<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 27, 1997
REGISTRATION NO. 333-11989
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 3
TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
SILGAN HOLDINGS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 06-1269834
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
----------------
4 LANDMARK SQUARE
STAMFORD, CT 06901
(203) 975-7110
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
HARLEY RANKIN, JR.
4 LANDMARK SQUARE
STAMFORD, CT 06901
(203) 975-7110
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES OF ALL COMMUNICATIONS TO:
FRANK W. HOGAN, III, ESQ. JERRY V. ELLIOTT, ESQ.
WINTHROP, STIMSON, PUTNAM & ROBERTS SHEARMAN & STERLING
695 EAST MAIN STREET 599 LEXINGTON AVENUE
STAMFORD, CT 06901 NEW YORK, NY 10022
(203) 348-2300 (212) 848-4000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If the registrant elects to deliver its latest annual report to security-
holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this form, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JANUARY 27, 1997
3,700,000 SHARES
[LOGO] SILGAN
HOLDINGS INC.(TM)
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
----------
All of the shares of Common Stock offered hereby are being sold by the
Company. Prior to the Offering, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public
offering price per share will be between $18 and $20. For factors considered in
determining the initial public offering price, see "Underwriting".
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN
CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.
The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "SLGN".
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
-------------- ------------ -----------
<S> <C> <C> <C>
Per Share............................... $ $ $
Total(3)................................ $ $ $
</TABLE>
- -----
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting estimated expenses of $1,000,000 payable by the Company.
(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional 555,000 shares at the initial public offering price per
share, less the underwriting discount, solely to cover over-allotments. If
such option is exercised in full, the total initial public offering price,
underwriting discount and proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting".
----------
The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York,
on or about February , 1997, against payment therefor in immediately available
funds.
GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
----------
The date of this Prospectus is February , 1997.
<PAGE>
[Reserved for photographs]
The Company intends to furnish to its stockholders annual reports containing
audited financial statements and quarterly reports containing unaudited
interim financial information for the first three quarters of each year of the
Company.
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and the consolidated financial
statements of the Company contained elsewhere in this Prospectus, as well as
the information appearing in the documents incorporated by reference herein.
Unless otherwise indicated or unless the context otherwise requires, (i) the
term "Holdings" means Silgan Holdings Inc., a Delaware corporation, the term
"Company" means the combined business operations of Holdings and its
subsidiaries, and the term "Silgan" means Silgan Corporation, a Delaware
corporation and a wholly owned subsidiary of Holdings; (ii) all share and per
share data have been adjusted to reflect the 17.133145 to 1 stock split of the
outstanding Common Stock of Holdings effected by Holdings prior to the date of
this Prospectus (the "Stock Split"), as described under "Description of Capital
Stock"; and (iii) the information contained in this Prospectus (A) gives effect
to the amendment to Holdings' restated certificate of incorporation to convert
the separate classes of common stock of Holdings into one class of common stock
of Holdings (see "Description of Capital Stock"), (B) assumes the Underwriters'
over-allotment option is not exercised and (C) assumes a public offering price
per share of Common Stock equal to $19.00. Certain information contained in
this summary and elsewhere in this Prospectus, including information under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and information with respect to the Company's expected operations,
expected financial results, cost savings, plans and strategy for its business
and related financing, are forward-looking statements. For a discussion of
important factors that could cause actual results to differ materially from the
forward-looking statements, see "Risk Factors".
THE COMPANY
The Company is a leading North American manufacturer of consumer goods
packaging products that currently produces (i) steel and aluminum containers
for human and pet food, (ii) custom designed plastic containers for personal
care, health, food, pharmaceutical and household chemical products and (iii)
specialty packaging items, including metal caps and closures, plastic bowls and
paper containers used by processors in the food industry. The Company is the
largest manufacturer of metal food containers in North America, with a unit
sale market share for the twelve months ended October 31, 1996 of 35% in the
United States, and is a leading manufacturer of plastic containers in North
America for personal care products. The Company's strategy is to increase
shareholder value by growing its existing businesses and expanding into other
segments by applying its expertise in acquiring, financing, integrating and
efficiently operating consumer goods packaging businesses.
The Company was founded in 1987 by its current Co-Chief Executive Officers.
Since its inception, the Company has acquired and successfully integrated ten
businesses, including the recent acquisitions of substantially all of the
assets of the Food Metal and Specialty business ("AN Can") of American National
Can Company ("ANC") in August 1995 for a purchase price of approximately $362.0
million (including net working capital of approximately $156.0 million) and the
U.S. metal container manufacturing business ("DM Can") of Del Monte Corporation
("Del Monte") in December 1993 for a purchase price of approximately $73.3
million (including net working capital of approximately $21.9 million). In
addition, on October 9, 1996 the Company completed its acquisition of Finger
Lakes Packaging Company, Inc. ("Finger Lakes"), the metal food container
manufacturing subsidiary of Curtice Burns Foods, Inc. ("Curtice Burns"). See
"--Recent Developments". The Company's strategy has enabled it to rapidly
increase its net sales and income from operations. The Company's net sales have
increased from $630.0 million in 1992 to $1,405.7 million in 1996, representing
a compound annual growth rate of approximately 22%. During this period, income
from operations increased from $42.2 million in 1992 to an estimated $123.0
million in 1996, representing a compound annual growth
3
<PAGE>
rate of approximately 31%, while the Company's income from operations as a
percentage of net sales increased approximately 2.1 percentage points from 6.7%
to an estimated 8.8% over the same period.
The Company's philosophy, which has contributed to its strong performance
since inception, is based on: (i) a significant equity ownership by management
and an entrepreneurial approach to business, (ii) its low cost producer
position and (iii) its long-term customer relationships. The Company's senior
management has a significant ownership interest in the Company, which fosters
an entrepreneurial management style and places a primary focus on creating
shareholder value. The Company has achieved a low cost producer status through
(i) the maintenance of a flat, efficient organizational structure, resulting in
low selling, general and administrative expenses as a percentage of total net
sales, (ii) purchasing economies, (iii) significant capital investments that
have generated manufacturing and production efficiencies, (iv) plant
consolidations and rationalizations and (v) the proximity of its plants to its
customers. The Company's philosophy has also been to develop long-term customer
relationships by acting in partnership with its customers, providing reliable
quality and service and utilizing its low cost producer position. This
philosophy has resulted in numerous long-term supply contracts, high retention
of customers' business and recognition from its customers, as demonstrated by
many quality and service awards.
GROWTH STRATEGY
The Company intends to enhance its position as a leading supplier of consumer
goods packaging products by aggressively pursuing a strategy designed to
achieve future growth and to increase profitability. The key components of this
strategy are to (i) increase the Company's market share in its current business
lines through acquisitions and internal growth, (ii) expand into complementary
business lines by applying the Company's acquisition and operating expertise to
other areas of the North American consumer goods packaging market and (iii)
improve the profitability of acquired businesses through integration,
rationalization and capital investments to enhance their manufacturing and
production efficiency.
INCREASE MARKET SHARE THROUGH ACQUISITIONS AND INTERNAL GROWTH. The Company
has increased its revenues and market share in the metal container, plastic
container and specialty markets through acquisitions and internal growth. As a
result of this strategy, the Company has diversified its customer base,
geographic presence and product line. Management believes that certain industry
trends exist which will enable the Company to continue to acquire attractive
businesses in its existing markets. For example, during the past ten years, the
metal container market has experienced significant consolidation due to the
desire by food processors to reduce costs and deploy resources to their core
operations. Self-manufacturers are increasingly outsourcing their container
needs by selling their operations to commercial container manufacturing
companies and agreeing to purchase containers from the buyer pursuant to long-
term contracts. The Company's acquisitions of the metal container manufacturing
operations of the Nestle Food Company ("Nestle"), The Dial Corporation and Del
Monte reflect this trend. As a result of its growth strategy, the Company has
more than tripled its overall share of the U.S. metal food container market
from approximately 10% in 1987 to approximately 35% for the twelve months ended
October 31, 1996. The Company expects this consolidation trend to continue as
evidenced by its October 9, 1996 acquisition of Finger Lakes. See "--Recent
Developments". The Company's plastic container business has also increased its
market position primarily through strategic acquisitions, from a sales base of
$88.8 million in 1987 to $216.4 million in 1996. The plastic container segment
of the consumer goods packaging industry is highly fragmented, and management
intends to pursue consolidation opportunities in that segment.
4
<PAGE>
The Company also expects to generate internal growth due to its participation
in certain higher growth segments of the consumer goods packaging market. For
example, due to increasing consumer preference for plastic as a substitute for
glass, the Company is aggressively pursuing opportunities for its custom
designed polyethylene terephthalate ("PET") and high density polyethylene
("HDPE") containers. These opportunities include producing PET containers for
regional bottled water companies, and HDPE and PET containers for products such
as shampoo, mouthwash, salad dressing and liquor. The Company also believes
that there will be opportunities to expand its specialty business, which
generated net sales of $90.7 million in 1996. Specialty products manufactured
by the Company include metal closures for vacuum sealed glass containers, its
licensed Omni plastic container, a plastic, microwaveable bowl with an easy-
open metal end, and paper containers.
EXPAND INTO COMPLEMENTARY BUSINESS LINES THROUGH ACQUISITIONS. Management
believes that it can successfully apply its acquisition and operating expertise
to new segments of the consumer goods packaging industry. For example, with the
AN Can acquisition, the Company expanded its specialty business into metal caps
and closures and its licensed Omni plastic container. Management believes that
certain trends in and characteristics of the North American consumer goods
packaging industry will continue to generate attractive acquisition
opportunities in complementary business lines. The Company is focused on the
North American consumer goods packaging industry, which represents a
significant part of the $95 billion North American packaging market (based on
estimated total sales in 1994). Importantly, the industry is also fragmented,
with numerous segments and multiple participants in each of them. In addition,
many of these segments are experiencing consolidation.
ENHANCE PROFITABILITY OF ACQUIRED COMPANIES. The Company seeks to acquire
businesses at reasonable cash flow multiples and to enhance profitability by
rationalizing plants, by improving manufacturing and production efficiencies
and through purchasing economies. Since 1991, the Company has reduced costs by
closing twelve smaller, higher cost facilities. Since its inception in 1987,
the Company has invested approximately $271.9 million to upgrade acquired
manufacturing facilities, aimed at generating manufacturing and production
efficiencies and achieving a low cost producer position. As a result, the
Company's acquisitions have generally been accretive to earnings and have
produced high returns on assets. The AN Can acquisition illustrates the ability
of the Company to enhance the profitability of acquired businesses. The Company
estimates that it has reduced AN Can's operating costs from its historical 1994
level by at least $21.0 million, through selling and administrative cost
reductions, improved manufacturing and production efficiencies and purchasing
economies. The Company expects to further reduce AN Can's operating costs over
the next few years by an aggregate of approximately $15.0 million
(approximately half of which is expected to be realized in 1997) through the
elimination of transitional administrative costs, the realization of additional
manufacturing and production synergies with its metal container business and
plant rationalizations.
FINANCIAL STRATEGY
The Company's financial strategy has been to use leverage to support its
growth and optimize shareholder returns. The Company's stable and predictable
cash flow, generated largely as a result of its long-term customer
relationships, has supported its financial strategy. Management has
successfully operated its businesses and achieved its growth strategy while
managing the Company's indebtedness. Management intends to apply this strategy
to further expand its business. Additionally, the Offering will provide the
Company with improved financial flexibility to implement its growth strategy.
5
<PAGE>
MANAGEMENT
The Company was founded by R. Philip Silver and D. Greg Horrigan, former
members of senior management of the packaging operations of Continental Group
Inc. ("Continental Can Company"), which in 1986 was one of the largest
packaging companies in the world. At Continental Can Company, Mr. Silver served
as President, and Mr. Horrigan served as Executive Vice President and Operating
Officer. The Company's senior members of management have on average 24 years of
experience in the packaging industry. Mr. Silver, Mr. Horrigan and other
members of senior management have a large ownership interest in the Company.
After the Offering, Messrs. Silver and Horrigan will collectively own 34.6%
(assuming that all outstanding stock options have been exercised in full) of
the fully diluted Common Stock and senior management (including Messrs. Silver
and Horrigan) will collectively own 43.4% (assuming that all outstanding stock
options have been exercised in full) of the fully diluted Common Stock. The
Company's ownership structure and philosophy align management's interests with
those of its shareholders.
BUSINESS SEGMENTS
Holdings is a holding company that conducts its business through two
operating companies, Silgan Containers Corporation ("Containers") and Silgan
Plastics Corporation ("Plastics"), each of which is a wholly owned subsidiary
of Silgan.
CONTAINERS. For 1996, Containers had net sales of $1,189.3 million (85% of
the Company's net sales) and estimated income from operations of $106.0 million
(85% of the Company's estimated income from operations) (without giving effect
to corporate expense). Containers manufactures metal containers for vegetables,
fruit, pet food, meat, tomato based products, coffee, soup, seafood and
evaporated milk. The Company estimates that approximately 80% of Containers'
projected sales in 1997 will be pursuant to long-term supply arrangements.
Containers also manufactures certain specialty packaging items, including metal
caps and closures, plastic bowls and paper containers used by processors in the
food industry. For 1996, Containers had net sales of specialty packaging items
of $90.7 million.
PLASTICS. For 1996, Plastics had net sales of $216.4 million (15% of the
Company's net sales) and estimated income from operations of $18.0 million (15%
of the Company's estimated income from operations) (without giving effect to
corporate expense). Plastics emphasizes value-added design, fabrication and
decoration of custom containers in its business. Plastics manufactures custom
designed HDPE containers for health and personal care products, including
containers for shampoos, conditioners, hand creams, lotions, cosmetics and
toiletries, household chemical products, including containers for scouring
cleaners, cleaning agents and lawn and garden chemicals and pharmaceutical
products, including containers for tablets, antacids and eye cleaning
solutions. Plastics also manufactures PET custom designed containers for
mouthwash, respiratory and gastrointestinal products, liquid soap, skin care
lotions, salad dressings, condiments, instant coffee, bottled water and liquor.
6
<PAGE>
RECENT DEVELOPMENTS
ACQUISITION
On October 9, 1996, Containers acquired substantially all of the assets of
Finger Lakes, a metal food container manufacturer with facilities in Lyons, New
York and Benton Harbor, Michigan and a wholly owned subsidiary of Curtice
Burns, for a purchase price of approximately $29.9 million (including net
working capital of approximately $8.0 million). As part of the transaction,
Containers entered into a ten year supply agreement with Curtice Burns to
supply all of the metal food container requirements of Curtice Burns' Comstock
Michigan Fruit and Brooks Foods divisions. For its fiscal year ended June 29,
1996, Finger Lakes had net sales of $48.8 million. The Company financed this
acquisition through working capital borrowings under the Silgan Credit
Agreement (as defined herein).
The Company is continually evaluating and intends to continue to pursue
acquisition opportunities in the North American consumer goods packaging
market. Although the Company has no present agreements or commitments to make
any acquisition, the Company has expressed indications of interest or made
preliminary bids on three acquisition opportunities presented to it, which have
annual sales ranging from approximately $30 million to $250 million. Any such
acquisition may be financed through the incurrence of additional indebtedness.
No assurance can be given that the Company will complete any such acquisition.
See "Risk Factors--Risks Associated with Growth Strategy".
1996 FINANCIAL RESULTS
Based on preliminary unaudited information, the Company's net sales for the
year ended December 31, 1996 were $1,405.7 million, as compared to net sales of
$1,101.9 million for the year ended December 31, 1995. Net sales for the
Company's metal container business for the year ended December 31, 1996 were
$1,189.3 million, an increase of $307.0 million from net sales of $882.3
million for the year ended December 31, 1995. This increase is due principally
to the fact that the Company had twelve months of sales from AN Can in 1996 as
compared to five months of sales in 1995. Net sales of the Company's metal
container business for 1996 were also slightly more than net sales, pro forma
for the AN Can acquisition, of $1,184.8 million for 1995. Net sales of the
Company's plastic container business for the year ended December 31, 1996 were
$216.4 million, as compared to net sales of $219.6 million for the year ended
December 31, 1995. This decrease was due principally to the pass through of
lower resin costs, offset by an increase in unit volume.
The Company anticipates that benefits realized from the AN Can acquisition
and improved operating performance in 1996 will result in higher income from
operations for the Company for the year ended December 31, 1996, which is
estimated to be approximately $123.0 million, as compared with income from
operations of $69.8 million and $92.7 million, historical and pro forma for the
AN Can acquisition respectively (in each case after giving effect to a charge
of $14.7 million to adjust the carrying value of certain assets), for 1995.
The Company's net income for the year ended December 31, 1996 is estimated to
be approximately $25.0 million. For the year ended December 31, 1995, the
Company incurred a historical net loss of $21.8 million (which included a
charge of $14.7 million to adjust the carrying value of certain assets). The
increase in net income in 1996 principally reflected the aforementioned
benefits realized from the acquisition of AN Can, improved operating
performance and plant consolidations, and the benefits of refinancing a portion
of the Discount Debentures in 1995 and 1996 with lower cost indebtedness.
REFINANCING
The Company has actively refinanced its higher cost indebtedness with lower
cost indebtedness. Since 1995, the Company will have refinanced all of
Holdings' 13 1/4% Senior Discount Debentures due 2002 (the "Discount
Debentures"), with the following: (i) lower cost bank indebtedness, (ii)
proceeds
7
<PAGE>
from the sale of Holdings' Exchangeable Preferred Stock Mandatorily Redeemable
2006 (the "Exchangeable Preferred Stock") and (iii) proceeds from the Offering.
The net result of this refinancing will be approximately $19.5 million of
annual current cash interest savings (excluding non-cash interest on
obligations related to the Exchangeable Preferred Stock). Such refinancing will
also permit the Company to deduct accreted interest of approximately $103.5
million on the Discount Debentures from their time of issuance, which will
reduce the Company's tax liability by an estimated $25.9 million for 1996 and
1997. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations". Holdings also intends to issue Subordinated Debentures
due 2006 (the "Exchange Debentures") in exchange for its Exchangeable Preferred
Stock. This will allow the Company to deduct substantially all of the cash
payments of interest on the Exchange Debentures.
THE OFFERING
Common Stock offered by the
Company....................
3,700,000 shares
Common Stock to be
outstanding after this
offering (the
"Offering")................ 18,862,833 shares(a)
Use of Proceeds............. The net proceeds from the Offering will be used
to redeem the remaining Discount Debentures and
to repay a portion of the term loans under the
Silgan Credit Agreement. See "Use of Proceeds".
Nasdaq Symbol.......... SLGN
- --------
(a) Excludes 3,534,568 shares of Common Stock reserved for issuance under the
Silgan Holdings Inc. Stock Option Plan (the "Stock Option Plan"). There are
currently 1,821,254 options outstanding under the Stock Option Plan, each
of which entitles the holder thereof to purchase one share of Common Stock.
See "Management--Stock Option Plan". The weighted average exercise price
for all of the options currently outstanding under the Stock Option Plan is
$2.18 per share.
8
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following summary historical and pro forma consolidated financial
information of Holdings were derived from, and should be read in conjunction
with, the historical financial statements and pro forma financial information
of Holdings, including the notes thereto, included elsewhere in this
Prospectus.
The summary unaudited pro forma net income per common share data for the nine
months ended September 30, 1996 give effect to (i) the Offering and the use of
the proceeds therefrom, (ii) the use of the proceeds from the sale (the
"Preferred Stock Sale") on July 22, 1996 by Holdings of 50,000 shares of
Exchangeable Preferred Stock to (a) purchase Holdings' Class B Common Stock,
par value $.01 per share (the "Holdings Class B Stock"), held by Mellon Bank
N.A. ("Mellon"), as trustee for First Plaza Group Trust ("First Plaza"), and
(b) redeem $12.0 million principal amount of Discount Debentures, (iii) the
incurrence of $125.0 million of additional B term loans in July 1996 and $17.4
million of working capital loans in June 1996 under the Silgan Credit
Agreement, and the use of such proceeds to redeem a portion of the Discount
Debentures, and (iv) the planned exchange of the Exchangeable Preferred Stock
for Exchange Debentures (collectively, the "Refinancing") as if such events had
occurred as of January 1, 1996. The summary unaudited pro forma balance sheet
data at September 30, 1996 give effect to the Refinancing (other than events
that occurred prior to such date) as if it had occurred as of such date.
The summary unaudited pro forma operating data and other data for the fiscal
year ended December 31, 1995 give effect to (i) the acquisition of AN Can, (ii)
borrowings under the Silgan Credit Agreement which were used to (a) finance the
acquisition of AN Can, (b) repay in full amounts owing under the Company's
previous credit agreement and Silgan's Senior Secured Floating Rate Notes due
1997 (the "Secured Notes"), and (c) repurchase $61.7 million principal amount
at maturity of Discount Debentures, and (iii) the Refinancing, as if such
events had occurred as of January 1, 1995.
The unaudited pro forma financial information does not purport to represent
what the Company's financial position or results of operations would actually
have been if such events had in fact occurred as of such dates or at the
beginning of the periods presented, or to project the Company's financial
position or results of operations for any future date or period. The unaudited
pro forma financial data and accompanying notes should be read in conjunction
with the unaudited pro forma condensed statements of operations and the
historical financial information of Holdings, including the notes thereto,
included elsewhere in this Prospectus.
9
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- ----------------------
PRO FORMA
1995(a) 1995(b) 1994(c) 1993(c) 1996(b) 1995(b)
----------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales............... $ 1,404.4 $ 1,101.9 $ 861.4 $ 645.5 $ 1,080.5 $ 811.5
Cost of goods sold...... 1,239.6 970.5 748.3 571.2 936.4 711.0
---------- ---------- ---------- ---------- ---------- ----------
Gross profit............ 164.8 131.4 113.1 74.3 144.1 100.5
Selling, general and
administrative
expenses............... 57.4 46.9 38.0 32.5 42.4 31.1
Reduction in carrying
value of assets(d)..... 14.7 14.7 16.7 -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Income from
operations(e).......... 92.7 69.8 58.4 41.8 101.7 69.4
Interest expense and
other related financing
costs.................. 79.4 80.7 65.8 54.3 68.3 57.7
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
income taxes........... 13.3 (10.9) (7.4) (12.5) 33.4 11.7
Income tax provision.... 2.0 5.1 5.6 1.9 3.0 5.9
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
extraordinary charges
and cumulative effect
of changes in
accounting principles.. 11.3 (16.0) (13.0) (14.4) 30.4 5.8
---------- ---------- ---------- ---------- ---------- ----------
Extraordinary charges
relating to early
extinguishment of
debt(f)................ -- (5.8) -- (1.3) (2.1) (5.8)
Cumulative effect of
changes in accounting
principles(g).......... -- -- -- (6.3) -- --
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) before
preferred stock
dividend
requirement(f)......... 11.3 (21.8) (13.0) (22.0) 28.3 --
Preferred stock dividend
requirement............ -- -- -- -- 1.3 --
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)
applicable to common
stockholders(f)........ $ 11.3 $ (21.8) $ (13.0) $ (22.0) $ 27.0 $ --
========== ========== ========== ========== ========== ==========
Net income (loss) per
common share(e)(f)(h):
Income (loss) before
extraordinary
charges............... $ 0.55 $ (0.77) $ (0.63) $ (0.87) $ 1.46 $ 0.28
Extraordinary charges.. -- (0.29) -- (0.08) (0.11) (0.28)
Cumulative effect of
accounting changes.... -- -- -- (0.38) -- --
---------- ---------- ---------- ---------- ---------- ----------
Total................. $ 0.55 $ (1.06) $ (0.63) $ (1.33) $ 1.35 $ 0.00
========== ========== ========== ========== ========== ==========
Pro forma net income per
common
share(a)(e)(f)(h)...... $ 1.78
==========
Weighted average number
of common and
common equivalent
shares outstanding(i).. 20,475,509 20,647,599 20,647,599 16,469,928 19,952,928 20,647,599
SELECTED SEGMENT DATA:
Net sales:
Metal container
business.............. $ 1,184.8 $ 882.3 $ 657.1 $ 459.2 $ 917.8 $ 642.9
Plastic container
business.............. 219.6 219.6 204.3 186.3 162.7 168.6
Income (loss) from
operations:(e)(j)
Metal container
business.............. 81.0 58.2 59.8 42.3 89.4 60.6
Plastic container
business.............. 13.2 13.2 (0.1) 0.6 13.1 9.8
OTHER DATA:
Adjusted EBITDA(k)...... $ 169.0 $ 132.4 $ 114.5 $ 76.1 $ 148.0 $ 99.4
Adjusted EBITDA as a
percentage of net
sales.................. 12.0% 12.0% 13.3% 11.8% 13.7% 12.2%
Income (loss) from
operations as a
percentage of net
sales.................. 6.6 6.3 6.8 6.5 9.4 8.6
Capital expenditures.... $ 54.9 $ 51.9 $ 29.2 $ 42.5 $ 38.6 $ 30.4
Depreciation and
amortization(l)........ 57.9 45.4 37.2 33.8 43.5 28.6
Cash flows provided by
(used for) operating
activities............. -- 209.6 47.3 48.1 (48.0) 16.8
Cash flows used for
investing activities... -- (397.1) (27.9) (116.1) (50.2) (374.1)
Cash flows provided by
(used for) financing
activities............. -- 186.9 (17.0) 65.3 99.0 358.5
Number of employees (at
end of period)(m)...... 5,110 5,110 4,000 3,330 -- --
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------
ACTUAL PRO FORMA(A)
-------- ------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA (at end of period):
Total assets............................................. $1,006.2 $1,005.3
Total long-term debt..................................... 732.3 724.7
Deficiency in stockholders' equity....................... (188.6) (121.2)
</TABLE>
(footnotes follow)
10
<PAGE>
NOTES TO SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(a) The unaudited pro forma net income per common share and balance sheet data
for the nine months ended September 30, 1996 and the unaudited pro forma
consolidated operating data for the year ended December 31, 1995 assume
gross proceeds from the Offering of $70.3 million and the use of the net
proceeds therefrom as described under "Use of Proceeds". For a detailed
presentation of the unaudited pro forma results of operations of the
Company for the nine months ended September 30, 1996 and the year ended
December 31, 1995, see the unaudited pro forma condensed statement of
operations, including the notes thereto, included elsewhere in this
Prospectus. The unaudited pro forma financial information for the year
ended December 31, 1995 does not give effect to adjustments for decreased
costs from manufacturing synergies resulting from the integration of AN Can
with Containers' existing can manufacturing operations and benefits the
Company may realize as a result of its planned rationalization of plant
operations.
(b) On August 1, 1995, the Company acquired AN Can for a purchase price of
$362.0 million (including the purchase from ANC of its St. Louis facility
in May 1996 for $13.1 million). 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 for the year ended December 31, 1995
included elsewhere in this Prospectus.
(c) On December 21, 1993, the Company acquired DM Can for a purchase price of
approximately $73.3 million. 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 for the year ended December 31, 1995
included elsewhere in this Prospectus.
(d) Based upon a review of its depreciable assets, the Company determined that
certain adjustments were necessary to properly reflect net realizable
values. In 1995, the metal container business recorded a write-down of
$14.7 million for the excess of carrying value over estimated realizable
value of machinery and equipment at existing facilities which had become
underutilized due to excess capacity. In 1994, charges of $7.2 million and
$9.5 million were recorded by the metal container business and plastic
container business, respectively, to write-down the excess carrying value
over estimated realizable value of various plant facilities held for sale
and for technologically obsolete and inoperable machinery and equipment.
(e) Under the terms of the stock option plans of Containers and Plastics, stock
options issued under such plans will be converted to options under the
Stock Option Plan at the time of the Offering. In accordance with
Accounting Principles Board ("APB") No. 25, options granted under these
plans are considered variable options with a final measurement date at the
time of conversion. The Company will recognize a non-cash charge of
approximately $21.1 million, assuming an initial public offering price of
$19.00 per share, net of $3.7 million previously accrued, at the time of
the Offering in the Company's first quarter in 1997, for the excess of fair
market value over grant price of these options less amounts previously
accrued. The unaudited pro forma financial data do not give effect to such
non-cash charge. Prior to the Offering, the Company recognized compensation
expense for the change in pro forma book value since the date of grant of
these options, amortized over the vesting period.
(f) The unaudited pro forma net income per common share data for the nine
months ended September 30, 1996 does not include the historical
extraordinary charge, net of tax, incurred in 1996 and an extraordinary
charge, net of tax, that the Company expects to incur in the first quarter
of 1997 of $0.7 million, in each case for the write-off of unamortized
deferred financing costs related to the early redemption of the Discount
Debentures. See "Capitalization". In addition, the unaudited pro forma
consolidated operating data for the year ended December 31, 1995 do not
include the historical extraordinary charge, net of taxes, incurred in 1995
as a result of the early extinguishment of amounts owing under the
Company's debt facilities.
11
<PAGE>
(g) During 1993, the Company adopted Statement of Financial Accounting
Standards ("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 did not elect to restate prior years' financial statements for any
of these pronouncements.
(h) Actual and pro forma net income (loss) per share are based on the weighted
average number of shares outstanding during the period, as adjusted in all
periods for the Stock Split, and after giving effect to stock options
considered to be dilutive common stock equivalents using the treasury stock
method. Primary and fully diluted net income (loss) per share are the same
for each of the periods. Under the terms of the stock option plans of
Containers and Plastics, stock options issued under such plans will be
converted to options under the Stock Option Plan at the time of the
Offering. Such conversion will be made based upon the allocable value of
Containers and Plastics determined in relation to the value of the Company.
Weighted average number of shares outstanding includes the subsidiary
options which are considered to be issued within 12 months prior to the
Offering at less than the assumed initial public offering price due to
their conversion feature as described in footnote (e) above. Supplementary
net income (loss) per share, assuming that sufficient shares will be issued
in the Offering to repay indebtedness as described in "Use of Proceeds" as
of January 1, 1995, was $(0.67) for the year ended December 31, 1995 and
$1.36 for the nine months ended September 30, 1996.
(i) The weighted average number of common and common equivalent shares
outstanding gives effect to the Stock Split.
(j) Income from operations in the selected segment data includes charges
incurred for the reduction in carrying value of certain assets for the
metal containers business of $14.7 million and $7.2 million for the years
ended December 31, 1995 (pro forma and historical) and 1994 and for the
plastic containers business of $9.5 million for the year ended December 31,
1994, as referred to in footnote (d) above. Income from operations for both
the metal container and plastic container businesses excludes corporate
expense.
(k) "Adjusted EBITDA" 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 applicable period, without duplication, consolidated
interest expense, income tax expense and depreciation and amortization
expense, as adjusted to add back expenses relating to postretirement health
care costs (which amounted to $2.3 million and $0.8 million for the nine
months ended September 30, 1996 and 1995, respectively, and $1.7 million,
$0.7 million and $0.5 million for the years ended December 31, 1995, 1994
and 1993, respectively), the reduction in carrying value of assets (which
were $14.7 million and $16.7 million for the years ended December 31, 1995
and 1994, respectively) and certain other non-cash charges (which included
charges relating to the vesting of benefits under Stock Appreciation Rights
("SARs") of $0.6 million for each of the nine months ended September 30,
1996 and 1995, and $0.8 million and $1.5 million for the years ended
December 31, 1995 and 1994, respectively). The Company has included
information regarding Adjusted EBITDA because management believes that many
investors consider it to be important in assessing a company's ability to
service and incur debt. Accordingly, this information has been disclosed
herein to permit a more complete analysis of the Company's financial
condition. Adjusted EBITDA should not be considered in isolation or as a
substitute for net income or other consolidated statement of operations or
cash flows data prepared in accordance with generally accepted accounting
principles ("GAAP") as a measure of the profitability or liquidity of the
Company. See the consolidated statements of operations and consolidated
statements of cash flows of Holdings, including the notes thereto, included
elsewhere in this Prospectus. Adjusted EBITDA does not take into account
the Company's debt service requirements and other commitments and,
accordingly, is not necessarily
12
<PAGE>
indicative of amounts that may be available for discretionary uses.
Additionally, Adjusted EBITDA is not computed in accordance with GAAP and
may not be comparable to other similarly titled measures of other
companies.
(l) Depreciation and amortization excludes amortization of debt financing
costs.
(m) The number of employees at December 31, 1995 includes approximately 1,400
employees who joined the Company on August 1, 1995 as a result of the
acquisition by Containers of AN Can. 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.
13
<PAGE>
RISK FACTORS
Prospective purchasers of the Common Stock offered hereby should consider
carefully all of the information set forth in this Prospectus and, in
particular, should evaluate the following risks in connection with an
investment in the Common Stock.
HIGH LEVERAGE; STOCKHOLDERS' DEFICIENCY; RESTRICTIVE COVENANTS; SECURITY
INTERESTS
The Company is highly leveraged primarily as a result of the financing of
the acquisitions of its metal and plastic container businesses. See
"Business--Company History" and "Description of Certain Indebtedness". At
September 30, 1996, on a pro forma basis after giving effect to the
Refinancing (assuming that the Refinancing occurred as of such date, other
than such events that occurred prior to such date), the Company would have had
approximately $873.7 million of total consolidated indebtedness. The Company
may incur significant amounts of additional indebtedness in the future,
particularly in connection with acquisitions. See "Prospectus Summary--Recent
Developments--Acquisition". A substantial portion of the Company's cash flow
must be used to service its indebtedness and is therefore not available to be
used in its business. In addition, a substantial portion of the Company's
indebtedness bears interest at floating rates, and therefore a substantial
increase in interest rates could have a material adverse effect on the
Company's results of operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations". Also, as of September 30,
1996, on a pro forma basis after giving effect to the Refinancing (assuming
that the Refinancing occurred as of such date, other than such events that
occurred prior to such date), Holdings' deficiency in stockholders' equity
would have been $121.2 million. Through 1995, the Company has experienced net
losses for each year since its inception, primarily as a result of interest
expense on its indebtedness. However, the Company expects to report net income
of approximately $25.0 million in 1996. See "Prospectus Summary--Recent
Developments--1996 Financial Results", "Capitalization" and "Selected
Historical and Pro Forma Financial Information".
The Company's instruments and agreements governing its indebtedness contain
numerous covenants, including financial and operating covenants, certain of
which are quite restrictive. In particular, certain financial covenants under
the credit agreement dated as of August 1, 1995 among Silgan and certain of
its subsidiaries, the lenders named therein (the "Banks"), Bankers Trust
Company ("Bankers Trust"), as Administrative Agent and Co-Arranger, and Bank
of America Illinois, as Documentation Agent and Co-Arranger, as amended (the
"Silgan Credit Agreement"), become more restrictive over time in anticipation
of scheduled debt amortization and improved operating results. These covenants
affect, and in many respects limit or prohibit, among other things, the
ability of the Company to incur additional indebtedness, create liens, sell
assets, engage in mergers and acquisitions, make certain capital expenditures
and pay dividends. Such covenants could restrict the Company in its pursuit of
its growth strategy. For a description of such covenants, see "Description of
Certain Indebtedness".
The obligations of each of Silgan, Plastics and Containers under the Silgan
Credit Agreement are guaranteed by Holdings and by each other subsidiary of
Holdings. Such obligations and guarantees under the Silgan Credit Agreement
are, and following consummation of the Offering will continue to be, secured
by first priority liens on all of the material assets of the Company and
pledges of the capital stock of all of Holdings' subsidiaries (collectively,
the "Collateral"). If an event of default under the Silgan Credit Agreement
were to occur, the Banks generally would have the right to accelerate and
declare due the Company's indebtedness thereunder. In such case, if the
indebtedness owed by the Company under the Silgan Credit Agreement were not
repaid or restructured, the Banks could proceed to foreclose on the
Collateral. See "Description of Certain Indebtedness".
RISKS ASSOCIATED WITH GROWTH STRATEGY
Historically, the Company has grown predominantly through acquisitions. The
Company's future growth will depend in large part on additional acquisitions
of consumer goods packaging businesses. There can be no assurance that the
Company will be able to locate or acquire other suitable
14
<PAGE>
acquisition candidates on acceptable terms or that the Company will be able to
fund future acquisitions because of limitations contained in its instruments
and agreements governing its indebtedness or otherwise. See "Description of
Certain Indebtedness".
In pursuing its strategy of growth through acquisitions, the Company will
face risks commonly encountered with such a strategy. These risks include
failing to assimilate the operations and personnel of the acquired businesses,
disrupting the Company's ongoing business, dissipating the Company's limited
management resources, and impairing relationships with employees and customers
of the acquired business as a result of changes in ownership and management.
Depending upon the size of the acquisition, it can take up to two to three
years to completely integrate an acquired business into the Company's
operations and systems and realize the full benefit of the Company's
strategies. During the early part of this integration period, the operating
results of an acquired business may decrease from results attained prior to
the acquisition. Moreover, additional indebtedness incurred to make
acquisitions could adversely affect the Company's liquidity and financial
stability, and the issuance of Common Stock to effect acquisitions could
result in dilution to the Company's shareholders.
RELIANCE ON MAJOR CUSTOMERS
Containers has agreements with Nestle (the "Nestle Supply Agreements")
pursuant to which Containers supplies a majority of Nestle's metal container
requirements, and an agreement with Del Monte (the "DM Supply Agreement")
pursuant to which Containers supplies substantially all of Del Monte's metal
container requirements. The Nestle Supply Agreements and the DM Supply
Agreement provide Containers with a potential market for a substantial portion
of its metal container output during the terms of these agreements.
Approximately 17% and 12% of the Company's sales in 1996 were to Nestle and
Del Monte, respectively. The Company has recently agreed with Nestle, subject
to definitive documentation, to extend the term of certain of the Nestle
Supply Agreements through 2004 (representing approximately 10% of the
Company's 1996 sales) in return for certain price concessions by the Company.
The Company believes that these price concessions will not have a material
adverse effect on its results of operations. Under the Company's recent
agreement with Nestle, with respect to the remaining Nestle Supply Agreements
that expire in August 1997 (representing approximately 6% of the Company's
1996 sales), the Company has the right to submit a bid to Nestle, and to match
any bid received by Nestle, for the 1998 supply year with respect to the metal
containers that are the subject of such Nestle Supply Agreements. There can be
no assurance that any such bid by the Company will be made at sales prices
equivalent to those currently in effect or otherwise on terms similar to those
currently in effect. In addition, the Company cannot predict the effect, if
any, on its results of operations of matching or not matching any such bids.
Under certain limited circumstances, Del Monte, beginning in December 1998,
and Nestle, beginning in January 2000 (with respect to all of the metal
containers supplied under the Nestle Supply Agreements that have been extended
through 2004), may receive competitive bids, and Containers has the right to
match any such bids. If Containers matches a competitive bid, it may result in
reduced sales prices with respect to the metal containers that are the subject
of such competitive bid. In the event that Containers chooses not to match a
competitive bid, such metal containers may be purchased from the competitive
bidder at the competitive bid price for the term of the bid. See "Business--
Sales and Marketing". The Company's results of operations could be adversely
affected if the Company loses significant unit sales to Nestle and/or Del
Monte as a result of a competitive bid or otherwise. Neither the Nestle Supply
Agreements nor the DM Supply Agreement require the purchase of minimum
amounts, and should Nestle's or Del Monte's demand decrease, the Company's
consolidated sales could decrease. The loss by the Company of either Nestle or
Del Monte as a customer would have a material adverse effect on the Company's
results of operations.
DEPENDENCE ON AGRICULTURAL HARVEST; SEASONALITY
The Company's metal container business sales are dependent, in part, upon
the vegetable, tomato and fruit harvests in the midwest and western regions of
the United States. The size and quality
15
<PAGE>
of these harvests varies from year to year, depending in large part upon the
weather conditions in those regions, and the Company's results of operations
could be impacted accordingly. The Company's results of operations could be
materially adversely affected in a year in which crop yields are substantially
lower than normal in either of the prime agricultural regions of the United
States in which the Company operates. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview--
Agricultural Harvest and Seasonality".
The Company's business is affected by seasonal variations as a result of the
timing of the harvest. Accordingly, the Company experiences higher unit sales
volume in the second and third quarters and, as a result, the Company has
historically generated a disproportionate amount of its income from operations
in the same periods. In 1996, the Company generated substantially all of its
net income in the second and third quarters. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview--
Agricultural Harvest and Seasonality."
COMPETITION
The manufacture and sale of metal and plastic containers is highly
competitive and many of the Company's competitors have substantially greater
financial resources than the Company. In particular, price competition can be
an important factor and may affect the Company's results of operations. See
"Business--Competition".
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends to a large extent on a number of key
employees, and the loss of the services provided by them could materially
adversely affect the Company. In particular, the loss of the services provided
by R. Philip Silver, the Chairman of the Board and Co-Chief Executive Officer
of Holdings and Silgan, and D. Greg Horrigan, the President and Co-Chief
Executive Officer of Holdings and Silgan, could materially adversely affect
the Company. However, the Company's operations are conducted through
Containers and Plastics, each of which has its own independent management.
S&H, Inc. ("S&H"), a company wholly owned by Messrs. Silver and Horrigan, has
agreed to provide certain general management and administrative services to
each of Holdings, Silgan, Containers and Plastics pursuant to management
services agreements. See "Certain Transactions--Management Agreements".
SIGNIFICANT STOCKHOLDERS
After completion of the Offering, Messrs. Silver and Horrigan and The Morgan
Stanley Leveraged Equity Fund II, L.P. ("MSLEF II") (collectively, the
"Principal Common Stockholders") will collectively own approximately 75.8% of
the outstanding Common Stock (approximately 73.7% if the Underwriters over-
allotment option is exercised in full). Accordingly, if such persons act
together they will be able to control all matters submitted to the
stockholders for a vote, including the election of directors. Under a
stockholders agreement entered into by the Principal Common Stockholders (the
"Principals Stockholders Agreement"), Messrs. Silver and Horrigan agreed to
vote their shares of Common Stock for the election of two directors chosen by
MSLEF II so long as MSLEF II holds at least one-half of the number of shares
of Common Stock held by it on the date of this Prospectus, and MSLEF II agreed
to vote its shares of Common Stock for the election of two directors chosen by
Messrs. Silver and Horrigan so long as they hold in the aggregate at least
one-half of the number of shares of Common Stock held by them on the date of
this Prospectus. Holdings currently has four directors, but intends to
increase its board of directors after the Offering to six members to include
two additional independent directors. Under the Principals Stockholders
Agreement, MSLEF II agreed that, so long as Messrs. Silver and Horrigan hold
in the aggregate at least one-half of the number of shares of Common Stock
held by them on the date of this Prospectus, Messrs. Silver and Horrigan will
nominate the two independent directors, who must then be elected in accordance
with Holdings' Restated Certificate of Incorporation. See "Management",
"Securities Ownership of Certain Beneficial Owners and Management" and
"Description of Capital Stock".
16
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Immediately after consummation of the Offering, the Company will have
outstanding 18,862,833 shares of Common Stock. The shares of Common Stock sold
pursuant to the Offering may be resold without restriction by persons other
than "affiliates" of Holdings. The shares of Common Stock directly or
indirectly held by the Principal Common Stockholders and Bankers Trust New York
Corporation ("BTNY") following the Offering will be "restricted" securities
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), and may not be sold in the absence of registration under the Securities
Act, or an exemption therefrom, including the exemptions contained in Rule 144
under the Securities Act. The Principal Common Stockholders and BTNY have
agreed, subject to certain exceptions, for a period of one year from the date
of this Prospectus not to register for sale or offer, sell, contract to sell,
or otherwise dispose of any shares of Common Stock without the prior written
consent of Goldman, Sachs & Co. See "Underwriting". Subject to such agreement
and restrictions under the Securities Act, the Principal Common Stockholders
could sell shares of Common Stock owned by them from time to time in the open
market for any reason. Holdings has granted MSLEF II and Messrs. Silver and
Horrigan certain registration rights with respect to the shares of Common Stock
owned by them which have been waived for a period of one year. Sales of
substantial amounts of Common Stock or the availability of such shares for sale
could adversely affect prevailing market prices for the Common Stock and the
Company's ability to issue additional equity securities. See "Shares Eligible
for Future Sale".
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF CERTAIN AGREEMENTS AND THE CERTIFICATE
OF INCORPORATION
Under the Principals Stockholders Agreement, MSLEF II agreed to vote its
shares of Common Stock against any unsolicited merger or sale of the Company's
business or its assets if Messrs. Silver and Horrigan oppose such transaction,
so long as Messrs. Silver and Horrigan hold at least 90% of the shares of
Common Stock held by them in the aggregate on the date of this Prospectus. See
"Description of Capital Stock--Description of Stockholders Agreements".
Certain provisions of Holdings' Restated Certificate of Incorporation may
have the effect of delaying or preventing transactions involving a change of
control of Holdings, including transactions in which stockholders might
otherwise receive a substantial premium for their shares over then current
market prices, and may limit the ability of stockholders to approve
transactions that they may deem to be in their best interests. In particular,
under the Restated Certificate of Incorporation, the Board of Directors is
authorized to issue one or more classes of preferred stock having such
designations, rights and preferences as may be determined by the Board. Under
the Restated Certificate of Incorporation, the Board of Directors is divided
into three classes, and each year, one third of the directors is elected for a
term of three years. In addition, any action taken by the holders of Common
Stock must be taken at a meeting and may not be taken by consent in writing,
and a special meeting of the stockholders may only be called by the Chairman of
the Board or the President of the Company or by a majority of the Board of
Directors of the Company, and may not be called by the holders of Common Stock.
See "Description of Capital Stock".
Under the Silgan Credit Agreement, the occurrence of a Change of Control (as
defined in the Silgan Credit Agreement) constitutes an event of default
thereunder, permitting, among other things, the acceleration of amounts owed
thereunder. Additionally, upon the occurrence of a Change of Control under and
as defined in the instruments governing Silgan's 11 3/4% Senior Subordinated
Notes due 2002 (the "11 3/4% Notes") and the Exchange Debentures, the holders
thereof have the right to require the repurchase of such indebtedness at a
purchase price equal to 101% of the principal amount thereof, plus accrued
interest thereon. See "Description of Certain Indebtedness".
ABSENCE OF PRIOR PUBLIC MARKET
Prior to the Offering, there has been no public market for the Common Stock.
Although the Common Stock has been approved for quotation on the Nasdaq
National Market under the symbol
17
<PAGE>
"SLGN", there can be no assurance that an active market for the Common Stock
will be developed or sustained following the Offering or that investors in the
Common Stock will be able to resell their shares of Common Stock at or above
the initial public offering price. The initial public offering price for the
shares of Common Stock will be determined through negotiations between the
Company and the representatives of the Underwriters, and may not be indicative
of the market price of the Common Stock after the Offering. See "Underwriting".
Morgan Stanley & Co. Incorporated ("Morgan Stanley") will not act as a market
maker for the Common Stock.
DILUTION
Purchasers of the Common Stock in the Offering will experience immediate and
substantial dilution in net tangible book value per share of Common Stock from
the initial public offering price. In addition, to the extent outstanding
options to purchase Common Stock are exercised, there will be further dilution.
See "Dilution".
USE OF PROCEEDS
The net proceeds to the Company from the Offering are estimated to be $64.4
million ($74.2 million if the Underwriters' over-allotment option is exercised
in full), after deducting the underwriting discount and estimated offering
expenses payable by the Company. The net proceeds of the Offering will be used
to redeem the remaining outstanding Discount Debentures (approximately $59.0
million aggregate principal amount). Accrued interest on such Discount
Debentures will be paid with working capital borrowings under the Silgan Credit
Agreement. The Discount Debentures bear interest at a rate of 13 1/4% per annum
and mature on December 15, 2002. A portion of the net proceeds from the
Offering will be used to prepay approximately $3.5 million principal amount of
the B term loans (together with accrued interest thereon) under the Silgan
Credit Agreement, which amount would have been due on December 31, 1997. Such B
term loans had a weighted average interest rate of 8.7% during the nine months
ended September 30, 1996. The remaining net proceeds from the Offering will be
used to prepay approximately $1.9 million principal amount of the A term loans
(together with accrued interest thereon) under the Silgan Credit Agreement that
would have been due on December 31, 1997. Such A term loans had a weighted
average interest rate of 8.2% during the nine months ended September 30, 1996.
Pending the redemption of the remaining Discount Debentures which is expected
to occur no later than 45 days after the completion of the Offering, the net
proceeds will be used to repay working capital loans under the Silgan Credit
Agreement. Generally, the Company may borrow, repay and reborrow working
capital loans from time to time in accordance with the Silgan Credit Agreement.
The Company financed its recent acquisition of Finger Lakes through working
capital borrowings under the Silgan Credit Agreement of approximately $29.9
million. See "Description of Certain Indebtedness--Description of the Silgan
Credit Agreement".
DIVIDEND POLICY
Holdings has never declared or paid cash dividends on its Common Stock. The
Company currently anticipates that it will retain all available funds for use
in the operation and expansion of its business and does not anticipate paying
any cash dividends on the Common Stock in the foreseeable future. Any future
determination to pay cash dividends will be at the discretion of Holdings'
Board of Directors and will be dependent upon the Company's results of
operations, financial condition, contractual restrictions and other factors
deemed relevant by Holdings' Board of Directors. The Holdings Guaranty (as
defined in "Description of Certain Indebtedness--Description of the Silgan
Credit Agreement") and the Exchangeable Preferred Stock (and, when issued, the
Exchange Debentures) limit the ability of Holdings to pay dividends, and the
Silgan Credit Agreement and the 11 3/4% Notes limit the ability of Silgan to
pay dividends to Holdings. See "Risk Factors--High Leverage; Stockholders'
Deficiency; Restrictive Covenants; Security Interests" and "Description of
Certain Indebtedness".
18
<PAGE>
DILUTION
As of September 30, 1996, the Company had a deficit in net tangible book
value of approximately $284.1 million or $18.73 per share of Common Stock.
"Net tangible book value" per share of Common Stock represents the total
amount of tangible assets of the Company, less the total amount of liabilities
of the Company, divided by the number of shares of Common Stock outstanding.
Without taking into account any changes in net tangible book value after
September 30, 1996, other than to give effect to (i) the sale by the Company
of the 3,700,000 shares of Common Stock offered hereby (at an assumed initial
public offering price of $19.00 per share and after deducting the underwriting
discount and offering expenses) and (ii) the application of the net proceeds
therefrom to redeem the remaining outstanding Discount Debentures and to repay
a portion of the A and B term loans under the Silgan Credit Agreement, the pro
forma deficit in net tangible book value of the Common Stock as of September
30, 1996 would have been approximately $219.7 million or $11.64 per share.
This represents an immediate decrease in pro forma deficit in net tangible
book value of $7.09 per share of Common Stock to existing stockholders and an
immediate dilution in pro forma net tangible book value of $30.64 per share to
new stockholders. "Dilution" per share represents the difference between the
price per share to be paid by the new stockholders and the pro forma deficit
in net tangible book value per share as of September 30, 1996. The following
table illustrates this per share dilution.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........ $ 19.00
Deficit in net tangible book value per share as of
September 30, 1996.................................... $(18.73)
Decrease in deficit in net tangible book value per
share attributable to the Offering and the application
of the proceeds therefrom............................. 7.09
-------
Pro forma deficit in net tangible book value per share
as of September 30, 1996 after giving effect to the
Offering and the application of the proceeds
therefrom............................................. (11.64)
-------
(Dilution) per share to new stockholders............... $(30.64)
=======
</TABLE>
The following table sets forth, on a pro forma basis as of September 30,
1996, the number of shares of Common Stock purchased from Holdings and the
total consideration and the average price per share paid by the existing
stockholders and to be paid by investors purchasing shares of Common Stock
offered hereby.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 15,162,833 80.4% $18,618,000 20.9% $1.23
New stockholders........ 3,700,000 19.6 70,300,000 79.1 19.00
---------- ----- ----------- -----
Total................. 18,862,833 100.0% $88,918,000 100.0% $4.71
========== ===== =========== =====
</TABLE>
The calculations in the tables set forth above do not reflect an aggregate
of 3,534,568 shares of Common Stock reserved for issuance under the Stock
Option Plan. There are currently 1,821,254 options outstanding under the Stock
Option Plan, each of which entitles the holder thereof to purchase one share
of Common Stock. See "Management--Stock Option Plan". The weighted average
exercise price for all of the options currently outstanding under the Stock
Option Plan is $2.18 per share. See "Management--Executive Compensation". To
the extent outstanding options to purchase Common Stock are exercised, there
will be further dilution.
19
<PAGE>
CAPITALIZATION
The following table sets forth (i) the unaudited actual consolidated
capitalization of Holdings as of September 30, 1996, and (ii) the unaudited
pro forma consolidated capitalization of Holdings as of September 30, 1996,
giving effect to the Offering (assuming gross proceeds of $70.3 million) and
the application of the proceeds therefrom, and the exchange of all outstanding
shares of Exchangeable Preferred Stock for Exchange Debentures. This table
should be read in conjunction with the historical and pro forma consolidated
financial information of Holdings included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-------------------------
(UNAUDITED)
ACTUAL PRO FORMA
----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
LONG-TERM DEBT:
Term loans(a).............................. $ 538,348 $ 538,348(b)
11 3/4% Senior Subordinated Notes due
2002...................................... 135,000 135,000
13 1/4% Senior Discount Debentures due
2002...................................... 58,940 --
13 1/4% Subordinated Debentures due 2006... -- 51,307
----------- -----------
Total long-term debt(c).................. 732,288 724,655
=========== ===========
Cumulative exchangeable redeemable preferred
stock....................................... 51,307 --
DEFICIENCY IN STOCKHOLDERS' EQUITY:
Common stock, par value $.01 per share,
100,000,000 shares authorized, 885,000
shares issued and outstanding (actual),
15,162,833 shares issued and outstanding
(as adjusted for the Stock Split), and
18,862,833 shares issued and outstanding
(pro forma)(d)............................ 9 189
Additional paid-in capital................. 18,609 107,647(e)
Accumulated deficit........................ (207,237) (229,055)(e)(f)
----------- -----------
Total deficiency in stockholders'
equity.................................. (188,619) (121,219)
----------- -----------
Total capitalization................... $ 594,976 $ 603,436
=========== ===========
</TABLE>
- --------
(a) The term loans exclude the current portion of the term loans under the
Silgan Credit Agreement. At September 30, 1996, the current portion of the
term loans was $28.5 million.
(b) Approximately $5.4 million of the net proceeds from the Offering will be
used to prepay a portion of the current portion of the term loans under
the Silgan Credit Agreement. See "Use of Proceeds".
(c) Pursuant to the Silgan Credit Agreement, the lenders thereunder have
agreed to lend to Plastics and Containers up to an aggregate of $225.0
million of revolving loans, which are reflected as short-term debt on the
Company's balance sheet. As of September 30, 1996, the outstanding
principal amount of revolving loans under the Silgan Credit Agreement was
$126.0 million. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Capital Resources and Liquidity".
(d) Excludes 3,534,568 shares of Common Stock reserved for issuance under the
Stock Option Plan, including shares reserved for issuance in connection
with currently outstanding options to purchase 1,821,254 shares of Common
Stock. The weighted average exercise price for all of the options
currently outstanding under the Stock Option Plan is $2.18 per share.
(e) Under the terms of the stock option plans of Containers and Plastics,
stock options issued under such plans will be converted to options under
the Stock Option Plan at the time of the Offering. In accordance with APB
No. 25, options granted under these plans are considered variable options
with a final measurement date at the time of conversion. The Company will
recognize a non-cash charge to earnings of approximately $21.1 million
(assuming an initial public offering price of $19.00 per share), net of
$3.7 million previously accrued, at the time of the Offering for the
excess of fair market value over grant price of these options, less
amounts previously accrued, which will be offset by an increase to paid-in
capital.
(f) Includes an extraordinary charge, net of tax, of $0.7 million for the
write-off of unamortized deferred financing costs related to the
redemption of Discount Debentures. Such charge is expected to be incurred
during the first quarter of 1997.
20
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
Set forth below are selected historical consolidated financial data of
Holdings at September 30, 1996 and 1995 and for the nine months then ended,
and at December 31, 1995, 1994, 1993, 1992 and 1991 and for the years then
ended. Also set forth below are unaudited pro forma consolidated financial
data of Holdings at September 30, 1996 and for the nine months then ended, and
for the fiscal year ended December 31, 1995.
The selected historical consolidated financial data of Holdings for the nine
months ended September 30, 1996 and 1995 is unaudited, but, in the opinion of
management, such information reflects all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation of the financial
data for the interim periods. The results for the interim periods presented
are not necessarily indicative of the results for the corresponding full
years. The selected historical consolidated financial data of Holdings at
December 31, 1995 and 1994 and for each of the three years in the period ended
December 31, 1995 (with the exception of employee data) were derived from the
historical consolidated financial statements of Holdings for such periods that
were audited by Ernst & Young LLP, independent auditors, whose report appears
elsewhere in this Prospectus. The selected historical consolidated financial
data of Holdings at December 31, 1993, 1992 and 1991 and for the years ended
December 31, 1992 and 1991 were derived from the historical audited
consolidated financial statements of Holdings for such periods.
The unaudited pro forma net income per common share data for the nine months
ended September 30, 1996 give effect to the Refinancing as if it had occurred
as of January 1, 1996. The summary unaudited pro forma balance sheet data at
September 30, 1996 give effect to the Refinancing (other than events that
occurred prior to such date) as if it had occurred as of such date. The
selected unaudited pro forma operating data and other data for the fiscal year
ended December 31, 1995 give effect to (i) the acquisition of AN Can, (ii)
borrowings under the Silgan Credit Agreement which were used to (a) finance
the acquisition of AN Can, (b) repay in full amounts owing under the Company's
previous credit agreement and the Secured Notes, and (c) repurchase $61.7
million principal amount at maturity of Discount Debentures and (iii) the
Refinancing, as if such events had occurred as of January 1, 1995.
The unaudited pro forma financial information does not purport to represent
what the Company's financial position or results of operations would actually
have been if such events had in fact occurred as of such dates or at the
beginning of the periods presented, or to project the Company's financial
position or results of operations for any future date or period. The selected
historical and pro forma consolidated financial information of Holdings were
derived from, and should be read in conjunction with, "Management's Discussion
and Analysis of Financial Condition and Results of Operations," the unaudited
pro forma condensed statements of operations and the historical financial
statements and pro forma financial information of Holdings, including the
notes thereto, included elsewhere in this Prospectus.
21
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------
(UNAUDITED)
1996 1995
--------------- ---------------
(DOLLARS IN MILLIONS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
OPERATING DATA:
Net sales............................... $ 1,080.5 $ 811.5
Cost of goods sold...................... 936.4 711.0
--------------- ---------------
Gross profit............................ 144.1 100.5
Selling, general and administrative
expenses............................... 42.4 31.1
--------------- ---------------
Income from operations(a)............... 101.7 69.4
Interest expense and other related
financing costs........................ 68.3 57.7
--------------- ---------------
Income before income taxes.............. 33.4 11.7
Income tax provision.................... 3.0 5.9
--------------- ---------------
Net income before extraordinary
charges................................ 30.4 5.8
Extraordinary charges relating to early
extinguishment of debt(b).............. (2.1) (5.8)
--------------- ---------------
Net income before preferred stock
dividend requirement(b)................ 28.3 --
Preferred stock dividend requirement.... 1.3 --
--------------- ---------------
Net income applicable to common
stockholders(b)........................ $ 27.0 $ --
--------------- ---------------
Net income per common share(c):
Income before extraordinary charges... $ 1.46 $ 0.28
Extraordinary charges................. (0.11) (0.28)
--------------- ---------------
Total............................... $ 1.35 $ 0.00
=============== ===============
Pro forma net income per common
share(a)(b)(c)(d)...................... $ 1.78
===============
Weighted average number of common and
common equivalent shares
outstanding(e)......................... 19,952,928 20,647,599
SELECTED SEGMENT DATA:
Net sales:
Metal container business.............. $ 917.8 $ 642.9
Plastic container business............ 162.7 168.6
Income from operations:(a)
Metal container business.............. 89.4 60.6
Plastic container business............ 13.1 9.8
OTHER DATA:
Adjusted EBITDA(f)...................... $ 148.0 $ 99.4
Adjusted EBITDA as a percentage of net
sales.................................. 13.7% 12.2%
Income from operations as a percentage
of net sales........................... 9.4 8.6
Capital expenditures.................... $ 38.6 $ 30.4
Depreciation and amortization(g)........ 43.5 28.6
Cash flows (used for) provided by
operating activities................... (48.0) 16.8
Cash flows used for investing
activities............................. (50.2) (374.1)
Cash flows provided by financing
activities............................. 99.0 358.5
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------------
(UNAUDITED)
PRO FORMA
1995 1996 1996(d)
-------- -------- ---------
<S> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets..................................... $1,067.3 $1,006.2 $1,005.3
Total long-term debt............................. 772.3 732.3 724.7
Deficiency in stockholders' equity............... (158.0) (188.6) (121.2)
</TABLE>
(footnotes follow)
22
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
PRO FORMA
1995(b)(d)(h)(i) 1995(j) 1994(k) 1993(k) 1992 1991(l)
---------------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales............... $ 1,404.4 $ 1,101.9 $ 861.4 $ 645.5 $ 630.0 $ 678.2
Cost of goods sold...... 1,239.6 970.5 748.3 571.2 555.0 605.2
----------- ---------- ---------- ---------- ---------- ----------
Gross profit............ 164.8 131.4 113.1 74.3 75.0 73.0
Selling, general and
administrative
expenses............... 57.4 46.9 38.0 32.5 32.8 33.7
Reduction in carrying
value of assets(m)..... 14.7 14.7 16.7 -- -- --
----------- ---------- ---------- ---------- ---------- ----------
Income from
operations(a).......... 92.7 69.8 58.4 41.8 42.2 39.3
Interest expense and
other related financing
costs.................. 79.4 80.7 65.8 54.3 57.0 56.0
Minority interest
expense................ -- -- -- -- 2.7 3.9
----------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
income taxes........... 13.3 (10.9) (7.4) (12.5) (17.5) (20.6)
Income tax provision.... 2.0 5.1 5.6 1.9 2.2 --
----------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
extraordinary charges
and cumulative effect
of changes in
accounting principles.. 11.3 (16.0) (13.0) (14.4) (19.7) (20.6)
Extraordinary charges
relating to early
extinguishment of
debt(b)................ -- (5.8) -- (1.3) (23.6) --
Cumulative effect of
changes in accounting
principles(n).......... -- -- -- (6.3) -- --
----------- ---------- ---------- ---------- ---------- ----------
Net income (loss)
applicable to common
stockholders(b)........ $ 11.3 $ (21.8) $ (13.0) $ (22.0) $ (43.3) $ (20.6)
=========== ========== ========== ========== ========== ==========
Net income (loss) per
common share(a)(b)(c):
Income (loss) before
extraordinary
charges............... $ 0.55 $ (0.77) $ (0.63) $ (0.87) $ (1.21) $ (1.26)
Extraordinary charges.. -- (0.29) -- (0.08) (1.44) --
Cumulative effect of
accounting changes.... -- -- -- (0.38) -- --
----------- ---------- ---------- ---------- ---------- ----------
Total.................. $ 0.55 $ (1.06) $ (0.63) $ (1.33) $ (2.65) $ (1.26)
=========== ========== ========== ========== ========== ==========
Weighted average number
of common and common
equivalent shares
outstanding(e)......... 20,475,509 20,647,599 20,647,599 16,469,928 16,364,313 16,364,313
SELECTED SEGMENT DATA:
Net sales:
Metal container
business.............. $ 1,184.8 $ 882.3 $ 657.1 $ 459.2 $ 437.4 $ 446.1
Plastic container
business.............. 219.6 219.6 204.3 186.3 192.6 232.1
Income (loss) from
operations:(a)(o)
Metal container
business.............. 81.0 58.2 59.8 42.3 40.7 36.6
Plastic container
business.............. 13.2 13.2 (0.1) 0.6 2.3 3.5
OTHER DATA:
Adjusted EBITDA(f)...... $ 169.0 $ 132.4 $ 114.5 $ 76.1 $ 74.0 $ 72.1
Adjusted EBITDA as a
percentage of net
sales.................. 12.0% 12.0% 13.3% 11.8% 11.7% 10.6%
Income from operations
as a percentage of net
sales.................. 6.6 6.3 6.8 6.5 6.7 5.8
Capital expenditures.... $ 54.9 $ 51.9 $ 29.2 $ 42.5 $ 23.4 $ 21.8
Depreciation and
amortization(g)........ 57.9 45.4 37.2 33.8 31.8 32.8
Cash flows provided by
operating activities... -- 209.6 47.3 48.1 15.4 61.2
Cash flows used for
investing activities... -- (397.1) (27.9) (116.1) (23.0) (9.8)
Cash flows provided by
(used for) financing
activities............. -- 186.9 (17.0) 65.3 8.6 (51.9)
Number of employees (at
end of period)(p)...... 5,110 5,110 4,000 3,330 3,340 3,560
BALANCE SHEET DATA (at
end of period):
Total assets............ -- $ 900.0 $ 504.3 $ 497.6 $ 389.0 $ 390.7
Total long-term debt.... -- 750.9 510.8 505.7 383.2 315.5
Redeemable preferred
stock of Silgan
(minority interest of
Holdings).............. -- -- -- -- -- 27.9
Deficiency in
stockholders' equity... -- (179.8) (158.0) (145.0) (138.0) (94.6)
</TABLE>
(footnotes follow)
23
<PAGE>
NOTES TO SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(a) Under the terms of the stock option plans of Containers and Plastics,
stock options issued under such plans will be converted to options under
the Stock Option Plan at the time of the Offering. In accordance with APB
No. 25, options granted under these plans are considered variable options
with a final measurement date at the time of conversion. The Company will
recognize a non-cash charge of approximately $21.1 million, assuming an
initial public offering price of $19.00 per share, net of $3.7 million
previously accrued, at the time of the Offering in the Company's first
quarter in 1997, for the excess of fair market value over grant price of
these options, less amounts previously accrued. The unaudited pro forma
financial data does not give effect to such non-cash charge. Prior to the
Offering, the Company recognized compensation expense for the change in
pro forma book value since the date of grant of these options, amortized
over the vesting period.
(b) The unaudited pro forma net income per common share data for the nine
months ended September 30, 1996 does not include the historical
extraordinary charge, net of tax, incurred in 1996 and an extraordinary
charge, net of tax, that the Company expects to incur in the first quarter
of 1997 of $0.7 million, in each case for the write-off of unamortized
deferred financing costs related to the early redemption of the Discount
Debentures. See "Capitalization". In addition, the unaudited pro forma
consolidated operating data for the year ended December 31, 1995 does not
include the historical extraordinary charge, net of taxes, incurred in
1995 as a result of the early extinguishment of amounts owing under the
Company's debt facilities.
(c) Actual and pro forma net income (loss) per share are based on the weighted
average number of shares outstanding during the period, as adjusted in all
periods for the Stock Split, and after giving effect to stock options
considered to be dilutive common stock equivalents using the treasury
stock method. Primary and fully diluted net income (loss) per share are
the same for each of the periods. Under the terms of the stock option
plans of Containers and Plastics, stock options issued under such plans
will be converted to options under the Stock Option Plan at the time of
the Offering. Such conversion will be made based upon the allocable value
of Containers and Plastics determined in relation to the value of the
Company. Weighted average number of shares outstanding includes the
subsidiary options which are considered to be issued within 12 months
prior to the Offering at less than the assumed initial public offering
price due to their conversion feature as described in footnote (e) above.
Supplementary net income (loss) per share, assuming that sufficient shares
will be issued in the Offering to repay indebtedness as described in "Use
of Proceeds" as of January 1, 1995, was $(0.67) for the year ended
December 31, 1995 and $1.36 for the nine months ended September 30, 1996.
(d) The unaudited pro forma net income per common share and balance sheet data
for the nine months ended September 30, 1996 and the unaudited pro forma
consolidated operating data for the year ended December 31, 1995 assume
gross proceeds from the Offering of $70.3 million and the use of the net
proceeds therefrom as described under "Use of Proceeds". For a detailed
presentation of the unaudited pro forma results of operations of the
Company for the nine months ended September 30, 1996 and the year ended
December 31, 1995, see the unaudited pro forma condensed statement of
operations, including the notes thereto, included elsewhere in this
Prospectus. For purposes of the pro forma financial information for the
year ended December 31, 1995, balance sheet data is not included.
(e) The weighted average number of common and common equivalent shares
outstanding gives effect to the Stock Split.
(f) "Adjusted EBITDA" 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 applicable period, without duplication, consolidated
interest expense (including minority interest expense), income tax expense
and depreciation and amortization expense, as adjusted to add back
expenses relating to postretirement health care costs (which amounted to
$2.3 million and $0.8 million for the nine months ended September 30,
24
<PAGE>
1996 and 1995, respectively, and $1.7 million, $0.7 million and $0.5
million for the years ended December 31, 1995, 1994 and 1993,
respectively), the reduction in carrying value of assets (which were $14.7
million and $16.7 million for the years ended December 31, 1995 and 1994,
respectively) and certain other non-cash charges (which included charges
relating to the vesting of benefits under SARs of $0.6 million for each of
the nine months ended September 30, 1996 and 1995, and $0.8 million and
$1.5 million for the years ended December 31, 1995 and 1994, respectively).
The Company has included information regarding Adjusted EBITDA because
management believes that many investors consider it to be important in
assessing a company's ability to service and incur debt. Accordingly, this
information has been disclosed herein to permit a more complete analysis of
the Company's financial condition. Adjusted EBITDA should not be considered
in isolation or as a substitute for net income or other consolidated
statement of operations or cash flows data prepared in accordance with GAAP
as a measure of the profitability or liquidity of the Company. See the
consolidated statements of operations and consolidated statements of cash
flows of Holdings, including the notes thereto, included elsewhere in this
Prospectus. Adjusted EBITDA does not take into account the Company's debt
service requirements and other commitments and, accordingly, is not
necessarily indicative of amounts that may be available for discretionary
uses. Additionally, Adjusted EBITDA is not computed in accordance with GAAP
and may not be comparable to other similarly titled measures of other
companies.
(g) Depreciation and amortization excludes amortization of debt financing
costs.
(h) Historical interest expense is reconciled to pro forma interest expense
for the year ended December 31, 1995 as follows:
<TABLE>
<CAPTION>
YEAR
ENDED
DECEMBER 31,
1995
---------------------
(DOLLARS IN MILLIONS)
<S> <C>
Historical interest expense........................... $ 80.7
Increase in interest expense to give effect to AN Can
acquisition(1)....................................... 8.5
Increase in interest expense related to bank
borrowings used to fund Discount Debenture
repurchase/redemption(1)............................. 16.9
Increase in interest expense related to the exchange
of the Exchangeable Preferred Stock for the Exchange
Debentures........................................... 6.8
Decrease in interest expense related to
the repurchase/
redemption of all of the Discount Debentures......... (28.6)
Decrease in interest expense due to the repayment of
bank debt from the excess proceeds of the Offering
(1).................................................. (4.0)
Net change in amortization of deferred financing
costs................................................ ( .9)
------
Pro forma interest expense............................ $ 79.4
======
</TABLE>
- --------
(1) For purposes of the above computations, the assumed interest rate for
borrowings under the Silgan Credit Agreement is based upon the three
month London interbank offered rate ("LIBOR") of 5.56% per annum as of
January 23, 1997 plus a fixed spread of 2 1/2% per annum for the A term
loans and working capital loans and 3% per annum for the B term loans.
(i) The unaudited pro forma financial information for the year ended December
31, 1995 includes the historical results of the Company and AN Can and
gives effect to certain pro forma adjustments including purchase
accounting adjustments which are based on appraisals and valuations, the
financing of the acquisition of AN Can by the Company and the refinancing
of certain of the Company's debt obligations and certain other
adjustments, as if these events had occurred as of the beginning of 1995.
During the second quarter of 1996, the purchase price allocation for the
AN Can acquisition was adjusted for differences between the actual and
preliminary valuations for the asset appraisals and for projected employee
benefit costs as well as for a revision in costs of
25
<PAGE>
plant rationalizations, administrative workforce reductions and other
matters, which in aggregate resulted in an adjustment to increase goodwill
by $20.7 million. Pro forma cost of goods sold includes adjustments for (i)
increased depreciation charges of $2.3 million based upon the fair values
of property, plant and equipment and applying an estimated useful life of
25 years for buildings and 5 to 11 years for machinery and equipment, (ii)
increased amortization of $0.4 million for the excess of fair value of net
assets acquired over a 40-year period, and (iii) increased employee
benefits costs for pension and post-retirement medical of $0.2 million. Pro
forma selling, general and administrative expenses include adjustments for
(i) increased depreciation charges of $0.1 million and (ii) decreased
administrative support costs of $7.6 million realized as a result of
integration of the Company's and AN Can's sales, administrative and
research functions. The unaudited pro forma financial information for the
year ended December 31, 1995 does not give effect to adjustments for
decreased costs from manufacturing synergies resulting from the integration
of AN Can with Containers' existing can manufacturing operations and
benefits the Company may realize as a result of its planned rationalization
of plant operations.
(j) On August 1, 1995, the Company acquired AN Can for a purchase price of
$362.0 million (including the purchase from ANC of its St. Louis facility
in May 1996 for $13.1 million). 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 for the year ended December 31, 1995
included elsewhere in this Prospectus.
(k) On December 21, 1993, the Company acquired DM Can for a purchase price of
approximately $73.3 million. 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 for the year ended December 31, 1995
included elsewhere in this Prospectus.
(l) On November 15, 1991, the Company sold its PET carbonated beverage bottle
business. In 1991, sales from the PET carbonated beverage business were
$33.4 million. See "Business--Company History".
(m) Based upon a review of its depreciable assets, the Company determined that
certain adjustments were necessary to properly reflect net realizable
values. In 1995, the metal container business recorded a write-down of
$14.7 million for the excess of carrying value over estimated realizable
value of machinery and equipment at existing facilities which had become
underutilized due to excess capacity. In 1994, charges of $7.2 million and
$9.5 million were recorded by the metal container business and plastic
container business, respectively, to write-down the excess carrying value
over estimated realizable value of various plant facilities held for sale
and for technologically obsolete and inoperable machinery and equipment.
(n) 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 did not elect to restate prior
years' financial statements for any of these pronouncements.
(o) Income from operations in the selected segment data includes charges
incurred for the reduction in carrying value of certain assets for the
metal containers business of $14.7 million and $7.2 million for the years
ended December 31, 1995 (pro forma and historical) and 1994 and for the
plastic containers business of $9.5 million for the year ended December
31, 1994, as referred to in footnote (m) above. Income from operations
excludes corporate expense for both the metal container and plastic
container businesses.
(p) The number of employees at December 31, 1995 includes approximately 1,400
employees who joined the Company on August 1, 1995 as a result of the
acquisition by Containers of AN Can. 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.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following should be read in conjunction with the consolidated financial
statements of the Company and the notes thereto included elsewhere in this
Prospectus. The following discussion includes certain forward-looking
statements regarding the Company's expected results of operations, cost
savings and future liquidity. For a discussion of important factors that could
cause actual results to differ materially from the forward-looking statements,
see "Risk Factors".
OVERVIEW
The Company is a leading North American manufacturer of consumer goods
packaging products that currently produces (i) steel and aluminum containers
for human and pet food, (ii) custom designed plastic containers for personal
care, health, food, pharmaceutical and household chemical products and (iii)
specialty packaging items, including metal caps and closures, plastic bowls
and paper containers used by processors in the food industry. The Company is
the largest manufacturer of metal food containers in North America, with a
unit sale market share for the twelve months ended October 31, 1996 of 35% in
the United States, and is a leading manufacturer of plastic containers in
North America for personal care products. The Company has focused on growth
through acquisitions, followed by plant rationalizations and consolidations
and investment in the acquired businesses to gain manufacturing and production
efficiencies and to provide for internal growth. Since its inception, the
Company has acquired and successfully integrated ten businesses, including the
recent acquisitions of AN Can in August 1995 for a purchase price of
approximately $362.0 million (including net working capital of approximately
$156.0 million) and DM Can in December 1993 for a purchase price of
approximately $73.3 million (including net working capital of approximately
$21.9 million). In addition, on October 9, 1996 the Company completed its
acquisition of Finger Lakes, the metal container manufacturing subsidiary of
Curtice Burns. See "Prospectus Summary--Recent Developments". The Company's
future growth will depend in large part on additional acquisitions of consumer
goods packaging businesses.
Holdings is a holding company that conducts its business through two
operating companies, Containers and Plastics, each of which is a wholly owned
subsidiary of Silgan.
COST REDUCTIONS AND INVESTMENTS FOLLOWING ACQUISITIONS
The Company believes that its acquisitions and investments have enabled it
to achieve a low cost position in the metal food container segment. To further
enhance its low cost position, the Company has realized cost reduction
opportunities through plant rationalizations and capital improvements, as well
as from improved production scheduling and line reconfiguration. Since 1991,
Containers has closed eight smaller, higher cost metal container facilities,
including five facilities that were closed in 1995 as a result of the
integration of the manufacturing operations of DM Can. Because most of the
facilities that were closed in 1995 were closed late in the year, the Company
began to realize the benefits from the closing of such facilities in 1996.
From 1991 through 1993, Plastics closed three manufacturing facilities and
consolidated the technical and administrative functions of its plastic
container businesses. An additional facility was closed in 1995. In 1994,
Plastics began to realize the benefits of this consolidation and
rationalization program, as well as from its capital investment program.
AN CAN ACQUISITION
Management believes that the acquisition of AN Can, which has seventeen
manufacturing facilities, provides the Company with further cost reduction
opportunities, not only through purchasing economies and manufacturing
synergies which it will realize from the combined operations, but also through
the integration of selling, general and administrative operations of AN Can
into the Company's
27
<PAGE>
existing metal container business. In 1996, the Company completed the
integration of these selling, general and administrative functions and realized
certain of the manufacturing synergies. The Company believes that it will
realize the full benefits of the integration of the selling, general and
administrative functions in 1997, and that benefits to be realized by the
rationalization of plant operations will begin to occur in 1997.
Although employee termination costs in connection with plant
rationalizations, administrative workforce reductions and other plant exit
costs associated with the acquisition of AN Can have been accrued through
purchase accounting adjustments, the Company incurred in 1995 and in 1996 other
non-recurring costs which under current accounting pronouncements will be
charged against operating income. These costs, which include redundant charges
related to the integration of selling and administrative functions, as well as
costs associated with plant rearrangement and clean-up, were $3.2 million in
1995 and were approximately $5.0 million in 1996.
NET SALES
LONG-TERM CONTRACTS. The Company seeks to develop and maintain long-term
relationships with its customers. The Company estimates that approximately 80%
of Containers' projected sales in 1997 will be pursuant to long-term supply
arrangements. Containers' has agreements with Nestle pursuant to which
Containers supplies a majority of Nestle's metal container requirements, and an
agreement with Del Monte pursuant to which Containers supplies substantially
all of Del Monte's U.S. metal container requirements. Revenues from these two
customers represented approximately 29% of net sales by Containers in 1996. In
addition to Nestle and Del Monte, Containers has multi-year supply arrangements
with several other customers, including contracts which AN Can had with many of
its customers. The Company has recently agreed with Nestle, subject to
definitive documentation, to extend the term of certain of the Nestle Supply
Agreements through 2004 (representing approximately 10% of the Company's 1996
sales) in return for certain price concessions by the Company. See "Risk
Factors--Reliance on Major Customers" and "Business--Sales and Marketing". The
Company believes that these price concessions will not have a material adverse
effect on its results of operations. Under the Company's recent agreement with
Nestle, with respect to the remaining Nestle Supply Agreements that expire in
August 1997 (representing approximately 6% of the Company's 1996 sales), the
Company has the right to submit a bid to Nestle, and to match any bid received
by Nestle, for the 1998 supply year with respect to the metal containers that
are the subject of such Nestle Supply Agreements. There can be no assurance
that any such bid by the Company will be made at sales prices equivalent to
those currently in effect or otherwise on terms similar to those currently in
effect. The loss by the Company of either Nestle or Del Monte as a customer
would have a material adverse effect on the Company's results of operations.
See "Risk Factors--Reliance on Major Customers" and "Business--Sales and
Marketing".
The Company's long-term supply contracts generally provide for pricing
changes in accordance with cost change formulas, thereby significantly reducing
the exposure of the Company's results from operations to the volatility of raw
material costs. In addition, the terms of the Company's long-term supply
contracts limit the Company's ability to increase margins.
AGRICULTURAL HARVEST AND SEASONALITY. The Company's metal container business
sales are dependent, in part, upon the vegetable, tomato and fruit harvests in
the midwest and western regions of the United States. The size and quality of
these harvests varies from year to year, depending in large part upon the
weather conditions in those regions. The fruit and vegetable pack harvest in
1994 was better than the below normal fruit and vegetable pack harvest in 1995,
resulting in greater sales to fruit and vegetable pack processing customers in
1994 as compared to 1995. The 1996 midwest vegetable harvest was better than in
1995, but, due to cool wet weather during the 1996 planting season, was less
than the harvest in 1994. See "Risk Factors--Dependence on Agricultural
Harvest; Seasonality".
28
<PAGE>
The Company's business is affected by seasonal variations as a result of the
timing of the harvest. Accordingly, the Company experiences higher unit sales
volume in the second and third quarters and, as a result, the Company has
historically generated a disproportionate amount of its income from operations
in the same periods. In 1996, the Company generated substantially all of its
net income in the second and third quarters. See "Risk Factors--Dependence on
Agricultural Harvest; Seasonality".
INTEREST EXPENSE
In order to increase its financial flexibility, during 1995 and 1996 the
Company refinanced portions of its higher cost capital with lower cost
capital. Upon completion of the Refinancing, the Company will have refinanced
all of the Discount Debentures. The net result of these refinancings will be
approximately $19.5 million of annual current cash interest savings (excluding
non-cash interest relating to the Exchange Debentures) and approximately $25.9
million of current cash tax savings (as a result of the deduction by the
Company of the accreted interest of approximately $103.5 million on the
retired Discount Debentures).
As of September 30, 1996, pro forma for the Refinancing, the Company will
have $873.7 million of indebtedness outstanding, including $126.0 million of
working capital loans. Because the Company sells metal containers used in
vegetable and fruit processing, 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. Due to these seasonal
requirements, the Company incurs short term indebtedness to finance its
working capital requirements. At its peak in September 1996, approximately
$182.5 million of the working capital revolver under the Silgan Credit
Agreement, including letters of credit, was utilized.
The Company's financial results are sensitive to changes in prevailing
market rates of interest. At December 31, 1996, on a pro forma basis after
giving effect to the Refinancing and including working capital loans of $27.8
million, 48.2% of the Company's indebtedness bore interest at floating rates,
taking into account interest rate swap agreements entered into by the Company
to mitigate the effect of interest rate fluctuations. These agreements have a
notional amount of $200.0 million, including interest rate swap agreements
entered into during the fourth quarter of 1996 with a notional amount of
$100.0 million. Under these agreements, floating rate interest was exchanged
for fixed rates of interest ranging from 5.6% to 6.2% plus the Company's
incremental margin, which currently ranges from 2.5% to 3.0%. Depending upon
market conditions, the Company may enter into additional interest rate swap or
hedge agreements in the future to hedge its exposure to interest rate
volatility.
INCOME TAX CONSIDERATIONS
FEDERAL TAX LIABILITY. Because the Discount Debentures represent "applicable
high yield discount obligations," the tax deduction that would otherwise have
been available to the Company for the accreted interest on the Discount
Debentures during the five years that no cash interest was paid thereon was
not available until the retirement of the Discount Debentures. After giving
effect to the Refinancing, the Company will have redeemed or repurchased all
of the Discount Debentures from 1995 to 1997, providing the Company with an
allowable deduction of approximately $103.5 million for the amount of accreted
interest on such indebtedness, and resulting in no federal tax liability for
the Company in 1996. Upon completion of the Refinancing, the Company estimates
it will have a regular net operating loss carryforward of approximately $185.0
million, which will have resulted principally from both the deduction of the
accreted interest on the Discount Debentures and significant tax depreciation
deductions from the acquisition of AN Can. Subject to certain limitations,
this net operating loss carryforward will be available to offset taxable
income that the Company expects to generate in 1997 and in the future until
such time as the regular net operating loss carryforward is fully utilized.
29
<PAGE>
Effective in 1993, however, the Company became subject to alternative
minimum tax ("AMT") for federal income tax purposes. Due to the availability
of an AMT net operating loss carryforward, the Company incurred an AMT
liability at the rate of 2% of AMT taxable income for 1993 through 1995.
Beginning in 1996, the Company would have fully utilized its AMT net operating
loss carryforwards and would have incurred an AMT liability at the statutory
rate of 20% of AMT taxable income if it had not realized the benefit of the
deduction of accreted interest on the retired Discount Debentures. As a result
of this deduction, the Company will have reduced its federal tax liability by
approximately $20.7 million and state tax liability by approximately $5.2
million for 1996 and 1997. Management expects that the Company will fully
utilize the benefit of this deduction in late 1997 or early 1998 at which time
it will then become subject to AMT at the statutory rate.
BOOK ACCOUNTING IMPLICATIONS. Although the Company has historically reported
book losses, it has not been permitted in accordance with SFAS No. 109 to
record an income tax credit for the benefit of its net operating loss
carryforward, but instead has provided a provision for income taxes based upon
federal, state and foreign taxes currently payable. In accordance with SFAS
No. 109, the Company will continue to provide for income taxes based upon
taxes currently payable, which are estimated to be $3.0 million for 1996 and
$5.0 million for 1997. During 1997, management expects that it will meet the
requirements under SFAS No. 109 to record the benefit of its cumulative net
operating loss carryforward and as a result will record a net deferred tax
asset and offsetting income tax benefit in that year. Thereafter, the Company
expects to provide for income taxes at the statutory rate.
RESULTS OF OPERATIONS
The following table sets forth certain income statement data for the
Company, expressed as a percentage of net sales, for each of the periods
presented, and should be read in conjunction with the historical and pro forma
financial information and related notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- ------------------
(UNAUDITED)
PRO FORMA
1995 1995 1994 1993 1996 1995
----------- ----- ----- ----- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales:
Metal container
business................ 84.4% 80.1% 76.3% 71.1% 84.9% 79.2%
Plastic container
business................ 15.6 19.9 23.7 28.9 15.1 20.8
----- ----- ----- ----- -------- --------
Total.................... 100.0 100.0 100.0 100.0 100.0 100.0
Cost of goods sold........ 88.3 88.1 86.9 88.5 86.7 87.6
----- ----- ----- ----- -------- --------
Gross profit.............. 11.7 11.9 13.1 11.5 13.3 12.4
Selling, general and
administrative expenses.. 4.1 4.3 4.4 5.0 3.9 3.8
Reduction in carrying
value of assets.......... 1.0 1.3 1.9 -- -- --
----- ----- ----- ----- -------- --------
Income from operations.... 6.6 6.3 6.8 6.5 9.4 8.6
Interest expense and other
related financing costs.. 5.7 7.3 7.6 8.4 6.3 7.2
----- ----- ----- ----- -------- --------
Income (loss) before
income taxes............. 0.9 (1.0) (0.8) (1.9) 3.1 1.4
Income tax provision...... 0.1 0.5 0.7 0.3 0.3 0.7
----- ----- ----- ----- -------- --------
Income (loss) before
extraordinary charges and
cumulative effect of
changes in accounting
principles............... 0.8 (1.5) (1.5) (2.2) 2.8 0.7
Extraordinary charges
relating to early
extinguishment of debt... -- (0.5) -- (0.2) (0.2) (0.7)
Cumulative effect of
changes in accounting
principles............... -- -- -- (1.0) -- --
----- ----- ----- ----- -------- --------
Net income (loss) before
preferred stock dividend
requirement.............. 0.8 (2.0) (1.5) (3.4) 2.6 --
Preferred stock dividend
requirement.............. -- -- -- -- (0.1) --
----- ----- ----- ----- -------- --------
Net income (loss)
applicable to common
stockholders............. 0.8% (2.0)% (1.5)% (3.4)% 2.5% -- %
===== ===== ===== ===== ======== ========
Pro forma net income...... 3.1%
========
</TABLE>
30
<PAGE>
RESULTS OF OPERATIONS--NINE MONTHS
Summary unaudited historical results for the Company's two business
segments, metal and plastic containers, for the nine months ended September
30, 1996 and 1995 and summary pro forma results for these business segments
for the nine months ended September 30, 1995 (after giving effect to the
acquisition of AN Can as of the beginning of 1995) are provided below.
The pro forma data includes the historical results of the Company and AN Can
and reflects the effect of purchase accounting adjustments based on final
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 unaudited pro forma 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 at the beginning of the
period indicated, or to project the Company's financial position or results of
operations for any future date or period. The pro forma financial data do not
give effect to adjustments for decreased costs from manufacturing synergies
resulting from the integration of AN Can with Containers' existing can
manufacturing operations and benefits the Company may realize as a result of
its planned rationalization of plant operations. The pro forma information
presented should be read in conjunction with the historical results of
operations of the Company for the periods ended September 30, 1996 and 1995.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------
HISTORICAL PRO FORMA
---------------------- -------------
1996 1995 1995
----------- --------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Net sales:
Metal container business................ $ 917.8 $ 642.9 $ 945.4
Plastic container business.............. 162.7 168.6 168.6
----------- --------- -----------
Consolidated.......................... $ 1,080.5 $ 811.5 $ 1,114.0
Income from operations:
Metal container business................ $ 89.4 $ 60.6 $ 83.6
Plastic container business.............. 13.1 9.8 9.8
Corporate expense....................... (0.8) (1.0) (1.0)
----------- --------- -----------
Consolidated.......................... $ 101.7 $ 69.4 $ 92.4
</TABLE>
HISTORICAL NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH HISTORICAL NINE
MONTHS ENDED SEPTEMBER 30, 1995
NET SALES. Consolidated net sales increased $269.0 million, or 33.1%, to
$1,080.5 million for the nine months ended September 30, 1996, as compared to
net sales of $811.5 million for the same nine months in the prior year. This
increase resulted predominantly from net sales generated by the former AN Can
operations.
Net sales for the metal container business (including net sales of its
specialty business of $66.2 million) were $917.8 million for the nine months
ended September 30, 1996, an increase of $274.9 million from net sales of
$642.9 million for the same period in 1995. Net sales of metal cans of $851.6
million for the nine months ended September 30, 1996 were $227.7 million
greater than net sales of metal cans of $623.9 million for the same period in
1995. This increase resulted from net sales of approximately $236.0 million
generated from the former AN Can operations during the first seven months of
1996 and increased unit sales due to a better vegetable pack harvest in 1996
as compared to 1995, offset to a limited extent by volume losses with certain
customers.
Sales of specialty items included in the metal container segment increased
$47.2 million to $66.2 million during the nine months ended September 30, 1996
as compared to the same period in 1995, due predominantly to additional sales
generated by the former AN Can operations.
31
<PAGE>
Net sales for the plastic container business of $162.7 million during the
nine months ended September 30, 1996 decreased $5.9 million from net sales of
$168.6 million for the same period in 1995. Despite an increase in unit sales,
net sales of plastic containers declined as a result of the pass through of
lower resin costs.
COST OF GOODS SOLD. Cost of goods sold as a percentage of consolidated net
sales was 86.7% ($936.4 million) for the nine months ended September 30, 1996,
a decrease of 0.9 percentage points as compared to 87.6% ($711.0 million) for
the same period in 1995. The decrease in cost of goods sold as a percentage of
net sales was principally attributable to synergies realized from the AN Can
acquisition, improved operating efficiencies due to can plant consolidations
as well as the improved manufacturing performance by the plastic container
business, offset, in part, by the higher cost base of the former AN Can
operations and the realization of higher per unit costs due to the Company's
one-time planned reduction in finished goods inventory. The additional
production capacity provided by AN Can has enabled the Company to produce its
product closer to the time of sale and, as a result, during 1996 the Company
reduced the amount of finished goods that it carries.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of consolidated net sales increased
0.1 percentage points to 3.9% ($42.4 million) for the nine months ended
September 30, 1996, as compared to 3.8% ($31.1 million) for the nine months
ended September 30, 1995. This increase in selling, general and administrative
expenses as a percentage of net sales principally reflects redundant costs,
estimated to be $4.0 million, associated with the integration of the AN Can
operations. Beginning in 1997, redundant costs are expected to decline as the
Company completes its integration of the administrative functions of AN Can
with the Company.
INCOME FROM OPERATIONS. Income from operations as a percentage of
consolidated net sales increased 0.8 percentage points to 9.4% ($101.7
million) for the nine months ended September 30, 1996, as compared with 8.6%
($69.4 million) for the same period in the prior year. This increase in income
from operations as a percentage of consolidated net sales was primarily
attributable to the aforementioned improvement in gross margin.
Income from operations as a percentage of net sales for the metal container
business improved to 9.7% ($89.4 million) for the nine months ended September
30, 1996, from 9.4% ($60.6 million) for the same period in the prior year.
This increase in income from operations as a percentage of net sales for the
metal container business was principally attributable to synergies resulting
from the acquisition of AN Can, improved operating efficiencies due to plant
consolidations and the benefit of cost reductions provided by the Company's
capital investment program, offset, in part, by the higher cost base of the AN
Can operations and the negative impact of the Company's one-time planned
reduction in the amount of finished goods inventory.
Income from operations as a percentage of net sales for the plastic
container business improved to 8.1% ($13.1 million) for the nine months ended
September 30, 1996, from 5.8% ($9.8 million) for the same period in 1995. The
improvement in the operating performance of the plastic container business was
principally attributable to increased production volumes as well as the
benefits realized through capital investment and improved production planning
and scheduling efficiencies.
INTEREST EXPENSE. Interest expense increased $10.6 million to $68.3 million
for the nine months ended September 30, 1996, principally as a result of
increased borrowings to finance the acquisition of AN Can in August 1995,
offset, in part, by the benefit realized from the redemption of $154.4 million
of the Discount Debentures with lower cost bank borrowings (additional B term
loans of $125.0 million and working capital loans of $17.4 million) and with
$12.0 million of the proceeds from the Preferred Stock Sale, and by lower
average bank borrowing rates. Due to the benefit of the redemption of the
Discount Debentures, interest expense for the fourth quarter of 1996 and the
first and second quarters of 1997 will decline significantly from the
comparable quarters in the prior years.
32
<PAGE>
INCOME TAXES. The provisions for income taxes for the nine months ended
September 30, 1996 and 1995 provide for federal, state and foreign taxes
currently payable. The decrease in the provision for income taxes of $2.9
million for the nine months ended September 30, 1996 as compared to the same
period in the prior year reflects the benefit of the current cash tax savings
realized from the deduction of accreted interest on the retired Discount
Debentures.
NET INCOME. As a result of the items discussed above, net income of $30.4
million (before extraordinary charges of $2.1 million and the preferred stock
dividend requirement of $1.3 million) increased $24.6 million for the nine
months ended September 30, 1996, as compared to net income of $5.8 million
(before extraordinary charges of $5.8 million) for the nine months ended
September 30, 1995.
During the third quarter of 1996 the Company incurred an extraordinary
charge of $2.1 million, net of taxes, for the write-off of unamortized debt
cost associated with the early redemption of Discount Debentures. In the third
quarter of 1995, the Company incurred an extraordinary charge of $5.8 million,
net of taxes, for the write-off of unamortized debt costs related to the
refinancing of its secured debt facilities to fund the AN Can acquisition, the
repurchase of a portion of the Discount Debentures and premiums paid on the
repurchase of such Discount Debentures.
HISTORICAL NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH PRO FORMA NINE
MONTHS ENDED SEPTEMBER 30, 1995
NET SALES. Consolidated net sales for the nine months ended September 30,
1996 declined $33.5 million as compared to pro forma consolidated net sales
for the same period in the prior year. This decline in net sales resulted
primarily from a decline in sales by the metal container business of $27.6
million, which was principally attributable to the loss of an AN Can customer
whose product line was acquired by a company that manufactured its own cans
and, to a lesser extent, volume losses with certain other customers, offset,
in part, by increased unit sales due to a better vegetable pack harvest in
1996 as compared to 1995. Although the plastic container business had
increased unit volume in 1996, net sales declined $5.9 million due to the pass
through of lower resin costs.
INCOME FROM OPERATIONS. Income from operations as a percentage of
consolidated net sales for the nine months ended September 30, 1996 was 9.4%
($101.7 million), as compared to pro forma income from operations as a
percentage of pro forma consolidated net sales of 8.3% ($92.4 million) for the
nine months ended September 30, 1995. The increase in income from operations
for the nine months ended September 30, 1996 as compared to pro forma income
from operations for the same period in the prior year was attributable to more
efficient production planning, the realization of can manufacturing synergies
resulting from the acquisition of AN Can, the benefits realized from plant
consolidations and capital investments, and the improved operating performance
of the plastic container business, offset, in part, by redundant costs
associated with the AN Can operations and the negative impact of the Company's
one-time planned reduction of the amount of finished goods inventory.
RESULTS OF OPERATIONS--YEAR END
Summary historical results for the Company's two business segments, metal
and plastic containers, for the calendar years ended December 31, 1995, 1994
and 1993 and summary pro forma results for these business segments for the
calendar years ended December 31, 1995 and 1994 (after giving effect to the
acquisition of AN Can as of the beginning of such periods) are provided below.
The pro forma data includes the historical results of the Company and AN Can
and reflects the effect of purchase accounting adjustments based on 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 periods presented. For a
33
<PAGE>
description of such adjustments, see the unaudited pro forma condensed
statements of operations of the Company, including the notes thereto, included
elsewhere in this Prospectus. 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
at the beginning of the periods indicated, or to project the Company's
financial position or results of operations for any future date or period. The
pro forma financial data do not give effect to adjustments for decreased costs
from manufacturing synergies resulting from the integration of AN Can with
Containers' existing can manufacturing operations and benefits the Company may
realize as a result of its planned rationalization of plant operations. The
pro forma information presented should be read in conjunction with the
historical results of operations of the Company for the years ended December
31, 1995 and 1994.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
HISTORICAL PRO FORMA
------------------------ ------------------
1995 1994 1993 1995 1994
-------- ------ ------ -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales:
Metal container business........ $ 882.3 $657.1 $459.2 $1,184.8 $1,253.7
Plastic container business...... 219.6 204.3 186.3 219.6 204.3
-------- ------ ------ -------- --------
Consolidated.................. $1,101.9 $861.4 $645.5 $1,404.4 $1,458.0
======== ====== ====== ======== ========
Income from operations:
Metal container business........ $ 72.9 $ 67.0 $ 42.3 $ 95.7 $ 107.6
Plastic container business...... 13.2 9.4 0.6 13.2 9.4
Reduction in asset value(1)..... (14.7) (16.7) -- (14.7) (23.8)
Write-down of goodwill(2)....... -- -- -- -- (26.7)
Restructuring expense(3)........ -- -- -- -- (10.1)
Corporate expense............... (1.6) (1.3) (1.1) (1.5) (1.4)
-------- ------ ------ -------- --------
Consolidated.................. $ 69.8 $ 58.4 $ 41.8 $ 92.7 $ 55.0
======== ====== ====== ======== ========
</TABLE>
- --------
(1) Included in the historical and pro forma income from operations of the
Company are charges incurred for the reduction of the carrying value of
certain underutilized equipment to net realizable value of $14.7 million
in 1995 allocable to the metal container business, and of $16.7 million in
1994, of which $7.2 million was allocable to the metal container business
and $9.5 million to the plastic container business. Additionally, pro
forma income from operations for 1994 includes a charge of $7.1 million
for the write-down of certain technologically obsolete equipment by AN
Can.
(2) Included in the historical financial information of AN Can as of December
31, 1994 is a charge of $26.7 million for the write-down of goodwill.
(3) Included in the pro forma income from operations for 1994 is a charge
incurred by AN Can of $10.1 million for shut down costs necessary to
realign the assets of the business more closely with the existing customer
base.
HISTORICAL YEAR ENDED DECEMBER 31, 1995 COMPARED WITH HISTORICAL YEAR ENDED
DECEMBER 31, 1994
NET SALES. Consolidated net sales increased $240.5 million, or 27.9%, to
$1.1 billion for the year ended December 31, 1995, as compared to net sales of
$861.4 million for the same period in 1994. This increase resulted from net
sales of $264.3 million generated by AN Can since its acquisition in August
1995 and a $15.3 million increase in sales of plastic containers offset, in
part, by a decline in sales of metal containers to Silgan's existing customer
base of $39.1 million.
Net sales for the metal container business (including its specialty
business) were $882.3 million for the year ended December 31, 1995, an
increase of $225.2 million from net sales of $657.1 million for the same
period in 1994. Excluding net sales of metal cans of $236.0 million generated
by AN Can
34
<PAGE>
since its acquisition, net sales of metal cans to the Company's customers were
$609.5 million during the year ended December 31, 1995, as compared to $647.5
million for the same period in 1994. Net sales to the Company's customers in
1995 decreased principally due to lower unit volume resulting from the below
normal 1995 vegetable pack offset, in part, by slightly higher sales prices
due to the pass through of raw material cost increases.
Sales of specialty items included in the metal container segment increased
$27.2 million to $36.8 million during the year ended December 31, 1995 as
compared to the same period in 1994, due to the acquisition of AN Can which
generated sales of $28.3 million of specialty items since its acquisition.
Net sales for the plastic container business of $219.6 million during the
year ended December 31, 1995 increased $15.3 million over net sales of $204.3
million for the same period in 1994. This increase was attributable to
increased unit sales for new customer products and to higher average sales
prices due to the pass through of higher average resin costs.
COST OF GOODS SOLD. Cost of goods sold as a percentage of consolidated net
sales was 88.1% ($970.5 million) for the year ended December 31, 1995, an
increase of 1.2 percentage points as compared to 86.9% ($748.3 million) for
the same period in 1994. The increase in cost of goods sold as a percentage of
net sales principally resulted from increased per unit manufacturing costs
resulting from reduced can production volumes, lower margins realized on
certain products due to competitive market conditions and lower margins on
sales made by AN Can, offset, in part, by improved manufacturing operating
efficiencies due to plant consolidations and lower depreciation expense due to
a change in the estimated useful life of certain equipment.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of consolidated net sales declined 0.1
percentage points to 4.3% ($46.9 million) for the year ended December 31, 1995
as compared to 4.4% ($38.0 million) for the year ended December 31, 1994. The
decrease in selling, general and administrative expenses as a percentage of
net sales resulted from the Company's continued control of these expenses in
respect of the Company's existing business, offset partially by a temporarily
higher level of expenses incurred during the integration of AN Can. The
Company expects that its selling, general and administration costs as a
percentage of sales will decline in 1997 after it completes the integration of
the administrative functions of its metal container business.
INCOME FROM OPERATIONS. Income from operations as a percentage of
consolidated net sales was 6.3% ($69.8 million) for the year ended December
31, 1995, as compared with 6.8% ($58.4 million) for the same period in 1994.
Included in income from operations were charges for the write-off of certain
underutilized assets of $14.7 million and $16.7 million in 1995 and 1994,
respectively. Without giving effect to these charges, income from operations
as a percentage of consolidated net sales would have declined 1.0% in 1995,
primarily as a result of the aforementioned decline in gross margin.
Income from operations as a percentage of net sales for the metal container
business (without giving effect to charges of $14.7 million and $7.2 million
in 1995 and 1994, respectively, to adjust the carrying value of certain
assets) was 8.3% ($72.9 million) for the year ended December 31, 1995, as
compared to 10.2% ($67.0 million) for the same period in the prior year. The
decrease in income from operations as a percentage of net sales principally
resulted from higher per unit manufacturing costs realized on lower production
volume, lower margins realized on certain products due to competitive market
conditions, inefficiencies caused by work stoppages at two of the Company's
California facilities, and lower margins realized on sales made by AN Can,
offset, in part, by operating efficiencies due to plant consolidations.
Income from operations as a percentage of net sales attributable to the
plastic container business (without giving effect to the charge of $9.5
million in 1994 to adjust the carrying value of certain assets)
35
<PAGE>
was 6.0% ($13.2 million) for the year ended December 31, 1995, as compared to
4.6% ($9.4 million) for the same period in 1994. The operating performance of
the plastic container business improved as a result of production planning and
scheduling efficiencies and benefits realized from capital investment, offset,
in part, by increased unit production costs incurred as a result of an
inventory reduction program.
INTEREST EXPENSE. Interest expense, including amortization of debt financing
costs, increased by approximately $14.9 million to $80.7 million for the year
ended December 31, 1995, principally as a result of increased borrowings to
finance the acquisition of AN Can and to fund higher working capital needs as
a result of the increased seasonality of the Company's metal container
business, and higher average interest rates. Accretion of interest on the
Discount Debentures in 1995 approximated the prior year's accretion due to the
repurchase of $61.7 million face amount of Discount Debentures in the third
quarter of 1995.
INCOME TAXES. The provisions for income taxes for the years ended December
31, 1995 and 1994 were comprised of federal, state and foreign income taxes
currently payable. The decrease in the provision for income taxes in 1995
reflects a decrease in federal income taxes currently payable due to the
deductibility of accrued interest on the Discount Debentures that were
repurchased in 1995.
NET INCOME. As a result of the items discussed above, net loss before the
extraordinary charge for the year ended December 31, 1995 was $16.0 million,
as compared to a net loss of $13.0 million for the year ended December 31,
1994.
As a result of the early extinguishment of amounts owed under its secured
debt facilities, the Company incurred an extraordinary charge of $5.8 million
(net of tax of $2.6 million) in 1995.
PRO FORMA YEAR ENDED DECEMBER 31, 1995 COMPARED WITH PRO FORMA YEAR ENDED
DECEMBER 31, 1994
NET SALES. Pro forma consolidated net sales for the year ended December 31,
1995 declined $53.6 million as compared to pro forma consolidated net sales
for the prior year. The decrease in net sales was primarily attributable to
lower unit volume resulting from the below normal 1995 vegetable pack and the
loss of an AN Can customer whose product line was acquired by a company with a
self-manufacturing capacity for that product.
INCOME FROM OPERATIONS. Pro forma income from operations as a percentage of
consolidated net sales (before unusual charges) for the year ended December
31, 1995 was 7.6% ($107.4 million) as compared to pro forma income from
operations as a percentage of consolidated net sales (before unusual charges)
for the year ended December 31, 1994 of 7.9% ($115.6 million). Management
believes that the decrease in income from operations was primarily
attributable to lower demand in 1995 for vegetable pack containers.
HISTORICAL YEAR ENDED DECEMBER 31, 1994 COMPARED WITH HISTORICAL YEAR ENDED
DECEMBER 31, 1993
NET SALES. 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
36
<PAGE>
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, and an
increase of $26.9 million in sales to all other customers. 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
specialty items 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. Cost of goods sold as a percentage of consolidated net
sales was 86.9% ($748.3 million) for the year ended December 31, 1994, a
decrease of 1.6 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. Selling, general and
administrative expenses as a percentage of consolidated net sales declined 0.6
percentage points to 4.4% of consolidated net sales ($38.0 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 SARs.
INCOME FROM OPERATIONS. 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 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. 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 incurrence of
additional bank borrowings to finance the acquisition of DM Can, higher
37
<PAGE>
average bank borrowing rates, higher accretion of interest on the Discount
Debentures and increased charges for the amortization of debt financing costs.
INCOME TAXES. 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.
NET INCOME. 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.
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.
On July 22, 1996, the Company completed the Preferred Stock Sale. With net
proceeds of $47.8 million from the Preferred Stock Sale, the Company purchased
the Holdings Class B Stock held by Mellon for $35.8 million and, on August 26,
1996, redeemed $12.0 million principal amount of Discount Debentures.
On August 1, 1995, Silgan, Containers and Plastics entered into the Silgan
Credit Agreement (which originally provided Silgan with $225 million of A term
loans and $225 million of B term loans and provided Containers and Plastics
with a commitment of $225 million for working capital loans) to finance the
acquisition by Containers of AN Can, to refinance and repay in full all
amounts owing under the Company's previous credit agreement and under the
Secured Notes. With borrowings of $200 million under the Silgan Credit
Agreement (as amended in May 1996 to include an additional $125 million of B
term loans), Holdings repurchased and redeemed an aggregate of $204.1 million
principal amount of Discount Debentures.
The Silgan Credit Agreement provides the Company with improved financial
flexibility by (i) enabling Silgan to transfer funds to Holdings for payment
by Holdings of cash dividends on the Exchangeable Preferred Stock (or, if
issued, cash interest on the Exchange Debentures), (ii) extending the maturity
of the Company's secured debt facilities until December 31, 2000, (iii)
lowering the interest rate spread on its floating rate borrowings by 1/2%, as
well as providing for further interest rate reductions in the event the
Company attains certain financial targets, and (iv) lowering the Company's
average cost of indebtedness by permitting Holdings to repurchase or redeem
Discount Debentures.
Upon completion of the Refinancing, the Company will have retired all of the
Discount Debentures. By refinancing all of the Discount Debentures with
borrowings under the Silgan Credit Agreement and proceeds from the Preferred
Stock Sale and from the Offering, the Company will have lowered its average
cost of indebtedness, will realize approximately $19.5 million of annual
current cash interest
38
<PAGE>
savings (excluding non-cash interest on the Exchange Debentures), and will
realize approximately $25.9 million of current cash tax savings as a result of
the deduction by the Company of the accreted interest on the retired Discount
Debentures. In addition, as a result of the Company's net operating loss
carryforwards, the Company does not expect to have any federal tax liability
in 1996, and expects to incur minimal federal tax liability in 1997. For
several years thereafter, the Company expects to incur federal tax liability
at the alternative minimum tax rates then in effect. See "--Overview--Income
Tax Considerations".
For the first nine months of 1996, net borrowings of working capital loans
under the Silgan Credit Agreement of $118.9 million, borrowings of $125.0
million of additional B term loans under the Silgan Credit Agreement, net
proceeds of $47.8 million from the Preferred Stock Sale and proceeds of $1.5
million from the sale of assets were used to fund cash used by operations of
$48.0 million for the Company's seasonal working capital needs, capital
expenditures of $38.6 million, the purchase by the Company of ANC's St. Louis
facility for $13.1 million, the redemption of $154.4 million of Discount
Debentures, the repurchase of Holdings' Class B Stock held by Mellon for $35.8
million, the repayment of $0.9 million of term loans under the Silgan Credit
Agreement, the payment of $1.6 million of financing costs associated with the
borrowing of additional B term loans under the Silgan Credit Agreement, and an
increase in cash balances of $0.8 million.
The Company's Adjusted EBITDA for the nine months ended September 30, 1996
in comparison to the same period in 1995 increased by $48.6 million to $148.0
million. The increase in Adjusted EBITDA resulted primarily from the
generation of additional cash flow from the former AN Can operations and, to a
lesser extent, from increased cash earnings by both the metal container
business and the plastic container business.
For the nine months ended September 30, 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 trade receivables and
trade payables, to support the former AN Can operations which are more
seasonal than the Company's existing business. Due to the seasonal nature of
some of the Company's business, a significant portion of the Company's cash
flow is generated in the fourth quarter. The Company expects that the change
in its fourth quarter net working capital position will be similar to last
year.
During 1995, cash generated from operations of $209.6 million (including
cash of $112.0 million generated by AN Can during the five month period from
its acquisition on August 1, 1995), proceeds of $3.5 million realized from the
sale of assets and a decrease of $0.6 million in cash balances were used to
repay $142.8 million of working capital borrowings used to fund the
acquisition of AN Can, fund capital expenditures of $51.9 million, repay $9.7
million of term loans and $5.5 million of working capital loans, and make
payments to former shareholders of $3.8 million in full settlement of
outstanding litigation. The Company's Adjusted EBITDA for the year ended
December 31, 1995 as compared to 1994 increased by $17.9 million to $132.4
million. The increase in Adjusted EBITDA reflected the generation of
additional cash flow from AN Can since its acquisition on August 1, 1995,
partially offset by a decline in the cash earnings of the Company's existing
business principally as a result of lower unit volume due to the below normal
1995 vegetable pack.
For the year ended December 31, 1995, the operating cash flow of the Company
increased significantly from the prior year due to the generation of cash by
AN Can since its acquisition on August 1, 1995 and the adoption by Silgan of
similar year-end vendor payment terms to those of AN Can. At December 31,
1995, the trade receivable balance of AN Can was $44.2 million ($90.2 million
on August 1, 1995), the inventory balance was $98.9 million ($137.9 million on
August 1, 1995), and the trade payables balance was $58.2 million ($64.2
million on August 1, 1995).
39
<PAGE>
Because the Company sells metal containers used in fruit and vegetable pack
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. The acquisition of AN Can increased the Company's
seasonal metal containers business. The Company's average outstanding trade
receivables increased in 1996 as compared to 1995 due to the acquisition of AN
Can which had more seasonal sales than the Company. 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. Approximately $182.5 million of the working capital
revolver under the Silgan Credit Agreement, including letters of credit, was
utilized at its peak in September 1996.
As of December 31, 1996, the outstanding principal amount of working capital
loans was $27.8 million and, subject to a borrowing base limitation and taking
into account outstanding letters of credit, the unused portion of working
capital commitments at such date was $190.0 million.
In addition to its operating cash needs, the Company believes its cash
requirements over the next several years consist primarily of (i) annual
capital expenditures of $50.0 to $60.0 million, (ii) scheduled principal
amortization payments of term loans under the Silgan Credit Agreement (without
giving effect to the use of any of the net proceeds from the Offering to
prepay bank terms loans) of $38.5 million, $53.4 million, $53.4 million,
$126.1 million and $155.9 million over the next five years, respectively,
(iii) expenditures of approximately $30.0 million over the next three years
associated with plant rationalizations, employee severance and administrative
workforce reductions, other plant exit costs and employee relocation costs of
AN Can, (iv) the Company's interest requirements, including interest on
working capital loans, the principal amount of which will vary depending upon
seasonal requirements, the bank term loans, most of which bear fluctuating
rates of interest, and the 11 3/4% Notes, and (v) payments of approximately
$3.0 million for state tax liabilities in 1996 and approximately $5.0 million
(based on the Company's current estimate of its 1997 net income) for federal
and state tax liabilities in 1997.
Management believes that cash generated by operations and funds from working
capital borrowings under the Silgan Credit Agreement will be sufficient to
meet the Company's expected operating needs, planned capital expenditures,
debt service and tax obligations for the foreseeable future.
The Silgan Credit Agreement, the indenture with respect to the 11 3/4% Notes
(the "11 3/4% Notes Indenture"), the Exchangeable Preferred Stock and, when
issued, the Exchange 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 1996 with all such covenants.
EFFECT OF INFLATION AND INTEREST RATE FLUCTUATIONS
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. See "--Overview--Net Sales--Long-term Contracts".
Because the Company has indebtedness which bears interest at floating rates,
the Company's financial results will be sensitive to changes in prevailing
market rates of interest. As of December 31, 1996, on a pro forma basis after
giving effect to the Refinancing and including working capital loans of $27.8
million, the Company had $748.6 million of indebtedness outstanding, of which
$360.6
40
<PAGE>
million bore interest at floating rates, taking into account interest rate
swap agreements entered into by the Company to mitigate the effect of interest
rate fluctuations. Under these agreements, floating rate interest was
exchanged for fixed rates of interest ranging from 5.6% to 6.2% plus the
Company's incremental margin, which currently ranges from 2.5% to 3.0%. The
notional principal amounts of these agreements totaled $200.0 million,
including interest rate swap agreements entered into during the fourth quarter
of 1996 with a notional amount of $100.0 million, and mature in the year 1999.
Depending upon market conditions, the Company may enter into additional
interest rate swap or hedge agreements (with counterparties that, in the
Company's judgment, have sufficient creditworthiness) to hedge its exposure
against interest rate volatility.
NEW ACCOUNTING PRONOUNCEMENTS
LONG-LIVED ASSET IMPAIRMENT
The Company adopted 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 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 1996
as a result of the adoption of SFAS No. 121. See Note 5 to the Consolidated
Financial Statements of the Company included elsewhere in this Prospectus.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123, "Accounting for Stock-Based Compensation", effective for the
1996 fiscal year. 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. In addition, the Company will be required to
include in its 1996 year end financial statements pro forma information
regarding compensation expense recognizable under SFAS No. 123. See Note 15 to
the Consolidated Financial Statements of the Company included elsewhere in
this Prospectus.
41
<PAGE>
BUSINESS
GENERAL
The Company is a leading North American manufacturer of consumer goods
packaging products that currently produces (i) steel and aluminum containers
for human and pet food, (ii) custom designed plastic containers for personal
care, health, food, pharmaceutical and household chemical products and (iii)
specialty packaging items, including metal caps and closures, plastic bowls
and paper containers used by processors in the food industry. The Company is
the largest manufacturer of metal food containers in North America, with a
unit sale market share for the twelve months ended October 31, 1996 of 35% in
the United States, and is a leading manufacturer of plastic containers in
North America for personal care products. The Company's strategy is to
increase shareholder value by growing its existing businesses and expanding
into other segments by applying its expertise in acquiring, financing,
integrating and efficiently operating consumer goods packaging businesses.
The Company was founded in 1987 by its current Co-Chief Executive Officers.
Since its inception, the Company has acquired and successfully integrated ten
businesses, including the recent acquisitions of AN Can in August 1995 for a
purchase price of approximately $362.0 million (including net working capital
of approximately $156.0 million) and DM Can in December 1993 for a purchase
price of approximately $73.3 million (including net working capital of
approximately $21.9 million). In addition, on October 9, 1996 the Company
completed its acquisition of Finger Lakes, the metal food container
manufacturing subsidiary of Curtice Burns. See "Prospectus Summary--Recent
Developments". The Company's strategy has enabled it to rapidly increase its
net sales and income from operations. The Company's net sales have increased
from $630.0 million in 1992 to $1,405.7 million in 1996, representing a
compound annual growth rate of approximately 22%. During this period, income
from operations increased from $42.2 million in 1992 to an estimated $123.0
million in 1996, representing a compound annual growth rate of approximately
31%, while the Company's income from operations as a percentage of net sales
increased approximately 2.1 percentage points from 6.7% to an estimated 8.8%
over the same period.
The Company's philosophy, which has contributed to its strong performance
since inception, is based on: (i) a significant equity ownership by management
and an entrepreneurial approach to business, (ii) its low cost producer
position and (iii) its long-term customer relationships. The Company's senior
management has a significant ownership interest in the Company, which fosters
an entrepreneurial management style and places a primary focus on creating
shareholder value. The Company has achieved a low cost producer status through
(i) the maintenance of a flat, efficient organizational structure, resulting
in low selling, general and administrative expenses as a percentage of total
net sales, (ii) purchasing economies, (iii) significant capital investments
that have generated manufacturing and production efficiencies, (iv) plant
consolidations and rationalizations and (v) the proximity of its plants to its
customers. The Company's philosophy has also been to develop long-term
customer relationships by acting in partnership with its customers, providing
reliable quality and service and utilizing its low cost producer position.
This philosophy has resulted in numerous long-term supply contracts, high
retention of customers' business and recognition from its customers, as
demonstrated by many quality and service awards.
42
<PAGE>
COMPANY HISTORY
Holdings is a Delaware corporation organized in April 1989, that, in June
1989, through a merger acquired all of the outstanding common stock of 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.
Since its inception in 1987, the Company has completed the following
acquisitions:
<TABLE>
<CAPTION>
ACQUIRED BUSINESS YEAR PRODUCTS
----------------- ---- --------
<S> <C> <C>
Metal Container Manufacturing division 1987
of Nestle Metal food containers
Monsanto Company's plastic container 1987
business Plastic containers
Fort Madison Can Company of The Dial 1988 Metal food containers
Corporation
Seaboard Carton Division of Nestle 1988 Paper containers
Aim Packaging, Inc. 1989 Plastic containers
Fortune Plastics Inc. 1989 Plastic containers
Express Plastic Containers Limited 1989 Plastic containers
Amoco Container Company 1989 Plastic containers
Del Monte's U.S. can manufacturing 1993
operations Metal food containers
Food Metal and Specialty business of 1995 Metal food containers, metal caps
ANC and closures and Omni plastic
containers
Finger Lakes, a subsidiary of Curtice 1996
Burns Metal food containers
</TABLE>
The principal executive offices of Holdings are located at 4 Landmark
Square, Stamford, Connecticut 06901, telephone number (203) 975-7110.
GROWTH STRATEGY
The Company intends to enhance its position as a leading supplier of
consumer goods packaging products by aggressively pursuing a strategy designed
to achieve future growth and to increase profitability. The key components of
this strategy are to (i) increase the Company's market share in its current
business lines through acquisitions and internal growth, (ii) expand into
complementary business lines by applying the Company's acquisition and
operating expertise to other areas of the North American consumer goods
packaging market and (iii) improve the profitability of acquired businesses
through integration, rationalization and capital investments to enhance their
manufacturing and production efficiency.
INCREASE MARKET SHARE THROUGH ACQUISITIONS AND INTERNAL GROWTH
The Company has increased its revenues and market share in the metal
container, plastic container and specialty markets through acquisitions and
internal growth. As a result of this strategy, the Company has diversified its
customer base, geographic presence and product line. Management believes that
certain industry trends exist which will enable the Company to continue to
acquire attractive businesses in its existing markets. For example, during the
past ten years, the metal container market has experienced significant
consolidation due to the desire by food processors to reduce costs and deploy
resources to their core operations. Self-manufacturers are increasingly
outsourcing their container needs by selling their operations to commercial
container manufacturing companies and agreeing to purchase containers from the
buyer pursuant to long-term contracts. The Company's acquisitions of the metal
container manufacturing operations of Nestle, The Dial
43
<PAGE>
Corporation and Del Monte reflect this trend. As a result of its growth
strategy, the Company has more than tripled its overall share of the U.S.
metal food container market from approximately 10% in 1987 to approximately
35% for the twelve months ended October 31, 1996. The Company expects this
consolidation trend to continue, as evidenced by its October 9, 1996
acquisition of Finger Lakes. See "Prospectus Summary--Recent Developments".
The Company's plastic container business has also increased its market
position primarily through strategic acquisitions, from a sales base of $88.8
million in 1987 to $216.4 million in 1996. The plastic container segment of
the consumer goods packaging industry is highly fragmented, and management
intends to pursue consolidation opportunities in that segment.
The Company also expects to generate internal growth due to its
participation in certain higher growth segments of the consumer goods
packaging market. For example, due to increasing consumer preference for
plastic as a substitute for glass, the Company is aggressively pursuing
opportunities for its custom designed PET and HDPE containers. These
opportunities include producing PET containers for regional bottled water
companies, and HDPE and PET containers for products such as shampoo,
mouthwash, salad dressing and liquor. The Company also believes that there
will be opportunities to expand its specialty business, which generated net
sales of $90.7 million in 1996. Specialty products manufactured by the Company
include metal closures for vacuum sealed glass containers, its licensed Omni
plastic container, a plastic, microwaveable bowl with an easy-open metal end,
and paper containers.
EXPAND INTO COMPLEMENTARY BUSINESS LINES THROUGH ACQUISITIONS
Management believes that it can successfully apply its acquisition and
operating expertise to new segments of the consumer goods packaging industry.
For example, with the AN Can acquisition, the Company expanded its specialty
business into metal caps and closures and its licensed Omni plastic container.
Management believes that certain trends in and characteristics of the North
American consumer goods packaging industry will continue to generate
attractive acquisition opportunities in complementary business lines. The
Company is focused on the North American consumer goods packaging industry,
which represents a significant part of the $95 billion North American
packaging market (based on estimated total sales in 1994). Importantly, the
industry is also fragmented, with numerous segments and multiple participants
in each of them. In addition, many of these segments are experiencing
consolidation.
ENHANCE PROFITABILITY OF ACQUIRED COMPANIES
The Company seeks to acquire businesses at reasonable cash flow multiples
and to enhance profitability by rationalizing plants, by improving
manufacturing and production efficiencies and through purchasing economies.
The Company rationalizes plants by closing or downsizing certain plants and by
consolidating production capacity within other plants. Since 1991, the Company
has reduced costs by closing twelve smaller, higher cost facilities. Since its
inception in 1987, the Company has invested approximately $271.9 million to
upgrade acquired manufacturing facilities, aimed at generating manufacturing
and production efficiencies and achieving a low cost producer position. As a
result, the Company's acquisitions have generally been accretive to earnings
and have produced high returns on assets. The AN Can acquisition illustrates
the ability of the Company to enhance the profitability of acquired
businesses. The Company estimates that it has reduced AN Can's operating costs
from its historical 1994 level by at least $21.0 million, through selling and
administrative cost reductions, improved manufacturing and production
efficiencies and purchasing economies. The Company expects to further reduce
AN Can's operating costs over the next few years by an aggregate of
approximately $15.0 million (approximately half of which is expected to be
realized in 1997) through the elimination of transitional administrative
costs, the realization of additional manufacturing and production synergies
with its metal container business and plant rationalizations.
BUSINESS SEGMENTS
The Company operates through two operating companies, Containers and
Plastics.
44
<PAGE>
CONTAINERS
For 1996, Containers had net sales of $1,189.3 million (85% of the Company's
net sales) and estimated income from operations of $106.0 million (85% of the
Company's estimated income from operations) (without giving effect to
corporate expense). Containers has realized compound annual unit sales growth
in excess of 18% since 1987, despite the relative maturity of the U.S. food
can industry. Containers 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. Containers manufactures metal containers for vegetables,
fruit, pet food, meat, tomato based products, coffee, soup, seafood and
evaporated milk. The Company estimates that approximately 80% of Containers'
projected sales in 1997 will be pursuant to long-term supply arrangements.
Containers has the Nestle Supply Agreements with Nestle pursuant to which
Containers supplies a majority of Nestle's metal container requirements, and
the DM Supply Agreement with Del Monte pursuant to which Containers supplies
substantially all of Del Monte's metal container requirements. In addition to
Nestle and Del Monte, Containers has multi-year supply arrangements with
several other major food processors.
Containers also manufactures certain specialty packaging items, including
metal caps and closures, plastic bowls and paper containers used by processors
in the food industry. For 1996, Containers had net sales of specialty
packaging items of $90.7 million.
PLASTICS
For 1996, Plastics had net sales of $216.4 million (15% of the Company's net
sales) and estimated income from operations of $18.0 million (15% of the
Company's estimated income from operations) (without giving effect to
corporate expense). Plastics is aggressively pursuing opportunities in custom
designed PET and HDPE containers. Plastics emphasizes value-added design,
fabrication and decoration of custom containers in its business. Plastics
manufactures custom designed HDPE containers for health and personal care
products, including containers for shampoos, conditioners, hand creams,
lotions, cosmetics and toiletries, household chemical products, including
containers for scouring cleaners, cleaning agents and lawn and garden
chemicals and pharmaceutical products, including containers for tablets,
antacids and eye cleaning solutions. Plastics also manufactures PET custom
designed containers for mouthwash, respiratory and gastrointestinal products,
liquid soap, skin care lotions, salad dressings, condiments, instant coffee,
bottled water and liquor. While many of Plastics' larger competitors that
manufacture extrusion blow-molded plastic containers employ technology
oriented to large bottles and long production runs, Plastics has focused on
mid-sized, extrusion blow-molded plastic containers requiring special
decoration and shorter production runs. 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.
MANUFACTURING AND PRODUCTION
As is the practice in the industry, most of the Company's can and plastic
container customers provide it with quarterly or 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. Containers estimates that approximately 80% of
its projected 1997 sales will be pursuant to multi-year contracts. Plastics
has 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.
45
<PAGE>
METAL CONTAINER BUSINESS
The Company's manufacturing operations include cutting, coating,
lithographing, fabricating, assembling and packaging finished cans. Three
basic processes are used 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. High integrity of the side seam is 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.
PLASTIC CONTAINER BUSINESS
The Company utilizes two basic processes to produce plastic bottles. In the
extrusion blow 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 post-consumer
recycled ("PCR") resins because of the relatively low capital costs required
to convert its equipment to utilize multi-layer container construction.
The Company's decorating methods for its plastic products include (1) in-
mold labeling which applies a paper or plastic film label to the bottle during
the blowing process and (2) post-mold decoration. Post-mold decoration
includes (i) silk screen decoration which enables the applications of images
in multiple colors to the bottle, (ii) pressure sensitive decoration which
uses a plastic film or paper label with an adhesive, (iii) heat transfer
decoration which uses a plastic coated label applied by heat, and (iv) hot
stamping decoration which transfers images from a die using metallic foils.
The Company has state-of-the-art decorating equipment, including, management
believes, one of the largest sophisticated decorating facilities in the
country.
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, 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 in accordance with
the Company's long-term supply arrangements and otherwise, any 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 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
46
<PAGE>
their arrangements, the Company will 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 comparable prices or terms. 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 recycled PET, HDPE-PCR
and virgin HDPE and PET and, to a lesser extent, low density polyethylene,
extrudable polyethylene 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. The Company believes that it will be able to purchase
sufficient quantities of resins for the foreseeable future.
SALES AND MARKETING
The Company's philosophy has been to develop long-term customer
relationships by acting in partnership with its customers, providing reliable
quality and service and utilizing its low cost producer position. The Company
markets its products in most areas of North America primarily by a direct
sales force and for its plastic container business, to a lesser extent,
through a 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 1996, 1995 and 1994, approximately 17%, 21% and 26%, respectively, of the
Company's sales were to Nestle, and approximately 12%, 15% and 21%,
respectively, 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
The Company is the largest manufacturer of metal food can containers in
North America, with a unit sale market share for the twelve months ended
October 31, 1996 of 35% in the United States. Containers has entered into
multi-year supply arrangements with many of its customers, including Nestle
and Del Monte. The Company estimates that approximately 80% of its projected
metal container sales in 1997 will be pursuant to such arrangements.
In 1987, the Company, through Containers, and Nestle entered into nine
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 1996, sales of metal
cans by the Company to Nestle were $240.6 million.
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.
47
<PAGE>
The Company has recently agreed with Nestle, subject to definitive
documentation, to extend the term of certain of the Nestle Supply Agreements
through 2004 (representing approximately 10% of the Company's estimated 1996
sales) in return for certain price concessions by the Company. The Company
believes that these price concessions will not have a material adverse effect
on its results of operations. Under certain limited circumstances, Nestle,
beginning in January 2000 (with respect to all of the containers supplied
under the Nestle Supply Agreements that have been extended through 2004), may
receive competitive bids, and Containers has the right to match any such bids.
If Containers matches a competitive bid, it may result in reduced sales prices
with respect to the metal containers that are the subject of such competitive
bid. In the event that Containers chooses not to match a competitive bid, such
metal containers may be purchased from the competitive bidder at the
competitive bid price for the term of the bid.
Under the Company's recent agreement with Nestle, with respect to the
remaining Nestle Supply Agreements that expire in August 1997 (representing
approximately 6% of the Company's estimated 1996 sales), the Company has the
right to submit a bid to Nestle, and to match any bid received by Nestle, for
the 1998 supply year with respect to the metal containers that are the subject
of such Nestle Supply Agreements. There can be no assurance that any such bid
by the Company will be made at sales prices equivalent to those currently in
effect or otherwise on terms similar to those currently in effect. In
addition, the Company cannot predict the effect, if any, on its results of
operations of matching or not matching any such bids.
On December 21, 1993, Containers and Del Monte entered into 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, substantially
all of Del Monte's annual requirements for metal containers to be used for the
packaging of food and beverages in the United States, subject to certain
limited exceptions. In 1996, sales of metal containers by the Company to Del
Monte were $168.0 million.
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, beginning in December 1998, 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 and fruit processors 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 customers beyond the end of the
season. The acquisition of AN Can increased the Company's seasonal metal
container business. 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. Management believes that the Company
is a leading manufacturer of plastic containers in North America for personal
care products. 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 largest
48
<PAGE>
customers in these product segments include the Helene Curtis and Chesebrough-
Ponds USA divisions of Unilever United States, Inc., Procter & Gamble Co.,
Avon Products, Inc., Andrew Jergens Inc., The Dial Corporation, Warner-Lambert
Company and Pfizer Inc. The Company also manufactures plastic containers for
food and beverage products, such as salad dressings, condiments, instant
coffee and bottled water and liquor. Customers in these product segments
include Procter & Gamble Co., Kraft 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 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, competitive 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 an advantage
over competitors from other areas, and the Company would be disadvantaged by
the loss or relocation of a major customer. As of December 31, 1996, the
Company operated 48 manufacturing facilities, geographically dispersed
throughout the United States and Canada, that serve the distribution needs of
its customers.
METAL CONTAINER BUSINESS
Of the commercial metal can manufacturers, Crown Cork and Seal Company, Inc.
and Ball Corporation are the Company's most significant national competitors.
As an alternative to purchasing cans from commercial can manufacturers,
customers have the ability to invest in equipment to self-manufacture their
cans. However, 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.
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
49
<PAGE>
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 technology for the manufacturing of
plastic bottles.
EMPLOYEES
As of December 31, 1996, the Company employed approximately 1,050 salaried
and 4,355 hourly employees on a full-time basis. Approximately 65% of the
Company's hourly plant employees are represented by a variety of unions.
The Company's labor contracts expire at various times between 1997 and 2008.
Contracts covering approximately 15% of the Company's hourly employees
presently expire during 1997. 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 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 the can operations of Nestle ("Nestle Can"), the Company has assumed
liability for the past waste disposal practices of Nestle Can. In 1989, the
Company 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" below.
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
of 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. In
connection with the acquisition of AN Can, subject to certain limitations, ANC
has agreed to indemnify the Company for a period of three years for the costs
attributable to any noncompliance by AN Can with any environmental law prior
to the closing, including costs attributable to the past waste disposal
practices of AN Can.
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<PAGE>
The Company is subject to the Occupational Safety and Health Act and other
laws regulating noise exposure levels and other safety and health concerns 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 PRODUCT DEVELOPMENT
METAL CONTAINER BUSINESS
The Company's research, product development and product engineering efforts
relating to its metal containers are currently conducted at its research
centers at Oconomowoc, Wisconsin and Neenah, Wisconsin. The Company is
building a state-of-the-art research facility in Oconomowoc, Wisconsin in
order to consolidate its two main research centers into one facility.
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 three non-U.S. plastic container
manufacturers that allow 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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<PAGE>
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 33 metal container
manufacturing facilities, 11 plastic container manufacturing facilities and 4
specialty packaging manufacturing facilities. Twenty of these facilities are
owned and 28 are leased by the Company. The leases expire at various times
through 2020. Some of these leases provide renewal options.
Below is a list of the Company's operating facilities, including attached
warehouses, as of December 31, 1996 for its metal container business:
<TABLE>
<CAPTION>
APPROXIMATE BUILDING AREA
LOCATION (SQUARE FEET)
-------- -------------------------
<S> <C>
City of Industry, CA............................. 50,000 (leased)
Kingsburg, CA.................................... 37,783 (leased)
Modesto, CA...................................... 35,585 (leased)
Modesto, CA...................................... 128,000 (leased)
Modesto, CA...................................... 150,000 (leased)
Riverbank, CA.................................... 167,000
San Leandro, CA.................................. 200,000 (leased)
Stockton, CA..................................... 243,500
Norwalk, CT...................................... 14,359 (leased)
Broadview, IL.................................... 85,000
Hoopeston, IL.................................... 323,000
Rochelle, IL..................................... 175,000
Waukegan, IL..................................... 40,000 (leased)
Woodstock, IL.................................... 160,000 (leased)
Evansville, IN................................... 188,000
Hammond, IN...................................... 160,000 (leased)
Laporte, IN...................................... 144,000 (leased)
Fort Madison, IA................................. 66,000
Ft. Dodge, IA.................................... 49,500 (leased)
Benton Harbor, MI................................ 20,246 (leased)
Savage, MN....................................... 160,000
St. Paul, MN..................................... 470,000
West Point, MS................................... 25,000 (leased)
Mt. Vernon, MO................................... 100,000
Northtown, MO.................................... 112,000 (leased)
St. Joseph, MO................................... 173,725
St. Louis, MO.................................... 174,000 (leased)
Edison, NJ....................................... 280,000
Lyons, NY........................................ 145,000
Crystal City, TX................................. 26,045 (leased)
Toppenish, WA.................................... 98,000
Vancouver, WA.................................... 127,000 (leased)
Menomonee Falls, WI.............................. 116,000
Menomonie, WI.................................... 60,000 (leased)
Oconomowoc, WI................................... 105,200
Plover, WI....................................... 58,000 (leased)
Waupun, WI....................................... 212,000
</TABLE>
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<PAGE>
Below is a list of the Company's operating facilities, including attached
warehouses, as of December 31, 1996 for its plastic container business:
<TABLE>
<CAPTION>
APPROXIMATE BUILDING AREA
LOCATION (SQUARE FEET)
-------- -------------------------
<S> <C>
Anaheim, CA...................................... 127,000 (leased)
Deep River, CT................................... 140,000
Monroe, GA....................................... 117,000
Norcross, GA..................................... 59,000 (leased)
Ligonier, IN..................................... 477,000 (284,000 leased)
Seymour, IN...................................... 406,000
Franklin, KY..................................... 122,000 (leased)
Port Clinton, OH................................. 336,000 (leased)
Langhorne, PA.................................... 156,000 (leased)
Mississauga, Ontario............................. 80,000 (leased)
Mississauga, Ontario............................. 60,000 (leased)
</TABLE>
The Company owns and leases certain other warehouse facilities that are
detached from its manufacturing facilities. All of the Company's facilities
are subject to liens in favor of the Banks.
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.
LEGAL PROCEEDINGS
On October 17, 1989, the State of California, on behalf of the California
Department of Health Services ("DHS"), 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 Containers, that had sent amounts of solder dross to the
facility for recycling as "Potentially Responsible Parties" ("PRPs") under the
Federal Superfund statute. Containers is one of the 15 defendant can companies
which agreed to participate as a group in response to the DHS suit (the "PRP
Group"). In the PRP Group agreement, Containers agreed with the other can
company defendants that its apportioned share of cleanup costs would be 6.72%
of the total cost of cleanup. The PRP Group has undertaken a feasibility study
for the purpose of developing, designing and implementing a final remedy for
the site. The feasibility study was approved by the California Department of
Toxic Substances Control ("DTSC") in June 1994. On March 14, 1995, the court
approved a settlement agreement and consent decree which ordered the PRP Group
to submit a draft Remedial Action Plan to the DTSC for approval, which the PRP
Group submitted to the DTSC on September 5, 1995. On September 13, 1995, the
DTSC notified the PRP Group by letter that the Remedial Action Plan had been
adopted for the Summer del Caribe site. According to the Remedial Action Plan,
the overall cost of site cleanup is estimated to be $3,000,000. Site cleanup
is near completion. However, monitoring at the site will be required for
approximately one year, the expenses for which represent a small portion of
the total expense of cleanup. The PRP Group has assessed approximately
$200,000 as Containers' share of the cleanup cost. The Company believes that
significant additional expenditures on its behalf are unlikely.
Other than the action mentioned above, there are no other material pending
legal proceedings to which the Company is a party or to which any of its
properties are subject.
53
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
HOLDINGS AND SILGAN
The following table sets forth certain information (ages as of December 31,
1996) concerning the directors and executive officers of Holdings and Silgan.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
R. Philip Silver................. 54 Chairman of the Board, Co-Chief Executive
Officer and Director
D. Greg Horrigan................. 53 President, Co-Chief Executive Officer and
Director
Robert H. Niehaus................ 41 Director
Leigh J. Abramson................ 28 Director
Harley Rankin, Jr................ 57 Executive Vice President, Chief Financial
Officer and Treasurer
Harold J. Rodriguez, Jr.......... 41 Vice President, Controller and Assistant
Treasurer
Glenn A. Paulson................. 53 Vice President
</TABLE>
CONTAINERS
The following table sets forth certain information (ages as of December 31,
1996) concerning the executive officers of Containers.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
James D. Beam...................... 53 President
Gerald T. Wojdon................... 60 Vice President--Operations and Assistant
Secretary
Gary M. Hughes..................... 54 Vice President--Sales & Marketing
H. Dennis Nerstad.................. 59 Vice President--Production Services
Joseph A. Heaney................... 43 Vice President--Finance
</TABLE>
PLASTICS
The following table sets forth certain information (ages as of December 31,
1996) concerning the Directors and executive officers of Plastics.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Russell F. Gervais......... 53 President
Howard H. Cole............. 51 Vice President and Assistant Secretary
Charles Minarik............ 59 Vice President--Operations and Commercial
Development
Alan H. Koblin............. 44 Vice President--Sales & Marketing
Colleen J. Jones........... 36 Vice President--Finance, Chief Financial Officer
and Assistant Secretary
</TABLE>
Mr. Silver has been Chairman of the Board and Co-Chief Executive Officer of
Holdings and Silgan since March 1994. Mr. Silver is one of the founders of the
Company and was formerly President of Holdings and Silgan. Mr. Silver has been
a Director of Holdings and Silgan since their inception in April 1989 and
August 1987, respectively. Mr. Silver has been a Director of Containers since
its inception in August 1987 and Vice President of Containers since May 1995.
Mr. Silver has been a Director of Plastics since its inception in August 1987
and Chairman of the Board of Plastics since March 1994. Prior to founding the
Company in 1987, Mr. Silver was a consultant to the packaging industry.
54
<PAGE>
Mr. Silver was President of Continental Can Company from June 1983 to August
1986. From September 1989 through August 1993, Mr. Silver held various
positions with Sweetheart Holdings Inc. and Sweetheart Cup Company, Inc.,
including Chairman of the Board and Director. Mr. Silver is a Director of
Johnstown America Corporation.
Mr. Horrigan has been President and Co-Chief Executive Officer of Holdings
and Silgan since March 1994. Mr. Horrigan is one of the founders of the
Company and was formerly Chairman of the Board of Holdings and Silgan. Mr.
Horrigan has been a Director of Holdings and Silgan since their inception in
April 1989 and August 1987, respectively. Mr. Horrigan has been Chairman of
the Board of Containers and a Director of Containers and Plastics since their
inception in August 1987. Mr. Horrigan was Executive Vice President and
Operating Officer of Continental Can Company from 1984 to 1987. From September
1989 through August 1993, Mr. Horrigan held various positions with Sweetheart
Holdings Inc. and Sweetheart Cup Company, Inc., including Chairman of the
Board and Director.
Mr. Niehaus has been a Director of Holdings since its inception in April
1989 and a Director of Silgan, Containers and Plastics since their inception
in August 1987. Mr. Niehaus joined Morgan Stanley in 1982 and has been a
Managing Director of Morgan Stanley since 1990. Mr. Niehaus has been a Vice
Chairman and a Director of Morgan Stanley Leveraged Equity Fund II, Inc.
("MSLEF II, Inc.") since January 1990 and a Vice Chairman and a Director of
the managing general partner of the general partner of Morgan Stanley Capital
Partners III, L.P. ("MSCP III") since January 1994. Mr. Niehaus is also a
Director of American Italian Pasta Company, Fort Howard Corporation and
Waterford Crystal Ltd., and Chairman of Waterford Wedgewood UK plc.
Mr. Abramson has been a Director of Holdings, Silgan, Containers and
Plastics since September 1996. He has been an Associate of Morgan Stanley
since 1994 and a Vice President of MSLEF II, Inc. and of the managing general
partner of the general partner of MSCP III since 1995. Mr. Abramson has been
with Morgan Stanley since 1990, first in the Corporate Finance Division and,
since 1992, in the Merchant Banking Division. Mr. Abramson is also a Director
of PageMart Wireless, Inc., PageMart, Inc. and Jefferson Smurfit Corporation.
Mr. Rankin has been Executive Vice President and Chief Financial Officer of
Holdings since its inception in April 1989 and Treasurer of Holdings since
January 1992. Mr. Rankin has been Executive Vice President and Chief Financial
Officer of Silgan since January 1989 and Treasurer of Silgan since January
1992. Mr. Rankin has been Vice President of Containers and Plastics since
January 1989 and was Treasurer of Plastics from January 1994 to December 1994.
Prior to joining the Company, Mr. Rankin was Senior Vice President and Chief
Financial Officer of Armtek Corporation. Mr. Rankin was Vice President and
Chief Financial Officer of Continental Can Company from November 1984 to
August 1986. From September 1989 to August 1993, Mr. Rankin was Vice
President, Chief Financial Officer and Treasurer of Sweetheart Holdings Inc.
and Vice President of Sweetheart Cup Company, Inc.
Mr. Rodriguez has been Vice President of Holdings and Silgan since March
1994 and Controller and Assistant Treasurer of Holdings and Silgan since March
1990. Prior to March 1990, Mr. Rodriguez was Assistant Controller and
Assistant Treasurer of Holdings and Silgan from April 1989 and October 1987,
respectively. Mr. Rodriguez has been Vice President of Containers and Plastics
since March 1994. From September 1989 to August 1993, Mr. Rodriguez was
Controller, Assistant Secretary and Assistant Treasurer of Sweetheart Holdings
Inc. and Assistant Secretary and Assistant Treasurer of Sweetheart Cup
Company, Inc. From 1978 to 1987, Mr. Rodriguez was employed by Ernst & Young
LLP, last serving as Senior Manager specializing in taxation.
Mr. Paulson has been Vice President of Holdings and Silgan since January
1996. Mr. Paulson was employed by Containers to manage the transition of AN
Can from August 1995 to December 1995. From January 1989 to July 1995, Mr.
Paulson was employed by ANC, last serving as Senior
55
<PAGE>
Vice President and General Manager, Food Metal and Specialty, North America.
Prior to his employment with ANC, Mr. Paulson was President of the beverage
packaging operations of Continental Can Company.
Mr. Beam has been President of Containers since July 1990. From September
1987 to July 1990, Mr. Beam was Vice President--Marketing & Sales of
Containers. Mr. Beam was Vice President and General Manager of Continental Can
Company, Western Food Can Division, from March 1986 to September 1987.
Mr. Wojdon has been Vice President--Operations and Assistant Secretary of
Containers since September 1987. From August 1982 to August 1987, Mr. Wojdon
was General Manager of Manufacturing of the Can Division of the Carnation
Company.
Mr. Hughes has been Vice President--Sales & Marketing of Containers since
July 1990. From February 1988 to July 1990, Mr. Hughes was Vice President,
Sales and Marketing of the Beverage Division of Continental Can Company. Prior
to February 1988, Mr. Hughes was employed by Continental Can Company in
various regional sales positions.
Mr. Nerstad has been a Vice President of Containers since December 1993.
From August 1989 to December 1993, Mr. Nerstad was Vice President--
Distribution and Container Manufacturing of Del Monte and was Director of
Container Manufacturing of Del Monte from November 1983 to July 1989. Prior to
1983, Mr. Nerstad was employed by Del Monte in various regional and plant
positions.
Mr. Heaney has been Vice President--Finance of Containers since October
1995. From September 1990 to October 1995, Mr. Heaney was Controller, Food
Metal and Specialty Division of ANC. From August 1977 to August 1990, Mr.
Heaney was employed by ANC and American Can Company in various divisional,
regional and plant finance/accounting positions.
Mr. Gervais has been President of Plastics since December 1992. From
September 1989 to December 1992, Mr. Gervais was Vice President--Sales &
Marketing of Plastics. From March 1984 to September 1989, Mr. Gervais was
President and Chief Executive Officer of Aim Packaging, Inc.
Mr. Cole has been Vice President and Assistant Secretary of Plastics since
September 1987. From April 1986 to September 1987, Mr. Cole was Manager of
Personnel of the Monsanto Engineered Products Division of Monsanto.
Mr. Minarik has been Vice President--Operations and Commercial Development
of Plastics since May 1993. From February 1991 to August 1992, Mr. Minarik was
President of Wheaton Industries Plastics Group. Mr. Minarik was Vice
President--Marketing of Constar International, Inc. from March 1983 to
February 1991.
Mr. Koblin has been Vice President--Sales & Marketing of Plastics since
1994. From 1992 to 1994, Mr. Koblin was Director of Sales & Marketing of
Plastics. From 1990 to 1992, Mr. Koblin was Vice President of Churchill
Industries.
Ms. Jones has been Vice President--Finance and Chief Financial Officer of
Plastics since December 1994 and Assistant Secretary of Plastics since
November 1995. From October 1993 to December 1994, Ms. Jones was Corporate
Controller of Plastics and from July 1989 to October 1993, she was Manager--
Finance of Plastics. From July 1982 to July 1989, Ms. Jones was an Audit
Manager for Ernst & Young LLP.
56
<PAGE>
BOARD OF DIRECTORS
Holdings presently has a Board of Directors consisting of four members.
Holdings intends to elect an additional two persons to serve as independent
directors of Holdings following the completion of the Offering. Prior to the
Offering, the Board of Directors will be divided into three classes
(designated Class I, Class II and Class III). Initially, Class I will consist
of Mr. Silver and Mr. Abramson, Class II will consist of Mr. Horrigan and Mr.
Niehaus, and the two Class III directorships will remain vacant until the
Board of Directors elects two independent persons to serve as Class III
directors following the completion of the Offering. The Class I, Class II and
Class III directors will serve until the annual stockholder meetings of
Holdings to be held in 1998, 1999 and 2000, respectively, and until their
successors are duly elected and qualified. At each annual stockholders'
meeting, directors nominated to the class of directors whose term is expiring
at that annual meeting will be elected for a term of three years, and the
remaining directors will continue in office until their respective terms
expire and until their successors are duly elected and qualified. Accordingly,
at each annual meeting two of the Company's six directors will be elected, and
each director will be required to stand for election once every three years.
The four directors that are not independent will be elected pursuant to the
Principals Stockholders Agreement. Under the Principals Stockholders
Agreement, MSLEF II agreed that, so long as Messrs. Silver and Horrigan hold
in the aggregate at least one-half of the number of shares of Common Stock
held by them on the date of this Prospectus, Messrs. Silver and Horrigan will
nominate the two independent directors, who must then be elected in accordance
with Holdings' Restated Certificate of Incorporation. Officers are elected by
the Board of Directors and serve at the discretion of the Board of Directors.
See "Description of Capital Stock--Description of Stockholders Agreements".
The Board of Directors has an Audit Committee, which is presently composed
of Messrs. Silver and Niehaus. After the Offering, the Board of Directors will
reconstitute its Audit Committee to consist of two Directors who are neither
officers nor employees of Holdings. The Audit Committee has the responsibility
of reviewing and supervising the financial controls of Holdings. The Audit
Committee's responsibilities include (i) making recommendations to the Board
of Directors with respect to its financial statements and the appointment of
independent auditors, (ii) reviewing significant audit and accounting policies
and practices of Holdings, (iii) meeting with the Company's independent public
accountants concerning, among other things, the scope of audits and reports
and (iv) reviewing the performance of overall accounting and financial
controls of Holdings.
The Board of Directors expects to establish a Compensation Committee and an
Executive Committee. The Compensation Committee will consist of at least two
Directors who are "outside directors" within the meaning of Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"). The Compensation
Committee will have the responsibility of reviewing the performance of the
executive officers of Holdings and recommending to the Board of Directors
annual salary and bonus amounts for all officers of the Company.
COMPENSATION OF DIRECTORS
It is anticipated that directors who do not receive compensation as officers
or employees of the Company or any of its affiliates will be paid an annual
retainer fee of $20,000 for their service on the Board of Directors, and a fee
of $2,000 for each meeting of the Board of Directors or any committee thereof
that they attend, plus reasonable out-of-pocket expenses.
57
<PAGE>
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, 1996, 1995 and 1994 of those
persons who at December 31, 1996 were (i) the Chief Executive Officer of
Holdings and (ii) the other four most highly compensated executive officers of
Holdings and its subsidiaries. Prior to the Offering, no director of Holdings
or its subsidiaries received any compensation for serving as a director of
Holdings or its subsidiaries. See "Certain Transactions--Management
Agreements".
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ----------------
AWARDS
----------------
OTHER SECURITIES
ANNUAL UNDERLYING STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(a)(b) BONUS(a)(c) COMPENSATION OPTIONS/SARS(d) COMPENSATION(e)
- --------------------------- ---- ------------ ----------- ------------ ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
R. Philip Silver......... 1996 $1,875,000 -- -- -- --
(Chairman of the Board
and 1995 1,830,000 -- -- -- --
Co-Chief Executive
Officer of 1994 1,684,135 -- -- -- --
Holdings and Silgan and
Chairman of the Board of
Plastics)
D. Greg Horrigan......... 1996 1,875,000 -- -- -- --
(President and Co-Chief 1995 1,830,000 -- -- -- --
Executive Officer of
Holdings 1994 1,684,135 -- -- -- --
and Silgan and Chairman
of the Board of
Containers)
Harley Rankin, Jr. ...... 1996 425,007 -- -- -- --
(Executive Vice
President, 1995 408,978 -- -- -- --
Chief Financial Officer
and 1994 384,930 -- -- 102,799 --
and Treasurer of
Holdings and Silgan)
James D. Beam............ 1996 372,600 $112,339 -- -- $73,805
(President of
Containers) 1995 361,200 -- -- -- 66,394
1994 350,000 169,092 -- -- 94,175
Russell F. Gervais....... 1996 234,000 111,400 -- -- 7,020
(President of Plastics) 1995 226,000 59,000 -- -- 5,085
1994 216,804 83,300 -- 137,066 --
</TABLE>
- --------
(a) 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".
(b) The salaries of Messrs. Beam and Gervais were paid by Containers and
Plastics, respectively.
(c) 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.
(d) Reflects options to purchase shares of Common Stock under the Stock Option
Plan, and gives effect to the Stock Split. Such options are exercisable
ratably over a five-year period which began on January 1, 1995. Mr.
Gervais' options are estimated and have been calculated in accordance with
Plastics' stock option plan to give effect to the conversion thereof to
options under the Stock Option Plan (based on a preliminary allocation of
value between subsidiaries and on an assumed initial public offering price
of $19.00 per share). The exact amount of Mr. Gervais' options under the
Stock Option Plan will be determined at the time of the Offering.
(e) In the case of Mr. Beam, includes amounts contributed under the Silgan
Containers Corporation Supplemental Executive Retirement Plan (the
"Supplemental Plan") and used to pay premiums for split-dollar life
insurance for Mr. Beam maintained in conjunction with the Supplemental
Plan and includes amounts contributed by Containers under the Silgan
Containers Corporation Deferred Incentive Savings Plan. In the case of Mr.
Gervais, includes amounts allocated to Mr. Gervais under the Silgan
Plastics Corporation Contributory Retirement Plan.
58
<PAGE>
OPTION VALUES AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
DECEMBER 31, 1996 DECEMBER 31, 1996(a)
----------------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ---------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
R. Philip Silver........ -- -- -- --
D. Greg Horrigan........ -- -- -- --
Harley Rankin, Jr.(b)... 233,011 41,120 $3,858,649 $ 635,567
James D. Beam(b)(c)..... 582,526 -- 9,972,862 --
Russell F.
Gervais(b)(c).......... 82,240 54,826 1,517,193 1,011,462
</TABLE>
- --------
(a) For the purposes of this table, the fair market value per share of Common
Stock at December 31, 1996 was estimated to be the assumed initial public
offering price of $19.00 per share.
(b) Options are for shares of Common Stock and give effect to the Stock Split.
(c) Messrs. Beam's and Gervais' options are estimated and have been calculated
in accordance with Containers' and Plastics' stock option plans,
respectively, to give effect to the conversion thereof to options under
the Stock Option Plan (based on a preliminary allocation of value between
subsidiaries and an assumed initial public offering price of $19.00 per
share). The exact amount of Messrs. Beam's and Gervais' options under the
Stock Option Plan will be determined at the time of the Offering.
STOCK OPTION PLAN
The Board of Directors and stockholders of Holdings approved the
establishment of the Stock Option Plan. Under the Stock Option Plan, as an
additional means of attracting and retaining officers and key personnel,
Holdings may grant options to purchase shares of Common Stock to participants.
Options granted may be either non-qualified stock options or "incentive stock
options".
The Board of Directors of Holdings, through a committee (the "Stock Option
Committee"), administers the Stock Option Plan and has the power to, among
other things, choose participants and fix the type of grant and all the terms
and conditions thereof, including number of shares covered by a grant and the
exercise price. Only officers (including executive officers) and other key
employees of the Company are eligible to participate in the Stock Option Plan.
The stock issuable under the Stock Option Plan includes shares of Holdings'
authorized and unissued or reacquired Common Stock. The number of shares for
which options may be granted under the Stock Option Plan may not exceed
3,534,568 shares.
Options are exercisable over such period as determined by the Stock Option
Committee, and generally, except as otherwise determined by the Stock Option
Committee, no option may remain exercisable more than ten years from the grant
date, subject to earlier termination as provided in the Stock Option Plan.
Options become exercisable no earlier than one year from the date of grant and
in such installments as specified in the option agreement therefor.
All options granted under the Stock Option Plan must be evidenced by an
option agreement between Holdings and the option recipient embodying all the
terms and conditions of the option grant, provided that (i) incentive stock
options granted must comply with Section 422 of the Code, (ii) no option shall
be transferable or assignable other than by will or the laws of descent and
distribution and, during the lifetime of the recipient, such option shall be
exercisable only by the recipient, (iii) all options must expire upon or
remain exercisable for a limited time after termination of employment, all as
specified in the Stock Option Plan, and (iv) upon exercise of options, full
payment for the shares covered thereby shall be made in cash or shares of
Common Stock already owned or a combination of cash and shares of Common
Stock.
Concurrent with the Offering, all outstanding stock options issued under
stock option plans of Containers and Plastics will be converted to stock
options under Holdings' Stock Option Plan in accordance with the terms of such
plans. Additionally, the holders of stock options under the
59
<PAGE>
Containers' and Plastics' stock option plans have waived certain registration
rights thereunder. At the time of the Offering, the Containers' and Plastics'
stock option plans will terminate. As a result, the only stock options that
will be outstanding after the Offering will be stock options under the
Holdings' Stock Option Plan.
As of the date of this Prospectus, options to purchase 1,821,254 shares of
Common Stock were outstanding under the Stock Option Plan at exercise prices
ranging from $0.55 to $4.35 per share. With respect to certain outstanding
options, Holdings has an obligation to pay to the optionees an amount per
option as specified in the applicable option agreement (determined in
connection with the merger in which Holdings acquired Silgan with respect to
the issuance of options under the Stock Option Plan in exchange for options
under a predecessor plan) upon exercise of such options. An aggregate amount
of $943,589 would be payable by Holdings to such optionees upon the exercise
of such outstanding options.
FEDERAL INCOME TAX CONSEQUENCES OF STOCK OPTION PLAN
The following discussion sets forth a brief summary of the U.S. federal
income tax aspects of options granted under the Stock Option Plan based on tax
laws in effect on the date hereof. This summary is not intended to be
exhaustive, and does not describe a number of special tax rules that could
apply in certain circumstances (i.e., alternative minimum tax). State, local
and foreign income tax consequences are not discussed, and may vary from
locality to locality. Participants in the Stock Option Plan are urged to
consult their own tax advisors with respect to the consequences of their
participation in the Stock Option Plan.
STOCK OPTIONS
The grant of incentive stock options or non-qualified stock options will not
result in taxable income for the optionee at the time the option is granted
and Holdings will not be entitled to a deduction at that time.
NON-QUALIFIED STOCK OPTIONS
In general, an optionee will be subject to tax for the year of exercise of a
non-qualified stock option on the amount of ordinary income equal to the
difference between the purchase price and the fair market value of the Common
Stock received at the time of such exercise. Holdings will be entitled to a
deduction in a corresponding amount. Income tax withholding requirements apply
upon exercise. The optionee's tax basis in the Common Stock acquired on
exercise will be equal to the exercise price plus the amount of ordinary
income subject to tax upon such exercise. Upon subsequent disposition of the
Common Stock, the holder will realize capital gain or loss, long-term or
short-term, depending upon the length of time the holder held the Common Stock
received upon the option exercise.
INCENTIVE STOCK OPTIONS
In general, the exercise of an incentive stock option will not result in
income for the optionee if the optionee (i) does not dispose of the Common
Stock within two years after the date of grant or one year after the
acquisition of the Common Stock upon exercise and (ii) is an employee of
Holdings or a subsidiary of Holdings from the date of the option grant until
three months before the exercise date. If these requirements are met, the tax
basis of the Common Stock upon later disposition will be the exercise price.
Any gain will be taxed to the holder as long-term capital gain and Holdings
will not be entitled to a deduction. The excess of the fair market value on
the exercise date over the exercise price is an item of tax preference,
potentially subject to the alternative minimum tax.
If an optionee disposes of the Common Stock acquired upon exercise prior to
the expiration of either of the holding periods described in clause (i) in the
immediately preceding paragraph, the optionee will recognize ordinary income
and Holdings will be entitled to a corresponding deduction equal to the lesser
of (a) the fair market value of the Common Stock on the exercise date minus
the exercise price or (b) the amount realized on disposition minus the
exercise price. Any gain in excess of the amount of the ordinary income
portion will be taxable as long-term or short-term capital gain, depending
upon the length of time the Common Stock was held after exercise.
60
<PAGE>
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.
The following table illustrates the estimated annual normal retirement
benefits that are payable under the Containers Pension Plan. 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.
CONTAINERS PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
FINAL AVERAGE -----------------------------------------------------------------------
EARNINGS 10 15 20 25 30 35
- ------------- ------- ------- ------- ------- -------- --------
<S> <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>
Benefits under the Containers Pension Plan are based on the participant's
average base pay (the "Salary" column in the Summary Compensation Table) over
the final three years of employment. The amount of average base pay taken into
account for any year is limited by Section 401(a)(17) of the Code, which
imposes a cap of $150,000 (to be indexed for inflation) on compensation taken
into account for 1994 and later years (the limit for 1993 was $235,840).
As of December 31, 1996, James D. Beam, the only eligible executive officer
named in the Summary Compensation Table, had nine years of credited service
under the Containers Pension Plan. Mr. Beam also participates in the
Supplemental Plan, which is designed to make up for benefits not payable under
the Containers Pension Plan due to Code limitations. Mr. Beam's benefits under
the Supplemental Plan are funded through a split-dollar life insurance policy;
income attributable to this life insurance policy is included in the "All
Other Compensation" column of the Summary Compensation Table.
The following table illustrates the estimated annual normal retirement
benefits that are payable under the Plastics Pension Plan. 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.
PLASTICS PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
FINAL AVERAGE --------------------------------------------------------------------
EARNINGS 10 15 20 25 30 35
- ------------- ------ ------- ------- ------- ------- -------
<S> <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>
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Benefits under the Plastics Pension Plan are based on the participant's
average total cash compensation (the "Salary" and "Bonus" columns in the
Summary Compensation Table) over the final 36 months of employment or over the
highest three of the final five calendar years of employment, whichever
produces the greater average compensation. In computing this average,
compensation for any year cannot exceed 125% of base pay. Compensation used in
determining benefits is also limited by Section 401(a)(17) of the Code, which
imposes the limits indicated above.
Benefits under the Plastics Pension Plan may be offset by a social security
amount (the plan provides benefits based on the greater of three formulas,
only one of which provides for a social security offset). Each of the benefit
estimates in the above table is based on the formula that produces the
greatest benefit for individuals with the stated earnings and years of
service.
As of December 31, 1996, Russell F. Gervais, the only eligible executive
officer named in the Summary Compensation Table, had seven years of credited
service under the Plastics Pension Plan.
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. Generally, these employment agreements provide for, among other
things, a minimum severance benefit equal to the employee's base salary and
benefits for, in most cases, a period of one year following termination (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 the Registration Statement (as
defined herein) of which this Prospectus is a part.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Holdings did not have a Compensation Committee during 1996. The compensation
of Messrs. Silver, Horrigan, Rankin and Rodriguez was paid by S&H, which was
paid by the Company for providing certain management services to the Company
pursuant to the Management Agreements (as defined in "Certain Transactions--
Management Agreements"). See "Certain Transactions--Management Agreements".
The compensation of all other executive officers of the Company was determined
by the senior management of the Company.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Prior to completion of the Offering, all of the issued and outstanding
Common Stock of Holdings was owned by the Principal Common Stockholders and
BTNY. Upon completion of the Offering, the Principal Common Stockholders will
own 14,306,176 shares of Common Stock, or approximately 75.8% of the issued
and outstanding shares of Common Stock (approximately 73.7% if the over-
allotment option granted to the Underwriters is exercised in full).
Under the Principals Stockholders Agreement, Messrs. Silver and Horrigan
agreed to vote their shares of Common Stock for the election of two directors
chosen by MSLEF II so long as MSLEF II holds at least one-half of the number
of shares of Common Stock held by it on the date of this Prospectus, and MSLEF
II agreed to vote its shares of Common Stock for the election of two directors
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chosen by Messrs. Silver and Horrigan so long as they hold in the aggregate at
least one-half of the number of shares of Common Stock held by them on the
date of this Prospectus. Holdings currently has four directors, but intends to
increase its board of directors after the Offering to six members to include
two additional independent directors. See "Certain Transactions" and
"Description of Capital Stock--Description of Stockholders Agreements".
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock prior to the Offering after giving effect to the
Stock Split and after the Offering as adjusted to reflect the sale of the
shares of Common Stock offered hereby, (i) by each person who is known by
Holdings to own beneficially more than 5% of the Common Stock, (ii) by each
current director of Holdings and each named executive officer and (iii) by all
executive officers and directors as a group.
Each of the persons named in the table has sole voting and investment power
with respect to the securities beneficially owned.
<TABLE>
<CAPTION>
BEFORE THE OFFERING AFTER THE OFFERING(1)
------------------------------ ------------------------------
NUMBER OF SHARES PERCENTAGE OF NUMBER OF SHARES PERCENTAGE OF
OF COMMON STOCK COMMON STOCK OF COMMON STOCK COMMON STOCK
BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY
OWNED OWNED(2) OWNED OWNED(2)
---------------- ------------- ---------------- -------------
<S> <C> <C> <C> <C>
R. Philip Silver(3)..... 3,576,544 23.59% 3,576,544 18.96%
D. Greg Horrigan(3)..... 3,576,544 23.59% 3,576,544 18.96%
Robert H. Niehaus(4).... -- -- -- --
Leigh J. Abramson(4).... -- -- -- --
Harley Rankin, Jr.(5)... 233,011 1.51% 233,011 1.22%
James D. Beam(6)........ 582,526 3.70% 582,526 3.00%
Russell F. Gervais(7)... 82,240 * % 82,240 * %
The Morgan Stanley
Leveraged Equity Fund
II, L.P.(8)............ 7,153,088 47.18% 7,153,088 37.92%
All officers and
directors as a group... 8,731,051 52.15% 8,731,051 42.71%
</TABLE>
- --------
(1) Assumes no purchase of shares in the Offering and no exercise of the
Underwriters' over-allotment option.
(2) An asterisk denotes beneficial ownership of 1% or less of the Common
Stock.
(3) Director of Holdings, Silgan, Containers and Plastics. 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.
(4) Director of Holdings, Silgan, Containers and Plastics. The address for
such person is c/o Morgan Stanley & Co. Incorporated, 1221 Avenue of the
Americas, New York, NY 10020.
(5) Reflects shares that may be acquired through the exercise of vested stock
options granted pursuant to the Stock Option Plan. The address for such
person is 4 Landmark Square, Stamford, CT 06901.
(6) Reflects shares that may be acquired through the exercise of vested stock
options granted pursuant to the Stock Option Plan. The address for such
person is 21800 Oxnard Street, Woodland Hills, CA 91367.
(7) Reflects shares that may be acquired through the exercise of vested stock
options granted pursuant to the Stock Option Plan. The address for such
person is 14515 N. Outer Forty, Chesterfield, MO 63017.
(8) The address for The Morgan Stanley Leveraged Equity Fund II, L.P., is 1221
Avenue of the Americas, New York, NY 10020.
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CERTAIN 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 then 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% 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 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 $83.5 million for the
calendar year 1996, and the Maximum Amount was $98.101 million for the
calendar year 1996. The Scheduled Amount is $89.5 million for the calendar
year 1997, and the Maximum Amount is $100.504 million for the calendar year
1997. The Management Agreements provide that upon receipt by Silgan of a
notice from Bankers Trust that certain events of default under the Silgan
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.
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 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.
Concurrent with the Offering, each of Holdings, Silgan, Containers and
Plastics will enter into an amended and restated management services agreement
(collectively, the "New Management Agreements") with S&H to replace in their
entirety the Management Agreements. The New Management Agreements will contain
substantially the same terms as the Management Agreements, except that after
the initial term of the New Management Agreements (which will continue until
June 30, 1999), the New Management Agreements will be automatically renewed
for successive one-year terms unless either party gives written notice at
least 180 days prior to the end of the then current term of its election not
to renew. The independent directors of Holdings will determine on behalf of
the companies whether to give such written notice not to renew. The New
Management Agreements may be terminated (i) at the option of each of the
respective companies upon the failure or refusal of S&H
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<PAGE>
to perform its obligations under the New Management Agreements, if such
failure or refusal continues unremedied for more than 60 days after written
notice of its existence shall have been given; (ii) at the option of S&H upon
the failure or refusal of any of the respective companies to perform its
obligations under the New Management Agreements, if such failure or refusal
continues unremedied for more than 60 days after written notice of its
existence shall have been given; (iii) at the option of S&H or the respective
companies (a) if S&H or one of the companies is declared insolvent or bankrupt
or a voluntary bankruptcy petition is filed by any of them, (b) upon the
occurrence of any of the following events with respect to S&H or one of the
companies 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 one of the companies 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; (iv) upon at least 180 days prior written notice at the
option of each of the respective companies for any reason; (v) upon at least
180 days prior written notice at the option of S&H for any reason other than
Cause or a Change of Control (each as defined in the New Management
Agreements); (vi) at the option of S&H after a Change of Control; (vii) at the
option of the respective companies in the event of criminal conduct or gross
negligence by S&H in the performance of the Services; or (viii) at the option
of S&H or the respective companies upon the termination of any of the New
Management Agreements for Cause (as defined therein). The New Management
Agreements will prohibit S&H from competing with the Company during the term
thereof and, only if S&H terminates the New Management Agreements pursuant to
clause (v) above, for a period of one year after such termination. The New
Management Agreements will provide that, in the event that they are terminated
pursuant to clause (iv) above, each of the respective companies will be
required to pay to S&H the present value of the amount of the payments that
would have been payable to S&H thereunder through the end of the initial term
or renewed term, as the case may be, thereof. In addition, under the New
Management Agreements the Scheduled Amount will be $89.5 million, $95.5
million and $101.5 million for the calendar years 1997, 1998 and 1999,
respectively, and the Maximum Amount will be $100.504 million, $102.964
million and $105.488 million for the calendar years 1997, 1998 and 1999,
respectively. For the calendar year 2000, the Scheduled Amount and the Maximum
Amount will be $108.653 million, and for each calendar year thereafter the
Scheduled Amount and Maximum Amount will increase by 3% from that of the
previous year.
The Company believes that it is difficult to determine whether the
Management Agreements and the New Management Agreements are on terms no less
favorable than those available from unaffiliated parties because of the
personal nature of the services provided thereunder and the expertise and
skills of the individuals providing such services. The Company believes that
arrangements under the Management Agreements and the New Management Agreements
are fair to both parties.
For the years ended December 31, 1996, 1995 and 1994, under the Management
Agreements, S&H earned aggregate fees, including reimbursable expenses and
fees payable to Morgan Stanley, of $5.3 million, $5.4 million and $5.0
million, respectively, from Holdings, Silgan, Containers and Plastics, and
during 1996, 1995 and 1994 Morgan Stanley earned fees of $425,000, $409,000
and $383,000, respectively.
OTHER
In connection with the refinancings of the Company's bank credit agreement
in 1995 and 1993, the banks thereunder (including Bankers Trust) received
certain fees amounting to $17.2 million and $8.1 million in 1995 and 1993,
respectively. In connection with a recent amendment to the Silgan Credit
Agreement in May 1996, the banks thereunder (including Bankers Trust) received
certain fees amounting to $1.6 million. In connection with the Preferred Stock
Sale, Morgan Stanley, which acted as the placement agent in connection
therewith, received certain fees amounting to $1.8 million. See "Securities
Ownership of Certain Beneficial Owners and Management" for a description of
the ownership by MSLEF II, an affiliate of Morgan Stanley, of certain
securities of Holdings.
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<PAGE>
Messrs. Silver and Horrigan, BTNY, MSLEF II and Holdings are parties to the
Stockholders Agreement, which provides for certain rights and obligations
among them and between them and Holdings. See "Description of Capital Stock--
Description of Stockholders Agreements".
G. William Sisley, Secretary of 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.
In the event that the Company enters into any future transactions with any
of its affiliates, the Company expects to enter into any such transactions on
terms no less favorable than those available from unaffiliated parties.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is incorporated under the laws of the State of Delaware.
Immediately prior to the closing of the Offering, Holdings will amend its
Certificate of Incorporation to change its authorized capital stock to
100,000,000 shares of Common Stock, par value $.01 per share (the "Common
Stock"), and 10,000,000 shares of preferred stock, par value $.01 per share.
Prior to the issuance of shares of Common Stock in the Offering, there are
15,162,833 shares of Common Stock issued and outstanding, 14,306,176 of which
are beneficially owned by the Principal Common Stockholders. Such number of
outstanding shares reflects the Stock Split. Upon consummation of the
Offering, 18,862,833 shares of Common Stock will be issued and outstanding
(assuming that the Underwriters' over-allotment option will not be exercised).
There are 53,255 shares of Exchangeable Preferred Stock issued and
outstanding, of which none are owned by the Principal Common Stockholders. All
outstanding shares of capital stock are, and the shares issued in the Offering
will be, fully paid and nonassessable.
COMMON STOCK
Each outstanding share of Common Stock entitles the holder thereof to one
vote on all matters submitted to a vote of stockholders, including the
election of directors. There is no cumulative voting in the election of
directors; consequently, the holders of a majority of the outstanding shares
of Common Stock can elect all of the directors then standing for election. See
"--Description of Stockholders Agreements". Holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from
time to time by the Board of Directors out of funds legally available
therefor. See "Dividend Policy". In the event of any liquidation, dissolution
or winding-up of the affairs of the Company, holders of Common Stock will be
entitled to share ratably in the assets of the Company remaining after
provision for payment of liabilities to creditors and obligations to holders
of preferred stock. Holders of Common Stock have no preemptive, subscription,
redemption or conversion rights and are not liable for further calls or
assessments. In addition, any action taken by the holders of Common Stock must
be taken at a meeting and may not be taken by consent in writing, and a
special meeting of the stockholders may only be called by the Chairman of the
Board or the President of the Company or by a majority of the Board of
Directors of the Company, and may not be called by the holders of Common
Stock.
PREFERRED STOCK
GENERAL
The Company's Board of Directors, without stockholder authorization, is
authorized to issue up to 10,000,000 shares of preferred stock in one or more
series and to fix the preferences, rights and privileges thereof, including
any dividend rights, conversion rights, voting rights, redemption rights and
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terms of any sinking fund provisions, liquidation preferences, the number of
shares constituting a series and the designation of such series. The Board
may, without stockholder approval, issue preferred stock with voting and other
rights that could adversely affect the voting power of the holders of Common
Stock. Currently, 53,255 shares of Exchangeable Preferred Stock are issued and
outstanding. However, after the Offering, Holdings intends to exchange its
outstanding Exchangeable Preferred Stock for the Exchange Debentures. See
"Description of Certain Indebtedness--Description of the Exchange Debentures".
The Company has no present plans to issue any additional shares of preferred
stock other than shares that may be issued to pay dividend obligations on the
Exchangeable Preferred Stock.
TERMS OF OUTSTANDING PREFERRED STOCK
The following is a summary of the terms of the Exchangeable Preferred Stock.
The Exchangeable Preferred Stock has a liquidation preference of $1,000 per
share and ranks senior to all outstanding capital stock of Holdings. Holdings
is required to redeem the Exchangeable Preferred Stock at its liquidation
preference of $1,000 per share, plus accrued and unpaid dividends, on July 15,
2006.
Dividends on the Exchangeable Preferred Stock are cumulative from the date
of issuance at 13 1/4% per annum on the liquidation preference thereof, and
are payable quarterly in cash or, on or prior to July 15, 2000 at the sole
option of Holdings, in additional shares of Exchangeable Preferred Stock, on
January 15, April 15, July 15 and October 15, commencing October 15, 1996. The
Exchangeable Preferred Stock is generally exchangeable into Exchange
Debentures at any time at the option of Holdings, in whole but not in part. If
by July 22, 1997 the Exchangeable Preferred Stock has not been exchanged for
the Exchange Debentures, the dividend rate on the Exchangeable Preferred Stock
will increase by 0.5% per annum to 13 3/4% per annum of the liquidation
preference thereof until such exchange occurs. The Company currently plans to
exchange the Exchangeable Preferred Stock for the Exchange Debentures after
completion of the Offering. For a summary of the terms of the Exchange
Debentures, see "Description of Certain Indebtedness--Description of the
Exchange Debentures".
On or after July 15, 2000, the Exchangeable Preferred Stock is redeemable,
at the option of Holdings, in whole or in part, at the rate of 109.938%
(declining ratably to 100% by July 15, 2003) of the liquidation preference
thereof, plus accrued and unpaid dividends to the redemption date. In
addition, at any time, or from time to time, on or prior to July 15, 2000,
Holdings may, at its option, redeem all (but not less than all) of the
outstanding shares of Exchangeable Preferred Stock at a redemption price equal
to 110% of the liquidation preference thereof, plus accrued and unpaid
dividends to the redemption date, with the proceeds of one or more sales of
common stock of Holdings. Upon a Change of Control (as defined in the
Certificate of Designation), Holdings is required to make an offer to purchase
all shares of Exchangeable Preferred Stock at a purchase price equal to 101%
of their liquidation preference, plus accrued and unpaid dividends to the date
of purchase.
Holders of the Exchangeable Preferred Stock have no voting rights except as
provided by law and as provided in Holdings' Restated Certificate of
Incorporation or in the Certificate of Designation relating to the
Exchangeable Preferred Stock (the "Certificate of Designation"). In the event
that dividends are not paid for four consecutive quarters or upon certain
other events as described in the Certificate of Designation (including failure
to comply with covenants under the Certificate of Designation and failure to
pay the mandatory redemption price on the Exchangeable Preferred Stock when
due), then the number of directors constituting Holdings' Board of Directors
will be adjusted to permit the holders of the majority of the then outstanding
Exchangeable Preferred Stock, voting separately as a class, to elect the
number of directors that is equal to the greater of (i) one and (ii) the whole
number obtained (rounding down to the nearest whole number) by (a) multiplying
1/6 by the number of directors then in office and (b) adding one.
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The Certificate of Designation contains certain covenants which, among other
things, restricts the ability of Holdings and its subsidiaries to incur
additional indebtedness and issue preferred stock; pay dividends or make
distributions in respect of their capital stock; purchase, redeem or otherwise
acquire for value shares of capital stock; make investments in any affiliate
or unrestricted subsidiary; enter into transactions with shareholders or
affiliates; create restrictions on the ability of Holdings' subsidiaries to
make certain payments; issue or sell stock of Holdings' subsidiaries; engage
in sales of assets; and engage in mergers or consolidations.
DESCRIPTION OF STOCKHOLDERS AGREEMENTS
Holdings, MSLEF II, BTNY and Messrs. Silver and Horrigan are parties to the
Stockholders Agreement dated as of December 21, 1993 (as amended, the
"Stockholders Agreement") which provides for certain rights and obligations
among such stockholders and between such stockholders and Holdings. The
operative provisions of the Stockholders Agreement take effect upon the
completion of the Offering. The following is a summary of the material
provisions of the Stockholders Agreement, which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
The Stockholders Agreement provides that for a period of eight years after
the Offering, MSLEF II shall have the right to demand two separate
registrations of its shares of Common Stock; provided, however, that such
demand right will terminate at such time as MSLEF II, together with its
affiliates, owns less than five percent of the issued and outstanding shares
of Common Stock. If, at any time or from time to time for a period of eight
years after the Offering, Holdings shall determine to register additional
shares of Common Stock (other than in connection with certain non-underwritten
offerings), Holdings will offer each of MSLEF II, BTNY and Messrs. Silver and
Horrigan the opportunity to register shares of Common Stock it holds in a
"piggyback registration".
The Stockholders Agreement prohibits the transfer prior to June 30, 1999 by
MSLEF II or by Messrs. Silver or Horrigan of Holdings' Common Stock without
the prior written consent of the others, 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 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)
certain transfers by MSLEF II to an Investment Entity or, in the event of
certain defaults under the Management Agreement between S&H and Holdings, to a
third party, in each case that comply with certain rights of first refusal
granted to the Group (the "Group" is 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 another
member of the Group) set forth in the Stockholders Agreement, (iv) certain
transfers by either member of the Group to a third party that comply with
certain rights of first refusal granted to the other member of the Group and
MSLEF II set forth in the Stockholders Agreement, and (v) 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, each of Messrs. Silver and
Horrigan and MSLEF II may pledge his or its shares of Holdings' Common Stock
to a lender or lenders reasonably acceptable to Holdings to secure a loan or
loans to him or it. In the event of any proposed foreclosure of such pledge,
such shares will be subject to certain rights of first refusal set forth in
the Stockholders Agreement.
Concurrent with the Offering, MSLEF II and Messrs. Silver and Horrigan
entered into the Principals Stockholders Agreement. The Principals
Stockholders Agreement provides that (i) for so long as MSLEF II and its
affiliates (excluding the non-affiliated limited partners of MSLEF II who
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acquire shares of Common Stock from MSLEF II in a MSLEF Distribution) hold at
least one-half of the number of shares of Common Stock held by MSLEF II on the
date of this Prospectus, each of Messrs. Silver and Horrigan will use his best
efforts (including to vote any shares of Common Stock owned or controlled by
him) to cause the nomination and election of two members of the Board of
Directors of Holdings to be chosen by MSLEF II; provided, however, that each
such nominee shall be either (a) an employee of Morgan Stanley whose primary
responsibility is managing investments for MSLEF II (or a successor or related
partnership) or (b) 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, and (ii) from and after the time that MSLEF II and its
affiliates (excluding the non-affiliated limited partners of MSLEF II who
acquire shares of Common Stock from MSLEF II in a MSLEF Distribution) hold
less than one-half of the number of shares of Common Stock held by MSLEF II on
the date of this Prospectus and until such time that MSLEF II and its
affiliates (excluding the non-affiliated limited partners of MSLEF II who
acquire shares of Common Stock from MSLEF II in a MSLEF Distribution) hold
less than five percent (5%) of the outstanding Common Stock beneficially
owned, each of Messrs. Silver and Horrigan will use his best efforts
(including to vote any shares of Common Stock owned or controlled by him) to
cause the nomination and election of one member of the Board of Directors of
Holdings to be chosen by MSLEF II; provided, however, that 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, the Principals Stockholders Agreement provides that (i) for so
long as the Group holds at least one-half of the number of shares of Common
Stock held by it in the aggregate on the date of this Prospectus, MSLEF II
will use its best efforts (including to vote any shares of Common Stock owned
or controlled by it) to cause the nomination and election of two individuals
nominated by the holders of a majority of the shares of Common Stock held by
the Group as members of the Board of Directors of Holdings; provided, however,
that at least one of such nominees shall be Mr. Silver or Mr. Horrigan and the
other person, if not Mr. Silver or Mr. Horrigan, will be a person reasonably
acceptable to MSLEF II, so long as MSLEF II and its affiliates (excluding the
non-affiliated limited partners of MSLEF II who may acquire shares of Common
Stock from MSLEF II in a MSLEF Distribution) hold at least one-half of the
number of shares of Common Stock held by MSLEF II on the date of this
Prospectus, (ii) from and after the time that the Group holds less than one-
half of the number of shares of Common Stock held by it in the aggregate on
the date hereof and until such time that the Group holds less than five
percent (5%) of the outstanding Common Stock beneficially owned, MSLEF II will
use its best efforts (including to vote any shares of Common Stock owned or
controlled by it) to cause the nomination and election of one individual
nominated by the holders of a majority of the shares of Common Stock held by
the Group as a member of the Board of Directors of Holdings; provided,
however, that such nominee shall be Silver or Horrigan or, if not Silver or
Horrigan, a person reasonably acceptable to MSLEF II, so long as MSLEF II and
its affiliates (excluding the non-affiliated limited partners of MSLEF II who
acquire shares of Common Stock from MSLEF II in a MSLEF Distribution) hold at
least one-half of the number of shares of Common Stock held by MSLEF II on the
date of this Prospectus, and (iii) so long as the Group holds at least one-
half of the number of shares of Common Stock held by it in the aggregate on
the date of this Prospectus, the Group will have the right to nominate for
election all directors of Holdings other than the directors referred to above
in this paragraph and in the preceding paragraph, and upon such nomination by
the Group such nominees will stand for election to Holdings' Board of
Directors in accordance with Holdings' Restated Certificate of Incorporation,
and MSLEF II will vote all shares of Common Stock owned or controlled by it
and its affiliates against any director standing for election for Holdings'
Board of Directors that has not been nominated by the Group, other than the
directors referred to above in this paragraph and in the preceding paragraph.
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The Principals Stockholders Agreement further provides that MSLEF II will
vote all shares of Common Stock held by it against any unsolicited merger, or
sale of Holdings' business or 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 of the number of shares of Common Stock held by it in the
aggregate at the date of this Prospectus.
The foregoing provisions of the Principals Stockholders Agreement could have
the effect of delaying, deferring or preventing a change of control of the
Company and preventing the stockholders from receiving a premium for their
shares of Common Stock in any proposed acquisition of the Company.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 ("Section 203") of the General Corporation Law of the State of
Delaware (the "DGCL") provides, in general, that a stockholder acquiring more
than 15% of the outstanding voting stock of a corporation subject to Section
203 (an "Interested Stockholder") but less than 85% of such stock may not
engage in certain Business Combinations (as defined in Section 203) with the
corporation for a period of three years subsequent to the date on which the
stockholder became an Interested Stockholder unless (i) prior to such date the
corporation's board of directors approved either the Business Combination or
the transaction in which the stockholder became an Interested Stockholder or
(ii) the Business Combination is approved by the corporation's board of
directors and authorized by a vote of at least 66 2/3% of the outstanding
voting stock of the corporation not owned by the Interested Stockholder.
LIMITATIONS ON DIRECTORS' LIABILITY
Holdings' Restated Certificate of Incorporation contains a provision which
eliminates the personal liability of a director to Holdings and its
stockholders for certain breaches of his or her fiduciary duty of care as a
director. This provision does not, however, eliminate or limit the personal
liability of a director (i) for any breach of such director's duty of loyalty
to Holdings or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Delaware statutory provisions making directors personally liable, under
a negligence standard, for unlawful dividends or unlawful stock repurchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. This provision offers persons who serve on the
Board of Directors of Holdings protection against awards of monetary damages
resulting from breaches of their duty of care (except as indicated above),
including grossly negligent business decisions made in connection with
takeover proposals for Holdings. As a result of this provision, the ability of
Holdings or a stockholder thereof to successfully prosecute an action against
a director for a breach of his duty of care has been limited. However, the
provision does not affect the availability of equitable remedies such as an
injunction or recision based upon a director's breach of his duty of care. The
Commission has taken the position that the provision will have no effect on
claims arising under the federal securities laws.
In addition, the Restated Certificate of Incorporation and By-Laws provide
mandatory indemnification rights, subject to limited exceptions, to any person
who was or is party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding by reason of the fact that
such person is or was a director or officer of Holdings, or is or was serving
at the request of Holdings as a director or officer of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise.
Such indemnification rights include reimbursement for expenses incurred by
such person in advance of the final disposition of such proceeding in
accordance with the applicable provisions of the DGCL.
TRANSFER AGENT AND REGISTRAR
The Bank of New York is the transfer agent and registrar for the Common
Stock.
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SHARES ELIGIBLE FOR FUTURE SALE
Immediately after consummation of the Offering, Holdings will have
outstanding 18,862,833 shares of Common Stock, assuming no exercise of the
over-allotment option granted to the Underwriters. Of these shares, the
3,700,000 shares of Common Stock sold in the Offering (or 4,255,000 shares if
the over-allotment option is exercised in full) will be freely tradeable
without restrictions or further registration under the Securities Act, unless
such shares are purchased by "affiliates" of the Company (as that term is
defined under the Securities Act). The 15,162,833 shares of Common Stock owned
by the Principal Common Stockholders and BTNY are "restricted securities" as
defined in Rule 144 under the Securities Act, and may not be sold in the
absence of registration under the Securities Act other than pursuant to Rule
144 under the Securities Act or another exemption from registration under the
Securities Act.
In general, under Rule 144, as currently in effect, (i) a person (or persons
whose shares are required to be aggregated) who has beneficially owned shares
of Common Stock as to which at least two years have elapsed since such shares
were sold by Holdings or by an affiliate of Holdings in a transaction or chain
of transactions not involving a public offering ("restricted securities") or
(ii) an affiliate of Holdings who holds shares of Common Stock that are not
restricted securities may, without regard to the holding period, sell, within
any three-month period, a number of such shares that does not exceed the
greater of 1% of Holdings' Common Stock then outstanding (188,628 shares after
completion of the Offering) or the average weekly trading volume in the Common
Stock during the four calendar weeks preceding the date on which notice of
such sale required under Rule 144 was filed. Sales under Rule 144 are also
subject to certain provisions relating to the manner and notice of sale and
availability of current public information about Holdings. Affiliates of
Holdings must comply with the requirements of Rule 144, including the two-year
holding period requirement, to sell shares of Common Stock that are restricted
securities. Furthermore, if a period of at least three years has elapsed from
the date restricted securities were acquired from Holdings or an affiliate of
Holdings, a holder of such restricted securities who is not an affiliate of
Holdings at the time of the sale and has not been an affiliate of Holdings at
any time during the three months prior to such sale would be entitled to sell
such shares without regard to the volume limitation and other conditions
described above.
All shares of Common Stock owned by each of the Principal Common
Stockholders and BTNY will immediately after consummation of the Offering be
eligible (subject to the one year lock-up arrangement described below) for
sale in the public market pursuant to, and in accordance with the volume,
manner of sale and other conditions of, Rule 144 described above. The
Stockholders Agreement provides for restrictions on transfers of Common Stock
by the Principal Common Stockholders other than sales pursuant to Rule 144 or
public offerings. Holdings has granted MSLEF II and Messrs. Silver and
Horrigan certain registration rights with respect to the shares of Common
Stock owned by them. See "Risk Factors--Shares Eligible for Future Sale" and
"Description of Capital Stock--Description of Stockholders Agreements".
Holdings and each of the Principal Common Stockholders and BTNY have agreed
that, subject to certain exceptions, they will not offer, sell or otherwise
dispose of any shares of Common Stock, other than in the Offering, or any
security convertible into or exchangeable or exercisable for shares of Common
Stock without the prior written consent of Goldman, Sachs & Co. on behalf of
the Underwriters for a period of one year after the date of this Prospectus.
See "Underwriting".
Holdings intends to register under the Securities Act the shares of Common
Stock issuable upon the exercise of options granted pursuant to the Stock
Option Plan. See "Management--Executive Compensation".
Prior to the Offering, there has been no public market for the Common Stock.
Sales of substantial amounts of Common Stock or the availability of such
shares for sale could adversely affect prevailing market prices of the Common
Stock and the ability of the Company to issue additional equity securities.
See "Risk Factors--Shares Eligible for Future Sale".
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DESCRIPTION OF CERTAIN INDEBTEDNESS
DESCRIPTION OF THE SILGAN CREDIT AGREEMENT
Pursuant to the Silgan Credit Agreement, the Banks loaned to Silgan (i) $225
million of term loans designated as "A Term Loans" and (ii) $350 million of
term loans designated as "B Term Loans" (together with the A Term Loans, the
"Term Loans"), and agreed to lend to Containers or Plastics up to an aggregate
of $225 million of revolving loans (the "Revolving Loans"). As of December 31,
1996, the outstanding principal amounts of A Term Loans, B Term Loans and
Revolving Loans under the Silgan Credit Agreement were $194.6 million, 343.7
million and $27.8 million, respectively. The A Term Loans mature on December
31, 2000 and are payable in varying increasing installments from December 31,
1996 through December 31, 2000. The B Term Loans mature on March 15, 2002 and
are payable in varying installments from December 31, 1996 through March 15,
2002. The Revolving Loans mature and are payable in full on December 31, 2000.
To secure the obligations of Silgan, Containers and Plastics (the
"Borrowers") under the Silgan Credit Agreement: (i) Silgan pledged to the
Banks all of the capital stock of Containers and Plastics held by Silgan; (ii)
Plastics pledged to the Banks 65% of the capital stock of 827599 Ontario Inc.
("Canadian Holdco") held by Plastics; (iii) Containers pledged to the Banks
all of the capital stock of SCCW Can Corporation ("SCCW Can"), a California
corporation and a wholly owned subsidiary of Containers, held by Containers;
(iv) Containers pledged to the Banks all of the capital stock of California-
Washington Can Corporation ("C-W Can"), a California corporation and a wholly
owned subsidiary of Containers, held by Containers; (v) Silgan, Containers,
Plastics, C-W Can and SCCW Can each granted to the Banks security interests in
substantially all of their respective real and personal property; and (vi)
Holdings pledged to the Banks all of the capital stock of Silgan held by
Holdings. In addition, each of Holdings, Silgan, Containers, Plastics, C-W Can
and SCCW Can have guaranteed the obligations of the Borrowers under the Silgan
Credit Agreement.
Each of the Term Loans and each of the Revolving Loans, at the respective
Borrower's election, consists of loans designated as Eurodollar rate loans or
as Base Rate (as defined in the Silgan Credit Agreement) loans. Subject to
certain conditions, each of the Term Loans and each of the Revolving Loans can
be converted from a Base Rate loan into a Eurodollar rate loan and vice versa.
Interest on Term Loans maintained as Base Rate loans accrues at floating rates
of 1.5% less the then applicable Interest Reduction Discount (as defined in
the Silgan Credit Agreement) (in the case of A Term Loans) and 2% (in the case
of B Term Loans) over the Base Rate. Interest on Term Loans maintained as
Eurodollar rate loans accrues at floating rates of 2.5% less the then
applicable Interest Reduction Discount (in the case of A Term Loans) and 3%
(in the case of B Term Loans) over a formula rate (the "Eurodollar Rate")
determined with reference to the rate offered by Bankers Trust for dollar
deposits in the New York interbank Eurodollar market. Interest on Revolving
Loans maintained as (i) Base Rate loans accrues at floating rates of 1.5%,
less the then applicable Interest Reduction Discount, plus the Base Rate or
(ii) Eurodollar Rate loans accrues at floating rates of 2.5%, less the then
applicable Interest Reduction Discount, plus the Eurodollar Rate.
Under the Silgan Credit Agreement, Silgan is required to repay the Terms
Loans in an amount equal to (i) 50% of Silgan's Excess Cash Flow (as defined
in the Silgan Credit Agreement) in any fiscal year during the Silgan Credit
Agreement, (ii) 80% of the net sale proceeds received from certain asset sales
(increasing to 100% of such net sale proceeds under certain circumstances as
described in the Silgan Credit Agreement), and (iii) 100% of the net equity
proceeds received from certain sales of equity (subject to certain exceptions
permitting the use of such proceeds to repay certain indebtedness (including
the Discount Debentures), decreasing to 50% of net equity proceeds received
after the occurrence of certain events as described in the Silgan Credit
Agreement.
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The financial covenants contained in the Silgan Credit Agreement include the
requirement to maintain a ratio of Consolidated Current Assets to Consolidated
Current Liabilities (each as defined in the Silgan Credit Agreement), a ratio
of EBITDA to Interest Expense (each as defined in the Silgan Credit Agreement)
which becomes more restrictive over time and a Leverage Ratio (as defined in
the Silgan Credit Agreement) which also becomes more restrictive over time.
The Silgan Credit Agreement restricts or limits each of the Borrowers' and
their respective subsidiaries' abilities, among other things: (i) to create
certain liens; (ii) subject to certain exceptions, to consolidate, merge or
sell its assets and to purchase assets; (iii) to pay dividends on, or
repurchase shares of, its capital stock, except for, among other things,
dividends in amounts to allow Holdings to pay cash dividends on the
Exchangeable Preferred Stock (or interest on the Exchange Debentures) as
provided in the Silgan Credit Agreement and dividends from Containers and
Plastics to Silgan as long as they remain wholly owned subsidiaries of Silgan;
(iv) to lease real and personal property; (v) to create additional
indebtedness, except for, among other things, unsecured subordinated
indebtedness of Silgan used to refinance 11 3/4% Notes; (vi) to make certain
advances, investments and loans, except for, among other things, certain
limited acquisitions and investments as provided in the Silgan Credit
Agreement; (vii) to enter into transactions with affiliates; (viii) to make
certain capital expenditures, except for, among other things, capital
expenditures which do not exceed in the aggregate for the Borrowers $65
million (plus amounts permitted and not utilized in the prior year) for each
calendar year; (ix) except as otherwise permitted under the Silgan Credit
Agreement, to make any voluntary payments, prepayments, acquire for value,
redeem or exchange, among other things, any 11 3/4% Notes, any of the
Exchangeable Preferred Stock or Exchange Debentures or to make certain
amendments to the 11 3/4% Notes, the Borrowers' or their respective
subsidiaries' respective certificates of incorporation and by-laws, or to
certain other agreements; (x) with certain exceptions, to have any additional
subsidiaries; and (xi) to engage in any business other than the packaging
business.
The Silgan Credit Agreement requires that Silgan own not less than 90% of
the outstanding common stock of Containers and Plastics and 100% of all other
outstanding capital stock of Containers and Plastics.
The ability of Holdings to take certain actions is restricted or limited
pursuant to the terms of the Second Amended and Restated Holdings Guaranty
dated as of August 1, 1995 made by Holdings (the "Holdings Guaranty"). The
Holdings Guaranty restricts or limits Holdings' ability to, among other
things: (i) create certain liens; (ii) incur additional indebtedness, except
that, among other things, Holdings may exchange the Exchangeable Preferred
Stock for the Exchange Debentures on or after the earlier of the third
anniversary of the issuance of the Exchangeable Preferred Stock or the
consummation by Holdings of a registered public offering of its common stock
in an amount equal to or greater than the principal amount of the Exchange
Debentures and Holdings may incur unsecured subordinated Indebtedness (as
defined in the Silgan Credit Agreement) the proceeds of which are used to
refinance, redeem or repay the Exchange Debentures or any Refinancing
Indebtedness (as defined in the Silgan Credit Agreement) of Holdings; (iii)
consolidate, merge or sell its assets and purchase or lease assets, except
that Holdings may merge with Silgan to the extent that such merger is
permitted under the Silgan Credit Agreement; (iv) pay cash dividends, except
that, among other things, Holdings may pay cash dividends on the Exchangeable
Preferred Stock to the extent that Silgan is permitted to pay cash dividends
or make advances to Holdings under the Silgan Credit Agreement for such
purpose and dividends to the holders of its common stock in amounts and at the
times as provided in the Silgan Credit Agreement after the consummation of a
registered public equity offering by Holdings; (v) repurchase any of its
capital stock; (vi) make loans or advances, except that, among other things;
Holdings may make advances to Silgan as permitted under the Silgan Credit
Agreement; and (vii) engage in any business other than holding Silgan's common
stock and certain other limited matters permitted by the Holding Guaranty.
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Events of default under the Silgan Credit Agreement include, with respect to
each of the Borrowers, as the case may be, among others: (i) the failure to
pay any principal on the Term Loans or the Revolving Loans, the failure to
reimburse drawings under any letters of credit when due or the failure to pay
within two business days after the date such payment is due interest on the
Term Loans, the Revolving Loans or any unpaid drawings under any letter of
credit or any fees or other amounts owing under the Silgan Credit Agreement;
(ii) subject to certain limited exceptions, any failure to pay amounts due
under certain other agreements or any defaults that result in or permit the
acceleration of certain other indebtedness; (iii) subject to certain limited
exceptions, the breach of any covenants, representations or warranties
contained in the Silgan Credit Agreement or any related document; (iv) certain
events of bankruptcy, insolvency or dissolution; (v) the occurrence of certain
judgments, writs of attachment or similar process against any of the Borrowers
or any of their respective subsidiaries; (vi) the occurrence of certain
Employee Retirement Income Security Act related liabilities; (vii) a default
under or invalidity of the guarantees (including an event of default under the
Holdings Guaranty) or of the security interests granted to the Banks pursuant
to the Silgan Credit Agreement; (viii) the failure of Holdings to own 100% of
the capital stock of Silgan; (ix) a Change of Control (as defined in the
Silgan Credit Agreement) shall occur; and (x) the requirement that Silgan
repurchase any 11 3/4% Note or that Holdings repurchase any Exchange
Debenture, in any case as a result of a Change of Control (as defined in the
agreements and indentures relating thereto).
DESCRIPTION OF THE 11 3/4% NOTES
Silgan sold the 11 3/4% Notes ($135 million principal amount) in a public
offering on June 29, 1992. The 11 3/4% Notes bear interest at a rate of 11
3/4% per annum. The 11 3/4% Notes are redeemable at any time on and after June
15, 1997 at the option of Silgan, in whole or in part, at 105.875% of their
principal amount plus accrued interest, declining to 100% of their principal
amount plus accrued interest on or after June 15, 1999. In the event of a
Change of Control (as defined in the 11 3/4% Notes Indenture), each holder of
the 11 3/4% Notes may require Silgan to repurchase its 11 3/4% Notes at 101%
of the principal amount plus accrued interest. The 11 3/4% Notes Indenture
contains certain covenants that, among other things, direct the application of
the proceeds from certain asset sales, limit the ability of Silgan and its
subsidiaries to incur indebtedness, make certain payments with respect to
their capital stock, make prepayments of certain indebtedness, make loans or
investments to entities other than Restricted Subsidiaries (as defined in the
11 3/4% Notes Indenture), enter into transactions with affiliates, engage in
mergers or consolidations, and, with respect to Silgan's subsidiaries, issue
stock. Generally, these covenants are no more restrictive than the covenants
contained in the Silgan Credit Agreement.
DESCRIPTION OF THE EXCHANGE DEBENTURES
Upon completion of the Offering and the redemption of the remaining Discount
Debentures (which is expected to occur no later than 45 days after the
completion of the Offering), Holdings intends to exchange all of the
outstanding Exchangeable Preferred Stock for Exchange Debentures. As a result,
Holdings will realize tax benefits resulting from the deductibility of
interest paid on the Exchange Debentures. The aggregate principal amount of
the Exchange Debentures will be equal to the aggregate liquidation preference
of, and accrued but unpaid dividends on, the Exchangeable Preferred Stock
outstanding on the date that the Exchangeable Preferred Stock is exchanged for
the Exchange Debentures (the "Exchange Date"). The Exchange Debentures will
mature on July 15, 2006. Each Exchange Debenture will bear interest at the
dividend rate in effect with respect to the Exchangeable Preferred Stock on
the date the Exchange Debentures are issued from the Exchange Date or from the
most recent interest payment date to which interest has been paid or provided
for. Interest will be payable on January 15 and July 15 of each year,
commencing with the first of such dates to occur after the Exchange Date. On
or prior to July 15, 2000, Holdings will be permitted to pay interest on the
Exchange Debentures by issuing additional Exchange Debentures.
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On or after July 15, 2000, the Exchange Debentures will be redeemable, at
the option of Holdings, in whole or in part, at the rate of 109.938% of the
principal amount thereof plus accrued interest, declining ratably to 100% by
July 15, 2003. In addition, at any time, or from time to time, on or prior to
July 15, 2000, Holdings will be able, at its option, to redeem all (but not
less than all) outstanding Exchange Debentures at a redemption price equal to
110% of the principal amount thereof plus accrued interest, with the proceeds
of one or more sales of common stock of Holdings. Upon a Change of Control (as
defined in the Indenture with respect to the Exchange Debentures (the
"Exchange Debenture Indenture")), Holdings will be required to make an offer
to purchase all of the Exchange Debentures at a purchase price equal to 101%
of their principal amount on the date of purchase, plus accrued and unpaid
interest to the date of purchase.
The Exchange Debenture Indenture will contain certain covenants that, among
other things, will direct the application of the proceeds from certain asset
sales, limit the ability of Holdings and its subsidiaries to incur
indebtedness, make certain payments with respect to their capital stock, make
prepayments of certain indebtedness, make loans or investments to entities
other than Restricted Subsidiaries (as such term will be defined in the
Exchange Debenture Indenture), enter into transactions with affiliates, engage
in mergers or consolidations, and, with respect to Holdings' subsidiaries,
issue stock. Generally, these covenants will be no more restrictive than the
covenants contained in the Silgan Credit Agreement.
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed upon for
Holdings by Winthrop, Stimson, Putnam & Roberts, Financial Centre, 695 East
Main Street, Stamford, Connecticut 06904-6760. G. William Sisley, a partner in
Winthrop, Stimson, Putnam & Roberts, is Secretary of Holdings and Silgan.
Winthrop, Stimson from time to time represents certain of the Underwriters in
connection with certain legal matters unrelated to its representation of
Holdings. Certain legal matters are being passed upon for the Underwriters by
Shearman & Sterling, New York, New York. Shearman & Sterling has performed,
and will continue to perform, legal services for MSLEF II, Morgan Stanley and
companies controlled by MSLEF II and Morgan Stanley.
EXPERTS
The consolidated financial statements of Silgan Holdings Inc. at December
31, 1995 and 1994, and for each of the three years in the period ended
December 31, 1995 appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein and in the Registration Statement,
and are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
The financial statements of American National Can Company's Food Metal &
Specialty Division as of December 31, 1994 and 1993, and for each of the three
years in the period ended December 31, 1994, incorporated by reference in this
Prospectus and Registration Statement have been so incorporated in reliance on
the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
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AVAILABLE INFORMATION
Holdings is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports with the Securities and Exchange Commission (the
"Commission"). Reports filed by Holdings may be inspected without charge and
copied, upon payment of prescribed rates, at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Commission's regional offices located at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World
Trade Center, 13th Floor, New York, New York 10048. Copies of such materials
may be obtained from the web site that the Commission maintains at
http://www.sec.gov.
Holdings has filed with the Commission a registration statement on Form S-2
(together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended. This Prospectus does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is hereby
made to the Registration Statement.
----------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 33-28409)
pursuant to the Exchange Act are incorporated herein by reference:
1. Holdings' Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 (excluding the Financial Statements of Silgan Corporation
included therein);
2. Holdings' Annual Report on Form 10-K/A-1 for the fiscal year ended
December 31, 1995 (excluding the Financial Statements of Silgan Corporation
included therein);
3. Holdings' Annual Report on Form 10-K/A-2 for the fiscal year ended
December 31, 1995;
4. Holdings' Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1996;
5. Holdings' Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 1996;
6. Holdings' Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1996;
7. Holdings' Current Report on Form 8-K dated August 14, 1995, as amended
by Amendment to Current Report on Form 8-K/A dated October 16, 1995;
8. Holdings' Current Report on Form 8-K dated May 31, 1996;
9. Holdings' Current Report on Form 8-K dated August 2, 1996; and
10. Holdings' Current Report on Form 8-K dated September 16, 1996.
Holdings will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any or all of the
documents which are incorporated herein by reference, other than exhibits to
such information (unless such exhibits are specifically incorporated by
reference into such documents). Requests should be directed to: Silgan
Holdings Inc., 4 Landmark Square, Stamford, CT 06901, Attention: Chief
Financial Officer (Telephone Number (203) 975-7110).
Statements contained in this Prospectus as to the contents of any contract
or document are not necessarily complete, and in each instance reference is
made to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. Any statement contained in a document all or a portion of
which is incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified shall not be
deemed to constitute a part of this Prospectus except as so modified, and any
statement so superseded shall not be deemed to constitute part of this
Prospectus.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors............................................ F-2
Consolidated Balance Sheets at December 31, 1995 and 1994................. F-3
Consolidated Statements of Operations for the years ended December 31,
1995, 1994 and 1993...................................................... F-4
Consolidated Statements of Deficiency in Stockholders' Equity for the
years ended December 31, 1995, 1994 and 1993............................. F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1994 and 1993...................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
Condensed Consolidated Balance Sheets (Unaudited) at September 30, 1996
and 1995................................................................. F-27
Condensed Consolidated Statements of Operations (Unaudited) for the nine
months ended September 30, 1996 and 1995................................. F-28
Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine
months ended September 30, 1996 and 1995................................. F-29
Notes to Condensed Consolidated Financial Statements (Unaudited).......... F-30
Unaudited Pro Forma Condensed Statements of Operations for the nine months
ended September 30, 1996 and for the year ended December 31, 1995........ F-34
Notes of Unaudited Pro Forma Condensed Statements of Operations........... F-37
</TABLE>
F-1
<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, 1995 and 1994, 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, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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, 1995 and 1994, and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Notes 2 and 12 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, Connecticut
March 8, 1996, except for Note 20, as to which date is , 1997
The foregoing report is in the form that will be signed at the time of the
initial public offering described in Note 20 to the consolidated financial
statements.
Stamford, Connecticut
January 24, 1997
/s/ Ernst & Young LLP
F-2
<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 2,102 $ 2,682
Accounts receivable, less allowances for doubtful
accounts of $4,832 and $1,557 for 1995 and 1994,
respectively.......................................... 109,929 64,700
Inventories............................................ 210,471 122,429
Prepaid expenses and other current assets.............. 5,801 8,044
--------- ---------
Total current assets................................. 328,303 197,855
Property, plant and equipment, net....................... 487,301 251,810
Goodwill, net............................................ 53,562 30,009
Other assets............................................. 30,880 24,618
--------- ---------
$ 900,046 $ 504,292
========= =========
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable................................. $ 138,195 $ 36,845
Accrued payroll and related costs...................... 32,805 26,019
Accrued interest payable............................... 4,358 1,713
Other accrued expenses................................. 43,457 21,976
Bank working capital loans............................. 7,100 12,600
Current portion of long-term debt...................... 28,140 21,968
--------- ---------
Total current liabilities............................ 254,055 121,121
Long-term debt........................................... 750,873 510,763
Deferred income taxes.................................... 6,836 6,836
Other long-term liabilities.............................. 68,086 23,570
Deficiency in stockholders' equity:
Preferred stock; 10,000,000 shares authorized,
none issued and outstanding........................... -- --
Common stock ($0.01 par value per share; 100,000,000
shares authorized, 19,446,120 shares issued and
outstanding).......................................... 195 195
Additional paid-in capital............................. 33,423 33,423
Accumulated deficit.................................... (213,422) (191,616)
--------- ---------
Total deficiency in stockholders' equity................. (179,804) (157,998)
--------- ---------
$ 900,046 $ 504,292
========= =========
</TABLE>
See accompanying notes.
F-3
<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.................................. $1,101,905 $ 861,374 $ 645,468
Cost of goods sold......................... 970,491 748,290 571,174
---------- ---------- ----------
Gross profit............................. 131,414 113,084 74,294
Selling, general and administrative
expenses.................................. 46,848 37,997 32,495
Reduction in carrying value of assets...... 14,745 16,729 --
---------- ---------- ----------
Income from operations................... 69,821 58,358 41,799
Interest expense and other related
financing costs........................... 80,710 65,789 54,265
---------- ---------- ----------
Loss before income taxes................. (10,889) (7,431) (12,466)
Income tax provision....................... 5,100 5,600 1,900
---------- ---------- ----------
Loss before extraordinary charges and
cumulative effect of changes in
accounting principles................... (15,989) (13,031) (14,366)
Extraordinary charges relating to early
extinguishment of debt.................... (5,817) -- (1,341)
Cumulative effect of changes in accounting
principles................................ -- -- (6,276)
---------- ---------- ----------
Net loss................................. $ (21,806) $ (13,031) $ (21,983)
========== ========== ==========
Net loss per common share:
Loss before extraordinary charges and
cumulative effect of accounting
changes................................. $ (0.77) $ (0.63) $ (0.87)
Extraordinary charges.................... (0.29) -- (0.08)
Cumulative effect of accounting changes.. -- -- (0.38)
---------- ---------- ----------
Net loss................................. $ (1.06) $ (0.63) $ (1.33)
========== ========== ==========
Weighted average number of common and
common equivalent shares outstanding...... 20,647,599 20,647,599 16,469,928
========== ========== ==========
</TABLE>
See accompanying notes.
F-4
<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
----------------
TOTAL
ADDITIONAL DEFICIENCY IN
PAR PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES VALUE CAPITAL DEFICIT EQUITY
---------- ----- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1992................... 885,000 $ 9 $18,609 $(156,602) $(137,984)
Adjustment for 17.133145
for 1 stock split...... 14,277,833 143 (143) -- --
---------- ---- ------- ---------- ---------
As restated at December
31, 1992 for stock
split.................. 15,162,833 152 18,466 (156,602) (137,984)
Issuance of 250,000
shares of Class B
Common Stock........... 4,283,287 43 14,957 -- 15,000
Net loss................ -- -- -- (21,983) (21,983)
---------- ---- ------- ---------- ---------
Balance at December 31,
1993................... 19,446,120 195 33,423 (178,585) (144,967)
Net loss................ -- -- -- (13,031) (13,031)
---------- ---- ------- ---------- ---------
Balance at December
31,1994................ 19,446,120 195 33,423 (191,616) (157,998)
Net loss................ -- -- -- (21,806) (21,806)
---------- ---- ------- ---------- ---------
Balance at December 31,
1995................... 19,446,120 $195 $33,423 $(213,422) $(179,804)
========== ==== ======= ========== =========
</TABLE>
See accompanying notes.
F-5
<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss...................................... $ (21,806) $(13,031) $ (21,983)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation................................. 42,217 35,392 31,607
Amortization................................. 8,083 7,075 5,488
Accretion of discount on discount
debentures.................................. 28,672 27,477 24,167
Reduction in carrying value of assets........ 14,745 16,729 --
Extraordinary charges relating to early
extinguishment of debt...................... 6,301 -- 1,341
Cumulative effect of changes in accounting
principles.................................. -- -- 6,276
Changes in assets and liabilities, net of
effect of acquisitions:
(Increase) decrease in accounts receivable.. (1,011) (21,267) 707
Decrease (increase) in inventories.......... 10,852 (16,741) (4,316)
Increase in trade accounts payable.......... 43,108 4,478 3,757
Net working capital provided by AN Can since
acquisition date........................... 85,213 -- --
Other, net (decrease) increase.............. (6,745) 7,221 1,091
--------- -------- ---------
Total adjustments.......................... 231,435 60,364 70,118
--------- -------- ---------
Net cash provided by operating activities.... 209,629 47,333 48,135
--------- -------- ---------
Cash flows from investing activities:
Acquisition of ANC's Food Metal & Specialty
business..................................... (348,762) -- --
Acquisition of Del Monte Can manufacturing
assets....................................... -- 519 (73,865)
Capital expenditures.......................... (51,897) (29,184) (42,480)
Proceeds from sale of assets.................. 3,541 765 262
--------- -------- ---------
Net cash used in investing activities........ $(397,118) $(27,900) $(116,083)
--------- -------- ---------
Cash flows from financing activities:
Borrowings under working capital loans........ $ 669,260 $393,250 $ 328,050
Repayments under working capital loans........ (674,760) (382,850) (366,250)
Proceeds from issuance of long-term debt...... 450,000 -- 140,000
Proceeds from issuance of common stock........ -- -- 15,000
Repayments of long-term debt.................. (234,506) (20,464) (42,580)
Debt financing costs.......................... (19,290) -- (8,935)
Payments to former shareholders of Silgan..... (3,795) (6,911) --
--------- -------- ---------
Net cash provided (used) by financing
activities................................... 186,909 (16,975) 65,285
--------- -------- ---------
Net increase (decrease) in cash and cash
equivalents................................... (580) 2,458 (2,663)
Cash and cash equivalents at beginning of
year.......................................... 2,682 224 2,887
--------- -------- ---------
Cash and cash equivalents at end of year....... $ 2,102 $ 2,682 $ 224
========= ======== =========
Supplementary data:
Interest paid................................. $ 45,293 $ 30,718 $ 25,733
Income taxes paid, net of refunds............. 8,967 2,588 722
</TABLE>
See accompanying notes.
F-6
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
1. BASIS OF PRESENTATION
Silgan Holdings Inc. ("Holdings", together with its wholly-owned
subsidiaries, the "Company") 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."). Holdings owns all of the
outstanding common stock of Silgan Corporation ("Silgan"). Since 1993, Silgan
has made two significant acquisitions. Silgan acquired the U.S. metal
container manufacturing business of Del Monte Corporation ("Del Monte") in
1993 and it acquired the Food Metal and Specialty business from American
National Can Company ("ANC") in 1995. Both acquisitions were accounted for
using the purchase method of accounting (see Note 3--Acquisitions).
The Company, through Silgan Containers Corporation ("Containers") and Silgan
Plastics Corporation ("Plastics"), is predominantly engaged in the manufacture
and sale of steel and aluminum containers for human and pet food products and
also manufactures custom designed plastic containers used for health and
personal care products. Principally, all of the Company's businesses are based
in the United States. Foreign subsidiaries are not significant to the
consolidated results of operations or financial position of the Company.
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 statement amounts are translated at the average
of monthly exchange rates.
Certain reclassifications have been made to prior year's financial
statements to conform with current year presentation. In addition, share and
per share information have been adjusted to give effect to the proposed
amendment to Holdings' Restated Certificate of Incorporation and the Stock
Split (see Note 20--Subsequent Events).
CASH AND CASH EQUIVALENTS
Cash equivalents represent short-term, highly liquid investments having
original maturities of three months or less from the time of purchase. The
carrying values of these assets approximate their fair values. As a result of
the Company's cash management system, checks issued and presented to the banks
for payment may create negative cash balances. Checks outstanding in excess of
related cash balances totaling approximately $30.0 million at December 31,
1995 and $5.4 million at December 31, 1994 are included in trade accounts
payable.
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).
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at historical cost less accumulated
depreciation. Major renewals and betterments that extend the life of an asset
are capitalized and repairs and maintenance expenditures are charged to
expense as incurred. Depreciation is computed using the straight-line
F-7
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
method over their estimated useful lives. The principal estimated useful lives
are 35 years for buildings and range between 3 to 18 years for machinery and
equipment. Leasehold improvements are amortized over the shorter of the life
of the related asset or the life of the lease.
GOODWILL
The Company has classified as goodwill the cost in excess of fair value of
net assets acquired in purchase transactions. Goodwill is stated at cost less
accumulated amortization. Amortization is computed on a straight-line basis
over periods ranging from 20 to 40 years. The Company periodically evaluates
the existence of goodwill impairment to access 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 reduction in values were to occur.
OTHER ASSETS
Other assets consist principally of debt issuance costs which are being
amortized on a straight-line basis over the terms of the related debt
agreements (5 to 10 years). Other intangible assets are amortized over their
expected useful lives using the straight-line method.
INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standard ("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.
POSTEMPLOYMENT BENEFITS
During 1993, the Company adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits". SFAS No. 112 requires accrual accounting for
employee benefits that are paid between the termination of active employment
but prior to retirement. Such benefits include salary continuation,
disability, severance, and health care. 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 for this charge due to the net operating loss position
of the Company.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts for cash, accounts receivable, accounts payable, and
other accrued liabilities are reflected in the financial statements and
reasonably approximate fair value due to the short maturity of these items.
The carrying value for short and long-term debt also approximates fair value
but may vary due to changing market conditions. Methods and assumptions used
to estimate fair value and the fair value of the Company's debt instruments
are disclosed in Note 9.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets
F-8
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
and liabilities, revenues and expenses, as well as footnote disclosures in the
financial statements. Actual results may differ from those estimates.
PER SHARE DATA
Per share data is based upon the weighted average number of common and
common equivalent shares outstanding for all periods presented. Weighted
average shares include options to purchase shares which were issued within the
twelve month period prior to the initial public offering at less than the
initial public offering price.
3. ACQUISITIONS
During the three years ended December 31, 1995, the Company made two
acquisitions, as discussed below. Both were accounted for using the purchase
method of accounting and the results of operations have been included with the
Company's results from the respective acquisition dates. The excess of the
purchase price over the fair value of net assets acquired was allocated to
goodwill.
FISCAL YEAR 1995 ACQUISITION
On August 1, 1995, Containers acquired from ANC substantially all of the
fixed assets and working capital, and assumed certain specified limited
liabilities, of ANC's Food Metal & Specialty business ("AN Can"), which
manufactures, markets and sells metal food containers and rigid plastic
containers for a variety of food products and metal caps and closures for food
and beverage products. The purchase price for the assets acquired and the
assumption of certain specified liabilities, including related transaction
costs, was $364.0 million (including $15.2 million for the operations of ANC's
St. Louis, MO facility which the Company intends to purchase by mid-1996 upon
completion of a rationalization project undertaken at that location).
The purchase price was allocated to the tangible and identifiable assets
acquired and liabilities assumed based upon their estimated fair values as
determined from preliminary appraisals and valuations which management
believes are reasonable. The purchase price allocation will be finalized
within one year of the acquisition date. Differences between actual and
preliminary valuations will cause adjustments to the AN Can purchase price
allocation as shown below. Estimated items subject to change include employee
benefit costs and termination costs associated with plant rationalization and
administrative workforce reductions and other plant exit costs. The aggregate
purchase price and its preliminary allocation to the assets and liabilities is
as follows for AN Can (dollars in thousands):
<TABLE>
<S> <C>
Net working capital acquired..................................... $155,967
Property, plant and equipment.................................... 240,079
Goodwill......................................................... 24,832
Other liabilities assumed........................................ (56,916)
--------
$363,962
========
</TABLE>
Set forth below are the Company's summary unaudited pro forma results of
operations for the years ended December 31, 1995 and 1994. The pro forma
results include the historical results of the Company and AN Can and reflect
the effect of purchase accounting adjustments based on preliminary appraisals
and valuations, the financing of the acquisition, the refinancing of the
Company's debt obligations, and certain other adjustments as if these events
occurred as of the beginning of the periods presented. The pro forma results
of operations do not give effect to adjustments for decreased costs from
manufacturing synergies resulting from the integration of AN Can with
Containers' existing can manufacturing operations and benefits the Company may
realize as a result of its planned rationalization of plant operations. Pro
forma adjustments have not been made to interest expense for
F-9
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
the years ended December 31, 1995 and 1994 for the subsequent events discussed
in Note 20. The pro forma data does not purport to represent what the
Company's results of operations actually would have been if the operations
were combined as of January 1, 1995 or 1994, or to project the Company's
results of operations for any future period.
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net sales............... $ 1,404,382 $ 1,457,968
Income from operations.. 92,749(1) 54,886(2)
Income (loss) before
income taxes........... 4,064 (34,636)
Net loss................ (2,736) (36,536)
Net loss per share...... $ (0.13) $ (1.77)
=========== ===========
</TABLE>
- --------
(1) Included in pro forma income from operations for the year ended December
31, 1995 is a charge incurred by the Company of $14.7 million to adjust
the carrying value of certain underutilized machinery and equipment at
Silgan facilities (existing prior to the AN Can acquisition) to net
realizable value.
(2) Included in pro forma income from operations for the year ended December
31, 1994 are charges incurred by AN Can of $10.1 million for shut down
costs necessary to realign the assets of the business more closely with
the existing customer base, $16.7 million related to Silgan and $7.1
million related to AN Can to adjust the carrying value of certain
technologically obsolete and inoperable equipment to realizable value, and
$26.7 million for the write-down of goodwill by AN Can.
FISCAL YEAR 1993 ACQUISITION
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 ("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
detail of the assets acquired is as follows (dollars in thousands):
<TABLE>
<S> <C>
Net working capital............................................... $21,944
Property, plant and equipment..................................... 47,167
Goodwill.......................................................... 13,729
Other liabilities assumed......................................... (9,494)
-------
$73,346
=======
</TABLE>
4. INVENTORIES
The components of inventories at December 31, 1995 and 1994 consist of the
following:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Raw materials.................................. $ 46,027 $ 38,575
Work-in-process................................ 24,869 19,045
Finished goods................................. 135,590 63,409
Spare parts and other.......................... 6,344 1,621
----------- -----------
212,830 122,650
Adjustment to value inventory at cost on the
LIFO method................................... (2,359) (221)
----------- -----------
$ 210,471 $ 122,429
=========== ===========
</TABLE>
F-10
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
The amount of inventory recorded on the first-in first-out method at
December 31, 1995 and 1994 was $14.9 million and $6.5 million, respectively.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant, and equipment consist of the following:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land............................................. $ 6,355 $ 3,707
Buildings and improvements....................... 68,860 51,665
Machinery and equipment.......................... 584,526 346,061
Construction in progress......................... 33,764 18,124
----------- -----------
693,505 419,557
Accumulated depreciation and amortization........ (206,204) (167,747)
----------- -----------
Property, plant and equipment, net............. $ 487,301 $ 251,810
=========== ===========
</TABLE>
For the years ended December 31, 1995, 1994, and 1993, depreciation expense
was $42.2 million, $35.4 million, and $31.6 million, respectively. The total
amount of repairs and maintenance expense was $26.9 million in 1995, $19.9
million in 1994, and $17.1 million in 1993.
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 the industry. The change had the effect of decreasing
depreciation expense and increasing net income in 1994 by approximately $1.3
million.
Based upon a review of its depreciable assets, the Company determined that
certain adjustments were necessary to properly reflect net realizable values.
In 1995, the Company recorded a write-down of $14.7 million for the excess of
carrying value over estimated realizable value of machinery and equipment at
existing facilities which have become underutilized due to excess capacity. In
1994, charges of $16.7 million were recorded which included $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 for technologically
obsolete and inoperable machinery and equipment.
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" which is
effective for the 1996 fiscal year. As required by this standard, impairment
losses will be recognized when events or changes in circumstances indicate
that the fair value of identified assets is less than the carrying amount. In
making such a determination, the Company will compare the undiscounted cash
flows generated by specified assets to the carrying value of such assets. The
Company will adopt SFAS No. 121 in 1996 and believes the effect of adoption
will not be material.
6. GOODWILL
Goodwill amortization charged to operations was $1.3 million in 1995; $1.2
million in 1994; and $0.5 million in 1993. Accumulated amortization of
goodwill at December 31, 1995, 1994, and 1993 was $5.0 million; $3.7 million;
and $2.5 million, respectively.
F-11
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
7. OTHER ASSETS
Other assets at December 31, 1995 and 1994 consist of the following:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Debt issuance costs.............................. $ 30,148 $ 25,142
Other............................................ 8,027 8,275
----------- -----------
38,175 33,417
Less: accumulated amortization................... (7,295) (8,799)
----------- -----------
$ 30,880 $ 24,618
=========== ===========
</TABLE>
During 1995, as part of the acquisition of AN Can and the related
refinancing of its secured debt facilities and its Discount Debentures, the
Company wrote off $6.3 million of unamortized debt issuance costs and
capitalized $19.3 million in new debt issuance costs. Amortization expense
relating to debt issuance for the years ended December 31, 1995, 1994, and
1993 was $4.9 million, $5.3 million, and $3.3 million, respectively.
8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
The Company has a working capital revolving credit facility which it uses to
finance its seasonal liquidity needs. As of December 31, 1995 and 1994, the
Company had $7.1 million and $12.6 million of working capital loans
outstanding, respectively.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Bank A Term Loans................................ $ 220,000 $ 39,845
Bank B Term Loans................................ 222,750 79,691
Senior Secured Floating Rate Notes due June 30,
1997............................................ -- 50,000
11 3/4% Senior Subordinated Notes due June 15,
2002............................................ 135,000 135,000
13 1/4% Senior Subordinated Debentures due
December 15, 2002............................... 201,263 228,195
----------- -----------
779,013 532,731
Less: Amounts due within one year................ 28,140 21,968
----------- -----------
$ 750,873 $ 510,763
=========== ===========
</TABLE>
The aggregate annual maturities of long-term debt at December 31, 1995 are
as follows (dollars in thousands):
<TABLE>
<S> <C>
1996................................ $ 28,140
1997................................ 37,170
1998................................ 52,138
1999................................ 52,138
2000................................ 102,281
2001 and thereafter................. 507,146
--------
$779,013
========
</TABLE>
F-12
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
1995 BANK CREDIT AGREEMENT
Effective August 1, 1995, Silgan, Containers, and Plastics entered into a
$675.0 million credit agreement (the "Credit Agreement") with various banks to
finance the acquisition by Containers of AN Can, to refinance and repay in
full all amounts owing under the previous bank credit agreement and the Senior
Secured Notes and to repurchase up to $75.0 million of its 13 1/4% Senior
Discount Debentures due 2002 (the "Discount Debentures"). In connection with
the refinancing of the Credit Agreement, the Company incurred a charge of $5.8
million (net of taxes of $2.6 million) in 1995 for the early extinguishment of
amounts owed under existing secured debt facilities and for the repurchase of
a portion of its Discount Debentures.
The Credit Agreement provided the Company with (i) $225.0 million of A Term
Loans, (ii) $225.0 million of B Term Loans, and (iii) a working capital
revolving credit facility of up to $225.0 million ("Working Capital Loans").
The Company used proceeds from the Credit Agreement to repay $117.1 million of
term loans under the previous bank credit agreement, repay in full $50.0
million of its Senior Secured Notes due 1997, acquire AN Can for $348.8
million (excluding $15.2 million for the St. Louis operations which the
Company expects to purchase by mid-1996), repurchase $57.6 million of its
Discount Debentures, and incur debt issuance costs of $19.3 million. The
Company is currently permitted under the debt facilities to make additional
repurchases of its Discount Debentures prior to June 30, 1996.
The A Term Loans mature on December 31, 2000, and the B Term Loans mature on
March 15, 2002. During 1995, principal repayments of $5.0 million were made on
the A Term Loans and $2.3 million on the B Term Loans. Principal is to be
repaid on each term loan in installments in accordance with the Credit
Agreement until maturity.
As defined in the Credit Agreement, the Company is required to repay the
term loans (ratably allocated between the A Term Loans and the B Term Loans)
in an amount equal to 80% of the net sale proceeds from certain asset sales
and up to 100% of the net equity proceeds from certain sales of equity.
Effective for the year ended December 31, 1996 and each year thereafter during
the term of the Credit Agreement, the Company is required to pre-pay the term
loans (ratably allocated between the A Term Loans and the B Term Loans) in an
amount equal to 50% of the Company's excess cash flow. Amounts repaid under
the term loans cannot be reborrowed.
The Credit Agreement provides Containers and Plastics, together, a revolving
credit facility of $225.0 million for working capital needs. The commitment
under the Credit Agreement for Working Capital Loans was initially $150.0
million. This initial commitment will increase at the time and by the amount
the Company repurchases its Discount Debentures (up to a maximum commitment of
$225.0 million). As of December 31, 1995, Holdings had repurchased $57.6
million of Discount Debentures, thereby increasing the commitment under the
revolving credit facility to $207.6 million. After taking into account
outstanding letters of credit of $6.6 million and Working Capital Loans of
$7.1 million, the borrowings available under the revolving credit facility
were $193.9 million at December 31, 1995. In addition to borrowings of Working
Capital Loans, the Company may utilize up to a maximum of $20.0 million in
letters of credit as long as the aggregate amount of borrowings and letters of
credit do not exceed the amount of the commitment. The aggregate amount of
Working Capital Loans and letters of credit which may be outstanding at any
time is also limited to the aggregate of 85% of eligible accounts receivable
and 50% of eligible inventory. Working Capital Loans may be borrowed, repaid,
and reborrowed over the life of the Credit Agreement until final maturity on
December 31, 2000.
F-13
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
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 higher of (i) 1/2 of 1% in excess of Adjusted Certificate of Deposit
Rate, or (ii) Bankers Trust Company's prime lending rate. Base Rate borrowings
bear interest at the Base Rate plus 1.50%, in the case of A Term Loans and
Working Capital Loans; and 2.0%, in the case of B Term Loans. Eurodollar Rate
borrowings bear interest at the Eurodollar Rate plus 2.50% in the case of A
Term Loans and Working Capital Loans; and 3.0%, in the case of B Term Loans.
At December 31, 1995, the interest rate for Base Rate borrowings was 10.0% and
the interest rate for Eurodollar Rate borrowings ranged between 8.1875% and
8.9375%.
For 1995, 1994 and 1993, respectively, the average amount of borrowings of
Working Capital Loans was $67.6 million, $14.4 million and $51.9 million; the
average annual interest rate paid on such borrowings was 8.9%, 8.4%, and 6.0%;
and the highest amount of such borrowings at any month-end was $184.0 million,
$43.9 million, and $80.3 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 revolving credit facility as well as a 2.75% 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 real and personal property of the Borrowers. 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, investments, 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.
1993 BANK CREDIT AGREEMENT
Effective December 21, 1993, Silgan, Containers, and Plastics entered into a
credit agreement with a group of banks for $140.0 million in term loans and
$70.0 million in working capital loans to finance in part the acquisition of
DM Can and repay $41.6 million of term loans owed under a previous bank credit
agreement. In addition, Holdings issued and sold 250,000 shares of its Class B
Common Stock for $15.0 million and, in turn, contributed such amount to
Silgan. As a result of the early extinguishment of debt, the Company incurred
a net charge of $1.3 million.
According to the terms of this bank credit agreement, 80% of amounts
received from the sale or disposal of assets was to be used to repay term
loans. Prior to the refinancing and repayment of this bank facility, an
additional principal payment of $2.5 million was made early in 1995 from net
proceeds received from asset sales.
SENIOR SECURED FLOATING RATE NOTES
The Company redeemed its Senior Secured Notes on August 30, 1995 for a
premium of $0.1 million.
F-14
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
11 3/4% SENIOR SUBORDINATED NOTES
The Company's 11 3/4% Senior Subordinated Notes (the "11 3/4% Notes") which
mature on June 15, 2002, represent unsecured general obligations, subordinate
in right of payment to obligations of the Company under the Credit Agreement
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:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PERCENTAGE
---- ----------
<S> <C>
1997.............................. 105.8750%
1998.............................. 102.9375%
1999 and thereafter............... 100.0000%
</TABLE>
The 11 3/4% Notes Indenture contains covenants which are comparable to or
less restrictive than those under the terms of the existing Credit Agreement.
13 1/4% SENIOR DISCOUNT DEBENTURES
The 13 1/4% Senior 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%. During the year ended December 31, 1995, the Company repurchased
$61.7 million face amount of its Discount Debentures for $57.6 million,
including a premium of $2.0 million. The carrying amount at December 31, 1995
of the Discount Debentures represents the face amount less an unamortized
discount of $12.1 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 Debentures Indenture contains covenants which are comparable to
or less restrictive than those under the Credit Agreement and the 11 3/4%
Notes.
9. FAIR VALUE 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 fair value due to the short
duration of those investments.
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.
F-15
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
The following table presents the carrying amounts and fair values of the
Company's financial instruments recorded at December 31, 1995 and 1994,
respectively:
<TABLE>
<CAPTION>
1995 1994
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Working Capital Facility............... $ 7,100 $ 7,100 $ 12,600 $ 12,600
Current Portion of long-term debt...... 28,140 28,140 21,968 21,968
Bank A Term Loans...................... 220,000 220,000 39,845 39,845
Bank B Term Loans...................... 222,750 222,750 79,691 79,691
Senior Secured Floating Rate Notes due
June 30, 1997......................... -- -- 50,000 50,000
11 3/4% Senior Subordinated Notes due
June 15, 2002......................... 135,000 144,500 135,000 140,400
13 1/4% Senior Subordinated Debentures
due December 15, 2002................. 201,263 205,873 228,195 235,100
</TABLE>
The Company has had limited involvement with derivative financial
instruments and does not use them for trading purposes. During 1995 and 1994,
the Company was not party to any interest rate hedge agreements, nor did it
use derivative instruments to hedge commodity or foreign exchange risks.
Subsequent to December 31, 1995, the Company entered into interest rate swap
agreements in order to manage its exposure to interest rate fluctuations.
These agreements effectively convert interest rate exposure from variable rate
to a fixed rate without the exchange of the underlying principal amounts. The
Company has agreed to pay fixed rates of interest ranging from 8.1% to 8.6% on
notional principal amounts totaling $100.0 million which mature in the year
1999. Net payments or receipts under these agreements will be recorded as
adjustments to interest expense.
CONCENTRATION OF CREDIT RISK
The Company derives a significant portion of its revenue from multi-year
supply agreements with many of its customers. Revenues from its two largest
customers accounted for approximately 36.0% of sales in 1995 and 47.3% in
1994. The receivable balances from these customers collectively represented
28.2% and 34.4% of accounts receivable before allowances at December 31, 1995
and 1994, respectively. As is common in the packaging industry, the Company
provides extended payment terms for some of its customers due to the
seasonality of the vegetable and fruit pack business. Exposure to losses is
dependent on each customer's financial position. The Company performs ongoing
credit evaluations of its customer's financial condition and its receivables
are not collateralized. The Company maintains an allowance for doubtful
accounts which management believes is adequate to cover potential credit
losses based on customer credit evaluations, collection history, and other
information.
F-16
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
10. COMMITMENTS
The Company has a number of noncancelable operating leases for office and
plant facilities, equipment and automobiles that expire at various dates
through 2020. Certain operating leases have renewal options. Minimum future
rental payments under these leases are (dollars in thousands):
<TABLE>
<S> <C>
1996................................. $13,442
1997................................. 10,768
1998................................. 7,973
1999................................. 5,778
2000................................. 4,928
2001 and thereafter.................. 7,159
-------
$50,048
=======
</TABLE>
Rent expense was approximately $10.8 million in 1995; $9.1 million in 1994;
and $8.0 million in 1993.
11. 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.
Pension benefits are provided 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.
The following table sets forth the funded status of the Company's retirement
plans as of December 31:
<TABLE>
<CAPTION>
PLANS IN WHICH PLANS IN WHICH
ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS
--------------- ----------------
1995 1994 1995 1994
------- ------ ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligations............ $12,135 $9,182 $31,465 $19,876
Non-vested benefit obligations........ 547 871 3,158 1,889
------- ------ ------- -------
Accumulated benefit obligations......... 12,682 10,053 34,623 21,765
Additional benefits due to future salary
levels................................. 5,667 5,358 7,132 3,557
------- ------ ------- -------
Projected benefit obligations........... 18,349 15,411 41,755 25,322
Plan assets at fair value............... 12,988 11,612 23,535 17,249
------- ------ ------- -------
Projected benefit obligation in excess
of plan assets......................... 5,361 3,799 18,220 8,073
Unrecognized actuarial gain (loss)...... (165) 504 1,237 3,916
Unrecognized prior service costs........ (615) (665) (2,128) (2,461)
Additional minimum liability............ -- -- 1,990 1,677
------- ------ ------- -------
Accrued pension liability recognized in
the balance sheet...................... $ 4,581 $3,638 $19,319 $11,205
======= ====== ======= =======
</TABLE>
F-17
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
As of the AN Can acquisition date, the Company assumed an accrued pension
liability of $6.8 million related to the active employee population
transferred to the Company from AN Can. Under the terms of the acquisition,
ANC retained the liability for the retired population as of August 1, 1995.
For certain pension plans with accumulated benefits in excess of plan assets
at December 31, 1995 and December 31, 1994, the balance sheet reflects an
additional minimum pension liability and related intangible asset of $2.0
million and $1.7 million, respectively,
The components of net periodic pension costs for defined benefit plans are
as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost.................................... $ 3,067 $ 2,947 $ 1,809
Interest cost................................... 3,887 3,334 2,144
Actual loss (return) on assets.................. (7,284) 539 (1,784)
Net amortization and deferrals.................. 5,008 (2,698) 317
------- ------- -------
Net periodic pension cost..................... $ 4,678 $ 4,122 $ 2,486
======= ======= =======
</TABLE>
During 1995, the Company recognized settlement and curtailment losses of
$0.4 million from the termination of participation in certain plans as a
result of plant closings and changes in pension benefit provisions. The
Company participates in several multi-employer pension plans which provide
defined benefits to certain of its union employees. The composition of total
pension cost for 1995, 1994, and 1993 in the Consolidated Statements of
Operations is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net periodic pension cost......................... $ 4,678 $ 4,122 $ 2,486
Settlement and curtailment losses, net............ 418 -- --
Contributions to multi-employer union plans....... 2,708 2,700 2,000
------- ------- -------
Total pension costs............................. $ 7,804 $ 6,822 $ 4,486
======= ======= =======
</TABLE>
The assumptions used in determining the actuarial present value of plan
benefit obligations as of December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Discount rate............................................... 7.5% 8.5% 7.5%
Weighted average rate of compensation increase.............. 4.0% 4.5% 4.5%
Expected long-term rate of return on plan assets............ 8.5% 8.5% 8.5%
</TABLE>
The Company also sponsors defined contribution pension and profit sharing
plans covering substantially all employees. Company contributions to these
plans are based upon employee contributions and operating profitability.
Contributions charged to income for these plans were $1.7 million in 1995;
$2.5 million in 1994; and $1.5 million in 1993. The decline in defined
contributions in 1995 as compared to 1994 resulted from lower profit-sharing
contributions made for Company employees since target financial objectives
were not achieved. This decrease was partially offset by an increase in the
contribution base attributable to additional employee participation as a
result of the acquisition of AN Can.
F-18
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
12. 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 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. Retiree health
benefits are paid as covered expenses are incurred.
The following table presents the funded status of the postretirement plans
and amounts recognized in the Company's balance sheet as of December 31:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees....................................... $ 1,587 $ 1,183
Fully eligible active plan participants........ 11,647 1,521
Other active plan participants................. 14,770 2,577
----------- ----------
Total accumulated postretirement benefit
obligation..................................... 28,004 5,281
Unrecognized net gain........................... (2,929) (219)
Unrecognized prior service costs................ (298) (79)
----------- ----------
Accrued postretirement benefit liability........ $ 24,777 $ 4,983
=========== ==========
</TABLE>
As of the AN Can acquisition date, the Company assumed a postretirement
benefit liability in the amount of $19.6 million for the active population
transferred to the Company from AN Can. Under the terms of the acquisition,
ANC retained the liability for the retired population as of August 1, 1995.
Net periodic postretirement benefit cost include the following components:
<TABLE>
<CAPTION>
1995 1994
------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Service cost....................................... $ 372 $ 321
Interest cost...................................... 1,097 412
Net amortization and deferral...................... 42 (14)
------------ ----------
Net periodic postretirement benefit cost......... $ 1,511 $ 719
============ ==========
</TABLE>
The weighted average discount rates used to determine the accumulated
postretirement benefit obligation as of December 31, 1995 and 1994 were 7.5%
and 8.5%, respectively. The net periodic postretirement benefit costs were
calculated using a discount rate ranging from 7.5% to 8.5% for 1995 and 8.5%
for 1994. The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation ranged from 7.14% to 10.0% in
1995 and was 14% in 1994, declining to a rate ranging from 5.0% to 6.0% in the
year 2003 and thereafter.
F-19
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
A 1% increase in the health care cost trend rate assumption would increase
the accumulated postretirement benefit obligation as of December 31, 1995 by
approximately $3.7 million and increase the aggregate of the service and
interest cost components of the net periodic postretirement benefit cost for
1995 by approximately $0.2 million.
13. INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current
Federal........................................ $ 500 $ 2,500 $ 300
State.......................................... 1,900 3,200 1,900
Foreign........................................ 100 (100) (400)
------- ------- -------
2,500 5,600 1,800
Deferred
Federal........................................ -- -- --
State.......................................... -- -- 100
Foreign........................................ -- -- --
------- ------- -------
-- -- 100
------- ------- -------
$ 2,500 $ 5,600 $ 1,900
======= ======= =======
</TABLE>
Income tax expense is included in the financial statements as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income before extraordinary charges.............. $ 5,100 $ 5,600 $ 1,900
Extraordinary charges............................ (2,600) -- --
------- ------- -------
$ 2,500 $ 5,600 $ 1,900
======= ======= =======
</TABLE>
The income tax provision varied from that computed by using the U.S.
statutory rate as a result of the following:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income tax benefit at the U.S. Federal income
tax rate..................................... $(3,811) $(2,601) $(4,363)
State and foreign tax expense net of Federal
income benefit............................... 1,820 2,015 1,235
Amortization of goodwill...................... 471 576 154
Losses with no benefit........................ 6,620 5,610 4,874
------- ------- -------
$ 5,100 $ 5,600 $ 1,900
======= ======= =======
</TABLE>
F-20
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
Deferred income taxes reflect the net tax effect 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:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation...................... $ 27,800 $ 21,900
Book over tax basis of assets acquired.......... 41,700 21,400
Other........................................... 3,900 4,100
----------- ----------
Total deferred tax liabilities................ 73,400 47,400
Deferred tax assets:
Book reserves not yet deductible for tax
purposes....................................... 56,300 24,800
Deferred interest on high yield obligations..... 25,100 21,300
Net operating loss carryforwards................ 35,600 26,200
Other........................................... 1,200 4,100
----------- ----------
Total deferred tax assets..................... 118,200 76,400
Valuation allowance for deferred tax assets..... 51,636 35,836
----------- ----------
Net deferred tax assets....................... 66,564 40,564
----------- ----------
Net deferred tax liabilities...................... $ 6,836 $ 6,836
=========== ==========
</TABLE>
The Company files a consolidated Federal income tax return. At December 31,
1995, the Company has net operating loss carryforwards of approximately $100.0
million which are available to offset future consolidated taxable income of
the group and expire from 2001 through 2010. The Company had an alternative
minimum tax liability of $0.5 million in 1995 and $1.5 million in 1994. At
December 31, 1995, the Company had $3.9 million of alternative minimum tax
credits which are available indefinitely to reduce future tax payments for
regular federal income tax purposes.
14. ACQUISITION RESERVES
In connection with the acquisition of AN Can, the Company plans to improve
operating efficiencies through production and facility consolidation and
through workforce reductions. As part of its preliminary purchase price
allocation, the Company established a reserve for $25.0 million which
primarily consists of $20.5 million for severance and $4.5 million of facility
exit costs. The provision for severance includes employee termination
benefits, such as, salary continuation, pension, and medical. Plant exit costs
include planned expenditures relating to facility shut down, equipment
removal, and compliance with environmental regulations. During the year, $0.9
million of costs were expended for severance. As of December 31, 1995, $7.1
million remained in other accrued expenses for costs expected to be paid
within one year and $17.0 million remained in long term liabilities.
Management believes that the operating improvements will not be fully
implemented until 1997 and the remaining reserve balance will be adequate to
cover anticipated costs.
15. 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-21
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
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 411,196 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 the shares covered by the options for the Containers and
Plastics plans 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' 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
Containers, Containers has the right to repurchase, and the employee has the
right to require Containers to repurchase, the common stock at the then pro
forma book value.
At December 31, 1995, there were outstanding options for 411,196 shares
under the Holdings plan, 936 shares under the Containers plan and 1,200 shares
under the Plastics plan. The exercise prices per share range from $2.04 to
$3.54 for the Holdings options, range from $2,122 to $4,933 for the Containers
options and $126 to $993 for the Plastics options. The stock options and SARs
generally become exercisable ratably over a five-year period. At December 31,
1995, there were 318,677 options exercisable under the Holdings plans, 840
options/SARs exercisable under the Containers plan and 180 options/SARs
exercisable under the Plastics plan. For the years ended December 31, 1995,
1994, and 1993, no stock options or SARs were exercised. The Company incurred
charges relating to the vesting of benefits under the stock option plans of
$0.8 million in 1995; $1.5 million in 1994; and $0.2 million in 1993.
In the event of a public offering of any of Holdings' capital stock or a
change in control of Holdings, (i) the options granted by Containers and
Plastics pursuant to the plans and (ii) any stock issued upon exercise of such
options issued by Containers are convertible into either stock options or
common stock of Holdings, as the case may be. The conversion of such options
or shares will be based upon a valuation of Holdings and an allocation of such
value among the subsidiaries after giving affect to, among other things, that
portion of the outstanding indebtedness of Holdings allocable to each such
subsidiary.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation", effective for the 1996 fiscal year. Under SFAS No. 123,
compensation expense for all stock-based compensation plans would be
recognized based on the fair value of the options at the date of grant using
an option pricing model. As permitted under SFAS No. 123, the Company may
either adopt the new pronouncement or may continue to follow the current
accounting method as prescribed under APB. Opinion No. 25, "Accounting for
Stock Issued to Employees". The Company does not intend to adopt SFAS No. 123
for expense recognition purposes in 1996.
F-22
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
16. DEFICIENCY IN STOCKHOLDERS' EQUITY
Deficiency in stockholders' equity includes the following classes of common
stock ($.01 par value):
<TABLE>
<CAPTION>
SHARES
ISSUED AND OUTSTANDING
CLASS DECEMBER 31, 1995 AND 1994
----- --------------------------
<S> <C>
A............................................... 7,153,088
B............................................... 11,436,374
C............................................... 856,658
----------
19,446,120
==========
</TABLE>
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.
As discussed in Note 20, in connection with the proposed initial public
offering, Holdings will amend its Restated Certificate of Incorporation and
convert Class A, Class B and Class C Common Stock into Common Stock on a one
for one basis.
17. 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 Mr. Silver, the Chairman and Co-Chief Executive Officer and
Mr. Horrigan, the President and Co-Chief Executive Officer, of Holdings and
Silgan, S&H provides Holdings, Silgan 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
$5.4 million in 1995, $5.0 million in 1994, and $4.4 million in 1993 and was
allocated, based upon EBDIT, as a charge to operating income of each business
segment. Included in accounts payable at December 31, 1995 and 1994, was $0.1
million payable to S&H.
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 refinancings and bank credit agreements entered into
during 1995 and 1993, the banks thereunder (including Bankers Trust Company)
received fees totaling $17.2 million in 1995 and $8.1 million in 1993.
18. LITIGATION
In connection with the acquisition by Holdings of Silgan as of June 30, 1989
(the "Merger"), a decision was rendered in 1995 by the Delaware Court of
Chancery with respect to appraisal
F-23
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
proceedings filed by certain former stockholders of 5,702,760 shares of stock
of Silgan. Pursuant to that decision, these former holders were awarded $0.42
per share, plus simple interest at a rate of 9.5%. This award was less than
the amount, $0.46 per share, that these former holders would have received in
the Merger. The right of these former holders to appeal the Chancery Court's
decision has expired, and the Company has tendered payment of $3.8 million to
these former holders. In 1994, prior to the trial for appraisal, the Company
and the former holders of an additional 9,266,985 shares of stock of Silgan
agreed to a settlement in respect of their appraisal rights, and the Company
made a payment of $6.9 million, including interest, in respect of the
settlement.
With respect to a complaint filed by limited partners of The Morgan Stanley
Leveraged Equity Fund, L.P. against a number of defendants, including Silgan
and Holdings, all claims against Silgan and Holdings related to this action
were dismissed on January 14, 1993. The plaintiff's time to appeal the
dismissal of the claims against Holdings and Silgan expired following the
dismissal of the claims against certain other defendants in June 1995.
Other than the actions mentioned above, there are no other pending legal
proceedings to which the Company is a party or to which any of its properties
are subject which would have a material effect on the Company's financial
position.
19. 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):
<TABLE>
<CAPTION>
NET OPER. IDENTIFIABLE DEP.& CAPITAL
SALES PROFIT ASSETS AMORT. EXPEND.
-------- ------ ------------ ------ -------
<S> <C> <C> <C> <C> <C>
1995
Metal container &
specialty(1).............. $ 882.3 $58.2 (2) $736.7 $31.6 $32.5
Plastic container.......... 219.6 13.2 159.4 13.8 19.4
-------- ----- ------ ----- -----
Consolidated............. $1,101.9 $71.4 $896.1 $45.4 $51.9
======== ===== ====== ===== =====
1994
Metal container &
specialty(1).............. $ 657.1 $59.8 (3) $335.3 $23.1 $16.9
Plastic container.......... 204.3 (0.1)(3) 162.8 14.1 12.3
-------- ----- ------ ----- -----
Consolidated............. $ 861.4 $59.7 $498.1 $37.2 $29.2
======== ===== ====== ===== =====
1993
Metal container &
specialty(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
======== ===== ====== ===== =====
</TABLE>
- --------
(1) Specialty packaging sales include closures, plastic bowls, and paper
containers used by processors and packagers in the food industry and are
not significant enough to be reported as a separate segment.
(2) Includes charge for reduction in carrying value of assets of $14.7 million
for the metal container segment.
(3) Includes charges for reduction in carrying value of assets of $7.2 million
for the metal container segment and $9.5 million for the plastic container
segment, respectively.
F-24
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
Operating profit is reconciled to income before tax as follows (in
millions):
<TABLE>
<CAPTION>
1995 1994 1993
------ ----- ------
<S> <C> <C> <C>
Operating profit................................... $ 71.4 $59.7 $ 42.9
Interest expense................................... 80.7 65.8 54.3
Corporate expense.................................. 1.5 1.3 1.1
------ ----- ------
Loss before income taxes......................... $(10.8) $(7.4) $(12.5)
====== ===== ======
</TABLE>
Identifiable assets are reconciled to total assets as follows (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Identifiable assets................................... $896.1 $498.1 $490.4
Corporate assets...................................... 3.9 6.2 7.2
------ ------ ------
Total assets........................................ $900.0 $504.3 $497.6
====== ====== ======
</TABLE>
Metal container and other segment sales to Nestle Food Company accounted for
21.4%, 25.9% and 34.1%, of net sales of the Company during the years ended
December 31, 1995, 1994 and 1993, respectively. Similarly, sales to Del Monte
accounted for 14.5% and 21.4% of net sales of the Company during the years
ended December 31, 1995 and 1994, respectively.
20. SUBSEQUENT EVENTS
EXCHANGEABLE PREFERRED STOCK
On July 22, 1996, the Company issued 50,000 shares of 13 1/4% Exchangeable
Preferred Stock, mandatorily redeemable in 2006 ("Preferred Stock"), for net
proceeds of $47.8 million. The Company used $35.8 million of these proceeds to
purchase its Class B Common Stock held by Mellon Bank, as trustee for First
Plaza Group Trust, pursuant to the right the Company had to purchase such
stock under the Organization Agreement entered into as of December 21, 1993
among R. Philip Silver, D. Greg Horrigan, MSLEF II, BTNY, First Plaza and
Holdings. As of September 30, 1996, additional paid in capital was reduced by
$15.0 million, the original issuance amount received for the Class B Common
Stock, and the remainder of the payment was applied to Holdings' accumulated
deficit. Additionally, the balance of the proceeds received from the issuance
of Preferred Stock was used to redeem $12.0 million principal amount of
Discount Debentures.
REFINANCINGS
During 1996, the Company redeemed $154.4 million principal amount of
Discount Debentures at par. These redemptions were funded through the
borrowing of $125.0 million of additional B term loans under the Company's
Credit Agreement, excess proceeds of $12.0 million from the issuance of
Preferred Stock, and the borrowing of $17.4 million of working capital loans
under the Company's Credit Agreement. In connection with the early redemption
of the Discount Debentures, the Company incurred an extraordinary charge of
$2.1 million, net of tax, for the write-off of unamortized deferred financing
costs.
F-25
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
DECEMBER 31, 1995 1994 AND 1993
As a result of these refinancings, the aggregate annual maturities of long-
term debt of the Company are as follows (in thousands):
<TABLE>
<S> <C>
1996................................ $ 28,454
1997................................ 38,433
1998................................ 53,401
1999................................ 53,401
2000................................ 126,130
2001 and thereafter................. 460,923
--------
$760,742
========
</TABLE>
1996 ACQUISITION
On October 9, 1996, the Company acquired substantially all of the assets of
Finger Lakes Packaging, Inc. ("Finger Lakes"), a metal food container
manufacturer and a wholly-owned subsidiary of Curtice Burns Foods, Inc.
("Curtice Burns") for approximately $29.9 million. As part of the transaction,
the Company entered into a ten-year supply agreement with Curtice Burns to
supply all of the metal food container requirements of Curtice Burns' Comstock
Michigan Fruit and Brooks Foods divisions. For its fiscal year ended June 29,
1996, Finger Lakes had net sales of $48.8 million. The Company financed this
acquisition through working capital borrowings under its Credit Agreement.
PROPOSED INITIAL PUBLIC OFFERING
In connection with the proposed initial public offering ("IPO") of Holdings'
Common Stock, Holdings will amend its Restated Certificate of Incorporation to
change its authorized capital stock to 100,000,000 shares of Common Stock, par
value $.01 per share and 10,000,000 shares of preferred stock, par value $.01
per share. In addition, immediately prior to the closing of the IPO, the
existing Class A, Class B, and Class C Common Stock will be converted to
Common Stock on a one for one basis, and thereafter, Holdings will effect a
17.133145 for 1 stock split. The estimated net proceeds from the IPO will be
used to redeem Holdings' remaining Discount Debentures outstanding
(approximately $59.0 million) and to repay a portion of the bank term loans.
Share information and per share data have been adjusted to give effect to the
proposed amendment to Holdings' Restated Certificate of Incorporation and the
Stock Split.
Upon the closing of the IPO, the Company will recognize a non-cash charge of
approximately $21.1 million (assuming an initial public offering price of
$19.00 per share), net of $3.7 million previously accrued, for the excess of
the fair market value over the grant price of the variable stock options under
the Containers and Plastics option plans which convert to Holdings options. In
connection with the aforementioned transactions and the proposed IPO, the
Company will recognize an additional extraordinary charge of approximately
$0.7 million, net of tax, for the write-off of unamortized deferred financing
costs related to the early redemption of the remaining Discount Debentures.
F-26
<PAGE>
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPT. 30, SEPT. 30,
1996 1995
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 2,874 $ 3,860
Accounts receivable, net........................... 218,883 262,819
Inventories........................................ 190,690 196,584
Prepaid expenses and other current assets.......... 9,801 21,142
---------- ----------
Total current assets............................. 422,248 484,405
Property, plant and equipment, net................... 479,505 496,392
Goodwill, net........................................ 72,218 53,966
Other assets......................................... 32,208 32,491
---------- ----------
$1,006,179 $1,067,254
========== ==========
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable............................. $ 86,609 $ 96,159
Accrued payroll and related costs.................. 40,811 35,400
Accrued interest payable........................... 16,543 10,449
Accrued expenses and other current liabilities..... 32,496 35,719
Bank working capital loans......................... 126,000 184,000
Current portion of long-term debt.................. 28,454 7,250
---------- ----------
Total current liabilities........................ 330,913 368,977
Long-term debt....................................... 732,288 772,292
Deferred income taxes................................ 6,836 6,836
Other long-term liabilities.......................... 73,454 77,171
Cumulative exchangeable redeemable preferred stock... 51,307 --
Deficiency in stockholders' equity:
Common stock....................................... 152 195
Additional paid-in capital......................... 18,466 33,423
Accumulated deficit................................ (207,237) (191,640)
---------- ----------
Total deficiency in stockholders' equity............. (188,619) (158,022)
---------- ----------
$1,006,179 $1,067,254
========== ==========
</TABLE>
See accompanying notes.
F-27
<PAGE>
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------
SEPT. 30, SEPT. 30,
1996 1995
---------- ----------
<S> <C> <C>
Net sales............................................. $1,080,486 $ 811,505
Cost of goods sold.................................... 936,397 710,975
---------- ----------
Gross profit........................................ 144,089 100,530
Selling, general and administrative expenses.......... 42,411 31,095
---------- ----------
Income from operations.............................. 101,678 69,435
Interest expense and other related financing costs.... 68,286 57,722
---------- ----------
Income before income taxes.......................... 33,392 11,713
Income tax provision.................................. 3,000 5,900
---------- ----------
Income before extraordinary charge.................. 30,392 5,813
Extraordinary charge relating to early extinguishment
of debt,
net of taxes......................................... 2,089 5,837
---------- ----------
Net income (loss) before preferred stock dividend
requirement........................................ 28,303 (24)
Preferred stock dividend requirement.................. 1,307 --
---------- ----------
Net income (loss) available to common stockholders.. $ 26,996 $ (24)
========== ==========
Net income (loss) per common share:
Income before extraordinary charges................. $ 1.46 $ 0.28
Extraordinary charges............................... (0.11) (0.28)
---------- ----------
Net income per common share......................... $ 1.35 $ --
========== ==========
Weighted average number of common and common
equivalent shares outstanding........................ 19,952,928 20,647,599
========== ==========
</TABLE>
See accompanying notes.
F-28
<PAGE>
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------
SEPT. 30, SEPT. 30,
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)....................................... $ 28,303 $ (24)
Adjustments to reconcile net income (loss) to net cash
(used) provided by operating activities:
Depreciation........................................... 40,009 27,233
Amortization........................................... 6,803 5,321
Accretion of discount on discount debentures........... 12,077 21,931
Extraordinary charge relating to early extinguishment
of debt,
net of taxes.......................................... 2,089 5,837
Changes in assets and liabilities:
(Increase) in accounts receivable..................... (106,461) (55,512)
Decrease in inventories............................... 21,238 14,472
(Decrease) increase in trade accounts payable......... (51,586) 2,508
Net working capital used by AN Can from 8/1/95 to
9/30/95.............................................. -- (11,195)
Other, net............................................ (461) 6,193
--------- ---------
Total adjustments.................................... (76,292) 16,788
--------- ---------
Net cash (used) provided by operating activities....... (47,989) 16,764
--------- ---------
Cash flows from investing activities:
Acquisition of ANC's Food Metal & Specialty business.... (13,121) (347,052)
Capital expenditures.................................... (38,624) (30,414)
Proceeds from sale of assets............................ 1,521 3,398
--------- ---------
Net cash used in investing activities.................. (50,224) (374,068)
--------- ---------
Cash flows from financing activities:
Borrowings under working capital loans.................. 710,550 490,410
Repayments under working capital loans.................. (591,650) (333,672)
Proceeds from issuance of long-term debt................ 125,000 450,000
Repayment of long-term debt............................. (155,348) (227,256)
Proceeds from issuance of preferred stock............... 50,000 --
Repurchase of common stock.............................. (35,811) --
Debt issuance costs..................................... (3,756) (21,000)
--------- ---------
Net cash provided by financing activities.............. 98,985 358,482
--------- ---------
Net increase in cash and cash equivalents................ 772 1,178
Cash and cash equivalents at beginning of year........... 2,102 2,682
--------- ---------
Cash and cash equivalents at end of period............... $ 2,874 $ 3,860
========= =========
Supplementary data:
Interest paid........................................... $ 41,112 $ 23,017
Income taxes paid....................................... 568 8,592
Preferred stock issued in lieu of cash dividend......... 1,307 --
</TABLE>
See accompanying notes.
F-29
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AT SEPTEMBER 30, 1996 AND 1995 AND
FOR THE NINE 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 September 30, 1996 and 1995
and, the results of operations for the three and nine months ended September
30, 1996 and 1995, and the statements of cash flows for the nine months ended
September 30, 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 Holdings' financial statements and
notes included in its Annual Report on Form 10-K for the year ended December
31, 1995.
Certain reclassifications have been made to prior year's financial
statements to conform with current year presentation. In addition, share and
per share information have been adjusted to give effect to the proposed
amendment to Holdings' Restated Certificate of Incorporation and the Stock
Split (See Note 6--Subsequent Events).
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 nine months of 1996 as a result
of the adoption of SFAS No. 121.
In October 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123, "Accounting for Stock-Based Compensation", effective for the
1996 fiscal year. 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
continues to recognize compensation expense in accordance with APB No. 25.
2. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
SEPT. 30, SEPT. 30,
1996 1995
--------- ---------
<S> <C> <C>
Raw materials and supplies........................... $ 37,314 $ 39,675
Work-in-process...................................... 32,792 22,588
Finished goods....................................... 111,229 132,804
Spare parts and other................................ 7,663 6,345
-------- --------
188,998 201,412
Adjustment to value inventory at cost on the LIFO
Method.............................................. 1,692 (4,828)
-------- --------
$190,690 $196,584
======== ========
</TABLE>
F-30
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT SEPTEMBER 30, 1996 AND 1995 AND FOR THE NINE MONTHS THEN ENDED
IS UNAUDITED)
3. ACQUISITIONS
Set forth below is the Company's summary unaudited pro forma results of
operations for the nine months ended September 30, 1995. The unaudited pro
forma results of operations of the Company for the nine months ended September
30, 1995 include the historical results of the Company and the Food Metal &
Specialty business of American National Can Company ("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 September 30, 1995 reflect
the effect of purchase accounting adjustments based upon appraisals and
valuations, the financing of the acquisition of AN Can by the Company, the
refinancing of certain of the Company's debt obligations, and certain other
adjustments as if these events had occurred as of the beginning of 1995. The
pro forma adjustments are based upon available information and upon certain
assumptions that the Company believes are reasonable. The pro forma results of
operations do not give effect to adjustments for decreased costs from
manufacturing synergies resulting from the integration of AN Can with
Containers' existing can manufacturing operations and benefits the Company may
realize as a result of its planned rationalization of plant operations. Pro
forma adjustments have not been made to interest expense for the nine months
ended September 30, 1995 for the refinancings as described in Note 5 or for
the subsequent events discussed in Note 6. 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 (in thousands except per share data):
<TABLE>
<CAPTION>
PRO FORMA
SEPTEMBER 30, 1995
------------------
<S> <C>
Net sales............................................... $1,113,982
Income from operations.................................. 92,359
Income before income taxes.............................. 25,880
Net income.............................................. 16,155
Net income per common share............................. 0.78
</TABLE>
In connection with the acquisition of AN Can, the Company has finalized its
plant rationalization and integration plans. These plans consist primarily of
the closing or downsizing of certain manufacturing plants and the integration
of the selling, general, and administrative functions of the former AN Can
operations with the Company. The Company estimates that costs related to such
plans include approximately $6.6 million related to plant exit costs, $22.6
million related to employee severance and relocation costs, and $3.5 million
related to administrative workforce reductions. The timing of the plant
rationalizations, among other things, will be dependent on covenants in
existing labor agreements and accordingly these costs will be incurred during
the period from late 1996 through early 1998. Through September 30, 1996,
costs of $3.3 million related to administrative workforce reductions and
relocation were incurred.
During 1996, the purchase price allocation for the AN Can acquisition was
adjusted for differences between the actual and preliminary valuations for the
asset appraisals and for projected employee benefit costs as well as for a
revision in estimated costs of plant rationalizations, administrative
workforce reductions and other various matters. The final purchase price
allocation resulted in an adjustment to increase goodwill by $20.7 million.
4. EXCHANGEABLE PREFERRED STOCK
On July 22, 1996, the Company issued 50,000 shares of 13 1/4% Exchangeable
Preferred Stock ("Preferred Stock"), mandatorily redeemable in 2006, at $1,000
per share which represents the liquidation preference of the Preferred Stock.
The Company used $35.8 million of these proceeds to
F-31
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT SEPTEMBER 30, 1996 AND 1995 AND FOR THE NINE MONTHS THEN ENDED
IS UNAUDITED)
purchase its Class B Common Stock held by Mellon Bank, as trustee for First
Plaza Group Trust, pursuant to the right the Company had to purchase such
stock under the Organization Agreement entered into as of December 21, 1993
among R. Philip Silver, D. Greg Horrigan, MSLEF II, BTNY, First Plaza and
Holdings. As of September 30, 1996, additional paid in capital was reduced by
$15.0 million, the original issuance amount received for the Class B Common
Stock, and the remainder of the payment was applied to Holdings' accumulated
deficit. Additionally, the balance of the proceeds received from the issuance
of Preferred Stock was used to redeem $12.0 million principal amount of
Holdings' 13 1/4% Senior Discount Debentures due 2002 (the "Discount
Debentures").
The Preferred Stock holders are entitled to receive cumulative dividends at
13 1/4% per annum, which are payable quarterly in cash or, on or prior to July
15, 2000 at the sole option of the Company, in additional shares of Preferred
Stock. After July 15, 2000, dividends may be paid only in cash. As of
September 30, 1996, the Company accrued $1.3 million for a dividend on the
Preferred Stock, payable in additional shares of Preferred Stock issued on
October 15, 1996.
The Preferred Stock is exchangeable into Holdings' Subordinated Debentures
due 2006 (the "Exchange Debentures"), in whole but not in part, at the option
of the Company, subject to certain conditions. The Exchange Debentures will
bear interest at the dividend rate in effect with respect to the Preferred
Stock. Interest on the Exchange Debentures will be payable semi-annually and,
on or prior to July 15, 2000, the Company may pay such interest by issuing
additional Exchange Debentures. If by July 22, 1997 the Preferred Stock has
not been exchanged for Exchange Debentures, the dividend rate on the Preferred
Stock will increase by 0.5% per annum to 13 3/4% per annum until such exchange
occurs.
The Company is required to redeem the Preferred Stock or Exchange Debentures
on July 15, 2006, but may elect to redeem the Preferred Stock or Exchange
Debentures prior to this date for a redemption price (expressed as a
percentage of the liquidation preference of the Preferred Stock or principal
amount of the Exchange Debentures) set forth below, plus an amount equal to
all the accumulated and unpaid dividends or accrued and unpaid interest.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2000......................................................... 109.938%
2001......................................................... 106.625%
2002......................................................... 103.313%
2003 and thereafter.......................................... 100.000%
</TABLE>
In addition, all (but not less than all) of the outstanding Preferred Stock
or Exchange Debentures may be redeemed prior to July 15, 2000 for a redemption
price equal to 110% of the liquidation preference of the Preferred Stock plus
accrued and unpaid dividends, or 110% of the principal amount of the Exchange
Debentures plus accrued and unpaid interest, to the redemption date with the
proceeds of any sale of its common stock.
The holders of the Preferred Stock do not have voting rights except in
certain limited circumstances. The Company's Credit Agreement and various debt
indentures restrict the Company's ability to, among other things, pay
dividends, incur additional indebtedness, and purchase or redeem shares of
capital stock.
F-32
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT SEPTEMBER 30, 1996 AND 1995 AND FOR THE NINE MONTHS THEN ENDED
IS UNAUDITED)
5. REFINANCINGS
During 1996, the Company redeemed $154.4 million principal amount of
Discount Debentures at par. These redemptions were funded through the
borrowing of $125.0 million of additional B term loans under the Company's
Credit Agreement, excess proceeds of $12.0 million from the issuance of
Preferred Stock, and the borrowing of $17.4 million of working capital loans
under the Company's Credit Agreement. In connection with the early redemption
of the Discount Debentures, the Company incurred an extraordinary charge of
$2.1 million, net of tax, for the write-off of unamortized deferred financing
costs.
As a result of these refinancings, the aggregate annual maturities of long-
term debt of the Company are as follows (in thousands):
<TABLE>
<S> <C>
1996................................ $ 28,454
1997................................ 38,433
1998................................ 53,401
1999................................ 53,401
2000................................ 126,130
2001 and thereafter................. 460,923
--------
$760,742
========
</TABLE>
6. SUBSEQUENT EVENTS
1996 ACQUISITION
On October 9, 1996, the Company acquired substantially all of the assets of
Finger Lakes Packaging, Inc. ("Finger Lakes"), a metal food container
manufacturer and a wholly-owned subsidiary of Curtice Burns Foods, Inc.
("Curtice Burns") for approximately $29.9 million. As part of the transaction,
the Company entered into a ten-year supply agreement with Curtice Burns to
supply all of the metal food container requirements of Curtice Burns' Comstock
Michigan Fruit and Brooks Foods divisions. For its fiscal year ended June 29,
1996, Finger Lakes had net sales of $48.8 million. The Company financed this
acquisition through working capital borrowings under its Credit Agreement.
1997 PUBLIC OFFERING
In connection with the proposed initial public offering ("IPO") of Holdings'
Common Stock, Holdings will amend its Certificate of Incorporation to change
its authorized capital stock to 100,000,000 shares of Common Stock, par value
$.01 per share, and 10,000,000 shares of preferred stock, par value $.01 per
share. In addition, immediately prior to the closing of the IPO, the existing
Class A, Class B, and Class C Common Stock will be converted to Common Stock
on a one for one basis, and thereafter, Holdings will effect a 17.133145 for 1
stock split. The estimated net proceeds from the IPO will be used to redeem
Holdings' remaining Discount Debentures outstanding (approximately $59.0
million) and to repay a portion of the bank term loans. Share information and
per share data have been adjusted to give effect to the proposed amendment to
Holdings' Restated Certificate of Incorporation and the Stock Split.
Upon the closing of the IPO, the Company will recognize a non-cash charge of
approximately $21.1 million (assuming an initial public offering price of
$19.00 per share), net of $3.7 million previously accrued, for the excess of
fair market value over the grant price of the variable stock options under the
Containers and Plastics option plans which convert to Holdings options. In
addition, to the extent the net proceeds of the IPO are used as expected, the
Company will recognize an additional extraordinary charge of approximately
$0.7 million, net of tax, for the write-off of unamortized deferred financing
costs related to the early redemption of the remaining Discount Debentures.
F-33
<PAGE>
SILGAN HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
INTRODUCTORY NOTE
Set forth below is the Company's unaudited pro forma condensed statements of
operations for the nine months ended September 30, 1996 and the year ended
December 31, 1995. The unaudited pro forma results of operations of the
Company include the historical results of the Company for such periods and
give effect to certain pro forma adjustments.
The unaudited pro forma condensed statement of operations for the nine
months ended September 30, 1996 gives effect to (i) the sale of $70.3 million
of Common Stock offered hereby, (ii) the sale of $50.0 million of Exchangeable
Preferred Stock (and the planned exchange of the Exchangeable Preferred Stock
for Exchange Debentures), and (iii) the incurrence of $125.0 million of
additional B term loans in July 1996 and $17.4 million of working capital
loans in June 1996 under the Company's Credit Agreement, and the use of such
proceeds to redeem in full the remaining outstanding amount of Discount
Debentures, to purchase the Holdings' Class B Common Stock held by Mellon Bank
N.A. for $35.8 million and to repay $5.4 million of bank term loans, as if
such events had occurred as of January 1, 1996.
The unaudited pro forma condensed statement of operations for the fiscal
year ended December 31, 1995 gives effect to (i) the acquisition of AN Can,
(ii) borrowings under the Silgan Credit Agreement which were used to finance
the acquisition of AN Can, repay in full amounts owing under the Company's
previous credit agreement, and repay the Secured Notes, and (iii) (A) the sale
of $70.3 million of Common Stock offered hereby, (B) the sale of $50.0 million
of Exchangeable Preferred Stock (and the planned exchange of the Exchangeable
Preferred Stock for Exchange Debentures), and (C) the incurrence of $125.0
million of additional B term loans and $75.0 million of working capital loans
under the Silgan Credit Agreement, and the use of such proceeds to redeem in
full the outstanding amount of Discount Debentures, to purchase the Holdings
Class B Stock held by Mellon Bank N.A. for $35.8 million and to repay bank
term loans, as if such events had occurred as of January 1, 1995.
In conjunction with the acquisition of AN Can, pro forma adjustments have
been made to reflect reduced selling, general and administrative expenditures
realized as a result of the integration of sales, administrative and research
functions of the Company and AN Can. Depreciation, goodwill amortization, and
interest expense (including debt amortization) have also been adjusted for the
allocated cost of the acquisition of AN Can and its related financing. The pro
forma results of operations do not give effect to adjustments for decreased
costs from manufacturing synergies resulting from the integration of AN Can
with Containers' existing can manufacturing operations and benefits it may
realize as a result of the planned rationalization of its plant operations.
The Company will not begin to realize the benefit of the integration of the
can manufacturing facilities until 1997.
The unaudited pro forma financial data do not purport to represent what the
Company's financial position or results of operations would actually have been
had such transactions been completed at the beginning of the periods
presented, or to project the Company's financial position or results of
operations at any future date or for any future period. The unaudited pro
forma adjustments are based upon available information and upon certain
assumptions that the Company believes are reasonable. The unaudited pro forma
financial data and accompanying notes should be read in conjunction with the
historical financial information of Holdings, including notes thereto,
included elsewhere in this Prospectus.
F-34
<PAGE>
SILGAN HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-------------------------------------------------------
DEBT
HISTORICAL RECAPITALIZATION(a) OFFERING(b) PRO FORMA
---------- ------------------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales............... $1,080,486 $ -- $ -- $1,080,486
Cost of goods sold...... 936,397 -- -- 936,397
---------- ------ ------ ----------
Gross profit.......... 144,089 -- -- 144,089
Selling, general and
administrative
expenses............... 42,411 -- -- 42,411
---------- ------ ------ ----------
Income from
operations........... 101,678 -- -- 101,678
Interest expense and
other related financing
costs(c)(d)............ 68,286 (4,433) (924) 62,929
---------- ------ ------ ----------
Income before income
taxes................ 33,392 4,433 924 38,749
Income tax provision.... 3,000 (600)(e) (100)(e) 2,300
---------- ------ ------ ----------
Net income(j)......... 30,392 5,033 1,024 36,449
Preferred stock dividend
requirement............ 1,307 3,794 (5,101) --
---------- ------ ------ ----------
Net income applicable to
common stockholders.... $ 29,085 $1,239 $6,125 $ 36,449
========== ====== ====== ==========
Net income per common
share(i)............... $ 1.46 $ 1.78
========== ==========
Weighted average number
of common and common
equivalent shares
outstanding............ 19,952,928 20,475,509
</TABLE>
F-35
<PAGE>
SILGAN HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA ADJUSTMENTS
----------------------- ---------------------------------------------
ANC FOOD
SILGAN METAL & AN CAN DEBT
HOLDINGS INC. SPECIALTY ACQUISITION RECAPITALIZATION(a) OFFERING(b) PRO FORMA
------------- --------- ----------- ------------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $1,101,905 $302,477 $ -- $ -- $ -- $1,404,382
Cost of goods sold...... 970,491 266,156 2,882(f) -- -- 1,239,529
---------- -------- ------ ------- ------ ----------
Gross profit.......... 131,414 36,321 (2,882) -- -- 164,853
Selling, general and
administrative
expenses............... 46,848 17,982 (7,470)(g) -- -- 57,360
Reduction in asset
carrying value......... 14,745 -- -- -- -- 14,745
---------- -------- ------ ------- ------ ----------
Income from
operations........... 69,821 18,339 4,588 -- -- (h) 92,748
Interest expense and
other related financing
costs(c)(d)............ 80,710 7,476 236 (11,447) 2,416 79,391
---------- -------- ------ ------- ------ ----------
Income (loss) before
income taxes......... (10,889) 10,863 4,352 11,447 (2,416) 13,357
Income tax provision.... 5,100 4,023 (1,923) (5,200)(e) -- 2,000
---------- -------- ------ ------- ------ ----------
Net income (loss)(j).. (15,989) 6,840 6,275 16,647 (2,416) 11,357
Preferred stock dividend
requirement............ -- -- -- 6,962 (6,962) --
---------- -------- ------ ------- ------ ----------
Net income (loss)
applicable to common
stockholders........... $ (15,989) $ 6,840 $6,275 $ 9,685 $4,546 $ 11,357
========== ======== ====== ======= ====== ==========
Net income (loss) per
common share(i)........ $ (0.77) $ 0.55
========== ==========
Weighted average number
of common and common
equivalent shares
outstanding............ 20,647,599 20,475,509
</TABLE>
F-36
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND THE YEAR ENDED DECEMBER 31,
1995
(a) Debt recapitalization includes adjustments for (i) the sale of $50.0
million of Exchangeable Preferred Stock and (ii) the incurrence of $125.0
million of additional B term loans and $75.0 million of working capital
loans under the Silgan Credit Agreement, and the use of such proceeds to
redeem a portion of the Discount Debentures and to purchase the Holdings
Class B Stock held by Mellon Bank N.A., as if such events had occurred as
of the beginning of the periods presented.
(b) The Offering includes adjustments for (i) the sale of $70.3 million of
Common Stock offered hereby and (ii) the planned exchange of the
Exchangeable Preferred Stock for Exchange Debentures. The net proceeds
from the Offering will be used to redeem in full the remaining outstanding
amount of Discount Debentures and to repay a portion of the bank term
loans.
(c) Pro forma adjustments made to the historical data for interest expense as
of September 30, 1996 and December 31, 1995 consist of the following (in
thousands):
<TABLE>
<CAPTION>
FOR THE NINE FOR THE
MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1996(1) DECEMBER 31, 1995(2)
--------------------- --------------------
<S> <C> <C>
Historical interest expense..... $ 68,286 $ 80,710
Increase in interest expense
related to additional bank
borrowings used to finance the
acquisition of AN Can at
current borrowing rates(3)..... -- 8,533
Increase in interest expense
related to additional bank
borrowings of B term loans and
working capital loans used to
fund the redemption of a
portion of the Discount
Debentures at current borrowing
rates(3)....................... 6,193 16,895
Increase in interest expense
related to the Exchange
Debentures(4).................. 5,078 6,844
Net increase (decrease) in
deferred financing costs
related to amortization of new
indebtedness less retired debt
costs.......................... 54 (895)
Decrease in interest expense due
to the redemption of the
Discount Debentures(5)......... (15,611) (28,672)
Decrease in interest expense due
to the repayment of bank term
loans from the excess proceeds
of the Offering(6)............. (1,071) (4,024)
-------- --------
Pro forma interest expense...... $ 62,929 $ 79,391
======== ========
</TABLE>
--------
(1) Pro forma interest expense for the nine months ended September 30, 1996
gives effect to (i) the sale of $70.3 million of Common Stock offered
hereby, (ii) the sale of $50.0 million of Exchangeable Preferred Stock
(and the planned exchange of the Exchangeable Preferred Stock for
Exchange Debentures), (iii) the incurrence of $125.0 million of
additional B term loans in July 1996 and $17.4 million of working
capital loans in June 1996 under the Silgan Credit Agreement, and the
use of such proceeds to redeem the remaining outstanding amount of
Discount Debentures, to purchase the Holdings Class B Stock held by
Mellon Bank N.A. for $35.8 million and to repay $5.4 million of bank
term loans, as if such events had occurred as of January 1, 1996.
F-37
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS--(CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND THE YEAR ENDED DECEMBER 31,
1995
(2) Pro forma interest expense for the year ended December 31, 1995 gives
effect to (i) borrowings under the Silgan Credit Agreement which were
used to finance the acquisition of AN Can and repay in full amounts
owing under the Company's previous credit agreement and the Secured
Notes, and (ii) (A) the sale of $70.3 million of Common Stock offered
hereby, (B) the sale of $50.0 million of Exchangeable Preferred Stock
(and the planned exchange of the Exchangeable Preferred Stock for
Exchange Debentures), and (C) the incurrence of $125.0 million of
additional B term loans and $75.0 million of working capital loans
under the Silgan Credit Agreement, and the use of such proceeds to
redeem in full the outstanding amount of Discount Debentures, to
purchase the Holdings Class B Stock held by Mellon Bank N.A. for $35.8
million and to repay a portion of the bank term loans, as if such
events had occurred as of January 1, 1995.
(3) For the computations above, the assumed interest rates for borrowings
under the Silgan Credit Agreement are based upon the three month LIBOR
of 5.563% per annum as of January 23, 1997 plus a fixed spread of 2
1/2% per annum for the A term loans and working capital loans and 3%
per annum for the B term loans.
(4) In conjunction with the Offering, it was assumed that the outstanding
shares of Exchangeable Preferred Stock were exchanged for 13 1/4%
Subordinated Debentures due July 2006.
(5) The adjustment in interest expense related to the Discount Debentures
has been calculated to eliminate the amount of historical interest
incurred.
(6) Pursuant to the Company's Credit Agreement, net equity proceeds in
excess of the amount required to redeem the remaining balance of
Discount Debentures were applied to repay bank term loans.
(d) The unaudited pro forma statement of operations for the nine months ended
September 30, 1996 and for the year ended December 31, 1995 assume that
the redemption of the Discount Debentures occurred as of the beginning of
the periods presented. Since the redemption of the Discount Debentures did
not actually occur as of the beginning of the periods presented and
because the Discount Debentures accrete in value, the aggregate principal
amount used to calculate interest expense for the pro forma calculations
for the nine months ended September 30, 1996 and the year ended December
31, 1995 differ from the principal amount of Discount Debentures that will
be outstanding at the time of their redemption. Therefore, actual interest
expense of the Company will also differ from the interest expense
reflected in the pro forma statement of operations. Set forth below is a
table estimating annual interest expense based upon the obligations
outstanding after the occurrence of the Offering:
<TABLE>
<CAPTION>
ESTIMATED
ANNUAL
PRINCIPAL INTEREST INTEREST
DEBT OBLIGATION AMOUNT RATE EXPENSE
--------------- ------------- -------- -------------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C>
Bank Working Capital Loan(1)(2)........ $ 90.0 8.06% $ 7.3
Bank A Term Loan(1)(3)................. 217.6 8.06% 17.5
Bank B Term Loan(1)(3)................. 343.8 8.56% 29.4
11 3/4% Subordinated Debentures........ 135.0 11.75% 15.9
Exchange Debentures(4)................. 50.0 13.25% 6.8
-----
$76.9
Amortization of debt financing
costs(5).............................. 4.5
-----
Total interest expense and related
financing costs..................... $81.4
=====
</TABLE>
F-38
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS--(CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND THE YEAR ENDED DECEMBER 31,
1995
--------
(1) Assumes borrowing rates set forth in footnote (c)(3) above.
(2) Assumes average amount of working capital loans outstanding during the
year.
(3) Excludes effect of an interest rate swap agreements for $200.0 million
of indebtedness entered into by the Company in 1996 under which
floating rate interest was exchanged for fixed rates of interest in
order to mitigate the effect of interest rate fluctuations.
(4) Interest on the Exchange Debentures is payable semi-annually and, on or
prior to July 15, 2000, the Company may pay such interest by issuing
additional Exchange Debentures. At September 30, 1996, the accrued
balance of Exchange Debentures would have been $51.3 million. For
purposes of the estimated annual interest expense, the Company has
assumed that interest will be paid in additional Exchange Debentures.
(5) Amortization of debt financing costs assumes average annual balance
outstanding.
(e) The income tax provision is comprised of federal, state and foreign income
taxes currently payable. The income tax provision for the nine months
ended September 30, 1996 and year ended December 31, 1995 has been
adjusted to reflect the federal and state income tax benefits realized
from the deduction of the accreted interest available to the Company as a
result of the redemption of the Discount Debentures.
(f) Pro forma adjustments to cost of goods sold reflects adjustments for (i)
increased depreciation charges of $2.282 million from historical amounts
based upon the fair values of property, plant and equipment acquired,
applying an estimated useful life of 25 years for buildings and 5 to 11
years for machinery and equipment, (ii) increased charge for amortization
of goodwill of $0.361 million from the historical amount for the excess of
fair value of net assets acquired over a 40-year period and (iii)
increased employee benefits costs for pension and post-retirement medical
expense of $0.239 million to reflect change to Containers' employee
benefit plans. The pro forma statement of operations for the year ended
December 31, 1995 does not give effect to adjustments for decreased costs
from manufacturing synergies resulting from the integration of AN Can with
Containers' existing can manufacturing operations and benefits the Company
may realize as a result of its planned rationalization of plant
operations.
(g) Pro forma adjustments to selling, general and administrative expenses
reflects adjustments for (i) increased depreciation charges of $0.074
million from historical amounts for the reasons described in footnote (f)
above, (ii) increased employee benefits costs for pension and post-
retirement medical expense of $0.039 million to reflect change to
Containers' employee benefit plans, and (iii) decreased administrative
support costs of $7.583 million ($4.1 million of which is allocable to the
period prior to the acquisition of AN Can) realized as a result of the
integration of Containers' and AN Can's sales, administrative and research
functions.
In connection with the acquisition of AN Can, the Company consolidated the
administrative functions of AN Can with its existing operations, thereby
eliminating the corporate staffing costs included in AN Can's historical
operating income. As a result, a pro forma adjustment was made to eliminate
the historical corporate annual charge of $7.1 million incurred by AN Can
for services that were eliminated as part of the acquisition of AN Can. ANC
had provided AN Can with certain data processing, human resources,
purchasing, credit, accounting and tax services, all of which (except for
certain MIS costs as indicated below) are performed within the Company's
existing structure. Moreover, as permitted under the Asset Purchase
Agreement for the AN Can acquisition, the Company elected not to provide
employment to certain AN Can employees. A pro forma adjustment was made to
reduce administrative costs for the compensation and benefits
F-39
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS--(CONCLUDED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND THE YEAR ENDED DECEMBER 31,
1995
attributed to 77 AN Can employees who were not hired by the Company as a
result of the acquisition. Additionally, a pro forma adjustment was made
for increased rental expense incurred at the Company's technical support
facility and corporate office locations and increased MIS costs. A summary
of the adjustments allocable to the period prior to the acquisition of AN
Can are as follows (in millions):
<TABLE>
<S> <C>
Elimination of AN Can's historical corporate charge................. $4.1
Administrative workforce reduction.................................. 4.5
Increased corporate rent expense.................................... (0.5)
Increased MIS expense............................................... (0.5)
----
$7.6
====
</TABLE>
(h) Under the terms of the Containers and Plastics option plans, stock options
issued under such plans will be converted to options under Holdings' Stock
Option Plan at the time of the offering. In accordance with APB No. 25,
options granted under the plans of the operating companies are considered
variable options with a final measurement date at the time of conversion.
The Company will recognize a non-cash charge of approximately $21.1
million (assuming an initial public offering price of $19.00 per share)
for the excess of fair market value over grant price of these options,
less amounts previously accrued, at the time of the Offering. Prior to the
offering, the Company recognized compensation expense for the change in
pro forma book value, as defined, since the date of grant of these
options, amortized over the vesting period.
(i) Actual and pro forma earnings per share are based on the weighted average
number of shares outstanding during the period, as adjusted in all periods
for the Stock Split, and after giving effect to stock options considered
to be dilutive common stock equivalents using the treasury stock method.
Primary and fully diluted net income (loss) per share are the same for
each of the periods.
(j) The pro forma condensed statement of operations does not include
historical extraordinary charges, net of taxes, of $2.1 million as of
September 30, 1996 and $5.8 million as of December 31, 1995 for the write-
off of unamortized deferred financing costs related to the early
redemption of Discount Debentures and for the early extinguishment of
amounts owing under the Company's debt facilities, respectively. The pro
forma condensed statement of operations as of September 30, 1996 also does
not include an extraordinary charge, net of tax, of $0.7 million expected
to be incurred in the first quarter of 1997 related to the redemption of
the remaining Discount Debentures.
F-40
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, Holdings
has agreed to sell to each of the Underwriters named below, and each of such
Underwriters, for whom Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated
and Salomon Brothers Inc are acting as representatives, has severally agreed
to purchase from Holdings, the respective number of shares of Common Stock set
forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER OF COMMON STOCK
----------- ----------------
<S> <C>
Goldman, Sachs & Co.......................................
Morgan Stanley & Co. Incorporated.........................
Salomon Brothers Inc......................................
---------
Total................................................. 3,700,000
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered
hereby, if any are taken.
The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at
such price less a concession of $ per share. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time
to time be varied by the representatives.
Holdings has granted to the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 555,000
additional shares of Common Stock solely to cover over-allotments, if any. If
the Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the 3,700,000 shares of Common
Stock offered.
Holdings, the Principal Common Stockholders and BTNY have agreed that,
during the period beginning from the date of this Prospectus and continuing to
and including the date one year after the date of the Prospectus, they will
not offer, sell, contract to sell or otherwise dispose of any securities of
Holdings (other than, in respect of Holdings, pursuant to employee stock
option plans existing, or on the conversion or exchange of convertible or
exchangeable securities outstanding, on the date of this Prospectus and shares
of Common Stock or securities convertible into such shares issued in
connection with acquisitions, if the holder thereof executes and delivers a
lock-up agreement covering a period of six months after the date of the
Prospectus as contemplated by the Underwriting Agreement) which are
substantially similar to the shares of Common Stock or which are convertible
into or exchangeable for securities which are substantially similar to the
shares of Common Stock, without the prior written consent of Goldman, Sachs &
Co., except for the shares of Common Stock offered in connection with the
Offering.
The Underwriters have reserved up to 111,000 shares of Common Stock offered
hereby for sale to certain employees of the Company at the initial public
offering price. The number of shares available to the general public will be
reduced to the extent such employees purchase reserved shares. Any reserved
shares that are not so purchased by such employees will be offered by the
Underwriters to the general public on the same terms as the other shares
offered hereby.
The general partner of MSLEF II is a wholly owned subsidiary of Morgan
Stanley Group Inc. ("MS Group"). Two of the Company's directors are employees
of wholly owned subsidiaries of MS Group. Morgan Stanley & Co. Incorporated
acted as the placement agent for the offering of the Exchangeable Preferred
Stock and received compensation for acting in such capacity. See "Management",
"Certain Transactions" and "Description of Capital Stock--Description of
Stockholders Agreements".
U-1
<PAGE>
Under Rule 2720 of the National Association of Securities Dealers, Inc. (the
"NASD"), the Company may be deemed an affiliate of Morgan Stanley & Co.
Incorporated. This offering is being conducted in accordance with Rule 2720,
which provides that, among other things, when an NASD member participates in
the underwriting of an affiliate's equity securities, the initial public
offering price can be no higher than that recommended by a "qualified
independent underwriter" meeting certain standards. In accordance with this
requirement, Goldman, Sachs & Co. has served in such role and has recommended
a price in compliance with the requirements of Rule 2720. Goldman, Sachs & Co.
will receive compensation from the Company in the amount of $10,000 for
serving in such role. In connection with the Offering, Goldman, Sachs & Co. in
its role as qualified independent underwriter has performed due diligence
investigations and reviewed and participated in the preparation of this
Prospectus and the Registration Statement of which this Prospectus forms a
part. In addition, the Underwriters may not confirm sales to any discretionary
account without the prior specific written approval of the customer.
Prior to the Offering, there has been no public market for the shares. The
initial public offering price will be negotiated among Holdings and the
representatives of the Underwriters. Among the factors to be considered in
determining the initial public offering price of the Common Stock, in addition
to prevailing market conditions, will be the Company's historical performance,
estimates of the business potential and earnings prospects of the Company, an
assessment of the Company's management and the consideration of the above
factors in relation to market valuation of companies in related businesses.
The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "SLGN".
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
U-2
<PAGE>
[RESERVED FOR MAP SHOWING THE COMPANY'S LOCATIONS]
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFOR-
MATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 14
Use of Proceeds.......................................................... 18
Dividend Policy.......................................................... 18
Dilution................................................................. 19
Capitalization........................................................... 20
Selected Historical and Pro Forma Financial Information.................. 21
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 27
Business................................................................. 42
Management............................................................... 54
Securities Ownership of Certain Beneficial Owners and Management......... 62
Certain Transactions..................................................... 64
Description of Capital Stock............................................. 66
Shares Eligible for Future Sale.......................................... 71
Description of Certain Indebtedness...................................... 72
Legal Matters............................................................ 75
Experts.................................................................. 75
Available Information.................................................... 76
Incorporation of Certain Documents by Reference.......................... 76
Index to Consolidated Financial Statements............................... F-1
Underwriting............................................................. U-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3,700,000 SHARES
[LOGO] SILGAN
HOLDINGS INC.(TM)
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------
PROSPECTUS
------------
GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
REPRESENTATIVES OF THE UNDERWRITERS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the fees and expenses payable by Holdings
in connection with the distribution of the Common Stock:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............... $29,742
NASD filing fee................................................... 9,125
NASDAQ listing fee................................................ 50,000
Legal fees and expenses........................................... *
Accountants' fees and expenses.................................... *
Printing and engraving expenses................................... *
Blue sky fees and expenses........................................ *
Transfer Agent and Registrar fees and expenses.................... *
Miscellaneous..................................................... *
-------
Total......................................................... $ *
=======
</TABLE>
- --------
* To be completed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the DGCL makes provision for the indemnification of officers
and directors in terms sufficiently broad to indemnify officers and directors
of Holdings under certain circumstances from liabilities (including
reimbursement for expenses incurred) arising under the Securities Act. The
Restated Certificate of Incorporation and By-laws of Holdings provide for
indemnification of officers and directors against costs and expenses incurred
in connection with any action or suit to which such person is a party to the
fullest extent permitted by the DGCL. The Company has purchased directors' and
officers' liability insurance covering certain liabilities which may be
incurred by the directors and officers of the Company in connection with the
performance of their duties. Certain of Holdings' affiliates also maintain
insurance and provide indemnification substantially similar to the foregoing.
See item 17(a) of this Registration Statement regarding the position of the
Commission on indemnification for liabilities arising under the Securities
Act.
ITEM 16. EXHIBITS.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
+1 Form of Underwriting Agreement among Holdings, Silgan, Containers,
Plastics and the Underwriters.
4.1 Indenture, dated as of June 29, 1992, between Holdings and Fleet
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 Fleet
National Bank, as Trustee, with respect to the 11 3/4% 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 Silgan Holdings Inc. Certificate of Designation of the Powers,
Preferences and Relative, Participating, Optional and Other Special
Rights of 13 1/4% Cumulative Exchangeable Redeemable Preferred Stock
and Qualifications, Limitations and Restrictions Thereof (incorporated
by reference to Exhibit 3 filed with Holdings' Current Report on Form
8-K dated August 2, 1996, Commission File No. 33-28409).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
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).
4.6 Registration Rights Agreement, dated July 22, 1996, between Holdings
and Morgan Stanley (incorporated by reference to Exhibit 5 filed with
Holdings' Current Report on Form 8-K dated August 2, 1996, Commission
File No. 33-28409).
4.7 Form of Holdings' 13 1/4% Cumulative Exchangeable Redeemable Preferred
Stock Certificate (incorporated by reference to Amendment No. 1 to
Holdings' Registration Statement on Form S-4, dated September 9, 1996,
Commission File No. 333-9979).
4.8 Indenture, dated as of July 22, 1996, between Holdings and Fleet
National Bank, as Trustee, with respect to the Exchange Debentures
(incorporated by reference to Exhibit 4.10 filed with Holdings'
Amendment No. 2 to Registration Statement on Form S-4, dated October
31, 1996, Registration Statement No. 33-9979).
4.9 Form of Holdings' Subordinated Debentures due 2006 (incorporated by
reference to Exhibit 4.11 filed with Holdings' Amendment No. 2 to
Registration Statement on Form S-4, dated October 31, 1996,
Registration Statement No. 33-9979).
**5 Opinion of Winthrop, Stimson, Putnam & Roberts as to the legality of
the Common Stock.
10.1 Supply Agreement between Containers and Nestle 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).
10.2 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).
10.3 Supply Agreement between Containers and Nestle 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).
10.4 Supply Agreement between Containers and Nestle 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).
10.5 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).
10.6 Supply Agreement between Containers and Nestle 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).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.7 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).
10.8 Supply Agreement between Containers and Nestle 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).
10.9 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 con-
fidential treatment pursuant to order of the Commission).
10.10 Supply Agreement between Containers and Nestle 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).
10.11 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).
10.12 Supply Agreement between Containers and Nestle 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).
10.13 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).
10.14 Supply Agreement between Containers and Nestle 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).
10.15 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).
10.16 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).
10.17 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).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.18 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, Commission File No. 33-28409).
10.19 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).
10.20 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).
10.21 Silgan Holdings Inc. Third Amended and Restated 1989 Stock Option Plan
(incorporated by reference to Exhibit 10.84 filed with Holdings'
Annual Report on Form 10-K for the year ended December 31, 1995,
Commission File No. 33-28409).
10.22 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).
10.23 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).
10.24 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).
10.25 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).
10.26 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).
10.27 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).
10.28 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).
10.29 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).
10.30 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 December 31,
1993, Commission File No. 1-11200). (Portions of this Exhibit are
subject to an application for confidential treatment filed with the
Commission.)
10.31 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.)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.32 Credit Agreement, dated as of August 1, 1995, among Silgan,
Containers, Plastics, the lenders from time to time party thereto,
Bankers Trust, as Administrative Agent and as a Co-Arranger, and Bank
of America Illinois, as Documentation Agent and as a Co-Arranger
(incorporated by reference to Exhibit 2 filed with Holdings' Current
Report on Form 8-K, dated August 14, 1995, Commission File No. 33-
28409).
10.33 Amended and Restated Holdings Guaranty, dated as of August 1, 1995,
made by Holdings (incorporated by reference to Exhibit 4 filed with
Holdings' Current Report on Form 8-K, dated August 14, 1995,
Commission File No. 33-28409).
10.34 Amended and Restated Borrowers Guaranty, dated as of August 1, 1995,
made by Silgan, Containers, Plastics, C-W Can and SCCW Can Corporation
(incorporated by reference to Exhibit 3 filed with Holdings' Current
Report on Form 8-K, dated August 14, 1995, Commission File No. 33-
28409).
10.35 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).
10.36 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).
10.37 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).
10.38 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).
10.39 Asset Purchase Agreement, dated as of June 2, 1995, between ANC and
Containers (incorporated by reference to Exhibit 1 filed with
Holdings' Current Report on Form 8-K, dated August 14, 1995,
Commission File No. 33-28409).
10.40 Placement Agreement between Holdings and Morgan Stanley, dated July
17, 1996 (incorporated by reference to Exhibit 6 filed with Holdings'
Current Report on Form 8-K dated August 2, 1996, Commission File No.
33-28409).
+10.41 Form of Silgan Holdings Inc. Fourth Amended and Restated 1989 Stock
Option Plan.
*10.42 Form of Amended and Restated Management Services Agreement between
Holdings and S&H.
**10.43 Form of Amended and Restated Management Services Agreement between
Silgan and S&H.
**10.44 Form of Amended and Restated Management Services Agreement between
Plastics and S&H.
**10.45 Form of Amended and Restated Management Services Agreement between
Containers and S&H.
*10.46 Form of Amendment to Stockholders Agreement among R. Philip Silver, D.
Greg Horrigan, MSLEF II, BTNY and Holdings.
+11 Statement of Computation of Earnings per Share for the nine months
ended September 30, 1996 and 1995 and for the years ended December 31,
1995, 1994 and 1993.
*23.1 Consent of Ernst & Young LLP.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*23.2 Consent of Price Waterhouse LLP.
**23.3 Consent of Winthrop, Stimson, Putnam & Roberts (included in Exhibit
5).
+24 Power of Attorney.
*99.1 Form of Restated Certificate of Incorporation of Holdings.
+99.2 Form of Amended and Restated By-laws of Holdings.
</TABLE>
- --------
* Filed herewith.
+ Previously filed.
** To be filed by amendment.
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Stamford, State of Connecticut, on
January 27, 1997.
SILGAN HOLDINGS INC.
/s/ R. Philip Silver
By: _________________________________
R. PHILIP SILVER
CHAIRMAN OF THE BOARD AND CO-CHIEF
EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ R. Philip Silver Chairman of the
- ------------------------------------- Board and Co-Chief January 27,
(R. PHILIP SILVER) Executive Officer 1997
(Principal
Executive Officer)
/s/ D. Greg Horrigan* President, Co-Chief
- ------------------------------------- Executive Officer January 27,
(D. GREG HORRIGAN) and Director 1997
/s/ Robert H. Niehaus* Director
- ------------------------------------- January 27,
(ROBERT H. NIEHAUS) 1997
/s/ Leigh J. Abramson* Director
- ------------------------------------- January 27,
(LEIGH J. ABRAMSON) 1997
/s/ Harley Rankin, Jr.* Executive Vice
- ------------------------------------- President, Chief January 27,
(HARLEY RANKIN, JR.) Financial Officer 1997
and Treasurer
(Principal
Financial Officer)
II-7
<PAGE>
SIGNATURE TITLE DATE
/s/ Harold J. Rodriguez, Jr.* Vice President,
- ------------------------------------- Controller and January 27,
(HAROLD J. RODRIGUEZ, JR.) Assistant Treasurer 1997
(Principal
Accounting Officer)
/s/ R. Philip Silver
*By: ________________________________
R. PHILIP SILVER ATTORNEY-IN-FACT
II-8
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
10.42 Form of Amended and Restated Management Services Agreement between
Holdings and S&H.
10.46 Form of Amendment to Stockholders Agreement among R. Philip
Silver, D. Greg Horrigan, MSLEF II, BTNY and Holdings.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Price Waterhouse LLP.
99.1 Form of Restated Certificate of Incorporation of Holdings.
</TABLE>
<PAGE>
EXHIBIT 10.42
AMENDED AND RESTATED
MANAGEMENT SERVICES AGREEMENT
This Amended and Restated Management Services Agreement (the
"Agreement") is made as of this ___ day of February, 1997 by and between S&H
INC., a Connecticut corporation ("S&H"), and SILGAN HOLDINGS INC., a Delaware
corporation ("Holdings").
W I T N E S S E T H:
-------------------
WHEREAS, S&H and Holdings have entered into the Amended and
Restated Management Services Agreement dated as of December 21, 1993 (the
"Original Management Services Agreement"), pursuant to which S&H provides
general management, supervision, administrative and other services to Holdings
in accordance with the terms of the Original Management Services Agreement;
WHEREAS, S&H also is a party to an Amended and Restated Management
Services Agreement dated as of December 21, 1993 with each of Silgan
Corporation, a wholly owned subsidiary of Holdings ("Silgan"), Silgan
Containers Corporation, a wholly owned subsidiary of Silgan ("Containers"), and
Silgan Plastics Corporation, a wholly owned subsidiary of Silgan ("Plastics");
<PAGE>
WHEREAS, S&H and each of Silgan, Containers and Plastics are
entering into an amended and restated management services agreement dated as of
the date hereof (collectively, as so amended and restated, the "Affiliate
Management Services Agreements"); and
WHEREAS, in contemplation of the consummation of an initial public
offering of the common stock of Holdings pursuant to an effective registration
statement under the Securities Act of 1933, as amended, S&H and Holdings desire
to amend and restate hereby the Original Management Services Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, S&H and Holdings agree as follows:
1. Management Services.
-------------------
(a) S&H and Holdings hereby agree that, during the period
beginning on the date hereof and continuing throughout the term hereof, S&H and
its Affiliates shall provide to Holdings general management, supervision and
administrative services, including, without limitation, the preparation of the
annual and long-term business plans of Holdings, and perform such other duties
and provide such other services as Holdings shall be permitted to request of
S&H pursuant to the Restated Certificate of Incorporation or By-Laws of
Holdings or pursuant to applicable
-2-
<PAGE>
law, which power and authority Holdings hereby grants to S&H ("General
Management Services"). (The General Management Services are hereinafter
collectively referred to as the "Services" and individually as a "Service").
(b) Any Service hereunder shall be provided to Holdings
only by S&H or its Affiliates or such consultants, subcontractors or agents as
may be selected from time to time by S&H to assist S&H in its provision of the
Services. It is understood and agreed that S&H may retain the services of
Morgan Stanley & Co. Incorporated or another suitable investment bank as
financial advisor to Holdings or as an underwriter or placement agent for
offerings of securities by Holdings.
2. Fees; Payment.
-------------
(a) In consideration for General Management Services
provided by S&H to Holdings hereunder, Holdings shall pay to S&H aggregate fees
or compensation therefor (not including any related out-of-pocket expenses),
(i) on a monthly basis, an amount equal to five thousand dollars ($5,000) plus
2.475% of EBDIT (as defined in Paragraph 2(i) hereof) for such calendar month
of Holdings until EBDIT for the calendar year to date has reached the Scheduled
Amount (as defined in Paragraph 2(d) hereof) for such calendar year, and 1.65%
of EBDIT for such calendar month of Holdings to the extent that EBDIT for the
-3-
<PAGE>
calendar year to date exceeds the Scheduled Amount but is not greater than the
Maximum Amount (as defined in Paragraph 2(d) hereof) (the "Monthly Management
Fee"); and (ii) on a quarterly basis, an amount equal to 2.475% of EBDIT for
such calendar quarter of Holdings until EBDIT for the calendar year to date has
reached the Scheduled Amount, and l.65% of EBDIT for such calendar quarter of
Holdings to the extent that EBDIT for the calendar year to date exceeds the
Scheduled Amount but is not greater than the Maximum Amount (the "Quarterly
Management Fee").
(b) Such Quarterly Management Fee shall continue to accrue,
but shall not be paid, to S&H by Holdings in the event that, and from the date
on which, Silgan shall have received written notice ("Notice") from the Agent
(as defined below) that an Event of Default (as such term is defined in the
Credit Agreement, dated as of August 1, 1995, among Silgan, Containers,
Plastics, the lenders from time to time party thereto, Bankers Trust Company, as
Administrative Agent and as a Co-Arranger (the "Agent"), and Bank of America
Illinois, as Documentation Agent and as a Co-Arranger, as in effect from time to
time, and any refinancings, renewals, amendments or extensions thereof (the
"Credit Agreement")) exists under any of Sections 9.01, 9.03 (but only to the
extent resulting from the violation of one or more of Sections 8.08, 8.09, 8.10,
and 8.11 of the Credit Agreement),
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<PAGE>
9.04(i)(x), 9.04(ii) or 9.05 of the Credit Agreement (each of the foregoing
Events of Default, a "Financial Covenant Event of Default") until, and shall be
paid by Holdings to S&H on, the earliest to occur of (x) the first date after
receipt of such Notice upon which no Financial Covenant Event of Default to
which the Notice related or otherwise known to S&H or Holdings shall be in
existence (and so long as no such Financial Covenant Event of Default would be
in existence after giving effect to the payment of such unpaid portion of the
Quarterly Management Fee), (y) the first date occurring 180 days or more after
receipt by Holdings of a written notice from the Agent stating that no Event of
Default exists under Section 9.01 of the Credit Agreement, or (z) the date that
Silgan, Containers, Plastics, California-Washington Can Corporation, a wholly
owned subsidiary of Containers, and SCCW Can Corporation, a wholly owned
subsidiary of Containers, shall have paid all outstanding Obligations (as such
term is defined under the Credit Agreement). In the event that a Notice is
delivered by the Agent, Holdings shall pay to S&H that portion of any unpaid
Quarterly Management Fee that has accrued with respect to that portion of such
calendar quarter prior to the occurrence of any Financial Covenant Event of
Default to which such Notice relates.
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<PAGE>
(c) Nothing contained in Paragraph 2(b) shall prevent the
Agent from giving successive Notices of the type described in Paragraph 2(b)
(in which case the rules set forth in Paragraph 2(b) shall apply to, and the
time periods set forth therein shall begin to run on, the date of such
subsequent Notice); provided that only one Notice relating to a single
--------
Financial Covenant Event of Default and all other Financial Covenant Events of
Default in existence at the date of the giving of any such Notice may be given.
Notwithstanding anything to the contrary stated herein, if at any time after the
giving of Notice by the Agent to Silgan, S&H shall certify in writing to
Holdings that all Financial Covenant Events of Default to which such Notice
relates have been cured or waived, and that S&H knows of no other Financial
Covenant Event of Default then in existence, then Holdings shall, unless it
knows of the existence of a Financial Covenant Event of Default which has not
yet been cured or waived, pay to S&H any accrued and unpaid Quarterly Management
Fee or portion thereof in the manner set forth in Paragraph 2(g) hereof unless a
Financial Covenant Event of Default would result from such payment. S&H shall
not be required to deliver any such certification to Holdings upon the
occurrence of the dates or events set forth in clauses (y) or (z) of Paragraph
2(b), and promptly after the occurrence of such date or event, Holdings
-6-
<PAGE>
will pay to S&H any accrued and unpaid Quarterly Management Fee or portion
thereof.
(d) For any given calendar year during the term of this
Agreement, the Scheduled Amount and the Maximum Amount for such calendar year
will be the amounts set forth in Schedule I hereto.
(e) In addition to the Monthly Management Fee and the
Quarterly Management Fee, Holdings shall also reimburse S&H in an amount equal
to all out-of-pocket expenses paid by S&H in providing the Services hereunder,
including fees and expenses paid to consultants, subcontractors and other third
parties, in connection with such Services. Such expenses shall be payable by
Holdings to S&H monthly in arrears.
(f) (i) Not later than fifteen (15) days after the end of
each calendar month during the term hereof with respect to the Monthly
Management Fee and (ii) not later than thirty (30) days after the end of each
full calendar quarter during the term hereof with respect to the Quarterly
Management Fee, S&H shall furnish Holdings with a bill for an amount equal to
the Monthly Management Fee and the Quarterly Management Fee, respectively, then
owing with respect to periods ended on or before the end of such calendar month
or such calendar quarter.
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<PAGE>
(g) Each bill furnished to Holdings hereunder shall be paid
in full within thirty (30) days of the receipt of such bill, except that any
accrued and unpaid Quarterly Management Fee or portion thereof shall be paid on
the earliest date on which such payment is permitted to be made pursuant to
Paragraphs 2(a), 2(b) and 2(c) hereof. All payments of such bills shall be sent
to:
S&H Inc.
4 Landmark Square
Suite 400
Stamford, CT 06901
Attention: R. Philip Silver
or to such other address as S&H may specify from time to time by written notice
to Holdings.
(h) All fees and expenses paid to S&H by Silgan, Containers
and Plastics, pursuant to their respective Affiliate Management Services
Agreements with S&H, shall be credited to the Monthly Management Fee, the
Quarterly Management Fee and the expenses referred to in Paragraphs 2(a) and
2(e) hereof.
(i) For purposes of this Section 2, EBDIT shall mean, for
any period, the consolidated net income of Holdings and its subsidiaries,
before interest expense and provision for income taxes and without giving
effect to any extraordinary non-cash gains or extraordinary non-cash losses and
any adjustments resulting from changes in the value of employee stock options
-8-
<PAGE>
and/or stock appreciation rights, and adjusted by adding thereto (i) the amount
of any fees and expenses paid pursuant to this Agreement or the Affiliate
Management Services Agreements, (ii) the amount of all charges and expenses
incurred in connection with any refinancing, restructuring, recapitalization or
reorganization involving Holdings and its subsidiaries (which charges and
expenses have been charged against the consolidated net income of Holdings or
its subsidiaries), and (iii) the amount of all amortization of intangibles,
covenants not to compete, goodwill and debt financing costs and all depreciation
(which amortization and depreciation have been charged against the consolidated
net income of Holdings and its subsidiaries, before interest expense), computed
in accordance with generally accepted accounting principles.
3. Direct Expenses.
---------------
It is understood that the consideration to be paid by Holdings to
S&H for Services hereunder shall not be in lieu of, and that Holdings shall be
directly liable for, direct expenses incurred by Holdings, or by S&H on
Holdings' behalf (other than the out-of-pocket expenses billed to Holdings by
S&H pursuant to Paragraph 2(e) hereof), for services rendered to Holdings by
third parties, including, but not limited to, legal and accounting fees and
insurance premiums. Holdings shall pay any
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<PAGE>
compensation (including employee benefit costs and any related out-of-pocket
expenses) to officers and other employees of Holdings who provide substantially
full-time services to Holdings, other than Messrs. R. Philip Silver ("Silver"),
D. Greg Horrigan ("Horrigan"), Harley Rankin, Jr. ("Rankin") and Harold J.
Rodriguez, Jr. ("Rodriguez") who shall receive no salaries (it being understood,
however, that Holdings shall reimburse S&H in respect of compensation paid by
S&H to Messrs. Rankin and Rodriguez consistent with the reimbursement therefor
by Holdings to S&H in 1996), notwithstanding that said officers and other
employees may simultaneously be officers or employees of S&H or one of its
subsidiaries or Affiliates.
4. Term.
----
(a) The term of this Agreement shall commence on the date
hereof and shall continue until June 30, 1999. Thereafter, the term of this
Agreement shall be automatically renewed for successive one-year terms unless
prior to the date that is 180 days prior to the expiration of the initial term
or the then current one-year term, as the case may be, either party shall have
given the other party written notice of its election not to renew the term of
this Agreement (it being understood that the determination by Holdings whether
to give such written notice of its election not to renew the term of this
Agreement will be
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<PAGE>
made by the independent members of the Board of Directors of Holdings).
For purposes hereof, the independent members of the Board of
Directors of Holdings shall not include any employee or affiliate of S&H, any
officer of Holdings or any member of the Board of Directors that is affiliated
with any entity that is receiving or is entitled to receive any payment from
Holdings under this Agreement or any payment from S&H in connection with this
Agreement. The term of this Agreement may be terminated prior to the
expiration of the initial term or the then current one-year term by written
notice to the other party as follows: (i) by Holdings for Cause, (ii) by S&H
for Cause, (iii) by Holdings for any reason other than Cause, upon at least 180
days prior written notice, (iv) by S&H for any reason other than (A) Cause or
(B) because of a Change of Control, upon at least 180 days prior written
notice, or (v) by S&H at any time after a Change of Control.
(b) Upon termination by Holdings of any Affiliate Management
Services Agreement for any reason other than "Cause" as defined in such
Affiliate Management Services Agreement, this Agreement shall be deemed to have
been terminated by Holdings pursuant to clause (iii) of the last sentence of
Section 4(a) hereof, effective as of the date of termination of such Affiliate
Management Services Agreement. Upon termination by S&H of any
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<PAGE>
Affiliate Management Services Agreement for any reason other than "Cause" or
because of a "Change of Control," each as defined in such Affiliate Management
Services Agreement, this Agreement shall be deemed to have been terminated by
S&H pursuant to clause (iv) of the last sentence of Section 4(a) hereof,
effective as of the date of termination of such Affiliate Management Services
Agreement.
(c) For purposes of this Section 4, a "Change of Control"
shall be deemed to have occurred when a majority of the Board of Directors of
Holdings shall not consist of "Continuing Holdings Directors," which shall mean
(i) the directors of Holdings on the date hereof and (ii) each other director
of Holdings who is either recommended, approved or nominated for election, or
is elected, to the Board of Directors of Holdings by a majority of the other
Continuing Holdings Directors.
5. Events of Default.
-----------------
Any one of the following defaults shall constitute an Event of
Default (other than by reason of an Event of Force Majeure in the case of each
of Paragraphs 5(a)-(f)):
(a) (i) The failure or refusal of S&H to comply with or
perform its obligations under this Agreement if such failure or refusal
continues unremedied for more than 60 days after written notice of the
existence of such failure or refusal
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<PAGE>
shall have been given to S&H by Holdings or (ii) the failure or refusal of
Holdings to comply with or perform its obligations under this Agreement if such
failure or refusal continues unremedied for more than 60 days after written
notice of the existence of such failure or refusal shall have been given to
Holdings by S&H;
(b) S&H or Holdings is declared insolvent or bankrupt by
any court of competent jurisdiction, or a voluntary petition in bankruptcy is
filed in any court of competent jurisdiction by either of them;
(c) An involuntary petition in bankruptcy is filed in any
court of competent jurisdiction against S&H or Holdings and within forty-five
(45) days thereafter shall not have been dismissed or stayed (and, in the event
of any such stay, such stay shall not have been set aside and the petition
dismissed within forty-five (45) days after the stay shall have been granted);
(d) A trustee or receiver is appointed for S&H or Holdings
and remains undischarged for more than forty-five (45) days after being
appointed;
(e) A proceeding seeking a reorganization, arrangement,
liquidation or dissolution of S&H or Holdings is instituted in a court of
competent jurisdiction and remains
-13-
<PAGE>
undismissed for more than forty-five (45) days after being instituted;
(f) S&H or Holdings voluntarily seeks any such
reorganization or arrangement or makes an assignment for the benefit of
creditors; or
(g) Death or permanent disability of both Horrigan and
Silver. For the purposes of this Agreement, "permanent disability" shall mean
the inability of Horrigan or Silver, as the case may be, by reason of illness
or injury to perform substantially all of his duties as Chairman of the Board
or as President of Holdings (or in performing his duties in any other office in
Holdings or any of its respective Affiliates to which he may be duly appointed)
during any continuous period of one hundred eighty (180) days.
6. Cause.
-----
(a) The occurrence of any of the following shall constitute
"Cause" for purposes of clause (i) of the last sentence of Section 4(a) of this
Agreement:
(i) An Event of Default, except for the Event of
Default described in Section 5(a)(ii) of this Agreement; or
(ii) Criminal conduct or gross negligence by S&H in
the performance of the Services; or
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<PAGE>
(iii) The termination of any Affiliate Management
Services Agreement by Silgan, Containers or Plastics, as the case may be,
for "Cause" as defined therein.
(b) The occurrence of either of the following shall
constitute "Cause" for purposes of clause (ii) of the last sentence of Section
4(a) of this Agreement:
(i) An Event of Default, except for the Event of
Default described in Section 5(a)(i) of this Agreement; or
(ii) The termination of any Affiliate Management
Services Agreement by S&H for "Cause" as defined therein.
7. Remedies.
--------
(a) In the event this Agreement is terminated (or deemed
terminated) by Holdings prior to June 30, 1999 for any reason other than for
Cause, Holdings shall be required to pay to S&H as liquidated damages, within
thirty (30) days of such termination, the present value of the sum of (i) the
Monthly Management Fee (or any portion thereof) that would have been payable by
Holdings to S&H for each month (or any portion thereof) from the date of such
termination through June 30, 1999 and (ii) the Quarterly Management Fee (or any
portion thereof)
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<PAGE>
that would have been payable by Holdings to S&H for each quarter (or portion
thereof) from the date of such termination through June 30, 1999, in each case
calculated based on a discount rate of eight percent (8%) per annum.
(b) In the event this Agreement is terminated by Holdings
after June 30, 1999 for any reason other than for Cause, Holdings shall be
required to pay to S&H as liquidated damages, within thirty (30) days of such
termination, the present value of the sum of (i) the Monthly Management Fee (or
any portion thereof) that would have been payable by Holdings to S&H for each
month (or any portion thereof) from the date of such termination through the end
of the then current one-year term and (ii) the Quarterly Management Fee (or any
portion thereof) that would have been payable by Holdings to S&H for each
quarter (or portion thereof) from the date of such termination through the end
of the then current one-year term, in each case calculated based on a discount
rate of eight percent (8%) per annum.
(c) The amounts described in clauses (i) and (ii) of
Sections 7(a) and 7(b) shall be calculated based upon the projections of
Holdings' EBDIT for the period from the date of such termination through June
30, 1999 or through the end of the then current one-year term, as the case may
be, which projections are (1) included in Holdings' most recently prepared
forecast
-16-
<PAGE>
statements required under the Credit Agreement or (2) if the Credit
Agreement is not in existence, included in Holdings' most recently prepared
forecast statements presented to its Board of Directors (provided such forecast
statements are prepared on a basis consistent with the requirements under the
Credit Agreement that was in effect last).
8. Force Majeure.
-------------
The term "Event of Force Majeure" as used herein shall mean any
failure of a party to perform any of its obligations hereunder if such failure
is due to circumstances beyond its control, including but not limited to, any
requisition by any government authority, act of war, strike, boycott, lockout,
picketing, riot, sabotage, civil commotion, insurrection, epidemic, disease,
act of God, fire, flood, accident, explosion, earthquake, storm, failure of
public utilities or common carriers, mechanical failure, embargo, or
prohibition imposed by any governmental body or agency having authority over
the party, which would have constituted an Event of Default but for the fact
that such events constituted an Event of Force Majeure. The party affected by
an Event of Force Majeure shall give prompt notice thereof to the other parties
hereto and each party shall use its best efforts to minimize the duration and
consequences of, and to eliminate, any such Event of Force Majeure. At such
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<PAGE>
time as an Event of Force Majeure no longer exists, the respective obligations
of the parties hereto shall be reinstated and this Agreement shall continue in
full force and effect.
9. Insurance.
---------
S&H agrees that for the term of this Agreement it shall cause
Holdings to obtain and maintain insurance for such risks and in such amounts
similar to companies of comparable size which are engaged in similar business
activities, provided that S&H shall be deemed to be in compliance with the
--------
provisions of this paragraph if Holdings maintains a level of insurance which
complies with the applicable terms of the Credit Agreement.
10. Indemnification.
---------------
(a) Holdings shall indemnify to the fullest extent permitted
by law (as now or hereafter in effect) S&H and each of its Affiliates,
officers, directors, employees, consultants and subcontractors, and any Person
controlling S&H and each of its Affiliates or any such consultant or
subcontractor (each, an "S&H Indemnitee," and collectively, the "S&H
Indemnitees") to the extent that any S&H Indemnitee is made, or threatened to be
made, a defendant to, or is involved in any manner in, any action, suit or
proceeding (whether civil, criminal, administrative, investigative or otherwise)
by reason
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<PAGE>
of the fact that such S&H Indemnitee is or was an agent of Holdings.
(b) In furtherance and not in limitation of the powers
conferred by statute:
(i) Holdings may purchase and maintain insurance on
behalf of any S&H Indemnitee as an agent of Holdings against any
liability asserted against any S&H Indemnitee and incurred by any S&H
Indemnitee in such capacity, or arising out of any S&H Indemnitee's
status as such, whether or not Holdings would have the power to indemnify
such S&H Indemnitee against such liability under the provisions of law;
and
(ii) Holdings may create a trust fund, grant a
security interest and/or use other means (including, without limitation,
letters of credit, surety bonds and/or other similar arrangements), as
well as enter into contracts providing indemnification to the full extent
authorized or permitted by law and including as part thereof provisions
with respect to any or all of the foregoing to ensure the payment of such
amounts as may become necessary to effect indemnification as provided
therein, or elsewhere.
(c) The manner of any indemnification under this Agreement
shall be in accordance with Section 2.8 of the
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<PAGE>
Stockholders Agreement dated as of December 21, 1993 among Silver, Horrigan, The
Morgan Stanley Leveraged Equity Fund II, L.P., Bankers Trust New York
Corporation, First Plaza Group Trust and Holdings (as amended from time to time,
the "Stockholders Agreement").
11. Noncompetition.
--------------
(a) During the term of this Agreement, S&H hereby agrees
that it will not, directly or indirectly, own, render services to, manage,
operate, control, or participate in the ownership, management, operation or
control of a business that is engaged in any "Business". For purposes hereof,
the term "Business" shall mean the manufacture and sale anywhere in the world
of consumer goods packaging products.
(b) In the event that this Agreement is terminated by S&H
pursuant to clause (iv) of the last sentence of Section 4(a) hereof, S&H hereby
agrees that, for a period of one year beginning on the date of such
termination, it will not, directly or indirectly: (i) own, render services to,
manage, operate, control, or participate in the ownership, management,
operation or control of a business that is engaged in any Business; (ii)
interfere with any customer or supplier relationship between Holdings and/or
its subsidiaries and any other person or business entity; or (iii) disclose or
use any
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<PAGE>
confidential or proprietary information relating to Holdings and its
subsidiaries' businesses, except for any information already in the public
domain through no act of S&H and except as may be required by law or
governmental or court order.
(c) Notwithstanding anything herein to the contrary, nothing
herein, however, shall restrict S&H from making any investments in any company
whose stock is listed on a national securities exchange or actively traded in
the over-the-counter markets, so long as such investment does not give S&H the
right to control or influence the policy decisions of any such company engaged
in any Business.
(d) If any particular provision or portion of this Section
11 shall be adjudicated to be invalid or unenforceable, this Section 11 shall
be deemed amended to delete therefrom such provision or portion adjudicated to
be invalid or unenforceable, and such amendment will apply only with respect to
the operation of such provision or portion in the particular jurisdiction in
which such adjudication was sought.
(e) The parties recognize that the performance of the
obligations under this Section 11 by S&H is special, unique and extraordinary
in character, and that in the event of a breach, or threatened breach, of any
of the terms and conditions of this Section 11, Holdings shall be entitled, if
it so elects,
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<PAGE>
in addition to any other remedies available to Holdings, to enforce the
specific performance thereof or to enjoin any breach thereof.
12. Notices.
-------
All notices and other communications required by or specifically
provided for in this Agreement shall be in writing and shall be deemed to have
been given (a) when delivered in person, (b) when sent by telex or telecopier
with answerback received, or (c) seventy-two (72) hours after having been
deposited in the U.S. mails, certified mail with return receipt requested and
postage prepaid, and in any case addressed to the party for which it is intended
at that party's address as set forth below, or at such other address as the
addressee shall have designated by notice hereunder to the other party.
If to S&H:
S&H Inc.
4 Landmark Square
Suite 400
Stamford, CT 06901
Attention: R. Philip Silver
If to Holdings:
Silgan Holdings Inc.
4 Landmark Square
Suite 400
Stamford, CT 06901
Attention: R. Philip Silver
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<PAGE>
If a notice is sent to any of the above, a copy shall
be sent to the following:
Winthrop, Stimson, Putnam & Roberts
Financial Centre
695 East Main Street
P.O. Box 6760
Stamford, CT 06904-6760
Attention: Frank W. Hogan, III, Esq.
Any notice or request sent by telecopier or similar facsimile telecommunication
shall be confirmed promptly by the sending of a copy of such notice or request
to the addressee thereof by prepaid certified mail, return receipt requested.
13. Definitions.
-----------
Terms not defined herein which are defined in the Stockholders
Agreement shall have the meanings ascribed to them therein.
14. Amendment; Assignment; Binding Effect.
-------------------------------------
This Agreement may be amended or modified only by a written
instrument signed by the parties hereto. No party shall assign or transfer
this Agreement, in whole or in part, or any of such party's rights or
obligations hereunder, to any other person or entity without the prior written
consent of the other party hereto, except that S&H may transfer or assign all
of its rights and obligations hereunder to any entity directly or indirectly
succeeding to S&H by merger, consolidation or reorganization.
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<PAGE>
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective permitted assigns.
15. Waiver; Severability.
--------------------
The failure of a party to insist in any instance upon the strict
and punctual performance of any provision of this Agreement shall not
constitute a continuing waiver of such provision. No party shall be deemed to
have waived any right, power, or privilege under this Agreement or any
provisions hereof unless such waiver shall have been in writing and duly
executed by the party to be charged with such waiver, and such waiver shall be
a waiver only with respect to the specific instance involved and shall in no
way impair the rights of the waiving party or the obligations of any other
party in any other respect or at any other time. If any provision of this
Agreement shall be waived, or be invalid, illegal or unenforceable, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain binding and in full force and effect.
16. Relationship of the Parties.
---------------------------
In all matters relating to this Agreement, each party hereto shall
be solely responsible for the acts of its employees, and employees of one party
shall not be considered employees of the other party. Except as otherwise
provided herein, no party
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<PAGE>
shall have any right, or authority to create any obligation, express or implied,
on behalf of any other party.
17. Governing Law.
-------------
This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without giving effect to its conflict of
laws rules and laws.
18. Entire Agreement; Termination of Original Management
-----------------------------------------------------
Services Agreement.
- ------------------
This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof, and supersedes all prior
agreements and understandings, either oral or written, with respect thereto.
Upon the execution and delivery of this Agreement, the Original Management
Services Agreement shall be terminated and shall be of no effect whatsoever.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
S&H INC.
By:
-----------------------------------
Title:
SILGAN HOLDINGS INC.
By:
-----------------------------------
Title:
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<PAGE>
SCHEDULE I
(000's Omitted)
Scheduled Amount 1/ Maximum Amount 1/
---------------- --------------
1997 $ 89,500 1997 $ 100,504
1998 95,500 1998 102,964
1999 101,500 1999 105,488
2000 108,653 2000 108,653
________________________
1. For each calendar year after 2000, the Scheduled Amount for such calendar
year shall be an amount equal to the Maximum Amount for such calendar year.
For each calendar year after 2000, the Maximum Amount for such calendar year
shall be equal to one hundred and three percent (103%) of the Maximum Amount
for the prior calendar year.
<PAGE>
EXHIBIT 10.46
AMENDMENT TO STOCKHOLDERS AGREEMENT
This Amendment (this "Amendment") to Stockholders Agreement is made
and entered into as of this ___ day of February, 1997, by and among R. Philip
Silver ("Silver"), D. Greg Horrigan ("Horrigan"), The Morgan Stanley Leveraged
Equity Fund II, L.P. ("MS Equity"), Bankers Trust New York Corporation
("BTNY"), and Silgan Holdings Inc. (the "Company").
W I T E S S E T H:
- - - - - - - - -
WHEREAS, Silver, Horrigan, MS Equity, BTNY and the Company are
parties to the Stockholders Agreement dated as of December 21, 1993 (the
"Stockholders Agreement"); and
WHEREAS, First Plaza Group Trust, who was a party to the
Stockholders Agreement, no longer holds any shares of capital stock of the
Company and therefore is no longer a party to, and is not subject to the terms
and provisions of, the Stockholders Agreement; and
<PAGE>
WHEREAS, Silver, Horrigan, MS Equity, BTNY, and the Company to
desire to amend the Stockholders Agreement as provided in this Amendment.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows.
1. Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Stockholders Agreement.
2. Article II of the Stockholders Agreement is hereby amended by
adding the following new section immediately following Section 2.11 of the
Stockholders Agreement:
"2.12 Rights of Partners of MS Equity. Upon a MSLEF
-------------------------------
Distribution, all of the partners of MS Equity, together and not individually
(collectively, the "MS Selling Stockholder"), shall be entitled to exercise any
remaining rights, if any, of MS Equity under this Article II with respect to
Demand Registrations. In furtherance thereof, the MS Selling Stockholder shall
be deemed to be a "Selling Stockholder" under the provisions of Article II of
the Stockholders Agreement in connection with the exercise any of such
remaining rights, may exercise any such remaining rights only in accordance
with the terms of this Article II, and shall be subject to all obligations of
MS Equity provided for in this Article II relating to the exercise of any such
remaining rights. Any request for a Demand
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<PAGE>
Registration by the MS Selling Stockholder under this Article II shall be made
only by Morgan Stanley Group Inc. ("Morgan Stanley") on behalf of the MS Selling
Stockholders and may only be made if shares of Common Stock of the Company owned
by Morgan Stanley are included in such Demand Registration. Additionally, Morgan
Stanley, and only Morgan Stanley and no other partner of MS Equity, shall have
the power and authority to exercise all rights, deliver all notices and
requests, make all decisions and do all other things required or permitted to be
exercised, delivered, made or done by or on behalf of the MS Selling
Stockholder. Upon and after a MSLEF Distribution, the obligation of the Company
to provide MS Equity with any notices, documents or information as provided in
this Article II shall be satisfied if the Company provides such documents and
information to Morgan Stanley. If the MS Selling Stockholder is required to
execute and deliver an underwriting agreement or any other agreements or
documents pursuant to this Article II, then each partner of MS Equity
participating in the applicable registration shall be required to execute and
deliver such underwriting agreement and any such other agreements and
documents."
3. Section 3.3 of the Stockholders Agreement is hereby amended by
adding the following new paragraph (c) immediately following paragraph (b)
thereof:
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<PAGE>
"(c) Notwithstanding anything else in this Agreement, each
of Silver and Horrigan may pledge his shares of Common Stock to a lender
or lenders reasonably acceptable to the Company to secure a loan or loans
to him. In the event of any proposed foreclosure of such pledge, such
shares will be subject to the right of first refusal of the Section
3.4(c) Offerees (as defined below) as provided in Section 3.4(c)."
4. This Amendment amends the Stockholders Agreement only to the
extent specifically provided herein, and does not constitute an amendment or
modification of any other provision of the Stockholders Agreement.
5. Each of the parties to this Amendment represents and warrants
that this Amendment has been duly authorized, executed and delivered by such
party and constitutes the legal, valid and binding obligation of such party,
enforceable against it in accordance with its terms.
6. This Amendment may be executed in any number of counterparts,
each of which when so executed shall be deemed an original, and all of which,
taken together, shall constitute one and the same agreement. This Amendment
shall become effective as of the date hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first written above.
--------------------------------------
R. Philip Silver
--------------------------------------
D. Greg Horrigan
THE MORGAN STANLEY LEVERAGED EQUITY FUND
II, L.P.
By: Morgan Stanley Leveraged Equity Fund
II, Inc. (General Partner)
By:
---------------------------------
Name:
Title:
BANKERS TRUST NEW YORK CORPORATION
By:
---------------------------------
Name:
Title:
SILGAN HOLDINGS INC.
By:
---------------------------------
Name:
Title:
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<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the references to our firm under the captions "Selected Historical
and Pro Forma Financial Information" and "Experts" and to the use of our report
dated March 8, 1996, except for Note 20, as to which date is ____________, 1997
with respect to the consolidated financial statements of Silgan Holdings Inc.
included in Amendment No. 3 to the Registration Statement (Form S-2,
No. 333-11989) and related Prospectus of Silgan Holdings Inc. for the
registration of _________ shares of its common stock and to the incorporation by
reference therein of our report dated March 8, 1996 with respect to schedules of
Silgan Holdings Inc. included in its Annual Report (Form 10-K) for the year
ended December 31, 1995, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Stamford, Connecticut
____________, 1997
The foregoing consent is in the form that will be signed upon the initial public
offering described in Note 20 to the consolidated financial statements.
/s/ ERNST & YOUNG LLP
Stamford, Connecticut
January 24, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Amendment No. 3 to the Registration Statement on Form
S-2 of Silgan Holdings Inc. of our report dated September 14, 1995 relating
to the financial statements of the Food Metal & Specialty Division of American
National Can Company, as of December 31, 1994 and 1993 and for each of the three
years in the period ended December 31, 1994, which appears in the Current Report
on Form 8-K/A of Silgan Holdings Inc. dated October 16, 1995. We also consent
to the reference to us under the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
January 24, 1997
<PAGE>
EXHIBIT 99.1
RESTATED CERTIFICATE OF INCORPORATION
OF
SILGAN HOLDINGS INC.
PURSUANT TO SECTIONS 242 AND 245
OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
SILGAN HOLDINGS INC., a Delaware corporation, the original Certificate
of Incorporation of which was filed with the Secretary of State of the State of
Delaware on April 6, 1989, HEREBY CERTIFIES that this Restated Certificate of
Incorporation, restating, integrating and amending its Certificate of
Incorporation, was duly proposed by its Board of Directors and adopted by its
stockholders in accordance with Sections 242 and 245 of the General Corporation
Law of the State of Delaware, and that the capital of the Corporation is not
being reduced under or by reason of any amendment in this Restated Certificate
of Incorporation.
FIRST: The name of this corporation (the "Corporation") is SILGAN
HOLDINGS INC.
SECOND: The address of the registered office of the Corporation in
the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle. The name of its registered agent at
such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware (the "GCL"), and, in general, to
possess and exercise all the powers and privileges granted by the GCL or by any
other law or by this Restated Certificate of Incorporation, together
<PAGE>
with any powers incidental thereto, so far as such powers and privileges are
necessary or convenient to the conduct, promotion or attainment of the business
or purposes of the Corporation.
FOURTH: A. The number of directors of the Corporation constituting
the entire Board of Directors shall be six. The Board of Directors shall be
divided into three equal classes, with the term of office of the first class
(the "Class I Directors") to expire at the 1998 annual meeting of stockholders,
the term of office of the second class (the "Class II Directors") to expire at
the 1999 annual meeting of stockholders and the term of office of the third
class (the "Class III Directors") to expire at the 2000 annual meeting of
stockholders. After the filing of this Restated Certificate of Incorporation
with the Secretary of State of the State of Delaware, the stockholders of the
Corporation shall elect the Board of Directors of the Corporation at the 1997
annual meeting of stockholders or by the consent in writing, in lieu of the 1997
annual meeting of stockholders, of the holders of outstanding stock of the
Corporation having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Any vacancies in the Board of
Directors for any reason, and any directorships resulting from any increase in
the number of directors, may be filled only by the Board of Directors (and not
by the stockholders), acting by a majority of the directors then in office, and
any directors so chosen shall hold office until the next election of the class
for which such directors shall have been chosen and until their successors shall
be elected and qualified. Notwithstanding the foregoing, and except as otherwise
required by law, whenever the holders of any one or more series of Preferred
Stock (as defined in Article SIXTH) shall have the right, voting separately as a
class, to elect one or more directors of the Corporation, the terms of the
director or directors elected by such holders shall expire at the next
succeeding annual meeting of stockholders. Subject to the foregoing, at each
annual meeting of stockholders the successors to the class of directors whose
term shall then expire shall be elected to hold office for a term expiring at
the third succeeding annual meeting.
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<PAGE>
B. At all meetings of the Board of Directors, a majority of the
Directors then in office shall be required to constitute a quorum ("Quorum") for
the transaction of business. The approval of a majority of the entire Board of
Directors, at a meeting at which a Quorum is present and acting throughout,
shall be required to approve all matters submitted to the Board of Directors;
provided, however, that the approval of a majority of the members of any
- -------- -------
committee of the Board of Directors shall be required to approve all matters
submitted to such committee.
C. Notwithstanding any other provisions of this Certificate of
Incorporation or the By-Laws of the Corporation (and notwithstanding the fact
that some lesser percentage may be specified by law, this Certificate of
Incorporation or the By-Laws of the Corporation), any director or the entire
Board of Directors of the Corporation may be removed at any time, but only for
cause and only by the affirmative vote of the holders of 75% or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class) cast at a meeting of the stockholders called for that purpose.
Notwithstanding the foregoing, and except as otherwise required by law, whenever
the holders of any one or more series of Preferred Stock shall have the right,
voting separately as a class, to elect one or more directors of the Corporation,
the provisions of Section C of this Article shall not apply with respect to the
director or directors elected by such holders of Preferred Stock.
D. There shall be an Audit Committee consisting of two or more of the
directors of the Corporation, who shall
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<PAGE>
perform such functions as shall be established by the Board of Directors.
FIFTH: The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors, provided that the
--------
Corporation may retain such qualified persons (as determined by the Board of
Directors) to provide the Corporation with general management, supervision and
administrative services relating to the operations of the Corporation.
Except as specifically authorized by the Board of Directors, approval
of the following actions shall not be delegated to any officer, employee or
agent of the Corporation:
1. Amendment of the Certificate of Incorporation or By-Laws of the
Corporation or any of its subsidiaries.
2. Issuance, sale, purchase or redemption of any capital stock,
warrants, options or other securities of the Corporation or any of its
subsidiaries (other than, in the case of any issuance or sale, to the
Corporation or any direct or indirect wholly owned subsidiary of the
Corporation) except as may be otherwise provided in this Restated Certificate of
Incorporation.
3. Sale of assets other than inventory to or from the Corporation or
any of its subsidiaries in excess of $2 million (i) in one or a series of
related transactions (regardless of the period of time in which such transaction
or series of related transactions take place) or (ii) in any number of
transactions within a six-month period.
4. Merger, consolidation, dissolution or liquidation of the
Corporation or any of its subsidiaries.
-4-
<PAGE>
5. Filing of any petition by or on behalf of the Corporation seeking
relief under the federal bankruptcy act or similar relief under any law or
statute of the United States or any state thereof.
6. Setting aside, declaration or making of any payment or
distribution by way of dividend or otherwise to the Corporation's stockholders
(or setting dividend policy).
7. Incurrence (other than in the ordinary course of business) of new
indebtedness (including capitalized leases, but excluding indebtedness incurred
pursuant to debt instruments of the Corporation in existence on the date hereof
and excluding indebtedness and guarantees thereof incurred under the Bank
Financing (as defined in Article NINTH) pursuant to commitments approved by the
Board of Directors) or any fixed or contingent liabilities in excess of $2
million.
8. Creation or incurrence of a lien or encumbrance on the property of
the Corporation or any of its subsidiaries, except for liens relating to the
Bank Financing or other minor liens, including liens for taxes or those arising
by operation of law, permitted to exist under the terms of the Bank Financing.
9. Guarantees in excess of $1 million of payment by or performance of
obligations of third parties other than in the ordinary course of business.
10. The Corporation's institution of, termination or settlement of
litigation not in the ordinary course of the Corporation's business (in each
case where such litigation represents a case or controversy in excess of $2
million).
11. Surrendering or abandoning any property, tangible or intangible,
or any rights having a book value in excess of $1 million.
-5-
<PAGE>
12. Except as set forth in subsection 16 below with respect to leases
which are not capitalized, any commitment of the Corporation (other than in the
ordinary course of its business) which creates a liability or commitment in
excess of $2 million.
13. Capital expenditures in excess of the amounts permitted under the
Bank Financing.
14. Donations of money or property in excess of $100,000 in a single
year.
15. Any investment of the Corporation or any of its subsidiaries in
another corporation, partnership or joint venture in excess of $2 million (in
one or a series or related transactions or in any number of transactions within
six months).
16. Entering into any lease (other than a capitalized lease which
shall be subject to the limitation set forth in subsection 12 above) of any
assets of the Corporation located in any one place having a book value in excess
of $4 million, or in excess of $1 million if the lease has a term of more than
five years.
17. Entering into agreements or material transactions between the
Corporation and a director or officer of any of the following companies or their
Affiliates (as defined in Article NINTH): the Corporation and The Morgan Stanley
Leveraged Equity Fund II, L.P., a Delaware limited partnership.
18. Replacement of independent accountants for the Corporation or any
of its subsidiaries.
19. Modification of significant accounting methods, practices,
procedures and policies.
20. Removal of officers.
-6-
<PAGE>
21. Termination of, or amendment or waiver of any provision of, the
Amended and Restated Management Services Agreement between the Corporation and
S&H Inc.
SIXTH: The total number of shares of capital stock which the
Corporation shall have authority to issue is 110,000,000 shares, consisting of
100,000,000 shares of common stock, par value $.01 per share (the "Common
Stock"), and 10,000,000 shares of preferred stock, par value $.01 per share (the
"Preferred Stock").
A. The rights, privileges and powers, including the voting powers, of
each share of the Common Stock shall be identical, with each share of the Common
Stock being entitled to one vote on all matters to come before the stockholders
of the Corporation. Subject to any voting rights that may be conferred upon the
holders of any series of the Preferred Stock established by the Board of
Directors of the Corporation pursuant to authority herein provided, and except
as otherwise provided herein or by law, the affirmative vote of the holders of
not less than a majority of the outstanding shares of Common Stock shall be
required for the approval of any matter to come before the stockholders of the
Corporation. Except as expressly provided in the third sentence of Article
FOURTH hereof, no action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be taken
without a meeting, and the stockholders of the Corporation may not consent in
writing, without a meeting, to the taking of any action.
B. The Board of Directors of the Corporation may cause dividends to
be paid to the holders of shares of Common Stock out of funds legally available
for the payment of dividends by declaring an amount per share as a dividend.
When and as dividends are declared, other than dividends declared with
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<PAGE>
respect to any outstanding Preferred Stock, whether payable in cash, in property
or in shares of stock of the Corporation, the holders of Common Stock shall be
entitled to share equally, share for share, in such dividends.
C. Shares of Preferred Stock of the Corporation may be issued from
time to time in one or more classes or series, each of which class or series
shall have such distinctive designation or title as shall be fixed by the Board
of Directors of the Corporation prior to the issuance of any shares thereof.
Each such class or series of Preferred Stock shall have such voting powers, full
or limited, or no voting powers, and such preferences and relative,
participating, optional or other special rights and such qualifications,
limitations or restrictions thereof, as shall be stated in such resolution
providing for the issue of such class or series of Preferred Stock as may be
adopted from time to time by the Board of Directors prior to the issuance of any
shares thereof pursuant to the authority hereby expressly vested in it, all in
accordance with the laws of the State of Delaware.
SEVENTH: A. The Executive Officers of the Corporation shall be the
Chairman of the Board of Directors, who shall preside at all meetings of the
stockholders and of the Board of Directors, and the President. All officers of
the Corporation shall serve until voluntary resignation or retirement, or
removal by the Board of Directors in accordance with the provisions set forth
herein. Any number of offices may be held by the same person, unless otherwise
prohibited by law, this Restated Certificate of Incorporation or the By-Laws of
the Corporation. The officers of the Corporation need not be stockholders of
the
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<PAGE>
Corporation nor, except in the case of the Chairman of the Board of Directors,
need such officers be directors of the Corporation.
B. The Chairman of the Board and the President of the Corporation
shall be nominated and elected to their positions, and may be removed from their
positions, by a majority of the Board of Directors. All of the other officers
of the Corporation shall be nominated by the Chairman of the Board and the
President, and such other officers shall be elected to their positions, and may
be removed from their positions, by a majority of the Board of Directors.
C. All officers of the Corporation shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors; and all officers of the
Corporation shall hold office until their successors are chosen and qualified,
or until their earlier resignation or removal. The salaries of all officers of
the Corporation shall be fixed by the Board of Directors.
EIGHTH: In furtherance and not in limitation of the powers conferred
by statute, the By-Laws of the Corporation may be altered, amended or repealed
in whole or in part, or new By-Laws may be adopted by approval of a majority of
the Board of Directors voting at a meeting of the Board of Directors at which a
Quorum is present and acting throughout.
NINTH: As used in this Restated Certificate of Incorporation, the
following terms shall have the meanings indicated below:
1. "Affiliate" shall mean with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common control
with such Person. For the purpose of
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<PAGE>
this definition, (i) the term "control" (including with correlative meanings,
the terms "controlling", "controlled by" and "under common control with"), as
used with respect to any person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of management and
policies of such Person, whether through the ownership of voting securities or
by contract or otherwise, and (ii) the term "Person" shall mean any individual,
partnership, corporation, joint venture, firm, limited liability company,
association, trust or other enterprise or any government or political
subdivision or any agency, department or instrumentality thereof.
2. "Bank Financing" shall mean the Credit Agreement, dated as of
August 1, 1995, among Silgan Corporation, Silgan Containers Corporation, Silgan
Plastics Corporation, the lenders from time to time party thereto, Bank of
America Illinois, as Documentation Agent and a Co-Arranger, and Bankers Trust
Company, as Administrative Agent and a Co-Arranger, as in effect from time to
time, and any refinancings, renewals, amendments or extensions thereof or
additional borrowings thereunder.
TENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Restated Certificate of Incorporation in
the manner now or hereafter prescribed by law, provided that (i) the resolution
--------
approving such amendment, alteration, change or repeal be adopted by the Board
of Directors by approval of a majority of the entire Board of Directors, at a
meeting at which a Quorum is present and acting throughout and (ii) the proposed
amendment, alteration, change or repeal be approved by a majority of the
outstanding shares of Common Stock.
-10-
<PAGE>
ELEVENTH: A. The Corporation shall indemnify to the fullest extent
permitted by law (as now or hereafter in effect) any person, his testator or
intestate, made, or threatened to be made, a defendant or involved in any manner
in any action, suit or proceeding (whether civil, criminal, administrative,
investigative or otherwise) by reason of the fact that he, is or was a director,
officer, employee or agent of the Corporation or by reason of the fact that such
director, officer, employee or agent, at the request of the Corporation, is or
was serving any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, in any capacity. The payment of any amounts
to any person pursuant to this Article ELEVENTH shall subrogate the Corporation
to any right such person may have against any other person or entity. The
rights conferred in this Article ELEVENTH shall be contract rights. Nothing
contained herein shall affect any rights to indemnification to which employees
other than directors and officers may be entitled to by law. No amendment or
repeal of this paragraph A of Article ELEVENTH shall apply to or have any effect
on any right to indemnification provided hereunder with respect to any acts or
omissions occurring prior to such amendment or repeal.
B. No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty by such a director as a director. Notwithstanding the foregoing sentence,
a director shall be liable to the extent provided by applicable law (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the
GCL, or (iv) for any
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<PAGE>
transaction from which such director derived an improper personal benefit. No
amendment to or repeal of this paragraph B of Article ELEVENTH shall apply to or
have any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
C. In furtherance and not in limitation of the powers conferred by
statute:
(i) the Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Corporation, or is serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
him against such liability under the provisions of law; and
(ii) the Corporation may create a trust fund, grant a security
interest and/or use other means (including, without limitation, letters of
credit, surety bonds and/or other similar arrangements), as well as enter into
contracts providing indemnification to the full extent authorized or permitted
by law and including as part thereof provisions with respect to any or all of
the foregoing to ensure the payment of such amounts as may become necessary to
effect indemnification as provided therein, or elsewhere.
TWELFTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws of the Corporation may provide. The books of
the Corporation may be
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<PAGE>
kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
IN WITNESS WHEREOF, SILGAN HOLDINGS INC. has caused this Restated
Certificate of Incorporation to be executed in its corporate name by its
Chairman and attested by its Secretary on the ___ day of February, 1997.
SILGAN HOLDINGS INC.
By: ------------------------------------
Name:
Title:
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