-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WWUD43xoe+2e6r22qFcJaAHUpu6cfRqPEnNQC5rCpOmIABOLuwDvWoPBLyotcnfy l/2broJ1vNy1tLr1jsZ2SA== 0000849869-03-000039.txt : 20031114 0000849869-03-000039.hdr.sgml : 20031114 20031113173622 ACCESSION NUMBER: 0000849869-03-000039 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SILGAN HOLDINGS INC CENTRAL INDEX KEY: 0000849869 STANDARD INDUSTRIAL CLASSIFICATION: METAL CANS [3411] IRS NUMBER: 061269834 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22117 FILM NUMBER: 03999462 BUSINESS ADDRESS: STREET 1: 4 LANDMARK SQ CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2039757110 10-Q 1 thirdquarterq03.txt FOR THE PERIOD ENDING 9/30/03 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended September 30, 2003 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from ________________ to ________________ Commission file number 000-22117 SILGAN HOLDINGS INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 06-1269834 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification No.) 4 Landmark Square Stamford, Connecticut 06901 (Address of Principal Executive Offices) (Zip Code) (203)975-7110 Registrant's Telephone Number, Including Area Code N/A (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ X ] No [ ] As of October 31, 2003, the number of shares outstanding of the Registrant's common stock, $0.01 par value, was 18,265,042. SILGAN HOLDINGS INC. TABLE OF CONTENTS Page No. -------- Part I. Financial Information 3 Item 1. Financial Statements 3 Condensed Consolidated Balance Sheets at 3 September 30, 2003 and 2002 and December 31, 2002 Condensed Consolidated Statements of Income for 4 the three months ended September 30, 2003 and 2002 Condensed Consolidated Statements of Income for the 5 nine months ended September 30, 2003 and 2002 Condensed Consolidated Statements of Cash Flows for 6 the nine months ended September 30, 2003 and 2002 Condensed Consolidated Statements of Stockholders' 7 Equity for the nine months ended September 30, 2002 and 2003 Notes to Condensed Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial 19 Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market 27 Risk Item 4. Controls and Procedures 28 Part II. Other Information 28 Item 1. Legal Proceedings 28 Item 6. Exhibits and Reports on Form 8-K 29 Signatures 30 Exhibit Index 31 -2- Part I. Financial Information Item 1. Financial Statements SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (Unaudited, see Note 1)
Sept. 30, Sept. 30, Dec. 31, 2003 2002 2002 ---- ---- ---- Assets Current assets Cash and cash equivalents ........................ $ 33,576 $ 19,794 $ 58,318 Trade accounts receivable, net ................... 333,718 316,170 124,657 Inventories ...................................... 321,525 274,935 272,836 Prepaid expenses and other current assets ........ 11,125 13,512 13,988 ---------- ---------- ---------- Total current assets ......................... 699,944 624,411 469,799 Property, plant and equipment, net .................... 809,113 688,008 705,746 Goodwill, net ......................................... 217,634 141,457 141,481 Other assets .......................................... 54,745 68,649 57,399 ---------- ---------- ---------- $1,781,436 $1,522,525 $1,374,425 ========== ========== ========== Liabilities and Stockholders' Equity Current liabilities Bank revolving loans ............................. $ 133,000 $ 148,000 $ -- Current portion of long-term debt ................ 21,670 1,750 20,170 Trade accounts payable ........................... 146,632 133,323 172,703 Accrued payroll and related costs ................ 71,116 55,604 56,238 Accrued liabilities .............................. 67,544 49,076 15,825 ---------- ---------- ---------- Total current liabilities .................... 439,962 387,753 264,936 Long-term debt ........................................ 1,059,394 956,987 936,655 Other liabilities ..................................... 166,949 107,357 109,742 Stockholders' equity Common stock ..................................... 209 209 209 Paid-in capital .................................. 125,551 124,872 124,872 Retained earnings ................................ 63,339 12,679 18,871 Accumulated other comprehensive loss ............. (13,575) (6,939) (20,467) Treasury stock ................................... (60,393) (60,393) (60,393) ---------- ---------- ---------- Total stockholders' equity ................... 115,131 70,428 63,092 ---------- ---------- ---------- $1,781,436 $1,522,525 $1,374,425 ========== ========== ==========
See accompanying notes -3- SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the three months ended September 30, 2003 and 2002 (Dollars and shares in thousands, except per share amounts) (Unaudited)
2003 2002 ---- ---- Net sales ............................................... $760,971 $640,854 Cost of goods sold ...................................... 658,775 559,620 -------- -------- Gross profit ....................................... 102,196 81,234 Selling, general and administrative expenses ............ 28,130 20,364 Rationalization charges (credits) ....................... 7,653 (2,619) -------- -------- Income from operations ............................. 66,413 63,489 Interest and other debt expense ......................... 21,571 19,977 -------- -------- Income before income taxes and equity in earnings of affiliate ......................... 44,842 43,512 Provision for income taxes .............................. 18,079 17,379 -------- -------- Income before equity in earnings of affiliate ...... 26,763 26,133 Equity in earnings of affiliate, net of income taxes .... -- 65 -------- -------- Net income ......................................... $ 26,763 $ 26,198 ======== ======== Earnings per share: Basic net income per share ......................... $1.47 $1.44 ===== ===== Diluted net income per share ....................... $1.45 $1.42 ===== ===== Weighted average number of shares: Basic ............................................. 18,253 18,226 Assumed exercise of employee stock options ........ 194 199 ------ ------ Diluted ........................................... 18,447 18,425 ====== ======
See accompanying notes. -4- SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the nine months ended September 30, 2003 and 2002 (Dollars and shares in thousands, except per share amounts) (Unaudited)
2003 2002 ---- ---- Net sales .............................................. $1,760,588 $1,521,359 Cost of goods sold ..................................... 1,538,601 1,330,211 ---------- ---------- Gross profit ...................................... 221,987 191,148 Selling, general and administrative expenses ........... 79,849 58,640 Rationalization charges (credits) ...................... 7,653 (4,878) ---------- ---------- Income from operations ............................ 134,485 137,386 Interest and other debt expense ........................ 60,398 55,845 ---------- ---------- Income before income taxes and equity in losses of affiliate ............................. 74,087 81,541 Provision for income taxes ............................. 29,338 32,214 ---------- ---------- Income before equity in losses of affiliate ....... 44,749 49,327 Equity in losses of affiliate, net of income taxes ..... (281) (1,711) ---------- ---------- Net income ........................................ $ 44,468 $ 47,616 ========== ========== Earnings per share: Basic net income per share ........................ $2.44 $2.63 ===== ===== Diluted net income per share ...................... $2.42 $2.59 ===== ===== Weighted average number of shares: Basic ............................................. 18,242 18,102 Assumed exercise of employee stock options ........ 153 283 ------ ------ Diluted ........................................... 18,395 18,385 ====== ======
See accompanying notes. -5- SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the nine months ended September 30, 2003 and 2002 (Dollars in thousands) (Unaudited) 2003 2002 ---- ---- Cash flows provided by (used in) operating activities Net income .............................................. $ 44,468 $ 47,616 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization ....................... 86,223 73,762 Rationalization charges (credits) ................... 7,653 (4,878) Equity in losses of affiliate ....................... 457 2,805 Other changes that provided (used) cash, net of effects from acquisitions: Trade accounts receivable, net ................. (186,641) (171,267) Inventories .................................... 30,267 (12,308) Trade accounts payable ......................... (40,137) (40,528) Accrued liabilities ............................ 44,783 20,343 Other, net ..................................... 16,981 18,207 --------- ----------- Net cash provided by (used in) operating activities ........................................ 4,054 (66,248) --------- ----------- Cash flows provided by (used in) investing activities Purchases of businesses, net of cash acquired ........... (207,676) -- Capital expenditures .................................... (79,160) (77,653) Proceeds from asset sales ............................... 1,619 844 --------- ----------- Net cash used in investing activities ............... (285,217) (76,809) --------- ----------- Cash flows provided by (used in) financing activities Borrowings under revolving loans ........................ 614,100 953,730 Repayments under revolving loans ........................ (481,100) (1,138,755) Proceeds from stock option exercises .................... 485 4,303 Proceeds from issuance of long-term debt ................ 150,000 656,000 Repayments of long-term debt ............................ (25,000) (308,823) Debt issuance costs ..................................... (2,064) (21,613) --------- ----------- Net cash provided by financing activities ........... 256,421 144,842 --------- ----------- Cash and cash equivalents Net (decrease) increase ................................. (24,742) 1,785 Balance at beginning of year ............................ 58,318 18,009 --------- ----------- Balance at end of period ................................ $ 33,576 $ 19,794 ========= =========== Interest paid ................................................ $ 42,091 $ 40,520 Income taxes paid, net of refunds ............................ 449 3,993
See accompanying notes. -6-
SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For the nine months ended September 30, 2002 and 2003 (Dollars and shares in thousands) (Unaudited) Common Stock Retained Accumulated ------------ Paid- earnings other Total Par in (accumulated comprehensive Treasury stockholders' Shares value capital deficit) income (loss) stock equity ------ ----- --------- ------------ ------------- -------- ------------- Balance at December 31, 2001 ............. 17,854 $205 $118,319 $(34,937) $ (8,046) $(60,393) $ 15,148 Comprehensive income: Net income ............................ -- -- -- 47,616 -- -- 47,616 Minimum pension liability, net of tax benefit of $74 .................. -- -- -- -- (115) -- (115) Change in fair value of derivatives, net of tax provision of $925 ........ -- -- -- -- 1,389 -- 1,389 Foreign currency translation .......... -- -- -- -- (167) -- (167) -------- Comprehensive income ..................... 48,723 Stock option exercises, including tax benefit of $2,254 .................. 377 4 6,553 -- -- -- 6,557 ------ ---- -------- -------- -------- -------- -------- Balance at September 30, 2002 ............ 18,231 $209 $124,872 $ 12,679 $ (6,939) $(60,393) $ 70,428 ====== ==== ======== ======== ======== ======== ======== Balance at December 31, 2002 ............. 18,231 $209 $124,872 $18,871 $(20,467) $(60,393) $63,092 Comprehensive income: Net income ............................ -- -- -- 44,468 -- -- 44,468 Change in fair value of derivatives, net of tax provision of $1,015 ....... -- -- -- -- 1,559 -- 1,559 Foreign currency translation .......... -- -- -- -- 5,333 -- 5,333 -------- Comprehensive income ..................... 51,360 Stock option exercises, including tax benefit of $194 .................... 34 -- 679 -- -- -- 679 ------ ---- -------- -------- -------- -------- -------- Balance at September 30, 2003 ............ 18,265 $209 $125,551 $ 63,339 $(13,575) $(60,393) $115,131 ====== ==== ======== ======== ======== ======== ======== See accompanying notes.
-7- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at September 30, 2003 and 2002 and for the three and nine months then ended is unaudited) Note 1. Significant Accounting Policies Basis of Presentation. The accompanying unaudited condensed consolidated financial statements of Silgan Holdings Inc., or Holdings, have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, the accompanying financial statements include all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation. The results of operations for any interim period are not necessarily indicative of the results of operations for the full year. The condensed consolidated balance sheet at December 31, 2002 has been derived from our audited consolidated financial statements at that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. You should read the accompanying condensed consolidated financial statements in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2002. Certain prior year amounts have been reclassified to conform with the current year's presentation. Stock-Based Compensation. We have two stock-based compensation plans. We apply the recognition and measurement principles of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for these plans. Accordingly, no compensation expense for employee stock options is recognized, as all options granted under these plans had an exercise price that was equal to or greater than the market value of the underlying stock on the date of the grant. -8- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at September 30, 2003 and 2002 and for the three and nine months then ended is unaudited) Note 1. Significant Accounting Policies (continued) Stock-Based Compensation (continued). If we had applied the fair value recognition provisions of Statement of Financial Accounting Standards, or SFAS, No. 123, "Accounting for Stock-Based Compensation," for the three and nine months ended September 30, net income and basic and diluted earnings per share would have been as follows:
Three Months Ended Nine Months Ended ------------------ ----------------- Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2003 2002 2003 2002 ---- ---- ---- ---- (Dollars in thousands, except per share data) Net income, as reported .......................... $26,763 $26,198 $44,468 $47,616 Deduct: Total stock-based employee compensation expense determined under fair value method for all stock option awards, net of income taxes .................. 317 76 1,010 783 ------- ------- ------- ------- Pro forma net income ............................. $26,446 $26,122 $43,458 $46,833 ======= ======= ======= ======= Earnings per share: Basic net income per share - as reported ..... $1.47 $1.44 $2.44 $2.63 ===== ===== ===== ===== Basic net income per share - pro forma ....... 1.45 1.43 2.38 2.59 ===== ===== ===== ===== Diluted net income per share - as reported ... $1.45 $1.42 $2.42 $2.59 ===== ===== ===== ===== Diluted net income per share - pro forma ..... 1.44 1.42 2.37 2.56 ===== ===== ===== =====
Recently Issued Accounting Pronouncements. Effective January 1, 2003, we adopted SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections." Among other provisions, SFAS No. 145 rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt," and SFAS No. 64, "Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements," such that certain gains or losses from the extinguishment of debt will no longer be classified as extraordinary items. Upon adoption in 2003, the extraordinary item for loss on early extinguishment of debt of $1.0 million before income taxes that was recorded in the second quarter of 2002 as a result of the refinancing of our previous senior secured credit facility with our new senior secured credit facility, or the Credit Agreement, was reclassified to interest and other debt expense in the Condensed Consolidated Statements of Income. -9- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at September 30, 2003 and 2002 and for the three and nine months then ended is unaudited) Note 1. Significant Accounting Policies (continued) Recently Issued Accounting Pronouncements (continued). Effective January 1, 2003, we adopted SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which is applicable to exit and disposal activities that are initiated after December 31, 2002. SFAS No. 146 addresses accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force, or EITF, Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146 requires the recognition of a liability for a cost associated with an exit or disposal activity when the liability is incurred. Under EITF Issue No. 94-3, a liability for an exit cost was recognized at the date an entity committed to an exit plan. In January 2003, the Financial Accounting Standards Board, or the FASB, issued Interpretation, or FIN, No. 46, "Consolidation of Variable Interest Entities," which expands upon existing accounting guidance on consolidation. A variable interest entity either does not have equity investors with voting rights or has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN No. 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or is entitled to receive a majority of the entity's residual returns. The provisions of FIN No. 46 are effective for us on December 31, 2003. We do not anticipate that the adoption of FIN No. 46 will have a material effect on our financial position or results of operations. Note 2. Acquisitions In January 2003, we acquired substantially all of the assets of Thatcher Tubes LLC and its affiliates, or Thatcher Tubes, a privately held manufacturer and marketer of decorated plastic tubes serving primarily the personal care industry. Including recently installed additional production capacity, the purchase price for the assets was approximately $32 million in cash. Thatcher Tubes had annual net sales of approximately $29 million in 2002. Thatcher Tubes operates as part of our plastic container business. In March 2003, we acquired the remaining 65 percent equity interest in the Amcor White Cap LLC, or White Cap, joint venture that we did not already own from Amcor White Cap Inc. for approximately $37 million in cash and repaid debt and purchased equipment subject to a third party lease for approximately $93 million. White Cap had annual net sales of approximately $250 million in 2002. The business operates as part of our metal food container business. In April 2003, we acquired PCP Can Manufacturing, Inc., or Pacific Coast Can, a subsidiary of Pacific Coast Producers, or Pacific Coast, through which Pacific Coast self-manufactured a majority of its metal food containers. The purchase price was approximately $44 million in cash, including approximately $29 million for inventory. As part of the transaction, we entered into a ten-year supply agreement with Pacific Coast under which Pacific Coast has agreed to purchase from us substantially all of its metal food container requirements. -10- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at September 30, 2003 and 2002 and for the three and nine months then ended is unaudited) Note 2. Acquisitions (continued) We financed these acquisitions through a $150 million incremental term loan borrowing and revolving loan borrowings under the Credit Agreement. These acquisitions were accounted for using the purchase method of accounting. Accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition, and the businesses' results of operations have been included in our consolidated operating results from the date of acquisition. The allocation of purchase price is based on preliminary estimates and assumptions and is subject to revision when valuations and integration plans have been finalized. Accordingly, revisions to the allocation of purchase price, which may be significant, will be reported in a future period as increases or decreases to amounts previously reported. Note 3. Rationalization Charges (Credits) and Acquisition Reserves As part of our plans to integrate the operations of our various acquired businesses, including the Food Metal and Specialty business of American National Can Company, or AN Can, and to rationalize certain facilities, we have established reserves for employee severance and benefits and plant exit costs. Activity in our rationalization and acquisition reserves since December 31, 2002 is summarized as follows:
Employee Plant Severance Exit and Benefits Costs Total ------------ ----- ----- (Dollars in thousands) Balance at December 31, 2002 - ---------------------------- AN Can Acquisition ................................ $ 747 $1,119 $ 1,866 Fairfield Plant Rationalization ................... -- 1,594 1,594 ------- ------ ------- Balance at December 31, 2002 ...................... 747 2,713 3,460 Activity for the Nine Months Ended September 30, 2003 - ----------------------------------------------------- AN Can Acquisition ................................ (631) (924) (1,555) Fairfield Plant Rationalization ................... -- (230) (230) 2003 Acquisition Reserves Established ............. 4,594 614 5,208 2003 Acquisition Reserves Utilized ................ (1,271) -- (1,271) 2003 Rationalization Reserves Established ......... 1,376 1,190 2,566 2003 Rationalization Reserves Utilized ............ (470) -- (470) ------- ------ ------- Total Activity .................................... 3,598 650 4,248 Balance at September 30, 2003 - ----------------------------- AN Can Acquisition ................................ 116 195 311 Fairfield Plant Rationalization ................... -- 1,364 1,364 2003 Acquisitions ................................. 3,323 614 3,937 2003 Rationalizations ............................. 906 1,190 2,096 ------- ------ ------- Balance at September 30, 2003 ..................... $ 4,345 $3,363 $ 7,708 ======= ====== =======
-11- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at September 30, 2003 and 2002 and for the three and nine months then ended is unaudited) Note 3. Rationalization Charges (Credits) and Acquisition Reserves (continued) 2003 Acquisition Reserves - ------------------------- During 2003, we established acquisition reserves in connection with our purchases of Thatcher Tubes, White Cap and Pacific Coast Can aggregating approximately $5.2 million, recorded pursuant to plans that we began to assess and formulate at the date of the acquisitions and which will be finalized within one year. As we continue to assess, formulate and finalize our integration plans, there may be revisions to these acquisition reserves. Currently, these plans include exiting the Lodi, California metal food can manufacturing facility and the Chicago, Illinois and Queretaro, Mexico metal closures manufacturing facilities. These reserves consisted of employee severance and benefits costs of $4.6 million and plant exit costs of $0.6 million related to the planned closing and downsizing of certain acquired facilities. Through September 30, 2003, a total of $1.3 million has been expended for employee severance and benefits related to these plans. At September 30, 2003, this reserve had a balance of $3.9 million. Cash payments related to these acquisition reserves are expected through 2004. 2003 Rationalizations - --------------------- In the third quarter of 2003, we approved and announced to employees our plans to exit the Norwalk, Connecticut and Anaheim, California manufacturing facilities of our plastic container business and the Queretaro, Mexico metal closures manufacturing facility. These plans include the termination of approximately 120 plant employees and other related exit costs. These decisions resulted in a charge to earnings of $7.7 million in the third quarter of 2003. This charge consisted of $5.1 million for the non-cash write-down in carrying value of assets, $1.4 million for employee severance and benefits and $1.2 million for plant exit costs. Through September 30, 2003, in addition to the write-down in carrying value of assets, a total of $0.5 million has been expended for employee severance and benefits. At September 30, 2003, this reserve had a balance of $2.1 million. Additional rationalization charges related to these facility closings are expected in the fourth quarter of 2003. The timing of certain cash payments is dependent upon the expiration of a lease obligation. Accordingly, cash payments related to these reserves are expected through 2010. 2002 Rationalization Credits - ---------------------------- During the third quarter of 2002, in order to support new business we decided to continue to operate our Kingsburg, California manufacturing facility. As a result, we recorded a $2.1 million rationalization credit, which consisted of $1.5 million related to certain assets with carrying values that were previously written down but will now remain in service and $0.6 million for the reversal of rationalization reserves related to employee severance and benefits and plant exit costs. The assets that remained in service were recorded in our Condensed Consolidated Balance Sheets at their depreciated cost, which approximated fair value. Also, during the third quarter of 2002, all actions related to our rationalization plans for our Northtown, Missouri and Waukegan, Illinois metal food container manufacturing facilities related to employee severance and benefits and plant exit costs were completed at amounts less than originally estimated, and all actions related to our rationalization plan for our Fairfield, Ohio plastic container manufacturing facility related to employee severance were completed at amounts less than originally estimated. Accordingly, we reversed $0.5 million of rationalization reserves as a rationalization credit. -12- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at September 30, 2003 and 2002 and for the three and nine months then ended is unaudited) Note 3. Rationalization Charges (Credits) and Acquisition Reserves (continued) During the first quarter of 2002, we placed certain assets of our metal food container business with carrying values that were previously written down back in service. As a result, we recorded a $2.3 million rationalization credit and recorded those assets in our Condensed Consolidated Balance Sheets at their depreciated cost, which approximated fair value. Rationalization and acquisition reserves are included in the Condensed Consolidated Balance Sheets as follows: Sept. 30, Sept. 30, Dec. 31, 2003 2002 2002 ---- ---- ---- (Dollars in thousands) Accrued liabilities ........ $5,515 $1,883 $1,813 Other liabilities .......... 2,193 2,009 1,647 ------ ------ ------ $7,708 $3,892 $3,460 ====== ====== ====== Note 4. Accumulated Other Comprehensive Loss Accumulated other comprehensive loss is reported in the Condensed Consolidated Statements of Stockholders' Equity. Amounts included in accumulated other comprehensive loss consisted of the following:
Sept. 30, Sept. 30, Dec. 31, 2003 2002 2002 ---- ---- ---- (Dollars in thousands) Foreign currency translation ................ $ 3,335 $(2,083) $ (1,998) Change in fair value of derivatives ......... (1,255) (1,878) (2,814) Minimum pension liability ................... (15,655) (2,978) (15,655) -------- ------- -------- Accumulated other comprehensive loss ..... $(13,575) $(6,939) $(20,467) ======== ======= ========
-13- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at September 30, 2003 and 2002 and for the three and nine months then ended is unaudited) Note 5. Inventories Inventories consisted of the following: Sept. 30, Sept. 30, Dec. 31, 2003 2002 2002 ---- ---- ---- (Dollars in thousands) Raw materials ........................... $ 32,820 $ 32,153 $ 31,925 Work-in-process ......................... 61,100 51,101 50,941 Finished goods .......................... 204,268 171,264 171,341 Spare parts and other ................... 20,576 13,916 13,944 -------- -------- -------- 318,764 268,434 268,151 Adjustment to value inventory at cost on the LIFO method .......... 2,761 6,501 4,685 -------- -------- -------- $321,525 $274,935 $272,836 ======== ======== ========
Note 6. Investment in Affiliate Effective July 1, 2001, we formed a joint venture company with Schmalbach-Lubeca AG that is a leading supplier of an extensive range of metal and plastic closures to consumer goods packaging companies in the food and beverage industries in North America. The venture operated under the name Amcor White Cap LLC. We contributed certain metal closure assets and liabilities, including our manufacturing facilities in Evansville and Richmond, Indiana, in return for a 35 percent interest in and $32.4 million of cash proceeds from the joint venture. Schmalbach-Lubeca AG contributed the remaining metal and plastic closure operations to the joint venture. In July 2002, Amcor Ltd. purchased Schmalbach-Lubeca AG's interest in the joint venture. As discussed in Note 2, in March 2003, we acquired the remaining 65 percent interest in the White Cap joint venture that we did not already own. The business now operates under the name Silgan Closures LLC, or Silgan Closures. Prior to our acquisition of White Cap, we accounted for our investment in the White Cap joint venture using the equity method. For the first two months of 2003, we recorded equity in losses of White Cap of $0.3 million, net of income taxes. The results of Silgan Closures since March 2003 have been included with the results of our metal food container business. For the third quarter of 2002, we recorded equity in earnings of White Cap of $0.1 million, net of income taxes. For the nine months ended September 30, 2002, we recorded equity in losses of White Cap of $1.7 million, net of income taxes. -14- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at September 30, 2003 and 2002 and for the three and nine months then ended is unaudited) Note 7. Long-Term Debt Long-term debt consisted of the following: Sept. 30, Sept. 30, Dec. 31, 2003 2002 2002 ---- ---- ---- (Dollars in thousands) Bank debt Bank revolving loans ............... $ 133,000 $ 148,000 $ -- Bank A term loans .................. 100,000 100,000 100,000 Bank B term loans .................. 498,250 350,000 348,250 ---------- ---------- -------- Total bank debt ................. 731,250 598,000 448,250 Subordinated debt 9% Senior Subordinated Debentures .. 479,814 505,737 505,575 Other .............................. 3,000 3,000 3,000 ---------- ---------- -------- Total subordinated debt ......... 482,814 508,737 508,575 ---------- ---------- -------- Total debt .............................. 1,214,064 1,106,737 956,825 Less current portion ............... 154,670 149,750 20,170 ---------- ---------- -------- $1,059,394 $ 956,987 $936,655 ========== ========== ======== 6 3/4% Notes - ------------ On November 14, 2003, we expect to issue $200 million aggregate principal amount of 6 3/4% Senior Subordinated Notes due 2013, or the 6 3/4% Notes, in a private placement. The 6 3/4% Notes will be general unsecured obligations of Holdings, subordinate in right of payment to obligations under the Credit Agreement and effectively subordinate to all obligations of the subsidiaries of Holdings. Interest on the 6 3/4% Notes will be payable semi-annually in cash. The 6 3/4% Notes are subject to certain transfer restrictions until we complete a registered exchange offer. The net cash proceeds from this issuance are expected to be used to redeem a portion of our 9% Debentures. Credit Agreement - ---------------- On November 13, 2003, we amended the Credit Agreement to, among other things, increase the uncommitted incremental term loan facility by $200 million and provide us with greater ability to redeem the 9% Debentures or any other subordinated indebtedness. This increases our uncommitted incremental term loan facility under the Credit Agreement to $325 million. Additionally, we have received commitments from lenders under the Credit Agreement to provide us with up to $200 million of incremental term loans subject to the satisfaction of certain conditions. The terms of these incremental term loans are expected to be the same as those for B term loans under the Credit Agreement. We anticipate using the proceeds from these incremental term loans and other funds to fully redeem all remaining outstanding 9% Debentures. If and once these commitments are funded, our uncommitted incremental term loan facility under the Credit Agreement will be reduced to $125 million. -15- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at September 30, 2003 and 2002 and for the three and nine months then ended is unaudited) Note 7. Long-Term Debt (continued) Credit Agreement (continued) - ---------------- On March 3, 2003, we completed a $150 million incremental term loan borrowing under the Credit Agreement. The proceeds were used largely to finance the acquisitions of White Cap and Thatcher Tubes. The terms of this incremental term loan borrowing are the same as those for B term loans under the Credit Agreement. 9% Debentures - ------------- On August 29, 2003, we redeemed $25 million principal amount of our 9% Senior Subordinated Debentures due 2009, or the 9% Debentures. The redemption price was 103.375% of the principal amount of the 9% Debentures redeemed, or approximately $25.8 million, plus accrued and unpaid interest to the redemption date. As permitted under the Credit Agreement, we funded this redemption with lower cost revolving loans under the Credit Agreement. As a result of this redemption, we recorded a loss on early extinguishment of debt of approximately $1.0 million in the third quarter of 2003 for the premium paid in connection with this redemption and for the write-off of unamortized debt issuance costs and unamortized premium related to the redeemed 9% Debentures. This loss on early extinguishment of debt was recorded as interest and other debt expense in the Condensed Consolidated Statements of Income. This redemption reduced the principal amount of 9% Debentures outstanding to $475 million. During the fourth quarter of 2003, we anticipate that we will fully redeem the $475 million remaining outstanding principal amount of the 9% Debentures. The redemption price will be 103.375% of the principal amount of the outstanding 9% Debentures, or approximately $491.0 million, plus accrued and unpaid interest, if any, to the redemption date. We anticipate funding this redemption with the proceeds from the issuance of the 6 3/4% Notes and from incremental term loans and other funds under the Credit Agreement. As a result of this anticipated redemption, we expect to record a loss on early extinguishment of debt of approximately $18.2 million in the fourth quarter of 2003 for the premium paid in connection with this redemption and for the write-off of unamortized debt issuance costs and unamortized premium related to the redeemed 9% Debentures. This loss on early extinguishment of debt will be recorded as interest and other debt expense in the Condensed Consolidated Statements of Income. General - ------- In June 2003, we entered into an interest rate swap agreement for an aggregate notional principal amount of $100 million. Under this agreement, we will pay a fixed rate of interest of 1.3 percent and receive a floating rate of interest based on three month LIBOR. This agreement matures in June 2005 and is accounted for as a cash flow hedge. At September 30, 2003, amounts expected to be repaid within one year consisted of $133.0 million of bank revolving loans related primarily to seasonal working capital needs and $21.7 million of bank term loans. -16- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at September 30, 2003 and 2002 and for the three and nine months then ended is unaudited) Note 8. Business Segment Information Reportable business segment information for our business segments is as follows:
Metal Food Plastic Containers(1) Containers(2) Corporate Total ---------- ---------- --------- ----- (Dollars in thousands) Three Months Ended September 30, 2003 - ------------------------------------- Net sales .................................... $ 621,721 $139,250 $ -- $ 760,971 Depreciation and amortization(3) ............. 18,185 10,785 9 28,979 Segment income from operations ............... 63,491 4,326 (1,404) 66,413 Three Months Ended September 30, 2002 - ------------------------------------- Net sales .................................... $ 517,279 $123,575 $ -- $ 640,854 Depreciation and amortization(3) ............. 15,508 8,798 11 24,317 Segment income from operations ............... 55,440 9,551 (1,502) 63,489 Nine Months Ended September 30, 2003 - ------------------------------------ Net sales .................................... $1,335,091 $425,497 $ -- $1,760,588 Depreciation and amortization(3) ............. 52,405 30,776 31 83,212 Segment income from operations ............... 101,369 37,131 (4,015) 134,485 Nine Months Ended September 30, 2002 - ------------------------------------ Net sales .................................... $1,144,237 $377,122 $ -- $1,521,359 Depreciation and amortization(3) ............. 44,266 26,773 44 71,083 Segment income from operations ............... 100,379 41,200 (4,193) 137,386 - ------------- (1) Segment income from operations includes a rationalization charge of $0.6 million recorded in the third quarter of 2003 and rationalization credits of $2.3 million in each of the first and third quarters of 2002. (2) Segment income from operations includes a rationalization charge of $7.1 million recorded in the third quarter of 2003 and a rationalization credit of $0.3 million recorded in the third quarter of 2002. (3) Depreciation and amortization excludes amortization of debt issuance costs of $1.1 million and $0.9 million for the three months ended September 30, 2003 and 2002, respectively, and $3.0 million and $2.7 million for the nine months ended September 30, 2003 and 2002, respectively.
-17- SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at September 30, 2003 and 2002 and for the three and nine months then ended is unaudited) Note 8. Business Segment Information (continued) Total segment income from operations is reconciled to income before income taxes and equity in earnings (losses) of affiliate as follows:
Three Months Ended Nine Months Ended ------------------ ----------------- Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2003 2002 2003 2002 ---- ---- ---- ---- (Dollars in thousands) Total segment income from operations ..... $66,413 $63,489 $134,485 $137,386 Interest and other debt expense .......... 21,571 19,977 60,398 55,845 ------- ------- -------- -------- Income before income taxes and equity in earnings (losses) of affiliate ....................... $44,842 $43,512 $ 74,087 $ 81,541 ======= ======= ======== ========
Note 9. Related Party Transactions Previously, pursuant to management services agreements, or the Management Agreements, entered into between each of Holdings, Silgan Containers Corporation and Silgan Plastics Corporation and S&H Inc., or S&H, a company wholly owned by R. Philip Silver, the Chairman and Co-Chief Executive Officer of Holdings, and D. Greg Horrigan, the President and Co-Chief Executive Officer of Holdings, S&H provided Holdings and its subsidiaries with general management, supervision and administrative services. The parties to the Management Agreements agreed to terminate the Management Agreements effective January 1, 2003. As a result, Messrs. Silver and Horrigan became employees of Holdings effective January 1, 2003, and neither Holdings nor its subsidiaries will make any payment in 2003 under the Management Agreements. -18- 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 us and therefore involve a number of uncertainties and risks, including, but not limited to, those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2002 and our other filings with the Securities and Exchange Commission. As a result, the actual results of our operations or our financial condition could differ materially from those expressed or implied in these forward-looking statements. RESULTS OF OPERATIONS The following table sets forth certain unaudited income statement data expressed as a percentage of net sales for the periods presented.
Three Months Ended Nine Months Ended ------------------ ----------------- Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2003 2002 2003 2002 ---- ---- ---- ---- Net sales Metal food containers........................... 81.7% 80.7% 75.8% 75.2% Plastic containers.............................. 18.3 19.3 24.2 24.8 ----- ----- ----- ----- Consolidated................................. 100.0 100.0 100.0 100.0 Cost of goods sold................................ 86.6 87.3 87.4 87.4 ----- ----- ----- ----- Gross profit...................................... 13.4 12.7 12.6 12.6 Selling, general and administrative expenses...... 3.7 3.2 4.6 3.9 Rationalization charges (credits) ................ 1.0 (0.4) 0.4 (0.3) ----- ----- ----- ----- Income from operations............................ 8.7 9.9 7.6 9.0 Interest and other debt expense................... 2.8 3.1 3.4 3.7 ----- ----- ----- ----- Income before income taxes and equity in earnings (losses) of affiliate.................. 5.9 6.8 4.2 5.3 Provision for income taxes........................ 2.4 2.7 1.7 2.1 ----- ----- ----- ----- Income before equity in earnings (losses) of affiliate....................................... 3.5 4.1 2.5 3.2 Equity in earnings (losses) of affiliate, net of income taxes.................................... -- -- -- (0.1) ----- ----- ----- ----- Net income........................................ 3.5% 4.1% 2.5% 3.1% ===== ===== ===== =====
-19- Summary unaudited results of operations for the three and nine months ended September 30, 2003 and 2002 are provided below.
Three Months Ended Nine Months Ended ------------------ ----------------- Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2003 2002 2003 2002 ---- ---- ---- ---- (Dollars in millions) Net sales Metal food containers ........ $621.7 $517.3 $1,335.1 $1,144.3 Plastic containers ........... 139.3 123.6 425.5 377.1 ------ ------ -------- -------- Consolidated .............. $761.0 $640.9 $1,760.6 $1,521.4 ====== ====== ======== ======== Income from operations Metal food containers(1) ..... $ 63.5 $ 55.4 $ 101.4 $ 100.4 Plastic containers(2) ........ 4.3 9.6 37.1 41.2 Corporate .................... (1.4) (1.5) (4.0) (4.2) ------ ------ -------- -------- Consolidated .............. $ 66.4 $ 63.5 $ 134.5 $ 137.4 ====== ====== ======== ======== - ------------- (1) Includes a rationalization charge of $0.6 million recorded in the third quarter of 2003 and rationalization credits of $2.3 million in each of the first and third quarters of 2002. (2) Includes a rationalization charge of $7.1 million recorded in the third quarter of 2003 and a rationalization credit of $0.3 million recorded in the third quarter of 2002.
Three Months Ended September 30, 2003 Compared with Three Months Ended September 30, 2002 Net sales. Consolidated net sales increased $120.1 million, or 18.7 percent, to $761.0 million for the third quarter of 2003, as compared to net sales of $640.9 million for the third quarter of 2002. This increase was the result of higher net sales in the metal food container business due to the acquisitions of the White Cap closures and Pacific Coast Can manufacturing businesses and higher net sales of the plastic container business due in part to the acquisition of Thatcher Tubes. Net sales for the metal food container business were $621.7 million for the third quarter of 2003, an increase of $104.4 million, or 20.2 percent, from net sales of $517.3 million for the third quarter of 2002. This increase was largely attributable to the inclusion of net sales of recently acquired businesses. Excluding net sales of Silgan Closures, net sales of the metal food container business for the third quarter of 2003 increased 7.2 percent due to increased sales volumes as a result of the acquisition of the Pacific Coast Can manufacturing business and slightly higher average selling prices as compared to the third quarter in 2002. Net sales for the plastic container business of $139.3 million for the third quarter of 2003 increased $15.7 million, or 12.7 percent, from net sales of $123.6 million for the third quarter of 2002. This increase was primarily a result of higher unit volume due in part to the acquisition of Thatcher Tubes and higher average selling prices due to the pass through of higher resin costs as compared to the same period last year. -20- Cost of goods sold. Cost of goods sold as a percentage of consolidated net sales was 86.6 percent for the third quarter of 2003, a decrease of 0.7 percentage points as compared to 87.3 percent for the same period in 2002. The increase in gross profit margin was primarily attributable to increased sales of value-added products and a reduction in costs incurred by the metal food container business to absorb new volume awarded in 2002, partially offset by higher employee health and welfare costs. Selling, general and administrative expenses. Selling, general and administrative expenses as a percentage of consolidated net sales increased by 0.5 percentage points to 3.7 percent for the third quarter of 2003, as compared to 3.2 percent for the same period in 2002. This increase was largely the result of the higher selling, general and administrative expense levels at the recently acquired White Cap closures and Thatcher Tubes businesses, as well as higher insurance and employee health and welfare costs. Income from operations. Income from operations for the third quarter of 2003 increased $2.9 million, or 4.6 percent, to $66.4 million, as compared to $63.5 million in the same period in 2002. Operating margin for the third quarter of 2003 decreased 1.2 percentage points to 8.7 percent, as compared to 9.9 percent for the same period in 2002. The increase in income from operations was largely due to the inclusion of the results of the recently acquired businesses and higher net sales in the plastic container business, partially offset by rationalization charges in 2003 as compared to rationalization credits in 2002. Income from operations of the metal food container business for the third quarter of 2003 increased $8.1 million, or 14.6 percent, to $63.5 million as compared to $55.4 million for the third quarter of 2002, while operating margin decreased 0.5 percentage points to 10.2 percent as compared to 10.7 percent for the same period in 2002. The increase in income from operations was principally due to higher net sales largely as a result of the recently acquired businesses, increased sales of value-added products and a reduction in costs incurred to absorb new volume awarded in 2002, partially offset by a rationalization charge of $0.6 million in the third quarter of 2003 as compared to a rationalization credit of $2.3 million in the same quarter last year, higher depreciation expense and increased employee health and welfare costs. Income from operations of the plastic container business for the third quarter of 2003 decreased $5.3 million, or 55.2 percent, to $4.3 million as compared to $9.6 million for the same period in 2002, while operating margin decreased 4.7 percentage points to 3.1 percent as compared to 7.8 percent for the third quarter of 2002. The decrease in income from operations was primarily a result of rationalization charges of $7.1 million (including the non-cash write-down in carrying value of assets of approximately $5.1 million) related to closing two manufacturing facilities. Excluding the impact of rationalization charges, income from operations increased due to higher unit volumes and improved productivity, partially offset by the impact of heightened competitive activity, higher depreciation expense and higher employee health and welfare costs. Interest and other debt expense. Interest and other debt expense increased $1.6 million to $21.6 million for the third quarter of 2003 as compared to the same period in 2002. This increase resulted primarily from a loss on early extinguishment of debt of $1.0 million for the premium paid and write-off of unamortized debt issuance costs and premium as a result of the redemption of $25 million of 9% Debentures in August 2003 and higher average borrowings due to three acquisitions completed in early 2003, partially offset by a lower average interest rate primarily due to lower LIBOR rates. Income taxes. The provision for income taxes for the third quarter of 2003 and 2002 was recorded at an effective income tax rate of 40.3 percent and 39.9 percent, respectively. -21- Net income and earnings per share. Net income for the third quarter of 2003 was $26.8 million, or $1.45 per diluted share, as compared to net income of $26.2 million, or $1.42 per diluted share, for the third quarter of 2002. Nine Months Ended September 30, 2003 Compared with Nine Months Ended September 30, 2002 Net sales. Consolidated net sales increased $239.2 million, or 15.7 percent, to $1,760.6 million for the nine months ended September 30, 2003, as compared to net sales of $1,521.4 million for the same nine months in the prior year. This increase was largely the result of higher net sales in the metal food container business due to the acquisitions of the White Cap closures and Pacific Coast Can manufacturing businesses in early 2003 and higher volumes in the plastic container business due in part to the acquisition of Thatcher Tubes in January 2003. Net sales for the metal food container business were $1,335.1 million for the nine months ended September 30, 2003, an increase of $190.8 million, or 16.7 percent, from net sales of $1,144.3 million for the same nine months in the prior year. This increase was primarily attributable to the inclusion of net sales of the recently acquired businesses in 2003. Excluding net sales of Silgan Closures, net sales of the metal food container business for the nine months ended September 30, 2003 increased 3.3 percent due to increased sales volumes as a result of the acquisition of the Pacific Coast Can manufacturing business and slightly higher selling prices as compared to the same nine months in the prior year. Net sales for the plastic container business of $425.5 million for the nine months ended September 30, 2003 increased $48.4 million, or 12.8 percent, from net sales of $377.1 million for the same nine months in the prior year. This increase was primarily a result of higher unit volume due in part to the acquisition of Thatcher Tubes in January 2003 and higher average selling prices due to the pass through of higher resin costs. Cost of goods sold. Cost of goods sold as a percentage of consolidated net sales was essentially unchanged at 87.4 percent for the nine months ended September 30, 2003 as compared to the same period in 2002. Selling, general and administrative expenses. Selling, general and administrative expenses as a percentage of consolidated net sales increased by 0.7 percentage points to 4.6 percent for the nine months ended September 30, 2003, as compared to 3.9 percent for the same period in 2002. This increase was largely the result of the higher selling, general and administrative expense levels at the recently acquired White Cap closures and Thatcher Tubes businesses, as well as higher employee health and welfare costs. Income from operations. Income from operations for the nine months ended September 30, 2003 decreased $2.9 million, or 2.1 percent, to $134.5 million, as compared to $137.4 million in the same period in 2002. Operating margin for the nine months ended September 30, 2003 decreased 1.4 percentage points to 7.6 percent, as compared to 9.0 percent for the same period in 2002. These decreases were primarily a result of rationalization charges in 2003 as compared to rationalization credits in 2002, higher depreciation expense and higher employee health and welfare costs, partially offset by the inclusion of the results of the businesses acquired in early 2003, increased sales of value-added products and a reduction in costs incurred by the metal food container business to absorb new volume awarded in 2002. -22- Income from operations of the metal food container business for the nine months ended September 30, 2003 increased $1.0 million to $101.4 million as compared to $100.4 million for the same period in 2002. Operating margin for the metal food container business decreased 1.2 percentage points to 7.6 percent as compared to 8.8 percent for the same period in 2002. The increase in income from operations was principally due to the inclusion of the results of the recently acquired businesses in 2003, increased sales of value-added products and a reduction in costs incurred to absorb new volume awarded in 2002, partially offset by a rationalization charge of $0.6 million in 2003 as compared to a rationalization credit of $2.6 million in 2002 related to placing certain previously written down assets back in service, higher depreciation expense and increased employee health and welfare costs. Income from operations of the plastic container business for the nine months ended September 30, 2003 decreased $4.1 million, or 10.0 percent, to $37.1 million as compared to $41.2 million for the same period in 2002, while operating margin decreased 2.2 percentage points to 8.7 percent as compared to 10.9 percent for the same period in 2002. The decrease in income from operations was primarily a result of rationalization charges of $7.1 million in 2003 related to closing two manufacturing facilities. Excluding the impact of rationalization charges, income from operations increased due to higher unit volumes largely due to the acquisition of Thatcher Tubes in January 2003 and improved productivity, partially offset by the impact of heightened competitive activity, higher depreciation expense and higher employee health and welfare costs. Interest and other debt expense. Interest and other debt expense increased $4.6 million to $60.4 million for the nine months ended September 30, 2003 as compared to the same period in 2002. This increase resulted primarily from higher average borrowings due to the three acquisitions completed in early 2003. The average interest rate was lower for the first nine months of 2003 as compared to the same period in 2002, as lower LIBOR rates more than offset the impact of the add-on issuance of $200 million of 9% Debentures at the end of April 2002 and higher interest rate spreads over LIBOR as a result of the refinancing of our previous senior secured credit facility with the Credit Agreement at the end of June 2002. As a result of our redemption of $25 million of 9% Debentures in August 2003, interest and other debt expense for the first nine months of 2003 included a loss on early extinguishment of debt of $1.0 million. As a result of the refinancing of our previous senior secured credit facility, interest expense for the first nine months of 2002 included a loss on early extinguishment of debt of $1.0 million for the write-off of unamortized debt issuance costs related to that credit facility. Income taxes. The provision for income taxes for the nine months ended September 30, 2003 and 2002 was recorded at an effective annual income tax rate of 39.6 percent and 39.5 percent, respectively. Net income and earnings per share. Net income for the nine months ended September 30, 2003 was $44.5 million, or $2.42 per diluted share, as compared to net income of $47.6 million, or $2.59 per diluted share, for the same period in 2002. CAPITAL RESOURCES AND LIQUIDITY Our principal sources of liquidity have been net cash from operating activities and borrowings under the Credit Agreement. Our liquidity requirements arise primarily from our obligations under the indebtedness incurred in connection with our acquisitions and the refinancing of that indebtedness, capital investment in new and existing equipment and the funding of our seasonal working capital needs. -23- For the nine months ended September 30, 2003, we used net borrowings of revolving loans of $133.0 million, incremental term loan borrowings of $150.0 million under the Credit Agreement, cash balances of $24.7 million, cash provided by operations of $4.1 million, proceeds from asset sales of $1.6 million and proceeds from stock option exercises of $0.5 million to fund the acquisitions of White Cap, Thatcher Tubes and Pacific Coast Can for $207.7 million, capital expenditures of $79.2 million, the partial redemption of $25 million of 9% Debentures and debt issuance costs of $2.0 million. For the nine months ended September 30, 2002, we used proceeds of $206.0 million from the add-on issuance of 9% Debentures, proceeds from stock option exercises of $4.3 million and proceeds from asset sales of $0.8 million to fund capital expenditures of $77.6 million, cash used in operations of $66.2 million primarily for our seasonal working capital needs, net repayments of revolving loans and long-term debt of $43.9 million and debt issuance costs of $21.6 million and to increase cash balances by $1.8 million. Because we sell metal containers used in fruit and vegetable pack processing, we have seasonal sales. As is common in the industry, we must utilize working capital to build inventory and then carry accounts receivable for some customers beyond the end of the packing season. Due to our seasonal requirements, we incur short-term indebtedness to finance our working capital requirements. During the third quarter of 2003, we utilized approximately $176.4 million of revolving loans under the Credit Agreement for our peak seasonal working capital requirements, excluding borrowings to initially fund acquisitions and redeem 9% Debentures. We may use the available portion of our revolving loan facility under the Credit Agreement, after taking into account our seasonal needs and outstanding letters of credit, for acquisitions and other permitted purposes. As of September 30, 2003, we had $133.0 million of revolving loans outstanding under the Credit Agreement related primarily to seasonal working capital needs. The unused portion of the revolving loan facility under the Credit Agreement at September 30, 2003, after taking into account outstanding letters of credit, was $245.1 million. On November 14, 2003, we expect to issue $200 million aggregate principal amount of 6 3/4% Senior Subordinated Notes due 2013 in a private placement. The 6 3/4% Notes will be general unsecured obligations of Holdings, subordinate in right of payment to obligations under the Credit Agreement and effectively subordinate to all obligations of the subsidiaries of Holdings. Interest on the 6 3/4% Notes will be payable semi-annually in cash. The 6 3/4% Notes are subject to certain transfer restrictions until we complete a registered exchange offer. The net cash proceeds from this issuance are expected to be used to redeem a portion of our 9% Debentures. On November 13, 2003, we amended the Credit Agreement to, among other things, increase the uncommitted incremental term loan facility by $200 million and provide us with greater ability to redeem the 9% Debentures or any other subordinated indebtedness. This increases our uncommitted incremental term loan facility under the Credit Agreement to $325 million. Additionally, we have received commitments from lenders under the Credit Agreement to provide us with up to $200 million of incremental term loans subject to the satisfaction of certain conditions. The terms of these incremental term loans are expected to be the same as those for B term loans under the Credit Agreement. We anticipate using the proceeds from these incremental term loans and other funds to fully redeem all remaining outstanding 9% Debentures. If and once these commitments are funded, our uncommitted incremental term loan facility under the Credit Agreement will be reduced to $125 milllion. -24- On March 3, 2003, we completed a $150 million incremental term loan borrowing under the Credit Agreement. The proceeds were used largely to finance the acquisitions of White Cap and Thatcher Tubes. The terms of this incremental term loan borrowing are the same as those for B term loans under the Credit Agreement. On August 29, 2003, we redeemed $25 million principal amount of our 9% Debentures. The redemption price was 103.375% of the principal amount of the 9% Debentures redeemed, or approximately $25.8 million, plus accrued and unpaid interest to the redemption date. As permitted under the Credit Agreement, we funded this redemption with lower cost revolving loans under the Credit Agreement. As a result of this redemption, we recorded a loss on early extinguishment of debt of approximately $1.0 million in the third quarter of 2003 for the premium paid in connection with this redemption and for the write-off of unamortized debt issuance costs and unamortized premium related to the redeemed 9% Debentures. This loss on early extinguishment of debt was recorded as interest and other debt expense in the Condensed Consolidated Statements of Income. This redemption reduced the principal amount of 9% Debentures outstanding to $475 million. During the fourth quarter of 2003, we anticipate that we will fully redeem the $475 million remaining outstanding principal amount of the 9% Debentures. The redemption price will be 103.375% of the principal amount of the outstanding 9% Debentures, or approximately $491.0 million, plus accrued and unpaid interest, if any, to the redemption date. We anticipate funding this redemption with the proceeds from the issuance of the 6 3/4% Notes and from incremental term loans and other funds under the Credit Agreement. As a result of this anticipated redemption, we expect to record a loss on early extinguishment of debt of approximately $18.2 million in the fourth quarter of 2003 for the premium paid in connection with this redemption and for the write-off of unamortized debt issuance costs and unamortized premium related to the redeemed 9% Debentures. This loss on early extinguishment of debt will be recorded as interest and other debt expense in the Condensed Consolidated Statements of Income. Our Board of Directors has authorized the repurchase of up to $70 million of our common stock. As of September 30, 2003, we have repurchased 2,708,975 shares of our common stock for an aggregate cost of approximately $61.0 million. We intend to finance future repurchases, if any, of our common stock with revolving loan borrowings. For the nine months ended September 30, 2003 and 2002, we did not repurchase any shares of our common stock. During 2003, we established acquisition reserves in connection with our purchases of Thatcher Tubes, White Cap and Pacific Coast Can aggregating approximately $5.2 million, recorded pursuant to plans that we began to assess and formulate at the date of the acquisitions and which will be finalized within one year. As we continue to assess, formulate and finalize our integration plans, there may be revisions to these acquisition reserves. Currently, these plans include exiting the Lodi, California metal food can manufacturing facility and the Chicago, Illinois and Queretaro, Mexico metal closures manufacturing facilities. These reserves consisted of employee severance and benefits costs of $4.6 million and plant exit costs of $0.6 million related to the planned closing and downsizing of certain acquired facilities. Through September 30, 2003, a total of $1.3 million has been expended for employee severance and benefits related to these plans. At September 30, 2003, this reserve had a balance of $3.9 million. Cash payments related to these acquisition reserves are expected through 2004. You should also read Note 3 to our Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2003 included elsewhere in this Quarterly Report. -25- In the third quarter of 2003, we approved and announced to employees our plans to exit the Norwalk, Connecticut and Anaheim, California manufacturing facilities of our plastic container business and the Queretaro, Mexico metal closures manufacturing facility. These plans include the termination of approximately 120 plant employees and other related exit costs. These decisions resulted in a charge to earnings of $7.7 million in the third quarter of 2003. This charge consisted of $5.1 million for the non-cash write-down in carrying value of assets, $1.4 million for employee severance and benefits and $1.2 million for plant exit costs. Through September 30, 2003 in addition to the write-down in carrying value of assets, a total of $0.5 million has been expended for employee severance and benefits. At September 30, 2003, this reserve had a balance of $2.1 million. Additional rationalization charges related to these facility closings are expected in the fourth quarter of 2003. The timing of certain cash payments is dependent upon the expiration of a lease obligation. Accordingly, cash payments related to these reserves are expected through 2010. During the third quarter of 2002, in order to support new business we decided to continue to operate our Kingsburg, California manufacturing facility. As a result, we recorded a $2.1 million rationalization credit, which consisted of $1.5 million related to certain assets with carrying values that were previously written down but will now remain in service and $0.6 million for the reversal of rationalization reserves related to employee severance and benefits and plant exit costs. The assets that remained in service were recorded in our Condensed Consolidated Balance Sheets at their depreciated cost, which approximated fair value. Also, during the third quarter of 2002, all actions related to our rationalization plans for our Northtown, Missouri and Waukegan, Illinois metal food container manufacturing facilities related to employee severance and benefits and plant exit costs were completed at amounts less than originally estimated, and all actions related to our rationalization plan for our Fairfield, Ohio plastic container manufacturing facility related to employee severance were completed at amounts less than originally estimated. Accordingly, we reversed $0.5 million of rationalization reserves as a rationalization credit. During the first quarter of 2002, we placed certain assets of our metal food container business with carrying values that were previously written down back in service. As a result, we recorded a $2.3 million rationalization credit and recorded those assets in our Condensed Consolidated Balance Sheets at their depreciated cost, which approximated fair value. We believe that cash generated from operations and funds from the revolving loans available under the Credit Agreement will be sufficient to meet our expected operating needs, planned capital expenditures, debt service and tax obligations for the foreseeable future. We have historically grown our businesses primarily through acquisitions, and we continue to evaluate acquisition opportunities in the consumer goods packaging market. As a result, we may incur additional indebtedness, including indebtedness under the Credit Agreement, to finance any such acquisition. However, in the absence of compelling (i.e., strategic and immediately accretive) acquisition opportunities, we expect to use our free cash flow to repay indebtedness or for other permitted purposes. We are in compliance with all financial and operating covenants contained in our financing agreements and believe that we will continue to be in compliance during 2003 with all of these covenants. -26- RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Effective January 1, 2003, we adopted SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections." Among other provisions, SFAS No. 145 rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt," and SFAS No. 64, "Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements," such that certain gains or losses from the extinguishment of debt will no longer be classified as extraordinary items. Upon adoption in 2003, the extraordinary item for loss on early extinguishment of debt of $1.0 million before income taxes that was recorded in the second quarter of 2002 as a result of the refinancing of our previous senior secured credit facility with the Credit Agreement was reclassified to interest and other debt expense. Effective January 1, 2003, we adopted SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which is applicable to exit and disposal activities that are initiated after December 31, 2002. SFAS No. 146 addresses accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146 requires the recognition of a liability for a cost associated with an exit or disposal activity when the liability is incurred. Under EITF Issue No. 94-3, a liability for an exit cost was recognized at the date an entity committed to an exit plan. In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities," which expands upon existing accounting guidance on consolidation. A variable interest entity either does not have equity investors with voting rights or has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN No. 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or is entitled to receive a majority of the entity's residual returns. The provisions of FIN No. 46 are effective for us on December 31, 2003. We do not anticipate that the adoption of FIN No. 46 will have a material effect on our financial position or results of operations. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ---------------------------------------------------------- Market risks relating to our operations result primarily from changes in interest rates. In the normal course of business, we also have limited foreign currency risk associated with our operations in Canada and Mexico and risk related to commodity price changes for items such as natural gas. We employ established policies and procedures to manage our exposure to these risks. Interest rate, foreign currency and commodity pricing transactions are used only to the extent considered necessary to meet our objectives. We do not utilize derivative financial instruments for trading or other speculative purposes. Information regarding our interest rate risk, foreign currency exchange rate risk and commodity pricing risk has been disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2002. Since such filing, there has not been a material change to our interest rate risk, foreign currency rate risk or commodity pricing risk or to our policies and procedures to manage our exposure to these risks. You should also read Note 7 to our Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2003 included elsewhere in this Quarterly Report. -27- Item 4. CONTROLS AND PROCEDURES ----------------------- We carried out an evaluation, under the supervision and with the participation of management, including our Co-Chief Executive Officers and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934). Based upon that evaluation, as of the end of the period covered by this Quarterly Report our Co-Chief Executive Officers and Chief Financial Officer concluded that the disclosure controls and procedures are effective in ensuring that all material information required to be disclosed in this Quarterly Report has been made known to them in a timely fashion. There were no changes in our internal controls over financial reporting during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, these internal controls. Part II. Other Information Item 1. Legal Proceedings In June 2001, the Company received a fine from the Jefferson County, Alabama Department of Health, or Jefferson County, for $2.3 million for alleged air violations at its Tarrant City, Alabama leased facility. The alleged violations stem from activities occurring during the facility's ownership by a predecessor owner, which the Company discovered and voluntarily disclosed to such state agency last year. In August 2003, the Company entered into a settlement agreement and release with Jefferson County pursuant to which it agreed to pay $350,000 to settle such alleged violations. In July 2003, the Company entered into a Consent Decree pursuant to which it agreed to pay the federal Environmental Protection Agency a $659,500 fine and make certain plant and operational changes in response to alleged past violations of the federal Clean Air Act at six of its facilities in California. The Consent Decree has been filed with the U. S. District Court, Eastern District of California, and the fine will be payable after entry of the Consent Decree. However, the Consent Decree can only be entered by the court if the applicable notice period expires without comments other than those which are agreed to by us. -28- Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Number Description - -------------- ----------- 12 Ratio of Earnings to Fixed Charges for the three and nine months ended September 30, 2003 and 2002. 31.1 Certification by the Co-Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act. 31.2 Certification by the Co-Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act. 31.3 Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act. 32.1 Certification by the Co-Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act. 32.2 Certification by the Co-Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act. 32.3 Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act. (b) Reports on Form 8-K 1. On July 23, 2003, we filed a Current Report on Form 8-K related to our announcement regarding our results of operations for the quarterly period ended June 30, 2003. 2. On July 31, 2003, we filed a Current Report on Form 8-K related to our announcement of a partial redemption of $25 million principal amount of our 9% Debentures. 3. On August 4, 2003, we filed a Current Report on Form 8-K related to our announcement of the election of William C. Jennings as a member of our Board of Directors and as the Chairman of our Audit Committee. 4. On August 14, 2003, we filed a Current Report on Form 8-K related to our announcement of the closing of our manufacturing facility in Norwalk, Connecticut, and a revision to our third quarter and full year 2003 earnings estimates for the related rationalization charges. -29- 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 13, 2003 /s/Anthony J. Allott - ------------------------- ----------------------------- Anthony J. Allott Executive Vice President and Chief Financial Officer (Principal Financial Officer) Dated: November 13, 2003 /s/Nancy Merola - ------------------------- ----------------------------- Nancy Merola Vice President and Controller (Chief Accounting Officer) -30- EXHIBIT INDEX EXHIBIT NO. EXHIBIT ----------- ------- 12 Ratio of Earnings to Fixed Charges for the three and nine months ended September 30, 2003 and 2002. 31.1 Certification by the Co-Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act. 31.2 Certification by the Co-Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act. 31.3 Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act. 32.1 Certification by the Co-Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act. 32.2 Certification by the Co-Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act. 32.3 Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act. -31- EX-12 4 extwelvethreeq03.txt Exhibit 12 SILGAN HOLDINGS INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Unaudited) The following table sets forth Silgan Holdings Inc.'s computation of its ratio of earnings to fixed charges for the periods presented.
Three Months Ended Nine Months Ended ------------------ ----------------- Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2003 2002 2003 2002 ---- ---- ---- ---- (Dollars in thousands) Earnings before fixed charges: Income before income taxes and equity in earnings (losses) of affiliate ............................ $44,842 $43,512 $ 74,087 $ 81,541 Interest and other debt expense .......... 21,571 19,977 60,398 55,845 Interest portion of rental expense ....... 176 176 530 435 ------- ------- -------- -------- Earnings before fixed charges ............ $66,589 $63,665 $135,015 $137,821 ======= ======= ======== ======== Fixed charges: Interest and other debt expense .......... $21,571 $19,977 $ 60,398 $ 55,845 Interest portion of rental expense ....... 176 176 530 435 Capitalized interest ..................... 81 334 866 827 ------- ------- -------- -------- Total fixed charges ...................... $21,828 $20,487 $ 61,794 $ 57,107 ======= ======= ======== ======== Ratio of earnings to fixed charges ............ 3.05 3.11 2.18 2.41
EX-31 5 cert31rps3q.txt R. PHILIP SILVER Exhibit 31.1 CERTIFICATION BY THE CO-CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT I, R. Philip Silver, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2003 of Silgan Holdings Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 13, 2003 /s/ R. Philip Silver -------------------------- Chairman of the Board and Co-Chief Executive Officer EX-31 6 cert31dgh3q.txt D. GREG HORRIGAN Exhibit 31.2 CERTIFICATION BY THE CO-CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT I, D. Greg Horrigan, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2003 of Silgan Holdings Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 13, 2003 /s/ D. Greg Horrigan -------------------------- President and Co-Chief Executive Officer EX-31 7 cert31aja3q.txt ANTHONY J. ALLOTT Exhibit 31.3 CERTIFICATION BY THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT I, Anthony J. Allott, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2003 of Silgan Holdings Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 13, 2003 /s/ Anthony J. Allott ---------------------------- Executive Vice President and Chief Financial Officer EX-32 8 cert32rps3q.txt R. PHILIP SILVER Exhibit 32.1 CERTIFICATION BY THE CO-CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT In connection with the Quarterly Report of Silgan Holdings Inc. (the "Company") on Form 10-Q for the period ended September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Quarterly Report"), I, R. Philip Silver, Co-Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1) The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ R. Philip Silver - -------------------- R. Philip Silver Chairman of the Board and Co-Chief Executive Officer November 13, 2003 A signed original of this written statement required by Section 906 has been provided to Silgan Holdings Inc. and will be retained by Silgan Holdings Inc. and furnished to the Securities and Exchange Commission or its staff upon request. EX-32 9 cert32dgh3q.txt D. GREG HORRIGAN Exhibit 32.2 CERTIFICATION BY THE CO-CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT In connection with the Quarterly Report of Silgan Holdings Inc. (the "Company") on Form 10-Q for the period ended September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Quarterly Report"), I, D. Greg Horrigan, Co-Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1) The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ D. Greg Horrigan - -------------------- D. Greg Horrigan President and Co-Chief Executive Officer November 13, 2003 A signed original of this written statement required by Section 906 has been provided to Silgan Holdings Inc. and will be retained by Silgan Holdings Inc. and furnished to the Securities and Exchange Commission or its staff upon request. EX-32 10 cert32aja3q.txt ANTHONY J. ALLOTT Exhibit 32.3 CERTIFICATION BY THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT In connection with the Quarterly Report of Silgan Holdings Inc. (the "Company") on Form 10-Q for the period ended September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Quarterly Report"), I, Anthony J. Allott, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1) The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Anthony J. Allott - --------------------- Anthony J. Allott Executive Vice President and Chief Financial Officer November 13, 2003 A signed original of this written statement required by Section 906 has been provided to Silgan Holdings Inc. and will be retained by Silgan Holdings Inc. and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----