Page 1 of 15
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarterly Period Ended March 31, 1996 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period from ______ to _______.
Commission file number 33-28409
SILGAN HOLDINGS INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1269834
(State of Incorporation) (I.R.S. Employer Identification Number)
4 Landmark Square
Stamford, Connecticut 06901
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (203) 975-7110
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
As of May 10, 1996 the number of shares outstanding of each of the
issuer's classes of common stock is as follows:
Classes of shares of Number of
common stock outstanding, $0.01 par value shares outstanding
Class A 417,500
Class B 667,500
Class C 50,000<PAGE>
Page 2 of 15
Part I. Financial Information
Item 1. Financial Statements
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March 31, March 31, Dec. 31,
1996 1995 1995
(unaudited)(unaudited)(audited)
ASSETS
Current assets:
Cash and cash equivalents $ 5,991 $ 1,352 $ 2,102
Accounts receivable, net 98,177 75,205 109,929
Inventories 254,092 148,501 210,471
Prepaid expenses and other current
assets 10,957 5,225 5,801
Total current assets 369,217 230,283 328,303
Property, plant and equipment, net 491,177 251,832 487,301
Goodwill, net 53,204 29,699 53,562
Other assets 29,156 22,675 30,880
$942,754 $534,489 $900,046
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $113,674 $ 50,416 $138,195
Accrued payroll and related costs 40,613 28,207 32,805
Accrued interest payable 8,340 5,713 4,358
Other accrued expenses 38,903 25,136 43,457
Bank working capital loans 60,150 15,200 7,100
Current portion of long-term debt 27,192 19,514 28,140
Total current liabilities 288,872 144,186 254,055
Long-term debt 757,501 518,280 750,873
Deferred income taxes 6,836 7,060 6,836
Other long-term liabilities 69,206 24,381 68,086
Deficiency in stockholders' equity:
Common stock 12 12 12
Additional paid-in capital 33,606 33,606 33,606
Accumulated deficit (213,279) (193,036) (213,422)
Total deficiency in stockholders'
equity (179,661) (159,418) (179,804)
$942,754 $534,489 $900,046
See accompanying notes.<PAGE>
Page 3 of 15
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands)
Three Months Ended
March 31, March 31,
1996 1995
Net sales $279,860 $203,264
Cost of goods sold 243,314 174,265
Gross profit 36,546 28,999
Selling, general and administrative expenses 12,830 10,168
Income from operations 23,716 18,831
Interest expense and other related
financing costs 22,573 17,251
Income before income taxes 1,143 1,580
Income tax provision 1,000 3,000
Net income (loss) $ 143 $ (1,420)
See accompanying notes.<PAGE>
Page 4 of 15
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three Months Ended
March 31, March 31,
1996 1995
Cash flows from operating activities:
Net income (loss) $ 143 $ (1,420)
Adjustments to reconcile net income (loss) to
net cash (used) provided by operating activities:
Depreciation 14,589 8,333
Amortization 1,958 1,766
Accretion of discount on discount debentures 6,628 7,517
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 11,713 (10,025)
(Increase) in inventories (43,621) (26,072)
(Decrease) increase in trade accounts payable (24,521) 13,571
Other, net 1,961 9,995
Total adjustments (31,293) 5,085
Net cash (used) provided by operating activities (31,150) 3,665
Cash flows from investing activities:
Capital expenditures (18,558) (8,359)
Proceeds from sale of assets 1,495 3,218
Net cash used in investing activities (17,063) (5,141)
Cash flows from financing activities:
Borrowings under working capital loans 210,350 89,710
Repayments under working capital loans (157,300) (87,110)
Repayment of term loans (948) (2,454)
Net cash provided by financing activities 52,102 146
Net increase in cash and cash equivalents 3,889 (1,330)
Cash and cash equivalents at beginning of year 2,102 2,682
Cash and cash equivalents at end of period $ 5,991 $ 1,352
Supplementary data:
Interest paid $ 10,864 $ 4,304
Income taxes paid 214 2,648
See accompanying notes.<PAGE>
Page 5 of 15
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 1996 and 1995 and for
the three months then ended is unaudited)
1. Basis of Presentation
The accompanying condensed unaudited consolidated financial statements of
Silgan Holdings Inc. ("Holdings" or the "Company") have been prepared in
accordance with Rule 10-01 of Regulation S-X and, therefore, do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations and cash flows in conformity
with generally accepted accounting principles. All adjustments of a
normal recurring nature have been made, including appropriate estimates
for reserves and provisions which are normally determined or settled at
year end. In the opinion of the Company, however, the accompanying
financial statements contain all adjustments (consisting solely of a
normal recurring nature) necessary to present fairly Holdings' financial
position as of March 31, 1996 and 1995 and December 31, 1995, the results
of operations for the three months ended March 31, 1996 and 1995, and the
statements of cash flows for the three months ended March 31, 1996 and
1995.
While the Company believes that the disclosures presented are adequate to
make the information not misleading, it is suggested that these financial
statements be read in conjunction with the financial statements and notes
included in Holdings' Annual Report on Form 10-K for the year ended
December 31, 1995.
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
lived Assets to be Disposed of" in the first quarter of 1996. Under SFAS
No. 121, impairment losses will be recognized when events or changes in
circumstances indicate that the undiscounted cash flows generated by the
assets are less than the carrying value of such assets. Impairment losses
are then measured by comparing the fair value of assets to their carrying
amount. There were no impairment losses recognized during the first
quarter of 1996 as a result of the adoption of SFAS NO. 121.<PAGE>
Page 6 of 15
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 1996 and 1995 and for the
three months then ended is unaudited)
1. Basis of Presentation (continued)
The Company also adopted SFAS No. 123, "Accounting for Stock-Based
Compensation" for 1996. Under SFAS No. 123, compensation expense for all
stock-based compensation plans would be recognized based on the fair value
of the options at the date of grant using an option pricing model. As
permitted under SFAS No. 123, the Company may either adopt the new
pronouncement or follow the current accounting methods as prescribed under
APB No. 25. The Company has not elected to adopt SFAS No. 123 and
continues to recognize compensation expense in accordance with APB No. 25.
2. Inventories
Inventories consisted of the following (dollars in thousands):
March 31, March 31, Dec. 31,
1996 1995 1995
Raw materials $ 44,771 $ 31,063 $ 46,027
Work-in-process 21,638 24,890 24,869
Finished goods 178,863 96,462 135,590
Spare parts and other 7,823 1,383 6,344
253,095 153,798 212,830
Adjustment to value inventory
at cost on the LIFO Method 997 (5,297) (2,359)
$254,092 $148,501 $210,471<PAGE>
Page 7 of 15
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 1996 and 1995 and for the
three months then ended is unaudited)
3. Acquisitions
Set forth below is the Company's summary unaudited pro forma results of
operations for the three months ended March 31, 1995. The unaudited pro
forma results of operations of the Company for the three months ended March
31, 1995 include the historical results of the Company and the Food Metal &
Specialty business of American National Can ("AN Can") for such period and
give effect to certain pro forma adjustments. The pro forma adjustments
made to the historical results of operations for March 31, 1995 reflect the
effect of purchase accounting adjustments based upon preliminary appraisals
and valuations, the financing of the acquisition by the Company, the
refinancing of the Company's debt obligations, and certain other
adjustments as if these events had occurred as of the beginning of the
1995. 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 January 1,
1995, or to project the Company's results of operations for any future
period (dollars in thousands):
Pro forma
March 31,
1995
Net sales $311,868
Income from operations 27,308
Income before income taxes 4,728
Net income 1,078
4. 13 1/4% Senior Discount Debentures
On June 15, 1996, the Company will redeem $17.4 million face value of its
13 1/4% Senior Discount Debentures due 2002 ("Discount Debentures").<PAGE>
Page 8 of 15
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations - Historical
Three months Ended March 31, 1996 Compared with
Three Months Ended March 31, 1995
Summary results for the Company's two business segments, metal and plastic
containers, for the three months ended March 31, 1996 and 1995 are provided
below.
March 31,
1996 1995
(Dollars in millions)
Net sales:
Metal containers and other $226.4 $144.7
Plastic containers 53.5 58.6
Consolidated $279.9 $203.3
Operating profit:
Metal containers and other $ 19.8 $ 15.9
Plastic containers 4.2 4.3
Corporate expense (0.3) (1.4)
Consolidated $ 23.7 $ 18.8
Consolidated net sales increased $76.6 million, or 37.7%, to $279.9 million
for the three months ended March 31, 1996, as compared to net sales of
$203.3 million for the same three months in the prior year. This increase
resulted primarily from net sales generated by the AN Can operations
offset, in part, by lower net sales of metal containers to the Company's
existing customer base and lower net sales of plastic containers.<PAGE>
Page 9 of 15
Results of Operations - Historical (continued)
Net sales for the metal container business (including net sales of its
specialty business of $22.6 million) were $226.4 million for the three
months ended March 31, 1996, an increase of $81.7 million from net sales of
$144.7 million for the same period in 1995. Net sales of metal cans of
$203.8 million for the three months ended March 31, 1996 were $61.2 million
greater than net sales of metal cans of $142.6 million for the same
period in 1995. This increase resulted principally from net sales of metal
cans generated by the AN Can operations of $85.6 million during the first
three months of 1996. The decline in sales of metal containers to the
Company's existing customers of $24.4 million during the first quarter of
1996 as compared to the first quarter of 1995 was primarily attributable to
lower unit volume. Approximately half of the decline reflects the expected
production and shipment of vegetable pack cans in the second and third
quarters of 1996 as compared to the first quarter of 1995, and the
remainder of the decline relates to lower unit sales of products other than
vegetable containers.
Sales of specialty items included in the metal container segment increased
$20.5 million to $22.6 million during the three months ended March 31, 1996
as compared to the same period in 1995, due to additional sales generated
in 1996 by the operations acquired from AN Can.
Net sales for the plastic container business of $53.5 million during the
three months ended March 31, 1996 decreased $5.1 million from net sales of
$58.6 million for the same period in 1995. The decline in net sales
resulted principally from the pass through of lower resin costs.
Cost of goods sold as a percentage of consolidated net sales was 86.9%
($243.3 million) for the three months ended March 31, 1996, an increase of
1.2 percentage points as compared to 85.7% ($174.3 million) for the same
period in 1995. The increase in cost of goods sold as a percentage of net
sales was primarily attributable to the higher cost base of the AN Can
operations and increased per unit manufacturing costs resulting from lower
can production volumes, offset, in part, by improved operating efficiencies
due to plant consolidations and synergies realized from the AN Can
acquisition.<PAGE>
Page 10 of 15
Results of Operations - Historical (continued)
Selling, general and administrative expenses as a percentage of
consolidated net sales declined 0.4 percentage points to 4.6% ($12.8
million) for the three months ended March 31, 1996, as compared to 5.0%
($10.2 million) for the three months ended March 31, 1995. The decrease in
selling, general and administrative expenses as a percentage of net sales
reflects the expected lower administrative expense realized from the
integration of AN Can and the Company, despite the incurrence of redundant
costs during the integration, and lower corporate legal and administrative
costs. The Company expects that its selling, general and administration
costs as a percentage of sales will continue to decline in 1996 as it
completes the integration of the administrative functions of its metal
container business.
Income from operations as a percentage of consolidated net sales was 8.5%
($23.7 million) for the three months ended March 31, 1996, as compared with
9.2% ($18.8 million) for the same period in 1995. The decline in income
from operations as a percentage of consolidated net sales was primarily
attributable to the aforementioned decline in gross margin.
Income from operations as a percentage of net sales for the metal container
business was 8.8% ($19.8 million) for the three months ended March 31,
1996, as compared to 11.0% ($15.9 million) for the same period in the prior
year. The decrease in income from operations as a percentage of net sales
for the metal container business principally resulted from higher per unit
manufacturing costs incurred as a result of lower production volume and
lower margins realized on sales made from AN Can facilities due to their
higher cost base.
Income from operations as a percentage of net sales for the plastic
container business was 7.9% ($4.2 million) for the three months ended March
31, 1996, as compared to 7.3% ($4.3 million) for the same period in 1995.
The operating performance of the plastic container business improved as a
result of production planning and scheduling efficiencies and benefits
realized from capital investment.
Interest expense increased $5.3 million to $22.6 million for the three
months ended March 31, 1996, principally as a result of increased
borrowings to finance the acquisition of AN Can, offset, in part, by the
benefit realized from the purchase of a portion of the Discount Debentures
with proceeds from the lower cost credit facility and slightly lower
average bank borrowing rates.<PAGE>
Page 11 of 15
Results of Operations - Historical (continued)
The provisions for income taxes for the three months ended March 31, 1996
and 1995 are comprised of Federal, state and foreign income taxes currently
payable.
As a result of the items discussed above, net income for the three months
ended March 31, 1996 was $0.1 million, $1.5 million greater than the loss
of $1.4 million for the three months ended March 31, 1995.
Results of Operations - Pro forma
Three months Historical Ended March 31, 1996 Compared with
Three Months Pro Forma Ended March 31, 1995
The following table compares the historical results of operations of the
Company for the three months ended March 31, 1996, to the pro forma results
of operations of the Company and AN Can for the three months ended March
31, 1995, after giving effect to the acquisition of AN Can as of the
beginning of 1995.
The pro forma data includes the historical results of the Company and AN
Can and reflects the effect of purchase accounting adjustments based on
preliminary appraisals and valuations, the financing of the acquisition of
AN Can, the refinancing of certain of the Company's debt obligations, and
certain other adjustments as if these events occurred as of the beginning
of the period presented. The pro forma adjustments are based upon
available information and upon certain assumptions that the Company
believes are reasonable. The purchase price allocation will be finalized
within one year of the closing of the acquisition of AN Can and may differ
from that used for the pro forma data. Differences between actual and
preliminary valuations, actuarially computed employee benefit costs, and
expenses associated with plant rationalizations may cause adjustments to
the AN Can purchase price allocation. The unaudited pro forma combined
financial data do not purport to represent what the Company's financial
position or results of operations would actually have been had these
transactions in fact occurred on the date or at the beginning of the period
indicated, or to project the Company's financial position or results of<PAGE>
Page 12 of 15
Results of Operations - Pro forma (continued)
operations for any future date or period. The pro forma information
presented should be read in conjunction with the historical results of
operations of the Company for the quarters ended March 31, 1996 and 1995.
Three Months Ended
Historical Pro forma
March 31, March 31,
1996 1995
(Dollars in millions)
Net sales:
Metal containers and other $226.4 $253.3
Plastic containers 53.5 58.6
Consolidated $279.9 $311.9
Operating profit:
Metal containers and other $ 19.8 $ 24.4
Plastic containers 4.2 4.3
Corporate expense (0.3) (1.4)
Consolidated $ 23.7 $ 27.3
Consolidated net sales for the three months ended March 31, 1996 declined
$32.0 million as compared to pro forma consolidated net sales for the same
period in the prior year. The decrease in net sales was attributable to a
decline in net sales to the Company's existing customers of $24.4 million
due to the expected production and shipment of vegetable pack cans in the
second and third quarters of 1996 as compared to the first quarter of 1995
and lower unit sales of products other than vegetable containers, lower
sales from the AN Can facilities of $4.9 million principally due to a
customer shifting to self manufacturing, and lower sales of plastic
containers due to the pass through of lower resin costs, offset, in part,
by higher sales of specialty packaging products.
Income from operations as a percentage of consolidated net sales for the
three months ended March 31, 1996 was 8.5% ($23.7 million) as compared to
pro forma income from operations as a percentage of sales of 8.8% ($27.3
million) for the three months ended March 31, 1995. Management believes
that the decrease in income from operations for the three months ended
March 31, 1996 as compared to pro forma income from operations for the same
period in the prior year was attributable to increased per unit costs
realized on lower production and sales volumes offset by the realization of
greater than anticipated manufacturing synergies and slightly lower
selling, general and administrative expenses.<PAGE>
Page 13 of 15
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 will also be affected by the interest associated with
Holdings' indebtedness.
For the first three months of 1996, net borrowings of working capital loans
of $53.1 million and proceeds of $1.5 million from the sale of assets were
used to fund $31.2 million of the Company's operating activities, capital
expenditures of $18.6 million, the repayment of $0.9 million of term loans,
and increase cash balances by $3.9 million. The Company's earnings before
depreciation, interest, taxes and amortization ("EBDITA") for the three
months ended March 31, 1996 increased by $12.1 million to $40.1 million in
comparison to the same period in 1995. The increase in EBDITA principally
reflected the generation of additional cash earnings from the AN Can
operations.
For the three months ended March 31, 1996, the operating cash flow of the
Company declined from the same period in the prior year primarily as a
result of the increased working capital needed, mainly for inventory, to
support the AN Can operations. Inventories increased due to the normal
seasonal build while accounts receivable declined from year-end as a result
of lower sales volume in 1996 and the payment by certain customers of
amounts due at year-end in early 1996. The decline in trade accounts
payable is attributable to the adoption by the Company of vendor payment
terms similar to AN Can.
Management believes that the average working capital needs of the combined
operations of the Company and AN Can for 1996 as compared to the pro forma
combined operations in the prior year will decline predominately as a
result of carrying a lower amount of finished goods inventory due to
scheduling production closer to the summer seasonal peak and the change in
vendor payment terms referred to above.<PAGE>
Page 14 of 15
Capital Resources and Liquidity (continued)
Because the Company sells metal containers used in vegetable and fruit
processing, its sales are seasonal. As is common in the packaging
industry, the Company must access working capital to build inventory and
then carry accounts receivable for some customers beyond the end of the
summer and fall packing season. Seasonal accounts are generally settled by
year end. The acquisition of AN Can increased the Company's seasonal metal
containers business, and as a result the Company increased the amount of
working capital loans available to it under its credit facility to $225.0
million. 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 $170 million of its
working capital revolver, including letters of credit, will be utilized at
its peak in June 1996.
As of March 31, 1996, the outstanding principal amount of working capital
loans of the Company was $60.2 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 $141.3
million.
Effective June 15, 1996, the Company will redeem $17.4 million face value
of its Discount Debentures. 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 up to $13.0 million
will be required to be made thereon. Silgan Corporation, a wholly-owned
subsidiary, intends to make such funds available to Holdings to enable it
to pay interest on its Discount Debentures.
Presently, the Company is actively considering refinancing a portion of its
Discount Debentures with lower cost indebtedness. In addition, the Company
is considering refinancing the remainder of its Discount Debentures 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.<PAGE>
Page 15 of 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report to be signed on its
behalf by the undersigned thereunto duly authorized.
SILGAN HOLDINGS INC.
Dated: May 15, 1996 /s/Harley Rankin, Jr.
Harley Rankin, Jr.
Executive Vice President, Chief
Financial Officer and Treasurer
(Principal Financial Officer)
Dated: May 15, 1996 /s/Harold J. Rodriguez, Jr.
Harold J. Rodriguez, Jr.
Vice President and Controller
(Chief Accounting Officer)<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Silgan
Holdings' Form 10-Q for the quarter ended March 31, 1996 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 5,991
<SECURITIES> 0
<RECEIVABLES> 98,177
<ALLOWANCES> 0
<INVENTORY> 254,092
<CURRENT-ASSETS> 369,217
<PP&E> 491,177
<DEPRECIATION> 0
<TOTAL-ASSETS> 942,754
<CURRENT-LIABILITIES> 288,872
<BONDS> 757,501
0
0
<COMMON> 12
<OTHER-SE> (179,673)
<TOTAL-LIABILITY-AND-EQUITY> 942,754
<SALES> 279,860
<TOTAL-REVENUES> 279,860
<CGS> 243,314
<TOTAL-COSTS> 243,314
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,573
<INCOME-PRETAX> 1,143
<INCOME-TAX> 1,000
<INCOME-CONTINUING> 143
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 143
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
