-----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, INyD55f2H0G5VGTlN262swfkilvfs3KcBMjD1pGlHu5O8gwtfiCjAfuBJbt1cSGl Clwu+M5DKkNyb4H3T3ot8A== 0000849869-98-000010.txt : 19980513 0000849869-98-000010.hdr.sgml : 19980513 ACCESSION NUMBER: 0000849869-98-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SILGAN HOLDINGS INC CENTRAL INDEX KEY: 0000849869 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED STRUCTURAL METAL PRODUCTS [3440] IRS NUMBER: 061269834 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22117 FILM NUMBER: 98616499 BUSINESS ADDRESS: STREET 1: 4 LANDMARK SQ CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2039757110 10-Q 1 FORM 10-Q FOR THE QUARTER ENDED 3/31/98 Page 1 of 16 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarter Ended March 31, 1998 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) of the Securities Exchange Act of 1934 for the Period ____________ to ____________. Commission file number 000-22117 SILGAN HOLDINGS INC. (Exact name of registrant as specified in its charter) Delaware 06-1269834 (State of Incorporation) (I.R.S. Employer Identification Number) 4 Landmark Square Stamford, Connecticut 06901 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (203) 975-7110 Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] As of May 1, 1998, the number of shares outstanding of the registrant's common stock, $0.01 par value, was 19,010,617. Page 2 of 16 Part I. Financial Information Item 1. Financial Statements SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) March 31, March 31, Dec. 31, 1998 1997 1997 ---- ---- ---- ASSETS (unaudited) (unaudited) (audited) Current assets: Cash and cash equivalents ................... $ 4,042 $ 5,860 $ 53,718 Accounts receivable, net .................... 132,109 104,730 125,837 Inventories ................................. 276,272 248,679 209,963 Prepaid expenses and other current assets ... 10,566 11,046 9,997 ----------- ----------- ----------- Total current assets .................... 422,989 370,315 399,515 Property, plant and equipment, net ............... 537,724 496,197 531,765 Other non-current assets ......................... 121,146 122,898 119,287 ----------- ----------- ----------- $ 1,081,859 $ 989,410 $ 1,050,567 =========== =========== =========== LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY Current liabilities: Trade accounts payable ...................... $ 113,354 $ 106,212 $ 142,281 Accrued payroll and related costs ........... 43,178 43,013 40,621 Accrued interest payable .................... 15,679 12,105 10,939 Accrued expenses and other current liabilities .............................. 21,161 35,874 20,871 Bank revolving loans ........................ 44,595 88,400 -- Current portion of long-term debt ........... 1,867 29,547 20,218 ----------- ----------- ----------- Total current liabilities ............... 239,834 315,151 234,930 Long-term debt ................................... 803,468 634,843 785,036 Other long-term liabilities ...................... 98,839 74,632 97,849 Cumulative exchangeable redeemable preferred stock ............................... -- 54,748 -- Deficiency in stockholders' equity: Common stock ................................ 189 189 189 Additional paid-in capital .................. 111,079 110,935 110,935 Accumulated deficit ......................... (171,195) (200,274) (177,864) Accumulated other comprehensive income ...... (355) (814) (508) ----------- ----------- ----------- Total deficiency in stockholders' equity (60,282) (89,964) (67,248) ----------- ----------- ----------- $ 1,081,859 $ 989,410 $ 1,050,567 =========== =========== =========== See accompanying notes.
Page 3 of 16 SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except per common share amounts) Three Months Ended ------------------ March 31, March 31, 1998 1997 ---- ---- Net sales ........................................ $ 334,413 $ 299,427 Cost of goods sold ............................... 290,089 256,708 ----------- ------------ Gross profit ................................ 44,324 42,719 Selling, general and administrative expenses ..... 15,663 14,035 Non-cash stock option charge ..................... -- 22,522 ----------- ------------ Income from operations ...................... 28,661 6,162 Interest expense and other related financing costs 17,963 19,965 ----------- ------------ Income (loss) before income taxes ........... 10,698 (13,803) Income tax provision (benefit) ................... 4,029 (24,850) ----------- ------------ Income before extraordinary charge .......... 6,669 11,047 Extraordinary charge relating to early extinguishment of debt, net of taxes .......... -- (742) ----------- ------------ Net income before preferred stock dividend requirement ..................... 6,669 10,305 Preferred stock dividend requirement ............. -- (1,755) ----------- ------------ Net income available to common stockholders . $ 6,669 $ 8,550 =========== ============ Basic earnings per common share: Income before extraordinary charges ......... $ 0.35 $ 0.64 Extraordinary charges ....................... -- (0.04) Preferred stock dividend requirement ........ -- (0.10) ----------- ------------ Net income per common share ...................... $ 0.35 $ 0.50 =========== ============ Diluted earnings per common share: Income before extraordinary charges ......... $ 0.33 $ 0.60 Extraordinary charges ....................... -- (0.04) Preferred stock dividend requirement ........ -- (0.10) ----------- ------------ Net income per common share ...................... $ 0.33 $ 0.46 =========== ============ Weighted average shares outstanding: Basic ....................................... 18,868,567 17,086,722 Diluted ..................................... 20,205,308 18,466,847 See accompanying notes. Page 4 of 16 SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Three Months Ended ------------------ March 31, March 31, 1998 1997 ---- ---- Cash flows from operating activities: Net income before preferred stock dividend requirement ........................ $ 6,669 $ 10,305 Adjustments to reconcile net income before preferred stock dividend requirement to net cash used in operating activities: Depreciation ................................ 16,222 13,714 Amortization ................................ 1,183 1,725 Extraordinary charge relating to early extinguishment of debt, net of taxes ..... -- 742 Non-cash stock option charge ................ -- 22,522 Changes in assets and liabilities, net of effect of acquisitions: (Increase) in accounts receivable ...... (4,121) (3,227) (Increase) in inventories .............. (64,660) (52,987) (Increase) decrease in other non-current assets ............................... 2,436 (17,148) (Decrease) in trade accounts payable ... (28,927) (16,411) Other, net ............................. 8,617 (4,137) --------- --------- Total adjustments .................. (69,250) (55,207) --------- --------- Net cash used in operating activities ....... (62,581) (44,902) --------- --------- Cash flows from investing activities: Acquisition of business ......................... (14,110) -- Capital expenditures, net ....................... (17,518) (10,255) --------- --------- Net cash used in investing activities ....... (31,628) (10,255) --------- --------- Cash flows from financing activities: Borrowings under working capital loans .......... 217,755 279,750 Repayments under working capital loans .......... (159,050) (219,150) Net proceeds from issuance of common stock ...... -- 67,220 Proceeds from issuance of long-term debt ........ 4,193 -- Repayment of long-term debt ..................... (18,365) (67,820) --------- --------- Net cash provided by financing activities ... 44,533 60,000 --------- --------- Net increase in cash and cash equivalents ............ (49,676) 4,843 Cash and cash equivalents at beginning of year ....... 53,718 1,017 --------- --------- Cash and cash equivalents at end of period ........... $ 4,042 $ 5,860 ========= ========= Supplementary data: Cash interest payments .......................... $ 12,902 $ 16,253 Cash income tax (refunds) payments .............. 1,006 (56) Preferred stock issued in lieu of cash dividend . -- 1,702 See accompanying notes. Page 5 of 16 SILGAN HOLDINGS INC. CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY (Dollars and shares in thousands) Common Stock Accumulated Total ------------ Additional other deficiency in Par paid-in Accumulated comprehensive stockholders' Shares Value capital deficit income equity ------ ----- ------- ------- ------ ------ Balance at December 31, 1997 .................. 18,863 $189 $110,935 $(177,864) $(508) $(67,248) Net income ................................. -- -- -- 6,669 -- 6,669 Foreign currency translation ............... -- -- -- -- 153 153 Proceeds from exercise of shares through employee stock option plans, including tax benefit of $120 ..................... 12 -- 144 -- -- 144 ------ ---- -------- --------- ----- -------- Balance at March 31, 1998 ..................... 18,875 $189 $111,079 $(171,195) $(355) $(60,282) ====== ==== ======== ========= ===== ======== See accompanying notes.
Page 6 of 16 SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at March 31, 1998 and 1997 and for the three months then ended is unaudited) 1. Basis of Presentation The accompanying condensed unaudited consolidated financial statements of Silgan Holdings Inc. ("Holdings" or the "Company") have been prepared in accordance with Rule 10-01 of Regulation S-X and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. All adjustments of a normal recurring nature have been made, including appropriate estimates for reserves and provisions which are normally determined or settled at year end. In the opinion of the Company, the accompanying financial statements contain all adjustments (consisting solely of a normal recurring nature) necessary to present fairly Holdings' financial position as of March 31, 1998 and 1997 and December 31, 1997, and Holdings' results of operations and statements of cash flows for the three months ended March 31, 1998 and 1997. While the Company believes that the disclosures presented are adequate to make the information not misleading, it is suggested that these financial statements be read in conjunction with Holdings' financial statements and notes included in its Annual Report on Form 10-K for the year ended December 31, 1997. In addition, certain reclassifications have been made to prior year's financial statements to conform with current year presentation. 2. Earnings per Share Earnings per share amounts for 1997 have been restated to conform with the requirements of Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share". Under SFAS No. 128, primary and fully diluted earnings per share were replaced with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes the dilutive effect of stock options. The number of common stock equivalents included in diluted weighted average shares outstanding at March 31, 1998 and March 31, 1997 were 1,336,741 and 1,380,125, respectively, all of which represented outstanding employee stock options. Page 7 of 16 SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at March 31, 1998 and 1997 and for the three months then ended is unaudited) 3. Comprehensive Income As of January 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income". SFAS No. 130 establishes standards for the reporting and display of comprehensive income and its components. The adoption of SFAS No. 130 had no impact on the Company's results of operations or stockholders' equity. Prior year's financial statements have been reclassified to conform to the requirements of SFAS No. 130. SFAS No. 130 requires foreign currency translation adjustments to be included in comprehensive income. Foreign currency translation adjustments were previously included as a separate component of stockholders' equity. The components of comprehensive income for the three month periods ended March 31, 1998 and 1997 are as follows (in thousands): 1998 1997 ---- ---- Net income ......................................... $6,669 $ 8,550 Foreign currency translation adjustments ........... 153 (40) ------ ------- Comprehensive income ........................... $6,822 $ 8,510 ====== ======= The components of accumulated other comprehensive income at March 31, 1998, March 31, 1997, and December 31, 1997 consist solely of foreign currency translation adjustments. 4. Acquisitions In January 1998, Silgan Plastics Corporation, a wholly owned subsidiary of Holdings ("Plastics"), acquired substantially all of the assets of Winn Packaging Co. ("Winn") for a purchase price of approximately $14.1 million (including net working capital of approximately $4.0 million). Winn was a privately held manufacturer and marketer of decorated rigid plastic containers, serving the personal care, automotive, and household chemical markets. Winn's sales in 1997 were approximately $22.0 million. The Company financed this acquisition through revolving loan borrowings under its U.S. Credit Agreement. The transaction was accounted for using the purchase method of accounting, and accordingly a preliminary purchase price allocation has been made based on the fair value of the assets acquired and liabilities assumed as of the date of acquisition. The purchase price allocation will be adjusted during 1998 for differences between actual and preliminary valuations for asset appraisals. The excess of the purchase price over the fair value of the net assets acquired of $5.5 million has been recorded as goodwill, and is being amortized over 40 years. Page 8 of 16 SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at March 31, 1998 and 1997 and for the three months then ended is unaudited) 5. Inventories Inventories consisted of the following (in thousands): March 31, March 31, Dec. 31, 1998 1997 1997 ---- ---- ---- Raw materials and supplies ........... $ 33,191 $ 32,718 $ 33,706 Work-in-process ...................... 54,521 43,444 43,529 Finished goods ....................... 178,754 161,577 121,369 Spare parts and other ................ 8,731 7,977 8,382 -------- -------- -------- 275,197 245,716 206,986 Adjustment to value inventory at cost on the LIFO Method ........ 1,075 2,963 2,977 -------- -------- -------- $276,272 $248,679 $209,963 ======== ======== ======== 6. Income Taxes During the first quarter of 1997, the Company determined that a portion of the future tax benefits arising from its net operating loss carryforward would be realized due to the Company's continued improvement in earnings and increased probability of future taxable income. In accordance with SFAS No. 109, the Company reduced its valuation allowance and recognized an income tax benefit of 23.2 million. The provision for income taxes for the three months ended March 31, 1998 was recorded at an effective tax rate of 37.7%, which represents the Company's estimated annual effective tax rate for 1998. 7. Exchangeable Redeemable Preferred Stock As of March 31, 1997, the Company had outstanding 53,258 shares of 13 1/4% Cumulative Exchangeable Redeemable Preferred Stock ("Preferred Stock"), with a liquidation preference of $1,000 per share. Included in Preferred Stock at March 31, 1997 were accrued dividends of $1.5 million. On April 15, 1997, the Company made its quarterly dividend payment of $1.8 million in additional shares of Preferred Stock. The Preferred Stock was exchanged into the Company's 13 1/4% Subordinated Debentures due 2006 (the "13 1/4% Debentures") in June 1997. Page 9 of 16 SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at March 31, 1998 and 1997 and for the three months then ended is unaudited) 8. Pending Acquisition In February 1998, the Company reached an agreement in principle with Campbell Soup Company ("Campbell") for the purchase of Campbell's can manufacturing assets. Although the transaction is subject to negotiation and execution of definitive documentation and other customary terms and conditions, it is expected that the purchase price will be approximately $125.0 million. The purchase price will be determined at the closing of the transaction. The Company expects to finance this acquisition with revolving loans under its U.S. Credit Agreement. As part of the transaction, the Company and Campbell will enter into a long-term supply agreement. Annual sales to Campbell under the supply agreement are expected to be in excess of $200.0 million. The Company anticipates that the closing of the transaction will occur in the late spring of this year. Page 10 of 16 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Statements included in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Quarterly Report on Form 10-Q which are not historical facts are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and Securities Exchange Act of 1934. Such forward-looking statements are made based upon management's expectations and beliefs concerning future events impacting the Company and therefore involve a number of uncertainties and risks, including, but not limited to, those described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and the Company's other filings with the Securities and Exchange Commission. As a result, the actual results of operations or financial condition of the Company could differ materially from those expressed or implied in such forward-looking statements. RESULTS OF OPERATIONS - THREE MONTHS Summary unaudited results of operations for the Company's two business segments, metal and plastic containers, for the three months ended March 31, 1998 and 1997 are provided below. Three Months Ended March 31, ---------------------------- 1998 1997 ---- ---- (In millions) Net sales: Metal containers and specialty .............. $ 259.2 $ 242.2 Plastic containers .......................... 75.2 57.2 ------ ------ Consolidated ............................ $ 334.4 $ 299.4 ====== ====== Operating profit: Metal containers and specialty .............. $ 19.1 $ 22.3 Plastic containers .......................... 10.0 6.8 Non-cash stock option charge ................ -- (22.5) Corporate expense ........................... (0.4) (0.4) ------ ------ Consolidated ............................ $ 28.7 $ 6.2 ====== ====== Three Months Ended March 31, 1998 Compared with Three Months ended March 31, 1997 Net Sales. Consolidated net sales increased $35.0 million, or 11.7%, to $334.4 million for the three months ended March 31, 1998, as compared to net sales of $299.4 million for the same three months in the prior year. This increase resulted primarily from incremental sales added from acquisitions and to a lesser extent from increased unit sales to existing plastic container customers. Page 11 of 16 Net sales for the metal container business (including net sales of its specialty business of $29.9 million) were $259.2 million for the three months ended March 31, 1998, an increase of $17.0 million, or 7.0%, from net sales of $242.2 million for the same period in 1997. Net sales of metal food cans increased slightly during the first quarter of 1998 to $229.3 million, as compared to $223.2 million for the same period in 1997. Sales of specialty items included in the metal container segment increased $10.9 million to $29.9 million during the three months ended March 31, 1998, as compared to $19.0 million in the same period in 1997, predominately due to incremental sales added from the April 1997 acquisition of the aluminum roll-on closure business. Net sales for the plastic container business of $75.2 million during the three months ended March 31, 1998 increased $18.0 million, or 31.5%, from net sales of $57.2 million for the same period in 1997. The additional sales were generated by incremental sales added from the acquisition of Winn in January 1998 and the acquisition in April 1997 of the North American plastic container business of Rexam plc and by higher unit volume with existing customers. Cost of Goods Sold. Cost of goods sold as a percentage of consolidated net sales was 86.8% ($290.1 million) for the three months ended March 31, 1998, an increase of 1.1 percentage points as compared to 85.7% ($256.7 million) for the same period in 1997. The decline in gross profit margins was primarily attributable to price concessions made to several contractual metal food can customers in exchange for contract term extensions with such customers, offset in part, by an increase in the gross profit margin of the plastic container business. Selling, General and Administrative Expenses. Selling, general and administrative expenses as a percentage of consolidated net sales for the three months ended March 31, 1998 and 1997 remained constant at 4.7% ($15.6 million and $14.0 million, respectively). Income from Operations. Income from operations as a percentage of consolidated net sales was 8.6% for the three months ended March 31, 1998, as compared with 2.1% for the same period in the prior year. Excluding the effect of the non-cash stock option charge of $22.5 million incurred in connection with the Company's initial public offering (the "IPO") of its common stock in 1997, income from operations as a percentage of consolidated net sales declined 1.0 percentage point to 8.6% for the three months ended March 31, 1998, as compared with 9.6% for the same period in the prior year. This decrease was a result of the aforementioned decline in gross profit margins. Excluding the effect of the non-cash stock option charge, income from operations for the three months ended March 31, 1998 and 1997 remained constant at $28.7 million. Page 12 of 16 In conjunction with the IPO, stock options issued under the stock option plans of Holdings' subsidiaries were converted to Holdings stock options. In accordance with generally accepted accounting principles, the Company recorded a charge of $22.5 million at the time of the IPO for the excess of the fair market value of the stock options issued under the subsidiary stock option plans over the grant price of the options. The Company will not recognize any future charges for these stock options. Income from operations as a percentage of net sales for the metal container business declined 1.8 percentage points to 7.4% ($19.1 million) for the three months ended March 31, 1998, from 9.2% ($22.3 million) for the same period in the prior year. This decrease in income from operations as a percentage of net sales reflected the impact of price concessions made to several contractual metal food can customers in exchange for contract term extensions with such customers, the acquisition in April 1997 of the aluminum roll-on closure business which operates at lower average margins and higher depreciation expense incurred as a result of increased capital expenditures. Income from operations as a percentage of net sales for the plastic container business improved 1.4 percentage points to 13.3% ($10.0 million) for the three months ended March 31, 1998, as compared to 11.9% ($6.8 million) for the same period in 1997. The improved operating performance of the plastic container business was attributable to increased production and sales volume resulting in lower per unit manufacturing costs and continuing manufacturing efficiencies realized from capital investment. Interest Expense. Interest expense declined $2.0 million to $18.0 million for the three months ended March 31, 1998 principally as a result of benefits realized from the refinancing of substantially all of the Company's indebtedness in the second and third quarters of 1997 with lower cost indebtedness, offset in part by additional indebtedness incurred under the Company's U.S. Credit Agreement to finance its recently completed acquisitions. Including the effect of the exchange of the Preferred Stock for 13 1/4% Debentures in June 1997, interest expense and preferred stock dividend requirements declined $3.7 million during the first quarter of 1998 as compared to the first quarter of 1997. Income Taxes. The provision for income taxes for the three months ended March 31, 1998 was recorded at an effective tax rate of 37.7% ($4.0 million), which represents the Company's estimated annual effective tax rate for 1998. During the first quarter of 1997, the Company determined that a portion of the future tax benefits arising from its net operating loss carryforward would be realized due to the Company's continued improvement in earnings and increased probability of future taxable income. In accordance with SFAS No. 109, the Company reduced its valuation allowance and recognized an income tax benefit. Page 13 of 16 Net Income and Earnings per Share. As a result of the items discussed above, net income for the three months ended March 31, 1998 was $6.7 million, a decrease of $4.3 million from net income of $11.0 million (before the extraordinary charge of $0.7 million and the preferred stock dividend requirement of $1.8 million) for the three months ended March 31, 1997. Earnings per diluted share for the first quarter of 1998 were $0.33 as compared with $0.46 for the same period in 1997. The Company estimates that earnings per diluted share for the three months ended March 31, 1998 would have been $0.06 greater than earnings per diluted share, before the preferred stock dividend requirement, of $0.27 for the same period in the prior year if unusual items for the non-cash stock option charge and the extraordinary charge incurred in connection with the refinancing of the Company's 13 1/4% Senior Discount Debentures due 2002 ("Discount Debentures") had been excluded from earnings and if earnings for the three months ended March 31, 1997 had been calculated utilizing the effective tax rate and the weighted average diluted shares outstanding for the three months ended March 31, 1998. During the first quarter of 1997, the Company incurred an extraordinary charge of $0.7 million, net of taxes, or $0.04 per diluted share, for the write-off of unamortized debt cost associated with the redemption of its remaining Discount Debentures. CAPITAL RESOURCES AND LIQUIDITY The Company's liquidity requirements arise primarily from its obligations under the indebtedness incurred in connection with its acquisitions and the refinancing of such indebtedness, capital investment in new and existing equipment and the funding of the Company's seasonal working capital needs. Historically, the Company has met these liquidity requirements through cash flow generated from operating activities and revolving loan borrowings. For the first three months of 1998, net borrowings of revolving loans of $58.7 million under the Company's U.S. Credit Agreement, $4.2 million of borrowings under the Company's Canadian credit facility and a decrease in cash balances of $49.7 million were used to fund cash used by operations of $62.6 million for the Company's seasonal working capital needs, capital expenditures of $17.5 million, the acquisition of Winn in January 1998 for $14.1 million, and the repayment of $18.4 million of bank term loans. Because the Company sells metal containers used in fruit and vegetable pack processing, its sales are seasonal. As is common in the industry, the Company must access working capital to build inventory and then carry accounts receivable for some customers beyond the end of the summer and fall packing season. Seasonal accounts are generally settled by year end. Due to the Company's seasonal requirements, the Company expects to incur short term indebtedness to finance its working capital requirements. Page 14 of 16 During 1998, the Company estimates that approximately $150.0 million of its revolving loan facilities under its credit agreements will be utilized at its peak in the third quarter of 1998 for seasonal working capital needs. Amounts available under the Company's revolving loan facilities in excess of such seasonal working capital needs are available to the Company to pursue its growth strategy and for other permitted purposes. The Company financed the acquisition of Winn in January 1998 through its revolving loan facility under its U.S. Credit Agreement, and intends to finance the acquisition of Campbell's can manufacturing assets through its revolving loan facility under its U.S. Credit Agreement. As of March 31, 1998, the Company had $58.7 million of revolving loans outstanding, of which $44.6 million related to seasonal working capital needs and $14.1 million related to long-term financing of acquisitions. The amount used for acquisition financing has been recorded as long-term debt. The unused portion of revolving loan commitments under the Company's credit agreements at March 31, 1998, after taking into account outstanding letters of credit, was $482.9 million. Management believes that cash generated by operations and funds from revolving loan borrowings under the Company's credit agreements will be sufficient to meet the Company's expected operating needs, planned capital expenditures, debt service and tax obligations for the foreseeable future. The Company is continually evaluating and intends to continue to pursue acquisition opportunities in the North American consumer goods packaging market. The Company intends to borrow additional revolving loans under its U.S. Credit Agreement to finance such acquisitions and to fund any resulting increased operating needs. However, the Company may need to incur additional new indebtedness to finance such acquisitions and to fund any resulting increased operating needs. Any such new financing will have to be effected in compliance with the agreements governing the Company's indebtedness. There can be no assurance that the Company will be able to complete any such acquisition or obtain any such new financing. The Company is in compliance with all financial and operating covenants contained in the instruments and agreements governing its indebtedness and believes that it will continue to be in compliance with all such covenants during 1998. Page 15 of 16 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Number Description 27 Financial Data Schedule. (b) Reports on Form 8-K None. Page 16 of 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned thereunto duly authorized. SILGAN HOLDINGS INC. Dated: May 12, 1998 /s/Harley Rankin, Jr. - -------------------- --------------------- Harley Rankin, Jr. Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) Dated: May 12, 1998 /s/Harold J. Rodriguez, Jr. - -------------------- --------------------------- Harold J. Rodriguez, Jr. Vice President and Controller (Chief Accounting Officer) EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from Silgan Holdings Inc. Form 10-Q for the three months ended March 31, 1998 and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-1998 MAR-31-1998 4,042 0 132,109 0 276,272 422,989 537,724 0 1,081,859 239,834 803,468 0 0 189 (60,471) 1,081,859 334,413 334,413 290,089 290,089 0 0 17,963 10,698 4,029 6,669 0 0 0 6,669 0.35 0.33
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