<PAGE>
Page 1 of 26
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) of the Securities Exchange
Act of 1934 for the Quarter Ended September 30, 1998 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) of the Securities Exchange
Act of 1934 for the Period ____________ to ____________.
Commission file number 000-22117
SILGAN HOLDINGS INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1269834
(State of Incorporation) (I.R.S. Employer Identification Number)
4 Landmark Square
Stamford, Connecticut 06901
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (203) 975-7110
Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
As of October 31,1998, the number of shares outstanding of the registrant's
common stock, $0.01 par value, was 19,102,814.
<PAGE>
Page 2 of 26
Part I. Financial Information
Item 1. Financial Statements
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
Sept. 30, Sept. 30, Dec. 31,
1998 1997 1997
---- ---- ----
ASSETS (unaudited) (unaudited) (audited)
Current assets:
<S> <C> <C> <C>
Cash and cash equivalents ......... $ 8,135 $ 7,727 $ 53,718
Accounts receivable, net .......... 294,271 251,893 125,837
Inventories ....................... 247,384 216,859 209,963
Prepaid expenses and other current
assets .......................... 9,107 8,547 9,997
----------- ----------- -----------
Total current assets .......... 558,897 485,026 399,515
Property, plant and equipment, net ..... 663,331 522,468 531,765
Other non-current assets ............... 146,317 126,623 119,287
----------- ----------- -----------
$ 1,368,545 $ 1,134,117 $ 1,050,567
=========== =========== ===========
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable ............ $ 128,959 $ 57,781 $ 142,281
Accrued payroll and related costs . 41,988 41,866 40,621
Accrued interest payable .......... 17,192 15,743 10,939
Accrued expenses and other current
liabilities .................... 23,770 44,681 20,871
Bank revolving loans .............. 131,328 160,650 --
Current portion of long-term debt . 1,730 1,000 20,218
----------- ----------- -----------
Total current liabilities ..... 344,967 321,721 234,930
Long-term debt ......................... 982,097 805,206 785,036
Other long-term liabilities ............ 83,454 78,357 97,849
Deficiency in stockholders' equity:
Common stock ...................... 199 189 189
Additional paid-in capital ........ 118,273 110,935 110,935
Accumulated deficit ............... (139,459) (181,527) (177,864)
Accumulated other comprehensive
loss ............................ (713) (764) (508)
Treasury stock, at cost ........... (20,273) -- --
----------- ----------- -----------
Total deficiency in
stockholders'equity ......... (41,973) (71,167) (67,248)
----------- ----------- -----------
$ 1,368,545 $ 1,134,117 $ 1,050,567
=========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE>
Page 3 of 26
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per common share amounts)
<TABLE>
<CAPTION>
Three Months Ended
------------------
Sept. 30, Sept. 30,
1998 1997
---- ----
<S> <C> <C>
Net sales ............................................. $ 561,085 $ 493,293
Cost of goods sold .................................... 486,035 424,320
--------- ---------
Gross profit ..................................... 75,050 68,973
Selling, general and administrative expenses .......... 18,055 15,993
--------- ---------
Income from operations ........................... 56,995 52,980
Interest expense and other related financing costs .... 22,500 20,884
--------- ---------
Income before income taxes ....................... 34,495 32,096
Income tax provision .................................. 12,947 10,270
--------- ---------
Income before extraordinary charge ............... 21,548 21,826
Extraordinary charge relating to early
extinguishment of debt, net of taxes ............... -- (7,358)
--------- ---------
Net income ....................................... $ 21,548 $ 14,468
========= =========
Basic earnings per common share:
Income before extraordinary charge ............... $ 1.12 $ 1.16
Extraordinary charge ............................. -- (0.39)
----- -----
Net income per common share ...................... $ 1.12 $ 0.77
===== =====
Diluted earnings per common share:
Income before extraordinary charge ............... $ 1.08 $ 1.08
Extraordinary charge ............................. -- (0.36)
----- -----
Net income per common share ...................... $ 1.08 $ 0.72
===== =====
</TABLE>
See accompanying notes.
<PAGE>
Page 4 of 26
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per common share amounts)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
Sept. 30, Sept. 30,
1998 1997
---- ----
<S> <C> <C>
Net sales ............................................. $1,288,289 $1,150,304
Cost of goods sold .................................... 1,116,338 981,650
--------- ---------
Gross profit ..................................... 171,951 168,654
Selling, general and administrative expenses .......... 50,465 45,221
Non-cash stock option charge .......................... -- 22,522
--------- ---------
Income from operations ........................... 121,486 100,911
Interest expense and other related financing costs .... 59,985 61,988
--------- ---------
Income before income taxes ....................... 61,501 38,923
Income tax provision (benefit) ........................ 23,096 (7,980)
--------- ---------
Income before extraordinary charge ............... 38,405 46,903
Extraordinary charge relating to early
extinguishment of debt, net of taxes ............... -- (16,382)
--------- ---------
Net income before preferred stock
dividend requirement .......................... 38,405 30,521
Preferred stock dividend requirement .................. -- (3,224)
--------- ---------
Net income available to common stockholders ...... $ 38,405 $ 27,297
========= =========
Basic earnings per common share:
Income before extraordinary charge ............... $ 2.02 $ 2.57
Extraordinary charge ............................. -- (0.90)
Preferred stock dividend requirement ............. -- (0.17)
---- -----
Net income per common share ...................... $ 2.02 $ 1.50
==== ====
Diluted earnings per common share:
Income before extraordinary charge ............... $ 1.92 $ 2.40
Extraordinary charge ............................. -- (0.84)
Preferred stock dividend requirement ............. -- (0.16)
---- -----
Net income per common share ...................... $ 1.92 $ 1.40
==== ====
</TABLE>
See accompanying notes.
<PAGE>
Page 5 of 26
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
Sept. 30, Sept. 30,
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income before preferred stock dividend
requirement ............................................ $ 38,405 $ 30,521
Adjustments to reconcile net income before preferred
stock dividend requirement to net cash used in
operating activities:
Depreciation ........................................... 53,439 45,017
Amortization ........................................... 3,453 4,557
Extraordinary charge relating to early
extinguishment of debt, net of taxes ................ -- 16,382
Non-cash stock option charge ........................... -- 22,522
Changes in assets and liabilities, net of effect
of acquisitions:
(Increase) in accounts receivable ................. (162,660) (145,299)
(Increase) in inventories ......................... (20,746) (11,847)
Decrease (increase) in other non-current assets ... 19,025 (10,893)
(Decrease) in trade accounts payable .............. (15,357) (67,550)
Other, net ........................................ (2,612) 5,454
---------- ----------
Total adjustments ............................. (125,458) (141,657)
---------- ----------
Net cash used in operating activities .................. (87,053) (111,136)
---------- ----------
Cash flows from investing activities:
Acquisition of businesses .................................. (193,972) (42,561)
Capital expenditures ....................................... (58,841) (41,226)
Proceeds from sale of assets ............................... 1,269 4,485
---------- ----------
Net cash used in investing activities .................. (251,544) (79,302)
---------- ----------
Cash flows from financing activities:
Borrowings under revolving loans ........................... 852,327 1,009,150
Repayments under revolving loans ........................... (530,027) (876,300)
Net proceeds from issuance of common stock ................. -- 67,220
Proceeds from stock option exercises ....................... 2,159 --
Purchase of treasury stock ................................. (20,273) --
Proceeds from issuance of long-term debt ................... 7,193 825,000
Repayment of long-term debt ................................ (18,365) (815,141)
Debt financing costs ....................................... -- (12,781)
---------- ----------
Net cash provided by financing activities .............. 293,014 197,148
---------- ----------
Net (decrease) increase in cash and cash equivalents ............ (45,583) 6,710
Cash and cash equivalents at beginning of year .................. 53,718 1,017
---------- ----------
Cash and cash equivalents at end of period ...................... $ 8,135 $ 7,727
========== ==========
Supplementary data:
Cash interest payments ..................................... $ 52,680 $ 53,232
Cash income tax payments ................................... 2,476 1,209
Preferred stock issued in lieu of cash dividend ............ -- 3,208
</TABLE>
See accompanying notes.
<PAGE>
Page 6 of 26
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDERS' EQUITY
(Dollars and shares in thousands)
<TABLE>
<CAPTION>
Common Stock
_____________ Accumulated Total
Additional other deficiency in
Par paid-in Accumulated comprehensive Treasury stockholders'
Shares Value capital deficit loss stock equity
------ ----- ------- ------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 18,863 $189 $ 110,935 $(177,864) $(508) $ -- $ (67,248)
Net income -- -- -- 38,405 -- -- 38,405
Foreign currency translation -- -- -- -- (205) -- (205)
Issuance of common shares
under stock option plan 1,055 10 7,338 -- -- -- 7,348
Repurchase of common shares -- -- -- -- -- (20,273) (20,273)
--------- ---- -------- --------- ----- --------- ---------
Balance at September 30, 1998 19,918 $199 $ 118,273 $(139,459) $(713) $ (20,273) $ (41,973)
========= ==== ========= ========= ===== ========= =========
</TABLE>
See accompanying notes.
<PAGE>
Page 7 of 26
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 1998 and 1997 and for the
three and 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, 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, 1998 and 1997 and December 31, 1997, results of
operations for the three and nine months ended September 30, 1998 and 1997, cash
flows for the nine months ended September 30, 1998 and 1997, and deficiency in
stockholders' equity for the nine months ended September 30, 1998.
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, 1997.
2. Acquisitions
In January 1998, the Company acquired substantially all of the assets of Winn
Packaging Co. ("Winn"), a privately held manufacturer and marketer of decorated
rigid plastic containers, serving the personal care, automotive, and household
chemical markets. Winn's sales in 1997 were approximately $22.0 million.
In June 1998, the Company acquired from Campbell Soup Company ("Campbell") a
wholly owned subsidiary of Campbell into which Campbell had transferred
substantially all of its assets used in its steel container manufacturing
business ("CS Can"). As part of the transaction, the Company and Campbell
entered into a ten-year supply agreement under which the Company has agreed to
sell Campbell substantially all of Campbell's steel container requirements to be
used for the packaging of foods and beverages for the United States. Annual
sales to Campbell under the long-term supply agreement are expected to be
approximately $210.0-$230.0 million.
<PAGE>
Page 8 of 26
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 1998 and 1997 and for the
three and nine months then ended is unaudited)
2. Acquisitions (continued)
In August 1998, the Company acquired all of the outstanding capital stock of
Clearplass Containers, Inc. ("Clearplass"). Clearplass was a privately held
manufacturer and marketer of rigid plastic containers serving the personal care
and pharmaceutical industries, with sales of $23.4 million in its 1998 fiscal
year.
The Company financed these acquisitions through revolving loan borrowings of
$191.0 million under its U.S. Credit Agreement. The excess of the purchase price
over the estimated fair market value of net assets acquired of $45.9 million for
these acquisitions has been recorded as goodwill and is being amortized over
periods ranging from 20-40 years.
These acquisitions were accounted for using the purchase method of accounting
and the results of operations therefrom have been included with the Company's
results of operations from the respective acquisition dates. The preliminary
purchase price was allocated to the tangible and intangible assets acquired and
liabilities assumed based on their estimated fair values as determined from
preliminary appraisals and valuations. The purchase price allocations will be
finalized within one year of the acquisition dates. Any differences between the
actual and preliminary valuations will cause adjustments to the purchase price
allocations.
Set forth below are the Company's summary unaudited pro forma results of
operations for the nine months ended September 30, 1998 and 1997. The unaudited
pro forma results of operations of the Company for the nine months ended
September 30, 1998 include the historical results of the Company, and give pro
forma effect to the acquisitions of Clearplass and CS Can as if those
acquisitions occurred as of the beginning of 1998. The unaudited pro forma
results of operations of the Company for the nine months ended September 30,
1997 include the historical results of the Company, and give pro forma effect to
the acquisitions of Clearplass, CS Can, Winn, the North American plastic
container business of Rexam plc and the aluminum roll-on closure business of
Alcoa Closure Systems International Inc. as if each acquisition occurred as of
the beginning of 1997. The pro forma adjustments made to the Company's
historical results of operations for the nine months ended September 30, 1998
and 1997 also reflect the effect of purchase accounting adjustments based upon
estimated fair values determined by appraisals and valuations, the financing of
the acquisitions by the Company, and certain other adjustments as if these
events had occurred as of the beginning of 1998 or 1997. The pro forma
adjustments are based upon available information and upon certain assumptions
that the Company believes are reasonable.
<PAGE>
Page 9 of 26
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 1998 and 1997 and for the
three and nine months then ended is unaudited)
2. Acquisitions (continued)
The pro forma results of operations do not give effect to adjustments for
decreased costs from manufacturing synergies resulting from the integration of
these acquisitions with the Company's existing manufacturing operations.
Additionally, the pro forma results of operations for the nine months ended
September 30, 1997 do not reflect the benefit realized by the Company from its
July 1997 refinancing of its U.S. bank credit facility. If the 1997 pro forma
results of operations had been based upon the weighted average 1998 bank
borrowing rates, 1997 pro forma earnings would have increased $0.07 per diluted
share.
The unaudited pro forma results of operations do not purport to represent what
the Company's results of operations would actually have been had the
acquisitions in fact occurred on January 1, 1998 or January 1, 1997, as the case
may be, or to project the Company's results of operations for any future period:
<TABLE>
<CAPTION>
Pro forma
---------
Nine months ended Sept. 30,
---------------------------
1998 1997
---- ----
(Dollars in thousands)
<S> <C> <C>
Net sales ........................... $1,390,953 $1,356,597
Income from operations .............. 129,448 116,022
Income before income taxes .......... 63,625 41,703
Income before extraordinary charge .. 39,732 48,793
Net income .......................... 39,732 29,187
Diluted earnings per common share:
Income before extraordinary charge $ 1.98 $ 2.49
Net income ....................... 1.98 1.49
</TABLE>
<PAGE>
Page 10 of 26
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 1998 and 1997 and for the
three and nine months then ended is unaudited)
3. Earnings per Share
Earnings per share amounts for 1997 have been restated to conform with the
requirements of Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share". Under SFAS No. 128, primary and fully diluted earnings per
share were replaced with basic and diluted earnings per share. The following
table summarizes the basic and diluted earnings per share computations for the
three and nine month periods ended September 30, 1998 and 1997, respectively:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Sept. 30, Sept. 30,
1998 1997 1998 1997
---- ---- ---- ----
(Dollars and shares in thousands, except per share amounts)
Numerator:
<S> <C> <C> <C> <C>
Income before extraordinary charge $21,548 $21,826 $38,405 $46,903
Extraordinary charge -- (7,358) -- (16,382)
Preferred stock dividend requirement -- -- -- (3,224)
------- ------- ------- -------
Numerator for basic and diluted
earnings per share:
Net income $21,548 $14,468 $38,405 $27,297
======= ======= ======= =======
Denominator:
Denominator for basic earnings
per share: weighted average
shares outstanding 19,253 18,863 19,051 18,239
Effect of dilutive securities:
Employee stock options 711 1,305 982 1,330
------- ------- ------- -------
Denominator for diluted earnings
per share:
Adjusted weighted average
shares outstanding 19,964 20,168 20,033 19,569
======= ======= ======= =======
Basic earnings per share:
Income before extraordinary charge $ 1.12 $ 1.16 $ 2.02 $ 2.57
Extraordinary charge -- (0.39) -- (0.90)
Preferred stock dividend requirement -- -- -- (0.17)
------- ------- ------- -------
Net income per common share $ 1.12 $ 0.77 $ 2.02 $ 1.50
======= ======= ======= =======
Diluted earnings per share:
Income before extraordinary charge $ 1.08 $ 1.08 $ 1.92 $ 2.40
Extraordinary charge -- (0.36) -- (0.84)
Preferred stock dividend requirement -- -- -- (0.16)
------- ------- ------- -------
Net income per common share $ 1.08 $ 0.72 $ 1.92 $ 1.40
======= ======= ======= =======
</TABLE>
<PAGE>
Page 11 of 26
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 1998 and 1997 and for the
three and nine months then ended is unaudited)
4. Inventories
Inventories consisted of the following:
<TABLE>
<CAPTION>
Sept. 30, Sept. 30, Dec. 31,
1998 1997 1997
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Raw materials and supplies .................... $ 41,433 $ 30,837 $ 33,706
Work-in-process ............................... 50,552 43,599 43,529
Finished goods ................................ 142,834 132,307 121,369
Spare parts and other ......................... 10,809 8,410 8,382
-------- -------- --------
245,628 215,153 206,986
Adjustment to value inventory
at cost on the LIFO Method ................. 1,756 1,706 2,977
-------- -------- --------
$247,384 $216,859 $209,963
======== ======== ========
</TABLE>
5. Long-term Debt
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
Sept. 30, Sept. 30, Dec. 31,
1998 1997 1997
---- ---- ----
(Dollars in thousands)
Bank debt:
<S> <C> <C> <C>
Bank Revolving Loans ..................... $190,972 $ -- $ --
Bank A Term Loans ........................ 223,900 250,000 235,714
Bank B Term Loans ........................ 192,449 200,000 199,000
Canadian Bank Facility ................... 17,300 -- 14,334
-------- -------- --------
Total bank debt ....................... 624,621 450,000 449,048
Subordinated debt:
9% Senior Subordinated Debentures ........ 300,000 300,000 300,000
13 1/4% Subordinated Debentures .......... 56,206 56,206 56,206
Other .................................... 3,000 -- --
-------- -------- --------
Total subordinated debt ............... 359,206 356,206 356,206
Total long-term debt .......................... 983,827 806,206 805,254
Less: Amounts due within one year ....... 1,730 1,000 20,218
-------- -------- --------
$982,097 $805,206 $785,036
======== ======== ========
</TABLE>
<PAGE>
Page 12 of 26
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 1998 and 1997 and for the
three and nine months then ended is unaudited)
5. Long-term Debt (continued)
In July 1997, the Company completed the refinancing of approximately $600.0
million of existing bank term and revolving loans by entering into a new $1.0
billion senior secured credit facility (the "U.S. Credit Agreement"). The U.S.
Credit Agreement initially provided the Company with (i) $250.0 million of A
Term Loans (ii) $200.0 million of B Term Loans and (iii) up to $550.0 million of
revolving loans. The A Term Loans and the revolving loans mature on December 31,
2003 and the B Term Loans mature on June 30, 2005. Principal on the A Term Loans
and B Term Loans is required to be repaid in scheduled annual installments.
Since September 30, 1997, the Company has repaid $26.1 million of the A Term
Loans and $7.6 million of the B Term Loans. Amounts repaid on the term loans may
not be reborrowed.
The Company currently has $545.5 million of revolving loans available to it
under the U.S. Credit Agreement, after giving effect to a $4.5 million reduction
from the original revolving loan commitment under the U.S. Credit Agreement as a
result of the Company's $4.5 million revolving loan facility under its Canadian
credit facility. Revolving loans may be used by the Company for working capital
needs, acquisitions, common stock repurchases, and other permitted purposes.
Revolving loans may be borrowed, repaid, and reborrowed until their final
maturity under the U.S. Credit Agreement. At September 30, 1998, the Company had
seasonal revolving loans outstanding of $131.3 million which have been recorded
as short term debt. During 1998, the Company also used $191.0 million of
revolving loans under the U.S. Credit Agreement to finance the acquisitions of
Winn, CS Can, and Clearplass. The borrowings used to finance acquisitions have
been recorded as long term debt. After taking into account outstanding letters
of credit, the unutilized portion of revolving loan commitments under the
Company's credit agreements was $216.8 million at September 30, 1998.
In December 1997, the Company entered into a Canadian credit facility with
various Canadian banks which provided the Company's Canadian subsidiaries with
$18.5 million of term loans and $4.5 million of revolving loans. Principal on
the term loans is required to be repaid in annual installments until maturity on
December 31, 2003. The revolving loans mature on December 31, 2003 and may be
borrowed, repaid, and reborrowed until maturity. At September 30, 1998, $17.3
million of term loan borrowings were outstanding under the Canadian credit
facility, and there were no revolving loans outstanding.
6. Income Taxes
The provision for income taxes for the nine months ended September 30, 1998 was
recorded at an effective tax rate of 37.6%, which represents the Company's
estimated annual effective tax rate for 1998.
The Company recognized an income tax benefit of $23.2 million in 1997 because it
determined that a portion of the future tax benefits arising from its net tax
operating loss carryforward would be realized in future years due to the
Company's continued improvement in earnings and increased probability of future
taxable income.
<PAGE>
Page 13 of 26
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 1998 and 1997 and for the
three and nine months then ended is unaudited)
7. New Accounting Standards
As of January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income". SFAS No. 130 establishes standards for the reporting and
display of comprehensive income and its components. The adoption of this
pronouncement had no impact on the Company's results of operations or
stockholders' equity. Prior year's financial statements have been reclassified
to conform with its requirements. SFAS No. 130 requires foreign currency
translation adjustments to be included in comprehensive income, instead of as a
separate component of stockholders' equity where it was previously included. The
components of comprehensive income for the nine months ended September 30, 1998
and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
(Dollars in thousands)
<S> <C> <C>
Net income ................................... $ 38,405 $ 27,297
Foreign currency translation adjustments ..... (205) 10
-------- --------
Comprehensive income .................... $ 38,200 $ 27,307
======== ========
</TABLE>
The components of accumulated other comprehensive income at September 30, 1998
and September 30, 1997 consist solely of foreign currency translation
adjustments.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" is effective for financial statements for fiscal years beginning
after December 15, 1997. As allowed under SFAS No. 131, the Company has elected
not to apply its provisions to interim financial statement reporting during the
initial year of adoption. SFAS No. 131 establishes standards for reporting
information related to operating segments. Although management is currently
evaluating the impact of SFAS No. 131, it is not anticipated that this
pronouncement will have any impact on its current reporting disclosures of
operating segment information.
SFAS No. 132, "Employers' Disclosure about Pensions and Other Postretirement
Benefits" was issued in February 1998 and is effective for financial statements
for fiscal years beginning after December 15, 1997. SFAS No. 132 revises
disclosures regarding pension and postretirement benefit plans, but does not
change the measurement or recognition of those plans. The Company has not yet
determined the impact of SFAS No. 132 on its pension and other postretirement
disclosures.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" was
issued in June 1998 and is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments, requiring recognition of all derivatives
as either assets or liabilities in the statement of financial position and
measurement of those instruments at fair value. As required, the Company will
adopt SFAS No. 133 in 2000 and does not anticipate that this pronouncement will
have a material impact on the Company's consolidated financial statements.
<PAGE>
Page 14 of 26
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 1998 and 1997 and for the
three and nine months then ended is unaudited)
8. Stockholder's Equity
During 1998, 1,055,580 shares of common stock of the Company were issued in
respect of the exercise of non-qualified stock options by officers of the
Company under the Company's stock option plan. The increase in additional paid
in capital from September 30, 1997 to September 30, 1998 represents (i) the
difference between the exercise price for these stock options and the par value
of the common stock issued to option holders of $2.1 million and (ii) the income
tax benefit of $5.2 million realized on the exercise of these stock options.
In late June 1998, the Company announced that its Board of Directors authorized
the repurchase by the Company of up to $30.0 million of its common stock from
time to time in the open market, through privately negotiated transactions or
through block purchases. The Company expects to fund repurchases from internally
generated funds or from revolving loan borrowings under its U.S. Credit
Agreement. The Company's repurchases of common stock are recorded as treasury
stock and result in a reduction of stockholders' equity. As of September 30,
1998, the Company had repurchased 800,600 shares of its common stock for $20.3
million.
<PAGE>
Page 15 of 26
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Statements included in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this Quarterly Report on
Form 10-Q which are not historical facts are "forward-looking statements" made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and Securities Exchange Act of 1934. Such forward-looking
statements are made based upon management's expectations and beliefs concerning
future events impacting the Company and therefore involve a number of
uncertainties and risks, including, but not limited to, those described in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997
and the Company's other filings with the Securities and Exchange Commission. As
a result, the actual results of operations or financial condition of the Company
could differ materially from those expressed or implied in such forward-looking
statements.
RESULTS OF OPERATIONS - THREE MONTHS
Summary unaudited results of operations for the Company's two business segments,
metal and plastic containers, for the three months ended September 30, 1998 and
1997 are provided below.
<TABLE>
<CAPTION>
Three Months Ended Sept. 30,
1998 1997
---- ----
(In millions)
Net sales:
<S> <C> <C>
Metal containers and specialty . $ 482.1 $ 425.1
Plastic containers ............. 79.0 68.2
---------- ----------
Consolidated ............... $ 561.1 $ 493.3
========== ==========
Operating profit:
Metal containers and specialty . $ 49.5 $ 46.0
Plastic containers ............. 8.3 7.5
Corporate expense .............. (0.8) (0.5)
---------- ----------
Consolidated ............... $ 57.0 $ 53.0
========== ==========
</TABLE>
Three Months Ended September 30, 1998 Compared with Three Months ended September
30, 1997
Net Sales. Consolidated net sales increased $67.8 million, or 13.7%, to $561.1
million for the three months ended September 30, 1998, as compared to net sales
of $493.3 million for the same three months in the prior year. This increase
resulted primarily from incremental sales added from acquisitions.
<PAGE>
Page 16 of 26
Net sales for the metal container business (including net sales of its specialty
business of $34.8 million) were $482.1 million for the three months ended
September 30, 1998, an increase of $57.0 million, or 13.4%, from net sales of
$425.1 million for the same period in 1997. Net sales of metal food cans
increased during the third quarter of 1998 to $447.3 million, as compared to
$391.5 million for the same period in 1997, principally due to sales to
Campbell. Excluding sales to Campbell, 1998 third quarter metal food can sales
were approximately the same as metal food can sales for the third quarter of
1997.
Sales of specialty items included in the metal container segment increased $1.2
million to $34.8 million during the three months ended September 30, 1998, as
compared to $33.6 million in the same period in 1997 due to increased unit
volume.
Net sales for the plastic container business of $79.0 million during the three
months ended September 30, 1998 increased $10.8 million, or 15.7%, from net
sales of $68.2 million for the same period in 1997. The additional sales were
primarily generated from the acquisitions of Winn in January 1998 and Clearplass
in August 1998 and, to a lesser extent, from higher unit volume with existing
customers, and were partially offset by the pass through of lower average resin
costs.
Cost of Goods Sold. Cost of goods sold as a percentage of consolidated net sales
was 86.6% ($486.0 million) for the three months ended September 30, 1998, an
increase of 0.6 percentage points as compared to 86.0% ($424.3 million) for the
same period in 1997. The decline in gross profit margins was primarily
attributable to lower margin sales to Campbell for the metal container business,
the incurrence of production inefficiencies in meeting increased volume
requirements by the plastic container business, and higher depreciation expense
resulting from increased capital expenditures.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses as a percentage of consolidated net sales for the three
months ended September 30, 1998 and 1997 remained constant at 3.2% ($18.1
million and $16.0 million, respectively).
Income from Operations. Income from operations improved to $57.0 million for the
three months ended September 30, 1998, as compared to $53.0 million for the
third quarter of 1997, due to the contribution of recent acquisitions. Despite
this improvement, income from operations as a percentage of consolidated net
sales declined to 10.2% for the three months ended September 30, 1998, as
compared with 10.7% for the same period in the prior year, as a result of the
aforementioned decline in gross margin.
Income from operations as a percentage of net sales for the metal container
business was 10.3% ($49.5 million) for the three months ended September 30,
1998, a decline of 0.5 percentage points from 10.8% ($46.0 million) for the same
period in the prior year. The decrease in income from operations as a percentage
of net sales for the metal container business was principally attributable to
lower margin sales to Campbell. Excluding the effect of the acquisition of
Campbell's can manufacturing assets, operating margins of the metal container
business in the third quarter were slightly higher than in the same period in
the prior year. The Company expects that seasonally higher sales to Campbell in
the fourth quarter will result in lower per unit manufacturing costs and higher
fourth quarter margins for the metal container business as compared to the same
period in the prior year.
<PAGE>
Page 17 of 26
Income from operations as a percentage of net sales for the plastic container
business was 10.5% ($8.3 million) for the three months ended September 30, 1998,
a decline of 0.5 percentage points from 11.0% ($7.5 million) for the same period
in 1997. The decrease in income from operations for the plastic container
business was primarily attributable to the occurrence of some production
inefficiencies in meeting increased volume requirements.
Interest Expense. Interest expense increased $1.6 million to $22.5 million for
the three months ended September 30, 1998 principally as a result of the
incurrence of additional indebtedness to finance recent acquisitions, offset in
part by slightly lower bank borrowing rates.
Income Taxes. The provision for income taxes for the three months ended
September 30, 1998 was recorded at an effective tax rate of 37.6% ($12.9
million), which represents the Company's estimated annual effective tax rate for
1998. During the third quarter of 1997, the Company recognized the benefit of a
portion of its net tax operating loss carryforward and recorded an effective tax
rate of 32.0%.
Net Income and Earnings per Share. As a result of the items discussed above, net
income for the three months ended September 30, 1998 was $21.6 million, a
decrease of $0.2 million from net income of $21.8 million (before the
extraordinary charge of $7.4 million) for the three months ended September 30,
1997.
Earnings per diluted share were $1.08 for the three months ended September 30,
1998 as compared with $0.72 for the same period in 1997. The Company estimates
that earnings for the third quarter of 1997 would have been $0.99 per diluted
share if the extraordinary charge incurred in connection with the refinancing of
the Company's debt obligations had been excluded from earnings and if earnings
for the three months ended September 30, 1997 had been calculated utilizing the
effective tax rate and the weighted average diluted shares outstanding for the
three months ended September 30, 1998.
During the third quarter of 1997, the Company incurred an extraordinary charge
of $7.4 million, net of taxes, or $0.36 per diluted share, for the write-off of
unamortized deferred financing costs associated with the refinancing of its
previous bank credit agreement.
<PAGE>
Page 18 of 26
RESULTS OF OPERATIONS - NINE MONTHS
Summary unaudited results of operations for the Company's two business segments,
metal and plastic containers, for the nine months ended September 30, 1998 and
1997 are provided below.
<TABLE>
<CAPTION>
Nine Months Ended Sept. 30,
1998 1997
---- ----
(In millions)
Net sales:
<S> <C> <C>
Metal containers and specialty . $ 1,057.2 $ 955.4
Plastic containers ............. 231.1 194.9
---------- ----------
Consolidated ............... $ 1,288.3 $ 1,150.3
========== ==========
Operating profit:
Metal containers and specialty . $ 95.9 $ 101.9
Plastic containers ............. 27.8 22.7
Non-cash stock option charge ... -- (22.5)
Corporate expense .............. (2.2) (1.2)
---------- ----------
Consolidated ............... $ 121.5 $ 100.9
========== ==========
</TABLE>
Nine Months Ended September 30, 1998 Compared with Nine Months ended September
30, 1997
Net Sales. Consolidated net sales increased $138.0 million, or 12.0%, to
$1,288.3 million for the nine months ended September 30, 1998, as compared to
net sales of $1,150.3 million for the same nine months in the prior year. This
increase resulted primarily from incremental sales added from acquisitions and,
to a lesser extent, from increased unit sales to existing customers of the
plastic container business.
Net sales for the metal container business (including net sales of its specialty
business of $98.2 million) were $1,057.2 million for the nine months ended
September 30, 1998, an increase of $101.8 million, or 10.7%, from net sales of
$955.4 million for the same period in 1997. Year to date net sales of metal food
cans increased $88.3 million during the first nine months of 1998 to $959.0
million, as compared to $870.7 million for the same period in 1997, principally
as a result of sales to Campbell.
Sales of specialty items included in the metal container segment increased $13.5
million to $98.2 million during the nine months ended September 30, 1998, as
compared to $84.7 million in the same period in 1997, due to incremental sales
from the April 1997 acquisition of the aluminum roll-on closure business of
Alcoa Closure Systems International Inc. and higher unit sales to existing
customers.
Net sales for the plastic container business of $231.1 million during the nine
months ended September 30, 1998 increased $36.2 million, or 18.6%, from net
sales of $194.9 million for the same period in 1997. The additional sales were
generated by incremental sales from recent acquisitions and by higher unit
volume with existing customers.
<PAGE>
Page 19 of 26
Cost of Goods Sold. Cost of goods sold as a percentage of consolidated net sales
was 86.7% ($1,116.3 million) for the nine months ended September 30, 1998, an
increase of 1.4 percentage points as compared to 85.3% ($981.7 million) for the
same period in 1997. The decline in gross profit margins was primarily
attributable to the effect of lower margin sales to Campbell and higher
depreciation expense, offset in part by plant rationalization benefits.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses as a percentage of consolidated net sales for the nine
months ended September 30, 1998 and 1997 remained constant at 3.9% ($50.5
million and $45.2 million, respectively).
Income from Operations. Income from operations as a percentage of consolidated
net sales was 9.4% ($121.5 million) for the nine months ended September 30,
1998, as compared with 8.8% ($100.9 million) for the same period in the prior
year. Excluding the effect of the non-cash stock option charge of $22.5 million
incurred in connection with the Company's initial public offering (the "IPO") of
its common stock in 1997, income from operations as a percentage of consolidated
net sales declined 1.3 percentage points to 9.4% for the nine months ended
September 30, 1998, as compared with 10.7% for the same period in the prior
year. This decrease was a result of the aforementioned decline in gross profit
margins.
In conjunction with the IPO, stock options issued under the stock option plans
of Holdings' subsidiaries were converted to Holdings stock options. In
accordance with generally accepted accounting principles, the Company recorded a
charge of $22.5 million at the time of the IPO for the excess of the fair market
value of the stock options issued under the subsidiary stock option plans over
the grant price of the options. The Company will not recognize any future
charges for these stock options.
Income from operations as a percentage of net sales for the metal container
business declined 1.6 percentage points to 9.1% ($95.9 million) for the nine
months ended September 30, 1998 from 10.7% ($101.9 million) for the same period
in the prior year. This decrease in income from operations as a percentage of
net sales reflected the impact of the decline in gross profit margin as
discussed above.
Income from operations as a percentage of net sales for the plastic container
business improved 0.4 percentage points to 12.0% ($27.8 million) for the nine
months ended September 30, 1998, as compared to 11.6% ($22.7 million) for the
same period in 1997. The improved operating performance of the plastic container
business was principally attributable to the benefits of capital investment and
increased production volumes.
Interest Expense. Interest expense declined $2.0 million to $60.0 million for
the nine months ended September 30, 1998 principally as a result of benefits
realized from the Company's 1997 refinancings, offset in part by additional
indebtedness incurred to finance the Company's recently completed acquisitions.
Income Taxes. The provision for income taxes for the nine months ended September
30, 1998 was recorded at an effective tax rate of 37.6% ($23.1 million), which
approximates the Company's estimated annual effective tax rate for 1998.
<PAGE>
Page 20 of 26
The Company recognized an income tax benefit in 1997 when it determined that a
portion of the future tax benefits arising from its net tax operating loss
carryforward would be realized in future years due to the Company's continued
improvement in earnings and increased probability of future taxable income.
Net Income and Earnings per Share. Net income for the nine months ended
September 30, 1998 was $38.4 million, or $1.92 per diluted share, compared to
$27.3 million, or $1.40 per diluted share, for the first nine months of 1997.
During the first nine months of 1997, the Company incurred an extraordinary
charge of $16.4 million, net of taxes, or $0.84 per diluted share, for the
write-off of unamortized debt financing costs and premiums associated with the
redemption of its debt obligations.
The Company estimates that earnings for the nine months ended September 30, 1997
would have been $35.2 million, or $1.80 per diluted share, if unusual items for
the non-cash stock option charge and the extraordinary charge incurred in
connection with the refinancings of the Company's debt obligations had been
excluded from earnings and if earnings for such period had been calculated
utilizing the effective tax rate and the weighted average diluted shares
outstanding for the nine months ended September 30, 1998.
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 revolving loan borrowings.
Through September 1998, the Company has used net borrowings of revolving loans
of $322.3 million under the Company's U.S. Credit Agreement, $4.2 million of
term loan borrowings under the Company's Canadian bank credit facility, $3.0
million of other borrowings related to the Campbell acquisition, $2.2 million of
proceeds from employee stock option exercises, $1.3 million of proceeds from
asset sales, and a decrease in cash balances of $45.6 million to fund cash used
by operations of $87.1 million for the Company's seasonal working capital needs,
capital expenditures of $58.8 million, acquisitions for $194.0 million, the
repurchase of common stock for $20.3 million, and the repayment of $18.4 million
of bank term loans.
Because the Company sells metal containers used in fruit and vegetable pack
processing, its sales are seasonal. As is common in the industry, the Company
must access working capital to build inventory and then carry accounts
receivable for some customers beyond the end of the summer and fall packing
season. Seasonal accounts are generally settled by year end. Due to the
Company's seasonal requirements, the Company expects to incur short term
indebtedness to finance its working capital requirements.
<PAGE>
Page 21 of 26
During the third quarter of 1998, at its peak the Company had incurred
approximately $370.0 million of revolving loan borrowings under its credit
agreements. The Company utilizes its revolving loan facility to meet seasonal
working capital needs, fund acquisitions, finance common stock repurchases, and
for other general corporate purposes. Amounts available under the Company's
revolving loan facilities in excess of its seasonal working capital needs are
available to the Company to pursue its growth strategy and for other permitted
purposes.
As of September 30, 1998, the Company had $322.3 million of revolving loans
outstanding, of which $131.3 million related to seasonal working capital needs
and $191.0 million related to long-term financing of acquisitions. The amount
used for acquisition financing has been recorded as long-term debt. The unused
portion of revolving loan commitments under the Company's credit agreements at
September 30, 1998, after taking into account outstanding letters of credit, was
$216.8 million.
In late June 1998, the Company announced that its Board of Directors had
authorized a repurchase program for up to $30 million of its common stock. At
current price levels, the Company believes a repurchase of its shares is an
attractive investment. As of October 31, 1998, the Company has repurchased
815,600 shares of its common stock at an average cost of $25.21 per share. The
share repurchases were funded through revolving loan borrowings under the
Company's U.S. Credit Agreement.
Management believes that cash generated by operations and funds from revolving
loan borrowings under the Company's credit agreements will be sufficient to meet
the Company's expected operating needs, planned capital expenditures, debt
service, share repurchase plan, and tax obligations for the foreseeable future.
The Company has recently reached agreement with Del Monte Corporation ("Del
Monte") to amend its Supply Agreement to extend the term by three years until
December 21, 2006 in return for certain economic consideration. Such economic
consideration will go into effect in 1999 and will reduce the gross margin
percentage on the Company's sales to Del Monte. However, taking into account all
aspects of the amendment, the Company believes that such economic consideration
will not have a material adverse effect on its financial condition or results of
operations. The Company and Del Monte entered into the Supply Agreement at the
time of the acquisition by the Company of Del Monte's U.S. metal container
manufacturing business in December 1993. Under the Supply Agreement, Del Monte
has agreed to purchase from the Company substantially all of its requirements of
metal containers for food and beverages. Approximately 11% of the Company's net
sales in 1997 were to Del Monte.
The Company is continually evaluating acquisition opportunities in the North
American consumer goods packaging market. The Company intends to borrow
additional revolving loans under its U.S. Credit Agreement to finance such
acquisitions and to fund any resulting increased operating needs. However, the
Company may need to incur additional new indebtedness to finance such
acquisitions and to fund any resulting increased operating needs. Any such new
financing will have to be effected in compliance with the agreements governing
the Company's indebtedness. There can be no assurance that the Company will be
able to complete any such acquisition or obtain any such new financing.
The Company is in compliance with all financial and operating covenants
contained in the instruments and agreements governing its indebtedness and
believes that it will continue to be in compliance with all such covenants
during 1998.
<PAGE>
Page 22 of 26
YEAR 2000 UPDATE
Since 1997 the Company has been in the process of reviewing its computer and
operational systems to identify and determine the extent to which its systems
will be vulnerable to potential errors and failures as a result of the "Year
2000" issue. The Year 2000 issue arises because many computer systems and other
equipment with embedded chips or processors use only two digits to represent the
year and, as a result, may be unable to process accurately certain data before,
during or after the year 2000. The Year 2000 issue presents several risks to the
Company, such as (i) the Company's internal systems may not function properly,
(ii) suppliers' computer and operational systems may not function properly and,
consequently, deliveries of materials and supplies may be delayed, (iii)
customers' computer and operational systems may not function properly and,
consequently, orders or payments for the Company's products may be delayed, and
(iv) the Company's banks' computer systems could malfunction, disrupting the
Company's orderly posting of deposits, funds, transfers and payments. Such a
disruption at any point in the Company's supply, manufacturing, processing,
distribution and financial chains could have a material adverse effect on the
Company's financial condition and results of operations.
As a manufacturer of consumer goods packaging products, the products produced
and sold by the Company are unaffected by Year 2000 issues since they contain no
microprocessors or similar electronic components.
The Company has undertaken various initiatives intended to ensure that its
internal computing infrastructure, business applications and shop-floor systems
are Year 2000 compliant. These systems assist in the control of the Company's
operations by performing such functions as processing financial data,
maintaining manufacturing processes and assisting with facilities management and
security. Many of these systems contain one or more microprocessors or other
embedded electronic components that could be affected by Year 2000 issues.
Failure of some of these systems could result in significant business
disruptions for the Company.
Based upon its identification and assessment efforts to date, the Company has
initiated modifications to its internal computing infrastructure, business
applications and shop-floor systems. These systems are being renovated or
replaced as necessary to assure Year 2000 compliance. Utilizing both internal
and external resources to identify and assess needed Year 2000 remediation, the
Company currently anticipates that its Year 2000 identification, assessment,
remediation and testing efforts will be completed by June 30, 1999, and that
such efforts will be completed prior to any currently anticipated impact on its
computer equipment and software and shop-floor systems. The Company estimates
that as of September 30, 1998 it had completed approximately 50% of the
initiatives that it believes will be necessary to fully address potential Year
2000 issues relating to its computer equipment and software and shop-floor
systems. The remaining initiatives are in process and expected to be completed
before or about June 30, 1999.
<PAGE>
Page 23 of 26
The Company believes that the cost of its Year 2000 identification, assessment,
remediation and testing efforts will approximate $2.0 to $3.0 million, which
expenditures will be funded from operating cash flows. As of September 30, 1998,
the Company had incurred costs of approximately $1.0 million related to the Year
2000 issue. Principally all of these costs relate to analysis, repair, upgrade
or replacement of existing software.
The Company relies on numerous third-party vendors and suppliers for a wide
variety of goods and services, including raw materials, telecommunications and
utilities such as water and electricity. Many of the Company's operating
locations would be adversely affected if these supplies and services were
curtailed as a result of a supplier's Year 2000 noncompliance. The Company's
vendor and supplier base is currently being surveyed. Vendors and suppliers have
received questionnaires and, based on the response and significance to the
Company's operations, may receive face-to-face verification follow-up.
Widespread disruption of certain utilities such as electricity would result in a
temporary closure of affected facilities and potential damage to production
equipment.
The Company is engaging in a Year 2000 business contingency planning process
that will identify and evaluate potential worse case business disruption
scenarios. Such plans may include securing alternate sources of supply,
stockpiling raw materials, increasing inventory levels, adjusting facility
shut-down and start-up schedules and other appropriate measures. The contingency
plans and related cost estimates will be refined as additional information
becomes available.
The Company presently believes that the Year 2000 issue will not pose
significant operational problems for the Company. However, if all Year 2000
issues are not identified, or assessment, remediation and testing are not
effected timely, there can be no assurance that the Year 2000 issue will not
materially and adversely impact the Company's results of operations or adversely
affect the Company's relationships with customers, vendors, or others.
Additionally, there can be no assurance that the Year 2000 issues of third
parties (including suppliers, customers, banks and governmental entities) will
not have a material adverse impact on the Company's systems or results of
operations.
The costs of the Company's Year 2000 identification, assessment, remediation and
testing efforts and the dates on which the Company believes it will complete
such efforts are based upon management's best estimates, which were derived
using numerous assumptions regarding future events, including the continued
availability of certain resources, third-party remediation plans, and other
factors. There can be no assurance that these estimates will prove to be
accurate, and actual results could differ materially from those currently
anticipated. Specific factors that could cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in Year 2000 issues, the ability to identify, assess, remediate and test all
relevant computer codes and embedded technology, and similar uncertainties.
<PAGE>
Page 24 of 26
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number Description
- -------------- -----------
12 Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
<PAGE>
Page 25 of 26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report to be signed on its behalf by
the undersigned thereunto duly authorized.
SILGAN HOLDINGS INC.
Dated: November 9, 1998 /s/Harley Rankin, Jr.
- ------------------------ --------------------------------
Harley Rankin, Jr.
Executive Vice President, Chief
Financial Officer and Treasurer
(Principal Financial Officer)
Dated: November 9, 1998 /s/Harold J. Rodriguez, Jr.
- ------------------------ -------------------------------
Harold J. Rodriguez, Jr.
Vice President and Controller
(Chief Accounting Officer)
<PAGE>
Page 26 of 26
Exhibit 12
SILGAN HOLDINGS INC.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
(Unaudited)
-----------
Sept. 30, Sept. 30,
1998 1997
<S> <C> <C>
Net income before income taxes ............................. $ 61,501 $ 38,923
Add:
Interest expense and debt amortization ............ 59,985 61,988
Rental expense representative of interest factor .. 703 817
-------- --------
Net income as adjusted ............................ $122,189 $101,728
Fixed charges:
Interest expense and debt amortization ............ $ 59,985 $ 61,988
Rental expense representative of interest factor .. 703 817
Preferred stock dividend requirement .............. -- 3,224
-------- --------
Total fixed charges and preferred stock dividends.. $ 60,688 $ 66,029
Ratio of earnings to combined fixed charges and
preferred stock dividends ............................... 2.01 1.54
======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Silgan
Holdings Inc. Form 10-Q for the nine months ended September 30, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 8,135
<SECURITIES> 0
<RECEIVABLES> 294,271
<ALLOWANCES> 0
<INVENTORY> 247,384
<CURRENT-ASSETS> 558,897
<PP&E> 663,331
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,368,545
<CURRENT-LIABILITIES> 344,967
<BONDS> 982,097
0
0
<COMMON> 199
<OTHER-SE> (42,172)
<TOTAL-LIABILITY-AND-EQUITY> 1,368,545
<SALES> 1,288,289
<TOTAL-REVENUES> 1,288,289
<CGS> 1,116,338
<TOTAL-COSTS> 1,116,338
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,985
<INCOME-PRETAX> 61,501
<INCOME-TAX> 23,096
<INCOME-CONTINUING> 38,405
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,405
<EPS-PRIMARY> 2.02
<EPS-DILUTED> 1.92
</TABLE>
