-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, dH9AiJzIKFtaubivN3ArU5TFN+Ukh7E5KS6rCOh7AAuJQRLUDInJF39m5VA1fWgP qOyHR+dNQ2SpjM1wQ+Nu8w== 0000825541-94-000017.txt : 19940815 0000825541-94-000017.hdr.sgml : 19940815 ACCESSION NUMBER: 0000825541-94-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SILGAN HOLDINGS INC CENTRAL INDEX KEY: 0000849869 STANDARD INDUSTRIAL CLASSIFICATION: 3440 IRS NUMBER: 061269834 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-28409 FILM NUMBER: 94543294 BUSINESS ADDRESS: STREET 1: 4 LANDMARK SQ CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2039757110 10-Q 1 Page 1 of 14 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarter Ended June 30, 1994 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) of the Securities Exchange Act of 1934 for the Period ____________ to ____________. Commission file number 33-28409 SILGAN HOLDINGS INC. (Exact name of registrant as specified in its charter) Delaware 06-1269834 (State of Incorporation) (I.R.S. Employer Identification Number) 4 Landmark Square Stamford, Connecticut 06901 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (203) 975-7110 Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] As of August 5, 1994, the number of shares outstanding of each of the issuer's classes of common stock is as follows: Classes of shares of Number of common stock outstanding, $0.01 par value shares outstanding Class A 417,500 Class B 667,500 Class C 50,000 Page 2 of 14 Part I. Financial Information Item 1. Financial Statements SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) June 30, June 30, Dec. 31, 1994 1993 1993 ASSETS (unaudited)(unaudited)(audited) Current assets: Cash and cash equivalents $ 6,675 $ 316 $ 224 Accounts receivable, net 77,216 49,435 44,409 Inventories 142,560 108,403 108,653 Prepaid expenses and other current assets 3,925 3,790 3,676 Total current assets 230,376 161,944 156,962 Property, plant and equipment, net 281,580 233,416 290,395 Other assets 51,874 36,675 50,276 $563,830 $432,035 $497,633 LIABILITIES & DEFICIENCY IN STOCKHOLDERS' EQUITY Current liabilities: Working capital loans $ 34,950 $ 65,750 $ 2,200 Current portion of term loans 20,000 20,899 20,000 Trade accounts payable 49,814 38,076 31,913 Accrued payroll and related costs 24,530 20,070 20,523 Accrued interest payable 1,746 1,056 783 Accrued expenses and other current liabilities 19,203 20,907 21,385 Total current liabilities 150,243 166,758 96,804 Term loans 120,000 20,553 120,000 Senior secured notes 50,000 50,000 50,000 11 3/4% Senior subordinated notes 135,000 135,000 135,000 13 1/4% Senior discount debentures 214,016 188,247 200,718 Deferred income taxes 6,776 6,536 6,836 Other long-term liabilities 33,510 16,526 33,242 Deficiency in stockholders' equity: Class A, B & C common stock 12 9 12 Additional paid-in capital 58,652 33,218 58,652 Accumulated deficit (204,379) (184,812) (203,631) Total deficiency in stockholders' equity (145,715) (151,585) (144,967) $563,830 $432,035 $497,633 See accompanying notes. Page 3 of 14 SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands) Three Months Ended June 30, June 30, 1994 1993 Net sales $200,959 $148,522 Cost of goods sold 172,228 128,583 Gross profit 28,731 19,939 Selling, general and administrative expenses 10,072 8,666 Income from operations 18,659 11,273 Interest expense and other related financing costs 16,284 13,228 Other expense 5 62 Income (loss) before income taxes 2,370 (2,017) Income tax provision 875 550 Net income (loss) $ 1,495 $ (2,567) See accompanying notes. Page 4 of 14 SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands) Six Months Ended June 30, June 30, 1994 1993 Net sales $387,203 $297,250 Cost of goods sold 335,748 260,405 Gross profit 51,455 36,845 Selling, general and administrative expenses 18,662 16,882 Income from operations 32,793 19,963 Interest expense and other related financing costs 31,930 26,318 Other (income) expense 161 (30) Income (loss) before income taxes 702 (6,325) Income tax provision 1,450 1,000 Loss before cumulative effect of changes in accounting principles (748) (7,325) Cumulative effect of changes in accounting principles - (6,276) Net loss $ (748) $(13,601) See accompanying notes. Page 5 of 14 SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Six Months Ended June 30, June 30, 1994 1993 Cash flows from operating activities: Net loss $ (748) $(13,601) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation 18,280 14,782 Amortization 3,309 2,741 Other items 551 (539) Accretion of discount on discount debentures 13,298 11,696 Reserve for postretirement health care benefits 254 200 Cumulative effect of changes in accounting principles - 6,276 Changes in assets and liabilities: (Increase) in accounts receivable (33,182) (4,302) (Increase) in inventories (33,907) (31,806) Increase in trade accounts payable 17,901 10,120 Other, net (2,414) 3,494 Total adjustments (15,910) 12,662 Net cash used by operating activities (16,658) (939) Cash flows from investing activities: Capital expenditures (9,641) (26,070) Proceeds from sale of assets - 216 Net cash used in investing activities (9,641) (25,854) Cash flows from financing activities: Borrowings under working capital loans 183,500 157,200 Repayments under working capital loans (150,750) (131,850) Repayments of term loans - (1,128) Net cash provided by financing activities 32,750 24,222 Net increase (decrease) in cash and cash equivalents 6,451 (2,571) Cash and cash equivalents at beginning of year 224 2,887 Cash and cash equivalents at end of period $ 6,675 $ 316 Supplementary data: Interest paid $ 14,071 2,275 Income taxes paid, net of refunds 1,389 (110) See accompanying notes. Page 6 of 14 SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at June 30, 1994 and 1993 and for the three months and six months then ended is unaudited) (Dollars in thousands) 1. Basis of Presentation The accompanying condensed unaudited consolidated financial statements of Silgan Holdings Inc. ("Holdings" or the "Company") have been prepared in accordance with Rule 10-01 of Regulation S-X and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. All adjustments of a normal recurring nature have been made, including appropriate estimates for reserves and provisions which are normally determined or settled at year end. In the opinion of the Company, however, the accompanying financial statements contain all adjustments (consisting solely of a normal recurring nature) necessary to present fairly Holdings' financial position as of June 30, 1994 and 1993 and December 31, 1993, the results of operations for the three months and six months ended June 30, 1994 and 1993, and the statements of cash flows for the six months ended June 30, 1994 and 1993. While the Company believes that the disclosures presented are adequate to make the information not misleading, it is suggested that these financial statements be read in conjunction with the financial statements and notes included in Holdings' Annual Report on Form 10-K for the year ended December 31, 1993. In the first quarter of 1993, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 106 "Employers' Accounting for Postretirement Benefits Other than Pensions" and SFAS No. 109 "Accounting for Income Taxes". In the fourth quarter of 1993, the Company adopted SFAS No. 112 "Employers' Accounting for Postemployment Benefits" effective as of January 1, 1993. The cumulative effect of these changes in accounting methods aggregated $6,276. The financial statements for the period ended June 30, 1993 have been restated to reflect the adoption of SFAS No. 112. Page 7 of 14 SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at June 30, 1994 and 1993 and for the three months and six months then ended is unaudited) (Dollars in thousands) 2. Inventories Inventories consisted of the following: June 30, June 30, Dec. 31, 1994 1993 1993 Raw materials and supplies $ 28,127 $ 22,869 26,458 Work-in-process 19,221 10,491 17,105 Finished goods 93,835 75,939 65,072 141,183 109,299 108,635 Adjustment to value inventory at cost on the LIFO Method 1,377 (896) 18 $142,560 $108,403 $108,653 3. Stockholders' Equity At June 30, 1994, the put option for the Class A common stock had expired and the fair market value that had been assigned to the put option liability has been reclassified to stockholders' equity for each of the periods presented. Page 8 of 14 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Three Months Ended June 30, 1994 Compared with Three Months Ended June 30, 1993 Net sales of metal containers were $150.4 million for the three months ended June 30, 1994 (including net sales of $51.5 million and $41.0 million to Nestle Food Company ("Nestle") and Del Monte Corporation ("Del Monte"), respectively, during such period), an increase of $52.4 million, or 53.5%, over net sales of metal containers of $98.0 million for the same period in 1993 (including net sales of $48.5 million and $2.4 million to Nestle and Del Monte, respectively, during the same period in 1993.) The increase in net sales for the three months ended June 30, 1994 as compared to the three months ended June 30, 1993 was primarily attributable to increased unit sales due to the acquisitions of all of the assets of Del Monte's container manufacturing business in the United States ("DM Can") in December 1993 and of an additional manufacturing facility in May 1993, increased sales of containers to existing customers, including vegetable pack customers, and an increase in unit sales to Nestle, offset, in part, by modestly lower average sales prices. Net sales of plastic containers increased $1.1 million to $48.1 million for the three months ended June 30, 1994, as compared to $47.0 million for the same period in 1993. The increase in net sales was principally attributable to increased unit sales to new and existing customers. Sales of other containers totaled $2.5 million for the three months ended June 30, 1994, compared to $3.5 million for the same period in 1993. Cost of goods sold was 85.7% of net sales ($172.2 million) for the three months ended June 30, 1994, a decrease of 0.9 percentage points as compared to 86.6% of net sales ($128.6 million) for the same period in 1993. The decrease in cost of goods sold as a percentage of net sales principally resulted from improved manufacturing efficiencies as a result of capital investments and synergistic benefits resulting from the acquisition of DM Can. Also, the purchase of an additional manufacturing facility in May 1993 increased production capacity and offset the first half 1993 outsourcing requirement for which there was no margin contribution. Page 9 of 14 RESULTS OF OPERATIONS (Continued) Selling, general and administrative expenses as a percentage of net sales declined 0.8 percentage points to 5.0% of net sales ($10.1 million) for the three months ended June 30, 1994, as compared to 5.8% ($8.7 million) for the same period in 1993. The decrease as a percentage of net sales resulted from the Company's ability to absorb the increase in selling, general and administrative functions associated with the acquisition of DM Can with a modest increase in expenses. Income from operations as a percentage of net sales increased 2.2 percentage points to 9.3% ($18.7 million) for the three months ended June 30, 1994, compared with 7.6% ($11.3 million) for the same period in 1993. The increase in income from operations of $7.4 million was attributable to the margin realized on the increased sales volume, offset, in part, by slightly higher selling, general and administrative expenses on the increased sales base. Interest expense increased by approximately $3.1 million to $16.3 million for the three months ended June 30, 1994. The increase resulted from the incurrance of additional bank borrowings to finance the acquisition of DM Can, higher average bank borrowing rates and higher accretion of interest on the Company's discount debentures. The provision for income taxes for the three months ended June 30, 1994 and June 30, 1993 were comprised of state and foreign components and recognized the benefit of certain deductions for federal income tax purposes which are available to Holdings. As a result of the items discussed above, net income for the three months ended June 30, 1994 was $1.5 million, $4.1 million greater than the net loss for the three months ended June 30, 1993 of $2.6 million. Page 10 of 14 RESULTS OF OPERATIONS (Continued) Six Months Ended June 30, 1994 Compared with Six Months Ended June 30, 1993 Net sales of metal containers were $283.7 million for the six months ended June 30, 1994 (including net sales of $101.9 million and $76.5 million to Nestle and Del Monte, respectively, during such period), an increase of $88.4 million, or 45.3%, over net sales of metal containers of $195.3 million for the same period in 1993 (including net sales of $106.3 million and $4.4 million to Nestle and Del Monte, respectively, during the same period in 1993.) The increase in net sales for the six months ended June 30, 1994 as compared to the six months ended June 30, 1993 was primarily attributable to increased unit sales due to the acquisitions of DM Can in December 1993 and of an additional manufacturing facility in May 1993 and increased sales of containers to existing customers, including vegetable pack customers, offset, in part, by lower unit sales to Nestle and modestly lower average sales prices. Net sales of plastic containers increased $3.2 million, or 3.4%, to $98.1 million for the six months ended June 30, 1994, as compared to $94.9 million for the same period in 1993. The increase in net sales was attributable to increased unit sales to new and existing customers and higher average sales prices due to a change in product mix. Sales of other containers totaled $5.4 million for the six months ended June 30, 1994, compared to $7.1 million for the same period in 1993. Cost of goods sold was 86.7% of net sales ($335.7 million) for the six months ended June 30, 1994, a decrease of 0.9 percentage points as compared to 87.6% of net sales ($260.4 million) for the same period in 1993. The decrease in cost of goods sold as a percentage of net sales principally resulted from improved manufacturing efficiencies as a result of capital investments, increased margin contribution due to a change in the mix of products sold and synergistic benefits resulting from the acquisition of DM Can. Also, the purchase of an additional manufacturing facility in May 1993 increased production capacity and offset the first half 1993 outsourcing requirement for which there was no margin contribution. Page 11 of 14 RESULTS OF OPERATIONS (Continued) Selling, general and administrative expenses as a percentage of net sales declined 0.9 percentage points to 4.8% of net sales ($18.7 million) for the six months ended June 30, 1994, as compared to 5.7% ($16.9 million) for the same period in 1993. The decrease as a percentage of net sales resulted from the Company's ability to absorb the increase in selling, general and administrative functions associated with the acquisition of DM Can with a modest increase in expenses. Income from operations as a percentage of net sales increased 1.8 percentage points to 8.5% ($32.8 million) for the six months ended June 30, 1994, compared with 6.7% ($20.0 million) for the same period in 1993. The increase in income from operations of $12.8 million was attributable to the margin realized on the increased sales volume, offset, in part, by slightly higher selling, general and administrative expenses on the increased sales base. Interest expense increased by approximately $5.6 million to $31.9 million for the six months ended June 30, 1994. The increase resulted from the incurrance of additional bank borrowings to finance the acquisition of DM Can, higher average bank borrowing rates and higher accretion of interest on the Company's discount debentures. The provision for income taxes for the six months ended June 30, 1994 and June 30, 1993 were comprised of state and foreign components and recognized the benefit of certain deductions for federal income tax purposes which are available to Holdings. As a result of the items discussed above, the loss before cumulative effect of changes in accounting principles for the six months ended June 30, 1994 was $0.7 million, $6.6 million less than the loss for the six months ended June 30, 1993 of $7.3 million. Effective January 1, 1993, the Company adopted SFAS No. 106, SFAS No. 109 and SFAS No. 112. The cumulative effect of these accounting changes, for years prior to 1993, was to decrease net income by $6.3 million. Page 12 of 14 RESULTS OF OPERATIONS (Continued) CAPITAL RESOURCES AND LIQUIDITY The Company's liquidity requirements arise primarily from its obligations under the indebtedness incurred in connection with its acquisitions and the refinancing of such indebtedness, capital investment in new and existing equipment and the funding of the Company's seasonal working capital needs. Historically, the Company has met these liquidity requirements through cash flow generated from operating activities and borrowings of working capital loans. For the first six months of 1994, the borrowing of working capital loans of $32.8 million was used to fund operating activities of $16.7 million and capital expenditures of $9.6 million and increase cash balances by $6.5 million. The Company's earnings before depreciation, interest, taxes and amortization for the six months ended June 30, 1994 increased by $15.8 million over the same period in the prior year to $51.8 million because of higher earnings realized on increased sales volume. However, cash used by operations during the first six months of 1994 increased by $15.7 million over the same period in 1993 because of an increase in working capital needs in 1994. During the first six months of 1994, there was an increase in accounts receivable due to greater sales during the first half of 1994 and an increase in inventories due to the projected requirements for DM Can and other vegetable pack customers, offset, in part, by an increase in trade accounts payable resulting from the higher inventory levels. Because the Company sells metal containers used in vegetable and fruit processing, its sales are seasonal. As is common in the packaging industry, the Company must access working capital to build inventory and then carry accounts receivable for some customers beyond the end of the summer and fall packing season. Seasonal accounts are generally settled by year end. Due to the Company's seasonal requirements, the Company incurred short term indebtedness to finance its working capital requirements, and approximately $50 million of the working capital revolver, including letters of credit, were utilized at its peak in July 1994. As of June 30, 1994, the outstanding principal amount of working capital loans was $35.0 million and, subject to a borrowing base limitation and taking into account outstanding letters of credit, the unused portion of working capital commitments at such date was $28.3 million. Page 13 of 14 RESULTS OF OPERATIONS (Continued) CAPITAL RESOURCES AND LIQUIDITY (Continued) In May 1994, Silgan Containers Corporation, an indirect wholly owned subsidiary of Holdings ("Containers"), extended the term of three of its supply agreements with Nestle (representing approximately 65% of the Company's unit sales to Nestle) through December 31, 2001. On December 21, 1993, Containers acquired DM Can from Del Monte. To finance the acquisition, Silgan Corporation, a wholly owned subsidiary of Holdings ("Silgan"), and its subsidiaries entered into a credit agreement, which credit agreement also refinanced in full Silgan's prior credit agreement. In conjunction therewith, the banks party to the credit agreement loaned Silgan an aggregate of $140 million of term loans and agreed to lend to Silgan's subsidiaries up to $70 million of working capital loans. In addition, in conjunction with the acquisition, Holdings sold 250,000 shares of its Class B Common Stock for $15 million. Page 14 of 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned thereunto duly authorized. SILGAN HOLDINGS INC. Dated: August 11, 1994 /s/Harley Rankin, Jr. Harley Rankin, Jr. Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) Dated: August 11, 1994 /s/Harold J. Rodriguez, Jr. Harold J. Rodriguez, Jr. Vice President and Controller (Chief Accounting Officer) -----END PRIVACY-ENHANCED MESSAGE-----