of Silgan preferred stock - - (31,508)
Cash dividends paid on preferred stock - - (1,137)
Payments to former shareholders of Silgan (6,911) - -
Debt financing costs - (8,935) (17,300)
Net cash provided (used) by financing
activities (16,975) 65,285 8,647
Net increase (decrease) in cash and
cash equivalents 2,458 (2,663) 1,069
Cash and cash equivalents at
beginning of year 224 2,887 1,818
Cash and cash equivalents at
end of year $ 2,682 $ 224 $ 2,887
Supplementary data:
Interest paid $ 30,718 $ 25,733 $ 46,757
Income taxes paid, net of refunds 2,588 722 1,206
See accompanying notes.
F-6<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
1. Basis of Presentation
Silgan Holdings Inc. ("Holdings", together with its wholly-owned
subsidiary, "the Company"), a company controlled by Silgan management and
The Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF II"), an
affiliate of Morgan Stanley & Co. Incorporated ("MS & Co."), own all the
outstanding common stock of Silgan Corporation ("Silgan"). Silgan has two
operating subsidiaries, Silgan Containers Corporation ("Containers") and
Silgan Plastics Corporation ("Plastics").
The Company, a North American packaging manufacturer, is engaged in the
manufacture and sale of steel, aluminum and paperboard containers, mainly
to processors and packagers of food products, and the design, manufacture
and sale of various plastic containers, mainly for health, personal care,
food, beverage, pharmaceutical and household chemical products.
2. Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. All significant
intercompany transactions have been eliminated. Assets and liabilities of
the Company's foreign subsidiary are translated at rates of exchange in
effect at the balance sheet date. Income amounts are translated at the
average of monthly exchange rates.
Cash and cash equivalents
Cash equivalents represent investments with maturities of three months or
less from the time of purchase and are carried at cost which approximates
fair value due to the short maturities of those instruments.
Accounts Receivable
Accounts receivable consist primarily of amounts due from domestic
companies. Credit is extended based on an evaluation of the customer's
financial condition and collateral is not generally required. The Company
maintains an allowance for doubtful accounts at a level which management
believes is sufficient to cover potential credit losses.
F-7<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
2. Summary of Significant Accounting Policies (continued)
Inventories
Inventories are stated at the lower of cost or market (net realizable
value) and are principally accounted for by the last-in, first-out method
(LIFO). The components of inventories at December 31, 1994 and 1993
consist of the following (in thousands):
1994 1993
Raw materials and supplies $ 40,196 $ 26,458
Work-in-process 19,045 17,105
Finished goods 63,409 65,072
122,650 108,635
Adjustment to value inventory
at cost on the LIFO method (221) 18
$122,429 $108,653
The amount of inventory recorded on the first-in first-out method at
December 31, 1994 and 1993 was $6.5 million and $7.4 million, respectively.
Property, plant and equipment
Property, plant and equipment are recorded at historical cost and are
depreciated on the straight-line method over their estimated useful lives.
Major renewals and betterments are capitalized and maintenance and repair
expenditures are charged to expense as incurred. The total amount of
repairs and maintenance expense was $19.9 million in 1994; $17.1 million in
1993; and $15.0 million in 1992.
The principal estimated useful lives are 35 years for buildings and range
between 3 to 18 years for machinery and equipment. Effective October 1,
1994, the Company extended the estimated useful lives of certain fixed
assets to more properly reflect the true economic lives of the assets and
to better align the Company's depreciable lives with the predominate
practice in industry. The change had the effect of decreasing depreciation
expense and increasing net income for the fourth quarter and the year by
approximately $1.3 million.
F-8<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
2. Summary of Significant Accounting Policies (continued)
Property, plant and equipment (continued)
Based upon a review of its depreciable assets, the Company determined, in
the fourth quarter of 1994, that certain adjustments were necessary to
properly reflect net realizable values. These adjustments include $2.6
million to write-down the excess carrying value over estimated realizable
value of various plant facilities held for sale and $14.1 million to reduce
the carrying value of certain technologically obsolete and inoperable
equipment.
Goodwill
The Company has classified as goodwill the cost in excess of fair value of
net assets acquired in purchase transactions. Goodwill is being amortized
on a straight-line basis over periods ranging between 20 and 40 years. The
Company periodically evaluates the existence of goodwill impairment to
assess whether goodwill is fully recoverable from projected, undiscounted
net cash flows of the related business unit. Impairments would be
recognized in operating results if a permanent diminution in value were to
occur. Goodwill amortization charged to operations was $1.2 million in
1994; $0.5 million in 1993; and $0.5 million in 1992. Accumulated
amortization of goodwill at December 31, 1994 and 1993 was $3.7 million and
$2.5 million, respectively.
Other Assets
Other assets consist principally of debt issuance costs which are being
amortized straight-line over the terms of the related debt agreements (3 to
10 years). The charge incurred for amortization of debt issuance cost was
$5.3 million in 1994; $3.3 million in 1993; and $2.9 million in 1992.
Other intangible assets are amortized over their expected useful lives
using the straight-line method.
Other assets at December 31, 1994 and 1993 consist of the following (in
thousands):
1994 1993
Debt issuance costs $25,142 $25,213
Other 8,275 3,789
33,417 29,002
Less: accumulated amortization (8,799) (2,901)
$24,618 $26,101
F-9<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
2. Summary of Significant Accounting Policies (continued)
Revenue Recognition
The Company recognizes revenue from product sales upon shipment to the
customer. As is common in the packaging industry, the Company must
manufacture containers for its seasonal pack customers throughout the year.
Revenue is recognized for such customers at the time insurable risk has
passed to the customer.
Income Taxes
Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting
for Income Taxes". Under SFAS No. 109, the liability method is used to
calculate deferred income taxes. The provision for income taxes includes
federal, state and foreign income taxes currently payable and those
deferred because of temporary differences between the financial statement
and tax bases of assets and liabilities. The Company had previously
reported under SFAS No. 96, "Accounting for Income Taxes". There was no
effect for the difference in methods at the date of adoption. See Note 7 -
Income Taxes.
Postemployment Benefits
During 1993, the Company adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits". The cumulative effect as of January 1, 1993 of
this accounting change was to decrease net income by $1.3 million. There
was no tax effect of the charge due to the net operating loss position of
the Company.
Fair Values of Financial Instruments
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.
F-10<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
2. Summary of Significant Accounting Policies (continued)
Fair Values of Financial Instruments (continued)
Short and long-term debt: The carrying amounts of the Company's borrowings
under its working capital loans and variable-rate borrowings approximate
their fair value. The fair values of fixed-rate borrowings are based on
quoted market prices.
Letters of Credit: Fair values of the Company's outstanding letters of
credit are based on current contractual amounts outstanding.
Derivatives
The Company has limited involvement with derivative financial instruments
and does not use them for trading purposes. On occasion, the Company has
used interest rate hedge agreements to reduce the impact of increases in
interest rates on floating-rate long-term debt. During 1994 and 1993, the
Company was not party to any interest rate hedge agreements. In addition,
during 1994 and 1993, the Company did not use derivative instruments to
hedge its commodity and foreign exchange risks.
3. Acquisitions
On December 21, 1993, Containers acquired from Del Monte Corporation ("Del
Monte") substantially all of the fixed assets and certain working capital
of Del Monte's container manufacturing business in the United States ("DM
Can"). The final purchase price for the assets acquired and the assumption
of certain specified liabilities, including related transaction costs, was
$73.3 million. The acquisition was accounted for as a purchase transaction
and the results of operations have been included with the Company's results
from the acquisition date. During 1994, the Company finalized its purchase
price accounting, adjusting the fair value of assets acquired and
liabilities assumed to the amounts determined based upon final appraisals
and valuations. The excess of the purchase price over the fair value of
net assets acquired was allocated to goodwill. The aggregate purchase cost
and its allocation to the assets and liabilities is as follows (in
thousands):
Net working capital acquired $21,944
Property, plant and equipment 47,167
Goodwill 13,729
Other liabilities assumed (9,494)
$73,346
F-11<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
3. Acquisitions (continued)
Set forth below is the Company's summary unaudited pro forma results of
operations for the years ended December 31, 1993 and 1992. The unaudited
pro forma results of operations include the combined historical results of
DM Can and the Company after giving effect to certain pro forma
adjustments.
The pro forma adjustments to the historical results of operations reflect
the sales prices set forth in the supply agreement with Del Monte, the
effect of purchase accounting adjustments based upon appraisals and
valuations, the financing of the acquisition and certain other adjustments
as if these events had occurred as of the beginning of the periods
mentioned therein. The following unaudited pro forma results of operations
do not purport to represent what the Company's results of operations would
actually have been had the transactions in fact occurred on the dates
indicated, or to project the Company's results for any future period (in
thousands):
1993 1992
Net sales $818,614 $819,579
Income from operations 50,669 56,747
Loss before income taxes (8,134) (8,102)
Loss before extraordinary charges
and cumulative effect of accounting changes (10,380) (11,060)
Net loss (17,997) (34,657)
4. Short-Term Borrowings and Long-Term Debt
1994 1993
(in thousands)
Short-term borrowings are as follows:
Bank Working Capital Loans $ 12,600 $ 2,200
Long-term debt consists of the following:
Bank A Term Loans $ 39,845 $ 60,000
Bank B Term Loans 79,691 80,000
Senior Secured Floating Rate Notes due
June 30, 1997 50,000 50,000
11 3/4% Senior Subordinated Notes due
June 15, 2002 135,000 135,000
13 1/4% Senior Discount Debentures due
December 15, 2002 228,195 200,718
532,731 525,718
Less: Amounts due within one year 21,968 20,000
$510,763 $505,718
F-12<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
4. Short-Term Borrowings and Long-Term Debt (continued)
The aggregate annual maturities of long-term debt at December 31, 1994 are
as follows (in thousands):
1995 $ 21,968
1996 97,568
1997 50,000
1998 -
1999 -
2000 and thereafter 363,195
$532,731
Bank Credit Agreement
On December 21, 1993, the Company, Containers and Plastics (the
"Borrowers") entered into a new credit agreement (the "Credit Agreement"),
with a group of banks to refinance in full amounts owing under the former
bank credit facility, which included $41.6 million of term loans, and to
finance, in part, the acquisition of DM Can. As a result of the early
extinguishment of debt, the Company incurred a charge of $1.3 million.
Pursuant to the Credit Agreement, the Company borrowed $60.0 million of A
Term Loans and $80.0 million of B Term Loans. The A Term Loans are payable
each year in scheduled installments with the final payment due September
15, 1996. The B Term Loans are payable in full on September 15, 1996.
Additionally, further repayments are required at the time of certain asset
sales or the issuance of equity. During 1994, in addition to the $20.0
million mandatory payment, a repayment of $0.5 million was made upon the
sale of certain assets.
The Credit Agreement also provides Containers and Plastics, together, with
a revolving credit facility of $70.0 million for working capital needs (the
"Working Capital Loans"). The aggregate amount of Working Capital Loans
which may be outstanding at anytime is limited to 85% of Containers' and
Plastics' eligible accounts receivable and 50% of Containers' and Plastics'
eligible inventory. In lieu of Working Capital Loans, Containers and
Plastics may request the issuance of up to $15.0 million of letters of
credit. At December 31, 1994, commitments under the revolving credit
facility of $51.9 million were available after taking into account
outstanding letters of credit of $5.5 million. The Working Capital Loans
can be borrowed, repaid and reborrowed from time-to-time until final
maturity on September 15, 1996.
F-13<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
4. Short-Term Borrowings and Long-Term Debt (continued)
Bank Credit Agreement (continued)
The borrowings under the Credit Agreement may be designated by the
respective Borrowers as Base Rate or Eurodollar Rate borrowings. The Base
Rate is the highest of (i) 1/2 of 1% in excess of Adjusted Certificate of
Deposit Rate, (ii) 1/2 of 1% in excess of the Federal Funds Rate or (iii)
Bankers Trust Company's prime lending rate. Base Rate borrowings bear
interest at the Base Rate plus 1.75%, in the case of A Term Loans; 2.0%, in
the case of Working Capital Loans; and 2.25%, in the case of B Term Loans.
Eurodollar Rate borrowings bear interest at the Eurodollar Rate plus 2.75%
in the case of A Term Loans; 3.0%, in the case of Working Capital Loans;
and 3.25%, in the case of B Term Loans. At December 31, 1994 the interest
rate for Base Rate borrowings ranged between 10 1/4% and 10 1/2% and for
Eurodollar Rate borrowings ranged between 8 5/8% and 10%.
For 1994, 1993 and 1992, respectively, the average amount of borrowings
under the Working Capital Loans was $14.4 million, $51.9 million and $44.5
million; the average annual interest rate paid on borrowings was 8.4%, 6.0%
and 6.3%; and the highest amount of such borrowings at any month-end was
$43.9 million, $80.3 million and $80.8 million.
The Credit Agreement provides for the payment of a commitment fee of 0.5%
per annum on the daily average unused portion of commitments available
under the Working Capital Loans as well as a 3 1/4% per annum fee on
outstanding Letters of Credit.
The indebtedness under the Credit Agreement is guaranteed by Holdings and
each of the Borrowers and secured by a security interest in substantially
all of the respective real and personal property of the Borrowers. Such
security interest also secures on an equal and ratable basis, subject to
certain intercreditor arrangements, the Senior Secured Notes.
Additionally, the stock of Silgan and the stock of principally all of its
subsidiaries have been pledged to the lenders under the Credit Agreement.
The Credit Agreement contains various covenants which limit or restrict,
among other things, indebtedness, liens, dividends, leases, capital
expenditures, and the use of proceeds from asset sales, as well as
requiring the Company to meet certain specified financial covenants. The
Company is currently in compliance with all covenants under the Credit
Agreement.
F-14<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
4. Short-Term Borrowings and Long-Term Debt (continued)
Senior Secured Floating Rate Notes
The Senior Secured Notes (the "Secured Notes") constitute senior
indebtedness of the Company and are secured by a first lien on
substantially all of the assets of the Company. Such collateral also
secures on an equal and ratable basis, subject to certain intercreditor
arrangements, all indebtedness of the Company under the Credit Agreement.
The Secured Notes mature on June 30, 1997 and bear interest, which is
payable quarterly, at a rate of three-month LIBOR plus 3%. The interest
rate is adjusted quarterly. The interest rate in effect at December 31,
1994 was 9.44%.
The Secured Notes are redeemable at the option of the Company at par plus
accrued and unpaid interest to the redemption date. Net cash proceeds from
certain asset sales and the issuance of capital stock by the Company are
required to be applied to prepay the Secured Notes and indebtedness under
the Credit Agreement on a pro rata basis, subject to certain exceptions.
The Secured Notes contain covenants which are comparable to or less
restrictive than those under the Credit Agreement.
11 3/4% Senior Subordinated Notes
The 11 3/4% Senior Subordinated Notes (the "11 3/4% Notes") which mature on
June 15, 2002, represent unsecured general obligations of Silgan,
subordinate in right of payment to obligations of the Company under the
Credit Agreement and the Secured Notes and effectively subordinate to all
of the obligations of the subsidiaries of the Company. Interest is payable
semi-annually on June 15 and December 15.
The 11 3/4% Notes are redeemable at the option of the Company, in whole or
in part, at any time during the twelve months commencing June 15 of the
following years at the indicated percentages of their principal amount,
plus accrued interest:
Redemption
Year Percentage
1997 105.8750%
1998 102.9375%
1999 and thereafter 100.0000%
The 11 3/4% Notes Indenture contains covenants which are comparable to or
less restrictive than those under the Credit Agreement and the Secured
Notes.
The estimated fair value of the 11 3/4% Notes at December 31, 1994, based
upon quoted market prices, was $140.4 million.
F-15<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
4. Short-Term Borrowings and Long-Term Debt (continued)
13 1/4% Senior Discount Debentures
The 13 1/4% Senior Discount Debentures (the "Discount Debentures"), which
are due on December 15, 2002, represent unsecured general obligations of
Holdings, subordinate in right of payment to the obligations of Silgan and
its subsidiaries. The original issue discount is being amortized through
June 15, 1996 with a yield to maturity of 13 1/4%. The carrying amount at
December 31, 1994 of the Discount Debentures represents the principal
amount less an unamortized discount of $46.8 million. From and after June
15, 1996, interest on the Discount Debentures will accrue on the principal
amount at the rate of 13 1/4% and be payable in cash semiannually. The
Discount Debentures are redeemable at any time, at the option of Holdings,
in whole or in part, at 100% of their principal amount plus accrued
interest to the redemption date.
The Discount Debenture Indenture contains covenants which are comparable to
or less restrictive than those under the Credit Agreement, the Secured
Notes and the 11 3/4% Notes.
The estimated fair value of the Discount Debentures at December 31, 1994
was $235.1 million.
1992 Refinancing
Effective June 29, 1992, Holdings and Silgan refinanced a significant
portion of their indebtedness (the "Refinancing"). The Refinancing
included a private placement by Silgan of $50.0 million principal amount of
its Secured Notes, a public offering of $135.0 million principal amount of
Silgan's 11 3/4% Notes and a public offering by Holdings of its Discount
Debentures for proceeds of $165.4 million. The aggregate proceeds from the
debt offerings, net of $17.3 million of transaction fees and expenses, were
used, in part, to redeem Silgan's 14% Senior Subordinated Notes (the "14%
Notes"), Silgan's 15% Cumulative Exchangeable Redeemable Preferred Stock
(the "Preferred Stock") and Holdings' Senior Reset Debentures due 2004 (the
"Holdings Reset Debentures"). The Preferred Stock (300,083 shares) was
redeemed on August 16, 1992 at a redemption price of $105 per share plus
accrued dividends. The 14% Notes ($85.0 million aggregate principal
amount) were redeemed on August 28, 1992 at a redemption price of 105% of
the principal amount thereof plus accrued interest. The Holdings Reset
Debentures were redeemed on July 29, 1992 ($175.2 million aggregate
principal amount) at a redemption price of 103.67% of the principal amount
thereof plus accrued interest. In addition, the Company paid cash interest
of $15.3 million at a rate of 17 1/2% on the principal amount of the
Holdings Reset Debentures for the period January 1 to June 30, 1992.
F-16<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
4. Short-Term Borrowings and Long-Term Debt (continued)
1992 Refinancing (continued)
In conjunction with the Refinancing, the credit agreement among various
bank lenders was amended to, among other things, permit the Refinancing,
and the Company repaid $30.0 million of term loans thereunder.
As a result of the Refinancing, unamortized deferred financing costs
relating to the 14% Notes, the Preferred Stock, the repayment of bank term
loans and Holdings Reset Debentures totaling $11.0 million in the aggregate
were written off in 1992 and, along with the redemption premiums of $12.6
million, are reflected as an extraordinary charge. There was no tax effect
on this charge due to the net operating loss position of the Company.
5. Retirement Plans
The Company sponsors pension and defined contribution plans which cover
substantially all employees, other than union employees covered by multi-
employer defined benefit pension plans under collective bargaining
agreements. The pension benefits are paid based on either a career
average, final pay or years of service formula. With respect to certain
hourly employees, pension benefits are provided for based on stated amounts
for each year of service. It is the Company's policy to fund accrued
pension and defined contribution costs in compliance with ERISA
requirements. Assets of the plans consist primarily of equity and bond
funds.
F-17<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
5. Retirement Plans (continued)
Based on the latest actuarial information available, the following table
sets forth the defined benefit plans funded status as of December 31 (in
thousands):
Plans in which
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
1994 1993 1994 1993
Actuarial present value of
benefit obligations:
Vested benefit obligations $9,182 $6,771 $19,876 $12,325
Non-vested benefit obligations 871 579 1,889 521
Accumulated benefit obligations 10,053 7,350 21,765 12,846
Additional benefits due to
future salary levels 5,358 5,733 3,557 4,092
Projected benefit obligations 15,411 13,083 25,322 16,938
Plan assets at fair value 11,612 9,040 17,249 9,287
Projected benefit obligation
in excess of plan assets 3,799 4,043 8,073 7,651
Unrecognized actuarial gain (loss) 504 (798) 3,916 800
Unrecognized prior service costs (665) - (2,461) (2,093)
Additional minimum liability - - 1,677 2,107
Unfunded pension liability
recognized in the balance sheet $ 3,638 $ 3,245 $11,205 $ 8,465
As required by SFAS No. 87, "Employers' Accounting for Pensions" the
Company recognized an additional pension liability and related intangible
asset of $1.7 million and $2.1 million for pension plans with accumulated
benefits in excess of plan assets as of December 31, 1994 and 1993,
respectively.
During 1994, Del Monte transferred fund assets of $8.9 million to the
Company, as calculated using a discount rate of 9%, in accordance with the
terms of the DM Can purchase agreement. In connection with the acquisition
of DM Can, the Company assumed defined benefit plan obligations, as
calculated using its 1993 discount rate of 7.5%, of $10.9 million.
F-18<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
5. Retirement Plans (continued)
The assumptions used in determining the actuarial present value of plan
benefit obligations as of December 31 are as follows:
1994 1993 1992
Discount rate 8.5% 7.5% 8.5%
Weighted average rate of
compensation increase 4.5% 4.5% 5.0 - 5.5%
Expected long-term rate of
return on plan assets 8.5% 8.5% 8.5%
The components of total pension expense for defined benefit plans are as
follows (in thousands):
1994 1993 1992
Service cost $2,947 $1,809 $1,722
Interest cost 3,334 2,144 2,101
Net amortization and deferrals (2,702) 500 75
Actual loss (return) on assets 539 (1,784) (891)
Other (gains) 4 (183) (183)
Net pension cost of defined
benefit plans $4,122 $2,486 $2,824
In addition, the Company participates in several multi-employer pension
plans which provide defined benefits to certain of its union employees.
The contributions to multi-employer plans were $2.7 million in 1994; $2.0
million in 1993; and $2.2 million in 1992. The Company also sponsors
defined contribution plans covering substantially all employees. Company
contributions to these plans are based upon employee contributions and, in
certain situations, are based upon operating profitability. Contributions
charged to income for these plans were $2.5 million in 1994; $1.5 million
in 1993; and $1.9 million in 1992.
F-19<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
6. Postretirement Benefits Other than Pensions
Effective January 1, 1993, the Company changed its method of accounting for
postretirement health care and other insurance benefits to conform to the
provisions of SFAS No. 106 "Employers' Accounting for Post Retirement
Benefits Other Than Pensions", which requires accrual of these benefits
over the period during which active employees become eligible for such
benefits. Previously, the Company recognized the cost of providing such
benefits on the pay-as-you-go basis. The Company elected to immediately
recognize a cumulative charge of $5.0 million for this change in accounting
principle which represents the accumulated postretirement benefit
obligation existing as of January 1, 1993. The postretirement benefit cost
for 1992 has not been restated.
The Company has defined benefit health care and life insurance plans that
provide postretirement benefits to certain employees. The plans are
contributory, with retiree contributions adjusted annually, and contain
cost sharing features including deductibles and coinsurance. The Company
does not fund these plans.
The following table presents the plan's funded status and amounts
recognized in the Company's balance sheet as of December 31 (in thousands):
1994 1993
Accumulated postretirement benefit obligation:
Retirees $1,183 $1,209
Fully eligible active plan participants 1,521 1,197
Other active plan participants 2,577 2,127
Total accumulated postretirement
benefit obligation 5,281 4,533
Unrecognized net gain or (loss) (219) (462)
Unrecognized prior service costs (79) -
Accrued postretirement benefit liability $4,983 $4,071
F-20<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
6. Postretirement Benefits Other than Pensions (continued)
Net periodic postretirement benefit cost include the following components
(in thousands):
1994 1993
Service cost $ 321 $ 152
Interest cost 412 326
Deferred loss 24 -
Other (gains) (38) -
Net periodic postretirement benefit cost $ 719 $ 478
The actuarial assumptions used in determining the accrued postretirement
benefit liability as of December 31 are as follows:
1994 1993
Discount rate 8.5% 7.5%
Weighted average rate of compensation
increase 4.5% 4.5%
The assumed health care cost trend used in measuring the accumulated
postretirement benefit obligation was 14% in 1994 and 15% in 1993,
ultimately declining to 6% in 2003 and remaining at that level thereafter.
A 1% increase in the trend rate assumption would increase the accumulated
postretirement benefit obligation as of December 31, 1994 by approximately
$0.1 million and increase the aggregate of the service and interest cost
components of the net periodic postretirement benefit cost for 1994 by
approximately $0.02 million.
7. Income Taxes
Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting
for Income Taxes" which requires the use of the liability method of
accounting for deferred income taxes. The Company had previously reported
under SFAS No. 96, "Accounting for Income Taxes". There was no effect for
the difference in methods at the date of adoption.
F-21<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
7. Income Taxes (continued)
The income tax provision consists of the following (in thousands):
1994 1993 1992
Current
Federal $2,500 $ 300 $ -
State 3,200 1,900 1,705
Foreign (100) (400) 31
5,600 1,800 1,736
Deferred
Federal - - -
State - 100 464
Foreign - - -
- 100 464
$5,600 $1,900 $2,200
The aggregate income tax provision varied from that computed by using the
U.S. statutory rate as a result of the following (in thousands):
1994 1993 1992
Income tax provision
at the U.S. federal
income tax rate $(2,601) $(4,363) $(5,977)
State and foreign tax expense
net of federal income taxes 2,015 1,235 1,452
Nondeductible items:
Amortization of goodwill 576 154 154
Minority interest expense - - 933
Losses for which no benefit
is available 5,610 4,874 5,638
$ 5,600 $ 1,900 $ 2,200
F-22<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
7. Income Taxes (continued)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets
at December 31 are as follows (in thousands):
1994 1993
Deferred tax liabilities:
Tax over book depreciation $21,900 $20,700
Book over tax basis of assets acquired 21,400 24,000
Other 4,100 3,600
Total deferred tax liabilities 47,400 48,300
Deferred tax assets:
Book reserves not yet deductible
for tax purposes 24,800 20,700
Deferred interest on high yield obligations 21,300 12,300
Net operating loss carryforwards 26,200 37,300
Other 4,100 3,400
Total deferred tax assets 76,400 73,700
Valuation allowance for deferred tax assets 35,836 32,236
Net deferred tax assets 40,564 41,464
Net deferred tax liabilities $ 6,836 $ 6,836
The Company files a consolidated federal income tax return. At December
31, 1994, the Company had net operating loss carryforwards of approximately
$75.0 million which are available to offset future consolidated taxable
income of the group and expire from 2001 through 2008. The Company had an
alternative minimum tax liability of $1.5 million in 1994 and $0.3 million
in 1993. At December 31, 1994, the Company had $3.4 million of alternative
minimum tax credits which are available indefinitely to reduce future tax
payments for regular federal income tax purposes.
8. Stock Option Plans
Holdings, Containers and Plastics have established stock option plans for
their key employees pursuant to which options to purchase shares of common
stock of Holdings and its subsidiaries and stock appreciation rights
("SARs") may be granted.
F-23<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
8. Stock Option Plans (continued)
Options granted under the plans may be either incentive stock options or
non qualified stock options. To date, all stock options granted have been
non qualified stock options. Under the plans, Holdings has reserved 24,000
shares of its Class C Common Stock and Containers and Plastics have each
reserved 1,200 shares of their common stock for issuance under their
respective plans. Containers has 13,764 shares and Plastics has 13,800
shares of $0.01 par value common stock currently issued, and all such
shares are owned by Silgan.
The SARs extend to all of the shares covered by the options and provide for
the payment to the holders of the options of an amount in cash equal to the
excess of, in the case of Holdings' and Containers' plans, the pro forma
book value, as defined, of a share of common stock (or in the event of a
public offering or a change in control (as defined), the fair market value
of a share of common stock) over the exercise price of the option, with
certain adjustments for the portion of vested stock appreciation rights not
paid at the time of the recapitalization in June, 1989; or, in the case of
the Plastics plan, in the event of a public offering or a change in control
(as defined), the fair market value of a share of common stock over the
exercise price of the option.
Prior to a public offering or change in control, should an employee leave
the Company, Holdings and Containers have the right to repurchase, and the
employee has the right to require Holdings or Containers, as the case may
be, to repurchase, his common stock at the then pro forma book value.
At December 31, 1994, there were outstanding options for 24,000 shares
under the Holdings plan, 1,056 shares under the Containers plan and 900
shares under the Plastics plan. The exercise prices per share range from
$35 to $61 for the Holdings options, range from $2,122 to $4,933 for the
Containers options and are $126 for the Plastics options. The stock
options and SARs generally become exercisable ratably over a five year
period. At December 31, 1994, there were 15,000 options/SARs exercisable
under the Holdings plan and 720 options/SARs exercisable under the
Containers plan. At December 31, 1994, no options/SARs were exercisable
under the Plastics plan. The Company incurred charges relating to the
vesting and payment of benefits under the stock option plans of $1.5
million in 1994; $0.2 million in 1993; and $0.4 million in 1992.
F-24<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
8. Stock Option Plans (continued)
In the event of a public offering of any of Holdings capital stock or a
change in control of Holdings, (i) the options granted by Containers and
Plastics pursuant to the plans, or (ii) any stock issued upon exercise of
such options issued by Containers are convertible into either stock options
or common stock of Holdings, as the case may be. The conversion of such
options or shares will be based upon a valuation of Holdings and an
allocation of such value among the subsidiaries after giving affect to,
among other things, that portion of the outstanding indebtedness of
Holdings allocable to each such subsidiary.
9. Deficiency in Stockholders' Equity
Deficiency in stockholders' equity includes the following classes of common
stock ($.01 par value) and preferred stock:
Shares Shares Issued and Outstanding
Class Authorized December 31, 1994 and 1993
A 500,000 417,500
B 667,500 667,500
C 1,000,000 50,000
2,167,500 1,135,000
Preferred Stock 1,000,000 -
During 1993, Holdings increased its authorized Class B Common Stock from
500,000 shares to 667,500 shares and on December 21, 1993, Holdings sold
250,000 shares of its Class B Common Stock for a purchase price of $60.00
per share and an aggregate purchase price of $15.0 million. Holdings
contributed the proceeds to Silgan in conjunction with the acquisition of
DM Can.
The minority interest represented shares of Preferred Stock issued by
Silgan. As of August 16, 1992, Silgan redeemed its Preferred Stock. Until
such redemption, the Preferred Stock holders received cumulative
preferential dividends at the rate per annum of 15% per share calculated as
a percentage of $100. Dividends were, at the option of Silgan, paid in
additional shares of Preferred Stock. During 1992, Silgan issued 21,301
shares of Preferred Stock at $100 per share, representing its Preferred
Stock dividend requirement for the two quarters ended May 15, 1992. A cash
dividend payment of $1.1 million was made for the quarter ended August 15,
1992.
F-25<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
9. Deficiency in Stockholders' Equity (continued)
The rights, privileges and powers of the Class A Common Stock and the Class
B Common Stock are identical, with shares of each class being entitled to
one vote on all matters to come before the stockholders of Holdings. The
Class C common stockholders do not have voting rights except in certain
circumstances.
Pursuant to an organization agreement, each of the holders of the Class A
Common Stock, upon death or permanent disablement, had the right to require
Holdings to acquire his shares at fair market value. Since this option
expired on June 30, 1994, the financial statements have been retroactively
adjusted, for all periods presented, to reflect the reclassification of the
put option liability to equity.
10. Commitments
The Company is committed under certain noncancelable operating leases for
office and plant facilities, equipment and automobiles. Certain operating
leases have renewal options. Minimum future rental payments under these
operating leases are (in thousands):
1995 $ 7,923
1996 6,856
1997 5,577
1998 4,006
1999 2,556
Thereafter 6,174
$33,092
Rental expense was approximately $9.1 million in 1994; $8.0 million in
1993; and $8.0 million in 1992.
F-26<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
11. Related Party Transactions
Pursuant to various management services agreements entered into between
Holdings, Silgan, Containers, Plastics, and S&H, Inc. ("S&H"), a company
wholly owned by Messrs. Silver and Horrigan, the Chairman of the Board and
President of Holdings, respectively, S&H provides Holdings and the Company
and its subsidiaries with general management, supervision and
administrative services. In consideration for its services, S&H receives a
fee of 4.95% (of which 0.45% is payable to MS & Co.) of Holdings'
consolidated earnings before depreciation, amortization, interest and taxes
("EBDIT") until EBDIT has reached the Scheduled Amount set forth in the
Management Agreements and 3.3% (of which 0.3% is payable to MS & Co.) after
EBDIT has exceeded the Scheduled Amount up to the Maximum Amount as set
forth in the Management Agreements, plus reimbursement for all related out-
of-pocket expenses. The total amount incurred under the Management
Agreements was $5.0 million in 1994, $4.4 million in 1993, and $4.2 million
in 1992 and was allocated, based upon EBDIT, as a charge to operating
income of each business segment. Included in accounts payable at December
31, 1994 and 1993, was $0.1 million and $0.6 million, payable to S&H,
respectively.
Under the terms of the Management Agreements, the Company has agreed,
subject to certain exceptions, to indemnify S&H and any of its affiliates,
officers, directors, employees, subcontractors, consultants or controlling
persons against any loss or damage they may sustain arising in connection
with the Management Agreements.
In connection with the Credit Agreement entered into in 1993, the Banks
(including Bankers Trust) received certain fees amounting to $8.1 million.
In connection with the 1992 Refinancing, MS & Co. received as compensation
for its services as underwriter for the Secured Notes, the 11 3/4% Notes
and the Discount Debentures, an aggregate of $11.5 million.
F-27<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
12. Litigation
On June 30, 1989, Holdings acquired all of the outstanding shares of Silgan
for $6.50 per share (the "Merger"). Contemporaneous with the Merger,
certain holders of 1,050,000 shares of Silgan Class B common stock filed
two actions in the Court of Chancery of the State of Delaware ("Chancery
Court") alleging that Silgan and certain affiliates, officers and directors
breached fiduciary duties in implementing the Merger. One of the actions
was voluntarily dismissed without prejudice of the right to reinstate the
action upon the conclusion of the appraisal proceeding described below.
The second action was dismissed following settlement.
The same Silgan stockholders also sought appraisal of the value of their
shares pursuant to Section 262 of the Delaware General Corporation Law.
Following discovery and settlement with the holders of 650,000 shares for
$6.9 million, including interest, trial of the appraisal with respect to
the remaining 400,000 shares of Class B common stock was conducted during
the week of November 28, 1994. Post-trial briefing is scheduled to be
completed on April 17, 1995.
Management believes that the consideration offered in the Merger fully
reflected the value of Silgan's Class B common stock and that the ultimate
resolution of the appraisal proceeding will not have a material effect on
the financial condition or results of operations of the Company.
Additionally, a complaint was filed by parties who are limited partners of
The Morgan Stanley Leveraged Equity Fund, L.P. ("MSLEF") against a number
of defendants including Silgan and Holdings. The complaint alleges, among
other things, that the general partners of MSLEF breached duties owed to
the limited partners by selling MSLEF's investment in Silgan at a grossly
inadequate price. The Court dismissed all claims against Silgan and
Holdings related to this action on January 14, 1993, and subsequently
upheld that dismissal after the plaintiff filed a motion for reargument.
Because this complaint continues against certain other defendants, the
plaintiff's right to appeal the dismissal of the claims against Silgan and
Holdings has not yet expired.
Management believes that there is no factual basis for the allegations and
claims contained in the complaint. Management also believes that the
lawsuit is without merit and they intend to defend the lawsuit vigorously.
In addition, management believes that the ultimate resolution of these
matters will not have a material effect on the financial condition or
results of operations of the Company.
F-28<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
12. Litigation (continued)
Other than the actions mentioned above there are no other pending legal
proceedings, other than ordinary routine litigation incidental to the
business of the Company, to which the Company is a party or to which any of
its properties are subject.
13. Business Segment Information
The Company is engaged in the packaging industry and operates principally
in two business segments. Both segments operate in North America. There
are no intersegment sales. Presented below is a tabulation of business
segment information for each of the past three years (in millions):
Net Oper. Identifiable Dep. & Capital
Sales Profit Assets Amort. Expend.
1994
Metal container & other(1) $657.1 $67.0(2) $335.9 $23.1 $16.9
Plastic container 204.3 9.4(2) 162.8 14.1 12.3
Consolidated $861.4 $76.4 $498.7 $37.2 $29.2
1993
Metal container & other(1) $459.2 $42.3 $324.5 $17.3 $25.3
Plastic container 186.3 0.6 165.9 16.5 17.2
Consolidated $645.5 $42.9 $490.4 $33.8 $42.5
1992
Metal container & other(1) $437.4 $40.7 $218.7 $16.4 $14.5
Plastic container 192.6 2.3 161.2 15.4 9.0
Consolidated $630.0 $43.0 $379.9 $31.8 $23.5
(1) Includes folding carton sales which are not significant enough to be
reported as a separate segment.
(2) Excludes charge for reduction in carrying value of assets of $7.2
million for metal container segment and $9.5 million for plastic
container segment.
F-29<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
13. Business Segment Information (continued)
Operating profit is reconciled to income before tax as follows (in
millions):
1994 1993 1992
Operating profit $76.4 $42.9 $43.0
Reduction in carrying
value of assets 16.7 - -
Interest and other
corporate expense 67.1 55.4 60.6
Loss before income taxes $(7.4) $(12.5) $(17.6)
Identifiable assets are reconciled to total assets as follows (in
millions):
1994 1993 1992
Identifiable assets $498.7 $490.4 $379.9
Corporate assets 6.1 7.2 9.1
Total assets $504.8 $497.6 $389.0
Metal container and other segment sales to Nestle accounted for 25.9%,
34.1% and 36.5%, of net sales during the years ended December 31, 1994,
1993 and 1992, respectively. Similarly, sales to Del Monte accounted for
21.4% of net sales during the year ended December 31, 1994. At December
31, 1994 and 1993, 12.6% and 12.6% of the accounts receivable balance was
due from Nestle and at December 31, 1994, 21.9% of the accounts receivable
balance was due from Del Monte.
F-30<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholder
Silgan Corporation
We have audited the accompanying consolidated balance sheets of Silgan
Corporation as of December 31, 1994 and 1993, and the related consolidated
statements of operations, common stockholder's equity and cash flows for
each of the three years in the period ended December 31, 1994. Our audits
also included the financial statement schedules listed in the index at Item
14(a). These financial statements and schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Silgan Corporation at December 31, 1994 and 1993, and the
consolidated 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. Also, in our opinion, the
related financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
As discussed in Notes 2 and 6 to the consolidated financial statements,
in 1993 the Company changed its method of accounting for income taxes,
postemployment benefits and postretirement benefits other than pensions.
Ernst & Young LLP
Stamford, CT
March 17, 1995
F-31<PAGE>
SILGAN CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
(Dollars in thousands)
ASSETS 1994 1993
Current assets:
Cash and cash equivalents $ 2,665 $ 205
Accounts receivable, less allowances for
doubtful accounts of $1,557 and $1,084 for
1994 and 1993, respectively 65,229 44,409
Inventories 122,429 108,653
Prepaid expenses and other current assets 8,044 3,562
Total current assets 198,367 156,829
Property, plant and equipment, at cost:
Land 3,707 4,469
Buildings and improvements 51,665 56,087
Machinery and equipment 346,061 352,409
Construction in progress 18,124 19,894
419,557 432,859
Less accumulated depreciation and amortization (167,747) (142,464)
Net property, plant and equipment 251,810 290,395
Goodwill, net of amortization 30,009 24,175
Other assets 20,491 20,665
$500,677 $492,064
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Trade accounts payable $ 36,845 $ 31,913
Accrued payroll and related costs 26,019 20,523
Accrued interest payable 1,713 783
Accrued expenses and other current liabilities 17,542 11,094
Bank working capital loans 12,600 2,200
Current portion of long-term debt 21,968 20,000
Total current liabilities 116,687 86,513
Long-term debt 282,568 305,000
Deferred income taxes 13,017 13,017
Other long-term liabilities 25,060 34,731
Stockholder's equity:
Common stock ($0.01 par value per share;
3,000 shares authorized, 2 shares issued) - -
Additional paid-in capital 69,535 64,135
Retained earnings (deficit) (6,190) (11,332)
Total common stockholder's equity 63,345 52,803
$500,677 $492,064
See accompanying notes.
F-32<PAGE>
SILGAN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
1994 1993 1992
Net sales $861,374 $645,468 $630,039
Cost of goods sold 747,457 571,174 554,972
Gross profit 113,917 74,294 75,067
Selling, general and
administrative expenses 37,993 31,821 32,274
Reduction in carrying value of assets 16,729 - -
Income from operations 59,195 42,473 42,793
Interest expense and other
related financing costs 36,142 27,928 26,916
Income before income taxes 23,053 14,545 15,877
Income tax provision 11,000 6,300 2,200
Income before extraordinary
charges and cumulative effects of
changes in accounting principles 12,053 8,245 13,677
Extraordinary charges relating to early
extinguishment of debt, net of taxes - (841) (9,075)
Cumulative effect of changes in accounting
principles, net of taxes - (9,951) -
Net income (loss) 12,053 (2,547) 4,602
Preferred stock dividend requirements - - 2,745
Net income (loss) applicable to
common stockholder $ 12,053 $ (2,547) $ 1,857
See accompanying notes.
F-33<PAGE>
SILGAN CORPORATION
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
Total
Additional Retained common
Common paid-in Earnings stockholder's
stock capital (deficit) equity
Balance at December 31, 1991 $ - $41,560 $ 5,082 $46,642
Preferred stock dividend
requirements - - (2,745) (2,745)
Net income - - 4,602 4,602
Dividend to Parent - - (15,724) (15,724)
Balance at December 31, 1992 - 41,560 (8,785) 32,775
Capital contribution
by Parent - 15,000 - 15,000
Tax benefit realized
from Parent - 7,575 - 7,575
Net loss - - (2,547) (2,547)
Balance at December 31, 1993 - 64,135 (11,332) 52,803
Tax benefit realized
from Parent - 5,400 - 5,400
Net income - - 12,053 12,053
Payments to former shareholders - - (6,911) (6,911)
Balance at December 31, 1994 $ - $69,535 $(6,190) $63,345
See accompanying notes.
F-34<PAGE>
SILGAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
1994 1993 1992
Cash flows from operating activities:
Net income (loss) $ 12,053 $ (2,547) $ 4,602
Adjustments to reconcile net
income (loss) to net cash provided
by operating activities:
Depreciation 35,392 31,607 29,538
Amortization 6,404 4,817 4,424
Reduction in carrying value of assets 16,729 - -
Other items 792 (136) 1,215
Contribution by Parent for federal
income tax provision 5,400 7,575 -
Extraordinary charges relating
to early extinguishment of debt - 1,341 9,075
Cumulative effect of changes in
accounting principles - 6,276 -
Changes in assets and liabilities,
net of effect of acquisitions:
(Increase) decrease in accounts
receivable (21,293) 707 (8,705)
(Increase) decrease in inventories (16,741) (4,316) 5,541
Increase (decrease) in trade
accounts payable 4,478 3,757 (4,330)
Other, net 4,121 (750) (7,000)
Total adjustments 35,282 50,878 29,758
Net cash provided by operating
activities 47,335 48,331 34,360
Cash flows from investing activities:
Acquisition of Del Monte Can
Manufacturing Assets 519 (73,865) -
Capital expenditures (29,184) (42,480) (23,447)
Proceeds from sale of assets 765 262 429
Net cash used in investing activities (27,900) (116,083) (23,018)
Continued on following page.
F-35<PAGE>
SILGAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
1994 1993 1992
Cash flows from financing activities:
Borrowings under working capital loans $393,250 $328,050 $316,050
Repayments under working capital loans (382,850) (366,250) (296,850)
Proceeds from issuance of long-term debt - 140,000 185,000
Reduction of long-term debt (20,464) (42,580) (125,205)
Premium paid on early retirement of debt - - (4,250)
Repayment of advance from Parent - - (25,200)
Capital contribution by Parent - 15,000 -
Payments to former shareholders (6,911) - -
Dividend to Parent - - (15,724)
Redemption of preferred stock - - (31,508)
Cash dividends paid on preferred stock - - (1,137)
Debt financing costs - (8,935) (10,250)
Net cash provided (used) by financing
activities (16,975) 65,285 (9,074)
Net increase (decrease) in cash and
cash equivalents 2,460 (2,467) 2,268
Cash and cash equivalents at
beginning of year 205 2,672 404
Cash and cash equivalents at
end of year $ 2,665 $ 205 $ 2,672
Supplementary data:
Interest paid $ 30,718 $ 25,733 $29,046
Income taxes paid, net of refunds 2,588 722 1,206
Additional preferred stock issued
in lieu of dividend - - 2,130
See accompanying notes.
F-36<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
1. Basis of Presentation
Silgan Corporation ("Silgan", together with its wholly owned subsidiaries,
Silgan Containers Corporation ("Containers") and Silgan Plastics
Corporation ("Plastics"), the "Company") is a wholly owned subsidiary of
Silgan Holdings Inc. ("Holdings" or "Parent"). Holdings is a company
controlled by Silgan management and The Morgan Stanley Leveraged Equity
Fund II, L.P. ("MSLEF II"), an affiliate of Morgan Stanley & Co.,
Incorporated ("MS & Co.").
The Company, a North American packaging manufacturer, is engaged in the
manufacture and sale of steel, aluminum and paperboard containers, mainly
to processors and packagers of food products, and the design, manufacture
and sale of various plastic containers, mainly for health, personal care,
food, beverage, pharmaceutical and household chemical products.
2. Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. All significant
intercompany transactions have been eliminated. Assets and liabilities of
the Company's foreign subsidiary are translated at rates of exchange in
effect at the balance sheet date. Income amounts are translated at the
average of monthly exchange rates.
Cash and cash equivalents
Cash equivalents represent investments with maturities of three months or
less from the time of purchase and are carried at cost which approximates
fair value due to the short maturities of those instruments.
Accounts Receivable
Accounts receivable consist primarily of amounts due from domestic
companies. Credit is extended based on an evaluation of the customer's
financial condition and collateral is not generally required. The Company
maintains an allowance for doubtful accounts at a level which management
believes is sufficient to cover potential credit losses.
F-37<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
2. Summary of Significant Accounting Policies (continued)
Inventories
Inventories are stated at the lower of cost or market (net realizable
value) and are principally accounted for by the last-in, first-out method
(LIFO). The components of inventories at December 31, 1994 and 1993
consist of the following (in thousands):
1994 1993
Raw materials and supplies $ 40,196 $ 26,458
Work-in-process 19,045 17,105
Finished goods 63,409 65,072
122,650 108,635
Adjustment to value inventory
at cost on the LIFO method (221) 18
$122,429 $108,653
The amount of inventory recorded on the first-in first-out method at
December 31, 1994 and 1993 was $6.5 million and $7.4 million, respectively.
Property, plant and equipment
Property, plant and equipment are recorded at historical cost and are
depreciated on the straight-line method over their estimated useful lives.
Major renewals and betterments are capitalized and maintenance and repair
expenditures are charged to expense as incurred. The total amount of
repairs and maintenance expense was $19.9 million in 1994; $17.1 million in
1993; and $15.0 million in 1992.
The principal estimated useful lives are 35 years for buildings and range
between 3 to 18 years for machinery and equipment. Effective October 1,
1994, the Company extended the estimated useful lives of certain fixed
assets to more properly reflect the true economic lives of the assets and
to better align the Company's depreciable lives with the predominate
practice in industry. The change had the effect of decreasing depreciation
expense for the fourth quarter and the year by approximately $1.3 million
and increasing net income by $0.8 million.
F-38<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
2. Summary of Significant Accounting Policies (continued)
Property, plant and equipment (continued)
Based upon a review of its depreciable assets, the Company determined, in
the fourth quarter of 1994, that certain adjustments were necessary to
properly reflect net realizable values. These adjustments include $2.6
million to write-down the excess carrying value over estimated realizable
value of various plant facilities held for sale and $14.1 million to reduce
the carrying value of certain technologically obsolete and inoperable
equipment.
Goodwill
The Company has classified as goodwill the cost in excess of fair value of
net assets acquired in purchase transactions. Goodwill is being amortized
on a straight-line basis over periods ranging between 20 and 40 years. The
Company periodically evaluates the existence of goodwill impairment to
assess whether goodwill is fully recoverable from projected, undiscounted
net cash flows of the related business unit. Impairments would be
recognized in operating results if a permanent diminution in value were to
occur. Goodwill amortization charged to operations was $1.2 million in
1994; $0.5 million in 1993; and $0.5 million in 1992. Accumulated
amortization of goodwill at December 31, 1994 and 1993 was $3.7 million and
$2.5 million, respectively.
Other Assets
Other assets consist principally of debt issuance costs which are being
amortized straight-line over the terms of the related debt agreements (3 to
10 years). The charge incurred for amortization of debt issuance cost was
$4.6 million in 1994; $2.6 million in 1993; and $2.2 million in 1992.
Other intangible assets are amortized over their expected useful lives
using the straight-line method.
Other assets at December 31, 1994 and 1993 consist of the following (in
thousands):
1994 1993
Debt issuance costs $18,092 $18,163
Other 9,519 4,396
27,611 22,559
Less: accumulated amortization (7,120) (1,894)
$20,491 $20,665
F-39<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
2. Summary of Significant Accounting Policies (continued)
Revenue Recognition
The Company recognizes revenue from product sales upon shipment to the
customer. As is common in the packaging industry, the Company must
manufacture containers for its seasonal pack customers throughout the year.
Revenue is recognized for such customers at the time insurable risk has
passed to the customer.
Income Taxes
Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting
for Income Taxes". Under SFAS No. 109, the liability method is used to
calculate deferred income taxes. The provision for income taxes includes
federal, state and foreign income taxes currently payable and those
deferred because of temporary differences between the financial statement
and tax bases of assets and liabilities. The Company had previously
reported under SFAS No. 96, "Accounting for Income Taxes". Under SFAS No.
96, the Company had recognized a federal income tax benefit from the tax
losses of Holdings. Under SFAS No. 109, this benefit will be reflected as
a contribution to additional paid-in capital instead of as a reduction of
income tax expense. As a result of this change, effective January 1, 1993,
the Company recorded a cumulative charge to earnings and a credit to paid-
in-capital of $6 million for the difference in methods up to the date of
adoption. As permitted by SFAS No. 109, the 1992 financial statements have
not been restated. See Note 7 - Income Taxes.
Postemployment Benefits
During 1993, the Company adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits". The cumulative effect as of January 1, 1993 of
this accounting change was to decrease net income by $0.8 million (after
related income taxes of $0.5 million).
Fair Values of Financial Instruments
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.
F-40<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
2. Summary of Significant Accounting Policies (continued)
Fair Values of Financial Instruments (continued)
Short and long-term debt: The carrying amounts of the Company's borrowings
under its working capital loans and variable-rate borrowings approximate
their fair value. The fair values of fixed-rate borrowings are based on
quoted market prices.
Letters of Credit: Fair values of the Company's outstanding letters of
credit are based on current contractual amounts outstanding.
Derivatives
The Company has limited involvement with derivative financial instruments
and does not use them for trading purposes. On occasion, the Company has
used interest rate hedge agreements to reduce the impact of increases in
interest rates on floating-rate long-term debt. During 1994 and 1993, the
Company was not party to any interest rate hedge agreements. In addition,
during 1994 and 1993, the Company did not use derivative instruments to
hedge its commodity and foreign exchange risks.
3. Acquisitions
On December 21, 1993, Containers acquired from Del Monte Corporation ("Del
Monte") substantially all of the fixed assets and certain working capital
of Del Monte's container manufacturing business in the United States ("DM
Can"). The final purchase price for the assets acquired and the assumption
of certain specified liabilities, including related transaction costs, was
$73.3 million. The acquisition was accounted for as a purchase transaction
and the results of operations have been included with the Company's results
from the acquisition date. During 1994, the Company finalized its purchase
price accounting, adjusting the fair value of assets acquired and
liabilities assumed to the amounts determined based upon final appraisals
and valuations. The excess of the purchase price over the fair value of
net assets acquired was allocated to goodwill. The aggregate purchase cost
and its allocation to the assets and liabilities is as follows (in
thousands):
Net working capital acquired $21,944
Property, plant and equipment 47,167
Goodwill 13,729
Other liabilities assumed (9,494)
$73,346
F-41<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
3. Acquisitions (continued)
Set forth below is the Company's summary unaudited pro forma results of
operations for the years ended December 31, 1993 and 1992. The unaudited
pro forma results of operations include the combined historical results of
DM Can and the Company after giving effect to certain pro forma
adjustments.
The pro forma adjustments to the historical results of operations reflect
the sales prices set forth in the supply agreement with Del Monte, the
effect of purchase accounting adjustments based upon appraisals and
valuations, the financing of the acquisition and certain other adjustments
as if these events had occurred as of the beginning of the periods
mentioned therein. The following unaudited pro forma results of operations
do not purport to represent what the Company's results of operations would
actually have been had the transactions in fact occurred on the dates
indicated, or to project the Company's results for any future period (in
thousands):
1993 1992
Net sales $818,614 $819,579
Income from operations 51,343 57,282
Income before income taxes 18,877 25,353
Income before extraordinary charges
and cumulative effect of accounting changes 10,844 22,301
Net income 52 13,226
4. Short-Term Borrowings and Long-Term Debt
1994 1993
(in thousands)
Short-term borrowings are as follows:
Bank Working Capital Loans $ 12,600 $ 2,200
Long-term debt consists of the following:
Bank A Term Loans $ 39,845 $ 60,000
Bank B Term Loans 79,691 80,000
Senior Secured Floating Rate Notes due
June 30, 1997 50,000 50,000
11 3/4% Senior Subordinated Notes due
June 15, 2002 135,000 135,000
304,536 325,000
Less: Amounts due within one year 21,968 20,000
$282,568 $305,000
F-42<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
4. Short-Term Borrowings and Long-Term Debt (continued)
The aggregate annual maturities of long-term debt at December 31, 1994 are
as follows (in thousands):
1995 $ 21,968
1996 97,568
1997 50,000
1998 -
1999 -
2000 and thereafter 135,000
$304,536
Bank Credit Agreement
On December 21, 1993, the Company, Containers and Plastics (the
"Borrowers") entered into a new credit agreement (the "Credit Agreement"),
with a group of banks to refinance in full amounts owing under the former
bank credit facility, which included $41.6 million of term loans, and to
finance, in part, the acquisition of DM Can. As a result of the early
extinguishment of debt, the Company incurred a charge of $0.8 million (net
of $0.5 million of taxes). Pursuant to the Credit Agreement, the Company
borrowed $60.0 million of A Term Loans and $80.0 million of B Term Loans.
The A Term Loans are payable each year in scheduled installments with the
final payment due September 15, 1996. The B Term Loans are payable in full
on September 15, 1996. Additionally, further repayments are required at
the time of certain asset sales or the issuance of equity. During 1994, in
addition to the $20.0 million mandatory payment, a repayment of $0.5
million was made upon the sale of certain assets.
The Credit Agreement also provides Containers and Plastics, together, with
a revolving credit facility of $70.0 million for working capital needs (the
"Working Capital Loans"). The aggregate amount of Working Capital Loans
which may be outstanding at anytime is limited to 85% of Containers' and
Plastics' eligible accounts receivable and 50% of Containers' and Plastics'
eligible inventory. In lieu of Working Capital Loans, Containers and
Plastics may request the issuance of up to $15.0 million of letters of
credit. At December 31, 1994, commitments under the revolving credit
facility of $51.9 million were available after taking into account
outstanding letters of credit of $5.5 million. The Working Capital Loans
can be borrowed, repaid and reborrowed from time-to-time until final
maturity on September 15, 1996.
F-43<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
4. Short-Term Borrowings and Long-Term Debt (continued)
Bank Credit Agreement (continued)
The borrowings under the Credit Agreement may be designated by the
respective Borrowers as Base Rate or Eurodollar Rate borrowings. The Base
Rate is the highest of (i) 1/2 of 1% in excess of Adjusted Certificate of
Deposit Rate, (ii) 1/2 of 1% in excess of the Federal Funds Rate or (iii)
Bankers Trust Company's prime lending rate. Base Rate borrowings bear
interest at the Base Rate plus 1.75%, in the case of A Term Loans; 2.0%, in
the case of Working Capital Loans; and 2.25%, in the case of B Term Loans.
Eurodollar Rate borrowings bear interest at the Eurodollar Rate plus 2.75%
in the case of A Term Loans; 3.0%, in the case of Working Capital Loans;
and 3.25%, in the case of B Term Loans. At December 31, 1994 the interest
rate for Base Rate borrowings ranged between 10 1/4% and 10 1/2% and for
Eurodollar Rate borrowings ranged between 8 5/8% and 10%.
For 1994, 1993 and 1992, respectively, the average amount of borrowings
under the Working Capital Loans was $14.4 million, $51.9 million and $44.5
million; the average annual interest rate paid on borrowings was 8.4%, 6.0%
and 6.3%; and the highest amount of such borrowings at any month-end was
$43.9 million, $80.3 million and $80.8 million.
The Credit Agreement provides for the payment of a commitment fee of 0.5%
per annum on the daily average unused portion of commitments available
under the Working Capital Loans as well as a 3 1/4% per annum fee on
outstanding Letters of Credit.
The indebtedness under the Credit Agreement is guaranteed by Holdings and
each of the Borrowers and secured by a security interest in substantially
all of the respective real and personal property of the Borrowers. Such
security interest also secures on an equal and ratable basis, subject to
certain intercreditor arrangements, the Senior Secured Notes.
Additionally, the stock of Silgan and the stock of principally all of its
subsidiaries have been pledged to the lenders under the Credit Agreement.
The Credit Agreement contains various covenants which limit or restrict,
among other things, indebtedness, liens, dividends, leases, capital
expenditures, and the use of proceeds from asset sales, as well as
requiring the Company to meet certain specified financial covenants. The
Company is currently in compliance with all covenants under the Credit
Agreement.
F-44<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
4. Short-Term Borrowings and Long-Term Debt (continued)
Senior Secured Floating Rate Notes
The Senior Secured Notes (the "Secured Notes") constitute senior
indebtedness of the Company and are secured by a first lien on
substantially all of the assets of the Company. Such collateral also
secures on an equal and ratable basis, subject to certain intercreditor
arrangements, all indebtedness of the Company under the Credit Agreement.
The Secured Notes mature on June 30, 1997 and bear interest, which is
payable quarterly, at a rate of three-month LIBOR plus 3%. The interest
rate is adjusted quarterly. The interest rate in effect at December 31,
1994 was 9.44%.
The Secured Notes are redeemable at the option of the Company at par plus
accrued and unpaid interest to the redemption date. Net cash proceeds from
certain asset sales and the issuance of capital stock by the Company are
required to be applied to prepay the Secured Notes and indebtedness under
the Credit Agreement on a pro rata basis, subject to certain exceptions.
The Secured Notes contain covenants which are comparable to or less
restrictive than those under the Credit Agreement.
11 3/4% Senior Subordinated Notes
The 11 3/4% Senior Subordinated Notes (the "11 3/4% Notes") which mature on
June 15, 2002, represent unsecured general obligations of Silgan,
subordinate in right of payment to obligations of the Company under the
Credit Agreement and the Secured Notes and effectively subordinate to all
of the obligations of the subsidiaries of the Company. Interest is payable
semi-annually on June 15 and December 15.
The 11 3/4% Notes are redeemable at the option of the Company, in whole or
in part, at any time during the twelve months commencing June 15 of the
following years at the indicated percentages of their principal amount,
plus accrued interest:
Redemption
Year Percentage
1997 105.8750%
1998 102.9375%
1999 and thereafter 100.0000%
The 11 3/4% Notes Indenture contains covenants which are comparable to or
less restrictive than those under the Credit Agreement and the Secured
Notes.
The estimated fair value of the 11 3/4% Notes at December 31, 1994, based
upon quoted market prices, was $140.4 million.
F-45<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
4. Short-Term Borrowings and Long-Term Debt (continued)
1992 Refinancing
Effective June 29, 1992, the Company and Holdings refinanced a significant
portion of their indebtedness (the "Refinancing"). The Refinancing
included a private placement by the Company of $50.0 million principal
amount of its Secured Notes and a public offering of $135.0 million
principal amount of the Company's 11 3/4% Notes. The proceeds from the
debt offerings, net of $10.3 million of transaction fees and expenses, were
used, in part, to redeem the Company's 14% Senior Subordinated Notes (the
"14% Notes") and 15% Cumulative Exchangeable Redeemable Preferred Stock
(the "Preferred Stock"). The Preferred Stock (300,083 shares) was redeemed
on August 16, 1992 at a redemption price of $105 per share plus accrued
dividends. The 14% Notes ($85.0 million aggregate principal amount) were
redeemed on August 28, 1992 at a redemption price of 105% of the principal
amount thereof plus accrued interest.
In conjunction with the Refinancing, the credit agreement among various
bank lenders was amended to, among other things, permit the Refinancing,
and the Company repaid $30.0 million of term loans thereunder. In
addition, the Company repaid the $25.2 million advance from Holdings and
advanced $16.0 million to Holdings. Upon completion of the redemption of
the 14% Notes, the Company paid a $15.7 million dividend to Holdings which
Holdings, along with additional cash earned on its short term investments
of proceeds received by it in connection with the Refinancing, used to
retire the outstanding advance from the Company. Such payments to
Holdings, along with the public offering by Holdings of its 13 1/4% Senior
Discount Debentures due 2002 (the "Discount Debentures") for an aggregate
amount of proceeds of $165.4 million, were used by Holdings to redeem its
Senior Reset Debentures due 2004 (the "Holdings Reset Debentures") on July
29, 1992.
As a result of the Refinancing, unamortized deferred financing costs
relating to the 14% Notes, the Preferred Stock and the repayment of bank
term loans totaling $3.3 million in the aggregate were written off in 1992
and, along with the redemption premiums of $5.8 million, are reflected as
an extraordinary charge. Since the Company was reporting under SFAS No.
96, there was no tax effect on this charge due to the tax allocation
arrangement with Holdings and Holdings' net operating loss position.
F-46<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
5. Retirement Plans
The Company sponsors pension and defined contribution plans which cover
substantially all employees, other than union employees covered by multi-
employer defined benefit pension plans under collective bargaining
agreements. The pension benefits are paid based on either a career
average, final pay or years of service formula. With respect to certain
hourly employees, pension benefits are provided for based on stated amounts
for each year of service. It is the Company's policy to fund accrued
pension and defined contribution costs in compliance with ERISA
requirements. Assets of the plans consist primarily of equity and bond
funds.
Based on the latest actuarial information available, the following table
sets forth the defined benefit plans funded status as of December 31 (in
thousands):
Plans in which
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
1994 1993 1994 1993
Actuarial present value of
benefit obligations:
Vested benefit obligations $9,182 $6,771 $19,876 $12,325
Non-vested benefit obligations 871 579 1,889 521
Accumulated benefit obligations 10,053 7,350 21,765 12,846
Additional benefits due to
future salary levels 5,358 5,733 3,557 4,092
Projected benefit obligations 15,411 13,083 25,322 16,938
Plan assets at fair value 11,612 9,040 17,249 9,287
Projected benefit obligation
in excess of plan assets 3,799 4,043 8,073 7,651
Unrecognized actuarial gain (loss) 504 (798) 3,916 800
Unrecognized prior service costs (665) - (2,461) (2,093)
Additional minimum liability - - 1,677 2,107
Unfunded pension liability
recognized in the balance sheet $ 3,638 $ 3,245 $11,205 $ 8,465
As required by SFAS No. 87, "Employers' Accounting for Pensions" the
Company recognized an additional pension liability and related intangible
asset of $1.7 million and $2.1 million for pension plans with accumulated
benefits in excess of plan assets as of December 31, 1994 and 1993,
respectively.
F-47<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
5. Retirement Plans (continued)
During 1994, Del Monte transferred fund assets of $8.9 million to the
Company, as calculated using a discount rate of 9%, in accordance with the
terms of the DM Can purchase agreement. In connection with the acquisition
of DM Can, the Company assumed defined benefit plan obligations, as
calculated using its 1993 discount rate of 7.5%, of $10.9 million.
The assumptions used in determining the actuarial present value of plan
benefit obligations as of December 31 are as follows:
1994 1993 1992
Discount rate 8.5% 7.5% 8.5%
Weighted average rate of
compensation increase 4.5% 4.5% 5.0 - 5.5%
Expected long-term rate of
return on plan assets 8.5% 8.5% 8.5%
The components of total pension expense for defined benefit plans are as
follows (in thousands):
1994 1993 1992
Service cost $2,947 $1,809 $1,722
Interest cost 3,334 2,144 2,101
Net amortization and deferrals (2,702) 500 75
Actual loss (return) on assets 539 (1,784) (891)
Other (gains) 4 (183) (183)
Net pension cost of defined
benefit plans $4,122 $2,486 $2,824
In addition, the Company participates in several multi-employer pension
plans which provide defined benefits to certain of its union employees.
The contributions to multi-employer plans were $2.7 million in 1994; $2.0
million in 1993; and $2.2 million in 1992. The Company also sponsors
defined contribution plans covering substantially all employees. Company
contributions to these plans are based upon employee contributions and, in
certain situations, are based upon operating profitability. Contributions
charged to income for these plans were $2.5 million in 1994; $1.5 million
in 1993; and $1.9 million in 1992.
F-48<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
6. Postretirement Benefits Other than Pensions
Effective January 1, 1993, the Company changed its method of accounting for
postretirement health care and other insurance benefits to conform to the
provisions of SFAS No. 106 "Employers' Accounting for Post Retirement
Benefits Other Than Pensions", which requires accrual of these benefits
over the period during which active employees become eligible for such
benefits. Previously, the Company recognized the cost of providing such
benefits on the pay-as-you-go basis. The Company elected to immediately
recognize a cumulative charge of $3.1 million (after related income taxes
of $1.9 million) for this change in accounting principle which represents
the accumulated postretirement benefit obligation existing as of January 1,
1993. The postretirement benefit cost for 1992 has not been restated.
The Company has defined benefit health care and life insurance plans that
provide postretirement benefits to certain employees. The plans are
contributory, with retiree contributions adjusted annually, and contain
cost sharing features including deductibles and coinsurance. The Company
does not fund these plans.
The following table presents the plan's funded status and amounts
recognized in the Company's balance sheet as of December 31 (in thousands):
1994 1993
Accumulated postretirement benefit obligation:
Retirees $1,183 $1,209
Fully eligible active plan participants 1,521 1,197
Other active plan participants 2,577 2,127
Total accumulated postretirement
benefit obligation 5,281 4,533
Unrecognized net gain or (loss) (219) (462)
Unrecognized prior service costs (79) -
Accrued postretirement benefit liability $4,983 $4,071
F-49<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
6. Postretirement Benefits Other than Pensions (continued)
Net periodic postretirement benefit cost include the following components
(in thousands):
1994 1993
Service cost $ 321 $ 152
Interest cost 412 326
Deferred loss 24 -
Other (gains) (38) -
Net periodic postretirement benefit cost $ 719 $ 478
The actuarial assumptions used in determining the accrued postretirement
benefit liability as of December 31 are as follows:
1994 1993
Discount rate 8.5% 7.5%
Weighted average rate of compensation
increase 4.5% 4.5%
The assumed health care cost trend used in measuring the accumulated
postretirement benefit obligation was 14% in 1994 and 15% in 1993,
ultimately declining to 6% in 2003 and remaining at that level thereafter.
A 1% increase in the trend rate assumption would increase the accumulated
postretirement benefit obligation as of December 31, 1994 by approximately
$0.1 million and increase the aggregate of the service and interest cost
components of the net periodic postretirement benefit cost for 1994 by
approximately $0.02 million.
7. Income Taxes
The income tax provision for 1994 and 1993 reflects the adoption of SFAS
No. 109 under which the Company provides for taxes as if it were a separate
taxpayer. The income tax provision for 1992 takes into consideration
certain matters covered under a tax allocation arrangement with Holdings,
under which the Company obtains a federal income tax benefit from Holdings'
tax losses.
F-50<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
7. Income Taxes (continued)
The income tax provision consists of the following (in thousands):
1994 1993 1992
Current
Federal $2,500 $ 300 $ -
State 3,200 1,900 1,705
Foreign (100) (400) 31
5,600 1,800 1,736
Deferred
Federal 5,400 4,100 -
State - 400 464
Foreign - - -
5,400 4,500 464
$11,000 $6,300 $2,200
The aggregate income tax provision varied from that computed by using the
U.S. statutory rate as a result of the following (in thousands):
1994 1993 1992
Income tax provision
at the U.S. federal
income tax rate $ 8,069 $5,091 $5,398
Income tax benefit realized
from Holdings - - (4,804)
State and foreign tax expense
net of federal income benefit 2,015 1,235 1,452
Amortization of goodwill 576 154 154
Other 340 (180) -
$11,000 $6,300 $2,200
F-51<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
7. Income Taxes (continued)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets
at December 31 are as follows (in thousands):
1994 1993
Deferred tax liabilities:
Tax over book depreciation $21,900 $20,700
Book over tax basis of assets acquired 21,400 24,000
Other 4,100 6,392
Total deferred tax liabilities 47,400 51,092
Deferred tax assets:
Book reserves not yet deductible
for tax purposes 24,600 20,700
Net operating loss carryforwards 3,800 7,800
Benefit taken for Holdings' losses 5,500 7,575
Other 483 2,000
Total deferred tax assets 34,383 38,075
Net deferred tax liabilities $13,017 $13,017
The Company files a consolidated Federal income tax return with Holdings.
In accordance with the tax allocation agreement, the Company is obligated
to reimburse Holdings for the use of Holdings' losses only to the extent
that Holdings has taxable income on a stand-alone basis. A liability has
not been established to the extent of the use of Holdings' losses since the
possibility of the ultimate payment for these benefits is considered
remote. Accordingly, the use of Holdings' losses has been accounted for as
a contribution of capital.
Also, in accordance with the tax allocation agreement, the Company is
required to reimburse Holdings for its allocable share of Holdings' tax
liability. The Company's share of Holdings' federal tax liability, for
alternative minimum tax, aggregated $1.5 million in 1994 and $0.3 million
in 1993.
F-52<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
7. Income Taxes (continued)
On a consolidated basis, the Company and Holdings have net operating loss
carryforwards at December 31, 1994 of approximately $75.0 million which are
available to offset future consolidated taxable income of the group and
expire from 2001 through 2008. The Company and Holdings, on a consolidated
basis at December 31, 1994, have $3.4 million of alternative minimum tax
credits which are available indefinitely to reduce future tax payments for
regular federal income tax purposes.
At December 31, 1994 the Company, if reporting on a separate company basis,
would have had net operating loss carryforwards for federal tax purposes of
approximately $9.0 million, which are subject to limitation under the
consolidated return regulations, and expire from 2001 to 2007.
8. Stock Option Plans
Containers and Plastics have established stock option plans for their key
employees pursuant to which options to purchase shares of common stock of
Holdings' and its subsidiaries and stock appreciation rights ("SARs") may
be granted.
Options granted under the plans may be either incentive stock options or
non qualified stock options. To date, all stock options granted have been
non qualified stock options. Under the plans, Containers and Plastics have
each reserved 1,200 shares of their common stock for issuance under their
respective plans. Containers has 13,764 shares and Plastics has 13,800
shares of $0.01 par value common stock currently issued, and all such
shares are owned by Silgan.
The SARs extend to all of the shares covered by the options and provide for
the payment to the holders of the options of an amount in cash equal to the
excess of, in the case of Containers' plan, the pro forma book value, as
defined, of a share of common stock (or in the event of a public offering
or a change in control (as defined), the fair market value of a share of
common stock) over the exercise price of the option, with certain
adjustments for the portion of vested stock appreciation rights not paid at
the time of the recapitalization in June, 1989; or, in the case of the
Plastics plan, in the event of a public offering or a change in control (as
defined), the fair market value of a share of common stock over the
exercise price of the option.
F-53<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
8. Stock Option Plans (continued)
Prior to a public offering or change in control, should an employee leave
the Company, Containers has the right to repurchase, and the employee has
the right to require Containers to repurchase, his common stock at the then
pro forma book value.
At December 31, 1994, there were outstanding options for 1,056 shares under
the Containers' plan and 900 shares under the Plastics' plan. The exercise
prices per share range from $2,122 to $4,933 for the Containers' options
and are $126 for the Plastics' options. The stock options and SARs
generally become exercisable ratably over a five year period. There were
720 options/SARs exercisable at December 31, 1994 under the Containers'
plan. At December 31, 1994, no options/SARs were exercisable under the
Plastics' plan. The Company incurred charges relating to the vesting and
payment of benefits under the stock option plans of $1.5 million in 1994;
$0.2 million in 1993; and $0.4 million in 1992.
In the event of a public offering of any of Holdings' capital stock or a
change in control of Holdings, (i) the options granted by Containers and
Plastics pursuant to the plans, or (ii) any stock issued upon exercise of
such options issued by Containers are convertible into either stock options
or common stock of Holdings, as the case may be. The conversion of such
options or shares will be based upon a valuation of Holdings and an
allocation of such value among the subsidiaries after giving affect to,
among other things, that portion of the outstanding indebtedness of
Holdings allocable to each such subsidiary.
9. Stockholder's Equity
Stockholder's equity includes the following classes of common stock ($.01
par value) and preferred stock:
Shares Shares Issued and Outstanding
Class Authorized December 31, 1994 and 1993
A 1,000 1
B 1,000 1
C 1,000 -
3,000 2
Preferred Stock 1,000 -
The outstanding shares are issued to Holdings.
F-54<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
9. Stockholder's Equity (continued)
In conjunction with the acquisition of DM Can in 1993, Holdings contributed
$15.0 million to the Company.
As of August 16, 1992, the Company redeemed its Preferred Stock. Until
such redemption, the Preferred Stock holders received cumulative
preferential dividends at the rate per annum of 15% per share calculated as
a percentage of $100. Dividends were, at the option of the Company, paid
in additional shares of Preferred Stock. During 1992, the Company issued
21,301 shares of Preferred Stock at $100 per share, representing its
Preferred Stock dividend requirement for the two quarters ended May 15,
1992. A cash dividend payment of $1.1 million was made for the quarter
ended August 15, 1992.
10. Commitments
The Company is committed under certain noncancelable operating leases for
office and plant facilities, equipment and automobiles. Certain operating
leases have renewal options. Minimum future rental payments under these
operating leases are (in thousands):
1995 $ 7,923
1996 6,856
1997 5,577
1998 4,006
1999 2,556
Thereafter 6,174
$33,092
Rental expense was approximately $9.1 million in 1994; $8.0 million in
1993; and $8.0 million in 1992.
F-55<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
11. Related Party Transactions
Pursuant to various management services agreements entered into between
Holdings, Silgan, Containers, Plastics, and S&H, Inc. ("S&H"), a company
wholly owned by Messrs. Silver and Horrigan, the Chairman of the Board and
President of Holdings and Silgan, respectively, S&H provides Holdings and
the Company and its subsidiaries with general management, supervision and
administrative services. In consideration for its services, S&H receives a
fee of 4.95% (of which 0.45% is payable to MS & Co.) of Holdings'
consolidated earnings before depreciation, amortization, interest and taxes
("EBDIT") until EBDIT has reached the Scheduled Amount set forth in the
Management Agreements and 3.3% (of which 0.3% is payable to MS & Co.) after
EBDIT has exceeded the Scheduled Amount up to the Maximum Amount as set
forth in the Management Agreements, plus reimbursement for all related out-
of-pocket expenses. The total amount incurred under the Management
Agreements was $5.0 million in 1994, $4.4 million in 1993, and $4.2 million
in 1992 and was allocated, based upon EBDIT, as a charge to operating
income of each business segment. Included in accounts payable at December
31, 1994 and 1993, was $0.1 million and $0.6 million, payable to S&H,
respectively.
Under the terms of the Management Agreements, the Company has agreed,
subject to certain exceptions, to indemnify S&H and any of its affiliates,
officers, directors, employees, subcontractors, consultants or controlling
persons against any loss or damage they may sustain arising in connection
with the Management Agreements.
In connection with the Credit Agreement entered into in 1993, the Banks
(including Bankers Trust) received certain fees amounting to $8.1 million.
In connection with the 1992 Refinancing, MS & Co. received as compensation
for its services as underwriter for the Secured Notes, the 11 3/4% Notes
and the Discount Debentures an aggregate of $11.5 million.
F-56<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
12. Litigation
On June 30, 1989, Holdings acquired all of the outstanding shares of Silgan
for $6.50 per share (the "Merger"). Contemporaneous with the Merger,
certain holders of 1,050,000 shares of Silgan Class B common stock filed
two actions in the Court of Chancery of the State of Delaware ("Chancery
Court") alleging that Silgan and certain affiliates, officers and directors
breached fiduciary duties in implementing the Merger. One of the actions
was voluntarily dismissed without prejudice of the right to reinstate the
action upon the conclusion of the appraisal proceeding described below.
The second action was dismissed following settlement.
The same Silgan stockholders also sought appraisal of the value of their
shares pursuant to Section 262 of the Delaware General Corporation Law.
Following discovery and settlement with the holders of 650,000 shares for
$6.9 million, including interest, trial of the appraisal with respect to
the remaining 400,000 shares of Class B common stock was conducted during
the week of November 28, 1994. Post-trial briefing is scheduled to be
completed on April 17, 1995.
Management believes that the consideration offered in the Merger fully
reflected the value of Silgan's Class B common stock and that the ultimate
resolution of the appraisal proceeding will not have a material effect on
the financial condition or results of operations of the Company or
Holdings.
Additionally, a complaint was filed by parties who are limited partners of
The Morgan Stanley Leveraged Equity Fund, L.P. ("MSLEF") against a number
of defendants including Silgan and Holdings. The complaint alleges, among
other things, that the general partners of MSLEF breached duties owed to
the limited partners by selling MSLEF's investment in Silgan at a grossly
inadequate price. The Court dismissed all claims against Silgan and
Holdings related to this action on January 14, 1993, and subsequently
upheld that dismissal after the plaintiff filed a motion for reargument.
Because this complaint continues against certain other defendants, the
plaintiff's right to appeal the dismissal of the claims against Silgan and
Holdings has not yet expired.
Management believes that there is no factual basis for the allegations and
claims contained in the complaint. Management also believes that the
lawsuit is without merit and they intend to defend the lawsuit vigorously.
In addition, management believes that the ultimate resolution of these
matters will not have a material effect on the financial condition or
results of operations of Silgan or Holdings.
F-57<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
12. Litigation (continued)
Other than the actions mentioned above there are no other pending legal
proceedings, other than ordinary routine litigation incidental to the
business of the Company, to which the Company is a party or to which any of
its properties are subject.
13. Business Segment Information
The Company is engaged in the packaging industry and operates principally
in two business segments. Both segments operate in North America. There
are no intersegment sales. Presented below is a tabulation of business
segment information for each of the past three years (in millions):
Net Oper. Identifiable Dep. & Capital
Sales Profit Assets Amort. Expend.
1994
Metal container & other(1) $657.1 $67.0(2) $335.9 $23.1 $16.9
Plastic container 204.3 9.4(2) 162.8 14.1 12.3
Consolidated $861.4 $76.4 $498.7 $37.2 $29.2
1993
Metal container & other(1) $459.2 $42.3 $324.5 $17.3 $25.3
Plastic container 186.3 0.6 165.9 16.5 17.2
Consolidated $645.5 $42.9 $490.4 $33.8 $42.5
1992
Metal container & other(1) $437.4 $40.7 $218.7 $16.4 $14.5
Plastic container 192.6 2.3 161.2 15.4 9.0
Consolidated $630.0 $43.0 $379.9 $31.8 $23.5
(1) Includes folding carton sales which are not significant enough to be
reported as a separate segment.
(2) Excludes charge for reduction in carrying value of assets of $7.2
million for metal container segment and $9.5 million for plastic
container segment.
F-58<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
13. Business Segment Information (continued)
Operating profit is reconciled to income before tax as follows (in
millions):
1994 1993 1992
Operating profit $76.4 $42.9 $43.0
Reduction in carrying
value of assets 16.7 - -
Interest and other
corporate expense 36.6 28.3 27.1
Income before income taxes $23.1 $14.6 $15.9
Identifiable assets are reconciled to total assets as follows (in
millions):
1994 1993 1992
Identifiable assets $498.7 $490.4 $379.9
Corporate assets 2.0 1.7 2.3
Total assets $500.7 $492.1 $382.2
Metal container and other segment sales to Nestle accounted for 25.9%,
34.1% and 36.5%, of net sales during the years ended December 31, 1994,
1993 and 1992, respectively. Similarly, sales to Del Monte accounted for
21.4% of net sales during the year ended December 31, 1994. At December
31, 1994 and 1993, 12.6% and 12.6% of the accounts receivable balance was
due from Nestle and at December 31, 1994, 21.9% of the accounts receivable
balance was due from Del Monte.
F-59<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF SILGAN HOLDINGS INC.
CONDENSED BALANCE SHEETS
December 31, 1994 and 1993
(Dollars in thousands)
ASSETS
1994 1993
Current assets:
Cash and cash equivalents $ 17 $ 19
Other current assets - 114
Total current assets 17 133
Investment in and other amounts due
from subsidiary 69,526 58,983
Notes receivable-subsidiary 1,489 1,489
Debt issuance costs 5,372 6,043
$76,404 $66,648
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses $ 4,963 $ 10,291
Amount payable to subsidiary 1,244 606
Total current liabilities 6,207 10,897
Discount debentures 228,195 200,718
Deficiency in stockholders' equity:
Common stock 12 12
Additional paid-in capital 33,606 33,606
Accumulated deficit (191,616) (178,585)
Total deficiency in stockholders'
equity (157,998) (144,967)
$ 76,404 $ 66,648
See Notes to Consolidated Financial Statements for Silgan Holdings Inc.
appearing elsewhere in this Form 10-K.
F-60<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF SILGAN HOLDINGS INC.
CONDENSED STATEMENTS OF OPERATIONS
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
1994 1993 1992
Net Sales $ - $ - $ -
Cost of goods sold - - -
Gross profit - - -
Selling, general and administrative
expenses 838 674 536
Loss from operations (838) (674) (536)
Equity in earnings of consolidated
subsidiaries 17,454 5,028 1,857
Interest expense and other related
financing costs (29,647) (26,339) (30,710)
Interest income - 2 536
Loss before income taxes (13,031) (21,983) (28,853)
Income tax provision - - -
Loss before extraordinary charges (13,031) (21,983) (28,853)
Extraordinary charges relating to
early extinguishment of debt - - (14,522)
Net loss $(13,031) $(21,983) $(43,375)
See Notes to Consolidated Financial Statements for Silgan Holdings Inc.
appearing elsewhere in this Form 10-K.
F-61<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF SILGAN HOLDINGS INC.
CONDENSED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
1994 1993 1992
Cash flows from operating activities: $ (2) $ (196) $(18,921)
Cash flows from investing activities:
Investment in subsidiary - (15,000) -
Cash dividend received from subsidiary 6,911 - 15,724
Net cash provided (used) by
investing activities 6,911 (15,000) 15,724
Cash flows from financing activities:
Proceeds from issuance of common stock - 15,000 -
Proceeds from issuance of discount
debentures - - 165,435
Redemption of reset debentures - - (181,588)
Repayment of advance to subsidiary - - 25,200
Payments to former shareholders
of Silgan (6,911) - -
Debt financing costs - - (7,050)
Net cash provided (used) by
financing activities (6,911) 15,000 1,997
Net decrease in cash and cash
equivalents (2) (196) (1,200)
Cash and cash equivalents at
the beginning of year 19 215 1,415
Cash and cash equivalents at
end of year $ 17 $ 19 $ 215
See Notes to Consolidated Financial Statements for Silgan Holdings Inc.
appearing elsewhere in this Form 10-K.
F-62<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF SILGAN CORPORATION
CONDENSED BALANCE SHEETS
December 31, 1994 and 1993
(Dollars in thousands)
ASSETS
1994 1993
Current assets:
Cash and cash equivalents $ 155 $ 61
Notes receivable-subsidiaries 21,968 39,850
Interest receivable-subsidiaries 1,699 810
Other current assets - 214
Total current assets 23,822 40,935
Investment in and other amounts due
from subsidiaries 70,947 37,104
Notes receivable-subsidiaries 286,640 305,072
Amount receivable from parent 1,244 607
Other assets 793 950
$383,446 $384,668
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of term loans $ 21,968 $ 20,000
Accrued interest payable 1,699 763
Accrued expenses 356 1,268
Total current liabilities 24,023 22,031
Long-term debt 282,568 305,000
Amounts payable to subsidiaries 11,148 3,123
Other long-term liabilities 2,362 1,711
Stockholder's equity:
Common stock - -
Additional paid-in capital 69,535 64,135
Retained earnings (deficit) (6,190) (11,332)
Total stockholder's equity 63,345 52,803
$383,446 $384,668
See Notes to Consolidated Financial Statements for Silgan Corporation
appearing elsewhere in this Form 10-K.
F-63<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF SILGAN CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
1994 1993 1992
Net Sales $ - $ - $ -
Cost of goods sold - - -
Gross profit - - -
Selling, general and administrative
expenses 543 368 239
Loss from operations (543) (368) (239)
Equity in earnings (losses) of
consolidated subsidiaries 13,445 (7,570) 6,148
Other income (expense) (651) 1,480 832
Interest expense and other related
financing costs (30,039) (19,899) (21,429)
Interest income-subsidiaries 29,841 23,940 19,313
Income (loss) before income taxes 12,053 (2,417) 4,625
Income tax provision - - -
Income (loss) before extraordinary
charges 12,053 (2,417) 4,625
Extraordinary charges relating to
early extinguishment of debt - (130) (23)
Net income (loss) 12,053 (2,547) 4,602
Preferred stock dividend requirements - - 2,745
Net income (loss) applicable
to common stockholder $12,053 $(2,547) $ 1,857
See Notes to Consolidated Financial Statements for Silgan Corporation
appearing elsewhere in this Form 10-K.
F-64<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF SILGAN CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
1994 1993 1992
Cash flows from operating activities: $ 7,005 $ 359 $ 1,825
Cash flows from investing activities:
(Increase) decrease in notes
receivable-subsidiaries 35,462 (117,515) (39,323)
(Increase) decrease in investment
in subsidiaries (14,998) - 30,008
Cash dividends received from
subsidiaries - - 16,861
Net cash provided (used) by
investing activities 20,464 (117,515) 7,546
Cash flows from financing activities:
Proceeds from issuance of long-term debt - 140,000 185,000
Reduction of long-term debt (20,464) (37,985) (120,827)
Repayment of advance from Parent - - (25,200)
Capital contribution by Parent - 15,000 -
Payments to former shareholders (6,911) - -
Dividend to Parent - - (15,724)
Redemption of preferred stock - - (30,008)
Cash dividends paid on preferred stock - - (1,137)
Debt financing costs - - (1,301)
Net cash provided (used) by
financing activities (27,375) 117,015 (9,197)
Net increase (decrease) in cash
and cash equivalents 94 (141) 174
Cash and cash equivalents at
the beginning of year 61 202 28
Cash and cash equivalents at
end of year $ 155 $ 61 $ 202
See Notes to Consolidated Financial Statements for Silgan Corporation
appearing elsewhere in this Form 10-K.
F-65<PAGE>
SCHEDULE II
SILGAN CORPORATION
SCHEDULES OF VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
Column A Column B Column C Column D Column E
Additions
Charged
Balance at Charged to to other Balance
beginning costs and accounts Deductions at end of
Description of period expenses describe describe(1) period
For the year ended
December 31, 1992:
Allowance for
doubtful accounts
receivable $ 925 $ 815 $ - $ 97 $1,643
For the year ended
December 31, 1993:
Allowance for
doubtful accounts
receivable $1,643 $ 91 $ - $ 650 $1,084
For the year ended
December 31, 1994:
Allowance for
doubtful accounts
receivable $1,084 $ 621 $ 58 $ 206 $1,557
(1) Uncollectible accounts written off, net of recoveries.
F-66<PAGE>
INDEX TO EXHIBITS
Exhibit No. Exhibit
27. Financial Data Schedule<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SILGAN
HOLDINGS' INC. FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 2,682
<SECURITIES> 0
<RECEIVABLES> 66,786
<ALLOWANCES> 1,557
<INVENTORY> 122,429
<CURRENT-ASSETS> 198,384
<PP&E> 419,557
<DEPRECIATION> 167,747
<TOTAL-ASSETS> 504,821
<CURRENT-LIABILITIES> 121,650
<BONDS> 510,763
<COMMON> 12
0
0
<OTHER-SE> (158,010)
<TOTAL-LIABILITY-AND-EQUITY> 504,821
<SALES> 861,374
<TOTAL-REVENUES> 861,374
<CGS> 747,457
<TOTAL-COSTS> 747,457
<OTHER-EXPENSES> 16,729
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65,789
<INCOME-PRETAX> (7,431)
<INCOME-TAX> 5,600
<INCOME-CONTINUING> (13,031)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,031)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
